Palin's Shortcomings

Sarah Palin appears to be kicking off her 2012 presidential campaign early. I have several serious objections to Sarah Palin as a presidential candidate. Contrary to the early victim rhetoric from the Palin camp, none of them have anything to do with the fact that she is a conservative Christian woman.

• Sarah Palin is intellectually dishonest. She ignores opinions different from her own, and even mis-represents expert opinions when she thinks she can get away with it.


• She tries to dictate other peoples' opinions. Her attempts to ban books and to control the activities of her librarian were nothing short of despicable. Her desire to force the teaching of theology in the science classroom is frightening to anyone who cares about the separation of church and state.


• She is ignorant. I don't care where she went to school or for how long. For anyone to grow to adulthood believing that Africa is a country and not a continent requires a level of intellectual incuriosity only matched by W.

--SCC

The Palin Selection

Oil Price Decline

Republicans have been claiming that the drop in the price of oil was a result of increased production thanks to their enlightened drilling policies. This assertion is patently absurd, as demonstrated by figures from the EIA.

These figures show that production has leveled off, and that any price decline has been a result of demand destruction.

The accompanying EIA report is slightly out of date. I also think that it fails to take into account the amount of air that speculators were blowing into the oil futures market.

I also think that they may be over-optimistic in their projections of non-OPEC supply growth. But at the end of the day, they agree with my assessment.

--SCC

Florida 2000

The U.S. Commission on Civil Rights (USCCR), produced a report in June 2001 titled "Voting Irregularities in Florida During the 2000 Presidential Election." The report concluded, "Despite the closeness of the election, it was widespread voter disenfranchisement, not the dead-heat contest, that was the extraordinary feature in the Florida election. The disenfranchisement was not isolated or episodic." The USCCR found that African-American voters were at least ten times more likely to have their ballots rejected than other voters and that 83 of the 100 precincts with the most disqualified ballots had black majorities.

There were several reports of black voters being obstructed when trying to vote:

Black politicians want the commission to press Governor Bush and other state officials about the unusually high presence of Florida highway patrolmen in black precincts in election day.

One state senator, Daryll Jones, said there had to have been an order for them to set up road-blocks.

Choicepoint was forced to pay compensation for their actions during the 2000 Florida election, when they created lists of voters to be excluded from voting.

--SCC

Is Obama a Socialist?

McCain doesn't think so. When asked, he waffled and eventually conceded that Obama was not a socialist.

Here's an interesting essay on the subject.

Most kids have no standard for comparison to understand why socialists are scary. By labeling all liberals as socialists, conservatives have robbed the word of its power. An increasing number of young people are self-identifying as Socialists or proclaiming themselves to be in favor of things like "socialized medicine." (Ie, the pollster asks a question like "Are you in favor of 'socialized medicine?'")

I disagree with the premise that there is some sort of Socialist resurgence going on.

After the election, the blue dogs will hold the balance of power in the Congress. If the Ds try to push them, then I'll get my wish for the creation of a third party based on traditional, hard-nosed fiscal discipline.

--SCC

Tax Philosophy

I've always favored consumption taxes over income taxes. We should seek to discourage consumption and encourage income-generating activities.

On the other hand, public property should not be given away to private interests without compensation. Oil companies (and other mining interests) should pay royalties for their use of lands and resources that belong to the people at large. The level of payment should be similar to what they would pay a private landowner.

--SCC

Palin and the Science Classroom

From the Alaska Daily News:

The volatile issue of teaching creation science in public schools popped up in the Alaska governor's race this week when Republican Sarah Palin said she thinks creationism should be taught alongside evolution in the state's public classrooms.

Palin was answering a question from the moderator near the conclusion of Wednesday night's televised debate on KAKM Channel 7 when she said, "Teach both. You know, don't be afraid of information. Healthy debate is so important, and it's so valuable in our schools. I am a proponent of teaching both."

Her main opponents, Democrat Tony Knowles and Independent Andrew Halcro, said such alternatives to evolution should be kept out of science classrooms. Halcro called such lessons "religious-based" and said the place for them might be a philosophy or sociology class.

The view expressed by Halcro is pretty much where I land on the issue.

Palin later backpedaled, after her staff informed her that her view was unconstitutional:

In an interview Thursday, Palin said she meant only to say that discussion of alternative views should be allowed to arise in Alaska classrooms:

"I don't think there should be a prohibition against debate if it comes up in class. It doesn't have to be part of the curriculum."

Palin's supporters claim that she does not support an imposition of Creationism in the classroom. This claim is based on the fact that she has not proposed it during her 18 months or so in office.

Her real beliefs are best represented by what she said before her aides had a chance to educate her on what the Constitution says. The fact that she did not try to impose Creationism in the classroom has more to do with Constitutional limits than her desire to circumvent the Constitution.

--SCC

Obama and the Iraq Pull-Out

I've always thought that Obama's position is more nuanced than his supporters (or his opponents) would have us believe. He's left himself weasel room in terms of "conditions on the ground" and the definition of "combat troops" (as opposed to "advisors," "trainers," or "peacekeepers," I suppose). I have been saying for a while that Obama is smart enough and precise enough of a speaker that he was leaving himself the weasel room because he intended to use it.

--SCC

Fannie, Freddie, and the Financial Collapse

Lenders were writing and pushing subprime mortgages, and packaging them into securities, before the FMs got involved. Fannie and Freddie made the problem worse, but they didn't create it.

Here's a liberal response to the Republican charges. I object to this article's attempt to whitewash Democratic responsibility for large portions of the crisis, but it at least acts as a counterweight to the RNC's talking points memos.

Here's a somewhat more balanced commentary.

My point on the other is that the structural problems caused by the deregulation of investment banks would have emerged one way or another, even without the mortgage crisis. You had a number of large companies writing out large "insurance policies" without adequate capital backing, and without any form of regulation. In any time period, that is a recipe for disaster.

It's pretty hard to be fully responsible for something that was happening before you arrived in the marketplace.

Fannie and Freddie made things worse, but focusing on them to the exclusion of serious structural problems in our financial system is like slaughtering Mrs O'Leary's cow to fix the Chicago building codes.

Financial markets need transparency and accountability, and that only comes about through responsible regulation. We need CDS transparency and probably a regulated exchange. The size of the CDS overhang dwarfs any other structural problem in our financial system. If we don't take care of it, we will be fighting fires until we do the right thing.

The easy answer is seldom the right one.

--SCC

The Party of Big Government

Republicans have been complaining that Obama represents the party of big government.


That rhetorical flourish would mean a lot more if the Republicans had done anything about reducing the size of government or even reducing waste, fraud and mismanagement. Instead, we've seen massive increases in both the size and inefficiency of government under their watch.

Maybe they should have spent more time governing than invading countries who didn't attack us, torturing POWs for useless non-information, and tapping the phones of American citizens.

Oh, I forgot. The Republicans are so ineffective that Nancy Pelosi stole their lunch money while they controlled all three branches of government. I knew this was all the Democrats' fault somehow.

(Ok, that was a cheap shot. I think we actually agree about many of the failings of the Republican party, and we could probably say the same about the Democrats. Where's Ross Perot when you need him?)

--SCC

Bush and Regulatory Incompetence

I've been intrigued by attempts by the RNC to exonerate Bush for failing to regulate the financial markets. According to the RNC, the problem was that those Evil Democrats (TM) in Congress prevented the passage of legislation that would have allowed him to regulate the markets.

Bush had no problem imposing his own policies on torture or domestic surveillance under the guise of "signing statements." If he had been so hot to introduce regulation, he could have done so on his own hook, as the head of the executive.

In fact, additional regulatory powers were part of the compromise that led to the bipartisan repeal of Glass-Steagall.

Contrary to RNC talking points, Fannie and Freddie did not start the rush to securitizing subprime mortgages. They joined in, and they made the problem worse, but they didn't start it. Claiming that they did betrays a lack of understanding about the nature of the current financial crisis.

Beyond that, you have to look at CDSs to see the mechanism by which problems in one part of the financial system are dominoing through other parts of the financial system. (People who watch such things were very relieved that the final settlement of the outstanding Lehman-related CDSs was on the low side of the estimates. The high side of the estimates could have made things really interesting. The fact that the estimates varied so widely shows exactly the transparency sorts of problems I've been talking about.)

Regulation of these CDSs was well within the powers of the regulators who were appointed by Bush. It is silly to try to give his administration a pass and blame the entire mess on the minority party in Congress. Fortunately, there are a lot of people for hire who specialize in oversimplification and silly mudslinging.

Blaming Fannie and Freddie exclusively is like blaming Mrs O'Leary's cow for the Chicago fire. The underlying problem was lax building and fire codes. If it hadn't been for the cow, there would have been little Timmy playing with matches or a lightning strike on Mrs O'Leary's barn.

The mortgage crisis was a precipitating event. Fannie and Freddie alone do not explain how the consequences of rising default rates were able to propagate through the international financial system so quickly and thoroughly.

Both parties participated in setting up a financial system that was under-regulated and that relied far too much on private ratings agencies and fraudulent (or at least opaque) financial statements. I don't find the finger-pointing exercise to be helpful or even particularly enlightening. Both parties gleefully accepted money in exchange for their connivance in setting up underregulated financial markets.

The real solution is to provide more transparency in financial instruments, especially derivatives. As long as derivatives (such as CDOs and CDSs) are opaque, there will be smart people who will be able to hide sludge in an apparently AAA asset. The only hope is to allow buyers and analysts to uncover the sludge. Obviously, this will probably require re-definition of some of these derivatives, and may require that a regulated exchange be set up for things like CDSs.

We're seeing so much butt-covering going on that nobody is looking at how to implement fire codes in our financial system.

In my view, sunlight is the best way to deal with a political infection. If we can force greater transparency on the financial markets, investors will be able to make more informed decisions. Premiums will be placed on experts who can perform insightful analysis rather than on tricksters who can hide toxic waste in a AAA rated bond.

One of the most frightening interviews I heard over the last couple of weeks was with someone who had been explaining CDSs to an official at the SEC. Evidently, that official thought that CDSs were being used exclusively as "insurance" and not as the world's biggest unregulated gambling salon. And the official had no idea that nobody was checking to see if the underwriters of CDSs actually had the capital reserves to make good in the event of a default. "Asleep at the switch" doesn't even start to cover it.

--SCC

Black Racism and Obama

Since black voters go overwhelmingly for the Democrat in most elections, it is hard to say that they are all voting for Obama because he is black.

The Republicans have only themselves to blame for losing the black vote. They did it deliberately in order to take the rural white southern vote away from the Democrats.

--SCC

Pirates!

Piracy appears to be alive and well.

Ukraine needs to dig deep and find some courage, unless they want to change the flag on their ships to a great big bullseye.

--SCC

Over-Simplifying the Crisis

It is an over-simplification to refer to this as a "mortgage" crisis. The problem with the mortgages is a precipitating event, but the structural issues that have been revealed are much deeper.

In particular, the lack of transparency and reportability of the CDOs and CDSs is what has caused the freeze-up in inter-bank lending. These issues can be resolved by setting up a regulatory framework for dealing with CDSs, and by requiring better information reporting on the instruments underlying a CDO.

Despite attempts by both parties to blame the other one, the fact is that both have been complicit in setting up a system that lacked adequate fraud protections and regulatory requirements.

I know that the popular media (and therefore the politicians) focus on the foreclosures and the mortgage defaults, but I think that is because they are easier to understand than having to think about how to properly regulate a marketplace of financial interests.

Pretty clearly, the "Masters of the Universe" can't be trusted to play with scissors without adult supervision.

--SCC

Trying to Pick the Winner

People should definitely vote for whomever they believe to be the better candidate. I don't get people who try to get on the bandwagon and vote for the "winner."

I'm not so convinced that Obama is as far ahead as the polls indicate. For whatever reason, polls seem to undercount Republicans. I've heard some theories about this from statisticians:

1. Republicans are less likely to talk to pollsters.


2. Evangelicals vote more faithfully than other groups.


3. People say that they are going to vote for Obama in order to seem "enlightened" even if they really plan on voting for McCain.

--SCC

The Role of Deregulation

The International Herald Tribune published an article on the role of lax regulation in the explosion of CDOs on Wall Street.

The article outlines how, in 2004, the big investment companies petitioned the SEC for the right to place the capital from their safety nets into play on the marketplace.

One commissioner, Harvey Goldschmid, questioned the staff about the consequences of the proposed exemption. It would only be available for the largest firms, he was reassuringly told — those with assets greater than $5 billion.

"We've said these are the big guys," Goldschmid said, provoking nervous laughter, "but that means if anything goes wrong, it's going to be an awfully big mess."

Part of the quid pro quo was that the SEC would have increased visibility into the activities of these firms to make sure that they were not abusing their new freedom.

The 2004 decision for the first time gave the SEC a window on the banks' increasingly risky investments in mortgage-related securities.

But the agency never took true advantage of that part of the bargain. The supervisory program under Cox, who arrived at the agency a year later, was a low priority.

The commission assigned seven people to examine the parent companies — which last year controlled financial empires with combined assets of more than $4 trillion. Since March 2007, the office has not had a director. And as of last month, the office had not completed a single inspection since it was reshuffled by Cox more than a year and a half ago.
...
"It's a fair criticism of the Bush administration that regulators have relied on many voluntary regulatory programs," said Roderick Hills, a Republican who was chairman of the SEC under President Gerald Ford. "The problem with such voluntary programs is that, as we've seen throughout history, they often don't work."

If you can't trust the big boys to regulate themselves, whom can you trust?

"We foolishly believed that the firms had a strong culture of self-preservation and responsibility and would have the discipline not to be excessively borrowing," said Professor James Cox, an expert on securities law and accounting at Duke School of Law (and no relationship to Christopher Cox).

Finally, there has been a recognition that this plan is not working:

Last Friday, the commission formally ended the 2004 program, acknowledging that it had failed to anticipate the problems at Bear Stearns and the four other major investment banks.

"The last six months have made it abundantly clear that voluntary regulation does not work," Cox said.

The decision to shutter the program came after Cox was blamed by Senator John McCain, the Republican presidential candidate, for the crisis. McCain has demanded Cox's resignation.

You would think that we would have learned this lesson from the past. Unfortunately, politicians are blinded by the large political contributions they receive from the "Masters of the Universe" on Wall Street.

--SCC

CDOs, CDSs, and the Panic

Republicans have been making an effort to lay this entire mess at the feet of the Democrats. This is entirely consistent with their ongoing efforts to avoid responsibility for anything bad that might have happened while they were in charge of the government.

Republicans controlled all three branches of government for most of the decade, including the critical years that saw a peak in the issuance of sub-prime mortgages. (If the Evil Democrats (TM) were so effective that they were able to run the government during those years, maybe they really should be elected, if only to replace the staggering ineffectiveness of the Republican majorities.)

CDOs peaked in 2006.

According to the Securities Industry and Financial Markets Association, aggregate global CDO issuance totaled US$ 157 billion in 2004, US$ 272 billion in 2005, US$ 552 billion in 2006 and US$ 503 billion in 2007.

Not that it's relevant, since this is something that would be regulated by the administration in power, not the Congress.

The Republican argument hinges on the idea that Pelosi and Reid were able to affect the rates of mortgage writing immediately upon taking power (even before passing any major relevant legislation), but that the Republican administration was helpless to stop them.

If the Republicans are such a bunch of feebs, why would I vote for them?

The truth is that both parties bear a portion of the blame for the crisis.

While the focus of the mainstream media has been on CDOs, the role of CDSs has been underreported.

Credit default swaps sit at the center of this whole mess. There are several times the level of outstanding debt contained in what amount to little more than casino-style bets. While these have existed in the past, they really came into vogue during the last decade.

Here's a reading assignment for the masochistically inclined:

Ok, I'll take mercy on you. The bottom line is that these are a way for investors to get insurance via an investment vehicle. Why don't they call it insurance? Because then it would fall under a number of state-level regulations, since insurance is regulated by the states. Among other things, insurers are required to prove that they have enough cash reserves to pay any reasonably expected number of claims.

So all the investment banks "share" risk by selling each other insurance. Now what happens if you have a systematic failure, where everyone needs to file a claim on their insurance?

Lousy shame that nobody managed to ask that question when they were designing their risk models...

So why didn't the regulators realize that insurance was being sold in a relatively unregulated environment? I'll leave that one as an exercise for the reader...


Here's a much better explainer:

Some key sections that should really tick you off:

As with reclamation of strip mines, the insurance companies will file for bankruptcy. Government, via a $700 billion emergency rescue plan, will step up to the plate. The costs will be paid by taxpayers who have seen only losses and no gains. Pursuant to a rescue plan that prohibits any and all forms of congressional or judicial oversight or opportunity to object.

Except for reports, to be filed twice yearly. Something akin to the fox being required to periodically report how many chickens he stole from the hen house, without being required to return any of the stolen chickens. And who will keep this count? The fox.

The inevitable bankruptcy of A.I.G? What other option exists for a company with a market value of $12 billion and liabilities of about $450 billion on credit default swaps written to hedge funds, many of which are headquartered offshore and thus pay no taxes in the United States. For this, the government is paying $85 billion in taxpayer's money. In return, the government, meaning the taxpayers, will be entitled to receive 80 percent of the company's stock. Stock that is all but assured to be totally worthless.

For insurance company executives, financial risks of corporate bankruptcy are all but non-existent. Lehman Brothers is a prime example. On September 15, Lehman filed bankruptcy - the biggest in America's history. Hours before, the New York headquarters was scrambling for cash. Other banks were refusing to provide loans to Lehman. Banks with loans outstanding were demanding immediate repayment. Counter parties to Lehman's credit default swaps were selling out at ten cents on the dollar.

Lehman's response: Hours before the bankruptcy filing, Lehman transferred $2.5 billion from the London office to the American holding company. This money had "accrued as part of group profits from the first nine months of the year" and will be used to pay employee bonuses. As a result, the London office had no funds with which to make the payroll.
...
Paulson, who steadfastly refuses to consider taking a hard look at A.I.G. and other financial firms. How could these companies, managed by the so-called "best and brightest" guys in the room, have committed such a long and horrendous series of "poor judgments"?

By accident, or sheer incompetence?

Hard to believe, given that everyone in the room knew millions of explosive mortgages were being written to families without sufficient income, or in some cases no documentation of any income at all, based on fraudulent appraisals and supported by fraudulent AAA ratings.

Given the size and blatant nature of the disaster, accident and incompetence excuses simply don't fly. Something more was involved. That something is the number and size of vultures who bet on and stand to gain from the disaster, and how much they stand to gain. Too many people owning fire insurance on my neighbor's valuable house.

Even though I agree with almost all of the above, I don't see that we had any choice but to do the bailout. In my opinion, Barney Franks had it right: Once Paulson had announced that a depression would ensue without the bailout, his pronouncement became a self-fulfilling prophecy.

Basically, I agree with his analysis that our economy has been kidnapped and is being held for ransom. Unlike him, I think we have to pay off the kidnapper.

Flame away...

--SCC

Alternative Minimum Tax

Here's a good article describing the extent of the problem with the Alternative Minimum Tax. Without a real fix for this problem, the AMT will take a bigger and bigger bite out of middle class incomes.

--SCC

Wall Street and the Financial Collapse

You've got to love Wall Street types. When the money is coming in, it's all about how they are so smart that government needs to get out of the way because they can protect themselves against fraud.

Then, when things are bad, it is the government's fault for getting out of the way while they were all trying to cheat each other.

By the way, I highly recommend the book "Liar's Poker" for a look at how Wall Street really operates. You should be able to pick it up second-hand for a song.

These guys aren't dumb. They're just convinced that they're so smart that they'll be able to find a chair before the music stops. The after-the-fact whining about how somebody should have saved them from themselves just rings false.

Congress (both parties) does not provide adequate oversight because they are bought and paid for by the same people who are trying to keep the cake-walk music going for just one more big score.

--SCC

Update on the Bailout

AP provided an interesting update:

John McCain and Barack Obama offered long-distance help from the campaign trail. They announced separately that they support a plan that some House Republicans had pushed earlier: raising the federal deposit insurance limit from $100,000 to $250,000.

I wonder what the cost is. I'll bet it's not too high. How many people keep more than $100k in a bank account anyway?

For his part, President Bush sought to avoid being marginalized. He spoke with both nominees, and made another statement in the White House. "Congress must act," he demanded in front of the cameras.

Avoid being marginalized? I think that boat already sailed. Has there ever been another sitting president kept out of his party's convention?

Another possible change to the bill would modify "mark to market" accounting rules. Such rules require banks and other financial institutions to adjust the value of their assets to reflect current market prices, even if they plan to hold the assets for years.

And, after all, we can certainly trust the banks to price their holdings properly.

Some lawmakers reported a shift in constituent calls pouring into their offices. Calls and e-mails were overwhelmingly opposed to the rescue plan before Monday's vote, many offices said. But Monday's stock market dive prompted calls Tuesday from Americans furious about Congress's inaction, some said.

Decisive, as ever.

--SCC

The Real Motives for the Bailout

CNBC was kind enough to report the real reason the bailout is needed:

“All our concern about bailing out Wall Street," Cashin said. "It’s really to try to free up Main Street. So the guy with the plumbing-supply business who gets a contract can go to the bank and get some of the money he needs overnight.”

You see, they're really in it for the little guy. It just gives you a warm feeling inside, doesn't it?

--SCC

Failure of the Bailout Vote

Republicans are claiming that the defeat of the Bush/Paulson bailout plan was due to the Democrats' failure to garner enough votes on their side of the aisle. Yet more blame-mongering by the Republicans.

Among the more ridiculous blame games being played by the Republicans is the assertion that they would have passed the bill if only Pelosi hadn't been so mean to them.

So there are a dozen Republicans, who had decided that the package was in the best interests of the country, who changed their minds because of something Pelosi said? I guess we'd better hope that Osama doesn't say the wrong thing.

Don't get me wrong. I previously characterized Pelosi's speech as "partisan bile." But this whole non-issue is a pretty transparent attempt by the Republican leadership to cover up how badly they had mis-counted their caucus.

This isn't a bill that Pelosi or Franks wanted. They had wanted a bill that had a real cap on executive compensation, strict oversight, and bankruptcy court authority to change mortgage T&C. They gave up those elements based on assurances from the Republican leadership. (The executive compensation clause in Monday's bill was toothless.)

Giving that speech was a bad idea, but the failure of the Republican House leadership to deliver on their deal is going to have serious repercussions on a number of areas.

The reason that Clinton negotiated with the Republicans so successfully is because he knew that they would deliver what they promised. If this leadership can't do that, perhaps the caucus should choose leadership that represents them better.

According to Reuters:

Without the bailout plan, which would allow the Treasury to buy toxic mortgage-related assets from banks, credit markets around the world could remain frozen, which could lead to a recession.

I think that Franks had a point last week, that this bailout story is becoming something of a self-fulfilling prophecy. Right now, we're seeing a market rally based on promises that something will pass on Thursday.

Given how low the prices of the mortgage-backed CDOs is, there is probably a killing to be made out there. If only there were more transparency to the underlying loans, there would be more buyers.

A real failure here is in the design of the instruments. If there were better visibility, it is likely that the CDOs based on liar loans would be rated and priced differently, which would have removed the financial incentives for companies to originate them. This sort of design issue is something that regulators should have enforced. This particular problem has been known since the mid-1980s, so there is plenty of blame to be spread over both parties on this one.

According to the AP:

Banks were in miser mode after the House's rejection of the rescue package. The key bank-to-bank lending rate, the London Interbank Offered Rate, or LIBOR, soared to 4.05 percent from 3.88 percent for 3-month dollar loans, and to 6.88 percent for overnight dollar loans — the highest level since tracking began in 2001.

That's especially worrisome because normally, LIBOR is just slightly above the Federal Reserve's target fed funds rates, an interbank lending rate. Now, it is more than 4 percentage points above the target rate of 2 percent. That has troubling implications for other lending rates tied to LIBOR, including homeowners' adjustable rate mortgages.

--SCC

Uncertainty Over the Bailout

Nobody is happy about the bailout, except for the investment bankers whose chestnuts will be rescued from the fire. But, for all the rhetoric about the importance of bi-partisan support for the bailout, some members of the GOP seem to be looking to score political points from opposition to the bailout.

I don't see the Democrats going along with even a modified version of the administration proposal unless the President and McCain can pull significant Republican congressional support behind the plan. Why should they go out on a limb while the Republican lawmakers play it safe?

It is time for McCain to play a leadership role in this battle. He needs to pick a side and support it publicly. Instead, we're getting a sort of mealy-mouthed attempt to placate the far right of his own party. From the AP story:

At one point in the White House meeting, according to two officials, McCain voiced support for Ryan's criticisms of the administration's proposal. Frank, a gruff Massachusetts liberal, angrily demanded to know what plan McCain favored.

These officials also said that as tempers flared, Bush struggled at times to maintain control.

At one point, several minutes into the session, Obama said it was time to hear from McCain. According to a Republican who was there, "all he said was, 'I support the principles that House Republicans are fighting for.'"

The modifications proposed by the Democrats all seem to me to be reasonable:

To be sure, Democrats demanded a number of changes in his $700 billion bailout plan, but administration insiders signaled they probably were acceptable. They included greater oversight, more protections for taxpayers, efforts to head off home foreclosures and piecemeal allocations of the federal money to buy toxic mortgage securities.

I also like the idea of limits on executive pay for participating companies, though I don't see that one passing in any substantive way. Everyone knows that investment bankers have taken home outlandish bonuses based on inflated valuations of these same CDOs that underlie the crisis in the first place. I don't see that it is unreasonable to ask them to take a pay cut to make up for their excesses.

--SCC

McCain's Temper

McClatchy has an interesting story describing McCain's temper. Even many of his fans agree that he tends to be too impulsive.

"Yeah, he has a temper," said Delaware Sen. Joseph Biden , the Democratic vice-presidential nominee and Senate Foreign Relations Committee chairman. "It's obvious. You've seen it.

"But is John whatever his opposition painted him to be, this unstable guy who came out of a prisoner or war camp not capable of (acting rationally)? I don't buy that at all."

I think that Biden's take is probably correct. I do think that McCain sometimes acts impulsively, and that it is very difficult to get him to recognize an error and reverse course.

On the other hand, when he recognizes an error, I can't think of another prominent politician who issues a more gracious apology. (His apology after the Keating 5 affair should be in a textbook, and he became as passionate an advocate of campaign finance reform as there is in the Senate.)

--SCC

Let Sarah Speak

Politico is reporting that Governor Palin has not made herself available to political reporters for in-depth interviews about her positions. This is not the sort of story that the Republicans want to have run about their candidate, since it will reinforce stereotypes about her.

Less than two months before voters hit the polls, Palin has yet to sit down for or even schedule an issues-oriented interview with any newspaper, magazine or television network.

She's tough, pretty, a good speaker, and she has a handle on the Republican "message." She would make a good showing. (I wouldn't characterize her as a "deep thinker," but she is very telegenic, and the Sunday morning shows aren't really good at evaluating how much depth a person has.)

In the meantime, the media will be thrilled to report on qvetching from issues-oriented reporters:

"We know now that Sarah Palin can give one hell of a speech," Carney said. "She's a natural. And that's no mean feat. We don't know yet and we won't know until you guys allow her to take questions, you know, can she answer tough questions about domestic policy, foreign policy?"

"But I mean, like from who?” Wallace asked. "From you?”

When Carney answered "Yes," Wallace followed up with, "Who cares?

"I think the American people want to see her," Wallace continued. "Who cares if she can talk to Time magazine?"

Later that day, Carney — who last week had a much-buzzed about interview with McCain in which the candidate became testy, and refused to answer some questions — told Politico that the McCain campaign is acting "condescending and smug" toward the press.

Palin is tough, pretty, a good speaker, and she has a handle on the Republican "message." The Republicans should let her speak to reporters. Maybe they don't want to start with Time, since their reporter seems to be particularly ticked off right now. Maybe they start with the Wall St Journal or the Washington Times.

Or maybe they put her back on TV, on the Sunday morning shows. She is a very telegenic candidate, and her depth of experience is much less important in a setting like television.

--SCC

Fact Check on the Republican Convention

AP provides an interesting fact check for claims made during Republican convention speeches.

I'm sure that everyone is shocked, simply shocked to discover that politicians sometimes stretch the truth to make a rhetorical point.

Smugness and the VP Candidates

I think we may be looking at a serious public health hazard during the vice presidential debate. Between Palin and Biden, the total level of smugness in the debating hall may well reach critical mass and ignite the world's atmosphere.

We have no choice but to condemn both Obama and McCain for their reckless disregard for public safety when they chose those two as their running mates.

--SCC

Palin Seeks to Ban Books

The New York Times reports that Palin sought to ban books from the Wasilla library shortly after her election on a conservative religious platform. When the librarian refused to go along, Palin fired her. (The librarian was re-instated due to community pressure.)

Shortly after becoming mayor, former city officials and Wasilla residents said, Ms. Palin approached the town librarian about the possibility of banning some books, though she never followed through and it was unclear which books or passages were in question.

Ann Kilkenny, a Democrat who said she attended every City Council meeting in Ms. Palin’s first year in office, said Ms. Palin brought up the idea of banning some books at one meeting. “They were somehow morally or socially objectionable to her,” Ms. Kilkenny said.

The librarian, Mary Ellen Emmons, pledged to “resist all efforts at censorship,” Ms. Kilkenny recalled. Ms. Palin fired Ms. Emmons shortly after taking office but changed course after residents made a strong show of support. Ms. Emmons, who left her job and Wasilla a couple of years later, declined to comment for this article.

In 1996, Ms. Palin suggested to the local paper, The Frontiersman, that the conversations about banning books were “rhetorical.”

Noonan disses Palin

Peggy Noonan let it all hang out over an open mike. After appearing on MSNBC to defend the Palin selection, Noonan was overheard telling GOP operative Mike Murphy:

"The most qualified? No. I think they went for this — excuse me — political bullshit about narratives," she said. "Every time the Republicans do that, because that's not where they live and it's not what they're good at, they blow it."

Murphy responded in kind:

"The greatness of McCain is no cynicism, and this is cynical."

Needless to say, this contrasted with Noonan's Wall St Journal column defending Palin. (She has since added comments to the top of that column explaining and apologizing for her open mike moment.)

--SCC

Thoughts on the Republican Convention

As an outside observer, I found it pretty funny how hard the McCain camp tried to keep Bush away from his own party's convention. I halfway thought that they were going to tell Bush and Cheney that there was an urgent crisis that required their personal attention somewhere in Antarctica.

They finally settled on a truncated speech by Bush over CCTV. It was pretty funny watching him try to judge how long to pause after the applause lines. The crowd (which may have contained every last citizen who still likes Bush) seemed to try really hard to fill up the places where he paused too long, and to cut short applause when he didn't allow enough time.

(I had a picture in my mind's eye of McCain, shears in hand, hunting around backstage for the cable with Bush's feed...)

Thompson's speech was very well received. He presented the McCain bio, which is a very compelling story. And he told some good-ole-boy homilies about the Obama tax plan. (The PBS commentators pointed out that his performance tonight was much better than anything he did while he was promoting his own candidacy.)

Lieberman's speech was very creditable. His reception appeared to be awkwardly warm, which was probably to be expected.

--SCC

Palin's Assault on Science

In August, Alaska filed suit against the federal government to overturn the listing of the polar bear as an endangered species. In support of this listing, Governor Palin wrote an editorial in the New York Times. This editorial claimed:

I strongly believe that adding them to the list is the wrong move at this time. My decision is based on a comprehensive review by state wildlife officials of scientific information from a broad range of climate, ice and polar bear experts.

Inside Higher Ed received a copy of this "comprehensive review," but only after substantial resistance from within the state government. The conclusion of this document was somewhat different than what Governor Palin suggested:

For the purpose of this review, we presumed that the projections of sea ice loss in the current scientific literature represent the best available information. Similarly, we have also presumed that the relatively substantial amount of information in the scientific literature on polar bear ecology, including habitat use and predator-prey dynamics, is applicable to polar bear subpopulations that have not been studied. Given these two critical assumptions and recognizing their significant associated uncertainties, the finding that the polar bear will decline significantly across much of its range is supported.

It seems likely that Palin would support a continuation of what has been termed Bush's "war on science."

--SCC

What Palin Really Thinks about Earmarks

The Washington Post has an interesting article about Palin's record regarding earmarks as a mayor of Wasilla. It turns out that she hired lobbyists to secure earmarks for Wasilla. Once she had hired the right people and paid them the right amount of money, the taps were opened.

Since both Palin and McCain have pointed to her opposition to earmarks as a key qualification, we have to ask exactly how committed that opposition is.

As mayor of Wasilla, however, Palin oversaw the hiring of Robertson, Monagle & Eastaugh, an Anchorage-based law firm with close ties to Alaska's most senior Republicans: Rep. Don Young and Sen. Ted Stevens, who was indicted in July on charges of accepting illegal gifts. The Wasilla account was handled by the former chief of staff to Stevens, Steven W. Silver, who is a partner in the firm.
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Palin was elected mayor of Wasilla in 1996 on a campaign theme of "a time for change." According to a review of congressional spending by Taxpayers for Common Sense, a nonpartisan watchdog group in Washington, Wasilla did not receive any federal earmarks in the first few years of Palin's tenure.

Senate records show that Silver's firm began working for Palin in early 2000, just as federal money began flowing.

In fiscal 2000, Wasilla received a $1 million earmark, tucked into a transportation appropriations bill, for a rail and bus project in the town. And in the winter of 2000, Palin appeared before congressional appropriations committees to seek earmarks, according to a report in the Anchorage Daily News.

Palin and the Wasilla City Council increased Silver's fee from $24,000 to $36,000 a year by 2001, Senate records show.

Soon after, the city benefited from additional earmarks: $500,000 for a mental health center, $500,000 for the purchase of federal land and $450,000 to rehabilitate an agricultural processing facility. Then there was the $15 million rail project, intended to connect Wasilla with the town of Girdwood, where Stevens has a house.
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In fiscal year 2002, Wasilla took in $6.1 million in earmarks -- about $1,000 in federal money for every resident. By contrast, Boise, Idaho -- which has more than 190,000 residents -- received $6.9 million in earmarks in fiscal 2008.

All told, Wasilla benefited from $26.9 million in earmarks in Palin's final four years in office.
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In hiring Silver, Wasilla found someone who was a member of each lawmaker's inner circle. Silver has donated at least $11,400 to Stevens's political committees and $10,000 to Young's reelection committee in the past decade, according to Federal Election Commission records.

More on the Palin Selection

I've been trying to give Palin a fair shake as a Vice Presidential nominee. After spending a couple of hours cruising around the Internet, I'm afraid that my fuse is burning short.

Palin's most attractive characteristic has been her reputation as a reform-minded governor. But even that is being called into serious doubt. As I posted earlier, Palin evidently supported the infamous bridge to nowhere before opposing it. Not only that, she kept the money that she claimed that she was saving the taxpayers.

From the Times Online piece:

in a first unsettling revelation – which the McCain camp will hope does not become a pattern – the Anchorage Daily News reported yesterday that when she ran for governor Mrs Palin campaigned on a “build the bridge” platform. The newspaper, in a reference to John Kerry’s alleged “flip-flopping” in the 2004 presidential campaign, said: “Palin was for the Bridge before she was against it.”

It also appears that Palin was nearly recalled as Mayor of Wasilla after she fired the police chief and library director for failing to support her campaign. This is certainly not an action one would expect of a "reform-minded" candidate.

There is also a collection of supporting documents related to the firing of the Public Safety Commissioner. From the Times Online piece:

The bipartisan investigation by the Alaskan state legislature, which is known locally as “Troopergate”, was launched last month when Mr Monegan, after he was fired, alleged publicly that he had been sacked for refusing to fire Mike Wooten, Mrs Palin’s brother-in-law, and after months of pressure by the Palin camp.

There is a fair amount of evidence that aides to Palin had placed pressure on Monegan. Palin denies that the pressure was applied at her direction.

From an AP report on troopergate:

Palin has denied the commissioner's dismissal had anything to do with her former brother-in-law. And she denied orchestrating the dozens of telephone calls made by her husband and members of her administration to Wooten's bosses.
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In 2005, before Palin ran for office, the Palin family accused Wooten of drinking a beer while in his patrol car, illegal hunting and firing a Taser at his 11-year-old stepson. The Palins also claimed Wooten threatened to kill Sarah Palin's father.

Wooten was suspended over the allegations for five days in 2006 but is still on the job. Monegan refused to comment on Wooten's situation, saying he could not discuss personnel matters.

More recently, Todd Palin said, he took his concerns over the governor's safety directly to Monegan. But he said he never told anyone to fire Wooten.
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Attorney General Talis Colberg's conducted an investigation and found that 14 members of the Palin administration — including Colberg himself — made calls to Department of Public Safety officials about Wooten.

Her Replacement Commissioner had to resign after just two weeks on the job, following revelations about a reprimand he had received for sexual harassment.

It also appears to be well-known that Palin favors inserting creationism into the science classroom.

The volatile issue of teaching creation science in public schools popped up in the Alaska governor's race this week when Republican Sarah Palin said she thinks creationism should be taught alongside evolution in the state's public classrooms.

Palin was answering a question from the moderator near the conclusion of Wednesday night's televised debate on KAKM Channel 7 when she said, "Teach both. You know, don't be afraid of information. Healthy debate is so important, and it's so valuable in our schools. I am a proponent of teaching both."

Later, Palin backpedaled, perhaps after consulting with somebody familiar with the concept of a separation between church and state:

The question has divided local school boards in several places around the country and has come up in Alaska before, including once before the state Board of Education in 1993.

The teaching of creationism, which relies on the biblical account of the creation of life, has been ruled by the U.S. Supreme Court as an unconstitutional injection of religion into public education.

Last December, in a widely publicized local case, a federal judge in Pennsylvania threw out a city school board's requirement that "intelligent design" be mentioned briefly in science classes. Intelligent design proposes that biological life is so complex that some kind of intelligence must have shaped it.

In an interview Thursday, Palin said she meant only to say that discussion of alternative views should be allowed to arise in Alaska classrooms:

"I don't think there should be a prohibition against debate if it comes up in class. It doesn't have to be part of the curriculum."

She added that, if elected, she would not push the state Board of Education to add such creation-based alternatives to the state's required curriculum.

I've been waiting for her Republican defenders to explain what Palin's national security qualifications for the presidency are. Maybe she had written articles or editorials, or maybe she had experience traveling to other lands. So far, the best they've come up with is:

• She has negotiated with the Canadian government over a natural gas pipeline from Alaska. (At least she has one good entry on her resume.)


• Alaska shares a border with Russia. (Presumably, she has obtained insight into the Russian soul via osmosis across the Bering Strait.)


• She first obtained a passport in 2007 to perform visits to the Alaska National Guard in Kuwait and Germany. (Her foreign travel experience is so limited that a stopover in Ireland is listed on her resume.)

In the August 31 "This Week" discussion of the Palin decision, George Will was so desperate that he had to fall back on the argument that he cared more about her positions than her experience. I can't think of another case where George Will has said such a thing.

There is more to the qualification to high executive branch office than experience. There is understanding the constitutional principle of limited government and the culture of corruption that inevitably develops in a capitol that abandones limited government; that regulates everything and subsidizes everybody. She understands that.

--SCC
Palin and Science
Palin and Earmarks
Palin Seeks to Ban Books
Palin & Funding for UnWed Mothers

Saving the Republican Party

Robert Borosage suggests that the Republicans can save their party by a return to the values that guided Eisenhower. His article makes a number of good points; here are a couple of quick quotes:

So what can be done? In the best tradition of circular firing squads, Republicans are sniping at one another for the debacle. The fundamentalists blame the neo cons; the country clubbers deride the evangelicals; the corporate core scorns the supply-siders. And each of them is justified, for every strand of the Republican party contributed to conservative misrule. The neo-cons led us into the debacle that is Iraq, while shredding the Constitution. The evangelicals shocked America with the Schaivo grandstanding, and the efforts to enforce morality through radical right judges. The supply-siders really did practice "voodoo economics." And the corporate cronies descended into corruption and plunder shocking even by Washington standards.
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Eisenhower reflected the common sense, country club values of a Republican Party that represented Main Street. He insisted on fiscal discipline, and was willing to raise taxes if necessary, even as he championed smaller government. To balance the budget, he put a lid on military spending, letting the services fight among themselves on how to divide the kitty. "We -- you and I, and our government," he warned, "must avoid the impulse to live only for today, plundering, for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow."

Palin and the Bridge to Nowhere

Reuters is reporting that the "Bridge to Nowhere" applause line used by Palin may be more controversial than it appeared at first blush. Palin originally supported the bridge during her campaign for governor, then reversed herself once in office.

The bridge itself was obviously a prime example of porkbarrel spending in Washington. Perhaps it looked like a great idea in Ketchikan, but it is pretty easy to see why taxpayers elsewhere were less keen on the project.

Palin especially risks charges of hypocrisy over the fact that she kept the federal money even after holding the big press conference to announce what a waste it was. That is going to strike a lot of voters (and taxpayers) as being two-faced, and not at all in sync with her image as a fresh-faced reformer.

In the city Ketchikan, the planned site of the so-called "Bridge to Nowhere," political leaders of both parties said the claim was false and a betrayal of their community, because she had supported the bridge and the earmark for it secured by Alaska's Congressional delegation during her run for governor.

The bridge, a span from the city to Gravina Island, home to only a few dozen people, secured a $223 million earmark in 2005. The pricey designation raised a furor and critics, including McCain, used the bridge as an example of wasteful federal spending on politicians' pet projects.

When she was running for governor in 2006, Palin said she was insulted by the term "bridge to nowhere," according to Ketchikan Mayor Bob Weinstein, a Democrat, and Mike Elerding, a Republican who was Palin's campaign coordinator in the southeast Alaska city.

"People are learning that she pandered to us by saying, I'm for this' ... and then when she found it was politically advantageous for her nationally, abruptly she starts using the very term that she said was insulting," Weinstein said.
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The state, however, never gave back any of the money that was originally earmarked for the Gravina Island bridge, said Weinstein and Elerding.

In fact, the Palin administration has spent "tens of millions of dollars" in federal funds to start building a road on Gravina Island that is supposed to link up to the yet-to-be-built bridge, Weinstein said.

"She said 'thanks but no thanks,' but they kept the money," said Elerding about her applause line.

--SCC

The Iraq Surge

The New York Times is reporting that there was significant debate within the Bush administration about whether to proceed with the Iraq "troop surge."

At the time, General Abizaid and others within the Pentagon objected that the surge would not be sustainable, and that it would not meet the goals laid out for it:

some officials and senior military officers are arguing against the idea, saying that it could undercut a sense of urgency for Iraqi units to take on a greater role in fighting the insurgency and preventing sectarian attacks. Gen. John P. Abizaid, the head of the United States Central Command, told Congress last week that the military was stretched so thin that such an increase could not be sustained over the long term.
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Temporary spikes in troop levels have succeeded in tamping down insurgent violence in Iraq in the past. But several Pentagon officials say they are not sure that the Army can achieve the same results against attacks fueled increasingly by sectarian tension. An increase in American forces this year to more than 140,000 from 128,000 has failed to stem the spike in sectarian attacks, they noted.

Representative Duncan Hunter, a California Republican who is losing the chairmanship of the Armed Services Committee at the end of the year, said at a news conference that rather than sending more American troops, he favored redeploying Iraqi units from largely calm areas to Baghdad and other violence-ridden sections of the country.

“The idea of having the Iraqi battalions that we’ve stood up and trained 50 to 100 miles away, in areas that are peaceful, simply staying in their barracks while we put together new rotations of Americans to take their place, simply doesn’t make sense,” he said.

Different factions within the administration favored different options:

But Mr. Bush’s penchant to defer to commanders in the field and to a powerful defense secretary delayed the development of a new approach until conditions in Iraq, in the words of a November 2006 analysis by the Central Intelligence Agency, resembled anarchy and “civil war.”

When the White House began its formal review of Iraq strategy that month, the Pentagon favored a stepped-up effort to transfer responsibility to Iraqi forces that would have facilitated American troop cuts.

The State Department promoted an alternative that would have focused on fighting terrorists belonging to Al Qaeda in Mesopotamia, containing the violence in Baghdad and intervening to quell sectarian violence only when it reached the proportions of “mass killing.”

The American ambassador to Baghdad argued that he should be given broad authority to negotiate a political compact among the Iraqis.

“The proposals to send more U.S. forces to Iraq would not produce a long-term solution and would make our policy less, not more, sustainable,” the ambassador, Zalmay Khalilzad, wrote in a classified cable.
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Because some aides to the Joint Chiefs of Staff were suggesting at the time that the military was stretched too thin to send many more troops, another security council staff member, William J. Luti, a retired Navy captain, was asked to quietly determine whether forces were available. Mr. Luti reported that five brigades’ worth of additional combat forces could be sent and recommended that they be deployed. The idea later won additional support among some officials as a result of a detailed study by Gen. Jack Keane, the former vice chief of staff at the Army, and Frederick W. Kagan, a military specialist, that was published by the American Enterprise Institute.

In the end, the troop reinforcement proposal split the military. Even after the president had made the basic decision to send additional troops, Gen. George W. Casey Jr., the top American commander in Iraq, never sought more than two brigades, about 8,000 troops in all, Defense Secretary Robert M. Gates reported to Mr. Bush in late December. But General Casey’s approach substantially differed from those of two officers who wanted a much bigger effort: the No. 2 commander in Iraq, Lt. Gen. Raymond T. Odierno, and Gen. David H. Petraeus, who helped oversee the military’s new counterinsurgency manual and whose views were known by the White House before he was publicly named to replace General Casey, administration officials said.
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Three days after the 2006 midterm Congressional elections, the White House finally convened a formal governmentwide review. The Republicans had taken a beating at the polls and the Iraq Study Group, a nonpartisan panel led by Lee H. Hamilton, the former Democratic representative, and James A. Baker III, the secretary of state to the first President Bush, was preparing to publish its recommendations — to step up efforts to train Iraqi troops and withdraw virtually all American combat brigades by spring 2008.
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the debate continued to swirl. In an early December meeting of top officials, Mr. Cheney argued for sending forces to address the sectarian violence in Baghdad, while Ms. Rice reiterated her argument that there was little the military could do to stop sectarian violence there, according to notes taken by a participant.
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By now, there was a split in the military community. General Odierno had taken over in early December as the second-ranking officer in Iraq. He conducted a review that called for a minimum of five additional brigades in and around Baghdad and two more battalions in Anbar Province to reinforce efforts to work with Sunni tribes there.

As a subordinate to General Casey, General Odierno had no role in the security council review. But his views were known to General Keane, the retired four-star general who had helped oversee the study for the American Enterprise Institute that advocated adding five Army brigades and two Marine regiments. In separate meetings with Mr. Bush and Mr. Cheney on Dec. 11, General Keane relayed General Odierno’ assessment, which was forwarded by General Pace as well.

Along with Mr. Kagan, General Keane also described in detail to Mr. Cheney and his staff his own plan calling for American forces to be deployed in mixed Sunni-Shiite neighborhoods in Baghdad to demonstrate that the United States would be even-handed in protecting civilians.
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Donald H. Rumsfeld’s resignation on Nov. 6, and Mr. Gates’s swearing-in to replace him as defense secretary in mid-December, removed some of the institutional resistance at the Pentagon to the “surge.” Ms. Rice also became more supportive after it was made clear that demands would be made of the Iraqis.

(Reuters has published a summary of this article.)

Much of the success of the surge has been due to the "Sunni Awakening," where Sunni tribes switched sides and began to fight against al Qaeda rather than being allied with them. Some critics of the surge point out that the Sunni tribesmen are on Washington's payroll, and suggest that they may decide to defect back once the payments stop. Washington has been encouraging the Iraqi government to integrate as many of these fighters as possible into the Iraqi defense forces, which would reduce this possibility.

But even as it sought ways to support Maliki, the United States was also hedging its bets by working with tribes in Iraq’s far-flung provinces. Before the surge, the American military had joined forces with Abdul Sattar Buzaigh al-Rishawi (known as Abu Risha) and other Sunni sheiks against Sunni insurgents. The additional American troops during the surge reinforced that effort and encouraged it to spread. The Iraqis called the tribal movement a Sahawa or Awakening. The Americans initially called the tribesmen “concerned local citizens,” but when translated into Arabic that came out something like “worried Iraqis.” So the name was changed to “Sons of Iraq.”
...

There has also been resistance from the Iraqi government to applying the same strategy to the Shiite militias.

Together they devised a plan to rid Diwaniya of the Shiite militias that roamed freely through the streets, and to strengthen the hand of Shiite tribal leaders: a variation on the tribal-empowerment plan that had already done so much to blunt the power of Sunni insurgents in Iraq’s once-violent Anbar Province. But their strategy wound up attracting far more attention than they liked from the Shiite-led government of Nuri Kamal al-Maliki, for the simple reason that sharing power within the Shiite fold was just as difficult for many Shiites as sharing power with Sunnis.

Over the previous few years, my own trips through Iraq had focused mostly on the U.S. and Iraqi governments’ struggle with Sunni insurgents in battlegrounds like Mosul, Baquba, Hit and Arab Jabour. But the nature of the war has fundamentally changed. The American “surge,” together with a strategy that emphasized protecting civilians and engaging with Sunni tribesmen, weakened Sunni insurgents and jihadists. The bitter fighting between Shiites and Sunnis that turned Baghdad into a killing ground of car bombs, suicide attacks and mutilated corpses has quieted down. And now this sectarian struggle has been eclipsed by a growing tussle for power among the Shiites themselves. The competition involves Prime Minister Maliki and the Shiite religious parties (the Islamic Supreme Council of Iraq and Maliki’s Dawa Party) that constitute the ruling hierarchy in Baghdad; Moktada al-Sadr’s weakened but still-popular political movement and its military wing, the Jaish al-Mahdi, or Mahdi Army; and, increasingly, Shiite tribes.
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Shiite tribal leaders had begun to network with the Sunni Anbar sheiks to discuss how they might bring more security to the south and enhance their own political clout. Maj. Gen. John Allen, who served as the second-highest-ranking American officer in Anbar in 2007 and early 2008, recalled how Shiite sheiks from neighboring Karbala Province visited Anbar for a tribal get-together. They chanted poetry and closed the session by posing before an Awakening flag: crossed scimitars, the scales of justice and a pot of coffee on a yellow field. There were other meetings. “Their plea was, ‘Help us to get organized and we can throw off this thing called the Mahdi Army, and we can get the tribal society dominant again in the south, and we can begin to bring social order to the south akin to the way Sunni tribes had brought social order back to Anbar Province,’ ” Allen recalled.
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After word of the program spread, dozens of sheiks began to approach Othman to get in on it. The next step was to import the program from the approach roads to the streets of the city. The sheiks were less of a force inside the city, so Team Phoenix put out the word that patrol volunteers would be paid slightly less than the pay scale for an Iraqi Army soldier. To protect the police’s prerogative, it was decided that the citizen-watch groups inside the city would not be armed. They would be equipped with radios to contact the police and would be outfitted with orange reflector belts for identification.
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On Dec. 2, 2007, there was a meeting of the Ministerial Committee for National Security, a top-level body in Baghdad that Maliki and senior American officials used to coordinate policy. One agenda item was the Sons of Iraq, of which there were now more than 100,000, largely as a result of the Sunni Awakening. As the Americans saw it, the program was integral to the turnaround in Anbar and helped improve security in Abu Ghraib, Yusufiya, Diyala and even Baghdad. They wanted the Maliki government to integrate at least 20,000 and ideally 30,000 of the recruits into the Iraqi Army and police and find ways to employ the rest.
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Maliki appeared to accept as many as 103,000 Sons of Iraq but insisted there could be no tribal Awakening in the Shiite south, his own power base. “The prime minister said, ‘Look, it is different in the south,’ ” recalled a senior American official who asked not to be named, because of the sensitivity of the subject. “ ‘There is not the same security imperative there. The Iraqi security forces can take on the security threat that comes from militias. It is not a question of the tribes being actively in bed with the militia. There is a different security dynamic. The Awakening would be a political movement. That is not what the coalition should be doing.’ I think he did not want us to be creating political movements to challenge him. I have got to say there is some merit to that.”

--SCC

Tension Ahead of Monday EU Meeting

Reuters is reporting that Russia continues to play a heavy hand ahead of Monday's EU meeting. President Medvedev has threatened to retaliate with sanctions against any countries taking what Russia sees as "aggressive" actions.

"Russia does not want confrontation with any country. Russia does not plan to isolate itself," Medvedev said in an interview with Russia's three main television stations.

But he added: "Everyone should understand that if someone launches an aggressive sortie, he will receive a response." He said Russian law allowed the Kremlin to impose sanctions on other states, though it preferred not to go down that path.

Russia continues to contend that their invasion of Georgia was necessary to halt a genocide in South Ossetia and Abkhazia.

the Kremlin said it acted to prevent what it called genocide against the separatist regions.

If they have evidence of such action, they should bring it before the international community by filing war crimes charges against the responsible people or against the Georgian government itself. Without such action by Georgia, their charges will be interpreted as just more hot air.

Georgia called for the EU to provide monitors to replace the Russian "peacekeepers"

Georgia urged the European Union to impose sanctions against those doing business with the two separatist regions, authorize a civilian mission to monitor buffer zones around them and give Tbilisi about $2 billion to help to help repair damage.

"Europe can do a lot, starting with sending a mission of civilian monitors, which would lead to an international peacekeeping mechanism that would replace the presence of Russian troops," Prime Minister Lado Gurgenidze told Reuters in Brussels.

While the UK favors a direct response to Russian aggression in the area, many continental powers, especially France and Germany, favor a more nuanced approach.

British Prime Minister Gordon Brown said Russia's intervention in Georgia was dangerous and unacceptable.

"In the light of Russian actions, the EU should review -- root and branch -- our relationship with Russia," Brown wrote in a comment published in Britain's Observer newspaper.

The German foreign minister said Moscow deserved criticism but Europe needed cooperation with Russia.

"Europe would only be hurting itself if we were to get full of emotion and slam all the doors shut to the rooms that we will want to enter afterwards," Steinmeier said.

Russia supplies more than a quarter of Europe's gas needs. Some observers say this makes tough EU sanctions unlikely.

The AP reports that Russia has strengthened its military commitment to South Ossetia and Abkhazia:

MOSCOW - Russia's president said Sunday his country will give military aid to the two separatist regions at the center of the war with Georgia — signaling Moscow has no intention of backing down in the face of Western pressure.
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Medvedev's decision Tuesday to recognize the Georgian breakaway provinces South Ossetia and Abkhazia as independent drew condemnation from the West. Though no other countries have followed Russia's lead, Medvedev reaffirmed the decision on Sunday.

"We have made our decision, and it's irreversible," he said in a speech broadcast on Russian television.

In particular, Medvedev has signaled that he views the confrontation in the Caucasus as a way to challenge US dominance of international affairs.

Dmitry Medvedev also warned that American domination of world affairs is unacceptable, though he insisted that Russia did not want hostile relations with the United States and other Western nations.
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Medvedev said Sunday the world would be more stable if the U.S. was less dominant.

"The world must be multi-polar; domination is unacceptable," he said. "We can't accept the world order where all decisions are made by one nation, even by such serious and authoritative nation as the United States. Such a world would be unstable and prone to conflicts."

--SCC

Impact of the Candidates' Tax Proposals

The Tax Policy Center recently released an updated report estimating the deficit impacts of the Obama and McCain tax plans. Due to a lack of detailed information from either campaign, they made some reasonable assumptions about exactly what was being proposed.

The Tax Policy Center reports that:

Compared to current law, TPC estimates the Obama plan would cut taxes by $2.9 trillion over the 2009-2018 period. McCain would reduce taxes by nearly $4.2 trillion

Moreover,

Neither candidate’s plan would significantly increase economic growth unless offset by spending cuts or tax increases that the campaigns have not specified.

Because neither campaign is proposing a fiscally responsible program, I do not feel that I can endorse either candidate in this election. Our children and grandchildren should not be saddled with debts resulting from our large structural deficit. Each generation should pay its own bills.

I did stumble across an interesting calculator estimating the amount of difference that the Obama tax plan would make for a particular taxpayer:
Alchemy Today Tax Calculator

(While most people will receive a tax cut under Obama's plan, a Gallup poll shows most Americans believing that Obama's plan will result in increased taxes for their household.)

McCain's Surprise VP Choice

McCain's decision to choose Sarah Palin as his VP candidate is bound to affect his argument that Obama is not qualified to lead the country. As reported by Reuters:

Palin, the former mayor of the town of Wasilla, is virtually unknown and untested nationally. That could hurt McCain's argument that Obama, 47, a first-term senator from Illinois, is too inexperienced to handle the White House.
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"Today, John McCain put the former mayor of a town of 9,000 with zero foreign policy experience a heartbeat away from the presidency," said Obama campaign spokesman Bill Burton, adding that she would work to overturn abortion rights and continue Republican economic policies.

The lack-of-experience angle is getting traction with the press. The AP reports:

She is younger and less experienced than the first-term Illinois senator, and brings an ethical shadow to the ticket. A governor for just 20 months, she was two-term mayor of Wasilla, Alaska, a town of 6,500 where the biggest issue is controlling growth and the biggest civic worry is whether there will be enough snow for the Iditarod dog-mushing race.

"On his 72nd birthday, is this really the one-heartbeat-away he wants to put in the White House?" said Rep. Rahm Emanuel, the No. 3 Democrat in the House. "What does this say about his judgment?"
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The pick earned McCain praise Friday from evangelicals and other social conservatives who have been skeptical of him. "Conservatives will be thrilled with this pick," said Greg Mueller, a conservative GOP strategist.

The price for that support could be high. Palin's lack of experience undercuts GOP charges that Obama is not ready to be commander in chief. McCain said in April that he was determined to avoid a pick like Dan Quayle, the little-known Indiana senator whom George H.W. Bush put on his ticket in 1988. The choice proved embarrassing.

Quayle "had not been briefed and prepared for some of the questions," McCain said while discussing his vice presidential search. He was clearly aware that, as a septuagenarian, the decision he made about a running mate would be "of enhanced importance."

Four months and one birthday later, McCain's announcement of Palin made clear the paucity of her experience.

"As the head of Alaska's National Guard and as the mother of a soldier herself," the statement said, "Gov. Palin understands what it takes to lead our nation and she understands the importance of supporting our troops."

It seems pretty clear that this choice was aimed at attracting disaffected supporters of Hillary Clinton:

But she could help him appeal to disaffected supporters of Democrat Hillary Clinton, who lost a bruising primary to Obama. Palin noted the achievements of Clinton and Democrat Geraldine Ferraro, who in 1984 became the first woman vice presidential nominee of a major party.

"Hillary left 18 million cracks in the highest, hardest glass ceiling in America," she said, referring to the 18 million votes Clinton received in the primaries. "But it turns out the women of America aren't finished yet, and we can shatter that glass ceiling once and for all."

Huckabee also tried to twist the knife that many Hillary supporters seem to feel Obama inserted between their shoulder blades. From MSNBC:

Huckabee also used the Palin pick to reach out to women.

"Governor Palin ... will remind women that if they are not welcome on the Democrat's ticket, they have a place with Republicans," he said.

Palin does have a reputation as a reformer, which may help reinforce McCain's image in that area. Reuters reports:

Alaska's first women governor and the state's youngest chief executive, the 44-year-old Palin gained statewide fame as a whistle-blower calling attention to ethical violations of high-ranking Republican officials, including the chairman of the state Republican Party.

MSNBC reports that there may be some skeletons in Palin's own closet, however, when it comes to ethical issues:

But Palin’s seemingly bright future was clouded in late July when the state Legislature voted to hire an independent investigator to find out whether she tried to have a state official fire her ex-brother-in-law from his job as a state trooper.

The allegation was made by former Department of Public Safety Commissioner Walt Monegan, whom Palin fired in mid-July.

“It is a governor’s prerogative, a right, to fill that Cabinet with members whom she or he believes will do best for the people whom we are serving,” Palin told CNBC’s Larry Kudlow in an interview on Aug. 1. “So I look forward to any kind of investigation or questions being asked because I’ve got nothing to hide.”
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"A legislative panel has launched a $100,000 investigation to determine if Palin dismissed Alaska's public safety commissioner because he would not fire the trooper, Mike Wooten," the AP wrote earlier this month. "Wooten went through a messy divorce from Palin's sister. Palin has denied the commissioner's dismissal had anything to do with her former brother-in-law. And she denied orchestrating the dozens of telephone calls made by her husband and members of her administration to Wooten's bosses. Palin said she welcomes the investigation: 'Hold me accountable.'"

Although she's not linked to them, Sen. Ted Stevens and Rep. Don Young are facing legal/ethical troubles. In fact, Stevens' trial will start in late September, so the Alaska Republican Party is a mess. And Palin's trooper trouble could play into that.

It will be interesting to see which story line catches on: "Palin, the reformer/maverick", or "Palin, under investigation?"

Russia Plans to Formally Annex South Ossetia

The AP is reporting that South Ossetia has announced that it will be formally annexed by Russia:

TSKHINVALI, Georgia - Russia intends to eventually absorb Georgia's breakaway province of South Ossetia, a South Ossetian official said Friday, three days after Moscow recognized the region as independent and drew criticism from the West.
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Russian President Dmitry Medvedev and the region's leader, Eduard Kokoity, discussed the future of South Ossetia earlier this week in Moscow, South Ossetian parliamentary speaker Znaur Gassiyev said.

Russia will absorb South Ossetia "in several years" or earlier, a position was "firmly stated by both leaders," Gassiyev said.

My view is that the formal process will be nothing more than a recognition of the de facto annexation of South Ossetia and Abkhazia by Russia. Short of starting World War III, it is not clear that the West will be able to prevent this annexation.

On the other hand, I can see no good reason for the West to recognize Russia's actions. There are areas where Russia would like Western cooperation, which means that there are ways for the West to express its displeasure short of a full-scale deployment of NATO forces.

The deployment of NATO naval forces to the Black Sea is another way in which the West can present its discontent.

In Georgia, the vice speaker of parliament, Gigi Tsereteli, said the statement cannot be taken seriously.

"The separatist regimes of Abkhazia and South Ossetia and the Russian authorities are cut off from reality," he said in Tbilisi. "The world has already become different and Russia will not long be able to occupy sovereign Georgian territory."

I suppose he has to say that, but I have to respectfully disagree. I think that Russia intends to annex the two provinces, and that they will do so. I don't see that internal nationalist Russian pressures will allow Medvedev and Putin to do otherwise.

Georgia has announced that they will suspend relations with Russia as a result of the Russian announcement:

Georgia said it would cut diplomatic ties with Russia after Moscow recognized its rebel South Ossetia and Abkhazia regions. A Russian Foreign Ministry source told RIA news agency Moscow would respond by closing its embassy in Tbilisi.

Reuters is reporting that the Europeans are unwilling to impose significant sanctions on Russia for its actions:

PARIS/MOSCOW (Reuters) - A defiant Russia said on Friday that international condemnation of its actions in Georgia was "biased," while the appetite in the European Union for imposing sanctions on Moscow appeared to dwindle.
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European diplomats said they had received clear signals from the Kremlin that Russia would retaliate if the European Union imposed punitive measures over Georgia when EU leaders meet for an emergency summit next week.
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A senior diplomat for EU president France said sanctions would not be adopted at the summit. That message contradicted remarks on Thursday by French Foreign Minister Bernard Kouchner, who said sanctions were among the options on the table.

"The time to pass sanctions has certainly not come," the French diplomat said.

In particular, the Europeans are concerned about their oil and gas supplies from Russia. Of course, everyone denies that this is having any impact on how they see the situation:

European diplomats said they had received clear signals from the Kremlin that Russia would retaliate if the European Union imposed punitive measures over Georgia when EU leaders meet for an emergency summit next week.

Russian oil companies and government officials denied a British newspaper report that they were preparing to restrict oil supplies in response to sanctions.
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Western policy-makers drafting a response to the Kremlin's actions are mindful that Russia supplies more than a quarter of Europe's gas and that its support is vital to maintain pressure on Iran over its nuclear program.

European diplomats said on Friday they were expecting Russian retaliation if the EU took punitive measures.

"They've been saying loud and clear that they feel they could do whatever they want with impunity," said one diplomat.

Russian threats have gone beyond oil and gas supplies at other issues of mutual concern:

Putin also hinted Russia's cooperation with the West on issues such as trade and nuclear non-proliferation could be at stake in the row over Georgia.

In the meantime, Russian President Medvedev is trying to sell a bizarre conspiracy theory by which the US "provoked" Russian intervention as a way to promote John McCain's candidacy. I don't see this conspiracy theory selling well in the US, even among Bush's staunchest critics. According to the BBC:

Mr Putin told CNN US citizens were "in the area" during the conflict over South Ossetia and were "taking direct orders from their leaders".

He said his defence officials had told him the provocation was to benefit one of the US presidential candidates.

--SCC

Obama Appeals to Pragmatists

Obama made a definite appeal to independents and pragmatists during his acceptance speech. Time will tell how much of it he can deliver, but the approach seems like the right one. The real question is whether the party hacks will allow this sort of approach to proceed, or whether they will want to keep the same old wedge issues active to stir up party activists during the next election.

America, our work will not be easy. The challenges we face require tough choices, and Democrats as well as Republicans will need to cast off the worn-out ideas and politics of the past. For part of what has been lost these past eight years can't just be measured by lost wages or bigger trade deficits. What has also been lost is our sense of common purpose - our sense of higher purpose. And that's what we have to restore.

We may not agree on abortion, but surely we can agree on reducing the number of unwanted pregnancies in this country. The reality of gun ownership may be different for hunters in rural Ohio than for those plagued by gang-violence in Cleveland, but don't tell me we can't uphold the Second Amendment while keeping AK-47s out of the hands of criminals. I know there are differences on same-sex marriage, but surely we can agree that our gay and lesbian brothers and sisters deserve to visit the person they love in the hospital and to live lives free of discrimination. Passions fly on immigration, but I don't know anyone who benefits when a mother is separated from her infant child or an employer undercuts American wages by hiring illegal workers. This too is part of America's promise - the promise of a democracy where we can find the strength and grace to bridge divides and unite in common effort.

The Great Wealth Transfer

Paul Krugman's Rolling Stone article discusses the transfer of wealth to the wealthiest few. It appeared in 2006, but the trends he discusses have accelerated.

An important part of the article is a debunking of the different myths explaining how this happened:

MYTH #1: INEQUALITY IS MAINLY A PROBLEM OF POVERTY.
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The real divergence in fortunes is between the great majority of Americans and a very small, extremely wealthy minority
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MYTH #2: INEQUALITY IS MAINLY A PROBLEM OF EDUCATION.
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Being highly educated won't make you into a winner in today's U.S. economy. At best, it makes you somewhat less of a loser.
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MYTH #3: INEQUALITY DOESN'T REALLY MATTER.
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America actually has less social mobility than other advanced countries: These days, Horatio Alger has moved to Canada or Finland. It's easier for a poor child to make it into the upper-middle class in just about every other advanced country -- including famously class-conscious Britain -- than it is in the United States.

A lot of this has been accomplished through Republican tax policy and the associated misinformation.

the administration has engaged in a systematic campaign of disinformation about whose taxes have been cut. Indeed, one of Bush's first actions after taking office was to tell the Treasury Department to stop producing estimates of how tax cuts are distributed by income class -- that is, information on who gained how much. Instead, official reports on taxes under Bush are textbook examples of how to mislead with statistics, presenting a welter of confusing numbers that convey the false impression that the tax cuts favor middle-class families, not the wealthy.

In reality, only a few middle-class families received a significant tax cut under Bush. But every wealthy American -- especially those who live off of stock earnings or their inheritance -- got a big tax cut. To picture who gained the most, imagine the son of a very wealthy man, who expects to inherit $50 million in stock and live off the dividends. Before the Bush tax cuts, our lucky heir-to-be would have paid about $27 million in estate taxes and contributed 39.6 percent of his dividend income in taxes. Once Bush's cuts go into effect, he could inherit the whole estate tax-free and pay a tax rate of only fifteen percent on his stock earnings. Truly, this is a very good time to be one of the have mores.