Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: ACTION items
on: June 12, 2010, 05:01:45 PM
A goodly percentage of my Founding Father Quotes come from this group as do several of my posts. In short I think them very good and worthy of my support , , , and yours.
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Politics, Religion, Science, Culture and Humanities / Politics & Religion / POTH: Karzai doubts success
on: June 12, 2010, 11:30:05 AM
Granted this is the NYT, and as such is a Pravda, but it reads very plausibly to me.
I have posted here for a long time about incoherence of our strategy , , ,
Karzai Is Said to Doubt West Can Defeat Taliban
By DEXTER FILKINS
Published: June 11, 2010
KABUL, Afghanistan — Two senior Afghan officials were showing President Hamid Karzai the evidence of the spectacular rocket attack on a nationwide peace conference earlier this month when Mr. Karzai told them that he believed the Taliban were not responsible.
In January, Hanif Atmar, then the interior minister of Afghanistan, gestured during a medal ceremony in Kabul. He and another top official have resigned from the Hamid Karzai government.
Afghanistan’s former intelligence chief, Amrullah Saleh, in Kabul on Wednesday. He also resigned his position.
“The president did not show any interest in the evidence — none — he treated it like a piece of dirt,” said Amrullah Saleh, then the director of the Afghan intelligence service.
Mr. Saleh declined to discuss Mr. Karzai’s reasoning in more detail. But a prominent Afghan with knowledge of the meeting, who spoke on condition of anonymity, said that Mr. Karzai suggested in the meeting that it might have been the Americans who carried it out.
Minutes after the exchange, Mr. Saleh and the interior minister, Hanif Atmar, resigned — the most dramatic defection from Mr. Karzai’s government since he came to power nine years ago. Mr. Saleh and Mr. Atmar said they quit because Mr. Karzai made clear that he no longer considered them loyal.
But underlying the tensions, according to Mr. Saleh and Afghan and Western officials, was something more profound: That Mr. Karzai had lost faith in the Americans and NATO to prevail in Afghanistan.
For that reason, Mr. Saleh and other officials said, Mr. Karzai has been pressing to strike his own deal with the Taliban and the country’s archrival, Pakistan, the Taliban’s longtime supporter. According to a former senior Afghan official, Mr. Karzai’s maneuverings involve secret negotiations with the Taliban outside the purview of American and NATO officials.
“The president has lost his confidence in the capability of either the coalition or his own government to protect this country,” Mr. Saleh said in an interview at his home. “President Karzai has never announced that NATO will lose, but the way that he does not proudly own the campaign shows that he doesn’t trust it is working.”
People close to the president say he began to lose confidence in the Americans last summer, after national elections in which independent monitors determined that nearly one million ballots had been stolen on Mr. Karzai’s behalf. The rift worsened in December, when President Obama announced that he intended to begin reducing the number of American troops by the summer of 2011.
“Karzai told me that he can’t trust the Americans to fix the situation here,” said a Western diplomat in Kabul, who spoke on condition of anonymity. “He believes they stole his legitimacy during the elections last year. And then they said publicly that they were going to leave.”
Mr. Karzai could not be reached for comment Friday.
If Mr. Karzai’s resolve to work closely with the United States and use his own army to fight the Taliban is weakening, that could present a problem for Mr. Obama. The American war strategy rests largely on clearing ground held by the Taliban so that Mr. Karzai’s army and government can move in, allowing the Americans to scale back their involvement in an increasingly unpopular and costly war.
Relations with Mr. Karzai have been rocky for some time, and international officials have expressed concern in the past that his decision making can be erratic. Last winter, Mr. Karzai accused NATO in a speech of ferrying Taliban fighters around northern Afghanistan in helicopters. Earlier this year, following criticism by the Obama administration, Mr. Karzai told a group of supporters that he might join the Taliban.
American officials tried to patch up their relationship with Mr. Karzai during his visit to the White House last month. Indeed, on many issues, like initiating contact with some Taliban leaders and persuading its fighters to change sides, Mr. Karzai and the Americans are on the same page.
But their motivations appear to differ starkly. The Americans and their NATO partners are pouring tens of thousands of additional troops into the country to weaken hard-core Taliban and force the group to the bargaining table. Mr. Karzai appears to believe that the American-led offensive cannot work.
At a news conference at the Presidential Palace this week, Mr. Karzai was asked about the Taliban’s role in the June 4 attack on the loya jirga and his faith in NATO. He declined to address either one.
“Who did it?” Mr. Karzai said of the attack. “It’s a question that our security organization can bring and prepare the answer.”
Asked if he had confidence in NATO, Mr. Karzai said he was grateful for the help and said the partnership was “working very, very well.” But he did not answer the question.
“We are continuing to work on improvements all around,” Mr. Karzai said, speaking in English and appearing next to David Cameron, the British prime minister.
A senior NATO official said the resignations of Mr. Atmar and Mr. Saleh, who had strong support from the NATO allies, were “extremely disruptive.”
The official said of Mr. Karzai, “My concern is, is he capable of being a wartime leader?”
Page 2 of 2)
The NATO official said that American commanders had given Mr. Karzai a dossier showing overwhelming evidence that the attack on the peace conference had been carried out by fighters loyal to Jalalhuddin Haqqani, one of the main leaders fighting under the Taliban’s umbrella.
“There was no doubt,” the official said.
The resignations of Mr. Saleh and Mr. Atmar revealed a deep fissure among Afghan leaders as to the best way to deal with the Taliban and with their patrons in Pakistan.
Mr. Saleh is a former aide to the late Ahmed Shah Massoud, the legendary commander who fought the Soviet Union and the Taliban. Many of Mr. Massoud’s former lieutenants, mostly ethnic Tajiks and now important leaders in northern Afghanistan, sat out the peace conference. Like Mr. Saleh, they favor a tough approach to negotiating with the Taliban and Pakistan.
Mr. Karzai, like the overwhelming majority of the Taliban, is an ethnic Pashtun. He appears now to favor a more conciliatory approach.
At the end of the loya jirga, Mr. Karzai announced the formation of a commission that would review the case of every Taliban fighter held in custody and release those who were not considered extremely dangerous. The commission, which would be led by several senior members of Mr. Karzai’s government, excluded the National Directorate of Security, the intelligence agency run by Mr. Saleh.
In the interview, Mr. Saleh said he took offense at the exclusion. His primary job is to understand the Taliban, he said; leaving his agency off the commission made him worry that Mr. Karzai might intend to release hardened Taliban fighters.
“His conclusion is — a lot of Taliban have been wrongly detained, they should be released,” Mr. Saleh said. “We are 10 years into the collapse of the Taliban — it means we don’t know who the enemy is. We wrongly detain people.”
Mr. Saleh also criticized the loya jirga. “Here is the meaning of the jirga,” Mr. Saleh said. “I don’t want to fight you. I even open the door to you. It was my mistake to push you into the mountains. The jirga was not a victory for the Afghan state, it was a victory for the Taliban.”
Mr. Karzai has been seeking to build bridges to the Taliban for months. Earlier this year, the president’s brother, Ahmed Wali Karzai, held secret meetings with Mullah Abdul Ghani Baradar, the Taliban’s deputy commander, according to a former senior Afghan official.
According to Gen. Hilaluddin Hilal, the deputy interior minister in an earlier Karzai government, Ahmed Wali Karzai and Mr. Baradar met twice in January near Spin Boldak, a town on the border with Pakistan. The meeting was brokered by Mullah Essa Khakrezwal, the Taliban’s shadow governor of Kandahar Province, and Hafez Majid, a senior Taliban intelligence official, General Hilal said.
A Western analyst in Kabul confirmed General Hilal’s account. The senior NATO official said he was unaware of the meeting, as did Mr. Saleh. Ahmed Wali Karzai did not respond to e-mail queries on the meeting.
The resolution of that meeting was not clear, General Hilal said. Mr. Baradar was arrested in late January in a joint Pakistani-American raid in Karachi, Pakistan. But Mr. Karzai’s attempts to negotiate with the Taliban have continued, he said.
“He doesn’t think the Americans can afford to stay,” General Hilal said.
Mr. Saleh said that Mr. Karzai’s strategy also involved a more conciliatory line toward Pakistan. If true, this would amount to a sea change for Mr. Karzai, who has spent his nine years in office regularly accusing the Pakistanis of supporting the Taliban insurgency.
Mr. Saleh says he fears that Afghanistan will be forced into accepting what he called an “undignified deal” with Pakistan that will leave his country in a weakened state.
He said he considered Mr. Karzai a patriot. But he said the president was making a mistake if he planned to rely on Pakistani support. (Pakistani leaders have for years pressed Mr. Karzai to remove Mr. Saleh, whom they see as a hard-liner).
“They are weakening him under the disguise of respecting him. They will embrace a weak Afghan leader, but they will never respect him,” Mr. Saleh said.
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Mexico-US matters
on: June 12, 2010, 12:54:23 AM
ARMED ARIZONAS By Massad Ayoob
Particularly after the recent murder of an Arizona rancher who had turned in to authorities a quantity of drugs he’d found cached on his property, Arid Zoners have taken to arming themselves with a new level of determination. They are well aware that they may find themselves up against VERY heavily armed people: see the photo below taken by law enforcement at what was reported to be a Zeta Cartel training camp just south of the border.
A good friend of mine who is heavily into teaching concealed carry classes in Southern Arizona, and supplemental courses for soldiers out of Fort Huachuca, with whom he is very well connected due to his own long and honorable Army service, tells me there is much interest among the ranchers in learning defensive employment of military style rifles. Makes sense to me. I’ve seen a recovered firearms training manual recovered by US law enforcement from cartel members, which indicates that they are attempting to train themselves to a military Special Forces standard. Folks with combat skills like these will be moving fast and taking advantage of hard cover: this makes it important to have a gun in the car that can send bullets punching through auto bodies and heavy, tempered window glass. Multiple, fast-moving targets require lots of ammo, too: twenty-round and larger magazines make sense here.
The US Border Patrol is struggling valiantly to contain the problem, but is short of manpower and budget. THIS VIDEO shows some of the scope of the problem.
During our sojourn on the border, we had an M4 in the car, and also my idea of an ideal “car gun,” Springfield Armory’s super-handy, super-controllable SOCOM-16 semiautomatic rifle in caliber 7.62mm NATO. Didn’t need it, of course, but it provided a sense of being ready for the worst…
Could such hardware ever be necessary on American streets? FBI Director Robert Mueller knows the answer. Read IN ITS ENTIRETY his 2009 speech HERE where he discusses the possibility of an American Mumbai.
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Stratfor: Eh tu, Moscow?
on: June 12, 2010, 12:36:37 AM
Et Tu, Moscow?
ADAY AFTER RUSSIA JOINED ITS FELLOW permanent U.N. Security Council members in passing a fresh round of sanctions against Iran, Ali Akbar Salehi, the head of Iran’s Atomic Energy Organization, coolly told state-run Al Alam TV that “Iran has been under sanctions and economic, technological and political blockade for more than 30 years — we got used to it.”
Iran may be used to a lot of things, but it is having an exceptionally difficult time getting used to the idea of Russia — long considered Iran’s primary power patron — hanging Tehran out to dry. Iran made no secret of its displeasure with Moscow in the lead up to the sanctions vote, releasing statement after statement warning the Kremlin of the consequences of turning its back on Tehran. Now having received the sanctions slap in the face, Iranian President Mahmoud Ahmadinejad is showing his defiance by canceling his trip to the Russian and Chinese-led Shanghai Cooperation Organization summit in Tashkent on June 11, while Iran’s oil minister has postponed a June 22 visit to Russia.
This is by no means the first time Iran has been betrayed by its Russian ally. After all, Russia voted in the affirmative the previous six times the Security Council passed sanctions resolutions against Iran. Those previous sanctions were a symbolic show of force against Iran, and everyone, including Iran, knew they lacked real bite and suffered from the enforceability dilemma. This latest round of sanctions will face the same enforcement challenges and were careful to avoid touching Iran’s energy trade so as to get Russian and Chinese buy-in. That said, this did not end up being a fluff resolution.
The newest resolution expands travel and financial sanctions on Islamic Revolutionary Guard Corps entities — a preponderant force in the Iranian economy. The sanctions also go beyond inspections of Iranian air cargo to the seizure and disposal of Iranian contraband traveling by air or sea that could be used for military purposes. Instead of calling on states to exercise vigilance and restraint in the supply, transfer or sale of offensive weapons to Iran, the new resolution bans all of the above. Like previous resolutions, this one bars Iran from all enrichment-related activity, but now also emphasizes the construction of new nuclear sites. In short, this sanctions round expands the list of things Iran supposedly cannot do, while it allows action by interested states to interfere with a broader range of Iranian activities.
“This is by no means the first time Iran has been betrayed by its Russian ally.”
No sanctions resolution would be complete, however, without its caveats. With no real legal mechanism to enforce across international boundaries, the level of adherence to the sanctions will be left for individual states to decide. A closer look at the sanctions text also reveals a number of loopholes by Russian design. For example, Iran may be banned from nuclear and enrichment activities, and other countries may be banned from making nuclear investments in Iran, but Russia contends that in projects like the Bushehr nuclear power plant (and even future projects), it is not making such an “investment” if Iran is the one paying for the construction and training, and if the project and training are taking place on Iranian soil. Russia was also careful to include enough fine print in the clause banning arms sales to Iran to exempt a long-threatened Russian sale of the S-300 air defense system to Iran.
With more holes than Swiss cheese, the sanctions are by no means a call to war. But Iran’s biggest fear goes beyond the actual text of the sanctions and into the meat of the negotiations currently taking place between Russia and the United States.
STRATFOR has been closely tracking a coming shift in Russia’s foreign policy, one that would emphasize pragmatism over belligerence in dealing with the United States over thorny issues like Iran. Russia hopes to obtain much-needed Western technology and investment to modernize its economy and ensure Moscow’s long-term competitiveness in the global system. While the United States and Russia have (for now) agreed to disagree on more contentious issues like U.S. military support for Poland and Georgia, the Russian decision to move against Iran with this sanctions resolution is quite telling of the progress made thus far in U.S.-Russia negotiations. And for those outstanding points of contention, Russia still has the S-300 and Bushehr levers to wave in Washington’s face should its negotiations with the United States take a turn for the worse. Meanwhile, Washington has just acquired a very useful tool to bolster its negotiating position vis-a-vis Iran: the prospect of Russia abandoning its premier Mideast ally.
The Iranians have long known that their alliance with Russia stood on shaky ground, but they also worked fastidiously to try to keep U.S.-Russian relations as agonizing as possible to avoid being put in this very position. This is not to say Iran would be coming to the negotiating table empty-handed when it faced Washington. After all, Iran still has very strong levers against the United States in Iraq, Lebanon and Afghanistan that it can use at a time of its choosing. The question, then, is whether that time may be approaching. As Iranian Foreign Minister Manouchehr Mottaki said Thursday, “It is now the Islamic republic’s turn to make the next move.”
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: The Politics of Health Care
on: June 10, 2010, 08:50:51 PM
Dear Policy Patriots -
Major Campaign to Sell ObamaCare - to You! This week, Politico and The New York Times published two devastating revelations:
Multimillion Dollar Propaganda Campaign. According to Politico, White House allies, led by former Senate Majority Leader Tom Daschle and Victoria Kennedy, the widow of the late Senator Ted Kennedy, are set to unveil a $125 million public relations make-over for ObamaCare. This unprecedented propaganda campaign is designed to last until the law is fully in place in 2014 and to convince you and millions of your fellow countrymen that up is down, that black is white and that ObamaCare is good for you.
Advice to Candidates: Avoid Voters, Avoid Talking about Health Care. You're not likely to see TV images of candidates confronting angry voters at town hall meetings this summer. The reason? As The New York Times reports, members of Congress who voted for ObamaCare have "heeded the advice of party leaders and tried to avoid unscripted question and answer sessions." Among the recommendations to lawmakers: "Hold events in controlled settings...without the worry of being snared in an angry confrontation with seniors."
ObamaCare Propaganda Aimed at Seniors - Paid for with Your Tax Dollars! During the debate over ObamaCare, the Obama Administration threatened health insurance companies who informed seniors of the possibility that they could lose Medicare Advantage (MA) benefits. However, the health insurance companies were telling the truth. In fact, the information they used came from the Administration's Congressional Budget Office (CBO) and the Chief Actuary of Medicare. Medicare's Chief Actuary predicted that under ObamaCare as many as 7.4 million beneficiaries will lose their MA plan altogether and another 7.4 million will experience a loss of benefits. Incredibly, the forthcoming ObamaCare media blitz will target these seniors and claim that Medicare Advantage enrollees will be better off under ObamaCare.
Sebelius Threatens Insurers Publicly. ObamaCare stripped $200 billion from federal payments to Medicare Advantage plans. And no knowledgeable person is in doubt about the consequences of that. As one expert explained, "Washington can't slash $200 billion out of Medicare Advantage and then try to shift the blame...when those cuts inevitably result in higher premiums and benefit reductions for seniors." Nevertheless, on Monday Health and Human Services Secretary Kathleen Sebelius threatened health insurers, warning them not to increase premiums and co-payments when they submit their 2011 Medicare Advantage bids to the federal government. This is a clever ruse - getting ready to blame the victim for the results of a crime the administration has already committed.
The Vaunted Seniors' Rebate Check: Penny Wise... This week the Obama Administration will advertise its efforts to provide health care for seniors, citing a one-time, $250 health care rebate check that 80,000 seniors will receive this week and as many as four million may receive in the coming months. What the President won't mention is that the four million seniors who receive a check represents less than 10 percent of the Medicare population and that the seniors who benefit are among the nation's wealthiest Medicare beneficiaries. The check only goes to those not already receiving Medicare Extra Help. Finally, the rebate check comes in the midst of rising prescription drug costs for all seniors, not just 10 percent. As Senate Minority Leader Mitch McConnell explained earlier this week, "for every senior who receives a check, more than three other seniors will see an increase in their prescription drug insurance premiums."
...Pound Foolish. Not only will the President fail to distribute a check to 9 out of 10 seniors, but the one-time check pales in comparison to ObamaCare's pilfering of seniors' health care. According to the non-partisan Congressional Budget Office (CBO), ObamaCare cuts Medicare spending by $8,980 per senior over the next ten years. Consider also that:
The Chief Medicare Actuary Warns against Cuts in Senior Care. They urge that the Administration's planned $500 billion cuts in Medicare could jeopardize the access to care seniors receive.
The Chief Medicare Actuary Predicts Seniors Lose Coverage. They say that $206 billion in cuts to Medicare Advantage (MA) will result in 7.4 million beneficiaries who will lose their Medicare health plan.
The CBO Puts a Number on Lost Benefits. Seniors enrolled in Medicare Advantage (MA) will lose an average of $816 per patient in 2019.
Premiums Will Rise, Says CBO. The CBO estimates that Medicare prescription drug coverage premiums will increase by 9 percent as a result of the Democrats' health law.
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Politics, Religion, Science, Culture and Humanities / Politics & Religion / I'm shocked, absolutely schocked , , ,
on: June 10, 2010, 08:46:54 PM
The seven experts who advised President Obama on how to deal with offshore drilling safety after the Deepwater Horizon explosion are accusing his administration of misrepresenting their views to make it appear that they supported a six-month drilling moratorium -- something they actually oppose.
The experts, recommended by the National Academy of Engineering, say Interior Secretary Ken Salazar modified their report last month, after they signed it, to include two paragraphs calling for the moratorium on existing drilling and new permits.
Salazar's report to Obama said a panel of seven experts "peer reviewed" his recommendations, which included a six-month moratorium on permits for new wells being drilled using floating rigs and an immediate halt to drilling operations.
"None of us actually reviewed the memorandum as it is in the report," oil expert Ken Arnold told Fox News. "What was in the report at the time it was reviewed was quite a bit different in its impact to what there is now. So we wanted to distance ourselves from that recommendation."
Salazar apologized to those experts Thursday.
"The experts who are involved in crafting the report gave us their recommendation and their input and I very much appreciate those recommendations," he said. "It was not their decision on the moratorium. It was my decision and the president's decision to move forward."
In a letter the experts sent to Salazar, they said his primary recommendation "misrepresents" their position and that halting the drilling is actually a bad idea.
The oil rig explosion occurred while the well was being shut down – a move that is much more dangerous than continuing ongoing drilling, they said.
They also said that because the floating rigs are scarce and in high demand worldwide, they will not simply sit in the Gulf idle for six months. The rigs will go to the North Sea and West Africa, possibly preventing the U.S. from being able to resume drilling for years.
They also said the best and most advanced rigs will be the first to go, leaving the U.S. with the older and potentially less safe rights operating in the nation's coastal waters
Politics, Religion, Science, Culture and Humanities / Science, Culture, & Humanities / Austrian Business Cycle Theory
on: June 10, 2010, 04:29:58 PM
Austrian Business Cycle Theory: A Brief
Daily Article | Posted on 5/7/2001 by Dan Mahoney
The media’s favorite phony solution to the economic downturn is for the
Fed to drop interest rates lower and lower until the economy registers an
upturn. What is wrong with this approach? Printing money—which is what
reducing interest rates below the market rate amounts to—is an artificial
means of recovering from the very real effects of an artificial boom. This
point, however, is completely lost on most commentators, because they
haven’t the slightest understanding of the Austrian theory of the business
This article gives a brief overview of the theory, which provides an
explanation of the recurrent periods of prosperity and recession that seem to plague capitalist societies. As
Salerno (1996) has argued, the Austrian business cycle theory is in many ways the quintessence of Austrian
economics, as it integrates so many ideas that are unique to that school of thought, such as capital structure,
monetary theory, economic calculation, and entrepreneurship. As such, it would be impossible to adequately
explain so rich a theory in a short note. (See Rothbard  for greater details.) However, an attempt will be
made here to indicate how those relevant ideas come together in a unified framework.
Man is confronted with a world of physical scarcity. That is, not all of our wants and needs, which are practically
limitless, can be met. Outside of the Garden of Eden, we must produce in order to consume, and this means that
we must combine our labor with whatever nature-given resources are available to us. As inherently rational
beings, men have come to recognize many ways of solving this problem, such as peaceful cooperation under the
division of labor leading to enhanced productivity, and private property rights permitting economic calculation
so that different courses of action can be meaningfully compared.
(This is not to say that man has perfect foresight and always correctly anticipates the outcome, good or bad, of
his actions; only that man acts purposefully—and so always judges ex ante a course of action to lead to a
preferred state of affairs—and is capable of distinguishing success from failure and acting accordingly.)
However, it would help to consider the course of economic development from a simplified example, that of an
isolated "Robinson Crusoe" situation. The circumstance faced here is that one must somehow combine one’s
labor with available resources to produce goods for consumption (e.g., food, shelter, etc.). For example, I can
pick berries by hand, and this will produce a certain level of consumption. However, if I wish to have a greater
level of consumption, I must create some means of increasing my berry collecting—for example, by building a
rod to knock berries from bushes and a net to collect them as they fall to the ground.
Unless these means are nature-given, however, I must build them myself, and this will take time—time during
which I cannot pick and consume berries with my old method. Thus, during the time I am making my new,
presumably more efficient, method, I must have some way of sustaining myself. This can only come about if I
have saved (i.e., abstained from consuming) a sufficient amount of berries in the past, so that I may work on
other approaches now. (For more on this process, see Rothbard , ch. 1.)
Let us be clear about what is happening here: One is not simply switching from consumption to production;
rather, one is switching from one form of production to another. One cannot consume something until it has been
produced, so all production processes involve foregoing consumption. The question, though, is what must be
done to switch to a supposedly more effective means of production.
Obviously, if the rod-and-net system, presumably more productive, had required the same amount of time to
construct as the hand-picking method, I would have engaged in this approach to begin with. Since acquiring the
increased productivity comes with a cost—namely, time spent away from using the old method to facilitate
production and, thus, consumption—there must be some means of paying that cost.
Of course, not all lengthier production processes are more productive. But at any given time, man always
chooses those production processes that can produce a given amount of output for consumption in the shortest
amount of time. A process that takes longer to arrive at the final stage of output will only be adopted if it is
correspondingly more productive. In the Austrian conception, greater savings permit the creation of more
"roundabout" production processes—that is, production processes increasingly far-removed from the finished
product. This is the role of savings, and we can ask what determines a particular level of savings.
Time preference is the extent to which people value current consumption over future consumption. The key point
of the Austrian business cycle theory is that interventions in the monetary system—and there is some debate over
what form those interventions must take to set in motion the boom-bust process—create a mismatch between
consumer time preferences and entrepreneurial judgments regarding those time preferences.
Let us return to the Crusoe example above, and consider attempts to construct more productive means of berry
extraction. What constrains me in this endeavor is my level of time preference. If I so enjoy current consumption
that the thought of increased future consumption cannot sway me from foregoing sufficient berry-eating now,
my rod-and-net system will not be built. In the context of fractional reserve banking, printing up berry-tickets
cannot change this fact.
As a numerical example, consider the case where hand-picking yields twelve berries a day, and I am simply
unwilling to go without less than ten berries per day. Suppose further that my time preference falls so that I am
willing to save two berries a day for seven days (leaving aside issues such as perishability, which obviously do
not apply to a monetary economy). I will then have a reserve of fourteen berries. Assume I work one-fourth of a
day on my new method of berry production and spend the remaining three-fourths of the day on producing
berries with the old technique. The old method will give me nine berries a day, and I can use one berry from my
savings to meet my current consumption needs.
If I can finish the rod-and-net system in fourteen days (the extent of my reserve), then everything is fine, and I
can go on to enjoy the fruits of my labor (no pun intended). If I misjudge however, and the process takes longer
than fourteen days, I must temporarily suspend production (or at least delay it) to fund my current consumption,
as, by assumption, I value a certain level of current consumption over increased future consumption (the essence
of time preference). The point is, sufficient property must exist for me to lengthen the structure of production,
and this property can only come from (past) savings. If my time preference does not enable sufficient property to
become available for creating this production process, my efforts will end in failure.
Lest it be thought this example is artificial, consider the situation where my needs are nine berries a day. It
would appear that I can still work one-fourth of a day on the new technique without having a previous cache of
savings, since the remaining three-fourths day of labor with the old method will meet those needs. Two things
should be noted, however. First, my time preference must first fall from a daily consumption of twelve berries to
nine berries. Second, and this is the key point, had I saved previously, then I could spend that much more time on
building the new method, thus bringing it into increased production of berries that much sooner. Savings remain
key to this process of capital construction, and savings are driven by time preference. Indeed, time preference
manifests itself in savings.
This same process of using savings to fund current production for future consumption goes on in more complex
economies. (Of course, with the introduction of more than one individual, recognition of increased productivity
under the division of labor becomes possible, thus raising man above the subsistence level and making possible a
pool of savings.) At any given time, the individuals in society are engaged in production to meet some "level" of
consumption needs. In order for more lengthy—and, hence, if they are to be maintained, more productive—
processes to be entered into, it is necessary that some individuals have refrained from consumption in the past so
that other individuals may be sustained and facilitated in assembling this new structure, during which they
cannot produce—and thus, not consume—consumption goods with the methods of the old structure.
The thrust of the Austrian theory of the business cycle is that credit inflation distorts this process, by making it
appear that more means exist for current production than are actually sustainable (at least in some renditions; see
Hülsmann  for a "non-standard" exposition of ABCT). Since this is in fact an illusion (printing claims to
property ["inflation"] is not the same thing as actually having property; see Hoppe et al. ), the endeavors
of entrepreneurs to create a structure of production not reflecting actual consumer time preferences (as
manifested in available savings for the purchase of producer goods) must end in failure.
Any kind of economy above the most primitive does not, of course, engage in barter, but rather uses money as a
medium of exchange to overcome the problem of the absence of a double coincidence of wants. It must be
stressed, though, that apart from this unique role, money is itself a good, the most marketable good. To be sure,
money is valuable to the extent that others are willing to accept it in exchange. However, money itself must first
have originated as a directly serviceable good before it could become an indirectly serviceable good (i.e.,
money). This is the thrust of Mises's regression theorem (Mises ; Rothbard , ch. 4).
Like any other exchange, one may find after the fact that it was not to one's liking; for example, one may find
that the money good is no longer accepted by "society." There is nothing unique about money in these respects.
What is unique about money is its use in economic calculation. Since all exchanges are, ultimately, exchanges
involving property, a common unit for comparing such exchanges is indispensable. In particular, the amount of
money as savings represents a "measure" of the amount of property available for production processes. (Indeed,
to even maintain a given structure of production requires some abstinence from consumption, so that production
dedicated to maintenance instead of consumption may be undertaken.)
Holding cash (in your wallet, in a tin can in the backyard, etc.) is not a form of saving. Cash balances can
increase without time preferences decreasing, as they do when one saves. (In fact, one saves because one's time
preference falls.) One can increase one's cash balances by decreasing one's spending on consumer AND producer
goods. To save is to decrease one's spending on consumer goods and increase one's spending on producer goods.
The fact that saving usually involves an intermediary (i.e., a bank) to permit someone else to spend on producer
goods does not change this fact. Money is inherently a present good; holding it "buys" alleviation from a
currently felt uneasiness about an uncertain future. (See Hoppe  and Hoppe et al.  for a discussion
of the nature of money.) Lending out demand deposits, or claims to current goods, cannot facilitate the purchase
of producer goods (for the creation of future goods at the expense of current goods), apart from the juridical
The crucial thing about money is that it permits economic calculation, the comparison of anticipated revenues
from an action with potential costs in a common unit. That is, one acquires property based on a judgment of the
future by exchanging other property, and this is impossible—or, rather, meaningless—to do without a common
unit for comparing alternatives. Money is property, and under a monetary system which makes it appear that
more property exists for production than actually exists, failure is inevitable.
One need not focus on whether entrepreneurs correctly "read" interest rates or not. Entrepreneurs make
judgments about the future and, of course, can always potentially be in error; success cannot be known now.
However, judgments will be in error when one is confronted with the illusion of a greater pool of savings than
actual consumer time preferences would justify. This is precisely the situation established by the banking
system—as intermediaries between savers and producers, or "investors"—as currently exists in the Western
world. The system ensures error, though of course it does not preclude success; thus, the existence of genuine
economic growth alongside malinvestments.
This analysis is not a moralistic insistence that an economy be ultimately founded on something "real." It is a
recognition that mere subjective wants cannot will more property into existence than actually exists. Should a
monetary system give the illusion that the time preferences of consumers, as providers of property for production
purposes, is smaller than it actually is, then the structure of production thus assembled in such a system is
inherently in error. Whatever plans appear to be feasible during the early phase of a boom will, of necessity,
eventually be revealed to be in error due to a lack of sufficient property. This is the crux of the Austrian business
Dan Mahoney, Ph,D., mathematics, works for Mirant-Americas. email@example.com
Hoppe, Hans-Hermann, 1994, "How is Fiat Money Possible? - or, The Devolution of Money and Credit," Review
of Austrian Economics, 7, 2.
Hoppe, Hans-Hermann, Jörg Guido Hülsmann, and Walter Block, 1998, "Against Fiduciary Media," Quarterly
Journal of Austrian Economics, 1, 1.
Hülsmann, Jörg Guido, 1997, "Knowledge, Judgment, and the Use of Property," Review of Austrian Economics,
Hülsmann, Jörg Guido, 1998, "Toward a General Theory of Error Cycles," Quarterly Journal of Austrian
Economics, 1, 4.
Mises, Ludwig von, 1981, The Theory of Money and Credit, Liberty Fund.
Rothbard, Murray N., 1983, America's Great Depression, Richardson and Snyder.
Rothbard, Murray N., 1993, Man, Economy, and State, Ludwig von Mises Institute.
Salerno, Joseph T., 1996, Austrian Economics Newsletter, Fall 1996.
See also The Austrian Theory of the Trade Cycle Study Guide .
DBMA Martial Arts Forum / Martial Arts Topics / Re: Dog Brothers Open Gathering Sept 19, 2010
on: June 10, 2010, 12:37:26 PM
A Dog Brothers Parable:
A couple have been enjoying videoing their livemaking and are rather impressed with themselves. They go to a porn producer to see about performing in front of his cameras. The producer checks out their videos and is duly impressed and agrees, but cautions the man about the unique experience of getting it up front of a whole and rather jaundiced film crew.
"No problem!" exclaimed the man.
Nonetheless, come the day of the shoot it is as the producer warned; the man can't get it up. When the producer starts with an I-told-you-so the man cuts him off and says
"I can't understand it! We practiced three times last night, and twice this morning!"
Politics, Religion, Science, Culture and Humanities / Science, Culture, & Humanities / Jefferson, 1818
on: June 10, 2010, 07:11:47 AM
"To give to every citizen the information he needs for the transaction of his own business; To enable him to calculate for himself, and to express and preserve his ideas, his contracts and accounts, in writing; To improve, by reading, his morals and faculties; To understand his duties to his neighbors and country, and to discharge with competence the functions confided to him by either; To know his rights; to exercise with order and justice those he retains; to choose with discretion the fiduciary of those he delegates; and to notice their conduct with diligence, with candor, and judgment; And, in general, to observe with intelligence and faithfulness all the social relations under which he shall be placed." --Thomas Jefferson, Report of the Commissioners for the University of Virginia, 1818
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Our man in Iraq
on: June 10, 2010, 07:10:18 AM
Looks like "Our man in Iraq" may be headed back. He writes:
"This is from my 'terp in Iraq. He is a Christian. And a very smart, well educated man. I think it is important to be able to see what is percolating inside their minds."
"People with no hope, when they are forbidden from living normal life, when ambitions die, moments of happiness were stolen from them, when they are forced to see dead bodies only...no newborns, when life become cheaper than an IED or a bullet, life becomes a burden."
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Stratfor: Considering a failed transition for China
on: June 10, 2010, 07:02:10 AM
Considering a Failed Transition for China
SOME TWO THOUSAND WORKERS CLASHED WITH POLICE in China on Tuesday during a staged walkout at a factory near Shanghai in Kunshan City, Jiangsu province. According to reports from Hong Kong, about 50 people were injured in the clash. It occurred amid a recent spate of labor incidents, including a series of worker suicides at the Foxconn electronics factory and strikes at Honda factories and several other factories in Guangdong province.
Recent labor problems have resulted in companies offering wage increases to appease workers. Foxconn has raised wages several times, most recently claiming to offer workers a 70 percent raise amid a public firestorm over the unsettling suicides at its plant that drew negative attention to major Western brands like Apple and Dell, who rely on Foxconn for parts. Honda raised wages only to see strikes emerge at one of its subsidiary’s factories. Elsewhere, failed negotiations over wages or unfulfilled promises of wage hikes have triggered walkouts. Most of the targeted companies have been foreign, mainly Taiwanese and Japanese, with one South Korea-affiliated factory. American company KFC agreed quietly during a round of negotiations to pay more to employees in China.
China is in the midst of an internal struggle to manage the rapid transformation of its economy and society. Few, when they look, can doubt that the struggle is one of consequence. The problem is that not many are looking. The recent labor issues raise serious questions about where China is going, and whether it will get there. The answers to these questions have a definite bearing on the global economy.
Beijing knows its lease has run out on rapid export-driven growth spurred by strong global demand. Across the world, stimulus programs are fading, and the debt hangover is setting in. Europe’s economies have become bogged down in unemployment, a weakening currency and painful attempts by many governments to correct their books. The inevitable result of this is less promise for the future consumption of Chinese goods. The United States’ prospects for growth are far better, but Americans’ consumer patterns have mellowed out, and Washington has fiscal problems of its own and is growing more mercantilist and more protectionist in the face of prolonged unemployment. None of these scenarios bode well for China’s manufacturing sector even if it had not spent almost 30 years experiencing unbridled expansion. The reality is that in the near term China will face lower external demand and slower growth rates, and not merely as a theoretical eventuality that can be noted and then blithely ignored.
The only hope for Beijing is to expedite the process of building its consumer base at home to generate new demand to keep Chinese workers busy and factories humming as foreign demand shrinks. One way to start restructuring a country as massive and diverse as China is to increase wages and household incomes, as Beijing has done by having local governments raise their required minimum wages. The more cash people have to spend and invest and boost the economy, the less likely they will be to take to the streets. Simple enough.
“Beijing knows its lease has run out on rapid export-driven growth spurred by strong global demand.”
Except that higher wages directly contravene the factor that made China an economic powerhouse in the first place: its massive pool of cheap labor. China’s manufacturers have already reached the point of saturating foreign markets and can no longer substantially increase their profits by increasing the bulk of production. In response they have pared down their costs, competing with each other to see who can run on thinner margins. This process too has nearly reached its end, with further margin-cutting starting to look fatal. If labor costs rise too high, a number of these companies will be forced to shed workers or shut down, and foreign investors may look elsewhere for cheap labor.
Nevertheless, this is the transition that China knows it must make. The survivors will be leaner and meaner and, ideally, the entire manufacturing sector will become more sophisticated and innovative. At the same time, new growth in other sectors will absorb the labor. The state will be there to catch those who fall through the cracks, economic restructuring will progress and China will shift away from export dependency and maintain growth at lower yet more sustainable rates.
Yet China’s ruling party fears it cannot handle the transition successfully, which explains its anxious attempts to manage the process as carefully and as gradually as possible. This entails using everything in its power to alleviate or suppress internal pressures and limit external interference and disturbances. The survival of the regime, not to mention the unity of the country, is at stake.
Needless to say, the rest of the world also fears a failed transition for China. China’s economy is currently the third largest in the world and much more deeply embedded into the global system than before, with a vast network of nations dependent on it in some way. While China could continue for a considerable period of time using fiscal spending and government direction to maintain its momentum and prop itself up (as it has done through the recent global crisis), a serious slowdown would have extremely negative consequences globally.
Reduced demand would send commodity prices falling and knock commodities producers off their feet in the Middle East, Africa, Latin America, Central and Southeast Asia and Australia. Supply chains linked into China’s manufacturing and assembly lines would collapse or be severely disrupted, harming China’s suppliers and leaving customers — from neighboring Japan and Korea to the United States and Europe — with shortages of goods integral to their own economies. Countries heavily invested in China would scramble to save what assets they could, and global financial markets would be in turmoil (not least because of American-Chinese financial interdependence). Opportunities would emerge for economic rivals to take advantage, developing countries would seek to fill the economic void and developed countries would try to take advantage of their various resources. China’s neighbors and the United States would see opportunities to strengthen their strategic position in China’s periphery.
In other words, trying to imagine what a failed transition would look like for the Chinese economy evokes memories of past failed attempts at social and economic transformation in China, all of which were catastrophic. The difference this time would be that the ramifications would extend further. The possibility alone, however far it may be from materializing in the near term (and STRATFOR suspects it is not as far off as conventional wisdom holds), has been enough to inject even more fear and uncertainty into the world economic system as China initiates new efforts to cool down its surging economy and reshape it for the future.
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Reuters busted again
on: June 09, 2010, 08:41:11 PM
The British-based Reuters news agency has been stung for the second time by charges that it edited politically sensitive photos in a way that casts Israel in a bad light. But this time Reuters claims it wasn’t at fault.
The news agency reacted to questions raised by an American blogger who showed that Reuters' photo service edited out knives and blood traces from pictures taken aboard the activist ship Mavi Marmara during a clash with Israeli commandos last week. Nine people were killed and scores were injured in the clash.
The pictures of the fight were released by IHH, the Turkish-based group that sponsored the six-ship fleet that tried to break Israel's blockade of Gaza.
In one photo, an Israeli commando is shown lying on the deck of the ship, surrounded by activists. The uncut photo released by IHH shows the hand of an unidentified activist holding a knife. But in the Reuters photo, the hand is visible but the knife has been edited out.
The blog “Little Green Footballs” challenged Reuters' editing of the photo.
“That’s a very interesting way to crop the photo. Most people would consider that knife an important part of the context. There was a huge controversy over whether the activists were armed. Cropping out a knife, in a picture showing a soldier who’s apparently been stabbed, seems like a very odd editorial decision. Unless someone was trying to hide it,” the blog stated.
In a second photo the unedited print issued by IHH showed blood along the ship's railing and a hand holding a knife as an Israeli soldier lies on the deck. Both the blood and the knife were missing in the photo that Reuters released.
Reuters on Tuesday denied it intended to alter the political meanings of the photographs.
“The images in question were made available in Istanbul, and following normal editorial practice were prepared for dissemination which included cropping at the edges," the news agency said in a statement. "When we realized that a dagger was inadvertently cropped from the images, Reuters immediately moved the original set as well."
Reuters has yet to respond to charges about the second photo.
This is the second time Reuters has been accused of manipulating photos. In 2006 a Reuters photographer, Adnan Hajj, doctored several photos of the destruction caused by Israel's bombing of Beirut. In one he added smoke to a panoramic picture of South Beirut to make the damage look more severe than it was. In a second photo, he showed a woman whose home had supposedly been destroyed in the same raid, but an investigation revealed that the woman's house had been destroyed prior to the Israeli strike.
Reuters later removed all of Hajj's more than 900 photos from distribution and severed its relationship with him. A photo editor also was fired.
What happened on the Mavi Marmara and who was responsible for the killing and bloodshed on the ship is still a matter of debate. Activists charge that Israeli commandos fired first and provoked the skirmish. Israeli commandos say they were compelled to use deadly force after they were attacked by people on board the ship.
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Unions
on: June 09, 2010, 09:54:22 AM
SEIU has been part of another thread for quite some time now, but I am thinking the subject of unions needs its own thread.
- The Foundry: Conservative Policy News. - http://blog.heritage.org
Morning Bell: Unions Just Flushed $5 Million of Your Tax Dollars Down the Toilet
Posted By Conn Carroll On June 9, 2010 @ 9:31 am In Enterprise and Free Markets | No Comments
It is not every day we get to agree with the Obama administration. But after Sen. Blanche Lincoln defeated Lieutenant Governor Bill Halter in the Arkansas Democratic Senate primary runoff election, after the AFL-CIO, SEIU, AFSCME poured millions of dollars into Halter’s campaign, a senior White House official told Politico : “Organized labor just flushed $10 million of their members’ money down the toilet.” But it wasn’t just “their members” money that those unions were wasting. This year the Bureau of Labor Statistics confirmed that for the first time in the history of the United States, a majority of union members work for the government, not the private sector . To be exact, 52% of all union members work for the federal or state and local governments. That means more than half of the $10 million that unions wasted just in Arkansas first came from your tax dollars. And the waste goes well beyond Arkansas.
In his ongoing battle with teachers unions, New Jersey Gov. Chris Christie (R) recently told  a town hall in Robbinsville: “My argument is not with teachers in New Jersey. My argument is with a union who collects $730 a year from every teacher and school employee in the union in mandatory dues. And if you don’t want to join the union here’s your option: you can be out. You pay 85% of $730 … to be out. It’s like the Hotel California. You can check in anytime you like but you can never leave. That raises for the teachers union, get ready, $130 million a year. What do they spend that money on? … $6 million in negative advertising against me since March 16th. Think about that. That’s a little over two months they have spent $6 million on New York TV and Radio, Philadelphia TV and radio to attack me. That’s dues money that is coming from their teachers, mandatory no choice, and from all of you because those salaries come from your property taxes and your state income taxes.”
Christie’s fight with government unions is over his constitutional amendment that would limit annual property tax increases to 2.5 percent. Government unions hate this policy because lower taxes mean less government spending which means less dues from government employees. At a meeting with conservative journalists yesterday at The Heritage Foundation, Indiana Gov. Mitch Daniels called government unions “the new privileged class in America.” He told Politico  earlier this week: “We used to think of government workers as underpaid public servants. Now they are better paid than the people who pay their salaries.”
As Heritage fellow James Sherk has documented  this battle between government unions and the people who pay their salaries is playing out across the country. In Maine, the Maine Municipal Association, the SEIU, the Teamsters, and the Maine Education Association collectively spent hundreds of thousands of dollars to campaign against a ballot initiative that would have prevented government spending from growing faster than the combined rate of inflation and population growth. In Illinois, AFSCME Council 31 ran television and radio ads pushing for tax increases in their “Fair Budget Illinois” campaign. In Oregon, government unions provided 90 percent of the $4 million spent advocating two ballot initiatives to raise personal income and business taxes by $733 million.
When a private sector company agrees to an unwise labor contract, it goes out of business (unless it gets bailed out by the government). But government never goes out of business, and in fact, always grows. In 2009 private-sector unions lost 834,000 members while public-sector unions actually gained 64,000 members. This is untenable. Something must change before government unions bankrupt this country.
According to a Treasury Department report to Congress, the ratio of debt to the gross domestic product will rise to 102 percent by 2015 .
According to Rasmussen Reports , 84% of Americans oppose a three percent (3%) tax on monthly cell phone bills to help newspapers and traditional journalism.
Secretary of State Hillary Rodham Clinton wooed Hugo Chavez ally  Ecuadorian President Rafael Correa Tuesday.
Turkey hosted Iranian President Mahmoud Ahmadinejad  at a regional security summit meeting in Istanbul yesterday.
Members of Israel’s National Student Union are organizing a “reverse flotilla”  to bring humanitarian aid to the “oppressed people of Turkish Kurdistan” and to members of the “Turkish Armenian minority.”
Article printed from The Foundry: Conservative Policy News.: http://blog.heritage.org
URL to article: http://blog.heritage.org/2010/06/09/morning-bell-unions-just-flushed-5-million-of-your-tax-dollars-down-the-toilet/
URLs in this post:
 Politico: http://www.politico.com/blogs/bensmith/0610/White_House_official_Organized_labor_just_flushed_10_million_of_their_members_money_down_the_toilet_.html
 for the first time in the history of the United States, a majority of union members work for the government, not the private sector: http://www.heritage.org/Research/Reports/2010/01/Majority-of-Union-Members-Now-Work-for-the-Government
 told: http://www.youtube.com/watch?v=1ksLlAi3iIc
 Politico: http://www.politico.com/news/stories/0610/38183.html
 the ratio of debt to the gross domestic product will rise to 102 percent by 2015: http://www.reuters.com/article/idUSN088462520100608
 Rasmussen Reports: http://www.rasmussenreports.com/public_content/business/general_business/june_2010/74_oppose_taxing_internet_news_sites_to_help_newspapers
 wooed Hugo Chavez ally: http://www.nytimes.com/2010/06/09/world/americas/09diplo.html?ref=todayspaper
 hosted Iranian President Mahmoud Ahmadinejad: http://www.nytimes.com/2010/06/09/world/middleeast/09turkey.html?partner=rss&emc=rss
 “reverse flotilla”: http://www.jpost.com/Israel/Article.aspx?id=177789
Politics, Religion, Science, Culture and Humanities / Politics & Religion / WSJ: The Alien in the White House
on: June 09, 2010, 08:15:11 AM
By DOROTHY RABINOWITZ
The deepening notes of disenchantment with Barack Obama now issuing from commentators across the political spectrum were predictable. So, too, were the charges from some of the president's earliest enthusiasts about his failure to reflect a powerful sense of urgency about the oil spill.
There should have been nothing puzzling about his response to anyone who has paid even modest critical attention to Mr. Obama's pronouncements. For it was clear from the first that this president—single-minded, ever-visible, confident in his program for a reformed America saved from darkness by his arrival—was wanting in certain qualities citizens have until now taken for granted in their presidents. Namely, a tone and presence that said: This is the Americans' leader, a man of them, for them, the nation's voice and champion. Mr. Obama wasn't lacking in concern about the oil spill. What he lacked was that voice—and for good reason.
Those qualities to be expected in a president were never about rhetoric; Mr. Obama had proved himself a dab hand at that on the campaign trail. They were a matter of identification with the nation and to all that binds its people together in pride and allegiance. These are feelings held deep in American hearts, unvoiced mostly, but unmistakably there and not only on the Fourth of July.
A great part of America now understands that this president's sense of identification lies elsewhere, and is in profound ways unlike theirs. He is hard put to sound convincingly like the leader of the nation, because he is, at heart and by instinct, the voice mainly of his ideological class. He is the alien in the White House, a matter having nothing to do with delusions about his birthplace cherished by the demented fringe.
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.One of his first reforms was to rid the White House of the bust of Winston Churchill—a gift from Tony Blair—by packing it back off to 10 Downing Street. A cloudlet of mystery has surrounded the subject ever since, but the central fact stands clear. The new administration had apparently found no place in our national house of many rooms for the British leader who lives on so vividly in the American mind. Churchill, face of our shared wartime struggle, dauntless rallier of his nation who continues, so remarkably, to speak to ours. For a president to whom such associations are alien, ridding the White House of Churchill would, of course, have raised no second thoughts.
Far greater strangeness has since flowed steadily from Washington. The president's appointees, transmitters of policy, go forth with singular passion week after week, delivering the latest inversion of reality. Their work is not easy, focused as it is on a current prime preoccupation of this White House—that is, finding ways to avoid any public mention of the indisputable Islamist identity of the enemy at war with us. No small trick that, but their efforts go forward in public spectacles matchless in their absurdity—unnerving in what they confirm about our current guardians of law and national security.
Consider the hapless Eric Holder, America's attorney general, confronting the question put to him by Rep. Lamar Smith (R., Texas) of the House Judicary Committee on May 13.
Did Mr. Holder think that in the last three terrorist attempts on this soil, one of them successful (Maj. Nidal Hasan's murder of 13 soldiers at Fort Hood, preceded by his shout of "Allahu Akbar!"), that radical Islam might have played any role at all? Mr. Holder seemed puzzled by the question. "People have different reasons" he finally answered—a response he repeated three times. He didn't want "to say anything negative about any religion."
And who can forget the exhortations on jihad by John Brennan, Mr. Obama's chief adviser on counterterrorism? Mr. Brennan has in the past charged that Americans lack sensitivity to the Muslim world, and that we have particularly failed to credit its peace-loving disposition. In a May 26 speech at the Center for Strategic and International Studies, Mr. Brennan held forth fervently, if not quite comprehensibly, on who our enemy was not: "Our enemy is not terrorism because terrorism is just a tactic. Our enemy is not terror because terror is a state of mind, and as Americans we refuse to live in fear."
He went on to announce, sternly, that we do not refer to our enemies as Islamists or jihadists because jihad is a holy struggle, a legitimate tenet of Islam. How then might we be permitted to describe our enemies? One hint comes from another of Mr. Brennan's pronouncements in that speech: That "violent extremists are victims of political, economic and social forces."
Yes, that would work. Consider the news bulletins we could have read: "Police have arrested Faisal Shahzad, victim of political, economic and social forces living in Connecticut, for efforts to set off a car bomb explosion in Times Square." Plotters in Afghanistan and Yemen, preparing for their next attempt at mass murder in America, could only have listened in wonderment. They must have marvelled in particular on learning that this was the chief counterterrorism adviser to the president of the United States.
Obama Resells Health Law to Seniors
Lincoln Bucks Wave Against Incumbents
The Blagojevich Drama Debuts
Showdown on Fund Taxes
.Long after Mr. Obama leaves office, it will be this parade of explicators, laboring mightily to sell each new piece of official reality revisionism—Janet Napolitano and her immortal "man-caused disasters'' among them—that will stand most memorably as the face of this administration.
It is a White House that has focused consistently on the sensitivities of the world community—as it is euphemistically known—a body of which the president of the United States frequently appears to view himself as a representative at large.
It is what has caused this president and his counterterrorist brain trust to deem it acceptable to insult Americans with nonsensical evasions concerning the enemy we face. It is this focus that caused Mr. Holder to insist on holding the trial of Khalid Sheikh Mohammed in lower Manhattan, despite the rage this decision induced in New Yorkers, and later to insist if not there, then elsewhere in New York. This was all to be a dazzling exhibition for that world community—proof of Mr. Obama's moral reclamation program and that America had been delivered from the darkness of the Bush years.
It was why this administration tapped officials like Michael Posner, assistant secretary of state for Democracy, Human Rights, and Labor. Among his better known contributions to political discourse was a 2005 address in which he compared the treatment of Muslim-Americans in the United States after 9/11 with the plight of the Japanese-Americans interned in camps after Pearl Harbor. During a human-rights conference held in China this May, Mr. Posner cited the new Arizona immigration law by way of assuring the Chinese, those exemplary guardians of freedom, that the United States too had its problems with discrimination.
So there we were: America and China, in the same boat on human rights, two buddies struggling for reform. For this view of reality, which brought withering criticism in Congress and calls for his resignation, Mr. Posner has been roundly embraced in the State Department as a superbly effective representative.
It is no surprise that Mr. Posner—like numerous of his kind—has found a natural home in this administration. His is a sensibility and political disposition with which Mr. Obama is at home. The beliefs and attitudes that this president has internalized are to be found everywhere—in the salons of the left the world over—and, above all, in the academic establishment, stuffed with tenured radicals and their political progeny. The places where it is held as revealed truth that the United States is now, and has been throughout its history, the chief engine of injustice and oppression in the world.
They are attitudes to be found everywhere, but never before in a president of the United States. Mr. Obama may not hold all, or the more extreme, of these views. But there can be no doubt by now of the influences that have shaped him. They account for his grand apology tour through the capitals of Europe and to the Muslim world, during which he decried America's moral failures—her arrogance, insensitivity. They were the words of a man to whom reasons for American guilt came naturally. Americans were shocked by this behavior in their newly elected president. But he was telling them something from those lecterns in foreign lands—something about his distant relation to the country he was about to lead.
The truth about that distance is now sinking in, which is all to the good. A country governed by leaders too principled to speak the name of its mortal enemy needs every infusion of reality it can get.
Ms. Rabinowitz is a member of the Journal's editorial board.
Politics, Religion, Science, Culture and Humanities / Politics & Religion / WSJ: Tea Party challenger wins to face Reid
on: June 09, 2010, 08:04:40 AM
By TAMARA AUDI and ALEXANDRA BERZON
Conservative outsider and tea-party pick Sharron Angle handily defeated more established rivals to win the Republican nomination for U.S. Senate in Nevada—which would give incumbent Democratic Sen. Harry Reid the opponent he had hoped to face.
With nearly all precincts reporting, Ms. Angle, a former state assemblywoman, was ahead of former casino executive Sue Lowden by 40% to 26.%. Ms. Lowden had emerged as the early leader in the race and was embraced by the Republican establishment, which saw her as the party's best chance for knocking out Mr. Reid.
Ms. Angle's primary victory sets up what is likely to be one of the bitterest Senate races in the country. Although Ms. Angle began the race as an outsider candidate with a three-person campaign staff—her most recent Federal Election Commission filing said she had just $138,609 on hand—she is expected to receive a flood of Republican money now that she is taking on Mr. Reid, the Senate Majority Leader.
Already, the members of the conservative Club for Growth, which endorsed her last month, have contributed $153,000 to her campaign. The group has spent another $475,000 in an independent expenditure to back her with television ads.
Mr. Reid, who has held office since 1987, is facing a tide of unpopularity in his home state, which has been hard-hit by the foreclosure crisis. Republicans have been strategizing for months about the best way to unseat the powerful Democrat.
On Monday, Mr. Reid's camp said it was preparing for an "aggressive campaign" against any Republican challenger. He commands a war chest of $9.1 million, a large sum for a state with only 2.6 million residents. And he is expected to be able to raise more easily.
A campaign spokesman said Mr. Reid planned to spend the rest of the week in Washington working on a jobs bill.
Nevada will be one of the most important testing grounds for the tea party. The state has long favored limited government but voted for Barack Obama in 2008. And it is small enough for a grass-roots movement like the tea party to have decisive impact. However, the state also has a strong union base, centered mostly around the Las Vegas hotel and casino industry.
The Reid camp maintains that Ms. Angle holds many views that lie outside the mainstream. For example, she supports a phased-in privatization of Medicare and Social Security. While serving in the Nevada state legislature, she made numerous enemies among fellow Republicans, because she was often unwilling to toe the party line. In a recent radio interview she called Felipe Calderon, the Mexican president who has generally friendly relations with the United States, a "despot" and a "tyrant."
But in a year when many voters are outraged by the weak economy and the health-care overhaul, Ms. Angle could be a wild card. Larry Hart, a consultant to the Angle campaign, said Ms. Angle would appeal to a wide array of voters at home. "She'll build a broad coalition of support. I know that's not the conventional wisdom, but she'll do that, and she'll start doing it tonight," Mr. Hart said.
The political equation in Nevada will be complicated by the fact that Mr. Reid's son, Rory, easily won the Democratic nomination for governor, meaning that both Reids will figure prominently on the November ballot.
The younger Mr. Reid will face off against former U.S. District Court Judge Brian Sandoval, who defeated embattled incumbent Gov. Jim Gibbons.
Politics, Religion, Science, Culture and Humanities / Science, Culture, & Humanities / Washington 1795
on: June 09, 2010, 07:40:44 AM
"[W]e ought to deprecate the hazard attending ardent and susceptible minds, from being too strongly, and too early prepossessed in favor of other political systems, before they are capable of appreciating their own." --George Washington, letter to the Commissioners of the District of Columbia, 1795
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Russia-Turkey and
on: June 09, 2010, 12:47:55 AM
Next Steps for Ankara and Moscow
WORLD LEADERS FROM ACROSS EURASIA and the Middle East will be gathering in Istanbul Tuesday for a Conference on Interaction and Confidence Building Measures in Asia (CICA) summit hosted by the Turkish leadership. Some of the high-profile attendees include Russian Prime Minister Vladimir Putin, Azerbaijani President Ilham Aliyev, Iranian President Mahmoud Ahmadinejad, Syrian President Bashar al Assad, Ukrainian President Victor Yanukovich and Kazakh President Nursultan Nazarbayev.
With Turkish-Israeli relations in serious jeopardy in the wake of the flotilla crisis, the war in Afghanistan in flux, Moscow contemplating a shift in foreign policy with the West and the United States trying to juggle all of the above, the geopolitical intensity surrounding the summit is all too apparent.
The headlining issue of the conference will of course be the Turkish-Israeli flotilla crisis. Not surprisingly, Israel decided to send a lower level diplomat from its consulate in Turkey rather than having a senior official come under fire by the Turkish hosts. Turkey will use the CICA platform — as well as a summit beginning Wednesday in Istanbul with Arab foreign ministers as part of the Turkish-Arab Cooperation Forum — to highlight what Turkey sees as the gross illegality of Israel’s actions that resulted in the death of eight Turkish citizens in international waters off the Gaza coast. Turkey does not intend to let this issue rest. The issue is not even really about Gaza, anymore. On the contrary, Turkey views its current crisis with Israel as an opportunity to accelerate its regional rise to fame.
For this plan to work, Turkey needs to go beyond the public censures and pressure Israel into making a very public concession to Ankara. The problem for Turkey is that there is no Arab consensus to build on in forging this campaign against Israel. The Arab states are happy to engage in the rhetoric alongside Turkey, but when it comes to taking action against Israel, the impetus falls flat. Though Turkey will attempt to galvanize the Arabs at the Wednesday summit, it is not clear to STRATFOR that Ankara will be able to overcome the challenge of Arab fractiousness and weakness in formulating its response to Israel.
“Turkey is not the only one with its hands full at this summit.”
Turkey will also be spending some quality time during the CICA summit with the Iranian president. Iran is happy to see the flotilla crisis deflect attention away from its own nuclear controversy with the West, but it’s also not enthused about Turkey soaking up the spotlight and hijacking Iran’s role in defending the Palestinians. Wanting their piece of the action, the Iranians have announced that they will send their own aid ships to the Gaza coast, while privately hinting that they will try to score a moral victory in attempting to recreate the Mavi Marmara incident by provoking Israeli forces into an attack. An Iranian-provoked confrontation with Israel in the Mediterranean is precisely what the Turks cannot afford. Such a move would draw the United States to Israel’s side and undercut Turkish momentum in a snap. The Turks will use the summit as an opportunity to share some of the spotlight with Ahmadinejad and thus try to keep Tehran from scuttling its own agenda, but Iranian tenacity on this issue may also be hard to beat.
Turkey is not the only one with its hands full at this summit. Putin has a slew of private meetings lined up with the leaders of Turkey, Azerbaijan, Ukraine and Kazakhstan. His sideline meetings in Istanbul come after Russia held a week of meetings in Germany and the Baltic states and ahead of a visit to France. Rather than an attempt to rack up frequent flyer miles, the prime minister’s busy agenda stems from a major shift Russia is seriously contemplating making in its foreign policy toward the West.
The strategic thrust behind the shift is a Russian desire to obtain Western technology to modernize the Russian economy in everything from energy to space to telecommunications. Russia has internally acknowledged that for it to get its hands on this technology –- and ensure Russia’s competitiveness as a global power in the years to come –- it needs to appear more pragmatic to the West in making its foreign policy moves. This doesn’t mean Russia is ready to be any less nationalistic, just a little more willing to strike deals to get what it wants. The only reason Russia can even think about making such a dramatic shift is because it has spent the past several years carefully laying the groundwork in the former Soviet Union states in preparation for this very moment.
Russia wants to make sure that before it follows through with this plan, it gets some assurances from Europe and the United States that they will reward Russian cooperation with the technological cooperation Moscow is seeking and respect the sphere of influence Russia has recreated. At the same time, Putin -– acting as the enforcer on this issue -– is talking to the former Soviet states to make sure they understand that any Russian opening to the West is not a signal of Russia relenting in its former Soviet space, but a sign of Moscow dealing with the West on its own terms and in the time of its choosing. In other words, Putin wants to make sure Ukraine, Georgia, the Central Asians and the Baltic states don’t get any ideas about trying to flirt with the West the second they see Moscow shift.
While Putin delivers this stern reminder to Ukraine and the Central Asians, he will also be meeting separately with Turkish Prime Minister Recep Tayyip Erdogan. The Russians are wary of Turkey’s regional resurgence and want to ensure that the two don’t bump heads in pursuing their respective agendas. But the Russians have a plan for this, too. By regularly waving deals on energy and peace agreements in the Caucasus, Russia is keeping its relationship with Turkey on an even keel. Putin is not (yet), however, scheduled to meet with the Iranian president, something that will not go unnoticed in Tehran. The Iranians, picking up on the leaks of a coming Russian foreign policy shift, have already spent the past weeks publicizing their ire against Moscow and warning the Russians against turning on them for a grand bargain with the United States. The Russians are not at the point of throwing Iran under the bus (Iran is still a very useful lever for them in dealing with Washington), but it doesn’t hurt Moscow to keep the Iranians on edge as Russia feels out the West and contemplates a major foreign policy shift that may be on the horizon.
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Taibbi: Wall Street's War-2
on: June 08, 2010, 07:26:35 AM
At the moment, though, Brown has a more pressing problem. He and Kaufman are both making themselves conspicuous in the Senate chamber, and the reason why is illustrative of the looniness of Senate procedure. Unlike in the House, where a rules committee decides in advance which amendments will be brought to a vote, senators have no orderly, dependable way of knowing if or when their proposals will get voted on. Instead, they're at the mercy of a strange and nebulous process that requires them to badger the leadership, who have the sole discretion of deciding which amendments go to a vote. So Brown is reduced to hanging around the Senate floor and trying to get a committee chair like Chris Dodd to put Too Big to Fail to a vote before other amendments use up all the time allotted for debate. It's not unlike fighting a crowd of pissed-off airport passengers for a single seat on an overbooked flight – you're completely at the mercy of the snippy airline rep behind the desk.
Near the end of the day, to Brown's surprise, Dodd actually allows his amendment to go to a vote. In the end, however, the proposal to break up the nation's riskiest banks gets walloped 61-33, with an astonishing 27 Democrats – including key banking committee heavyweights like Dodd and Chuck Schumer of New York – joining forces to defeat it. After the debate, Kaufman, a gregarious and aggressive advocate of finance reform, seems oddly unfazed that his fellow Democrats blew the best chance in a generation to corral the great banking monsters of Wall Street. "For some of them, it was just a bridge too far," he says. "There's an old saying: Never invest in anything you don't understand." Given the bizarre standards of the Senate bureaucracy, Kaufman considers it a victory just to have gotten his amendment into the woodshed for an ass-whipping.
I encounter that same "just glad to be here" vibe from Sen. Jeff Merkley, a Democrat from Oregon who co-authored one of the handful of genuinely balls-out reforms in the entire bill. The Merkley-Levin amendment couldn't have been more important; it called for restoring part of the Glass-Steagall Act, the Depression-era law that prevented commercial banks, investment houses and insurance companies from merging. The repeal of Glass-Steagall in 1999 paved the way for the creation of the Too-Big-to-Fail monsters like Citigroup, who drove the global economy into a ditch over the past 10 years.
Merkley-Levin was the Senate version of the "Volcker Rule," a proposal put forward by former Fed chief and Obama adviser Paul Volcker, that would prevent commercial banks from engaging in the kind of speculative, proprietary trading that helped trigger the financial crisis. When I meet with Merkley, he is in the same position as Brown and Kaufman, waiting anxiously for a chance to get his amendment voted on, with no idea of when or if that might happen. A vote – even if it means defeat – is all he's hoping for. When I ask if he's excited about the prospect of restoring a historic piece of legislation like Glass-Steagall, he smiles faintly. "I'm not saying I'm real optimistic," he says.
In the end, Merkley is forced to resort to the senatorial equivalent of gate-crashing: He attaches his amendment to the sordid proposal to exempt auto dealers from the CFPB, which has already been approved for a vote. That Merkley has to invoke an arcane procedural stunt just to get such a vital reform a vote is a testament to how convoluted American democracy looks by the time it reaches the Senate floor.
As with the whittled-down victories over the Fed audit and the Consumer Finance Protection Bureau – and the brutal defeat of Too Big to Fail – the stalling over the Volcker Rule underscores the basic dynamic of the Senate. With deals cut via backroom consensus, and leaders like Reid and Dodd tightly controlling which amendments go to a vote, the system allows a few powerful members whose doors are permanently open to lobbyists to pilot the entire process from beginning to end. One Democratic aide grumbles to me that he had no access to the negotiations for months, while a Wall Street lobbyist he knows could arrange an audience with the leadership. The whole show is carefully orchestrated from start to finish; no genuinely tough amendment with a shot at being approved receives an honest up-or-down vote. "It's all kind of a fake debate," the aide says.
REINING IN DERIVATIVES
When all the backroom obfuscation doesn't work, of course, there is always one last route in Congress to killing reform: the fine print. And never has an amendment been fine-printed to death as skillfully as the proposal to reform derivatives.
Imagine a world where there's no New York Stock Exchange, no NASDAQ or Nikkei: no open exchanges at all, and all stocks traded in the dark. Nobody has a clue how much a share of IBM costs or how many of them are being traded. In that world, the giant broker-dealer who trades thousands of IBM shares a day, and who knows which of its big clients are selling what and when, will have a hell of a lot more information than the day-trader schmuck sitting at home in his underwear, guessing at the prices of stocks via the Internet.
That world exists. It's called the over-the-counter derivatives market. Five of the country's biggest banks, the Goldmans and JP Morgans and Morgan Stanleys, account for more than 90 percent of the market, where swaps of all shapes and sizes are traded more or less completely in the dark. If you want to know how Greece finds itself bankrupted by swaps, or some town in Alabama overpaid by $93 million for deals to fund a sewer system, this is the explanation: Nobody outside a handful of big swap dealers really has a clue about how much any of this shit costs, which means they can rip off their customers at will.
This insane outgrowth of jungle capitalism has spun completely out of control since 2000, when Congress deregulated the derivatives market. That market is now roughly 100 times bigger than the federal budget and 20 times larger than both the stock market and the GDP. Unregulated derivative deals sank AIG, Lehman Brothers and Greece, and helped blow up the global economy in 2008. Reining in derivatives is the key battle in the War for Finance Reform. Without regulation of this critical market, Wall Street could explode another mushroom cloud of nuclear leverage and risk over the planet at any time.
The basic pillar of derivatives reform is simple: From now on, instead of trading in the dark, most derivatives would have to be traded on open exchanges and "cleared" through a third party. Last fall, Wall Street lobbyists succeeded at watering down the clearing requirement by pushing through a series of exemptions for "end-users" – that is, anyone who uses derivatives to hedge a legitimate business risk, like an airline buying swaps as a hedge against fluctuations in jet-fuel prices. But the House then took it even further, expanding the exemption to include anyone who wants to hedge against balance-sheet risk. Since every company has a balance sheet, including giant insurers like AIG and hedge funds that gamble in derivatives, the giant loophole now covered pretty much everyone except a few megabanks. This was regulation with a finger crossed behind its back.
When it came time for the Senate to do its version, however, the lobbyists were in for a surprise. Sen. Blanche Lincoln of Arkansas – best known as one of the few Democrats to vote for Bush's tax cuts – suddenly got religion and closed the loophole. Facing a tough primary battle against an opponent who was vowing to crack down on Wall Street, Lincoln tweaked the language so derivatives reform would apply to any greedy financial company that makes billions trading risky swaps in the dark.
Republicans went apeshit, pulling the same tactics they tried to gut the Consumer Finance Protection Bureau. Sen. Enzi, back at the lectern after his failed attempt to claim that the CFPB was a government plot to control the orthodontics industry, barked to the Senate gallery that Lincoln's proposal would harm not millionaire swap dealers at JP Morgan and Goldman Sachs, but "a wheat-grower in Wyoming." Unmoved by such goofy rhetoric, the Senate shot down an asinine Republican amendment that would have overturned Lincoln's reform by a vote of 59-39.
Then reform advocates started reading the fine print of the Lincoln deal, and realized that all those Wall Street lobbyists had really been earning their money.
That same day the GOP amendment failed, the derivatives expert Adam White was at his home in Georgia, poring over a "redline" version of the Lincoln amendment, in which changes to the bill are tracked in bold. When he came to a key passage on page 570, he saw that it had a single line through it, meaning it had been removed. The line read, "Except as provided in paragraph (3), it shall be unlawful to enter into a swap that is required to be cleared unless such swap shall be submitted for clearing."
Translation: It was no longer illegal to trade many uncleared swaps. Wall Street would be free to go on trading these monstrosities by the gazillions, largely in the dark. "Regulators can't say any longer if you don't clear it, it's illegal," says White.
Once he noticed that giant loophole, White went back and found a host of other curlicues in the text that collectively cut the balls out of the Lincoln amendment. On page 574, a new section was added denying the Commodity Futures Trading Commission the power to force clearinghouses to accept swaps for clearing. On page 706, two lines were added making it impossible for buyers who get sold an uncleared swap to void the deal. Taken altogether, the changes amount to what White describes as a "Trojan Horse" amendment: hundreds of pages of rigid rules about clearing swaps, with a few cleverly concealed clauses that make blowing off those rules no big deal. Michael Greenberger, a former official with the Commodity Futures Trading Commission who has been fighting for derivatives reform, describes the textual trickery as a "circle of doom. Despite the pages and pages of regulations, violating them is risk-free."
On May 18th, as the clock ran out on the deadline to file amendments, reform-minded Democrats staged a concerted push to close the loopholes. But when Sen. Maria Cantwell of Washington offered a proposal to eliminate the "Trojan Horse" sham, Reid tried to slam the door on her and everyone else working to strengthen reform. The majority leader called for a vote to end debate – a move that would squelch any remaining amendments. This extraordinary decision to cut off discussion of our one, best shot at revamping the rules of modern American finance was made, at least in part, to enable senators to get home for Memorial Day weekend.
But then something truly unexpected took place. Cantwell revolted, joined by Sen. Russ Feingold of Wisconsin. That left Reid in the perverse position of having to convince three Republicans to come over to his side to silence a member of his own party. On May 20th, Reid got the votes he needed to kill the debate. A few hours later, the Senate passed the bill, loopholes and all, by a vote of 59-39.
In a heartwarming demonstration of the Senate's truly bipartisan support for Wall Street, Sen. Sam Brownback – a Republican from Kansas – stepped in to help Democrats kill one of the bill's most vital reforms. At the last minute, Brownback mysteriously withdrew his amendment to exempt auto dealers from regulation by the CFPB – a maneuver that prevented the Merkley-Levin ban on speculative trading, which was attached to Brownback's amendment, from even being voted on. That was good news for car buyers, but bad news for the global economy. Senators may enjoy scolding Goldman Sachs in public hearings, but when it comes time to vote, they'll pick Wall Street over Detroit every time.
The rushed vote also meant that the Democratic leadership wasn't able to gut 716, the amazingly aggressive section of Lincoln's amendment that would cut off taxpayer money to big banks that gamble on risky derivatives. Not that they didn't try. With just three minutes to go before the deadline, Dodd had filed a hilarious amendment that would have delayed the ban on derivatives for two years – and empowered a new nine-member panel to unilaterally kill it. Sitting on the panel would be Bernanke, Treasury Secretary Tim Geithner and FDIC chief Sheila Bair, all of whom violently opposed 716.
Dodd was forced to withdraw his amendment after Wall Street complained that even this stall-and-kill tactic would create too much "uncertainty" in the market. That left 716 still alive for the moment – but even its staunchest supporters expected the leadership to find some way to gut it in conference, especially since President Obama personally opposes the measure. "Treasury and the White House are in full-court mode, assuring everybody that this will be fixed," says Greenberger. "And when they say fixed, that means killed."
Whatever the final outcome, the War for Finance Reform serves as a sweeping demonstration of how power in the Senate can be easily concentrated in the hands of just a few people. Senators in the majority party – Brown, Kaufman, Merkley, even a committee chairman like Lincoln – took a back seat to Reid and Dodd, who tinkered with amendments on all four fronts of the war just enough to keep many of them from having real teeth. "They're working to come up with a bill that Wall Street can live with, which by definition makes it a bad bill," one Democratic aide explained in the final, frantic days of negotiation.
On the plus side, the bill will rein in some forms of predatory lending, and contains a historic decision to audit the Fed. But the larger, more important stuff – breaking up banks that grow Too Big to Fail, requiring financial giants to pay upfront for their own bailouts, forcing the derivatives market into the light of day – probably won't happen in any meaningful way. The Senate is designed to function as a kind of ongoing negotiation between public sentiment and large financial interests, an endless tug of war in which senators maneuver to strike a delicate mathematical balance between votes and access to campaign cash. The problem is that sometimes, when things get really broken, the very concept of a middle ground between real people and corrupt special interests becomes a grotesque fallacy. In times like this, we need our politicians not to bridge a gap but to choose sides and fight. In this historic battle over finance reform, when we had a once-in-a-generation chance to halt the worst abuses on Wall Street, many senators made the right choice. In the end, however, the ones who mattered most picked wrong – and a war that once looked winnable will continue to drag on for years, creating more havoc and destroying more lives before it is over.
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Taibbi: Wall Street's War-1
on: June 08, 2010, 07:25:43 AM
Wall Street's War
Congress looked serious about finance reform – until America's biggest banks unleashed an army of 2,000 paid lobbyists
It's early May in Washington, and something very weird is in the air. As Chris Dodd, Harry Reid and the rest of the compulsive dealmakers in the Senate barrel toward the finish line of the Restoring American Financial Stability Act – the massive, year-in-the-making effort to clean up the Wall Street crime swamp – word starts to spread on Capitol Hill that somebody forgot to kill the important reforms in the bill. As of the first week in May, the legislation still contains aggressive measures that could cost once-indomitable behemoths like Goldman Sachs and JP Morgan Chase tens of billions of dollars. Somehow, the bill has escaped the usual Senate-whorehouse orgy of mutual back-scratching, fine-print compromises and freeway-wide loopholes that screw any chance of meaningful change.
The real shocker is a thing known among Senate insiders as "716." This section of an amendment would force America's banking giants to either forgo their access to the public teat they receive through the Federal Reserve's discount window, or give up the insanely risky, casino-style bets they've been making on derivatives. That means no more pawning off predatory interest-rate swaps on suckers in Greece, no more gathering balls of subprime shit into incomprehensible debt deals, no more getting idiot bookies like AIG to wrap the crappy mortgages in phony insurance. In short, 716 would take a chain saw to one of Wall Street's most lucrative profit centers: Five of America's biggest banks (Goldman, JP Morgan, Bank of America, Morgan Stanley and Citigroup) raked in some $30 billion in over-the-counter derivatives last year. By some estimates, more than half of JP Morgan's trading revenue between 2006 and 2008 came from such derivatives. If 716 goes through, it would be a veritable Hiroshima to the era of greed.
"When I first heard about 716, I thought, 'This is never gonna fly,'" says Adam White, a derivatives expert who has been among the most vocal advocates for reform. When I speak to him early in May, he sounds slightly befuddled, like he can't believe his good fortune. "It's funny," he says. "We keep waiting for the watering-down to take place – but we keep getting to the next hurdle, and it's still staying strong."
In the weeks leading up to the vote on the reform bill, I hear one variation or another on this same theme from Senate insiders: that the usual process of chipping away at key legislation is not taking place with its customary dispatch, despite a full-court press by Wall Street. The financial-services industry has reportedly flooded the Capitol with more than 2,000 paid lobbyists; even veteran members are stunned by the intensity of the blitz. "They're trying everything," says Sen. Sherrod Brown, a Democrat from Ohio. Wall Street's army is especially imposing given that the main (really, the only) progressive coalition working the other side of the aisle, Americans for Financial Reform, has been in existence less than a year – and has just 60 unpaid "volunteer" lobbyists working the Senate halls.
The companies with the most at stake are particularly well-connected. The lobbying campaign for Goldman Sachs, for instance, is being headed up by a former top staffer for Rep. Barney Frank, Michael Paese, who is coordinating some 14 different lobbying firms to fight on Goldman's behalf. The bank is also represented by Capitol Hill heavyweights like former House majority leader Dick Gephardt and former Reagan chief of staff Ken Duberstein. All told, there are at least 40 ex-staffers of the Senate Banking Committee – and even one former senator, Trent Lott – lobbying on behalf of Wall Street. Until the final weeks of the reform debate, however, it seemed that all these insiders were facing the prospect of a rare defeat – and they weren't pleased. One lobbyist even complained to The Washington Post that the bill was being debated out in the open, on the Senate floor, instead of in a smoky backroom. "They've got to get this thing off the floor and into a reasonable, behind-the-scenes" discussion, he groused. "Let's have a few wise fathers sit around the table in some quiet room" to work it out.
As it neared the finish line, the Restoring American Financial Stability Act was almost unprecedentedly broad in scope, in some ways surpassing even the health care bill in size and societal impact. It would rein in $600 trillion in derivatives, create a giant new federal agency to protect financial consumers, open up the books of the Federal Reserve for the first time in history and perhaps even break up the so-called "Too Big to Fail" giants on Wall Street. The recent history of the U.S. Congress suggests that it was almost a given that they would fuck up this one real shot at slaying the dragon of corruption that has been slowly devouring not just our economy but our whole way of life over the past 20 years. Yet with just weeks left in the nearly year-long process at hammering out this huge new law, the bad guys were still on the run. Even the senators themselves seemed surprised at what assholes they weren't being. This new baby of theirs, finance reform, was going to be that one rare kid who made it out of the filth and the crime of the hood for everybody to be proud of.
Then reality set in.
Picture the Restoring American Financial Stability Act as a vast conflict being fought on multiple fronts, with the tiny but enormously influential Wall Street lobby on one side and pretty much everyone else on the planet on the other. To be precise, think World War II – with some battles won by long marches and brutal campaigns of attrition, others by blitzkrieg attacks, still more decided by espionage and clandestine movements. Time after time, at the last moment, the Wall Street axis has turned seemingly lost positions into surprise victories or, at worst, bitterly fought stalemates. The only way to accurately convey the scale of Wall Street's ingenious comeback is to sketch out all the crazy, last-minute shifts on each of the war's four major fronts.
AUDITING THE FED
The most successful of the reform gambits was probably the audit-the-Fed movement led by Sen. Bernie Sanders, the independent from Vermont. For nearly a century, the Federal Reserve has been, within our borders, a nation unto itself – with vast powers to shape the economy and no real limits to its authority beyond the president's ability to appoint its chairman. In the bubble era it has been transformed into a kind of automatic bailout mechanism, helping Wall Street drink itself sober by flooding big banks with cheap money after the collapse of each speculative boom. But suddenly, with both the Huffington Post crowd and the Tea Party raising their pitchforks in outrage, Sanders managed to pass – by a vote of 96-0 – an amendment to force the Fed to open its books to congressional scrutiny.
If Alan Greenspan and Ben Bernanke don't take that 96-0 vote as a kick-to-the-groin testament to the staggering unpopularity of the Fed, they should. When 96 senators agree on something, they're usually affirming their devotion to the flag or commemorating the death of Mother Teresa. But as it turns out, the more than $2 trillion in loans that the Fed handed out in secret after the 2008 meltdown is something that both the left and the right have no problem banding together to piss on. One of the most bizarre alliances of the bailout era took place when Sanders, a democratic socialist, and Sen. Jim DeMint, a hardcore conservative from South Carolina, went on the CNBC show hosted by crazy supply-sider Larry Kudlow – and all three found themselves in complete agreement on the need to force Fed loans into the open. "People who come from very different places agree that it ought not to be done in secret, that the Fed isn't Skull and Bones," says Michael Briggs, an aide to Sanders.
The Sanders amendment, if it survives in conference, will lead to some delicious disclosures. Almost exactly a year ago, Sanders questioned Bernanke at a Senate-budget hearing, asking him to name the banks that had been bailed out by the Fed. "Will you tell the American people to whom you lent 2.2 trillion of their dollars?" Sanders demanded.
After a little hemming and hawing, a bored-looking Bernanke – Time magazine's 2009 Person of the Year, by the way – bluntly said, "No." It would be "counterproductive," he explained, if clients and investors learned that these poor banks were broke enough to need a public handout.
Bernanke's performance that day so rankled Sanders that he wrote up his amendment specifically to bring the Fed's goblin-in-chief to heel. The new law will force Bernanke to post the identity of loan recipients on the Fed's website for all to see. It also mandates that the Government Accountability Office investigate potential conflicts of interest that took place during the bailout, such as the presence of Goldman CEO Lloyd Blankfein in the room during the negotiations of the AIG bailout, which led to Goldman's receiving $13 billion of public money via the rescue.
The Sanders amendment was perhaps the headline victory to date in the ongoing War for Finance Reform, but even this battle entailed some heavy casualties. Sanders had originally filed an amendment that was much closer to a House version pressed by libertarian hero Ron Paul, one that would have permanently opened the Fed's books to Congress. But as the Senate crawled closer to a vote, the Sanders camp began to hear that the Obama administration opposed the bill, fearing it would give Congress too much day-to-day involvement in Fed policy. "The White House was saying how wonderful transparency is, but they still had 'concerns,' "Briggs says. "Within a couple hours, those concerns were being worked out."
The end result was a deal that restricted the audit to a one-time shot: Congress could only examine Fed loans made after December 2007. Once the audit was complete, the Fed's books would once again be sealed forever from public scrutiny. Sen. David Vitter, a Democrat from Louisiana, countered with an amendment to permanently open up the Fed's books, but it was shot down by a vote of 62-37. In one of the most absurd and indefensible retreats of the war, a decisive majority of senators voted to deny themselves the power to audit the Federal Reserve on behalf of the American people. When it comes to protecting the world's wealthiest banks from public scrutiny, it turns out, Democrats and Republicans have no trouble achieving bipartisanship.
The biggest no-brainer of finance reform was supposed to be the Consumer Financial Protection Bureau. The idea was simple: create a federal agency whose sole mission would be to make sure that financial lenders don't rape their customers with defective products, unjust fees and other fine-print nightmares familiar to any American with a credit card. In theory, the CFPB would rein in predatory lending by barring lenders from making loans they know that borrowers won't be able to pay back, either because of hidden fees or ballooning payments.
Wall Street knew it would be impossible to lobby Congress on this issue by taking the angle of "We're a rapacious megabank that would like to keep skull-fucking to death our customers using incomprehensible and predatory loans." So it came up with another strategy – one that deployed some of the most inspired nonsense ever seen on the Hill. The all-powerful lobbying arm of the U.S. Chamber of Commerce, which has been fierce in its representation of Wall Street's interests throughout the War for Finance Reform, cued up a $3 million ad campaign implying that the CFPB, instead of targeting asshole bankers in flashy suits and hair gel, would – and this isn't a joke – target your local butcher, making it hard for him to lend you the money to buy meat. That's right: The ads featured shots of a squat butcher with his arms folded, standing in front of a big pile of meat. "The economy has made it tough on this local butcher's customers," the ad reads. "So he lets some of them run a tab and pay the bill over time to make ends meet. But now Washington wants to make it tougher on everyone." After insisting – falsely – that this kindly butcher would be subject to the new consumer protection bureau, the ad warns that the CFPB "would also have the ability to collect information about his customers' financial accounts and take away many of their financial choices."
Sitting in the Senate chamber one afternoon not long before the vote, I even heard Sen. Mike Enzi, an impressively shameless Republican from Wyoming, insist that the CFPB would mean that "anyone who has ever paid for dental care in installments could be facing the prospect of paying for dental care upfront." Other anti-reform ads claimed that everyone from cabinetmakers to electricians would be hounded by the new agency – even though the CFPB's mandate explicitly excludes merchants who are "not engaged significantly in offering or providing consumer financial products or services."
The CFPB was always a pretty good bet to pass in some form. Just as pushing through anything that could plausibly be called "health care reform" was a political priority for the Obama administration, creating a new agency with the words "consumer protection" in the title was destined from the start to be the signature effort of the finance bill, which is otherwise mostly a mishmash of highly technical new regulations. But that didn't stop leading Democrats from doing what they could to chisel away at the thing. Throughout the process, Chris Dodd, the influential chairman of the Senate Banking Committee, has set new standards for reptilian disingenuousness – playing the role of stern banker-buster while taking millions in Wall Street contributions. Dodd worked overtime trying to craft a "bipartisan" bill with the Republican minority – in particular with Sen. Richard Shelby, the ranking Republican on the committee. With his dyed hair, porcine trunk and fleshy, powdery-white face, Shelby recalls an elderly sumo wrestler in drag. I happened to be in the Senate on the day that Shelby proposed a substitute amendment that would have stuffed the CFPB into the FDIC, effectively scaling back its power and independence. Throughout the debate, I was struck by the way that Dodd and his huge black caterpillar eyebrows kept crossing the aisle to whisper in Shelby's ear. During these huddles, Dodd would gently pat Shelby's back or hold his arm; it was like watching a love scene in a Japanese monster movie.
Shelby's amendment was ultimately defeated by a vote of 61-37 – but he and Dodd still reached a number of important compromises that significantly watered down the CFPB. The idea was to rack up as many exemptions as possible for favored industries, all of which had contributed generously to their favorite senators. By mid-May, Republicans and Democrats had quietly agreed to full or partial "carve-outs" for banks with less than $10 billion in deposits, as well as for check-cashers and other sleazy payday lenders. As the bill headed toward a vote, there was also a furious fight to exempt auto dealers from anti-predatory regulations – a loophole already approved by the House – even though car loans are the second-largest source of borrowing for Americans, after home mortgages. The purview of the CFPB, in essence, was being limited to megabanks and mortgage lenders. That's a major victory in the war against Wall Street, but it will be hard to be too impressed if Congress can't even find a way to vote for consumer protection against used-car salesmen.
ENDING "TOO BIG TO FAIL"
Perhaps the fiercest fight of all over finance reform involved a part of the bill called "resolution authority" – also known as, "The next time an AIG or a Lehman Brothers goes belly up, do we bail the fuckers out? And if so, with whose money?" In its original form, the bill answered these crucial questions by requiring that banks contribute to a $50 billion fund that could be used to aid failing financial institutions. The fund was hardly a cure-all – $50 billion "wouldn't even be enough to bail out Citigroup's prop-trading desk," as one industry analyst observed – but it at least established a precedent that banks should pay for their own bailouts, instead of simply snatching money from taxpayers.
The fund had been established after a fierce battle last fall, when Democrats in the House beat back a seemingly insane proposal backed by the Obama administration that would have paid for bailouts by borrowing from taxpayers and recouping the money from Wall Street later on, by means of a mysterious, convoluted process. That heroic stand in the House, which was marked by long nights of ferocious negotiations, was wiped out in one fell swoop on May 5th, after Dodd and Shelby huddled up in another of their monster-love sessions and hammered out a deal to strip the bailout fund from the bill. The surprise rollback was introduced by the Senate leadership late on a Wednesday and voted on three hours later. Just like that, taxpayers were back to fronting the nation's biggest banks the money when they find themselves in financial trouble.
One day after the Shelby-Dodd wipeout, another key reform got massacred. This was the "Too Big to Fail" amendment put forward by two reform-minded freshmen, Sens. Ted Kaufman of Delaware and Sherrod Brown of Ohio. The measure would have mandated the automatic breakup of any bank that held more than 10 percent of all insured deposits, or had at risk more than two percent of America's GDP. The amendment was just the kind of common-sense, loophole-proof, no-bullshit legislation that, sadly, almost never passes in the modern Senate.
Brown is an interesting character. Whenever I talk to him, I often forget he's a U.S. senator; he feels more like a dude you met on an Amtrak train and struck up a conversation with. He remains the only member of Congress I've ever met who took off his shoes and socks in the middle of an interview. But when I catch up with him in an anteroom outside the Senate chamber on the day his and Kaufman's amendment ends up being voted on, he seems harried and tense, like a man waiting for bad news in a hospital lobby. In recent weeks, he confides, he has found himself facing both barrels of the banking lobby.
"There are 1,500 bank lobbyists in this town, and they're coming by all the time," he says. "And it's not just the lobbyists. When the bank lobbyist from Columbus comes by, he brings 28 bankers with him."
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Israel, and its neighbors
on: June 08, 2010, 06:26:31 AM
The Limits of Public Opinion: Arabs, Israelis and the Strategic Balance
June 8, 2010
By George Friedman
Last week’s events off the coast of Israel continue to resonate. Turkish-Israeli relations have not quite collapsed since then but are at their lowest level since Israel’s founding. U.S.-Israeli tensions have emerged, and European hostility toward Israel continues to intensify. The question has now become whether substantial consequences will follow from the incident. Put differently, the question is whether and how it will be exploited beyond the arena of public opinion.
The most significant threat to Israel would, of course, be military. International criticism is not without significance, but nations do not change direction absent direct threats to their interests. But powers outside the region are unlikely to exert military power against Israel, and even significant economic or political sanctions are unlikely to happen. Apart from the desire of outside powers to limit their involvement, this is rooted in the fact that significant actions are unlikely from inside the region either.
The first generations of Israelis lived under the threat of conventional military defeat by neighboring countries. More recent generations still faced threats, but not this one. Israel is operating in an advantageous strategic context save for the arena of public opinion and diplomatic relations and the question of Iranian nuclear weapons. All of these issues are significant, but none is as immediate a threat as the specter of a defeat in conventional warfare had been. Israel’s regional enemies are so profoundly divided among themselves and have such divergent relations with Israel that an effective coalition against Israel does not exist — and is unlikely to arise in the near future.
Given this, the probability of an effective, as opposed to rhetorical, shift in the behavior of powers outside the region is unlikely. At every level, Israel’s Arab neighbors are incapable of forming even a partial coalition against Israel. Israel is not forced to calibrate its actions with an eye toward regional consequences, explaining Israel’s willingness to accept broad international condemnation.
To begin to understand how deeply the Arabs are split, simply consider the split among the Palestinians themselves. They are currently divided between two very different and hostile factions. On one side is Fatah, which dominates the West Bank. On the other side is Hamas, which dominates the Gaza Strip. Aside from the geographic division of the Palestinian territories — which causes the Palestinians to behave almost as if they comprised two separate and hostile countries — the two groups have profoundly different ideologies.
Fatah arose from the secular, socialist, Arab-nationalist and militarist movement of Egyptian President Gamal Abdul Nasser in the 1950s. Created in the 1960s, Fatah was closely aligned with the Soviet Union. It was the dominant, though far from the only, faction in the Palestine Liberation Organization (PLO). The PLO was an umbrella group that brought together the highly fragmented elements of the Palestinian movement. Yasser Arafat long dominated Fatah; his death left Fatah without a charismatic leader, but with a strong bureaucracy increasingly devoid of a coherent ideology or strategy.
Hamas arose from the Islamist movement. It was driven by religious motivations quite alien from Fatah and hostile to it. For Hamas, the liberation of Palestine was not simply a nationalist imperative, but also a religious requirement. Hamas was also hostile to what it saw as the financial corruption Arafat brought to the Palestinian movement, as well as to Fatah’s secularism.
Hamas and Fatah are playing a zero-sum game. Given their inability to form a coalition and their mutual desire for the other to fail, a victory for one is a defeat for the other. This means that whatever public statements Fatah makes, the current international focus on Gaza and Hamas weakens Fatah. And this means that at some point, Fatah will try to undermine the political gains the flotilla has offered Hamas.
The Palestinians’ deep geographic, ideological and historical divisions occasionally flare up into violence. Their movement has always been split, its single greatest weakness. Though revolutionary movements frequently are torn by sectarianism, these divisions are so deep that even without Israeli manipulation, the threat the Palestinians pose to the Israelis is diminished. With manipulation, the Israelis can pit Fatah against Hamas.
The Arab States and the Palestinians
The split within the Palestinians is also reflected in divergent opinions among what used to be called the confrontation states surrounding Israel — Egypt, Jordan and Syria.
Egypt, for example, is directly hostile to Hamas, a religious movement amid a sea of essentially secular Arab states. Hamas’ roots are in Egypt’s largest Islamist movement, the Muslim Brotherhood, which the Egyptian state has historically considered its main domestic threat. Egyptian President Hosni Mubarak’s regime has moved aggressively against Egyptian Islamists and sees Hamas’ ideology as a threat, as it could spread back to Egypt. For this and other reasons, Egypt has maintained its own blockade of Gaza. Egypt is much closer to Fatah, whose ideology derives from Egyptian secularism, and for this reason, Hamas deeply distrusts Cairo.
Jordan views Fatah with deep distrust. In 1970, Fatah under Arafat tried to stage a revolution against the Hashemite monarchy in Jordan. The resulting massacres, referred to as Black September, cost about 10,000 Palestinian lives. Fatah has never truly forgiven Jordan for Black September, and the Jordanians have never really trusted Fatah since then. The idea of an independent Palestinian state on the West Bank unsettles the Hashemite regime, as Jordan’s population is mostly Palestinian. Meanwhile, Hamas with its Islamist ideology worries Jordan, which has had its own problems with the Muslim Brotherhood. So rhetoric aside, the Jordanians are uneasy at best with the Palestinians, and despite years of Israeli-Palestinian hostility, Jordan (and Egypt) has a peace treaty with Israel that remains in place.
Syria is far more interested in Lebanon than it is in the Palestinians. Its co-sponsorship (along with Iran) of Hezbollah has more to do with Syria’s desire to dominate Lebanon than it does with Hezbollah as an anti-Israeli force. Indeed, whenever fighting breaks out between Hezbollah and Israel, the Syrians get nervous and their tensions with Iran increase. And of course, while Hezbollah is anti-Israeli, it is not a Palestinian movement. It is a Lebanese Shiite movement. Most Palestinians are Sunni, and while they share a common goal — the destruction of Israel — it is not clear that Hezbollah would want the same kind of regime in Palestine that either Hamas or Fatah would want. So Syria is playing a side game with an anti-Israeli movement that isn’t Palestinian, while also maintaining relations with both factions of the Palestinian movement.
Outside the confrontation states, the Saudis and other Arabian Peninsula regimes remember the threat that Nasser and the PLO posed to their regimes. They do not easily forgive, and their support for Fatah comes in full awareness of the potential destabilizing influence of the Palestinians. And while the Iranians would love to have influence over the Palestinians, Tehran is more than 1,000 miles away. Sometimes Iranian arms get through to the Palestinians. But Fatah doesn’t trust the Iranians, and Hamas, though a religious movement, is Sunni while Iran is Shiite. Hamas and the Iranians may cooperate on some tactical issues, but they do not share the same vision.
Israel’s Short-term Free Hand and Long-term Challenge
Given this environment, it is extremely difficult to translate hostility to Israeli policies in Europe and other areas into meaningful levers against Israel. Under these circumstances, the Israelis see the consequences of actions that excite hostility toward Israel from the Arabs and the rest of the world as less dangerous than losing control of Gaza. The more independent Gaza becomes, the greater the threat it poses to Israel. The suppression of Gaza is much safer and is something Fatah ultimately supports, Egypt participates in, Jordan is relieved by and Syria is ultimately indifferent to.
Nations base their actions on risks and rewards. The configuration of the Palestinians and Arabs rewards Israeli assertiveness and provides few rewards for caution. The Israelis do not see global hostility toward Israel translating into a meaningful threat because the Arab reality cancels it out. Therefore, relieving pressure on Hamas makes no sense to the Israelis. Doing so would be as likely to alienate Fatah and Egypt as it would to satisfy the Swedes, for example. As Israel has less interest in the Swedes than in Egypt and Fatah, it proceeds as it has.
A single point sums up the story of Israel and the Gaza blockade-runners: Not one Egyptian aircraft threatened the Israeli naval vessels, nor did any Syrian warship approach the intercept point. The Israelis could be certain of complete command of the sea and air without challenge. And this underscores how the Arab countries no longer have a military force that can challenge the Israelis, nor the will nor interest to acquire one. Where Egyptian and Syrian forces posed a profound threat to Israeli forces in 1973, no such threat exists now. Israel has a completely free hand in the region militarily; it does not have to take into account military counteraction. The threat posed by intifada, suicide bombers, rockets from Lebanon and Gaza, and Hezbollah fighters is real, but it does not threaten the survival of Israel the way the threat from Egypt and Syria once did (and the Israelis see actions like the Gaza blockade as actually reducing the threat of intifada, suicide bombers and rockets). Non-state actors simply lack the force needed to reach this threshold. When we search for the reasons behind Israeli actions, it is this singular military fact that explains Israeli decision-making.
And while the break between Turkey and Israel is real, Turkey alone cannot bring significant pressure to bear on Israel beyond the sphere of public opinion and diplomacy because of the profound divisions in the region. Turkey has the option to reduce or end cooperation with Israel, but it does not have potential allies in the Arab world it would need against Israel. Israel therefore feels buffered against the Turkish reaction. Though its relationship with Turkey is significant to Israel, it is clearly not significant enough for Israel to give in on the blockade and accept the risks from Gaza.
At present, Israel takes the same view of the United States. While the United States became essential to Israeli security after 1967, Israel is far less dependent on the United States today. The quantity of aid the United States supplies Israel has shrunk in significance as the Israeli economy has grown. In the long run, a split with the United States would be significant, but interestingly, in the short run, the Israelis would be able to function quite effectively.
Israel does, however, face this strategic problem: In the short run, it has freedom of action, but its actions could change the strategic framework in which it operates over the long run. The most significant threat to Israel is not world opinion; though not trivial, world opinion is not decisive. The threat to Israel is that its actions will generate forces in the Arab world that eventually change the balance of power. The politico-military consequences of public opinion is the key question, and it is in this context that Israel must evaluate its split with Turkey.
The most important change for Israel would not be unity among the Palestinians, but a shift in Egyptian policy back toward the position it held prior to Camp David. Egypt is the center of gravity of the Arab world, the largest country and formerly the driving force behind Arab unity. It was the power Israel feared above all others. But Egypt under Mubarak has shifted its stance versus the Palestinians, and far more important, allowed Egypt’s military capability to atrophy.
Should Mubarak’s successor choose to align with these forces and move to rebuild Egypt’s military capability, however, Israel would face a very different regional equation. A hostile Turkey aligned with Egypt could speed Egyptian military recovery and create a significant threat to Israel. Turkish sponsorship of Syrian military expansion would increase the pressure further. Imagine a world in which the Egyptians, Syrians and Turks formed a coalition that revived the Arab threat to Israel and the United States returned to its position of the 1950s when it did not materially support Israel, and it becomes clear that Turkey’s emerging power combined with a political shift in the Arab world could represent a profound danger to Israel.
Where there is no balance of power, the dominant nation can act freely. The problem with this is that doing so tends to force neighbors to try to create a balance of power. Egypt and Syria were not a negligible threat to Israel in the past. It is in Israel’s interest to keep them passive. The Israelis can’t dismiss the threat that its actions could trigger political processes that cause these countries to revert to prior behavior. They still remember what underestimating Egypt and Syria cost them in 1973. It is remarkable how rapidly military capabilities can revive: Recall that the Egyptian army was shattered in 1967, but by 1973 was able to mount an offensive that frightened Israel quite a bit.
The Israelis have the upper hand in the short term. What they must calculate is whether they will retain the upper hand if they continue on their course. Division in the Arab world, including among the Palestinians, cannot disappear overnight, nor can it quickly generate a strategic military threat. But the current configuration of the Arab world is not fixed. Therefore, defusing the current crisis would seem to be a long-term strategic necessity for Israel.
Israel’s actions have generated shifts in public opinion and diplomacy regionally and globally. The Israelis are calculating that these actions will not generate a long-term shift in the strategic posture of the Arab world. If they are wrong about this, recent actions will have been a significant strategic error. If they are right, then this is simply another passing incident. In the end, the profound divisions in the Arab world both protect Israel and make diplomatic solutions to its challenge almost impossible — you don’t need to fight forces that are so divided, but it is very difficult to negotiate comprehensively with a group that lacks anything approaching a unified voice.
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Small Alabama town defies the Feds
on: June 08, 2010, 06:21:46 AM
Looks like the Community Organizer in Chief would do well to take lessons from these folks.
In Alabama, a Home-Grown Bid to Beat Back Oil
By JOHN LELAND
Published: June 7, 2010
MAGNOLIA SPRINGS, Ala. — James Hinton looked over a barge jutting into the mouth of a 6,000-acre estuary last weekend and said, “If we can make this work, if the oil don’t get in here, 1,275 miles of bay and river coastline will be protected. I could go to jail for going against unified command. Now, I don’t mind going to jail, I just need to make sure it’s for doing the right thing.”
In a month in which Gulf Coast officials have railed about not being able to protect their shorelines from oil and not getting support from BP or the unified command structure set up to handle the cleanup efforts, Mr. Hinton, a volunteer fire chief in Magnolia Springs, a small town of fewer than 1,000, has emerged as a man with a plan.
“What he’s doing is really admirable,” said Bethany Kraft, executive director of the Alabama Coastal Foundation, a nonprofit environmental group. “He’s taking things into his own hands instead of waiting for other people to do something about it.”
Mr. Hinton went into action the first week of May, calling a town meeting to discuss ideas for protecting Weeks Bay, an estuary off Mobile Bay that supports 19 federally protected species, including bald eagles and wood storks. The residents came up with a solution that is unique on the gulf, said Malissa Valdes, a spokeswoman for the unified command, which approves all responses in federally governed waters.
From the start, the townspeople were unsatisfied with the unified command’s plan for Weeks Bay — a strand of floating surface barriers known as boom stretched across the bay’s mouth. Because of tidal currents, any oil on top of the water could splash over the boom, then into the bay and up the Fish and Magnolia Rivers into nurseries for area wildlife. A plan to string boom across Mobile Bay failed when water shredded the barrier.
Mr. Hinton’s solution was simple: run a wall of barges across the mouth of Weeks Bay to block the current, then run five layers of boom behind it — two to block the oil, and three strands of absorbent boom to soak up any oil that got through the containment layers.
The town bought the boom right away, before an increase in demand nearly quadrupled the price. Money for the project came from the state, which received $25 million from BP for emergency response efforts.
“We’re not biologists or engineers or scientists,” Mr. Hinton said. “We took common sense and what we knew about the water from living here. I’m pretty proud of our little plan.”
Between rain showers on Sunday, two dozen volunteer firefighters and teenage explorers laid out the layers of boom, while a tugboat and a crane moved nine barges into place, anchored by 40-foot spikes, with a closeable 100-foot gap for boats to pass through.
To seal the bay entirely they would need approval from unified command. But they are resolved to close it at the first sight of nearby oil, with or without approval, said Charles S. Houser, the mayor of Magnolia Springs, who earns a monthly salary of $100.
“We’re not going to wait for BP,” Mr. Houser said. “If we saw oil right there we’d close the bay right now. The lesson we learned from Louisiana is to act, not wait. We’ll ask for forgiveness later.”
The biggest challenge, Mr. Hinton said, has been dealing with BP and the unified command bureaucracy. The 36 fire chiefs in Baldwin County here passed a resolution to censure BP for poor communications with fire crews.
Mr. Hinton said that so far no other communities had contacted him about copying his plan. “A fire chief told me, ‘Jamie, you can slow down in your preparations, the federal government is going to take care of it.’ I said, ‘Meaning the way they took care of Katrina, Ivan and the Valdez spill?’ ”
He added: “If you wait on BP, it’ll be like Louisiana. They had a month to protect the marshes. The Bible says the good Lord made the world in seven days. I’m not going to risk what happened in Louisiana happening here.”
Politics, Religion, Science, Culture and Humanities / Politics & Religion / POTH: Medicaid cut places States in budget bind
on: June 08, 2010, 06:15:59 AM
Medicaid Cut Places States in Budget Bind
By KEVIN SACK
Published: June 7, 2010
Having counted on Washington for money that may not be delivered, at least 30 states will have to close larger-than-anticipated shortfalls in the coming fiscal year unless Congress passes a six-month extension of increased federal spending on Medicaid.
MedicaidGovernors and state lawmakers, already facing some of the toughest budgets since the Great Depression, said the repercussions would extend far beyond health care, forcing them to make deep cuts to education, social services and public safety.
Gov. Edward G. Rendell of Pennsylvania, for instance, penciled $850 million in federal Medicaid assistance into the revenue side of his state’s ledger, reducing its projected shortfall to $1.2 billion. The only way to compensate for the loss, he said in an interview, would be to lay off at least 20,000 government workers, including teachers and police officers, at a time when the state is starting to add jobs.
“It would actually kill everything the stimulus has done,” said Mr. Rendell, a Democrat. “It would be enormously destructive.”
The Medicaid provision, which would extend assistance first granted in last year’s stimulus package, was considered such a sure bet by many governors and legislative leaders that they prematurely included the money in their budgeting. But under pressure from conservative Democrats to rein in deficit spending, House leaders in late May eliminated $24 billion in aid to states from a tax and jobs bill that was approved and forwarded to the Senate.
The Senate plans to take up the measure this week, and the majority leader, Senator Harry Reid of Nevada, favors restoring the money, said his spokesman, Jim Manley. The House speaker, Nancy Pelosi, signaled last week that her chamber was open to reconsidering the appropriation.
But state and Congressional officials said the evolving politics of a midterm election year meant that the federal aid could no longer be taken for granted. And if it does not arrive, it will leave gaping shortages for states that are already slashing services and raising taxes to balance their recession-racked budgets.
According to the National Conference of State Legislatures, states are relying on the money to close more than a fourth of the $89 billion in cumulative budget shortfalls projected for the 2011 fiscal year, which starts on July 1 in 46 states.
In California, Gov. Arnold Schwarzenegger’s proposed budget assumed $1.5 billion in increased federal aid for Medicaid. With his state reeling from $57 billion in cuts over three years and facing a shortfall of $19 billion in 2011, further reductions would be “both cruel and counterproductive,” Mr. Schwarzenegger, a Republican, wrote to members of Congress last week.
In New York, which started its fiscal year on April 1 without a financial plan, Gov. David A. Paterson’s proposed budget included $1.1 billion in unsecured federal financing. Mr. Paterson, who is depending on the money to narrow a $9.2 billion gap, joined Mayor Michael R. Bloomberg of New York City at Gracie Mansion on Thursday to lobby their state’s Congressional delegation.
Governors and state lawmakers were caught largely by surprise by the House’s removal of the appropriation. Over the previous 10 months, the Medicaid money had been included in separate bills passed by each chamber, and President Obama had wrapped the extension into his executive budget proposal.
“There was every reason to think they’d get together,” Mr. Rendell said.
But in recent weeks, Republicans and conservative Democrats began to complain that the proposed spending would add to the deficit because it was not “paid for” with new revenue or other cuts. Their success in reducing the size of the bill reflected a deepening debate in Congress — and on the campaign trail — about the long-term consequences of using deficit spending to fight the recession.
Democratic aides in both the House and the Senate said state officials had not pressed their case forcefully enough.
“We may have fallen asleep at the wheel a little bit because we took it as a certainty for so long,” said Michael Bird, federal affairs counsel for the National Council of State Legislatures.
Republican governors in particular, the aides said, had been reluctant to petition for relief while the party’s leaders in Congress were criticizing Democrats for driving up the national debt.
“Governors need to make it clear that it is vital that their states receive this money, instead of blasting Congress for ‘out-of-control spending,’ ” said a senior Democratic aide in the House, speaking on the condition of anonymity because he was not authorized to talk about the issue publicly.
But the need to balance state and federal interests makes for awkward politics for some governors. Timing has made the conflict more pronounced because state budgets typically do not recover until well after a national recession fades.
“I’m very concerned about the level of federal spending and what it would mean for the long term,” said Gov. Jim Douglas of Vermont, a Republican and chairman of the National Governors Association. “But for the short term, states need this bridge to sustain the safety net of human services programs and education.”
A report issued Thursday by the National Governors Association and the National Association of State Budget Officers projected that state revenues would “remain sluggish” for two more years. State general fund spending declined by nearly $75 billion, or 11 percent, from 2008 to 2010, according to the report. But states, which unlike the federal government must balance their budgets, avoided even harsher cuts because of nearly $135 billion in stimulus grants from Washington.
The aid included $87 billion made available by adjusting how states and the federal government share the growing cost of Medicaid, the health insurance program for the poor and the disabled. The economic downturn is expected to drive up enrollment in the program by 21 percent from 2009 to 2011, according to the report.
Although the federal Medicaid share varies by state, the stimulus act raised it to an average of 66 percent, from 57 percent, according to the Kaiser Family Foundation.
The reimbursement increase was limited to a 27-month period that ends on Dec. 31. Almost as soon as it took effect, governors began fretting about the fiscal precipice they would face when the enhanced payments ended. In February, governors from 42 states and several territories signed a letter to Congressional leaders pleading for a six-month extension.
But with the public alarmed about deficit spending, House leaders found that they could not muster the Democratic votes needed to pass the tax and jobs bill without jettisoning several expensive components.
In a conference call with bloggers last week, Ms. Pelosi, Democrat of California, took note of the changed political climate, calling the package “too large for members to digest.”
“If I had all the votes that I needed in the non-Blue Dog world,” she said, referring to the caucus of conservative Democrats, “I would not have had to make some of the changes I made to get some of the Blue Dog support.”
Many states do not have contingencies for replacing the federal money. Their options will be limited by the severity of the steps they already have taken, and by federal requirements that they maintain eligibility levels for Medicaid.
“We don’t have a specific list of things we would do if we don’t get the money,” said Erik Kriss, a spokesman for Mr. Paterson’s budget office, “but we are looking for the most part at the cut side of the ledger.”
Politics, Religion, Science, Culture and Humanities / Science, Culture, & Humanities / Franklin, 1749: Education of Youth
on: June 08, 2010, 05:56:50 AM
"The good Education of Youth has been esteemed by wise Men in all Ages, as the surest Foundation of the Happiness both of private Families and of Common-wealths. Almost all Governments have therefore made it a principal Object of their Attention, to establish and endow with proper Revenues, such Seminaries of Learning, as might supply the succeeding Age with Men qualified to serve the Publick with Honour to themselves, and to their Country." --Benjamin Franklin, Proposals Relating to the Education of Youth in Pennsylvania, 1749
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Laffer: Tax Hikes and 2011 econ collapse
on: June 07, 2010, 10:40:49 AM
By ARTHUR LAFFER
People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.
It shouldn't surprise anyone that the nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates. People and businesses change the location of income based on incentives.
Likewise, who is gobsmacked when they are told that the two wealthiest Americans—Bill Gates and Warren Buffett—hold the bulk of their wealth in the nontaxed form of unrealized capital gains? The composition of wealth also responds to incentives. And it's also simple enough for most people to understand that if the government taxes people who work and pays people not to work, fewer people will work. Incentives matter.
People can also change the timing of when they earn and receive their income in response to government policies. According to a 2004 U.S. Treasury report, "high income taxpayers accelerated the receipt of wages and year-end bonuses from 1993 to 1992—over $15 billion—in order to avoid the effects of the anticipated increase in the top rate from 31% to 39.6%. At the end of 1993, taxpayers shifted wages and bonuses yet again to avoid the increase in Medicare taxes that went into effect beginning 1994."
Just remember what happened to auto sales when the cash for clunkers program ended. Or how about new housing sales when the $8,000 tax credit ended? It isn't rocket surgery, as the Ivy League professor said.
On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush's tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.
Tax rates have been and will be raised on income earned from off-shore investments. Payroll taxes are already scheduled to rise in 2013 and the Alternative Minimum Tax (AMT) will be digging deeper and deeper into middle-income taxpayers. And there's always the celebrated tax increase on Cadillac health care plans. State and local tax rates are also going up in 2011 as they did in 2010. Tax rate increases next year are everywhere.
.Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be.
Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe "double dip" recession.
In 1981, Ronald Reagan—with bipartisan support—began the first phase in a series of tax cuts passed under the Economic Recovery Tax Act (ERTA), whereby the bulk of the tax cuts didn't take effect until Jan. 1, 1983. Reagan's delayed tax cuts were the mirror image of President Barack Obama's delayed tax rate increases. For 1981 and 1982 people deferred so much economic activity that real GDP was basically flat (i.e., no growth), and the unemployment rate rose to well over 10%.
But at the tax boundary of Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983 and 5.5% in 1984. It has always amazed me how tax cuts don't work until they take effect. Mr. Obama's experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.
Consider corporate profits as a share of GDP. Today, corporate profits as a share of GDP are way too high given the state of the U.S. economy. These high profits reflect the shift in income into 2010 from 2011. These profits will tumble in 2011, preceded most likely by the stock market.
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.In 2010, without any prepayment penalties, people can cash in their Individual Retirement Accounts (IRAs), Keough deferred income accounts and 401(k) deferred income accounts. After paying their taxes, these deferred income accounts can be rolled into Roth IRAs that provide after-tax income to their owners into the future. Given what's going to happen to tax rates, this conversion seems like a no-brainer.
The result will be a crash in tax receipts once the surge is past. If you thought deficits and unemployment have been bad lately, you ain't seen nothing yet.
Mr. Laffer is the chairman of Laffer Associates and co-author of "Return to Prosperity: How America Can Regain Its Economic Superpower Status" (Threshold, 2010).
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Congress agreeing to EPA taking its legislative power?
on: June 07, 2010, 10:07:43 AM
This also could be posted in the Issues in the American Creed -Constitutional Law thead on the SCH forum as a matter of Separation of Powers.
For Immediate Release: June 7, 2010
Contact: David Almasi at (202) 543-4110 x11 or (703) 568-4727
Judy Kent at (703) 759-7476 or firstname.lastname@example.org
Senators to Vote on Whether to Cede Congressional Authority to the EPA
Washington, D.C. - Senators will soon consider a resolution to pare back an Environmental Protection Agency plan to regulate greenhouse gases - a plan that would raise energy costs.
On June 10, the U.S. Senate will consider a "resolution of disapproval" regarding a 2009 ruling made by the EPA in late 2009 claiming six greenhouse gases are a threat to public health. This makes these gases -- carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride -- subject to regulation under the Clean Air Act.
"The EPA's endangerment finding endangers our economy and our liberty," said Deneen Borelli, full-time fellow with the Project 21 black leadership network. "The EPA's effort to regulate greenhouse gases will affect virtually every aspect of our economy and our lives. In expert opinion, this will result in higher energy costs and job losses while having -- by their own admission -- virtually no effect on cooling global climate."
Senate Joint Resolution 26, introduced by Senator Lisa Murkowski (R-AK), would use the Congressional Review Act to overturn the administrative ruling. This would allow elected representatives to deliberate and pass their own regulations as Congress sees fit.
"I don't want an unelected bureaucrat imposing rules and regulations on businesses that are essentially a tax on energy and will be passed along to consumers -- many of whom are just getting by as it is," said Tom Borelli, director of the Free Enterprise Project of the National Center for Public Policy Research.
"Opposition to the cap-and-trade bill that was jammed through the House of Representatives is one of the key positions of the tea parties, and this endangerment finding is cap-and-trade by other means," noted Deneen Borelli. "Americans are already skeptical enough of lawmakers these days. Watching them pass up an opportunity to do what they were sent to Washington for will restore no lost faith in the government."
"This resolution is a major indicator of where our republic is headed. Senators will determine if they are going to cede their authority as an elected representative of the people to largely unaccountable bureaucrats," added Tom Borelli. "While the White House is eager for the EPA to seize regulatory authority, rank-and-file Americans such as those found in the tea party movement are troubled and will be watching to see who will be for and who will be against this massive federal power grab."
The National Center for Public Policy Research is a non-profit, free-market think-tank established in 1982 and funded primarily by the gifts of over 100,000 recent individual contributors. Less than one percent of funding is received from corporations.
Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: US Foreign Policy
on: June 06, 2010, 06:38:14 PM
As Sarkozy asked in a spontaneous moment, “C’est debile?” Oui, oui, monsieur il est debile.
Here’s how things stack up for me at the moment:
Our policy in Afghanistan is utterly incoherent. BO (President Obama) says we are there because it is a vital war of national self-defense. This is why we will leave it up to Karzai and the central government as we begin to leave in a year. The Wackostans will return to their wicked ways in full measure. The ISI will act accordingly. Pakistan’s nuke program, if it has not already slipped its leash, will do so once again. BO has thrown away everything in Iraq. Iran will dominate via the Shias. Turkey, will work with Iran to screw the Kurds. This may be part of why Turkey just assisted and enabled Iran’s fraudulent pretense at meeting objections to its enrichment program. Iran will go nuke. Russia, having given up nothing in return for our pulling the rug from under Poland and the Czechs, will finish re-establishing its dominance over East Europe, and central Asia. Its action in and against Georgia has ensured that no pipelines will be built through Georgia. Thus central Asian gas will not be able to get to Europe outside of Russian control. Central Europe, especially Germany, will increasingly be subject to Russian whims. With Iran going nuke, and BO and the US’s proven track record of being an unreliable umbrella, the Arab mid-east will seek to go nuke as well. Turkey will seek to re-assert its historical regional dominance and influence. The farce it just pulled off at Israel’s expense is the sign that a very large and very important decision has been made. If Israel’s blockade against arms in Gaza is broken, Iran will have Israel surrounded: via Hezbollah, thanks to Israel’s bellicus interruptus of a few years ago, it how has some 50,000 rockets which reach most of Israel. In Gaza it will be able to reach what it cannot from Lebanon. It certainly will be able to reach Israel’s nuke reactor. The US presence in Iraq will soon be meaningless. Israel’s extermination is likely to be attempted. In the meantime, back in the USA the laws of gravity and of supply and demand will assert themselves and our final economic bubble will burst. We will all be Californians. In search of purchasing the Latino vote, BO and Congress will grant amnesty to 10-20 million illegals, plus visas to some 20-50 million more family members. They will vote Democratic, and the Republican Party will become as dead a letter for the entire nation as it already is for New England and the Atlantic States.
Have a nice day.