Rocket

North Korea went ahead and launched. Looks like only the weather stopped them from doing this yesterday.

North Korea defied the United States, China and a series of United Nations resolutions by launching a rocket on Sunday that the country said was designed to propel a satellite into space, but that much of the world viewed as an effort to prove it is edging toward the capability to shoot a nuclear warhead on a longer-range missile.

The launching took place at 11:30 a.m. local time, said an official at the Foreign Ministry of South Korea who spoke on condition of anonymity until the government makes a formal announcement.

The motivation for the test appeared as much political as technological: After acquiring the fuel for six or more nuclear weapons during the Bush administration, and negotiating a halt of its main nuclear reactor in return for aid, North Korea’s recent statements appear to be a bid for attention from the Obama administration.

Over the years the North has sometimes conducted tests as a gambit to extract concessions for more aid and fuel and to demonstrate its nuclear capabilities.

I'd add that holding two American journalists and threatening to put them on trial for "hostile acts" is something of a cry for attention as well.

This comes on the eve of a major policy speech by the President in Prague about eliminating all nuclear weapons on the planet. Might need a quick edit.

The Lesson

I don't know that I have much to say about the dysfunction in the Obama economic team that wouldn't just be a rewrite of Glenn Greenwald's piece, but it may be worth it to just disseminate the information. Here's the story so far:

Banks lost a ton of money by making terrible bets based on fanciful notions that housing prices would go up 20% year over year approximately forever. All the while the executives sat on each other's boards and handed out giant bonuses and compensation packages to each other while the financial sector grew essentially out of control. In the process, they used their money and power to effectively buy Capitol Hill and make sure their portion of the economy could keep growing, whether through usurious interest rates, a total lack of oversight (including by some of the same people now charged with overseeing the banks) or just massive wealth transfers. When everything came crashing down, the very last thing these banking interests wanted to do was admit defeat or give back any of their money and power. At the same time, the entire country was furious at them. So they set to work bribing who they knew would be top officials in the next government, people like Larry Summers, who honestly didn't even need to be bribed. And every time Congress or the executive branch threatened to end their party and put limits on their power, they found in Summers and other officials a willing partner in subverting the rules that would make them give back their bonuses and excessive compensation, which by the way the taxpayer is funding. We, the taxpayers, are told that this is necessary to ensure financial sector participation in the program to rid the banks of all of their bad assets at a potentially massive taxpayer expense. However, left unsaid is the fact that the same banks are planning to game the system by passing the same bad assets back and forth among each other at high prices, and using tricky accounting tactics to pretend that the assets on their books have value.

I think we can go to Greenwald now:

Rubin, Summers and Greenspan succeeded in inducing Congress -- funded, of course, by these same financial firms -- to enact legislation blocking the CFTC from regulating these derivative markets. More amazingly still, the CFTC, headed back then by Born, is now headed by Obama appointee Gary Gensler, a former Goldman Sachs executive (naturally) who was as instrumental as anyone in blocking any regulations of those derivative markets (and then enriched himself by feeding on those unregulated markets).

Just think about how this works. People like Rubin, Summers and Gensler shuffle back and forth from the public to the private sector and back again, repeatedly switching places with their GOP counterparts in this endless public/private sector looting. When in government, they ensure that the laws and regulations are written to redound directly to the benefit of a handful of Wall St. firms, literally abolishing all safeguards and allowing them to pillage and steal. Then, when out of government, they return to those very firms and collect millions upon millions of dollars, profits made possible by the laws and regulations they implemented when in government. Then, when their party returns to power, they return back to government, where they continue to use their influence to ensure that the oligarchical circle that rewards them so massively is protected and advanced. This corruption is so tawdry and transparent -- and it has fueled and continues to fuel a fraud so enormous and destructive as to be unprecedented in both size and audacity -- that it is mystifying that it is not provoking more mass public rage.

At the same time, the exact same banks which the government has propped up to the tune of trillions of dollars will not lift a finger to help out industries that produce tangible goods, further crumbling them and increasing the financial sector share of the economy.

And the lesson we have to learn here is that the financial sector bought government and has thus far gotten what they paid for.

I think I'll watch some basketball. Go Villanova! Your government is in control. You are free... to do as we tell you...

Leaning On The Tax Code

The lesson I'm drawing from all of these Obama Administration cabinet nominees with tax troubles is that the relevant Senate committee staffers are the only ones performing audits on people of means:

For starters, the IRS strongly disputes a report this week from the Transactional Records Access Clearinghouse that says audits of the wealthy have fallen off.

The bottom line is that "if you're a millionaire, you're a lot more likely to hear from the IRS than taxpayers in any other income bracket," says agency spokesman Terry Lemons.

Taxpayers who make more than $10 million a year or more have nearly a 10% chance of being audited, he adds.

People with $1 million and up are "clearly are getting more scrutiny," says Benson Goldstein, technical manager at the American Institute of Certified Public Accountants.

TRAC, a research group affiliated with Syracuse University, interpreted agency data to show that the IRS audit rate dropped by at least 19% on the 300,000-plus returns reporting income of more than $1 million between fiscal 2007 and fiscal 2008. The decline reflects IRS "failure to keep its eyes on the ball," TRAC co-director Susan B. Long, also associate professor of managerial statistics at the Martin J. Whitman School of Management at Syracuse University, told Dow Jones Newswires.

The IRS, like many bureaucracies, are large and unwieldy and unlikely to have a dedicated system to shield certain classes of taxpayers from audits. But there is such a thing as a culture, and given the permissiveness from government toward the wealthy and powerful in general, particularly in the past three decades, I will have to side with the TRAC on this debate.

The overarching point is that legislating through the tax code often makes bad policy, and without the IRS as an overseer, individuals and companies can frequently get away with murder.

Thanks to an obscure tax provision, the United States government stands to pay out as much as $8 billion this year to the ten largest paper companies. And get this: even though the money comes from a transportation bill whose manifest intent was to reduce dependence on fossil fuel, paper mills are adding diesel fuel to a process that requires none in order to qualify for the tax credit. In other words, we are paying the industry--handsomely--to use more fossil fuel. "Which is," as a Goldman Sachs report archly noted, the "opposite of what lawmakers likely had in mind when the tax credit was established."

Basically, the process of paper making produces a sludge called "black liquor," which is subsequently used to heat pulp and turn it into paper. To qualify for the alternative energy tax credit, paper companies ADD diesel fuel - which is not needed - in the process, and reap the rewards. This PR flak for International Paper is unapologetic.

Despite the obvious contrivance of the procedure, Wrobleski is unapologetic: "The credit is supposed to encourage the use of green fuel." Sure, I said, but isn't it a bit weird you're now adding diesel fuel to the process in order to take advantage of it? "It is what it is," she said.

Others are less charitable. "You use the toilet every day," said one hedge fund analyst who's been closely following the issue. "Imagine if you could start pouring a little gasoline into the bowl and get fifty cents a gallon every time you flushed."

If you think this is an anomaly, you haven't been paying attention.

Unlike George Bush, who famously said that taxes shouldn't be raised because rich people will just avoid them, I think the goal should be to both simplify the system to reduce the number of deductions and then stringently look at every single return. And as for the constant efforts to encourage or discourage behavior through the tax code, we need to re-think the over-reliance on that technique. We could outright BAN certain fuels instead of messing with the so-called "free market" to make them more or less attractive. We could mandate wind and solar, instead of trying to even out the price with tax credits. It just takes a new perspective.

Friday Random Ten

OK, I put even more new songs on the iPod this week, including the new Yeah Yeah Yeahs album (which rocks), in another futile effort to get it to play something new in random mode. I'm not hopeful...

El Mañana - Gorillaz
I Can't Live Without My Radio - LL Cool J
La Vacaloca - Manu Chao
Manic Depression - Jimi Hendrix
Ragoo - Kings Of Leon
Moby Octopad - Yo La Tengo
The Modern Age - The Strokes (seriously? Again?)
Weird Fishes/Arpeggi - Radiohead
Rematerialised - Death In Vegas
Comin' Back - The Crystal Method

Better luck next week.

Reich Calls It A Depression

Thanks for blowing my whole weekend, Robert Reich.

The March employment numbers, out this morning, are bleak: 8.5 percent of Americans officially unemployed, 663,000 more jobs lost. But if you include people who are out of work and have given up trying to find a job, the real unemployment rate is 9 percent. And if you include people working part time who'd rather be working full time, it's now up to 15.6 percent. One in every six workers in America is now either unemployed or underemployed.

Every lost job has a multiplier effect throughout the economy. For every person who no longer has a job and can't find another, or is trying to enter the job market and can't find one, there are at least three job holders who become more anxious that they may lose their job. Almost every American right now is within two degrees of separation of someone who is out of work. This broader anxiety expresses itself as less willingness to spend money on anything other than necessities. And this reluctance to spend further contracts the economy, leading to more job losses [...]

This is still not the Great Depression of the 1930s, but it is a Depression. And the only way out is government spending on a very large scale. We should stop worrying about Wall Street. Worry about American workers. Use money to build up Main Street, and the future capacities of our workforce.

I agree with Tim Fernholz - this whole notion that employment is a "lagging indicator" of the economy is dangerously out of balance. 663,000 people had their lives turned upside down in the last four weeks. Fixing their situation and getting them working again is actually the MEASURE of the economy, in my opinion.

So how do we do it? Obviously, the stimulus funds already in the pipeline and just starting to make their way out to the public will help. But Reich argues we'll need much more. Brad DeLong has some macro-economic ideas, including additional government spending, central banks buying government bonds, and boosting financial asset prices. I don't know exactly what needs to be done, and I'm willing to wait to see how this initial stimulus affects employment before calling for a new one. But this is a very tough time in the economy, and with the lack of retirement savings leading our elderly to the want ads, I'm just very worried about how we're going to come back.

My Dream Of Seeing Hyman Roth-Era Havana Closer To Reality

There was some talk earlier in the week that Congress has the votes to lift the travel ban to Cuba for all Americans. There is compelling research that lifting the ban would generate as much as $1.6 billion dollars in economic activity, much of it in the United States, with boosts for airlines and cruise ships and travel agents. Plus it's a useless policy that hasn't worked for the 50 years of the Castro regime, and we might as well try something new like using tourists as ambassadors for the US.

Well, at least with respect to families, President Obama isn't waiting for the Congress.

President Barack Obama plans to lift a longstanding U.S. ban on family travel and remittances to Cuba, a senior administration official said Friday, in what could be an opening gesture toward more openness with the Castro regime.

The move will fulfill a campaign promise and follows more modest action in Congress this year to loosen travel rules.

The president has authority to loosen these rules on his own, and the move is likely meant as a signal of a new attitude toward both Cuba and other Latin American countries that have pressed the U.S. to alter its policy.

The Congress should still make good on lifting the ban completely. But this is an undeniably good signal, and may lead toward ending the embargo and restarting diplomatic relations with our Southern neighbor. Maybe we could actually have some leverage over their human rights record as a partner, leverage we have not had as an enemy.

If the President wants an early victory in foreign policy, he needs to look no further than Cuba

Answer The Question, Norm

Todd Beeton reports that Norm Coleman continues to talk about soldiering on in the Minnesota Senate recount, which is to be expected at this point. He has every right to appeal the decision of the three-judge panel when it's brought down next week to the Minnesota Supreme Court. After that, however, all bets are off. And it would be nice, if he's seeking out all this attention, if he would answer some other questions on the record.

There have been reports that the FBI had opened an investigation into allegations in the Texas lawsuit and a similar one in Delaware. Asked if the FBI had contacted him, Coleman smiled and shrugged his shoulders.

“I can’t say anything,” he said. “We want this matter to be fully reviewed and fully investigated because nothing happened and we are looking forward to that taking place.”

And on that note, we arrived at Coleman’s car and he ended the conversation by turning and putting his hands on my shoulders.

“Too many questions,” he said, laughing.

Then, he hopped into the passenger seat and was driven away with a wave and another broad smile.

I have no problem with Coleman taking interviews and pleading his case as long as he answers whether or not the FBI has an ongoing investigation into his corruption practices. DSCC Communications Director Eric Schultz agrees:

"If Norm Coleman is going to continue his farfetched legal appeal, the least he can do is answer if the FBI is investigating him," said DSCC Communications Director Eric Schultz. "It is a yes or no question that Minnesotans deserve an answer to. There are now two executives who have gone under oath - under penalty of perjury - affirming the criminal conspiracy to funnel $100,000 to a sitting U.S. Senator from one of his top donors. Norm dodged the question before the election - but he ought to fess up now."

Shouldn't be too hard, he's on Fox News every 30 minutes.

...Incidentally, election law expert Rick Hasen says Coleman has no shot at a case before the federal courts if the Minnesota Supremes don't decide in his favor.

Special Election Delays Make Yacht Party Happy Campers

CapAlert gets around to covering the issue we covered on Wednesday - how legislative vacancies on the Democratic side embolden the Yacht Party and make it more impossible to pass a decent budget. What amazes me is that they get a Yacht Party leader to go on the record about it:

To this day, Ridley-Thomas' seat remains unfilled. Democratic Assemblyman Curren Price of Inglewood finished first in the primary last week and is expected to take his place in the upper house after a May 19 runoff.

Of course, that will create a vacancy in the Assembly, which will likely last until early October by virtue of the state's election-scheduling laws.

"Every vote we pick up, it is exponential for the Republicans," said Assembly GOP leader Mike Villines. "It gives us a lot of ability to move the debate and navigate to issues that we care about."

This is Yacht Party logic - they actually think a vacancy is a PICK-UP for them. It's the logic of an extortionist. No sane person other than someone trying to exploit would agree that a less-than-full legislature for years on end makes sense from a public policy standpoint. That's why we could significantly reduce the time of the merry go-round AND save millions of dollars in special election costs by instituting Instant Runoff Voting for special election seats.

But the Yacht Party has no intention of fixing the policy. They want to laugh as they see legislators walk out the door.

In Northern California, Rep. Ellen Tauscher has accepted an Obama post in the state department, though still faces the confirmation process.

Sen. Mark DeSaulnier, D-Concord, has already declared for the seat, and Assemblywoman Joan Buchanan, D-Alamo, is said to be considering a run.

"Joan Buchanan should run for Congress," said a laughing Villines, hoping for yet another vacancy in his house. "She'd be an excellent congresswoman."

"It creates a better dynamic than having the ability of the liberal-controlled Legislature to just steamroll its own desires," Villines said.

A better dynamic in the sense of being a fake dynamic, where the elected will of the voters is not reflected in the ability of the legislature. I can't think of a better argument to repeal two-thirds than these two quotes.

Big Of Them

I understand that it's largely a symbolic gesture, but is there any point to France boasting that they have decided to accept one prisoner from Guantanamo?

The Bondholder's Gamble

President Obama characterized the withholding of funds to GM as a chance to give them 60 days to submit plans for further restructuring, but clearly he has already decided that he would rather try an accelerated bankruptcy to force haircuts on all the key stakeholders. It looks like that will take the form of a good GM and a bad GM.

The Obama administration's auto task force has pressed General Motors to consider a form of bankruptcy that would split the company in two, with one entity containing the unprofitable units and the other in essence becoming the new GM consisting of the company's more successful brands, people familiar with the matter say.

The company prefers not to ever enter bankruptcy because the mere word would stir fear among consumers and further damage sales. But GM will be forced to do so if it fails to win concessions from its bondholders, union and dealers within 60 days. Then bankruptcy court would compel GM stakeholders to make sacrifices, rehabilitating the company by clearing away billions of dollars of debts from its balance sheet.

"They're all options. They're all being studied," Kent Kresa, GM's new chairman, said in an interview. "The preferred [option] is to do it outside of bankruptcy."

You would think this would be the last outcome sought by the bondholders, as their stakes would be crammed down in a bankruptcy court. However, I wondered earlier whether they think they have a better shot from a judge than from a negotiation. And Autoblog reports on another potential reason - they could cash in their credit default swaps.

The bondholders appear to be the biggest obstacle to restructuring. They're not allowing GM to reach its government-mandated target for debt reduction because they would lose much of their investment in the process. According to Denninger, however, the biggest and most savvy of those bondholders could get 100% of their investment back if GM files for bankruptcy. Those bondholders would have had their bonds backed by credit default swaps (CDS), which Denninger supposes would have been written in large part by insurance giant AIG. If that's the case, then we the taxpayers are on the hook to repay 100% of those bonds because the government has agreed to fulfill AIG's CDS collateral obligations.

Thus, these particular bondholders would have no reason to help GM stay afloat by reducing its debt obligations. If GM goes under, they would just wait for checks from the government to be made whole again. Denninger goes on to say that in such a scenario, these bondholders could make even more than 100% of their investment back because the government backing takes place "even if the bonds have a recovery in bankruptcy." The only way to stop this would be for the government to decline to back any more AIG obligations, which could then bankrupt the "too big to fail" AIG depending on its ultimate exposure, but would save GM. Decisions, decisions...

Wow. Just, wow.

Send One Back, Take Fifty More

No doubt under duress from the Americans, the Iraqi government abruptly released a Sunni Muslim Awakening Council leader and dropped all charges. Of course, he's just one of the several they've captured.

While freeing Raad Ali, the Shiite-led government continued to hold another Sunni leader, whose arrest Saturday triggered an uprising that left at least 17 people wounded, and it's arrested a number of other Sunni paramilitary leaders and members this week.

The turmoil is fueling fears that rising tensions between Sunnis and Shiites and between Sunni Arabs and Kurds could trigger a new round of violence and even disrupt the Obama administration's plans to draw down American forces in Iraq.

Ali, the head of the Sons of Iraq in the Ghazaliyah neighborhood in northwest Baghdad, returned home to a rain of celebratory shooting by neighbors and supporters. He told McClatchy that he'd been charged with seven crimes, including kidnapping a man who'd already accused someone else of the crime, planting roadside bombs, displacing Shiite families and killing two police officers, one of whom had been his own follower.

He said that all of the charges were bogus. He was treated well while in prison and was able to plead his case before a judge Wednesday, he said.

What's worrying is that the arrests are continuing. Another 50 were arrested yesterday in Ameriyah, a Sunni neighborhood in Baghdad. Ali was a US ally, but he's but one of what is now ranging into hundreds of detainees. And he is correct that this could spark a new round of violence.

"The Awakening succeeded to make everything good and clean the face of the government," Ali said. "They (the Iraqi government) are crazy, they are foolish, they don't need to target us . . . . we help you and support you why do you want to target us?"

He said he'd told U.S. officials many times that the Iraqi government's apparent plan was to "arrest big leaders," and that this would "destroy" the U.S. project to end the Sunni insurgency. But the American said he was wrong, he said.

I hope somebody at the highest levels of the White House is paying attention to this. It could explode.

...Oh dear. This could get really, really bad.

An American military aircraft opened fire Thursday night on Sons of Iraq members who were allegedly spotted placing a roadside bomb north of Baghdad, the U.S. military said Friday.

The incident, which killed one suspected member of the paramilitary group and wounded two, is the latest sign of the fraying allegiance between the paramilitary groups and the U.S. military.

Can you say "insurgency resurgence"?

The Coming Military-Industrial Complex Battle

A Senate panel that I assume doesn't include Evan Bayh or Ben Nelson passed unanimously a bill to rein in the contracting process at the Pentagon. There's a lot to like about this bill, which is co-sponsored by John McCain.

The bill would require the Pentagon to do more extensive engineering studies before embarking on new weapons programs and to rebuild its oversight staff, which was sharply reduced after the end of the cold war.

It would create a position for a project-testing director at the Pentagon and make it easier to end programs that exceed their original budget estimates by 25 percent.

Senator Carl Levin, a Democrat from Michigan who is chairman of the committee, said before the vote on Thursday that the changes were meant to be “tough medicine.”

Defense Secretary Robert M. Gates has been scrutinizing the most troubled programs and is expected to propose cuts in several major programs soon.

The Government Accountability Office, the auditing arm of Congress, reported this week that nearly 70 percent of the Pentagon’s 96 largest weapons programs were over budget last year, for a combined total of $296 billion above the original estimates.

Obviously, it's easy to change the PROCESS for procurement - a fair bit of the bill concerns realistic cost estimates (read: higher ones). The proof of whether Congress can really push back against out-of-control contracting comes when Bob Gates releases his Pentagon budget.

Reporting from Washington -- Defense Secretary Robert M. Gates will announce his plans for a sweeping overhaul of the defense budget on Monday, Pentagon officials said today.

Gates will announce his decisions first in telephone calls to congressional leaders Monday morning and then in an afternoon news conference.

Gates has been working for weeks on an overhaul of the defense budget and has been contemplating tough decisions on whether to cancel the Air Force's F-22 fighter plane, Navy shipbuilding programs, the Army's Future Combat System and a host of other weapons programs.

In an unusual move for the Pentagon, Gates will announce his budget recommendations before shipping the formal recommendation to the White House's Office of Management and Budget.

"It ... reflects the magnitude of the decision," said Pentagon press secretary Geoff Morrell. "These aren't changes on the margins. It is a fundamental shift in direction."

Already Holy Joe and his pals in the GOP are pushing back against this. They cannot conceive of an armed forces without bloated budgets the size of the rest of the world combined. It doesn't matter that America can't afford it, because military spending is magic.

This will be an epic fight.

What A Putz

After all that sturm und drang, all the speeches about values, all the high-minded talk of massive debts and staying true to conservative principles, Mark Sanford chickened out.

Gov. Mark Sanford will comply with a midnight Friday stimulus deadline and become the last governor in the nation to seek millions of dollars in federal economic-recovery funds for his state, aides said late Thursday.

Sanford will continue contesting $700 million in education and law enforcement money for South Carolina, but his 11th-hour move to meet the deadline buys time for schools fearing mass teacher layoffs and draconian cuts.

Sanford's month-long fight over stimulus money placed South Carolina in the national spotlight and put him at loggerheads with President Barack Obama.

"Tomorrow the governor is going to send the (Section) 1607 certification for everything except the stabilization funds," Sanford's spokesman, Joel Sawyer, said Thursday evening. "The governor will apply for that (additional) money if the General Assembly is willing to compromise and pay down some debt with it."

They are all a bunch of frauds. And great work by the Obama Administration to force this confrontation. Now every time Sanford tries to contest this or that provision of funds, lawmakers in his state can point to this decision. And laugh.

Different Answers Across The Pond

The town hall meeting President Obama held in Strasbourg, France today included some answers I would like to see at town halls in Omaha, Nebraska:

Even with the Cold War now over, the spread of nuclear weapons or the theft of nuclear material could lead to the extermination of any city on the planet. And this weekend in Prague, I will lay out an agenda to seek the goal of a world without nuclear weapons. (Applause.)

We also know that the pollution from cars in Boston or from factories in Beijing are melting the ice caps in the Arctic, and that that will disrupt weather patterns everywhere. The terrorists who struck in London, in New York, plotted in distant caves and simple apartments much closer to your home. And the reckless speculation of bankers that has new fueled a global economic downturn that's inflicting pain on workers and families is happening everywhere all across the globe.

He later elaborated that time is running out to tackle climate change, and that all the countries of the world must do more. With Arctic sea ice now thought to be virtually gone within 30 years, he's absolutely right. But changing public opinion in Strasbourg is a lighter lift than changing it in Nebraska, in Mississippi, in Alabama. They too need to hear a progressive message from their leaders.

They may even be ready to hear the President's middle name:

Q I just want to know what do you expect from the French and the European countries regarding the war on terror?

PRESIDENT OBAMA: Good. That's a good question. Look, I think that over the last seven, eight years, as I said in my speech, a lot of tensions have developed between the United States and Europe. And one of the legacies, I hope, from my administration is, is that we start bringing our historic alliance back together in a much more effective way.

Now, that doesn't mean that we're not going to have honest disagreements. All countries have disagreements between themselves. But I think that we can work much more effectively and cooperatively, and maintain that core trust that we have towards each other.

Nowhere have we seen more suspicion than around questions of war and peace and how we respond to terrorism. When 9/11 happened, Europe responded as a true friend would respond to the United States, saying, "We are all Americans." All of us have a stake in ensuring that innocent people who were just going about their business, going to work, suddenly find themselves slaughtered -- all of us have an interest in preventing that kind of vicious, evil act.

But after the initial NATO engagement in Afghanistan, we got sidetracked by Iraq, and we have not fully recovered that initial insight that we have a mutual interest in ensuring that organizations like al Qaeda cannot operate. And I think that it is important for Europe to understand that even though I'm now President and George Bush is no longer President, al Qaeda is still a threat, and that we cannot pretend somehow that because Barack Hussein Obama got elected as President, suddenly everything is going to be okay.

I agree with all these messages. I just think an American audience could handle them, too.

California: Ground Zero For The Health Care Crisis

On Monday morning the final regional White House forum on health care reform will be held in Los Angeles and at satellite sites throughout California, in San Diego, Oakland and Clovis. Details can be found at HealthReform.Gov. California certainly figures as a good place to talk about health care reform; a study released today by Families USA shows that 37% of all Californians were without health insurance during all or part of 2007 and 2008.

About 12.1 million Californians, or 37% of non-senior residents, were uninsured for at least one month during 2007 and 2008, Ron Pollack, executive director of Families USA, a Washington, D.C.-based group, said Thursday.

Most of them were uninsured for at least six months, Pollack said, and more than 80% of them were in working families. Minorities were more likely to be uninsured; 53% of Latinos and 38% of blacks were uninsured during the two-year period; for whites, 25% were uninsured.

They were among the 86.7 million U.S. residents who went without insurance for at least one month during the same two-year period, according to the organization's count.

The legislature is working to make sure this number doesn't get any larger. They passed a bill yesterday, AB23, allowing workers laid off from small businesses with under 20 workers to apply for the same health insurance subsidy that workers in larger firms can to retain COBRA, as part of the federal stimulus package. Of course, that would impact 60,000 to 100,000 Californians, which is a drop in the bucket given these latest numbers.

Our broken health care system does not merely have an effect on the margins. A near-majority of Californians face this crisis in a very direct way. And with the recession only getting worse here, and slipping into Depression in some areas, something must be done as soon as possible to remedy this, both for fiscal reasons and reasons of basic humanity.

America's Worst People

I mentioned that Congress passed a budget yesterday. In the Senate, the vote played out almost exclusively among party lines, with only two Senators - Evan Bayh and Ben Nelson - crossing the aisle. They are the two most conservative Democrats in the 111th Congress, by voting record. And they didn't only vote against the budget - they voted definitively FOR a motion to recommit, which essentially would have substituted this budget for a Republican version.

Enter Mike Johanns, the freshman Republican senator from Nebraska whose amendment preventing the Senate from passing climate change legislation through the reconciliation process passed on Tuesday.

He also authored a different measure--not an amendment, but a "motion to recommitt"--which would have scrapped the budget that passed and replaced it with a much more conservative version. Most significantly, it would have indexed non-defense, non-veterans discretionary spending to the expected rate of inflation. It failed 43-55--for all intents and purposes a mirror image of the vote on the final budget resolution. Which is to say that Bayh and Nelson voted for the "Johanns Budget".

So how did these two Republicans, who voted affirmatively for a Republican budget, justify their votes? They said it costs too much.

Nelson defended his vote in a prepared statement:

"The administration inherited a lot of red ink in this budget, along with our ailing economy. But this budget still has trillion dollar-plus deficits in the next two years, and adds unsustainably to the debt. These are tough times, and the federal government needs to take a lesson from American families and cut down on the things we can do without.

I respect the Administration offering an honest budget…but it just costs too much."

Similarly, Bayh issued a statement saying he opposed the budget in an attempt to be the voice of “fiscal responsibility“:

"[U]nder this budget, our national debt skyrockets from $11.1 trillion today to an estimated $17 trillion in 2014. As a percentage of our gross domestic product, it reaches a precarious 66.5 percent. The deficit remains larger than our projected economic growth, an unsustainable state of affairs. This budget will increase our borrowing from and dependence upon foreign nations. I cannot support such results. We can do better, and for the sake of our nation and our children’s future, we must."

These same two Senators, the ones whining and crying about fiscal responsibility, voted last night to shield millionaires from taxes on their estates, costing the government $250 billion dollars.

WASHINGTON (AP) -- The Senate has voted to cut taxes on multimillion-dollar estates as it gets ready to pass a budget backed by President Barack Obama.

By a 51-48 vote, the Senate embraced a nonbinding but symbolically important amendment by Arkansas Democrat Blanche Lincoln and Arizona Republican Jon Kyl to exempt estates up to $10 million from the estate tax. Estates larger than that would be taxed at a 35 percent rate.

Tim Fernholz has more on this nonsense, including the good news that this will likely never make law. But let's just soak in this for a minute. The two ConservaDems who voted against the budget on the grounds of fiscal responsibility voted to give a handout to families with estates over $7 million dollars. Tremayne at Open Left has a chart showing just exactly who this tax policy would affect.

Hard to see it, but those with annual incomes in the millions are represented by the vertical red line on the left and those making less than a million (i.e., almost everyone) are the horizontal red line on the bottom. Lincoln and Kyl are concerned about the people on the vertical red line.

So are Bayh and Nelson, America's worst people.

This Week In Health Care

The Progressive Caucus has a PR problem, but they also have an institutional muscle problem. The Blue Dogs frequently vote as a block, or at least threaten to do so if certain elements of legislation are not met. The Progressive Caucus rarely does that. But on health care reform, they are asserting themselves.

Dear Madam Speaker and Majority Leader,

Regarding the upcoming health care reform debate, we believe it is important for you to know that virtually the entire 77-Member Congressional Progressive Caucus (CPC) prefers a single-payer approach to healthcare reform. Therefore, it will come as no surprise as you work to craft comprehensive health care reform legislation, that we urge the inclusion of a public plan option, at a minimum, in the final legislation. We have polled CPC Members and a strong majority will not support legislation that does not include a public plan option that is supported on a level playing field with private health insurance plans.

We look forward to working with you to ensure inclusion of a public plan option and the successful passage of healthcare legislation that will provide a choice of quality healthcare for all Americans

Sincerely,

Lynn Woolsey, Co-Chair, Congressional Progressive Caucus
Raul Grijalva, Co-Chair, Congressional Progressive Caucus

Now, I mentioned a couple weeks ago what "a level playing field" actually means, and I don't think progressives are really going to like it.

The Level Playing Field Plan. Insurers, predictably, howled that a public insurer with access to Medicare's market power would put them out of business. (Generally speaking, liberals agreed with that.) The messaging they settled on was conceptually odd but has proven pretty effective. A public insurer, they argued, would not be competing on a "level playing field." This might have caused someone to wonder when, exactly, the market had ever cared about "fair." But instead, this frame has been widely adopted, with Obama telling Chuck Grassley, "I recognize that there's that concern. I think it's a serious one and a real one. And we'll make sure that it gets addressed." In answer to this, Len Nichols proposed a public insurance plan that doesn't have access to Medicare's bargaining power, and this is the policy that CAP's paper advocates. This is not single-payer lite. It's just an insurer without shareholders or highly-paid executives. (I should note that some, like Harold Pollack, believe you could begin with this plan and end with the single-payer lite plan. I'm not convinced, but its possible.)

As I said then, "such a public option would not achieve the kind of bargaining power to make it cost-effective."

Now, public option supporters got a boost with an endorsement from Kathleen Sebelius, who explained similar plans in the states:

In response to questions about a federal public-insurance option, Ms. Sebelius pointed to a government-run health plan for state employees in Kansas, as well as a public plan in California for Medicaid recipients. Such plans help create competition in insurance markets where there is little, Ms. Sebelius said.

"Often when you have 60% to 70% of market share, you have a monopoly, and it's really not a competitive environment," said Ms. Sebelius, who previously served as Kansas' insurance commissioner. "We have examples throughout the country of very competitive, very effective strategies."

But if those strategies are neutered and turned into something called a "public option" without the monopsony bargaining power that a public option could provide, it's not quite a revolution.

I do think that this new liberal pro-business group will be a major help in the health care debate. Already we're seeing Walgreens offering free health care for the unemployed and the uninsured at its in-store clinics. Businesses that are friendly to reform and have some resemblance of a heart can really move the debate.

Meanwhile, the leading voice on the opposite side of the debate has a past:

Richard L. Scott is unusual in these tough economic times: a rich, conservative investor willing to spend freely on a political cause.

He visited with lawmakers on Capitol Hill this week, and his new group, Conservatives for Patients’ Rights, has hired a leading conservative public relations firm, CRC, well known for its work with Swift Boat Veterans for Truth, the group that attacked Senator John Kerry, Democrat of Massachusetts, during his presidential campaign.

Mr. Scott’s emergence this spring as the most visible conservative opponent to Mr. Obama’s not-fully-defined health care effort has former friends and foes alike doing double takes, given Mr. Scott’s history.

Once lauded for building Columbia/HCA into the largest health care company in the world, Mr. Scott was ousted by his own board of directors in 1997 amid the nation’s biggest health care fraud scandal. The company’s guilty plea and payment of $1.7 billion to settle charges including the overbilling of state and federal health programs was taken as a repudiation of Mr. Scott’s relentless bottom-line approach.

“He hopes people don’t Google his name,” said John E. Hartwig, a former deputy inspector general at the Department of Health and Human Services, one of various state and federal agencies that investigated Columbia/HCA when Mr. Scott was its chief executive.

If this ends up being the best conservatives can do, we're going to be fine.

Still Falling Off A Cliff

Another terrible jobs number for March.

Nonfarm payroll employment continued to decline sharply in March (-663,000), and the unemployment rate rose from 8.1 to 8.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Since the recession began in December 2007, 5.1 million jobs have been lost, with almost two-thirds (3.3 million) of the decrease occurring in the last 5 months. In March, job losses were large and widespread across the major industry sectors.

Almost half of the jobs were lost in the manufacturing and construction sectors. We're becoming more of a service-sector McJob economy as a result of this Great Recession. Meanwhile China wants to become the leader in electric vehicles.

We're screwed.

Good News For Bloggers, Rod Blagojevich Is Back In The News!

As expected, Patrick Fitzgerald indicted Rod Blagojevich and multiple aides, including his own brother, on corruption charges including (but not limited to) the selling of Barack Obama's Senate seat.

Federal prosecutors expanded their case against former Gov. Rod Blagojevich today in an indictment that drew more of his closest aides into the scandal and adds new schemes to the list of charges against him: Pocketing money funneled through his wife through a phony real estate job. Shaking down a powerful congressman. Running the state as a racket.

Coming nearly four months after federal agents roused a sitting governor out of his Northwest Side home in a predawn arrest -- and weeks after lawmakers dumped him from power -- today's indictment of Blagojevich, his brother and four former top insiders could have been anti-climactic.

Instead, prosecutors added a few more chapters to the Blagojevich saga, further pulling his family into the pay-to-play conspiracy, revealing yet more confidants had turned on him and suggesting he was intent on corruption before he was even sworn in. The indictment carries a potentially lengthy prison sentence and possible forfeiture of his family home should Blagojevich be convicted [...]

Blagojevich was indicted on 16 racketeering, fraud and extortion counts. Among the new, damaging allegations were that Blagojevich delayed a $2 million grant to a public charter school while trying to extort campaign cash from now-White House Chief of Staff Rahm Emanuel and threatened to withhold future state business from financial institutions that refused to hire his wife.

Blagojevich's effort to profit, both personally and for his Friends of Blagojevich campaign fund, was so pervasive that federal prosecutors labeled the racketeering scheme the "Blagojevich Enterprise."

When you have a nickname for your stealing, you're doing a lot of stealing.

More on the attempted shakedown of Rahm Emanuel here. For the record, Emanuel rejected it, and good for him. But his involvement in the case does mean that other things may come up in the discovery phase. At this point, however, I'll stress that Rahm looks clean.

The breadth of the corruption is pretty staggering, even for Illinois. Meanwhile Blagojevich was down at Disney World yesterday. Apparently, Fitz applied RICO statutes to some of this, meaning that the Feds could confiscate Blago's property. In short, he's in big trouble.

"...No, It's Iowa."

The Iowa Supreme Court today ruled unanimously that a 1998 state law banning same-sex marriage is unconstitutional.

The Iowa Supreme Court this morning struck down a 1998 state law that limits marriage to one man and one woman.

The ruling is viewed as a victory for the gay rights movement in Iowa and elsewhere, and a setback for social conservatives who wanted to protect traditional families.

The decision makes Iowa the first Midwestern state, and the fourth nationwide, to allow same-sex marriages. Lawyers for Lambda Legal, a gay rights group that financed the court battle and represented the couples, had hoped to use a court victory to demonstrate acceptance of same-sex marriage in heartland America.

Here's the opinion and the summary. You may be wondering whether Iowa can pull a Prop. 8 and reverse the decision at the ballot box. It's a little more difficult to do there under state law.

Some Iowa lawmakers, mostly Republicans, attempted last year to launch a constitutional amendment to specifically prohibit same-sex marriage.

Such a change would require approval in consecutive legislative sessions and a public vote, which means a ban would could not be put in place until at least 2012 unless lawmakers take up the issue in the next few weeks.

“If you’ll remember when we proposed the Iowa marriage amendment, the Democrats’ excuse for not taking it up was that it was in the hands of the Iowa Supreme Court,” Senate Republican leader Paul McKinley of Chariton said Friday. “It was implied that should they find against traditional marriage, that the Legislature would handle that. I would certainly hope they’ll keep their promise.”

Democrats run the House and Senate in Iowa, and could conceivably bottle this up in their respective Judiciary Committees. Even if they didn't, same-sex marriage will be the law of the land for a minimum of three years in Iowa.

Change happens slowly...

...I should add that the Vermont state House voted to allow gay marriage by a 95-52 count. The Republican governor Jim Douglas is expected to veto, but activists feel they have a shot to override it.

Problem Solved, The Banksters Get To Lie Again!

Today, the Financial Accounting Standards Board approved a change to mark-to-market accounting that will allow banks to pretend they're still solvent, which apparently will end the crisis in their minds.

A once-obscure accounting rule that infuriated banks, who blamed it for worsening the financial crisis, was changed Thursday to give banks more discretion in reporting the value of mortgage securities.

The change seems likely to allow banks to report higher profits by assuming that the securities are worth more than anyone is now willing to pay for them. But critics objected that the change could further damage the credibility of financial institutions by enabling them to avoid recognizing losses from bad loans they have made.

Critics also said that since the rules were changed under heavy political pressure, the move compromised the independence of the organization that did it, the Financial Accounting Standards Board.

During the financial crisis, the market prices of many securities, particularly those backed by subprime home mortgages, have plunged to fractions of their original prices. That has forced banks to report hundreds of billions of dollars in losses over the last year, because some of those securities must be reported at market value each three months, with the bank showing a profit or loss based on the change.

Bankers bitterly complained that the current market prices were the result of distressed sales and that they should be allowed to ignore those prices and value the securities instead at their value in a normal market. At first FASB, pronounced FAS-bee, resisted making changes, but that changed within a few days of a Congressional hearing at which legislators from both parties demanded the board act.

Shorter banking industry: We should be able to price worthless crap at whatever dollar amount we want! We want a goddamn pony!

What will happen is that the banks will put this into their accounting statements and puff up their earnings reports for the first quarter, then making jazz hands at the market and singing "Let's put on another show, kids!" It won't work this time, as James Kwak explains.

Investors and regulators are not idiots. They know what the accounting rules are. If banks claim they were forced to mark their assets down to “fire-sale” prices, investors can look at the facts themselves and apply any upward corrections they want. Now that banks will be able to mark their assets up to prices based solely on their own models, investors will make the downward corrections they want. It’s a little like what happened when companies were forced to account for stock option compensation as expenses; nothing happened to stock prices, because anyone who wanted to could already read the footnotes and do the calculations himself.

However, the situation is not symmetrical, and the change is bad for two reasons. First, fair market value (”mark to market”) has the benefit of being a clear rule that everyone has to conform to. So from the investor’s perspective, you have one fact to go on. The new rule makes asset prices dependent on banks’ internal judgment, and each bank may apply different criteria. So from the investor’s perspective, now you have zero facts to go on. It’s as if auto companies were allowed to replace EPA fuel efficiency estimates with their own estimates using their own tests. We all know the EPA estimates are not realistic, but we can find out exactly how they were obtained and make whatever adjustments we want. If each auto company can use its own criteria, then we have no information at all.

Second, this takes away the bank’s incentive to disclose information. Under the old rule, if a bank had to show market prices but thought they were unfairly low, it would have to show some evidence in order to convince investors of its position. Under the new rule, a bank can simply report the results of its internal models and has no incentive to provide any more information.

So what we get is less information and more uncertainty. That was all reason number one.

Read the whole thing. Didn't bad accounting standards get us INTO this mess, in some ways (I'm referring to Enron and the various scandals of 2001-2002)?

The banksters want to live in an alternate reality, and will be tempted to raise less capital because of the magic numbers on their books, leaving them even more vulnerable than before. You know it's a problem when the SEC Commissioners under Bill Clinton AND George Bush denounce it.

The vote drew condemnation from an organization called the Investors Working Group, and the two former S.E.C. chairman who lead it — William H. Donaldson, appointed by the second President Bush, and Arthur Levitt Jr., who served in the Clinton administration.

“In order to create high-quality accounting standards, it is critical that the process be independent and free from political pressure,” the group said in a statement. “This will ensure that such standards are neutral and faithfully represent economic reality. To the extent that these new FASB proposals reduce the free flow of transparent and reliable financial information, they undermine investor interests and weaken their ability to make sound investment decisions.”

This is absurd. And Kevin G. Hall notes that this is EXACTLY what happened during the S&L crisis.

"Why should all assets be treated as if they're really for sale?" asked Bert Ely, a banking expert who gained wide recognition during the savings and loan crisis of the late 1980s.

During the S&L crisis, government regulators initially eased federal accounting rules for troubled S&Ls, which hid their negative worth and allowed them to make even worse decisions that led to their collapse and an expensive federal rescue.

Could it happen again?

"That concern does come up with this situation," Ely said. "At what point in time do we move from improved accounting to manipulation?"

Priorities, Pt. II

The House passed a budget resolution tonight, one that largely contours to Barack Obama's outline, on a vote of 233-196, with all Republicans opposed. The President responded favorably, saying that "Tonight, the House of Representatives took another step toward rebuilding our struggling economy." But that was but one of a host of budgets that were voted upon today.

The Progressive Caucus advanced a plan to spend hundreds of billions more on domestic programs than Obama, while cutting back on his defense budget. It failed, 348-84.

Next came a proposal from the conservative Republican Study Conference that would have cut Obama's domestic spending proposals, and reduced taxes. It was defeated, 322-111.

The Congressional Black Caucus proposed immediately repealing Bush-era tax cuts for wealthy taxpayers, while adding a new tax on couples making over $1 million. It called for greater spending on domestic programs,including education, transportation and job training. It fell, 318-113.

House Republicans presented a comprehensive alternative, including a provision to eliminate the current traditional Medicare program as an option for anyone currently under 55. Upon turning 65, their Medicare coverage would come only from plans operated by private insurance companies. Their costs would be paid at least in part with government funds.

Supporters said the change would prevent Medicare from going broke.

The Republican budget was rejected 293-137. More than three dozen members of the GOP rank and file voted against it, and several officials said the internal opposition stemmed in large measure from controversy surrounding the Medicare proposal.

Good to know that eliminating Medicare is more popular in the House of Representatives than cutting one dime of that defense budget. But at least we're closing the gap!

Chart Of The Day

Blanche Lincoln (D-AR) and Jon Kyl (D-AZ) teamed up today to offer a budget amendment that would offer $250 billion dollars in tax cuts to families that inherit estates worth over $7 million dollars. Tremayne at Open Left links to this chart showing just exactly who this tax policy would affect.

Hard to see it, but those with annual incomes in the millions are represented by the vertical red line on the left and those making less than a million (i.e., almost everyone) are the horizontal red line on the bottom. Lincoln and Kyle are concerned about the people on the vertical red line. Actually, as the OpEd piece linked above points out, the concern is not for everyone on the vertical red line but only the wealthiest of those wealthy.

Why would Lincoln, a Democrat, be so concerned about that tiny and very wealthy segment of the population I wondered.

This is not so hard to find, and Tremayne was able to locate the source of Lincoln's concern, which begins with Wal and ends with Mart.

But, are there any rich people at all in Arkansas? Turns out there are. Here are the richest 5 families there:

1. Sam Walton Family (Wal-Mart, inheritance)

2. Witt and Jack Stephens Family (finance)

3. Charles Murphy Family (oil, etc.)

4. Winthrop Paul Rockefeller Family (inheritance money, ha ha)

5. Don Tyson Family (chicken)

I wonder, does Blanche Lincoln have any connections to these rich families? Is that why she is so concerned about them she is cosponsoring an amendment that won't help hardly anyone else? Hmmm.

A little more Googling around and I found this, the list of the top 5 contributors to Blanche Lincoln's reelection campaign:

Stephens Group: $34,200
DaVita Inc: $32,000
Wal-Mart Stores: $25,800
Tyson Foods: $24,750
Goldman Sachs: $24,000

Very interesting. Let's see if there is any overlap with the above list of rich families. Hey, lookie there: 3 of the top four contributors are also on the top five wealthiest families in Arkansas. How about that?

I don't think it even has to be that complicated. The Walton family wields tremendous power in Arkansas that can be measured well beyond campaign contributions, and Lincoln has an interest in ensuring their ability to hoard money and make them richer.

The New York Times hit this with an editorial today. But Blanche Lincoln is simply an example of a Democrat beholden to a certain sector on key issues, in this case ultra-rich department store owners. There are niche sectors for plenty of other Democrats: the credit card industry in South Dakota and Delaware, the financial sector in New York, the auto sector in Michigan, farm states like Minnesota and North Dakota and Iowa. These regional anomalies have frustrated progressive change for some time, making this a sclerotic country that seems stuck in molasses and unable to move forward on important issues. There's a path to neutralize these forces, but let's get real - we're going to be dealing with this in some form forever.

A Word On The "Circular Firing Squad"

Tell you what, Chris Van Hollen. I and my "liberal groups" will lay off of fellow Democrats the moment that political leaders who call themselves Democrats stop doing things to deserve my wrath, such as the head of the DNC banning funding for stem cell research in Virginia, for example.

Virginia Gov. Tim Kaine, the chairman of the Democratic National Committee, has signed a bill into law banning the use of some state funds for embryonic stem cell research [...]

It contains language inserted by the General Assembly that would prevent a state fund from providing dollars to organizations or businesses that undertake "research in Virginia on human cells or tissue derived from induced abortions or from stem cells obtained from human embryos."

Kaine's support for the legislation is not surprising: He is a staunch Catholic who has long opposed using taxpayer money for embryonic stem cell research. But the platform of the Democratic Party, now headed by Kaine at Obama's behest, describes embryonic stem cell research as "research that could save lives."

See, I care more about principle than any party designation, and when Tim Kaine screws up, I'm likely to tell him he screwed up. Van Hollen's problem is determining who started "the circular firing squad": the politician who operates in a fashion dramatically opposed to Democratic core beliefs, or the "liberal groups" who respond? Obviously, Van Hollen is a politician himself, so we know where he lies on that axis.

“What I’ve been warning people very clearly is, beware of forming a circular firing squad,” Van Hollen said. “We believe people should be focusing their efforts on expanding the Democratic majority, and that should be their singular focus."

No, it shouldn't, the focus should be on improving the lives of the American people.

Priorities

The Progressive Caucus actually put together a budget, with numbers, that accurately describes their values and suggests what could be possible if everyone were actually straight about the needs of the American people separate from the needs of lobbyists and greedheads on Wall Street:

CPC Budget cuts and revenue raisers highlights:

· Elimination of unneeded, unwanted, and unproven Cold War Era weapons systems ($60 billion/year);

· Elimination of waste, fraud, and abuse at DOD. ($8.7 billion/year);

· Redeployment of all U.S. troops and military contractors out of Iraq ($90 billion);

· Repeal of Bush tax breaks for the top 1% of taxpayers ($222 billion);

· Instituting "Make Wall Street Pay For Wall Street's Bailout" tax of .25% on all stock transactions ($150 billion/year);

· Closing egregious corporate tax loopholes ($100 billion/year);and

· Cap on tax deductibility of excessive executive compensation ($20 billion/year).

CPC Budget investment highlights:

· Provides $991 billion for non-military discretionary spending in FY10, $469 billion above President Obama's request, primarily to help rescue the faltering U.S. economy and those Americans hardest hit;

· Provides $479 billion as sufficient defense spending level;

· Provides a strong economic stimulus package of $300 billion that includes an extension of unemployment insurance, an increase in assistance for food stamps, transportation infrastructure, school construction, water and flood control projects;

· Provides $120 billion a year for health care for all Americans; and

· Provides $1.22 trillion to cut the poverty rate in half over the next decade.

That's a real-live progressive budget - what's more, it's no less fiscally responsible than the President's, with the $469 billion in spending more than canceled out by the $600 billion-plus in savings. Rep. Lynn Woolsey has more. This actually went up on the House floor today. They got 84 votes for it, which isn't a bad starting point for real change. But it got approximately no news.

Meanwhile, the idiotic Republican "budget," which assumes Americans would pick a higher tax bracket in order to balance it, gets all kinds of ink. And John S. McCain offered his budget, which included a total spending freeze, today in the Senate, and he got 38 Republican votes for it, including Arlen Specter, who voted for the stimulus package, which included, you know, spending.

It's important for the Progressive Caucus to set this marker every year, to create a budget and argue out in the open. They just need a better publicist.

Detritus

Banks are starting to skip out on foreclosures, just up and leaving the properties so the homeowners can't walk away. And now boat owners are leaving their property to float in the water. My uneasy feeling is that, in these terrible times, we're starting to see physical markers of the Great Recession, actual hulks of failure lining the entire country.

It's scary.

Lugubrious Tales Of Woe

Zack Roth catches Chris Matthews mistaking Eric Holder's dismissal of charges in the Ted Stevens case, due to prosecutorial misconduct, with the notion that Stevens was completely innocent and the charges should have never been filed.



It's no surprise that Matthews has no idea how the criminal justice system works. And of course, the rest of the Village establishment has taken up for their pal Ted as well, deliberately misreading yesterday's events and intoning gravely how this honorable man has been "besmirched."

George Stephanopoulos of ABC News (via Twitter): "Whatever your politics, hard not to feel for Ted Stevens."

Sen. Jeff Sessions (R-AL): "This incredible man, he served his country well, he was a power player ... he took care of Alaska."

Sen. Robert Bennett (R-UT): "We're delighted that it's been demonstrated that Ted was telling us the truth all along. (Ed: Needless to say, nothing of the sort was demonstrated.) Obviously, we're a little disappointed that this didn't come out before the election....I think he can get his reputation back. I don't know where he goes to get his legal fees back."

Sen. Orrin Hatch (R-UT): "Here's a guy who gave 60 years of service to this country, and he was screwed [by federal prosecutors] ... How does he get his reputation back?"

Sen. Jon Kyl (R-AZ): "That's why we have the presumption of innocence ... I never called for him to step down or resign or anything like that. I think those who did might regret it now."

Sen. Lisa Murkowski (R-AK): "[I am] deeply disturbed that the government can ruin a man's career and then say, 'Never mind.'"

Sen. Daniel Inouye (D-HI): "I didn't tell him this, but, you know, he's really suffered ... I don't want to use the word 'angry,' but I'm just disappointed that prosecutors were involved in that type of misbehavior ... Lawyers' fees are not cheap. He'll have to work the rest of his life."

As Roth notes, the bulk of these quotes appeared in "responsible Beltway publications," without being challenged or balanced with a statement of the plain fact that nothing in the dismissal of the suits admits Stevens' innocence.

For the record I think Holder did the right thing. The prosecutors clearly committed misconduct and that shouldn't go by without consequences. I also hope this is just the beginning of restoring the assault on the rule of law committed at the highest levels of the Justice Department, and Don Siegeleman's phone should be getting a ring shortly.

But this is classic Village behavior. Their friend, the guy they see shopping at the Safeway all the time, gets off on a technicality, and the collective water works come out, and these encomiums, these tales of woe. Meanwhile thousands of people are railroaded all the time in the criminal justice system, a key piece of our failed prison policy. But of course the Village doesn't KNOW those folks.

...and the Alaska GOP thinks we should rerun Stevens' Senate election. Can't wait to see that in Ruth Marcus' column shortly.

Food Stamp Increases Can Give California's Economy A Boost

The rollout of the American Recovery and Reinvestment Act continues with this very good piece of public policy.

California food stamp recipients will receive 13.6% more benefits thanks to the federal economic stimulus package, the state Department of Social Services announced Wednesday.

The increase, effective immediately, was included in the American Recovery and Reinvestment Act, approved by Congress and signed by President Obama in February.

John Wagner, the state social services director, said in a statement that the increase "will dramatically help families, while also boosting California's economy in ways that benefit grocers, food manufacturers and growers."

The average monthly food stamp benefit received by about 2.5 million Californians will increase from $300 to $341 per household. State food stamp rolls are expected to increase by 300,000 this year, officials said.

The federal stimulus package also provided $22 million in administrative funding for the state food stamp program, and 10 million pounds of food for food banks and pantries that serve low-income Californians through the federal Emergency Food Assistance Program.

Food stamp money is almost immediately spent. It's among the most effective forms of stimulus there is, with each dollar generating $1.73 in economic activity. Combined with the one-time $250 payment to anyone in the Social Security system, which is also very likely to get spent, these actions will provide a short-term boost to the economy, especially in California, which has an older population than other states.

Gloria Molina is trying to extend the benefit to those who have lost their jobs:

Earlier this week, in an effort to help unemployed middle-class workers who do not qualify for government aid, L.A. County Supervisor Gloria Molina proposed that the county pursue temporary state and federal waivers of eligibility requirements for cash aid, food stamps and housing benefits.

"As more and more people lose their jobs and search in vain for new ones in a shrinking job market, many families are finding themselves, often for the first time, with inadequate funds to pay their rent or mortgage, keep their utilities and provide food for their children," Molina said Tuesday, citing an article in The Times last week.

Molina noted that each month, food stamp applications are denied for more than 19,000 county residents, and 7,000 applicants are denied benefits under CalWorks, a welfare program for families.

The middle-class needs for aid have gone up dramatically in the state over the past six months. Particularly in our areas in Depression, the crisis is very wide and broad. Until the economy recovers, and as a means for it to recover, these actions at the federal level can at least cushion the blow.

Don't Worry Be Happy Conservatism

Eric Cantor thinks everyone should chill out.

GOP Whip Eric Cantor thinks his party can retake the House in next year's midterm elections -- and accused Democrats like Rahm Emanuel of "overreacting" to the economic crisis by embarking on a federal spending spree.

The Virginia Republican, speaking to reporters at the Christian Science Monitor breakfast Thursday morning, praised Rush Limbaugh for his "ideas" and for avoiding the Democratic error of "overreacting, if you will, which this town often does, to crisis. ... Rahm Emanuel said, 'We're not going to miss the opportunity to take advantage of this crisis because we're going to do all the things we couldn't get done before."

I think Steve Benen is largely right. Regardless of the specific context of Cantor's remarks, he is broadly saying that the biggest worry at a time of massive unemployment and financial turmoil is that policymakers do too much. Therefore doing nothing, by contrast, is seen as a greater virtue than doing something. I just don't think that the 669,000 people tossed out of work and onto unemployment last week would agree.

This can be seen with the jockeying-for-position conservative governors who want to reject stimulus money to look "tough":

WINNSBORO, S.C. -- By Friday, South Carolina Gov. Mark Sanford must decide whether to accept $700 million of federal stimulus money that he considers wasteful, or risk the wrath of residents in a state with the nation's second-highest unemployment rate.

Mr. Sanford's dilemma underscores the web of fault lines running through Republican and conservative circles, especially in the South. Mississippi Gov. Haley Barbour, Alaska Gov. Sarah Palin and Louisiana Gov. Bobby Jindal are among a handful of GOP governors who have protested at least some of the federal stimulus money. In response, some lawmakers in Alaska and Louisiana have promised to request the federal money even if their governors don't [...]

And as South Carolina's unemployment rate rose to 11% in February, second only to Michigan, even his supporters have expressed dismay.

"I'm real disappointed in the governor that he's doing what he's doing for political reasons, apparently," said Lexington County Sheriff James Metts, a Republican who echoed the rising indignation among the governor's core base of conservative voters. "We have programs that are being cut, school teachers being cut, jobs being lost by the thousand across the state."

Jimmy Ray Douglas agreed. The 66-year-old owner of Carolina Furniture Co. whose donations to the national Republican Party earned him Christmas cards from former President George W. Bush, said: "We need every cent we can get in South Carolina."

Cantor and Sanford aren't simply expressing an unpopular opinion, but the wrong one. Economic stimulus, in historical terms, works. Aggressive government intervention does disrupt and stave off economic crises.

The best takedown of Ms. (Amity) Shlaes’s thesis came from Eric Rauchway, a historian, who pointed out that her favorite statistic did not count people employed by New Deal programs to be employed. Excluding the effects of the medicine, the patient is as sick as ever!

When Roosevelt stuck to a stimulus program, unemployment fell markedly, and the biggest stimulus of all — World War II — did the rest. It’s true that economic models say the economy shouldn’t work this way. When resources are sitting idle, businesses should find a way to use them profitably. But they often don’t.

People become irrationally pessimistic during a downturn. They are driven by what Keynes called animal spirits. Only government can typically change the dynamic.

Could the government spending eventually lead to inflation and crippling debts? Absolutely. But the mistakes of the last 80 years have gone in the other direction. During the Great Depression, Japan’s lost decade, the Asian financial crisis and even the last 18 months, governments didn’t act aggressively enough. Deflation and lack of growth ended up being the real risks.

The Obama Administration is playing a game of chicken with these GOP governors, arguing that they cannot be bailed out by their legislatures, and that they must request stimulus funding in order to receive it. Sanford and his pals wanted to look tough on stimulus without passing the effects on to their constituents. Obama's team shut off that option. So they must have the courage to tell their citizens they refused help for them. After all, they can just relay that they don't want to overreact.

We're Talking About Gifts?

To say nothing of the fact that a signed songbook by Rodgers and Hammerstein is fairly priceless, I really don't see the point of nervous ninnies commenting on what one person in power gives another person in power as a token. This is a factor in anyone's life how?

And yes, I do think there's a larger meme of "the nouveau-riche black guy doesn't know etiquette" at work here.

G20 FTW

The G20 Summit has wrapped up with a final communiqué (French? I knew it!). Kevin Drum sees little change from the draft communiqué. Basically, the big news is $1.1 trillion dollars in guarantees to the IMF and the World Bank standing in for global stimulus, as well as a load of new regulations of the global financial system.

The Group of 20 also agreed on new global rules to cap the pay and bonuses of bankers, as well as a common approach to dealing with the toxic assets on the balance sheets of the world’s banks. That is an issue that has bedeviled the Obama administration and other governments [...]

A financial stability board with enhanced authorities will also be created to provide an early warning mechanism to alert nations of systemic risks to the international economy, the communiqué said.

“Together these steps give us confidence that world economy can return to trend growth,” Mr. Brown said.

The announcements came after negotiators from the United States and Europe worked frantically to hash out an agreement on new regulations, a day after France and Germany signaled a rift over the level of scrutiny that regulators should have over hedge funds and other global financial institutions.

While the United States was determined to resist European efforts to create regulatory authorities with crossborder authority, officials said the two sides worked out policies on transparency and early risk warnings for banks that would placate France and Germany.

“There’s not going to be a ceding of sovereignty to a global regulator,” said a White House official, who spoke on condition of anonymity because the negotiations were confidential.

France other Europeans countries also pressed China to accept action against tax havens, a step it has resisted because of the possible consequences for its coastal banking centers, Hong Kong and Macao.

“I think we’re going to see an agreement,” said Stephen Timms, the financial secretary to the Treasury. “I am expecting sanctions against tax havens. We want that pressure to be maintained.”

There's also some namby-pamby language about "naming and shaming" countries that erect trade barriers, but the truth is that every developed country does it, and the playing field is never level.

I actually do appreciate this statement from the President, signaling that the US cannot carry the consumption growth of the global economy any more.

Such resistance may not have mattered as much in the past. In previous downturns -- including the Asian crisis in the late 1990s -- the United States was by and large the driving force of global recoveries. But in the wake of the current crisis, Obama said, Washington will have to deal with "our long-term fiscal position" and the notoriously low consumer savings rates that for years drove Americans further into debt even as U.S. imports soared.

This time, he said, the rest of the world cannot depend on the "United States being a voracious consumer market."

"Those are all issues that we have to deal with internally, which means that if there's going to be renewed growth, it cannot just be the United States as the engine," he said during a news conference with British Prime Minister Gordon Brown. "Everybody is going to have to pick up the pace."

For too long we have used cheap credit and a culture of consumption to drive growth, and that's just not sustainable any more. Our citizens are drowning in debt and can't buy all of China's crap. I don't want to see a zero-growth economy - with population growth you consign large chunks of the world to endless poverty and starvation - but the burden must be shared and the go-go consumption just has to end.

Very Serious Torture Apologist

Rachel Maddow had her Frost/Nixon moment last night when she got to question Colin Powell about his role in authorizing and directing torture. He was part of the principals meetings where interrogation techniques were discussed, and while practically every journalist who has ever interviewed Powell in the past year has neglected that fact, Rachel did not.

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Good for Rachel for pressing Powell on this - I'm sure the very serious people around NBC News tut-tutted the ignominy of their friend the noble soldier having to take this abuse. Except this is a familiar pattern for Powell. He's been covering for abuses at the highest levels since he was merely an Army major:

As Powell notes in his 1995 autobiography, My American Journal, in 1969 he was an Army major, the deputy operations officer of the Americal Division, stationed at division headquarters in Chu Lai. He says that in March of that year, an investigator from the inspector general's office of Military Assistance Command Vietnam (MACV) paid a call. In a "Joe Friday monotone," the investigator shot questions at Powell about Powell's position at the division and the division's operational journals, of which Powell was the custodian. The inspector then asked Powell to produce the journals for March 1968. Powell started to explain that he had not been with the division at that time. "Just get the journal," the IG man snapped, "and go through that month's entries. Let me know if you find an unusual number of enemy killed on any day."

Powell flipped through the records and came upon an entry from March 16, 1968. The journal noted that a unit of the division had reported a body count of 128 enemy dead on the Batangan Peninsula. "In this grinding, grim, but usually unspectacular warfare," Powell writes, "that was a high number." The investigator requested that Powell read the number into the tape recorder he had brought, and that was essentially the end of the interview. "He left," Powell recalls, "leaving me as mystified as to his purpose as when he arrived."

It would not be until two years later (according to the orginal version of Powell's book) or six months later (according to the paperbck version of the book) that Powell figured out that the IG official had been probing what was then a secret, the My Lai massacre. Not until the fall of 1969 did the world learned that on March 16, 1968, troops from the Americal Division, under the command of Lieut. William Calley, killed scores of men, women and children in that hamlet. "Subsequent investigation revealed that Calley and his men killed 347 people," Powell writes. "The 128 enemy 'kills' I had found in the journal formed part of the total."

Though he does not say so expressly, Powell leaves the impression that the IG investigation, using information provided by Powell, uncovered the massacre, for which Calley was later court-martialed. That is not accurate.

The transcript of the tape-recorded interview between the IG man--Lieut. Col. William Sheehan--and Powell tells a different story. During that session--which actually happened on May 23, 1969--the IG investigator did request that Powell take out the division's operations journals covering the first three weeks of March. (The IG inquiry had been triggered by letters written to the Pentagon, the White House and twenty-four members of Congress by Ron Ridenhour, a former serviceman who had learned about the mass murders.) Sheehan examined the records. Then he asked Powell to say for the record what activity had transpired in "grid square BS 7178" in this period. "The most significant of these occurred on 16, March, 1968," Powell replied, "beginning at 0740 when C Company, 1st of the 20th, then under Task Force Barker, and the 11th Infantry Brigade, conducted a combat assault into a hot LZ [landing zone]." He noted that C Company, after arriving in the landing zone, killed one Vietcong. About fifteen minutes later, the same company, backed up by helicopter gunships, killed three VC. In the following hour, the gunships killed three more VC, while C Company "located documents and equipment" and killed fourteen Vietcong. "There is no indication of the nature of the action which caused these fourteen VC KIA," Powell said. Later that morning, C Company, according to the journal, captured a shortwave radio and detained twenty-three VC suspects for questioning, while two other companies that were also part of Task Force Barker were active in the same area without registering any enemy kills [...]

There had been attempts at cover-up. Prior to Ridenhour's letter, the Army promoted the story that C Company had killed 128 VC and captured three weapons in the March 16 action. (Note the 128 figure--which Powell, in his memoirs, uses in describing the number of enemy kills he supposedly found in the journals. In his book, he is repeating the cover story, not recalling what was actually in the journal.) And information pertaining to My Lai disappeared from the Americal Division's files. A military review panel--convened after the Hersh stories to determine why the initial investigations did not uncover the truth of My Lai--found that senior officers of the Americal Division had destroyed evidence to protect their comrades. Powell keeps that out of his account.

Powell has never been implicated in any of the wrongdoing involving My Lai. No evidence ties him to the attempted cover-up. But he was part of an institution (and a division) that tried hard to keep the story of My Lai hidden--a point unacknowledged in his autobiography. Moreover, several months before he was interviewed by Sheehan, Powell was ordered to look into allegations made by another former GI that US troops had "without provocation or justification" killed civilians. (These charges did not mention My Lai specifically.) Powell mounted a most cursory examination. He did not ask the accuser for more specific information. He interviewed a few officers and reported to his superiors that there was nothing to the allegations [see "Questions for Powell," The Nation, January 8/15, 2001]. This exercise is not mentioned in his memoirs.

Concurrent with this, Powell brushed off a soldier's complaint about routine brutality of civilians by US forces in Vietnam. He was part of a military establishment that sought to cover up crimes like My Lai. So this dodging Maddow's questions on principals meetings and torture comes very naturally to him, I would imagine.

Of course, today Colin Powell is a very serious person, so he should never be questioned on such uncouth subjects. But recognize that this shame cannot just be wished away. Just today a federal judge ruled that subjects held at Bagram AFB in Afghanistan can challenge their detention in US courts. The torture regime will have ramifications for years, and the establishment, as represented here by Colin Powell, will continue to deny the problem, allowing it to fester.