According to a senior State Department official he believes Russia will lose no time in testing Obama.
I suspect a long line will develop fairly early. (See 1 below.)
More Israelis injured as Olmert and Barak twiddle their thumbs. This time a shopping center sustained a direct hit. If Olmeret and Barak intend to do nothing the least they could do is move to Sderot. I doubt Olmert has the guts to move to Sderot and live among those Israelis his government has deserted. (See 2 below.)
Eli Kavon suggests another option and writes Olmert should read the story of Ahab in the Old Testament, take the parallels to heart, and resign now. (See 3 below.)
Shas Chairman and Deputy Prime Minister Eli Yishai speaks out regarding continued Hamas bombing from Gaza. Yishai's logic is overwhelming but he might as well go to Jerusalem and wail at The Wall - Olmert is deaf. (See 4 below.)
Brent Budowsky sees a bail out backlash coming. Perhaps, but I disagree because Americans have become sheeplike, numb and used to being shorn by their elected officials.
The question I would pose to Budowsky is will the backlash come before or after Obama spends another trillion? (See 5 below.)
Gerard Baker writes the Fed has thrown away the rule book.
Soon we will be rolling in dough, debt and then inflation. (See 6 below.)
Dana Milbank writes, reporters expecting answers from Obama to their questions are finding it is no "slam dunk."
In due time Dana!(See 7 below.)
Dick
1) US official: Russians intend to test Obama on arms
By ROBERT BURNS
WASHINGTON – The Russian government is likely to "test the mettle" of Barack Obama and his administration by taking a tougher stance against U.S. missile defenses, a senior State Department official said Wednesday. John Rood, the department's top arms control official, told reporters he believes the Russians are waiting to size up the Obama administration before Moscow advances its position on disputed arms issues.
In discussing the state of Russian opposition to U.S. missile defense bases in Poland and the Czech Republic, Rood said it appears that Moscow has "paused" in anticipation of a new national security approach in Washington.
"My assessment is that the Russians intend to test the mettle of the new administration and the new president," he said. "The future will show how the new administration chooses to answer that challenge."
Asked to elaborate, he said, "I think missile defense and other subjects will be among those that the Russians intend to determine what the new administration's posture will be." He said he reached this conclusion on the basis of an impression gained during talks in Moscow on Monday rather than from explicit Russian statements.
He also said the Russians have been less flexible lately in talks on missile defense. In particular he cited their stance on U.S. proposals to give the Russians more assurance that a missile interceptor site in Poland and a missile-tracking radar in the Czech Republic would pose no security threat to Russia.
The U.S., with the support of the Polish and Czech governments, has proposed that Russian officials be given regular access to the interceptor and radar sites and that they be allowed to monitor activity at both sites through undisclosed technical means. Rood did not elaborate on the details in dispute.
"I don't want to spell out all the details because I think this is a high-priority dialogue for us in the United States, and I don't think that putting all the details out will facilitate a resolution to it," he said.
Rood led a U.S. government delegation in talks with senior Russian officials on a range of subjects, including efforts by both governments to negotiate a treaty to replace the 1991 START nuclear arms deal, which expires in December 2009. Rood said the talks were useful but did not achieve any breakthroughs.
In Moscow on Tuesday, Russian news agencies quoted Foreign Minister Sergey Lavrov as saying Moscow hopes the Obama administration will agree that the weapons limitations under START "should be preserved and strengthened, rather than weakened."
Rood said the Russians want to expand the scope of a follow-on to the START treaty to include limitations on non-nuclear strategic weapons such as long-range conventional bombers and possibly submarines. The Bush administration has resisted that, saying the restrictions should be on nuclear warheads only.
Rood said he consulted with members of Obama's transition team before traveling to Moscow and will brief them on the substance of the talks. And he said he expects additional talks with the Russians on these subjects before President Bush leaves office Jan. 20.
Brooke Anderson, the Obama transition office's chief spokesperson on national security affairs, declined to comment on Rood's remark about the Russians likely seeking to test the new president.
The missile defense issue has been one of the most divisive over the past few years. The Bush administration has argued that extending its U.S.-based defense system to Europe is important in defending Europe and the United States from a possible long-range missile strike from Iran, while the Russians dispute the immediacy of an Iranian threat and worry about U.S. military expansion near Russian borders.
On Nov. 5, the day after Obama's election, President Dmitry Medvedev warned that Russia would move short-range missiles to NATO's borders to "neutralize" any U.S. missile defense system in Eastern Europe if necessary.
Medvedev has since backed off slightly. He stressed on Nov. 15 that Russia would not act unless the United States took the first step and expressed hope that the new U.S. administration will be open to negotiations.
Obama has not been explicit, at least in public, about whether he would proceed with the missile defense plan in Poland and the Czech Republic. More broadly he has said he supports missile defense but wants to ensure that it is proven to be a reliable system that does not detract from other security priorities.
2)Crowded Sderot shopping center takes direct Qassam hit from Gaza, 12 injured
The 15th missile from Gaza, injured 12 people - three from shrapnel, the rest in shock - exploded in the Sderot supermarket parking area, destroying shops and cars and scattering crowds of panicky Hanukah shoppers.
The attack capped two days of a massive Palestinian missile and mortar barrage against several Israeli towns and villages without an Israeli military response. Only after the Sderot shopping center was ravaged did the Air force go into action against the Palestinians launching missiles from Beit Hanun in the northern Gaza Strip. Even then, the Palestinians kept on firing raising the day's number to 21.
This week, despite the escalating barrage from Gaza, the chief of staff, Lt. Gen. Gaby Ashkenazi held the IDF down to one counter-attack per day. Senior officers in the Southern Command said this order had made the Israeli army and its ability to protect the Israelis living around the Gaza Strip look ridiculous. The fact that the Palestinian Hamas and Jihad Islami missile teams have switched from mobile to stationary launchers showed they were aware that defense minister Ehud Barak had tied the Israeli military's hands and they could carry on firing safe from interference.
The defense minister had counted on Egypt to hold the Hamas in check when he accepted a six-month unwritten "truce" through its good offices in June. This strategy collapsed along with the "truce" which expires Friday.
Since then, Barak and Ashkenazi have drummed up all sorts of pretexts to duck the long-delayed effective military ground action in Gaza.They say that before embarking on a major military operation it is essential to know how it will end; to be effective, the Gaza Strip must be reoccupied; or such action would put at risk the life of the kidnapped Israeli soldier Gilead Shalit held in Gaza for two-and-a-half years.
More recently, the defense minister challenged the state attorney, Menahem Mazuz, to provide legal sanction for the army to go into Gaza. Mazuz tossed the buck back by withholding an opinion. He has not forgotten that Barak ignored the last opinion he was asked for, permission to demolish the home of the Jerusalem tractor-terrorist. That building is still standing. It is as glaringly obvious to the state attorney as to everyone else on both sides of the conflict that the defense minister only consulted him as an excuse to avoid action.
Former generals, including the ex-chief of Military Intelligence, Aaron Farkas, have stated publicly that every day the Palestinian terrorists get away without punishment further erodes the Israeli military's deterrent power in the Middle East at large. They strongly urge an end to procrastination and the immediate launch of a series of pinpoint strikes against the Palestinian terror organizations shooting the missiles from Gaza: Hamas, Jihad Islami, Fatah and the Popular Resistance Committees. Without a serious military campaign, the security threat emanating from the Gaza Strip will go from bad to worse.
The reoccupation of the Gaza Strip is not a serious option for any military authority and therefore should not be used as a pretext to shirk the necessary counter-action to the Palestinian missile blitz.
3) The Ahab syndrome: Why Olmert should resign now!
By Eli Kavon
If Prime Minister Ehud Olmert had a better grasp of the history of the Jewish people, he would have already resigned and repented for his sins. Olmert, who has lost the trust of most Israelis - as well as the Jews in the Diaspora whom he bilked - should open up his copy of the Bible and read the sad but enlightening story of King Ahab. Perhaps he would learn the lesson of what happens when a powerful man loses sight of what is truly important in life and becomes seduced by the power of his authority.
Ahab was one of the most successful and accomplished monarchs of the ancient Middle East in the period following the breakup of David's united kingdom into two states. The descendants of David ruled the southern kingdom of Judah from the capital in Jerusalem. The Omride dynasty, although later overthrown, led the northern kingdom of Israel for many years. Ahab ruled the northern kingdom in the mid-ninth century BCE.
The archeological record reveals Ahab as a monarch who fielded massive armies in battle and who was a master builder. A monument of Shalmaneser III, the king of the powerful Assyrian empire, reports that in a battle north of Damascus at Karkar in 853 BCE, Ahab's kingdom contributed 2,000 chariots and 10,000 foot soldiers to the fight against the Assyrians. The king of Israel was successful at stopping the Assyrian advance, despite Shalmaneser's boasts of victory over the alliance rebelling against his empire.
Ahab was also a great builder, as is evidenced by the finds of archeologists in Dan, Hatzor, Megiddo and Tirza. The citadels he built and the sophisticated systems of delivering water to major cities that he developed are a marvel of ancient architecture and engineering. Ahab was an important and powerful leader in the annals of the ancient Israelites and the Middle East.
IT IS too bad for Ahab, however, that the Bible hardly mentions his great accomplishments as the monarch of the northern kingdom. In fact, the scribes and prophets who authored the books of Kings paint a portrait of Ahab as an idol worshiper and a tyrant. The king is condemned for marrying Jezebel, a princess of Tyre who promoted Ba'al worship and persecuted prophets of the God of Israel. In its most searing indictment of Ahab, recounted in I Kings 21, Elijah condemns him for stealing the vineyard of Naboth and, with Jezebel encouraging the ruler, executing this man who owned the plot of prime land near the palace. According to the Bible, "there never was anyone like Ahab, who committed himself to do what was displeasing to the Lord, at the instigation of his wife Jezebel. He acted most abominably, straying after the fetishes just like the Amorites, whom the Lord had dispossessed before the Israelites." The battle of Karkar and Ahab's 2,000 chariots are never mentioned in the Bible and there is scant reference to his building projects in and around Samaria, the capital of the northern kingdom.
At first glance, these omissions in the Holy Scriptures might seem unfair. Why not give Ahab the credit for his success where the credit is due? Ahab's record as a ruler was a record of accomplishment and success both in the kingdom of Israel and throughout the Middle East. Israel flourished under the Omride king. Ahab, in the face of overwhelming force of the great empire of Assyria, defended the kingdom he ruled and retained its political and military integrity. He should be commended for his leadership, not condemned.
If the books of Kings were simply a social and economic history of the kingdoms of Judah and Israel, perhaps Ahab would have been credited for his success. But the reality of the Bible is that it is alone interested in the relationship between God and His chosen people. Fidelity to God is the paramount concern of the most important book in Western literature and faith. For all of Ahab's glory as a strong leader, he fails miserably in the Bible as a paragon of virtue and belief.
He and Jezebel are enemies of the prophets and are lacking in the ethics required of true Israelite leaders. Elijah is the hero in the story of Ahab's reign. Ahab has always been remembered as the villain. For all of his success in realpolitik, Ahab is a moral and ethical failure. That is how he will always be remembered, no matter how many archeological finds reveal otherwise.
I HOPE Ehud Olmert takes Ahab into consideration as he repents for sins committed as mayor of Jerusalem, as a leader in the cabinet and as prime minister. All of Olmert's positive accomplishments in these roles as a public servant will be forgotten for a long, long time. In America today, Richard Nixon is remembered as a purveyor of political scandal, not the leader who revolutionized American foreign policy by opening relations with Mao's China, promoting détente with the Soviet Union and helping to arm Israel during the crisis early in the Yom Kippur War.
Too bad for Ahab. Too bad for Nixon. And too bad for Ehud Olmert. The role of a public servant is not only to promote a nation's power and wealth. He or she must act responsibly and ethically. Olmert should leave the office of responsibility entrusted to him - now. He should have thought years ago about his responsibility to the State of Israel and its citizens. Certainly he, a Jewish leader who suffers from the syndrome of the great but seriously flawed King Ahab, should remember that responsibility now.
4) Minister Yishai demands Gaza action
By Roni Sofer
Shas chair urges cabinet to make operational decisions in light of ongoing Qassam fire on south
As the rocket fire on the western Negev increases and as the election campaign accelerates ahead of February 10, the government's policy of restraint is taking center stage.
"Blood and pain have stained this ceasefire. I urged the cabinet to make operational decisions. Stop selling a virtual calm," said Shas Chairman and Deputy Prime Minister Eli Yishai.
Bombarded
Further escalation in south: At least five Qassam rockets fired at southern Israeli communities Wednesday afternoon. Rocket explodes in Sderot parking lot, three people sustain light wounds; eyewitness: Children were crying.
Wednesday saw at least 17 Qassam rockets fired from northern Gaza at the western Negev. One of the rockets hit a busy shopping center in Sderot, causing three people light injuries and several others to suffer shock. Other rockets landed in open areas, causing no harm.
The IAF struck a rocket launcher in the northern Gaza Strip town of Beit Hanoun Wednesday evening, in response to the fire.
"The terrorists are targeting Sderot and the Gaza vicinity communities like they were on a dart board, as our leaders seen to have turned into pillars of salt when it comes to making decisions, and pillars of ice when it comes to feelings," Yishai said. "Those trying to butcher us should know that we have targets of our own. No one is immune."
Likud Chairman Benjamin Netanyahu added that the government's current policy proves conducive to the escalating rocket fire, saying that the situation will change "only when we go from being passive to taking actions that restore Israel's deterrence, which has been eroded to the point of nonexistence."
"The current policy does not contribute to peace, just to terror," he said, pledging that a Likud-led government will not agree to divide Jerusalem or to release any more Palestinian prisoners.
5) Bailout backlash
By Brent Budowsky
Americans have begun an angry backlash against bailouts that could become a national revolt in 2009.
The Federal Reserve has cut interest rates by some 500 basis points. Government agencies have poured close to $8 trillion into banking bailouts. The Treasury secretary has promoted massive government support of troubled, failed and corrupted institutions.
This program is a 100 percent top-down exercise involving the largest amount of money in history.
Virtually none of this money directly helps average Americans. Virtually none of it trickles down to the people who suffer the most and pay for the program.
After $8 trillion we are still debating whether any money should be used to directly help average Americans.
The Fed has cut rates dramatically. It is shameful that after all of these rate cuts and all of these bailouts, banks continue raising credit card interest rates, lowering credit lines, refusing to lend to creditworthy businesses and allowing the Grapes of Wrath-like foreclosure crisis to continue with minimal effort to address it.
The banks don’t trust the banks. The banks don’t trust their customers. Business does not trust the banks or the government. Taxpayers don’t trust anyone.
The only trust is from the Fed and the Treasury Department that transfer huge sums of money to the large institutions that caused the problem, often in secret, often involving complicated financial derivatives that neither Congress nor many CEOs understand, based on trust that these institutions will use this money wisely, which often they have not.
The Securities and Exchange Commission is discredited. The Federal Reserve has failed in its duty as banking regulator. Congress has failed in its duty of oversight. The most wise and citizen-friendly regulator, Sheila Bair of the Federal Deposit Insurance Corporation, is treated with contempt by the Treasury secretary.
The public backlash is only beginning. It will rise with every new scandal and Ponzi scheme and every new increase in credit card rates. It has already infected good judgment in the auto case, where major support is needed, tied to major plans for industry renewal.
I do not oppose bailouts, I oppose bailouts managed with banana-republic standards of secrecy and incompetence in which recipients of massive taxpayer largesse work against those who pay for this largesse.
Today the Federal Reserve Board refuses to disclose information regarding some $2 trillion provided to financial institutions. Bloomberg business news has filed a historic freedom-of-information case seeking disclosure. Congress and the president-elect should support it.
Bailout money is not a private account that belongs to Fed Chairman Ben Bernanke, Fed governors, the Treasury secretary or the banks. It is the people’s money. It should be used to benefit the people. It should be monitored through the checks and balances of the democratic process.
Secrecy is the enemy of equity, integrity and common sense. Secrecy is the friend of negligence, misjudgment and corruption. There are probably selected instances where the Fed should not disclose, but show me $2 trillion of secretly spent money and I will show you trouble.
In the coming days I will be writing about the Bloomberg case and offering specific bailout proposals on The Hill’s Pundits Blog. The backlash is coming. Time is short. The dangers are extreme.
America needs new thinking and an informed national consensus — and we need it now.
6) Fed throws out the rulebook
Gerard Baker
The Federal Reserve yesterday threw away the monetary policy rule book it has been using for 50 years in its most dramatic effort yet to stem the global economic crisis.
In a single stroke, the US central bank in effect eliminated the cost of borrowing money between banks overnight. It promised that US rates would stay at or near zero for the foreseeable future. And, acknowledging that it now has no more room to cut rates, it announced new, unprecedented measures to stimulate the economy, namely pouring cash into almost every crevice of the financial system and massively expanding its own balance sheet.
The two-day meeting of the Fed’s open market committee which ended yesterday must have been one of the most extraordinary in the central bank’s 95-year history. For more than a year the Fed has been deploying all kinds of weapons – traditional monetary policy implements as well as hastily-manufactured new ones – to prevent the US economy from collapsing into a deep and enduring depression.
There were three key elements to the Fed’s move – each of them dramatic in its own right.
First, it cut rates once again from the existing one per cent to something close to nothing. But, instead of announcing a target rate for the overnight interest rate – as it has done for the last decade – the Fed said it would aim to keep the rate in a range – between zero and a quarter percentage point. This unusual move reflects the fact that the federal funds rate – a market interest rate that the Fed can move only indirectly – has been volatile recently because of continuing strains in the interbank lending market.
Second, in its statement accompanying the move, it noted that the US economy had deteriorated on almost all fronts in the last few weeks, and it said that those “weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”
The Fed rarely commits itself to future policy decisions but those words are tantamount to saying that rates will remain at or near zero for a long time.
Third, Mr Bernanke has launched the US on an uncharted path of what economists call “quantitative easing”, emergency measures to stimulate an economy in the clutches of deflationary collapse.
With short-term interest rates now at zero, the central bank can no longer cut rates to stimulate the economy. Instead, it can in effect print money, by buying up all kinds of assets and flooding the economy with cash. The Fed’s statement said it would begin buying mortgage-backed securities on the open market. It also announced it was evaluating buying up long-term government debt.
The significance of this development is that it will push interest rates on these assets substantially lower from their already low level. That should help stimulate demand.
The key difference in yesterday’s announcement from everything the Fed has done in the last year is that it is now going to buy up hundreds of billions of dollars of these financial instruments, not simply lend money to banks secured on some of those same assets.
There are risks to the central bank’s action. Even lower interest rates on both short-term and long-term lending may still not generate much economic activity. What’s more, printing money in this way – the Fed’s balance sheet will expand significantly as it acquires all these assets from the markets – could risk an inflationary surge when the immediate crisis is past.
But Mr Bernanke and his colleagues are surely right to think that is a risk worth taking given the severity of the current crisis. Inflation right now looks like a distant dream, as prices are plummeting.
That was underlined by news that consumer price inflation in the US fell at its fastest rate on record last month. Prices fell by 1.7 per cent in November, in large part as a result of declines in oil and commodity prices, but prices were lower almost across the board.
As recently as July the annual rate of inflation was 5.6 per cent and economists fretted about the risk of so-called stagflation – a period of simultaneously rising prices and falling economic activity. Those days seem long ago now, and it is clear that the greatest threat the developed world faces is collapsing economic activity that pushes prices down.
History suggests that once deflation takes hold it can be horribly difficult to reverse. Consumers defer purchases and businesses put off investment in expectation of lower future prices. The real value of debt increases as prices fall. Since interest rates cannot go below zero, the deflationary spiral means monetary policy, even at the lowest feasible nominal interest rate, is still squeezing demand in the economy.
Mr Bernanke's move seems to have been strongly influenced by what happened in Japan in the late 1990s. Japan experienced deflation, when prices began falling in 1998 but it took the Bank of Japan far too long to begin a policy of quantitative easing similar to the one the Fed now seems to be embarking upon. The Bank did not move until 2001 and It was only in 2005 that prices stopped falling.
What is “quantitative easing”?
A clumsy term that describes a complicated but crucial process. A central bank does not directly set interest rates, but influences them through the amount of cash it injects every day into the markets, buying and selling assets such as government debt. The bank usually buys or sells just enough assets to ensure the amount of cash in the market keeps the interest rate at its desired level.
But with quantitative easing, the central bank buys up far more assets from the private sector than it needs to keep the interest rate at zero. The surplus cash does not push rates into negative territory (for all intents and purposes, impossible). Instead it results in much more cash in the economy, and a big increase in the bank’s assets.
The desired effect is more money chasing around the economy — which should help to push up prices.
7) Obama's Pressers: No Comment -- and NoDoz
By Dana Milbank
A month from now, the nation will say farewell to its sports-obsessed president who doesn't like tough questions. And it will replace him with, well, another sports-obsessed president who doesn't like tough questions.
"I did not select Arne because he's one of the best basketball players I know," President-elect Barack Obama said yesterday, introducing Education Secretary-designate Arne Duncan. "Although I will say that I think we are putting together the best basketball-playing Cabinet in American history, and I think that is worth noting."
The nominee, one of the half a dozen accomplished basketball players suiting up for Obama's inner circle, made reference to his time as a professional hoopster in Australia.
But the Chicago Tribune's John McCormick didn't want to talk basketball. He wanted to know about contacts that Obama's chief of staff, Rahm Emanuel, had with disgraced Illinois Gov. Rod Blagojevich.
"John, John, let me just cut you off," Obama interrupted, "because I don't want you to waste your question." The president-elect said the "facts are going to be released next week" -- when he, by random coincidence, will be enjoying Christmas vacation in Hawaii -- and "it would be inappropriate for me to comment" before then. "So, do you have another question?"
McCormick tried to rephrase the question, to no avail. "John, John," Obama repeated, reproachfully. "I said, the U.S. attorney's office specifically asked us not to release this until next week."
There's no denying Obama's team has an impressive starting five: Duncan (6-foot-5), incoming national security adviser James Jones and body man Reggie Love (both 6-foot-4) all played college basketball, while Attorney General-designate Eric Holder and U.N. Ambassador-designate Susan Rice played high school ball. But Obama's response to Blagojevich questions has been decidedly junior varsity. Begging off because of an ongoing investigation? Hiding behind Patrick Fitzgerald's skirt? Warning a reporter not to "waste" a question and asking for an alternative question? All four techniques were popularized by Bush.
"We're in the midst of an ongoing investigation, and I will be more than happy to comment further once the investigation is completed" was President Bush's version.
"I would ask for your patience, because I do not want to interfere with an ongoing investigation" is Obama's.
McCormick's exchange in Chicago yesterday brought to mind Bush's tangle with David Gregory last year when the NBC newsman asked about an Israeli raid in Syria. "I'm not going to comment on the matter," Bush said. "You're welcome to ask another question, if you'd like to, on a different subject," the president added.
The opposition sees sinister motives in Obama's noncommittal ways. "The guy is strategically soporiferous," charges Stephen Hayes of the Weekly Standard. "He's trying to be so boring that no one will notice that he has avoided taking a position on virtually every issue that we've seen arise over the past three months."
The charge may be premature. Obama has proved himself to be far more willing to take questions than Bush, and if he makes good on his promise to release the full account of his aides' Blagojevich ties -- even on Christmas Eve -- it will be a major improvement in transparency over the current administration.
Still, it often seems as though Obama is choosing his words in a way that will make them the least interesting. Asked about his earlier disparagement of Hillary Rodham Clinton, Obama replied that "this is fun for the press to try to stir up whatever quotes were generated during the course of the campaign" -- as if the words came from a rogue word processor rather than from Obama's mouth. Asked about the Blagojevich affair on Monday, Obama again retreated deep into the passive voice: "There is nothing in the review that was presented to me that in any way contradicted my earlier statements that this appalling set of circumstances that we've seen arise had nothing to do with my office."
Yesterday, the president-elect began with opening-statement platitudes: "If we want to outcompete the world tomorrow, then we're going to have to outeducate the world today. . . . We need a new vision for the 21st-century education system."
Obama followed that by allowing the vice president-elect to deliver one of his trademark meanders: "My mom has an expression -- and you all are tired of hearing me say this all through the last couple years -- that children tend to become that which you expect of them. . . . These kids, Mr. President, are the kite strings that lift our national ambitions aloft."
Next up in Obama's insomnia treatment was an acceptance speech by the previously unknown nominee, followed by the president-elect's own blend of convoluted and passive answers to questions: "We're going to have to work through a lot of these difficulties, these structural difficulties that built up over many decades, some of it having to do with the financial industry and the huge amounts of leverage, the huge amounts of debt that were taken on, the speculation and the risk that was occurring, the lack of financial regulation, some of it having to do with our housing market, stabilizing that."
The whole thing might have ended in snores if McCormick hadn't piped up about Blagojevich. After upbraiding the reporter for his first two attempts at a question, Obama dispatched McCormick's third try -- whether there should be a special election to fill Obama's Senate seat -- with a no-comment. "I'm going to let the state legislature make a determination," he said.
McCormick tried something more to the president-elect's liking. "Do you or Duncan have a better jump shot?" he inquired.
"Duncan -- much better," Obama replied readily."That's an easy one."
Wednesday, December 17, 2008
Let'em Eat Cake! Silence Golden, Publish it Instead!
Israel prostitutes itself trying to buy friendship and the U.S. concurs and encourages? (See 1 below.)
Let 'em eat cake! (See 2 below.)
Since silence is golden, publish it instead. (See 3 below.)
Truce ends - rockets continue. Olmert and Barak remain pitiful Gullivers. Would any president allow Mexico to rocket Texas every day? In today's PC climate, perhaps so.(See 4 below.)
We never kicked him out of our college fraternity. He was just a bright kid then. Now he has become a confused intellectual so Israel did it. (See 5 below.)
It will be more expensive to postpone reality according to Sowell but cheaper for politicians. Postponing reality has become an American way of life.
Sowell also recommends a few Christmas book gift ideas. (See 6 and 6a below.)
Liberals are conflicted over Caroline Kennedy getting Hillary's seat. It is fascinating watching liberals debate the merit and/or demerit of one of their own - Caroline Kennedy would restore the luster of Camelot, but is she qualified?, who cares about being qualified, she is a Kennedy - American Royalty like Grace Kelly and on and on the blather goes.
Does this poor shy lovely young lady know what she is getting herself into? I doubt it. She will become a watched magnet and her every word and move will attract the world's media and press but will she help Gov. Patterson win re-election? What will our nation be without a Senator named Kennedy? Must the torch of truth, liberty, sacrifice for the unwashed, which was not doused by Chappaquidick's murky waters, and which Teddie carried for eons be kept lit by his niece?
As for myself, I say why not Caroline Kennedy? She is apparently intelligent, has engaged in worthy causes and that is more than I can say for half the current crop of Senators. Who cares about earning anything today. We live in 'give away land' and Caroline is as deserving as anyone else despite her last name. After all, we will soon have a president whose qualifications are more oral than based on solid time proven accomplishments. Isn't that what liberals said about GW and GW certainly is not even an effective communicator. Is the Left being boomeranged by the prospect of an inexperienced cut from their own cloth?
The way I see it, Caroline would be an effective anti-dote to a clown like Franken should he slide in so - Caroline, show them what you are made of! After all the Senate is a joke, it is up for sale so why not Caroline. (See 7 below.)
Dick
1) Russia bids for first Israeli military purchase – spy drones
A $10-12 million transaction for Moscow to purchase Israeli spy drones for the Russian army is in negotiation with Israel's Aerospace Industries. The Russian Kommersant reported Tuesday, Dec. 16 that Gen. Vladimir Popovkin, head of Russia's armed forces, visited Israel in November for talks on the purchase of a first batch of the unmanned reconnaissance drones which Georgia used successfully in its conflict with Russia last August.
Military sources report that the sale, if finally approved by the defense ministry in Tel Aviv, would be Israel's first advanced hardware sale to Russia. It would also mark a reversal of Israeli policy, since the Russian army would almost certainly use the drones in another future round of hostilities with Georgia over the breakaway regions of South Ossetia and Abkhazia.
A drone transaction with Moscow would give the Russian army a technological-intelligence edge over Caucasian and Caspian nations, like Georgia and Azerbaijan, and therefore place in doubt their future arms purchases from Israel.
Jerusalem consulted with Washington over the deal, as required under the US-Israel 2006 security pact covering Israeli weapons transfers to third countries. The advanced state of Israel-Russian negotiations indicates its approval by the outgoing Bush White House and incoming Obama administration in line with their efforts to improve relations with Moscow.
2) Insiders still own Illinois' Senate seat
By Douglas O'Brien
At first it seemed that the outrageous acts of Illinois Governor Rod Blagojevich had resulted in an epiphany of transparency among some of the most reflexive stalwarts of the state's Democratic junta.
Close on the heels of the Governor's arrest for, in part, trying to sell the President-elect's Senate seat, the state's senior Senator, Dick Durbin called loudly for a special election to be held to fill the position. Soon, Lieutenant Governor Pat Quinn, and Congresswoman Jan Schakowsky joined the chorus. State House Speaker Michael Madigan called for a special session of the legislature to change the state's law that allowed the Governor to fill a Senate vacancy and give the decision to the voters. Even Barack Obama chimed in, saying he thought the people should decide the fate of his former position. Democrats were falling over each other to present themselves as champions of openness and advocates for the people.
The Chicago Tribune and Sun-Times editorialized that a special election was the best option for filling the vacancy in light of the crippling effects of the scandal and the public's desire to break from the culture of sleeze in Illinois politics.
But a funny thing happened on the way to empowerment of the people. Democrats realized that a special election would create a remote possibility that a non-Democrat could win the seat. It dawned on them that the voters seemed really miffed about all this third-world-style corruption and that they could prefer a senator who was not a product of their machine.
They then heard rumblings that suburban Congressman Mark Kirk, a moderate who was just elected to his fifth term in the House was seriously considering a run in the special election. Kirk has fought off several multi-million dollar challenges from the national Democrats, holding a district that voted overwhelmingly for Al Gore, John Kerry and Barack Obama. The naval intelligence officer, know for his smarts, clean image and fundraising prowess, was just the kind of candidate who could take advantage of the situation.
Add to the presence of at least one formidable GOP candidate the likelihood of a brutal Democratic primary and the politicians began trying to cram the genie back in the bottle.
African American politicians cried that a special election was a backdoor attempt to steal the seat from their community since it would be very hard for any of the prospective black candidates to win. Democrat lawyers started opining that a special election would be unconstitutional. Others began caterwauling about the price tag for holding the election, even though the special could be held in tandem with the municipal and local elections being held across the state in the spring and greatly reduce the costs.
While there are valid questions about and arguments against a special election, (former Republican Governor Jim Edgar has publicly said it is a bad idea) it soon became clear that politics were driving an about face by Democratic leaders.
Democrats also realized their potential candidates had some problems. Representative Jesse Jackson, Jr. spent much of the week tap dancing around allegations his camp tried to buy him the seat. Representative Danny Davis also had to dodge questions about how openly he had been lobbying the Governor for the appointment, appearing with Blagojevich at several events and praising him effusively. And Representative Schakowsky admitted lobbying the Governor as well, which added to her problems dealing with the fact that her political operative husband just recently got out of prison for financial crimes while heading up a non-profit advocacy group.
Still, a Rasmussen poll conducted late last week showed that 66% of Illinoisians favored a special election, with only 21% against. GateHouse News Service polled state legislators (both houses are firmly under Democrat control) and found 67% in support of holding an election.
Quinn, the Lieutenant Governor who would take over if Blagojevich resigns or is kicked out of office began to change his tune, saying he wanted to appoint a new senator once he got into office or at least appoint a temporary replacement who would then have a leg up if a special election were held. Others followed suit, reneging on, or modifying their support for a special election.
Seeing the tide begin to turn, the Illinois Republican Party tried to keep the pressure on the Democrats by running television ads reminding everyone of the original calls for a special election and the furious backtracking going on now.
And the state Democrats did not disappoint. When the special session of the legislature convened Speaker Madigan (who is chairman of the state Democratic Party and father of Attorney General Lisa Madigan whose gubernatorial ambitions are no secret) neglected to call the special election bill which had been the original purpose of the session. Democrats in the state senate are also refusing to call a similar bill in that chamber.
At first the state's Democrats showed that they were all too eager to dive head first into the deep end of open government as they scrambled to distance themselves from their disgraced leader. But they ignored both the practical and political realities.
Practicalities are rarely of major concern to politicians of any stripe, but when the Democrats realized that they had jeopardized political strength in their callous attempt to avoid the fallout of scandal, they immediately hid behind these minor technical concerns as an excuse to deny the people a voice in the process and keep power in the hands of the political class that has created this crisis to begin with. This scandal may have serious long-term impacts on Illinois Democrats and even the new administration. But for the time being, the loss of a senate seat does not appear to be a possible consequence.
3)Defense reporter: Cabinet approved secret Gaza plan last week; now, ministers must keep silent
By Ron-Ben Yishai
Silence is the key
Prime Minister Ehud Olmert, as opposed to what is being published on
occasion, is not enthusiastic about escalating the IDF's response to the
sporadic rocket and mortar fire originating from Gaza. He knows that harsh
responses will ultimately require the IDF to carry out a large-scale
operation in the Strip which it does not wish to embark on at this time.
Therefore, Olmert is adhering to the same restrained positions as Barak and
Ashkenazi.
Yet this leaves many members of the Israeli public confused and mostly
frustrated. Reports regarding Hamas' considerations in favor of and against
the lull abound. Yet the considerations that prompt the Israeli government
to openly declare that it wishes to see the lull go on are much less clearer
to Israel's citizens. The statements made by the politicians lead us to
understand that top security officials are curbing more hawkish actions,
which many ministers support.
The explanations offered by Defense Minister Barak to the public fail to
make it clear why the ministers - including Deputy PM Ramon, Foreign
Minister Livni, and Transportation Minister Mofaz, among others - make do
with belligerent statements, instead of uniting in order to enforce a
belligerent decision in the cabinet. It is still unclear what Minister Barak
and his deputy Vilnai mean when they say that the IDF is prepared to carry
out a broad and creative series of Gaza operations, and will be carrying it
out - at the "right time." What conditions are required in order to create
this timing?
The key to deciphering all those question marks apparently has to do with
the policy and action plan formulated by top security officials. The plan
was approved by the kitchen-cabinet last week. We are dealing with a plan
that is meant to secure several targets, including the release of Gilad
Shalit and a long-term solution to the terror attacks originating in the
Gaza Strip.
There is no way of knowing whether the policy and action plan are effective
and whether they will secure the desired results. Their execution may prove
that we are dealing with a complete fiasco. However, security officials are
justifiably claiming that exposing the plan, and even exposing the
considerations it is based on and the preparatory steps required for its
successful execution, may jeopardize its outcome and the lives of IDF
soldiers.
For that reason, the prime minister and senior ministers make sure to remain
silent and vague - this includes making ministers and senior officials and
officers sign declarations of secrecy. It is legitimate for the government
and defense establishment to prevent such sensitive information from being
revealed publicly. However, this requires government ministers to draw the
right conclusions and maintain their restraint.
The vague statements made by ministers because of electoral considerations
on the advice of their strategic advisors cause damage. On the one hand,
they do not help the public in understanding and coping with the situation,
yet on the other hand they may expose Israel's intentions. Even the defense
minister and foreign minister must behave responsibly now, overcome their
urges, and remain silent.
4) 9 Qassams land in southern Israel
By Ilana Curiel
Two days before end of truce, Gaza vicinity residents wake up to another reminder of shaky situation with seven rockets hitting Eshkol Regional Council. Another rocket lands in Ashkelon; no injuries or damage reported.
Palestinian gunmen fired nine Qassam rockets from the Gaza Strip into southern Israel on Wednesday morning. Seven rockets landed within the Eshkol Regional Council. There were no reports of injuries or damage.
Shortly afterwards, a mortar shell landed within the Sha'ar Hanegev Regional Council, without causing injuries or damage.
A rocket fired from the northern Gaza Strip in the later morning hours landed in an open area near a factory in Ashkelon's southern industrial zone. Three factory workers were evacuated to the city's Barzilai Medical Center after suffering from ringing in their ears.
Another Qassam landed in an open area within the Ashkelon Coast Regional Council without causing any injuries.
The ceasefire between Israel and Hamas, which has become particularly shaky in the past few weeks, is slated to expire over the coming weekend.
Eshkol Council head Haim Yalin told Ynet, "Yesterday everyone watched the 'Big Brother' final, but the Qassams landing here are not a reality show. This is most likely the promo waiting for us ahead of the official expiry of the alleged lull."
"We woke up to the sounds of the Color Red alert system and explosions," Ella Fox, a community manager in one of the council's kibbutzim, told Ynet. "We are strong, but this situation is unbearable. Instead of starting our day like any other citizen in the State of Israel, we're forced to start it like this."
"Adults and children can't even wake up to a regular morning, and once again we have to check what's happening with the children who have to go to school. The children in the kindergartens can't even go out to the yard today. This is life not everyone in Israel knows, it's something completely different," Fox said.
She added that when her family members heard the Color Red system they immediately ran into the corridor. "We don’t' have fortification yet. They're working on it."
Wednesday's rockets joined nine Qassam fired into Israel on Tuesday, causing a boy to suffer from shock and damaging a factory in the town of Sderot.
The Israel Air Force struck twice ready-to-launch rocket launchers in the northern Gaza Strip, near the town of Beit Hanoun. The army reported that the targets were hit.
5) Israel kicks out outrageously biased UN official
By Dion Nissenbaum
Has the Jewish State finally learned its lesson?
JERUSALEM — No one can say they didn't see it coming: Israel this week expelled a United Nations investigator who compared Israeli policies to the Nazi Holocaust.
Israeli officials barred Richard Falk from entering Israel to investigate its policies towards the Palestinians because, as one Israeli official said, of Falk's "extreme, methodic criticism of Israel."
Last April, Falk was named to be the U.N. Human Rights Council's special investigator on the Palestinian territories — and Israel made it clear at the time that the Princeton University professor emeritus and American Jew was not going to be welcome.
The heart of the matter is a 2007 piece Falk wrote with the provocative title: "Slouching Toward a Palestinian Holocaust."
"Is it an irresponsible overstatement to associate the treatment of Palestinians with this criminalized Nazi record of collective atrocity?" Falk wrote in the piece. "I think not. The recent developments in Gaza are especially disturbing because they express so vividly a deliberate intention on the part of Israel and its allies to subject an entire human community to life-endangering conditions of utmost cruelty. The suggestion that this pattern of conduct is a holocaust-in-the-making represents a rather desperate appeal to the governments of the world and to international public opinion to act urgently to prevent these current genocidal tendencies from culminating in a collective tragedy."
The inflammatory article was widely criticized by Israeli leaders who made it clear, for obvious reasons, that they didn't view Falk as an impartial arbiter.
"Of all the people to be able to appoint, to find somebody who compares Israel to the Nazis is very bizarre and outrageous," Israeli Foreign Ministry spokesman Arye Mekel said at the time.
In May, Falk had a chance to explain what he meant in an extended interview on the BBC.
While Falk said he regretted using the analogies, under persistent pressure from the host, he stood by his statements.
After sending Falk packing Monday, the Israeli government criticized Falk and the U.N. for appointing him to the post.
"In the case of Prof. Falk, beyond the imbalance inherent in his mandate, the bias is further exacerbated by the highly politicized views of the Rapporteur himself, in legitimizing Hamas terrorism and drawing shameful comparisons to the Holocaust," the Israeli government said. "In light of his vehement publications in the past, it is hard to square his appointment with the requirements of the Council's own internal procedures which call for the appointment of mandate holders who are impartial, objective and possess the quality of personal integrity."
6) Postponing Reality
By Thomas Sowell
Some of us were raised to believe that reality is inescapable. But that just shows how far behind the times we are. Today, reality is optional. At the very least, it can be postponed.
Kids in school are not learning? Not a problem. Just promote them on to the next grade anyway. Call it "compassion," so as not to hurt their "self-esteem."
Can't meet college admissions standards after they graduate from high school? Denounce those standards as just arbitrary barriers to favor the privileged, and demand that exceptions be made.
Can't do math or science after they are in college? Denounce those courses for their rigidity and insensitivity, and create softer courses that the students can pass to get their degrees.
Once they are out in the real world, people with diplomas and degrees-- but with no real education-- can hit a wall. But by then the day of reckoning has been postponed for 15 or more years. Of course, the reckoning itself can last the rest of their lives.
The current bailout extravaganza is applying the postponement of reality democratically-- to the rich as well as the poor, to the irresponsible as well as to the responsible, to the inefficient as well as to the efficient. It is a triumph of the non-judgmental philosophy that we have heard so much about in high-toned circles.
We are told that the collapse of the Big Three automakers in Detroit would have repercussions across the country, causing mass layoffs among firms that supply the automobile makers with parts, and shutting down automobile dealerships from coast to coast.
A renowned economist of the past, J.A. Schumpeter, used to refer to progress under capitalism as "creative destruction"-- the replacement of businesses that have outlived their usefulness with businesses that carry technological and organizational creativity forward, raising standards of living in the process.
Indeed, this is very much like what happened a hundred years ago, when that new technological wonder, the automobile, wreaked havoc on all the forms of transportation built up around horses.
For thousands of years, horses had been the way to go, whether in buggies or royal coaches, whether pulling trolleys in the cities or plows on the farms. People had bet their futures on something with a track record of reliable success going back many centuries.
Were all these people to be left high and dry? What about all the other people who supplied the things used with horses-- oats, saddles, horse shoes and buggies? Wouldn't they all go falling like dominoes when horses were replaced by cars?
Unfortunately for all the good people who had in good faith gone into all the various lines of work revolving around horses, there was no compassionate government to step in with a bailout or a stimulus package.
They had to face reality, right then and right there, without even a postponement.
Who would have thought that those who displaced them would find themselves in a similar situation a hundred years later?
Actually the automobile industry is not nearly in as bad a situation now as the horse-based industries were then. There is no replacement for the automobile anywhere on the horizon. Nor has the public decided to do without cars indefinitely.
While Detroit's Big Three are laying off thousands of workers, Toyota is hiring thousands of workers right here in America, where a substantial share of all our Toyotas are manufactured.
Will this save Detroit or Michigan? No.
Detroit and Michigan have followed classic liberal policies of treating businesses as prey, rather than as assets. They have helped kill the goose that lays the golden eggs. So have the unions. So have managements that have gone along to get along.
Toyota, Honda and other foreign automakers are not heading for Detroit, even though there are lots of experienced automobile workers there. They are avoiding the rust belts and the policies that have made those places rust belts.
A bailout of Detroit's Big Three would be only the latest in the postponements of reality. As for automobile dealers, they can probably sell Toyotas just as easily as they sold Chevvies. And Toyotas will require just as many tires per car, as well as other parts from automobile parts suppliers.
6a) Christmas Books
By Thomas Sowell
Good books are especially good to give as gifts to the proverbial "man who has everything" because he (or she) may not have heard of a new book that fits their interests.
Good new books are one of the few good things about this past year. Here are some books that could make fine gifts, obtainable painlessly without battling crowds at the mall-- or even in the bookstores, if you order on-line.
The most outstanding political book of 2008 has been "Liberal Fascism" by Jonah Goldberg. It shoots to pieces the prevailing ideas of who is on "the left" and who is on "the right."
It can become especially relevant in the coming year, if the new administration goes further with the government interventions in the economy begun by the outgoing administration-- the kind of economic policies that were at the heart of fascism.
Fans of economist and columnist Walter Williams will welcome a new collection of his columns in a book titled "Liberty versus the Tyranny of Socialism." Spiced with imaginative examples of economic principles in everyday life, it is vintage Williams.
It's not all economics, either. Professor Williams' columns are also on education, law, politics and other subjects, all done in his own inimitable style.
Another economist and columnist, Robert J. Samuelson of Newsweek, also published a new book this year-- one focused on a topic that is likely to be of growing interest and growing concern in the years ahead. Its title is "The Great Inflation and Its Aftermath."
It is an account of how the American economy went from price stability in the 1950s to the beginning of inflation in the 1960s, reaching dangerous levels of inflation in the 1970s, with inflation then being brought under control with a lot of tough decisions and painful consequences in the 1980s.
This is the kind of book that may be more fully appreciated by an economist but it is written in plain English, with no graphs or jargon, so it should be interesting to a lot of people who are not economists.
"The Great Inflation and Its Aftermath" also has that most uncommon characteristic, common sense.
Not all the books recommended this year were published this year. "Greatness" by Steven F. Hayward is an unusual book published in 2005. In its 170 pages of text, it deftly compares Winston Churchill and Ronald Reagan as leaders, revealing a truly remarkable range of similarities between these two men from radically different social backgrounds.
Written at a popular level in an engaging style, "Greatness" is also a book from which scholars can learn-- except for those who think they already know it all.
A very different book is a little book of whimsical cartoons titled "Furry Logic" by Jane Seabrook. It is good for a few moments of real pleasure and cheer during the holiday season, perhaps especially good for people recovering in hospitals or at home, but enjoyable by people of all ages and circumstances.
Books about the past can be relevant to the future, especially when the same kinds of policies reappear under new names. It is good to have an understanding of why these policies did not work when they were tried before, as a sneak preview of what to expect from such policies the second time around.
Since so many of the approaches that Barack Obama has advocated under the mantra of "change" are things already tried out during the 1930s by Franklin D. Roosevelt, a devastating and very readable book titled "FDR's Folly" by Jim Powell spells out just exactly what happened in the American economy when such policies were put into effect.
My own new book this year is "Economic Facts and Fallacies." While I cannot pretend to give an unbiased evaluation of it, I can point out that it received a prize at an international gathering in Zurich and has already been translated in Spain.
Since fallacies flourish during election years, you may already have heard quite a few of these fallacies this year. "Economic Facts and Fallacies" can help prepare you for what is likely to happen when those fallacies are turned into policies in the new administration next year.
7) Who Plays...Who Pays.
By Joe Klein
I've met Caroline Kennedy a few times and she seems like a good person. Compared to many children of the rich and famous, she has lived her life quietly, modestly, in exemplary fashion. She has worked hard for worthy causes; those who've worked with her say she is intelligent and self-effacing. Or was self-effacing. You can't really say that she is now, having thrust herself into the midst of the selection process for Hillary Clinton's Senate seat. By doing so, she has displayed an eminently New York quality: chutzpah.
Indeed, Kennedy's play seems very much of a moment recently passed--the dynasty years of American politics, when Kennedys, Clintons, Bushes (and other, less obtrusive dynasties--Udalls, Cuomos) cluttered our public life. There is nothing new about this. We've had our Adamses and Roosevelts in epochs past. But the combination of dynasty and celebrity in a too-hot media age has proved a diversion from good governance. That was part of the message sent by Barack Obama's victory over Hillary Clinton in the primaries--Clinton was, and is, a fine public servant, but she came attached to a moveable media carnival. There was, I think, a gnawing, somewhat subconscious sense that in this difficult time we needed to turn the page from the carnival years. The Era of Big Strange Political Families was over. (That goes for you, too, Jesse Jackson Jr.)
If nothing else, Barack Obama's transition demonstrates his intent to launch an era of Real Serious Governance. He has chosen well outside the standard political fast-food menu in some cases--James (OOPs: Steven) Chu, the Secretary of Energy comes to mind. And I'd hope that Governor David Paterson might consider a similar sort of selection--an honorary, non-political (but Democratic) appointee, a person of real, world-class, distinction who would never normally serve in the Senate, to grace the seat until the next election--if he hasn't already been bum-rushed into the Kennedy coronation. Certainly, New York State is filled with extraordinary people. Here are four:
--Dr. Harold Varmus, former head of the National Institutes of Health, now director of the Memorial Sloan Kettering cancer hospital. He could add real value to the Senate's health insurance debate.
--Geoffrey Canada has spent his life doing extraordinary work with the young people, especially the young men, of Harlem. He would be a strong, African-American voice for the poor.
--Vishaka Desai, president of the Asia Society would be the first member of the Senate born in India. She would bring great knowledge about the world's hottest hot-spot to the Senate, plus great expertise in the areas of education and culture.
--Judge Judith Kaye, the briliant chief justice of New York's highest court, soon to retire.
There are dozens of others such. The point is, that the Blagojevich fiasco and now the Kennedy play have turned the selection of new Senators into a skeevy travesty. The best way to change the story would be go in the exact opposite direction--go completely high-minded.
Meanwhile, in a related area, Morton Abramowitz makes the excellent argument that it's also time for Obama to move past the era of dispensing ambassadorships as baubles to high-rolling campaign contributors. That's an another semi-corrupt anachronism we can no longer afford.
Let 'em eat cake! (See 2 below.)
Since silence is golden, publish it instead. (See 3 below.)
Truce ends - rockets continue. Olmert and Barak remain pitiful Gullivers. Would any president allow Mexico to rocket Texas every day? In today's PC climate, perhaps so.(See 4 below.)
We never kicked him out of our college fraternity. He was just a bright kid then. Now he has become a confused intellectual so Israel did it. (See 5 below.)
It will be more expensive to postpone reality according to Sowell but cheaper for politicians. Postponing reality has become an American way of life.
Sowell also recommends a few Christmas book gift ideas. (See 6 and 6a below.)
Liberals are conflicted over Caroline Kennedy getting Hillary's seat. It is fascinating watching liberals debate the merit and/or demerit of one of their own - Caroline Kennedy would restore the luster of Camelot, but is she qualified?, who cares about being qualified, she is a Kennedy - American Royalty like Grace Kelly and on and on the blather goes.
Does this poor shy lovely young lady know what she is getting herself into? I doubt it. She will become a watched magnet and her every word and move will attract the world's media and press but will she help Gov. Patterson win re-election? What will our nation be without a Senator named Kennedy? Must the torch of truth, liberty, sacrifice for the unwashed, which was not doused by Chappaquidick's murky waters, and which Teddie carried for eons be kept lit by his niece?
As for myself, I say why not Caroline Kennedy? She is apparently intelligent, has engaged in worthy causes and that is more than I can say for half the current crop of Senators. Who cares about earning anything today. We live in 'give away land' and Caroline is as deserving as anyone else despite her last name. After all, we will soon have a president whose qualifications are more oral than based on solid time proven accomplishments. Isn't that what liberals said about GW and GW certainly is not even an effective communicator. Is the Left being boomeranged by the prospect of an inexperienced cut from their own cloth?
The way I see it, Caroline would be an effective anti-dote to a clown like Franken should he slide in so - Caroline, show them what you are made of! After all the Senate is a joke, it is up for sale so why not Caroline. (See 7 below.)
Dick
1) Russia bids for first Israeli military purchase – spy drones
A $10-12 million transaction for Moscow to purchase Israeli spy drones for the Russian army is in negotiation with Israel's Aerospace Industries. The Russian Kommersant reported Tuesday, Dec. 16 that Gen. Vladimir Popovkin, head of Russia's armed forces, visited Israel in November for talks on the purchase of a first batch of the unmanned reconnaissance drones which Georgia used successfully in its conflict with Russia last August.
Military sources report that the sale, if finally approved by the defense ministry in Tel Aviv, would be Israel's first advanced hardware sale to Russia. It would also mark a reversal of Israeli policy, since the Russian army would almost certainly use the drones in another future round of hostilities with Georgia over the breakaway regions of South Ossetia and Abkhazia.
A drone transaction with Moscow would give the Russian army a technological-intelligence edge over Caucasian and Caspian nations, like Georgia and Azerbaijan, and therefore place in doubt their future arms purchases from Israel.
Jerusalem consulted with Washington over the deal, as required under the US-Israel 2006 security pact covering Israeli weapons transfers to third countries. The advanced state of Israel-Russian negotiations indicates its approval by the outgoing Bush White House and incoming Obama administration in line with their efforts to improve relations with Moscow.
2) Insiders still own Illinois' Senate seat
By Douglas O'Brien
At first it seemed that the outrageous acts of Illinois Governor Rod Blagojevich had resulted in an epiphany of transparency among some of the most reflexive stalwarts of the state's Democratic junta.
Close on the heels of the Governor's arrest for, in part, trying to sell the President-elect's Senate seat, the state's senior Senator, Dick Durbin called loudly for a special election to be held to fill the position. Soon, Lieutenant Governor Pat Quinn, and Congresswoman Jan Schakowsky joined the chorus. State House Speaker Michael Madigan called for a special session of the legislature to change the state's law that allowed the Governor to fill a Senate vacancy and give the decision to the voters. Even Barack Obama chimed in, saying he thought the people should decide the fate of his former position. Democrats were falling over each other to present themselves as champions of openness and advocates for the people.
The Chicago Tribune and Sun-Times editorialized that a special election was the best option for filling the vacancy in light of the crippling effects of the scandal and the public's desire to break from the culture of sleeze in Illinois politics.
But a funny thing happened on the way to empowerment of the people. Democrats realized that a special election would create a remote possibility that a non-Democrat could win the seat. It dawned on them that the voters seemed really miffed about all this third-world-style corruption and that they could prefer a senator who was not a product of their machine.
They then heard rumblings that suburban Congressman Mark Kirk, a moderate who was just elected to his fifth term in the House was seriously considering a run in the special election. Kirk has fought off several multi-million dollar challenges from the national Democrats, holding a district that voted overwhelmingly for Al Gore, John Kerry and Barack Obama. The naval intelligence officer, know for his smarts, clean image and fundraising prowess, was just the kind of candidate who could take advantage of the situation.
Add to the presence of at least one formidable GOP candidate the likelihood of a brutal Democratic primary and the politicians began trying to cram the genie back in the bottle.
African American politicians cried that a special election was a backdoor attempt to steal the seat from their community since it would be very hard for any of the prospective black candidates to win. Democrat lawyers started opining that a special election would be unconstitutional. Others began caterwauling about the price tag for holding the election, even though the special could be held in tandem with the municipal and local elections being held across the state in the spring and greatly reduce the costs.
While there are valid questions about and arguments against a special election, (former Republican Governor Jim Edgar has publicly said it is a bad idea) it soon became clear that politics were driving an about face by Democratic leaders.
Democrats also realized their potential candidates had some problems. Representative Jesse Jackson, Jr. spent much of the week tap dancing around allegations his camp tried to buy him the seat. Representative Danny Davis also had to dodge questions about how openly he had been lobbying the Governor for the appointment, appearing with Blagojevich at several events and praising him effusively. And Representative Schakowsky admitted lobbying the Governor as well, which added to her problems dealing with the fact that her political operative husband just recently got out of prison for financial crimes while heading up a non-profit advocacy group.
Still, a Rasmussen poll conducted late last week showed that 66% of Illinoisians favored a special election, with only 21% against. GateHouse News Service polled state legislators (both houses are firmly under Democrat control) and found 67% in support of holding an election.
Quinn, the Lieutenant Governor who would take over if Blagojevich resigns or is kicked out of office began to change his tune, saying he wanted to appoint a new senator once he got into office or at least appoint a temporary replacement who would then have a leg up if a special election were held. Others followed suit, reneging on, or modifying their support for a special election.
Seeing the tide begin to turn, the Illinois Republican Party tried to keep the pressure on the Democrats by running television ads reminding everyone of the original calls for a special election and the furious backtracking going on now.
And the state Democrats did not disappoint. When the special session of the legislature convened Speaker Madigan (who is chairman of the state Democratic Party and father of Attorney General Lisa Madigan whose gubernatorial ambitions are no secret) neglected to call the special election bill which had been the original purpose of the session. Democrats in the state senate are also refusing to call a similar bill in that chamber.
At first the state's Democrats showed that they were all too eager to dive head first into the deep end of open government as they scrambled to distance themselves from their disgraced leader. But they ignored both the practical and political realities.
Practicalities are rarely of major concern to politicians of any stripe, but when the Democrats realized that they had jeopardized political strength in their callous attempt to avoid the fallout of scandal, they immediately hid behind these minor technical concerns as an excuse to deny the people a voice in the process and keep power in the hands of the political class that has created this crisis to begin with. This scandal may have serious long-term impacts on Illinois Democrats and even the new administration. But for the time being, the loss of a senate seat does not appear to be a possible consequence.
3)Defense reporter: Cabinet approved secret Gaza plan last week; now, ministers must keep silent
By Ron-Ben Yishai
Silence is the key
Prime Minister Ehud Olmert, as opposed to what is being published on
occasion, is not enthusiastic about escalating the IDF's response to the
sporadic rocket and mortar fire originating from Gaza. He knows that harsh
responses will ultimately require the IDF to carry out a large-scale
operation in the Strip which it does not wish to embark on at this time.
Therefore, Olmert is adhering to the same restrained positions as Barak and
Ashkenazi.
Yet this leaves many members of the Israeli public confused and mostly
frustrated. Reports regarding Hamas' considerations in favor of and against
the lull abound. Yet the considerations that prompt the Israeli government
to openly declare that it wishes to see the lull go on are much less clearer
to Israel's citizens. The statements made by the politicians lead us to
understand that top security officials are curbing more hawkish actions,
which many ministers support.
The explanations offered by Defense Minister Barak to the public fail to
make it clear why the ministers - including Deputy PM Ramon, Foreign
Minister Livni, and Transportation Minister Mofaz, among others - make do
with belligerent statements, instead of uniting in order to enforce a
belligerent decision in the cabinet. It is still unclear what Minister Barak
and his deputy Vilnai mean when they say that the IDF is prepared to carry
out a broad and creative series of Gaza operations, and will be carrying it
out - at the "right time." What conditions are required in order to create
this timing?
The key to deciphering all those question marks apparently has to do with
the policy and action plan formulated by top security officials. The plan
was approved by the kitchen-cabinet last week. We are dealing with a plan
that is meant to secure several targets, including the release of Gilad
Shalit and a long-term solution to the terror attacks originating in the
Gaza Strip.
There is no way of knowing whether the policy and action plan are effective
and whether they will secure the desired results. Their execution may prove
that we are dealing with a complete fiasco. However, security officials are
justifiably claiming that exposing the plan, and even exposing the
considerations it is based on and the preparatory steps required for its
successful execution, may jeopardize its outcome and the lives of IDF
soldiers.
For that reason, the prime minister and senior ministers make sure to remain
silent and vague - this includes making ministers and senior officials and
officers sign declarations of secrecy. It is legitimate for the government
and defense establishment to prevent such sensitive information from being
revealed publicly. However, this requires government ministers to draw the
right conclusions and maintain their restraint.
The vague statements made by ministers because of electoral considerations
on the advice of their strategic advisors cause damage. On the one hand,
they do not help the public in understanding and coping with the situation,
yet on the other hand they may expose Israel's intentions. Even the defense
minister and foreign minister must behave responsibly now, overcome their
urges, and remain silent.
4) 9 Qassams land in southern Israel
By Ilana Curiel
Two days before end of truce, Gaza vicinity residents wake up to another reminder of shaky situation with seven rockets hitting Eshkol Regional Council. Another rocket lands in Ashkelon; no injuries or damage reported.
Palestinian gunmen fired nine Qassam rockets from the Gaza Strip into southern Israel on Wednesday morning. Seven rockets landed within the Eshkol Regional Council. There were no reports of injuries or damage.
Shortly afterwards, a mortar shell landed within the Sha'ar Hanegev Regional Council, without causing injuries or damage.
A rocket fired from the northern Gaza Strip in the later morning hours landed in an open area near a factory in Ashkelon's southern industrial zone. Three factory workers were evacuated to the city's Barzilai Medical Center after suffering from ringing in their ears.
Another Qassam landed in an open area within the Ashkelon Coast Regional Council without causing any injuries.
The ceasefire between Israel and Hamas, which has become particularly shaky in the past few weeks, is slated to expire over the coming weekend.
Eshkol Council head Haim Yalin told Ynet, "Yesterday everyone watched the 'Big Brother' final, but the Qassams landing here are not a reality show. This is most likely the promo waiting for us ahead of the official expiry of the alleged lull."
"We woke up to the sounds of the Color Red alert system and explosions," Ella Fox, a community manager in one of the council's kibbutzim, told Ynet. "We are strong, but this situation is unbearable. Instead of starting our day like any other citizen in the State of Israel, we're forced to start it like this."
"Adults and children can't even wake up to a regular morning, and once again we have to check what's happening with the children who have to go to school. The children in the kindergartens can't even go out to the yard today. This is life not everyone in Israel knows, it's something completely different," Fox said.
She added that when her family members heard the Color Red system they immediately ran into the corridor. "We don’t' have fortification yet. They're working on it."
Wednesday's rockets joined nine Qassam fired into Israel on Tuesday, causing a boy to suffer from shock and damaging a factory in the town of Sderot.
The Israel Air Force struck twice ready-to-launch rocket launchers in the northern Gaza Strip, near the town of Beit Hanoun. The army reported that the targets were hit.
5) Israel kicks out outrageously biased UN official
By Dion Nissenbaum
Has the Jewish State finally learned its lesson?
JERUSALEM — No one can say they didn't see it coming: Israel this week expelled a United Nations investigator who compared Israeli policies to the Nazi Holocaust.
Israeli officials barred Richard Falk from entering Israel to investigate its policies towards the Palestinians because, as one Israeli official said, of Falk's "extreme, methodic criticism of Israel."
Last April, Falk was named to be the U.N. Human Rights Council's special investigator on the Palestinian territories — and Israel made it clear at the time that the Princeton University professor emeritus and American Jew was not going to be welcome.
The heart of the matter is a 2007 piece Falk wrote with the provocative title: "Slouching Toward a Palestinian Holocaust."
"Is it an irresponsible overstatement to associate the treatment of Palestinians with this criminalized Nazi record of collective atrocity?" Falk wrote in the piece. "I think not. The recent developments in Gaza are especially disturbing because they express so vividly a deliberate intention on the part of Israel and its allies to subject an entire human community to life-endangering conditions of utmost cruelty. The suggestion that this pattern of conduct is a holocaust-in-the-making represents a rather desperate appeal to the governments of the world and to international public opinion to act urgently to prevent these current genocidal tendencies from culminating in a collective tragedy."
The inflammatory article was widely criticized by Israeli leaders who made it clear, for obvious reasons, that they didn't view Falk as an impartial arbiter.
"Of all the people to be able to appoint, to find somebody who compares Israel to the Nazis is very bizarre and outrageous," Israeli Foreign Ministry spokesman Arye Mekel said at the time.
In May, Falk had a chance to explain what he meant in an extended interview on the BBC.
While Falk said he regretted using the analogies, under persistent pressure from the host, he stood by his statements.
After sending Falk packing Monday, the Israeli government criticized Falk and the U.N. for appointing him to the post.
"In the case of Prof. Falk, beyond the imbalance inherent in his mandate, the bias is further exacerbated by the highly politicized views of the Rapporteur himself, in legitimizing Hamas terrorism and drawing shameful comparisons to the Holocaust," the Israeli government said. "In light of his vehement publications in the past, it is hard to square his appointment with the requirements of the Council's own internal procedures which call for the appointment of mandate holders who are impartial, objective and possess the quality of personal integrity."
6) Postponing Reality
By Thomas Sowell
Some of us were raised to believe that reality is inescapable. But that just shows how far behind the times we are. Today, reality is optional. At the very least, it can be postponed.
Kids in school are not learning? Not a problem. Just promote them on to the next grade anyway. Call it "compassion," so as not to hurt their "self-esteem."
Can't meet college admissions standards after they graduate from high school? Denounce those standards as just arbitrary barriers to favor the privileged, and demand that exceptions be made.
Can't do math or science after they are in college? Denounce those courses for their rigidity and insensitivity, and create softer courses that the students can pass to get their degrees.
Once they are out in the real world, people with diplomas and degrees-- but with no real education-- can hit a wall. But by then the day of reckoning has been postponed for 15 or more years. Of course, the reckoning itself can last the rest of their lives.
The current bailout extravaganza is applying the postponement of reality democratically-- to the rich as well as the poor, to the irresponsible as well as to the responsible, to the inefficient as well as to the efficient. It is a triumph of the non-judgmental philosophy that we have heard so much about in high-toned circles.
We are told that the collapse of the Big Three automakers in Detroit would have repercussions across the country, causing mass layoffs among firms that supply the automobile makers with parts, and shutting down automobile dealerships from coast to coast.
A renowned economist of the past, J.A. Schumpeter, used to refer to progress under capitalism as "creative destruction"-- the replacement of businesses that have outlived their usefulness with businesses that carry technological and organizational creativity forward, raising standards of living in the process.
Indeed, this is very much like what happened a hundred years ago, when that new technological wonder, the automobile, wreaked havoc on all the forms of transportation built up around horses.
For thousands of years, horses had been the way to go, whether in buggies or royal coaches, whether pulling trolleys in the cities or plows on the farms. People had bet their futures on something with a track record of reliable success going back many centuries.
Were all these people to be left high and dry? What about all the other people who supplied the things used with horses-- oats, saddles, horse shoes and buggies? Wouldn't they all go falling like dominoes when horses were replaced by cars?
Unfortunately for all the good people who had in good faith gone into all the various lines of work revolving around horses, there was no compassionate government to step in with a bailout or a stimulus package.
They had to face reality, right then and right there, without even a postponement.
Who would have thought that those who displaced them would find themselves in a similar situation a hundred years later?
Actually the automobile industry is not nearly in as bad a situation now as the horse-based industries were then. There is no replacement for the automobile anywhere on the horizon. Nor has the public decided to do without cars indefinitely.
While Detroit's Big Three are laying off thousands of workers, Toyota is hiring thousands of workers right here in America, where a substantial share of all our Toyotas are manufactured.
Will this save Detroit or Michigan? No.
Detroit and Michigan have followed classic liberal policies of treating businesses as prey, rather than as assets. They have helped kill the goose that lays the golden eggs. So have the unions. So have managements that have gone along to get along.
Toyota, Honda and other foreign automakers are not heading for Detroit, even though there are lots of experienced automobile workers there. They are avoiding the rust belts and the policies that have made those places rust belts.
A bailout of Detroit's Big Three would be only the latest in the postponements of reality. As for automobile dealers, they can probably sell Toyotas just as easily as they sold Chevvies. And Toyotas will require just as many tires per car, as well as other parts from automobile parts suppliers.
6a) Christmas Books
By Thomas Sowell
Good books are especially good to give as gifts to the proverbial "man who has everything" because he (or she) may not have heard of a new book that fits their interests.
Good new books are one of the few good things about this past year. Here are some books that could make fine gifts, obtainable painlessly without battling crowds at the mall-- or even in the bookstores, if you order on-line.
The most outstanding political book of 2008 has been "Liberal Fascism" by Jonah Goldberg. It shoots to pieces the prevailing ideas of who is on "the left" and who is on "the right."
It can become especially relevant in the coming year, if the new administration goes further with the government interventions in the economy begun by the outgoing administration-- the kind of economic policies that were at the heart of fascism.
Fans of economist and columnist Walter Williams will welcome a new collection of his columns in a book titled "Liberty versus the Tyranny of Socialism." Spiced with imaginative examples of economic principles in everyday life, it is vintage Williams.
It's not all economics, either. Professor Williams' columns are also on education, law, politics and other subjects, all done in his own inimitable style.
Another economist and columnist, Robert J. Samuelson of Newsweek, also published a new book this year-- one focused on a topic that is likely to be of growing interest and growing concern in the years ahead. Its title is "The Great Inflation and Its Aftermath."
It is an account of how the American economy went from price stability in the 1950s to the beginning of inflation in the 1960s, reaching dangerous levels of inflation in the 1970s, with inflation then being brought under control with a lot of tough decisions and painful consequences in the 1980s.
This is the kind of book that may be more fully appreciated by an economist but it is written in plain English, with no graphs or jargon, so it should be interesting to a lot of people who are not economists.
"The Great Inflation and Its Aftermath" also has that most uncommon characteristic, common sense.
Not all the books recommended this year were published this year. "Greatness" by Steven F. Hayward is an unusual book published in 2005. In its 170 pages of text, it deftly compares Winston Churchill and Ronald Reagan as leaders, revealing a truly remarkable range of similarities between these two men from radically different social backgrounds.
Written at a popular level in an engaging style, "Greatness" is also a book from which scholars can learn-- except for those who think they already know it all.
A very different book is a little book of whimsical cartoons titled "Furry Logic" by Jane Seabrook. It is good for a few moments of real pleasure and cheer during the holiday season, perhaps especially good for people recovering in hospitals or at home, but enjoyable by people of all ages and circumstances.
Books about the past can be relevant to the future, especially when the same kinds of policies reappear under new names. It is good to have an understanding of why these policies did not work when they were tried before, as a sneak preview of what to expect from such policies the second time around.
Since so many of the approaches that Barack Obama has advocated under the mantra of "change" are things already tried out during the 1930s by Franklin D. Roosevelt, a devastating and very readable book titled "FDR's Folly" by Jim Powell spells out just exactly what happened in the American economy when such policies were put into effect.
My own new book this year is "Economic Facts and Fallacies." While I cannot pretend to give an unbiased evaluation of it, I can point out that it received a prize at an international gathering in Zurich and has already been translated in Spain.
Since fallacies flourish during election years, you may already have heard quite a few of these fallacies this year. "Economic Facts and Fallacies" can help prepare you for what is likely to happen when those fallacies are turned into policies in the new administration next year.
7) Who Plays...Who Pays.
By Joe Klein
I've met Caroline Kennedy a few times and she seems like a good person. Compared to many children of the rich and famous, she has lived her life quietly, modestly, in exemplary fashion. She has worked hard for worthy causes; those who've worked with her say she is intelligent and self-effacing. Or was self-effacing. You can't really say that she is now, having thrust herself into the midst of the selection process for Hillary Clinton's Senate seat. By doing so, she has displayed an eminently New York quality: chutzpah.
Indeed, Kennedy's play seems very much of a moment recently passed--the dynasty years of American politics, when Kennedys, Clintons, Bushes (and other, less obtrusive dynasties--Udalls, Cuomos) cluttered our public life. There is nothing new about this. We've had our Adamses and Roosevelts in epochs past. But the combination of dynasty and celebrity in a too-hot media age has proved a diversion from good governance. That was part of the message sent by Barack Obama's victory over Hillary Clinton in the primaries--Clinton was, and is, a fine public servant, but she came attached to a moveable media carnival. There was, I think, a gnawing, somewhat subconscious sense that in this difficult time we needed to turn the page from the carnival years. The Era of Big Strange Political Families was over. (That goes for you, too, Jesse Jackson Jr.)
If nothing else, Barack Obama's transition demonstrates his intent to launch an era of Real Serious Governance. He has chosen well outside the standard political fast-food menu in some cases--James (OOPs: Steven) Chu, the Secretary of Energy comes to mind. And I'd hope that Governor David Paterson might consider a similar sort of selection--an honorary, non-political (but Democratic) appointee, a person of real, world-class, distinction who would never normally serve in the Senate, to grace the seat until the next election--if he hasn't already been bum-rushed into the Kennedy coronation. Certainly, New York State is filled with extraordinary people. Here are four:
--Dr. Harold Varmus, former head of the National Institutes of Health, now director of the Memorial Sloan Kettering cancer hospital. He could add real value to the Senate's health insurance debate.
--Geoffrey Canada has spent his life doing extraordinary work with the young people, especially the young men, of Harlem. He would be a strong, African-American voice for the poor.
--Vishaka Desai, president of the Asia Society would be the first member of the Senate born in India. She would bring great knowledge about the world's hottest hot-spot to the Senate, plus great expertise in the areas of education and culture.
--Judge Judith Kaye, the briliant chief justice of New York's highest court, soon to retire.
There are dozens of others such. The point is, that the Blagojevich fiasco and now the Kennedy play have turned the selection of new Senators into a skeevy travesty. The best way to change the story would be go in the exact opposite direction--go completely high-minded.
Meanwhile, in a related area, Morton Abramowitz makes the excellent argument that it's also time for Obama to move past the era of dispensing ambassadorships as baubles to high-rolling campaign contributors. That's an another semi-corrupt anachronism we can no longer afford.
Tuesday, December 16, 2008
Save the Economy - Drown 'em in Debt!
When my friend, Marshall Goldman, spoke here he emphasized Europe's dependency upon Russian gas and the positive impact the price of energy was having on Russia's economy and benefits to Putin. In view of the sharp decline in the price of oil I asked Marshall to up date his thinking for me and he responded that the gas umbilical cord remains intact though Europe is seeking ways to diminish its influence. He agreed that the decline in oil was having a depressing impact on the Ruble,Russia's economy, was testing Putin and could produce a period of internal unrest. Certainly Goldman's thesis that Russia's dependence on energy was a long term deterrent to a broader based Russian economy remain valid. That said, Marshall thought his recent book about 'The Russian Energy State' still had relevance though he admitted his wife jokingly told him he would have to return to the typewriter.
What Obama might learn as he tries to move in a different direction. (See 1 below.)
Pushing on a string Japanese style. (See 2 below.)
Rice's N Korea approach is not a model for Hillary to follow but Hillary may have forgotten they also stiffed husband, Bill.(See 3 below.)
This from a neighbor friend: "Thought you would be interested in these figures.Still do not think Washington gets it."
I responded: 'Washington does get it because they simply want to cater to their consituents. Politicians are not interested in running an effective government just creating a lottery that pays off their friends.'(See 4 below.)
A RETIREE'S THOUGHT...
My wife said, "Whatcha doin today?"
I said, "Nothing."
She said, "You did that yesterday."
I said, "I wasn't finished."
Yes, our enemies are hurting but so are we for other reasons. (See 5 below.)
Those who believe government oversight works and protects should be having second thoughts. Government oversight, all too frequently, actually works in reverse because it allows everyone to rely on someone else, ie government bureaucrats. Defenders of the SEC argue it is not a pro-active organization. The SEC, they assert,acts after the fact.
I am currently reading David Einhorn's: "Fooling Some of The People All of The Time." Einhorn's offered his research and accusations to the SEC but it took the SEC years to investigate what Einhorn laid in their lap. When the SEC did get involved they initially distrusted Einhorn and assumed he had an ulterior motive - crash a stock by incessant shorting and walk away with a huge profit.
Anne Applebaum, seems to have over reacted, in an article about Madoff's fraud, writing it will cripple Capitalism. The only thing that will cripple Capitalism is Congress and their overreaction to the seamy side of the basest of human nature. Even Congress can't change human behaviour and if they could then charity begins at home. (See 6 below.)
Today the Fed opened the flood gates. Like the Col. who said of the Okinawans: "I will teach them democracy if I have to kill everyone of them," Bernanke is going to right our economy even if drowns us in debt.
Dick
1) The Return of Realpolitik in Arabia: Bush's 'diplomacy of freedom' gives way to Obama's caution and reticence. The Middle East may test our fatigue.
By FOUAD AJAMI
President Bush assumed office promising a "humble foreign policy." But it was his luck, or fate, to have much of his presidency consumed by adventures in the Greater Middle East. It is clear from the passion of his valedictory tour that he has caught the bug of that region, that it has worked its way on him as he himself worked his will, and the power available to him, on its settled and ruinous ways.
Ismael RoldanPresident-elect Barack Obama has signaled that the foreign world will not be his primary concern, that the repair of the American economy will trump all other pursuits and temptations. On the lands and the peoples of the Middle East, Mr. Obama has been largely silent, if not detached. He was in the Illinois Senate when a huge storm blew over the Islamic world. He was lucky, as his secretary of state designate endlessly reminded us, to have given a solitary speech on Iraq when the challenge came calling.
There is a detached tone to Mr. Obama's utterances on the Islamic world, a kind of knowingness. In part, it is no doubt an intended contrast to the heat and fervor of George W. Bush. If Mr. Bush believed he could remake that old and broken and wily region, Mr. Obama signals a fatigue with it, an acceptance of its order of power. If Mr. Bush believed that he could insert himself into the internal affairs of distant Islamic lands, Mr. Obama and his foreign-policy advisers portend a return to realpolitik and to a resigned acceptance of the ways of foreign autocracies. We have erred, the Obama worldview preaches, and overreached. We have overread the verdict of 9/11, and it is time to make our peace with regimes we have offended in the Bush years. It is the Scowcroftian way -- other lands, other ways.
Then, too, the Obama reticence about those burning grounds of the Islamic world is, in part, a matter of biography. The Islamic faith was the faith of his father. A candidate with the middle name of Hussein could not afford soaring rhetoric about the ability of freedom to survive on Islamic soil.
In contrast, George W. Bush had been free and confident enough to take up the cause of reform and drastic change in the Islamic world. True, he did not know much about the ways of those lands, but neither did Woodrow Wilson. His doctrine of self-determination in the aftermath of the Great War, and the dissolution of the Ottoman empire, endures as the most consequential and revolutionary American message taken to the lands of old empires.
Wilson himself, it should be recalled, had been chastened by the radical sweep and impact of his own doctrine; he had preached the gospel of self-determination, he said, "without the knowledge that nationalities existed, which are coming to us day after day." Detailed "knowledge" can be overrated in the choices that history opens up. The post-Ottoman world was never the same after that American president who had known so little about it. A circle was closed between that Wilsonian policy and the massive American push into Arab and Islamic lands by George W. Bush.
One thing is sure to go with Mr. Bush when he departs to Crawford, Texas: his "diplomacy of freedom." That diplomacy -- which propelled the wars in Afghanistan and Iraq, which drove the Syrians out of Lebanon after they had all but destroyed the sovereignty of that country, and had challenged pro-American allies in Egypt and the Arabian Peninsula -- is gone for good.
It was an odd spectacle, the time behind us: a conservative American president preaching the gospel of liberty for lands beyond, his liberal detractors at home giving voice to a deep skepticism about liberty's chances in inhospitable settings. No one was more revealing of the liberal temper -- and of things to come -- than Vice President-elect Joe Biden (then the point man for foreign policy among the Democrats) speaking in December 2006 about the hazards of believing in liberty's appeal to Muslim lands. Of President Bush, he said: "He has this wholesome but naive view that Westerners' notions of liberty are easily transported to that area of the world." Mr. Biden knew better: He warned the president, he said, that Grand Ayatollah Ali Sistani's view of liberty differed from "our view of liberty . . . I think the president thinks there's a Thomas Jefferson or Madison behind every sand dune waiting to jump up. And there are none."
The course of history can shred the most detailed of briefing books. On the face of it, the new team tells us that there shall be no attachment to the gains we made in Iraq. This is not Mr. Obama's cause, or call. That country can fend for itself, it is implied. The new cause shall be a return to the struggle for Afghanistan. This is the liberal narrative: the bad, unilateral "war of choice" in Iraq, the good, multilateral "war of necessity" in Afghanistan. The doves on Iraq can thus be hawks on the Afghan-Pakistan frontier. The strategic gurus who preached that Iraq is a hopeless, artificial state put together by Gertrude Bell and Winston Churchill and T.E. Lawrence can try for victory and nation building in the unforgiving tribal lands of Afghanistan and Pakistan. If there is an artificial state in our world of nations, Afghanistan must be its closest approximation. If there is a false national boundary -- mocked by ethnicity and historical allegiance -- it is the Durand Line, drawn up by British power in the 1890s, between Afghanistan and Pakistan, through the lands of the Pashtuns. Afghanistan could yet thwart President Bush's successors, frustrate them in the way Iraq frustrated him.
Our country will be forgiving toward the new foreign-policy team, it is fair to assume. The hubris and self-confidence needed for expeditions into foreign lands have been devastated by the economic meltdown in our midst.
Of the good manners and pliability of foreign regimes, we can be less certain. Nature abhors a vacuum, and challengers are sure to step forth. To its surprise, the new administration could yet discover that our adversaries do not wish to see our withdrawal from their midst. The Iranians thrive on the American presence in the Persian Gulf and feed off it. They are the quintessential oppositional force. They are not good at generating policies of their own. Their work consists of subversive attacks on Pax Americana in the region. The call by President Bush's critics for a dialogue with Iran will be exposed for the pathetic fraud it has been all along. The American drama swirling around the rise of Mr. Obama is of no interest to the theocrats in Tehran. For them, it is business as usual in the Persian Gulf.
We have witnessed the gains and the heartbreak of American activism and ambition on foreign shores. Around the corner lurk the risks of caution and reticence, of enemies who could see through, and test, our fatigue. The world is under no obligation to accommodate us.
2) Barack Obama-san Article
As January 20 nears, Barack Obama's ambitions for spending on the likes of roads, bridges and jobless benefits keep growing. The latest leak puts the "stimulus" at $1 trillion over a couple of years, and the political class is embracing it as a miracle cure.
Not to spoil the party, but this is not a new idea. Keynesian "pump-priming" in a recession has often been tried, and as an economic stimulus it is overrated. The money that the government spends has to come from somewhere, which means from the private economy in higher taxes or borrowing. The public works are usually less productive than the foregone private investment.
In the Age of Obama, we seem fated to re-explain these eternal lessons. So for today we thought we'd recount the history of the last major country that tried to spend its way to "stimulus" -- Japan during its "lost decade" of the 1990s. In 1992, Japanese Prime Minister Kiichi Miyazawa faced falling property prices and a stock market that had sunk 60% in three years. Mr. Miyazawa's Liberal Democratic Party won re-election promising that Japan would spend its way to becoming a "lifestyle superpower." The country embarked on a great Keynesian experiment:
August 1992: 10.7 trillion yen ($85 billion). Japan passed its largest-ever stimulus package to that time, with 8.6 trillion yen earmarked for public works, 1.2 trillion to expand loan quotas for small- and medium-sized businesses and 900 billion for the Japan Development Bank. The package passed in December, but investment kept falling and unemployment rose. By the end of the year, Japan's debt-to-GDP ratio was 68.6%.
April 1993: 13.2 trillion yen. At exchange rates of the day, this was a whopping $117billion giveaway, again mostly for public works and small businesses. Tokyo erupted into domestic politicking over election practices, the economy went sideways, and the government fell. New Prime Minister Morihiro Hosokawa floated tax cuts, deregulation and decentralization to spur growth. But as the economy worsened -- inflation-adjusted GNP shrank 0.5% in the April to June quarter -- the political drumbeat for handouts increased.
September 1993: 6.2 trillion yen. Mr. Hosokawa announced a compromise "smaller" stimulus of $59 billion, along with minor deregulation. He dropped plans for an income-tax cut. The stimulus included 2.9 trillion yen in low-interest home financing, one trillion yen for "social infrastructure," and another trillion for business. The economy didn't respond. By the end of the year, Japan's debt-to-GDP reached 74.7%.
Is any of this beginning to sound familiar? There's more.
February 1994: 15.3 trillion yen. This stimulus included 5.8 trillion in income-tax cuts, 7.2 trillion in public investment, 1.5 trillion for small business and employment-support, 500 billion for land purchases and 230 billion for agricultural modernization. The income tax cut was temporary, effective only for 1994. The economy stagnated and Prime Minister Hosokawa resigned amid a corruption scandal. By the end of the year, debt-to-GDP was 80.2%.
September 1995: 14.2 trillion yen. The Socialist government of Tomiichi Murayama, with a wobbly coalition, rolled out a $137 billion whopper, with 4.6 trillion in public works, 3.2 trillion for government land purchases, 1.3 trillion in business loans, and more. Mr. Murayama resigned in early 1996, and in June Prime Minister Ryutaro Hashimoto agreed to raise consumption taxes to 5% from 3%, starting in April 1997, to reduce the fiscal deficit.
In 1994 and 1995, Japan spent 3.1% and 2.9% of its annual GDP, and (helped by central bank easing) the economy did respond with modest growth for about two years. Debt-to-GDP hit 87.6%.
April 1998: 16.7 trillion yen. When growth starting slowing again, the re-elected LDP turned to old medicine: 7.7 trillion yen for public works. The $128 billion grab-bag also included 2.3 trillion for the disposal of bad loans. The government announced four trillion yen in (again) temporary income-tax cuts, spread over two years. Mr. Hashimoto resigned in July after voters registered their discontent at the polls.
November 1998: 23.9 trillion yen. Desperate to get the economy moving, Prime Minister Keizo Obuchi rolled out the country's largest-ever stimulus, valued at $195 billion. The giveaway included 8.1 trillion yen in social public works, 5.9 trillion for business loans, one trillion for job-creation programs, 700 billion in cash handouts to 35 million households, and more. By the end of the year, debt-to-GDP hit 114.3%.
November 1999: 18 trillion yen. In a "last push," Mr. Obuchi's government spent 7.4 trillion yen to prop up businesses, 6.8 trillion yen for social infrastructure projects like telecommunications and environmental projects, and two trillion yen for housing loans, among other things. Debt-to-GDP reached 128.3%.
Japan's economy grow anemically over that decade, but as the nearby chart shows, its national debt exploded. Only in this decade, with a monetary reflation and Prime Minister Junichiro Koizumi's decision to privatize state assets and force banks to acknowledge their bad debts, did the economy recover. Yet recent governments have rolled back Mr. Koizumi's reforms and returned to their spending habits. But Japan does have better roads.
Now we're told that a similar spending program -- a new New Deal -- will revive the U.S. economy. How do you say "good luck" in Japanese?
3)Condi's Korean Failure: Putting diplomacy above disarmament.
Condoleezza Rice has spent her four years as Secretary of State trying to engage America's adversaries in much the same way that Hillary Clinton is promising to do. So it's worth noting the final collapse of Ms. Rice's North Korean diplomacy last week.
Pyongyang announced that it won't put in writing the verbal commitments on nuclear verification that it had previously made to U.S. negotiator Christopher Hill. Ms. Rice and Mr. Hill had used those verbal promises to persuade President Bush in October to remove North Korea from the U.S. list of terror-sponsoring countries. But having won that concession, the North is now refusing to submit to even de minimis verification of its supposed disarmament.
This is no great surprise, except perhaps to Mr. Hill and Ms. Rice. The North has never kept a commitment, verbal or written. Its negotiating habit is to make promises to win concessions, then renege on those promises and saber-rattle until the U.S. offers further concessions. Under the verification deal, U.S., Japan, South Korea, China and Russia had pledged one million tons of fuel oil to the energy-starved North. The State Department said Friday that those shipments would be halted, but half of the deliveries have already been made. The North will now hold out for an even better deal from the Obama Administration, knowing from experience that it will probably get it.
Meanwhile, the suffering of the North Korean people has continued, with new reports of food shortages and an even harsher crackdown on Koreans trying to flee to China. Ms. Rice recently said the only alternative to her Pyongyang policy was short-term "regime change," which is a classic false dilemma. Her failure -- and Mr. Bush's -- was putting the appearance of diplomatic progress above genuine disarmament.
4)Now here is some real smart Pelosi/Clinton Demanomics.....And this is an example of what middle America will pay for ! ! ! Unions ? ? ? ?
According to Forbes:
Labor cost per hour, wages and benefits for hourly workers.
Ford: $70.51 ($141,020 per year)
GM: $73.26 ($146,520 per year)
Chrysler: $75.86 ($151,720 per year)
Toyota, Honda, Nissan (in U.S. ): $48.00 ($96,000 per year)
According to AAUP and IES, the average annual compensation for a college professor in 2006 was $92,973 (average salary nationally of $73,207 + 27% benefits).
Bottom Line: The average UAW worker with a high school degree earns 57.6% more compensation than the average university professor with a Ph.D., and 52.6% more than the average worker at Toyota , Honda or Nissan.
Many industry analysts say the Detroit Three, must be on par with Toyota and Honda to survive. This year's contract, they say, must be "transformational" in reducing pension and health care costs.
What would "transformational" mean? One way to think about "transformational" would mean that UAW workers, most with a high school diploma, would have to accept compensation equal to that of the average university professor with a PhD.
Then there's the "Job Bank"
When a D3 ( Detroit 3 carmaker) lays an employee off, that employee continues to receive all benefits - medical, retirement, etc., etc., PLUS an hourly wage of $31/hour.
Here's a typical story....
Ken Pool is making good money. On weekdays, he shows up at 7 a.m. at Ford Motor Co.'s Michigan Truck Plant in Wayne , signs in, and then starts working -- on a crossword puzzle. Pool hates the monotony, but the pay is good: more than $31 an hour, plus benefits.
"We just go in and play crossword puzzles, watch videos that someone brings in or read the newspaper," he says. "Otherwise, I just sit."
Pool is one of more than 12,000 American autoworkers who, instead of installing windshields or bending sheet metal, spend their days counting the hours in a jobs bank set up by Detroit automakers as demanded by the United Auto Workers Union - UAW - as part of an extraordinary job security agreement.
Now the D3 wants Joe Taxpayer to pick up this tab in a $25 Billion bailout package - soon to be increased to $45 Billion if Nancy Pelosi and Hillary Clinton have their way.
The "Big 3" want this money - not to build better autos. No. They want it to pay the tab for Medical and Retirement benefits for RETIRED auto workers. Not ONE PENNY would be used to make them more competitive, or to improve the quality of their cars.
We ALL have problems paying for our Medical Insurance - but the Democrat leaders in Congress now want us to pay the Medical Insurance premiums of folks who have RETIRED from Ford, GM and Chrysler.
Not a good deal for us.
How about Chapter 11 - and getting rid of these ridiculous union contracts?
5) THE IMPENDING COLLAPSE OF OUR ENEMIES
By DICK MORRIS & EILEEN MCGANN
The Depression -- let’s call it what it is -- leaves us, well, depressed. But there is very good news from around the world. Our enemies are collapsing under the strain of dropping oil and gas prices. What we had all hoped conservation20and off-shore drilling would achieve, the global economic collapse is accomplishing: the defeat of OPEC, Iran, Chavez, Putin and the weakening of the financial underpinnings of Islamist terrorism. In each of these nations, the hold of the dictator is weakening as, one after the other, they face the consequences of dropping oil prices.
In Iran, the sanctions imposed by the United Nations, the aggressive efforts of the U.S. government, and the actions of states like California, Florida, and Missouri to ban pension investments in companies that do business with Iran are having a big effect. Unable to expand its oil production for a lack of foreign investment, Iran faces the need to slash its budget drastically as energy revenues, the source of 85% of its income, crash. Iranian President Ahmadinejad is announcing harsh austerity measures. Having based his budget on $50-$60 oil, he now must recast it for at a $40 per barrel level. He boasts of cash reserves of $23 billion, but that sum won’t last long unless he makes major cuts. (Do the math: a shortfall of $25/barrel per day x 4 million barrels a day x 365 days = $36.5 billion, more than he’s got on hand).
The question for Ahmadinejad and for the Ayatollah who stands behind him is: Can their regime survive economic collapse? Unable to buy social peace by handouts and subsidies, will the top blow off an country that hates the regime, is predominantly very young, and is only 40% Farci?
Chavez, in Venezuela is not in any better shape. Because of corruption and incompetence, Venezuelan oil production has dropped from over 3 million barrels per day when Chavez took over to about 1.7 million today. As long as oil prices were quadrupling, it didn’t matter, but when they crashed, a harsh wind of reality blew in the door. Chavez was losing popularity before the oil price dropped. He lost a constitutional referendum to give himself lifetime tenure and he just lost his municipal elections in the largest cities and states in the nation. After knocking out most of the major opposition candidates on phony charges of corruption, he managed to hang on to the governorships of the small, rural provinces, but he lost the cities – even the poor areas of the cities vote d against him.
Now, beset already by food shortages and galloping inflation, Venezuela has to make do with less subsidization and drastic cuts. Feeling cold times ahead, Chavez is desperately press ing ahead with a new attempt to abolish term limits in a vote set for the end of February, but, if he falls short – which we think he will – he could be out in a matter of months.
Chavez’ client-states -- Ecuador, Nicaragua, and Bolivia –- have to face life without subsidies. Evo Morales, the head of Bolivia who got elected pledging to allow cocoa cultivation again, already faces a virtual civil war as the energy-rich half of his country wants autonomy and, possibly, independence. Argentina, whose corrupt regime has held onto power by massive borrowing from Chavez, must now seek sustenance from the global markets, only recently burned by its default on its foreign debt. Fat chance.
Putin’s Russia, which so recently threw its weight around by invading Georgia, faces perhaps the biggest hit of all to its economy. Producing 10 million barrels per day, Russia will be hit the hardest by the collapse of prices. (Again, do the math: Assume Russia budgeted at $60 oil prices and the price drops to $40. $20/barrel x 10 million barrels per day x 365 = a $73 billion annual shortfall). With a GDP of only about $1.4 trillion, Russia faces the loss of about 5% of its economy. And Russian oil production has dropped by one million barrels per day for each of the past two years. With prices at rock=2 0bottom and nationalization an ever-present threat, who is going to invest in increasing Russian production?
And what of OPEC and the economic base of the Islamist terrorists? Countries like the United Arab Emirates, Qatar, and Kuwait will be OK because they have small populations among whom to divide their oil earnings. Saudi Arabia will make it because of its massive production and relatively small population. But every other OPEC nation has a large population where the ruler, usually a dictator, buys social peace with oil money. The pressure to stay in power will be so intense that these leaders will force production as high as they can to offset the shortfall. The result is that there will be constant deflationary pressure on oil prices, a vicious cycle that will impoverish all the right people.
6) Breach of Trust:Bernard Madoff's massive fraud will cripple American capitalism.
By Anne Applebaum
Scene 1: We are buying an apartment in Warsaw, Poland, sometime in the early 1990s. At every stage of the transaction, both my husband and I have to show up in person, stand in line, and present identity cards. We appear at the notary's office more than once. We appear at the tax office more than once. Finally, we are asked to hand over a briefcase full of dollars. The seller will not accept a bank transfer and does not want to be paid in his country's currency, either.
Scene 2: We are buying a car in Washington, D.C., sometime in the early 2000s. We test-drive a few and tell the dealer which car we want. We hand him a personal check, which he accepts without asking for an identity card. My husband asks if he isn't worried the check will bounce. The dealer laughs, and we drive out of the dealership in a brand-new car.
Two different times, two different places, but above all, two different kinds of capitalism: If Francis Fukuyama, the author of Trust: The Social Virtues and the Creation of Prosperity, were writing this article, he would describe the Warsaw of the first scene as a "low trust" culture and the Washington of the second as a "high trust" culture. One could also call them a "place where financial transactions are irritating and time-consuming" and "a place where financial transactions are easy," respectively. Such labels do not last forever, though. In the nearly two decades that have passed since the early 1990s, bank transfers, telephone transactions, and the use of the local currency have all become the norm in Warsaw. The question now is whether American capitalism will also change over the next two decades—and for the worse.
Reading the accounts of the collapse of Bernard L. Madoff Investment Securities, it is impossible not to conclude that it will. The scale of this fraud stretches far beyond anything a car dealer or even the purchaser of an apartment might commit, of course: Among the victims of Madoff's extraordinary pyramid scheme are major banks (BNP Parisbas, Nomura Securities), famous people (Mort Zuckerman), and Madoff's friends from the Palm Beach Country Club. In the wake of Madoff's arrest, charities are going to close, and previously rich people will become poor. Worst of all, everyone who invests anywhere will think just that much harder, take that much longer, demand that much more documentation. And they will do so not only because of Madoff, but because of the subprime lenders, Wall Street investment banks, and Enron fraudsters who have worked so hard to erode our faith in the reliability of our system.
The deeper irony here is that all these schemes were only possible in the first place precisely because we have, until now, lived in a culture with such extraordinarily high levels of trust, a culture in which a customer's bona fides are accepted without question and wealthy people are thought to have earned their money. In our culture, someone like Madoff was trusted precisely because he was rich; because he was a member of the Palm Beach Country Club; because his company worked out of expensive Manhattan offices, most of which were occupied by people doing real jobs. It occurred to no one that a small group of select insiders was also operating a massive fraud scheme on the 17th floor.
In other cultures—maybe most other cultures—very rich people are suspect by definition. Recently, I met a wealthy Russian and automatically assumed he was the beneficiary of some shady scheme: How else would someone from that part of the world get rich? In fact, he turned out to be the CEO of a Western-owned company in Kiev, Ukraine, and totally above board. But I know why I made the mistake: I still remember—and Russians still remember—the fraudulent "privatization" deals and complex money-laundering operations that created so many Russian billionaires over the last two decades. I also remember the extraordinary saga of the MMM company, which in the 1990s defrauded some 2 million Russians of $1.5 billion, using what will now surely be known as the second-largest pyramid scheme of all time. Back then, we thought such blatant fraud could only take place in the lawlessness of the post-Soviet world.
We were wrong. Madoff's pyramid scheme, far broader than anything MMM dreamed up, was made possible by our own tradition of lawfulness. And now he will help bring that tradition down. Here's a prediction: In the coming years, American capitalism will become slower, more cautious, less productive, and less entrepreneurial. We're still a long way from Eastern Europe of the 1990s or from the Latin America or Russia of the present. But maybe not as far as we think.
What Obama might learn as he tries to move in a different direction. (See 1 below.)
Pushing on a string Japanese style. (See 2 below.)
Rice's N Korea approach is not a model for Hillary to follow but Hillary may have forgotten they also stiffed husband, Bill.(See 3 below.)
This from a neighbor friend: "Thought you would be interested in these figures.Still do not think Washington gets it."
I responded: 'Washington does get it because they simply want to cater to their consituents. Politicians are not interested in running an effective government just creating a lottery that pays off their friends.'(See 4 below.)
A RETIREE'S THOUGHT...
My wife said, "Whatcha doin today?"
I said, "Nothing."
She said, "You did that yesterday."
I said, "I wasn't finished."
Yes, our enemies are hurting but so are we for other reasons. (See 5 below.)
Those who believe government oversight works and protects should be having second thoughts. Government oversight, all too frequently, actually works in reverse because it allows everyone to rely on someone else, ie government bureaucrats. Defenders of the SEC argue it is not a pro-active organization. The SEC, they assert,acts after the fact.
I am currently reading David Einhorn's: "Fooling Some of The People All of The Time." Einhorn's offered his research and accusations to the SEC but it took the SEC years to investigate what Einhorn laid in their lap. When the SEC did get involved they initially distrusted Einhorn and assumed he had an ulterior motive - crash a stock by incessant shorting and walk away with a huge profit.
Anne Applebaum, seems to have over reacted, in an article about Madoff's fraud, writing it will cripple Capitalism. The only thing that will cripple Capitalism is Congress and their overreaction to the seamy side of the basest of human nature. Even Congress can't change human behaviour and if they could then charity begins at home. (See 6 below.)
Today the Fed opened the flood gates. Like the Col. who said of the Okinawans: "I will teach them democracy if I have to kill everyone of them," Bernanke is going to right our economy even if drowns us in debt.
Dick
1) The Return of Realpolitik in Arabia: Bush's 'diplomacy of freedom' gives way to Obama's caution and reticence. The Middle East may test our fatigue.
By FOUAD AJAMI
President Bush assumed office promising a "humble foreign policy." But it was his luck, or fate, to have much of his presidency consumed by adventures in the Greater Middle East. It is clear from the passion of his valedictory tour that he has caught the bug of that region, that it has worked its way on him as he himself worked his will, and the power available to him, on its settled and ruinous ways.
Ismael RoldanPresident-elect Barack Obama has signaled that the foreign world will not be his primary concern, that the repair of the American economy will trump all other pursuits and temptations. On the lands and the peoples of the Middle East, Mr. Obama has been largely silent, if not detached. He was in the Illinois Senate when a huge storm blew over the Islamic world. He was lucky, as his secretary of state designate endlessly reminded us, to have given a solitary speech on Iraq when the challenge came calling.
There is a detached tone to Mr. Obama's utterances on the Islamic world, a kind of knowingness. In part, it is no doubt an intended contrast to the heat and fervor of George W. Bush. If Mr. Bush believed he could remake that old and broken and wily region, Mr. Obama signals a fatigue with it, an acceptance of its order of power. If Mr. Bush believed that he could insert himself into the internal affairs of distant Islamic lands, Mr. Obama and his foreign-policy advisers portend a return to realpolitik and to a resigned acceptance of the ways of foreign autocracies. We have erred, the Obama worldview preaches, and overreached. We have overread the verdict of 9/11, and it is time to make our peace with regimes we have offended in the Bush years. It is the Scowcroftian way -- other lands, other ways.
Then, too, the Obama reticence about those burning grounds of the Islamic world is, in part, a matter of biography. The Islamic faith was the faith of his father. A candidate with the middle name of Hussein could not afford soaring rhetoric about the ability of freedom to survive on Islamic soil.
In contrast, George W. Bush had been free and confident enough to take up the cause of reform and drastic change in the Islamic world. True, he did not know much about the ways of those lands, but neither did Woodrow Wilson. His doctrine of self-determination in the aftermath of the Great War, and the dissolution of the Ottoman empire, endures as the most consequential and revolutionary American message taken to the lands of old empires.
Wilson himself, it should be recalled, had been chastened by the radical sweep and impact of his own doctrine; he had preached the gospel of self-determination, he said, "without the knowledge that nationalities existed, which are coming to us day after day." Detailed "knowledge" can be overrated in the choices that history opens up. The post-Ottoman world was never the same after that American president who had known so little about it. A circle was closed between that Wilsonian policy and the massive American push into Arab and Islamic lands by George W. Bush.
One thing is sure to go with Mr. Bush when he departs to Crawford, Texas: his "diplomacy of freedom." That diplomacy -- which propelled the wars in Afghanistan and Iraq, which drove the Syrians out of Lebanon after they had all but destroyed the sovereignty of that country, and had challenged pro-American allies in Egypt and the Arabian Peninsula -- is gone for good.
It was an odd spectacle, the time behind us: a conservative American president preaching the gospel of liberty for lands beyond, his liberal detractors at home giving voice to a deep skepticism about liberty's chances in inhospitable settings. No one was more revealing of the liberal temper -- and of things to come -- than Vice President-elect Joe Biden (then the point man for foreign policy among the Democrats) speaking in December 2006 about the hazards of believing in liberty's appeal to Muslim lands. Of President Bush, he said: "He has this wholesome but naive view that Westerners' notions of liberty are easily transported to that area of the world." Mr. Biden knew better: He warned the president, he said, that Grand Ayatollah Ali Sistani's view of liberty differed from "our view of liberty . . . I think the president thinks there's a Thomas Jefferson or Madison behind every sand dune waiting to jump up. And there are none."
The course of history can shred the most detailed of briefing books. On the face of it, the new team tells us that there shall be no attachment to the gains we made in Iraq. This is not Mr. Obama's cause, or call. That country can fend for itself, it is implied. The new cause shall be a return to the struggle for Afghanistan. This is the liberal narrative: the bad, unilateral "war of choice" in Iraq, the good, multilateral "war of necessity" in Afghanistan. The doves on Iraq can thus be hawks on the Afghan-Pakistan frontier. The strategic gurus who preached that Iraq is a hopeless, artificial state put together by Gertrude Bell and Winston Churchill and T.E. Lawrence can try for victory and nation building in the unforgiving tribal lands of Afghanistan and Pakistan. If there is an artificial state in our world of nations, Afghanistan must be its closest approximation. If there is a false national boundary -- mocked by ethnicity and historical allegiance -- it is the Durand Line, drawn up by British power in the 1890s, between Afghanistan and Pakistan, through the lands of the Pashtuns. Afghanistan could yet thwart President Bush's successors, frustrate them in the way Iraq frustrated him.
Our country will be forgiving toward the new foreign-policy team, it is fair to assume. The hubris and self-confidence needed for expeditions into foreign lands have been devastated by the economic meltdown in our midst.
Of the good manners and pliability of foreign regimes, we can be less certain. Nature abhors a vacuum, and challengers are sure to step forth. To its surprise, the new administration could yet discover that our adversaries do not wish to see our withdrawal from their midst. The Iranians thrive on the American presence in the Persian Gulf and feed off it. They are the quintessential oppositional force. They are not good at generating policies of their own. Their work consists of subversive attacks on Pax Americana in the region. The call by President Bush's critics for a dialogue with Iran will be exposed for the pathetic fraud it has been all along. The American drama swirling around the rise of Mr. Obama is of no interest to the theocrats in Tehran. For them, it is business as usual in the Persian Gulf.
We have witnessed the gains and the heartbreak of American activism and ambition on foreign shores. Around the corner lurk the risks of caution and reticence, of enemies who could see through, and test, our fatigue. The world is under no obligation to accommodate us.
2) Barack Obama-san Article
As January 20 nears, Barack Obama's ambitions for spending on the likes of roads, bridges and jobless benefits keep growing. The latest leak puts the "stimulus" at $1 trillion over a couple of years, and the political class is embracing it as a miracle cure.
Not to spoil the party, but this is not a new idea. Keynesian "pump-priming" in a recession has often been tried, and as an economic stimulus it is overrated. The money that the government spends has to come from somewhere, which means from the private economy in higher taxes or borrowing. The public works are usually less productive than the foregone private investment.
In the Age of Obama, we seem fated to re-explain these eternal lessons. So for today we thought we'd recount the history of the last major country that tried to spend its way to "stimulus" -- Japan during its "lost decade" of the 1990s. In 1992, Japanese Prime Minister Kiichi Miyazawa faced falling property prices and a stock market that had sunk 60% in three years. Mr. Miyazawa's Liberal Democratic Party won re-election promising that Japan would spend its way to becoming a "lifestyle superpower." The country embarked on a great Keynesian experiment:
August 1992: 10.7 trillion yen ($85 billion). Japan passed its largest-ever stimulus package to that time, with 8.6 trillion yen earmarked for public works, 1.2 trillion to expand loan quotas for small- and medium-sized businesses and 900 billion for the Japan Development Bank. The package passed in December, but investment kept falling and unemployment rose. By the end of the year, Japan's debt-to-GDP ratio was 68.6%.
April 1993: 13.2 trillion yen. At exchange rates of the day, this was a whopping $117billion giveaway, again mostly for public works and small businesses. Tokyo erupted into domestic politicking over election practices, the economy went sideways, and the government fell. New Prime Minister Morihiro Hosokawa floated tax cuts, deregulation and decentralization to spur growth. But as the economy worsened -- inflation-adjusted GNP shrank 0.5% in the April to June quarter -- the political drumbeat for handouts increased.
September 1993: 6.2 trillion yen. Mr. Hosokawa announced a compromise "smaller" stimulus of $59 billion, along with minor deregulation. He dropped plans for an income-tax cut. The stimulus included 2.9 trillion yen in low-interest home financing, one trillion yen for "social infrastructure," and another trillion for business. The economy didn't respond. By the end of the year, Japan's debt-to-GDP reached 74.7%.
Is any of this beginning to sound familiar? There's more.
February 1994: 15.3 trillion yen. This stimulus included 5.8 trillion in income-tax cuts, 7.2 trillion in public investment, 1.5 trillion for small business and employment-support, 500 billion for land purchases and 230 billion for agricultural modernization. The income tax cut was temporary, effective only for 1994. The economy stagnated and Prime Minister Hosokawa resigned amid a corruption scandal. By the end of the year, debt-to-GDP was 80.2%.
September 1995: 14.2 trillion yen. The Socialist government of Tomiichi Murayama, with a wobbly coalition, rolled out a $137 billion whopper, with 4.6 trillion in public works, 3.2 trillion for government land purchases, 1.3 trillion in business loans, and more. Mr. Murayama resigned in early 1996, and in June Prime Minister Ryutaro Hashimoto agreed to raise consumption taxes to 5% from 3%, starting in April 1997, to reduce the fiscal deficit.
In 1994 and 1995, Japan spent 3.1% and 2.9% of its annual GDP, and (helped by central bank easing) the economy did respond with modest growth for about two years. Debt-to-GDP hit 87.6%.
April 1998: 16.7 trillion yen. When growth starting slowing again, the re-elected LDP turned to old medicine: 7.7 trillion yen for public works. The $128 billion grab-bag also included 2.3 trillion for the disposal of bad loans. The government announced four trillion yen in (again) temporary income-tax cuts, spread over two years. Mr. Hashimoto resigned in July after voters registered their discontent at the polls.
November 1998: 23.9 trillion yen. Desperate to get the economy moving, Prime Minister Keizo Obuchi rolled out the country's largest-ever stimulus, valued at $195 billion. The giveaway included 8.1 trillion yen in social public works, 5.9 trillion for business loans, one trillion for job-creation programs, 700 billion in cash handouts to 35 million households, and more. By the end of the year, debt-to-GDP hit 114.3%.
November 1999: 18 trillion yen. In a "last push," Mr. Obuchi's government spent 7.4 trillion yen to prop up businesses, 6.8 trillion yen for social infrastructure projects like telecommunications and environmental projects, and two trillion yen for housing loans, among other things. Debt-to-GDP reached 128.3%.
Japan's economy grow anemically over that decade, but as the nearby chart shows, its national debt exploded. Only in this decade, with a monetary reflation and Prime Minister Junichiro Koizumi's decision to privatize state assets and force banks to acknowledge their bad debts, did the economy recover. Yet recent governments have rolled back Mr. Koizumi's reforms and returned to their spending habits. But Japan does have better roads.
Now we're told that a similar spending program -- a new New Deal -- will revive the U.S. economy. How do you say "good luck" in Japanese?
3)Condi's Korean Failure: Putting diplomacy above disarmament.
Condoleezza Rice has spent her four years as Secretary of State trying to engage America's adversaries in much the same way that Hillary Clinton is promising to do. So it's worth noting the final collapse of Ms. Rice's North Korean diplomacy last week.
Pyongyang announced that it won't put in writing the verbal commitments on nuclear verification that it had previously made to U.S. negotiator Christopher Hill. Ms. Rice and Mr. Hill had used those verbal promises to persuade President Bush in October to remove North Korea from the U.S. list of terror-sponsoring countries. But having won that concession, the North is now refusing to submit to even de minimis verification of its supposed disarmament.
This is no great surprise, except perhaps to Mr. Hill and Ms. Rice. The North has never kept a commitment, verbal or written. Its negotiating habit is to make promises to win concessions, then renege on those promises and saber-rattle until the U.S. offers further concessions. Under the verification deal, U.S., Japan, South Korea, China and Russia had pledged one million tons of fuel oil to the energy-starved North. The State Department said Friday that those shipments would be halted, but half of the deliveries have already been made. The North will now hold out for an even better deal from the Obama Administration, knowing from experience that it will probably get it.
Meanwhile, the suffering of the North Korean people has continued, with new reports of food shortages and an even harsher crackdown on Koreans trying to flee to China. Ms. Rice recently said the only alternative to her Pyongyang policy was short-term "regime change," which is a classic false dilemma. Her failure -- and Mr. Bush's -- was putting the appearance of diplomatic progress above genuine disarmament.
4)Now here is some real smart Pelosi/Clinton Demanomics.....And this is an example of what middle America will pay for ! ! ! Unions ? ? ? ?
According to Forbes:
Labor cost per hour, wages and benefits for hourly workers.
Ford: $70.51 ($141,020 per year)
GM: $73.26 ($146,520 per year)
Chrysler: $75.86 ($151,720 per year)
Toyota, Honda, Nissan (in U.S. ): $48.00 ($96,000 per year)
According to AAUP and IES, the average annual compensation for a college professor in 2006 was $92,973 (average salary nationally of $73,207 + 27% benefits).
Bottom Line: The average UAW worker with a high school degree earns 57.6% more compensation than the average university professor with a Ph.D., and 52.6% more than the average worker at Toyota , Honda or Nissan.
Many industry analysts say the Detroit Three, must be on par with Toyota and Honda to survive. This year's contract, they say, must be "transformational" in reducing pension and health care costs.
What would "transformational" mean? One way to think about "transformational" would mean that UAW workers, most with a high school diploma, would have to accept compensation equal to that of the average university professor with a PhD.
Then there's the "Job Bank"
When a D3 ( Detroit 3 carmaker) lays an employee off, that employee continues to receive all benefits - medical, retirement, etc., etc., PLUS an hourly wage of $31/hour.
Here's a typical story....
Ken Pool is making good money. On weekdays, he shows up at 7 a.m. at Ford Motor Co.'s Michigan Truck Plant in Wayne , signs in, and then starts working -- on a crossword puzzle. Pool hates the monotony, but the pay is good: more than $31 an hour, plus benefits.
"We just go in and play crossword puzzles, watch videos that someone brings in or read the newspaper," he says. "Otherwise, I just sit."
Pool is one of more than 12,000 American autoworkers who, instead of installing windshields or bending sheet metal, spend their days counting the hours in a jobs bank set up by Detroit automakers as demanded by the United Auto Workers Union - UAW - as part of an extraordinary job security agreement.
Now the D3 wants Joe Taxpayer to pick up this tab in a $25 Billion bailout package - soon to be increased to $45 Billion if Nancy Pelosi and Hillary Clinton have their way.
The "Big 3" want this money - not to build better autos. No. They want it to pay the tab for Medical and Retirement benefits for RETIRED auto workers. Not ONE PENNY would be used to make them more competitive, or to improve the quality of their cars.
We ALL have problems paying for our Medical Insurance - but the Democrat leaders in Congress now want us to pay the Medical Insurance premiums of folks who have RETIRED from Ford, GM and Chrysler.
Not a good deal for us.
How about Chapter 11 - and getting rid of these ridiculous union contracts?
5) THE IMPENDING COLLAPSE OF OUR ENEMIES
By DICK MORRIS & EILEEN MCGANN
The Depression -- let’s call it what it is -- leaves us, well, depressed. But there is very good news from around the world. Our enemies are collapsing under the strain of dropping oil and gas prices. What we had all hoped conservation20and off-shore drilling would achieve, the global economic collapse is accomplishing: the defeat of OPEC, Iran, Chavez, Putin and the weakening of the financial underpinnings of Islamist terrorism. In each of these nations, the hold of the dictator is weakening as, one after the other, they face the consequences of dropping oil prices.
In Iran, the sanctions imposed by the United Nations, the aggressive efforts of the U.S. government, and the actions of states like California, Florida, and Missouri to ban pension investments in companies that do business with Iran are having a big effect. Unable to expand its oil production for a lack of foreign investment, Iran faces the need to slash its budget drastically as energy revenues, the source of 85% of its income, crash. Iranian President Ahmadinejad is announcing harsh austerity measures. Having based his budget on $50-$60 oil, he now must recast it for at a $40 per barrel level. He boasts of cash reserves of $23 billion, but that sum won’t last long unless he makes major cuts. (Do the math: a shortfall of $25/barrel per day x 4 million barrels a day x 365 days = $36.5 billion, more than he’s got on hand).
The question for Ahmadinejad and for the Ayatollah who stands behind him is: Can their regime survive economic collapse? Unable to buy social peace by handouts and subsidies, will the top blow off an country that hates the regime, is predominantly very young, and is only 40% Farci?
Chavez, in Venezuela is not in any better shape. Because of corruption and incompetence, Venezuelan oil production has dropped from over 3 million barrels per day when Chavez took over to about 1.7 million today. As long as oil prices were quadrupling, it didn’t matter, but when they crashed, a harsh wind of reality blew in the door. Chavez was losing popularity before the oil price dropped. He lost a constitutional referendum to give himself lifetime tenure and he just lost his municipal elections in the largest cities and states in the nation. After knocking out most of the major opposition candidates on phony charges of corruption, he managed to hang on to the governorships of the small, rural provinces, but he lost the cities – even the poor areas of the cities vote d against him.
Now, beset already by food shortages and galloping inflation, Venezuela has to make do with less subsidization and drastic cuts. Feeling cold times ahead, Chavez is desperately press ing ahead with a new attempt to abolish term limits in a vote set for the end of February, but, if he falls short – which we think he will – he could be out in a matter of months.
Chavez’ client-states -- Ecuador, Nicaragua, and Bolivia –- have to face life without subsidies. Evo Morales, the head of Bolivia who got elected pledging to allow cocoa cultivation again, already faces a virtual civil war as the energy-rich half of his country wants autonomy and, possibly, independence. Argentina, whose corrupt regime has held onto power by massive borrowing from Chavez, must now seek sustenance from the global markets, only recently burned by its default on its foreign debt. Fat chance.
Putin’s Russia, which so recently threw its weight around by invading Georgia, faces perhaps the biggest hit of all to its economy. Producing 10 million barrels per day, Russia will be hit the hardest by the collapse of prices. (Again, do the math: Assume Russia budgeted at $60 oil prices and the price drops to $40. $20/barrel x 10 million barrels per day x 365 = a $73 billion annual shortfall). With a GDP of only about $1.4 trillion, Russia faces the loss of about 5% of its economy. And Russian oil production has dropped by one million barrels per day for each of the past two years. With prices at rock=2 0bottom and nationalization an ever-present threat, who is going to invest in increasing Russian production?
And what of OPEC and the economic base of the Islamist terrorists? Countries like the United Arab Emirates, Qatar, and Kuwait will be OK because they have small populations among whom to divide their oil earnings. Saudi Arabia will make it because of its massive production and relatively small population. But every other OPEC nation has a large population where the ruler, usually a dictator, buys social peace with oil money. The pressure to stay in power will be so intense that these leaders will force production as high as they can to offset the shortfall. The result is that there will be constant deflationary pressure on oil prices, a vicious cycle that will impoverish all the right people.
6) Breach of Trust:Bernard Madoff's massive fraud will cripple American capitalism.
By Anne Applebaum
Scene 1: We are buying an apartment in Warsaw, Poland, sometime in the early 1990s. At every stage of the transaction, both my husband and I have to show up in person, stand in line, and present identity cards. We appear at the notary's office more than once. We appear at the tax office more than once. Finally, we are asked to hand over a briefcase full of dollars. The seller will not accept a bank transfer and does not want to be paid in his country's currency, either.
Scene 2: We are buying a car in Washington, D.C., sometime in the early 2000s. We test-drive a few and tell the dealer which car we want. We hand him a personal check, which he accepts without asking for an identity card. My husband asks if he isn't worried the check will bounce. The dealer laughs, and we drive out of the dealership in a brand-new car.
Two different times, two different places, but above all, two different kinds of capitalism: If Francis Fukuyama, the author of Trust: The Social Virtues and the Creation of Prosperity, were writing this article, he would describe the Warsaw of the first scene as a "low trust" culture and the Washington of the second as a "high trust" culture. One could also call them a "place where financial transactions are irritating and time-consuming" and "a place where financial transactions are easy," respectively. Such labels do not last forever, though. In the nearly two decades that have passed since the early 1990s, bank transfers, telephone transactions, and the use of the local currency have all become the norm in Warsaw. The question now is whether American capitalism will also change over the next two decades—and for the worse.
Reading the accounts of the collapse of Bernard L. Madoff Investment Securities, it is impossible not to conclude that it will. The scale of this fraud stretches far beyond anything a car dealer or even the purchaser of an apartment might commit, of course: Among the victims of Madoff's extraordinary pyramid scheme are major banks (BNP Parisbas, Nomura Securities), famous people (Mort Zuckerman), and Madoff's friends from the Palm Beach Country Club. In the wake of Madoff's arrest, charities are going to close, and previously rich people will become poor. Worst of all, everyone who invests anywhere will think just that much harder, take that much longer, demand that much more documentation. And they will do so not only because of Madoff, but because of the subprime lenders, Wall Street investment banks, and Enron fraudsters who have worked so hard to erode our faith in the reliability of our system.
The deeper irony here is that all these schemes were only possible in the first place precisely because we have, until now, lived in a culture with such extraordinarily high levels of trust, a culture in which a customer's bona fides are accepted without question and wealthy people are thought to have earned their money. In our culture, someone like Madoff was trusted precisely because he was rich; because he was a member of the Palm Beach Country Club; because his company worked out of expensive Manhattan offices, most of which were occupied by people doing real jobs. It occurred to no one that a small group of select insiders was also operating a massive fraud scheme on the 17th floor.
In other cultures—maybe most other cultures—very rich people are suspect by definition. Recently, I met a wealthy Russian and automatically assumed he was the beneficiary of some shady scheme: How else would someone from that part of the world get rich? In fact, he turned out to be the CEO of a Western-owned company in Kiev, Ukraine, and totally above board. But I know why I made the mistake: I still remember—and Russians still remember—the fraudulent "privatization" deals and complex money-laundering operations that created so many Russian billionaires over the last two decades. I also remember the extraordinary saga of the MMM company, which in the 1990s defrauded some 2 million Russians of $1.5 billion, using what will now surely be known as the second-largest pyramid scheme of all time. Back then, we thought such blatant fraud could only take place in the lawlessness of the post-Soviet world.
We were wrong. Madoff's pyramid scheme, far broader than anything MMM dreamed up, was made possible by our own tradition of lawfulness. And now he will help bring that tradition down. Here's a prediction: In the coming years, American capitalism will become slower, more cautious, less productive, and less entrepreneurial. We're still a long way from Eastern Europe of the 1990s or from the Latin America or Russia of the present. But maybe not as far as we think.
Monday, December 15, 2008
Change In The Air? Not In The Windy City!
Peter Zeihan does not believe oil prices will rise any time soon even though OPEC might cut production. Why? A word called recession. He also deems consumption cut backs have a permanency that he cannot ignore. (See 1 below.)
While our brainless Senators have been focusing on hedge funds and trying to determine whether they were a threat to national security a crook named Madoff skimmed about $50 billion from the pockets of very astute investors one of whom is a sitting Senator. Madoff took some twenty years to accomplish this fraud.
So much for government oversight. Guess we need to ship more money to the SEC along with some appointments for their staff with a competent DC eye doctor. Perthaps Obama will appoint a Fraud Czar! (See 2 below.)
Change is in the air but not in "The Windy City. The stench of Illinois' corrupt Governor continues to foul the air because the Democrats now fear an open election might result in a Republican winning the president elect's seat so they are back pedalling and are now more interested in impeaching one of their own and figuring out how they can get a Democrat sent to the Senate.
Illinois Democrats decided to wait til after the Holidays in hope they will get some divine guidance placed in their political stockings from Santa.(See 3 below.)
Phillip Jenkins is a Conservative who seems to have concerns Obama will become another Carter. (See 4 below.)
My early prediction that Caroline Kennedy would be the next Senator from New York may soon become a reality.
While many of our newspapers are financially dying, newspapers in Iraq are burgeoning. Their reporters are also enjoying a new found freedom even to the point of throwing their shoes at GW. The reporter who did so has GW to thank that he can do so because he would have been beheaded on the spot by Sadaam.
More importantly, lest anyone forget, GW was visiting Iraq in recognition of the fact that he will be handing his successor a war that is mostly won because GW defied his successor's advice and stayed the course while everyone cursed him. History will deservedly treat GW far better than the rude Iraq reporter who threw shoes at him,the Bush haters who applauded and the New York Times that devoted four pages to a despicable act against our nation's leader.
Let's hear it for Chicago? Now Obama has appointed the head of Chicago's Schools to head the nation's Education Department. Obama should shut it down and save the taxpayers a lot of money. That would really be change! (See 5 below.)
Dick
1) Falling Fortunes, Rising Hopes and the Price of Oil
By Peter Zeihan
Oil prices have now dipped — albeit only briefly — below US$40 a barrel, a precipitous plunge from their highs of more than US$147 a barrel in July. Just as high oil prices reworked the international economic order, low oil prices are now doing the same. Such a sudden onset of low prices impacts the international system just as severely as recent record highs.
But before we dive into the short-term (that is, up to 12 months) impact of the new price environment, we must state our position in the oil price debate. We have long been perplexed about the onward and upward movement of the oil markets from 2005 to 2008. Certainly, global demand was strong, but a variety of factors such as production figures and growing inventories of crude oil seemed to argue against ever-increasing prices. Some of our friends pointed to the complex world of derivatives and futures trading, which they said had created artificial demand. That may well have been true, but the bottom line is that, based on the fundamentals, the oil numbers did not make a great deal of sense.
Things have clarified a great deal of late. We are now facing an environment in which the United States, Europe and Japan are in recession, while China is, at the very least, expecting to see its growth slow greatly. Demand for crude the world over is sliding sharply even as the Organization of the Petroleum Exporting Countries (OPEC) member states so far seem unable (or, in the case of Saudi Arabia, perhaps unwilling) to make the necessary deep cuts in output that might halt the price slide. The bottom line is that, while the breathtaking speed at which prices have collapsed has caught us somewhat by surprise, the direction and the depth of the plunge has not.
Prices are likely to remain low for some time. Most of the world’s storage facilities — such as the U.S. Strategic Petroleum Reserve — are full to the brim, so large cuts are needed simply to prevent massive oversupply. Yet any OPEC production cuts — the cartel meets Dec. 17 and deep cuts are expected — will take months to have a demonstrable impact, especially in a recessionary environment. And there is the simple issue of scale. The global oil market is a beast: Total demand at present is about 86 million barrels per day. This is not a market that can turn on a dime. A firm fact that flies in the face of conventional wisdom is that oil actually falls far faster than it rises when the fundamentals are out of whack. This has happened on multiple occasions, and not that long ago.
Falls occurred both in the aftermath of the 1990-1991 Persian Gulf War and as a result of the 1997-1998 Asian financial crises that were similar in percentage terms to the present drop. Until the balance between supply and demand is restruck — something not likely until a global economic recovery is well under way — there is no reason to expect a significant price recovery. The journey, of course, is not necessarily a one-way trip. Quirks in everything from weather to shipping to Nigerian riots and Russian military movements can set prices gyrating, but the fundamentals are clearly bearish. It will most likely take several months for the core features of the new reality to change much at all.
Low oil prices create both winners and losers on the international scene. First, the winners’ list.
Far and away the biggest winner from drastically lower prices is the world’s largest consumer and importer of oil: the United States. The last two years of high prices have spawned a sustained American consumer effort to get by with less oil via a mix of conservation and a shift to better-mileage vehicles. Whether this purchase pattern in automobiles lasts is not at issue. The point is that it has already happened: Many Americans have already shifted to more fuel-efficient vehicles. Just as the 1990s obsession with sport utility vehicles artificially boosted American gasoline demand so long as those automobiles were on the road, so the new fleet of hybrids and smart cars will push demand in the opposite direction for a sustained period.
Overall U.S. oil consumption has plummeted by nearly 9 percent from its peak in August 2007 to November 2008, according to the U.S. Department of Energy. Combining this with the drop in prices since July translates into U.S. energy savings of approximately US$1.95 billion at a price of US$50 a barrel and US$2.1 billion at a price of US$40 a barrel. And that is daily cost savings. In recessionary times, that cash will go a long way to building confidence and stanching the recession.
Next on the list are the major European importers of crude: Germany, Italy and Spain. As a rule, European economies are less energy-intensive than the United States, but by dint of fuel mix and lack of domestic production these three major states are forced to rely on substantial amounts of imported oil. We exclude the other major European economies from this list as they are either major oil producers themselves (the United Kingdom and the Netherlands) or their economies are extremely oil efficient (France, Belgium and Sweden). Don’t get us wrong — the EU states are all quite pleased that oil prices have dialed back. Nevertheless, in terms of relative gain, Germany, Italy and Spain are the real winners. And with Europe facing a recession much deeper and likely longer than that in the United States, the Europeans need every advantage they can get.
India, far removed from Europe culturally and geographically, sports a somewhat similar economic structure in that it boasts (or suffers from, based on your perspective) an industrializing base that is highly dependent on oil imports. Broadly, the Indians are in the same basket as Spain in that they are voracious energy consumers who have seen their demand skyrocket in recent years. Between the Nov. 26 Mumbai attack, upcoming federal elections and the energy price pain from earlier in the year, the government is desperate to pass on the cost savings to the population to shore up its support.
Then there are the East Asian states of South Korea, China and Japan (listed in descending order of how much each one benefits from the price drop). All import massive amounts of crude oil, but we put them at the end of the list of winners because of their financial systems. In East Asia — and particularly in China and Japan — money is not allocated on the basis of rate of return or profitability as it is in the West. Instead, the concern is maximizing employment. It does not matter much in East Asia if one’s business plan is sound; the government will provide cheap loans so long one employs hordes of people. One side effect of this strategy is that firms can get loans for anything, including raw materials they otherwise could not afford — such as oil at US$147 a barrel.
Therefore, high oil prices just do not affect East Asia as badly as they affect the West. Just as the East Asian financial system mutes the impact of high prices, the converse is true as well. In the West, energy consumers are not shielded from high prices, so lower prices immediately translate into more purchasing power, and thus more economic activity. Not so in East Asia, where the same financial shielding that blunts the impact of high prices lessens the benefits of low prices.
The order in which we listed the three Asian giants relates to how much progress they have made in reforming their financial practices. South Korea’s financial system is much closer to the Western model than the Asian model: South Korea hurts more as prices rise, and so will be more relieved as prices fall. China is in the middle in terms of financial practices, but it is also attempting to unwind its system of energy price-fixing as oil costs drop; due to subsidies being reduced, Chinese consumers actually may not be seeing much of a change in retail prices. Finally, Japan will benefit the least because its system is already highly efficient compared to the other two, so the price impact was less in the first place. One barrel of oil consumed in Japan generates approximately US$2,610 of Japanese gross domestic product (GDP), while the comparative figures for Korea and China are US$1,270 and US$1,130 respectively.
In short, the heavily industrialized Asians still benefit, but the impact isn’t as much as one might think at first glance. In fact, the biggest benefit to these states from cheaper energy is indirect — lower prices spur consumption in the West, and then the West purchases more Asian products.
And now, the losers.
Venezuela and Iran top this list by far. Both are led by politicians who have lavished vast amounts of oil income on their populations to secure their respective political positions. But that public approval has come at its own price in terms of economic dislocation (why diversify the economy if strong oil prices bring in loads of cash?), low employment (the energy sector may be capital-intensive, but it certainly is not labor-intensive), and high inflation (high government spending has led to massive consumption and spurred rampant import of foreign goods to satiate that demand).
Of the two states, Venezuela is certainly in the worse position. By some estimates, Venezuela requires oil prices in the vicinity of US$120 a barrel to maintain the social spending to which its population has become accustomed. Iran’s number may be only somewhat lower, but President Mahmoud Ahmadinejad is in the process of at least beginning to bow to economic reality. On Dec. 5, he announced massive cuts in subsidy outlays with the intent of reforging the budget based on a price of only US$30 a barrel.
It is an open question whether the Iranian government — and especially the increasingly unpopular Ahmadinejad — can survive such cuts (if they are indeed made), but at least there is a public realization of the depth of the crisis at the top level of government. In Venezuela, by contrast, the mitigation process has barely begun, and for political reasons it cannot truly be implemented until after a referendum in early 2009 on term limits that could allow Chavez to run for president indefinitely.
Next is Nigeria. In terms of seeing an increase in human misery, Nigeria should probably be at the top of the losers’ list. But the harsh reality is that Nigerians are used to corrupt government, inadequate infrastructure, spotty power supply and all-around poor conditions. Some of the perks of high energy prices undoubtedly will disappear, but none of those perks succeeded in changing Nigeria in the first place.
The real impact on Nigeria will be that the government will have drastically less money available to grease the political wheels that allow it to keep competing regional and personal interests in check. Those funds have been particularly crucial for funneling cash to the country’s oil-rich Niger Delta region, giving local bosses reason not to hire and/or arm militant groups like the Movement for the Emancipation of the Niger Delta to attack oil and natural gas sites. With Abuja having less cash, the oil regions will see a surge in extortion, kidnapping and oil bunkering (i.e., theft). We already have seen attacks ramp up against the country’s natural gas industry: Within the last few days, attacks against supply points have forced operators to take the Bonny Island liquefied natural gas export facility offline. And since Nigeria’s militants never really differentiate between the country’s various forms of energy export, oil disruptions are probably just around the corner.
Russia is also in the crosshairs, but not nearly to the same degree as Venezuela, Iran and Nigeria. Russia has four things going for it that the others lack. First, it exports massive amounts of natural gas and metals, giving it additional income streams. (Venezuela and Iran actually import natural gas and have no real alternative to oil income.) Second, Russia never spent its money on its population. Thus, Russians have not become used to massive government support, so there will be no sharp cuts in public spending that will be missed by the populace. Third, Russia has saved nearly every nickel it made in the past eight years, giving it cash reserves worth some US$750 billion. The financial crisis is hitting Russia hard, so at least US$200 billion of that buffer already has been spent, but Russia still remains in a far better position than most oil exporters. Fourth and last, the Russians can rely on Deputy Prime Minister and Finance Minister Alexei Kudrin to (somewhat forcefully) keep the books firmly in balance. At his insistence, the government is in the process of refabricating its three-year budget on the basis of oil prices of below US$35 a barrel, down from the original estimate of US$95.
At the end of the losers’ list we have two states that most people would not think of: Mexico and Canada. Both have other sources of economic activity. Canada is a modern service-based economy with a heavy presence of many commodity industries, while Mexico has become a major manufacturing hub. But both are major oil exporters, and have been leading suppliers to the American economy for decades. So both are exposed, but their concerns are more about unforeseen complications rather than the “simple” quantitative impact of lower prices.
Mexico has purchased derivatives contracts that, in essence, insure the price of all its oil exports for 2009. So should prices remain low, Mexico’s actual income will be unchanged. We only include Mexico on the list of losers, therefore, because it’s quite rare in geopolitics that such planning actually works out as planned. Hurricanes and strikes happen. (Mexico also faces the problem of insufficient funds, expertise and technology to counter rapidly declining output, something that will leave it with a lack of oil to sell in the first place — but that is an issue more for 2012 than 2009.)
As for Canada, most of the oil it produces comes from Alberta province, the seat of power of the ruling Conservative Party. Right now, the Canadian government is wobbling like a slowing top. Seeing the Conservatives’ power base take a massive economic hit due to oil prices is not the sort of complication the government needs right now. In the longer term, Alberta recently increased taxes on oil sands projects. Oil sands extraction is among the more capital-intensive and technologically challenging sorts of oil production currently possible. Combine the tax changes with the nature of the subindustry and the recent price drops and there is likely to be precious little investment interest in oil during — at a minimum — 2009.
Most readers will take note of the countries we have chosen not to include on the list of vulnerable states. These include the bulk of the OPEC states — specifically Angola, Iraq, Kuwait, Saudi Arabia, the United Arab Emirates, Qatar and Libya. All of these states count oil as their only meaningful export (except the United Arab Emirates and Qatar, which also export natural gas), so why do we feel such countries are not in the danger zone?
For its part, Angola only became a major producer recently. Nearly all of Angolan oil output is from offshore projects controlled by foreigners — shutting in such production is a very tricky affair for a country that is utterly reliant on foreign technology to operate its only meaningful industry. But the primary reason Angola is not feeling the heat is that most of its income has not been spent but instead has been stashed away due to a lack of the necessary physical and personnel infrastructure needed to leverage the income.
Iraq is in a somewhat similar position as far as finances are concerned. While Iraq has been producing crude for decades, its current government is only a few years old, and its institutions simply cannot allocate the monies involved. Despite massive outlays by both Iraq and Angola, their respective governments simply lack the capacity to spend, and so have stored up cash accounts worth US$26 billion and US$54 billion respectively.
The rest of the Arab oil producers warrant a much simpler explanation: They’ve been fiscally conservative. While all have shared the wealth with their somewhat restive populations, none of them has repeated the mistakes of the 1970s, when they overspent on gaudy buildings and overcommitted themselves to expensive social programs. All have been saving vast amounts of cash, with the Saudis alone probably having more than US$1 trillion socked away. Tiny Kuwait officially has a wealth fund worth more than US$250 billion.
So while none of the Arab oil states are particularly thrilled with the direction — and in particular the speed — oil prices have gone, none of these governments faces a mortal danger at this time. What they are now missing is the ability to make a substantial impact on the world around them. At oil’s height the Gulf Arab oil producers were taking in US$2 billion a day in revenues — far more cash than they could ever hope to metabolize themselves. Bribes are powerful tools of foreign policy, and their income allowed them — particularly Saudi Arabia — to wield outsized influence in Iraq, Syria, Lebanon, and even in Beijing, London and Washington. So while none of these states faces a meltdown from falling prices, there are certainly some hangovers in store for them. It is just that they are more political than economic in nature, at least for now.
2) Madoff and the Global Economy
By Michael Mandel
The world was told the U.S. was a low-risk, high-return investment. But like the Wall Street trader's victims, we are learning the truth
For years, Bernie Madoff, all-around nice guy, pulled billions of dollars of foreign and domestic money into his investment fund. His lure? He promised the implausible combination of good returns and low risk—and people believed him.
Painfully, the allegations of fraud surrounding the Madoff affair are also exposing the fundamental fallacy of the global economy. Like Madoff's trusting investors, the rest of the world was willing to assume that the U.S. economy as a whole was a low-risk, good-return investment. This belief drove the entire structure of global trade and finance for the past 10 years. And when the subprime crisis showed this assumption of low risk to be false, the financial crisis resulted.
Consider this: Since the Asian financial crisis of 1997-98, the rest of the world has been willing to lend money to finance the U.S.'s huge and growing trade deficit. Not just small amounts of cash either: over the past decade, the U.S. borrowed a cumulative total of $5 trillion from foreigners at relatively low interest rates.
Why were foreigners so generous?
Without this flow of easy money into the U.S., globalization in its current form would not have been possible. The U.S. was the consumer of last resort, absorbing cars from Germany and Japan, electronics from Taiwan and Korea, and clothes and furniture from China. The earth was flat, and why not? Pluck a laptop from Taiwan and pay for it with a home equity loan, which—if you trace back the connections—was at least partly funded with foreign money, too.
The big unanswered question, for years, was why this money flow persisted. Why the heck were foreign investors willing to lend the U.S. such large amounts of money on such good terms? Economists and journalists spun out hypothesis after hypothesis (we'll see more below), but there was no agreement on why.
Now we see what happened. Wall Street firms—big operators like Lehman and relatively small fish like Madoff—told foreign investors they could put their money into the U.S.—the world's safest economy—and still make decent returns. Madoff, of course, appears to have lied. He allegedly ran an investment scam that has resulted in billions of dollars of losses reported around the world, including $4 billion in Switzerland and $3 billion in Spain.
Exporting 'low risk' Derivatives
But it wasn't simply Madoff. The Wall Street boom of recent years was built, as far as I can figure out, on selling the low-risk story to foreign investors. In fact, most of the financial innovations of recent years were about making investments in the U.S. 'safer' for foreign investors. The enormous growth of foreign exchange derivatives enabled those abroad to protect their U.S. investments from exchange-rate fluctuations. The sudden increase in credit default swaps could be used to protect foreign bond investors from problems with individual countries. And collateralized debt obligations, which could be divided into high-risk and low-risk pieces, increased the supply of low-risk investments to be sold outside the U.S.
This low-risk, good-return story attracted investors from around the world. One example: Lehman sold $2 billion in 'mini-bonds' to Hong Kong investors, including many retirees.
However, the low-risk, good-return story simply wasn't true, for two key reasons: First, the U.S. economy was supposed to be on the cutting edge of innovation. Innovation through technological change, by nature, is a very risky activity. Sometimes it pays off and sometimes it doesn't. If the investment in innovation pays off, the economy booms, as it did during the second half of the 1990s.
U.S. Regulation Failed
But innovation has fallen short in recent years. Biotech and nanotech still have not come to fruition, and alternative energy is moving slowly. As a result, the U.S. economy has fallen short of expectations. The income isn't there, and the debt just piles up.
The second reason why the low-risk, good-return story wasn't true: the breakdown of regulation. And that's where we come back to the alleged Madoff scam. His was no complicated global securitization, based on black-box rocket science. Instead, it appears to be a good old-fashioned Ponzi scheme, enabled by a lack of government supervision.
What comes next? The fallacy is punctured. Globalization will be seen as what it is—a game with risks that can't be wished away. And U.S. prosperity will depend on the success or failure of its ability to innovate—not its ability to tell an implausible story to foreign investors.
3) The Chicago Rules:Obama’s Illinois past is not gone. It’s not even past.
By John Heilemann
The turd tossed by Illinois governor Rod Blagojevich into Barack Obama’s punch bowl had been floating there for 48 hours when the president-elect stepped to the podium at his press conference last Thursday morning. Obama’s initial response to the astonishing—and comical, and nauseating, and DSM-worthy-crazy—corruption case had seemed wan, perfunctory. His call for Blago’s resignation had been issued through a spokesman. But Obama’s handling of the matter at the press conference was more sure-footed. Beyond the substance of what he said, his tone and bearing were pretty much pitch-perfect: saddened, disgusted, denunciatory, not the least defensive. And his oblique reference to being called a “motherfucker” by Blagojevich (“I won’t quote back some of the things that were said about me … this is a family program, I know”) earned him extra points for humor.
Yet one of the concrete takeaways from the Q&A was that the Obamans won’t be moving past Blagogate in anything like a heartbeat. Though Obama reiterated his claim that he never talked to the governor about the filling of his former Senate seat, he was careful not to say that no one on his team had done the same. He pledged to “gather all the facts about any staff contacts that may have taken place” between transition officials and Blago or his people and present them in the days ahead.
Assuming Obama follows through, this is a commendable first step toward the new transparency he’s promised. And certainly it would mark a departure from the way that George W. Bush and Bill Clinton handled similar situations. But it guarantees at least one more round of stories about the incoming administration’s connection to the Blagobroglio—and, depending on the nature of the contacts and who engaged in them, maybe more than that. Lawyers. Depositions. Testimony. The endless braying and conspiracy-theorizing of the right-wing freak show. For Obama, one question is whether all this will be damaging or merely distracting. And another is whether Blago’s will be the last grasping, clawlike hand to reach up from the Illinois swamp and try to seize Obama by the ankles.
For all the coverage of Obama’s rise, his political gestation in that swamp remains one of the least understood aspects of his history. Ryan Lizza’s long piece in The New Yorker this past summer on the subject was superb, but much of its force lay in the fact that the ground he covered was so untilled. Beyond that, there was abundant (though largely unenlightening) coverage of Obama’s relationship to Tony Rezko—and not much else that managed to break through the clutter. I’d wager that, before last week, no more than a handful of national reporters could have told you if Obama and Blagojevich were friends, foes, or something in between.
When Obama was asked at his press conference, “What’s wrong with politics in Illinois?” by a gobsmacked Chicago reporter, he outlined two competing traditions in the Land of Lincoln: “There’s a view of politics that says you go into this for sacrifice and public service, and then there’s a view of politics that says this is a business, and you’re wheeling and dealing, and ‘What’s in it for me?’ ” he said.
Obama’s delineation is too neat, too binary; countless pols, especially in the milieus of Chicago and Springfield, straddle the line, embracing both views to one degree or another, albeit implicitly. More to the point, even among those in Illinois who cast themselves as members of the Democratic Party’s reform wing, the salient question is their orientation toward those flapping on the other side of the bird: Do they accommodate (or cozy up to) the machine or crusade against it?
Nobody doubts that Obama was with the reformers in Illinois, both in terms of the legislation he helped pass in the State Senate (including on campaign finance and ethics) and in his philosophical orientation. But Obama was hardly some sort of anti-Establishment firebrand. He is close to the Daleys—Mayor Richard and brother Bill—and Emil Jones, a longtime leader in the State Senate. He assisted Blagojevich in getting elected in 2002, and though they have been estranged for some years, he supported Blago for reelection and refused to condemn him (or Mayor Daley) when they became ensnared in corruption contretemps, a fact that left some reform-minded supporters “feeling alienated and angry,” according to Lizza. And, of course, there was his alliance and friendship with Rezko.
In all of this, Obama calls to mind Bill Clinton. Aside from the wack-job caucus, few regarded Clinton’s lengthy tenure in the Arkansas statehouse as egregiously corrupt. But neither would any history of great reformist governors feature him prominently, if at all. Some of his close friends from Little Rock would wind up in prison: Susan McDougal, Webb Hubbell. And Clinton’s various entanglements in the Razorback State’s quasi-feudal political and business cultures came back to haunt him during his time in office, most glaringly in the case of Whitewater.
That Whitewater was a trumped-up tin-pot scandal in which WJC was never proved to have done anything illegal is beside the point—or, more accurately, is precisely the point. The investigations Whitewater spawned were more intrusive than a thousand colonoscopies. They consumed countless news cycles, drained away political capital, inflicted horrendous legal bills on dozens of innocent bystanders, and energized the Republicans and their allies on the fringes of society and in the mainstream media. And for what? For nada.
Could Blagogate do something similar to Obama? Already one “prominent Chicago Democrat” is telling Politico that the mess poses the risk of “Whitewater-type exposure” to the president-elect. “What will splatter on to Obama is he is to some degree a product of this culture, and he has never entirely stood against it,” said this person.
It’s obviously pertinent here that no one is accusing Obama himself of any sort of wrongdoing—quite the contrary. (Equally so that Patrick Fitzgerald is no Ken Starr.) And if it turns out that Team Obama’s hands are clean, the political danger for the incoming administration will be significantly reduced. But even then, it’s safe to assume that any transitionite who spoke to Blago or his chief of staff, no matter how innocently or appropriately, will have to lawyer up in preparation for the forthcoming trial. The GOP is already seizing the opportunity to hammer Obama; they are likely to cling to the slimmest reed in an effort to keep the story alive.
At the press conference, Obama said that all he could do was “shake my head” after reading the Blago transcripts. One can only imagine his incredulity at the circus now unfolding around the case and what it might mean for him. Every politician arises in a context, which shapes him and affects his future in ways he can only barely comprehend. There are no shining cities (or states) on a hill in local American politics. Some are nastier, sleazier, and uglier than others, but none are what you’d properly call pretty. Winning the presidency promises, among other things, an escape from all of that. But few presidents in recent memory have been able to avoid a Michael Corleone moment: “Just when I thought I was out, they pull me back in.” This is the first such moment for Obama. For his sake, and, Heaven help us, for ours too, let’s hope it’s his last.
4) The Spirit of ’76: Welcome back, Carter
By Philip Jenkins
Historical analogies have been much in vogue since this election. Are we living at the end of 1932, preparing to face the glories and disasters of a revived New Deal? Or are we in a mirror-image 1980, the beginning of an era of liberal dominance, with a massive party realignment that might not even reach full fruition for another decade or so? These questions matter, not just because such debates give employment to academic historians. Deciding which year offers the closest parallel to the present forces conservatives to think how they will adjust to the new order. Just how radically have public attitudes shifted?
Actually, the year that offers the closest historical parallels to the present might be neither 1932 nor 1980 but 1976, and that analogy helps us understand the directions in which the country will be moving. Both in government and opposition, people might want to hold off on planning for the next New Deal, still less for a coming generation of liberal hegemony. In three or four years, the main political fact in this country could well be a ruinous crisis of Democratic liberalism.
Why 1976? That was the year Jimmy Carter defeated Gerald Ford for the presidency by a slim but convincing margin: Ford won 48 percent of the popular vote, a little more than John McCain’s 46 percent. Democrats did significantly better in the House in 1976 than they did last month. They held a two-to-one majority of seats, and they retained a supermajority of 61 in the Senate. Broadly, however, the 1976 results look similar to 2008.
The mood of the country in 1976 also parallels our present situation, with a pervasive sense of disgust at politics as usual and widespread fears of national decline. As if the end of the Vietnam War and the Watergate fiasco were not catastrophic enough, foreign-policy disasters in Africa and Asia suggested that the U.S. was losing its hegemony. The oil crisis pointed to a vast transfer of wealth and power to the Middle East, while many pundits predicted environmental catastrophe. The sharp economic downturn resulted in heavy unemployment and rising inflation. A concatenation of scandals tarnished once-trusted institutions: corporations, the military, intelligence agencies, police, and, of course, the politicians.
So disaffected was bicentennial America that it sought leaders unconnected to the establishment. In Jimmy Carter, voters found a candidate whose main qualifications were his lack of experience and connections within the Beltway or corporate worlds. Like Barack Obama, Carter claimed to rise above failed partisanship, while his New South background allowed him to symbolize racial healing. Carter, like Obama, sold himself mainly on the virtues of his character. He presented himself as a man of simple honesty, faith, and decency, and his lack of a track record allowed voters to see in him what they wanted, however far-fetched those hopes might be. If they hadn’t believed it, they wouldn’t have seen it with their own eyes. Above all, Carter promised change, a message that carried weight as long as its details remained nonspecific. The problem with messiahs from nowhere is that when they do exercise power, people discover to their horror what their leader’s actual views and talents are. The disillusion can be dreadful.
The rhetoric and psychology of the Democratic Party in 1976 also foreshadows the present day. And as they did in 1976, Democrats now show every sign of repeating the blunders that led to a generation-long discrediting of liberalism. As the phrase goes, they have learned nothing in the intervening years, and they have forgotten nothing. And they will soon face a barrage of issues that they have neither the will nor competence to understand. Liberal triumph in 1976 led inexorably to evisceration in 1980. The same trajectory is likely to recur in the Obama years.
The key mistake Democrats made in 1976 was failing to realize what brought them to power. Democrats won because of public dissatisfaction with the previous regime, which had overseen the economic crisis, and also because of a wider fear that America would have to live with diminished expectations. But although they won on largely economic grounds, Democrats acted as if they had a sweeping mandate for cultural transformation—for social libertarianism, affirmative action and egalitarianism, dovish internationalism, and idealistic notions of human rights. These ideas dominated a radical Congress and were enthusiastically adopted by the cohort of Carter appointments to the judiciary. They all ignored a basic principle: just because people are unhappy where they are does not mean they are willing to go anywhere you try to lead them.
In 1976, liberals were wrong on multiple counts, and all the signs point to them repeating the same mistakes. Even if Obama plays Mr. Moderate, the congressional party contains more than enough take-no-prisoners far leftists to torpedo any chance of bipartisanship or restraint. Specifically, liberals believe that the public will support radical change in three highly sensitive areas, and in each area they will overreach to the point of self-destruction. In domestic affairs, they believe the culture wars are over and that revolutionary social changes like gay marriage can now advance unchecked. They think that popular concern over environmental problems will translate into a blank check for limitless government spending and the decisive transfer of U.S. sovereignty to international agencies. And liberals are now sure that all that foolishness with international dangers and crises is firmly behind us so that we no longer need the military or intelligence capabilities developed to respond to them. As the coming three or four years will show, they are dreadfully wrong on all counts.
In the 1970s, liberal hubris manifested itself especially in domestic politics. Democrats focused obsessively on race and class, to the exclusion of culture, morals, and religion. Reading the situation in those terms allowed liberals an easy framework for explaining opposition to their policies, which must be based on overt or disguised forms of racism (and that was before they had a President Obama). If every social problem boiled down to matters of economic and racial justice, then there could be no legitimate grounds for concerns that presented themselves as cultural or religious.
That severely blinkered view goes a very long way to explaining the collapse of liberalism in 1979-80. America in the 1970s was undergoing traumatic social and moral changes, which caused widespread unhappiness and fear. Many social conservatives were alarmed that governments were using children as tools in social experimentation, an issue made most explicit in school busing. Popular opposition focused on the defense of community and local autonomy but above all on child safety. Once again, though, liberals had no valid answer to these fears, as any questioning of public education must of necessity be a disguised form of vulgar prejudice. Their response was predictable: Damn the racists, full speed ahead.
Across the board, the critical pressure points in the social politics of the 1970s involved children and young people. For the ’60s generation, progress demanded removing restraints on the actions of consenting adults, whether this involved sexual experimentation, gay rights, drug use, or participation in weird and wonderful fringe religions. Who was to say that individuals should not be allowed to go to hell in their chosen way? That principle worked splendidly, unless and until people began to reflect on the effects on children. Yes, an adult could consent to engage in bizarre or self-destructive behavior, but that libertarian approach did not and could not extend to the young. Time and again, Americans have shown themselves liberal on social issues that are framed in terms of “live and let live.” They draw the line when the behavior in question appears to threaten youth. Hence the most successful conservative campaigns on domestic issues of the late 1970s focused strictly on child protection, and those movements coalesced into a general concern about defending and restoring American culture.
From 1977—the pivotal year of the social-conservative revival—liberals suffered reversal after reversal, on issues of drug abuse, pornography, and gay rights. In every case, child protection gave the key to victory. Carter administration plans to decriminalize drugs foundered on the opposition of a burgeoning parents’ movement. Popular fears of threats to children defeated referenda on gay rights. Near universal nausea about the availability of child porn provoked the first serious questioning of ever expanding sexual frankness. Fears about threats against children merged easily with concerns about threats by children. The astonishing rise of violent youth crime, which reached its Himalayan peak between 1979 and 1981, was read as a symptom of a feral generation that had not been subject to appropriate family restraints or care. By the end of the 1970s, these various child-related themes drove a triumphant social conservative coalition, which included those newly galvanized religious voters mobilized in the Moral Majority.
America today has changed enormously since 1978, but many of those older issues survive in latent form and should resurface shortly. Questions of youth protection will transform the gay-marriage debate, which for most media observers has been framed in terms of social justice and equality. Presumably by judicial fiat, the practice will extend to many more states in the coming years and quite conceivably to all 50 states. This in itself will not be a popular move: recall the recent California referendum, which was decided by the blacks and Latinos who turned out to support Obama but who favored traditional family models.
How will attitudes to gay marriage evolve when people contemplate the proper age of consent in such unions? Assuming the age is to be the same as in heterosexual marriages, then adolescents of 18 will marry freely, and in many states parental consent will grant that right to boys of 16 or so. Are Americans ready to see blushing teenage male brides? And if boys of that age can marry, demands to reduce the age of sexual consent for all youngsters will certainly follow.
The more strenuously liberals press for gay equality in matters involving youth, in marriage and adoption, the more they will generate a child-protection reaction, even among people who consider themselves socially liberal, and the more likely this reaction is to take religious forms. Following the recent California referendum, Mormons bore the brunt of liberal fury, and Catholics and other religious groups will face legal challenges for refusing to participate in gay adoptions and marriages. Other areas like abortion, contraception, and transgender surgery promise to generate many confrontations between religious believers and the current sexual revolution, and religious sensibilities can expect no sympathy from government, courts, or media. The resulting battles should re-energize a religious constituency that is currently disoriented and disillusioned. Anyone for Moral Majority II: The Sequel?
As in the 1970s, the problem of out-of-control youth could very soon be back on the political agenda. Although youth crime hasn’t been on the national radar since the crack boom of the early 1990s, demographic trends confidently predict a rising storm that should break within two years or so. The crime surge of the 1970s was in large part the consequence of the baby boom reaching its most crime-prone years, as the huge cohort of those born around 1960 hit their late teens. Something very similar is about to happen again. The number of babies born in the U.S. in 1990 was only slightly smaller than the 1960 generation, and by 2010 we could be entering an alarming era of violent crime, manifested in soaring rates for homicide and robbery. Factor in the economic crisis, and American cities could look as frightening and dangerous as they did at the time of New York City’s 1977 blackout, with its rioting and looting.
Making the situation still worse, the massive expansion of union membership for which many Democrats clamor will add mightily to the plethora of urban problems. Imagine cities devastated by youth crime and gang wars, while emergency workers, hospitals, buses, and garbage services are regularly on strike. If you think Americans were alienated from government in 2008, come back in two years. Liberals will try to interpret the coming crisis in terms of race and class, a problem to be solved by unlimited social spending. Conservatives had better be ready to respond with ideas of individual and family responsibility and the defense of social order.
In other ways, too, liberals utterly misread public sentiment and will build their policy upon those delusions. Americans have shown themselves open to green rhetoric and feel that policies to protect the environment are generally a good thing. Few conservatives would criticize any move in the direction of energy independence, which would be a wonderful first step toward extracting the nation from Middle Eastern quagmires. But of course, that is not what we are going to get. We will instead be facing a determined and fanatical campaign to eliminate the vastly exaggerated menace of global warming, which will mean a wholesale assault on America’s energy supplies. This will translate into striking at coal- and oil-based energy while refusing to make progress toward reliance on nuclear resources, all the while seeking to curb carbon usage through onerous taxes and surcharges. Remember those Americans infuriated by strikes and intimidated by crime? They are also going to be freezing, living with rationed energy and brownouts. A grossly underpowered economy will find it all but impossible to reconstruct and revive when the coming depression ends.
As if all this isn’t bad enough, expect global-warming rhetoric to be used as a wedge to undermine national sovereignty. Under Obama, we face the virtual certainty of American accession to new treaties that go far beyond Kyoto in demanding radical cutbacks in carbon usage. The U.S. will presumably stand out as the only power attempting to enforce these standards, which would institutionalize the nation’s relative decline in the face of Chinese and Indian growth. The moral and political issue of sovereignty will thus be linked to the practical daily realities of the energy crisis at home.
And then there is national security. Democrats observe, quite rightly, that Americans are uncomfortable with images of Guantanamo and waterboarding, and they are profoundly unhappy with open-ended military commitments in Iraq and Afghanistan. But here, too, liberals will overreach when they interpret these moral qualms as a basis for winding up American military and intelligence capabilities.
However dreadful the Carter administration may have been, however widespread the domestic discontent, what actually finished off the Democrats and opened the door for Ronald Reagan was the Iran hostage crisis. And that was a direct and predictable consequence of overreach by the administration and Congress. Since 1976, congressional liberals had led a series of campaigns against the intelligence services, exposing supposed abuses and atrocities, and in the process discrediting the whole work of intelligence. By 1977, massive purges had removed many of the CIA’s best agents, while congressional restrictions made it all but impossible for the agency to pursue its work. In the Middle East and elsewhere, America was flying blind.
Underlying these bizarre actions was a theory of human rights that assumed the whole world could and should operate according to Western theories of democratic liberalism. Unfortunately, it didn’t. In Iran, the shah was an unsavory dictator with a heavy-handed secret police, but he exercised his powers to pursue a pro-American policy. Under the Carter regime, the U.S. ended its support of the shah, while ceasing to pay off the truly dangerous radical Islamists who would eventually replace him. American efforts at self-immolation succeeded in 1979, with the Islamic Revolution and the hostage crisis that destroyed the Carter administration.
Surely congressional liberals are not stupid enough to do anything like that again? Don’t believe it. By the end of 2009, expect a purge of U.S. intelligence agencies, as well as suffocating new constraints on intelligence-gathering capacities. These moves will probably be accompanied by a series of congressional hearings, which will provide maximum opportunities for showboating by politicos, while embarrassing the CIA. A blinded and disarmed Obama administration will then blunder anew into confrontations that will once again plumb the depths of national humiliation—if not in Iran, then in Taiwan, Ukraine, Venezuela, or Pakistan. If we’re very unlucky, airliners will again be crashing into our skyscrapers and cargo ships will be exploding in our ports. And as in the late 1970s, there will be plenty of discharged and disaffected former intelligence agents wandering the corridors of power, serving as endless sources of leaks and disinformation against the Obama regime. Expect the worst age of political scandal since, well, the 1970s.
All analogies limp, and no one is suggesting a straight replay of the Carter years, still less that some kind of new Reagan era is its inevitable sequel. But if liberals seem so determined to repeat the mistakes of that era, then we have at least a plausible sketch of the coming Obama administration—of its rise and ruin.
5) Perhaps the U.S. should "pull out of Chicago" ?
Body count: In the last six months 292 killed (murdered) in Chicago ; 221 killed in Iraq .
Senators. Barack Obama & Dick Durbin, Rep. Jesse Jackson Jr., Illinois Gov. Rod Blogojevich, Illinois House leader Mike Madigan, Illinois Atty. Gen. Lisa Madigan (daughter of Mike), Chicago Mayor Richard M. Daley (son of Mayor Richard J. Daley)
.....our leadership in Illinois .....all Democrats.
Thank you for the combat zone in Chicago .
Of course, they're all blaming each other.
GEE, maybe it's Predsident Bush's' fault ???? Can't blame Republicans; there aren’t any there!
State pension fund $44 Billion in debt, worst in country.
Cook County ( Chicago ) sales tax 9.0% highest in country. (Look 'em up if you want).
Chicago school system rated one of the worst in the country.
This is the political culture that Obama comes from in Illinois . And he's gonna 'fix' Washington politics for us! …
While our brainless Senators have been focusing on hedge funds and trying to determine whether they were a threat to national security a crook named Madoff skimmed about $50 billion from the pockets of very astute investors one of whom is a sitting Senator. Madoff took some twenty years to accomplish this fraud.
So much for government oversight. Guess we need to ship more money to the SEC along with some appointments for their staff with a competent DC eye doctor. Perthaps Obama will appoint a Fraud Czar! (See 2 below.)
Change is in the air but not in "The Windy City. The stench of Illinois' corrupt Governor continues to foul the air because the Democrats now fear an open election might result in a Republican winning the president elect's seat so they are back pedalling and are now more interested in impeaching one of their own and figuring out how they can get a Democrat sent to the Senate.
Illinois Democrats decided to wait til after the Holidays in hope they will get some divine guidance placed in their political stockings from Santa.(See 3 below.)
Phillip Jenkins is a Conservative who seems to have concerns Obama will become another Carter. (See 4 below.)
My early prediction that Caroline Kennedy would be the next Senator from New York may soon become a reality.
While many of our newspapers are financially dying, newspapers in Iraq are burgeoning. Their reporters are also enjoying a new found freedom even to the point of throwing their shoes at GW. The reporter who did so has GW to thank that he can do so because he would have been beheaded on the spot by Sadaam.
More importantly, lest anyone forget, GW was visiting Iraq in recognition of the fact that he will be handing his successor a war that is mostly won because GW defied his successor's advice and stayed the course while everyone cursed him. History will deservedly treat GW far better than the rude Iraq reporter who threw shoes at him,the Bush haters who applauded and the New York Times that devoted four pages to a despicable act against our nation's leader.
Let's hear it for Chicago? Now Obama has appointed the head of Chicago's Schools to head the nation's Education Department. Obama should shut it down and save the taxpayers a lot of money. That would really be change! (See 5 below.)
Dick
1) Falling Fortunes, Rising Hopes and the Price of Oil
By Peter Zeihan
Oil prices have now dipped — albeit only briefly — below US$40 a barrel, a precipitous plunge from their highs of more than US$147 a barrel in July. Just as high oil prices reworked the international economic order, low oil prices are now doing the same. Such a sudden onset of low prices impacts the international system just as severely as recent record highs.
But before we dive into the short-term (that is, up to 12 months) impact of the new price environment, we must state our position in the oil price debate. We have long been perplexed about the onward and upward movement of the oil markets from 2005 to 2008. Certainly, global demand was strong, but a variety of factors such as production figures and growing inventories of crude oil seemed to argue against ever-increasing prices. Some of our friends pointed to the complex world of derivatives and futures trading, which they said had created artificial demand. That may well have been true, but the bottom line is that, based on the fundamentals, the oil numbers did not make a great deal of sense.
Things have clarified a great deal of late. We are now facing an environment in which the United States, Europe and Japan are in recession, while China is, at the very least, expecting to see its growth slow greatly. Demand for crude the world over is sliding sharply even as the Organization of the Petroleum Exporting Countries (OPEC) member states so far seem unable (or, in the case of Saudi Arabia, perhaps unwilling) to make the necessary deep cuts in output that might halt the price slide. The bottom line is that, while the breathtaking speed at which prices have collapsed has caught us somewhat by surprise, the direction and the depth of the plunge has not.
Prices are likely to remain low for some time. Most of the world’s storage facilities — such as the U.S. Strategic Petroleum Reserve — are full to the brim, so large cuts are needed simply to prevent massive oversupply. Yet any OPEC production cuts — the cartel meets Dec. 17 and deep cuts are expected — will take months to have a demonstrable impact, especially in a recessionary environment. And there is the simple issue of scale. The global oil market is a beast: Total demand at present is about 86 million barrels per day. This is not a market that can turn on a dime. A firm fact that flies in the face of conventional wisdom is that oil actually falls far faster than it rises when the fundamentals are out of whack. This has happened on multiple occasions, and not that long ago.
Falls occurred both in the aftermath of the 1990-1991 Persian Gulf War and as a result of the 1997-1998 Asian financial crises that were similar in percentage terms to the present drop. Until the balance between supply and demand is restruck — something not likely until a global economic recovery is well under way — there is no reason to expect a significant price recovery. The journey, of course, is not necessarily a one-way trip. Quirks in everything from weather to shipping to Nigerian riots and Russian military movements can set prices gyrating, but the fundamentals are clearly bearish. It will most likely take several months for the core features of the new reality to change much at all.
Low oil prices create both winners and losers on the international scene. First, the winners’ list.
Far and away the biggest winner from drastically lower prices is the world’s largest consumer and importer of oil: the United States. The last two years of high prices have spawned a sustained American consumer effort to get by with less oil via a mix of conservation and a shift to better-mileage vehicles. Whether this purchase pattern in automobiles lasts is not at issue. The point is that it has already happened: Many Americans have already shifted to more fuel-efficient vehicles. Just as the 1990s obsession with sport utility vehicles artificially boosted American gasoline demand so long as those automobiles were on the road, so the new fleet of hybrids and smart cars will push demand in the opposite direction for a sustained period.
Overall U.S. oil consumption has plummeted by nearly 9 percent from its peak in August 2007 to November 2008, according to the U.S. Department of Energy. Combining this with the drop in prices since July translates into U.S. energy savings of approximately US$1.95 billion at a price of US$50 a barrel and US$2.1 billion at a price of US$40 a barrel. And that is daily cost savings. In recessionary times, that cash will go a long way to building confidence and stanching the recession.
Next on the list are the major European importers of crude: Germany, Italy and Spain. As a rule, European economies are less energy-intensive than the United States, but by dint of fuel mix and lack of domestic production these three major states are forced to rely on substantial amounts of imported oil. We exclude the other major European economies from this list as they are either major oil producers themselves (the United Kingdom and the Netherlands) or their economies are extremely oil efficient (France, Belgium and Sweden). Don’t get us wrong — the EU states are all quite pleased that oil prices have dialed back. Nevertheless, in terms of relative gain, Germany, Italy and Spain are the real winners. And with Europe facing a recession much deeper and likely longer than that in the United States, the Europeans need every advantage they can get.
India, far removed from Europe culturally and geographically, sports a somewhat similar economic structure in that it boasts (or suffers from, based on your perspective) an industrializing base that is highly dependent on oil imports. Broadly, the Indians are in the same basket as Spain in that they are voracious energy consumers who have seen their demand skyrocket in recent years. Between the Nov. 26 Mumbai attack, upcoming federal elections and the energy price pain from earlier in the year, the government is desperate to pass on the cost savings to the population to shore up its support.
Then there are the East Asian states of South Korea, China and Japan (listed in descending order of how much each one benefits from the price drop). All import massive amounts of crude oil, but we put them at the end of the list of winners because of their financial systems. In East Asia — and particularly in China and Japan — money is not allocated on the basis of rate of return or profitability as it is in the West. Instead, the concern is maximizing employment. It does not matter much in East Asia if one’s business plan is sound; the government will provide cheap loans so long one employs hordes of people. One side effect of this strategy is that firms can get loans for anything, including raw materials they otherwise could not afford — such as oil at US$147 a barrel.
Therefore, high oil prices just do not affect East Asia as badly as they affect the West. Just as the East Asian financial system mutes the impact of high prices, the converse is true as well. In the West, energy consumers are not shielded from high prices, so lower prices immediately translate into more purchasing power, and thus more economic activity. Not so in East Asia, where the same financial shielding that blunts the impact of high prices lessens the benefits of low prices.
The order in which we listed the three Asian giants relates to how much progress they have made in reforming their financial practices. South Korea’s financial system is much closer to the Western model than the Asian model: South Korea hurts more as prices rise, and so will be more relieved as prices fall. China is in the middle in terms of financial practices, but it is also attempting to unwind its system of energy price-fixing as oil costs drop; due to subsidies being reduced, Chinese consumers actually may not be seeing much of a change in retail prices. Finally, Japan will benefit the least because its system is already highly efficient compared to the other two, so the price impact was less in the first place. One barrel of oil consumed in Japan generates approximately US$2,610 of Japanese gross domestic product (GDP), while the comparative figures for Korea and China are US$1,270 and US$1,130 respectively.
In short, the heavily industrialized Asians still benefit, but the impact isn’t as much as one might think at first glance. In fact, the biggest benefit to these states from cheaper energy is indirect — lower prices spur consumption in the West, and then the West purchases more Asian products.
And now, the losers.
Venezuela and Iran top this list by far. Both are led by politicians who have lavished vast amounts of oil income on their populations to secure their respective political positions. But that public approval has come at its own price in terms of economic dislocation (why diversify the economy if strong oil prices bring in loads of cash?), low employment (the energy sector may be capital-intensive, but it certainly is not labor-intensive), and high inflation (high government spending has led to massive consumption and spurred rampant import of foreign goods to satiate that demand).
Of the two states, Venezuela is certainly in the worse position. By some estimates, Venezuela requires oil prices in the vicinity of US$120 a barrel to maintain the social spending to which its population has become accustomed. Iran’s number may be only somewhat lower, but President Mahmoud Ahmadinejad is in the process of at least beginning to bow to economic reality. On Dec. 5, he announced massive cuts in subsidy outlays with the intent of reforging the budget based on a price of only US$30 a barrel.
It is an open question whether the Iranian government — and especially the increasingly unpopular Ahmadinejad — can survive such cuts (if they are indeed made), but at least there is a public realization of the depth of the crisis at the top level of government. In Venezuela, by contrast, the mitigation process has barely begun, and for political reasons it cannot truly be implemented until after a referendum in early 2009 on term limits that could allow Chavez to run for president indefinitely.
Next is Nigeria. In terms of seeing an increase in human misery, Nigeria should probably be at the top of the losers’ list. But the harsh reality is that Nigerians are used to corrupt government, inadequate infrastructure, spotty power supply and all-around poor conditions. Some of the perks of high energy prices undoubtedly will disappear, but none of those perks succeeded in changing Nigeria in the first place.
The real impact on Nigeria will be that the government will have drastically less money available to grease the political wheels that allow it to keep competing regional and personal interests in check. Those funds have been particularly crucial for funneling cash to the country’s oil-rich Niger Delta region, giving local bosses reason not to hire and/or arm militant groups like the Movement for the Emancipation of the Niger Delta to attack oil and natural gas sites. With Abuja having less cash, the oil regions will see a surge in extortion, kidnapping and oil bunkering (i.e., theft). We already have seen attacks ramp up against the country’s natural gas industry: Within the last few days, attacks against supply points have forced operators to take the Bonny Island liquefied natural gas export facility offline. And since Nigeria’s militants never really differentiate between the country’s various forms of energy export, oil disruptions are probably just around the corner.
Russia is also in the crosshairs, but not nearly to the same degree as Venezuela, Iran and Nigeria. Russia has four things going for it that the others lack. First, it exports massive amounts of natural gas and metals, giving it additional income streams. (Venezuela and Iran actually import natural gas and have no real alternative to oil income.) Second, Russia never spent its money on its population. Thus, Russians have not become used to massive government support, so there will be no sharp cuts in public spending that will be missed by the populace. Third, Russia has saved nearly every nickel it made in the past eight years, giving it cash reserves worth some US$750 billion. The financial crisis is hitting Russia hard, so at least US$200 billion of that buffer already has been spent, but Russia still remains in a far better position than most oil exporters. Fourth and last, the Russians can rely on Deputy Prime Minister and Finance Minister Alexei Kudrin to (somewhat forcefully) keep the books firmly in balance. At his insistence, the government is in the process of refabricating its three-year budget on the basis of oil prices of below US$35 a barrel, down from the original estimate of US$95.
At the end of the losers’ list we have two states that most people would not think of: Mexico and Canada. Both have other sources of economic activity. Canada is a modern service-based economy with a heavy presence of many commodity industries, while Mexico has become a major manufacturing hub. But both are major oil exporters, and have been leading suppliers to the American economy for decades. So both are exposed, but their concerns are more about unforeseen complications rather than the “simple” quantitative impact of lower prices.
Mexico has purchased derivatives contracts that, in essence, insure the price of all its oil exports for 2009. So should prices remain low, Mexico’s actual income will be unchanged. We only include Mexico on the list of losers, therefore, because it’s quite rare in geopolitics that such planning actually works out as planned. Hurricanes and strikes happen. (Mexico also faces the problem of insufficient funds, expertise and technology to counter rapidly declining output, something that will leave it with a lack of oil to sell in the first place — but that is an issue more for 2012 than 2009.)
As for Canada, most of the oil it produces comes from Alberta province, the seat of power of the ruling Conservative Party. Right now, the Canadian government is wobbling like a slowing top. Seeing the Conservatives’ power base take a massive economic hit due to oil prices is not the sort of complication the government needs right now. In the longer term, Alberta recently increased taxes on oil sands projects. Oil sands extraction is among the more capital-intensive and technologically challenging sorts of oil production currently possible. Combine the tax changes with the nature of the subindustry and the recent price drops and there is likely to be precious little investment interest in oil during — at a minimum — 2009.
Most readers will take note of the countries we have chosen not to include on the list of vulnerable states. These include the bulk of the OPEC states — specifically Angola, Iraq, Kuwait, Saudi Arabia, the United Arab Emirates, Qatar and Libya. All of these states count oil as their only meaningful export (except the United Arab Emirates and Qatar, which also export natural gas), so why do we feel such countries are not in the danger zone?
For its part, Angola only became a major producer recently. Nearly all of Angolan oil output is from offshore projects controlled by foreigners — shutting in such production is a very tricky affair for a country that is utterly reliant on foreign technology to operate its only meaningful industry. But the primary reason Angola is not feeling the heat is that most of its income has not been spent but instead has been stashed away due to a lack of the necessary physical and personnel infrastructure needed to leverage the income.
Iraq is in a somewhat similar position as far as finances are concerned. While Iraq has been producing crude for decades, its current government is only a few years old, and its institutions simply cannot allocate the monies involved. Despite massive outlays by both Iraq and Angola, their respective governments simply lack the capacity to spend, and so have stored up cash accounts worth US$26 billion and US$54 billion respectively.
The rest of the Arab oil producers warrant a much simpler explanation: They’ve been fiscally conservative. While all have shared the wealth with their somewhat restive populations, none of them has repeated the mistakes of the 1970s, when they overspent on gaudy buildings and overcommitted themselves to expensive social programs. All have been saving vast amounts of cash, with the Saudis alone probably having more than US$1 trillion socked away. Tiny Kuwait officially has a wealth fund worth more than US$250 billion.
So while none of the Arab oil states are particularly thrilled with the direction — and in particular the speed — oil prices have gone, none of these governments faces a mortal danger at this time. What they are now missing is the ability to make a substantial impact on the world around them. At oil’s height the Gulf Arab oil producers were taking in US$2 billion a day in revenues — far more cash than they could ever hope to metabolize themselves. Bribes are powerful tools of foreign policy, and their income allowed them — particularly Saudi Arabia — to wield outsized influence in Iraq, Syria, Lebanon, and even in Beijing, London and Washington. So while none of these states faces a meltdown from falling prices, there are certainly some hangovers in store for them. It is just that they are more political than economic in nature, at least for now.
2) Madoff and the Global Economy
By Michael Mandel
The world was told the U.S. was a low-risk, high-return investment. But like the Wall Street trader's victims, we are learning the truth
For years, Bernie Madoff, all-around nice guy, pulled billions of dollars of foreign and domestic money into his investment fund. His lure? He promised the implausible combination of good returns and low risk—and people believed him.
Painfully, the allegations of fraud surrounding the Madoff affair are also exposing the fundamental fallacy of the global economy. Like Madoff's trusting investors, the rest of the world was willing to assume that the U.S. economy as a whole was a low-risk, good-return investment. This belief drove the entire structure of global trade and finance for the past 10 years. And when the subprime crisis showed this assumption of low risk to be false, the financial crisis resulted.
Consider this: Since the Asian financial crisis of 1997-98, the rest of the world has been willing to lend money to finance the U.S.'s huge and growing trade deficit. Not just small amounts of cash either: over the past decade, the U.S. borrowed a cumulative total of $5 trillion from foreigners at relatively low interest rates.
Why were foreigners so generous?
Without this flow of easy money into the U.S., globalization in its current form would not have been possible. The U.S. was the consumer of last resort, absorbing cars from Germany and Japan, electronics from Taiwan and Korea, and clothes and furniture from China. The earth was flat, and why not? Pluck a laptop from Taiwan and pay for it with a home equity loan, which—if you trace back the connections—was at least partly funded with foreign money, too.
The big unanswered question, for years, was why this money flow persisted. Why the heck were foreign investors willing to lend the U.S. such large amounts of money on such good terms? Economists and journalists spun out hypothesis after hypothesis (we'll see more below), but there was no agreement on why.
Now we see what happened. Wall Street firms—big operators like Lehman and relatively small fish like Madoff—told foreign investors they could put their money into the U.S.—the world's safest economy—and still make decent returns. Madoff, of course, appears to have lied. He allegedly ran an investment scam that has resulted in billions of dollars of losses reported around the world, including $4 billion in Switzerland and $3 billion in Spain.
Exporting 'low risk' Derivatives
But it wasn't simply Madoff. The Wall Street boom of recent years was built, as far as I can figure out, on selling the low-risk story to foreign investors. In fact, most of the financial innovations of recent years were about making investments in the U.S. 'safer' for foreign investors. The enormous growth of foreign exchange derivatives enabled those abroad to protect their U.S. investments from exchange-rate fluctuations. The sudden increase in credit default swaps could be used to protect foreign bond investors from problems with individual countries. And collateralized debt obligations, which could be divided into high-risk and low-risk pieces, increased the supply of low-risk investments to be sold outside the U.S.
This low-risk, good-return story attracted investors from around the world. One example: Lehman sold $2 billion in 'mini-bonds' to Hong Kong investors, including many retirees.
However, the low-risk, good-return story simply wasn't true, for two key reasons: First, the U.S. economy was supposed to be on the cutting edge of innovation. Innovation through technological change, by nature, is a very risky activity. Sometimes it pays off and sometimes it doesn't. If the investment in innovation pays off, the economy booms, as it did during the second half of the 1990s.
U.S. Regulation Failed
But innovation has fallen short in recent years. Biotech and nanotech still have not come to fruition, and alternative energy is moving slowly. As a result, the U.S. economy has fallen short of expectations. The income isn't there, and the debt just piles up.
The second reason why the low-risk, good-return story wasn't true: the breakdown of regulation. And that's where we come back to the alleged Madoff scam. His was no complicated global securitization, based on black-box rocket science. Instead, it appears to be a good old-fashioned Ponzi scheme, enabled by a lack of government supervision.
What comes next? The fallacy is punctured. Globalization will be seen as what it is—a game with risks that can't be wished away. And U.S. prosperity will depend on the success or failure of its ability to innovate—not its ability to tell an implausible story to foreign investors.
3) The Chicago Rules:Obama’s Illinois past is not gone. It’s not even past.
By John Heilemann
The turd tossed by Illinois governor Rod Blagojevich into Barack Obama’s punch bowl had been floating there for 48 hours when the president-elect stepped to the podium at his press conference last Thursday morning. Obama’s initial response to the astonishing—and comical, and nauseating, and DSM-worthy-crazy—corruption case had seemed wan, perfunctory. His call for Blago’s resignation had been issued through a spokesman. But Obama’s handling of the matter at the press conference was more sure-footed. Beyond the substance of what he said, his tone and bearing were pretty much pitch-perfect: saddened, disgusted, denunciatory, not the least defensive. And his oblique reference to being called a “motherfucker” by Blagojevich (“I won’t quote back some of the things that were said about me … this is a family program, I know”) earned him extra points for humor.
Yet one of the concrete takeaways from the Q&A was that the Obamans won’t be moving past Blagogate in anything like a heartbeat. Though Obama reiterated his claim that he never talked to the governor about the filling of his former Senate seat, he was careful not to say that no one on his team had done the same. He pledged to “gather all the facts about any staff contacts that may have taken place” between transition officials and Blago or his people and present them in the days ahead.
Assuming Obama follows through, this is a commendable first step toward the new transparency he’s promised. And certainly it would mark a departure from the way that George W. Bush and Bill Clinton handled similar situations. But it guarantees at least one more round of stories about the incoming administration’s connection to the Blagobroglio—and, depending on the nature of the contacts and who engaged in them, maybe more than that. Lawyers. Depositions. Testimony. The endless braying and conspiracy-theorizing of the right-wing freak show. For Obama, one question is whether all this will be damaging or merely distracting. And another is whether Blago’s will be the last grasping, clawlike hand to reach up from the Illinois swamp and try to seize Obama by the ankles.
For all the coverage of Obama’s rise, his political gestation in that swamp remains one of the least understood aspects of his history. Ryan Lizza’s long piece in The New Yorker this past summer on the subject was superb, but much of its force lay in the fact that the ground he covered was so untilled. Beyond that, there was abundant (though largely unenlightening) coverage of Obama’s relationship to Tony Rezko—and not much else that managed to break through the clutter. I’d wager that, before last week, no more than a handful of national reporters could have told you if Obama and Blagojevich were friends, foes, or something in between.
When Obama was asked at his press conference, “What’s wrong with politics in Illinois?” by a gobsmacked Chicago reporter, he outlined two competing traditions in the Land of Lincoln: “There’s a view of politics that says you go into this for sacrifice and public service, and then there’s a view of politics that says this is a business, and you’re wheeling and dealing, and ‘What’s in it for me?’ ” he said.
Obama’s delineation is too neat, too binary; countless pols, especially in the milieus of Chicago and Springfield, straddle the line, embracing both views to one degree or another, albeit implicitly. More to the point, even among those in Illinois who cast themselves as members of the Democratic Party’s reform wing, the salient question is their orientation toward those flapping on the other side of the bird: Do they accommodate (or cozy up to) the machine or crusade against it?
Nobody doubts that Obama was with the reformers in Illinois, both in terms of the legislation he helped pass in the State Senate (including on campaign finance and ethics) and in his philosophical orientation. But Obama was hardly some sort of anti-Establishment firebrand. He is close to the Daleys—Mayor Richard and brother Bill—and Emil Jones, a longtime leader in the State Senate. He assisted Blagojevich in getting elected in 2002, and though they have been estranged for some years, he supported Blago for reelection and refused to condemn him (or Mayor Daley) when they became ensnared in corruption contretemps, a fact that left some reform-minded supporters “feeling alienated and angry,” according to Lizza. And, of course, there was his alliance and friendship with Rezko.
In all of this, Obama calls to mind Bill Clinton. Aside from the wack-job caucus, few regarded Clinton’s lengthy tenure in the Arkansas statehouse as egregiously corrupt. But neither would any history of great reformist governors feature him prominently, if at all. Some of his close friends from Little Rock would wind up in prison: Susan McDougal, Webb Hubbell. And Clinton’s various entanglements in the Razorback State’s quasi-feudal political and business cultures came back to haunt him during his time in office, most glaringly in the case of Whitewater.
That Whitewater was a trumped-up tin-pot scandal in which WJC was never proved to have done anything illegal is beside the point—or, more accurately, is precisely the point. The investigations Whitewater spawned were more intrusive than a thousand colonoscopies. They consumed countless news cycles, drained away political capital, inflicted horrendous legal bills on dozens of innocent bystanders, and energized the Republicans and their allies on the fringes of society and in the mainstream media. And for what? For nada.
Could Blagogate do something similar to Obama? Already one “prominent Chicago Democrat” is telling Politico that the mess poses the risk of “Whitewater-type exposure” to the president-elect. “What will splatter on to Obama is he is to some degree a product of this culture, and he has never entirely stood against it,” said this person.
It’s obviously pertinent here that no one is accusing Obama himself of any sort of wrongdoing—quite the contrary. (Equally so that Patrick Fitzgerald is no Ken Starr.) And if it turns out that Team Obama’s hands are clean, the political danger for the incoming administration will be significantly reduced. But even then, it’s safe to assume that any transitionite who spoke to Blago or his chief of staff, no matter how innocently or appropriately, will have to lawyer up in preparation for the forthcoming trial. The GOP is already seizing the opportunity to hammer Obama; they are likely to cling to the slimmest reed in an effort to keep the story alive.
At the press conference, Obama said that all he could do was “shake my head” after reading the Blago transcripts. One can only imagine his incredulity at the circus now unfolding around the case and what it might mean for him. Every politician arises in a context, which shapes him and affects his future in ways he can only barely comprehend. There are no shining cities (or states) on a hill in local American politics. Some are nastier, sleazier, and uglier than others, but none are what you’d properly call pretty. Winning the presidency promises, among other things, an escape from all of that. But few presidents in recent memory have been able to avoid a Michael Corleone moment: “Just when I thought I was out, they pull me back in.” This is the first such moment for Obama. For his sake, and, Heaven help us, for ours too, let’s hope it’s his last.
4) The Spirit of ’76: Welcome back, Carter
By Philip Jenkins
Historical analogies have been much in vogue since this election. Are we living at the end of 1932, preparing to face the glories and disasters of a revived New Deal? Or are we in a mirror-image 1980, the beginning of an era of liberal dominance, with a massive party realignment that might not even reach full fruition for another decade or so? These questions matter, not just because such debates give employment to academic historians. Deciding which year offers the closest parallel to the present forces conservatives to think how they will adjust to the new order. Just how radically have public attitudes shifted?
Actually, the year that offers the closest historical parallels to the present might be neither 1932 nor 1980 but 1976, and that analogy helps us understand the directions in which the country will be moving. Both in government and opposition, people might want to hold off on planning for the next New Deal, still less for a coming generation of liberal hegemony. In three or four years, the main political fact in this country could well be a ruinous crisis of Democratic liberalism.
Why 1976? That was the year Jimmy Carter defeated Gerald Ford for the presidency by a slim but convincing margin: Ford won 48 percent of the popular vote, a little more than John McCain’s 46 percent. Democrats did significantly better in the House in 1976 than they did last month. They held a two-to-one majority of seats, and they retained a supermajority of 61 in the Senate. Broadly, however, the 1976 results look similar to 2008.
The mood of the country in 1976 also parallels our present situation, with a pervasive sense of disgust at politics as usual and widespread fears of national decline. As if the end of the Vietnam War and the Watergate fiasco were not catastrophic enough, foreign-policy disasters in Africa and Asia suggested that the U.S. was losing its hegemony. The oil crisis pointed to a vast transfer of wealth and power to the Middle East, while many pundits predicted environmental catastrophe. The sharp economic downturn resulted in heavy unemployment and rising inflation. A concatenation of scandals tarnished once-trusted institutions: corporations, the military, intelligence agencies, police, and, of course, the politicians.
So disaffected was bicentennial America that it sought leaders unconnected to the establishment. In Jimmy Carter, voters found a candidate whose main qualifications were his lack of experience and connections within the Beltway or corporate worlds. Like Barack Obama, Carter claimed to rise above failed partisanship, while his New South background allowed him to symbolize racial healing. Carter, like Obama, sold himself mainly on the virtues of his character. He presented himself as a man of simple honesty, faith, and decency, and his lack of a track record allowed voters to see in him what they wanted, however far-fetched those hopes might be. If they hadn’t believed it, they wouldn’t have seen it with their own eyes. Above all, Carter promised change, a message that carried weight as long as its details remained nonspecific. The problem with messiahs from nowhere is that when they do exercise power, people discover to their horror what their leader’s actual views and talents are. The disillusion can be dreadful.
The rhetoric and psychology of the Democratic Party in 1976 also foreshadows the present day. And as they did in 1976, Democrats now show every sign of repeating the blunders that led to a generation-long discrediting of liberalism. As the phrase goes, they have learned nothing in the intervening years, and they have forgotten nothing. And they will soon face a barrage of issues that they have neither the will nor competence to understand. Liberal triumph in 1976 led inexorably to evisceration in 1980. The same trajectory is likely to recur in the Obama years.
The key mistake Democrats made in 1976 was failing to realize what brought them to power. Democrats won because of public dissatisfaction with the previous regime, which had overseen the economic crisis, and also because of a wider fear that America would have to live with diminished expectations. But although they won on largely economic grounds, Democrats acted as if they had a sweeping mandate for cultural transformation—for social libertarianism, affirmative action and egalitarianism, dovish internationalism, and idealistic notions of human rights. These ideas dominated a radical Congress and were enthusiastically adopted by the cohort of Carter appointments to the judiciary. They all ignored a basic principle: just because people are unhappy where they are does not mean they are willing to go anywhere you try to lead them.
In 1976, liberals were wrong on multiple counts, and all the signs point to them repeating the same mistakes. Even if Obama plays Mr. Moderate, the congressional party contains more than enough take-no-prisoners far leftists to torpedo any chance of bipartisanship or restraint. Specifically, liberals believe that the public will support radical change in three highly sensitive areas, and in each area they will overreach to the point of self-destruction. In domestic affairs, they believe the culture wars are over and that revolutionary social changes like gay marriage can now advance unchecked. They think that popular concern over environmental problems will translate into a blank check for limitless government spending and the decisive transfer of U.S. sovereignty to international agencies. And liberals are now sure that all that foolishness with international dangers and crises is firmly behind us so that we no longer need the military or intelligence capabilities developed to respond to them. As the coming three or four years will show, they are dreadfully wrong on all counts.
In the 1970s, liberal hubris manifested itself especially in domestic politics. Democrats focused obsessively on race and class, to the exclusion of culture, morals, and religion. Reading the situation in those terms allowed liberals an easy framework for explaining opposition to their policies, which must be based on overt or disguised forms of racism (and that was before they had a President Obama). If every social problem boiled down to matters of economic and racial justice, then there could be no legitimate grounds for concerns that presented themselves as cultural or religious.
That severely blinkered view goes a very long way to explaining the collapse of liberalism in 1979-80. America in the 1970s was undergoing traumatic social and moral changes, which caused widespread unhappiness and fear. Many social conservatives were alarmed that governments were using children as tools in social experimentation, an issue made most explicit in school busing. Popular opposition focused on the defense of community and local autonomy but above all on child safety. Once again, though, liberals had no valid answer to these fears, as any questioning of public education must of necessity be a disguised form of vulgar prejudice. Their response was predictable: Damn the racists, full speed ahead.
Across the board, the critical pressure points in the social politics of the 1970s involved children and young people. For the ’60s generation, progress demanded removing restraints on the actions of consenting adults, whether this involved sexual experimentation, gay rights, drug use, or participation in weird and wonderful fringe religions. Who was to say that individuals should not be allowed to go to hell in their chosen way? That principle worked splendidly, unless and until people began to reflect on the effects on children. Yes, an adult could consent to engage in bizarre or self-destructive behavior, but that libertarian approach did not and could not extend to the young. Time and again, Americans have shown themselves liberal on social issues that are framed in terms of “live and let live.” They draw the line when the behavior in question appears to threaten youth. Hence the most successful conservative campaigns on domestic issues of the late 1970s focused strictly on child protection, and those movements coalesced into a general concern about defending and restoring American culture.
From 1977—the pivotal year of the social-conservative revival—liberals suffered reversal after reversal, on issues of drug abuse, pornography, and gay rights. In every case, child protection gave the key to victory. Carter administration plans to decriminalize drugs foundered on the opposition of a burgeoning parents’ movement. Popular fears of threats to children defeated referenda on gay rights. Near universal nausea about the availability of child porn provoked the first serious questioning of ever expanding sexual frankness. Fears about threats against children merged easily with concerns about threats by children. The astonishing rise of violent youth crime, which reached its Himalayan peak between 1979 and 1981, was read as a symptom of a feral generation that had not been subject to appropriate family restraints or care. By the end of the 1970s, these various child-related themes drove a triumphant social conservative coalition, which included those newly galvanized religious voters mobilized in the Moral Majority.
America today has changed enormously since 1978, but many of those older issues survive in latent form and should resurface shortly. Questions of youth protection will transform the gay-marriage debate, which for most media observers has been framed in terms of social justice and equality. Presumably by judicial fiat, the practice will extend to many more states in the coming years and quite conceivably to all 50 states. This in itself will not be a popular move: recall the recent California referendum, which was decided by the blacks and Latinos who turned out to support Obama but who favored traditional family models.
How will attitudes to gay marriage evolve when people contemplate the proper age of consent in such unions? Assuming the age is to be the same as in heterosexual marriages, then adolescents of 18 will marry freely, and in many states parental consent will grant that right to boys of 16 or so. Are Americans ready to see blushing teenage male brides? And if boys of that age can marry, demands to reduce the age of sexual consent for all youngsters will certainly follow.
The more strenuously liberals press for gay equality in matters involving youth, in marriage and adoption, the more they will generate a child-protection reaction, even among people who consider themselves socially liberal, and the more likely this reaction is to take religious forms. Following the recent California referendum, Mormons bore the brunt of liberal fury, and Catholics and other religious groups will face legal challenges for refusing to participate in gay adoptions and marriages. Other areas like abortion, contraception, and transgender surgery promise to generate many confrontations between religious believers and the current sexual revolution, and religious sensibilities can expect no sympathy from government, courts, or media. The resulting battles should re-energize a religious constituency that is currently disoriented and disillusioned. Anyone for Moral Majority II: The Sequel?
As in the 1970s, the problem of out-of-control youth could very soon be back on the political agenda. Although youth crime hasn’t been on the national radar since the crack boom of the early 1990s, demographic trends confidently predict a rising storm that should break within two years or so. The crime surge of the 1970s was in large part the consequence of the baby boom reaching its most crime-prone years, as the huge cohort of those born around 1960 hit their late teens. Something very similar is about to happen again. The number of babies born in the U.S. in 1990 was only slightly smaller than the 1960 generation, and by 2010 we could be entering an alarming era of violent crime, manifested in soaring rates for homicide and robbery. Factor in the economic crisis, and American cities could look as frightening and dangerous as they did at the time of New York City’s 1977 blackout, with its rioting and looting.
Making the situation still worse, the massive expansion of union membership for which many Democrats clamor will add mightily to the plethora of urban problems. Imagine cities devastated by youth crime and gang wars, while emergency workers, hospitals, buses, and garbage services are regularly on strike. If you think Americans were alienated from government in 2008, come back in two years. Liberals will try to interpret the coming crisis in terms of race and class, a problem to be solved by unlimited social spending. Conservatives had better be ready to respond with ideas of individual and family responsibility and the defense of social order.
In other ways, too, liberals utterly misread public sentiment and will build their policy upon those delusions. Americans have shown themselves open to green rhetoric and feel that policies to protect the environment are generally a good thing. Few conservatives would criticize any move in the direction of energy independence, which would be a wonderful first step toward extracting the nation from Middle Eastern quagmires. But of course, that is not what we are going to get. We will instead be facing a determined and fanatical campaign to eliminate the vastly exaggerated menace of global warming, which will mean a wholesale assault on America’s energy supplies. This will translate into striking at coal- and oil-based energy while refusing to make progress toward reliance on nuclear resources, all the while seeking to curb carbon usage through onerous taxes and surcharges. Remember those Americans infuriated by strikes and intimidated by crime? They are also going to be freezing, living with rationed energy and brownouts. A grossly underpowered economy will find it all but impossible to reconstruct and revive when the coming depression ends.
As if all this isn’t bad enough, expect global-warming rhetoric to be used as a wedge to undermine national sovereignty. Under Obama, we face the virtual certainty of American accession to new treaties that go far beyond Kyoto in demanding radical cutbacks in carbon usage. The U.S. will presumably stand out as the only power attempting to enforce these standards, which would institutionalize the nation’s relative decline in the face of Chinese and Indian growth. The moral and political issue of sovereignty will thus be linked to the practical daily realities of the energy crisis at home.
And then there is national security. Democrats observe, quite rightly, that Americans are uncomfortable with images of Guantanamo and waterboarding, and they are profoundly unhappy with open-ended military commitments in Iraq and Afghanistan. But here, too, liberals will overreach when they interpret these moral qualms as a basis for winding up American military and intelligence capabilities.
However dreadful the Carter administration may have been, however widespread the domestic discontent, what actually finished off the Democrats and opened the door for Ronald Reagan was the Iran hostage crisis. And that was a direct and predictable consequence of overreach by the administration and Congress. Since 1976, congressional liberals had led a series of campaigns against the intelligence services, exposing supposed abuses and atrocities, and in the process discrediting the whole work of intelligence. By 1977, massive purges had removed many of the CIA’s best agents, while congressional restrictions made it all but impossible for the agency to pursue its work. In the Middle East and elsewhere, America was flying blind.
Underlying these bizarre actions was a theory of human rights that assumed the whole world could and should operate according to Western theories of democratic liberalism. Unfortunately, it didn’t. In Iran, the shah was an unsavory dictator with a heavy-handed secret police, but he exercised his powers to pursue a pro-American policy. Under the Carter regime, the U.S. ended its support of the shah, while ceasing to pay off the truly dangerous radical Islamists who would eventually replace him. American efforts at self-immolation succeeded in 1979, with the Islamic Revolution and the hostage crisis that destroyed the Carter administration.
Surely congressional liberals are not stupid enough to do anything like that again? Don’t believe it. By the end of 2009, expect a purge of U.S. intelligence agencies, as well as suffocating new constraints on intelligence-gathering capacities. These moves will probably be accompanied by a series of congressional hearings, which will provide maximum opportunities for showboating by politicos, while embarrassing the CIA. A blinded and disarmed Obama administration will then blunder anew into confrontations that will once again plumb the depths of national humiliation—if not in Iran, then in Taiwan, Ukraine, Venezuela, or Pakistan. If we’re very unlucky, airliners will again be crashing into our skyscrapers and cargo ships will be exploding in our ports. And as in the late 1970s, there will be plenty of discharged and disaffected former intelligence agents wandering the corridors of power, serving as endless sources of leaks and disinformation against the Obama regime. Expect the worst age of political scandal since, well, the 1970s.
All analogies limp, and no one is suggesting a straight replay of the Carter years, still less that some kind of new Reagan era is its inevitable sequel. But if liberals seem so determined to repeat the mistakes of that era, then we have at least a plausible sketch of the coming Obama administration—of its rise and ruin.
5) Perhaps the U.S. should "pull out of Chicago" ?
Body count: In the last six months 292 killed (murdered) in Chicago ; 221 killed in Iraq .
Senators. Barack Obama & Dick Durbin, Rep. Jesse Jackson Jr., Illinois Gov. Rod Blogojevich, Illinois House leader Mike Madigan, Illinois Atty. Gen. Lisa Madigan (daughter of Mike), Chicago Mayor Richard M. Daley (son of Mayor Richard J. Daley)
.....our leadership in Illinois .....all Democrats.
Thank you for the combat zone in Chicago .
Of course, they're all blaming each other.
GEE, maybe it's Predsident Bush's' fault ???? Can't blame Republicans; there aren’t any there!
State pension fund $44 Billion in debt, worst in country.
Cook County ( Chicago ) sales tax 9.0% highest in country. (Look 'em up if you want).
Chicago school system rated one of the worst in the country.
This is the political culture that Obama comes from in Illinois . And he's gonna 'fix' Washington politics for us! …
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