2008 in Review - String Theory (November)

The debate over how to use the second-round of bailout money, and the lovely stories of Wall Street doling out bonuses-as-usual goes on.  The same prescription is needed.

Watching the titans of capitalism scramble for a piece of the government bailout money like pigeons attacking a discarded bagel has me thinking about physics.  Specifically, I find myself constantly turning over a phrase:  String Theory.

Not that the study of eleven dimensional space-time really applies.  But right now I see strings everywhere, connecting everything, and see where the new strings need to be.

First the connective strings.  In the summer of 2007, Countrywide Mortgage nose-dived as the housing bubble finally burst, but it was believed that the damage could be contained.  The British government moved in to limit the impact of the Northern Rock debacle, and the Fed trimmed interest rates.  

But it turned out that there were strings from mortgages to everything else.  As more and more banks began to find that the stench of toxic mortgages was coming from their own vault, the loose lending of the past decade suddenly turned into scrutiny of each transaction.  Bank after bank took a write-down to account for the likely non-performance of the lousy loans on their books. 

As companies started scrutinizing their own and each other’s assets more carefully, distrust became the order of the day.  Tugging on the strings of credit revealed that virtually every player in the financial business had leveraged itself based upon the presumption of eternal credit-worthiness.  The first credit crisis began, with lenders cutting off the flow of money into the system.

Tightening credit stopped the growth in the economy.  The fundamental weakness of the current economic model came to the fore.  Too much of our economy has been based upon consumer-driven borrowing and the packaging, re-packaging, leveraging, and borrowing against the consumer-driven borrowing.  Nobel Prize-winning economist Paul Krugman once described the chief engine of the economy as “selling each other houses with money borrowed from China.”

The inability to borrow more looped back around on the housing bubble, as consumers reached their debt ceiling, and foreclosures increased.  The rise in foreclosures tugged on the strings of the holders of collateralized debt obligations, who tugged on the strings of the issuers of credit default swaps.  As the price of insurance against defaults went rocketing upward, credit tightened further.

The large brokerage houses were not content to peddle toxic mortgages, but had tied themselves heavily into their own products, because of the ludicrously high returns on those portfolios.  When the asset value disappeared, so did the brokerages.

Uncertainty in the economic markets stoked a run-up in commodity prices, including oil.  The spike in the price of a barrel of oil, while also attributable to numerous other factors having little to do with the cost of production or current supply, stagnated purchasing power and brought car buying to a standstill.

Meanwhile, the decision by the automotive giants to diversify into financial services during the roaring 90s began to backfire dramatically in the post-Lehman credit world.  Cars won’t sell and there’s no paper to be leveraged.  And this disaster has contributed to the rapid decline in the fortunes of the Big Three automakers, such that they are appealing for the the government to ride in and save the day.  The same federal government that they have regularly dismissed and reviled for attempting to increase fleet mileage standards that would have reduced our dependence on $140 a barrel oil and softened the economic impact on consumers of $4 a gallon gas.

Strings.  For want of a nail, the war was lost.

But now it is time for String Theory to apply the other way.  It’s clear that the Obama Administration, like the Bush Administration of the past nine months, is going to be handing out a phenomenal amount of money in an effort to move the economy back to productivity and growth.  What needs to happen, though, is that the government money - our money, after all - needs to come with strings attached.

First, a long-forgotten principle for government spending.  Every dollar which the federal government spends needs to be in service of some basic governmental goal.  With highway money, for instance, this is easy enough to see.  And this cold-eyed approach needs to be taken with every other dollar, too.

Strings.  When the government is buying things,  the strings are apparent.  But when the government is baling out investments banks, it is not at all clear how the benefit  to the taxpayer are to tracked.  It is time for all that money to come with strings attached.

This seems most clear to me in reference to the automobile industry.  For all the talk about how the automobile industry cannot be allowed to fail, very little ink is being spilled on the question of accountability.  Strings.  Detroit squandered its profitable years fighting to keep mileage and tailpipe emissions standards low, the whole time ignoring the obvious need for a wholesale re-tooling for the energy and environmental needs of the next century - this century.  So for the automobile industry, the money comes with strings that tie it making better, more fuel-efficient, less gasoline-engine cars.  You can have billions of dollars, but your products are going to consistent with our national energy policy - reducing consumption of oil and emphasizing new and renewable energy sources.

The banking industry has come calling for hundreds of billions of dollars to reverse the impact of its horrific decision-making and untrammeled greed.  For a couple of decades, financial institutions from Fannie Mae and Freddie Mac to credit derivative and credit default markets have fought against efforts to make them more accountable and more transparent.  The results of opacity and complexity are all too clear to see.  Billions of dollars, which had circled the globe being repeatedly re-invested in new financial products, have disappeared like fog in the sunlight.

Strings.  The money going into the financial community needs to come with real requirements for repayment and for how it is to be used.  The monies advanced to banks need to be used to make loans.  Period.  Improving the balance sheet of a large bank so that it can buy up smaller banks is not the goal.  Unfreezing the lending market is the goal.

The government needs to invest, not give away money.  Bailout funds need to come as purchasing power in the struggling businesses, preferred stock, paid before common stock, and rules for limiting retention bonuses to executives.  The argument comes back that limiting top executives pay will drive away talent.  Tough.  These are the people who have driven their companies to the brink of failure; we can insist on accountability and genuine performance standards before passing out millions of taxpayer dollars on bonuses and severance packages.

And the strings have to be able to be pulled.  We do not have the financial luxury to use surplus treasury funds to bail out companies without expectation of repayment.  These are investments in struggling industries, needed capital infusions without which they will expire and because of which they will not.  And as investor in chief, the US government needs to move to the head of the line when it comes to distributions and accountability.  Our investment gets repaid, at least in part, before the next penny of dividend gets paid to shareholders.  And someone needs to account for where the money goes; since the corporate boards of directors cannot be trusted to act in our best interests, there almost needs to be an accounting whistle-blower assigned to each company that gets federal bailout money.

The government should be a more, not less, prudent investor.  After all, each dollar spent bailing out business is a dollar less for fixing potholes, building new airports, developing energy alternatives, or being put back in the pocket of the citizenry.

Yes, the government is going to get more heavily involved in propping up business.  The economic lifelines tossed out by government need to tie these businesses to sound corporate governance and competent leadership.  It is a time for tough love and a little economic Darwinism.  If you want to use our money, you have to play by our rules.  If you don’t like our rules, then finish dying like a beached whale and let us use that money for other things. 

2008 in Review - Detroit Produces Another Lemon (Nov)

The images are still fresh enough to need no elaboration.

Everything that is wrong with the Big Three automakers was on display this week.  GM, Ford and Chrysler came to Washington to make their case for being handed a pile of cash.  They had a largely sympathetic audience in the Democratic Congress.  And yet at the end of the day, they came away with no money, and yet another bad p.r. rap.

Apparently, the American auto companies are losing money so fast that they won’t be able to survive past Christmas without a massive federal bailout.  The argument against letting any of the three sink into bankruptcy is a compelling one - it’s not just the auto factories that will close, and not just the well-compensated executives and heavily-pensioned autoworkers who would join the ranks of the unemployed.  Parts manufacturers, transporters, and auto dealers are the easiest-to-identify three additional businesses that would be hard hit.  

But there are still plenty of reasons why the government should not be monkeying with the gears of capitalism.  This isn’t government assistance to re-build after a natural disaster.  The automakers brought this debacle upon themselves.  The reason that Detroit’s flagship industry is flat on its back, pulse thin and weak, is that they made a bet when they were making money, and they lost.  They bet that gas was going to remain (relatively) inexpensive and Americans would remain hooked on horsepower.  

Technical innovation over the past couple decades has not gone to making fuel-efficient cars or the next generation of alternative fuel vehicles.  It has instead been spent on squeezing more horsepower out of the same amount of gasoline.  Trucks and SUVs got bigger and more powerful; four-door cars rolled off the line with zero to sixty times that would have been the envy of the Indy 500 a generation ago; and apparently no one gave any thought to what happens when the oil well ran dry.

Detroit squandered its profitable years fighting to keep CAFÉ standards low.  Over and over, auto industry executives and their lobbyists fought to keep Congress from revising mileage standards and tailpipe emissions requirements.  Those same happy capitalists are begging for government aid now.

Virtually every choice made by Detroit has contributed to the long slide downward.  The legacy costs - pension obligations, health care benefits, and the rest of the UAW goody-bag - made it virtually impossible for the automakers to develop and sell cars at a profit.  Only the lucrative truck and SUV markets kept them from bankruptcy years ago.  And so they cut down on car and mini-van production, focused more and more on the truck and SUV markets - and watched as Honda and Toyota and other imports seized the market for cars.

As the automakers idled car plants and laid off workers, they could have chosen to invest - to re-tool those factories and re-train those workers to develop the cars of the future.  Instead, they bet exclusively on big engines and wide frames.  Then 4 dollar-a-gallon of gas slapped Detroit, but good.  Trucks, SUVs and powerful cars getting 16 mpg began to crowd the dealerships’ parking lots like rotting fruit around the tree.  And none of the Big Three could roll out a car that might address the problem.

So there are plenty of skeptical members of Congress who needed to be persuaded.  The automakers, though, simply showed up and expected to be granted the largesse they sought. 

They did not have a single answer to the question:  what do you plan to do with the money?  They were utterly unprepared to explain how an infusion of $25 billion would bridge the gap between today’s borderline bankruptcy and tomorrow’s robust return to profitability.

It was also not lost upon the audience - by which I mean the Congressional committees - that the automakers flew their corporate jets to Washington to make their case.  It is hard to win the case that you are running low on cash with a fleet of LearJets idling on the tarmac at Reagan National.

Unnecessary spending, no plan for the future, intense lobbying for a result that a significant number of people think is foolish.  Sounds like the American auto industry for the past several decades.

But this Congress is in such a giving and forgiving mood that they have given the auto industry a second chance.  “Go do your homework and you can take this test again,” said Nancy Pelosi.  The unknown now is whether the boys from Detroit will learn the easy lessons.  Merely claiming that your companies are too big to fail is the surest way for Congress to decide to test your thesis.

First, make some apologies.  Take responsibility for the decisions that have the industry on the verge of collapse.  Second, have a plan.  It doesn’t have to be specific down to the date of sale of the first alternative-fuel vehicle, but it does need to tie the funding being sought to the improvements which will improve your ability to sell cars.  

Third, make an offer than can’t be refused.  Tell Congress to set whatever CAFÉ standards they want and that you’ll meet them.  Show yourselves as an American industry that is eager to innovate and that in trade for the government’s help today, you’ll give us the cars of tomorrow.

Finally, drive from Detroit.  Have your fleet of cars - every make and model -  motorcade from Detroit to Washington.  It shows that you believe in your products.  It will eliminate the image of corporate fat-cats flying to Washington to load up their jets with the taxpayer’s money.  And make a point to stop a few times along the way, at car dealerships and truck depots and parts companies.  Showcase the businesses all along the road from Detroit to Washington that will suffer if you can’t convince Congress that you are sincere.  You may be too big to fail; now prove that you’re not too stupid to succeed.

2008 in Review - The Last Debate (October)

A few brief thoughts born of wishing we could have had a real discussion of what was going to be important.  Sadly, the last debate didn't deliver any more than the previous ones.

The first two debates have followed a depressingly similar pattern - a question is asked and the candidates then quickly pivot away from the question to spout a piece of their stump speech, leaving us all tugging at our hair and shouting at the television - “answer the damn question!”  The “town hall” debate had the potential to be more entertaining, with questions from left field, but either the folks in the audience were selected for their ennui or Tom Brokaw took all the juice out of the questions himself.   In either event, the town hall was not stylistically different.

The high point of the second debate was when Barack Obama actually answered a question.  It was the ultimate softball:  prioritize health care, energy and entitlement spending.  Somehow, though, John McCain had managed to spend about two minutes “answering” the question without even repeating the three subjects.  And then Obama actually ticked off one, two, three before sprinting back to the safety of his prepared remarks.

The other too-regular feature from the first debates have been the pointless moments when each takes a swipe at the other.  In that ninety-minute span, each candidate manages to get every negative message from their whole campaign into their answers.  And the audience surveys clearly show that nobody wants to hear that.  Every time a candidate went to attack mode, we would wince slightly and think “don’t do that.”

Which brings us to the third debate.  With all the polls pointing to an Obama victory, McCain needs a clear win.  Obama can use the debate to finish the growing consensus that he can be president.  

The “winner” of the last debate is the one who reverses the depressing trend from the first two debates.  Answer the questions that are asked even if it requires a departure from your prepared text.  After all, the job requires a certain ability to adapt to conditions, and we’d actually like to see these boy think on their feet.

More importantly, the ad hominen attacks need to stop.  We know that McCain supporting going to Iraq in 2002; we know that Obama opposed the surge.  We know you don’t like each other’s tax policies.  Let’s spend ninety minutes talking about what you’re going to do.

2008 in Review - Sarah Palin's National Address (Sept)

Before Tina Fey (with help from Palin herself) reduced her to a caricature, there was a moment when Palin had the whole country watching.

The criticism of the media during the past week was right on one point.  There is most definitely has been an elitist bias against Sarah Palin.  And not just from liberals.  The reaction to the speech revealed it.  

Any response to the speech which talked about meeting or exceeding expectations was making some unwarranted assumptions about Palin before she stepped up to the microphone.  She’s young for national politics and new to national politics and from a small and remote state.  However, none of those facts were relevant to whether she could deliver a speech.  It’s not like she’s never done it before - you don’t get elected governor of any state without gaining experience in making speeches.  Whose expectations were met or exceeded?   Did the commentators expect her to freeze up when she got on stage, stutter badly or utter some horrific gaffe?

There is a certain small and petty segment of the country which hoped for such a result.  I am not one of them.  The idea that some people would be gleeful over a major candidate for office being undone makes me ill.  Schadenfreude is a national obsession these days, stoked by reality TV and gotcha journalism, and when it is added to the hyper-partisan politics of this decade, it is a stomach-turning mess to behold.  The sad losers who posited, wholly without evidence, that Palin’s baby son Trig was actually born of her teenage daughter have no place in civilized society and since censorship is right out, the best treatment is to ignore them.

But back to Palin’s acceptance speech.  I wanted it to be memorable for its positives.  Given the distinct possibility that she will be Vice-President of the United States, I want Palin to be more than her supporters could hope for.  She has no national political experience, sure, but I want her to seem like that little problem is only a matter of time.  Barack Obama had no national political experience in 2004, but by the time he finished the keynote address of the Democratic National Convention, everyone knew it wasn’t for lack of ability.  

The fact that I might not have chosen Palin as my running mate wasn’t relevant when she walked onto that stage.  She was chosen; she’s one of the two people who will be our next Vice-President.  Therefore, I wanted Palin to show me that she has a facile mind, a quick grasp of issues, and a clear ability to inspire - because we just might need her to have those skills.

One of the retorts heard this week to the argument that Palin is not experienced enough to be Vice-President is that she is not some “politician” but a regular woman and mother, a normal citizen of our country, the same as you and me.  That argument always gives me pause.  I don’t want our leaders to be “regular people”  I know lots of regular people, of outstanding personal character, good moral fiber and even good managerial skills.  But I want our leaders to be extraordinary, because two of the people we’re voting for are going to have to make the hard decisions on domestic issues and exercise statecraft in world affairs.  I’m not nearly as interested in Palin’s “experience” as I am in her abilities.

And for that reason her speech was disappointing.  Evidently someone had decided that she needed to be “introduced” to America but then made her do it herself, and then introduce her family by name too.  It was the oratorical equivalent of a “Hi, my name is” name-tag.

The real problem was that the small and personal story of Sarah Palin never really progressed into something larger.  She then discussed how she got there.  She had a nation on the edge of sofa, leaning toward the television, to hear why she was McCain’s choice for the second-highest office in the land, and she answered “hell, I don’t really know myself.”

I found myself contrasting her speech to Rudy Giuliani’s, which immediate preceded her on the stage.  They both laid into Obama, repeatedly and sarcastically.  But I realized that he commanded the camera, he made declarations.  Palin never did.  

The Republicans are having trouble grasping the brass ring of “change” when it comes to developing new energy technologies.  The section of Palin’s speech addressing energy suffered from that lack of focus.  She boasted of hammering out a deal with big oil companies that they didn’t like, and boasted of putting money back into the hands of the average taxpayer.  But she didn’t actually describe what she made them knuckle under and agree to, because her accomplishment was not one that really fits the Republican program -- claiming a larger share of the revenues to go to the state from a natural gas pipeline sounds an awful lot like taxing business, even if the money goes to the citizens.  From that ambiguous beginning, she rattled off a list of energy alternatives that she promised Republicans will deliver, and suggested that Democrats wouldn’t.  The problem, though, is that the list was identical to the one Obama  highlighted himself just last week.

Palin then spent a minute cataloging the taxes that she claims would be raised by Obama, as the first half of painting him as a tax and spend liberal.  She didn’t identify any spending priorities that she disagreed with, merely pointed out that Obama was going to spend more money.  And that, unfortunately, was the end of the constructive criticism portion of her speech.  Most of the rest of her “attacks” on Obama were no more than snarky asides like “he’s written two memoirs but no legislation.”  Interspersed with such partisan sniping, she provided solid and repeated support for McCain.  

Overall, she seemed most comfortable with boosting McCain and twitting Obama.  And that was why my final impression was one of disappointment.  We won’t hear more than a sound-bite or two from Palin again until the vice-presidential debate, so this was her chance to show that she was more than just “qualified to be vice-president.”  This was her one, and probably only, chance to show leadership qualities and to vault over the argument that she lacks experience.

This speech, though, was ultimately small and personal -- her personal story, her personal reasons for dis-liking Obama and her personal reasons for supporting McCain.  She could be our next vice-president.  I wanted her to give me a reason to want her to be vice-president.

2008 in Review - Sarah Palin (Sept)

Everybody had an opinion about Sarah Palin.  Most of mine were opinions about the opinionators.

It’s been a week since John McCain decided to tap Sarah Palin as his Vice-Presidential nominee.  Predictably, because it has become the rule in our partisan political world, the conservatives are ecstatic about the choice and anyone who questions Palin’s experience, credentials or political history is unpatriotic, sexist, or elitist.  Equally predictably, liberal commentators are scandalized by the choice and anyone who supports Palin is hopelessly partisan, two-faced or intellectually limited.  

Both partisan sides are wrong and right, as usual.  We should at least agree on some facts, which are beyond dispute.

First of all, John McCain did not pick Sarah Palin because she’s a woman.  Gender helped, sure, but it wasn’t the reason.  He picked her because he liked her best out of the candidates he was allowed to choose from.  He may have preferred Tom Ridge or Joe Lieberman, but the Republican Party isn’t ready for him to stray that far off the reservation.

Look at McCain’s choices - his primary opponents and the handful of young, and therefore relatively inexperienced, faces.  A ticket of two aging white guys won’t counter the powerful message of ‘change’ that has been the mantra of 2008, so it was the new faces that always had the lead.  Tim Pawlenty and Bobby Jindal are both in the same position as Palin, recently elected governors of states that don’t carry much media cachet.  

Palin, then, has several pluses -- she’s female in the year when Hilary Clinton made it clear that gender would no longer be a bar; she has impeccable conservative credentials on social issues in a year when mainstream Republicans aren’t sold on McCain’s fealty to social conservative causes; and she has a reputation for challenging the entrenched interests, in a year when much of the discussion has been over how to shake up politics as usual.  Viewed from this lens, then, Sarah Palin is not such a disaster as a v-p candidate.  

And it’s easy to see why McCain liked her best.  In addition to having a great family story and being a Washington outsider, she’s quick with a quip and connects with people.  And to state the un-PC obvious, she is pretty easy on the eyes too.

Second fact:  McCain jumped way outside the usual process for vetting running mate candidates, essentially trusting his instincts on picking Palin without a thorough look at her whole history.  Other potential candidates were screened thoroughly, and many have spent quality time with McCain during the spring and summer.  Palin, though, for the McCain campaign, came out of left field.

The revelation that the McCain campaign had not vetted Palin is at least as surprising as the choice.  She has been included in lists of possible candidates circulating in the commentariat for a couple of months.  She didn’t show up in columns about McCain’s “short list” at random.  Someone suggested she was worth considering; the surprise is not so much that she wasn’t vetted before she was picked, as much as that nobody thought to do the work long before the deadline. 

The result has been open season on Palin’s entire history, political and personal, and on McCain’s judgment.  Some silly commentators have gone so far as to suggest that McCain is reprising George McGovern’s 1972 selection of Tom Eagleton, (the urge to find historical parallels is too great for some to resist - Iraq is not and never will be Vietnam, but that didn’t stop opponents of the war from reaching for the analogy) and will have the same sticky ending.  That’s nonsense, but the week of muck-raking is a predictable result of springing a surprise on the media.

It is undisputed that McCain wanted to name his running mate on the morning after Obama’s acceptance speech, to run over Obama’s media coverage and minimize the fawning in print and the airwaves which could lead to a bump in the polls.  That deadline loomed large as McCain angled to get one of his preferred candidates approved.  Not everyone in the Republican party, and virtually no one outside, was comfortable with McCain’s decision-making process.  And that’s all we can really apply his choice of Palin to - his decision-making process.  But we should all get used to the idea, because it was vintage McCain and is a precursor to how decisions are apt to be made in a McCain White House.  

Third fact:  the media’s job has been to find out who Sarah Palin is, what kind of person she is, what her history is, and what positions she has taken or appeared to have taken on issues great and small.  As always, how deplorable the media is acting in pursuing these stories is a direct function of whether your own ox is being gored.  But the job of journalists is to find the story and there is no denying that Palin was the story of the week.

Touching again on the prior point, the appearance that the McCain camp was surprised by some of what was revealed by the media only highlights concern that McCain was shooting first and trusting that the answers to the questions asked later would be all right.  We won’t know if he was right for a while longer; but having to address the issue at all was an unnecessary hurdle for McCain to place in front of himself.

And the conservative commentariat needs to quit acting like media scrutiny, and even media muck-raking, is somehow cheaply partisan.  These people spent weeks camped out in front of JonBenet Ramsey’s house.  It’s the story they’re after, and if some scalp comes along with it, that’s what happens.  If she comes through the airing of her laundry in public, then she is that much more likely to be accepted.  McCain understands that.

Fourth fact:  virtually every published response to the choice of Palin came straight from the speaker’s “pre-Palin” pre-disposition to vote Republican.  The initial reactions were (sometimes) tempered with more considered reasons, but the significance of the revelations in the media of Bristol Palin’s baby and the Alaska Senate’s investigation was determined by the pre-disposition; conservatives minimized the reports, liberals gloried in them as exemplars of a disastrous choice.

That pre-disposition largely governs how to answer the political junkie’s question of whether Palin is experienced enough or qualified to be Vice-president.  The question really is: whether Palin is qualified to be President any time soon; three or four or eight years of vice-presidency from now, there will be no dispute about experience or qualification.  To quote Hillary Clinton: is she ready to lead on Day One?  It is hopelessly naive or partisan to claim the answer is yes.

But there should also be universal agreement that the question is bogus, because Palin is qualified to be Vice-President.  She’s over 35 years of age and a natural-born American; if there are any other qualifications, they haven’t been written down.  The main requirements of the job are to preside over the Senate, cast a tie-breaking vote if needed, and do whatever else the President may designate.  There have been men not up the task of being President, but there’s no list of failed Vice-Presidencies (or stellar ones for that matter).

So after a week all we really have is the latest turn on a very long and very winding road to the White House.  Conventional wisdom has taken a beating for at least a year in this election cycle and the nomination of Palin is completely harmonious with that theme.  Conventional wisdom about McCain’s wisdom in choosing Palin is likely to be just as wrong.

2008 in Review - States' Rights (August)

In the dog days, I found myself stewing over the demise of Federalism.  And I finally figured out who to blame.

I blame Orval Faubus.  And George Wallace.  And Strom Thurmond.  And the Board of Education of Topeka, Kansas.  And the rest of a generation and a half of unrepentent racist Cro-Magnons who used the power of the state to perpetuate the reprehensible notion that all men are not created equal.  

As World War II ended, the American people were confronted with too many proofs that race was no judge of character or conduct or competence.  But blacks were shunted to the back of the bus and barred from hotels and restaurants, given schools with no heat, no running water and no textbooks.

And when the courts and federal government stepped in to simply elevate the Negro to the status of “human,” those racist politicians croaked “state’s rights” So it’s them I blame.  FDR’s New Deal may have paved the way for a bloated federal bureaucracy, but it was the segregationists that made it permanent.  “State’s rights” - a concept actually enshrined in the Constitution - became a slur and the states have essentially been stripped of their sovereignty any time the federal government desired to act.

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”  So reads the Tenth Amendment of the Constitution, part of the original Bill of Rights - right up there with Freedom of Speech and the right to bear arms.  But the racist reactionaries of the South, and little ways beyond, reduced the Tenth Amendment to oblivion.

Our government now, as shown in every election cycle, is a national government.  Every issue is a national issue.  Congress and the courts intervene at will in the daily lives of citizens who have no more interstate connection than watching TV made in California and buying food shipped in from the Midwest.  As a result of the nationalization of everything, the real priorities of the federal government are constantly being routed around the local concerns of every district.

The usurpation of law-making authority by the federal government caused two problems.  The first is that the states are reduced to small subdivisions of the federal government, the people in those states stripped of any independent personality or quirky culture which might interfere with the way the federal government wants the country run.  If the people of Massachusetts want to eliminate public schools entirely, that’s their little experiment to run.  If the people of Louisiana think that the drinking age should be 16, why is that any concern of the federal government?  

If the people of California think that the national ecological policy is a recipe for toxic air, why should the federal government be allowed to insist on less stringent standards for pollution generated in that state?  That last is the red herring, since California has repeatedly created tougher standards for pollutants and tailpipe emissions - but it is the exception which proves the rule, because it so clearly chafes the federal government that every possible attempt at sovereignty is challenged on the grounds that the federal Supremacy Clause is threatened by California’s willingness to allow medicinal uses for marijuana or clean water rules.

The second problem is more insidious.  Our federal government is so absorbed in local politics that national policy is ignored.  For thirty-five years, we have needed a national energy policy.  We have no policy. 

We have no national education policy.  We have a cabinet-level department of education.  We have billions of dollars in education funds.  We have no national policy for what to do with that money.

And my argument would be that where you can’t find a national policy, you shouldn’t find the national government.  If we can reach no consensus on what the national education strategy should be, what the minimum national standards should be, then the federal government should get out of the education business entirely.

We have serious national issues to resolve.  A national energy policy.  A national policy on renewing the nation’s transportation infrastructure.  But we have a Congress devoted to bringing as much of the national money into each member’s district - bridges to nowhere, museums of the most purely local interest, bicycle trails around town.

Tip O’Neill said that “all politics is local.”  National politics shouldn’t be.  The people of Petaluma, California don’t want their federal tax dollars being spent on a skateboard park in Lima, Ohio.  And vice versa.  But that is where a ludicrous amount of effort in Congress is directed.

Finally, because all issues are national issues, all elections become national elections - and all national elections become local elections.  Whether any individual member of Congress is for or against abortion should be as wholly irrelevant as whether any individual city council member is opposed to the war in Iraq.  More often that it is used, the phrase “it’s not your damn job” should be heard in politics.  

2008 in Review - Wall-E World (July)

I always wanted to be a political cartoonist, but I can't draw a straight line with a ruler.  Still my choice for best movie of 2008 (though I have a couple left to see), Wall-E provided my favorite editorial cartoon of the year - which I had to write instead.

Listening to an explanation of how sub-prime mortgages spun out of control, I found myself thinking about Wall-E.  What does a futuristic trash-compactor have to do with the credit meltdown?

In the old days - you know, the early 90s - lenders paid attention to the credit-worthiness of the borrowers they were loaning money to.  Historically, loans were held by the lender, only occasionally being assigned to another financing company who then held onto the loan.  As a result, there was very little “sub-prime” lending, because lenders didn’t want the risks caused by loans going bad.

But in the middle 90s, a new trend began to emerge.  A market was created for gathering loans from lenders and converting them into a different product – Collateralized Debt Obligations, among others.  Now the lender no longer held onto the loan for the life of the borrower, but sold it off.  The risk of the loan going bad passed out of the hands of the lender and onto the next holder.  Make a loan, make an origination fee on the loan, sell the loan and off-load the risk.  Pretty easy to see how volume lending and lax lending standards became common-place.

The investment house - Morgan Bear Wall-E, we’ll call it - would gather up a bunch of loans from all over the country and “package” them into the new product.  MBW would scoop up an armload of loans and compress it into a tidy cube, which became a building block.  Initially, these blocks were still very solid, because most of the loans being “bundled” were of good quality.  The less-attractive loans, the ones made of rubbish, were safely compacted into a tranche with enough solid loans that the whole block was stable.

The business of packaging loans, though, started heating up.  And so the original concept of packaging a few weak loans in with the rest got pushed aside in the demand for more loans to package.  Over time, what got scooped up wasn’t important. What was important was there was enough to scoop, and so more and more of the loans became the less-solid, rubbish kind –  sub-prime loans and stated-income loans and wildly optimistic adjustable-rate, teaser-rate and interest-only loans.  Like Wall-E’s earth, more and more rubbish piled up with the valuable stuff.  So more and more of what got scooped and compacted was rubbish.  But since MBW was less and less concerned about what was in each little cube, they kept scooping and packaging. 

Having taken individual loans and popped them into a little cube, they were now considered securities.  They looked like the earlier-generation of cubes, but there was absolutely no way of determining the credit-worthiness of the tightly-packed debt that made up the security.  In stepped the bond-rating agencies.  They were being paid to evaluate the cubes, but there was no history to support their ratings - and there was pressure from MBW, who paid the fee, to have the cubes rated as good, solid building blocks.  So they were.  

What was once a teaser-rate, interest-only loan, given to a borrower with barely enough income to pay the interest at the teaser rate, and secured by a house with no equity, was now transformed into an investment-grade security.  Loans that no reasonable investor would buy standing alone were given the illusion of stability by being packed into a tight little cube of other loans.  

Morgan Bear Wall-E would then deposit the newest block next to, on top of, and all around other blocks - their own and cubes made by others - until a nice, tall building was finished.  A nice, tall building made of rubbish.  Morgan Bear Wall-E would then find a buyer for the building.  The building had been given a seal of approval as being made of AAA-rated securities, and there were plenty of buyers. 

For a time, it worked.  After all, some of what was being scooped up and packaged was fairly solid building material.  Even the really unappealing loans don’t all go into default.  They still haven’t.  But as can be predicted when scooping whatever happens to be around in the trash heap, some of what got compacted into cubes wasn’t nice solid steel-type debris, but was more like compost.  Some of these loans were fraudulent on some level.  Some were merely wildly optimistic about the real estate market.  But they were not nearly so solid after all.  And so some of the cubes packaged by Morgan Bear Wall-E started breaking down.

The cycle of packaging more and more loans into investments almost assured the result.  As more questionable loans were made, MBW still snapped them up to make sure there was enough volume, and so more cubes were destined to be made of less than solid material.  When some of the cubes start to give way, it doesn’t matter that half of the cubes are made of sturdier stuff, the building is coming down.  With irony which should be remembered in the future, what was thought to be a means of reducing risk perversely became the reason that the market for real securities and for good home loans collapsed.  

There’s the old adage that says “one man’s trash is another man’s treasure.”  Somehow, everyone involved in the mortgage industry unanimously declared that there was no more trash, merely recycled treasure.  Pixar probably didn’t see this particular parable coming, but I can’t hear about the credit crunch, the crisis in consumer confidence or the rise in foreclosures without seeing wobbly buildings teetering on rotting foundations - and a plucky little robot, scooping up all those questionable loans and then popping out tidy little blocks of marketable securities.  Every economic collapse should have an iconic action figure.

2008 in Review - Bush But Better (July)

Frustration over the way McCain refused to step out of the shadow of the President led to this thesis "Bush But Better"  The problem dogged McCain all the way to the finish line.

John McCain has a serious problem in trying to run for President as the Republican successor to President Bush.  George W. Bush is wildly unpopular.  Bush’s approval ratings have been below freezing for over a year, and nothing he has done or said has moved the number. 

Barack Obama has repeatedly tried to tie McCain to the president, referring to McCain as Bush’s Third Term.  The charge has a certain shock appeal.  A clear majority of Americans are horrified at the thought of this Administration continuing one day longer than constitutionally-mandated.

And so McCain has tried to distance himself from George W. Bush.  He has not done it, though, with substantive distinctions between his policies and those of the President.  Rather he has been selectively critical of the executive (small E) failings of the Bush administration.  He has been to Louisiana and declared the President’s to Hurricane Katrina unacceptable.  He has announced that he would cease the use of Guantanamo Bay as a detention center. 

But on the substantive questions of the day, on the topics which by necessity will consume the energies of whoever is our next President, McCain stands shoulder-to-should with W.

Iraq.  McCain has been vocally supportive of Bush’s decisions - the surge, maintaining troop levels through stop-loss and shortened stateside rotations, and in insisting that the U.S. will not leave Iraq “until the job is done.”

Taxes.  The John McCain who opposed tax cuts in the first years of the decade has been replaced by one who promises to continue the Bush tax cuts and even extend them.  His opposition was based upon the argument that tax cuts without spending reductions was fiscally unsound.  Nothing has happened to make that argument untrue. 

Health Insurance.  To the extent that McCain has a plan, it is based on providing support to health insurance companies.

The housing crisis.  McCain urges restraint whenever it is suggested that government should take a hand to prevent wide-spread foreclosures or that government should better regulate the industry to prevent similar mortgage loan abuses.

Energy policy.  McCain favors drilling and opposes subsidies for energy alternatives.

In all these areas, McCain lines up right beside the President.  He is keen to distance himself from the President, but not too keen to actually disagree with the President. 

And so his rejoinder to the claim that he is running to be George Bush the Third is that actually he is running to be Bush But Better.  All of the same policies trumpeted by the President, without the hard edge of ineptitude which has marked almost every endeavor.  

Having learned from Bush’s mistakes in Iraq, McCain urges a significant troop increase in Afghanistan before it descends into another sectarian quagmire.  

Horrified by the callousness and bureaucratic bungling of FEMA, McCain loudly proclaims that no such disaster will occur on his watch.  He doesn’t explain what policy changes he would make - he isn’t arguing for a massive investment in infrastructure improvements - but he makes plain that the Bush Administration made a hash of Katrina and he won’t do that.

Bush But Better is all nuance and no substance.  McCain is betting that he can convince the voters that George W. Bush wasn’t wrong, merely a lousy executive.  Since McCain can’t tell us what policies he would abandon, his argument comes down to a distinction between the failed policies and failed performance.  The problem, though, is that the voters are trouble separating the two.

McCain would be far better served to highlight his policy differences with the President.  The people are in the mood for change.  There is positively no upside to trying to argue that the President is doing anything right.  McCain needs to highlight those areas, even if few in number, where Bush was not inept but mis-guided. 

He needs to forcefully argue for new directions.  Otherwise he will continue to be tarred by the President’s dismal approval ratings.  He needs to specifically address the President’s perceived weaknesses - his dogged pursuit of the most expansive possible definition of presidential power, his spend-thrift fiscal policy, his inability acknowledge opposing viewpoints, even his refusal to admit a mistake.

McCain needs to address each of these traits as well as the mis-guided policies which these traits have perpetuated.  This shouldn’t be hard to do.  John McCain, the maverick from Arizona, would have had no trouble highlighted the failings of the President’s policies and leadership style.  And in doing so, McCain isn’t required to repudiate any of his own policies - just reject the culture of partisanship, chide the President for being unnecessarily difficult to work with, and point out a few identifiable ways that a McCain Administration will depart from the current path.

Until he takes that step, though, he will continue to be dragged down by Bush’s unpopularity.

The longer the campaign goes on, the harder it will be for McCain to rebut the allegation that he is merely continuing the legacy of W.  Faced with an opponent who skillfully invokes the better angels of our nature, McCain needs to offer the people more inspirational than Bush But Better.  

2008 in Review - The Final Harvey Gantt review

From June to November, watching the Electoral polling maps was made more interesting by considering the Harvey Gantt Problem.  Only at the very last did it appear that Obama was going to win even if it was true.  This is the analysis I wrote on the last day before the election.

In this election, there has been substantial discussion of “the Bradley effect.”  Named for Mayor Tom Bradley of Los Angeles, the Bradley effect posits that polls are not accurate when it comes to electing African-Americans.  In the 1982 gubernatorial race, Bradley led in the polls and the exit polling suggested that he was going to be the winner, only to find out that the race went the other way.

The Bradley effect presumes something extremely cynical about people - that they will tell pollsters that they are going to vote for the African-American, but then they don’t.  My problem with all the speculation around the Bradley effect is that it is too cute.  It presumes that people will lie when there is no known reason for them to do so.  It presumes that the voter is going to think “well, I’m voting for McCain, but this pollster on the phone - who has interrupted America’s Got Talent to ask me who I’m voting for - might think I am a racist and that would be a bad thing, so I had better lie to him and tell him that I’m voting for Obama.”  It is too much to expect for people to go through that exercise.

One of the problems with someone positing a thesis like the Bradley effect is that some number of people jump on board without examining the original premise.  In this case, the problem is that Bradley was never the significant favorite - in the final weeks of the election.  He was favored in polls, but by small enough margins to be within the margin of error.  In my opinion, the Bradley effect has always been the wrong way to look at the question, if it remains a question, of why a black man cannot get elected in America.  The explanation to me is called the Harvey Gantt problem.

Using the current 538 composite polling for the map, there are three kinds of states: (1) where Obama leads by more than 50%, (2) where McCain leads, and (3) where Obama leads without reaching 50% (or neither candidate has a statistical lead).  The Harvey Gantt states - where Obama leads in the polls by less than 50% - are Florida, Missouri, North Carolina, Nevada, and Ohio.  The toss-ups, which under this theory all go to McCain, are Indiana, Montana, and North Dakota.  Interestingly, Pennsylvania - where McCain has invested a great deal of effort - and Virginia, which hasn’t voted Republican in a generation, are actually outside the polling for the Gantt Problem (which means that if McCain prevails in either one, the polls were way off and there is something to the Gantt Problem).

Under this calculator, Obama still wins the election, because he exceeds the 50% margin in states with a total of 286 electoral votes.  However, if that is the exact number, it suggests that there is validity to the Gantt Problem.

It isn’t clear that the Harvey Gantt Problem is real.  No one can hope that it is.  But if it exists, it says all too clearly that we still have a ways to go in overcoming racism.  An Obama victory doesn’t necessarily lay this particular thesis to rest, but it is definitely bright-line test to measure how far we have come.

So what was the real bottom-line?  Four of the five states where Obama led but had a less than 50% margin - Florida, North Carolina, Ohio and Nevada - all went for Obama; and the fifth, Missouri, was so close that a recount would have been ordered if those votes had been needed to decide the election.  With two of those states in the old segregated South, I think we can lay this hypothesis to rest.  I didn't say it was right, but I'm glad that I was wrong in thinking it might be.

2008 in review - The Harvey Gantt Problem (June)

The national media called it the Bradley effect - but I always disagreed, because that hypothesis was based on people actually lying to pollsters and that showed less respect for people than I think is deserved.  Still, it seemed a valid question to ask.  This is my favorite thing that I was wrong about in 2008.

Harvey Gantt was once a rising star in the Democratic party in North Carolina.  He was the first African-American admitted to Clemson University, graduating with a degree in architecture and then went on to earn a Master’s Degree from MIT.   After a decade on the City Council of Charlotte, North Carolina, he was elected and then re-elected mayor.  He was a dynamic speaker and ran optimistic campaigns promoting jobs and education.  In 1990 he swept to the nomination for the US Senate, running against Jesse Helms - the conservative icon and unreformed darling of the “Fergit, Hell” wing of southern politics. 

Gantt led in the polls, by as much as double digits, but without a majority, right up to the election.  And then, on election night came the surprising news that Jesse Helms had pulled out the win and was re-elected.  The final polls all showed Gantt with about 47-48% of the vote, and that is where he ended up.  Helms, though, rose from the low forties in polling to pull out a narrow victory, as all of the “uncommitted” votes pulled the lever for Jesse Helms.

In 2008, the question is whether Barack Obama has a Harvey Gantt Problem.  During the Democratic primary season, a debate went on about whether America is more sexist than racist.  The Harvey Gantt Problem is a test of whether America will elect an African-American as President, or whether there remains a subtle and hidden racial divide.  

The thesis of the Harvey Gantt Problem is this - until the polls reflect that an actual majority of people say they will vote for Obama, he will not actually prevail.  The uncommitted votes are going to go against him.

It wasn’t that people lied to the pollsters in North Carolina, saying they would support Gantt and then didn’t.  The 47% or so who said they would vote for Gantt did so.  The Problem is that in the privacy of the voting booth, everyone who hadn’t committed to voting for Gantt voted the other way.  Racism?  Perhaps.  But the psychological analysis of the electorate is for another day.  This question is presented because it is about winning an election.  Or more accurately, about watching to see whether what was once true in America still is.

Since the presidential election isn’t simply a popularity contest, Obama’s Problem isn’t merely about the percentages in the polls.  National polls are entertaining to read, and fodder for the commentariat, but the popular vote isn’t the issue.  Obama could get to 50% in the national polls, and in the election, without winning.  The Electoral College further sharpens the features of the Problem.  

In some ways, the Electoral College makes the thesis easier to track and easier to test in the end.  Current polling data places Obama in a national lead - but not a substantial one, and without a majority.  Recent polls, however, also show that about 35 states can be considered fairly certain to vote for one candidate or the other.  The remaining “swing states” are what this election will be about.  Applying the thesis of the Harvey Gantt Problem, if McCain can prevent Obama from gaining a majority in those states - even where the polling shows McCain behind - then McCain prevails in the election.

Another departure from the North Carolina race of 1990 is the presence of third-party candidates, who may draw votes from one candidate or the other, and so the uncommitted vote may actually go to a third party candidate instead of McCain.  It is possible therefore, for the thesis to remain correct - that Obama receives essentially the same percentage of votes as percentage in the polls - and for Obama to win a state where the uncommitted vote goes to Libertarian candidate Bob Barr.

One of the things to watch for will be attempts - whether by the Republican party, or by 527 groups working to defeat Obama - to subtly inject race into the election.  With an African-American running for the presidency, it is unlikely that we will see a “Willie Horton” ad.  The backlash would be swift and the condemnation universal.  But in a close election, where a few votes based on race could swing a state, something less directly confrontational may air.

In 1990, a TV ad ran in North Carolina called “Hands”   The ad showed a pair of white hands holding a sheet of paper - “you needed that job” intoned the voice-over, “but they had to give it to a minority.”  Crumple paper.  Harvey Gantt favored affirmative action - certainly no surprise for a Democrat in the South in 1990 - and the unsubtle point of the ad was that Jesse Helms would protect white folks from losing their jobs.  But “Hands” wasn’t just about affirmative action.  The social dynamics of 2008 are different enough that such an appeal would have a very limited audience - illegal immigrants are now the bete noir.  The ad was about reminding people to think about race.

It isn’t clear that the Harvey Gantt Problem is real.  No one can hope that it is.  But if it exists, it says all too clearly that we still have a ways to go in overcoming racism.  Seldom do we have such a bright test to measure how far we have come.  

I spent the summer and fall tracking the polls to see what the prediction would be using this hypothesis.  The next post, written the day before the election set up the final question. 

2008 in review - VP Math (June)

I decided to actually review the validity of one of the most time-wasting exercises each election cycle - the "geographically balanced" ticket.

Now that we’ve finally settled on presidential candidates for the Republican and Democratic parties, speculation naturally turns to the second spot on the ticket, and theories abound about why McCain and Obama should pick this or that candidate.  And these speculations always seem to revolve first, and sometimes solely, on the ability of the chosen veep candidate to bring in the electoral votes of his home state.

Like so many aspects of political punditry in this country, this game has no basis in reality.  The simple fact is that when it is time to tally up the votes in the Electoral College, the vice-presidential candidate has been close to irrelevant.

Conventional wisdom for the value of the vice-president in the general election usually looks first to 1960.  It is true that Texas went for John Kennedy and Lyndon Johnson, and so Johnson is widely credited with having carried Texas for Kennedy.  However, Texas in the 1960s was not the solidly Republican state it has become - Texas went on to vote for Hubert Humphrey in 1968. 

In 1968, Spiro Agnew on the ticket didn’t result in his home state, Maryland, going for Nixon.  In 1976, Walter Mondale’s Minnesota voted for Jimmy Carter, but Minnesota has been in the Democratic column in every election from 1960.

In 1980, Texas was listed as the official home-state of the peripatetic George Bush, though he was generally considered as being from Kennebunkport, Maine, a state that had also gone for Gerald Ford in 1976.

In 1988, the Electoral votes from Indiana, home state of vice-president Dan Quayle, went to Bush, but Indiana has been as Republican as Minnesota has been Democratic - only Lyndon Johnson in 1964 has carried the state for the Democrats since 1936.

In 1992, Tennessee’s votes went to Bill Clinton, the one instance of a state departing from its recent electoral history.  However, it is not clear that Al Gore’s presence on the ticket swung votes to Clinton, who haled from next-door neighbor Arkansas.  At the time, there was some amount of hand-wringing about the lack of wisdom shown in selecting a vice-presidential candidate who bought no geographic balance to the ticket.  As Clinton won several states in the South - Kentucky, Georgia and Mississippi - that had voted Republican just four years before, the impact of Al Gore on the ticket seems minimal.

The 2000 selection of Dick Cheney as the running mate for George W. Bush added no votes from Wyoming, a state which had voted only once for a Democrat (again Lyndon Johnson in 1964) since Harry Truman.  Joe Lieberman’s Connecticut voted for the Democratic ticket - as it did in 1996 and 2004.

The final straw in this argument comes from the last election.  John Edwards’ inability to bring his home state of North Carolina to the Democratic column in 2004 did not quite cost John Kerry the election.  Those 15 electoral votes, cast for Kerry, would have left him 1 vote short.  But North Carolina voted Republican, as it had in every election since 1976. 

What is puzzling is the persistence of this election myth, since the myth itself is based on a flawed premise, from right there in the bellwether election of 1960.  Kennedy won 303 electoral votes that year; even if Nixon had carried Texas, its 25 electoral votes would have left him short. 

And so, as speculation over the reasons why Senators McCain and Obama should select a particular individual will always list a handful of reasons, the least important one should be geographic.  While it isn’t clear what impact the vice-presidential candidate has on voters, changing the electoral map is clearly not one of them. 

2008 in Review - The Parting Shot (June)

By June, we were all exhausted by the Bataan Death March that was the Democratic nomination process.  The end of the Clinton dynasty couldn't come fast enough for some people.

The drumbeat began long before the final votes on Tuesday, June 3.  In March, when the delegate math made it clear that Hillary Clinton could not win the nomination by delegates awarded in the primary season, calls began for her to step aside, for the good of the party.

Throughout the Spring, the drum rolled.  It was accepted as fact that continuing this primary campaign was harming the Democrat’s chances for victory in November.  Despite the fact that record numbers of voters were turning out to cast votes, despite the fact that John McCain’s spent the Spring taking a victory lap - courting disaffected conservatives and having a shakeout of staffers, despite the daily attention to the Democratic candidates and thus Democratic issues, the drumming continued.  A lengthy primary was bad for the party and somebody - meaning Hillary - should quit.

Finally, we reached June and the end of the long march.  Barack Obama’s inevitable victory became his actual victory in the delegate count.  And with that came the last shots taken at Hillary Clinton’s Energizer Bunny campaign.  Early Tuesday, the voices started clamoring that Hillary owed it to the party, owed it to Obama, to make a concession speech and get off the stage.  As the week wore on, the drum rolled again - her delay between Tuesday’s vote totals and Saturday’s withdrawal speech were harming the party.  

This is nonsense.  What mattered was not when Hillary quit once the result was known, but how she did it.  And she did it right.

The noise-makers calling for a concession speech on Tuesday were simply wrong.  After 17 months of running for the Democratic nomination, wasn’t Hillary entitled to a day to digest the disappointment and gather her thoughts and her emotions?  And is it only me, or did the clamor about her failure to graciously accept her defeat seemed tinged with a little too much glee?

Part of this is our current American cultural desire for clean breaks and clear decisions.  Too much is expected to be black-and-white, cut-and-dried.  As the media culled the punditry and politicos for sound-bites about how Hillary could dare to offend Obama by hanging around on Wednesday and Thursday, you could almost hear a clipped British accent saying “You are the weakest link, good-bye.”

All the clamor for a quick exit missed the real point.  This primary season came to a close with Hillary winning 9 of the last 16 contests and some by whopping margins.  The Democratic party was threatening to splinter by the end, with the rancorous Rules Committee meeting over the Florida and Michigan delegations, and far too many voters were saying they weren’t sure they would vote for Obama in November.  With the nomination ultimately in the hands of the “superdelegates,” she should have spent the week calling each and every one and asking “are you sure?”  

Analysis in the final weeks also picked up a theme of disappointed, and potentially disaffected, women voters, who felt that sexism played a little too large a role in Hillary’s demise.  There may be some truth to that charge, but true or not, it had the potential to create a split in the party and again was heard the sentiment that some of those voters might stay home or vote for John McCain in November.

Hillary Clinton was the first choice of half of the people who took the time to go to the polls and vote in a Democratic primary.  She clearly had the ability to cripple Obama’s candidacy, by signaling that voters should not accept Obama as the legitimate Democratic nominee, setting up a shadow third-party - Hillary supporters unwilling to support Obama.  Some pundits proposed that she may have spent the week doing just that.

But on Saturday afternoon in Washington, Clinton put all that to rest.  Her concession speech said eveything which Barack Obama could hope to hear.  The only way she could have been more clear was to have said “To everyone who is thinking about  withholding your vote from Barack Obama, I will personally beat you with a baseball bat if you do.”

In some ways, this speech showed again why so many people were eager to vote for Hillary Clinton.  She touched on the main themes of her campaign as the main themes of the Democratic party, in the kind of forceful language that left us wondering where such eloquence had been in January and February when she needed it.  She made the case for electing Barack Obama in November as gleefully as she had made the case for herself, and she pledged to do everything she can do to make it happen.

The Hillary-haters, and there are many, will continue to look for the hidden agenda.  Rumors of her lust for the vice-presidency abound, and may be true.  But Clinton did not spend the week negotiating conditions for her withdrawal from the race, as so many speculated.  She spent the week getting used to the idea that she was not going to be president, and then crafting a speech which would eradicate the doubts about her loyalty to the party.  

The final weeks of the campaign highlighted how tenuous Barack Obama’s grip on the electorate is.  The voters of West Virginia, for instance, have serious problems with his message, and possibly with his race, and turned out in droves for Clinton.  But their willingness to vote for a Democratic candidate at all is a hopeful sign for the election in November, if Hillary Clinton matches her rhetoric with muscle in the coming months.

2008 in review - The Torch Relay (April)

The story of the Olympic Torch Relay was my favorite international absurdity of 2008.  Let's laugh at it again.

I can’t quite decide what is the most ludicrous aspect of the global public relations nightmare that is the Beijing Olympic Torch Relay.

First of all, why are we having this event in early April when the Olympics don’t kick off for another 120 days.  What kind of symbolism is the Olympic flame leaving Athens four and a half months before the Olympic Games, and taking a plane to Beijing?  If the “official Olympic flame” is already in China, what happens now?  Does it just sit there hissing like the time your uncle Benny forgot to turn off the gas grill and you went out the next morning to find all the Gladiolas lightly toasted?

But forget that part for now.  When did carrying that burning stick become such a symbol of national pride for China.  It’s not their torch.  It’s the Olympic torch.  Shouldn’t Juan Antonio Samaranch or Hootie Johnson or whoever the hell is in charge of the Olympics these days be deciding where the torch goes, and generally saying that the Chinese will get the torch in August when -whether they’ve gotten rid of the smog or chucked a few thousand dissenters into General Tso’s Gulag or not - they actually get around to hosting the Olympics?

The next head-scratcher for me is the vehemence of the protesters, in England and France, for the cause of Tibetan independence.  For starters, since when did the French hit the street to protest the oppression of anyone but the French?  And while there are always agitators for every cause, how did they decide that the flashpoint for this little fiasco would be Tibet.  It probably isn’t in the top five of crimes perpetrated by the Chinese government.  What happened to their cozy sponsorship of the Sudanese genocide in Darfur?  The human rights abuses in their own country? The crippling poverty in the countryside?  The wholesale censorship?  There are plenty of reason to hiss at the Chinese; shouldn’t we be using them all?

The comedy from today’s “torch relay” in San Francisco abounds.  The phrase that lingers longest is still “the only portion of the relay in North America.”  This big, important world event called the Olympic Torch Relay - and it must be a big, important world event because the people doing it are acting like anyone cares, and the people using it as a platform for protest are acting like anyone cares, and the media are covering it like Paris Hilton was carrying the torch while riding a horse bareback - this big, important event comes to North America for a six-mile trip around the Embarcadero?  And that’s it?  Not to sound too jingoistic here, but are you freaking kidding me?  Never mind the part about the US being the world’s only remaining superpower and the straw that stirs the drink in virtually every endeavor, let’s look at it this way: as the Olympic Flame circles the globe to encompass all mankind in the warm “I’d like to teach the world to sing” glow that is the brotherhood of international sport, North America, one of only seven continents, something like 15% of the world’s landmass, gets recognized by a six-mile stroll of Fishermans Wharf.  

The Canadians and Mexicans should be pissed.  They don’t even get sloppy seconds on the continental tour.  And isn’t there something sneakily racist in having the North American segment run through Chinatown, USA?  Maybe I’m just being white here, but this smacks of  “sticking it to the Man.”  I mean, New York has a very nice Chinatown too.

What kind of relay hops from London to Paris to San Francisco?  Doesn’t relay suggest a lengthy chain of hands passing the Olympic Flame across continents?  This sounds more like the Olympic checked luggage derby.

The sight of the Olympic torch being protected by a few hundred police and security in London was funny.  The sight of the Olympic torch being doused and toted across Paris in a bus was laughable.  But the low point for the week was reached in San Francisco when the torch took a different route around the city and then a ceremony was canceled entirely.  

The symbol of the Olympic “Movement” and all of mankind’s highest aspirations for fair play and brotherhood sneaks around the city in a private ceremony.  There was a real “we’re going to carry this damned stick around San Francisco for a while and it will too be important” sound to the whole event.  It a little like finding out that the national anthem will not be sung at home plate before the game but was actually whistled by a guy in the tunnel behind the visitors dugout about twenty minutes ago.  We did it and that’s all that counts.  Symbolism be damned; we’re not going to allow our moment in the sun to be taken away, unless we take it away ourselves.

And in the wake of several consecutive appearances of the Olympic torch in circumstances that could charitably be called unfortunate and could accurately be called acutely embarrassing, there has been a proud stand taken by Chinese and Olympic officials that the torch relay will not be canceled.  Because cancelling the torch toting would be a loss of honor; unlike the lengthy airplay given to the torch being doused and carried in a bus or the farce of holding a ceremony that is so tenuous that the time, place and manner are all changed to avoid having many people know it was going on.  Why not just bring the torch in a handful of cities in the dead of night and ride around on a bicycle for a couple of hours?  That is at least as symbolically significant.

But I am not calling for the torch relay to be canceled.  You can’t give in to blackmail.  I advocate just having the torch-bearers carry right along, without layers of security.  And every time the peace-loving, non-violent protesters trip the torch-bearer to the ground and rip the torch from her hands, the officials would pick her up, dust her off and hand her another cheap Chinese knock-off of the patented Olympic torch to carry down the path. 

2008 in review - The Credit Crunch (March)

Since this blog didn't begin until the end of 2008 (thanks for the push, Ben), all of the good stuff I wrote before then has been composting on the hard drive.  So here as a series of posts are commentaries that were written through 2008.

In March I took my first look at the evolving credit crisis:

The national media recently made an interesting discovery - that the current financial crisis is actually impacting the economy, that Wall Street’s losses and the subprime mortgage debacle are actually beginning to make people buy less and talk about feeling less secure.  Stories have begun circulating about how the dicey economy is causing people to cut back on the size of their weddings or where they shop or maybe even, perish the thought, not buy that new car.

Now that the shopping habits of such exotic places as Knoxville, Tennessee are being examined, I think it would be a useful service to Manhattan and Washington to explain why these folks are behaving so.  After all, just a few years ago the dot.com bubble burst and stock prices went into a tailspin, but no financial panic ensued.

My explanation: this time, it’s not just a night in a casino.  It’s real money.

The dot.com boom and bust were entertaining stories about capitalism and the economics of hope over experience, but they did not resonate far beyond the stock market and the small alien world of Silicon Valley.  The rest of the economy, where people make things and sell things and buy things, kept going.  Some paper wealth got wiped out, but only the very few people whose monthly income actually depended on the stock market or the dot.com companies were genuinely shoved to the curb.  People watched their 401k nose-dive, but it wasn’t real money.  It was gambling money.

Real money implies real consequences.  Real money is the reason we don’t all splurge on a spa retreat or golf vacation or trip to Kenya monthly.  Real money is why we clip coupons and compare prices and want prescription drug coverage in our health insurance.

Gambling money isn’t real money.  It’s entertainment money.  Once you convert that money to chips, it isn’t your money anymore.  You bought a night’s entertainment.  Only fools and gambling addicts bring their house payment to the casino.  You never bet what you can’t afford to lose.

Money in stock market, for most people, was not their house payment, and so when the market dropped, it hurt like a losing your chips at the blackjack table.  You wanted to win, and for a while you did real well, and you kick yourself for not cashing in at the peak.  But it wasn’t the house payment.  It wasn’t real money.

This time, though, millions of people have discovered that real money is on the table.  (I’ll not torture this analogy further by noting that almost no one understands the game being played - that’s a commentary for another time.)  Suddenly across America, people have discovered that what they thought was financial planning actually involved bringing their house payment to the casino.  It turns out that we’ve all been betting that home values would keep rising.

The recession, and the roller-coaster financial market, is all about home values and monthly mortgage payments.  Consumers bet on continued rises in value to allow them to refinance into a more affordable monthly payments and the financial world bet on continued rises in value to protect the collateral on which the loans were made.  The folly and the blame are for another time.  The impact is clear - untold millions of Americans have far too much riding on the bet that the value of their home was going to keep increasing.  Collectively, we forgot not to bet what we couldn’t afford to lose.

“This is the bedrock asset for the lion’s share of the population of the United States,” Robert Barbera, chief economist for the trading and research firm ITG, said earlier this week in The New York Times.  “It’s not like dot-com stocks, where I bought Webvan for 1,000 times the imaginary earnings, and now it’s worth nothing but I go and have a beer.”

The dot.com bubble didn’t involve real money.  Stock prices fell, and uncertainty chilled the economy for a spell because the “new economy” suddenly was found to have the same rules as the “old economy” - such rules as the purpose of business is to make money.  But it was short-lived.  At the end of the day, most people could continue on exactly as they had the day before their stock tanked.  Not this time.  

Even people who are not on the verge of foreclosure find that the security which they felt is slipping away.  For too long, Americans have used their houses as virtual ATMs – whether they were buying necessities or luxuries or borrowing to send their kids to college or to re-finance the last round of purchases and school tuition.  

Suddenly, because the lenders at the very top of the financing chain no longer consider every house, or possibly any house, to be sufficient collateral - buyers have to come up with more cash, and sellers can’t expect eager buyers to compete for their homes, and only fools and addicts think that re-financing can get them ahead of the game.