The economy is humming along but only 'big ears' Obama can hear it. (See 1, 1a and 1b below.)
Sinking under Obama's mountainous debt. (See 1c below.)
Stu Eizenstat would like to know where do we go from here regarding Iran.
Stu, do you really think our Nobel Peace Prize president is going to go to war over something as inconsequential as a nuclear Iran that threatens Israel's existence?
I continue to maintain an attack by Obama on Iran could propel him into the White House again because it would serve as a 'gauntlet throw down' to those who see him as weak. Being a political animal ,I would never rule it out because he has a consistent history of going against his own dreamy and unrealistic declarations when he backs himself into a corner - otherwise Guantanamo would be closed. (See 2, 2a and 5a below.)
Are Republicans dumb enough to fall into a tax trap Obama is laying for them? You betcha! (See 3 below.)
Don't declare my Obamacare unconstitutional! I am starting my bullying campaign against you Chief Justice Roberts in order to light a match under my party faithfuls.
Like the Charlie Daniels' ad: "That's how its done son." (See 4 below.)
A response to my last memo from my least severe critic: Beautiful piece.I don't(and have no reason)to envy anyone, but your life sure beats the hell out of working in a grocery store all day long. Four years in the army was almost like a vacation.)
Chamberlain? These people can't name their congressman(what's a congressman?)and to name ONE Supreme Court Justice,forget about it. Happy 4th..............W
CENTCOM missing a leader as prospect of confrontation in Middle East looms larger.
(See 5 and 5a below.)
Feminists remain mute over Al's masseuse matter.
Feminist elites always remain mute when it's a working girl episode. The movement was never about 'Tillie The Toiler' but only professionals. More hypocrisy? (See 6 below.)
Netanyahu hardens his position towards Turkey and makes peace with Lieberman. (See 7 below.)
Middle East talks making progress according to Obama.
When Netanyahu concedes everything Abbas wants, priot to direct negotiations, then real progress will be made. Palestinians have always used that ploy and it is a clever one because Israel is always seen as the obdurate negotiator in the eyes of the world and even Israel's far Left press and media. The Palestinians are generally portrayed as reasonable rejected victims. It has also led to a lot of suffering on both sides but that never seemed to bother Arafat nor Abbas.
Caroline Glick lays out the cold facts that Obama needs a victory and if it comes at Israel's expense so be it because it would serve both his political purposes as well as his emotional ones. She urges Netanyahu to hang tough and recognize he too has some negotiating leverage.
No matter what Netanyahu or Israel do they will be blamed because in a world of Gullivers and Lilliputians, Israel is always the pariah. (See 8 and 8a below.)
Is Obama's heart in winning in Afghanistan? Even if it was what does a win mean? If we are intent on winning then Petraeus will be called upon to make a commitment the public is not willing to support and it will require a vast buildup and destruction we are incapable of inflicting because our hands are tied. .
Obama made Afghanistan his war because, by doing so, he was able to attack GW for going into Iraq. Obama was more interested in scoring campaign points and never thought through the consequences of pursing an extended war in Afghanistan. Petraeus, I fear, will rue the day he joined Obama in this pursuit because, I daresay, Obama will eventually pull the rug from under him.
Robert Harris has reviewed Seth Jones': "In The Graveyard of Empires: America's War in Afghanistan. Norton Publisher . An interesting read for those who believe Obama's approach will defy history. (See 9 below.)
A whistle blower lays bare Obama's Justice Department which has become politically manipulated . (See 10 below.)
Andy Grove, Intel's former Chief Executive, on how to create job growth. Long but well worth reading. (See 11.)
1) Job market not growing fast enough for big rebound
By JEANNINE AVERSA and CHRISTOPHER S. RUGABER
A second straight month of lackluster hiring by American businesses is sapping strength from the economic rebound.
The jobless rate fell to 9.5 percent in June, still far too high to signal a healthy economy. It came in slightly lower than the month before only because more than a half-million people gave up looking for work and were no longer counted as unemployed.
The private sector added just 83,000 jobs for the month. Looked at from that angle or almost any other, from a teetering housing market to falling factory orders, the recovery is limping along as it enters the year's second half. And that is when the benefits of most of the government's stimulus spending will begin to wear off.
The fate of the economy will hinge on whether it can stand on its own. President Barack Obama acknowledged the slow pace of the recovery and used the new jobs figures to argue for more stimulus spending and extended unemployment benefits.
"We're not headed there fast enough for a lot of Americans," the president said. "We're not headed there fast enough for me, either."
Overall, the nation's total payroll actually shrank last month by 125,000, the first decline in six months, the Labor Department said Friday. The loss reflected the end of 225,000 temporary jobs helping the U.S. Census Bureau complete its 10-year head count.
The 83,000 jobs added by the private sector was a better performance than in May, when private job creation nearly stalled. But it fell far short of what the economy needs — at least 200,000 jobs a month — to bring down the unemployment rate.
Nobody, from Obama to Federal Reserve Chairman Ben Bernanke to private economists, expects that anytime soon. And the government has mostly exhausted its realistic options for nudging the economy along faster.
Benchmark interest rates, which at low levels can encourage borrowing to spur economic growth, are already near zero. Republicans in Congress object to additional stimulus spending.
Unemployment is expected to stay above 9 percent through the midterm elections in November. And the Fed predicts joblessness could still be as high as 7.5 percent two years from now. Normal is considered closer to 6 percent, and economists say it will probably take until the middle of this decade to achieve that.
The jobless rate did come down in June from 9.7 percent the month before. But that was mainly because 652,000 people abandoned their job searches.
Even among Americans with secure jobs, confidence is fading. One gauge of consumer confidence fell in June to about 53, down nearly 10 points in a single month. And it's well below the reading of 90 typically seen in a healthy economy.
Add to that jitters over Europe's debts, an edgy stock market and cautious consumer spending, and the result is an economy essentially moving sideways. It's no surprise that businesses are reviewing their orders and seeing no reason to add to payrolls.
Few big companies say they plan to step up hiring in the second half of the year. Most auto, airline and railroad companies, for example, say they expect little or no job growth, blaming weak demand.
One that does plan to hire, Chrysler Group LLC, expects to add engineers and other workers as it updates its aging line of cars and trucks. The company has announced 1,000 factory jobs in Detroit to meet demand for the new Jeep Grand Cherokee SUV.
But airlines, including Delta and American, plan no staff increases this year. And major railroads, which have furloughed thousands since the recession, say they have no plans to add employees in the coming months.
In June, manufacturers, the leisure and hospitality industries, temporary staffing agencies, and education and health services providers all added jobs. Retailers, construction firms and financial service providers cut payrolls. So did state and local governments, which are wrestling with budget shortfalls.
On Wall Street, stocks sagged yet again on the news. The Dow Jones industrial average finished down 46 points, its seventh consecutive losing session. The Dow lost more than 10 percent of its value in the second quarter.
Trying to put a positive outlook on the report, Obama said it showed that "we are headed in the right direction." At the same time, he acknowledged there is a "great deal of work to do to repair the economy and get the American people back to work."
His options are limited. Senate Republicans concerned about record budget deficits this week blocked his efforts to extend unemployment benefits for millions of out-of-work Americans.
"The two things that are growing fastest in this Democrat economy are the size of the federal government and the crushing burden of the national debt," said Senate Republican leader Mitch McConnell of Kentucky, who led opposition to the extension.
All told, 14.6 million people were unemployed in June. An additional 11.2 million have given up their job searches or are working part-time but would prefer full-time work. That adds up to nearly 26 million Americans, and an "underemployment" rate of 16.5 percent.
Eric Model, co-owner of Seal & Co., a shop in Summit, N.J., that sells accessories and toys, said he has not replaced the two back-office workers he let go two years ago. Not including a summer hire, Model has four employees, plus himself.
"It would be nice to get some support," Model said. "But I don't want to go out on a limb and hire somebody, anticipating things will improve. I would rather run with low expenses."
Those Americans who still have jobs drew smaller paychecks last month. Average hourly wages fell 2 cents to $22.53. Workers' hours were cut, too. Those factors could dampen consumer spending in the months ahead and further weaken the recovery.
It all threatens to perpetuate a vicious cycle for the economy.
"It is a Catch-22 situation," said Sung Won Sohn, professor at California State University, Channel Islands. "Businesses are reluctant to hire for fear of a 'double-dip' recession. Without jobs, people are watchful of their spending, a danger to the recovery."
1a)Jobs and government “help.” A bad combination and bleak prognosis
By Mark lass="blsp-spelling-error" id="SPELLING_ERROR_23">Landsbaum
What a shock! The jobs report was “disappointing.” We imagine for people still without jobs, that’s putting it mildly.
Small businesses cut jobs in June, the Register reports this morning, leading the disappointing report on private, nonfarm jobs. Remember the previous jobs’ reports? The ones that showed a huge spurt in new jobs, but on closer inspection they turned out to be government jobs? Yeah, private jobs – you know, the productive type of jobs – declined during the same period.
The government, we were told, intended to kick-start the economy by selecting areas that were hurting and pumping money (your taxes) into them as a stimulus, but are just as likely to be payoffs for pet government causes. In the short-term this always has an effect. In these cases, a modest effect would be overstating the case.
But there are also the unintended consequences - industries placed at a disadvantage because of the short-term effects on industries picked by government for its blessing (with your money). Cash for clunkers was a disaster for used car sales and for sellers of old car parts because the government demanded the clunkers be destroyed, not even stripped to be re-used or re-sold. As is so often the case, poor people were hurt by the government playing favorites because the cars they can most afford were removed from the road. It doesn’t exactly encourage consumer spending either.
And of course the short-term help for new car sales really wasn’t much help because it generally affected people who were going to buy new cars anyway. All it did was compress the sales into a shorter period of time. That gave the erroneous impression of economic recovery, but once the spike declined, we were back where we began, except your tax money was gone. As for the economy, no lasting effect.
Government’s help hurts more than it helps, particularly in the long-run. It props up companies that should be allowed to fail. It misdirects capital investment into those eventual failed uses. It artificially stimulates things like jobs reports, skewing them unnaturally such as did the bulge in government temporary jobs rather than private jobs.
Perhaps most destructively, the government’s “help” channels a limited resource – capital – into unproductive, short-term uses that return little on the investment other than a fleeting feeling things may get better, but prevents that money from being used to create productive jobs in the private sector that create wealth and allow for long-term economic growth.
President Obama campaigned that he was going to take us where we wanted to go. This is that destination? I don’t think so. But it’s the inevitable destination for government-manipulated economies.
A bank this morning said it would attempt to stimulate small business job growth by discounting loan rates half a percent for every new employee a company hired, up to a total of 1.5 percent. Of course, government “help” meanwhile will cost companies several times that saving by imposing new health care costs on them. And imagine how much more burden companies face with a cap-and-tax plan from Sacramento and Washington.
Does anyone wonder why businesses are reluctant to hire? Their costs thanks to government “help” are soaring and threaten to go even higher. Private banks would have to give away money to offset that damage.
A 1.5 percent savings on a loan that’s still unaffordable on top of such an uncertain future is paltry compared to the ill effects of government “help.”
What do you say?
1b)Unemployment Rate Drops, In This Case Sucks, As Economy Staggers
By JERRY K. REMMERS,
The nation’s unemployment rate dropped to 9.5%, the government reported Friday, the lowest level since June 2009.
That is terrible, depressing news when you consider 652,000 left the labor force after failing to find jobs. About 1.3 million of the 6 million unemployed have exhausted their unemployment benefits.
The data released by the Labor Department Thursday and Friday in many sectors indicates to me that what gains we made as an indirect result of Congress’s $787 billion stimulus package in March 2009 has evaporated as money and programs run out.
Employers cut 125,000 jobs in May and the federal government 225,000 temporary Census takers. Private businesses hired 83,000 new workers, up from 41,000 in April.
“It could have been worse, but it wasn’t good,” said Nigel Gault, chief U.S. economist at IHS Global Insight, an economic forecasting firm. “It’s adding to the evidence that growth has slowed.”
Factory orders which had been nudging upward for five months dipped 1.4%.
Here are word bites I culled from the financial reports:
– The nation still has 7.9 million fewer private payroll jobs than it did when the recession began. It takes about 125,000 new jobs a month to keep up with population growth.
– Counting those who have given up their job searches and those who are working part time but would prefer full-time work, the underemployment rate edged down to 16.5 percent from 16.6 percent in May.
–The number of pending home sales plunged 30% in May from April, to the lowest level since at least 2001, an industry group reported Thursday, reflecting a larger-than-expected fallout from the expiration of the federal tax credit for home buyers.
“The general tone has darkened over the past month,” said Sophia Koropeckyj, an analyst at Moody’s Economy.com, which this week estimated the odds of a return to recession at 1 in 3, up from the previous estimate of 1 in 4.
A happier forecast:
– After a series of strong economic data early this year, recent reports have been more mixed, but that hasn’t altered the fundamental outlook for the economy, said Ken Matheny, a senior economist at Macroeconomic Advisers, a forecasting firm based in St. Louis.
“It hasn’t shaken our belief for a solid, sustainable recovery,” he said, noting that business investment remained solid and consumer spending was holding up fairly well.
Back to the gloomier side:
– By all accounts, the broader economy has been recovering since last summer, powered by government stimulus funds and an upturn in manufacturing. But the rate of growth has fallen from 5.6% in the fourth quarter of last year to half that pace in the first three months of this year.
– The reports renewed fears among economists that the housing market could be headed for more trouble now that the home-buyer tax credit is no longer fueling the real estate market.
The National Assn. of Realtors’ pending home sales index, based on the number of contracts signed to buy previously owned homes in the U.S., dropped to 77.6 in May from 110.9 in April. It was the lowest point since the index was created in 2001.
Lawrence Yun, the trade group’s chief economist, said June and July’s numbers were also likely to be sluggish. But if pending sales don’t begin rising by August, the housing market could be headed for a more prolonged decline, he said. “We need to see a steady rise in that figure,” Yun said.
To a large extent, the housing market depends on the job market – because to buy a home, people need to have money coming in and the confidence that they won’t lose that income.
“The housing market just can’t stay on stimulus medicine forever,” Yun said. “What is really needed is jobs.”
– Investors’ willingness to lock up their money in bonds at such low rates — 2.92% for 10-year Treasury notes — typically is a sign that they expect the economy to slow sharply.
A beleaguered President Obama did his best Friday to brighten a gloomy forecast by announcing a nationwide project to expand broadband Internet access in rural areas. He said it would create 5,000 private sector construction jobs in the short term and ultimately benefit “tens of millions” of people.
And where does that money come from? The remaining portions of the $787 billion stimulus package.
1c)America is sinking under Obama’s towering debt
By Nile Gardiner
I hope the White House is paying attention to the latest annual Congressional Budget Office Long-Term Budget Outlook, which offers a truly frightening picture of the scale of America’s national debt, with huge implications for the country’s future prosperity. According to the non-partisan CBO, “the federal government has been recording the largest budget deficits, as a share of the economy, since the end of World War II”:
As a result of those deficits, the amount of federal debt held by the public has surged. At the end of 2008, that debt equaled 40 percent of the nation’s annual economic output (as measured by gross domestic product, or GDP), a little above the 40 year average of 36 percent. Since then, large budget deficits have caused debt held by the public to shoot upward; the Congressional Budget Office (CBO) projects that federal debt will reach 62 percent of GDP by the end of this year—the highest percentage since shortly after World War II.
In its report, the CBO also offers two alternative long-term scenarios. The first long-term budget scenario, the more conservative extended baseline scenario, is worrying enough:
Federal debt held by the public would grow from an estimated 62 percent of GDP this year to about 80 percent by 2035. Interest payments, which absorb federal resources that could otherwise be used to pay for government services, currently amount to more than 1 percent of GDP; under this scenario, they would rise to 4 percent of GDP (or one sixth of federal revenues) by 2035.
The second, far bleaker budget outlook, is the alternative fiscal scenario, which “incorporates several changes to current law that are widely expected to occur or that would modify some provisions of law that might be difficult to sustain for a long period.” Under this scenario:
With significantly lower revenues and higher outlays, debt would reach 87 percent of GDP by 2020, CBO projects. After that, the growing imbalance between revenues and noninterest spending, combined with spiraling interest payments, would swiftly push debt to unsustainable levels. Debt as a share of GDP would exceed its historical peak of 109 percent by 2025 and would reach 185 percent in 2035.
The CBO warns of potentially devastating consequence for the United States if this debt mountain is not tackled, and even points out that its “projections understate the severity of the long-term budget problem because they do not incorporate the significant negative effects that accumulating substantial amounts of additional federal debt would have on the economy”:
Large budget deficits would reduce national saving, leading to higher interest rates, more borrowing from abroad, and less domestic investment—which in turn would lower income growth in the United States. Growing debt would also reduce lawmakers’ ability to respond to economic downturns and other challenges.
Over time, higher debt would increase the probability of a fiscal crisis in which investors would lose confidence in the government’s ability to manage its budget, and the government would be forced to pay much more to borrow money.
The CBO assessment is probably the most important economic report the President of the United States will read this year. And it should be a huge wake-up call for the Obama administration, which has so far adopted a policy of sticking its head in the sand in the face of an impending Greek-style financial crisis in the very near future.
In striking contrast, the new British government has acknowledged the scale of the debt crisis in the UK, and has launched a tough austerity package to deal with it. The White House needs to wake up to reality, and aggressively reduce borrowing, cut down on public spending, and dramatically reduce the size of the federal government. If it doesn’t, there will be devastating implications for the United States as the world’s only superpower.
With his reckless big government policies, Barack Obama threatens to run his country into the ground, with American decline the inevitable end result. It is not too late to reverse course, but so far there is not a shred of evidence that the president is willing to do what is necessary. Not only will the United States suffer from this kamikaze-style approach, but the world will too.
2)Iran Sanctions: Where We Go From Here
A coordinated strategy by the U.S. and the European Union will determine success or failure
By STUART E. EIZENSTAT
The overwhelming international support for the new U.N. Security Council sanctions against Iran represents one of the most tangible successes of the Obama administration's foreign policy. While not mandatory, these new sanctions call upon states to prevent any financial service—including insurance and reinsurance, freezing any assets, and prohibiting new banking relationships—that contributes to Iran's nuclear proliferation program.
The question now is whether the European Union and the United States can use the legal umbrella of U.N. sanctions to create a coordinated sanctions strategy to put the squeeze on Iran.
Following the U.N. vote on June 9, the Obama administration broadened its sanctions regime to target a state-owned bank and a score of state-owned petroleum, petrochemical and insurance companies. And yesterday, the president signed into law new congressional sanctions banning international firms that aid Iranian banks sanctioned by the U.N. from conducting business in this country.
Now the key test moves to the EU. It must put aside its traditional commercial relations with Iran and take firm action to prevent Tehran from going nuclear.
The goal of sanctions against Iran is to make the cost of continuing its nuclear program higher than the benefits. Shutting down the financial sources the regime uses to support its nuclear program is the most effective way to change its behavior. Iran is not North Korea: It is a significant economy that depends heavily on funding from its energy sector to sustain its nuclear program.
Iran skillfully exploits the differences in various countries' sanctions regimes to finance its nuclear activities. Thus it is crucial that the EU and U.S. harmonize the disparities between their sanctions regimes, and then push their allies to adopt the same policies.
As a first step, the EU should place all Iranian state-owned banks on its sanctions list. Past U.N. resolutions only sanctioned one Iranian state-owned bank, Bank Sepah in 2007, for its role financing Iran's nuclear program. The new U.N. sanctions add only one subsidiary of another Iranian bank. The U.S. has gone further, adding all other major state-owned banks—a total of 16—including Bank Mellat, Future Bank, the Export Development Bank and Bank Saderat. Since the U.N. vote, the U.S. also added Post Bank, barring it from the U.S. dollar market.
The EU is an entirely different story. In 2008 it barred any European companies from doing any business with Bank Melli, but took no similar action on any other Iranian bank. But the U.N. never explicitly designated Bank Melli at all, only calling for "vigilance" on financial ties to the bank. This lack of transatlantic symmetry is unacceptable, and only rewards Tehran.
The EU should sanction all Iranian state-owned banks and their subsidiaries, preventing any transactions with them in the eurozone market. All are involved in supporting illicit trade in arms, and all finance front companies for the nuclear weapons program. To leave any off the sanctions list only invites Iran to shift transactions to those not on the list. All pollute the integrity of the global financial system.
Second, the EU should make its sanctions systemic. America's sanctions regime covers all transactions by Iranian state-owned banks—not only those directly related to nuclear activities. The U.S. bars dollar-transactions involving Iran if they are cleared through the United States. Right now, the EU has no similar policy. It should.
The EU should prohibit any euro-denominated transactions involving Iran from being cleared through the European banks. Once the U.S. ban was put into place, Iranian banks and front companies changed many of their nuclear-related transactions from dollars to euros. Thus, only by this prohibition can the EU protect its own banks from unknowingly participating in nuclear proliferation financing.
Third, the EU and U.S. should agree to ban all insurance companies under their jurisdiction from providing insurance or re-insurance to any ships carrying refined petroleum to Iran, which imports 40% of its needs, and prohibit any new investment in Iran's oil and gas industry.
As a fourth step, the EU should work together with the U.S. in multilateral forums outside of the U.N. to broaden the number of countries undertaking serious financial sanctions. With EU-U.S. cooperation, Japan will be more likely to take the same type of action for yen-denominated transactions. If it did, Iran would be deprived of financing its nuclear activities in any of the three major international currencies. The EU and U.S. should jointly work through the 34-nation Financial Action Task Force, which has already played an effective role in limiting money laundering, to enhance its work on Iranian nuclear financing.
Lastly, it's time to shine a harsh light on the Central Bank of Iran. The new U.N. resolution stresses the need for nations to exercise "vigilance" over the activities of the bank, but the EU and U.S. should go further.
Except in times of war, central banks have been sacrosanct because of the potential disruption to the global financial system. But Iran's central bank has forfeited its special status. It functions like no other central bank. It is not only Iran's monetary arm, but it conceals financial transfers, assists Iranian banks and companies in navigating around existing sanctions, and helps finance front companies to acquire nuclear technology and parts. The EU and U.S. should jointly warn the Central Bank that if it does not cease its illicit activities, it too could become a sanctions target. In the meantime, the new U.N. panel tasked with monitoring sanctions should be asked to report on the bank's role in subverting past U.N. resolutions.
Whether or not sanctions are effective depends in large part on the EU's will to take these steps. Harmonized transatlantic sanctions led by the U.S. and EU with the support of their allies offers the last, best chance of avoiding two unpalatable alternatives: Bombing Iran's nuclear infrastructure, or conceding that Iran will become a nuclear weapons state.
Mr. Eizenstat was ambassador to the EU in the Clinton administration and played a major role fashioning international sanctions policy.
2a)Obama’s Apogee in His Rearview Mirror
By George Will
For reasons related to normal rhythms of American politics and to Barack Obama’s abnormal lurch to the left, his presidency probably has passed its apogee.
If Obama has a second term, it probably will be, as most are, more difficult than the first, during which his party’s brand has been badly damaged in just 17 months. The 22nd Amendment renders reelected presidents instant lame ducks. Public boredom is induced by the incontinent talkativeness of those who occupy the modern rhetorical presidency. And power seeps from reelected presidents as attention turns to selecting their successors.
The remainder of Obama’s first term will be complicated by this November’s elections. Turnout in this nonpresidential year will be significantly smaller than in 2008. The largest declines will be among young and minority voters who were energized by Obama being on the ballot. So this year’s turnout will be older, whiter—and more conservative.
Many conservatives were too dispirited to vote in 2008. Not now. Gallup reports a four-poll average of 59 percent of Republicans and Republican-leaning independents saying that this year they are unusually enthusiastic about voting, the highest number Gallup has recorded for a midterm election since the earthquake year of 1994, when Republicans gained 54 House seats. In Gallup’s June poll, 53 percent of Republicans said they were unusually enthusiastic, 39 percent said they were less; 35 ercent of Democrats said they were unusually enthusiastic, 56 percent said they were less. The Republicans’ net of plus 14 more enthusiastic compared with the Democrats’ negative 21 is the largest party advantage Gallup has ever recorded for a midterm election.
This 111th Congress may leave Washington in December after a post-election lame-duck session in which defeated legislators with nothing to lose might vote for measures the unpopularity of which is, to progressives, evidence of how progressive the measures are. How many dead legislators walking might there be in December? Political analyst Charles Cook notes that in July 1994, four months before the Republican House landslide, Congress’s job approval was 53 percent. In October 2006, percent of Americans approved of the job Congress was doing—and a month later Republicans lost control of both chambers. In recent polls, approval of Congress has ranged from 19 to 26 percent.
Americans usually exempt their particular representative from their normal disparagement of Congress. Today, however, with 62 percent saying the country is on the wrong track, the Wall Street Journal/NBC poll shows 57 percent want to elect a new representative, the highest total in 18 years. Peter Hart, a Democrat who helps conduct this poll, says voters “are just looking for change.” Change they can believe in?
A “wave” election is defined as one in which a party gains at least 20 House seats. The 2006 and 2008 elections were the first two consecutive waves since 1980–82. (There have not been three in a row since 1948, 1950, 1952.) Waves wash legislators into seats that, when normality is restored, are inhospitable to their occupants. Liberal waves give moderate Democrats tenuous holds on essentially Republican districts. Because most Democratic losses will be among the least liberal Democrats, next year Speaker Pelosi’s caucus will be even more at odds with an increasingly center-right country.
In May, Gallup found that 20 percent of registered voters identified themselves as liberals; 42 percent said they were conservatives. The 49 percent of Americans who say the Democratic Party is “too liberal” is just one point below the 50 percent who said that after administering to the party the 1994 shellacking. The 50 percent was the highest number recorded in the 18 years Gallup has asked the question.
The 2012 and 2014 election cycles will be even more hazardous for Democrats because of their party’s exposure in Senate races. This year, Republicans are expected to gain at least five seats, even though they and the Democrats are defending 18 seats. But because of the 2006 and 2008 waves, in 2012 Democrats will be defending 23 Senate seats, Republicans only 10, and in 2014, Democrats will be defending 20, Republicans 13. The Democrats’ exposure in these two cycles (43) will be almost twice the Republicans’ (23). If Senate GOP leader Mitch McConnell has even 44 in his caucus next year, as he probably will, he will almost always be able to muster 41 votes to block bills. Which is another reason Obama’s apogee is in his rearview mirror.
George Will is also the author of One Man's America: The Pleasures and Provocations of Our Singular Nation and With a Happy Eye But … America and the World, 1997—2002.
3)The Obama Tax Trap
How some Republicans are preparing to walk right into it.
"'Next year when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits step up. Because I'm calling their bluff."
That was President Barack Obama, the heretofore unknown deficit hawk, all but announcing the other day the tax trap that he's been laying for Republicans. From what we hear about intra-GOP debates, more than a few will be happy to walk right into it.
You don't need a Mensa IQ to figure this one out. Mr. Obama's plan has been to increase spending to new, and what he hopes will be permanent, heights. Then as the public and financial markets begin to fret about deficits and debt, he'll claim that the debt is "unsustainable" and that the only "responsible" policy is to raise taxes.
White House officials even talk privately about the galvanizing political benefit of a bond market crisis, which would force panicked Members of Congress to accept a big new value-added tax. The President's two looming tax reports—one from his deficit commission and the other from Paul Volcker's economic advisory group—are intended to propose a VAT and other tax options. Whatever their initial reception, the proposals will be there to be pulled from the shelf when the political moment is right.
Voila, Mr. Obama will have established a new spend-and-tax policy architecture that has the feds taking from 25% to 30% of GDP, up from the roughly 21% modern average.
This strategy explains why Mr. Obama is now starting to fret in public about deficits and debt. This week he even said reducing the debt will be "our project." Funny how debt seemed a lower priority when he was urging Congress to pass $862 billion in stimulus and $1 trillion in new health-care subsidies.
The Congressional Budget Office is contributing to this political drama by declaring this week that the "federal budget is on an unsustainable path." Of course, but why? The biggest reason is that Medicare and Medicaid keep rising at two to three times the rate of everything else in the economy and, as CBO explains, will eventually take up every dollar of tax revenues raised, leaving no money for anything else, including national defense.
"Slowing the growth rate of outlays for Medicare and Medicaid," advises CBO, "is the central long term challenge for federal fiscal policy." This is the same CBO that blessed ObamaCare's Medicaid expansion to 16 million more recipients.
What CBO's latest apocalyptic report doesn't stress is what we'd call the more important deficit in its forecast: the growth deficit. CBO predicts an annual rate of GDP growth of 2.2%. Yet since 1959 the U.S. economy has grown at an average rate of 3%, and during the 1980s and 1990s it was closer to 3.5%. The compounding effect of restoring this faster pace of growth would mean far more net national wealth and would certainly make debt repayment easier.
Even Mr. Obama's current spending level of 25% of GDP would be more manageable if the slow economic recovery weren't keeping tax revenue at unusual lows. In 2007, the economy threw off revenue of 18.5% of GDP. That fell to 14.8% in 2009 and may not be too much higher this year. The point is that there is no hope of balancing the federal budget without a return to higher levels of economic growth.
This is where Republicans need to maneuver around Mr. Obama's tax trap. He and his White House economists believe that taxes have little effect on growth so they can get revenues to 20% or 25% of GDP simply by raising tax rates or imposing a VAT. But if they're wrong about the impact of those taxes on a still-fragile economy recovery, they could keep the economy on a subpar growth path for years to come. We think the last thing the U.S. economy needs at the moment—and the worst policy for the deficit—is the big tax increase that will hit on January 1 with the expiration of the Bush tax cuts.
Yet we hear that even many Republicans are privately insisting that any extension of those Bush tax cuts must be "paid for" with other tax increases. Under Congress's perverse budget rules, extending those tax cuts will "cost" the Treasury revenue, even though extending those tax rates would only prevent a tax increase.
And because Congress still uses static revenue scoring—meaning no change in economic behavior from tax changes—the Joint Tax Committee thinks it will raise nearly $1 trillion over 10 years from the higher tax rates on incomes, dividends and capital gains. That's highly improbable. After those tax rates were cut in 2003, total federal tax revenue increased by 44%, or $743 billion, from 2003-2007.
In other words, Democrats have rigged the rules so that merely stopping a tax increase will be scored to increase the deficit. These are the same Democrats who haven't "paid for" trillions of spending in the last four years, but watch them soon denounce Republicans as fiscally irresponsible merely for trying to stop a tax increase. Orwell would love modern Washington.
If Republicans go along with this perverse pay-as-you-go logic, they will play into Mr. Obama's hands. He'll gladly offer to raise taxes on the wealthy in order to "pay for" extending the lower Bush rates on the middle class. Never mind that the tax increases on capital gains, dividends and income tax rates will do the most economic harm.
Republicans need to break out of their rhetorical preoccupation with debt and deficits, focusing their political aim instead on spending and above all on reviving economic growth. They should hold the line against all tax increases and begin to consider a menu of tax cuts to make the U.S. more competitive, especially if the economy continues to underperform.
Mr. Obama's strategy of spending our way to prosperity clearly hasn't worked, as the voters are coming to understand. But if the GOP policy response is merely to bemoan deficits, they will soon find themselves back at their historic stand as tax collectors for the welfare state. To avoid Mr. Obama's tax trap, Republicans also need a growth agenda.
4)Reconfirming John Roberts
Why Democrats are targeting the Chief Justice.
Pardon us for asking, but was that really Elena Kagan's Supreme Court confirmation hearing this week? We're double checking because Senate Democrats seemed preoccupied with refighting the 2005 nomination of Chief Justice John Roberts.
"There is such a thing as legislating from the bench," declared Al Franken, who is playing the role of Senator from Minnesota. "And it is practiced repeatedly by the Roberts Court, where it has cut in only one direction: in favor of powerful corporate interests, and against the rights of individual Americans." The list of Democrats who devoted a chunk of their camera time to deplore the Chief included Patrick Leahy, Sheldon Whitehouse, Ben Cardin and Chuck Schumer, rather like a political campaign.
Which it is. By decrying the Court's record, Democrats hope to intimidate the Justices away from future decisions that could derail liberal priorities, notably ObamaCare. As one of the most dramatic expansions of federal power since the 1930s or 1960s, the law is already facing challenges from 20 states on the grounds that its individual mandate to buy health insurance is unconstitutional.
Contrary to the imaginings of Messrs. Franken & Co., the Roberts Court is really a centrist Court that swings left and right depending on the subject. It also routinely decides cases on narrow grounds that pull a larger majority. In the 2006 term, some 70% of the Court's cases were decided unanimously, and this term saw 56% of the cases decided either unanimously or by an 8-1 margin. While that number has ebbed and flowed depending on the term, there's no question Justice Roberts has proven to be a pragmatic jurist who is wary of overturning precedents without ample legal and historical justification.
On property rights this term, the Court ruled 8-0 against property owners in a case called Stop the Beach Renourishment v. Florida. On antitrust law, it ruled unanimously against the National Football League in a case that would have significantly loosened antitrust restrictions. In one of the term's final decisions, Justice Roberts himself voted with the Court's liberal bloc in a case that ruled out life sentences for juvenile criminals in non-murder cases.
The prominent 5-4 exceptions to the rule this term are the ones that now haunt liberal dreams, Citizens United v. FEC and McDonald v. Chicago. In both instances, the court took on pet political causes of the left—campaign finance reform and gun control, respectively—and dispatched them, but neither decision comes within whacking distance of judicial "activism."
In the two guns cases, McDonald and its prequel, 2008's District of Columbia v. Heller, the Court was grappling for the first time since the 19th century with whether the Second Amendment guaranteed an individual right to bear arms. Citizens United likewise restored the First Amendment's guarantee of a right to free speech by overturning some of Congress's most egregious limits on campaign spending. A few months later, the same gang of supposedly marauding ideologues declined to hear a challenge to soft-money limits brought by the Republican National Committee.
Also singled out for Democratic fear and loathing was the Court's record on business cases, including Stoneridge Investment Partners v. Scientific Atlanta. In that decision, the Court declined to open up a vast new avenue for class-action suits against companies under the novel theory of "scheme liability." But in business cases too, the Court often ruled unanimously on narrow grounds, as it did in the recent trio of decisions limiting, but not discarding, the oft-abused statute on "honest services" fraud.
In their pique, Congressional Democrats are following President Obama, who took out his own billy club during this year's State of the Union address, criticizing the Court's decision in Citizens United as the Justices sat in front of him as a captive audience. In nominating Ms. Kagan, Mr. Obama pointedly praised her for defending "the rights of shareholders and ordinary Americans against unscrupulous corporations."
With midterm elections ahead, Democrats want to fire up their liberal base against the Roberts Court while threatening the Justices with more bludgeons if they dare question the Constitutional affront of ObamaCare. It's not the first time lawmakers have tried to work the judicial refs and poison public opinion against them, but with any luck it might backfire. Justices know that criticism goes with their job, but we doubt they take well to being bullied.
5)Obama Let the Immediate Drive Out the Important in the McChrystal Affair
By Ed Timperlake
When President Obama replaced General McChrystal with the "brilliant" choice of David Petraeus, he created a critical job vacancy, technically demoting the Commanding General of Central Command (CENTCOM).
Now, with the increasing probability of war in the Middle East between Israel and Iran, a very important Combat Command will have to wait for the Senate Confirmation of a yet-to-be-selected replacement as Commanding General.
So before they start building Styrofoam Greek columns to enshrine President Obama's Lincoln/McClellan or Truman/MacArthur moment, all Americans must recognize that a much bigger and more dangerous issue is in play.
Revealing a significant consequence of their total myopic focus on Afghanistan, the administration's National Security Team demonstrated that they could only work sequentially. The evidence is the fact that the president's rapid announcement relieving General McCrystal makes it very obvious that they were driven by a 24-hour PR inbox focus, and in doing so, they left a significant problem leaderless.
With the president's White House announcement on General McChrystal, it can be justifiably argued that the press has determined the immediate agenda for our National Command Authority. History will show conclusively that Rolling Stone Magazine set the agenda on what the NSC determined was the most important problem needing immediate presidential attention.
The reporter was given access, and he did his job very well because he is a good writer. But a close read indicates that evidence of a firing offense-worthy quote by General McCrystal is just not present. Yet even if the president felt the need to act, which is his right as Commander-in-Chief, the consequences of his immediate action were not thought through completely.
Those cheering President Obama's decisiveness in relieving General McCrystal missed a much bigger picture: the very real possibility of a coming military clash over Iran's quest for nukes.
However, to be fair, on a troop level, there is one area in which General Petraeus can make a real difference -- the Afghanistan Rules of Engagement (ROE) -- so his transfer on that level is a very good event.
The president stressed that his relieving General McChrystal wasn't personal, but it probably was, because his National Security team is notoriously thin-skinned. Additionally, the president also stressed that the strategy and tactics were not going to change. Although with a fresh look by General Petraeus, the restraint on firepower that has proven to be deadly to U.S. and Allied troops under the current ROE might quickly change.
The current Afghanistan ROE stresses significant restraint on the employment of air power, artillery, and other ground tactics in order to -- excuse the cliché -- win the hearts and minds of the Afghan people. However, General Petraeus, an extremely capable officer, is smart enough to recognize that restrictive ROE might wind up ultimately losing the hearts and minds of U.S. families, especially those with loved ones in combat.
But it should be remembered that the chain of command -- from General Patreaus, Commanding General of CENTCOM, to Chairman Joint Chiefs of Staff Admiral Mullen, then Secretary of Defense Gates, and finally General Jim Jones, Director National Security Council and the Commander-in-Chief President Obama -- all signed off on the restrictive restraints.
But independent of the Afghanistan ROE debate, the harsh and unforgiving reality is that after relieving General McChrystal, the president and his team created a new and much more important problem by racing to solve their immediate PR issue.
An extremely deadly combat confrontation may be coming soon, with a world-altering, historic military clash. There are numerous current, worldwide, credible reports of military preparations indicating a major combat engagement brewing between Israel and Iran.
If the Israeli Air Force flies into combat, how the U.S., People's Republic of China, Russia, and even North Korea factor in is anyone's guess. CENTCOM is now without a confirmed Commanding Admiral or General (with a name not even announced) and has one the most important missions in America's national security posture.
CENTCOM must always be ready to report and execute U.S. and allied actions needed to quickly and decisively address how the entire Arab and Islamic world will react to an IDF/Iran confrontation and the consequences for the world's oil supply.
So while the president and his team were focusing on a magazine article, the CENTCOM Theater, with responsibilities for the entire Middle East -- not just Afghanistan -- is really beginning to heat up, and events can spin out of control very fast.
It is a failure of leadership that the president and his team did not take all this into account before acting on just the General McCrystal problem. Quite possibly, like the delayed response to the U.S. Gulf oil disaster, the C.G. CENTCOM selection issue could fester while a major war in the Middle East is reaching a boiling point
Not a very impressive moment in American history, and the entire affair shows very shallow and dangerous strategic thinking and planning on the part of President Obama and his National Security team.
5a)Iran threatens oil routes as Obama signs tough new energy sanctions
A US-Iran showdown loomed closer early Friday, July 2, when president Barack Obama signed into law a series of energy sanctions, the toughest yet, for arresting Iran's nuclear weapons program. Iran's defense minister Gen. Ahmad Vahidi warned that searches of its ships or planes would have "dire consequences" for world security and the Middle East in particular.
The law drafted by Congress shuts US markets to firms that provide Iran with refined petroleum products, such as gasoline and jet fuel, invest in its energy sector, or provide financing, insurance or shipping services. Non-US banks doing business with blacklisted Iranian entities, primarily Islamic Revolutionary Guard Corps organizations, will be banned from US markets.
These measures complement and strengthen the new UN Security Council sanctions and European measures and will hit every Iranian. The oil-rich country Islamic Republic imports 40 percent of its refined oil needs because of its own inadequate refining capacity. Any investors in projects for developing this sector would be punishable under the new US law.
Earlier, Gen. Vahidi warned world powers against implementing certain UN sanctions: "As regards inspection of (Iranian) ships, there are one or two countries which pursue the issue and have made some comments about it and this indicates that these people don't pay any attention to security issues in the region and the world," said.
Tuesday, June 26, military sources reported the arrival of the USS Nassau-LHA-4 at the head of a strike group of amphibian craft to the Gulf of Aden-Red Sea sector with 4,000 Marines aboard, including special units trained in operations behind enemy lines. Our sources disclosed that their presence caused Tehran to hold back the ships destined for breaking Israel's sea blockade of the Gaza Strip for fear they would be intercepted and searched as UN sanctions permits. To read article click here.
The Speaker of the Iranian parliament (Majlis) Ali Larijani and the Revolutionary Guards commander Gen. Ali Fadavi have both threatened harsh reprisals against all vessels, including American warships and oil tankers sailing through the Persian Gulf and Straits of Hormuz, for any attempts to search ships or planes carrying cargoes to Iran.
The new US law will make shipping and insurance costs for Iran's gasoline imports prohibitive. They are the first sanctions to bite really deep into Iran's economy and hit the Guards' commercial empire. Their control of refined oil imports is a major source of revenue and those profits provide funding for their operations, the foremost of which is the development and manufacture of nuclear weapons.
Iranian sources have no doubt that Iran will not take the new penalties lying down and will strike back - possibly, in the first instance, by impeding Persian Gulf shipping carrying Saudi and Gulf oil out to the United States, Europe and the Far East, with immediate effect on world oil prices.
Interception of an Iranian ship suspected of carrying contraband energy products could well spin into a showdown.
President Obama indicated that this time the United States is determined to follow through on its punitive measures against Iran. As he signed the new sanctions, he said: "There should be no doubt, the US and the international community are determined to prevent Iran from acquiring nuclear weapons. The new sanctions would strike at its capacity to finance its nuclear program." He went on to say, "If Tehran persists in its course, the pressure will continue to mount and its isolation continue to deepen
6)Al's Masseuse and the Feminists
By Jeannie DeAngelis
Weeks after the accusation that Al Gore forced himself upon an innocent service provider in a Portland, Oregon hotel room, there is yet to be an outcry from feminist groups in support of defenseless women forced to physically fight off influential male aggressors.
Massage therapist Molly Hagerty has emerged from the shadows and "bravely gone public" with her story of being terrorized by a powerful politician in search of someoneon whom to "release his second Chakra." Molly claims the ex-vice president is "a pervert and a sexual predator ... He's not what people think he is -- he's a sick man!"
Over the years, there have been many examples of feminists speaking on behalf of oppressed, abused, and harassed women. However, so far, vocal feminists haven't uttered one word in Molly-the-masseuse's defense. What's the problem?
According to Ms. Hagerty, she was groped by Mr. Global Warming. According to the licensed massage therapist caught unaware, Big Al started the attempted seduction with a drunken bear hug followed by lewd innuendo and forceful sexual contact. According to official police records, Gore pushed the woman onto a bed, crushing and kissing her abruptly. If there is any doubt, Molly has black pants in a Zip-Loc bag to prove it.
My personal interaction with duplicitous feminists began years ago at work. The first clue manifested when a gender-equity-weekend-activist recruited female underlings to serve as personal baristas during the workweek. Having not yet completed my education, I was often beckoned to a subservient position and asked to do menial tasks for the grand dame of female equity.
When Anita Hill accused Clarence Thomas of sexual harassment, I was working in academia. It didn't take long to realize that educated feminists view women without advanced degrees as undeserving of being included in the infringed-rights group.
During the Clarence Thomas/Anita Hill hearings, I arrived to work one day to find a prominent liberal feminist trembling with revulsion over Clarence Thomas's alleged mistreatment of Anita, which had supposedly taken place ten years prior to the accusation.
Standing beside my desk, tightly gripping a yellow legal pad in anticipation of my servile self, was a professor/feminist. The woman assumed by reason of gender that I would automatically concur, and announced, "I am crafting a group letter to Anita Hill, which will include signatures of indebted women thanking Ms. Hill for her bravery in stepping forward to expose Clarence Thomas' disgusting display of sexual harassment. I need you to type a draft, and afterwards, I know you will sign."
My reaction was palpable. There was no need for words. I stared directly into two cruelty-free, mascara-adorned eyes, and without uttering a single word, conveyed the following message: "Ahhh, I don't think so."
Gasping and clutching her pad close to her chest, the feminist in search of a servant replied "Oh my. Well...what are you saying? Are you saying you don't agree?" I said, "Absolutely correct!" At a loss for words as well as a slavish typist, one shocked Anita Hill supporter said, "So you mean you won't type it?" I promptly retorted, "Also correct."
Feminists reacted with shocked indignation over the alleged treatment of Anita Hill, a sister with a prestigious Juris Doctor from Yale Law School. Molly Hagerty has a degree in Liberal Studies from Portland State University and a professional diploma from Oregon School of Massage, which might explain tepid feminist reaction to a service provider toting a collapsible massage table daring to make an accusation against a liberal icon.
On the feminist scale of offensive behavior, a liberal man groping a masseuse just doesn't carry the same level of transgression as a conservative judge insulting a female law professor.
Like liberal women, liberal men also tend to extend broad deference to Anita Hill types. It appears that while attending global warming conferences or environmental colloquiums, Al Gore conducted himself like a gentleman and a scholar. However, back at the hotel, amorous "Call me Al" allegedly felt comfortable enough to be predatory toward a helpless woman whom the left could readily relegate to the disposable "trailer park trash" pile along with Paula Jones and Juanita Broderick.
On the left, "liberal" coupled with the word "male" connotes unquestioning support for the feminist agenda. Unlike conservative troglodyte-oppressors, the left's political fraternity proudly touts meninist-politicians renowned in feminist circles as above sexual harassment reproach. Liberal men are esteemed as partners with enlightened females co-laboring for the advancement of the feminist cause.
Based on the indifferent reaction from feminist circles, it appears that as long as naughty boys are liberal, women on the left are not offended by raunchy male conduct. Could it be that liberal ladies find it easy to overlook attempted rape and sexual harassment charges if the male aggressor is pro-choice and promises to save the planet?
I may be out of the loop, but since Anita Hill attempted to use unproven Coke can stories as a weapon to destroy Clarence Thomas, another "you go girl" group letter has never crossed my path. To the best of my knowledge, the same feminist entourage who eagerly lambasted Judge Thomas and jumped to the defense of Ms. Hill felt little need to communicate with a laundry list of women accusing the perpetually randy Bill Clinton of everything from indecent exposure to rape.
Unless I missed something, I don't recall receiving an e-mail blast announcing a Women's Studies project that included sending a letter of commiseration to the spurned wife of John Edwards, who, while Johnny cavorted in hotel rooms with a videographer, suffered alone from advanced terminal cancer.
However, all is not lost, because American feminists now have a spanking new opportunity to extend sympathies to an oppressed member of the sisterhood. In fact, although I no longer serve as a personal handmaiden on call for liberal java urges, I have decided to voluntarily step forward to do what I had declined doing many years ago: Type a letter.
Progressive feminists are welcome to add supportive signatures to a communiqué similar to the one sent almost twenty years ago lauding the heroic Anita Hill. The only difference is that the current correspondence will be addressed to a masseuse from Portland, Oregon named Molly Hagerty. The content of the letter will offer feminists concerned about women's issues the opportunity to thank Molly for bravery and courage in exposing the adductor muscle massage-craving, "crazed sex poodle," male feminist, and staunch ally of both mothers and nature, Al Gore.
-------------------------------------------------------------------------------------7)Netanyahu: No apology, no compensation to Turkey over Gaza flotilla
Netanyahu: It's good for Israeli and Turkish interests to try to stop the deterioration in relations.
Israel won't apologize to Turkey over the Gaza aid flotilla clashes and the possibility of giving compensation to those injured in the incident is not up for discussion, Prime Minister Benjamin Netanyahu said on Friday.
"Israel cannot apologize for our soldiers being forced to defend themselves against the mob that almost slaughtered them," Netanyahu said during an interview with Israel's Channel 1.
"We are sorry over the loss of life," Netanyahu said. "This is clear."
The prime minister also denied reports that Israel is considering compensating those injured in the clashes.
"That is not up for discussion," Netanyahu said.
The clandestine talks between Industry, Trade and Labor Minister Benjamin Ben-Eliezer and Turkish Foreign Minister Ahmet Davutoglu which took place in Brussels earlier this week caused a small spat between Netanyahu and Foreign Minister Avigdor Lieberman.
Netanyahu acknowledged that it was a mistake not to update the foreign minister on what was happening.
"I explained the circumstances [to Lieberman], the mistake was fixed and we are moving forward. The coalition is not in danger," Netanyahu said.
Speaking about the actual meet, Netanyahu said "It's good that there was contact on a senior level, even if there are no agreements. It's good for Israeli interests and even for Turkish interests to try and stop the deterioration [in relations]."
Netanyahu said that different people had approached him in recent weeks with proposals of finding ways to contact Turkey in order to stop the worsening of relations.
"One of them was Ben-Eliezer, who proposed an unofficial meet at the airport in Zurich. I told him 'go ahead, meet.'"
8)US: Mideast talks making progress
Ahead of Netanyahu-Obama meeting, official says gaps between Israel, Palestinians have narrowed
The White House insisted Friday that US-brokered indirect Middle East talks were making progress, despite Palestinian complaints that the Israelis were stalling.
Senior US officials said they hoped to be able to move to direct talks between the two sides soon, though could not give a timeline, as they briefed reporters ahead of Prime Minister Benjamin Netanyahu's visit next week.
Daniel Shapiro, President Barack Obama's senior director for the Middle East, said the talks "have made progress and the gaps have been narrowed."
Washington sees the proximity talks brokered by US Middle East envoy George Mitchell as an interim step towards full direct talks between the two sides.
"It is hard to put a precise timeline on when that step could be taken," Shapiro said. "But we are encouraged by the progress that has been made."
On Monday, Palestinian president Mahmud Abbas offered Israeli newspapers a negative summary of how the talks have been going.
"We haven't received from Netanyahu even a single sign that might indicate progress," Abbas was quoted as saying by the Maariv daily.
"He has completely ignored everything we've raised," the paper quoted him as saying in comments made to Israeli journalists from four newspapers who spent the evening at his West Bank headquarters in Ramallah.
The indirect talks, which began on May 9 and are scheduled to take four months, are
focusing on core issues including borders and security.
Netanyahu wants direct talks to begin but the Palestinian leadership first wants progress on recognizing borders of Palestinian lands and a halt to demolitions of Palestinian homes in east Jerusalem.
Netanyahu had been due to see Obama last month, but had to cancel the visit due to the crisis over the Israeli raid on a flotilla heading for Gaza.
"There is absolutely no rift between the United States and Israel," said Ben Rhodes, deputy national security advisor for strategic communications.
"This is a relationship first of all that is very strong and very important to the United States... our administration in partnership with the Israeli government has taken a number of steps to strengthen and deepen our cooperation."
Rhodes said the talks would focus primarily on the push for direct Palestinian and Israeli talks, but would also range onto regional security challenges like Iran.
Obama would also bring up the new Israeli policy easing restrictions on the goods that are allowed to cross between Israel and Gaza, which was adopted following global outrage at the IDF flotilla raid.
"The president welcomed those changes which we think already are, and as they are implemented, will make a significant difference in the lives of people on the ground in Gaza," Shapiro said.
"I think the president and the prime minister really look forward to reviewing that progress."
8a) Netanyahu must play for time
By CAROLINE GLICK
If he plays his cards wisely, he can say no to Obama and avoid an open confrontation.
Just ahead of Prime Minister Binyamin Netanyahu’s trip next week to Washington, Palestinian Authority Chairman Mahmoud Abbas went on a charm offensive towards the Israeli media. On Tuesday, Abbas invited representatives of the Hebrew-language press to his office in Ramallah and assured them of his good intentions towards Israel.
We have been here before. In Netanyahu’s last go-around as prime minister, it seemed like every time he was due to visit Washington, then president Bill Clinton’s advisers would set up a meeting for Abbas’s predecessor Yasser Arafat with the Israeli media. Arafat would talk about how much he wanted peace with Israel, and how he was just waiting for Netanyahu to agree to embrace the cause of peace.
The peace-crazed Israeli media enthusiastically reported Arafat’s lies to the Israeli people without questioning either Arafat’s motives or his honesty.
Had they exhibited even a minimal amount of journalistic competence, they would have at least checked to see what the Arafat-controlled Palestinian media was reporting about their meeting with the “Rais.”
But that would have ruined their Netanyahu-bashing narrative. And so the Israeli public was denied the knowledge that not only did the Arafat-controlled Palestinian media fail to report their meeting, Arafat’s newspapers and television broadcasts routinely told the Palestinian people that there could be no peace with the Jews.
Indeed, they daily exhorted the Palestinians to view the destruction of Israel as their greatest goal.
In a similar manner, this week, as Israel’s newspapers published ecstatic headlines about Abbas’s moderation and desire for peace, the Abbas-controlled Palestinian media made no mention of the meeting. Moreover, in recent weeks, the Abbas-controlled Palestinian media have been intensifying their incitement against Israel and Jews.
As Palestinian Media Watch reported this week, on Tuesday, Abbas-controlled PATV aired a sermon by the PA’s Mufti Sheikh Muhammad Hussein. The mufti said, “The Jews, the enemies of Allah and of His Messenger, the enemies of Allah and of His Messenger! Enemies of humanity in general, and of Palestinians in particular... The Prophet says: ‘You shall fight the Jews and kill them...’” Similarly, last week PATV re-broadcast a “documentary” film in which all of Israel is described as “occupied Palestine.”
In one excerpt cited by PMW, the film’s narrator asserts, “The West Bank and Gaza have another section in Palestine which is the Palestinian coast that spreads along the [Mediterranean] sea, from... Ashkelon in the south, until Haifa, in the Carmel Mountains.
“Haifa is a well-known Palestinian port. [Haifa] enjoyed a high status among Arabs and Palestinians, especially before it fell to the occupation [Israel] in 1948. To its north, we find Acre. East of Acre, we reach a city with history and importance, the city of Tiberias, near a famous lake, the Sea of Galilee. Jaffa, an ancient coastal city, is the bride of the sea, and Palestine's gateway to the world.”
On Tuesday, the moderate Abbas told his Israeli guests that he’s ready to hold direct negotiations with Netanyahu as soon as the premier gives him his positions on borders and security.
As Abbas’s full statement made clear, what he means by that is that he will negotiate with Netanyahu after the latter agrees to adopt his predecessor Ehud Olmert’s position on borders and security. Those positions included an Israeli withdrawal to the 1949 armistice lines – including the division of Jerusalem – and the stationing of foreign forces along the border with Jordan.
FOR ITS part, the Obama administration is putting its own pressure on Netanyahu to make Abbas – and US President Barack Obama – happy. Over the past several weeks the administration has been pressuring Netanyahu to extend the 10-month prohibition on Jewish construction in Judea and Samaria beyond its scheduled September end date.
As a sweetener to help Netanyahu swallow this strategically and politically disastrous pill, Obama and his aides claim that an extension of the draconian, bigoted policy would serve as a confidence building measure to convince Abbas to begin direct negotiations with Israel.
In Obama’s bid to convince Netanyahu to extend the Jewish building ban, we see the foreign policy equivalent of a used car salesman’s attempt to sell the same customer the same lousy car twice – using different lies each time.
Last year, Obama and his advisers justified their demand that Netanyahu act to strangle the Jewish communities of Judea and Samaria by claiming that doing so would make the Arab world begin normalizing its relations with Israel.
Obama’s Jewish surrogate, former congressman Robert Wexler, told Netanyahu last July that in exchange for barring Jews from building kindergartens in Israel’s heartland, Israel would see 20 Arab embassies open in Tel Aviv.
Of course not only did that not happen, moments after Netanyahu announced the prohibition on Jewish building, Obama’s peace mediator George Mitchell claimed that his massive and unprecedented concession was insufficient.
Channeling Abbas, Mitchell declared that the US expects Israel to agree to destroy all the Jewish communities in Judea and Samaria and withdraw to the indefensible 1949armistice lines.
Weeks after Netanyahu’s concession in Judea and Samaria, the administration began its onslaught against Jewish building in Jerusalem.
As the minutes tick by towards Netanyahu’s visit with Obama at the White House, Netanyahu is signaling that he is willing to buy the same used car a second time. Although Netanyahu continues to insist that he will not accept preconditions for negotiations, he has empowered Defense Minister Ehud Barak to take a leading role in contacts with the PA.
On Wednesday, Barak announced that he will be holding direct talks with Israel-boycotting PA Prime Minister Salam Fayyad in the coming days. Earlier this week Barak effectively announced his support for an Israeli withdrawal to the 1949 armistice lines even without a peace treaty. In a media interview, Barak claimed that that the unilateral withdrawals from Gaza and South Lebanon were great achievements that should be repeated.
Netanyahu’s desire to avoid a confrontation with the Obama administration is understandable.
Given the nature of the Israeli media, Netanyahu would certainly pay a political price if he were to be blamed for making the administration turn against Israel. But the truth is that today more than ever, Obama shares Netanyahu’s desire to avoid an open clash.
THE MIDTERM congressional elections are just four months away and Obama’s Democratic colleagues are running scared. Polls show that the Democratic Party is likely to lose control over the House of Representatives. The Democrats will also likely see their control over the Senate weakened if not lost. As The Wall Street Journal’s political analyst John Fund reported this week, out of 70 competitive congressional districts, the Democrats will likely lose 60 and so lose control over the House.
Going into such a problematic electoral season, the last thing Obama needs is an open confrontation with Israel. A new row with Netanyahu will not only harm Democrats in key states like Florida, New York, New Jersey, Illinois and Pennsylvania.
It will harm the Democrats’ fund-raising efforts among Jewish American donors. Over the past several months, there have been repeated reports that Jewish Americans are drastically cutting back their donations to Democrats. The trend will likely escalate if Obama forces Netanyahu into a corner next week.
What this means is that Netanyahu is well placed to stand up to Obama’s pressure. If he plays his cards wisely, he can say no to Obama and avoid an open confrontation. For instance, instead of agreeing to extend the building prohibition, Netanyahu should say that he is willing to discuss that demand in face-to-face negotiations with Abbas. Rather than agree to Abbas’s preconditions, Netanyahu should say that he is willing to listen to Abbas’s position in face-to-face negotiations. And so on and so forth. Such statements by Netanyahu will take the pressure for making concessions off him and put Obama and Abbas on the spot.
Even more importantly, it will buy Israel time.
And buying time should be Israel’s chief goal with respect to Washington today. Since taking office, Obama has repeatedly demonstrated that he will not reconsider his fundamentally hostile view of Israel. Obama’s basic belief that Israel’s strength and size are to blame for all the violence and radicalism in the Arab world is not subject to change, regardless of how clearly and continuously events on the ground prove it wrong.
EVEN WORSE for Israel, Obama is not alone in this view. Indeed, as a report in Foreign Policy this week makes clear, Obama’s position on Israel is moderate when compared to the positions being staked out in influential policy circles in the US military.
On Wednesday, Foreign Policy published the content of a memo written last month in the US Military’s Central Command. The memo, a “Red Team” assessment of how the US should position itself vis-à-vis the likes of Hamas and Hizbullah, reveals that among key members of the US policy-making community, Israel is viewed with extreme hostility.
The leaked memo reportedly reflects the views of a significant number of senior and mid-level officers in Centcom, including large numbers of intelligence officers, as well as a significant number of area analysts stationed in the Middle East. It argues that it is wrong for the US to lump jihadist movements like Hamas, the Muslim Brotherhood, al-Qaida and Hizbullah in one group.
Dismissing the significance of the identical religious dogma that stands at the root of these movements, the memo asserts that Hamas and Hizbullah are pragmatic and important social forces with which the US must foster good relations.
The memo calls for the US to support the integration of Hizbullah forces into the Lebanese military. It also calls for the US to encourage and permit the integration of Hamas forces into the US-trained Palestinian security forces.
As far as Israel is concerned, the memo blames the Jewish state for the US’s failure to date to adopt these recommended policies. Moreover, the memo’s authors condemn Israel’s maritime blockade of Gaza as keeping “the area on the verge of a perpetual humanitarian collapse.”
The Centcom memo also condemns Israel’s July 2006 decision to respond to Hizbullah’s unprovoked bombardment of northern Israel and its unprovoked cross-border attack against an IDF patrol in which five soldiers were killed and two were kidnapped and subsequently murdered.
Denying Hizbullah’s subservient relationship with the Iranian regime, the report claims that Israel’s decision to use force to defend itself against Hizbullah’s acts of war served to strengthen Hizbullah’s ties to Teheran.
What this memo shows is that Israel has little hope of seeing a change for the better in US policy in the near future and its best bet today is to play for time. Next week at the Oval Office, Netanyahu should capitalize on his advantage four months ahead of the congressional elections and put the burden on Obama and Abbas to show their good intentions.
9)How long will the public tolerate Afghan war?
By: Byron York
Gen. David Petraeus sailed through Senate confirmation so quickly that few people noticed what he had to say about his new job as top U.S. military commander in Afghanistan.
Petraeus told the Senate Armed Services Committee that American forces face many more battles against a determined and resilient Taliban. "My sense is that the tough fighting will continue," Petraeus said. "Indeed, it may get more intense in the next few months."
But Petraeus said that as the fighting increases, and American casualties rise, the public should remember that "progress is possible" in Afghanistan. Petraeus knows that's true, he explained, because he has seen it.
"For example, nearly seven million Afghan children are now in school as opposed to less than one million a decade ago under Taliban control," Petraeus said. "Immunization rates for children have gone up substantially and are now in the 70 to 90 percent range nationwide. Cell phones are ubiquitous in a country that had virtually none during the Taliban days."
It was an extraordinary moment. Americans overwhelmingly supported the invasion of Afghanistan after the September 11 terrorist attacks. In eight and a half years of war there, 1,149 American servicemembers have died. And after all that sacrifice, the top American commander is measuring the war's progress by school attendance, child immunization and cell phone use.
That sort of nation building, especially in a place as primitive as Afghanistan, has never been popular with American voters. It's especially unpopular when combined with highly restrictive rules of engagement that have tied the hands of the nearly 100,000 U.S. troops in Afghanistan, exposing them to danger from an enemy they're not allowed to strike.
We have dozens of examples of the effects of those rules, most recently in the Rolling Stone article that led to the firing of Petraeus' predecessor, Gen. Stanley McChrystal. The article told how U.S. commanders wanted to destroy an abandoned house used by the Taliban to launch attacks, but were denied permission. Then a 23-year-old Army corporal was killed there.
"Does that make any f--king sense?" a fellow soldier asked. "You sit and ask yourself: What are we doing here?"
In another scene detailed by author Michael Hastings, a soldier confronted McChrystal about the rules. "We aren't putting fear into the Taliban," he told the general.
"Winning hearts and minds in [counterinsurgency operations] is a coldblooded thing," McChrystal responded. "The Russians killed 1 million Afghans, and that didn't work."
"I'm not saying go out and kill everybody, sir," the solder responded. "You say we've stopped the momentum of the insurgency. I don't believe that's true in this area. The more we pull back, the more we restrain ourselves, the stronger it's getting."
Put aside the fact that American leaders in Afghanistan are unironically using the phrase "hearts and minds" -- the very words used to describe the folly of U.S. policy in the Vietnam era. Does the American public want to continue a war in which Americans die because they're not allowed to fight back when attacked, all for the purpose of increasing school attendance, child immunization, and cell phone use?
President Obama's deadline to begin withdrawing U.S. troops in January 2011 was a topic of much discussion at the Petraeus hearing. There's disagreement in the Senate over the timeline, but the public's opinion is clear.
A recent Gallup survey found that 58 percent of those questioned support Obama's timetable, versus 38 percent who oppose. Of those opposed, 7 percent say they're against the timetable because withdrawal starts too late. Add them to the 58 percent who support withdrawal as scheduled, and you have 65 percent of Americans who want a withdrawal that begins no later than July of next year.
Given the dreary assessments we've heard from Petraeus and McChrystal, it's unlikely any great victories in Afghanistan will change those opinions.
This is not a blame-Obama issue. The first seven years of the war were not his doing. But the decision to leave or stay in Afghanistan is his to make.
Near the end of the Rolling Stone article, one of McChrystal's top aides, Maj. Gen. Bill Mayville, gave a bleak forecast of the war's end. "It's not going to look like a win, smell like a win or taste like a win," Mayville said. "This is going to end in an argument."
If that's the case, why not just get out and start the argument now?
Byron York, is The Examiner's chief political correspondent.
------------------------------------------------------------------------------------ 10)And Justice For All
By Richard Fernandez
The salient thing about J. Christian Adams’s accusation that the Obama administration deliberately let off the New Black Panther Party after it engaged in voter intimidation is that, if true, it constitutes a pure exercise in the abuse of power. The other wrongs it represents — the perversion of the electoral process, the violation of civil rights — are secondary. The most serious allegation in the whole affair is that the certain officials countenanced a crime because they wanted to. The most concentrated expression of tyranny is malice in the service of caprice.
Adams was a Department of Justice lawyer who resigned in disgust after “we were ordered to dismiss the case. I mean we were told drop the charges against the New Black Panther Party. It’s the easiest case I ever had at the Justice Department. It doesn’t get any easier than this. If this doesn’t constitute voter intimidation, nothing will. .. ”
Like the recently concluded Robert Wone case — in which three gay men were acquitted of the murder of a man in their apartment — the New Black Panther incident pits a politically powerful minority against ordinary victims. The public is asked to understand the situation from the perspective of the underdog. What does it matter if men in New Black Party uniforms paced across a voting precinct? They’re just evening the score. Or so we are told. But in situations where the world’s largest midget fights the world’s smallest giant the “correct narrative” is no longer so obvious; just who is bigger is no longer clear and the system by rights should fall back on the law itself and ask itself “who really violated the law.”
But the habits of political correctness are so ingrained that even this logical parachute fails to open. In the Wone case, even when the judge is inclined to find the stories of the three defendants preposterous, the word “guilty” can hardly be pronounced. The Washington Post reports that Judge “Leibovitz said she believed that the three defendants know who killed Wone, but that the prosecution failed to prove that they did. It came down to the reasonable doubt standard, she said.” The Wone case is singular for the questions that were not asked and the media coverage that never materialized. The Washington Post question and answer gives a flavor of what was left off the books.
I want to raise a bit of an uncomfortable topic. In the early stages of the investigation, the media reported that human semen (perhaps his own) was found on the body of Mr. Wone. I did not read anything about it once the trial started. Were the reports accurate? If so, was it raised at the trial, and what were the conclusions? …
Keith Alexander: It is indeed a delicate question but a question I have been getting from readers via email and letters for weeks now. Yes, when the men were arrested in 2008 for obstruction of justice and conspiracy, prosecutors said Wone had been sexually assaulted. They based their conclusion on the fact that his own DNA was found on him, well, in his rectum area. Defense attorneys said Wone was never sexually assaulted and produced a medical expert during motions who said the Wone may have discharged the semen as he was dying. The government decided not to pursue the sexual assault theory primarily because this was a conspiracy trial, not a murder or sexual assault trial, so such details would have just distracted a jury from the actual case. So they agreed to leave it out, before the defense requested not to have a jury trial and instead allow the judge to hear the case.
Despite the sensational elements in both the Black Panther and Robert Wone cases there has been very little media coverage of the incidents. Wikipedia notes that “Camille Paglia commented that the relative lack of news coverage for the crime ‘appears to be a blatant case of politically correct censorship’”. The Washington Post was asked about the empty media seats at the Wone trial. It was as if they had been forced to witness a plague.
Washington, D.C.: Are you aware of 20/20 or Dateline doing an episode on this case? It would seem perfect for their audience.
Keith Alexander: Dateline had a reserved seat in the courtroom during the trial, but I only saw someone in that seat a few times. So I really don’t know. Never saw anyone from 20/20.
It was left to elements of the gay community to appoint themselves the strongest advocates of justice for Robert Wone. Some of them banded together to start the website Who Murdered Robert Wone? and the depth of their coverage, its professionalism and thoroughness, has put much of the MSM to shame. They at all events had not forgotten that they shared a common humanity with Robert Wone. Perhaps they were emboldened, and not a little empowered by the knowledge that in demanding justice for the victim, they could not be accused of the greater crime of homophobia. It is demotion of crime — even murder — to the shibboleths of political correctness that is the most remarkable aspect of both cases. Albert Camus had remarked on it before: “on the day when crime dons the apparel of innocence — through a curious transposition peculiar to our times — it is innocence that is called upon to justify itself.” Camus’ mistake was to believe this reversal was peculiar to Hitler or Stalin. It now threatens to become a fixture of the modern world.
So though it is theoretically irrelevant, it is probably unfortunate that J. Christian Adams, the Justice Department lawyer who resigned over the mishandling of the New Black Panther case, is white. In our politically correct world, it would have been far better had he been black, because just as those who are seeking justice for Robert Wone are themselves gay, the case against voter intimidation would have been immeasurably strengthened if the complainants had been persons of color.
The greatest damage that political correctness has inflicted on society is to make each of us forget that underneath the accidents of color, nationality and creed, that all of us are men. By dividing humanity into hyphenated buckets, each sequestered in its hate, the puppet masters have managed to set one against the other so thoroughly that the sharpers, wheeler-dealers and fixers can operate undisturbed. In a world where every one thinks of himself as white, black, gay, straight — we have forgotten that the real distinction is between who holds power and who does not. Nothing else matters. The Black Panthers and the three men who are suspected of killing Robert Wone are not impotent underdogs. On the contrary, they wield far more power than we, in our normal lives, could ever dispose of. God grant we never meet them, for if we do, we meet them alone. W.H. Auden, himself a homosexual man, understood that survival in hyphenation was impossible. He wrote:
In the nightmare of the dark
All the dogs of Europe bark,
And the living nations wait,
Each sequestered in its hate;
Stares from every human face,
And the seas of pity lie
Locked and frozen in each eye.
Follow, poet, follow right
To the bottom of the night,
With your unconstraining voice
Still persuade us to rejoice;
With the farming of a verse
Make a vineyard of the curse,
Sing of human unsuccess
In a rapture of distress;
In the deserts of the heart
Let the healing fountain start,
In the prison of his days
Teach the free man how to praise
11)How America Can Create Jobs
By Andy Grove
The former Intel chief says "job-centric" leadership and incentives are needed to expand U.S. domestic employment again
Recently an acquaintance at the next table in a Palo Alto (Calif.) restaurant introduced me to his companions, three young venture capitalists from China. They explained, with visible excitement, that they were touring promising companies in Silicon Valley. I've lived in the Valley a long time, and usually when I see how the region has become such a draw for global investments, I feel a little proud.
Not this time. I left the restaurant unsettled. Something did not add up. Bay Area unemployment is even higher than the 9.7 percent national average. Clearly, the great Silicon Valley innovation machine hasn't been creating many jobs of late—unless you're counting Asia, where American tech companies have been adding jobs like mad for years.
The underlying problem isn't simply lower Asian costs. It's our own misplaced faith in the power of startups to create U.S. jobs. Americans love the idea of the guys in the garage inventing something that changes the world. New York Times columnist Thomas L. Friedman recently encapsulated this view in a piece called "Start-Ups, Not Bailouts." His argument: Let tired old companies that do commodity manufacturing die if they have to. If Washington really wants to create jobs, he wrote, it should back startups.
Friedman is wrong. Startups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter.
The scaling process is no longer happening in the U.S. And as long as that's the case, plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs.
What Went Wrong?
Scaling used to work well in Silicon Valley. Entrepreneurs came up with an invention. Investors gave them money to build their business. If the founders and their investors were lucky, the company grew and had an initial public offering, which brought in money that financed further growth.
I am fortunate to have lived through one such example. In 1968 two well-known technologists and their investor friends anted up $3 million to start Intel (INTC), making memory chips for the computer industry. From the beginning we had to figure out how to make our chips in volume. We had to build factories, hire, train, and retain employees, establish relationships with suppliers, and sort out a million other things before Intel could become a billion-dollar company. Three years later the company went public and grew to be one of the biggest technology companies in the world. By 1980, 10 years after our IPO, about 13,000 people worked for Intel in the U.S.
Not far from Intel's headquarters in Santa Clara, Calif., other companies developed. Tandem Computers went through a similar process, then Sun Microsystems, Cisco (CSCO), Netscape, and on and on. Some companies died along the way or were absorbed by others, but each survivor added to the complex technological ecosystem that came to be called Silicon Valley.
As time passed, wages and health-care costs rose in the U.S. China opened up. American companies discovered that they could have their manufacturing and even their engineering done more cheaply overseas. When they did so, margins improved. Management was happy, and so were stockholders. Growth continued, even more profitably. But the job machine began sputtering.
The 10X Factor
Today, manufacturing employment in the U.S. computer industry is about 166,000, lower than it was before the first PC, the MITS Altair 2800, was assembled in 1975 (figure-B). Meanwhile, a very effective computer manufacturing industry has emerged in Asia, employing about 1.5 million workers—factory employees, engineers, and managers. The largest of these companies is Hon Hai Precision Industry, also known as Foxconn. The company has grown at an astounding rate, first in Taiwan and later in China. Its revenues last year were $62 billion, larger than Apple (AAPL), Microsoft (MSFT), Dell (DELL), or Intel. Foxconn employs over 800,000 people, more than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard (HPQ), Intel, and Sony (SNE) (figure-C).
Until a recent spate of suicides at Foxconn's giant factory complex in Shenzhen, China, few Americans had heard of the company. But most know the products it makes: computers for Dell and HP, Nokia (NOK) cell phones, Microsoft Xbox 360 consoles, Intel motherboards, and countless other familiar gadgets. Some 250,000 Foxconn employees in southern China produce Apple's products. Apple, meanwhile, has about 25,000 employees in the U.S. That means for every Apple worker in the U.S. there are 10 people in China working on iMacs, iPods, and iPhones. The same roughly 10-to-1 relationship holds for Dell, disk-drive maker Seagate Technology (STX), and other U.S. tech companies.
You could say, as many do, that shipping jobs overseas is no big deal because the high-value work—and much of the profits—remain in the U.S. That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work—and masses of unemployed?
Since the early days of Silicon Valley, the money invested in companies has increased dramatically, only to produce fewer jobs. Simply put, the U.S. has become wildly inefficient at creating American tech jobs. We may be less aware of this growing inefficiency, however, because our history of creating jobs over the past few decades has been spectacular—masking our greater and greater spending to create each position. Should we wait and not act on the basis of early indicators? I think that would be a tragic mistake, because the only chance we have to reverse the deterioration is if we act early and decisively.
Already the decline has been marked. It may be measured by way of a simple calculation—an estimate of the employment cost-effectiveness of a company. First, take the initial investment plus the investment during a company's IPO. Then divide that by the number of employees working in that company 10 years later. For Intel this worked out to be about $650 per job—$3,600 adjusted for inflation. National Semiconductor (NSM), another chip company, was even more efficient at $2,000 per job. Making the same calculations for a number of Silicon Valley companies shows that the cost of creating U.S. jobs grew from a few thousand dollars per position in the early years to a hundred thousand dollars today (figure-A). The obvious reason: Companies simply hire fewer employees as more work is done by outside contractors, usually in Asia.
The job machine breakdown isn't just in computers. Consider alternative energy, an emerging industry where there's plenty of innovation. Photovoltaics, for example, are a U.S. invention. Their use in home energy applications was also pioneered by the U.S. Last year, I decided to do my bit for energy conservation and set out to equip my house with solar power. My wife and I talked with four local solar firms. As part of our due diligence, I checked where they get their photovoltaic panels—the key part of the system. All the panels they use come from China. A Silicon Valley company sells equipment used to manufacture photo-active films. They ship close to 10 times more machines to China than to manufacturers in the U.S., and this gap is growing (figure-D). Not surprisingly, U.S. employment in the making of photovoltaic films and panels is perhaps 10,000—just a few percent of estimated worldwide employment.
There's more at stake than exported jobs. With some technologies, both scaling and innovation take place overseas.
Such is the case with advanced batteries. It has taken years and many false starts, but finally we are about to witness mass-produced electric cars and trucks. They all rely on lithium-ion batteries. What microprocessors are to computing, batteries are to electric vehicles. Unlike with microprocessors, the U.S. share of lithium-ion battery production is tiny (figure-E).
That's a problem. A new industry needs an effective ecosystem in which technology knowhow accumulates, experience builds on experience, and close relationships develop between supplier and customer. The U.S. lost its lead in batteries 30 years ago when it stopped making consumer electronics devices. Whoever made batteries then gained the exposure and relationships needed to learn to supply batteries for the more demanding laptop PC market, and after that, for the even more demanding automobile market. U.S. companies did not participate in the first phase and consequently were not in the running for all that followed. I doubt they will ever catch up.
The Key to Job Creation
Scaling isn't easy. The investments required are much higher than in the invention phase. And funds need to be committed early, when not much is known about the potential market. Another example from Intel: The investment to build a silicon manufacturing plant in the '70s was a few million dollars. By the early '90s the cost of the factories that would be able to produce the new Pentium chips in volume rose to several billion dollars. The decision to build these plants needed to be made years before we knew whether the Pentium chip would work or whether the market would be interested in it.
Lessons we learned from previous missteps helped us. Some years earlier, when Intel's business consisted of making memory chips, we hesitated to add manufacturing capacity, not being all that sure about the market demand in years to come. Our Japanese competitors didn't hesitate: They built the plants. When the demand for memory chips exploded, the Japanese roared into the U.S. market and Intel began its descent as a memory chip supplier. Despite being steeled by that experience, I still remember how afraid I was as I asked the Intel directors for authorization to spend billions of dollars for factories to produce a product that did not exist at the time for a market we could not size. Fortunately, they gave their O.K. even as they gulped. The bet paid off.
My point isn't that Intel was brilliant. The company was founded at a time when it was easier to scale domestically. For one thing, China wasn't yet open for business. More importantly, the U.S. had not yet forgotten that scaling was crucial to its economic future.
How could the U.S. have forgotten? I believe the answer has to do with a general undervaluing of manufacturing—the idea that as long as "knowledge work" stays in the U.S., it doesn't matter what happens to factory jobs. It's not just newspaper commentators who spread this idea. Consider this passage by Princeton University economist Alan S. Blinder: "The TV manufacturing industry really started here, and at one point employed many workers. But as TV sets became 'just a commodity,' their production moved offshore to locations with much lower wages. And nowadays the number of television sets manufactured in the U.S. is zero. A failure? No, a success."
I disagree. Not only did we lose an untold number of jobs, we broke the chain of experience that is so important in technological evolution. As happened with batteries, abandoning today's "commodity" manufacturing can lock you out of tomorrow's emerging industry.
Wanted: Job-Centric Economics
Our fundamental economic beliefs, which we have elevated from a conviction based on observation to an unquestioned truism, is that the free market is the best of all economic systems—the freer the better. Our generation has seen the decisive victory of free-market principles over planned economies. So we stick with this belief, largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better.
Such evidence stares at us from the performance of several Asian countries in the past few decades. These countries seem to understand that job creation must be the No. 1 objective of state economic policy. The government plays a strategic role in setting the priorities and arraying the forces and organization necessary to achieve this goal. The rapid development of the Asian economies provides numerous illustrations. In a thorough study of the industrial development of East Asia, Robert Wade of the London School of Economics found that these economies turned in precedent-shattering economic performances over the '70s and '80s in large part because of the effective involvement of the government in targeting the growth of manufacturing industries.
Consider the "Golden Projects," a series of digital initiatives driven by the Chinese government in the late 1980s and 1990s. Beijing was convinced of the importance of electronic networks—used for transactions, communications, and coordination—in enabling job creation, particularly in the less developed parts of the country. Consequently, the Golden Projects enjoyed priority funding. In time they contributed to the rapid development of China's information infrastructure and the country's economic growth.
How do we turn such Asian experience into intelligent action here and now? Long term, we need a job-centric economic theory—and job-centric political leadership—to guide our plans and actions. In the meantime, consider some basic thoughts from a onetime factory guy.
Silicon Valley is a community with a strong tradition of engineering, and engineers are a peculiar breed. They are eager to solve whatever problems they encounter. If profit margins are the problem, we go to work on margins, with exquisite focus. Each company, ruggedly individualistic, does its best to expand efficiently and improve its own profitability. However, our pursuit of our individual businesses, which often involves transferring manufacturing and a great deal of engineering out of the country, has hindered our ability to bring innovations to scale at home. Without scaling, we don't just lose jobs—we lose our hold on new technologies. Losing the ability to scale will ultimately damage our capacity to innovate.
The story comes to mind of an engineer who was to be executed by guillotine. The guillotine was stuck, and custom required that if the blade didn't drop, the condemned man was set free. Before this could happen, the engineer pointed with excitement to a rusty pulley, and told the executioner to apply some oil there. Off went his head.
We got to our current state as a consequence of many of us taking actions focused on our own companies' next milestones. An example: Five years ago a friend joined a large VC firm as a partner. His responsibility was to make sure that all the startups they funded had a "China strategy," meaning a plan to move what jobs they could to China. He was going around with an oil can, applying drops to the guillotine in case it was stuck. We should put away our oil cans. VCs should have a partner in charge of every startup's "U.S. strategy."
The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability—and stability—we may have taken for granted.
I fled Hungary as a young man in 1956 to come to the U.S. Growing up in the Soviet bloc, I witnessed first-hand the perils of both government overreach and a stratified population. Most Americans probably aren't aware that there was a time in this country when tanks and cavalry were massed on Pennsylvania Avenue to chase away the unemployed. It was 1932; thousands of jobless veterans were demonstrating outside the White House. Soldiers with fixed bayonets and live ammunition moved in on them, and herded them away from the White House. In America! Unemployment is corrosive. If what I'm suggesting sounds protectionist, so be it.
Every day, that Palo Alto restaurant where I met the Chinese venture capitalists is full of technology executives and entrepreneurs. Many of them are my friends. I understand the technological challenges they face, along with the financial pressure they're under from directors and shareholders. Can we expect them to take on yet another assignment, to work on behalf of a loosely defined community of companies, employees, and employees yet to be hired? To do so is undoubtedly naïve. Yet the imperative for change is real and the choice is simple. If we want to remain a leading economy, we change on our own, or change will continue to be forced upon us.
Andy Grove, senior adviser to Intel, was the company's chief executive officer or chairman from 1987 until 2005.