LibertyAir

Its been a long time

2009-06-16T13:31:00.002-04:00

Its been a long time since I wrote in this blog. To be honest I was a little burned out after the election. Now however I am feeling the need to write again. I am glad that the Obama administration won, but man can they be disappointing.

President Obama has completely dropped the ball when it comes to Gay rights.
His selection of his economic team has been pretty poor.
His handling of Executive Power has left many with a sour taste in their mouth.

Have A Question For the President

2009-03-26T11:39:00.003-04:00

President Obama and the White House have created a space for the average citizen to ask a question of the President. They have created a place on WhiteHouse.gov called Open For Questions.
From the website, we're told Obama will be answering some of the questions himself:

We invite you to participate in our community-moderated online town hall. Submit your own question about the economy and vote on submissions from others. We also
encourage you to include a link to a video of yourself asking your question (ideally 30 seconds or less), but text submissions are all you need. Come back on Thursday to watch the President answer some of the most popular submissions live at WhiteHouse.gov.Submit your question or video -- or vote for the ones you want answered. You know these questions will be better and more pertinent than what the talking heads come up with. The past couple times I've gone to the White House press conferences, we got some great suggestions for questions. Send them directly to Obama.

Check the video at YouTube: http://www.youtube.com/watch?v=hjJm_Hzc6Yg&eurl=http%3A%2F%2Fmoderator%2Ewhitehouse%2Egov%2Fask%2F%3Fembed%2316%2Fe%3D55f8&feature=player_embedded

Update:

Obama's Online Townhall has begun

The White House is live streaming Obama's townhall from the East Room here. He'll be taking the questions, relating to the economy, that received the most votes in each category. According to the website, "92,920 people have submitted 104,116 questions and cast 3,606,819 votes." The President will also take questions from the audience.Jared Bernstein, V.P. Biden's chief economic adviser (and a blogger) did the intro, he just said, "The goal is to open up the White House to the American people."

Hoovervilles Return as Bushvilles

2009-03-26T10:42:00.003-04:00

Today in the New York Times there is a report on the growth of tent cities across the country. Atrios at the blog Eschaton has dubbed them "Bushvilles." I think the title fits.

From the New York Times:

Like a dozen or so other cities across the nation, Fresno is dealing with an unhappy déjà vu: the arrival of modern-day Hoovervilles, illegal encampments of homeless people that are reminiscent, on a far smaller scale, of Depression-era shanty towns. At his news conference on Tuesday night, President Obama was asked directly about the tent cities and responded by saying that it was “not acceptable for children and families to be without a roof over their heads in a country as wealthy as ours.”While encampments and street living have always been a part of the landscape in big cities like Los Angeles and New York, these new tent cities have taken root — or grown from smaller enclaves of the homeless as more people lose jobs and housing — in such disparate places as Nashville, Olympia, Wash., and St. Petersburg, Fla.

The Economy Shrank Faster Than Thought

2009-03-26T10:17:00.004-04:00

The U.S. economy contracted at pace of 6.3% at end of 2008, slightly worse than had been
previously reported. This was the worst showing in a quarter-century, and probably isn't doing much better this quarter.

Other news about the economy was not much better. New claims for unemployment benefits last week rose to a seasonally adjusted 652,000 from the previous week's revised figure of 644,000, the Labor Department said Thursday. The total number of people claiming benefits jumped to 5.56 million, higher than economists' projections of 5.48 million, and a ninth straight record-high. More job losses were announced this week. Shaw Industries Group Inc., the world's largest carpet maker and a subsidiary of Warren Buffett's holding company Berkshire Hathaway Inc., said it would close two plants in Georgia and lay off about 600 workers. Pharmaceutical company Hospira Inc. said it would cut 1,450 jobs, or about 10 percent of its work force, while beleaguered automaker General Motors Corp. said it laid off 160 engineers, the beginning of 3,400 planned cuts among its salaried employees.

The figures indicate the labor market remains weak even as some other economic indicators have come in better than expected. All the negative forces that are occurring in the economy are now feeding each other in a vicious cycle that has only deepened the recession, now in its second year, and really made this a Great Recession.

Making Sense of Geithner's Plan

2009-03-26T08:23:00.004-04:00

Man there are a lot of people lining up against Tim Geithner's plan for ridding the financial system of 'toxic assets'. Of course people have lampooned that Geithner has changed the name to 'legacy assets', though I thought this was smart public relations. It might sound silly but rebranding works.

I don't like Geithner as the head of the Treasurery Department, he is not up too the job, which requires more than an understanding of the financial system. And I do think that Obama should have other voices on his economic team.

However I think that some critics of the new plan are confusing their dislike of Geithner with his plan. Not all, I think Professor Krugman brings up some relavent areas of concern, but on the whole, I am more optimistic of this plan than many.

One question I have heard is why is the Obama administration going with this plan, my uninformed opinion is the Obam administration is trying to avoid anything that requires legislative action. Lets face it, nothing coming out of Congress has any real chance of fixing this mess.

The main components of Treasury Secretary Geithner’s new PPIP to price and remove toxic assets from banks’ balance sheets are as follows:

Here are the Basic Principles of the Plan: Treasury will use $75bn - $100bn in TARP money to co-invest alongside private sector participants and the FDIC as well as the Federal Reserve, to buy $500bn to $1 trillion of toxic mortgage assets (both residential and commercial) off banks’ books ('toxic assets' I mean ‘legacy assets’)

There are two separate approaches that Geithner has for legacy loans and for legacy securities. At first, Treasury will share its $75-100bn equity stake equally between the two programs with the option to shift the bulk of financing towards the option with the greater promise of success with market participants.

1) Public-Private Program for Legacy Loans: The FDIC is going to establish several public-private investment funds whose sole purpose will be to purchase and hold specific loan pools put up for sale by banks (large and small). The transaction price will be established by the highest bid at an auction run by the FDIC, in which a wide array of institutional investors and even individuals with a long-term orientation are encouraged to participate. The liabilities of the investment fund consist of an equity stake (50% of which provided by auction winner, 50% from Treasury TARP), and collateralized debt issued by the investment fund and guaranteed by the FDIC to finance the remainder of the purchase price (FDIC gets guarantee fee). Before the auction, the FDIC specifies the pool-specific debt-to-equity ratio it is willing to guarantee subject to a maximum 6-to-1 leverage ratio. The private investor would then manage the servicing of the asset pool - using asset managers approved and supervised by the FDIC - until disposal or maturity.

Example: Assuming a 6-to-1 debt-to-equity ratio, the highest bid for a loan pool with $100 face value might turn out to be $84. Of this amount, the FDIC would provide $72 in debt guarantees whereas the equity stake of $12 would be shared equally between the auction winner ($6) and the Treasury ($6).

2) Legacy Securities Program: The legacy securities program is to be incorporated into the Term Asset-Backed Securities Facility (TALF) whose original goal was to provide collateralized financing (non-recourse loans) to buyers of newly created consumer loan/small business loan ABS. Under the Legacy Securities Program, the eligible collateral for TALF is extended to include non-agency RMBS that were originally rated AAA and outstanding CMBS and ABS that are rated AAA.

Example: Under the Legacy Securities Program, up to five Treasury-approved fund managers will have a period of time to raise private capital to target the purchase of designated securities. Assuming the fund manager is able to raise $100 of private capital for the fund, Treasury will provide $100 equity co-investment alongside private investors. Treasury will then provide a $100 loan to the public-private investment fund. Moreover, Treasury may also choose to provide an additional loan of up to $100 to the fund. The investment fund then has $300-$400 at its disposal to buy legacy securities at its discretion. As a purchaser of TALF-eligible securities, the PPIF would also have access to the expanded TALF program of collateralized Fed loans when it is launched.

Assessment

The main sticking points in previous market-based approaches to clear toxic assets from banks’ books were threefold:

a) How to value illiquid assets?
b) Once a transaction price is established, will banks be willing to sell and take a hair cut?
c) How to induce private investors to purchase legacy assets without unduly wasting taxpayer money?

a) Valuation of Illiquid Assets

The theoretical foundations of Geithner’s plan are provided by Lucian Bebchuk from Harvard University among others. He explains that “if the underlying market failure is at least partly one of liquidity, an effective plan for a public-private partnership in buying troubled assets can be designed. The key is to have competition at two levels.First, at the level of buying troubled assets, the government’s program should focus on establishing many competing funds that are privately managed and partly funded with private capital-- and not creating one, large "aggregator bank"-- funded with public and private capital and engaging in purchasing troubled assets. Second, several potential fund managers should compete for government capital under a market mechanism resulting in maximum participation of private capital and minimum costs to taxpayers.”
Geithner’s plan seems to follow these guidelines to a large degree. In particular, on the one hand the government subsidy allows private investors to bid a higher price than otherwise warranted (i.e. the government gives investors the equivalent of a call option.) On the other hand, the fact that the private investor is bound to lose its entire equity stake if the asset value deteriorates from artificially high valuations provides an incentive to bid conservatively. Both effects together may contribute to a reasonable level of price discovery. In case of the securities program, the prospect of refinancing purchased legacy securities with TALF via a non-recourse loan (which is the equivalent of a put option) should incentivize private investors to bid higher than otherwise warranted.

b) Will banks participate?

A similar purely private solution to get toxic assets off banks’ balance sheets was tried with Paulson’s aborted Super-SIV when legacy assets were still marked substantially higher than at present. It became clear then that the private sector will require a possibly substantial taxpayer subsidy in order to overcome the collective action paralysis. Indeed, in the case of the legacy loan example outlined in the Geithner plan with a 6/1 leverage, private investors that invest 7.1% (=1/7 * 0.5) of the equity will get 50% of any upside in return. While Treasury will also share in any upside by half, any downside beyond the private investors’ equity stake is clearly borne by the taxpayers.

While this subsidy to investors provides a powerful incentive to bid prices up in a competitive auction, banks stuck with particularly toxic assets or thin capital buffers may still find a potential writedown at market-clearing prices prohibitive and some might need to be recapitalized after taking the hair cut. FDIC Chairman Sheila Bair has already warned that while this plan will help many solvent banks get rid of their toxic assets thus clearing the way for new loans and fresh capital some banks are beyond the stage of rescue. Those borderline insolvent banks will likely require an additional incentive to sell or mandatory participation otherwise they will prefer to hold on to their assets, especially in view of the FASB’s prospective easing of mark-to-market accounting rules.

For the sake completeness, some commentators would also like to see better safeguards established in order to prevent banks and asset managers from potentially colluding in their common interest to the detriment of the taxpayer.

c) And taxpayers?

At the end of the day the performance of the toxic legacy assets is driven by the cash flow performance of the underlying loans. Keep in mind that among subprime borrowers, serious delinquencies and foreclosures have affected about 20% of outstanding loans as of December 2008 thus impairing the cash flow directed to junior RMBS investors and/or ABS CDOs consisting of these junior tranches. While ABX prices responded positively to the prospect of increased buyer interest, the ultimate loan value will depend on whether households and commercial real estate borrowers will continue making payments in the future. More on that below.

As a practical example of the performance of a toxic portfolio, take the Fed’s Maiden Lane portfolio with Bear Stearns assets. Cumberland Advisors reported that so far the results aren’t promising, and they see no prospect for a profit on the assets. In fact, the portfolio has lost over 10% of its value, and losses are mounting. At present, losses on that portfolio exceed $4.5 billion and the taxpayers’ share is now $3.5 billion. Others point to the low recovery value of IndyMac’s mortgage portfolio as a benchmark.

Bottom line: Will it get credit flowing again?

The immediate market reaction (equities and investment grade CDS staged a substantial rally, less so high yield CDS) was clearly one of relief that nationalization seems to be off the table for now and that the administration is committed to market-based solutions. While the extent of the guarantees almost makes one wonder why the involvement of the private sector is needed in the first place, it is the involvement of the private sector that creates a context in which price setting and discovery happen based on a market mechanism.

An important question at this point is: What should we look at while assessing the plan in the months ahead?

Clearly the unfreeze of credit markets would be the first sign of success but we might not see this happening before some time. Some of the banks that choose to sell assets and take a writedown might be in need of additional capital before they can resume lending. Also, for those institutions that are beyond the stage of rescue and effectively insolvent, the plan will likely not be as effective in stimulating lending or participation in the first place.

The increase in the supply of credit that will come from institutions that are solvent will be important, but will demand be there to do its part? If the real side of the economy continues to deteriorate, it is likely that credit demand might be subdued. Moreover, a further continued deterioration on the real side of the economy would imply new defaults on credit cards, consumer loans, auto loans and mortgages that would result in new toxic assets on the balance sheets of financial institutions recreating an environment where banks would maintain stringent lending standards. Therefore, the success of the plan is a necessary but not sufficient condition to get the economy back on a recovery path. The success of the fiscal stimulus package in sustaining aggregate demand and minimizing job losses and the success in restarting demand in the housing sector will be instrumental to put a stop to the negative feedback loop between the real and the financial side of the economy.

Moreover, if the negative feedback loop persists, need for further funding will arise. While it will be very challenging to obtain Congress approval for additional TARP money, we should point out that the government has set aside an additional $750bn in the FY2010 budget in aid for the financial sector.

Hence, taking care of legacy loans and securities is a welcome step forward, especially for solvent institutions whose asset values are subject to a substantial liquidity discount. However, insolvent institutions might not find as much relief from this plan, and the impact of the plan on the real economy might not be enough to pull the economy out of a contraction for good part of this year and sluggish growth thereafter. But by conducting auctions and determining the market value of the toxic assets, the Treasury will be implicitly using the private sector to ‘stress test’ the financial system to determine which banks are insolvent and therefore will need further government intervention.

Today is the Iraq war’s sixth anniversary.

2009-03-19T16:38:00.004-04:00

Today marks the sixth Aniversary of the Iraq war. Whahoo! It's hard to believe that it's been 6 years since Bush lied to this nation and took us to war with Iraq.

This was a preventive war of choice, which is something this nation has rarely done, and it was based on “intelligence fixed around the policy.”

Since the invasion, hundreds of billions of dollars have been spent, over 4,000 U.S. servicemen and women and hundreds more from coalition countries have died (tens of thousands more physically and mentally wounded), over a 100,000 (or more) Iraqi civilians have parished and nearly 5 million have been displaced.

Yet the New York Times, Washington Post, LA Times, Wall Street Journal, and many other major American newspapers are ignoring the anniversary today. Only USA Today printed a story noting the anniversary of the invasion.

The Center for America's Progress blog Progress Report has more on the good, the bad, and the ugly of developments surrounding the Iraq war over the last year.

UpdateCheck out ThinkProgress's updated timeline of the Iraq war.

Jon Stewart on Dick Cheney

2009-03-19T16:34:00.003-04:00

The Daily Show's Jon Stewart marvels at former vice president Dick Cheney's recent interview on CNN, and his "willful obliviousness to the impact of his policies, both economically and in the realm of foreign policy."

He offers some possible titles for Cheney's upcoming book. Among them: "The Bush Administration: If We Did It, Here's How It Happened," "A Heartclogging Work of Staggering Evil," and "I Know How to Make the Caged Bird Sing."

The Daily Show With Jon Stewart

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comedycentral.com

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President Obama Getting Tough With Congress

2009-03-18T16:08:00.002-04:00

For the first two months of his administration President Obama tried to show due deference to Congress, but now President Obama is thankfully starting to play hardball with the Republicans and right-leaning Democrats who are threatening to sink his ambitious proposals for this country. He's both calling out his critics and raising the option of using a legislative shortcut that would eliminate the threat of a Senate filibuster. Here are what a few new's sources are saying.

According to the New York Times:

"During an appearance on Tuesday at the Eisenhower Executive Office Building, Mr. Obama took a swipe at Republican critics of his $3.6 trillion budget and its agenda for health care, energy, taxes and economic recovery.
"'If there are members of Congress who object to specific policies and proposals in this budget, then I ask them to be ready and willing to propose constructive, alternative solutions,' Mr. Obama said. '"Just say no" is the right advice to give your teenagers about drugs. It is not an acceptable response to whatever economic policy is proposed by the other party.'
"The strong words were the latest in a push that has come to resemble elements of the two-year-long presidential campaign. Mr. Obama may hold his second prime-time news conference as president, perhaps as early as next week, to talk up the budget."

In addition Walter Alarkon writes in The Hill that Obama's change in rhetorical strategy is his response to "substantial pushback from lawmakers in both parties who sharply attacked key elements in his $3.55 trillion proposal."

And the Associated Press writes:

"In a new Web video, President Barack Obama is asking Americans to help him pass his $3.6 trillion budget."

But Obama's big shot across Congress's bow is this from McClatchy Newspapers:

"A top White House official threatened Tuesday to use a congressional rule to force some controversial proposals through the Senate by eliminating the Republicans' power to block legislation.
"Peter Orszag, the director of the White House Office of Management and Budget, said the Obama administration would prefer not to use the budget 'reconciliation' process that allows measures to pass the Senate on simple majority votes.
"Orszag said he wouldn't rule it out, however. The legislative tactic is being considered to push through Obama's global warming and health care programs, and perhaps his proposals to raise taxes on the wealthy....
"Under normal Senate rules, it requires 60 votes in the 100-member Senate to shut off debate and force a final vote. Democrats currently have 58 Senate votes. Under reconciliation, 51 votes can force anything through.
"There is plenty of historical precedent of using it by both parties, including Republican Presidents Ronald Reagan and George W. Bush, who used it force through big tax cuts.
"'Pretty much every major piece of budget legislation going back to April 1981, April '82, April 1990, April 1993, the 1990 act, the 2001 tax legislation, they were all done through reconciliation. Yet somehow this is being presented as an unusual thing,' Orszag said.
"'The historical norm as opposed to the exception is for a major piece of budget legislation to move through reconciliation.'"

The Washington Post reports the predictable Republican response:

"Republicans are howling about the proposal to expand health coverage and tax greenhouse gas emissions without their input, warning that it could irrevocably damage relations with the new president....
"Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee, has argued against reconciliation as well....
"'There are many more problems with using reconciliation than is commonly appreciated,' Conrad said yesterday, after he and House Budget Committee Chairman Rep. John M. Spratt Jr. (D-S.C.) met with Obama at the White House. The topic of reconciliation came up 'in passing,' Conrad said, but no decisions were made.
"One big problem, Conrad said, is that reconciliation was conceived as a way to force hard budget choices, such as tax increases or spending cuts, not as a means to advance substantive legislation."

Roll Call reports on the opposition from some within Obama's own party:

"A bloc of Senate Democratic moderates is quietly maneuvering to keep open the
option of vetoing two of President Barack Obama's most ambitious agenda items
this year — climate change and health care reform.
"Eight Democrats who want to water down new climate change legislation have already joined with Republicans and signed a letter opposing any attempt to use fast-track budget rules to prevent filibusters. Many of the same Democrats also oppose using those budget rules to prevent filibusters of health care legislation...
"Democratic moderates have been couching their opposition to reconciliation with terms like 'bipartisanship' and 'regular order,' but when pressed, some Senators acknowledged they want to ensure their voices are heard during upcoming debates on global warming and health care.
"Senators from energy-producing states like West Virginia and Louisiana are worried new carbon taxes could be slammed down their throats. And fiscal conservatives are concerned they could be left out of the room while liberal Democrats push for a series of tax hikes proposed by Obama....
"But other Democrats said they were concerned that Republicans will filibuster anything Obama pushes on energy and climate change, and the recent run of near-total Republican opposition to Democratic priorities doesn't give them cause for hope. They argue that reconciliation — and the simple majority it requires — would ensure Democrats can forward their top agenda items.

Despite the tougher tack with Congress and Republican's in particular, it's worth nothing that President Obama is still not taking anything like Bush's "imperial presidency" approach to dealing with the legislative branch. For instance, he's actually asking Congress to write major legislation itself.

Robert Pear reports in the New York Times on how's that going:

"Three powerful House committee chairmen have agreed to work together on legislation to overhaul the health care system, starting with the view that most
employers should help finance coverage and that the government should offer a public health insurance plan as an alternative to private insurance.
"The unified approach contrasts with the competition and rivalry among committee
chairmen that helped sink President Bill Clinton's plan for universal health insurance 15 years ago....
"In a letter to President Obama, the chairmen said, 'Our intention is to bring similar
legislation before our committees.'"

Three Consecutive Good Days on Wall Street

2009-03-13T11:09:00.002-04:00

We have not seen this in a while, three consecutive good days on Wall Street. This occurred because there were some small glimmers of hope. The were some indications that the economy’s downward spiral might be slowing. On Monday the markets fell to their lowest point in 12 years, but since then the indexes have bounced back roughly 10%.

Now we are not out of the woods yet, but a few days of light was welcome relief.

South Carolina's Republican Governor Turns Down $700m in Stimulus Money

2009-03-13T08:51:00.005-04:00

South Carolina has the second highest unemployment rate in the country, so of course their Repuglican governor is going to turn down $700 million in stimulus money for unemployment insurance. What a moron. The people of South Carolina should really think about the votes they have made. They voted for McCain 54% to 45% for Obama. They voted for this Republican governor who will screw his state for an ideology. Now their state is entering into a massive depression, and I have to wonder will they wake up? I sure hope so, because we need the whole country to succeed. We are in the midst of a great recession, we don't have time for Repuglicans.

Update: Obama says NO to South Carolina Governor's stimulus scam

The Governor of South Carolina, Mark Sanford, trying to curry favor with the far right wing of the Republican Party (the ones who vote in presidential primaries and attend presidential caucuses, btw), wants to use federal stimulus dollars to pay his state's debt instead of rebuilding schools, for example.

Today, Obama, via OMB Director Peter Orszag, said NO to Sanford's scheme:

The Obama administration has rejected South Carolina Gov. Mark Sanford's request to use $700 million in federal stimulus cash to pay down state debt.White House Budget Director Peter Orszag (OHR'-zag) said in a letter to the Republican on Monday that the federal stimulus law doesn't allow President Barack Obama to make an exception for that cash. Sanford sought a waiver last week, asking to pay off debt rather than use the money to create jobs and avoid deep program cuts.Don't mess with Orszag. Now, keep in mind, Sanford pulled this stimulus stunt to garner attention. He got some of that attention in the form of an ad from the Democratic National Committee:

Obama Addresses Earmark Obsession

2009-03-12T08:22:00.005-04:00

I'm glad that President Obama came out yesterday and expressed a sense of weariness over the media's obsession with earmarks while he also outlined his proposal to reduce and reform their use in the future. President Obama said this as he announced that he would sign the $410 billion omnibus spending bill that does include earmarks (they make up less than 2% of the bill) when it arrived his desk.

I want to remind people because the media seems to have forgotten that earmarks were not Obama's issue during the campaign -- they were Republican candidate John McCain's. Seriously people, there are those who are complaining that President Obama did not keep John McCain's campaign promise. President Obama never promised to veto them, just reduce their number and make their sponsors more accountable. Now he did not reduce them in this bill, which was written before he was elected, but he did make them more transparent. We now know who was the author and sponsor of every earmark.

Keith Olbermann pointed this out on Countdown last night. He showed President Obama speaking about this, and then spoke with Newsweek's Richard Wolfe.

Watch it here:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Here are President Obama's statement:

"Yesterday, Congress sent me the final part of last year's budget; a piece of legislation that rolls nine bills required to keep the government running into one – a piece of legislation that addresses the immediate concerns of the American people by making needed investments in line with our urgent national priorities."
"That is what nearly 99 percent of this legislation does – the nearly 99 percent you probably haven't heard much about."

In fact, President Obama came out and said quite clearly that earmarks have some value:

"Done right, earmarks give legislators the opportunity to direct federal money to worthy projects that benefit people in their district, and that's why I have opposed their outright elimination."

And he took a swipe at some of the bill's critics:

"I also find it ironic that some of those who railed the loudest against this bill because of earmarks actually inserted earmarks of their own – and will tout them in their own states and districts."

President Obama suggested new guidelines for earmarks that he said were consistent with his pledge to restore "responsibility, transparency, and accountability to the actions government takes." He said that earmarks should be announced and justified ahead of time, shouldn't go to private companies without competitive bidding and shouldn't be traded for political favors.

House Majority Leader Steny H. Hoyer wrote about the stupidity of the Republican's argument in a USA Today op-ed yesterday:

"Some politicians try to cultivate an image of fiscal discipline by railing against earmarks — and 'pork' also makes a great story for the news media. But as congressional scholar Thomas Mann recently noted, earmarks do not generally increase spending but simply allow members of Congress to direct a small part of a program's funding.
'Abolishing all earmarks would therefore have a trivial effect on the level of spending,' Mann explained, adding that 'hyperbolic attacks on earmarks are a disservice to the public, encouraging people to concentrate way too much attention and energy on a largely symbolic issue and ignore the critical decisions that we face.'"

Because They Can't Walk and Chew Gum

2009-03-11T12:10:00.004-04:00

The weirdest argument coming from Repuglicans lately is that President Obama is overreaching, trying to do to much, and not keeping his eye on the ball. Just because the prior President could not deal with more than one thing at a time, does not mean Obama can't. Still this is what the Repuglicans are going with.

And of course a lot of the mainstream media is ready to run with this talking point. Here is ABC's Jake Tapper on Monday night during Nightline: "It's the media's new question. Is the president attempting to do too much?" The NBC's Brian Williams last night on the Nightly News: "Today marked President Obama's 50th day in office. Halfway through his first 100 days, the president's first seven weeks have been a whirlwind, with often dramatic movement in all directions, on all fronts: the economy, health care, two wars, and today education reform, which raises the question talked about on cable all day long: Is it all too much for any one administration?"

What?

Then you read Carl Cameron on Fox News and he confirms this is a Republican talking point: "Republicans across Capitol Hill today complained that President Obama and Democrats are taxing too much, spending too much, and borrowing too much. They say this is their mantra for the weeks and months ahead."

Along with ABC's George Stephanopoulous who on Monday night said: "The phrase is 'overloading the circuits'....It's coming from a lot of different corners, especially Republicans like John McCain, and the White House is pushing back very hard against this criticism."

Luckily President Obama and his staff seemed ready for this critism and had some good responses to such charges. Here's what he had to say on the subject yesterday, as a preface to his speech on education:

"I know there's some who believe we can only handle one challenge at a time. And they forget that Lincoln helped lay down the transcontinental railroad and passed the Homestead Act and created the National Academy of Sciences in the midst of civil war. Likewise, President Roosevelt didn't have the luxury of choosing between ending a depression and fighting a war; he had to do both. President Kennedy didn't have the luxury of choosing between civil rights and sending us to the moon. And we don't have the luxury of choosing between getting our economy moving now and rebuilding it over the long term.
"America will not remain true to its highest ideals -- and America's place as a global economic leader will be put at risk -- unless we not only bring down the crushing cost of health care and transform the way we use energy, but also if we do -- if we don't do a far better job than we've been doing of educating our sons and daughters; unless we give them the knowledge and skills they need in this new and changing world."

This is just a really lame attack by the Repuglicans, and I hope the media stops giving it.

Roubini: Recession Might Not Be Half Way Over

2009-03-11T09:50:00.004-04:00

Dr. Doom, Professor Nouriel Roubini is the man who predicted the current financial crisis and yesterday he said the U.S. recession could drag on for years without drastic action. He says that this recession could last 36 months. As we are in the 15th month of a recession this is not good.

This is a nation of shopped-out and debt-burdened consumers who just lost their ability to keep over spending. They lost their resilience and started to give up on spending in the third quarter of 2008. This was when for the first time in two decades, personal consumption contracted. With personal consumption making up for over two-thirds of aggregate demand for the U.S. economy, the outlook for the U.S. is not good for 2009. Consumers are still at the center of the dynamics that will play out in the real economy in 2009.

Professor Roubini told CNBC in a live interview:

"Growth is going to be close to zero and unemployment rate well above 10 percent into next year."

Professor Roubini also said he sees:

"There is no hope for the recession ending in 2009 and will more than likely last into 2010."

Last he again pushed the idea of bank nationalization of at least the four major banks:

"Most of the U.S. financial institutions are entirely insolvent."
"The market friendly view for the banks is nationalization."
"Temporarily take over the banks, clean them up and get them working again."

According to Professor Roubini, unfortunately, Tim Geithner's Financial Stability plan won't solve our financial woes because it assumes that the system is solvent, while nationalization is the only option that would permit us to solve the problem of toxic assets in an orderly fashion and allow lending finally to resume.

Congress Approves $410 Billion Spending Bill

2009-03-11T09:20:00.004-04:00

Another victory for President Obama and the Democrats as the Senate approved the $410 billion funding measure to keep the government running for the rest of the year. The White House announced that President Obama will sign the measure on Wednesday, where he will also announce steps aimed at curbing lawmakers' penchant for pet projects.

Now personally I believe that earmarks are getting a bad name, and are not as evil as Republicans are making them out to be. Earmarks should be a tool that Representatives and Senators use, to specifically meet their states needs. Its just that earmarks should be above board, clear who has submitted the earmark, and not tied to any lobbyist. Earmarks should be done in conjunction with state and local government to ensure they meet the needs of the state.

The media has been too willing to confuse pork barrel projects and earmarks. A pork barrel project is usually an earmark, but not every earmark is pork barrel.

I don't understand why the media is trying to say this bill is an embarresment for President Obama. He argued against wasteful spending, not earmarks (that was McCain who has priven to be an idiot). In addition, what this economy needs is spending, and that is what this bill delivers. And the bill was written mostly over the course of last year, with support from key Republicans such as Minority Leader Mitch McConnell of Kentucky and Lamar Alexander of Tennessee, the Senate's No. 3 Republican, so the belly-aching by Republicans has been humorous. By the way even though McConnell was very active in writing the bill, he voted against it. Can you say covering his butt?

The spending measure chips away at several leftover Bush administration policies. It clears the way for the Obama administration to reverse a rule issued late in the Bush administration that says greenhouse gases may not be restricted to protect polar bears from global warming. Another Bush administration rule that reduced the input of federal scientists in endangered species decisions can also be quickly overturned without a lengthy rulemaking process.
The big increases — among them a 14 percent boost for a popular program that feeds infants and poor women and a 10 percent increase for housing vouchers for the poor — represent a clear win for Democrats who spent most of the past decade battling with Bush over money for domestic programs.

Generous above-inflation increases are spread throughout the bill for initiatives that the Bush Administration underfunded, including a $2.4 billion, 13 percent increase for the Agriculture Department and a 10 percent increase for Amtrak passenger rail system.

How Science Works

2009-03-10T18:13:00.003-04:00

P. Z. Myers takes the occasion of President Obama reversing the Stem cell ban to explain how science works to people who are fundamentally opposed to free inquiry.

The stem cells to be used for this research come from the 600,000 embryos every year that are produced in the US for in vitro fertilization attempts, and which are discarded anyway. Although some on the right say that these eggs can be implanted in women and raised as children, only 60 a year or so are "adopted." That means that all those religious persons who say that they believe that human life begins at conception are hypocrites, standing idly by and allowing a virtual holocaust to occur annually, since they are not adopting these frozen embryos and raising them.
They also don't put filters on their toilets to try to save the millions of embryos that prematurely detach from the uterus wall in very early miscarriages, some of which scientists might be able to somehow save if the proper precautions were taken. I mean, if millions of adults were drowned in toilets annually, wouldn't we put in special safety procedures to stop it from happening?
I think the likelihood is that the strange new doctrine of life beginning at conception is mainly intended to keep women barefoot and pregnant, since no obvious heroic
measures are actually being taken by any significant number of believers to save
the embryos. The belief that life begins at conception is recent, irrational, and has frankly highly impractical consequences.

Under the Bush administration, scientific reasoning took a backseat to politics, as administration officials repeatedly manipulated the scientific process and distorted findings. This was seen in reporting on climate change, environmental issues, and even the run-up to the war with Iraq (remember how those aluminum tubes were pushed).

This manipulation was also seen in the stem cell research debate. Bush came to his decision on stem cells in 2001, after consulting with Karl Rove, not talking to his scientists.

Appearing on national television, White House officials repeatedly distorted the facts behind ES research. Even Bush's own scientists publicly broke with him on the issue. Obama's decision marks a long-awaited shift restoring science to public policy. Yesterday, Obama signed a Presidential Memorandum calling on the director of the White House Office of Science and Technology Policy (OSTP) to "make sure officials who deal with science and technology policy are selected because of their expertise rather than their politics."

IMF warns of global "Great Recession"

2009-03-10T13:04:00.003-04:00

The International Monetary Fund warned on Tuesday that the world economy will likely contract this year in a "Great Recession." The IMF expects global growth to slow below zero this year, the worst performance since World War II.

This will be the backdrop when the Group of 20 leaders meet in London on April 2

Stocks Up on Citigroup News

2009-03-10T11:14:00.003-04:00

There was some actual good news from Wall Street this morning, and the markets responded. Led by financial stocks, the market made its first big move upward in weeks Tuesday after Citigroup Inc. said it had operated at a profit during the first two months of the year. Dow Jones industrials shot up more than 250 points.

Dark Ages Of Science Nearing An End

2009-03-09T15:59:00.003-04:00

President Barack Obama today took a couple of steps to reinstating science to it's rightful place in the decision making process as he signed an executive order that lifted the limits on federal funding for stem-cell research and a new memorandum addressing the role of scientific research in his administration, and throughout the government.

These were further steps in clarifying President Obama's broader vision of how government engages with science.

As David Neiwert of Crooks and Liars says the War on Science is finally over and Science won.

As President Obama signed the executive order that lifted the limits on federal funding for stem-cell research he said:

This Order is an important step in advancing the cause of science in America. But let’s be clear: promoting science isn’t just about providing resources – it is also about protecting free and open inquiry. It is about letting scientists like those here today do their jobs, free from manipulation or coercion, and listening to what they tell us, even when it’s inconvenient – especially when it’s inconvenient. It is about ensuring that scientific data is never distorted or concealed to serve a political agenda – and that we make scientific decisions based on facts, not ideology.

By doing this, we will ensure America’s continued global leadership in scientific discoveries and technological breakthroughs. That is essential not only for our economic prosperity, but for the progress of all humanity.

While hosting the White House ceremony to announce the change, the president also explained a new memorandum he has signed addressing scientific integrity itself. President Obama stipulated that his memorandum is meant to restore "scientific integrity to government decision-making." He noted that this is the beginning of a process of ensuring his administration bases its decision on sound science; appoints scientific advisers based on their credentials, not their politics; and is honest about the science behind its decisions.

"Promoting science isn't just about providing resources, it is also about protecting free and open inquiry," Obama said. "It is about letting scientists like those here today do their jobs, free from manipulation or coercion, and listening to what they tell us, even when it's inconvenient especially when it's inconvenient. It is about ensuring that scientific data is never distorted or concealed to serve a political agenda and that we make scientific decisions based on facts, not ideology."

Alex Koppelman notes that this memorandum carries with it an "unsubtle ... repudiation of the Bush administration and its attitude towards science."

These are just more examples of the change that President Obama promised. Back when he introduced a Nobel Prize-winning physicist as his choice for Energy Secretary, President Obama said:

"His appointment should send a signal to all that my administration will value science, we will make decisions based on the facts."

Soon after, he introduced a really impressive science team, and soon after that, the president devoted one of his weekly multimedia addresses to the issue:

"The truth is that promoting science isn't just about providing resources -- it's about protecting free and open inquiry. It's about ensuring that facts and evidence are never twisted or obscured by politics or ideology. It's about listening to what our scientists have to say, even when it's inconvenient -- especially when it's inconvenient. Because the highest purpose of science is the search for knowledge, truth and a greater understanding of the world around us."

These are the reasons why I say that the Dark Age of anti-intellectualism pushed by George W. Bush, Dick Cheney and the Republican party is coming to an end.

President Obama's Weekly Address - March 7 2009

2009-03-08T23:00:00.003-04:00

President Barack Obama used his weekly address to detail his plans to fix our ailing economy, noting that reforming healthcare is necessary to ensure our long term fiscal health.

Watch It Here:

LibertyAir Blog

Just for Fun: Tim Geithner's New Plan

2009-03-08T22:32:00.005-04:00

Tim Geithner has become a national joke, and that means Saturday Night Live just has to lampoon him. The trouble with the plan laid out in this skit is that it might actually be Tim Geithner's plan. Great cold opening to this week's show.

Watch it here:

LibertyAir Blog

Just for Fun: What Happens when Obama Gets Mad

2009-03-08T22:26:00.005-04:00

A great skit with Barack Obama turning into the Rock Obama.
I love the impersonation of Rahm Emanuel

Watch it here:

LibertyAir Blog

Paul Krugman: The Big Dither

2009-03-06T10:08:00.004-05:00

Paul Krugman writes today in the New York Times about the need to fix America’s banks. Professor Krugman asks the question if President Obama is being bold enough, or is he and his administration dithering too much?

I do think that Obama has been slow in the steps that are necessary to fix the banking mess, but I do wonder if the President is constrained by politics, and the need to keep the markets some what calm. I think Krugman brings up great points, and as an academic and a pundit Professor Krugman provides a strong progressive argument. It is not his job to worry about the politics, but to suggest the best course from an economic sense.

The Big Dither
By PAUL KRUGMAN
Last month, in his big speech to Congress, President Obama argued for bold steps to fix America’s dysfunctional banks. “While the cost of action will be great,” he declared, “I can assure you that the cost of inaction will be far greater, for it could result in an economy that sputters along for not months or years, but perhaps a decade.”
Many analysts agree. But among people I talk to there’s a growing sense of frustration, even panic, over Mr. Obama’s failure to match his words with deeds. The reality is that when it comes to dealing with the banks, the Obama administration is dithering. Policy is stuck in a holding pattern.
Here’s how the pattern works: first, administration officials, usually speaking off the record, float a plan for rescuing the banks in the press. This trial balloon is quickly shot down by informed commentators.
Then, a few weeks later, the administration floats a new plan. This plan is, however, just a thinly disguised version of the previous plan, a fact quickly realized by all concerned. And the cycle starts again.
Why do officials keep offering plans that nobody else finds credible? Because somehow, top officials in the Obama administration and at the Federal Reserve have convinced themselves that troubled assets, often referred to these days as “toxic waste,” are really worth much more than anyone is actually willing to pay for them — and that if these assets were properly priced, all our troubles would go away.
Thus, in a recent interview Tim Geithner, the Treasury secretary, tried to make a distinction between the “basic inherent economic value” of troubled assets and the “artificially depressed value” that those assets command right now. In recent transactions, even AAA-rated mortgage-backed securities have sold for less than 40 cents on the dollar, but Mr. Geithner seems to think they’re worth much, much more.
And the government’s job, he declared, is to “provide the financing to help get those markets working,” pushing the price of toxic waste up to where it ought to be.
What’s more, officials seem to believe that getting toxic waste properly priced would cure the ills of all our major financial institutions. Earlier this week, Ben Bernanke, the Federal Reserve chairman, was asked about the problem of “zombies” — financial institutions that are effectively bankrupt but are being kept alive by government aid. “I don’t know of any large zombie institutions in the U.S. financial system,” he declared, and went on to specifically deny that A.I.G. — A.I.G.! — is a zombie.
This is the same A.I.G. that, unable to honor its promises to pay off other financial institutions when bonds default, has already received $150 billion in aid and just got a commitment for $30 billion more.
The truth is that the Bernanke-Geithner plan — the plan the administration keeps floating, in slightly different versions — isn’t going to fly.
Take the plan’s latest incarnation: a proposal to make low-interest loans to private investors willing to buy up troubled assets. This would certainly drive up the price of toxic waste because it would offer a heads-you-win, tails-we-lose proposition. As described, the plan would let investors profit if asset prices went up but just walk away if prices fell substantially.
But would it be enough to make the banking system healthy? No.
Think of it this way: by using taxpayer funds to subsidize the prices of toxic waste, the administration would shower benefits on everyone who made the mistake of buying the stuff. Some of those benefits would trickle down to where they’re needed, shoring up the balance sheets of key financial institutions. But most of the benefit would go to people who don’t need or deserve to be rescued.
And this means that the government would have to lay out trillions of dollars to bring the financial system back to health, which would, in turn, both ensure a fierce public outcry and add to already serious concerns about the deficit. (Yes, even strong advocates of fiscal stimulus like yours truly worry about red ink.) Realistically, it’s just not going to happen.
So why has this zombie idea — it keeps being killed, but it keeps coming back — taken such a powerful grip? The answer, I fear, is that officials still aren’t willing to face the facts. They don’t want to face up to the dire state of major financial institutions because it’s very hard to rescue an essentially insolvent bank without, at least temporarily, taking it over. And temporary nationalization is still, apparently, considered unthinkable.
But this refusal to face the facts means, in practice, an absence of action. And I share the president’s fears: inaction could result in an economy that sputters along, not for months or years, but for a decade or more.

The truth is the Bernanke-Geithner plan will not work and I hope President Obama soon realizes this, and makes the changes that are necessary to fix this country.

Bankers Don't Care About the Banks

2009-03-06T09:53:00.002-05:00

I am a huge fan of the Young Turks and wanted to point out this must-read piece that their host Cenk Uygar wrote:

Tim Geithner and Larry Summers and many others are missing the fundamental flaw in the system. The bankers don't care about the banks; they care about the
bankers.
These days, the way executives make money instead is in the form of bonuses for years where they bring in a lot of return (and often times for years they don't), but the threat of being fired for too much risk taking is minimal. The more risk you take, the more money everyone makes. And it's not the partner's money you're playing with anymore. You're playing with house money. No one is minding the store anymore.
So, now we have Tim Geithner and the rest of Treasury working so hard to prop up not just these failed banks - but these failed bank executives - because we don't want government running these large companies. The self-interest of the market will do a better job of managing these companies. But it hasn't - because of this fundamental flaw.
These executives did not actually fail. They succeeded wildly. It's just that they had a different goal - to take home as much money as they possibly could for themselves. Mission accomplished!
The Treasury plan is all wrong. We have to first acknowledge that the boards of these companies are not truly representing the shareholders. They are largely friends with most of the CEOs and they do not have an incentive to reign in out of control compensation for the top executives. Then those CEOs pass on the wrong incentives to the executives below them. The more risk they all take, the more money they take home. And if their company goes broke one day - who cares?
Most of these guys took home millions upon millions of dollars already for profits that never really existed. If the company goes under, okay the gravy train came to an end but they still have all the money they made from all those years. It's in their personal bank accounts. That's enlightened self-interest!
Do you know that last year, as Merrill Lynch was in its death throes, 696 executives got bonuses over a million dollars? 696! As the company lost tens of billions of dollars, the executives took home a combined $3.6 billion that year. Billions in bonuses in the worst year in the company's history. They're not stupid; they're smart. They're looting the store before the cops show up.
This is the financial equivalent of the federal government not showing up to rescue people after Hurricane Katrina. Last year the five biggest Wall Street securities firms lost $25.3 billion. The executives at those companies still took home $26 billion in bonuses. In other words, they wouldn't have lost a nickel if they hadn't taken any bonuses.
The Treasury Department still hasn't shown up to take over these looted stores. In fact, they keep pouring taxpayer money into these same shops, as the money continues to move out the back door. Tim Geithner is the worst sheriff in the world.
But we already knew that. Because the main guy who was overseeing all of these banks in New York, as they took these giants risks, was the president of the Federal Reserve Bank of New York - Tim Geithner.
He is under the misimpression that his job is to protect the sanctity of the banks.
Not only is that not his job, but that is working against his actual goal. His real job is to stabilize the financial system, with or without these particular banks or bank executives. The longer he keeps these guys in charge, the longer the looting continues.

UNEMPLOYMENT RATE JUMPS TO 8.1%

2009-03-06T08:59:00.002-05:00

The unemployment rate for the United States jumped up to 8.1 percent in February, the highest since late 1983, as cost-cutting employers slashed 651,000 jobs. Both figures were worse than analysts expected. The net loss of 651,000 jobs in February came after even deeper payroll reductions in the prior two months, according to revised figures. The economy lost 681,000 jobs in December and another 655,000 in January.

Employers are shrinking their work forces at alarming clip and are turning to other ways to slash costs — including trimming workers' hours, freezing wages or cutting pay — because the recession has eaten into their sales and profits.

One of the major differences from other Recessions has been that the job losses are across the board. Construction companies eliminated 104,000 jobs. Factories axed 168,000. Retailers cut nearly 40,000. Professional and business services got rid of 180,000, with 78,000 jobs lost at temporary-help agencies. Financial companies reduced payrolls by 44,000. Leisure and hospitality firms chopped 33,000 positions.

This recession (Which may actually be a depression) has fallen into a vicious cycle in which all the economy's negative problems feed on each other, worsening the downward spiral.

Colbert Report Takes Glenn Beck

2009-03-05T17:09:00.003-05:00

Stephen Colbert did a hysterical parody of the Glenn Beck Show last night. Colbert nailed such
segments like the "GLENN BECK WAR ROOM" where he and his guests "game out" a bunch of doomy scenarios. If you have not seen them you should check it out. Seriously my question to Fox is, did they know what a complete loon they were hiring. Beck was an idiot on CNN's
Headline News, but at Fox News Beck has gone INSANE.

Check out Colbert here:

The Colbert ReportMon - Thurs 11:30pm / 10:30c

Carl Wilson

Colbert Report Full Episodes
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and here (part 2):

The Colbert ReportMon - Thurs 11:30pm / 10:30c

Doom Bunker - Jack Jacobs and Stephen Moore

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White House Summit On Health Care

2009-03-05T16:25:00.004-05:00

Today during the White House summit on health President Obama emphasized how health care is interconnected our economic problems and we can not fix one without fixing the other.

"We are here today to discuss one of the greatest threats not just to the well-being of our families and the prosperity of our businesses, but to the very foundation of our economy -- and that is the exploding cost of health care in America today.

"In the last eight years, premiums have grown four times faster than wages, and an additional nine million Americans have joined the ranks of the uninsured. The cost of health care now causes a bankruptcy in America every thirty seconds. By the end of the year, it could cause 1.5 million Americans to lose their homes. And even for folks who are weathering this economic storm, and have health care now, all it takes is one stroke of bad luck -- an accident or illness; a divorce or lost job -- to become one of the nearly 46 million uninsured or the millions who have health care, but can't afford it.

"We did not get here by accident. The problems we face today are a direct consequence of actions we failed to take yesterday.... [T]here are those who say we should defer health care reform once again -- that at a time of economic crisis, we simply cannot afford to fix our health care system as well.

"Well, let's be clear: the same soaring costs that are straining our families' budgets are sinking our businesses and eating up our government's budget too. Too many small businesses can't insure their employees. Major American corporations are struggling to compete with their foreign counterparts. And companies of all sizes are shipping their jobs overseas or shutting their doors for good.

"Medicare costs are consuming our federal budget. Medicaid is overwhelming our state budgets. And at the Fiscal Summit we held here last week, the one thing on which everyone agreed was that the greatest threat to America's fiscal health is not Social Security, though that is a significant challenge; and it is not the investments we've made to rescue our economy; it is the skyrocketing cost of health care.

"That is why we cannot delay this discussion any longer. And that is why today's forum is so important. Because health care reform is no longer just a moral imperative, it is a fiscal imperative. If we want to create jobs and rebuild our economy, then we must address the crushing cost of health care this year, in this Administration. Making investments in reform now, investments that will dramatically lower costs, won't add to our budget deficits in the long-term -- rather, it is one of the best ways to reduce them."

The government will spend $2.5 trillion on health care this year. In less than a decade, it will constitute 20% of GDP. If we're going to improve the economy and take fiscal sustainability seriously, this won't wait. The question isn't whether we can afford to tackle health-care reform; the question is whether we can afford not to.

Watch President Obama speak here:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Rachel Maddow was on "The Tonight Show" with Jay Leno the other night, and they discussed how President Obama is taking on the financial crisis, the economy in general, energy policy, and health care. Leno even asks, "Is he [Obama] biting off too much?"

Watch Rachel here:

Jon Stewart Smacks CNBC Good

2009-03-05T15:10:00.003-05:00

Jon Stewart of the Daily Show had a lot of fun eviscerating CNBC last night. In a great little segment he points out that CNBC and it's commentators have just been shills for Wall Street, who hyped a failing system to the detriment of its viewer/investors.

As he so often does Stewart uncovered what mainstream news doesn't generally cover or investigate. He points out that CNBC really is just a cheerleader for the American oligarchy, cheerily misleading the average American into an economic ambush.

Jon Stewart points out that CNBC consistently boosted the Wall Street without exposing what any reporter close to the situation must have known. Through a combination of fantastical stock market theories, suck-up interviews with CEOs of failing companies, affirmations of robust financial health for riverboat gambling financial empires that were about to collapse and become multi-billion dollar welfare recipients of our money -- and more boosterism -- CNBC, with rare exception, has become an advertorial for the looting, unregulated, "default swap," hedge fund, con artist, gambling ways that have destroyed the fundamentals of the heart of our financial system.

Watch the segment here:

The Daily Show With Jon StewartM - Th 11p / 10c

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Though I recommend you watch the entire March 4th Daily Show because Jon Stewart provides one of the most concise primers of the Wall Street mess I've seen.

Obama's Biggest Mistake

2009-03-02T13:14:00.003-05:00

President Obama made a huge mistake during the transition period leading up to his assuming the presidencey of the United States, and it was naming Tim Geithner as the Treasurey Secretary. Geithner just is not the right man to be head of the US Treasurey as the world slips towards a second Great Depression.

Tim Geithner just does not seem to have the creativity to deal with the economic mess that this nation is facing. He seems committed to the view that banks should never be saved by the government, and no matter what they should stay private even if they’re bankrupt, because — well because. Geithner seems incapable of envisioning a government run solution, which is okay, except he is one of the men in charge of developing the government's solution. I believe that Geithner has tunnel vision which prevents him from trying to devise a policy which assumes that the many of the assets in the banking system are “bad,” and need to be removed from the system.

My question is how long does President Obama stick with Tim Geithner as the Treasurey Secretary? Can Geithner turn it around at Treasurey? How long can we wait to find out?

Dow Headed towards 6000

2009-03-02T11:15:00.002-05:00

The Dow has gone below 7000 today. I used to think that 7000 was the floor that this crisis on Wall Street would hit, but 7000 was not the floor, and 6000 may be the floor.

Paul Krugman Describes Obama's Budget As Real Change

2009-03-01T12:23:00.004-05:00

Elections have consequences, that is how Professor Krugman starts his column in the New York Times this last Friday, and while many have heard this sentiment, I think few actually understand what that means. Back in 2000 many did not think there was really any substanstive difference between Gore and Bush. How wrong they were.

Elections do have consequences, and President Obama's budget as set-forth this week is another reminder of that.

Climate of Change
By PAUL KRUGMAN
Elections have consequences. President Obama’s new budget represents a huge break, not just with the policies of the past eight years, but with policy trends over the past 30 years. If he can get anything like the plan he announced on Thursday through Congress, he will set America on a fundamentally new course.
The budget will, among other things, come as a huge relief to Democrats who were starting to feel a bit of postpartisan depression. The stimulus bill that Congress passed may have been too weak and too focused on tax cuts. The administration’s refusal to get tough on the banks may be deeply disappointing. But fears that Mr. Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished.
For this budget allocates $634 billion over the next decade for health reform. That’s not enough to pay for universal coverage, but it’s an impressive start. And Mr. Obama plans to pay for health reform, not just with higher taxes on the affluent, but by putting a halt to the creeping privatization of Medicare, eliminating overpayments to insurance companies.
On another front, it’s also heartening to see that the budget projects $645 billion in revenues from the sale of emission allowances. After years of denial and delay by its predecessor, the Obama administration is signaling that it’s ready to take on climate change.
And these new priorities are laid out in a document whose clarity and plausibility seem almost incredible to those of us who grew accustomed to reading Bush-era budgets, which insulted our intelligence on every page. This is budgeting we can believe in.
Many will ask whether Mr. Obama can actually pull off the deficit reduction he promises. Can he actually reduce the red ink from $1.75 trillion this year to less than a third as much in 2013? Yes, he can.Right now the deficit is huge thanks to temporary factors (at least we hope they’re temporary): a severe economic slump is depressing revenues and large sums have to be allocated both to fiscal stimulus and to financial rescues.
But if and when the crisis passes, the budget picture should improve dramatically. Bear in mind that from 2005 to 2007, that is, in the three years before the crisis, the federal deficit averaged only $243 billion a year. Now, during those years, revenues were inflated, to some degree, by the housing bubble. But it’s also true that we were spending more than $100 billion a year in Iraq.
So if Mr. Obama gets us out of Iraq (without bogging us down in an equally expensive Afghan quagmire) and manages to engineer a solid economic recovery — two big ifs, to be sure — getting the deficit down to around $500 billion by 2013 shouldn’t be at all difficult.
But won’t the deficit be swollen by interest on the debt run-up over the next few years? Not as much as you might think. Interest rates on long-term government debt are less than 4 percent, so even a trillion dollars of additional debt adds less than $40 billion a year to future deficits. And those interest costs are fully reflected in the budget documents.
So we have good priorities and plausible projections. What’s not to like about this budget? Basically, the long run outlook remains worrying.
According to the Obama administration’s budget projections, the ratio of federal debt to G.D.P., a widely used measure of the government’s financial position, will soar over the next few years, then more or less stabilize. But this stability will be achieved at a debt-to-G.D.P. ratio of around 60 percent. That wouldn’t be an extremely high debt level by international standards, but it would be the deepest in debt America has been since the years immediately following World War II. And it would leave us with considerably reduced room for maneuver if another crisis comes along.
Furthermore, the Obama budget only tells us about the next 10 years. That’s an improvement on Bush-era budgets, which looked only 5 years ahead. But America’s really big fiscal problems lurk over that budget horizon: sooner or later we’re going to have to come to grips with the forces driving up long-run spending — above all, the ever-rising cost of health care.
And even if fundamental health care reform brings costs under control, I at least find it hard to see how the federal government can meet its long-term obligations without some tax increases on the middle class. Whatever politicians may say now, there’s probably a value-added tax in our future.
But I don’t blame Mr. Obama for leaving some big questions unanswered in this budget. There’s only so much long-run thinking the political system can handle in the midst of a severe crisis; he has probably taken on all he can, for now. And this budget looks very, very good.

Any one who honestly reads Paul Krugman knows that he is not an Obama apologist. Professor Krugman has been critical of Obama's bailout plans and did not think that the stimulus package Obama pushed for was bold enough. At the same time, I trust a lot of what Professor Krugman has to say about the economy. So when Professor Krugman says that this budget is a good progressive budget, than I am very hopeful.

Obama's Weekly Address

2009-02-28T19:26:00.003-05:00

From The White House Blog:
Keeping Promises

In the Weekly Address this morning, President Obama explains how the budget he sent to Congress will fulfill the promises he made as a candidate. On fiscal responsibility, a fair tax code, a clean energy economy, real health care reform, and education, this budget sets out a new vision for our country.

But having put his priorities on paper and having stood behind them, the President recognizes that there are those who will fight against change every step of the way.

Two years ago, we set out on a journey to change the way that Washington works.

We sought a government that served not the interests of powerful lobbyists or the wealthiest few, but the middle-class Americans I met every day in every community along the campaign trail – responsible men and women who are working harder than ever, worrying about their jobs, and struggling to raise their families. In so many town halls and backyards, they spoke of their hopes for a government that finally confronts the challenges that their families face every day; a government that treats their tax dollars as responsibly as they treat their own hard-earned paychecks.

That is the change I promised as a candidate for president. It is the change the American people voted for in November. And it is the change represented by the budget I sent to Congress this week.

During the campaign, I promised a fair and balanced tax code that would cut taxes for 95% of working Americans, roll back the tax breaks for those making over $250,000 a year, and end the tax breaks for corporations that ship our jobs overseas. This budget does that.

I promised an economy run on clean, renewable energy that will create new American jobs, new American industries, and free us from the dangerous grip of foreign oil. This budget puts us on that path, through a market-based cap on carbon pollution that will make renewable energy the profitable kind of energy; through investments in wind power and solar power; advanced biofuels, clean coal, and more fuel-efficient American cars and American trucks.

I promised to bring down the crushing cost of health care – a cost that bankrupts one American every thirty seconds, forces small businesses to close their doors, and saddles our government with more debt. This budget keeps that promise, with a historic commitment to reform that will lead to lower costs and quality, affordable health care for every American.

I promised an education system that will prepare every American to compete, so Americans can win in a global economy. This budget will help us meet that goal, with new incentives for teacher performance and pathways for advancement; new tax credits that will make college more affordable for all who want to go; and new support to ensure that those who do go finish their degree.

This budget also reflects the stark reality of what we’ve inherited – a trillion dollar deficit, a financial crisis, and a costly recession. Given this reality, we’ll have to be more vigilant than ever in eliminating the programs we don’t need in order to make room for the investments we do need. I promised to do this by going through the federal budget page by page, and line by line. That is a process we have already begun, and I am pleased to say that we’ve already identified two trillion dollars worth of deficit-reductions over the next decade. We’ve also restored a sense of honesty and transparency to our budget, which is why this one accounts for spending that was hidden or left out under the old rules.

I realize that passing this budget won’t be easy. Because it represents real and dramatic change, it also represents a threat to the status quo in Washington. I know that the insurance industry won’t like the idea that they’ll have to bid competitively to continue offering Medicare coverage, but that’s how we’ll help preserve and protect Medicare and lower health care costs for American families. I know that banks and big student lenders won’t like the idea that we’re ending their huge taxpayer subsidies, but that’s how we’ll save taxpayers nearly $50 billion and make college more affordable. I know that oil and gas companies won’t like us ending nearly $30 billion in tax breaks, but that’s how we’ll help fund a renewable energy economy that will create new jobs and new industries. In other words, I know these steps won’t sit well with the special interests and lobbyists who are invested in the old way of doing business, and I know they’re gearing up for a fight as we speak. My message to them is this:
So am I.

The system we have now might work for the powerful and well-connected interests that have run Washington for far too long, but I don’t. I work for the American people. I didn’t come here to do the same thing we’ve been doing or to take small steps forward, I came to provide the sweeping change that this country demanded when it went to the polls in November. That is the change this budget starts to make, and that is the change I’ll be fighting for in the weeks ahead – change that will grow our economy, expand our middle-class, and keep the American Dream alive for all those men and women who have believed in this journey from the day it began.
Thanks for listening.

Obama sets out firm deadlines on Iraq

2009-02-27T13:58:00.004-05:00

Today President Obama traveled to Marine Corps base Camp Lejeune in North Carolina to announce his strategy for Iraq. President Obama said today that "This strategy is grounded in a clear and achievable goal shared by the Iraqi people and the American people: an Iraq that is sovereign, stable, and self-reliant."

President Obama's strategy is to remove all combat troops from Iraq in 18 months, while leaving as many as 50,000 troops there in non-combat roles until the end of 2011. Now I was a lowly non-com in the Marines, so I don't claim to be some great strategy, but I do not get the 50,000 troops being left behind. The missions that get described when people are defending leaving 50,000 soldiers and Marines in Iraq, do not require that many soldiers.

The mission that gets described would only require 10,000 U.S. personnel with air support mostly coming from bases in neigboring countries.

During his speech, President Obama declared that:

"To achieve that goal [to remove combat troops from Iraq], we will work to promote an Iraqi government that is just, representative, and accountable, and that provides neither support nor safe-haven to terrorists. We will help Iraq build new ties of trade and commerce with the world. And we will forge a partnership with the people and government of Iraq that contributes to the peace and security of the region."

President Obama does seem to understand the quandaries that remain in Iraq. In today's speech he frankly described many of the challenges:

"Iraq is not yet secure, and there will be difficult days ahead. Violence will continue to be a part of life in Iraq. Too many fundamental political questions about Iraq’s future remain unresolved. Too many Iraqis are still displaced or destitute. Declining oil revenues will put an added strain on a government that has had difficulty delivering basic services. Not all of Iraq’s neighbors are contributing to its security. Some are working at times to undermine it. And even as Iraq’s government is on a surer footing, it is not yet a full partner – politically and economically – in the region, or with the international community."

President Obama also emphasized that the problems in Iraq will not be solved through military means. He stated that:

"critical recognition that the long-term solution in Iraq must be political – not military....The long-term success of the Iraqi nation will depend upon decisions made by Iraq’s leaders and the fortitude of the Iraqi people. Iraq is a sovereign country with legitimate institutions; America cannot – and should not – take their place."

Still he set an almost impossible goal when he declared that they will leave Iraq with Iraqi a "government that is just, representative, and accountable."

Watch President Obama speaking at Camp Lejeune:

Visit msnbc.com for Breaking News, World News, and News about the Economy

David Gregory had an initial take on MSNBC with retired General McCaffrey and retired Colonel Jacobs. The NBC reporter of course is a tool who has no idea what he is talking about when he speaks about the surge. Washington Post reporter Tom Ricks has a really good take on the situation. You can watch it here:

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Here is another take on the plan from NBC:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Fourth Quarter GDP Figures Have Been Revised

2009-02-27T10:41:00.003-05:00

To all those who have tried to suggest the economic problems of this country are not that bad (I'm looking at you Republicans) and that there were even signs of recovery at the end of Bush's administration, the news today is not good.

Highlighting that this nation is facing a major crisis, the fourth quarter GDP figures have been revised.

In Revision, G.D.P. Shrank at 6.2% Rate at the End of 2008, by Catherein Rampell, New York Times: The economy at the end of last year contracted at a far faster rate than initially estimated... With the exception of government spending, every major component of the economy shrank.
Output fell 6.2 percent at an annualized rate in the fourth quarter of 2008, revised downward from a previous estimate of a 3.8 percent decline.
The economy took the biggest hits in exports, retail sales, equipment and software, and residential fixed investment.
The downward revisions, though, came primarily because of a larger-than-anticipated contraction in inventories of unsold goods. ... Some hail the decline in inventories as potentially good news.
“The only plus to take out of this is that inventories weren’t as high, and that implies you don’t have to cut as much this quarter to get them back under control,” Mr. Gault said. He added that inventories were still too high, and he expected companies to further scale back their production, especially in response to the dismal consumer spending numbers.
Households also saved much more of their paychecks than initially estimated.

Professor Krugman comments in his blog

Minus 6.2%: Yikes.
And if the data on new unemployment claims are any indication (which they are), the economy is continuing to plunge at least as fast.
As Brad DeLong says, I think we’re going to need a bigger stimulus.

This will be a surprise for some, but it just confirms what most people thought was happening.

Should The US Consider Nationalizing Banks That Are In Trouble

2009-02-27T09:08:00.005-05:00

Professor Nouriel Roubini of Global EconoMonitor, who is also known as Dr. Doom (because he for years was warning of the on-coming financial crisis) has given several interviews over the lasy week to Business New Europe, Charlie Rose, Wall Street Journal, Bloomberg, Reuters, ABC, NBR and CNBC.

In his CNBC interview, he strongly advocates a Swedish-style bank nationalization to repair the ailing financial system and prevent banks from turning into 'zombie banks' like were in Japan.

"If you don't nationalize them on a temporary basis the fiscal commitments will be bigger. The alternative is actually a dangerous debt spiral.”

The Swedish-style bank nationalization is where the government of Sweden in 1992 had to deal with the collapse of a real estate bubble and had to take control of two of that country's largest banks, Nordbanken and Gota. The government stripped the banks of their bad assets, which it kept in a pair of new companies known as "bad banks." The remnant "good banks" were then merged into a single company and launched back into the marketplace.

Even Conservatives like Alan Greenspan and Senator Graham have publicly suggested that the idea of nationalization may be needed. Professor Roubini has pointed to this in a number of interviews like the one he had with Tunku Varadarajan in Wall Street Journal.

The biggest barrier to nationalization is the negative public image as 'Bolshevik' rather than 'pragmatic.' But this is stupid, and the result of idiots like Hannerty, Limbaugh, and Republican politicians who toss out accusations of socialism and communism without consideration. Nationalizing troubled banks would allow the government to take distressed assets without having to set a price.

For those who are scared of the word 'nationalization' you should consider the example of IndyMac, a bank that was nationalized and quickly re-privatized in less than a year. IndyMac was an example of a company that needed to be seized.

During a discussion of the banking crisis on ABC's This Week with George Stephonopilis that featured Professor Roubini, Professor Paul Krugman and George Will, and they discussed a temporary nationalization. Professor Krugman suggested calling nationalization “pre-privatization” to sugarcoat the program. Krugman also points out that in 2009 we have already nationalized 14 banks. Similarily the Federal government took control of mortgage finance companies Fannie Mae and Freddie Mac in early September of 2008.

Administration officials say they are determined to maintain the appearance, and in important respects the reality, that banks remain under private ownership. I do not agree with this, the current leadership of these banks are the major problem. The Obama administration argues that they have a responsibility to pursue the least costly solution, and that they continue to believe smaller steps than nationalization can resolve the crisis. They are wrong.

Another argument against nationilzation is that the U.S. Banking system is larger than Swedens, and while the problem is spread across many of the nation's 8,300 banks, the bulk of the problem is in a concentrated few. Fix these mega banks like Citi and Bank of America and you have taken the largest concentration of troubled assets. Nationalize these mega banks, and break them up, no bank should ever be 'too big to fail.'

No one is arguing that the banks should be nationalized on a permanent basis. Those who are arguing against that are attacking straw men.

Obama and his economic team need to step-up as leaders and whether they call it Nationalization or not (it will most probably be called receivership or conservatorship) and take over those major banks that have dragged the economy down.

Another Reason To Get The Pitchforks

2009-02-27T08:34:00.005-05:00

The other day Cenk Uyger of the Young Turks explained in the "Memebers Only" portion of the show how the top 5 Wall Street Finanacial Institutions lost 25.3 Billion Dollars and then gave out 25 Billion Dollars in bonuses.

Get that the companies lost 25.3 Billion and in the same year they paid 25 Billion in bonuses. If they cut the bonues, they would not have lost any money.

Now we are just talking bonuses here, this is not their full compensation. They would have been paid, they would just not have received their bonuses, and considering the job they had done, no bonuses should have been paid.

If you are not a member of the Young Turks, I would recommend joining so you can have access to the "Memebers Only" portion of the show.

World Stocks Lower as Economic Fears Remain

2009-02-27T08:14:00.004-05:00

President Obama's plan to reform America's costly health care system is supposedly the cause of another bad day in the financial markets. Supposedly concerns about banks and pharmaceutical companies, whose profits may be curbed by President Obama caused investors to sell. I don't believe it.

I believe people are using Obama as an excuse to cover their want to sell assets and get what profit they can.

European markets fell today with Britain's FTSE 100 plunged 2 percent to 3,834.89, Germany's DAX lost 2 percent to 3,863.96, and France's CAC 40 dropped 1.5 percent to 2,702.89. This was lead by Lloyds Banking Group, which fell 20%. In total European bank stocks as a collective are down 25 percent since the beginning of the year.

In Asia, stock markets were mixed. Trade was listless after a bruising, volatile month that saw the region's export-driven economies sank deeper into recession amid collapsing demand and their currencies wither.

Ever Closer To a World Wide Depression

2009-02-27T08:00:00.003-05:00

I was just passing through a room that had CNN on, and the report out of Japan was not good.

Sony is sacking its President CEO, and is turning to their head of British operations. Japanese Car companies are reporting that sails are down 40%, and while unemployment remains the same, they are reporting this is due to people giving up on looking for jobs, rather than any stabilization.

This financial crisis is not ending any time soon, and the problem is worse than most understand.

$634 billion for health care in Obama's budget

2009-02-26T15:29:00.002-05:00

In his speech Tuesday night, President Barack Obama said he was serious about fixing the health care crisis in this country. The budget that was released today show's that President Obama is very serious about health care. Very serious:

President Obama is proposing to begin a vast expansion of the U.S. health-care system by creating a $634 billion reserve fund over the next decade, launching an overhaul that most experts project will ultimately cost at least $1 trillion.The "reserve fund" in the budget proposal being released today is Obama's attempt to demonstrate how the country could extend health insurance to millions more Americans and at the same time begin to control escalating medical bills that threaten the solvency of families, businesses and the government.
Obama aims to make a "very substantial down payment" toward universal coverage by trimming tax breaks for the wealthy and squeezing payments to insurers, hospitals, doctors and drug manufacturers, a senior administration official said yesterday.
Embedded in the budget figures are key policy changes that the administration argues would improve the quality of care and bring much-needed efficiency to a health system that costs $2.3 trillion a year.
By first identifying a large pot of money to underwrite health-care reform -- before laying out a proposal on who would be covered or how -- Obama hopes to draw Congress to the bargaining table to tackle the details of a comprehensive plan. The strategy is largely intended to avoid the mistakes of the Clinton administration, which crafted an extensive proposal in secret for many months before delivering the finished product to lawmakers, who quickly rejected it.

I'm impressed by the strategy -- and the number.

Obama forecasts $1.75 trillion deficit this year

2009-02-26T12:24:00.005-05:00

Today President Barack Obama and his administration have predicted a deficit of $1.75 trillion in a budget proposal for 2009. This is the legacy of President Bush, a $1,075,000,000 deficit. This gaping hole in the treasury is huge! This deficit represents 12.3% of U.S. GDP (gross domestic product), and is the largest percentage share of GDP since the end of World War II.

The President's budget sets some major goals such as overhauling the healthcare system and shoring up the U.S. economy.

Now senior Obama administration officials are suggesting that the President's expensive policy goals will be offset by cuts in spending on existing programs that are no longer necessary or have proven wasteful. The Obama administration is promising to put the country in better fiscal shape.

This is going to be difficult to near impossible as federal spending is skyrocketing as Obama officials try to jolt the faltering economy with public-works spending and tax cuts and continue to bail out the troubled financial industry. Still President Obama has made a bold pledge to halve the more-than $1 trillion deficit he inherited from former Republican President George W. Bush in four years.

To do this Obama is producing tax increases on wealthier Americans and reduce the cost of the Iraq war as a troop drawdown, to curb the deficit. Currently the budget projects costs of fighting in Iraq and Afghanistan as totaling just over $140 billion this year and $130 billion in the 2010 fiscal year. Obama's budget proposes that annual costs will drop after the drawdown to $50 billion annually. The proposed budget would also phase out government payments to crop producers making more than $500,000 -- saving $9.8 billion over 10 years -- and eliminate subsidies for cotton storage, saving an additional $570 million over the same period.

Playing Symantics

2009-02-26T09:46:00.003-05:00

Yesterday Fed Chairman Ben Bernanke had this to say about nationalizing banks:

"Nationalization, to my mind, is when government seizes the banks, zeros out the shareholders and begins to manage and run the bank, and we don't plan anything like that."

Some our saying this is proof that the Obama administration is not considering nationalizing some of the major banks which are on the verge of collapse. I however take from this that the Obama administration will be taking control of these banks, but calling it a different name.

Bobby Jindal Swings and Misses

2009-02-25T09:09:00.003-05:00

After President Obama's speech last night, the Republicans as the loyal opposition gave their rebuttal. They asked Louisiana Govenor Bobby Jindal to give this response, and to be honest I was interested in what he would have to say. Govenor Jindal is seen as an up-and-coming leader of the party, he has put him self out there as an opponent of the stimulus package. I wanted to see what the opposition had to offer. I was not impressed. The Governor called Obama's economic plans "irresponsible" in his response speech, but offered no real evidence of this, and offered nothing new in the way of ideas. His speech was immediately panned as poorly-delivered.

Even the Fox News panelists, who are always the GOPs’ biggest cheer leaders panned the Governor's response:

BRIT HUME: “The speech read a lot better than it sounded. This was not Bobby Jindal’s greatest oratorical moment.”
NINA EASTON: “The delivery was not exactly terrific.”
CHARLES KRAUTHAMMER: “Jindal didn’t have a chance. He follows Obama, who in making speeches, is in a league of his own. He’s in a Reagan-esque league. … [Jindal] tried the best he could.”
JUAN WILLIAMS: “It came off as amateurish, and even the tempo in which he spoke was sing-songy. He was telling stories that seemed very simplistic and almost childish.”

Still I think Rachel Maddow had the best rebuttal to the Governor's response. Rachel while discussing with Keith Olbermann and Chris Matthews expressed her disbelief that the GOP response to President Barack Obama’s address to Congress referenced Hurricane Katrina, and it left her speechless.

Watch it here:

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LibertyAir Blog

Obama's first "State of the Union Speech"

2009-02-25T08:17:00.004-05:00

Last nights speech was awesome! Last night's speech was a reminder about why we as a nation elected Barack Obama to be President of the United States. We as a nation need a real president, and I believe President Obama again showed he is up to the challenge. I know this was not technically the State of the Union speech, but it was.

President Obama set the tone for what he intends to do, while listing the challenges ahead:

“Now is the time to jumpstart job creation, re-start lending, and invest in areas like energy, health care, and education that will grow our economy, even as we make hard choices to bring our deficit down.”

This speech was well crafted and expertly delivered. The speech was not overly wonkish, but it was really well delivered. In fact the speech sounded better than it read. The President helped explain why huge resources must go into creating a baseline of solvency for the system and a commitment to renewed lending and down the road growth. The speech and how Obama delivered it really set the right tone. Instant public surveys on Barack Obama's speech showed that generally speaking the public was incredibly receptive to his speech, regardless of political party.

A CBS News poll of approximately 500 people saw approval of the president rise from 62% before the speech to 69% afterward. A CNN poll showed 68% of respondents viewed the speech positively, 24% somewhat positively, and only 8% not positively. 82% supported the president's economic plan as outlined in the speech, while 17% opposed it.

As with every President, Obama did try to rally the nation by extolling the extraordinary character of the American people.

“Even in the most trying times, amid the most difficult circumstances, there is a generosity, a resilience, a decency, and a determination that perseveres; a willingness to take responsibility for our future and for posterity.”

As to the speech, I believe President Obama's comments on the economy do foreshadow tough decisions in the near future. Many are going to be embedded in his budgetary request that will come out two days from now.

He layed out the tasks of cutting federal spending, resuscitating the nation’s banking system, reviving the moribund auto industry, improving this nation's energy plan, and improving education; all huge tasks un-to-themselves. While the President acknowledged that these would be daunting tasks, but that we as a nation could face them together and overcome.

I believe President Obama helped to frame the state of the nation and the debate when he said:

“Short-term gains were prized over long-term prosperity… we failed to look beyond the next payment, the next quarter, or the next election… difficult decisions were put off for some other time on some other day.”

Foreign policy was a sideshow in this speech, and I understand why, but we live in a world so interconnected, that I do not believe a discussion of our economy cannot include more about our foreign relations. A lot of the success that President Obama is hoping for is working with China, Japan, Germany, and Europe as a whole.

Still it was a great speech. One every other speech he gives will be compared to, and 20 years from now another President will be preparing for a speech, and the pundits will ask can their speech compare to President Obama's first address to the nation. And in the end President Obama's message was a simple one to the nation, ‘We will recover.’

Read the text of the full speech here.

You can watch it here:

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LibertyAir Blog

Entitlement Reform Morphs into Health Care Reform

2009-02-23T18:10:00.002-05:00

One thing to come out of the fiscal summit today was the message that the true problem is rising health care costs in both the public and private sectors, not entitlements. That's good news.

Ezra Klein writes about this today:

How Entitlement Reform Became Health Reform, by Ezra Klein, American Prospect: It's testament to how deeply the idea of an entitlement crisis has embedded itself in Washington that news that Obama planned a "fiscal accountability summit" was immediately taken as proof by The Washington Post that he was readying a frontal assault on Medicare, Medicaid, and Social Security.
It was an understandable leap for the paper to make. Fiscal responsibility has, in this town, long been an anodyne synonym for entitlement reform. The "responsible" part signaled that you were courageous enough to cut treasured social programs in service of the national debt. The left, which never bought into this ruthlessly austere vision of responsibility, reacted with a defensive fury. It had just spent eight years protecting the entitlement programs from sharp-knifed "reformers." Would it have to do so again?
Today's "White House Fiscal Summit" ... will feature speeches from the president and vice president and "breakout" sessions... Notice what's not in there: Entitlement Reform.
Its absence is the product of a quiet but powerful change in thinking that has taken place in the offices of elite Washington and, now, the halls of the White House. Where a decade ago the looming fiscal threat of entitlement spending led economists and budget wonks to wear out their worry beads, today a more subtle understanding of our fiscal future dominates. In this telling, there's no such program as Social Security and Medicare and Medicaid. There's Social Security, which ... needs little, if any, help. And then there's health-care reform. "That," says Henry Aaron, a senior economist at the Brookings Institution, "is the big kahuna."
How this happened depends on whom you talk to. Dean Baker ... points to the 2005 Social Security privatization fight. ... That forced left-of-center wonks who'd not thought much about the crisis to confront the numbers...
Aaron locates his light-bulb moment in a paper written by Richard Kogan, Matt Fiedler, Aviva Aron-Dine, and Jim Horney for the Center on Budget and Policy Priorities. He remembers sitting around a table with ... an array of ... economic luminaries while Kogan and Horney presented their findings. "The long-term fiscal outlook is bleak," they wrote, and "rising health care costs are the single largest cause."
Aaron says that the "meeting was sort of a slap-the-forehead moment. I said 'you guys are saying there is no problem other than a health-care financing problem long-term!' Credit goes to them, in my opinion." ...
What everyone agrees on is that the thinking entered government in the person of Peter Orszag. In 2007, Orszag was named director of the Congressional Budget Office. From that perch, he brought Kogan and Horney's thinking to the halls of Congress. Orszag liked to show a particular slide in his public presentations... Government spending and Social Security, it says, will hold relatively constant in coming years. It's Medicare and Medicaid that chew up federal spending.
This graph, however, could be used as evidence for a simple focus on Medicare and Medicaid. The programs are unsustainable. They need to be slashed. The next slide in Orszag's presentation is titled "misdiagnosing the problem." The fiscal threat, it argues, is not more beneficiaries or ... factors internal to Medicare and Medicaid. It's the cost per beneficiary. Orszag has a graph for this, too...
And since Medicaid and Medicare pay for health services on the private market, this can only be fixed through broader health reform. Orszag ... will lead today's "health care" breakout session. Richard Kogan works for him. So it's no surprise that asked for details on today's fiscal summit, one senior administration official told me that "the most likely outcome at this point is that we focus on health care given that it's the key to our fiscal future." Another explained the focus starkly. "Health is mathematically bigger,"... The rumors originally held that eager entitlement cutter Peter G. Peterson would give the day's keynote. Now Robert Greenstein, director of the very think tank that released Kogan and Horney and Cox's paper, will speak.
Fiscal responsibility, in other words, is no longer a stand-in for entitlement reform. In Obama's Washington, it means health reform.

Alter on Obama

2009-02-23T17:45:00.003-05:00

Jonathan Alter writes in Newsweek about President Obama and his ability to read the political situation that he has before him.
Jonathan Alter writes:

"He knows that now is not the moment to cheerlead, not when the financial players are lying dazed on the field. There will be time for that, when the banks have been 'restructured' (see, that sounds better than 'nationalized') and the credit starts flowing again....

"Obama is betting on two things: first, that people are so tired of being bamboozled that a little straight talk about their woes will make them feel more in control, the prerequisite for genuine confidence. And second, that he'll get props for trying, that the very effort of riding events instead of letting them ride him will at least offer the illusion of mastery. Once these mental pieces are fastened in place and we're fully 'in recovery,' to use therapy lingo, the enduring problems won't seem so terrifying anymore."

Watch Jonathan Alter interview by NBC's Norah O'Donnel here:

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Stocks Sink to Lowest Levels in a Decade

2009-02-23T17:34:00.002-05:00

It's all gone. The Dow Jones industrial average tumbled 251 points to its lowest close since Oct. 28, 1997, while the Standard & Poor's 500 index logged its lowest finish since April 11, 1997. All the major indexes slid more than 3 percent.

Over a decades worth of capitol in the stock markets is gone, and I think it will be a long time before this money is remade.

As has been the case for the past nine months, financial stocks were the heart of the crash. Investors are still concerned that a number of the country's largest banks could be nationalized as they continue to suffer severe losses because of their mismanagement and the on-going recession. They're also worried that banks' losses will keep escalating as the recession sends more borrowers into default.

The market's decline extends massive losses from last week when the major stock indexes tumbled more than 6 percent. The major indexes plunged through the lows they reached in late November, at the height of the credit crisis.

Obama's Budget Plans

2009-02-23T17:13:00.004-05:00

President Obama came out today and discussed his budget plans. It is how he kicked off this afternoon's "Fiscal Responsibility Summit" at the White House. In a bold statement that I am not sure is possible, President Obama said he intends to halve the country's budget deficit by the end of his first term.

NBC correspondent Chuck Todd reported on a meeting between President Obama and governors that took place last night and today. Watch his report here:

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President Obama went over a number of the steps that he is taking to fix the mess he inherited. He talked about the accounting gimicks that would no longer be tolerated, so that we would have an honest accounting of the financial state of the budget. He also declares that "Pay as you go" will be reinstated to the budget.

Watch President Obama speak at today's summit here:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Lori Montgomery and Ceci Connolly wrote in Sunday's Washington Post: "President Obama is putting the finishing touches on an ambitious first budget that seeks to cut the federal deficit in half over the next four years, primarily by raising taxes on businesses and the wealthy and by slashing spending on the wars in Iraq and Afghanistan, administration officials said."

Now it had been rumored that President Obama had considered announcing the formation of a bipartisan Social Security task force, but had relented under pressure from the liberal left who were worried about what this would do to other initiatives like healthcare. Solve healthcare and you go a long way to solving Medicare (immediate problem) and Social Security (long term problem.)

No More Accounting Slight of Hand

2009-02-20T14:23:00.004-05:00

One of the most unreported aspects of the Bush Administration was the accounting gimmicks that they used to make deficit projections look smaller and the budget they were presenting look better. I remember a few voices like Paul Krugman and Dean Baker would raise their voices about these gimmicks, and how the deficit this nation was incurring was worse than being reported, but our media just let it slide by.

Now President Obama has written an executive order the bans four specific accounting tricks that Bush and his cronies when producing his budget which will be submitted to Congress next week. Bush and his people used these accounting trick to cover the true extent of the damage that Bush's policies were causing to the government's budget. According to Obama administration officials these gimmicks hid a budget that is $2.7 trillion deeper in the red over the next decade than had been reported by Bush officials. The new accounting involves including the spending on the wars in Iraq and Afghanistan, showing what Medicare reimbursements to physicians are expected to be, and the projecting actual costs of disaster responses. The Obama budget will also deal with revenues from the alternative minimum tax. All things that should have been in the budget in the first place. It was always one of my biggest pieces of evidence that the Bush Administration was corrupt, and at heart liars.

In discussing the changes that Obama has called for, OMB Director Peter Orszag explains:
"The president prefers to tell the truth, rather than make the numbers look better by pretending."

Noam Scheiber writes that it will be "kinda helpful to have a budget that actually means something when you're debating public policy," and added the political upside to using honest budget numbers for a change: "Why not make the long-term deficit look as large as possible at the beginning of your term? Not only can you fairly blame your predecessor at that point; the bigger the deficit looks, the easier it is to show progress, which Obama will need to do as he runs for re-election. To take one example, you can't claim savings from drawing down in Iraq if you don't put Iraq spending on the budget in the first place (which Bush mostly didn't)."

John Cole offers the administration some excellent advice:
The very first thing I would do if I were Peter Orszag and company, and this is one of the very few times I actually hope someone in government listens to me, is to go back and re-score the last decade or so of budgets using the new accounting system, so when they roll this out they can say "Here is what this year's budget would have looked like under the old system. Here is what it looks like under the new system. Here are the past ten years worth of budgets under the old system. Here they are under the new system." For political reasons, this simply has to be done.

All Gone

2009-02-20T08:10:00.002-05:00

The Dow Jones closed down at its lowest level in six years. The gains in the market during the Bush years are all gone. The gains made after the crash which came in the wake of 9-11 are all gone. The Dow is at about half of its all-time high of 14,164, which was reached in October 2007. The total value of all shares of companies on the Dow has now dwindled to $2.45 trillion, down from $4.51 trillion. Bank stocks have been especially hit as investors grow increasingly nervous about the fragile economy.

This economic crisis is going to be one for the history books. The trouble is our government has become so split and dysfunctional, I'm not sure it can meet the needs of the crisis. Look at what has been happening in California. California is the world's 8th largest economy, but has a 42 billion dollar deficit. They needed a draconian budget of tax increases and cost cutting to keep going yet Republicans were not willing to work with Democrats and compromise. Luckily at the last minute the disaster was averted in California.

More on the Beltway Bubble

2009-02-19T13:25:00.003-05:00

The growing refrain these days, especially in the Liberal Blogosphere is that the Washington media and political elite just don't get it. Either they can't or don't want to see the reality of 99% of America. Dan Froomkin has written about this in recent posts on the Washington Post's White House Watch: Washington vs. the Rest of America and Obama: I Won't Play Washington Games.

Similariarly, today on the Washington Post's opinion page, columnist David Ignatius takes on his fellow members of the Washington media establishment this morning:

"Media coverage of the $787 billion stimulus package signed Tuesday by President Obama has had an air of unreality -- as if people were reporting on a baseball game or a tennis match. Is Obama up or down today? Did the Republicans gain or lose momentum? Meanwhile, as Washington obsesses over the political box score, the economy has been going down the toilet.
"You get a better sense of what the crisis feels like -- and the real impact of the stimulus package -- when you leave the miasma of federal spending and examine state and local governments. Here, the impact of the downturn is severe and immediate...
"Did President Obama have a good day Tuesday when he signed the stimulus bill? You bet he did. But the point that weirdly seems to get relatively little attention
is that it was a good day for millions of Americans who are getting hammered by
the recession."

f course on the same opinion page there is a column by David Broder who just can't get his head around the fact that Republicans are not interested in working with Obama, and bipartisanship is not what American's really want, what they want is a functional government.

Fed Downgrades Economic Forecast for this Year

2009-02-18T17:21:00.003-05:00

Do not expect a quick ending to the recession/depression lite, because today the Federal Reserve sharply downgraded its projections for the country's economic performance this year. They are predicting that the U.S. economy will actually shrink, while unemployment will grow.

Dear God when will it end.

Under the Fed's new projections, the unemployment rate will rise to between 8.5 and 8.8 percent this year. Personally I think they are being conservative here, I bet that it will be between 9.0 and 9.2. Of course this is using the metrics that don't count millions, and the actual number will be over 16 percent. Now the old forecasts, issued in mid-November, predicted the jobless rate would rise to between 7.1 and 7.6 percent. This was always a laugh. Employment is almost always the last part of the economy to heal once it emerges out of recession and is in recovery mode. Therefore the jobs picture will remain grim for years to come.

The Fed also believes the economy will contract this year between 0.5 and 1.3 percent. The old forecast said the economy could shrink by 0.2 percent or expand by 1.1 percent. The last time the economy registered a contraction for a full year was in 1991, by 0.2 percent. If the Fed's new predictions prove correct, it would mark the weakest showing since a 1.9 percent drop in 1982, when the country had suffered through a severe recession.

Fed officials do predict that the economy should pick up speed in 2011, growing by as much as 5 percent, which would be considered robust, though I again say they are being optimistic.

Obama Announces Plan To Keep Millions From Losing Homes

2009-02-18T17:00:00.003-05:00

In a very bold announcement President Barack Obama laid out his $75 billion plan to tackle
the housing crisis. Calling it "a crisis unlike any we've ever known" in home foreclosures, he said his plan is necessary to help save the economy.

"In the end, all of us are paying a price for this home mortgage crisis."
"And all of us will pay an even steeper price if we allow this crisis to deepen."

President Obama unveiled the plan while in Arizona, which has been particularly hard-hit by the housing crunch. The plan he outlined is much more expensive than many experts had expected. The goal of this plan aims to keep 9 million people from losing their homes. While discussing the plan as a broad strategy, and what it will mean for the economy, the President took great care not to miss the pain that the housing problems are causing for individual families.

"The American Dream is being tested by a home mortgage crisis that not only threatens the stability of our economy but also the stability of families and neighborhoods. While this crisis is vast, it begins just one house and one family at a time."

One part will ease refinancing for people who owe more on their mortgages than their homes are currently worth. Another provides incentives for mortgage lenders to help those on the verge of foreclosure.

President Obama cautioned that the plan will not save every home but that he believes it will prevent "the worst consequences of this crisis from wreaking even greater havoc on the economy."

His final message:

"The plan I'm announcing focuses on rescuing families who have played by the
rules and acted responsibly. It will not rescue the unscrupulous or
irresponsible by throwing good taxpayer money after bad loans."

As a person with a mortgage teetering on the edge of going underwater, I really hope his plan works.

Dow Drops Almost 300

2009-02-18T08:55:00.002-05:00

On the day that President Obama signed the stimulus package into law the markets took another tumble. The Dow Jones industrial average .DJI fell 297.81 points, or 3.79 percent, to 7,552.60. The Standard & Poor's 500 Index .SPX gave up 37.67 points, or 4.56 percent, at 789.17. The Nasdaq Composite Index .IXIC lost 63.70 points, or 4.15 percent, to 1,470.66.

Wall Street's slide pulled the S&P 500 and Dow to their lowest levels since November 20, when stocks hit 11-year lows. Just before the end of the session, the Dow briefly broke through its bear market closing low that was hit on November 20.

The day's losses brought the Dow down 13.9 percent since the start of the year, while the S&P 500 is down 12.6 percent and the Nasdaq has fallen 6.7 percent.

Why Geithner's Plan was a Dud

2009-02-17T11:44:00.004-05:00

You might remember that last week Treasury Secretary Tim Geithner delivered a much anticipated speech on the next steps Treasury would be taking to bring stability back to the financial and banking sectors.

It bombed.

The question was why?

There were many who thought maybe President Obama had erred in selecting Geithner for this role, and to be honest I wondered it myself.

Geithner's plan as he presented in a live speech and press conference lacked details, and the Secretary looked scared. He made pronouncements about elements of the plan, but then said that we'd learn about the details eventually. Investors were not impressed, and the markets fell hard and quickly.

The question again was why? It turns out that Geithner decided late in the process that the plan he'd been working on was not going to work. So at the last moment he scrapped it entirely. Once the Treasury secretary and his team realized they would need a different approach, they had to decide how to present a plan that was still coming together. As they saw it, the Bush administration had a habit of presenting plans with details they had no intention of sticking to, which didn't exactly inspire confidence. Geithner preferred to "disappoint the markets with vagueness than lay out a lot of details they might have to change later."

At the same time the Treasurey Department has a shortage of personnel. To date, President Obama has not nominated any assistant secretaries or undersecretaries at Treasury, and the handful of mid-level staffers who have started work are still finding their offices and getting their building passes and BlackBerrys.

In addition Geithner and his team made a strategic decision to limit input from the financial industry and other outsiders, aiming to prevent leaks and avoid a perception they were designing the plan for the benefit of big banks. But that also meant they were unable to vet their plan with the companies involved or set realistic expectations of what would be announced.

All this combined to lead to the flop last week. Lets hope the extra time helps them to get a better plan, which can actually succeed.

Obama Signing Stimulus Bill Today, In Denver

2009-02-17T11:09:00.003-05:00

President Obama is scheduled to leave Washington DC today and head to Denver Colorado. While in Colorado he will conduct a tour of a solar panel installation in Denver, and then will sign the stimulus bill into law at the Denver Museum of Nature and Science.

Afterwards, he'll leave for Phoenix, Arizona, where he will talk about the housing crisis tomorrow.

DC Media Hearts GOP

2009-02-17T09:25:00.003-05:00

An odd thing is happening with that "Liberal Media", they don't seem very liberal, and they seem to be living in a bubble. Now I don't think they are "conservative" to be honest I have always thought they were corprotists, to beholden to big business which is more interested in profit than journalism. Now I think another part of the problem is that for all the news shows, we get the same talking heads and pundits, rehashing the same points to each other till an echo chamber is created which blocks out all other thoughts.

The DC media elite love to hear their own voices, and 24 hour cable news has given them an echo chamber, and I believe we now see how clueless they really are. Jane Hamsher of the blog Firedoglake and Markos Moulitsas of Daily Kos have looked into this media bubble, and have written some great posts about it.

Ms. Hamsher deconstructs the DC media's love of the "GOP obstructionists" and Markos has the research that shows those DC media types are just wrong.

They both point out that for many of the upper middle class and above in DC, they live in an economic and political bubble and they remain largely insulated from the troubles hitting the rest of the country. I have to hope the bubble bursts soon, but I have my doubts.

Obama: I'm An Optimist -- Not A Sap

2009-02-16T08:59:00.002-05:00

After a tough start to his Presidencey, President Barack Obama sat down for an interview with the National Journal. The National Journal makes the point that President Obama appears increasingly focused on ends, not means. My point is that this seems to be President Obama's modus operandi all along. In the interview President Obama said he is open to reaching across the aisle, but policy results matter. Here are some snippets of what he told the National Journal:

"My bottom line is not how pretty the process was."
"My bottom line was: Am I getting help to people who need it?"

He also added:

"I am an eternal optimist [but] that doesn't mean I'm a sap."

This article again points out that President Obama is open to consultation, compromise and readjusting his course to build inclusive coalitions, but will keep the results he intends to produce fixed. Not a bad plan in my estimation.

House and Senate Pass the Economic Stimulus Package

2009-02-14T07:57:00.003-05:00

Yesterday President Barack Obama earned his first major victory with the passing of the $787 billion economic stimulus package. The news commentators are marking this as a "major milestone on our road to recovery."

The House voted 246-183 to pass the economic recovery plan, again with zero Republican votes.

Then Senator Sherrod Brown of Ohio rushed back to Capitol Hill last night, to give the economic stimulus bill its 60th vote.

The package is now on the way to the White House.

Speaking in his weekly radio and Internet address, President Obama said, "I will sign this legislation into law shortly, and we'll begin making the immediate investments necessary to put people back to work doing the work America needs done."

Watch President Obama's Internet address here:

2/14/09: Your Weekly Address from White House on Vimeo.
LibertyAir Blog

Paul Krugman: Bad Faith Economics Failure to Rise

2009-02-13T09:37:00.003-05:00

Paul Krugman really has become one of the main voices of the liberal movement. He this week has another outstanding editorial on the stimulus package.

Failure to Rise
By Paul Krugman
By any normal political standards, this week’s Congressional agreement on an economic stimulus package was a great victory for President Obama. He got more or less what he asked for: almost $800 billion to rescue the economy, with most of the money allocated to spending rather than tax cuts. Break out the Champagne!
Or maybe not. These aren’t normal times, so normal political standards don’t apply: Mr. Obama’s victory feels more than a bit like defeat. The stimulus bill looks helpful but inadequate, especially when combined with a disappointing plan for rescuing the banks. And the politics of the stimulus fight have made nonsense of Mr. Obama’s postpartisan dreams.
Let’s start with the politics.
One might have expected Republicans to act at least slightly chastened in these early days of the Obama administration, given both their drubbing in the last two elections and the economic debacle of the past eight years.
But it’s now clear that the party’s commitment to deep voodoo — enforced, in part, by pressure groups that stand ready to run primary challengers against heretics — is as strong as ever. In both the House and the Senate, the vast majority of Republicans rallied behind the idea that the appropriate response to the abject failure of the Bush administration’s tax cuts is more Bush-style tax cuts.
And the rhetorical response of conservatives to the stimulus plan — which will, it’s worth bearing in mind, cost substantially less than either the Bush administration’s $2 trillion in tax cuts or the $1 trillion and counting spent in Iraq — has bordered on the deranged.
It’s “generational theft,” said Senator John McCain, just a few days after voting for tax cuts that would, over the next decade, have cost about four times as much.
It’s “destroying my daughters’ future. It is like sitting there watching my house ransacked by a gang of thugs,” said Arnold Kling of the Cato Institute.
And the ugliness of the political debate matters because it raises doubts about the Obama administration’s ability to come back for more if, as seems likely, the stimulus bill proves inadequate.
For while Mr. Obama got more or less what he asked for, he almost certainly didn’t ask for enough. We’re probably facing the worst slump since the Great Depression. The Congressional Budget Office, not usually given to hyperbole, predicts that over the next three years there will be a $2.9 trillion gap between what the economy could produce and what it will actually produce. And $800 billion, while it sounds like a lot of money, isn’t nearly enough to bridge that chasm.
Officially, the administration insists that the plan is adequate to the economy’s need. But few economists agree. And it’s widely believed that political considerations led to a plan that was weaker and contains more tax cuts than it should have — that Mr. Obama compromised in advance in the hope of gaining broad bipartisan support.
We’ve just seen how well that worked.
Now, the chances that the fiscal stimulus will prove adequate would be higher if it were accompanied by an effective financial rescue, one that would unfreeze the credit markets and get money moving again. But the long-awaited announcement of the Obama administration’s plans on that front, which also came this week, landed with a dull thud.
The plan sketched out by Tim Geithner, the Treasury secretary, wasn’t bad, exactly. What it was, instead, was vague. It left everyone trying to figure out where the administration was really going. Will those public-private partnerships end up being a covert way to bail out bankers at taxpayers’ expense? Or will the required “stress test” act as a back-door route to temporary bank nationalization (the solution favored by a growing number of economists, myself included)? Nobody knows.
Over all, the effect was to kick the can down the road. And that’s not good enough. So far the Obama administration’s response to the economic crisis is all too reminiscent of Japan in the 1990s: a fiscal expansion large enough to avert the worst, but not enough to kick-start recovery; support for the banking system, but a reluctance to force banks to face up to their losses. It’s early days yet, but we’re falling behind the curve.
And I don’t know about you, but I’ve got a sick feeling in the pit of my stomach — a feeling that America just isn’t rising to the greatest economic challenge in 70 years. The best may not lack all conviction, but they seem alarmingly willing to settle for half-measures. And the worst are, as ever, full of passionate intensity, oblivious to the grotesque failure of their doctrine in practice.
There’s still time to turn this around. But Mr. Obama has to be stronger looking forward. Otherwise, the verdict on this crisis might be that no, we can’t.

I think it’s worth revisiting one point made by Professor Krugman that I have not heard any other comentator or pundit make:

[Obama's stimulus] costs substantially less than either the Bush administration’s $2 trillion in tax cuts or the $1 trillion and counting spent in Iraq.

Seriously, the Bush Administration has taken $3 trillion dollars out of the economy, how did we let this happen? And why can't the media point that out when they are talking to Republican whiners? The Bush Administration created a huge hole, and it is going to take a huge response. The trouble is the plan that came out of the Senate is probably to weak.

My only hope is that Obama and his people are actually competent, and that more will be coming down the pike.

Michael Hirsh: Tear Down Wall Street

2009-02-13T09:16:00.002-05:00

Michael Hirsh of newsweek has a very strong article in this week's magazine comes out strong for radical changes to Wall Street and the American economic system that has developed. He points out that the survivors of Wall Street melt down who appeared before Congress this week are 'too big to fail', but are doing just that. They're failing, now what should we do.

It was a classic populist spectacle, reminiscent of William Jennings Bryan's "Cross of Gold" speech or Huey Long's mid-Depression campaign to "Share the Wealth." There, arrayed before Rep. Barney Frank and other voices of the people's outrage, sat the former titans of Wall Street, each of them trying desperately to convince their congressional questioners, and the world, that they deserved some fate other than oblivion.
And these were the survivors! The hardy ones. The eight CEOs who appeared before the House Financial Services Committee on Wednesday—among them Jamie Dimon of JPMorgan Chase, Lloyd Blankfein of Goldman Sachs and John Mack of Morgan Stanley—were actually the bankers who have best navigated the financial turmoil in recent months after taking money from the "Troubled Asset Relief Program," or TARP. That may help explain why some of the angrier congressmen, like Gary Ackerman of New York (who last week roared to former SEC officials: "You couldn't find your backside with two hands if the lights were on!") were a little calmer this time. But it was a striking display of the new balance of power in America. One by one, the former "captains of the universe," as Rep. Maxine Waters described them, genuflected before their congressional masters. "I feel more like a corporal of the universe," Bank of America's Ken Lewis joked weakly. The CEOs described how much they've slashed their salaries and bonuses, how hard they've tried to lend out the billions of taxpayer dollars, and how quickly they'll try to get off the federal dole.
Truth is, this is all mostly whistling past the graveyard—which is where most of these giant banks are headed someday. Or at least let us hope so, while Washington still has the power to make it happen. With a couple of possible exceptions, these financial behemoths can't be allowed to survive and securitize us to the brink again, only to have to be rescued because they're too important to the economy to be permitted to go bankrupt. This is still the heart of the crisis—the problem that President Obama's stimulus package and Treasury Secretary Tim Geithner's financial plan don't even touch. If it weren't for the fact that too many of these banks are too big to fail—"systemic risks," in the jargon—we would have been through a lot of the worst already. Bankruptcy and oblivion is supposed to be the fate of market players who make bad choices. That's how capitalism works. The system gets cleaned out, the survivors deservingly pick up their failed rivals' business and get richer, and the economy comes back to life quickly. But that's what is not working now. Oversize screw-ups like AIG and Citigroup survive on, zombielike, with Fed and Treasury "commissars" on the inside watching their every move, because no one can bear the thought of how many other institutions they would take down if they failed.
Among those who appear to understand this is Federal Reserve Chairman Ben Bernanke. " 'Too big to fail' is an enormous problem," Bernanke said in his own congressional testimony on Tuesday. "We are very unhappy with this problem, and we think that it should be a top priority to fix it as we go forward, so that … the situation doesn't arise again." One of the most telling moments at the CEO hearing came when one congresswoman asked if any of them had grown too large. All were silent. At other points, the CEOs tried to make the case that, with a thaw in lending barely under way, the issue is not with them but with the "nonbank" sector that was responsible for most of the worst mortgage-lending practices during the bubble. What they didn't say is that some of their own companies, among them Bank of America, actually went out and bought the most predatory and seamiest nonbank lenders, like Countrywide Mortgage. Just swallowed them whole. They're incorrigible.
This is the main reason why, to the market's chagrin, Geithner declines to provide details on how to unwind the bad loans and assets at these big companies. Geithner's predecessor, Hank Paulson, dithered over this problem as well. The indecision has been dragging on for five months. That's because the problem is all but insurmountable. If you value those toxic assets at actual market levels, most of these banks would become insolvent. Letting them fail would almost automatically trigger the depression the government has been trying to avert. But if instead the government artificially inflates the assets' values, it commits itself to spending trillions more in public money at a time when Congress and the public are fed up with bailouts (the IMF estimates that potential losses are still $2.2 trillion; Bernanke countered Tuesday that only half of those are with U.S. institutions, but he admitted the banks still have yet to write down about $500 billion in losses). And if the government declines to do either of these things—if it neither values the bad assets at market level nor buys them up at inflated prices—bank stocks will continue to be suspect and private capital will stay on the sidelines. The economy will remain frozen.
In other words, there are no good choices. According to a Treasury source, Geithner knows what a lot of these assets are worth. "The government has gone through these assets very carefully," Citigroup's Vikram Pandit told the House committee. But knowing the value doesn't help. So the Treasury secretary is trying to finesse his way through, probably case by case, hoping he can gradually nudge asset values higher by restoring confidence to the market.
Geithner may be too optimistic. As one senior economic official in Washington said to me the other day, "the Obama administration has got as much political capital as it's ever going to have. This is the time to lay it all out." In other words, tell everyone just how bad the problem really is. It's more than a matter of how much public money to commit. The "fundamental reshaping" of the financial system that Geithner referred to on Tuesday has to be part of the solution as well. The Citigroups and AIGs should be carefully broken up as soon as possible.
True, you're not going to place artificial limits on a firm's size; that's a bridge too far into socialism. But as John Kay of the Financial Times wrote on Wednesday, there's no reason why we can't rediscover the wisdom of Senators Glass and Steagall during the Depression. "Tension between the buccaneering culture appropriate to trading and investment banking and the meticulous processing and caution needed for retail banking is perpetual," Kay wrote. Indeed, as Joseph Stiglitz wrote in 2003, the wisdom behind Glass-Steagall goes "back even further to Teddy Roosevelt and his efforts to break up the big trusts." Let's simply acknowledge that. Yes, finance marches on. We're not going back to 1933. But some things about human nature never change. Now that we understand the fallacy of the "dispersion of risk" idea—which Wall Street, with a big assist from Alan Greenspan, sold us on before the crash—we should arrive at about the same place as Glass, Steagall and Teddy Roosevelt did. We can't have a free-market economy dominated by institutions so huge that they don't have to play by free-market rules. And yet we still do.
© 2009

Senator Patrick Leahy wants to see Bush and Cheney Investigated

2009-02-13T07:15:00.002-05:00

Senator Patrick Leahy has a diary on Daily Kos today. He is pushing a petition to investigage Bush-Cheney abuses of power. You can sign the petition here.

Judd Gregg withdraws nomination as Secretary of Commerce.

2009-02-12T17:04:00.002-05:00

Judd Gregg, the Republican Senator from New Hampshire has announced that he is withdrawing from consideration for Commerce Secretary, citing “irresolvable conflicts” on the stimulus package and the Census. Gregg said in a statement:

However, it has become apparent during this process that this will not work for me as I have found that on issues such as the stimulus package and the Census there are irresolvable conflicts for me. Prior to accepting this post, we had discussed these and other potential differences, but unfortunately we did not adequately focus on these concerns. We are functioning from a different set of views on many critical items of policy.

Gregg's statement is surprising because last week Senator Gregg actually gave the recovery package a bit of an endorsement (if half-hearted) saying:

"I think the one that's pending is in the range we need. I do believe it's a good idea to do it at two levels, which this bill basically does, which is immediate stimulus and long-term initiatives which actually improve our competitiveness and our productivity."

Guess I was not the only one surprised by the news as MSNBC is reporting that the White House press office was "surprised" by Gregg's withdrawal, saying that it was "news to them." The Politico is echoing MSNBC in their reporting that the White House was “totally caught off guard” by the news.

Personnally I'm glad he will not be the Commerce Secretary. I want someone who is more progressive, pro-worker, and less beholden to big business.

Agreement on the Stimulus

2009-02-12T15:40:00.004-05:00

This happened a lot faster than I thought it would. Yesterday, the House and Senate had ironed out the differences between their two recovery packages to agree on a $789 billion bill. Senate Majority Leader Reid went out in front of the television cameras to boast:

“The middle ground we’ve reached creates more jobs than the original Senate bill and spends less than the original House bill.”

The Washington Post noted that, after all the negotiating and compromising, “the bill followed remarkably closely to the broad outline that Obama had painted more than a month ago,” with a roughly 60-40% split between spending and tax breaks. That is still a terrible split. At best it should have been a 70-30% or even better a 75-25%.

That said the compromise between the House and the Senate did make vital improvements to the Senate version, which would have created 9 to 12 percent fewer jobs than the version passed by the House while costing $17 billion more.

The new compromise cuts out big business giveaways, restores education funding, and raises funding for science research, among other improvements to the Senate bill:

– Eliminates big business tax giveaway. The compromise cut a provision from the
Senate bill that allowed companies of any size to claim an estimated $67.5 billion in tax refunds this year and next, by allowing companies to write off losses from 2008 against taxes paid over the last five years.
– Restores House funding of food stamps. The Senate had granted $16 billion in food stamp aid, but the new compromise expands that to the House’s full $20 billion funding.
– Removes nuclear loans. The $50 billion in loans for the nuclear industry, which were snuck into the Senate bill by “budget gimmickry” and which would not have created a single job for many years, were completely eliminated by the conference committee.
– Slashes tax cut for rich homeowners. The Senate bill granted a $15,000 tax cut to new home buyers, a provision Nobel Prize winner Paul Krugman called a “bonus to affluent people who flip their houses.” The new compromise “drastically reduced” the tax credit, cutting the overall cost from $35 billion to about $5 billion.

The compromise bill allocates $30 billion for smart grid technology and energy efficiency measures and nearly $46 billion to fund education and modernize schools, which is considerably higher than the Senate’s $39 billion total.

The Wall Street Journal also notes that the compromise significantly “expands federal aid to an array of programs aimed at the poor and jobless, with billions of dollars for health care, unemployment insurance, food stamps and other programs.”

Though the compromise bill is an improvement over the Senate version, it's too small and still includes non-stimulative tax breaks. The spending in the bill, the most stimulative component, fell from $604 billion as introduced in the House to $637 billion when later passed by the House, falling again to $545 billion in the Senate-passed version. The final compromise has only $513 billion in spending, with $276 billion in tax breaks.

One of the most egregious problems with the compromise is the tax breaks. Some of these tax breaks, such as the credit for new home buyers, are particularly non-stimulative, and the largest tax break is the $70 billion to spare millions of Americans from paying the alternative minimum tax. I am still not sure why the AMT is in there; the AMT has nothing to do with recovery. The AMT will offer no stimulus to the economy, and it would have been taken care of later in it's own bill, as has happened every year for over a decade. This was a wasted $70 billion. That $70 billion could have really helped the states, or gone into infrastructure investment.

Though President Obama admitted this week that “the plan is not perfect,” it’s clear the congressional compromise is a dramatic improvement over the Senate bill passed earlier this week. The final bill, after passing both houses of Congress, is expected to arrive on Obama’s desk no later than Monday.

Geithner's Plan Falls Flat

2009-02-11T08:09:00.005-05:00

Yesterday Treasury Secretary Timothy Geithner presented the Obama’s administration’s Financial Stability Plan to deal with the financial system’s toxic asset overhang and ease, if not reverse, the ongoing decline in bank lending to households and corporations.

To say that it went over like a lead balloon would be an understatement.

Out of the three broad strategies that most economists say are available - nationalization, ‘good / bad bank’, backstop guarantee on ring-fenced toxic assets - the administration plan offers elements of all three.

I am always wary of a plan that offers a little bit of everything.

Geithner’s first program involves a mandatory ‘stress test’ for all banks with $100bn-plus assets which should also shed some clarity on the individual banks exposures and valuations of toxic assets. This I like because there is still too much we do not know about the financial crisis. A major part of this whole economic meltdown has been fear of the unknown. Safe investments and secure loans have been damaged by fear of toxic assets.

According to the plan Geithner laid out yesterday, after the stress test the Treasury’s Capital Assistance Program would stand ready with preferred shares / warrants injections where needed, only this time with clear lending requirements and strict limits on dividends, stock repurchases and acquisitions next to a $500,000 compensation cap. This solves some of the problems with the original $350 billion that Paulson injected into the financial markets late last year.

Geithner claims that any capital investments made by Treasury under the CAP would be placed in the Financial Stability Trust. However, Geithner left unclear what other options are there for institutions that are severely undercapitalized or fail to attract public capital on a recurring basis (Bank of America and Citigroup are two examples) Yes the program aims at ensuring that there is full transparency disclosing all relevant information on capital recipients at www.FinancialStability.gov; but is that enough to give Geithner our trust?

The second program Geithner spoke about was the Public-Private Investment Fund (PPP). This program aims at setting up a new lending/guarantee facility (the so called Bad Bank solution). This program would work by leveraging an initial private capital commitment with government funds to an initial scale of up to $500 billion (and if you look at the fine print it can be expanded to a maximum of $1 trillion.) The aim of this idea is to involve private capital on a large scale that sits currently on the sidelines while also allowing private market forces to determine the price for currently troubled and illiquid assets.

Personally I think yesterday’s tanking of the Dow was because Geithner mentioned using private capitol in his plan.

A similar experiment was tried before with the private sector sponsored M-LEC vehicle that ultimately proved unviable due to asymmetric toxic asset exposures of participating banks and due to still unresolved asset valuation issues. Commentators agree that for a similar plan to work this time, the government will have to assume a potentially substantial downside in order to induce otherwise unwilling investors to participate in view of the size of potential losses.

Renowned distressed debt experts such as Edward Altman and Martin Fridson note that the best time to invest in distressed debt is when default rates peak. Mind that high-yield default rates are set to rise to 15-20% sometime in 2010 from currently 4-5% due to very bad credit quality at the outset of the cycle.

Yet this again is putting all the risk on the public and all the reward for those who got us in this message.

The third program put forth by Secretary Geithner is an expanded version of the previously $200bn Federal Reserve Term Asset Backed Securities Loan Facility (TALF) program aimed at unclogging the markets for auto, student and other consumer loans. That initiative may expand to as much as $1 trillion, using $100 billion from the Treasury's rescue funds, and include aid for commercial real estate markets.

Geithner points out that securitization created about 40% of the demand for new loans extended to consumers, students, and auto buyers. The decline of securitized lending to the tune of $1.2 trillion between 2006 and 2008 leaves a hole that needs to be filled if a severe lending contraction should be prevented.

Economist Nouriel Roubini in his latest writing It Is Time to Nationalize Insolvent Banking Systems argues that, ultimately, nationalization may be a more market friendly solution of a banking crisis: it creates the biggest hit for common and preferred shareholders of clearly insolvent institutions and – possibly – even the unsecured creditors in case the bank insolvency is too large; it provides a fair upside to the tax-payer. Moreover, it bypasses the asset valuation issue as any overpayment goes back into taxpayers pockets. “With the government starting stress tests to figure out which institutions are so massively undercapitalized that they need to be taken over by the FDIC the administration is putting in place the steps for the eventual and necessary takeover of the insolvent banks.” This might well explain some of the negative market reaction.

The Treasury has stressed that while the ongoing price correction will stimulate home demand, there is a need to reduce foreclosures, which otherwise adding to the excess overhang of homes pose the risk of price over-correction, pushing more homeowners into negative equity. The Treasury plans to announce a Housing Program in the next few weeks to help refinance mortgages and contain foreclosures by reducing monthly payments for homeowners. The program will be financed by using $50 billion from the remaining TARP funds. To increase lender participation, the plan makes it compulsory for banks using government funds under the Financial Stability Plan to participate in foreclosure mitigation. In order to stimulate home demand and help the current homeowners refinance, the Treasury and Fed will continue with their November 2008 plans use $600 billion to buy MBSs and debt of the GSEs using and reduce mortgage rates to the 4-4.5% range. More importantly, the plan will increase flexibility to modify loans under the Hope Now and FHA Programs started in 2007-08 to help increase participation and foreclosure prevention.

Efforts to stimulate demand reducing mortgage rates and offering tax incentives will be largely ineffective as they are a small factor in determining home demand relative to factors such as tighter lending standards, changing dynamics for households - job and income loss, wealth erosion, rising savings rate, and low expectations of income or asset appreciation. These factors will constrain home demand in the short run while potential buyers await further price correction and banks don’t see the viability in offering mortgage for a house whose value is expected to fall.

As a result, the government needs to focus on the supply side of the market by refinancing at-risk mortgages and preventing foreclosures that will only add to the existing overhang of houses. Moreover, government’s loan modification program should reduce mortgage principal rather than just reducing the mortgage rate or extending the loan maturity, which has been the case in past government programs. Unless the problem of insolvency among a large number of households is addressed, default on modified mortgages will also continue. Also, given the large number of homeowners with negative home equity, the program will need much larger funds - over $600 billion to $1 trillion though the actual cost might be much less, since the government will receive a share from future home appreciation. Monetary incentives for servicers are also low and ineffective. Even the number of homeowners the program plans to target, 1.5-2 million is a very small fraction of the over 12 million homeowners with negative equity. In fact, several Democrats are pushing a legislation to allow bankruptcy judges to change mortgage terms that would allow lenders to reduce the mortgage principal for primary homes and bring down monthly payments. To increase participation, they support offering monetary incentives for servicers while lenders will be entitled to a share if the homeowner sells the house and also have the government share any losses on the modified mortgage.

Looking at the shortcomings of past government programs such as the Hope Now, Housing Retention and FDIC programs, the new program should be mandatory for lenders in order to increase participation.

The government will also need to share the cost of modifying the loan, by matching the principal or the interest rate cut in a proportionate or less than proportionate amount. By guaranteeing the loans, the government will be the senior debt holder. The new interest rate should be based on the risk assessment of the borrower and all three parties – homeowner, lenders and servicers, and the government should share the cost of modification. However, determining the extent of principal reduction based on the true value of the house, and dealing with second lien mortgages and the diverging interests of mortgage servicers will be challenging.

Under the new guidelines for compensation issued by the Treasury, firms receiving federal aid will be subject to shareholder say on pay and will be required to cap executive compensation at $500,000 with any additional compensation given out in restricted stocks which can be cashed only after the government has been repaid or the bank has satisfied repayment obligations, and met lending and stability standards. Moreover, bonuses and compensation for other top executives will also be reduced. At the very least the Treasury is going to require disclosure of the compensation structure and strategy, and expenditure on luxury items. Still, while the government's intervention is warranted, the compensation reform being put forward does little to align risks with rewards. Sadly reports are that Geithner fought for real compensation reform.

A large share of the compensation can and will be given out in restricted stocks including compensation for several traders and funds managers who are not under the lenses of the current plan. These measures also give a green light to those who have already received large compensation and severance packages at the troubled banks. More importantly, the measures might act a disincentive in attracting credible executive talent to these troubled institutions in the future who can help deal with the bank losses and overhaul. Wall Street compensation is determined in a competitive market with CEOs joining a firm offering the most attractive pay packages and perks. Many banks are already reluctant to seek capital injection from the Treasury or are contemplating to payback past borrowings in order to avoid government scrutiny over their compensation packages. There is too much voluntary action on the part of the banks. The government needs to be much more forceful. These companies caused the financial crisis, and should not have the luxery of choosing to take part in this package.

To reduce excessive risk-taking in the short-run, compensation, bonuses and even severance packages should be based on the long-term performance of the employee relative to the risk undertaken with large part of the payments given out in restricted stocks that can be redeemed over a longer period of time.

Is Cornyn Preparing for a Run at the White House?

2009-02-10T13:13:00.002-05:00

Senator John Cornyn, a staunch conservative Republican from Texas was the only Senator not to vote yesterday on the economic recovery package. He instead was at a New York gathering of prominent media conservatives and Wall Street Republican donors.

Cornyn has been one of the most vocal opponents of the stimulus, and has been positioning himself as the voice of the Republicans. So I have to wonder why was Cornyn at the Grand Hyatt hotel in Midtown Manhattan, when such a big vote was going on. Is he lining up support for a run? Was he sure not to be part of a vote that if it works he does not want to be on the record against, while already having gained some cred for standing up to the Democrats?

I think we are going to see a John Cornyn candidacy.

Key Stimulus Motion Passes 61-36 In Senate

2009-02-10T08:20:00.006-05:00

Senate Democrats on Monday advanced the $838 billion economic stimulus bill past Republican filibusters. The Senate Democrats were able to pass the vote, by 61 to 36, to close debate on the stimulus, gaining 3 Republican votes. The final roll call is online, and as expected Republican's Collins, Specter, and Snowe were the only senators to break party ranks. Interesting note that Senator Cornyn of Texas, who was a major opponent of the stimulus plan, did not vote.

If the Senate approves the measure tomorrow, as expected, negotiations to resolve differences with the $820 billion bill passed by the House are expected to focus in part on the Senate's decision to cut $40 billion from a state stabilization fund.

Another interesting fact was that Ted Kennedy was on the floor for the vote. For the first time since Inauguration Day, where he collapsed. He left the chamber soon after his "Aye" vote was recorded.

Senate Democrats got a victory, but it was at a cost.

Last night Rachel Maddow had Senator Ben Nelson of Nebraska on her MSNBC show to discuss the stimulus package. Senator Nelson was one of the lead "centrists" who worked out the deal in the Senate. His argument with Rachel was that if there were no cuts, than there would be no Senate bill. He argued that spending on schools was still in the bill, and would be in other bills. He made a passioned argument, I just don't believe he made a compelling argument, though I do believe his work did get the 3 moderate Republican votes.

Watch it here:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Cenk Uygur For The 10pm MSNBC Timeslot!!!

2009-02-10T06:12:00.002-05:00

Cenk Uygur of the Young Turks is campaigning for the 10pm MSNBC Timeslot, which I would love.

Here are a couple of on-line tools they have put together for the campaign:
http://www.facebook.com/hom... The Official Young Turks Page http://www.facebook.com/pag... Watch more at http://www.theyoungturks.com

Watch the video here:

Colbert Nation - A Debate on the Stimulus

2009-02-10T06:04:00.002-05:00

James Surowiecki of the New York Times went on the Stephan Colbert show recently to discuss the stimulus debate. During the discussion he said that Democrats are using the financial crisis to push through programs that are in the long-term interest of Americans.

It is too bad we have to go to a comedy show for this discussion.

Watch it here:

The Colbert ReportMon - Thurs 11:30pm / 10:30c

Economic Stimulus Bill - James Surowiecki

Colbert Report Full Episodes
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LibertyAir Blog

The Young Turks on Obama's Press Conference

2009-02-10T05:55:00.004-05:00

Here is Cenk Uyger's take on President Obama's first press conference.

Watch it here:

LibertyAir Blog

Cluster F#@k to the Poor House

2009-02-10T05:33:00.004-05:00

Just for fun, the Daily Show's take on the debate over the stimulus plan.

Watch it here:

The Daily Show With Jon StewartM - Th 11p / 10c

Clusterf#@k to the Poor House - Economic Recovery Plan

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Geithner to Announce New Plan

2009-02-10T05:22:00.005-05:00

Treasury Secretary Timothy Geithner is scheduled to unveil a plan to handle the government's second half of the $700 billion financial rescue program today. The plan as it is being leaked is to impose tough new standards on future payments to banks. It also calls for greatly expanding an effort to unclog credit markets to provide loans to consumers and businesses. The administration also announced that the program would be expanded beyond consumer and small business loans to provide aid to the troubled commercial real estate sector.

The administration's new plan will include a government-private sector partnership aimed at removing toxic assets from banks' balance sheets, although the details on how this program would operate were still being worked out.

The Obama administration is promising an aggressive effort to combat the worst financial crisis in seven decades, unveiling a program that could mobilize well over $1 trillion in public and private support to get the frozen credit markets functioning again.

The new plan would greatly expand an effort to unclog credit markets that provide loans to consumers and businesses. Funding for this effort would see a huge increase — from $20 billion up to $100 billion.

Mark and Sam Discuss the Stimulus Package

2009-02-09T15:17:00.010-05:00

Marc Maron and Sam Sedar had a really good discussion about the stimulus package on their Air America show Breakroom Live.

Sam brings up a great point about Repuglican Senator Ensign of Nevada and his appearence on Meet the Press.

Watch the video here:

Obama Team Begins to take the Gloves Off

2009-02-09T13:43:00.003-05:00

The Obama team is clearly embarking on a new and more aggressive strategic effort to draw attention to the size of his popular mandate and paint Washington as a place designed to obstruct the public’s will.

Case in point: White House press secretary Robert Gibbs, on the presidential plane today, directly targeted cable news as out of touch with America when asked about polling on the stim package.

I think it’s illuminating because it may not necessarily be where cable television is on all of this. But, you know, we’re sort of used to that. We lost on cable television virtually every day last year. So, you know, there’s a conventional wisdom to what’s going on in America via Washington, and there’s the reality of what’s happening in America.

In addition David Axelrod came out on the campaign plane, saying that the new Gallup poll proves how out of touch Beltway insiders are with the public at large.

“If I had listened to the conversation in Washington during the campaign for president, I would have jumped off a building about a year and a half ago.”

Josh Marshall recently noted, that President Obama had not really tapped into the real source of his power — his popular public support — as well as he could be.

The Obama team is clearly trying to change that.

President Obama's First Town Hall Meeting

2009-02-09T12:46:00.005-05:00

President Barack Obama held his first town hall meeting today. He traveled to the economically hard-hit town of Elkhart, Indiana. I listened to it, and thought President Obama did well. He took a lot of questions, gave a lot of good answers, and had a few really good lines which will make great sound bytes.

This was the First time President Obama traveled outside the capital to promote his plans for reinvigorating the economy. I really think this is the right strategy for the President. It worked well for Bush to be seen talking to people outside of Washington, and I believe it will put more pressure on Republicans. So far despite numerous attempts to reach out, President Obama failed to gather meaningful Republican support for the stimulus. So I think he needs to apply pressure from the bottom up. He needs to get a public which is very supportive of his efforts to apply pressure to on obstructionist Republicans. The question-and-answer sessions with citizens and later tonight when he meets with news reporters at a prime-time news conference will allow President Obama to appeal directly to the public and build more grass-roots backing of his plans. This is another reason I believe that Republicans have been making both tactical and strategic mistakes.

President Obama continued to implore the Congress to take action, repeating the nation can't afford to wait.

"We can no longer posture and bicker and resort to the same failed ideas that got us into this mess in the first place - and that the American people rejected at the polls this past November."

President Obama also made some news saying that he was going to push for putting some of the education money the "Centrists" in the Senate took out. This is good, because the Senate's cuts to education were stupid.

I will get video when it is available.

Note: Unlike the Town Halls of George W. Bush, President Obama's Town Hall was completely open to the public. And this was no Democratic stronghold, Obama lost the county with Elkhart, IN to John McCain 44 percent to 56 percent. Despite that fact, the White House did not screen its audience, and a number of them had a chance to ask President Obama questions. There were no partisan litmus test for attendees or for those asking questions.

Americans Trust Obama, Republicans Not So Much

2009-02-09T10:36:00.006-05:00

So far the American public is giving President Barack Obama their approval for handling the government's efforts to pass an economic stimulus bill, while they don't believe the Republicans in Congress have been doing a very good job. In a new Gallup Poll the Repugs receive an approval rating 31%, in fact fifty-eight percent of the public openly disapprove of the GOP’s actions.

This is really surprising.

You might have read how Think Progress released a report showing that Republican members of Congress outnumbered their Democratic counterparts by a ratio of 2 to 1 on the cable news shows. Apparently these Republicans and their talking points haven't been very persuasive. This is surprising because not only have conservative Republicans been dominating the discourse, but their talking points have been largely internalized by journalists covering the debate.

Let's hope this is not a outlier, and that the American public is paying attention.

Now a new CNN poll found similar results to the Gallup poll.

Seventy-six percent of those quesioned [sic] in a CNN/Opinion Research Corporation survey released Monday give President Obama a thumbs-up when it comes to the way he's performing his duties, with 23 percent disapproving of the way Obama's handling his job as president.

While Repuglicans have been exceedingly pleased with their actions over the last few weeks, the American public is not.

Three out of four say that President Obama is doing enough to cooperate with Republicans in Congress, but only 39 percent feel that congressional Republicans are cooperating enough with the President.
Six out of ten approve of the way Democratic leaders in Congress are handling their jobs. But only 44 percent of those questioned approve of the way Republican leaders in Congress are performing.

Republicans may like to act as if they are not concerned with public attitudes, but they are. Republican leadership is the biggest set of cowards you have ever seen, and they will start feeling the heat. Watch them begin to fold this week.

Rachel Maddow to the GOP: Get out of the way.

2009-02-09T09:54:00.005-05:00

I am sure over the past two weeks you have seen assessments of both the stimulus and the debate over the stimulus, but if you did not see Rachel Maddow's take on Friday night then you missed the best. She plainly and clearly points out that Republicans are not trying to come up with an effective stimulus plan. Personally I believe they are trying to make the situation worse.

Watch it here:

Visit msnbc.com for Breaking News, World News, and News about the Economy

She rightly points out that it is completely idiotic to cut food-stamp funding from an economic stimulus package during a recession. Food-stamps are one of the best ways to get money into the economy quickly, and are spent fast. She states correctly that a whopping proportion of the Republican rhetoric about stimulus is just wrong, and it is time for Republicans to get out of the way of the people who are actually trying to save the country.

Jon Stewart Replies to Dick Cheney

2009-02-09T09:51:00.004-05:00

Last Thursday night Jon Stewart had the best response to Dick Cheney's Politico interview. Dick Cheney is a cowardly little punk who is just trying to protect his rep. I absolutely loved Jon Stewart's questions for Cheney, it's too bad no reporter has ever asked these questions.

Watch the video here:

The Daily Show With Jon StewartM - Th 11p / 10c

Why Are You Such a Dick? - Audio Tape

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Obama On Stimulus: 'This Is Not A Game'

2009-02-06T10:36:00.002-05:00

Speaking before the House Democrats at a retreat last night, President Obama finally delivered a really robust defense of the stimulus package, while at the same time he responded to the GOP talking points.

He declared that tax cuts alone [are] "a losing formula." He also acknowledged the package won't be "absolutely perfect," but went on to say "this is not a contest for who's in power and who's up and who's down."

Watch Video From Obama's Speech

President Obama declared:

"They [the public] didn't vote for the status quo; they sent us here to bring change. We owe it to them to deliver."

This was a feisty speech (thank God) before a fiercely partisan crowd, and President Obama took a sharper tone than he has in recent weeks and seemed to be sending a message to Republicans that there is a steel fist within a velvet glove.

I an implicit criticism of the GOP that was in power during the last 8 years.

"We are not going to get relief by turning back to the very same policies that for the last eight years doubled the national debt and threw our economy into a tailspin."

Since his inauguration two weeks ago, the president repeatedly has reached across the aisle to Republicans as his economic plan has wound its way through the Democratic-controlled Congress. Now increasingly the President has sought to rebut Republican criticisms even as he continues to sell the stimulus package.

Paul Krugman: On the Edge

2009-02-06T10:05:00.004-05:00

Paul Krugman nails the absurdity of the current situation:

A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.
It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive. Even if a major stimulus bill does pass the Senate, there’s a real risk that important parts of the original plan, especially aid to state and local governments, will have been emasculated.
Somehow, Washington has lost any sense of what’s at stake — of the reality that we may well be falling into an economic abyss, and that if we do, it will be very hard to get out again.
It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world.
Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving — a good thing in the long run, but a huge blow to the economy right now. Developers of commercial real estate, watching rents fall and financing costs soar, are slashing their investment plans. Businesses are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. And exports, which were one of the U.S. economy’s few areas of strength over the past couple of years, are now plunging as the financial crisis hits our trading partners.
Meanwhile, our main line of defense against recessions — the Federal Reserve’s usual ability to support the economy by cutting interest rates — has already been overrun. The Fed has cut the rates it controls basically to zero, yet the economy is still in free fall.
It’s no wonder, then, that most economic forecasts warn that in the absence of government action we’re headed for a deep, prolonged slump. Some private analysts predict double-digit unemployment. The Congressional Budget Office is slightly more sanguine, but its director, nonetheless, recently warned that “absent a change in fiscal policy ... the shortfall in the nation’s output relative to potential levels will be the largest — in duration and depth — since the Depression of the 1930s.”
Worst of all is the possibility that the economy will, as it did in the ’30s, end up stuck in a prolonged deflationary trap.
We’re already closer to outright deflation than at any point since the Great Depression. In particular, the private sector is experiencing widespread wage cuts for the first time since the 1930s, and there will be much more of that if the economy continues to weaken.
As the great American economist Irving Fisher pointed out almost 80 years ago, deflation, once started, tends to feed on itself. As dollar incomes fall in the face of a depressed economy, the burden of debt becomes harder to bear, while the expectation of further price declines discourages investment spending. These effects of deflation depress the economy further, which leads to more deflation, and so on.
And deflationary traps can go on for a long time. Japan experienced a “lost decade” of deflation and stagnation in the 1990s — and the only thing that let Japan escape from its trap was a global boom that boosted the nation’s exports. Who will rescue America from a similar trap now that the whole world is slumping at the same time?
Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective — to turn it into little more than another round of Bush-style tax cuts — are so destructive.
So what should Mr. Obama do? Count me among those who think that the president made a big mistake in his initial approach, that his attempts to transcend partisanship ended up empowering politicians who take their marching orders from Rush Limbaugh. What matters now, however, is what he does next.
It’s time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation’s future at risk. The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge.

President Obama would do well to listen to Paul Krugman right now. Krugman and other economists have for a long time been saying that the stimulus must have more spending, and be larger.

Unemployment Rate Hits 7.6% -- Worse Than Expected.

2009-02-06T09:54:00.002-05:00

The new unemployment numbers are out:

January job losses: 598,000
Job losses from Nov-Jan: 1.8 million
Unemployment rate: 7.6%
Unemployed workers: 11.6 million

In a word they are ugly.

So while Republicans continue to play political games with the future of this nation, the number of Americans who have lost their jobs is skyrocketing. The Numbers were worse than expected:

U.S. employers slashed 598,000 jobs in January, the deepest cut in payrolls in 34 years as the national unemployment rate shot up to 7.6 percent, according to a Labor Department report on Friday that underlined a deepening recession.
January's job losses were worse than the 525,000 that had been forecast by Wall Street economists, who also had expected the unemployment rate to come in lower at 7.5 percent. The bleak employment data is certain to be cited by the Obama administration as a fresh reason for Congress to speed up debate over a multibillion-dollar package of proposals to try to stimulate economic activity.

Daschle withdraws his nomination for HHS Secretary

2009-02-03T13:00:00.003-05:00

Former senator Tom Daschle has withdrawn his nomination for Health and Human Services Secretary, after it was revealed he failed to pay over $100,000 in taxes. In a statement, Daschle vowed that he “will not be a distraction” from the fight for health care reform. Earlier today, Senator Jim DeMint called on Obama to withdraw Daschle’s nomination, becoming the first Republican to do so. DeMint was obviously going for Conservative Hypocrite of the week, but it looks like Daschle wanted to get out before the pressure got too big.

What sucks is that when you actually look at what Daschle did, it is apparent that the 30 second news bytes our media keeps pushing greatly distorted the reality of the situation.

Now the questions will start to roll out.

Why did he pull out?

Were there more tax problems?

Did he just grow tired of the scrutiny?

What is President Obama's Plan B for HHS and his health care reform campaign?

Remember when Senator Daschle was nominated he was supposed to run the largest cabinet agency and to steer the debate on health care reform.

This will be the major debate of the talking heads tonight.

Obama picks Judd Gregg as Secretary of Commerce

2009-02-03T12:33:00.003-05:00

It became official today; President Obama picked Republican Senator Judd Gregg as his Secretary of Commerce.

During his remarks, Senator Gregg said, "This is not a time for partisanship."

Really? If this is so, why did Senator Gregg insist on being replaced by a Republican Senator? As we know, Senator Gregg went out of his way to make it clear he would not accept this appointment unless a deal was cut to make sure his seat was filled by a Republican.

Here's what he said:

I also want to that thank the Governor of New Hampshire for his courtesy and courage in being willing to make this possible through the agreement we have relative to my successor in the Senate.

If partisanship doesn't matter, why would Gregg care if a Republican gets his seat?

This is not a time for partisanship unless you are a Republican hypocrite. It will be very interesting to see when Republican's filibuster the stimulus does Gregg side with his old boss, McConnell, or his new boss, Obama?

Obama Picks Duckworth To Be VA Asst. Secretary

2009-02-03T10:54:00.004-05:00

This is a great pick by President Obama.

President Obama picked Tammy Duckworth to be the Assistant Secretary of the Veteran's Administration.

Tammy Duckworth, who is currently the director of the Illinois Department of Veterans Affairs, and a veteran of the Iraq War will be the Assistant Secretary of Public and Intergovernmental Affairs for the Department of Veterans Affairs.

As assistant secretary, Duckworth will direct VA's public affairs, internal communications and intergovernmental relations. She also will oversee programs for homeless Veterans, consumer affairs and special rehabilitative events.

She is serving as a major in the Illinois National Guard and was previously deployed to Operation Iraqi Freedom where, as a captain, she was assistant operations officer for a 500-soldier aviation task force. She also served as a logistics officer and company commander. As a helicopter pilot flying combat missions in 2004, she suffered grave injuries when her helicopter was struck by a rocket-propelled grenade, losing both legs and partial use of one arm.

Her previous managerial experience includes coordinating the Center for Nursing Research at Northern Illinois University in DeKalb, and working for Rotary International's Asia-Pacific region from 2002 to 2004.

Holder sworn in as attorney general

2009-02-03T10:53:00.000-05:00

Eric Holder has been sworn in as the nation's attorney general, the first African-American to fill the job.

Vice President Joe Biden administered the oath to President Barack Obama's pick to lead the Justice Department.

Biden said the department, under Holder, would return to a past standard of "no politics, no ideology. Only a clear assessment of facts and law."

Hundreds of department employees packed the hallways and stairways to welcome Holder. To loud cheers and applause, he pledged to remake the department by "taking it back to what it once was and always has to be."

Holder was confirmed Monday evening by a 75-21 Senate vote, with all the opposition coming from Republicans.

Holder takes over a department wracked by Bush administration scandals over politically motivated hirings and firings.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP) — Eric Holder has won confirmation as the first African-American attorney general, but he'll have little time to consider his role in history as he decides which Bush administration counterterrorism policies to reverse.

Holder was confirmed 75-21 Monday, with all the opposition coming from Republicans. He will be sworn in Tuesday by Vice President Joe Biden.

For starters, the new attorney general will learn the secrets of the Office of Legal Counsel, whose lawyers justified the use of controversial interrogation tactics and even declined to provide Bush administration documents to internal Justice Department investigators.

Holder will inherit a Justice Department wracked by Bush administration scandals over politically inspired hirings and firings. He has pledged to restore its reputation.

Holder also will play a major role in the future of terrorism detainees.

President Barack Obama, in a major policy shift, signed an executive order to close the U.S. detention center at Guantanamo Bay, Cuba, within a year. He also created a special task force to review detainee policy; Holder and Defense Secretary Robert Gates will serve as co-chairs.

That panel will look at options for apprehension, detention, trial, transfer or release of detainees and report to the president within 180 days.

Holder promised senators he would review why career prosecutors in Washington decided not to prosecute the former head of the department's Civil Rights Division. An inspector general's report last month found that Bradley Schlozman, the former head of the division, misled lawmakers about whether he politicized hiring decisions.

Another key question facing Holder is whether to reverse former President George W. Bush's order that three of his former top aides — Karl Rove, Harriet Miers and Josh Bolten — should not testify before Congress about firings of U.S. attorneys. Rove and Miers were former aides when Bush gave his order.

If Obama reverses Bush's policy, it would create a new legal issue: whether a former president's order against testifying would still be valid.

The Bush administration's warrantless surveillance program is certain to come under Holder's scrutiny.

After a lengthy and heated debate that pitted privacy and civil liberties concerns against the desire to prevent terrorist attacks, Congress last year eased the rules under which the government could wiretap American phone and computer lines to listen for terrorists and spies.

Holder promised one senator that he would re-examine a ruling by former Attorney General Michael Mukasey that immigrants facing deportation do not have a right to government-provided lawyers. Holder said he understands the desire to expedite immigration court proceedings, but added that the Constitution also requires that proceedings be fair.

There also could be changes in conducting warrantless surveillance.

Holder's chief supporter, Sen. Patrick Leahy, D-Vt., said the confirmation was a fulfillment of Martin Luther King's dream that everyone would be judged by the content of their character.

"Come on the right side of history," said Leahy, chairman of the Senate Judiciary Committee.

President Obama's Weekly Address - 01/31/09

2009-01-31T13:58:00.000-05:00

1/31/09: Your Weekly Address from White House on Vimeo.

Pro-Union

2009-01-30T15:52:00.004-05:00

Today President Obama and Vice President Joe Biden held their strongest pro-union event thus far in their young administration. Earlier today they addressed a labor-heavy crowd at the White House as President Obama signed several pro-union executive orders.

Speaking to the crowd, President Obama announced that Vice-President Biden will be chairman of a task force charged with improving and strengthening the country's middle-class. He said "We have to reverse many of the policies toward organized labor."

Vice-President Biden was much more blunt as he addressed the assembled pro-union crowd:

"Welcome back to the White House!"

This drew a loud and sustained applause.

Vice-President Biden noted that he'll be leaning heavily on his economic adviser, Jared Bernstein who has worked for years as a senior official at the Economic Policy Institute, a labor-funded think tank which advocates for low and middle-income workers.

The Economy Shrinks Again

2009-01-30T10:15:00.004-05:00

It was predicted that the numbers would be bad, and this morning it was confirmed that they were. During the fourth quarter of 2008 the U.S. economy shrank at its fastest pace in 26 years. The gross domestic product (GDP) -- a crucial measure of economic performance -- shrank at an annual rate of 3.8% in the fourth quarter of 2008 as the credit crisis deepened the recession.

Some will say that 3.8% was better than expected, but I would not take much comfort in this as it will undoubtedly be revised down, and MarketWatch is reporting that the number are much closer to 5.1% if inventory is included.

The bad thing is that the economy may not have yet hit bottom.

S-Chip Passes In The Senate

2009-01-30T10:05:00.004-05:00

After being vetoed twice by former President Bush, the S-Chip Bill has passed the Senate. Nine Republicans joined the Democrats to pass the bill 66 to 32. Note that 32 of the Senate's 41 Republicans opposed the measure. After years of Bush's idocracy, we are finally poised to expand healthcare for low-income children. I could never understand Bush's obstinance to providing healthcare to low-income children.

The Democratic majority actually acted like a majority and brushed aside Republican objections. This debate showed the outlines of what promises to be a much larger political fight over universal coverage in the Senate. The House passed a nearly identical bill two weeks ago, by a vote of 289 to 139, with 40 Republicans joining nearly all Democrats in support of the measure. The House and Senate versions differ slightly, but the bill should be on Obama's desk by early next week.

To pay for the expansion, which is expected to cost about $32 billion over four and a half years, Congress is raising cigarette taxes to $1 a pack.

The final roll-call is online.

Blagojevich Goes Down

2009-01-29T18:20:00.001-05:00

It's official by a 59-0 vote. Rod Blagojevich has been removed as Illinois governor. Lt. Gov. Pat Quinn becomes Gov. Pat Quinn.

Obama Has Signed First Bill Into Law

2009-01-29T10:49:00.002-05:00

This morning in the first of what we hope will be many progressive pieces of legislation passed by the Democratic Congress, the President signed the Lily Ledbetter Fair Pay Restoration Act into law, with Lily Ledbetter at his side.

Here's an excerpt from the President Obama's remarks:

Because while this bill bears her name, Lilly knows this story isn’t just about her. It’s the story of women across this country still earning just 78 cents for every dollar men earn – women of color even less – which means that today, in the year 2009, countless women are still losing thousands of dollars in salary, income and retirement savings over the course of a lifetime.
But equal pay is by no means just a women’s issue – it’s a family issue. It’s about parents who find themselves with less money for tuition or child care; couples who wind up with less to retire on; households where, when one breadwinner is paid less than she deserves, that’s the difference between affording the mortgage – or not; between keeping the heat on, or paying the doctor’s bills – or not. And in this economy, when so many folks are already working harder for less and struggling to get by, the last thing they can afford is losing part of each month’s paycheck to simple discrimination.
So in signing this bill today, I intend to send a clear message: That making our economy work means making sure it works for everyone. That there are no second class citizens in our workplaces, and that it’s not just unfair and illegal – but bad for business – to pay someone less because of their gender, age, race, ethnicity, religion or disability. And that justice isn’t about some abstract legal theory, or footnote in a casebook – it’s about how our laws affect the daily realities of people’s lives: their ability to make a living and care for their families and achieve their goals.
Ultimately, though, equal pay isn’t just an economic issue for millions of Americans and their families, it’s a question of who we are – and whether we’re truly living up to our fundamental ideals. Whether we’ll do our part, as generations before us, to ensure those words put to paper more than 200 years ago really mean something –
to breathe new life into them with the more enlightened understandings of our time.
That is what Lilly Ledbetter challenged us to do. And today, I sign this
bill not just in her honor, but in honor of those who came before her. Women
like my grandmother who worked in a bank all her life, and even after she hit
that glass ceiling, kept getting up and giving her best every day, without
complaint, because she wanted something better for me and my sister.
And I sign this bill for my daughters, and all those who will come after us, because I want them to grow up in a nation that values their contributions, where there are no
limits to their dreams and they have opportunities their mothers and grandmothers never could have imagined.
In the end, that’s why Lilly stayed the course. She knew it was too late for her – that this bill wouldn’t undo the years of injustice she faced or restore the earnings she was denied. But this grandmother from Alabama kept on fighting, because she was thinking about the next generation. It’s what we’ve always done in America – set our sights high for ourselves, but even higher for our children and grandchildren.
Now it’s up to us to continue this work. This bill is an important step – a simple fix to ensure fundamental fairness to American workers – and I want to thank this remarkable and bi-partisan group of legislators who worked so hard to get it passed. And this is only the beginning. I know that if we stay focused, as Lilly did – and keep standing for what’s right, as Lilly did – we will close that pay gap and ensure that our daughters have the same rights, the same chances, and the same freedom to pursue their dreams as our sons.

Obama is right, "This is only the beginning." And, it's a very good start.

The Senate is Expected to Approve SCHIP Legislation

2009-01-29T10:35:00.002-05:00

The Senate is expected to approve SCHIP legislation today. This paves the way for President Obama to claim another early legislative victory. This bill will make an additional 4 million children eligible for discounted care but it will still leave President Obama about 5 million children short of his promise to insure all kids.

The True State of Employment

2009-01-29T09:37:00.003-05:00

Jobless rate

The other day I heard George Will pontificate that the unemployment rate of 8% is better than the 10% unemployment this nation faced during the recession of the early 80's. Yes it's true that today the United States is approaching an official uneployment rate of 8%, but we are not using the same methodology to determine the unemployment rate that was used in 1980. The methedology has been changed by both Reagan and Clinton. If the methodology used in 1980, before the Reagan Administration first changed it to hide the depth of that era's deep recession, were applied, it would be 17% today, or one in seven workers

Even still the number of jobless American workers receiving unemployment checks rose to the highest level since the government began keeping records in 1967. The Labor Department is reporting that the number of Americans drawing jobless benefits for a week or longer rose to 4,776,000 in the week ended Jan. 17, the latest data available.

This number eclipses the prior mark set in November 1982, when 4,713,000 million Americans drew benefits.

Americans who moved to collect their first unemployment checks rose for the third consecutive week, to 588,000, according to a government report released Thursday. The number of Americans filing for unemployment claims has surged by 61% from this time a year ago. The AP notes that the results “were worse than analysts expected.”

Roubini: US Banking System is Insolvent

2009-01-29T09:18:00.004-05:00

Nouriel Roubini, of RGE Monitor, was one of the first people to predict the housing crisis, and now he has come out and said that "the US Banking System is Insolvent." While at Davos Nouriel Roubini said he believes this because expected losses for the US banking system will be about $2 trillion, which far exceeds bank capital of about $1.5 trillion. Roubini has also said that he believes total financial system losses could hit $3.6 trillion.

Because of this fact Roubini does not believe the government plan for buying the toxic assets of US banks may not work.

Instead Nouriel Roubini suggests that the Obama administration should look towards Sweden's plan of nationalizing all insolvent banks, cleaning them up and then selling off the good assets to the private sector.

I can just hear the Republicans howling now.

How will Obama respond?

2009-01-28T09:19:00.004-05:00

Now that the Republicans have shown President Obama the back of their hand, and have proven to be a bunch of whiney children, what will he do? Will Obama continue to work for bipartisanship as an end in itself? Will he agree to more GOP modifications just to buy a few votes?

I really do not know.

I understand the want for bipartisanship, but at what cost? At what point should Obama push for a real progressive stimulus package, knowing that success will bring Republican support after the fact?

I just don't know.

The public overwhelmingly supports President Obama, so at what point does he have to stop waiting for Republicans to act in good faith, and instead move forward?

At the end of the day some sort of stimulus package will inevitably make it into law. But whether it passes with meaningful support from Republicans, or is a meaningful package, is the first test of Obama's administration.

Democrats Cave Again

2009-01-28T07:55:00.003-05:00

House Democrats again proving that they will back down at the slightest whine by Republicans have removed a provision from their stimulus bill that would exempt states from the need to get waivers for covering family planning under Medicaid. The family-planning aid has been the subject of repeated Republican attacks over the past few days, and health care advocates were dismayed by the Democrats' decision to give in on its removal.

The Medicaid Family Planning State Option was a common-sense provision which would have expanded basic health care for millions of women, many of whom have lost their jobs in the current economic crisis, was a victim of misleading attacks and partisan politics by cry-baby Republicans.

White House spokesman Robert Gibbs addressed the removal of the Medicaid provision, which occurred at Obama's request, during today's press briefing:

The president called Chairman Henry Waxman yesterday and said that, while he believed the policy of increased funding for family planning was the right one, that he didn't believe this bill was the vehicle to make that happen.

The one bright spot is that the House's move doesn't necessarily mean that the family-planning aid is dead. There have been suggestions out of the White House that it could be added to a comprehensive Healthcare bill. Senator Debbie Stabenow has also stated publicly that she would focus on how to attach the family-planning aid to another Senate bill coming down the pike.

Tax Cuts: Been There, Tried That

2009-01-27T15:23:00.003-05:00

The tax cut approach as stimulus has already been tried and failed as economic stimulus. The Bush administration often claimed as they tried to sell the Bush tax cuts of 2003, that they would generate 1.4 million jobs on top of the 4.1 million jobs that were expected to be generated over the eighteen months following June 2003. This did not happen. Not only did the promised 1.4 million additional jobs not appear, but the 4.1 million jobs expected with no action also failed to materialize. In all, only 2.4 million jobs were created—1.7 million short of the administration’s projection without their new policy.

You can check http://www.jobwatch.org/ to see what I am saying.

The Bush Administration called the tax cut package, its "Jobs and Growth Plan," and by it's own metrics the tax cut program fell short by a total of 3.1 million jobs. That would be called failure.

Republicans have but one answer to every problem, TAX CUTS.

This is wrong http://economistsview.typepad.com/economistsview/2009/01/the-2003-jobs-and-growth-plan-tax-cuts-didnt-work.html

What’s up with the Republicans?

2009-01-27T13:13:00.003-05:00

New York Times columnist Bob Herbert asks the question, why is anyone even listening to the Repuglicans?

I would like to know too.

The Same Old Song
By Bob Herbert

What’s up with the Republicans? Have they no sense that their policies have sent the country hurtling down the road to ruin? Are they so divorced from reality that in their delusionary state they honestly believe we need more of their tax cuts for the rich and their other forms of plutocratic irresponsibility, the very things that got us to this deplorable state?
The G.O.P.’s latest campaign is aimed at undermining President Obama’s effort to cope with the national economic emergency by attacking the spending in his stimulus package and repeating ad nauseam the Republican mantra for ever more tax cuts.
“Right now, given the concerns that we have over the size of this package and all the spending in this package, we don’t think it’s going to work,” said Representative John Boehner, an Ohio Republican who is House minority leader. Speaking on NBC’s “Meet the Press,” Mr. Boehner said of the plan: “Put me down in the ‘no’ column.”
If anything, the stimulus package is not large enough. Less than 24 hours after Mr. Boehner’s televised exercise in obstructionism, the heavy-equipment company Caterpillar announced that it was cutting 20,000 jobs, Sprint Nextel said it was eliminating 8,000, and Home Depot 7,000.
Maybe the Republicans don’t think there is an emergency. After all, it was Phil Gramm, John McCain’s economic guru, who told us last summer that the pain was all in our heads, that this was a “mental recession.”
The truth, of course, is that the country is hemorrhaging jobs and Americans are heading to the poorhouse by the millions. The stock markets and the value of the family home have collapsed, and there is virtual across-the-board agreement that the country is caught up in the worst economic disaster since at least World War II.
The Republican answer to this turmoil?
Tax cuts.
They need to go into rehab.
The question that I would like answered is why anyone listens to this crowd anymore. G.O.P. policies have been an absolute backbreaker for the middle class. (Forget the poor. Nobody talks about them anymore, not even the Democrats.) The G.O.P. has successfully engineered a wholesale redistribution of wealth to those already at the top of the income ladder and then, in a remarkable display of chutzpah, dared anyone to talk about class warfare.
A stark example of this unholy collaboration between the G.O.P. and the very wealthy was on display in the pages of this newspaper on Jan. 18. The Times’s Mike McIntire wrote an article about the first wave of federal bailout money for the financial industry, which was handed over by the Bush administration with hardly any strings attached. (Congress, under the control of the Democrats, should never have allowed this to happen, but the Democrats are as committed to fecklessness as the Republicans are to tax cuts.)
The public was told that the money would be used to loosen the frozen credit markets and thus help revive the economy. But as the article pointed out, there were bankers with other ideas. John C. Hope III, the chairman of the Whitney National Bank in New Orleans, in an address to Wall Street fat cats gathered at the Palm Beach Ritz-Carlton, said:
“Make more loans? We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”
How’s that for arrogance and contempt for the public interest? Mr. Hope’s bank received $300 million in taxpayer bailout money.
The same article quoted Walter M. Pressey, president of Boston Private Wealth Management, which Mr. McIntire described as a healthy bank with a mostly affluent clientele. It received $154 million in taxpayer money.
“With that capital in hand,” said Mr. Pressey, “not only do we feel comfortable that we can ride out the recession, but we also feel that we’ll be in a position to take advantage of opportunities that present themselves once this recession is sorted out.”
Take advantage, indeed. That, in a nutshell, is what the plutocracy is all about: taking unfair advantage.
When the G.O.P. talks, nobody should listen. Republicans have argued, with the collaboration of much of the media, that they could radically cut taxes while simultaneously balancing the federal budget, when, in fact, big income-tax cuts inevitably lead to big budget deficits. We listened to the G.O.P. and what do we have now? A trillion-dollar-plus deficit and an economy in shambles.
This is the party that preached fiscal discipline and then cut taxes in time of war. This is the party that still wants to put the torch to Social Security and Medicare. This is a party that, given a choice between Abraham Lincoln and Ronald Reagan, would choose Ronald Reagan in a heartbeat.
Why is anyone still listening?

Republicans have decided to "rule by hissy fit" as Atrios calls it. It is time to stop listening to them. After all the damage that John Boehner, Mitch McConnel, George W. Bush, Dick Chenney and all the GOP have done to our nation, they need to be relegated to the back of the closet. Democrats need to step up and take charge. Republicans are now lead by children who need to not be heard from.

Paul Krugman: Bad Faith Economics

2009-01-27T11:25:00.003-05:00

Professor Paul Krugman argues today in his column that the House GOP isn't interested in acting in good faith, or helping the economy, and in fact they reject the very idea of an economic stimulus package. Professor Krugman points out that Republicans are lying to make their arguments. That they have a habit of "zeroing in on the least-defensible possible position," including opposition to state aid and Medicaid expansion.

Bad Faith Economics
by Paul Krugman

As the debate over President Obama’s economic stimulus plan gets under way, one thing is certain: many of the plan’s opponents aren’t arguing in good faith. Conservatives really, really don’t want to see a second New Deal, and they certainly don’t want to see government activism vindicated.
So they are reaching for any stick they can find with which to beat proposals for increased government spending. Some of these arguments are obvious cheap shots. John Boehner, the House minority leader, has already made headlines with one such shot: looking at an $825 billion plan to rebuild infrastructure, sustain essential services and more, he derided a minor provision that would expand Medicaid family-planning services — and called it a plan to “spend hundreds of millions of dollars on contraceptives.”
But the obvious cheap shots don’t pose as much danger to the Obama administration’s efforts to get a plan through as arguments and assertions that are equally fraudulent but can seem superficially plausible to those who don’t know their way around economic concepts and numbers. So as a public service, let me try to debunk some of the major antistimulus arguments that have already surfaced. Any time you hear someone reciting one of these arguments, write him or her off as a dishonest flack.
First, there’s the bogus talking point that the Obama plan will cost $275,000 per job created. Why is it bogus? Because it involves taking the cost of a plan that will extend over several years, creating millions of jobs each year, and dividing it by the jobs created in just one of those years.
It’s as if an opponent of the school lunch program were to take an estimate of the cost of that program over the next five years, then divide it by the number of lunches provided in just one of those years, and assert that the program was hugely wasteful, because it cost $13 per lunch. (The actual cost of a free school lunch, by the way, is $2.57.)
The true cost per job of the Obama plan will probably be closer to $100,000 than $275,000 — and the net cost will be as little as $60,000 once you take into account the fact that a stronger economy means higher tax receipts.
Next, write off anyone who asserts that it’s always better to cut taxes than to increase government spending because taxpayers, not bureaucrats, are the best judges of how to spend their money.
Here’s how to think about this argument: it implies that we should shut down the air traffic control system. After all, that system is paid for with fees on air tickets — and surely it would be better to let the flying public keep its money rather than hand it over to government bureaucrats. If that would mean lots of midair collisions, hey, stuff happens.
The point is that nobody really believes that a dollar of tax cuts is always better than a dollar of public spending. Meanwhile, it’s clear that when it comes to economic stimulus, public spending provides much more bang for the buck than tax cuts — and therefore costs less per job created (see the previous fraudulent argument) — because a large fraction of any tax cut will simply be saved.
This suggests that public spending rather than tax cuts should be the core of any stimulus plan. But rather than accept that implication, conservatives take refuge in a nonsensical argument against public spending in general.
Finally, ignore anyone who tries to make something of the fact that the new administration’s chief economic adviser has in the past favored monetary policy over fiscal policy as a response to recessions.
It’s true that the normal response to recessions is interest-rate cuts from the Fed, not government spending. And that might be the best option right now, if it were available. But it isn’t, because we’re in a situation not seen since the 1930s: the interest rates the Fed controls are already effectively at zero.
That’s why we’re talking about large-scale fiscal stimulus: it’s what’s left in the policy arsenal now that the Fed has shot its bolt. Anyone who cites old arguments against fiscal stimulus without mentioning that either doesn’t know much about the subject — and therefore has no business weighing in on the debate — or is being deliberately obtuse.
These are only some of the fundamentally fraudulent antistimulus arguments out there. Basically, conservatives are throwing any objection they can think of against the Obama plan, hoping that something will stick.
But here’s the thing: Most Americans aren’t listening. The most encouraging thing I’ve heard lately is Mr. Obama’s reported response to Republican objections to a spending-oriented economic plan: “I won.” Indeed he did — and he should disregard the huffing and puffing of those who lost.

President Obama deserves credit for trying to deal in good faith with the Republicans in Congress. He made a honest effort to earn the support of conservative Republican House members and Senators to create a comprehensive economic stimulus package. Obama negotiated with them, compromised with them, and even included a whole lot of tax cuts to win them over.

But it was all for not. Republicans will not compromise, and will not negotiate honestly. John Boehner has announced that the GOP should vote against stimulus, even as President Obama is going to the Capitol to speak directly with congressional Republicans.
I can appreciate the political dynamic here, and that the Obama White House wants to get at least some bipartisan support for an economic stimulus package. But since it is not there, Obama should instead push for the most liberal progressive bill he can. First I think the progressive plan will work, second Republicans have to be shown that there is no benifit to being obstinate. There's no point in Democrats offering unwelcome enticements to the Repuglicans who are bound and determined to remain obstinate. I believe there is great advantage to showing the Republicans that there will be a cost for not working in good faith. Pull the enticements and let the Democratic party do the right thing.

The Actual CBO Report

2009-01-27T10:49:00.002-05:00

For about a week we have heard that the Congressional Budget Office (CBO) had released a report that purportedly showed that the Democrats' stimulus proposal would be ineffective. This was based on a flawed AP report which stated that a leaked CBO “report” showed that it would take years before an infrastructure spending program to boost the economy.

Even though the story was false and the CBO report did not actually exist, the AP story took off. Think Progress has found that since the story was posted, the non-existent CBO report had been cited at least 81 times on Fox News, CNN, MSNBC, CNBC, the Sunday shows and the network newscasts in order raise questions about Obama’s recovery plan.

Now the Congressional Budget Office has actually released their report which states that roughly two-thirds of the spending and tax cuts in the House stimulus plan would “flow into the economy by the end of fiscal 2010, producing a ‘noticeable impact on economic growth and employment.’”

Yesterday the Congressional Budget Office actually released the “first actual cost estimate” of the plan. The results of the actual report are far more encouraging than Repuglicans have been stating. Indeed, the CBO found that implementing the stimulus plan "would have a noticeable impact on economic growth and employment in the next few years." Specifically, the CBO estimates that in the spending portion of the bill, $477 billion out of $604 billion would be disbursed either this fiscal year which ends in October or in the next fiscal year, for a sum total of 79% of the whole stimulus package. At the asme time the portion of the bill that I hate, the tax cuts, nearly 100% of them are allocated during the next 18 months.

Citing this actual CBO report, Speaker Nancy Pelosi said the plan will help create jobs while making responsible investments for the future.

Will this actual CBO report get the same kind of attention?

The Wars Continue

2009-01-27T09:22:00.003-05:00

While the number of U.S. Soldiers and Marines dying in Iraq have gone down, the deaths still continue, and the war drags on. Yesterdaty two military helicopters crashed in Iraq, killing four U.S. service members.

While in Afghanistan roadside bomb attacks hit a record in 2008, and increased 45% over the year before. The result was 161 fatalities among coalition troops -- double 2007.

Bad News on the Economy - Again

2009-01-27T08:58:00.002-05:00

Brutal news on the job market yesterday, with six major corporations announcing combined layoffs of over 71,400 people. One of the companies was construction machinery manufacturer Caterpillar (CAT, Fortune 500) said Monday it will cut 20,000 jobs amid a "very challenging global business environment." Another company was Pfizer (PFE, Fortune 500) which said in an earnings report it would cut 10% of its staff of 81,900 and close five of its manufacturing plants. And a second round of cuts will shed about 15% of employees from the combined Pfizer/Wyeth staff of 120,000. That makes a total of 26,000 jobs lost. The company already cut 4,700 jobs in 2008.

Sprint Nextel Corp. (S, Fortune 500) will cut a total of about 8,000 jobs by March 31, the company said in a release. The telecommunications company's plan is to reduce internal and external labor costs by about $1.2 billion on an annual basis.

Home Depot (HD, Fortune 500), the world's largest home improvement retailer, announced Monday it will eliminate its EXPO design center business and cut 7,000 associates, or approximately 2% of the company's total workforce. The company blamed a lack of demand for big ticket design and decor projects.

Texas Instruments (TXN, Fortune 500) said it will slash its workforce by 3,400 employees to cope with weak demand and the slowing economy. More than half of those cuts will be layoffs while "voluntary retirements and departures" will make up the rest.

The cuts mark a horrific start to the week, and a brutal start to 2009. In the previous week, around 40,000 cuts were announced across multiple industries.

Glad that the Republicans have decided to be an obstacle to the stimulus plan.