Saturday, December 26, 2009

Is The Republican Party Doomed?

The Senate passed its version of a health insurance bill just before Christmas. Much of that victory belongs to Senate Majority Leader Harry Reid who somehow managed to get the 60 votes needed to stop Republican obstructionism. That must have been harder than herding kittens with a stick. There are reports that the senate legislation contains considerable pork benefitting individual senators in exchange for their votes. So be it. That’s how it must be done in a less-than-perfect world. Reid deserves a medal.

On the other hand, what is up with Republicans? Their obstructionist behavior proves that they are motivated to make the Democratic party fail, regardless of what is right or wrong. Not a single Republican vote was cast for health care reform in the Senate. Not one. How can ALL Republicans be in the pocket of insurers? How can every one of them be without compassion? How can 100% of them be contemptuous of the needs of the people they supposedly represent? It is unfathomable. It’s not that they wanted more debate; they wanted to shut down all debate. They are simply petulant obstructionists, like a child who threatens to hold his breath until he gets his way.

The Republican party has become morally, ethically, and intellectually bankrupt. I am sure that as soon as the legislation is reconciled and passed, they will begin campaigning for its repeal. If Dems have any sense of public relations (and they often don’t), they will start framing their victory message now to inoculate the public against the unconscionable Republican hypocrisy inevitably forthcoming.

At some point, even the most ignorant of American voters surely will realize that the Republican party is the party of small-minded greed, selfishness, and immaturity. It will become patently obvious through the party’s bizarre, unjustifiable antics. Won’t it? There must be a bottom to the well of ignorance. This health care reform episode might illuminate that bottom if the Democrats play their P.R. cards right.

I will not be too surprised if, within a decade, the Republican party is defunct, replaced by a new political party, The Conservatives, or something like that, made up of lawmakers who are responsible to the American voters, who do have conscience, ethics, and ideas, but who, unlike Republicans, would like to seriously and honestly engage American voters about important issues such as excessive government spending, and have the courage to stand for election based on their principles. They will become strong. The GOP will be no more.

Monday, December 14, 2009

Killer Joe?

Fox reports that Senator Joseph Lieberman is being called a "killer" because of digging in his heels on the health care debate. (,2933,580229,00.html).

He has vowed that he will not vote for the currently debated health care reform bill if it includes a current proposal to extend Medicare to persons under 65 years of age. Thousands of people without health care will die, and Lieberman is their killer if he doesn't extend healthcare to them, the argument goes.

It's stupid rhetoric. Lieberman is right. The cost of extending Medicare down the age ladder would be too expensive. Medicare is already enormously expensive and inadequately funded. Expanding it makes no sense, especially since the rest of the healthcare reform bill will provide for people under 65 in other ways anyway.

Lieberman is not my favorite senator, by a long shot. But I grudgingly admit he has called this one correctly. Spending is fine. We need to spend on our people. That's what government does. But Harry Reid and the other Democrats can easily go completely bananas with public money if nobody speaks up. There are limits to what is possible. Thanks, Joe.

Friday, December 11, 2009

Two Errors in Obama's Nobel Speech

“…Perhaps the most profound issue surrounding my receipt of this prize is the fact that I am the Commander-in-Chief of a nation in the midst of two wars,” said President Obama, accepting the Nobel Prize for Peace on December 10. That fact was a stark incongruity that framed the speech and which made it an almost impossible situation for him. Yet it is that very incongruity that will make the speech endure. School children will read it for generations precisely because it eloquently addresses the inherent tension between peace and war.

He did far better than could have been expected under the circumstance, and delivered a very articulate speech on the topic of peace while commanding armies at war, still, I thought he said two wrong things.

One was his assertion of the universality of American values, which is a myopic, self-centered view. Obama listed “the” iconic American values as if they were automatically universal human truths: defense of human rights, the ideals of liberty, self-determination, equality and the rule of law, and so forth. In fact, not all people and not all governments embrace these values (obviously) which are very far from being universal human values. They just happen to be things that we believe are good. There are other ways to live. Obama does not try to force these values down the throats of others, as G.W. Bush often did, but to list them as universal virtues without qualification is an error that reveals a surprising blind spot.

The second wrong thing Obama said was that “…Evil does exist in the world.” It is true, as he explained, “A non-violent movement could not have halted Hitler's armies. Negotiations cannot convince al Qaeda's leaders to lay down their arms.” These “small men with outsize rage,” as he called them, cannot be spoken to. Unfortunately they must be killed, in self-defense. That is the sad reality. But that does not imply they are evil. It just means we are unable to talk with them because of utterly incompatible world views.

If a rabid dog attacks you, you may have to kill it, but that does not make the dog evil. It just means that, regrettably, you have no other method of communication. This is a distinction I thought Obama would be familiar with, and I was surprised to hear him invoke the Manichaeism that G.W. was so fond of. It is an erroneous and dangerous way to characterize your enemy.

Tuesday, November 17, 2009

Palestine by Fiat?

Late last week, the head Palestinian negotiator, Saeb Erekat, announced that Palestinians would ask the U.N. Security council to recognize a Palestinian state on 1967 borders. The chance of that happening is nil, since the U.S. would veto it.

Nevertheless, is it such a bad idea to ask? It would force the U.S. into an awkward position, drawing world attention to its one-sided, pro-Israeli policy. That might dislodge some diplomatic energy that is lacking at the moment.

What would happen if Palestinians were to unilaterally declare such a state? It would be interesting. Israel might acknowledge it, but would seal its borders and shut off the water. Trade and transportation would stop. There would be no effective communication between Gaza and the West Bank. Since Hamas controls Gaza and is against such a declaration, in effect, you would have a Palestine on the West Bank only.

(1967 Borders)

Israel would not give up its settlements without a fight, so the idea of 1967 borders would not be real on the ground. Still, there would be, in fact, a Palestinian state. The Arab world would recognize it and money, goods, and military support would flow in immediately. Palestine would no longer be dependent on Israel, but instead on Jordan, and other neighbors, until it could find its feet.

One can imagine that over time, the new Palestine would develop its own governance and economy and become a functioning state. It would solve the persistent “middle east crisis” by its defacto recognition of Israel. Israel would be hard pressed not to acknowledge the legitimacy of the new state (not necessarily with formal diplomatic recognition). Palestine declared independence once before, in 1988, and many countries recognized that declaration, but for practical reasons, nothing came of it. Is it worth trying again?

On the down side, there is the problem of the illegal settlements. Essentially, there would be an unresolved border issue there. But if the Palestinians were to simply accept the border of The Wall that Israel has built, and give up on land already annexed, they would have stopped that erosion and staked firm borders. They would have to get past wet-eyed talk about historic homelands and all that, and just go for the certainty of statehood.

Gaza would be left to itself. In the long run, it might declare itself the new state of Hamas, or be taken over by Egypt, or if Hamas were to fall, opt to be annexed to Palestine. None of those outcomes is so terrible.

(Original 1947 Borders)

The new Palestine could join the U.N., the Arab League, and whatever other organizations it could. Any hostility between Israel and Palestine would be a matter for U.N. negotiation. Israel would remain secure with U.S. backing. Such an outcome would take much of the ideological wind out of extremists who excuse their militancy on grounds of supporting the struggle of the Palestinian people. That struggle would be over.

Monday, October 19, 2009

The AFPAK Conundrum

President Obama will soon announce whether or not he will agree to General McChrystal’s request to send 40,000 more troops to Afghanistan. Most pundits agree that 40K would be merely a downpayment; that at least 100,000 would be needed to suppress the Taliban there. So we are looking at a Vietnam-style gradual escalation that slowly bleeds the country (our country) white, whereupon we throw in the towel in defeat. It’s not even clear what these 40K troops would be used for. It’s not even clear what the present troops there are doing. The war in Afghanistan is not popular with Americans, but even allowing for the fact that the American public has a short attention span, sending more troops is a bad idea now and an even worse trend.

Should we pull out then? Let the Taliban take over? An argument could be made for that option, except for one small problem: Pakistan has the atomic bomb. The Taliban are not going to stay in Afghanistan. They have already migrated into Pakistan, which is now their headquarters. We do not need another bunch of nut-case Islamic extremists with nuclear weapons. The consequences are too severe to even consider.

So what is a good strategy? Not that Obama calls me any more, but if he did, I would say, don’t sent any more fighting troops to Afghanistan. It’s a never-ending battle there. No matter how many Taliban we kill, they can easily recruit more. Instead, send 40,000 troops into Pakistan to wipe out the Taliban in the Northwest region, drive them back into Afghanistan. Pakistan is what we need to protect, not Afghanistan.

Granted, the Pakis may not care to have 40,000 American troops barge in. But maybe there is a way around that. Maybe they are 40,000 trainers, advisors, logistics personnel, and whatnot; everything but trigger-pullers.

Once Pakistan is secure, we take these further actions in Afghanistan: We seal the borders of Afghanistan (as much as possible) from the inside with troops, and from the outside with economic and political sanctions. Especially the border with Pakistan. Then we eradicate the poppies, which is the Taliban’s source of income, and we pay farmers a subsidy to grow something more useful to the same profit level. Hey, it works in Wisconsin, it can work in Kandahar. I am sure that farm subsidies are less costly than a war without end. Finally, we spend money, money, money on training and infiltrating human intelligence into Afghanistan, psychological warfare, and on building schools, electric generators, and water systems in villages. We do NOT try to convert the country to democracy, capitalism, or Christianity. I would guess that all these efforts, costly though they might be, would still be less expensive than another eight years of warfare.

So Obama should send in, not 40,000 troops, but 40,000 civil engineers, spies, and micro-diplomats. Troops are not what we need.

Thursday, September 17, 2009

Better Than a Poke In The Eye

The recently released “Baucus” senate health care reform plan has the virtue of providing health insurance coverage for a good proportion of the currently uninsured. Everybody will be required to have health insurance, just as we must now have car insurance, but the cost of insurance will be subsidized for the poor and the lower middle class. Those costs will be recovered through “fees” (basically new taxes) on health insurers, pharmaceutical makers, health labs and medical device makers.

Providing health insurance for the poor is a good thing. It could even nominally reduce costs by reducing use of emergency rooms, (which we all pay for in increased costs), the method by which the poor get health care now. It also introduces some slight regulation of the insurance industry, eliminating the more egregious practices, such as denying coverage for pre-existing conditions, and by setting some minimum coverage standards. Regulation like that is badly needed.

However, the plan does not propose to reduce overall health care spending. The high, “unsustainable” cost of health care has been Obama’s main argument for why reform is needed. This plan does not address that argument. There will be non-profit consumer cooperatives established for the purpose of providing health care insurance. These are supposed to provide much-needed price competition, but it is hard to see how they would, unless, over time, they became extremely large and essentially became the “public option” not included in this plan. A small insurance co-op just wouldn’t have enough actuarial muscle to spread the risk.

State-based exchanges, or central markets, would be set up where individuals could easily compare prices and coverage from health insurers. That will help with price transparency, but is not much different than spending a few hours on the internet. You still can only buy insurance from companies licensed in your state, which is a limited choice. And if the pricing information is provided by the industry, it will be about as transparent as mud. Have you ever tried to compare pricing for TV cable services, or wireless services online? There are so many vaguely defined variables, misdirections and subtle subterfuges that a straightforward comparison is impossible. I am not sanguine about the helpfulness of that idea.

We should assume that the taxes levied on the health care industry to pay for the Baucus plan will be passed along to consumers. The companies are not going to just take the hit. They will raise the cost of coverage, probably across the board but mostly on the high end. This will have the effect of employers choosing to offer lower grade coverage or higher prices, and the same for individuals buying their own coverage. There are simply no price controls in this plan. By assigning the new costs disproportionately to higher end consumers, the plan effects a wealth transfer, the rich subsidizing the newly insured poor. That’s not a bad thing in principle, but it does nothing to reduce overall costs, which was the problem to be solved.

So this plan is batting .500. It does address one of the two outstanding problems, health insurance coverage for the 50 million uninsured in this country. But it whiffs the second problem, lowering the overall cost of health care. One out of two is better than none out of two, but it is not the sweeping FDR-like vision many had hoped for. Perhaps it is not the final word.

Sunday, September 6, 2009

It's the Insurance, Stupid

President Obama will soon give a big speech to congress (mostly to the Democrats) about health care reform. He needs to right the ship of discussion quickly. It has been listing badly under the weight of irrational and malicious propaganda from the right and petty bickering on the left.

The plain fact is that the current health care system is financially unsustainable. Three quarters of Americans will simply have to go broke from health care costs if it continues on the present course. Or, more likely, premiums will rise sharply and benefits will be cut to keep it going, leaving more of us out in the cold. None of these is a desirable outcome. Ergo, we need to reform the health care system.

Obama has at least identified the problem correctly as an insurance problem. The problem is not that doctors are price gouging. The problem is not that hospital profits are too high. The problem is not that the quality of health care is low. The problem is not fraud (although there is some of that, to be sure). The problem is not frivolous use of medical services. The problem is cost, cost cost. Why are the costs so high? Because the insurance companies charge too much for the services they render. The problem is with the insurance companies.

I am very satisfied with my health insurance just the way it is. It is comprehensive and low cost. I fork over a $15 copay every time I visit the doctor, and that’s it. I don’t even know what the true cost is of the medical services I receive. As far as I know, anything I want costs $15.

What do I pay for this fabulous level of care? Thousands and thousands of dollars! I pay about $6,432 annually for basic health insurance (including wife). My employer pays at least that much, probably double that amount. I also pay $624 per year for dental insurance (employer pays the rest) and $3,214 a year to medicare, a service I do not use, so I am donating that amount to “the system” so others can benefit.

But just looking at basic health insurance, Aetna gets $6432 annually from me and let’s assume $12, 864 annually from my employer, for a total of $19, 296 per year in premiums. And this has been going on for the past 40 years, at ever increasing rates. I can guarantee that I do not consume $20K worth of medical services in a year and never have. So Aetna has literally, made a fortune on just me and my employer!

Now, granted, my employer can deduct some of their portion of the insurance payments from their taxes, which amounts to a government subsidy (a partial “single-payer” system). And granted, I paid less for insurance in the distant past. And granted, when I get really old, it is not inconceivable that I might blow through $20K in medical services in a year. But I have been paying in for a long time, and I am just one person! Millions upon millions of people have been paying these same premiums into Aetna and the other insurance companies for years. Who is getting rich?

Does the “free-market” system of insurance work? It works for me. I have no motivation to change anything. But in two years, my employer-subsidised medical insurance runs out. Then what will I do? Will I be able to come up with private insurance? Preliminary research shows that I will have to pay at least $1500 a month, or about $27,000 a year for private coverage that includes only the most catastrophic medical events, with a high copay and a high deductible. That is nasty. No more annual physicals. No more lab tests that detect potentially serious conditions before they occur. No more going to the doctor every time there is an infection, rash, or pain that is not life-threatening.

I simply cannot not afford the level of coverage I have now once I separate from my employer. It is no wonder that nearly 50 million Americans have no medical coverage at all. It's expensive! I will just chance it for a few more years until I qualify for medicare.

Obama has suggested that the government should offer public insurance to compete with the private companies, like Aetna. Presumably, it would be cheaper than Aetna’s and just as good. That would force Aetna to lower their prices (and take a lower profit, poor babies.)

Critics object that if there were a public option, many small to medium employers (and maybe the large employers too) would simply stop offering health benefits. Why should they, when the public option is available to anyone? So, the complaint goes, the public option would force out the private option.

That objection is nonsense, borne of either ignorance or malicious disinformation. Why would private employers continue to offer health coverage? For the same reason they offer salary: to compensate employees! Health insurance is part of the compensation package. If my employer stopped offering health care coverage, that would be equivalent to a $12,000 per year pay cut. Forget that. I would look to a more generous employer rather quickly.

Secondly, if the public option is cheaper and just as good, and let’s say employers do stop offering private coverage, and workers move in throngs to the public option, what is Aetna going to do? Will they say, “Oh well, it was good while it lasted, but now we’re out of business. Too bad?” Of course not. They are not going out of business. They will fight back, and that is the whole point. They will lower premiums and improve services and do whatever it takes to be competitive and stay in business. And that is exactly the desired outcome.

Who could be against lower costs for health care at the same high level? Only a few groups. The insurance companies are against it, of course. And the politicians they support are against it. And all the lawyers, accountants, adjustors, clerks and millions of others who feed off the insurance industry would be against it. But those are all greedy self-interests. It is perfectly clear that health insurance reform is in the best interest of the public.

I hope Obama addresses the health insurance issue head on and does not get drawn into peripheral or nonexistent issues such as “unnecessary lab tests” fraud, paperwork reduction, tort reform, health rationing, “death panels”, and so on. None of that is keeping his eye on the ball. Insurance is the ball.

Sunday, August 30, 2009

Cheney Offended by Rule of Law

Former vice-president Dick Cheney said on Fox News that the Attorney General’s probe into CIA torture under the Bush-Cheney administration “offends the Hell out of me.”

( 8/30/09. )

(Fox News Graphic)

Cheney has “serious doubts,” he said, about whether President Obama “understands and is prepared to do what needs to be done to defend the nation."

But what “nation” is Cheney talking about? A democratic America that operates by the will of the people, under the rule of law, or some other nation, in which an autocratic ruler (or a pair of them) decide arbitrarily “what needs to be done” regardless of the law?

Torture of prisoners is illegal. It is illegal now, and it was illegal when Cheney was vice-president. Since credible evidence has emerged that the CIA engaged in systematic torture with at least tacit, and probably explicit approval of Cheney, then what is the attorney general supposed to do? Ignore it? He can’t. It would be illegal for him to ignore it.

The attorney general swore in his oath of office to protect and uphold the constitution, and unlike Cheney, who also took that oath, the attorney general apparently is a man of his word.

The new policy (of upholding the law), will be, according to Cheney, "very, very devastating, I think, … on morale inside the intelligence community." That is probably correct. No criminal likes to be caught and punished. It understandably deflates morale.

The trail of crumbs might lead straight back to Cheney’s office, whereupon he would be, we can guess, extremely, extremely offended all to Hell that his criminal behavior was exposed.

Monday, August 3, 2009

R2P: Is there a Right to Protect?

R2P stands for “Responsibility to Protect,” a phrase and an idea tirelessly promoted by Gareth Evans, a former Australian foreign minister. The United Nations has been debating the idea this week in the General Assembly.

What is it? Four years ago a meeting of more than 150 world leaders issued a declaration asserting that the “international community” (however that is defined) has a “right” and a duty to protect people from genocide and mass killings, especially when their own government will not or cannot protect them. The situation everyone probably had in mind was the mass murders in Rwanda and in Bosnia in the 1990’s. The world mostly stood by and watched, saying “What can we do? It is an internal affair of that country.”

The declaration says, no, mass atrocities and genocide are not internal political affairs, but moral issues that concern all civilized people. It is seen as a small extension to widely accepted international principles of human rights.

According to the R2P principle, if the government of a country could not or would not protect its own people from mass slaughter, then, if the security council of the United Nations agreed, the U.N. could intervene by providing advice and mediation. If that did not work, then in an extreme case, armed intervention would be justified to protect the afflicted population. The proposal has been endorsed by U.N. Secretary Ban Ki Moon.

Who could be against this? Surely we do not want to sit by and watch another slaughter like we saw in Rwanda?

The question is, who defines what counts as “atrocity” or “genocide”? Is the killing in Darfur a genocide? The leaders in Khartoum don’t say so. They are just fighting rebels, they say. The U.N. has no right to interfere.

According to Miguel D’Escoto, the U.N. General Assembly president, R2P is just a disguised form of neo-colonialism to be used by big Western powers to impose their will on the weak. It is a fig leaf for a big country to wear as it invades a smaller one.

Recently, Russia appealed to the R2P principle as a reason it “had to” invade Georgia. Is that wrong? Hitler used the R2P argument to invade Czechoslovakia before World War II. Japan claimed it “had to” invade Manchuria in 1931 to end the slaughter of its citizens there. So clearly the principle can be used for various ends.

Nevertheless, it seems that if the U.S., Britain, France, Russia, and China, the members of the U.N. security council who rarely agree on anything, all agreed that invocation of R2P was appropriate, that would seem to be an adequate judicial opinion. But some countries who are not members of that club disagree.

Not everyone in the U.S. is sold on the idea of R2P either. The GW Bush administration was worried that a vote could be taken against US actions around the world, such as in Iraq or Afghanistan, in the name of preventing inhuman slaughter of innocents. Obama’s government has supported the idea.

If we were not a permanent member of the security council, how would we feel about this principle, having no veto over its execution? Would we be fearless? Surely we know genocide when we see it, and we ourselves would never commit genocide! No? We have in the past. We wiped out the American Indians. We wiped out two Japanese cities with nuclear bombs. We killed an awful lot of Vietnamese for no obvious reason. There is just no reason to think that any particular country could be immune from a U.N. resolution to invade on grounds of R2P. Nobody wants to be in that position.

So despite what seems to be a no-brainer extension to the basic principles of human rights, the U.N. will not endorse the R2P idea this week. Fear for self-preservation is much stronger than any noble impulse to help nameless foreigners in some god-forsaken corner of the globe. It’s a pity. We have not really come so far from the big monkeys we started out as.

Saturday, June 6, 2009

Peace, Inshallah

President Obama’s speech in Cairo last week is generally regarded as a success. He did reach out to the Islamic world, hoping, as he said, for “a new beginning.” But very early in the speech, he started with an untrue premise. He stated that Christianity and Islam have much in common, shared values and interests. In the most abstract sense that is correct, as all religions have in common acknowledgment of a supreme God. But a very large difference between Christianity and Islam is captured in the single Arab word, “inshallah,” meaning “God willing.”

“Inshallah” peppers every conversation, almost every statement, in Arabic, and for good reason. Many Muslims take a passive attitude toward life that moves by the hand of God, not by their own hand. There is not the sense we have in the West of “doing” one’s life, building one’s career, striving for success, and so on. All those things are in God’s hands. What happens is not up to me. Inshallah.

In Christianity there is a similar theme of submission to God’s will in all things. Yet somehow that does not come at the expense of individual ego. Christians talk about God intervening in human affairs from time to time, making things turn out well or badly, but there is not a pervasive feeling that every minute of every day is controlled by the hand of God, individuals mere corks bobbing on the sea of divine events. It’s a fundamental difference in psychology that must underly any attempts at reconciliation of the cultures, and any political dialog. By suggesting otherwise, Obama started on shaky ground.

Christians do not prostrate themselves five times a day and pray in public. Our relationship with God is very private, very inner. Yet in one sense, Muslims practice inner mindfulness far more intensely than Christians, for that. Praying ostensibly five times a day would necessarily make you more mindful of God’s presence. That is the whole point of the practice. They are not praying to ask god to intervene so that their favorite sports team will win the playoffs. No. Each Muslim is reminding himself, “My life is not my life. My life is God’s life. Inshallah.
(Image: Reuters)

Tuesday, May 26, 2009

Vive La France

The big news today is not the appointment of a new Supreme Court judge, and not North Korea’s underground nuclear test. The real news is that France opened its first foreign military base in 50 years, in Abu Dhabi, United Arab Emirates. ( ).

Why would France do that? Oil is one obvious answer. France needs to protect a future supply of oil just as the US has military bases in the Middle East for the same reason.

Secondly, the new base is a mere 137 miles from Iran, and that is surely no accident. That delightfully tweaks the Iranian nose, but also stands as a serious warning, by the UAE, and by implication, from other Arab states, that they are prepared to confront an aggressive Iran, even a nuclear Iran. France is a nuclear power, of course.

French president Nicolas Sarkozy highlighted the new base’s ability to fight pirates in the shipping lanes, but that is more misdirection than motivation.

The longer term strategic interest is that France wants to project its foreign policy into the Middle East to compete for military, economic, and cultural influence in the Arab world. That is a competition the U.S. would love to lose. We want out, not in. Let France strut its stuff for a while. We would pay them to open that base! (Maybe we did, who knows?).

The history of the Middle East is the history of Western meddling, especially by Britain, France, Russia, and the U.S. There is almost no other history to tell since before World War I. The uncertainty and latent instability in the region today is legacy of that sordid modern history. If we did not need the oil, we could let the devil take the hindmost. As it is, we should be grateful to France for providing some backbone while we are otherwise occupied. We have indeed come a long way from "Freedom Fries."

Sunday, May 17, 2009

Pakistan Vs. Taliban

A million people are displaced from the fighting in the Swat valley in northwest Pakistan as the Pakistani army attempts to rout the Taliban. According to sketchy press reports “hundreds” of Taliban fighters have been killed and the army controls the valley again.

It is a worthy show of force that convinces the West that Pakistan is serious about fighting the Taliban. But is the army going to stay? Surely there are thousands, not merely hundreds of Taliban fighters. They are not going to retire. They will lie low until the Pakistan army retreats.
(Image: Huffington

Blowing up villages is dramatic and accomplishes several objectives. It drives the enemy out, asserts the government’s authority, and assures continuing aid from the west. However it also creates millions of refugees and does nothing to solve the long term problem of Islamic radicalism in Pakistan. In the absence of a strategy, this may be the best that can be attained right now.

Tuesday, April 28, 2009

Whither Pakistan?

The Taliban have advanced from the lawless tribal areas of Pakistan to within 60 miles of the capitol, Islamabad. What we do not need is for the Taliban to have a nuclear weapon. These puritanical extremists are utterly irrational by Western standards and cannot be reasoned with. Amazingly, this story has not received much attention in mainstream western media.

Today the New York Times reports that the Pakistani government is finally sending in troops and aircraft against the advancing Taliban, albeit only “paramilitary” forces, not regular army. Is it yet another half-hearted effort or do they mean it this time? There is evidence and rumors that the Pakistani government is actually sympathetic to the Taliban and that the Pakistani intelligence agency (ISI) has aided and abetted the Taliban in the past. Surveys show that most Pakistanis are ambivalent about the Taliban. Most of the Muslim terrorist training camps are in Pakistan. So it is difficult to be sanguine about the earnestness or effectiveness of the government’s effort.

According to the Wall Street Journal, House Democrats are now considering whether to speed up financial aid to Pakistan to help them fight. Nearly two billion dollars are destined for Pakistan by later this summer. The question being considered is whether some of that money can be released early, like right now.

This is a story we have heard before. We funded and armed the Taliban in Afghanistan when the Russians invaded it. Look how well that turned out. We funded and armed Saddam Hussein against the Iranians in the 1980’s. We have done the same thing many times before in many parts of the globe. Geopolitical expedience comes back to haunt us. Very often the weapons end up being turned against us, but even when they do not, the culture certainly does. We have done it in Iran, Nicaragua, Panama, … the list goes on.

So far, we have gotten away with arming and propping up Israel; an exception to the rule. But Pakistan? They are halfway over to the Taliban side already. It is only a matter of time. Why don’t we put the $2billion into Afghan border security and let Pakistan fend for itself. If regional players do not care if the Taliban takes over Pakistan, and Pakistan itself doesn’t seem to care much, then why should we? We don’t want a nuclear Taliban (or a nuclear Iran either, or North Korea), but we cannot single handedly hold back the tide. Maybe we should be supporting India more, defending the Afghan borders, and getting ready to respond to a limited nuclear war in the middle east.

Friday, April 3, 2009

Do Republicans Care About Children?

The Obama budget passed both the house and senate with NO Republican votes. Why? Too much spending, increases the deficit says the GOP.

“Let’s not do this to our kids,” said Representative Mike Pence of Indiana, the No.3 Republican in the House. “Let’s not borrow from the next generation of Americans.”
(Hulse,, 4/2/09).

Representative Pence voted FOR the monster Bush tax cuts of 2001 and 2003 (, which doubled the national debt from $5 trillion to $10 trillion. ( ).

Maybe Pence did not care so much about children back then.

It is worth noting that the Reagan tax cuts more than tripled the deficit, from $908 billion in 1980 to $3.2 trillion in 1990. If Pence had been in congress then, no doubt he would have voted for those tax cuts too (since he votes with his party 97% of the time).

Fom what I can discern, Republicans care not one whit for the financial well-being of future generations. Current protestations to the contrary are simply “not consistent with the facts.”

Thursday, April 2, 2009

Hair of the Hound?

FASB announced today a “relaxation” of accounting rules for banks. “Relaxation” is a lovely euphemism. Everybody is in favor of relaxation. Who could be against it? What it actually means is a reduction in risk management. We could all be really, really relaxed if there were no laws at all, by that way of thinking.

FASB is the Financial Accounting Standards Board (often pronounced “Faz-bee”), a non-profit, non-governmental accounting industry organization ( Member organizations include the American Institute of Certified Public Accountants, the American Accounting Association, and 28 others.

FASB attempts to maintain generally accepted accounting principles (GAAP) in the US, which is what makes it possible to understand the financial statement of just about any audited company. If you’re a company and you do not conform to GAAP, your auditors will not sign your financial statements.

The Securities and Exchange Commission (SEC) is responsible for setting and maintaining the accounting standards that publicly traded companies in the US must follow, but the SEC handed off that job to FASB in 1973. I don’t know how a government agency can privatize its legal responsibilities like that, but it happened, and it has been working okay ever since.

To the point, today FASB changed the acceptable accounting rules for banks that are holding piles of those “toxic assets” we have heard so much about. Banks are supposed to show those assets on their financial statements according to what they are worth. But what ARE they worth? In reality, they are worth almost nothing because if they put them up for sale today, they would find few, if any buyers.

Let’s say they are worth only 20 cents of their face value. Why not sell them at 20 cents each then and be done with it? The main reason is that you don’t really know if they are worth 20 cents. You might not get any buyers at 20 cents, or even at 10 cents because there just isn’t a market out there. Nobody’s buying anything. So in effect, if you put the toxic assets on the non-market right now, you could find they are worth zero dollars.

The banks have so many of these assets, they are not willing to put them up for sale and find out they are worth nothing. That would mean a large part of the bank was worth nothing, and that would mean the bank was insolvent. So to put the assets up for sale would be suicide. So they won’t do it. But they have to do it if they want to get the assets off their books because that is the “mark to market” GAAP rule.

But here is the wrinkle: Bankers claim that some of these assets are actually quite valuable. They are probably worth 60 or even 80 cents of face value, they say, because they are debt instruments from solid borrowers with good credentials who are making their payments and there is no problem with these assets other than the fact that everybody is afraid of them. In a normal market, these would be good assets. It just happens that there is no market right now.

FASB has bought that argument and said, okay, you can assign whatever price you think is reasonable to these assets and show that on your books. You don’t have to really mark them to market because there is no market. FASB will allow banks and their auditors to use "significant judgment" to value their “impaired assets” (no longer toxic, just impaired, and who hasn’t been impaired from time to time? ).

Conveniently, the first quarter just ended two days ago and banks are now feverishly preparing 1Q reports. What a godsend to be able to show that the bank is actually healthy, not rotten to the core! How do you think they will value the troubled assets? Zero? Not likely. Twenty percent of face? Well, why not use some “significant judgment” and value them at 80% of face, because then, hallelujah, the report will show that the bank is healthy!

You might think the bankers would be showering FASB with tearful thanks for letting them off the hook and for nullifying the consequences of their greed and irresponsibility. But no. The response of the American Bankers’ Association was to ask FASB, “Could you make that retroactive? This is great for 1Q09, but you know, we took a major hit in 4Q08, so if you would make the rule retroactive, we could revise the ’08 statement and we would really come out smelling like a rose!”

This request would make us laugh with despair, except that House Financial Services Committee Chairman Barney Frank (D-MA), said he will consider it! I hope he meant, “I will give it all the consideration it deserves.” Which is NONE! Frank is a smart guy, and so far he has done the right thing. We must wait to see if he is who he appears to be.

One interesting consequence of the FASB “relaxation” is that Paul Krugman is thwarted. He has been saying for weeks that the banks are rotten and the only cure is to cut out the cancer by nationalizing them. But this FASB move finesses him. Now the toxic assets will have a fantasy value based on their owners’ opinions, but if that fools enough people, investors might show up at Geithner’s yard sale and buy some. Then a market will in fact exist, and the price will be a real-market price, and the financial reports will suddenly be true, and the banks will be recovered. It’s like the Emperor’s New Clothes. If nobody calls “naked!” the scheme might work.

If that is the outcome, I will be the first to praise its brilliance. Markets are 99% psychology anyway, so it could work, and that would be wonderful.

There are loose ends though. One is the moral issue of letting all those greedy banks off the hook so easily. We are supposed to hold our noses and let that go for the sake of the recovery, but that is not easy to do.

Another is that this sleight of hand by the green eyeshade crowd is exactly the kind of non-transparent shenanigans that brought the whole system down in the first place. It is a hair of the hound that bit us. Does that theory work?

Tuesday, March 24, 2009

In Defense of Bonuses!

I suspect the people who are enraged about the AIG bonus scandal are people who don’t leave tips for wait staff in restaurants. Hey, they already get paid a salary, right, so why leave a tip? This is such a non-issue, I can hardly believe it is still in the news.

The common sense meaning of a “bonus” is something that is over and above what is normally expected in a situation. So it sounds like these AIG employees were showered with gratuitous money on the basis of greed alone.

But that is not what a “bonus” means in many industries, including the financial industry. Your bonus is a normal, expected part of your compensation. In the case of AIG it was written into the employment contract over a year ago. There was nothing unexpected, unusual, or gratuitous about it. Some employees could have a salary of $1 per year and a large “bonus” at the end of the year. Remove the bonus and they have worked a year for one dollar. That’s not fair.

Another reason people get tied in a knot over this incident is that the bonuses are very large, compared to what most people earn in a year. Many bonuses were a million dollars or more. But so what? That’s what people make in that industry. If you don’t make that much, maybe you went into the wrong business. Get over it. Resentment over the size of somebody else’s pay package is just unconscionable envy.

The argument has been made that the people who got these bonuses were undeserving. They were the very people who got AIG into so much financial trouble that it required taxpayer bailout. Since a bonus is contingent on performance, it seems inconceivable to many, including those in congress, that these employees could have earned any bonus.

But congresspersons are in no position to judge what is satisfactory performance at a firm like AIG. If the job is to bring in revenues by writing contracts of a certain kind, and you do that well, you get paid. That’s what the employment contract said and that’s what they did, so they got paid. Fair’s fair. It is an incorrect presumption to think that somebody in congress is a better judge of of the employees' performance.

Admittedly, the criterion performance to be rewarded should have been quality, not quantity. That is a common difficulty in any behavior management scheme – specifying the desired behavior with precision. But the employees did not specify the behavior to be rewarded, the bosses did. It is called a labor contract because you exchange your labor for cash payment. So the government would do better to replace the worthless executives in charge and retain the employees who proved so capable of performing the work required!

I did not even bother to write to my congresspersons about the idiotic house proposal to tax the bonuses at 90%. It was so stupid on the face of it that I did not think it had a chance of passing. Was I wrong about that! The legislation was not only a knee-jerk reflex, based on irrational emotion rather than reason, but it is almost certainly unconstitutional. (It is illegal to use tax law to punish individuals or selected groups). I now believe that rationality will prevail in the senate, but I am writing to my senators just in case. You just never know with politicians.

Tuesday, March 17, 2009

Reincarnation at Treasury?

Reincarnated? These two fellows must be karmically related.

Although Ludwig was never much for economics, Tim isn't strong on language games, either.

Still, you have to wonder.

(Ludwig Wittgenstein) ..................................................... (Timothy Geithner)

Tuesday, March 3, 2009

Propping Up Versus Fixing

“We had no choice” but to prop up AIG, said Fed Chairman Bernanke (, 3/3/09), as the government dumped another $30 billion into the insurance giant, bringing the taxpayer onus to over $200 billion so far on just that one black hole.

He is right, sickening though it is. And more billions will be probably be needed. The trouble is that AIG insures against default of credit-backed securities for dozens of banks worldwide. If AIG defaulted on its insurance contracts, all those banks would collapse and we would indeed be back to The Great Depression.

So why not fix the problem rather than continual “propping up”? What we do NOT need is a Potemkin banking system.

Whatever happened to the plan for the government to buy the toxic assets? Whatever happened to the “bad bank” strategy? Where the hell is Geithner? I’m starting to get the sinking feeling that nobody is in charge.

Sunday, February 22, 2009

The New Hillary

Secretary of State Hillary Clinton visited Asia this week on her first outing as a member of the Obama Administration. She talked with leaders in Myanmar (Burma), Japan, South Korea, China, and Malaysia, and according to news reports, some of her comments were unusually candid. She emphasized economics and climate change, not human rights with China. She talked about North Korean regime change in Seoul, and wondered aloud if sanctions against Burma were useful. There’s nothing wrong with saying what’s obvious, she told reporters (Kessler, G.: Washington, 22 Feb 09).
(Clinton in China Feb 09 LA Times Photo)

But that is exactly what is not obvious. As she herself has said, diplomacy is a head game. Stating the obvious may not be to one’s advantage. Human rights organizations are furious with her for not emphasizing human rights issues in China. Others wonder if she is just trying to be well-liked or if she has any policy in mind, and if it is a policy, since when did the US no longer care about human rights?

But I think she is doing the right thing, and I confess I did not realize she had the flexibility to think in a different way, whether directed by Obama or not. Her comments show a subtlety of mind I did not know lurked there.

Her comments mark a sharp break with the Bush foreign policy. She is saying, we are no longer going to throw our weight around like the bullies we have been. We are now willing to talk plainly and listen with an open mind. That is a fundamental change in direction for US diplomacy and it is important to indicate to all, that is what is happening.

She is also saying, especially by choosing Asia for her maiden voyage, that our important future allies are not necessarily going to be in Europe but in Asia. That’s the truth, and it is smart to signal that, to both Asia and Europe. So there is a policy behind her remarks and it is much larger and more important than whether Tibetans should be allowed more autonomy.

The Chinese can be harsh in dealing with their own citizens, but so can we. They have a billion people to keep in check, three times what we have, with much more diversity in culture and language, and with with a fraction of the wealth and education we enjoy. “Human Rights” should be re-thought in less absolute terms. What do we know about how China works? We barely know how the US works.

The US has been the world leader in promoting human rights since the Carter presidency, and that should continue, but perhaps, in view of our abominable performance in the last eight years, with a bit more humility.

I am impressed with Clinton’s comments. If she continues in such a candid and yet subtly strategic way, she might well be the best secretary of state we have had in living memory. I never saw that coming.

Wednesday, January 28, 2009

Do Republicans Have Any Ideas?

President Obama’s economic stimulus package passed the House today, 244 to 188, without a single Republican vote. Not one.

I find that remarkable. The president has openly talked up his desire for more bipartisan government, and he made a big display of going up to the Hill to jawbone the Republicans.

Yet the Republicans all, to a person, essentially said, “Go soak your head.” They appear as juvenile, spiteful, self-destructive poseurs obsessed with game-playing, all while the American economy goes down the tubes. How can the whole batch of them be so consistently small, mean-spirited, selfish, and immature? Isn’t there a single statesman among them?

I try to stick to rational analysis of the facts, but these people make it very difficult to remain unemotional.

“Principles!” the Republicans cry. "Of course we want to do what’s best for America, but this stimulus package is so worthless, if not downright harmful or evil, that no conscionable person could vote for it."

That is an implausible argument under the circumstances, but at least conceivable. Is there any truth behind it? I can’t find it.

Republicans have only a single concept of governance: elimination of taxes. It does not seem to bother them, or occur to them, that if we were to eliminate taxes, there would be no government and no Republicans either. But they apparently get a “tax-cut” chip implanted in their brain as a condition of joining the party. Anything other than massive tax cuts, especially those that benefit the wealthy, is considered utterly unacceptable to them.

This is notwithstanding actual facts, such as,

1. The economic stimulus package is made up of about 1/3 tax cuts and 2/3 new spending. So it is simply not the case that the legislation does not accommodate the Republican desire for tax cuts. One third of 800 billion dollars is $260 billion in tax cuts, not a trivial amount. The Republicans’ “principled” objection to the legislation rings hollow.

2. Tax cuts don’t do much good for individuals or business that aren’t paying much in taxes. Especially for small businesses (under 100 employees), projected near-term profits are expected to be small to zero, so tax cuts on nonexistent profits wouldn't be much of an economic stimulus.

3. The Republicans had eight years to play around with tax cuts, which they did, and the result has not turned out well. The “trickle-down” mythology has been thoroughly repudiated in fact and theory. What legitimate justification could there be for clinging to the tax-cut mantra in the face of evidence? One is tempted to suspect that the motivations are less than noble.

Try this simple test. Watch any television news show that interviews a Republican about the stimulus package. Clock how much time passes before the Republican says the phrase “tax cuts.” I have done this and the mean elapsed time is 15 seconds. These people must be possessed by an evil spirit. Or have a brain implant. I am not aware of any alternative economic stimulus proposal from the Republicans that involves anything other than “Tax cuts!”

Another Republican criticism of the stimulus package is that it spends too much on non-economic items, such as health, education, and safety. In what alternate universe is education NOT the basic engine of economic growth? For a Republican, economic growth apparently only means more cash, today! No doubt there are some stupid or irrelevant line items buried in the package and I'm sure we will hear all about them soon. That kind of idiocy is not a particularly Democratic problem. If we look at the largest 80% of the stimulus package, not the 20% chaff, it looks eminently reasonable.

Yet another Republican criticism is that they did not have sufficient “input” to the drafting of the legislation. From what I can gather, that is because they declined to participate when invited. Their complaint is at best disingenuous, more likely, misdirection and petulant whining.

Finally, consider that even if the economic stimulus package was a bitter pill for any Republican to swallow, on principle, why not support it anyway, for Heaven’s sake? The country is going down! What kind of high and mighty “principles of governance” are so sacred that you would choose ashes in everyone’s mouth instead of compromise? I think “principles” are not the issue here at all. Republican behavior points to psychological immaturity and a paucity of ideas badly papered over by tawdry egos.

Maybe I was wrong in my criticism of Krugman’s book, “The Conscience of a Liberal.” (Halfway down the page at

I said Krugman was unjustifiably hostile toward conservatives and had devolved to mere name-calling. But maybe he was more perceptive than I realized. Unless the Republicans come up with some reasoned, evidence-based explanations for their behavior, I think the Democrats should just ignore them because they can’t be spoken to.

Tuesday, January 20, 2009

The Inaugural Address

The Inaugural Address

It almost didn’t matter what he said. The very fact of him, a young African-American, standing there, said it all. The speech was a success before he opened his mouth.

Nevertheless, I was disappointed. I wanted the soaring rhetoric he is famous for, something that acknowledged the significance of the moment. Instead, we got a fairly pedestrian speech, albeit finely crafted.

Mr. Obama opened with thinly veiled words of criticism for G.W. Bush’s administration, as if he, Obama had been holding back a steaming kettle of Pelosi-esque disgust and derision until the very first moment when he could let the whistle sound without being inappropriate. He emphasized that his administration, only minutes old, was an about face. “From this moment on,” he would reject the idea that our ideals (e.g., constitutional rights) must be sacrificed for safety. He would replace the politics of fear-mongering with the politics of hope. He pointed a blaming finger at the "greed and irresponsibility of some" and said that a free market economy must be well-regulated if there is to be prosperity for more than the prosperous few. He will "restore science to its rightful place." And so on. It was a scathing indictment delivered with feeling.

Abruptly, Mr. Obama changed direction and spoke about his awareness of the many sacrifices that have gone before us. He spoke of George Washington, our forefathers, the defenders of American freedom through history, and so on. It was standard history book stuff, although he alluded to the fact that our history has a dark side too. Slavery and the civil war were mentioned. He asked us to choose “our better history,” a strange request. Wouldn't that be intentional biasing of the facts?

He paused to issue a statement to worldwide Islamist extremists: “You can’t outlast us and we will get you,” he averred. I am young but no milquetoast.

Then he segued into the need for personal responsibility among all Americans. But this was an unclear admonition. We should all work at a soup kitchen once in a while? Ok, fine, but what is the political point? People should be nicer? Of course they should. It was a nonspecific argument he was trying to sell. We should drive smaller cars? Maybe, but also, he said “Americans do not apologize for our way of life.” So I guess SUVs are ok after all. I thought the implication might have been, if you want to partake of the forthcoming government largesse, you must sacrifice something, in some unspecified way. But what? How? That part of the speech went past me.

Just as vaguely, Mr. Obama emphasized that we are now in the era of post-partisan politics. It does not matter whether you think government is too big or too small, he said, only what actually works. Well, sure. But “what works” is as much a matter of ideology as of empiricism. Do massive government bureaucracies, such as government-sponsored health care, “work,” or do they only lead to involuted “big gummint”? Do large, permanent tax cuts “work” or are they only subsidies for the rich? Obama cannot be described as na├»ve, so his rhetoric of post-partisan politics must be seen as partisan populist positioning ahead of what he knows are going to be tough ideological battles.

Taken as a whole, the speech seemed flat to me, full of platitudes, and maybe even a little dishonest in the sense that it was ostensibly addressed to the 2 million people standing in front of him, but actually addressed to the politicians sitting near him, and listening to him around the world.

On the other hand, the speech had the artistic quality of deicticism, meaning it demonstrated in fact what it was about in content. The speech began with burning criticism of the past administration and arced forward to glowing terms of hope and bipartisanship. That verbal change of scenery echoed the transition between the two administrations in front of our eyes, and the facticity of Obama standing there, confidently addressing millions of screaming followers, while G.W. Bush sat beside him with a blank expression. So the speech expressed its own gesture.

Nevertheless, I thought I could read the thoughts on Bush’s forehead: “He has no idea. A rude shock awaits.”