Craig Eisele on …..

February 26, 2012

Can Globalization Ever Be Used For Good??

Filed under: Uncategorized — Mr. Craig @ 11:12 pm

ADAM OZIMEK responds to David Pogue’s most recent post at the New York Times on working conditions at Foxconn’s iPhone factories, in which he notes several things. First, Apple has hired the Fair Labor Association to investigate Foxconn’s factories. Second, Foxconn has raised wages. Third, an ABC documentary team visited Foxconn’s factories and found mostly a lot of perfectly natural boredom, rather than dangerous working conditions per se. (Foxconn was aware of the visit in advance, and obviously would have ensured everything was scrubbed for the camera and that only compliant workers were around.) And finally, there’s tons of evidence that the Chinese workers are very happy to have Foxconn jobs. They’re better-paid than life in the village, they’re often viewed as starter jobs for young people who are planning to move on to something more substantial later on, and, as one letter writer notes, working at Foxconn was a lot better for his aunt than her prior job as a village prostitute.

Mr Ozimek concludes two things. The first is an argument about the primacy of rising productivity, rather than labour safety regulations, in improving working conditions. The second is that Westerners who argue that we should be sourcing our products in countries with better-enforced labour laws, like South Korea, Taiwan or Japan, rather than China, are making a huge mistake, trying to deprive Chinese of the income growth they need to better their lives and ultimately achieve safer and happier workplaces.

On this latter point, Mr Ozimek is absolutely right. But that’s not the important argument here. The argument isn’t “many factories in China have terrible labour conditions, therefore we shouldn’t buy Chinese products.” That would indeed be silly. It would also be completely doomed. Globalisation is a fact, not an option. We import huge amounts of stuff from China, and will continue to until Chinese wages rise much, much higher than they currently are. Rather, the argument is “many factories in China have terrible labour conditions, therefore we should demand that Western companies that source their products in China use their bargaining power to force Chinese factories to improve working conditions.”

A lot of people who are generally supportive of free trade seem to be making the same mistake Mr Ozimek is making in response to the Foxconn story: they’re refighting the “sweatshops, good or bad?” argument of the 1990s. That’s not what this is about. 

There are probably some people trying to argue that we should be demanding Apple make its iPhones in America to avoid infractions of its corporate code of conduct. Mr Ozimek cites Andrew Leonard’s article at Salon about a labour-union official who said in his search for an ethically manufactured mobile phone he considered buying Samsung because their phones are largely manufactured in South Korea, where safety regulations are better enforced. This is not a significant phenomenon. Vanishingly few people will ever go to the trouble this labour-union official has gone to in researching the sourcing of his phone, so any hypothetical harms from such decisions will fail to develop.

The media and public pressure being exerted on Apple is not focused on getting it to stop making phones in China. It’s focused on getting it to apply its own corporate code of conduct rigorously at the factories that make its phones in China. That corporate code of conduct is part of Apple’s brand ID. It is part of the reason why people desire to buy the phones that make those Chinese richer in the first place. If people think Apple is a sleazy company that employs workers under abusive conditions, they will not want to pay as much for its phones, and then those Chinese workers will be harmed. Getting manufacturing companies in China to allow more open scrutiny of the workplace and to cease any possible violations of their contracts guaranteeing adequate working conditions is good for Apple, good for consumers, good for the companies, and good for the workers. It’s just good. There’s nothing wrong with it. Nobody is trying to stop globalisation here, or take away Chinese workers’ jobs. As Mr Pogue’s article puts it:

[We] should be happy that in this corner of the Chinese landscape, things are getting better. On ABC’s show, a Fair Labor Association inspector, Ines Kaempfer, called the last month a “Nike moment” for Apple. In the 1990s, Nike’s sweatshops weren’t the worst in the business, but they’re the ones that got the negative publicity. In response, it cleaned up its act, and thereby lifted the bar for the entire industry.

Clearly, the recent spotlight on conditions at Foxconn has performed a similar service for the electronics industry. Better wages are good. More careful monitoring is good. Transparency—like letting TV cameras into your assembly lines—is good.

The Lack of Fear Is What We Need To Fear The Most

Filed under: Uncategorized — Mr. Craig @ 10:51 pm

WHAT to read into the following? At an event for CFOs and finance directors in London this week, I asked the audience whether Greece would end up leaving the euro zone. Every single hand went up. Asked whether more countries than Greece would leave, roughly two-thirds of the audience agreed they would.

Coming a week after an agreement on a second international bail-out for Greece, such certainty that the country would have to exit the euro was striking. It may be that an audience in London, albeit a cosmopolitan one, is prone to misjudge the willingness of the euro-zone creditors to keep lending money to Greece even if the country’s programme goes off-track again. But I still think their judgment is right, for three reasons.

First, the demands being made of Greece will be almost impossible to meet: they will eventually need more money or some kind of forbearance. Wolfgang Schäuble, Germany’s finance minister, and Jean-Claude Juncker, Luxembourg’s prime minister, have both suggested in recent days that a third bail-out may well be needed.

Second, there is a finite amount of times that creditor nations can justify bail-outs to their taxpayers, and the poisonous manner in which the latest package was agreed suggests this point may already have been reached. There is a good chance that approving extra money is becoming politically impossible. The Greeks themselves may well give up on the whole process, too.

To be clear, a Greek default is not the worry. It is already happening, after all: a 70%-plus fall in the net present value of private-sector bonds counts as a pretty severe pasting for investors. The worry is the unpredictable impact of a euro-zone exit, not just for Greece but for the rest of the euro zone. The Economist has argued for a Greek default for a year, but always on the presumption that default need not mean exit. But it is ever harder to envisage a situation in which official creditors take a loss on their Greek bond holdings, which is needed to put Greek debt on a sustainable footing, but also agree to keep funding the country until it starts running a primary surplus. Default and exit are becoming inseparable.

Which brings us to the third reason why exit is likely. The prospect of euro-zone departures (even multiple ones) doesn’t scare people as much as it should. The overall mood of the delegates at the conference was relatively sanguine about the effects of an exit. Contingency plans were in place at their firms to deal with it; this wouldn’t be another 2008.

Yet 2008 is what the current situation ominously resembles. Sticking plasters have been applied (for Greek bail-outs, read the rescues of Bear Stearns, Fannie Mae and Freddie Mac) but more rescues are needed. Politicians are reaching the point where they believe that injecting more public money into failing entities is untenable. And there is an assumption that people have had enough time to prepare for the consequences of a shock that it would be absorbable. That strongly echoes the mood when policymakers let Lehman fail. Sometimes it’s good to be afraid.

Barack Obama’s job – and yours

Filed under: Uncategorized — Mr. Craig @ 10:50 pm

Can Barack Obama win re-election with the current employment rate?

San Pedro, CA – “No president since World War II has been re-elected with an unemployment rate over 7.2 per cent.” That’s a snippet of conventional wisdom that’s been floating around almost since the day that Barack Obama was inaugurated in January 2009, a month that ultimately closed out with an ominous unemployment rate of 7.8 per cent – although it was only reported at 7.6 per cent at the time.  

That too-rosy, though still dismal employment statistic was just one factor feeding into a too-rosy economic projection that ended up getting the Obama Administration into a good deal of trouble. Although economic adviser Christine Romer originally pushed for a $1.8tn stimulus in a December 2008 memo, that was considered politically impossible, and Obama officially asked for less than half that amount – and still was greeted with intense GOP opposition, even though around 40 per cent of his stimulus package was tax cuts. The projections released on January 10, 10 days before his inauguration, anticipated peak unemployment of 8 per cent with the scaled-down stimulus, and 9 per cent without it. In reality, the 8 per cent figure was passed the next month, which ended with at 8.3 per cent unemployment. The stimulus plan was signed into law on February 18. 

On the surface, Republicans were able to argue the stimulus was a failure, since unemployment peaked at 10 per cent in October 2009. But Romer’s original calculations had been generally vindicated: the recession was far more severe than originally anticipated, and a much larger stimulus had been called for. The unemployment rate could have easily been over 11 per cent or more without the stimulus. That’s scant solace, of course. But those stubbornly high unemployment rates may not be as politically deadly as they once seemed. 

For one thing, they are finally coming back down to earth – though still nowhere near what they should be. Yet, at 8.3 per cent – down 0.7 per cent in four months – the unemployment rate now matches that of February 2009. It’s still a far cry from 7.2 per cent, but that level nine months from now is far from impossible.  

More importantly, though, that 7.2 per cent figure extremely misleading, as Nate Silver explained at the New YorkTimes “
“538” blog last June. For one thing, Ronald Reagan was re-elected with a 7.2 per cent unemployment rate – by a whole 18 points – strongly suggesting he could have been re-elected with a much higher rate than that. (What’s more, before World War II FDR was re-elected by even bigger landslides in 1936 and 1940, with unemployment still in double digits!)

But the real problem Silver highlighted was an overall lack of correlation. “Historically, the correlation between the unemployment rate and a president’s electoral performance has been essentially zero.” And, of course, he had the charts to prove it. He also said that looking at the change in the unemployment rate over a president’s term was little better. “This does produce some positive correlation, but it’s quite weak and almost entirely driven by a couple of outlying data points surrounding the Great Depression.” Again, he had the charts to prove it.  

There’s just one catch: the four-year time-frame wasn’t a good predictor, but a two-year time-frame could work wonders, as an AP story from last month pointed out. “Going back to 1956 no incumbent president has lost when unemployment fell over the two years leading up to the election. And none has won when it rose.” True enough, but still misleading, George Washington University political scientist John Sides told me.

Sides has published on the subject of economically modeling elections, as well as writing about it on the blog Monkey Cage, which he co-curates. First off, “the year before is what matters more”, rather than the two-year period, he said. Second, “It’s not necessarily useful to pick any one indicator or one particular threshold that candidates need to meet. It’s the general trend that matters.”

There are, in fact, a number of strong indicators to choose from, if you look at election year changes. “We shouldn’t get too concerned with which exact indicator we choose. When the economy is growing, most indicators will move in a positive direction: GDP, real disposable income and unemployment. That’s the important point.”

In a paper Sides coauthored, he noted that “at a meeting of political scientists held over Labor Day weekend in 2008 –  even before the start of the Republican National convention – a panel of political scientists each presented a forecast of the outcome. Almost all of them predicted the exact outcome within a couple of percentage points. The average of their predictions was 53 per cent, and that’s what Obama got.” So much for all the hoopla over Sarah Palin – at least for that election. And indeed, the nine-month period from January through September seems quite enough for predictive purposes. By the time the traditional campaign season is halfway done, the economic cake is already baked.

Although Silver missed these nuances initially, he caught up rather thoroughly, writing another post last November, in which he looked at 43 economic variables over the nine-month period for the 16 presidential elections held since World War II. The strongest indicators all account for a third of the winning margin or more. These were real GDP, real personal income, change in non farm payrolls, change in unemployment rate, change in employment-to-population ratio and the ISM manufacturing index, a multi-factor index regarded as a leading indicator for the economy at large. Not too surprisingly, this leading indicator proved the strongest election predictor, accounting for 46 per cent of winning margin. Altogether, Silver found 21 economic indicators that accounted for at least one-fifth of the winning margin.

Summing up, what all the above tells us is:

  • The unemployment rate is electorally unimportant. From a human standpoint, as well as an economic one, it’s very bad indeed that the unemployment rate still stands at 8.3 per cent, with many millions more who are working part-time involuntarily, or else have left the job market entirely. But from a political standpoint, this is irrelevant.
  • The change in unemployment rate from January to September this year is very important,but so are a handful of other economic indicators. As the economy continues to improve, the unemployment rate may go up again temporarily, as previously discouraged workers rejoin the potential workforce pool. But as long as the overall trend is positive, and other indicators continue moving in the same direction, Obama could be in very good shape, even if the unemployment rate remains higher than 7.2 per cent. What matters, in short, is whether or not people feel the economy is improving fast enough to promise a better tomorrow, and make them reluctant to take chances on switching direction.
  • Most political commentators are woefully ignorant about how the economy impacts elections. Conventional wisdom – even when it’s good enough to be technically true – can be dangerously shallow and misleading. An example comes from a Monkey Cage post by Sides from June 2010, “Do Americans Really Want to Cut the Deficit?” As Sides shows, reducing the debt has a much smaller effect on the incumbent party’s presidential candidate’s share of the vote than does increasing Americans’ disposable income. (Both measures are for the single year before the election.) The lesson about conventional commentators’ ignorance applies in other ways as well, such as evaluating the candidates’ job proposals, to which we now turn. It’s not that everyone is stupid – they’re not. But crucial big-picture facts may be missing from the pictures they paint. And with all the Republican candidates in particular offering “jobs” plans that actually encompass every aspect of economic policy and then some, it’s increasingly necessary to compare overall visions of how the economy works and how it can be made to function better.

Obama’s jobs plan

In September 2011, Obama announced a four-part, $447bn jobs plan (with a fifth part dedicated to making sure it would be deficit-neutral), which Republicans in Congress blocked. But it remains a good guide to the kinds of things he would like to do in a second term. Parts of it are about to be passed, as shifting political fortunes have made Republicans more willing to work with him.

The first part of his plan, “cuts to help America’s small businesses hire and grow”, had as its centerpiece cutting the payroll tax in half for 98 per cent of businesses. It also included a complete payroll tax holiday for added workers or increased wages. 

The second part, “Putting workers back on the job while rebuilding and modernising America”, included a “Returning Heroes” hiring tax credit for veterans, proving anywhere from $5,600 to $9,600; support for state and local governments to prevent up to 280,000 teacher layoffs, while keeping cops and firefighters on the job; school modernisation for at least 35,000 public schools, supporting new science labs, internet-ready classrooms and other renovations; immediate investments in infrastructure and a National Infrastructure Bank to modernise roads, rail, airports and waterways and put hundreds of thousands of workers back to work; a new “Project Rebuild”, which will put people to work rehabilitating homes, businesses and communities, via various different public-private collaborations.

The third part, “Pathways back to work for Americans looking for jobs”, included extension of unemployment insurance for five million Americans with three “innovative reforms” supporting state-level programs, one to support work-sharing alternatives to layoffs; another for displaced workers to take temporary, voluntary work or pursue on-the-job training and a third to provide wage insurance to help reemploy older workers or help them start their own businesses. It also included a $4,000 employer tax credit for hiring the long-term unemployed, and a prohibition on discriminating against unemployed workers. 

The fourth part, “Tax relief for every American worker and family”, included cutting payroll taxes in half for 160 million workers in 2012, providing a $1,500 tax cut to the typical American family; and allowing more Americans to refinance their mortgages at then-current interest rates, around 4 per cent.

This proposal represented a true “jobs plan” in a traditional sense. It had a detailed focus on specific aspects of the problem and specific policies to address those aspects. The relationship between problem and solution was transparent and straighforward, which also means that problems with the ideas proposed, as well as possible alternatives, could also be articulated with a good deal of specificity. This is inevitably less true with broader economic plans, which have multiple explicit short- and long-term goals, as well as cultural, social and political agendas as well. This could be seen if one were to consider Obama’s recently-released budget, for example, or even the more narrowly job-focused recent proposals of Obama’s jobs council of top US business leaders.

But it’s much more pronounced with the economic proposals of the remaining top two GOP candidates, Mitt Romney and Rick Santorum.

Obama’s Campaign Opens Fire–on the Kochs

Filed under: Uncategorized — Mr. Craig @ 9:37 pm

I just received a new mailer from  Even before the primaries are finished, Obama is apparently kicking off the campaign against his now-inevitable opponent: the Koch brothers.

Obama - Biden
Friend —

In just about 24 hours, Mitt Romney is headed to a hotel ballroom to give a speech sponsored by Americans for Prosperity, a front group founded and funded by the Koch brothers.

Those are the same Koch brothers whose business model is to make millions by jacking up prices at the pump, and who have bankrolled Tea Party extremism and committed $200 million to try to destroy President Obama before Election Day.

Obviously, the campaign is not yet fully fleshed out. How will Obama distinguish himself from the Kochs on important issues like the Iranian missile program, gay marriage, and national education standards?  How will he counter the favorability boost that the Kochs are expected to get from the fact that their name sounds like a popular soft drink (and will people get confused when pollsters ask them if they prefer “Coke, or Obama”)?  Will he be courting the paleolibertarians whose hatred of the Kochs is second only to that of the Center for American Progress?  How will he counter if the Kochs promise to lower gas prices in exchange for the presidency?

I know it’s customary to whine about the permanent election, but I confess, I’m excited to see this one unfold.  Sure, it was historic to have our first black president–not to mention the first president who was a professor at my alma mater–and I don’t mean to take anything away from that.  But it would also be a pretty big landmark to have our first joint presidency.
Not that that will influence my vote, mind you.  I vote the issues.  Which is why I’m not proffering an endorsement until I know how the Kochs feel about soda taxes and those videos of animals being killed. 

Wisconsin Recall Rival Slams Governor Walker

Filed under: Uncategorized — Mr. Craig @ 9:00 pm

In a preview of the Wisconsin recall election, top Democratic challenger Kathleen Falk has come out guns blazing against Gov. Scott Walker, saying he ruined the state, has no scruples in labeling any opponent as a union pawn, and is under a cloud from the ongoing “John Doe” criminal investigation into some of his former aides.

“I have worked around the state with citizens who have just reacted to the extreme far right agenda of Scott Walker in a way I’ve never seen before,” Falk told POLITICO in an interview. “In Wisconsin, we don’t skew far left or skew far right. We just want good education, some health care, clean air and water and a decent job — very common sense values. The Governor Walker agenda has just torn the state apart.”

Falk, a former Dane County executive who also ran for governor in 2002, has already promised to reverse one of Walker’s most provocative measures — stripping away collective bargaining rights from public employees — if she wins the likely recall election later this year. And after jumping into the race just one day following the announcement that one million signatures had been gathered to prompt a recall election against the first-term Republican governor, Falk said she is ready for the campaign to take down Walker and his “extreme far-right agenda.”

Falk has already started raking in major endorsements — the Wisconsin chapter of the American Federation of State, County and Municipal Employees union, with more than 60,000 public employees, SEIU Healthcare Wisconsin, the state’s largest healthcare workers union, and Emily’s List have all thrown their support behind the 60-year-old Milwaukee born and raised contender.

Falk said she’s proud to have the union support, but also cited her work as county executive negotiating with public employees to cut their salaries as proof she is not the union stooge some may paint her as.

“I’m not a soft touch, I’m just fair,” she said. “And that process of negotiating through collective bargaining accomplished a ten million dollar saving for taxpayers, and I am proud of it. I am proud of those unions for doing their share of the sacrifice. Wisconsin is the home to public sector collective bargaining and Walker refused to negotiate, he refused to talk, so his extreme position is one of those reasons he will be recalled.”

Walker has made labor unions a cornerstone of his attacks against any potential Democratic opponent. He recently told POLITICO in an interview that if he keeps his seat in the recall contest, it would send a crushing blow to the “national big government union bosses.”

“[The unions] want to send a clear message to any politician, be it Republican or even a handful of the Democrats that might even consider this, that if you try anything courageous, if you try to tackle tough issues, you’re going to get burned,” he said.

After AFSCME endorsed Falk on Monday, Walker’s campaign slammed home the union connection. “It comes as no surprise that Kathy Falk is emerging as the handpicked choice of the big government union bosses who will fund her campaign,” the Walker campaign said.

 For Falk, it’s also no surprise that Walker will tie any Democratic contender, herself included, to unions.

“I think he is going to label whoever his opponent is with those kinds of what he believes are derogatory labels,” she said. “One of the reasons he is in deep political trouble is because he labels those he disagrees with and marginalizes them instead of working with them. He doesn’t talk to people, he doesn’t negotiate with people, he doesn’t work with people he doesn’t agree with. And you can’t be a leader that way.”

It’s not the only aspect of Walker’s leadership qualities that Falk cites as troubling. Falk, who noted her path would sometimes cross with Walker when the two were county executives, said the ongoing John Doe investigation looking into whether some of the governor’s former staffers engaged in political activity on taxpayer time when he served as Milwaukee County executive casts a cloud over his current campaign and term in office.

On Jan. 5 the district attorney said it found that Tim Russell, who had been with Walker as a campaign and county aide since 2002 but did not get a job in the governor’s administration, and Kevin Kavanaugh, Walker’s appointee to the Milwaukee County Veterans Service Commission, stole funds intended for wounded vets and families of U.S. soldiers who died in Iraq and Afghanistan. And on Jan. 26, Kelly Rindfleisch and Darlene Wink, two former aides, were charged with engaging in campaign fundraising during work hours.

Walker, who said he does not believe the probe is targeting him, has announced he will voluntarily meet with prosecutors about the investigation.

Falk slammed Walker for not publicly addressing the investigation and questioned how a manager could possibly be unaware of what his closest aides were up to during work hours.

“People are reserving final judgment as they ought to, but they are very dismayed,” she told POLITICO. “They are very troubled by this cloud surrounding Gov. Walker. It is very hard to understand because he has not publicly explained how he could have been in his office as county executive literally feet from his chosen staff, his high level ranking staff, who are accused of running a political campaign to foster his political future literally within a stone’s throw from his office without him knowing about it.”

“Or, if he didn’t know about it, what kind of manager does that make him?” she added. “No matter what angle you look at it from, people are very concerned and he has not been forthcoming about what he knew or when he knew about it. I am, like most people, disappointed and concerned about this cloud that hangs over him and will be looking to what the district attorney finds next or whom the district attorney charges next.”

Falk has already hit the ground running on her month-old campaign, traveling across the state and securing endorsements from major unions and organizations. If the recall goes ahead as expected, the election should come in late May or early June — and with such a short time frame, Falk says she’s laser-focused on locking up the Democratic nomination and then moving into the governor’s mansion.

“I’m running strong and hard. It’s why I announced I was running literally the day after the million signatures were announced,” she said. “I’m running a statewide campaign. I’m on the road a lot and have an A+ team running my campaign and advising me. This will be a very short election.”

Michigan’s incredible shrinking workforce

Filed under: Uncategorized — Mr. Craig @ 7:00 pm

Michigan jobless rate drops, but not because more jobs exist

As the presidential race moves to Michigan for next week’s primary, a lot of focus is on the state’s economy — one of the hardest-hit by the recession.

But things are changing in the Great Lakes State.

After leading the nation in unemployment for four years, Michigan has finally dropped out of the Top 10. State unemployment slid to 9.3% in December, only a touch higher than the national rate, and a sharp decline from the 14.1% rate that Michigan hit in the fall of 2009.

And last year was the first time the state added any jobs since the turn of the 21st Century.

Sounds great, huh? Well, hold the applause.

The main reason Michigan’s unemployment rate is falling is because its labor force is shrinking fast, economists said. The state has lost 4.6% of its workforce since the recovery began in mid-2009, according to Donald Grimes, senior research specialist at the University of Michigan.

America’s Jobs Crisis

And the state still has a long way to go before it regains the hundreds of thousands of jobs it lost over the past decade.

But let’s start with the good news.

2011 was a rocking year for American automakers, the lifeblood of Michigan’s economy. It was the first time since 2004 that all three major U.S. automakers were profitable at the same time. And it came only two years after two of them declared bankruptcy and had to be bailed out by the federal government.

That helped fuel the creation of 67,000 jobs in 2011, according to Bruce Weaver, economic analyst at the state Department of Technology, Management and Budget. Michigan gained 26,000 manufacturing jobs last year. It was the second best performing sector behind only professional and business services, which includes temp jobs and engineers and IT professionals who support the auto industry.

How to save U.S. manufacturing jobs

“After a horrendous decade, Michigan is walking in the right direction,” said Charles Ballard, economics professor at Michigan State University.

Since the recession ended in mid-2009, some 94,200 jobs have been created. And the number of unemployed has fallen by 239,200. This has helped to bring the unemployment rate down to its lowest level since the fall of 2008.

In fact, Michigan’s job growth outpaced the nation’s in 2011.

The employment picture has improved so much that jobless residents are no longer eligible for the maximum 99 weeks of unemployment insurance. Those on the federal extended benefit program, which lasts up to 20 weeks, received their last unemployment check in mid-February.

Residents are also feeling more optimistic. Nearly half of those surveyed say the economy is starting to improve, while only 19% expect it to worsen, according to a recent poll conducted by the Detroit Free Press and WXYZ-TV. Those are the best numbers in years, according to the pollster.

Michigan is expected to keep adding jobs in coming years. The state should expand its payrolls by nearly 77,000 jobs by the end of 2012, according to a University of Michigan forecast.

Now for the not-so-good news.

One reason Michigan’s unemployment rate is falling is because people are leaving the workforce in droves. Nearly 224,000 residents have dropped out since the recovery began, either because they have left the state, retired, returned to school or are too discouraged to look.

While the ravaged state has definitely been losing residents, that’s not the whole story. The population lost only 94,000 people over the past two years.

Another explanation could be the fact that Michigan has more Baby Boomers than other states. When older workers lose their jobs, it’s harder for them to find new ones. So these folks might have left the workforce in favor of collecting disability or starting their retirement earlier than planned, Grimes said.

Also, Michigan entered the recession earlier than other states, so more jobless have likely exhausted their unemployment benefits. Since the unemployed have to be actively looking for work to collect benefits, it’s not uncommon for discouraged people to stop searching when the checks stop coming.

The overall improvement in the unemployment rate has surprised state economists, most of whom expected the unemployment rate to remain relatively flat. But it’s not something they are happy to see.

Unemployment: Where does your state rank?

A shrinking labor force can wreak havoc on the state’s finances because it means less tax revenue coming in and could force more people to seek public assistance, including Medicaid and housing help.

“You want the unemployment rate to fall because people are getting jobs,” he said.

And while the addition of 94,200 jobs is certainly a plus, it only puts a tiny dent in the overall job loss since 2000, which exceeds 850,000 positions, Grimes said.

“We’re picking up some of those jobs, but we still have a long way to go,” he said. 

Six Bank Companies Have Assets Equaling 60 Percent of U.S. GDP

Filed under: Uncategorized — Mr. Craig @ 5:15 pm


“Today, you have six financial institutions, the largest six, that have assets that are the equivalent of 60 percent of the GDP of the United States of America.”Bernie Sanders on Tuesday, October 4th, 2011 in an interview with MSNBC


Bernie Sanders says six bank companies have assets equaling 60 percent of U.S. GDP

During an Oct. 4, 2011, interview on MSNBC, host Ed Schultz

nd Sen. Bernie Sanders, I-Vt., discussed the “Occupy Wall Street” protests, which are targeting the financial services sector. Sanders offered a statistic designed to demonstrate the power of American banks.

Sanders suggested that many of the protesters “have not seen the president be as strong as he should be on Wall Street,” saying they want the federal government to take tougher measures against financial-services companies.

“Ed, today, you have six financial institutions, the largest six, that have assets that are the equivalent of 60 percent of the GDP of the United States of America,” Sanders said. (GDP stands for gross domestic product.)

We wondered whether Sanders’ math was correct.

When we contacted Sanders’ office, a spokesman provided testimony to a congressional oversight panel by Simon Johnson, a professor of entrepreneurship at the MIT Sloan School of
Management. “Our six largest bank holding companies currently have assets valued at just over 63 percent of GDP,” Johnson testified, citing figures for the fourth quarter of 2010. “This is up from around 55 percent of GDP before the crisis (e.g., 2006) and no more than 17 percent of GDP in 1995.”

We wanted to find the original statistics, and we located them in a chart posted by the National Information Center, the federal repository of data about banks and other institutions for which the Federal Reserve has a supervisory, regulatory or research interest. The chart lists the 50 biggest bank holding companies as of June 30, 2011.

Here are the top six and their total assets:

1. Bank of America Corp., $2.264 trillion
2. J.P. Morgan Chase & Co., $2.246 trillion
3. Citigroup Inc., $1.957 trillion
4. Wells Fargo & Co., $1.260 trillion
5. Goldman Sachs Group Inc., $937 billion
6. Morgan Stanley, $831 billion

Together, the top six companies’ assets were $9.495 trillion.

For the second part of the equation — gross domestic product — we turned to the U.S. Commerce Department’s Bureau of Economic Analysis.

Though the time spans don’t line up perfectly, we decided to use the GDP figure for 2010, the most recent full year. That figure is $14.527 trillion.

Dividing these top banks’ assets by the national GDP produces a result of 65 percent — which is actually a slightly larger percentage than Sanders had indicated, but certainly in the ballpark.

To make sure we weren’t missing something, we contacted a few experts on financial services issues. They offered a few caveats:

• The comparison is a bit of apples vs. oranges. The banks’ asset figures are an aggregation measured at a single point in time, whereas the GDP figure is an aggregation of goods and services measured over time. “This distinction is the equivalent to a comparison of your net worth with your personal income,” said Lawrence White, an economist at New York University’s Stern School of Business. “Economists generally don’t find these sorts of comparisons very useful or interesting. So the best that can be said is that these comparisons provide a rough sense of comparative magnitudes.”

• The data are constantly moving. “Several of these banks, especially Bank of America, have lost significant” value since the figures were published in June 2011, said Satya Thallam, director of the Financial Markets Working Group at George Mason University’s Mercatus Center. The denominator, GDP, is always changing, as well. So, any estimate is true for a specific point in time, but possibly out of date not long after it’s made.

• Banks’ overseas holdings significantly complicate the comparison. For starters, the comparison Sanders is making doesn’t mean that these banks own 60 percent of the U.S. wealth, because some of these banks’ assets are in overseas holdings. However, Sanders appears to be on safe ground with his phrasing, since all he said was that the two dollar figures were “equivalent.”

Potentially more problematic for Sanders is that the assets-to-GDP ratio for the top six bank companies in the U.S. are actually quite modest when compared to the biggest banks in other nations.

A 2010 study by J.P. Morgan listed the 25 biggest banks internationally in 2008, along with the percentages of their home country’s GDP. The highest was UBS, with 376 percent of Switzerland’s GDP. And six other banks all had assets as large as their home country’s GDP — Credit Suisse Group of Switzerland (218 percent), Dexia of Belgium (180 percent), Fortis of the Netherlands (155 percent), Royal Bank of Scotland of the United Kingdom (131 percent), Barclays of the United Kingdom (112 percent) and BNP Paribas of France (101 percent).

All of these dwarf the combined holdings of the top six banks in the U.S., in part because America’s GDP is so much larger than the GDP of these other nations.

The significance of this fact for Sanders’ assertion, however, is less clear.

“This doesn’t tell us what is a ‘proper’ or ‘appropriate’ number,” Thallam said. “One might reply that other countries are much more concentrated, but that only means they’re worse — not that we’re in a good position.” Some scholars, he added, have said that even at current concentration levels, U.S. banks should be broken up because they create a “too big to fail” problem. “On the other hand, people for years said that banking exhibited economies of scale, so consolidation was natural,” Thallam said.

Our ruling

Sanders’ math is correct — in fact, the percentage he offers is actually a little low. And he’s careful to say only that the banks’ assets are only “equivalent” to 60 percent of the United States’ GDP, not that the banks own 60 percent of the United States. Sanders doesn’t note that big banks in other countries are far bigger, compared to their nations’ GDP, than the U.S. banks are. Still, on balance, we rate his statement True.

Germans overwhelmingly oppose Greek bailout: poll

Filed under: Uncategorized — Mr. Craig @ 4:10 pm

(Reuters) – Germans overwhelmingly oppose further aid for Greece, according to opinion poll released on Sunday, one day ahead of a vote in parliament on a new Greek bailout package where Chancellor Angela Merkel may be forced to rely on opposition support.

The poll by the Emnid Institute in Bild am Sonntag newspaper found 62 percent oppose a new 130 billion ($175 billion) rescue package while 33 percent are in favor. A similar Emnid poll in September found 53 percent opposed and 43 percent in favor.

Merkel’s centre-right coalition faces a testing vote in parliament on Monday when at least a dozen deputies are expected vote against the measure. It should still pass with ease because opposition parties will vote for it.

But the prospect of the ruling bloc failing to win a majority on its own would be a humiliating setback for Merkel, with some analysts and opposition leaders warning it could endanger her coalition.

Further signs of tension in the coalition emerged on Saturday when Merkel’s Interior Minister, Hans-Peter Friedrich, became the first member of her government to openly call for Greece to leave theeuro zone.

What is really happening in Iran?

Filed under: Uncategorized — Mr. Craig @ 4:00 pm

Supreme Leader Ayatollah Khamenei may control the nuclear programme, but he lacks a critical mass of Iranians.

Hong Kong – The supreme war-or-peace question regarding the Iran psychodrama has got to be: What game is Iran’s Supreme Leader Ayatollah Khamenei really playing?

Sharp wits among the lively Iranian global diaspora maintain that the Supreme Leader is the perfect US/Israel asset – as he incarnates Iran as “the enemy” (although in most cases in a much less strident way than Ahmadinejad).  

In parallel, the military dictatorship of the mullahtariat in Tehran also needs “the enemy” – as in “the Great Satan” and assorted Zionists – to justify its monopoly of power.

The ultimate loser, voices of the diaspora sustain, is true Iranian democracy – as in the foundation for the country’s ability to resist empire. Especially now, after the immensely dodgy 2009 presidential election and the repression of the Green movement. Even former supporters swear the Islamic Republic is now neither a “republic” – nor “Islamic”.    

For their part, another current of informed Iranian – and Western – critics of empire swear that the belligerent Likud-majority government of Israel is in fact the perfect Iranian asset. After all, Prime Minister Bibi Netanyahu and former Moldova bouncer turned Foreign Minister Avigdor Lieberman’s non-stop warmongering tends to rally Iranians of all persuasions – always proudly nationalistic – behind the flag.

The absolute majority of Iranians knows and feels they are targeted by a heavily weaponised foreign power – US/Israel. The leadership in Tehran has been wily enough to instrumentalise this foreign threat, and at the same time further smash the Green movement.

Your bombs are no good here

Parliamentary elections in Iran are only a few days away, on March 3. These are the first elections after the 2009 drama. In The Ayatollahs’ Democracy: An Iranian Challenge (Penguin Books), Hooman Majd makes a very strong case to detail how the election was “stolen”. And that’s the heart of the matter; millions of Iranians don’t believe in their Islamic democracy anymore.

Gholam Reza Moghaddam, a cleric, and the head of the Majlis (parliament) commission that is conducting an extremely delicate move in the middle of an economic crisis – to end government subsidies on basic food items and energy – recently admitted that the Ahmadinejad government is, by all practical purposes, bribing the population “to encourage them to vote in the Majlis elections”.

Major General Yahya Rahim Safavi – a senior military adviser to Khamenei and, crucially, former chief of the 125,000-strong Iranian Revolutionary Guard Corps (IRGC) – asked Iranians to “take the elections seriously, and, by voting in maximum numbers, create another epic event”. The Supreme Leader himself believes – or hopes – turnout at the “epic event” will be around 60 per cent.

“We believe that using nuclear weapons is haram and prohibited, and that it is everybody’s duty to make efforts to protect humanity against this great disaster.”

– Ayatollah Khamenei

They may be in for a rude shock. Word in Iran is that the election appeal at universities is close to zero. No wonder, Green movement leader Mir Hossein Mousavi has been under house arrest for a full year. According to Kaleme, a website close to Mousavi and his wife, Dr Zahra Rahnavard, a few days ago they were allowed to speak only briefly, by phone, with their three daughters.

So far, Khamenei’s attention seems to have been concentrated more on external pressure than the internal dynamic. Once again, last Wednesday, he went public to renew his vow that nuclear weapons are anti-Islamic. His words should – but they won’t – be carefully scrutinised in the West: 

We believe that using nuclear weapons is haram and prohibited, and that it is everybody’s duty to make efforts to protect humanity against this great disaster. We believe that besides nuclear weapons, other types of weapons of mass destruction such as chemical and biological weapons also pose a serious threat to humanity. The Iranian nation, which is itself a victim of chemical weapons, feels more than any other nationthe danger that is caused by the production and stockpiling of such weapons and is prepared to make use of all its facilities to counter such threats.

To see the Supreme Leader’s “nuclear” views, US and Israeli warmongers could do worse than to consult his website. Of course, they won’t.

What’s certain is that Khamenei seems to be digging in for the long haul. Retired Major General Mohsen Rezaei, the secretary-general of the Expediency Council, said it in so many words. Western sanctions will go on for at least another five years, and are much tougher than those imposed during the 1980-1988 Iran-Iraq war.

Rezai also said that, for 16 years, when Rafsanjani and then Khatami served as presidents, Iran tried to reach some sort of deal with the US, but “because the gap [between the two] was too deep, a compromise was not possible … We allowed them to inspect Natanz, we reduced the number of centrifuges, we suspended the Isfahan [uranium conversion facility], and our president [Khatami] began the ‘dialogue among civilisations’. But Bush declared that Iran, Iraq and North Korea constituted the ‘axis of evil’ and began a confrontation with us.” (Here’s the original text, in Farsi.)

A former spokesman for the Iranian nuclear negotiation team, Ambassador Hossein Mousavian, brought this confrontational mood up to date – to the IAEA team visit to Iran last October, led by Deputy Director General Herman Nackaerts – the same Nackaerts who was back in Iran last week.

According to Mousavian, “during the visit, Fereydoon Abbasi-Davani, the head of Iran’s Atomic Energy Organisation, offered a blank cheque to the IAEA, granting full transparency, openness to inspections and co-operation with the IAEA. He also informed Nackaerts of Iran’s receptiveness to putting the country’s nuclear programme under ‘full IAEA supervision’, including implementing the Additional Protocol for five years, provided that sanctions against Iran were lifted”.

Washington’s reaction was predictable: instead of diplomacy, more belligerence. The next steps are well-known; the Fast-and-Furious plot trying to frame Tehran for the assassination attempt on the Saudi ambassador to the US; the pressure to divert the IAEA’s November 2011 report on Iran by adding a spin on a “possible” military angle to the nuclear programme; the oil embargo; the sponsoring of a UN resolution against Iran on terrorism; and the list goes on.

A new report by the International Crisis Group (ICG), based in Brussels, virtually endorses Iran’s approach as outlined by Mousavian. The result would be the recognition of Iran’s right to enrich uranium up to five per cent, and the lifting of existing sanctions – in stages.

The report recommends the US and the EU follow Turkey’s diplomatic way of dealing with Iran. Instead of sanctions, sabotage and non-stop threats of war, the report stresses that “economic pressure is at best futile, at worse counter-productive”, and that Tehran “ought to be presented with a realistic proposal”. This is exactly what the BRICS group of emerging powers, plus Turkey, has been advocating all along.

Show me the path of the Imam

In all matters external and internal, in Iran the buck stops with Khamenei – and not with end-of-mandate Ahmadinejad. If the Supreme Leader seems to have his pulse firmly on the nuclear dossier, home matters are infinitely more complicated. Khamenei may take comfort that, outside the big cities, he remains quite popular – as government loans in rural areas remain generous, at least while the new Western sanctions have yet to bite. 

But high-ranking clerics in Qom are now openly calling for legal mechanisms to oversee – and criticise – him; his response – hardly a secret in Tehran – was to order all their offices and homes to be bugged.

Khamenei has vehemently rejected any sort of oversight by the Council of Experts – the Iranian body that appoints the Supreme Leader, monitors his performance, and can even topple him.

According to Seyyed Abbas Nabavi, the head of the Organisation for Islamic Civilisation and Development, Khamenei told the experts: “I do not accept the assembly can say that the Supreme Leader is still qualified, but then question why such and such official was directed in a certain direction, or why I allowed a certain official [to do certain things].” (Here’s the original text, in Farsi.)

In 2011, I heard from exiled Iranian film director Mohsen Makhmalbaf that, “we actually started the Arab Spring, in 2009, with the Green movement in the streets”. Following the outbursts of outrage after the election result – when for the first time Iranians openly called for the downfall of the Supreme Leader – revolt steadily marches on, with urban, highly educated professionals deriding Khamenei as stubborn, jealous and vindictive, and holding a monster grudge against those millions who never swallowed his endorsement of Ahmadinejad in 2009 (he always calls them “seditionists”).

For instance, even the daughter of a well-known ayatollah has gone public, saying that Khamenei “holds a grudge in his heart” against Rafsanjani and former presidential candidates Mousavi and Karoubi “because of the Imam’s [Khomeini’s] love and support for them – and also because, in comparison to these three, in particular Hashemi [Rafsanjani] and Mousavi, he is clearly a second-rate individual”.

Khamenei is now being widely blamed for anything from Iran’s falling production capacity to mounting inflation and widespread corruption.  

And that leads us to another key question: What about the IRGC’s support for the Supreme Leader?

“The cream of the IRGC is engaged in a sort of economic war against the bazaaris – the traditionally very conservative Persian merchants.”

The Iranian diaspora largely considers this support to be pure propaganda. Yet the fact is that the IRGC is not only an army, but a monster conglomerate with myriad military-industrial, economic and financial interests. Top managers – and the array of enterprises they control – are bound to the ethos of antagonising the West, the same West from whose sanctions they handsomely profit. So, for them, the status quo is nice and dandy – even with the everyday possibility of a miscalculation, or a false-flag operation, leading to war.    

At the same time, the IRGC may count on the key strategic/political support of BRICS members – Russia and China – and is certain that the country will be able to dribble the embargo and keep selling oil mostly to Asian clients (currently 62 per cent of exports, and rising).   

But what’s really juicy, in terms of Iran’s internal dynamic, is the fact that the cream of the IRGC is engaged in a sort of economic war against the bazaaris – the traditionally very conservative Persian merchants.  

It’s crucial to remember that these bazaaris financed the so-called “Path of the Imam” Islamic Revolution. They were – and remain – radically anti-colonialist (especially as practiced by the Brits and then the US); but this does not mean they are anti-Western (something that most in the West still don’t understand).

Once again, as top Iranian analysts have been ceaselessly pointing out, one must remember that the Islamic Revolution’s original motto was “Neither East nor West”; what mattered was a sort of curiously Buddhist “middle of the road” – exactly that “Path of the Imam” which would guarantee Islamic Iran as a sovereign, non-aligned country.

And guess who was part of this original “Path of the Imam” coalition of the willing? Exactly: Khamenei (and Ahmadinejad) foes Mousavi, Khatami, Karoubi and Rafsanjani, not to mention a moderate faction of the IRGC, graphically symbolised by former IRGC commander and former presidential candidate, Mohsen Rezai.

So what the “Path of the Imam” coalition is essentially saying is that Khamenei is a traitor of the principles of the revolution; they accuse him of trying to become a sort of Shia Caliph – an absolute ruler. This message is increasingly getting public resonance among millions of Iranians who believe in certainly an “Islamic”, but most of all a “true” “Republic”.

And that leads us to the Supreme Leader’s supreme fear, that a coalition of purists – including influential Qom clerics and powerful IRGC commanders or former commanders, with widespread urban support – may eventually rise up, get rid of him, and finally implement their dream of a true Islamic Republic. Only this is certain: The one thing they won’t get rid of is Iran’s civilian nuclear programme.

Greece Could Take Down Wall Street

Filed under: Uncategorized — Mr. Craig @ 3:50 pm

How Greece Could Take Down Wall Street

Wednesday 22 February 2012
by: Ellen Brown, Web of Debt Blog | News Analysis

A truck with a black flag, which is displayed in protest of moves by the Greek government to opening the trucking profession, on a road in Elefsina, Greece, on September 22, 2010. (Photo: Angelos Tzortzinis / The New York Times)

In an article titled “Still No End to ‘Too Big to Fail,’” William Greider wrote in The Nation on February 15th:

Financial market cynics have assumed all along that Dodd-Frank did not end “too big to fail” but instead created a charmed circle of protected banks labeled “systemically important” that will not be allowed to fail, no matter how badly they behave.

That may be, but there is one bit of bad behavior that Uncle Sam himself does not have the funds to underwrite: the $32 trillion market in credit default swaps (CDS).

  Thirty-two trillion dollars is more than twice the U.S. GDP and more than twice the national debt. 

CDS are a form of derivative taken out by investors as insurance against default.  According to the Comptroller of the Currency, nearly 95% of the banking industry’s total exposure to derivatives contracts is held by the nation’s five largest banks: JPMorgan Chase, Citigroup, Bank of America, HSBC, and Goldman Sachs.  The CDS market is unregulated, and there is no requirement that the “insurer” actually have the funds to pay up.  CDS are more like bets, and a massive loss at the casino could bring the house down.

It could, at least, unless the casino is rigged.  Whether a “credit event” is a “default” triggering a payout is determined by the International Swaps and Derivatives Association (ISDA), and it seems that the ISDA is owned by the world’s largest banks and hedge funds.  That means the house determines whether the house has to pay. 

The Houses of Morgan, Goldman and the other Big Five are justifiably worried right now, because an “event of default” declared on European sovereign debt could jeopardize their $32 trillion derivatives scheme.  According to Rudy Avizius in anarticle on The Market Oracle (UK) on February 15th, that explains what happened at MF Global, and why the 50% Greek bond write-down was not declared an event of default. 

If you paid only 50% of your mortgage every month, these same banks would quickly declare you in default.  But the rules are quite different when the banks are the insurers underwriting the deal. 

MF Global: Canary in the Coal Mine?

MF Global was a major global financial derivatives broker until it met its unseemly demise on October 30, 2011, when it filed the eighth-largest U.S. bankruptcy after reporting a “material shortfall” of hundreds of millions of dollars in segregated customer funds.  The brokerage used a large number of complex and controversial repurchase agreements, or “repos,” for funding and for leveraging profit.  Among its losing bets was something described as a wrong-way $6.3 billion trade the brokerage made on its own behalf on bonds of some of Europe’s most indebted nations.

Avizius writes:

[A]n agreement was reached in Europe that investors would have to take a write-down of 50% on Greek Bond debt. Now MF Global was leveraged anywhere from 40 to 1, to 80 to 1 depending on whose figures you believe. Let’s assume that MF Global was leveraged 40 to 1, this means that they could not even absorb a small 3% loss, so when the “haircut” of 50% was agreed to, MF Global was finished. It tried to stem its losses by criminally dipping into segregated client accounts, and we all know how that ended with clients losing their money. . . . 

However, MF Global thought that they had risk-free speculation because they had bought these CDS from these big banks to protect themselves in case their bets on European Debt went bad. MF Global should have been protected by its CDS, but since the ISDA would not declare the Greek “credit event” to be a default, MF Global could not cover its losses, causing its collapse.

The house won because it was able to define what “ winning” was.  But what happens when Greece or another country simply walks away and refuses to pay?  That is hardly a “haircut.”  It is a decapitation.  The asset is in rigor mortis.  By no dictionary definition could it not qualify as a “default.”

That sort of definitive Greek default is thought by some analysts to be quite likely, and to be coming soon.  Dr. Irwin Stelzer, a senior fellow and director of Hudson Institute’s economic policy studies group, was quoted in Saturday’s Yorkshire Post (UK) as saying:

It’s only a matter of time before they go bankrupt. They are bankrupt now, it’s only a question of how you recognise it and what you call it.

Certainly they will default . . . maybe as early as March. If I were them I’d get out [of the euro].

The Midas Touch Gone Bad

In an article in The Observer (UK) on February 11th  titled “The Mathematical Equation That Caused the Banks to Crash,” Ian Stewart wrote of the Black-Scholes equation that opened up the world of derivatives:

The financial sector called it the Midas Formula and saw it as a recipe for making everything turn to gold.  But the markets forgot how the story of King Midas ended.

As Aristotle told this ancient Greek tale, Midas died of hunger as a result of his vain prayer for the golden touch.  Today, the Greek people are going hungry to protect a rigged $32 trillion Wall Street casino.  Avizius writes:

The money made by selling these derivatives is directly responsible for the huge profits and bonuses we now see on Wall Street. The money masters have reaped obscene profits from this scheme, but now they live in fear that it will all unravel and the gravy train will end. What these banks have done is to leverage the system to such an extreme, that the entire house of cards is threatened by a small country of only 11 million people. Greece could bring the entire world economy down. If a default was declared, the resulting payouts would start a chain reaction that would cause widespread worldwide bank failures, making the Lehman collapse look small by comparison.

Some observers question whether a Greek default would be that bad.  According to a comment on Forbes on October 10, 2011:

[T]he gross notional value of Greek CDS contracts as of last week was €54.34 billion, according to the latest report from data repository Depository Trust & Clearing Corporation (DTCC). DTCC is able to undertake internal netting analysis due to having data on essentially all of the CDS market. And it reported that the net losses would be an order of magnitude lower, with the maximum amount of funds that would move from one bank to another in connection with the settlement of CDS claims in a default being just €2.68 billion, total.  If DTCC’s analysis is correct, the CDS market for Greek debt would not much magnify the consequences of a Greek default—unless it stimulated contagion that affected other European countries. 

It is the “contagion,” however, that seems to be the concern.  Players who have hedged their bets by betting both ways cannot collect on their winning bets; and that means they cannot afford to pay their losing bets, causing other players to also default on their bets.  The dominos go down in a cascade of cross-defaults that infects the whole banking industry and jeopardizes the global pyramid scheme.  The potential for this sort of nuclear reaction was what prompted billionaire investor Warren Buffett to call derivatives “weapons of financial mass destruction.”  It is also why the banking system cannot let a major derivatives player—such as Bear Stearns or Lehman Brothers—go down.  What is in jeopardy is the derivatives scheme itself.  According to an article in The Wall Street Journal on January 20th:

Hanging in the balance is the reputation of CDS as an instrument for hedgers and speculators—a $32.4 trillion market as of June last year; the value that may be assigned to sovereign debt, and $2.9 trillion of sovereign CDS, if the protection isn’t seen as reliable in eliciting payouts; as well as the impact a messy Greek default could have on the global banking system.

Players in the future may simply refuse to play.  When the house is so obviously rigged, the legitimacy of the whole CDS scheme is called into question.  As MF Global found out the hard way, there is no such thing as “risk-free speculation” protected with derivatives. 

Wall Street in the White House?

Filed under: Uncategorized — Mr. Craig @ 3:30 pm

As public anger with bankers remains high, we ask how big a role financiers will play in the US presidential elections. Does anyone really believe Romney or ANY republican if elected President will go after Bankers  for Fraud and to file Criminal Complaints against ANYONE  on Wall Street?

The Republican Party may have its doubts about Mitt Romney, but when it comes to Wall Street it is a completely different story. Financial executives are throwing their support, and their money, behind Romney’s bid for the White House.

Figures released recently show Wall Street has shifted its support toward the former Massachusetts governor and away from Barack Obama, the US president.

“There may be an issue with regard to the Super PACs and transparency is a big issue. But money in America, at least in terms of campaign contributions, is seen as free speech. So it is up to the voter to do a little more research but it is quite obvious where the money is coming from. Money and politics is nothing new … Wall Street does play both sides, and the American voter knows that.”

– Ford O’Connell, a Republican strategist

A campaign monitoring group found that in 2011 the leaders of six Wall Street giants gave nearly $2m to Romney’s campaign.

They have also been joined by hedge fund managers and private equity leaders who have been pouring money into Romney’s unofficial political action committee or Super PAC – the machine behind his now-infamous campaign attack ads.

It underscores the influence that Wall Street has on US politics. Romney himself is a former private equity executive.

And it is not just the Republicans. Obama won the presidency thanks in no small part to the investment firm Goldman Sachs – the biggest backer of his 2008 campaign.

And despite tough talk about reining-in the excesses of the bankers, Obama’s government is peppered with former finance industry executives or figures close to Wall Street.

Among them is Timothy Geithner, the US treasury secretary who was criticised for his instrumental 
role in ensuring big banks were paid in full from a taxpayer bailout of AIG insurance during the financial crisis.

“We are seeing a degradation of the political process. It used to be a joke that we have the best democracy or government money can buy. But it is no longer a joke, no longer said with humour but with bitterness by growing numbers of Americans. This is dividing the country politically, ideologically and ethically.”

– Richard Wolff, an emeritus economics professor, University of Massachusetts

Then there is Larry Summers, who served as Obama’s chief economic advisor. Under Bill Clinton, the former US president, Summers championed financial deregulation and later earned millions from Wall Street companies.

And all three of those who have served as Obama’s chief of staff are former Wall Street executives.

The battle for and against controls on Wall Street has been raging for the last couple of decades.

More than 60 years of financial regulation under the Glass Steagall Act came to an end in 1999 after intense lobbying from the banking industry.

Many economists say the resulting increase in risky and fraudulent bank practices led to the financial crisis four years ago.

The banking industry again lobbied hard against tightening the rules, but eventually the Dodd-Frank Act was passed, which once again imposed, albeit limited, regulation.

Romney, however, has pledged to repeal the Dodd-Frank Act should he win in November, leaving no regulation whatsoever.

So, what role will Wall Street play in the 2012 election? 

Joining Inside Story US 2012 with presenter Lisa Fletcher are guests: Ford O’Connell, a Republican strategist formerly with John McCain’s campaign; Bob Biersack, a senior fellow at the Center for Responsive Politics, a group that monitors campaign funds; and Richard Wolff, an emeritus economics professor at the University of Massachusetts.

“The money that has been available to different sources in different ways in the ’80s and ’90s it was soft money, corporate money, unlimited individual contributions going directly to the parties. Now it goes to these outside groups that parties are prohibited from taking it, but can be used in spending directly on the election carrying very specific messages.”
Bob Biersack, a senior fellow at the Center for Responsive Politics

The cash cow of US politics:
> Wall Street has outspent all other special interest groups in all areas of this year’s national election, which includes not just the US presidency but also races for Congress.

> The majority of the money spent – nearly 53 per cent – went to the Republicans, compared to 32 per cent to the Democrats. Multinational investment giant Goldman Sachs is Wall Street’s biggest donor. Sachs was also Obama’s top contributor in 2008.

> Wall Street has so far given more than $12m to Romney’s official campaign, twice as much as to Obama.

The imperial way: US decline in perspective

Filed under: Uncategorized — Mr. Craig @ 3:00 pm

Imperialism is still with us, but power has become more broadly distributed in a diversifying world.

Cambridge, MA – In the years of conscious, self-inflicted decline at home, “losses” continued to mount elsewhere. In the past decade, for the first time in 500 years, South America has taken successful steps to free itself from western domination, another serious loss. The region has moved towards integration, and has begun to address some of the terrible internal problems of societies ruled by mostly Europeanised elites, tiny islands of extreme wealth in a sea of misery. They have also rid themselves of all US military bases and of IMF controls. A newly formed organisation, CELAC, includes all countries of the hemisphere apart from the US and Canada. If it actually functions, that would be another step in US decline, in this case in what has always been regarded as “the backyard”.

The MENA countries have been regarded as ‘one of the greatest material prizes in world history’ [GALLO/GETTY]

Even more serious would be the loss of the MENA countries – Middle East/North Africa – which have been regarded by planners since the 1940s as “a stupendous source of strategic power, and one of the greatest material prizes in world history”, Control of MENA energy reserves would yield “substantial control of the world”, in the words of the influential Roosevelt advisor AA Berle. To be sure, if the projections of a century of US energy independence based on North American energy resources turn out to be realistic, the significance of controlling MENA would decline somewhat, though probably not by much: the main concern has always been control more than access. However, the likely consequences to the planet’s equilibrium are so ominous that discussion may be largely an academic exercise.

The Arab Spring, another development of historic importance, might portend at least a partial “loss” of MENA. The US and its allies have tried hard to prevent that outcome – so far, with considerable success. Their policy towards the popular uprisings has kept closely to the standard guidelines: support the forces most amenable to US influence and control. Favoured dictators are supported as long as they can maintain control (as in the major oil states). When that is no longer possible, then discard them and try to restore the old regime as fully as possible (as in Tunisia and Egypt). The general pattern is familiar: Somoza, Marcos, Duvalier, Mobutu, Suharto, and many others. In one case, Libya, the three traditional imperial powers intervened by force to participate in a rebellion to overthrow a mercurial and unreliable dictator, opening the way, it is expected, to more efficient control over Libya’s rich resources (oil primarily, but also water, of particular interest to French corporations), to a possible base for the US Africa Command (so far restricted to Germany), and to the reversal of growing Chinese penetration. As far as policy goes, there have been few surprises.

Crucially, it is important to reduce the threat of functioning democracy, in which popular opinion will significantly influence policy. That again is routine, and quite understandable. A look at the studies of public opinion undertaken by US polling agencies in the MENA countries easily explains the western fear of authentic democracy, in which public opinion will significantly influence policy.

Israel and the Republican Party

Similar considerations carry over directly to the second major concern addressed in the issue of Foreign Affairs cited in part one of this piece: the Israel-Palestine conflict. Fear of democracy could hardly be more clearly exhibited than in this case. In January 2006, an election took place in Palestine, pronounced free and fair by international monitors. The instant reaction of the US (and of course Israel), with Europe following along politely, was to impose harsh penalties on Palestinians for voting the wrong way.

“For 35 years the US has led the rejectionist camp on Israel-Palestine.”

That is no innovation. It is quite in accord with the general and unsurprising principle recognised by mainstream scholarship: the US supports democracy if, and only if, the outcomes accord with its strategic and economic objectives, the rueful conclusion of neo-Reaganite Thomas Carothers, the most careful and respected scholarly analyst of “democracy promotion” initiatives.

More broadly, for 35 years the US has led the rejectionist camp on Israel-Palestine, blocking an international consensus calling for a political settlement in terms too well known to require repetition. The western mantra is that Israel seeks negotiations without preconditions, while the Palestinians refuse. The opposite is more accurate. The US and Israel demand strict preconditions, which are, furthermore, designed to ensure that negotiations will lead either to Palestinian capitulation on crucial issues, or nowhere.

The first precondition is that the negotiations must be supervised by Washington, which makes about as much sense as demanding that Iran supervise the negotiation of Sunni-Shia conflicts in Iraq. Serious negotiations would have to be under the auspices of some neutral party, preferably one that commands some international respect, perhaps Brazil. The negotiations would seek to resolve the conflicts between the two antagonists: the US and Israel on one side, most of the world on the other.

The second precondition is that Israel must be free to expand its illegal settlements in the West Bank. Theoretically, the US opposes these actions, but with a very light tap on the wrist, while continuing to provide economic, diplomatic and military support. When the US does have some limited objections, it very easily bars the actions, as in the case of the E-1 project linking Greater Jerusalem to the 39,000-resident settlement of Ma’aleh Adumim, virtually bisecting the West Bank, a very high priority for Israeli planners (across the spectrum), but which raised some objections in Washington, so that Israel has had to resort to devious measures to chip away at the project.

The pretence of opposition reached the level of farce in February 2011 when Obama vetoed a Security Council resolution calling for implementation of official US policy (also adding the uncontroversial observation that the settlements themselves are illegal, quite apart from their expansion). Since that time there has been little talk about ending settlement expansion, which continues, with studied provocation.

Thus, as Israeli and Palestinian representatives prepared to meet in Jordan in January 2011, Israel announced new construction in Pisgat Ze’ev and Har Homa, West Bank areas that it has declared to be within the greatly expanded area of Jerusalem, annexed, settled, and constructed as Israel’s capital – all in violation of direct Security Council orders. Other moves carry forward the grander design of separating whatever West Bank enclaves will be left to Palestinian administration from the cultural, commercial, political centre of Palestinian life in the former Jerusalem.

It is understandable that Palestinian rights should be marginalised in US policy and discourse. Palestinians have no wealth or power. They offer virtually nothing to US policy concerns; in fact, they have negative value, as a nuisance that stirs up “the Arab street”.

Israel, in contrast, is a valuable ally. It is a rich society with a sophisticated, largely militarised high-tech industry. For decades, it has been a highly valued military and strategic ally, particularly since 1967, when it performed a great service to the US and its Saudi ally by destroying the Nasserite “virus”, establishing the “special relationship” with Washington in the form that has persisted since. It is also a growing centre for US high-tech investment. In fact, high-tech –  particularly military – industries in the two countries are closely linked.

Apart from such elementary considerations of great power politics as these, there are cultural factors that should not be ignored. Christian Zionism in Britain and the US long preceded Jewish Zionism, and has been a significant elite phenomenon with clear policy implications (including the Balfour Declaration, which drew from it). When General Allenby conquered Jerusalem during World War I, he was hailed in the US press as “Richard the Lion-Hearted”, who had at last won the Crusades and driven the pagans out of the Holy Land.

The next step was for the Chosen People to return to the land promised to them by the Lord. Articulating a common elite view, President Franklin Roosevelt’s Secretary of the Interior Harold Ickes described Jewish colonisation of Palestine as an achievement “without comparison in the history of the human race”. Such attitudes find their place easily within the Providentialist doctrines that have been a strong element in popular and elite culture since the country’s origins: the belief that God has a plan for the world, and that the US is carrying it forward under divine guidance, as articulated by a long list of leading figures.

Moreover, evangelical Christianity is a major popular force in the US. Further towards the extremes, End Times evangelical Christianity also has enormous popular outreach, invigorated by the establishment of Israel in 1948, revitalised even more by the conquest of the rest of Palestine in 1967 – all signs that End Times and the Second Coming are approaching.

These forces have become particularly significant since the Reagan years, as the Republicans have abandoned the pretence of being a political party in the traditional sense, while devoting themselves in virtual lockstep uniformity to servicing a tiny percentage of the super-rich and the corporate sector. However, the small constituency that is primarily served by the reconstructed party cannot provide votes, so they have to turn elsewhere. 

The only choice is to mobilise tendencies that have always been present, though rarely as an organised political force: primarily nativists trembling in fear and hatred, and religious elements – extremists by international standards if not in the US. One outcome is reverence for alleged Biblical prophecies, hence not only support for Israel and its conquests and expansion, but passionate love for Israel, another core part of the catechism that must be intoned by Republican candidates – with Democrats, again, not too far behind.

These factors aside, it should not be forgotten that the “Anglosphere” – Britain and its offshoots – consists of settler-colonial societies, which rose on the ashes of indigenous populations, suppressed or virtually exterminated. Past practices must have been basically correct, in the US case even ordained by Divine Providence. Accordingly there is often an intuitive sympathy for the children of Israel when they follow a similar course. But primarily, geostrategic and economic interests prevail, and policy is not graven in stone.

The Iranian ‘threat’ and the nuclear issue

Let us turn finally to the third of the leading issues addressed in the establishment journals cited earlier, the “threat of Iran”. Among elites and the political class this is generally taken to be the primary threat to world order – though not among populations. In Europe, polls show that Israel is regarded as the leading threat to peace. In the MENA countries, that status is shared with the US, to the extent that, in Egypt, on the eve of the Tahrir Square uprising, 80 per cent felt that the region would be more secure if Iran had nuclear weapons. The same polls found that only ten per cent regard Iran as a threat – unlike the ruling dictators, who have their own concerns.

In the United States, before the massive propaganda campaigns of the past few years, a majority of the population agreed with most of the world that, as a signatory of the Non-Proliferation Treaty, Iran has a right to carry out uranium enrichment. And even today, a large majority favours peaceful means for dealing with Iran. There is even strong opposition to military engagement if Iran and Israel are at war. Only a quarter regard Iran as an important concern for the US altogether. But it is not unusual for there to be a gap, often a chasm, dividing public opinion and policy.

Why exactly is Iran regarded as such a colossal threat? The question is rarely discussed, but it is not hard to find a serious answer – though not, as usual, in the fevered pronouncements. The most authoritative answer is provided by the Pentagon and the intelligence services in their regular reports to Congress on global security. They report that Iran does not pose a military threat. Its military spending is very low, even by the standards of the region – minuscule, of course, in comparison with the US.


“It makes very good sense to try to prevent Iran from joining the nuclear weapons states, including the three that have refused to sign the Non-Proliferation Treaty – Israel, India and Pakistan – all of which have been assisted in developing nuclear weapons by the US, and are still being assisted by them.”


Iran has little capacity to deploy force. Its strategic doctrines are defensive, designed to deter invasion long enough for diplomacy to set it. If Iran is developing nuclear weapons capability, they report, that would be part of its deterrence strategy. No serious analyst believes that the ruling clerics are eager to see their country and possessions vaporised, the immediate consequence of their coming even close to initiating a nuclear war. And it is hardly necessary to spell out the reasons why any Iranian leadership would be concerned with deterrence, under existing circumstances.

The regime is doubtless a serious threat to much of its own population – and regrettably, is hardly unique on that score. But the primary threat to the US and Israel is that Iran might deter their free exercise of violence. A further threat is that the Iranians clearly seek to extend their influence to neighboring Iraq and Afghanistan, and beyond as well. Those “illegitimate” acts are called “destabilising” (or worse). In contrast, forceful imposition of US influence halfway around the world contributes to “stability” and order, in accord with traditional doctrine about who owns the world.

It makes very good sense to try to prevent Iran from joining the nuclear weapons states, including the three that have refused to sign the Non-Proliferation Treaty – Israel, India and Pakistan – all of which have been assisted in developing nuclear weapons by the US, and are still being assisted by them. It is not impossible to approach that goal by peaceful diplomatic means. One approach, which enjoys overwhelming international support, is to undertake meaningful steps towards establishing a nuclear weapons-free zone in the Middle East, including Iran and Israel (and applying as well to US forces deployed there), better still extending to South Asia. 

Support for such efforts is so strong that the Obama administration has been compelled to formally agree, but with reservations: crucially, that Israel’s nuclear program must not be placed under the auspices of the International Atomic Energy Association, and that no state (meaning the US) should be required to release information about “Israeli nuclear facilities and activities, including information pertaining to previous nuclear transfers to Israel”. Obama also accepts Israel’s position that any such proposal must be conditional on a comprehensive peace settlement, which the US and Israel can continue to delay indefinitely.

This survey comes nowhere near being exhaustive, needless to say. Among major topics not addressed is the shift of US military policy towards the Asia-Pacific region, with new additions to the huge military base system underway right now, in Jeju Island off South Korea and Northwest Australia, all elements of the policy of “containment of China”. Closely related is the issue of US bases in Okinawa, bitterly opposed by the population for many years, and a continual crisis in US-Tokyo-Okinawa relations.

Revealing how little fundamental assumptions have changed, US strategic analysts describe the result of China’s military programs as a “classic ‘security dilemma’, whereby military programs and national strategies deemed defensive by their planners are viewed as threatening by the other side”, writes Paul Godwin of the Foreign Policy Research Institute. The security dilemma arises over control of the seas off China’s coasts. The US regards its policies of controlling these waters as “defensive”, while China regards them as threatening; correspondingly, China regards its actions in nearby areas as “defensive” while the US regards them as threatening. No such debate is even imaginable concerning US coastal waters. This “classic security dilemma” makes sense, again, on the assumption that the US has a right to control most of the world, and that US security requires something approaching absolute global control.

While the principles of imperial domination have undergone little change, the capacity to implement them has markedly declined as power has become more broadly distributed in a diversifying world. Consequences are many. It is, however, very important to bear in mind that – unfortunately – none lifts the two dark clouds that hover over all consideration of global order: nuclear war and environmental catastrophe, both literally threatening the decent survival of the species.

Quite the contrary. Both threats are ominous, and increasing.

Manufacturing Job Illusions

Filed under: Uncategorized — Mr. Craig @ 2:49 pm

Improvement in the US manufacturing sector obscures the fact that workers, by and large, aren’t sharing in the gains.

Berkeley, CA – Suddenly, manufacturing is back – at least on the election trail. But don’t be fooled. The real issue isn’t how to get manufacturing back. It’s how to get good jobs and good wages back. They aren’t at all the same thing.

Republicans have become born-again champions of US manufacturing. This may have something to do with crucial primaries occurring next week in Michigan and the following week in Ohio, both of them former arsenals of manufacturing.

Mitt Romney says he’ll “work to bring manufacturing back” to the US by being tough on China, which he describes as “stealing jobs” by keeping value of its currency artificially low and thereby making its exports cheaper.

Rick Santorum promises to “fight for American manufacturing” by eliminating corporate income taxes on manufacturers and allowing corporations to bring their foreign profits back to the US tax-free – as long as they use the money to build new factories.

President Obama has also been pushing a manufacturing agenda. Last month the president unveiled a six-point plan to eliminate tax incentives for companies to move offshore and create new lures for them to bring jobs home. “Our goal,” he said, is to “create opportunities for hard-working Americans to start making stuff again”.

Meanwhile, consumers’ pent-up demand for appliances, cars, and trucks have created a small boomlet in US manufacturing – setting off a wave of hope, mixed with nostalgic patriotism, that US manufacturing could be coming back. Clint Eastwood’s Super Bowl “Halftime in America” hit the mood exactly.

But US manufacturing won’t be coming back. Although 404,000 manufacturing jobs have been added since January 2010, that still leaves us with 5.5 million fewer factory jobs today than in July 2000 – and 12 million fewer than in 1990. The long-term trend is fewer and fewer factory jobs.

Even if we didn’t have to compete with lower-wage workers overseas, we’d still have fewer factory jobs – because the old assembly line has been replaced by numerically controlled machine tools and robotics. Manufacturing is going high-tech.

“GM just announced record profits – but its new workers won’t be getting much of a share.”

Bringing back US manufacturing isn’t the real challenge, anyway. It’s creating good jobs for the majority of Americans who lack four-year college degrees.

Manufacturing used to supply lots of these kinds of jobs, but that was only because factory workers were represented by unions powerful enough to get high wages.

That’s no longer the case. Even the once-mighty United Auto Workers has been forced to accept pay packages for new hires at the Big Three that provide half what new hires got a decade ago. At $14 an hour, new auto workers earn about the same as most service-sector workers in the US.

GM just announced record profits – but its new workers won’t be getting much of a share.

In the 1950s, more than a third of US workers were represented by a union. Now, fewer than seven per cent of private sector workers have a union behind them. If there’s a single reason why the median wage has dropped dramatically for non-college workers over the past three and a half decades, it’s the decline of unions.

How do the candidates stand on unions? Mitt Romney has done nothing but bash them. He vows to pass so-called “right to work” legislation barring job requirements of union membership and payment of union dues. “I’ve taken on union bosses before,” he said, “and I’m happy to take them on again”. When Romney’s not blaming China for US manufacturers’ competitive problems, he blames high union wages. Romney accuses the president of “stacking” the National Labor Relations Board with “union stooges”.

Rick Santorum says he’s supportive of private-sector unions. While in the Senate he voted against a national right to work law (Romney is now attacking him on this), but Santorum isn’t interested in strengthening unions, and he doesn’t like them in the public sector.

President Obama praises “unionised plants” – such as Master Lock, the Milwaukee maker of padlocks he visited last week, which brought back 100 jobs from China. But the president has not promised that if reelected he’d push for the Employee Free Choice Act, which would make it easier for workers to organise a union. He had supported it in the 2008 election but never moved the legislation once elected.

“Although jobs are slowly returning, wages continue to drop, adjusted for inflation.”

The president has also been noticeably silent on the labour struggles that have been roiling the Midwest – from Wisconsin’s assault on the bargaining rights of public employees, through Indiana’s recently enacted right to work law – the first in the Rust Belt.

The fact is, US corporations – in both manufacturing and services – are doing wonderfully well. Their third-quarter profits (the latest data available) totaled $2tn. That’s 19 per cent higher than the pre-recession peak five years ago.

But workers aren’t sharing in this bounty. Although jobs are slowly returning to the country, wages continue to drop, adjusted for inflation. Of every dollar of income earned in the United States in the third quarter, just 44 cents went to workers’ wages and salaries – the smallest share since the government began keeping track in 1947.

The fundamental problem isn’t the decline of US manufacturing, and reviving manufacturing won’t solve it. The problem is the declining power of workers to share in the gains of the economy.

How Will the Republican Candidates Create Jobs?

Filed under: Uncategorized — Mr. Craig @ 2:15 pm

A closer look at the job plans of the Mitt Romney and Rick Santorum campaigns.

n Pedro, CA – We start with Romney, who released his jobs plan in September, getting a brief jump on President Obama’s employment speech to Congress. Despite its title, Romney’s plan is anything but tightly focused on job creation ideas. Quite the opposite, it rambles all over the map, while including 95 separate proposals. In unveiling it, Romney claimed his plan would produce 11.5 million jobs in his first term, with average GDP growth of four per cent per year, and a reduction in the unemployment rate from the then-current 9.1 per cent to 5.9 per cent.

These claims seem dubious, at best. No Republican president since the Great Depression has presided over a four-year term with four per cent average growth. Only Democrats have done this well (or better) – and indeed, every Democrat except Jimmy Carter managed this level of growth for at least one term. Ronald Reagan’s second-term 3.7 per cent GDP growth – the best Republican record in this era – trailed Bill Clinton’s 4.4 per cent second-term growth, while George W Bush’s best – 2.2 per cent – was just half that of Clinton’s. While Johnson topped five per cent, Truman barely missed that mark and FDR topped 7.8 per cent his first term and just missed 15 per cent during World War II. There’s an old saying from the New Deal era: “If you want to live like a Republican, you must vote like a Democrat.” Three generations down the road, the historical record still bears this out.

Although Romney’s plan was touted as a “bold, sweeping and detailed proposal” promising a “fundamental turnaround of the American economy”, the pro-GOP Wall Street Journal said his plan “shrinks from some of the biggest issues”, and “strike[s] us as surprisingly timid and tactical considering our economic predicament”, whilePolitico noted: “Many of Romney’s proposed policies are standard GOP fare: cutting corporate taxes, reducing government spending, eliminating burdensome regulations, expanding US energy production and restricting the power of labour unions.” None of which have a particularly strong proven relationship with job creation.

What Politico called “standard GOP fare” generally means actions that favour GOP-aligned groups, regardless of economic impact. They help redistribute power and money upwards. Thus, Romney’s plan included these seven anti-labour provisions, none of which has any obvious job-creation role:

  • (40) Appoint to the NLRB (National Labour Relations Board) experienced individuals with respect for the rule of law.
  • (41) Amend NLRA (National Labour Relations Act) to explicitly protect the right of business owners to allocate their capital as they see fit.
  • (42) Amend NLRA to guarantee the secret ballot in every union certification election.
  • (43) Amend NLRA to guarantee that all pre-election campaigns last at least one month.
  • (44) Support states in pursuing right-to-work laws.
  • (45) Prohibit the use for political purposes of funds automatically deducted from worker paycheques.
  • (46) Reverse executive orders issued by President Obama that tilt the playing field toward organised labour.

Similarly, Romney’s plan included a number of provisions to expand support for the fossil fuel industry (which, to be fair, Obama’s jobs panel also does), while concentrating support for green alternatives on “basic research” at a time when China, Europe and others are pouring production investments into these fundamental building blocks of the 21st century’s global economy. Besides favouring a dinosaur industry over a future-oriented one, fossil fuel production is notoriously capital-intensive, precisely the sort of spending that produces far fewer jobs per dollar than other uses of taxpayer money. How any such spending counts as a “jobs program” is a mystery indeed.

Despite the obstacles, there are two sensible ways to get a feel for Romney’s economic approach: first to look at the actions that he himself chose to highlight, and second, to look at his tax policies and spending policies – particularly regarding the big three – Medicare, Medicaid and Social Security, which in Romney’s case amounts to standard GOP fare (in order to get through the primaries) presented in a softer light (in order to not get massacred in the general election, should he get that far). On the first count, ABC News reported: “Romney says that, on the first day in office he would take ten actions to turn around the economy, including sending a package of five bills to Congress and asking for action within 30 days.”

Romney called that package of bills the “Day One, Job One Initiative”, clearly highlighting their importance, in his view. It included:

  • Reducing the corporate income tax from 35 per cent to 25 per cent, which he claimed would induce short-term job growth through incentive hiring;
  • Passing the “stalled” Colombia, Panama and South Korea Free Trade agreements;
  • Calling for a survey of US energy reserves that could in turn promote domestic production of energy and create jobs;
  • Making states responsible for retraining programs; and
  • Submitting a bill to cut non-security discretionary spending by five per cent

It should be noted that the “stalled” free trade agreements were passed by Congress roughly one month later, and signed by President Obama almost immediately. Although conservative Republicans and neo-liberal Democrats such as Obama are both ideologically devoted to such agreements, the empirical evidence on them is decidedly mixed, at best. The economic theory of comparative advantage, which supports them, is a static theory, rather than a dynamic, developmental one, which deeply undermines its credibility, as explained by economist Ian Fletcher in his paper, “[Seven] Dubious Assumptions of the Theory of Comparative Advantage”. Empirically, the most prominent example, NAFTA, has made mainstream economists happy, but the results for workers have been much more negative, as documented in a 2006 report from the Economic Policy Institute: “Revisiting NAFTA: Still Not Working for North America’s Workers”. Thus, Obama’s support for these “free trade agreements” is strong evidence of how similar his views are to mainstream Republicans, rather than being wildly alien, as he is often portrayed.

Romney also promised to issue five executive orders to:

  • Repeal “Obamacare”;
  • Eliminate or repeal any Obama-era regulations that “have a negative effect on job creation and economic growth”;
  • Develop a streamlined process to create new oil and gas drilling;
  • Sanction China for currency manipulation; and
  • Reverse pro-union orders issued by the Obama administration

Given that “Obamacare” is a federal law, Romney obviously can’t repeal it with an executive order. You’re supposed to learn this in high school civics class. Thus, Romney chose to give one of his top “job creation” slots to a political stunt to pander to the Republican base. Significantly, Romney’s plan only mumbled about Social Security and Medicare, which were briefly discussed, but did not appear on his summary list of his 59 points.  

Under the heading “Enact Entitlement Reform”, which also did not make his list of 59 points, Romney framed his approach thusly: “First, we must keep the promises made to our current retirees: their Social Security and Medicare benefits should not be affected. But second, we should ensure that the promises that we make to younger generations are promises we can keep.” Since Romney ruled out raising more revenue, this clearly means cutting benefits. Regarding Medicare, he said: “The plan put forward by Congressman Paul Ryan makes important strides” but “as president, Romney’s own plan will differ, but it will share those objectives”. 

Live Box 20121816112138306

Ryan’s plan would privatise Medicare through a voucher system that would only pay for a fraction of private medical insurance – a fraction that would continually decrease over time. Romney later said his plan would preserve the existing Medicare programme as an option, making it less punitive than Ryan’s plan, but also making it less economically coherent. In short, Romney plans deep cuts to government, but is reluctant to spell out the most painful details, much less consider how this will affect the economy and jobs. 

Turning to Romney’s tax plan as a whole, an analysis from Citizens for Tax Justice found that Romney’s plan, cutting government revenues by $6.6tn, “would give the richest one per cent an average tax cut of $126,450, which would be over 100 times as large as the average tax cut of $1,220 that the middle fifth of Americans would receive”. However, this is largely based on inference, since Romney has only made a few sweeping statements, without releasing any detailed proposals. He’s also made some contradictory statements indicating he would cut top tax rates below what he previously stated.

Romney’s plan was actually the least expensive of all the GOP candidate plans that Citizens for Tax Justice analysed. Nevertheless, by continuing the Bush tax cuts for the wealthy, and adding even more tax cuts on top of them, Romney is clearly doubling down on the GOP’s trickle-down approach that has repeatedly failed to generate broad prosperity or even levels of overall growth that could compare with what Democratic presidents have previously delivered.

Rick Santorum’s jobs proposals

In November, Rick Santorum released his “Made In America” plan to “revitalise the American economy”. At least he did not misleadingly label it a “jobs plan” – although the jobs theme is implicitly underscored in the plan itself. Like Romney, its primary focus is broadly political – favouring one group over another rather than focussing on policies beneficial to the country and economy as a whole, but it’s presented somewhat less starkly in us-vs-them terms (more highlighting “us”, less focus on “them”).

Meanwhile, it adds one and a half dimensions that Romney’s plan lacks: It has a number of proposals favouring larger families (even with higher divorce rates, this tends to favour Republicans) and it also rhetorically targets rebuilding domestic manufacturing – even though it also includes provisions that favour overseas US companies as well. Rhetorically, Santorum does a superior job of melding economic and social conservatism, even though the empirical evidence relating this union to economic outcomes is far from compelling for most economists.

But there’s another problem with Santorum’s rhetoric and logic, as recently highlighted by BusinessWeek:

“Republican presidential candidate Rick Santorum says he doesn’t believe the US government should pick the economy’s ‘winners and losers’. Except for manufacturers. And small businesses. And families.” This typifies the way in which the recent merging of social and economic conservatives – the culmination of a decades-long process – has increased political power at the price of basic, logical, realworld coherence.

In announcing his plan, Santorum said: “Our nation’s first economy is the family, and we must create an environment where families can thrive and succeed in America again. Government must get out of the way, and encourage an economic environment where the American entrepreneurial spirit can again take our nation to the heights of success. My plan does just that – it fosters families, gets the government out of the way, and rebuilds the great middle of America that has been lost over the past 50 years. It’s time that we focus on getting American[s] back to work.”

It’s an appealing narrative to post-Bush conservatives, who would like to forget the massive deficits that Bush created, even before the economic meltdown – deficits that Rick Santorum, as a senator until 2006, had a big hand in creating. But this narrative is seriously at odds with the facts. The United States experienced manufacturing dominance and broad prosperity growth – higher for the middle class than for the top one per cent – during the early post-World War II period, which was dominated by big government liberalism. It’s the Reagan and post-Reagan period, from 1980 onward, when manufacturing has been exported, and middle-class incomes have stagnated, while the one per cent has prospered as never before. Economic deregulation – not big government – has dominated the period of the United States’ manufacturing decline.

Typifying this disconnect, the first point in Santorum’s plan is: “Cut and simplify personal income taxes by cutting the number of tax rates to just two – ten per cent and 28 per cent – returning to the Reagan era pro-growth top tax rate.” But, as already noted above, Reagan’s “pro-growth” record fell significantly short of Clinton’s, who got there by raising taxes – and eliminating the massive deficits that Reagan created.

Santorum also proposes cutting capital gains and dividend tax rates to 12 per cent, cutting the corporate income tax rate in half to 17.5 per cent and eliminating it entirely for manufacturers, also eliminating the inheritance tax and the Alternative Minimum Tax (AMT), tripling the personal deduction for each child, and increasing the research and development tax credit from 14 per cent to 20 per cent. All this is supposed to  promote a US manufacturing renaissance. But Santorum would also reward US firms for their offshore businesses. He would eliminate the 35 per cent tax on repatriated overseas profits “when manufacturers invest in plant and equipment” and reduce it to 5.25 per cent on other repatriated income. In short, outside of manufacturing, US firms would be taxed at 17.5 per cent domestically, but 5.25 per cent for their overseas operations.

Regarding Santorum’s tax proposals as a whole, the Citizens for Tax Justice analysis found that his plan, totalling $9.4tn in cuts, would result in a similar disparity – albeit with the figures doubled – to Romney’s scheme. “[Santorum’s projections] would give the richest one per cent of Americans an average tax cut of $217,500, which would be over 100 times as large as the average tax cut of $2,160 that the middle fifth of Americans would receive.”

Like Romney, he would repeal “Obamacare”, saying he would replace it “with market-based healthcare innovation and competition to improve America and America’s health and create jobs”. But we already have a market-based healthcare system, which not only leaves tens of millions of us without medical care, it produces per capita costs roughly double those of the rest of the developed world. Santorum offers no explanation of how he would produce a different result.

Santorum’s target list for funding cuts includes the following proposals:

“Eliminate all agriculture and energy subsidies within four years, letting the markets work; eliminate resources for job killing radical regulatory approaches at the EPA and refocus its mission on safe and clean water and air and commonsense conservation; eliminate funding for Planned Parenthood and support adoption; reduce funding for the National Labour Relations Board (NLRB) for extreme positions undermining economic freedom; eliminate funding for implementation of Obamacare, and eliminate funding for United Nations organisations that undermine America’s interests.”

As with Romney’s plan, this is more about favouring Republican-oriented groups over Democratic ones than it is about job growth per se, with the notable exception of the very first item, which certainly deserves more attention than it’s gotten so far. Did Iowa farmers know about it, one wonders? Santorum would also “pass a Balanced Budget Amendment to the Constitution”, like Romney also promises – another power that the president does not have – while “capping government spending at 18 per cent of GDP”. 

Santorum also promised to “reform Social Security and Medicare for sustainable retirements” – standard GOP boilerplate that’s virtually identical to Mitt Romney. But while Romney shied away from embracing Ryan’s draconian plan to destroy Medicare, starting in 2022, Santorum displays openly hostility that strongly suggests he’d like to begin dismantling Medicare immediately. “The Medicare system is simply like Romneycare in Massachusetts,” Santorumsaid on one occasion, “It is incredibly inefficient.” (In fact, as economist Paul Krugman notes, Medicare’s administrative costs of two per cent are far below private plans. Medicare Advantage plans average 11 per cent costs, and when profit-taking is added, this rises to 16 per cent the amount not going to actual medical care.) 

“We should not have a government-run health care system on Medicare or anything else,” Santorum said on another occasion. He even once claimed that Medicare was “crushing” the “entire health care system in this country”. Santorum has yet to explain how doing away with Medicare is supposed to create jobs. The obvious answer – more money spent on advertising, administration and claims agents denying people coverage – is not exactly encouraging, since it also implies a reduction in actual medical care, and the jobs that go along with that.

Other points from Santorum’s plan include:

  • Eliminate all other Obama era regulations with economic impact of more than $100m;
  • Negotiate five Free Trade Agreements and submit to Congress in first year of presidency;
  • Tap into vast US domestic energy resources to power our 21st century economy without picking winners and losers, so all American families and businesses can have lower energy costs;
  • Unleash innovation in telecommunications and internet consumer options by getting government out of the way, which will expand productivity and lower costs;
  • Block grant Medicaid, housing, job training and other social services to the States;
  • Freeze current non-defence related federal worker pay levels for a year, and reduce federal workforce by at least ten per cent, with no compensatory increase in the contract workforce; and
  • Reclaim the role of parents as the decision makers in their children’s education and incentivise the states to promote parental choice and quality educational options – because the family is the foundation of the economy.

At their best, it’s difficult to estimate any sort of job-creation impact for any of these measures. In part, this reflects the general GOP ideology that government can’t create jobs, it can only “create the climate” in which private businesses create jobs.

As can be seen by comparing this with Obama’s job plan, things look very different when you believe that government can play a direct, positive, measurable role. For one thing, the proposals get quite focused and specific. This facilitates analytical assessments, pro or con. For whatever combination of reasons, the so-called hard-headed “Daddy Party” no longer seems interested in that sort of thing.

Fighting censorship on principle

Filed under: Uncategorized — Mr. Craig @ 1:45 pm

Tunisia could set an example for the region by standing against internet censorship.

San Francisco, CA – When Tunisia hosted the World Summit on the Information Society (WSIS) in 2005, the foreign guests in attendance caught a firsthand glimpse of the extent of Ben Ali’s repression. As Ethan Zuckermanrecalled last year, a workshop – entitled Expression Under Repression – was cut from the programme by Tunisian authorities, who chained the doors to the meeting room. Though the meeting was later revived after pressure from the Dutch government, its attendees were closely monitored. It was later reported that some Tunisian human rights activists were beaten by government thugs. At the time, Zuckerman recalled a fellow participant declaring: “it’s our duty to be sure that we’re all watching Tunisia, not just during this summit, but afterwards”.

Over the course of the next five years, however, Tunisia was routinely pushed to the backburner by major players in the free expression community in favour of countries like China and Iran. Even US government actors – despite Secretary Clinton’s mention of Tunisia in her 2010 remarks on Net freedom – seem to have focussed their efforts on the two countries, funding circumvention tools developed with China in mind. In 2010, Tunisian activist Sami Ben Gharbia questioned what he perceived as the US government’s failure to target online repression in Tunisia, Syria, and Vietnam, to which a former government official responded by acknowledging that the US “pays more attention to countries that have nuclear weapons than to those that don’t”.

Fortunately, today Tunisia is in a different place. Along with the fall of Ben Ali quickly came the fall of onlinerepression, and by mid-January 2011 the Tunisian internet was more open than ever before. The Tunisian Internet Agency (ATI) was quickly transformed from a place of fear into a hopeful contender for Tunisia’s main internet exchange point, or IXP, its aim to become a neutral player. 

That openness, however, was not without challenge: in May, a military tribunal ordered the blocking of several Facebook pages, a move quickly followed by a civilian lawsuit demanding the blocking of pornography. The ATI, under the leadership of CEO Moez Chakchouk, has stood staunchly against the order, fighting the decision through a series of appeals that resulted on Wednesday in the country’s highest court deciding in favor of the ATI and sending the case back to the Court of Appeals.

For many, it might seem strange that a relatively conservative, Muslim country like Tunisia would fight to keep pornography accessible on the Internet, but in Tunisia, that fight is justified by experience: Under the rule of Ben Ali, it wasn’t just obscene content that was unavailable to citizens, but political opposition websites, information on human rights, and even YouTube.

As a result, Chakchouk – as well as many Tunisians – are wary of letting the government force the ATI to re-install the same tools that allowed such overreaching censorship to happen in the first place. As Chakchouk himself has argued: “It’s not a matter of pornography or not, it’s a matter of whether we have censorship or not in Tunisia.”

The collateral damage of online censorship

“The re-implementation of a filtering system could create a slippery slope in Tunisia.”

Indeed, installing a system like the one previously used by the Ben Ali government (which was, incidentally, built by American company McAfee, owned by Intel) would leave the ATI vulnerable to further government demands. And while Chakchouk is prepared to censor individual URLs by legitimate court order (as was the case with the Facebook pages), he opposes broader filtering mechanisms, saying: “If there is to be Internet control in Tunisia, this control should be smart, transparent and for security reasons.”

Although censoring pornography might not bother the majority of Tunisian citizens, censoring social networks certainly would, as evidenced by the street protests that occurred when the government briefly blocked Facebook in 2008.

It’s not only the government Tunisians should worry about, however. The filtering software used by many governments, companies, and parents to block online content is imprecise. A ban on a sexually explicit word or phrase, for example, could result in unrelated, innocuous content being blocked, a problem regularly suffered by the English town of Sussex.

In other words, the re-implementation of a filtering system could create a slippery slope in Tunisia, where politics remain a delicate balance.

An example for the region

For Chakchouk, it’s not just about Tunisia. He believes that Tunisia, which set an example for the region in 2011 when its citizens took to the streets to overthrow a dictator, should set an example for free expression as well.

Fortunately, the country is well-poised to do so. Just a little more than a year after Ben Ali fled, Tunisia is largely stable, its citizens poised to ensure the freedom they fought so hard for remains intact. It has not suffered the stop-and-start heartbreak of Egypt, nor the explosion of violence taking place in Libya. In fact, to speak to some members of the activist community, it would seem as though the real problem for many now is apathy. In order to effectively ward off the spectre of censorship, Chakchouk says, “civil society must be as active as it was during the regime of Ben Ali”.

As of now, the fate of the ATI hangs in the balance. The decision issued Wednesday by the Court of Cassation is big, but it’s not final. However, the ATI has won other cases against censorship orders, so it’s possible they’ll win this one too. And if they do, they will have set the bar high for the rest of the region’s nascent democracies.



An Arab vision in focus

Filed under: Uncategorized — Mr. Craig @ 1:15 pm

Read about the role satellite media played in the Arab Spring in an excerpt from chapter six of The Invisible Arab.

New and social media have played vital roles in coordinating, sharing, and transmitting information and images. They have been effective, especially among the young and connected middle classes, but satellite television reaches most homes 24/7, providing hundreds of Arabic-speaking channels. Unlike new media, it requires no interactivity and tends to reach its target audience with much ease and little resistance. If it’s on the news, it must be real. More importantly, reporting the facts has an empowering effect on those sitting on the sidelines. For the tens of millions who have watched the revolution unfold live, change became real and probable. As satellite television transmitted images, disseminated information, and provided analysis, background and debate, change became a reality. The extended and rolling coverage by the Arab news networks proved indispensable for organisers and activists as they transmitted their eyewitness accounts to the general public at little or no effort or cost.

When the regimes tried to jam internet-based communications, or block certain social media outlets, television played an important role as the information bridge between protesters in different parts of the country. The satellite networks projected real, dramatic images of the evolving protests while conservative and censored state media brought ever more ridicule and contempt upon themselves.

The emergence of satellite networks broke the Arab state’s hold on media, as satellite networks competed in the political and religious playing fields and through the use of entertainment and pop culture. In denial or under orders to tame its coverage, official outlets presented the upheavals either as exaggerated media fantasy or as instigated from the outside.

For decades, the regimes have spread lies and spewed propaganda. They turned their defeats into televised victories along the lines of “the mother of all battles” when referring to Iraq’s forced ejection from Kuwait, and justified their internal repression against minorities and peaceful opposition under the guise of “ensuring stability” and “citizen safety” against fifth columns, using brutal force against civilians to “protect” the population. The visits of foreign officials were projected as elaborate state pageants that underlined the strategic importance of the regime for regional security. Once a regime lost its control over the message, it lost control, period. From then on, it was a question of public will and time.

The same could be said, perhaps, about the early Western monopoly over the airwaves. When satellite television first emerged, Arabs, among others, were likely in 1991 to hear CNN‘s Bernard Shaw reporting from Baghdad, followed by US generals, and, in between, commercials for McDonald’s, Nike, and Jeep. By the time of the 2003 US war in Iraq, satellite television had become the enterprise of the Arab public and private sector, with masked resistance fighters, bearded Islamic scholars, angry intellectuals, and bitter Iraqis dominating the screens.

The affordability and popularisation of television technology allowed dishes and antennas to proliferate on every other rooftop, rendering hundreds of television stations accessible with the mere flick on a remote control. While hardly a sign of renaissance, they’ve underlined and strengthened the Arab collective. In the process, the satellite television market became pluralistic, diverse, and competitive long before new media took root in the Arab world. Since the founding of the Middle East Broadcasting Centre (MBC) in the early 1990s, but more strategically since the introduction of Al Jazeera in 1996, hundreds of satellite networks tore through the curtains of state censorship to enter Arab living rooms. They also upstaged the likes of CNN and the BBC, which presented themselves as viable alternatives to local media. Paradoxically, many of these channels were subsidised through Gulf money in search of influence and commercial gains, but were run by Arabs from each and every country in the region, adding to the plurality of accents and perspectives.

Arab talent on show

Regionalisation or so-called “perverse globalisation” has become the norm in the Arab world, as culturalisation took precedence over Western-driven globalisation. Arabic took over from English and French, and Al Jazeera and Al Arabiya pulled ahead of CNN and the BBC on the ratings charts, just as Rotana pulled ahead of MTV among Arabs – including the English-speaking elites. Satellite television has brought the Arab-speaking world together, for better or worse. It mostly advanced Arab rather than Western brands, explored Arab desires instead of US preoccupations, Arab drama and soap operas, rather than French literature or British sitcoms. Even when they adopted Western pop culture, they succeeded in adding their own flavour to it, prompting regional and global powers from Iran to China through France, Russia, and the United States, to establish satellite networks that broadcast in Arabic.

With their own pop stars, Arabic series, and video clips transmitted on specialised satellite networks, the choice was no longer limited for Arabs. Arab pop culture pulled ahead of its Western counterpart, Amr Diab became more popular than Prince, Nancy Ajram became the Arabs’ own Mariah Carey, singing words they understood and felt. The youth reclaimed Arab pop stars and even their stars’ physiques. Frequently aired and widely circulated, the video clips of Ruby, a young Egyptian student turned singer/dancer, became a pan-Arab phenomenon. Shakira had to step aside as many marvelled at the way Ruby moved her hips and went as far as to discuss her bottom on satellite television. In a bitter response to the “Ruby phenomenon”, a conservative Muslim commentator ridiculed her fans, claiming she was no more than an ass. Ruby’s body parts and talents notwithstanding, Arab pop culture, Westernised or otherwise, had become a unifying and somewhat liberating factor for young Arabs, a mirror for their aspirations. Like their predecessors who united the Arab world through the printing press and the radio airwaves, the mandarins of new media have unified and connected the Arabs like never before.

The success of Arabic networks, which bypassed state borders and broke social taboos, answered two central freedoms: freedom of mind and body. This was clearly represented by the early success of Al Jazeera and theLebanese Broadcasting Corporation (LBC), with the former providing an open platform for voicing opinions, discussion and debate, and the latter providing an entertainment platform that underlined aesthetics and exhibited suggestive sensual/sexual expressions. Many of the hundreds of channels that have sprung up since have either emulated Al Jazeera and LBC, or specialised in sports and religion. The fact that Al Jazeera belongs to the Qatari state and LBC is financed by Saudi businessman Waleed Ben Talal adds another paradox to the complicated world of Arab television.

Beyond news and sports, the airwaves have been polarised between the liberal and the conservative camps with a few hundred presenters, stars, and symbols on each side of the cultural divide. The tele-evangical garrison presented a wide range of opinions, from the less conservative Sharia preachers to the hardline Wahhabi apologists that defended the rulers of Saudi Arabia. All the while, the liberal camp presented everything from erotic video clips to the latest catwalk shows by head-scarfed models. By 2010, the airwaves were dominated by hundreds of populist clerics preaching the virtues of living piously and hundreds of mostly female hosts, artists, and pop culture stars. Both sides of the divide were financed primarily by, and based in, the rich Gulf region.

Virtual pluralism

Satellite television networks have also revealed the “invisible Arabs” for the caged political animals they were. They provided a virtual public square for debates and discussions among secularists and fundamentalists, liberals and leftists, feminists and conservatives, officials and opposition never seen or heard before in the region. Along with the Doha-based Al Jazeera and other twenty-four-hour news organisations such as Al Arabiya, there were entertainment, religious, general, or specialised networks that have long presented the Arabs with a wide range of views, perspectives, and information beyond their borders and region that contrasted sharply with the authoritarian regimes and information distributed on domestic channels. No longer were Saudis subjected to the joy of watching endless hours of their king receiving those paying their respects to him, nor the Libyan leader forcing the state television channel to broadcast the image of his hanging shoes as a signal of his dissatisfaction with their programmes. News was no longer prioritised according to hierarchies. Urgency and importance mattered because news no longer had to begin with kings and presidents and end with the commoner. An editor at a state-run television or newspaper had to remember the exact hierarchy of the ruling family so as to start from the top down, regardless of content. If a king or president’s picture came after or below that of a “less significant” person, the journalist was all but condemned.

Democracies make civic studies mandatory in the classroom and incorporate courses on universal values, democracy, and the separation of powers in the curriculum, but not in the Arab states. Familiarity with freedom of expression, civil and human rights, and voting had to be acquired through television. At times it had the feel of a political circus or a “tower of Babel”, but voicing the most outrageous of opinions has long proved more productive than taming them. Indeed, there is no point in defending those we agree with; it’s the right of the most unconventional and disagreeable voices that are preserved by a liberal media and society.

When the television programme “Star Academy” was featured on the MBC channel a decade ago, hundreds of thousands of young people from the Atlantic to the Gulf voted for their favourite stars, and as far as we know, their votes counted. For many, this was a revelation; it was the first vote they’d ever cast, albeit in a virtual democratic ballot run by a TV station. The same was repeated on Abu Dhabi Television, where a popular programme featuring competition among poets was aired. But when, after weeks of live competition, an Emirati won the people’s vote through phone texting, many suspected this was more of the same rigged elections they had grown to hate.

Paradoxically, undemocratic countries that tried to liberalise their economies and commercialise their satellite networks, such as the United Arab Emirates, Saudi Arabia, and Qatar, in addition to Lebanon – and later Egypt – have paved the way for a more liberal, albeit consumerist, media in the Arab world. Television and other forms of marketing provided abundant competition and multiple choices in consumer products and services, an abundance that became terribly scarce when it came to the political and social spheres. Eventually, people, especially the younger generation, couldn’t see why they had a choice among laundry detergents and TVs, but not textbooks; news networks, but not political leaders.

Autocracies, sensing the disadvantage of being left out, allowed for a relative opening that underlined Arab culture and history, presenting nationalist and historic series that depicted Arab heroism and pride. Bab al-Hara or “The Neighbourhood Gate”, a Syrian soap opera shown on MBC during Ramadan in 2010, recounted the proud and steadfast resistance to the French occupation in the early part of the twentieth century. The month-long series was reportedly watched by more viewers than any other. The courage and dignity expressed by its characters couldn’t have been lost on a new generation of repressed and humiliated Syrians and Arabs across the region.

The Al Jazeera effect

“What Al Jazeera is doing is vicious, inaccurate, and inexcusable”
Donald Rumsfeld, former US Secretary of Defence

One could hardly speak of change in the Arab world without invoking the “Al Jazeera effect” in nurturing democracy and connecting people from all walks of life and of all philosophical, ideological, and religious persuasions. A Western colleague once told me: “At times I catch myself watching Al Jazeera, not because I understand anything that it is saying, but because I love watching the pictures and the lively debates that draw me in like nothing on Western networks.”

When it was first founded in the mid-1990s, Al Jazeera was seen as a positive development in the West and was praised in US and European capitals for presenting Westerners, Israeli spokespersons, and politicians of all stripes for the first time to an Arab audience. But soon after its coverage of the 1998 US bombing of Afghanistan and its extended coverage of the second Palestinian Intifada against the Israeli occupation in 2000, Al Jazeera was criticised for providing an open forum for popular sentiments and anti-Israeli and anti-US views.

The network’s detractors multiplied afterward. US-Middle East scholar and an apologist for the Bush administration, Fouad Ajami, wrote:

“Al Jazeera, which claims a global audience of 35 million Arabic-speaking viewers, may not officially be the Osama bin Laden channel, but he is clearly its star, as I learned during an extended viewing of the station’s programming in October. On Al Jazeera (which means ‘the peninsula’), the Hollywoodisation of news is indulged with an abandon that would make the Fox News Channel blush.”

And Fox news anchor Bill O’Reilly didn’t blush or flinch when he said: “That anti-American operation is spurring on the revolt. Many Arabs get their information from Al Jazeera. That network is extremely powerful and is encouraging uprisings all over the Muslim world. Al Jazeera very rarely condemns the jihadists, and I believe the network would be happy to see them take power.” Ajami at least understands Arabic; O’Reilly doesn’t.

Al Jazeera‘s coverage of the US invasion and occupation of Afghanistan and Iraq after the 9/11 attacks exacerbated Washington’s already hostile attitude towards its uncensored – and at times unfiltered – coverage of the wars. Demonising the Arabic channel became the order of the day for the Bush administration with Secretary of Defence Donald Rumsfeld blaming Al Jazeera for the escalation of violence. President Bush had reportedly discussed with British Prime Minister Tony Blair bombing Al Jazeera‘s bureau in Baghdad. The election of Barack Obama, after eight years of Bush, toned down the criticism, and the United States began to see the network with more objectivity. Secretary of State Hillary Clinton characterised Al Jazeera as “real news” that was winning against US media outlets. She stressed: “Where you’ve got a set of global networks that Al Jazeera has been the leader in, that are literally changing people’s minds and attitudes and like it or hate it, it is really effective.”

Indeed, the Arab Spring has underlined the importance of Al Jazeera as a free media outlet in a sea of authoritarianism. As the New York Times’ David D Kirkpatrick wrote:

“As the protests accelerated this month, some Tunisian officials protested that Al Jazeera was hyping the unrest because of its anti-Western agenda: its managers wanted to see a ‘moderate’ Arab regime fall, even if the protesters were not Islamists, like those in so many earlier revolts. But that seems unlikely. Al Jazeera’s producers knew they had a story line that their audience would love.”

ABC News Washington correspondent Sam Donaldson told my colleague on “ABC This Week” in January 2010:

“Thank you for what you’re doing. People say Al Jazeera fanned the flames here by bringing the fact that democracy is in existence and that people are being suppressed. That’s what we need. We need more communication in the world. It’s not Al Jazeera’s fault that Mubarak is under siege now.” 

Similar sentiments were echoed by Frank Schaeffer, in the Huffington Post, who asked: “Why Aren’t you Watching Al Jazeera?”

“If you care about anything more on the news than celebrity trivia join me in saying: Thank God For Al Jazeera! We Americans are so isolated from the larger world that we will always be a dollar short and a day late unless we find alternatives to our ‘media’. Al Jazeera is that alternative. If freedom and democracy comes to countries ranging from Egypt to Libya future historians will note that the freedom of information provided by Al Jazeera (at great cost) played a huge role, a bigger role than the increasingly irrelevant US media that is too busy worrying about Charlie Sheen to notice that the planet is changing.”

Indeed, some book titles on Al Jazeera are more than sufficient to give you an idea regarding the role of the Arab network. As Mohammed el-Nawawy’s titles put it, Al-Jazeera: The Story of the Network that Is Rattling Governments and Redefining Modern Journalism; and Al Jazeera: How the Free Arab News Network Scooped the World and Changed the Middle East; and Hugh Miles’s book, Al-Jazeera: The Inside Story of the Arab News Channel that Is Challenging the West.

Al Jazeera‘s reach has been its most important asset and source of legitimacy. It allows it greater access to more people than many other media outlets, old and new. Its viewing numbers jump to the tens of millions during major news events. And during the early days of the Arab Spring it captured the spirit of the revolution like no other network. Admittedly, as with any vibrant news organisation, Al Jazeera has seen serious internal disagreements within its editorial leadership and made some poor calls of judgment during its years of continual round the clock coverage. But ultimately, its success lies in its capacity to report the facts uninhibitedly, provide an open forum for debate, and continuously correct and renew itself – relatively free from commercial and geopolitical pressures.

As Marc Lynch, a leading US Middle East media observer said in the New York Times at the end of January 2010: “The protests rocking the Arab world this week have one thread uniting them: Al Jazeera, whose aggressive coverage has helped propel insurgent emotions from one capital to the next.” Indeed, Al Jazeera became the Arab public square where everyone met, and where updates from the centres and the flanks were watched and heard, unfiltered and uncensored.

Robert Malley and Hussein Agha wrote in the Washington Post the day Mubarak fell: “Al Jazeera has emerged as a full-fledged political actor because it reflects and articulates popular sentiment. It has become the new Nasser. The leader of the Arab world is a television network.”

Does AIPAC Want The USA/Israel to Go to War With Iran?

Filed under: Uncategorized — Mr. Craig @ 1:00 pm

If a bill pushed by Lieberman passes, it could give the US “political authorisation for military force” against Iran.

Washington, DC – For all it has done to promote confrontation between the United States and Iran, the American Israel Public Affairs Committee has worked to avoid the public perception that AIPAC is openly promoting war. In AIPAC’s public documents, the emphasis has always been on tougher sanctions. (If you make sanctions “tough” enough – an effective embargo – that is an act of war, but it is still at one remove from saying that the US should start bombing.)

But a new Senate effort to move the goalposts of US policy to declare it “unacceptable” for Iran to develop a nuclear weapons capability – not a nuclear weapon, but the technical capacity to create one – gives AIPAC the opportunity to make a choice which all can observe. If the Lieberman resolution becomes an ask for AIPAC lobbyists at the March AIPAC policy conference, then the world will know: AIPAC is lobbying Congress for war with Iran.

US intelligence suggests no Iranian nukes.

Sponsors of the Lieberman resolution deny that it is an “authorisation for military force”, and in a legal, technical sense, they are absolutely correct: it is not a legalauthorisation for military force. But it is an attempt to enact apolitical authorisation for military force. It is an attempt to pressure the administration politically to move forward the tripwire for war, to a place indistinguishable from the status quo that exists today. If successful, this political move would make it impossible for the administration to pursue meaningful diplomatic engagement with Iran, shutting down the most plausible alternative to war.

The first “resolved” paragraph of the Lieberman resolution affirms that it is a “vital national interest” of the United States to prevent Iran from acquiring a “nuclear weapons capability“.

The phrase “vital national interest” is a “term of art”. It means something that the US should be willing to go to war for. Recall the debate over whether the US military intervention in Libya was a “vital national interest” of the United States (which Defence Secretary Robert Gates said it wasn’t.) It was a debate over whether the bar was met to justify the United States going to war.

The resolution seeks to establish it as US policy that a nuclear weapons capability – not acquisition of a nuclear weapon, but the technical capacity to create one – is a “red line” for the United States. If the US were to announce to Iran that achieving “nuclear weapons capability” is a red line for the US, the US would be saying that it is ready to attack Iran with military force in order to try to prevent Iran from crossing this “line” to achieve “nuclear weapons capability”.

And this is reportedly being openly discussed by the bill’s sponsors.

Senators from both parties said Thursday that a diplomatic solution was still the goal and they believed the sanctions on Iran were working, but that a containment strategy was less preferable than a military strike on Iranian nuclear facilities if all else fails.

So, what the Senators are reportedly saying is that if “all else fails” – that is, if diplomacy and sanctions appear to be “failing” to prevent Iran from achieving a nuclear weapons capability – according to these Senators, that’s what “failure” would be – then they want war. That’s not a legal “authorisation of force”, but it is a political one. 

And it is not a political authorisation of force in some far-off future. It is a political authorisation of force today.

“Nuclear weapons capability” is a fuzzy term with no legal definition. But Joe Lieberman, a principal author of the bill, has said what he thinks this term means:

“To me, nuclear weapons capability means that they are capable of breaking out and producing a nuclear weapon – in other words, that they have all the components necessary to do that,” Lieberman said. “It’s a standard that is higher than saying ‘The red line is when they actually have nuclear weapons’.”

But many experts think that Iran already has the “components” necessary for “breaking out”.

“To me, nuclear weapons capability means that they are capable of breaking out and producing a nuclear weapon – in other words, that they have all the components necessary to do that.”

– Senator Joseph Lieberman

On Thursday, Anthony Cordesman of the Centre for Strategic and International Studies was quoted saying that the November report from the International Atomic Energy Agency “basically laid out the fact that Iran now has every element of technology needed to make a fission weapon”.

On January 24, Helene Cooper reported in the New York Times:

Several American and European officials say privately that the most attainable outcome for the West could be for Iran to maintain the knowledge and technology necessary to build a nuclear weapon while stopping short of doing so.

This suggests two things. One, these US and European officials believe that Iran already has “the knowledge and technology necessary to build a nuclear weapon”; two, these US and European officials believe that inducing Iran not to use this knowledge and technology to build a nuclear weapon is the best outcome that the West can achieve.

If the experts and Western officials who believe that Iran already has “the knowledge and technology necessary to build a nuclear weapon” are right, then what that says is that Iran has already crossed the “red line” of the Lieberman bill. And therefore, the supporters of the Lieberman bill are saying that they are ready for war today. Or they are ready for war any time that they decide to join the experts and officials who say that Iran has already crossed the Lieberman “red line”, which of course is something that the Lieberman supporters can do anytime they want.

It’s as if someone wearing a bag over their head says, “I’m ready for war whenever I see light”. All they have to do to see light is take the bag off their head, so they are saying that they are ready for war whenever it is convenient for them to say that they are.

Anyone who supports the Lieberman bill is declaring themselves for war. If AIPAC makes the Lieberman bill an ask for its March policy conference, then at least we’ll be done with the pretence that AIPAC is doing anything besides trying to get the US into another Middle East war.

War with Iran: Focusing on the end-game

Filed under: Uncategorized — Mr. Craig @ 12:45 pm

The war between Israel and Iran is already underway, even if the methods employed on both sides are subterranean.

Washington, DC – Talk of war is in the air. In the US, one can hardly pick up a newspaper or magazine, or tune in to a public affairs show without encountering speculation about hostilities with Iran. The conservative right is fairly clambering for conflict, and even parties not normally associated with them – the Washington Post comes to mind – are just a step or two behind in demanding clear “red lines” to trigger the first salvo.

Those to the left of centre are notable for their hand-wringing passivity. They whine about the daunting risks and pallid potential gains of a strike against Iran’s nuclear facilities, but lack the moral conviction to make any compelling counter-argument. 

Most prominent in the latter ranks is the Obama administration itself. It clearly has no taste for war with Iran, and just as clearly fears what the Israelis might do, but cannot say so, for fear of crippling itself politically. And so it assumes a seemingly safe middle ground, posturing, in coded language, that “all options are on the table”, while hoping against hope that increasingly stringent sanctions and the thinly veiled threat of a conventional military strike will induce Iran to change course before Israel acts.

One reads the stories of firm messages supposedly being passed in private to the Israeli government, warning them against precipitate action – most recently, we are told, by General Dempsey, Chairman of the Joint Chiefs of Staff. What precise messages General Dempsey or others may have delivered we do not know, but it is implausible that anyone in the Netanyahu government, caught up in geo-political hysteria, would heed them. Why should they? What possible credibility can Obama have in making an argument in private that he fears to make in public? With a majority of the US electorate heavily convinced that Iran poses an imminent and mortal threat, and having done as much as anyone to promote this canard, how precisely would the US government sustain a policy of leaving Israel to its own devices after striking a blow ostensibly in its own defence? It could not; and Israel knows it.

Again, no one believes the US will strike Iran first. Observers instead wait to see whether and when Israel will touch off the conflagration.

Such observers are a bit slow on the uptake. In fact, the war between Israel and Iran is already underway, even if the methods employed on both sides are subterranean. No one doubts an Israeli hand behind the recent assassinations of Iranian nuclear scientists; Israel itself will not deny it. And only the willfully naïve could doubt that recent terrorist incidents involving Israeli diplomatic personnel in India and Georgia are connected with Iran, particularly after the highly damaging evidence of direct Iranian complicity in similar, subsequent attack preparations in Thailand.

It is easy to see the motivations behind these actions on both sides, which are reminiscent of the war of assassination which took place between Israel and the PLO in various western capitals in the 1970s. It is harder to see their point, however, as nothing remotely productive or decisive can come of them. The question now is not whether there will be war, as we can already see its wasteful effects, but whether it will expand into the conventional realm, and draw in new participants.

Any conventional war involving Israel, the US, Iran and perhaps other regional powers would be a limited one.”

It is prudent at the outset of any form of violent conflict to have some idea of one’s objectives. In virtually all wars, the point of resorting to military means is to arrive at a more favourable, or at least more lasting and stable political arrangement. With Israel and Iran already in violent conflict and perhaps soon to expand the scope of the battle to involve the US, it might be worthwhile, at this early stage, to consider what such a new political arrangement might look like.

Any conventional war involving Israel, the US, Iran and perhaps other regional powers would be a limited one. Military efforts to degrade Iranian nuclear capabilities and defence infrastructure will surely not include an attempt at occupying the country, nor at forcibly removing its government. Even the US would not be capable of doing so, even if it were so inclined. Nor is war likely to induce either the Iranian regime or its people to capitulate on their nuclear programme, regardless of its ultimate intent. Instead, armed intervention is far more likely to swing the Iranians more solidly behind their government and its nationalist agenda, even if that agenda were temporarily set back.

Thus, if the point of conflict from the perspective of Israel and the West were to remove the eventual threat of Iranian nuclear arms, and military means on their own will not be sufficient to achieve such an end, what sort of political arrangement might armed conflict help to precipitate?

It seems reasonable to suppose that an Iranian attempt to acquire nuclear weapons capability would have at least three ends, in probable descending order of importance: To have the asymmetric means to counter overwhelming US conventional armed superiority in the Gulf; to achieve a greater degree of regional prestige and hegemony over the Gulf Arab nations; and to counter the Israeli nuclear threat. Thus, a new political arrangement in the region designed to achieve strategic balance without resort to nuclear weapons, and to win broad regional support would need to include a firm political governor on the unfettered employment of unilateral military means by the US; mutual assurances against internal interference and subversion designed to allay Arab fears of Persian dominance; and a comprehensive regional denuclearisation regime – which would perforce include Israel.

None of these might seem feasible or palatable now. But the world will look different after a messy armed conflict in the Gulf, and what might once have seemed unthinkable might well become imperative. Thus, if Israel and the US, the former actively and the latter passively, are willing to contemplate armed conflict with Iran in order to counter its nuclear intentions, they would do well to plan now for the eventual political adjustments which such a programme will necessarily imply, and to consider, while there is still time, whether they can live with them.

Is Israel Fueling Fear Not Facts Over Iran?

Filed under: Uncategorized — Mr. Craig @ 12:30 pm

So the question is “If the US message to Israel is ‘do not attack Iran’ or ‘do not attack Iran now’.

“At most, [the benefit of a strike on Iran] would be a delay in Iran’s nuclear programme. The question which American policy makers and Western policy makers and Middle Eastern policy makers haven’t been proactive on is what policies they would have in place to take advantage of that delay.
– Michael Rubin from the American Enterprise Institute

As UN nuclear inspectors make a critical visit to Tehran, the White House says there is still time for diplomacy to work over Iran’s disputed nuclear programme, but no options are off the table.

Tom Donilon, the US president’s national security adviser, has concluded three days of talks with Israeli leaders, in which, it has been reported, he delivered a clear message: “Don’t attack Iran.”

His visit came at the same time that US General Martin Dempsey, the chairman of the joint chiefs of staff, said a military strike on Iran’s disputed nuclear programme would be premature and destabilising.

The UN inspectors are due to meet Iranian scientists and to visit facilities to gage claims that Iran is making nuclear weapons. Iran has consistently denied that accusation.

“It is very important … to think about the morning after. What can really be achieved if there is any sort of strike on Iran’s nuclear facilities? If anything, this will motivate the Iranian government to definitely develop a nuclear weapon. It will give it the kind of legitimacy and rationale it needs and doesn’t have today – that a nuclear weapon is definitely needed as some form of deterrence.– Geneive Abdo, an Iran analyst

Tougher sanctions have been imposed on Tehran and it has threatened to close the Strait of Hormuz, through which a third of the world’s seaborne oil travels. And after the European Union threatened to stop importing crude oil from Iran in July, Iran has now stopped selling to British and French companies.

But there may also be a diplomatic opportunity. Last week, Iran indicated in a letter, that it is willing to restart talks about its nuclear status.

So what is the US policy regarding Iran’s disputed nuclear programme?

How close are US and Israeli views? How concerned is the US that Israel is going to attack Iran?

Is imprecisely chosen language and media hype fuelling fears rather than facts?

And is the US perspective ‘don’t attack Iran’ or ‘don’t attack Iran now’?

Joining Inside Story Americas to discuss this are: Hillary Mann Leverett, a former White House and US state department official who co-authors the blog The Race for Iran; Michael Rubin from the American Enterprise Institute who served as an adviser on Iranian issues during the Bush presidency; and Geneive Abdo, an Iran analyst at The Century Foundation.

Since the … US withdrew from Iraq … Iraq’s skies are defenceless …. That means … there may be this narrow window when there is a straight shot over Jordan and Iraq toward Iran …. Operationally, the Israelis may feel they have this window of opportunity … to go into Iran ….

“Right now, I think the Israelis have assessed that President Obama and the US administration is paralysed politically to do anything, to say anything to really affect Israeli decision-making to attack. That window closes in November. Now, even though the Israelis have, I think, tried to disregard, not listen to, maybe even sometimes embarrass President Obama, they are concerned he could be re-elected. And, if he’s re-elected, they don’t know what a renewed term for President Obama would mean for them and whether they would have the same opportunity.

“So, I don’t think this is really driven by any existential threat coming out of Iran. It is driven by this window of opportunity militarily for the Israelis and this political vulnerability for the United States.”

Hillary Mann Leverett, a former White House and state department official

Drums of war: The US media’s ‘Iranian threat’

Filed under: Uncategorized — Mr. Craig @ 12:15 pm

Examining US coverage of Iran and ask if a culture of journalism has emerged that ignores the dangers of conjecture.

On Listening Post this week: Beating the drum for war – the US media and ‘The Iranian Threat’. Plus, the burgeoning media scene in post-revolutionary Libya.

Something sounds familiar. ‘Long-range nuclear missiles’, ‘terrorist sleeper cells’, ‘WMDs': terms which quickly became part of the media’s vocabulary in the run up to the 2003 US-led invasion of Iraq. Fast-forward to 2012 and they are featuring heavily once again, only now it is not about Iraq, but Iran. Last time, the media’s saber-rattling followed the Bush administration’s lead in selling the attack on Iraq. This time, the so-called ‘Iranian Threat’ is a narrative being constructed by the US media all by itself – with scant public support from the Obama administration. Our News Divide this week takes a close look at the coverage of Iran and a culture of journalism that seems to have forgotten the very real dangers of hypothesis and conjecture.

In our News Bytes this week: Two international journalists become the latest victims in the Syrian uprising; Rupert Murdoch announces the launch of his new Sunday tabloid in the UK; New CCTV footage reveals the extent of an attack on a Mexican newspaper last year; and an edition of a Spanish newspaper is banned in Morocco for containing a caricature of King Mohammed VI.

For more than 40 years, the media in Libya served as a propaganda tool for Colonel Muammar Gaddafi. But the revolution has brought change not just to the country’s leadership, but also to its media environment. Over the past year, Libyans have seen an explosion in brand new media outlets. At least 120 print outlets have sprung up, as well as fresh alternatives on TV and radio. Meanwhile, a new generation of Libyan journalists are enjoying their newfound freedom of expression despite the lack of training and infrastructure. In this week’s feature, Listening Post’s Flo Phillips examines the flourishing media scene in Libya and the challenges that lie ahead.

The latest homemade video to be speeding around the internet is a film by Argentinean filmmaker, Fernando Livschitz which makes his homeland’s capital, Buenos Aires, look like an amusement park. The budding director managed to cut scenes from a funfair into shots of the city to make it look like the revellers were coasting their way around town.  Internet Video of the Week is called Inception Park

Is the Senate trying to force Obama to go to war?

Filed under: Uncategorized — Mr. Craig @ 11:30 am

In pushing for war with Iran, some US Senators are putting Netanyahu’s priorities ahead of the United States.

Washington, DC – No one knows if President Obama intends to bomb Iran’s nuclear facilities, give Israel the go-ahead to do it, continue to rely on sanctions or turn to comprehensive negotiations to resolve the escalating conflict.

The decision to go to war is the most difficult one a president can make because it is impossible to foresee the outcome of a war. Even if it is Israel that attacks rather than the United States, the consequences for us are likely to be the same. That is because the entire world knows that the United States and Israel are linked by means of strategic cooperation agreements which prevent Israel from acting without, at least, tacit US approval. If Israel is “in”, so are we.


It is safe to assume that Obama wants to avoid war. Having just come out of the disastrous Iraq experience, which cost 4,500 American lives and severely damaged our interests and credibility in the Middle East (and beyond), the president wants to keep his options open. If he can prevent war (i.e., Americans dying and other vital US interests being attacked), he will.

But while the president needs his options open, the United States Congress, under intense pressure from pro-war lobbyists, is determined to shut down all but one of them.

That is the meaning of the legislation introduced this month by senators Bob Casey (D-Pennsylvania), Lindsey Graham (R-South Carolina), Joseph Lieberman (I-Connecticut) and Richard Blumenthal (D-Connecticut).

The legislation:

“rejects any United States policy that would rely on efforts to contain a nuclear weapons-capable Iran; and urges the President to reaffirm the unacceptability of an Iran with nuclear weapons-capability and oppose any policy that would rely on containment as an option in response to the Iranian nuclear threat.”

The legislation’s intent was made clear by Lieberman: “All options must be on the table when it comes to Iran –except for one, and that is containment.” He added that “the consequences of a nuclear-armed Iran cannot be ‘contained’ like the threat of the Soviet Union” – or China, or North Korea, or Pakistan.

The senators are telling the president that if Iran develops a “nuclear weapons capability”, we must go to war.

Imagine if President Kennedy had been told by the Congress back in 1962 that if the Soviet Union placed missiles in Cuba, he would have no choice but to attack the USSR. If it had, I wouldn’t be here writing this column today and you wouldn’t be reading it.

Presidents need latitude to make decisions affecting matters of national security and, until now, all presidents have been afforded it, as provided for in the United States Constitution. But, in the case of Iran, the rules are changing.

Here is more evidence.

On Sunday, General Martin Dempsey, the chairman of the Joint Chiefs of Staff, told interviewer Fareed Zakaria that he does not think the US should rush to war. He was speaking after a visit to Israel and long consultations with its leaders.

Dempsey said that it was not “prudent at this point to decide to attack Iran” and that “a strike at this time would be destabilising and wouldn’t achieve [Israel’s] long-term objectives”. He also said that he did not believe that the Iranian regime was insane but was rather a “rational actor” not likely to commit national suicide.

Dempsey’s remarks outraged Prime Minister Netanyahu, whose office put out a statement saying that Dempsey, and other US officials who questioned the rationale for war, were “serving Iran’s interests.”

Had another foreign leader implied that the head of the Joint Chiefs of Staff, a four-star general, was some kind of Iranian agent, he would have been smacked down. But that is not how it works with Netanyahu.

It turns out that senators John McCain (R-Arizona) and Graham were in Israel at the time Netanyahu attacked Dempsey. Rather than defend the American general as these uber-nationalists would do in any other similar situation, they joined the Israeli government in bashing the general – and decorated war hero. (The long-held custom of government officials not criticising US policies when in a foreign country has not applied to Israel for years.)

Check out this Jerusalem Post story on McCain’s reaction, which the paper correctly characterised as “siding with Jerusalem in the debate” over how to deal with Iran.

As for Graham, he said, “I admire General Dempsey,” but added that “people are giving Israel a lot of advice here lately from America. I just want to tell our Israeli friends that my advice to you is never lose control of your destiny. Never allow a situation to develop that would destroy the Jewish state.”

In other words, American advice to think long and hard about the consequences of war with Iran is tantamount to allowing “a situation to develop that would destroy the Jewish state”.

The most appalling aspect of the senators’ remarks is that their zeal to please Netanyahu and his backers in the US has overridden their constitutional responsibility to put the security of the United States above all other considerations. An Israeli decision to attack Iran affects Americans, including their constituents in uniform and even ordinary Americans walking down the streets of New York, Washington, or Arizona and South Carolina.

As noble as their professed concern for Israel may be, the United States is supposed to come first for United States senators. McCain and Graham ought to be ashamed for standing in a foreign country and blatantly placing its government’s interests before ours.

But, hey, it’s politics, and what could be more important than nailing down support for the next election?

Spectacle and political power in Egypt

Filed under: Uncategorized — Mr. Craig @ 11:30 am

The military’s responses to recent unrest shows it is learning to use manipulate events to its own political advantage.

Doha, Qatar – Somewhere, Field Marshal Tantawi of Egypt’s ruling military council must have been laughing to himself. When MP Mamduh Ismail of the Salafi al-Nur Party interrupted a session of parliament to deliver the Muslim call to prayer earlier this month, the chamber erupted in outrage over the presumptuous nature of the act. Saad al-Katatni, the parliamentary speaker representing the Muslim Brotherhood’s Freedom and Justice Party, shouted him down to a wave of applause, declaring that Ismail was not holier than anyone else in parliament.

One could interpret this bizarre scene as the fulfilment of Western apprehensions about a democratic Egypt transforming the parliamentary floor into a pulpit from which to legislate morality and enforce public piety. A case could even be made that, based on such outward displays of religious demagoguery, Islamic politics are poised to hinder Egypt’s transition to a pluralistic state that respects individual freedoms and the rule of law.

However, to do so would be to miss the point entirely. For the better part of the past year, the ruling Supreme Council of the Armed Forces (SCAF), led by Tantawi, has depended on the occasional public spectacle to aid in cementing its increasingly tenuous grasp on political power. Since the fall of the Mubarak regime, Egypt’s revolution has been hanging in the balance as the military attempts to preserve a status quo, marked by its historically dominant role in Egypt’s political and economic spheres. These spectacles have taken on various forms and fulfilled a number of different objectives, all of which have ultimately served to bolster the military’s power while giving the appearance of change.

Turning into spectacle

The so-called “Football Rots” that resulted in the deaths of 74 fans at a Port Said stadium on February 1 is another such incident. While many Western news outlets framed these events in the context of historic tragedies and fan violence in the world of football, the venue in reality just provided a convenient cover story for the actual developments of the day. The frequent government crackdown on popular protests – whether by uniformed officers or plain clothed thugs – that have become a fixture of the Egyptian revolt had continued under the guise of violence among competing football ultras. Tahrir Square was transported to Port Said Stadium (and subsequently transferred back in front of the Interior Ministry on Muhammed Mahmood Street in Cairo).

Such seemingly spontaneous eruptions of violence in recent months have contributed to the sense of instability that would presumably force Egypt’s young revolutionaries to reassess their political objectives by raising the costs of their continued activism. The message seems to be that, not only is it the occasional gathering of the country’s impetuous youth (whether in public squares or football stadiums) that is at the heart of Egypt’s prolonged insecurity, but that the military is the only institution defending the country against total anarchy. Tantawi implied as much in his brief comments immediately after the Port Said incident, expressing little sympathy for the victims at a time of deep national sorrow, and lending further credence to the widespread belief in Egypt that the violence was used to settle political scores that date back to the launch of the protests more than one year ago.

Similarly, the SCAF has attempted to score an additional strategic victory through the manufacture of a highly politicised legal case intended for widespread public consumption. Many observers have been puzzled by the Legal Proceedings against the 19 American NGO workers

representing a number of democracy promotion organisations such as the National Democratic Institute and the International Republican Institute. While the charge of foreign manipulation of Egypt’s fragile democratic processes is certainly serious enough to warrant thorough investigation, the Egyptian military, itself a recipient of $1.3bn in annual US aid, is hardly in a position to determine whether Egyptian civil society has been subject to undue foreign influence.

Despite the international fallout from this incident, including the threat of suspension of US aid, the Egyptian government has pressed on with its case. While SCAF leaders may be privately expressing their apprehensions about the consequences of this trial for US-Egyptian relations, they are also sure to recognise its success in channelling popular nationalist sentiments in their favour. In fact, the effect of this spectacle is doubly beneficial to the military: While Egypt’s emerging political parties and revolutionary youth groups have been compromised by foreign agents, the SCAF has acted as the state’s guardian against external threats to its sovereignty.

Full circle

This brings the discussion full circle. Having thus violently repressed the revolutionary forces in the street and poked holes in the credibility of the rising political class, the SCAF has proceeded to respond to every impending or actual crisis with a healthy dose of democracy. It enthusiastically supported the early push for parliamentary elections endorsed by last year’s March referendum, and months later relied on those elections to defuse a rapidly escalating confrontation between the military and protesters.

But whatever authority the SCAF supposedly sacrifices through opening the political field it has more than made up for by effectively limiting the power of the newly elected legislature from exercising actual governance. Unable to appoint ministers or forge policy independently, the parliamentarians have instead engaged in pointless political wrangling and spectacles, such as that which surrounded the pronouncement of the midday prayer. Egypt’s democracy in action, or so the SCAF would have citizens believe.

In fact, the cycle has continued almost effortlessly. Like clockwork, in the immediate aftermath of the Port Said stadium deaths, the SCAF attempted to placate protesters demanding the military’s accountability by announcing the official nomination of presidential candidates to commence on March 10, several weeks ahead of schedule. One spectacle replaces another.

How the SCAF will respond to the election of Egypt’s first president in the post-authoritarian era remains to be seen. But given that the powers of the office have yet to even be determined and the independent candidates will also have to contend with a parliament attempting to secure its own authority, the military is sure to exploit the developing situation to its own advantage – all while claiming that it is, in fact, retreating to its barracks.

This is not to suggest that Egypt’s military ruling institution is an all-powerful or omniscient Wizard of Oz figure. Far from it. It has made frequent mis-steps that have only emboldened the revolutionaries, and when it has succeeded, has only done so due to other actors playing their parts in the spectacle. What is becoming more clear, however, is that the SCAF has learned to adapt to the changing conditions more quickly, and has become more adept at managing the spectacle to its own political advantage. For Egypt’s revolution to succeed, the curtain must be pulled back and the wizard must be exposed for all to see.


Greece and those wild and crazy guys at the European Central Bank

Filed under: Uncategorized — Mr. Craig @ 10:53 am

The European economic establishment is pushing policies with little theoretical or empirical support.

“The people in Greece and peripheral countries must wake up to the fact that they are not dealing with reasonable people on the other side of the negotiating table.”

Many Greeks resent the troika’s demands for economic austerity in Greece

Washington, DC – I have been following the European sovereign debt crisis since it first developed more than two years ago. It was evident from the beginning that the conditions on the debtor nations being demanded by the “troika” of the European Central Bank, the European Union, and the International Monetary Fund were both onerous and counterproductive.

This view has been confirmed by the fact that the debtor countries have missed target after target and that growth has consistently come in far below projections. (Actually, the crisis countries have been contracting for much of the past two years.) This could leave analysts guessing as to what economic reasoning lies behind the troika’s conditions.

Last week I got the answer when I had occasion to meet with a high-level EU official. There is no economic reasoning behind the troika’s positions. For practical purposes, Greece and the other debt-burdened countries are dealing with crazy people. The pain being imposed is not a route to economic health; rather, it is a gruesome bleeding process that will only leave the patient worse off. The economic doctors at the troika are clueless when it comes to understanding a modern economy.

The basic story of the crisis countries is simple. Their economies became uncompetitive with the rest of the eurozone in the past decade as inflation in these peripheral countries outpaced inflation in the core eurozone countries of northern Europe, most importantly Germany. This created a large gap in price levels that caused peripheral countries to run massive current account deficits.

In some countries, such as Greece and to a lesser extent Portugal, the current account deficit corresponded to excessive public sector borrowing. In Spain and Ireland, the current account deficit was associated with a massive private sector borrowing boom.

The remedy for this situation is obvious, even if getting from here to there may not be simple. The peripheral countries have to regain competitiveness by having their prices fall relative to prices in the core countries. If these countries still had their own currencies, this could be accomplished quickly through a devaluation of the currencies of the peripheral countries.

However, being part of the eurozone rules out this option. With a single currency the only route for the peripheral countries to regain competitiveness is to have a lower inflation rate than the core countries.

This would be a doable task if the core countries were prepared to run inflation rates in the range of 3-5 per cent annually. If the peripheral countries kept their inflation rates in a range of 1-2 per cent, they would soon be able to restore their competitiveness.

But the core countries have zero intention of allowing their inflation rate to increase from the current 1-3 per cent range. As I learned from my conversations with this EU official, low inflation is viewed as the equivalent of a commandment from God. He could not even see the logic of deliberately allowing the inflation rate to rise.

He viewed the idea of 4-5 per cent inflation as being like a dreaded disease, as though there were not a long history of countries experiencing robust growth with inflation rates in this range or even higher.

The alternative route suggested by this EU official was that Greece and other peripheral countries would bring about a restructuring of their economy. This would lead to lower costs and higher productivity, and thereby a return to competitiveness.

There is little doubt that there are many inefficiencies in the peripheral economies that should be eliminated or reduced. But the idea that this can be quickly done, in the context of economies that are rapidly contracting, is more than a little fanciful. There certainly is no precedent for a successful restructuring like this anywhere in the world.

The country that some proponents of this route hold up as a model is Latvia. Latvia has seen its economy contract by more than 20 per cent, although it is now seeing respectable growth. Still, its unemployment rate is well into the double-digits. Furthermore, Latvia’s unemployment rate would undoubtedly be much higher if close to ten per cent of its workforce had not emigrated to other countries in search of work.

If people on the left proposed a set of economic policies with so little theoretical or empirical support, they would be laughed out of the public debate. In this case, because the people pushing such policies hold the highest positions in government and the European economic establishment, they end up making official policy.     

The people in Greece and peripheral countries must wake up to the fact that they are not dealing with reasonable people on the other side of the negotiating table. The notion of leaving the euro cannot be a pleasant one, but the troika is giving the peripheral countries little choice.

US and UK urge Israel not to attack Iran

Filed under: Uncategorized — Mr. Craig @ 10:44 am

Western allies call for more time for sanctions to work, as tensions run high following Iranian naval deployment.

The United States and Britain have urged Israel against any military action against Iran and its nuclear programme, after Iranian warships passed through the Suez Canal to dock at the Syrian port of Tartous, ratcheting up tensions in the region.

Martin Dempsey, the chairman of the US joints chiefs of staff committee, and William Hague, the British foreign minister, both said that an Israeli attack on Iran would destabilize the entire region, and urged Israel to give international sanctions against Tehran more time to work. 

In comments on Sunday,  Dempsey said an Israeli attack would be “not prudent”, and Hague said it would not be “a wise thing”.

In an interview broadcast on CNN on Sunday, Dempsey said Israel has the capability to strike Iran and delay the Iranians “probably for a couple of years. But some of the targets are probably beyond their reach”.

He expressed concern that an Israeli attack could spark reprisals against US targets in the Gulf or Afghanistan, where American forces are based. “That’s the question with which we all wrestle. And the reason that we think that it’s not prudent at this point to decide to attack Iran,” Dempsey said.

Describing Iran as a “rational actor”, Dempsey said he believed that the international sanctions on Iran are beginning to have an effect. “For that reason, I think, that we think the current path we’re on is the most prudent path at this point.”

Tom Donilon, the White House national security advisor, was to meet with Benjamin Netanyahu, the Israeli prime minister, though there was no confirmation from either government on whether or not that meeting took place.

Donilon is due to meet Ehud Barak, the Israeli defence minister, on Monday.

Al Jazeera’s John Terrett, reporting from Washington DC, said it was highly unusual for a national security advisor to travel overseas and that he was likely to bluntly tell the Israelis to “put the brakes” on its attack plans.

Speaking to the BBC, British Foreign Minister Hague said the UK’s approach was focused on sanctions and diplomatic means.

“I don’t think a wise thing at this moment is for Israel to launch a military attack on Iran,” he said. “I think Israel like everyone else in the world should be giving a real chance to the approach we have adopted on very serious economic sanctions and economic pressure and the readiness to negotiate with Iran.”

Warships enter Mediterranean

Iranian warships crossed the Suez Canal and docked in Syria’s port of Tartous on Sunday, Iranian state media reported.

The Mehr news agency said on Sunday that Tehran’s show of support has caused “extreme worry for Zionist forces”.

Youcef Bouandel, professor of international affairs at Qatar University, told Al Jazeera that Iran’s deployment has to be viewed as part of a “broader picture”, because the Iranian government feels that “Syria is the first step towards putting Iran in the corner”.

“Iran has been having a few standoffs with the West in general over its nuclear programme and over its oil embargo,” said Bouandel, who added that the docking of the ships on the Syrian coast had two largely symbolic meanings.

“Iran has been threatening to close the Strait of Hormuz and has been a strong ally of Syria over the last year in particular … The two ships … crossed the Suez Canal without being stopped or searched [which] suggests that they do not carry any weapons,” he said.

Tensions over the nature of Iran’s nuclear programme have led to ever-tightening sanctions on the country’s oil exports, prompting Iran to threaten to close the strait, the world’s most important chokepoint for oil transport.

Israeli reaction

Reacting to the news on Saturday, Israel’s foreign ministry denounced the deployment as a “provocation” and a “power play”. Israel said it will be watching the ships’ movements closely to ensure they do not approach its coast.

There have been increasingly frequent media reports, as has been the case in the past, citing Israeli officials who say they must bomb Iran’s nuclear facilities before the government acquires the ability to construct a nuclear bomb.

Israel has expressed some satisfaction with recent harsh sanctions passed against Iran’s financial sector but does not believe they alone will lead Tehran to re-evaluate its nuclear program, said Shamayleh, reporting from Jerusalem.

Israeli officials accused Tehran of orchestrating anti-Israeli bombings in India and Georgia as well as blasts in Thailand last week, allegations that Iran denies.

Iran has accused Israel of assassinating several of its nuclear scientists.

Iran carries ‘message of peace’

In remarks carried by the official IRNA news agency, Iranian Admiral Habibollah Sayari did not say how many vessels had crossed the canal or what missions they were planning to carry out in the Mediterranean, but he said the flotilla had previously docked in the Saudi port city of Jeddah.

Two Iranian ships, the destroyer Shahid Qandi and supply vessel Kharg, had docked in the Red Sea port on February 4, according to Iranian media.

Sayari said the naval deployment to the Mediterranean would carry a “message of peace” but also put on display “the might” of Iran’s military.

“It will prove to the world that despite increasing enemy sanctions over the past 33 years, our manpower, obedient to the orders of the leader Imam Khamenei, continue to add to their academic and military abilities,” Sayari said.

The first Iranian presence in the Mediterranean in February 2011 provoked strong reactions from Israel and the US.

During the 2011 deployment, two Iranian vessels, a destroyer and a supply ship, sailed past the coast of Israel and docked at the port of Latakia in Syria before returning to Iran via the Red Sea.

Russia, who has close relations with Iran and has at every turn opposed military action against Syria, also has a base in Tartous.

Mitt Romney, ‘welfare queen’

Filed under: Uncategorized — Mr. Craig @ 10:39 am

Romney’s wealth is based on the private equity business model, founded on tax-payer subsidies.

Mitt Romney’s limited tax-form release validates what we already knew: He’s not just a member of the one per cent, he’s in the one per cent of the one per cent,

So now the GOP has gotten a taste of their own medicine, with lurid, hyperbolic attack ads dominating the electoral process. And they do not like it, not one bit. Two deeply flawed candidates have emerged as front-runners in a process that has exacerbated and amplified those flaws a thousand fold. The tide may have finally turned, Mitt Romney may have finally learned how to punch back, and the tide of establishment money may have finally swamped Newt Gingrich for good as a serious threat – though he’s unlikely to quit. But even if Gingrich were to quit today, months and months of videotaped debates, press conferences, attack ads and various other vicious odds and ends are not just going to go away. They’ll be back when the general election campaign really heats up next fall.San Pedro, CA – Ever since Brown vs Board of Education, conservatives have been complaining about judges “legislating from the bench”. It was a brilliant strategy: “We’re not racists,” they could say. “There’s a matter of high principle involved here.” But it was not until 56 years later, with the Citizens United decision – and conservative justices ruling the roost – that we got to see what an earth-shattering example of legislating from the bench reallylooks like – and the Republican presidential primary is the number one surprise casualty. It’s just the sort of unintended consequence you’d expect in the absence of a thorough legislative fact-finding process, and the fine-tuning of final legislation. It’s not that the legislative process is flawless – far from it. But this sort of staggering bolt-from-the-blue consequence is precisely the sort of thing that the legislative process is intended to avoid, and that the judicial process is ill-equipped to anticipate. Oops!

Although Gingrich attacks Romney for what he’s done to US workers, there’s an even deeper jujitsu criticism to be made of his business mode: Mitt Romney is a welfare queen. As we’ll see below, without the tax-breaks given to interest payment, the private equity business model would never have been born. Those tax-breaks are nothing but a taxpayer subsidy, paid for by everybody else picking up the slack for Mitt Romney and his crony corporate raiders. But let’s not spoil our appetites by starting with dessert.More importantly, the Republican primary has unwittingly validated the Occupy movement in spades, laying the groundwork for a potentially very different sort of campaign environment not just in the fall, but starting right now. Mitt Romney’s limited tax-form release validates what we already knew: He’s not just a member of the one per cent, he’s in the one per cent of the one per cent – perfectly positioned to illustrate everything that’s wrong with the existing system. Seen through the lens of Romney’s own example, it’s not capitalism per se that’s the problem, but the dramatic shift away from a form of capitalism that benefited almost everyone to a form that only benefits a small handful. And it is Gingrich’s campaign that has forcefully made this point, on the stump, in debates and in the half-hour video, When Mitt Romney Came to Town, which starts off with a paen to capitalism as the source of the strength of the US, before turning dark with its focus on Wall Street, leveraged buyouts and Romney’s Bain Capital in particular. 

Newt’s populist put-on

Economist Dean Baker is one of a small handful of economists who saw the housing bubble for what it was years before its inevitable bust. In the 1990s, he began what might be the first blog, Beat The Press, devoted to debunking false assumptions and misleading arguments in the economics coverage of the Washington Post and theNew York Times (later expanded to include to the Wall Street Journal and the Economist). His most recent book,The End of Loser Liberalism: Making Markets Progressive, argues that the right/left divide on economics should not be conceived of as pro- vs anti-free market, but as how to structure markets – to favour the rich, or to favour society as a whole.

Baker’s prescience, breadth of vision, and detailed critical attention to the foibles of economic conventional wisdom made him an obvious choice to turn to with questions about what all this might mean. Before turning to Romney, I asked him first about Gingrich’s populist rhetoric, and how Obama’s policies had opened the door for this implausible development. I talked to him just before Gingrich’s sharp decline in Florida’s polls.

“Gingrich is really an astute politician,” Baker began. “In principle, he’s very much of these elites. He made millions of dollars as a lobbying, we know what he did. He very much comes from that group – so him going against the elites is a little perverse that way, but that doesn’t mean he couldn’t do it. Would he be able to win? I wouldn’t rule it out. President Obama has gotten more populist in his rhetoric in the past four or five months. But it’s not clear that it’s going to translate much into action. More importantly, for him in terms of election, it’s not clear that people will buy it.”

As for how Obama’s policies opened the door for this, Baker first pointed to the undersized stimulus, and referred to the just-released “Summers Memo”, defining the framework of Obama administration, thinking about the stimulus before taking office. “He was always very cautious about the stimulus,” Baker said. “They under-estimated the severity of the downturn and they were always concerned that they go too far with the deficit, and clearly that was the wrong approach. They needed much more stimulus than they got.”

“The result of that is we got very weak recovery. You know, the unemployment rate is still very high. That’s what people are going to grade him on. So, to some extent, his line is ‘it could have been worse’. Of course, that is always true. It’s not a very compelling re-election slogan.”

Baker also pointed to the failure to break up the big banks. “The banking system is more concentrated [now] than it was before the downturn,” he pointed out.
It would also have meant a lot fewer houses standing empty, helping to drive down property values for the neighborhoods around them. “In the same vein,” Baker continued, “he could have pushed for bankruptcy cram-down, which again does the same sort of thing. It gives people a stick in their negotiations with banks. He basically backed down on that. He may not have been able to get that through Congress, but he didn’t try.”But one reason I chose Baker was because I knew he’d thought a lot about other things that could be done. And he did not disappoint. He turned to the disaster of Obama’s foreclosure programme (HAMP), but wasted no time criticising it, instead turning quickly to what could have been done. “What I would have preferred, I argued for this, was the right to rent – allowing people to stay in their homes as renters, following foreclosures so that would lead to housing security, and probably lead to lots of banks voluntarily doing write-downs in order to avoid that situation.”

“So he did all these things that people question, they don’t necessarily know all the details, but they can see the banks are still there, bigger than ever and people without work are losing their homes. So, without knowing a great deal about specific policies, it’s not hard for people to draw the conclusion he doesn’t really seem to be on our side.”

This helped create the perfect opening for a huckster like Gingrich. And though his candidacy may be fading, his impact lives on – particularly when it comes to reframing Romney, not as a poster-boy for capitalism, but as a cautionary example of how it has gone wrong these past 30+ years.

Private equity 101

Baker cited two different issues that have been raised about private equity firms. First is the casual indifference to workers, treating them as utterly disposable. Second is the way the tax codes actively create incentives for them, without any countervailing laws, policies and practices to curb their destructive effects. The first, Baker noted, had been emphasised by Gingrich’s video, When Mitt Romney Came to Town.

“You have all these people who have worked for decades, and now they throw them out the door and give them nothing. It’s not something only private equity companies do. Now private equity companies do that, but General Electric does it, General Motors … downsizing is not unique to private equity,” Baker pointed out. “It would be great to get a discussion going. Clearly that has resonance. That’s one of the things I love about this. Here’s Newt Gingrich doing this in a conservative Republican state. And he’s not stupid, I’m sure he had this focus-group tested and he did this because he know this would have resonance.”

It could easily be quite different. “The US really stands out that way. Across Europe, just about everywhere you can’t just fire someone who’s been working for you for years. You owe them severance pay, you at least have to give them warning.” Policies that pay, say, two weeks of severance pay for every year of employment, provide both a cushion for workers who are fired, and a disincentive to casually fire them in the first place. In the US, Baker noted, “CEOs get that, so it’s not a concept that’s not known here”.

From the standpoint of basic economics, Baker said, “We know there’s externalities in the sense that you lay off a worker in their early 50s, they have a hell of a time getting re-employed. Many never will. So they’re going to collect unemployment benefits, in addition to the harm it does to the worker, so it’s reasonable to say there are serious externalities here. If someone’s really not pulling their weight and you’re paying them, fine, get rid of them, but give them something to go away on. And if that prevents you from doing it, well then, maybe they’re not that much of a drag.”

This much is relatively easy to grasp – as proved by Gingrich’s stunning upset in South Carolina. But the second issue – the role of rigged rules, including the tax code – may be harder to grasp or even just focus on… or at least it was, before Romney released his tax returns, turning himself into a poster-boy for the nexus between high incomes and low taxes.

“The basic story of private equity [called “leveraged buyouts” in the 1980s] is that they leverage firms to the hilt and then they hope that they have something viable to sell off at the end of the day. But very often, they’ve already gotten their money out either way,” Baker explained. This is quite different from venture capital – the funding of small startups that pour resources into a company, rather than stripping them out – which Bain originally focused on, but largely abandoned for the less risky, more lucrative private equity game.Private equity for grad students

“It’s standard practice that they buy a firm, they borrow against the firm, so it’s not their own borrowing… then they pay themselves back from the borrowing.” This is the key: the company bought pays back the buyer, even while taking on debt itself. (And the key to the key is that debt payments are tax-deductible.) But then it gets worse, Baker said, “Then they sell off assets, so they sell off their real estate, and they often set up a REIT (Real Estate Investment Trust) and that will hold the real estate and then they rent it back to the stores. So here, they have these stores, they have been a viable, profitable company, now they have all this debt, plus they don’t have any assets. They have to come up with the rent each month to stay in business.”

“At the end of that, if they still have a company they can sell off, they’re golden. If they don’t, well, they just go into bankruptcy, and they tell the creditors: ‘Hey, too bad, you’re out of luck.’ And if they’ve already gotten their money out, the private equity company’s OK. So what they manage to do is create a heavily leveraged bet where they pretty much could only win. It’s a one-sided bet.” Which is why Bain found it so much more attractive than the venture capital game. Indeed, it’s so attractive that private equity firms frequently buy and sell companies back and forth to one another, making money with each transaction underwritten by taxpayers. Brand-name companies, with decades, even a century or more of public goodwill, have been taken into bankruptcy, then purchased by another private equity firm multiple times.

As already indicated, there’s a huge political/tax policy point to all this, Baker explains. “A lot of what’s going on is that interest is tax-deductible, whereas dividends are not. So a lot of their gains are simply replacing dividend payments with interest payments. Which comes from the taxpayers. You’re not creating value. Mitt Romney – if he loads up a company with debt – he hasn’t created value, he’s just basically found a way to bilk the taxpayers. You can get rich, but that’s not creating value for the economy.” That’s the initial stage, the tax law that gets the ball rolling. The second stage, the asset stripping, which frequently leads to bankruptcies, involves ripping off creditors. “There, too, it’s not a case where you’re creating value. You’re basically creating risk for other people, getting rich in the process.”

Conceptually, it’s not hard to fix this situation. “You could get rid of the tax reduction for interest, or in any case make interest payments and dividend payments symmetrical.” That alone might well do the trick, since the tax savings are key to making leveraged buyout deals possible in the first place. But making the law more creditor friendly to protect against asset-stripping should also be considered, Baker said.

Financial journalist Josh Kosman wrote a whole book on the topic, The Buyout of America: How Private Equity Is Destroying Jobs and Killing the American Economy. In an interview at Mike Konczal’s Rortybomb blog, he explained both how things got started, and how they changed.

“The original leveraged buyout firms saw that there were no laws against companies taking out loans to finance their own sales, like a mortgage,” Kosman said. “So when a private equity firm buys a company and puts 20 per cent down, and the company puts down 80 per cent, the company is responsible for repaying that.”

Those who began this practice differed significantly from those who never knew anything else. At first, the leveraged deal was just part of a process, most of which was not that different from standard business practices. But this soon changed, simply because the leveraging process was profitable. It became common practice to use short-term profits to take on more debt, while paying dividends to the private equity firm.

This departed significantly from the original model, Kosman explained, “If you look at Ted Forstmann, an original private equity person who just passed away, he would rail against dividends in this manner – borrowing money to pay out dividends. He was more interested in taking companies public and selling shares and paying down debts and collecting proceeds that way. I can respect that a lot more. The initial private equity model was that you would make money by reselling your company or taking it public, not by levering it a second time.””If you look at the dividends stuff that private equity firms do, and Bain is one of the worst offenders, if you increase the short-term earnings of a company, you then use those new earnings to borrow more money,” Kosman said. “That money goes right back to the private equity firm in dividends, making it quite a quick profit. More importantly, most companies can’t handle that debt load twice. Just as they are in a position to reduce debt, they are getting hit with maximum leverage again. It’s very hard for companies to take that hit twice.”

The backdrop to all this is the taxpayer subsidy. As Konczal noted, “A recent paper from the University of Chicago looking at private equity found ‘a reasonable estimate of the value of lower taxes due to increased leverage for the 1980s might be ten to 20 per cent of firm value’, which is value that comes from taxpayers to private equity as a result of the tax code.”

And Kosman pointed out that for the 1990s, “Moody’s just put out a report in December that looked at the 40 largest buyouts of this era and showed that their revenue was growing at four per cent since their buyout, while comparable companies were growing at 14 per cent”.

With two or more rounds of leveraging, taxpayer subsidies, and much lower growth rates, the private equity model has little, if anything, to recommend it to society at large. But Romney, who started at Bain as CEO in 1984, never knew any other way of doing business. Except, that is, for the relatively brief period of time when Bain focused on venture capital deals, deals that actually can and do build companies and add jobs – though often at the expense of other companies and the jobs they provided (just think of how many independent stationary and office-supply stores Staples helped to put out of business, for example). The fact that Romney shifted focus from venture capital to private equity tells you everything you need to know about what his priorities were. “Creating jobs” was clearly not among them. Nor was creating lasting value. That’s simply not what the private equity world is all about. And that world reflects the values that have come to define the one per cent, increasingly at odds with the welfare of the US as a whole.

Obama-Romney campaign

While most Democrats would love nothing more than to run against Gingrich this year – polls indicate he could lead the GOP to a landslide defeat, taking down thousands of other elected officials as well -Baker leans the other way. “In a lot of ways I’d prefer to see a race with Romney,” he said. “Of course, Obama will run the kind of race he wants to run… But it’s more likely to pressure [him] to run a campaign that might actually focus on some fundamental issues of what the economy might look like. I worry that if you had a race with Gingrich it might get buried under complete nonsense.”There would also be a more favourable environment for progressive economic ideas to be advanced. “The battle overSOPA [the “Stop Online Piracy Act”] is fascinating,” Baker said, citing a recent example. There had been a prolonged battle waged by online activists, fearing it would cripple the web as we know it. But as soon as Google and Facebook got on board against it, a flurry of about-faces occurred – both in the Senate and the White House.

“When people with money – people with power – are getting burned, that’s when you can make change,” Baker said. The getting burned part has certainly been happening with creditors left holding the bag in private equity bankruptcies. A Romney candidacy just might provide an organising opportunity for them to fight back – and in doing so, to make things better and fairer for the rest of the US as well.

Ever since the Great Depression, Republicans have attacked Democrats as being anti-business, anti-capitalist, “creeping socialists”, “soft on communism”…  the attacks on Obama as a socialist, among other things, are particularly hyperbolic and absurd, bolstered by racial stereotypes and animosities, but they come out of a long tradition. Yet, the historical record is clear: the US as a whole has done best under Democratic rule. From the end of World War II through the early 1970s, when even Richard Nixon said: “We are all Keynesians now,” the rate of income growth for all levels was relatively well in sync. From 1945 to 1973, incomes rose 99 per cent for the bottom 99 per cent, but only 40 per cent for the top one per cent.

But from Reagan’s election in 1980 through to 2007, the year before the Wall Street crash, the top one per cent gained 232 per cent, compared with just 20 per cent for the bottom 99 per cent. The record of government budgets is equally clear-cut. Every presidential term from the end of World War II through the early 1970s also saw a reduction in the debt-to-GDP ratio – the most basic baseline measure of fiscal responsibility. Every presidential term from 1980 onwards has shown a significant growth in the debt-to-GDP ratio… except, of course, for Bill Clinton’s two terms. (A trajectory that began two years before Gingrich became Speaker.)

As long as Republican’s black-and-white rhetoric shapes economic debates, the vast majority of US voters will continue to be bamboozled into a more and more dysfunctional state, reflected in the most basic economic data referred to above. This bamboozlement has been going on for three decades now. But if the focus shifts toparticular practices, if it’s a question of how markets are structured and why, a commonsense, nuts-and-bolts question of who benefits and who loses, then things could be very different.

The economist, Hyman Minsky, whose financial instability hypothesis predicted and explained the genesis of the Wall Street meltdown decades in advance, had a much more refined, historical understanding of capitalism as an evolving real-world system, rather than an ideological construct. In a co-authored 1996 working paper, “Economic Insecurity and the Institutional Prerequisites for Successful Capitalism“, he wrote:

The financial structure of the American economy has undergone significant evolution over the history of the republic. From its initial stage of “commercial” capitalism, during which external finance was used mainly for trade, this structure has evolved into its present stage of “money-manager” capitalism, where financial markets and arrangements are dominated by managers of funds.

Two financial stages, “industrial” capitalism and “paternalistic” capitalism, were dominant between the eras of commercial and money-manager capitalism.

Against this broader historical background, the question raised by private equity firms such as Bain Capital is whether they’re a feature or a bug of money-market capitalism – as well as what other buggy features we might well want to alter or abolish, as our founding fathers might have put it. This is a very far cry from being a “socialist attack” on the American way of life.

If the issue is not capitalism in the airy abstract, but the concrete historical reality of Bain Capital and the world it represents, then maybe, just maybe, we really might start inching in the direction of real and fundamental change. Change we don’t have to believe in, because we can shape it with our very own hands and see it with our very own eyes.

It’s the 0.000063% of the US Who REALLY Deciding the Presidential Election

How US politics became the politics of the “super rich”.

New York, NY – At a time when it’s become a cliché to say that Occupy Wall Street has changed the nation’s political conversation – drawing long overdue attention to the struggles of the 99 per cent – electoral politics and the 2012 presidential election have become almost exclusively defined by the one per cent. Or, to be more precise, the .000063 per cent. Those are the 196 individual donors who have provided nearly 80 per cent of the money raised by Super PACs in 2011 by giving $100,000 or more each.

These political action committees, spawned by the Supreme Court’s 5-4 Citizens United decision in January 2010, can raise unlimited amounts of money from individuals, corporations, or unions for the purpose of supporting or opposing a political candidate. In theory, Super PACs are legally prohibited from coordinating directly with a candidate, though in practice they’re just a murkier extension of political campaigns, performing all the functions of a traditional campaign without any of the corresponding accountability.

If 2008 was the year of the small donor, when many political pundits (myself included) predicted that the fusion of grassroots organising and cyber-activism would transform how campaigns were run, then 2012 is “the year of the big donor”, when a candidate is only as good as the amount of money in his Super PAC. “In this campaign, every candidate needs his own billionaires,” wrote Jane Mayer of The New Yorker.


‘This really is the selling of America,” claims former presidential candidate and Democratic Party Chairman Howard Dean. “We’ve been sold out by five justices thanks to the Citizens United decision.” In truth, our democracy was sold to the highest bidder long ago, but in the 2012 election the explosion of Super PACs has shifted the public’s focus to the staggering inequality in our political system, just as the Occupy movement shined a light on the gross inequity of the economy. The two, of course, go hand in hand.

“We’re going to beat money power with people power,” Newt Gingrich said after losing to Mitt Romney in Florida as January ended. The walking embodiment of the lobbying-industrial complex, Gingrich made that statement even though his candidacy is being propped up by a Super PAC funded by two $5 million donations from Las Vegas casino magnate Sheldon Adelson. It might have been more amusing if the GOP presidential primary weren’t a case study of a contest long on money and short on participation.

The Wesleyan Media Project recently reported a 1,600 per cent increase in interest-group-sponsored TV ads in this cycle as compared with the 2008 primaries. Florida has proven the battle royale of the Super PACs thus far. There, the pro-Romney Super PAC, Restore Our Future, outspent the pro-Gingrich Super PAC, Winning Our Future, five to one. In the final week of the campaign alone, Romney and his allies ran 13,000 TV ads in Florida, compared with only 200 for Gingrich. Ninety-two per cent of the ads were negative in nature, with two-thirds attacking Gingrich, who, ironically enough, had been a fervent advocate of the Citizens United decision.

With the exception of Ron Paul’s underdog candidacy and Rick Santorum’s upset victory in Iowa – where he spent almost no money but visited each of the state’s 99 counties – the Republican candidates and their allied Super PACs have all but abandoned retail campaigning and grassroots politicking. They have chosen instead to spend their war chests on TV.

The results can already be seen in the first primaries and caucuses: an onslaught of money and a demobilized electorate. It’s undoubtedly no coincidence that, when compared with 2008, turnout was down 25 per cent in Florida, and that, this time around, fewer Republicans have shown up in every state that’s voted so far – except for South Carolina. According to political scientists Stephen Ansolabehere and Shanto Iyengar, negative TV ads contribute to “a political implosion of apathy and withdrawal”. New York Times columnist Tim Egan has labelled the post-Citizens United era “your democracy on meth”.


The 0.01 per cent primary .

More than 300 Super PACs are now registered with the Federal Election Commission. The one financed by the greatest number of small donors belongs to Stephen Colbert, who’s turned his TV show into a brilliant commentary on the deformed Super PAC landscape. Colbert’s satirical Super PAC, Americans for a Better Tomorrow, Tomorrow, has raised $1 million from 31,595 people, including 1,600 people who gave $1 each. Consider this a rare show of people power in 2012.

Otherwise the Super PACs on both sides of the aisle are financed by the one per cent of the one per cent. Romney’s Restore Our Future Super PAC, founded by the general counsel of his 2008 campaign, has led the herd, raising $30 million, 98 per cent from donors who gave $25,000 or more. Ten million dollars came from just ten donors who gave $1 million each. These included three hedge-fund managers and Houston Republican Bob Perry, the main funder behind the Swift Boat Veterans for Truth in 2004, whose scurrilous ads did such an effective job of destroying John Kerry’s electoral prospects. Sixty-five per cent of the funds that poured into Romney’s Super PAC in the second half of 2011 came from the finance, insurance and real estate sector, otherwise known as the people who brought you the economic meltdown of 2007 to 2008.

Romney’s campaign has raised twice as much as his Super PAC, which is more than you can say for Rick Santorum, whose Super PAC – Red, White & Blue – has raised and spent more than the candidate himself. Forty per cent of the $2 million that has so far gone into Red, White & Blue came from just one man, Foster Friess, a conservative hedge-fund billionaire and Christian evangelical from Wyoming.

In the wake of Santorum’s upset victories in Colorado, Minnesota, and Missouri on February 7, Friess told the New York Times that he’d recruited $1 million for Santorum’s Super PAC from another (unnamed) donor and upped his own giving, though he wouldn’t say by how much. We won’t find out until the next campaign disclosure filing in three months, by which time the GOP primary will almost certainly be decided.

For now, Gingrich’s sugar daddy Adelson has pledged to stay with his flagging campaign, but he’s also signalled that if the former Speaker of the House goes down, he’ll be ready to donate even more Super PAC money to a Romney presidential bid. And keep in mind that there’s nothing in the post-Citizens United law to stop a donor such as Adelson, hell-bent on preventing the Obama administration from standing in the way of an Israeli attack on Iran’s nuclear facilities, from giving $100 million, or for that matter, however much he likes.

Before Citizens United, the maximum amount one person could give to a candidate was $2,500; for a political action committee, $5,000; for a political party committee, $30,800. Now, the sky’s the limit for a Super PAC, and even more disturbingly, any donor can give an unlimited contribution to a 501c4 – outfits defined by the IRS as “civic leagues or organisations not organised for profit but operated exclusively for the promotion of social welfare” – and to make matters worse, that contribution will remain eternally secret. In this way, US politics is descending further into the darkness, with 501c4s quickly gaining influence as “Shadow Super PACs”.

“Forty per cent of the TV ads in the presidential race so far came from these tax-exempt ‘social welfare’ groups.”

A recent analysis by the Washington Post found that, at a cost of $24 million, 40 per cent of the TV ads in the presidential race so far came from these tax-exempt “social welfare” groups. The Karl Rove-founded American Crossroads, a leading conservative Super PAC attacking Democratic candidates and the Obama administration, also runs a 501c4 called Crossroads GPS. It’s raised twice as much money as its sister group, all from donations whose sources will remain hidden from US voters. Serving as a secret slush fund for billionaires evidently now qualifies as social welfare.

The ‘income defense industry’

In his book Oligarchy, political scientist Jeffrey Winters refers to the disproportionately wealthy and influential actors in the political system as the “income defence industry”. If you want to know how the moneyed class, who prospered during the Bush and Clinton years, found a way to kill or water down nearly everything it objected to in the Obama years, look no further than the grip of the one per cent of the one per cent on our political system.

This simple fact explains why hedge-fund managers pay a lower tax rate than their secretaries, or why the US is the only industrialised nation without a single-payer universal healthcare system, or why the planet continues to warm at an unprecedented pace while we do nothing to combat global warming. Money usually buys elections and, whoever is elected, it almost always buys influence.

In the 2010 election, the one per cent of the one per cent accounted for 25 per cent of all campaign-related donations, totalling $774 million dollars, and 80 per cent of all donations to the Democratic and Republican parties, the highest percentage since 1990. In congressional races in 2010, according to the Centre for Responsive Politics, the candidate who spent the most money won 85 per cent of House races and 83 per cent of Senate races.

The media loves an underdog story, but nowadays the underdog is less likely than ever to win. Given the cost of running campaigns and the overwhelming premium on outspending your opponent, it’s no surprise that nearly half the members of Congress are millionaires, and the median net worth of a US Senator is $2.56 million.


The influence of Super PACs was already evident by November 2010, just nine months after the Supreme Court’s ruling. John Nichols and Robert McChesney of The Nation note that, of the 53 competitive House districts where Rove’s Crossroads organisation outspent Democratic candidates in 2010, Republicans won fifty-one. As it turned out, however, that election was a mere test run for the monetary extravaganza that is 2012.

Republicans are banking on that Super PAC advantage again this year, when the costs of the presidential contest and all other races for federal posts will soar from $5 billion in 2008 to as high as $7 billion by November. (The 2000 election cost a “mere” $3 billion.) In other words, the amount spent this election season will be roughly the equivalent of the gross domestic product of Haiti.

The myth of small donors

In June 2003, presidential candidate Howard Dean shocked the political establishment by raising $828,000 in one day over the internet, with an average donation of $112. Dean, in fact, got 38 per cent of his campaign’s total funds from donations of $200 or less, planting the seeds for what many forecast would be a small-donor revolution in US politics.

Four years later, Barack Obama raised a third of his record-breaking $745 million campaign haul from small donors, while Ron Paul raised 39 per cent from small dollars on the Republican side. Much of Paul’s campaign was financed by online “money bombs”, when enthusiastic supporters generated millions of dollars in brief, coordinated bursts. The amount of money raised in small donations by Obama, in particular, raised hopes that his campaign had found a way to break the death grip of big donors on US politics.

In retrospect, the small-donor utopianism surrounding Obama seems naïve. Despite all the adulatory media attention about his small donors, the candidate still raised the bulk of his money from big givers. (Typically, these days, incumbent members of Congress raise less than ten per cent of their campaign funds from small donors, with those numbers actually dropping when you reach the gubernatorial and state legislative levels.) Obama’s top contributors included employees of Goldman Sachs, JP Morgan Chase, and Citigroup, hardly standard bearers for the little guy. For obvious reasons, the campaign chose to emphasise the small donors over the big ones in its narrative, as it continues to do in 2012.

Interestingly enough, both Obama and Paul actually raised more money from small donors in 2011 than they did in 2008, 48 per cent and 52 per cent of their totals, respectively. But, in the Super PAC era, that money no longer has the same impact. Even Dean doubts that his anti-establishment, internet-fuelled campaign from 2004 would be as successful today. “Super PACs have made a grassroots campaign less effective,” he says. “You can still run a grassroots campaign but the problem is you can be overwhelmed now on television and by dirty mailers being sent out … It’s a very big change from 2008.”

Obama is a candidate with a split personality, which makes his campaign equally schizophrenic. The Obama campaign claims it’s raising 98 per cent of its money from small donors and is “building the biggest grassroots campaign in American history”, according to campaign manager Jim Messina. But the starry-eyed statistics and the rhetoric that accompanies it are deeply misleading. Of the $89 million raised in 2011 by the Obama Joint Victory Fund, a collaboration of the Democratic National Committee (DNC) and the Obama campaign, 74 per cent came from donations of $20,000 or more and 99 per cent from donations of $1,000 or more.

The campaign has 445 “bundlers” (dubbed “volunteer fundraisers” by the campaign), who gather money from their wealthy friends and package it for Obama. They have raised at least $74.4 million for Obama and the DNC in 2011. Sixty-one of those bundlers raised $500,000 or more. Obama held 73 fundraisers in 2011 and 13 last month alone, where the price of admission was almost always $35,800 a head.


An increase in small donor contributions and a surge of big money fundraisers still wasn’t enough, however, to give Obama an advantage over Republicans in the money chase. That’s why the Obama campaign, until recently adamantly against Super PACs, suddenly relented and signaled its support for a pro-Obama Super PAC named Priorities USA.

A day after the announcement that the campaign, like its Republican rivals, would Super PAC it up, Messina spoke at the members-only Core Club in Manhattan and “assured a group of Democratic donors from the financial services industry that Obama won’t demonize Wall Street as he stresses populist appeals in his re-election campaign”, reported Bloomberg Businessweek. “Messina told the group of Wall Street donors that the president plans to run against Romney, not the industry that made the former governor of Massachusetts millions.”

In other words, don’t expect a convincing return to the theme of the people versus the powerful in campaign 2012, even though Romney, if the nominee, would be particularly vulnerable to that line of attack. After all, so far his campaign has raised only nine per cent of its campaign contributions from small donors, well behind both Senator John McCain (21 per cent) in 2008, and George W. Bush (26 per cent) in 2004.

In the fourth quarter of 2011, Romney outraised Obama among the top firms on Wall Street by a margin of 11 to one. His top three campaign contributions are from employees of Goldman Sachs ($496,430), JPMorgan ($317,400) and Morgan Stanley ($277,850). The banks have fallen out of favour with the public, but their campaign cash is indispensable among the political class – and so they remain as powerful as ever in US politics.

In a recent segment of his show, Stephen Colbert noted that half of the money ($67 million) raised by Super PACs in 2011 had come from just 22 people. “That’s seven one-millionths of one per cent,” or roughly 0.000000071 per cent, Colbert said while spraying a fire extinguisher on his fuming calculator. “So, Occupy Wall Street, you’re going to want to change those signs.”

Romney Places BIG Bet on Michigan. But Will NEVER Get 50%+

Filed under: Uncategorized — Mr. Craig @ 8:41 am


Great expectations: Romney bets house on Michigan

 DETROIT – For Mitt Romney, the Michigan Republican primary is a matter of expectations.

It’s about waging a campaign against an incumbent president who hasn’t lived up to expectations. It’s about managing expectations for just how grand of a venue would play host to a major economic speech.

And most fundamentally, it’s about meeting and surpassing expectations about how strongly he should perform in Tuesday’s crucial primary being held in a state where Romney was born and raised.

The former Massachusetts governor’s campaign has put all of its chips on the Great Lakes State, hoping it serves Romney the same way primaries in New Hampshire and Florida had done.

He won each of those convincingly, and at a moment of peril for his candidacy. Romney’s victories tamped down dissatisfaction with his candidacy, and helped him lay claim again to being the GOP campaign’s frontrunner.

Michigan isn’t likely to give Romney such a decisive imprimatur. His campaign has deluged the state with advertising and aggressive messaging, just as it had done in New Hampshire and Florida to help dismiss Romney’s challengers at the time.

But Rick Santorum, the former Pennsylvania senator who upset Romney in a trio of nominating contests earlier this month, is hanging around with Romney in the polls. Santorum threatens to upend expectations – namely, that Romney would be able to win here comfortably, just as he had done in 2008.

Members of the Detroit Economic club gather to hear a speech by Republican presidential candidate, former Massachusetts Gov. Mitt Romney during a luncheon at Ford Field on Feb. 24, 2012 in Detroit, Michigan.

“I think he’s a strong candidate, no doubt about it. But it’s not going to be handed to him on a silver platter,” said Glory Aiken, an Oakland County Republican deciding between the two candidates.

“There’s a lot of high emotion in this election. There are a lot of people in this country who don’t think we’re heading in the right direction, and that’s powerful stuff,” she said at a Romney speech to Tea Party members Thursday night in Milford, Mich.

Romney makes frequent mention of upbringing in Michigan during his stump speech. He talks about having been born in Harper Hospital, growing up around Woodward and 7 Mile Road, and, yes, autos.

Whether that connection is enough to propel Romney to victory is a bigger question. Fifty-seven percent of likely Republican primary voters said in a Detroit Free Press/WXYZ poll released this week that they don’t view Romney as a Michigander. Those voters break for Santorum said Bernie Porn, the EPIC-MRA pollster who conducted the survey.

Romney is struggling in particular with conservatives in the state, who favor Santorum in a familiar retread of a narrative in previous primaries.

“The perception of him as a moderate is strong with me,” said Tom Petiprin of Lapeer, Mich. “When Johnny McCain endorsed him – that was almost the kiss of death for my vote. But I’m trying to be more open minded. “

NBC News Senior Political Editor Mark Murray shares his thoughts on the three toss-up states now leaning towards a specific party.

The crowd Thursday evening was composed of more of the white, middle-class voters Romney will need on Tuesday (and for which Santorum is aggressively competing.)

The audience was quite different on Friday at a cavernous Ford Field, at a speech hosted by the Detroit Economic Club, right around the 30-yard-line where the Lions play in the fall. Romney made reference to the well-heeled audience by referencing toward them during a portion of his tax speech talking about limiting deductions for high-income Americans.

The speech was moved here after a record sellout of tickets for the event, but members of the economic club were unable to find an intermediate venue. The speech was slated to be the former unveiling of Romney’s tax plan, though he outlined most of it earlier in the week. Applause for it died in the cavernous, mostly empty stadium.

He headlined the speech by noting that Obama had failed to meet expectations.

“That deep confidence in a better tomorrow is the basic promise of America. But today, that promise is being threatened by a faltering economy and, in my view, a failed president,” he said.

And later, setting expectations for himself, responding to a question about which Republican had the best chance of beating Obama: “I not only think I have the best chance, I think I have the only chance.”

To accomplish that, Romney is relying on a similar brew of voters that he had courted in New Hampshire and Florida: those who believe he is, indeed, the best candidate to unseat the Democratic president.

While speaking to supporters in Michigan on Friday, Republican presidential candidate Mitt Romney reveals that his wife drives ‘a couple of Cadillacs.’

“I probably will give him my vote, because I think he’s the strongest to beat Obama,” said Kathy Kubik, of Brighton, Mich. “The debate last night, it might have helped.”

Michael Woods, also of Brighton, agreed: “I just feel that not only from a conservative standpoint but once he gets the nod and gets in the general election, the election is going to be won among independent voters. Of the four candidates we have left here, to me, personally, I think Mr. Romney meshes well into both the conservative side and the independent side.”

But it’s been self-inflicted wounds by Romney that have most compromised his status as the most electable Republican.

Media were quick to note that, in an aside about American cars, Romney noted that his wife, Ann, drives a Cadillac – “a couple of them, actually.”

And the tens of thousands of empty seats in the backdrop invited comparisons to instances when Obama filled stadiums with exuberant audiences in his 2008 Democratic convention speech.

But with four days until the primary, Romney still has his chance with voters like Ingrid Rowe, an undecided Republican from the suburban Detroit area. She said she had hoped to hear “something convincing – something that has not been part of the talking points so far” from Romney.

“I am aware of the political maneuvering that goes on, and I wanted to get a feel,” she said.

Santorum Bets He will Play Better Than Romney in Michigan

Filed under: Uncategorized — Mr. Craig @ 8:39 am

ROY, Mich. – If Mitt Romney is counting on winning Michigan’s primary because he’s from the state, Rick Santorum is betting he’ll win here by better connecting with the state’s voters.

The former Pennsylvania senator has so far managed to battle equally with Romney in the state where the former Massachusetts governor was raised. Romney won the primary here in 2008, and had been expected to easily win again this year before Santorum upset Romney in a trio of mid-February contests.

And campaigning in the state, Santorum’s strategy has become clear. He’s courting Michigan’s broad, middle class electorate, a group that’s been affected strongly by the economic downturn, by focusing on themes of reviving manufacturing, bringing down energy prices, and crafting policies to encourage families.

“I care about the very poor,” Santorum said at a Friday night rally in Lincoln Park, a blue collar community downriver from the site of Ford’s famed River Rouge plant. “I’m a 100 percenter, not 99 versus 1.”

Said Len Marshick of Belleville, Mich.: “He holds the same values we do.”

Santorum is a candidate who cut his political teeth in Pennsylvania by being able to win over broad swaths of blue collar workers in that state’s most populous corners. He eked out victory in Iowa by courting those voters and the state’s social conservatives, and relied on a similar recipe to conjure upsets of Mitt Romney in Colorado, Minnesota and Missouri.

“I think he’s more work, work, work – a family type of person,” said Frank Lughermo, an undecided voter who grew up in southwest Detroit before leaving the city for the suburbs after the 1960s riots. “He can relate to people in industry.”

Santorum is courting in Michigan the very voters with whom Romney has struggled to connect: the working class and social conservatives – the famous “Regan Democrats” who make up a large segment of the electorate here. Romney has fared better with wealthier voters, according to exit polls of preceding primaries, while the margins are closer among the less well-heeled.

Santorum’s effort to connect with the middle class was maybe most clear in a quip Santorum made Saturday morning before a group of conservative activists, which won him a standing ovation.

“President Obama once said he wants everybody in America to go to college,” he said. “What a snob!”

Santorum’s campaigned in the state with a “Made in America” slogan more reminiscent of a union imprint than a Republican presidential campaign. He assailed Romney for having opposed the 2009 bailouts of GM and Chrysler, while, within the same time frame, supporting the Wall Street bailout.

“If you’re going to bail out one, and help your friends on Wall Street … why pick one, and not the other?” he asked, conceding in the meanwhile his own opposition to both.

But Santorum still faces challenges in driving that message home, namely his less robust fundraising and organizational infrastructure compared to Romney.

That deficit was on display Friday night, when Santorum arrived – late – in snowy conditions to address a Knights of Columbus hall that was less than half full to hear Santorum deliver a “major” address about his first 100 days in office.

Santorum laid out a 10-point plan to specify his agenda, though the specific points were sometimes lost in an especially long-winded speech, a hallmark of Santorum’s campaign style.

“Nobody is a perfect candidate, but he’s probably the most overall consistent – probably has the least ups and downs,” said Dan Fuller, an engineer for a material supplier in the auto industry.

By contrast, Romney’s campaign is more scripted – almost to a fault, judging by the cavernous backdrop for his economic address at Ford Field, remarks at which included a minor gaffe about his wife, Ann, owning two Cadillacs (a departure from prepared remarks).

Romney’s speeches are peppered with references to his upbringing in Michigan, a reminder to voters that his father, George, served here as governor.

Betty Ridan, of Bloomfield Hills, Mich., said at Saturday’s conference that she was a longtime Romney supporter precisely because of his roots in the state. But she also described Santorum’s speech as “inspiring,” and admitted the former Pennsylvania senator would have been her second choice.

What victory may mean for Santorum is a gut sense – a feeling by Michiganders that, for all of his warts, Santorum is more representative of their needs and issues than any of the other candidates.

“You see it too often where people vote because the media tells them that this is the guy that looks like the president,” said Sister Maria of the Dominican Sisters of Mary, Mother of the Eucharist. About a dozen of the sisters, wearing full habits, attended the Friday speech. “That doesn’t make sense to me.”

US Federal Debt Ceiling to be Issue AGAIN Sooner Than Expected.

Filed under: Uncategorized — Mr. Craig @ 8:36 am

The federal government could hit the debt ceiling sooner than expected — and possibly around the November election — according to a report out Friday.

Lawmakers on Capitol Hill had hoped that last summer’s deal to end the nasty fight over lifting the debt ceiling would ensure the issue wouldn’t resurface until at least 2013.

But the Bipartisan Policy Center said Friday that the debt-limit doomsday could come earlier than that.

Analysts from the Bipartisan Policy Center projected that the United States will hit its $16.4 trillion debt ceiling between late November 2012 and early January 2013 due to lower-than-expected corporate tax revenues and the recent extension of the payroll tax holiday.

A number of other factors, such as the ongoing financial crises in Europe, volatile gas prices and how quickly the U.S. economy continues to grow could push the debt-ceiling deadline forward or backwards, according to the center.

“When the Budget Control Act of 2011 increased the debt ceiling last August, Congress, the administration, and outside analysts believed that this increase would allow federal borrowing under the limit well into 2013,” the center’s analysts wrote. “Due to unexpected circumstances … that belief appears increasingly likely to have been misguided.”

The current debt level is $15.4 trillion, according to the Treasury Department.

The center’s report echoes a warning from Treasury Secretary Timothy Geithner last week, when he testified before the Senate Budget Committee that the country would reach the debt limit “significantly” after the fiscal year ends on Sept. 30, but “before the end of the calendar year.”

“Those estimates will change, it’s a long way away and you know those estimates change a lot,” Geithner told senators. “But what we do try and do is update those estimates regularly, transparently and we’ll keep doing that as we have in the past.”

President Barack Obama’s fiscal 2013 budget also foreshadows an earlier-than-expected deadline. As of Sept. 30, the debt level is expected to hit $16.3339 trillion, running close to the statutory $16.394 trillion limit, according to the budget.

A grueling, weeks-long battle in Congress last summer ended with an agreement to slash $2.1 trillion from the federal budget in exchange for raising the debt limit by the same amount. The standoff pushed the country to the edge of default and triggered the first-ever downgrade of the nation’s credit rating.

If the United States maxes out its credit limit before the end of this year, that could set up another messy and acrimonious battle during the lame-duck session. Lawmakers already face a dilemma over expiring Bush-era tax rates and a potential fight over preventing the $1.2 trillion in automatic budget cuts that were borne out of the supercommittee’s failure last November.

Congress has to sign off on any increases to the debt ceiling, but the Treasury Department can employ a variety of accounting maneuvers to stall the absolute deadline before the country defaults on its debt. It did so last year, when the debt limit was actually hit in May but Treasury was able to delay the deadline until early August.

The Bipartisan Policy Center said it believed that the Treasury Department could punt the debt-limit deadline until February 2013 if the so-called extraordinary measures were again used.

A recent analysis from JP Morgan also estimated that due to the payroll tax holiday deal – which also included an extension of jobless benefits and a delay in steep pay cuts to doctors who serve Medicare patients – the debt ceiling will be reached in mid-December. But the investment banking firm said that with the various accounting measures, Treasury could delay the absolute deadline until February 2013

Iran Faces Hard Economic Reality.. But the Citizens will Suffer.

Filed under: Uncategorized — Mr. Craig @ 8:00 am

Tougher sanctions

From half-hearted to harsh

Iran’s economy is now at risk of grave damage

Feb 25th 2012 | from the print edition

IN NOVEMBER the International Atomic Energy Agency reported that it had “serious concerns regarding possible military dimensions to Iran’s nuclear programme”. Since then America has introduced sanctions that target Iran’s central bank, the country’s main conduit for oil transactions, by penalising any foreign financial institutions doing business with it. For its part, the European Union has imposed an embargo on Iranian oil. Oil and petrochemical exports account for between 50% and 70% of the government’s revenues.

To give markets time to adjust, the oil embargo (affecting about 25% of Iran’s exports, or 600,000 barrels a day) will not take effect until July. The full force of the sanctions on the central bank will also not be felt until the second half of the year. However, the International Energy Agency (IEA), a rich-world energy consumers’ club, says that European customers have already stopped buying Iranian crude and that Asian buyers are looking elsewhere. That blunts Iran’s recent announcement of an embargo of its own, against Britain and France. The IEA estimates that Iran’s oil exports may fall to about 60% of their former level once the sanctions are fully in place. And countries, such as China and India, that continue to buy Iranian oil, will be able to extract discounts.

Up to now, sanctions have failed in their main political objective—to persuade Iran to change course by committing itself to verifiably peaceful nuclear development. But the ratcheting up of sanctions is taking its toll on the country’s creaking economy. The Iranian rial has lost half its value since December, despite attempts by the regime to prop it up. There are reports of food shortages, hoarding and a drying up of investment.

In late December Iran’s president, Mahmoud Ahmadinejad, admitted to the majlis, Iran’s parliament, that the country was in effect shut out of the international banking system. In anticipation of pressure to come, SWIFT, the Society for Worldwide International Financial Telecommunication, based in Belgium, announced this month that it was preparing to blacklist Iran from the system banks use for wire transactions.

Judging the way Iran’s leaders will respond is difficult. In the past Iran has found clever ways to circumvent an array of less formidable sanctions. Some Israelis concede that this time it may be different. Last week Israel’s vice-prime minister, Moshe Ya’alon, told Israel Radio that Iranian “inflation and unemployment are high. There is also disquiet that is threatening the regime. We are seeing reactions that are in some ways hysterical.” But the frustration for Israel’s leaders is that the new sanctions did not come earlier. And the idea that they might eventually work remains doubtful to people who believe that the time in which Israel can act in its own defence is running out.

Kentucky Supreme Court Affirms What the People of Kentucky Knew All Along

Filed under: Uncategorized — Mr. Craig @ 7:31 am

Supreme Court: Lawmakers to run in old districts

Roger Alford

Legislative candidates will have to run in decade-old districts in this year’s elections, the Kentucky Supreme Court ruled Friday afternoon.

 Chief Justice John D. Minton, writing for the full court, said newly drawn legislative districts are “facially unconstitutional” and that lawmakers will have to operate under the old districts until more balanced boundaries are drawn.

Justices heard oral arguments Friday morning in the redistricting case that has been speeding through the legal process. The original lawsuit was filed only a month ago.

Franklin County Circuit Judge Phillip Shepherd ruled earlier this month that newly drawn legislative districts are out of balance and must be redrawn to comply with the “one person, one vote” mandate in federal and state law. Challenges were quickly taken to the Kentucky Court of Appeals and then to the Supreme Court.

The Supreme Court upheld Shepherd’s ruling. Justice Will T. Scott had recused himself from the case because he is seeking re-election this year in a judicial district that was redrawn under the same legislation that reshaped legislative districts.

“This is really an easy case,” Lexington attorney Scott White said in brief comments to the Supreme Court earlier Friday. White is representing Democratic state Sen. Kathy Stein, whose district was shifted more than 100 miles northeast from Lexington. He said justices simply had to decide whether lawmakers could have created a better population balance between legislative districts.

Besides being shifted geographically, Stein was being ushered out of the Senate at the end of this year under the redistricting plan. She praised the Supreme Court ruling as “magnificent.”

“It was clear what was happening,” said Stein, a liberal Democrat in a Senate controlled by conservative Republicans. “I know it was political, but it just didn’t make sense.”

Justices also upheld the Feb. 10 filing deadline for legislative candidates. And Secretary of State Allison Lundergan Grimes said Friday she intends to certify legislative candidates on Monday so that county elections officials can begin preparing ballots for the May primary.

Redistricting occurs every 10 years to account for population changes reported in the U.S. Census. The latest count found that the state’s overall population grew from 4 million to 4.3 million between 2000 and 2010, requiring new legislative and congressional district boundaries. At each level of government _ state House, Senate and Congress _ the districts must be of nearly equal size.

Unhappy with the outcome of legislative redistricting, House Republicans sued in late January. Stein joined the lawsuit, which contends that the new districts are unconstitutional.

The changes produced some oddly shaped legislative districts. One House district stretched from the Tennessee line in McCreary County, zigzagged narrowly through Laurel County, then encompassed all of Jackson County. One Senate district stretched more than 130 miles from Barbourville to Morehead.

Kentucky is one of at least 25 states with pending court cases involving redistricting. A similar Kentucky lawsuit filed after the 1990 Census established some of the case law that House Republicans reference in their challenge.

Senate President David L. Williams said in a statement Friday that he’s ready to work on new legislative districts.

“The Supreme Court has the ultimate authority to determine the constitutionality of any statute and I accept their decision,” he said. “We stand prepared to run in the old districts or draw new legislative lines, if the House is so inclined, in conformity with the Supreme Court ruling.”

Meanwhile, some are pointing to the divisive redistricting process as reason to enlist an independent commission to handle the chore.

“This year’s debacle over redistricting is part of a recurring trend,” said Jim Waters, head of the conservative Bluegrass Institute for Public Policy Solutions in Bowling Green. “The system is broken to the point that the constitutional guarantees that all citizens will be properly represented are being threatened. While the Legislature still must oversee the process, an independent commission needs to draw the lines.”

Republicans Afraid of Prolonged Nomination Fight

Filed under: Uncategorized — Mr. Craig @ 7:17 am

WASHINGTON, D.C.–The ongoing race for the Republican presidential nomination appears to be causing heartburn among some party leaders who are eager to start taking on a president who has begun to feel the political benefit of a rehabilitating economy and a divisive GOP primary process.

“I definitely would like to see it finished before the convention. I think it is a good thing for the Republican Party to line up behind one candidate,” Gov. Brian Sandoval, R-Nevada, said as a meeting of the nation’s governors was getting underway here Saturday.

Sandoval also said that the 20 primary debates will help get his party’s eventual nominee battle tested for the fall, but that the negative campaigning among the candidates provides helpful material to President Obama’s reelection efforts.

“I think it is going to be healthy and strong for somebody to emerge so that they can start contrasting themselves with the president,” he added.

“It would be better for our general election prospects if more time and focus was on Obama’s policies and the failures of those policies,” said former Mississippi Governor and Republican National Committee Chairman Haley Barbour.

“There’s still time for that. But, would it improve our prospects earlier, more greatly if this was going on now? Of course, it would.”

Gov. Mitch Daniels, R-Indiana, who once again said there was no chance he would reconsider his decision to forgo a presidential campaign, said a shorter nomination process would better serve the party in the future.

“I don’t know anyone who thinks it is optimal,” Daniels said of the process in which the candidates are currently engaged. “It’s inevitable, at least temporarily, that they will get all chewed up and dinged up by the way we’ve chosen to do this,” he added before expressing optimism that things can change swiftly when a nominee emerges.

Gov. Tom Corbett, R-Penn., also said it would certainly be helpful for his party to begin a one-on-one debate with President Obama sooner rather than later. Bowing to the reality that it still may be a while before a presumptive nominee emerges, Corbett urged the presidential contenders to keep the conversation on the most pressing issue on the minds of the voters.

“I’d like to see the candidates focusing much more from here on out on the economy,” Corbett said.

In recent weeks the dominant conversation in the campaign has centered around social issues such as contraception and abortion, causing concern among some Republicans that critical independent voters, who are less likely to be motivated by those issues, may turn away from the party.

“The problem that I would worry about is that our side might not offer a bold enough, specific enough, constructive enough, and I would say inclusive enough alternative to America,” Daniels said.

Only a handful of Republican governors have chosen sides in the volatile presidential race. The vast majority of them appear content to avoid navigating the tricky politics of competing interests that inevitably come with an endorsement.

“I’m ready for it to be over tomorrow,” said Romney backer Gov. Bob McDonnell, R-Virginia who endorsed last month. “I would love for Mitt to have this thing done on Super Tuesday. There is a path for Super Tuesday or shortly after. If he wins Michigan and Arizona has a good Super Tuesday, I think there’s a path to it being over or close to over, but the people have to decide.”

Of course, a rapid conclusion to the GOP contest looks somewhat unlikely at the moment. Gov. Daniels said one of the reasons he is not planning to make an endorsement in the race is because he believes the competition could still be in full swing by the time the Indiana primary rolls around in early May and he’d like to be a good host to all the candidates.

2012 Poised for Record Breaking Cyber Crime Activity

Filed under: Uncategorized — Mr. Craig @ 6:45 am

For online security professionals, 2012 is turning out to be a banner year. Prominent hacks are taking place nearly every week. Credit card fraud and piracy on the Internet are booming. Hacktivist attacks against government computers and private companies are occurring almost daily. Big-name government agencies and businesses everywhere are shelling out for security assistance … but for everyday Internet users, it’s a giant headache with unclear risks.

The one thing no one is really able to explain is why cybercrime’s booming. According to a recent Norton study, cybercrime cost the global economy (in both direct damage and lost productivity time) $388 billion in 2011 — significantly more than the global black market for marijuana, cocaine and heroin combined. Officials at the Department of Homeland Security have reported exponentially increasing demand for cybercrime assistance—something confirmed by this reporter in anecdotal discussions with online security experts.

Every single expert has a different theory. Some say it’s due to a global economy that’s putting programmers out of work and turning them rogue. Others say it’s the easy availability of computers in poor regions of the world where job prospects are few. Then others say it’s simply that scripts and DDoS attacks have democratized cybercrime.

DDoS attacks — and their first cousins, botnets — are one of the biggest culprits. Most DDoS attacks are amazingly simplistic; they are denial-of-service attacks frequently made via software that requires no programming or IT knowledge. Botnets are impromptu networks of Internet-connected computers turned rogue via malware. Once a computer is compromised, they can be used for everything from financial fraud to knocking websites offline. Reached by email, Carl Herberger ofthe  security firm Radware put much of the blame on hacktivists such as Anonymous.

“The motive for attacks has changed and this new motive brought with it new tools and attack techniques,” Herberger tells Fast Company. “These new motives — frequently called ‘Hacktivism’ — are in a new category which will go down in the record books as one of the most active periods of cyberattacks in the history of information security. Given the current efficacy of ideologically based multi-vulnerability attacks such as WikiLeaks revenge attacks of 2010 and the Sony attacks of 2011, we believe this will only serve to encourage even more actors to enter the picture and spawn a vicious cycle of future malicious activity.”

While the idea that politicized groups such as Anonymous are malicious and/or criminals is controversial, many security experts agree with Herberger. At the recent Kaspersky Lab Cyber Conference in Cancun, CEO Eugene Kaspersky compared hacktivists to radicals who plant car bombs and commit arsons in the name of ideology. Similar alarms were raised in an end-of-year letter from risk management firm Stroz Friedberg, which largely conflated hacktivism with threats like state-sponsored data theft and zero-day exploits.

As for state-sponsored data theft, the New York Times just reported on the lengths to which American companies go to avoid Chinese cyber-espionage. American businesspeople, consultants and politicians working in China avoid bringing their work computers into the country and use throwaway mobile phones — to name the most common tricks — in order to avoid the loss of business secrets to state-sponsored corporate spies. While China is the most blatant nation-state to engage in spying on foreign businesses for the benefit of homegrown companies, it isn’t uncommon. Russia, France, Israel, Taiwan and others have also been alleged to engage in the process.

The use of malware and worms is continuing unabated. While they remain common, little innovation has made it into the mass criminal market — the truly unique manifestations are only isolated creations of genius rogue programmers. But … the last major threat of 2012 is cyberwarfare. Anonymous has successfully transformed from their humble prankster beginnings at 4chan into an international movement. Other organizations such as LulzSec — and a host of others — are successfully coming up with cutting-edge prank attacks on high-profile targets. Non-state actors such as Anonymous will increasingly see their methods used by nation-states and sympathetic patriots. Ongoing saber rattling between Britain and Argentina, friction between Russia and neighboring ex-Soviet states, war clouds over Israel and Iran, and the migration of foreign volunteers to Syria will all contribute to fertile grounds for cyberwarfare. The question now isn’t if we journalists are going to be writing about it — it’s when.

Bad Week for Santorum.. or was it?

Filed under: Uncategorized — Mr. Craig @ 6:23 am

Wish I had a nickel for every conservative who confidently predicted that the Arizona debate would, of course, feature obnoxious questions about birth control and the devil aimed at Rick Santorum. As it turned out, CNN’s John King did not ask “gotcha” questions and for the most part, conducted a fair and informative debate. The exception, and this may not have been King’s fault, was CNN’s absurd reality-show-style introductions of the candidates: “Newt Gingrich, the determined challenger,” “Mitt Romney, the long-distance runner.” Hmm. How about “CNN, the desperate, ratings-starved network”?

Memo to file: John King isn’t one of the bad guys. He’s pretty straight. Maybe FoxNews should offer him a job? Consider all of the reasonable people Fox has attracted from other networks: Brit Hume from ABC, Jim Angle from NPR, Chris Wallace from ABC, John Roberts from CNN, Doug McKelway from ABC. Truth is, there are still some nonliberals even in the unlikeliest places, such as the major networks.

The debate moderated by King along with other events of the past week, have resolved a question that has been swirling since the Missouri, Colorado and Minnesota primaries: Why not Santorum?

There is much to like and admire about Rick Santorum. He did fine work enacting welfare reform in the 1990s. He was an eloquent and thoughtful advocate for the unborn. He has kept a weather eye on Iran for many years. He’s a dedicated family man. He was the first candidate to raise the issue of family structure in the context of discussions of poverty. And he had a solid, conservative voting record in Congress (with some exceptions — there are always exceptions).

But Santorum would make a poor Republican nominee.

Because he has phrased his socially conservative views in vivid terms, he is precisely the sort of candidate who will evoke a Pavlovian response from the press. Just as Sarah Palin drove them mad, Rick Santorum will outrage them. The campaign will be cluttered by the continual discovery of “controversial” Santorum quotes from the past three decades, and precious time will be lost as he explains, justifies or withdraws his comments on women in the workforce, contraception, gay unions, Obama’s “theology” (by which he did not mean to question the president’s faith, something he’ll have to explain over and over) and so forth.

In fact, Santorum’s sanctimonious style might put off even many religious voters. His intense 2008 warning about “the father of lies, Satan” having his “sights on the United States of America … attacking the great institutions of America — using those great vices of pride, vanity and sensuality as the root to attack all of the strong plants that (have) so deeply rooted in the American tradition” is not the sort of language most preachers, to say nothing of political figures, employ today. American religion these days is heavy on forgiveness and light on sin. We’ve long since left Jonathan Edwards behind. Anything other than comic references to Satan are likely to give people the creeps.

Additionally, as Santorum himself seemed to acknowledge in the Arizona debate, the social issues that worry him — and should worry all of us — such as the collapse of the two-parent family, are not the kinds of problems that government can or should even attempt to solve. Yes, welfare programs that reward unwed parenting by subsidizing it are part of the problem. But as Santorum will tell you (repeatedly), he helped reform welfare. That was the easy part. The rest is cultural change, and the president of the United States has very limited influence there.

If the fall campaign is all about what Rick Santorum said about gay adoptions, or a dozen other cultural live wires, it will not be about the Republican Party’s most important and compelling issues — the ballooning national debt, the gross expansion of the federal government into every realm of life, economic growth, the flaccid foreign policy of the Obama administration, and the vain pursuit of “green” energy at the expense of abundant domestic oil and gas.

Americans are open to being persuaded that the federal behemoth can be tamed, that our health care system can be saved before it buries us in red tape and incompetence, and that entitlements can be sensibly reformed. But they wouldn’t even hear those arguments from Rick Santorum. He’d be too busy putting Satan behind him.

Google TV… Coming to an Internet Near You

Filed under: Uncategorized — Mr. Craig @ 6:13 am

One Way Google Might Crash Cable’s Party

BY DAVID HOLMESFri Feb 24, 2012

Is Google Fiber a Trojan Horse?

While it doesn’t take much for Google to make headlines, this week’s news that it filed applications to operate a video service in Kansas City was much more than your average “Hey look what Google did” story. From the release of Google TV to its recent YouTube redesign to the way it’s been courting professional talentfor its YouTube channels, Google has been steadily inching closer to the world of cable TV and shifting its content-delivery strategy from America’s computers to America’s living rooms.

You might remember how Google got caught up in the Kansas City market to begin with–over two years ago, cities across the country jockeyed to become the test market for a high-speed Internet service called Google Fiber. One even went so far as to rename a city landmark after the tech giant. In the end, Kansas City was selected as the lucky community, but was the high-speed Internet offering a Trojan Horse for Google to break into the cable TV business?

The company is keeping a tight lid on its plans; in an email to the Kansas City Star, Google spokesperson Jenna Wandres wrote, “We’re still exploring what products will be available when we launch Google Fiber.”

Google’s application is a bit more revealing, however, stating that it “will utilize national and regional video headend facilities to send IPTV” or Internet Protocol Television, the method AT&T uses to deliver cable programming with its U-Verse service.

But whether Google is merely dipping its toes in cable’s television waters or planning a big splash, the company’s experimentation with various ways to provide video will likely pay off, says Steve Rosenbaum, the author and entrepreneur behind the video curation platform,

“If you look at what they’ve done, they’ve decided to explore video from all sides, which is very smart given their resources and the shifting sands of content delivery. So they’vepurchased Motorola Mobility to be in the set top box business, they built and deployed Google TV, they’re funding content through YouTube originals. It’s all very smart because some of it will work, and they’ll get a ton of earnings in the process.”

But having the hardware and the broadband is only half the battle. Google also needs eyeballs, which means it will also need access to sportscasts and other high-quality programming that viewers still rely on cable television to provide. To secure that, Rosenbaum says the answer is simple:

“Show up with bags of cash. It’s not a whole lot more complicated than that. Rights owners know that Google is trying to shift the playing field. And there’s a long history between cable and the leagues and movie studios. Those negotiations haven’t always been warm and fuzzy, but in the end, both sides came out okay. So for Google to ask a major licensor to give cable a head-on competitor, they’ll have to more than make it worth their while.”

New Facebook Ads Show New Marketing Direction

Filed under: Uncategorized — Mr. Craig @ 5:08 am

Facebook’s New, Entirely Social Ads Will Recreate Marketing

BY E.B. BOYDThu Feb 23, 2012

Leaked documents show Facebook making a radical departure from traditional online display advertising into a world where ads are conversations and brands automatically tell you which of your friends are already on their side. Facebook appears ready to launch a new set of premium ad units, and, based on a review of documents which purport to describe them, the social network would seem to be doubling down on two core principles that mark fundamental departures from traditional advertising.

First, Facebook is making the new ads social by default, meaning they will automatically show users when their friends have already Liked the advertiser. And the new formats will draw their content exclusively from posts to brands’ Facebook Pages, rather from advertising copy written independently.

Combined, these features make two statements about where Facebook believes the future of online advertising lies–at least in its particular universe. It is saying that ads based on content, rather than messaging, have a better chance of hitting home, and that ads involving tacit endorsements from the people you know have a better chance of capturing your attention.

“When people hear about you from friends, they listen,” the Facebook materials say. “We’ll expand your ad with stories from friends who have already connected.” (“Stories” is Facebook’s shorthand for a wide varitey of interactions on the site. In the case of ads, it seems to refer to the fact that the ads will display which of a viewer’s friends have Liked the brand.)

Facebook has not commented publicly on the new ads (presumably they will discuss them at a marketing launch event in New York next week). But the materials describing the new units were posted to Scribd earlier this week. The news was first reported on GigaOm. The documents are below.

Each of the new units will include Like buttons and places for viewers to comment on the ads. When viewers click the Like button or enter a comment, those activities will be posted to the user’s  friends’ News Feeds. They will also be posted to the brand’s Page. In the documents, Facebook says it is scrapping most of the display ad units it has offered until now, replacing them with the new formats. The previous ad units incorporated some of the social and interactive elements, but the new ones are implementing those features in a more comprehensive way.

Similarly, each ad will include pictures of friends who have already Liked the brand. The Facebook documents say this will happen automatically, instead of as an add-on.

While Facebook had already been moving in these directions with its previous ad units, the decision to draw ad content from Page posts is the most significant new feature–and a potentially radical departure from conventional notions of advertising.

The ads don’t simply repurpose content from brands’ Pages. By giving users the ability to respond to the content inside the ad, just as if they had seen the content on the brand Page itself, and then by posting those responses to the user’s friends’ News Feeds, as well as on the brand’s Page itself, the ads are acting less like traditional broadcast advertisements and more like viral mechanisms to expand and perpetuate the conversation off into the far corners of the social network, effectively giving the brand visibility in places it might not otherwise have reached and in a much more organic way than if it had simply plastered the site with a bunch of banner ads.

“Everything starts with great content from the Page,” says one of the Facebook documents. “Paid, owned, and earned work seamlessly together.”

Facebook believes that this ultimately will pay greater dividends for brands than conventional advertising. According to tests the company said it performed internally, the new ads produce 40 percent more engagement (usually meaning they get more Likes, comments, and clicks) and are 80 percent more likely to be remembered.

The company documents also claim the ads produce “signficant increases” in purchase intent, and it claims that viewers of an ad are four times more likely to purchase when they “see friends interact with a brand.”

If the ads truly do deliver the results Facebook claims, that could mean the social network is slowly but surely finding the marketing holy grail of “word of mouth”–at scale. And if that’s the case, it could have profound implications for the advertising industry as a whole.

The six new units are based on the type of content a brand would post to their Page. The Facebook documents label them as Status (a text comment), Photo, Video, Question (which replaces the old “Poll” ad format and which allows viewers to answer the question right in the ad), Event (ad viewers will similarly be able to sign up for the event right in the ad itself), and Link (which points viewers to content outside of Facebook).

The Facebook documents say that brands will continue to be able to target their ads as they do today, choosing to place their ads in front of any of Facebook’s 845 million users who fit demographic and interest criteria selected by the advertiser.

Virginia Republican Lawmakers Display the Epitome of STUPIDITY

Filed under: Uncategorized — Mr. Craig @ 4:25 am

RICHMOND, Va. (AP) — Once the word “transvaginal” became a big joke on “Saturday Night Live” and “The Daily Show With Jon Stewart,” it wasn’t long before Virginia’s conservative Republicans realized they had overreached on abortion.

Gov. Bob McDonnell and GOP state lawmakers Wednesday abandoned a bill requiring women to undergo an intrusive type of sonogram before an abortion — an abrupt reversal that demonstrated the power of political satire and illustrated again how combustible the issue of women’s reproductive health has become over the past few weeks.

“You never want to get on the wrong side of popular culture,” said Steve Jarding, a professor at Harvard University’s John F. Kennedy School of Government and a Democratic consultant who has run campaigns in Virginia. He added: “When people are laughing at you, you know you’ve gone too far.”

At issue was a bill pushed by anti-abortion lawmakers that would have required women seeking an abortion to undergo atransvaginal sonogram, in which a wand is inserted in the vagina to yield an image of the fetus. The procedure differs from an abdominal sonogram, in which a wand is rubbed over the woman’s belly.

Seven states have laws mandating some form of pre-abortion ultrasound exam. The Guttmacher Institute, which researches abortion-related issues, said none of the ultrasound laws in other states explicitly require the transvaginal procedure.

However, Elizabeth Nash, Guttmacher’s state issues manager, said several of the laws, including a Texas measure recently upheld in federal court, effectively leave doctors with no option but the transvaginal procedure. That’s because an abdominal sonogram does not produce the detailed image of a first-trimester pregnancy that is required by some of the laws, Nash said.

In Virginia, the bill began muscling its way through a legislature that recently came under the rule of GOP conservatives. It moved ahead despite an outcry from women and Democrats, including a female lawmaker who called it “state-mandated rape” and another who made her point with a failed amendment requiring rectal prostate exams for men seeking Viagra prescriptions.

It didn’t fully jump the fence from politics into pop culture until “SNL” lampooned it on Saturday.

“Really?” comic Amy Poehler sneered in noting the Virginia bill on “SNL.” ”Don’t get me wrong, Transvaginal is my favorite airline. I have so many miles on Transvaginal that they upgrade me to ladybusiness.”

Stewart wisecracked that “Transvaginal Ultrasound” was the name of a jazz fusion band he once saw in concert.

And conservative columnist Megan McCain, daughter of 2008 GOP presidential nominee John McCain, said on MSNBC that she is “pro-life, but I’m not pro-vaginal probing.” She added: “I’m just horrified by this bill. As a Republican woman, I’m horrified.”

Earlier this week, more than 1,400 people — mostly women — locked arms in protest outside the Capitol, and petitions bearing more than 30,000 names were presented to McDonnell by women’s groups.

McDonnell, a Roman Catholic political protégé of religious broadcaster Pat Robertson who has been mentioned as a possible vice-presidential candidate on a ticket with Mitt Romney, backed down on Wednesday, saying: “Mandating an invasive procedure in order to give informed consent is not a proper role for the state.”

He said he supports legislation that would require pre-abortion sonograms, but not the invasive variety.

It was just the latest reversal over the past few weeks on the issue of women’s health.

After a three-day furor, the Susan G. Komen breast cancer charity dropped plans to withdraw funding from Planned Parenthood. And President Barack Obama was forced to back off requiring religiously affiliated universities, hospitals and other organizations to provide free birth control their employees.

How much damage is done to McDonnell and the GOP depends on how broadly the issue permeates pop culture and who’s watching, said Merle Black, a political science professor at Emory University in Atlanta.

“A lot of people watching those shows wouldn’t necessarily support McDonnell anyway. The question is whether it’s reaching and turning off independents and especially women,” Black said.

But Jarding warned: “When the female anatomy becomes a policy term in your state and the governor is the guy identified with that, that’s not where you want to be.”


A Virginia Lawmaker Claims The Abortion Debate Ruined his Seduction of His Wife!!

Political foul of the week.  Warning. This is cringe-inducing.

A Virginia lawmaker took to the state house floor to blame his involvement in the debate over an abortion measure this week for ruining his chances at getting lucky with his wife.

It’s a joking moment probably meant to lighten the atmosphere after a politically charged week. But video of the speech, in which State Del. Dave Albo turns on jazz music and describes trying to seduce his wife during a speech to the legislative body, is sure to offend some who disagree with the controversial law he helped pass.

Albo wrote compromise language that removed a requirement for an invasive transvaginal ultrasound for women early in pregnancy to receive an abortion. Only a less invasive ultrasound will be required under Albo’s compromise.

And it was that word – transvaginal, or as Albo says, “trans v” – that was a major turnoff to his wife on Tuesday.

And in a speech in Richmond, he describes going home Tuesday to his wife and kid, and later that night, after putting his boy to sleep, putting the moves on his wife.

Albo says he poured some red wine, turned on some music – at this point in his speech he literally turns on some smooth 70’s sounding jazz to play behind his speech – and mimics putting his arm around his wife by putting his arm around the legislator next to him.

“So I got my theme music going, my red wine, looking to watch the Redskins, and I’m flippin’ through the channels. I have to get through the news stuff and all of a sudden on my big screen TV comes this big thing and it’s a picture of a bill and it has ‘Albo’ on it. And I went, Wow! Holy smokes! It’s my  name as big as the wall. And the very next scene was the gentleman from Alexandria’s face as big as my wall going ‘Trans v brrb, Trans v this and trans v that. And they hate women…’… and I’m like this with my wife and the show’s over and she looks at me and she goes, ‘I gotta go to bed.'”

“So if the gentleman’s plan was to make sure there is one less Republican in this world, he did,” said Albo in closing, and to guffaws from the Virginia House floor, jokingly asking for an apology from Democratic Del. Dave Englin, who had just apologized for heated rhetoric during the debate.

What is your REAL Tax Rate??

Filed under: Uncategorized — Mr. Craig @ 4:01 am
FEB 21, 2012 16:42 ESTYou’re not paying the tax rate you think you are

If you make more than about $33,500 a year, your federal income tax burden is probably lighter than you think.

The portion of your income that you pay in taxes is your “effective tax rate.” But when politicians and pundits talk about effective tax rates, the data they typically use relies on an incomplete measure for income. Use an incomplete measure for income and your tax rate calculation comes out high.

In a new analysis the Tax Policy Center, a nonpartisan Washington research organization, used a wider measure of income to calculate effective tax rates. The rates are much lower using this broader measure of income.

The Tax Policy Center computer model of the tax system, which estimates how changes in the law would affect tax burdens, has repeatedly made projections that subsequent events showed were accurate. The center is a joint project of two Washington research organizations, the Urban Institute and the Brookings Institution. The George W. Bush administration went out of its way to praise the reliability of the center findings even when they were not helpful to administration policy.

The incomplete measure is called “adjusted gross income,” or AGI. This is the number on the last line of the front page of the standard tax return.

To get a fuller picture, the Tax Policy Center used what it called “cash income” to calculate effective tax rates. This included municipal bond interest, government benefits and many of the other items that are excluded from AGI. Use this fuller measure of income and the share of income that goes to taxes falls.


In its new analysis, the Tax Policy Center found that the discrepancy between these two ways of measuring tax rates varies significantly between different income groups.

For the middle fifth of taxpayers, those with cash income between $33,542 and $59,486 a year, the average tax burden is 4.1 percent of adjusted gross income but only 3.2 percent of cash income. So these middle-income people are paying almost one percentage point less of their income in federal income taxes than they might imagine based on the popular debate.

One percentage point may seem small, but for people in this income group it means they are actually paying one fifth less in income tax than they might think.

The percentage point discrepancy widens as incomes increase. For the next fifth of taxpayers, those earning between $59,486 and $103,465, the average federal income tax is 8.2 percent of AGI but only 7 percent of cash income, a difference of 1.2 percentage points. For the top fifth, those earning more than $103,465, the average federal income tax is 17.3 percent of AGI but only 14.9 percent of cash income.

For the top tenth of one percent – whose combined income comes close to equaling that of the bottom 50 percent of taxpayers – the disparity is even greater. The tax rate is 23.6 percent of AGI but only 19.8 percent of cash income, a difference of 3.8 percentage points.


As valuable as the Tax Policy Center’s report is, the center acknowledges that it understates the disparity for people at the very top. The reason for this is that the computer model cannot capture certain kinds of income that are only available to the very wealthy. For example, Congress considers the personal use of corporate jets to be income. But, under rules Congress set in 1985, only a small fraction of the real value is included in AGI. Unfortunately, the Tax Policy Center’s model does not capture the remainder as part of cash income.

For the 40 percent of Americans on the bottom of the income ladder, using AGI to measure income also distorts the effective tax rate calculation, but in a different way.

On average, people in the bottom 40 percent receive money from the federal income tax system rather than pay money into it, so their effective tax rates are negative.

This is because the first $19,000 of income for a couple was free of income tax last year. At the same time, they may have received cash payments such as the Earned Income Tax Credit for the working poor or the Child Tax Credit for parents of children. These tax credits are not included in AGI, but the Tax Policy Center counts them as cash income.

The payments the poorest fifth of taxpayers – those who made less than $16,812 last year – get on average from the tax system amount to 12.3 percent of their AGI. But, when calculated against cash income, these payments amount to only 5.8 percent. So, the AGI method overstates the amount this group is getting from the tax system.

For most of us – those in the middle class and above – our effective tax rate is lower than politicians say. So smile a bit today. The cost of civilization is not as high as you’ve been told.

Who Will Be The Next Head of the World Bank?

Filed under: Uncategorized — Mr. Craig @ 2:47 am

SINGAPORE (Reuters) – A solid U.S. candidate to head the World Bank would be good for the United States and the bank because the world’s largest economy should be represented in top international bodies, outgoing President Robert Zoellick said on Saturday, while emphasizing he has no role in the selection process.

In an interview in Singapore, Zoellick also said he did not believe Spain, Italy or Portugal needed bailouts to ease massive debt burdens but that reforms needed critical support of Germany and other European leading nations and expressed cautious optimism that the global economy would sustain growth this year.

The World Bank last week launched the nomination process to select a new president to succeed Zoellick when he steps down in June, inviting names from any of its 187 member countries. The Obama administration has said it would open the process to competition.

Zoellick noted however that Americans did not hold top posts at the United Nations, World Trade Organization, regional development banks or International Monetary Fund.

“I want the United States to feel a sense of responsibility to the international system. So in that sense if you get the right American candidate I think that can be good for the United States and the bank.”

So far, two people most often mentioned as possible successors are both American: U.S. Secretary of State Hillary Clinton and former White House economic adviser and former Treasury Secretary Lawrence Summers. The State Department has insisted that Clinton would not be taking the job.

Much like in 2011, when Dominique Strauss-Kahn resigned as managing director of the International Monetary Fund, officials from countries such as Brazil and the Philippines said it was time to break the decades-old pattern of putting an American in charge of the World Bank and a European atop the IMF.

Agustin Carstens, Mexico’s central bank governor, who had made an unsuccessful bid to head up the International Monetary fund last year, said on Wednesday the World Bank presidency should be open to a wide field of candidates.


Zoellick said the latest Greek bailout totaling 130 billion euros would merely buy time.

“It’s too early to know, partly it depends on the actions the Greeks have to take,” he said.

“I think that the European Union has dealt with Greece as one element but the core elements are really going to be the success of some of the bigger countries, such as Italy and Spain.”

But he said bailouts weren’t necessary for these two countries or Portugal.

“Each country’s situation is different and you really have three interconnected problems. For some it’s the size of the sovereign debt, for some it’s the effect on the banking industry, and for some it’s their competitiveness,” he said adding that “Spain and Italy need time to make the reforms.”

“But I do think that all this is harder to accomplish when there is a recession in Europe.”

Support from other European nations was also crucial.

“What I’ve tried to suggest, given the politics of reform in some of the Mediterranean countries, (is that) it will be important for Germany and other leaders in the process to show some prospects if the reforms are taken and how they will be supported by the other European countries.”

Zoellick heads next to China for the release on Monday of a major economic report by the bank and a Chinese government think tank, looking at economic opportunities and challenges to the year 2030.


Zoellick said that prospects for global economic growth this year remain guardedly positive with much hinging on Europe stabilizing and China reaching a soft landing, with oil prices a wildcard.

“I have a cautious optimism about the international economy. Our forecasts are that growth might slow down a little bit this year. What I see is that the U.S. economy has got some momentum,” he said.

“If Europe is able to continue to stabilize the situation, that’s a big if, but that’s an important part. And I think China has issues in the real estate sector but my own guess is they are on the process for a soft landing.

“The two big question marks to me are energy prices with the political risk and Europe being able to maintain things.”

Brent crude futures settled near a 10-month high above $125 a barrel on Friday, posting a fifth straight weekly gain as heightened concerns over tensions with Iran about its nuclear program and cuts in supply sent oil prices up on both sides of the Atlantic.

The crude oil price spike has prompted speculation the International Energy Agency may again call for the release of oil stocks, or the U.S. may release strategic petroleum reserves.

Zoellick said oil prices remain a concern, though the World Bank is only an observer in any decision to release strategic oil stocks.

“Not my call,” he said, adding that “I don’t think one should rush into that but the reason that the strategic reserve was created was for use in emergency situations.”

Meanwhile : 

MEXICO CITY, Feb. 25, 2012 (Reuters) — A meeting of BRICS major emerging countries discussed the selection process of the next head of the World Bank and emphasized it should be open to all countries, rejecting the tradition that the job automatically goes to an American, a senior BRIC official said on Saturday. 

The official, speaking after a meeting of the BRICS – Russia, South Africa, Brazil, India and China – said the United States had not circulated the name of its proposed candidate for the World Bank.

Asked whether emerging economies could field their own candidate for the post, the official said: “That is certainly a discussion we will have.”

And THEN: 

India has proposed setting up a multilateral bank that would be funded by developing nations with the aim of funding projects in those countries and possibly other developing nations, Bloomberg reported. A Brazilian official has confirmed the proposal

The proposal has been circulating among BRIC nations and will be discussed when they meet for the G20 talks in Mexico City this weekend. Officials are expected to continue these talks at a March BRICS summit in New Delhi.

MEXICO CITY (Reuters) – The world’s major emerging economies on Saturday rejected the tradition that an American automatically is selected to head the World Bank and they will look at putting forward their own candidate for the open job.

Finance chiefs from the BRICS group of emerging market powerhouses – Brazil, Russia, India, China and South Africa – met on the sidelines of a G20 meeting in Mexico City and agreed the top World Bank job should be open to all countries.

“Candidates should be based on merit and not on nationality,” Brazilian Finance Minister Guido Mantega told reporters.

Another BRICS official said the group will discuss the possibility of putting up their own candidate to challenge whoever the U.S. government nominates. “Certainly it is a discussion we will have.”

Countries have until March 23 to submit names for the top post and a decision is likely by April meetings of the World Bank and International Monetary Fund.

Americans have held the top job since the World Bank was set up at the end of theSecond World War but the unwritten rule has in recent years faced more resistance, along with the tradition that a European heads the International Monetary Fund, as emerging economies gain more economic clout.

“It is time we break the traditions of the U.S. and Europe sharing the two seats and amongst all of us we must try harder this time to find some consensus,” said Pravin Gordhan, South Africa’s finance minister.

Robert Zoellick, the current World Bank president, plans to step down at the end of June after deciding against seeking a second five-year term.

The United States has said it will nominate a replacement candidate but has not yet said who it will be.

Possible candidates are thought to include former U.S. treasury secretary Lawrence Summers, current Secretary of State Hillary Clinton, and Susan Rice, the U.S. ambassador to the United Nations. The State Department has said Clinton would not be taking the job.

The World Bank is the leading provider of development aid to poorer countries and its president is one of the world’s top policymakers.

“They can put forward their candidate,” Gordhan said, referring to the United States. “But rather than it becoming a destructive exercise, it should be a constructive process so that we attempt to build consensus on who the candidate should be. It is idealistic but let’s give it a shot.”

Euro Zone Help For Greece NOT Guaranteed Yet

Filed under: Uncategorized — Mr. Craig @ 1:43 am

MEXICO CITY (Reuters) – Euro zone leaders may not be able to meet international demands to ramp up their own funds for bailing out the bloc’s debtors when they meet next week because Germany is showing no sign of dropping its opposition to the plan, euro zoneofficials said.

A bigger European fund is a condition for major non-European economies before they lend more money to the International Monetary Fund to provide an even bigger wall of cash to fight the crisis that has already claimed three euro debtor countries and now threatens the much bigger economies of Italy and Spain.

“I would not bet on a positive outcome by the end of the March 1-2 summit,” one euro zone official said. “German opposition to a deal is still very strong.”

Euro zone leaders are set to review the 500 billion euro ($675 billion) limit on the joint lending capacity of their temporary and permanent bailout funds, known by their acronyms EFSF and ESM, at the March 1-2 summit.

If they decide to merge the funds, they would create a firewall of 750 billion euros which would help convince markets that they were committed to bringing the crisis under control.

The European Central Bank supports such an increase as do policymakers around the world who are considering more than doubling the IMF’s resources by $600 billion.

“Everybody says there is a pre-condition that Europe makes more efforts first,” South Korea’s central bank governor Kim Choong-soo said before a meeting of finance ministers and central bankers of Group of 20 leading economies in Mexico City.

But Germany, the euro zone’s biggest economy, insists Europe’s current bailout arrangements are more than sufficient and that increasing them would send a signal to markets that the euro zone it expects more trouble ahead.

German officials say countries would lose the impetus to carry out badly needed belt-tightening reforms.

“It makes no sense, and is rather harmful,” said one German official.

Others in Berlin argue the extra obligations under the combined bailout funds could increase the risk of further credit rating downgrades for some euro zone countries. And the sense of urgency is dissipating because Italy and Spain are paying less to borrow on markets.

Officials from other countries warn that argument is premature.

“The current improvement in markets is very fragile, so we need to be careful not become complacent,” a second euro zone official said.

“Most euro zone countries are ready to move now, but I am afraid that Germany will need more time to agree to the increase, mainly to be able to better manage the Bundestag,” the official said.

The country’s parliament is due to vote on Monday on the agreement to provide Greece with a new financial lifeline, agreed earlier this month despite much opposition from German taxpayers.

A draft set of conclusions prepared ahead of next week’s summit showed that euro zone leaders will call for an international deal to increase IMF resources in April, implying a deal within the euro zone on its bailout funds in March. Yet this was unlikely to come as soon as next week, officials said.

“What we can expect, at most, is a reference in the conclusions suggesting Germany is not closing the door,” one senior euro zone official said.


The United States has said it will not participate in any IMF funding boost. Canada is reluctant too, unless the euro zone makes a bigger effort. That leaves China and Japan as the two biggest candidates for increasing IMF resources through bilateral loans.

One G20 official said there were hopes that China, the world’s second-biggest economy, could contribute some $100 billion to the IMF and Japan another $50 billion.

Both countries said last Sunday that the euro zone must move first. Three euro zone officials said a decision on the size of the euro zone bailout funds could be taken after next week’s summit, but still during March.

One of the officials said: “The leaders said they would review the adequacy of the funds’ resources in March. March 1-2 is just the first opportunity.”

Another of the officials said Germany first wanted to see the outcome of Greece’s debt swap which Athens wants to conclude by March 12 when euro zone finance ministers are due to meet.

“From this point, we believe there is a small window of opportunity to get a deal done, before the IMF board meeting in mid-March,” one of the euro zone officials said.

An extra euro zone summit after March 12 may be necessary to approve the changes to the ESM and EFSF. But this would still allow time for the April increase of IMF resources to take place, a fourth euro zone official said.

A key factor for Berlin may be the level of opposition or support for the Greek rescue plan over the following two days not only in Germany’s parliament on Monday, but also in the Netherlands and Finland. The three countries have all retained their top AAA credit rating and led demands for austerity in debtor countries.

“Our view is that an informal agreement between a few key euro zone countries could be enough for IMF Managing Director Christine Lagarde to go to the IMF board and ask for increased commitments for Europe,” the official said.

For Germany, rather than quickly combining the temporary and permanent funds, one of the options could be to allow the permanent European Stability Mechanism to reach its full capacity of 500 billion euros more quickly than over five years from July 2012, as envisaged now.

Germany would be ready to pay its contribution to the ESM’s 80 billion-euro paid-in capital more quickly than in five tranches or even make all its payments in two steps, officials said. But not all euro zone countries are ready to follow. ($1 = 0.7428 euros)

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