Rants

Obama and Boeing - From The Economist

2011-05-25T17:26:00.000-07:00

The White House and American business
Don't bully Boeing, Barack
Want to prove you are “pro-business”? Condemn a loony-left complaint against America’s biggest exporter

May 19th 2011 | from the print edition

IF YOU book a holiday and the flight is cancelled, you may decide to use a different airline the next time. Airlines know this, which is why Sir Richard Branson, the boss of Virgin Group, was so angry when Boeing failed to deliver the planes he needed to ferry thousands of passengers to sunny climes one Christmas. He blamed a strike by Boeing workers in Washington state. “If union leaders and management can’t get their act together to avoid strikes, we’re not going to come back here again,” he told reporters. “We’re already thinking: ‘Would we ever risk putting another order with Boeing?’”

No one disputes a traveller’s right to switch airlines, or an airline’s right to switch suppliers. But woe betide an aircraft-maker that tries to shift production from a strike-plagued American state to a more business-friendly one; at least, if the National Labour Relations Board (NLRB) gets its way. Under President Barack Obama, the federal agency charged with policing interactions between firms and employees has started to interpret old laws in new and troubling ways.

Its case against Boeing goes like this. Since 1995 Boeing has suffered three strikes at its unionised factories near Seattle. The longest stoppage, in 2008, lasted for eight weeks, cost the firm $2 billion and prompted customers such as Sir Richard to use phrases like “absolutely and utterly ghastly”. Oddly enough, when deciding where to expand production, Boeing took this into account. In 2009 it announced that it would build a new factory to assemble 787 Dreamliner jumbos in South Carolina. That, the NLRB’s general counsel claims, was an illegal act of “retaliation” against strikers in Washington, aimed at intimidating them into not striking in the future. Its proposed remedy is for Boeing to move the work to Washington. What would become of the $1 billion it has already invested in the new factory, and the 1,000 South Carolinians it has hired, is anyone’s guess. The case will be heard next month (see article).

Be careful what you wish for

The 1935 National Labour Relations Act has never been construed so broadly. Boeing is not actually reducing the amount of work it does in Washington. Quite the opposite: it increased its workforce there by 2,000. It is not closing the factories where the strikes occurred, nor is it sacking the strikers. It is merely choosing to add capacity in a state where labour relations are more cordial. In Washington, once workers at a company vote to unionise, every employee can be forced to join (and pay dues to) the union. In South Carolina they cannot. It is one of 22 “right to work” states where such compulsion is illegal (and to which millions of jobs have migrated).

Labour unions hate right-to-work laws, and are hoping that the NLRB will undermine them. They should be careful what they wish for. The NLRB’s line of reasoning would make it potentially illegal to build a new factory in a right-to-work state if you already operate one in a heavily unionised state—creating a powerful incentive never to do business in a heavily unionised state in the first place. It would be safer to make things only in places like South Carolina, or perhaps south China.

The NLRB is an autonomous body, but its board members are appointed by the president. Under a Democratic president, American businesses expect a more pro-union line, but the agency’s recent militancy is shocking, reminiscent of “loony-left” posturing in Britain in the 1970s. Not only does the agency in effect claim the power to tell firms where they may build factories. It is also suing two states (Arizona and South Dakota) where voters have decided that workers should be guaranteed a secret-ballot election before their workplace is unionised. Mr Obama has so far said nothing about any of these cases. The president claims he understands business. Condemning the NLRB would be a good way to prove it.

http://www.economist.com/node/18714050?story_id=18714050&CFID=164728604&CFTOKEN=32815208

2011-05-25T17:16:00.000-07:00

http://www.economist.com/node/18714050?story_id=18714050&CFID=164728604&CFTOKEN=32815208

From the Wall Street Journal

2010-08-11T18:14:00.001-07:00

The Case For Birthright Citizenship

Since the abolition of slavery, we have never denied citizenship to any group of children born in the U.S. Why change now?

By LINDA CHAVEZ

Republican leaders in Congress are now flirting with changing portions of the 14th Amendment—which grants citizenship to "all persons born or naturalized in the United States and subject to the jurisdiction thereof"—to deny citizenship to children born here to illegal immigrants.

The idea of modifying birthright citizenship has been around for decades but was previously relegated to the fringes of the immigration restriction movement. Yet in recent days, Sens. John McCain, Lindsey Graham and Jon Kyl have embraced the idea; Senate and House GOP leaders Mitch McConnell and John Boehner have proposed hearings.

Repealing birthright citizenship is a terrible idea. It will unquestionably jeopardize the electoral future of the GOP by alienating Hispanics—the largest minority and fastest-growing segment of the U.S. population. More importantly, ending birthright citizenship would fundamentally change what it means to be an American.

Proponents of repeal argue that the 14th Amendment was passed after the Civil War to guarantee citizenship to freed slaves, and that it was never intended to grant rights to the offspring of illegal aliens. But this argument is a non sequitur. At the time of the adoption of the amendment, there was no category of "illegal alien" because immigration was unrestricted and unregulated. If you secured passage to the United States, or simply walked across the open border with Mexico or Canada, you could stay permanently as a resident alien or apply to be naturalized after a certain number of years. And if you happened to give birth while still an alien, your child was automatically a citizen—a right dating back to English common law.

The most serious challenge to birthright citizenship for the children of aliens came in 1898, and it involved a class of aliens who were every bit as unpopular as present-day illegal immigrants: the Chinese. Like most illegal immigrants today, the Chinese came here to work as common laborers, eagerly recruited by employers but often deeply resented by the workers with whom they competed. This popular resentment, coupled with racial prejudice, led to America's first immigration restriction law, the Chinese Exclusion Act of 1882. It was followed by successively more restrictive federal and state laws that denied Chinese aliens—and, later, other Asians—the right to own property, to marry, to return to the U.S. if they left, or to become American citizens.

With anti-Chinese alien sentiment still high, the Supreme Court took up the case U.S. v. Wong Kim Ark in 1898. Born in San Francisco to alien parents who later returned to China, Wong travelled to his parents' homeland for a visit and was denied re-entry on his return in 1895. The government argued that Wong had no right to birthright citizenship under the 14th Amendment because his parents remained "subjects of the emperor of China" not subject to U.S. jurisdiction, even while residing in California at the time of his birth. In a 7-2 vote, the Supreme Court ruled otherwise.

The court found that the only persons Congress intended to exclude from birthright citizenship under the 14th Amendment were children born to diplomats—an ancient, universally recognized exception even under common law; Indians, who by treaty were considered members of sovereign nations; and children of an occupying enemy. "The amendment, in clear words and in manifest intent, includes the children born within the territory of the United States of all other persons, of whatever race or color, domiciled within the United States," wrote Justice Horace Gray for the majority. To hold otherwise, he noted, would be to deny citizenship to the descendants of English, Irish, Germans and other aliens who had always been considered citizens even if their parents were citizens of other countries. For more than a 100 years, the court has consistently upheld this analysis.

Our history has been largely one of continuously expanding the community of people regarded as Americans, from native-born whites to freed slaves to Indians to naturalized citizens of all races and ethnicities. Since the abolition of slavery, we have never denied citizenship to any group of children born in the U.S.—even when we denied citizenship to their parents, as we did Asian immigrants from 1882 to 1943. This expansive view of who is an American has been critical to our successful assimilation of millions of newcomers.

Conservatives should not betray these values based on a misreading of American history and legal precedent. Instead of amending the Constitution to eliminate "anchor babies"—the ugly term opponents of birthright citizenship use to describe these U.S. citizens—Republicans should be helping them become good Americans.

Ms. Chavez is chairman of the Center for Equal Opportunity in Falls Church, Va. and was director of public liaison in the Reagan White House.

Build that Mosque

2010-08-11T17:36:00.000-07:00

From the current issue of The Economist

Lexington

Build that mosque

The campaign against the proposed Cordoba centre in New York is unjust and dangerous

Aug 5th 2010

WHAT makes a Muslim in Britain or America wake up and decide that he is no longer a Briton or American but an Islamic “soldier” fighting a holy war against the infidel? Part of it must be pull: the lure of jihadism. Part is presumably push: a feeling that he no longer belongs to the place where he lives. Either way, the results can be lethal. A chilling feature of the suicide video left by Mohammad Sidique Khan, the leader of the band that killed more than 50 people in London in July, 2005, was the homely Yorkshire accent in which he told his countrymen that “your” government is at war with “my people”.

For a while America seemed less vulnerable than Europe to home-grown jihadism. The Pew Research Centre reported three years ago that most Muslim Americans were “largely assimilated, happy with their lives… and decidedly American in their outlook, values and attitudes.” Since then it has become clear that American Muslims can be converted to terrorism too. Nidal Malik Hassan, born in America and an army major, killed 13 of his comrades in a shooting spree at Fort Hood. Faisal Shahzad, a legal immigrant, tried to set off a car bomb in Times Square. But something about America—the fact that it is a nation of immigrants, perhaps, or its greater religiosity, or the separation of church and state, or the opportunities to rise—still seems to make it an easier place than Europe for Muslims to feel accepted and at home.

It was in part to preserve this feeling that George Bush repeated like a scratched gramophone record that Americans were at war with the terrorists who had attacked them on 9/11, not at war with Islam. Barack Obama has followed suit: the White House national security strategy published in May says that one way to guard against radicalisation at home is to stress that “diversity is part of our strength—not a source of division or insecurity.” This is hardly rocket science. America is plainly safer if its Muslims feel part of “us” and not, like Mohammad Sidique Khan, part of “them”. And that means reminding Americans of the difference—a real one, by the way, not one fabricated for the purposes of political correctness—between Islam, a religion with a billion adherents, and al-Qaeda, a terrorist outfit that claims to speak in Islam’s name but has absolutely no right or mandate to do so.

Why would any responsible American politician want to erase that vital distinction? Good question. Ask Sarah Palin, or Newt Gingrich, or the many others who have lately clambered aboard the offensive campaign to stop Cordoba House, a proposed community centre and mosque, from being built in New York two blocks from the site of the twin towers. Every single argument put forward for blocking this project leans in some way on the misconceived notion that all Muslims, and Islam itself, share the responsibility for, or are tainted by, the atrocities of 9/11.

In a tweet last month from Alaska, Ms Palin called on “peaceful Muslims” to “refudiate” the “ground-zero mosque” because it would “stab” American hearts. But why should it? Cordoba House is not being built by al-Qaeda. To the contrary, it is the brainchild of Imam Feisal Abdul Rauf, a well-meaning American cleric who has spent years trying to promote interfaith understanding, not an apostle of religious war like Osama bin Laden. He is modelling his project on New York’s 92nd Street Y, a Jewish community centre that reaches out to other religions. The site was selected in part precisely so that it might heal some of the wounds opened by the felling of the twin towers and all that followed. True, some relatives of 9/11 victims are hurt by the idea of a mosque going up near the site. But that feeling of hurt makes sense only if they too buy the false idea that Muslims in general were perpetrators of the crime. Besides, what about the feelings, and for that matter the rights, of America’s Muslims—some of whom also perished in the atrocity?

Ms Palin’s argument does at least have one mitigating virtue: it concentrates on the impact the centre might have, without impugning the motives of those who want to build it. The same half-defence can be made of the Anti-Defamation League, a venerable Jewish organisation created to fight anti-Semitism and other forms of bigotry. To the dismay of many liberal Jews, the ADL has also urged the centre’s backers to seek another site in order to spare the feelings of families of the 9/11 victims. But at least it concedes that they have every right to build at this site—and that they might (only might, since the ADL hints at vague concerns about their ideology and finances) genuinely have chosen it in order to send a positive message about Islam.

The Saudi non-sequitur

No such plea of mitigation can be entered on behalf of Mr Gingrich. The former Republican speaker of the House of Representatives may or may not have presidential pretensions, but he certainly has intellectual ones. That makes it impossible to excuse the mean spirit and scrambled logic of his assertion that “there should be no mosque near ground zero so long as there are no churches or synagogues in Saudi Arabia”. Come again? Why hold the rights of Americans who happen to be Muslim hostage to the policy of a foreign country that happens also to be Muslim? To Mr Gingrich, it seems, an American Muslim is a Muslim first and an American second. Al-Qaeda would doubtless concur.

Mr Gingrich also objects to the centre’s name. Imam Feisal says he chose “Cordoba” in recollection of a time when the rest of Europe had sunk into the Dark Ages but Muslims, Jews and Christians created an oasis of art, culture and science. Mr Gingrich sees only a “deliberate insult”, a reminder of a period when Muslim conquerors ruled Spain. Like Mr bin Laden, Mr Gingrich is apparently still relitigating the victories and defeats of religious wars fought in Europe and the Middle East centuries ago. He should rejoin the modern world, before he does real harm.

Over the counter, out of sight

2009-11-15T14:14:00.000-08:00

Derivatives

Over the counter, out of sight

Nov 12th 2009
From The Economist print edition

Derivatives are extraordinarily useful—as well as complex, dangerous if misused and implicitly subsidised. No wonder regulators are taking a close look

Illustration by Otto Dettmer

IN 1958 American onion farmers, blaming speculators for the volatility of their crops’ prices, lobbied a congressman from Michigan named Gerald Ford to ban trading in onion futures. Supported by the president-to-be, they got their way. Onion futures have been prohibited ever since.

Futures are agreements to trade something at a set price at a given date. They are perhaps the simplest example of a derivative, a contract whose value is “derived” from the price of a commodity or another asset. Derivatives continue to be vilified, usually when someone loses a lot of money. Orange County and Procter & Gamble lost fortunes on them in the 1990s. They were at the core of Enron’s failure. And in September 2008 they brought American International Group (AIG), a mighty insurer, to its knees. Its fetish for credit default swaps (CDSs), a type of derivative that insures lenders against borrowers’ going bust, led it to guarantee at least $400 billion-worth of other companies’ loans—including those of Lehman Brothers. The American government forked out $180 billion to save AIG from collapse.

Every catastrophe brings calls for restrictions on derivatives. This year Joseph Stiglitz, a Nobel economics laureate, has said that their use by the world’s largest banks should be outlawed. But derivatives have defenders too. Used carefully, they are an excellent—some would say indispensable—tool of risk-management. Myron Scholes, another Nobel prize-winner, says a ban would be a “Luddite response that takes financial markets back decades.”

Because of the mayhem of the past year or so, lawmakers in America and Europe are on the point of giving derivatives markets their biggest shake-up since the 1970s. For the world’s biggest banks, billions of dollars are at stake. For taxpayers, the stakes are just as high.

Derivatives come in many shapes. Besides futures, there are options (the right, but not the obligation, to buy or sell at a given price), forwards (cousins of futures, not traded on exchanges) and swaps (exchanging one lot of obligations for another, such as variable for fixed interest payments). They can be based on pretty much anything, as long as two parties are willing to trade risks and can agree on a price: commodities, currencies, shares or bonds. Derivatives create leverage too. Contracts are sealed with initial payments that are a small fraction of the potential gain or loss.

In the main, businesses use derivatives to shift risks to other firms, chiefly banks, that are willing to bear them. An airline worried about fuel prices can limit or fix its bills. A bank concerned about its credit exposure to the airline can pass some of its default risk to other banks without selling the underlying loans. About 95% of the world’s 500 biggest companies use derivatives. A lack of them can be costly. “The absence of derivatives in iron-ore markets makes negotiations between Australian suppliers and Chinese buyers very confrontational,” says Philip Killicoat of Credit Suisse. Earlier this year Rio Tinto’s chief negotiator, Stern Hu, was arrested in China during hard bargaining over prices. And the futures ban has not stopped the price of onions from going up and down.

Derivatives have a long history, stretching back thousands of years. In the 17th century the Japanese traded simple rice futures in Osaka and the Dutch bought and sold derivatives in Amsterdam. But trading in financial derivatives really took off only in the 1970s. The fluctuations in currencies and interest rates after the collapse of the Bretton Woods system gave a push to demand. The option-pricing formula developed by Fischer Black and Mr Scholes, plus advances in computing power, made valuing derivatives much easier. Regulators encouraged them, too. Thrift Bulletin 13, issued by the Federal Home Loan Bank System in 1989, obliged American thrifts to hedge their interest-rate risk.

Derivatives are bought and sold in two ways. Contracts with standardised terms are traded on exchanges. Tailored varieties are bought “over the counter” (OTC) from big “dealer” banks. These banks support the OTC market by hedging their clients’ risks with each other or on an exchange.

The OTC market dwarfs exchange trading (see chart 1). Estimating its size, however, demands caution. In figures published this week the Bank for International Settlements, the central bankers’ central bank, puts its “notional” value at $604.6 trillion. But “those numbers don’t appear on anyone’s balance sheet,” says Barry Epstein, an accountant who specialises in derivatives. For example, the notional value of the CDS market is $36 trillion, says the BIS. But that counts all guaranteed debt—the equivalent, in home insurance, of the value of houses covered rather than premiums paid.

For interest-rate contracts, notional values are even more misleading because they are based on principal amounts; actual obligations depend on interest payments. “Gross market values”, which show how much money would change hands if derivative contracts were sold on the reporting date at prevailing prices, are a better guide. But even they are an overstatement. Once banks’ claims on each other are stripped out, the residual (“gross credit exposure”) is $3.7 trillion, well under 1% of the notional total (see chart 2).

Even so, $3.7 trillion is a large sum. And although derivatives did not cause the financial crisis, they (or their misuse) made it worse. They concentrated risk as much as they spread it, and amplified bad judgments. Their leverage magnified losses on underlying assets like mortgages and crippled even the biggest firms.

Size is not the only reason for regulators’ interest. Another is a practice called “close-out netting”. Traders of OTC derivatives record their net obligations to each other. On any day, each trader’s thousands of bilateral contracts boil down to a single net position owed to or by its counterparties. Netting agreements ensure that if a trader goes bankrupt its position is settled at once, with no need to wait for a court.

“Counterparties to derivative contracts effectively get a super-senior claim to each other’s assets,” says Craig Pirrong, a finance professor at the University of Houston. For example, in 2008 Goldman Sachs extended credit to CIT, a troubled American lender, but in the form of a “total return swap”, a type of derivative, rather than a conventional loan. Now that CIT has filed for bankruptcy, close-out netting puts Goldman up the queue for repayment.

Another problem is that governments implicitly subsidise derivative markets. Dealer banks are so important to the financial system that they cannot be allowed to fail. This government guarantee lowers their cost of borrowing and allows them to provide derivatives more cheaply than they otherwise could. “Even if dealers keep much of the benefit for themselves, everyone is getting derivatives more cheaply at the expense of the taxpayer,” says Edward Kane, a professor of finance at Boston College. About one-third of OTC trades require no margin or collateral requirements at all. In effect, firms can get leverage for nothing. On exchanges, traders must put up margin or collateral.

Complexity is a further worry. Richard Bookstaber, who headed market-risk management at Morgan Stanley, says that “complexity cloaks catastrophe”. Clients—even supposedly sophisticated ones—do not always understand the risks they are taking on. That’s their lookout, you might say, so long as traders do not defraud them and so long as bankrupted clients do not have to be bailed out by the state.

But regulators do have an interest in complexity. It makes valuation difficult: dealers often allocate different values to the same contract. This in turn makes financial accounts more opaque. (Remember Enron.) And the popularity of arcane derivatives has been sustained by “less than lofty purposes”, says Mr Bookstaber. For example, under the Basel capital-adequacy rules, when a bank makes a loan to an ordinary company it has to set aside 8% of the loan’s value as capital. But for loans to other banks the charge is only 1.6%, because the rules assume banks are more creditworthy. The less they must put aside, the more banks can lend and the more money they can make. This is where CDSs come in handy. A bank overexposed to airlines can use CDSs to share credit risk with other banks and slash the cost of holding the loan. Buying a CDS from AIG, which had a high credit rating, gave banks a similar deal. No wonder they were so eager.

Time to clear up

Regulators have a two-part answer to these problems. First, they want more OTC contracts to be cleared by central counterparties (CCPs). A central banker in Europe thinks this will offer “a clear point of entry for authorities to rescue the financial system next time, rather than rummaging through a mire of interlocking obligations.” Second, they want more of them to be shifted to exchanges.

The American Treasury has made specific proposals. The European Commission is a couple of steps behind, but promises to “ensure global consistency”. To prod derivative markets towards clearing, and ideally trading on exchanges, OTC trades that are not cleared will face a higher capital charge than contracts that are. This may ruin the habitat of more exotic OTC species. Regulators think this is a cost society can bear.

In America supervision would remain split between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The SEC would regulate derivatives tied to individual securities and the CFTC much of the rest. For instance, the SEC would oversee CDSs for a single company, whereas the CFTC would regulate those for an index with more than ten names.

CCPs have been around since 1925, when the Chicago Board of Trade Clearing Corporation became the legal counterparty to buyers and sellers of derivative contracts. CCPs take margin and collateral according to the size of trades, so that if a trader defaults, the clearing house should see his counterparty right. They also allow traders to net their positions across all their counterparties, reducing the margin and collateral required.

A sizeable proportion of CCPs are likely to be owned by banks, even though a cap of 20% on their stakes is being mooted in Congress. This year at least three new CCPs have been given approval to clear credit derivatives. Two of them failed to attract significant volume. The other, ICE Trust, is backed by leading dealer banks. In October LCH. Clearnet, an established clearing house, underwent a €330m ($489m) share buyback that happened to boost banks’ shareholdings.

To calculate margins, CCPs need to compute a derivative contract’s volatility, but for a lot of customised OTC contracts the necessary historical price data do not exist. So the proposed rules require only that “standardised” derivatives be cleared. Clearing CDSs presents another difficulty: because a firm is either bankrupt or not, it is difficult for CCPs to demand margins or collateral that vary smoothly with the risk of the loans insured. The world’s largest banks have promised the Federal Reserve they will clear more than 90% of “eligible” interest-rate and credit derivatives by the end of the year. But this includes only derivatives now accepted for clearing.

Deciding what else should be cleared will be fraught. Some argue that regulators should choose, others that CCPs themselves should: if they can clear it, then it must be cleared. Different CCPs may have different motives. Independent clearing houses may overreach themselves in the hope of scooping up more business. CCPs owned by dealer banks might be more reluctant to clear because their owners might find it more profitable to keep trades purely two-way and charge bespoke prices.

CCPs are lauded for their safety and efficiency. When Lehman Brothers defaulted, LCH.Clearnet, the largest clearer of interest-rate swaps, processed its $9 trillion of OTC interest-rate derivatives seamlessly. Even so, regulators may be creating another set of institutions that are too important to fail. CCPs are supposed to have enough money in hand to withstand the default of one member under “extreme but plausible” conditions—whatever that means. As Ben Bernanke, the Fed’s chairman, has noted, CCPs’ margin and collateral will never be enough to protect them from a financial earthquake. Taxpayers will have to back them.

Exchange of views

Reforms will accelerate a shift to CCP clearing that was already under way, but proposals to push standardised and cleared derivatives onto exchanges are new, and more contentious. Critics believe large dealers “have a strong incentive to steer clients towards complex OTC rather than exchange-traded derivatives, because the margins are so much greater,” says Frank Partnoy, a professor of law and finance at the University of San Diego.

Indeed, commercial banks in America have pocketed $115 billion from cash and derivatives trading in the past ten years, according to the Office of the Comptroller of the Currency, a regulator. “Banks lump their trading revenue together but the significant majority of it comes from derivatives,” says Kevin McPartland of TABB Group, a research firm. The market is concentrated, too. In America the leading five dealer banks account for about 95% of all banks’ derivative contracts by value. This year trading has been especially lucrative. In the first six months of 2009 American banks earned $15 billion (see chart 3). Market insiders at an inter-dealer broker believe that derivative revenues at the biggest European banks are at least as large.

Robert Pickel, chief executive of the International Swaps and Derivatives Association, a trade group, dismisses accusations of profiteering. He says that users can always phone different dealers to get the best price. And dealer banks are rewarded for risks they assume.

Even so, exchanges would eat into banks’ trading profitability by making prices more widely available to buyers of OTC derivatives. But getting OTC derivative markets to use trading platforms is harder than getting them to clear: anything traded on an exchange can be cleared, but the converse is not true.

A simple OTC contract with an obscure maturity date is easy to value and margin. But it would not elicit enough interest from buyers or sellers to justify listing on an exchange. And OTC derivative trades are usually big. On an exchange, a single order could move the market price, creating uncertainty for traders. Mr McPartland likens this to buying a book on Amazon instead of eBay: you often pay more at Amazon, but at least you know the price in advance.

Regulators will permit use of a “swap execution facility” in place of an exchange. But that term remains undefined. It could mean simply allowing broking over the telephone to continue. Or it could mean an electronic trading system provided by a third party. ICAP, the biggest inter-dealer broker, has two such platforms ready to go.

Watchdogs are also expected to establish data repositories, which will give them unfettered access to dealers’ trades. BME, the Spanish stock exchange, launched a new one this month. These should alleviate uncertainty about inter-bank exposures. But Darrell Duffie, a finance professor at Stanford University, worries the reforms will not go far enough. “Any derivatives that are cleared should have the prices made public, regardless of whether they are put through an exchange,” he says.

Non-financial firms that use derivatives are keen to escape the new rules. They have no wish to be forced into joining a clearing house and thus into more demanding margin calls. Nor do they like the idea of capital charges. More than 170 of these “end users” wrote to Congress last month arguing that they needed derivatives but would not be able to afford them under the new rules. So far the proposals leave them out. But Mr Duffie asks: “What sort of firm is General Electric?” (it has a big financial division). Regulators fear that hedge funds, which are not strictly financial institutions, will wriggle out, too.

Some argue that those who use derivatives should face the economic cost whatever their legal status. Easier standards for end-users could encourage them to trade even more. Mr Partnoy thinks they are already predisposed to trade too much: “Making $10m profit here and there irresistibly snowballs into a bigger trading operation.” Their risk-management, he adds, is not as savvy. Josh Rosner, managing director of Graham Fisher, a financial-research firm, says banks will game the rules: “Dealers like Goldman Sachs could reach agreements with exempted firms like Cargill [a food trader] and funnel their derivative trades through them.”

Some companies are acting already. Paul Chrispin of Principal Search, a recruitment firm, reckons that physical trading firms like Noble and Vitol have been on a recruitment drive among banks’ derivative traders. “Traders are worried about their future compensation at banks; and the freer regulatory environment at non-financials makes them an attractive place to work right now,” he observes.

The ingenuity of derivatives traders in adapting to both market forces and regulations may well send supervisors back to the drawing board in a decade or so. For now, a higher capital charge for OTC contracts is a sensible step. Doing away with derivatives altogether is neither wise nor likely. As Mr Scholes says: “Cars cause accidents but we don’t ban them.” But the state does insist on seat belts.

Options have a future

2009-11-15T14:11:00.000-08:00

Derivatives

Options have a future

Nov 12th 2009
From The Economist print edition

Economies need derivatives, but reform is justified

KING HAMMURABI of Mesopotamia regulated the use of derivatives almost 4,000 years ago. The Japanese have been trading rice futures since around 1650. That contracts based on the price of some commodity or asset have been around for about as long as mankind has been trading indicates that they are pretty useful.

Derivatives enable individuals and companies to insure themselves against risk. Just as they fear the destruction of their belongings by fire or theft, businesses may also be concerned that exchange- or interest-rate movements may turn a good idea into a lossmaker. Derivatives allow them to lessen that risk. But someone needs to take the other side of the bargain, and that usually requires a speculator. Some of those speculators will go bust. Those who insure against fire and theft can set premiums on the basis of decades of experience; financial markets are inherently less predictable.

In the latest crisis, the problem was that investors erroneously believed property prices were quite predictable and built a whole edifice of derivatives on the back of the American housing market. To make matters worse, regulators wrongly believed that the use of derivatives, and the bundling of property loans into securities, had spread risk evenly throughout the system. They accordingly allowed banks to gear up their balance-sheets to a greater extent than before. In fact, much of the risk of a property crash still resided in the banks, and the complex nature of derivatives made their exposure very hard to calculate, leading to a loss of confidence in almost all of them.

Derivatives’ tendency to magnify problems has led to calls for regulators to ban some types. Their economic usefulness, it is argued, is far outweighed by their capacity to create systemic risk. Similar arguments were advanced two decades ago, when equity futures may have contributed to the Black Monday crash of 1987 and British local councils lost money in the obscure world of interest-rate swaps.

But after a few modest reforms, equity and interest-rate futures traded without incident, even through the latest crisis. And the same could be true of the more complex stuff. Even the much-maligned credit default swaps have their uses; by allowing investors to separate default risk from the other risks involved in buying bonds, they potentially reduce the cost of capital for business. Nor is a ban likely to achieve its aims. Congress banned onion futures in the 1950s on the ground that speculators were driving the price of the vegetable. The initiative ended in tears: onion prices since have been no less volatile than they were before.

Clearing and present danger

More modest reform, however, is needed (see article). Proposed legislation to encourage the trading of more derivatives on exchanges or through central counterparties deserves support, for it would make it easier to monitor what market participants were doing. Capital requirements need to be increased, so derivatives cannot be used as an easy way for banks to get around restrictions on gearing.

The trickiest issue concerns exemptions for end-users, such as manufacturers. Allowing companies to hedge their risks is the whole point of the instrument. But if the rules favour them over financial companies, trading will tend to migrate towards them, and away from banks. AIG, once the world’s biggest insurer, thought it was making “easy money” by using its strong credit rating to sell protection against credit defaults; in fact, it was digging its own grave.

These reforms may raise the price of using derivatives, but that would not necessarily be a bad thing. When fire and theft premiums rise, those who really need insurance still pay up.

The Fatal Conceit

2009-10-29T14:19:00.000-07:00

October 27, 2009

Op-Ed Columnist

By DAVID BROOKS

Humans are overconfident creatures. Ninety-four percent of college professors believe they are above average teachers, and 90 percent of drivers believe they are above average behind the wheel. Researchers Paul J.H. Schoemaker and J. Edward Russo gave computer executives quizzes on their industry. Afterward, the executives estimated that they had gotten 5 percent of the answers wrong. In fact, they had gotten 80 percent of the answers wrong.

Fortunately, for those who study the human comedy, the epicenter of overconfidence moves from year to year. Up until recently, people in the financial world bathed in the warm glow of their own self-approval. Hubris in that world always takes the same form: The geniuses there come to believe that they have mastered risk. The future is an algorithm and they’ve cracked the code.

Over the past year, the bonfire of overconfidence has shifted to Washington. Since the masters of finance have been exposed as idiots, the masters of government have concluded (somewhat illogically) that they must be really smart.

Overconfidence in government also has a characteristic form: that of highly rational Olympians who attempt to stand above problems and solve them in a finely tuned and impartial manner. In moments of government overconfidence, officials come to see society not as a dynamic and complex organism, but as a machine, which can be rebuilt. In such moments, governance and engineering merge into one.

Examples of this overconfidence abound. But let us pick just one: the effort to cap financial compensation.

Back in the days of Wall Street overconfidence, the financial titans believed that they deserved to give each other G.D.P.-level pay packages, even though there is no evidence that such packages improve performance. Now in disgrace, Wall Street firms are rewriting their rules, but the Obama administration has decided it should take control of compensation reform. Nobody seriously believes high pay caused the financial meltdown; it was bubblicious groupthink. But cutting executive pay just polls so well.

Every great action can be done in a spirit of humility or in a spirit of overconfidence. Regulating pay in a spirit of humility would mean rebalancing the power between shareholders and executives, without getting government involved in micromanaging individual pay decisions.

But this is not a moment of humility. Treasury officials are now making individual pay-package decisions across an array of different companies — and they must have really big brains to understand the motivational psychology of all those different people. The Federal Reserve, meanwhile, has decided to police banks and veto pay deals that lead to excessive risk. Those experts must have absolutely gigantic brains if they can define excessive risk years before investments pay off.

The best and the brightest in government are now rewriting existing pay contracts and determining that certain firms will be compelled to pay much less than their competitors. They’re not leveling the playing field, as a humble government would do. They’re making it less level in complicated ways.

Reality, of course, has a way of upending finely crafted plans. The effort to cap golden parachutes in 1989 perversely caused companies to increase their golden parachute packages right up to the legal limit. A 1993 law to cap C.E.O. pay led to greater use of stock options and encouraged riskier behavior.

In advance of the current new pay restrictions, 12 out of the 25 highest-paid executives have already left A.I.G., and 11 out of 25 have left Bank of America. We’ll never know how much future talent was dissuaded from working at these ailing firms.

Citigroup used to have a really high-performing energy unit. But under the new salary regime, the bank wasn’t permitted to pay the chief of that unit what he thought he was worth. Citigroup was forced to sell that profitable unit at bargain-basement prices to Occidental Petroleum.

These rules probably won’t even have a big effect on executive wealth. They’ll just drive compensation into back channels and risk-taking into unseen parts of the market.

Again, the issue is not whether government acts, but whether it acts with an awareness of the limits of its knowledge. Sometimes we seem to have a government with no sense of those limits, no sense that perhaps government officials don’t know how to restructure General Motors, pick the most promising battery technology, re-engineer the health care system from the top, or fine-tune the complex system of executive pay.

Furthermore, when extending federal authority, the Obama folks never seem to ask how Republicans will use this power when they regain the White House. The Democrats trust themselves to set private-sector salaries and use extralegal means to go after malefactors, but would they trust a future Dick Cheney?

I hope they know what they’re doing. Because when a future Cheney comes into office, I’m pretty sure he’ll be coming after columnists’ salaries first.

Don't Build Up

2009-10-28T06:45:00.000-07:00

October 28, 2009

Op-Ed Columnist

Don’t Build Up

By THOMAS L. FRIEDMAN

It is crunch time on Afghanistan, so here’s my vote: We need to be thinking about how to reduce our footprint and our goals there in a responsible way, not dig in deeper. We simply do not have the Afghan partners, the NATO allies, the domestic support, the financial resources or the national interests to justify an enlarged and prolonged nation-building effort in Afghanistan.

I base this conclusion on three principles. First, when I think back on all the moments of progress in that part of the world — all the times when a key player in the Middle East actually did something that put a smile on my face — all of them have one thing in common: America had nothing to do with it.

America helped build out what they started, but the breakthrough didn’t start with us. We can fan the flames, but the parties themselves have to light the fires of moderation. And whenever we try to do it for them, whenever we want it more than they do, we fail and they languish.

The Camp David peace treaty was not initiated by Jimmy Carter. Rather, the Egyptian president, Anwar Sadat, went to Jerusalem in 1977 after Israel’s Moshe Dayan held secret talks in Morocco with Sadat aide Hassan Tuhami. Both countries decided that they wanted a separate peace — outside of the Geneva comprehensive framework pushed by Mr. Carter.

The Oslo peace accords started in Oslo — in secret 1992-93 talks between the P.L.O. representative, Ahmed Qurei, and the Israeli professor Yair Hirschfeld. Israelis and Palestinians alone hammered out a broad deal and unveiled it to the Americans in the summer of 1993, much to Washington’s surprise.

The U.S. surge in Iraq was militarily successful because it was preceded by an Iraqi uprising sparked by a Sunni tribal leader, Sheik Abdul Sattar Abu Risha, who, using his own forces, set out to evict the pro-Al Qaeda thugs who had taken over Sunni towns and were imposing a fundamentalist lifestyle. The U.S. surge gave that movement vital assistance to grow. But the spark was lit by the Iraqis.

The Cedar Revolution in Lebanon, the Israeli withdrawals from Gaza and Lebanon, the Green Revolution in Iran and the Pakistani decision to finally fight their own Taliban in Waziristan — because those Taliban were threatening the Pakistani middle class — were all examples of moderate, silent majorities acting on their own.

The message: “People do not change when we tell them they should,” said the Johns Hopkins University foreign policy expert Michael Mandelbaum. “They change when they tell themselves they must.”

And when the moderate silent majorities take ownership of their own futures, we win. When they won’t, when we want them to compromise more than they do, we lose. The locals sense they have us over a barrel, so they exploit our naïve goodwill and presence to loot their countries and to defeat their internal foes.

That’s how I see Afghanistan today. I see no moderate spark. I see our secretary of state pleading with President Hamid Karzai to re-do an election that he blatantly stole. I also see us begging Israelis to stop building more crazy settlements or Palestinians to come to negotiations. It is time to stop subsidizing their nonsense. Let them all start paying retail for their extremism, not wholesale. Then you’ll see movement.

What if we shrink our presence in Afghanistan? Won’t Al Qaeda return, the Taliban be energized and Pakistan collapse? Maybe. Maybe not. This gets to my second principle: In the Middle East, all politics — everything that matters — happens the morning after the morning after. Be patient. Yes, the morning after we shrink down in Afghanistan, the Taliban will celebrate, Pakistan will quake and bin Laden will issue an exultant video.

And the morning after the morning after, the Taliban factions will start fighting each other, the Pakistani Army will have to destroy their Taliban, or be destroyed by them, Afghanistan’s warlords will carve up the country, and, if bin Laden comes out of his cave, he’ll get zapped by a drone.

My last guiding principle: We are the world. A strong, healthy and self-confident America is what holds the world together and on a decent path. A weak America would be a disaster for us and the world. China, Russia and Al Qaeda all love the idea of America doing a long, slow bleed in Afghanistan. I don’t.

The U.S. military has given its assessment. It said that stabilizing Afghanistan and removing it as a threat requires rebuilding that whole country. Unfortunately, that is a 20-year project at best, and we can’t afford it. So our political leadership needs to insist on a strategy that will get the most security for less money and less presence. We simply don’t have the surplus we had when we started the war on terrorism after 9/11 — and we desperately need nation-building at home. We have to be smarter. Let’s finish Iraq, because a decent outcome there really could positively impact the whole Arab-Muslim world, and limit our exposure elsewhere. Iraq matters.

Yes, shrinking down in Afghanistan will create new threats, but expanding there will, too. I’d rather deal with the new threats with a stronger America.

Fox wars

2009-10-23T10:33:00.000-07:00

The 'post-partisan' president makes an enemies list

By Charles Krauthammer
Friday, October 23, 2009

Rahm Emanuel once sent a dead fish to a live pollster. Now he's put a horse's head in Roger Ailes's bed.

Not very subtle. And not very smart. Ailes doesn't scare easily.

The White House has declared war on Fox News. White House communications director Anita Dunn said that Fox is "opinion journalism masquerading as news." Patting rival networks on the head for their authenticity (read: docility), senior adviser David Axelrod declared Fox "not really a news station." And Chief of Staff Emanuel told (warned?) the other networks not to "be led [by] and following Fox."

Meaning? If Fox runs a story critical of the administration -- from exposing "green jobs" czar Van Jones as a loony 9/11 "truther" to exhaustively examining the mathematical chicanery and hidden loopholes in proposed health-care legislation -- the other news organizations should think twice before following the lead.

The signal to corporations is equally clear: You might have dealings with a federal behemoth that not only disburses more than $3 trillion every year but is extending its reach ever deeper into private industry -- finance, autos, soon health care and energy. Think twice before you run an ad on Fox.

At first, there was little reaction from other media. Then on Thursday, the administration tried to make them complicit in an actual boycott of Fox. The Treasury Department made available Ken Feinberg, the executive pay czar, for interviews with the White House "pool" news organizations -- except Fox. The other networks admirably refused, saying they would not interview Feinberg unless Fox was permitted to as well. The administration backed down.

This was an important defeat because there's a principle at stake here. While government can and should debate and criticize opposition voices, the current White House goes beyond that. It wants to delegitimize any significant dissent. The objective is no secret. White House aides openly told Politico that they're engaged in a deliberate campaign to marginalize and ostracize recalcitrants, from Fox to health insurers to the U.S. Chamber of Commerce.

There's nothing illegal about such search-and-destroy tactics. Nor unconstitutional. But our politics are defined not just by limits of legality or constitutionality. We have norms, Madisonian norms.

Madison argued that the safety of a great republic, its defense against tyranny, requires the contest between factions or interests. His insight was to understand "the greater security afforded by a greater variety of parties." They would help guarantee liberty by checking and balancing and restraining each other -- and an otherwise imperious government.

Factions should compete, but they should also recognize the legitimacy of other factions and, indeed, their necessity for a vigorous self-regulating democracy. Seeking to deliberately undermine, delegitimize and destroy is not Madisonian. It is Nixonian.

But didn't Teddy Roosevelt try to destroy the trusts? Of course, but what he took down was monopoly power that was extinguishing smaller independent competing interests. Fox News is no monopoly. It is a singular minority in a sea of liberal media. ABC, NBC, CBS, PBS, NPR, CNN, MSNBC vs. Fox. The lineup is so unbalanced as to be comical -- and that doesn't even include the other commanding heights of the culture that are firmly, flagrantly liberal: Hollywood, the foundations, the universities, the elite newspapers.

Fox and its viewers (numbering more than those of CNN and MSNBC combined) need no defense. Defend Fox compared to whom? To CNN -- which recently unleashed its fact-checkers on a "Saturday Night Live" skit mildly critical of President Obama, but did no checking of a grotesquely racist remark that CNN falsely attributed to Rush Limbaugh?

Defend Fox from whom? Fox's flagship 6 o'clock evening news out of Washington (hosted by Bret Baier, formerly by Brit Hume) is, to my mind, the best hour of news on television. (Definitive evidence: My mother watches it even on the odd night when I'm not on.) Defend Fox from the likes of Anita Dunn? She's been attacked for extolling Mao's political philosophy in a speech at a high school graduation. But the critics miss the surpassing stupidity of her larger point: She was invoking Mao as support and authority for her impassioned plea for individuality and trusting one's own choices. Mao as champion of individuality? Mao, the greatest imposer of mass uniformity in modern history, creator of a slave society of a near-billion worker bees wearing Mao suits and waving the Little Red Book?

The White House communications director cannot be trusted to address high schoolers without uttering inanities. She and her cohorts are now to instruct the country on truth and objectivity?

letters@charleskrauthammer.com

Doctors as the Key to Health Care Reform

2009-09-25T11:29:00.000-07:00

Posted by NEJM • September 23rd, 2009 • Printer-friendly

Arnold S. Relman, M.D.

Experts agree that sustainable health care reform requires reiningin rising costs, but few people understand that the controlof medical expenditures is largely in the hands of the medicalprofession. Doctors, in consultation with their patients —not insurance companies, legislators, or government officials— make most of the decisions to use medical resources,thereby determining what the United States spends on medicalcare.
Most doctors are paid on a fee-for-service basis, which is astrong financial incentive for them to maximize the electiveservices they provide. This incentive, combined with the continuedintroduction of new and more expensive technology, is a majorfactor in driving up medical expenditures. The same incentiveis attracting more and more young doctors into specialties thatcommand much higher fees — and therefore guarantee muchgreater income — than those earned by primary care practitioners.Primary care is rapidly becoming an endangered specialty; animportant, but not the only, reason is its relatively low economicrewards.

A system like ours, which is grossly deficient in primary carephysicians and dominated by specialists who are trained to useexpensive tests and procedures, is inevitably costly, particularlywhen most specialists practice as independent small businesses,competing for patient referrals and for income. Adjusting thefees paid by insurers, with increases for primary care and decreasesfor specialized procedures, or basing fees on the quality oroutcome of care won’t solve this problem, because specialistscan easily control the volume and kinds of services they provide.Furthermore, competition doesn’t lower prices in medical careas it does in other markets, because physicians usually choosethe services to be provided and are paid largely by insurance— not by the consumers for whose business they would competeif this were an ordinary market.

To judge from the health care reform proposals getting seriousattention in Washington, there is little evidence that lawmakersare aware of, or understand the significance of, these facts— or that, even if they did, they would have the stomachfor the major reforms needed to solve this problem.¹ Havingsurveyed all the current legislative proposals for slowing thecontinued inflation of costs, the Congressional Budget Officeis not optimistic. Why should it be? We are not likely to controlmedical inflation unless the incentives in the traditional fee-for-servicepayment of doctors are eliminated, but nothing on the tablein the health care reform debate even comes close to eliminatingthem. This fact explains why the private insurance and drugindustries have so far been willing to support the Obama administration’sreform proposals. These proposals would expand coverage andincrease total health care expenditures, which means more incomefor insurers and drug manufacturers. Even after their promisedhelp in reducing the increase in costs, these industries willmake more money in the reformed system than they do now.

Massachusetts, often mentioned as a model for the nation, enactedlegislation more than 3 years ago that achieved nearly universalinsurance coverage but from the outset found itself strugglingto keep up with rising costs. To control expenditures, a specialstate commission on health care payment has recommended theelimination of traditional fee-for-service payment.²^,³ The commissionenvisions the creation of new, as-yet-undefined medical managemententities that it calls “accountable care organizations” (ACOs),which would organize physicians into multispecialty teams withstrong primary care staffing. ACOs could include hospitals,could be for-profit or not-for-profit, and would be expectedto take risks only for their performance. Insurance carrierswould continue to hold the insurance risk for their contractswith ACOs, and they would pay the latter on a per capita, risk-adjustedbasis for comprehensive care. They would also use “pay for performance”as an incentive to promote quality and efficiency. The commissiondoes not specify how physicians in ACOs would be paid, but asalary system is implied by the report’s emphasis on the argumentthat Massachusetts cannot afford fee -for-service payment ofits doctors if it wants to provide near-universal health insurance.Whether the commission’s proposals will prove acceptable tostakeholders and, if so, whether they will ever be implementedremain to be seen.

As it moves to expand insurance coverage, the federal governmentwill soon face the financial difficulty now confronting Massachusetts.

^{Relman AS. The health reform we need and are not getting. New York Rev Books 2009;56:38-40.}

^{Recommendations of the Special Commission on the Health Care Payment System. Boston: Commonwealth of Massachusetts, July 16, 2009.}

^{Steinbrook R. The end of fee-for-service medicine? Proposals for payment reform in Massachusetts. N Engl J Med 2009;361:1036-1038. [Free Full Text]}

Economic vandalism

2009-09-19T15:53:00.000-07:00

Sep 17th 2009
From The Economist print edition

A protectionist move that is bad politics, bad economics, bad diplomacy and hurts America. Did we miss anything?

YOU can be fairly sure that when a government slips an announcement out at nine o’clock on a Friday night, it is not proud of what it is doing. That is one of the only things that makes sense about Barack Obama’s decision to break a commitment he, along with other G20 leaders, reaffirmed last April: to avoid protectionist measures at a time of great economic peril. In every other way the president’s decision to slap a 35% tariff on imported Chinese tyres looks like a colossal blunder, confirming his critics’ worst fears about the president’s inability to stand up to his party’s special interests and stick to the centre ground he promised to occupy in office.

This newspaper endorsed Mr Obama at last year’s election (see article) in part because he had surrounded himself with enough intelligent centrists. We also said that the eventual success of his presidency would be based on two things: resuscitating the world economy; and bringing the new emerging powers into the Western order. He has now hurt both objectives.

Deeply tyresome

Last year the fear was that Mr Obama would give in to enormous protectionist pressure from Congress. By introducing the levy, Mr Obama has pandered to a single union, one that does not even represent a majority of American tyre-industry workers, and he has done so against the interests of everyone else (see article). America’s tyre-makers, who have more or less given up making low-end tyres at home in favour of importing them (often from joint-ventures in guess where) declined to support the application for import “relief”. Consumers will have to pay more. The motor and garage trades will be harmed. And no one can seriously imagine that any American tyre-making job will be saved; firms will simply import cheap tyres from other low-cost places like India and Brazil.

One might argue that these tariffs don’t matter much. They apply, after all, only to imports worth a couple of billion dollars last year, hardly the stuff of a great trade war. China is incandescent with rage; but China is a master of theatrical overreaction. Its actual response so far has been the minor one of announcing an anti-dumping investigation into American chicken and car-parts exports. The whole affair might blow over, much as did the furore surrounding George Bush’s selective steel tariffs (much worse ones than Mr Obama’s on tyres) back in 2002. Presidents, after all, sometimes have to throw a bit of red meat to their supporters: Mr Obama needs to keep the unions on side to help his health-reform bill.

That view seems naive. It is not just that workers in all sorts of other industries that have suffered at the hands of Chinese competitors will now be emboldened to seek the same kind of protection from a president who has given in to the unions at the first opportunity. The tyre decision needs to be set into the context of a string of ominously protectionist policies which started within weeks of the inauguration with a nasty set of “Buy America” provisions for public-works contracts. The president watered these down a bit, but was not brave enough to veto. Next, the president stayed silent as Congress shut down a project that was meant to lead to the opening of the border to Mexican trucks, something promised in the NAFTA agreement of 1994. Besides these sins of commission sit the sins of omission: the president has done nothing at all to advance the three free-trade packages that are pending in Congress, with Colombia, Panama and South Korea, three solid American allies who deserve much better. And much more serious than that, because it affects the whole world, is his failure to put anything worthwhile on the table to help revive the moribund Doha round of trade talks. Mr Bush’s tariffs, like the Reagan-era export restraints on Japanese cars and semiconductors, came from a president who was fundamentally committed to free trade. Mr Obama’s, it seems, do not.

America is needed to lead. The global trading system has many enemies, but in recent times the man in the White House could be counted as its main champion. As the driver of the world’s great opening, America has gained hugely in terms of power and prestige, but the extraordinary burst of growth that globalisation has triggered has also lifted hundreds of millions out of poverty over the past few decades and brought lower prices to consumers everywhere. The global recession threatens to undo some of that, as country after country is tempted to subsidise here and protect there. World trade is likely to slump by 10% in 2009, and a report from the London-based Global Trade Alert claimed this week that, on average, a G20 member has broken the no-protectionism pledge once every three days since it was made. For Mr Obama now to take up the no-protection cause at the G20’s forthcoming meeting in Pittsburgh would, alas, be laughable. But if America does not set an example, no one else is likely to.

Dumb and dumber

Nor is the potential fallout from Mr Obama’s wrongheaded decision limited to trade. Evidence of a weak president being pushed leftward might cause investors to worry whether he will prove similarly feeble when it comes to reining in the vast deficits he is now racking up; and that might spook the buyers of bonds that finance all those deficits. Looming large among these, of course, are the Chinese. Deteriorating trade relations between the world’s number one debtor and its number one creditor are enough to keep any banker awake at night.

And America needs China for a lot more than T-bonds. Any hope of securing a climate-change agreement at Copenhagen in December on a successor treaty to Kyoto will require close co-operation between America and China. So does the work of negotiating with North Korea on its nuclear weapons. And as for Iran, where America is keen to seek a fresh round of UN sanctions in the hope of forcing it to scrap its nuclear programme, China holds a power of veto at the Security Council. Under the relevant trade laws, Mr Obama had the absolute discretion not to impose the recommended tyre tariffs on the grounds of overall economic interest or national security. Given everything that is at stake, his decision not to exercise it amounts to an act of vandalism.

Fact-Checking the President on Health Insurance

2009-09-15T12:27:00.000-07:00

OPINION

SEPTEMBER 14, 2009, 9:51 A.M. ET

His tales of abuse don't stand scrutiny.

By SCOTT HARRINGTON

In his speech to Congress last week, President Barack Obama attempted to sell a reform agenda by demonizing the private health-insurance industry, which many people love to hate. He opened the attack by asserting: "More and more Americans pay their premiums, only to discover that their insurance company has dropped their coverage when they get sick, or won't pay the full cost of care. It happens every day."

Clearly, this should never happen to anyone who is in good standing with his insurance company and has abided by the terms of the policy. But the president's examples of people "dropped" by their insurance companies involve the rescission of policies based on misrepresentation or concealment of information in applications for coverage. Private health insurance cannot function if people buy insurance only after they become seriously ill, or if they knowingly conceal health conditions that might affect their policy.

Traditional practice, governed by decades of common law, statute and regulation is for insurers to rely in underwriting and pricing on the truthfulness of the information provided by applicants about their health, without conducting a costly investigation of each applicant's health history. Instead, companies engage in a certain degree of ex post auditing—conducting more detailed and costly reviews of a subset of applications following policy issue—including when expensive treatment is sought soon after a policy is issued.

This practice offers substantial cost savings and lower premiums compared to trying to verify every application before issuing a policy, or simply paying all claims, regardless of the accuracy and completeness of the applicant's disclosure. Some states restrict insurer rescission rights to instances where the misrepresented or concealed information is directly related to the illness that produced the claim. Most states do not.

To highlight abusive practices, Mr. Obama referred to an Illinois man who "lost his coverage in the middle of chemotherapy because his insurer found he hadn't reported gallstones that he didn't even know about." The president continued: "They delayed his treatment, and he died because of it."

Although the president has used this example previously, his conclusion is contradicted by the transcript of a June 16 hearing on industry practices before the Subcommittee of Oversight and Investigation of the House Committee on Energy and Commerce. The deceased's sister testified that the insurer reinstated her brother's coverage following intervention by the Illinois Attorney General's Office. She testified that her brother received a prescribed stem-cell transplant within the desired three- to four-week "window of opportunity" from "one of the most renowned doctors in the whole world on the specific routine," that the procedure "was extremely successful," and that "it extended his life nearly three and a half years."

The president's second example was a Texas woman "about to get a double mastectomy when her insurance company canceled her policy because she forgot to declare a case of acne." He said that "By the time she had her insurance reinstated, her breast cancer more than doubled in size."

The woman's testimony at the June 16 hearing confirms that her surgery was delayed several months. It also suggests that the dermatologist's chart may have described her skin condition as precancerous, that the insurer also took issue with an apparent failure to disclose an earlier problem with an irregular heartbeat, and that she knowingly underreported her weight on the application.

These two cases are presumably among the most egregious identified by Congressional staffers' analysis of 116,000 pages of documents from three large health insurers, which identified a total of about 20,000 rescissions from millions of policies issued by the insurers over a five-year period. Company representatives testified that less than one half of one percent of policies were rescinded (less than 0.1% for one of the companies).

If existing laws and litigation governing rescission are inadequate, there clearly are a variety of ways that the states or federal government could target abuses without adopting the president's agenda for federal control of health insurance, or the creation of a government health insurer.

Later in his speech, the president used Alabama to buttress his call for a government insurer to enhance competition in health insurance. He asserted that 90% of the Alabama health-insurance market is controlled by one insurer, and that high market concentration "makes it easier for insurance companies to treat their customers badly—by cherry-picking the healthiest individuals and trying to drop the sickest; by overcharging small businesses who have no leverage; and by jacking up rates."

In fact, the Birmingham News reported immediately following the speech that the state's largest health insurer, the nonprofit Blue Cross and Blue Shield of Alabama, has about a 75% market share. A representative of the company indicated that its "profit" averaged only 0.6% of premiums the past decade, and that its administrative expense ratio is 7% of premiums, the fourth lowest among 39 Blue Cross and Blue Shield plans nationwide.

Similarly, a Dec. 31, 2007, report by the Alabama Department of Insurance indicates that the insurer's ratio of medical-claim costs to premiums for the year was 92%, with an administrative expense ratio (including claims settlement expenses) of 7.5%. Its net income, including investment income, was equivalent to 2% of premiums in that year.

In addition to these consumer friendly numbers, a survey in Consumer Reports this month reported that Blue Cross and Blue Shield of Alabama ranked second nationally in customer satisfaction among 41 preferred provider organization health plans. The insurer's apparent efficiency may explain its dominance, as opposed to a lack of competition—especially since there are no obvious barriers to entry or expansion in Alabama faced by large national health insurers such as United Healthcare and Aetna.

Responsible reform requires careful analysis of the underlying causes of problems in health insurance and informed debate over the benefits and costs of targeted remedies. The president's continued demonization of private health insurance in pursuit of his broad agenda of government expansion is inconsistent with that objective.

Mr. Harrington is professor of health-care management and insurance and risk management at the University of Pennsylvania's Wharton School and an adjunct scholar at the American Enterprise Institute.

Obama's Health Rationer-in-Chief

2009-09-02T16:18:00.000-07:00

OPINION
AUGUST 27, 2009, 12:52 P.M. ET

Obama's Health Rationer-in-Chief

White House health-care adviser Ezekiel Emanuel blames the Hippocratic Oath for the 'overuse' of medical care.

By BETSY MCCAUGHEY

Dr. Ezekiel Emanuel, health adviser to President Barack Obama, is under scrutiny. As a bioethicist, he has written extensively about who should get medical care, who should decide, and whose life is worth saving. Dr. Emanuel is part of a school of thought that redefines a physician’s duty, insisting that it includes working for the greater good of society instead of focusing only on a patient’s needs. Many physicians find that view dangerous, and most Americans are likely to agree.

The health bills being pushed through Congress put important decisions in the hands of presidential appointees like Dr. Emanuel. They will decide what insurance plans cover, how much leeway your doctor will have, and what seniors get under Medicare. Dr. Emanuel, brother of White House Chief of Staff Rahm Emanuel, has already been appointed to two key positions: health-policy adviser at the Office of Management and Budget and a member of the Federal Council on Comparative Effectiveness Research. He clearly will play a role guiding the White House's health initiative.

The Reaper Curve: Ezekiel Emanuel used the above chart in a Lancet article to illustrate the ages on which health spending should be focused. "Principles for Allocation of Scarce Medical Interventions" The Lancet, January 31, 2009

Dr. Emanuel says that health reform will not be pain free, and that the usual recommendations for cutting medical spending (often urged by the president) are mere window dressing. As he wrote in the Feb. 27, 2008, issue of the Journal of the American Medical Association (JAMA): "Vague promises of savings from cutting waste, enhancing prevention and wellness, installing electronic medical records and improving quality of care are merely 'lipstick' cost control, more for show and public relations than for true change."

True reform, he argues, must include redefining doctors' ethical obligations. In the June 18, 2008, issue of JAMA, Dr. Emanuel blames the Hippocratic Oath for the "overuse" of medical care: "Medical school education and post graduate education emphasize thoroughness," he writes. "This culture is further reinforced by a unique understanding of professional obligations, specifically the Hippocratic Oath's admonition to 'use my power to help the sick to the best of my ability and judgment' as an imperative to do everything for the patient regardless of cost or effect on others."

In numerous writings, Dr. Emanuel chastises physicians for thinking only about their own patient's needs. He describes it as an intractable problem: "Patients were to receive whatever services they needed, regardless of its cost. Reasoning based on cost has been strenuously resisted; it violated the Hippocratic Oath, was associated with rationing, and derided as putting a price on life. . . . Indeed, many physicians were willing to lie to get patients what they needed from insurance companies that were trying to hold down costs." (JAMA, May 16, 2007).

Of course, patients hope their doctors will have that single-minded devotion. But Dr. Emanuel believes doctors should serve two masters, the patient and society, and that medical students should be trained "to provide socially sustainable, cost-effective care." One sign of progress he sees: "the progression in end-of-life care mentality from 'do everything' to more palliative care shows that change in physician norms and practices is possible." (JAMA, June 18, 2008).

"In the next decade every country will face very hard choices about how to allocate scarce medical resources. There is no consensus about what substantive principles should be used to establish priorities for allocations," he wrote in the New England Journal of Medicine, Sept. 19, 2002. Yet Dr. Emanuel writes at length about who should set the rules, who should get care, and who should be at the back of the line.

"You can't avoid these questions," Dr. Emanuel said in an Aug. 16 Washington Post interview. "We had a big controversy in the United States when there was a limited number of dialysis machines. In Seattle, they appointed what they called a 'God committee' to choose who should get it, and that committee was eventually abandoned. Society ended up paying the whole bill for dialysis instead of having people make those decisions."

Dr. Emanuel argues that to make such decisions, the focus cannot be only on the worth of the individual. He proposes adding the communitarian perspective to ensure that medical resources will be allocated in a way that keeps society going: "Substantively, it suggests services that promote the continuation of the polity—those that ensure healthy future generations, ensure development of practical reasoning skills, and ensure full and active participation by citizens in public deliberations—are to be socially guaranteed as basic. Covering services provided to individuals who are irreversibly prevented from being or becoming participating citizens are not basic, and should not be guaranteed. An obvious example is not guaranteeing health services to patients with dementia." (Hastings Center Report, November-December, 1996)

In the Lancet, Jan. 31, 2009, Dr. Emanuel and co-authors presented a "complete lives system" for the allocation of very scarce resources, such as kidneys, vaccines, dialysis machines, intensive care beds, and others. "One maximizing strategy involves saving the most individual lives, and it has motivated policies on allocation of influenza vaccines and responses to bioterrorism. . . . Other things being equal, we should always save five lives rather than one.

"However, other things are rarely equal—whether to save one 20-year-old, who might live another 60 years, if saved, or three 70-year-olds, who could only live for another 10 years each—is unclear." In fact, Dr. Emanuel makes a clear choice: "When implemented, the complete lives system produces a priority curve on which individuals aged roughly 15 and 40 years get the most substantial chance, whereas the youngest and oldest people get changes that are attenuated (see Dr. Emanuel's chart nearby).

Dr. Emanuel concedes that his plan appears to discriminate against older people, but he explains: "Unlike allocation by sex or race, allocation by age is not invidious discrimination. . . . Treating 65 year olds differently because of stereotypes or falsehoods would be ageist; treating them differently because they have already had more life-years is not."

The youngest are also put at the back of the line: "Adolescents have received substantial education and parental care, investments that will be wasted without a complete life. Infants, by contrast, have not yet received these investments. . . . As the legal philosopher Ronald Dworkin argues, 'It is terrible when an infant dies, but worse, most people think, when a three-year-old dies and worse still when an adolescent does,' this argument is supported by empirical surveys." (thelancet.com, Jan. 31, 2009).

To reduce health-insurance costs, Dr. Emanuel argues that insurance companies should pay for new treatments only when the evidence demonstrates that the drug will work for most patients. He says the "major contributor" to rapid increases in health spending is "the constant introduction of new medical technologies, including new drugs, devices, and procedures. . . . With very few exceptions, both public and private insurers in the United States cover and pay for any beneficial new technology without considering its cost. . . ." He writes that one drug "used to treat metastatic colon cancer, extends medial survival for an additional two to five months, at a cost of approximately $50,000 for an average course of therapy." (JAMA, June 13, 2007).

Medians, of course, obscure the individual cases where the drug significantly extended or saved a life. Dr. Emanuel says the United States should erect a decision-making body similar to the United Kingdom's rationing body—the National Institute for Health and Clinical Excellence (NICE)—to slow the adoption of new medications and set limits on how much will be paid to lengthen a life.

Dr. Emanuel's assessment of American medical care is summed up in a Nov. 23, 2008, Washington Post op-ed he co-authored: "The United States is No. 1 in only one sense: the amount we shell out for health care. We have the most expensive system in the world per capita, but we lag behind many developed nations on virtually every health statistic you can name."

View Full Image
McCaughey
Associated Press
McCaughey
McCaughey

This is untrue, though sadly it's parroted at town-hall meetings across the country. Moreover, it's an odd factual error coming from an oncologist. According to an August 2009 report from the National Bureau of Economic Research, patients diagnosed with cancer in the U.S. have a better chance of surviving the disease than anywhere else. The World Health Organization also rates the U.S. No. 1 out of 191 countries for responsiveness to the needs and choices of the individual patient. That attention to the individual is imperiled by Dr. Emanuel's views.

Dr. Emanuel has fought for a government takeover of health care for over a decade. In 1993, he urged that President Bill Clinton impose a wage and price freeze on health care to force parties to the table. "The desire to be rid of the freeze will do much to concentrate the mind," he wrote with another author in a Feb. 8, 1993, Washington Post op-ed. Now he recommends arm-twisting Chicago style. "Every favor to a constituency should be linked to support for the health-care reform agenda," he wrote last Nov. 16 in the Health Care Watch Blog. "If the automakers want a bailout, then they and their suppliers have to agree to support and lobby for the administration's health-reform effort."

Is this what Americans want?

Ms. McCaughey is chairman of the Committee to Reduce Infection Deaths and a former lieutenant governor of New York state.

The Death Book for Veterans

2009-08-31T16:23:00.000-07:00

* The Wall Street Journal

* OPINION
* AUGUST 18, 2009, 7:12 P.M. ET

The Death Book for Veterans
Ex-soldiers don't need to be told they're a burden to society.

By JIM TOWEY

If President Obama wants to better understand why America's discomfort with end-of-life discussions threatens to derail his health-care reform, he might begin with his own Department of Veterans Affairs (VA). He will quickly discover how government bureaucrats are greasing the slippery slope that can start with cost containment but quickly become a systematic denial of care.

Last year, bureaucrats at the VA's National Center for Ethics in Health Care advocated a 52-page end-of-life planning document, "Your Life, Your Choices." It was first published in 1997 and later promoted as the VA's preferred living will throughout its vast network of hospitals and nursing homes. After the Bush White House took a look at how this document was treating complex health and moral issues, the VA suspended its use. Unfortunately, under President Obama, the VA has now resuscitated "Your Life, Your Choices."

Who is the primary author of this workbook? Dr. Robert Pearlman, chief of ethics evaluation for the center, a man who in 1996 advocated for physician-assisted suicide in Vacco v. Quill before the U.S. Supreme Court and is known for his support of health-care rationing.

"Your Life, Your Choices" presents end-of-life choices in a way aimed at steering users toward predetermined conclusions, much like a political "push poll." For example, a worksheet on page 21 lists various scenarios and asks users to then decide whether their own life would be "not worth living."

The circumstances listed include ones common among the elderly and disabled: living in a nursing home, being in a wheelchair and not being able to "shake the blues." There is a section which provocatively asks, "Have you ever heard anyone say, 'If I'm a vegetable, pull the plug'?" There also are guilt-inducing scenarios such as "I can no longer contribute to my family's well being," "I am a severe financial burden on my family" and that the vet's situation "causes severe emotional burden for my family."

When the government can steer vulnerable individuals to conclude for themselves that life is not worth living, who needs a death panel?

One can only imagine a soldier surviving the war in Iraq and returning without all of his limbs only to encounter a veteran's health-care system that seems intent on his surrender.

I was not surprised to learn that the VA panel of experts that sought to update "Your Life, Your Choices" between 2007-2008 did not include any representatives of faith groups or disability rights advocates. And as you might guess, only one organization was listed in the new version as a resource on advance directives: the Hemlock Society (now euphemistically known as "Compassion and Choices").

This hurry-up-and-die message is clear and unconscionable. Worse, a July 2009 VA directive instructs its primary care physicians to raise advance care planning with all VA patients and to refer them to "Your Life, Your Choices." Not just those of advanced age and debilitated condition—all patients. America's 24 million veterans deserve better.

Many years ago I created an advance care planning document called "Five Wishes" that is today the most widely used living will in America, with 13 million copies in national circulation. Unlike the VA's document, this one does not contain the standard bias to withdraw or withhold medical care. It meets the legal requirements of at least 43 states, and it runs exactly 12 pages.

After a decade of observing end-of-life discussions, I can attest to the great fear that many patients have, particularly those with few family members and financial resources. I lived and worked in an AIDS home in the mid-1980s and saw first-hand how the dying wanted more than health care—they wanted someone to care.

If President Obama is sincere in stating that he is not trying to cut costs by pressuring the disabled to forgo critical care, one good way to show that commitment is to walk two blocks from the Oval Office and pull the plug on "Your Life, Your Choices." He should make sure in the future that VA decisions are guided by values that treat the lives of our veterans as gifts, not burdens.

Mr. Towey, president of Saint Vincent College, was director of the White House Office of Faith-Based Initiatives (2002-2006) and founder of the nonprofit Aging with Dignity.

The Economist endorses Obama

2008-11-02T06:03:00.000-08:00

It's time
Oct 30th 2008
From The Economist print edition

America should take a chance and make Barack Obama the next leader of the free world

IT IS impossible to forecast how important any presidency will be. Back in 2000 America stood tall as the undisputed superpower, at peace with a generally admiring world. The main argument was over what to do with the federal government’s huge budget surplus. Nobody foresaw the seismic events of the next eight years. When Americans go to the polls next week the mood will be very different. The United States is unhappy, divided and foundering both at home and abroad. Its self-belief and values are under attack.

For all the shortcomings of the campaign, both John McCain and Barack Obama offer hope of national redemption. Now America has to choose between them. The Economist does not have a vote, but if it did, it would cast it for Mr Obama. We do so wholeheartedly: the Democratic candidate has clearly shown that he offers the better chance of restoring America’s self-confidence. But we acknowledge it is a gamble. Given Mr Obama’s inexperience, the lack of clarity about some of his beliefs and the prospect of a stridently Democratic Congress, voting for him is a risk. Yet it is one America should take, given the steep road ahead.

Thinking about 2009 and 2017

The immediate focus, which has dominated the campaign, looks daunting enough: repairing America’s economy and its international reputation. The financial crisis is far from finished. The United States is at the start of a painful recession. Some form of further fiscal stimulus is needed, though estimates of the budget deficit next year already spiral above $1 trillion. Some 50m Americans have negligible health-care cover. Abroad, even though troops are dying in two countries, the cack-handed way in which George Bush has prosecuted his war on terror has left America less feared by its enemies and less admired by its friends than it once was.

Yet there are also longer-term challenges, worth stressing if only because they have been so ignored on the campaign. Jump forward to 2017, when the next president will hope to relinquish office. A combination of demography and the rising costs of America’s huge entitlement programmes—Social Security, Medicare and Medicaid—will be starting to bankrupt the country. Abroad a greater task is already evident: welding the new emerging powers to the West. That is not just a matter of handling the rise of India and China, drawing them into global efforts, such as curbs on climate change; it means reselling economic and political freedom to a world that too quickly associates American capitalism with Lehman Brothers and American justice with Guantánamo Bay. This will take patience, fortitude, salesmanship and strategy.

At the beginning of this election year, there were strong arguments against putting another Republican in the White House. A spell in opposition seemed apt punishment for the incompetence, cronyism and extremism of the Bush presidency. Conservative America also needs to recover its vim. Somehow Ronald Reagan’s party of western individualism and limited government has ended up not just increasing the size of the state but turning it into a tool of southern-fried moralism.

The selection of Mr McCain as the Republicans’ candidate was a powerful reason to reconsider. Mr McCain has his faults: he is an instinctive politician, quick to judge and with a sharp temper. And his age has long been a concern (how many global companies in distress would bring in a new 72-year-old boss?). Yet he has bravely taken unpopular positions—for free trade, immigration reform, the surge in Iraq, tackling climate change and campaign-finance reform. A western Republican in the Reagan mould, he has a long record of working with both Democrats and America’s allies.

If only the real John McCain had been running

That, however, was Senator McCain; the Candidate McCain of the past six months has too often seemed the victim of political sorcery, his good features magically inverted, his bad ones exaggerated. The fiscal conservative who once tackled Mr Bush over his unaffordable tax cuts now proposes not just to keep the cuts, but to deepen them. The man who denounced the religious right as “agents of intolerance” now embraces theocratic culture warriors. The campaigner against ethanol subsidies (who had a better record on global warming than most Democrats) came out in favour of a petrol-tax holiday. It has not all disappeared: his support for free trade has never wavered. Yet rather than heading towards the centre after he won the nomination, Mr McCain moved to the right.

Meanwhile his temperament, always perhaps his weak spot, has been found wanting. Sometimes the seat-of-the-pants method still works: his gut reaction over Georgia—to warn Russia off immediately—was the right one. Yet on the great issue of the campaign, the financial crisis, he has seemed all at sea, emitting panic and indecision. Mr McCain has never been particularly interested in economics, but, unlike Mr Obama, he has made little effort to catch up or to bring in good advisers (Doug Holtz-Eakin being the impressive exception).

The choice of Sarah Palin epitomised the sloppiness. It is not just that she is an unconvincing stand-in, nor even that she seems to have been chosen partly for her views on divisive social issues, notably abortion. Mr McCain made his most important appointment having met her just twice.

Ironically, given that he first won over so many independents by speaking his mind, the case for Mr McCain comes down to a piece of artifice: vote for him on the assumption that he does not believe a word of what he has been saying. Once he reaches the White House, runs this argument, he will put Mrs Palin back in her box, throw away his unrealistic tax plan and begin negotiations with the Democratic Congress. That is plausible; but it is a long way from the convincing case that Mr McCain could have made. Had he become president in 2000 instead of Mr Bush, the world might have had fewer problems. But this time it is beset by problems, and Mr McCain has not proved that he knows how to deal with them.

Is Mr Obama any better? Most of the hoopla about him has been about what he is, rather than what he would do. His identity is not as irrelevant as it sounds. Merely by becoming president, he would dispel many of the myths built up about America: it would be far harder for the spreaders of hate in the Islamic world to denounce the Great Satan if it were led by a black man whose middle name is Hussein; and far harder for autocrats around the world to claim that American democracy is a sham. America’s allies would rally to him: the global electoral college on our website shows a landslide in his favour. At home he would salve, if not close, the ugly racial wound left by America’s history and lessen the tendency of American blacks to blame all their problems on racism.

So Mr Obama’s star quality will be useful to him as president. But that alone is not enough to earn him the job. Charisma will not fix Medicare nor deal with Iran. Can he govern well? Two doubts present themselves: his lack of executive experience; and the suspicion that he is too far to the left.

There is no getting around the fact that Mr Obama’s résumé is thin for the world’s biggest job. But the exceptionally assured way in which he has run his campaign is a considerable comfort. It is not just that he has more than held his own against Mr McCain in the debates. A man who started with no money and few supporters has out-thought, out-organised and outfought the two mightiest machines in American politics—the Clintons and the conservative right.

Political fire, far from rattling Mr Obama, seems to bring out the best in him: the furore about his (admittedly ghastly) preacher prompted one of the most thoughtful speeches of the campaign. On the financial crisis his performance has been as assured as Mr McCain’s has been febrile. He seems a quick learner and has built up an impressive team of advisers, drawing in seasoned hands like Paul Volcker, Robert Rubin and Larry Summers. Of course, Mr Obama will make mistakes; but this is a man who listens, learns and manages well.

It is hard too nowadays to depict him as soft when it comes to dealing with America’s enemies. Part of Mr Obama’s original appeal to the Democratic left was his keenness to get American troops out of Iraq; but since the primaries he has moved to the centre, pragmatically saying the troops will leave only when the conditions are right. His determination to focus American power on Afghanistan, Pakistan and proliferation was prescient. He is keener to talk to Iran than Mr McCain is— but that makes sense, providing certain conditions are met.

Our main doubts about Mr Obama have to do with the damage a muddle-headed Democratic Congress might try to do to the economy. Despite the protectionist rhetoric that still sometimes seeps into his speeches, Mr Obama would not sponsor a China-bashing bill. But what happens if one appears out of Congress? Worryingly, he has a poor record of defying his party’s baronies, especially the unions. His advisers insist that Mr Obama is too clever to usher in a new age of over-regulation, that he will stop such nonsense getting out of Congress, that he is a political chameleon who would move to the centre in Washington. But the risk remains that on economic matters the centre that Mr Obama moves to would be that of his party, not that of the country as a whole.

He has earned it

So Mr Obama in that respect is a gamble. But the same goes for Mr McCain on at least as many counts, not least the possibility of President Palin. And this cannot be another election where the choice is based merely on fear. In terms of painting a brighter future for America and the world, Mr Obama has produced the more compelling and detailed portrait. He has campaigned with more style, intelligence and discipline than his opponent. Whether he can fulfil his immense potential remains to be seen. But Mr Obama deserves the presidency.

Blame Fannie Mae?

2008-09-23T06:03:00.000-07:00

OPINION
SEPTEMBER 23, 2008

Blame Fannie Mae and Congress
For the Credit Mess

By CHARLES W. CALOMIRIS and PETER J. WALLISON

Many monumental errors and misjudgments contributed to the acute financial turmoil in which we now find ourselves. Nevertheless, the vast accumulation of toxic mortgage debt that poisoned the global financial system was driven by the aggressive buying of subprime and Alt-A mortgages, and mortgage-backed securities, by Fannie Mae and Freddie Mac. The poor choices of these two government-sponsored enterprises (GSEs) -- and their sponsors in Washington -- are largely to blame for our current mess.

How did we get here? Let's review: In order to curry congressional support after their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of "affordable housing." They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse.

It is important to understand that, as GSEs, Fannie and Freddie were viewed in the capital markets as government-backed buyers (a belief that has now been reduced to fact). Thus they were able to borrow as much as they wanted for the purpose of buying mortgages and mortgage-backed securities. Their buying patterns and interests were followed closely in the markets. If Fannie and Freddie wanted subprime or Alt-A loans, the mortgage markets would produce them. By late 2004, Fannie and Freddie very much wanted subprime and Alt-A loans. Their accounting had just been revealed as fraudulent, and they were under pressure from Congress to demonstrate that they deserved their considerable privileges. Among other problems, economists at the Federal Reserve and Congressional Budget Office had begun to study them in detail, and found that -- despite their subsidized borrowing rates -- they did not significantly reduce mortgage interest rates. In the wake of Freddie's 2003 accounting scandal, Fed Chairman Alan Greenspan became a powerful opponent, and began to call for stricter regulation of the GSEs and limitations on the growth of their highly profitable, but risky, retained portfolios.

If they were not making mortgages cheaper and were creating risks for the taxpayers and the economy, what value were they providing? The answer was their affordable-housing mission. So it was that, beginning in 2004, their portfolios of subprime and Alt-A loans and securities began to grow. Subprime and Alt-A originations in the U.S. rose from less than 8% of all mortgages in 2003 to over 20% in 2006. During this period the quality of subprime loans also declined, going from fixed rate, long-term amortizing loans to loans with low down payments and low (but adjustable) initial rates, indicating that originators were scraping the bottom of the barrel to find product for buyers like the GSEs.

The strategy of presenting themselves to Congress as the champions of affordable housing appears to have worked. Fannie and Freddie retained the support of many in Congress, particularly Democrats, and they were allowed to continue unrestrained. Rep. Barney Frank (D., Mass), for example, now the chair of the House Financial Services Committee, openly described the "arrangement" with the GSEs at a committee hearing on GSE reform in 2003: "Fannie Mae and Freddie Mac have played a very useful role in helping to make housing more affordable . . . a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing." The hint to Fannie and Freddie was obvious: Concentrate on affordable housing and, despite your problems, your congressional support is secure.

In light of the collapse of Fannie and Freddie, both John McCain and Barack Obama now criticize the risk-tolerant regulatory regime that produced the current crisis. But Sen. McCain's criticisms are at least credible, since he has been pointing to systemic risks in the mortgage market and trying to do something about them for years. In contrast, Sen. Obama's conversion as a financial reformer marks a reversal from his actions in previous years, when he did nothing to disturb the status quo. The first head of Mr. Obama's vice-presidential search committee, Jim Johnson, a former chairman of Fannie Mae, was the one who announced Fannie's original affordable-housing program in 1991 -- just as Congress was taking up the first GSE regulatory legislation.

In 2005, the Senate Banking Committee, then under Republican control, adopted a strong reform bill, introduced by Republican Sens. Elizabeth Dole, John Sununu and Chuck Hagel, and supported by then chairman Richard Shelby. The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator. In light of the current financial crisis, this bill was probably the most important piece of financial regulation before Congress in 2005 and 2006. All the Republicans on the Committee supported the bill, and all the Democrats voted against it. Mr. McCain endorsed the legislation in a speech on the Senate floor. Mr. Obama, like all other Democrats, remained silent.

Now the Democrats are blaming the financial crisis on "deregulation." This is a canard. There has indeed been deregulation in our economy -- in long-distance telephone rates, airline fares, securities brokerage and trucking, to name just a few -- and this has produced much innovation and lower consumer prices. But the primary "deregulation" in the financial world in the last 30 years permitted banks to diversify their risks geographically and across different products, which is one of the things that has kept banks relatively stable in this storm.

As a result, U.S. commercial banks have been able to attract more than $100 billion of new capital in the past year to replace most of their subprime-related write-downs. Deregulation of branching restrictions and limitations on bank product offerings also made possible bank acquisition of Bear Stearns and Merrill Lynch, saving billions in likely resolution costs for taxpayers.

If the Democrats had let the 2005 legislation come to a vote, the huge growth in the subprime and Alt-A loan portfolios of Fannie and Freddie could not have occurred, and the scale of the financial meltdown would have been substantially less. The same politicians who today decry the lack of intervention to stop excess risk taking in 2005-2006 were the ones who blocked the only legislative effort that could have stopped it.

Mr. Calomiris is a professor of finance and economics at Columbia Business School and a scholar at the American Enterprise Institute. Mr. Wallison, a senior fellow at the American Enterprise Institute, was general counsel of the Treasury Department in the Reagan administration.

The Post-Lehman World

2008-09-23T06:02:00.001-07:00

September 19, 2008

Op-Ed Columnist

The Post-Lehman World

By DAVID BROOKS

A few years ago, real estate was all the rage. Earlier this year, the business magazines were telling us to invest in Lehman Brothers and Merrill Lynch, because those stocks were bound to zoom. Now another herd is on the march.

We’re in a paradigm shift, its members say. The current financial turmoil marks the end of the era of wide-open global capitalism. Today’s gigantic government acquisitions signal a new political era, with more federal activism and tighter regulations.

This observation is then followed by a string of ethereal gottas and shoulds. We gotta have smart regulation that offers security but doesn’t stifle innovation. We gotta have rules that inhibit reckless gambling without squelching sensible risk-taking. We should limit excesses during booms and head off liquidations when things go bad.

It all sounds great (like buying a house with no money down), but do you mind if I do a little due diligence?

In the first place, the idea that our problems stem from light regulation and could be solved by more regulation doesn’t fit all the facts. The current financial crisis is centered around highly regulated investment banks, while lightly regulated hedge funds are not doing so badly. Two of the biggest miscreants were Fannie Mae and Freddie Mac, which, in theory, “were probably the world’s most heavily supervised financial institutions,” according to Jonathan Kay of The Financial Times.

Moreover, there is a lot of lamentation about Clinton era reforms that loosened restrictions on banks. But it’s hard, as Megan McArdle of The Atlantic notes, to see what these reforms had to do with rising house prices, the flood of foreign investment that fed the credit bubble and the global creation of complex new financial instruments for pricing and distributing risk.

In other words, maybe there is something more going on here than just a bunch of laissez-faire regulators asleep at the wheel. But even if it is true that we need more federal activism, I’m a little curious about what we’re going to need to make the system work.

Surely, we’re going to need lawmakers who understand what caused the current meltdown and who can design rules to make sure it doesn’t happen again. And yet there’s no consensus about what caused this bubble.

Some people blame the Fed’s monetary policies, but some say the Fed had only a marginal effect. Some argue a flood of foreign investment allowed us to live beyond our means, while others say bad accounting regulations after Enron created a chain reaction of losses.

We don’t even have a clear explanation about the past, yet we’re also going to need regulators who understand the present and can diagnose the future.

We’re going to need regulators who can anticipate what the next Wall Street business model is going to look like, and how the next crisis will be different than the current one. We’re going to need squads of low-paid regulators who can stay ahead of the highly paid bankers, auditors and analysts who pace this industry (and who themselves failed to anticipate this turmoil).

We’re apparently going to need an all-powerful Super-Fed than can manage inflation, unemployment, bubbles and maybe hurricanes — all at the same time! We’re going to need regulators who write regulations that control risky behavior rather than just channeling it off into dark corners, and who understand what’s happening in bank trading rooms even if the C.E.O.’s themselves are oblivious.

We’re also going to need regulators who can overcome politics and human nature. As McArdle notes, cracking down on subprime loans just when they were getting frothy would have meant issuing an edict that effectively said: “Don’t lend money to poor people.” Good luck with that.

We’d need regulators who could spot a bubble and squelch a boom just when things seem to be going good, who can scare away foreign investment and who could over-rule popularity-mongering presidents. (The statements by the two candidates this week have been moronic.)

To sum it all up, this supposed new era of federal activism is going to confront some old problems: the lack of information available to government planners, the inability to keep up with or control complex economic systems, the fact that political considerations invariably distort the best laid plans.

This doesn’t mean there’s nothing to be done. Martin Wolf suggests countercyclical capital requirements. Everybody seems to be for some updated version of the Resolution Trust Corporation, though disposing of complex debt securities has got to be more difficult than disposing of commercial real estate.

It’s just that there’s a big difference between dreaming of some ideal regulatory regime and actually putting one into practice. Everybody says we’re about to enter a new political era, rich in global financial regulation. The herd might just be wrong once again.

Cash for Trash

2008-09-23T05:57:00.000-07:00

I (almost) never agree with Paul Krugman

but

September 22, 2008

Op-Ed Columnist

Cash for Trash

By PAUL KRUGMAN

Some skeptics are calling Henry Paulson’s $700 billion rescue plan for the U.S. financial system “cash for trash.” Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq.

There’s justice in the gibes. Everyone agrees that something major must be done. But Mr. Paulson is demanding extraordinary power for himself — and for his successor — to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense.

Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us.

So let’s try to think this through for ourselves. I have a four-step view of the financial crisis:

1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.

2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.

3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.

4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”

The Paulson plan calls for the federal government to buy up $700 billion worth of troubled assets, mainly mortgage-backed securities. How does this resolve the crisis?

Well, it might — might — break the vicious circle of deleveraging, step 4 in my capsule description. Even that isn’t clear: the prices of many assets, not just those the Treasury proposes to buy, are under pressure. And even if the vicious circle is limited, the financial system will still be crippled by inadequate capital.

Or rather, it will be crippled by inadequate capital unless the federal government hugely overpays for the assets it buys, giving financial firms — and their stockholders and executives — a giant windfall at taxpayer expense. Did I mention that I’m not happy with this plan?

The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.

That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)

But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.

I’m aware that Congress is under enormous pressure to agree to the Paulson plan in the next few days, with at most a few modifications that make it slightly less bad. Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.

But I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem. Don’t let yourself be railroaded — if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future.

Obama

2008-08-28T16:48:00.000-07:00

Obama Needs to Take a Stand on Race and Other Issues

2008-08-28T10:42:00.000-07:00

By JUAN WILLIAMS

Wall Street Jouranl
August 28, 2008; Page A15

There is a powerful, often painful, thread of memory in the American mind with regard to race. It is a flowing narrative from the time of slavery to the Civil War and on to the nation's struggle for racial equality. That story includes Martin Luther King's life and death as a martyr. Today the story continues in a nation where one-third of the population is made up of racial minorities. There is also an unprecedented number of immigrants and record levels of prosperity among the black and Hispanic middle-class.

Now we have Barack Obama's astonishing political rise, advancing the story to the point where a majority white nation might possibly select him as its first president of color.

For Sen. Obama's supporters and much of the American media, the message of this neatly packaged story is that the Illinois senator is the man who fulfills King's dream. "Had it not been for that speech," Mr. Obama told the Rocky Mountain News last week, "I very likely wouldn't be standing in Invesco [field] to accept the nomination from my party." He told USA Today he plans to pay tribute to King tonight, and use the speech to express "pride in how much this country has transformed itself in my lifetime . . . I don't think we can shy away from the significance of that."

More than 90% of black Americans are now on board with that story line, and according to polls, more than a third of black voters say his race is either the most important factor or one key factor in explaining their support for Mr. Obama. His race is at least a key issue for about a quarter of white voters as well, and that percentage is going up. Many white voters -- especially young people -- appreciate Mr. Obama as the biracial candidate capable of moving America to a new day, and past its legacy of endless racial tensions.

Yet given this central racial dynamic, it is incredible that on any issue of racial consequence Mr. Obama has become a stealth candidate. It is arguably smart politics not to focus on potentially controversial racial issues when you are a black man running in an election with an electorate that is more than 75% white. But how is it possible that Mr. Obama, as he rises to claim the mantle of Dr. King before 75,000 people and a national TV audience of millions here tonight, remains a mystery on the most important civil rights issues of our day?

Mr. Obama is nowhere man when it comes time to speak out on reforming big city public schools, with their criminally high dropout rates for minority children. He apparently refuses to do it for fear that supporting vouchers or doing anything to strengthen charter schools will alienate vote-rich unions. His rare references to the critical argument over affirmative action -- an issue that is on several state ballots this fall -- give both opponents and supporters reason to think he might be on their side. He has had little if anything to say about the persistent 25% poverty rate in black America.

The only speech Mr. Obama has given on race came after his minister's racist rants became public. In that celebrated talk he defended Rev. Jeremiah Wright, while at the same time distancing himself from the rants. That quick escape did not work, because Rev. Wright continued to spew vitriol -- threatening the campaign with questions about whether Mr. Obama subscribed to the same angry, anti-American views. It was only rational for voters to ask how he could have kept silent in the face of the minister's sermons over 20 years.

Time and again, the man who draws so openly on King's legacy refuses to sacrifice an iota of possible political support by taking a principled stand on matters of racial justice that King said are matters of right and wrong. Instead, Obama makes cryptic or general comments that leave his position on important racial issues ambiguous or unknown.

All of this can be written off as a politician in search of votes moving to the ideological middle, to accommodate public opinion as he focuses on winning. It might be said he is not a captive of any set ideology. John McCain has had his own flaws and changes of heart on a few issues in this election season.

But this is not a game in which all the players and issues are the same and everyone has dirty hands. Racial justice is beyond bargaining. And a special responsibility falls on Mr. Obama, because he has come to represent not just another presidential candidate, but a reflection of the nation's desire to heal its racial wounds.

The uneasy truth may be that Mr. Obama is not worried about alienating white voters with his stands on race. It is more likely that he fears having to speak the truth about the poor -- who are disproportionately black and Latino -- needing to take more responsibility for family breakdown, bad schools, thug-life culture and high poverty rates.

A 2007 Pew poll found that nearly 40% of blacks said the poor have become so divorced from middle-class values that they are a separate race. Mr. Obama has to know this tension exists. When he spoke in a black church about the need for black men to be good fathers it may have angered the Jesse Jacksons of the world. But it was a rare moment when he was willing to reveal himself and speak on an important racial issue. It did him no political harm; it may have helped him.

In the bad old days of legal segregation many white politicians would not take a stand, either. Men like Orval Faubus and Strom Thurmond used to make a political show of opposing what they called "race mixing" and equal rights for all. Later in life they said they had not been racists, but didn't want to risk losing elections to segregationist candidates who made outright racial appeals. Faubus and Thurmond did win elections. But sadly for them, there is no bargaining with history about accommodating injustice and particularly racism.

Whatever good they did in their political careers is a footnote compared to the corruption they advanced with their public accommodation of racism. Their failure to stand on principle prolonged segregation, damaging people and the nation.

If Mr. Obama is really to remind the nation of Martin Luther King, he might follow King's example of taking a moral stand. King did not vacillate on his call for civil rights laws, voting rights laws or fair housing laws. He took a stand even with his own supporters. In his historic speech on Aug. 28, 1963, King declared "there is something that I must say to my people," and then spoke against bitterness, hatred and violence even in the name of "gaining our rightful place" and freedom.

Now it is Mr. Obama's turn to speak as a moral conscience on race -- if only because it is the only truly effective way he can put the race issue behind him. Then he can begin filling in the specifics of his plans for the economy, dealing with terrorists and the war in Iraq. That will give voters a chance to realize the nation's dream of judging people on the content of their character and leadership, not their race.

Mr. Williams, a political analyst for National Public Radio and Fox News, is author of several books, including "Eyes on the Prize: America's Civil Rights Years, 1954-1965" (Penguin, 1988).

Barack Obama: Leap of Faith

2008-08-28T10:37:00.000-07:00

WONDER LAND

By DANIEL HENNINGER

Barack Obama: Leap of Faith
Wall Street Journal
August 28, 2008; Page A13

"Every four years the Democrats send us another Governor we have to get to know."

So said The Wall Street Journal editorial page in 1992 as the electorate began its discovery of Arkansas's then-obscure governor, Bill Clinton. In 1988 it was Massachusetts Gov. Michael Dukakis, and before that Georgia's Jimmy Carter. "The real question," the Journal's editorialist wondered, "is why the party that dominates Congress has to keep putting up unknowns to contest the world's most powerful political office." Once again, the author mused, the system must "come to grips at the presidential level with more Democratic mystery."

Now comes the most mysterious Democratic presidential candidate in the memory of any living voter -- Barack Obama. After a 19-month run for the presidency, we still don't know him.

Jimmy Carter, the previous holder of the most mysterious candidate title, served four years as a reform governor in Georgia. Bill Clinton, though little known beyond Arkansas, was a governor for 12 years.

The U.S. presidency is a political office, and nearly all nominees for it had a record in politics to offer a basis for shaping a view of how they might conduct the nation's highest office.

By this most traditional of measures, the Obama candidacy is a leap of faith.

A New York Times article on his years at Harvard Law, where he was editor of the law review, said, "In dozens of interviews, his friends said they could not remember his specific views from that era, beyond a general emphasis on diversity and social and economic justice." A similar piece on his years teaching at the University of Chicago Law School said he notably did not participate in its intellectual debates.

Barack Obama raises the prospect of a candidate for the first time being elected into the presidency almost wholly on the basis of a compelling persona. It is no surprise this could happen in an age tugged by the siren song of celebrity.

The 2008 election is almost certainly going to be decided by white, lower-middle-class voters -- the people who voted for Hillary Clinton this year and before that for Ronald Reagan. If these voters don't swing behind the Obama candidacy in Ohio, Michigan, Florida and Missouri, he will lose.

Yet amid a universally described lack of clarity about Sen. Obama's experience and core political beliefs, it is now being said that if the people in blue-collar counties don't vote for him, they, and their nation, remain racist.

This is false. If they don't vote for Barack Obama, it won't be over his personal roots, but because they're confused about the roots of his politics.

The assertion that workaday white people in Ohio's Mahoning Valley, Altoona, Pa., or Macomb County, Mich., won't vote for a black man reveals more about the race-based obsessions of the intellectual elites making these claims than the reality of this campaign.

Bear in mind that these voters didn't become an explicit concern of the Obama campaign until after Super Tuesday. Before the primaries arrived in Ohio and Pennsylvania, Sen. Obama's biggest wins were Iowa, South Carolina, Minnesota, Kansas, home-state Illinois, Georgia, Delaware, Connecticut, Colorado, Virginia, Maryland and Wisconsin. Amid the Obama jubilation, Hillary was winning California, New Jersey, Massachusetts, New York.

Sen. Obama accumulated his victorious lead early with a liberal coalition willing to vote for him mainly for reasons of faith – upper-middle-class whites, black voters and young idealists -- all attempting to complete the civil-rights promise, answer the post-partisan appeal, or vote against the war and George Bush.

Hillary's wins in the big states above were portents. His coalition's limitations hit the wall in Ohio. Here Sen. Clinton discovered her Rosie-the-Riveter persona, and it worked. I watched her sell bread-and-butter policy before blue-collar crowds in Youngstown, Akron and Cleveland. She was tremendously good at it. He just wasn't. The Sunday before the Ohio vote, Sen. Obama abandoned Ohio. The way Hillary won in these crucial November swing states may have fatally damaged his candidacy.

Does a candidate for the U.S. presidency have to be able to connect somehow with white working-class voters who didn't attend college to win? The answer, 40 years after the Civil Rights Act of 1964, is no longer about race. It's about the most fundamental question a plain-thinking voter asks: Does this guy get me?

Sen. Obama's biography is as compelling as his supporters claim. His problem is that there is nothing in it to suggest he has spent any significant time thinking about these people other than as a political abstraction. It's made more difficult by the fact that it is so hard for them to get a sure grip on him. When a politician leaves no political trail, some voters get lost. For Sen. Obama, after this long campaign, too many still look lost.

Write to henninger@wsj.com

Obama in Chicago

2008-08-20T06:07:00.000-07:00

Obama Played by Chicago Rules

By DAVID FREDDOSO
August 20, 2008; Page A19

Democrats don't like it when you say that Barack Obama won his first election in 1996 by throwing all of his opponents off the ballot on technicalities.

By clearing out the incumbent and the others in his first Democratic primary for state Senate, Mr. Obama did something that was neither illegal nor even uncommon. But Mr. Obama claims to represent something different from old-style politics -- especially old-style Chicago politics. And the senator is embarrassed enough by what he did that he misrepresents it in the prologue of his political memoir, "The Audacity of Hope."

In that book, Mr. Obama paints a portrait of himself as a genuine reformer and change agent, just as he has in this presidential campaign. He attributes his 1996 victory to his message of hope, and his exhortations that Chicagoans drop their justifiable cynicism about politics.

...

In real life, it did not matter what Mr. Obama said on the stump or whether South Side voters were impressed. What mattered was that, beginning on Jan. 2, 1996, his campaigners began challenging thousands of petition signatures the other candidates in the race had submitted in order to appear on the ballot. Thus would Mr. Obama win his state Senate seat, months before a single vote was cast.

According to the Chicago Tribune, Mr. Obama's petition challengers reported to him nightly on their progress as they disqualified his opponents' signatures on various technical grounds -- all legitimate from the perspective of law. One local newspaper, Chicago Weekend, reported that "[s]ome of the problems include printing registered voters name [sic] instead of writing, a female voter got married after she registered to vote and signed her maiden name, registered voters signed the petitions but don't live in the 13th district."

One of the candidates would speculate that his signature-gatherers, working at a per-signature pay rate, may have cheated him by signing many of the petitions themselves, making them easy to disqualify.

In the end, Mr. Obama disqualified all four opponents -- including the incumbent state senator, Alice Palmer, and three minor candidates. Ms. Palmer, a former ally of Mr. Obama, had gathered 1,580 signatures, more than twice the 757 required to appear on the ballot. A minor, perennial candidate had gathered 1,899 signatures, suggesting the Obama team invested much time working even against him.

The act of throwing an incumbent off the ballot in such a fashion does not fit neatly into the narrative of a public-spirited reformer who seeks to make people less cynical about politics.

But Mr. Obama's offenses against the idea of a "new politics" are many, and go well beyond hardball election tactics. It is telling that, when asked at the Saddleback Forum last weekend to name an instance in which he had worked against his own party or his own political interests, he didn't have a good answer. He claimed to have worked with his current opponent, John McCain, on ethics reform. In fact, no such thing happened. The two men had agreed to work together, for all of one day, in February 2006, and then promptly had a well-documented falling-out. They even exchanged angry letters over this incident.

The most dramatic examples of Mr. Obama's commitment to old-style politics are his repeated endorsements of Chicago's machine politicians, which came in opposition to what people of all ideological stripes viewed as the common good.

In the 2006 election, reformers from both parties attempted to end the corruption in Chicago's Cook County government. They probably would have succeeded, too, had Mr. Obama taken their side. Liberals and conservatives came together and nearly ousted Cook County Board President John Stroger, the machine boss whom court papers credibly accuse of illegally using the county payroll to maintain his own standing army of political cronies, contributors and campaigners.

The since-deceased Stroger's self-serving mismanagement of county government is still the subject of federal investigations and arbitration claims. Stroger was known for trying repeatedly to raise taxes to fund his political machine, even as basic government services were neglected in favor of high-paying county jobs for his political soldiers.

When liberals and conservatives worked together to clean up Cook County's government, they were displaying precisely the postpartisan interest in the common good that Mr. Obama extols today. And Mr. Obama, by working against them, helped keep Chicago politics dirty. He refused to endorse the progressive reformer, Forrest Claypool, who came within seven points of defeating Stroger in the primary.

After the primary, when Stroger's son Todd replaced him on the ballot under controversial circumstances, a good-government Republican named Tony Peraica attracted the same kind of bipartisan support from reformers in the November election. But Mr. Obama endorsed the young heir to the machine, calling him -- to the absolute horror of Chicago liberals -- a "good, progressive Democrat."

Mayor Richard M. Daley -- who would receive Mr. Obama's endorsement in 2007 shortly after several of his top aides and appointees had received prison sentences for their corrupt operation of Chicago's city government -- was invested in the Stroger machine's survival. So was every alderman and county commissioner who uses the county payroll to support political hangers-on. So was Mr. Obama's friend and donor, Tony Rezko, who is now in federal prison awaiting sentencing after being convicted in June of 16 felony corruption charges. Rezko had served as John Stroger's finance chairman and raised $150,000 for him (Stroger put Rezko's wife on the county payroll).

Mr. Obama has never stood up against Chicago's corruption problem because his donors and allies are Chicago's corruption problem.

Mr. Obama is not the reformer he now claims to be. The real man is the one they know in Chicago -- the one who won his first election by depriving voters of a choice.

Thomas Friedman has it right

2008-08-16T05:52:00.000-07:00

August 13, 2008

Op-Ed Columnist

Eight Strikes and You’re Out

By THOMAS L. FRIEDMAN

John McCain recently tried to underscore his seriousness about pushing through a new energy policy, with a strong focus on more drilling for oil, by telling a motorcycle convention that Congress needed to come back from vacation immediately and do something about America’s energy crisis. “Tell them to come back and get to work!” McCain bellowed.

Sorry, but I can’t let that one go by. McCain knows why.

It was only five days earlier, on July 30, that the Senate was voting for the eighth time in the past year on a broad, vitally important bill — S. 3335 — that would have extended the investment tax credits for installing solar energy and the production tax credits for building wind turbines and other energy-efficiency systems.

Both the wind and solar industries depend on these credits — which expire in December — to scale their businesses and become competitive with coal, oil and natural gas. Unlike offshore drilling, these credits could have an immediate impact on America’s energy profile.

Senator McCain did not show up for the crucial vote on July 30, and the renewable energy bill was defeated for the eighth time. In fact, John McCain has a perfect record on this renewable energy legislation. He has missed all eight votes over the last year — which effectively counts as a no vote each time. Once, he was even in the Senate and wouldn’t leave his office to vote.

“McCain did not show up on any votes,” said Scott Sklar, president of The Stella Group, which tracks clean-technology legislation. Despite that, McCain’s campaign commercial running during the Olympics shows a bunch of spinning wind turbines — the very wind turbines that he would not cast a vote to subsidize, even though he supports big subsidies for nuclear power.

Barack Obama did not vote on July 30 either — which is equally inexcusable in my book — but he did vote on three previous occasions in favor of the solar and wind credits.

The fact that Congress has failed eight times to renew them is largely because of a hard core of Republican senators who either don’t want to give Democrats such a victory in an election year or simply don’t believe in renewable energy.

What impact does this have? In the solar industry today there is a rush to finish any project that would be up and running by Dec. 31 — when the credits expire — and most everything beyond that is now on hold. Consider the Solana concentrated solar power plant, 70 miles southwest of Phoenix in McCain’s home state. It is the biggest proposed concentrating solar energy project ever. The farsighted local utility is ready to buy its power.

But because of the Senate’s refusal to extend the solar tax credits, “we cannot get our bank financing,” said Fred Morse, a senior adviser for the American operations of Abengoa Solar, which is building the project. “Without the credits, the numbers don’t work.” Some 2,000 construction jobs are on hold.

Roger Efird is president of Suntech America — a major Chinese-owned solar panel maker that actually wants to build a new factory in America. They’ve been scouting the country for sites, and several governors have been courting them. But Efird told me that when the solar credits failed to pass the Senate, his boss told him: “Don’t set up any more meetings with governors. It makes absolutely no sense to do this if we don’t have stability in the incentive programs.”

One of the biggest canards peddled by Big Oil is that, “Sure, we’ll need wind and solar energy, but it’s just not cost effective yet.” They’ve been saying that for 30 years. What these tax credits are designed to do is to stimulate investments by many players in solar and wind so these technologies can quickly move down the learning curve and become competitive with coal and oil — which is why some people are trying to block them.

As Richard K. Lester, an energy-innovation expert at the Massachusetts Institute of Technology, notes, “The best chance we have — perhaps the only chance” of addressing the combined challenges of energy supply and demand, climate change and energy security “is to accelerate the introduction of new technologies for energy supply and use and deploy them on a very large scale.”

This, he argues, will take more than a Manhattan Project. It will require a fundamental reshaping by government of the prices and regulations and research-and-development budgets that shape the energy market. Without taxing fossil fuels so they become more expensive and giving subsidies to renewable fuels so they become more competitive — and changing regulations so more people and companies have an interest in energy efficiency — we will not get innovation in clean power at the scale we need.

That is what this election should be focusing on. Everything else is just bogus rhetoric designed by cynical candidates who think Americans are so stupid — so bloody stupid — that if you just show them wind turbines in your Olympics ad they’ll actually think you showed up and voted for such renewable power — when you didn’t.

George McGovern got it right

2008-08-09T08:33:00.000-07:00

My Party
Should Respect
Secret Union Ballots

By GEORGE MCGOVERN
August 8, 2008; Page A13

As a congressman, senator and one-time Democratic nominee for the presidency, I've participated in my share of vigorous public debates over issues of great consequence. And the public has been free to accept or reject the decisions I made when they walked into a ballot booth, drew the curtain and cast their vote. I didn't always win, but I always respected the process.

Voting is an immense privilege.

That is why I am concerned about a new development that could deny this freedom to many Americans. As a longtime friend of labor unions, I must raise my voice against pending legislation I see as a disturbing and undemocratic overreach not in the interest of either management or labor.

The legislation is called the Employee Free Choice Act, and I am sad to say it runs counter to ideals that were once at the core of the labor movement. Instead of providing a voice for the unheard, EFCA risks silencing those who would speak.

The key provision of EFCA is a change in the mechanism by which unions are formed and recognized. Instead of a private election with a secret ballot overseen by an impartial federal board, union organizers would simply need to gather signatures from more than 50% of the employees in a workplace or bargaining unit, a system known as "card-check." There are many documented cases where workers have been pressured, harassed, tricked and intimidated into signing cards that have led to mandatory payment of dues.

Under EFCA, workers could lose the freedom to express their will in private, the right to make a decision without anyone peering over their shoulder, free from fear of reprisal.

There's no question that unions have done much good for this country. Their tenacious efforts have benefited millions of workers and helped build a strong middle class. They gave workers a new voice and pushed for laws that protect individuals from unfair treatment. They have been a friend to the Democratic Party, and so I oppose this legislation respectfully and with care.

To my friends supporting EFCA I say this: We cannot be a party that strips working Americans of the right to a secret-ballot election. We are the party that has always defended the rights of the working class. To fail to ensure the right to vote free of intimidation and coercion from all sides would be a betrayal of what we have always championed.

Some of the most respected Democratic members of Congress -- including Reps. Marcy Kaptur of Ohio, George Miller and Pete Stark of California, and Barney Frank of Massachusetts -- have advised that workers in developing countries such as Mexico insist on the secret ballot when voting as to whether or not their workplaces should have a union. We should have no less for employees in our country.

I worry that there has been too little discussion about EFCA's true ramifications, and I think much of the congressional support is based on a desire to give our friends among union leaders what they want. But part of being a good steward of democracy means telling our friends "no" when they press for a course that in the long run may weaken labor and disrupt a tried and trusted method for conducting honest elections.

While it is never pleasant to stand against one's party or one's friends, there are times when such actions are necessary -- as with my early and lonely opposition to the Vietnam War. I hope some of my friends in Congress will re-evaluate their support for this legislation. Because as Americans, we should strive to ensure that all of us enjoy the freedom of expression and freedom from fear that is our ideal and our right.

Mr. McGovern is a former senator from South Dakota and the 1972 Democratic presidential candidate.

Mallard Fillmore

2008-04-16T05:11:00.000-07:00

2008-04-01T07:54:00.000-07:00

Lexington

The joys of parenthood

Mar 27th 2008
From The Economist print edition

Illustration by Kevin Kallaugher

Why conservatives are happier than liberals

IN EVERY nursery there is one child known as the Biter. Who suffers the most from this child's delinquency? Not his classmates, whose bite marks quickly heal. It is the Biter's mum and dad, who endure sideways glances from other parents when dropping him off in the morning and fret constantly that their own poor parenting has produced a monster.

Arthur Brooks was once the father of a Biter. For a year, his son gnawed on boys, girls, siblings, friends and so many guests that he had to be removed from his own fourth birthday party. Mr Brooks worried, argued with his wife, lost sleep and sought professional help. So he speaks from experience when he says that having children does not make you happy.

Happily for the reader, his book, “Gross National Happiness”, is not a memoir. It is a subtle and engaging distillation of oceans of data. When researchers ask parents what they enjoy, it turns out that they prefer almost anything to looking after their children. Eating, shopping, exercising, cooking, praying and watching television were all rated more pleasurable than watching the brats, even if they don't bite. As Mr Brooks puts it: “There are many things in a parent's life that bring great joy. For example, spending time away from [one's] children.”

Despite this, American parents are much more likely to be happy than non-parents. This is for two reasons, argues Mr Brooks, an economist at Syracuse University. Even if children are irksome now, they lend meaning to life in the long term. And the kind of people who are happy are also more likely to have children. Which leads on to Mr Brooks's most controversial finding: in America, conservatives are happier than liberals.

Several books have been written about happiness in recent years. Some have tried to discern which nations are the happiest. Many more purport to offer a foolproof guide to self-fulfilment. Others wonder if the obsessive pursuit of happiness is itself making people miserable. Mr Brooks offers something different. He writes only about Americans, thus avoiding the pitfalls of trying to figure out, for example, whether Japanese people mean the same thing as Danes when they say they are happy. And he writes intriguingly about the politics of happiness.

In 2004 Americans who called themselves “conservative” or “very conservative” were nearly twice as likely to tell pollsters they were “very happy” as those who considered themselves “liberal” or “very liberal” (44% versus 25%). One might think this was because liberals were made wretched by George Bush. But the data show that American conservatives have been consistently happier than liberals for at least 35 years.

This is not because they are richer; they are not. Mr Brooks thinks three factors are important. Conservatives are twice as likely as liberals to be married and twice as likely to attend church every week. Married, religious people are more likely than secular singles to be happy. They are also more likely to have children, which makes Mr Brooks confident that the next generation will be at least as happy as the current one.

When religious and political differences are combined, the results are striking. Secular liberals are as likely to say they are “not too happy” as to say they are very happy (22% to 22%). Religious conservatives are ten times more likely to report being very happy than not too happy (50% to 5%). Religious liberals are about as happy as secular conservatives.

Why should this be so? Mr Brooks proposes that whatever their respective merits, the conservative world view is more conducive to happiness than the liberal one (in the American sense of both words). American conservatives tend to believe that if you work hard and play by the rules, you can succeed. This makes them more optimistic than liberals, more likely to feel in control of their lives and therefore happier. American liberals, at their most pessimistic, stress the injustice of the economic system, the crushing impersonal forces that keep the little guy down and what David Mamet, a playwright, recently summed up as the belief that “everything is always wrong”. Emphasising victimhood was noble during the 1950s and 1960s, says Mr Brooks. By overturning Jim Crow laws, liberals gave the victims of foul injustice greater control over their lives. But in as much as the American left is now a coalition of groups that define themselves as the victims of social and economic forces, and in as much as its leaders encourage people to feel helpless and aggrieved, he thinks they make America a glummer place.

Extreme happiness

So much for right versus left. Mr Brooks also finds that extremists of both sides are happier than moderates. Some 35% of those who call themselves “extremely liberal” say they are very happy, against only 22% of ordinary liberals. For conservatives, the gap is smaller: 48% to 43%. Extremists are happy, Mr Brooks reckons, because they are certain they are right. Alas, this often leads them to conclude that the other side is not merely wrong, but evil. Some two-thirds of America's far left and half of the far right say they dislike not only the other side's ideas, but also the people who hold them.

Oddly for a political writer, Mr Brooks thinks his country is doing pretty well. Americans are mostly free to pursue happiness however they choose with little interference from the state. Well-meaning coercion is less common than in Europe, though it can still backfire spectacularly. He cites this example: a county in Virginia recently banned giving food to the homeless unless it was prepared in a county-approved kitchen, to prevent food poisoning. Churches stopped ladling soup, and more homeless people were forced to scavenge in skips. This hurt not only the hungry, but also the volunteers who might have found satisfaction in helping them. The surest way to buy happiness, argues Mr Brooks, is to give some of your time and money away.

A Think Man's Speech - Peggy Noonan - WSJ

2008-03-22T07:54:00.000-07:00

DECLARATIONS

By PEGGY NOONAN

A Thinking Man's Speech
March 21, 2008; Page W16

I thought Barack Obama's speech was strong, thoughtful and important. Rather beautifully, it was a speech to think to, not clap to. It was clear that's what he wanted, and this is rare.

It seemed to me as honest a speech as one in his position could give within the limits imposed by politics. As such it was a contribution. We'll see if it was a success. The blowhard guild, proud member since 2000, praised it, and, in the biggest compliment, cable news shows came out of the speech not with jokes or jaded insiderism, but with thought. They started talking, pundits left and right, black and white, about what they'd experienced of race in America. It was kind of wonderful. I thought, Go, America, go, go.

You know what Mr. Obama said. The Rev. Jeremiah Wright was wrong. His sermons were "incendiary," and they "denigrate both the greatness and the goodness of our nation." Mr. Obama admitted that if all he knew of Mr. Wright were what he saw on the "endless loop . . . of YouTube," he wouldn't like him either. But he's known him 20 years as a man who taught him Christian faith, helped the poor, served as a Marine, and leads a community helping the homeless, needy and sick. "As imperfect as he may be, he has been like family to me." He would not renounce their friendship.

Most significantly, Mr. Obama asserted that race in America has become a generational story. The original sin of slavery is a fact, but the progress we have lived through the past 50 years means each generation experiences race differently. Older blacks, like Mr. Wright, remember Jim Crow and were left misshapen by it. Some rose anyway, some did not; of the latter, a "legacy of defeat" went on to misshape another generation. The result: destructive anger that is at times "exploited by politicians" and that can keep African-Americans "from squarely facing our own complicity in our condition." But "a similar anger exists within segments of the white community." He speaks of working- and middle-class whites whose "experience is the immigrant experience," who started with nothing. "As far as they're concerned, no one handed them anything, they've built it from scratch." "So when they are told to bus their children to a school across town," when they hear of someone receiving preferences they never received, and "when they're told their fears about crime in urban neighborhoods are somehow prejudiced," they feel anger too.

This is all, simply, true. And we are not used to political figures being frank, in this way, in public. For this Mr. Obama deserves deep credit. It is also true the particular whites Obama chose to paint -- ethnic, middle class -- are precisely the voters he needs to draw in Pennsylvania. It was strategically clever. But as one who witnessed busing in Boston first hand, and whose memories of those days can still bring tears, I was glad for his admission that busing was experienced as an injustice by the white working class. Next step: admitting it was an injustice, period.

* * *

The primary rhetorical virtue of the speech can be found in two words, endemic and Faulkner. Endemic is the kind of word political consultants don't let politicians use because 72% of Americans don't understand it. This lowest-common-denominator thinking, based on dizzy polling, has long degraded American discourse. When Obama said Mr. Wright wrongly encouraged "a view that sees white racism as endemic," everyone understood. Because they're not, actually, stupid. As for Faulkner -- well, this was an American politician quoting William Faulkner: "The past isn't dead and buried. In fact, it isn't even past." This is a thought, an interesting one, which means most current politicians would never share it.

The speech assumed the audience was intelligent. This was a compliment, and I suspect was received as a gift. It also assumed many in the audience were educated. I was grateful for this, as the educated are not much addressed in American politics.

Here I point out an aspect of the speech that may have a beneficial impact on current rhetoric. It is assumed now that a candidate must say a silly, boring line -- "And families in Michigan matter!" or "What I stand for is affordable quality health care!" -- and the audience will clap. The line and the applause make, together, the eight-second soundbite that will be used tonight on the news, and seen by the people. This has been standard politico-journalistic procedure for 20 years.

Mr. Obama subverted this in his speech. He didn't have applause lines. He didn't give you eight seconds of a line followed by clapping. He spoke in full and longish paragraphs that didn't summon applause. This left TV producers having to use longer-than-usual soundbites in order to capture his meaning. And so the cuts of the speech you heard on the news were more substantial and interesting than usual, which made the coverage of the speech better. People who didn't hear it but only saw parts on the news got a real sense of what he'd said.

If Hillary or John McCain said something interesting, they'd get more than an eight-second cut too. But it works only if you don't write an applause-line speech. It works only if you write a thinking speech.

They should try it.

* * *

Here's what didn't work. Near the end of the speech, Mr. Obama painted an America that didn't summon thoughts of Faulkner but of William Blake. The bankruptcies, the dark satanic mills, the job loss and corporate corruptions. There is of course some truth in his portrait, but why do appeals to the Democratic base have to be so unrelievedly, so unrealistically, bleak?

This connected in my mind to the persistent feeling one has -- the fear one has, actually -- that the Obamas, he and she, may not actually know all that much about America. They are bright, accomplished, decent, they know all about the yuppie experience, the buppie experience, Ivy League ways, networking. But they bring along with all this -- perhaps defensively, to keep their ideological views from being refuted by the evidence of their own lives, or so as not to be embarrassed about how nice fame, success, and power are -- habitual reversions to how tough it is to be in America, and to be black in America, and how everyone since the Reagan days has been dying of nothing to eat, and of exploding untreated diseases. America is always coming to them on crutches.

But most people didn't experience the past 25 years that way. Because it wasn't that way. Do the Obamas know it?

This is a lot of baggage to bring into the Executive Mansion.

Still, it was a good speech, and a serious one. I don't know if it will help him. We're in uncharted territory. We've never had a major-party presidential front-runner who is black, or rather black and white, who has given such an address. We don't know if more voters will be alienated by Mr. Wright than will be impressed by the speech about Mr. Wright. We don't know if voters will welcome a meditation on race. My sense: The speech will be labeled by history as the speech that saved a candidacy or the speech that helped do it in. I hope the former.

Question

2007-06-17T18:14:00.000-07:00

Would you bring this girl home to meet your mother?

Diarrhea

2007-05-12T05:20:00.000-07:00

My goal last night was to stink up every bathroom in the house before the Amodium kicked in. Today I will be shiting BBs that feel like bowling balls.

Clowns to the left of me – jokers to the right

2007-05-10T16:30:00.000-07:00

I am so frustrated with the lack of focus and discipline in my class that I sit there with my thumb up my butt. Yes I should contribute, but I have this feeling of total hopelessness. I may not go back.

Fat

2007-05-03T14:21:00.001-07:00

Why are there so many obese people? Are we, as a nation, getting fatter and uglier? OK, for some, it is a medical condition. But this is not true for most of us.

LLI

2007-05-03T14:20:00.001-07:00

I am very disappointed in my LLI class. There is a total lack of focus and it doesn’t appear that anyone has researched the topic of the day so, rather than knowledge, we are getting opinions. There isn’t much diversity of opinion in this group.

The lonely stripper

2007-01-25T04:23:00.000-08:00

There is nothing sadder than a stripper with no one at her stage. Here she is, literally naked before the world, and no one is interested.

Missouri Miracle

2007-01-17T05:40:00.000-08:00

I am not trying to be disrespectful. It is an amazing story and I am happy for the kids and their families. Before moving to God's Country, I lived in Kirkwood. It is the last place you would have expected something like this to happen. I hope the creep that kidnapped them does hard time.

But

You can’t turn on a news program, local or national, without fifteen minute updates. I am particularly tired of all of the “profilers” they are dragging out of the woodwork who don’t know any more than the rest of us about what actually happened. The full story will emerge. When it does I will be as interested as anyone. But, until then, give me a break.

PS
While editing this post there was another update on CNN!

Rainy Days & Mondays

2007-01-15T06:52:00.000-08:00

I have made pretty good progress on the Nativism talk and not much on Petersburg. The problem with the Civil War is that there are too many burgs. I get them confused. Plus there are way too many generals.

Here is an interesting quote from Ben Franklin

“Which leads me to add one Remark: That the Number of purely white People in the World is proportionably very small. All Africa is black or tawny. Asia chiefly tawny. America (exclusive of the new Comers) wholly so. And in Europe, the Spaniards, Italians, French, Russians and Swedes, are generally of what we call a swarthy Complexion; as are the Germans also, the Saxons only excepted, who with the English, make the principal Body of White People on the Face of the Earth. I could wish their Numbers were increased. And while we are, as I may call it, Scouring our Planet, by clearing America of Woods, and so making this Side of our Globe reflect a brighter Light to the Eyes of Inhabitants in Mars or Venus, why should we in the Sight of Superior Beings, darken its People? why increase the Sons of Africa, by Planting them in America, where we have so fair an Opportunity, by excluding all Blacks and Tawneys, of increasing the lovely White and Red? But perhaps I am partial to the Compexion of my Country, for such Kind of Partiality is natural to Mankind.”

Imbue

I like the template

2007-01-14T13:10:00.000-08:00

I have been posting for several years on another blog site. Played with blogger off and on.

Rants

Obama and Boeing - From The Economist

http://www.economist.com/node/18714050?story_id=18714050&CFID=164728604&CFTOKEN=32815208

From the Wall Street Journal

The Case For Birthright Citizenship

Since the abolition of slavery, we have never denied citizenship to any group of children born in the U.S. Why change now?

By LINDA CHAVEZ

Build that Mosque

From the current issue of The Economist

Lexington

The campaign against the proposed Cordoba centre in New York is unjust and dangerous

Over the counter, out of sight

Options have a future

The Fatal Conceit

Don't Build Up

Don’t Build Up

Fox wars

Doctors as the Key to Health Care Reform

Economic vandalism

Fact-Checking the President on Health Insurance

His tales of abuse don't stand scrutiny.

Obama's Health Rationer-in-Chief

Obama's Health Rationer-in-Chief

White House health-care adviser Ezekiel Emanuel blames the Hippocratic Oath for the 'overuse' of medical care.

The Death Book for Veterans

The Economist endorses Obama

Blame Fannie Mae?

Blame Fannie Mae and CongressFor the Credit Mess

By CHARLES W. CALOMIRIS and PETER J. WALLISON

The Post-Lehman World

The Post-Lehman World

Cash for Trash

Cash for Trash

Obama

Obama Needs to Take a Stand on Race and Other Issues

Barack Obama: Leap of Faith

Obama in Chicago

Obama Played by Chicago Rules

Thomas Friedman has it right

Eight Strikes and You’re Out

George McGovern got it right

My PartyShould RespectSecret Union Ballots

Mallard Fillmore

A Think Man's Speech - Peggy Noonan - WSJ

A Thinking Man's SpeechMarch 21, 2008; Page W16

Question

Diarrhea

Clowns to the left of me – jokers to the right

Fat

LLI

The lonely stripper

Missouri Miracle

Rainy Days & Mondays

I like the template

Blame Fannie Mae and Congress
For the Credit Mess

My Party
Should Respect
Secret Union Ballots

A Thinking Man's Speech
March 21, 2008; Page W16