Health Reform with modified public option starting to look like a "slam dunk"

It looks like the U.S. Senate is finally on the verge of coming up with a winning formula for the "public option" for a health reform bill that can attract enough votes to pass in the Senate. The "opt-out" modification for states to the public option looks as if it should do the trick. Granted, a fair amount of additional tinkering may be required to arrive at the final bill that will finally get enough votes to pass, but that's to be expected. The imprtant thing is that the overall process appears to have finally "turned the corner." My senator, Chuck Schumer, is doing a great job carrying the torch and "lobbying" for a robust and passable health reform bill. Read some of his latest comments in a MarketWatch article by Deborah Levine entitled "Senate Demos have votes for public health plan: Schumer".

One way or another, some sort of health reform bill is a virtual "slam dunk" this fall.

The whole process may seem extremely chaotic (and it is!), but that really is "par for the course" when trying to push dramatic change through Washington, D.C. Sure, a lot of people are "appalled" with the process, but personally I am "okay" with it. Sure, I would prefer a smoother process, but I also recognize that we have a very diverse range of political views in this country. That's why I am a centrist.

-- Jack Krupansky

How important is Obama's address to Congress?

Sure, the media and punditry is chattering about how Pres. Obama's address to the joint session of Congress tonight is a really, really big deal and that it is a "make or break" moment of his presidency, but all of that is pure hype, silliness, and nonsense. Yes, it is simply a bit of theater. Besides, if there is one thing that Barack Obama has proven, repeatedly it is that he knows how to give a great speech. Slam dunk. End of story. This one speech will not and is not intended to "save health reform." Yes, it will be a pep talk, both to rally supporters and to persuade non-supporters that this president is not out to get their blood and that "change" can work out well for everyone. At most, the speech will simply remind people that all of the remaining hard work on health insurance reform will occur in private meetings long after the final applause for this speech has died off.

Sure, maybe there will be a few new ideas or new formulations in the speech to spice it up, but that is besides the core purpose of simply pulling a lot of the loose threads together and reminding people exactly what the president asked Congress to do way back in June.

Personally, I do not think the speech is technically needed at all, but given the bizarre ways that the media and punditry and random politicians "operate", it may in fact be psychologically needed to persuade those "professionals" that everything is fine, we really are on track, and the big dogs really do know what they are doing and that the results are likely to be fairly decent, despite all of the chatter.

Sure, a lot of average Americans out there are quite confused and anxious about it all, but that is primarily because the media and punditry have gotten themselves "all wee-weed up" and need an adult to calm them down a little. Besides, the average American is really only interested in how the final result actually works in the real world, not all of this "inside baseball" of the Washington political machinery.

I am quite sure that once the president has finished speaking and the media and punditry have had their say tonight, by tomorrow morning people will not be so... wee-weed up. Sure, there are still plenty of details to be negotiated and ironed out, but that is all par for the course. Health insurance reform really is solidly on track.

I just wish I could write the opening line of the president's speech:

Thank you. Thank you... How is everyone doing?... Is everybody all wee-weed up?

-- Jack Krupansky

Is Pres. Obama ready to pull the plug on bipartisonship?

The media and pundits are making it sound as though Pres. Obama is ready to call it quits on his "dream" of bipartisanship. While it is certainly true that his record to date on enlisting bipartisan support has been pathetic, that is more a measure of the depth of the problems in Washington, D.C. than a measure of the president's resolve. Bipartisanship is a core value of this president. He could no more give it up than he could give up his own skin. Bipartisanship is something that Pres. Obama really, REALLY believes in. Just because you believe in something does not mean that you can achieve it overnight or in six months, but when it comes to core, unshakable beliefs, short-term failure is not a good predictor of long-term results.

Sure, quite a few of the left-wing "progressives" would like for the president to give up on bipartisanship and compromise and "all of that", but the simple truth is that... it simply is not going to happen!

It will not be because of what the president or any of us want, but because of who he is.

Bipartisanship is in his blood. Bipartisanship flows through his veins.

Sure, Pres. Obama has to deal with the "reality" of his party and the people he has to work with in Washington, D.C., but reality has a funny way of evolving over time so that the reality of tomorrow can be radically different from the reality of today or yesterday.

It may take a lot of time to see genuinely bipartisan results, but that is par for the course when it comes to difficult goals.

So, reports of the death of bipartisanship are premature. Pres. Obama is not about to pull the plug on bipartisanship, not today, not tomorrow, not any day.

As they say: Stay tuned.

-- Jack Krupansky

Is health reform ready to have its plug pulled?

If you believe the media coverage you probably think that the health reform effort is on its last legs and simply waiting for somebody to pull its plug. Unfortunately, the media is not providing us with an accurate assessment of the state of the health reform effort. Sure, there has been plenty of criticism and scorn heaped on the health reform effort. True enough. But, criticism is only one side of the equation and the media does revel in focusing on drama. Sure, polls do show that public support for "the" health reform "plan" has slipped and now only a minority support "it." True enough. But, there is no well-defined "it" yet, with four different plans and various negotiations and talks underway to finalize what "it" might be. And, polls are notorious for being influenced by media coverage. So, in short, the media is giving plenty of details, but not anything resembling "the big picture."

The other major problem with the media coverage is that each politician has multiple audiences to cater to, multiple regions "back home", multiple demographic sectors, multiple categories of backers, and then multiple audiences in Washington, D.C. Some of these audiences are public and some are private. Each audience has its own interests, issues, agendas, and "language." The point is that each public pronouncement, or each leaked private statement, is usually intended for the target audience. Sure, every audience hears every statement, but in general most audiences only pay attention when the politician is speaking directly to them. The media of course pays attention to all statements to all audiences, but that ends up giving us an extremely distorted view of a politician's views on any topic or issue. Each audience has to be addressed on its own terms and in its own "language." Trying to transport a message literally from one audience to another is usually a fool's errand. So, just because politicians did a lot of posturing for various audiences back home is no indication of their attitude on various issues back in Washington, D.C. To wit, Senator Grassley's office reaffirmed today that health reform talks are continuing, despite a media message to the contrary and impressions that Grassley may have given back home.

August is traditionally a rather slow time in Washington, D.C. That give people plenty of opportunity for political mischief. We still have the traditional Labor Day weekend coming up. Congress will not be back in the saddle in force until the middle of next week. And now we hear that Pres. Obama has been "invited" to address a joint session of Congress on... health reform. So, real soon the health reform process will be heating up in earnest again, but right now it is simply sputtering through the lazy end of summer. No surprise there. At least it shouldn't be any surprise, except that the media has made a big deal about it.

My hunch is that within two or three weeks a lot of the puzzle pieces will be brought together and there will be greater clarity about the "plan".

On process, it is okay for the House to pass its own plan and then the Senate passes a somewhat different plan. That would result in formation of a "conference committee" which would resolve the two different bills. In practice, that means that the leaders from both sides and from both the House and the Senate would get together in the proverbial "smoke-filled back room" and engage in the proverbial "horse trading" to come up with a compromise bill which could be quite different from either the House or Senate bill. So, don't get too excited in the Senate talking about one plan while the House is voting on a different, seemingly incompatible plan.

In any case, health reform is still on track and still very likely to be completed within the next two or three months.

-- Jack Krupansky

Ted Kennedy's contribution to the ARPANET: the Interfaith Message Processor

My other eternal memory of Ted Kennedy is his famous contribution to ARPANET lore, the "Interfaith Message Processor." In all honesty, Ted did make a significant contribution (albeit non-technical) to the ARPANET, the forerunner of today's Internet. Bolt Beranek and Newman (BBN) was the major contractor for much of the ARPANET development. Being a big-deal government contractor and a Massachusetts-based company, BBN was championed in Washington, D.C. by Ted Kennedy and the other members of Massachusetts' congressional delegation.

Back in 1974/1975 (or so I recall) a few us from Stevens Institute of Technology drove up to Cambridge, MA to "visit" the famed AI lab at MIT one summer Saturday evening. A couple of the guys knew some people and had been there before. There was hardly anybody in the lab, we had the place to ourselves. We didn't do anything other print out some code, copy some LISP and assembler code onto tape, and take some copies of the infamous "AI Memos" from their storage room.

Mostly I just wandered around to see what all of their computer hardware was. They had old PDP-10 boxes from Digital Equipment Corporation with special virtual memory hardware and their homegrown ITS operating system.

Off in one corner was their ARPANET IMP. The IMP, Interface Message Processor, is the box that hooked their computers up to "the net".

Taped onto the front of the IMP was a clipping of some text that basically said that Senator Edward Kennedy was congratulating BBN on getting a big-deal contract for development of their... Interfaith Message Processor. We thought it was really funny. It let us technies feel infinitely more superior to a mere politician.

-- Jack Krupansky

Ted Kennedy is gone?

Time is certainly marching on. The oldtimers are dropping like flies. Is this fate telling us that they are no longer needed or a warning to the rest of us that we need to get our collective acts together? Probably the latter.

I was never a great fan of Ted's, but he did deserve a lot of respect for his public service.

I never met him personally, but I did see him a few times.

Back in the early 1980's I was working at Wang Loaboraties in Lowell, MA. Ted was on the board of directors since Wang was a big deal in Massachusetts at the time. I remember looking out the window and seeing Ted get out of his limo on one of his visits to the company.

I once saw Ted in a Senate hallway while walking to the public Senate Gallery. He was talking to some kids.

And once I saw him in a fancy seafood restaurant in downtown Washington, DC.

I wanted to check a detail on his Wikipedia page, but boy was I surprised how mean and viciously his page has been hacked. It is currently completely unusable. Oops... I just checked again and it has been restored, but maybe not for long. These idiots have no sense of decency or limit to their idiocy.

-- Jack Krupansky

Evil words from the president: "we're happy to make sensible compromises"

I personally am 100% behind President Obama's health insurance reform efforts. Sure, the process is rather "bumpy", but that's par for the course and not unexpected in any way. I am absolutely confident that President Obama will find a compromise solution that can pass muster in Congress, notably the Senate. Unfortuntely, although "compromise" is a good word in the vocabulary of centrists and moderates, it is a horribly evil word to many liberals (or right-wingers for that matter), especially the so-called "progressives." The political extremists have a rigid and extreme "vision" of the one "truth" that they can accept. Compromise is something that they can never accept. So, I can only imagine the horror experienced by the elitist left-wing progressive extremists when President Obama said that "we're happy to make sensible compromises." Ouch. That must have felt like a dagger to the heart by the progressives.

The president did go on and say very soothing words:

What we're not willing to do is give up on the core principle that Americans who don't have health insurance should get it, that Americans who do have health insurance should get a better deal from insurance companies and have consumer protections.

But, the mere mention of the word "compromise" must have had the progressives seething and weeping in despair. Not to mention that the president had used the plural form, suggesting that multiple compromises may be in store.

President Obama is doing a great job at tackling health care reform. It may not be perfect, but it is certainly a great effort.

As far as those covered by Medicare or Medicaid, they really do not need to worry about losing any of their coverage or care. The current reform efforts will only improve and strengthen the coverage and care that seniors and the disabled get.

-- Jack Krupansky

The PolicySpeak Disaster for Health Care

George Lakoff, Professor of Cognitive Science and Linguistics at UC Berkeley, Author, and blogger for The Huffington Post has an interesting post entitled The PolicySpeak Disaster for Health Care on what he believes are communications mistakes that have been committed by the Obama administration when selling people on health care reform. It is a very long and detailed post, so I am not going to try to summarize it with accuracy here in any detail. He starts out:

Barack Obama ran the best-organized and best-framed presidential campaign in history. How is it possible that the same people who did so well in the campaign have done so badly on health care?

...

What has been going wrong?

...

The answer is simple and unfortunate: The president put both the conceptual framing and the messaging for his health care plan in the hands of policy wonks. This led to twin disasters.

The PolicyList Disaster

The whole is greater than the sum of its parts.

Howard Dean was right when he said that you can't get health care reform without a public alternative to the insurance companies. Institutions matter. The list of what needs reform makes sense under one conceptual umbrella. It is a public alternative that unifies the long list of needed reforms... one idea, properly articulated, takes care of the list: An American Plan guarantees affordable care for all Americans. Simple. But not for policy wonks.

The policymakers focus on the list, not the unifying idea...

The PolicySpeak Disaster

PolicySpeak is the principle that: If you just tell people the policy facts, they will reason to the right conclusion and support the policy wholeheartedly.

...

To many liberals, PolicySpeak sounds like the high road: a rational, public discussion in the best tradition of liberal democracy. Convince the populace rationally on the objective policy merits. Give the facts and figures. Assume self-interest as the motivator of rational choice. Convince people by the logic of the policymakers that the policy is in their interest.

But to a cognitive scientist or neuroscientist, this sounds nuts. The view of human reason and language behind PolicySpeak is just false. Certainly reason should be used. It's just that you should use real reason, the way people really think. Certainly the truth should be told. It's just that it should be told so it makes sense to people, resonates with them, and inspires them to act. Certainly new media should be used. It's just that a system of communications should be constructed and used effectively.

The good professor details what he believes is a flawed model of how people reason:

What Is Reason Really Like?

PolicySpeak is supposed to be reasoned, objective discourse. It thus assumes a theory of what reason itself is -- a philosophical theory that dates back to the 17th Century and is still taught.

Over the past four decades, cognitive science and neuroscience have provided a scientific view of how the brain and mind really work. A handful of these results have come into behavioral economics. But most social scientists and policymakers are not trained in these fields. They still have the old view of mind and language.

The old philosophical theory says that reason is conscious, can fit the world directly, is universal (we all think the same way), is dispassionate (emotions get in the way of reason), is literal (no metaphor or framing in reason), works by logic, is abstract (not physical) and functions to serve our interests. Language on this view is neutral and can directly fit, or not fit, reality.

The scientific research in neuroscience and cognitive science has shown that most reason is unconscious. Since we think with our brains, reason cannot directly fit the world. Emotion is necessary for rational thought; if you cannot feel emotion, you will not know what to want or how anyone else would react to your actions. Rational decisions depend on emotion. Empathy with others has a physical basis, and as much as self-interest, empathy lies behind reason.

Ideas are physical, part of brain circuitry. Ideas are constituted by brain structures called 'frames' and 'metaphors,' and reason uses them. Frames form systems, called worldviews.

All language is defined relative to such frames and metaphors. There are very different conservative and progressive worldviews, and different words can activate different worldviews. Important words, like freedom, can have entirely different meanings depending on your worldview. In short, not everybody thinks the same way.

As a result, what is taken as "objective" discourse is often worldview dependent. This is especially true of health care. All progressive writing supporting some version of health care assumes a progressive moral worldview, in which no one should be forced to go without heath care, the government should play a role, market regulation is necessary, and so on.

Those with radical conservative worldviews may well think otherwise: that everyone should be responsible for their own and their family's health care, that the government is oppressive and should stay out of it, that the market should always dominate, and so on.

Overall, the foundational assumptions underlying PolicySpeak are false. It should be no wonder that PolicySpeak isn't working.

Ultimately, he claims to know what to do to fix the problem, but then suggests why progressives are not receptive to such a fix:

They may find it hard to comprehend framing, metaphor, and narrative as the way reason really works -- as what you need to do to communicate truth. Instead, they may well think of framing as merely manipulation and spin, as the mechanism that the right wing uses to communicate lies.

I'll try to summarize:

• Lists of features don't "sell" people on anything of importance.
• Traditional, classical, 17th century "reasoning" doesn't sell people.
• Ignore recent advances in neuroscience and cognitive science at your peril.
• Framing is essential.
• Metaphor is essential.
• Narrative is essential.
• Empathy and emotion are essential.
• Tools do not lose their validity just because "the other side" uses them against you.

I actually do not agree with everything he says and I believe that the Obama administration really is following the optimum path given the realities called Washington and America, but many of his ideas do have merit, at least in an abstract sense on paper. In truth, I believe that the Obama administration is in fact already following the essence of a lot of his advice even if not to the degree and specificity that he would prefer.

-- Jack Krupansky

Full text of H.R. 3200 Energy/Commerce health care reform bill

Just in case you cannot access the "official" text of the H.R. 3200 House Energy and Commerce Committee health care reform bill at the Library of Congress Thomas web site, you can find it here:

• House Energy and Commerce Committee web site
• Government Printing Office web site
• Open Congress web site

The official name of the bill ("Act") is "America's Affordable Health Choices Act of 2009."

-- Jack Krupansky

Is the public option for health insurance reform now dead?

The public option for health insurance reform has been on shaky ground for about a month or so, ever since the Senate Finance Committee effectively endorsed co-ops as a preferred alternative. Even before the recent town meeting brawls, President Obama had taken to emphasizing the public option more lightly or even de-emphasizing it. Does that mean that the public option is dead? No, not at all. What it does mean is that the supporters and proponents of the public option are on notice that they must come up with a reformulated public option which is a lot more palatable and far less "socialist" than the current proposals, otherwise the public option will die in favor of the co-op approach. Personally, I do not expect the public option crowd to simply roll over and play dead, but I am not necessarily optimistic that they are emotionally ready to admit defeat and "go with the flow."

Personally, I think the president really does want the public option, but he is enough of a politician to be able to read the writing on the walls and recognize that "the perfect cannot be the enemy of the good."

I personally even think the president really wants a single-provider solution, but he is enough of a realist, pragmatist, and moderate to understand that single-provider is a non-starter, now and for the foreseeable future.

I would rate the prospects for the public option at 50-50. The votes in the Senate are close enough that the balance between the public option and co-ops probably wobbles back and forth on a weekly if not daily basis. How the vote might go today is not an indication of how the vote might go in September or October, especially if the public option is reformulated, possibly even with a "trigger" that puts the insurance companies on notice that it is up to them to take the lead in reforming themselves, otherwise the public option would almost automatically be "triggered" into existence.

The bottom line is that regardless of the fate of the public option, President Obama is still definitely on track to preside over passage of health insurance reform legislation before the end of the year.

-- Jack Krupansky

Will the health care reform protests sway the decision?

Boisterous protesters at health reform forums certainly get great press coverage, but will they actually have any significant impact on the decisions about whether and how reform will occur? I think not.

Even without the noisy protesters, there are still plenty of thorny issues up in the air. That is why there were four separate reform proposals floating around in Congress and why Congress decided to punt and defer further decisions until September.

The protesters simply add another layer to the discussion and are simply raising the volume for the pre-existing objections from conservative Republicans.

Put simply, the protesters are not adding any new information to the debate.

In fact, by highlighting extremist positions and clearly false claims about health reform the protesters are inadvertently undermining the case against health reform.

I think that national (and local) polls are a much more valuable indicator of the level of support for health reform and the level and type of concerns that people have about both the current system and any proposed reform.

Clearly there are plenty of (non-protesting) Americans who have deep concerns about the reform "plan". And they should! After all, that is why there are four separate plans and key issues that are unresolved.

The good news is that Pres. Obama is striking a reasonable balance between staying out of the specific details of the reform proposals and staying engaged and keeping the heat on moving forward with a credible plan as soon as possible. In other words, he is being very realistic and very pragmatic. He knows what is at stake, both from the perspective of health care and health insurance on the one hand and the political reality of America on the other.

There are still plenty of important details which will be decided at the eleventh hour, which is typical of how Washington works, but sometimes that is actually a great way to get all of the relevant parties to focus more intensely on the decisions that really matter. At that stage, the extremist rantings of a few thousand mindless protesters will carry very little weight at all.

-- Jack Krupansky

Do we have a constitutionally protected right to listen and to be heard?

All of us Americans have a constitutionally-protected right of "freedom of speech", but do we have a protected right to listen and hear what someone else is saying and do we have a protected right to be heard by those who we are speaking to? Maybe or maybe not.

Amendment I of the Bill of Rights of the U.S. Constitution simply says:

Congress shall make no law ... abridging the freedom of speech ...

That does not necessarily guarantee that you can and will be heard whenever and wherever you want, but simply forbids Congress from trying to stop you from speaking.

That same amendment gives us the right to assemble:

Congress shall make no law ... abridging ... the right of the people peaceably to assemble, and to petition the government for a redress of grievances.

What if one or more citizens seek to prevent you from being heard?

What if one or more citizens seek to prevent you from hearing what someone else has to say?

Do constituents have a right to hear what their elected representatives and officials have to say?

Is trying to "shout someone down" constitutionally-protected exercise of "freedom of speech"?

Stray hecklers are to be tolerated, but is the same true if large numbers of them gang up and act in concert as a mob, seeking to prevent a speaker or a citizen from being heard and preventing others from hearing what is being said?

Do members of a mob of hecklers have a right to use their constitutionally-protected "freedom of speech" to intimidate, both physically and verbally, citizens from speaking, being heard, and hearing others?

Does the constitutional protection of "freedom of speech" extend to using that speech to disrupt a constitutionally-protected and lawful gathering of citizens?

Does the right of assembly really permit hecklers from outside the district to "pack" the available seating of a venue to prevent citizens of the district from peaceably assembling?

Lately there have been quite a number of incidents where "right-wingers" have been nominally exercising their constitutionally-protected rights  to freedom of speech" and "peaceably to assemble" at "town halls" of numerous congressmen across the country, but with their extreme heckling and mob-like behavior having the effect of causing extreme disruption, and as I suggest here interfering with the ability of citizens to: 1) assemble in a peaceable manner,  2) hear what their congressman has to say, 3) to speak and be heard by their congressman, and 4) to hear what their fellow citizens have to say to them and their congressman.

In my view, this kind of behavior is in fact abridging the rights to freedom of speech and assembly of the non-hecklers and their congressmen, and that this behavior is in fact a misuse of the freedoms of speech and to assemble, analogous to yelling "fire" in a crowded theater or inciting a mob to disruptive and disorderly behavior.

Where exactly to draw the line for what is protected and proscribed is a thorny matter. Nonetheless, it is deeply disturbing that we do not have "community standards" of decency and courteous conduct that would cover these types of situations.

I would hate to have to make it a crime for a group of people to heckle and heckle loudly, but it is ridiculous that this type of behavior should be tolerated let alone contemplated here in the 21st century.

-- Jack Krupansky

Great idea: Require all Wall Street bonuses to be paid with "toxic" assets

Various people are complaining about Wall Street bonuses and how "banks" are still carrying so much in "toxic" assets on their books at uncertain valuations, so I have the solution to all of these problems:

For the foreseeable future, until the value of these toxic assets goes to zero, require all Wall Street bonuses to be paid in the form of these toxic assets that are on the firm's books.

Give these bozos a taste of their own medicine. Yeah!!

The beauty of this approach is that lets management balance discounting of the value of the toxic assets on the one hand and the willingness of the bozos to accept such assets on the other hand.

In truth, a lot of sharp financial gurus would in fact accept a lot of these assets if only the discount was steep enough.

Of course banks don't want a steep discount because that decimates their capital. Somewhere in the middle is a balance that both sides can accept. The bozos certainly won't get as steep a discount as they would want, but that is probably okay with the American people, the taxpayers, the people who bailed out these bozos.

So, what do you think? Great idea, or am I being too unkind to the bozos on Wall Street?

I really think this could work.

-- Jack Krupansky

Bill Clinton shows us (U.S.) how it's done

I am personally all in favor of diplomacy, but between the badmouthing of diplomacy by the right and the "diplomacy by public pontification" of the left, it is all but extinct. Until yesterday, when former President Bill Clinton reminded everyone (by example) how it is done: in private. Private talks with no public pontification in advance that is likely to poison the actual talks.

Now, whether such private diplomacy will ever again be tolerated in a Washington that is obsessively focused on public pontification remains to be seen.

There is plenty of opportunity for working towards a "working relationship" with Iran, but it will take a lot of this "true" (private) dipomacy, especially when just about everybody is poised, itching to jump up and say something incredibly stupid  and counterproductive in public.

Hopefully such private "preparations" are already underway with Iran. But all of the incessant public babbling about "nuclear ambitions" and sanctions really is counterproductive and useless compared to true, private dipomacy.

-- Jack Krupansky

What is our strategy to win and exit in Afghanistan?

Anybody out there have even the slightest clue as to what our strategy for winning in Afghanistan really is? Or what our exit strategy is for Afghanistan? As far as I can tell there isn't any!

Yeah, sure, you can read about "A New Strategy for Afghanistan and Pakistan" on the White House web site, as of March 27, 2009, including the six-page "White Paper of the Interagency Policy Group's Report on U.S. Policy toward Afghanistan and Pakistan", but it basically only tells us what we wish we could do rather than a true, hard-core strategy that will actually get there:

... the core goal of the U.S. must be to disrupt, dismantle, and defeat al Qaeda and its safe havens in Pakistan, and to prevent their return to Pakistan or Afghanistan.

...

Objectives

Achieving our core goal is vital to U.S. national security. It requires, first of all, realistic and achievable objectives. These include:

• Disrupting terrorist networks in Afghanistan and especially Pakistan to degrade any ability they have to plan and launch international terrorist attacks.
• Promoting a more capable, accountable, and effective government in Afghanistan that serves the Afghan people and can eventually function, especially regarding internal security, with limited international support.
• Developing increasingly self-reliant Afghan security forces that can lead the counterinsurgency and counterterrorism fight with reduced U.S. assistance.
• Assisting efforts to enhance civilian control and stable constitutional government in Pakistan and a vibrant economy that provides opportunity for the people of Pakistan.
• Involving the international community to actively assist in addressing these objectives for Afghanistan and Pakistan, with an important leadership role for the UN.

Those are all truly great things to do, but that still does not constitute a hard-core strategy to win and to get out.

Notice, for example, that it seeks to get the Afghan security forces only to a level where they can fight with "reduced U.S. assistance." How about a goal of zero U.S. assistance? There simply isn't a game plan in place for that.

Notice, for example, that it seeks to "disrupt" terrorists and to "degrade any ability they have to plan and launch international terrorist attacks." Yes, "degrade" is good, but it is not good enough to win and get us out. No strategy or plan is offered to eliminate "any ability they have to plan and launch international terrorist attacks." If there is no elimination of the threat, then guess what? The implication is that we have to stay, potentially for a very long time.

Go ahead and pore through that white paper as closely as you can, but you won't find any mention of two concepts: win and exit.

Sure, the white paper tells us of "the desired end state":

the removal of al-Qaeda's sanctuary, effective democratic government control in Pakistan, and a self-reliant Afghanistan that will enable a withdrawal of combat forces while sustaining our commitment to political and economic development.

And it even gives a set of "steps" that must be taken and they are indeed great steps to take, but there is still a massive disconnect between lofty goals and "steps" on the one hand and how to actually close the deal and win in a way that leads to a full wind-down of U.S. military involvement and realistic exit.

If we intend to stay as long as al Qaeda, the Taliban, and other "bad actors" (including drug lords) are running around, I would simply say that is a fair assessment of the problem, but it is not a strategy for winning.

Adding more troops is not a strategy either. Double, triple, quadruple the troops. Increase by an order of magnitude. Whatever. There is no number of troops that would assure the complete elimination of all of the "bad guys." Especially, if they can easily slip across the border into Pakistan, Iran, or wherever.

Even if we did eliminate all of the "bad guys" that we could find, Afghanistan is still a relatively uncivilized and tribal country that simply does not have a robust social structure that could deter a reemergence of "bad actors" in the future. The lure of poppies and opium assures that, no matter what.

Pres. Obama said a lot of the right words back in March:

Going forward, we will not blindly stay the course.  Instead, we will set clear metrics to measure progress and hold ourselves accountable.  We'll consistently assess our efforts to train Afghan security forces and our progress in combating insurgents.  We will measure the growth of Afghanistan's economy, and its illicit narcotics production.  And we will review whether we are using the right tools and tactics to make progress towards accomplishing our goals.

Unfortunately, that means that we are still essentially clueless as to what "progress" really is in terms of a complete elimination of the terrorist threat.

The really key problem is that the phrase "our goals" essentially and effectively means a collection of tools and tactics to "pursue" rather than tangible real-world targets to objectively obtain.

In truth, my hunch is that the "bad guys" in Afghanistan is only a small part of the reason why we are there. The big reason we are there is more likely as a semi-permanent base to deter Iran in the region.

In any case, the bottom line is that we have no strategy or plan to end the war in Afghanistan and exit the region.

How long are we going to simply keep adding more troops with no realistic strategy for how they will actually achieve a conclusion of hostilities?

How high will the body count get before the American people finally say enough?

The bottom line is that a large U.S. force in Afghanistan is simply a long-term losing proposition. Eventually, a U.S. president will come to that same conclusion and we will some years from now simply pull out, much as the Soviets did. Meanwhile, the infamous "consensus" is that increased troop levels in Afghanistan is "the way to go."

-- Jack Krupansky

Health insurance reform inches along towards passage

Yes, everybody has to hold their noses when they dig into the gory details of the various health insurance reform proposals grinding their way through the digestive system of the snake called Congress, but the simple truth is that there is a lot of good stuff in there that will be a solid foundation for future health reform efforts. Sure, it would be nice to have a better proposal or even a perfect proposal, but we have got to focus on what is doable in the current political and economic environment. In any case, the various proposals are incrementally changed to make them more palatable to a broader political base. The net result is that we are getting closer and closer to a legislative package that can actually be passed by Congress and signed into law. This really is going to happen!

A vote in September is almost assured. Or, they could spend more time in September to improve the bill further, but that would be even better.

This is not the end-all of health reform. My personal view is that the real end-all proposal will come 3 to 5 years down the road after our social and economic and political system digests the actual reforms in the real world and then we will have solid support for a better, more comprehensive longer-term proposal.

I expect that we will have at least annual congressional efforts to tweak the reforms as we gain more real-world experience. Maybe even a couple revisions every year.

My condolences to those left-wingnuts who want a pure single-payer system. Ain't gonna happen. Ever.

My assurance to those right-wingnuts worried about a federal government takeover of the health care system. Ain't gonna happen. Ever.

To everybody else, there is something in reform for everybody. Maybe even including me.

-- Jack Krupansky

Pres. Obama should sponser a chat with Prof. Gates and "the arresting officer"

Given all of the "uproar" over the arrest of Prof. Henry Gates and Pres. Obama's own foray into the discussion, I think it makes perfect sense for the President to offer to sit down and have a "chat" with just the three of them present. It might not resolve anything or change anything, but it is just the president's kind of opportunity to show him at his "community organizing" best.

Right now, the "discussion" is happening in the national media, which is a truly horrible venue for resolving conflicts.

Pres. Obama could also go to Cambridge and host the "chat" there.

I really do think it would do some good, and give the president a chance to positively demonstrate his conciliatory abilities.

It would also be good because it would push the national media out of the picture. As well as any activists who might be spoiling for a fight.

The issue should not be how Prof. Gates is going to "fight" the Cambridge Police Department, but rather the issue should be how Pres. Obama can use his skills and the presidential office to actually make a dent in racial confict in America.

-- Jack Krupansky

Health care reform now!

I just wanted to clarify that although plenty of criticism can be heaped on current health care reform efforts, even by me, I am nonetheless 100% supportive of President Obama's effort to pass a comprehensive health care reform package real soon. I am 100% supportive of his discretion as to whether the package gets completed before the August congressional recess, or whenever he agrees to shift it. And, I am 100% supportive of his discretion to negotiate exactly which elements of reform are included in the final package (which can always be revised and extended in future years.)

As far as the timing, personally, I would not lose any sleep if it took another month or two or year or two, but I am 100% supportive of President Obama's "the urgency of now" philosophy. I also believe that health care reform falls under the "If not now then when?" philosophy since continued delay means... endless delay.

Maybe health care reform would be better next year or the year after, but it could also be a lot worse if the resolve to actually do it dissipates and politicians begin feeling that their reelection prospects are safer by continuing to delay.

Personally, I do not think that a delay of a month or two or a year or two will result in a substantially better package than the current options in Congress, so if we are really going to do it, we should just get it done, now.

So, let's have Health Care Reform Now!

And then we can all move on to other things!

-- Jack Krupansky

How will health care reform change health care for the average American?

I've followed the current effort at so-called health care reform in the media, with various descriptions of the various changes embodied in the various proposals, but it is still unclear what the net impact will be for the average American, or even for any American.

First, the overall reform effort is really focused on coverage and insurance, not actual care. Sure, there is a lot of talk about how incentives impact care, such as how many tests are performed, but ultimately that does not translate into a net impact on care per se and doesn't tell the average American (or any American) what changes they can expect to see. Or, are we all really expected to see a dramatic decline in the number of tests that doctors perform? I'm sure there is some fraud with regard to tests, but my hunch is that the vast bulk of tests are performed because the doctors simply need the information to provide better care. What exactly would you want to change here?

I am sure that some of the uninsured will be provided with coverage/insurance, but not all. So, how is the average uninsured American supposed to figure out whether they will become insured? And, at what cost. Even low cost insurance will likely still be unaffordable to many people in the uninsured category.

I still have not heard a good, solid reason for why health care reform, other than simply covering the uninsured, should cost anything, let alone a lot of money. Maybe the real bottom line is that a single-payer system is much cheaper and more efficient, so our "desire" to maintain a much more complicated system means that it will inherently be much more expensive and much more inefficient. Makes sense, sort of, in a bizarre kind of way.

There is a lot a talk about reining in health care costs, but even the talk focuses on the long-term, with expectations that costs will continue to rise in the short term. In truth, even with all of the talked-about reform, health care costs will continue to rise, albeit at a somewhat slower rate, at best. Why no serious effort to actually dramatically reduce the cost of health care? That's an easy question to answer, if you are not a politician: Because the single best and maybe only effective approach to dramatically scaling back health care costs is to do something resembling a single payer system, and that is unfortunately political dynamite. They disparage it as socialized health care or socialized medicine. Makes it sound horrible. The alternative, what we have now, is... anti-social health care or anti-social medicine. Is that really better. Do we really need medicine and health care that is so much less social?

I continue to believe that health care reform will come in two stages. The current effort is stage one. The good news is that this current effort will break the logjam and finally get people in a frame of mind to actually change the current "system." The bad news is that the system will remain somewhat broken and horribly inefficient and horribly expensive. The second stage, real health care reform, will come three to five years from now when people realize that the current reform "package" is simply not good enough to deliver the changes we need, and people begin to focus on how to transition from the current reform to something that actually resembles an efficient, effective, and economical health care system.

Meanwhile, I, like most Americans, continue to have no idea what my own personal slice of the health care system will look like a year or two or three from now.

-- Jack Krupansky

Lobbyists in sheep's clothing

I thoroughly enjoyed reading the article in The New York Times by David Kirkpatrick and Ron Nixon entitled "Lobbies Adopt Tone of Accord With President" which chronicles the extent to which the Obama administration has managed to get lobbyists to agree to work semi-constructively with the administration as legislative efforts are crafted in a spirit of compromise. The amusing part is how activists at both the right and left extremes of the political spectrum are really annoyed at this spirit of cooperation and collaboration (and concession.) For activists, compromise is not a virtue but the ultimate sin. Meanwhile, centrists, pragmatists, and moderates can all breathe a sigh of relief as the Obama administration blazes a trail of sensibility rather than extremist activism.

Even with most of the big lobbyists "onboard" and eager to "work with" the administration, there are plenty of non-lobbyist special interest groups in Washington that are "lobbying" (in a loose, non-legal use of the term) through whitepapers, advertising, editorials, whispering to the media, and other forms of "public education" that do not involve directly lobbying Congress, which is a regulated activity. The NYT article mentions a few of these organizations, but fails to highlight the important distinction between true lobbyists and mere spokespersons for special interest groups.

-- Jack Krupansky

Situation in Iran

Although I have made a number of comments on Twitter, this is my first foray into blogging about the situation in Iran. The situation is complex. That is part of why I have held off on commenting. I wanted to let at least a little of the dust to settle and see where things might be headed.

Originally, I titled this post "Democracy in Iran", but then I realized that the situation is not strictly limited or even necessarily directly related to democracy, per se.

Personally, I am very reluctant to attempt to categorize the situation in Iran as a true crisis per se, but I'll go along since the situation is in fact one that warrants some level of attention.

First, is there "a" crisis in Iran, or is this merely another crisis, or has Iran been a crisis since 1979? Or maybe the crisis dates from when the Neoconservatives decided that Iran was part of an Axis of Evil? It is unclear, or maybe all of the above.

Ultimately, I do have to say that it is simply too difficult to tell for sure, at this time, due to all of the hype and noise and hysteria that surrounds everything in the West that has to do with Iran.

Let me state some facts, as I seem them:

• I am a big believer in democracy. There is no better alternative, anywhere.
• I think all countries should be governed as democracies.
• I think Iran should be governed as a democracy.
• I do not think Iran's current government is close enough to being a reasonable democracy.
• I do not think Iran ever was close enough to being a reasonable democracy, not under the Shah, not before the recent election, not at any time back to 1979 (or before.)
• I do firmly believe that democracy is a very good thing and that it would be a very good thing if Iran were to develop a reasonable facsimile of a modern democracy. 
• The limited available evidence strongly suggests election irregularities, but the available evidence does not justify a strong claim that all of the evidence would "hold up in court" as proof of the degree of fraud that is currently claimed.
• I believe that there was some degree of fraud in the election.
• I do not know if there actually was enough fraud to change the election results.
• I believe that the people of Iran have a right to peaceful assembly and protest.
• I believe that the people of any nation always reserve the right to revolt, if they feel it necessary, but as a last resort. See the language in the U.S. Declaration of Independence.
• I believe it is horribly wrong for the people of any nation to actively encourage (or incite) the people of another nation to revolt. That needs to be a hard decision of the people within a nation, not incited by outsiders.
• I believe that the so-called Pro-Israel Lobby is a major factor inciting opposition to Iran in the West, especially in the U.S.
• I do believe that Iranian-American expatriates are also a major factor inciting opposition to Iran in the West, especially in the U.S.
• I believe that Netroots members and sympathizers are a major factor inciting opposition to Iran in the West.
• I believe that Netroots promotes a trans-national approach to politics and that makes the situation in Iran appealing to them.
• I believe that Netroots members and sympathizers are exploiting and taking advantage of the situation in Iran.
• I believe that Netroots is making the situation worse rather than better. 
• I do not believe that the U.S. government should be promoting or inciting regime change anywhere, including Iran. There is no firm evidence of current U.S. policy with regard to inciting regime change. There was such a policy to incite regime change in Iran, but there is no clear public record as to whether that policy has been rescinded.
• I do not believe that citizens of the U.S., including members or sympathizers of Netroots should be promoting or inciting regime change anywhere, including Iran.
• Throwing rocks in the street is not a peaceful activity.
• Lighting fires in the street is not a peaceful activity.
• Using the word "death" (to anyone) in a chant is not a peaceful activity.
• I do believe that most, a majority, of the protesters in Iran are in fact peaceful.
• I believe that the evidence is clear that some percentage of the protesters in Iran are in fact non-peaceful.
• I believe that there are Americans and members or sympathizers of Netroots that are encouraging, even if only indirectly, at least some of the non-peaceful protesting in Iran.
• I do not know, from the available evidence, what percentage of the citizens of Iran actually agree with the protesters in Iran (or their supporters in the West.) I presume, but do not know, that a significant percentage do support the (peaceful) protesters. How far they want the protesters to go is unknown.
• I do NOT think that it is at all up to those of us outside of Iran to lobby, promote, encourage, incite or otherwise seek to influence the people (or government) of Iran in how they choose what form of government they feel is best for them.
• The people of Iran (in Iran) are more than able, and presumably willing, to stand up at any time that they want to pursue whatever form of government that they want. They do not need our help, either as individual or our government.
• As far as I can tell, the people of Iran do not in any way need my assistance or support or encouragement to pursue their own agenda with regard to governance.
• I do support President Obama and his team as they work through the issues concerning Iran.
• I do not agree with any Netroots members or sympathizers who think that they are entitled to have their own foreign policy with respect to the protesters in Iran.
• The citizens of America do have a right to free speech, but incitement is not a right. Bloggers, and Twitterers, and the users of all forms of social media are certainly entitled to exercise free speech and give their own views, but once again, incitement is not a right. Users of social media need to remain cognizant that there is a line and that they should remain vigilant to avoid crossing over the line from protected speech to incitement.

To reiterate, there is far too much hype, noise, and hysteria surrounding everything in the West that has to do with Iran. That is very unfortunate. What is needed instead is calm and reason.

As far as Iran's so-called "nuclear ambitions", here are some facts as I see them.

• Iran is a sovereign nation. They do not need the permission of the U.S. to do... anything.
• I am opposed to the spread of nuclear weapons.
• I am opposed to Iran or any other nation obtaining nuclear weapons.
• I am NOT opposed to nuclear energy.
• I am okay with Iran developing nuclear energy.
• I am okay with Iran seeking to develop the full fuel cycle for nuclear energy, including refining, enrichment, and reprocessing of spent fuel.
• Iran, as a sovereign nation, has the right to energy independence and should not be strong-armed into becoming dependent on an external supplier and processor of nuclear fuel.
• The U.S., EU, Israel, the so-called Pro-Israel Lobby, and others are misguided in attempting to strong-arm Iran into giving up its right to develop nuclear energy.
• As a sovereign nation, Iran has a right to develop nuclear weapons.
• The U.S., EU, Israel, et al do not have a right to prevent any sovereign nation from developing nuclear weapons, per se. They can and should seek to dissuade others from developing nuclear weapons, but no sovereign nation has the right to demand that another sovereign nation not develop defenses as they see fit.
• Many decades of bullying and interference by the U.S. in the Middle East have destroyed U.S. credibility.
• The U.S. needs to restore its lost credibility in the Middle East. Continued bullying and interference are unhelpful.
• It is unlikely that Iran can be dissuaded from developing nuclear weapons as long as the U.S. continues to lack credibility as a peaceful nation in the region. The U.S. needs to recognize that fact.
• I am not convinced that Iran has an active nuclear weapons development program at this time. They may, but that is a poor excuse for the U.S. to continue to stumble on with very poor judgment in the region.
• I would hope that Iran would not threaten the U.S. or any other country with nuclear weapons.
• The U.S. always reserves the right to protect itself and that may involve strikes against other countries if those countries threaten the U.S. with nuclear weapon capabilities.
• Israel also has such sovereign rights of protection.
• The U.S. is currently doing a fairly poor job of dialing back the fear-mongering rhetoric concerning Iran and any so-called "nuclear ambitions." They need to do much better.

So, what should be done about Iran?

Well, our first order of business is to get our own house in order. Fix the economy, fix the broken financial system, fix the health care system, fix our energy strategy, work on our credibility as a peaceful nation, etc. That would be a start.

The U.S. needs to become an agent of peace in the world and in the Middle East, not an agent of fear as we currently are.

And then and only then should the U.S. (and its loud-mouthed activists) turn any attention on Iran.

Any questions?

-- Jack Krupansky

What is the meaning of happiness in "the pursuit of happiness"?

The U.S. Declaration of Independence states that we have rights to "Life, Liberty and the pursuit of Happiness", but what exactly did they mean by "Happiness"? The text from the preamble to the declaration:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

It seems rather obvious from the context that "happiness" is not being used as merely a synonym for pleasure, so what is it really referring to?

The Wikipedia article on the declaration notes that Jefferson, et al were influenced by the writers of The Enlightenment. A separate Wikipedia article on the key phrase alone notes that John Locke may have been the ultimate source of the general language:

The famous phrase is based on the writings of English writer John Locke, who expressed that "no one ought to harm another in his life, health, liberty, or possessions."[1]

...

1. Locke, John (1690). Two Treatises of Government (10th edition). Project Gutenberg. Retrieved on January 21, 2009.

To me, that superficially suggests that Jefferson may have treated happiness as a reference to health and possessions, at least loosely speaking.

The Wikipedia article also notes that the Virginia Declaration of Rights had the language (by George Mason):

That all men are by nature equally free and independent, and have certain inherent rights, of which, when they enter into a state of society, they cannot, by any compact, deprive or divest their posterity; namely, the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety.

That is not inconsistent with Locke. I would interpret "safety" as roughly the combination of "life and liberty", so "happiness and safety" would leave us with roughly the rights of life, liberty and the pursuit of happiness. This suggests that Mason was considering happiness to be roughly "acquiring and possessing property."

I would superficially interpret property as roughly meaning livelihood, the means to support yourself and provide for your family and the prospect of accumulating wealth.

Almost immediately after the July 4, 1776 signing of the declaration, a draft of the Articles of Confederation were published, on July 12, 1776, with no reference to happiness. Article II said:

Article II. The said Colonies unite themselves so as never to be divided by any Act Whatever, and hereby severally enter into a firm League of Friendship with each other, for their common Defence, the Security of their Liberties, and their mutual and general Welfare, binding said Colonies to assist one another against all Force offered to or attacks made upon them or any of them, on Account of Religion, Sovereignty, Trade, or any other Pretence whatever.

Assuming that "Defence" substitutes for protecting Life, then it would seem that Happiness has been replaced with "general Welfare." To me, that is not inconsistent with interpreting "Welfare" as the means to support yourself and provide for your family, although the concept of accumulating wealth in the form of property is not explicit.

More than a year later (November 15, 1777) the final version of the articles were drafted and submitted to the states, with some wordsmithing, but no essential change in meaning. Article II became Article 3:

ART 3. The said states hereby severally enter into a firm league of friendship with each other for their common defence, the security of their liberties, and their mutual and general welfare; binding themselves to assist each other against all force offered to, or attacks made upon them, or any of them, on account of religion, sovereignty, trade, or any other pretence whatever.

For various reasons the articles were superseded by the U.S. Constitution, which also refrained from explicitly referring to happiness. Taking on a little more of the tone of the declaration, the constitution had a preamble, using the language:

We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

Once again, it would appear that the role of happiness is subsumed by welfare. I interpret the term "general welfare" as meaning that pursuit of the welfare of the individual collectively benefits the whole of society.

Then came the Bill of Rights. Did that have anything to do with "happiness"? I think not. I think the rights and freedoms enumerated in the Bill of Rights fit more squarely under the category of liberty. Nothing in the Bill of Rights seems to relate directly to acquiring and owning property, livelihood, or accumulating wealth.

Overall, my take on these documents is that happiness and welfare seem to relate to the prosperity of the individual and that the states and the nation had a vested interest in the prosperity of the people as individuals.

I ran across a piece by Carol V. Hamilton entitled "The Surprising Origins and Meaning of the 'Pursuit of Happiness'." She quotes Locke from his essay "Concerning Human Understanding":

The necessity of pursuing happiness [is] the foundation of liberty.  As therefore the highest perfection of intellectual nature lies in a careful and constant pursuit of true and solid happiness; so the care of ourselves, that we mistake not imaginary for real happiness, is the necessary foundation of our liberty. The stronger ties we have to an unalterable pursuit of happiness in general, which is our greatest good, and which, as such, our desires always follow, the more are we free from any necessary determination of our will to any particular action, and from a necessary compliance with our desire, set upon any particular, and then appearing preferable good, till we have duly examined whether it has a tendency to, or be inconsistent with, our real happiness: and therefore, till we are as much informed upon this inquiry as the weight of the matter, and the nature of the case demands, we are, by the necessity of preferring and pursuing true happiness as our greatest good, obliged to suspend the satisfaction of our desires in particular cases.

That does suggest a more solid origin of Jefferson's pursuit of happiness, but still does not cut to the heart of the meaning of that happiness. I interpret the reference to liberty and happiness being its foundation as indicating that a person cannot experience true liberty unless they are also experiencing true happiness. In other words, without true happiness, liberty is for naught. You cannot feel truly free unless you are enjoying the pursuit of happiness.

Ms. Hamilton digs deeper and finally informs us that:

Properly understood, therefore, when John Locke, Samuel Johnson, and Thomas Jefferson wrote of "the pursuit of happiness," they were invoking the Greek and Roman philosophical tradition in which happiness is bound up with the civic virtues of courage, moderation, and justice. Because they are civic virtues, not just personal attributes, they implicate the social aspect of eudaimonia. The pursuit of happiness, therefore, is not merely a matter of achieving individual pleasure. That is why Alexander Hamilton and other founders referred to "social happiness."

That still does not answer the whole question, but at least informs a belief that pursuit of true happiness at a personal level does relate to doing good for the whole of society. If we read pursuit of happiness as the pursuit of social happiness, that leads us to inquire what form of "happiness" at a personal level would benefit the whole of society. To me, the answer is enlightened self-interest, pursuing activities that serve a dual purpose of directly benefiting the needs of the individual while simultaneously indirectly benefiting the whole of society. Pursuit of prosperity seems to fit that bill. The ancient philosophers speak of virtue and civic virtue, but I think that is compatible with enlightened self-interest.

In short, my reading of all of this is that Jefferson was using the happiness in the pursuit of happiness to mean prosperity with a strong sense of enlightened self-interest, with prosperity referring to livelihood, the ability to take care of your family, the right to enjoy the fruits of your labors (including at least a little pleasure), the obligation to give back to the community, and at least the hope of accumulating wealth in the form of property and money. Coupled with protection of your life and liberty, all of this would benefit both the individual and the whole of society.

-- Jack Krupansky

What is fascism?

What exactly is meant by calling someone or some party "fascist"? According to the Merriam-Webster dictionary, fascism is:

 a political philosophy, movement, or regime (as that of the Fascisti) that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition

Hmmm...

The basic problem with this term is the issue of degree. How "forcible" does suppression need to be? How "severe" does the "economic and social regimentation" need to be? Is an absolute dictator required?

It is difficult to see the raw definition applying anywhere in modern American politics, but I suppose some could argue that there may be a "hint" or "flavor" or fascism creeping into the mindset of various party operatives.

My hunch is that people are going to try to water down and redefine fascism to mean whatever makes their opponent look worse.

Fascism-light anybody?

Or maybe a little Neo-fascism?

-- Jack Krupansky

Will GM really file for bankruptcy before summer?

Some of the media coverage and chatter this morning seemed to suggest that a GM bankruptcy was likely before summer. But, if you read the coverage carefully, such as the article in The New York Times by Micheline Maynard and Michael de la Merced entitled "'Surgical' Bankruptcy Possible for G.M." it is clear that bankruptcy is still only an "option", not a near slam-dunk certainty as the chatter suggests. It seems clear that the "leak" of preparation for a bankruptcy filing is intended to convince bondholders and the unions that they really do need to cave in on the demands of GM management as the government is requesting. In other word, the content and timing of the "leak" is a negotiating tactic.

I do not doubt that the government is in fact making plans for a possible bankruptcy filing by GM. If the bondholders and unions do not cave, bankruptcy will then be the only reasonable option left to the government.

Either way, at least we will have the certainty that by summer GM will be headed for a "light" future without most of its current baggage.

I continue to lean towards voluntary restructuring without a formal bankruptcy. The bondholders will have to decide whether they want to chance the uncertainty of bankruptcy or cut a deal while they can. My hunch is that the end result will probably be about the same either way.

I am tempted to buy a hundred shares of GM as a "lottery ticket" for restructuring. An alternative is to buy some GM debt at a firesale price that will get converted to stock whether in bankruptcy or voluntary restructuring. The bonds would probably be a safer bet, but even now may be priced too richly.

The open question is how much money the government will have to supply to fund healthcare and retirement "bailouts" for GM, regardless of how things turn out in June. That may make the government the de facto "owner" of GM, for now. Hmmm... GM = "Government Motors". Sigh.

In short, my belief is that GM will restructure without bankruptcy.

It also appears that GM will pick up and own the "remains" of its bankrupt Delphi spinoff. That would be an appropriate resolution.

-- Jack Krupansky

I continue to have great confidence in President Obama and his entire team

Unlike many of President Obama's "supporters" who are "concerned" about many of his decisions and the members of his team, especially his economic team, and are offering "advice" on how he should do many things differently, I continue to have 100% unequivocal confidence in both the President and his entire team, including his economic team. They are all doing a great job.

My message to President Obama and his entire team: Damn your critics and full speed ahead!

Especially all of those critics who deign to refer to themselves as "Progressives."

-- Jack Krupansky

The Shadow Open Market Committee is back in action

After a three-year hiatus, the Shadow Open Market Committee (SOMC) is resuming operation. "The Shadow" is a small group of economists who meet periodically to present papers on and discuss various aspects of the economy and monetary policy that are relevant to the Federal Reserve in general and the Federal Open Market Committee in particular. They last met in May 2006 at the Cato Institute in Washington, D.C. They are now scheduled to meet for the first time since then on Friday, April 24, 2009. The format is changed and there are several new members. The group has not met since co-chair Charles Plosser was "demoted" to be the President of the Federal Reserve Bank of Philadelphia back in August 2006.

The old format involved a separate working session on Sunday afternoon, with a one-hour presentation and press conference late Monday morning followed by a luncheon. The meetings were open to the public.

The new format will consist of a three-hour symposium (well, two and three-quarters hours) in the morning with plenty of opportunity for audience participation, followed by a luncheon. The symposium is open to the public but requires advance reservation (I think.)

The goal of the SOMC, as stated on their old web site, was that:

The Committee's deliberations are intended to improve policy discussions among policy makers, journalists and the general public with the hope that wiser policy decisions will result.

The web site has not been updated since May 2006, so the SOMC "charter" may have changed, but I suspect not.

As the old web site says, "The SOMC is an independent organization whose members are drawn from academic institutions and private organizations." The SOMC is mostly academic, and certainly nobody currently in the government, although members of the SOMC have gone on to join the Federal Reserve and former Federal Reserve officials and employees have joined the SOMC after leaving government employment.

Previous members continuing on the "new" SOMC are Professor Gregory Hess of Claremont McKenna College, Mickey Levy of Bank of America, Professor Bennett McCallum of Carnegie Mellon University, and Anna Schwartz of NBER.

The new SOMC members are Professor Michael Bordo of Rutgers University, Professor Charles Calomiris of Columbia University, and Professor Marvin Goodfriend of Carnegie Mellon University.

The old SOMC met twice a year. It is not yet clear whether the new SOMC will meet on the same schedule.

I have been attending the SOMC as an observer since... longer than I can remember, since 2000.

The first SOMC meeting was back in September 1973. The SOMC was founded by Prof. Karl Brunner of the University of Rochester and Prof. Allan Meltzer of Carnegie-Mellon University.

The papers to be presented and discussed at the April 2009 "Shadow" symposium are:

• Michael Bordo: "The Great Contraction 1929–1933: Are There Parallels to the Current Crisis?"
• Charles Calomiris: "The Dos and Don'ts of Financial Regulatory Reform" and "TALF and PPIP: Will they Work to Unclog the Financial Plumbing?"
• Marvin Goodfriend: "We Need an Accord for Fed Credit Policy"
• Mickey Levy: "What's in Worse Shape, the Economy or Fiscal Policy?"
• Bennett McCallum: "China, the U.S. Dollar, and SDRs"
• Anna Schwartz: "Boundaries Between the Fed and the Treasury"

Gregory Hess will be moderating.

For those of us into economics, finance, monetary policy, and fiscal policy, it will be an exciting morning.

It is always interesting to listen to the form of questions asked by "the media."

See the Cato web site for details on attending.

-- Jack Krupansky

Health care without any fine print

"Universal health care", "health care reform", and similar phrasings are such mouthfuls of words that are also vague and confusing, and they do not tell you what you really want and need to know. We need a better slogan, and here it is:

Health care without any fine print

No fine print. None. Zip. Zilch. Nada. Not even a line requiring you to sign your name.

My requirements for any credible health care reform "package" are simply as follows:

1. Care is universal. Everyone is covered and all treatments are covered. Period. No fine print about people or conditions that "may" not be covered fully.
2. No non-medical information is needed before receiving care. An ID may be provided, but only to facilitate access to medical records for medical treatment.
3. Anywhere and anytime. No restrictions as to where or when a person can receive care.
4. No fine print! Really! No document is needed to describe anything other than the preceding three points. That's it! Really!

That's it! Really!

Oh, and one other thing, before I forget... No fine print!

-- Jack Krupansky

Troop buildup in Afghanistan is great leverage against Iran

I doubt that anybody is happy with the prospect of the U.S. troop buildup in Afghanistan, but Iran is clearly the "player" with the most to lose from such a prospect, meaning that the buildup gives the U.S. significant leverage that will be very meaningful and helpful in negotiations with Iran.

The buildup is occurring primarily due to political instability in Afghanistan. A side effect of the buildup is that significant U.S. troop presence in the region is a deterrence to Iranian "activity" in the region.

The only way that Iran can "deter" a more aggressive buildup is to work very hard to encourage and assist in stabilizing the region. Specifically, that would mean reducing its support for terrorism in general and reducing its moral support for the Taliban.

So, if Iran wants to keep the size of the U.S. presence in check, Iran will have to work for exactly the political aims that the U.S. is pursuing. Otherwise, the U.S. presence will increase and Iran will be under even greater pressure.

The escalating U.S. presence also distinctly "implies" to Iran that Iran's "pursuit of nuclear ambitions" is not "helpful" if Iran wants the U.S. to have a less significant presence in the region. The U.S. can imply that any reduction in U.S. presence in the region requires Iran to be cooperative with U.S. aims on all fronts.

I have not been a fan of increasing U.S. presence in Afghanistan, but since it will be killing multiple birds with one stone, it does have a beneficial silver lining, and for that reason should be supported, at least for now.

-- Jack Krupansky

My question for WhiteHouse.gov: Universal Health Care -- with NO fine print

I just submitted my question to the WhiteHouse.gov online Town Hall:

Why can't we simply say that one of our economic goals is "Universal Health Care -- with NO fine print" -- in those simple, meaningful words -- rather than evasively refer to "reform" and "cost savings" and other confusing nonsense?

I'm waiting for my answer.

-- Jack Krupansky

I continue to have great confidence in President Obama's economic team

Nothing new here, but I just wanted to reaffirm that I continue to have absolute confidence in President Obama and his economic team, including Tim Geithner and Ben Bernanke, despite all of the gratuitous scorn being heaped upon them. I have absolutely no reservations about any member of the team and their policy decisions to date. They have a big task in front of them and are doing an absolutely amazing job.

What about the big Wall Street bonuses? Yeah, what about them?!?! Talk about a red herring. Yes, the bonuses are absolutely outrageous, but so what?! President Obama and his economic team have plenty of much bigger fish to fry, so please, please, please stop trying to distract them from focusing on the core of the problem. The bonuses are a mere sideshow. Let Congress hold some hearings and then let's move on. If any laws are being broken, then of course the relevant law enforcement authorities will pursue the matter at that level, but the kind of mindless "outrage" being puffed up in the media and by disgruntled Republicans and non-centrist Progressives is a real waste of national energy.

Message to President Obama and his economic team: Back to REAL work.

-- Jack Krupansky

Future of Wall Street and public companies

With so many rules and regulations and with many more coming, one has to wonder about the future of public companies, the stock market, and Wall Street. Besides, with the advent of the Internet and direct access to consumers and businesses and financial institutions, what benefit does Wall Street really provide? I do not have any immediate answers, but this is something to think about.

One possibility is that a much smaller collection of companies will remain public while smaller companies and some larger companies seek shelter in status of non-public ownership or consolidation with other firms.

It is quite possible that Google (GOOG) was the last major tech IPO of our lifetimes, or at least until Wall Street morphs into a far more rational structure.

It would not surprise me if some of the big banks decided to go private, especially with their puny stock prices.

I remain comfortable with my modest stake in Microsoft (MSFT). It is certainly not be as glamorous as it once was, but it is relatively rock solid (despite what Apple fans and the anti-Microsoft crowd will tell you) and one of the very, very few companies with an AAA credit rating. And it pays a nice dividend which appears to be relatively safe and secure. I am not buying any more outright, but I am reinvesting dividends, at least for now.

I am wondering whether Verizon (VZ) might be a good investment, but I have not done any deep research yet. Landlines may be fading, but the phone companies are stealing cable customers as well. I am contemplating Qwest (Q) as well. One big question is what the new broadband infrastructure stimulus spending will mean for these companies.

-- Jack Krupansky

Tracking the ongoing media mania over alleged parallels to The Great Depression

I am endeavoring to track the current media mania of attempting to draw parallels between the current economic situation and The Great Depression. I am doing this by using Google News to count the total number of "news" references to the phrase "The Great Depression" in the previous 24 hours.

• 1/10/2009: 411 hits
• 1/30/2009: 319 hits
• 2/6/2009: 308 hits
• 2/25/2009: 389 hits
• 3/10/2009: 306 hits

-- Jack Krupansky

My suggestion for the White House economic recovery web site: blog and Twitter

The White House has an "okay" web site for the stimulus package, www.recovery.gov, but it needs a blog and they need to exploit Twitter. I sent them the following suggestion:

The web site needs a blog and Twitter feeds to provide us with more timely information.

See the NY Fed site for Twitter examples:
http://www.newyorkfed.org/
http://twitter.com/NYFed_news
http://twitter.com/NYFed_data

Thanks.

-- Jack Krupansky

They do have a blog on the main White House web site, so it is not an unnatural request.

Somehow, I find it amusing that the New York Federal Reserve Bank is on Twitter!

In any case, I at least gave them some useful feedback. Have you??

-- Jack Krupansky

My suggestion for the White House economic recovery web site

It is all well and good that the White House has a web site for the stimulus package, www.recovery.gov, but I did not find it immediately helpful in terms of how much money is actually flowing into the U.S. economy. I sent them the following suggestion:

What is missing and really needed is a classic thermometer that shows the amount of stimulus funding that has actually been disbursed or spent by each agency and is actually out there in the economy.

There should be a daily log listing the agency, specific program, and amounts for daily disbursements and expenditures into the economy above the agency/program baseline budget that is directly attributable to the ARRA stimulus spending.

Thanks.

-- Jack Krupansky

It will be interesting to see if they actually can tell when each dollar of ARRA money is disbursed or spent.

In any case, I at least gave them some useful feedback.

-- Jack Krupansky

Is the nation at the brink of a depression?

What a great name for someone alleging that we are on the "brink of a depression": Specter. According to an Associated Press article entitled "Specter says nation on 'brink of a depression'":

The nation is on the "brink of a depression," but there's a "reasonable chance" that the $787 billion economic stimulus package will help ease the situation, Sen. Arlen Specter said Monday.

Specter, R-Pa., said the nation's economic situation is more dire than the public has been told, but did not elaborate.

"Our economic problems are enormously serious - more serious than is publicly disclosed. And I think we're on the brink of a depression," he told reporters at the state Capitol.

...

"Had there been no stimulus, I think we'd have gone right off the edge," he said. "I think we're pretty close to the edge anyway, to be very brutally blunt about it."

This is the same Arlen Specter who concocted the infamous Single-Bullet Theory of the JFK assassination and here he is concocting a conspiracy theory about the U.S. government allegedly withholding information about the economy. Yeah, right.

In truth, there is no "edge" or single trigger event for a depression. A true depression is a very long, very slow downward slide. Sure, people worry about whether our current slide might have that lasting potential, but there is no evidence of that yet -- even if the dear senator might have fearmongered himself into believing so.

It may not feel like the government actions are having much of an effect, but that is because the Federal Reserve, Treasury, et al are still busy putting all of the elements into place and it will take more than just a few months to see fruit borne of those efforts.

My theory is simply that we need to finish burning off the excess "growth" of the past several years which was fueled by super-cheap credit and exotic financial instruments. That might mean a net hit of 5% to 10% to GDP, employment, income, and spending, but this is not a long-term depressionary process. Sure, such a "structural contraction" is much worse than a garden-variety inventory-based recession, but we already have enough structural supports in place to effectively preclude a true depression.

If we are at a brink, it is a brink of starting to see the positive impact of the stimulus and the Federal Reserve efforts to restart non-bank lending (what was called the "shadow banking system.")

The simple reality is that politicians love to peddle one of two things: sunny-day fantasies or deep, dark gloom. The latter gets a lot of traction these days regardless of what reality might be.

-- Jack Krupansky

Has the economy really fallen off a cliff?

Colorful metaphors are great fun, but never terribly enlightening. Warren Buffet is an endless source of colorful metaphors, the latest of which is his allusion that the U.S. economy has "fallen off a cliff." He uttered this odd characterization in an interview on CNBC [but... but... but... I thought their credibility had "fallen off a cliff" after Jon Stewart's "takendown"!!! Have they rehabilitated themselves already?!?!] that is summarized in a Reuters article by Jonathan Stempel entitled "Buffett says economy fell off cliff, fears inflation."

Now, to be fair, maybe Mr. Buffett considers any recession to be a "cliff." Sure, any contraction of economic activity is not to be desired, but the simple fact is that the "fall" to date of the U.S. economy has been only a "few" percent, which is hardly a cliff.

Now, the stock market can be legitimating characterized as having "fallen off a cliff", but there has been no comparable decline in the overall real economy, whether you look at GDP, employment, income, or spending.

To be clear, yes, the U.S. is experienced a severe "structural contraction", that may leave the U.S. economy 5% to 10% smaller over the next year or two, but that hardly constitutes a "cliff."

A fall from a cliff is not something that you survive. The U.S. economy is surely going to survive.

Mr. Buffett enjoys being colorful, something that CNBC is well-positioned to promote, but not for any socially useful purpose.

-- Jack Krupansky

Zombies and nationalization, what's it all about?

With all of the non-stop, mega-volume talk about "zombie banks" and how nationalization of banks is the only way to go, one has to wonder whether President Obama and his team are really as bone-headed stupid as their critics suggest. So, what is really going on?

Put simply, it is all about sour grapes and lobbying.

First, let's acknowledge that there is always more than one way to skin a cat, and that includes dealling with so-called zombie banks. So, maybe critics half a half a point in that their proposals could work. The problem is that these critics refuse to accept what I just said, namely that there are in fact multiple possible paths that lead out of the current financial swamp. Alas, pride, ego, and ideology prevent the critics from admitting any such thing.

Second, the whole concept of a bank being a so-called "zombie" is predicated on all of their "risky" credit assets effectively being worth zero or at least something very far from 100 cents on the dollar. The real problem is that we will not know the true value of many of these assets until the economy is back to normal growth mode. Until then, hard-core freemarketeers will insist that all "risky" assets are effectively worth zero. Their ideology and possibly even personal trading positions prevent them from allowing that a significant fraction of these risky assets will be worth something much closer to 100 cents on the dollar a few years from now. In short, one man's "zombie" is simply another doctor's hospital patient. Never confuse the present with the future. The future has to be worth something to any sane person, but those who drone on and on about zombies can admit no such thing.

Third, many of these critics are probably just shilling for pals who have bearish trading positions that are bets on the decline or failure of the various financial institutions. Even if they do not have a direct position, they may pal around with traders and speculators who do and essentially be their mouthpieces.

And then there is the media. They love a juicy story. Negativity sells. They are out to make money, not enlighten you.

The real bottom line is that many of the critics are much more interested in lobbying for their pet plans than allowing that the administration economic team might succeed.

Treasury and the Federal Reserve may not yet have all of their ducks lined up yet, but they are actually doing an outstanding job and much more likely to succeed than their critics will ever be willing to admit, even after the fact.

Yeah, our major banks sure have made a lot of mistakes over the past five years, but it would be far better to allow the administration economic team to continue their efforts, which includes course adjustements as reality evolves, than to try to bend to every self-serving criticsim and proposition that critics lob at them.

Personally, I do not see any of the big banks as likely to fail or in need of true nationalization. All of them are in fact lending, but not to the excess we saw during the housing boom. I see no merit in referring to them as zombies. Yes, more bailout money will clearly be needed (a trillion, maybe two?), but their trajectory is getting better as each day, week, and month goes by.

The good news is that the evil old Wall Street which was the primary driver of the excesses of recent years is rapidly vanishing.

In short, no sane American need lose even a moment of sleep at night worrying about "zombies" and "nationalization".

-- Jack Krupansky

What are we doing in Afghanistan?

I am no fan of New York Times Op-Ed columnist Bob Herbert, but in his column entitled "Wars, Endless Wars" he does raise troubling questions concerning just what exactly the U.S. is doing in Afghanistan. As he puts it:

The U.S. economy is in free fall, the banking system is in a state of complete collapse and Americans all across the country are downsizing their standards of living. The nation as we've known it is fading before our very eyes, but we're still pouring billions of dollars into wars in Afghanistan and Iraq with missions we are still unable to define.

Bob expresses his concerns, but does not really try to dig deeply to identify the root problems other than a sense that there is simply no clear strategy.

Is it really all about Iran, keeping them boxed in and under pressure to abandon their support for terrorism (Hamas and Hezbollah) and their "nuclear ambitions"? Maybe, but not quite since there are also troubles in Pakistan.

Is it really all about religious extremists? If so, major military operations are probably not likely to ever reach a point we could call success.

Is it maybe at heart a war on Islam? Could be, but nobody will admit that in public.

Is it driven by yet another crackpot worldview and policy initiative of the shadowy so-called Pro-Israel Lobby? Once again, it could be, but nobody will admit that in public.

Whatever it is, we do not appear to have a robust exit strategy identified and in place and underway.

Are we fighting "terrorists" or shadows or even illusions? Maybe all three.

-- Jack Krupansky

Paul Volcker argues for splitting commercial and investment banks

In a recent speech, Paul Volcker, former Federal Reserve Chairman and current economic adviser to President Barack Obama, argues that we need to separate traditional commercial banking from investment banking in order to get a more stable banking system:

I think a primary characteristic of the system ought to be a strong, traditional, commercial banking-type system. Probably we ought to have some very large institutions -- or at least that's the way the market is going -- whose primary purpose is a kind of fiduciary responsibility to service consumers, individuals, businesses and governments by providing outlets for their money and by providing credit. They ought to be the core of the credit and financial system.

This kind of system was in place in the United States thirty years ago and is still in place in Canada, and may have provided support for the Canadian system during this particularly difficult time. I'm not arguing that you need an oligopoly to the extent you have one in Canada, but you do know by experience that these big commercial banking institutions will be protected by the government, de facto. No government has been willing to permit these institutions, or the creditors and depositors to these institutions, to be damaged. They recognize that the damage to the economy would be too great.

What has happened recently just underscores that. And I think we're at the point where we can no longer fool ourselves by saying that is not the case. The government will support these institutions, which in turn implies a closer supervision and regulation of those institutions, a more effective regulation than we've had, at least in the United States, in the recent past. And that may involve a lot of different agencies and so forth. I won't get into that.

But I think it does say that those institutions should not engage in highly risky entrepreneurial activity. That's not their job because it brings into question the stability of the institution. They may make a lot of money and they may have a lot of fun, in the short run. It may encourage pursuit of a profit in the short run. But it is not consistent with the stability that those institutions should be about. It's not consistent at all with avoiding conflict of interest.

These institutions that have arisen in the United States and the UK that combine hedge funds, equity funds, large proprietary trading with commercial banks, have enormous conflicts of interest. And I think the conflicts of interest contribute to their instability. So I would say let's get rid of that. Let's have big and small commercial banks and protect them – it's the service part of the financial system.

And then we have the other part, which I'll call the capital market system, which by and large isn't directly dealing with customers. They're dealing with each other. They're trading. They're about hedge funds and equity funds. And they have a function in providing fluid markets and innovating and providing some flexibility, and I don't think they need to be so highly regulated. They're not at the core of the system, unless they get really big. If they get really big then you have to regulate them, too. But I don't think we need to have close regulation of every peewee hedge fund in the world.

So you have this bifurcated -- in a sense -- financial system that implies a lot about regulation and national governments. If you're going to have an open system, you have got to get much more cooperation and coordination from different countries. I think that's possible, given what we're going through. You've got to do something about the infrastructure of the system and you have to worry about the credit rating agencies.

These banks were relying on credit rating agencies while putting these big packages of securities together and selling them. They had practically – they would never admit this – given up credit departments in their own institutions that were sophisticated and well-developed. That was a cost centre – why do we need it, they thought. Obviously that hasn't worked out very well.

This leaves open the question of whether commercial banks could offer retail brokerage services. I think they could. In today's model, retail brokerage has traditionally been a "sales" function for investments banks, but that is no longer working out very well for most consumers.

They key thing is that banks would once again be true banks, with a focus on absolute protection of the value of cash.

-- Jack Krupansky

Here is what President Obama needs to do...

There is only one thing that President Obama needs to do:

1. Continue to ignore all of the "back-seat driving" advice he is getting from so many pundits, commentators, alleged experts, journalists, and even his supposed supporters.

He is incredibly smart in his own right and has direct access to the infamous "best and brightest", many either working right in the White House or a mere phone call away. He has no shortage of resources for assembling all of the relevant facts and driving towards effective solutions to the challenges before us. End of story!!!

There are two core camps of critics of the President:

1. "The Opposition" - plenty of sour grapes there. This is to be expected -- and ignored. They lost, but they want their losing ideas to live on. President Obama is doing a great job of continuing to humor them.
2. Progressive supporters who can never accept the concept of compromise. They need to just sit down and shut up. President Obama will compromise on progressive ideals only to the extent that it is necessary to effectively govern. The Progressives need to accept that.

President Obama can, has been, should, and will continue to "dialog" with both camps as he continues to forge compromises that address the challenges before us.

In other words, President Obama needs only to continue to follow his own nose and gut instinct, critics be damned. Or, in today's vernacular, "Let them blog."

-- Jack Krupansky

Tracking the ongoing media mania over alleged parallels to The Great Depression

I am endeavoring to track the current media mania of attempting to draw parallels between the current economic situation and The Great Depression. I am doing this by using Google News to count the total number of "news" references to the phrase "The Great Depression" in the previous 24 hours.

• 1/10/2009: 411 hits
• 1/30/2009: 319 hits
• 2/6/2009: 308 hits
• 2/25/2009: 389 hits

-- Jack Krupansky

Is it all about trust or about honor?

The financial crisis is causing people to reflect on trust, but I think the core issue is honor. Honor has to be in place before trust can be established, otherwise the trust is simply empty and truly meaningless. For quite some time I have thought of Wall Street (and even most banks) as "Thieves Without Honor." Without a core of intense honor, any firm is just one giant Ponzi scheme, one ethical error away from disaster. Wall Street wants to take a CDO approach to "managing" trust -- with bad assumptions about the maximum default rate on their synthesized approach to "honor". We need a return to hard-core, true honor not the synthetic, artificial contrived appearances that Wall Street and banks in general have made their stock in trade.

In the old days, lots of marble, polished brass, fine-tailored suits, and an impressive-looking vault were all we needed to "trust" a bank. No more. Sadly, Wall Street and most banks still believe in a lot of that crap, albeit with a "fresh modern" veneer of a lot of slimy marketing as icing on their cake, but all of that needs to go.

The really tough thing is that trust is based on appearances for so many people. How do we go about emphasizing, measuring, auditing, and rewarding honor as "Job #1"?

-- Jack Krupansky

Financial models, variables, parameters, assumptions, "Garbage In, Garbage Out"

It is so easy to blame so much of the current financial crisis on complex "financial weapons of mass destruction", but it is not necessarily so simple. I have read descriptions about how CDOs (Collateralized Debt Obligations) are supposed to work. The actual ideas are not that bad. Clearly the models for these instruments ultimately failed, but as far as I can tell the basic models are in fact reasonable.

Like all models, there are plenty of variables and parameters. If you do not get the variables and parameters right, then of course the models will fail.

Any wizened old computer programmer can tell you a simple truth about even the most perfect computer software: GIGO - Garbage In, Garbage Out. In fact, it does not matter if you get 99.9% of the variables and parameters absolutely right, even one bad key parameter can spoil the entire model.

In the case of CDOs, a key parameter is the maximum default rate, how many people can fail to pay their mortgage payments before the model begins to fail. If the default rate is below some threshold, the models work extremely well and almost everybody makes lots of money. But, if the default rate is above some threshold, the models, as they say, "blow up" and either nobody makes any money (a CDO of absolute junk subprimes) or many people get wiped out and some indeterminate number are still magically protected by the models. But unless you can accurately predict how many will be protected, the safe assumption is that none will be protected. Unfortunately, we need to know the expected default rate in the future for a given pool of securities, and that is the one most important thing we do not know at this stage, unless the government steps in with a guarantee.

The crisis appears to have occurred because the assumptions about the near future and resulting parameter values were simply wrong, really wrong. Sure, the modelers may claim that they did not "know" that junk mortgages were being sold and that the housing boom was actually a bubble, but models are supposed to incorporate all of the variables and parameters of the real world, not some idealized world.

During the housing boom, modelers set their parameters on the assumption that the future would resemble the past. No gung-ho modeling group anxious to share in the corporate bonus pool was going to set their parameters based on the near future resembling The Great Depression (or worse.)

Wouldn't it be a hoot if it was all that simple, great models, but just a few "bad" parameter values?!?!

-- Jack Krupansky

The financial crisis and the Nuremberg Excuse

There is no shortage of finger-pointing as to the causes of the current financial crisis. I was somewhat stunned to read the following anecdote by former Federal Reserve Chairman Paul Volcker in a recent speech:

One of the saddest days of my life was when my grandson -- and he's a particularly brilliant grandson -- went to college. He was good at mathematics. And after he had been at college for a year or two I asked him what he wanted to do when he grew up. He said, "I want to be a financial engineer." My heart sank. Why was he going to waste his life on this profession?

A year or so ago, my daughter had seen something in the paper, some disparaging remarks I had made about financial engineering. She sent it to my grandson, who normally didn't communicate with me very much. He sent me an email, "Grandpa, don't blame it on us! We were just following the orders we were getting from our bosses." The only thing I could do was send him back an email, "I will not accept the Nuremberg excuse."

What else is there to say?

-- Jack Krupansky

Thomas Friedman: The government should give money to venture capital funds

I am no fan of Thomas Friedman, but I do agree with most of what he says in his latest Op-Ed in The New York Times entitled "Start Up the Risk-Takers" in which is proposes a fairly simple model for government investment to create new jobs:

Call up the top 20 venture capital firms in America, which are short of cash today because their partners -- university endowments and pension funds -- are tapped out, and make them this offer: The U.S. Treasury will give you each up to $1 billion to fund the best venture capital ideas that have come your way. If they go bust, we all lose. If any of them turns out to be the next Microsoft or Intel, taxpayers will give you 20 percent of the investors' upside and keep 80 percent for themselves.

Sounds like a plan. But, it is not quite so simple. True, professional venture capital firms operate in a relatively narrow range of financing and stage of development. The typical paradigm for a venture capital-funded venture is "early stage", were only a relatively modest level of capital is needed (rarely more than $20 million), and where only a modest number of jobs are generated. Sure, some venture capital firms offer "later stage" funding, but that is still for the relatively early life of a new venture when growth is high but revenue and jobs are still relatively modest. The Googles and Microsofts and Intels of the world did not require large-scale capital in their venture capital stages. So-called expansion capital on a large scale typically comes not from professional capital firms, but either organically funded from revenue and profits from dramatic early success of a Google or Microsoft or Intel, or from debt offerings on Wall Street or other non-venture capital sources. That is the stage when a high volume of jobs are created.

Professional VC firms do offer growth stage funding ($10 to $50 million), but that is still only the stage where a venture might be hiring no more than a few hundred people, not the major growth stage where thousands of jobs are being created and hundreds of millions of capital investment are being made.

Sure, I agree with Friedman -- and have already myself suggested -- that the government should temporarily step in to fund professional venture capital firms that are having difficulty raising capital from their traditional sources such as large banks, insurance companies, pension funds, and large endowment funds (all of whom are themselves struggling financially), but this is money to fuel a future wave of job creation, say three to ten years from now, and won't create millions of new jobs in the next two to three years.

There are also SBIR, SBA, and other government funding programs that can be boosted directly by the government. Government guarantees for bank loans and debt offerings for young, innovative ventures could also be a big help for growing innovative companies far beyond the early stages where venture capital is most successful at boosting promising companies and weeding out the good ideas that simple do not work in the real world.

Yes, by all means the government should ramp up venture capital investment, but that will not obviate the need for stimulating and supported significant chunks of the "old economy" for many years to come.

Besides, the last thing we need is yet another new "bubble", let alone a slew of them.

We want new ventures that are robust and durable, not flash-in-the-pan, "gold rush" style "opportunities."

Energy innovation is worthy of investment, as is filling the gap for funding of venture capital firms, but let us be careful to avoid turning this into another "dot-com boom", because we all know how that movie ended.

The good news is that it might cost only $20 billion (as Friedman suggests) to give the venture capital industry the shot in the arm that it does in fact need.

Personally, I am not completely convinced that any or many of the top VC firms could actually put $1 billion to use with their current investment paradigms and I would not want to destroy the current paradigm that works so well. To be clear, over-investment does not result in comparably greater success. Maybe $250 million average (per year) for the top 20 firms and $50 million average for the rest of the top 100 firms would be more than sufficient for the level of investment that these firms could manage successfully at this point. That works out to about $9 billion a year. Okay, double it to make sure that good businesses do not have trouble getting funded. That gets us to $18 billion, close to Friedman's number. My own original number was $2 to $3 billion a month or $24 to $48 billion per year. My model was simply that in times of financial crisis, better to err way over the top. At this point, I would prefer to hear the VC sector tell us what they feel that they need. Offer them $50 billion a year and sit back and watch the spectacle of them saying "Please give us less money."

Maybe the key thing is for the government to be able to assure VC firms that there will be "government supported" funding (e.g., debt securities) available for VC-funded companies that have advanced beyond the VC-supported stages to the point where they do need tens or even hundreds of millions to expand to the degree where individual firms are creating many hundreds or thousands of jobs. This might help to encourage VC firms to fund new ventures that will eventually require large-scale capital after they advance beyond the stages where traditional VC firms add the most value.

Finally, Friedman did not even mention so-called "angel" investing, where individual investors are funding innovative new ventures at a smaller scale than normally appeals to professional venture capital firms. Give these people more generous tax incentives, matching funds, and possibly some degree of government guarantees, or maybe outright tax credits, and you could see a dramatic blooming of innovative firms.

In any case, I do have to give Friedman credit for raising awareness of this critical issue to the national level. A single small paragraph in my own blog simply wasn't good enough to even get the ball rolling:

Provide government funding to venture capital firms which are experiencing extreme difficulty raising funds from traditional sources (big banks, pension funds, and insurance companies) due to the credit crunch and skrinkage of the economy, on the order of $2 to $3 billion per month.

-- Jack Krupansky

Death to the Hummer!!

As GM struggles to restructure to survive, it seems abundantly clear to me that the Hummer has to go. Sure, if they find a buyer they should sell the Hummer business. If they are unable to line up a buyer and the business is unprofitable, the solution is clear: they must kill off the Hummer business. Simply shut it down, kill the Hummer.

Besides, the Hummer is the epitome of excess of a world that no longer exists. Big, expensive, guzzles fossil fuel, favored by overpaid managers and executives -- including those of Wall Street.

At heart, the Hummer is a distraction to GM management. Rather than expending time, energy, and resources figuring out how to save the Hummer, GM management should focus all of that time, energy, and resources on the Volt and other paths that at least have a hope for the future.

The Hummer must go. GM should kill it while they have the chance.

What about Saab? Simply spin it off to local Swedish management for $1, let it file for bankruptcy, and let the Swedish government decide if there is anything worth saving there. If anybody actually wants to buy it for more than $1, great, sell it ASAP. Either way, get this dog off of the plate of GM management as well.

The only thing GM management should be focused on is the path to the future.

-- Jack Krupansky

Simple solution to the mortgage crisis

All manner of "fixes" have been proposed and will continue to be proposed to "fix" the housing/mortgage crisis, but none have so fare managed to gain traction. I have a simple proposal which I call the Mortgage Resolution Corporation (MRC), a government-sponsored entity (yeah, I know...), whose primary function is simply to make mortgage payments whenever the consumer fails to do so.

The bank or other mortgage servicing entity would simply electronically "debit" an account for the consumer at the MRC for the principal and interest.

In exchange, the MRC incrementally assumes a partial ownership of the mortgaged property, ahead of the consumer, and possibly ahead of the bank or mortgage servicer for the amount of principle paid down.

The MRC would maintain a debit account for the amount of mortgage payments paid so that if and when the underlying property is sold, the consumer would receive a capital gain only to the extent that they have paid down their MRC debit account. This would provide an incentive for consumers to eventually catch up on their payments and not get too much of a free ride.

The MRC would be like the old toxic waste dump "Superfund" program in that its first job is to keep payments flowing and keep people in their houses, but to also attempt to recoup costs whenever legally possible.

Initially, the U.S. government would fund the MRC, but after it has been in operation for a few years, it would be expected that the private sector would buy into the MRC and supply private capital to run the program with explicit government backing of the mortgages.

This plan would:

1. Eliminate foreclosures.
2. Keep mortgage payments flowing to banks, servicers, and investors.
3. Keep people in their houses even when they lose employment or have expensive health problems.
4. Earn the taxpayers a healthy return over a 5-10 year period as the housing market eventually bounces back.
5. Earn homeowners a profit to the extent they maintain the property for 5-10 years and eventually catch up on all mortgage payments.

Do you have a better idea??

-- Jack Krupansky

Stimulus II

Now that the stimulus bill is virtually a done deal, it is time to start thinking about what the next phase of stimulus should look like. The current stimulus package will have some positive effect on the ecnomy, but there is still a lot more painful restructuring of businesses needed that will leave millions more people out on the street in the coming months. Another 700,000 workers filed for unemployment insurance in the past week alone. The number of ex-workers on unemployment insurance is approaching 6 million. And there is no end in sight. Sure, there will be some firms that will begin rehiring over the next couple of months as some of the stimulus kicks in, but many firms will still be faced with declining revenues over those same months.

The current stimulus package is a decent stopgap measure, but it is still only a partial solution. Even if it creates several million jobs over the next two years, there will continue to be millions of people with no significant income and many millions of those who still have jobs who become more frugal, further savaging consumer spending.

By June, a lot of the reality of the current stimulus and ongoing restructuring of the economy will be somewhat more obvious, so that July might be an excellent timeframe for considering Phase II of stimulus.

My current thinking is that a "Stimulus II" package should include:

1. Direct stimulus to consumers, on the order of $50 to $100 billion per month "until further notice". Sure, some people will save much of this, but that will help to shore up consumer balance sheets, which is a necessary component of getting the economy on a sounder footing. Besides, there are so many millions of people out of work for whom "saving" is not an option. This spending would phase out as real consumer income gradually and eventually improves.
2. Increased government business investment spending on the order of $50 to $100 billion per month to spur demand for the goods and services of businesses. Businesses need to see higher demand and actual revenues before they start hiring in earnest. The simple reality is that we need a somewhat bigger government component in the economy to protect people from serious economic episodes such as this one. There is plenty of room for expansion of government services - paid for by the government, but provided by the private sector.
3. Provide government funding to venture capital firms which are experiencing extreme difficulty raising funds from traditional sources (big banks, pension funds, and insurance companies) due to the credit crunch and skrinkage of the economy, on the order of $2 to $3 billion per month.

That would be a start. I am sure that even more is needed. But, maybe not a lot more. Basically, we need to keep stimulating until unemployment is low again, and then gradually withdraw stimulus as the private sector picks up the slack.

The key is that unless there is sustained stimulus, we risk facing a "1937" problem, where the U.S. actually began recovering from 1934 to 1937, but then ran out of steam and declined again and languished until another form of stimulus appeared (World War II.)

-- Jack Krupansky

Senate stimulus bill ready for final vote tomorrow

The Senate version of the stimulus bill cleared its main hurdle a few minutes ago with 61 senators voting for the compromise deal amendment. This means that the Senate can hold the final vote on its bill tomorrow. Then the House and Senate bills move on to a conference committee where the real horsetrading begins. Once the conference committee issues its final "report" for the bill, the House and Senate each hold one final vote to approve the final conference bill that will be sent to President Obama for his signature.

It is unclear at this time what House items might be added back or what Senate items might be removed. That will be a matter for the House and Senate leaders to negotiate, not to mention the three Republican senators whose votes are needed to pass the final bill in the Senate.

The bill remains a cross between an over-decorated Christmas tree and an over-stuffed sausage, but that is about how it started out in the House anyway. The final trimming and stuffing will not occur until Wednesday and Thurdsday when the House and Senate bills are reconciled by the conference committee.

-- Jack Krupansky

John Taylor: How Government Created the Financial Crisis

Monetary policy expert John Taylor has an excellent opinion piece in The Wall Street Journal entitled "How Government Created the Financial Crisis- Research shows the failure to rescue Lehman did not trigger the fall panic" that succinctly argues that it was a string of monetary policy errors and misguided interventions on the part of the Federal Reserve and Treasury that created and prolonged the financial crisis. Technically, he is absolutely correct, but unfortunately monetary policy has more than a little domestic politics guiding it that precludes a strict and correct monetary policy. Could we have done better? Yes, but we could have done a lot worse as well.

-- Jack Krupansky

Is bipartisan politics DOA in Obama's "new" Washington?

Barack Obama was chosen by Americans to be their next president based on an apparently sincere desire to bring "change" to Washington. He claimed that he was going to eliminate the "same old games." He claimed that he would reach across the aisle in a truly bipartisan spirit. He claimed to be devoutly anti-lobbyist. I do believe that he is sincere in these commitments, but some of them will simply take time and never should have been considered as "Day One" slam-dunks.

The case in front of us is the fiscal stimulus bill currently soldiering down the partisan political gauntlet known as Congress. As traditional Washington legislation goes, this bill is actually doing quite well, but as a centerpiece of the "new politics" bipartisan spirit that Candidate Obama seemed to be espousing, it is essentially DOA (dead on arrival.) Its one success is that it does not have any true "earmarks", but it is chock full of pet hobbyhorses of innumerous subgroups of congressional factions of every stripe and flavor.

One other semi-success is that the original "plan" from the White House economic team did have one bipartisan twist, namely a significant dose of tax cuts and breaks that were clearly designed to appeal to Republicans. That was a wise choice, but President Obama is essentially credited with no points for that wisdom since liberal Democrats hate it and Republicans were denied the right to a "pride of authorship" participation in the drafting of the plan.

The net result is that just about everybody hates the bill for some reason or another. Maybe that is why it will pass: each faction knows that no other faction got what it really wanted. There is an old saying that the only truly successful and lasting settlement is one in which each party to the negotiation gives up something very dear to them.

That is essentially the proposition before us: Do we "blame" President Obama for this ugly duckling of a bill, or do we praise him for setting idealism and ideology aside and being so pragmatic as our Community-Organizer-in-Chief?

Us centrists and pragmatists will praise him, but the idealists (progressives) and ideologues (conservative Republicans) will vilify him.

Essentially this comes down to an all-out battle (war?) between those who believe that compromise (bipartisanship) is a force of good and those for whom it represents pure evil.

This is not the end of bipartisanship, but it will be a long war as the right wing conservatives seek to protect their dwindling legacy and the left wing progressives seek to recover that which they believe was stolen from them and otherwise denigrated in past years (vengeance?).

-- Jack Krupansky

Compromise amendment for stimulus bill still not quite ready, but coming soon

Senate Majority Leader Harry Reid just explained that staff has been drafting the 800-page compromise amendment non-stop since the 5 PM deal yesterday and it is expected to be ready to be formally submitted within a few minutes. There would be a procedural vote late Monday afternoon and then the big Senate vote on the entire bill could occur on Tuesday.

-- Jack Krupansky

Stimulus bill nearing end of its sojourn through the Senate

There does appear to be a compromise deal in place for the stimulus bill in the Senate, but the overall status is a bit murky. Even after the deal was announced, debate on amendments continued. The Senate meets at noon today to continue the debate even after the so-called deal. Most importantly, there has not yet been a vote on the deal and it is not clear when the vote will occur. Maybe Sunday, maybe Tuesday, or so I have read. Or, maybe it could happen today. In truth, it is not clear what exactly is holding up a deal to schedule the vote. Maybe the so-called deal also involves permitting at least the show of attempting a bunch more amendments. Or, maybe people are waiting to hear whether the president is really willing to accept only 60 votes or whether he will be willing to offer some additional compromise to get closer to 70 votes. In any case, the joint House and Senate conference committee will be deep into blending their two bills by Tuesday or Wednesday.

In short, good progress is being made.

-- Jack Krupansky

Stimulus bill continues to progress through the Senate

The stimulus bill continues to make good progress in the Senate. In fact, after they vote on the latest batch of ammendments and then have their final debate (maybe an hour on each side) we could see the final vote this evening, maybe in about three hours or so. This is actually great progress. Still, the close vote and last-minute arm-twisting could delay the proceedings into the weekend.

Sure, the bill remains a cross between an over-decorated Christmas tree and an over-stuffed sausage, but that is about how it started out in the House anyway. The final trimming and stuffing will not occur until next week when the House and Senate bills are reconciled by the conference committee.

The big question is whether this bill will actually be enough to stop the job losses and get the economy going again. The simple truth is that this is just the first step. Treasury will be outlining their financial plan next week. We will have a better view in three to four months after the stimulus package and new Treasury plan have had time to work through the economy. Then, adjustments can and will be made to both plans, either to accelerate them, or to pull them back a bit if the economy gains more traction than expected.

No matter what, job losses will probably continue for at least the next three to five months. Even if the economy does gain traction soon, it will be at a moderately lower level of economic activity and financial leverage that simply does not justify or support the current levels of business employment. Only later in the year and next year will some of the "green job" and other forms of investment begin to boost the needs for jobs for the future.

-- Jack Krupansky

Stimulus bill progressing through the Senate

The stimulus bill is making good progress in the Senate. The Republicans are being given plenty of room to propose amendments, even if most of them are being voted down. Despite the chatter and headlines in the media, the debate in the Senate is quite civil. The ammendment process might even finish up this evening. The final vote is likely to occur tomorrow (Friday.)

The big question is whether President Obama is willing to let the ammended bill go forward as is with a bare 60 (plus or minus) votes in the Senate, or whether he will go along with some changes to make enough moderate Republicans happy to get a more bipartisan mix in the final vote.

Rather than further ammend the Senate bill, President Obama and congressional leaders could simply agree in advance to make a further collection of bipartisan changes when the bill goes to the conference committee. That might encourage more Republican support in the final Senate vote on th bill as is.

In any case, the bill is making great progress.

Sure, the bill is quite the cross between an over-decorated Christmas tree and an over-stuffed sausage, but that is to be expected.

-- Jack Krupansky

Howard Dean for Health!

I was never thrilled with Daschle for Health. That always seemed like a political payoff for Daschle's support during the primary. His tax problems were merely the straw that broke the camel's back. I was also concerned abot his connections to the health industry. But, I am very excited by the prospect of Howard Dean for the position. He does not have the Senate background, but his experience as a Governor and a doctor and a former presidential candidate make him a wise choice.

My only concerns are whether he and Obama have the right chemistry and whether Obama will agree to step back and let Howard run the health reform show. Oh, and Obama needs to promise to keep Joe on a short leash (muzzled!) so that Howard really will be leading the health charge.

Go Howard!

-- Jack Krupansky

On to the next phase of the stimulus bill negotiation in the Senate

Despite the ominous media chatter and headlines, the stimulus package is right on course and schedule. We have now moved on to the phase where all of the big Washington animals loudly stomp their feet and trumpet and bellow and do all the other noxious things that big animals do to stake out their turf and draw their lines, and even loudly pronounce that they will not compromise on their core values (whatever they might be.) This will go on for a while, causing mere mortals to quiver in fear that the end of the world is near. Then, eventually, a few meetings will be held, a compromise will be announced, changes made, and the new bill will then proceed to a vote in the Senate, maybe even by the end of the week, or early next week. All it will take is to trim out some of the House's non-stimulus spending and adding a few tax cut proposals, and some "secret" promises of unspecified actions in future legislation or Treasury bailout efforts.

-- Jack Krupansky

Rather quiet in Iraq

It is rather amazing that Iraq is as calm as it is, almost a relative sense of normalcy. Even before President Obama has gotten a chance to lift a finger, Iraq is suddenly no longer a top news issue. Sure, we still have many thousands of troops there, but there seems to be a sense that a gradual drawdown will actually be feasible without any dramatic efforts from our new commander in chief. The biggest issue may simple be how to actually base and structure the more limited numbers of troops that will remain after we have officially "withdrawn" 16 or 18 months from now.

-- Jack Krupansky

Task force to study how to rejuvenate the middle class

Almost 18 months ago I wrote a post on the need to rejuvenate the dying middle class in America, so I am glad to see that somebody in Washington has woken up to that reality as President Obama and VP Biden have announced the formation of a task force to study and hopefully "fix" the middle class - the White House Task Force on Middle Class Working Families. Whether their efforts will go anywhere is another matter, but at least they are taking a step in the right direction. Limited details about the task force are available. The short summary:

The Task Force is a major initiative targeted at raising the living standards of middle-class, working families in America. It is comprised of top-level administration policy makers, and in addition to regular meetings, it will conduct outreach sessions with representatives of labor, business, and the advocacy communities. The Task Force will be chaired by Vice President Joe Biden. The Vice President and members of the task force will work with a wide array of federal agencies that have responsibility for key issues facing the middle class and expedite administrative reforms, propose Executive orders, and develop legislative and policy proposals that can be of special importance to working families.

Goals include:

• Expanding education and lifelong training opportunities
• Improving work and family balance
• Restoring labor standards, including workplace safety
• Helping to protect middle-class and working-family incomes
• Protecting retirement security

-- Jack Krupansky

What do the Republicans want from the stimulus package?

Sure, the Republicans are raising a big stink about the stimulus plan, but in the end it may not take too much to get a bunch of moderate Republicans to go along in the Senate. From a Reuters article by Richard Cowan entitled "Obama and Congress seek deal on economic stimulus":

McConnell said a main goal for the Senate Republicans will be to increase the amount of tax cuts in the package so they amount to 40 percent of the overall measure, with the rest in emergency spending.

The House-passed bill is closer to 33 percent being devoted to tax cuts -- not hugely different from McConnell's goal.

Give them another $10 billion or so in tax cuts and a number of moderate Republicans will go along with the deal.

I am sure the Republicans want a bunch of other goodies and to strip out some of the Democratic goodies, but the big deal is to assure that the moderate Republicans get enough tax cuts in the bill. Sure, that will make the bill bigger, but in this environment that is not a problem.

President Obama still has a good shot at getting his 80 votes in the Senate, but that is no slam-dunk. Still, 70 to 75 votes could easily be within reach and give the Senate version of the bill at least a somewhat bi-partisan flavor.

-- Jack Krupansky

Al Gore's Senate climate crisis testimony

The U.S. Senate Foreign Relations Committee has posted the testimony (prepared statement) of former Vice President Al Gore at a hearing on climate change entitled "Addressing Global Climate Change: The Road to Copenhagen." There was a lot of Q&A and discussion (and pictures) that followed that is not in the prepared statement. Ranking Member Senator Lugar presented a prepared opening statement, but committee Chairman Kerry did not have a prepared opening statement.

I have not read through all of this in detail yet, but there does not appear to be much of anything new, but simply people saying we need to get back on the pre-Bush track and pick up the pace and show some true global leadership.

-- Jack Krupansky

Major milestone for stimulus bill

Although the final stimulus package will inevitably be somewhat different from the bill just passed by the House, the vote was still a major milestone. It would have been nice to have them vote on something much closer to the final bill, but this is the way things are typically done in Washington, despite President Obama's call for "change." The Democrats got to vote for their vision of the package and the Republicans got to vote against it.

The Senate bill, still not in its final form, will likely be larger than the House bill and garner at least a modest level of bipartisan support. It sounds as if the Senate will vote next week.

Then, we will have two very versions of the same basic bill. A conference committee will be appointed, back-room negotiations will occur, and deals and changes will be made, enough to get some semblance of bipartisan support in the conference committee. The final bill could have major differences. It may seem odd that the conference committee can essentially rewrite the entire bill to its liking, but that is the way the process works. The actual conference committee members are carefully chosen by the congressional leadship of each party, so the members can be expected to deliver whatever the leadersip negotiates. Overall, the final bill will likely follow the rough contours of the original proposal(s), not identical, but close enough that the average American might not notice the differences, other than a significantly higher price tag.

Then, that final bill will go to the President to sign.

Despite a lot of negative media headlines, the process is actually going amazingly well and on a great schedule. There should not be any major obstacles to getting the bill passed before the end of the second week of February.

Then, the really big debate begins: how soon will money actually flow into the economy and actually show up in the economic reports.

A somewhat longer debate will be how soon we will actually see jobs created, and then how soon the net created jobs begin to exceed losses.

-- Jack Krupansky

Are we really sending hundreds of billions of dollars a year for foreign oil to the most dangerous and unstable regions of the world?

Former Vice President Al Gore continues to misrepresent the amount of money the U.S. spends on crude oil imports from "the most dangerous and unstable regions of the world". According to ABC News, today he said:

As long as we continue to send hundreds of billions of dollars for foreign oil -- year after year -- to the most dangerous and unstable regions of the world, our national security will continue to be at risk.

Hundreds of billions? Really? I would like to see his math!

According to the Department of Energy Energy Information Administration, in November of 2008 the U.S. imported 9.817 million barrels of oil per day from all countries. That included 2.028 million barrels per day from Canada, our largest source of imported oil, 1.461 million barrels per day from Saudi Arabia, our second largest source, and 1.296 million barrels per day from Mexico, our third largest source. The U.S. itself produced 5.064 million barrels per day in 2007.

Excluding Canada, Mexico, Brazil, and the UK, countries which any sane person would not consider "dangerous and unstable regions of the world", our crude imports were 6.096 million barrels per day in November.

That works out to 2.225 billion barrels of crude oil imported each year from "the most dangerous and unstable regions of the world", including Saudi Arabia, Venezuela, Russia, Nigeria, Iraq, Angola, Columbia, etc.

At $100 a barrel, that would work out to $222.5 billion, technically "hundreds" of billions, but at $50 a barrel those "dangerous" imports work out to $111.3 billion, hardly "hundreds of billions." Even at $75 a barrel, it only costs $166.9 billion, still not in the "hundreds of billions." At $60 per barrel, the cost would be $133.5 billion.

Sure, if you forecast oil up at $200 per barrel, then the cost would go up to $445 billion, but we are not dealing with $200 oil at this time.

There, that's my math. Now, if only we could get the former Vice President (and Nobel Laureate) to start being a little more honest and transparent. I am not holding my breath.

-- Jack Krupansky

Senate Finance Committee work on stimulus bill

As promised, the Senate Finance Committee has released its preliminary proposal for its portion of the fiscal stimulus package. Frankly, it is not easy reading, but here it is, split into four documents:

1. Original Chairman's Mark of Senate Finance Committee Tax Provisions for the American Recovery and Reinvestment Act of 2009, Title I (Tax Relief, Trade Adjustment Assistance, and Other Provisions)
2. Original Chairman's Mark of Additional Senate Finance Committee Provisions for the American Recovery and Investment Act of 2009, Titles II – V (Unemployment Insurance, Health, and Other Provisions)
3. Joint Committee on Taxation Analysis of Senate Finance Tax Provisions for the American Recovery and Reinvestment Act of 2009
4. Finance Committee Staff Summary of Senate Finance Tax Provisions for the American Recovery and Reinvestment Act of 2009

That last document is the closest to being readable, it is titled "Tax Relief Included in 'The American Recovery and Reinvestment Plan." The first document goes into the gory details.

Note that even these documents are not the actual bill, but semi-readable summary documents for people to review and the guidance for staff to go forward. The actual bill will be presented for "markup" on Tuesday, January 27, 2009.

Note that the almost-official name of the bill is "American Recovery and Reinvestment Tax Act of 2009." The initials are A-R-R-T-A. I guess we can start calling it "arta."

Oh no... I just noticed... the name used in that fourth document, admittedly a less formal document, is "The American Recovery and Reinvestment Plan", the initials being T-A-R-R-P, awfully close to the much-maligned TARP plan. Maybe somebody's idea of a joke. Sigh. But, that is not the official name, yet.

When Congress gets done with this thing it is going to look like a cross between a Christmas tree and a sausage. Got that visual image? Something for everybody, something for everybody to hate, and what comes out will not look like anything that went in. But, the truth is that this bill has only one real purpose: to spend a lot of money as quickly as possible and as widely in the economy as possible.

-- Jack Krupansky

Obama and Pelosi and the stimulus bill game

President Obama is patiently biding his time waiting for House Speaker Pelosi and her compatriots to finish playing their partisan games with their partisan Democrat stimulus bill. Sure, they can probably pass a partisan Democrat stimulus bill in the House, but since it won't pass muster in the Senate, so what is the point. Somehow, they will manage to score some "political points" and can say "See, look, we tried and look what the mean-spirited Republicans did!" Barack knows that the current House stimulus bill is a goner, but he is smart enough to know that his best strategy is to go ahead and let the House Democrats "score" their political points and then he can do his community organizing thing and sit down with the Republicans to find out what they need to give him something close to the 80 votes he wants in the Senate.

Barack is supposed to sit down in a bipartisan meeting of congressional leaders today, but that will still be mostly for "show" since the House Democrats are truly hell-bent on passing a partisan Democrat stimulus bill even if it is headed nowhere. Sure, Barack will make a semi-serious attempt to jawbone House Democrats into being less partisan, but this early in his administration he simply has not earned his spurs to be doing any heavy arm-twisting. Besides, he really does want to go the community organizing route, which means that you simply keep meeting with the parties around the table until they are too worn down to object to settling for a common-ground proposal.

Meanwhile, Senate Democrats are at work developing less-partisan legislation, which will probably be much closer to the eventual stimulus package.

The stimulus effort is actually making great progress. There is still a full week left in January. The main thing holding up true progress is the House Democratic insistence on pursuing a partisan House-only bill before getting down to pursuing a wide-majority bi-partisan bill.

The House is far more rambunctious than the sedate Senate, so Pelosi does have to give House Democrats a lot of leeway before trying to rein them in. She may in fact privately concur that a much more bi-partisan approach is needed, but she probably also believes that she needs to "put up a good fight" in order to stay king/queen of the hill in the House.

-- Jack Krupansky

New WhiteHouse.gov -- massive blunder, broken links

On its surface, the new WhiteHouse.gov, especially with a blog, is a great idea. Unfortunately, the implementation has scored a major blunder: all links to historical, archival content on the "old" White House web site from blogs and other web sites are now hopelessly broken!! Oops.

What they really need is to restore the old web site to a shadow "archive" location and then have a piece of proxy software that redirects valid old archival links to the shadow "archive" location.

The same goes for archival content for speeches of political appointees at the Department of State, for example.

I find this "purge" to be rather offensive, and wholly unnecessary. It is an example of partisan political chicanery at its worst.

-- Jack Krupansky

What is this "new era of responsibility" all about?

Although Barack Obama's whole campaign was centered on "change", his inaugural address referred to a "new era of responsibility":

What is required of us now is a new era of responsibility - a recognition, on the part of every American, that we have duties to ourselves, our nation, and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task.

So, what is different from before the address was given? What new responsibilities do we have?

Or was this simply a dig at the Bush administration, suggesting that their "values" were off-key in some ways?

The full paragraph does not provide much more context for this "new era":

Our challenges may be new. The instruments with which we meet them may be new. But those values upon which our success depends - hard work and honesty, courage and fair play, tolerance and curiosity, loyalty and patriotism - these things are old. These things are true. They have been the quiet force of progress throughout our history. What is demanded then is a return to these truths. What is required of us now is a new era of responsibility - a recognition, on the part of every American, that we have duties to ourselves, our nation, and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task.

This is the price and the promise of citizenship.

This is the source of our confidence - the knowledge that God calls on us to shape an uncertain destiny.

This is the meaning of our liberty and our creed - why men and women and children of every race and every faith can join in celebration across this magnificent mall, and why a man whose father less than sixty years ago might not have been served at a local restaurant can now stand before you to take a most sacred oath.

It is also not clear whether his focus is on the responsibilities of the government or businesses or the responsibilities of individual citizens or all of the above. I certainly hope that he was not trying to suggest that only citizens shoulder full responsibility and that somehow politicians and business leaders and managers are supposed to get some kind of free pass from responsibility for their decisions and actions.

Maybe, when he refers to "a recognition, on the part of every American, that we have duties" he is in fact attempting to remind politicians and business leaders and managers that they individually have responsibilities to the people, society, and the world as well as to their bosses, boards of directors, and shareholders. Maybe, but his tortured prose, as eloquent as it is, is far from clear.

In the preceding passage of the address he said that "For as much as government can do and must do, it is ultimately the faith and determination of the American people upon which this nation relies." That seems to refer to the people as individuals, but still fails to make clear whether he is or is not saying that it is our leaders, politicians and business executives, who have the bulk of the "responsibility" for the high-level decisions and direction of the nation as a whole, are going to be held more accountable. The American "people" did not decide to invade Iraq. The American "people" are not deciding that President Obama should send more troops to Afghanistan. Where exactly is the responsibility?

He also mentioned above "This is the price ... of citizenship", but he did not elaborate on that in a clear and unambiguous manner. Yes, we as individual citizens do have responsibilities [speed limits, taxes, jury duty - yay!!], but what differences is he suggesting for this "new era"?

Who knows, maybe this was all just a teaser, a hint of a specific speech to come. Or, maybe he is simply saying that his administration and Congress must now be seen as being more "responsible" than the Bush administration and earlier Congresses.

The only other reference to "responsibility" in the entire address was an early reference to its negative, "irresponsibility", as in "Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some." Sure, we want bankers and regulators to be more "responsible", but is he suggesting a level of responsibility as it was eight years ago, or something different?

I believe that there is a role for individual responsibility, but that is a level of responsibility that is outside the review and control of the government. Rather, our politicians and business leaders need to take on an entirely new view of their responsibilities to "us."

In short, I am not sure what President Obama was really asking for or from any of us on this issue of a "new era of responsibility."

Maybe it was some kind of insider "progressive" code language that I am not aware of.

We will have to see how it unfolds, or maybe it was simply a little too much over-the-top eloquence on the part of the new Orator-in-Chief.

-- Jack Krupansky

Is Hamas really a terrorist group?

From an article in The New York Times by Ethan Bronner entitled "Parsing Gains of Gaza War" :

Shlomo Brom, a researcher at the Institute for National Security Studies at Tel Aviv University and a retired brigadier general, said it was wrong to consider Hamas a group of irrational fanatics.

"I have always said that Hamas is a very rational political movement," he said. "When they use suicide bombings, for example, it is done very consciously, based on calculations of the effectiveness of these means. You see, both sides understand the value of calculated madness. That is one reason I don't see an early end to this ongoing war."

Continuing to label ("designate") Hamas and Hezbollah (Hizballah) as "terrorist groups" or "terrorist organizations" will continue to be counterproductive. They are certainly paramilitary organizations, but are political organizations as well.

How to effectively deal with such "extremists" is an open question, but a policy of extermination has not been very effective to date, as the Israelis with all of their military might have proven.

-- Jack Krupansky

Should there be an inquest into crimes and abuses commited by the Bush administration?

New York Times op-ed columnist Paul Krugman asks:

Why, then, shouldn't we have an official inquiry into abuses during the Bush years?

I would answer than Congress has had ample opportunity to review and question just about every decision made by the Bush administration over the past eight years. That should be enough.

Congress could have impeached President Bush if it felt so strongly that "crimes" had been committed. For whatever reasons, Congress chose not to do so. That should be enough.

Barack Obama could have decided that such an inquest was a priority for himself, his administration, and the American people, but he has decided that it is not a top priority at this time. That should be enough.

Oddly, for all of their support for Barack Obama in the presidential campaign, Krugman and the other so-called progressives have decided that they know better than Barack Obama how a Barack Obama presidency should set its priorities. These people think of themselves as being above the president. They indeed look down on the president. They in fact look at Barack Obama as if he were a mere puppet to do their bidding, the way the Neo-conservatives looked at President Bush.

Myself, I have faith that Barack Obama will do the right thing.

Who knows, maybe Barack Obama or even Congress will decide to investigate Bush-era policies. If so, so be it, but it is not up to Paul Krugman or the rest of The Progressives to demand that the president or Congress take actions that may not necessarily be in the best interest of all Americans, which is the criteria that an Obama Administration should be using.

-- Jack Krupansky

Summary of House $825 billion stimulus bill now available

Finally, after all the chatter and rumors, a summary of the big fiscal stimulus bill is available, at least the House version. Released by the House Appropriations Committee, the summary calls the bill the American Recovery and Reinvestment Bill of 2009, and it totals $825 billion in stimulus. The summary tells us that:

In the next two weeks, the Congress will be considering the American Recovery and Reinvestment Bill of 2009. This package is the first crucial step in a concerted effort to create and save 3 to 4 million jobs, jumpstart our economy, and begin the process of transforming it for the 21st century with $275 billion in economic recovery tax cuts and $550 billion in thoughtful and carefully targeted priority investments with unprecedented accountability measures built in.

The package contains targeted efforts in:

• Clean, Efficient, American Energy
• Transforming our Economy with Science and Technology
• Modernizing Roads, Bridges, Transit and Waterways
• Education for the 21st Century
• Tax Cuts to Make Work Pay and Create Jobs
• Lowering Healthcare Costs
• Helping Workers Hurt by the Economy
• Saving Public Sector Jobs and Protect Vital Services

The summary does detail each of those areas at least to the bullet-point level, but trying to make sense of that level of budgetary detail is difficult unless you are a budget analyst.

I do appreciate the first phrase quoted above, "In the next two weeks, the Congress will be considering", which makes it sounds as if they are serious about trying to pass a bill by the end of the month. Or, maybe that is just for the House version and then there would be two weeks to recouncile the House and Senate bills and the will of the Obama team. We will see.

Note, this is not the actuall bill, but simply a summary of the main points. The summary provides something to talk about and feed into negotiations. It may get revised further before committee staff goes off to draft the actual bill.

It is unclear whether a core collection of Republican moderates are already onboard for the points contained in the summary, or whether this is their first viewing and maybe significant negotiations may be needed to finalize details sufficient for a bill that could pass the House and have a chance of being acceptable by moderate senators.

In any case, this is a good start and shows that great progress is being made.

-- Jack Krupansky

Oh no... Unconfirmed Sources report that zero shortage threatens Obama stimulus plan

Just when I though Obama was in for some smooth sailing, now I read that Unconfirmed Sources are saying that "Zero Shortage Threatens Obama Stimulus Plan." The report states that:

Unconfirmed sources are reporting that a shortage of zeros, is threatening to derail the Obama transition team's stimulus plans. The impending shortage of the "0" digit was discovered yesterday as copies of the proposed plan were being printed to distribute to members of congress. All federal agencies are being tasked to help conserve zeros until the crisis is over.

The report elaborates that:

"I was watching the print outs come off the machine when I noticed that some of the budget numbers looked too small." Says Stacey Goodman, of the Obama transition team. "I noticed that some of the zero's were missing. I then went to refill the zeros in the printer and found out the whole office was out. I then called around and discovered that everybody was running low on zeros."

Further noting that:

It seems that the massive size of all the numbers flying around Washington are putting a strain on the nation's zero supply. A quick informal survey of zero suppliers finds that, industry wide, zero's are being used faster than they can be made.

The report provides some background on the source of the problem:

"I've never seen anything like it." Says Ken Burton of Burton Digital Digits Manufacturing Co. "We are normally able to keep up with the demand for all numerals and letters, but the size of the numbers being used today has caught all of us suppliers off guard. We are trying to ramp up production of zeros, but these things take time. It could be weeks before we can meet the new demand."

The report concludes by passing on a caution from the government:

In the mean time government officials and suppliers are recommending that people try to use other digits to conserve the number of zero's available.

There was no mention as to whether existing zeros can be recycled.

As to their recommendation that other digits be used, they neglected to recommend any rationing plan for different digits since an obvious switch to the "1" digit would simply result in another shortage of a critical digit. Possibly each organization should consider using the last digit of their local zip code so that we get a more uniform use of digits to avoid future shortages.

Or, maybe it is time to expand from ten digits to twenty or even one hundred. That could shorten the lengths of these big numbers and possibly save paper. Besides "million" is a lot less scary than "trillion." How many people even know what a trillion is?!?!?!! Quick: How many zeros do you need for a trillion?

Hmmm... I did check the date and it is not April 1, so this report is probably not a joke, but it could be a hoax or a scam of some sort. Who knows...

Hey, you have to admit that this "hoax" is more realistic than a lot of the media coverage for the Obama stimulus plan.

What's next, a shortage of waterdoodles and labra hounds?

-- Jack Krupansky

Labradoodles, water hounds, and fiscal stimulus

While the American people are anxiously awaiting the passage of a massive fiscal stimulus bill, media coverage tells us precisely where the priorities of the media are: focusing on labradoodles and water hounds. And when they get bored, taking a cheap shot at Obama's efforts to pass a stimulus bill is a second-best choice. When it comes to priorities, the media all too often focuses on fun and games rather than on truth and enlightenment.

Fine, let the media focus on labradoodles and water hounds. Meanwhile, the Obama economic team is working to coordinate a fiscal stimulus package that can gain congressional support in the near future.

They seem right on track. The Obama team, that is. Not the media, unless your real interest is labradoodles and water hounds.

-- Jack Krupansky

Despite the criticisms and "rifts", Obama stimulus bill amazingly on schedule

Barack Obama is actually committed to an open and constructive dialog with Congress, including the Republicans. It is only natural that such an open dialog would lead to criticisms and even disputes, and that the media will gleefully label even the most minor of molehills with such impressive terms as "rifts." The goal of the stimulus bill was never to be something crafted only by the White House and shoved down the throats of members of Congress. Maybe the perception problem is that the media acted during the campaign as if Barack was being elected as a god ("The One") and is now acting confused when he insists on practicing his consummate community organizing skills in Washington. Barack is right on track. The media is behind the curve, obsessing on its own misguided narratives. Meanwhile, Barack and his economic team have presented Congress with a credible starting point, met with the various constituencies in Congress, gotten plenty of frank and constructive feedback, and is already at work modifying their proposal. And all of this is in a single week and Barack is not even in charge yet. That is amazing progress, but you would not know it from the media coverage.

Seeing where the discussions were at the end of this week, it is still very possible that a completed bill could be passed and signed by the end of the month.

Barack and his team and Congress still have all of next week, parts of inauguration week, and the entire following week to pull it all together. That is a dog's age in Barack Obama community organizing time. The media refuses to acknowledge that reality, but they may begin to catch on in a few weeks.

This is by all means a real test of Barack's abilities and organizing skills, but I strongly suspect that he really is up to the challenge.

-- Jack Krupansky

What concessions will Barack Obama make to the Republicans to get a timely stimulus bill passed by a wide margin?

Although there has been talk of the big stimulus bill being delayed until the middle of February, I think this is simply the "same old games of Washington" mentality trying to take root again, and premised on the Democrats proposing an unacceptable bill that passes the House and then fails in the Senate and then gets renegotiated to be what it should have been in the first place. But, in meetings on Monday, Barack apparently indicated that he wanted a bill sooner than what people were talking about. There was also talk that he is determined to get 80 votes in the Senate. That makes a lot of sense to me, but suggests that major concessions will be needed. The ultimate question is what concessions Barack Obama will be willing to make to the Republicans in the Senate in order to assure that the bill gets passed, gets passed with a fairly wide margin of moderate Republicans, does not get blocked by angry right-wing Republicans, and gets passed ASAP, within a few days of the innauguration.

The precise list of concessions is not as important as the question of process. Barack is a strong enough community organizer to be able to deeply comprehend the extent to which he will need to make moderate Republicans relatively comfortable with any stimulus plan, as well as to assure that no right-wing Republicans feel offended enough to block the bill with parliamentary maneuvers. I am 100% confident that Barack knows this "game" well and will play it well, despite opposition to compromise that will come from his Progressive supporters.

I look forward to Barack signing a solid stimulus bill before the first of February.

-- Jack Krupansky

Does Pelosi get the message about working with the Republicans?

In his weekly address, Barack Obama talks in vague terms that "the problems we face today are not Democratic problems or Republican problems... These are America's problems, and we must come together as Americans to meet them with the urgency this moment demands." and that "we need an American Recovery and Reinvestment Plan." I am sure that Barack fully understands that he needs more than a couple of Republicans onboard if he wants a plan that is as grandiose as he envisions and as quickly as he correctly deems it necessary, but I have seen no evidence that Pelosi and her fellow Democratic hench-persons in both houses of Congress are in fact ready if not enthusiastic about accommodating the alternative views of a moderate number of moderate Republicans. From news reports, it does sound as if Barack's stimulus (or "recovery and reinvestment") team has been instructed to incorporate items from an earlier House stimulus bill, but that is surely a recipe for arriving at a standoff with most Republicans in the Senate. I suspect that Barack knows that this will be the result in the very near term (this week) and that he has "calculated" that he needs to allow that result to show that he is nominally on the side of the Progressive wing of the Democratic party. Once that standoff is reached, Barack can then turn to Pelosi, et al and wait for them to finally admit that they will have to make some concessions in order to get their bill passed. Barack will not have to say anything. The Democrats already know that concessions are needed, but they need to play to The Progressives and pretend that the Democrats "control" Congress. This is the way "The Game" is played in Washington. Sure, Barack said he wanted to stop playing "the same old games of Washington", but he wants fast, substantial results, so that's what is required.

So, the question is what Progressive elements of the current, unseen American Recovery and Reinvestment Plan will need to be ditched and what minimal collection of Republican stimulus policies need to be added to get at least a dozen moderate Republicans to vote for the bill and to not have it be so toxic to the remaining right-wing Republicans that they engage in parliamentary stalling tactics.

Barack said:

I look forward to meeting next week in Washington with leaders from both parties to discuss this plan.  I am optimistic that if we come together to seek solutions that advance not the interests of any party, or the agenda of any one group, but the aspirations of all Americans...

The first part about "discuss this plan" suggests that his initial proposal is somehow already cut into stone and he will be like Moses presenting the Ten Commandments, but then he goes on to say "seek solutions that advance not the interests of any party, or the agenda of any one group", suggesting that significant changes would be permitted, even bi-partisan changes that are not strictly supported by only the Democrats. These are conflicting messages, but I suspect that is intentional on his part.

What Barack is really saying is that his initial proposal incorporates most if not all of the Progressive economic agenda, which should convince The Progressives that he is nominally on their side, but that he fully recognizes that compromise with moderate Republicans will be required and essential and in fact a good thing.

To be fair, Pelosi may in fact agree with this approach 100%, but for political reasons cannot and must not challenge The Progressives and admit that compromise will be even considered.

So, this necessary Democratic pandering to The Progressives means that an economic stimulus plan needs to be rolled out in this multi-step fashion, with step one being intentionally crippled to pander to The Progressives, step two being moderate Republicans shaking their heads "No", step three being Barack meeting with all of the "injured" parties, step four being Pelosi acknowledging that the Senate does not have the votes, step five being modifications to make the plan bi-partisan, and finally passable by the Senate.

-- Jack Krupansky

Is Iran an Arab country?

Despite what many people may think, Iran is not an Arab country. Iran may share a religion and political and economic interests with Arab countries, but the people of Iran are primarily Persians and speak Farsi and other Persian languages, not Arabic. Iran is not a member of the Arab League and not considered an Arab state by the United Nations Development Programme.

Accoring to the Wikipedia, the Arab League has 22 member states:

1. Algeria
2. Bahrain
3. Comoros
4. Djibouti
5. Egypt
6. Iraq
7. Jordan
8. Kuwait
9. Lebanon
10. Libya
11. Mauritania
12. Morocco
13. Oman
14. Palestine
15. Qatar
16. Saudi Arabia
17. Somalia
18. Sudan
19. Syria
20. Tunisia
21. United Arab Emirates
22. Yemen

The UNDP says that "The Arab States region is home to some 320 million people living in 22 countries that stretch from Morocco and Algeria in the west to Yemen and Oman in the east."

Iran is not in either definition of an Arab state/country.

-- Jack Krupansky

Obama Palestine policy

It will be interesting to see Barack Obama's initial policy for Palestine. He will clearly "inherit" the current mini-crisis over Gaza, Hamas' rockets, and Israeli attempts to eradicate Hamas, but that is only the starting point. Clearly Hillary will have a major role in carrying out policy, but it is not clear how far she can go on her own and how Barack's "plans" might conflict with her own thoughts. Not to mention that Joe Biden and National Security Adviser James Jones will be in the mix as well. While we can expect some rollback of the Bush policy of total support for an aggressive and one-sided Israeli policy, we can also expect that both Barack and Hillary have to cater to substantial Jewish pro-Israel constituencies from the get-go. One might hope that the U.S. would essentially return to the policies in force at the end of the Clinton administration, but there are the simple facts that Clinton was not being terribly successful at the end and many facts have changed since then. I simply hope that we see some "fresh" thinking, otherwise we will simply continue with endless "talks" and endless recriminations. Barack's Web site says only the following:

The Obama-Biden foreign policy will ... seek a lasting peace in the Israeli-Palestinian conflict.

...

Israeli-Palestinian Conflict: Obama and Biden will make progress on the Israeli-Palestinian conflict a key diplomatic priority from day one. They will make a sustained push -- working with Israelis and Palestinians -- to achieve the goal of two states, a Jewish state in Israel and a Palestinian state, living side by side in peace and security.

At a practical level, Barack and Hillary have three problems on Day One: 1) defusing the Gaza mini-crisis, 2) figuring out how to get Hamas to stop firing rockets into Israeli territory, and 3) whether to continue the policy of labeling Hamas a terrorist organization and siding with Israel on its eliminination or whether to consider it to be one of the political players and negotiate or at least have some form of talks with it. And there is the question of Iranian influence with both Hamas and Hezbollah.

Longer term, the biggest issue is to recognize that Iran is a major player and major part of the problem and that improved relations with the so-called "Arab World" and the rest of the Middle East, especially Iran, is just as essential to bringing peace to Palestine as peace in Palestine is to bringing stability and normalized relations to the rest of the Middle East.

Although the incoming administration says that it supports a two-state solution, the current problem is that there are really effectively three states, with Hamas in Gaza effectively a state on its own. And then there is the fact that Hezbollah in Lebanon is effectively another "state."

I do in fact look forward to Barack Obama bringing some fresh thinking to the problems in Palestine. He has a bunch of first-rate players on his team. It will be interesting to see how he leads that team. The big question right now is whether they start with some positive progress right out of the gate or stumble and blunder for a number of months before finally hitting their stride. I would suggest the former is most likely, but the latter is certainly possible.

Another issue is whether it is best to push for a lot of rapid initial progress or whether it is better to go slow and let  the region simmer for awhile but gradually dial down the heat. "Confidence building" may be a key part of the process, so the latter may be more likely. So, I would look to a lot of low-key talks behind the scenes rather than any public big push in the first six months.

-- Jack Krupansky

What will our relations with Iraq be like under Obama?

Other than removing U.S. combat troops within 16 months, I cannot recall hearing anything about the intentions of the incoming administration of Barack Obama on relations between the U.S. and Iraq. Ultimately the question is whether the intention is for fully "normalized" relations. And then that begs the question of whether the intention is for truly friendly relations. Even if the "details" of relations with Iraq are intentionally be left to Hillary to sort out, there needs to be some high-level intention by the incoming president. Or, maybe, he honestly does not know and it all depends on how the government of Iraq evolves as the U.S. removes combat forces.

Part of the problem may be that the so-called Pro-Israel Lobby sees Iran as the deadlier concern and doesn't mind if Iraq sits there in a state of internal chaos for an extended period of time. That begs the question of intentions for relations with Iran, but we already know two things about intentions towards Iran: 1) there will be some form of "talks" after "preparations", and 2) absolutely no tolerance for advancement of Iran's so-called "nuclear ambitions", even as those ambitions continue to advance.

One thing we know about both Iraq and Iran is that both are experiencing severe pressure on their income from oil as the price of crude oil continues its steep decline. The impact on internal politics is going to be quite unpredictable.

Layering uncertain U.S. intentions on top of that internal uncertainty leaves the whole region a potential source for great volatility.

-- Jack Krupansky

Has Detroit been rescued?

Although the so-called loans by the U.S. Treasury to the Detroit car companies are now a done deal, it is not clear what that means in terms of their long-term viability. Sure, they can pay their bills for a couple more months, but even if the economy steadies, they may be even worse off in a couple of months when they have exhausted the loan funds, and it is quite debatable whether they will have completed significant restructuring within a couple of months that will be sufficient to change their cost structure in a radical enough manner to be profitable in this weakened economy. Can it be done? Sure, it can. Is it likely to be done? That questioned will be answered by the auto workers and the holders of their debt.

I suspect what will happen is that they will make a few restructuring steps, enough to convince the Obama Treasury that they are at least on a plausible path, so that they can then be "loaned" more money.

I suspect that most of the original debt holders are long gone and that most of the debt is held by hedge funds and distressed debt specialists who have bought it at the current bankruptcy price levels or moderately higher. It may be simply a question of what level of profit these speculators want on their investments. Maybe if they are paid with government-guaranteed preferred stock they will be willing to sell the debt at a reasonable price.

The basic negotiating strategy will likely be that they will offer the auto workers and debt holders a deal with the caveat that if negotiations fail, full-blown banktuptcy is the next step.

In short, the car companies have been pointed in the direction of a rescue, but whether they will continue to progress down that path is unclear.

In any case, the deal was about as good a deal as we could have asked for given the overall situation. The message is quite clear, "restructure now or die."

-- Jack Krupansky