Bush Legacy Watch: Shoe Thrower

I wonder if W. even realizes the significance of shoes being thrown at him by an Arab.

During the invasion U.S. soldiers witnessed Iraqis throwing shoes at murals of Saddam Hussein: it is an act of profound disrespect.

Apparently, the reporter who threw his shoes at President George W. Bush hates both the U.S. and Iranian role in Iraq.

More Apologies and a Very Sad Explanation

I apologize for the lack of posts, but my time with the blogosphere has become limited due to tragic circumstances at my workplace.

As noted, "Some Defunct Economist" waits tables. The restaurant I work at is something of a local institution. A few of the servers have been there for years, and one in particular has worked there since the late '70s.

This last weekend she went to the hospital with some chest pains and learned that she has multiple health problems, including cancer, which has metastasized.

She won't be back to work.

Since we are a small organization, the rest of us on the schedule have had to alter our schedules. I and a couple of other servers will be pretty much living there for the next few weeks.

I am very depressed by these events, such that even when I find time in front of my roommate's laptop I don't even want to think about stuff outside my direct line of sight.

I apologize for my current lack of zeal. Perhaps in a couple of weeks I'll do more than simply complain, but until then, keep the faith by doing two things: reading Krugman and expressing overt exasperation with both neoconservatives and supply side charlatans.

Thanks,

JJV

Apologies & Some Summarizing, Updated

My apologies: posting is light at I am again having some computer issues involving a spastic video card that is producing double vision. I will try to produce something later today/night but between my work schedule and my bum machine I will not be posting too much until one or another of the situations resolves itself.

It is 11 degrees here and snowing.

On to other news.

David Gregory is the new host of Meet the Press.

Obama is promising big infrastructure projects, while Krugman, who advocates such policies, worries that they will take a while--up to a year--to rally the real economy since they take time to plan and execute. So, hopefully, extended unemployment benefits and food stamps for the short-term? They provide the best bang for the buck, anyway.

Obama, being no idiot, knows this, and honestly admits that the economy will get worse before it gets better.

Obama's honesty is quite refreshing, but also states the incredibly obvious: American citizens read/heard/watched on Friday, when the latest jobs report announced that over a half-million jobs had been "lost" in November alone.

Robert Reich wonders if we can call Depression 2.0 a Depression yet. When professional economists are freaking out, well, things are pretty grim.

It may not look like it at first, but the fact the Senate refuses to let Vice President-Elect Joe Biden join in its deliberations is probably a very good thing for those sensitive to separation of powers, checks and balances, a non-tyrannical executive branch, civil liberties, and the overall general reasons constitutional republics are preferable to banana republics.

The AP reports on Freddie Mac's drive to free itself of regulatory control. Wow, they spared no expense.

George Will often makes no sense. Here, he continues in the same vein, inventing a new ideology, reactionary liberalism, and then ascribing it some curious goals. Ysglesias' take on Will's column is here. My fascination is this: it was conservatives not liberals who turned "liberal" into a dirty word by doing exactly what Will does here, which is to make stuff up and rhetorically link liberals to it. Will's market fundamentalism might be amusing were he not so insistent on not learning anything at all from recent economy history.

Well, back to watching the Vikings try to end the Lions' winless streak and then off to work.

Bush Legacy Watch--That Which We Dare Not Name

Remember that the Bush Legacy includes torture.

How President-Elect Obama deals with this issue will form a large part of the Obama Legacy.

Froomkin nails it:

Of all the ways the Bush presidency represented a break with traditional American values, none is more shocking or grievous than the countenancing of torture.

In order to be morally superior to one's enemy, one must act morally superior to one's enemy.

This is something the neo-conservatives completely forgot/ignored/dismissed/twisted in all their thinking about responding to 9/11.

They approached the issue from the perspective of an implicit American moral superiority so grandiose that it made the use of any possible means a moral act.

And thus completely immoral means adopted without apology.

Neo-connery.

Auto Bailout News

The auto industry is screaming louder, but they still face skepticism in Congress.

The crisis Detroit faces may soon come to a head: Ford says it will go down if GM goes down, and GM says it could go down within weeks.

While weighing possible action to save the Big Three, the New York Times editorial board argues that the American auto manufacturers can give taxpayers reduced greenhouse emissions in exchange for their dollars.

However, Robert Reich rains all over this parade, arguing that no matter what, Detroit will continue to ignore fuel-efficiency:

Telling automakers to make more fuel-efficient cars as a condition of being bailed out is like telling Citigroup or any other big bank to issue more affordable loans to Main Street as a condition of being bailed out. It won't happen. Conditions like these make the public feel better about using their tax dollars to bail out private firms, but they're useless. Automakers, like the big banks, will do the minimum required, and you can bet their lawyers and lobbyists will find ever more clever ways of avoiding even that minimum. Without lots of buyers who want fuel-efficient cars, automakers won't produce them, period. (Without credit-worthy borrows able and willing to pay the costs of bank loans, they won't be issued, either.)

John Cole depicts the auto industry's collapse as a three act play, wherein labor gets hosed due to management's incompetence. Nice shot at Mitt Romney (and anyone else echoing his line about UAW pay), by the way.

Keynes--the essential primer

For those confused about all things Keynsian, here is Robert Reich's "abridged version". The essential essentials are this:

Keynes' basic idea was simple. In order to keep people fully employed, governments have to run deficits when the economy is slowing. That's because the private sector won't invest enough. As their markets become saturated, businesses reduce their investments, setting in motion a dangerous cycle: less investment, fewer jobs, less consumption and even less reason for business to invest. The economy may reach perfect balance, but at a cost of high unemployment and social misery. Better for governments to avoid the pain in the first place by taking up the slack.

And, regarding the (somewhat intentional) confusion some are sowing between the original New Deal and the use of a Keynsian stimulus:

As the Depression wore on, Roosevelt tried public works, farm subsidies and other devices to restart the economy, but he never completely gave up trying to balance the budget. In 1938 the Depression deepened. Reluctantly, F.D.R. embraced the only new idea he hadn't yet tried, that of the bewildering British "mathematician." As the President explained in a fireside chat, "We suffer primarily from a failure of consumer demand because of a lack of buying power." It was therefore up to the government to "create an economic upturn" by making "additions to the purchasing power of the nation."

Yet not until the U.S. entered World War II did F.D.R. try Keynes' idea on a scale necessary to pull the nation out of the doldrums — and Roosevelt, of course, had little choice. The big surprise was just how productive America could be when given the chance. Between 1939 and 1944 (the peak of wartime production), the nation's output almost doubled, and unemployment plummeted — from more than 17% to just over 1%.

Never before had an economic theory been so dramatically tested. Even granted the special circumstances of war mobilization, it seemed to work exactly as Keynes predicted.

An immediate conclusion: Even if the New Deal didn't work, the Obama Administration still has a shot at using Keynsian policies to mitigate the impact of Depression 2.0.

And that's what I'm talking about when I say, "Bring on the stimulus." I am simply echoing far, far better minds than my own. Expertise matters, even in republics, and we ignore it at our peril.

Mumbai Terror: Pakistan Links Unearthed

A former Department of Defense official, speaking anonymously to the New York Times, says that the Mumbai attackers received Pakistani training as tens of thousands marched in Mumbai's streets.

Meanwhile, India reports possession of proof of Pakistani involvement, implicating Pakistan's intelligence service, the ISI. Additionally, training for this mission began a year ago. However, despite the linkages between the terrorists and the ISI, India has few options for a response given Pakistan's political fragility.

Further complicating matters, the Pakistani military has reasons to desire a diversion away from the Afghanistan border and towards the Indian border:

According to the Indian sources, the military in Pakistan appears to be acting out of three motivations. First, they wish to divert international concern away from the Mumbai attacks and the role of Pakistan-based terrorists towards a more general concern about India-Pakistan tension.

Second, they wanted to send a message to India that “you can talk all you like to Zardari and the civilian government but nothing will change.”

The third reason, the sources said, was that the Pakistan army “needs a way out of the unpopular war it is fighting under U.S. pressure in FATA and Wana. They really have a problem and need a diversion. Thanks to the war on terror and the Musharraf legacy, for the first time in the history of Pakistan, the army is unpopular inside the country. They are in trouble.”

The New York Times editorial board urges India not to treat the Mumbai attacks the way the United States treated 9/11, arguing against a major troop buildup on the Indo/Pak border:

When commentators repeat the metaphor of 9/11 they are in effect pushing the Indian government to mount a comparable response. If India takes a hard line modeled on the actions of the Bush administration, the consequences are sure to be equally disastrous. The very power of the 9/11 metaphor blinds us to the possibility that there might be other, more productive analogies for the invasion of Mumbai: one is the Madrid train bombings of March 11, 2004, which led to a comparable number of casualties and created a similar sense of shock and grief.

If 9/11 is a metaphor for one kind of reaction to terrorism, then 11-M (as it is known in Spanish) should serve as shorthand for a different kind of response: one that emphasizes vigilance, patience and careful police work in coordination with neighboring countries. This is exactly the kind of response India needs now, and fortunately this seems to be the course that the government, led by the Congress Party, has decided to follow. Government spokesmen have been at some pains to specify that India does not intend to respond with a troop buildup along the border with Pakistan, as the Bharatiya Janata-led government did after the attack by Muslim extremists on India’s Parliament in 2001.

Finally, and a bit off-topic, the terrorists used all the trappings of high-tech culture in these attacks--satellite telephones, Blackberries, GPS indicators, and high definition photography. Such developments had been anticipated recently in Wired. This is the cutting tactical edge of Fourth Generation Warfare (4GW). (Please see Thomas X. Hammes' The Sling and the Stone for a lot of stuff to think about regarding 4GW.)

The Bush Legacy: Worse than Hoover?

Harold Myerson of the Washington Post sticks another icepick into Bush. His formulation is that Bush = Hoover, but worse, and after citing Hoover's, uh, responses to the economic downturn we now call the Great Depression, Myerson gets right to the meat of the comparison:

The Bush administration's approach to today's meltdown is to direct all its energies and largess to lending institutions. There is, as yet, no program to help floundering homeowners renegotiate the terms of their mortgages. The president is opposed to further stimulus programs, even though private-sector investment in the United States has all but ceased.

It's becoming increasingly clear, however, that while saving the banks may limit further calamities, it doesn't really save anybody else. Even with government-guaranteed lines of credit, financial institutions are refusing to lend money. With the banks effectively on strike, an economic recovery, if there is to be one, must begin with the government injecting funds to those parts of the economy that need it most: infrastructure development, state and local governments, an alternative-energy sector. These are all programs to which Bush is firmly opposed.

In a sense, Bush's inactivity is even less excusable than Hoover's. Unlike Hoover, Bush could learn from the successes of New Deal and World War II-era programs to revive the economy. Keynes's general theory of how to defeat depressions wasn't around when Hoover was president, but it's been with us now for 72 years. What's more, virtually every reputable conservative economist, from Martin Feldstein on down, now supports a government stimulus program. But Bush, drawing on no known body of economic thought, remains opposed. (So does Republican House leader John Boehner, who seems determined to elevate stupidity to a party principle.) And with each passing day, the economic hole out of which we will have to climb grows deeper.

Myerson goes on to argue that there aren't mammoth protests against Bush right now because his suckiness as a president is as mammoth as our three worst previous presidents (and how 'bout that for a trifecta?):

So where's the outrage? Why aren't demonstrators besieging the White House? Where are the "Welcome to Bushville" signs in those neighborhoods where abandoned homes outnumber the occupied ones?

The answer, I suspect, is that you can only irreversibly give up on a president once. Further catastrophic failures on the president's part elicit only diminishing returns. Buchanan did nothing while the South seceded: That was it for him. Hoover did nothing as farmers, workers and middle-class America got wiped out: With that, he was beyond rehabilitation. Nixon had Watergate: Enough said. One mega-strike and you're out.

Bush, however, has had three. He misled us into a nearly endless war of choice to disarm a threat that never really existed. He let a great American city drown. And now he stands by while the economic security of tens of millions of Americans is vanishing.

Yet, somehow, W. has few, if any, regrets, and sees nothing, nothing at all, as his fault.

Amazing.

The Audacity of Dope.

Obama Cabinet: Foreign Affairs Stuff

President-Elect Obama taps retired General James Jones as National Security Adviser.

Jones' tasks will include restoring the proper (statutory) functioning of the National Security Council and the interagency process in the national security bureaucracy. Why? Well, as David Corn puts it:

One of George W. Bush and Dick Cheney's many accomplishments was to wreck the national security apparatus of the United States government--with key assists from Condi Rice, Donald Rumsfeld and Paul Wolfowitz. For years, Foggy Bottom and the CIA were at war with the Pentagon and the White House, while the national security adviser (that would be Rice) became not a policy broker (as the job requires) but an enabler. She allowed ideologues to run wild and to trump expertise. She made sure that dissenting opinions were not placed front and center before the president. Foreign policy became the territory of a small band of arrogant know-it-alls who, it turned out, did not know nearly enough.

On Bush and Cheney's watch, the system broke down--by design. It's imperative that the foreign policy machinery of the US government be revived and restored. There needs to be a working balance between the intelligence community, the military, and the diplomats. There needs to be a free flow of ideas. The views of true experts inside and outside the government ought to be factored into major decision-making. And it is the job of the national security adviser to ensure this happens.

That mission will fall to Jones.

(For more on the broken interagency process between 2001 and 2005, see the text of Lawrence Wilkerson's speech at the New America Foundation, here; as the former chief of staff for Colin Powell, he's the guy who first made me aware of the brokenness of the interagency process and how Rice enabled both the brokenness and Bush's horrible decision making.)

Fred Kaplan offers a similar analysis of Jones' new role, here, and as usual he nails it:

It may be telling that Obama has been seeking advice lately from two other generals who served as national-security advisers: Colin Powell and Brent Scowcroft. Anthony Zinni, a retired Marine general who's known Jones for 30 years and followed a similar career path, told me in an e-mail that he sees Jones as "a Scowcroft type of NSA," elaborating, "He works hard to build consensus and has a lot of patience. He doesn't like to seek confrontation but won't shrink from a fight. … He doesn't seek the limelight but will be the hand behind keeping things on track and focused."

"On track and focused" is precisely where George W. Bush failed to keep things, especially in his first six years (that is, until Robert Gates replaced Donald Rumsfeld at the Pentagon). As a result, policies drifted, information was suppressed, dissenting views were circumvented, and, sometimes, decisions made by the National Security Council were simply ignored or surreptitiously overruled. (For one crucial instance, click here; for others, read some of thesebooks.)

Rumsfeld in particular was able to get away with this high-handedness—at one point, to prevent a decision from being made, he simply didn't show up for three consecutive NSC meetings—in part because Condoleezza Rice, Bush's first-term national-security adviser, was a weak manager; Rumsfeld, a veteran infighter, ran circles around her; and Bush, a lackadaisical president in this respect, declined to rein him in.

This sort of manipulation and chaos, it's safe to bet, won't be countenanced by Gen. Jones.

Combine this appointment with the retention of Gates at Defense, who provides Republican cover for Obama's national security decision-making, and then factor in Clinton at State, and the outlines of Obama's mastery of process begin to take shape, as Andrew Sullivan argues:

I'll place my bet that all the surge has done is postpone an inevitable "total breakdown." Obama's biggest test will be resisting the temptation to stay once violence soars as US troops withdraw. But that's what Clinton is for. She's the armor on his vehicle out, and will provide the political cover for the necessary retreat.

While a cynical reading of the situation (not that I'm above that in any way), it is also breathtaking in both its audacity and political brilliance.

My guess is the President-Elect has read The Prince.

The Bush Legacy (Sarcasm Minimized, I Promise)

There were two things in the news that attracted me the way blood in the water attracts sharks.

The first concerned Bush's "exit interview" with Charlie Gibson in which he still refuses to concede he did anything wrong. (Note that we will see, below, how the LA Times headline distorts what Bush actually meant by saying that.) The full transcript of the interview is here.

Dan Froomkin, writing in his "White House Watch" blog for the Washington Post, absolutely goes to town on both Bush and on some of the spin in the stories about his interview (today's entry is titled "Bush Gets Out the Shovel"), pointing out that Bush refused to accept responsibility for the mistakes made before the invasion or Iraq or for the current economic and financial crises:

Rather, in the first of several planned "exit interviews," Bush continues to refuse to take responsibility for a single thing that went wrong on his watch.

The president who sent troops into a disastrous war under false pretenses, led the economy into its biggest crash since the Great Depression, let New Orleans drown, embraced torture and turned America into a pariah nation seems to think that if anyone is to blame, it's not him. He just happened to be in charge during a series of unfortunate events.

Bush seems to think he can win over the verdict of history with a smirk and a shrug, and by maintaining that he "stuck to his principles."

The second amusing news item concerned an exchange on Fox News where a "who was worse: Nixon or Bush" meme made an appearance. It deserves discussion. The Bush Administration has a lot in common with the Nixon Administration, really, but the Bushies have perpetrated greater sins. See John Dean's Worse than Watergate and Jane Mayer's The Dark Side for more.

Mumbai Terrorism Update

The United States claims it warned India of the Mumbai attacks.

The Pakistani president claims the terrorists were "stateless actors", thus denying any official government involvement in the attacks.

Current Secretary of State Condoleezza Rice is currently in India, urging Pakistan and India to cooperate in investigating the origins of the Mumbai attacks.

Marc Ambinder writes that the attacks have vastly complicated the situation in South Asia making it another Middle East but with nuclear weapons included:

It's the Middle East with nuclear weapons on both sides. If soft power doesn't work, do you despose [sic] the Pakistani government and take possession of their nuclear program? Let them have a nuclear exchange and hope that it somehow does not spread? The next steps for the US aren't clear. President Obama might appoint an envoy to the region, empowered to engage in shuttle diplomacy a la Richard Holbrooke, Geroge [sic] Tenet or Dennis Ross.

Speaking of Richard Holbrooke, he will be working on South Asia issues for the Obama Administration. Some preliminary analysis from Foreign Policy here.

Conservative Reality Dysfunction: Hunter

Republican Congressman Duncan Hunter claims there is more violence in Tijuana, Mexico than in Iraq and Afghanistan. His additional comments regarding public safety in Baghdad are equally incredible.

Mumbai--U.S. & India Agree Attacks Linked to Pakistan

The Cheesetec, "Some Defunct Economist's" dad, writes:

The Indian intellegence agency say that the terrorists were from Pakistan Occupied Kashmir. The message they sent claiming to be a new group contained quite a few expressions that belie that it is a home-grown group. The spelling and the terms used to identify it is a Hyderabad-based group betrays a Hindustani or Urudu slant, which is more in tune with Pakistani group.

The United States and India are officially in agreement about a link between Pakistan and the terrorists who assaulted Mumbai.

The New York Times notes the effectiveness and the preparedness of the attackers.

In what The Hindu calls a "key test for India-U.S. intelligence ties" the FBI is on the scene in Mumbai offering technical assistance.

The Mumbai police chief says the terrorists came to Mumbai from Karachi, Pakistan aboard a ship. The New York Times picks this up and then notes U.S. officials agree that militants in Pakistan directed the operation.

The group being mentioned is Lashkar-e-Taiba (often abbreviated L-e-T). Further information is available here. More data provided by: the Council on Foreign Relations; the New York Times; GlobalSecurity.org; Reuters; and the Times of India.

Pakistan's leading English newspaper, Dawn, reports that the United States is saying it trusts Pakistan. At the same time, Pakistan has some really serious problems, as indicated by the following headlines on Dawn's website: "10 Killed In Mingora suicide attack" and "Militants hit NATO supplies; 22 trucks torched" and "Anarchy continues to haunt Karachi".

These attacks will heighten tensions in the region, both between India and Pakistan as well as intercommunally within India.

UPDATE--Time asks if a reversal of the India-Pakistan "thaw" is to follow.

Iraq: Contractor Abuses

McClatchy breaks depressing news, headlined "Military contractor in Iraq holds foreign workers in warehouses." The story says:

About 1,000 Asian men who were hired by a Kuwaiti subcontractor to the U.S. military have been confined for as long as three months in windowless warehouses near the Baghdad airport without money or a place to work.

Najlaa International Catering Services, a subcontractor to KBR, the Texas firm formerly known as Halliburton, hired the men, who're from India, Nepal, Sri Lanka and Bangladesh. On Tuesday, they staged a march outside their compound to protest their living conditions.

It continues:

The laborers said they paid middlemen more than $2,000 to get to Iraq for jobs that they were told would earn them $600 to $800 a month. Some of the men took out loans to cover the fees.

"They promised us the moon and stars," said Davidson Peters, 42, a Sri Lankan. "While we are here, wives have left their husbands and children have been shut out of their schools" because money for the families has dried up.

The men live in three warehouses with long rows of bunk beds crammed tightly together. Reporters who tried to get a better glimpse inside were ushered away by armed guards.

The conditions in which the men have been held appear to violate guidelines the U.S. military handed down in 2006 that urged contractors to deter human trafficking to the war zone by shunning recruiters that charged excessive fees. The guidelines also defined "minimum acceptable" living spaces — 50 square feet per person — and required companies to fulfill the pledges they made to employees in contracts.

When questioned, the U.S. military denied knowledge:

A U.S. military spokesman for the Multi-National Force-Iraq referred questions to KBR. The spokesman said that the American military wasn't aware of the warehouses until McClatchy and the Times of London began asking questions about it on Monday.

Wow, talk about winning some hearts and minds. (OR: Wow, the private sector really makes America look great around the world! And: Thanks KBR/Haliburton/Cheney for actively making the world hate us more than it ever imagined it possibly could.)

Depression 2.0--Krugman in Longer Format

Krugman writes about what needs to be done in the New York Review of Books.

Depression 2.0--One Year and Counting

The AP writes its story upside down, here.

The New York Times story puts the more important information at the top.

The AP story is worth studying, however, for it is quite informative, despite taking a roundabout way to the good stuff.

The AP begins and goes on at length about a sell-off on Wall Street taking 7 paragraphs to get to the important stuff:

Adding to the gloom, the National Bureau of Economic Research, a group of academic economists, concluded Monday that the country has been suffering through a recession since December 2007.

With NBER's decision, the United States has fallen into two recessions during Bush's eight years in office. The first one started in March 2001 and ended in November of that year.

The economy jolted into reverse in the final three months of last year. After a short spring rebound, it contracted again in the summer. Economists say it is still shrinking and will continue to do so through at least the first quarter of next year.

Unlike past recessions, consumers are bearing the brunt of this one. Clobbered by job losses, hard-to-get credit and hits to their wealth from sinking home values and plunging portfolio investments, consumers have cut back sharply on their spending, throwing the economy into chaos.

Watching customers' appetites wane, employers have throttled back on hiring. The unemployment rate in October zoomed to 6.5 percent, a 14-year high. So far this year, 1.2 million positions have disappeared. The jobless rate is likely to climb to 8 percent or higher next year.

Against that backdrop, many economists believe the current recession will be the worst since the 1981-82 downturn.

This is terrible news except in one respect: it reinforces the big F**K YOU we should all be throwing Phil Gramm's way. Remember Phil Gramm?

You know, Phil Gramm, who as chairman of the Senate Banking Committee, recklessly deregulated banking and financial markets, paving the way to the Trillion Dollar Meltdown.

Phil Gramm, who in July 2008 while working as an economic advisor to the McCain campaign, delcared that the United States of America has become "a nation of whiners" that is merely in a "mental recession."

Thus the "official" news that the nation has been in a recession for a year, makes me wonder just how little Gramm, an economist by training(?!?!), actually knows about, well, anything. Gramm, a wildly conservative economic "expert", was completely out-thought by the American electorate who knew the economy sucked way back in July. The electorate telling this to pollsters inspired Gramm to open his mouth and spew forth his ignorance (video, here).

News that the recession has been going on for a hear thus stands as (yet more) evidence of the idiocy of Supply Side Nonsense. (Those who wish to claim that nobody else knew there was anything wrong with the economy may want to check here.)

UPDATE--Andrew Leonard satisfyingly piles on Phil Gram and Amity Shlaes in Salon, here. The money quote ends the piece:

But the footnote to today's NBER announcement is that we can now definitively say that Shlaes was wrong, back in July. Her understanding of current economic affairs proved embarrassingly limited.

And this is a person we're supposed to take seriously as she attempts to rewrite the history of the 1930s?

Enough spleen and back to that upside-down written AP article we were talking about. Yup, talk about burying the lead, they start with the Dow, drop some meaty anti-supply side recession information on us, and they save the most important news for last.

Why would I say that? Well, the article concludes with Fed chair Ben Bernake's a concession that monetary policty has ceased to have any traction:

To help ease the pain, Bernanke said additional interest-rate cuts are "certainly feasible," but he warned there are limits to how much such action would revive the economy, which is likely to stay mired in weakness well into next year.

The Fed's key interest rate now stands at 1 percent, a level seen only once before in the past half-century, and many economists predict Bernanke and his colleagues will drop the rate again at their next meeting on Dec. 15-16.

The Fed can lower its key rate only so far — to zero — and it's getting ever closer. Given that constraint, Bernanke said there are other ways to bolster economic activity.

The Fed, for instance, could buy longer-term Treasury or agency securities on the open market in substantial quantities, he said. This might lower rates on these securities, "thus helping to spur aggregate demand," Bernanke said.

Because the Fed can go only so low in reducing interest rates, the central bank over the past year has resorted to a flurry of other radical and often unprecedented actions with the hope of busting through credit jams and getting financial markets operating more normally.

The bracing impact of the Fed's aggressive rate reductions, however, has been somewhat stymied by the credit and financial crises, Bernanke said. Despite lower borrowing costs, skittish banks have been reluctant to lend money to people and businesses, a vicious cycle that has seriously hobbled the U.S. economy.

"Even if the functioning of financial markets continues to improve, economic conditions will probably remain weak for a time," Bernanke warned.

This news is wildly important and worrisome.

One, more evidence that we approach--or may now be within--liquidity trap territory. That's a very bad place to be. Here is Krugman going long and wonky on the whole matter of the Fed's loss of influence on events in the real economy.

Economists aren't very drama-ish. They don't run around and wave their hands. But right now they are, for economists, pretty much freaking out. If they were say, literary scholars, their hair would be on freakin' fire.

Thanks, W.! I've always wondered what panicked social scientists would look like and, in that regard, you are a gift that keeps on giving: economists, sociologists, political scientists of all specialties--international relations thinkers, comparative political analysts, specialists in domestic politics and such quaint notions as "civil liberties" and "checks and balances"--all freaking out over the costs and consequences of Bush's rule.

"May you live in interesting times."

Conservatism vs. Realism

One of the emerging narratives of Obama's cabinet appointments is the re-emergence of the realists in the foreign policy realm. After eight miserable years of Neo-Connery (neoconservative dominance), this is welcome.

Daniel Larison wonders why conservatism doesn't produce more realists, citing specifically the [Andrew] Jacksonian side of American conservative thought.

Hmm. Well, the biggest reason would be this: Realists reject unquestioning acceptence of an actor's--any actor's--stated intentions. Whether it's "us" or "them" doing to moralizing, realists brush that away and start looking for the interests underlying the rhetoric.

For realists, there is no room for beating one's breast and declaring one's intrinsic moral superiority.

As a result, the conservatism of the moment--assuming such a thing can be said to exist as a coherent body of thought--mixes very poorly with realism, as it is directed at some core level to consistently assume and/or proclaim the moral superiority of its vision, regardless of what actions it adovacates.

Realists are mostly disinterested in weighing morality in international politcss, but they do recognize that morality is a function of actions rather than words. To most realists, neocons are wildly amoral and breathtakingly hypocritical.

Realists, for the most part, didn't advocate the invasion of Iraq in 2003. They certainly didn't beg the Department of Justice to functionally void the Geneva Conventions. They don't agonize over negotiating with the Iranians, for realists think talking with one's "enemies" is a good way to avoid misunderstandings.

No, realists pretty much reject the GOP mainstream's foreign policy priorities.

And that doesn't make them soft at all. It makes them a whole lot better adjusted to the world as it is than any neo-conniving nitwit.

Mumbai Militancy Continues...With Implications

Several hostages were slain as the death toll continues to rise, and the siege of Mumbai continued, the Hindu and the Hindustan Times reported Friday.

This report from the BBC contains a good overview.

Slate's "Today's Papers" has extensively linked coverage from all the major U.S. dailies.

There are many speculations on who exactly is behind these attacks. The holding of Western hostages leads the Times of London to suggest that Al Qaeda may be involved:

Dozens of gunmen were involved in up to 19 different attacks, although the main focus seemed to be the taking of foreign hostages and detaining them in two of Bombay’s most prestigious hotels.
Judging by the apparent cockiness of at least one of the gunmen caught looking into television cameras, these terrorists were clearly prepared to die for their cause.

Al-Qaeda as an organisation has proved in the past that it has the capability to coordinate multiple attacks. Last night an organisation calling itself Deecan Mujahideen claimed responsibility but, as in the past when unknown groups came forward to admit involvement, the name was neither recognizable nor relevant.The sheer audacity of the terrorists are all familiar elements of al-Qaeda’.

"Apparent cockiness" aside, India's NDTV suggests the signs point to a previously unknown group.

Fareed Zakaria, answering questions from Newsweek, also doubts Al Qaeda involvement, suggesting that militants from Kashmir may have had a hand.

Insurgents from Kashmir certainly have the training and experience to do this. This raises the troubling possibility that elements within Pakistan are linked to this attack.

In fact, the Indian government has linked the actions to elements in Pakistan:

The conflict in the stricken Indian city of Mumbai narrowed to a final running battle between commandos and at least one attacker who was still roaming the charred corridors of a luxury hotel, the Taj, but the murderous assault on the country’s financial capital continued to shake the nation and raised perilous tensions with neighboring Pakistan.

A measure of the possible disturbing implications of the attacks for regional relations, the chief of Pakistan’s powerful intelligence organization, Ahmed Shuja Pasha, was due to make an extraordinary visit to India to assist in the investigations and calm tensions between the two countries, as the Indian government explicitly blamed “elements with links to Pakistan” and the full scale and death toll from the attacks became clearer.

American intelligence and counterterrorism officials said Friday there was mounting evidence that a Pakistani militant group based in Kashmir, most likely Lashkar-e-Taiba, was responsible for the deadly attacks on Mumbai.

The Indian media and American government officials are looking at a Pakistan-backed Kashrmir-based insurgent group:

The Indian media focused on the possible involvement of Lashkar-e-Taiba, a Pakistani guerrilla group run by Pakistani intelligence in the conflict with India in the disputed territory of Kashmir.

As the State Department reported that Secretary of State Condoleezza Rice had called President-elect Obama twice to brief him on the attacks, American intelligence and counterterrorism officials said Friday there was mounting evidence pointing to the involvement of Lashkar- e-Taiba, or possibly another Pakistani group based in Kashmir, Jaish-e-Muhammad.

Indian government officials also emphasize Pakistani involvment:

In a televised speech Thursday, Prime Minister Manmohan Singh blamed forces “based outside this country” in a thinly veiled accusation that Pakistan was involved. A day later, India’s foreign minister Pranab Mukherjee was quoted by the Press Trust of India as saying that, according to preliminary reports, “some elements in Pakistan are responsible.”

On the other hand, the Wall Street Journal suggests that domestic Islamists may be responsible for this carnage:

The scale and sophistication of the Mumbai attacks, as well as the choice of targets, however, appeared to point to a more insidious threat that the Indian government has been reluctant to acknowledge so far -- the potential involvement of extremists within the country's own Muslim community, which, at 150 million, is the world's third-largest after Indonesia and Pakistan. It is also one of India's most economically and politically disadvantaged minorities.

In a statement that couldn't be independently authenticated, a previously unknown group, the Deccan Mujahideen, claimed responsibility for the Mumbai operation, describing itself as hailing from the south Indian city of Hyderabad. Hyderabad was the world's largest Muslim-ruled monarchy until it was invaded and annexed by India in 1948.

The WSJ's report cites some international terrorism experts supportive of this perspective:

"It would be extremely difficult for foreigners to come in and operate in this manner," said Rohan Gunaratna, head of the International Center for Political Violence and Terrorism Research in Singapore. "They certainly had intimate knowledge of the city. The pre-eminent threat to India is home-grown."

Christine Fair, a South Asia specialist at the Rand Corp. think tank, added that the modus operandi of the Mumbai militants -- coordinated small-arms assaults and hostage-takings, rather that suicide bombings -- didn't match the signature of the best known Pakistani militant groups or Al Qaeda.

"I think it's very much a home-grown attack," she said. "There are very deep and unresolved social justice issues for Indian Muslims. They have a lot of motivation."

India's Muslims, some of them still nostalgic for a medieval golden age when most of the subcontinent was under Muslim dominion, are among the country's poorest communities, partly because much of the Muslim professional class emigrated to Pakistan at partition in 1947.

In addition to being disproportionately targeted in outbreaks of religious violence, they are severely underrepresented in the country's government bureaucracy, universities and security services. On literacy scores, young Indian Muslims now lag behind even the country's historically most disadvantaged group, the Dalits, or Hinduism's "untouchables."

While only a small minority of Indian Muslims supports violence, the community is often represented by hardline clerics in India's interest-group brand of politics, where caste and religion-based "vote banks" frequently trump political platforms and ideologies. The global campaign against Salman Rushdie's "Satanic Verses" was launched by an Indian Muslim politician in 1988. Last year, Bangladeshi feminist writer Taslima Nasrin was expelled from Calcutta and eventually had to leave India because of violent protests organized against her by Indian Muslim community leaders who described her writings as disrespectful of Islam.

Finally, the Journal notes that the BJP, the "Hindu nationalist" political party also sees domestic Islamists as the culprits (uh, no surprise there, huh?):

India's main opposition movement, the Hindu nationalist Bharatiya Janata Party, has repeatedly accused the ruling Congress party of undermining the country's anti-terror effort by extending "political patronage" to supporters of radical Islam. The Congress-led central government, which usually relies on the Muslim vote, has earned BJP's ire by scrapping draconian anti-terror laws passed by the previous BJP administration, and by staying a death sentence against a Muslim cleric convicted of orchestrating a 2001 attack against the Indian parliament.

"People are very concerned about the soft policies of the present government," Mukhtar Abbas Naqvi, a BJP spokesman, said after the Mumbai attacks. "This isn't the only terror attack. There have been several this year," he added, ticking off bombings in various Indian cities.

On the other hand, both India Today and The Hindu report that the terrorists used a highjacked ship to reach Mumbai. The Lost Angeles Times passes along a report that the militants arrived by sea, landing in small boats.

Whomever is ultimately responsible for these attacks, two consequences will be heightened Indian suspicion of Pakistan as well as further complicating American strategy in the region:

But no matter who turns out to be responsible for the Mumbai attacks, their scale and the choice of international targets will make the agenda of the new American administration harder.

Reconciliation between India and Pakistan has emerged as a basic tenet in the approaches to foreign policy of President-elect Barack Obama, and the new leader of Central Command, Gen. David H. Petraeus. The point is to persuade Pakistan to focus less of its military effort on India, and more on the militants in its lawless tribal regions who are ripping at the soul of Pakistan.

A strategic pivot by Pakistan’s military away from a focus on India to an all-out effort against the Taliban and their associates in Al Qaeda, the thinking goes, would serve to weaken the militants who are fiercely battling American and NATO forces in Afghanistan.

But attacks as devastating as those that unfolded in Mumbai — whether ultimately traced to homegrown Indian militants or to others from abroad, or a combination — seem likely to sour relations, fuel distrust and hamper, at least for now, America’s ambitions for reconciliation in the region.

The early signs were that India, where state elections are scheduled next week, would take a tough stand and blame its neighbor. In his statement to the nation, the Indian prime minister, Manmohan Singh, who in the past has been relatively moderate in his approach to Pakistan, sounded a harsh tone.

He said the attacks probably had “external linkages,” and were carried out by a group “based outside the country.” There would be a “cost” to “our neighbors,” he said, if their territory was found to have been used as a launching pad.

The prime minister did not name Pakistan. But everyone — certainly on Pakistani television news programs Thursday night — knew that is what he meant, and that the long history of Pakistani-Indian finger-pointing had returned.

The Hindustan Times, an influential Indian newspaper, reported Thursday that India’s security agencies believed that the multiple attacks in Mumbai were by an Islamic militant group, Lashkar-e-Taiba, operating out of Pakistan.

Mumbai Terrorism Considered

An interesting post at Crooks & Liars asks who is behind the attack: Al Qaeda, Pakistani proxies, or some other entity?

Continued updates forthcoming.

Mumbai Hostages Rescued

The hostages have been rescued as explosions rocked the Taj hotel. The Times of India updates. (Cheesetec may wonder why I didn't link the Hindu, but honestly, they are hours behind on this story.)

The gunmen have demanded the release of Islamist militants.

Links between the gunmen and Al Qaeda have been disputed.

The standoff continues.

Kristol's Appeal to Ignorance

William Kristol, editor of the Weekly Standard and opinion columnist at the New York Times, appeals to ignorance in this piece in the Times. (By "appeal to ignorance", I mean that Kristol essentially argues that because he has no idea how large an economic stimulus is necessary that no one could possibly know.)

Here he is:

The truth is, Schumer hasn’t a well-grounded view, or even a well-informed clue, as to how large the stimulus package “has to be.” I’d be amazed if he could give a coherent explanation of why it should be $500 billion to $700 billion instead of, say, $300 billion or $900 billion. On TV, he simply invoked the authority of “most economists,” who, according to Schumer, “say, to make this work, you need about 5 percent of G.D.P., which would be $700 billion.” Nor do I think Schumer could begin to explain why a demand-side stimulus package oriented toward employment, infrastructure and consumer spending will “work” in dealing with an economic crisis whose origins seem to be in the collapse of a housing bubble and the deleveraging of overstretched financial institutions.

Now I hasten to add — wait a second, Senator Schumer, put down the phone, no need to call me at home this early in the morning! — that I don’t mean to pick in any way on Chuck Schumer, who is surely among the more economically literate members of Congress. It’s not as if his colleagues have a better understanding of what has happened, or of what should be
done. And it’s not as if the rest of us do.

That first paragraph buries a cleverly constructed non-sequitur in its second half. Even if the "origins" of the economic crisis "seem to be in the collapse of a housing bubble and the deleveraging of overstretched financial institutions," that fact alone would not prevent the efficacy of a demand-side solution. Additionally, since the housing sector contributed so much to economic growth between 2001 and 2006, a collapsing housing market means aggregate demand is sagging as we speak. And the whole assertion is totally debatable at the top level, that of "origins", anyway. But I digress...

The second paragraph takes three sentences, not one of which contains an actual argument or any evidence, to assert that no on really knows what to do. It is here that he generalizes his own ignorance into a miasma of ignorance of such matters that affects all the rest of us, too.

Kristol's ignorance even extends to economists, apparently, for despite the fact they actually study such matters, he asserts they don't know anything, either:

In his interview, Schumer appealed to the authority of economists. Economists still do have considerable sway in our public life — even though it doesn’t seem that a large number of them have been particularly prescient in warning about, or strikingly persuasive in explaining, the current economic situation.

*Sigh*

He's wrong.

He's so wrong he should quit receiving payment for rendering opinions.

For a public intellectual to make the claims he makes about what can or can't be known in these circumstances is for him abdicate that very title.

At a minimum, it is intellectually lazy, and it verges outright intellectually dishonesty. Maybe I should soften that: he is one of three things, stupid, colossally lazy, or a liar. (Some other liberal bloggers might say he's all three.)

In the fact-based part of reality, it turns out that multiple economists have been able to provide an estimate as to what the stimulus should be.

Additionally, another columnist at the Times, Nobel laureate Paul Krugman, has written wonkishly about the necessary size of a stimulus on his blog at the New York Times website. In fact, anyone who's encountered national income accounting could probably give it a go if they had accurate numbers regarding GDP and its components.

Maybe Kristol didn't know about Krugman's scibbling. Maybe he is that lazy.

Now, when Kristol says economists didn't see the crisis coming, he may well be stating things as he knows them. He probably only knows supply siders and they don't predict anything right, anyway. They don't even predict stuff right historically. Instead, they keep reading their pet tax cuts back onto Kennedy's '63 tax cut, and they never consider the counterfactual question of what might have happened if Kennedy had opted for stimulatory spending, instead. But I digress...

That Paul Krugman guy we talked about earlier, well, he was writing about the liquidity trap on his blog in March. He sure saw something coming.

Hell, Nouriel Roubini predicted this crisis. Everyone hated on him for it, but he looks pretty prophetic now. Whatever model he's using proved accurate. Now, he calls for a massive government stimulus.

[And aside: Note that a lot of the links lead to New York Times materials. Once again: Is Kristol so lazy he couldn't even examine the website of the publication for which he writes?]

I think it goes back to the supply siders. Neoconservatives don't have an economic program of their own; instead, they have adopted contemporary Republican orthodoxy (conservative economic dogma), which happens to be Supply Side Nonsense. If the supply siders look foolish, so do the neoconservatives. As a paragon of neoconservatism, Kristol harbors little desire to be seen as foolish.

So, Kristol, I think, is: (1) trying to excuse supply siders for being so utterly unable to make accurate predictions, (2) painting the lack of such ability as "normal", acceptable, and simply passe, and (3) attempting to undermine the "Competency Narrative" that is surrounding President-Elect Obama and his Cabinet by implying they really don't know anything, anyway. In doing number (2), Kristol essential sweeps any responsibility for this mess under the rug, lest any of us forget that Supply Side Nonsense got us here to begin with.

Kristol finally obscures any distinction between forests and trees by saying this:

Indeed, one hopes they’re not too invested in the findings of the economics profession of which they’re such distinguished products — because one suspects many of the conventional answers of that profession aren’t much applicable to the current situation. After all, wasn’t it excessive confidence in complex economic models and sophisticated financial instruments on the part of people well educated in modern economics that helped get us into the current mess?

This is fine example of intellectual dishonesty disguised as witty remonstration.

No, the models macroeconomists use aren't the same models the math whiz kids tried to use to beat the derivatives markets. No, indeed. Even if those who wrote the financial models of the derivative markets were, in fact, "well educated in modern economics", there is no necessary relationship between models of a specific asset's performance and those of macroeconomic performance. It is a little like confusing data about a single student's performance for the results of the whole student body.

To be repetitively redundant: This quality of analysis is what the Times pays Kristol for? Seriously?

Public Intellectual, my bum left knee.

"Prime" Mortgage Borrowers Going Belly Up, Too

The implosion of the housing bubble continues to spread bad news. Now it's the people who had good credit who are now feeling the pinch.

The Los Angeles Times fills us in on skyrocketing delinquencies and foreclosures in the "prime" mortgage market:

Although soaring defaults on subprime loans and other dicey mortgages are a well-known cause of the country's financial crisis, delinquencies and foreclosures now are skyrocketing among "prime" borrowers -- people with good credit histories who documented their incomes when applying for their relatively straightforward mortgages.

Nationwide, 3.07% of prime mortgages were in foreclosure or at least 60 days late in the second quarter of this year, the latest period for which the Mortgage Bankers Assn. has figures, easily topping the previous record of 1.97% set in 1985.

In California, with a jobless rate topping 8% and home prices down more than 40% from their peak and falling, the situation is significantly worse, with 4.15% of prime loans seriously delinquent. That far exceeded peaks of about 2.6% reached in the recessions of the 1980s and 1990s.

The epidemic of bad loans and lost homes among prime borrowers has only worsened since the second quarter ended, according to other, more recent data.

By putting more foreclosed homes on the market, the trend is likely to further depress housing prices, intensify the mortgage-related crisis afflicting the financial system and exacerbate the recession most economists believe is already underway.

"We should be really worried," said Stephen C. Levy, director of the Center for the Continuing Study of the California Economy, a private research firm in Palo Alto.

And as home prices continue to fall, delinquent borrowers are more likely than ever to end up in foreclosure.

"During the rising market, if you lost your job, got sick or your marriage failed you always had a parachute: Sell the house, pay off your mortgage and have something left to start again," said consumer finance expert Elizabeth Warren, a professor at Harvard Law School. "Or sometimes you could use your home equity line of credit to get by."

But now, for most people, "that parachute has gone up in flames," Warren said.

In California, delinquencies on prime mortgages could increase for years, said Christopher Thornberg, founder of consulting firm Beacon Economics in Los Angeles.

One reason, he said, is that home lenders became so complacent during the housing boom that they did little to qualify borrowers besides having computers check a few facts.

" 'Prime' lost a lot of meaning in the insanity of the last few years," said Thornberg, who was one of the first experts to foresee the housing downturn.

To be sure, the damage has been greatest in subprime mortgages, the high-risk loans tapped heavily during the go-go years by borrowers with the worst credit, the heaviest debt loads or the lowest down payments (and sometimes all three of those).

In August, more than 43% of subprime loans nationally were in foreclosure or at least 60 days late in paying, a rate nearly double that of August 2007, according to First American CoreLogic's LoanPerformance unit, which tracks 82% of all U.S. loans.

But problems with prime loans are increasing as fast or faster. About 7.5% of prime jumbo mortgages -- high-quality home loans too large to be sold to government-backed Fannie Mae and Freddie Mac -- were at least 60 days late or in foreclosure, according to LoanPerformance. That was more than three times the level of a year earlier.

As a result, prime loans account for a larger proportion of foreclosures than they did in August 2007.

Terrorist Assault in India

Mumbai (Bombay) endures coordinated terrorist attack centering on popular tourist destinations, slaying key police personnel.

Center Right Nation Update Revisited

Dueling pollsters debate the Center Right Nation Thesis (CRNT). Despite the partisan self-identification numbers, it sure seems like the nation (at least a majority of it) is a bit more center-left than center-right:

Whatever the appropriate label, substantial majorities of the voters of 2008 want the war in Iraq to end as soon as possible. Large majorities favor affordable health insurance for everyone, a fairer distribution of wealth and income, and higher taxes on the rich. They want to preserve traditional Social Security. They want more effective government regulation of the financial sector. On social issues, the country that elected Obama is tolerant of homosexuality and legal recognition of same-sex partnerships, less so of same-sex marriage. A post-election survey by Greenberg Quinlan Rosner, a Democratic polling firm, showed that 51 percent said "the government should do more to solve problems."

In a sense, then, the CRNT is all a blizzard of words, sort of like whistling past the graveyard, a verbal tic to prevent conservatives from freaking out about how far out of the mainstream they are. Conservatives just can't handle the truth, and so they invented a reassuring thing they can repeat to themselves to control their anxiety. (I guess they figure it beats the hell out of self-reflection.)

It turns out that voters hold eclectic rather than uniform views about issues--they can be liberal about some issues and conservative about others:

So claims that we are a "center-right" nation are not, even if true, determinative of "how Obama should govern." Nor is the statement likely to be true as a blanket statement, or to remain true over time. We may be a center right nation when it comes to foreign relations, a center left nation when it comes to Social Security, and maybe even a leftist nation when it comes to corporate power. And how do the terms "left" and "right" even apply to issues like government surveillance and civil rights? Both leftist and rightist authoritarian governments invade the hell out of their citizens rights and privacy.

As a consequence, Obama should govern based on his own judgment rather than by trying to predict what a "center right nation" would want him to do:

If Obama is a successful president, he will at various times anger and disappoint just about every existing political faction. If Obama is a great president, he will eventually dismantle many of the existing political factions and form new ones based around the current problems and needs of a very, very different world than the one that existed when the current factions formed.

All of this is one reason why I'm not upset that most of Obama's picks for the high level jobs have worked in the upper levels of government before. That alone does not mean that there won't be change. If Obama can select the right experienced people, and can set the right tone in his relationship with them, he will get a lot of input from people who understand the structure of the government, how its moving parts mesh or grind, and where a design modification may make all the difference in the world.

Obama should govern from his best judgment. Voters should all use our own best judgment in deciding how we feel about that governance. We should all hope that we turn out to have some much needed good luck.

Auto Bailout: Some Information on the Debate

On the one hand, will Paulson sink Detroit? Dean Baker of the Center for Economic and Policy Research seriously wonders:

On the other hand, in the midst of a global economic slowdown, automobile output must decline, meaning that bailing out Detroit may spark all kinds of crazy industrial policy worldwide. Worth considering: if the U.S. goes for the bailout, and if other nations follow suit, then the global automotive industry becomes an even more entrenched interest in national economies. (If you subsidize something, you get more of it.)

As for proximate causes of Detroit's poor health, conservatives are blaming unions, the high labor costs union benefits require (like the "$70/hour lie"), and fuel efficiency standards.

The fuel efficiency argument is empirically denied by, oh, the Japanese auto industry.

Those blaming unions, like Rush Limbaugh, are going increasingly crazy with their arguments/assertions. Uh, Rush, what the hell are you thinking? What historical period's version of the American Dream says, "Work until you die?"

As long as we're considering the American Dream, remember that union jobs are one of the few ways for non-college educated workers to rise into the middle class (especially with the housing sector now in the toilet). Freddie argues:

Now we've got this financial crisis, and this proposed automaker bailout, and I read posts like this from Matt Yglesias and this from Jim Manzi, and I really feel like, hiding in the reeds of contemporary conservatism, there's a fundamental contradiction somewhere. Opposition to unions has long been a conservative virtue. Recently popular is the notion that we've overexpanded the ranks of those who attend or have attended college, and that we've got to stop acting like everyone should go to college, or is qualified to. And we've got thoughtful conservatives like Manzi pointing out that it isn't actually possible for large groups of Americans to make a middle class living without a college degree.

I put it to you that this collection of factors simply can't be synthesized with the American dream in any kind of broadly applied sense.

Many conservatives believe that personal economic growth is the best (and for the less sober among them, the only) method through which large amounts of people are capable of having their lives improved. The way to help be, the thinking goes, is to get out of their way, keep their taxes as low as possible and let them enjoy the fruits of increasing material wealth. This is entirely in keeping with the American dream. Conservatives, however, tend to be rabidly opposed to unions which, whatever else is true, raise wages and benefits for their constituents. The Two Minutes hate that is directed against the UAW by scores of conservative bloggers is not the product of a failure of the union to gain increased wages and improved benefits. In fact, it is the product of the exact opposite: the union has been too good in improving the employment conditions of its members, and management reports-- and many uncritically repeat-- that this makes it impossible for the companies to remain fiscally solvent. In any event, conservatives are opposed to unions, so they would remove this tool that workers have to attain increased affluence.

Detroit's real problem, Bernard Avishai argues in the Washington Post, is that the Big Three suffer from has an innovation deficit. Government intervention would have to impinge on many areas:

Innovation is mainly a matter of integration. These "modular" principles have been true for consumer electronics for years; car companies are simply getting up to speed. In fact, this set of principles applies to pretty much every high-tech product and every high-tech manufacturing process that produces a low-tech product. It applies to delivering professional and financial services. Peer-to-peer networks have changed the rules. Nobody is as smart as everybody.

Washington cannot save GM and Ford by handing them money and waiting for them to produce (or even demanding that they produce) an advanced hybrid. You can't order up innovation; you have to empower entrepreneurial teams to assemble delight, piece by piece, for specific customers. The Volt will need to be a part of a family of cars for GM to succeed. The Volt's key power-train components should quickly be absorbed into an environment-friendly Saab, for instance, or into some California-style sports car built around an iPhone. Even the coolest of these models will face stiff competition from global rivals, so they had better be made right.

Government -- or, more precisely, governments -- can help only if they grasp the way manufacturing companies work. The shakiest firms will need a tariff regime that permits an auto group to import components from the country where they are designed or most competitively produced. (The European Union's trade rules were a huge help in making it possible for Skoda to acquire components from VW Group companies, including the Spanish firm SEAT.) Federal and state governments should help jump-start a grid for electric cars, as Israel is doing. Most important, perhaps, Washington should move to stimulate innovation in entrepreneurial companies along the whole supply chain -- companies aspiring to provide new generations of components.

In particular, Washington should make patent protection harder to come by lest big companies become complacent and would-be competitors get stifled. In much the same way that the U.S. government is now taking stakes in banks that it's bailing out, it should also take stakes in car companies it invests in (remember, the German state of Lower Saxony still owns about 20 percent of Volkswagen).

The coming contraction need not spell disaster for Detroit. But we must understand that financial capital isn't the only kind that flows around the world or is managed and regulated. The same is true of intellectual capital -- the sheer capacity to turn learning into stuff. The good news is that the United States still has the world's largest proven reserves of intellectual capital. The bad news is that, unlike oil, the fact that we have it doesn't mean that others do not.

The Shrinking GOP

Sophia A. Nelson says the GOP is a small tent party that is shrinking fast and needs to make some radical changes. Nelson specifically cites the lack of diversity within the GOP

Nate Silver goes broader, linking the GOP's inability to persuade those of differing points of view to conservative talk radio.

Citigroup Rescue Announced

In yet another shift in the Federal government's response to the crisis in American credit and equities markets, government officials announced a huge plan to stave off Citigroup's collapse.

Daniel Politi of Slate.com provides background on shifting government strategies:

To recap: First, the government said it would buy troubled assets, then scrapped that plan in favor of injecting money into financial institutions. Now it's made it clear that it's ready to try a mixture of the two for certain institutions. The previous efforts led to a bit of optimism in Wall Street, but that optimism has always proved short-lived. The WSJ points out that the portfolio involved in this rescue is really only a drop in the bucket for a company that has $3 trillion in assets, including $667 billion in mortgage-related securities alone.

On to the details of the plan itself.

The New York Times reports:

Federal regulators announced late Sunday night that the government had approved a radical plan to stabilize Citigroup in an arrangement in which the government could soak up billions of dollars in losses at the struggling bank. President Bush said on Monday that more such rescues could be arranged if they became necessary.

The numbers are immense:

The complex rescue plan calls for the government to back about $306 billion in loans and securities and directly invest about $20 billion in Citigroup. The plan, emerging after a harrowing week in the financial markets, is the government’s third effort in three months to contain the deepening economic crisis and may presage other multibillion-dollar financial rescues.

Success is by no means a certainty:

Whether this latest rescue plan will help calm the markets is uncertain, given the stress in the financial system caused by losses at Citigroup and other banks. Each previous government effort initially seemed to reassure investors, leading to optimism that the banking system had steadied. But those hopes faded as the economic outlook worsened, raising worries that more bank loans were turning sour.

Here are the terms of the agreement between Citigroup and the federal government:

Under the agreement, Citigroup and regulators will back up to $306 billion of largely residential and commercial real estate loans and certain other assets, which will remain on the bank’s balance sheet. Citigroup will shoulder losses on the first $29 billion of that portfolio.

Any remaining losses will be split between Citigroup and the government, with the bank absorbing 10 percent and the government absorbing 90 percent. The Treasury Department will use its bailout fund to assume up to $5 billion of losses. If necessary, the F.D.I.C. Corporation will bear the next $10 billion of losses. Beyond that, the Federal Reserve will guarantee any additional losses.

In exchange, Citigroup will issue $7 billion of preferred stock to government regulators. In addition, the government is buying $20 billion of preferred stock in Citigroup. The preferred shares will pay an 8 percent dividend and will slightly erode the value of shares held by investors.

Once again, the notion of a firm being "too big to fail" has entered into the policy equation:

Once the nation’s largest and mightiest financial company, Citigroup lost half its value in the stock market last week. Although Citigroup executives maintain the bank is sound, investors worry that its finances are deteriorating. Citigroup has suffered staggering losses for a year now, and few analysts think the pain is over. Many investors worry that it needs more capital.

With more than $2 trillion in assets and operations in more than 100 countries, Citigroup is so large and interconnected that its troubles could spill over into other institutions. Citigroup is widely viewed, both in Washington and on Wall Street, as too big to be allowed to fail.

The Los Angeles Times notes that rescuing Citigroup is the largest single rescue effort to date:

In the largest single rescue effort thus far in the current financial crisis, the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. will shoulder 90% of the losses on most of a $306-billion portfolio of toxic mortgages and related securities.

According to the LAT, officials briefing the press claimed that Citigroup's failure could drastically deepen the nation's current economic crisis:

Government officials, briefing reporters late Sunday, made clear they believed that permitting any further trouble at Citigroup could shake investor and depositor confidence in the global financial system and dramatically deepen what already is the country's worst financial crisis since the Great Depression.

The terms of this agreement appear "lenient" compared to those granted AIG:

Terms of the new rescue package are considerably more lenient than those the government imposed on failing insurer behemoth American International Group Inc. In AIG's case, Washington required that the company's current management leave and demanded a near-80% ownership stake before helping the firm.

Government officials made it clear that they did not want to impose punitive terms on Citigroup because its stability was crucial to protecting the financial system.

Oh, great, and AIG has made such good use of the money that regulators have thrown at them.

*Sigh*

UPDATE--Some economists' views on this deal, from Economist's Views (h/t Krugman). Krugman himself says the deal is lousy.

The Bush Legacy (OR Bushed!)

Of course, the largest parts of the Bush Legacy look (right now) to be international and economic chaos. (Echoing Josh Marshall: Why, oh why, did Bush ruin the country?)

Unfortunately, there is still time for W. to add to this legacy.

Lots of stuff is happening at the midnight hour:

Now, of course, Bush has entered into his own midnight period, and it promises to be a dark time indeed. Among the many new regulations—or, rather, deregulations—the Administration has proposed are rules that would: make it harder for the government to limit workers’ exposure to toxins, eliminate environmental review from decisions affecting fisheries, and ease restrictions on companies that blow up mountains to get at the coal underneath them. Other midnight regulations in the works include rules to allow “factory farms” to ignore the Clean Water Act, rules making it tougher for employees to take family or medical leave, and rules that would effectively gut the Endangered Species Act. Most regulations are subject to public input; such is the sense of urgency that the Administration has brought to the task of despoliation that the Interior Department completed its “review” of two hundred thousand public comments on the endangered-species rules in just four days, a feat that, one congressional aide calculated, required each staff member involved to read through comments at the rate of seven per minute. “So little time, so much damage” is how the Times recently put it.

The Bush Administration is, in fact, distinguishing itself in its current efforts:

What distinguishes this Administration in its final days—as in its earlier ones—is the purity of its cynicism. White House officials haven’t even bothered to argue that these new rules are in the public interest. Such a claim would, in any event, be impossible to defend, as just about every midnight regulation being proposed is, evidently, a gift to a favored industry.

In particular, the Bush Administration seems intent on trashing America's wilderness areas as thoroughly as possible:

George Bush is working at a breakneck pace to dismantle at least 10 major environmental safeguards protecting America's wildlife, national parks and rivers before he leaves office in January.

With barely 60 days to go until Bush hands over to Barack Obama, his White House is working methodically to weaken or reverse an array of regulations that protect America's wilderness from logging or mining operations, and compel factory farms to clean up dangerous waste.

In the latest such move this week, Bush opened up some 800,000 hectares (2m acres) of land in Rocky Mountain states for the development of oil shale, one of the dirtiest fuels on the planet. The law goes into effect on January 17, three days before Obama takes office.

The timing is crucial. Most regulations take effect 60 days after publication, and Bush wants the new rules in place before he leaves the White House on January 20. That will make it more difficult for Obama to undo them.

The reason for this effort, dear reader? It's a legacy thing:

The flurry of new rules - known as midnight regulations - is part of a broader campaign by the Bush administration to leave a lasting imprint on environmental policy. Some of the actions have provoked widespread protests such as the Bureau of Land Management's plans to auction off 20,000 hectares of oil and gas parcels within sight of Utah's Delicate Arch natural bridge.

The Bush administration is also accused of engaging in a parallel go-slow on court-ordered actions on the environment. "There are the midnight regulations that they are trying to force out before they leave office, and then there are the other things they are trying not to do before they go. A lot of the climate stuff falls into the category of things they would rather not do," said a career official at the Environmental Protection Agency.

Other presidents have worked up to the final moments of their presidency to impose their legacy on history. But Bush has been particularly organised in his campaign to roll back years of protections - not only on the environment, but workplace safety and employee rights.

"This is Bush trying to leave a legacy that supports his ideology," said Gary Bass, executive director of OMB Watch, an independent Washington thinktank that monitors the White House office of management and budget. "This was very strategic and it was in line of the ideology of the Bush administration which has been to put in place a free market and conservative agenda."

These Bush Administration initiatives weaken the Clean Water Act, the Clean Air Act, and the environmental impact study provisions of the Endangered Species Act:

The new regulations include a provision that would free industrial-scale pig and cattle farms from complying with the Clean Water Act so long as they declare they are not dumping animal waste in lakes and rivers. The rule was finalised on October 31. Mountain-top mining operations will also be exempt from the Clean Water Act, allowing them to dump debris in rivers and lakes. The rule is still under review at the OMB. Coal-fired power plants will no longer be required to install pollution controls or clean up soot and smog pollution.

Yet another of the new rules, which has generated publicity, would allow the Pentagon and other government agencies to embark on new projects without first undertaking studies on the potential dangers to wildlife.

At the same time, we learn of other actions that should be considered a part of the Bush Legacy, for example, another domestic propaganda initiative.

Ah, the Bush Administration! Like the Appalling Sarah Palin, a gift that just keeps on giving.