Goodbye Paris

It wasn't easy getting back to Santa Barbara from France. The little pieces of the corporate world don't really mesh that well. This is especially true of the pieces that connect to other corporate worlds in other countries. Trying to get Air France to book our bags onto United Airlines for the hop from LAX to Santa Barbara took at least half-an-hour of standing at the counter with this very nice young man who wanted to help. How long would it have taken if he didn't?

The flight was great because so many seats were empty. Coach was always bearable when no one showed up, and you could dump all your crap in the seat next to you. I got a huge amount of research work done because I couldn't check my email to find messages on the UC budget meltdown irritating enough to require a response. It was a nice trip, floating over an increasingly wet-looking polar ice cap - until we landed at LAX.

We had to go from terminal 2 to terminal 7, found a nice supervisor to give us the boarding pass to the United flight that Air France couldn't, got on the little jumper and took off only a half a hour late. It was a beautiful mid-afternoon off the Southern California shore - so much nicer than the city itself which I grew in but do not miss. It was 1 am for me Paris time so I dozed and then woke up to see the Goleta coast below us - trucks crawling on highway 101, the temporarily florescent-green coastal hills, and then El Capitan, and up there Gaviota. Suddenly I realized we'd gone too far north! Everyone was reading or sleeping, and as we drifted along in the sunlight I thought oh, so we've been hijacked. And laughed. And then thought that wouldn't be so bad, doomed to buzz along like this inside of our giant silver bee above the sunny shoreline water and the empty hills.

Then the pilot came on to say that a fog back had rolled in. We couldn't land in Santa Barbara. We had to fly all the way back to Los Angeles, which is what we did. And that meant crossing the whole LA basin, with its dirty pastel circuit-board of streets and one-story houses stretching without end unless here and there interrupted by the large rectangles of industrial buildings. There are plenty of swimming pools but hardly in the whole dry basin a square of grass. We landed back in the coastal fog. We sat on the plane. Two passengers used their cellphones to rent cars or get SB Airbus reservations and they were gone in 60 seconds.

A customer service guy came on, and his charm lasted about the same amount of time. But he did have some good news: the pilot was going to take us back to SB. There was a 95 percent chance that this time we were going to land. On the other hand, he said, if we didn't land he'd fly on to San Francisco and put us on a (6 hour) bus back to SB from there.

I was having my usual dark thoughts about United right then. There was no way they could do anything flexible like land at Santa Maria and put us on a 60 minute bus back to SB. There was no way they could do anything nonpunitive like say let's try a second time and then we'll take you back here for a bus from LA. There was no way they could actually commit themselves and say we'll get in this time, let's go, period. 95 percent sounded like a fake number, and we'd already failed to land when everyone assumed the odds were 100 percent.

So who else got off? Here we are at the counter:

There were two sisters in their 30s whom I'd noticed in the airport bar because of their non-identical matching jeans, boots, tattoos, and walking-around impatience that was equal to ours. One told us she had a friend who worked at the SB airport and the fog had rolled in again. We got up and followed the Blackberry twin. Two Brits sitting next to us got off too; they were doing a documentary for the Discovery channel on brain evolution - obviously had to go a long way to find any evidence for it - had just come from Australia, had discovered United had lost one of their equipment bags, had an 8 am UCSB shoot about the topic, and couldn't still be on the bus from SB having breakfast in Pismo Beach when the time rolled around. Finally, a German woman visiting her uncle came with us too - all the long haul folks, the SB twins having come from some fashion shoot in New York.

I sat in the back of the supershuttle with the twins. We crawled up the westside 405 for an hour or so. Welcome to LA I said to the middle row, British and German, who sooner or later managed to fall asleep. Avery tried every once in a while to get the semi-deaf shuttle driver to agree to stop at the Radisson but he never would. Looks like he's using his disability as an excuse to give us rock-bottom service, I said to the twins. Does he work for United? The one sitting next to me laughed and smacked me. Looking around past Sunset I said it's great to have a whole new audience for the comment I always make after coming back from Europe: in a 100 miles stretch through some of the richest areas in the world, you can't find a single building you'd want to look at. - The Bonaventure, the other twin suggested? - that's downtown, doesn't count! And on we went like that, with stories of war movies, restaurants that opened and closed, and what it was like to grow up in Santa Barbara and have to leave.

It's nice to be back in Santa Barbara, since I don't expect more from it than the mountains and the ocean and my friends. I hope to see them soon. The sun comes in the yellow kitchen in the back of the house, and shines in the breakfast room all day long. I looked around remembering what it was like when we first bought it, and how Mrs. Cavaletto spent most of her time in the breakfast room because of the light. Avery has all our stuff out of the garage and back in the house in two hours or so. I spend the morning getting the old cars going again. Gas price booms has made one of our junkers valuable. Triple A asks me what color is it, I say can't tell any more. Tow truck driver says, now it's a "gas saver," you should hang onto this. On the second day we drove back to LA, to the 24th St theater downtown were Avery gave a talk at our friend David Lloyd's play reading. We were back up here by midnight again. Spring has started - the pear trees have already gone from blossom to leaf. The trick will be to stay happy with the things that really are here.

A Time of Desperate Journalists

When the well of conventional wisdom runs dry, journalists take the lid off the well of History. This is a sign of intellectual trouble. It means that the stuff their sources usually tell them, and their standard, typical, and familiair explanations, are no longer adding up.

When one of the NYT's best financial journalists Frank Norris says that a book about the 1907 financial panic is one of the most insightful books he has ever read, you know we live in desperate times. Or at least in times of desperate journalists, who realize gradually that the analyses they have been passing faithfully on to their readers for years no longer make sense - and in fact didn't really make sense in the first place.

A couple of notes about the Norris piece:

• it features a recovery wrought by a heroic strongman, JP Morgan, described yet again as locking bankers in his study overnight until they provided liquidity. The photo above says it all - Morgan as god-like visionary. Or Greenspan-like. Greenspan's mistakes depended directly on the willingness of the media to see him as a Morgan-like genius, presiding over all with his laissez-faire wisdom that made America the land of infinite plenty. So spare us your historical strongmen, please.
• It continues to note that this is not just a subprime crisis. This was obvious to the Financial Times in August of last year, and I would like to know whether readers of the NYT business pages, presumably largely business people and executives, still need to be reminded of this obvious fact. If they still don't get it, we really ARE in trouble.

Folks, in terms of figuring out what really happened and what to do, we are on our own.

Missing Bodies

This morning's Financial Times has a headline story called "US banks borrow $50bn via new Fed facility." Doesn't sound too exciting - it starts out by saying the Feds are now better at getting liquidity into the banking system than they were last summer when the wheels went crunch.

But the FT folks have been good at relentlessly unearthing the deeper story:

The move has sparked unease among some analysts about the stress developing in opaque corners of the US banking system and the banks’ growing reliance on indirect forms of government support.

“The TAF ... allows the banks to borrow money against all sort of dodgy collateral,” says Christopher Wood, analyst at CLSA. “The banks are increasingly giving the Fed the garbage collateral nobody else wants to take ... [this] suggests a perilous condition for America’s banking system.”

Where are all of the bodies and timebombs buried? Nobody knows.

That brings us to this chart, from John Authers's column today, "The Short View."

Authers's subject was a Barclay's report that argued that we've been in a period of anomalously low inflation (see the gold line below the red line) that is now over, thanks to cost pressures coming from the booming "developing world."

But there's a more interesting point here. For most of the last century, equity investments gave the investor no gain on retail price inflation.

This brings me to a simpleminded but fundamental point. Overall economies cannot invest their way to prosperity. They have to work their way there, by inventing stuff and then making and selling it. Capital is a prerequisite but not the main vehicle of development. The latter comes from labor. Societies need to be judged by the growth in earned income - what they can and actually do pay their working populations.

On this measure, we're not doing so well.

What for Brains?

You know I'm a faithful reader of Fr. Frank's Sunday sermon, and today is no exception. I would feel better about this piece if I had Obama Fever. But I just can't catch it.

I do like him better than Hillary, who has always struck me as an institutional manipulator whose main goal is her own advantage. Not that this makes her worse than Bill Clinton or most other politicians for that matter in a country as trapped as ours by old ideologies and thus more or less unable to have new social ideas and look for political innovators. But I agree with Sean Gonsalves, who wrote about Hillary, what record? What has she done besides broker a lot of forgettable-to-rotten deals on stuff like enabling the Iraq invasion? That's a non-rhetorical question.

But Obama. I notice that Fr. Frank used to praise him by damning Hillary. Today he's moved on to praising him by damning McCain. He points out how the Republicans are a party of old and wealthy white men who don't represent or resemble America. And . . . ah, so what? That has been true since General Grant, and in the modern period since Ronald Reagan. Reagan turned 70 a month after he was inaugurated. MacCain will turn 72 before election day 2008, but lucky for him 72 is the new 62 - he looks a lot better than Reagan at the same age, leading member of the meat-and-martinis generation. The point is that the Republicans have represented the interests of a tiny white minority since for decades, and this hasn't stopped them from controlling three out of three branches of government for most of that time. We need a better reason for thinking that Obama can actually win.

There's the post-boomer belief that they are post-racism: Gonsalves believes this about his people. I don't. I haven't seen a massive movement about white Thirtysometimes to put their kids in majority-Latino public schools for the good of society. What is true is that crude racism toward Obama will sink the Republicans in a second - even comments about how "articulate" he is will be turned into instant CNN crawlers.

What is also still true is that Obama won't be able to Act Black. He'll have to get mad only in that weird resonant TV-preacher way, full of high-minded moral indignation. If he falls off that wagon it will be a huge deal and lots of fun to watch the media tie itself in knots trying to talk about his blackness without actually using the words.

The Change Candidate wasn't in #1 most-emailed position in the NYT today though. That position went to a piece called "Dumb and Dumber," about how Americans don't actually know anything. Well TV Americans, anyway, one of whom thought Budapest was the capital of the country called "Europe." It's tempting to see Obama, who says only what other Democrats have already said, is the candidate of the Dumb Generation(s), who will inherit America and do an even better job than the Meat-and-Martini generation of running the country into the ground.

But there's also the "hope" thing. Obama comes along at a time when leaders have never in recent times been more removed from the majority, more ignorant of it, and more unaccountable. Something about Obama's fervor and commitment makes it seem like he can cross the chasm. I think that's what people really loved about Kennedy's Camelot - he came from a family of bootleggers, but he wasn't a dreary, overstuffed crook. He seemed to have ideals. He wasn't just handsome enough to be a romantic lead, but had enough idealism to be romantic about politics and therefore make politics seem like it was part of people's lives again - of their hopes. He helped people take romanticism seriously. Obama seems to be doing the same thing.

Obama has something else going for him. The president is always the national father, and Hillary threatens that cultural function. Of course the president has always also been the white father, so it looks at first like Obama would be at as much of a disadvantage as Hillary. But "presidentialism," as the American Studies scholar Dana Nelson puts it, involves a deep masculinity function. George Lakoff, the Democratic commentator on campaign language and categories, identifies Democrats with the nurturing parent, which he contrasts with the Republican's strong father. Obama has the air of idealism, but whites, especially white men, will automatically attribute to him a suppressed rage that they will identify with strength. Hope in Obama comes from the sense that his race, ironically, will allow him to appear to be the first strong-nurturer the democrats have had since JFK.

Sunday Politics

I've been avoiding David "Schoolboy" Brooks for a long time, but embarrassed myself by finally biting on his listing as a top-10 most forwarded on the NYT webpage for the past few days. The piece is an "Answer Man" dialog that makes Obama an upmarket "experience" candidate and Hillary a working-class retail gal. Schoolboy improves his grades by getting a B+ this time. College vs. non-college is not a dumb analytic distinction.

You can also see the New anti-Hillary Strategy taking form on the Right. Rush and the rest will trot out the Hillary-hating themes, while Thoughtful Conservatives led in the media by Schoolboy and Bill Kristol will paint Hillary as old-school New Deal - actually a pretty nice lady, but outdated and misguided. This will trick her into moving right, and she will lose exactly the working-class votes she needs to win in November.

The overall Right doesn't actually see working America as defunct. They see the white working-class as the key to their own power, unions as their great political enemy, and their culture war (click Schoolboy label) against colleges and its middle-class grads as one of their two or three essential strategies.

Fr Frank's sermon does a good job of analyzing the "thick deck of race cards" Hillary is playing against Obama.

In October, seven months after the two candidates’ dueling church perorations in Selma, USA Today found Hillary Clinton leading Mr. Obama among African-American Democrats by a margin of 62 percent to 34 percent. But once black voters met Mr. Obama and started to gravitate toward him, Bill Clinton and the campaign’s other surrogates stopped caring about what African-Americans thought. In an effort to scare off white voters, Mr. Obama was ghettoized as a cocaine user (by the chief Clinton strategist, Mark Penn, among others), “the black candidate” (as Clinton strategists told the Associated Press) and Jesse Jackson redux (by Mr. Clinton himself).

The result? Black America has largely deserted the Clintons. In her California primary victory, Mrs. Clinton drew only 19 percent of the black vote.

Can you say "President McCain"?

My friend Susan's son Arnault has grown up in Paris with dual US-French citizenship, and asked me at dinner the other night whether the Clintons weren't good people whom liberals etc. should support. I gave him a short lecture on the Clinton Republocrat completion of the Reagan Revolution (wall street economy, end of welfare as we know it, acceptance of the evil of New Deal social democracy that, I added, is our only bulwark against barbarism and the "planet of slums) - poor kid. But I will send him this link on Bill Clinton in action. His deep driver was always to attract, be with, be liked by, be supported by the rich, and then become one of them.

This whole generation of post-60s politicians offers a sellout idealism that just makes me miss FDR - or CLR.

Coming Democratic sea-change

Here's an interesting piece from the Financial Times that strikes me as a real possibility, and it is not written by an advocate of a shift to the left, but by an opponent.

***
Beware the coming Democratic sea-change
By David Frum
Financial Times: February 7 2008

The conservative ascendancy in American politics is coming to an end. For three decades, the right has dominated, with the Republicans winning five of the seven presidential elections since 1980. Conservatives did more than just win elections: even when liberals gained power, they governed on conservative terms.

What were the most important accomplishments of the Clinton presidency? Balancing the budget, welfare reform and the expansion of Nato - not exactly left-of-centre projects. And of Jimmy Carter's? The deregulation of the airline and natural gas industries.

Neither president set out to accomplish these goals. Indeed, they often resisted them. In the end they had to accept the limits of the possible - just as Republican presidents Dwight Eisenhower and Richard Nixon accepted the limits of the possible in the liberal era from 1930 to 1975.

Neither Mr Clinton nor Mr Carter created a single, major, permanent new national social programme. Mr Clinton failed to bequeath power to his chosen successor; Mr Carter failed even to win a second term.

John Mitchell, Richard Nixon's attorney-general, predicted in 1970: "This country is going so far right you won't recognise it." His prophecy was vindicated. Now its time is up: 2008 is shaping up to be the first decisive Democratic victory since 1964 - a 1980 in reverse. The signs are gathering everywhere. Three-quarters of Americans now describe the country as "on the wrong track". Almost 90 per cent express strong dissatisfaction with the costly healthcare system.

In primaries and caucuses, Democratic contests have drawn more voters than Republican ones. An early estimate after Super Tuesday suggests that, thus far, 11m Americans have cast ballots for Republican candidates, while more than 15m have voted for Democratic ones. Democrats outpolled Republicans by 20 per cent even in the state of South Carolina, maybe the most conservative in the nation.

Usually pundits expect that the party that chooses its nominee first will win the election. That will probably not be true this time. Although the Hillary Clinton-Barack Obama contest looks likely to continue longer than John McCain's march to the Republican nomination, Democrats tell pollsters they like both candidates - they are just deciding which they like best. Republicans remain divided, with Mr McCain, Mitt Romney and Mike Huckabee each passionately disliked by opposing factions within their party.

In polls, Americans express preference for Democrats over Republicans on almost every issue surveyed, including such traditional Republican advantages as taxes, ethics and competence.

In 2002, equal numbers of Americans identified as Republicans and Democrats. In the six years since, Republican identification has collapsed back to the level recorded before Ronald Reagan. The decline has been steepest among young voters. If they eat right, exercise and wear seatbelts, today's 20-somethings will be voting against George W. Bush deep into the 2060s. Most ominously, US polls show an ideological sea change: a desire for a more activist government, a loss of interest in the tax question and a shift to the left on most social issues (although not, interestingly, abortion).

As things are going, the Democratic nominee will win a majority of the votes cast (unlike Mr Clinton). They will almost certainly gain an increased majority in Congress (unlike Mr Carter). If the present mood lasts, that nominee will have a green light to move the US in new policy directions (unlike either Mr Clinton or Mr Carter).

The stage has been set for the boldest and most dramatic redirection of US politics since Reagan's first year in office. Of course, there are no guarantees in politics. An inept president could bungle his or her chances. Unexpected events could intrude: a nuclear test in Iran, a major terrorist attack on US soil or some attention-grabbing political scandal. But given moderate luck and skill, the next president could join Reagan, Lyndon Johnson and Franklin Roosevelt as one of the grand reshapers of politics and government.

Tragically, that reshaping is likely to be for the worse. The things that Mrs Clinton and Mr Obama want to do are likely to prove costly and counterproductive, if not outright disastrous. A greater government role in healthcare, higher taxes, tighter regulation, more social welfare, an increased flow of low-skilled migrants with amnesty for those already here, a cut-and-run from Iraq: these are not measures likely to improve US competitiveness or enhance America's standing in the world.

To prevent these negative consequences - to retrieve victory from impending defeat - would require more creativity and responsiveness than Republicans and conservatives have displayed for many years. Unless American conservatism can rejuvenate itself, the odds favour the liberal left holding sway until the day that its own errors and delusions lay it low again.

The writer, a resident fellow at the American Enterprise Institute, is the author of Comeback: Conservatism That Can Win Again

The Thrifty Middle Class - Not!

A good piece today gets at one of my worries about the U.S. economy's ability to avoid long-term decline. That is the failure of Americans to spend less than what they earn, i.e. save.

The hook is that some Americans are actually waiting to have the money before they spend it! This is news only because we haven't been doing this. "In 1984, Americans were still saving more than one-tenth of their income, according to the government. A decade later, the rate was down by half. Now, the savings rate is slightly negative, suggesting that on average Americans spend more than their disposable income."

The article suggests that there's going to be a cultural shift against having debt-fueled stuff.
"In homes now saturated with debt, conspicuous consumption and creative financing have come to seem a sign of excess not unlike that of a suntan in an age of skin cancer." See the quotations from people trying to get over their low-grade envy of the Cadillac next door.

But there are a couple of problems. One is that the economy depends on overspending. And people overspend not just because they like Cadillacs, but because they don't make enough money. Individual wages for the bottom 80 percent have barely budged for 35 years.

Given our low-cost low-wage economy, will employer be able to imagine how to raise wages so that people can save?

PS: See also a nice column last month by David Leonhardt on the direct conflict between spending on social development and spending on the war in Iraq.

Meltdown Continued

Dean Baker is clearer today about why homeowners are defaulting on their houses before they default on their credit cards.

Glen Ford projects a historic loss of wealth for people of color. The report on which his piece is based suggests that African Americans will achieve home-ownership parity with whites in only 5, 423 years!

Very unpleasant data on US contraction sent the Dow and S&P 500 into a tailspin - they are around 3 percent down in one day. Markets were especially shocked by a survey of non-manufacturing sector managers that looked like the service economy in the US is going off a cliff. European bankers may be figuring out a US decline will start to sink them too.

The frequently awful Martin Wolf of the Financial Times is scared into making real sense today. He points out that "the banking sector is the recipient of massive explicit and implicit public subsidies," makes risk public and profits private, suffers from "massive agency problems," while society lacks the ability to monitor transactions until long after they're over. This is the FT equivalent of Bolshevism, and ends in a call for - regulation!

Take a careful look at that graph above. See where the US makes its money. Nearly half of all profits in the U.S. now come from the financial sector. This is about double their share at the end of the decade. Meanwhile, the last employment report showed that manufacturing employment in the U.S. feel for the first time in known history below 10 percent of the total.

Now look at the one below. See how much financials make.



I had a great day with Gaye and Chuck visiting from out of town - aside from the moment when Chuck predicted Mitt Romney will be the Republican candidate.

I tried to find something economically relevant on the candidates' websites. Well they do say things: Hillary Clinton for one; Barak Obama for another. He at least calls for raising the cap on social security taxes to pick up higher-income folks - some minimal tax fairness. They don't know what to do about the larger picture.

While you're waiting for the candidates' to say something effective, have fun with the NYT's class graphic.

The absence of a clear explanation of what's happening that people can understand - it's fairly mindboggling.

The absence in the mainstream of a coherent policy alternative to Blairite-Clintonish finance capital is equally interesting.

But it will come. As Chuck said, "The Giants won the Super Bowl on Sunday. Anything is possible."

Drips from the Meltdown

Instability among private financial firms - that is, rampant opacity in asset vs. liability valuations - hasn't kept the guardians of middle-class economic propriety from continuing to bash the more-efficient public sector. The economist Dean Baker writes the following:

The Wall Street Journal did the standard "Social Security, Medicare, and Medicaid" trick to argue for the need to cut Social Security. As BTP readers know, the projected increase in Social Security spending is relatively modest. By contrast, Medicare and Medicaid spending are projected to soar, driven primarily by higher health care costs. This means that anyone seriously concerned about reducing the long-term deficit would focus on fixing the health care system rather than cutting Social Security.

While all the experts cited in the article seem to share the WSJ's desire to see Social Security cut, the WSJ was good enough to include a chart with the article. The chart shows clearly the contrast between the projected explosion in Medicare and Medicaid costs with the modest projected increase in Social Security spending. In effect, the chart contradicts the thrust of the article.

The article gets a few other important items wrong. For example, the article asserts that the Medicare drug benefits "costs almost $80 billion a year." According to the Congressional Budget Office, the benefit will cost $44 billion in the current fiscal year.

Also, when discussing plans to cut Social Security benefits, it would have been appropriate to mention that the Social Security trust fund is projected by the Congressional Budget Office to be fully funded for almost 40 years. Cutting benefits in this context effectively amounts to defaulting on the bonds held by the trust fund. If the government is going to default on bonds designated to fund workers' retirements, then the public may want to consider defaulting on other government bonds as well.

There was also a piece last week in the Financial Times on housing foreclosures. It was interesting because it's author clearly didn't know what his real theme was. Dean Baker thought it was that banks and securitizers of housing loans "did not take loan to value ratios into consideration. As a result, they are surprised that homeowners with negative equity are defaulting on their loans." If true, this is an amazing fact: lenders didn't care about lending more than the underlying asset was worth. That can be explained by the next item.

This was the little piece that caught my eye this morning. It sounds at first like it will bore your ass off: "The leveraged loan market begins the week in “disarray” following the collapse of efforts to syndicate $14bn of the debt used to finance the $30bn buy-out of Harrah’s Entertainment, bankers say." But there's not only a story of banker panic, which is always interesting. There's one of the huge stories of the whole crisis: banks are unwilling to loan money even to good companies unless they can simultaneously get rid of the liability. This means, in the case above, that banks didn't care that the house was worth less than the loan becuse they were going to sell the loan to somebody else. That somebody had no idea what house any loan was tied to - in fact, the security rolled all individual loans into one ureadable lump.

There's more. High returns correlated not with high risks taken by hairy-chested pirate-bankers giving the gift of liquidity to the global system. High returns correlated with no risks - dumped risks, dispersed and scattered risk, invisible risks, risks passed on to Somebody Else. Like me, and you.

We're not yet close to the bottom of that particular kind of unaccountability, or the corruption it has caused.

Sprawl Ain't Just Ugly

Sprawl isn't just ugly. It's dumb - economically. Michael Klare explains how all that commuting increases U.S. oil dependence which worsens the balance of payments which makes the dollar drop which drives up US prices which makes people broke, which stops them from buying which tanks the economy.

See! Economics is easy. It's people that are hard to understand.

For a compelling alien-abduction theory of inexplicable Republicanism, see Jeff Cohen's funny and yet obviously true Stepford Husbands theory of right-wing voting.

And see Naomi Klein's interesting link between the home-ownership society and the growing number of Americans (now almost half) who think they live in a society divided by class (haves vs. have-nots).

No Wonder We're Broke

I'm distrcting myself from the irrelevant news of the day, like Microsoft bidding for Yahoo! - can't create it? go buy it! -which does not give me hope for the American Innovation System. For some reason I remembered Chalmers Johnson, the International Relations expert, and his estimate that military and military-related spending in the U.S. was $1.1 trillion last year.

How dumb can we get, throwing money away like that? Then I found the reason why.

Why of course the people don't want war. Why would some poor slob on a farm want to risk his life in a war when the best he can get out of it is to come back to his farm in one piece. Naturally, the common people don't want war; neither in Russia nor in England nor in America, nor for that matter in Germany. That is understood. But after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a Parliament or a Communist dictatorship ... voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country.

Thank you, Hermann Goering at the Nrember trial, April 18, 1946 (from "Nuremberg Diary" by G.M. Gilbert, via hottub Eskimo.

And the Next President of the United States Is

I'd like to talk about the financial crisis but I'm even more distracted than the Freakonomics dopes, who are using their NYT blog to take pictures of the soda locker in the U of Chicago business school and ponder moronic correlations between colleges with high SAT scores and reading Lolita and, um, Freakonomics. No way am I linking to them. Let me just say that when they talk about human behavior, they are boyish idiots. There is a whole profession just for them. It is called Economics.

And then there are the presidential candidates. My main problem with John Edwards leaving the race is that now the Democratic field doesn't have a Democrat. Hillary Clinton is the strong arm of the veiled Clinto-Republican Archimandrite that serves the invisible empire of capital gains. And Barak Obama. I don't know who he is the strong arm of because I honestly can't remember a policy statement of his five minutes after he's made it. I do think he's on Hillary's right. Today's Nouvel Observateur said "same thoughts, different styles." It's hard to argue with that.

Cognitive Dem therapist George Lakoff wrote an analysis that made me feel like a horrible cynic - for a second. He says Obama understands that the people "do not vote primarily on the basis of policies, but rather on (1) values, (2) connection, (3) authenticity, (4) trust, and (5) identity." Guess which politician understood this best? That's right, Ronald Reagan. Hence, Hillary, policy "incrementalist" - bad. Obama - boldness and empathy - good.

Lakoff is one of a long line of Dims who love and admire Reagan - the stylist, of course, not the ideologue. The elements of this love include the patronizing belief that the people need values and feelings and don't actually think; and a naive belief that the people are basically good, and could as easily vote for a liberal Obama as for a reactionary Reagan. This view is related to the Tom Frank-style thesis that people vote Right because they are duped about their own interests. It flows from the general American liberal phobia for political ideas and commitments, as strong in academics like Lakoff as elsewhere.

In fact, the voting majority of Americans are consistently conservative. They have been since the end of World War II when the government gave them a lot of free stuff (highways, subsidized suburbs, schools, universities, water projects) while pretending it wasn't, and since the 60s, when they took some criticism from students and black folks. Earth to George: maybe the voters liked Reagan because they liked what he said: cut taxes, crack heads, bomb Russia, lock up black males, and send in the Marines. Maybe they liked his warbling authoritarian personality. Maybe the United States is a conservative, rear-guard country!! Maybe it is closer to Columbia than to France. Maybe there are more than a few Reagan voters who would as soon see Obama get shot as get the presidency.

Which leads to two words: President McCain.

Who the Hell Knows?

Finance has screwed up on a colossal scale. The salesmen on the left have no idea what to do. The man on the right, Treasury Secretary Henry Paulson, said today that the U.S. is on track for growth in 2008. Nobody's buying. Nobody bought the Bush "stiumulus" either. Partly it was because it was more self-serving shoveling of tax money to the wealthy. But really because nobody thinks it will work. That is because nobody has any idea what will work.

Headlines say things like "Fed Watchers at a Loss . . . : Rare uncertainty." Financial journalists scratched their head all weekend all over the world. Le Monde offered a compendium of non-knowledge about how Societe Generale could have lost $7.2 billion because of the bad bets of a single 31-year-old low-level trader - they don't even try to figure it out. The Yale economist and famous bubble-pricker Robert Schiller goes back to the New Deal and offers a vague meditation on the possible value of regulation.

At the weekend edition of the UK's Financial Times, the interesting "Short View" columnist John Authers wrote a classic thumb-sucker called "I've got a funny feeling about negative sentiment," in which he says that tracking the frequency of the use of the word "recession" often indicates the approach of a recession. He then describes the opposite view - that when editors figure out something like a recession is coming, it may already have happened. I call this piece "classic" because it makes visible the logic of most popular financial discussion: how markets work is completely clear - until the opposite becomes clear.

Trapped people are stupid. That's a lot of the recent story, in which the middle-classes of the US and UK respond to decades of stagnating wages with the hope for investment income - stocks in the 1990s, real estate in the 2000s. In their time, each would obviously go up and each was obviously a good investment. If you didn't buy Internet stocks in 1998 and real estate in 2003 you were an idiot - you had hurt your family, your kids' education, your retirement security. The crucial point is that at the time the delusion was totally rational, indeed mandatory. Skepticism was a huge mistake. It cost you big money. In real terms, it actually did.

Also in the FT, Sharlene Goff noted in passing that “A year ago, some 30 lenders were offering mortgaes of at least 100 per cent of the value of the property. A number were regularly handout out up to 125 per cent. This market has substantially dried up. Almost a third of lenders have withdrawn, and those left in the market are charing eye-popping interest rates." Who would ever lend 125 percent of the value of the collatoral? Well, anybody in 2004 who could count, since the property would escalate by that much in a year in much of the US and UK.
The veteran financial jounralist Joe Nocera describes what he sees as the middle-class problem.

Starting with the crash of 1987, every time there has been a market break, it always snapped back, usually sooner rather than later. Every time housing prices faltered — as they did in the early 1990s — they quickly snapped back as well. As a result, those twin engines, stocks and homes, became the assets we absolutely came to depend on to live the life we wanted. Our employers made the broad transition from pension plans — where the risk was spread broadly and the companies were responsible for their employees’ retirement — to 401(k) plans, where the risk was shifted entirely to the employees. But we were O.K. with that, weren’t we? We were happy to assume that risk because the market’s inevitable rise would secure for us a decent retirement.

Similarly, our home offered us the ability to buy things we wanted — vacations, for instance, or second homes — because we learned that we could borrow against the equity. The rise in the value of that asset made the prospect of repayment relatively painless. It also allowed us to avoid facing the fact that our incomes weren’t keeping pace with our desires.

All this is true. It is all regrettable - a series of bad decisions based on biased information and dumbness about how markets don't actually love the little people. But in real time, and not in hindsight, what was the middle-class supposed to do? To demand that corporations stick with defined-benefit pensions? That was pointless since even Democrats rushed to embrace the wealth-machine of market-dependent pension investments. When that went bad, was the middle class supposed to stick it out and NOT revert to the asset it actually understood, housing? All of its intellectuals, like Joe Nocera, were describing the trends as inevitable. To be intellectually independent, and to buck trends, is the single best way in markets to get royally screwed.

The real point is that people's financial security and quality of life should NOT be dependent on their powers of financial prophecy. They're supposed to do their jobs, spend time with family and friends, see and do and think new things, and have their lives, not spend 40-60 hours at work and another 20 on stock and real estate analysis - which even then means nothing about the outcome.

The financial markets are having the same problem. It's not just sub-prime loans. It's not only a liquidity crisis. It's not just temporary mutual suspicion. It's a crisis of knowledge. People don't know how to value credit and risk anymore. They don't believe in the math in the same way.

What should we do? It's actually not that complicated. We should bring finance into the socially-responsible economy by taxing it like everything else. That means

1. Pass Tobin taxes on financial transactions, which are untaxed, in contrast to your purchase of food (in most states) or movie tickets.
2. Return capital gains taxes to the same level as taxes on wages.

Both of these would generate a lot of income for social development all over the world. They would raise the cost of incessant betting and random arbitrage, lowering its unbelievable rate. And they might get a lot of people focused on inventing things and making stuff that we need all over again. All this money is a huge distraction from actually saving our asses from global warming and world poverty and other fairly pressing things.

Financial "Freefall"

There's a big stock selloff going on all over Asia and Europe today, and it will start up in the US in a few minutes. Steve Goldstein at Marketwatch traces it to paragraph nine of an article published in the International Herald-Tribune, which he correctly describes as mostly an NYT reprint paper for Americans abroad who can't read the local language.

That paragraph reads: "I'm reasonably confident that French banks will weather this turmoil without major trouble even though they are clearly, like all banks, in the world still in the process of marking down assets," said Christian Noyer, governor of the Bank of France and a member of the European Central Bank's governing council."

Apparently the fuss came from the statement that French banks were still "marking down assets."

Was there a single finance professional on earth who thought otherwise? Presumably not, so they are just "selling the news" - selling on the theory that stocks will go down because now the herd knows that French banks are still marking down assets.

But of course the herd also knew this, since it does know how to turn on a TV. So it's a case of "I (now) know that you know that I know that French banks are still marking down assets."

It's a great way to run a world economy.

On the Chopping Block

I spent nearly all of the weekend doing the spreadsheets and then writing a report on how the latest casual attack on California state government - Arnold Schwarzenegger, Director - will end the University of California as a public university, converting it to a public-private partnership at the mercy of private donors and interests. Fun stuff - trying to issue a wake-up call to folks who can seem to quite believe that their well-educated and docile heads are getting lopped off.

On some gut level I am furious with myself for having not only stayed in but spent much time trying to save what looks like a loser institution, when I should have just said bye-bye about ten years ago.

The middle-class has slept through the demise of the institutions that built it - as I say often enough on these pages. This is no longer the case at the Los Angeles Times, one of the country's
best newspapers, where yet another chief editor has just been fired for not cutting fast enough. The piece notes that this is "the fourth time in less than three years that the highest-ranking editor or the publisher has left for that reason."

The latest ex-editor, James O'Shea, was apparently resisting cuts on top of a long series of previous cuts. It is in the nature of modern managers and investors not to care - Arnold-style - about your previous sacrifices. The people who do the actual work know about the steady deterioration of both job and product. They already know that "The Times had a newsroom staff of more than 1,100 people at the start of this decade, but the number has declined to below 900, officials say. Its weekday circulation has dropped to about 800,000, from 1.1 million."

The owners look at the circulation and revenue numbers and demand even more cuts. The cuts are apparently completely unreasonable, given the fact that this fired editor started out as a hired gun for management.

The removal of the editor, James E. O’Shea, by the publisher, David D. Hiller, mirrors the odd spectacle of a little more than a year ago, when the previous publisher, Jeffrey M. Johnson, was fired for refusing to eliminate newsroom jobs as directed by the paper’s owner, the Tribune Company. In each case, a longtime Tribune executive was expected to rein in costs at the paper, but instead sided with the newsroom and lost his job for it.

Will the newsroom folks actually do anything? Who knows: with the Writers Guild Strike going on like the Justice For Janitors strikes used to, L.A. is again becoming a labor town. Maybe it's really dawning on people that they've been screwed.

Krugman had a good piece today about the failure of Reaganomics and the need to get this story out. Amen Mr. Krugman. Middle-classes I hope you're listening for a change.

Why Care about Keynes

Thinking about the presidential campaign makes Fr. Frank dull this morning. A fit of economic nationalism makes Maureed Dowd more interesting. Actually the term economic nationalism just means healthy concern at the blatantly negative effects of the dogma of free trade and the decoupling of the financial sector from national development.

In case anyone thought the Bush Administration would think about the national welfare instead of the welfare of its wealthy core, the president's "stimulus package" wants to make permanent the upper-bracket skew of his tax cuts, which will fail to stimulate. Fail, that is, to stimulate anything except more donations to him from the very rich, who appear to be giving more money than usual to the Democrats.

I'm not sure folks have grasped the philosophy behind the Republican hatred of "Keynesian" economics. Keynes was a major source of the idea that a government-led stimulus could reduce and end a downturn, like the one that in the 1930s was known as the Great Depression. The core concept is that you give money to people who will spend it. They get the goods the money pays for, and the economy is stimulated by their spending on those goods, which increases sales of products and services, which increases investment and hiring, which gets the economy going again.

Republican hatred starts with the association of Keynesian policy with the Democrats, and specifically with their most influential and effective president ever, Franklin Delano Roosevelt. They never stopped hating his New Deal, and here we get beyond the surface partisanship. The people who most immediately and completely spend the extra money they get from a tax rebate or government program are the middle-class and the poor. Keynes offered a solid technical reason for targeting generous, substantial public services at the bottom and the middle of the income ladder rather than at the top.

Even worse for Republicans, Keynesian policy worked. It created a counter-cycle during the Depression. It justified the massive public investment that was the fundamental ingredient of the economic "golden age" after World War II (I've written about this more than once.) It greatly expanded the American middle class (and the British, and the French, and the German . . .) It also, for a time, made a huge number of basically conservative white voters into Democrats. Only Nixon- and Reagan-pioneered campaigns against ungrateful Negroes and hippie students started to peel off the white middle-class from the Democrats (Nixon-Wallace in the 1968 election, Reagan in the 1966 election for governor of California). Good public services remained very popular - as long as their main beneficiaries didn't seem to be "welfare queens" and unAmerican critics of big business or war.

Beneath the political concerns lies a Darwinist disdain for the financial status of ordinary people. The silent assumption is that if ordinary people were any good with money they would already have more of it. If they deserve more money, then they will go out on their own and get more money. Republicans generally deny the economic conditions, discrimination, structural problems, or the sheer mediocrity of the wages nearly all of us earn doing basically useful things like teaching children how to add and subtract or or like nursing hospital patients. There are still some "Main Street" Republicans who don't stick their fingers in their ears or cover their eyes - Kevin Phillips has long been one, and has railed against Wall Street economic concentration better than nearly any Democrat. But the party leaders oppose economic power and broad-based wealth every chance they get.

Sounds a little extreme to say so, but in fact Republicans have spread economic Darwinism, rationalized all inequality booms, and suggested in effect that if schoolteachers don't like their salaries they can always quit and become intellectual property lawyers. They always oppose minimum wage policies,wage increases for the public-sector employees that have been the backbone of the black middle class, and broad-based stimulus packages that give meaningful rebates to regular people. "Free markets" have for a quarter-century been moving wealth and income from the bottom and middle to the top, and Republicans will protect the perimeter that defends around market inequality to their dying breath.

As long as the Democratic candidates don't really attack the inequality perimeter, I will stay bored with them.

More Fun with Finanical Crisis

For the best overview of the role of finance capital in Britain today, see John Lancaster's piece in the London Review of Books. At one point he asks a friend in finance about the effects of the crisis. His friend says it's a much-needed "correction."

So we’ll have to stop running around spending money like drunken sailors,’ I said.

‘Well, drunk sailors tend to be spending their own money,’ Tony said. ‘By contemporary standards they’re quite prudent.’

For a not-as-funny overview of recent American events, here's the economist Dean Baker's summary:

Citigroup continues to rank at the top in dollar losses from the housing market meltdown. It has now set aside $23.2 billion in loss reserves. This sum is a bit less than 20 percent of the company's current market value of $134 billion. Of course, its market value was more than twice as high before investors discovered how deeply involved it was in the subprime mortgage market. The safest bet in this story is that there will be more big write downs to come as falling house prices cause the epidemic of bad debt to spread.

The other major banks are also being hit, even if not quite as hard. Citigroup has already announced that it is laying off almost 10 percent of its workforce. With a sharp reduction in employment at the major banks, Wall Street and New York's economy are likely to feel the pain.

Even those keeping their jobs are likely to have less money to spend. The stock prices of all the major banks and brokerage houses are down sharply, leading to a tremendous loss of wealth for those in the industry. The value of Morgan Stanley's stock has fallen by $30 billion from its year ago levels, Merrill Lynch's decline has been worth almost $40 billion, and Citigroup's plunge has destroyed $147 billion of market value. While investors all over the world own stakes in these companies, these declines will be disproportionately felt in the New York area. Especially since there is almost certainly more on the way.

Watch the New York housing market. Real house prices in the New York City area more than doubled in the decade from 1996 to 2006, driven in large part by the extraordinary boom on Wall Street. With the boom turning into a colossal bust, the NYC real estate market looks quite vulnerable.

The weak December retail sales data released yesterday confirmed the reports from the chain stores last week. Consumers are beginning to cut back in a big way. There seems to be no way around the conclusion that this was a very weak holiday season. Comparing year over year nominal sales growth figures even understates the weakness somewhat since inflation has been higher in 2007 than it had been in prior years in this decade.

The inflation data released this week must have the Fed worried. Core inflation continues to creep up with the core inflation rate over the last three months reaching 2.7 percent. While this is still a very modest inflation rate by any reasonable standard, it is above the 2.0 percent rate that Chairman Bernanke would like the Fed to target. Furthermore, it looks like there is more inflation in the pipeline as non-fuel import prices are finally reflecting the decline in the dollar, rising at a 4.8 percent annual rate over the last quarter.

The Fed will have to be prepared to accept slightly higher inflation if it continues on its path of lowering rates. In this regard, it is worth noting that a 50 basis point cut in the federal funds rate will push it below the 4.0 percent overnight rate set by the ECB. If the ECB holds and the Fed continues to lower, then the dollar is almost certain to drop further against the euro.

For more fun and games, see the Guardian's slam of the Facebook founders, big venture cap libertarian haters of multiculturalism. I heart Facebook - world's lowest brain-power form of human interaction ever invented - unless I think about it. Which this piece made me do. Facebook incessantly packages mass mailings as individual appeals - Anna asks you What Serial Killer are You? - but actually Anna asked 20 people, and did so because she couldn't access the application until she did. The Skip button is a dummy.

I'm sure this is connected to the financial meltdown.

Sunday in East Berlin

Berlin is in most ways the opposite of Paris. It sprawls. Many of its plazas dwarf human beings. Its streets can take along time to walk across. Its newer apartment blocks go on forever. It feels wide open to a Los Angeles native like me, though Berliners don't really see the LA comparison. Unlike Paris too, half of its central city was destroyed during World War II, and rebuilt by sector and then rebuilt again after the end of the Cold War. There are only bits and pieces of the 19th century here, and not the enormous Hausmannian unity that makes Paris beautiful and yet a little isolated in itself.



Berlin is half-way to everywhere to the East and South - Prague, Budapest, the Ukraine, Bulgaria, Istanbul, Bagdhad. The approach to Berlin is across mile after mile of rails and roads. The new central train station is bigger than a drydock for an aircraft carrier. Across the street from the new station the old Berlin wall lines the Spree River- now the longest collaborative mural project anywhere. On the opposite bank stripped brick factories wait for something with their windows gone. Large parts of town are still under construction, while old power stations and apartment blocks remain shut down, waiting for the next round, which will be as big as the round they're in. On the first day the setting sun shone on a still working station's three steel towers.

Thus it took us a while Sunday morning to get out to Lichetenberg east of the city, on the S-Bahn that goes to Wartenberg. It was too sunny not to take pictures, of metallic Friedrichstrasse, the Spree downtown, the industrial wrecks, the rebuilt village blocks lining empty streets, including the one leading from the station at Noldherplatz, where Ines said the Neonazis were planning their march that would rename, unofficially, some street there after the Berlin police commander who in 1919 ordered the killing of Karl Liebknecht and Rosa Luxemburg.

These two famous socialists were among many other things founders of the Spartacist League and prominent anti-war and anti-imperialist activists who had called on soldiers and sailors to stop fighting the war and rise up to replace the Kaiser. Luxemburg was a leading marxist intellectual as well, and had written superb, original, and fundamental work on a range of subjects from the role of imperialism in the capital accumulation process to the weakness of reformism to the politics of the mass strike and to major errors committed by the leaders of the Russian Revolution. After the Spartacist League had formed an alliance that became the German Communist Party and supported the January general strike in 1919, the Social Democrats, led by Luxemburg's former student Friedrich Ebert, used the Freikorps to suppress their Left opposition, and in the process had her, Liebknecht and hundreds of others killed. As it happened, we were passing the Nazi march site on our way to visit the Luxemburg memorial on the anniversary of the assassination.

I had pictured a small memorial. There would be a gravesite - greener and more spread out than Jim Morrison's in Pere Lachaise in Paris. There would be a similar number of devotees, maybe up to a hundred since it was an anniversary. But after all this was Berlin.

We got off the train and hopped into a taxi. The driver said the streets were blocked and we hopped out again. We entered the tunnel to cross under the tracks and were swept into a river of people. We emerged on the other side and found hundreds more carrying red flowers. There were a few college-age anarchists and then thousands of middle-aged and elderly people, mostly well-dressed, utterly respectable, all carrying the same red flowers - thousands and thousands of flowers. There was a steady stream of people from grandparents to infants that went on hour after hour. There was the clustering, the solid wall of unmoving people, around the graves and the mounds of flowers. There were food trucks and political tents. They were expecting 80,000.



What is Rosa Luxemburg to them? Martyr to war and to proto-Nazism? A great figure of revo- lutionary thought and action? One of the giants of German political history? Unfor- gotten leader of a continuing revolution?

I have no idea. I don't know whether the members of the procession think she belongs to the future as well as to history. I don't know who they were - reluctant capitalist conscripts from the former East Berlin. Or older people unhappy with the regressions visible in the world, or people honoring part of their national identity. I do know I have never seen such a mountain of red flowers, or such a flow of people carrying flowers while not carrying. Whoever they were, they came for her. They came for the fallen. I think they came for the cause she fell for. If you put a flower on the grave, and you remember, then what you remember isn't actually gone.




We took the S-bahn back west a few stops to Waschauer, got off in the sun and walked over the bridge to another of Berlin's apparently several dozen art zones, this one in Friedrichshain. We ordered lunch in a corner tavern on Revalerstr and toasted various things including the Rosas still to come. Mattias joined us, and we walked through the neighborhood on Koperikusstr toward the east bank of the Spree, past 50s apartment blocks to an abandoned east Berlin power station on Rudersdstr that has become the biggest club in Europe, then rounded the corner where the statue of Rosa Luxemburg in the Michelin guidebook sits in front of the empty Neue Deutchland building, East Berlin's defunct daily, whose building continues to preside.

We were on Pariser Kommune by this point, and we walked in front of the shopping-mall train station Ostbahnhof down to Holzmrkt along the industrial buildings next to the water. One is a glass-cube restaurant. We walked down the side and found a brick patio with chairs facing the sun. There was the Spree, as still as a mirror, as empty as a good beach day after the a-bomb's gone off. Hidden below the patio was a wooden dock where a golden wood vaporetto dinner boat waited to take Mattias and Ines on their friend's birthday cruise. Off they went. I looked back across the water into the sun. Berlin here is Venice - if Venice had built brick factories by the river, let them fall into ruin, and allowed the grass to swallow them. My camera had stopped. The sun hung there. The boat froze on the mirror.

We started everything up again - back to the S-bahn at Jannowitzbruche, Hackesher Markt, and the History museum for the rest of the afternoon. In the exhibit on Portugal I saw a globe by Martin Behaim from the early 1500s. It had a golden-brown Europe and Africa and Asia, and on the other side, in the black sea, no New World. It was an Earth with everything except the Americas. It was another Earth, an alternate Earth, and in this room no two Earths were the same. In the Klaus May exhibit there were the Indians he invented in Bavaria, and the Arabs he connected with heroic utopias. In the long gigantic history of Germany there are the centuries of almost unbroken war, and the amazing murderousness of the leaders. And through all of this time there were always many Germanies.

Actually since 1919 not that much time has passed. On this trip, about my sixth to Berlin, I felt that the hidden side of the world is going to rotate into view.

New Hamphire Primary Results

My basic reactions, based partly on a Los Angeles Times exit poll:
-the NH Dems are split. This is a more important story than Hill's repeat of Bill's "comeback kid." - NHers think that Obama has the best chance of the three major candidates to beat the Republicans. Hillary didn't squeak ahead on the basis of electability (experience, etc.). They think Edwards has the worst chance to beat the Republicans. I think this is completely backwards and don't understand these people at all.

• Voters saw no ideological differences between the candidates. This is too bad, because it means the campaign remains a popularity contest dominated by image positioning and generational identifications (Clinton gets the old, Obama the young).
• Too much college: 54 percent of voters report having a college degree, which is exactly twice the percentage of college degrees in the general population. (These folks skew for Obama).
• desperation time: "change" beat "best chance to win" by an incredible 54-6 percent as the main factor in one's selection.
• the only Dem candidate who would really change foreign policy by, for example, withdrawing troops from Iraq is Bill Richardson, and he came in at 5 percent.
• Forget Iowa and New Hampshire. Iowa is a white state (2.5 percent Black). New Hampshire is, amazingly, even whiter! (1.1 percent Black). Their votes are really not representative of "America," and yet some estimates say nearly half of all campaign media coverage is devoted to Iowa and NH, giving these country states truly illegitimate power.
• No Fear for Tears. It's good Hillary wasn't dinged for having a teary moment when asked how hard it is to get out of bed every morning. Many news stories actually dragged out Edmund Muskie from 1972 to ask if wet eyes could sink her campaign. That's a sign of the empty-headedness of the media, of course, and also of sadly authoritarian foundation of American political life, in which the secret test question is always "are you willing to kill for America." Hillary has repeatedly said yes, and people seem still to believe her.
  

That was one of the few interesting moments in these incredibly scripted and mentally lowgrade campaigns. The question seems to have prompted Clinton to have an unbidden thought about how hard her campaign life is. Maybe she felt, for a fleeting moment, that her life is joyless and sacrificial in general. I think it probably is, in spite of the fame and power. Hard, hard hard - this is a problem with American politics. It shuts down a lot of options before we even know it.

Some Financial Emotions

Father Frank's Sunday sermon was cheerier than usual, thanks to his reading of Obama's victory in Iowa. FF believes Obama and Huckabee are the anti-war candidates, relatively speaking, and that voters went for them because they dislike the war.

Unfortunately, the polls that Rich cites are ambiguous, even in his own paraphrase of them, to suggest an anti-war surge among voters. There's no evidence of revolt against war as an instrument of US foreign policy, and nearly half of the public think that reduced solider body counts mean the war is going well. That kind of bare-half (48 percent here) is how Republicans and near-Republicans like Hillary Clinton maintain control. Father Frank's spirit of joy passed me by.

I would be happier if the Dims had some non-conservative economic ideas - concrete alternatives to what Paul Krugman calls the Repub's decades of "Robin-Hood-in-reverse." With the partial exception of Edwards, they don't.

The core problem for the Dims once again is that Real Beats Fake. The Repubs believe in their Darwinist business-run economy. The Dims don't believe in a social-development alternative - they don't have one. The Dims are nicer about supporting public services, yet not because they are essential to wealth creation and justice, but because they believe in charity. Hillary will follow Bill's Fake Republicanism and do even better than he did to make it real. People don't actually want this nonfunctional neo-classical anti-public economics any more. They just don't have much choice.

The most important public statement in the Iowa campaign was actually uttered on Jay Leno's strikebreaking show, and it came from Republican Huckabee: "People are looking for a presidential candidate who reminds them more of the guy they work with rather than the guy that laid them off."

More everyday signs of the need for new socially-oriented economic theory:

- a good Wall Street Journal story on Japan's stagnation that traces it to the boom in low wage workers. The US kept consumption going through borrowing. Someday we'll rediscover the basic Keynesian idea of helping the economy by supporting demand, which requires good and rising wages for the majority.

- a strange New York Times article on job sadness among affluent doctors and lawyers. The Times is very sensitive to the mood of its base, which has taken a beating: starting as a lawyer in a big firm at $200,000 a year just doesn't feel as good as it used to. Topping out at $500,000 a year hurts a lot of physician's feelings. The article claims that working everyday at really challenging jobs for lots of money pales by comparison to creating your own start-up company!

The better explanation is the combination of grotesque overwork - 80 hour-weeks make everyone feel like indentured servants - and the inequality boom. It's not that you can't live on $500,000 a year. It's that all labor, even the best-paid, is grossly under-rewarded by comparison to corporate ownership and executive placement.

The pivotal economic issue in the election is capital gains tax policy. Will any Dim candidate say unearned income (via investments) should be taxed at the same rate as the income you earn with your own skill and work? Even Edwards won't go there. Until one of the candidates can, we'll have a banker's economy that will make every one else feel kind of bad.