If I Were King

President Obama met with the Congressional leaders of both parties today to discuss what could be done in the near-term legislatively. I wasn't a fly on the wall, or anywhere close to it, but here's the speech I would've given if I were he.

Good morning Speaker Pelosi, Speaker-elect Boehner, Majority Leader Byrd, Minority Leader McConnell, and all the rest of you in the current and future Congressional leadership. I welcome you to the White House and thank you all for coming here, and I will be eager to hear your thoughts on getting the economy going and taking the right steps to make our nation more secure.

I would encourage you to take up the debate of tax policy in this closing session of the current Congress, just as you are planning to do. I know that the Senate Republicans have the ability to block an extension of the middle-class tax cut that I want, but I have a similar capability to block an extension of tax cuts for the wealthy. So, let's end this Mexican standoff and move forward.

I will promise to sign a tax cut extension for the rich folks under the following conditions:
1) it must come to my desk before December 15; and
2) it must be separate from the tax cut extension bill for the middle class, which must be approved before the end of the session, and about which my requirements are more specific.
I know it is not my place to write the legislation, but I would recommend that the best elements to retain from the tax cuts are the lower rate on capital gains, the savings of which are more likely to be re-invested in our economy, and on dividends, which will help the stock market. We all know that stock market success by itself will not bring down the level of the unemployed, but it is important in bringing back consumer confidence, which, combined with other favorable developments will bring the necessary resurgence in investment.

I have a further suggestion: since many of you seem to believe that these lower taxes for the wealthy somhow promote jobs, let's put our money where our mouths are, and make the tax cuts for the wealthiest income groups dependent on the growth of jobs: if the net job growth over the next year meets targets, the tax cuts would be extended automatically; if they fail to produce the jobs, they would end. Our Labor Department will be glad to work with you to set those job-growth targets at achievable levels if the cuts are working.

As for extending the tax cuts for the first $250,000 of taxable income, I am less flexible, but I am cognizant of the need to reduce budget deficits. I ask you to pass a bill which permanently resolves the problem of downward-creeping Alternative Minimum Tax levels, and which extends the tax cuts for two years. This bill should contain provisions for the tax cuts to be renewed under reconciliation procedures with a simple majority of both Houses.

If you pass this bill, I will sign the bill for the tax cut extension for the rich folks that you come up with; if you don't I will use my power of the pocket veto to kill that extension. I would encourage my Democratic colleagues to work with the Speaker-elect and Majority Leader to come up with a sensible compromise.

But let me advise you: I will have no hesitation in vetoing any and all retroactive tax cut extensions in the next Congress, or any passed now that do not meet the tests I have provided you. It is a great honor to serve the American people in this position, but, having done it for about two years now, I can tell you that it is not much fun most of the time--I will not miss it.

The time while the House puts together the bills for tax policy would be a great opportunity for the Senate to debate, and then to ratify, the START2 treaty with Russia. When you review the committee proceedings and what we have done since then, you will see that we have answered with clear progress all the objections which were raised, whether for cost of modernizing our nuclear weapons or arranging for the best possible, most economical missile defense program--one that has the full support of our allies and even the agreement of Russia. The consequences of failing to ratify the treaty would be grave, in so many areas, and failure to ratify in this session would be a major setback for our security. I trust you to do the right thing.

Finally, I ask all members to review the report coming out today on the military's "Don't Ask, Don't Tell" policy. You will see that a change in this policy, overdue in the minds of the public, will have only positive effects on our military readiness. By all means, bring in the Defense Secretary, the Joint Chiefs, but take the action that they are recommending. This is one more area in which we owe the American people prompt action, working together.

I trust that this is only the first of many meetings to work together for our country's benefit. Thank you again.

Thoughts on Thanksgiving

One thing that we're kind of asked to do for this holiday is to think about all the gifts we have and be grateful for them.

My own thoughts often run along the lines of, "Why me? Why here? Why now?" Not in the desperate, hair-pulling sense, but more from the point of view of seeking a larger meaning of my life in my circumstances and opportunities.

The "now" part may be the most explainable: I haven't done the math, but I have to figure that, at least in the 6,000 or so years of recorded history, a good portion of all the people who've lived are alive today (I'm guessing about 10-20% of them). So, whether you believe that souls are reborn or just go around once, it's not that strange to be around now (and who knows about the future?) Still, I feel that, compared to most of those folks in most of those times, I'm very lucky to be alive at this time when so much seems to be at stake through how we conduct our lives (even if we haven't done all that well, so far, in terms of providing for the future of humanity).

Then there's the "here" part: Given that now's our time, certainly I'm lucky (about 5% chance) to be part of this American society, blessed as it is by our resources, our favorable climate, our abundance, our liberty. From what I have seen in my travels, I can appreciate these gifts: it's not so much that our lives' quality is so much better, but our opportunities are greater.

The "me" part is the trickiest. I'm one that believes that, while I have accomplished some things through perseverance and occasional insight, I don't really deserve all that much credit. I wasn't born wealthy or anything like it, but my advantages have been many, and I didn't do all that much more than--for the most part--utilize them, rather than waste them.

I'm also not one of those who has always known what I was born to do; even now, I'm not sure I will ever know that (until, of course, that day may come when I know that whatever I've done was all that I was ever going to do). I figure the best I can do is learn what I can, be open to the possibilities, try and hold on to a little wisdom and judgement, and do the right thing when those critical occasions (or maybe, some particular occasion) may come before me. The role model is someone like Gerald Ford (!), who found himself President though he had never sought national elective office, and did the best he could (and it wasn't that bad, really) when he got there.

Of course, there are those substantial things like the family I grew up with, the family I have now, the friends I've made, my loves, my jobs, my homes, my entertainments. All of which have been excellent, or even better than that.

I guess what I'm trying to say is that, although there is much I don't understand, I know enough to see that I have much for which to be grateful.

It Rears Its Ugly Head Again

North Korea has proved this week yet another time that it is the worst, and most dangerous, actor on the international stage. It escalated a tense situation by using its artillery to fire on South Korean territory. South Korea fired back, and we can only hope that will conclude the actual use of armaments, instead of just aggressive posturing (the US and S. Korea were conducting joint maneuvers prior to the gunplay, while the US is maneuvering an aircraft carrier into the area to show its support for South Korea, while North Korea's threats and provocations are just their normal bodily function).

North Korea's dictatorship cares not a whit for its people, but one has to believe its rulers will not seek open, unlimited conflict. While they can cause great damage to South Korea, the response would be complete destruction of their own country, no doubt with a priority placed on wiping out all government and military facilities. It would bring some pleasure to permanently eliminate this ugly blot on the governance of humanity, and I suspect the US has the war plan mapped out in full detail, but the cost to our South Korean allies would be too great, not to mention that it could cause a greater escalation involving North Korea's solitary backer, China.

I don't really believe a regime of sanctions would have much deterrent effect, though denial of the aid this beggar regime usually seeks could be inconvenient (especially to China, who'd have to make up the difference), and a proposal to impose them in the U.N. would be vetoed by China, anyway. Like a dog closed in a room alone that tears up the furniture, North Korea's misbehavior is a plea for attention.

We cannot appease the North Koreans during this period of madness, but we should assure them that if they will only quit acting up we will be willing to meet with them. Of course, they are completely untrustworthy when it comes to their agreements, but if we can get sufficient access for verification, we can once again resume efforts to reduce the harm they cause to the region through their threats and ambitions to produce nuclear weapons.

In a month or so, President Obama could perhaps nominate our state's current governor Bill Richardson to be the point man of our negotiating team. He is one American they are willing to trust--he has a fairly long history of dealing with them, going back to his days as US Ambassador to the U.N.--and Richardson is leaving his job at the end of the year. He's about as popular as a North Korean dictator around these parts right now, but he's an experienced negotiator, discreet, and an ally of President Obama that he could trust.

Politics and National Security

I am usually amused when politicians of all stripes react in horror to the notion--in the words of the "Casablanca" police chief, they are "shocked, shocked"--that someone may be "playing politics" with matters of foreign affairs, even of national security. As I am with most hypocrisy. Military policy, like diplomatic policy or trade policy, is subject to the winds of political fortune, and it is naive or infantile to pretend otherwise. Similarly, the idea that private citizens may never carry their disputes with official policy in these matters beyond our borders is self-deceiving or excessively innocent.

The idea of these pretenders is that there is something which may objectively be called "the national interest", and that it is the role of the Henry Kissingers and think-tankers of Washington to determine what that is; after which we should all salute it and fall in line. The danger, they will point out, is that by making these matters partisan, they will be held hostage to parochial interests and, inevitably, gridlock. As we will see later, that is exactly what Republican Congressional leaders are trying to do with a couple of current national security issues.

The answer to politicization of such topics is to point out such things as the results--both the intended and likely unintended ones--of proposed policies; to identify the interests that stand to gain, or lose, from them; and to consider such larger issues as how policies will be viewed by the world and how they may affect or modify our country's mission in the world. These are political arguments, though ones that are honestly presented, and I would not pretend otherwise.

Case Study: Iraq
If we look at the U.S. invasion of Iraq in 1993 and events leading up to that, there are three separate events in which I would point to very clear politicization of military policy by the Bush Administration.

The first is the timing of the authorization votes in Congress which President Bush ultimately used to demonstrate legal justification for the invasion: October, 2002. Why did Bush & Co. wait a year or more after 9/11 to request it, if it follows logically? The answer is not that they are slow thinkers, or that something additional happened in the meantime which changed our policy's direction, or even that it took that long to rally the political support for the vote, which was ultimately, arguably "bipartisan" (in that many in Congress from both parties supported it). The vote was taken at that time to put the maximum pressure on Democratic Senators and Congressmen (and on any Republicans who may have been wavering) to support the resolution. The argument was clear: It was their patriotic duty to give the President what he needed, and the Sword of Democracy, in the form of likely revenge from the bamboozled public, dangled over them should they dare to challenge the official wisdom.

The second was the timing of the invasion itself; we heard lots of stuff at the time about how it was so important to invade at that exact time because of weather conditions (which turned out to be awful for the actual invasion), and Bush himself asked the question, "How long were we to wait on the borders once the invasion force was assembled? For what?" This argument ignores the fact that there were supposed to be inspections of possible WMD sites that were interrupted because of the imminent attack, or even the longshot possibility that those inspections might have made the invasion (seem) unnecessary, something that was unthinkable to consider once the invasion force was in place. The real reason for the timing had been calculated long in advance: April 2003 was the optimum timing, more or less, to get the invasion and occupation over with and gain the maximum political advantage from Iraq's new democracy for the re-election in 2004. That it didn't turn out that way this time, that Bush had to deal with the blowback in 2004 (but still somehow got elected) does not change that fact.

The third was the infamous "outing" of covert CIA agent Valerie Plame Wilson occurring soon after the invasion, and the coverup which followed that disclosure. Because her husband, former Ambassador Joseph Wilson, had the temerity to call the allegation that Saddam had sought uranium in Niger a lie (which he knew because he had been asked to investigate it), certain key people in the Bush Administration decided to take steps to discredit Wilson, including telling columnist Bob Novak and other journalists that Wilson's investigation had been pushed by his CIA agent wife. Because she was a covert agent, and it is a crime to disclose intentionally the identity of a covert agent, it then became critical to protect the administration from the danger that this political conspiracy gone awry could pose--it could have been the Watergate-type event which brought down the administration, or brought its political defeat in the 2004 election. (I'm looking forward to seeing the dramatization of this history in the new movie, "Fair Game", which I will make a point to review when it comes to our town.) Unfortunately, some cover-ups succeed, and though V.P. Cheney's assistant Scooter Libby took the fall for the conspirators, the lid stayed on until 2006, when it just became more rubble in the massive collapse of W's second-term administration.

The point of reviewing these is just to show the degree to which political calculations routinely enter into these decisions; their actions are contemptible because of the underhanded (or possibly, in the case of the Deputy Secretary of State Armitage's disclosure of Plame Wilson's covert identity, clumsy and inadvertent) tactics, and because of the dishonesty before the public and the world.

The Matters at Hand
The announcement by Republican Senator Jon Kyl--the person designated to be the point man for his party in the consideration of the START2 nuclear disarmament treaty with Russia signed by President Obama and under consideration for ratification--that he does not believe there is time to address his concerns in the lame-duck session is pure politics, that is certain. The substantive concerns raised by the Republicans in committee hearings have been addressed directly by the Administration:

First, the concern raised that our nuclear weapon capabilities needed to be revamped has been answered clearly by the Administration's generous commitments of funding for that purpose;
second, there was a concern that Russia's distaste for American missile defense programs had not been satisfied in the treaty's provision--that has now been fully addressed by the agreement of the NATO nations, with Russia's acceptance, to deploy revised missile defense systems for Europe (and for Israel). *

Kyl's reluctance to deal with the issue now does not reflect new reservations about the treaty, but just a desire to stall for time until the new Congress comes in, one in which the Republicans will be in a better position to demand additional concessions from the Administration to pass the treaty. Worse, they may seek then to hold it up indefinitely in order to discredit the Administration before the rest of the world and the American voters. The political calculation would be that, while Russia is no longer the Cold War-era Communist threat to our way of life, it's still safe to treat them as our mortal enemy.

This post is already too long, but the key points about the treaty are these: no one claims that the mutual reduction in arms would endanger our security, the treaty is necessary to resume verification inspections in Russia (critical for the effort to ensure the security of nuclear weapons materials from the danger of falling into the hands of terrorist organizations), Russia's continued cooperation in our efforts to restrain Iran and North Korea may depend on this important confidence-building treaty, and we are required by the Nuclear Nonproliferation Treaty to take steps to reduce our nuclear arsenals. All these considerations seem to be secondary to the Senate Republican leadership's political calculations (and poorly calculated, to boot).

Then there is the question of the repeal of "Don't Ask, Don't Tell" from our military policy, which has been proposed for inclusion in the military authorization bill under consideration. As proposed, the change would be implemented by the military services according to their leaders' judgment of the best manner to put it in place. Republican Senators seem intent on digging in the heels to block the provision, even though it is supported by Secretary of Defense Gates (a Republican) and the military's Joint Chiefs of Staff.

As with the START treaty and Russia, the Republicans seem to have made the political calculation that they can gain by blocking this change: they will discredit the Administration and its authority over the military, they can appeal to the homophobic who would not want to admit there may be gay people in our armed forces, and they calculate that they will only offend gay people, who would have to be nearly insane to support the Republicans anyway (though some do).

It's just politics as usual, but it's bad politics. The only remedy is good politics.


*Missile defense still suffers from one fundamental problem--it doesn't work--but at least Obama has changed the program to a less costly form, one that is not designed to be a thumb in the eye to Russia nor an embarrassment to Turkey.

Impious Thoughts

This seems to be the time when those supposed allies and fellow travelers of the Obama Administration get to take free shots at the President. It probably helps that Rahm Emmanuel has departed (less fear in attacking) and that Obama is out of the country. Those who are doing so are falling into two groups: those who need to be cynical about everything for professional reasons, and those who have been secretly harboring bitterness about one issue or another while trying to support the broader Democratic effort during the election campaign.

Now that it's over, and the Democrats have well and truly been shellacked, to these people it seems perfectly natural to come out with virulent attacks about everything except Obama's basketball skills (here, there is truly no reference point, as a basketball-playing President seems without precedent, and it seems they--those skills--are pretty impeccable, anyway). To give the names, I want to villify in particular Maureen Dowd, Frank Rich, and Jim Van de Hei. (I would normally provide links, but I really don't recommend that you read the pieces.)

Dowd's fickleness is no surprise; the latest foul ploy is a column written from the perspective of her Republican brother Kevin. I don't believe her and think it's just a cheap trick allowing her to give vent to her most wicked, disloyal thoughts; even if she did have such a brother, why would we want to read his opinions, paraphrased? Rich's column was a real disappointment; he seems to feel that Obama's supporters who went down in the midterm bloodbath were sacrificed for too little; what I'd say is that Rich sees his beliefs challenged by the electoral defeat and blames the leadership. Van de Hei, in Politico, allows a variety of unnamed Democratic pols to vent about a variety of things, some incredibly petty.

The common thread is that Obama is arrogant, out of touch, and isolated. They question whether he can get his mojo back. Rich, Dowd, and the party's carping hectorate seem to want a different President, the one they imagined that they had.

Another common thread is the lack of prescription: Very little is offered in the way of constructive suggestions. Either they have none, or they're waiting for a better time, such as...when?

I am not bound by such restrictions; I can accept the reality of the drubbing without losing faith that we have the best leader, who has pursued wise policies, and that he can lead us to better times. I will modestly suggest some areas in which President Obama can provide some thoughtful leadership, just as he has done in the past, but today I will restrict myself to a few comments on process, and on immediate issues (ones that need to be tackled during the lame-duck Congress).

Popping the Bubble

President Obama has been very frank that he is frustrated by the difficulty of getting exposure to a sufficiently wide variety of "folks" (you don't have to quit using that word, Barack!) The White House is in a permanent state of surface tension, one that is shored up by security needs, and those admitted within are likely to fit into one of three categories: the overawed, friends protecting him, or subordinates protecting themselves.

Two very simple ideas should help soften the shell, if not to collapse it completely. The first is just to have more Cabinet meetings and get the group to participate in a wide range of debates. The Cabinet was well-chosen; it is full of people who are experienced, intelligent, and accomplished, many of them being very savvy politicians, and there is a wide range of political viewpoints (including a significant number of Republicans). President Obama must use them wisely. The rules must be established with all Cabinet members: no telling tales on others, no vital secrets leaked, no disparagement of colleagues; and failure to observe these rules would be grounds for exclusion from future sessions, if not dismissal. Surely they all want to be playing, so they should follow the rules.

The second is to reach out from the bubble to pull us in: to have a systematic outreach effort to identify people who could be brought in and actually encouraged to interact with the President, either one-on-one or in small groups (and backed up by private chat access). President Obama needs to make time--maybe two or three dinners and a couple more hours a week--to sit down with these people and engage them in a relaxed, but substantive, way.

The campaign site has long invited people to contribute and essentially participate in lotteries to meet with the President. This is much too random. There is no doubt that the White House must receive thousands of letters a week; the data base of contributors can be scanned on the Internet to identify people who could be potential candidates; local newspapers have people writing in to express their thoughts. Find the ones who have something constructive to say (even if they're not partisan Democrats), screen them to find ones willing and able to help, and bring them in on the sly.

The 111th Congress is Only Lame, Not Dead
Here's a walking-stick of support.
There are three areas we should hope that the lame-duck session of Congress should address directly, and others that departing Congresspeople should be invited to opine upon freely before they leave.

The first, of course, is that of the expiring Bush tax cuts. Republicans seem to think their interests are best served by taking outrageous negotiating positions on this one; it is true that they can bring up the issue next year with extensions of cuts made retroactive to the beginning of 2011. Obama should take a stance that is extremely accommodating of the Republican point of view with regard to tax cut extension as a short-term program, but that is firm that he will not hesitate to veto tax cuts in 2011 that do not suit him, either politically or economically. Republican insistence on tax cuts for the rich is an issue that will end up burning them badly, if he forces the issue.

My view is that none of the tax rate cuts should be extended more than three years, even for the lower incomes; that, given the weakness of the recovery, dividends and capital gains reductions are the best part of the cuts to extend, if some must be extended indefinitely; that the alternative minimum tax bands have to be more definitively walled off from the middle class, so they won't need to be fixed again every year or two; and that a new band should be established for true high-end incomes over, say, $1 million.

Here are two out-of-the-box ideas to help make it work: 1) Obama and the Democratic leadership should agree that, if an agreement can be reached on high-end tax rate cuts and their duration, that would be passed first as a confidence builder. Once they've gotten theirs, with Democratic support, the tax cuts for everyone else would be approved--and to guard against the possibility the Republicans renege, President Obama can use the pocket veto.
2) A novel approach that violates economic theory but could work would be to make the tax cuts dependent on the expansion of jobs in 2011; if the job expansion materializes (as confirmed by some official measures), the cuts would continue(!) indefinitely, and if they prove not to work, they would expire. Part of the rationale for this counterintuitive approach is that if jobs increase, then there will be more revenue, allowing us to meet long-term budget targets while continuing something that's working. The targets might be modest, like closing 10% of the jobs gap toward a desired level like the traditional non-inflationary 5% gap from full employment.

The second big issue that must be tackled is the proposed START2 treaty with Russia. The proposal has been thoroughly vetted in committee and by defense experts, and it's been watered down by requiring (unnecessary) development of a new batch of nuclear weapons, It's time to fish, not to cut bait. It's make or break time, in terms of relations with Russia, and breaking is exactly what we should not do. If we are serious about our participation in the international nonproliferation treaty, we are basically required to do something, and this is such a small thing, we must do it. To give just one example of the huge negative consequences a failure would bring, not approving it would virtually guarantee an end to Russian cooperation in keeping Iran from making and testing a nuclear weapon. Plenty of Republican senators will support the treaty if given a chance; a filibuster would not work. John Bolton has now come out against "hasty action", and he's my pole star: I navigate directly away from whatever he says.

Last of the big unfinished business that must be done now is bringing to a conclusion the "Don't Ask, Don't Tell" saga. Secretary of Defense Robert Gates has come out in favor of ending the policy--and the law--and he has clear ideas on how to implement the change. Very simply, Gates should request an audience with the current Congress' Republican caucus, he should tell them how it should be done, and they should get behind it. Otherwise, the Administration should announce an orderly end to its enforcement of the policy; the Defense Department has already signaled this direction by requiring any penalty discharges be approved at the highest level, and the policy can no doubt be redefined by fuzzing up the definition of coming out gay until it becomes acts of insubordination, and thus something that directly undermines unit discipline.

Last outreach suggestion for today: The outgoing Congresspeople are among the best possible ones to get advice--on the record--about two long-term problems: a sensible plan for reining in the deficits, with or without full employment; and the mortgage deduction phase-out being proposed by the deficit reduction commission; and a short-term issue: a nonpartisan proposal for revising the rules of the Senate (specifically the filibuster-related provisions). Any proposal would have to be made at the outset of the Senate session in January, but the concept of a proposal that favors neither the majority nor the minority might seem fair to people in both parties now.

A Kinder, Gentler Bushite
Are They Human? Or Are They Dancing?--The Killers
I have been impressed by the discipline former President George W. Bush has shown since emerging from retirement to launch his new book. Showing great respect for his former office, as well as to the job's difficulty and complexity, Dubya is refusing to make any criticism of President Obama and his policies, and he's sticking to it. I'm not ready to read the book, much less to recommend it, but I'm willing to praise this, and I'll make this further offer: I will retire my use of the word "Bushite" to refer to "establishment Republicans" (that phrase for it that seems to have settled in, despite my best efforts). The only conditions on that promise are that fmrPOTUS W continue to observe that restraint, that his brother Jeb does not run for President, and I allow myself its use as a putdown when someone impolitely calls me a "libturd". What is that supposed to be a wordplay on, anyway? (Don't answer, it's a rhetorical question.)


I missed David Brooks' editorial "The Crossroads Nation" when it first came out Wednesday. Naturally, when I ran across it, I thought it was about Turkey, and opened it to find a fairly modest proposal that, if we play it right, this lonely outpost America could have a global future as the location of a chain of local hives of cultural and economic activity in a hypothetical 2050. To me, he was making the entirely reasonable suggestion that we must think about such things--and now--and just throwing out his idea, for what it's worth, to start the debate.

In the letters, Brooks was flamed deeply, widely and persistently. I read several pages of the comments--starting from the Most Recommended--and never saw one that supported even the topic of the discussion. The comments were mostly about how stupid Americans were, in so many ways as evidenced by the recent elections, and very little about how that related, or didn't relate, to Brooks' idea. OK, it was bad timing, but I'm going to persist in trying to stay on the subject when I post on those things, even if I agree with some of the sentiments.

I will try to bring future suggestions under the tag (Label) of "impious thoughts".

Crawling through the Wreckage

The Voters in Their Wisdom...blah, blah, blah.

Unlike the politicians, pundits, or others who need the goodwill of the public for their living, I have no compunction about debunking that introductory phrase which will lead almost every speech.

To say that the government cannot continue to run trillion-dollar deficits is the wisdom of the obvious. Those who blame out-of-control discretionary Federal spending programs like the stimulus program for the deficit have it factually wrong, though; most of the deficit comes from the impact of decreased revenue--due to reduced income caused by the Great Crater and the continuing impact of tax reductions--and from the cost of our military and our unfunded wars in Asia (OK, maybe one could call those discretionary, but even that would be an indictment of their continuation, as wars should be compelled of us, not our choices).

In response to the folly of our voters, the lame-duck Congress seems likely to perpetuate the folly of the Bushite tax cuts. It is also factually incorrect to say that our citizens and our businesses are overtaxed, as compared to the other developed economies, most of which have recovered much more vigorously to the Great Crater than we have. Neither does the business community's excuse of "uncertainty" as a reason for holding off (on expansion decisions which would add jobs) hold any water: all business expansion is done in the context of uncertainty, except that which is spurred by monopolistic control--if that's what businesses are expecting as a condition, we are doomed either to fascism or perpetually high unemployment.

I would say that it is instead the certainty which holds them back: certainty of slack aggregate demand, continuing de-leveraging of households' financials, certain continued excesses of available labor which allow them to offer less for more productivity from workers, near-certain continued improvements in productivity largely driven by technology improvement. Plus, there is the negative effect of what everyone sees as not certain, but likely: increases in benefit costs per employee, increases in costs of inputs for those utilizing any sort of raw materials, rising inflation.

Voters' priorities wisely center around the poor pace of recovery and high degree of underemployment. I don't see any sign, though, that their choices are going to promote the chances of a faster, more durable recovery. What is the job-producing agenda of the Republicans? Repeal health care reform; remove the financial oversight and allow the conditions that produced the economic collapse to be restored; maintain indefinitely the deficit-producing tax reductions which were in effect when the economy collapsed? Buh?

Mostly, though, I don't buy the wisdom of voters' choice--and it's mostly two groups of "voters", the independents and those who for whatever reason didn't show up to vote this time--to give the Republicans "a second chance" (and I do feel it's accurate for them to interpret their mandate that way). The Bushites permanently forfeited their party's claim to any demonstrated ability to competently manage our government; giving them another chance was an excessive act of generosity, even if it was not done in that spirit.

That Being Said...
It is impossible to minimize the damage that the voters, "in their wisdom", have done to the great possibilities of the Obama Administration and to their own interests. The damage is political, but the political damage will likely impair our nation's ability to prosper and make intelligent decisions, forward-looking actions, for years to come. As Jon King said, the voters "put the car in R", and thus we go backwards.

Independent voters, again "in their wisdom", have expressed their preference, both explicitly in poll question responses and implicitly through their choices, for divided control of government. To some extent, this is understandable and practical when they are always faced with the choice of Big Party A candidate and Big Party B's nominee. What I find is lacking is any effort to initiate something which allows them to change this system. The Tea Party--even to the partial extent that it was a genuine insurgent movement from the grassroots--may claim to have sympathizers among Democrats and independents, but in its political expression it has shown itself to be a wholly-owned subsidiary of the Republican party (at least for now, and I seriously doubt the GOP will ever let them run free). In terms of big money clustered around party organizations and its fellow travelers, nothing seems to be on the horizon, and don't look for that change to come from either the Democratic or Republican public servants.

To get specific about the damage, the setbacks in the House were much worse than they could or should've been, but the damage was in losing control of the body, dropping below 218 representatives--beyond a few seats' cushion, the rest was excess pounding that doesn't have too much significance: just a bigger hill to climb to recover it. Essentially, the Democrats lost all the ground they gained in 2006 and 2008, mostly in districts in red-leaning states or regions of states. There was a national shift of about 5% in support from Democrat to Republican, about the same amount that shifted the other way from 2004 to 2008. The strategy of finding moderate Democrats who could triangulate a tightrope that veered from the anchoring of the national party strategies in somewhat hostile territory, filling the vacuum caused by Bushite failures, has not proved to be a durable success. (How can one triangulate a tightrope?) The House can be won back in 2012, and with just as definitive a majority as the Democrats held prior to this election, but it will be done by moving the electorate, not the previous form of electoral trickery.

Longer-lasting damage may have been caused by deep Republican victories in state legislatures across the country, and by critical victories in governors' races of key states for Presidential elections and upcoming re-districting contests--both decisive ones, like in Wisconsin, Michigan, Texas, Pennsylvania, New Mexico and Nevada; and the very narrow, particularly painful ones in Ohio and Florida. These might be thought of as adding another 15-20 House seats to the hill Democrats must climb to recover that majority, and probably effectively taking a couple of states' electoral votes from leaning Democratic to leaning Republican as we go to the next general election.

The Senate bloodbath was not as bad as others I have seen, and not as bad as it could have been. Partly this was due to Republican overreach in selecting far-right candidates in Nevada and Delaware, as well as self-financing would-be plutocrats in California, Connecticut, and West Virginia. Assuming the current leaders in the pending races in Washington and Colorado hold their leads, the loss of six seats does not change things too much: beside the long-indicated losses in North Dakota, Indiana, and Arkansas, the other seats lost were those of Illinois, Wisconsin, and (technically, due to Arlen Specter's late-career party switchover) Pennsylvania. The first of these should be recoverable in the future, but the last two hurt deeply, as Joe Sestak and Russ Feingold were among the best candidates voters could, in their wisdom, have chosen.

In the further wisdom (on top of the voters') of virtually all the pundits', President Obama has been repudiated--whether personally, in his policies and agenda, or in his deficiencies as a human being interacting with others. I see it differently: Obama was not on the ballot, and his chances of re-election were not noticeably diminished (the price of the Intrade contract for an unnamed Democratic victor in the 2012 Presidential election did drop from 61% to 58% through the evening, though). His job will get tougher, the need for him to exercise sensitivity and discretion will be increased, but he will be better focused and more able to deflect any shortcomings in our short-term shared national destiny toward his opponents (a rhetorical approach which clearly didn't work this year).

I would direct those who want some comment on the future political climate, how it will play out, and how President Obama's fate may look to review my forecast at the tail end of my final election preview. Like President Obama, despite the shellacking, I wouldn't change a thing.

My Personal Responsibility
I have to do some soul-searching about the strategy of my contributions--financial, and, more valuably, of my time--in this campaign. I successfully kept myself to a limited budget of both resources, but I can't feel that I got satisfaction for my investments.

Early in this year, I gave moderately small contributions to each of the principal official Democratic party organizations: the Democratic National Committee (through Democrats of New Mexico), the Democratic Senatorial Campaign Committee, the Democratic Congressional Campaign Committee, the Democratic Governors' Association, and the Democratic Legislative Campaign Committee. After that, I resisted all of the many appeals for additional contributions, except one small additional contribution last month to the DLCC.

Instead, I gave some $$ down the stretch to selected candidates through the Act Blue website. I like the fact that it puts the contributor in control of where the money goes, so--in my case--it isn't wasted in futile money-chasing contests to protect the seats of Blue Dogs sitting on deck chairs on the Titanic. I contributed (small amounts) mostly to losing contests, though: Feingold, Sestak, Alan Grayson in Florida, Alex Sink in Florida, Kentucky Senate candidate Jack Conway, and New Hampshire House candidate Kuster. The two individuals to whom I gave who won were Colleen Hanabusa in Hawaii and (apparently) Michael Bennet in Colorado. Is money given to losing campaigns wasted? Good question, and I have to seriously consider whether I want to participate in the future in a game rigged for big-money, anonymous donations by oligarchs. In 2012, I may just give to Obama's campaign and the DNC and let them channel some, if any can be spared, to deserving races.

In terms of my time, that's where I worked to help our candidates in the New Mexico races. I put about 30 hours of phone canvassing in this cycle, attending some meetings, and helped my wife do door-to-door on Election Day. I think that's a reasonable expenditure of time for unpaid effort.

The results here were acceptable: while Diane Denish went down to defeat (by about 54-46%) in the governor's race, Taos County did its part for the Democrats once again: about a 5-to-2 margin, on vote totals about 80% of 2008's record turnout. For our incumbent House member, Ben Ray Lujan, the county produced a margin of about 7-to-2, similar to that for Obama in 2008, helping him to a 57-43% win over a Tea Party organizer named Tom Mullins. (Mullins ran a creditable race with positions close to his ideological movement, and 40% is not so bad for this district--I wonder whether they are counting him as a TP roll-out loser?) I find this return on my investment to be more satisfactory.

Most Hurtful Losses: 1) Joe Sestak; 2) Alex Sink; 3) Russ Feingold
Most Pleasurable Wins: 1) Michael Bennet; 2) Harry Reid; 3) Lisa Murkowski

Intrade Review

To Bet or Not to Bet
The follower of this blog will remember that I covered the 2008 elections' betting site on Rasmussen Markets (not real money, though), in which one could take sides on a market for various outcomes--primary election winners, the Presidential race, how many seats the Democrats would win in Congress, and individual races as well. There is some experimental data that things like this can be good oracles of probable outcomes for things like this, or for something like the future performance of the stock--the so-called Delphi effect, but this requires large numbers of people and an active market.

After the 2008 election, though, Rasmussen shut the site down. It was never explained, but I guess that the site did not do what Rasmussen wanted, which was provide some independent confirmation of what they were seeing in the polls, and that failure might have been ascribed to the fact that real money was not at stake. Thus, political operatives or others with ideological axes to grind might have tried to manipulate the results.

There still is Intrade, though, and I have revived my account there so I could monitor the action. Intrade is based somewhere offshore of the British Isles, and it is technically illegal for Americans to wager there (prohibitions on online betting)--if you have an offshore account you can fund it, though they won't accept American credit cards. It is not illegal to have an account there, though.

Intrade makes markets on all kinds of things--sports, the overall performance of the stock market, movie box office or Oscars--both short-term and long-term. Elections, though, are the basis of a very extensive variety of posted markets there--this was true, for example, of the recent British and Brazilian elections, too. Some of those markets are very poorly populated, as measured by number of contracts, or number of bidders out there, while others have thousands or tens of thousands of contracts booked. Most--though not all--of the ones booked on the American elections will be resolved tonight, though there can be dramatic moves in prices of new trades, sometimes several dramatic moves, in the course of an evening. It's also interesting to follow how these "markets" have moved over time; often in synch with polling results, naturally, but sometimes much more dramatically, and sometimes surprisingly.

My feeling about the practicalities of investment on these bets is that one shouldn't/wouldn't take a position unless one has a strong feeling to one side or the other. Of course, there is the temptation to play in the big contests for entertainment purposes.

Getting Down to Cases
Just as I saw with Rasmussen, or one might see with a poll of Wall Street traders, I feel that the Intrade-playing population is a bit biased toward the Republicans. So, for example, while 538.com rates the chances of the Democrats holding onto a majority at 16%, you can get that contract at 4.8 out of 100 (Republicans winning is at 97.0, and "neither", which by the rules would mean that neither side had 218 official winners by Dec. 31, was last traded at 0.5). Now, I would not recommend buying that Democratic-win contract, even if it's underpriced, unless one is willing to stay with the screen and sell it at the first positive news for Democrats during the evening. I learned from my Rasmussen Markets experience that there can be such movements, and that even if things might look good for awhile, you don't want to be hanging onto the losing end of a contract at any price.

The House bet that I do like is on the number of seats the Republicans pick up: Silver (and a consensus of various experts) are talking about 55 or so as the median of their probability distributions, but for that bet (that Republicans pick up 55 or more seats) you'd have to pay 71.0 (last trade, and also current lowest "ask" price), so that might be one to bet against. That "71" is a substitute for the probability of the outcome, the odds at which buyers and sellers balance out. Even better might be to bet against the Republicans gaining 50 or more seats: that last traded at 88, though the price seems to be moving down (you could sell a contract for 82.0 right now, while the low "ask" price now is at 87). The idea would be to bet against the Republicans' doing that, but to be prepared to close out the position, buying an equal amount in the other direction at a lower price. Timing would be critical, and at some point you'd have to decide whether the trend would hold until the end, making you a winner, or would you need to close it out and (hopefully) take a profit, and it may take several nervous days for the contract to be finally decided, if that turns out to be close to the final number (if it's not, trading interest will dry up completely even if the contract is not definitively judged to be either a winner or loser).

When it comes to the Senate, the way Intrade has posted the rules has made for some interesting plays. They are not counting independents Lieberman and Sanders toward the Democrats' total, so the bet is whether the Democrats have 50 votes (because the V.P. would break a tie) without them. As for the bet on the Republican side, you could choose whether to bet they have actual control (51 seats, again without any independents--Murkowski in Alaska, presumably, wouldn't count) or whether they have 50 or more seats. Then, there is the "neither" bet, which would finish "in the money" if the Democrats have 50 or 51 seats (counting Lieberman/Sanders, or 48 or 49 without them). This bet is very popular, with very narrow spreads between bid and ask: most recent trade quotes (as of 9 a.m. MDT) are 48 for Democratic control (should be interpreted in the conventional sense as 52 or more Democratic caucus votes), 12.5 for Republicans, and 42.8 for "Neither"!

The probability, as described above, for a "neither" outcome would have to be rated pretty high--essentially if every race goes as current polls indicate, the Democrats would have 51 and it would be a winner--but the variability on outcomes at this point would suggest this is going to be a very volatile bet through the night. This makes it a good trade, but not necessarily one to "buy and hold".

When it comes to individual races, I find the prices fairly realistic when there is sufficient market volume. Here are some current quotes on individual Senate candidates' chances of winning: Bennet of Colorado, 30.0; Boxer of California, 90.0; Marco Rubio of Florida, 93.0; Kirk in Illinois, 78.9; and Sestak of Pennsylvania, 14.0 (but dropping). Two with somewhat unusual quotes at present are Nevada, where Senator Reid's last quote is at 34, and his opponent Sharron Angle is at 75 (suggesting some strong support for both sides, and a great opportunity for arbitrage), and the difficult race to handicap in Alaska (because of the strong write-in candidacy of the incumbent Lisa Murkowski, and the possibility that support for Republican candidate Joe Miller may be dropping): current quotes are 77.5 for the Republican Miller, 8.0 for the Democratic underdog MacAdams, and 26.5 for Neither (a/k/a Murkowski); however, there are very wide spreads between bid and ask on some of those trades, suggesting there will be a lot of volatility--and that may be true for days or weeks, as the write-in votes will need to be individually counted, so if the race is close, these may continue to fluctuate. Or not.

The key races in the House are generally not so heavily traded, and, somewhat surprisingly, that's true of the governors' races, too, so probably they are not worth commenting upon.

In a longer-term sense, you can bet on whether Sarah Palin will get the Republican nomination in 2012 (currently around 19) or Barack Obama will win re-election (61). These quotes both seem pretty reasonable to me.