Mumbai Timeline

Reuters has stitched together a partial sequence of events of the guerilla attacks on Mumbai, designed both to kill randomly and receive massive Western media coverage for doing it.

They change nothing about the underlying logic now controlling world events. The logic is sustained by the way leaders sustain conflicts for decades at a time to stay in power, and the grotesque inequality, suffering, and brutality that go with it. The attacks and the carnage simply express that logic.

The carnage is of course completely disgusting and unjustifiable. I feel not only for the victims but for everyone who loves Mumbai in part because it seems like the open and hospitable crossroads of India. And there is almost nothing I abhor more than highly armed religious idiots ushering in the kingdom of heaven by drenching the earth in blood.

But that doesn't mean we have to be stupid ourselves, and regress to the infamous Friedman culture war between the "Lexus" and the "olive tree." A NYT op-ed set it up this way - a Mumbai native defines Mumbai as the center of Lexus culture in India, as gloriously free commerce joining the peoples of the world. He continues like this:

the best answer to the terrorists is to dream bigger, make even more money, and visit Mumbai more than ever. Dream of making a good home for all Mumbaikars, not just the denizens of $500-a-night hotel rooms. Dream not just of Bollywood stars like Aishwarya Rai or Shah Rukh Khan, but of clean running water, humane mass transit, better toilets, a responsive government. Make a killing not in God’s name but in the stock market, and then turn up the forbidden music and dance; work hard and party harder.

This comment confuses wealth and investment-banker partying with social development for all. It then swallows "dreaming" by this morass. If we don't see religion, even the murderous kind, as about a form of dreaming that is neither about mountains of money nor the good society, then we understand exactly zero about religion.

That's one problem. The other is that Mumbai and India in general - and the United States - are monuments to the nightmarish gap between accumulating wealth and creating the good society. The gap today is vastly greater than that which produced the cycles of violence one can read in the Old Testament.

Thus it's really dumb for the NYT columnist to define Mumbai as a temple of progress and not as also at the same time a swamp of unspeakable squalor that drowns the lives of untold millions. I've written before about how the historical Jesus understood the community of the world that could arise in the absence of tyrants and moneylenders - the heaven-on-earth I associate with the all-welcoming Jesus of the tympanum at Vezelay rather than with the weigher-of-souls at Autun. There's no excuse for our not being at least this intelligent, and seeing nightclub globalization as an atrocity visited on tens of millions of people whom we do ignore completely until they fire their guns.

The Opposite of Transparent

The NYT had a good piece about this week's biggest bailout - the $800 bil for consumer and mortgage loans. It notes that "the most troublesome unknowns are how the maze of protections for investors and consumers will change economic and political behavior in the future."

The lack of transparency is a political issue, since public money is being used with no transparency or accountability to prop up private interests, nearly all of whom were active agents in causing the problems for which they are being bailed out. The injustice is plain. Peter Cohan at Blogging Stocks offers the best short take on secrecy's motives.

Others are noting that the feds are letting banks do whatever they want with the money, which doesn't include actually lending it to people. So the failure of the bailout to set lending standards and write rules for bankers explains why the financial handouts are not helping the real economy, where housing prices continue to fall as credit stays hard to find.

An even smaller number of commentators are making an equally crucial point: the deliberate concealment of bailout distributions is not maintaining confidence, as the feds claim secrecy does, but keeping investors and bankers in states of fear and doubt. We have no idea which banks are getting what, "we have no idea what banks are doing with the money being loaned to them," as Bloomberg's Editor in Chief Matt Winkler noted a couple of weeks ago." He concluded that "without transparency the market is going to have difficulty recovering."

Not only is transparency just and democratic - it would also be more effective at saving the real economy from enormous pain.

Surface to Air

A day without a bailout - Happy Thanksgiving!

Some kind of new model army is beseiging the wealthy foreign-oriented parts of Mumbai. I watched coverage from Lyon in four languages, including Arabic which I don't understand. (Arabic is the best singing language ever, but that's another story.) Nobody knows anything. And its still going on 24 hours later.

This is very interesting - the capacity of small organized guerilla groups to disrupt everything in modern, highly armed, nuclear security states like India. I'm sure it's making poor oppressed people everywhere pay attention. Maybe they will attack actual leaders for a change.

Today in Bretagne farmers set fires outside of the supermarket chains that force unliveable prices on them. In Paris, CNRS researchers occupied the offices of the main research agency, which of course is trying to downsize them.

One among various bad things about these random, bloody attacks on non-combatants like the one in Mumbai is that they help billions of people believe that it's the little people, the poverty-stricken fanatics from illiterate hinterlands who kill. These cases are in fact a tiny minority of the death dealt out for political or economic reasons.

So Mumbai reminded me of former-Soviet Georgia, and the moronic military clash last August, stage-managed by leaders in Tbilissi, Moscow, and Washington DC. One 48 year old man who fled Gori with his family was interviewed by the French daily Liberation. My translation of some of the remarks of Merab:

All this, it's the fault of big-time politics. Before, we all lived very well together, I [a Georgian] had Ossetian friends. We celebrated our births and deaths together, we married each otehr. It's true that after perestroika, the Ossetians started to have nationalist ambitions. The Russians, who helped them in secret, complicated everything. They had money and arms that crossed the frontiers. Everything got worse when Zviad Garnsakhourdia, the first Georgian president, came into power.

To keep from making the same mistakes following our leaders, learn the backstory from guys like Merab.

One Retread Too Many

The incoming admin- istration had already been putting too many old Clinton tires on the Obama Express - Larry Summers, Tim Geithner, etc. Now Obama has found a pre-Clintonian retread - the 81-year-old former Federal Reserve chairman Paul A. Volcker - who is going to chair a new group called the Economic Recovery Advisory Board.

The board sounds very New Deal, but Volcker is not a New Deal guy. His main accomplishment as Fed chair was shock therapy - the brutal elevation of that took the prime rate - the rate at which banks lend to each other overnight - to 20%. The idea was to "break the back of inflation" by, in reality, breaking the back of the economy. He helped send unemployment to 11%. Crude and destructive. Volcker also helped Nixon unravel the Bretton Woods conventions on currency exchange, which has been a gold mine for speculators and destabilizing for everyone else, particularly developing nations. Volcker has never shown any interest in social development or social reconstruction. He is on the face of things a terrible, misguided choice for a board focused on economic recovery.

It looks like the only Clintonian big wheel not to get a new White House job will be Robert Reich, former labor secretary who was in fact the only committed progressive in Clinton's economic inner circle. He also has a blog, and I read this to mean blogs are very bad for political careers.

Reich's deeper liability is that he has always advocated the development and the protection of new-wave labor, by which he mostly has meant white-collar brainwork, the work of what he called "symbolic analysts" in his classic book "The Work of Nations" (1991). Reich was a Clintonian darwinist about the inevitable decline of manufacturing in the face of allegedly higher value-added activities like architecture and radiology - both of which are being offshored as well. But Reich was honest about the stratification and inequality and evil social fallout of this system - the last long dystopian section of WN makes the book still worth reading.

Reich also thought democratic governments could choose policies that would maintain - or at least valorize - social solidarity. The good thing about solidarity is that it sustains a capacity to renew the workforce rather than simply dumping into low-wage dead-end jobs. If Obama doesn't agree with his we are really screwed.

Obama obviously wants to assemble a team of well-connected insiders so that Washington doesn't freeze up on him when he tries to do something. I see the point here. But there is a wider range of insiders than the ones he is picking from. The Business Roundtable is a little too content.

These appointments are also scary because of the sheer multiplication of economists and economic perspectives. The White House has both a Council of Economic Advisors (to be headed by a UC Berkeley economicst Christina D. Romer), and a National Economic Council (Summers). There is a White House Office of Management and Budget (to be headed by Congressional Budget Office director Peter Orszag). There is a chief economic advisor, who will be U of Chicago professor Austan Goolsbee. There is also a Domestic Policy Council, and multiple other economics jobs.

One problem with this redundancy is that economics has a profound bias in favor of market-like mechanisms and against political institutions. The profession has been instrumental in creating the mess we're in. It's hard to see that any of these people have the ability to put society back in the mix.

Pressure for any kind of New Deal is clearly going to have to come from outside. But be ready to dodge shredded retreads.

Ridiculous Obameconomists

I read every page of today's Financial Times while eating dinner in the Brasserie 1904 in Grenoble. Did I find a single moment of insight coming from Obama's new-old economists. Sadly, I did not.

I watched Grenoble's Tram A and Tram B glide by every few minutes, and noted for the hundreth time that rich America has nothing like this, and my hometown Los Angeles will not have multi-class, multi-racial public transit in my lifetime. I will have to come to Grenoble to see working trams - or 200 other cities in Europe. Why?

I thought about trying to find the great Addams Family Thanksgiving scene on You Tube.

I thought about the students I met with today at our study center, and about how one I especially like had exactly 20 Euro with which to go to Spain for fall break - until I loaned her 100 E, which she paid back the next week with 5 twenties.

I thought about another student in Lyon who I met with last night for an hour or so. She started in the beginning French program and clawed her way into being good enough to stay for the year. She has expenses of about 1100 Euros a month, or 12,000-14,000 a year - not too comfortable or relaxing, really a poverty income. What about her income? She has several loans and grants that give her $450 a month. She has a monthly shortfall that means that she will have to borrow another $6000 to stay the rest of the academic year. What do you normally do, I asked? "I work - 30 hours a week." As a full-time student.

Citibank has $309 billion in toxic assets. It gave the govt $27 billion in preferred stock. That is around the maximum amount it can lose on its toxic assets ($29 billion). The government insures the rest, meaning it is exposed for 90% of the losses. The gov gets dividend payments - but no control of Citibank assets or decisions.

So here's how it works. Make up a bunch of assets and sell them to people desperate for higher returns. Earn 20% plus each year in an economy that grows at 1/10th the pace, while 80% of wages don't grow at all. Pay your top people tens of millions a year. Militate the entire time in a weird, tireless way against worker and environmental protections, wage increases, pension funds, unemployment insurance, and government programs. Predict rising prices forever. When suddenly prices fall, and you turn out to be wrong in fact, wrong in theory, and the BIGGEST LOSER OF ALL TIME - go collect $309 billion from the government. Give them $29 bil in exchange in "stock" - i.e your own special printed money. No strings. no apologies. No agreement to pay actual taxes. no ownership, compensation, nothing. Just a bunch of comments about how the future of civlization depends on you getting free government handout money.

I wish I could give my student $309 for her rent in Lyon - 309 billion I mean.

Why say it myself when others have said it for me?

Essential reading: great roundtable on Democracy Now - Bob Kuttner, Michael Hudson, and Naomi Klein.

Bloomburg: the tab is already $7.7 trillion. With no bailout for things like pension funds.

That was the weekend. Today was another day, and another $800 billion bailout - 600 bil more for Fannie and Freddie.

I'm sleeping up under the roof in a hotel in Grenoble. There isn't a sound. I wish it would snow.

Defeating Trickle Down Democrats

OK so we have Larry Summers in the White House itself rather than down the street at Treasury. He's going to head Obama's Council of Economic Advisors. I'm not relieved.

Later on I will say more about Summers' recent ideas. But what has to be said now is historical: he was a central player in the Clinton administration, and the Clinton administration presided over the continuation and the acceleration of the economic inequality boom in the United States. It was amazing that Clinton economists like Summers either didn't know or didn't care that wages were absolutely flat for 60-80% of the population while income for the top 1% and top 0.1% doubled or tripled.

Actually, I think the story's worse than that. The Clinton economists did care that inequality was increasing, and they liked it. They agreed with the Reaganomic view that capital belonged in the hands of the rich because they invested and spent more effectively. The Clinton economists made no obvious effort to increase wages or regulate banks and non-bank investors. They are the people that wound up the mechanical bankers and let them decide who to give our money too and then eat the rest of it.

Summers will make sure that investor interests are everlastingly at the table when the government funding cards are being dealt. He may help them to get two or three cards while everyone else gets one. The Wall Street Journal announced Summers' appointment in the same piece that suggested that Obama's plan to raise income taxes a little on the $250,000 plus bracket was going to be delayed to 2011.

So what would be better than Son of Clinton & Summers?

1. big big bailout - for society. Social reinvestment on a giant scale. More confirmation that size matters from Bob Kuttner.
2. quarantining and disinvesting from speculative finance based on the social value of what it investment supports. Nomi Prins reminds us that backing "consumer-oriented banks" was one of the good parts of the New Deal.
3. getting investment capital into the streets. Do this by directing capital to local governments, municipalities, and states that propose specific projects of social development and mass benefit.
4. find these funds both through taxpayer-funded government debt, and through a "capital recovery" project that taxes past windfall profits in the financial sector. This would be a version of the "negative bonus" some banks imposed on employees who got huge bonuses in one year by staking out unstable positions that would lose money in the following year.

The Clintonians are heading towards 1. They won't go for 2-4 -- without a lot of help from us.

Keep Your Head, Write Some Theory

This was not a good week for Planet Economy.

The Financial Times reports that mass layoffs came to 80,000 in just five days.

In the same paper, financial editor Martin Wolf summarizes the bad bad bad financial indicators.

This week, Citigroup lost half its market value.

After Thursday's massive plunge, Wall Street greeted the appointment of New York Fed chair Tim Geithner as Obama's Treasury Secretary with a festive one-day increase of about 6.5%. Is it because the Markets were as worried about Larry Summers as I was? There was some certainty-effect - the news was finally in. Geithner is what we could call smart-orthodox. He came up under Summers in Treasury in the late 1980s, has lived abroad and seen other systems, has criticized aspects of the paradigm without breaking with it.

For example, FT reports

In speeches going as far back as 2004, Mr Geithner praised innovations in finance such as securitisation and globalisation. But at the same time he warned that these developments, while reducing the probability of a crisis, could exaggerate the downside if one ever did occur.

Plus, "Within the Fed, Mr Geithner has a reputation as a fiercely competitive sportsman." So they don't really know anything. I would say he's like Obama himself: an ecumenical insider - an insider with the ability to see what the outsider thinks, without actually responding to it.

The markets continued to refute the existence of "market rationality." Or more accurately, the markets revealed the panicky followership that has always been the real meaning of "market rationality." Leaving aside the Buffet-exceptions, investors imitate other investors, going up or going down. The reason is simple: the "market" controls the value of their position. If they don't follow it, they lose out (going up), or lose (going down). The master gesture here is imitation. Look at the volatility boom in the chart below (from Yahoo Finance). Increased risk has made the logic of the market more dramatic - but the mass of the markets always simply followed the trend - wherever it led.


I have never experienced that apparently widespread gut feeling that markets are the most effective way to allocate resources. The markets are a complicated network of financial institutions that broker and mediate all individual contact with them. These institutions, like all brokers, take a piece of the action. Commissions in high-end investment banking were famously huge - one standard was 2% of assets under management as an automatic fee, and 20% of profits. In 2007, the financial sector produced 40% of all the profits of that advanced industrialized country known as the United States. Often capital got moved into exciting new things that needed it. But the price of this capital was much higher than we think.

We cannot assume money wouldn't have gone to those things under a leaner and more democratic system, in which public policy debates shaped resource allocation, as they may do with Obama's infrastructure plan.

Deregulated markets have been a good way for the best - the best-connected? - brokers to get very rich. After 1980 they were a good way for the middle classes to feel in this money. It's a seductive feeling. Small investors grew their money through a variety of brokered instruments in a 20-year bull market - a bull created in large part by the mass obligation to stay in the action, not so much to buy and hold but to buy and sell. The bull also arose from the action - and the expectation of action - that spread from Wall Street to Main Street as companies converted pensions into personal investment funds. The bull continued with massive leveraging - buying assets with borrowed ones, sometimes in a 30:1 ratio of borrowed to owned, or even more. This ran the price up on most things. It created the mass expectation that the price could go up on anything. Leveraging, cheap and easy credit, high fees, new money from the market's munchkins - all this was enabled by rising prices, which enabled prices to rise even more.

I was always impressed by the absence of critiques of rising housing prices. Huge portions of the population were shut out from home ownership - or forcibly relocated from more to less desirable areas by cost. Not that I don't like Las Vegas, but why do half of my African American students at the University of California, who grew up in places like San Francisco or San Pedro, now have to go to Vegas to visit their parents. But the critique was stifled by the combination of sprawl development - low-cost outland development - and almost-free credit, deliberately cheapened by Fed Chairman Alan Greenspan.

The critique should have been part of the pricing of housing, credit, and stocks. Some kind of social discourse should have been in the mix. One way of putting the problem is that the theory that markets are both free and self-regulating was factually wrong - as Greenspan himself now admits.

We aren't close yet to understanding the mass psychology of markets - or the more basic fact that markets are mass psychology. When we do, the Age of Markets will indeed be over.

The Death Trip Continues

The Marshall Plan that rebuilt Europe cost $115 billion in today's dollars.

The New Deal cost $500 billion, and it rebuilt the United States - actually built the place for the first time in its country-ass, lonesome-mile, wagon-train across the burning prairie history.

The War in Iraq cost about $600 billion in these terms - or $3 trillion according to Joseph Stiglitz.

See the great slideshow at CNBC. Then shed a few tears.

The Great Bank Bailout - 4 trillion dollars. Cry yourself a river. Then get pissed and do something for a change.

Today in Place Bellecour here in Lyon the cops didn't police a big protest - they led it. They dressed up a mannequin in a Police Nationale uniform and full headgear and hung it by the neck from a giant crane. The strangulation of public services by a blind unseeing grasping state shovelling money to the top of the ladder - or some such symbolism. Their speaker said "the great eye of Mordor sees all, and means evil to us." Well actually, he said, "reductions, limitations, privatizations, destructions of public services, we accept none of this, and we will fight it.

Meanwhile, Sun Microsystems laid off about 6000 people, bringing the number of layoffs in the tech sector to nearly 60,000 in the last 2 1/2 months. Startups - the "jobs of the future" - are cutting deeper. The auto industry, which still accounts for about 2.5% of the US economy, has laid off 100,000 people since January. And fricking Citigroup is laying off 50,000 in one swoop.

This is of course the middle-class past present future, getting whacked. Where's the peep?

Bailout leader Henry Paulson objected to the idea that bank bailout money be used to help ease home foreclosures. This prompted Rep. Barney Frank to say "The fundamental policy issue is our disappointment that funds are not being used out of the $700 billion to supplement mortgage foreclosure reduction," Frank said."

Naomi Klein has been doing a great job of explaining how the crisis is being used as "shock therapy" to force changes that before would have been unacceptable. I was struck yesterday by how she clearly feels the window on reform is closing, and that the crisis caused by the wealth-making practices of banks is being used to make even more money for the same banks.

The process is staying crooked, as Klein pointed out:

really what [Washington is] saying is, we can’t afford to enforce the law, because there is an economic crisis, that somehow, because there’s an economic [crisis], legality is a luxury that Congress can’t afford. That is a very scary statement. But this . . . bear market, has the temperament of an ill-tempered two-year-old. I mean, it throws temper tantrums whenever it doesn’t get what it wants, whenever it is frightened.

That's pretty much how it will be run until the loyal henchmen derail it.

Gates Foundation Puts New Focus on College Completion

By BEN GOSE

Wednesday, November 12, 2008

Seattle

The Bill & Melinda Gates Foundation plans to spend several hundred million dollars over the next five years to double the number of low-income young people who complete a college degree or a certificate program by age 26, foundation officials told an exclusive group of education leaders who gathered here on Tuesday to provide feedback on the ambitious plan.

If successful, the new postsecondary program would result in an additional 250,000 people per year with some type of higher-education credential. And it broadens the foundation's already-generous spending on education, which previously has focused on secondary schools and college scholarships. Over all, the foundation plans to spend $3-billion on education during the next five years.

The foundation announced its new campaign at a conference attended by about 100 people, including current and former governors, prominent business executives and school superintendents, and Education Secretary Margaret Spellings.

The new effort will initially focus on community colleges because of their relatively low tuitions and open admissions policies. Foundation officials said they would consider expanding innovative approaches to improve college-completion rates, such as using technology to allow a student to move quickly through remedial work, and forgiving a portion of debt each year for students who stay in college and are making progress toward a degree.

In a speech on Tuesday, Melinda Gates, a co-chair of the foundation, pointed to data from the federal Bureau of Labor Statistics showing that more than half of all new jobs in the United States will require more than a high-school diploma. Only about 20 percent of low-income black and Hispanic students earn any sort of postsecondary credential.

“Completing high school ready for college is a key transition point in the path out of poverty,” Ms. Gates said. “A second transition is earning a postsecondary credential with value in the workplace. If young people fail to make the first transition, it’s unlikely they will make the second. If they fail to make the second, it’s likely they will be poor.”

Hilary Pennington, the Gates official who is leading the effort, said the foundation would announce a small initial round of grants next month, and that within a year, it would select eight to 10 states in which it will focus its work for the next three to five years. Grants will probably go to networks of institutions and organizations, rather than to individual colleges, she said.

Regret at Being Left Out

The foundation took some risk by presenting its general ideas to a high-profile audience before announcing even a single grant. Ms. Gates asked for “candid feedback” during sessions moderated by the journalist Juan Williams, and the foundation received plenty.

Some conference attendees wondered why the foundation—which has by its own admission achieved mixed results in its eight years of trying to improve high-school education—wasn’t spending more on elementary and middle-school education, rather than college completion.

“We made a choice,” said Bill Gates, a co-chair of the foundation and a co-founder of Microsoft. He said the foundation was motivated in part by new approaches that are helping students make it through certificate programs and community colleges.

University officials who attended, including Charles B. Reed, chancellor of the California State University system, urged the foundation to broaden its initial focus to include four-year institutions. And representatives of for-profit institutions grumbled that the foundation’s age cutoff—26—would exclude the many proprietary institutions that focus on adult learners.

The foundation has hired Thomas J. Kane, a professor of economics and education at Harvard University, to oversee an initial research effort. Vicki L. Phillips, the foundation’s director of education, said it would spend $500-million over the next five years on data and research related to college preparation and completion.

The Gates Foundation, which gives away $3.5-billion a year, far more than any other American foundation, is already an important force in education. It has spent $4-billion over the past seven years on efforts to improve high schools and on scholarships for low-income minority students (The Chronicle, August 8, 2006).

'Big and Bold' Endeavor

But the new postsecondary effort was touted by foundation officials as the modern equivalent of the GI Bill, which helped millions of returning soldiers attend college.

“We must be as big and bold as we were at the end of World War II,” Ms. Pennington said. “And we must do everything we can to make certain that postsecondary education is not just about access but success.”

Gates Foundation officials said they would work in partnership with other foundations, especially the Lumina Foundation for Education, which focuses on expanding access to postsecondary education, and they would look to expand successful programs that have already been created by colleges or industry.

They will also support efforts to use technology more effectively. In a speech on Tuesday afternoon, Ms. Pennington cited Rio Salado College, in Arizona, which has a rich online course catalog that is complemented by online tutoring and support services, and a graduation rate that, at 60 percent, is double the national average.

The conference focused on both college readiness and college completion, and the majority of the discussion focused on how to improve high schools so that students could succeed in college. Attendees included Joel I. Klein and Michelle Rhee, the school chancellors in New York and the District of Columbia, respectively, and politicians who have worked to improve education, like former North Carolina Gov. James B. Hunt Jr. Pennsylvania Gov. Edward G. Rendell participated by teleconference.

The foundation’s first efforts in education focused on creating smaller high schools, but Bill Gates said the foundation would now put more emphasis on improving teaching through new standards, curricula, and instructional tools.

“It’s clear that you can’t dramatically increase college readiness by changing only the size and structure of a school,” he said. “The schools that made dramatic gains in achievement did the changes in design and also emphasized changes inside the classroom.”

Through the postsecondary effort, the foundation is bringing its resources to bear on a problem that states and colleges have been grappling with for more than a decade, with little to show for it. Twenty years ago, the United States ranked first in the world in the percentage of adults between the ages of 25 and 34 who held a postsecondary credential. It has now fallen to 10th place, according to the Organisation for Economic Cooperation and Development.

The country’s financial crisis may aid the Gates Foundation as it tries to persuade states, school districts, and colleges to embrace structural changes and experimental approaches. The federal government and many states won’t have the money to lead a reform effort, noted Arthur Levine, president of the Woodrow Wilson National Fellowship Foundation, and a former president of Teachers College at Columbia University.

“That means the Gates Foundation could become the most powerful force in American education in the years to come,” he said.

http://chronicle.com/daily/2008/11/7251n.htm

How the Economic Hard Times Will Affect Colleges

From the issue dated November 14, 2008

By LAWRENCE WHITE

So what next? In rapid succession and over what seems like an impossibly short period of time, our nation's economy has absorbed a series of staggering body blows. In ordinary times, any one of them would have been the biggest business story of the year.

Trillions of dollars of the market value of publicly traded stock have evaporated in the past 12 months, a big proportion of it in September and October. Credit has dried up. Banks are unable or unwilling to engage in short-term lending and are hoarding cash. Credit standards have tightened, and in certain parts of the country it is almost impossible to secure intermediate or long-term loans.

The national unemployment rate was 4.8 percent a year ago. In September it was 6.1 percent. Economists expect jobs to drop by an average of 74,000 a month for the next year and project that the unemployment rate will reach close to 7 percent by June 2009. In some states — hard hit by mortgage foreclosures and corporate retrenchment — the unemployment rate could rise close to or even above 10 percent by the end of the academic year.

That's where we are today. What impact will continued financial turbulence have on higher education in the weeks and months ahead? Colleges will probably have to deal with:

Affordability issues. All of the investment and savings vehicles that parents and independent students traditionally use to pay college expenses — appreciated home values, prudently invested savings, private and government loans, lines of credit — have evaporated, making it considerably more difficult for millions of Americans to finance the cost of higher education. At colleges already struggling to fill seats, the enrollment pinch may become acute as spring-semester tuition bills are mailed to enrolled students in the next few weeks.

Affordability problems will be compounded by the convergence of three other factors related to the deteriorating economy. First, the federal Pell Grant budget will fall billions of dollars short of the needs of eligible students and their families. This year Congress appropriated $14-billion for Pell Grants. But as early as July, the projected number of Pell Grant-eligible students had already risen by 800,000 over the previous year. Today higher-education officials estimate that Congress will need to appropriate an additional $6-billion to meet the needs of eligible students during the current academic year.

Second, institutions are hard pressed to make up the gap in federal aid because their own institutional aid budgets are shrinking as endowments are eroded by the plummeting stock market and more students clamor for assistance.

Finally, just as parents are scrambling to find money for college, institutions are raising tuition to make up for cuts in state aid, fund-raising shortfalls, and reductions in endowment income. Some state higher-education systems are considering taking the almost unprecedented step of imposing midyear or midsemester increases in tuition and fees.

Problems accessing debt and credit markets. Colleges are steady borrowers. They use proceeds from bond issuances to finance capital construction and long-term leases. They even out cyclical revenue flows by tapping lines of credit. In many ways, colleges are better positioned than other enterprises to cope with paralysis in lending markets. Their ability to offer tax-exempt interest payments makes their bonds attractive to lenders, and their predictable cash flows give them access to credit lines other enterprises can't tap.

Yet the cost of borrowing has already spiked. The Wall Street Journal reported in October that seized-up credit markets have forced many colleges and universities to cancel or slow projects for the construction of new buildings. Other institutions fear that voters may not approve bond referenda for campus construction. For institutions that can still tap into lending markets, the cost of borrowing can be expected to go up even further as bond yields jump.

Liquidity fears. Like all good-sized organizations, colleges park uncommitted money in "near cash" accounts — money-market accounts, mutual funds, and Treasury notes. The dollar value of assets held in those accounts dwarfs every other investment medium. Historically those funds have been as safe and liquid as cash, and colleges move money on a daily or even hourly basis among such funds and from those funds into their operating accounts.

But many forms of near-cash accounts do not enjoy the same kind of deposit-insurance protection available to holders of commercial bank accounts. In September and October, nervous investors withdrew unprecedented amounts from near-cash accounts, creating problems of liquidity and redemption for even the largest of those funds. According to The New York Times, in the week after Lehman Brothers filed for bankruptcy, in September, investors withdrew more than $169-billion from the nation's money-market funds. September saw a freeze on redemptions from accounts at Commonfund, which holds endowment and other assets for about 1,800 colleges. Putnam Investments also briefly froze withdrawals from its Prime Money Market Fund, a popular parking place for college operating money. Since then mutual and hedge funds have experienced sporadic illiquidity. The failure of even a small number of near-cash funds could cause snowballing liquidity problems for colleges, making it difficult for some institutions to pay bills and meet payroll for weeks or even months at a time.

Fragility in the insurance sector. Colleges are heavy purchasers of insurance products. They use commercial policies to protect against slip-and-fall claims and motor-vehicle-accident claims, as well as for construction subrogation, medical malpractice, directors' and officers' liability, and environmental exposures, among many other risks. Following the near-failure of the American International Group — a major underwriter of college insurance policies — concerns surfaced over potential problems at the nation's largest insurance companies. In early October, insurance companies lost almost a third of their market capitalization in one five-day period, on fears that capital erosion would affect their liquidity and ultimately their solvency. For colleges, problems in the insurance market have already translated into higher premiums and difficulty in purchasing policies.

Macroeconomic woes. This recession, according to analysts, will be deeper and more prolonged than those that preceded it in the 1980s and 1990s and the early part of this decade. In a disturbing article on the front page of The Wall Street Journal on October 27, economists concurred that job loss, unemployment, and home foreclosures are already deeper and more widespread than at comparable points in the cycles of previous recessions, raising the prospect that this one will be longer and more painful than any recession since the Great Depression of the 1930s.

Colleges will feel the impact in many ways. High unemployment rates will mean that greater numbers of students will have to postpone college. State budgets will suffer, and appropriations to support public institutions will be reduced — and have, in fact, already been reduced in as many as half the states. Some institutions have instituted hiring freezes and layoffs, and we can expect the number of belt-tightening institutions to grow rapidly.

We can foresee that employees will be asked to endure benefit reductions and to pay more for the benefits they already receive. As is always true in periods of financial stringency, labor malaise will affect workplaces. The number of employee grievances and employment-related lawsuits will grow, and collective bargaining will become more contentious. Any executive-compensation arrangement that could be characterized as excessive will be questioned.

Economic bad times will make it more difficult for institutions to conduct fund-raising campaigns. Defaults on pledges and planned gifts will increase. Corporations and foundations will reduce their philanthropic giving, and federal support for research and development will dwindle. Institutions will feel pressure to dip into endowments or increase their spending rates to protect the operating budget against draconian cuts — but at the cost of reducing endowments that are already being hammered by dropping asset values.

So — to return to the question with which we started — what is likely to come next?

First, we will continue to see growing pressure on the Treasury Department, the Federal Reserve Board, and Congress to re-engineer the $700-billion rescue plan enacted in early October. Its principal focus has been to restore liquidity to the financial-service sector. We can see growing indications that other sectors — insurance, automobile manufacturing, and state and local governments — will agitate for rescue plans of their own, financed either through rededicated pieces of the $700-billion or through follow-on rescue plans.

Second, we will see discussion — heatedly partisan, in all likelihood — of a second stimulus bill from Congress. Last February 13 — a date that seems like a lifetime ago in terms of the national economy — President Bush signed into law a stimulus package of more than $150-billion, consisting largely of direct rebates to taxpayers. Congressional leaders are now talking about a differently designed stimulus package — perhaps in the range of $150-billion to $300-billion — with features that might benefit higher education directly. The new plan might include payments to hard-hit states that could be used to support midcycle, supplemental appropriations for public institutions, and additional funds for Pell Grants and other federal student-aid programs.

And third, we will reach something of a moment of truth in early 2009, when colleges get their first glimpse at spring-semester enrollments. At that point we will be able to gauge whether — as many economists have predicted, and as many higher-education officials fear — this recession will cause pain not only immediately and deeply, but for a sustained period.

Lawrence White, formerly chief counsel to the Pennsylvania Department of Education and general counsel at Georgetown University, is an educational consultant in Philadelphia. This article is adapted from remarks at the University of Vermont's 18th Annual Legal Issues in Higher Education Conference, in October.

Section: Commentary
Volume 55, Issue 12, Page A120
http://chronicle.com/weekly/v55/i12/12a12001.htm

Shredding Your Own Safety Net

Steven Greenhouse has a good Sunday piece on the weakening of unemployment protections. Unemployment benefit duration has fallen from 65 to 39 weeks. Only about a third of unemployed workers receive any unemployment benefits (down from one half in the mid-1970s), and 40% of very poor families who quality for public assistance actually get it, or half as many as in 1990. The implication is that more people losing all of their private-sector income with no public replacement will make the recession worse, or turn a recession into a depression.

The middle-class's happy cutting of social services was premised on a cluster of incorrect ideas: that investment income (including their house(s)) would always rise faster than inflation, they could always borrow at low rates and roll over the loan indefinitely, and that social services were for Other People, generally foreign and/or undeserving. Now bankruptcy filing are setting new records. The NYT has a good piece on this, with a story about one middle-class family caught in the bind, and caught by doing what they thought they were supposed to do.

The same goes for 401(k) plans, whose ability to harness the wealth-producing genius of the markets persuaded tens of millions of employees to allow their companies to replaced defined-benefit pensions with defined-contribution pensions. This "great risk shift" from companies to employees was sold as the road to riches. The LA Times writes that with many employees having lost ten years of gains in the last few months, these middle-class stalwarts are having a rethink.

The dismantling of social infrastructure - including unemployment and poverty benefits - was premised on the idea that poor people were bad people. If your society had good social services, it would encouraging losers. These losers would hang on to their loser habits. They would breed and multiply. (Hence the power of the image of the "welfare mom," who was also a "welfare queen," who "bought vodka with food stamps" - Reagan's oft-repeated urban legend - that she obtained by having six children with six different absent fathers.)

Well hey - Losers R Us. If we got rid of the dumb economic moralizing, we might both avoid Great Depression II and rebuild society.

Emphasis on the word WE. They, the economic leaders of the country and the world, aren't going to do Jack. See Gretchen Morgenson's typically acerbic analysis of the Paulson fumbling which isn't even helping bank credit, to say nothing of credit for the people.

Since the $700 billion TARP was funded, it has been used solely to shore up banks and other financial institutions. (An irreverent friend calls it The Act Rewarding Plutocrats.)

Treasury officials did move closer to helping consumers with a new plan floated last week aimed at offering $50 billion in loans to companies that issue credit cards, make student loans and finance car purchases.

Kind of interesting, isn’t it, that troubled homeowners are missing from the list of TARP beneficiaries and left to fend for themselves?

Yes you said it - interesting. Interesting that WE helped build this system by submitting to its world view. Interesting that WE might reconsider.

G20 Flop

Having now read the G-20 Summit statement, I pronounce the meeting a failure. It reiterated some tired platitudes about an open global economy and not retreating into protectionism, as though this were really the danger facing the world. It called for some mild regulatory reforms of the financial system that caused this mess, with no specific proposals. The big omissions were the following:

1. construction of an integrated system of standards, what Martin Wolf at the FT has called a "new Bretton Woods."
2. call for stimulus packages to help populations in the global North and South alike. The world's population is almost entirely absent from this document. The American and European middle-classes are also absent.
3. any vision of social development. The UN's Millennial Goals are there unexpressed and articulated - for poor people.
   

Many others will argue this is a major step in an important process. I doubt it.

I now think it was a prophetic moment when the French finance minister, Christine Lagarde, pulled out her Coolpix (a not very recent model) to take a snapshot of her neighbor at the big round table. These world leaders are acting like a bunch of tourists.

The public is going to have to do this on its own.

The Curse of the Countryside

It's Sunday morning, so I'm reading Father Frank, who flays the Republicans in no uncertain terms:

The G.O.P. ran out of steam and ideas well before George W. Bush took office and Tom DeLay ran amok, and it is now more representative of 20th-century South Africa during apartheid than 21st-century America.

It's kind of amazing to see that in print: the Republicans as the American Apartheid Party.

Rich then cites David Letterman's joke about how the 10 G.O.P. presidential candidates at an early debate looked like “guys waiting to tee off at a restricted country club."

The very limited region of GOP gains were immediately apparent, and yet the GOP base in white males remained very solid this year. I criticized Father F last Sunday for understating how Republican white males continue to be overall, regardless of how culturally brain-dead or economically dysfunctional their party becomes.

There were reports this week of an upswelling of anti-Obama racist attacks on black folks, especially but not only in the South. Is it racism or some kind of country politics - or both - that made Southern whites go for McCain 68% - 30%? If you broke males out of the number it would be even higher?

The split between country and city is huge: cities over 500,000 went for Obama 70% - 28%, and cities 50,000-500,000 gave Obama a 59% - 39% advantage. Suburbs were almost evenly split, and everything below 50,000 went 53-45% for McCain.

On the other hand, the "West" is full of rural spaces, and yet "Whites in the West" gave McCain 48% and not the 68% McCain got from their Southern cousins. This may well be because the West has more gigantic coastal cities, huge urban-oriented suburbs, and multipolar racial politics.

This begs the question of why you need all those things to have even minimally centrist politics (Obama vs. the hard-right McCain and Palin). Why can't you have centrist politics with the normal class mixture of the white and still-rural South?

Journalistic anthropology isn't yet giving us answers. The best newspaper piece I've seen focused on the Republicans overdoing it on their Southern strategy and alienating voters elsewhere. But here's the underlying analysis:

Mr. Obama’s race appears to have been the critical deciding factor in pushing ever greater numbers of white Southerners away from the Democrats.

Here in Alabama, where Mr. McCain won 60.4 percent of the vote in his best Southern showing, he had the support of nearly 9 in 10 whites, according to exit polls, a figure comparable to other Southern states. Alabama analysts pointed to the persistence of traditional white Southern attitudes on race as the deciding factor in Mr. McCain’s strong margin. Mr. Obama won in Jefferson County, which includes the city of Birmingham, and in the Black Belt, but he made few inroads elsewhere.

And the idea is driven home by the accompanying visual stereotype of Southern White Man (one Bill Pennington of Vernon, Alabama).


Unfortunately, this assumes the cracker racism that needs to be explained.

The best non-Southern analysis I've read involves my favorite issue - the degradation of public systems and social spaces that force people to stick with personal hierarchies and private solutions. Racism supports the hierarchy that has done more in a perverse and destructive way for white Southern working class security in their own world than has the region's white economic and social leaders. The latter have pursued strategies of underdevelopment decade after decade since the beginning of the South itself - slavery, Jim Crow segregation, and "massive resistance" to integration led appropriately enough by Sen. Harry F. Byrd, a descendant of the Byrd family colonizers of Virginia, who united stone racism with stone opposition to public spending - all which have kept the South backward as an economy and a civil society and a democracy. It is a non-democracy, where that requires the full participation of all social partners. The poet Charles Simic wrote a great piece on this just before the 2004 presidential election, and it is worth reading now.

What is Congress Doing?

Joe Nocera reports on some bailout hearings last week. He had some moments of surpise and optimism:

“Do you believe that the collapse of large hedge funds pose systemic risk?” [Rep. Henry Waxman] began. “And does this justify greater federal regulation?” That question, in turn, provoked one of the most amazing hearings I’ve ever attended, not because sparks flew but because the hedge fund managers responded with answers I never thought I would hear in my lifetime.

[The hedge fund managers] all agreed with Mr. Waxman, and with the other Congressional questioners, that in certain cases hedge funds could indeed pose systemic risk. All but Mr. Griffin said they would favor at least some regulation of hedge funds. They all agreed on the need for more disclosure. They said they had no problem turning over now-hidden information about their portfolios to a federal regulator. Mr. Simons and several others (though, again, not Mr. Griffin) said that if Congress changed the tax laws in ways that caused them to have to pay more taxes, they would be O.K. with that. I almost fell out of my chair.

Nocerca is a good financial journalist and I hope he didn't hurt himself. But it is not quite that surprising: hedge funds took enormous risks because they had to keep up with everyone' else's enormous risks so they could match their profits. I'm not justifying it, but it is common sense that pitchers could agree with batters that they shouldn't spit on the ball - as long as other pitchers don't do it. That Nocera is shocked is a sign of how ideologically bent finance economics has become.

For a good explanation of what was wrong with the bailout passed in early October, see former World Bank president turned critic Joseph Stiglitz's discussion last month.

I have a few things to say about George W. Bush's ignorance of the simple facts about how much worse the degregulated US banking system has done than its European counterparts, but am still looking for a decent copy of his speech last week.

Big as China

Yesterday I said the public should ask for and receive a public infrastructure building program of $750 billion ove two years, to come closer to the scale of China's new program for its own upgrades. Today I was gratified to see Paul Krugman estimate the need to be $600 billion. Pretty close!

A Bailout for Actual People?

What an idea! But bank analysts are noticing that unem- ployment tends to create liquidity problems for individuals. That in turn can further clog the financial system. Thus spaketh Richard Bernstein of Merrill Lynch: "The government can come up with any number of refinancing and liquidity plans, but households are likely to increasingly default on mortgages and other debts if cash flow is not stabilized via employment." The economy lost 265,000 jobs in October and 285,000 in Septermber, and nearly 1.2 million so far this year. Analysts are promising worse to come. So hey - should we spend some bailout money on creating jobs for people?

Time entertained itself with a new series called "Top Ten Scared Traders of the Week" (see above).

There are lots of good ideas for the milllon things that need building or rebuilding, starting with green housing and green transportion.

Bush's lame-duck Treasury department isn't likely to help with this. Everyone should read Treasury Secretary Paulson's statement from yesterday - a masterpiece of omnious vagueness about the dismal future. All the allocated hundreds of billions are going to scarily bad banks who made such major mistakes that their failure could create a giant sucking sound pulling who knows how many businesses, pension plans, bond funding programs with it. We don't know who owns what, so we don't know exactly why the top folks like Paulson are so freaked out.

Paulson announced expanding the capital injection program to include private partnerships. They, that is we, are going to have to offer massive sweeteners to get private capital into this mess - if they thought it was safe they would have gotten back in already. That's going to cost. Apparently something like recent declines in consumer spending has increased Treasury concern about non-business credit markets. Paulson writes,

The important markets for securitizing credit outside of the banking system also need support. Approximately 40 percent of U.S. consumer credit is providedthrough securitization of credit card receivables, auto loans and student loans and similar products. This market, which is vital for lending and growth, has for all practical purposes ground to a halt.

This process of "securitization" refers to creating securities that are nominally backed by an asset like 10,000 houses whose mortgages were pooled into the security.

But Paulson's language is important. He could have said "Approximiately 40 percent of U.S. consumer credit has been provided through securitization of credit card receivables . . ." This change in English verb structure would identify securitization as a historically local and specific, and perhaps reversible practice. His text could then entertain the possiblity that securitizing everything from home mortgages to credit card balances was a mistake - the mistake that underlies the whole current mess. The reason that is was a mistake is that instead of spreading and "hedging" risk, securitization depended on a collective belief that the value of these instruments would be sustained (and usually grow very quickly) even though their contents, and thus their risk, was not possible to caculate. Once the collective belief faded (the market became "illiquid"), the risk of most of these investments became, practically speaking, infinite.

Yesterday's Greenspan-like tedium of utterance marked an important expansion of the bailout that denies the error of securitization.

we are examining strategies to support consumer access to credit outside the banking system. To date, Fed, FDIC and Treasury programs have been targeted at our banking system, and the non-bank consumer finance sector continues to face difficult funding issues. Specifically, the asset-backed securitization market has played a critical role for many years in lowering the cost and increasing the availability of consumer finance. This market is currently in distress, costs of funding have skyrocketed and new issue activity has come to a halt. Today, the illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans and credit cards. This is creating a heavy burden on the American people and reducing the number of jobs in our economy.

With the Federal Reserve we are exploring the development of a potential liquidity facility for highly-rated AAA asset-backed securities. We are looking at ways to possibly use the TARP to encourage private investors to come back to this troubled market, by providing them access to federal financing while protecting the taxpayers' investment.

Paulson's plan is to revive the securitization market and not to end it, and to do this by luring private investors back with unspecified but - logically speaking - inevitably expensive incentives.

Why not do something a few people were talking about two months ago? Instead save the money for infrastructural rebuilding, China style - say $750 billion over 2 years? The jobs, the new consumer spending, the return to the housing market, would all do more for finance than simply propping a rotten market with bribes. And it would buy the country a new infrastructure rather than a bunch of toxic bonds.

America the Socialist - you WISH

Fivethirtyeight.com has a nice explanation of the electoral shift in 2008 that appears in the map at the left. Well and good for Dims to win elections. But it misses the big picture.

The big picture is that whites took a look at a Republican candidate who offered tax cuts skewed toward the wealthy investors that had just tanked their middle-class pensions, and who will double their government's deficit, and who are forcing cuts in every public support for middle-class life known to man, and took a look at this candidate who defined the 30-year boom in income inequality and 30-year wage freeze for 80% of Americans as the fountain of wealth, and who trashed tax cuts NOT skewed toward the rich as socialism - and 55% of the dimwits voted for him!

We have to face the fact that when it comes to their own money, white Americans are the dumbest fuckers on earth.

Reality check. Guess who made the middle class. Franklin Delano Roosevelt. Pushed by the labor movement, by Democrats, and by socialists. And by communists! And then by the New Deal's mass public works program that was finally and sadly given its proper enormous scale by World War II, and still later by retaining and expanding it via the Republican Gov Earl Warren in California and even a little by Dwight D. Eisenhower in the Republican 1950s White House, even as McCain and Palin's ideological godfathers were defining socialism as anti-Americanism, and by being expanded yet again by Dem Gov of California Pat Brown and Republican Gov of New York Nelson Rockefeller - before that kind of Republican was drummed out of the party and turned into a Clinton Democrat.

Here's a short, starter list of the socialist government programs that created the middle-class out of the abandoned farmers and union-busted workers and semi-educated fake professional service workers like the folks who bred me.

• Federal Home Loan Bank Act (1932): creates savings and loans to fund mortgages with federal guarantees in case of default
• Home Owners’ Loan Act (1933): cheap credit
  
• Glas-Steagall Banking Act (1933): established Federal Deposit Insurance Corporation and kept banks from blowing all of your money like they did after its repeal in the late Clinton period.
  
• Various New Deal Legislation (1930s): support for farms, small business, home building, credit stability, rural electrification
• Servicemen’ Readjustment Act (1944) (“GI Bill of Rights” - supports education, job training, medical care consumer loans, home loans for vets
• Highway Authorization Acts (1947, 1956): 79,000 miles constructed
  
• Federal Housing Administration: direct loans (4%) and loan guarantees for large-scale housing development

Each of these programs had to be pried open over many years for African Americans and other people of color. But this long civil rights struggle doesn't change the fact that the middle-class, segregated then more integrated, exists only because of mass social investment, now and forever, amen.

Meanwhile, yesterday, mass social investment was indeed taking place, for the t0p 0.01%, and NOT happening for everyone else:

• AIG upped its take of your money to $150 billion. For just one gambling insurance company, that's what it costs for us to cover its lost bets.
• Fannie Mae announced another $29 billion in losses for the 3rd quarter of 2008.
• American Express declared itself a bank so it could feed at the same federal windows.
• Arnold Schwarzenegger, put into office by the white middle-class, and saying every week for years that the state of California spends too much, suddenly declared that the real problem is the state doesn't tax enough. His solution: increase the sales tax, soaking the middle and the poor.
• GM has decided to save its dwindling cash reserves by stopping retiree health benefits for its former white-collar workers.
• The New York Times published data suggesting that 10 million homeowners will soon have their houses "underwater" - worth less than the mortgage they are paying to stay in the house.
• The University of California announced that its pension fund had lost 28.3% of its value since June 30, 2007 - echoing similar losses all over the country.
• The Los Angeles Times reported that the federal bank bailout could cost the state of California $2 billion in lost tax revenues.
  

Meanwhile the war in Iraq, that great murderer of Iraqis and fleecer of the American public, got going again.

Smile as you write those checks, and give thanks to Baal that we have no socialism in America!

Meet our New Deal President - in China!

During the election, Obama got a little play with his little program for infrastructural development. He plans to create a "National Infrastructure Reinvestment Bank," because nothing says efficiency and stability like a title with the word "bank." This entity would then spend $6 million dollars, as Dr. Evil would say - ok, $60 billion dollars in our dollars. The catch - it would do this over 10 years.

Using America's world-renowned math skills, I divide 60 by 10 and get 6, umm, 6 million, whoops, $6 billion dollars a year. Since the US has 300 million or so people, that means that our New Deal president-elect plans to spend, per person per year, for the renewal of American prosperity - 20 bucks!

Meanwhile, China just announced its own stimulus package, focused on public works: the equivalent of $586 billion, in two years. Since China has about 1.4 billion people, it will spend a little more than $200 per person per year, or almost exactly 10 times the Obamanomics amount.

But hey, we can think big like China too: we're spending $200 per person per year - to bail out failed banks. And that's just round 1.

Contemplating the Unchanged

It's always nice to start Sunday with a sermon from Fr. Frank of the First Church of Media Populism. That didn't come out quite right, but I mean it as a complement. Every Sunday morning Frank Rich flays patronizing media groupthink about the doltish American public, which of course is often doltish but which cannot be assumed to fall for every stupid trick that Republican campaign managers - themselves no geniuses - can invent. He's good on the class bias - the white upper-middle class big media view that has swallowed market economics whole (my beef) while anxiously overestimating the power of the public to be duped just as easily as they were by the same right-wing ideas.

Father's close is especially nice - hmm, forget it, I won't spoil the ending by pulling it out of context. Read the piece and the good Obama quote at the end.

Father misreads some of his stats, however, to make the point that we the people shattered two assumptions: that whites won't vote for a black president, and that the culture wars are over. The latter cannot be shown by saying as Father does that "only" gay marriage was crushed by culture warriors. More on this later.

As for the first point, exit polls show no improvement (outside of a margin of error) in the white vote for the Democratic candidate. Father Frank uses the National Journal poll, and if you play around with the menus you can see the sad flatline of white male support for Dems - from the previous high of 38% (Clinton 1996) to Obama's 41%. That's within a margin of error. Look at "White Men Attending Church Weekly" - an unvarying 3:1 Republican margin. The only solid Dem improvement with white men was in the 18-29 age group.

When you look at whites overall - same story. Every grouping of whites aged 30 and over went at least 55% for McCain. Among voters 65 and over, the Dems do worse every time, this one included.

And check out the impact of religion. If you declare an affiliation, even if you don't attend church regularly there's a 60% chance the Republicans own your vote.

And white women? If you break out single college-educated white women, you can see a strongly Dem group that has gotten more Democratic over time. But white women overall voted slightly more strongly for Gore and Clinton '96 than for Obama.

I just hope that marriage, when it eventually comes to them, doesn't turn the gay vote as Republican as it does the straight vote.

The Two Obamas

Obama One: Policy Obama.

This is the Obama of the often muddled and mediocre policy choices, as on health care.

This is the Obama of the boring new "change" website and the strong tendency to follow Bill Clinton into "too little too late" - like his wee stimulus package.

This is the Obama who may pick Larry Summers or some other Clintonista who conspired with the right-wing deregulators of the late 1990s to cause the problems he is now supposed to solve.

This is the Obama who did pick a central Clinton figure Rahm Emmanuel to be White House Chief of Staff, thus putting hard-line pro-Israeli positions and hard-line pro-Wall Street neoliberalism in the guardhouse to the Oval Office.

This is the Obama who has taken up positions in foreign policy much like those of Bush and Condi Rice.

This is the Obama who favors same-sex civil unions while opposing gay marriage, and who was used by the YES on 8 campaign in California against gay marriage, even as he said he was opposed to Proposition 8.

This is the Obama who can be pushed to the "center" by right-wing spin about how the people voted massively on November 4 for low taxes and small government. This is the Obama that, like Clinton before him, the Right can roll.

Obama Two: Movement Obama

This is popular Obama, mass Obama, the Obama of the 7 hour lineup to vote, the Obama that belongs entirely to the global public because this "Obama" is created by their hopes and dreams. This could be called the Multitude Obama. This is the Obama of November 5, of the Obama Revolution. This is the Obama that inspired Le Monde to follow its gloomy editorial about Obama's conventional realism in foreign policy with several pages of articles about the electrifying effect on France's racial awareness in general and the demands of its people of color more specifically.

Some commentators were invoking Obama Two as soon as the election was finished. Here's a statement I especially like from Columbia professor Mahmood Mamdani

There is that remarkable primary debate with Hillary and Edwards, where a reporter asked the three of them who would Martin Luther King support on this day, and Hillary and Edwards responded by convincing the audience why King would have supported them. And Obama responded by saying King would not have supported anybody, that King would have organized his movement to push the winning candidate to pursue the objectives. Well, that’s the real question now in the US today.

There was a movement, a youth movement, to elect Obama. Will that movement dissolve itself? Will that movement build itself now around the objectives for which it organized? Will America recognize, as I believe South Africa has after the election of Mandela, that the election of Mandela was not change, but an opportunity to change? And whether that opportunity is realized and transformed into a program of social justice within the country and peace abroad will depend on the movement that pushes Obama and gives him the opportunity to respond to it. . . .

Has the movement been absorbed into the state? Look, there’s a remarkable difference between the youth movement of the ’60s, which mainly organized outside the system, and the youth movement which has brought Obama to power, because this movement has organized within the system to reform the system. Obama keeps on saying that this movement must not go away, that change hasn’t come, that this is the beginning of change. Now, will the candidate be able to tame the movement, or will the movement be able to stamp itself to some extent in the coming days.

See Robert Kuttner and Arun Gupta saying very similar things about the financial front: Obama One will need his better half if he is to do the right (and effective) thing, and that better half comes from social movements under the pressure of events.

We regular folks can't do a damn thing about Obama One. But we created Obama Two and can send him into battle any time we need to. He is neither of those guys at the top:

Yes We Did

Everybody's happy. everybody's jumping. On the world scale, at the very least 80%. Every single one of my blue-state Republican family and friends voted for him. My 80-year-old father and his wife wrote: "hooray, we watched the dramatic win here on Maui. It surely would have been fun to be in Chicago at Grant Park. Now let us begin."

The World joy will be hard to stop.

And it will be hard to stop everybody's work. The Seven Million who worked for Obama. The four years of endless efforts in precincts all over the country to have an actual fair vote in which everyone is counted.

On the show she does with Elizabeth Robinson on KCSB, "No Alibis," Avery Gordon said it was also sad that everyone worked so hard just for a fair election, the meager baseline of formal democracy. Sharon Hoshida pointed out the victory for bottom-up organizing in general.

Both of these are true. Community organizing was the big winner Tuesday night. Even if organizing job 1 was to count the votes correctly. wow!

Obama's greatest strength is not his "intellect" and "character" as has been touted by beltway folks. These are very good. But his real genius is understanding the power and the intelligence of the streets and corners where people live, talk, think, and act.

His best line in his acceptance speech:

I know you didn't do this just to win an election and I know you didn't do it for me. You did it because you understand the enormity of the task that lies ahead.

His second best line:

will always be honest with you about the challenges we face. I will listen to you, especially when we disagree.

Obama's win was a win for the grassroots - again, its brains and power - and a win for someone who unlike nearly any other national politician and pundit I can think of, learned how to listen.

This also means people will be able to talk back. There will be discussions. There will be multiple sides, international differences exchanged, and no prefabricated victory for the power-associated view.

This sounds simple, like a dumb-level pluralism. But in the context of American politics, it is huge.

That is because We-Obama defeated the two principles that have allowed the Right to rule three decades of US national politics:

• before the election, do not debate. Throw the other side out of the debate (liberal abortionist gay- marriage supporting terrorist-loving pacifists who hate America).

• during the election, suppress the other side's vote

The absolutely awe-inducing lines, the endless discussion of voting minutae, the national care for the voting booth defeated the second. And something else defeated the first- the sperading perception of the sheer failure of the rhetoric and the deeds of polarization to fix the country.

You could see it in the red counties of western Virginia and eastern Indiana in the way McCain and culture-war Amazon Palin polled 10-15 points behind the Bush of 2004. The casting out of the political thought of the entire post-1929 period had visibly ceased to work.

While looking for something better, people looked to Obama because he does get it - the labor, the ordinary effort, the regular intelligence, and how change comes from that. My friend Virigina, American in Paris, got me to read the Yes We Can section in the Nov 4 speech again and she is right about how good it is.

Ann Nixon Cooper is 106 years old.

She was born just a generation past slavery; a time when there were no cars on the road or planes in the sky; when someone like her couldn't vote for two reasons -- because she was a woman and because of the color of her skin.

And tonight, I think about all that she's seen throughout her century in America -- the heartache and the hope; the struggle and the progress; the times we were told that we can't, and the people who pressed on with that American creed: Yes we can.

At a time when women's voices were silenced and their hopes dismissed, she lived to see them stand up and speak out and reach for the ballot. Yes we can.

When there was despair in the dust bowl and depression across the land, she saw a nation conquer fear itself with a New Deal, new jobs and a new sense of common purpose. Yes we can.

There are storm clouds on the horizon for We-Obama:

Obama's Clintonomics
Obama's Clinton people.
The hardship that was already there.

Amy Goodman got one of the best quotes of the night, from a woman at an Obama rally in Chicago:

I feel that I want to hang a flag. That I'm a part of the United States. And that we matter. All of us.

That's the core of the victory right there. "we matter. All of us." That will be the source of all the change to come.