Marco Polo

Will Christina Romer Cripple The Obama's presidency Even Before It Starts?

2008-11-25T16:23:00.008+01:00

One problem with the economic team Barack Obama presented on Monday in Chicago is that it includes people whose cultural background is directly opposed to what it should be, and to what Obama promises to do. Much has been said about Larry Summers, directly responsible for the banking and insurance deregulation of the Nineties, as The New York Times pointed out today:

As treasury secretary in 2000, Mr. Summers championed the law that deregulated derivatives, the financial instruments — a k a toxic assets — that have spread the financial losses from reckless lending around the globe. He refused to heed the critics who warned of dangers to come. That law, still on the books, reinforced the false belief that markets would self-regulate. And it gave the Bush administration cover to ignore the ever-spiraling risks posed by derivatives and inadequate supervision.
Mr. Summers now will advise a president who has promised to impose rational and essential regulations on chaotic financial markets. What has he learned?

Even more interesting is the case of Christina Romer, a professor at the University of California, Berkeley, who apparently was not shy to offer her Greenspan-like ideas as late as September 2007, when sensible economists such as Dean Baker and James Galbraith already sounded the alarm.

John Judis, senior editor at The New Republic, points out that Romer, in a paper about economic policy in the Sixties, wrote:

In my opinion, better policy, particularly on the part of the Federal Reserve, is directly responsible for the low inflation and the virtual disappearance of the business cycle in the last 25 years. In this area, the policy mistakes of the 1960s were a painful, but not permanent, detour on the road to excellent economic performance.

It must be remembered that "the road to excellent economic performance" has been paved by Federal Reserve-created market bubbles, and that these bubbles, in the end, have provoked the crash which is under our eyes. Maybe the "virtual disappearance of the business cycle" was, well, "virtual," and the real cycle came back with a vengeance, in the form of today's downturn (even after the gains of the last two days, the S&P500, is down forty per cent compared to one year ago). But let's read more:

Overall, the story of stabilization policy of the last quarter century is one of amazing success. We have seen the triumph of sensible ideas and have reaped the rewards in terms of macroeconomic performance. The costly wrong turn in ideas and macropolicy of the 1960s and 1970s has been righted and the future of stabilization looks bright.

In 2008, the "future of stabilization" has been all but bright (and not even acceptable) simply because economists of Romer's mind frame, obsessed by balancing the budget, and keeping a tight control over money supply, completely ignore the dangers of the new financial instruments proliferated during "the triumph of sensible ideas."

Now, confronted to a crisis of big magnitude, Barack Obama has promised a large program of building infrastructures, giving tax-relief to middle-class families, financing a "green revolution" in the field of energy, all things that will cost an enormous amount of money on top of what the federal government is already spending. What does Romer say about that?

On the idea that persistent deficits don’t matter, I think there is widespread consensus that that too is not true. There may be differences in our estimates of the size of the eventual effects, but most economists agree that deficits over decades unquestionably reduce national saving and have consequences for long-run standards of living.

And Romer, parroting the discredited economic theory that public investments financed by deficits "crowd out" private investments, continues:

at some point, the debt burden reaches a level that threatens the confidence of investors. Such a meltdown and a sudden stop of lending would unquestionably have enormous real
consequences.

Indeed, a "meltdown and a sudden stop of lending" materialized last September, but the cause was definitely not the debt burden of the public sector, quite the opposite: it was the collapse of trust inside the private sector that triggered the crisis.

Seasoned political reporter E. J. Dionne has a piece in Real Clear Politics, where he quotes an Obama's close adviser: Obama "feels very strongly that this is not just a short-term fix but a long-term retooling of the American economy, [he] has a holistic view of the economy. Health care is going to be part of it, and so will green energy investments, education reform and a new approach to regulating financial markets."
So, the question is: what will Romer do as chair of Obama's Council of Economic Advisers? Answer: she will do her best to discard this "holistic view", eviscerate Obama's agenda, and promote Ronald Reagan's and George W. Bush's catastrophic economic policies.

Do "Teams of Rivals" Work in The Long Run?

2008-11-22T20:18:00.004+01:00

With the almost-certain appointment of Hillary Clinton as secretary of State, Barack Obama seems indeed decided to imitate Abraham Lincoln, who "pulled in all the people who had been running against him into his Cabinet," as Obama himself has summarized the thesis of Doris Kearns Goodwin's book on the Lincoln presidency, "Team of Rivals" (look at the cover on our right bar).

That seems to be political astute at this moment. However, one should be aware that in 1861 it didn't work that well for Lincoln. The problems created by the decision to put in the cabinet William Seward as secretary of State and Salmon Chase as Treasury secretary are well described by Matthew Pinsker, who teaches Civil War history at Dickinson College in Pennsylvania, in this piece for the Los Angeles Times:

Lincoln's decision to embrace former rivals inevitably meant ignoring old friends -- a development they took badly. "We made Abe and, by God, we can unmake him," complained Chicago Tribune Managing Editor Joseph Medill in 1861. Especially during 1861 and 1862, the first two years of Lincoln's initially troubled administration, friends growled over his ingratitude as former rivals continued to play out their old political feuds.
In fairness, Goodwin describes several of these more difficult moments, such as when Secretary of State William Seward tried to seize political command from Lincoln during the Ft. Sumter crisis. But she passes over their consequences too easily.
Though Seward, the former New York senator who had been the Republican front-runner, eventually proved helpful to the president, the impact of repeated disloyalty and unnecessary backroom drama from him and several other Cabinet officers was a significant factor in the early failures of the Union war effort.
By December 1862, there was a full-blown Cabinet crisis.
"We are now on the brink of destruction," Lincoln confided to a close friend after being deluged with congressional criticism and confronted by resignations from both Seward and Treasury Secretary Salmon P. Chase. Goodwin suggests that Lincoln's quiet confidence and impressive emotional intelligence enabled him to survive and ultimately forge an effective team out of his former rivals, but that's more wishful thinking than serious analysis.
Consider this inconvenient truth: Out of the four leading vote-getters for the 1860 Republican presidential nomination whom Lincoln placed on his original team, three left during his first term -- one in disgrace, one in defiance and one in disgust.
Simon Cameron was the disgraced rival, Lincoln's failed first secretary of War. Goodwin essentially erased him from her group biography, not mentioning him in the book's first 200 pages, even though he placed third, after Seward and Lincoln, on the first Republican presidential ballot. Cameron proved so corrupt and inept that the Republican-controlled House of Representatives censured him after he was removed from office in 1862.
Chase was the defiant rival. The Treasury chief never reconciled himself to Lincoln's victory, continuously angling to replace him. Lincoln put up with this aggravation until he secured renomination and then dumped his brilliant but arrogant subordinate because, in his words, their "mutual embarrassment" was no longer sustainable.
Atty. Gen. Edward Bates was the disgusted rival. The elder statesman -- 67 when he was appointed -- never felt at home in the Lincoln Cabinet and played only a marginal role in shaping policy. He resigned late in the first term. His diary reflects deep discontent with what he considered the relentless political maneuvering of his Cabinet peers and even the president. (...)
Only Seward endured throughout the Civil War. He and Lincoln did become friends, and he provided some valuable political advice, but the significance of his contributions as Lincoln's secretary of State have been challenged by many historians, and his repeated fights with other party leaders were always distracting.
John Hay, one of Lincoln's closest aides, noted in his diary that by the summer of 1863, the president had essentially learned to rule his Cabinet with "tyrannous authority," observing that the "most important things he decides & there is no cavil."
Over the years, it has become easy to forget that hard edge and the once bad times that nearly destroyed a president. Lincoln's Cabinet was no team. His rivals proved to be uneven as subordinates. Some were capable despite their personal disloyalty, yet others were simply disastrous.

So, we should hope that Obama's Cabinet will be a team and that his previous rivals Clinton and Richardson will prove to be capable and loyal. One should be aware, however, that an hyper-ambitious secretary of State with hawkish views in foreign policy will present more than a risk of personal disloyalty, she could alienate the very political base who was critical in Obama's election, and create a disastrous infighting inside the administration.

Paulson: "I didn't have the authority for anything"

2008-11-19T20:18:00.003+01:00

It's nice to discover that our analysis of the blatantly illegal actions taken by Secretary Paulson is shared, somehow late, by The Washington Post:

During his 28 months at the Treasury, Paulson has accumulated more power than nearly any of his predecessors and has wielded it boldly, even brazenly at times, in a bid to tame the financial crisis of a lifetime. He has burst through the customary boundaries that separate federal agencies, bent regulations to his will and pushed up against legal limits. As financial firms tumble and traditional oversight agencies prove impotent, Paulson has filled the void with his 6-foot-1 frame, summoning the rest of Washington and Wall Street to get in line.
"Even if you don't have the authorities -- and frankly I didn't have the authorities for anything -- if you take charge, people will follow," Paulson said in an interview. "Someone has to pull it all together."

It's truly amazing to discover that in the 2,280-word article there is no hint of doubt, scandal, or indignation for Paulson's openly admitted crimes ("I didn't have the authorities for anything"). True, compared to what Bush and Cheney did, this is peanuts (but are 700 billion peanuts?)

Is Larry Summers Better Than Greenspan And Paulson?

2008-11-17T16:35:00.003+01:00

The infotainment obsession that dominates mainstream media has utterly trivialized the issue of the possible appointment of Larry Summers as Treasury Secretary in the Obama administration. It seems that the main problem would be the "veto" of feminist groups because of his infamous remarks about women and science, when he was President at Harvard. While he amply demonstrated his lack of political sensitivity, and tact (not to mention a deep ignorance of human biology) the fact of the matter is that he wants to become again the Treasury secretary. And in this capacity he should deal with the problems of a financial crisis whose origins go back to the three men shown on this cover of Time magazine in February 1999. Rubin, Greenspan and Summers opposed all attempts to regulate the derivatives market in the 1990s. As a New York Times reader pointed out today,

Brooksley Born, head of the Commodity Futures Trading Commission, proposed greater transparency in derivatives trading in the late 1990s, involving disclosure of trades and reserves available in case of losses. Summers called Born into his office to chastise her for such a proposal. Eventually her reforms were killed through the efforts of Summers, Robert Rubin, and Alan Greenspan — the great wise men. Now we live with the consequences.

At least, Greenspan feigned to be repentant: not so Larry Summers. They have indeed NOT saved the world, but only postponed the financial meltdown. Would Summer's appointment be a change in Washington?

Has Hank Paulson Ever Read The U.S. Constitution?

2008-11-17T10:02:00.003+01:00

In October, we raised the issue of what it means for American democracy having a Treasury Secretary who uses public money as he pleases (here and here). And we have followed up with several posts in November. Now, the Center for American Progress has published an interesting comment on the last “Hank” Paulson's press conference, and we think it's worth reading part of it (see the full text here).

Treasury Secretary Paulson yesterday made it absolutely clear that he had no intention of using the authority granted to him by Congress under the $700 billion Troubled Asset Relief Program, or TARP, to purchase troubled mortgage-related assets or to provide relief to struggling homeowners facing foreclosures. The message was clear to homeowners facing foreclosure and their neighbors watching the value of their homes plummet—drop dead.
Having already spent $250 billion to recapitalize banks with no strings attached and an additional $40 billion to restructure and sweeten the now $150 billion bailout of U.S. insurance giant American International Group Inc., there remains only $60 billion available to Treasury to spend before having to go back to Congress to request the second $350 billion tranche appropriated by Congress for TARP. But Paulson told Congress none of that money will be used to purchase mortgage-related assets—despite that being the premise under which the staggering sums of money were granted.
Paulson was quite open in his about-face: “In crafting the financial rescue package, we and the Congress agreed that Treasury would use its leverage as a major purchaser of troubled mortgages to work with servicers and achieve more aggressive mortgage modification standards. Now that we are not planning to purchase illiquid mortgage assets, we must find another way to meet that commitment.”
Translation: Having foreclosed making an investment in mortgages for the purpose of restructuring them, we now need to scramble to find an alternative.
The Center for American Progress has long advocated for the transfer of troubled mortgages out of the hands of the current holders of these assets because they are either unable or unwilling to modify the loans so that families can pay their mortgages, shifting these mortgages into the hands of an entity able and willing to make the necessary modifications to provide benefits to homeowners and investors alike. With simple modifications to the so-called Real Estate Mortgage Investment Conduit, or REMIC rules, barriers to participation by mortgage servicers in mortgage restructurings would be eliminated, and Treasury could purchase the mortgages.
The discount at which mortgage-backed securities are currently valued in the secondary market by institutional investors provides ample room for modifications to be made while still offering Treasury—and by extension the taxpayers—a reasonable return on these investments. But given that Treasury is not using the money to deal with the housing crisis, what are they going to use the money for?

We should only add that Article I, Section 8, of the U.S. Constitution clearly prescribes (among other things): "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law, and a regular Staement and Account of the Receipts and Expenditures of all public Money shall be published".

Kucinich Shows That Some Democrats Understand What Is Happening

2008-11-15T00:06:00.006+01:00

Yesterday, Neel Kashkari, Treasury's interim head of the $700 billion bailout package testified in Congress, and we must say that some Democrats dared to ask the right questions.

For example, Rep. Dennis Kucinich, D-Ohio, chairman of the panel, said the Treasury Department had "abdicated its responsibility" to prevent home foreclosures, and he added that the changes in implementing the bailout announced by Treasury Secretary Henry Paulson this week (see our previous posts on this topic below)

break with congressional intent, contradict public assurances previously made by Treasury and leave the federal government without an adequate mechanism to stem the tide of home foreclosures

We couldn't have said better.

Naomi Klein on Wall Street and Spineless Democrats

2008-11-14T08:40:00.002+01:00

Naomi Klein writes in The Nation about the transition, and she has no kind words for the spineless Democratic leadership:

The more details emerge, the clearer it becomes that Washington's handling of the Wall Street bailout is not merely incompetent. It is borderline criminal.
In a moment of high panic in late September, the US Treasury unilaterally pushed through a radical change in how bank mergers are taxed--a change long sought by the industry. Despite the fact that this move will deprive the government of as much as $140 billion in tax revenue, lawmakers found out only after the fact. According to the Washington Post, more than a dozen tax attorneys agree that "Treasury had no authority to issue the [tax change] notice."
Of equally dubious legality are the equity deals Treasury has negotiated with many of the country's banks. According to Congressman Barney Frank, one of the architects of the legislation that enables the deals, "Any use of these funds for any purpose other than lending--for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc.--is a violation of the act." Yet this is exactly how the funds are being used.
Then there is the nearly $2 trillion the Federal Reserve has handed out in emergency loans. Incredibly, the Fed will not reveal which corporations have received these loans or what it has accepted as collateral. Bloomberg News believes that this secrecy violates the law and has filed a federal suit demanding full disclosure.

Read the entire article, and let your voice heard by your Senator and Representative.

"No Money Shall Be Drawn From The Treasury..."

2008-11-13T08:17:00.010+01:00

It's somehow amazing that Congress, the media, and the public are not calling what the secretary of the Treasury is doing for what it is: a financial Coup d'Etat. Congress was steamrolled into approving a $700 billion plan under which the federal government would buy up toxic assets from banks. As Phil Mattera writes,

That plan was put on the back burner by Treasury Secretary Henry Paulson as he instead embarked on a program—never debated by Congress—to purchase holdings in the banks themselves.

Today, we also learn, from the New York Times, that now the Treasury Shifts Focus in Credit Bailout to the Consumer. This should be better than the previous Paulson's proposals, but was that approved somewhere, or at the very least debated in the House and in the Senate?

One should go no farther than the Washington Post to find the answer: "It's a mess," said Eric M. Thorson, the Treasury Department's inspector general, who has been working to oversee the bailout program:

I don't think anyone understands right now how we're going to do proper oversight of this thing.

Last time I checked my battered copy of the Constitution, I noticed that Article I, Section 8, stipulates, "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law, and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published..."

If the law approved by Congress appropriated money to buy assets from banks, can the Treasury use it to purchase holdings, to support mergers between banks, or to unlock the frozen consumer credit market? Should the answer be "yes," why Mr. Paulson could not use it to build a new financial city in the desert of Arizona, pay for the landing of marines on the shores of financial-rich Japan, or direct NASA to explore the gold-rich mountains of Jupiter in order to strengthen the financial position of the U.S.?

Reward The Democratic Coalition, or Pay The Price in 2010

2008-11-11T11:32:00.011+01:00

The interest of the media is focused on Obama's team, which is no small matter, but in order to assess the chances of success of the new democratic president, we should start from the basics: the coalition he put together, and the situation of the country. Let's remember what we wrote here in March:

While the interest of the media is focused on the candidates, political scientists should look at the tectonic shift under way in the American electorate. Seven years of Bush Administration have played the role of midwife to a new coalition of groups that is making the party younger, more liberal, and more responsive to women, Latinos, and African-Americans.

The exit polls have indeed validated this prediction: Obama won 99-1 among African Americans, 67-30 among Latinos, and 66-30 among the 18-29 voters. At the same time, Obama had the best results of any Democratic candidate among postgraduate educated Americans (64%) and a good performance among Catholics (53% versus the 47% collected by catholic candidate John Kerry).

Contrary to the conventional wisdom of a race "too close to call," spread by mainstream media, these results were easy to forecast because of long-term trends in the American electorate:

About 90 percent of those identifying with a political party vote for that party's presidential candidate The exit polls in 2004 showed that John Kerry had won 89 percent of the Democratic vote, George W. Bush 93 percent of the Republican vote. As it is, this translates in a huge advantage for the party that is ahead in what political scientists call "party identification," simply because the pool of voters is larger. And what is the situation on this front? The Democratic advantage is now of almost 10 points,

In October, it was about 7 point, which matched precisely the gap of 6.5% between Obama and McCain after all the votes were counted.

And what was the main issue of this election? Economy, as we wrote back in April:

McCain is the Republican candidate in a year when all the the strong currents of American politics favor the Democrats. The economic crisis and the social tragedy of million of people losing their home will be on the forefront of voters' concerns in November. The same can be said for the Iraq war, that vanished from the TV screen, but not from the mind of citizens: two-thirds still want the troops home ASAP.
After the Convention, if Obama will adopt Bill Clinton's 1992 slogan "It's the Economy, stupid!" that will be enough for the Democrats to win.

Now, the problem is that the voters trust Obama to deliver the miracle of a good economy in a matter of weeks, when under any conceivable scenario the American economy will not grow at all next year, and will remain in dire straits in 2010, too. According to The New York Times, "2009 could turn out to be fairly miserable. The American consumer, long the spender of last resort for the global economy, may finally be spent."

This means that any incremental measure, any fiscal timidity in launching new programs targeted to the most depressed areas and to the most suffering segments of the population would be catastrophic. We must remember that even mild downturn as the one of 1990 have lasting consequences: at that time, an imploding real estate bubble, a construction bust, a banking crisis, and a credit crunch made the nation's gross domestic product fell 3.0 percent in the fourth quarter of 1990 and 2.0 percent in the first quarter of 1991. But even after the economy started expanding again, the unemployment rate kept rising until it hit 7.8 percent in June of 1992, and people keep thinking that economic conditions were bad still in 1994.
Obama probably raised unrealistic expectations, but his message was received as a promise: "the public expects results, and may not listen to excuses for very long if a Democratic Congress and a Democratic White House can't get their act together in time." Therefore, the Obama administration would pay the ultimate political price if it doesn't act boldly. The fate of Clinton, who acted clumsily in his first 100 days, and was not able to convince a democratic Congress to pass his health care reform should be remembered: two years later, the Democrats lost 55 seats in the House, and the Republican majority last for the next twelve years.

Right now, there is indeed a vast conspiracy of bankers and lobbyists to have Obama's ear, and convince him that the catastrophic Paulson's plan (money with no strings attached) should continue. This is the first thing to reverse: not one dime should be thrown into Wall Street's toxic pit, and the FBI should start investigate both those who accepted the money, and those who disbursed it.

The second point should be solving the tragedy of foreclosures, leaving families in their homes as much as possible; to this purpose, it will be necessary to create an agency charged of buying mortgages and renegotiating them with banks, as it existed between 1936 and 1951 (one of the great successes of the New Deal).

Last, but not least, it is urgent to provide fiscal relief to families under $75,000 a year (the core of Obama's coalition) and to launch a plan of rebuilding American crumbling infrastructures, starting with the states where this task is more urgent: Pennsylvania, Ohio, Indiana, Michigan. Instead of "saving" General Motors, let's build some high-speed railways, and metropolitan transit systems.

A LARGER, BIGGER DEMOCRATIC COALITION/1

2008-03-07T10:48:00.011+01:00

While the interest of the media is focused on the candidates, political scientists should look at the tectonic shift under way in the American electorate. Seven years of Bush Administration have played the role of midwife to a new coalition of groups that is making the party younger, more affluent, more liberal, and more responsive to women, Latinos, and African-Americans. Of course, many of these constituencies were heavily tilted toward the Democrats already in the 1970s, but what is new is the growth of Latinos, and there commitment to the Democratic party. It is worth noting that still in 2004 Republicans scored some successes among them, playing the religious card (most of them are catholic, and traditionalist).

This shift, well described in a recent National Journal article, can be measured both by looking at the participation in the democratic primaries so far and by checking the polls about party affiliation.

We already noticed the surprisingly large turnout on the Democratic side ("Let's Crunch Some Numbers", below) but now Edison Media Research and Mitofsky International polls offer evidence that in 18 the states where it is possible to compare 2004 and 2008 caucuses and primaries, the share of the vote cast by young people has risen by substantial margins. Women's share of the vote has grown in 17 of the 18 states, albeit by smaller increments because the "gender gap" was already significant. In 12 of those states, Latinos have cast a larger percentage of votes, as have the voters who consider themselves liberals. African-Americans have boosted their share in 11 of the 18 states. Look at this chart, courtesy of National Journal, that shows how the movement was under way already in 2006.

A LARGER, BIGGER DEMOCRATIC COALITION/2

2008-03-09T21:08:00.018+01:00

Obama's pledged delegates: 1406
Clinton's pledged delegates: 1246

As we have noted in the first installment of this series, eight years of Republican control of Presidency and Congress politically activated new segments of the American electorate. How this fact will play in this year's races, and beyond, is the topic we should explore.
It is plain that the failure of the Bush presidency is the dominant fact of American politics today.George W. Bush's approval ratings stabilized around 30 percent, 25 percentage points below those of Ronald Reagan's in 1988. Bush's presidency has been marred by scandals, an unpopular war, and an economy that is already in recession, hardly ideal for any party wanting to hold onto the White House as Carter learned in 1980 ("Billygate," hostages in Iran, and stagflation).
The mobilization of new angry voters was what created the successes of Democratic political strategy since early 2006, when they focused on the campaign themes that brought their takeover of the House and Senate in November 2006. The majority in the Senate, for example, was entirely the byproduct of unexpected victories in Republican-held territory, like Montana or Virginia. The so-called success of the troop surge in Iraq, which has reduced the number of American casualties has not altered the centrality of George W. Bush and his failed presidency in the mind of Democratic voters approaching November.
Any forecast about the Presidential and Congressional elections must be based not on the last maneuvering of the candidates, but on long-term political trends. The central trend in recent years has been polarization of the electorate, a factor that for a long time was central to Karl Rove's successful strategy. About 90 percent of those identifying with a political party vote for that party's presidential candidate The exit polls in 2004 showed that John Kerry had won 89 percent of the Democratic vote, George W. Bush 93 percent of the Republican vote. As it is, this translates in a huge advantage for the party that is ahead in what political scientists call "party identification," simply because the pool of voters is larger. And what is the situation on this front? The Democratic advantage is now of almost 10 points, according to Rasmussen and even more according to the Gallup Organization. That disparity is one of the widest partisan gaps ever measured and it is clearly linked to the beginning of the primaries season: the 9.7 percentage point advantage for Democrats now is up from a 5.6 point advantage in January and a 2.1 point advantage in December.
To gauge the importance of this factor, imagine that in November vote the same 120 million Americans who voted in 2004 (there will be more voters, but it doesn't matter here). If Obama or Clinton will keep the share of 90 percent of the Democratic vote, that translates into a huge gap (12 million votes!) with the Republican candidate, assuming (somehow generously) that he will able to bring the same percentage of followers to the polls (this is a very optimistic assessment of Republican cohesiveness this year: even among Republicans, almost a third of Newsweek's survey respondents said they disapprove of the job Bush is doing).
This assumptions translate into 90 percent of 48 million votes for the Democratic standard bearer against 90 percent of 36 million votes for the Republican one. In an year of economic hardship as this one, there is no way the so-called Independents would split 50-50 between the two parties: more probably they will go 55-45 for the Democratic candidate, McCain's courtship of them notwithstanding. That means another 4 million votes in the democratic column (Independents are about a third of the voters, as of today). As there will be new voters, a large majority of them pulling the lever for the democratic candidates (remember that turnout in their primaries has been the double than in Republican ones) this will bring another 2 million votes net advantage to Hillary/Obama.
Question: Can the democrats squander a 18 MILLION VOTES ADVANTAGE between March and November? The answer is: "In theory, that is possible," Democrats have a long tradition of snatching defeat from the jaws of victory.
However, this would really go against the odds. To win, it is enough to reassure the constituencies now pouring into their primaries, especially women, Latinos and young people: they should give the Democrats a comfortable edge in November's election, and potentially well beyond. Right now, calculations about the electoral college give the Democratic candidate a solid majority of 318 votes but the victory might be much larger, with Obama (who in the end will prevail over Clinton) collecting more than 350 votes in the electoral college.
If you add to this the real possibility of large majorities in the House (25 seats more) and in the Senate (6 to 8 seats more), one realizes that there are on the table long-term opportunities for the Democrats, the possibility of changing American political landscape for a generation, as Ronald Reagan did for Republicans in 1980. This, of course, is a question of leadership but it all depends on how the party leader will conduct themselves.

How Will Obama Perform in November?

2008-05-22T10:25:00.007+02:00

No matter what, Barack Obama has secured the nomination: he need only 63 more delegates to cross the required number of 2,025. However, the first Afroamerican candidate to the presidency nominated by a major party has many serious problems that the media is ignoring. While the conventional wisdom is that hate and racism disappeared in American politics, the fact that they are banned in polite discourse in Manhattan doesn’t mean that they are equally banned at the ballot box.

The actual performance of Afroamerican politicians in elections is mixed at best. A number of them have been elected mayors (David Dinkins in New York, Harold Washington in Chicago, Andrew Young in Atlanta, Kurt Schmoke in Baltimore (MD), Harvey Gannt in Charlotte (SC), and many others). There is a number of successful representatives, whose dean is Charles Rangel, who has been in the House since 1971, taking over the Harlem’s seat of colourful Adam Clayton Powell. And, of course, there has been a handful of black senators: Obama himself had Carol Moseley Braun among his predecessor in Illinois, but she was a one-term senator, elected in 1992 and easily defeated in 1998. Gannt run twice, in 1990 and in 1996, against aging Republican Jesse Helms in South Carolina and he was defeated twice, favorable polls notwithstanding. Harold Ford was a young and dynamic politician, but he failed to win the Tennessee Senate seat in 2006.

This experience in various elections suggests that charismatic politicians of Afroamerican origin can win, but they some times underperform compared to the expectations in the polls. If a black candidate is credited of 53% of the vote 24 hours before the voting, his actual results may be between 48% and 51%. People were simply ashamed of saying pollsters they would NOT vote for him, inflating his numbers in the polls and depressing them in the actual results. Does this mean that Obama is a weak candidate? Not in the least, but he will need a mistake-free campaign because his margins will be smaller than those of a white candidate. This is clearly shown by the angry reactions of some Edward’s supporters to the announcement that he would endorse Obama (more later on this). We are strongly convinced, however, that race will a factor much less important this year, and that long-term demographic and political trends will propel Obama to victory in November.

Is John McCain A Strong Candidate?

2008-04-11T11:49:00.005+02:00

Polls give today John McCain with a statistically insignificant one-point advantage over Barack Obama, 46% to 45%. Yesterday, it was Obama leading McCain by that same statistically insignificant margin (it is important to understand that 46-45 may mean any result between 49 Obama and 42 McCain, or 43 Obama v. 48 McCain). In a match-up with Hillary Clinton, McCain would obtain 48% of the vote while Clinton would get 42%.
This almost perfect parity between the two main candidates is reflected in the balance of power in the Electoral College, which is what really matters in November. There, the race remains a toss-up: Democrats lead in states with 190 Electoral Votes while the GOP has the advantage in states with 189. When States that “lean” toward one of the two camps are added, the Democrats lead 243 to 240 (the magic number to enter the White House is 270).
All this means that John McCain, at the moment when Democrats are engaged in a dogfight, and mainstream media are all sweetness toward the Senator from Arizona, is not capable of obtaining a significant lead over Obama, and has only a modest advantage over Clinton. What is the reason of this relative weakness?
The only explanation is that McCain is the Republican candidate in a year when all the the strong currents of American politics favor the Democrats. The economic crisis and the social tragedy of million of people losing their home will be on the forefront of voters' concerns in November. The same can be said for the Iraq war, that vanished from the TV screen, but not from the mind of citizens: two-thirds still want the troops home ASAP.
After the Convention, if Obama will adopt Bill Clinton's 1992 slogan "It's the Economy, stupid!" that will be enough for the Democrats to win.

LET'S CRUNCH SOME NUMBERS

2008-03-06T00:53:00.008+01:00

With 99% of the votes counted in Texas, it looks as though the number of votes in the Democratic primary will largely exceed the number of votes cast for Al Gore in 2000, and match John Kerry's vote total for the 2004 general election. Kerry received 2,832,704 votes in Texas in 2004. At this writing, Clinton and Obama are at 2,812,289 between them. A primary that has a party turnout similar, or larger, than a general election is simply unprecedented in American politics and, indeed, Republicans voters on March 4 were about ONE THIRD of the voters who supported Bush in the 2004 general election.
Let's look at the 2004 Presidential Primary: four years ago Kerry got about 560,000 votes, Edwards 120,000, Dean 40,000 and other candidates about 115,00 for a grand total of 835.000 ballots cast. That is two million less than the number of votes cast this year. Or, Democratic voters seem to be this year more than three times the number they were in 2004. Hillary Clinton received more votes than all Republican candidates combined in Texas last night, Barack Obama received nearly as many. Clinton doubled the vote total of Republican nominee John McCain, Obama nearly did as well.
Remember, this is Texas, home of George W. Bush, who got 61% of the vote in 2004. Here, no Democratic candidate for President won the state's electoral votes since Jimmy Carter in 1976. Democrats haven't won a Senate race since Lloyd Bentsen in 1988, or a Governor's race since Ann Richards in 1990. Next Fall, observers may well throw their political maps out of the window.

Young People Won the Election for Obama

2008-11-08T09:15:00.006+01:00

Sure, the picture of Obama with his economic team had the purpose of reassuring Americans concerned because of the financial crises, but it certainly conveyed no message of change whatsoever. Right in the middle is Paul Volcker, 81 (and the architect of Regan's victory in 1980). At the far right, Larry Summers, booted from the top post at Harvard in 2005 because he said that women "are not that good in mathematics." To the left, Robert Rubin (70) who was secretary of the Treasury 15 years ago. Are these the men young people elected to change America?

As a remainder OF HOW IMPORTANT THE YOUNG VOTE WAS LAST TUESDAY, we host here an analysis of the results by Patrick Ruffini, who is a conservative columnist, but is good at math. His conclusions: Obama's ENTIRE POPULAR VOTE MAJORITY is accounted for by his increased appeal to youth and African Americans.

As a sidenote to Obama's 66-32 blowout among 18-29 voters, check out how these same voters voted for the House. Not much different: 63-34.
So, in casting an identity politics vote for Barack Obama, a hip young (by political standards) African American, young voters were also apt to vote straight ticket for the Democrats down ballot. Nor is this new: the 2004 Democratic margin in the House among these voters mirrored the Kerry vote (+11 for Democrats vs. +9 for Kerry).
People have been focusing on whether the youth vote was up. It was -- slightly: going from 17 to 18 percent. But the real story about the youth vote is not how many "new" voters Obama got to show up. It's how he produced a gargantuan 25% swing among existing young voters, or those who were sure to vote for the first time anyway.
How big?
18 percent times a 25 percent increase in the Democratic margin equals 4.5 points, or a majority of Obama's popular vote margin. Had the Democratic 18-29 vote stayed the same as 2004's already impressive percentage, Obama would have won by about 2 points, and would not have won 73 electoral votes from Florida, Ohio, North Carolina, or Indiana.
So, to clarify here: Obama's youth margin = 73 electoral votes. Without the economic crisis, this would have been the difference.
In the House, the youth margin for Democratic candidates was up 18 points from 2004 and 7 points from 2006 (with a 50% increase in the voter pool from '06). The 18-29 demographic's net contribution to Democratic margins in the House went from 12% x 22% = 2.64% in 2006, to 18% x 29% = 5.22% in 2008. How many of our guys [Ruffini refers here to Republican candidates] lost by 2.6% or less? [My answer: about 20, that means that there would have been no increase in the 2006 Democratic majority in the House without the young voters]. For the most part it was the same young voters, who were conditioned to vote for Democratic candidates after switching to Obama.
Related to this are African Americans. Here too, turnout was up a point from 12% to 13%, or Census + 1. But that's only part of the story. The biggest part is Obama's increased margins, moving from 88-11 in '04 to 95-4 in '08. The black vote's net contribution to Democrats moved from 9.7 points to 11.8 points (91% x 13%), or an increase of 2.1 points.
Now, let's be generous and shave 10% off the youth effect assuming some of these youths are African American, but also tempered by the fact that the young black vote is already so highly Democratic that a 25% swing is impossible here. 4.1 percent (18-29) + 2.1 percent (AA's) equals 6.2 percent. Obama's current popular vote margin is 6.1 percent.
Obama's entire popular vote majority is accounted for by his increased appeal to youth and African Americans.
This is not to say that a white male (or female) Democratic candidate would not have won the election. The youth and African American figures would have moved some, though not as strongly for them, and if it was Hillary, you'd have seen a similar phenomenon with women voters. So, simply transposing 2004 figures onto 2008 isn't the right baseline. But this is a dramatic statement nonetheless. Obama has reshaped the electorate. And it's been only partially through new voter registration. He has gobbled up every last, existing young voter and African American (FTW, I get the distinct sense that Condi Rice too voted for Obama).

As of today, Obama has 364 votes in the electoral college, 96 more than needed (Missori is recounting, but McCain is slightly ahead there). As Obama's youth margin is worth 73 electoral votes, without taking into account the impact of ground mobilization fueled by a million yooung volunteers, that means Obama is the President-elect almost only because of young Americans who have faith in him. It would be unwise to forget that.

The End of Conservatism and A New Liberal Majority?

2008-11-06T10:07:00.006+01:00

Obama won, Congress has large Democratic majorities in both the House and the Senate, but the important question today is: "Has the conservative political cycle that began in 1968 come to an end?" On this topic, we host a contribution by Eric Alterman, who is a professor of Journalism at CUNY, and a friend. This piece come from The Nation.

Readers of the Washington Post woke up one recent Friday morning to a remarkable juxtaposition of two ostensibly unrelated articles. The first was a news analysis titled "The End of American Capitalism?" which heralded the apparent demise of laissez-faire as the intellectual underpinning of the nation's economic system. In the same paper was another story: "Anger Is Crowd's Overarching Emotion at McCain Rally," which described a John McCain event characterized by hysterical crowd attacks on Barack Obama as an ally of terrorists, a "socialist" and other angry epithets. By coincidence, the thread that connected these two disparate stories could be found that morning in the New York Times, in an implicitly self-critical column by David Brooks. He wrote: "Modern conservatism began as a movement of dissident intellectuals.... Driven by a need to engage elite opinion, conservatives tried to build an intellectual counterestablishment with think tanks and magazines. They disdained the ideas of the liberal professoriate, but they did not disdain the idea of a cultivated mind.... But over the past few decades, the Republican Party has driven away people who live in cities, in highly educated regions and on the coasts.... What had been a disdain for liberal intellectuals slipped into a disdain for the educated class as a whole."
Brooks--a nearly perfect product of the right-wingers' long-term investment in the fertilization of the conservative imagination, having done stints at the Wall Street Journal editorial page and The Weekly Standard before being invited to the [New York] Times and PBS's NewsHour--was unwittingly explaining the connection between the collapse of Friedmanite capitalism and the mindless fury of the Republican base. The upshot is that conservatives, having fed at the trough of power for the better part of three decades, are out of ideas and have targeted their appeal to a coterie of Americans remarkably similar to the minority coalition enjoyed by Barry Goldwater in 1964, with an angry, retrograde message that harks back to Joe McCarthy. McCain's baffling, fumbling performances at the presidential debates reflect this confusion. He didn't know whether to attack Obama or defend what remains of his reputation. Pathetically, he ended up accomplishing neither.
Liberals and progressives, however, are in the opposite position. Obama has proven an inspirational messenger, speaking to and for a public eager to embrace the kind of politics that has been demonized and trivialized for the past eight years by mainstream media desperate to deflect the right's accusations of "liberal bias." According to the Pew Center's extensive national survey, released well before this endless election got under way, roughly 70 percent of respondents believe that the government has a responsibility "to take care of people who can't take care of themselves." Two-thirds (66 percent)--including most of those who say they would prefer a smaller government (57 percent)--support government-funded health insurance for all citizens. Most also regard the nation's corporations as too powerful, while nearly two-thirds (65 percent) say corporate profits are too high--about the same number who say "labor unions are necessary to protect the working person" (68 percent). When it comes to the environment, a large majority (83 percent) back stricter laws and regulations, while 69 percent agree "we should put more emphasis on fuel conservation than on developing new oil supplies" and 60 percent say they would "be willing to pay higher prices in order to protect the environment."
Yet the MSM [mainstream media] --with precious few exceptions--remain wedded to right-wing assumptions long since discredited by reality. We don't need to look at extremes like the infamous performance of ABC's George Stephanopoulos and Charles Gibson in the Clinton-Obama debate in January--one that may possibly have cost that network any hope of participating in the general election debates. Just examine the thrust of the questions asked during the Obama-McCain contests. Even absent distractions like lapel pins and preacher politics, virtually all questions regarding the financial crisis assumed that the meltdown calls for a drastic reduction in public investment--as if Keynesianism, rather than Friedmanite economics, were somehow at fault. And why was just about every foreign policy question predicated on the alleged efficacy of neocon-style threats of the use of force? Where were the questions about the need for collective action to combat climate change? Where were the debates about the causes and effects of the global migration and food crises? Why did we hear not a single inquiry about the challenges to labor and environmental standards arising from the billion or so workers in China, India and elsewhere, who stand ready to displace millions of Americans in our increasingly globalized workplace? And where were the questions about torture, wiretapping US citizens and restoring respect for our Constitution?
In a wonderfully apoplectic editorial titled "A Liberal Supermajority," frightened [Wall Street] Journal editors worried that an Obama landslide could presage "one of the most profound political and ideological shifts in U.S. history. Liberals would dominate the entire government in a way they haven't since 1965, or 1933." Among the coming horrors: "Medicare for all...[a] green revolution...national, election-day voter registration...the end of Guantanamo and military commissions...'net neutrality' rules...."
America's liberal supermajority has watched as its country has been degraded and dishonored for the past eight years while many in the MSM [mainstream media] have either cheered, acquiesced or looked the other way. If you ask me, the pundit with the greatest gift for political prophecy right now is the late, great Sam Cooke: "It's been a long, long time coming, but I know a change is [finally] going to come."

Have Champagne, Break the Glasses (But Keep a Couple of Aspirins at Hand)

2008-11-04T12:40:00.007+01:00

The polls opened in Indiana a few minutes ago, and in about 18 hours (because of different time zones) they will close. My prediction is that we will know the result of this record-breaking presidential election early, maybe very early if Barack Obama wins where no Democratic candidate has won since 1964: Virginia e Indiana. The entire world should party all night, if the results will bring a close not only the catastrophic presidency of George W. Bush, but the entire conservative cycle that began in Chicago in 1968. And the gift is even sweeter because the celebration will be in Chicago, propelled again to the center of national stage by a gifted politician who began his career not far from the same Grant Park where the police of then-mayor Richard J. Daley rioted while the "Entire world [was] watching."

Therefore, tonight we should drink champagne, and break the glasses Russian-style, before going to bed, but tomorrow morning we shall take a couple of aspirins with the coffee, because formidable challenges lay ahead.

The greatest problem for the new administration will be the fact that, responding to the desire for change, Barack Obama implicitly promised to the voters that he wants, and can, "wipe clean the slate of history and begin again from scratch," as John Judis write in TNR a few months ago. Few columnists, however, have measured the implications of this promise today.

No Country can free itself from geography and history: this should be obvious in the U.S., as it is in the rest of the world from Lisbon to St.Petersburg, and from Tehran to Sidney. Unfortunately, the U.S. still thinks of itself as a Country with a "mission" to fulfill, nothing like the other, "normal" countries of the world. It is American exceptionalism that supplies the bedrock for the pretense of being able to "begin again from scratch" when needed.

American exceptionalism, as most ideologies, is an important resource for leaders who position themselves on its wavelength, and Barack Obama surfed it with grace this year. However, in time he is bound to disappoint his followers because promises based on ideology cannot be fulfilled. Leaders who capitalize on the desire for political change will disappoint supporters even more, because voters don't realize that the Founding Fathers did their best to prevent, or at least slow, any change.
Any political scientist, or historian, could tell citizens that separation of powers, checks and balances, and countermajoritarian institutions like the Supreme Court, were devised precisely to forbid changes, and to create a structure that will last for centuries. The authors of the Constitution were not optimistic about human nature, nor was Abraham Lincoln, who openly expressed his doubts concerning the political institutions born in Philadelphia in 1787: "Now," he said in his Gettysburg address, "we are engaged in a great civil war, testing whether that nation, or any nation, so conceived and so dedicated, can long endure." The Founding Fathers had only a modicum of faith in their fellow citizens, and ingeniously created a weak federal government that would not put Liberty in danger.
In time, the weak government grew strong but obstacles to its reform are as formidable today as they were in 1787 or in 1861. American Presidents cannot be tyrannical, but neither can they be efficient. Their appetite for reform inevitably clashes with lobbies, petty squabbles in the House, money interests in the Senate, and frank hostility in the Supreme Court. The Commander in Chief can easily invade a foreign country, but has trouble in giving health care to children.
Congress could, and would, pass legislation in order to give health care to children, but only if Big Pharma, American Doctors, and other relevant lobbies give their assent. Forty Republican senators will be enough to filibuster any proposal that would implement Obama's campaign promises. And both branches of Government will bow to a reactionary the Supreme Court that will not change its political bias for decades.
Magic moments come only once in a generation, and often they are a source of tragic disappointments when politicians like Bob Kennedy or Martin L. King pay the price of their commitment. Should Barack Obama become President on January 20, he would probably be a weak President, not because of a lack of character, or of political qualifications, but because the Constitution wants him (or anybody else) this way. Sure, Franklin Roosevelt, Lyndon Johnson and Ronald Reagan were strong leaders but even them were able to implement only a fraction of their ambitious agenda. One can only hope that Barack Obama will reveal his true self in office, a character more like the one of Abraham Lincoln than to those of Jimmy Carter's or Bill Clinton's.

Republicans Operatives Asked By Judge If They Electronically Manipulated Elections

2008-11-02T19:39:00.005+01:00

Probably, this year we will not hear many claims that the elections were "stolen," simply because the result will be so overwhelming that any manipulation of some touch-screen voting machines would be useless. We host, however, this opinion by Yale professor Sheila Levrant de Bretteville, on the proceedings against a Republican operative which may reveal a lot about the events of 2000 and 2004.

This election November 4th is now less likely to be rigged because the computer IT guru of the Republican party has been exposed and compelled to appear in an Ohio federal court this past Friday, Oct. 31. The judge ruled that he, Michael Connell, would have to testify under oath on Monday, Nov. 3 about his work for George Bush and Karl Rove electronically manipulating
elections. So, less than 24 hours before the polls open on Tuesday and 20 years after he began doing computer work for Bush Senior, Michael Connell will finally have to begin answering questions about what he has done to help Republicans win (steal) elections. However, the questions in the deposition on Monday will be much narrower, limited to his relationship with Karl Rove, how an "intelligent man in the middle" computer can change the tabulation of the vote, how a remote Trojan Horse computer program can manipulate the tabulation in real time as the statewide count is being tallied and effect the outcome of an election, and how the GOP company Triad was able to help rig the 2004 vote in Ohio. Some of Connell's testimony may be made public before the election.
You can see Connell's picture beside the website he designed for McCain, at
www.velvetrevolution.us and there is more information at www.RoveCyberGate.com.
In the past, Michael Connell has set up websites for Bush/Quayle, Jeb Bush, Bush/Cheney, Katherine Harris (in Florida 2000), Saxby Chambliss (who ran against Max Cleland in 2002), SwiftBoat Veterans. Evidence indicates that he has been at the scene of many stolen elections.
Now we are beginning to understand how it was done with computers inserted invisibly into the process of tabulating the vote before the outcome is announced. Connell may well be innocent of any wrong doing. He may have only programmed the computers while others designed and carried out the dirty work. It will be for the judge to decide if he, or higher ups,
are guilty. But light is being shed on his shady history and he is going to be held accountable. Preparing for his court hearing on Friday and deposition this Monday, Connell was surely distracted from any last minute fine tuning of his election tampering network.
Even more important, he knows that the gig is up, people are on to him and that a federal judge is watching his every move. He knows that he might go to jail if he doesn't tell who told him to do what, -implicate higher ups. And this may make the higher ups, the unseen ones calling the shots, disinclined to throw another election to the Republicans.
Sheila Levrant de Bretteville

Does Paulson’s Plan Really Exist?

2008-10-31T15:30:00.005+01:00

Looking ahead, nothing could be more interesting (and terrifying) of this post by our friend Philip Mattera of Dirt Diggers Digest:

Those who regard Treasury Secretary Henry Paulson’s bailout program as a step toward socialism should remember that such a system involves not just government ownership but also some degree of centralized economic planning. With all the twists and turns in Paulson’s actions, it is difficult to determine whether he is indeed trying to guide some aspects of U.S. business but is doing so in a way we mere mortals cannot understand.

Especially puzzling is Treasury’s approach to deciding which banks should receive capital infusions. It was no surprise that the first $125 billion went to nine of the country’s largest financial institutions, since Paulson believes that shoring up the big guys is key to restoring stability to the system. But when he then turned to regional banks for smaller injections, it was unclear why some were on the list and others were not (at least not yet).

As Fortune points out, Paulson seems to have deliberately omitted Cleveland’s National City Bank (which is now being sold to PNC) because of its precarious portfolio of bad home loans, but he included similarly situated ones such as Milwaukee’s Marshall & Isley. Now that Paulson, under pressure, is reportedly planning to extend the capital program to privately held banks, whose finances are less transparent, it will be more difficult to figure out if there is rhyme or reason to Treasury’s picks.

Paulson was so lackadaisical in structuring the bailout that the banks getting the federal investments did not hesitate to signal that they would use the funds not to make loans but rather to finance acquisitions and continue paying out dividends and probably big executive bonuses. Presumably responding to criticism from other quarters, ranging from members of Congress to the United Steelworkers, some banks are promising that they will take steps to ease the credit crunch. Yet it is unlikely these limited gestures will be enough to shore up a financial system that grows weaker by the day.

So, are things going according to Paulson’s plan—or is there no real plan but simply an ad hoc set of measures that desperately seek to prevent a collapse?

Nothing more should be said before a new Treasury Secretary is confirmed by the Senate. If that will happen only when barter will be again the typical tool of commerce over the prairies of buffalo-rich North America is another matter.

November 4: What The Math Tells Us

2008-10-29T12:04:00.007+01:00

As we wrote two weeks ago, the race is indeed tightening, but any forecast about the Presidential and Congressional elections of next Tuesday must be based not on the last maneuvering of the candidates, but on long-term political trends. All the more so, given the fact that an important fraction of the electorate already cast their ballots, or decided to do so before November 4. Whatever McCain or Palin could say between today and next Tuesday, about one voter in five already voted, and those who did so largely broke in favor of Obama, particularly in the West and in the South, where the opposite should have happened.

The key point we must bear in mind is that the political trend in recent years has been a strong polarization of the electorate, a factor that was central to Karl Rove's successful strategy. About 90 percent of those identifying with a political party vote for that party's presidential candidate. The exit polls in 2004 showed that John Kerry had won 89 percent of the Democratic vote, George W. Bush 93 percent of the Republican vote. As it is, this translates in a huge advantage for the party that is ahead in what political scientists call "party identification," simply because the pool of voters is larger.

And what is the situation on this front? The Democratic advantage in September was about 4 points, according to Rasmussen. That disparity is now probably larger because early September was the moment of McCain's convention, the high tide of Republican fortunes this year.

However, imagine that in November the gap remains the same, and that the same 120 million Americans who voted in 2004 will vote (there will be more voters, but we'll talk about that later). If Obama will keep the share of 90 percent of the Democratic vote, that translates into an advantage of several million votes for him. The math is quite simple:

90 percent of 46.8 million votes for the Democratic standard bearer (total: 42.1) against 90 percent of 40.8 million votes for the Republican one (total: 36.7). In a moment of painful economic hardship as this one, there is no way the so-called Independents would split 50-50 between the two parties: more probably they will go 55-45 for the Democratic candidate. That means another 4 million votes in the democratic column (Independents are about a third of the voters, as of today). As there will be new voters, a large majority of them pulling the lever for the democratic candidates because of superior field work by the Obama's campaign, this will bring another 2 million votes net advantage to him.

Question: Can the voters who secretly cannot bear the idea of voting for a "nigger" reverse a 11.5 MILLION VOTES ADVANTAGE on November 4th? The answer is: "No, at this point in the game that is not possible."

Obama has been excellent in reassuring independents about his ability to tackle the economic crisis, and he can count on the traditional Democratic constituencies now pouring into the voting boots, especially women, Latinos and young people: they will give the Democrats a comfortable edge. Right now, calculations about the electoral college give the Democratic candidate a solid majority, but the victory might be much larger, with Obama collecting more than 300 votes in the electoral college. His supporters should work hard, but can sleep well.

Obama's "Tax Tsunami"

2008-10-28T16:35:00.007+01:00

As we wrote some time ago, conservatives already start complaining about the Obama administration "raising taxes," something that seems a bit premature, giving the fact that before anything could happen on this issue, at least TEN things must happen:

1) Obama should win a majority in the Electoral College on November 4

2) He should survive the plans to assassinate him through January 20, 2009

3) He should be sworn in on January 20

4) He should nominate a Secretary of the Treasury

5) This individual should be confirmed by the Senate

6) A plan to change the tax code should be presented to Congress

7) It should pass in the House

8) It should break an almost-certain filibuster in the Senate

9) It should pass the Senate

and finally, supposing that the bill doesn't need to go to a House-Senate conference to reconcile the differences,

10) It will go to Obama's desk for his signature, and in some time, it will be implemented.

Now, even if points 1, 2, 3 and 4 are reasonable forecasts (John McCain wouldn't agree, but that is that), all other requirements are events that may or may not happen. The Senate could be a stumbling block difficult to overcome, particularly on points n. 5 and 8. In the best case, nothing will happen before April or May next year, and this is a very optimistic forecast.

It sound almost comical, therefore, that former Republican candidate for vice president in 1996 Jack Kemps could write:

In their new book, "The End of Prosperity," Art Laffer, Steve Moore and Peter Tanous argue that the threat of this tax tsunami is already destabilizing our financial markets and causing capital flight from America.
They write, "Hot capital is escaping over the borders out of the United States and flowing into China, India, Europe, and even Japan. . . Starting in late 2007, foreigners started pulling their money out of the United States, and Americans started investing more abroad. Global investors are losing confidence in the U.S.

These global investors are so terrified by Obama's bolshevik plans that the U.S. dollar went up almost 30% against the euro in just three months (from 0.63 in July to 0.80 yesterday). "Losing confidence" in the currency, indeed.

Financial Crisis: Thinking Ahead

2008-10-26T09:01:00.004+01:00

We have today a guest, economist Joseph Halevi, who thinks ahead to the possible developments of the financial crisis.

There is no major change in perspectives despite a lot of institutional talk, most of which is not very substantive such as that at the Beijing meeting.
The centre of gravity of financial vulnerability is now the maze of the derivatives of credit default swaps. They are being hollowed out and, to that effect, I should mention some institutional steps, which are taken individually and are not coordinated except possibly one.
The first is by France and concerns the formation of a State financial institution with the objective of preventing take overs of French industrial companies by hedge funds, In effect this stops hedge funds from trading in firms' stocks. Many people on the "left" would like that but, whatever its merit, it does not address the compelling issue of vanishing investment plans. What it does it will allow the companies to close down and even relocate abroad or shift production to their foreign plants (it is happening with Renault which is shifting output to Roumania and Brazil), thereby firing workers, without their stocks being traded and speculated as junk stocks. The unemployed will be unemployed, period.

In the same vein the Berlusconi government in Italy is preparing
legislation to guarantee borrowing by firms, that is to underwrite
firms' debt vis à vis banks, while banks are also guaranteed by the
Central Bank, ultimately by the ECB. The crucial issue is that firms
will borrow less because demand is evaporating, hence it does not solve the issue of labor losses nor does it guarantee a recovery. It simply protects capital from every possible direction: banks are even protected twice.
A credit default swaps clearing house is being planned by the Euro15. In effect this means making the credit default swaps non convertible, i.e. non tradeable. This is an important event if it goes ahead. Credit default swaps were used also to 'cover' for the external deficits of the deficit countries. By rendering them non convertible the deficit countries will have to pay up, hence the external constraint will become visible and binding again (as I always thought it to be in the core of the functioning of the economy).

On the other hand, CDS are highly toxic because they condense all the other forms of debt. They were not only used to ensure against potential default but also to make money in both directions simultaneously. Since hedge funds hold a great deal of CDS, the decisions to keep hedge funds at bay will reduce the 'value' of the CDS, hence the need of a clearing house for an orderly euthanasia of this type of paper.
Japan and China are the only countries that have initiated policies from the spending side. Japan's new package is an extended version of that passed in July or August. Public works and some income support schemes. However it is just a "stay afloat like a dead corpse strategy" reminiscent of the 1990s when they did everything to absorb production without much success.
Japan has huge structural problems since it is the perfect Marxian
"overproduction cum disproportionality" economy, given the size of its heavy industry and capital goods sectors. It is very difficult to bring up domestic demand to the level needed to ensure recovery. And now they are also subjected to the revaluation of the yen vis à vis the US $ without the mitigating factor of US growth; hence they experience hyper revaluation vis à vis the Euro where demand is also not doing well.
Furthermore, an important Japanese export market for heavy machinery (and thus for Japan's external surpluses, which are now dwindling), the Korean, is just drifting away because of the deep Korean crisis. Japan is really in a big blackish hole. Nothing much can be expected from those keynesesque measures therefore.
China has undertaken the only noticeable spending program. It is based on placing orders at its own heavy industry through very large programs of structural investments. But many consumption goods sectors are being affected by the fall in demand in the USA and it is difficult to see how the sectoral composition of the economy can be changed in the short, or even medium, run. Moreover if the spending programs are based on the heavy industry sectors, the slow down and actual crisis in the exporting sectors like toys etc. will exacerbate the gap between domestic production and domestic consumption demand. Thus China can find itself in a dynamic version of the Japanese situation.
We should also expect major real crises in Latin America, given what is happening to Brazil and Argentina. The fall in oil revenues prevents Venezuela from acting as a benevolent lender. After all they helped Argentina to pay the rest of the debt by buying it themselves. Notice that through Venezuela and the energy-raw materials surpluses of Argentina, Brazil some others, the Latin America economy is more dollarized than ever. But now raw materials prices are falling and the values of the Real and the Argentinian Peso are falling drastically. They are back in a real deflation+ price cum interest rates inflation crisis. Indeed Brazil had to increase interest rates sharply to stem the outflow of capital.
India: India has the fourth largest trade deficit in the world. They make up for it through capital inflows on the capital accounts and invisibles on the current account. With the credit crunch underway the ability to make money by sending money to India will be severely limited. Hence the situation is wobbly but I think they will still expand in their own Indian style.
Notice that, in spite of all the talk about coordination there is none.
They present their trips to Camp David, Paris, Beijing as coordination, but there is nothing concretely there. Every country uses its own finances, the only common elements are: to throw money at banks and - for the USA-EURO15 relations - the unlimited unsecured and non recourse lending of $ by the US Federal Reserve to the ECB. As to the common ASEAN fund supported by China, Japan and Korea fund we should judge it
when we see it, if we will see it. I cannot possibly figure the Asean
countries being capable of managing that fund given their litigious relations, it will have to be done by Japan with China and Korea.
The crisis is generating fragmentation in the world economy.

Democracy, the Treasury and the Federal Reserve

2008-10-25T19:12:00.003+02:00

As the financial crisis unfolds, it may be important to discuss not only various technical solutions to the current mess, but also what the recent events tell us about the functioning of "democracy" in Washington, DC.

I put "democracy" into quotation marks because it appears that the long decline of Congress relevance vis-à-vis the President, the Treasury, and the Federal Reserve has now possibly reached a non-return point.

These are the remarks of Sam Peltzman, Professor Emeritus of Economics at the University of Chicago, a couple of weeks ago, commenting on the bailouts:

The Federal Reserve and the Treasury (...) have the demonstrated ability to act without serious democratic restraint.
How else can one interpret the sudden revelation that $29 billion of the full faith and credit of the
US Treasury had been committed to the Bear Stearns transaction, or the equally sudden
undebated and unvoted announcement that $85 billion of government funds had been loaned to
AIG? If there is any principle that emerges from these announcements – and non-
announcements like the decision not to rescue Lehman Brothers – it seems to be that amounts at
least as large as $85 billion can be appropriated, or not, at the discretion of official Washington.

As the Constitution reserves to Congress, and Congress alone, the power of appropriating public money, it appears that another legacy of the Bush administration will be the ultimate irrelevance of Congress in serious matters like war or economic catastrophe. This irrelevance is duly reflected in the current standing of Congress in the court of public opinion, where its current approval rate is about as good as Wall Street's credit, around 8% of approval. However, this is a profoundly unhealthy situation, and Barack Obama will be wise in reflecting on it, resisting the temptation of using the quasi-dictatorial powers he will inherit from George W. Bush, even for good purposes.

When Readers Are Wiser Than Pundits

2008-10-20T19:58:00.003+02:00

The discussion inside the fractured conservative camp continues, and this comment by a Californian reader of Bill Kristol's column in The New York Times seems perfectly on target:

Joe the Plumber is exactly the problem of the Republican party. He has never benefited, and will never benefit, from the Republican policies. While Joe is too ignorant to realize that, most of the other Plumbers (the smart ones) are dumping the Republican party as quickly as they can. Which leaves the party without both those that read books and those that do not (but are smart). What is left? Joe the Plumber and Sarah Palin. A promising future, no doubt...

This reader's opinion about about the beneficiaries of Republican policies is supported by a Nobel-class analysis about the income decline for average Americans during the last eight years.

Now Conservatives Think Ahead To President Obama

2008-10-18T15:33:00.008+02:00

Another week is over, and a quick assessment would go something like this:

1) Whatever John McCain says, the voters don't believe it, not even if Joe the Plumber supports it.

2) Whatever the Bush administration does, the Wall-Street-types don't believe it for more than a couple of hours.

In other words, this is a crisis of trust in the ability of Republicans of all stripes to solve the economic mess, and this feeling can't possibly turn around before the election.

3) All this is perfectly clear to any conservative with an IQ in the 90-110 range, as shown by the last Matthew Kaminski's column in the Wall Street Journal.

What is interesting in Kaminski's piece is the fact that in his 1300-word column, nowhere the possibility that Barack Obama will NOT be elected is mentioned. The very title, "The Axelrod Method. The 'change' president could be in for a rough ride on Capitol Hill," indicates that while McCain's campaigns launches its last fireworks, conservatives start thinking to a completely different subject: the possible failure of Obama's first term.

Kaminsky writes about the election of Deval Patrick, governor of Massachusetts:

As a path to power, the Axelrod method appears to be the best thing going today. Coming into the 2006 race, Mr. Patrick was a political novice with 1%-2% name recognition in a state that's 6% black . He faced off against a sitting state attorney general favored by the Democratic Party establishment. The former Clinton administration lawyer energized the grass-roots and youth vote with superior organization and stirring oratory. The candidate himself was the message; the campaign dwelled on his personal story, not the issues. (...) Massachusetts never saw anything like it. Mr. Patrick upset the favorite in the Democratic primary and won the general election by 21 points.

Then Kaminski, goes into the details of the difficult relationship between the governor and the Democratic legislature:

That crusading optimism, so critical to his election victory, fast bumped up against established Democratic interests such as the police unions and power brokers on Beacon Hill. They didn't know Mr. Patrick, didn't appreciate him jumping the queue to the governor's chair, didn't buy his reformist outsider message, and frankly liked things as they were. Great speeches or popular support were insufficient for Mr. Patrick to get his way.

And Kaminski makes his final point forecasting "a rough ride" for Obama, when dealing with "the Democratic warhorses on Capitol Hill."

Well, no doubt that the Republican candidate for president will be happy to hear THAT (with still 17 days to go) but let's put aside John McCain's feelings, and discuss the scenario offered by the Wall Street Journal.

First, Kaminski could have found a better example than the one of a first-term governor: in fact, president Carter's relationship with Democratic Congress between 1977 and 1981, would be much more significant.

Jimmy Carter, indeed had trouble in having legislation passed by Congress, as had Bill Clinton in 1993-1995. It would be fair to say that all Democratic presidents, including Franklin Roosevelt, had sooner or later strong difficulties in implementing their agenda because of resistance from Congress. Only Roosevelt in his first term (before the "Court-Packing" episode) and Lyndon Johnson after the 1964 landslide were able to lead Congress in the direction they wanted.

Carter and Clinton, on the contrary, were both governors of backward Southern states, real outsiders in the party. Clinton was more well-connected than Carter, but his first term began in worst possible way, with troubles in confirming his cabinet, and the public relation disaster of gays in the military. Clinton got only 43% of the popular vote, and no senator or representative felt obliged to him for his election.

What about president Obama? If the Democratic ticket wins on November 4, it will be largely because a perfect campaign that has reshaped the political geography of the country. Axelrod's and Plouffes' efforts in mobilizing activists and voters from North Dakota to Louisiana will benefit local Democratic candidates for the House and the Senate, many of whom will enter Congress only because of Obama's coattails.

Obama will win with more than 50% of the popular vote (FiveThirtyEight's forecasts, the best in the business, give him 52%) and a large majority in the electoral college. He will bring to Washington a NEW Democratic majority in the Senate, a majority that today exists only in name (the party controls 49 seats, and only the conditional support of two independents allows Harry Reid to claim the mantle of Senate Majority Leader). Democratic candidates for a senate seat might win in states like Texas, on November 4: will they forget in a minute who is the leader that propelled them over the top? And representative who will win in arch-conservatives districts will give Obama a "rough ride?"

Maybe.

However, a more plausible scenario is that President Obama will start with strong majorities in both houses of Congress, and that the bulk of these senators and representatives will be grateful to him, and decided to implement his agenda to turn the page after eight years of George W. Bush. The sense of urgency created by financial chaos will add to the discipline of the troops, exactly as happened during Franklin Roosevelt's first term. The fact that the mood of the country changed, and that Democrats will be on the verge of a filibuster-proof majority in the Senate will strengthen the administration enormously.

What Barack Obama will be able to do is another matter. Two wars and a depression will tax his abilities enough, Congress will not be the top of his concerns.