Costa Rican Impressions: Pt. 2

First, I need to provide some answers to the problems I posed in my first posting on the subject:

The short-term approach to Costa Rica's problems is road improvement--that's going on several places, including a key stretch near the most prominent San Jose suburb, Escazu. The general state of road improvement in the hinterland has to be frustrating: we were there at the very end of the dry season, and they had just finished grading in most areas. They weren't going to have much of a chance to pave anything before the season downpours came and washed away all the roadwork.

I heard that an electric train is being planned between San Jose and the nearby small city of Alvarado, site of UCR's main campus. This could be the beginning of a real 21st-century solution for the country. Train lines could work well through some of the big mountain ridges that are huge obstacles for developing a modern highway system. They should just skip that one, and move on.

Sports Notes

Now's a good time to pause and reflect, after the pleasures of recent days, and before the next round of tense action commences.

Football

No comments on the meat market of the NFL draft; I'm talking futbol, or soccer.

Mostly, it's got to be about Chelsea, but first a note about Mexico: The combination of escalating war against and among gangs on the US border, swine flu in the heartland, and the woes of the national team have to constitute what Comintern would describe as "objectively revolutionary conditions". I'm exaggerating, but this looks pretty serious. Though there is a long way to go, right now Mexico would not qualify for the World Cup from the CONCACAF group (all the Western Hemisphere except S. America)--they'd have a make-or-break playoff game with a South American also-ran. Mexico trails Honduras, Costa Rica and the US in a six-nation round-robin.

Following their pattern set so far of road losses and home wins all the way to the end might get Mexico in, but woe to them, and especially the new coach Javier Aguirre, if they just get a draw or two at home (such will be the objective of the US team when they come to town). Woe already sent Sven Goran Eriksson packing, for a 3-1 drubbing in Honduras.

And now for something completely different:
Topline report for the Blues is that I have ended my search for a new leader for Chelsea; Guus Hiddink is my man. The key success was in the first leg of the quarterfinal matchup with Liverpool, when Chelsea won 3-1 at Anfield. The incredible 4-4 draw with them at home in the rematch only confirmed Chelsea's definitive win over its nemesis in the club's greatest challenge and opportunity (Premier League not-with-standings).

Hiddink's great strategic move has been the offensive combination of early-season comeback fave Nicolas Anelka with Didier Drogba, now fully recovered from his injuries. Together with Frank Lampard's cannonades from just beyond the box, Chelsea now has the guns to score on anyone. And, as they demonstrated in the incredible 0-0 tie in this round's first match at Barcelona, they retain the ability to shut down any team. What we're looking for in this week's match--which we have to expect will be a more open game--is a good balance between the clampdown and the beautiful game: a 2-1 win will probably include some nervous moments, but would suffice to bring on a rip-roaring finale in Roma, probably against the colossus of Manchester U.

Our other expectation is now for the F.A. Cup. Everton did the dirty work for us in the semifinal, outlasting Manchester United in penalty kicks (US starting goalie Tim Howard the hero for Everton). So we just have to beat the Toffees (yes!) at Wembley to get at least that trophy.

Sir Alex Ferguson's plan--to squeak through past Everton with a cheap goal, say, on a penalty, despite playing his second team--was denied. What he didn't consider was neutral-field refereeing--he'd have gotten his call at home. The F.A., in its wisdom, decided to go with Wembley for the semifinals rather than the usual F.A. format. Still, probably not a bad move by Fergie, who (because of winning also the World Club Championship last fall) could still accomplish an unprecedented quadruple trophy result if they can get by Arsenal and then Barca/Chelsea in the Champions League.

Seeing Manchester lose, even if it wasn't "in the run of play", is the only thing better than seeing Chelsea defeat a mighty foe. And, I'm not particular about the style--the desultory Everton match was so much better than the recent, thrilling game I watched between MU and THS (the fabulously-named Tottenham Hotspurs, or just, "Spurs!"--always delivered with gusto!) Tottenham had a miraculous 2-0 lead at halftime; then the miracle vanished and Manchester scored four goals in half an hour, coasting home 4-2. That's the norm, watching ManU as an opponent--they build up your hopes, then mercilessly dash them.

Anelka and Drogba, for all their merits, are not "Rooney and Ronaldo". So, how do we beat them in Rome? For us, it's got to be a combination of sterling team effort and outstanding defense. Besides the Anelka-Drogba combo, Hiddink's Blues have shown improved contributions from Malouda and Ballack, and the central defense partnership of John Terry and Alex looks to be the best yet (of many others). Ultimately, I think it comes down to Lampard, though--he is our man of destiny and the time for his reward for staying in West London is coming soon.

NBA

We're writing this as the second round begins--there was about five minutes or so between the end of the first and the beginning of the second. No matter--I like Denver over Dallas (in six), and I'll stand by that even if they somehow lose this first game at home.

The big question I had going in was "Who Can Stop L.A.?" Houston will pose a challenge, in the form of two marquee matchups, Yao Ming vs. Andrew Bynum and Ron Artest vs. Kobe Bryant. Though I like our guys in both positions (Artest is one of the few with the strength and defensive chops to slow down Kobe), I won't claim they will be decisive. Basically, Yao is worth two points every time you get the ball into him on the post, regardless of who is guarding him. The challenge will be to control the boards, and I'm afraid the Lakers may still have the edge. If Bynum is not up to the challenge, this will show a weakness that could yet be exploited later in the playoffs.

Like in the next round. The Nuggets are the team that nobody saw coming that could pull it off. They combine great offensive punch with some serious beef (Nene, Kenyon Martin), as well as my personal favorite, Chauncey Billups, one of a handful of players with the ability and confidence to take and make the big shots in the close ones, like Kobe. The others of that class are Dewayne Wade (his team isn't strong enough and he's not in good enough condition to carry them), the Celtics' Ray Allen and Paul Pierce, LeBron, and, apparently, Ben Gordon.

The Celtics-Bulls series was entertainment of the highest order, but it has made it clear that the Cavaliers--with the emergence of Mo Williams as a top-class second banana--stand alone at the top of the East. We can still hope to stop the Lakers in the Finals if Denver can't do it sooner.

Mind The Bird

Yesterday's Kentucky Derby, coming very soon to a cinema near you.

I have to mention how our New Mexican trainer (Bernie Woolley) brought his 50-1 longshot horse personally to Louisville, driving the vehicle pulling the horse's trailer despite a leg shattered in a motorcycle accident. Also, the deepwoods redneck jockey (Calvin Borel), who seems to know only one way to win: the shortest route (and why not?) along the rail.

And how about the poor announcer calling the race? I won't say he didn't even name the winner before he crossed the finish line, but he was definitely caught up watching a tight three-horse battle--which turned out to be for second place.

The trainer, who'll be played by fellow New Mexican Val Kilmer once his gubernatorial bid dies out, had gotten sick of himself-as-storyline. Whereas before the race he was all humble and "Just happy to be here," now he told them off: "Now you guys can talk about something else besides how we got here. "

And there was Michael Jordan, wearing a zoot suit and glorying in his new vice, the ponies. I'm afraid he demonstrated that he was, if anything, more clueless about betting on horses than he was on golf. Fortunately, he has an infinite amount of money, and probably the ability to generate more income should he need it. Which is what makes the whole Derby thing so exciting: what conspicuous consumption!

The subhead is my preferred nickname for "Mine That Bird"--it's also better advice. Eliot Spitzer, please note.

Don't You Want Somebody to Shove?

Blame Game Update

I think those greedy bank executives who are putting us through this torture deserve prosecution for violating the Geneva Conventions and taking their bonuses. Or is it the Basel II Framework? Perhaps I am confusing two different issues, and I did promise to try to avoid sarcasm.

I see nothing wrong with most of them getting bonuses if their divisions are doing well. The heads of the companies, of course, can easily pass on one year's extra compensation, and that is to be expected when simultaneously taking massive bailout money and producing enormous losses. A second disastrous year, though, should mean firing. That would mean the huge write-offs they took the first year--when they really had the chance to name their size--were insufficient, and would mean that they did a terrible job of risk management indeed.

Otherwise, it's a shame the non-bank manipulators are coming back so energetically, this time promoting "Obama-driven" mortgage reform scams. At least there's no Countrywide ads. So far.

Please see my two previous postings ("Bailout FAQ" and "Bailout FAQ Revisited") for blame assignments. Some of the assignments are being completed, though none have been turned in, more have not even begun hearings. I'm waiting to see how the new Federal super-regulatory agency will handle the credit rating agencies. In the popular view, AIG is the arch-villain that constructed the financial meteor that hit us.


Taxing Offshore Profits

President Obama announced this week he will push for revisions in the US tax code which will take away flexibility from corporations with regard to reporting profits overseas. This is the method he has chosen to fulfill one of his campaign promises, namely to take away the right of corporations ("Benedict Arnold corporations", John Kerry called them in 2004) to deduct expenses related to outsourcing jobs overseas.

The gnashing of teeth of the US Chamber of Commerce about this suggests that august organization is much more concerned for their multinational clients than they are about the US or about domestic commerce. Or about the US government budget deficits projected for the future. There was also supposed to be some tightening with regard to foreign companies operating in the US, which would make sense if only to prevent those on the fence from switching their incorporation out of the country.

I think that the discussions I heard totally missed a key point: what the US government is trying to do to Corporate entities is no less or no more than they already do with "US individuals". As most any expat could tell you, the US is alone in taxing the worldwide income of US citizens and "US persons"--namely anybody who wants to return to these spacious skies, etc. Other countries go through elaborate means to allow their taxpayers to identify the portion of their income which is home income as opposed to foreign income, which is not taxed. We, instead, have this notion that all income of Americans is US-taxable (though we do credit for taxes paid overseas).

In other words, the Obama proposal is an overreach, just as it is for individuals. It will encourage "legal cheating" and a lot of feigned ignorance. Still, a willingness to tackle the tax code will be a critical aspect of successful policy to end Bushite economics.

Banks Pass Smell Test

It will surprise no one that the Treasury's stress tests on the 19 largest TARP banks will result in zero Federal takeovers of those banks; if AIG wasn't insolvent enough, how could any of these banks--all of whom have been more-or-less officially designated "too big to fail"?

I was watching the news and the movements on some of these bank stocks closely this week. I see a pretty clear pattern that banks had been notified of the contents of today's announcements (who needed more capital, and how much). Then, possibly as a signal of Geithner/Obama's benign intentions toward the banks, or possibly just as a pragmatic move, they seemed to have told the banks they could go ahead and try to make the best use of the information in the public arena. Bank of America, which needs a lot more capital, leaked that news out on a good market day and having thus broken wind in advance, didn't suffer as the stink was broadly received today.

Similarly, American Express, having been told they wouldn't need to reinforce their capital, pushed out a different piece of news (on another good day; there have been quite a few recently)--that their credit was being downgraded by rating agencies due to "liquidity concerns". Amex's problem doesn't appear to be the toxic assets they acquired, as much as worries about weak consumption spending combined with increased credit losses from their cardholders. The rating downgrade should have pushed the stock down, as it will certainly reduce their margins, but the stock rallied as investors concluded--correctly, I believe--that the bad news was then fully out.

These were successful stock boosterism moves; those who waited and now need to face bad news in the face of the overall pleasing aroma coming off the stress tests (Citicorp?) will be punished.

The title of this update on financial news (actually posted on 5/6/09) comes, modified, from Soul Asylum via the Jefferson Airplane.

Second Six Weeks' Report Card

We will continue to grade Obama on three dimensions: Political, Economic, and Diplomatic.

Re-Election Is the Validation We Crave

Right now, the measure of political success is completely identified with economic recovery and the expectation of it. Hopes have risen in recent days, driven by stock market improvement, which has interrupted the slide in Obama's popularity.

The projected political outcome--which I graded a 'B' from the first six weeks' report--is of Congressional losses in 2010 driven by the sense that recovery is not yet in place, but by a sufficient recovery by 2012 for a commanding re-election victory.

That remains the standard measure of acceptable political success. If we get at least that kind of moderately-good result we can expect a definitive success in the other key areas--the economic and diplomatic ones--rather than some kind of reversion to neo-Bushite Misrule (Bushite, but without the incompetence). So, while today politics are subordinate to economics, in terms of long-term result, political success rates first in importance.

Put in those terms, the tides that rise and fall with the outcome of policy and legislation on the issues themselves are an order of magnitude less important. Obama is off to a good start on health care reform, and energy policy is clearly going to move forward. The debate on education has begun--being the most long-lasting and the key policy area one most worthy of deliberate consideration, I don't think the urgency of action in the first year is as important as establishing the right long-term direction.

One area which is probably a bridge too far--though just at the boundary--is immigration, and Obama's pledge to press for legislative reform in this area this year. It's clearly redemption of a pledge earned with the huge contribution of Hispanic votes to his election, but I think it risks damaging the Democratic brand and letting the opposition demagogue its way back into the national dialogue. Otherwise, the trend is clearly to move the Republicans to the periphery of the debate, and I for one welcome this trend (and the recognition of it, as well, which has prompted some interesting debate whether we need the Republicans' "contributions").

Second Six Weeks' Grade: A- Cumulative Average: B+

Riding the Curve of the Great Crater

Not even the most impatient could expect that the economy would already be improving. The CNBC Talking Crania are about right when they identify the general perception as having recently passed "an inflection point". That would be the second derivative, when the rate of increase in the rate of decrease crosses zero. In other words, things are not getting worse at an accelerating rate anymore--the deterioration was accelerating for a good six months, from September, 2008 to March of this year.

I think passing that perceived mathematical milestone was a definitive one; the economy will continue to decline for another year, in my estimation, but at a rate generally slower than in the past several months.

Has the market found a bottom? Not necessarily, but it has shown that a bottom exists. I do expect a downturn in stock prices, and probably quite soon, but not as widespread as before and not as deep. New bad news will be doubly punished, as the smart guys have socked away enough reserves for contingencies and bumps in the accounting road.

What has Obama done? He got the stimulus passed; whatever its job-creating qualities (many or not so many; sooner or later; sustainable or temporary), he's got some muscles to flex. He's also gotten people to stop hyperventilating about the unquantifiability of the toxic asset problem with round two of Tim Geithner's public sales job for The Nasty.

Second Six Weeks' Grade: B+ Cumulative: B

President of the World

"Well, he hasn't gotten us into a new war yet, so his grade is at least passing." That was my evaluation of Bushite Misrule in mid-2001, and I kept it until he got us into the second new war--I gave him a pass on the first one in Afghanistan.

Obama is not being graded on the pass/fail scale, though--expectations are much higher. His multilateral outreach program has been a huge success. Hardly a grimace in any of the targeted countries (maybe Pakistan), but the G20 and Latin America have fallen hard for Obama, and his speech in Turkey was boffo (click on the title of this blog), even if he probably didn't write much of it. It's probably the only country he's visited that he wouldn't be able to defeat the local sitting President in a straight runoff, but I still think it went down well, and beyond Turkey as well.

Movement on relations with Cuba has been very positive; on Iran, results are a bit more problematic as we get past the first, euphoric stage. I still think that a meeting with Khamenei may occur after the Iranian Presidential election, if its result is not too negative (i.e., something better than Ahmadinejad coming out of it).

Second Six Weeks' Grade: A Cumulative Grade: A-

Three Days' Times

A bit of praise for the Times getting past the noise (CNN seems intoxicated):

Kristof went after the root of our problems on April 15, Taxday: "How to Raise Our I.Q." His careful reading of the evidence led to some practical, useful recommendations.

On the public policy level, he concludes that we should invest more in early childhood education (but not in Head Start, much earlier). In terms of childhood parenting, it means practices like praising effort and teaching delayed gratification. The best bit he had came on the subject of middle-schoolers:

another proven intervention is to tell junior-high-school students that I.Q. is expandable, and that their intelligence is something they can help shape. Students exposed to that idea work harder and get better grades.

He didn't draw the conclusion that if we raised our "collective I.Q." a billion points or so we might actually be able to revise the Tax Code, though.

Following on the topic of the massive challenges to our educational system, today's critical assessment of social standards, "Dude, You've Got Problems" took a shot across the bow of the "Op-Extra" boat (a weekly column called "Domestic Disturbances) and rocked it, as I see things. Judith Warner picked exactly the right topic, the promiscuous labelling of non-homoerotic behavior as "gay". It's the second-worst behavior of our youngbloods, next only to beltlines that are designed to fall down to the lower thigh (and this latter one seems finally to be abating).

She sets up the key findings, not limiting herself to the use of complete sentences, and acutely describes the girls sin, too; they have only a

very fine line between progress and utter regression. Spending unprecedented amounts of time and money on their hair, their skin and their bodies, at earlier and earlier ages. Essentially accepting the highly sexualized identity imposed on them, long before middle school, by advertisers and pop culture.

Just kidding, I love the tone, and I find the piece excellent fodder for some kind of modern Civics class ("ethical choices?")

The piece I note as being yesterday's was Nobel laureate Paul Krugman allowing himself to deceive the reader with his falsely hopeful title, "Green Shoots and Glimmers". He proceeded to stamp on the shoots and block the light over the glimmers. Krugman is merely continuing on the theme he went with big, proclaiming "Obama Is Wrong" on the Newsweek cover April 6.

Krugman's bases his "loyal opposition" (to be accomplished by all means necessary) on his staking out a position in favor of more use of make-work infrastructure jobs in the stimulus package. I largely accept his argument that more jobs could be created in this way, and that this would give more forward movement to the economy than alternative approaches (such as Obama's, which focused on structural adjustment and tax cuts for the middle class). Further, even the most pragmatic Obamaian should accept that "jobs, jobs, jobs" is the critical measure of "it's the stupid economy".

Ultimately, though, I side with Obama (Every time I viewed the Newsweek cover I heard a song in my mind: "If Obama is wrong, I don't wanna be right!") . I think it far better to create jobs with a sustainable basis rather than ones programmed to be short in duration (or else pure waste). The Bushite Recovery of 2003-08 should be enough to show us that not all job-creation, such as the non-bank mortgage refinancing industry for example, is equal.

The compromise position Krugman will accept will be the backup plan Obama will show him (in private). If things don't work right with the targeted, structural appoach, he will go heavier for the make-work, either taking some of the money appropriated in principle through the legislation or asking for additional spending authority. So, I disagree with those who say there is no Plan B.

Costa Rican Impressions: Pt. 1

The place is living up to its billing in two particular regards: endless variety of colorful birds, pretty much everywhere (even inhabited zones), and more green than can be seen. This looks like the place to rack up numbers of birds sighted, breaking a sweat but barely having to turn one's head.

Also, the traffic in San Jose (do you know the way?) is just as bad as promised.

When it's hot here, it's hot like nowhere I've been (OK, maybe like India when it's hot there). It isn't always, though, which gives hope.

My advice is to plan for a recovery day in a decent hotel with A/C and TV after about every 2-4 days in the rustic eco-cabins. One has to do laundry about that often, anyway.

As far as traveling around in the country, the better way hasn't yet emerged. Perhaps one of those services where you pay a monthly fee, then pick up a car or SUV when you need one. That way you aren't stuck waiting for buses to pick you up, driving whenyou don't want to, or taking dangerous dinky planes or unseaworthy boats.

A Few Sports Notes

NCAA:

Not getting to watch much from down here in Costa Rica (see the post which will follow this, or precede this if you're reading down the page). I am very interested in this year's tourney, primarily because of Louisville, which seems to have peaked at the right time. If we can just get UNC out of there, it should be a wide-open Final 8.

The fact that everything is following form so far is no issue; it just means there's a bit bigger gap between the top 10-15 teams and the rest this year. Previous years, with all the hurrah over bracket busting, it was because there were lots of teams about equal in positions 9-32 (roughly).

NBA

I'm hoping for something other than a Celtics-Lakers rematch (we've had enough of those for one lifetime). I think that means I'll be rooting for the Spurs and/or Cavs, though I'm not too enthusiastic about those teams, either. Clearly, though, I'll be rooting for the not-Lakers in the Western Conference finals, and in the finals should the n-L's win.

WBC

That's World Baseball Classic, for those not following (who apparently number in the billions). Japan-Korea final seems totally appropriate, as they are the countries who have best mobilized their talent (and which have enough to mobilize); Venezuela clearly was next best at that task. I guess I'm rooting for the upstart Koreans to upend the defending champs.

Soccer

Chelsea blew what appears to have been its last chance to get into the Premier League race down the stretch. Now, the matchup with nemesis Liverpool in the Champions League makes me gloomy and thinking that the FA Cup is their best chance to win something this year. I hope I'm proven wrong, but it will probably mean scoring at Anfield, something they have no track record of doing.

Bring back The Chosen One! Or, if not him, Claudio Ranieri!

Obama 1st 6-weeks' period Grade: B

Prologue

The grade I'd give a US President isn't fixed over time.

A good example is actually the first Bush Administration: six months in I gave him a D, which I thought to be a well-established and potentially stable mark. The policies were dumb and wrong-headed, but at least he hadn't gotten us into a war yet.

His grade probably would've peaked at a C- about nine months later, after he recovered from the jolt on September 11 with the relatively successful war by proxy in Afghanistan and before his folks' ambitions for aggression in Iraq were nakedly revealed. It's an F, of course, from then on, until such point as we kick him out of the classroom when it becomes apparent the Iraq whole thing was planned to be a stage-managed photo op to make him look good in his re-election campaign.

Botched, like everything else, Bushite Misrule showed that two negatives--bad policies, badly executed--don't make a positive. Just chaos.

Still, Obama represents such a pivot toward the light that the range of grades I'd consider would only go from A+ to C. I think a solid B is tough but fair, as I'll explain over the three critical dimensions: economic, diplomatic, and political.

Obama 1st 6-weeks' period Grade: B

Part I

It's stupid, the economy.

I continue to be amazed that nobody is connecting the dots on the purchases of toxic assets and figuring out where the bottom is--we're headed straight for it at ninety miles an hour.

I believe that our National Buggy has passed the inflection point: the angle of descent into the Great Crater has passed its maximum. Soon we will be on the long, gentle slope that leads into the depressed plain, and drag will cause our velocity to slow down--the real-life economic manifestation of this physical analogy will be a reduction in volatility of markets, and this will signal an end to the hysterical tone, which is the all-important first step towards regaining our balance. Right now we're just riding in the cart, taking the bumps which are coming at us too fast to dodge.

The sad flatline zone of the plain at the bottom of the Crater has to be traversed, and it ideally should be crossed directly opposite to the orientation we came down upon. If we try shortcuts off to the side, we will run up partway and slide or roll back down--this is what happened in the '30's. I will grade performance by how well Obama finds the right answers from the outset and sticks to them, not how well he improvises when he goes astray.

Obama described the path he wants to take across, which means the path out of here, as being based upon initiatives in energy, health care, and education which will transform the core of the country's economy. Are they the right ones? I'd say yes. Course corrections will be required, no doubt, but we've got the right azimuth, in general terms.

Beyond that, I don't know what anyone can expect. One thing we don't know is how far across the moonscape-like plain it will be. I say that, then rashly predict: I think the timing will be such that a nascent recovery will not be evident by the 2010 midterm elections, even with the course being maintained properly.

This will translate into a tough, but not impossible, fight to hold onto the safe margins the Democrats enjoy in both Houses of Congress. I would say the midpoint of expectations would be the loss of 20-30 seats by the Democrats in the House, which will keep them in the majority, but less securely. I think the Senate will stay more or less the same in 2010, regardless, and thus Obama will retain a Congress sufficiently compliant to complete his first-term program.

The rest, as they say, will become history.

Obama 1st 6-weeks' period Grade: B

Part II

Foreign policy is central to my grading of the performance of a Presidency of the US. It includes military policy (just ask Clausewitz), which is equally vital and equally controllable from the White House. In this regard F.P. is unlike economic policy (the outcome of which is normally not controllable, just as we are seeing) or, say, sports boosterism (a traditional Presidential activity, of little importance--I saw Daddy O caught the Bulls when they came to visit in DC the other day).

Obama, Hillary, and the key envoys Mitchell and Holbrooke have yet to make a big mark diplomatically of any kind. But it's only been 40 days!

I see vision behind the mundane diplomatic developments viewed so far.

The biggest news was Susan Rice's statement at the U.N. that the U.S. was not going to put up with failed states taking out their sickness on their citizens any more, but that we are going to take this up in the U.N. itself. This suggests a major Charter revision, and I hail that intention.

I believe that the Obama Administration has correctly identified Russia as the key dance partner in these early months' diplomacy. The Kremlin has so much leverage toward our success with Iran, with China, North Korea, Pakistan.

As an example, the US needs a redundantly-secure supply line toward its theater in South Asia (the existing primary one being through Kuwait), in other words a second safe staging area near the region, and I don't think Turkey is going to provide it in the short run. It won't run through Russia's sacred soil itself, but it will cross their sphere of influence at some point or it won't exist. Meaning, they will have to tolerate any new basing we develop as we leave Iraq. That needs to get worked out.

I even see some relevance to the urgently rising problem in Eastern Europe. The Eastern European nations have made the mistake of looking entirely to the near neighbors to the West, which have scorned them in their hour of crisis. I wouldn't mistake Russia for a benign financial influence, but an American initiative which fortifies the financial system for both Russia and the Eastern European nations, including basket cases like the Ukraine, will promote the general global welfare and lower tensions.

In the US' Second Front of diplomacy, the Middle East, Mitchell and Co. have no choice but to wait for the Israeli dust to settle--both from the Gaza incursion and the parliamentary elections. So they correctly build up relationships with all parties.

One hopes that includes the Israeli Arabs, the key group required for a successful peaceful resolution in Palestine; I believe their voice may, one day soon, become the means for the extra-Israeli Palestinians to develop consensus policies. If and when Netanyahu gets the P.M. job and then fails to make progress, there may be an opportunity for a Center-Left government of Kadima/Labor/Arabs-plus a few to create a major diplomatic opening. Of course we have to let the Israelis reach this in their own time.

WOT is Dis?

I think so far the Obama formulation of War On Terror is to make it regional rather than global. Well, it least it's not GWOT no more! That's progress, but only of a certain kind.

I think the withdrawal targets in Iraq are fine, if Iraq validates the SOFA worked out in the latter days of Bushite Misrule. If things are cool over there with our planned rate of departure, we should be on the low side of estimates all the way and not sweat it too much. If they don't tolerate our withdrawal plan, there's going to be a sense of impending doom over the whole process which will no doubt be self-fulfilling. As for timing and numbers, I don't mind the extra three months, but I think Obama does owe an explanation of how the 5000 or so he campaigned upon became 35,000 or so.

As for Afghanistan/Pakistan, though, the critics are right: we need to see the other side of the buildup curve, and it needs to be a promise to the American people. Maybe the buildup--over 24 months, to 50,000 in both countries (half in active combat roles, half in training roles)--followed by a dotted line of indeterminate width (6-24 months) depending on how long it takes to get OBL&Co. onto the run again, then a promised reduction curve of appropriate steepness (roughly crossing the 2009 starting level at Election Day 2012), with a long, low tail of 5000 or so--not 35,000--and their primary role being to protect an international corps of aid engineers.

Obama 1st 6-weeks' period Grade: B

Part III

The Republicans are losing the political war, even if they're winning a couple of battles. A good example is this "omnibus spending bill larded with earmarks", which it is. It is also going to pass, and Obama is going to sign it. All of which infuriates John McCain, who was thinking specifically of this bill when he made all his threats about "You will know their names!" in the campaign.

McCain fulminated ineffectively in favor of his amendment to cut local earmarks:

"How does anyone justify some of these earmarks: $1.7 million for pig odor research in Iowa; $2 million 'for the promotion of astronomy' in Hawaii; $6.6 million for termite research in New Orleans; $2.1 million for the Center for Grape Genetics in New York," he said.

Actually, I can probably justify most of that without even reading the specifics to which he referred: "pig odor research" would be a study dealing with the huge problem of handling the massive volume of excretions pig farming produces, and I guess they're thinking of a chemical treatment to neutralize it or make it useful; "astronomy in Hawaii" is a good way to save money vs. launching a new Hubble Space Telescope, worthy as that kind of initiative will be in a few years (when we've got a new manned launching platform worked out); accidentally-imported termites are creating nearly infinitely-large colonies causing a sci-fi-type national defense issue (with an ideal breeding ground in the abandoned districts of N'awlins); and, I'll let my entomologist sister argue this better some other time, but intelligent use of "natural" cross-breeding informed by superb knowledge of grape vine DNA sounds like a great way to build up resistance to mold and other pests, not to mention major potential gains in productivity, and thus, jobs in upstate New York.

So, yeah, I'd vote for those.

Your Mission, Barack, is to Atomize Them, Not Us

The Republicans seemed embarked on a no-win strategy with their opposition to stimulus spending: if Obama succeeds, they become history's dust; if he doesn't, we're all dead anyway.

They passed up an opportunity to come inside the tent, which is really the only way to have any influence over what happens in there. The three Senators who crossed over are the only Republicans who did their careers any good.

I would like to see a quicker descent for the budget deficits in the outer projected years (2013-2015) of the Obama Administration's new proposal. If this stuff is working, we should be back to budget deficits in the $200-400 billion range, or better. I don't doubt that it's a good idea to under-promise and over-deliver, but the quality represented in the proposed budget's out years isn't high enough to gain acceptability from anyone. It will get changed in the negotiations, and Obama will live with the revised targets.

An Early Thaw

This post establishes the unreality of the blogging system; it's one I didn't post last month.

The correct title should be "A Late Snowfall"; that's what happened last week. Three days in a row in the 70's, though, has allowed me to move my ice melt and snowshovels to the back of the shed.

Carbon Tax

I've been thinking about the Big C.T. lately, as opposed to the cap-and-trade, or C&T, that Obama and others have proposed.

One statement that really struck me came from Al Gore, I believe. It was that Big CT could generate enough tax revenue to allow us to eliminate the payroll tax (Soc. Security and Medicare), and that change would generate millions of new jobs.

The last part--the new jobs that could come out of the economy's rally if payroll taxes for workers and employers were eliminated or cut sharply--sounds right to me, and an extremely relevant prescription for the current Great Crater, towards the bottom of which we are currently rolling at top speed.

I also think that Big CT could be a lot simpler to implement than C&T, which promises to be a grim vertical turf war for cap room through loopholes and other Mickey Mouse (think of NBA trades and the contortions taken on in order for teams to bid on LeBron in '10).

I've got two problems with Big CT, before I endorse it fully:

1) All this theoretical stuff sounds fine, but I've got to think we're talking about estimated carbon usage as the basis for both the Big CT and C&T systems. The weak link in this chain seems to be measurement of actual carbon usage. Consider, as a close analogy, the difference between "Estimated EPA mpg" and "what one gets". If the little gizmos that measure the carbon usage aren't in place, aren't sufficiently accurate or are somehow tricked, we let the cheaters take the advantage, with a possible cascade toward defeating the environmental objective. (possible investment tip--find the gizmo makers and buy them?)

2) If we eliminated the payroll tax and then--heaven forbid!--we succeed in reducing our carbon usage, then how are we going to pay for Social Security and Medicare? Better not eliminate the mechanism, ever. It would still be significant to cut the rates (!) by 20-25%, phasing in Big CT sooner rather than later, but keeping Big CT rates relatively low in the initial stages to control inflation. I actually like this approach better than the tax rate cuts proposed in the stimulus plan, though I know those are pretty close to a core Obama position.

Good Sports

If you watched the Australian Open men's finals, you saw a great match: Nadal vs. Federer, first time ever matched up Down Under. A battle all the way, until Nadal broke Roger's serve midway through the final set.

If you saw the post-match ceremony, Roger cracked up and cried. Quite a lot, actually. One could excuse it as being the emotion of the moment, but I think there was something really for him to mourn. I think that match finally convinced him that he was really #2. Not that #1 ranking is gone for good, necessarily, but that it is not a fluke and Rafael is really ahead of him for now. Nadal was gracious and kind to Federer, who has always been a champion of the first order.

As for the Super Bowl, it wasn't quite as Stupor Bowl as usual. XLIII was one of only about VIII that were really contested (something like XV-XX PC).

The finish was dramatic, after the record-setting comeback of the Cardinals highlighted by Fitzgerald's brilliant catch and run for the lead. What surprised me most was that the incredible play in which LB Harrison of the Steelers ran back an interception 100 yards just at halftime, falling into the endzone as time ran out, did not settle--could not be argued to have settled--the game's outcome. Normally, a big break like that, worth at least 10 points in a tight game, would push the Super Bowl Teeter-Totter of Destiny over to one side for good.

Salutes to both QB in particular. Roethlisberger and Kurt Warner should both be destined for football's HOF, even though Roethl. may have a short career, and Warner's is checkered. Football is a little more forgiving than baseball of those who didn't rack up huge career stats and recognizing of brilliance over a period of, say, a dozen years.

Whatsa Matter with this Crisis, Already?

The proposed stimulus bill and the financial industry interventions are remarkable commitments toward recovery, but the feeling out here remains that there is still more new pain to be felt.

At the heart of that uneasy feeling* is the continuing uncertainty about the devaluations of mortgage- and mortgage-related assets--there has been a substantial writedown, but is it enough? We still hear people saying, "no one has any idea how big this may be".

We also hear people saying, "the problem of transparency is that it would reveal just how large the hole is, and we can't fill it". This statement is almost certainly wrong, though knowing the exact location of all the skeletons would modify the cemetery's size for many a deserving institution. The fact that "no one knows", though, means that people can say that sort of thing without being contradicted, which prolongs the lives of such Unconventional Unwisdom.

It's time to plumb that hole and find out how deep is the bottomless pit, and I'm considering offering to do so for the U.S. Treasury. Time to put myself back in the cave, to see if I can find the light so I can show it to them all.

The Learning Process Has Begun, Though

I explain the bad feeling to the simple requirement of time to adjust to a new reality in America. If anyone were ever asked, we would say that the natural trend of property values, virtually anywhere in this country where there's a market to speak of, is upward. And it would've been true. You didn't even have to think about it.

I think the possibility has dawned that this may not be true anymore. At least, somewhere between many and most people would say that they have their doubts. Not that real estate prices should be descending on an ongoing basis, either; more like, it's possible that the total value of real estate is about what it should be. Some places will go up, some down.

Recall the real estate meltdown in Japan, probably the closest model to what is happening in the USA (and spreading outward). The steady increase on to infinity doesn't really seem like a sustainable model.



*Credits to Matt Johnson and The The for use of that song title.

Great Letter to Editor

Toward a More Secure Retirement

(Published: January 31, 2009)

Re “From Here to Retirement” (editorial, Jan. 26):

The financial crisis and the decision by some companies to cut matching contributions to their 401(k) plans highlight the need to think anew about how Americans achieve lifetime financial security and the mechanisms in place to help them do so. The 401(k) plans upon which most workers now rely were never conceived as a holistic retirement system.

What is needed is a retirement system that combines the best of portable, individually owned accounts with guarantees to help make sure that individuals do not outlive their savings. The system would automatically enroll workers, tie savings increases to raises, include provisions for health care needs, offer objective investment advice to help them plan, and assure a lifelong income base by automatically converting some of their savings to a low-cost annuity at retirement.

Such protections, while not shielding individuals from investment risk, would significantly bolster Americans’ economic security.

Roger W. Ferguson Jr.
New York, Jan. 26, 2009

The writer is president and chief executive of TIAA-CREF, which manages retirement savings on behalf of 3.6 million individuals and 15,000 institutions, and a former vice chairman of the Federal Reserve. He is a member of President Obama’s Transition Economic Advisory Board.--NYT

I am particularly interested by the comment about annuities, which would probably need some Federal support to be viable. On the one hand, I wish I had converted some of my assets into annuities when I went into semi-retirement (I investigated them but was discouraged by very high fees). On the other, one has to wonder how well annuity structures might've survived the recent financial holocaust. Still, the author expresses an important point, one that will become central to future economic planning discussions.

This is What We're Talking About

US envoy backs UN's 'responsibility' to civilians

By JOHN HEILPRIN – 1 day ago

UNITED NATIONS (AP) — U.S. Ambassador Susan Rice, in her first appearance before the U.N. Security Council, signaled Thursday that the new U.S. administration feels a "responsibility" to sometimes take on nations that abuse their own citizens.

"As agreed to by member states in 2005 and by the Security Council in 2006, the international community has a responsibility to protect civilian populations from violations of international humanitarian law when states are unwilling or unable to do so," Rice told the council in a closed-door session.

"The United States takes this responsibility seriously," Rice said, according to a transcript of her remarks.

During the past year the U.N. has debated whether it has a responsibility to protect civilians in such cases. Last May the council discussed a proposal by France to authorize the U.N. to enter Myanmar and deliver aid without waiting for approval from the nation's ruling military junta. Several countries, citing issues of sovereignty, blocked the idea.

Rice also emphasized that the U.S. would work to strengthen protections for civilians in conflict zones and support international prosecutions of war crimes.

"It is in this spirit of cooperation and determination that we will seek to use this body of international law to minimize human suffering and protect vulnerable populations," Rice said.

She said the International Criminal Court "looks to become an important and credible instrument for trying to hold accountable the senior leadership responsible for atrocities committed in the Congo, Uganda, and Darfur."

The U.S. opposed the court's creation and for the past decade refused to join it. Nevertheless, it has been a key supporter of bringing Sudan's president before the court on charges of orchestrating atrocities in Sudan's Darfur region.

Rice also defended Israel while pressuring it to account for its military actions.

"Violations of international humanitarian law have been perpetrated by Hamas through its rocket attacks against Israeli civilians in southern Israel and the use of civilian facilities to provide protection for its terrorist attacks. There have also been numerous allegations made against Israel some of which are deliberately designed to inflame," Rice said.

"We expect Israel will meet its international obligations to investigate," she said.
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Copyright © 2009 The Associated Press. All rights reserved.

The first argument might be expected to inflame China and Russia (click on this post's title for an excellent article on Russia's latest human-rights embarrassment, in Chechnya), but I think they actually will suck it up and move on: Do they really care? I think not. Security Council votes apply to other countries, ones that don't have vetoes. At least we'll be on the right side of some of these issues as we go forward.

Meanwhile, Russia has already signaled that the phony outrage over missile defense is over. We won't pretend we can stop their missiles, and they won't pretend they can build a missile defense, either.

As for the Israel bit, we can see here that this "even-handed support" for the Israelis that the Obama administration is attempting is clearly proving to be tricky. As almost any Israeli (or Palestinian) would tell you: You can not support my enemy and be my friend. To ignore the danger in this position is to invite a problem like Ronald Reagan had when he put the Marines into Lebanon (and how, exactly, did he survive that disaster politically? Frankly, I can't remember.)

Here's a thought: When the two states are headed by Hamas and by Benyamin Netanyahu--as that seems to be where events are pointing--how can there be any solution?

Democratically-elected state leaders are far from immune from looking to use warfare as a political tool. Just look at our last eight years (though the democratically-elected part could be debated). In the case of Olmert, his Israeli left-center government, and the attacks on Gaza, it now appears not to have worked politically, after all.

I think it would be great if George Mitchell could get a strong cease-fire into place in Gaza (with some kind of Egyptian support). That would be an unambiguously positive development and give some time to calm things down, hopefully prevent or limit Netanyahu's electoral victory, and give folks time to work out exactly how many states and what kind of solvent.

Ten Day/Point Update

If this columnist is to be believed, Obama has already completed one of the key changes we expect from him, ending what we like to call GWOT:

U.S. President Barack Obama reaffirmed the rule of law over U.S. foreign policy, dialing back a number of the expansive and, to many experts, illegal powers invested in the executive branch during the Bush administration. Obama prohibited the CIA from maintaining secret prisons and nullified every legal opinion regarding interrogations issued by any executive-branch lawyer since the 9/11 attacks. In addition, Obama banned the practices of torture and rendition and called for new rules regarding the treatment and legal situation of detainees -- effectively ending the Bush-era "war on terror." get link article by Dana Priest, Bush's 'War' On Terror Comes to a Sudden End http://www.washingtonpost.com/wp-dyn/content/article/2009/01/22/AR2009012203929.html(WaPo?)

Personally, I think it's too early to declare that Mission Accomplished; however, it is undeniable progress.

Here's a quick read on my 10-point program, and how Obama's doing:

1.. Get control of climate-changing gases. Expecting progress, too early .
2. Preserve our biosphere. Same, TETS. (Too Early to Say.)
3. Rebuild our relations with the world. Already well underway. Fortunately, the world is well-disposed for its part.
4. Visualize our children’s / grandchildren’s society, and the implications of that vision. Somewhat, but mostly lip service thus far.
5. Reform the UN Charter. Second-term business.
6. Get control of armaments. See previous comment.
7. Establish clearly the political dimensions of privacy and of permissible government intrusions into it. This will be a running battle, nuanced and complex, with my expectations largely favorable at this point. Obama was a Con Law professor at U of Chicago: this suggests a thinking-man's approach to these issues, but not a clearcut ideological one.
8. Provide health care to our people. Not underway yet, and Daschle running into thickets on confirmation isn't such a good sign, either.
9. Electoral reform. Actually, I may be looking for help on this one from the wrong party--Obama was more harmful to the cause then helpful in his campaign, and why would he want to change a system he totally outfoxed last year?
10. End the "War on Drugs" (or at least give it some focus on the more harmful ones). Obama would like to postpone this one until the second term, but I don't think he will be able to do so. It will keep popping up until he takes some clear position.

Official Pre-Inauguration Post

Is it hard or not?

Some would emphasize the opportunity part of this "danger opportunity", as the Chinese might or might not say. All Obama needs to do is deliver the economic recovery, and re-election is virtually guaranteed.

They think back to Reagan, who outlived the previous "worst recession since the Depression". The application of high interest rates broke the back of stagflation, and he had enough time to make tax cuts work to recover from the resulting high unemployment. It just takes a couple of years.

I agree with them on the last point, at least. I'm not of the "100 Days" philosophy, that somehow Obama has 3 1/3 months to set the tone and establish his Administration's fate. He can enunciate principles and initial efforts now, and work on making it all real in the following months, as his Administration's appointments in the domestic departments all come on line and re-discover their moribund (or worse: evil-minded) organizations' potential value. It does take a couple of years.

It is the return of competence that should ultimately prove Obama's great strength, and about which I have the highest confidence and greatest expectations. Obama's hires are experienced, seasoned leaders of great knowledge and integrity, who should work through consultation and up-to-date, purposeful communication methods to produce policies built on principle and sound reasoning. I think we're off to a good start with this, but it's so easy to be derailed.

This is not easy stuff; no job for a latter-day Ronald Reagan.

Expectations: Scylla, or Charybdis?

Expressions of what people expect from the Obamadministration seem drawn by the currents toward the extremes: maximalism and "putting his feet to the fire" demands on one side, and lowered-bar, minimalist ones on the other.

Those who advocate the lower expectations have plenty of history on their side, and they quite reasonably argue that Washington will demand its accommodations and Obama have to make his, as well.

Obama's inclination is clearly to emphasize the practical outcome, even while maintaining a high-quality discourse and moral tone. If there are any of his supporters doomed to be continually disappointed, they would be the ones who are looking for symbolic gestures that have no direct practical import. No capital is likely to be expended for their benefit.

A good example would be federal liberalization of marijuana laws. He might support it, but has shown no sign of doing so--if it were to happen with Obama I would not expect anything until the second term. Ending the "don't ask, don't tell" in the military, on the other hand, will probably be decided soon, and on a caluclation of the net benefit--additions due to the "open tent", as it were, versus losing some homophobic veterans.

My own expectations are ambitious, but only somewhat so. I expect Obama to be the best President since I've become aware of politics. But I don't think that's saying so much--I expected that of HRC when she was practically crowned, and I think Obama can be a much better President than she could have done.

(For the record, I wasn't really what I'd call aware of politics when JFK was assassinated, though I did observe what was going on, and certainly had my own opinions by the next time around.)

From the first term, I expect improvement in the healthcare insurance offerings available to those who are not full-time employees. I expect a reasonable muddle on Social Security (which isn't so broken) and some modest improvement on the out-of-control growth-rates of Medicare. I expect some upward adjustment in taxes paid by those in higher tax brackets by the end of the term, including retirees. No change in tax loopholes--we're looking to protect jobs here, not eliminate them, right?

Foreign policy progress may develop faster than I expect, because I don't expect much for six months or so. Still, there can be huge improvements. I'm waiting to see Obama's initial position toward Russia, which will have to be carefully considered. I expect Obama to meet with both al-Sistani in Iraq and Khamenei in Iran before the first term is over, and I am hopeful that a confrontation with Iran over nuclear weapons can be avoided.

I think the most nuanced policy to come from Obama will be in the area of executive powers, those extended by the Bushites in the interest of the "unitary executive". He will pull back only selectively; in other words, he will give back the Bushite power-grabs only when they were applied incompetently or abusively, not on principle. I now suspect that Obama will retain the Hobbesian principle of a theoretically unlimited state, as long as nations are in a state of nature amongst themselves.

In order to address that last issue--the complete disrespect of international organizations by the Bushites--he will have to tread on the shaky ground of U.N. Charter reform, but I believe that will be a second-term initiative.

My pick for the most likely Obama quote for his inaugural address is this bit, which could be properly planted into the declaration of a new posture toward the rest of the world:

to do all which may achieve and cherish a just and lasting peace among ourselves and with all nations.

It's from Lincoln's Second Inaugural ("with malice toward none..."), the greatest touchstone for Obama's whole approach.


As for the economy....

I'm going to withhold judgment until I see it, but I am somewhat skeptical of the stimulus package. The question is whether we know what sort of deficit spending and what sort of tax reductions will produce the desired result (i.e., a turnaround in the recessionary trend without rampant inflation).

Tax cuts are the attempt to provide direct stimulus to the largest number of people. The problem is, spread so thin, people don't get enough to change their behavior much. I see only marginal relief, in the form of some recovery in consumption levels, from those.

It's really a matter of the spending and whether it will produce sustainable jobs. On this one, I'm afraid that there's a real question if there's enough real need for labor to go around (i.e., maintain our lifestyle) in normal times. I think that the experience of the last dozen or so years has clearly shown that we don't need to be in the manufacture of cheap plastic items, that we don't know how to run a proper financial cartel, and that the Internet is fully portable (as in, no boundaries).

On the other hand, we have a good start in providing services in the Internet, and we still have abundant natural resources (even if we've depleted our crude oil more than some). We also have a central role in the evolving World culture, and that is something we have earned and from which we will be hard to displace. I find the argument that most of the deficit spending should be directed towards creating a new strength in energy technology and its application to be a compelling one, but it will also be slow in creating jobs.

My bottom line expectation is that Obama can "arrest the decline by end of oh-nine"; that may not be a good-enough result to produce his re-election, but I say we can't expect more.

We Are Tomorrow's Fossil Fuels

I think when future geologists look back upon the Plasticiferous period deposits and their abundant long-string carbon molecules, they will be impressed. What iridium?--the Cenozoic monsters poisoned all competing genotypes, but in so doing, poisoned themselves.

And I can see the pipelines running from today's landfills to power future homes with clean-burning natural gas!