Shovel Ready? Depends on What your Are Shoveling!

I asked an old friend, fellow memo reader and savvy investment person what his thoughts were on the market outlook. His reply:"It seems to me that the market is just adjusting to lower near term growth expectations. After 6 down weeks and 7% down from the peak and declining crude prices, some rally attempt is likely, particularly as we approach the 200 day around 1254. With that said, new highs are not likely until we see better news from Europe and indications that growth will accelerate. Also, the extent of the China bubble is very difficult to fathom. From a tactical standpoint, I continue to favor good quality dividend payers in the US and growth stories internationally.

Longer term, I am more cautious on the US than I have ever been. It is not just the economics of a maturing economy. The sociological deterioration fomented by irresponsible, even incompetent, government programs is very frightening. The micro management culture has invaded almost all companies and destroyed employee initiative. Ethical management has become an oxymoron and the labor share of GDP has reached an almost intolerable level. Everything is a scam. Perhaps we are reaching an inflection point and the pendulum will begin to swing back, but where is the leadership to guide the population through the tough choices necessary to get us back to health?"

Pimco's Gross continues dour!

It is plain for anyone with half a brain and a first grade understanding of economics to see Obama inherited an accumulation of 60 or more years of fiscal and monetary mismanagement and then proceeded to make it worse and, perhaps, so much worse that it is now beyond a point of redemption. (See 1 below.)
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Meanwhile, our bully pulpit president does what he does best - bullies! Partly out of arrogance, partly because he has thin skin and does not like being challenged but mostly because his Muslim background and blood runs deep.(See 2 below.)
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It is Obama's economy now and those who bought his 'hope and change' are paying the price. (See 3 and 3a below.)

Obama's strategy is to 'shovel' it into the lap of the electoral college. (See 3b below.)
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Hezballah is about to strangle Lebanon and Assad will be allowed to finesse the killing of his own citizens regardless of how many ships we move offshore. Why? Because Obama can only play act at being CIC! Libya and the entire Middle East comes to mind for starters .(See 4 and 4a below.)
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An interesting observation - it is not the uncertainty but the certainty of the uncertainty. (See 5 below.)
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A myriad of announced Republicans were paraded on a New Hampshire stage recently. To a person they all had qualifications, at the very least, equal to, if not exceeding, those of Obama. Except for Rep. Bachmann, the more favored lacked charisma and like it or not voters like to buy soap.

Obama, unlike Republicans, will have most of the fawning press and media billowing his sails.

Obama recently said 'shovel ready jobs were not as shovel ready as he had originally thought.' It all depends on what you are shoveling.

The road to Nov 2012 is long and Obama is no longer an untouchable.

Whomever the Republicans eventually nominate, that candidate must highlight Obama's 'hope and change' promises and contrast them with his failed accomplishments. If they do this effectively and Americans re-elect Obama, I would conclude it signals we no longer care about saving our Republic and would rather dig our own grave with Obama shovels. (See 6 below.)
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Dick
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1)Pimco’s Gross: US in Worse Financial Shape Than Greece
By Forrest Jones

The United States is in worse financial shape than Greece due to the amount of money needed to cover future liabilities, says Bill Gross, head of Pimco, the world's largest bond fund.

Lawmakers are debating raising a $14.3 trillion public debt ceiling to avoid an August default.

Unfunded liabilities owed to programs like Medicare, Medicaid and Social Security, however, surpass $50 trillion.

Add to that other debts such as those run up during the bailouts of the 2008 crisis, and the total comes to "nearly $100 trillion," Gross says.

Even if that estimate is on the high side, the country's debt issue is here to stay for a while.

"To think that we can reduce that within the space of a year or two is not a realistic assumption," Gross tells CNBC.

"That's much more than Greece, that's much more than almost any other developed country. We've got a problem and we have to get after it quickly."

Pimco manages more than $1.2 trillion in assets and runs the largest bond fund in the world.

Many other financial and economic experts have made similar warnings recently.

New York University professor Nouriel Roubini said during the weekend that a “perfect storm” of fiscal woe in the U.S., a slowdown in China, European debt restructuring and stagnation in Japan may converge on the global economy.

There’s a one-in-three chance the factors will combine to stunt growth from 2013, Roubini, who predicted the global financial crisis, told Bloomberg.

Other possible outcomes are “anemic but OK” global growth or an “optimistic” scenario in which the expansion improves.

“There are already elements of fragility,” he said. “Everybody’s kicking the can down the road of too much public and private debt. The can is becoming heavier and heavier, and bigger on debt, and all these problems may come to a head by 2013 at the latest.”

Elevated U.S. unemployment, a surge in oil and food prices, rising interest rates in Asia and trade disruption from Japan’s record earthquake threaten to sap the world economy. Stocks worldwide have lost more than $3.3 trillion since the beginning of May, and Roubini said financial markets by the middle of next year could start worrying about a convergence of risks in 2013.

Meanwhile, a recent USA Today study shows the government is facing $62 trillion in unfunded liabilities, mainly to Social Security and Medicare.

According to a poll sponsored by Public Notice, a non-profit policy research firm, Americans are concerned that if Congress raises the debt ceiling, spending cuts will not ensue, a demand from many Republican lawmakers.

"The American people don’t trust Congress. They are skeptical of politicians of all stripes who have promised and failed to get spending under control time again," says Gretchen Hamel, executive director of Public Notice.

"They blame both parties for the mess we are in and want Republicans and Democrats to work to get us out of it."

Elsewhere, Greece on Monday became the country with the lowest credit rating in the world after Standard & Poor's downgraded it by three notches, saying the agency would consider a likely debt restructuring as a default.

A restructuring of Greece's debt — either with a bond swap or by extending maturities on existing bonds — looks increasingly likely to be imposed by European policymakers as a means of sharing the burden of Greece's crisis with the private sector, S&P said in a statement.

S&P cut Greece's long-term sovereign credit ratings to CCC, just four steps away from default, from B. The short-term rating was affirmed at C and all the ratings were removed from credit watch.

© All rights reserved.
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2)Obama bullies Israel; so much for promises at AIPAC
By Jennifer Rubin


Since the president’s Arab Spring speech, friends of Israel have been nervous about at least two issues: the promise Israel would not have to sit down with those who seek its destruction and the negotiations based on the “1967 borders with land swaps.” This weekend it became apparent that there is much to worry about and that the Obama administration has been playing a game usually practiced by the Palestinians, namely telling its domestic audience one thing and the negotiating parties something different.

The trouble for the administration began on Friday afternoon when Eli Lake published a story for the Washington Times.

Lake reported:

The White House is pressing Israeli Prime Minister Benjamin Netanyahu to publicly adopt President Obama’s view that Israel’s pre-1967 border should be the basis for future peace talks.

The Obama White House appealed to Jewish leaders on Friday that the request of Israel was part of an effort to head off Palestinian plans to declare an independent state at the United Nations in September.

The request of Mr. Netanyahu was made Monday to the prime minister’s top peace negotiator, Yitzhak Molcho, at a meeting with Secretary of State Hillary Clinton at the National Security Council, according to an Israeli diplomat based in Jerusalem.

Lake also wrote:

Steven Simon, the new White House National Security Council senior director for the Middle East and North Africa, told representatives of the Jewish Community Friday during a conference call that the White House was looking to get both the Palestinian Authority and the Israeli government to adopt Mr. Obama’s “principles as a basis for negotiation,” according to a recording of the call played for the Washington Times.

Mr. Obama’s position is “the borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps.”

Is the U.S. president pressuring Israel to adopt a position that is not its own and diminishes its bargaining position? And what happened to the statements in President Obama’s speech to AIPAC that Israel could not be expected to sit down with those who want to destroy it? After all Hamas has not yet agreed to the Quartet principles (recognize Israel, renounce terrorism and abide by past agreements), nor has Mahmoud Abbas separated himself from the unity government. To the contrary now he is renouncing past agreements including the Oslo Accords, which call for mutually negotiated final borders and prohibit the parties from taking unilateral steps that would impair negotiations.

I contacted the White House on Friday regarding the latter issue. I asked multiple times, “1.Can you confirm that the president’s position is that Israel should come to the table even without a commitment by Hamas to the Quartet principles and without Abbas breaking with Hamas? 2.If he is asking for 1967 borders from Israel, has anything been asked of Abbas before coming to the table?” Thomas Vietor, the NSC spokesman, refused to give a direct answer, referring me back to Obama’s speech:

1. The President was pretty clear about this in his speech. He said, “Recognizing that negotiations need to begin with the issues of territory and security does not mean that it will be easy to come back to the table. In particular, the recent announcement of an agreement between Fatah and Hamas raises profound and legitimate questions for Israel — how can one negotiate with a party that has shown itself unwilling to recognize your right to exist? In the weeks and months to come, Palestinian leaders will have to provide a credible answer to that question.” He also said that “We will continue to demand that Hamas accept the basic responsibilities of peace, including recognizing Israel’s right to exist and rejecting violence and adhering to all existing agreements.”

2. The President laid out several principles for negotiations in his speech. These include that “a lasting peace will involve two states for two peoples,” with “Israel as a Jewish state and the homeland for the Jewish people,” “a lasting peace that ends the conflict and resolves all claims” and security arrangements that are “robust enough to prevent a resurgence of terrorism; to stop the infiltration of weapons; and to provide effective border security” in a “non-militarized” Palestinian state. He also said that the “borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps.”

But that didn’t answer the question. Is the administration now asking Israel to sit down with Abbas absent a commitment by Hamas or a break-up of the unity government? By gosh, that should be an easy answer (“No!”) , yet the administration won’t say.

This is a very, very big deal. Former deputy national security adviser Elliott Abrams explained to me Friday evening: “I hope news reports of what the Obama White House is privately demanding of Israel are wrong. If the reports are right, the U.S. is now abandoning the Quartet Principles — and asking Israel to negotiate with a Palestinian side that includes Hamas without Hamas taking one single step away from terror. The Palestinian ‘concession’ if these negotiations start would be to pull the plug on seeking U.N. membership.” Moreover, it is a “concession” with very little meaning. Abrams told me that the Palestinians “can’t get U.N. membership if the U.S. vetoes it, so this looks like a desperate White House effort to avoid having to veto. It would leave Israel negotiating with Abbas in the mornings while he is negotiating with Hamas in the afternoons. Then when he gets the Hamas deal the negotiations will collapse, just like they did last year.” He cracked, “The only thing left of that effort is the memory of Mubarak’s purple-black dyed hair in the East Room.” And like clockwork, Obama’s position now becomes the Palestinians’ latest precondition. It’s almost like they are on the same team.

Although it was a Friday evening, Capitol Hill was already rumbling. A GOP adviser told me, “If the administration really wanted to, it could pressure the Quartet to formally oppose the Palestinians’ unilateral move at the U.N. and nip the whole issue in the bud in a long weekend. Clearly, they would rather use this situation to box Prime Minister Netanyahu into a false choice between unilateral statehood and ’67 borders. The Congress will reject this false choice and so should the PM.” Moreover, Democrats who have been spinning the president’s conflicting statements as best they can may now feel burned. A longtime Middle East insider put it this way: “If there are preconditions [for Israel], then that is a change in policy. Just like the mistake we made over settlements, as Abbas said, leading him up a tree. And this time, not only creating a new Palestinian precondition to talks, but in essence giving the P.A. an excuse to pursue the U.N. track, if this latest gambit to wrest pre-negotiations concessions from the Israelis — and nothing from the Palestinians — ends in failure.”

Now what about the 1967 borders? Democratic defenders of the president have insisted that “1967 borders with land swaps” is nothing new. But it appears it certainly is. As the insider noted, “Yes, they are pressing for ’67 with swaps, not exactly ’67. But that’s not really the point — they’ve already adopted what was a Palestinian ‘goal’ as U.S. policy.”

And it is actually worse than that. On Saturday I asked a State Department official authorized only to speak on background: Does “1967 borders with land swaps” mean “1967 and then we discuss swaps” or does it mean “1967 borders plus the swaps that the parties previously agreed to in negotiations including the Jerusalem suburbs”? The latter, I pointed out is consistent with the 2004 Bush-Sharon letters, but the former is not. In fact, if it is 1967 and then they discuss land swaps, that is the same as starting with the 1967 borders. Period. And sure enough the State Department official told me, “It means swaps that the parties will agree on in the course of direct negotiations.”

To be clear, Israel is being pressured to give up prior understandings that the Western Wall and the Jerusalem suburbs, for example, would never be part of a Palestinian state. A veteran negotiator explains, “This administration believes that every single deviation from ‘the 1967 borders’ must be paid for by Israel in a one to one swap. That has never before been the U.S. government’s demand, and it weakens Israel’s bargaining position.” In other words, there is zero difference in the Obama scheme between “1967 borders” and “1967 border with land swaps.” In both, the starting point is borders Israel has deemed indefensible.

Congressional friends of Israel are likely to be enraged A spokesman for Sen. Orrin Hatch (R-Utah) conveyed the senator’s view: “The president’s insistence last month that Israel return to the pre-1967 borders represented a significant departure from past U.S. policy and has been roundly repudiated by members of both parties. Given this lack of support, even from his own party, it is inconceivable why the President would continue to undermine the position of our democratic ally Israel in its negotiations with a hostile neighbor.”

I spoke to Rep. Peter King (R-N.Y.), who plainly was angry over the continued effort to bully Israel. He said in a phone interview, “President Obama never learns. His real instinct is to weaken Israel. You don’t treat an ally this way.” He said he has never seen this sort of behavior from any U.S. president. After the apparent “rapprochement” following the Arab Spring speech, King says the current posture is “shameful.” Given the strong support in the Congress for Israel, will there be resolutions or a cutoff of funding for the Palestinians? He said firmly that it is time to start “fighting fire with fire.” In other words, as much as Obama seeks to pressure Israel while whispering vague promises to the American Jewish community, the Congress may very well try to recalibrate the balance. We should at least have one branch of government in our ally’s corner, right?
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3)Roosevelt Redux: How Obama is Creating a Great Depression of His Own
By Robert R. Barker

Franklin Delano Roosevelt (FDR) is to liberals as Ronald Reagan is to conservatives, a greatly revered hero of their cause. Barack Obama is following in FDR's shoes. Roosevelt was more destructive to the economy in his own time than Obama has been in his... thus far.

Roosevelt responded to the recession he inherited with a combination of massive spending on new government programs and sweeping controls over private industry, (sound familiar?). His thinking was that government spending would get people back to work, and controls over private industry would end deflation. Rules and regulations over private industry were put in place designed, incredibly, to increase the prices of goods. The President and his advisors thought deflation was a cause of the recession. But of course it wasn't a cause; it was a result.

The Works Progress Administration (WPA) and the Civilian Conservation Corps (CCC) were formed. The WPA was created to carry out infrastructure projects (sound familiar?) and the CCC to provide government jobs for young men by performing work of a conservation nature on government-owned land. The WPA and CCC were prime elements of FDR's stimulus program. Both programs increased the size of government and added to the Federal payroll but did little for private industry which is the heart of an economy.

The Reconstruction Finance Corporation (RFC) was a government sponsored organization (GSO) structured somewhat like Fannie Mae and Freddie Mac. The RFC was expanded by Roosevelt and served as the money conduit for bailing out failing banks. It was funded with over 5 billion dollars in taxpayer money, equivalent to 84 billion today after adjusting for inflation. According to Wikipedia, "The RFC was bogged down in bureaucracy and failed to disperse much of its funds. It failed to reverse the problem of mass unemployment." (Sound familiar?)
FDR created a Farm Board with the power to control the amount of production and the price of grains and livestock. The board mandated that crop farmers let some of their fields lie fallow. Agriculture farmers were paid by the government for crops that didn't exist because they were forbidden to plant them. Livestock farmers were not overlooked either. Six million young piglets were ordered destroyed at taxpayer expense. The purpose was to reduce the supply of pigs and increase the price of bacon and pork. Instead of pigs, Obama chose to destroy used cars. At least that move is more humane.

Roosevelt's first legislative victory was congressional passage of the National Industrial Recovery Act to be administered by the National Recovery Administration (NRA). This new law created a new agency giving Washington vast powers of control over private enterprise. It established maximum and minimum wages and price controls over many goods and services. It was the most contentious of all the programs in Roosevelt's "New Deal." Had it not been for the economic crisis then at hand, such sweeping legislation could never have been enacted. (Sound familiar?)

But the NRA turned out to be a step too far. In an attempt to end the controversy surrounding the program, Roosevelt chose to make an example of a kosher chicken processing firm run by two immigrant brothers in Brooklyn, NY. The proprietors were arrested, tried, found guilty and jailed for selling chickens at prices below those allowed by the law and for permitting wholesale customers to pick and choose which birds they wanted to buy. Both acts violated regulations set by the National Recovery Administration.

The strategy backfired when the proprietors, the Schechter brothers, fought back. The case went to the Supreme Court where, by a unanimous decision, the National Industrial Recovery Act was declared to be unconstitutional. The NRA which administered the Act was dismantled. Today we see parallels in Obama's use of czars and broad powers of regulation to control the private sector. If the question of the constitutionality of the Patient Protection and Affordable Care Act, commonly known as ObamaCare, winds up in the Supreme Court it will be one more instance of Roosevelt redux.

Eight years after Roosevelt was first elected, unemployment stood at 14.6%. Henry Morgenthau, Jr., FDR's Secretary of the Treasury from 1934-1945, admitted to himself in a written in his personal diary that the stimulus spending programs had failed.

"We have tried spending money. We are spending more money than we have ever spent before and it does not work... We have never made good on our promises. . . . I say after eight years of this administration we have just as much unemployment as when we started . . . . And an enormous debt to boot!"

Then on December 7th 1941, Japan attacked Pearl Harbor. The unemployed went back to work. Assembly lines ran around the clock making tanks and planes, guns and ships in the all-out war effort. FDR, already the only President to win a third term, went on to win a fourth.

Obama is treading the same path as FDR, repeating the same steps that turned a recession into the Great Depression. But fear not; we survived the Civil War, Woodrow Wilson, Franklin Roosevelt and World War II. We'll survive Barack Obama as well. But we must make certain he only reigns for one term.

Robert Barker also writes for RandomThots.org . His work is driven by love of country and concern for its people, both present and yet to be.

3a)How's That Hope and Change Working Out for Obama Supporters?
By Chad Stafko

Barack Obama benefited from strong support among a number of demographic groups during his 2008 presidential campaign. In an economic sense, after two-and-a-half years of his presidency, those same groups which showed him the greatest support have suffered disproportionately more than others in the United States.

It begs the question as to whether these groups will be political lemmings for Obama both in their support of his campaign and when they pull the lever in the 2012 presidential election. If their votes are based upon how their financial lives have changed since Obama took office, then they cannot reelect Obama into the White House. In other words, logic should tell them to vote against Obama next year. Consider these groups.

African-Americans

Barack Obama captured a staggering 96% of the African-American vote in the 2008 election, an increase even above their traditional backing of the Democrats' candidate. In addition, there was a slight uptick in voter turnout for Obama, as blacks had a 2% increase in turnout versus the 2004 presidential election. It is hard to fathom that a presidential candidate could possibly garner greater support from a demographic group than did Obama from African-Americans.

However, that support at the polling place has far from translated into a better way of life for the group as a whole.

When Obama took office in January 2009, the nation's unemployment rate stood at 7.6%. For African-Americans, as a group, the unemployment rate was 12.6%.

Fast forward two-and-a-half years and, according to the latest data released for May 2011, the nation's unemployment rate is 9.1%. The present rate of unemployment rate for blacks is 16.2%. So, while the overall unemployment rate has risen by 1.5% since Obama took office, the rate of unemployment for blacks is 3.6% higher. Seen another way, the gap between the African-American unemployment rate versus that of the entire population has widened from 5.0% when Obama took office to 7.1% as of May 2011. That is a rather huge move in a relatively short period of time.

What we've seen then is that African-Americans have had their economic state of life drop at a far greater rate versus other Americans during Obama's time in the White House, despite their overwhelming support of him in the 2008 elections. The numbers show that President Barack Obama has done nothing for the economic well-being of the African-American demographic group.

For him to capture a similar level of this group's votes in 2012 would be indicative of the group simply ignoring how their financial status has declined disproportionately more than the overall population under Obama's fiscal policies.

College/Young Professionals

This group was another strong supporter of Barack Obama to become President back in 2008. His message of hope and change resonated with the college crowd and among those just starting their careers. In fact, turnout among those 18-24 years of age rose slightly to 49% in the 2008 elections versus 47% in 2004. Exit poll data from 2008 show Obama enjoyed a 66% approval rating for the 18-29 year-old demographic group.

Unfortunately for this group, economic opportunities have become more and more scarce during Obama's presidency. According to a recent report from the Economic Policy Institute, for calendar year 2010, the unemployment rate for workers 16-24 years of age averaged 18.4% verses a rate of 9.6% for the overall population.

The same report states, "...the class of 2011 will likely face the highest unemployment rate for young college graduates since the Great Recession began."

The policies of the very man this demographic group supported has caused many of them to be either underemployed or unemployed, while also now burdened with thousands and thousands of dollars in college loans, in many cases.

Low Income Families

Lower income Americans offered strong support for Barack Obama. More than 70% of voters who earned less than $15,000 per year punched their card for Obama, while those whose earnings were $15,000-$30,000 voted for Obama at a clip better than 60%. Better than 50% of those earning $30,000-$50,000 also supported Obama for the Oval Office.

Yet, these same individuals have found life under Obama to be rather difficult. When Barack Obama assumed the position of President of the United States, the average price of gasoline was $1.81/gallon. Going into the past weekend, the average price nationwide was $3.72/gallon. That's a mere 106% price increase under Obama.

Energy prices, as a proportion of income, naturally impact lower income families more than middle class or upper class families. We've also seen a substantial increase in food prices, including corn and wheat, which again impact the lower income group more than the overall population.

In fact, Federal Reserve Chairman, Ben Bernanke recently indicated that lower income Americans were being hit harder by the economy as he showed that lower income Americans continue to suffer disproportionately higher unemployment than middle and upper class Americans.

Three Groups: African-Americans, College/Young Professionals, and Low Income Families. All have seen disproportionately more economic challenges than the general population during Obama's term in office. If the economy is their top issue, then they cannot support the man who has made their lives worse since he took office.

Chad Stafko is a writer and political consultant living in the Midwest. He can be reached at stafko@msn.com


3b)The Obama Campaign Team's Electoral College Obsession
By Richard Baehr

The GOP nominating process is more than half a year away from the first in the nation Iowa caucuses. There could be several late entries into a field that already includes or is likely to include Mitt Romney, Newt Gingrich, Tim Pawlenty, Gary Johnson, Herman Cain, Michelle Bachmann, Ron Paul, Rick Santorum, and John Huntsman. Rick Perry seems likely to get into the race, and Sarah Palin, Paul Ryan, Chris Christie and Rudy Giuliani are all possible late entries.

The Obama campaign team is not waiting around for an opponent to be nominated. They are hoping to have raised $60 million by the end of June, and are providing early signals on the states where they think the 2012 contest will be decided.


From every indication the Obama team believes the 2012 race will be much more like the 2000 and 2004 Presidential contests that were won very narrowly by George Bush than the 2008 election won decisively by Obama. George Bush won 31 states and 286 Electoral College votes in 2004. Those Bush 2004 states now represent 292 Electoral College votes. For Obama to win in 2012, he needs to hold all of the Kerry states from 2004 and then pick off enough Bush 2004 states to net at least 24 Electoral College votes to get to 270. In 2008, Obama won 9 of the Bush 2004 states: Iowa, Nevada, New Mexico, Colorado, Virginia, North Carolina, Florida, Ohio and Indiana. Obama made a major effort in Missouri but lost the state by 4,000 votes. The Obama campaign team has made comments that suggest that they think Indiana and Missouri may be beyond their reach in 2012. This is telling because it hints at some misdirection by Obama campaign spokesmen last week, who talked about making a major effort to pick off Georgia (16 Electoral College votes) and Arizona (11 Electoral College votes). John McCain won Georgia by 5% in 2008, and Arizona by 9%. Are these states really better targets for Obama in 2012 than Missouri, which was practically a tie in 2008, or Indiana, which he carried by 1%? I think not, but if Obama can get the GOP to spread more of its money, time, and manpower across two states they are likely to carry, it means less of all these things for the truly competitive states -- Ohio, Florida, Virginia, and Colorado, most prominently.

In 2008, the McCain team played defense in many Bush 2004 states, and made a major effort in only one Kerry state, Pennsylvania (20 Electoral College votes) , which Obama won by 10%. Obama has a weak approval number in Pennsylvania at the moment (low 40s) but even with GOP victories in the Governor's race, Senate race, and pickups of several U.S. House seats in 2010, Obama remains the favorite to carry the state in 2012. The Keystone State is typically about 5% more Democratic leaning in a Presidential year than Ohio, and with Ohio as a tossup, Pennsylvania starts as a lean Democratic state.

One other Kerry state from 2004 may have moved further away from the Democrats. That state is New Hampshire (4 Electoral College votes), where Kerry won by 1%, and Obama by 9%. In 2010 the GOP decisively won the open Senate seat (Kelly Ayotte winning by over 20%), won back both U.S. House seats, and won large majorities in the state legislature. If New Hampshire goes for the GOP in 2012, then Obama would fall short in the Electoral College at 270-268, even if he swept Iowa, Colorado, New Mexico and Nevada. All but New Mexico are tossup states for 2012, though Obama might be slightly favored in all of them.

The Obama team's strategy for 2012 will be to work on turnout among minority groups that gave big margins to Obama in 2008, and to accumulate a large enough war chest so as to overwhelm the GOP nominee in the general election season on all major media, as occurred in 2008. The Mediscare campaign, successfully trotted out in the New York 26 special election, will be a regular feature of ads in states with large percentage elderly populations , such as Florida and Pennsylvania -- and Arizona, if the Obama team sees a real opening.


Much of the money will be spent earlier than in the general election months, attempting to create a toxic image of the eventual GOP nominee, before that candidate has had a chance to create a strong impression on the electorate on his or her own. The eventual GOP nominee can expect to be "Palinized" both by the official Obama campaign, and its surrogates in the national media (the major networks, the New York Times, the Washington Post, the newsweeklies).

A largely negative campaign by the President's team is easy enough to understand. It will be hard for Obama to run on his record in 2012. The weak economy, the high jobless rate, the enormous annual deficits and accumulated debt, are all going to be tough to defend for the party in power. Most voters think the $850 billion stimulus was a failure. Outside of Michigan, most people opposed the auto bailout and still do. By 2012, the blame for the current economy will be on Obama's shoulders and the attempt to shift blame to George Bush for the "mess he inherited" will have less resonance. ObamaCare, the signature "achievement" of the Administration, remains deeply unpopular, and may not survive court challenges.


In foreign policy, the Arab Spring has turned into a nightmare scenario where the three largest Muslim majority states in the region, Turkey, Iran and Egypt, may all soon be in the grip of Islamists, hostile to the United States and the West. Obama started a third unpopular war in Libya, while waving at mass murder committed by Syria, and Iran may become a nuclear nation on his disinterested watch.

The president has managed to alienate some members of one of the most loyal Democratic constituencies, Jewish voters and contributors, with his obsessive pressure on Israel on settlements and by badgering Israel to negotiate with the Palestinian Authority (which now includes Hamas) on terms that remove any leverage Israel might have in the negotiating process before it begins.


The Obama team is committed to creating or preserving two jobs: Obama's and Joe Biden's, and if the electoral calculus in the spring of 2012 suggests that a new VP may help more in a difficult race, Biden will be jettisoned, too.

The generic ballot tests suggest an unnamed Republican runs about even with Obama at this point. Obama's bin Laden bounce has disappeared, and he now has an average approval score in the high 40s again, down from the low 50s. Obama wins virtually every head to head pairing with potential GOP nominees at this point, which does not mean much for many of the candidates, since they are not nationally known. The head to head tests are more important indicators of electability for candidates who are better known, and can do less to re-establish their national image, such as Romney, Palin and Gingrich. On this score, Romney looks competitive, and the other two are not.


In any case, the GOP would be well advised to look for a team that can run well in the states that will determine the outcome. Obama won Virginia by just over 6% , North Carolina by 0.3% last time, and Florida by 2.8%. North Carolina leans to the GOP this time around, and Virginia and Florida will be fiercely contested by the Obama team. The Obama camp believes that the growing Hispanic percentage of the voting population in several Southwest states moves Colorado, Nevada and New Mexico in their direction. Democrat incumbents hung on to win two hard fought Senate battles in Colorado and Nevada in a good GOP year in 2010, though in each state the GOP nominee may not have been the strongest general election candidate of those who sought the nomination. The Midwest states -- Ohio, Wisconsin, Iowa and possibly Minnesota, if Pawlenty is on the ticket -- will all be getting a lot of attention. Michigan looks stronger for Obama, and Pennsylvania may be the blue state he has to work hardest to defend. Only New Hampshire in the Northeast is competitive.

A Republican candidate who can demonstrate successful experience in governing, and successful experience in the business world, will have a better shot at winning the independent votes needed to supplement the core conservative base, which may be large enough to win some Southern states and Rocky Mountain states, but not enough to win the tossup states. It may also be the case that that after the Clinton, Bush and Obama years, the electorate may look kindly on someone a bit duller this time around, who projects competence and problem solving ability, but does not win the charisma derby.


Odd as it may seem, it is easier at this point to identify potential Vice Presidential candidates to run with the eventual GOP nominee, who would help in the states just mentioned. Senator Marco Rubio of Florida would be a big plus in Florida and probably in the Southwest as well. Senator Kelly Ayotte of New Hampshire might lock up her state for the GOP, and have appeal to suburban women in many of the tossup Midwestern and "New South" (Virginia, North Carolina) states where there is still a significant gender gap.

Richard Baehr is chief political correspondent of American Thinker.
------------------------------------------------------------------------------------------------------------------------4)US naval movements around Syria. Hizballah moves rockets

Military and intelligence sources report the US deployed the USS Bataan amphibian air carrier strike vessel opposite Syria's Mediterranean coast with 2,000 marines, 6 war planes, 15 attack helicopters, including new V-22 Ospreys, and 27 choppers for landing forces aboard.Also this week, US naval units went operational in the Aegean, Adriatic and Black Seas as part of the joint US-Ukrainian Sea Breeze 2011 exercise.
The USS Monterrey cruiser armed with Aegis surface missile interceptors has additionally been stationed in the Black Sea. Western sources additonally report a build-up of ship-borne anti-missile missile strength in the Mediterranean basin.

This huge concentration of naval missile interceptor units looks like preparations by Washington for the contingency of Iran, Syria and Hizballah letting loose with surface missiles against US and Israeli targets in the event of US military intervention to stop the anti-opposition slaughter underway in Syria.

Moscow, Tehran and Damascus, in particular, are taking this exceptional spate of American military movements in and around the Mediterranean as realistically portending American intervention in Syria.

This concentration of US might also the effect of deterring the Turkish government from going through with its decision to send Turkish troops into Syria. The plan was to create a protected buffer zone where the thousands of refugees in flight from the Assad regime's military crackdown would be kept safe on Syrian side of the border and out of Turkey.

Turkish Prime Minister Tayyep Erdogan is averse to be seen working hand in glove militarily with any US interference in Syria. At the same time, Western intelligence sources in the Persian Gulf are sure Washington is coordinating its military movements with Ankara and that Erdogan quietly agreed to place Turkish bases at US disposal for an operation in Syria.

Military sources also report Hizballah began shifting the long- and medium-range rockets it had stored in northern Lebanon to locations in the center of the country. Western military sources first thought the Lebanese Shiite group was taking the precaution of keeping its arsenal safe from a spillover of violence from Syria. Tuesday, however, they learned that Iranian intelligence had advised Hizballah to remove its rockets out of range of a possible American operation in Syria.
Tuesday, Iran capped these events with three separate warnings to the Obama administration against military interference in Syria.

Foreign Ministry Spokesman Ramin Mehman-Parast said Tuesday: "The Americans are not allowed to launch a military intervention in any country of the region including Syria."

He accused "Israel and the USA of standing behind the riots in Syria, Iran's closest ally in the Arab world… with particular aims…of provoking terrorist groups in Syria and in the region to carry out terrorist and sabotage operations."

Another spokesman warned: "Western attempts to set the model of Libya in Damascus are doomed to failure."

Iranian Vice President Reza Rahimi accused the United States of preparing and executing "the slaughter of Muslims" worldwide.

Iran's ground forces commander Brig. Gen. Kioumars Heidari added this threat: Any new military move by the US in the region will impose heavy costs on the country far greater than the costs it paid in Iraq and Afghanistan."


4a)Why Syria will get away with it
By Gideon Rachman

As Syrian tanks prepared to advance on Jisr al-Shughour late last week, Robert Gates, the US defence secretary, launched an offensive of his own. In a speech in Brussels, he dismissed most of America’s European allies as a useless bunch of timewasters. I paraphrase – but not much.

Gates pointed out that while all Nato countries had voted to intervene in Libya, most had chosen not to participate in the actual fighting. Even those European countries that are taking part began to run short of munitions just 11 weeks into the fighting – forcing an exasperated America to step into the breach. More broadly, a situation in which the US accounts for 75 per cent of the military spending in Nato was “unacceptable” and unsustainable. If it is not rectified, Gates predicted, Nato faces a “dismal” future.

The conjunction of the Gates speech and the Syrian civil war is very telling. It explains why a 20-year experiment with the idea that western military force can put the world to rights is coming to a close.

Just a few weeks ago, that would have seemed a surprising conclusion. Supporters of “liberal interventionism” hailed the decision to bomb Colonel Gaddafi’s forces in Libya as evidence of a longed-for new era, in which dictators can no longer feel free to massacre their own people.

However a western failure to intervene, as the Syrian army brutalises and kills its own citizens, is likely to be a more accurate guide to the future than the Libyan campaign. There is, of course, a direct link between the west’s reluctance to get involved in Syria and the frustrating and (so far) inconclusive nature of the Libyan intervention.

However, the Syrian conflict also needs to be seen in the context of a generation-long experiment with liberal interventionism. That era began in 1991, when the collapse of the Soviet Union left the US as the world’s sole superpower and a swift victory in the first Gulf war restored confidence in the power and effectiveness of American military might. Since then, the debate about how and when to use military power has waxed and waned. Western governments chastised themselves over the failure to protect the Kurds and the Shia in Iraq in 1991, over the Rwandan genocide of 1994 and over the many years of dithering as lives were lost in the Balkans. But a series of apparently successful interventions – Bosnia, Kosovo, East Timor, Sierra Leone – gradually strengthened the belief that western military power could be used to end conflicts and save civilians.

The bitter experiences of the Afghan and Iraq wars, however, shifted the debate on military intervention once more. Both Barack Obama in the US and David Cameron in Britain promised to be leaders who would adopt a much more cautious attitude to foreign military adventures. Then along came the Arab spring and western leaders once again found themselves committing to military action, this time in Libya – Obama with evident reluctance, Cameron and President Nicolas Sarkozy of France with apparent enthusiasm.

The Libyan war illustrates how unfolding events can force a political leader’s hand. That could still happen in Syria. But it seems much more likely that, this time, the west will stand aside.

In part, this is because of deadlock at the UN, where Russia and China – angry about the Libyan war – are blocking efforts to pass a resolution that even condemns events in Syria, let alone prepares the ground for intervention. However the broader context is the west’s diminishing ability and willingness to intervene at all.

The Gates speech effectively marks the end of the American ambition to turn Nato into the global, military arm of a unified western world. The Americans have flirted with this idea, ever since the onset of the “war on terror”. But, as the Afghan war has worn on, so the military effort has become more and more heavily dependent on the US.

The fact that Europeans called for a campaign in Libya that they are incapable of conducting alone has merely re-enforced the American view that the European arm of Nato is, to varying degrees, feckless and unreliable. Disarray and recriminations within Nato hobble the single most effective potential tool for western military intervention overseas.

Even more significant in the long run is the American anxiety that budgetary constraints, which are leading to defence cuts in Europe, are beginning to be replicated in the US itself. Admiral Michael Mullen, America’s top military officer, has called the budget deficit the single biggest threat to US national security. It is also the single biggest constraint on future bouts of “liberal interventionism”.

Money is not the only problem, however. Over the past 20 years it has become apparent that swiftly agreed-upon military actions can lead to entanglements that last for many years. There is still a Nato mission in Kosovo and an EU military mission in Bosnia, more than a decade after the fighting ended in both places.

As for Afghanistan – that conflict has now lasted almost twice as long as the second world war. Western governments are also only beginning to come to terms with what may soon be required in Libya. Against this background, there are very few takers for yet another military venture – this time in Syria.

Copyright The Financial Times Limited 2011
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5)UnCertainty Is Not The Problem

It's not the policies we don't know about that are retarding the economy. It's the bad policies we have.
By CLIFFORD S. ASNESS

Many commentators blame our continuing economic woes on "uncertainty." They allege that recent and anticipated dramatic policy changes make business planning difficult, and that this is retarding growth and employment. This view is not wrong—but our main problem is not the uncertainty surrounding new policies. It is the policies.

Consider two uncertain situations. In the first, our business is waiting to find out the location decision for a customer's new industrial plant, so we know where to build our new supply facility. Until this is resolved, we will not invest in building nor will we hire staff. In the second situation, we know we are in for some pain, someone is going to make our business less productive and profitable, but we do not yet know how much. Planning is marginally more difficult, but the main reason we will not grow in the second situation is that investment is less attractive regardless of the precise resolution of uncertainty.

In the first case, uncertainty is the obstacle. Once it is resolved, we invest. In the second case, uncertainty is a small part of the problem. The large part is simply that bad things are happening. The day we are told "well, it's exactly a 30% hit to productivity and profits," all uncertainty is resolved—yet we will still not invest or hire.

The Obama administration's economic policies have defenders. For instance, New York Times columnist Paul Krugman will tell you the stimulus helped, and we didn't have enough. I disagree. I will tell you the stimulus was wasteful and politicized, and the American people, not being idiots, know they will have to pay for it eventually. People adjust their plans to account for the additional debt heaped on them, meaning lower investment and consumption.

I will also tell you Dodd-Frank, with its enshrining of too big to fail and its large regulatory costs, is an albatross. I will add that ObamaCare's gigantic new entitlement has hurt. I will throw in that massive additional regulatory costs being foisted upon business is an extra drain on the economy. I would definitely say that the disregard for law during the auto-company "bankruptcies" has long-lasting negative effects. I'd even throw in that the president's demonization of business has been harmful. Finally, I'd say the expected tax increases, even if only on the "super rich"—defined as anyone still gainfully employed—weigh upon us. So what does all this have to do with uncertainty and whether that's our problem? Consider a hypothetical.

Imagine, right now, we passed a giant additional wasteful stimulus. Imagine all the rules of Dodd-Frank were revealed and are even more stifling than we expected. Imagine we doubled the new health-care entitlement and expanded government control of health care more than previously predicted, but set all the details today. Imagine assorted government agencies passed more burdensome regulations than we anticipated, increasing both the cost of doing business and the drag of crony capitalism. But all uncertainty was resolved by passing them today.

Next imagine that the president promised, in no "uncertain" terms, to up his hectoring of business in perpetuity. Further, imagine we passed higher taxes going forward on everyone but, again, we settled it for certain right now. Finally, imagine we committed ourselves to no entitlement reform ever. Is all this good or bad? Well, uncertainty has been eliminated, but it sounds pretty darn bad.

Now let's go the opposite way and consider good policies surrounded by uncertainty. Imagine we will move from here toward free-market health-care reforms appropriate for a free people. We will reduce government spending and our debt, letting people spend their own money as they see fit. We will lower taxes across the board for individuals and businesses, and we'll reduce and simplify deductions.

Imagine even more that we'll make grown-up decisions and reform entitlements to levels we might possibly afford. Now imagine that while we know the direction of each of these policy changes, alas, we are very uncertain about how far these wonderful ideas will go. Imagine this uncertainty is even higher than it is around today's bad policies. Would these changes, uncertainty and all, make things better or worse? Well, it seems pretty clear that should these changes occur in any nontrivial fashion, you would have to duck to get out of the way of the ensuing economic boom, regardless of the uncertainty.

Focusing on "uncertainty" takes our eyes off the ball. We should not seek clarity about the many new drags on our economy. We should seek to have the administration cease and desist, then reverse them.

Mr. Asness is the managing and founding principal of AQR Capital Management.
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6)Is Pawlenty Plenty?
By Thomas Sowell

The Republicans' confused assortment of announced presidential candidates-- as well as unannounced candidates and distant possibilities of candidates-- seems to be clarifying somewhat. The withdrawal of Donald Trump and Mike Huckabee, as well as the withdrawal of much of Newt Gingrich's staff, seems like a much-needed weeding-out process.

Although Mitt Romney has been leading in the polls, his lead over other potential rivals has been slim. Being a "front-runner" this far ahead of next year's nominating convention would not mean much, even if Governor Romney's lead and his support were much bigger than they are.

The albatross around Romney's neck is the RomneyCare medical plan that he signed into law in Massachusetts. His refusal to repudiate RomneyCare means that, as a presidential candidate, he would forfeit one of the strongest argument against Barack Obama, who has ObamaCare as his albatross.

Nor is an about-face on RomneyCare a viable option for Mitt Romney. He has already done too many other about-faces for the voters to be likely to trust him after another. He has painted himself into a corner.

Articulate Newt Gingrich might be the best Republican to go toe-to-toe with Obama in presidential debates-- and a lack of effective articulation has been the Republicans' big weakness for years. Try to name a Republican renowned for his articulation, besides Ronald Reagan, Theodore Roosevelt and Abraham Lincoln.

While Newt Gingrich is not at that level, he is definitely a cut above most Republican candidates in talking. He also represents a cherished moment in Republican history, when they took the House of Representatives for the first time in 40 years, as a result of Gingrich's "contract with America" election strategy.

But that was back in the 1990s, and many younger voters today may have no idea what that was all about. Worse yet, former Speaker Gingrich has shown too many signs of opportunism -- including his wholly unnecessary swipe at Republican Congressman Paul Ryan's attempt to bring some fiscal sanity to Washington-- to be trusted.

His own staff should know him better than the rest of us. Their recent resignations should mark the end of a very promising career that did not live up to all its promises. Even so, Gingrich performed a real service to the country as Speaker of the House of Representatives, which brought federal spending under control and produced what the media chose to call "the Clinton surplus."

Among the other announced Republican presidential candidates, former governor Tim Pawlenty of Minnesota talks the most sense and shows the most courage. When you tell people in a corn-producing state like Iowa that you want to cut back on Ethanol subsidies, that takes guts, because Iowa will also produce the first results in next year's primary campaign season. And first results, like other first impressions, carry a lot of weight.

But somebody has got to talk sense about our dire economic problems-- and it is painfully clear that Barack Obama will not be that somebody. The fact that Pawlenty has put his neck on the line to do so is a big plus.

Tim Pawlenty cites his track record to back up his statements. That includes reducing Ethanol subsidies when he was governor of Minnesota and cutting the growth of state government spending from just over 20 percent a year to under 2 percent a year.

Governor Pawlenty fought Minnesota's transit unions over runaway pensions and hung tough during a long strike. "Today," he says, "we have a transit system that gives commuters a ride, without taking the taxpayers for a ride."

Some fear that Governor Pawlenty doesn't have the charisma and fireworks rhetoric that they would like to see in a candidate. Charisma and rhetoric are what gave us the current disastrous administration in Washington. Charisma and rhetoric gave people in other countries even bigger disasters, up to and including Hitler.

Politicians and the media may want a candidate with verbal fireworks but the people want jobs. As Tim Pawlenty put it: "Fluffy promises of hope and change don't buy our groceries, make our mortgage payments, put gas in our cars, or pay for our children's clothes."
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