Tiny Bubbles

The very good Joe Nocera has an interesting piece in the New York Times, which may read as a little cruel to some. His basic premise is that Bernard Madoff had accomplices in his crime, and they were also his victims.

At a panel a month ago, put together by Portfolio magazine, Mr. Wiesel expressed, better than I’ve ever heard it, why people gave Mr. Madoff their money. “I remember that it was a myth that he created around him,” Mr. Wiesel said, “that everything was so special, so unique, that it had to be secret. It was like a mystical mythology that nobody could understand.” Mr. Wiesel added: “He gave the impression that maybe 100 people belonged to the club. Now we know thousands of them were cheated by him.”

And yet, just about anybody who actually took the time to kick the tires of Mr. Madoff’s operation tended to run in the other direction. James R. Hedges IV, who runs an advisory firm called LJH Global Investments, says that in 1997 he spent two hours asking Mr. Madoff basic questions about his operation. “The explanation of his strategy, the consistency of his returns, the way he withheld information — it was a very clear set of warning signs,” said Mr. Hedges. When you look at the list of Madoff victims, it contains a lot of high-profile names — but almost no serious institutional investors or endowments. They insist on knowing the kind of information Mr. Madoff refused to supply.

I suppose you could argue that most of Mr. Madoff’s direct investors lacked the ability or the financial sophistication of someone like Mr. Hedges. But it shouldn’t have mattered. Isn’t the first lesson of personal finance that you should never put all your money with one person or one fund? Even if you think your money manager is “God”? Diversification has many virtues; one of them is that you won’t lose everything if one of your money managers turns out to be a crook.

There's no question that the SEC failed in a core function to protect the investor from fraud. But did anybody really want them to step in? The market was overheated for so long that investors felt entitled to unrealistic returns. Those who trusted in Madoff didn't want to know how the decisions were made or where the money was coming from. They were investing in another part of the shadow banking system, one that turned out to be as fraudulent as the supposedly regulated system of credit default swaps and collateralized debt obligations.

What Madoff did was a crime and the fact that he pulled it off for close to twenty years is an act of regulatory malpractice, but in the end, nobody - not least of which the investors themselves - wanted to pop the bubble anywhere on Wall Street. If it wasn't ever-larger stock prices for the Pets.com sock puppet it was more mortgages to slice and dice into securities and sell everywhere. They made a fortune off of a phantom, and they certainly didn't want anyone telling them it wasn't real.

In another interesting perspective, Chadwick Matlin calls Bernie Madoff a hero, because he focused anger on an individual on Wall Street, as well as exposing the SEC and the whole regulatory apparatus. I don't know if I totally agree with that, but what Madoff has done is uncover the danger of bubbles, and of endless belief in the power of small men who are mythologized into Masters of the Universe. It has made plain that when wealth is rewarded instead of work, when the economy tips out of balance and moving money becomes a growth industry, when free market fundamentalism reigns, greed takes over, and the endless desire for growth makes fools of us all. What Madoff has accomplished is to give recognition that we need what is being called at the highest levels a post-bubble economy.

The last point that I'd make -- and I made this point to the Business Roundtable yesterday -- it is very important, even as we're focused on the financial system and the credit markets, that we are laying the foundation for what I'm calling a post-bubble economic growth market. The days when we are going to be able to grow this economy just on an overheated housing market or people spending -- maxing out on their credit cards, those days are over. What we need to do is go back to fundamentals, and that means driving our health care costs down. It means improving our education system so our children are prepared and we're innovative in science and technology. And it means that we're making this transition to the clean energy economy. Those are the priorities reflected in our budget, and that is part and parcel with the short-term steps that we're taking to make sure that the economy gets back on its feet.

In politics you sometimes need villains, and so calling out Bernie Madoff or the bankster CEOs is fine. It's what they represent - an unsustainable bubble economy, based on cheap credit and over-leveraging and the illusion of wealth and prosperity - that is the real culprit, that took in all of us in one way or another. There's no floor under our feet in such an economy, and so we have to rebuild that floor out of something heavier than air. It's not going to happen quickly. But it has to happen now, with the necessary investments to get it going. This is why fixing what's broken is not enough, and reinflating bubbles will only lead to them bursting larger.

Charge, Release, Or Change The Terms And Do The Same Thing

Yesterday I wrote about the Obama Administration decision to drop the term "enemy combatant" in dealing with detainees at Guantanamo. This was positive, as was rejecting the reliance on "inherent authority" as commander in chief in the detention of these prisoners. But semantics only go so far, and I should have done a deeper assessment of this.

WASHINGTON – The Obama administration said Friday that it is abandoning one of President George W. Bush's key phrases in the war on terrorism: enemy combatant. But that won't change much for the detainees at the U.S. naval base in Cuba — Obama still asserts the military's authority to hold them. Human rights attorneys said they were disappointed that Obama didn't take a new stance.

The Justice Department said in legal filings that it will no longer use the term "enemy combatants' to justify holding prisoners at Guantanamo Bay.

"This is really a case of old wine in new bottles," the Center for Constitutional Rights, which has been fighting the detainees' detention, said in a statement. "It is still unlawful to hold people indefinitely without charge. The men who have been held for more than seven years by our government must be charged or released."

We are still holding prisoners without charges, based on theories that, while not as extreme as the Bush Administration's, remain incomplete. Emptywheel is very direct about this.

The President has the authority ... the President determines ... the President has the authority.

You see, it's still the same unitary power, stripped of the baggage of Bush's vocabulary. And even as they abandon Bush's vocabulary, they progressively expand the reach of that authority to include just about all those whom Bush already determined were enemy combatants, no matter how nebulous that person's ties to al Qaeda [...]

In short, it's a big, fat, cynical game. A word game, like any other parlor game, giving a tired old concept a verbal facelift. Without, however, changing the concept itself.

The Obama Administration suggests in this filing it is just trying to meet its March 13 deadline. My first and best response to that is the same I used to have--as a professor--when students obviously turned in shoddy work just to meet my hardass deadlines: to tell the lazy student to start doing her work.

"You haven't completed the terms of the assignment. No matter whether you got this handed in by the designated deadline or not, you have not done your work. So take this back and do the work assigned in the first place. And don't turn in this shoddy word game as serious work again."

Thus far, this is just Bush's policies under new name. And they're not even clever enough word games to fool most of the people--particularly the international community--these word games were designed to fool.

Adam Serwer has more, with basically the same conclusion. The Administration gave themselves an out by saying that the process is evolving and is subject to future determination. I think the verdict is clear - bring these detentions in line with Constitutional law and international norms, or reap the consequences. Charge, or release.

Post-Bubble Economics

I thought Larry Summers gave an interesting speech yesterday. Clearly the White House is interested in having him in public right now. He dominates the Sunday shows tomorrow, and with Geithner's credibility in question, he's the biggest voice on economic issues coming from that point of authority. Most progressives have a dim view of Summers because of his past association with the deregulation and corporate-friendly policies of the Clinton Administration. But let's look at a bit of what he said yesterday.

The beginning was a reassurance that this crisis will pass, that the policies being put in place will lead to economic growth. The White House is clearly trying to project confidence on this front, using their blog to pick out examples of "Recovery in Action" from across the country. But then Summers summarized the current problem, and offered what was, for me, a novel way of thinking about it.

It was a central insight of Keynes' General Theory that two or three times each century, the self-equilibrating properties of markets break down as stabilizing mechanisms are overwhelmed by vicious cycles. And the right economic metaphor becomes an avalanche rather than a thermostat. That is what we are experiencing right now.

• Declining asset prices lead to margin calls and de-leveraging, which leads to further declines in prices.
• Lower asset prices means banks hold less capital. Less capital means less lending. Less lending means lower asset prices.
• Falling home prices lead to foreclosures, which lead home prices to fall even further.
• A weakened financial system leads to less borrowing and spending which leads to a weakened economy, which leads to a weakened financial system.
• Lower incomes lead to less spending, which leads to less employment, which leads to lower incomes.

An abundance of greed and an absence of fear on Wall Street led some to make purchases – not based on the real value of assets, but on the faith that there would be another who would pay more for those assets. At the same time, the government turned a blind eye to these practices and their potential consequences for the economy as a whole. This is how a bubble is born. And in these moments, greed begets greed. The bubble grows.

Eventually, however, this process stops – and reverses. Prices fall. People sell. Instead of an expectation of new buyers, there is an expectation of new sellers. Greed gives way to fear. And this fear begets fear.

This is the paradox at the heart of the financial crisis. In the past few years, we've seen too much greed and too little fear; too much spending and not enough saving; too much borrowing and not enough worrying. Today, however, our problem is exactly the opposite.

It is this transition from an excess of greed to an excess of fear that President Roosevelt had in mind when he famously observed that the only thing we had to fear was fear itself. It is this transition that has happened in the United States today.

This is kind of a recitation of the theory of animal spirits that the White House is consumed with, the psychological theory for the crisis in the markets. The financial barons had an "irrational exuberance" on the way up, and now they have an irrational pessimism on the way down, the theory goes. Only I don't think it's all that irrational - the phantom wealth created by the derivative markets and on-paper assessments of assets really has vanished and it's not coming back. Ultimately, restoring confidence isn't going to paper over the giant hole in the balance sheet.

Nevertheless, here was Summers' assessment of the solution, after laying out the problem:

While greed is no virtue, entrepreneurship and the search for opportunity is what we need today. We need a program that breaks these vicious cycles. We need to instill the trust that allows opportunity to overcome fear and enables families and businesses to again imagine a brighter future. And we need to create this confidence without allowing it to lead to unstable complacency.

While the economy is falling far short today, perhaps a trillion dollars or more short, we should never lose sight of its potential. We have the most productive workers in the world, the greatest universities and capacity for innovation, an incredible amount of resilience, entrepreneurship, and flexibility, and the most diverse and creative population of any major economy [...]

Taken together, these steps to support incomes, increase the flow of credit, and normalize housing market conditions address each of the vicious cycles that is leading to decline.

With the passage of time, it will permit the re-engagement of the normal processes of economic growth: rising incomes and employment, greater credit flows, increased spending, a stronger US economy and a stronger global economy. They will reinforce crucial dynamics that will also operate to promote recovery.

There's a substantial amount of question about whether those steps, particularly with respect to the banking sector, are going to work. And really, recovery hinges on getting those steps right. But what I really, really liked about Summers' approach was that he rejected the idea of reinflating bubbles as the road to recovery, and using this crisis as an opportunity to rebuild the economy on a sustainable path. This sequence is solid.

Bubble driven economic growth is problematic because of disruption and dislocation – affecting those who took part in the bubble's excesses and those who did not. And, it is not entirely healthy even while it lasts. Between 2000 and 2007 – a period of solid aggregate economic growth – the typical working-age household saw their income decline by nearly $2000. The decline in middle-class incomes even as the incomes of the top 1% skyrocketed has a number of causes, but one of them is surely rising asset prices and the fact that financial sector profits exploded to the point to where they represented 40% of all corporate profits in 2006.

Confidence today will be enhanced if we put measures in place that assure that the coming expansion will be more sustainable and fair in the distribution of benefits than its predecessor. That is why the President has priorities that go beyond the immediate goal of containing the downturn and promoting recovery.

I think that is the perfect way to rebut the stodginess of the naysayers who have decided Obama is doing too much too fast. In fact, laying the foundation for sustainable growth goes hand-in-hand with that progress on health care and energy and education. It will make business more competitive, and increase home-grown manufacturing industries. Most of all it will bring the economy into balance, so that the "industry" of wealth creation isn't too big to fail and instead performing its actual function of facilitating the flow of capital through the real economy. Obama addressed this as well in remarks to the Business Roundtable. We can't have bubble and burst cycles anymore that rip up the middle class who didn't create them.

You see, we cannot go back to endless cycles of bubble and bust. We can't continue to base our economy on reckless speculation and spending beyond our means; on bad credit and inflated home prices and over-leveraged banks. This crisis teaches us that such activity is not the creation of lasting wealth -- it's the illusion of prosperity, and it hurts us all in the end.

Instead, we must build this recovery on a foundation that lasts -- on a 21st century infrastructure and a green economy with lower health care costs that create millions of new jobs and new industries; on schools that prepare our children to compete and thrive; on businesses that are free to invest in the next big idea or breakthrough discovery.

In addition, Summers defended the need for increased labor protections.

If we want to propel this economy forward and we want to have a sound expansion, it has to be an expansion whose benefits are more broadly shared. And that goes to questions of tax policy... It goes to the questions of education over the longer term. And it goes to the question of having a healthy and well-functioning trade union movement. And I think it is hard to avoid the conclusion that the way in which our labor laws have functioned, and have been enforced and been acted on over many years, have not been constructive from the point of view of having a healthy trade union movement. And an attempt to redress that balance seems to me something that is appropriate at such a time.

I think this is a good philosophy going forward. It's the right message, and one that's harder to argue with. The Masters of the Universe broke the economy, and now we have to take the steps to ensure it never happens again. But in addition, we have to reward work and not wealth, so that these greedheads aren't even in the position to try it.

Now That's What I Call Talking To Your Enemies

Supreme Jurisprudent Ali Khamenei runs Iran. There is no dictator named Ahmadinejad. There is no Iranian Revolution without the Ayatollah. If you're going to make a deal with Iran, you're going to have to get the participation of Khamenei. Which, impressively, is what President Obama is seeking.

In what I’m going to interpret as clear evidence that President Obama reads this blog, the Wall Street Journal reports that the administration is “looking at ways to develop a direct line of communication to [Iranian] Supreme Leader Ali Khamenei.”

American and European officials say Mr. Khamenei is the only Iranian leader who can make the ultimate decision to suspend or freeze Iran’s nuclear program.

“The key issue is now to find a channel to Khamenei,” said a senior Western diplomat briefed on the Obama administration’s policy review in recent days. “If the supreme leader moves, he’s going to do it in a very prudent and incremental way.”

The discussions are part of a larger Iran-policy review that the Obama administration is aiming to complete this month, according to U.S. officials.

Matt Yglesias has a bit more. This is smart for several reasons, the most obvious being that you bargain with the one who can actually secure the bargain. There's an election for the Iranian President in June, with Mahmoud Ahmadinejad challenged by a number of reformers. His word in negotiations will be held up by politics for several months, and we should not wait until that is settled. I don't think renewing sanctions and forward actions like shooting down an Iranian drone over Iraq (did you even hear that happened?) are particularly helpful to the extent that they strengthen the hand of the hard-liners. But the Obama Administration is clearly offering a mixture of carrots and sticks, and if they actually get the ear of Khamenei, there's a very real chance of success.

NY-20: The Last Days Of Tedisco

I don't know much about Scott Murphy, the Democratic candidate in NY-20, other than that he said he'd join the Blue Dogs and that's enough for me to know that I won't endorse him or give him a dime. We have enough Democrats in the House, and the major problem over there is the power and influence of that corporate whore caucus, so I have little interest in seeing it grow.

At the same time, I understand that Republicans failing to pick up a seat in a heavily Republican district would be kind of an embarrassment and may signal the end of Michael Steele's tenuous hold on the RNC. So it's with a sense of bemusement that I see Jim Tedisco, the Republican candidate, freaking out because he's sinking in the polls (by the way, James L. wins the award for title of the year for "Panic! At Tedisco")

Reacting to his Democratic opponent's surge in the polls, Tedisco said Thursday he's taking control of the content of his advertising from the National Republican Congressional Committee.
"I'm taking over and we're going to run a campaign that relates to the people of the 20th Congressional District," he said.

The first depiction of "the real Jim" will air in a new television commercial set to debut this evening, he said. [...]

Tedisco blamed his drop in the poll on an advertising strategy that has focussed heavily on attacking his Democratic opponent.

Tedisco said going forward the content of his ads will be more positive with him making the decisions instead of the national party.

Even more amusingly, the NRCC, the Republican campaign arm in the House, will run their ads anyway despite Tedisco's demands for them to stop. Hilarious.

The rub here is that the NRCC ads may be hurting Tedisco. A recent Siena College poll found that Tedisco commercials made 12% more likely to back him, and 28% less likely.

While it’s unclear whether the ads that are backfiring are the Tedesco campaign’s or the NRCC’s, it’s very possible that the national GOP’s spots are doing the damage, Siena pollster Steven Greenberg tells me. “It is certainly plausible that the NRCC commercials are the ones that are turning off voters,” Greenberg says.

This was Kirsten Gillibrand's seat that she vacated to go to the Senate, and now she has an ad up for Murphy. By contrast, there's this free-for-all on the right.

I really don't care who wins, but it has a certain train-wreck quality to it.

Food Safety And Its Consequences

It is exceedingly smart for the President to tackle food safety in his weekly address. The Twitterers in Washington will yelp "But how can he take on something ELSE?" But I'm going to go ahead and guess that 100% of Americans eat food. And the e. coli conservatism of the Bush years had a real and profound effect on people. There's a lady on my street who I see walking my dog every now and again, and one of her dogs died from the melamine scandal a couple years back. Here in California, the tainted spinach scare of 2007 cost the state's farmers hundreds of millions of dollars. It's astonishing that we have had to worry for so long about the quality of the food we purchase, and it contributes to this anti-government backlash that they are incompetent and unable to deal with even core functions.

And that was true - under an executive branch that didn't regulate and didn't care about food safety. But this executive branch will. And Obama's opening paragraph of his weekly address signals that government is vital and needs to be treated with seriousness and respect.

I’ve often said that I don’t believe government has the answer to every problem or that it can do all things for all people. We are a nation built on the strength of individual initiative. But there are certain things that we can’t do on our own. There are certain things only a government can do. And one of those things is ensuring that the foods we eat, and the medicines we take, are safe and don’t cause us harm. That is the mission of our Food and Drug Administration and it is a mission shared by our Department of Agriculture, and a variety of other agencies and offices at just about every level of government.

In the address Obama announced the appointment of Margaret Hamburg as the new head of the FDA. She has a long record in government, including a stint as New York's health commissioner. Her deputy, Joshua Sharfstein, is the Baltimore Health Commissioner. They are serious people who are not former lobbyists or executives of the industries they will regulate, and they will get the proper staffing and funding to actually carry out the mission of the department.

People have lost faith in our institutions. A more competent and successful FDA may seem small, but it's part of an effort to restore trust in government, as the only entity big enough for numerous tasks. Proven ability in making food safer and more secure can lead to proving that government can administer health care or implement a workable system to fight global warming. With e. coli conservatism demonizing the functions of government for so long, it's vital to see some pushback.

The address is below.



UPDATE: Here's a really good part of this - banning downer cows from the food supply. This is a health initiative, not just public safety.

Friday Random Ten

And that's a wrap for today...

Crooked Teeth - Death Cab For Cutie
Desiree - Neil Diamond
Chronomentrophobia - Andre 3000
Where It's At - Beck
Snappin' & Trappin' - Outkast
Go It Alone - Beck (the old Outkast-Beck-Outkast-Beck trick, ay?)
All We Have - Brazilian Girls
I Wanna Be Like You - Pizzicato Five
4 Out Of 5 - Soul Coughing
Michael And Heather At The Baggage Claim - Fountains Of Wayne

In Charge And Mad You're Not Happy About It

Chris Bowers has the depressing details on the financial services industry, through their advocates in the Senate, continuing to hold up eminently sensible foreclosure reform.

A House-passed bill that would allow bankruptcy judges to modify the terms of troubled homeowners' mortgages has entered a holding pattern in the Senate, where the necessary 60 votes remain elusive.

The bankruptcy provision - often referred to as "cramdown" - is a key component of the Obama administration's housing initiative, but it worries moderate Democrats in both chambers.

Indiana Democrat Evan Bayh and Pennsylvania Republican Arlen Specter are leading a group of Senate moderates in an effort to limit the bill's reach in a way that could attract 60 votes.

Senate leaders had hoped to have the bill go straight to the floor as early as this week, but it may now have to go through the Senate Banking, Housing and Urban Affairs Committee as proponents of the measure search for a deal. On March 11, the bill was referred to the panel.

"There are still significant concerns with the bill on both sides of the aisle," said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, a group that lobbies on behalf of the banking industry.

Lenders fiercely oppose the cramdown language, which would allow bankruptcy judges to reduce the principal owed on a primary-residence mortgage and order other modifications in mortgage terms.

These lenders lied on forms to get customers into loans, lied to their customers about the terms of those loans, sold these unstable loans around the world and caused a near-collapse of the global financial system.

In America, that not only means they still have a check on legislation, they think the lawmakers are being too mean to them as well.

“When I hear the constant vilification of corporate America, I personally don’t understand it,” (JP Morgan CEO Jamie) Dimon said in his speech. “I would ask a lot of our folks in government to stop doing it because I think it’s hurting our country.”

Jamie Dimon and all his buddies are lucky they aren't sharing the same cell right now. The audacity of these people, to have rewritten the rules of the US economy only to see it fail, and then demand courtesy!? We have paid you our tax dollars, given you the capital to finance your adventure (h/t Jon Stewart), and now you want a chocolate from us?

Oh, they also want all accounting laws changed so they can more easily fudge the numbers, too.

Before financial institutions have collapsed over the past several months, they have come to the Financial Accounting Standards Board, pleading for a change in mark-to-market accounting rules so that they can continue to appear to be solvent on their balance sheets.

Robert Herz, head of the FASB, told a panel of lawmakers Thursday that the loudest critics of fair market accounting practices have been the very same banks that have gone belly up when regulators would not let them adjust their accounting.

"There seems to be a clamoring for changing mark-to-market rules that seems to come largely from institutions that may be insolvent," Rep. Alan Grayson (D-Fla.) said to Herz at a meeting of the Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.

Grayson said that, from Herz' testimony, it seemed that "there may be institutions that are insolvent and they haven't been forced to write down their books to the point [of insolvency] yet, and those are maybe the same institutions that are asking us to modify the mark-to-market rules so that they won't have to admit that they're bankrupt. Is that correct?"

Herz said that it was.

As Grayson says, "We have people who break every rule in the book and then they think that the answer to their problems is to break more rules."

I'm all for criticizing the Obama Administration for their failure to come up with a workable plan to fix the banks; heck, I've done it on occasion. But I save some special loathing for these criminals running major companies into the ground, lying to everybody about the inner workings of their companies, exerting the same power and influence over the legislative process as if nothing happened, and coming back for more changes and work-arounds so they can keep the Wurlitzer playing for just a few hours longer. I think trained chimps in the corner offices of every firm on Wall Street could do better. And they wouldn't ask us to stop being so mean to them.

Most Dangerous Trouble Spot In The World Update

This is actually good news. The US and the UK have been leading hard on the Zardari government to arrive at a deal in their increasingly boisterous political standoff, and there are tentative signs that such a deal is being made.

The chief of the army, Gen. Ashfaq Parvez Kayani, met Friday with Mr. Zardari, and with the prime minister, Yousaf Raza Gillani, in what politicians said was an imminent decision to lift executive rule in Punjab Province, one of Mr. Sharif’s demands for stepping back from confrontation.

Mr. Zardari placed the Punjab, the most populous province in Pakistan and the stronghold of Mr. Sharif, under the rule of the governor on Feb. 25, and effectively dismissed the provincial assembly, where Mr. Sharif’s party predominates.

Pakistani leaders were also discussing a Feb. 25 Supreme Court decision that disqualified Mr. Sharif and his brother, Shahbaz, from elective office, politicians from both the ruling and opposition parties said.

That decision has been widely criticized in the Pakistani press and among politicians as a political ruling carried out at Mr. Zardari’s behest.

It's a good start, but considering that the reinstatement of the Chief Justice of the Supreme Court, Iftikhar Mohammed Chaudhry, was what sparked mass protests both against Pervez Musharraf and Zardari, and that is not to be found in this deal, I wonder how successful it would be in stopping the marches. This may appease Nawaz Sharif, who Juan Cole thinks is not respecting democracy by threatening open rebellion against the elected government, but it doesn't address the larger question.

This report from Middle East Progress gets at many of the thornier issues, which are complex. One thing is clear, however; this situation, no matter how unstable, is better than another military coup. An excerpt:

Mr. Sharif’s PML-N lost out to the PPP in the 2008 elections due to a sympathy vote after Ms. Bhutto’s assassination. Unable to digest the prospect of sitting out in the cold for another four years (Musharraf had exiled him earlier for nine years), Mr. Sharif desperately wants the restoration of the deposed chief justice, Iftikhar Chaudhry, in the fair expectation that the latter would hold all Musharraf acts illegal – including the reprieve from corruption granted to Mr. Zardari and several PPP leaders – and thereby compel a mid-term election later this year or next. Mr. Sharif is capitalizing on his rising nation-wide popularity in the wake of the plunging fortunes of the ruling PPP and its coalition partners, the results of a run of bad political decisions by Mr. Zardari, including retaining the chairmanship of the PPP while serving as president of Pakistan and having a party loyalist acting as prime minister. Mr. Zardari’s refusal to reinstate Mr. Chaudhry has led Mr. Sharif to join hands with a simmering country-wide lawyers’ movement in support of Mr. Chaudhry. The joint opposition has launched a “Long March” on Islamabad from all over the country, starting March 12 and reaching its destination for an interminable “sit-in” outside parliament in Islamabad on March 16 [...]

Pakistan is unraveling. The only recipe is more democracy, not less, so that civilian support for, and ownership of, the war on terror can be manufactured and strengthened. Western efforts must be focused on strengthening the economy (there is no substitute for jobs, well-being and upward mobility in ensuring a political stake in the system rather than Long Marches and terrorism) and retraining and re-equipping the Pakistani military to cope with insurgency. Above all, greater intervention is needed in discreetly but firmly knocking political heads together in Pakistan. The last thing the United States should consider is a wink and a nod to another army general to seize power. The war against Al Qaeda and the Taliban will eventually be won in the hearts and minds of the people.

Read the whole thing.

Cash For Trash

One of the developments that drove the market this week was the news that GM wouldn't need any further financing from the government in March. Which is great. But the reason wasn't that auto sales bounced back to life. It was that they have been able to extract more blood from the stone than they expected.

G.M., the nation’s largest automaker, issued a statement saying that it had told President Obama’s auto industry task force, which is reviewing the restructuring plan that the company submitted last month, that its March financing request “would not be needed at this time” because it was making more progress than expected in reducing costs.

The statement did not specify whether G.M. still expected to need the full $30 billion that it had requested.

“This development reflects the acceleration of G.M.’s companywide cost reduction efforts as well as proactive deferrals of spending previously anticipated in January and February,” the statement said. “G.M. will remain in regular contact with the presidential task force on the auto industry on the status of G.M.’s restructuring actions, its liquidity position, timing of future funding requests, and other relevant topics of mutual concern.”

What is missing in that report is the selling of cars. They can cut as deep and hard as possible, and force their union to knuckle under as well, the way Ford did this week. Ultimately, that will reduce wages across the industry, and in the non-union shops as well, as everyone races to the bottom. But again, the problem is that nobody is selling any cars.

I think we should seriously consider the German "cash for trash" model:

Amid the gruesome headlines generated by the world's auto industry these days, it almost read like a typo: new car registrations in Germany rose 21% year-on-year in February, the country's Association of the Automotive Industry (VDA) announced March 3. This, though, was no error. The 278,000 cars put on the road, crowed Matthias Wissmann, VDA's president, amounted to "the highest level of sales in the month of February for ten years."

Why the splurge? German drivers have latched onto a juicy new deal. Under a scheme started in January, car owners who trade in a vehicle more than nine years old for a new, greener model can expect $3,172 from the German government as well as a break from paying road tax for at least a year. Similar "scrapping schemes" have been launched in recent months in France, Italy and Spain. Now motor manufacturers in Britain are pleading with its government to follow suit.

You can do more to fight global warming by improving performance at the low end than by giving everyone who has a moderately efficient vehicle a Prius. A "cash for trash" scheme would do just that by dramatically increasing the fuel economy of the overall American fleet, with the added benefit of jump-starting sales for the moribund auto industry. There's legislation on this, and seeing how Germany and other nations are using this plan to boost their own homegrown industries it would be in no way protectionist to do the same for the Big Three. If you want to sell cars, subsidize the overhaul of the fleet.

More Crisis Coming, As Expected

Yesterday Karen Bass let it slip that the state budget projections were coming up short and another revenue gap would have to be filled by June. Now there's independent confirmation of this, courtesy the Legislative Analyst.

The Legislature's budget analyst, Mac Taylor, declared today that the immense package of spending cuts, new taxes and loans aimed at closing the state's $40 billion budget deficit will fall short by $8 billion because the state's economy is continuing to falter.

"Unfortunately, the state's economic and revenue outlook continues to deteriorate," the Legislative Analyst's Office (LAO) said in a review of the package, which covered the remainder of this fiscal year and all of the next.

"Even in the few weeks since the budget was signed, there have been a series of negative developments. Our updated revenue forecast projects that revenues will fall short of the assumptions in the budget package by $8 billion. Consequently, the Legislature and governor will need to adopt billions of dollars in additional solutions in the coming months to bring the 2009-10 budget back into balance."

Taylor had some more bad news for the state's political leaders. Because so many of the "solutions" adopted last month are temporary, "without corrective actions, the state's huge operating deficits will reappear in future years - growing from $12.6 billion in 2010-11 to $26 billion in 2013-14."

This is a powerful argument for continued structural reform. Otherwise, we will keep offering insufficient short-term solutions that will collapse in a matter of years. And the result will be severe deficits, reduced services, and lots of people out of work. Having won the court battles, the Governor now has the furlough bullet in his chamber and he will not be afraid to use it.

In the short term, there are a number of steps that can be taken. It continues to be insane to leave as much as $10 billion in Medi-Cal spending from the federal stimulus on the table because the legislature won't change the eligibility rules. They have until July 1 of this year to do so, and let's remind everyone why they changed these rules in the first place - to get poor families mired in red tape and cheat them out of services.

Had lawmakers and Gov. Arnold Schwarzenegger enacted the budget on time, prior to the start of the current fiscal year on July 1, there would be no problem.

However, since the budget signed by the GOP governor was a record 85 days late, an attempt to save $70 million by changing eligibility rules for children receiving care from Medi-Cal prevents the state from qualifying for the federal money.

The change requires children to fill out a report every six months confirming their continuing eligibility along with their parents who were already filling out such reports.

Critics of the requirement say that most of the children who lose eligibility do so because they forget to turn in the paperwork, not because they actually lose eligibility. Sorting out such issues increases Medi-Cal costs to counties, who administer the program locally.

In addition, by maximizing the use of the stimulus money, the state can clear the trigger hurdle so that the worst cuts are spared (for now) and tax increases are reduced. Sure, this will probably be the first area we go back to when negotiations resume, but at least they wouldn't be on the books currently, reducing the even more draconian measures that would be further needed. The Administration doesn't want the trigger to go off because the deficit would widen, so they're lowballing the figures. But the legislature could absolutely get the kind of dollars necessary from the federal government to fill in that money.

Then there are the half-dozen ballot measures on May 19, three of which directly impact the budget deficit and would grow it by about $6 billion (that would be 1C, 1D, and 1E, the measures that would sell the lottery and raid voter-approved funds for children's programs and mental health). I actually think this revelation that the budget is already in deficit will make proponents' jobs harder. Sure, they'll try scare tactics (don't make the deficit bigger), but this undermines confidence in a deal that essentially the voters are being asked to ratify. Schwarzenegger's star power is on the wane with his approval ratings, and his failed leadership can be seen by the numbers.

In the longer term, today's news screams for additional budget reform. Schwarzenegger predictably doesn't want to repeal the anti-democratic 2/3 rule, preferring a Rube Goldberg approach that will not work. But this is the linchpin to political reform in the state, with a Constitutional convention being the other big idea. Without either, we will continue to lurch from crisis to crisis.

"Has Someone Ever Criticized Your Tie And You Just Want To Slice Open Their Throat?"

I think Glenn Beck is delivering way too much information about himself in this clip:

BECK: So, the shooting in Alabama. Did you hear how they described this guy? I mean it was the typical, "He was a loner, he was quiet," oh really? But what they really described, when they really got down into it, what they said was, here's a guy who felt that he had been wronged. He didn't feel comfortable talking to anybody, he was disgruntled and everything else and then he went out and shot a bunch of people. As they were describing him and they said, you gotta go, now more than ever, you gotta start talking to people, you have to start connecting with people, because we're going into hard times, yada yada yada. As I'm listening to the description, first of all this guy's a psycho, clearly he's a psycho. But as I'm listening to him, I'm thinking about the American people that feel disenfranchised right now. That feel like no one is hearing their voice. The government isn't hearing their voice. Even if you call, they don't listen to you on both sides. If you're a conservative, you're called a racist, you want to starve children. Yada yada yada. And every time they do speak out, they’re shut down by political correctness. How do you not have those people turn into that guy?

O’REILLY: Well, look, nobody, even if they’re frustrated, is going to hurt another human being unless they’re mentally ill. I think.

BECK: I think pushed to the wall, you don’t think people get pushed to the wall?

O’REILLY: Nah, I don’t believe in this snap thing. I think that that kind of violence is inside you and it’s a personality disorder.

This is not an unfortunate attempt at a causal connection. This is Glenn Beck trying to justify himself to himself, with Bill O'Reilly (!) as the voice of reason. Since he's been put in his proper ideological box at Fox News, he has spiraled downward into this militia mentality ever faster. Today, he's doing his show from something called the Doom Room for a special called "You Are Not Alone."



Beck speaks to a small, strange, resentful movement at the far, far right of the spectrum that is emotionally unstable. There's clearly an audience for it, and increasingly the conservative movement is embodying it - note "the real problem is bisexuality, not mass murder" articulated by Rod Dreher - but it's notably dangerous. Beck is going to be leading a group out to the woods in Idaho and trying to secede within a month, I'm thinking.

Rigged Game

I sincerely hope that nobody is surprised by the fact that MSNBC, which has hyped the Jon Stewart/Jim Cramer "battle royale" for over a week now, has coincidentally dropped coverage of it at precisely the moment when Stewart delivered the knockout punch and made minced meat out of Cramer, CNBC and the entire media-industrial complex:

TVNewser reports that “MSNBC producers were asked not to incorporate the Jim Cramer/Jon Stewart interview into their shows today.” By TVNewser’s count, Cramer’s Daily Show interview was only mentioned once on MSNBC today and that was during the White House press conference when a reporter asked for Obama’s reaction.

CNBC is part of a corporate entity (although, interestingly, they don't report to the news division. That corporate entity is not going to get rich by highlighting the deficiencies of certain parts of its business. Like I said earlier, it's not just CNBC. It's the entire media complex. And this indictment of their business won't be prosecuted and turned into a conviction.

James Rainey is also interesting today about CNBC and the larger implications.

"Immediate Action Is Needed"

A report by California's Interagency Climate Action Team released this week shows that sea levels can be expected to rise 55 inches by the end of the century, impacting hundreds of thousands of residents along the coast, as well as billions of dollars' worth of infrastructure and construction. The worst areas would be San Mateo and Orange Counties, where over 100,000 people would be affected. The report isn't necessarily looking at how to combat climate change; it's looking at how to deal with its obvious reality.

The group floated several radical proposals: limit coastal development in areas at risk from sea rise; consider phased abandonment of certain areas; halt federally subsidized insurance for property likely to be inundated; and require coastal structures to be built to adapt to climate change.

"Immediate action is needed," said Linda Adams, secretary for environmental protection. "It will cost significantly less to combat climate change than it will to maintain a business-as-usual approach."

We're talking about flood zones in residential neighborhoods in Venice and Marina del Rey. We're talking about the SFO and Oakland airports being covered with water. Same for the ports of Los Angeles and Long Beach. It's truly terrifying. And with this being a global problem where the worst scenarios are increasingly being realized, California is little more than a bystander to this calamity, able to plan against the worst disasters and reduce development in the most affected areas, but unable to truly combat the problem without the rest of the world joining in. We will get the worst of this, to the point that livability becomes a question.

The full report, The Impacts of Sea-Level Rise on
the California Coast, can be viewed here. They've also prepared detailed maps showing the changes that would result from a 55-inch rise in sea levels.

RIP Enemy Combatant

I'm not thrilled with everything the President is doing from a civil liberties standpoint. In many respects he is continuing policies put in place by George W. Bush, or at least shielded those policies from scrutiny. But I'd give a thumbs up to this unwinding of the most extreme actions undertaken by the executive over the past eight years.

In a filing today with the federal District Court for the District of Columbia, the Department of Justice submitted a new standard for the government's authority to hold detainees at the Guantanamo Bay Detention Facility. The definition does not rely on the President's authority as Commander-in-Chief independent of Congress's specific authorization. It draws on the international laws of war to inform the statutory authority conferred by Congress. It provides that individuals who supported al Qaeda or the Taliban are detainable only if the support was substantial. And it does not employ the phrase "enemy combatant."

The Department also submitted a declaration by Attorney General Eric Holder stating that, under executive orders issued by President Obama, the government is undertaking an interagency review of detention policy for individuals captured in armed conflicts or counterterrorism operations as well as a review of the status of each detainee held at Guantanamo. The outcome of those reviews may lead to further refinements of the government's position as it develops a comprehensive policy.

"As we work towards developing a new policy to govern detainees, it is essential that we operate in a manner that strengthens our national security, is consistent with our values, and is governed by law," said Attorney General Holder. "The change we've made today meets each of those standards and will make our nation stronger."

The government is still basing its authority to hold detainees at Guantanamo on the 2001 AUMF (which should be repealed or at least clarified), but they do appear to be following the international laws of war, and this filing is but a way-station to the eventual closing of Guantanamo. Of course, there's still the question of Bagram, and about how we're going to deal with those who tortured in our name. But we are seeing a gradual shift. I'd like it to be more acute, but at this point, I'll take it.

...I have to admit to have grossly misread the initial information on this story. I will revisit it tomorrow. This is not change.

The Democrats We Have

For too long we've heard from Democratic leaders that we just need Democrats, any Democrats, to gain back the majority from Republicans, or we just need a Democrat, any Democrat, in the White House, or we just need a filibuster-proof majority of Democrats, any Democrats, and everything will fall into place. This has always been a ploy to get grassroots financial support, and we are seeing the essential bankruptcy of that ploy today.

When President Obama submitted a budget that predicted passage of a revenue-raising climate change bill, hopes rose that Congress could successfully rein in carbon emissions this year.

But a cap-and-trade climate bill is almost certain to be filibustered by Republicans -- and in a letter delivered to the Senate Budget Committee yesterday, eight Democratic senators joined 25 Republicans to defend the GOP's right to set a 60-vote margin for passing emissions limits.

"We oppose using the budget process to expedite passage of climate legislation," the senators, including eight centrist Democrats, wrote in their missive.

Using the procedure of budget reconciliation, which would allow a climate change measure to become law with 50 votes while preventing filibusters, "would circumvent normal Senate practice and would be inconsistent with the administration's goals of bipartisanship, cooperation, and openness," the 33 senators wrote.

Actually, the normal Senate practice is that items included in the budget should go through the process of budget reconciliation. Further, normal Senate practice for 200-odd years up until now is that filibusters weren't routinely used to obstruct all legislation. But that history has been forgotten, for the specific reason that a group of Democratic Senators don't want to pass climate change legislation. Here are the names:

The eight Democratic senators who signed on to the letter are Robert Byrd (WV), Blanche Lincoln (AR), Ben Nelson (NE), Evan Bayh (IN), Mark Pryor (AR), Bob Casey (PA), Carl Levin (MI), and Mary Landrieu (LA).

Of those eight, only Robert Byrd is possibly asserting Senate rules in drawing this line in the sand, although being from a coal state you cannot be sure. The others make up the core of the Senate Blue Dogs, and lawmakers from states with a vested interest in stopping America's addiction to oil. They don't want to stop the gravy train that has funded their rise to political power, and so the planet continues to burn and moneyed interests continue to hold the marionette strings over their heads. And even beyond these louts are additional members who want to stand in the way of progress.

President Obama’s budget doesn’t have enough support from lawmakers to pass, the Senate Budget Committee chairman said Tuesday.

Sen. Kent Conrad (D-N.D.) said he has spoken to enough colleagues about several different provisions in the budget request to make him think Congress won’t pass it.

Conrad urged White House budget director Peter Orszag not to “draw lines in the sand” with lawmakers, most notably on Obama’s plan for a cap-and-trade system to curb carbon emissions.

“Anybody who thinks it will be easy to get the votes on the budget in the conditions that we face is smoking something,” Conrad said [...]

Conrad joined Sen. Judd Gregg (N.H.), the top Republican on the Budget Committee, and Sen. Lindsey Graham (R-S.C.) in criticizing the administration’s cap-and-trade proposal for not doing enough to counterbalance increases in energy costs that will be felt by consumers and companies, especially those in energy states such as North Dakota.

Conrad said that it would be a “distant hope” to expect the climate change plan to pass unless it includes help for industries that would be hit hard by limits on carbon emission production.

Yes, I weep for the polluting industries who have skated by without having to pay for the externalities they create for decades, who have generated phantom wealth by destroying the planet and never having to pay for it (Yes, I know that link is a Tom Friedman column, drill down to the quote by Joe Romm).

Conrad, in addition, doesn't want Obama getting any big ideas about spending any money as a down payment on health care reform, either. And he doesn't see the need to restrict Big Agriculture subsidies to wealthy farmers either, with the detachment of a Senator representing the farm state of North Dakota.

Conrad is but one of the budget-writing barons who have their jurisdiction over the legislating process and are quick to assert it. And this is standard practice and how the process works, so that's fine. But what Conrad and his pals are putting forward are the same short-sighted, uninspiring policies that have created mistrust and anger with the Democratic Party for a generation. Democrats were inspired by a Presidential candidate talking about big ideas and plans to solve pressing problems for the first time in a long while. But he is one man representing part of one branch of government. As Matt Yglesias rightly notes, he needs partners on the Hill:

The legislative accomplishments of 1933-34 and 1965-66 were partially the result of tactical acumen in the wake of an electoral victory on the part of the White House.

But in part, they reflected a genuinely willing congress. There was a key block of legislators in the mid-1960s who really wanted to dramatically advance social justice in the United States. They wanted black kids and white kids to attend the same schools, and they wanted the schools to be better. They wanted equal voting rights and equal rights to public accommodations and a guarantee of health security for the poor and the elderly. They though it was obscene for extreme poverty to flourish in the wealthiest country on earth. Lyndon Johnson’s leadership was important to making that happen as was, obviously, the role of social movement leaders like Martin Luther King, Jr. But LBJ and MLK didn’t bewitch the congress into having those priorities. A critical mass of key members really wanted to solve these problems.

When I read stories about Democrats signing letters urging the leadership not to pass cap & trade through budget reconciliation, or whining that Clinton-era tax rates will wreck the economy, or preemptively caving on permit auction, then it’s hard to escape the conclusion that it’s not the administration doing something wrong is that the key members of congress just fundamentally agree with George W. Bush and Mitch McConnell that it doesn’t matter if people die of treatable illness or if the planet ceases to support human life.

I've been reading G.Calvin Mackenzie and Robert Weisbrot's The Liberal Hour: Washington and the Politics of Change in the 1960s, and what jumped out at me is that, while John Kennedy and Barack Obama shared a lot of the same profile at the beginning of their Presidencies - both were cautious centrists who were wary of the left flank of their parties - in Kennedy's case what ultimately led to the eventual policy successes (most of them carried out under Lyndon Johnson) was the strength and ingenuity of the leaders in Congress, who were skilled enough and bold enough to push these changes through. I don't see that kind of urgency in today's Congress. They are perfectly content on the poll-driven margins to fulfill the John Kerry 2004 agenda - stem cell research, SCHIP, half-measures on energy, etc. I don't mean to denigrate these accomplishments. But actually, I do. We have too many problems that have gone unsolved for too long, and it seems like the political muscles among liberals in Congress have completely atrophied. And these hornets have been allowed in the nest, these corporate whores who exist as moles inside the caucus to make sure all this hope and change doesn't hold a hope of changing anything.

Under normal circumstances, these would be debates we could have and struggles we could play out for a year or so. But the string has run out. The time has all but passed. And yet the same elites predominate. If there's an excess of fear out there right now, at least part of it stems from the feeling that these elected men and women are either unable or, more likely, unwilling, to ever do what's necessary, not for prosperity, but for survival.

Play Hardball, Al

Eric Kleefeld has done America and the blogosphere a great service by painstakingly documenting the Minnesota Senate recount trial between Norm Coleman and Al Franken. Closing arguments were made today, and Senator-elect Franken's were pretty strong. But of course, like any trial, after Coleman loses this challenge he will have the right to appeal. And then perhaps an appeal up to the Supreme Court. So we're looking well into the summer before Franken could be seated, with the possibility that the Supremes would pull a Bush v. Gore and overturn a settled and well-adjudicated election.

However, Franken does have a tool in his toolkit, should he want to use it, and given how slimy Coleman has been throughout this entire process, I see no reason why he shouldn't.

The election-contest proceeding operates under a loser-pays system -- so if Coleman loses, his campaign committee would have to pay all the legal costs of Team Franken. Those numbers aren't publicly available, but Schultz estimates it at anywhere between $1-3 million.

And it's also normal procedure in such civil cases, Schultz explains, for a losing party that appeals to then be served a court order requiring them to place in escrow the amount for which they are currently liable. So if Franken's lawyers are smart people -- and nobody would doubt that they are -- Schultz sees it as very likely that they would seek to force Coleman's committee to procure millions of dollars up front just so they could start an appeal. "I think it's very likely -- not a certainty but very likely -- a court would agree with that," said Schultz, "for the Coleman campaign to provide the costs and legal fees."

And after some additional legal wrangling, a decision like this could effectively end it: "A one-two combination of asking for the escrow, and having the money dry up because of the credit-card problem, that could very well dictate how far he goes."

If Republicans are going to obstruct, they ought to be forced to pay for it. Considering that the RNC and the campaign committees are short on cash as it is, this is probably the only way to get Coleman to cut his losses. Franken's legal team should absolutely pursue this.

...Mitch McConnell is talking about going all the way to the Supreme Court. OK, Mitch, you can pay for it, then. And Al Franken's lawyers are pricey. Because they're actually good.

Moratorium Time

Jim Moran is right to go on offense about this nonsense:

The Army fired 11 soldiers in January for violating the military's policy that gay service members must keep their sexuality hidden, according to a Virginia congressman. Democratic Rep. Jim Moran said he has requested monthly updates from the Pentagon on the impact of the policy until it is repealed.

In a statement released on Thursday, Moran said the discharged soldiers included an intelligence collector, a military police officer, four infantry personnel, a health care specialist, a motor-transport operator and a water-treatment specialist.

"How many more good soldiers are we willing to lose due to a bad policy that makes us less safe and secure?" asked Moran, a member of the House panel that oversees military spending.

The President says he supports repeal of DADT. He says he's undergoing a policy review with Pentagon officials to get the best outcome. Well, how about a moratorium on discharges like this until that policy is set? Everyone agrees the current policy is wrongheaded, and we can't afford to lose more good soldiers at this time. Why are we still firing people for who they are?

...for that matter, gay couples should get spousal benefits. The governor of freakin' UTAH agrees with this. It's uncontroversial, and it's the fallback position for Republicans who don't support gay marriage but don't want to look like bigots. Why not do the right thing, Mr. President?

The 28th Amendment

It's hard to even write anything today because it will just pale in comparison to Jon Stewart channeling the rage of 10 million blog posts last night. But I have a responsibility to my legions of fans, so...

Let's talk the Senate appointment process!

Russ Feingold held a hearing this week on his proposed Constitutional amendment, to mandate special elections for all Senate vacancies, just as there are for House vacancies. With the spectacular flameout of the Blagojevich/Burris fiasco and other appointments handled poorly, there is no better time to get this done. And the number of appointments - 6 in the past two years - is robbing the people of their ability to choose their own representatives.

Mr. Feingold said he was motivated not only by the furor surrounding the disputed appointment of Roland W. Burris to the Senate by Gov. Rod R. Blagojevich of Illinois, since impeached, but also by the sheer number of appointees in the turnover after the election of President Obama.

“I really became troubled when I realized that such a significant percentage of the U.S. Senate was about to be appointed rather than elected by the people,” said Mr. Feingold, who will convene a joint House-Senate judiciary hearing on the proposal on Wednesday. “I think of it as a right-to-vote issue.”

At the hearing, Sen. Mark Begich testified to the personal experience in his family with this issue:

In October 1972, the Alaska Democrat’s father, Rep. Nick Begich, was declared missing along with House Majority Leader Hale Boggs, D-La., when their plane disappeared on its way to Juneau. It wasn’t until two months later that Nick Begich was declared deceased — and that was after he had been re-elected.

"Throughout this ordeal, Alaskans were officially without representation in the House of Representatives," Begich noted at a bicameral hearing of the House and Senate Judiciary committees. "But my recollection — and my review of news reports from that era — show no outcry for the appointment of a new congressman. Alaskans then, like Alaskans now, feel strongly that their elected representatives in the federal government should be exactly that — elected."

Special elections will remove the possibility for one corrupted politician to make a decision for millions of constituents and help restore democracy to the Senate. It's an obvious fix, so much so that even one of the appointed Senators, Delaware's Ted Kaufman, responded to the proposal by saying, "I think this is a good idea."

You can join Sen. Feingold as a citizen co-sponsor to what he is terming "the 28th Amendment".

The Beatdown

In case you missed it, you can catch the entire three-part interview between Jim Cramer and Jon Stewart here. I'd embed it but it's everywhere already. I think James Fallows has the right take.

Through karmic guidance, I sprang awake at the exact moment Jon Stewart was beginning his merciless demolition of interview with Jim Cramer of CNBC's "Mad Money." [...]

Although, improbably, I share a journalistic background with Cramer*, I thought Stewart, without excessive showboating, did the journalistic sensibility proud.

Just before leaving China -- ie, two days ago -- I saw with my wife the pirate-video version of Frost/Nixon, showing how difficult it is in real time to ask the kind of questions Stewart did. I know, Frost was dealing with a former president. Still, it couldn't have been easy to do what Stewart just did. Seeing this interview justified the three-day trip in itself.

The post is entitled "It's true: Jon Stewart has become Edward R. Murrow".

I don't know what to say beyond what's already been said. Stewart is seemingly the only guy left in America willing to call out the media who has the platform to do it to their face. Jim Cramer is a criminal walking free and I don't use that term lightly. He has practically admitted to crimes, and Stewart played some of them last night. But it's not just CNBC. It's the entire media complex. What is said on television or in print is such a small part of the story, and what is concealed is so often more vital for a well-informed citizenry than what is revealed. How is what CNBC has done any different from the cheerleading into war in Iraq?

I'd like to think that this is a moment for change, but Jon Stewart is a comedian on a comedy show, and he's well aware of that, even though he's the only guy in the business with the platform. There will be a backlash against him, and it's already starting to happen. He can take it and give back plenty. But ultimately, the system remains. And this indictment won't be picked up as a conviction. Because the entire media is corroded.

Must-See TV

Don't miss Jim Cramer on The Daily Show tonight, the culmination of a week-long feud. Initially, I didn't think Jon Stewart will actually make Cramer REALLY uncomfortable, like by bringing up Deep Capture or his admission that he manipulated the markets as a hedge fund trader, but apparently that video is played, and the interview is good. For his part, Cramer tried to talk everything down this morning.

The CNBC star, apparently trying to soften his image, went on “The Martha Stewart Show” this morning and admitted that Stewart has gotten the better of him so far. “My kids only know I have a show ‘cause Jon Stewart’s been skewering me,” the "Mad Money" host said.

Cramer's never hesitated to show emotion before, but on Thursday, he showed a new, vulnerable side. "I’m a little nervous. How bad is it gonna be? Is he gonna kill me?” Cramer said. “You should be nervous,” (Martha) Stewart said. "He’s fast as lightning!”

“I’m not, I’m slow as molasses,” Cramer replied. Considering that the entire conceit of “Mad Money” is that Cramer is manic -- “mad,” if you will -- this new, self-deprecating incarnation of the man seems pretty implausible.

So I'm guessing Cramer will sit there and say he's sorry a lot, and Stewart will tear CNBC a new one, and they'll agree to disagree.

Is that an exciting preview or what?

Party Of No Clue

I briefly alluded to Mark Sanford rejecting stimulus funds that will result in up to 7,500 teachers being laid off. South Carolina legislators are trying to outflank him on that. But he's not the only one. Governor Goodhair of Texas is denying his citizens stimulus funds, too:

Gov. Rick Perry will announce today that he is blocking the state from accepting $550 million for expanded unemployment benefits as part of the federal stimulus package.

With an upscale Houston hardware store as his backdrop, he will paint the expansion as a burden on small business.

The Legislature still could move to change state law to draw down the money, but those changes would be subject to a Perry veto.

To be eligible for all the money, Texas must enact legislation that would change how the state’s calculates a worker’s eligibility and extend benefits to more workers, including those looking for part-time work.

Arnold Schwarznegger is trying the same thing in California, with the same argument that the changes in eligibility would impose an "unnecessary burden" on state businesses. Actually, what would impose a burden on them is them having to file for bankruptcy because nobody's buying goods because their unemployment ran out.

There's no real argument for this obstinacy from a policy perspective, just shopworn and outdated ideology. Sanford compared the stimulus to the policies of Zimbabwe, saying all this federal spending will lead to hyper-inflation. I wish! Right now we're in a deflationary spiral, and the only thing the Fed has the monetary tools to combat is inflation at this point. If we were experiencing any inflation at all, it would mean that the economy is at least sort of working again.

Then there's the argument that all this fiscal policy is like what FDR did during the Depression. Yes, they use that as a negative. The Bible for this revisionist history is a book by Amity Shlaes, and Jon Chait fairly well demolishes it.

Now here is the extremely strange thing about The Forgotten Man: it does not really argue that the New Deal failed. In fact, Shlaes does not make any actual argument at all, though she does venture some bold claims, which she both fails to substantiate and contradicts elsewhere. Reviewing her book in The New York Times, David Leonhardt noted that Shlaes makes her arguments "mostly by implication." This is putting it kindly. Shlaes introduces the book by asserting her thesis, but she barely even tries to demonstrate it. Instead she chooses to fill nearly four hundred pages with stories that mostly go nowhere. The experience of reading The Forgotten Man is more like talking to an old person who lived through the Depression than it is like reading an actual history of the Depression. Major events get cursory treatment while minor characters, such as an idiosyncratic black preacher or the founder of Alcoholics Anonymous, receive lengthy portraits. Having been prepared for a revisionist argument against the New Deal, I kept wondering if I had picked up the wrong book [...]

Shlaes begins every chapter with a date (say, December 1936), an unemployment percentage (15.3) and a Dow Jones Industrial Average. The tick-tick-tick of statistics is meant to show that conditions did not improve throughout the course of Roosevelt's presidency. Yet her statistics are highly selective. As those of us who get our economic information from sources other than the CNBC ticker know, the stock market is not a broad representative of living standards. Meanwhile, as the historian Eric Rauchway has pointed out, her unemployment figures exclude those employed by the Works Progress Administration and other workrelief agencies. Shlaes has explained in an op-ed piece that she did this because "to count a short-term, make-work project as a real job was to mask the anxiety of one who really didn't have regular work with long-term prospects." So, if you worked twelve hours per day in a coal mine hoping not to contract black lung or suffer an injury that would render you useless, you were employed. But if you constructed the Lincoln Tunnel, you had an anxiety-inducing make-work job.

In response to this criticism, Shlaes has retreated to the defense that unemployment was still high anyway. "Even if you add in all the work relief jobs, as some economists do," she has contended, "Roosevelt-era unemployment averages well above 10 percent. That's a level Obama has referred to once or twice--as a nightmare." But Roosevelt inherited unemployment that was over 20 percent! Sure, the level to which it fell was high by absolute standards, but it is certainly pertinent that he cut that level by more than half. By Shlaes's method of reckoning, Thomas Jefferson rates poorly on the scale of territorial acquisition, because on his watch the United States had less than half the square mileage it has today.

This is the intellectual heft on the right. And it manifests itself into policy with things like the "no-cost stimulus" - really - which would create two million jobs by, um, drill baby drilling, I guess. Never mind that oil prices are down, auto mileage is down and it takes ten years to get a drop of oil out of a new platform. That's going to be the "timely, targeted" stimulus to save our souls.

I'm beginning to think that, by trying to talk himself out of the RNC Chairmanship, Michael Steele is the SMART one.

Time To Play A Game

Here's a list of all the co-sponsors of the Employee Free Choice Act, which would make it easier for workers to join a union and harder for union-busting companies to intimidate and harass their own employees. Since it was introduced on Tuesday, it has gained 223 co-sponsors in the House and 40 in the Senate. If you click on California, you'll get a rundown of every lawmaker in the state who has endorsed.

Do you notice who's missing?

Her name rhymes with Schmeinstein.

And yes, she's the ONLY ONE of the entire Democratic delegation who hasn't endorsed.

Senator Feinstein's Los Angeles office may not be aware of this fun fact. Give them a call at (310) 914-7300, and ask why she's the only California Democrat to withhold her support of the Employee Free Choice Act.

(what's more, if you're a union member, call your local supervisor and make sure they let their superiors know. I'm sure the California Labor Federation would be interested in the news.)

Go To Jail

Apparently when Bernie Madoff was remanded to a corrections facility pending sentencing the courtroom burst into spontaneous applause. I wouldn't normally feel thrilled about someone being sent to a cell the size of a walk-in closet, but I'll make an exception. Apparently Madoff was running his Ponzi scheme since THE RECESSION OF THE EARLY 1990s. Books could be written about how the SEC missed this for close to 20 years, and I'm sure they will be. For today, I have to be happy that the $7 million dollar penthouse apartment in Manhattan will be empty.

Going Public

The raw numbers are that Americans support a public option to compete with for-profit insurers and keep them honest, so they have to compete on price and quality instead of deny care to their consumers to make a bigger profit than the insurer next door. The poll was done in ways harmful to the public option, with negative messaging, and it didn't matter:

The poll was conducted by Lake Research Partners and it tests reactions to the public insurance option seven ways to Sunday. It asks whether the public insurance option "will have an unfair competitive advantage over private insurance because the government will set rules that favor the public plan" and suggests that "a new public health insurance plan will reimburse doctors and hospitals at much lower rates, causing many doctors and hospitals to shift higher costs onto people who buy private health insurance." It dangles that "a public health insurance plan will be another big, government bureaucracy that will increase costs to taxpayers" and warns that it might "force people into lower quality care including long waiting times and rationing of care."

It doesn't matter. In case after case after case, the public insurance option retains majority support. And the reason why probably comes in another question from the same poll. Lake Research asked "do you favor or oppose providing access to affordable, quality health care for all Americans even if it means a major role for the federal government?" The preference for federal involvement was overwhelming.

I think the answer to this is that Americans have in general lost faith in all current institutions, and are willing to believe in some new institutions, at least temporarily. The other issue is that the broken health care system cannot be hidden away. We spend more and get less, and all of us are either personally affected by that or know someone who is. So when Barack Obama says that the system has become unsustainable and needs a full overhaul, people believe him because it fits with their experience.

None of this means that Obama's answers on health care are all correct - why the hell is he talking about veterans buying private insurance to cover injuries suffered on the battlefield? - or even that the public option will survive a contentious sausage-making process, or even accomplish the goal of keeping private insurance honest in the form it comes out. The policymakers seem so concerned about it "crowding out" private insurance that they are determined to neuter its effectiveness entirely:

The centrist New America Foundation has a paper out today explaining exactly what that level playing field would look like, And, in practice, it doesn't seem too hard. The key is cleaving the public insurance option from Medicare. If the public plan can use Medicare's market share and payment rates, then it can easily overwhelm private insurers. If it's barred from acting as a quasi-national health plan, then it's just another insurance plan being run by government bureaucrats instead of insurance company bureaucrats and freed from the profit motive.

In practice, this report will probably be used by folks on the Left to trumpet the fact that the public insurance option can be run on a level playing field. And indeed, it can. But those who wanted to see the public insurer act as a soft single-payer system -- where the benefits of massive market share are used to aggressively bargain down costs -- won't be too pleased. The reason that government-run systems arguably work better is that they use monopsony bargaining power to control costs. Take that away, and the public insurance option becomes a lot of fury over what amounts to one more non-profit insurance option.

That is a public option in name only, which won't bring down costs, won't rein in insurers, and won't really do anything. Which is why it's the most likely scenario in the Congress.

Village Markers Laid

I am a little late to this party, but Howard Fineman's barbaric yawp on behalf of the political establishment is a truly amazing document. It should be put in a time capsule so that future generations can understand why American politics became so corroded in the late 20th and early 21st centuries. What Fineman appears to be saying is that the public, who elected Barack Obama with the belief that he would fulfill his agenda, supports him in that effort; but that the "establishment," who is unelected and self-appointed, is very unhappy about all this agenda-fulfilling going on, and that might sink the President. He cites a bunch of data points that I think he picked off of random Twitter feeds from the Gang of 500 to prove his point, but then he admits that they are all contradictory:

"The stimulus was too small. The omnibus was too big. He's doing too much in the budget. He's doing too little for housing. He won't nationalize the banks. He's doing too much "social engineering" on health care and energy and education. He's not explaining enough. He's doing too much explaining while "outsourcing" the details to Congress (who write the laws). And his Treasury Secretary was lampooned on Saturday Night Live.

It's just a mish-mash of various complaints of Obama from across the ideological spectrum, not from any named source or based on any reporting or significant of any one constituency. But Fineman has read the entrails and decided that "the establishment" is unhappy. And guess what, he's just a trusty observer, your man in the Beltway, not one of those elites himself:

Other than all that, in the eyes of the big shots, he is doing fine. The American people remain on his side, but he has to be careful that the gathering judgment of the Bigs doesn't trickle down to the rest of us.

Did you know that Fineman's just a ham-and-egger Newsweek reporter, the guy who likes his meat red and his arugula off his plate?

Jamison Foser takes these complaints one by one so I don't have to. It's really a bizarre mix, with establishmentarian Fineman, for example, accusing Obama of not wanting to prosecute "the malefactors of the last 15 years" - when his magazine Newsweek employs Stuart Taylor and recently ran a cover story entitled "What Would Dick Do" encouraging the President to "see things Dick Cheney's way." Then there's the familiar "he's doing too much" argument, which says more about Fineman's attention span than his conception of the size of the federal bureaucracy and their capacity to implement multiple policies because the President isn't the only guy working for the government.

What I think is interesting is that all the Beltway types who welcomed George Bush and his gang into the family when he was trading off his 48% mandate and passing humongous tax cuts early in his term have all these doubts and troubles with Barack Obama trying to make good on his campaign promises. But more than that is this mindset that the "establishment" chatterers are the real constituency in this country, and the people on the outside, the chattel, the hoi polloi, the dumb rubes in flyover country, they're nobody off of which to base a winning electoral coalition. The Village still thinks that the role of the President is to please the Villagers, but public opinion isn't bearing that out. Congress' approval has jumped since they passed a stimulus package and health care for kids and equal pay for women. People trust government to fix the economy and not big business - part of the "establishment" in Fineman's scenario.

I'm not saying that all of these bits and bytes in Fineman's bill of particulars are without merit. But people are very scared right now at what they are seeing in their own lives, and they are desperate for leadership to see them through it. They are fairly uninterested in the opinion of "the establishment" and are clearly willing to give Obama more than the two seconds Fineman and his Twitter pals are.

It's not the criticisms themselves that get me - it's the sense of entitlement, that these unelected pundits still think they hold veto power over the government, that they see their role not as reporters, not even as adversaries, but as a constituency.

How Dare YOU, Sir!

There's a new cottage industry in Washington, and that's defending George Bush's legacy on talk shows. The Bush Legacy Project never really got off the ground because the participants have to run such a con to even try to defend this guy, their pleadings look ridiculous. And here is Ari Fleischer:

FLEISCHER: It was in part because of Iraq and large part because of the economy that Barack Obama won. Having said that, I also think Barack Obama should say thank you every day that he inherited a world without Saddam Hussein in it. The one thing people are going to remember the most is that he kept us safe. […]

But after September 11th, having been being hit once, how could we take a chance that Saddam Hussein might not strike again? We got a report saying al Qaeda is determined to attack the United States. Well, that’s not a surprise. Of course, they are. It doesn’t say where, it doesn’t say when, it doesn’t say how. So, if you get a report like that, what do you do?

It's the old conflate-Saddam-with-9/11 backflip one-and-a-half with a twist! What's the score? Ooh, a 4.5 with the Finnish judge, that's going to hurt him. And a 0 from the American people.

But this is the even better part:

Matthews: We were attacked on your watch. If you start getting into who was attacked when, we suffered the worst domestic calamity in history on your watch.

Fleischer: Chris, how dare you!

How DARE you bring up factual events!

Well, Fleischer clearly failed in that effort. How about Bush Legacy Project Manager, 43 himself?

Former President George W. Bush’s first post-presidency speech will take place on St. Patrick’s Day — March 17 — in Calgary, Alberta. Although organizers have declined to say if Bush will be paid, he once boasted that he hoped to make “ridiculous” money on the lecture circuit once he leaves office.

But instead of greeting Bush with open arms and (potentially) wads of cash, activists and human rights lawyers in Canada are hoping their government will greet him with handcuffs — or at the very least — bar him entry in to the country. In fact, Vancouver Lawyer Gail Davidson said the government has an obligation under the law to ban Bush from entering Canada because of his role in supporting torture:

"Davidson says that because Bush has been “credibly accused” of supporting torture in Iraq and Guantanamo Bay, Cuba, Canada has a legal obligation to deny him entry under Canada’s Immigration and Refugee Protection Act. The law says foreign nationals who have committed war crimes or crimes against humanity, including torture, are “inadmissible” to Canada. “The test isn’t whether the person’s been convicted, but whether there’s reasonable grounds to think that they have been involved,” says Davidson."

Oops. I guess directing and authorizing torture does get in the way of spinning all your successes.

(by the way, Stephen Harper is not going to arrest George Bush. But I'm sure he'll get the hero's welcome he deserves in Calgary.)