Is Wall Street lying? (See 1a and below.)
Articles 2a - 5 have something in common in my view.
That I do not believe Obama should have been elected is, by now, quite obvious. That he be re-elected should relate to accomplishments as opposed to fancy speeches and an appealing, though not to me, campaign style.
At the very least, Obama and all presidents should be judged, within reason, on how they perform with respect to foreign and domestic affairs.
In foreign affairs Obama, to date, is an abject failure. He told us Afghanistan was the critical place for fighting the war against the misguided (he has been unable to pronounce Islamist terrorists.) The media has shielded him from his Afghanistan war by 'un' and sympathetic reporting. Whereas, in the case of GW, they were unrelenting in their attacks.
Obama then set about to resolve the knotty problems between Israel and the Palestinians and did so by highlighting Israeli settlements. By attacking our most loyal ally and only democratic nation in the region Obama emboldened the Palestinians. Obama failed to support those who rebelled in Iran and has allowed Iran to press forward with its nuclear development. Finally, he has flubbed in containing N Korea.
Granted all of these problems existed before he entered the picture but Obama has made them worse.
Domestically Obama has moved our nation closer to bankruptcy, expanded government and invaded its presence deeper into both our private as well as our public lives. His policies have heaped untold cost burdens on American business and now we have the spectre of high inflation combined with an eroding dollar.
Again, Obama inherited problems that relate to years of political mis-management and overspending but he again made them worse.
In terms of healing our nation, Obama has been divisive. In terms of reducing unemployment it has increased.
Not a sterling record of achievement to date.
As for the grip narrow special interests have on both parties it is obvious Republicans paid a heavy price with independent voters for embracing many of the Religious Right's agenda.
Now that we no longer can afford the high cost of such economically costly allegiances Democrats are paying a healthy price for being in bed with unions , trial lawyers etc.
among independent voters.
It is amazing that only when stupidity costs too much do voters realize the downside of such inanities.(See 2 below.)
Another message about change - this time it is about China. (See 2a below.)
And the war goes on or have you forgotten? (See 3 below.)
Will repealing 'Obamascare' remain appealing? (See 4 below.)
Democrats and Unions - can they continue to co-exist as they have? (See 5 below.)
In upholding Sharia Law did this Federal Judge trample on our own Constitution? Maybe the 6th Circuit will reverse his decision. Stay tuned. (See 6 below.)
Sowell fears Fed trapped in its own endless cycle of printing money. (See 7 below.)
1)How the Food Crisis Will Affect Your Portfolio in 2011
By Chris Mayer, editor, Capital & Crisis
A story I've been warning about for years is making sensational headlines right now.
It's a story most people don't realize could make a huge impact on all of our portfolios in a number of ways
"U.S. Crop Stock Forecasts Deepen Fears of Food Crisis" read a recent Financial Times headline. The U.S. government cut its estimate for key crops. This came only a week after the U.N. warned the world faces "food price shock." Corn and soybean prices jumped and now sit at 30-month highs. Inventories are very tight. Corn is up 94% since June!
And the world worries about a repeat of 2008, when food riots erupted in poor countries around the world.
This has been in the works for a long time. It was there for all to see. The ratio of arable land to people has been falling for decades. Gains in crop yields have slowed. Population has expanded and income levels have grown. Diets have shifted. More people are eating more meat, which is much more grain-intensive to produce.
And the love affair with biofuels puts food production in direct competition with energy. Plus, there are water scarcity issues affecting food supply. Readers have made gains from this trend by owning shares of agricultural fertilizer producers Potash (POT) and Mosaic (MOS).
I should also make the point that this fits in with another topic I'm concerned about: inflation. Now, the man on the street uses the term "inflation" to mean when prices for everything seem to go up. Or put another way, inflation is when the dollars in his pocket buy less. In truth, this is the effect of inflation. The root cause is simply money printing. When you print more money, that money has less value than if you didn't print any new money at all.
So what we are seeing with rising commodity prices is not only the supply and demand story I led off with. It's also the effect of paper money losing its purchasing power in the real world of things. This, too, was easy enough to see. Finally, all that money printing – the "quantitative easing" baloney you've heard about – is coming home to roost.
Still, it's disconcerting to see it all playing out. For the sake of our world, I'd rather have gotten this one wrong. But we have to deal with the market we are in. So what might "Food Crisis II" mean from an investment point of view?
Food prices will have to rise: There is no way around this. We are all going to pay more for food. Wells Fargo predicts U.S. retail food prices will rise about 4% this year. Some things will go up much more. Pork and beef could rise more than 10%.
This won't necessarily mean that meat producer stocks are good buys, because they may not get to raise prices to fully offset the rise in feed costs. Anecdotally, for instance, The Wall Street Journal cited a Minnesota 300-cow operation that reported feed costs had doubled. Plus, I've listened in to the conference calls of a number of food producers – Tyson, Hormel, and Sanderson Farms. They all talk about getting squeezed by rising feed costs.
I do think these companies will be good buys sometime this year, because people will adapt and farmers will respond. Producers won't produce meat at a loss for long. And farmers will bring every resource they have to bear. It's been slow getting the crops in the ground so far in many places. But ultimately, there is a lot of potential supply from Brazil and the U.S.
Still, weather is the big wild card here. If we have a drought in the U.S. or in Brazil, this could really get ugly.
Emerging markets are vulnerable: This follows from the above. It doesn't really faze the typical American to have to pay 4% more at the grocery store. Food is still such a small part of the typical American's budget. I think Michael Pollan in The Omnivore's Dilemma points out that the U.S. spends 9% of its income on food, which is among the lowest percentage of any people anywhere at any time in history.
The same is not true in India or China or many emerging markets . In China, people spend 50% of every incremental dollar on food. And in India, it's more like 70%. So the rising price of food is felt more keenly in these markets.
The price of food is rising faster in emerging markets, too. In India, food prices are up 18% and at their highest level in a year. China has the same problem. Prices rose 5% in November alone. All around the world, emerging markets have a big problem with rising food prices. Indonesia's president is trying to get people to grow their own chili peppers. And the South Korean government recently released emergency stores of cabbage, pork, mackerel, radish, and other staples. I could go on and on.
The point is that the emerging markets boom is not going to go far when it faces a food crisis. Already, the markets are starting to reflect this. India's Sensex was down three straight days and off 6% to start the year. Other markets also started badly. And if China and India and the rest slow down, it's going to have a huge impact on all those stocks and commodities most sensitive to emerging market growth.
Keep a close eye on these developments. There will be opportunities in this crisis, as with all others. For instance, though rising grain prices are not good for meat producers or emerging markets right now, it's a boon for fertilizer stocks. As the old golf saying goes, "Every putt makes somebody happy.
1a)treet Is Lying to You, These Warning Signs Are Not
By Jeff Clark
They say nobody rings a bell at the top of a bull market. But that's a lie.
The truth is… bells are ringing all the time. Yet no one listens.
Quasimodo is in the bell tower right now, and he's doing everything but peeing over the side. No one seems to care.
Investor sentiment is more bullish than ever. The Volatility Index (the "VIX") is displaying extreme investor complacency. The put/call ratio (another sign of fear in the markets) closed last Friday at its lowest level in three years. And speculative penny stocks, typically the last group to move higher in a bull market, are bursting like popcorn on a hot stove.
"There's nothing to worry about," says one financial analyst after another as they goad mom and pop investors into chasing stocks higher.
Meanwhile, long-term interest rates are creeping higher. The Fed is actively monetizing the nation's debt. States and municipalities are bordering on bankruptcy. And our elected officials continue to raise the debt ceiling ever higher toward infinity.
Oh sure, there's nothing to worry about.
Among all the other bells that are clanging and trying to warn investors of an impending correction, another one is ready to sound off…
The above chart shows the bullish percent index of the transportation sector (BPTRAN). This chart measures the percentage of stocks in the transportation average trading with bullish point-and-figure charts. In short, it measures momentum, and it indicates when a sector is overbought or oversold.
Typically, when a bullish percent index (BPI) rallies above 80, the sector is overbought and vulnerable to a decline. Oversold conditions occur when a BPI drops below 30.
Sell signals occur on the BPTRAN when the index reaches overbought levels then declines below its 20-day moving average (DMA). The happened last January and again last April. Both times preceded large corrections in the stock market by just a few days.
BPTRAN is on the verge of triggering another sell signal. The index and the 20-DMA have both been at 95 for the past two weeks. When the index moves below the 20-DMA, another bell will ring on the stock market.
Is anyone listening?
2)Obama at Half Time: Two Years in the Middle East
By Elliott Abrams
There will be many assessments of what President Obama has achieved in the Middle East during his two years as President, and few will be positive.
Twenty years of negotiations between Israelis and Palestinians were scuttled by the obsession with a construction freeze in settlements and in Jerusalem. The one ray of light, Palestinian Authority Prime Minister Salam Fayyad’s reforms and constructive programs on the ground in the West Bank, continues to get more American lip service than real dedicated effort. George Mitchell’s uninterest in the actual progress on the ground in the West Bank has been glaringly obvious, all the focus instead on imaginary negotiating tables.
Repeated efforts to “engage” Syria produced no change in Syrian internal or external conduct. David Schenker summed it up last month:
In the face of blandishment, reckless and destabilizing Syrian behavior has only increased. For example, a year ago, after Washington tried to re-establish border security cooperation with Damascus on Iraq, car bombs—courtesy of Syria according to Prime Minister Al Malaki—killed over 100 in Baghdad. Then, in March 2009, just weeks after the Administration nominated the first US ambassador to Damascus since the 2005murder of former Lebanese premier Rafiq Hariri, President Asad hosted Iranian president Mahmoud Ahmedinejad and Hizballah leader Hassan Nasrallah, and publicly mocked Secretary of State Clinton. The dinner in Damascus effectively scuttled the confirmation of a new US ambassador. More recently, Administration officials expressed concern that Syria had transferred SCUD or Fatah 110 missiles to Hizballah in Lebanon.
The recent decision to send an ambassador to Damascus through a recess appointment was described in a tough piece by Michael Young of the Beirut Daily Star as “remarkably foolish.”
In Lebanon, the March 14 forces feel abandoned and with varying degrees of speed reflecting varying levels of courage most have made their peace with Syrian and Hizballah dominion over the state and nation. Now Hizballah has brought down the government to protect itself from expected indictment by the UN’s Special Tribunal for Lebanon for killing former Prime Minister Hariri in 2005. “American diplomacy has become the butt of jokes here,” The New York Times’s Beirut correspondent reported. In Damascus the Syrians, Qataris and Turks just met to guide Lebanon’s future. The absence of the United States at that meeting is suggestive of our diminished role, as the Times described in detail:
It is yet another episode in which the United States has watched — seemingly helplessly — as events in places like Tunisia, Lebanon and even Iraq unfold unexpectedly and beyond its ability to control. The jockeying might be a glimpse of a post-American Middle East, where the United States’ allies and foes, brought together in the interests of stability, plot foreign policies that intersect in initiatives the United States must grudgingly accept. “There is a sense that the regional players have gone up as the United States has gone down in terms of its presence, its viability, its role,” said a high-ranking Lebanese official allied with the American-backed side in the crisis, which erupted last week.
The early Obama efforts at engagement with Iran went aground as that regime stole the June 2009 elections and has since become increasingly repressive as it tries to crush the “Green Movement.” Diplomatic efforts to stop the Iranian nuclear program continue, but any deal is more likely to concede to the Iranian regime some limited right to reprocess and enrich uranium than to stop the Iranian bomb. Americans can only blink twice when the French are, as now, the hard-liners who must urge Washington against further concessions. Sanctions and sabotage have slowed the Iranians down and credit is due to some combination of the EU, the United States, and Israel, but the Iranian centrifuges continue to spin.
Democracy activists in the region have been steadily weaker during these two years, and their oppressors have been feeling less beleaguered—the very opposite of what American policy should produce. Egypt is one case in point, where last Fall’s parliamentary election was far worse than its predecessor in 2005. The Administration barely reacted. Is there one country in the region where there is more respect for human rights since the Obama Administration took office?
Two weeks ago the answer was no; today it is “yes, Tunisia,” for a spontaneous revolt pushed the rapacious Ben Ali apparat out of power. Will the Administration now do a 180-degree turn and embrace the call for democracy in the Arab world? When Secretary Clinton spoke at a forum on reform in Qatar, she did not even utter the words “democracy” or “freedom” or “human rights.” And that was the very day after Ben Ali had fled Tunis.
What led to the adoption of the policies that produced these results, and what might lead to new ones in the second half of Mr. Obama’s term?
Alas, there is no evidence of a fundamental rethinking by the president; his Middle East policy is the product of his view of America and the world. In this take, America has (worst of all under George W. Bush) been too aggressive, insisting on its culture and interests rather than reaching out to “engage” and bending to accommodate the interests of others. And those “others” turn out to be regimes, for in the Obama perspective individuals too often tend to fade away. We seek “engagement” with the Asad regime in Syria and the Mubarak regime in Egypt, and with the ayatollahs in Iran, not with the people who live under their thumbs.
Inherent in this policy is a deep contradiction. The president places great store in multilateralism (as opposed to the allegedly excessive nationalism, the “go it alone” approach, the disrespect for international organizations, inaccurately said to have marked the Bush Administration); he believes in the UN Security Council and the Human Rights Council, in treaties like the NPT and START, in the IAEA, in multilateral cooperation. But the regimes with which he wishes to engage do not, so that Asad tries to ruin the UN’s Special Tribunal for Lebanon and Iran’s nuclear program threatens to destroy the Non-Proliferation Treaty and the IAEA. The president is in this sense in the position of those who for decades sought “world peace” primarily by engaging with the Soviet Union, which did not share that goal.
So the question for the next two years is whether the president will remain wedded to policies that cannot achieve his stated goals. Unless shaken out of the current rut by events—terrible ones like Iran’s acquisition of nuclear weapons, or even worse a terrorist attack in the United States, or positive ones like more revolts against Arab dictatorships—the best bet is that there will be no significant change in policy despite the lack of achievements. None of the personnel changes thus far announced involves anyone with a new and different perspective on the Middle East. No doubt there is some rethinking going on at the White House, but there is no sign that the President believes things have gone wrong. As William Quandt (who served in the NSC in the Nixon and Carter years) wrote in his book Peace Process, “Wishful thinking is a particularly potent way to resolve uncertainty.”
2a)Don't Bank on China 'Rebalancing'
There are deeply rooted reasons—from banking habits to government policy—why Chinese are unlikely to increase consumption anytime soon.
By JOSEPH STERNBERG
Chinese President Hu Jintao is in Washington this week, and economic affairs are sure to feature prominently. Inevitably, that will mean talk of "rebalancing," the notion that Americans need to consume less and Chinese need to consume more. This is typically presented as a question of aggregate American and Chinese levels of investment, household savings and consumption, plus the exchange rate. But the problem with Chinese consumption runs much deeper, a fact that should inform the discussion on both sides.
To see how and why this is, look at banks, which affect so much of the rest of the economy.
To start, China lacks the infrastructure of modern consumer finance, and is years—possibly decades—away from building it to the standards of the developed world. Outstanding consumer credit stands at about 13% of GDP, according to a 2009 study from McKinsey & Company, compared to 48% in Malaysia and 70% in South Korea.
Banks face significant structural and regulatory barriers to offering more consumer-finance products. One is the lack of national consumer credit ratings that would give banks greater confidence in their ability to measure credit risks. Another is that loan officers and managers still work from a mindset focused heavily on business lending.
Meanwhile, Beijing has lost a decade or more during which it could have allowed foreign banks to start developing a consumer-finance market. Thus Chinese banks have faced few competitive pressures to serve lower-income consumer borrowers themselves, so they haven't. Only in November did regulators allow a foreign company into this brand-new field. Dutch PPF Group will offer in-store financing for durable-goods purchases—the kind of installment plan that made its appearance in America 160 years ago.
More interesting is the supply side of the consumption equation. Rebalancing is not a matter of Chinese export factories losing a foreign customer and gaining a domestic one, Patrick Chovanec of Tsinghua University observes. Export factories are part of global supply chains in which someone else does the product development, logistics, marketing and retailing. Chinese export factories aren't equipped to do those things on their own. Rebalancing would cause them to lose foreign customers and go out of business, allowing entrepreneurs who are oriented toward domestic consumption to buy the assets.
China needs to reallocate capital and labor on a massive scale to orient itself toward producing goods and services that Chinese consumers want to consume. This will require major banking changes, especially improving access to credit for the small and medium-sized enterprises that make a modern consumption-driven economy tick. Both regulation and habit will get in the way.
The regulation involves interest rates: Government manages both deposit and lending rates in a way that guarantees banks a wide spread. This was intended to help banks earn themselves out of an earlier generation of nonperforming loans at the expense of households, which earn lower rates on savings deposits. And the policy could prove especially necessary if 2009's credit binge results in huge piles of bad debts.
But the policy hurts consumption by depressing household earnings on savings. It also depresses bank lending to small enterprises by discouraging bank risk-taking. Instead of taking a chance that some of their guaranteed profit margin might be eaten up by a nonperforming loan to a small start-up, banks can reap the entire spread by lending to larger state-owned enterprises whose debts the government implicitly or explicitly guarantees.
A related banking habit is insistence on physical collateral, often real estate, a stricture that favors asset-heavy state-owned companies and exporting manufacturers. Any other kind of business lending is more challenging, as it involves training each loan officer and his manager to evaluate a small firm's business plan and projections to reach a judgment on creditworthiness. And without clear laws in place for when uncollateralized loans go bad, banks will continue to prefer the comfort of having assets to seize if worse comes to worst.
Beijing could solve these problems, slowly, if leaders wanted to. Odds are that they don't, though. The current pro-export banking bias is not an accident. It represents Beijing's deliberate choice to maintain a degree of control over the economy via political allocation of capital. The 2009 credit stimulus shows that instinct is still alive and well.
All this suggests two implications for this week's Washington powwow. For one, President Obama needs to be more realistic about the prospects of China rebalancing any time soon. It's a mistake for him to rely on a rapid rise in Chinese consumption to fill a global economic gap left by the failure of his policies to stimulate the U.S. economy.
As for Mr. Hu, a bit of humility is in order. China's investment-driven growth has paid off so far but may already be witnessing declining marginal returns. McKinsey estimates that China now needs to invest $4.90 to produce each dollar of GDP growth, up from $3.30 in the early 1990s. Shifting to a new model will require changes at every level, right down to the bank branch. That's hard to do when you're preoccupied asserting economic might you may not have.
Mr. Sternberg is an editorial page writer for the Wall Street Journal Asia.
3)Will Afghanistan Be a Forgotten War? Spirit of America fought through the government bureaucracy to support the troops in Afghanistan. Will the rest of us stay the course?
By DANIEL HENNINGER
We are here, and 97,000 men and women from all over the United States are in what in wartime is known as "over there"—in Afghanistan, at risk, fighting for us. When the opinion-poll people call, some 60% of Americans say they are against the war there. Some of that may be war weariness. But I hope it doesn't mean people are drawing the curtains on what is going on there, including our nation's troops. The U.S. already has one "forgotten war"—in Korea from 1950 to 1953. We don't need another one.
In 2004, when enthusiasm for the Iraq war was still tied to post-9/11 national unity, I wrote a column ("Here's a Way You Can Help the Cause in Iraq") about a group called Spirit of America, created to support the troops with aid from stateside. Readers responded with a burst of support for the new organization, founded by California software entrepreneur Jim Hake.
Even as the nation dialed back its attachments to these far-off battles between U.S. troops and Islamic fanaticism, Mr. Hake and his Spirit of America associates stayed in the game. First in Iraq and now in Afghanistan, they've continued to fill requests from commanders on the ground for the sort of stuff—sewing machines, blankets, radios, soccer balls—that is too small to register with the Pentagon's procurement bureaucracies but matters in terms of creating trust between the troops and local villagers.
Until the Defense Department made them stop.
The Spirit of America fought through the government bureaucracy to support the troops in Afghanistan. Will the rest of us stay the course?
For seven years, Spirit of America had worked with the U.S. military, mainly with the Marines in Iraq, to provide civilian aid to battalion commanders engaged in counterinsurgency operations at the village level. Last year, Mr. Hake thought it would make sense in Afghanistan to broaden the relationship by creating a formal Commander Support Program (CSP). Senior Marine officers, who had developed a good working relationship with the group in Iraq, supported Mr. Hake's idea.
Until then, Spirit of America had been operating at whatever level is below micro. Then Mr. Hake stuck his head up. "Because we pushed on the Commander Support Program," he says, "we got scrutiny from the military's lawyers at a higher level. They not only concluded the CSP couldn't be done, but what we'd been doing the past seven years couldn't be done either. It wasn't what we were hoping for."
Spirit of America had fallen down the rabbit hole of government ethics rules.
The lawyers said in June that what Spirit of America had been doing—sending goods into the war zone through battalion commanders—could be defined as a "gift" to the commanders under current ethics rules. Spirit of America was dead in the water.
Through a friend, Mr. Hake found Arnold & Porter attorney John Bellinger, formerly legal adviser to the State Department, where he had dealt with the arcana of government ethics. "The military's lawyers have gotten cautious about everything," Mr. Bellinger told me, "because people can get so beaten up even on something well-meaning like this. Even trying to find ways around the rules could subject them to criticism."
Mr. Bellinger thought senior Pentagon officials would want to solve this if they could, and he and Mr. Hake met with the Defense Department's general counsel, Jeh Johnson, an Obama appointee, and its chief ethics officer, Leigh Bradley.
Mr. Bellinger argued that "these ethics rules are on the books to prevent corrupt conduct for private gain by public officials. This doesn't do that. It saves lives."
It also helped that Spirit of America's work in Iraq had earned the support of Marine Gen. Jim Mattis, currently head of U.S. Central Command, and Gen. Joe Dunford, the Marines' No. 2 officer. Gen. Mattis said that if the program fit within the Pentagon's guidelines, his lawyers would write it into a workable regulation.
Mr. Johnson and Ms. Bradley signed off in late October, Gen. Mattis's lawyers wrote the reg, and Spirit of America this week has Matt Valkovic and Chris Hellie on the ground with the Marines in Helmand Province. Mr. Hake arrives in Afghanistan next Wednesday.
It is hard not to note the irony of needing government at the highest level to green-light a good idea at the lowest level. That, I'm afraid, is the story of government in our time.
Asked about his involvement, Gen. Mattis characteristically cut to the chase: "When capable people with good intentions meet bad processes, bad processes win nine out of 10 times. The CSP is a good process that connects good people on opposite sides of the earth—Afghan and American—to each other using our troops who can see the immediate needs." Gen. Mattis says the program "opens a whole new vista for direct support when U.S. government money is not the right answer."
Mr. Hake, wearing his software cap, thinks the right analogy for unlocking private, civilian expertise to support modern warfighting needs in places like Iraq or Afghanistan is the way we developed Web standards, which set in motion waves of innovation. His guys on the ground in Afghanistan, for example, carry satellite Internet access everywhere they go and plan to set up Skype video conferences to access expertise for immediate, nonmilitary needs—say, for village health or local commerce.
"Even if you don't think we should be there," says Mr. Hake, "you should want us to be successful as long as we are there. This is the time to lean forward and this private support is one way to do it."
It's also one good way to ensure that the Americans over there on our behalf aren't forgotten by the rest of us back here.
5)The Repeal Vote
An historic repudiation of an entitlement that is only 10 months old.
Democrats are deriding last night's House vote to repeal ObamaCare as "symbolic," and it was, but that is not the same as meaningless. The stunning political reality is that a new entitlement that was supposed to be a landmark of liberal governance has been repudiated by a majority of one chamber of Congress only 10 months after it passed. This sort of thing never happens.
More House Members—245 in total—voted to rescind the new entitlement than the 219 Democrats who voted to create it last March. That partisan majority narrowly prevailed over all 178 Republicans and some 38 Democrats. The three Democrats who favored repeal yesterday confirmed the bipartisan opposition to the kind of vast new social program that historically has been built on a national bipartisan consensus.
Republicans across the country campaigned on repeal last year, and yesterday's vote showed refreshing respect for the often invoked, rarely consulted American people. Meanwhile, six additional states have asked to join the momentous constitutional challenge to ObamaCare in Florida, bringing the total to 26, plus Virginia's separate suit. A majority of states resisting this mandate is another "symbolic" threshold.
It's also telling that even many Democrats are now bowing to the public mood, conceding that the law needs fixing even if they oppose outright repeal. No less than President Obama declared that "I'm willing and eager to work with both Democrats and Republicans to improve the Affordable Care Act. But we can't go backward." House Minority Whip Steny Hoyer said on Tuesday that Democrats are "open to better ideas."
These feints toward conciliation would be more convincing if Harry Reid were willing to bring the repeal bill to the Senate floor. No doubt the Majority Leader fears defections when Republicans eventually do force an up-or-down vote, especially among the many vulnerable red-state Democrats standing for re-election in 2012. The retirement of North Dakota's Kent Conrad, the self-styled deficit hawk who voted for this fiscal disaster, may be a portent.
Various liberal sages chimed in with a prediction/hope that repeal will backfire on Republicans, usually based on outlier polls like those produced by the Kaiser Family Foundation. These are the same wise men who after Scott Brown's Massachusetts Senate upset a year ago importuned Democrats to pass the bill anyway. They claimed it would be a political winner, eventually, once voters were hooked up to subsidized coverage.
But such spin can't overcome the reality of premium increases and other damage in the insurance market that consumers can see in their own paychecks and that will only grow. Recall that reform was sold as a way to control costs and increase consumer choice. But underlying medical costs continue to climb, carrying premiums aloft in tandem. Even a nonprofit insurer like Blue Shield of California, a reliable lobbyist for progressive causes, says it must raise rates by as much as 59%, in part to comply with ObamaCare's mandates.
The law's central planning has also set off a wave of health-industry consolidation that is already reshaping medicine as providers try to shelter themselves from political risk. A Thompson Reuters survey released this week found that 65% of physicians believe the quality of care will deteriorate over the next five years, with only 18% thinking it will improve. Republicans could have done better in yesterday's debate by focusing more on this deterioration in choice and quality, rather than so much on the (admittedly real) harm to jobs and the federal deficit.
The GOP does need to craft a reform alternative based on competition and market incentives that is more than a return to the status quo ante. And while "repeal and replace" can't happen as long as Mr. Obama wields veto power, yesterday's vote sent an important signal to voters that ObamaCare can't be fixed at the margins when it is so destructive at its core. Next up: defunding the law's implementation and repealing some of its more pernicious parts.
-------------------------------------------------------------------------------------5)The Union Threat to the Democrats' Future
Unless the party confronts its allies in the public-employee unions, it will continue to lose credibility with voters around the country.
By DOUGLAS E. SCHOEN
There is a crisis in state and municipal finance. That much is clear. What hasn't been fully understood is that the fate of the Democratic Party is bound up in the resolution of that crisis.
In the November midterm elections, the Democratic Party lost its congressional majority. The far graver threat to the party, though, is that its base is made up disproportionately of public-employee unions, liberals, trial lawyers and other special-interest groups.
A key reason for the Democrats' extraordinary defeat in the midterms is that the party lost critical support from independent swing voters. In large part, as polls consistently show, this is because of the party's big-government programs such as health-care reform, the bailouts, and the stimulus packages.
If the Democrats want to be competitive in 2012, they must move decisively back to the center. And unless they're able to break the stranglehold that government-employee unions have on the party on policy, as well as in financial and political support, it will be virtually impossible for Democrats to restore fiscal health to states like New York and California.
Working-class families are fleeing the Democratic Party en masse, a trend that is likely to continue if their own economic situation remains weak in the face of ever-higher taxes, deficits and debt. These working-class voters see that public employees are continuing to receive more generous benefits and enjoy greater job security than they are. Support for the Democratic Party is now well below 40% with working-class voters who are unionized, and as low as 33% with whites who are not college educated.
By providing Democratic candidates the bulk of their campaign funding, public unions have essentially bought control of the party. This is particularly true when it comes to the politicians who control union contracts and pensions at the state and municipal level.
At the national level, public-employee unions spent more than $200 million to defeat Republican candidates during the 2010 midterm election. The American Federation of State, County and Municipal Employees—the main union of state employees—spent over $90 million during the campaign, and it was the top donor to the Democrats' efforts to win gubernatorial and state-legislative races.
In California, public-employee unions spent about $25 million to elect Democratic Gov. Jerry Brown. And they've seeded California's state legislature with union operatives from the highest levels on down. One union leader was caught on tape telling elected officials: "We helped to get you into office, and we got a good memory. Come November, if you don't back our program, we'll get you out of office."
In New York, public-employee unions effectively run their own political party dedicated to defeating measures such as wage freezes, benefit cuts and tougher work rules. The Working Families Party, an alliance of labor unions, community groups and politicians, has disproportionate influence in the state assembly. A majority of members were endorsed by and appeared on the Working Families Party ballot line. So far, assembly speaker Sheldon Silver has resisted all efforts to make the kind of cuts in public-employee benefits that would make a meaningful dent in the state's $9 billion deficit.
Democratic leaders are going to have to make hard choices in these states and others where public-employee pension systems are directly responsible for bringing treasuries to the brink of bankruptcy after years of reckless spending.
Mr. Brown in California and Gov. Andrew Cuomo in New York both spoke in their inaugural addresses about the need for public-employee unions to compromise and make some sacrifices. But talk is not enough. These governors, and the Democratic Party more generally, must develop and implement a new reform agenda that includes furloughs, layoffs, wage freezes and reductions in pension benefits—certainly for new workers, if not those currently in the system. This is not only essential public policy, it is essential politically for the Democrats to maintain their credibility.
Mr. Brown—who first gave California's public employees the right to bargain collectively during his first term as governor—promised during his inaugural speech last week to review the benefits received by government workers. But he has said nothing about the specific steps he plans on taking to close California's $28 billion budget gap or to address the growing labor contracts and swelling pensions of public employees. It remains unclear whether he will be able to negotiate the give-backs necessary to avoid bankruptcy. It's more likely that he'll push for a tax increase that will be unpalatable to voters if proposed and choke growth if enacted.
Mr. Cuomo has outlined a comprehensive plan to close New York's $10 billion budget gap with specific proposals such as a property tax cap and a freeze on state salaries. While Mr. Cuomo has demonstrated the will to take on both the state-employee unions and Mr. Silver—who have rejected any compromise that would reduce public-employee pay—it remains to be seen whether he has the political heft to succeed where his predecessor David Paterson failed. Mr. Paterson was unable to negotiate give-backs, such as reductions in scheduled raises and an extended pay lag for public employees, with New York's powerful labor unions, most notably the 1199/SEIU.
It wasn't always this way. In 1975, New York Gov. Hugh Carey was able to secure the cooperation of New York City's powerful unions as well as the financial community to narrowly avert bankruptcy. The result was a period of unprecedented fiscal health for New York, as well as significant improvement of the Democrats' electoral fortunes—including the election of Andrew Cuomo's father, Mario Cuomo, to three successful terms as governor.
Republicans are already making hard choices around the country: reducing union benefits, weakening their influence and limiting their right to strike and even their right to bargain collectively. Unless the Democrats engage in similar efforts, there will be a powerful new campaign issue for the Republicans to rally around going in 2012 and beyond.
Mr. Schoen is a political strategist and served as a pollster for President Bill Clinton. He is the author, with Scott Rasmussen, of "Mad as Hell: How the Tea Party Movement is Fundamentally Remaking Our Two-Party System" (Harper, 2010).
6)Shariah Law gains foothold in US: Federal judge upholds government funding
of Islam; Thomas More Law Center files appeal
Last week, Judge Lawrence P. Zatkoff, a federal district
court judge in Michigan, dismissed a constitutional challenge to the U.S.
Government's bailout of AIG, which used over a hundred million dollars in
federal tax money to support Islamic religious indoctrination through the
funding and promotion of Sharia-compliant financing (SCF). SCF is financing
that follows the dictates of Islamic law.
The challenge was brought by the Thomas More Law Center (TMLC), a national
public interest law firm based in Ann Arbor, Michigan, and co-counsel David
Yerushalmi, on behalf of Kevin Murray, a Marine Corps veteran of the Iraqi
War. TMLC filed a notice of appeal immediately after the ruling and will be
seeking review of the decision in the U.S. Court of Appeals for the Sixth
Richard Thompson, President and Chief Counsel of TMLC, commented: "Judge
Zatkoff's ruling allows for oil-rich Muslim countries to plant the flag of
Islam on American soil. His ruling ignored the uncontested opinions of
several Sharia experts and AIG's own website, which trumpeted
Sharia-compliant financing as promoting the law of the Prophet Mohammed and
as an ethical product, 'and a new way of life.' His ruling ignored AIG's use
of a foreign Islamic advisory board to control investing in accordance with
Continued Thompson: "This astonishing decision allows the federal government
as well as AIG and other Wall Street bankers to explicitly promote Sharia
law-- the 1200-year-old body of Islamic canon law based on the Koran, which
demands the destruction of Western Civilization and the United States. This
is the same law championed by Osama bin Laden and the Taliban; it is the
same law that prompted the 9/11 Islamic terrorist attacks; and it is the
same law that is responsible for the murder of thousands of Christians
throughout the world. The Law Center will do everything it can to stop
Sharia law from rearing its ugly head in America.
The federal lawsuit was filed in 2008 against Secretary of the Treasury
Timothy Geithner and the Board of Governors of the Federal Reserve System.
It challenges that portion of the "Emergency Economic Stabilization Act of
2008" (EESA) that appropriated $70 billion in taxpayer money to fund and
financially support the federal government's majority ownership interest in
AIG, which is considered the market leader in SCF. According to the lawsuit,
"The use of these taxpayer funds to approve, promote, endorse, support, and
fund these Sharia-based Islamic religious activities violates the
Establishment Clause of the First Amendment to the United States
Through the use of taxpayer funds, the federal government acquired a
majority ownership interest (nearly 80%) in AIG; and as part of the bailout,
Congress appropriated $70 billion of taxpayer money to fund and financially
support AIG and its financial activities, $47.5 billion of which was
actually distributed to AIG. AIG, which is now a government owned company,
engages in SCF, which subjects certain financial activities, including
investments, to the dictates of Islamic law and the Islamic religion. This
specifically includes any profits or interest obtained through such
financial activities. AIG itself publicly describes "Sharia" as "Islamic law
based on the Quran and the teachings of the Prophet [Mohammed]."
With the aid of taxpayer funds provided by Congress, AIG also employs a
"Shariah Supervisory Committee." According to AIG, the role of its Sharia
authority "is to review our operations, supervise its development of Islamic
products, and determine Shariah compliance of these products and our
investments." Are you kidding me!!!!!
Shortly after filing the complaint in 2008, attorneys for the Obama
administration's Department of Justice (DOJ) asked the court to dismiss the
lawsuit on behalf of the named defendants. In a written opinion issued in
May 2009, the judge denied the request, holding that the lawsuit properly
alleged a federal constitutional challenge to the use of taxpayer money to
fund AIG's Islamic religious activities.
In its request to dismiss the lawsuit, DOJ argued that the plaintiff, Kevin
Murray, who is a federal taxpayer, lacked standing to bring the action. And
even if he did have standing, DOJ argued that the use of the bailout money
to fund AIG's operations did not violate the Establishment Clause of the
First Amendment. The court disagreed, noting, in relevant part, the
In this case, the fact that AIG is largely a secular entity is not
dispositive: The question in an as-applied challenge is not whether the
entity is of a religious character, but how it spends its grant. The
circumstances of this case are historic, and the pressure upon the
government to navigate this financial crisis is unfathomable. Times of
crisis, however, do not justify departure from the Constitution. In this
case, the United States government has a majority interest in AIG. AIG
utilizes consolidated financing whereby all funds flow through a single port
to support all of its activities, including Sharia-compliant financing.
Pursuant to the EESA, the government has injected AIG with tens of billions
of dollars, without restricting or tracking how this considerable sum of
money is spent. At least two of AIG's subsidiary companies practice
Sharia-compliant financing, one of which was unveiled after the influx of
government cash. . . . Finally, after the government acquired a majority
interest in AIG and contributed substantial funds to AIG for operational
purposes, the government co-sponsored a forum entitled "Islamic Finance
101." These facts, taken together, raise a question of whether the
government's involvement with AIG has created the effect of promoting
religion and sufficiently raise Plaintiff's claim beyond the speculative
level, warranting dismissal inappropriate at this stage in the proceedings.
Following this favorable ruling, the parties engaged in discovery. During
discovery, TMLC took depositions, acquired numerous sworn affidavits from
AIG and many of its subsidiaries, and acquired thousands of documents. This
voluminous evidence was filed with the court in support of TMLC's motion for
summary judgment-a request that the court enter final judgment in its favor
because there is no genuine issue of material fact and TMLC should prevail
as a matter of law.
On January 14, 2011, the court reversed its earlier position and ruled
against Plaintiff Murray, claiming that there was no evidence presented of
religious indoctrination, and if there were such evidence, the
indoctrination could not be attributed to the federal government and
besides, the amount of federal money that was used to support SCF-$153
million-was -"de minimus" in light of the large sum of tax money the federal
government actually gave to AIG- $47.5 billion.
Robert Muise, Senior Trial Counsel for TMLC, commented: "Based on the
incredible amount of evidence presented, much of which DOJ could not refute,
and in light of the strength of the court's prior ruling, we expected the
court to ultimately rule in our favor and hold that the federal government
violated the U.S. Constitution by using federal tax money to fund Islamic
religious activities. As soon as we read the court's adverse opinion, we
filed an immediate appeal."
In addition to the court's remarkable claim that $153 million in tax money
is "de minimis," the court stated the following: "In the absence of evidence
showing that AIG's development and sale of SCF products has resulted in the
instruction of religious beliefs for the purpose of instilling those beliefs
in others or furthering a religious mission, Plaintiff has failed to
demonstrate that a reasonable observer could conclude that AIG has engaged
in religious indoctrination by supplying SCF products."
In the court filings, however, TMLC presented overwhelming and un-rebutted
evidence from experts and AIG itself to demonstrate that AIG, with the
direct support of the U.S. Government, was engaging in religious
indoctrination. Specifically, in addition to AIG's own description of its
Islamic financing as based upon Sharia and Sharia in turn described as
"Islamic law based on Quran [sic] and the teachings of the Prophet (PBUH),"
AIG promotes Sharia and SCF as a way to proselytize non-Muslims through an
"ethical product" and a "new way of life." Indeed, in the U.S. Government's
filings in the case, it admitted that SCF involves "a theological
Muise concluded, "Apparently, the court does not believe that the federal
government violates the U.S. Constitution when it provides $153 million in
taxpayer money to support Islamic religious activities. This is certainly
more than the 'one pence' James Madison warned about when he helped craft
the First Amendment, and I am sure this decision is news for all of the
Christian and Jewish organizations and businesses that are prevented from
receiving a dime of federal tax money to support their religious
The appeal is expected to take at least a year to complete.
The Thomas More Law Center defends and promotes America's Christian heritage
and moral values, including the religious freedom of Christians,
time-honored family values, and the sanctity of human life. It supports a
strong national defense and an independent and sovereign United States of
America. The Law Center accomplishes its mission through litigation,
education, and related activities. It does not charge for its services. The
Law Center is supported by contributions from individuals, corporations and
foundations, and is recognized by the IRS as a section 501(c)(3)
organization. You may reach the Thomas More Law Center at (734) 827-2001 or
visit our website at
-------------------------------------------------------------------------------------7)Sowell: Fed Trapped in Endless Easing Cycle
By Greg Brown and Ashley Martella
Economist and author Thomas Sowell believes that the Federal Reserve could well end up trapped in an endless cycle of printing money to prop up the U.S. economy.
Sowell is currently the Rose and Milton Friedman Senior Fellow on Public Policy at the Hoover Institution at Stanford University. Sowell’s book "Basic Economics" has been translated into six languages and is now in its fourth edition.
The latest round of so-called quantitative easing — money printing by the Fed to buy up U.S. debt and keep interest rates low — is likely to continue, Sowell tells Newsmax.TV.
“Once you buy the argument that this kind of stuff is what you need to get the economy out of a recession and you try it and it doesn’t work, politically, you can’t say, 'I was a fool, let’s stop doing this,'” Sowell said.
“You have got to press on, doing more and saying, ‘We didn’t do it enough.’ Somewhere down the road, the next generation may be seeing QE20 or QE30,” he said.
The resulting flood of dollars into the U.S. money supply has created inflationary pressures worldwide, particularly for prices of energy and food but also commodities like gold and copper. Copper just set a new trading record in London and oil experts now see oil quickly surpassing $100 a barrel, a trend Sowell believes will be hard to contain, considering real demand.
“When you have two largest nations on earth in terms of population, India and China, growing at a very rapid rate, the demand for petroleum is huge. Even though the inventories may be large, absolutely, apparently the market doesn’t think they are large relative to the growing demand for petroleum,” Sowell said.
Until supply grows, don’t expect oil to come down soon, Sowell warned.
“I wouldn’t bet on it. We’re still restricting the development of our own oil. We’re restricting exploration in the gulf of Mexico, (Alaska’s) ANWAR and so forth,” he said.
As for the secondary effects of Fed easing, Sowell doesn’t believe that a decline in the value of the dollar will translate into much advantage for the United States.
Financial observers have been warning for months of the risk of competitive devaluations as major economies seek to support job growth by destroying their own currencies. Chinese President Hu Jintao kicked off his current U.S. visit by proclaiming the dollar a relic and promoting the yuan to replace it.
Even if the dollar continues its historic slide, don’t count on earning an advantage from that, Sowell warned.
“People are talking about how our exports are getting better. The import-export balance is grossly overrated,” Sowell said.
“The United States had an export surplus every year of the Great Depression of the 1930s, yet that doesn’t seem to do a lot for the economy,” he said.
As for alternatives to currency, Sowell cautions that predicting the direction of precious metals like gold “has really not been reduced to any kind of science.”
Nevertheless, he says, “I’m struck by how much it’s already gone up, but that doesn’t mean it’s ready to come down.”