Previous month:
October 2008
Next month:
December 2008

November 2008

History Lessons from the New Deal

Paul Krugman:

Franklin Delano Obama?: The reason for F.D.R.’s limited short-run success, which almost undid his whole program, was the fact that his economic policies were too cautious....[T]he institutions F.D.R. built have proved both durable and essential... remain the bedrock of our nation’s economic stability. Imagine how much worse the financial crisis would be if the New Deal hadn’t insured most bank deposits. Imagine how insecure older Americans would feel right now if Republicans had managed to dismantle Social Security....

But the new administration should try not to emulate a less successful aspect of the New Deal: its inadequate response to the Great Depression itself. Now, there’s a whole intellectual industry, mainly operating out of right-wing think tanks, devoted to propagating the idea that F.D.R. actually made the Depression worse. So it’s important to know that most of what you hear along those lines is based on deliberate misrepresentation.... The New Deal brought real relief to most Americans.

That said, F.D.R. did not, in fact, manage to engineer a full economic recovery during his first two terms. This failure is often cited as evidence against Keynesian economics, which says that increased public spending can get a stalled economy moving. But the definitive study of fiscal policy in the ’30s, by the M.I.T. economist E. Cary Brown, reached a very different conclusion: fiscal stimulus was unsuccessful “not because it does not work, but because it was not tried.”...

The effects of federal public works spending were largely offset by other factors, notably a large tax increase, enacted by Herbert Hoover, whose full effects weren’t felt until his successor took office. Also, expansionary policy at the federal level was undercut by spending cuts and tax increases at the state and local level.

And F.D.R. wasn’t just reluctant to pursue an all-out fiscal expansion — he was eager to return to conservative budget principles. That eagerness almost destroyed his legacy. After winning a smashing election victory in 1936, the Roosevelt administration cut spending and raised taxes, precipitating an economic relapse that drove the unemployment rate back into double digits....

This history offers important lessons for the incoming administration. The political lesson is that economic missteps can quickly undermine an electoral mandate. Democrats won big last week — but they won even bigger in 1936, only to see their gains evaporate after the recession of 1937-38. Americans don’t expect instant economic results from the incoming administration, but they do expect results, and Democrats’ euphoria will be short-lived if they don’t deliver an economic recovery.

The economic lesson is the importance of doing enough. F.D.R. thought he was being prudent by reining in his spending plans; in reality, he was taking big risks with the economy and with his legacy. My advice to the Obama people is to figure out how much help they think the economy needs, then add 50 percent...

American Right Wing Crashed-and-Burned Watch

Former Public Interest editor Mark Lilla is very unhappy with the Republican Party and the "conservative" intellectual movement:

Mark Lilla: The Palin farce is already the stuff of legend.... [But] John McCain's choice was not a fluke, or a senior moment, or an act of desperation. It was the result of a long campaign by influential conservative intellectuals to find a young, populist leader to whom they might hitch their wagons in the future. And not just any intellectuals. It was the editors of National Review and the Weekly Standard, magazines that present themselves as heirs to the sophisticated conservatism of William F. Buckley and the bookish seriousness of the New York neoconservatives. After the campaign for Sarah Palin, those intellectual traditions may now be pronounced officially dead....

For the past 40 years American conservatism has been politically ascendant, in no small part because it was also intellectually ascendant.... Magazines like the Public Interest and Commentary became required reading for anyone seriously concerned about domestic and foreign affairs.... I still remember the thrill of coming upon their writings for the first time. I discovered the Public Interest the same week that Patty Hearst was kidnapped by the Symbionese Liberation Army, and its pages offered shelter from the storm -- from the mobs on the street, the radical posing of my professors and fellow students, the cluelessness of limousine liberals, the whole mad circus of post-'60s politics. Conservative politics mattered less to me than the sober comportment of conservative intellectuals at that time; I admired their maturity and seriousness, their historical perspective, their sense of proportion....

So what happened? How, 30 years later, could younger conservative intellectuals promote a candidate like Sarah Palin, whose ignorance, provinciality and populist demagoguery represent everything older conservative thinkers once stood against? It's a sad tale that began in the '80s, when leading conservatives frustrated with the left-leaning press and university establishment began to speak of an "adversary culture of intellectuals."... In 1976 Irving Kristol publicly worried that "populist paranoia" was "subverting the very institutions and authorities that the democratic republic laboriously creates for the purpose of orderly self-government." But by the mid-'80s, he was telling readers of this newspaper that the "common sense" of ordinary Americans on matters like crime and education had been betrayed by "our disoriented elites," which is why "so many people -- and I include myself among them -- who would ordinarily worry about a populist upsurge find themselves so sympathetic to this new populism."

The die was cast. Over the next 25 years there grew up a new generation of conservative writers who cultivated none of their elders' intellectual virtues.... [T]heir function within the conservative movement is no longer to educate and ennoble a populist political tendency, it is to defend that tendency against the supposedly monolithic and uniformly hostile educated classes. They mock the advice of Nobel Prize-winning economists and praise the financial acumen of plumbers and builders. They ridicule ambassadors and diplomats while promoting jingoistic journalists who have never lived abroad and speak no foreign languages....

Writing recently in the New York Times, David Brooks noted correctly (if belatedly) that conservatives' "disdain for liberal intellectuals" had slipped into "disdain for the educated class as a whole," and worried that the Republican Party was alienating educated voters. I couldn't care less about the future of the Republican Party, but I do care about the quality of political thinking and judgment in the country as a whole. There was a time when conservative intellectuals raised the level of American public debate and helped to keep it sober. Those days are gone.... [T]he conservative intellectual tradition is already dead. And all of us, even liberals like myself, are poorer for it.

There seem to me to be a number of things wrong with Mark Lilla's analysis:

The first is the despairing lament for the lost golden age of American conservatism. When was this age, exactly? Was it when National Review was calling for white southerners to engage in terrorism to keep African-Americans from voting in the south? Was it when William F. Buckley was saying that George C. Marshall was part of the conspiracy so immense that had handed China and was working to hand America over to Josef Stalin? Was it when Jeanne Kirkpatrick told the press that the murdered Maryknoll missionaries in El Salvador weren't just Christian missionaries?

The second is Lilla's mischaracterization of conservatism. The early Public Interest was the creation of Nathan Glazer, Daniel Bell, and Irving Kristol. The Bell and Glazer tendencies were always worth reading. The Kristol tendency was not. By the time I started reading the Public Interest in the late 1970s, Irving Kristol had pushed Daniel Bell out and had pushed Nathan Glazer to the sidelines. Irving Kristol had decided that the way to deal with the conflict between the first-balance-the-budget Republicans and the first-cut-taxes Republicans was to pretend that cutting taxes was the way to balance the budget--not, you understand, because he believed that it was true but because false claims that it was true were useful for the construction of a permanent Republican majority. And the Public Interest's chief economist was Jude Wanniski. And--as Mark Lilla notes--the exaltation of the people of America who had been "betrayed" by their "educated elites" was in place by the mid-1980s. That was twenty years ago. The Palin phenomenon is not a new one.

The third is Mark Lilla's evasion of the role in all this played by the "neoconservative" disciples of Chicago political philosopher Leo Strauss. The grandchildren of Leo Strauss pursued a form of intellectual politics that had three planks:

  1. They sought as political front-men "gentlemen" who would not understand their ideas and doctrines but who could both be persuaded to follow their lead in designing policies and could win votes from the electorate--Ronald Reagan, Dan Quayle, George W. Bush, Sarah Palin. (George H.W. Bush's and Robert Dole's and Mitt Romney's problem, from their point of view, was that they were too smart.
  2. The neoconservatives routinely lied to the outside world--advocated a false "exoteric teaching" that they thought would have good poitical effects.
  3. The neoconservatives told the truth about what they believed and thought only to themselves--and not always then, for how could you know whether you were really one of those in on the con or one of the marks and suckers (hoi polloi, outer party, et cetera) for whom the point of the con was to make you think that you were in on the con.

Thus I resent Mark Lilla's "shocked! shocked!" Claude Rains moment at the eruption of Sarah Palin, as if this is the act of a "new generation of conservative[s]" who have "none of their elders' virtues." The differences between Sarah Palin and George W. Bush are easily summarized:

  • Sarah Palin is more coherent.
  • Sarah Palin does not have her father's rolodex and social network at her disposal.
  • Sarah Palin has not spent three years being intensively tutored in national political issues by Condi Rice and Larry Lindsey.
  • Sarah Palin is prettier.
  • Sarah Palin is (probably) smarter.
  • Sarah Palin is more confident in her own judgment.

The differences between Sarah Palin and Dan Quayle are similar:

  • Sarah Palin is more coherent.
  • Sarah Palin does not have her father's money at her disposal.
  • Sarah Palin is prettier.
  • Sarah Palin is (probably) smarter.
  • Sarah Palin is more confident in her own judgment.

The differences between Sarah Palin and Ronald Reagan--well, remember Mitch Daniels's statements that Ronald Reagan was more out-of-it as far as policy substance was concerned than George W. Bush?

This has been building for quite a while.

There is, however, one difference between the rhetoric of the Irving Kristol generation and the rhetoric of the William Kristol generation. In the Irving Kristol generation it was OK for the "gentlemen" to be hard-working or smart--it wasn't necessary, but it wasn't a disability. For the William Kristol generation there are three legitimate ways to become rich and powerful:

  • You can peddle influence--use your Republican political connections to enrich a company, and take a share--that's OK.
  • You can inherit money--that's OK.
  • You can marry money--that's OK.

But to work hard? To learn stuff? To think hard? That's not OK--that marks you as an "elitist."

Ben Bernanke as Greenspanist

Six years ago. Ben Bernanke:

Ben Bernanke: Can the Federal Reserve (or any central bank) reliably identify "bubbles" in the prices of some classes of assets, such as equities and real estate? And, if it can, what if anything should it do about them?... The Fed likewise has two broad sets of policy tools... monetary policy... setting... the overnight interest rate... [and] rule-making powers, supervisory oversight, and a lender-of-last resort function.... [T]he Fed will do best by focusing its monetary policy instruments on achieving its macro goals--price stability and maximum sustainable employment--while using its regulatory, supervisory, and lender-of-last resort powers to help ensure financial stability....

[T]he Fed should ensure that financial institutions and markets are well prepared for the contingency of a large shock to asset prices... banks be well capitalized and well diversified... contribute to reducing the probability of boom-and-bust cycles... more-transparent accounting and disclosure practices... financial literacy and competence... integrity of the financial infrastructure--in particular, the payments system....

Aggressive bubble-poppers would like to see the Fed raise interest rates vigorously and proactively to eliminate potential bubbles in asset prices. To be frank, this recommendation concerns me greatly.... [T]he Fed cannot reliably identify bubbles in asset prices... monetary policy is far too blunt a tool for effective use against them.... I worry about... if the Fed attempts to substitute its judgments for those of the market... increase the unhealthy tendency of investors to pay more attention to rumors about policymakers' attitudes than to the economic fundamentals.... A truly vigorous attempt by a central bank to rein in a supposed speculative bubble may well succeed but only at the risk of throttling a legitimate economic boom or, worse, throwing the whole economy into depression.....

[T]he stock market was as much a victim as a cause of the Depression... the stock market boom of the 1920s was surprisingly hard to kill... only began to plummet when the depth of the general economic decline became apparent.... The correct interpretation of the 1920s, then, is not the popular one--that the stock market got overvalued, crashed, and caused a Great Depression. The true story is that monetary policy tried overzealously to stop the rise in stock prices. But the main effect of the tight monetary policy, as Benjamin Strong had predicted, was to slow the economy--both domestically and, through the workings of the gold standard, abroad. The slowing economy, together with rising interest rates, was in turn a major factor in precipitating the stock market crash. This interpretation of the events of the late 1920s is shared by the most knowledgeable students of the period, including Keynes, Friedman and Schwartz, and other leading scholars of both the Depression era and today.... The Federal Reserve went on to make a number of serious additional mistakes that deepened and extended the Great Depression of the 1930s... little or no effort to protect the banking system from depositor runs and panics... permitted a severe deflation....

Even putting aside the great difficulty of identifying bubbles in asset prices, monetary policy cannot be directed finely enough to guide asset prices without risking severe collateral damage to the economy.

A far better approach... supervisory action to ensure capital adequacy in the banking system, stress-testing of portfolios, increased transparency in accounting and disclosure practices, improved financial literacy, greater care in the process of financial liberalization, and a willingness to play the role of lender of last resort when needed...

Congressional Democrats

Andrew Gelman is puzzled at Mickey Kaus and Charlie Cook:

The myth of poor Democratic performance in House races in the 2008 election | Red State, Blue State, Rich State, Poor State: There’s an idea going around that the Democrats turned in a disappointing performance in Congressional races this year. For example, a politically-minded friend of mine of the liberal persuasion wrote: “The election was good news, although the Democrats did not do quite as well in the Senate and House as I expected. Obama did not have very long coattails–given how anti-Republican Americans are these days.” Some of the pros say this too; for example, Charlie Cook writes, “given the strength of the top of the ticket nationally, one might have thought that the victory would have been more vertically integrated. . . . what happened down-ballot was not proportional to what happened at the top.” And Mickey Kaus attributes this to moderate ticket-splitters...

That Mickey Kaus gets something wrong is not surprising--why oh why can't we have a better press corps?--but it is surprising for Charlie Cook.

Andrew goes on:

The only trouble with this theory is that it’s not supported by the data. Obama won 53% of the two-party vote, congressional Democrats averaged 56%. The average swing of 5.7% from Democratic congressional candidates in 2004 to Dems in 2008 was actually greater than the popular vote swing of 4.5% from Kerry to Obama. Let’s look at what happened state by state.... In the states in the upper left of this graph, the Democrats improved more in the congressional than in the presidential vote; the states in the lower right are those where the Obama-Kerry swing was greater than the Democrats’ swing in House races. There are a lot more states in the upper left than in the lower right....

The myth of poor Democratic performance in House races in the 2008 election | Red State, Blue State, Rich State, Poor State

For some historical perspective, here are the Democrats’ two-party vote share in presidential elections and average two-party vote in congressional elections since 1946:

The myth of poor Democratic performance in House races in the 2008 election | Red State, Blue State, Rich State, Poor State

Presidential voting has been much more volatile than congressional voting (incumbency and all that). This makes the Democrats’ 5.7-point gain over two elections even more impressive.... I don’t think it makes a lot of sense to consider Obama’s 53% “enormously impressive” and congressional Democrats’ 56% a disappointment. The data demolish the idea that voters in 2008 were pulling the lever for Barack but not for the Dems overall (not for “Nancy Pelosi,” if you will).

Marching Orders for Congress

Back in both 1977 and 1993 the Democratic congressional barons treated Carter and Clinton with utter contempt--as if they had no skin in the game, and were unaffected by either president's success or failures. Their belief was that presidents come and go but that Democratic majorities in both chambers and Democratic committee chairs endure forever. Sam Nunn teaching Clinton a lesson over gays in the military. Robert Byrd teaching Clinton a lesson over the stimulus package. Boren, and Breaux teaching Clinton a lesson over the BTU tax. Moynihan teaching Clinton a lesson over health care. Kerrey teaching Clinton a lesson over nothing in particular.

That won't happen this time. 1980 ought to have been a wake-up call--the Democratic senators lost their majority and their control over the agenda. 1994 was definitely a wake-up call: President Clinton's first two years were perceived as years of failure, and so the Democrats lost their seats and their majorities.

The Republicans learned half the lesson from 1994: in 2001 they believed that George W. Bush had to be perceived as a success, therefore they would follow him blindly and give him victories in whatever he asked for so that he would be perceived as a success. And it worked for a while--in 2002 and 2004. But by 2006 it became clear that stupid presidential policies lead to presidential failure--and take the party over the cliff. And 2008 looks to be more so.

Let's hope the Democrats learn the full lesson: Barack Obama needs to be perceived as a success and needs to be a success.

One way in which 2009 is different from 1993 is that the Democratic Party is far to the left of where it was back then--let alone back in 1977. As one former hill staffer writes:

[W]hile there are Blue Dogs... and they have their annoying views, they are far to the left of the actual conservative Dems of the past. Clinton's Democratic majority included people like Richard Shelby and Billy Tauzin, who when they finally switched parties, went straight to the far right of the GOP.... Gene Taylor may be the most conservative Democrat today... [but] he is fundamentally a southern economic populist...

Why Is the Sands Casino Going Bankrupt?

It doesn't have any subprime mortgage exposure, does it?

Beth Jinks of Bloomberg: Las Vegas Sands Corp., billionaire Sheldon Adelson's casino company, fell the most in New York trading since going public after saying it may default on debt and face bankruptcy. The casino owner, which had $8.8 billion in long-term debt at the end of June, said in a regulatory filing today that it probably won't meet the requirements of loans arranged by Citigroup Inc., Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. unless it cuts spending on developments, boosts earnings at its Las Vegas Strip casinos and raises more capital.

The reversal of fortune is a black eye for the 75-year-old Adelson, who was once America's third-richest man on the strength of his Las Vegas Sands holdings. The Las Vegas-based company's dwindling cash flow is threatening $16 billion worth of developments in Macau, China, and Singapore, where Las Vegas Sands is building resorts to cater to wealthy Asian gamblers. They need to raise money,'' said Keith Foley, a New York- based analyst at Moody's Investors Service Inc.It's getting to the point where they need to do something now.''

The shares dropped $3.81, or 33 percent, to $7.85 at 4:04 p.m. in New York Stock Exchange composite trading, the biggest decline since its initial share sale in December 2004. Las Vegas Sands had tumbled 91 percent before today this year as investors dumped the stock, worried that falling casino winnings and the global financial meltdown would leave the company without enough cash....

Spending declines on the Vegas Strip and restrictions on visas in Macau have stemmed the flow of cash into Las Vegas Sands. Today's admission comes after Adelson, who holds a stake of more than 64 percent, invested an additional $475 million in September to avoid violating the terms of a loan, and hired an unidentified investment bank to raise more capital with his help...

Eric Rauchway vs. Alex Tabarrok on New Deal Unemployment

I score this one for Eric, 15-0. There are two questions here:

  1. What did the New Deal do to relieve economic distress--i.e., was the New Deal a failure?
  2. How fast did the economy-as-we-know-it recover from the Great Depression?

The fact that a huge number of people were on work relief jobs in the late 1930s is powerful evidence that the economy-as-we-know it did not recover from the Great Depression until the 1940s.

The fact that a huge number of people were on work relief jobs in the late 1930s is powerful evidence that the New Deal was not a failure--tha it did a lot to relieve economic distress.

It's fine to cite the Lebergott series for proposition (2). The problem is that Shlaes and Tabarrok appear to want to cite it for proposition (1). And that seems to me to be not right:

Eric writes:

Please read before posting. « The Edge of the American West: Alex Tabarrok reads my post on unemployment and says “nonsense.” Then he quotes Historical Statistics of the United States showing the almost-twenty-percent unemployment rate.

Rauchway knows this but wants to measure unemployment using an alternative series which shows a lower unemployment rate in 1938 (12.5%). Nothing wrong with that but there’s no reason to call people who use the official series liars.

The problem is [that] Tabarrok quotes the old, bicentennial edition of HSUS. And in that edition, you find Lebergott’s unemployment data, which was assembled before Michael Darby, Robert Margo, and David Weir’s work. As Tabarrok should know, and as readers of this site do know, in the current edition of HSUS, when you look for an unemployment time series, you find Weir’s.

Tabarrok says,

Rauchway thinks that counting people on work-relief as unemployed is a right-wing plot. If so, it is a right-wing plot that exists to this day because people who are on workfare, the modern version of work relief, are also counted as unemployed.

Here is what Weir says about that:

For 1931 to 1943, I accept Lebergott’s employment estimates as accurate, except for a major conceptual conflict regarding the classification of federal emergency relief workers. Darby challenged the standard classification followed by the census, the CPS, and Lebergott that counted such workers unemployed. Lebergott has argued eloquently that counting them as unemployed is a more accurate depiction of the failure of the private economy to generate unemployment. Margo has found that the labor supply behavior of relief workers shared some characteristics of both employed and unemployed workers, and suggests that at least some should probably be classified as employed. In the absence of a clear basis for distinguishing employed from unemployed relief workers, I agree with Darby that counting all relief workers as employed is more consistent with modern theoretical interpretations of unemployment, so I include them as government workers.

It’s true, HSUS should put Weir’s series, which is in its current edition, on the web instead of the old series.

But I believe all this means that I am right, and Tabarrok is wrong.

Obama Administration Personnel: What Is Really Going on

Spencer Ackerman is unhappy:

Open Wide: Do you know why you're not reading solid stuff about who's getting what positions in an Obama administration? Because everyone in Democratic D.C. thinks s/he's about to get a job and doesn't want to go spoiling his/her chances by blabbing to reporters, even when said reporters are just trying to collect quotes about what such-and-such an appointment would signify about Obama's approach to issue X. This is a really f---ing irritating day.

Here are the talking points for Obama-Biden administration personnel selections. They have the added advantage of being true:

  1. The bench is very deep right now. Practically everyone competent and qualified for high executive office has come over to the Democratic Party over the fourteen years since the coming of Gingrich. Thus there are a huge number of superb choices available for every position.

  2. Everyone being considered for high federal office is intellectually honest: they understand not just the advantages of their own views, but their flaws and disadvantages as well; they understand the pluses of views opposed to theirs. Policy will be realit-based: it will depend upon our collective best guesses as to the way the world works, and not the idiosyncratic intellectual hobbyhorses of ex-AEI staffers.

  3. Everyone knows that the American people have elected Barack Hussein Obama and Joe Biden--not their staffs. Everyone knows that the jobs of staffers will be to present Obama and Biden with the options, their pluses and minuses, and then strive to implement their choices as best they can. The policies of the Obama-Biden administration will be Obama-Biden policies.

  4. Everyone thinks it would be a great honor to work for the Obama-Biden administration.

  5. Everyone knows that the bench is deep, and that their chances--however qualified they are--are low.

  6. Everyone's knows that this is bigger than any of us, and that the right attitude is to ask for an oar, find a place on a bench, and start rowing. There is an awful lot to do.

Why We Do Not Need a Republican Party

Hoisted from comments: Bullfighter:

Grasping Reality with Both Hands: I remember other campaigns smearing the opponent. I don't remember them smearing other people who don't even work for the opponent's campaign. The comparison of Rashid Khalidi and a neo-Nazi was the dirtiest thing I ever heard a campaigning politician say in this country. (I've heard dirtier, but it was in the Balkans.)

What would I have to pay to get another, alternative, decent opposition party to the Democrats?

The Dishonorable and Dishonest John McCain

Liz Cox Barrett:

CJR: McCain Ends “Classy”: McCain’s gracious concession speech is only notable because it contrasts so sharply with the sad and shabby campaign that he chose to run. Five classy minutes should not expiate several months’ worth of name calling, insinuations, and intellectual dishonesty. Honor cannot be worn like a jacket, to be slipped on and off as the situation dictates. John McCain irrevocably ceded his moral high ground during the course of his campaign, and the press should realize that one good speech doesn’t change that. Joe Klein has it right: Talk about putting lipstick on a pig.

Wall Street Journal Death Spiral Watch (Amity Shlaes Birdcage Liner Edition)

Eric Rauchway--whose little finger knows more about the Great Depression than could be found in 15 clones of Amity Shlaes--is a tad unhappy:

Stop lying about Roosevelt’s record. « The Edge of the American West: Oh for pity’s sake. Some real news outlet needs to publish a nice short piece on conservative falsehoods about the New Deal. Amity Shlaes’s Liberty League retread has got a new lease of life, thanks to the Daily Show of all outlets (Jon Stewart, you should be ashamed) and now in the Wall Street Journal’s five “myths” about the Great Depression, we find stated as fact

As late as 1938, after almost a decade of governmental “pump priming,” almost one out of five workers remained unemployed.

Readers of this site know this is simply not true. For pity’s sake, Conrad Black knows this is not true. (You may here enjoy Bill Scher pointing out that Shlaes describes the Historical Statistics of the United States as an “obscurer” source of data.)

We find listed as a myth

The stock market crash in October 1929 precipitated the Great Depression. What the crash mainly precipitated was a raft of wrongheaded policies that did major damage to the economy

I’m sure Christina Romer would have something to say about that; so would Joseph Schumpeter. So indeed would Ben Bernanke. Interestingly, had the WSJ writer listed as a myth that the crash “caused” the Depression, he would have had a case. But that the crash “precipitated” the Depression is not so much myth as exactly right: it crystallized and let drop consumer worries, accelerating the downturn by occasioning a drying-up of buying on credit.

We find listed as a myth

Where the market had failed, the government stepped in to protect ordinary people

I’m sure the people saved from starving and homelessness by CWA, WPA, and CCC would differ; so would those saved from penury by FDIC; so would those saved from poverty by Social Security.

These people, these people who spend their time propagating these incorrect lessons from the Great Depression, the truth is not in them....

At this point I am forced to believe that lining a bird cage with the WSJ would be just cruel. To the bird.

Why oh why can't we have a better press corps?

If Rupert Murdoch wants to play with the big boys and still have a newspaper in five years, he needs to clean up his act rapidly.

Washington Post Crashed-and-Burned Watch (Robert Samuelson Edition)

He makes his play for the Stupidest Man AliveTM crown:

Robert Samuelson: As The Rich Get Poorer Making the rich poorer doesn't make everyone else richer: For years, we've debated rising economic inequality. On one side, liberals denounce it as unjust. Redistribute wealth to the poor and middle class, they say. On the other, conservatives minimize its importance...

Not true: for years conservatives have denied its existence.

What matters most [conservatives say] is overall economic growth, they retort. Well, the conjunction of the presidential campaign and the financial crisis is giving the debate a curious twist. Liberals have triumphed politically; soaking the rich has become more acceptable. But conservatives may have won the intellectual argument; making the rich poorer doesn't make everyone else richer...

Making the rich poorer by deregulating financial markets so that a bunch of overleveraged Wall Street firms fail at risk management and cause a financial crisis doesn't make anybody richer. Making the rich poorer by taxing them more and devoting the money to debt reduction, infrastructure, and education does make everybody else richer--as we learned in the 1990s.

Robert Samuelson goes on:

Thousands of well-paid investment bankers, traders, portfolio managers and securities analysts are losing their jobs... executive compensation may be similarly squeezed. Profits are down; the political climate is hostile.... Judged only by economic inequality, the financial crisis is a godsend. It will probably narrow the gap—though still vast—between the rich and everybody else. But what good will that do? Economic inequality also declined in the Great Depression. The country wasn't better off. By and large, the poor aren't poor because the rich are rich. They're usually poor for their own reasons: family breakdown, low skills, destructive personal habits and plain bad luck.

The presumption implicit in the criticism of growing economic inequality is that society's income is a given and, if the rich have less, others will have more.... The larger truth is that much of the income of the rich and well-to-do comes from what they do. If they stop doing it, then the income and wealth vanish. No one gets it. It can't be redistributed because it doesn't exist. Everyone's poorer...

The income and wealth of Wall Street has vanished not because the "rich" of Wall Street have stopped doing what they do, but because the too many of the "rich" of Wall Street did do what they do: it is their failures of risk management that have made everybody poorer.

Every column of Robert Samuelson that Newsweek and the Washington Post publish hastens their demise--and harms the reputation of all their reporters.

Obama's Victory

A correspondent writes:

[Carter won] the 11 southern states by 9.4 percent and [lost] the non-south by 0.1 percent [in 1976]. (just think about a democrat losing the non-south overall...weird.)... [C]linton flipped the script... winning the other 39 by 8.1 and losing the south overall by 1.4. Guess what obama's south/non-south differential is? ALMOST EXACTLY TWICE THAT: Obama won the non-south by 12.5 points, and lost the south by 6.5. (these are based on the CNN numbers as of late today).... [N]o democrat since, who?, maybe roosevelt has won the non-south by such a wide margin. Clinton came next closest... when he won the non-southern 39 states by 11.7 in 1996...

The Onion

America's Finest News Source:

Black Man Given Nation's Worst Job | The Onion - America's Finest News Source: African-American man Barack Obama, 47, was given the least-desirable job in the entire country Tuesday when he was elected president of the United States of America. In his new high-stress, low-reward position, Obama will be charged with such tasks as completely overhauling the nation's broken-down economy, repairing the crumbling infrastructure, and generally having to please more than 300 million Americans and cater to their every whim on a daily basis. As part of his duties, the black man will have to spend four to eight years cleaning up the messes other people left behind. The job comes with such intense scrutiny and so certain a guarantee of failure that only one other person even bothered applying for it. Said scholar and activist Mark L. Denton, "It just goes to show you that, in this country, a black man still can't catch a break."

Some More of teh Internet Triumphalism

Matthew Yglesias:

Matthew Yglesias: The Difference-Makers: [The McCain campaign] struck me as less vile and dishonorable than the other presidential campaigns (2004, 2000, 1996) that I remember. At any rate, Brad DeLong says:

Yes, John McCain ran a dirty campaign. But it was a less dirty campaign than any Republican has run since... well, since the memory of man runneth (with the possible exception of Ford 1976). The difference this year was that–for some reason–this year a fraction of the mainstream press called them on it rather than ignoring it entirely.

I think the “for some reason” here is pretty clear: It’s the infrastructure, stupid. Organizations like Think Progress, TPM Media, The Huffington Post, Media Matters, and Progressive Accountability have ensured that there are dozens of people working, every day, to shoot down bogus storylines and to highlight especially egregious behavior. And those institutions are connected to a vast web of individual or small-group blogs that together form a sea in which long-existing progressive publications like The American Prospect, Mother Jones, The Nation, and The Washington Monthly all swim, all reaching much broader audiences than they could in their strictly print days. New, more progressive columnists with ties to those institutions like Harold Meyerson and Paul Krugman have joined The Washington Post and New York Times op-ed pages. Television programs open to progressive ideas hosted by Keith Olbermann and Rachel Maddow have appeared on cable.

To make a long story short, the Obama-McCain matchup is taking place in a very different media context from the Kerry-Bush matchup in 2004. And Kerry-Bush happened in a very different context than Gore-Bush in 2000. And I think it’s no coincidence that as progressive infrastructure gets bigger and stronger, it gets harder and harder for conservative media strategies to work. The press’s all-out war against Gore galvanized people and have created institutions designed to fight back against that kind of garbage.

There is some evidence for this: for example, John Harris's May 2001 explanation of why he and his friends were so tough on Clinton and such a pushover for Bush:

John Harris, May 6, 2001: Bush Catches a Washington Break: Are the national news media soft on Bush? The instinctive response of any reporter is to deny it. But my rebuttals lately have been wobbly.... The difference is not in journalists' attitudes toward Bush or their willingness to report aggressively on him. It is that nearly all the political and institutional forces that constitute Washington writ large have aligned to make Bush's life more pleasant than Clinton's ever was.... There is no well-coordinated corps of aggrieved and methodical people who start each day looking for ways to expose and undermine a new president.

There was just such a gang ready for Clinton in 1993. Conservative interest groups, commentators and congressional investigators waged a remorseless campaign that they hoped would make life miserable for Clinton and vault themselves to power. They succeeded.... It is not that reporters have been charmed by Bush. It is not that Democrats are nicer, more decent people than Republicans. The difference is that the GOP conservatives' zeal to undermine Clinton -- and the techniques they used to do it -- flowed from special historical circumstances....

Reporters and editors... give more coverage to stories when someone is shouting....

In Clinton's first term, Rep. Richard K. Armey (R-Tex.) turned to Democrats and said, "Your president is just not that important to us." This underscores the irony that Bush, whose ascension was clouded by questions over whether he really won, has been accorded more legitimacy by the opposition than Clinton was -- or than Gore would have had he become president while losing the popular vote...

Let's see how much of a honeymoon John Harris gives Barack Obama.

Republican Circular Firing Squad of Flying Republican Attack Monkey Republicans

Dana Bash:

CNN Political Ticker: Sources: McCain aide fired for 'trashing' staff: (CNN) — Randy Scheunemann, a senior foreign policy adviser to John McCain, was fired from the Arizona senator's campaign last week for what one aide called "trashing" the campaign staff, three senior McCain advisers tell CNN. One of the aides tells CNN that campaign manager Rick Davis fired Scheunemann after determining that he had been in direct contact with journalists spreading "disinformation" about campaign aides, including Nicolle Wallace and other officials. "He was positioning himself with Palin at the expense of John McCain's campaign message," said one of the aides.

Senior campaign officials blame Schuenemann specifically for stories about the way Wallace and chief campaign strategist Steve Schmidt mishandled Palin's rollout — stories that the campaign says threw them off message in the critical final weeks of the campaign. Another aide said McCain personally was "very disappointed by Randy," who worked for McCain for many years in the Senate.

Scheunemann became close with Palin during her debate prep process...

Fox News:

Smith: Now that the election is over, Carl, tell us more about those reports of infighting between Palin and McCain staffers.

Cameron: I wish I could have told you more at the time but all of it was put off the record until after the election. There was great concern in the McCain campaign that Sarah Palin lack the degree of knowledgeability necessary to be a running mate, a vice president, and a heartbeat away from the presidency. We're told by folks that she didn't know what countries that were in NAFTA, the North American Free Trade Agreement, that being the Canada, the US, and Mexico. We're told she didn't understand that Africa was a continent rather than a country just in itself ... a whole host of questions that caused serious problems about her knowledgeability. She got very angry at staff, thought that she was mishandled.....was particularly angry about the way the Katie Couric interview went. She didn't accept preparation for that interview when the aides say that that was part of the problem. And that there were times that she was hard to control emotionally there's talk of temper tantrums at bad news clippings...

New Republic Crashed-and-Burned Watch

Why oh why can't we have a better press corps?

Frank Foer goes into the tank for John McCain:

As a one-time admirer of John McCain, I was grateful to see him at his patriotic, eloquent best tonight. It harkened back to his performance during the first half of the Bush administration, when he was one of the best spokesmen for a progressive agenda in Washington. During the past campaign, I wondered if his performance during those years was an aberration. Was he only driven to the left by his hatred for George W. Bush and his despicable performance in the 2000 primary? Or was he a decent man with humane instincts who had never thought about the world very hard—but had the capability for genuine outrage when confronted with injustice?

McCain made a devil’s deal when he decided to run for the presidency this cycle. He reconciled himself with George W. Bush’s party and the Karl Rove style of dirty politics. His flip-flops were some of the most absurd in recent history. My reading is that he clearly didn’t feel comfortable with this new persona. You could see it in his unease in interviews and his overall moodiness. My guess is that he’s going to spend the next few years atoning for his performance these past couple of months—and the fact that he’s about to become a piñata of the right will likely drive him further in that direction.

Matthew Yglesias snarks:

Matthew Yglesias: Atonement: Frank Foer speaks for many once and future McCain admirers.... Since I was never a McCain fanboy, I never felt the sense of betrayal and anger than some did. But by the same token, I think there’s no atoning for this. McCain’s not a young man who can learn his lesson and do better next time. In 2000, he ran a high-toned campaign as long as it suited him, and then endorsed the Confederate Flag when he thought that’s what he had to do to win. When he lost, he “atoned.” Then in 2008, he went through the whole rotten cycle again. A man who violates the dictates of his honor whenever it’s convenient, and apologizes for doing so only after his opportunistic gambits fail, is not a man of honor at all...

Republican Circular Firing Squad of Flying Attack Monkeys

It's ugly in there:

Highlights: Newsweek's Special Election Project | Newsweek Politics: Campaign 2008 | NEWSWEEK has also learned that Palin's shopping spree at high-end department stores was more extensive than previously reported. While publicly supporting Palin, McCain's top advisers privately fumed at what they regarded as her outrageous profligacy. One senior aide said that Nicolle Wallace had told Palin to buy three suits for the convention and hire a stylist. But instead, the vice presidential nominee began buying for herself and her family—clothes and accessories from top stores such as Saks Fifth Avenue and Neiman Marcus. According to two knowledgeable sources, a vast majority of the clothes were bought by a wealthy donor, who was shocked when he got the bill. Palin also used low-level staffers to buy some of the clothes on their credit cards. The McCain campaign found out last week when the aides sought reimbursement. One aide estimated that she spent "tens of thousands" more than the reported $150,000, and that $20,000 to $40,000 went to buy clothes for her husband. Some articles of clothing have apparently been lost. An angry aide characterized the shopping spree as "Wasilla hillbillies looting Neiman Marcus from coast to coast," and said the truth will eventually come out when the Republican Party audits its books.

A Palin aide said: "Governor Palin was not directing staffers to put anything on their personal credit cards, and anything that staffers put on their credit cards has been reimbursed, like an expense. Nasty and false accusations following a defeat say more about the person who made them than they do about Governor Palin."

McCain himself rarely spoke to Palin during the campaign, and aides kept him in the dark about the details of her spending on clothes because they were sure he would be offended. Palin asked to speak along with McCain at his Arizona concession speech Tuesday night, but campaign strategist Steve Schmidt vetoed the request.

Contribute to Jim Martin for Senate in Georgia!!

Jim Martin for senate in Georgia:

Jim Martin Statement On U.S. Senate Runoff: We are in a runoff. And the runoff race begins right now. Yesterday was a historic day in American history. Barak Obama was elected President of the United States.

I was struck by what he said last night. He said:

For even as we celebrate tonight, we know the challenges that tomorrow will bring are the greatest of our lifetime -- two wars, a planet in peril, the worst financial crisis in a century. Even as we stand here tonight, we know there are brave Americans waking up in the deserts of Iraq and the mountains of Afghanistan to risk their lives for us. There are mothers and fathers who will lie awake after the children fall asleep and wonder how they'll make the mortgage or pay their doctors' bills or save enough for their child's college education. There's new energy to harness, new jobs to be created, new schools to build, and threats to meet, alliances to repair.

Those words of Barak Obama’s are why this runoff campaign is so important. Those remarks will guide me over the next four weeks. We’re going to win on December second, because this race is going to be about helping President-elect Barack Obama get our economy back on track and making the economy work for the middle class again. America has elected Barack Obama President, and I say now is the time for all of us to help him succeed. Let’s take some time off from partisan politics, we face the biggest challenges of the past 60 years now, let’s work together to solve them. I think that starts with helping Barack Obama succeed, not undercutting him for partisan advantage or to protect special interests. And that’s the difference in this runoff election. I will do everything I can to help Barack Obama change Washington and get the economy moving again.

The View from Across the Pond...

If you are the British ambassador to Washington, fear not that the walls have ears--fear that they have tongues, and fear your bureaucratic enemies in the remains of Whitehall Palace:

John McCain's verdict on Sarah Palin: more trouble than a pitbull | Politics | The British ambassador reveals what the defeated presidential candidate really thinks of his running mate: Nicholas Watt

So now we know what John McCain really thinks of his running mate Sarah Palin -- and that's not just because of the awkward body language between them during his concession speech in Phoenix, Arizona. An exasperated McCain has been telling friends in recent weeks that Palin is even more trouble than a pitbull. In one joke doing the rounds, the Republican presidential candidate has been asking friends: what is the difference between Sarah Palin and a pitbull? The friendly canine eventually lets go, is the McCain punchline. McCain's joke is a skit on Palin's most famous line after she was picked as his surprise running mate. Palin delighted the Republican base when she said the only difference between a pitbull and a hockey mom was lipstick.

We owe the new glimpse into the tense McCain/Palin relationship to Sir Nigel Sheinwald, the British ambassador to Washington. Sheinwald recently wrote a lengthy assessment of McCain in a telegram that winged its way across the Atlantic to Whitehall. The jaws of senior mandarins dropped when they read Sheinwald's account of McCain's thoughts on Palin, which the ambassador reportedly picked up from a military friend of McCain's. The telegram was restricted to an even smaller group of people than usual for fear of another embarrassing leak. "We took one look at this and hid it away," one Whitehall source said.

Mandarins wanted to avoid a repeat of last month's embarrassing leak of Sheinwald's private thoughts on Barack Obama. My friend and colleague Ben Brogan reports that Sheinwald will be a nervous man today because those private thoughts got out. In a memo to Gordon Brown, Sheinwald described Obama as a "decidedly liberal" man who "got diverted by his presidential ambitions".

Senior figures on both sides of the House of Commons are wondering how long Sheinwald can last in Washington because he is unlikely to be able to carry out the great Jonathan Powell instruction that a British ambassador should "get up the arse of the White House and stay there".

How to Understand the Election

I think the way to understand the presidential election is that economic fundamentals were +4% for the Democrat, campaign and media were +4% for the Democrat, and being Black was -3% for the Democrat--if the Black coefficient were not -3%, we would see a hell of a lot more Black legislators in America than we do.

Take a look at this from Andrew Gelman:

Path Finder

How much of the young-middle aged-elderly delta is really a "we geezers are really scared of the Black guy!" delta? My guess is that a good third of it is.

How quickly things can change!

A commenter writes:

Marc Bloch emphasizes the shortness of pedigree in the early feudal period--this strikes me as the one real false note in Lord of the Rings. However, in the Hobbit Bard addresses his arrow "I had you from my father and he had you from old. If you came from the forges of the true King under the mountain...." This strikes me as more authentic: a sense of ruins and ancient power from a decayed civilization with pedigrees of people and things that are "old" if they go back two or three generations.

The speed with which the deck of the social order can be reshuffled has always been truly amazing.

Speechwriters Should Pay to Work for Barack Obama

In the winters of Obama's term we have, IIRC, Martin Luther King Jr.'s 80th birthday, Lincoln's 200th birthday, and the 150th anniversary of the bombardment of Ft. Sumter.

There is not a speechwriter in the world who would not give both organs of generation for the honor of working on any of those three speeches.

God Save This Honorable Court

Duncan Black writes:

Eschaton: The Supremos: I was talking with someone the other day about how oddly absent the Supremos are in this election. The candidates aren't bringing them up much. The press isn't bringing them up much. The next president will likely get to make 2, if not 3, appointments pretty much the day after he takes office. Not saying the lack of discussion is good or bad, just find it a bit weird. Supremo discussions usually loom large in presidential politics.

At the moment the Supreme Court consists of one very smart centrist-liberal Democrat, Ruth Bader Ginsburg; one very smart centrist-centrist Democrat, Stephen Breyer; one very old good-hearted Republican, John Paul Stevens; one very tired center-right Republican, David Souter; one right-establishment Republican, Anthony Kennedy; and four raving Republican wingnuts with varying degrees of cleverness. Seven Republicans, only three of them attached to reality, and two Democrats.

This degree of Republican partisan entrenchment in the court is--in a word--bizarre. It is not a good thing.

Moreover. this Supreme Court forfeited any claim to be due deference from the other branches of the government when it prostituted its office to install George W. Bush as president eight years ago. It then established a new constitutional principle: that if an election is close and if one party has appointed an overwhelming majority of justices of the Supreme Court, that majority gets to decide the election.

Republican hack Alex Castellanos said last night, on CNN: "There is no way for us Republicans to win this election unless we had a 9-0 majority on the Supreme Court." That was a joke. But it really wasn't a joke at all, was it?

Think about that.

Is this a constitutional principle that we want established? No. But it will be established unless we declare that this is not, in fact, a constitutional moment we want to embrace.

How can we push back? How can we keep this from becoming an established constitutional principle? All five of the Bush v. Gore justices should have been impeached, but the Republicans--for partisan political reasons--would not step up to the plate. However, now that George W. Bush is on the way out perhaps Republican senators can be persuaded that they do not want "he who appointed the judges wins" to be part of our constitution.

Therefore, it is time to push back. Three of the justices who prostituted their high offices in Bush v. Gore are still on the bench. Either Thomas, Scalia, and Kennedy resign, or congress needs to sanction them. If Thomas, Scalia, and Kennedy will not do the honorable thing, the congress should neutralize them by temporarily enlarge the court to twelve as a one-time sanction for the way in which they prostituted their office eight years ago.

I am not proposing a permanent expansion of the court: when each of the three retires, he will not be replaced. This would be a temporary deviation from the principle that their should be nine justices in the interest of protecting the higher principle that justices should not be corrupt.

UPDATE: If Souter, Stephens, and Ginsburg retire over the next year or two, that would create six openings on the Supreme Court of the United States. Which six people should be appointed?

Obama's Mandate

Paul Krugman:

Mandate: A magnificent victory for Barack Obama. And bear in mind that the campaign, in its final stages, was really about different philosophies of governing. This wasn’t like the 2004 campaign, which was essentially fought over fake issues — Bush running on national security and social issues, then claiming that he had a mandate to privatize Social Security. In this election, Obama proudly stood up for progressive values and the superiority of progressive policies; John McCain, in return, denounced him as a socialist, a redistributor. And the American people rendered their verdict.

Now the work begins.

Normal Politics and Policymaking Can Now Resume...

Crappy Hour: Stop Worrying About Obama Losing Already

Obama 54; McCain 45...

For the first time since the end of 1994, we can have normal politics and policymaking--can discuss what policies are best for America, and what America should be.

You see, from the end of 1994 to the end of 2000, the Republican congressional majority's single fixed idea was that nothing should happen that could be portrayed as a success for Bill Clinton. And from the end of 2000 to today, the executive branch was controlled by a gang of malevolent, immoral, and destructive thugs that have disgraced the United States of America.

We can finally have normal politics and policymaking again. That's not a tremendous accomplishment, is it?

It feels like one:

And I saw a new heaven and a new earth... the holy city, new Jerusalem.... And there came unto me one of the seven angels... and talked with me.... And he carried me away in the spirit to a great and high mountain, and shewed me that great city, the holy Jerusalem, descending out of heaven from God, Having the glory of God: and her light was like unto a stone most precious, even like a jasper stone, clear as crystal;

And had a wall great and high, and had twelve gates, and at the gates twelve angels, and names written thereon, which are the names of the twelve tribes of the children of Israel.... And the building of the wall of it was of jasper: and the city was pure gold, like unto clear glass. And the foundations of the wall of the city were garnished with all manner of precious stones. The first foundation was jasper; the second, sapphire; the third, a chalcedony; the fourth, an emerald; The fifth, sardonyx; the sixth, sardius; the seventh, chrysolite; the eighth, beryl; the ninth, a topaz; the tenth, a chrysoprasus; the eleventh, a jacinth; the twelfth, an amethyst. And the twelve gates were twelve pearls; every several gate was of one pearl: and the street of the city was pure gold, as it were transparent glass....

And the nations of them which are saved shall walk in the light of it: and the kings of the earth do bring their glory and honour into it. And the gates of it shall not be shut at all by day: for there shall be no night there. And they shall bring the glory and honour of the nations into it...

U.S. News and World Report

James Pethokoukis:

The Latest From Inside McCain HQ - Capital Commerce ( I just talked to one of my best Team McCain sources who told me that heading into today all the key battleground polls were moving hard and fast in their direction. The source, hardly a perma-optimist, thinks it will be a long night, but that McCain is going to win. So add this with the new Battleground poll (Obama +1.9 only) and the rising stock market...

The Class Act that Is National Review...


National Review Online: Waneth the Trembling Moon: From my occasional glances at the TV, waneth is what it doeth. I'm thinking of another election 29½ years ago, when Margaret Thatcher swept into power in the U.K. As I recall, there was no great fuss one way or the other about her being the first female Prime Minister. Those of us who supported her just knew she had the right stuff, and so she did. If the first female Prime Minister had been someone lesser, especially someone from out in left field — Barbara Castle, say — that likely would have been a disaster, and a great many people would have concluded that electing a woman Prime Minister had been a really bad idea.

It is of course a great thing that we are (it seems pretty certain) electing a black President. It's just a crying shame it had to be this shallow, empty man, who has never shown a flicker of interest in wealth creation, whose head is stuffed with all the vapid nostrums of 1980s student leftism, and who seems — putting the most charitable construction on it — not to mind the brazenly thuggish tactics of his supporters. I'd gladly join in the cheering and self-congratulation of our nation's first black president, if it were a person of the caliber of Margaret Thatcher. This guy is just Jimmy Carter lite. Way lite — ol' Jimbo had at least run a business and served in the military.

Inside the Tent...

Youth: Why do the Democrats let Joe Lieberman caucus with them?

Me: You know, it is the old Lyndon Johnson saying: better to have him inside the tent pissing out rather than outside the tent pissing in.

Youth: But he's inside the tent pissing in!

We Are All Frank

I have heard the words "franchise" and "enfranchise" more today more times than in the rest of the past year...

Literally: to make somebody a Frank--a member of the tribe of Franks, that is. So that you then have all the rights and privileges of the Franks, including the right to attend the meeting to choose the new drighten by clanging your sword on your shield (with the candidate whose name elicits the greatest volume of noise being elected).

Bruce Schneier's Forecasts

He writes:

Discuss the election results...with special guest poster Bruce Schneier: This year was the year traditional polling collided with modern statistics. Most people I know watched, but I preferred the math at the Princeton Election Consortium. These sites both took every poll they could find, analyzed the data, and presented a better picture of the race than any single poll could....

Here’s now to quickly assess the electoral vote count. In 2004, Kerry won the northeast through PA and MD, the midwest states of MI, OH, WI, and MN, the west coast, and HI. He lost the EV count by 286 to 252, basically by losing OH. For Obama to win, he needs to win all the 2004 Kerry states plus another big one. That big one could be OH, it could be VA, it could be FL. He only needs one. His firewall is IA + CO + NM; if he wins those three he doesn’t need to win a non-Kerry biggie. This is why his prospects look so good, he has many ways reach 269 EV....

I think we’ll have some idea what will happen early. The first polls close at 7:00 PM EST in GA, IN, KY, SC, VT, and VA. Pay close attention to IN, GA, VA, and SC. How these states come in compared to their polls will be indictave of the night. VA, GA, and SC will tell us a lot about how the South will go. In will tell us a lot about how PA and OH will go.

I predict an Obama blowout. His ground game is easily worth a couple of points, and the pollsters demograpics are underestimating Obama support. Early voting seems to validate these points. Nationwide: +8. He’ll win all the Kerry states plus FL, VA, NV, OH, IA, NM, CO, MO, NC, IN, MT, ND, GA. He’ll win GA by the smallest margin, and lose either AZ or WV by the smallest margin. I also expect some serious Obama coattails, and that down ballot races will also do better. In the senate, Dem pickups in NM, CO, NH, OR, AK, MN, NC, and GA. No KY or MS. In the house, 260 seats for the Dems.

For governorships, wins in OR, MO, NE, WV, HN, DE, and NC. NC will be the closest, but between Obama’s and Hagen’s coattails I expect Perdue to eek it out. And California Prop 8 will lose, barely. Again, Obama’s coattails.

This isn’t enough. What I really want to lose is the Republican all-slime-all-the-time campaign strategy. I want McCain, Dole, Coleman and the rest to be so discredited that no one will try to run a campaign that way again. I want campaigns to be about ideas. Maybe that’s too much to ask.

The Recession Gets Deeper

Greg Robb of Marketwatch:

U.S. Sept. factory orders down sharply for second month: WASHINGTON (MarketWatch) - U.S. and foreign businesses sharply cut back their demand for capital equipment for the second straight month in September, the Commerce Department reported Tuesday. Factory orders fell 2.5% in September, much weaker than the 0.2% fall expected by economists surveyed by MarketWatch. Factory orders had fallen 4.3% in August, the biggest drop in almost two years. Orders for durable goods increased a revised 0.9% in September, up slightly from 0.8% estimated a week ago. But this gain was swamped by a 5.5% drop in orders for nondurable goods. Core capital equipment orders fell 1.5% in September after falling 2.3% in August.

Today's Election-in-Process Talking Points

About Barack Obama:

  1. If he gets above 50.1 percent it will be the highest dem pct since LBJ.
  2. If he gets 54% it will be the highest pct for any non-incumbent candidate of either party since 1952.
  3. If he simply comes in first, with any total, it will be four pop vote wins for dems in the past five cycles.
  4. He should amass more votes than any other candidate ever, including reagan's 1984 standard.
  5. He will be the winning candidate with the highest share of his votes coming from non-whites... and probably the candidate with the highest non-white share of all time.
  6. By this evening 3/4 of American Jews will have voted for a guy whose middle name is Hussein: if we cannot use this lever for good in the Middle East, we do not deserve to be a superpower.

About John McCain:

  1. We simply do not know what kind of president John McCain would make--it could be good, it could be very bad.
  2. We do know what kind of president Sarah Palin would make--and we all should be eager to keep her as far away from the presidential line of succession as possible.
  3. Yes, John McCain ran a dirty campaign. But it was a less dirty campaign than any Republican has run since... well, since the memory of man runneth (with the possible exception of Ford 1976). The difference this year was that--for some reason--this year a fraction of the mainstream press called them on it rather than ignoring it entirely.
  4. The Republican candidates this year were all one or more of: (i) ideologically-blinded, (ii) incompetent, or (iii) risk-loving for its own sake and hence erratic. John McCain was (iii)--which makes him the best of the Republicans on offer this year.

Mitch Daniels: Coward

Reihan Salam writes:

Mitch Daniels 2012 | Politics | The American Scene: If McCain loses this time around, I think I have my candidate for 2012. When Indiana was facing a severe budget shortfall, Mitch Daniels, a budget hawk, backed a tax hike on Indianans making over $100,000. Though the legislature didn’t go along with the proposal, he demonstrated a level of sanity and flexibility that’s admirable. Daniels also made a number of controversial decisions to improve the quality of Indiana’s infrastructure that have since paid off. He expanded healthcare coverage and placed a strong emphasis on prevention. In the Hoosier tradition, he has also sought to increase competition and transparency in the delivery of public services and he’s a firm believer in data-driven — i.e., reality-based — public policy. There’s a lot to like. He’s gone through long spells of extreme unpopularity, yet one senses that he’s won grudging respect from voters. Now, Daniels doesn’t exactly sound like the candidate who will set the base on fire. But perhaps a solid, steady, competent manager, one who turned around Indiana’s public finances, is exactly the face Republicans should be presenting the next time around.

From Ron Suskind's The Price of Loyalty:

p. 219: Mitch Daniels became agitated. He blurted out, "Well, yes, but if you can't do the right thing when you're at 85 percent approval, then when can you do the right thing? I think it's time to say no." Everyone looked with surprise at Daniels--he has a way of expressing what others are thinking but don't say. Often, he'd find himself doubling back when he got an arched brow from Cheney or Rove...

p. 296: The Commerce Secretary echoed much of what had been said.... As usual, not a real discussion, O'Neill thought as he looked over at [Mitch] Daniels.... He knew Daniels was focused on the perils of rising deficits, but it would take gumption to air those concerns in a room full of tax cut ideologues. "I think we need to balance concerns," Daniels said.... "You need to be out front on the economy, but I am concerned that this package may not do it. The budget hole is getting deeper... we are projecting deficits all the way to the end of your second term." From across the table came glares from the entire Bush political team. Daniels paused.... "Ummmm. On balance, then, I think we need to do a [tax cut] package... accelerate the rate cuts and the double taxsation of dividends..." O'Neill looked with astonishment at Daniels... turn 180 degrees in midsentence...

The Wolfsburg Corner

The Economist:

Porsche breaks the hedge funds | Squeezy money | The Economist: GREAT cornering and eye-popping acceleration make Porsche’s cars popular.... Now its clients are discovering that the carmaker itself has an unexpected talent for cornering markets. In a few tumultuous days it is thought to have made a cool €6 billion-12 billion ($7.5 billion-15 billion) on the share price of Volkswagen (VW)—a coup that has roiled the world’s financial markets.

Porsche’s gambit was as old as finance itself. For about three years it had been steadily increasing its stake in VW.... Its buying had driven up the price of VW’s shares to above the level at which it would make any economic sense for Porsche to buy VW. Seeing this, hedge funds sold shares in VW that they did not own. One strategy was a bet that VW’s share price would fall. Some also bought shares in Porsche, in a wager that shares of both would converge.

The risks of short selling should have been apparent to the brightest hedge-fund managers in Mayfair and Greenwich because of widespread suspicion that Porsche, a dab hand in currency-derivatives markets, was also mucking about with options on VW stock. Adam Jonas of Morgan Stanley warned clients on October 8th of the danger of playing “billionaire’s poker” by betting against Porsche. Max Warburton of Alliance Bernstein said Porsche could make billions by squeezing short-sellers of VW’s shares.

At the time Porsche dismissed these musings as a “fairy-tale”. But on October 26th it executed a handbrake turn, saying that it owned nearly 43% of VW’s shares outright and had derivative contracts on nearly 32% more. That meant it had tied up almost all of the freely available shares (the rest are held by the state government and index funds). Hedge funds quickly did the maths, concluding that they could be caught in an “infinite squeeze” in which they were forced to buy shares at any price.

Their frenzied buying sent VW’s share price soaring.... After languishing below €200 last year, it jumped to more than €1,005 at one point on October 28th, briefly making VW the world’s most valuable company....

Hedge funds that take bad bets may garner little sympathy, but the VW saga does more than punish a few “locusts”. On October 28th shares in Morgan Stanley, Goldman Sachs and Société Générale wobbled on worries (denied by all) that they might also be exposed to VW. If the losses are big enough to cause the failure of even a few hedge funds, that would spell more pain for the battered banking system. Other casualties include buyers of passive funds that track the German market who will end up with a disproportionate stake in VW within their portfolios. With VW’s share price falling again, those who sell now will lock in a loss.

The greatest damage is to the reputation of Germany’s capital markets, where regulators are now belatedly investigating what went on. Allowing acquirers to build large secret stakes in bid targets does nothing for confidence. Even Porsche may come to rue its coup. “They may struggle to sell 911s to hedge-fund managers for years and years to come,” says one investor.

Lyndon Baines Johnson

Before congress:

LBJ: There is no cause for pride in what has happened in Selma. There is no cause for self-satisfaction in the long denial of equal rights of millions of Americans. But there is cause for hope and for faith in our Democracy in what is happening here tonight. For the cries of pain and the hymns and protests of oppressed people have summoned into convocation all the majesty of this great government--the government of the greatest nation on earth.

Our mission is at once the oldest and the most basic of this country--to right wrong, to do justice, to serve man. In our time we have come to live with the moments of great crises. Our lives have been marked with debate about great issues, issues of war and peace, issues of prosperity and depression. But rarely in any time does an issue lay bare the secret heart of America itself. Rarely are we met with a challenge, not to our growth or abundance, or our welfare or our security, but rather to the values and the purposes and the meaning of our beloved nation. The issue of equal rights for American Negroes is such an issue. And should we defeat every enemy, and should we double our wealth and conquer the stars, and still be unequal to this issue, then we will have failed as a people and as a nation. For, with a country as with a person, "what is a man profited if he shall gain the whole world, and lose his own soul?"

There is no Negro problem. There is no Southern problem. There is no Northern problem. There is only an American problem.

John McCain: Dishonest and Dishonorable

Steve Benen:

The Washington Monthly: AN OBJECT LESSON IN VETTING.... No matter what happens tomorrow, I'd like to think presidential campaign have learned a valuable lesson about the importance of vetting. That's obviously the case when it comes to running mates -- John McCain had no idea who Sarah Palin was before putting her on the national ticket -- but it's also true when it comes to picking mascots to exploit.

Sam "Joe the Plumber" Wurzelbacher asked Barack Obama a question a couple of weeks ago, and according to the McCain campaign, quickly became the single most important person on the planet. McCain didn't know anything about the guy, but Obama told him he'd like to "spread the wealth" around to the middle class, and as far as the Republican ticket was concerned, that's all they needed to know. Wurzelbacher became the central focus of a McCain debate strategy, ad campaign, stump speech, and multi-state tour.

And yet, Wurzelbacher's penchant for saying insane things suggests McCain probably should have thought this through before acting. Yesterday, McCain's mascot told Fox News that "greatly" questions Obama's "loyalty to our country."

This came five days after Wurzelbacher endorsed the idiotic idea that a vote for Obama would be "a vote for the death of Israel," and four days after Wurzelbacher said the notion of progressive taxation is "honestly right out of Karl Marx's mouth. No one can debate that. That's not my opinion. That's fact."

Josh Marshall noted that, as far as the Republican ticket is concerned, Wurzelbacher has "become a part of McCain's campaign, like any other surrogate." That's true, but it also goes further -- just a few days ago, McCain described Wurzelbacher as "an American hero, a great citizen of Ohio and my role model."

"Role model."

In other words, the Republican nominee for president has picked some strange man who believes bizarre things and, without any vetting at all, made him the centerpiece of his entire campaign.

Let this be a lesson for all future presidential campaigns: vetting is your friend.

Yes, Virigina, There Is a Credit Crunch Going on

Shawn Langlois:

GM, Ford post big October sales drops, so does Toyota: SAN FRANCISCO (MarketWatch) - General Motors Corp. reported on Monday a monthly sales tally that plumbed the lowliest of Wall Street's grim projections, as the struggling automaker blamed the nation's credit crisis for its 45% plunge in October U.S. sales. Separately, Ford Motor Co. handed in a 30% drop, touting the launch of its new F-Series pickup as a silver lining in an economic environment marked by challenges "the likes of which haven't been seen in more than two decades." Chrysler LLC posted a 35% decline.

Toyota Motor Corp. and Honda Motor Co. both fared slightly better, but their sales were still off more than 20% each. The final industry numbers have yet to be tallied but, according to George Pipas, Ford's top sales analyst, the seasonally adjusted annual rate of sales could fall below 11 million cars and trucks and finish the year at less than 14 million in total vehicle sales.... General Motors reported that its light vehicle sales plunged to 168,719 cars and trucks in October from 307,408 a year ago. The car side took a 34.3% hit to 73,466 units, and total truck sales dropped 51% to 97,119 vehicles.

"If you adjust for population growth, this is probably the worst industry sales month in the post-WWII era," Mark LaNeve, head of GM sales and marketing, said. "We believe there is considerable pent-up demand from the last three years, but until the credit markets open up and consumer confidence improves, the entire U.S. economy, and any industry like autos that relies on financing, will suffer"...

John Cochrane: Some Simple Economics of the Financial Crisis

John Cochrane**: Some Simple Economics of the Financial Crisis:

A decline in new loans does not necessarily imply a ‘credit crunch’ is under way, in which undercapitalized banks are unable to make new loans, nor does it demand government action to save individual banks, said John Cochrane, Myron S. Scholes Professor of Finance. ‘Recent data shows the banking system is working well,’ Cochrane said.

‘The banking system is unwilling, not unable, to make loans, reflecting the preferences of the people who invest in it,’ he added. ‘People have learned that banks and businesses can fail. The risk premium, especially for credit risk, has shot up, so people’s willingness to make risky loans of any sort or hold risky assets is much less. When the supply of risky loans shifts, we make less loans at higher interest rates. That is exactly what we’re seeing.’  In addition, Cochrane pointed out that banks don’t ‘lend to hold’ anymore, then ‘originate to sell,’ and they won’t do that until they can sell securitized debt to us, the ultimate savers.  

Cochrane’s presentation opened a two-day discussion of the unfolding credit crisis at CRSP Forum 2008 hosted by the Center for Research in Security Prices at Gleacher Center in Chicago on November 3.

He pointed out that his view stems from studying capital markets, not banking, whose scholars have diagnosed a ‘crunch’ in the banking system and advocated government ‘injections’ of capital. ‘We’re all like two-year-olds with hammers, where everything you see looks like a nail,’ he said. ‘But you have to use what you know and look through the binoculars you know how to use, and I hope to offer a different perspective.’

A number of factors suggest Cochrane’s view is a more accurate version of the current economic story than the view that undercapitalized banks are unable to originate loans, he said:

  • After a year of crisis, the banking system’s ability to lend has decreased little. ‘Individual banks may not be able to lend,’ Cochrane said. ‘But the overall banking system’s numbers seem fine, and lots of other lending is going on.’

  • Banks can and do raise equity capital. Since the crisis began, total writedowns, or losses, and capital raised by banks are about the same, he said, and total $400 to $ 500 billion. The ‘crunch’ view states that this can’t happen, so banks must halt lending instead after their assets decline in value.

  • Banks can and do fail and get taken over. Their operations continue under new ownership, able to make new loans.  ‘The mechanisms that said we were going to get stuck in this credit crisis didn’t happen, quite surprisingly so over the last year,’ Cochrane said.

  • Banks represent a smaller fraction of lending than many people assume. Commercial banking provides 17.5 percent and saving institutions three percent of the debt in our economy, he said. Direct lending can continue despite banking problems.

The Treasury purchase and debt guarantee did not stop the ‘crisis’ in its tracks. ‘Banks that got equity and debt guarantee from government are still showing remarkably little inclination to lend to anybody,’ Cochrane said. ‘They’re holding massive reserves and paying dividends. They didn’t ask for the equity capital, are showing all sorts of signs of not wanting more equity, and are capable of getting more. They’re buying other banks. To the consternation of liberal Congressmen, who, now that we own banks, may start to force them to lend, they don’t seem to want to lend.’

Very high-risk premiums currently exist for non-financial assets, which do not reflect bank failure and are not intermediated by banks. Cochrane also passed on some thoughts on how investors should react to stock market turmoil — that is, why not to panic. He pointed out that recent huge declines imply better returns going forward; stocks are a little bit like bonds in that regard, and long-term investors can therefore ignore the current extraordinary short-run volatility. Some investors might even want to buy. ‘The economics of the situation say that long-horizon investors should be buying because we see panic selling by institutions that have borrowed money and have to de-leverage,’ Cochrane said, though he added ‘I’m back to just holding the market.’

Many dangers lie ahead in financial markets adapting to much higher risk premiums and in the political effects of government bailouts, he said. ‘You’re supposed to bail things out only when there are systemic effects ─ only when if this institution fails, supply won’t equal demand because this institution won’t be there to do something. The economic principle is, you bail out only as a last resort to stem systemic effects.’ He also stressed the great uncertainty engendered by constantly shifting government plans.  

The government’s ownership share of nine banks raises many questions, Cochrane said. ‘Can those banks ever lose more money or fail?’ he said. ‘Will the government prop them up forever? Now that the government owns banks and Congressmen are certainly aware of it, aren’t they going to get a little mad if the banks start lending to people they don’t like? Who’s next? Ford and GM? Insurance companies? People whose home mortgages are under water? State pension funds?’