carapace – Not your father's america

Minimum Wage Raise

Thursday, July 23, 2009

On Friday, the federal minimum wage is set to rise to $7.25 an hour, from $6.55.

HOLLY SKLAR, hsklar@letjusticeroll.org, http://www.letjusticeroll.org

Co-author of the report “Raise the Minimum Wage to $10 in 2010″ and the book “Raise The Floor: Wages and Policies That Work For All Of Us,” Sklar said today: “The minimum wage is stuck in the 1950s. With the raise to $7.25, the minimum wage is still lower than the 1956 minimum wage of $7.93 in today’s dollars. It would take $9.92 today to match the buying power of the minimum wage at its peak in 1968, the year Martin Luther King died fighting for living wages for sanitation workers — and all workers.

“The long-term fall in worker buying power is one reason we are in the worst economic crisis since the Great Depression. In advocating passage of the federal minimum wage during the Depression, President Franklin Roosevelt called it ‘an essential part of economic recovery.’ And so it is today. The minimum wage sets the wage floor. We can’t build a strong economy with poverty wages and rising greed. In 1968, the richest 1 percent of Americans had 11 percent of national income. By 2006, they had 23 percent — the highest share since 1928, right before the Great Depression.

“It’s obscene that underpaid workers and responsible businesses are bailing out banks and corporations run by reckless overpaid bosses who milked their companies and our country like cash cows — and trashed the global economy. If the minimum wage had stayed above the nearly $10 value it had in 1968, it would have put upward pressure — rather than downward pressure — on the average worker wage. The Let Justice Roll Living Wage Campaign is calling for a minimum wage of $10 in 2010. It’s time to break the cycle of too little, too late raises. A job should keep you out of poverty, not keep you in it.” Sklar is senior policy adviser for the Let Justice Roll Living Wage Campaign.

Nearly 1,000 business owners and executives including Costco CEO Jim Sinegal, U.S. Women’s Chamber of Commerce CEO Margot Dorfman and small business owners from all 50 states, have signed a statement supporting the current minimum wage increase.

See: http://www.businessforafairminimumwage.org

From: Institute for Public Accuracy

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Regional and State Employment and Unemployment Summary

News release: “Regional and state unemployment rates were generally higher in June. Thirty-eight states and the District of Columbia recorded over-the-month unemployment rate increases, 5 states registered rate decreases, and 7 states had no rate change, the Bureau of Labor Statistics of the U.S. Department of Labor reported on July 17, 2009. Over the year, jobless rates were higher in all 50 states and the District of Columbia. The national unemployment rate, at 9.5 percent, was little changed between May and June, but was up 3.9 percentage points from a year earlier.”

http://www.bls.gov/news.release/pdf/laus.pdf

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130 workers to lose jobs in Muncie tool plant closing And more …

July 22, 2009

MUNCIE — About 130 workers will lose their jobs as a Central Indiana tool-making plant is shutting down. Company officials say the Duffy Tool and Stamping factory in Muncie will close by the end of October. Duffy’s parent company, Cleveland-based Brittany Stamping LLC, said the closing was caused by poor economic conditions “created by the collapse of the banking and auto industries.” (Muncie Star-Press)

Complete article at:

http://americaneconomicalert.org/news_item.asp?NID=3903837

Lives and fortunes intertwined in GM town

July 21, 2009

Ontario, Ohio, near the city of Mansfield, is one of 12 communities facing the grim prospect that a major employer, GM, is closing a plant in the next two years. When that happens, the effect ripples to every corner of the region, leading to more businesses losing customers and more job losses.

Complete article at:

http://americaneconomicalert.org/news_item.asp?NID=3901710

Harley plans to cut another 1,000 jobs

Company also plans production shutdowns at several of its plants
By Rick Barrett of the Journal Sentinel
July 16, 2009

Easing off the throttle and cutting 1,000 more jobs, Harley-Davidson Inc. has hit a rough patch of road.

The world’s largest manufacturer of heavyweight motorcycles on Thursday also said it was shutting down production for 14 weeks later this year at plants in Wauwatosa and Kansas City, Mo. The company also is suspending production between five and 14 weeks at other plants, including Menomonee Falls, Tomahawk, and York, Pa.

Nearly half of the 1,000 job reductions announced Thursday will be in Wisconsin, including 300 hourly production jobs and 180 salaried positions, mostly at the Milwaukee headquarters and product development center. Worldwide, the company has 9,200 employees.

Harley-Davidson is slashing its payroll and slowing production to address the current difficulties of selling motorcycles that can cost up to $35,000.

Even many die-hard Harley loyalists, caught by the severity of the recession, aren’t buying new bikes.

“I think the company is rightsizing itself and preparing for a smaller market going forward,” said analyst Philip Gorham with Morningstar Research, in Chicago.

Harley said its second-quarter net income fell 91% to $19.8 million, or 8 cents per share. That’s down from $222.8 million, or 95 cents per share, in the same period last year.

Much of the drop could be explained by two non-cash charges related to the company’s motorcycle financing division. But Harley also said its worldwide motorcycle sales fell 30% during the quarter, and its U.S. sales were down about 35% from a year ago.

Earlier this year, the company said it planned to cut from 1,400 to 1,500 hourly positions and about 300 salaried jobs. Thursday’s announcement of another 1,000 layoffs was worse than some union officials expected.

“It’s going to go pretty deep with us. People are going to get hurt,” said Mike Masik, president of United Steelworkers Local 2-209 in Milwaukee.

The Steelworkers already have about 240 people on indefinite layoff from Harley.

“You can get a gut feeling about what’s happening,” Masik said. “We hope that we will see people coming back to work here in January,” but there are no guarantees.

Restructuring since May Harley has been restructuring since the beginning of the year as it sought to cope with weaker sales. In May, the company said it was considering closing its motorcycle assembly plant in York, Pa., and a study is under way to assess whether production will remain in York or move to another U.S. site.

Harley now expects to ship from 212,000 to 228,000 motorcycles to its dealers and distributors worldwide this year, down from 25% to 30% from 2008 shipment levels and lower than earlier expectations.

“We are pulling back on everything,” CEO Keith Wandell said in an interview. “We will be shutting down the Sportster production line in our fourth quarter, and that will have an impact on the Capitol Drive plant which makes engines for Sportsters.”

The shutdown will accelerate a plan to close the Capitol Drive facility and move its production to the company’s factory on Pilgrim Road, in Menomonee Falls.

“With the plant being down, we can move a lot of the equipment at that time,” Wandell said.

The cost-cutting measures announced Thursday could result in more than $70 million a year in savings for Harley and do not include anything that might come from York. The company’s decisions could affect another several thousand jobs.

“Let me assure you that we are not taking these actions lightly. We are taking them because we feel a strong sense of accountability to make the tough calls that are required to ensure the long-term viability and success of Harley-Davidson,” Wandell said in a conference call with analysts.

A hundred jobs are being eliminated at Harley-Davidson Financial Services, the consumer lending arm of Harley-Davidson Inc.

That division, which currently has 780 employees, posted an operating loss of $62.1 million in the second quarter, down from operating income of $37.1 million a year ago. Tight credit conditions have weighed on the unit, which has been heavily reliant on the battered securitization market for funding.

“It was another rough quarter for HDFS, but that was to be expected,” said analyst Ned Douthat with Ockham Research.

Buyout program

Harley has offered salaried employees a buyout program that could reduce the number of layoffs. Most of the salaried job reductions are expected in the next three months.

A decision on whether to close York will come by the end of the year, Wandell said.

“We are trying to be respectful of the process and are asking our employees there to make some tough decisions around flexibility, work rules, job classifications and outsourcing of some production that’s not core-competency for us,” he said.

The drop in quarterly sales, while steep, was better than the 48% decline in the heavyweight motorcycle market overall.

Harley increased its market share in the heavyweight category, despite the sales decline.

That’s encouraging, but it won’t change the near-term outlook for the company, according to Gorham.

“We see no end in sight to Harley’s challenging operating environment,” he said. “We do not expect any recovery in this highly discretionary industry until consumer confidence has returned and the labor market has stabilized.”

Harley shares rose 8.4% Thursday to close at $18.96.

Analysts said Wall Street likes it when a company cuts costs, even if it results in thousands of job losses.

“In the short term it’s certainly important that Harley get some of its costs out of the system,” Gorham said.

“Companies can always ramp up again once things turn around. It’s easier to ramp up than it is to wind down,” he said.

Complete article at:

http://www.jsonline.com/news/wisconsin/50935662.html

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Global Power and Global Government: Evolution and Revolution of the Central Banking System Part 1

By Andrew Gavin Marshall
Global Research, July 21, 2009

Introduction

Humanity is on the verge of entering into the most tumultuous period in our history. The prospects of a global depression, the likes of which have never been seen before; a truly global war, on a scale never before imagined; and societal collapse, for which nations of the world are building totalitarian police states to control populations; are increasing by the day. The major global trend forecasters are sounding the alarms on economic depression, war, a return to fascism and a total reorganization of society. Through crisis, we are seeing the reorganization of the global political economy, and the transformation of capitalism into a totalitarian capitalist world government. Capitalism has never stayed the same through its history; it has always changed and will continue to do so. Its changes are explained and analyzed through political-economic theory, both mainstream theory and critical. The changes are undertaken over years, decades and centuries. The next phase of capitalism is one in which the world moves to a state-controlled economic system, much like China , of totalitarian capitalism.

The global political economy itself is being reorganized into a world government body, consisting of one center of global power where the socio-political-economic power of the world is centralized in one institution. This is not a conspiracy theory; it is a reality. Nor is this a subject confined to the realm of “internet conspiracy theorists,” but in fact, the concept of world government originates and evolves throughout the history of capitalism and the global political economy. Mainstream and critical political-economic theory has addressed the concept of world government for centuries.

The notion of a world government has such a long history, as the forces driving the world into such a structure intertwine with the history of the modern global political economy itself. The purpose of this report is to examine the history of the global political economy in taking steps toward forming a world government, in both theory and practice.

How did we get here and where are we going?

Why Study Theory?

Within the academic realm of Political Science, specifically the field of Global Political Economy (GPE), it is essential to understand the various theoretical perspectives of political economy so as to understand the actions and directions taken within the global political economy, and how capitalism has been and continues to be reorganized and altered. Theory provides the foundation upon which actors are understandable and actions are undertaken. As the political economist Robert Cox once stated, “Theory is always for someone and for some purpose.” It is important to understand and analyze the theoretical leanings of those making changes in the global political economy, in order to understand the changes being made, specifically the theoretical foundations of a world government. As well as this, it is important to examine critical theory in how it interprets both how and why a world government is being constructed.

Mercantilism

The history of political economic theory shows a continued fascination with the concept of constructing such a cosmopolitan or global community. The earliest forms of western Global Political Economy theorists lie in the early mercantilist period, and with the emergence of Liberal theory, following Adam Smith’s Wealth of Nations, mercantilist writers such as Friedrich List and Alexander Hamilton wrote critiques of the underlying Liberal concepts. List wrote in Political and Cosmopolitical Economy that Smith dispersed with the idea of a “national economy” in which nation’s determined economic conditions, and instead advocated replacing the “national” economy with a “cosmopolitical or world-wide economy.” List discusses the perspective of Jean-Baptiste Say (J.B. Say), a French liberal economist, saying that Say “openly demands that we should imagine the existence of a universal republic in order to comprehend the idea of general free trade.”[1]

List states that, “If, as the prevailing school [of political-economic thought] requires, we assume a universal union or confederation of nations as the guarantee for an everlasting peace, the principle of international free trade seems to be perfectly justified,” however, this prevailing thought “assumes the existence of a universal union and a state of perpetual peace, and deduces therefrom the great benefits of free trade. In this manner it confounds effects with causes.” List elaborates in explaining that, “Among the provinces and states which are already politically united, there exists a state of perpetual peace; from this political union originates their commercial union.” Further, “All examples which history can show are those in which the political union has led the way, and the commercial union has followed. Not a single instance can be adduced in which the latter has taken the lead, and the former has grown up from it.”[2]

It must be addressed that List is a mercantilist theorist. This means that he views the realm of the political and economic as an interacting realm in which they are intertwined and merged, however, the political realm remains above the economic, which is subject to the dictates of the political element. Liberal theorists believe that the political and economic realms are separate, and that they should be separated, so that political elements interact separately and without influence over the economic realm, which itself acts independently and separately of the political. This is the foundation for the ideas of the “free market” and the oft-quoted Adam Smith phrase, “the invisible hand of the free market,” which was only mentioned once in his entire volume of the Wealth of Nations. The ascension of liberal theorists marked a separation in the academic and theoretical studies, in which Political Economy was separated as a field, and saw the emergence of Political Science and Economics as separate studies.

As political economist Robert Cox stated, “Theory is always for someone and for some purpose.” The purpose of this separation was to compartmentalize academic thought and separate the realms of politics and economy, so as to better control both – as the banking interests, which dominated both the realms of politics and economics since the late 1600s, continued to view the world in terms of political-economic theory. It was a strategy of “divide and conquer,” in which theory and academia was divided in order to conquer and control thought on both sides. This separation continues to this day, as even the field of Political Economy is placed underneath and subjective to Political Science, whereas it would make more sense that Political Science and Economics would be under the umbrella of Political Economy. Again, compartmentalize thought and then the control of discussion and debate becomes much easier.

What List was arguing in his essay was a critique of the liberal concept of a cosmopolitical society, in which all nations are united in a world federation. Naturally, this was not the case in that era, it was an incorrect and dubious assumption on the part of liberal theorists. List explained that never before had economic or commercial interdependence and union led to a political union. List postulated that history showed that political union had to precede an economic union. However, List was writing in the first half of the 19th century, and history has changed the course of events and Political Economic theory. I would argue that the major banking interests, essentially made up of a dynasty of banking families (the Rothschilds, Warburgs, and later the Morgans and Rockefellers, among many others), decided to chart a different course, in which they would pursue a strategy in which economic union would be incrementally undertaken with the aim of constructing a political union to follow in its footsteps.

Central Banking

Thus, liberal economic theory came to the forefront, championed by the global hegemonic power of the day, Great Britain , which was firmly under the control of the banking dynasties. In 1694, the Bank of England was formed as a private central bank, which would issue the currency of the nation, lending it to the government and industry at interest, which would be paid back to the Bank of England’s shareholders, made up of these private banking dynasties.[3] The 16th to the 19th centuries was the period in which both the nation-state and capitalism emerged, soon followed by central banking in the late 1600s. This is when the origins of what was known as a “world economy” took place. Mercantilist economic theory dominated this period, in which the economy was secondary and submissive to the political structure of nations.

Liberal theorists rose in opposition to this. Adam Smith wrote the Wealth of Nations in 1776, the same year that the American colonies revolted against the British imperial forces in the country, and ultimately gained independence from the British Empire . Among many of the primary motivating factors for the Revolution were the British military presence in the American colonies, acting above the law; a heavy imposition of colonial taxes, particularly on tea and other imports from foreign nations such as France, in an effort to promote the mercantilist assumptions that the colony should only survive and trade with the metropole (imperial hegemon) – which extracts the resources of the nation in trade for material goods to that nation, creating a dependence upon the colonial power. Arguably one of the primary motivations for the Revolution was the control of currency by a foreign imperial power, with the ability to control inflation and devaluation, essentially controlling the entire economic conditions of the colony from abroad. The Founding Fathers of the United States understood the necessity of controlling one’s own currency if one was to preserve sovereignty and independence.

Following Britain ‘s humiliating defeat, which was aided by the French who supported the American revolt, European banking interests suffered a significant blow against their mercantilist expansion. Capitalism functions in that it constantly needs to expand and consume more. Central banking functions in a very similar, although much more dubious manner, in which it needs to expand its control over industry, nations and people through the expansion of debt, continually needing to bring more individuals, nations and industries under debt bondage. Debt is the source of all power and wealth for the central banking system – as they do not actually produce any tradable good, such as industry; nor do they provide any necessary service, such as government. Interest on debt is the source of income and authority for the central banking system, and thus, it needs to continually advance credit and expand debt. Thus, the loss of the American colonies as a source of expansionary credit and debt was a massive blow to their entrenched interests.

The European banking interests quickly learned their lesson regarding not falling under the imperial hubris of believing people of a given region or nation could never defeat imperial might and armies. Revolution had become a great threat to the entrenched capitalist, and particularly, banking interests.

Within a decade of the American Revolutionary War, which ended in 1783, another nation was going down the road of revolutionary zeal, in part inspired by the American example. However, this nation was no colony, but rather a mercantilist imperial power, and thus, its loss would be too great a loss to allow. In 1788, the French Monarchy was bankrupt, and as tensions grew between the increasingly desperate people of France and the aristocratic and particularly monarchic establishment, European bankers decided to pre-empt and co-opt the revolution. In 1788, prominent French bankers refused “to extend necessary short-term credit to the government,”[4] and they arranged to have shipments of grain and food to Paris “delayed” which triggered the hunger riots of the Parisians.[5] This sparked the Revolution, in which a new ruling class emerged, driven by violent oppression and political and actual terrorism. However, its violence grew, and with that, so too did discontentment with the Revolutionary Regime, and its stability and sustainability was in question. Thus, the bankers threw their weight behind a general in the Revolutionary Army named Napoleon, whom they entrusted to restore order. Napoleon then gave the bankers his support, and in 1800, created the Bank of France, the privately owned central bank of France , and gave the bankers authority over the Bank. The bankers owned its shares, and even Napoleon himself bought shares in the bank.[6]

The bankers thus sought to control commerce and government and restore order to their newly acquired and privately owned and operated empire. However, Napoleon continued with his war policies beyond the patience of the bankers, which had a negative impact upon commercial activities,[7] and Napoleon himself was interfering in the operations of the Bank of France and even declared that the Bank “belongs more to the Emperor than to the shareholders.”[8] With that, the bankers again shifted their influence, and remained through regime change.[9]

The Rothschilds ascended to the throne of international banking with the Battle of Waterloo. After having established banking houses in London, Paris, Frankfurt, Vienna and Naples, they profited off of all sides in the Napoleonic wars.[10] The British patriarch, Nathan Rothschild, was known for being the first with news in London, ahead of even the monarchy and the Parliament, and so everyone watched his moves on the stock market during the Battle of Waterloo. Following the battle, Nathan got the news that the British won over 24 hours before the government itself had news, and he quietly went into the London Stock Exchange and sold everything he had, implying to those watching that the British lost. A panic selling ensued, in which everyone sold stock, stock prices crumbled, and the market crashed. What resulted was that Rothschild then bought up the near-entire British stock market for pennies on the dollar, as when news arrived of the British victory at Waterloo, Rothschild’s newly acquired stocks soared in value, as did his fortune, and his rise as the pre-eminent economic figure in Britain.[11]

As Goergetown University History professor, Carroll Quigley wrote in his monumental Tragedy and Hope, “The merchant bankers of London had already at hand in 1810-1850 the Stock Exchange, the Bank of England, and the London money market,” and that:

In time they brought into their financial network the provincial banking centers, organized as commercial banks and savings banks, as well as insurance companies, to form all of these into a single financial system on an international scale which manipulated the quantity and flow of money so that they were able to influence, if not control, governments on one side and industries on the other.[12]

The period from 1815 to 1914 was known as the British Imperial Century, in which they adopted the liberal economic concepts of Adam Smith, and manipulated and distorted them for their own imperial ambitions. Mercantilism was still strong in practice, but rode under the banner of a liberal economic order, “free markets” and the “invisible hand.” The “invisible hand” was in fact, connected to a body made up of government and industry, molding the “free market” according to its designs, and the body was controlled by the brain, the central bank, the Bank of England. Markets were hardly “free” and the hand was visible to those who could see the rest of the body.

The Liberal Revolution

…

Complete article at:

www.globalresearch.ca/index.php?context=va&aid=14464

Andrew Gavin Marshall is a Research Associate with the Centre for Research on Globalization (CRG). He is currently studying Political Economy and History at Simon Fraser University .

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Wealthy conservative media figures deny crisis in health care

Rush Limbaugh, Glenn Beck, and Sean Hannity — who each reportedly make more than $20 million per year — have downplayed the struggles of those lacking adequate health care, asserted that “there isn’t a health care crisis,” or characterized the United States as having “the best health care system in the world.”

Read More

http://mediamatters.org/items/200907230048?lid=1053266&rid=32077966

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JOHN STEWART ‘MOST TRUSTED NEWSCASTER’ IN 37/50 STATES

By Joshua Holland, AlterNet

Says a lot about the state of our media.

http://www.alternet.org/blogs/peek/141512/john_stewart_%27most_trusted_newscaster%27_in_37_50_states/

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And now for the important news ….

By Argus Hamilton

Federal Reserve chairman Ben Bernanke raised his unemployment forecast for the fall to ten percent Thursday. It’s especially bad in Los Angeles. People with jobs can’t enjoy it because people without jobs are still driving around tying up traffic.

http://www.JewishWorldReview.com

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three thousand words

(click here to view)

Signe Wilkinson Philadelphia Daily News Jul 24, 2009 EditorialCartoonists.com

Cameron Cardow: aspirations
(www.cagle.com)

Matt Davies: The Horror!
(davies.lohudblogs.com)

Karn: Credit and credibility

Richard Karn, author of the Emerging Trends Report, is now offering his assessment of today’s financial turmoil and what he considers to be the five most pressing issues the global economy will face in the years ahead. The critical issues explored include:

Chapter 1: Pay no attention to the man behind the curtain! discusses fiat currency, the financial excesses and abuse it engenders, interventionist policy response to perpetuate it, and the role of the US dollar going forward;

Chapter 2: Nobody’s right when everybody’s wrong develops our contention that all fiat currencies today have become derivatives of the US dollar;

Chapter 3: May you live in interesting times explores the extent to which emerging markets can decouple from “consumer” economies and the role of China as the litmus test for the thesis;

Chapter 4: The report of my death was an exaggeration details our contention the world has had its fill of “financial innovation”, and the only way the US economy will recover will be through its traditional strengths in agriculture, manufacturing, invention, and hard work; and

Chapter 5: Passing laws, just because offers our assessment of the anthropogenic global warming debate and pending legislation.

The first two chapters of the highly-informative study are now available online.

Click the following links to access the material:

Chapter 1 http://www.emergingtrendsreport.com/files/Ch_1_on_stationery_non-sequential.pdf

Chapter 2 http://www.emergingtrendsreport.com/files/Ch_1_on_stationery_non-sequential.pdf

Chapter 3 http://www.emergingtrendsreport.com/files/Ch_3_on_stationery_non-sequential.pdf

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A rocky road for the fiscal stimulus

By Clive Crook
Published: July 19 2009

Unemployment has already risen further in the US than President Barack Obama’s economics team expected, and forecasters agree it will rise for quite a while yet. In fact, it has risen further than in the White House projections early this year of what would happen if Congress failed to pass the fiscal stimulus. A huge stimulus was enacted. Now Republicans point to the weakness of the economy and say the policy failed.

Supposing it did, was this because the fiscal remedy was misconceived in the first place? Or was it because the stimulus was too timid, as some Democrats believe, implying the need for a second round of tax cuts and spending increases?

Respectable economists can be found to defend each of these positions, and no doubt others as well. Unsurprisingly, the administration’s view, as set out by Lawrence Summers, head of the National Economic Council and Mr Obama’s principal economic adviser, is that the stimulus was about right, and that it is working.

In a lecture on Friday at the Peterson Institute for International Economics in Washington, Mr Summers said that he had once advocated stimulus that was “timely, targeted and temporary”. But this unprecedented crisis had persuaded him that a different though equally alliterative approach was needed: “speedy, substantial and sustained”. I do not know that you could call it speedy, but at 5 per cent of gross domestic product the stimulus was substantial all right, and it was phased to act on the economy over several years.

More front-loading, in my view, would have been wise. A stimulus that relied more on tax cuts and less on long-delayed infrastructure investment – much of questionable benefit, except in macroeconomic terms – would have been faster acting. Sadly, on the other hand, the depth and likely persistence of this recession make it hard to argue that when the full force of the stimulus arrives next year, it will be too late.

The administration said all along that the stimulus would build up gradually, peaking in 2010, with 70 per cent delivered in the first 18 months. “Now, five months after the passage,” Mr Summers said, “we are on track to meet that timeline.”

If all is going according to plan, why is unemployment heading for 10 per cent and beyond? Higher-than-expected unemployment is not mainly due to lower-than-expected economic activity, said Mr Summers. Unemployment has risen between 1 and 1.5 percentage points more than you would normally expect, given the severity of the downturn in output. Why companies have shed labour faster than usual – fast enough to keep productivity rising even as the economy tanked – is unclear. It could be a sign of just how scared businesses became. The economy was weak, to be sure, but confidence was destroyed.

Most forecasters agree that output and jobs would have dropped further without the stimulus. The independent Congressional Budget Office, unafraid to torture both the president and the Democratic party’s leaders in Congress last week with vicious assessments of the cost of healthcare reform, supports that view. But the centrality of confidence in the economy does complicate the argument.

Measures of confidence are indeed beginning to pick up. Most companies now say they expect improving market conditions; six months ago they did not. The stock market is no longer contemplating doom. Credit flows are normalising. Output is flattening off. But the role of fiscal policy is ambiguous.

The stimulus this year and especially next directly injects demand, which is all to the good. But the stunning scale of the intervention adds to growing alarm about an approaching fiscal crunch. On present policies, the public debt is on a path of explosive growth. The danger is that when it comes to confidence, what the stimulus gives, the debt projections take away.

Fears about public debt are worsening so much that they make the debate about a second stimulus moot. As a matter of practical politics, it cannot be done – not for the moment, at any rate, certainly not with the exuberant marketing of January. Politics more than economics guided the design of the first stimulus, after all. Democrats preferred public spending because they wanted to widen government’s role and repudiate the Republicans’ instinct to cut taxes regardless of the circumstances. But the politics have shifted. The debt projections are genuinely scary. For now, another daring boost is politically impossible.

The best thing for confidence would have been an even bigger short-term stimulus married to a credible plan to bring the deficit under control. It is not too late for the second part, but on this the administration is failing abjectly.

Impressive as he is, Mr Summers was unconvincing on the long-term fiscal outlook. “The president’s budget contains numerous proposals directed at long-term fiscal discipline.” Yes, but Congress is gutting them and the White House, far from resisting, is saying that is fine. “Containing growth in debt is a central objective of the administration’s healthcare reform proposals.” No, the administration is calling for a fiscally neutral healthcare reform. That does nothing to bring deficits down.

Suppose, optimistically, that a deficit-neutral healthcare reform does pass. The CBO still expects the budget deficit in 2020, after nearly 10 years of steady expansion, to be 7 per cent of GDP. How confident does that make you feel?

Write to clive.crook@gmail.com
More columns at www.ft.com/clivecrook

Complete article at:

http://www.ft.com/cms/s/0/5433b15a-748b-11de-8ad5-00144feabdc0.html?nclick_check=1

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Ten Myths about Subprime Mortgages

07.23.09
Economic Commentary
Ten Myths about Subprime Mortgages
Yuliya Demyanyk

On close inspection many of the most popular explanations for the subprime crisis turn out to be myths. Empirical research shows that the causes of the subprime mortgage crisis and its magnitude were more complicated than mortgage interest rate resets, declining underwriting standards, or declining home values. Nor were its causes unlike other crises of the past. The subprime crisis was building for years before showing any signs and was fed by lending, securitization, leveraging, and housing booms.

Subprime mortgages have been getting a lot of attention in the United States since 2000, when the number of subprime loans being originated and refinanced shot up rapidly. The attention intensified in 2007, when defaults on subprime loans began to skyrocket. Researchers, policymakers, and the public have tried to identify the factors that explained these defaults.
Unfortunately, many of the most popular explanations that have emerged for the subprime crisis are, to a large extent, myths. On close inspection, these explanations are not supported by empirical research.

Myth 1: Subprime mortgages went only to borrowers with impaired credit

Subprime mortgages went to all kinds of borrowers, not only to those with impaired credit. A loan can be labeled subprime not only because of the characteristics of the borrower it was originated for, but also because of the type of lender that originated it, features of the mortgage product itself, or how it was securitized.

Specifically, if a loan was given to a borrower with a low credit score or a history of delinquency or bankruptcy, lenders would most likely label it subprime. But mortgages could also be labeled subprime if they were originated by a lender specializing in high-cost loans—although not all high-cost loans are subprime. Also, unusual types of mortgages generally not available in the prime market, such as “2/28 hybrids,” which switch to an adjustable interest rate after only two years of a fixed rate, would be labeled subprime even if they were given to borrowers with credit scores that were sufficiently high to qualify for prime mortgage loans.

The process of securitizing a loan could also affect its subprime designation. Many subprime mortgages were securitized and sold on the secondary market. Securitizers rank ordered pools of mortgages from the most to the least risky at the time of securitization, basing the ranking on a combination of several risk factors, such as credit score, loan-to-value and debt-to-income ratios, etc. The most risky pools would become a part of a subprime security. All the loans in that security would be labeled subprime, regardless of the borrowers’ credit scores.

The myth that subprime loans went only to those with bad credit arises from overlooking the complexity of the subprime mortgage market and the fact that subprime mortgages are defined in a number of ways—not just by the credit quality of borrowers. One of the myth’s byproducts is that examples of borrowers with good credit and subprime loans have been seen as evidence of foul play, generating accusations that such borrowers must have been steered unfairly and sometimes fraudulently into the subprime market.

Myth 2: Subprime mortgages promoted homeownership

The availability of subprime mortgages in the United States did not facilitate increased homeownership. Between 2000 and 2006, approximately one million borrowers took subprime mortgages to finance the purchase of their first home. These subprime loans did contribute to an increased level of homeownership in the country—at the time of mortgage origination. Unfortunately, many homebuyers with subprime loans defaulted within a couple of years of origination. The number of such defaults outweighs the number of first-time homebuyers with subprime mortgages.

Given that there were more defaults among all (not just first-time) homebuyers with subprime loans than there were first-time homebuyers with subprime loans, it is impossible to conclude that subprime mortgages promoted homeownership.

Myth 3: Declines in home values caused the subprime crisis in the United States

Researchers, policymakers, and the general public have noticed that a large number of mortgage defaults and foreclosures followed the decline in house prices. This observation resulted in a general belief that the crisis occurred because of declining home values.

The decline in home values only revealed the problems with subprime mortgages; it did not cause the defaults. Research shows that the quality of newly originated mortgages was worsening every year between 2001 and 2007; the crisis was brewing for many years before house prices even started slowing down. But because the housing boom allowed homeowners to refinance even the worst mortgages, we did not see this negative trend in loan quality for years preceding the crisis.
Myth 4: Declines in mortgage underwriting standards triggered the subprime crisis

An analysis of subprime mortgages shows that within the first year of origination, approximately 10 percent of the mortgages originated between 2001 and 2005 were delinquent or in default, and approximately 20 percent of the mortgages originated in 2006 and 2007 were delinquent or in default. This rapid jump in default rates was among the first signs of the beginning crisis.

If deteriorating underwriting standards explain this phenomenon, we would be able to observe a substantial loosening of the underwriting criteria between 2001–2005 and 2006–2007, periods between which the default rates doubled. The data, however, show no such change in standards.

Actually, the criteria that are associated with larger default rates, such as debt-to-income or loan-to-value ratios, were, on average, worsening a bit every year from 2001 to 2007, but the changes between the 2001–2005 and 2006–2007 periods were not sufficiently high to explain the near 100 percent increase in default rates for loans originated in these years.

Myth 5: Subprime mortgages failed because people used homes as ATMs

Rising house prices and falling mortgage interest rates before 2006 gave many homeowners an opportunity to refinance their mortgages and extract cash. The cash extracted from home equity could be spent for home improvements, bill payments, or general goods and services. Among subprime mortgages that were securitized, more than half were originated to refinance existing mortgages into larger ones and to take cash out of home equity.

While this option was popular throughout the subprime years (2001–2007), it was not a primary factor in causing the massive defaults and foreclosures that occurred after both home prices and interest rates reversed their paths. Mortgages that were originated for refinancing actually performed better than mortgages originated solely to buy a home (comparing mortgages of the same age and origination year). The rates of default for cash-out refinance mortgages within one year of origination were 17 percent for mortgages originated in 2006 and 20 percent for those originated in 2007. In contrast, the rates of default within one year of origination for mortgages originated to buy a home were 23 percent and 27 percent for the origination years 2006 and 2007, respectively.

Myth 6: Subprime mortgages failed because of mortgage rate resets

Among subprime loans, the most popular type of adjustable rate mortgage (ARM) is a hybrid, a loan whose interest rate is reset after an initial two- or three-year period of fixed rates. A fixed-rate mortgage (FRM), on the other hand, never has its rate reset. The belief that rate resets caused many subprime defaults has its origin in the statistical analyses of loan performance that were done on these two types of loans soon after the problems with subprime mortgages were coming to light. Those analyses compared loan performance in a way that was conventional at the time, but which turned out to be inappropriate for these loans.

To ascertain whether ARMs or FRMs were experiencing different levels of default, analysts compared the proportion of outstanding FRMs that were delinquent to the proportion of outstanding ARMs that were delinquent. Based on that comparison, the proportion of delinquent hybrid loans had begun to skyrocket after 2006, while that of fixed-rate loans looked as if it was fairly stable.

The problem with this type of analysis is that it hid problems with FRMs because it considered all outstanding loans; that is, it combined loans that had been originated in different years. Combining old with more recent loans influences the results, first, because older loans tend to perform better. Second, FRM loans were losing their popularity from 2001 to 2007, so fewer loans of this type were being originated every year. When newer loans were defaulting more than the older loans, any newer FRM defaults were hidden inside the large stock of older FRMs. By contrast, the ARM defaults were more visible inside the younger ARM stock.

To illustrate the problem, consider the following example. Suppose there are 1,000 FRMs and 100 ARMs outstanding in the market. In the current year, 100 new FRMs and 100 new ARMs are originated. Suppose the default rate for both types of new loans is 100 percent within a year and that old loans do not default. The observed default rate for FRMs is 100 out of 1,100 outstanding loans (9.1 percent), and the default rate for ARMs is 100 out of 200 outstanding loans (50 percent). Even though the level of default is the same for all new originations, the FRM pool looks much healthier.
If we compare the performance of adjustable- and fixed-rate loans by year of origination (which keeps new and old loans separate), we find that FRMs originated in 2006 and 2007 had 2.6 and 3.5 times more delinquent loans within one year of origination, respectively, than those originated in 2003. Likewise, ARMs originated in 2006 and 2007 had 2.3 times and 2.7 times more delinquent loans one year after origination, respectively, than those originated in 2003. In short, FRMs showed as many signs of distress as did ARMs. These signs for both types of mortgage were there at the same time; it is not correct to conclude that FRMs started facing larger foreclosure rates after the crisis was initiated by the ARMs.

Myth 7: Subprime borrowers with hybrid mortgages were offered (low) “teaser rates”

By design, a hybrid mortgage contract offers a fixed mortgage rate for a couple of years; after that, the rate is scheduled to reset once or twice a year to the current market rate plus a margin that is prespecified in the contract. A market rate combined with the margin may be lower or higher than the initial fixed mortgage rate, as it largely depends on the market rate that prevails at the reset time.

Hybrid mortgages were available both in prime and subprime mortgage markets, but at significantly different terms. Those in the prime market offered significantly lower introductory fixed rates, known as “teaser rates,” compared to rates following the resets. People assumed that the initial rates for subprime loans were also just as low and they applied the same label to them—“teaser rates.” We need to understand, though, that the initial rates offered to subprime hybrid borrowers may have been lower than they most likely would have been for the same borrowers had they taken a fixed-rate subprime mortgage, but they were definitely not low in absolute terms.

The average subprime hybrid mortgage rates at origination were in the 7.3–9.7 percent range for the years 2001–2007, compared to average prime hybrid mortgage rates at origination of around 2–3 percent. The subprime figures are hardly “teaser rates.”

Myth 8: The subprime mortgage crisis in the United States was totally unexpected

Observing the extent of the subprime mortgage crisis in the United States and the global financial crisis that followed, it is hard to tell that this turmoil and its magnitude were anticipated by anyone. The data suggest, though, that some market participants were likely aware of an impending market correction.

In a market with rapidly rising prices, mortgage contracts that cannot be sustained can be terminated through prepayment or refinancing. Borrowers can change houses and mortgage contracts easily in a booming environment, and defaults do not occur as frequently as they would without the boom. Because of this ability to dispose of unsustainable mortgages, signs of the crisis brewing between 2001 and 2005 were hidden behind a “mask” of rising house prices. Using a statistical model to control for rising housing prices, Otto Van Hemert and I determined that default rates were increasing every year for six consecutive years before the crisis had shown any signs. This deterioration is observable now, with the help of hindsight and research findings, but it was also known to some extent to those who were securitizing subprime mortgages in those years. Securitizers seemed to have been adjusting mortgage interest rates to reflect this deterioration in loan quality. In short, lenders’ expectations of the increasing risk of massive defaults among subprime borrowers were forming for years before the crisis; most likely, it was not the crisis that was unexpected, it was its timing and magnitude.

Myth 9: The subprime mortgage crisis in the United States is unique in its origins

The mortgage crisis in the United States is large and devastating, and it has led to global financial turmoil. In this sense, it is certainly unique. However, neither the origin of this crisis or the way it has played out was unique at all. In fact, it seems to have followed the classic lending boom-and-bust scenario that has been observed historically in many countries. In this scenario, a lending boom of a sizable magnitude leads to a lending-market collapse if it is associated with a deterioration in lending standards, an increase in the riskiness of loans, and a decrease in the price markup of said risk. Argentina in 1980, Chile in 1982, Sweden, Norway, and Finland in 1992, Mexico in 1994, and Thailand, Indonesia, and Korea in 1997 all experienced a pattern similar to the U.S. subprime boom-and-bust cycle. The United Stated has had similar episodes, though on a smaller scale, as well: a crisis with farm loans in the 1980s and one with commercial real estate loans in the 1990s.

Myth 10: The subprime mortgage market was too small to cause big problems

Before the crisis, there was a conventional belief that a market as relatively small as the U.S. subprime mortgage market (about 16 percent of all U.S. mortgage debt in 2008) could not cause significant problems in wider arenas even if it were to crash completely. However, we now see a severe ongoing crisis—a crisis that has affected the real economies of many countries in the world, causing recessions, banking and financial turmoil, and a credit crunch—radiating out from failures in the subprime market. Why is it so?

The answer lies in the complexity of the market for the securities that were derived from subprime mortgages. Not only were the securities traded directly, they were also repackaged to create more complicated financial instruments (derivatives), such as collateralized debt obligations. The derivatives were again split into various tranches, repackaged, re-split and repackaged again many times over. This, most likely, was one of the mechanisms that amplified problems in the subprime securitized market, and the subsequent subprime-related losses. Each stage of the securitization process increased the leverage financial institutions were taking on (as they were purchasing the securities and derivatives with borrowed money) and made it more difficult to value their holdings of those financial instruments. With the growing leverage and inability to value the securities, uncertainty about the solvency of a number of large financial firms grew.

Conclusion

Many of the myths presented here single out some characteristic of subprime loans, subprime borrowers, or the economic circumstances in which those loans were made as the cause of the crisis. All these factors are certainly important for borrowers with subprime mortgages in terms of their ability to keep their homes and make regular mortgage payments. A borrower with better credit characteristics, a steady job, a loan with a low interest rate, and a home whose value keeps increasing is much less likely to default on a mortgage than a borrower with everything in reverse.
But the causes of the subprime mortgage crisis and its magnitude were more complicated than mortgage interest rate resets, declining underwriting standards, or declining home values. The crisis had been building for years before showing any signs. It was feeding off the lending, securitization, leveraging, and housing booms.

Recommended Reading

“Understanding the Subprime Mortgage Crisis,” by Yuliya Demyanyk and Otto Van Hemert. 2008. Forthcoming in the Review of Financial Studies. Working paper available at http://ssrn.com/abstract=1020396 .

Complete article at:

Federal Reserve Bank of Cleveland:

http://www.clevelandfed.org/research/commentary/2009/0509.cfm

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Inflation, Industrial Production and Retail Sales

Wednesday, July 15, 2009

John Williams published a Flash Update this morning covering the above topics, in the light of recent
government reports.

Although the full content of the Flash Update is available only to SGS paid subscribers, as a subscriber to the free ShadowStats News List we provide you below with the main bullet points and the first two introductory paragraphs, which we hope you will find of interest.

- Inflation Accelerates (Annualized June Rate of 9.3%)

- June CPI-U Annual Deflation of 1.4%
Versus SGS-Alternate Estimate of 6.1% Inflation

- Quarterly Production and Real Retail Sales Contractions
Confirm Ongoing Recession

Ongoing Recession and Inflation. On the economic front, quarterly contractions continued in key series. Annualized quarter-to-quarter change (the way headline GDP growth is reported) was negative for both industrial production and real (inflation-adjusted) retail sales. The contraction in second-quarter industrial production was 11.6%, versus a 19.1% contraction in the first quarter. The contraction in real second-quarter retail sales was 3.0%, versus a 3.1% contraction in the first quarter. While recent GDP reporting never fully reflected what was happening in these underlying series, upcoming benchmark revisions should show the current downturn to have been much longer and deeper than has been reported, so far. A narrowing quarter-to-quarter contraction but a deepening year-to-year downturn are fair bets for the gimmicked second-quarter GDP “advance” estimate, due for release on July 31st, along with the benchmark revisions.

On the inflation front, annualized quarter-to-quarter change in the CPI-U rose to 3.3% in the second quarter, from 2.2% in the first quarter. The annualized seasonally-adjusted inflation rate for June was 9.3%.

http://www.shadowstats.com

Regards,
The ShadowStats Team

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This Week in Petroleum (TWIP)

Thursday, July 23, 2009

This Week in Petroleum (TWIP) has been updated to the EIA website:

http://tonto.eia.doe.gov/oog/info/twip/twip.asp

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STRATFOR – Examining the Jakarta Attacks: Trends and Challenges

By Scott Stewart and Fred Burton
July 22, 2009

On the morning of July 17, a guest at the JW Marriott hotel in Jakarta came down to the lobby and began walking toward the lounge with his roll-aboard suitcase in tow and a backpack slung across his chest. Sensing something odd about the fellow, alert security officers approached him and asked him if he required assistance. The guest responded that he needed to deliver the backpack to his boss and proceeded to the lounge, accompanied by one of the security guards. Shortly after entering the lounge, the guest activated the improvised explosive device (IED) contained in the backpack, killing himself and five others. Minutes later, an accomplice detonated a second IED in a restaurant at the adjacent Ritz-Carlton hotel, killing himself and two other victims, bringing the death toll from the operation to nine — including six foreigners.

The twin bombings in Jakarta underscore two tactical trends that STRATFOR has been following for several years now, namely, the targeting of hotels in terrorist attacks and the use of smaller suicide devices to circumvent physical security measures. The Jakarta attacks also highlight the challenges associated with protecting soft targets such as hotels against such attacks.

Hotels as Targets

During the 1970s the iconic terrorist target became the international airliner. But as airline security increased in response to terrorist incidents, it became more difficult to hijack or bomb aircraft, and this difficulty resulted in a shift in targeting. By the mid-1980s, while there were still some incidents involving aircraft, the iconic terrorist target had become the embassy. But attacks against embassies have also provoked a security response, resulting in embassy security programs that have produced things like the American “Inman buildings”, which some have labeled “fortress America” buildings due to their foreboding presence and their robust construction designed to withstand rocket and large IED attacks. Due to these changes, it became far more difficult to attack embassies, many of which have become, for the most part in our post-9/11 world, hard targets. (This is certainly not universal, and there are still vulnerable embassies in many places. In fact, some countries locate their embassies inside commercial office buildings or hotels.)

Overall, however, this trend of making embassies hard targets has caused yet another shift in the terrorist paradigm. As STRATFOR has noted since 2004, hotels have become the iconic terrorist target of the post-9/11 era. Indeed, by striking an international hotel in a capital city, militants can make the same type of statement against Western imperialism and decadence that they can make by striking an embassy. Hotels are often full of Western businessmen, diplomats and intelligence officers, providing militants with a target-rich environment where they can kill Westerners and gain international media attention without having to penetrate the extreme security of a modern embassy.

Our 2004 observation about the trend toward attacking hotels has been borne out since that time by attacks against hotels in several parts of the world, including Pakistan, Afghanistan, Iraq, Jordan, India and Egypt. In addition to attacks against single hotels, in the attacks in Mumbai, Amman, Sharm el-Sheikh — and now Jakarta — militants staged coordinated attacks in which they hit more than one hotel.

Hotels have taken measures to improve security, and hotel security overall is better today than it was in 2004. In fact, security measures in place at several hotels, such as the Marriott in Islamabad, have saved lives on more than one occasion. However, due to the very nature of hotels, they remain vulnerable to attacks.

Unlike an embassy, a hotel is a commercial venture and is intended to make money. In order to make money, the hotel needs to maintain a steady flow of customers who stay in its rooms; visitors who eat at its restaurants, drink at its bars and rent its banquet and conference facilities; and merchants who rent out its shop space. On any given day a large five-star hotel can have hundreds of guests staying there, hundreds of other visitors attending conferences or dinner events and scores of other people eating in the restaurants, using the health club or shopping at the luxury stores commonly found inside such hotels. Such amenities are often difficult to find outside of such hotels in cities like Peshawar or Kabul, and therefore these hotels also become gathering places for foreign businessmen, diplomats and journalists residing in the city, as well as for wealthy natives. It is fairly easy for a militant operative to conduct surveillance of the inside of a hotel by posing as a restaurant patron or by shopping in its stores.

Of course, the staff required to run such a huge facility can also number in the hundreds, with clerks, cooks, housekeepers, waiters, bellboys, busboys, valets, florists, gardeners, maintenance men, security personnel, etc. These hotels are like little cities with activities that run 24 hours a day, with people, luggage, food and goods coming and going at all hours. There are emerging reports that one of the suicide bombers in the Jakarta attack was a florist at one of the hotels and it is possible that he used his position to smuggle IED components into the facility among floral supplies. If true, the long-term placement of militant operatives within the hotel staff will pose daunting challenges to corporate security directors. Such an inside placement could also explain how the cell responsible for the attack was able to conduct the detailed surveillance required for the operation without being detected.

Quite simply, it is extremely expensive to provide a hotel with the same level of physical security afforded to an embassy. Land to provide standoff distance is very expensive in many capital cities and heavy reinforced-concrete construction to withstand attacks is far more expensive than regular commercial construction. Such costs must be weighed against the corporate bottom line.

Moreover, security procedures at an embassy such as screening 100 percent of the visitors and their belongings are deemed far too intrusive by many hotel managers, and there is a constant tension between hotel security managers and hotel guest-relations managers over how much security is required in a particular hotel in a specific city. In fact, this debate over security is very similar to the tension that exists between diplomats and security personnel at the U.S. Department of State. And the longer the period between successful attacks (there had not been a successful terrorist attack in Jakarta since September 2004 and in Indonesia since October 2005), the harder it is to justify the added expense — and inconvenience — of security measures at hotels. (Of course, in very dangerous places such as Baghdad, Islamabad and Kabul heavy security is far easier to justify, and some hotels in such locations have been heavily fortified following attacks on other hotels in those cities.)

In many places, hotel guests are subjected to less security scrutiny than visitors to the hotel, as the hotel staff seeks to make them feel welcomed, and it is not surprising that militants in places like Mumbai (and perhaps Jakarta) have been able to smuggle weapons and IED components into a hotel concealed inside their luggage. We have received a report from a credible source indicating that one of the Jakarta attackers had indeed been checked into the JW Marriott hotel. The source says the attacker, posing as a guest, was an Indonesian but was likely from a remote area because he did not appear to be familiar with how to use modern conveniences such as the room’s Western-style toilet. That the attackers were Indonesians supports the theory the attack was conducted by the Southeast Asian group Jemaah Islamiyah (JI) or a JI splinter group. JI has conducted (or is a suspect in) every high-profile terror attack in Indonesia in recent years.

Sources advise that significant similarities exist between the unexploded device discovered in the attacker’s hotel room in the JW Marriott and known JI explosive devices used in past attacks and recovered in police raids. This is another strong indication JI was involved.

One other important lesson that travelers should take from this string of hotel attacks is that, while they should pay attention to the level of security provided at hotels, and stay at hotels with better security, they should not rely exclusively on hotel security to keep them safe. There are some simple personal security measures that should also be taken to help mitigate the risk of staying at a hotel.

Size is Not Everything

As STRATFOR has noted since 2005, the counterterrorism tactic of erecting barricades around particularly vulnerable targets — including government buildings such as embassies and softer targets such as hotels — has forced militants to rethink their attack strategies and adapt. Instead of building bigger and bigger bombs that could possibly penetrate more secure areas, operational planners are instead thinking small — and mobile. In fact it was the October 2005 triple-bomb attacks against restaurants in Bali, Indonesia, by JI and the November 2005 triple suicide-bombing attacks against three Western hotels in Amman, Jordan, that really focused our attention on this trend.

Like the July 7, 2005, London bombings, these two attacks in Jakarta and Amman used smaller-scale explosive devices to bypass security and target areas where people congregate. Such attacks demonstrated an evolution in militant tactics away from large and bulky explosives and toward smaller, more portable devices that can be used in a wider variety of situations. Flexibility provides many options, and in the case of the operative who attacked the JW Marriott on July 17, it appears that he was able to approach a meeting of foreign businessmen being held in the lobby lounge and attack them as a target of opportunity. A vehicle-borne IED (VBIED) detonated in front of the hotel would not likely have been able to target such a group so selectively on the fly.

Of course, this trend does not mean that large VBIEDs will never again be employed any more than the trend to attack hotels means aircraft and embassies will never be attacked. Rather, the intent here is to point out that as security has been increased around targets, militants have adapted to security measures designed to stop them and they have changed their tactics.

At first glance, it would seem logical that the shift from large VBIEDs would cause casualty counts to drop, but in the case of JI attacks in Indonesia, the shift to smaller devices has, in fact, caused higher casualty counts. The August 2003 attack against the JW Marriott in Jakarta used a VBIED and left 12 people dead. Likewise, the September 2004 attack against the Australian embassy in Jakarta used a VBIED and killed 10 people. The use of three smaller IEDs in the 2005 Bali attacks killed 23, more than JI’s 2003 and 2004 VBIED attacks combined. Additionally, the 2005 attacks killed five foreigners as opposed to only one in the 2003 attack and none in the 2004 attacks. The operatives behind the July 17 attacks surpassed the 2005 Bali attacks by managing to kill six foreigners.

The reason that smaller is proving to be more effective at killing foreigners is that the rule for explosives is much like real estate — the three most important factors are location, location and location. Though a larger quantity of explosives will create a larger explosion, the impact of an explosion is determined solely by placement. If a bomber can carry a smaller explosive into the center of a heavily packed crowd — such as a wedding reception or hotel lobby — it will cause more damage than a larger device detonated farther away from its intended target. These smaller devices can also be used to target a specific person, as seen in the December 2007 assassination of former Pakistani Prime Minister Benazir Bhutto .

A person carrying explosives in a bag or concealed under clothing is much more fluid and can thus maneuver into the best possible position before detonating. In essence, a suicide bomber is a very sophisticated form of “smart” munition that can work its way through gaps in security and successfully seek its target. This type of guidance appears to have worked very effectively in the July 17 Jakarta attacks. As noted above, of the seven victims in this attack (the nine total deaths included the bombers), six were foreigners. JI has received criticism from the Islamist community in Indonesia for killing innocent bystanders (and Muslims) and such targeted attacks will help mute such criticism.

In addition to being more efficient, smaller IEDs also are cheaper to make. In an environment where explosive material is difficult to obtain, it is far easier to assemble the material for two or three small devices than the hundreds of pounds required for a large VBIED. An attack like the July 17 Jakarta attack could have been conducted at a very low cost, probably not more than a few thousand dollars. The three devices employed in that attack (as noted above, there was a third device left in the hotel room that did not explode) likely did not require much more than 60 pounds of explosive material.

This economical approach to terrorism is a distinct advantage for a militant group like Noordin Mohammad Top’s faction of JI, Tanzim Qaedat al-Jihad. Due to the Indonesian government’s crackdown on JI and its factions, the Indonesian militants simply do not have the external funding and freedom of action they enjoyed prior to the October 2002 Bali attack. This means that, at the present time, it would be very difficult for JI to purchase or otherwise procure the hundreds of pounds of explosive material required for a large VBIED — coming up with 60 pounds is far easier.

Even though JI is fragmented and its abilities have been degraded since the 2002 Bali attack, a cell like the one headed by Top certainly maintains the ability and the expertise to conduct low-cost, carefully targeted attacks like the July 17 Jakarta bombings. Such attacks are easily sustainable, and the only real limiter on the group’s ability to conduct similar attacks in the future is finding attackers willing to kill themselves in the process. Perhaps a more significant limiter on their operational tempo will be the law enforcement response to the attack, which could force the cell to go underground until the heat is off. It might also be difficult to move operatives and IEDs from safe houses to targets when there is more scrutiny of potential JI militants.

Increased security at potential targets could also cause the cell to wait until complacency sets in before attacking a less wary — and softer — target. Of course, the group’s operational ability will also be affected should the Indonesian government capture or kill key operatives like Top and his lieutenants.

From the standpoint of security, the challenges of balancing security with guest comfort and customer service at large hotels will continue to be a vexing problem, though certainly it would not be surprising to see an increase in the use of magnetometers and X-ray machines to screen guests and visitors at vulnerable facilities. This may also include such measures as random bomb-dog searches and sweeps in areas where dogs are not a cultural taboo. Additionally, in light of the threat of suicide bombers using smaller devices or posing as guests, or even placing operatives on the hotel staff, much more effort will be made to implement proactive security measures such as protective intelligence and countersurveillance, which focus more on identifying potential attackers than on his or her weapons.

Hotel staff members also need to be taught that security is not just the role of the designated security department. Security officers are not omnipresent; they require other people on the hotel staff who have interactions with the guests and visitors to be their eyes and ears and to alert them to individuals who have made it through security and into the hotel and appear to be potential threats. Of course, the traveling public also has a responsibility not only to look out for their own personal security but to maintain a heightened state of situational awareness and notify hotel security of any unusual activity.

Please feel free to distribute this Intelligence Report to friends, or if you repost on a website include a link to www.STRATFOR.com .

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UnitedHealth Group Q2 Profit Jumps 155%

22 Jul 2009

Health care company UnitedHealth Group Inc. said Tuesday that its second quarter profit more than doubled from last year, but its health insurance enrollment continued to decline amid the economic recession. The Minnetonka, Minnesota-based company reported second quarter net income of $859 million, or 73 cents per share, compared with only $337 million, or 27 cents per share, in the year-ago period. Last year’s results included a pretax charge of $922 million, or 47 cents per share, however.

Complete article at:

http://www.nasdaq.com/newscontent/20090721/unitedhealthgroupq2profitjumps155unh.aspx?storyid=1395

From: CLG News

Pat Oliphant: health care
(imgsrv.gocomics.com/)

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REPORT: On health care reform, networks highlight perceived setbacks far more than progress

In two studies, Media Matters documents that TV news networks have repeatedly given considerably more attention to perceived setbacks to progressive health care reform efforts than to events that signal progress for those efforts.

Read More

http://mediamatters.org/items/200907220012?lid=1052856&rid=32029066

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Henry Louis Gates Arrested for Stealing Quart of Milk from Own Refrigerator

Andy Borowitz
BorowitzReport.com
July 23, 2009

Harvard professor Henry Louis Gates is back in hot water with law enforcement again today as Cambridge police arrested him for allegedly stealing a quart of milk from his own refrigerator.

“He was acting suspiciously in his kitchen, removing items from the cupboard such as a glass,” said Cambridge police spokesman Ryan Slatson. “When he made a move for the refrigerator, we pounced.”

One day after President Obama was harshly critical of them, the Cambridge police force received a strong vote of support from the National Alliance of Stupid Police.

According to an official statement from the Alliance, “We will be always on the lookout for perpetrators trying to break into their own homes, steal their own cars, and forcibly remove quarts of milk from their own refrigerators.”

Follow Andy Borowitz on Twitter: www.twitter.com/BorowitzReport

Complete article at:

http://www.huffingtonpost.com/andy-borowitz/henry-louis-gates-arreste_b_243398.html

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three thousand words

(click here to view)

Steve Artley Artleytoons Jul 23, 2009 EditorialCartoonists.com

David Horsey: … and I’m fighting for you !!! …
(www.seattlepi.com)

Matt Davies: The Horror!
(davies.lohudblogs.com)

Russia, Ahmadinejad and Iran Reconsidered

by George Friedman
July 20, 2009

At Friday prayers July 17 at Tehran University, the influential cleric and former Iranian President Ali Akbar Hashemi Rafsanjani gave his first sermon since Iran’s disputed presidential election and the subsequent demonstrations. The crowd listening to Rafsanjani inside the mosque was filled with Ahmadinejad supporters who chanted, among other things, “Death to America” and “Death to China.” Outside the university common grounds, anti-Ahmadinejad elements — many of whom were blocked by Basij militiamen and police from entering the mosque — persistently chanted “Death to Russia.”

Death to America is an old staple in Iran. Death to China had to do with the demonstrations in Xinjiang and the death of Uighurs at the hands of the Chinese. Death to Russia, however, stood out. Clearly, its use was planned before the protesters took to the streets. The meaning of this must be uncovered. To begin to do that, we must consider the political configuration in Iran at the moment.

The Iranian Political Configuration

There are two factions claiming to speak for the people. Rafsanjani represents the first faction. During his sermon, he spoke for the tradition of the founder of the Islamic republic, Ayatollah Ruhollah Khomeini, who took power during the 1979 Iranian Revolution. Rafjsanjani argued that Khomeini wanted an Islamic republic faithful to the will of the people, albeit within the confines of Islamic law. Rafsanjani argued that he was the true heir to the Islamic revolution. He added that Khomeini’s successor — the current supreme leader, Ayatollah Ali Khamenei — had violated the principles of the revolution when he accepted that Rafsanjani’s archenemy, Mahmoud Ahmadinejad, had won Iran’s recent presidential election. (There is enormous irony in foreigners describing Rafsanjani as a moderate reformer who supports greater liberalization. Though he has long cultivated this image in the West, in 30 years of public political life it is hard to see a time when has supported Western-style liberal democracy.)

The other faction is led by Ahmadinejad, who takes the position that Rafsanjani in particular — along with the generation of leaders who ascended to power during the first phase of the Islamic republic — has betrayed the Iranian people. Rather than serving the people, Ahmadinejad claims they have used their positions to become so wealthy that they dominate the Iranian economy and have made the reforms needed to revitalize the Iranian economy impossible. According to Ahmadinejad’s charges, these elements now blame Ahmadinejad for Iran’s economic failings when the root of these failings is their own corruption. Ahmadinejad claims that the recent presidential election represents a national rejection of the status quo. He adds that claims of fraud represent attempts by Rafsanjani — who he portrays as defeated presidential candidate Mir Hossein Mousavi’s sponsor — and his ilk to protect their positions from Ahmadinejad.

Iran is therefore experiencing a generational dispute, with each side claiming to speak both for the people and for the Khomeini tradition. There is the older generation — symbolized by Rafsanjani — that has prospered during the last 30 years. Having worked with Khomeini, this generation sees itself as his true heir. Then, there is the younger generation. Known as “students” during the revolution, this group did the demonstrating and bore the brunt of the shah’s security force counterattacks. It argues that Khomeini would be appalled at what Rafsanjani and his generation have done to Iran.

This debate is, of course, more complex than this. Khamenei, a key associate of Khomeini, appears to support Ahmadinejad’s position. And Ahmadinejad hardly speaks for all of the poor as he would like to claim. The lines of political disputes are never drawn as neatly as we would like. Ultimately, Rafsanjani’s opposition to the recent election did not have as much to do with concerns (valid or not) over voter fraud. It had everything to do with the fact that the outcome threatened his personal position. Which brings us back to the question of why Rafsanjani’s followers were chanting “Death to Russia?”

Examining the Anomalous Chant

For months prior to the election, Ahmadinejad’s allies warned that the United States was planning a “color” revolution. Color revolutions, like the one in Ukraine, occurred widely in the former Soviet Union after its collapse, and these revolutions followed certain steps. An opposition political party was organized to mount an electoral challenge the establishment. Then, an election occurred that was either fraudulent or claimed by the opposition as having been fraudulent. Next, widespread peaceful protests against the regime (all using a national color as the symbol of the revolution) took place, followed by the collapse of the government through a variety of paths. Ultimately, the opposition — which was invariably pro-Western and particularly pro-American — took power.

Moscow openly claimed that Western intelligence agencies, particularly the CIA, organized and funded the 2004-2005 Orange Revolution in Ukraine. These agencies allegedly used nongovernmental organizations (human rights groups, pro-democracy groups, etc.) to delegitimize the existing regime, repudiate the outcome of election regardless of its validity and impose what the Russians regarded as a pro-American puppet regime. The Russians saw Ukraine’s Orange Revolution as the breakpoint in their relationship with the West, with the creation of a pro-American, pro-NATO regime in Ukraine representing a direct attack on Russian national security. The Americans argued that to the contrary, they had done nothing but facilitate a democratic movement that opposed the existing regime for its own reasons, demanding that rigged elections be repudiated.

In warning that the United States was planning a color revolution in Iran, Ahmadinejad took the Russian position. Namely, he was arguing that behind the cover of national self-determination, human rights and commitment to democratic institutions, the United States was funding an Iranian opposition movement on the order of those active in the former Soviet Union. Regardless of whether the opposition actually had more votes, this opposition movement would immediately regard an Ahmadinejad win as the result of fraud. Large demonstrations would ensue, and if left unopposed, the Islamic republic would come under threat.

In doing this, Ahmadinejad’s faction positioned itself against the actuality that such a rising would occur. If it did, Ahmadinejad could claim that the demonstrators were — wittingly or not — operating on behalf of the United States, thus delegitimizing the demonstrators. In so doing, he could discredit supporters of the demonstrators as not tough enough on the United States, a useful charge against Rafsanjani, whom the West long has held up as an Iranian moderate.

Interestingly, while demonstrations were at their height, Ahmadinejad chose to attend — albeit a day late — a multinational Shanghai Cooperation Organization conference in Moscow on the Tuesday after the election. It was very odd that he would leave Iran at the time of the greatest unrest; we assumed that he had decided to demonstrate to Iranians that he didn’t take the demonstrations seriously.

The charge that seems to be emerging on the Rafsanjani side is that Ahmadinejad’s fears of a color revolution were not simply political, but were encouraged by the Russians. It was the Russians who had been talking to Ahmadinejad and his lieutenants on a host of issues, who warned him about the possibility of a color revolution. More important, the Russians helped prepare Ahmadinejad for the unrest that would come — and given the Russian experience, how to manage it. Though we speculate here, if this theory is correct, it could explain some of the efficiency with which Ahmadinejad shut down cell phone and other communications during the postelection unrest, as he may have had Russian advisers.

Rafsanjani’s followers were not shouting “Death to Russia” without a reason, at least in their own minds. They are certainly charging that Ahmadinejad took advice from the Russians, and went to Russia in the midst of political unrest for consultations. Rafsanjani’s charge may or may not be true. Either way, there is no question that Ahmadinejad did claim that the United States was planning a color revolution in Iran. If he believed that charge, it would have been irrational not to reach out to the Russians. But whether or not the CIA was involved, the Russians might well have provided Ahmadinejad with intelligence of such a plot and helped shape his response, and thereby may have created a closer relationship with him.

How Iran’s internal struggle will work itself out remains unclear. But one dimension is shaping up: Ahmadinejad is trying to position Rafsanjani as leading a pro-American faction intent on a color revolution, while Rafsanjani is trying to position Ahmadinejad as part of a pro-Russian faction. In this argument, the claim that Ahmadinejad had some degree of advice or collaboration with the Russians is credible, just as the claim that Rafsanjani maintained some channels with the Americans is credible. And this makes an internal dispute geopolitically significant.

The Iranian Struggle in Geopolitical Context

At the moment, Ahmadinejad appears to have the upper hand. Khamenei has certified his re-election. The crowds have dissipated; nothing even close to the numbers of the first few days have since materialized. For Ahmadinejad to lose, Rafsanjani would have to mobilize much of the clergy — many of whom are seemingly content to let Rafsanjani be the brunt of Ahmadinejad’s attacks — in return for leaving their own interests and fortunes intact. There are things that could bring Ahmadinejad down and put Rafsanjani in control, but all of them would require Khamenei to endorse social and political instability, which he will not do.

If the Russians have in fact have intervened in Iran to the extent of providing intelligence to Ahmadinejad and advice to him during his visit on how to handle the postelection unrest (as the chants suggest), then Russian influence in Iran is not surging — it has surged. In some measure, Ahmadinejad would owe his position to Russian warnings and advice. There is little gratitude in the world of international affairs, but Ahmadinejad has enemies, and the Russians would have proven their utility in helping contain those enemies.

From the Russian point of view, Ahmadinejad would be a superb asset — even if not truly under their control. His very existence focuses American attention on Iran, not on Russia. It follows, then, that Russia would have made a strategic decision to involve itself in the postelection unrest, and that for the purposes of its own negotiations with Washington, Moscow will follow through to protect the Iranian state to the extent possible. The Russians have already denied U.S. requests for assistance on Iran. But if Moscow has intervened in Iran to help safeguard Ahmadinejad’s position, then the potential increases for Russia to provide Iran with the S-300 strategic air defense systems that it has been dangling in front of Tehran for more than a decade.

If the United States perceives an entente between Moscow and Tehran emerging, then the entire dynamic of the region shifts and the United States must change its game. The threat to Washington’s interests becomes more intense as the potential of a Russian S-300 sale to Iran increases, and the need to disrupt the Russian-Iranian entente would become all the more important. U.S. influence in Iran already has declined substantially, and Ahmadinejad is more distrustful and hostile than ever of the United States after having to deal with the postelection unrest. If a Russian-Iranian entente emerges out of all this — which at the moment is merely a possibility, not an imminent reality — then the United States would have some serious strategic problems on its hands.

Revisiting Assumptions on Iran

For the past few years, STRATFOR has assumed that a U.S. or Israeli strike on Iran was unlikely. Iran was not as advanced in its nuclear program as some claimed, and the complexities of any attack were greater than assumed. The threat of an attack was thus a U.S. bargaining chip, much as Iran’s nuclear program itself was an Iranian bargaining chip for use in achieving Tehran’s objectives in Iraq and the wider region. To this point, our net assessment has been accurate.

At this point, however, we need to stop and reconsider. If Iran and Russia begin serious cooperation, Washington’s existing dilemma with Iran’s nuclear ambitions and its ongoing standoff with the Russians would fuse to become a single, integrated problem. This is something the United States would find difficult to manage. Washington’s primary goal would become preventing this from happening.

Ahmadinejad has long argued that the United States was never about to attack Iran, and that charges by Rafsanjani and others that he has pursued a reckless foreign policy were groundless. But with the “Death to Russia” chants and signaling of increased Russian support for Iran, the United States may begin to reconsider its approach to the region.

Iran’s clerical elite does not want to go to war. They therefore can only view with alarm the recent ostentatious transiting of the Suez Canal into the Red Sea by Israeli submarines and corvettes. This transiting did not happen without U.S. approval. Moreover, in spite of U.S. opposition to expanded Israeli settlements and Israeli refusals to comply with this opposition, U.S. Secretary of Defense Robert Gates will be visiting Israel in two weeks. The Israelis have said that there must be a deadline on negotiations with Iran over the nuclear program when the next G-8 meeting takes place in September; a deadline that the G-8 has already approved. The consequences if Iran ignores the deadline were left open-ended.

All of this can fit into our old model of psychological warfare, as representing a bid to manipulate Iranian politics by making Ahmadinejad’s leadership look too risky. It could also be the United States signaling the Russians that stakes in the region are rising. It is not clear that the United States has reconsidered its strategy on Iran in the wake of the postelection demonstrations. But if Rafsanjani’s claim of Russian support for Ahmadinejad is true, a massive re-evaluation of U.S. policy could ensue, assuming one hasn’t already started — prompting a reconsideration of the military option.

All of this assumes that there is substance behind a mob chanting “Death to Russia.” There appears to be, but of course, Ahmadinejad’s enemies would want to magnify that substance to its limits and beyond. This is why we are not ready to simply abandon our previous net assessment of Iran, even though it is definitely time to rethink it.

Please feel free to distribute this Intelligence Report to friends, or if you repost on a website include a link to www.STRATFOR.com

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Taliban financers based in Persian Gulf: Holbrooke

21 Jul 2009

Richard Holbrooke, the United States’ special envoy to Afghanistan and Pakistan, says some fundamentalists based in Persian Gulf states are financing the Taliban. Some official sources in Pakistan estimate the budget for Taliban forces — stationed on the Afghanistan-Pakistan border — to be between three and four billion dollars, BBC reported. Holbrooke says such a huge amount of money could not be acquired only through illegal drug trafficking. Only in 2008, the US-led coalition forces spent over $16 billion on the war in Afghanistan, which shows that the Taliban must be receiving a huge amount of financial support [from those allegedly 'fighting' the Taliban].

At:

http://www.presstv.ir/detail.aspx?id=101287&sectionid=351020403

From: CLG News

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THERE IS NO REASON FOR US TO BE IN AFGHANISTAN — EVERYONE KNOWS IT, AND IT SPELLS DEFEAT

By Chris Hedges, Truthdig

The confusion of purpose in Afghanistan mirrors the confusion on the ground. We are embroiled in a civil war.

Complete article at:

http://www.alternet.org/world/141478/there_is_no_reason_for_us_to_be_in_afghanistan_–_everyone_knows_it%2C_and_it_spells_defeat/

Triple Cross: How bin Laden’s Master Spy Penetrated the CIA …

See:

http://www.peterlance.com/peterlance.com/Home/Home.html

Read an excerpt from Triple Cross:

http://www.readersread.com/excerpts/triplecross.htm

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Mathematical Model Shows Why Defeating Insurgent Groups Like Taliban Is So Difficult

Insurgent groups like the Taliban can only be effectively engaged with timely and accurate military intelligence, and even good intelligence may only succeed in containing the insurgency, not defeating it, according to a new study in the current issue of Operations Research, a flagship journal of the Institute for Operations Research and the Management Sciences (INFORMS®)

Complete article at:

http://www.medicalnewstoday.com/articles/157931.php

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National Security Archive Update, July 17, 2009

MORE DUBIOUS SECRETS

Systematic Overclassification of
Defense Information Poses Challenge
for President Obama’s Secrecy Review

For more information contact:
William Burr – 202/994-7000

http://www.nsarchive.org

Washington, DC, July 17, 2009 – Pentagon classification authorities are treating classified historical documents as if they contain today’s secrets, rather than decades-old information that has not been secret for years. Today the National Security Archive posted multiple versions of the same documents–on issues ranging from the 1973 October War to anti-ballistic missiles, strategic arms control, and U.S. policy toward China–that are already declassified and in the public domain. What earlier declassification reviewers released in full, sometimes years ago, Pentagon reviewers have more recently excised, sometimes massively. The overclassification highlighted by these examples poses a major problem that should be addressed by the ongoing review of national security information policy that President Obama ordered on May 27, 2009. New presumptions against classification that may be added to an executive order on national security information will not, in isolation, end overclassification. Rigorous oversight, accompanied by improved training and consequences for improper classification are essential.

The Public Interest Declassification Board is continuing to accept ideas and comments on the classification system through Sunday July 19 at its online blog:

http://blog.ostp.gov/

Among the dubious secrets in today’s posting is the Air Force’s recent decision to classify the fact that the Nixon administrated ordered a DEFCON [Defense Readiness Condition] 3 alert during the 1973 Arab-Israeli war. An excised Air Force history, released in 2009, conceals what is well known to historians, journalists, and the interested public: in the early morning of 25 October 1973, at the height of the Arab-Israeli War, the Nixon administration put U.S. military forces on higher alert–DEFCON 3. Defense Secretary James Schlesinger and National Security Adviser Henry Kissinger ordered the DEFCON to deter a feared Soviet intervention in the Middle East conflict. The Nixon White House could not keep this a secret and news of the alert soon reached the national media, with The New York Times explaining to its readers what a DEFCON meant. More recently, U.S. government agencies have declassified documents mentioning the DEFCON 3 alert. In spite of the precedents and an appeal pointing out the previous disclosures, the Air Force today will not acknowledge the fact of the DEFCON, claiming that disclosure would cause “serious damage to the national security.”

The Obama administration’s review of U.S. secrecy policy should take examples like these into account when it tries to develop a credible system for classifying and declassifying information about U.S. foreign relations and military policy. Declassification standards for historical information (25 years old or older) should not mirror those used to declassify current information. Neither historians, taxpayers, nor the secrecy system itself are well-served when declassification reviewers treat historical classified information in the same way as today’s secrets. This doesn’t mean a laissez-faire attitude; in some areas–such as nuclear weapons design data and names of confidential informants–there is a public interest in secrecy, but the objective should be high walls around the most sensitive information, and the walls should be torn down when they are not needed.

Please visit the National Security Archive Web site for more information.

http://www.nsarchive.org

Public Interest Declassification Board – http://blog.ostp.gov/

==========

Greetings from TRAC.

Tuesday, July 21, 2009

Very timely Justice Department data obtained and analyzed by the Transactional Records Access Clearinghouse (TRAC) show that immigration enforcement under the Obama Administration is returning to the unusually high levels that were reached under President Bush.

The clearest sign of the administration’s current immigration enforcement policy emerged from the monthly growth in such prosecutions — up from 6,562 in January when the president came into office to 9,037 in April. But the government’s initial decision to step up immigration prosecutions goes back to FY 2004 with the launching of a program called “Operation Streamline.” While the monthly number of prosecutions varied during President Bush’s second term, it hit an all time high of 11,454 in September of 2008. For the latest data, go to

http://trac.syr.edu/tracreports/bulletins/immigration/fil/

In addition to the most recent figures on immigration prosecutions, TRAC continues to provide additional free reports on a wide range of current enforcement trends.

Go to http://trac.syr.edu/tracreports/bulletins/

for information on April 2009 convictions and prosecutions in the areas of immigration, drugs, white collar crime, official corruption and more. You can also find free reports on the enforcement activities of selected government agencies such as the IRS, FBI, DHS and DEA.

David Burnham and Susan B. Long, co-directors
Transactional Records Access Clearinghouse
Syracuse University
Suite 360, Newhouse II
Syracuse, NY 13244-2100
315-443-3563
trac@syr.edu

http://trac.syr.edu

==========

Echoing Drudge and Heritage, Limbaugh falsely claimed Obama “admits he doesn’t know” what’s in House health bill

The Drudge Report, a Heritage Foundation blog, and Rush Limbaugh all falsely claimed that President Obama, in Limbaugh’s words, “admit[ted] he doesn’t know” what’s in the House health care bill. In fact, Obama said he was “not familiar” with opponents’ false talking point that the bill will make individual private medical insurance illegal.

Read More

http://mediamatters.org/items/200907210049?lid=1052476&rid=31973516

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July 2009 Southwest Climate Outlook

Tuesday, July 21, 2009

The July 2009 Southwest Climate Outlook is online. This month’s feature article is entitled, “Who’s paying attention to the drought on the Colorado Plateau?”.

To view the Southwest Climate Outlook in html format or the printer-friendly PDF file visit:

http://www.climas.arizona.edu/forecasts/swoutlook.html

Highlights from the July 2009 Outlook

Drought– Monsoon rains have helped ease drought conditions in Arizona, particularly in the southeast region. The rains also have helped New Mexico, decreasing the extent of moderate and severe drought conditions.

Temperature– Only a few areas in western New Mexico and southern Arizona have had below-average temperatures.

Precipitation– Predictions of an early and wet monsoon have come true for central and southeast New Mexico and south-central Arizona.

ENSO– The NOAA-Climate Prediction Center has officially declared an El Niño event. El Niño conditions are expected to continue to develop during the next several months, evolving into a weak to moderate event that lasts through the 2009–10 winter.

Monsoon- The forecast for the 2009 monsoon called for an early start to the rainy season accompanied by above-average precipitation for the first half of the season. After the first month of rains, the forecast appears to have been accurate.

Climate Forecasts– Late summer and fall forecasts for much of the Southwest indicate temperatures similar to the warmest 10 years of the 1971–2000 observed conditions. Forecasters are uncertain about summer to fall precipitation because El Niño events can either increase or decrease rainfall.

The Bottom Line– The monsoon season so far has lived up to expectations, arriving early and with above-average rains in some parts of both states. However, because the past few monsoon seasons have been very wet, this season may seem dry. August storms are expected to deliver more rain to the parched Four Corners region, and rains elsewhere will continue to improve short-term drought conditions.

Zack Guido
Associate Physical Scientist
Climate Assessment for the Southwest (CLIMAS)
Institute of the Environment (formally ISPE)
University of Arizona
520-882-0879

http://www.climas.arizona.edu/

==========

And now for the important news ….

By Argus Hamilton

http://www.JewishWorldReview.com

Michael Jackson’s family was reported Monday to be planning to make Neverland a West Coast version of Graceland. Elvis only made it to forty-two, while Jackson made it to fifty. This is evidence you should never mix sleeping pills with fried peanut butter.

==========

Conspiracy Theorists Say NASA Faked Obama’s Birth

Andy Borowitz
BorowitzReport.com
July 22, 2009

The so-called “Birther” movement gained new steam today as one of its prominent Congressional advocates claimed that NASA faked the birth of President Barack Obama.

In an appearance on CNN this morning, Rep. John Campbell (R-CA) said that “the reason Barack Obama doesn’t have a legal birth certificate was that NASA totally faked his birth 47 years ago.”

The California congressman said that he and his fellow conspiracy theorists had proof that the President’s birth was faked on a Hollywood soundstage over four decades ago using state-of-the-art special effects.

According to Rep. Campbell, Mr. Obama is not legally qualified to serve as president “because we have no proof that Barack Obama exists.”

Follow Andy Borowitz on Twitter: www.twitter.com/BorowitzReport

==========

three thousand words

(click here to view)

Chan Lowe Sun-Sentinel Jul 22, 2009 EditorialCartoonists.com

Tom Tomorrow: Sometimes there’s more to the picture…
(www.salon.com)

Cartoon du Jour – By Khalil: white man’s last stand
(www.bendib.com)

The Real Price of Goldman’s Giganto-Profits

by Matt Taibbi

“By now almost everyone knows that for decades mortgage dealers insisted that home buyers be able to produce a down payment of 10 percent or more, show a steady income and good credit rating, and possess a real first and last name. Then, at the dawn of the new millennium, they suddenly threw all that shit out the window and started writing mortgages on the backs of napkins to cocktail waitresses and excons carrying five bucks and a Snickers bar.” – Matt Taibbi, author of The Great American Bubble Machine

Equity underwriting boomed during the period as dozens of banks raised money to strengthen capital and repay Troubled Asset Relief Program funds. The business reported record revenue of $736 million.
via Article – WSJ.com.

So what’s wrong with Goldman posting $3.44 billion in second-quarter profits, what’s wrong with the company so far earmarking $11.4 billion in compensation for its employees? What’s wrong is that this is not free-market earnings but an almost pure state subsidy.

Last year, when Hank Paulson told us all that the planet would explode if we didn’t fork over a gazillion dollars to Wall Street immediately, the entire rationale not only for TARP but for the whole galaxy of lesser-known state crutches and safety nets quietly ushered in later on was that Wall Street, once rescued, would pump money back into the economy, create jobs, and initiate a widespread recovery. This, we were told, was the reason we needed to pilfer massive amounts of middle-class tax revenue and hand it over to the same guys who had just blown up the financial world. We’d save their asses, they’d save ours. That was the deal.

It turned out not to happen that way. We constructed this massive bailout infrastructure, and instead of pumping that free money back into the economy, the banks instead simply hoarded it and ate it on the spot, converting it into bonuses. So what does this Goldman profit number mean? This is the final evidence that the bailouts were a political decision to use the power of the state to redirect society’s resources upward, on a grand scale. It was a selective rescue of a small group of chortling jerks who must be laughing all the way to the Hamptons every weekend about how they fleeced all of us at the very moment the game should have been up for all of them.

Now, the counter to this charge is, well, hey, they made that money fair and square, legally, how can you blame them? They’re just really smart!

Bullshit. One of the most hilarious lies that has been spread about Goldman of late is that, since it repaid its TARP money, it’s now free and clear of any obligation to the government – as if that was the only handout Goldman got in the last year. Goldman last year made your average AFDC mom on food stamps look like an entrepreneur. Here’s a brief list of all the state aid that is hiding behind that $3.44 billion number they announced the other day. In no particular order:

1. The AIG bailout. Goldman might have gone out of business last year if AIG had been allowed to proceed to an ordinary bankruptcy, as AIG owed Goldman about $20 billion at the time it went into a death spiral. Instead, Goldman gets to call upon its former chief, Hank Paulson, who green-lights this massive, $80 billion bailout of AIG (with Lloyd Blankfein in the room), at least $12.9 billion of which went straight to Goldman. Moreover, let’s not forget this: both Goldman and Bank Societe Generale had been tattooing AIG with collateral calls in the period before AIG’s collapse, with Goldman extracting a full $5.9 billion from the company during that time. It was those collateral calls that really killed AIG.

Now, ask yourself: exactly how big would Goldman’s profits be this year, if they had to fill a still-extant $13 billion or even a $20 billion hole on its balance sheet from AIG’s collapse? You think it would still be $3.44 billion? What if Hank Paulson had elected to save Lehman instead of saving AIG/Goldman, how big would Goldman’s profits be then? Is anyone even asking this question?

I keep hearing people say, “Well, so what – it’s only fair that Goldman got paid off for its deals with AIG. After all, AIG was contractually obligated to Goldman. Goldman deserves that money, because it was doing the right thing in buying insurance from AIG in the first place.”

That’s bullshit, too. As Rich Bennett over at the hilarious monkey business blog pointed out to me the other day, Goldman was insane and reckless in making those deals with AIG. Goldman wasn’t removing risk from its books by buying CDS protection from AIG, they were exchanging one kind of risk for another kind of risk, counterparty risk. “If you have too much risk to one entity and they go bust, you’re shit outta luck,” Rich says. “They took AIG for a ride, and when the music stopped, they and their partners were going to be taking up the proverbial tookus.”

So to review: Goldman makes insane bets, runs wild on AIGFP’s house idiot Joe Cassano for a while, sticking him with $20 billion in risk, and when it all went to shit – as it inevitably had to – they drove a big stake through AIG’s heart and got the government to step in and pay them off using our money. How’s that for market capitalism? Just like Adam Smith drew it up, right? They’re just smart guys!

2. TARP. Much discussed, no need to really review here. Goldman got its $10 billion. It paid off its $10 billion. Good for them. However, there’s one thing to note here, and it hasn’t been mentioned really at all in the press. It is continually reported that now that Goldman has repaid its TARP money, it no longer has restrictions on its executive compensation. That’s actually not true. The government still holds warrants from Goldman and other companies that it acquired during the TARP process, and until the banks pay off those warrants (and they’re all already trying to pay them off at below market prices), the Treasury still technically has the authority to prevent lavish bonuses. Not that that will happen, of course, and this is yet another government handout – a firmer government would be hard on Goldman to the end of the process, while this government is doing its matador job and waving through these massive bonuses early on in the repayment schedule.

3. The Temporary Liquidity Guarantee Program. So Goldman last year converts from an investment bank to bank holding company status, which now makes it eligible for a new program that gives commercial banks FDIC backing for unsecured debt. This is not a direct subsidy in the sense of us actually handing over a bunch of money to Goldman, but it’s almost better, in a way. This basically hands over a free AAA rating to the big banks and allows them access to mountains of cheap money, with all of us on the hook if something went wrong. This is the equivalent of telling Exxon it can take crude from the Strategic Petroleum Reserve at below-market rates during an energy crisis and then turn around and sell it on the market at whatever price it wants, and pocket the difference, for the good of God and country. Goldman took full advantage of this deal, issuing $28 billion in FDIC-backed debt after its conversion. Exactly how hard is it for a bank to make a profit when it has unlimited access to virtually free money? It is almost impossible for banks to not make money when their cost of capital sinks this low.

Ask yourself this question: has borrowing money gotten any cheaper for you this year? Did someone from the government walk up to you after you foreclosed on your house or missed payments on your charge card and, as a favor, just because you’re so cool, jack your credit score back up to the 99th percentile and invite you to start all over again? Because that’s what happened to these assholes. They made every bad move you can think of and they not only got a clean credit slate but a virtually ceiling-free spending limit.

4. The Fed Programs. By converting to a bank holding company, Goldman also became eligible for a whole galaxy of new bailout programs administered through the federal reserve like the Term Asset-Backed Securities Loan Facility (TALF); it also became eligible to borrow cheap money from the Fed’s discount window. There is so much to cover here that it would take forever to get to all of it, but the key number to remember here is $2.2 trillion (not billion, trillion). That’s how much the Fed has lent out in assistance since this crisis started and we have no idea how much of it went to Goldman or any other firm, thanks to Ben Bernanke, who refuses to disclose this information. But you can bet that Goldman has taken full advantage of all the various programs designed to relieve the banks of the worthless crap assets they acquired while they were playing roulette the past ten years or so. We just have no idea how much crap they unloaded on the Fed, or how much they borrowed. Would you really bet that it wasn’t much?

5. The TARP Repayment Bonanza. See the story at the top of this piece. As part and parcel of the TARP program, the banks that received money had strict guidelines imposed on them by the state in the area of how they could raise the money to repay. TARP recipients had to issue new equity according to certain parameters, and guess who one of the only major equity underwriters left on Wall Street is? That’s right, Goldman, Sachs. So say International Reckless Dickwad Bank needs to issue $100 million in new stock to pay off TARP; they hire Goldman to do the deal, and since the fee for equity underwriting is 7%, Goldman gets, in essence, a state-mandated $7 million fee. Because so much money was lent out under TARP, the underwriters on Wall Street made a massive bonanza on all the new bank stock. As noted above, Goldman’s equity underwriting department hauled in $736 million this quarter. Does this happen without the bailouts? No. Do the bailouts happen if banks like Goldman hadn’t blown up the universe in the first place? No. You do the math; this is another subsidy.

And that’s just some of the help they’ve gotten. Should we bother to count Goldman’s status as one of just 17 remaining primary dealers in U.S. Treasuries, which naturally did a crisp business last year as the U.S. borrowed its way out of a hole the banks had themselves created? Should we count the ban on short-selling Goldman asked for and got last year? Or how about the seemingly obvious fact that the bank used all of this state assistance and guarantees as a crutch to prop up lots of new risk-taking activity, which was the exact opposite of what was supposed to have been achieved by the bailouts, which were supposed to usher in an new era of austerity and temperance?

As Felix Salmon notes, Goldman last year, after it converted to bank holding company status, announced that it was “taking steps to reduce leverage.” But what’s happened since then is that Goldman has actually been emboldened by all its state backing to borrow more and gamble more than ever. This is the equivalent of a regular casino gambler who hears that the house has doubled down on his credit line and decides to stay up at the tables all night, instead of going home and sobering up. Just look at Goldman’s VaR, or Value at Risk, which measures the amount of money the bank puts at risk on any given day: it’s soared since last year.

Taken altogether, what all of this means is that Goldman’s profit announcement is a giant “fuck you” to the rest of the country. It is a statement of supreme privilege, an announcement that it feels no shame in taking subsidies and funneling them directly into their pockets, and moreover feels no fear of any public response. It knows that it’s untouchable and it’s not going to change its behavior for anyone. And it doesn’t matter who knows it.

There are going to be some people who say that some of this stuff isn’t government subsidy so much as ordinary government contracting. After all, do we criticize Boeing for making airplanes or Electric Boat for making submarines during a war? If we don’t do that, then why should we be pissed about Goldman making a profit underwriting TARP repayment stock issuances, or Treasuries?

The difference is that Boeing and Electric Boat didn’t start the war. But these guys on Wall Street caused this crisis, and now they’re raking in money on the infrastructure their buddies in government have devised to bail them out. It’s a self-fulfilling cycle – beautiful, in a way, but at the same time sort of uniquely disgusting. That they’re going to get away with it is bad enough – that they’re getting praised for it, for being such smart guys, is damn near intolerable.

This article originally appeared on True/Slant and is reprinted with permission.

July 18, 2009

Matt Taibbi is the author of The Great Derangement and Spanking the Donkey.

Complete article at:

http://www.lewrockwell.com/taibbi/taibbi10.1.html

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Will There Be a Fight To Save American Manufacturing?

New York Times: “The United States ranks behind every industrial nation except France in the percentage of overall economic activity devoted to manufacturing — 13.9 percent, the World Bank reports, down a percentage point or so in a decade. The 19-month-old recession has contributed to this decline. Industrial production has fallen 17.3 percent, the sharpest drop during a recession since the 1930s…Manufacturing has long been viewed as an essential pillar of a powerful economy. It generates millions of well-paid jobs for those with only a high school education, a huge segment of the population. No other sector contributes more to the nation’s overall productivity, economists say. And as manufacturing weakens, the country becomes ever more dependent on imports of merchandise, computers, machinery and the like — running up a trade deficit that in time could undermine the dollar and the nation’s capacity to sustain so many imports.”

http://www.nytimes.com/2009/07/21/business/economy/21manufacture.html

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Today’s Gasoline Prices

Monday, July 20, 2009

RETAIL GASOLINE: (Self Service Prices per Gallon, Including Taxes) This report contains price estimates for gasoline sold in ozone non-attainment areas which require the sale of
reformulated gasoline (RFG) as designated by the Environmental Protection Agency, and Conventional areas which includes both attainment areas and carbon monoxide non-attainment areas.

Mogas web site url

http://www.eia.doe.gov/oil_gas/fwd/wrgp.html

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Bank of Canada. The outlook for the global supply of oil : running on faith?

by Olivier Gervais and Ilan Kolet
Ottawa : Bank of Canada, July 2009.
(Discussion paper ; 2009-9)

http://www.bankofcanada.ca/en/res/dp/2009/dp09-9.pdf

EIA – Canada Country Analysis Brief

Canada Country Analysis Brief (07/09/2009):

“Canada has considerable natural resources and is one of the world’s largest producers and exporters of energy. In 2006, Canada produced 19.3 quadrillion British Thermal Units (Btu) of total energy, the fifth-largest amount in the world. Since 1980, Canada’s total energy production has increased by 87 percent, while its total energy consumption has increased by only 44 percent. Almost all of Canada’s energy exports go to the United States, making it the largest source of U.S. energy imports. Canada is consistently among the top sources for U.S. oil imports, and it is the largest source of U.S. natural gas and electricity imports. Recognizing the importance of the energy trade between the two countries, both participate in the North American Energy Working Group, which seeks to improve energy integration and cooperation between Canada, the U.S., and Mexico.”

http://www.eia.doe.gov/emeu/cabs/Canada/Background.html

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New articles at Iraq Oil Report

Wednesday, July 15, 2009

Iraq Oil Report has posted a new item

Big, careful steps

http://www.iraqoilreport.com/the-biz/big-careful-steps-1959/

As Iraq appears to start slowly denationalizing its oil sector, politicians and foreign companies must ensure Iraqis are satisfied.

New articles at Iraq Oil Report

Thursday, July 16, 2009
Iraq Oil Report has posted a new item

Biden, US Policy in Iraq and the Concept of Muhasasa

http://www.iraqoilreport.com/politics/biden-us-policy-in-iraq-and-the-concept-of-muhasasa-1965/

By REIDAR VISSER
Historiae.org

On 27 February this year, President Barack Obama held one of the best speeches on Iraq delivered by a US senior official for a long time. Obama congratulated the Iraqis for having resisted the forces of partition, and while he noted the need for political reconciliation, he pretty much refrained from imposing his
[...]

Kurdish security chief acknowledges violations

http://www.iraqoilreport.com/security-conflict/kurdish-security-chief-acknowledges-violations-1981/

The head of one KRG security agency discusses human rights critics and explores the role of the agency in the future of Iraqi Kurdistan.

Fallujans’ faith in local justice renewed

http://www.iraqoilreport.com/life/fallujans-faith-in-local-justice-renewed-1985/

Residents pleased to see restoration of local court after putting up with years of so-called tribal justice.

Iraqis relieved at American exit

http://www.iraqoilreport.com/life/iraqis-relieved-at-american-exit-1989/

City dwellers recall experiences of retreating US military with bitterness and, occasionally, admiration.

New articles at Iraq Oil Report

Saturday, July 18, 2009
Iraq Oil Report has posted a new item

Workers rebel

http://www.iraqoilreport.com/the-biz/workers-rebel-1994/

Iraq’s oil unions allude to tense future in Rumaila as foreign firms signed by the Oil Ministry are unwelcome, at least on the current terms.

Desertification destroys Ninawa villages

http://www.iraqoilreport.com/life/desertification-destroys-ninawa-villages-2002/

Whole villages in Ninawa province are being abandoned as a result of drought and increasing desertification which is making life impossible for those who remain on the once arable land.

Kurds seek new political opposition

http://www.iraqoilreport.com/politics/kurds-seek-new-political-opposition-2005/

Vote next week sets stage for possible new opposition to KDP and PUK, parties which now dominate politics in Iraq’s north.

Raw docs

http://www.iraqoilreport.com/the-biz/raw-docs-2009/

Three key documents from Iraq’s June 30 auction for six oil and two gas fields.

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Op-Ed: Here comes the next fiscal crisis

Contra Costa Times

http://www.contracostatimes.com/search/ci_12852750?IADID=Search-www.contracostatimes.com-www.contracostatimes.com&nclick_check=1

By ALAN J. AUERBACH and William G. Gale

AUERBACH IS A PROFESSOR OF ECONOMICS AND LAW AND DIRECTOR OF THE BURCH CENTER FOR TAX POLICY AND PUBLIC FINANCE AT THE UNIVERSITY OF CALIFORNIA, BERKELEY. Gale is vice president of the Brookings Institution and co-director of the Urban Institute-Brookings Institution Tax Policy Center.

July 19, 2009

The United States confronts not one but two economic challenges: its worst recession since the Depression and a growing imbalance between federal spending and revenues that makes its underlying fiscal policy unsustainable….

Most economists accept the need to put aside concerns about fiscal balance as we address the recession. But soon enough we will face pressure to shift our focus from the short-term economic problem to our longer-term fiscal problem. Unfortunately, poor policy choices in the past combined with the enormity of the recession make the second problem worse and reduce the time we will have to deal with it….

In the immediate future, policymakers will face a delicate balancing act between encouraging economic recovery and establishing fiscal sustainability. Short-term stimulus can boost an otherwise weak economy, so withdrawing stimulative policies and imposing fiscal discipline too soon could slow the recovery. But delaying fiscal discipline too long could be equally destructive. Success will take new ideas, some luck and uncharacteristic honesty and resoluteness — from our leaders in Washington and from the rest of us.

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Afghanistan Policy: Assessing the Latest

Monday, July 20, 2009

In recent days, Defense Secretary Robert Gates has publicly opened the door to more U.S. troop deployments in Afghanistan while declaring that “nobody is prepared to have a long slog where it is not apparent we are making headway.” On Sunday, the Los Angeles Times reported that Gates said in an interview: “If we can show progress, and we are headed in the right direction, and we are not in a stalemate where we are taking significant casualties, then you can put more time on the Washington clock.”

NORMAN SOLOMON, norman@accuracy.org, http://www.WarMadeEasyTheMovie.org

Solomon, executive director of the Institute for Public Accuracy, is the author of “War Made Easy: How Presidents and Pundits Keep Spinning Us to Death.” He said today: “For U.S. troop levels in an escalating war, the Obama administration is now in a classic cycle of raising the ceiling — and then turning it into the new floor. Statements by Secretary Gates in recent days have all the earmarks of a step-by-step spin strategy on the home front, aimed at gradually acclimating the public to the idea that U.S. military involvement in the Afghan war must continue to grow in magnitude and duration.”

He added: “There’s official talk about how the military situation in Afghanistan must begin to turn around in the next year, but such pledges litter the history of protracted U.S. war efforts in Vietnam and Iraq. The horizon keeps moving, and so do the timelines for completion — remaining in sight and out of reach.”

Solomon wrote the recent article “Escalation Scam: Troops in Afghanistan”:

http://www.commondreams.org/view/2009/07/09-1

From: Institute for Public Accuracy

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McClatchy ignores progressive economists in report on minimum-wage increase

A McClatchy article about the scheduled increase in the federal minimum wage provided only arguments from “some economists” against raising the minimum wage while ignoring economists who argue that the economy will benefit from increasing it.

Read More

http://mediamatters.org/items/200907200024?lid=1052037&rid=31903517

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Bloggers Fail to Convince Their Mothers They Met with Obama

Andy Borowitz BorowitzReport.com
July 21, 2009

One day after a group of liberal bloggers met with President Barack Obama to discuss influencing the national debate on health care, many of the writers who met with the president are still having trouble convincing their moms that the meeting actually took place.

“Yesterday I told my mom that I was going to meet Obama and she was like, ‘Yeah, tell me another one,’” said Tracy Klugian, 34, who has been writing the liberal blog www.LibDemWatch.com since he dropped out of graduate school in 2003. “I think she thought I was just going to see Harry Potter again.”

Mr. Klugian said he found his mother’s incredulous reaction “hurtful, IMO” because “I would NEVER get out of my pajamas and leave the basement unless it was for something REALLY, REALLY IMPORTANT,” explaining that he often speaks in capital letters for emphasis.

He and the others assembled at the White House brought up a number of health care concerns particularly worrisome to bloggers, including an alarming uptick in carpal tunnel syndrome and vision loss due to poor lighting. More here.

Follow Andy Borowitz on Twitter: www.twitter.com/BorowitzReport

==========

three thousand words

(click here to view)

Abell Smith Eat the State! Jul 21, 2009 EditorialCartoonists.com

Dwayne Booth: the nightmare is always the same …
(www.cagle.com)

Jerry Holbert: recession grinder
(www.cagle.com)

A Million (Dollar) Reasons for Earmarks

Volume XIV No. 29: July 17, 2009

This week, the House Defense Appropriations Subcommittee huddled in closed session to vote on next year’s Defense Department spending bill. As the members worked, they were probably going over a million proposals and initiatives while they decided how to spend hundreds of billions of tax dollars. Or the members were thinking of the near-million dollars in campaign contributions received from entities for which these members tried to secure earmarks.

Our exhaustive analysis of the defense spending bill found that the 18 members of the subcommittee submitted more than $1.6 billion in defense earmark requests–and potentially a lot more. Why potentially? Because despite brand-new rules intended to compel disclosure, Reps. Kilpatrick (D-MI) and Kingston (R-GA) refused to tell taxpayers exactly what they requested, but indicated their offices received requests for more than $2.4 billion in earmarked projects, some of which were surely submitted. Leaving aside those requests, subcommittee members were behind at least 181 requests worth $845 million for 130 companies that contributed $963,265 to them since 2007.

Companies line up campaign contributions for Defense Appropriations lawmakers because that’s where the money is. Nearly half the total earmark dollars each year are contained in the defense spending bill, so thousands of dollars in campaign contributions can turn into millions of taxpayer dollars to pad a company’s bottom line. That’s a pretty fair return on investment.

On top of the subcommittee campaign contribution heap was Rep. Moran (D-VA) with $201,100, followed closely by Chairman Murtha (D-PA) at $199,050. Rep. Murtha pulled down $32,600 from Argon ST executives, potential recipients of an $8 million earmark to upgrade a torpedo. Perhaps most interesting is third-place winner Rep. Young (R-FL), the ranking member of the subcommittee. Rep. Young pulled in $123,800, $4,050 of which came from Cobham Corporate North America or its subsidiary, the beneficiaries of a $4 million earmark by the Congressman. Wednesday, federal agents raided Conax (the subsidiary), and Rep. Young pulled the earmark request.

To be sure, it is very difficult to prove a quid pro quo between campaign contributions and earmarks, but it doesn’t take a financial analyst to realize these companies aren’t necessarily donating out of altruism. Lawmakers are very well positioned to deliver earmark bucks for defense companies in their district.

This problem was a concern for President Obama when he was in the Senate. A couple years into his Senate tenure, Sen. Obama vowed to not ask for any earmarks that benefit private companies. As President, he has argued that earmarks to private companies should be competed. Good luck with that: Most earmarks are written so that there is only one possible recipient – the company favored by the lawmaker behind the earmark.

We think earmarks to private companies should just be eliminated. The risk of corruption is too high, and these contracts should have been competed in the first place.

We will continue to analyze the data and figure out how campaign contributions correlate to earmark awards, but in the meantime, we will sort through the 1,080 earmarks worth $2.7 billion stuffed into the defense spending bill.The analysis and full database is available here.

Let us know what you think.

Going on at Taxpayer.net This Week

The President’s 2010 Budget: Reining in on Oil and Gas Subsidies

Oil and Gas Industry Profits

House Defense Appropriations Committee Members Rake in Nearly $1 million from Potential Earmark Beneficiaries

House Appropriators Reject Weapons Cuts

Fiscal Year 2010 Earmark Databases

TCS Holds Congressional Briefing on Defense Spending

TCS Letter to Congress: Protect Taxpayers from Risky Reactors

UPDATE: Support Levin/McCain F-22 Amendment

UPDATE: Senate Adds $312 Million in Earmarks to Homeland Security Spending Bill

UPDATE: Defense Authorization Earmarks Disclosed

Bailout Bank Bios

TCS Staff are compiling profiles of all financial institutions receiving funds under the 2008 Emergency Economic Stabilization Act. See all completed bios here.

TCS in the News

TCS was cited in dozens of stories this past week Check them all out in the Headlines About TCS section of our redesigned website.

Notable Quote

“Is there a rule against that?”

Austin Durrer, a spokesman for Rep. Jim Moran (D-VA), when asked by the Wall Street Journal about campaign donations from employees of companies receiving earmarks.

From: the weekly wastebasket at www.taxpayer.net

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It is time to put finance back in its box

By Philip Augar

Published: April 13 2009

Nicolas Sarkozy arrived at the Group of 20 summit having said: “The all-powerful market that is always right is finished.” The French president left it proclaiming “a page has been turned” on the Anglo-Saxon financial model. Whether or not a page really has been turned depends on the construction of a practical successor to free-market economics, a process that entrenched interests in America and Britain would be well-advised to encourage if they wish to remain centre stage.

The ideas that defined the golden age of market capitalism were formed in the vacuum left by the collapse of the Bretton Woods system of fixed exchange rates in 1971. Over the next two decades, the Chicago School of free-market economists helped to persuade the Reagan and Thatcher administrations to adopt laisser faire policies and deregulation. Simultaneously, at Northwestern University, Professor Alfred Rappaport’s work on creating shareholder value clarified the objectives of the corporate sector.

Management consultants took hold of these ideas and converted them to a coherent strategy for business. Then investment bankers, liberated by deregulation and with an eye to the main chance, picked up the whole package and sold it hard to chief executives. Once developments in derivatives theory in the 1970s opened the door to share options and performance-based compensation for executives, there followed three decades in which tooth-and-claw capitalism ruled supreme.

Conditions are now right for another radical rethink. The old model is busted. The big beasts of free-market economics, Britain and America, are more wounded than other species. Governments, central banks and regulators are groping unconvincingly for solutions. Against this background, new ideas should be welcomed. But for this to occur there would need to be a turnround in government attitudes on either side of the Atlantic, and a more effective and creative response from the academic sector in these countries than we have seen in recent years.

A change in government thinking requires finance to be put back in its box. The industry gradually infiltrated the commanding heights of public life in America and Britain from the late 20th century onwards. Senior bankers such as Robert Rubin, Jon Corzine and Hank Paulson upheld the American tradition of Wall Street titans taking public office. In Britain, the Conservatives’ connections with the Square Mile were well established, but the City was quick to build bridges with New Labour when it was elected to office in 1997 and the incoming government was equally eager to respond. Former investment bankers appeared in full-time positions at the Treasury, the government department that worked most closely with the City, and as chancellor of the exchequer Gordon Brown appointed City grandees to the business councils that advised him.

The influence of finance over political life was reinforced by money. Wall Street bankers regularly appeared at the top of the giving lists for the political parties. In the UK, financial sector philanthropists donated to Labour and supported the government’s pet schemes, such as the Academies programme. Others lined up behind the Conservatives, whose fundraising is led by two of the City’s most prominent people, Michael Spencer, chief executive of Icap, the world’s largest inter-dealer broker, and Stanley Fink, former chief executive of Man Group, the hedge fund manager. There is no suggestion of impropriety or that this enabled the industry to buy favour, it is just that in its pomp, finance became so important and so influential that it crowded out other voices.

Similar forces were at work in the academic world, a sector that might have stimulated debate but which was conspicuous by its absence when it came to forming an effective critique of red-blooded capitalism. The few academics who suggested that markets did not always know best were dismissed by economic liberals as living in the past or told that the new financial system had “transformed risk” and raised global living standards.

Finance wrapped its tentacles around relevant parts of the academic world. Hard-pressed business schools competed for students eager to forge careers in finance after they completed their masters’ degrees. The quantitative skills of certain academics were sought by hedge funds that were prepared to pay them life-changing sums in consultancy fees. Rich alumni endowed their alma mater with benefactions to further the study of finance. The giving was well intended, and everyone has the right to pursue their career of choice, but under these circumstances it is little wonder that so much academic output was supportive of the financial system.

But now is the time for change. Unless governments in America and Britain really open themselves up to new ideas, emerging economies in Asia and mainland Europe, places where alternative economic and corporate governance models do exist, will seize the initiative and redefine the global agenda. In parallel, academics need to recapture their heritage of creative, independent thinking and throw off the influence of finance. Wall Street and the City need to be grown up about this. They might not like the prospect of losing their grip on government and exposing themselves to new ideas. But unless they do, they might just find that the page has indeed been turned and they are no longer on it.

The writer was an investment banker before turning to writing in 2000. His latest book is ‘Chasing Alpha: How reckless growth and unchecked ambition ruined the City’s golden decade’

http://www.ft.com/cms/s/0/0073f3e6-2859-11de-8dbf-00144feabdc0.html

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Dismantling the Temple

By William Greider
This article appeared in the August 3, 2009 edition of The Nation.
July 15, 2009

The financial crisis has propelled the Federal Reserve into an excruciating political dilemma. The Fed is at the zenith of its influence, using its extraordinary powers to rescue the economy. Yet the extreme irregularity of its behavior is producing a legitimacy crisis for the central bank. The remote technocrats at the Fed who decide money and credit policy for the nation are deliberately opaque and little understood by most Americans. For the first time in generations, they are now threatened with popular rebellion.

During the past year, the Fed has flooded the streets with money–distributing trillions of dollars to banks, financial markets and commercial interests–in an attempt to revive the credit system and get the economy growing again. As a result, the awesome authority of this cloistered institution is visible to many ordinary Americans for the first time. People and politicians are shocked and confused, and also angered, by what they see. They are beginning to ask some hard questions for which Federal Reserve governors do not have satisfactory answers.

Where did the central bank get all the money it is handing out? Basically, the Fed printed it, out of thin air. That is what central banks do. Who told the Fed governors they could do this? Nobody, really–not Congress or the president. The Federal Reserve Board, alone among government agencies, does not submit its budgets to Congress for authorization and appropriation. It raises its own money, sets its own priorities.

Representative Wright Patman, the Texas populist who was a scourge of central bankers, once described the Federal Reserve as “a pretty queer duck.” Congress created the Fed in 1913 with the presumption that it would be “independent” from the rest of government, aloof from regular politics and deliberately shielded from the hot breath of voters or the grasping appetites of private interests–with one powerful exception: the bankers.

The Fed was designed as a unique hybrid in which government would share its powers with the private banking industry. Bankers collaborate closely on Fed policy. Banks are the “shareholders” who ostensibly own the twelve regional Federal Reserve banks. Bankers sit on the boards of directors, proposing interest-rate changes for Fed governors in Washington to decide. Bankers also have a special advisory council that meets privately with governors to critique monetary policy and management of the economy. Sometimes, the Fed pretends to be a private organization. Other times, it admits to being part of the government.

The antiquated quality of this institution is reflected in the map of the Fed’s twelve regional banks. Five of them are located in the Midwest (better known today as the industrial Rust Belt). Missouri has two Federal Reserve banks (St. Louis and Kansas City), while the entire West Coast has only one (located in San Francisco, not Los Angeles or Seattle). Virginia has one; Florida does not. Among its functions, the Federal Reserve directly regulates the largest banks, but it also looks out for their well-being–providing regular liquidity loans for those caught short and bailing out endangered banks it deems “too big to fail.” Critics look askance at these peculiar arrangements and see “conspiracy.” But it’s not really secret. This duck was created by an act of Congress. The Fed’s favoritism toward bankers is embedded in its DNA.

This awkward reality explains the dilemma facing the Fed. It cannot stand too much visibility, nor can it easily explain or justify its peculiar status. The Federal Reserve is the black hole of our democracy–the crucial contradiction that keeps the people and their representatives from having any voice in these most important public policies. That’s why the central bankers have always operated in secrecy, avoiding public controversy and inevitable accusations of special deal-making. The current crisis has blown the central bank’s cover. Many in Congress are alarmed, demanding greater transparency. More than 250 House members are seeking an independent audit of Fed accounts. House Speaker Nancy Pelosi observed that the Fed seems to be poaching on Congressional functions–handing out public money without the bother of public decision-making.

“Many of us were…if not surprised, taken aback, when the Fed had $80 billion to invest in AIG just out of the blue,” Pelosi said. “All of a sudden, we wake up one morning and AIG was receiving $80 billion from the Fed. So of course we’re saying, Where is this money coming from? ‘Oh, we have it. And not only that, we have more.’” So who needs Congress? Pelosi sounded guileless, but she knows very well where the Fed gets its money. She was slyly tweaking the central bankers on their vulnerability.

Fed chair Ben Bernanke responded with the usual aloofness. An audit, he insisted, would amount to “a takeover of monetary policy by the Congress.” He did not appear to recognize how arrogant that sounded. Congress created the Fed, but it must not look too deeply into the Fed’s private business. The mystique intimidates many politicians. The Fed’s power depends crucially upon the people not knowing exactly what it does.

Basically, what the central bank is trying to do with its aggressive distribution of trillions is avoid repeating the great mistake the Fed made after the 1929 stock market crash. The central bankers responded hesitantly then and allowed the money supply to collapse, which led to the ultimate catastrophe of full-blown monetary deflation and created the Great Depression. Bernanke has not yet won this struggle against falling prices and production–deflationary symptoms remain visible around the world–but he has not lost either. He might get more public sympathy if Fed officials explained this dilemma in plain English. Instead, they are shielding people from understanding the full dimensions of our predicament.

President Obama inadvertently made the political problem worse for the Fed in June, when he proposed to make the central bank the supercop to guard against “systemic risk” and decide the terms for regulating the largest commercial banks and some heavyweight industrial corporations engaged in finance. The House Financial Services Committee intends to draft the legislation quickly, but many members want to learn more first. Obama’s proposal gives the central bank even greater power, including broad power to pick winners and losers in the private economy and behind closed doors. Yet Obama did not propose any changes in the Fed’s privileged status. Instead, he asked Fed governors to consider the matter. But perhaps it is the Federal Reserve that needs to be reformed.

A few months back, I ran into a retired Fed official who had been a good source twenty years ago when I was writing my book about the central bank, Secrets of the Temple: How the Federal Reserve Runs the Country. He is a Fed loyalist and did not leak damaging secrets. But he helped me understand how the supposedly nonpolitical Fed does its politics, behind the veil of disinterested expertise. When we met recently, he said the central bank is already making preparations to celebrate its approaching centennial. Some of us, I responded, have a different idea for 2013.

“We think that would be a good time to dismantle the temple,” I playfully told my old friend. “Democratize the Fed. Or tear it down. Create something new in its place that’s accountable to the public.”

The Fed man did not react well to my teasing. He got a stricken look. His voice tightened. Please, he pleaded, do not go down that road. The Fed has made mistakes, he agreed, but the country needs its central bank. His nervous reaction told me this venerable institution is feeling insecure about its future.

Six reasons why granting the Fed even more power is a really bad idea:

1. It would reward failure. Like the largest banks that have been bailed out, the Fed was a co-author of the destruction. During the past twenty-five years, it failed to protect the country against reckless banking and finance adventures. It also failed in its most basic function–moderating the expansion of credit to keep it in balance with economic growth. The Fed instead allowed, even encouraged, the explosion of debt and inflation of financial assets that have now collapsed. The central bank was derelict in enforcing regulations and led cheers for dismantling them. Above all, the Fed did not see this disaster coming, or so it claims. It certainly did nothing to warn people.

2. Cumulatively, Fed policy was a central force in destabilizing the US economy. Its extreme swings in monetary policy, combined with utter disregard for timely regulatory enforcement, steadily shifted economic rewards away from the real economy of production, work and wages and toward the financial realm, where profits and incomes were wildly inflated by false valuations. Abandoning its role as neutral arbitrator, the Fed tilted in favor of capital over labor. The institution was remolded to conform with the right-wing market doctrine of chairman Alan Greenspan, and it was blinded to reality by his ideology (see my Nation article “The One-Eyed Chairman,” September 19, 2005).

3. The Fed cannot possibly examine “systemic risk” objectively because it helped to create the very structural flaws that led to breakdown. The Fed served as midwife to Citigroup, the failed conglomerate now on government life support. Greenspan unilaterally authorized this new financial/banking combine in the 1990s–even before Congress had repealed the Glass-Steagall Act, which prohibited such mergers. Now the Fed keeps Citigroup alive with a $300 billion loan guarantee. The central bank, in other words, is deeply invested in protecting the banking behemoths that it promoted, if only to cover its own mistakes.

4. The Fed can’t be trusted to defend the public in its private deal-making with bank executives. The numerous revelations of collusion have shocked the public, and more scandals are certain if Congress conducts a thorough investigation. When Treasury Secretary Timothy Geithner was president of the New York Fed, he supervised the demise of Bear Stearns with a sweet deal for JPMorgan Chase, which took over the failed brokerage–$30 billion to cover any losses. Geithner was negotiating with Morgan Chase CEO and New York Fed board member Jamie Dimon. Goldman Sachs CEO Lloyd Blankfein got similar solicitude when the Fed bailed out insurance giant AIG, a Goldman counterparty: a side-door payout of $13 billion. The new president at the New York Fed, William Dudley, is another Goldman man.

5. Instead of disowning the notorious policy of “too big to fail,” the Fed will be bound to embrace the doctrine more explicitly as “systemic risk” regulator. A new superclass of forty or fifty financial giants will emerge as the born-again “money trust” that citizens railed against 100 years ago. But this time, it will be armed with a permanent line of credit from Washington. The Fed, having restored and consolidated the battered Wall Street club, will doubtless also shield a few of the largest industrial-financial corporations, like General Electric (whose CEO also sits on the New York Fed board). Whatever officials may claim, financial-market investors will understand that these mammoth institutions are insured against failure. Everyone else gets to experience capitalism in the raw.

6. This road leads to the corporate state–a fusion of private and public power, a privileged club that dominates everything else from the top down. This will likely foster even greater concentration of financial power, since any large company left out of the protected class will want to join by growing larger and acquiring the banking elements needed to qualify. Most enterprises in banking and commerce will compete with the big boys at greater disadvantage, vulnerable to predatory power plays the Fed has implicitly blessed.

Whatever good intentions the central bank enunciates, it will be deeply conflicted in its actions, always pulled in opposite directions. If the Fed tries to curb the growth of the megabanks or prohibit their reckless practices, it will be accused of damaging profitability and thus threatening the stability of the system. If it allows overconfident bankers to wander again into dangerous territory, it will be blamed for creating the mess and stuck with cleaning it up. Obama’s reform might prevail in the short run. The biggest banks, after all, will be lobbying alongside him in favor of the Fed, and Congress may not have the backbone to resist. The Fed, however, is sure to remain in the cross hairs. Too many different interests will be damaged–thousands of smaller banks, all the companies left out of the club, organized labor, consumers and other sectors, not to mention libertarian conservatives like Texas Representative Ron Paul. They will recognize that the “money trust” once again has its boot on their neck, and that this time the government arranged it.

The obstacles to democratizing the Fed are obviously formidable. Tampering with the temple is politically taboo. But this crisis has demonstrated that the present arrangement no longer works for the public interest. The society of 1913 no longer exists, nor does the New Deal economic order that carried us to twentieth-century prosperity. The country thus has a rare opportunity to reconstitute the Federal Reserve as a normal government agency, shorn of the bankers’ preferential trappings and the fallacious claim to “independent” status as well as the claustrophobic demand for secrecy.

Progressives in the early twentieth century, drawn from the growing ranks of managerial professionals, believed “good government” required technocratic experts who would be shielded from the unruly populace and especially from radical voices of organized labor, populism, socialism and other upstart movements. The pretensions of “scientific” decision-making by remote governing elites–both the mysterious wisdom of central bankers and the inventive wizardry of financial titans–failed spectacularly in our current catastrophe. The Fed was never independent in any real sense. Its power depended on taking care of its one true constituency in banking and finance.

A reconstituted central bank might keep the famous name and presidentially appointed governors, confirmed by Congress, but it would forfeit the mystique and submit to the usual standards of transparency and public scrutiny. The institution would be directed to concentrate on the Fed’s one great purpose–making monetary policy and controlling credit expansion to produce balanced economic growth and stable money. Most regulatory functions would be located elsewhere, in a new enforcement agency that would oversee regulated commercial banks as well as the “shadow banking” of hedge funds, private equity firms and others.

The Fed would thus be relieved of its conflicted objectives. Bank examiners would be free of the insider pressures that inevitably emanate from the Fed’s cozy relations with major banks. All of the private-public ambiguities concocted in 1913 would be swept away, including bank ownership of the twelve Federal Reserve banks, which could be reorganized as branch offices with a focus on regional economies.

Altering the central bank would also give Congress an opening to reclaim its primacy in this most important matter. That sounds farfetched to modern sensibilities, and traditionalists will scream that it is a recipe for inflationary disaster. But this is what the Constitution prescribes: “The Congress shall have the power to coin money [and] regulate the value thereof.” It does not grant the president or the treasury secretary this power. Nor does it envision a secretive central bank that interacts murkily with the executive branch.

Given Congress’s weakened condition and its weak grasp of the complexities of monetary policy, these changes cannot take place overnight. But the gradual realignment of power can start with Congress and an internal reorganization aimed at building its expertise and educating members on how to develop a critical perspective. Congress has already created models for how to do this. The Congressional Budget Office is a respected authority on fiscal policy, reliably nonpartisan. Congress needs to create something similar for monetary policy.

Instead of consigning monetary policy to backwater subcommittees, each chamber should create a major new committee to supervise money and credit, limited in size to members willing to concentrate on becoming responsible stewards for the long run. The monetary committees, working in tandem with the Fed’s board of governors, would occasionally recommend (and sometimes command) new policy directions at the federal agency and also review its spending.

Setting monetary policy is a very different process from enacting laws. The Fed operates through a continuum of decisions and rolling adjustments spread over months, even years. Congress would have to learn how to respond to deeper economic conditions that may not become clear until after the next election. The education could help the institution mature.

Congress also needs a “council of public elders”–a rotating board of outside advisers drawn from diverse interests and empowered to speak their minds in public. They could second-guess the makers of monetary policy but also Congress. These might include retired pols, labor leaders, academics and state governors–preferably people whose thinking is no longer defined by party politics or personal ambitions. The public could nominate representatives too. No financial wizards need apply.

A revived Congress armed with this kind of experience would be better equipped to enact substantive law rather than simply turning problems over to regulatory agencies with hollow laws that are merely hortatory suggestions. Reordering the financial system and the economy will require hard rules–classic laws of “Thou shalt” and “Thou shalt not” that command different behavior from certain private interests and prohibit what has proved reckless and destructive. If “too big to fail” is the problem, don’t leave it to private negotiations between banks and the Federal Reserve. Restore anti-monopoly laws and make big banks get smaller. If the financial system’s risky innovations are too complicated for bank examiners to understand, then those innovations should probably be illegal.

Many in Congress will be afraid to take on the temple and reluctant to violate the taboo surrounding the Fed. It will probably require popular rebellion to make this happen, and that requires citizens who see through the temple’s secrets. But the present crisis has not only exposed the Fed’s worst failures and structural flaws; it has also introduced citizens to the vast potential of monetary policy to serve the common good. If Ben Bernanke can create trillions of dollars at will and spread them around the financial system, could government do the same thing to finance important public projects the people want and need? Daring as it sounds, the answer is, Yes, we can.

The central bank’s most mysterious power–to create money with a few computer keystrokes–is dauntingly complicated, and the mechanics are not widely understood. But the essential thing to understand is that this power relies on democratic consent–the people’s trust, their willingness to accept the currency and use it in exchange. This is not entirely voluntary, since the government also requires people to pay their taxes in dollars, not euros or yen. But citizens conferred the power on government through their elected representatives. Newly created money is often called the “pure credit” of the nation. In principle, it exists for the benefit of all.

In this emergency, Bernanke essentially used the Fed’s money-creation power in a way that resembles the “greenbacks” Abraham Lincoln printed to fight the Civil War. Lincoln was faced with rising costs and shrinking revenues (because the Confederate states had left the Union). The president authorized issuance of a novel national currency–the “greenback”–that had no backing in gold reserves and therefore outraged orthodox thinking. But the greenbacks worked. The expanded money supply helped pay for war mobilization and kept the economy booming. In a sense, Lincoln won the war by relying on the “full faith and credit” of the people, much as Bernanke is printing money freely to fight off financial collapse and deflation.

If Congress chooses to take charge of its constitutional duty, it could similarly use greenback currency created by the Federal Reserve as a legitimate channel for financing important public projects–like sorely needed improvements to the nation’s infrastructure. Obviously, this has to be done carefully and responsibly, limited to normal expansion of the money supply and used only for projects that truly benefit the entire nation (lest it lead to inflation). But here is an example of how it would work.

President Obama has announced the goal of building a high-speed rail system. Ours is the only advanced industrial society that doesn’t have one (ride the modern trains in France or Japan to see what our society is missing). Trouble is, Obama has only budgeted a pittance ($8 billion) for this project. Spain, by comparison, has committed more than $100 billion to its fifteen-year railroad-building project. Given the vast shortcomings in US infrastructure, the country will never catch up with the backlog through the regular financing of taxing and borrowing.

Instead, Congress should create a stand-alone development fund for long-term capital investment projects (this would require the long-sought reform of the federal budget, which makes no distinction between current operating spending and long-term investment). The Fed would continue to create money only as needed by the economy; but instead of injecting this money into the banking system, a portion of it would go directly to the capital investment fund, earmarked by Congress for specific projects of great urgency. The idea of direct financing for infrastructure has been proposed periodically for many years by groups from right and left. Transportation Secretary Ray LaHood co-sponsored legislation along these lines a decade ago when he was a Republican Congressman from Illinois.

This approach speaks to the contradiction House Speaker Pelosi pointed out when she asked why the Fed has limitless money to spend however it sees fit. Instead of borrowing the money to pay for the new rail system, the government financing would draw on the public’s money-creation process–just as Lincoln did and Bernanke is now doing.

The bankers would howl, for good reason. They profit enormously from the present system and share in the money-creation process. When the Fed injects more reserves into the banking system, it automatically multiplies the banks’ capacity to create money by increasing their lending (and banks, in turn, collect interest on their new loans). The direct-financing approach would not halt the banking industry’s role in allocating new credit, since the newly created money would still wind up in the banks as deposits. But the government would now decide how to allocate new credit to preferred public projects rather than let private banks make all the decisions for us.

The reform of monetary policy, in other words, has promising possibilities for revitalizing democracy. Congress is a human institution and therefore fallible. Mistakes will be made, for sure. But we might ask ourselves, If Congress were empowered to manage monetary policy, could it do any worse than those experts who brought us to ruin?

About William Greider

National affairs correspondent William Greider has been a political journalist for more than thirty-five years. A former Rolling Stone and Washington Post editor, he is the author of the national bestsellers One World, Ready or Not, Secrets of the Temple, Who Will Tell The People, The Soul of Capitalism (Simon & Schuster) and, most recently, Come Home, America.

Complete article at:

http://www.thenation.com/doc/20090803/greider/

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Regional and State Employment and Unemployment Summary

News release: “Regional and state unemployment rates were generally higher in June. Thirty-eight states and the District of Columbia recorded over-the-month unemployment rate increases, 5 states registered rate decreases, and 7 states had no rate change, the Bureau of Labor Statistics of the U.S. Department of Labor reported on July 17, 2009. Over the year, jobless rates were higher in all 50 states and the District of Columbia. The national unemployment rate, at 9.5 percent, was little changed between May and June, but was up 3.9 percentage points from a year earlier.”

http://www.bls.gov/news.release/pdf/laus.pdf

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GAS PUMP THIEVERY: WHO’S REALLY BEHIND THE RISING PRICES AT THE PUMPS?

By Jim Hightower, AlterNet

What’s going on here is not the “magic of the marketplace,” but some hocus-pocus by brand-name dealers. http://www.alternet.org/workplace/140889/gas_pump_thievery%3A_who%27s_really_behind_the_rising_prices_at_the_pumps/

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Congressman Paul’s Texas Stright Talk: Healthcare…

Monday, July 20, 2009

Healthcare is a Good, Not a Right

“The government will be paying the bills, forcing doctors and hospitals to dance more and more to the government’s tune. Having to subject our health to this bureaucratic insanity and mismanagement is possibly the biggest danger we face. The great irony is that in turning the good of healthcare into a right, your life and liberty are put in jeopardy…”

Click here to read the full article:

http://www.house.gov/paul/index.shtml

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CBS’ Smith advanced falsehood that Dems are taxing small businesses to fund health bill

CBS News’ Harry Smith misrepresented the House Democrats’ health care reform proposal, saying that one idea to fund the bill will result in “putting a very tough tax on small business owners.” In fact, businesses with annual payrolls of less than $250,000 would not face a penalty for failing to providing health insurance.

Read More

http://mediamatters.org/items/200907190009?lid=1051704&rid=31851318

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Fox on 15th Stands Up For the Little Guy

No doubt many of you have been concerned about Goldman Sachs getting a bad rap. People have been getting down on them just because they made $3.4 billion in profits last quarter, betting with the taxpayers’ money, and that they intend to hand out this bounty in bonuses to their executives. Fortunately, the Washington Post is there to come to Goldman’s aid with a column by Mark Gimien telling us not to punish success.

Gimien’s basic line is that we should be glad that Goldman made lots of money, would we rather be bailing them out? Here he has a point. After all, Goldman had borrowed $10 billion from Treasury through TARP (recently repaid), $28 billion in FDIC insured bonds, and untold billions from the Fed’s special lending facilities. If its bets had not paid off, then the taxpayers would potentially be out some really big bucks.

Of course Goldmans’ profits do come from somewhere. Insofar as they come from trading, Goldman’s gains will largely still come from the rest of us, albeit through a a different pocket than their subsidized loans. There is nothing inherently pernicious about this behavior — it’s just like gambling in Las Vegas. We don’t ban gambling, we just tax it.

Of course speculation can occasionally serve a productive purpose. Informed speculators share their knowledge with the markets and society. If we had more informed speculators 4-5 years ago, they could have bet against the stock and bonds of Citigroup, Fannie, Freddie and the rest. Perhaps by driving the price of these stocks down enough it might have called attention to the housing bubble. But, those trading on real information will be able to cover the cost of a modest transactions tax. We need not worry if some of those trading on gossip and hunches get driven away by higher transactions costs.

Let’s take the case of oil. Suppose that Goldman was smart enough or lucky enough to catch oil on the way up. This means that Goldman bought oil at a lower price and sold it to an end user (or another speculator) at a higher price. Due to Goldman’s good fortune, an oil producer received less money than otherwise would have been the case or a consumer ended up paying more. In the former case, the oil industry will have less money to invest in new production. (Okay, no one really believes that.) In the latter case, consumers will end up paying higher prices than they might have otherwise.

In other words, Goldman’s profits were in part the higher prices we paid at the pump. Note that this story assumes no manipulation, just good wholesome speculation.

Suppose that the speculation was driven by irrational exuberance about oil prices that Goldman rose up and then jumped ship. In that case, we got hosed, as perhaps did a few speculators who got left holding the bag when oil prices turned. (Think back to last summer when speculators bought oil at $150 a barrel.)

In these stories, Goldman did nothing wrong — they just bet with our money and won. Their gain helped to raise our gas prices. There is nothing illegal in this picture, it is just a simple story of rent-seeking where Goldman won

From:

Beat the Press Weekly Roundup, 7/20/09

http://prospect.org/csnc/blogs/beat_the_press

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Borowitz Report – look who’s jewish now

July 20, 2009

Britney’s Conversion Diary
Pop Tart’s Jewish Journey

Britney Spears has never been one to take things slowly when it comes to relationships. So it’s no surprise she’s considering converting to Judaism to show her commitment to new bloke Jason Trawick. The singer has been spotted wearing a necklace with the Star of David symbol on during her world tour. She has even recruited a rabbi to help her study the faith.

-The Sun.

Shalom, Diary:

I think Rabbi Pearlstein is really pissed at me. Today in Jewish class he was going through the Halakha, which I thought was the Jewish word for Hannah Montana but turns out to be like a whole bunch of boring laws about days of the week and pork and shit, and I was like, “Rabbi P., is there any way you could break this down into a bunch of tweets? I’ll read it on my phone on the way to rehearsal.” He got so mad those curls on the sides of his head started shaking. (I don’t know why he won’t let my stylist snip them off. They’re not a good look for him, K.?) On the plus side, he taught me this awesome Jewish trivia fact: You don’t have to call Jewish people “Jewish people.” It turns out they don’t mind being called plain old “Jews.” LOL.

Continued here.

http://www.newyorker.com/humor/2009/07/27/090727sh_shouts_borowitz

Upcoming Events

August 1, 2009 at 3:30PM

Nantucket – FREE SHOW!

In addition to his appearances at the Nantucket Comedy Festival, Andy will make a joint appearance with his wife Olivia Gentile sponsored by Nantucket Bookworks. Andy will perform a free standup show and interview Olivia about her book LIFE LIST: A Woman’s Quest for the World’s Most Amazing Birds. Andy will take questions about his book, WHO MOVED MY SOAP? The CEO’s Guide to Surviving in Prison: The Bernie Madoff Edition. After the show, Andy and Olivia will sign copies of their books.

Location:
Arno’s, 41 Main Street

http://www.borowitzreport.com/

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three thousand words

(click here to view)

Ted Rall Universal Press Syndicate Jul 20, 2009 EditorialCartoonists.com

Matt Davies: … bear the burden
(davies.lohudblogs.com)

David Horsey: … you’re a comedian
(www.seattlepi.com)

More than 55,000 retirees from GM and GM Delphi plants had their promised health care benefits stripped away by the automaker’s bankruptcy plan.

The IUE-CWA, United Steelworkers and Operating Engineers are appealing the plan. Click here to learn more about the campaign to save GM retirees’ health benefits. The UAW, whose retirees were able to maintain their benefits, strongly supports the campaign.

July 17, 2009

Retirees Were Promised Health Care—GM Deal Breaks the Promise

by James Parks, Jul 17, 2009

Workers and retirees have suspected for years that companies often use bankruptcy as an excuse to cheat retirees out of their promised benefits. Now, three unions say that’s exactly what the U.S. Treasury Department is doing to tens of thousands of General Motors (GM) retirees.

The IUE-CWA, United Steelworkers (USW) and the Operating Engineers (IUOE) plan to appeal a bankruptcy judge’s approval late last week of a plan to allow the new GM, which now is owned primarily by the taxpayers, to take away health coverage from 55,000 retirees at some GM and GM Delphi plants.

In a series of newspaper ads, the unions urge workers to call the White House at 202-456-1414 or send an e-mail to www.whitehouse.gov and ask President Obama to restore the GM retirees’ health care benefits. Click here to learn more about IUE-CWA’s campaign to save the retirees’ benefits.

The ads feature retirees like Debra Turner (see ad above), a GM retiree who suffers from multiple sclerosis and rheumatoid arthritis. At 51, she’s not eligible for Medicare. Until now, her GM health care paid for most of the $3,400 a month in medicines she has to take.

Turner says:

It’s not right for our government to sacrifice people’s health while it’s pouring out billions to save giant corporations like the banks and auto companies.

But the U.S. Treasury decision to wipe out health care benefits for retirees like her could mean that she will end up in a wheelchair because the cost of insurance—$8,000 a year—is out of reach.

The UAW, whose retirees at GM were able to keep their health care, is strongly backing the other unions’ efforts. An e-mail to UAW activists says:

The UAW stands in solidarity with our brothers and sisters from these other unions in their efforts to get justice for all GM retirees. Please take the time to contact President Obama on this issue. Tell the President that it is wrong for the U.S. Treasury Department to be sacrificing the health care of these retirees. Urge the President to take whatever action is necessary to ensure that these retirees receive the same treatment as UAW-represented retirees.
The GM retirees also picked up bipartisan support from 13 members of Congress from Ohio, where two of the affected plants are located. In a letter to Treasury Secretary Timothy Geithner, the representatives call on him to reverse the decision in order to “spare a disaster.” The Ohio congressional members’ letter emphatically stated to the Treasury secretary: “In short, it is your representatives who have decided that these retirees will not have an opportunity for a decent retirement.”

IUE-CWA President Jim Clark puts it bluntly:

It is a sad day in America when a formerly blue chip company joins hands with the government to rob those who built the company of the health care that was promised to them.

Our message is simple: Spending taxpayer dollars…[to strip] 50,000 retirees of their health care is not the change we voted for last November. The White House must direct the U.S. Treasury to reach a fair and equitable solution.

As the purchaser of GM, the Treasury Department determined which liabilities and assets would be transferred to the new company and which would stay behind in the bankrupt company. According to the union, a member of the administration’s auto taskforce told the bankruptcy hearing there was no “commercial necessity” for the new company to pick up the liability for these retirees.

Court documents obtained during discovery also show that GM decided to cut retiree health care by 87 percent so it could leave executive pension and salaried health care largely intact with only 32 percent and 25 percent reductions, respectively, the unions claim.

To add insult to injury, according to the unions, GM chief executive Fritz Henderson testified in January that the company decided to give salaried retirees a $300 a month increase in their pensions to offset what it would cost them to purchase insurance when the company eliminated their medical insurance.

USW President Leo Gerard says:

[The unions] hope our federal government will come to its senses on fairness for the former GM workers who contributed nothing less than the autoworkers to the fortunes of the company.

IUE-CWA represents 41,000 GM Delphi retirees and surviving spouses, whose benefits are valued at $2.87 billion. USW represents 6,200 retirees and surviving spouses, saying the present value of the lost benefits is at least $424 million. Other Delphi retirees are represented by the IUOE.

This is a cross-post from the Firedoglake blog. http://firedoglake.com/

Complete article at:

http://blog.aflcio.org/2009/07/17/retirees-were-promised-health-caregm-deal-breaks-the-promise/

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A ‘New’ GM?

Ed Wallace
Posted on Fri, Jul. 17, 2009
Special to the Star-Telegram

What’s important is that here Fritz Henderson showed that he has no clue what to do with General Motors in the future.

“Won’t be doing business as usual” is business as usual

Just over a week ago the new General Motors was spun out of the old company – speaking of which, contrary to popular belief, the Old GM will stay in the bankruptcy courts for years to come. The good news is that as of today all American taxpayers have acquired 61 percent ownership of General Motors. The bad news is that if the new GM is successful enough to float an IPO and issue new stock, our majority ownership stake will not qualify us to receive any dividends. Bummer.

It became obvious that now is the time when hype replaces reality when GM’s latest president and CEO, Fritz Henderson, held a press conference a week ago Friday: He promised customers a “new and more responsive” General Motors.

Now, I’ve had numerous private conversations with most of GM’s top executives over the years, and yet somehow I’ve never met Fritz or even talked with him on the phone. However, many of my personal friends, who have spent a great deal of face time with Henderson, report that he’s unbelievably smart and possibly one of the best General Motors CFOs in 50 years.

That being said, for as long as four years in conversations with David Welch, formerly with the Star-Telegram and now the Detroit Bureau Chief for BusinessWeek, I’ve been hearing that Wall Street has always had a strong belief in Henderson and his capabilities. The Street never really cared for former CEO Rick Wagoner. This is speculation on my part: Wagoner, while trying to reform General Motors after 40 years of disastrous upper management, was running GM more like a Japanese company – farsightedly looking to secure its future 20 to 30 years out.

Henderson, in contrast, is likely to want to fix GM in a way that produces profits short term.

Not to put too fine a point on it, but the maniacal quest for short-term profits is what got GM into its current troubles. However, as we know, Wall Street doesn’t take the long view of things; they want a large return on investments by the next quarter. Assuming they can’t get a return in two days by hyper-inflating the stock.

Forever Reinventing the Wheel

Fritz was quoted as saying that GM is lucky to get this important “second chance” and will honor the commitment to repay the federal government as quickly as possible. In this statement he shows how little he knows of his company’s history, as General Motors has come close to failing numerous times.

In 1910, had GM’s bankers not reversed course on closing down the company completely, it would have failed just two years after its creation. And if the DuPont family had not stepped in with huge financial commitments, GM would have failed in 1920. So Fritz: This is GM’s third chance.

I found it humorous to hear Fritz say that the new GM will not do business as usual, because GM has said that very thing at least five times in the last 30 years.

My favorite instance was back in the early nineties; Chevrolet General Manager John Middlebrook said it took far too long to sell a new car, so he wanted to alter how car sales take place at GM dealerships. His goal was the 45-minute sale. Ironically, Middlebrook’s manual for achieving this goal was almost 200 pages long; it would take salesmen a couple of days to read the new way to sell cars in 45 minutes. I don’t want to play master of the obvious, but if he or she is doing the job correctly, a salesperson needs almost two hours to show all of the features and benefits of any given automobile.

Personally, while that Middlebrook-inspired manual was actually a brilliant instructional guide on how to sell a new car with a high degree of integrity, I thought its biggest contribution to the car industry was convincing dealers to quit trying to lure customers in on the weekend by putting balloons on new cars facing the street. Which is why you don’t see balloons tied to cars anymore.

We’re Gonna Use the Internet!

Fear not, because Fritz has a better idea: He announced that GM had cut a deal with eBay to sell new cars online. The fact that eBay issued a public relations release just hours later saying they had cut no such deal with General Motors is but a minor problem. What’s important is that here Fritz Henderson showed that he has no clue on how to sell GM cars. In fact, that one comment alone tells me he should not be in charge of GM’s revival. Here’s why.

It’s one thing to put a mint 1968 Pontiac GTO convertible on eBay, because the auction drives up the price of a rare automobile. Although with the downturn in our economy, even those vehicles are not bringing anything like they did two years ago. As of this writing, one 1968 GTO convertible on eBay has three bids, with the top being $20,100, yet the “buy it now” price is over $35,000.

It’s another thing to put a new and “super rare” Corvette ZR1 on eBay, because some buyers have paid as much as $200,000 over the list price to acquire one. But those two vehicles are both extremely rare. When it comes to common, high-volume cars, auctions drive their prices down, not up.

Besides, as it turns out, new GM vehicles are already being sold by dealerships on eBay. But it’s not looking too good for the home team. Most of the new 2010 Chevrolet Equinox models have zero bids – although a large number of the new and scarce Camaros are bringing top dollar, often far in excess of the Manufacturer’s Suggested List Price. Additionally, I found one 2008 Chevy Cobalt with only 8,200 miles on the odometer and the best bid shown is $4,500. How is that going to improve GM’s image or help them make the margins they need for their products to return to profitability?

I’ve personally bought and sold many things on eBay over the past few years, and my experience has been that the rarer and more desirable items bring top dollar. When the goal is to buy something new and easy to acquire, however, it’s smarter to go to a retailer. Customers know that.

Let’s Tick off the Weirdos

Fritz’s next great idea is to have a new Web site created with the name Ask Fritz, which opens a dialogue between the public and the president of the company. Really? For one thing, GM already has that Web site; it’s called GM Fastlane and it’s been in operation for years. But for another, GM is acting like retail buyers are their customers – and that’s not true. Dealers buy 100 percent of GM’s production and they in turn sell to the public.

Frankly, if the Internet has proven anything, it’s the power of the uneducated Web-surfing keyboarder. Take it from someone who receives a thousand e-mails a week (regarding my columns and radio show) and whose columns in BusinessWeek often receive hundreds of online comments. While most of the personal e-mails I get are articulate, intelligent and thoughtful, some 15 percent actually scare me: The facts in them are not facts at all, their authors’ logic is impenetrable, and they make it woefully clear that our education system lets individuals graduate who cannot write a complete sentence.

Therein lies a danger: When you correct false information or false logic (much less nonexistent grammar), it’s all too easy to offend the writer, thereby making that individual almost an evangelist for your demise. I can afford to infuriate a few people here and there, but GM can’t.

Carrot and Stick, Hold the Carrot

Finally, on the day of Fritz’s news conference on how GM culture will change, it turns out GM sent a letter to dealers. It was addressed to members of Congress and the content asked dealers to back GM on the permanent closing of other dealers. This letter-cum-petition was meant to stop a Congressional movement to pass a law forcing Detroit to stop canceling certain dealers’ franchises. But a reasonably large number of GM dealers refused to go along with that request. And guess what happened? Dealers who refused to sign that letter received calls from their local zone office pressuring them to sign that open letter to Congress — and, according to some dealers, threatening them if they didn’t.

Man, that’s pure old-GM-school “business as usual.”

GM will be saved, but not by Fritz Henderson or Washington’s oversight. Its salvation will come because by and large GM has a strong dealer body. Those dealers will sell the cars — not eBay — and when the economy truly turns positive, they’ll likely sell enough new vehicles to bring GM back.

As for Fritz, do your homework and read some General Motors histories. Quit trying things that will drive down the price of GM cars, and quit doing things that alienate your dealers. Other than that, you’re off to a great start.

Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Society. He reviews new cars every Friday morning at 7:15 on Fox Four’s Good Day, contributes articles to BusinessWeek Online and hosts the top-rated talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF.
E-mail: wheels570@sbcglobal.net and read all of Ed’s work at www.insideautomotive.com .

Complete article at:

http://www.star-telegram.com/ed_wallace/story/1492798.html

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Illinois’s Unemployment Insurance Fund Goes Broke

By Olga Pierce

Illinois has just become the 16th state forced to borrow money from the federal government to pay unemployment insurance benefits because its trust fund has run dry. The roughly $34.7 million Illinois has borrowed so far pales in comparison to the unemployment insurance debt of states like neighboring Michigan, which has borrowed $2.2 billion so far. But since Illinois, like many states, received most of its unemployment insurance revenue in the first two quarters of the year, the borrowing has probably only just begun.

Read the story.

http://www.propublica.org/feature/illinois-unemployment-insurance-fund-goes-broke-717

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Possible Nummi plant shutdown worries Fremont And more …

San Francisco Chronicle – CA, USA

Toyota announced Friday it’s considering closing New United Motor Manufacturing Inc., the Warm Springs auto plant founded 25 years ago as a joint venture …

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/07/12/BAL318N2ES.DTL

The iconic chocolate drink Yoo-Hoo Opelousas plant is closing. Did …

The Times-Picayune – NOLA.com – New Orleans,LA,USA
by Chris Rose, Columnist, The Times-Picayune OPELOUSAS

— They’re closing down the Yoo-Hoo plant out on the edge of town, boys, and these jobs ain’t
coming …

http://www.nola.com/rose/index.ssf/2009/07/the_iconic_chocolate_drink_yoo.html

Fenton Plant Closing

KOMU-TV – Columbia,MO,USA

In the 1980s the plant had over 8000 employees. Now the plant is closing is gates and leaving 1000 workers jobless. “It’s devastating, it’s a possibility …

http://www.komu.com/satellite/SatelliteRender/KOMU.com/ba8a4513-c0a8-2f11-0063-9bd94c70b769/65ec6189-80ce-0971-015e-796e313bfd8d

Nioxin closing next year; 112 jobs affected

Times-Georgian – Carrollton,GA,USA

Art Hansen, Nioxin vice president of human capital, said Thursday that a definite plant closing date has not been set. “This decision is based on the …

http://www.times-georgian.com/pages/full_story/push?article-Nioxin+closing+next+year-+112+jobs+affected%20&id=2921652-Nioxin+closing+next+year-+112+jobs+affected&instance=west_ga_news

86 to lose jobs in Grundy Center plant closing

DesMoinesRegister.com – Des Moines,IA,USA

NCM, a manufacturer of air-filtration components for automobiles and construction vehicles, is closing after nearly 50 years in Grundy Center.
…

http://www.desmoinesregister.com/article/20090710/BUSINESS/90709036/1029

Nearly 90 to lose jobs at plant closing in Iowa

Chicago Tribune – United States

AP GRUNDY CENTER, Iowa – A plant that makes air-filtration components for cars and construction vehicles is closing in Grundy Center, putting nearly 90 …

http://www.chicagotribune.com/news/chi-ap-ia-iowaplantclosing,0,1312124.story

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Foreword from Amusing Ourselves to Death

by Neil Postman

We were keeping our eye on 1984. When the year came and the prophecy didn’t, thoughtful Americans sang softly in praise of themselves. The roots of liberal democracy had held. Wherever else the terror had happened, we, at least, had not been visited by Orwellian nightmares.

But we had forgotten that alongside Orwell’s dark vision, there was another – slightly older, slightly less well known, equally chilling: Aldous Huxley’s Brave New World. Contrary to common belief even among the educated, Huxley and Orwell did not prophesy the same thing. Orwell warns that we will be overcome by an externally imposed oppression. But in Huxley’s vision, no Big Brother is required to deprive people of their autonomy, maturity and history. As he saw it, people will come to love their oppression, to adore the technologies that undo their capacities to think.

What Orwell feared were those who would ban books. What Huxley feared was that there would be no reason to ban a book, for there would be no one who wanted to read one. Orwell feared those who would deprive us of information. Huxley feared those who would give us so much that we would be reduced to passivity and egoism. Orwell feared that the truth would be concealed from us. Huxley feared the truth would be drowned in a sea of irrelevance. Orwell feared we would become a captive culture. Huxley feared we would become a trivial culture, preoccupied with some equivalent of the feelies, the orgy porgy, and the centrifugal bumblepuppy. As Huxley remarked in Brave New World Revisited, the civil libertarians and rationalists who are ever on the alert to oppose tyranny “failed to take into account man’s almost infinite appetite for distractions”. In 1984, Huxley added, people are controlled by inflicting pain. In Brave New World, they are controlled by inflicting pleasure. In short, Orwell feared that what we hate will ruin us. Huxley feared that what we love will ruin us.

This book is about the possibility that Huxley, not Orwell, was right.

(click here to view)

Terry Wise Ratland Ink Press Jul 19, 2009 EditorialCartoonists.com

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Pallin’ around with the liberal media

On Monday, Eric Boehlert highlighted Time’s upcoming cover story on Sarah Palin, titled, “The Outsider: Where is Sarah Palin Going Next?” While Palin has certainly received her share of bad press, a great deal of it has been the inevitable result of her own statements and actions. Interpretive articles like this one, however, are different and provide journalists with the chance to use their judgment to put past actions and ongoing trials in a broader context that will help readers better understand the subject at hand.

Read More

http://mediamatters.org/items/200907180004?lid=1051627&rid=31830416

(click here to view)

Mike Keefe Denver Post Jul 19, 2009 EditorialCartoonists.com

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Quillen: A real minority report

By Ed Quillen
The Denver Post
07/12/2009

In my mailbox recently, I found yet another “Report to Constituents from Congressman Doug Lamborn.” Like the others, it was printed in full color on heavy, glossy stock and featured a mountain.

Oddly for a Colorado Republican (recall the Alaskan peak used by Bob Schaffer last year and more recently, the Canadian scenery from Scott McInnis), the Lamborn mountain was actually in Colorado — a fall shot of Pikes Peak from the Garden of the Gods.

Lamborn’s “Report” is titled “The Federal Budget Impact on Colorado’s 5th Congressional District.”

The 5th District has been around since Colorado gained a seat after the 1970 census, and it has never elected a Democrat. That’s because it is dominated by Colorado Springs and El Paso County, and James Dobson will come out in support of gay polygamy long before the district is remotely competitive.

The district also includes most of Park County and all of Teller, Fremont, Lake and Chaffee, where I live. We’re so unimportant that our county gets switched around to equalize populations. We were in the 3rd District in the 1970s, the 5th in the ’80s, the 3rd in the ’90s, and back to the 5th in the ’00s. I’d predict another move to the 3rd after the 2010 census, but that makes too much sense.

Our Rep. Lamborn has a staff, and he can draw on the Congressional Budget Office and the Congressional Research Service. So it seemed reasonable to look for some details about “the Federal Budget Impact on Colorado’s 5th Congressional District.”

For instance, how might changes in military priorities — the shift in focus from Iraq to Afghanistan, for instance — affect the military installations in the district: Fort Carson, Peterson and Schriever Air Force bases, the U.S. Air Force Academy and the North American Aerospace Defense Command. No matter how much Lamborn talks about avoiding “dependence on government,” those government payrolls are important.

Or we could consider public-lands management. Will the federal budget help with the killer-beetle infestation now working its way south into the forests of Lake County? Should it? How much of the Forest Service budget should go to providing recreational facilities? Does the U.S. Bureau of Land Management need more staff to enforce its regulations?

What about energy development? Will federal support for “green energy” translate into money here, where we’ve got plenty of wind and sun?

How much stimulus money are we getting? Is it being wasted, or going to infrastructure that will endure?

Those are a few of the issues Lamborn might have addressed if he were actually reporting to his constituents about the federal budget. But instead, when you turn over the glossy report card, there’s a line graph that shows projected annual deficits climbing to the stratosphere under “the majority budget agenda” and declining with “the minority budget solution.”

It looks ominous, but I remember seeing charts like this a decade ago that showed the national debt would be paid off by now. In other words, these projections don’t mean much.

Lamborn’s “report” is about 500 words of generic boilerplate from the Republican Study Commission, a caucus of right-thinking representatives that comes up with an alternative budget every year.

That’s what opposition parties are supposed to do — propose a different course. But should it be produced and mailed at taxpayer expense? And should it be called a report to Colorado’s 5th District, when it contains not one word specific to this district? It’s so generic that it could be used in 434 other congressional districts.

I’ve got a question for Colorado Springs. What did we ever do to you to cause you to give us Lamborn?

Ed Quillen (ekquillen@gmail.com) of Salida is a freelance writer and history buff, and a frequent contributor to The Post.

Complete article at:

http://www.denverpost.com/quillen/ci_12805322

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And now for the important news ….

By Argus Hamilton

Michael Jackson’s life insurers refused to pay his twenty million dollar policy Tuesday. They say his drug use amounted to suicide, which isn’t covered. Joe Jackson just promised to whip all his surviving children until one of them confesses to murder.

http://www.JewishWorldReview.com

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three thousand words

(click here to view)

Scott Stantis Birmingham News Jul 19, 2009 EditorialCartoonists.com

Rob Rogers: after the taxpayer bailout
(www.cagle.com)

Walt Handelsman: too big to fix?
(www.investmentpostcards.com)