Wednesday, June 30, 2010

War Is The Budget Buster

PARK CITY, UT - JANUARY 27:  TV personality Am...Image by Getty Images via @daylife

We Can’t Afford War

“General Petraeus is a military man constantly at war with the facts,” began the attack ad against Gen. David Petraeus back in 2007, after he had delivered a report to Congress on the status of the war in Iraq. George W. Bush was president, and MoveOn was accusing Petraeus of “cooking the books for the White House.” The campaign asked “General Petraeus or General Betray Us?” on a full-page ad in The Washington Post. MoveOn took tremendous heat for the campaign, but stood its ground.
Three years later, Barack Obama is president, Petraeus has become his man in Afghanistan, and MoveOn pulls the critical Web content. Why? Because Bush’s first war, Afghanistan, has become Obama’s war, a quagmire. The U.S. will eventually negotiate its withdrawal from Afghanistan. The only difference between now and then will be the number of dead, on all sides, and the amount of (borrowed) money that will be spent.
Petraeus’ confirmation to become the military commander in Afghanistan was never in question. He replaces Gen. Stanley McChrystal, who resigned shortly after his macho criticisms of his civilian leadership became public in a recent Rolling Stone magazine article.
The statistics for Afghanistan, Obama’s Vietnam, are surging. June, with at least 100 U.S. deaths, is the highest number reported since the invasion in 2001. 2010 is on pace to be the year with the highest U.S. fatalities. Similar fates have befallen soldiers from the other, so-called coalition countries. Petraeus is becoming commander not only of the U.S. military in Afghanistan, but of all forces, as the invasion and occupation of Afghanistan is run by NATO.
U.S. troops, expected to rise to 98,000 this year, far outnumber those from other nations. Public and political support in many of those countries is waning.
Journalist Michael Hastings, who wrote the Rolling Stone piece, was in Paris with McChrystal to profile him. What didn’t get as much attention was Hastings’ description of why McChrystal was there:
“He’s in France to sell his new war strategy to our NATO allies—to keep up the fiction, in essence, that we actually have allies. Since McChrystal took over a year ago, the Afghan war has become the exclusive property of the United States. Opposition to the war has already toppled the Dutch government, forced the resignation of Germany’s president and sparked both Canada and the Netherlands to announce the withdrawal of their 4,500 troops. McChrystal is in Paris to keep the French, who have lost more than 40 soldiers in Afghanistan, from going all wobbly on him.”
The whistle-blower website, which received international attention after releasing leaked video from a U.S. attack helicopter showing the indiscriminate slaughter of civilians and a Reuters cameraman and his driver in Baghdad, has just posted a confidential CIA memo detailing possible public relations strategies to counter waning public support for the Afghan War. The agency memo reads: “If domestic politics forces the Dutch to depart, politicians elsewhere might cite a precedent for ‘listening to the voters.’ French and German leaders have over the past two years taken steps to preempt an upsurge of opposition but their vulnerability may be higher now.”
I just returned from Toronto, covering the G-20 summit and the protests. The gathered leaders pledged, among other things, to reduce government deficits by 50 percent by 2013. In the U.S., that means cutting $800 billion, or about 20 percent of the budget. Two Nobel Prize-winning economists have weighed in with grave predictions. Joseph Stiglitz said, “There are many cases where these kinds of austerity measures have led to ... recessions into depressions.” And Paul Krugman wrote: “Who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.”
In order to make the cuts promised, Obama would have to raise taxes and cut social programs such as Social Security and Medicare. Or he could cut the war budget. I say “war budget” because it is not to be confused with a defense budget. Cities and states across the country are facing devastating budget crises. Pensions are being wiped out. Foreclosures are continuing at record levels. A true defense budget would shore up our schools, our roads, our towns, our social safety net. The U.S. House of Representatives is under pressure to pass a $33 billion Afghan War supplemental this week.
We can’t afford war.
Denis Moynihan contributed research to this column.
Amy Goodman is the host of "Democracy Now!," a daily international TV/radio news hour airing on more than 800 stations in North America. She is the author of "Breaking the Sound Barrier," recently released in paperback and now a New York Times best-seller.
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Monday, June 28, 2010

The Land Where Theories of Warfare Go to Die.

Official photo of General David Howell Petraeu...Image via Wikipedia

The Land Where Theories of Warfare Go to Die Obama, Petraeus, and the Cult of COIN in Afghanistan

by Robert Dreyfuss
Less than a year ago, General David Petraeus saluted smartly and pledged his loyal support for President Obama's decision to start withdrawing U.S. forces from Afghanistan in July 2011. In December, when Obama decided (for the second time in 2009) to add tens of thousands of additional American forces to the war, he also slapped an 18-month deadline on the military to turn the situation around and begin handing security over to the bedraggled Afghan National Army and police. Speaking to the nation from West Point, Obama said that he'd ordered American forces to start withdrawing from Afghanistan at that time.
Here's the exchange, between Obama, Petraeus, and Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, as reported by Jonathan Alter in his new book, The Promise: President Obama, Year One: OBAMA: "I want you to be honest with me. You can do this in 18 months?"
PETRAEUS: "Sir, I'm confident we can train and hand over to the ANA [Afghan National Army] in that time frame."
OBAMA: "If you can't do the things you say you can in 18 months, then no one is going to suggest we stay, right?"
PETRAEUS: "Yes, sir, in agreement."
MULLEN: "Yes, sir."
That seems unequivocal, doesn't it? Vice President Joe Biden, famously dissed as Joe Bite-Me by one of the now-disgraced aides of General Stanley McChrystal in the Rolling Stone profile that got him fired, seems to think so. Said Biden, again according to Alter: "In July of 2011 you're going to see a whole lot of people moving out. Bet on it."
In the Alice-in-Wonderland world of the U.S. military, however, things are rarely what they seem. Petraeus, the Centcom commander "demoted" in order to replace McChrystal as U.S. war commander in Afghanistan, seems to be having second thoughts about what will happen next July -- and those second thoughts are being echoed and amplified by a phalanx of hawks, neoconservatives, and spokesmen for the counterinsurgency (COIN) cult, including Henry Kissinger, the Heritage Foundation, and the editorial pages of the Washington Post. Chiming in, too, are the lock-step members of the Republican caucus on Capitol Hill, led by Senator John McCain.
In testimony before Congress just last week, Petraeus chose his words carefully, but clearly wasn't buying the notion that the July deadline means much, nor did he put significant stock in the fact that President Obama has ordered a top-to-bottom review of Afghan policy in December. According to the White House, that review will be a make-or-break assessment of whether the Pentagon is making any progress in the nine-year-long conflict against the Taliban.
In his recent Senate testimony -- before he fainted, and afterwards -- Petraeus minimized the significance of the December review and cavalierly declared that he "would not make too much of it." Pressed by McCain, the general flouted Biden's view by claiming that the deadline is a date "when a process begins [and] not the date when the U.S. heads for the exits."
The Right's Marching Orders for the President
Petraeus's defiant declaration that he wasn't putting much stock in the president's intending to hold the military command accountable for its failure in Afghanistan next December earned him an instant rebuke from the White House. Now, that same Petraeus is in charge.
The dispute over the meaning of July 2011 is, and will remain, at the very heart of the divisions within the Obama administration over Afghan policy.
Last December, in that West Point speech, Obama tried to split the difference, giving the generals what they wanted -- a lot more troops -- but fixing a date for the start of a withdrawal. It was hardly a courageous decision. Under intense pressure from Petraeus, McChrystal, and the GOP, Obama assented to the addition of 30,000 U.S. troops, ignoring the fact that McChrystal's unseemly lobbying for the escalation amounted to a Douglas MacArthur-like defiance of the primacy of civilian control of the military. (Indeed, after a speech McChrystal gave in London insouciantly rejecting Biden's scaled-down approach to the war, Obama summoned the runaway general to a tarmac outside Copenhagen and read him the riot act in Air Force One.)
If Obama's Afghan decision was a cave-in to the brass and a potential generals' revolt, the president also added that kicker of a deadline to the mix, not only placating his political base and minimizing Democratic unhappiness in Congress, but creating a trap of sorts for Petraeus and McChrystal.  The message was clear enough: deliver the goods, and fast, or we're heading out, whether the job is finished or not.
Since then, Petraeus and McChrystal -- backed by their chief enabler, Secretary of Defense Robert Gates, a Republican holdover appointed to his position by George W. Bush -- took every chance they could to downplay and scoff at the deadline.
By appointing Petraeus last Wednesday, Obama took the easy way out of the crisis created by McChrystal's shocking comments in Rolling Stone. It might not be inappropriate to quote that prescient British expert on Afghan policy, Peter Townsend, who said of the appointment: "Meet the new boss. Same as the old boss."
On the other hand, Petraeus is not simply another McChrystal. While McChrystal implemented COIN doctrine, mixing in his obsession with "kinetic operations" by U.S. Special Forces, Petraeus literally wrote the book -- namely, The U.S Army/Marine Corps Counterinsurgency Field Manual.
If the COIN cult has a guru (whom all obey unquestioningly), it's Petraeus. The aura that surrounds him, especially among the chattering classes of the Washington punditocracy, is palpable, and he has a vast well of support among Republicans and assorted right-wingers on Capitol Hill, including the Holy Trinity: John McCain, Lindsay Graham, and Joe Lieberman. Not surprisingly, there have been frequent mentions of Petraeus as a candidate for the GOP nomination for president in 2012, although Obama's deft selection of Petraeus seems, once and for all, to have ruled out that option, since the general will be very busy on the other side of the globe for quite a while.
Even before the announcement that Petraeus had the job, the right's mighty Wurlitzer had begun to blast out its critique of the supposedly pernicious effects of the July deadline. The Heritage Foundation, in an official statement, proclaimed: "The artificial Afghanistan withdrawal deadline has obviously caused some of our military leaders to question our strategy in Afghanistan... We don't need an artificial timeline for withdrawal. We need a strategy for victory."
Writing in the Washington Post on June 24, Henry Kissinger cleared his throat and harrumphed: "The central premise [of Obama's strategy] is that, at some early point, the United States will be able to turn over security responsibilities to an Afghan government and national army whose writ is running across the entire country. This turnover is to begin next summer. Neither the premise nor the deadline is realistic... Artificial deadlines should be abandoned."
And the Post itself, in the latest of a long-running series of post-9/11 hawkish editorials, gave Obama his marching orders: "He... should clarify what his July 2011 deadline means. Is it the moment when ‘you are going to see a whole lot of people moving out,' as Vice President Biden has said, or ‘the point at which a process begins... at a rate to be determined by conditions at the time,' as General Petraeus testified? We hope that the appointment of General Petraeus means the president's acceptance of the general's standard."
Is the COIN Cult Ascendant?
It's too early to say whether Obama's decision to name Petraeus to replace his protégé McChrystal carries any real significance when it comes to the evolution of his Afghan war policy. The McChrystal crisis erupted so quickly that Obama had no time to carefully consider who might replace him and Petraeus undoubtedly seemed like the obvious choice, if the point was to minimize the domestic political risks involved.
Still, it's worrying. Petraeus's COIN policy logically demands a decade-long war, involving labor-intensive (and military-centric) nation-building, waged village by village and valley by valley, at a cost of hundreds of billions of dollars and countless U.S., NATO, and Afghan casualties, including civilians. That idea doesn't in the least square with the idea that significant numbers of troops will start leaving Afghanistan next summer. Indeed, Bruce Riedel, a former CIA officer with long experience in the Middle East and South Asia, who headed Obama's first Afghan policy review in February 2009, told me (for an article in Rolling Stone last month) that it's not inconceivable the military will ask for even more troops, not agree to fewer, next year.
The Post is right, however, that Obama needs to grapple seriously with the deep divisions in his administration. Having ousted one rebellious general, the president now has little choice but to confront -- or cave in to -- the entire COIN cult, including its guru.
If Obama decides to take them on, he'll have the support of many traditionalists in the U.S. armed forces who reject the cult's preaching. Above all, his key ally is bound to be those pesky facts on the ground.
Afghanistan is the place where theories of warfare go to die, and if the COIN theory isn't dead yet, it's utterly failed so far to prove itself. The vaunted February offensive into the dusty hamlet of Marja in Helmand province has unraveled. The offensive into Kandahar, the birthplace of the Taliban and a seething tangle of tribal and religious factions, once touted as the potential turning point of the entire war, has been postponed indefinitely. After nine years, the Pentagon has little to show for its efforts, except ever-rising casualties and money spent.
Perhaps Obama is still counting on U.S. soldiers to reverse the Taliban's momentum and win the war, even though administration officials have repeatedly rejected the notion that Afghanistan can be won militarily. David Petraeus or no, the reality is that the war will end with a political settlement involving President Karzai's government, various Afghan warlords and power brokers, the remnants of the old Northern Alliance, the Taliban, and the Taliban's sponsors in Pakistan.
Making all that work and winning the support of Afghanistan's neighbors -- including India, Iran, and Russia -- will be exceedingly hard.  If Obama's diplomats managed to pull it off, the Afghanistan that America left behind might be modestly stable. On the other hand, it won't be pretty to look at it. It will be a decentralized mess, an uneasy balance between enlightened Afghans and benighted, Islamic fundamentalist ones, and no doubt many future political disagreements will be settled not in conference rooms but in gun battles. Three things it won't be: It won't be Switzerland. It won't be a base for Al Qaeda. And it won't be host to tens of thousands of U.S. and NATO troops.
The only silver lining in the Petraeus cloud is that the general has close ties to the military in Pakistan who slyly accept U.S. aid while funneling support to the insurgency in Afghanistan. If Obama decides to pursue a political and diplomatic solution between now and next July, Petraeus's Pakistan connection would be useful indeed. Time, however, is running out.
Robert Dreyfuss is an independent journalist in the Washington, D.C., area. He is a contributing editor at the Nation magazine, and a frequent contributor to Rolling Stone and Mother Jones. His blog, The Dreyfuss Report, appears at the Nation's website. His book, Devil's Game: How the United States Helped Unleash Fundamentalist Islam, was published by Henry Holt/Metropolitan Books in 2005.  Listen to Dreyfuss in the latest TomCast audio interview discussing Obama's war with the military by clicking here, or to download to your iPod, here.
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Friday, June 25, 2010

Right To Know Bill Introduced

Dennis Kucinich, member of the U.S. House of R...Image via Wikipedia
June 24, 2010
2:17 PM
CONTACT: Congressman Dennis Kucinich
 Nathan White (202)225-5871

Kucinich Introduces Right to Know Legislation; Bills Create Regulatory Framework for Genetically Engineered Organisms

WASHINGTON - June 24 - Congressman Dennis Kucinich (D-OH), a long-time advocate of family farmers and organic foods, today introduced H.R. 5577, The Genetically Engineered Food Right to Know Act, as well as supporting legislation that will provide a comprehensive regulatory framework for all Genetically Engineered (GE) plants, animals, bacteria, and other organisms.
"To ensure we can maximize benefits and minimize hazards, Congress must provide a comprehensive regulatory framework for all Genetically Engineered products. Structured as a common-sense precaution to ensure GE foods do no harm, these bills will ensure that consumers are protected, food safety measures are strengthened, farmers' rights are better protected and biotech companies are responsible for their products," said Kucinich.
In addition to the Genetically Engineered Food Right to Know Act, Kucinich introduced the Genetically Engineered Safety Act, HR 5578, which prohibits the open-air cultivation of GE pharmaceutical and industrial crops and establishes a tracking system to regulate and ensure the safety of GE pharmaceutical and industrial crops.
The third bill is the Genetically Engineered Technology Farmer Protection Act, HR 5579 which would protect farmers and ranchers that may be harmed economically by genetically engineered seeds, plants, or animals, to ensure fairness for farmers and ranchers in their dealings with biotech companies that sell GE products.
Congressman Kucinich has long been a proponent of ‘Right to Know' legislation, and has introduced similar bills in previous sessions of Congress.
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Wednesday, June 23, 2010

Time For Transaction Fee?

   July/August 2010 ATLANTIC MAGAZINE

Monsters in the Market

In today’s exchanges, strong programs prey on weak ones, humans are hard to find, and the SEC struggles to keep up.

By Timothy Lavin

On the third floor of Citigroup’s Manhattan headquarters, at the far end of a trading floor overlooking the Hudson River, Young Kang, Citi’s global head of algorithmic products, leans over a terminal and monitors the progress of a canny and powerful beast named Dagger. Bred and trained in secret by Citi’s financial engineers, Dagger can stalk through more than 20 markets, public and otherwise—hunting for anomalies, buying and selling, prowling through mountains of historical data—all at the behest of Citi’s clients. Amid the trading-floor din, Dagger fulfills its duties in flickering silence, with a speed and acuity no human can match.
“It’s self-learning,” Kang says. “The numbers keep updating, the strategy keeps adjusting itself. It gets smarter.”
And it makes a lot of money. Algorithms like Dagger can exploit the smallest inefficiencies in the market. They can parse trades in millionths of a second. Some species can detect other algos embarking on predictable trading strategies, and ruthlessly adjust their techniques. They’re growing ever more complex, subtle, and sophisticated. And as they become more popular, they’re creating some serious headaches for regulators.
By some estimates, algorithms now trigger 70 percent of all trades in U.S. equities. The speed and volume of everyday trading have propelled the market into a new and esoteric dimension, and rendered traders in the pits largely obsolete. Average daily share volume on the New York Stock Exchange increased by 181 percent between 2005 and 2009, while the time required to execute a trade on its electronic systems dropped to 650 microseconds.
Such changes have a lot of people worried, including the Securities and Exchange Commission. It released a wide-ranging paper earlier this year seeking suggestions on how to restructure the entire equity market, and created a Division of Risk, Strategy, and Financial Innovation in part to help monitor new technologies. A market collapse in early May—in which automated-trading systems exacerbated a sell-off that drove the Dow down more than 900 points in less than an hour, before it quickly recovered—gave two worries new public salience: that the proprietors of these algos may not be in full control of their creations, and that the strategies they pursue are, in some cases, fundamentally warping the financial markets.
In January, the NYSE fined Credit Suisse $150,000 for “failing to adequately supervise the development, deployment, and operation of a proprietary algorithm.” The fine was a pittance, but more troubling was that the bank didn’t even know that its malfunctioning algo (which sent hundreds of thousands of cancel-and-replace requests for orders that hadn’t been made) had crippled some of the NYSE’s trading stations until regulators called them the next day. This spring, a newsletter from the Federal Reserve Bank of Chicago warned: “Although algorithmic trading errors have occurred, we likely have not yet seen the full breadth, magnitude, and speed with which they can be generated. Furthermore, many such errors may be hidden from public view.”
Bernard Donefer, a finance professor at Baruch College and the author of a study in the most recent Journal of Trading called “Algos Gone Wild,” contends that the speed of these equations, and their ability to reach so many markets simultaneously, could turn even a minor coding error into a spiraling disaster. “Another 1987,” he told me, referring to the epic crash caused in part by simpler automated-trading schemes. This view puts Donefer in the minority in the financial community, which tends to have more faith in firms’ internal risk controls. But he thinks that without better regulation, more algo-gone-wild scenarios are inevitable. He notes that while controls at big firms, like Citi, are generally exemplary, second- and third-tier firms present a graver risk.
The SEC wants to hire a lot more staffers, both for its new risk division and for its trading division, and it is considering new methods of tracking algorithmic trades; Donefer and others have suggested a tagging system for the biggest traders, which the SEC says is on the table. The commission also may soon outlaw a practice called “naked access,” in which some broker-dealers offer their clients direct access to exchanges—allowing them to potentially bypass risk controls—in pursuit of faster trading.
A more widespread worry, now getting increased attention from regulators and Congress, is a strategy known as high-frequency trading. Employers of this technique apply algorithms and other automated technology, along with real-time market data, to buy and sell so quickly (in microseconds) and in such quantities (millions of trades a day), that they engorge themselves on penny differentials in prices. These traders argue that they supply the market with needed liquidity and tighter spreads. Regulators tend to agree, for the most part; free markets have always rewarded better information, speed, and creativity. But this technology unloads on such a massive scale, and so quickly, that they fear it could feed a dangerous and self-reinforcing volatility.
At least a few high-frequency traders have learned to make a killing by detecting the more simplistic algo strategies deployed by basic pension funds and mutual funds, buying the next stock the funds plan to buy, and then selling it to them at a higher price. This may not be illegal, but it’s almost certainly unfair to the funds’ investors. “It is increasingly clear that there are quite a number of high-frequency bandits in the high- frequency-trading community who pump up volume statistics, front-run investor orders, increase transaction costs, and hurt real liquidity,” David Weild, an adviser at Grant Thornton and a former vice chairman of Nasdaq, told me. *
These changes in trading technology raise a more fundamental question: If the majority of trades racing back and forth are simply lines of code swapping with other lines of code, moved by indicators obscure to even the mortal authors of the algorithms themselves, what exactly is the financial market? “The market structure’s totally changed, and it’s distorted what we do,” says Joe Saluzzi, the co-head of equities trading at Themis Trading and a vocal opponent of some high-frequency strategies. “The machine thinks for itself.”
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Tuesday, June 22, 2010

Net Neutrality In Danger

Save the InternetImage by Squirmelia via Flickr

The Fate of the Internet. Decided in a Back Room

by Tim Karr
The Wall Street Journal just reported that the Federal Communications Commission is holding "closed-door meetings" with industry to broker a deal on Net Neutrality – the rule that keeps control over the Internet with the people who use it. Given that the corporations at the table all profit from gaining control over information, the outcome won't be pretty.
The meetings include a small group of industry lobbyists representing the likes of AT&T, Verizon, the National Cable & Telecommunications Association, and Google. They reportedly met for two-and-a-half hours on Monday morning and will convene another meeting today. The goal according to insiders is to "reach consensus" on rules of the road for the Internet.
This is what a failed democracy looks like: After years of avid public support for Net Neutrality – involving millions of people from across the political spectrum – the federal regulator quietly huddles with industry lobbyists to eliminate basic protections and serve Wall Street’s bottom line.
We’ve seen government cater to big business in the same ways, prior to the BP oil disaster and the sub-prime mortgage meltdown. The Industry's regulatory capture of the Internet is now almost complete. The leadership of the one agency tasked with oversight of communications policy now thinks they can wriggle free of their obligation to protect the open Internet if only industry agrees on a solution.
Congress is holding its own series of meetings and, while they’ve been ambiguous on the details, many remain skeptical on whether the process will lead to an outcome that serves the public interest. After all, this is the same Congress that is bankrolled by the phone and cable lobby in excess of $100 million.
Why is this so startling even for the more cynical among us? The Obama administration promised to embrace a new era of government transparency. It’s the tool we were supposed to use to pry open policy-making and expose it to the light of public scrutiny.
In that spirit, President Obama pledged to "take a backseat to no one" in his support for Net Neutrality. He appointed Julius Genachowski to head the FCC -- the man who crafted his pro-Net Neutrality platform in 2008.
But the mere existence of these private meetings reveals to us a chairman who has fallen far short of expectations. Instead Genachowski is shying from the need to fortify the Internet’s open architecture in favor of deals made between DC power brokers.
These deals will determine who ultimately controls Internet content and innovation. Will phone and cable companies succeed in their decade-long push to take ownership of both the infrastructure of the Internet and the information that flows across its pipes? Will they cut in a few giant companies like Google and the recording industry to get their way?
Whatever the outcome, the public – including the tens of millions of Americans who use the Internet every day and in every way – are not being given a seat at the table.
Genachowski’s closed-door sessions come after six months of public comments on whether the agency should proceed with a rule to protect Net Neutrality.
During that period, more than 85 percent of comments received by the agency called for a strong Net Neutrality rule. Look at it this way: If a candidate received more than 85 percent of the vote, wouldn’t she have a mandate to decide on the public’s behalf?
In Chairman Genachowski’s alternative view of reality, though, the public is immaterial, and industry consensus supreme.
Timothy Karr oversees all Free Press campaigns and online outreach efforts, including and its work on public broadcasting, propaganda, and journalism.
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Monday, June 21, 2010

Deficit Hawks Wrong On Social Security

Soothe Bond Market by Challenging Powerful, Not Gutting Social Security

Instead of beating up on retirees by cutting social security, we can reduce deficits by standing up to powerful interest groups

by Dean Baker
The deficit hawks have been pushing the line in recent months that we have to make cuts in social security, along with some revenue increases, in order to reassure the bond markets about the creditworthiness of the US government. According to this argument, by taking tough steps (ie cutting social security benefits) we will have shown the bond markets that we are prepared to do what is necessary to keep our budget deficits within manageable levels.
There is some reason to question the merits of this argument. First off, the deficit hawks don't have an especially good track record in the insight category. Not one person among the leading crusaders was able to see the $8tn housing bubble that wrecked the economy. If they couldn't see something so huge that was right in front of their face, we might wonder about their ability to ascertain anything as amorphous as the sentiment of actors in bond markets.
Furthermore, the fixation on social security is peculiar. The Congressional Budget Office shows the programme can pay all future benefits through the year 2044 with no changes whatsoever. Even after that date the shortfalls are relatively minor. If we instituted a fix in 2030 that is comparable to the one put in place in 1983 it would leave the programme fully solvent out to the 22nd century.
Furthermore, cutting benefits for near-retirees (workers in their late 40s and 50s) seems cruel and unwarranted. These people paid for their benefits through decades of work. Also, this cohort has seen most of the wealth that they did manage to accumulate destroyed with the collapse of the housing bubble and the plunge in the stock market. The bulk of this cohort will therefore be relying on social security for the overwhelming majority of their retirement income.
For these reasons, the determination to cut social security has the feeling of the class bullies telling the rest of us that we have beat up the weakest kid in the class in order to be admitted to the club. That may be the way things work in Washington, but this doesn't mean it is right.
If the issue is assuaging the bond markets by convincing them that we are prepared to take tough choices to limit long-term deficits, let's put a few other items on the table. For item number 1: how about a financial speculation tax? Wouldn't the bond markets be impressed by seeing Congress crack down on the Wall Street hot shots whose recklessness helped fuelled the housing bubble? That one would show real courage given the power of Goldman Sachs-Citigroup gang.
As a second item, Congress could go after the pharmaceutical industry. By 2020 we are projected to be spending almost $500bn a year on prescription drugs. We pay close to twice as much for our drugs as people in other wealthy countries and about 10 times as much as the drugs would cost if they could be sold in competitive market without government patent monopolies.
Suppose Congress decided to pay for the clinical testing of drugs directly and then allowed all new drugs to be sold as generics. This could save taxpayers hundreds of billions of dollars a year. Wouldn't the bond markets be impressed by seeing Congress stand up to the pharmaceutical industry?
As a third item, suppose Congress revisited plans for a public insurance option. The Congressional Budget Office projected that this would save over $100bn by 2020 and certainly much more in future decades. Wouldn't the bond markets be impressed if Congress stood up to the insurance industry?
These are three clear ways in which Congress can take big steps towards reducing long-term budget deficits by standing up to powerful interest groups. In each case Congress would be reducing the deficit in ways that would likely make most people better off, not worse off. If bringing the long-term deficit into line is the issue, all three of these measures should be at the top of everyone's list.
Remarkably, the leading budget hawks never discuss these measures when they push their deficit-cutting agenda. Somehow we are supposed to believe that cutting social security will do the trick with the markets, even though this will hurt tens of millions of people who actually need the money.
If the budget hawks had a track record of knowing about the economy or financial markets then perhaps we should take them seriously, but they don't. Therefore we should just view them as people who want to cut social security and are putting out some nonsense to rationalise beating up on retirees.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer ( and the more recently published Plunder and Blunder: The Rise and Fall of The Bubble Economy. He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues. You can find it at the American Prospect's web site.

Saturday, June 19, 2010

Family Values Exemplified by Obama

President Barack Obama and First Lady Michelle...Image via Wikipedia

Washington Post

On Father's Day, hypocrites are all in the family


Saturday, June 19, 2010 
Family, marriage and the contribution of fathers come together as topics for reflection on Father's Day. So I'd like to know why Barack Obama, a husband and a father in a family structure that encompasses bonds deemed essential to our society, is constantly and savagely attacked by conservative leaders whose personal circumstances undermine the family values they espouse?
Consider Obama: Raised by a single mother in a middle-class family where hard work and education were watchwords, Obama graduated from two of the top schools in the country, Columbia University and Harvard Law School. His legal scholarship was recognized when he became the first African American president of the Harvard Law Review. He married and, equally important, has stayed married to Michelle Robinson, a Princeton graduate and Harvard Law alumna. He lives with his wife, two children and his mother-in-law. Obama: constitutional law professor, civil rights lawyer, state legislator, U.S. senator, 44th U.S. president, family man.
Now let's turn to Obama's foremost critics: Rush Hudson Limbaugh III, Newton Leroy Gingrich and Sarah Palin.
Limbaugh and Gingrich have said too many negative things about Obama to count. "I want him to fail" (Limbaugh) and "secular socialist" (Gingrich) are just two of their attacks. Yet two of the nation's loudest proponents of family-values issues are serial husbands. Between them, the two men have had seven wives.
Limbaugh, who dropped out of college after one year, married his first wife, a sales secretary, in September 1977. She filed for divorce three years later; it was granted in July 1980. Limbaugh next married an usherette in 1983; they divorced in 1990. In May 1994, he married an aerobics instructor he met online. They separated in June 2004 and divorced that December.
Two weeks ago, Limbaugh married a Florida party planner. He's still wedded to her as far as I can tell.
Gingrich is one nuptial behind Limbaugh. But he started earlier. In 1962, at age 19, Gingrich married his 26-year-old former high school geometry teacher. Gingrich left her in the spring of 1980. He did return to see her at the hospital where she was getting treatment for cancer. He was there to discuss divorce terms. Formally divorced in 1981, Gingrich remarried six months later.
That marriage lasted until 2000. By his own admission, Gingrich started an affair with a woman 23 years his junior during his second marriage. It was around the time he was taking Bill Clinton to task over Monica Lewinsky.
Gingrich's second marriage ended in 2000, and he married his girlfriend the same year. The current Mrs. Gingrich is still with him, as far as I can tell.
Gingrich and Limbaugh, national icons in the conservative movement -- and mockers of this country's most traditional and honored symbol of commitment: holy matrimony.
But what would a Father's Day discussion of the nuclear family and a moral society be without bringing into the picture Mrs. Family Values herself, Sarah Palin?
The same Palin who last week said of President Obama, "It sounds like the inner circle that he has are some Chicago thugs." Well, Palin knows lawbreaking, too.
Her sister-in-law, Diana Palin, half sister of the former governor's husband, got a 15-month sentence this year. Burglarizing the same Alaska house three times for money to satisfy a drug habit is the kind of thing that can get you arrested. Thuggery? How about Sherry Johnston, the mother of Levi Johnston, the high school dropout who fathered Palin's grandson? She was arrested and charged with selling drugs; after pleading guilty to one count with intent to deliver the drug OxyContin she was sentenced to three years.
Because of her medical condition, the woman who was once Bristol Palin's future mother-in-law was released from prison to home confinement, where she wears an ankle-monitoring device.
And the whereabouts of 19-year-old Levi on this Father's Day weekend? His bonds with the Palins were so tight, he said on TV, that Sarah and her husband, Todd, allowed Levi to live in their house with Bristol while they dated. Conservative family values?
Levi can be found on the cover of Playgirl magazine, his nude body blocked from full exposure by his strategically placed arm.
And to think, as we prepare to celebrate this day of men and family, Limbaugh, Gingrich and Palin have the unmitigated gall to look down their noses at our president.
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Friday, June 18, 2010

Back Room Deals Not In Public Interest?

Robert ReichImage via Wikipedia

The Obama Plot for a Carbon Tax

By Robert Reich

Thursday, June 17, 2010
Teachable moments are rare in America. George Bush missed the chance right after 9/11 to call for a new era of service to the nation; he asked instead that Americans do more shopping.
Tuesday night, President Obama did not call for a tax on carbon. He didn’t even ask the Senate to pass the cap-and-trade legislation that emerged from the House.  Instead, he said there were lots of good ideas out there and he’s willing to consider any of them — which seemed more like a way of declaring cap-and-trade dead.
But maybe the President has a more subtle strategy in mind. Here’s what New York Magazine’s John Heilemann thinks may be going on:
Lacking the 60 votes necessary for cap-and-trade, the administration plans to get behind a more modest conservation measure in the Senate, then push for a carbon pricing mechanism during the conference committee merger with the House bill — and do so during a lame-duck session after the midterms, when victorious Democrats will find it easier to make a tough vote and losing ones will be freed of political constraints.
It’s plausible. After all, the President has now gotten BP to agree to a $20 billion escrow fund. Maybe the MO of this president is, like Teddy Roosevelt’s, to speak softly and carry a big stick — make nice to adversaries in public and conceal his weapon until he gets them behind closed doors.
But if that’s his strategy it’s a curious one considering Obama’s great gift (on display especially during the 2008 presidential election) to stir the nation and mobilize it behind him.
Furthermore, given the unprecedented power of large corporations to call the shots in Washington aided by unlimited campaign contributions and platoons of lobbyists, surely the only way to advance the public interest these days is to rally Americans to a cause. Closed-door conference committees, back-room deals, and lame-duck sessions keep the public out. And when the public is shut out, the big guys have even more clout.
Yet hard-boiled Washington hands I talk with disagree. They point to the $80 billion back-room deal that bought off Big Pharma for health care. They claim there’s no other way to do business in Washington now because public opinion is too easily manipulated.
They say Machiavellian (more accurately, Emanuelian) deal-making behind closed doors ain’t pretty but the public can’t be counted on. The only way to get close to a carbon tax or anything else that’s good for America is to buy the bums off.
Maybe. But when the bums are paid off the public gets stuck with the tab. We’ll be paying far more for our drugs under the new health care law than otherwise because of the deal with Big Pharma.
The $20 billion deal with BP was also crafted in secret, and we have no way to know what assurrances were given the oil giant that might cost us later.
So too with the financial reform bill that’s now being finalized in conference committee, and with any potential energy bill where the real deals are made in the back room.
Remember the back-room deal that bailed out Wall Street? We still don’t have all the details but it’s clear the public was taken to the cleaners, and the titans of Wall Street are beaming through their bonuses.
Call me old fashioned but I still think democracy is better than corporatist negotiation. And when we have a president as articulate and thoughtful as the one we now have — more capable than almost any occupant of the Oval Office in modern times to educate the public about real challenges and real solutions — he and his advisors do a disservice to the American people when they make the important deals in secret.
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Wednesday, June 16, 2010

BP Is a Corporate Criminal

Jim Hightower at the 2008 Texas Book Festival,...Image via Wikipedia

BP Is a Corporate Criminal

Gosh, how quickly things turn. One day, you're a strutting peacock — the next day, you're just another gasping, oil-covered bird.
In early April, BP was strutting about in full corporate splendor, showing off the $9 billion in profits that it had soaked up in just the first three months of this year. It was also basking in a corporate re-imaging campaign, depicting itself as a clean-energy pioneer and declaring that BP now stood for "Beyond Petroleum."
Since its Gulf of Mexico well blew out on April 20, however, BP has proven to be beyond belief. The wider and deeper that this catastrophe spreads, the more we discover just how oily this giant is.
From the time it was known as the Anglo-Persian Oil Company and set out to grab and control the rich petroleum reserves owned by what is now Iran, BP has been a recidivist global criminal. In the past three decades, it grew huge by swallowing such competitors as Standard Oil of Ohio, Amoco and Arco. Along the way, it has been implicated in bribery, overthrowing governments, plunder and money laundering, plus having established one of the worst safety and environmental records in an industry that is notoriously reckless on both counts.
And now, its rap sheet grows almost daily. In fact, the Center for Public Integrity has revealed that the oil giant's current catastrophic mess should come as no surprise, for it has a long and sorry record of causing calamities. In the last three years, the center says, an astonishing "97 percent of all flagrant violations found in the refining industry by government safety inspectors" came at BP facilities. These included 760 violations rated as "egregious" and "willful." In contrast, the oil company with the second-worst record had only eight such citations.
While its CEO, Tony Hayward, claims that its gulf blowout was simply a tragic accident that no one could've foreseen, internal corporate documents reveal that BP itself had been struggling for nearly a year with its inability to get this well under control.
Also, it had been willfully violating its own safety policies and had flat out lied to regulators about its ability to cope with what's delicately called a major "petroleum release" in the Gulf of Mexico.
"What the hell did we do to deserve this?" Hayward asked shortly after his faulty well exploded. Excuse us, Tony, but you're not the victim here — and this disaster is not the work of fate. Rather, the deadly gusher in the gulf is a direct product of BP's reckless pursuit of profits. You waltzed around environmental protections, deliberately avoided installing relatively cheap safety equipment, and cavalierly lied about the likelihood of disaster and your ability to cope with it.
"It wasn't our accident," the CEO later declared, as oil was spreading. Wow, Tony, in one four-word sentence, you told two lies. First, BP owns the well, and it is your mess. Second, the mess was not an "accident," but the inevitable result of hubris and greed flowing straight from BP's executive suite.
"The Gulf of Mexico is a very big ocean," Hayward told the media, trying to sidestep the fact that BP's mess was fast becoming America's worst oil calamity. Indeed, Tony coolly explained that the amount of oil spewing from the well "is tiny in relation to the total water volume." This flabbergasting comment came only two weeks before it was revealed that the amount of gushing oil was 19 times more than BP had been claiming.
Eleven oil workers are dead, thousands of Gulf Coast people have had their livelihoods devastated and unfathomable damage is being done to the gulf ecology. Imagine how the authorities would be treating the offender if BP were a person. It would've been put behind bars long ago — if not on death row.
National radio commentator, writer, public speaker, and author of the book, Swim Against The Current: Even A Dead Fish Can Go With The Flow, Jim Hightower has spent three decades battling the Powers That Be on behalf of the Powers That Ought To Be - consumers, working families, environmentalists, small businesses, and just-plain-folks.
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Tuesday, June 15, 2010

Economists Are Economissed

Portrait of Dean BakerImage via Wikipedia

Surprises in Store for Economists

Some analysts are shocked that US retail sales have declined. Have they lost their grasp of basic economic concepts?

The commerce department reported that retail sales in May were down by 1.2% from April. This surprised most economists who had expected a modest increase. The media were filled with accounts of economists trying to explain why consumers were still reluctant to open up their wallets and spend in a big way. It would have been much more interesting to hear accounts of why economists were surprised.There is always a large random element in month-to-month movements in retail sales or any other economic variable. Therefore no one is ever going to be able to explain these changes with any precision. (The data are also subject to large revisions, so it is entirely possible that revised data will look very different from the report released last week (pdf).)
Nonetheless, there is little basis for the surprise shown by so many economic analysts. With few exceptions these analysts failed to see the $8tn housing bubble, the collapse of which sank the economy. Remarkably, even now they apparently cannot understand its importance.
To put it as simply as possible (so even an economist can understand it), the housing bubble was driving the economy in the period prior to its collapse, beginning in 2007. It drove the economy in two ways. The run up in house prices led to a building boom. Residential construction, which is typically less than 4% of GDP, rose to more than 6%, creating more than $300bn in additional annual demand. A bubble in non-residential real estate added perhaps another $150bn to annual demand.
The bubble also drove the economy through the effect of housing wealth on consumption. Economists usually estimate that $1 of additional housing wealth increases annual consumption by between 5-7 cents. This implies that the $8tn of housing bubble wealth would lead increase consumption by $400bn to $560bn a year.
With most of the bubble wealth eliminated by the collapse of house prices over the last three years, we should expect a sharp drop in consumption. Furthermore, stock prices have lost a bit less than a third of their value (around $6tn), which we should expect to cause a further decline in consumption. With the stock wealth effect estimated at 3-4 cents on the dollar, the decline in stock prices should have reduced annual consumption by $180bn to $240bn. In total we should expect to see annual consumption have dropped by between $600bn and $900bn as a result of the loss of housing and stock wealth.
This is all very simple arithmetic and basic economics. Consumption had been driven by the housing bubble prior to the recession. Now that the bubble has collapsed and trillions of dollars of wealth has disappeared we should expect much lower levels of consumption. To flip this around, the savings rate, which had averaged more than 8% in the decades prior to the 90s, fell to near zero in the years leading up to the recession. Now that the bubble has collapsed, we should expect consumption to fall and saving to return back to its normal level. In fact, it might even go higher since the huge cohort of baby boomers is now mostly in their 50s and most have almost nothing saved for retirement. This might lead savings rates to go above their long-term average.
There seems very little room for argument in this story. The existence and housing and stock wealth effects are among the least questioned propositions in economics. Nor is there too much dispute about their size. How could any economist see the collapse of an $8tn housing bubble and the destruction of more than $6tn in stock wealth and not expect to see a substantial decline in consumption?
Yet, we have dozens of economists being cited in newspapers and broadcast news, all saying that they are surprised by weak consumption. If anything the surprise should be that consumption is still as strong as it is. The saving rate is still near 4%, far below its historic average. Why on earth would any economist expect it to go still lower?
The reason that consumers are not spending more money has nothing to do with attitudes. The reason that most consumers aren't spending is the same reason that homeless people don't spend much money: they don't have any.
Economists used to be able to understand basic economic concepts. Apparently, most have lost this ability. As a result we are likely to see many more surprised economists and much proposed in the way of very bad economic policy.
Dean Baker is co-director of the Center for Economic and Policy Research
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