Not In Kansas Anymore, Dot

PoliticFact Sells Out

2012-01-07T15:47:00.001-08:00

In 2009, PolitiFact awarded its annual Lie of the Year distinction to the claim that the Affordable Care Act included death panels. In 2010, Lie of the Year went to Republicans for saying the Affordable Care Act was a "government takeover of health care." This year, Democrats got the distinction for saying that Paul Ryan’s budget would "end Medicare." Paul Ryan actually campaigned to get PolitiFact to name "end Medicare" their Lie of the Year. Guess what? PolitiFact caved in. And yet Ryan is one of the prime offenders behind the 2010 Lie of the Year -- that the Affordable Care Act was a "government takeover" of the health-care system.Some real fact checking is order: Medicare is currently a public, single-payer, defined-benefit health-care system. Ryan’s budget would turn it into a defined-contribution system relying on private insurers. Sure, it would still be called Medicare, and it would still offer some amount of health-care coverage to seniors over age 65. The resemblance is superficial.I’m not really interested in debating whether this actually ends Medicare, or merely ends Medicare as we currently know it. I would say the Ryan budget contained one of the year’s major lies: Its savings relied on either capping Medicare’s rate of cost growth at inflation -- which every serious health-care policy expert will tell you is completely impossible. Its savings were thus illusory. Whether the Ryan budget ends Medicare, it doesn’t end the deficit.The meta-point here is that we’re seeing, in real time, why the "fact checker" model is probably unsustainable. A few weeks ago, the conservative Weekly Standard published a cover story called "Lies, Damned Lies, and ‘Fact Checking’". Subhead: "The liberal media’s latest attempt to control the discourse." Over at Big Government, John Nolte put it more bluntly: "MSM fact-checkers are an absolute cancer on our political process, a cynical and partisan conceit created by the left-wing media that allows them to arbitrarily judge what is and is not the truth, all in an effort to bring down Republicans and boost Democrats."Steve Benen, Paul Krugman, and others speculate that PolitiFact’s decision to choose a claim associated with Democrats as ‘Lie of the Year’ was a tacit answer to these attacks. ‘See? We’re not liberal! We’re defending Paul Ryan!’ If they had chosen one of their other Lie of the Year contenders -- for instance, the claim that the stimulus created "zero" jobs -- they might have lost the right forever.And that, ultimately, is the problem with the fact checker model. They have no actual power, so their only influence comes from the public’s sense of their legitimacy. And about half of the public leans towards one party and about half of the public leans toward the other. That means PolitiFact and these other outlets need to find some uneasy balance between the parties, too. But that just means the parties will have plenty of opportunities to decide that these are hackish, partisan operations. Conservatives got there a few weeks ago, and now liberals are following.The likely result is that these outlets will be listened to when one side or the other finds it convenient and ignored otherwise. Rather than policing the political discourse, they’ll just become one more bludgeon within it. Much as politicians have figured out how to game the he-said, she-said conventions of news reporting, they’re figuring out how to game the fact checkers. And so the umpires become unwitting players in the very game they’re trying to referee.http://www.washingtonpost.com/blogs/ezra-klein/post/the-problem-for-the-fact-checkers/2011/08/25/gIQAMXxi7O_blog.html... "The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

2012 will only rearrange the deck chairs

2011-12-29T09:37:00.000-08:00

The boat will still be sinking, just a bid more rapidly I suspect. Case in point, consider the global devastation of the northern pine forests:

Trees are effectively the greatest CO2 warehouses ever created. For every metric ton of wood grown, 1.5 metric tons of CO2 is absorbed and one metric ton of oxygen is released.

...instability has reverberated on every forested continent as elevated temperatures in the past 40 years of just over 0.5 degrees Celsius on average are killing mature trees by the billions. In B.C., the mountain pine beetles have killed half the commercial forests in the last 15 years. Instead of absorbing CO2, these massive graveyards of dead trees are releasing 250 million metric tons of CO2 into the atmosphere...

It doesn't even begin to end there; the spruce beetles in the far north of the province into Yukon and Alaska have taken full advantage of warming temperatures by speeding up their life cycles, which formerly took two years and now occurs within one year.

In Kluane National Park and Reserve, Yukon spruce beetles have accomplished something never recorded in modern or past times. Since the cold ecological constraint has been removed, spruce beetles have killed over 350,000 hectares of white spruce. Before this, the largest spruce attack was a modest 247 hectares in 1977.

The long-lived, thrifty high elevation forests of white bark and limber pines of B.C. have also been decimated by mountain pine beetles because, again, the cold-temperature barrier precluding attacks is no longer in situ. Mortality in parts of northern B.C. ranges from 72 per cent to 80 per cent.
These forests are crucial habitat for grizzly and black bears, and of paramount importance to retain winter snow-fall, slowly release spring melt back into the water cycle and replenish the Pacific Ocean, its salmon, eagles, wolves, bears and orcas.

Death rates of white bark and limber pines across the western United States are as high as 90 per cent.
The sentinels of the high country have become the tsunami sirens of global warming, showing ecologist, climatologist and physiologists that a warming world is irrevocably altering the landscape across the entire mountainous region of western North America.

http://www.vancouversun.com/technology/Bark+beetles+climate+change+future/5922634/story.html

... "The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

The age of asymmetric polarization

2011-11-27T05:31:00.000-08:00

When politicians and their supporters believe the other side is pursuing policies that would destroy all they cherish, compromise becomes not a desirable expedient but "almost treasonous," to use the phrase tossed about by Gov. Rick Perry of Texas.

Under these circumstances, taking enormous risks with the country's well-being, as House Republicans did in the debt-ceiling rumble, is no longer out of bounds. It's a form of patriotism. When your adversaries' ideas are so dastardly, it's better to court chaos, win the fight, and pick up the pieces later.

And to make matters worse — and more confusing — the two sides are not equally distant from the political center. We are in an age of asymmetric polarization.

Precisely because they believe in both the government and the marketplace, Democrats are always more ready to compromise. Obama's economic address in September was seen as tough and firm because he finally called Republicans in Congress out. Progressives liked the new fortitude, and also the relatively large sums of money Obama would mobilize to jolt the economy back to vibrancy.

But there was nothing remotely radical (or even particularly liberal) about Obama's ideas: tax cuts, many of them business-friendly, and new spending for such exotic projects as, well, schools and roads. As the president said, his proposals had all drawn Republican support in the past.

He was, however, talking about a Republican Party that existed before it was taken over by a new sensibility linking radical individualism with a loathing for government that would shock Hamilton, Clay, Lincoln and, for goodness' sake, Robert Taft.

http://seattletimes.nwsource.com/html/opinion/2016161772_dionne12.html

... my bumper sticker: Pod People Have Stolen My Party. ... "The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

As California Goes (Bust), so Goes the Nation

2011-10-11T08:16:00.000-07:00

vanityfair.com
California and Bust
by Michael Lewis Photograph by Art Streiber Read Later

On August 5, 2011, moments after the U.S. government watched a rating agency lower its credit rating for the first time in American history, the market for U.S. Treasury bonds soared. Four days later, the interest rates paid by the U.S. government on its new 10-year bonds were plummeting on their way to record lows. The price of gold rose right alongside the price of U.S. Treasury bonds, but the prices of virtually all stocks and other bonds in rich Western countries went into a free fall. The net effect of a major U.S. rating agency’s saying that the U.S. government was less likely than before to repay its debts was to lower the cost of borrowing for the U.S. government and to raise it for everyone else. This told you a lot of what you needed to know about the ability of the U.S. government to live beyond its means: it had, for the moment, a blank check. The shakier the United States government appeared, up to some faraway point, the more cheaply it would be able to borrow. It wasn’t exposed yet to the same vicious cycle that threatened the financial life of European countries: a moment of doubt leads to higher borrowing costs, which leads to greater doubt and even higher borrowing costs, and so on until you become Greece. The fear that the United States might actually not pay back the money it had borrowed was still unreal.

On December 14, 2010, the television news program 60 Minutes aired a 14-minute piece about U.S. state and local finances. Correspondent Steve Kroft interviewed a private Wall Street analyst named Meredith Whitney, who, back in 2007, had gone from being obscure to famous when she correctly suggested that Citigroup’s losses in U.S. subprime bonds were far bigger than anyone imagined, and predicted the bank would be forced to cut its dividend. The 60 Minutes segment noted that U.S. state and local governments faced a collective annual deficit of roughly half a trillion dollars, adding that another trillion-dollar gap existed between what the governments owed retired workers and the money they had on hand to pay them. Whitney pointed out that even these numbers were unreliable, and probably optimistic, as the states did a poor job of providing information about their finances to the public. New Jersey governor Chris Christie concurred with her and added, “At this point, if it’s worse, what’s the difference?” The bill owed by American states to retired American workers was so large that it couldn’t be paid, whatever the amount. At the end of the piece, Kroft asked Whitney what she thought about the ability and willingness of the American states to repay their debts. She didn’t see a real risk that the states would default, because the states had the ability to push their problems down to counties and cities. But at these lower levels of government, where American life was lived, she thought there would be serious problems. “You could see 50 to a hundred sizable defaults, [maybe] more,” she said. A minute later Kroft returned to her to ask when people should start worrying about a crisis in local finances. “It’ll be something to worry about within the next 12 months,” she said.

That prophecy turned out to be self-fulfilling: people started worrying about U.S. municipal finance the minute the words were out of her mouth. The next day the municipal-bond market tanked. It kept falling right through the next month. It fell so far, and her prediction received so much attention, that money managers who had put clients into municipal bonds felt compelled to hire more people to analyze states and cities, to prove her wrong. (One of them called it “the Meredith Whitney Municipal Bond Analyst Full Employment Act.”) Inside the financial world a new literature was born, devoted to persuading readers that Meredith Whitney didn’t know what she was talking about. She was vulnerable to the charge: up until the moment she appeared on 60 Minutes she had, so far as anyone knew, no experience at all of U.S. municipal finance. Many of the articles attacking her accused her of making a very specific forecast—as many as a hundred defaults within a year!—that failed to materialize. (Sample Bloomberg News headline: meredith whitney loses credibility as muni defaults fall 60%.) The whirlwind thrown up by the brief market panic sucked in everyone who was anywhere near municipal finance. The nonpartisan, dispassionate, sober-minded Center on Budget and Policy Priorities, in Washington, D.C., even released a statement saying that there was a “mistaken impression that drastic and immediate measures are needed to avoid an imminent fiscal meltdown.” This was treated in news accounts as a response to Meredith Whitney, as she was the only one in sight who could be accused of having made such a prediction.

But that’s not at all what she had said: her words were being misrepresented so that her message might be more easily attacked. “She was referring to the complacency of the ratings agencies and investment advisers who say there is nothing to worry about,” said a person at 60 Minutes who reviewed the transcripts of the interview for me, to make sure I had heard what I thought I had heard. “She says there is something to worry about, and it will be apparent to everyone in the next 12 months.”

Whatever else she had done, Meredith Whitney had found the pressure point in American finance: the fear that American cities would not pay back the money they had borrowed. The market for municipal bonds, unlike the market for U.S. government bonds, spooked easily. American cities and states were susceptible to the same cycle of doom that had forced Greece to seek help from the International Monetary Fund. All it took to create doubt and raise borrowing costs for states and cities was for a woman with no standing in the municipal-bond market to utter a few sentences on television. That was the amazing thing: she had offered nothing to back up her statement. She’d written a massive, detailed report on state and local finances, but no one except a handful of her clients had any idea what was in it. “If I was a real nasty hedge-fund guy,” one hedge-fund manager put it to me, “I’d sit back and say, ‘This is a herd of cattle that can be stampeded.’ ”

What Meredith Whitney was trying to say was more interesting than what she was accused of saying. She didn’t actually care all that much about the municipal-bond market, or how many cities were likely to go bankrupt. The municipal-bond market was a dreary backwater. As she put it, “Who cares about the stinking muni-bond market?” The only reason she had stumbled into that market was that she had come to view the U.S. national economy as a collection of regional economies. To understand the regional economies, she had to understand how state and local governments were likely to behave, and to understand this she needed to understand their finances. Thus she had spent two unlikely years researching state and local finance. “I didn’t have a plan to do this,” she said. “Not one of my clients asked for it. I only looked at this because I needed to understand it myself. How it started was with a question: How can G.D.P. [gross domestic product] estimates be so high when the states that outperformed the U.S. economy during the boom were now underperforming the U.S. economy—and they were 22 percent of that economy?” It was a good question.

From 2002 to 2008, the states had piled up debts right alongside their citizens’: their level of indebtedness, as a group, had almost doubled, and state spending had grown by two-thirds. In that time they had also systematically underfunded their pension plans and other future liabilities by a total of nearly $1.5 trillion. In response, perhaps, the pension money that they had set aside was invested in ever riskier assets. In 1980 only 23 percent of state pension money had been invested in the stock market; by 2008 the number had risen to 60 percent. To top it off, these pension funds were pretty much all assuming they could earn 8 percent on the money they had to invest, at a time when the Federal Reserve was promising to keep interest rates at zero. Toss in underfunded health-care plans, a reduction in federal dollars available to the states, and the depression in tax revenues caused by a soft economy, and you were looking at multi-trillion-dollar holes that could be dealt with in only one of two ways: massive cutbacks in public services or a default—or both. Whitney thought default unlikely, at least at the state level, because the state could bleed the cities of money to pay off its bonds. The cities were where the pain would be felt most intensely. “The scary thing about state treasurers,” she said, “is that they don’t know the financial situation in their own municipalities.”

“How do you know that?”

“Because I asked them!”

All states may have been created equal, but they were equal no longer. The states that had enjoyed the biggest boom were now facing the biggest busts. “How does the United States emerge from the credit crisis?” Whitney asked herself. “I was convinced—because the credit crisis had been so different from region to region—that it would emerge with new regional strengths and weaknesses. Companies are more likely to flourish in the stronger states; the individuals will go to where the jobs are. Ultimately, the people will follow the companies.” The country, she thought, might organize itself increasingly into zones of financial security and zones of financial crisis. And the more clearly people understood which zones were which, the more friction there would be between the two. (“Indiana is going to be like, ‘N.F.W. I’m bailing out New Jersey.’ ”) As more and more people grasped which places had serious financial problems and which did not, the problems would only increase. “Those who have money and can move do so,” Whitney wrote in her report to her Wall Street clients, “those without money and who cannot move do not, and ultimately rely more on state and local assistance. It becomes effectively a ‘tragedy of the commons.’ ”

The point of Meredith Whitney’s investigation, in her mind, was not to predict defaults in the municipal-bond market. It was to compare the states with one another so that they might be ranked. She wanted to get a sense of who in America was likely to play the role of the Greeks, and who the Germans. Of who was strong, and who weak. In the process she had, in effect, unearthed America’s scariest financial places.

“So what’s the scariest state?” I asked her.

She had to think for only about two seconds.

“California.”
California Iron Man

At seven o’clock one summer morning I pedaled a $5,000 titanium-frame mountain bike rented in anxiety the previous evening down the Santa Monica beach road to the corner where Arnold Schwarzenegger had asked me to meet him. He turned up right on time, driving a black Cadillac S.U.V. with a handful of crappy old jalopy bikes racked to the back. I wore the closest I could find to actual bicycle gear; he wore a green fleece, shorts, and soft beige slipper-like shoes that suggested both a surprising indifference to his own appearance and a security in his own manhood. His hair was still vaguely in a shape left by a pillow, and his eyelids drooped, though he swore he’d been up for an hour and a half reading newspapers. After reading the newspapers, this is what the former governor of California often does: rides his bike for cardio, then hits the weight room.

He hauls a bike off the back of the car, hops on, and takes off down an already busy Ocean Avenue. He wears no bike helmet, runs red lights, and rips past do not enter signs without seeming to notice them and up one-way streets the wrong way. When he wants to cross three lanes of fast traffic he doesn’t so much as glance over his shoulder but just sticks out his hand and follows it, assuming that whatever is behind him will stop. His bike has at least 10 speeds, but he has just 2: zero and pedaling as fast as he can. Inside half a mile he’s moving fast enough that wind-induced tears course down his cheeks.

He’s got to be one of the world’s most recognizable people, but he doesn’t appear to worry that anyone will recognize him, and no one does. It may be that people who get out of bed at dawn to jog and Rollerblade and racewalk are too interested in what they are doing to break their trance. Or it may be that he’s taking them by surprise. He has no entourage, not even a bodyguard. His former economic adviser, David Crane, and his media adviser, Adam Mendelsohn, who came along for the ride just because it sounded fun, are now somewhere far behind him. Anyone paying attention would think, That guy might look like Arnold, but it can’t possibly be Arnold, because Arnold would never be out alone on a bike at seven in the morning, trying to commit suicide. It isn’t until he is forced to stop at a red light that he makes meaningful contact with the public. A woman pushing a baby stroller and talking on a cell phone crosses the street right in front of him and does a double take. “Oh . . . my . . . God,” she gasps into her phone. “It’s Bill Clinton!” She’s not 10 feet away, but she keeps talking to the phone, as if the man were unreal. “I’m here with Bill Clinton.”

“It’s one of those guys who has had a sex scandal,” says Arnold, smiling.

“Wait . . . wait,” says the woman to her phone. “Maybe it’s not Bill Clinton.”

Before she can make a positive identification, the light is green, and we’re off.

His life has been a series of carefully staged experiences. He himself has no staged presentation of it, however. He is fresh, alive, and improvisational: I’m not sure even he knows what he will do next. He’s not exactly humble, but then, if I had lived the life he’s lived, I’m not sure I would be, either, though I might try to fake humility more often than he does, which is roughly never. What saves him from self-absorption, aside from a natural curiosity, is a genuine lack of interest in personal reflection. He lives the same way he rides his bike, paying far more attention to what’s ahead than what’s behind. In office, he kept no journal of any sort. I find it amazing, but he now says he didn’t so much as scribble little notes that might later be used to reconstruct his experience and his feelings about it. “Why would I do that?” he says. “It’s kind of like you come home and your wife asks you about your day. I’ve done it once and I don’t want to do it again.” What he wanted to do after a long day of being governor, more or less, was to lift weights.

We’re just a couple of miles in when he zips around a corner and into a narrow alleyway just off Venice Beach. He’s humoring me; I’ve been pestering him about what it was like for him when he first arrived in America, back in 1968, with little money, less English, really nothing but his lats, pecs, traps, and abs, for which there was no obvious market. He stops beside a tall brick wall. It surrounds what might once have been an impressive stone house that now just looks old and bleak and empty. The wall is what interests him, because he built it 43 years ago, right after he had arrived and started to train on Muscle Beach. “Franco [Columbu, like Schwarzenegger a former Mr. Olympia] and I made money this way. In bodybuilding there was no money. Here we were, world champions of this little subculture, and we did this to eat. Franco ran the business. I mixed the cement and knocked things down with the sledgehammer.”

Before he stumbled while running downhill with a refrigerator strapped to his back, Columbu was the front-runner in the 1977 contest for the title of the World’s Strongest Man, so there was some distinction in being hired by his operation, as Schwarzenegger was, to be the muscle. They had a routine. Franco would play the unreliable Italian, Arnold the sober German. Before they cut any deal they’d scream at each other in German in front of the customer until the customer would finally ask what was going on. Arnold would turn to the customer and explain, Oh, he’s Italian, and you know how they are. He wants to charge you more, but I think we can do it cheaply. Schwarzenegger would then name a not so cheap price. “And the customer,” he says now, laughing, “he would always say, ‘Arnold, you’re such a nice guy! So honest!’ It was selling, you know.”

He surveys his handiwork. “It’ll be here for a thousand years,” he says, then points out some erosion on the top. “I said to Franco we ought to come back and fix the top. You know, to show it was guaranteed for life.”

A poor kid from a small village in Austria, the son of a former Nazi, hops on a plane to America, starts out laying bricks, and winds up running the state and becoming one of America’s most prominent political leaders. From post to wire the race takes less than 35 years. I couldn’t help but ask the obvious question.

“If someone had told you when you were building this wall that you would wind up governor of California, what would you have said?”

“That would be all right,” he said, not exactly catching my drift.

“As a boy,” I said, taking another tack, “did you believe you’d lead something other than an ordinary life?”

“Yes.” He didn’t miss a beat.

“Why?”

“I don’t know.”

“No one has had this kind of crazy, wild ride,” he says as we speed away from the brick wall, but in a tone that suggests the ride was an accident. “I was influenced a lot by America,” he said. “The giant six-lane highways, the Empire State Building, the risktaking.” He still remembers vividly the America he heard and read about as a boy in Austria: everything about it was big. The only reason he set out to grow himself some big muscles was that he thought it might be a ticket to America.

If there had not been a popular movement to remove sitting governor Gray Davis and the chance to run for governor without having to endure a party primary, he never would have bothered. “The recall happens and people are asking me, ‘What are you going to do?’ ” he says, dodging vagrants and joggers along the beach bike path. “I thought about it but decided I wasn’t going to do it. I told Maria I wasn’t running. I told everyone I wasn’t running. I wasn’t running.” Then, in the middle of the recall madness, Terminator 3: Rise of the Machines opened. As the movie’s leading machine, he was expected to appear on The Tonight Show to promote it. En route he experienced a familiar impulse—the impulse to do something out of the ordinary. “I just thought, This will freak everyone out,” he says. “It’ll be so funny. I’ll announce that I am running. I told Leno I was running. And two months later I was governor.” He looks over at me, pedaling as fast as I can to keep up with him, and laughs. “What the fuck is that?”

We’re now off the beach and on the surface roads, and the traffic is already heavy. He veers left, across four lanes, arrives on the other side, and says, “All these people are asking me, ‘What’s your plan? Who’s on your staff?’ I didn’t have a plan. I didn’t have a staff. I wasn’t running until I went on Jay Leno.”

His view of his seven years trying to run the state of California can be summarized as follows. He came to power accidentally, but not without ideas about what he wanted to do. At his core he thought government had become more problem than solution: an institution run less for the benefit of the people than for the benefit of politicians and other public employees. He behaved pretty much as Americans seem to imagine the ideal politician should behave: he made bold decisions without looking at polls; he didn’t sell favors; he treated his opponents fairly; he was quick to acknowledge his mistakes and to learn from them; and so on. He was the rare elected official who believed, with some reason, that he had nothing to lose, and behaved accordingly. When presented with the chance to pursue an agenda that violated his own narrow political self-interest for the sake of the public interest, he tended to leap at it. “There were a lot of times when we said, ‘You just can’t do that,’ ” says his former chief of staff, Susan Kennedy, a lifelong Democrat, whose hiring was one of those things a Republican governor was not supposed to do. “He was always like, ‘I don’t care.’ Ninety percent of the time it was a good thing.”

Two years into his tenure, in mid-2005, he’d tried everything he could think of to persuade individual California state legislators to vote against the short-term desires of their constituents for the greater long-term good of all. “To me there were shocking moments,” he says. Having sped past a do not enter sign, we are now flying through intersections without pausing. I can’t help but notice that, if we weren’t breaking the law by going the wrong way down a one-way street, we’d be breaking the law by running stop signs. “When you want to do pension reform for the prison guards,” he says, “and all of a sudden the Republicans are all lined up against you. It was really incredible, and it happened over and over: people would say to me, ‘Yes, this is the best idea! I would love to vote for it! But if I vote for it some interest group is going to be angry with me, so I won’t do it.’ I couldn’t believe people could actually say that. You have soldiers dying in Iraq and Afghanistan, and they didn’t want to risk their political lives by doing the right thing.”

He came into office with boundless faith in the American people—after all, they had elected him—and figured he could always appeal directly to them. That was his trump card, and he played it. In November 2005 he called a special election that sought votes on four reforms: limiting state spending, putting an end to the gerrymandering of legislative districts, limiting public-employee-union spending on elections, and lengthening the time it took for public-school teachers to get tenure. All four propositions addressed, directly or indirectly, the state’s large and growing financial mess. All four were defeated; the votes weren’t even close. From then until the end of his time in office he was effectively gelded: the legislators now knew that the people who had elected them to behave exactly the way they were already behaving were not going to undermine them when appealed to directly. The people of California might be irresponsible, but at least they were consistent.
Home of the Free . . . Lunch

A compelling book called California Crackup describes this problem more generally. It was written by a pair of journalists and nonpartisan think-tank scholars, Joe Mathews and Mark Paul, and they explain, among other things, why Arnold Schwarzenegger’s experience as governor was going to be unlike any other experience in his career: he was never going to win. California had organized itself, not accidentally, into highly partisan legislative districts. It elected highly partisan people to office and then required these people to reach a two-thirds majority to enact any new tax or meddle with big spending decisions. On the off chance that they found some common ground, it could be pulled out from under them by voters through the initiative process. Throw in term limits—no elected official now serves in California government long enough to fully understand it—and you have a recipe for generating maximum contempt for elected officials. Politicians are elected to get things done and are prevented by the system from doing it, leading the people to grow even more disgusted with them. “The vicious cycle of contempt,” as Mark Paul calls it. California state government was designed mainly to maximize the likelihood that voters will continue to despise the people they elect.

But when you look below the surface, he adds, the system is actually very good at giving Californians what they want. “What all the polls show,” says Paul, “is that people want services and not to pay for them. And that’s exactly what they have now got.” As much as they claimed to despise their government, the citizens of California shared its defining trait: a need for debt. The average Californian, in 2011, had debts of $78,000 against an income of $43,000. The behavior was unsustainable, but, in its way, for the people, it works brilliantly. For their leaders, even in the short term, it works less well. They ride into office on great false hopes and quickly discover they can do nothing to justify those hopes.

In Paul’s view, Arnold Schwarzenegger had been the best test to date of the notion that the problem with California politics was personal, that all the system needed to fix itself was an independent-minded leader willing to rise above petty politics and exert the will of the people. “The recall was, in and of itself, an effort by the people to say that a new governor—a different continued from page 183 person—could solve the problem,” says Paul. “He tried every different way of dealing with the crisis in services. He tried to act like a Republican. He tried to act like a Democrat. He tried making nice with the legislature. When that didn’t work he called them girlie men. When that didn’t work he went directly to the people. And the people voted against his proposals.”

The experiment wasn’t a complete failure. As governor, Schwarzenegger was able to accomplish a few important things—reforming worker compensation, enabling open primaries, and, at the very end, ensuring that legislative districts would be drawn by an impartial committee rather than by the legislature. But on most issues, and on virtually everything having to do with how the state raised and spent money, he lost. In his first term Schwarzenegger had set out to cut spending and found he could cut only the things that the state actually needed. Near the end of his second term, he managed to pass a slight tax increase, after he talked four Republicans into creating the super-majority necessary for doing so. Every one of them lost his seat in the next election. He’d taken office in 2003 with approval ratings pushing 70 percent and what appeared to be a mandate to fix California’s money problems; he left in 2011 with approval ratings below 25 percent, having fixed very little. “I was operating under the commonsense kind of thing,” he says now. “It was the voters who recalled Gray Davis. It was the voters who elected me. So it will be the voters who hand me the tools to do the job. But the other side was successful enough for the voters to take the tools away.”

David Crane, the former economic adviser—at that moment rapidly receding into the distance—could itemize the result: a long list of depressing government financial statistics. The pensions of state employees ate up twice as much of the budget when Schwarzenegger left office as they had when he arrived, for instance. The officially recognized gap between what the state would owe its workers and what it had on hand to pay them was roughly $105 billion, but that, thanks to accounting gimmicks, was probably only about half the real number. “This year the state will directly spend $32 billion on employee pay and benefits, up 65 percent over the past 10 years,” says Crane later. “Compare that to state spending on higher education [down 5 percent], health and human services [up just 5 percent], and parks and recreation [flat], all crowded out in large part by fast-rising employment costs.” Crane is a lifelong Democrat with no particular hostility to government. But the more he looked into the details, the more shocking he found them to be. In 2010, for instance, the state spent $6 billion on fewer than 30,000 guards and other prison-system employees. A prison guard who started his career at the age of 45 could retire after five years with a pension that very nearly equaled his former salary. The head parole psychiatrist for the California prison system was the state’s highest-paid public employee; in 2010 he’d made $838,706. The same fiscal year that the state spent $6 billion on prisons, it had invested just $4.7 billion in its higher education—that is, 33 campuses with 670,000 students. Over the past 30 years the state’s share of the budget for the University of California has fallen from 30 percent to 11 percent, and it is about to fall a lot more. In 1980 a Cal student paid $776 a year in tuition; in 2011 he pays $13,218. Everywhere you turn, the long-term future of the state is being sacrificed.

This same set of facts, and the narrative it suggested, would throw an ordinary man into depression. He might conclude that he lived in a society that was ungovernable. After seven years of trying and mostly failing to run California, Schwarzenegger is persuasively not depressed. “You have to realize the thing was so much fun!” he says. “We had a great time! There were times of frustration. There were times of disappointment. But if you want to live rather than just exist, you want the drama.” As we roll to a stop very near the place on the beach where he began his American bodybuilding career, he says, “You have to step back and say, ‘I was elected under odd circumstances. And I’m going out in odd circumstances.’ You can’t have it both ways. You can’t be a spoiled brat.”

The odd circumstances were the never-ending financial crises. He’d come to power in the bust after the Internet bubble; he’d left in the bust after the housing bubble. Before and after our bike ride, I sat down with him to get his view of this second event. It was in the middle of 2007, he said, when he first noticed something was not quite right in the California economy. He’d been finishing up budget negotiations and arrived at a number, however phony, where the budget could be declared balanced. An aide walked into his office to give him a heads-up: the tax receipts for that month were less than expected. “We were all of a sudden short $300 million in revenue for the month,” says Schwarzenegger. “I somehow felt, Uh-oh. Because there was something in the air.” Soon after that he visited the George W. Bush White House, where he gave a talk that was, as ever, upbeat. “At the end of it this guy—he was the guy who was in charge of housing, I forgot the name. Great guy. For some reason or other he was very honest with me. I don’t know why. He probably didn’t think I’d go out and blab, which I didn’t. He says, ‘That was a great speech you gave, but we’re heading to a major problem.’ I said, ‘What do you mean?’ He said, ‘I looked at some of the numbers, and it’s going to be ugly.’ That’s all he said. He wouldn’t elaborate.” A housing-price decline in the United States meant a housing-price collapse in California, and a housing-price collapse in California meant an economic collapse and a decline in tax revenues. “The next month our revenues came in short $600 million. By December we were short a billion.”

At some point in our talks I asked Schwarzenegger how much time he had spent, as governor, grappling with the on-the-ground local implications of the big state crisis. The question pretty clearly bored him. “I’m not into the local stuff,” he’d said. “I was born for the world.”
City of Broken Dreams

About an hour into the weekly meeting of the San Jose City Council, I find myself wishing that I, too, was born for the world. A hundred citizens yawn and text as the council honors National Farmers Market Week; the few people who seem to be paying attention get up and leave after the honor is bestowed. The council commemorates August 7 as Assyrian Martyrs Day, “honoring the massacre of three thousand people in August 1933, and recognizing 2,000 years of persecution of Assyrian Christians.” Maybe 30 people turn their attention from their cell phones to the ceremony, but then they, too, rise and exit the chamber. A mere handful of people are left to hear the San Jose city manager offer the latest bleak financial news: the state of California was clawing back tens of millions of dollars more, and “140 employees have been separated from the city.” (New times call for new euphemisms.) A pollster presents his finding that, no matter how the question is phrased, the citizens of San Jose are unlikely to approve any ballot measure that raises taxes. A numbers guy gets to his feet and explains that the investment returns in the city’s pension plan are not likely to be anything near as high as was assumed. In addition to there not being enough money in this particular pot to begin with, the pot is failing to expand as fast as everyone had hoped, and so the gap between what the city’s employees are entitled to and what will exist is even greater than previously imagined. The council then votes to postpone, for six weeks, a vote on whether to declare the city’s budget a “public emergency,” and thus to give to the mayor, Chuck Reed, new powers.

Following each motion an obese man not so much dressed as enshrouded in blue-jean overalls maximizes his right to be heard for five minutes on every subject: over and again he rises from the front row of the audience, waddles to the podium, and delivers sophisticated-sounding but incomprehensible critiques of everything. “The absolute reduction in competence of government is predicated on what happened today . . . ”

The relationship between the people and their money in California is such that you can pluck almost any city at random and enter a crisis. San Jose has the highest per capita income of any city in the United States, after New York. It has the highest credit rating of any city in California with a population over 250,000. It is one of the few cities in America with a triple-A rating from Moody’s and Standard & Poor’s, but only because its bondholders have the power to compel the city to levy a tax on property owners to pay off the bonds. The city itself is not all that far from being bankrupt.

It’s late afternoon when I meet Mayor Chuck Reed in his office at the top of the city-hall tower. The crowd below has just begun to chant. The public employees, as usual, are protesting him. Reed is so used to it that he hardly notices. He’s a former air-force officer and Vietnam-era veteran with an intellectual bent and the clipped manner of a midwestern farmer. He has a master’s degree from Princeton, a law degree from Stanford, and a lifelong interest in public policy. Still, he presents less as the mayor of a big city in California than as a hard-bitten, upstanding sheriff of a small town who doesn’t want any trouble. Elected to the city council in 2000, he became mayor six years later; in 2010 he was re-elected with 77 percent of the vote. He’s a Democrat, but at this point it doesn’t much matter which party he belongs to, or what his ideological leanings are, or for that matter how popular he is with the people of San Jose. He’s got a problem so big that it overwhelms ordinary politics: the city owes so much more money to its employees than it can afford to pay that it could cut its debts in half and still wind up broke. “I did a calculation of cost per public employee,” he says as we settle in. “We’re not as bad as Greece, I don’t think.”

The problem, he explains, pre-dates the most recent financial crisis. “Hell, I was here. I know how it started. It started in the 1990s with the Internet boom. We live near rich people, so we thought we were rich.” San Jose’s budget, like the budget of any city, turns on the pay of public-safety workers: the police and firefighters now eat 75 percent of all discretionary spending. The Internet boom created both great expectations for public employees and tax revenues to meet them. In its negotiations with unions the city was required to submit to binding arbitration, which works for police officers and firefighters just as it does for Major League Baseball players. Each side of any pay dispute makes its best offer, and a putatively neutral judge picks one of them. There is no meeting in the middle: the judge simply rules for one side or the other. Each side thus has an incentive to be reasonable, for the less reasonable they are, the less likely it is that the judge will favor their proposal. The problem with binding arbitration for police officers and firefighters, says Reed, is that the judges are not neutral. “They tend to be labor lawyers who favor the unions,” he says, “and so the city does anything it can to avoid the process.” And what politician wants to spat publicly with police officers and firefighters?

Over the past decade the city of San Jose had repeatedly caved to the demands of its public-safety unions. In practice this meant that when the police or fire department of any neighboring city struck a better deal for itself, it became a fresh argument for improving the pay of San Jose police and fire. The effect was to make the sweetest deal cut by public-safety workers with any city in Northern California the starting point for the next round of negotiations for every other city. The departments also used each other to score debating points. For instance, back in 2002, the San Jose police union cut a three-year deal that raised police officers’ pay by 18 percent over the contract. Soon afterward, the San Jose firefighters cut a better deal for themselves, including a pay raise of more than 23 percent. The police felt robbed and complained mightily until the city council crafted a deal that handed them 5 percent more premium pay in exchange for training to fight terrorists. “We got famous for our anti-terrorist-training pay,” explains one city official. Eventually the anti-terrorist-training premium pay stopped; the police just kept the extra pay, with benefits. “Our police and firefighters will earn more in retirement than they did when they were working,” says Reed. “There used to be an argument that you have to give us money or we can’t afford to live in the city. Now the more you pay them the less likely they are to live in the city, because they can afford to leave. It’s staggering. When did we go from giving people sick leave to letting them accumulate it and cash it in for hundreds of thousands of dollars when they are done working? There’s a corruption here. It’s not just a financial corruption. It’s a corruption of the attitude of public service.”

When he was elected to the city council, Reed says, “I hadn’t even thought about pensions. I can’t say I said, ‘Here is my plan.’ I never thought about this stuff. It never came up.” It wasn’t until San Diego flirted with bankruptcy, in 2002, that he wondered about San Jose’s finances. He began to investigate the matter. “That’s when I realized there were big problems,” he says. “That’s when I started paying attention. That’s when I started asking questions: Could it happen here? It’s like the housing bubble and the Internet bubble. There were people around who were writing about it. It’s not that there aren’t people telling us that this is crazy. It’s that you refuse to believe that you are crazy.”

He hands me a chart. It shows that the city’s pension costs when he first became interested in the subject were projected to run $73 million a year. This year they would be $245 million: pension and health-care costs of retired workers now are more than half the budget. In three years’ time pension costs alone would come to $400 million, though “if you were to adjust for real life expectancy it is more like $650 million.” Legally obliged to meet these costs, the city can respond only by cutting elsewhere. As a result, San Jose, once run by 7,450 city workers, was now being run by 5,400 city workers. The city was back to staffing levels of 1988, when it had a quarter of a million fewer residents. The remaining workers had taken a 10 percent pay cut; yet even that was not enough to offset the increase in the city’s pension liability. The city had closed its libraries three days a week. It had cut back servicing its parks. It had refrained from opening a brand-new community center, built before the housing bust, because it couldn’t pay to staff the place. For the first time in history it had laid off police officers and firefighters.

By 2014, Reed had calculated, a city of a million people, the 10th-largest city in the United States, would be serviced by 1,600 public workers. “There is no way to run a city with that level of staffing,” he said. “You start to ask: What is a city? Why do we bother to live together? But that’s just the start.” The problem was going to grow worse until, as he put it, “you get to one.” A single employee to service the entire city, presumably with a focus on paying pensions. “I don’t know how far out you have to go until you get to one,” said Reed, “but it isn’t all that far.” At that point, if not before, the city would be nothing more than a vehicle to pay the retirement costs of its former workers. The only clear solution was if former city workers up and died, soon. But former city workers were, blessedly, living longer than ever.

This wasn’t a hypothetical scary situation, said Reed. “It’s a mathematical inevitability.” In spirit it reminded me of Bernard Madoff’s investment business. Anyone who looked at Madoff’s returns and understood them could see he was running a Ponzi scheme; only one person who had understood them bothered to blow the whistle, and no one listened to him. (See No One Would Listen: A True Financial Thriller, by Harry Markopolos.)

In his negotiations with the unions, the mayor has gotten nowhere. “I understand the police and firefighters,” he says. “They think, We’re the most important, and everyone else goes [gets fired] first.” The police union recently suggested to the mayor that he close the libraries for the other four days. “We looked into that,” Reed says. “If you close the libraries an extra day you pay for 20 or 30 cops.” Adding 20 more police officers for a year wouldn’t solve anything. The cops who were spared this year would be axed next, in response to the soaring costs of the pensions of city workers who already had retired. On the other side of the inequality is the taxpayer of San Jose, who has no interest in paying more than he already does. “It’s not that we’re insolvent and can’t pay our bills,” says Reed. “It’s about willingness.”

I ask him what the chances are that, in this pinch, he could raise taxes. He holds up a thumb and index finger: zero. He’s recently coined a phrase, he says: “service-level insolvency.” Service-level insolvency means that the expensive community center that has been built and named cannot be opened. It means closing libraries three days a week. It isn’t financial bankruptcy; it’s cultural bankruptcy.

“How on earth did this happen?” I ask him.

“The only way I can explain it,” he says, “is that they got the money because it was there.” But he has another way to explain it, and in a moment he offers it up.

“I think we’ve suffered from a series of mass delusions,” he says.

I didn’t completely understand what he meant, and said so.

“We’re all going to be rich,” he says. “We’re all going to live forever. All the forces in the state are lined up to preserve the status quo. To preserve the delusion. And here—this place—is where the reality hits.”

On the way back to the elevators I chat with two of Mayor Reed’s aides. He’d mentioned to me that, as bad as they might think they have it in San Jose, a lot of other American cities have it worse. “I count my blessings when I talk to the mayors of other cities,” he’d said.

“Which city do you pity most?” I ask just before the elevator doors close.

They laugh and in unison say, “Vallejo!”
Living on the Default Line

Welcome to vallejo, city of opportunity, reads the sign on the way in, but the shops that remain open display signs that say, we accept food stamps. Weeds surround abandoned businesses, and all traffic lights are set to permanently blink, which is a formality, as there are no longer any cops to police the streets. Vallejo is the one city in the Bay Area where you can park anywhere and not worry about getting a ticket, because there are no meter maids either. The windows of city hall are dark, but its front porch is a hive of activity. A young man in a backward baseball cap, sunglasses, and a new pair of Nike sneakers stands on a low wall and calls out an address:

“Nine hundred Cambridge Drive,” he says. “In Benicia.”

The people in the crowd below instantly begin bidding. From 2006 to 2010 the value of Vallejo real estate fell 66 percent. One in 16 homes in the city is in foreclosure. This is apparently the fire sale, but the characters involved are so shady and furtive that I can hardly believe it. I stop to ask what’s going on, but the bidders don’t want to talk. “Why would I tell you anything?” says a guy sitting in a Coleman folding chair. He obviously thinks he’s shrewd, and perhaps he is.

The lobby of city hall is completely empty. There’s a receptionist’s desk but no receptionist. Instead, there’s a sign: to foreclosure auctioneers and foreclosure bidders: please do not conduct business in the city hall lobby.

On the third floor I find the offices of the new city manager, Phil Batchelor, but when I walk in, there is no one in sight. It’s just a collection of empty cubicles. At length a woman appears and leads me to Batchelor himself. He’s in his 60s and, oddly enough, a published author. He’s written one book on how to raise children and another on how to face death. Both deliver an overtly Christian message, but he doesn’t come across as Evangelical; he comes across as sensible, and a little weary. His day job, before he retired, was running cities with financial difficulties. He came out of retirement to take this job, but only after the city council had asked him a few times. “The more you say no, the more determined they are to get you,” he says. His chief demand was not financial but social: he’d take the job only if the people on the city council ceased being nasty to one another and behaved civilly. He actually got that in writing, and they’ve kept their end of the bargain. “I’ve been in a lot of places that have been in a lot of trouble, but I’ve never seen anything like this,” he says. He then lays out what he finds unusual, beginning with the staffing levels. He’s now running the city, and he has a staff of one: I just met her. “When she goes out to the bathroom, she has to lock the [office] door,” he says, “because I’m in meetings, and we have no one else.”

Back in 2008, unable to come to terms with its many creditors, Vallejo declared bankruptcy. Eighty percent of the city’s budget—and the lion’s share of the claims that had thrown it into bankruptcy—were wrapped up in the pay and benefits of public-safety workers. Relations between the police and the firefighters, on the one hand, and the citizens, on the other, were at historic lows. The public-safety workers thought that the city was out to screw them on their contracts; the citizenry thought that the public-safety workers were using fear as a tool to extort money from them. The local joke was that “P.D.” stands for “Pay or Die.” The city-council meetings had become exercises in outrage: at one, a citizen arrived with a severed pig’s head on a barbecue grill. “There’s no good reason why Vallejo is as fucked up as it is,” says longtime resident Marc Garman, who created a Web site to catalogue the civil war. “It’s a boat ride to San Francisco. You throw a stone and you hit Napa.” Since the bankruptcy, the police and fire departments have been cut in half; some number of the citizens who came to Phil Batchelor’s office did so to say they no longer felt safe in their own homes. All other city services had been reduced effectively to zero. “Do you know that some cities actually pave their streets?” says Batchelor. “That’s not here.”

I notice on his shelf a copy of Fortune magazine, with Meredith Whitney on the cover. And as he talked about the bankrupting of Vallejo, I realized that I had heard this story before, or a private-sector version of it. The people who had power in the society, and were charged with saving it from itself, had instead bled the society to death. The problem with police officers and firefighters isn’t a public-sector problem; it isn’t a problem with government; it’s a problem with the entire society. It’s what happened on Wall Street in the run-up to the subprime crisis. It’s a problem of people taking what they can, just because they can, without regard to the larger social consequences. It’s not just a coincidence that the debts of cities and states spun out of control at the same time as the debts of individual Americans. Alone in a dark room with a pile of money, Americans knew exactly what they wanted to do, from the top of the society to the bottom. They’d been conditioned to grab as much as they could, without thinking about the long-term consequences. Afterward, the people on Wall Street would privately bemoan the low morals of the American people who walked away from their subprime loans, and the American people would express outrage at the Wall Street people who paid themselves a fortune to design the bad loans.

Having failed to convince its public-safety workers that it could not afford to make them rich, the city of Vallejo, California, had hit bottom: it could fall no lower. “My approach has been I don’t care who is to blame,” Batchelor said. “We needed to change.” When I met him, a few months after he had taken the job, he was still trying to resolve a narrow financial dispute: the city had 1,013 claimants with half a billion dollars in claims but only $6 million to dole out to them. They were survivors of a shipwreck on a life raft with limited provisions. His job, as he saw it, was to convince them that the only chance of survival was to work together. He didn’t view the city’s main problem as financial: the financial problems were the symptom. The disease was the culture. Just a few weeks earlier, he had sent a memo to the remaining city staff—the city council, the mayor, the public-safety workers. The central message was that if you want to fix this place you need to change how you behave, each and every one of you. “It’s got to be about the people,” he said. “Teach them respect for each other, integrity and how to strive for excellence. Cultures change. But people need to want to change. People convinced against their will are of the same opinion still.”

“How do you change the culture of an entire city?” I asked him.

“First of all we look internally,” he said.
Too Fat to Fly

The road out of Vallejo passes directly through the office of Dr. Peter Whybrow, a British neuroscientist at U.C.L.A. with a theory about American life. He thinks the dysfunction in America’s society is a by-product of America’s success. In academic papers and a popular book, American Mania, Whybrow argues, in effect, that human beings are neurologically ill-designed to be modern Americans. The human brain evolved over hundreds of thousands of years in an environment defined by scarcity. It was not designed, at least originally, for an environment of extreme abundance. “Human beings are wandering around with brains that are fabulously limited,” he says cheerfully. “We’ve got the core of the average lizard.” Wrapped around this reptilian core, he explains, is a mammalian layer (associated with maternal concern and social interaction), and around that is wrapped a third layer, which enables feats of memory and the capacity for abstract thought. “The only problem,” he says, “is our passions are still driven by the lizard core. We are set up to acquire as much as we can of things we perceive as scarce, particularly sex, safety, and food.” Even a person on a diet who sensibly avoids coming face-to-face with a piece of chocolate cake will find it hard to control himself if the chocolate cake somehow finds him. Every pastry chef in America understands this, and now neuroscience does, too. “When faced with abundance, the brain’s ancient reward pathways are difficult to suppress,” says Whybrow. “In that moment the value of eating the chocolate cake exceeds the value of the diet. We cannot think down the road when we are faced with the chocolate cake.”

The richest society the world has ever seen has grown rich by devising better and better ways to give people what they want. The effect on the brain of lots of instant gratification is something like the effect on the right hand of cutting off the left: the more the lizard core is used the more dominant it becomes. “What we’re doing is minimizing the use of the part of the brain that lizards don’t have,” says Whybrow. “We’ve created physiological dysfunction. We have lost the ability to self-regulate, at all levels of the society. The $5 million you get paid at Goldman Sachs if you do whatever they ask you to do—that is the chocolate cake upgraded.”

The succession of financial bubbles, and the amassing of personal and public debt, Whybrow views as simply an expression of the lizard-brained way of life. A color-coded map of American personal indebtedness could be laid on top of the Centers for Disease Control’s color-coded map that illustrates the fantastic rise in rates of obesity across the United States since 1985 without disturbing the general pattern. The boom in trading activity in individual stock portfolios; the spread of legalized gambling; the rise of drug and alcohol addiction—it is all of a piece. Everywhere you turn you see Americans sacrifice their long-term interests for short-term rewards.

What happens when a society loses its ability to self-regulate, and insists on sacrificing its long-term interest for short-term rewards? How does the story end? “We could regulate ourselves if we chose to think about it,” Whybrow says. “But it does not appear that is what we are going to do.” Apart from that remote possibility, Whybrow imagines two outcomes. The first he illustrates with a true story, which might be called the parable of the pheasant. Last spring, on sabbatical from the University of Oxford, he was surprised to discover that he was able to rent an apartment inside Blenheim Palace, the Churchill family home. The previous winter at Blenheim had been harsh, and the pheasant hunters had been efficient; as a result, just a single pheasant had survived in the palace gardens. This bird had gained total control of a newly seeded field. Its intake of food, normally regulated by its environment, was now entirely unregulated: it could eat all it wanted, and it did. The pheasant grew so large that, when other birds challenged it for seed, it would simply frighten them away. The fat pheasant became a tourist attraction and even acquired a name: Henry. “Henry was the biggest pheasant anyone had ever seen,” says Whybrow. “Even after he got fat, he just ate and ate.” It didn’t take long before Henry was obese. He could still eat as much as he wanted, but he could no longer fly. Then one day he was gone: a fox ate him.

The other possible outcome was only slightly more hopeful: to hit bottom. To realize what has happened to us—because we have no other choice. “If we refuse to regulate ourselves, the only regulators are our environment,” says Whybrow, “and the way that environment deprives us.” For meaningful change to occur, in other words, we need the environment to administer the necessary level of pain.

In August 2011, the same week that Standard & Poor’s downgraded the debt of the United States government, a judge approved the bankruptcy plan for Vallejo, California. Vallejo’s creditors ended up with 5 cents on the dollar, public employees with something like 20 and 30 cents on the dollar. The city no longer received any rating at all from Moody’s and Standard & Poor’s. It would take years to build the track record needed to obtain a decent rating. The absence of a rating mattered little, as the last thing the city needed to do was to go out and borrow money from strangers.

More out of idle curiosity than with any clear purpose, I drove up again to Vallejo and paid a call on the fire department. In the decay of our sense of common purpose, the firefighters are a telling sign that we are approaching a new bottom. It isn’t hard to imagine how a police department might wind up in conflict with the community it’s hired to protect. A person who becomes a police officer enjoys the authority. He wants to stop the bad guys. He doesn’t necessarily need to care for the people he polices. A person who becomes a firefighter wants to be a good guy. He wants to be loved.

The Vallejo firefighter I met with that morning was named Paige Meyer. He was 41 years old. He had short salt-and-pepper hair and olive skin, with traces of burn marks on his cheeks. His natural expression was a smile. He wasn’t particularly religious or political. (“I’m not necessarily a God guy.”) The closest thing he had to a religion, apart from his family, was his job. He was extremely proud of it, and of his colleagues. “I don’t want this to sound arrogant at all,” he said, “but many departments in nicer communities, they get a serious fire maybe once a year. We get them all the time.” The Vallejo population is older and poorer than in many surrounding cities, and older still are the buildings it lives in. The typical Vallejo house is a charming, highly flammable wooden Victorian. “In this town we fight fires,” says Meyer. “This town rips.” The department was shaped by its environment: they were extremely aggressive firefighters. “When I came to this department you rolled to a fire,” he said. “You were not going to see an exterior water stream from this department. We’re going in. You have some knucklehead calling in with a sore throat—your giddyup is not so fast. But I’ll tell you something about this department. They get a call that there’s a baby choking or a 10-year-old not breathing, you better get out of the way or you’re going to get run over.”

As a young man, to pay his way through college, Meyer had worked as a state-beach lifeguard at lakes in central California. He assumed that there would be little drama in the work but people would turn up, get drunk, and attempt to drown. A few of the times he pulled people from the water, they were in bad enough shape that they needed paramedics; the fire department was there on the spot. He started talking to firefighters and found that “they all absolutely loved what they did. You get to go and live and create a second family. How can you not like that?” He came to Vallejo in 1998, at the age of 28. He had left a cushy job in Sunnyvale, outside San Jose, where there aren’t many fires, precisely because he wanted to fight fires. “In other departments,” he says, “I wasn’t a firefighter. The first six months of the job here, I was out at two in the morning at a fire every other week. I couldn’t believe it.” The houses of Vallejo are mainly balloon-frame construction. The interior walls have no firebreaks: from bottom to top, all four walls carry fire as efficiently as a chimney. One of the rookie mistakes in Vallejo is to put the fire out on the ground floor, only to look up and see it roaring out of the roof. “When we get to a fire we say, ‘Boom! Send someone up to the attic.’ Because the fire is going right to the attic.”

Meyer actually had made that rookie mistake. One day not long after he’d arrived, he jumped off the truck already breathing air from a tank and raced into what appeared to be a burning one-bedroom apartment. He knocked down the door and put the attack line on the fire and then wondered why the fire wasn’t going out. “It should have been getting cooler, but it was getting hotter and hotter.” Right in front of his face, on his plastic mask, lines trickled down, like rain on a windshield. The old-school firefighters left their ears exposed so they could feel the heat: the heat contained the critical information. Meyer could only see the heat: his helmet was melting. “If your helmet starts to shrivel up and melt, that’s not cool,” he says. A melting helmet, among the other problems it presents, is an indication that a room is about to flash. Flashing, he explains, “is when all combustible materials simultaneously ignite. You’re a baked potato after that.” He needed more water, or to get out, but his ego was invested in staying inside, and so he stayed inside. Moments later a backup arrived, with another, bigger hose.

Afterward, he understood his mistake: the building was three stories, built on a slope that disguised its size, and the fire had reached the attic. “I’m not saying that if the backup hadn’t come when it did I’d be dead,” he says, but that’s exactly what he is saying. The scar on his face is from that fire. “I needed to learn to control my environment,” he said. “I’d had this false sense of security.”

When you take care of something, you become attached to it, and he’d become attached to Vallejo. He was extremely uncomfortable with conflict between his union and the citizens, and had found himself in screaming matches with the union’s negotiator. Meyer thought firefighters, who tended to be idealistic and trusting, were easily duped. He further thought the rank and file had been deceived both by the city, which lied to them repeatedly in negotiations, and by their own leadership, which harnessed the firefighters’ outrage to make unreasonable demands in the union-negotiated contract with the city. What was lost at the bargaining table was the reason they did what they did for a living. “I’m telling you,” Meyer says, “when I started, I didn’t know what I was getting paid. I didn’t care what I was getting paid. I didn’t know about benefits. A lot of things that we’re politicizing today were not even in my mind. I was just thinking of my dream job. Let me tell you something else: nobody cared in 2007 how much I made. If I made six figures they said, ‘Shit, man, you deserve it. You ran into a burning building.’ Because everyone had a job. All they knew about our job is that it was dangerous. The minute the economy started to collapse, people started looking at each other.”

Today the backup that may or may not have saved him is far less likely to arrive. When Vallejo entered bankruptcy, the fire department was cut from 121 to 67, for a city of 112,000 people. The department handles roughly 13,000 calls a year, extremely high for the population. When people feel threatened or worried by anything except other people, they call the fire department. Most of these calls are of the cat-in-the-tree variety—pointless. (“You never see the skeleton of a cat in a tree.”) They get calls from people who have headaches. They get calls from people who have itches where they can’t scratch. They have to answer every call. (“The best call I ever had was phantom-leg pain in a guy with no legs.”) To deal with these huge numbers of calls, they once had eight stations, eight three-person engine companies, a four-man truck company (used only for actual fires and rescue calls), one fireboat, one confined-space rescue team, and a team to deal with hazardous materials. They now are down to four stations, four engines, and a truck.

This is particularly relevant to Paige Meyer because, two months ago, he became Vallejo’s new fire chief. It surprised him: he hadn’t even applied for the job. The city manager, Phil Batchelor, just called him to his office one day. “He didn’t ever really ask me if I wanted the job,” says Meyer. “He just asked how’s the family, told me he was giving me the job, and asked if I had any problem with that.”

He didn’t, actually. He sat down and made a list of ways to improve the department. He faced a fresh challenge: How to deliver service that was the same as before, or even better than before, with half the resources. How to cope with an environment of scarcity. He began to measure things that hadn’t been measured. The No. 1 cause of death in firefighting was heart attacks. No. 2 was truck crashes. He was now in charge of a department that would be both overworked and in a hurry. Fewer people doing twice the work probably meant twice the number of injuries per firefighter. He’d decided to tailor fitness regimes to fit the job. With fewer fire stations and fewer firefighters in them, the response times were going to be slower. He’d need to find new ways to speed things up. A longer response time meant less room for error; a longer response time meant the fires they’d be fighting would be bigger. He had some thoughts about the most efficient way to fight these bigger fires. He began, in short, to rethink firefighting.

When people pile up debts they will find difficult and perhaps even impossible to repay, they are saying several things at once. They are obviously saying that they want more than they can immediately afford. They are saying, less obviously, that their present wants are so important that, to satisfy them, it is worth some future difficulty. But in making that bargain they are implying that, when the future difficulty arrives, they’ll figure it out. They don’t always do that. But you can never rule out the possibility that they will. As idiotic as optimism can sometimes seem, it has a weird habit of paying off.

... "The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Stop Apologizing for the Stimulus

2011-06-07T06:49:00.001-07:00

The president needs to make the case for his economic policies, not hide from them.

By Eliot SpitzerPosted Monday, June 6, 2011, at 4:19 PM ET

Barack ObamaThe White House may hope to dismiss last week's dismal jobs data as a "little bump,"
but the reality is that the state of the economy is dire. President
Obama must acknowledge the economic malaise. Then he can make the
powerful and true case that the policies he has been pursuing are
correct while the Republican alternatives are horrendous canards.

It's
alarming that once again we are letting the Republican candidates'
rhetoric and near-hysterical fear of government spending distort the
national debate and keep us from the more dramatic economic changes we
still need.

The lessons of the Great Recession and the semi-recovery are clear:

Keynes was, and is, right.
Though much-maligned by Greenspan neo-libertarians, government spending
in the absence of private sector demand can resuscitate an economy. The
stimulus bill worked. It saved millions of jobs, generated demand when
there was none, and kept the economy from near total collapse. The
unemployment rate kept going up, but it would have been so much worse
without it. Take a look at the data. There is no doubt that the jobs picture stabilized and then improved after the stimulus kicked in.
Targeted government intervention works. Carefully
calibrated government intervention in individual sectors can return
those sectors to solvency and also force needed reform when done
properly. The auto bailouts are a case study in wise use of capital both
to overcome a short-term cash flow crisis and to impose necessary
structural changes. The bank bailout was only a partial success, because
although the sector was returned to solvency, the needed reforms were
not imposed. Hence the social gains have been much more limited. But
both sectors prove that government can play a hugely important and
positive role as a lender of last resort.
An individual health insurance mandate works.
Look at the Massachusetts example. The requirement that people pay for
their coverage when they can do so overcomes an enormous free-rider
problem, as both Newt Gingrich and Mitt Romney have admitted, and it
saves the government huge sums of money. The president should offer a
full-throated defense of the mandate invoking both Romney and Gingrich.
Making the Bush tax cuts permanent has not created jobs.
The lack of job growth is driven by inadequate demand and excess
capacity. Marginal tax rates at this point have a minimal impact.
The housing crisis still needs to be addressed head-on.
Too many homeowners—especially unemployed homeowners—have mortgages
they can't afford, and this will be a drag on the economy for years to
come. We know we can't depend on the housing sector to provide
significant growth during the next few years, but we also must ensure
that it doesn't drag us down. The failure to require significant
mortgage reform as part of the bank bailout was an egregious policy
error.
Joblessness—not the deficit—should be our immediate policy concern.
The debt crisis is real—but in the medium and long term, not the short
term. The market is still saying to the U.S. government: We want to lend
to you. While the issue of long-term entitlement costs looms, it will
not metastasize for a decade or so. The immediate crisis is joblessness
and the resulting anemic growth rate. If growth remains in the range of
1.8 percent to 2 percent, we will never generate enough revenue to
balance our books. If growth accelerates to 4 percent, then deficits
will organically decline. Priming the pump to increase growth is the
imperative. Leave the deficit to next year.

All this argues
for a more robust presidential response. He should trumpet the success
of the stimulus, not just the bailout of Chrysler. He should starting
pushing back against the Tea Party's rhetoric.

The
president should go to bat for Keynes, for Roosevelt, for the policy
tools that have worked. He should again challenge the deregulatory,
Hoover-based-thinking that created the mess we are in. We need a
full-throated defense of the policies of the past several years, not
meekness and apology.

The stimulus worked: The president needs to make the case for his economic policies, not hide from them. - By Eliot Spitzer - Slate Magazine

The most important political story?

2011-06-01T10:09:00.001-07:00

The most important political story in America
is that its government — distressingly like those under assault in a
dozen nations across the globe — has become almost entirely unresponsive
to the nation’s needs and its citizens’ concerns. It’s become
profoundly corrupt, representing only the needs of the richest of the
rich and the interests of corporate oligarchs, and uncaring about
everyone else. And there’s virtually no check on this accelerating
decline in governmental accountability.

Not a single important problem that really matters to most Americans is
being addressed, let alone responsibly, in Congress or those Biden
meetings. All of the sound and fury in the nation’s capital that pundits
think are “news” is just posturing over things that are not, and never
have been, actual problems, let alone crises. And even for those
contrived issues, the “solutions” being considered are completely at
odds with the wishes of the American people — which is why the
discussions are happening behind closed doors.

... I think we'll move the deck chairs to the port side today.

News of the economy's demise appear premature

2011-05-06T08:37:00.001-07:00

Politics World - forums - craigslist

April payroll employment rises a more-than-expected 244,000 (Consensus: +190,000; Decision Economics: +172,000), following on upward-revised increases of 221,000 (was 216,000) in March and 235,000 (was 194,000) in February.

The general picture is much more encouraging to confidence in the upward momentum of the economy than as expected and unrevised results would have been. The new increase overshot the indication given by initial claims numbers in the month--suggesting, very critically, that the new-hiring side of the labor market has accelerated, even as layoffs have picked up. Severe downgradings of the May outlook--and of the medium-term outlook--will be held in abeyance because of that positive development.

In April, private employment rose a solid 268,000 in a very widespread way.

Another standout feature of the report was an upgraded income picture, with average hourly earnings up a mild 0.1% in April, but with upward revisions to both March (+0.2% vs unch) and February (+0.1% vs unch).

Those revisions will be reflected in upward revisions to personal income--and the new picture of ongoing wagerate growth is more encouraging for the outlook than the stagnation that seemed to be occurring before.

Fast Train to Nowhere

2011-04-25T04:24:00.001-07:00

http://www.nytimes.com/2011/04/24/opinion/24white.html?_r=1

My favorite part...

"only two high-speed rail routes run without operating subsidies: Paris to Lyon and Osaka to Tokyo.

Without bond guarantees, private investors, which so far seem more prone
to due diligence than the California High-Speed Rail Authority, have
yet to put up money.

The most astonishing thing is that even as
financial problems force California to dismantle its social safety net,
eviscerate its educational system, and watch its roads crumble, it has
agreed on a plan for high-speed rail that demands substantial local
subsidies and certainly will involve further concessions by the state to
attract private investment.

It is as if a family, with one spouse out of work, unable to meet
mortgage payments or school tuition, eagerly takes out a loan to buy an
electric car after an uncle offers to share the cost. The catch is that
there is no upper limit on the price, and the neighbors have to chip in."

...Self-inflicted wounds are always the most
painful.

From: Charles Atherton <cratherton@gmail.com>
To: "Atherton, Michael" <atherton42@yahoo.com>; "Dennis, Patrick & Rosemary"

Robert Reich: President has to connect the dots

2011-04-05T07:03:00.000-07:00

"Here’s the truth: The only way America can reduce the long-term budget
deficit, maintain vital services, protect Social Security and Medicare,
invest more in education and infrastructure, and not raise taxes on the
working middle class is by raising taxes on the super rich.

.............

All the President has to do is connect the dots – the explosion of
income and wealth among America’s super-rich, the dramatic drop in their
tax rates, the consequential devastating budget squeezes in Washington
and in state capitals, and the slashing of vital public services for the
middle class and the poor.

This shouldn’t be difficult. Most Americans are on the receiving end. By
now they know trickle-down economics is a lie. And they sense the dice
are loaded in favor of the multi-millionaires and billionaires, and
their corporations, now paying a relative pittance in taxes.
"

Robert Reich (Why We Must Raise Taxes on the Rich)

Why We Must Raise Taxes on the Rich

Monday, April 4, 2011

It’s tax time. It’s also a time when right-wing Republicans are setting the agenda for massive spending cuts that will hurt most Americans.

Here’s the truth: The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich.

Even if we got rid of corporate welfare subsidies for big oil, big agriculture, and big Pharma – even if we cut back on our bloated defense budget – it wouldn’t be nearly enough.

The vast majority of Americans can’t afford to pay more. Despite an economy that’s twice as large as it was thirty years ago, the bottom 90 percent are still stuck in the mud. If they’re employed they’re earning on average only about $280 more a year than thirty years ago, adjusted for inflation. That’s less than a 1 percent gain over more than a third of a century. (Families are doing somewhat better but that’s only because so many families now have to rely on two incomes.)

Yet even as their share of the nation’s total income has withered, the tax burden on the middle has grown. Today’s working and middle-class taxpayers are shelling out a bigger chunk of income in payroll taxes, sales taxes, and property taxes than thirty years ago.

It’s just the opposite for super rich.

The top 1 percent’s share of national income has doubled over the past three decades (from 10 percent in 1981 to well over 20 percent now). The richest one-tenth of 1 percent’s share has tripled. And they’re doing better than ever. According to a new analysis by the Wall Street Journal, total compensation and benefits at publicly-traded Wall Street banks and securities firms hit a record in 2010 — $135 billion. That’s up 5.7 percent from 2009.

Yet, remarkably, taxes on the top have plummeted. From the 1940s until 1980, the top tax income tax rate on the highest earners in America was at least 70 percent. In the 1950s, it was 91 percent. Now it’s 35 percent. Even if you include deductions and credits, the rich are now paying a far lower share of their incomes in taxes than at any time since World War II.

The estate tax (which only hits the top 2 percent) has also been slashed. In 2000 it was 55 percent and kicked in after $1 million. Today it’s 35 percent and kicks in at $5 million. Capital gains – comprising most of the income of the super-rich – were taxed at 35 percent in the late 1980s. They’re now taxed at 15 percent.

If the rich were taxed at the same rates they were half a century ago, they’d be paying in over $350 billion more this year alone, which translates into trillions over the next decade. That’s enough to accomplish everything the nation needs while also reducing future deficits.

If we also cut what we don’t need (corporate welfare and bloated defense), taxes could be reduced for everyone earning under $80,000, too. And with a single payer health-care system – Medicare for all – instead of a gaggle of for-profit providers, the nation could save billions more.

Yes, the rich will find ways to avoid paying more taxes courtesy of clever accountants and tax attorneys. But this has always been the case regardless of where the tax rate is set. That’s why the government should aim high. (During the 1950s, when the top rate was 91 percent, the rich exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent – still substantial by today’s standards.)

And yes, some of the super rich will move their money to the Cayman Islands and other tax shelters. But paying taxes is a central obligation of citizenship, and those who take their money abroad in an effort to avoid paying American taxes should lose their American citizenship.

But don’t the super-rich have enough political power to kill any attempt to get them to pay their fair share? Only if we let them. Here’s the issue around which Progressives, populists on the right and left, unionized workers, and all other working people who are just plain fed up ought to be able to unite.

Besides, the reason we have a Democrat in the White House – indeed, the reason we have a Democratic Party at all – is to try to rebalance the economy exactly this way.

All the President has to do is connect the dots – the explosion of income and wealth among America’s super-rich, the dramatic drop in their tax rates, the consequential devastating budget squeezes in Washington and in state capitals, and the slashing of vital public services for the middle class and the poor.

This shouldn’t be difficult. Most Americans are on the receiving end. By now they know trickle-down economics is a lie. And they sense the dice are loaded in favor of the multi-millionaires and billionaires, and their corporations, now paying a relative pittance in taxes.

The President has the bully pulpit. But will he use it?

Math Professor Predicts MLB 2011 Standings

2011-04-01T08:36:00.001-07:00

NJIT professor uses math analytics to project 2011 Major League Baseball winners

Expected wins: AL East: Red Sox – 97; Yankees – 97; Rays – 83; Orioles – 78; Blue Jays – 71. AL Central: Tigers – 92; Twins – 91; White Sox – 88; Indians - 62; Royals – 55. AL West: Rangers – 95; A's – 87; Mariners – 72; Angels – 71. NL East: Phillies – 92; Braves – 90; Marlins – 81; Mets – 79; Nationals – 72; NL Central: Cards – 92; Reds – 86; Brewers – 83; Cubs – 78; Astros – 64; Pirates – 63. NL West: Giants – 89; Rockies – 87; Dodgers – 86; Padres – 79; Diamondbacks – 70.

Natural Gas for Cars

2011-01-25T17:33:00.001-08:00

KGO Newstalk 810 San Francisco

Natural Gas for Cars: An all win, no
lose, initiative that will please the country and stop the blackmail from
foreign oil suppliers

Send an email
to the White House at the following link: http://www.whitehouse.gov/contact

-or-

The White House Fax (most effective)
is: 202-456-2461

------

To: President Barack Obama

Subject: Easy way for you to drop gas prices to $2 a gallon for
American workers. Otherwise, they will soon be paying for $5 gas --- and
blaming your administration.

Mr. President:

Here is an
all-win, no-lose, plan that will please the country and stop the blackmail from
foreign oil suppliers. The outrage of $5 gas is coming soon - probably next
year. It will wipe out the recovery and your administration in the next
election. It must be stopped. Challenge the foreign oil suppliers with America’s most
abundant and cleanest transportation fuel, NATURAL GAS. We can still use all
the ethanol our farmers can make in dual-fuel cars. Conversion to natural gas
cars sounds like a long and expensive transition. Not at all! You don’t need to
force anyone. All you need to do is start the ball rolling. And there is a
clever way to do that without any government subsidy, believe it or not!
Nationally known and syndicated financial expert Bob Brinker came up with the
deceptively simple, genius idea described below.

Mr. President, please sign a simple executive order
tomorrow that says that all federal vehicles purchased after, say, January 1,
2012, must run on NATURAL GAS as well as other fuels such as gasoline, diesel,
or ethanol. Such dual-fuel vehicles are already being used by smart companies
all over the country. No new design or technology is needed. (Federal agencies
can opt out for a while if they have no easy natural gas supply.)

Why does this
work? The federal government is the biggest purchaser of new vehicles. The
automakers already supply tens of thousands of cars that run on natural gas or
gasoline (or ethanol) for utility companies and taxis companies all over the
country who gladly pay a higher price for these dual-fuel vehicles because
their fuel costs are reduced. With the
enormous federal government market for natural gas vehicles, car manufacturers
will quickly make natural gas cars and light trucks available to everyone at no
big price increase over conventional gasoline cars. Natural gas is
available in almost all urban areas where most of the commuting is done. It is
easy to fuel natural gas cars at home. But this initiative does not force any
private citizen to buy natural gas/dual-fuel cars.

1. Natural gas
is the only significant "alternative transportation fuel" that is
certain to be available over the ten to twenty years. And it is available
everywhere, right now!

2. Dual-fuel
natural gas+gasoline(or ethanol) cars will quickly be available to the general public at no
increased cost. Car makers now deliver them for utilities and taxis.

3. The middle
east oil countries know how much natural gas we have. They are terrified that
we start using it and less of their oil. They will bring the price of gas down
to $2 a gallon and keep it there to discourage our conversion.

This is a all-win, no-lose initiative for you. All you have to do
is sign a piece of paper. Any agency that does not want to buy natural gas, dual-fuel
vehicles can opt out. But your executive order alone will cause foreign oil
suppliers to think twice about blackmailing the U.S. for oil. It tells them where
we are going -- and that we will not need their oil in ten years or so.

The biggest
worry for the foreign oil suppliers is that we will start using our enormous
natural gas supplies, now estimated to supply the U.S. more than 100 years. The price
of gasoline will drop to $2.00 per gallon or less – even before we convert
large numbers of our vehicles to natural gas. American workers – and the
economy -- will applaud you. SIMPLY
ANNOUNCING A REAL U.S.
GOVERNMENT INITIATIVE TO USE NATURAL GAS FOR TRANSPORTATION FUEL WILL BRING THE
PRICE OF CRUDE OIL DOWN BELOW $50 A BARREL.

On Gabby's Shooter

2011-01-12T17:25:00.000-08:00

The nut in question is apparently not a political ideologue and was not spurred by the hate mongers. There have been enough acts by ideologues so inspired in recent months that it's not surprising people jumped to the wrong conclusion. I'd bet they won't be wrong next time.

... "The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

I got your tax cut right here

2010-09-17T13:45:00.001-07:00

Why Congress Should Let the Bush Tax Cuts Expire - Newsweek

The tax cuts could have been made permanent or extended at some point before now. Alternatively, the folks who ran fiscal policy from 2001 through 2008—the Republican White House and a Congress that was controlled for most of that period by Republicans—could have created the conditions that would have made it possible to extend the tax cuts or make them permanent. But they didn't. Instead of running balanced budgets, they appropriated hundreds of billions of dollars to fight two wars, created an expensive, open-ended entitlement without a funding mechanism (Medicare prescription drug coverage), and increased discretionary spending. Oh, and their failures of oversight, regulation, and management led to expensive, deficit-enhancing bailouts.

...President Obama's proposal to extend the tax cuts for those making less than $250,000 per year will add $3.2 trillion to the debt. But as the Congressional Budget Office noted, extending them all will add $3.9 trillion in debt. Now, advocating tax cuts without specifying spending cuts (and, no, John Boehner, saying you want to roll back spending to 2008 levels doesn't count) means you're advocating a huge increase in new debt creation. It's sad to say, but it's nearly impossible to find a Democrat or Republican who can speak seriously about how we can align revenues with expenditures. (And, no, Rep. Paul Ryan, your much-discussed "road map" doesn't count, since it cuts taxes on the rich but doesn't lower deficits over the long term.)

The bold and confident assertions made about the links between tax rates and economic growth, market performance, and prosperity are almost certainly wrong. Turn on CNBC or look at the Wall Street Journal op-ed page these days, and you'll learn that we must keep tax rates on capital gains, dividends, and income precisely where they are because shifting them to different levels will retard economic growth. Keep this in mind: The people who designed the current, unsustainable tax system promised us that lower marginal rates, and lower taxes on capital and dividends, would boost the economy, promote investment, create jobs, spur market performance, and raise everybody's income. They were wrong. (It's no coincidence that these same people also warned us that raising taxes in 1993 would kill market returns and the economy. They were wrong then, too. They're pretty much always wrong.)

GOP destroyed economy

2010-08-13T07:27:00.000-07:00

Reagan insider: GOP destroyed economy Paul B. Farrell - MarketWatch

or perhaps it should be titled something like "Self-inflicted wounds are invariably the most painful."?...

ARROYO GRANDE, Calif. (MarketWatch) -- "How my G.O.P. destroyed the U.S. economy." Yes, that is exactly what David Stockman, President Ronald Reagan's director of the Office of Management and Budget, wrote in a recent New York Times op-ed piece, "Four Deformations of the Apocalypse."

Get it? Not "destroying." The GOP has already "destroyed" the U.S. economy, setting up an "American Apocalypse."

Yes, Stockman is equally damning of the Democrats' Keynesian policies. But what this indictment by a party insider -- someone so close to the development of the Reaganomics ideology -- says about America, helps all of us better understand how America's toxic partisan-politics "holy war" is destroying not just the economy and capitalism, but the America dream. And unless this war stops soon, both parties will succeed in their collective death wish.

But why focus on Stockman's message? It's already lost in the 24/7 news cycle. Why? We need some introspection. Ask yourself: How did the great nation of America lose its moral compass and drift so far off course, to where our very survival is threatened?

We've arrived at a historic turning point as a nation that no longer needs outside enemies to destroy us, we are committing suicide. Democracy. Capitalism. The American dream. All dying. Why? Because of the economic decisions of the GOP the past 40 years, says this leading Reagan Republican.

Please listen with an open mind, no matter your party affiliation: This makes for a powerful history lesson, because it exposes how both parties are responsible for destroying the U.S. economy. Listen closely:
Reagan Republican: the GOP should file for bankruptcy

Stockman rushes into the ring swinging like a boxer: "If there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation's public debt ... will soon reach $18 trillion." It screams "out for austerity and sacrifice." But instead, the GOP insists "that the nation's wealthiest taxpayers be spared even a three-percentage-point rate increase."

In the past 40 years Republican ideology has gone from solid principles to hype and slogans. Stockman says: "Republicans used to believe that prosperity depended upon the regular balancing of accounts -- in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses too."

No more. Today there's a "new catechism" that's "little more than money printing and deficit finance, vulgar Keynesianism robed in the ideological vestments of the prosperous classes" making a mockery of GOP ideals. Worse, it has resulted in "serial financial bubbles and Wall Street depredations that have crippled our economy." Yes, GOP ideals backfired, crippling our economy.

Stockman's indictment warns that the Republican party's "new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one:"
Stage 1. Nixon irresponsible, dumps gold, U.S starts spending binge

Richard Nixon's gold policies get Stockman's first assault, for defaulting "on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world." So for the past 40 years, America's been living "beyond our means as a nation" on "borrowed prosperity on an epic scale ... an outcome that Milton Friedman said could never happen when, in 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves."

Remember Friedman: "Just let the free market set currency exchange rates, he said, and trade deficits will self-correct." Friedman was wrong by trillions. And unfortunately "once relieved of the discipline of defending a fixed value for their currencies, politicians the world over were free to cheapen their money and disregard their neighbors."

And without discipline America was also encouraging "global monetary chaos as foreign central banks run their own printing presses at ever faster speeds to sop up the tidal wave of dollars coming from the Federal Reserve." Yes, the road to the coming apocalypse began with a Republican president listening to a misguided Nobel economist's advice.

Stage 2. Crushing debts from domestic excesses, war mongering

Stockman says "the second unhappy change in the American economy has been the extraordinary growth of our public debt. In 1970 it was just 40% of gross domestic product, or about $425 billion. When it reaches $18 trillion, it will be 40 times greater than in 1970." Who's to blame? Not big-spending Dems, says Stockman, but "from the Republican Party's embrace, about three decades ago, of the insidious doctrine that deficits don't matter if they result from tax cuts."

Back "in 1981, traditional Republicans supported tax cuts," but Stockman makes clear, they had to be "matched by spending cuts, to offset the way inflation was pushing many taxpayers into higher brackets and to spur investment. The Reagan administration's hastily prepared fiscal blueprint, however, was no match for the primordial forces -- the welfare state and the warfare state -- that drive the federal spending machine."

OK, stop a minute. As you absorb Stockman's indictment of how his Republican party has "destroyed the U.S. economy," you're probably asking yourself why anyone should believe a traitor to the Reagan legacy. I believe party affiliation is irrelevant here. This is a crucial subject that must be explored because it further exposes a dangerous historical trend where politics is so partisan it's having huge negative consequences.

Yes, the GOP does have a welfare-warfare state: Stockman says "the neocons were pushing the military budget skyward. And the Republicans on Capitol Hill who were supposed to cut spending, exempted from the knife most of the domestic budget -- entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans' fiscal religion."

When Fed chief Paul Volcker "crushed inflation" in the '80s we got a "solid economic rebound." But then "the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts." By 2009, they "reduced federal revenues to 15% of gross domestic product," lowest since the 1940s. Still today they're irrationally demanding an extension of those "unaffordable Bush tax cuts [that] would amount to a bankruptcy filing."

Recently Bush made matters far worse by "rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures." Bush also gave in "on domestic spending cuts, signing into law $420 billion in nondefense appropriations, a 65% percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy." Takes two to tango.
Stage 3. Wall Street's deadly 'vast, unproductive expansion'

Stockman continues pounding away: "The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector." He warns that "Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation." Wrong, not oblivious. Self-interested Republican loyalists like Paulson, Bernanke and Geithner knew exactly what they were doing.

They wanted the economy, markets and the government to be under the absolute control of Wall Street's too-greedy-to-fail banks. They conned Congress and the Fed into bailing out an estimated $23.7 trillion debt. Worse, they have since destroyed meaningful financial reforms. So Wall Street is now back to business as usual blowing another bigger bubble/bust cycle that will culminate in the coming "American Apocalypse."

Stockman refers to Wall Street's surviving banks as "wards of the state." Wrong, the opposite is true. Wall Street now controls Washington, and its "unproductive" trading is "extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives." Wall Street banks like Goldman were virtually bankrupt, would have never survived without government-guaranteed deposits and "virtually free money from the Fed's discount window to cover their bad bets."
Stage 4. New American Revolution class-warfare coming soon

Finally, thanks to Republican policies that let us "live beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore," while at home "high-value jobs in goods production ... trade, transportation, information technology and the professions shrunk by 12% to 68 million from 77 million."

As the apocalypse draws near, Stockman sees a class-rebellion, a new revolution, a war against greed and the wealthy. Soon. The trigger will be the growing gap between economic classes: No wonder "that during the last bubble (from 2002 to 2006) the top 1% of Americans -- paid mainly from the Wall Street casino -- received two-thirds of the gain in national income, while the bottom 90% -- mainly dependent on Main Street's shrinking economy -- got only 12%. This growing wealth gap is not the market's fault. It's the decaying fruit of bad economic policy."

Get it? The decaying fruit of the GOP's bad economic policies is destroying our economy.
Warning: this black swan won't be pretty, will shock, soon

His bottom line: "The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing ... it's a pity that the modern Republican party offers the American people an irrelevant platform of recycled Keynesianism when the old approach -- balanced budgets, sound money and financial discipline -- is needed more than ever."

Wrong: There are far bigger things to "pity."

First, that most Americans, 300 million, are helpless, will do nothing, sit in the bleachers passively watching this deadly partisan game like it's just another TV reality show.

Second, that, unfortunately, politicians are so deep-in-the-pockets of the Wall Street conspiracy that controls Washington they are helpless and blind.

And third, there's a depressing sense that Stockman will be dismissed as a traitor, his message lost in the 24/7 news cycle ... until the final apocalyptic event, an unpredictable black swan triggers another, bigger global meltdown, followed by a long Great Depression II and a historic class war.

So be prepared, it will hit soon, when you least expect.

2010-06-02T11:14:00.000-07:00

Today's college kids lack empathy
Compared to 30 years ago, it's all about me now, study finds
By Jeanna Bryner
updated 8:55 a.m. PT, Fri., May 28, 2010

College students today are less likely to "get" the emotions of others than their counterparts 20 and 30 years ago, a new review study suggests.

Specifically, today's students scored 40 percent lower on a measure of empathy than their elders did.

The findings are based on a review of 72 studies of 14,000 American college students overall conducted between 1979 and 2009.
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"We found the biggest drop in empathy after the year 2000," said Sara Konrath, a researcher at the University of Michigan's Institute for Social Research.

The study was presented this week at the annual meeting of the Association for Psychological Science in Boston.

Compared with college students of the late 1970s, current students are less likely to agree with statements such as "I sometimes try to understand my friends better by imagining how things look from their perspective," and "I often have tender, concerned feelings for people less fortunate than me."

Konrath's colleague graduate student Edward O'Brien added, "It's not surprising that this growing emphasis on the self is accompanied by a corresponding devaluation of others.”

Other recent studies have shown mixed results on the character of today's youth . For instance, one study of more than 450,000 high-school seniors born at different time periods showed today’s youth are no more self-centered than their parents were at their age.

The role of media
Even so, Konrath and O'Brien suggest several reasons for the lower empathy they found, including the ever-increasing exposure to media in the current generation.

"Compared to 30 years ago, the average American now is exposed to three times as much nonwork-related information," Konrath said. "In terms of media content, this generation of college students grew up with video games , and a growing body of research, including work done by my colleagues at Michigan, is establishing that exposure to violent media numbs people to the pain of others."

The rise in social media could also play a role.

"The ease of having 'friends' online might make people more likely to just tune out when they don't feel like responding to others' problems, a behavior that could carry over offline," O'Brien said.

In fact, past research has suggested college students are addicted to social media .

Other possible causes include a society today that’s hypercompetitive and focused on success, as well as the fast-paced nature of today, in which people are less likely than in time periods past to slow down to really listen to others, O'Brien added

http://www.msnbc.msn.com/id/37399539/ns/health-behavior/

... "The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

... I rank pretty damn low myself. I wonder what it all means.

Olbermann: GOP self-destruction imminent

2010-03-24T10:37:00.000-07:00

The party's obsolete ideas will undermine its relevance
March. 22, 2010

Finally as promised, a Special Comment in the wake of the passage of Health Care Reform and it's a first step, there's a lot wrong with it, but the penalty for not paying the fine for not buying the mandatory insurance has been reduced to nothing.

So, blessings nonetheless on those who took this first step, pat yourselves on the back, and, tomorrow morning, get back to work fixing what is still wrong with our American Health Care system. These remarks are about our political climate in the wake of the bill's passage.

Eight days ago, a 16-year old kid picked up a courtesy phone at a store in Washington Township, New Jersey, and announced over the public address system, quote "Attention, WalMart customers: All black people leave the store now." The boy has been arrested and charged with harassment and bias intimidation.

Two days ago, a Tea Party protestor shouted the "n" word at Congressman John Lewis of Georgia, one of the heroes of 20th Century America, and Congressman Andre Carson of Indiana and another shouted anti-gay slurs at Congressman Barney Frank of Massachusetts.

Capitol Hill Police confirm no arrests were made and there were no serious efforts to identify the vermin involved. Television, print, and radio news organizations will not be asked to turn over their tapes and images of the event, nor subpoenaed if necessary. This is not to dismiss what the 16-year old did in New Jersey.

But it would seem that what was shouted at the Congressmen merits at least as much investigation and hopefully as much prosecution. After all, it did occur inside the halls of Congress, a place at least as crowded as, and as sanctified as a WalMart.

In a backwards, sick-to-my-stomach way, I would like to thank whoever shouted at Mr. Lewis and Mr. Carson for proving my previous point. If racism is not the whole of the Tea Party, it is in its heart, along with blind hatred, a total disinterest in the welfare of others, and a full-flowered, self-rationalizing refusal to accept the outcomes of elections, or the reality of Democracy, or of the narrowness of their minds and the equal narrowness of their public support.

On Saturday, that support came from evolutionary regressives as Michele Bachmann and Jon Voight. On a daily basis that support comes from the racists and homophobes of radio and television: the Michael Savages and the Rush Limbaughs. Shockingly, that support even came, on a specific basis, from another Congressman, Republican Devin Nunes of the California 21st.

"When you use totalitarian tactics, people, you know, begin to act crazy," he said on C-SPAN. "And I think, you know, there's people that have every right to say what they want. If they want to smear someone, they can do it."

Congressman Nunes, you should resign. You have no business opening a door for a man like John Lewis, let alone serving alongside him. And if you shouldn't resign for your endorsement, your encouragement, of the most vile, the most reprehensible, and the most outdated spewings of the lizard-brain of this country, you should resign because of your total disconnect from reality.

There have been no "totalitarian tactics," Congressman. People, these few, sad, people, have begun to act crazy, because it has been the dedicated purpose, the sole method and sole function, of the Republican party, to entice them to act crazy.

Those shouts against the Congressmen, Mr. Nunes, were inspired not by what people like John Lewis have done in their lives. They have been inspired by what people like you have done in the last year.

And so the far right escalates the rhetoric and the level of threat, just a little more. And worse still, it escalates the level of delusion. The election of a Democratic president is socialism. The election of a black president is an international conspiracy. The enactment of any health care reform is an apocalypse. And the willful denial of reality by the leader of the minority party in Congress is the only truth.

A willful denial, incidentally, that includes the leader of the minority party in Congress ignoring the fact that his is the minority party, and that he represents the minority, and that despite having broken all the rules of decorum in place in this nation since the end of the Civil War
that despite having played every trick — mean and low, despite having the limitless financial backing of one of the biggest cartels in the world, he and his cronies and the manufactured outrage of the Tea Party failed to derail Health Care Reform.

Failed Mr. Boehner. You lost. You blew it. "Shame on each and every one of you who substitutes your will and your desires above those of your fellow countrymen," you said last night just before the vote. The will and desire of your countrymen, Mr. Boehner?

If you're one of the leaders of a party that in four years coughed up the Senate Majority, coughed up the House Majority, coughed up the White House, coughed up Health Care Reform, and along the way ignored every poll and every election result, I would think the "will and desires of your fellow countrymen" should be pretty damn clear by now: Your countrymen think your policies are of the past, and your tactics are of the gutter.

But Boehner’s teary "shame on you" over the tyranny of the vast majority taking a scrap back from the elite clueless minority — that's just an isolated incident. Just as Congressman Neugebauer shouting "Baby-Killer" at, or " It's a Baby-Killer" during, Congressman Stupak's laudable speech last night was just an isolated incident.

Just as the shouting of "n" words at Congressmen Lewis and Carson was just an isolated incident. Just as the spitting on Congressman Cleaver was just an isolated incident . Just as the abuse of Congressman Frank was just an isolated incident. Just as the ethnic slurs shouted at Congressman Rodriguez of Texas was just an isolated incident. Just as the oinking by Congressman Wilson during the President's address was just an isolated incident.

Just as whatever's next will be just an isolated incident. You know what they call it when you have a once-a-week series of isolated incidents? They call it two things. They call it a "pattern" and in the United States of 2010 they call it "The Republican Party."

American political parties have disappeared before. They are never forced out by their rivals. They die by their own hands, because they did not know that the hatred or the myopia or the monomania they thought was still okay wasn't okay, any more. And so I offer this olive branch to the defeated Republicans and Tea Partyers.

It is a cold olive branch, and scarred, and there aren't many olives on it, but it still counts.You are rapidly moving from "The Party of No," past "The Party Of No Conscience," towards "The Party of No Relevancy." You are behind the wheel of a political Toyota. And before the mid-terms, you will have been reduced to only being this generation's home for the nuts.

You will be the Flat-Earthers, the Isolationists, the Segregationists, the John Birchers. Stop.
Certainly you must recognize the future is with the humane, the inclusive, the diverse— it is with America. Not the America of 1910, but the America of 2010. Discard this dangerous, separatist, elitist, backward-looking rhetoric, and you will be welcomed back into the political discourse of this nation. Continue with it, and you will destroy yourselves and whatever righteous causes you actually believe in, and on the way you will damage this country in ways and manners untold.

But even that damage will not be permanent. Faubus, and the MacNamara Brothers, and Bull Connor, and Lindbergh, and Joe McCarthy damaged this nation. We survived and they were swept away by history. You cannot destroy this country, no matter how hard you seem to be trying to nor can you destroy this country's inexorable march towards the light.

The Belgian Nobel Prize winner Maurice Maeterlinck once wrote that, quote, "at every cross-roads on the path that leads to the future, tradition has placed 10-thousand men to guard the past." Last night those 10,000 men fell.

http://www.msnbc.msn.com/id/35990654
...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

AGW Skeptic Arguments and What the Science Says

2010-02-19T09:16:00.000-08:00

http://www.skepticalscience.com/argument.php

Here is a summary of what the science says on each skeptic argument. You can also view the arguments sorted by taxonomy.
Skeptic Argument vs What the Science Says
1 "It's the sun" In the last 35 years of global warming, the sun has shown a slight cooling trend. Sun and climate have been going in opposite directions.
2 "Climate's changed before" Natural climate change in the past proves that climate is sensitive to an energy imbalance. If the planet accumulates heat, global temperatures will go up. Currently, CO2 is imposing an energy imbalance due to the enhanced greenhouse effect. Past climate change actually provides evidence for our climate's sensitivity to CO2.
3 "There is no consensus" That humans are causing global warming is the position of the Academies of Science from 19 countries plus many scientific organisations that study climate science. More specifically, 97% of climate scientists actively publishing climate papers endorse the consensus position.
4 "It's cooling" Empirical measurements of the Earth's heat content show the planet is still accumulating heat and global warming is still happening. Surface temperatures can show short term cooling when heat is exchanged between the atmosphere and the ocean, which has a much greater heat capacity than the air.
5 "Models are unreliable" While there are uncertainties with climate models, they successfully reproduce the past and have made predictions that have been subsequently confirmed by observations.
6 "Temp record is unreliable" Numerous studies into the effect of urban heat island effect and microsite influences find they have negligible effect on long term trends, particularly when averaged over large regions.
7 "It hasn't warmed since 1998" The planet has continued to accumulate heat since 1998 - global warming is still happening. Nevertheless, surface temperatures show much internal variability due to heat exchange between the ocean and atmosphere. 1998 was an unusually hot year due to a strong El Nino.
8 "Ice age predicted in the 70s" 1970s ice age predictions were predominantly media based. The majority of peer reviewed research at the time predicted warming due to increasing CO2.
9 "We're heading into an ice age" The warming effect from CO2 increases greatly outstrips the influence from orbital changes or variations in solar activity even if solar levels were to drop to Maunder Minimum levels.
10 "Antarctica is gaining ice" While the interior of East Antarctica is gaining land ice, overall Antarctica is losing land ice at an accelerating rate. Antarctic sea ice is growing despite a strongly warming Southern Ocean.
11 "CO2 lags temperature" When the Earth comes out of an ice age, the warming is not initiated by CO2 but by changes in the Earth's orbit. The warming causes the oceans to give up CO2. The CO2 amplifies the warming and mixes through the atmosphere, spreading warming throughout the planet. So CO2 causes warming AND rising temperature causes CO2 rise.
12 "Global warming is good" The negative impacts of global warming on agriculture, health, economy and environment far outweigh any positives.
13 "Al Gore got it wrong" While there are minor errors in An Inconvenient Truth, the main truths presented - evidence to show mankind is causing global warming and its various impacts is consistent with peer reviewed science.
14 "It's freaking cold!" Since the mid 1970s, global temperatures have been warming at around 0.2 degrees Celsius per decade. However, weather imposes its own dramatic ups and downs over the long term trend. We expect to see record cold temperatures even during global warming. Nevertheless over the last decade, daily record high temperatures occurred twice as often as record lows. This tendency towards hotter days is expected to increase as global warming continues into the 21st Century.
15 "Hurricanes aren't linked to global warming" It is unclear whether global warming is increasing hurricane frequency but there is increasing evidence that warming increases hurricane intensity.
16 "Mars is warming" Martian climate is primarily driven by dust and albedo and there is little empirical evidence that Mars is showing long term warming.
17 "It's cosmic rays" While the link between cosmic rays and cloud cover is yet to be confirmed, more importantly, there has been no correlation between cosmic rays and global temperatures over the last 30 years of global warming.
18 "1934 - hottest year on record" 1934 is the hottest year on record in the USA which only comprises 2% of the globe. According to NASA temperature records, the hottest year on record globally is 2005.
19 "It's just a natural cycle" The 1500 year cycles, known as Dansgaard-Oeschger events, are localized to the northern hemisphere and accompanied with cooling in the southern hemisphere. In contrast, current global warming is occuring in both hemispheres and particularly throughout the world's oceans, indicating a significant energy imbalance.
20 "Sea levels aren't rising (much)" Sea levels are measured by a variety of methods that show close agreement - sediment cores, tidal gauges, satellite measurements. What they find is sea level rise has been steadily accelerating over the past century.
21 "It's Urban Heat Island effect" While urban areas are undoubtedly warmer than surrounding rural areas, this has had little to no impact on warming trends.
22 "Hockey stick is broken" Since the hockey stick paper in 1998, there have been a number of proxy studies analysing a variety of different sources including corals, stalagmites, tree rings, boreholes and ice cores. They all confirm the original hockey stick conclusion: the 20th century is the warmest in the last 1000 years and that warming was most dramatic after 1920.
23 "Arctic icemelt is a natural cycle" Arctic sea ice has been retreating over the past 30 years. The rate of retreat is accelerating and in fact is exceeding most models' forecasts.
24 "Other planets are warming" There are three fundamental flaws in the 'other planets are warming' argument. Not all planets in the solar system are warming. The sun has shown no long term trend since 1950 and in fact has shown a slight cooling trend in recent decades. There are explanations for why other planets are warming.
25 "Water vapor is the most powerful greenhouse gas" Water vapour is the most dominant greenhouse gas. Water vapour is also the dominant positive feedback in our climate system and amplifies any warming caused by changes in atmospheric CO2. This positive feedback is why climate is so sensitive to CO2 warming.
26 "Greenland was green" The Greenland ice sheet has existed for at least 400,000 years. There may have been regions of Greenland that were 'greener' than today but this was not a global phenomenon.
27 "Human CO2 is a tiny % of CO2 emissions" The CO2 that nature emits (from the ocean and vegetation) is balanced by natural absorptions (again by the ocean and vegetation). Therefore human emissions upset the natural balance, rising CO2 to levels not seen in at least 800,000 years. In fact, human emit 26 gigatonnes of CO2 per year while CO2 in the atmosphere is rising by only 15 gigatonnes per year - much of human CO2 emissions is being absorbed by natural sinks.
28 "We're coming out of an ice age" The main driver of the warming from the Little Ice Age to 1940 was the warming sun with a small contribution from volcanic activity. However, solar activity leveled off after 1940 and the net influence from sun and volcano since 1940 has been slight cooling. Greenhouse gases have been the main contributor of warming since 1970.
29 "Oceans are cooling" Early estimates of ocean heat from the Argo showed a cooling bias due to pressure sensor issues. Recent estimates of ocean heat that take this bias into account show continued warming of the upper ocean. This is confirmed by independent estimates of ocean heat as well as more comprehensive measurements of ocean heat down to 2000 metres deep.
30 "It cooled mid-century" There are a number of forcings which affect climate (eg - stratospheric aerosols, solar variations). When all forcings are combined, they show good correlation to global temperature throughout the 20th century including the mid-century cooling period. However, for the last 35 years, the dominant forcing has been CO2.
31 "It warmed before 1940 when CO2 was low" Early 20th century warming was in large part due to rising solar activity and relatively quiet volcanic activity. However, both factors have played little to no part in the warming since 1975. Solar activity has been steady since the 50's. Volcanoes have been relatively frequent and if anything, have exerted a cooling effect.
32 "Mt. Kilimanjaro's ice loss is due to land use" Mount Kilimanjaro's shrinking glacier is complicated and not due to just global warming. However, this does not mean the Earth is not warming. There is ample evidence that Earth's average temperature has increased in the past 100 years and the decline of mid- and high-latitude glaciers is a major piece of evidence.
33 "Climate sensitivity is low" Climate sensitivity can be calculated empirically by comparing past temperature change to natural forcings at the time. Various periods of Earth's past have been examined in this manner and find broad agreement of a climate sensitivity of around 3°C.
34 "There's no empirical evidence" Direct observations find that CO2 is rising sharply due to human activity. Satellite and surface measurements find less energy is escaping to space at CO2 absorption wavelengths. Ocean and surface temperature measurements find the planet continues to accumulate heat. This gives a line of empirical evidence that human CO2 emissions are causing global warming.
35 "Polar bear numbers are increasing" While there is some uncertainty on current polar bear population trends, one thing is certain. No sea ice means no seals which means no polar bears. With Arctic sea ice retreating at an accelerating rate, the polar bear is at grave risk of extinction
36 "Glaciers are growing" While there are isolated cases of growing glaciers, the overwhelming trend in glaciers worldwide is retreat. In fact, the global melt rate has been accelerating since the mid-1970s.
37 "Extreme weather isn't caused by global warming" There is growing empirical evidence that warming temperatures cause more intense hurricanes, heavier rainfalls and flooding, increased conditions for wildfires and dangerous heat waves.
38 "Satellites show no warming in the troposphere" Satellite measurements match model results apart from in the tropics. There is uncertainty with the tropic data due to how various teams correct for satellite drift. The U.S. Climate Change Science Program conclude the discrepancy is most likely due to data errors.
39 "IPCC does not represent a scientific consensus" The IPCC lead authors are experts in their field, instructed to fairly represent the full range of the up-to-date, peer-reviewed literature. Consequently, the IPCC reports tend to be cautious in their conclusions. Comparisons to the most recent data consistently finds that climate change is occurring more rapidly and intensely than indicated by IPCC predictions.
40 "CO2 effect is weak" An enhanced greenhouse effect from CO2 has been confirmed by multiple lines of empirical evidence. Satellite measurements of infrared spectra over the past 40 years observe less energy escaping to space at the wavelengths associated with CO2. Surface measurements find more downward infrared radiation warming the planet's surface. This provides a direct, empirical causal link between CO2 and global warming.
41 "CO2 is not a pollutant" While there are direct ways in which CO2 is a pollutant (acidification of the ocean), it's primary impact is its greenhouse warming effect. While the greenhouse effect is a natural occurance, too much warming has severe negative impacts on agriculture, health and environment.
42 "There's no correlation between CO2 and temperature" Even during a period of long term warming, there are short periods of cooling due to climate variability. Short term cooling over the last few years is largely due to a strong La Nina phase in the Pacific Ocean and a prolonged solar minimum.
43 "CO2 has been higher in the past" When CO2 levels were higher in the past, solar levels were also lower. The combined effect of sun and CO2 matches well with climate.
44 "Scientists can't even predict weather" Weather is chaotic, making prediction difficult. However, climate takes a long term view, averaging weather out over time. This removes the chaotic element, enabling climate models to successfully predict future climate change.
45 "Greenland is gaining ice" While the Greenland interior is in mass balance, the coastlines are losing ice. Overall Greenland is losing ice mass at an accelerating rate. From 2002 to 2009, the rate of ice mass loss doubled.
46 "Neptune is warming" Neptune's orbit is 164 years so observations (1950 to present day) span less than a third of a Neptunian year. Climate modelling of Neptune suggests its brightening is a seasonal response. Eg - Neptune's southern hemisphere is heading into summer.
47 "Jupiter is warming" Jupiter's climate change is due to shifts in internal turbulence fueled from an internal heat source - the planet radiates twice as much energy as it receives from the sun.
48 "CRU emails suggest climate conspiracy" While some of the private correspondance is not commendable, an informed examination of their "suggestive" emails reveal technical discussions using techniques well known in the peer reviewed literature. Focusing on a few suggestive emails merely serves to distract from the wealth of empirical evidence for man-made global warming.
49 "There's no tropospheric hot spot" Satellite measurements match model results apart from in the tropics. There is uncertainty with the tropic data due to how various teams correct for satellite drift. The U.S. Climate Change Science Program conclude the discrepancy is most likely due to data errors.
50 "Pluto is warming" Pluto's climate change over the last 14 years is likely a seasonal event. Pluto experiences drastic season changes due to an elliptical orbit (that takes 250 Earth years). Any Plutonian warming cannot be caused by solar variations as the sun has showed little to no long term trend over the past 50 years and sunlight at Pluto is 900 times weaker than it is at the Earth.
51 "It's Pacific Decadal Oscillation" PDO as an oscillation between positive and negative values shows no long term trend, while temperature shows a long term warming trend. When the PDO last switched to a cool phase, global temperatures were about 0.4C cooler than currently. The long term warming trend indicates the total energy in the Earth's climate system is increasing due to an energy imbalance.
52 "Greenland ice sheet is stable" Satellite gravity measurements show Greenland is losing ice mass at an accelerated rate, increasing its contribution to rising sea levels.
53 "It's the ocean" Oceans are warming across the globe. In fact, globally oceans are accumulating energy at a rate of 4 x 1021 Joules per year - equivalent to 127,000 nuclear plants (which have an average output of 1 gigawatt) pouring their energy directly into the world's oceans. This tells us the planet is in energy imbalance - more energy is coming in than radiating back out to space.
54 "The CO2 effect is saturated" If the CO2 effect was saturated, adding more CO2 should add no additional greenhouse effect. However, satellite and surface measurements observe an enhanced greenhouse effect at the wavelengths that CO2 absorb energy. This is empirical proof that the CO2 effect is not saturated.
55 "Animals and plants can adapt to global warming" A large number of ancient mass extinction events have been strongly linked to global climate change. Because current climate change is so rapid, the way species typically adapt (eg - migration) is, in most cases, simply not be possible. Global change is simply too pervasive and occurring too rapidly.
56 "Volcanoes emit more CO2 than humans" Volcanoes emit around 0.3 billion tonnes of CO2 per year. This is about 1% of human CO2 emissions which is around 29 billion tonnes per year.
57 "Less than half of published scientists endorse global warming" Schulte's paper makes much of the fact that 48% of the papers they surveyed are neutral papers, refusing to either accept or reject anthropogenic global warming. The fact that so many studies on climate change don't bother to endorse the consensus position is significant because scientists have largely moved from what's causing global warming onto discussing details of the problem (eg - how fast, how soon, impacts, etc).
58 "CO2 measurements are suspect" CO2 levels are measured by hundreds of stations scattered across 66 countries which all report the same rising trend.
59 "It's aerosols" The global dimming trend reversed around 1990 - 15 years after the global warming trend began in the mid 1970's.
60 "It's El Niño" The El Nino Southern Oscillation shows close correlation to global temperatures over the short term. However, it is unable to explain the long term warming trend over the past few decades.
61 "It's a climate regime shift" A full reading of Tsonis and Swanson's research shows that internal variability from climate shifts merely cause temporary slow downs or speeding up of the long-term warming trend. When the internal variability is removed from the temperature record, what we find is nearly monotonic, accelerating warming throughout the 20th Century.
62 "Humans are too insignificant to affect global climate" Atmospheric CO2 levels are rising by 15 gigatonnes per year. Humans are emitting 26 gigatonnes of CO2 into the atmosphere. Humans are dramatically altering the composition of our climate.
63 "It's land use" Correlations between warming and economic activity are most likely spurious. They don't take into account local forcing agents such as tropospheric ozone or black carbon. Correlations are likely over-estimated since grid boxes in both economic and climate data are not independent. Lastly, there is significant independent evidence for warming in the oceans, snow cover and sea ice extent changes.
64 "It's microsite influences" Data analysis comparing the temperature trends from poorly sited weather stations to well sited stations find the poor sites actually show a cooling bias compared to good sites. The cooling bias is caused by a change to the Maximum/Minimum Temperature Systems which is found more often at poor sites. When the change of instrument biases are taken into account, there is very little difference between the trends from poor and well sited weather stations.
65 "It's methane" While methane is a more potent greenhouse gas than CO2, there is over 200 times more CO2 in the atmosphere. Hence the amount of warming methane contributes is 28% of the warming CO2 contributes.
66 "Medieval Warm Period was warmer" While the Medieval Warm Period saw unusually warm temperatures in some regions, globally the planet was cooler than current conditions.
67 "Solar Cycle Length proves its the sun" The claim that solar cycle length proves the sun is driving global warming is based on a single study published in 1991. Subsequent research, including a paper by a co-author of the original 1991 paper, finds the opposite conclusion. Solar cycle length as a proxy for solar activity tells us the sun has had very little contribution to global warming since 1975.
68 "Naomi Oreskes' study on consensus was flawed" An examination of the papers that critics claim refute the consensus are found to actually endorse the consensus or are review papers (eg - they don't offer any new research but merely review other papers). This led the original critic Benny Peisner to retract his criticism of Oreskes' study.
69 "Water levels correlate with sunspots" There seems to be evidence for a link between solar activity and water levels. However, more direct comparisons between solar activity and global temperature finds that as the sun grew hotter or cooler, Earth's climate followed it with a 10 year lag - presumably due to the dampening effect of the ocean. Also found was that the correlation between solar activity and global temperatures ended around 1975, hence recent warming must have some other cause than solar variations.
70 "Solar cycles cause global warming" A full reading of Tung 2008 finds a distinct 11 year solar signal in the global temperature record. However, this 11 year cycle is superimposed over the long term global warming trend. In fact, the authors go on to estimate climate sensitivity from their findings, calculate a value between 2.3 to 4.1°C. This confirms the IPCC estimate of climate sensitivity.
71 "The sun is getting hotter" Various independent measurements of solar activity all confirm the sun has shown a slight cooling trend since 1978.
72 "IPCC were wrong about Himalayan glaciers" The IPCC error on the 2035 prediction was unfortunate and it's important that such mistakes are avoided in future publications through more rigorous review. But the central message of the IPCC AR4, is confirmed by the peer reviewed literature. The Himalayan glaciers are of vital importance, providing drinking water to half a billion people. Satellites and on-site measurements are observing that Himalayan glaciers are disappearing at an accelerating rate.
73 "It's albedo" The long term trend from albedo is that of cooling. In recent years, satellite measurements of albedo show little to no trend.
74 "Water vapor in the stratosphere stopped global warming" The effect from stratospheric water vapor contributes a fraction of the temperature change imposed from man-made greenhouse gases. Also, it's not yet clear whether changes in stratospheric water vapor are caused by a climate feedback or internal variability (eg - linked to El Nino Southern Oscillation). However, the long term warming trend seems to speak against the possibility of a negative feedback.
75 "Phil Jones says no global warming since 1995" When you read Phil Jones' actual words, you see he's saying there is a warming trend but it's not statistically significant. He's not talking about whether warming is actually happening. He's discussing our ability to detect that warming trend in a noisy signal over a short period.
76 "CO2 is not the only driver of climate" While there are many drivers of climate, CO2 is the most dominant radiative forcing and is increasing faster than any other forcing.
77 "Sea level rise predictions are exaggerated" Observed sea levels are actually tracking at the upper range of the IPCC projections. When accelerating ice loss from Greenland and Antarctica are factored into sea level projections, the estimated sea level rise by 2100 is between 75cm to 2 metres.
78 "December 2009 saw record cold spells" The cold snap is due to a strong phase of the Arctic Oscillation. This is causing cool temperatures at mid-latitudes (eg - Eurasia and North America) and warming in polar regions (Greenland and Arctic Ocean). The warm and cool regions roughly balance each other out with little impact on global temperature.
79 "It's not happening" There are many lines of independent empirical evidence for global warming, from accelerated ice loss from the Arctic to Antarctica to the inexorable poleward migration of plant and animal species across the globe.
80 "Trenberth can't account for the lack of warming" Trenberth's views are clarified in the paper "An imperative for climate change planning: tracking Earth's global energy". We know the planet is continually heating due to increasing carbon dioxide but that surface temperature sometimes have short term cooling periods. This is due to internal variability and Trenberth was lamenting that our observation systems can't comprehensively track all the energy flow through the climate system.
81 "It's CFCs" Models and direct observations find that CFCs only contribute a fraction of the warming supplied by other greenhouse gases.
82 "CO2 is not increasing" Currently, humans are emitting around 29 billion tonnes of carbon dioxide into the atmosphere per year. Around 43% remains in the atmosphere - this is called the 'airborne fraction'. The rest is absorbed by vegetation and the oceans. While there are questions over how much the airborne fraction is increasing, it is clear that the total amount of CO2 in the atmosphere is increasing dramatically. Current CO2 levels are the highest in 15 million years.
83 "Climate is chaotic and cannot be predicted" Weather is chaotic because air is light, it has low friction and viscosity, it expands strongly when in contact with hot surfaces and it conducts heat poorly. Therefore weather is never in equilibrium and the wind always blows. The climate is mostly explained by equilibrium radiation physics, which puts the brakes on variations in global temperatures. Effects from weather, the Sun, volcanoes etc. currently only causes a small amount of chaotic behavior compared to the deterministic, predictable greenhouse gas forcing for the next 100 years"
84 "It's ozone" Multiple satellite measurements and ground-based observations have determined the ozone layer has stopped declining since 1995 while temperature trends continue upwards.
85 "It's satellite microwave transmissions" A generous estimate of the energy generated by satellites is around 1 million times too small to cause global warming.
86 "Global temperatures dropped sharply in 2007" 2007's dramatic cooling is driven by strong La Nina conditions which historically has caused similar drops in global temperature. It is also exacerbated by unusually low solar activity.
87 "Ice isn't melting" Ice mass loss is occuring at an accelerated rate in Greenland, Antarctica and globally from inland glaciers. Arctic sea ice is also falling at an accelerated rate. The exception to this ice loss is Antarctic sea ice which has been growing despite the warming Southern Ocean. This is due to local factors unique to the area.
88 "Tree-rings diverge from temperature after 1960" The divergence problem is a physical phenomenon - tree growth has slowed or declined in the last few decades, mostly in high northern latitudes. The divergence problem is unprecedented, unique to the last few decades, indicating its cause may be anthropogenic. The cause is likely to be a combination of local and global factors such as warming-induced drought and global dimming. Tree-ring proxy reconstructions are reliable before 1960, tracking closely with the instrumental record and other independent proxies.
89 "A drop in volcanic activity caused warming" A drop of volcanic activity in the early 20th century may have had a warming effect. However, volcanoes have had no warming effect in the last 40 years of global warming. If anything, they've imposed a slight cooling effect.
90 "IPCC were wrong about Amazon rainforests" The IPCC statement on Amazon rain forests is correct. The error was incorrect citation, failing to mention the peer-reviewed papers where the data came from. The peer-reviewed science prior to the 2007 IPCC report found that up to 40% of the Brazilian forest is vulnerable to drought. Subsequent field research has confirmed this assessment.
91 "We didn't have global warming during the Industrial Revolution" Global CO2 emissions during the Industrial Revolution were a fraction of the CO2 we are currently emitting now.
© Copyright 2010 John Cook

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"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Republicans and Medicare -Krugman

2010-02-13T12:06:00.001-08:00

Op-Ed Columnist - Republicans and Medicare - NYTimes.com

By PAUL KRUGMAN

Published: February 11, 2010

“Don’t cut Medicare. The reform bills passed by the House and Senate cut Medicare by approximately $500 billion. This is wrong.” So declared Newt Gingrich, the former speaker of the House, in a recent op-ed article written with John Goodman, the president of the National Center for Policy Analysis.
And irony died.

Now, Mr. Gingrich was just repeating the current party line. Furious denunciations of any effort to seek cost savings in Medicare — death panels! — have been central to Republican efforts to demonize health reform. What’s amazing, however, is that they’re getting away with it.

Why is this amazing? It’s not just the fact that Republicans are now posing as staunch defenders of a program they have hated ever since the days when Ronald Reagan warned that Medicare would destroy America’s freedom. Nor is it even the fact that, as House speaker, Mr. Gingrich personally tried to ram through deep cuts in Medicare — and, in 1995, went so far as to shut down the federal government in an attempt to bully Bill Clinton into accepting those cuts.

After all, you could explain this about-face by supposing that Republicans have had a change of heart, that they have finally realized just how much good Medicare does. And if you believe that, I’ve got some mortgage-backed securities you might want to buy.

No, what’s truly mind-boggling is this: Even as Republicans denounce modest proposals to rein in Medicare’s rising costs, they are, themselves, seeking to dismantle the whole program. And the process of dismantling would begin with spending cuts of about $650 billion over the next decade. Math is hard, but I do believe that’s more than the roughly $400 billion (not $500 billion) in Medicare savings projected for the Democratic health bills.

What I’m talking about here is the “Roadmap for America’s Future,” the budget plan recently released by Representative Paul Ryan, the ranking Republican member of the House Budget Committee. Other leading Republicans have been bobbing and weaving on the official status of this proposal, but it’s pretty clear that Mr. Ryan’s vision does, in fact, represent what the G.O.P. would try to do if it returns to power.

The broad picture that emerges from the “roadmap” is of an economic agenda that hasn’t changed one iota in response to the economic failures of the Bush years. In particular, Mr. Ryan offers a plan for Social Security privatization that is basically identical to the Bush proposals of five years ago.

But what’s really worth noting, given the way the G.O.P. has campaigned against health care reform, is what Mr. Ryan proposes doing with and to Medicare.

In the Ryan proposal, nobody currently under the age of 55 would be covered by Medicare as it now exists. Instead, people would receive vouchers and be told to buy their own insurance. And even this new, privatized version of Medicare would erode over time because the value of these vouchers would almost surely lag ever further behind the actual cost of health insurance. By the time Americans now in their 20s or 30s reached the age of eligibility, there wouldn’t be much of a Medicare program left.

But what about those who already are covered by Medicare, or will enter the program over the next decade? You’re safe, says the roadmap; you’ll still be eligible for traditional Medicare. Except, that is, for the fact that the plan “strengthens the current program with changes such as income-relating drug benefit premiums to ensure long-term sustainability.”

If this sounds like deliberately confusing gobbledygook, that’s because it is. Fortunately, the Congressional Budget Office, which has done an evaluation of the roadmap, offers a translation: “Some higher-income enrollees would pay higher premiums, and some program payments would be reduced.” In short, there would be Medicare cuts.

And it’s possible to back out the size of those cuts from the budget office analysis, which compares the Ryan proposal with a “baseline” representing current policy. As I’ve already said, the total over the next decade comes to about $650 billion — substantially bigger than the Medicare savings in the Democratic bills.

The bottom line, then, is that the crusade against health reform has relied, crucially, on utter hypocrisy: Republicans who hate Medicare, tried to slash Medicare in the past, and still aim to dismantle the program over time, have been scoring political points by denouncing proposals for modest cost savings — savings that are substantially smaller than the spending cuts buried in their own proposals.

And if Democrats don’t get their act together and push the almost-completed reform across the goal line, this breathtaking act of staggering hypocrisy will succeed.

Letter from Army major in Iraq

2010-01-03T12:05:00.001-08:00

Roy Speaks of Bakersfield, an Army major stationed in Iraq, wrote the following letter to a friend about the stresses of serving in that country. He granted us permission to share it with our readers.

Carl,

I was reading one of the many articles about how the Army is trying to figure a way to decrease the occurrence of post traumatic stress and thought of that conversation we had a couple years ago.

It is an unfortunate reality that a person who has not experienced it will never know.

I have changed. I can't talk to my wife about it, and there may be something in our conversation that may help someone in the future, so here goes.

Upon arrival your life significantly changes just by sight. Walking through the area is like walking through a maze. Fourteen-foot concrete blast walls are everywhere. The living area is symmetrically lined up and is probably two miles square. Since I am a major I share a room with another major.

The trailer itself is called a CHU -- Containerized Housing Unit. It has one door, one window, and an air conditioner. Keep in mind that your CHU is surrounded by 14-foot blast walls. They are inherently dirty.

Everything is dirty because of the dust in the summer and the mud in the winter. The walls may or may not have years of smoke film on them, not from cigarettes but from the burning trash pits and occasional fires.

Sounds like a prison cell doesn't it? Actually I can say that I believe prisoners have better conditions. At least they have a toilet in their room. I have to walk 30 yards to a porta-john and 200 yards if I want to get to a trailer. You learn to use water bottles in the middle of the night.

Food is served by third country nationals, usually Pakistani or Indian, and it is just a big room.

The food isn't bad, but you eat at the same time every day and always the same things on the menu. Sound like prison?

You go to work, you eat, work, back to the CHU and sleep. There is TV if you buy it or bring it that plays Armed Forces Network programming.

OK, that sets the stage.

Each morning I sit in on an update to the commander. The brief consists of when, where, and how attacks occurred and of course how many US KIA (killed in action) and WIA (wounded in action).

It talks continuously about how we are helping the Iraqis to secure themselves from themselves. Is that crazy or what? I always look and see that the locations of the attacks. Sometimes they occur where I have been, on occasion as recently as the day prior. I think every time that it could have been me. At the end the chaplain picks one of the U.S. service members who has been killed in the last week and does what they call a soldier tribute. We stand and listen to where he lived, what he did growing up and who he left behind. Kids, wife, mom, dad -- it all sucks because everyone leaves someone else behind. It could have been me.

At night you may be sitting in your CHU reading when the alarm sounds for incoming. You can do nothing other than hope it does not land on your CHU. You hear the explosion and try and guess how far away it was -- 1/2 mile, 1000 yards, or 100 feet? You wonder where the next one will hit and if it will hit your CHU.

Typically on those nights I do not sleep real well.

The first thing you do after the attack is head for accountability. Did it hit a friend or co-worker's CHU? Who is dead?

The next day you read the report, it landed by the chow hall; 10 wounded, 2 killed. It landed on someone's CHU. He died reading a book. It could have been me.

My job is to develop plans to "assist the Iraqi government to establish a secure and stable Iraq." They don't even help themselves. My experience is that they are ungrateful, they want, want, want.

When it is convenient they claim religious rights, when it is not convenient, they do not abide.

My view of the Arab culture has changed significantly. My views on Islam have changed significantly. And unfortunately my view on Muslims overall has changed and in particular in America.

I am angry, sad, disappointed, and scared. It could be me next. Wrong place, wrong time by coincidence and it could be me, Carl.

Means I don't get to go home. I don't get to hold Kadie or play with Mason.

It could be me, Carl. Carry that around each and every day for 12 -15 months and imagine how that effects your psyche when you return to freedom.

I can easily see a kid having too much to drink, too much anger, getting over being scared s------- every night for 12 months. He is in the wrong place at the wrong time and circumstances trigger something. An inner thought or feeling and he makes a mistake.

Bang, no representation or representation that can't understand. Representation that wants to understand but just can't. It is impossible unless you have lived it. There is no jury of peers, only a jury of people that don't understand. A judge that doesn't understand.

I am not excusing criminal behavior, merely using it as an example. I could have used employment to prove a point.

I am praying that when I get home I can sleep, the edge comes off, the anger goes away and the old Roy comes back but I don't know.

I can tell you that regardless of the adjustment and re-integration there are feelings that will never change. This experience changes all of us whether they admit it or not.

OK, how is that for a rambling story? Thanks for listening and I look forward to the dialogue. I think it helps me to talk about it.

It's now 295 days down and 75 remaining. I can see the light at the end of the tunnel but I am not sure where it leads. I do not for one second regret my service to my country nor do I regret my most recent deployment. I have learned so many things, met great people, and influenced the Iraqi conflict on behalf of the American citizens.

The difficulty of being separated from your family, however, is immeasurable.

Surrounded by so many, but have never felt so alone.

Five Critical Flaws in the Senate Health Care Bill

2009-12-22T15:06:00.000-08:00

The Senate bill would:

#1—Deny Americans the choice of a public option. In contrast, the House bill contains a national public option, the key to real competition, greater choice, and lower costs.

#2—Leave insurance unaffordable for some lower income and working people. Both bills require virtually all Americans to buy insurance. But even with the subsidies provided, some families could have to pay up to 20% of their income on health care expenses.

#3—Impose dangerous restrictions on women's reproductive health care. Unfortunately, both bills do this and the House provision is worse. Both versions would be a dangerous step and neither should be in the final bill.

#4—Tax American workers' health coverage to pay for reform. The Senate would pay for part of reform by taxing the hard-won benefits packages of many working Americans. The House, on the other hand, pays for reform with a small surcharge on only the wealthiest Americans—a far better approach.

#5—Allow insurance companies to remain exempt from anti-trust laws. Under current law, insurance companies are actually exempt from laws designed to prevent monopolies and price-gouging. The House bill would fix this, but the Senate bill leaves it in place.
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"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

I wonder what Ben Stein would say now

2009-12-07T08:26:00.001-08:00

From 2007...

In an excellent piece in the New York Times, entitled It's Time to Take a Deep Breadth, Stein outlines the issues, the stresses, and the realities of the market volatility and corrections underway. He does not run from or white wash the credit disaster and the real estate crash underway, but he brings perspective and calm to his analyses. He is a voice otherwise missing at this time in the markets, in government, and in the media. Let me quote briefly from his article, near the end of his piece and after he says “I get to the point of laughing when I read doom-saying articles in the business sections of newspapers or watch Jim Cramer on CNBC.":

"Yes, there are real problems: housing, mortgage defaults, losses at financial firms, rot in hedge funds. But over all, things will be fine.... This economy is very big and very solid. It cannot be derailed for long by anything we have seen lately.... If I were the editor of the business section for just one day, I would run one immense headline: Everything in Going to Be Fine. Go Back to Work."

http://www.nytimes.com/2007/09/09/business/09every.html?ref=todayspaper

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"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Negative stimulus on its way

2009-12-07T07:27:00.000-08:00

estimates for budget shortfalls at the state level come to $145 billion to $178 billion in the fiscal year that ends next June. Budget gaps like that, on top of already drastic spending cuts in 2008 and 2009, will produce deep cutbacks in spending on everything from road and school construction to employment of police, firefighters, teachers and state park workers. The same survey that showed 44% of contractors anticipating more layoffs also showed that 76% expect state transportation departments to put less work out for bid in 2010 than in 2009.
...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Look out! We're gonna crash! (again)

2009-11-18T08:48:00.001-08:00

Why the Stock Market Should Crash -- Seeking Alpha

I'm not saying the stock market will crash, only that if it had any relation to the real U.S. economy that it should crash, and soon.

The current politics of experience is so warped by misleading statistics and orchestrated propaganda that it feels strange to state the obvious and find it is "that which cannot be spoken" -- the credit-dependent, consumer-dependent U.S. economy is going down, and going down hard, and the trillions of dollars borrowed and spent by the U.S. government and Federal Reserve to crank up a recovery have failed completely, utterly and totally.

The basic idea of Keynesian policy is simple: when the wheels fall off the private, quasi-free enterprise economy the government borrows and spreads mountains of money around like fertilizer which will stimulate "green shoots" of recovery.

The forgotten key to successful Keynesian policy is a government which has not been borrowing and spending trillions of dollars even during an era of so-called "prosperity." When a government like that of the U.S. has been propping up "prosperity" with trillions in borrowed money for a decade, then doubling or tripling the "stimulus" in the hopes that the green shoots will be enduring is truly farcical.

If the economy needed several trillion dollars in deficit spending to eke out the meager jobless growth of 2001-2007, then why does anyone think that doubling or tripling that deficit spending will create an enduring boom?

The truth is the U.S. economy has been dependent on Federal stimulus for years, both the indirect stimulus of artificially low interest rates and unlimited liquidity, and the direct spending of hundreds of billions of borrowed dollars.

Even before the financial crisis, the Federal government was borrowing and spending $400 billion a year to prop up "prosperity." All that spending simply papered over the rot at the core of the economy:

1. The primary support of the U.S. economy is consumer spending which is ultimately based on household income and assets.

Earned income has been flat to down for most Americans for years. The median income has been skewed upward by the top 10% whose earnings have risen significantly. According to the Bureau of Economic Analysis, real disposable personal income-- income adjusted for inflation and taxes--declined 3.4% in the third quarter after increasing 3.8% in the second quarter.

In an economy dependent on consumer spending for 70% of GDP, how can GDP rise by 3.5% while personal income plummeted by 3.4%? Assuming that boost in GDP is real and not just statistical legerdemain, then where did it come from? From borrowed money, of course-- the Federal government borrowed and spent over $1.4 trillion in fiscal 2009.

In the good old days of 2002-2007, households would have borrowed and spent hundreds of billions as well. But the consumer, beset by declining assets ($13 trillion lost in the past two years), declining income (see above), falling housing values and worrisome employment trends (17% unemployment/underemployment, broadly measured), is actually cutting back on borrowing. (Revolving Consumer Credit Drops 13.1% in August.)

Consumer credit decreased at an annual rate of 5-3/4% in August 2009. Revolving credit (credit cards) decreased at an annual rate of 13%, and nonrevolving credit decreased at an annual rate of 1-1/2% --the longest decline in consumer debt since 1991.

So while households are still burdened with almost $2.5 trillion in credit card and nonrevolving debt (auto loans, etc.), they are paying debt down, not adding more.

And let's not forget that homeowners pulled out about $5 trillion in home equity in 2001-2007, and the home equity ATM is closed for good. That brings us to:

2. The primary asset in most U.S. households is a home, and home values are still dropping, foreclosures are still rising and the only force keeping the market from falling faster is the Federal government's de facto nationalization of the entire U.S. mortgage market.

Of the $1.5 trillion mortgage securities issued in 2009, a mere 1% ($15 billion) have been issued by banks; 99% are backed by the government. The government owns over half the nation's $10 trillion in mortgages via its de facto ownership of Fannie Mae (FNM) and Freddie Mac (FRE), and it has guaranteed virtually all the mortgages originated in the past year via FHA or VA.

The residential mortgage market is now effectively owned lock, stock and barrel by the Federal government and its private "central bank," the Federal Reserve.

Should the Fed and Treasury reduce their subsidies (that wonderful $8,000 giveaway tax credit to new home buyers or anyone claiming to be one), guarantees and outright purchases of mortgages ($1.2 trillion this year alone), then the mortgage market would instantly freeze up or start pricing in the very real risk that housing is not "recovering" and that anyone holding a mortgage could suffer huge losses if real estate continues declining in value.

Here are a few charts to ponder:

3. So how have companies "surprised" with higher profits? By slashing payrolls, R&D and various accounting tricks. Actual revenue growth is missing in action. So how do you keep "surprising to the upside" after you've slashed headcount, burned R&D and turned every accounting trick in the book?

You don't. A stock market rising on the hopes of an actual, real, tangible recovery in household income, home equity and creditworthiness is seeing mirages and hallucinating that the lake just ahead is deep and wonderful and stretches to the horizon.

Only we never reach the "lake," do we? "Stabilization" is a chimera; the reality is the government is propping up the economy via unprecedented borrowing and spending, and there is absolutely no evidence that private capital, credit or spending are rising from the "stabilization."

We are walking through the desert, kept alive by the sugar-water drip of Federal stimulus, guarantees and subsidies. The "so near, yet so far" mirage of "recovery" has been propping up the stock market for nine months, and when a slight breeze blows away the thermal illusion, then the market will crash back to the March lows, or perhaps even lower. That crash will simply reflect the state of the real economy.

...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Schaeffer's Open Letter to the Republican Traitors

2009-09-17T15:40:00.001-07:00

Frank Schaeffer: Open Letter to the Republican Traitors (From a Former Republican)

You Republicans are the arsonists who burned down our national home. You combined the failed ideologies of the Religious Right, so-called free market deregulation and the Neoconservative love of war to light a fire that has consumed America. Now you have the nerve to criticize the "architect" America just hired -- President Obama -- to rebuild from the ashes. You do nothing constructive, just try to hinder the one person willing and able to fix the mess you created.

I used to be one of you. As recently as 2000 I worked to get Senator McCain elected in that year's primary. (McCain and Gen. Tommy Franks wrote glowing endorsements regarding my book about military service, AWOL.). I have a file of handwritten thank you notes from Presidents Ford, Reagan, Bush I and II. In the 1970s and early 80s I hung out with Jack Kemp and bought into his "supply side" myth and even wrote a book he endorsed pushing his ideas.) There's more, but take it from me; my parents (evangelical leaders Francis and Edith Schaeffer) and I were about as tight with -- and useful to -- the Republican Party as anyone. We played a big part creating the Religious Right.

In the mid 1980s I left the Religious Right, after I realized just how very anti-American they are, (the theme I explore in my book Crazy For God). They wanted America to fail in order to prove they were right about America's "moral decline." Soon after McCain lost in 2000 I re-registered as an independent in disgust with W. Bush. But I still respected many Republicans. Not today.

How can anyone who loves our country support the Republicans now? Barry Goldwater, William F. Buckley and Ronald Reagan defined the modern conservatism that used to be what the Republican Party I belonged to was about. Today no actual conservative can be a Republican. Reagan would despise today's wholly negative Republican Party. And can you picture the gentlemanly and always polite Ronald Reagan, endorsing a radio hate-jock slob who crudely mocked a man with Parkinson's and who now says he wants an American president to fail?!

With people like Limbaugh as the loudmouth image of the Republican Party -- you need no enemies. But something far more serious has happened than an image problem: the Republican Party has become the party of obstruction at just the time when all Americans should be pulling together for the good of our country. Instead, Republicans are today's fifth column sabotaging American renewal.

President Obama has been in office barely 45 days and the Republican Party has the nerve to blame him for the economic and military cataclysm he inherited. I say economic and military cataclysm because without the needless war in Iraq you all backed we would not be in the economic mess we're in today. If that money had been spent here at home on renovating our infrastructure, taking us toward a green economy, putting our health-care system in order we'd be a very different situation.

As the father of a Marine who served in George W. Bush's misbegotten wars let me say this: if President Obama's strategy to repair our economy, infrastructure and healthcare fails that will put our troops at far greater risk because the world will become a far more dangerous place. So for all you flag-waving Republicans who are trying to undermine the President at home -- if you succeed more of our troops will be killed abroad.

When your new leader Rush Limbaugh calls for President Obama to fail he's calling for more flag-draped coffins. Limbaugh is the new "Hanoi Jane."

For the party that created our crises of misbegotten war, mismanaged economy, the lack of regulation of our banking industry, handing our country to rich crooks... to obstruct the one person who is trying to repair the damage is obscene.

Just imagine where America would be today if the 14 to 20 million voters -- "the rube base" who slavishly follow the likes of Limbaugh -- had not voted as a block year after year thus empowering the Republican fiasco. We would have a regulated banking industry and would have avoided our current financial crisis; some 4000 of our killed military men and women would be alive; over to 35,000 wounded Americans would be whole; we would have been leaders in the environmental movement; we would be in the middle of a green technology boom fueling a huge expansion of our economy and stopping our dependence on foreign oil, and our health-care system would be reformed.

After Obama was elected, you Republican leaders had a unique last chance to send a patriotic message of unity to the world -- and to all Americans. You could have backed our president's economic recovery plan. Since we all know that half of our problem is one of lost confidence and perception, nothing would have done more to calm the markets and project resolve and confidence than if you had been big enough to take Obama's offered hand and had work with him -- even if you disagreed ideologically. You had the chance to put our country first. You utterly failed to rise to the occasion.

The worsening economic situation is your fault and your fault alone. The Republicans created this mess through 8 years of backing the worst president in our history and now, because you put partisan ideology ahead of the good of our country, you have blown your last chance to redeem yourselves. You deserve the banishment to the political wilderness that awaits all traitors.

The GOP: Party of Nihilists

2009-08-23T08:22:00.000-07:00

The GOP Has Become a Party of Nihilists
By Joe Klein Thursday, Aug. 20, 2009

...There have been times when Democrats have run demagogic scare campaigns on issues like Social Security and Medicare. There are more than a few Democrats who believe, in practice, that government should be run for the benefit of government employees' unions. There are Democrats who are so solicitous of civil liberties that they would undermine legitimate covert intelligence collection. There are others who mistrust the use of military power under almost any circumstances. But these are policy differences, matters of substance. The most liberal members of the Democratic caucus — Senator Russ Feingold in the Senate, Representative Dennis Kucinich in the House, to name two — are honorable public servants who make their arguments based on facts. Hyperbole and distortion certainly exist on the left, but they are a minor chord in the Democratic Party. They don't retail outright lies.
It is a very different story among Republicans. ..There are conservatives — Senator Lamar Alexander, Representative Mike Pence, among many others — who make their arguments based on facts. But they have been overwhelmed by nihilists and hypocrites more interested in destroying the opposition and gaining power than in the public weal. The philosophically supple party that existed as recently as George H.W. Bush's presidency has been obliterated. The party's putative intellectuals — people like the Weekly Standard's William Kristol — are prosaic tacticians who make precious few substantive arguments but oppose health-care reform mostly because passage would help Barack Obama's political prospects...A striking example of the prevailing cravenness was Senator Johnny Isakson of Georgia, who has authored end-of-life counseling provisions and told the Washington Post that comparing such counseling to euthanasia was nuts — but then quickly retreated when he realized that he had sided with the reality-based community against his Rush Limbaugh-led party...And when Palin floated the "death panel" canard, the number of prominent Republicans who rose up to call her out could be counted on one hand...
Until recently, the Republican Party contained a strong moderate wing. It was a Republican, the lawyer Joseph Welch, who delivered the coup de grâce to Senator McCarthy when he said, "Have you no sense of decency, sir, at long last?" Where is the Republican who would dare say that to Rush Limbaugh, who has compared the President of the United States to Adolf Hitler? ...This may tell us something about the actual state of play on health care: the nutters are a tiny minority; the Republicans are curling themselves into a tight, white, extremist bubble — but there may be enough of them raising dust to render creative public policy impossible.

http://www.time.com/time/nation/article/0,8599,1917525-2,00.html

...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Crazy for the Loonie—and Canada --Jubak

2009-08-09T13:16:00.001-07:00

Thursday, August 06, 2009
Crazy for the Loonie—and Canada

The world’s greatest currency?

Not the yen, or the euro, or the renminbi. Sure as shootin' not the US dollar or the British pound.

Yep, it's the loonie, Canada's dollar with the ghostly-voiced diving bird on it. And not just at the moment, either. This is the currency I most want to own for the next decade.

Right now, all the currencies of global commodity producers are rallying. The Australian and New Zealand dollars, the Norwegian krone, and the Canadian loonie all hit 11-month highs against the greenback this week.

The belief that China has gone on a sustainable commodity-buying spree to support its economic recovery has caused commodity prices to soar—and so too have the stock markets and currencies of countries that have commodity-based economies.

At Wednesday’s close, the iShares MSCI Canada Index (NYSEArca: EWC) ETF was up 80% from its March 9th low (the Standard & Poor's 500 index rose 48% during that period), while the Canadian dollar has gained 21% against the US dollar. (EWC traded above $24 late Thursday—Editor.)

I'd put the loonie and Canadian stocks ahead of currencies and stocks of other commodity-based countries because Canada's commodity basket is the most diversified in the world. (Well, Brazil will give Canada a run for the money if the South Atlantic oil discoveries pan out.) Canada has Norway's oil, Australia's mines and farms, and New Zealand's timber and farms all in one package.

And Canada is better positioned in the interest rate cycle. High domestic interest rates—as long as they're not so high that they signal some major economic dysfunction—make a currency stronger. Canada's loonie is strong even though the Bank of Canada has set its target interest rates at just 0.25%, exactly where they are in the US.

That means there will be plenty of support for the loonie when the Bank of Canada—no sooner than the middle of 2010, it has said—starts raising rates again.

lso, the bank has repeatedly pledged to keep its hands off the currency unless its outlook on growth and inflation materially changes.

But finally, I prefer the loonie to the rest of the world's currencies—and certainly to the US dollar—because Canada’s accumulated national debt has been falling, not climbing, for most of the last decade.

After hitting a high near 80% of the country's GDP in 1995-2000, Canada's accumulated national government deficit has dropped pretty much every year until it stood at just 30% of GDP in 2008. In comparison, the US ended 2008 with an accumulated federal debt of about 70% of GDP, and it’s projected to head higher.

...all aboard!

a bouquet of ironies here-- EPA suppresses GW skeptic

2009-07-01T12:40:00.001-07:00

EPA May Have Suppressed Report Skeptical Of Global Warming - Political Hotsheet - CBS News

The Environmental Protection Agency may have suppressed an internal report that was skeptical of claims about global warming, including whether carbon dioxide must be strictly regulated by the federal government, according to a series of newly disclosed e-mail messages.

Less than two weeks before the agency formally submitted its pro-regulation recommendation to the White House, an EPA center director quashed a 98-page report that warned against making hasty "decisions based on a scientific hypothesis that does not appear to explain most of the available data."

The EPA official, Al McGartland, said in an e-mail message to a staff researcher on March 17: "The administrator and the administration has decided to move forward... and your comments do not help the legal or policy case for this decision."

The e-mail correspondence raises questions about political interference in what was supposed to be a independent review process inside a federal agency -- and echoes criticisms of the EPA under the Bush administration, which was accused of suppressing a pro-climate change document.

Alan Carlin, the primary author of the 98-page EPA report, told CBSNews.com in a telephone interview on Friday that his boss, McGartland, was being pressured himself. "It was his view that he either lost his job or he got me working on something else," Carlin said. "That was obviously coming from higher levels."

E-mail messages released this week show that Carlin was ordered not to "have any direct communication" with anyone outside his small group at EPA on the topic of climate change, and was informed that his report would not be shared with the agency group working on the topic.

"I was told for probably the first time in I don't know how many years exactly what I was to work on," said Carlin, a 38-year veteran of the EPA. "And it was not to work on climate change." One e-mail orders him to update a grants database instead.

For its part, the EPA sent CBSNews.com an e-mailed statement saying: "Claims that this individual’s opinions were not considered or studied are entirely false. This Administration and this EPA Administrator are fully committed to openness, transparency and science-based decision making. These principles were reflected throughout the development of the proposed endangerment finding, a process in which a broad array of voices were heard and an inter-agency review was conducted."

Carlin has an undergraduate degree in physics from CalTech and a PhD in economics from MIT. His Web site lists papers about the environment and public policy dating back to 1964, spanning topics from pollution control to environmentally-responsible energy pricing.

After reviewing the scientific literature that the EPA is relying on, Carlin said, he concluded that it was at least three years out of date and did not reflect the latest research. "My personal view is that there is not currently any reason to regulate (carbon dioxide)," he said. "There may be in the future. But global temperatures are roughly where they were in the mid-20th century. They're not going up, and if anything they're going down."

Carlin's report listed a number of recent developments he said the EPA did not consider, including that global temperatures have declined for 11 years; that new research predicts Atlantic hurricanes will be unaffected; that there's "little evidence" that Greenland is shedding ice at expected levels; and that solar radiation has the largest single effect on the earth's temperature.

If there is a need for the government to lower planetary temperatures, Carlin believes, other mechanisms would be cheaper and more effective than regulation of carbon dioxide. One paper he wrote says managing sea level rise or reducing solar radiation reaching the earth would be more cost-effective alternatives.

The EPA's possible suppression of Carlin's report, which lists the EPA's John Davidson as a co-author, could endanger any carbon dioxide regulations if they are eventually challenged in court.

"The big question is: there is this general rule that when an agency puts something out for public evidence and comment, it's supposed to have the evidence supporting it and the evidence the other way," said Sam Kazman, general counsel of the Competitive Enterprise Institute, a non-partisan think tank in Washington, D.C. that has been skeptical of new laws or regulations relating to global warming.

Kazman's group obtained the documents -- both CEI and Carlin say he was not the source -- and released the e-mails on Tuesday and the report on Friday. As a result of the disclosure, CEI has asked the EPA to re-open the comment period on the greenhouse gas regulatory proceeding, which ended on Tuesday.

The EPA also said in its statement: "The individual in question is not a scientist and was not part of the working group dealing with this issue. Nevertheless the document he submitted was reviewed by his peers and agency scientists, and information from that report was submitted by his manager to those responsible for developing the proposed endangerment finding. In fact, some ideas from that document are included and addressed in the endangerment finding."

That appears to conflict with an e-mail from McGartland in March, who said to Carlin, the report's primary author: "I decided not to forward your comments... I can see only one impact of your comments given where we are in the process, and that would be a very negative impact on our office." He also wrote to Carlin: "Please do not have any direct communication with anyone outside of (our group) on endangerment. There should be no meetings, e-mails, written statements, phone calls, etc."

One reason why the process might have been highly charged politically is the unusual speed of the regulatory process. Lisa Jackson, the new EPA administrator, had said that she wanted her agency to reach a decision about regulating carbon dioxide under the Clean Air Act by April 2 -- the second anniversary of a related U.S. Supreme Court decision.

"All this goes back to a decision at a higher level that this was very urgent to get out, if possible yesterday," Carlin said. "In the case of an ordinary regulation, these things normally take a year or two. In this case, it was a few weeks to get it out for public comment." (Carlin said that he and other EPA staff members asked to respond to a draft only had four and a half days to do so.)

In the last few days, Republicans have begun to raise questions about the report and e-mail messages, but it was insufficient to derail the so-called cap and trade bill from being approved by the U.S. House of Representatives.

Rep. Joe Barton, the senior Republican on the Energy and Commerce committee, invoked Carlin's report in a floor speech during the debate on Friday. "The science is not there to back it up," Barton said. "An EPA report that has been suppressed... raises grave doubts about the endangerment finding. If you don't have an endangerment finding, you don't need this bill. We don't need this bill. And for some reason, the EPA saw fit not to include that in its decision." (The endangerment finding is the EPA's decision that carbon dioxide endangers the public health and welfare.)

"I'm sure it was very inconvenient for the EPA to consider a study that contradicted the findings it wanted to reach," Rep. James Sensenbrenner, the senior Republican on the House Select Committee on Energy Independence and Global Warming, said in a statement. "But the EPA is supposed to reach its findings based on evidence, not on political goals. The repression of this important study casts doubts on EPA's finding, and frankly, on other analysis EPA has conducted on climate issues."

The revelations could prove embarrassing to Jackson, the EPA administrator, who said in January: "I will ensure EPA’s efforts to address the environmental crises of today are rooted in three fundamental values: science-based policies and programs, adherence to the rule of law, and overwhelming transparency." Similarly, Mr. Obama claimed that "the days of science taking a back seat to ideology are over... To undermine scientific integrity is to undermine our democracy. It is contrary to our way of life."

"All this talk from the president and (EPA administrator) Lisa Jackson about integrity, transparency, and increased EPA protection for whistleblowers -- you've got a bouquet of ironies here," said Kazman, the CEI attorney.

Larry Kudlow is a moron

2009-05-05T13:56:00.001-07:00

Sometimes, when I fail to hit mute on my TV, I am blasted by the brainless rantings of CNBC’s Larry Kudlow, whose zeal for tax cuts rivals his earlier addiction to cocaine and alcohol. He believes that returning high-income tax rates to those during the 90’s boom will lead to the destruction of mankind. If rich people are so motivated by tax rates, then why do so many live in NYC and California? Even Kudlow lived in NYC until he was fired from his Wall St. job and went to a drug treatment center in ‘95. NY has a fairly high state tax that is 6.85% max and NYC adds ~3.5% max. There’s also a fairly high property tax and sales tax. Why haven’t the rich left NYC a long time ago? Financial companies can now move anywhere because the markets are mostly electronic. People could commute from upstate NY, CT or NJ to avoid some NYC tax. Some do, but many remain. More importanly, why did Kudlow live in NYC rather than commute from a lower tax area? The boat outside my house takes me to Wall St. in 10 minutes.

Kudlow’s addictive personality and meager education in economics made him susceptible to Arthur Laffer’s simplistic view of the world. And his pompous and pseudo-intellectual manner probably makes him popular on the right-wing cocktail party circuit. Indeed, his conversion to Catholicism is yet another example of his need to belong to a cult. My only hope is that someday Steve Liesman will strangle Kudlow live on-the-air.

Larry Kudlow is a moron « Handwaving

the stimulus gloves are off

2009-04-28T14:30:00.001-07:00

In a recent issue of Grant's Interest Rate Observer, Jim Grant charted the stimulus money (both monetary policy and government spending) as a percentage of gross domestic product for this downturn, compared with the previous 13 recessions.

In those earlier recessions, if you added all the percentages, the cumulative monetary stimuli constituted about 6 percentage points, while thus far in this recession, the stimuli have clocked in at 18%. Add in the 11.9% (of GDP) supplied by the government and you get 29.9% for the combined stimuli. That's compared with a total of 39.3 percentage points for the prior 13 recessions combined.

It's also already 4 times the New Deal's percentage of GDP!

Yes, I'd say the gloves are off. By the time the dust settles, you may not recognize the economic landscape.

http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/thank-uncle-sam-for-the-rally.aspx

"GOP: like Trekkies, but paranoid."

2009-04-28T09:14:00.001-07:00

BILL MAHER: "It's been a week now, and I still don't know what those "tea bag" protests were about. I saw signs protesting abortion, illegal immigrants, the bank bailout and that gay guy who's going to win "American Idol." But it wasn't tax day that made them crazy; it was election day. Because that's when Republicans became what they fear most: a minority.

The conservative base is absolutely apoplectic because, because ... well, nobody knows.

They're mad as hell, and they're not going to take it anymore. Even though they're not quite sure what "it" is. But they know they're fed up with "it," and that "it" has got to stop.

Here are the big issues for normal people: the war, the economy, the environment, mending fences with our enemies and allies, and the rule of law.

And here's the list of Republican obsessions since President Obama took office: that his birth certificate is supposedly fake, he uses a teleprompter too much, he bowed to a Saudi guy, Europeans like him, he gives inappropriate gifts, his wife shamelessly flaunts her upper arms, and he shook hands with Hugo Chavez and slipped him the nuclear launch codes.

Do these sound like the concerns of a healthy, vibrant political party?

It's sad what's happened to the Republicans. They used to be the party of the big tent; now they're the party of the sideshow attraction, a socially awkward group of mostly white people who speak a language only they understand. Like Trekkies, but paranoid.... "

http://www.alternet.org/story/138354/bill_maher%3A_the_gop_is_acting_like_a_guy_who_got_dumped/

http://sfbay.craigslist.org/forums/?ID=123096601

Bottom? What bottom?

2009-04-15T09:51:00.001-07:00

April 15, 2009
© 2009 Decision Economics, Inc. All rights reserved. Reproduction in whole or in part without the written permission of the copyright owner is prohibited.
Page 1 of 1
Industrial Production: No hint of a turn
March industrial production drops a more-than-generally-expected 1.5% (Consensus: -0.9%; Decision Economics: -
1.5%), from a minimally revised February level.
Within the total, manufacturing output dropped 1.7%, mining activity ell 3.2%, and utility output rose 1.8%. The
auto industry was a minimal factor in the manufacturing decline, with factory output excluding motor vehicles and
parts dropping 1.9%, across virtually all industries.
Thus, there was no hint that the process of inventory liquidation is drawing to a close. When it does, production
can be expected to bounce back up to meet the pace of sales--at whatever depressed level that may be. The turn will
not be pre-announced, and might happen at any time--but the strong downward momentum of output, and the
still very uncertain trend of final sales, suggest that the moment is not too near.
Ongoing big output declines expand industrial slack capacity (with the manufacturing utilization rate falling 1.1
points), and can lead to further employment cuts. Those trends generally argue for an increasing downward pull
on goods prices--which may, already, be in outright decline.

https://public.fidelityresearch.com/wsod-lehman/nationalfinancial/resources/server/pdf.asp?feedId=99&docTag=US_Economic_Indicators&versionTag=2fcb0592e7f2b5ea93a0c2b76247b7c2&reportName=US%2520Economic%2520Indicator%2520Insights%2520%2526%2520Analyses&doc

Head fake from financials?

2009-04-15T08:04:00.001-07:00

Goldman Sachs (GS) And The Secret Of Bank Earnings - 24/7 Wall Street

Goldman’s results were unexpectedly good. The company said it earned $1.81 billion, or $3.39 a share, in the first quarter as improved trading revenue outweighed asset write-downs, handily beating the $1.64 estimate of 16 analysts surveyed by Bloomberg.

While Goldman’s earnings were good, what was better was that the company said it would raise $5 billion and use that and capital on hand to pay back the $10 billion of TARP funds it got from the federal government. The “payback” is the key sign that the Goldman results are the real deal. Wells Fargo did not offer the government a check. It said it hoped to, someday. That is almost certainly a sign that the bank can’t make the payment now or it needs to keep the cash it has for estimated losses in future quarters.

Goldman set a tone for bank earnings which probably won’t be matched this earnings season. By paying the TARP funds it said that it did not have to worry about the next few quarters. It is not concerned that losses from toxic assets, consumer credit, commercial lending, or leveraged buy-outs will be a problem later this year. Goldman implied that its earnings won’t be undermined by the troubles that may affect other financial firms as the economy continues to stumble and bank loans of almost every sort default with increasing frequency.

None of the other banks are going to be able to pull off what Goldman did.

Lincoln Worship Redux

2009-03-22T08:31:00.001-07:00

recounting of the story of Lincoln's leadership, his remarkable ability to persevere through adversity, to use his common sense and uncommon intelligence to chart a road to victory, amazes still, and reminds us yet again of our extraordinary good fortune as a nation to have had that man in that office at that moment. We are reminded, too, of the seeming hopelessness of the task that Lincoln faced as he took office in 1861. He was so loathed he had not even been on the ballot in ten southern states; the secession of seven states took place before he was even inaugurated. By the time nine months of his presidency had elapsed, northern forces had been ignominiously defeated only miles from the Capitol; efforts to liberate Unionist Tennessee had failed; no military commander seemed to have any plan for effective movement against the enemy; and northern popular opinion was impatient for either military success or political compromise. "The bottom is out of the tub," Lincoln proclaimed in despair. "What shall I do?"

In the face of such odds, he managed to create an army, win a war, and save a nation--setting the stage as commander-in-chief for Union military triumph but also, as national strategist and policy maker, tying war aims to larger purposes--creating the new birth of freedom of which he spoke, and which we are still realizing today. Perhaps this is why, in the season of his two-hundredth birthday, this remarkable president continues to mean so much to us. Abraham Lincoln is, quite simply, the greatest argument against despair in dark times that our history provides." -- Drew Gilpin Faust is president of Harvard University and the author most recently of This Republic of Suffering: Death and the American Civil War

... yes, but -- No matter the purity of his motives, he was stll the co-architect of unimaginable suffering that haunted the nation for a century. I do wonder if he'd known in '61 the depth of horror in store in the next 4 years, would he still have accepted the challenge? No one worshiping at his altar ever seems to raise the question.

My patience is wearing thin.

2009-02-15T17:31:00.000-08:00

As one who dared to hope Obama really meant change from the unmitigated disaster of the last 8 years, he and Pelosi and Geithner have been singularly disappointing. The housing collapse was the catalyst for the economic collapse; until house prices stop dropping there can be no sustained recovery, yet nobody in position of authority seems capable of addressing this central fact head on.

Getting banks to lend would certainly be helpful but it can't really happen in a sustained fashion until the recession finds a bottom, and that means housing prices stabilize. Ditto for business hiring. Ditto for creating work for the jobless in the interim....

I want to believe but it requires a leap of more faith than I have left. I take some comfort that it's driving the RW nuts but the pricetag of this schadenfreude I can't afford. It reeks of Old Politics.

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Key Trends for '09: Inflation & Food

2009-01-06T04:52:00.000-08:00

plus solvency. That's critical...

"The hot trends for 2009 are:

* Inflation. Gold has started to move up. The U.S. dollar has started to move down. Overseas investors are cutting back on their purchases of dollar-denominated debt. And the faithful news consumer can see the beginnings of a tidal wave of articles and editorials worrying about the inevitability of inflation now that the Federal Reserve has decided to pay overtime to the crew that prints paper money.

* Food. Yes, food commodity stocks collapsed in 2008. And, yes, prices for food commodities went into a retreat that turned into a rout; the prices of major grains are down 50% from their 2008 peaks. But don't count on food getting cheaper still in 2009. All the signs point the other way. The United Nations' Food and Agriculture Organization has warned that because of the global credit crunch, many farmers lack capital to buy seed and fertilizer for the 2009-10 growing season. That's likely to show up in commodity prices, via the futures market, by mid-2009.

* Stability. Companies able to deliver solid revenue and earnings at or maybe even a little above expectations are rare as hens' teeth at this stage of the recession. Companies with those kinds of results are also in a position to use the current global slowdown to attack weaker competitors, buy market share and aggressively develop new products. That's a combination investors particularly prize in the current uncertainty.

I'd give those three trends green lights right now. "

http://articles.moneycentral.msn.com/Investing/JubaksJournal/10-key-trends-for-investors-in-09.aspx?page=all

I just wish I knew a good way to short treasuries.

...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

You want a bailout? Here's my offer

2008-11-21T10:43:00.001-08:00

clipped from sfbay.craigslist.org

[sfo] Politics World
(context)
You want a bailout? Here's my offer < RuffJustice >
2008-11-21 08:04:47

If you need a taxpayer bailout, you issue us redeemable convertible preferred shares at the common price paying 1% + the 10-yr T-note rate, redeemable / convertible for 1/5 of a common share at 5x the current share price. The maximum that can be issued is of the number of common shares outstanding.

Until the preferred is redeemed:

1. The dividend paid to common and preferred stockholders must be reduced by the percentage of preferred shares issued to us divided by common shares outstanding, and

2. Executive compensation decisions will be turned over to the National Executive Compensation Board chaired by the SEC.

Don't count on a bonus.

3. If you miss a payment on our dividend, the Treasury Secretary will appoint a new CEO and board to manage the company. Don't count on a golden parachute.

reply

The Gaza 2 Step

2008-11-19T11:07:00.001-08:00

1. Kill some Israeli kids
2. Party

clipped from www.humanevents.com

On the evening of March 6 in Jerusalem, a heavily armed Palestinian terrorist from nearby east Jerusalem entered the Mercaz Harav yeshiva and opened fire on the unarmed teenage students studying there. Eight died, and 11 were badly wounded before another student and an off-duty soldier shot the terrorist. The atrocity ignited wild celebrations in Gaza.

If you thought that the celebrations were anomalous, you might want to know about recent findings just published by the Palestinian Center for Policy and Survey Research, an independent polling organization based on the West Bank. According to its polls, 84 percent of Palestinians approved of this attack. Moreover, 64 percent approve of Hamas randomly firing rockets and mortars from Gaza into Israeli communities, and 75 percent favor ending negotiations between their leaders and the Israeli government.

...so it goes.

Meanwhile, back at the train wreck

2008-11-17T11:28:00.000-08:00

formerly known as The Economy, the evidence of the tipping point receding in the rear view mirror continues to mount ...

"The Empire State Manufacturing Index fell to -25.4 (DE: -28.5, Consensus: -26.0) in November from -24.6 in October. The result is the lowest in the Index's brief history (it began in 2001). New orders fell sharply for the second straight month, with the index falling to -22.2 from -20.5. Shipments also fell again, dropping to -13.9 from -8.9 in October. As a result of orders falling more sharply than shipments, unfilled orders fell as well, with the index reading -24.1 from last month's -12.2. This was the 8th straight month of falling unfilled orders.

The story of this report however, was the deterioration of the employment index, which fell to -28.9 from -3.7 last month. The reading was the worst since December 2001.

The average employee workweek also dropped, with the index falling to -25.3 from -9.8. Meanwhile, expectations for employment six months from now turned negative, hitting -4.2 from 1.1 in October. Only once in the history of the series (September 2001) did the expected employment index turn negative. In 2001 however, that result was almost certainly September 11th related, as the expected index read 15.5 in August, and rebounded to 8.0 in October. This time around, it likely reflects a sharp deterioration in the economic outlook."

... In other words, it's not just getting worse, it's getting worse faster and faster. This means it's going to get REALLY BAD before it even starts to get bad more slowly. YOU'VE BEEN WARNED.

...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

You could almost hear the global sigh of relief

2008-11-06T12:11:00.000-08:00

CNN 2008-11-05

The Times of London said Obama had revitalized U.S. politics. In Germany, Der Spiegel called Obama's rise "astonishing," while the Times of India called Obama an "advocate of strong partnership with India."

Al Jazeera said Obama had "surfed to power on a wave of voter discontent generated by the failures of President George Bush and the Republican Party" and added that he faces "unique challenges." It continued that his country was "sick of war."

Actually, the whole world pronounced itself sick of what it perceived to be Bush's multipronged military approach. From the start, President Obama will have to tackle the campaign pledge that defined his candidacy: bringing U.S. troops home from Iraq and ending the war there.
At the same time, he has to tackle a Rubik's Cube of America's overstretched and fatigued forces, to figure out how to redeploy more to wrest victory from the jaws of defeat in Afghanistan.
And next door in Pakistan, he must devise a strategy to rescue a failing state, bolster democracy and simultaneously crack down on al Qaeda and Taliban militants there.

And what about Iran? Many believe that's Foreign Policy Challenge Number 1A, if not Number 1, because of Iran's nuclear program.

Iran officially reacted to Obama's victory with cautious optimism, praising the end of what it termed "Bush's defeated policies." It added that Obama "can play an important role in future relations between the U.S. and Asia and the Middle East."

Here in America, many former secretaries of state and other officials also believe in playing that role. They say an Obama administration should explore the possibility of engaging with Iran and even restoring diplomatic relations as a way to help solve challenges such as Iran's nuclear program and its role in regional power politics in Iraq, Afghanistan and the Middle East peace process.

Obama can ride the wave of warm welcome from European and other global allies, but he is already being encouraged to restore an era of cooperation and compromise after the unilateral approach of the Bush administration.
reply...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Why you must NEVER trust a "conservative"

2008-10-17T09:30:00.000-07:00

in one simple table...

http://www.skymachines.com/US-National-Debt-Per-Capita-Percent-of-GDP-and-by-Presidental-Term.htm

...Goddammit, pod people stole my party!...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

White Privilege: a rant

2008-10-02T13:48:00.000-07:00

For those who still can't grasp the concept of white privilege,
or who are constantly looking for some easy-to-understand
examples of it, perhaps this list will help.

White privilege is when you can get pregnant at seventeen like Bristol
Palin and everyone is quick to insist that your life and that of your
family is a personal matter, and that no one has a right to judge you or
your parents, because "every family has challenges," even as black and
Latino families with similar "challenges" are regularly typified as
irresponsible, pathological and arbiters of social decay.

White privilege is when you can call yourself a "fuckin' redneck,"
like Bristol Palin's boyfriend does, and talk about how if anyone messes
with you, you'll "kick their fuckin' ass," and talk about how you like
to "shoot shit" for fun, and still be viewed as a responsible,
all-American boy (and a great son-in-law to be) rather than a thug.

White privilege is when you can attend four different colleges in six
years like Sarah Palin did (one of which you basically failed out of,
then returned to after making up some coursework at a community
college), and no one questions your intelligence or commitment to
achievement, whereas a person of color who did this would be viewed as
unfit for college, and probably someone who only got in the first
place because of affirmative action.

White privilege is when you can claim that being mayor of a town smaller
than most medium-sized colleges, and then governor of a state with about
the same number of people as the lower fifth of the island of Manhattan,
makes you ready to potentially be president, and people don't all piss
on themselves with laughter, while being a black U.S. Senator, two-term
state Senator, and constitutional law scholar, means you're "untested."

White privilege is being able to say that you support the words "under
God" in the pledge of allegiance because "if it was good enough for the
founding fathers, it's good enough for me," and not be immediately
disqualified from holding office--since, after all, the pledge was
written in the late 1800s and the "under God" part wasn't added until
the 1950s--while believing that reading accused criminals and terrorists
their rights (because, ya know, the Constitution, which you used to
teach at a prestigious law school requires it), is a dangerous and silly
idea only supported by mushy liberals.

White privilege is being able to be a gun enthusiast and not make people
immediately scared of you. White privilege is being able to have a
husband who was a member of an extremist political party that wants your
state to secede from the Union, and whose motto was "Alaska first," and
no one questions your patriotism or that of your family, while if you're
black and your spouse merely fails to come to a 9/11 memorial so she can
be home with her kids on the first day of school, people immediately
think she's being disrespectful.

White privilege is being able to make fun of community organizers and
the work they do--like, among other things, fight for the right of women
to vote, or for civil rights, or the 8-hour workday, or an end to child
labor--and people think you're being pithy and tough, but if you merely
question the experience of a small town mayor and 18-month governor with
no foreign policy expertise beyond a class she took in college--you're
somehow being mean, or even sexist.

White privilege is being able to convince white women who don't even
agree with you on any substantive issue to vote for you and your running
mate anyway, because all of a sudden your presence on the ticket has
inspired confidence in these same white women, and made them give your
party a "second look."

White privilege is being able to fire people who didn't support your
political campaigns and not be accused of abusing your power or being a
typical politician who engages in favoritism, while being black and
merely knowing some folks from the old-line political machines in
Chicago means you must be corrupt.

White privilege is being able to attend churches over the years whose
pastors say that people who voted for John Kerry or merely criticize
George W. Bush are going to hell, and that the U.S. is an explicitly
Christian nation and the job of Christians is to bring Christian
theological principles into government, and who bring in speakers who
say the conflict in the Middle East is God's punishment on Jews for
rejecting Jesus, and everyone can still think you're just a good
church-going Christian, but if you're black and friends with a black
pastor who has noted (as have Colin Powell and the U.S. Department of
Defense) that terrorist attacks are often the result of U.S. foreign
policy and who talks about the history of racism and its effect on black
people, you're an extremist who probably hates America.

White privilege is not knowing what the Bush Doctrine is when asked by a
reporter, and then people get angry at the reporter for asking you such
a "trick question," while being black and merely refusing to give
one-word answers to the queries of Bill O'Reilly means you're dodging
the question, or trying to seem overly intellectual and nuanced.

White privilege is being able to claim your experience as a POW has
anything at all to do with your fitness for president, while being black
and experiencing racism is, as Sarah Palin has referred to it, a "light"
burden.

And finally, white privilege is the only thing that could possibly allow
someone to become president when he has voted with George W.
Bush 90 percent of the time, even as unemployment is skyrocketing,
people are losing their homes, inflation is rising, and the U.S. is
increasingly isolated from world opinion, just because white voters
aren't sure about that whole "change" thing. Ya know, it's just too
vague and ill-defined, unlike, say, four more years of the same, which
is very concrete and certain.

White privilege is, in short, the problem.

...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Market Outlook "Worst Ever"

2008-08-06T16:46:00.000-07:00

PIMCO 3Q08 Market Outlook

07/01/2008
http://www.allianzinvestors.com/commentary/frm_PIMCO_mkt07012008.jsp
PIMCO Secular Economic Outlook for 2008 - Market Outlook for 3rd Quarter

PIMCO believes that secular economic, social and political trends exert the most powerful and sustained influences on bond markets. They define “secular” as the next three to five years. PIMCO's secular outlook guides the way they structure portfolios in terms of duration, yield curve positioning, sector exposure, credit quality and other risk measures. The following are the views and findings from the PIMCO Secular Outlook:

Emerging Economies to Lead Global Growth - Global growth will remain robust despite a cyclical downturn in the U.S. and other developed economies. Growth will be driven to a greater extent by emerging markets that are in the midst of a breakout development phase. The global economy is evolving into a multi-polar growth world where countries such as China emphasize more balanced development paths that include enhanced consumption, market-based systems and more flexible exchange rates.
Upward Trend in Inflation - Inflation pressures will spring from several sources. These include: the spillover of global demand into commodities; gradually rising wages as well as policy shifts toward greater employment and social spending in developing economies; and loose U.S. monetary policy that tends to export inflation, especially to emerging economies that align their currencies with the U.S. dollar.
Lower Corporate Profits - Profits are likely to decline from current high levels, both overall and relative to labor, as low wages in emerging markets rise. In addition, as the financial sector works its way through the subprime crisis it will have to raise more capital, reduce leverage and tighten lending standards. While such measures will promote stability over the long run, they will have a depressing effect on profitability over the next several years for financial companies and the corporate sector overall.
Realignment of the Global Financial System - In developed economies, regulatory changes and balance sheet management will drive realignment. Now that the Federal Reserve has opened its discount window to investment banks, these institutions are likely to face greater capital requirements and oversight. The financial sector in the developed world will be driven toward a business model with lower leverage and lower risk. Realignment will take a different form in emerging markets. Local capital markets in emerging economies will continue to develop as consumers and businesses demand a wider range of financial services. The influence of sovereign wealth funds will grow as they diversify risk profiles of their portfolios.

PIMCO Cyclical Economic Outlook

While the Secular Outlook is the foundation for the PIMCO portfolio strategies, they refine this outlook to account for expected developments over a cyclical, or 6- to 12-month time frame. Major aspects of PIMCO's cyclical view are:

Fed Unlikely to Tighten in Near Term – The financial system is highly sensitive to shifts in monetary and fiscal policy amid constrained balance sheet liquidity and asset write-downs that continue to erode banks’ capital. There is also growing evidence that fallout from the subprime debacle has now spread to the U.S. regional banking sector. In this environment, the Fed is unlikely to have the latitude to raise short-term interest rates over the next several months despite growing inflation pressure.
Heightened Volatility for Investment Strategies - PIMCO expects that the vulnerability of the global financial system to policy mistakes will make risk exposures in investment portfolios more volatile. On the positive side, however, this volatility is also likely to create more opportunities for astute investors to add value.

Investment Implications of Secular and Cyclical Outlook

The following is a summary of broad investment themes that flow from the PIMCO Secular Outlook, as well as descriptions of how PIMCO expects to express these themes.

Limit Interest Rate Risk - PIMCO will look to reduce exposure to interest rates in the U.S. and elsewhere in the world, especially on the longer end of yield curves. Longer maturity rates are vulnerable to inflation risk and, in the case of the U.S., the need to finance higher expected fiscal deficits and attract investors already heavily exposed to Treasuries. In the U.S., PIMCO will target duration below the benchmark. With the U.S. yield curve likely to remain steep, they plan to retain our focus on relatively short maturities, a strategy that offers the potential for gains as bonds “roll down,” or mature along the steep yield curve over time.

Outside the U.S., PIMCO plans to retain exposure to the front end of the U.K. yield curve, though at reduced levels. The Bank of England faces the same constraints with respect to raising rates as does the Fed, which means that U.K. short rates are unlikely to rise as much as markets expect.

Seek Out High-quality Assets With Attractive Yields - Debt reduction and balance sheet realignment, and the resulting dearth of liquidity, have contributed to a dramatic widening in risk premiums across a variety of fixed-income assets. PIMCO will be discriminating as it pursues these opportunities. They believe that the best risk-adjusted returns will be found in the senior part of the economy’s capital structure. These securities include top quality corporates, municipals, mortgages and other asset-backed bonds where valuations have cheapened less for reasons of credit weakness than because of system-wide liquidity constraints.

For example, PIMCO plans to retain an overweight to mortgage-backed bonds, especially those arranged by the major mortgage agencies, to capture yield premiums well above historical averages. Municipal bonds trading at yields above Treasuries are another high quality opportunity.

Look for Value in Financials - Realignment of the financial sector could create compelling opportunities for investors. Regulators will look to remove risks of institutional failure from the banking system. The cost of this regulatory reaction will be a lower return on capital that will likely tilt relative value in the direction of bondholders and away from stocks of financial companies. While PIMCO plans to retain an overall underweight to the corporate sector, they will continue to emphasize select, high-grade corporates where the credit crisis has produced attractive valuations, including bonds of banking and finance companies. Some of these financial institutions may well be too big to fail, thus putting them under the “umbrella” of the Fed.
Position for Renewed U.S. Dollar Weakness – The U.S. dollar’s decline is not over, but the currencies that carry the brunt of the appreciation versus the dollar will change. The gainers will no longer be dominated by countries with floating currencies, such as the euro, pound and yen. PIMCO plans to take modest positions that benefit when these currencies lose value versus the U.S. dollar. They will emphasize currencies of emerging market countries (such as China and elsewhere in Asia) with relatively inflexible currency regimes that will be forced to let their currencies rise against the U.S. dollar to combat inflation.

...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

CRAMERAMA

2008-07-15T11:16:00.001-07:00

Get more business news from CNBC!

Check the Stock Market Quotes on CNBC.com.

More Fecal Matter Approaching the Rotational Air Circulation Device

2008-07-07T20:33:00.000-07:00

End of an Era
By ALAN ABELSON

Prepare for meaner slumps and less exuberant recoveries. The jobs report tells only half the bad news.

WHAT CAN YOU SAY ABOUT JUNE? IN A FAMILY MAGAZINE, THAT IS. Except good riddance.

It was, as Dubya might put it, a heck of a month. But that doesn't quite convey how very distinctive and how awfully bloody it was. Great for ghouls, vampires and short sellers. Bad for just about anyone else with a pulse who happened to own as much as one solitary share of stock.

Of course, if you had invested your dough in a nice little oil well somewhere you probably feel like a million bucks and your net worth must feel even better. Or, if you were one of those dastardly speculators who, sneering all the while at the world's hungry millions, took a flier on wheat, while steering clear of zinc, June was a positively lovely month.

But if you're the diehard equity type, as so many of us innocents are, you suffered the agonies of poor old Job. For the sad truth is, to find an equal to how bad June's stock market was. you need to go all the way back to 1930, when the fall-out from the Great Crash was wrenchingly evident and the bodies were still hitting the pavement on Wall Street.

If it's any consolation, the elite billionaires as well as we poor investment peasants have been roughed up by this year's cruel and vicious market. We can offer you that solace, thanks to the efforts of crack researcher Teresa Vozzo, who secured the data from an interesting Website dubbed GuruFocus.com

As its fairly repellent name may give you a hint, GuruFocus tracks the stock picking performance of 55 mostly famous (and usually rich) investors including the likes of Warren Buffett, George Soros, Dave Williams, Glenn Greenberg, Carl Icahn, Ron Baron, David Dreman, Edward Lampert, Bill Miller, Marty Whitman and Seth Klarman. We know a number of these fine gents and even like a few of them.

According to GuruFocus, in the first half of this year, only four of the 55 bought stocks that collectively scored a gain. This lucky quartet was headed by T. Boone Pickens, the oil maven, whose stock purchases in the first half of the year were up a nifty 23%; Ken Heebner, whose equity buys averaged a 14.5% rise; Steve Mandel, who enjoyed a 10.1% average gain on the shares he bought in the opening six months, and David Winters, who posted a 3.8% appreciation.

The worst losers were Marty Whitman, whose first-half picks were down 43.9%; Mohnish Pabrai, whose buys were down an average of 41.9%; and Bill Miller, whose purchases, on average, lost 38.5%. No need, we hazard, to pass the collection plate.

THE BANK FOR INTERNATIONAL SETTLEMENTS -- BIS, for short, and blessedly less of a mouthful than the official moniker -- has been around four score years and thus seen it all: panics and booms, recession, depression and bountiful prosperity, inflation, disinflation and that particularly ugly hybrid, stagflation. The bank, in the not unlikely case its existence has eluded your ken, is the central banks' central bank, a kind of global nanny keeping an eye cocked on the world's banking system and trying, regrettably not always with success, to persuade its charges to act with some semblance of prudence and reason.

For an institution coping with no fewer than 55 central banks, it somehow has contrived to retain its sanity and, perhaps even more surprisingly, its equilibrium. Indeed, for the most part, it manages to eschew those endearing qualities that conspire to make "smart banker" an oxymoron. Unlike so many vaguely official entities with "international" in their title, the BIS renders its analyses and opinions as guided by facts on the ground rather than revelations from on high.

We're grateful to our friends, Philippa Dunne and Doug Henwood at the Liscio Report, whose latest commentary on the economy prompted this little riff on the BIS. Like the diligent scholars they are, they plowed through the 260 pages of the bank's annual report and distilled some of the salient material it contains. Less scholarly and for sure less diligent, we, in turn, are distilling their distillate.

The BIS, incidentally, is based in Basel (forgive us our alliterations), which, we suppose, doesn't surprise you, for where else would the central bank of the world's central banks be based but in Switzerland? More to the point, its Swiss locale provides a suitably neutral perch from which to survey the global economic and financial scenes. What we found gratifying is that so much of the BIS' view of the way things are and what lies ahead of us is very much akin to what we've been scribbling here for months on end (vanity, thank heavens, is not a mortal sin). Its take on inflation, for example, seems quite on the money. It doesn't much hold with the notion, so firmly held in Wall Street and Washington, that the concoction known as "core" inflation, which eliminates such insignificant stuff as the cost of food and energy, is the proper measure of inflation. Instead, the bank is convinced that in the U.S. and the Eurozone, headline inflation -- which, of course, much to the chagrin of the no-inflation claque, includes prices of food and energy -- has become a much better predictor of inflation.

As to whether the economy is done in by a violent flare-up of inflation in a redux of the 1970s or by the insufferable weight of debt aggravated by the brutal credit crunch, the BIS ventures with admirable impartiality that those on both sides of the argument might in the fullness of time be proved right. Which pretty much echoes our feeling that the current surge of inflation will worsen ponderably and be followed by a painful period of deflation. The bank warns that resorting to "gimmicks and palliatives" to support asset prices and stymie an impulse among consumers to save will only make things worse.

The BIS lays the blame for the current financial mess we find ourselves in squarely on the vast buildup of debt over the years that has instilled in various global economies a dangerous tendency, fed by easy credit, to magnify booms and busts. From here on, in other words, you might as well kiss those comparatively mild recessions and moderate expansions that we've recently had goodbye.

As Philippa and Doug sum up the message in the BIS annual, it increasingly looks "like the evermore freewheeling financial environment that we've taken for granted for the last 25 years is behind us." Or, as the Bank declaims "has run its course."

In sum, better buckle your seat belt; the ride ahead stacks up as pretty darn bumpy.

ANOTHER MONTH, ANOTHER PUNK EMPLOYMENT REPORT.

We're always razzing the poor old consensus for its bum forecasts, often so very much off the mark, of monthly employment numbers. So we figure it's only fair to be nice for a change and commend the consensus for being smack on target. And we'll even refrain from pointing out that once in a very great while, the guy or gal with a blindfold on does pin the tail on the donkey.

Anyway, the going estimate on the Street for June was a loss of 60,000 or so jobs and, by golly, the actual number was 62,000. All you members of the consensus, stand, please, and take a bow (it may be a long time before you get a chance to do it again).

The unemployment rate, meanwhile, which had taken a huge jump in May, the biggest, in fact, in 22 years, held steady at 5.5%. Revisions to April and May swelled the earlier reported totals of pink slips by a combined 52,000.

The private sector lost 91,000 jobs, with, as you might expect, construction and manufacturing the heaviest hit. The good news was on the skimpy side: The biggest gains in hiring were by municipalities and states, and given the increasing financial pinch afflicting city halls and statehouses just about everywhere, that old reliable geyser looks due to dry up in a hurry.

Just for the record, governments of every stripe chipped in 29,000 to the job total. There were some 30,000 fewer temps working at the end of June than at its start, which tells you more about the economy than you'd like to hear. It's also a bit of an evil harbinger for employment.

That insightful pair, Philippa Dunne and Doug Henwood, cited above, are invariably spot-on when it comes to parsing the monthly job numbers and we've passed along their conclusions, many a time and oft. Our only reservation, and a modest one, has been, kindly souls that they are, they were too forgiving of the Bureau of Labor Statistics' birth/death model, which seeks to capture the jobs added and subtracted by, well, the birth and death of new firms. The device invariably strikes us as a fire alarm that works swell -- except when there's a fire. And in the overwhelming majority of months, it perhaps conveniently serves to bloat the total of jobs added.

As it happens, we now have reason to forgive Philippa and Doug for being forgiving. Here's what they say in Friday's review of the latest jobs report: "Although we usually shy away from pointing to mischief coming from the birth/death model, this seems to be one of those moments when we should overcome our shyness: It added 177,000 to June employment."

Duly noting that the birth/death calculation is made without seasonal adjustment, they nonetheless observe that save for it, private employment would have been down a formidable 268,000 or so. Other absurdities: The birth/death model miraculously added 29,000 to rapidly vanishing construction employment, 22,000 to professional business and professional services and -- get this -- a whopping 86,000 to leisure and hospitality.

They comment dryly: "Given the weakness of the economy and the crunchiness of credit, we doubt there are enough start-ups around to match these imputations." Exactly.

http://online.barrons.com/article/SB121512484846628107.html?mod=googlenews_barrons&page=2&page=sp#
...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

End of an Era

2008-06-03T12:56:00.001-07:00

The era of unlimited abundance is ending. Instead of delusioning on windmills and solar power destined to provide only a few percent of our needs for the next 300 years, the world must go immediately to nuclear energy. Instead of going on and on about Chernobyl and Three Mile Island, the truth is that France has gone nearly 80% nuclear since the 1970s, and it's never had an accident. And the choice is not between nuclear and solar, it's between nuclear and all of us shivering in the dark.

Nuclear at least would give the planet enough energy for everybody for the next few centuries. And by then, we might have practical nuclear fusion that would emulate the power of the sun, and just pray some lunatic at that point doesn't use it to destroy the whole planet.

The Pacific Ocean is like a huge lake with a circular current around it, and it's recently been discovered that there's a huge collection of plastic garbage in its centre, twice the size of the United States; everything from old toothbrushes to nets that trap the remaining fish.

Personally, I'll say good riddance to oil so that the air can be clean again, and I can once again see the beauty of the planet in the distance, instead of hazy smog. As my father said, "If you abuse yourself, you'll go blind." And I said, "Hey, Dad, I'm over here."

...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Profiting from the dollar's decline

2008-06-02T07:17:00.000-07:00

Commentary: If the dollar continues to fall, don't invest in dollars
By Bill Donoghue, MarketWatch
Last Update: 12:01 AM ET Jun 2, 2008

SEATTLE (MarketWatch) -- Federal Reserve Chairman Ben Bernanke painted himself and the American economy into a corner. Treasury Secretary Henry Paulson is promising help -- but not until after he is likely out of office. At least the paint will be dry by then and Bernanke and Paulson can go home in peace (or disgrace).

There are two factors strongly affecting the value of the dollar; the trend of interest rates, which directly affects the value of the dollar, and the depressing state of our economy. Rates are not likely to fall far any time soon (they're more likely to rise with inflation) and a long painful recession is in the works.

Bernanke's policy to ease financial markets by lowering the ultrashort overnight rates he can set (the discount rate where banks borrow from "the lender of last resort" -- a crowded line this summer -- and the Fed funds rate where mostly country banks lend their excess reserves on deposit at the Federal Reserve to regional and financial center banks who make the largest commercial business and real estate loans) has been slow to stimulate the American economy.

It also undermined the value of the U.S. dollar and made investing in foreign stocks "safer," as non-U.S. dollar-denominated securities offer an added extra currency cushion. That attracts rational security-cautious investors and denies capital to American borrowers trying to reestablish market leadership.

Profit directly from a weakening dollar index

To profit directly from a weakened dollar on a day when the U.S. dollar index (DXY: news) falls 1%, the inverse Falling Dollar U.S. ProFunds (FDPIX: news) should rise 1% and the leveraged Rydex Weakening Dollar 2X strategy fund (RYWBX: news) earns 2%. In a rising dollar day the funds lose 1% and 2%, respectively. These funds can be disturbingly volatile but if you feel the dollar is likely to continue weakening, these are excellent choices.

There is also the PowerShares U.S. Dollar Bearish ETF (UDN: news) that tracks the Deutsche Bank Short U.S. Dollar Index Futures Index. They beat both ProFunds and Rydex to the exchange-traded funds market as their rising dollar index ETFs are still in registration.

Profit from investing in currency funds

CurrencyShares are ETFs distributed by Rydex. They offer eight currency choices; the Australian Dollar (FXA: news), the British Pound Sterling (FXB: news), the Canadian Dollar (FXE: news), the Euro (FXE: news), Japanese Yen (FXY: news), the Mexican Peso (FXM: news), the Swedish Krona (FXS: news) and the Swiss Franc (FXS: news).

Currently, the Australian dollar and euro, along with our neighbors to the north, the Canadian "loonie," and our neighbors to the south, the Mexican peso, represent the best profit opportunities -- although you might choose to build a portfolio of all four. Remember, that will require four times the trading costs as these are ETFs, though using discount brokers like E-Trade or TD Ameritrade should keep your trading costs to $7 to $10 dollars per ETF.

Profit from investing in foreign currency-denominated bank accounts

If you wish a wider choice of currencies, you could open certificates of deposit or money market deposit accounts at Everbank.com and reduce your trading costs to exchanges within 1% of the institutional exchange rates; a low cost you probably couldn't get at most banks or brokers.

Profit from investing in foreign stock funds

Of course, the best way to take advantage of a falling dollar is to invest in foreign-currency denominated stocks where your return is a combination of strong local stock opportunities and currency profits. Brazil (EWZ: news) and Canada (EWC: news) are excellent choices. Brazil has become the "OPEC of sugar ethanol" (we blew it on less efficient corn ethanol), is energy independent and has just found new oil reserves off its coast. Canada is the U.S.' largest supplier of oil (from oil shale) and their currency last year was so strong that simply opening a checking account in Vancouver or Toronto would have bought you 23% more dollars by year end without earning any interest.

Profiting from the falling U.S. dollar is easy; Profiting in the U.S. is hard

Which U.S. sectors will be the hottest (to buy long) or the coldest (to sell short) is always a hard choice, but with a dollar this weak and interest rates so low and a Fed that seems impotent to fight back, makes being a dollar bear an easy bet.

Even if they are successful, it will take a long time to know they succeeded -- and even then, the best investments are likely to be across the border anyway.

Bill Donoghue is editor of The Proactive Fund Investor, a weekly newsletter published by MarketWatch, and chairman of W. E. Donoghue & Co. in Norwood, Mass. donoghue.com

...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

"Greed Kills" Investing Strategy

2008-05-29T09:04:00.000-07:00

Albert Meyer, a former accounting professor from South Africa now based in Plano, Texas, brings a healthy dose of skepticism to stock analysis. He picks companies for the fund by starting with two basic rules.

First, Meyer rejects companies where stock-option grants represent more than 5% of the shares outstanding. He says that because of shortcomings in rules on how to account for options, the true cost to shareholders doesn't come through in reported financial numbers. Overly generous grants are so widespread that this rule eliminates more than 75% of the stocks in the Russell 3000 index ($RHK.X), according to Paul Hodgson of The Corporate Library, which tracks grants as part of its corporate-governance rating system.

Next, Meyer avoids companies where execs get too much pay. There's no strict cutoff. But he's unlikely ever to hold a company where the boss makes more than $5 million a year. That's about half of the $9.9 million in average compensation that CEOs at S&P 500 companies made in 2007, according to The Corporate Library.

From there, Meyer looks for qualities such as pristine financials, strong cash flow, good profit margins and reasonable dividends in businesses surrounded by some kind of protective moat. He's also a value investor who favors stocks that look cheap.
First-rate results
But wait a second. Whenever I focus this column on companies with highly paid CEOs, I'm told that these pay levels are necessary to attract the top talent. Doesn't Meyer run the risk of winding up with companies run by a bunch of second-rate leaders?

"It's a total scam to say, 'If we don't pay these salaries, we won't draw the talent,'" Meyer says. "That's not what I find. The companies we own pay modest salaries, and they do extremely well. They are not suffering because of a lack of high salaries."
Video on MSN Money
Say on pay © MedioImages
Aflac shareholders win 'say on pay'
The company's shareholders have become the first investors to have an official say on executive compensation.

Meyer's track record bears this out. Investments for managed accounts at his Bastiat Capital -- where he also shuns companies with greedy execs -- were up 43.4% from April 30, 2006, through the end of April this year. The S&P 500 was up 5.72% in the same time frame.

http://articles.moneycentral.msn.com/Investing/CompanyFocus/MakeABuckByShunningFatCats.aspx?page=2
...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

2008-05-28T11:39:00.000-07:00

Four Mega-Dangers International Financial Markets Face

By Dennis J. Snower
01 May 2008 at 10:06 AM GMT-04:00

BOSTON (voxEU.org) -- Day after day new, alarming news emerges from the world’s financial markets, and day after day the public is surprised by how bad it is. But instead of wringing our hands, let’s ask ourselves an important, unconventional question: What is more surprising: that financial markets have turned from bad to worse, or that we continue to be surprised by each successive piece of adverse news?

I suggest that our repeated surprise should be more surprising. This issue is important, because if we were better at recognising the financial risks we face, we could do more to avoid them. If banks, investment houses, and American homeowners had done a better job in recognising the risks in the subprime mortgage market, we could have spared ourselves the current crisis.

Why does the public repeatedly underestimate the repercussions of the present financial crisis? The answer is simple: most of us are short-sighted; we can’t imagine a future that is radically different from the present. In particular, most of us don’t understand that economic events often unfold gradually due to the operation of important lagged adjustment processes embedded in the economy. The public, the media and politicians would do well to give them close attention. Lagged adjustment processes. After the Titanic’s hull was punctured, it took hours for its hull to fill with water; thus the passengers couldn’t imagine that it would sink.

In my judgment, there are currently four major dangers facing the world economy, and all of them are currently obscured by the fact they play themselves out slowly.

Four dangers

The first danger we have witnessed since August 2007: The subprime mortgage crisis gave rise to a liquidity crisis in the international banking system, due to uncertainty about who holds the losses. This is leading to reduced lending to firms and households. But that is not the end of the story, because the reduced lending will lead to reduced consumption and investment. With a lag, reduced sales of goods and services will reduce stock market valuations. And, with another lag, the lower stock market prices will – in the absence of any favourable fortuitous events – intensify the banks’ liquidity crisis.

The second danger lies in the dynamics of U.S. house prices. As more and more U.S. households find themselves unable to repay their mortgages, foreclosures are on the rise, more houses are put on the market, the price of houses falls further – with further lags – this leads to more foreclosures and declines in housing wealth. This dynamic process plays itself out only gradually, as households face progressively more stringent credit conditions and house sales gradually lead to lower house prices.

The third danger results from the interaction between wealth, spending and employment. As U.S. households’ wealth – in the housing market and the stock market – falls, their consumption is beginning to fall and will continue to do so, again with a lag. This decline in consumption is leading to a decline in profits, of which more is on the way, which in turn will lead to a decline in investment. The combined decline in consumption and investment spending will eventually lead to a decline in employment, as firms begin to recognise that their labour is insufficiently utilised. The decline in employment, in turn, means a drop in labour income, which, with a lag, leads to a further drop in consumption.

And that leaves the fourth (and possibly the nastiest) of the dangers, one that concerns the latitude for monetary policy intervention. As the Fed reduces interest rates to combat the crisis, the dollar is falling. This is leading to higher import prices and oil prices in the United States, putting upward pressure on inflation. The greater this inflationary pressure – which is currently in excess of 4 percent – the more difficult it will be for the Fed to reduce interest rates in the future, without running a serious risk of inflaming inflationary expectations and starting a wage-price spiral. U.S. firms and households will gradually recognise this dilemma and the bleak prospect of little future interest rate relief will further dampen consumption and investment spending.

Eventually, of course, the decline in spending will lead to a decline in inflation, but this will only happen with a lag. The longer the lag turns out to be, the longer the period over which the U.S. economy will endure stagflation, that is, a cruel combination of rising prices and falling aggregate demand. Much hinges on how persistent U.S. inflation is. More persistent inflation will inevitably give rise to higher inflationary expectations, leading gradually to higher inflation, and so on. It took central banks over a decade, in the 1980s and early 1990s, to get inflationary expectations under control, and the fruits of this battle are now in danger of being lost.

Global implications

The international financial crisis and the decline in the U.S. economy will inevitably have an adverse effect on the growth of the world economy. Europe and the emerging markets of Latin America and the Far East cannot fill the gap that the U.S. economy leaves. There exists no economic mechanism whereby a drop in the U.S. aggregate demand will be matched by a correspondingly large increase in aggregate demand elsewhere. Germany and other European economies highly exposed to the vagaries of international trade will certainly feel the pinch.

In the longer run, the prospects for the world economy look much brighter. Eventually U.S. house prices will stabilise, rising exports will help the U.S. economy recover, the fall in world demand for goods and services will reduce the price of raw materials, U.S. households will learn the importance of saving, and global imbalances will correct themselves. These rosy prospects lie in the mists of the future. Meanwhile, however, we are well advised to stay focused on the four dangers."

http://www.resourceinvestor.com/pebble.asp?relid=42413

... let's just say the housing bubble affected the overall economy on the way up; it is sure to do so on the way down.
...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Social Security Inconvenient Truths

2008-05-27T16:09:00.000-07:00

When Social Security (FICA) was introduced it was promised:

* Participation in the program would be completely voluntary.

* Participants would only have to pay 1% of the first $1,400 of their annual incomes into the program.

* The money the participants elected to put into the program would be deductible from their income for tax purposes each year.

* The money the participants put into the independent trust fund rather than into the general operating fund, would be used only to fund Social Security, and no other government program.

* Payments to the retirees would never be taxed as income.

The millions who have paid into FICA for years and are now receiving a Social Security check every month -- and who then find they are getting taxed on 85% of the money they gave to the federal government to save for them -- may be interested in the following:

* Social Security money has been removed from the trust fund and put it into the general fund so that Congress could spend it.

* The income tax deduction for Social Securitjavascript:void(0)
Save Nowy withholding has been eliminated.

* Social Security annuities are now taxed.

Now contrast this with the fact that Congress passed a 100% retirement benefit for members who have served at least one term.

http://articles.moneycentral.msn.com/Investing/StrategyLab/Rnd17/P1/HighIQjournal20080524.aspx

...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Good luck with that zero carbon footprint, bubba

2008-03-10T07:07:00.000-07:00

Carbon Output Must Near Zero To Avert Danger, New Studies Say
By Juliet Eilperin
Washington Post Staff Writer
Monday, March 10, 2008; Page A01

"The task of cutting greenhouse gas emissions enough to avert a dangerous rise in global temperatures may be far more difficult than previous research suggested, say scientists who have just published studies indicating that it would require the world to cease carbon emissions altogether within a matter of decades.

Their findings, published in separate journals over the past few weeks, suggest that both industrialized and developing nations must wean themselves off fossil fuels by as early as mid-century in order to prevent warming that could change precipitation patterns and dry up sources of water worldwide.

Using advanced computer models to factor in deep-sea warming and other aspects of the carbon cycle that naturally creates and removes carbon dioxide (CO2), the scientists, from countries including the United States, Canada and Germany, are delivering a simple message: The world must bring carbon emissions down to near zero to keep temperatures from rising further.

"The question is, what if we don't want the Earth to warm anymore?" asked Carnegie Institution senior scientist Ken Caldeira, co-author of a paper published last week in the journal Geophysical Research Letters. "The answer implies a much more radical change to our energy system than people are thinking about."

http://www.washingtonpost.com/wp-dyn/content/article/2008/03/09/AR2008030901867.html
...

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Resignation of top GAO official

2008-02-25T12:31:00.000-08:00

"Facing indifference on the Hill and unrealistic spending promises, Walker is resigning with five years still remaining in his term to head the newly formed Peter G. Peterson Foundation. Peterson, senior chairman of The Blackstone Group and Commerce secretary in the Nixon administration, has pledged an astounding startup budget for the foundation of $1 billion.

That money will attack what the foundation considers "the most substantial economic, fiscal and other sustainability challenges of our current age" -- including federal entitlement programs, health care, unprecedented trade and budget deficits, low savings rates, mounting foreign debt, soaring energy consumption, an uncompetitive educational system, and the proliferation of nuclear warfare materials. Maybe Congress will listen this time.

"I have been around a very long time, and I have never seen so many simultaneous challenges that I would describe as undeniable, unsustainable and virtually untouchable politically," Peterson said in a prepared statement.

...
http://custom.marketwatch.com/custom/myway-com/news-story.asp?guid={D566230C-F9D9-4384-B64E-E9B480D2B23F}

"The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." - Winston Churchill, The Gathering Storm

Yet Another Shoe About to Drop

2008-02-10T06:55:00.001-08:00

How many feet does the damn thing have, anyway? ...

In many cases, munis are sold as part of "tender option bond," or "put bond," derivatives. In these programs, which became very popular among hedge funds in this decade because their low risk profiles permitted a lot of leveraging, a bond could be tendered back to the issuer if any of a variety of troublesome events triggered, ranging in severity from a default to a ratings downgrade. The programs required the issuer to buy the bonds back at par, or face value.

If the monoline insurers that guarantee the bonds lose even one notch of their high ratings, then every one of the hundreds of thousands of munis they have underwritten over the years likewise loses its high rating. And that would be an event that could lead bondholders to attempt to tender the bonds back to issuers. Only cities and states don't have anywhere near the tens of billions of dollars it would cost to buy them back. They would need to issue more debt at higher interest rates, and, well, you can see this can spiral way out of control.

Continued: A worst-case scenarios

It's one thing for corporate bonds to run into trouble, because they are typically backed by hefty amounts of assets that can be sold, even if that must happen at rock-bottom prices. And besides, there just aren't that many corporate bonds in the country: If they were all listed in a telephone book, it would be around three-quarters of an inch thick. But there are hundreds of thousands of U.S. muni bonds -- at least enough to fill a 9-inch-thick telephone book -- and cities can't just sell a bridge or sewer line or school building to raise money to pay them off in a crisis.

Let me give you an idea of the magnitude of the worst-case scenario: When ratings agency Moody's put the rating of monoline insurers Ambac and MBIA on downgrade alert last month, it was obligated to, in turn, put about 1,000 structured finance issues -- those CDOs and the like -- on "negative watch," which is a way of telling holders to beware of downgrades of their own. This is exactly what led in turn to banks' headlong efforts to get in front of the crisis by writing down the value of those issues and take multibillion-dollar losses, putting their shares in free falls.

What got less publicity was the fact that Moody's put 60,000 munis on negative watch at the same time for each monoline insurer. And when another ratings agency, Fitch, downgraded a much smaller privately held monoline called Financial Guaranty Insurance, it was forced to put 114,560 municipal bonds on negative watch.

http://articles.moneycentral.msn.com/Investing/SuperModels/TheBigThreatOfMuniDebt.aspx?page=all

Sep 07, we were warned

2008-01-24T04:21:00.000-08:00

SuperModels9/20/2007 12:01 AM ET
Are we headed for an epic bear market?

The credit bubble is just starting to unwind, a credit-derivative insider says. And while U.S. borrowers are being blamed for the mess, they were really just pawns in a global game.
By Jon Markman

Satyajit Das is laughing. It appears I have said something very funny, but I have no idea what it was. My only clue is that the laugh sounds somewhat pitying.

One of the world's leading experts on credit derivatives, Das is the author of a 4,200-page reference work on the subject, among a half-dozen other tomes. As a developer and marketer of the exotic instruments himself over the past 30 years, he seemed like the ideal industry insider to help us get to the bottom of the recent debt crunch -- and I expected him to defend and explain the practice.

I started by asking the Calcutta-born Australian whether the credit crisis was in what Americans would call the "third inning." This was pretty amusing, it seemed, judging from the laughter. So I tried again. "Second inning?" More laughter. "First?"

Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy.
An epic bear market
Das is pretty droll for a math whiz, but his message is dead serious. He thinks we're on the verge of a bear market of epic proportions.

The cause: Massive levels of debt underlying the world economy system are about to unwind in a profound and persistent way.

He's not sure if it will play out like the 13-year decline of 90% in Japan from 1990 to 2003 that followed the bursting of a credit bubble there, or like the 15-year flat spot in the U.S. market from 1960 to 1975. But either way, he foresees hard times as an optimistic era of too much liquidity, too much leverage and too much financial engineering slowly and inevitably deflates.

Like an ex-mobster turning state's witness, Das has turned his back on his old pals in the derivatives biz to warn anyone who will listen -- mostly banks and hedge funds that pay him consulting fees -- that the jig is up.

Rather than joining the crowd that blames the mess on American slobs who took on more mortgage debt than they could afford and have endangered the world by stiffing lenders, he points a finger at three parties: regulators who stood by as U.S. banks developed ingenious but dangerous ways of shifting trillions of dollars of credit risk off their balance sheets and into the hands of unsophisticated foreign investors; hedge and pension fund managers who gorged on high-yield debt instruments they didn't understand; and financial engineers who built towers of "securitized" debt with math models that were fundamentally flawed.

Jim Jubak
What the Fed can’t do
Investors are abuzz over the Fed’s interest-rate decision, but the Federal Reserve can’t fix everything, cautions MSN Money’s Jim Jubak. Lower interest rates alone won’t boost confidence in the debt market.

"Defaulting middle-class U.S. homeowners are blamed, but they are merely a pawn in the game," he says. "Those loans were invented so that hedge funds would have high-yield debt to buy."
The liquidity factory
Das' view sounds cynical, but it makes sense if you stop thinking about mortgages as a way for people to finance houses and think about them instead as a way for lenders to generate cash flow and create collateral during an era of a flat interest-rate curve.Although subprime U.S. loans seem like small change in the context of the multitrillion-dollar debt market, it turns out these high-yield instruments were an important part of the machine that Das calls the global "liquidity factory." Just like a small amount of gasoline can power an entire truck given the right combination of spark plugs, pistons and transmission, subprime loans became the fuel that underlays derivative securities many, many times their size.

Continued: How it worked

Here's how it worked: In olden days, like 10 years ago, banks wrote and funded their own loans. In the new game, Das points out, banks "originate" loans, "warehouse" them on their balance sheet for a brief time, then "distribute" them to investors by packaging them into derivatives called collateralized debt obligations, or CDOs, and similar instruments. In this scheme, banks don't need to tie up as much capital, so they can put more money out on loan.

The more loans that were sold, the more they could use as collateral for more loans, so credit standards were lowered to get more paper out the door -- a task that was accelerated in recent years via fly-by-night brokers now accused of predatory lending practices.

Buyers of these credit risks in CDO form were insurance companies, pension funds and hedge-fund managers from Bonn to Beijing. Because money was readily available at low interest rates in Japan and the United States, these managers leveraged up their bets by buying the CDOs with borrowed funds.

So if you follow the bouncing ball, borrowed money bought borrowed money. And then because they had the blessing of credit-ratings agencies relying on mathematical models suggesting that they would rarely default, these CDOs were in turn used as collateral to do more borrowing.

In this way, Das points out, credit risk moved from banks, where it was regulated and observable, to places where it was less regulated and difficult to identify.
Turning $1 into $20
The liquidity factory was self-perpetuating and seemingly unstoppable. As assets bought with borrowed money rose in value, players could borrow more money against them, and it thus seemed logical to borrow even more to increase returns. Bankers figured out how to strip money out of existing assets to do so, much as a homeowner might strip equity from his house to buy another house.

These triple-borrowed assets were then in turn increasingly used as collateral for commercial paper -- the short-term borrowings of banks and corporations -- which was purchased by supposedly low-risk money market funds.

According to Das' figures, up to 53% of the $2.2 trillion commercial paper in the U.S. market is now asset-backed, with about 50% of that in mortgages.

When you add it all up, according to Das' research, a single dollar of "real" capital supports $20 to $30 of loans. This spiral of borrowing on an increasingly thin base of real assets, writ large and in nearly infinite variety, ultimately created a world in which derivatives outstanding earlier this year stood at $485 trillion -- or eight times total global gross domestic product of $60 trillion.

Without a central governmental authority keeping tabs on these cross-border flows and ensuring a standard of record-keeping and quality, investors increasingly didn't know what they were buying or what any given security was really worth.
A painful unwinding
Now here is where the U.S. mortgage holder shows up again. As subprime loan default rates doubled, in contravention of what the models forecast, the CDOs those mortgages backed began to collapse. Because they were so hard to value, banks and funds started looking at all CDOs and other paper backed by mortgages with suspicion, and refused to accept them as collateral for the sort of short-term borrowing that underpins today's money markets.

Through late last month, according to Das, as much as $300 billion in leveraged finance loans had been "orphaned," which means that they can't be sold off or used as collateral.

... How's that working for ya?

definitely far more serious than anyone would have thought

2008-01-14T06:56:00.000-08:00

I'll say it again, it's the ACCELERATION, stupid!...

A scramble to understand Greenland's melting ice sheets
By Andrew C. Revkin
Monday, January 7, 2008

The ancient frozen dome cloaking Greenland is so vast that pilots have crashed into what they thought was a cloud bank spanning the horizon. Flying over it, one can scarcely imagine that this ice could erode fast enough to raise sea levels dangerously any time soon.

Along the flanks in spring and summer, however, the picture is very different. For a lengthening string of warm years, a lacework of blue lakes and rivulets of meltwater have been spreading ever higher on the ice cap. The melting surface darkens, absorbing up to four times as much energy from the sun as unmelted snow, which reflects sunlight. Natural drainpipes, called moulins, carry water from the surface into the depths, in some places reaching bedrock. The process slightly, but measurably, lubricates and accelerates the grinding passage of ice toward the sea.

Most important, many glaciologists say, is the breakup of huge semi-submerged clots of ice where some large Greenland glaciers, particularly along the west coast, squeeze through fjords as they meet the warming ocean. As these passages have cleared, this has sharply accelerated the flow of many of these creeping, corrugated, frozen rivers.

All of these changes have many glaciologists "a little nervous these days - shell-shocked," said Ted Scambos, the lead scientist at the National Snow and Ice Data Center in Boulder, Colorado, and a veteran of both Greenland and Antarctic studies.

Some say they fear that the rise in seas in a warming world could be much greater than the upper estimate of about two feet in this century made last year by the Intergovernmental Panel on Climate Change. (Seas rose less than a foot, or 30 centimeters, in the 20th century.) The panel's assessment did not include factors known to contribute to ice flows but not understood well enough to estimate with confidence. All the panel could say was, "Larger values cannot be excluded."

A scientific scramble is under way to clarify whether the erosion of the world's most vulnerable ice sheets, in Greenland and West Antarctica, can continue to accelerate. The effort involves field and satellite analyses and sifting for clues from past warm periods, including the last warm span between ice ages, which peaked about 125,000 years ago and had sea levels 12 to 16 feet higher than today's.

The Arctic Council, representing countries with Arctic territory, has commissioned a report on Greenland's ice trends, to be completed before the 2009 round of climate-treaty talks in Copenhagen, at which the world's nations have pledged to settle on a long-term plan for limiting human-caused global warming.

Konrad Steffen, a University of Colorado glaciologist who has camped on the shoulders of Greenland's ice sheet each year since 1990, is a United States author working on that study. Last August, he and a team focusing on the ways meltwater might affect ice movement dropped a camera 330 feet, or 100 meters, down a water-filled moulin to explore whether the plumbing system can be mapped.

Research on alpine glaciers shows that as more water flows through such apertures, ice can shift more quickly. But eventually large sewer-like conduits form, limiting the lubrication effect. The camera drop was only an initial test.

Alberto Behar, a NASA engineer who designed the camera, said some unconventional methods were being considered to chart the flow of such water. "We had ideas to send rubber ducks down and see if they pop out in the ocean," he said. "They'd have a little note saying, 'Please call this number if you find me.' "

The changes seen in Greenland may turn out to be self-limiting in the short run; surging glaciers can flatten out and slow, for instance. Or they may be a sign that the island's ice - holding about the same volume of water as the Gulf of Mexico - is poised for a rapid discharge. Scientists are divided on that question, and also on whether there is a near-term risk from a Texas-size portion of West Antarctica's ice sheet that is also showing signs of instability. This split divides those foreseeing a rise in the sea level of a couple of feet this century from water added by Greenland, West Antarctica and fast-vanishing mountain glaciers, and a few experts who speak of a couple of meters in that time.

Those holding a more conservative view of Greenland's near-term fate include Richard Alley of Pennsylvania State University, who noted that ice cores and tests of organic material from beneath the ice imply that the main core of the Greenland ice sheet clearly endured thousands of years of warming in the past without vanishing.

"It's basically a big lump of ice sitting on this bedrock," Alley said in describing Greenland's behavior in warm conditions. "What it tries to do is snow more in the middle and melt more on the edges. If it pulls its edges back, then there's less area to melt, and that helps it survive. That's why you can have a stable ice sheet in a warmer climate."

But there is no significant debate on the long-term picture any more: Should greenhouse-gas emissions follow anything close to a "business as usual" rise, the resulting warming and ice loss at both ends of the earth would cause coasts to retreat for centuries to come. While it was circumspect about near-term changes, the intergovernmental panel was confident about that long view.

The prospect of having no "normal" coastline for the foreseeable future has many scientists deeply concerned.

"What is at stake is the stability we have always taken for granted" both for coasts and climate itself, said Jason Box, an associate professor of geography at Ohio State University. Box presented fresh findings at the American Geophysical Union meeting last month showing that several Greenland glaciers accelerated sharply in direct response to warming, both in a warm spell starting in the 1920s and now.

Eric Rignot, a longtime student of ice sheets at both poles for NASA's Jet Propulsion Laboratory, said he hoped that the public and policymakers did not interpret the uncertainty in the 21st-century forecast as reason for complacency on the need to limit risks by cutting emissions.

Rignot recently proposed that unabated warming could result in three feet of global sea rise just from water flowing off Greenland, three feet from Antarctica and 18 inches, or 46 centimeters, as the remaining alpine glaciers shrivel away.

This is similar to projections by the most prominent NASA climate scientist, James Hansen, but more than twice the three-foot rise that many glaciologists seem to agree on as an outer bound for what is possible by century's end.

"It is too early to reassure that all will stabilize, and similarly there is no way to predict a catastrophic collapse," Rignot said. "But things are definitely far more serious than anyone would have thought five years ago."

http://www.iht.com/bin/printfriendly.php?id=9063550

...Houston, YOU have a problem.

Follow the Heebner

2008-01-09T17:32:00.001-08:00

"Everything in this market has been poisoned by the Federal Reserve," said Cramer, adding the only sectors worth investing in are oil, infrastructure, agriculture, aerospace/defense, health care cost-containment and gold. "We may have lost the tech stocks," warned Cramer adding he would only trust a company like Microsoft which makes its numbers. Out of the 4,000 or more stocks Cramer keeps his eye on, he would only pick 40 or 70, including PEP, MO, KO and MHS.

Follow the Heebner: Posco (PKX), Arcelor (MT), Vimpel (VIP), Mobile Telesystems (MBT), Research In Motion (RIMM), Canadian Natural Resources (CNQ), Suncor (SU), Petroleo Brasileiro (PBR), Cnooc (CEO), CVRD (RIO), Rio Tinto (RTP), BHP Billiton (BHP), Freeport McMoRan (FCX), McDermott (MDR), Foster Wheeler (FWLT), and Fluor (FLR)

In tough times, Cramer recommends piggybacking off successful investors like Ken Heebner of the CGM Focus fund which is ranked third and increased 79.9% in 2007. Cramer noted Heebner recently sold HANs, MA and RIG, and thinks he should have held onto RIG. Cramer noted recent buys include PKX, MT, VIP, MBT, RIMM, CNQ, SU, PBr, CEO, RIO, RTP, BHP, FCX, MDR, FWLT and FLR, and concluded these moves confirm that infrastructure, oil, mining are bull markets.

How to live forever (or a real long time anyway)

2008-01-09T17:30:00.000-08:00

Abolishing ageing
How to live forever
Jan 3rd 2008From The Economist print edition
It looks unlikely that medical science will abolish the process of ageing. But it no longer looks impossible
Stephen Jeffrey
“IN THE long run,” as John Maynard Keynes observed, “we are all dead.” True. But can the short run be elongated in a way that makes the long run longer? And if so, how, and at what cost? People have dreamt of immortality since time immemorial. They have sought it since the first alchemist put an elixir of life on the same shopping list as a way to turn lead into gold. They have written about it in fiction, from Rider Haggard's “She” to Frank Herbert's “Dune”. And now, with the growth of biological knowledge that has marked the past few decades, a few researchers believe it might be within reach.
To think about the question, it is important to understand why organisms—people included—age in the first place. People are like machines: they wear out. That much is obvious. However a machine can always be repaired. A good mechanic with a stock of spare parts can keep it going indefinitely. Eventually, no part of the original may remain, but it still carries on, like Lincoln's famous axe that had had three new handles and two new blades.

The question, of course, is whether the machine is worth repairing. It is here that people and nature disagree. Or, to put it slightly differently, two bits of nature disagree with each other. From the individual's point of view, survival is an imperative. You cannot reproduce unless you are alive. A fear of death is a sensible evolved response and, since ageing is a sure way of dying, it is no surprise that people want to stop it in its tracks. Moreover, even the appearance of ageing can be harmful. It reduces the range of potential sexual partners who find you attractive—since it is a sign that you are not going to be around all that long to help bring up baby—and thus, again, curbs your reproduction.

The paradox is that the individual's evolved desire not to age is opposed by another evolutionary force: the disposable soma. The soma (the ancient Greek word for body) is all of a body's cells apart from the sex cells. The soma's role is to get those sex cells, and thus the organism's genes, into the next generation. If the soma is a chicken, then it really is just an egg's way of making another egg. And if evolutionary logic requires the soma to age and die in order for this to happen, so be it. Which is a pity, for evolutionary logic does, indeed, seem to require that.
The argument is this. All organisms are going to die of something eventually. That something may be an accident, a fight, a disease or an encounter with a hungry predator. There is thus a premium on reproducing early rather than conserving resources for a future that may never come. The reason why repairs are not perfect is that they are costly and resources invested in them might be used for reproduction instead. Often, therefore, the body's mechanics prefer lash-ups to complete rebuilds—or simply do not bother with the job at all. And if that is so, the place to start looking for longer life is in the repair shop.

Seven deadly things
One man who has done just that is Aubrey de Grey. Dr de Grey, who is an independent researcher working in Cambridge, England, is a man who provokes strong opinions. He is undoubtedly a visionary, but many biologists think that his visions are not so much insights as mischievous mirages, for he believes that anti-ageing technology could come about in a future that many now alive might live to see.
Vision or mirage, Dr de Grey has defined the problem precisely. Unlike most workers in the field, he has an engineering background, and is thus ideally placed to look into the biological repair shop. As he sees things, ageing has seven components; deal with all seven, and you stop the process in its tracks. He refers to this approach as strategies for engineered negligible senescence (SENS).
The seven sisters that Dr de Grey wishes to slaughter with SENS are cell loss, apoptosis-resistance (the tendency of cells to refuse to die when they are supposed to), gene mutations in the cell nucleus, gene mutations in the mitochondria (the cell's power-packs), the accumulation of junk inside cells, the accumulation of junk outside cells and the accumulation of inappropriate chemical links in the material that supports cells.
It is quite a shopping list. But it does, at least, break the problem into manageable parts. It also suggests that multiple approaches to the question may be needed. Broadly, these are of two sorts: to manage the process of wear and tear to slow it down and mask its consequences, or to accept its inevitability and bring the body in for servicing at regular intervals to replace the worn-out parts.
Eat up your greens
Managing wear and tear may not be as complicated as it looks, for the last five items on Dr de Grey's list seem to be linked by a single word: oxidation. Regular visitors to the “health and beauty” sections of high-street pharmacies will, no doubt, have come across creams, pills and potions bearing the word antioxidant on their labels and hinting—though never, of course, explicitly saying—that they might possibly have rejuvenating effects. These products are the bastard children of a respectable idea about one of the chief causes of ageing: that one big source of bodily wear and tear, at least at the chemical level, is the activity of the mitochondria.
Mitochondria are the places where sugar is broken down and reacted with oxygen to release the energy needed to power a cell. In a warm-blooded creature such as man, a lot of oxygen is involved in this process, and some of it goes absent without leave. Instead of reacting with carbon from the sugar to form carbon dioxide, it forms highly reactive molecules called free radicals. These go around oxidising—and thus damaging—other molecules, such as DNA and proteins, which causes all sorts of trouble. Clear up free radicals and their kin, and you will slow down the process of ageing. And the chemicals you use to do that are antioxidants.
This idea goes back to one of the founders of scientific gerontology, Bruce Ames of the University of California, Berkeley. Dr Ames began his career studying cancer. He found that damage to certain genes was a cause of cancer. These genes evolved to keep tumours at bay by stopping cells dividing too readily, and the damage was often done by oxidation. Gradually, his focus shifted to the more general damage that oxidation can do—and what might, in turn, be done about it.
Some vitamins, such as vitamin C, are antioxidants in their own right. This is the basis of the high-street propaganda, though there is no evidence that consuming such antioxidants in large quantities brings any benefit. A few years ago, however, Dr Ames found he could pep up the activity of the mitochondria of elderly rats—with positive effects on the animals' memories and general vigour—by feeding them two other molecules: acetyl carnitine and lipoic acid. These help a mitochondrial enzyme called carnitine acetyltransferase to do its job. Boosting their levels seems to compensate for oxidative damage to this enzyme. He also reviewed the work of other people and found about 50 genetic diseases caused by the failure of one enzyme or another to link up with an appropriate helper molecule. Such helpers are often B vitamins, and the diseases were often treatable with large doses of the appropriate vitamin.
The enzyme damage in these diseases is similar to that induced by oxidation, so Dr Ames suspects that its effects, too, can be ameliorated by high doses of vitamins. He has gathered evidence from mice to support this idea, but whether it is the case in people has yet to be tested. Nor is it easy to believe it ever will be. The necessary clinical trials would be long-winded. They would also be expensive—and there is no reason for vitamin companies to pay for them since sales are already buoyant and the products could not be patented. Nor is Dr Ames claiming vitamins will make you live longer than a natural human lifespan, even if he thinks they might prolong many individual lives. For that, other technologies will need to be invoked.
Stemming time's tide
One way that might let people outlive the limit imposed by disposable somas is to accept the machine analogy literally. When you take your car to be serviced or repaired, you expect the mechanic to replace any worn or damaged parts with new ones. That, roughly, is what those proposing an idea called partial immortalisation are suggesting. And they will make the new parts with stem cells.
The world has heard much of stem cells recently. They come in several varieties, from those found in embryos, which can turn into any sort of body cell, to those whose destiny is constrained to becoming just one or a few sorts of cell. The thing about stem cells of all types, which makes them different from ordinary body cells, is that they have special permission to multiply indefinitely.
For a soma to work, most of its component cells have to accept they are the end of the line—which, given that that line in question stretches back unbroken to the first living organisms more than 3 billion years ago, is a hard thing to do. There are, therefore, all sorts of genetic locks on such cells to stop them reproducing once they have arrived at their physiological destination. If these locks are picked (for example by oxidative damage to the genes that control them, as discovered by Dr Ames), the result is unconstrained growth—in other words, cancer. One lock is called the Hayflick limit after its discoverer, Leonard Hayflick. This mechanism counts the number of times a cell divides and when a particular value (which differs from species to species) is reached, it stops any further division. Unless the cell is a stem cell. Every time a stem cell divides, at least one daughter remains a stem cell, even though the other may set off on a Hayflick-limited path of specialisation.
Some partial immortalisers seek to abolish the Hayflick limit altogether in the hope that tissue that has become senescent will start to renew itself once more. (The clock that controls it is understood, so this is possible in principle.) Most, though, fear that this would simply open the door to cancer. Instead, they propose what is known as regenerative medicine—using stem cells to grow replacements for tissues and organs that have worn out. The most visionary of them contemplate the routine renewal of the body's organs in a Lincoln's axish sort of way.
In theory, only the brain could not plausibly be replaced this way (any replacement would have to replicate the pattern of its nerve cells precisely in order to preserve an individual's memory and personality). Even here, though, stem-cell therapists talk openly of treating brain diseases such as Parkinson's with specially grown nerve cells, so some form of partial immortalisation might be on the cards. But it is a long way away—further, certainly, than Dr Ames's vitamin therapy, if that is shown to work.
Neither prevention, nor repair, is truly ready to roll out. But there is one other approach, and this is based on the one way of living longer that has been shown, again and again, in animal experiments, to be effective. That is to eat less.
From threadworms to mice, putting an animal on a diet that is near, but not quite at, starvation point prolongs life—sometimes dramatically. No one has done the experiment on people, and no one knows for sure why it works. But it does provide a way of studying the problem with the reasonable hope of finding an answer.
Gluttons for punishment
You would, of course, have to wish a lot for a long life to choose to starve yourself to achieve it. Extrapolating from the mouse data, you would need to keep your calorie intake to three-quarters of the amount recommended by dieticians. That means about 1,800 for sedentary men and 1,500 for sedentary women. But several people are trying to understand the underlying biology, in order to develop short cuts.
One such is David Sinclair of Harvard University. Unlike those trying to fight the causes of ageing or to repair the damage done, Dr Sinclair thinks he has found, in caloric restriction as the technique is known, a specifically evolved natural anti-ageing mechanism that is quite compatible with disposable-soma theory.
The reason for believing that prolonged life is an evolutionary response to starvation rather than just a weird accident is that when an animal is starving the evolutionary calculus changes. An individual that has starved to death is not one that can reproduce. Even if it does not die, the chance of it giving birth to healthy offspring is low. In this case, prolongation of life should trump reproduction. And that is what happens, even among people. Women who are starving stop ovulating. The billion-dollar trick would be to persuade the body it is starving when it is not. That way people could live longer while eating normally. They might even, if the mechanism can truly be understood, be able to reproduce, as well.
In Dr Sinclair's view, the way caloric restriction prolongs life revolves around genes for proteins called sirtuins. Certainly, these genes are involved in life extension in simple species such as threadworms and yeast. Add extra copies of them to these organisms' chromosomes, or force the existing copies to produce more protein than normal, and life is prolonged. This seems to be because sirtuins control the abundance of a regulatory molecule called nicotinamide adenine diphosphate which, in turn, controls the release of energy in the mitochondria.
The most intriguing connection in this story is with the French paradox. This is the fact that the French tend to eat fatty diets rich in red meat but to have the survival characteristics of those whose diets are lean and vegetarian. Some researchers link this with their consumption of red wine—and, in particular, of a molecule called resveratrol that is found in such wine. Resveratrol activates sirtuins, and some similar molecules activate them much more. It is these sirtuin super-stimulators that interest Dr Sinclair.
Not everyone is convinced, but Dr Sinclair has done experiments on mice that look promising, and has started a company called Sirtris Pharmaceuticals to follow it up. The fact that he is (at least in his own eyes) working with nature rather than against it argues that this is the most promising approach of all.
That said, the logic of the disposable-soma theory is profound. Even working with its grain may do no more than buy a few extra years of healthy living. Dr de Grey's reason for thinking that some people now alive may see their lives extended indefinitely is based on the hope that those few extra years will see further discoveries and improved life-extension technologies based on them—a process he describes as achieving “longevity escape velocity”.
The chances are that it will not work. But hope springs eternal. To end with another quote, this time from Woody Allen, “I don't want to achieve immortality through my work. I want to achieve immortality through not dying.” If any researcher manages to beat evolutionary history and achieve his goal, he might get to do both.

2008-01-04T09:58:00.000-08:00

Jubak's Journal1/4/2008 12:01 AM ET
Is '70s-style stagflation returning?
Inflation is rising and the economy is decelerating, but those problems don't add up to that nasty combination of stagnant growth and out-of-control price increases. Yet.
By Jim Jubak
Stagflation is coming. Lock up your portfolio. We could be on our way to a replay of the 1970s.
That's the worry among an increasing number of investors as we head into 2008. It's certainly possible for the year ahead, but it's unlikely. In this column, I'll look at what would have to go wrong for stagflation to return and how to position a portfolio if you think stagflation is more of a danger than I do.
The '70s have a lot to answer for:
"Airport," "Airport 1975," "Airport '77" and "Airport '79."
The Village People and "YMCA."
The breakup of the Beatles.
President Jimmy Carter and the killer rabbit.
Sonny Bono's bell bottoms.
And stagflation, that lethal brew of stagnant growth and high inflation.
In the United States, headline inflation started off the decade at 5.5% in 1970, peaked at 12.2% in 1974 and again at 13.3% in 1979, and didn't drop below 4% until 1982. For the '70s as a whole, inflation averaged 7.4% annually. In comparison, inflation in the 1960s averaged 2.5% annually.
Real economic growth tumbled. Subtracting for inflation, the economy grew by just 3.27% on average from 1970 to 1979, quite a drop from the 4.44% average annual growth in real gross domestic product recorded from 1960 to 1969. And in two years during the 1970s, after subtracting for inflation, the economy actually declined in size -- by 0.5% in 1974 and 0.2% in 1975.
As you might expect, the 1970s weren't a great time for investors. The Standard & Poor's 500 Index ($INX) returned a compound annual 5.9% from 1970 to 1979. With inflation running at an annual 7.4%, an investor in the stock market was losing ground every year to inflation. Bond investors had it even worse: The compound annual return on a long-term U.S. Treasury bond for the decade was just 4.8%, 2.6 percentage points lower than the inflation rate.
So you can understand why the prospect of stagflation in 2008 would send shivers up investors' spines. How likely is that scenario? Let me break down stagflation into its two parts, the "stag" and the "flation." I'll deal with "flation" first.
The 'flation' part of the equationIs high inflation coming back? Yes.
The Federal Reserve and the European Central Bank, the two most important inflation fighters in the world, are worried that inflation is too high. Headline inflation, the number the European Central Bank watches, was 3.1% in November in Europe, way above the bank's 2% limit. In the United States, headline inflation was 4.3% in November.
The Fed's preferred measure of core inflation -- headline inflation minus any increases in volatile food and energy prices -- was a lower 2.3%. (Energy prices were up 21% in the month, so leaving them out of the inflation calculation helped.) But even that was above the Fed's comfort zone.
For the "flation" part of stagflation to set in, those rates have to go higher and create the expectation that inflation is headed out of control.
Video on MSN Money

Jubak’s Journal: A turnaround for the dollar?The US dollar could turn out to be the big comeback surprise of 2008. One reason: As foreign investors put big money into US companies, those foreign countries are less likely to dump the dollar, MSN Money's Jim Jubak says.
Unfortunately, higher inflation is coming from every direction you care to look. Normally, the Federal Reserve and the European Central Bank would move to stomp out inflation by raising interest rates. Now, thanks to a weakening U.S. economy and turmoil in the debt markets, the Fed is lowering interest rates instead, and both banks are flooding the financial markets with short-term cash.
China, Russia and other emerging-market economies determined to keep their currencies from gaining against the dollar are creating money to buy dollars, inflating their own currencies, and that money is fueling booms in stock and real-estate markets. Inflation hit 6.9% in China in November, for example. And these countries are exporting some of their inflation in the form of higher prices for developed-world customers such as Wal-Mart Stores (WMT, news, msgs). Demand from these fast-growing economies for raw materials is driving up the price of coal, iron ore, corn, wheat, oil -- just about every commodity you can name. A falling U.S. dollar is driving up the cost of everything the country imports, from oil to children's toys.
Normally, the Federal Reserve could count on a slowing economy to take a bit of wind out of inflation's sails. But many of the current causes of inflation aren't linked to the U.S. economy. We could get inflation and slower growth -- the definition of stagflation.
Continued: How we get to 'stag'
How we get to 'stag'So what's the "stag" part of stagflation look like as we begin 2008?
The economy seems to be decelerating rapidly:
According to the latest data, released Dec. 27 but dating to the end of October, home prices are falling at a record rate. The S&P/Case-Shiller index of home prices in 10 major metropolitan areas dropped 6.7% from October 2006. That's a record year-to-year decline, beating the old record of 6.3%, set in April 1991.
That decline is feeding into a whopping increase in credit card delinquencies. The dollar amount of credit card debt at least 30 days late jumped 26%, to $17.3 billion, in October 2007 from the same month of 2006, according to an Associated Press study of 325 million individual accounts held by the 17 largest credit card trusts.
Retail sales in the just-concluded Christmas shopping season appeared weaker than projected, with growth in same-store sales running below estimates of 2.5%, according to the International Council of Shopping Centers. All this is starting to hit the real economy where it counts: in the unemployment numbers. Initial claims for unemployment, a good gauge for what's going on in the job market, rose to 350,000 in the week that ended Dec. 22. That left the four-week moving average for initial claims at 343,000. That's getting worryingly close to the 360,000 level in the four-week moving average that has accompanied recessions in 1990 (362,000) and 2001 (373,000).
But as bad as this news is, it doesn't add up to the "stag" in "stagflation."
What was so excruciating about the stagflation of the 1970s was the duration of the "stag." Slow or negative growth went on for quarter after quarter. After growing at a 4.7% real rate in the second quarter of 1973, real economic growth turned negative, dropping by 2.1% in the third quarter. The economy then rebounded to a 3.9% real growth rate in the fourth quarter of 1973 before heading into the Dumpster. The economy showed negative 3.4% real growth in the first quarter of 1974, a minor revival to a positive 1.2% growth rate in the second quarter and then three straight negative quarters of 3.8%, 1.6% and 4.7%.
No wonder the bear market in stocks of 1973 and 1974 was so painful. Stocks fell 14.7% in 1973 and then 26.5% in 1974.
Right now, no one on Wall Street is looking for a repeat of that extended slump. Growth is supposed to slow in the first half of 2008 and then pick up, leaving growth for 2008 at 2.3%, according to the Federal Reserve. I think that forecast is too optimistic. The slump in 2008 is likely to last for more than just the two quarters Wall Street expects.
Video on MSN Money

Jubak’s Journal: A turnaround for the dollar?The US dollar could turn out to be the big comeback surprise of 2008. One reason: As foreign investors put big money into US companies, those foreign countries are less likely to dump the dollar, MSN Money's Jim Jubak says.
But I still don't expect a recession in 2008 (see "Why the Fed is running scared") and certainly not anything like the negative growth in five out of seven quarters that the economy turned in from mid-1973 to early 1975. (Officially a recession is two consecutive quarters of negative economic growth.)
Not over yetWhat could tip us from slow growth -- either the two quarters that Wall Street expects or the three to four that I think is likely (see "Don't count on a 'normal' recession") -- into 1970s-style stagnation?
An expansion of the credit crunch from its current victims -- home buyers who can't find a mortgage and homeowners who can't refinance a mortgage -- to corporate borrowers with decent credit ratings. If companies can't raise capital on decent terms, they'll cut spending on new equipment and construction, then eliminate plans for hiring, then cut back on buying anything that's not essential and, finally, fire workers. And then we'll be on the road to something worse than a couple of slow quarters.
Continued: Portfolio suggestions
So far, the credit crunch and the rise in effective interest rates has been enough to produce a slowdown, but not a recession and not stagnation. However, we're not done with this crisis. On Dec. 27, Goldman Sachs (GS, news, msgs) said Citigroup (C, news, msgs), Merrill Lynch (MER, news, msgs) and JPMorgan Chase (JPM, news, msgs) would announce write-downs of $18.7 billion, $11.5 billion and $3.4 billion, respectively, on their mortgage-related portfolios when they report fourth-quarter results in January.
Of course, that's not likely to be the last of the bad news because the banks and other financial companies with big exposure to the mortgage market are not exactly rushing to embrace their losses. We're looking at more quarters when bad news will come dribbling out of the big banks. Enough dribbles, and banks could cut lending to all customers even further.
Portfolio suggestionsSo how do you position a portfolio as we go into 2008?
Remember that stagflation is possible but not certain. Investors who pay attention to the financial news out of the big banks should be able to keep their portfolios a step ahead of any shifts in the economy's direction.
Fortunately, many of the investments you'd make to combat stagflation should work pretty well in 2008 even if all we get is a slowdown spread over a few quarters and a step up in inflation. Commodities and energy. Gold, of course. Growth stocks in sectors of the economy that will grow even if the economy slows. And any defensive growth stock with enough pricing power to raise its prices fast enough to stay ahead of inflation.
Some suggestions?
The oil drilling and services area, especially companies with big international operations. Worldwide exploration and production spending is set to rise 11% in 2008, according to Lehman Bros.' annual oil-industry capital-spending survey. Take a look at Schlumberger (SLB, news, msgs), Weatherford International (WFT, news, msgs) and FMC Technology (FTI, news, msgs).
Iron-ore and natural-gas stocks. Iron-ore demand is up, and supply hasn't kept pace. Natural gas is still near a low, and the stocks are just starting to move. Iron-ore plays include Fortescue Metals Group (FSUMF, news, msgs) and Companhia Vale do Rio Doce (RIO, news, msgs), both in Jubak's Picks.
Jubak's Picks Kinross Gold (KGC, news, msgs) and GoldCorp (GG, news, msgs) will give you good exposure to the classic hedge against rising inflation and a falling dollar.
Video on MSN Money

Jubak’s Journal: A turnaround for the dollar?The US dollar could turn out to be the big comeback surprise of 2008. One reason: As foreign investors put big money into US companies, those foreign countries are less likely to dump the dollar, MSN Money's Jim Jubak says.
Take a look at the growth stocks I picked in my Dec. 7 column, "5 stocks to profit from a weak dollar," for companies that will be able to outrun stagflation.
And don't forget a dose of pricing powerhouses such as PepsiCo (PEP, news, msgs) and Johnson & Johnson (JNJ, news, msgs). Picks from that group should help you play defense with your portfolio.
I know my end-of-the-year columns have been a bit gloomy -- a longer slowdown than Wall Street expects and the possibility of stagflation. A little yule hemlock, anyone?
Enough of the doom and gloom, however. In my next column, I'm going to take a cheery look at how to make money out of the deeply stupid energy bill Congress passed and President Bush signed Dec. 19.
Continued: My fourth-quarter performance
Fourth-quarter performance for Jubak's Picks Sometimes I'm happy playing good defense, and that's the story for the fourth quarter of 2007. For the period, Jubak's Picks eked out a tiny 0.87% return. But that's a good result when the stock market as a whole is in retreat. For the quarter, the Dow Jones Industrial Average ($INDU) fell 3.4%, the S&P 500 was down 3.3%, and the Nasdaq Composite Index ($COMPX) retreated 1.8%.
The key for the quarter, as it was for all of 2007, was staying away from the financial and consumer discretionary sectors and overweighting energy. The Select Sector SPDR-Financial (XLF, news, msgs) and the Select Sector SPDR Consumer Discretionary (XLY, news, msgs) exchange-traded funds (ETFs) finished a dismal year by falling an additional 18.5% and 14%, respectively, in the fourth quarter.
By contrast, the Select Sector SPDR-Energy (XLE, news, msgs) ETF was up 36.9% for the year and 7.1% for the fourth quarter. But there were few places to hide in the quarter, as even sectors such as Select Sector SPDR-Materials (XLB, news, msgs) and Select Sector SPDR-Industrials (XLI, news, msgs), which were up 22.2% and 13.5%, respectively, for the year fell in the fourth quarter by 0.05% and 4.2%. The biggest disappointment for the quarter was the technology sector: Select Sector SPDR-Technology (XLK, news, msgs) dropped 0.7% in a quarter when it usually rallies. The sector still gained 14.4% on the year.
It's great when you get the sector right and back the right stock in the sector, too. That's what I did with Devon Energy (DVN, news, msgs), up 9.9% in the fourth quarter; Ultra Petroleum (UPL, news, msgs), up 13.1% in the period; Yara International (YARIY, news, msgs), up 43.9%; Jacobs Engineering Group (JEC, news, msgs), up 10.7% since I added it to the portfolio Oct. 30; and Joy Global (JOYG, news, msgs), up 13.2% since my Oct. 30 addition to the portfolio.
And it's really aggravating when you get the sector right but the stock wrong, as I did with technology picks Maxwell Technologies (MXWL, news, msgs), down 27.8% for the quarter, and Nvidia (NVDA, news, msgs), down 7.8% for the period; and energy pick CGG Veritas (CGV, news, msgs), down 13.3% since I added it to the portfolio Oct. 26.
And of course, no quarter would be complete without the boneheaded, "what was I thinking" moves. The number of picks in this category rises when a difficult and shifting quarter leads me to try to zig and zag my way out of danger and into profits. I'd put in this category my picks of Marriott International (MAR, news, msgs), down 17.5% since my Nov. 2 buy, and Quintana Maritime (QMAR, news, msgs) down 17.7% since Oct. 16 -- so far, anyway.
Playing successful defense in the fourth quarter let me hold on to my market gains for the year. For the full year, I had a 25.2% total return versus an 8.8% return for the Dow industrials, 5.5% for the S&P 500 and 9.8% for the Nasdaq Composite.
I've got my doubts about the stock market in 2008, especially in the first half of the year. I think there's a good chance that investors who now expect the economic slowdown and troubles in the financial sector to be over by mid-2008 will be disappointed. That could create some good bargains around midyear for patient investors with cash. I've slowly raised cash in Jubak's Picks to 13%, up from 12% in the third quarter and 11% in the second quarter, and I'll continue to look for ways to raise my cash position as we move deeper into 2008.
Jubak's Picks versus major averages:
Index
Q4 2007
12 months
Jubak's Picks
0.9%
25.2%
Nasdaq Composite ($COMPX)
-1.8%
9.8%
S&P 500 ($INX)
-3.3%
5.5%
Dow Jones industrials ($INDU)
-3.9%
8.8%
Longer-term performance:
Index
3-year return*
5-year return**
From inception***
Jubak's Picks
90.5%
258.0%
375.9%
Nasdaq Composite
21.8%
98.5%
98.4%
S&P 500
43.5%
82.6%
78.9%
Dow Jones industrials
32.0%
77.8%
86.4%
*Close on Dec. 30, 2004, through close on Dec. 31, 2007. **Dec. 31, 2002, through Dec 31, 2007. ***May 7, 1997, through Dec. 31, 2007.
All returns for Jubak's Picks deduct costs of commissions. Returns for Jubak's Picks and the indexes all include dividends.
Meet Jubak at The Money Show MSN Money's Jim Jubak will be among more than 120 investment and finance experts sharing buy and sell advice at The World Money Show in Orlando, Fla., Feb. 6-9. Invest four days dedicated to planning and refining your portfolio by attending the event's more than 320 workshops and panel presentations.
Admission is free for MSN Money readers. To sign up, call 1-800-970-4355 and mention priority code No. 009554, or register online.
Video on MSN Money

Jubak’s Journal: A turnaround for the dollar?The US dollar could turn out to be the big comeback surprise of 2008. One reason: As foreign investors put big money into US companies, those foreign countries are less likely to dump the dollar, MSN Money's Jim Jubak says.
Editor's note: Jim Jubak, the Web's most-read investing writer, normally posts a new Jubak's Journal every Tuesday and Friday. Please note that recommendations in Jubak's Picks are for a 12- to 18-month time horizon. For suggestions to help navigate the treacherous interest-rate environment, see Jubak's portfolio of Dividend Stocks for Income Investors. For picks with a truly long-term perspective, see Jubak's 50 Best Stocks in the World or Future Fantastic 50 Portfolio. E-mail Jubak at jjmail@microsoft.com.
At the time of publication, Jim Jubak owned or controlled shares in the following equities mentioned in this column: Devon Energy, Companhia Vale do Rio Doce, Fortescue Metals Group, GoldCorp, Jacobs Engineering, Joy Global, Kinross Gold, Maxwell Technologies, Schlumberger, Ultra Petroleum and Yara International. He did not own short positions in any stock mentioned in this column.

... How's that working for ya?

More unexplained acceleration

2008-01-03T14:46:00.000-08:00

Nature And Man Blamed For Thawing Arctic
WASHINGTON, Jan. 2, 2008

(AP) There's more to the recent dramatic and alarming thawing of the Arctic region than can be explained by man-made global warming alone, a new study found. Nature is pushing the Arctic to the edge, too. There's a natural cause that may account for much of the Arctic warming, which has melted sea ice, ice sheets and glaciers, according to a study published Thursday in the journal Nature. New research points a finger at a natural and cyclical increase in the amount of energy in the atmosphere that moves from south to north around the Arctic Circle. But that energy transfer, which comes with storms that head north because of ocean currents, is not acting alone either, scientists say. Another upcoming study concludes that the combination of both that natural energy transfer increase and man-made global warming serve as a one-two punch that is pushing the Arctic over the edge. Scientists are trying to figure out why the Arctic is warming and melting faster than computer models predict. The summer of 2007, like the summer of 2005, smashed all records for loss of summer sea ice in the Arctic Ocean and ice sheet in Greenland. In September, the Arctic Ocean had 23 percent less sea ice than the previous record low. Greenland's ice sheet melted 19 billion tons more than its previous record. The Nature study suggests there's more behind it than global warming because the air a couple miles above the ground is warming more than calculated by the climate models. Climate change theory concentrates on warming of surface temperatures and explains an Arctic that is warming faster than the rest of the world as mostly because reduced sea ice and ice sheets means less reflecting solar rays. Rune Graversen, the Nature study co-author and a meteorology researcher at Stockholm University in Sweden, said a shift in energy transfer explains the thawing more, including what's happening in the atmosphere, but does not contradict consensus global warming science. Oceanographer James Overland, who reviewed Graversen's study for Nature, said the research dovetails with an upcoming article of his which concludes that the Arctic thawing is a combination of the two. "If we didn't have the little extra kick from global warming then we wouldn't have gone past the threshold for the change in sea ice," said Overland, of the National Oceanic and Atmospheric Administration's lab in Seattle. Other researchers said Graversen's study underestimates the effect of global warming because it relied on older data that stopped at 2001 and wasn't the most accurate. Overland and scientist Mark Serreze disagree over which effect - man-made or natural - was the big shove that pushed the Arctic over the edge, but they agreed that overall it's a combined effort. "Think of it as a boxer that's almost going down for the count ... and that one blow to the noggin comes and he's down for the count," said Serreze, a senior scientist at the government's snow and ice data center in Boulder, Colo.

http://apnews.myway.com//article/20080103/D8TUKJ500.html

US Educational Train Wreck In Progress...

2008-01-02T12:46:00.000-08:00

Achieve, Inc., a bipartisan, nonprofit education organization formed by governors and prominent business leaders, found that math and English tests for high school diplomas require only middle school knowledge, and found those math graduation tests measure only what students in other countries learn in the seventh grade

http://www.stateline.org/stateline/?pa=story&sa=showStoryInfo&id=377921)

(... and if that doesn't scare you, maybe this will...)

U.S. 15 year olds ranked 29th in Science - U.S.A rank # 29
Here's a partial listing of examination rankings in the Science series.
Finland was the highest-performing country on the PISA 2006 science scale. Six other high-scoring countries were: Canada, Japan and New Zealand and the partner countries/economies Hong Kong-China, Chinese Taipei and Estonia. Australia, the Netherlands, Korea, Germany, the United Kingdom, the Czech Republic, Switzerland, Austria, Belgium and Ireland, and the partner countries/economies Liechtenstein,Slovenia and Macao-China also scored above the OECD average.
Rankings first 30 nations in the Science series > Finland, Hong Kong-China, Canada, Chinese-Taipei, Estonia, Japan, New Zealand, Australia, Netherlands, Liechenstein, Korea, Slovenia, Germany, England, Czech Republic, Switzerland, Macao-China, Austria, Belgium, Ireland, Hungary, Sweden, Poland, Denmark, France, Crotia, Iceland, Latvia, U.S.A., Slovak Republic.
U.S.A. scored below avearage in the Science series, at ranking position #29.
U.S. 15 year olds ranked 35th in Mathematics - U.S.A. rank #35
Mathematics Performance > Finland and Korea, and the partners Chinese Taipei and Hong Kong-China, outperformed all other countries/economies in PISA 2006. Other countries with mean performances significantly above the OECD average were the Netherlands, Switzerland, Canada, Japan, New Zealand, Belgium, Australia, Denmark, the Czech Republic, Iceland and Austria, as well as the partner countries/economies Macao-China, Liechtenstein, Estonia and Slovenia.

http://mwhodges.home.att.net/new_96_report.htm

... How's that working for ya?

Feds' budget tricks hide trillions in debt

2007-11-29T17:08:00.000-08:00

Feds' budget tricks hide trillions in debt
Every year, tens or even hundreds of billions of dollars are quietly added to the national debt -- on top of the deficits that we hear about. What's going on here?

When it comes to financial magic, the government of the United States takes the prize. Sleights of hand and clever distractions by purveyors of line-of-credit mortgages, living-benefit variable annuities and equity-indexed life insurance are clumsy parlor tricks compared with the Big Magic of American politicians.
Consider the proud trumpeting that came from Washington at the close of fiscal 2007. The deficit for the unified budget was, politicians crowed, down to a mere $162.8 billion.

In fact, our government is overspending at a far greater rate. The total federal debt actually increased by $497.1 billion over the same period.
But politicians of both parties use happy numbers to distract us. Democrats routinely criticize the Republican administration for crippling deficits, but they politely use the least-damaging figure, the $162.8 billion. Why? Because references to more-realistic accounting would reveal vastly greater numbers and implicate both parties.

You can understand how this is done by taking a close look at a single statement on federal finance from the president's Council of Economic Advisers. The September statement shows that the "on-budget" numbers produced a deficit of $344.3 billion in fiscal 2007. The "off-budget" numbers had a surplus of $181.5 billion. (The off-budget figures are dominated by Social Security, Medicare and other programs with trust funds.)
Combine those two figures and you get the unified budget, that $162.8 billion. In the past eight years we've had two years of reported surpluses and six years of reported deficits. Altogether, the total reported deficit has run $1.3 trillion.
Some numbers don't add up But if you examine another figure, the gross federal debt, you'll see something strange. First, the debt has increased in each of the past eight years, even in the two years when surpluses were reported. Second, the gross federal debt, which includes the obligations held by the Social Security and Medicare trust funds, has increased much faster than the deficits -- about $3.3 trillion over the same eight years.
That's $2 trillion more than the reported $1.3 trillion in deficits over the period. Can you spell "Enron"?

In other words, while our reported deficits averaged $164 billion over the past eight years, government debt increased an average of $418 billion a year. That's a lot more than twice as much.
How could this happen?
Easy. The Treasury Department simply credits the Social Security, Medicare and other trust funds with interest payments in the form of new Treasury obligations. No cash is actually paid. The trust funds magically increase in value with a bookkeeping entry. It represents money the government owes itself.
So what happens if we take out the funny money?
When the imaginary interest payments are included, Social Security and Medicare are running at a tranquilizing surplus (that $181.5 billion mentioned earlier). But measure actual cash, and the surplus disappears.

How to control deficit spendingU.S. Rep. Tom Tancredo, R-Colo., says Social Security and Medicare are the keys to cutting federal budget deficits.
In 2005, for instance, the Social Security Disability Income program started to run at a cash loss. 2007 is the first year that Medicare Part A (the hospital insurance program) benefits exceeded income.
The same thing will happen to the Social Security retirement-income program in six to nine years, depending on which of the trustees' estimates you use. During the same period, the expenses of Medicare Part B and Part D, which are paid out of general tax revenue, will rise rapidly.
Despite this, the Social Security Administration writes workers every year advising them that the program will have a problem 34 years from now, not six or nine years. In fact, the real problem is already here. It will be a big-time problem in less than a decade.
Count on it.

Federal deficits versus increases in the federal debt
Fiscal year
Reported surplus/deficit
Debt increase
Debt at start of year
Debt at year's end
2000
$236.2 billion surplus
$23.2 billion
$5.606 trillion
$5.629 trillion
2001
$128.2 billion surplus
$141.2 billion
$5.629 trillion
$5.770 trillion
2002
$157.8 billion deficit
$428.5 billion
$5.770 trillion
$6.198 trillion
2003
$377.6 billion deficit
$561.6 billion
$6.198 trillion
$6.760 trillion
2004
$412.7 billion deficit
$594.7 billion
$6.760 trillion
$7.355 trillion
2005
$318.3 billion deficit
$550.6 billion
$7.355 trillion
$7.905 trillion
2006
$248.2 billion deficit
$546.1 billion
$7.905 trillion
$8.451 trillion
2007
$162.8 billion deficit
$497.1 billion
$8.451 trillion
$8.949 trillion

How's that working for ya?

Idiot Corporate Looters Strike Retirement Gold

2007-11-28T15:25:00.000-08:00

The 5 richest payoffs for fired CEOs
Many axed CEOs depart their troubled companies with millions of dollars in cash, stock and options -- like Merrill Lynch's Stanley O'Neal did last month. Here are five who stand atop this golden goodbye club.
The sweetest sound on Wall Street these days? "You're fired."
Regular folks may get a modest pension or maybe just a box for their personal items. But for Wall Street CEOs, the exit sign needs at least eight digits.
The latest example is the $161.5 million retirement package collected by former Merrill Lynch (MER, news, msgs) chief Stanley O'Neal on his way out the doors of the troubled brokerage last month.
On O'Neal's watch, Merrill cranked out risky debt instruments backed by dodgy subprime mortgages. Then last month, O'Neal left the brokerage amid revelations of Merrill's heavy exposure to the imploding mortgage market.

Despite all the problems that developed while he was at the helm, he will benefit nicely if his successors can clean up the mess. Most of the value of O'Neal's golden goodbye comes in the form of restricted stock and stock options. But astonishingly, unlike options or stock grants that are wiped out or expire quickly for regular employees when they leave to "spend more time with the family," O'Neal's awards will continue to vest for years to come under a timetable set years ago.

The big 5

O'Neal, of course, is not the sole member of the exclusive corner office golden goodbye club. Paul Hodgson, a CEO pay expert at The Corporate Library, estimates that getting rid of the CEOs at 16 investment banks and financial institutions that potentially have the biggest exposure to the subprime mess would cost an astonishing $1 billion, including O'Neal's take. Angelo Mozilo, who as co-founder and chief of mortgage lender Countrywide Financial (CFC, news, msgs) bears a good bit of the blame for the current subprime mess, would collect more than $73 million, according to Hodgson.
As big as O'Neal's $161.5 million "retirement package" was, he ranks only fifth in the golden goodbye club so far this millennium. Below are the other CEOs who got even more loot than him on the way out the door, with numbers courtesy of an Oct. 31 Corporate Library research note on this problem called "Too Little, Too Late."
No. 4: Ex-Gillette chief James Kilts. Total retirement take: $165 million.
It's been more than two years since Procter & Gamble (PG, news, msgs) took over Gillette, putting Gillette CEO James Kilts out of a job. A lot of CEOs have left their corner offices since then, but Kilts' golden goodbye was so huge it still takes the No. 4 slot for the all-time biggest retirement payouts this millennium. His take: $165 million, including a $13 million "gross-up" payment to help cover taxes triggered by a golden parachute. In response to criticism in the local press for this huge retirement cash-out, Kilts described himself as "Boston's piñata" and argued that he earned the pay by creating billions of dollars in shareholder wealth.
Continued: Home Depot's former CEO
No. 3: Former Home Depot CEO Robert Nardelli. Total retirement take: $210 million.
The sheer size of former Home Depot (HD, news, msgs) CEO Robert Nardelli's golden goodbye sparked outrage on many fronts when he left the company in early 2007. First, Home Depot stock declined nearly 8% under his six-year watch. Next, he got all the loot even though he had already collected huge sums in annual pay -- including $219.7 million in the two years before leaving the company, according to The Corporate Library.
Finally, $84 million of his golden goodbye came in the form of accelerated vesting of deferred stock awards and grants of unvested options, according to the AFL-CIO Office of Investment. So just like Merrill's O'Neal -- but unlike most rank-and-file employees -- Nardelli got to keep his restricted stock and options and will gain if his successor, Frank Blake, manages to turn Home Depot around and make its stock go up.
No. 2: Former Pfizer boss Henry McKinnell. Total retirement take: $213 million.
Under Henry McKinnell's watch from early 2001 through 2006, the shares of Pfizer (PFE, news, msgs) declined 40%. That cost shareholders $140 billion. No matter. He still left the CEO slot in July 2006 with a $213 million golden goodbye, thanks to an extremely generous board.
While private-sector pensions typically replace 20% to 35% of salary, the value of McKinnell's pension worked out to about $6.5 million a year, or 100% of his annual salary and bonus before leaving, according to the AFL-CIO. He actually took it in the form of an $82 million lump sum, part of that $213 million total.
No. 1: Former ExxonMobil boss Lee Raymond. Total retirement take: $351 million.
Given the strength in energy stocks since 2000, it probably comes as no surprise that the richest golden goodbye this millennium went to Lee Raymond, who retired as CEO of ExxonMobil (XOM, news, msgs) in 2006. He got $351 million. That's a lot for a guy who earned $70 million in his last year of work, or $34,457 an hour, according to The Corporate Library. His cash-out included a $98.4 million lump-sum pension payment.
ExxonMobil stock advanced nearly fourfold during the 13 years he served as CEO, so supporters argued he earned the money. However, much of that advance was linked to a broad rise in energy stocks as oil prices advanced sharply in the past several years. Should Raymond really get credit for that?
What you can do If any of this ticks you off, there are a couple of things you can do. First, if you own stock, watch closely for proxy votes during the shareholder meeting season. Two of the most popular shareholder resolutions these days call for limits on severance pay and "say on pay," in which shareholders vote thumbs up or thumbs down on company compensation reports. These votes aren't binding, but they send a message.

Next, if you have a political bent, you can ask your representatives to support legislators like Rep. Barney Frank, D-Mass., who are working on bills that would require public companies to have these votes on severance pay and "say on pay" votes.

Finally, contact the Securities and Exchange Commission and support changes in rules that would allow shareholders to have more proxy access to change company bylaws. This kind of leeway could allow shareholder activists to change the way board members are voted on -- so it's easier to boot out the ones who consistently buckle to executive demands for higher pay.

http://articles.moneycentral.msn.com/Investing/CompanyFocus/The5RichestPayoffsForFiredCEOs.aspx?page=all

The Economic Consequences of Mr. Bush

2007-11-13T09:39:00.000-08:00

The Economic Consequences of Mr. Bush

The next president will have to deal with yet another crippling legacy of George W. Bush: the economy. A Nobel laureate, Joseph E. Stiglitz, sees a generation-long struggle to recoup.
by Joseph E. Stiglitz December 2007

When we look back someday at the catastrophe that was the Bush administration, we will think of many things: the tragedy of the Iraq war, the shame of Guantánamo and Abu Ghraib, the erosion of civil liberties. The damage done to the American economy does not make front-page headlines every day, but the repercussions will be felt beyond the lifetime of anyone reading this page.
I can hear an irritated counterthrust already. The president has not driven the United States into a recession during his almost seven years in office. Unemployment stands at a respectable 4.6 percent. Well, fine. But the other side of the ledger groans with distress: a tax code that has become hideously biased in favor of the rich; a national debt that will probably have grown 70 percent by the time this president leaves Washington; a swelling cascade of mortgage defaults; a record near-$850 billion trade deficit; oil prices that are higher than they have ever been; and a dollar so weak that for an American to buy a cup of coffee in London or Paris—or even the Yukon—becomes a venture in high finance.
And it gets worse. After almost seven years of this president, the United States is less prepared than ever to face the future. We have not been educating enough engineers and scientists, people with the skills we will need to compete with China and India. We have not been investing in the kinds of basic research that made us the technological powerhouse of the late 20th century. And although the president now understands—or so he says—that we must begin to wean ourselves from oil and coal, we have on his watch become more deeply dependent on both.
Up to now, the conventional wisdom has been that Herbert Hoover, whose policies aggravated the Great Depression, is the odds-on claimant for the mantle "worst president" when it comes to stewardship of the American economy. Once Franklin Roosevelt assumed office and reversed Hoover’s policies, the country began to recover. The economic effects of Bush’s presidency are more insidious than those of Hoover, harder to reverse, and likely to be longer-lasting. There is no threat of America’s being displaced from its position as the world’s richest economy. But our grandchildren will still be living with, and struggling with, the economic consequences of Mr. Bush.
Remember the Surplus?
The world was a very different place, economically speaking, when George W. Bush took office, in January 2001. During the Roaring 90s, many had believed that the Internet would transform everything. Productivity gains, which had averaged about 1.5 percent a year from the early 1970s through the early 90s, now approached 3 percent. During Bill Clinton’s second term, gains in manufacturing productivity sometimes even surpassed 6 percent. The Federal Reserve chairman, Alan Greenspan, spoke of a New Economy marked by continued productivity gains as the Internet buried the old ways of doing business. Others went so far as to predict an end to the business cycle. Greenspan worried aloud about how he’d ever be able to manage monetary policy once the nation’s debt was fully paid off.
This tremendous confidence took the Dow Jones index higher and higher. The rich did well, but so did the not-so-rich and even the downright poor. The Clinton years were not an economic Nirvana; as chairman of the president’s Council of Economic Advisers during part of this time, I’m all too aware of mistakes and lost opportunities. The global-trade agreements we pushed through were often unfair to developing countries. We should have invested more in infrastructure, tightened regulation of the securities markets, and taken additional steps to promote energy conservation. We fell short because of politics and lack of money—and also, frankly, because special interests sometimes shaped the agenda more than they should have. But these boom years were the first time since Jimmy Carter that the deficit was under control. And they were the first time since the 1970s that incomes at the bottom grew faster than those at the top—a benchmark worth celebrating.
By the time George W. Bush was sworn in, parts of this bright picture had begun to dim. The tech boom was over. The nasdaq fell 15 percent in the single month of April 2000, and no one knew for sure what effect the collapse of the Internet bubble would have on the real economy. It was a moment ripe for Keynesian economics, a time to prime the pump by spending more money on education, technology, and infrastructure—all of which America desperately needed, and still does, but which the Clinton administration had postponed in its relentless drive to eliminate the deficit. Bill Clinton had left President Bush in an ideal position to pursue such policies. Remember the presidential debates in 2000 between Al Gore and George Bush, and how the two men argued over how to spend America’s anticipated $2.2 trillion budget surplus? The country could well have afforded to ramp up domestic investment in key areas. In fact, doing so would have staved off recession in the short run while spurring growth in the long run.
But the Bush administration had its own ideas. The first major economic initiative pursued by the president was a massive tax cut for the rich, enacted in June of 2001. Those with incomes over a million got a tax cut of $18,000—more than 30 times larger than the cut received by the average American. The inequities were compounded by a second tax cut, in 2003, this one skewed even more heavily toward the rich. Together these tax cuts, when fully implemented and if made permanent, mean that in 2012 the average reduction for an American in the bottom 20 percent will be a scant $45, while those with incomes of more than $1 million will see their tax bills reduced by an average of $162,000.
The administration crows that the economy grew—by some 16 percent—during its first six years, but the growth helped mainly people who had no need of any help, and failed to help those who need plenty. A rising tide lifted all yachts. Inequality is now widening in America, and at a rate not seen in three-quarters of a century. A young male in his 30s today has an income, adjusted for inflation, that is 12 percent less than what his father was making 30 years ago. Some 5.3 million more Americans are living in poverty now than were living in poverty when Bush became president. America’s class structure may not have arrived there yet, but it’s heading in the direction of Brazil’s and Mexico’s.
The Bankruptcy Boom
In breathtaking disregard for the most basic rules of fiscal propriety, the administration continued to cut taxes even as it undertook expensive new spending programs and embarked on a financially ruinous "war of choice" in Iraq. A budget surplus of 2.4 percent of gross domestic product (G.D.P.), which greeted Bush as he took office, turned into a deficit of 3.6 percent in the space of four years. The United States had not experienced a turnaround of this magnitude since the global crisis of World War II.
Agricultural subsidies were doubled between 2002 and 2005. Tax expenditures—the vast system of subsidies and preferences hidden in the tax code—increased more than a quarter. Tax breaks for the president’s friends in the oil-and-gas industry increased by billions and billions of dollars. Yes, in the five years after 9/11, defense expenditures did increase (by some 70 percent), though much of the growth wasn’t helping to fight the War on Terror at all, but was being lost or outsourced in failed missions in Iraq. Meanwhile, other funds continued to be spent on the usual high-tech gimcrackery—weapons that don’t work, for enemies we don’t have. In a nutshell, money was being spent everyplace except where it was needed. During these past seven years the percentage of G.D.P. spent on research and development outside defense and health has fallen. Little has been done about our decaying infrastructure—be it levees in New Orleans or bridges in Minneapolis. Coping with most of the damage will fall to the next occupant of the White House.
Although it railed against entitlement programs for the needy, the administration enacted the largest increase in entitlements in four decades—the poorly designed Medicare prescription-drug benefit, intended as both an election-season bribe and a sop to the pharmaceutical industry. As internal documents later revealed, the true cost of the measure was hidden from Congress. Meanwhile, the pharmaceutical companies received special favors. To access the new benefits, elderly patients couldn’t opt to buy cheaper medications from Canada or other countries. The law also prohibited the U.S. government, the largest single buyer of prescription drugs, from negotiating with drug manufacturers to keep costs down. As a result, American consumers pay far more for medications than people elsewhere in the developed world.
You’ll still hear some—and, loudly, the president himself—argue that the administration’s tax cuts were meant to stimulate the economy, but this was never true. The bang for the buck—the amount of stimulus per dollar of deficit—was astonishingly low. Therefore, the job of economic stimulation fell to the Federal Reserve Board, which stepped on the accelerator in a historically unprecedented way, driving interest rates down to 1 percent. In real terms, taking inflation into account, interest rates actually dropped to negative 2 percent. The predictable result was a consumer spending spree. Looked at another way, Bush’s own fiscal irresponsibility fostered irresponsibility in everyone else. Credit was shoveled out the door, and subprime mortgages were made available to anyone this side of life support. Credit-card debt mounted to a whopping $900 billion by the summer of 2007. "Qualified at birth" became the drunken slogan of the Bush era. American households took advantage of the low interest rates, signed up for new mortgages with "teaser" initial rates, and went to town on the proceeds.
All of this spending made the economy look better for a while; the president could (and did) boast about the economic statistics. But the consequences for many families would become apparent within a few years, when interest rates rose and mortgages proved impossible to repay. The president undoubtedly hoped the reckoning would come sometime after 2008. It arrived 18 months early. As many as 1.7 million Americans are expected to lose their homes in the months ahead. For many, this will mean the beginning of a downward spiral into poverty.
Between March 2006 and March 2007 personal-bankruptcy rates soared more than 60 percent. As families went into bankruptcy, more and more of them came to understand who had won and who had lost as a result of the president’s 2005 bankruptcy bill, which made it harder for individuals to discharge their debts in a reasonable way. The lenders that had pressed for "reform" had been the clear winners, gaining added leverage and protections for themselves; people facing financial distress got the shaft.
And Then There’s Iraq
The war in Iraq (along with, to a lesser extent, the war in Afghanistan) has cost the country dearly in blood and treasure. The loss in lives can never be quantified. As for the treasure, it’s worth calling to mind that the administration, in the run-up to the invasion of Iraq, was reluctant to venture an estimate of what the war would cost (and publicly humiliated a White House aide who suggested that it might run as much as $200 billion). When pressed to give a number, the administration suggested $50 billion—what the United States is actually spending every few months. Today, government figures officially acknowledge that more than half a trillion dollars total has been spent by the U.S. "in theater." But in fact the overall cost of the conflict could be quadruple that amount—as a study I did with Linda Bilmes of Harvard has pointed out—even as the Congressional Budget Office now concedes that total expenditures are likely to be more than double the spending on operations. The official numbers do not include, for instance, other relevant expenditures hidden in the defense budget, such as the soaring costs of recruitment, with re-enlistment bonuses of as much as $100,000. They do not include the lifetime of disability and health-care benefits that will be required by tens of thousands of wounded veterans, as many as 20 percent of whom have suffered devastating brain and spinal injuries. Astonishingly, they do not include much of the cost of the equipment that has been used in the war, and that will have to be replaced. If you also take into account the costs to the economy from higher oil prices and the knock-on effects of the war—for instance, the depressing domino effect that war-fueled uncertainty has on investment, and the difficulties U.S. firms face overseas because America is the most disliked country in the world—the total costs of the Iraq war mount, even by a conservative estimate, to at least $2 trillion. To which one needs to add these words: so far.
It is natural to wonder, What would this money have bought if we had spent it on other things? U.S. aid to all of Africa has been hovering around $5 billion a year, the equivalent of less than two weeks of direct Iraq-war expenditures. The president made a big deal out of the financial problems facing Social Security, but the system could have been repaired for a century with what we have bled into the sands of Iraq. Had even a fraction of that $2 trillion been spent on investments in education and technology, or improving our infrastructure, the country would be in a far better position economically to meet the challenges it faces in the future, including threats from abroad. For a sliver of that $2 trillion we could have provided guaranteed access to higher education for all qualified Americans.
The soaring price of oil is clearly related to the Iraq war. The issue is not whether to blame the war for this but simply how much to blame it. It seems unbelievable now to recall that Bush-administration officials before the invasion suggested not only that Iraq’s oil revenues would pay for the war in its entirety—hadn’t we actually turned a tidy profit from the 1991 Gulf War?—but also that war was the best way to ensure low oil prices. In retrospect, the only big winners from the war have been the oil companies, the defense contractors, and al-Qaeda. Before the war, the oil markets anticipated that the then price range of $20 to $25 a barrel would continue for the next three years or so. Market players expected to see more demand from China and India, sure, but they also anticipated that this greater demand would be met mostly by increased production in the Middle East. The war upset that calculation, not so much by curtailing oil production in Iraq, which it did, but rather by heightening the sense of insecurity everywhere in the region, suppressing future investment.
The continuing reliance on oil, regardless of price, points to one more administration legacy: the failure to diversify America’s energy resources. Leave aside the environmental reasons for weaning the world from hydrocarbons—the president has never convincingly embraced them, anyway. The economic and national-security arguments ought to have been powerful enough. Instead, the administration has pursued a policy of "drain America first"—that is, take as much oil out of America as possible, and as quickly as possible, with as little regard for the environment as one can get away with, leaving the country even more dependent on foreign oil in the future, and hope against hope that nuclear fusion or some other miracle will come to the rescue. So many gifts to the oil industry were included in the president’s 2003 energy bill that John McCain referred to it as the "No Lobbyist Left Behind" bill.
Contempt for the World
America’s budget and trade deficits have grown to record highs under President Bush. To be sure, deficits don’t have to be crippling in and of themselves. If a business borrows to buy a machine, it’s a good thing, not a bad thing. During the past six years, America—its government, its families, the country as a whole—has been borrowing to sustain its consumption. Meanwhile, investment in fixed assets—the plants and equipment that help increase our wealth—has been declining.
What’s the impact of all this down the road? The growth rate in America’s standard of living will almost certainly slow, and there could even be a decline. The American economy can take a lot of abuse, but no economy is invincible, and our vulnerabilities are plain for all to see. As confidence in the American economy has plummeted, so has the value of the dollar—by 40 percent against the euro since 2001.
The disarray in our economic policies at home has parallels in our economic policies abroad. President Bush blamed the Chinese for our huge trade deficit, but an increase in the value of the yuan, which he has pushed, would simply make us buy more textiles and apparel from Bangladesh and Cambodia instead of China; our deficit would remain unchanged. The president claimed to believe in free trade but instituted measures aimed at protecting the American steel industry. The United States pushed hard for a series of bilateral trade agreements and bullied smaller countries into accepting all sorts of bitter conditions, such as extending patent protection on drugs that were desperately needed to fight aids. We pressed for open markets around the world but prevented China from buying Unocal, a small American oil company, most of whose assets lie outside the United States.
Not surprisingly, protests over U.S. trade practices erupted in places such as Thailand and Morocco. But America has refused to compromise—refused, for instance, to take any decisive action to do away with our huge agricultural subsidies, which distort international markets and hurt poor farmers in developing countries. This intransigence led to the collapse of talks designed to open up international markets. As in so many other areas, President Bush worked to undermine multilateralism—the notion that countries around the world need to cooperate—and to replace it with an America-dominated system. In the end, he failed to impose American dominance—but did succeed in weakening cooperation.
The administration’s basic contempt for global institutions was underscored in 2005 when it named Paul Wolfowitz, the former deputy secretary of defense and a chief architect of the Iraq war, as president of the World Bank. Widely distrusted from the outset, and soon caught up in personal controversy, Wolfowitz became an international embarrassment and was forced to resign his position after less than two years on the job.
Globalization means that America’s economy and the rest of the world have become increasingly interwoven. Consider those bad American mortgages. As families default, the owners of the mortgages find themselves holding worthless pieces of paper. The originators of these problem mortgages had already sold them to others, who packaged them, in a non-transparent way, with other assets, and passed them on once again to unidentified others. When the problems became apparent, global financial markets faced real tremors: it was discovered that billions in bad mortgages were hidden in portfolios in Europe, China, and Australia, and even in star American investment banks such as Goldman Sachs and Bear Stearns. Indonesia and other developing countries—innocent bystanders, really—suffered as global risk premiums soared, and investors pulled money out of these emerging markets, looking for safer havens. It will take years to sort out this mess.
Meanwhile, we have become dependent on other nations for the financing of our own debt. Today, China alone holds more than $1 trillion in public and private American I.O.U.’s. Cumulative borrowing from abroad during the six years of the Bush administration amounts to some $5 trillion. Most likely these creditors will not call in their loans—if they ever did, there would be a global financial crisis. But there is something bizarre and troubling about the richest country in the world not being able to live even remotely within its means. Just as Guantánamo and Abu Ghraib have eroded America’s moral authority, so the Bush administration’s fiscal housekeeping has eroded our economic authority.
The Way Forward
Whoever moves into the White House in January 2009 will face an unenviable set of economic circumstances. Extricating the country from Iraq will be the bloodier task, but putting America’s economic house in order will be wrenching and take years.
The most immediate challenge will be simply to get the economy’s metabolism back into the normal range. That will mean moving from a savings rate of zero (or less) to a more typical savings rate of, say, 4 percent. While such an increase would be good for the long-term health of America’s economy, the short-term consequences would be painful. Money saved is money not spent. If people don’t spend money, the economic engine stalls. If households curtail their spending quickly—as they may be forced to do as a result of the meltdown in the mortgage market—this could mean a recession; if done in a more measured way, it would still mean a protracted slowdown. The problems of foreclosure and bankruptcy posed by excessive household debt are likely to get worse before they get better. And the federal government is in a bind: any quick restoration of fiscal sanity will only aggravate both problems.
And in any case there’s more to be done. What is required is in some ways simple to describe: it amounts to ceasing our current behavior and doing exactly the opposite. It means not spending money that we don’t have, increasing taxes on the rich, reducing corporate welfare, strengthening the safety net for the less well off, and making greater investment in education, technology, and infrastructure.
When it comes to taxes, we should be trying to shift the burden away from things we view as good, such as labor and savings, to things we view as bad, such as pollution. With respect to the safety net, we need to remember that the more the government does to help workers improve their skills and get affordable health care the more we free up American businesses to compete in the global economy. Finally, we’ll be a lot better off if we work with other countries to create fair and efficient global trade and financial systems. We’ll have a better chance of getting others to open up their markets if we ourselves act less hypocritically—that is, if we open our own markets to their goods and stop subsidizing American agriculture.
Some portion of the damage done by the Bush administration could be rectified quickly. A large portion will take decades to fix—and that’s assuming the political will to do so exists both in the White House and in Congress. Think of the interest we are paying, year after year, on the almost $4 trillion of increased debt burden—even at 5 percent, that’s an annual payment of $200 billion, two Iraq wars a year forever. Think of the taxes that future governments will have to levy to repay even a fraction of the debt we have accumulated. And think of the widening divide between rich and poor in America, a phenomenon that goes beyond economics and speaks to the very future of the American Dream.
In short, there’s a momentum here that will require a generation to reverse. Decades hence we should take stock, and revisit the conventional wisdom. Will Herbert Hoover still deserve his dubious mantle? I’m guessing that George W. Bush will have earned one more grim superlative.

Joseph Stiglitz, a leading economic educator, is a professor at Columbia.

http://www.vanityfair.com/politics/features/2007/12/bush200712?printable=true&currentPage=all

... Hoover v. Bush? No brainer. It all kinda reminds me of an obscure 70's song, The Needle and the Damage Done.