Monday, November 24, 2008

the palin turkey massacre video

She really is the gift that keeps on giving.

Her “Turkey Massacre Interview” is so … post-modern.

I admit I was a bit slow picking up on this one. It is, perhaps, best viewed with no explanation whatsoever.

Here is
the video. Enjoy. Happy Thanksgiving!

Of course, it wouldn’t be a Palin moment without some subsequent prevarication. From Andrew Sullivan:

The wack-job is once again denying reality. Here's a sane person:
Scott Jensen is the one who filmed the scene. He’s local station KTUU’s award winning chief photographer. He told CC from KUDO radio yesterday that Sarah Palin, who was standing next to her personal assistant throughout the entire interview, chose the spot on which she stood for the “turkey slaughter interview” that quickly went viral on the internet, and received wide coverage in the news media. The turkey slaughter was already underway when the governor chose the spot. The photographer pointed out what was going on and asked her if she wanted to move. She said, “No worries.”

But Palin is now denying all of it, and implicitly calling the photographer a liar:
“The [Alaska] governor did not know it was going on behind her,” Palin’s spokesperson tells ET of the reportedly grisly scene at Triple D Farm & Hatchery outside Wasilla. Cameras captured Palin extending the annual Thanksgiving pardon to one turkey while a farm hand slaughtered the bird’s feathered friends in the background.
Who are you going to believe: Palin or your lyin' eyes?
OK, while I’m at it, I was a bit slow passing this along. Here is Bush at the APEC meeting in Peru being snubbed by his fellow world leaders (or was it the other way around?):

Watch the video.

57 days. But who's counting.

Sunday, November 23, 2008

turning around the economy

In my last post (“the meltdown”), I summarized where the economy stands. It’s not pretty.

Where do we go from here?

Berkeley professor and former Clinton Labor Secretary, Robert Reich had a good blog post (“How Obama is Already Taking Charge”):

Obama's immediate challenge is to fill the leadership vacuum created by a lame-duck president with historically-low approval ratings who seems to have lost interest in his job (at this writing, he's out of the country) and who's disappeared from the media, and a Treasury chief who has all but punted on coming up with any workable solution to the crisis. But Obama doesn't become president until 12 noon eastern standard time on January 20 -- and the national economy is imploding right now.

How does Obama manage this feat? Two ways: (1) appointing a highly-capable economic team, and (2) telling the nation what he plans to do starting the afternoon of January 20. Specifically:

(1) The members of Obama's new economic team fit the bill. They're reported (I have no inside knowledge) to include Tim Geithner at Treasury, Peter Orszag at the Office of Management and Budget, Jack Lew and Jason Furman at the National Economic Council, and Austan Goolsbee at the Council of Economic Advisors. All have several things in common. They're relatively young, in their late 30s or 40s, representing a generational change and a fresh start. Despite their youth, they're also experienced; almost all were up-and-comers in the Clinton Treasury, NEC, and OMB.

All are pragmatists. Some media have dubbed them "centrists" or "center-right," but in truth they're remarkably free of ideological preconception. All have well-earned reputations as hard workers, well-versed in the technical details of public and
private finance. They are not visible veterans of the old battles over supply-side economics or deficit reduction, nor are they well-known to the public. They are not visionaries but we don't need visionaries when the economic perils are clear and immediate. We need competence. Obama could not appoint a more competent group.
(2) The President-Elect has also signaled the country what he wants to do: enact an "Economic Recovery Plan" that will mean 2.5 million more jobs by January of 2011. In his words (from Saturday's radio address) a plan "big enough to meet the challenges we face ... a two-year, nationwide effort to jumpstart job creation in America and lay the foundation for a strong and growing economy." Again, I have no inside knowledge, but I'd expect it to be about $600 to $700 billion.

Its focus will be on infrastructure of a sort that will not only put people to work but also improve the productivity of the economy. His words: "We’ll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels; fuel-efficient cars and
the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead."

In short, Obama's job-stimulus plan will be a down-payment on his larger plan to
increase the nation's public investment. "These aren’t just steps to pull ourselves out of this immediate crisis," he says, "these are the long-term investments in our economic future that have been ignored for far too long. And they represent an early down payment on the type of reform my Administration will bring to Washington." He could not be more specific, at least while still President-Elect.

At a time when aggregate demand is shriveling because consumers aren't spending and investors have stopped investing, and exports are shrinking, Obama recognizes that government must be the spender of last resort. He will combine old-fashioned Keynesian economics with newly-fashioned public investments to pull the economy out of its slump.

By putting his economic team in place barely three weeks after he was elected, and telling the nation what he plans to do immediately after he takes office, the President-Elect is asserting leadership at a time when the Bush administration has all but abdicated.

Let’s take both of the elements Reich cites. First, Obama’s economic team.

My previous post (“the meltdown”) described conditions in the financial markets as of last Thursday. On Friday, the markets were essentially flat until mid-afternoon when the un-official announcement came out that Obama would pick New York Fed chief Tim Geithner as his Treasury Secretary. The
markets liked it:

The S&P 500 was up more than 6.3% in just the hour after word of the likely Geithner nomination hit the newswires.

A GREAT choice. Geithner is the same age as Obama (both born in August of 1961) and shares the same temperament – cool, fit, energetic, and non-ideological, with an easy-going manner and a good sense of humor. To an even greater extent than Obama, he spent much of his childhood overseas, living in East Africa, India, China, Japan and Thailand (where he went to high school). He is not particularly partisan. He worked for Robert Rubin and Larry Summers in the Clinton Treasury Department (where he worked on various financial crises, including those in Mexico, Thailand, Brazil and Argentina and the Long Term Capital Management crisis – excellent experience for his current assignment). But he also worked briefly for the Reagan Treasury Department, for Kissinger and Associates, and for the IMF. He is part of the
Group of Thirty, a an international body of financial industry and academic economics types, including Paul Krugman, Paul Volcker and Larry Summers among others, that work to develop financial and economic policies.

It is also helpful that as New York Fed chief he already is at the heart of efforts to manage the financial crisis. He is already on the job. That is huge right now.

The Economist has a
good piece on Geithner. Here is a bit:

Investors were … relieved that their darkest fears of a Sarah Palin-like shock announcement did not come to pass and that Mr Obama, as in his other important appointments, has chosen ability over connections. Mr Geithner does not know Mr Obama well and has no notable ties to the Democratic Party. But for this cabinet post more than any other, an overtly political appointment would have been corrosive to investor confidence.

Assuming he is nominated Mr Geithner brings two crucial qualities. First, he represents continuity. From the first days of the crisis last year, he has worked hand in glove with Ben Bernanke, the Fed Chairman, and Mr Paulson. He can continue to do so while awaiting confirmation. If Citigroup, for example, needs federal help, Mr Geithner will be involved. An unknown when he joined the New York Fed in 2003, he is now a familiar face to the most senior executives on Wall Street and to central bankers and finance ministers overseas.

Second, he represents competence. He has spent more time on financial crises, from Mexico and Thailand to Brazil and Argentina than probably any other policymaker in office today. Mr Geithner understands better than almost anyone that in crises you throw out the forecast and focus on avoiding low probability events with catastrophic consequences. Such judgments are excruciating: do too little, and you undermine
confidence and generate a bigger crisis that needs even bigger policy action. Do too much, and you look panicked and invite blowback from Wall Street, Congress and the press. At times during the crisis Mr Geithner would counsel Mr Bernanke on the importance of the right “ratio of drama to effectiveness”. …

Mr Geithner looks a lot younger than his 47 years (though not as young as he did
before the crisis began). He skateboards and snowboards and exudes a sort of
hipster-wonkiness, using “way” as a synonym for “very” as in “way consequential”
and occasionally underlining his point with the word “fuck”. In temperament he
seems similar to Mr Obama: he is suspicious of ideology, questions received
wisdom, likes a competition of ideas and is keenly aware of how uncertain the
world is.

Mr Geithner learned about crisis management as an aide to Lawrence Summers who rose to Treasury Secretary under Bill Clinton. Mr Summers was the other candidate for the job under Mr Obama, and his appointment would probably also have been greeted enthusiastically. He will reportedly join the administration in a White House advisory role. …

Mr Obama is assembling a formidable economic team. With the economy perhaps on the precipice of its worst recession since the Depression, he will need it.

Last June, Portfolio magazine also had a
good, long piece on Geithner.

We’ve come a long way from the recent past when we had a hack like John Snow at Treasury essentially acting as a salesman for economic policies devised in the White House by the likes of Dick Cheney and Karl Rove on the basis of right-wing ideology and short-term electoral politics.

Getting to Reich’s second point: The need for Obama to outline early what he plans to do upon taking office. That is exactly what Obama did in his radio address (and YouTube video) yesterday. Here is the
four-minute video and transcript in full:

Good morning.

The news this week has only reinforced the fact that we are facing an economic crisis of historic proportions. Financial markets faced more turmoil. New home purchases in October were the lowest in half a century. 540,000 more jobless claims were filed last week, the highest in eighteen years. And we now risk falling into a deflationary spiral that could increase our massive debt even further.

While I’m pleased that Congress passed a long-overdue extension of unemployment benefits this week, we must do more to put people back to work and get our economy moving again. We have now lost 1.2 million jobs this year, and if we don’t act swiftly and boldly, most experts now believe that we could lose millions of jobs next year.

There are no quick or easy fixes to this crisis, which has been many years in the making, and it’s likely to get worse before it gets better. But January 20th is our chance to begin anew – with a new direction, new ideas, and new reforms that will create jobs and fuel long-term economic growth.

I have already directed my economic team to come up with an Economic
Recovery Plan that will mean 2.5 million more jobs by January of 2011 – a plan
big enough to meet the challenges we face that I intend to sign soon after taking office. We’ll be working out the details in the weeks ahead, but it will be a two-year, nationwide effort to jumpstart job creation in America and lay the foundation for a strong and growing economy. We’ll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels; fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.

These aren’t just steps to pull ourselves out of this immediate crisis; these are the
long-term investments in our economic future that have been ignored for far too
long. And they represent an early down payment on the type of reform my
Administration will bring to Washington – a government that spends wisely,
focuses on what works, and puts the public interest ahead of the same special
interests that have come to dominate our politics.

I know that passing this plan won’t be easy. I will need and seek support from Republicans and Democrats, and I’ll be welcome to ideas and suggestions from both sides of the aisle.

But what is not negotiable is the need for immediate action. Right now, there are millions of mothers and fathers who are lying awake at night wondering if next week’s paycheck will cover next month’s bills. There are Americans showing up to work in the morning only to have cleared out their desks by the afternoon. Retirees are watching their life savings disappear and students are seeing their college dreams deferred. These Americans need help, and they need it now.

The survival of the American Dream for over two centuries is not only a testament to its enduring power, but to the great effort, sacrifice, and courage of the American people. It has thrived because in our darkest hours, we have risen above the smallness of our divisions to forge a path towards a new and brighter day. We have acted boldly, bravely, and above all, together. That is the chance our new beginning now offers us, and that is the challenge we must rise to in the days to come. It is time to act. As the next President of the United States, I will. Thank you.

This is EXACTLY what the country and the economy need right now. In addition to being badly-needed short-term fiscal stimulus it would also be a down payment on badly-needed long-term infrastructure investments.

I wrote a previous post (“
the two trillion dollar deficit”) on the need to err on the side of aggressive fiscal stimulus over budgetary discipline in the near term. Another long-time deficit hawk, policy wonk Matt Miller (author of “The Two Percent Solution”), wrote on the same subject in FORTUNE last week (“How to Love Trillion Dollar Deficits”):

I used to be a deficit fetishist, an oddball who read one of Pete Peterson's budget doomsday books on his honeymoon, and who has bored countless friends with filibusters on our fiscal follies. But I've changed.

What's a fallen fiscal conservative to say? When a character in Hemingway's The Sun Also Rises was asked how he went bankrupt, he famously replied, "Slowly, then suddenly."

My journey into the heart of the New Deficit Indifference feels the same. I came of age as an economics student just as Ronald Reagan was on his way to quadrupling the national debt. I imbibed the wisdom that deficits crowd out private investment, hurt productivity growth and living standards, and pass big burdens to the next generation. All because politicians were afraid to make a few unpleasant choices!

By 1992 I was the kind of New Democrat who thought Ross Perot performed a tremendous public service when his charts and graphs proved that 20% of the electorate could be roused to care about our fiscal mess. In the early Clinton White House I was the resident deficit monomaniac, the guy who griped that we weren't moving fast enough to shrink the debt even as we skimped on needed investments in health care, infrastructure and education. ...

In the face of all this, how can a deficit hawk like me now blithely countenance the coming trillion-dollar gap? It's apt to invoke the godfather of deficit spending himself. "When the facts change, I change my mind," John Maynard Keynes once growled when grilled about an inconsistency. "What do you do, sir?"

In ways that 9/11 didn't, today's economic meltdown really does change everything, at least for a few years. Every day brings fresh proof that the credit crunch and the exhaustion of debt-fueled consumer spending threatens to dangerously collapse aggregate demand. There's simply no way to avoid a major recession without the federal government stepping in to bolster demand until we work through the subprime hangover.

Toss in reasonable down payments by the Obama administration on expanded health coverage, green energy, infrastructure and schools, and the only question is how the new president can manage appearances so that this trillion dollar milestone doesn't become a political millstone to boot. ...

Even though he is still two months from taking office, Obama is getting off to a excellent start. But based on how he ran his campaign, would you have expected anything less?

the meltdown

Here is where things stood in the financial markets at the end of the day Thursday.

First, the stock market.

On Thursday, the S&P 500 fell 6.7% in one day (after having fallen by 6.1% the previous day) to 752, its lowest level since 1997. (The S&P 500 is a better, broader measure of the stock market than the Dow Jones Industrial Average. The Dow only includes 30 large stocks and is price-weight averaged, unlike the 500 stocks in the S&P index which are market-weight averaged.) On the way down, it passed the low of 777 that it set in October of 2002 during the last bear market. It’s now lower than it was before the boom, the NASDAQ market crash and the post-2003 bull market that sent stocks to record heights. It was down 52% from its peak of 1565 set in October of last year. As of Thursday, $8.3 trillion in stock market wealth had been erased in the US in just the past 13 months. If the year ended on Thursday, the S&P 500 would have been down 49% for the year, the worst annual decline in its 80-year history. (The Dow has been around longer – since 1896. In that time it has had ONE year with a bigger decline – that was its 52% decline in 1931.)

(An interesting Depression-era note: It took the Dow 25 years – until 1954 – to again reach the level of its pre-1929-crash high on an inflation-adjusted basis. A lost generation for investors.)

Globally, investors have erased more than $33 trillion in stock market value this year.

But the credit markets were even scarier.

When people pull money out of riskier investments like stocks or bonds, where do they put it for safety? Treasury bills. As more people seek the safety of Treasury bills, the higher their price and the lower the yield. On Thursday, the yield on the two-year Treasury note dropped below one percent (to 0.97%) for the first time EVER. (The yield had been as high as 3.11 earlier this year, in June. Had you held those notes throughout 2007 you would have earned a return of 7.5%.) Yields on two-, five-, and 10-year notes and 30-year bonds all dropped to their lowest levels since the Treasury began regular issuance of those securities. Rates on three-month bills dropped to 0.02% -- essentially nothing. The equivalent of storing money under your bed.

The two-year breakeven rate (the difference in yields between inflation-linked bonds and nominal bonds) was minus 4.09%, suggesting that traders are betting that the US economy will face deflation over the next two years. That reflects the
1% decline in consumer prices in October, the largest monthly decline since World War II. The producer price index fell by an even larger amount in October – 2.8% – the largest monthly decline since that measure was created in 1947. Once you get into a deflationary environment, it gets REALLY hard to turn things around. No one wants to invest now to generate lower cash returns in the future. Consumers hold off as long as possible on purchases to take advantage of falling prices. And the Fed loses its ability to stimulate the economy through interest rate cuts when rates go negative. That is what economists refer to as a “liquidity trap.” When Japan fell into a liquidity trap in the early ‘90’s, it took a couple of decades for that country’s economy to climb back out.

The financial markets are reflecting activity (or the lack thereof) in the “real” economy. On Thursday it was reported that the number of people filing
new unemployment claims during the previous week reached a 16-year high of 542,000. (Bush finally dropped his opposition to an extension of unemployment benefits, and on Thursday Congress approved another 13-weeks of benefits for those who have already exceeded the previous 26-week limit.) Even before the big losses of this month, the US economy had already shed over 1.2 million jobs this year.

Fed officials lowered their growth estimates for 2008 from a range of 1 to 1.6% previously to zero to 0.3%. Fed estimates for 2009 dropped to a range from a contraction of 0.2% to growth of 1.1%.
Goldman Sachs was even more pessimistic. They slashed their fourth quarter 2008 economic growth forecast from a negative 3.5% to a negative 5% (at an annualized rate). For first two quarters of 2009, they are forecasting declines of 3% and 1%. They are also forecasting unemployment reaching 9% by the fourth quarter of next year. (An interesting Goldman note: Their share price is now down by 54% since Warren Buffett invested $5 billion in the firm only seven weeks ago.) Shares of Citigroup fell more than 50% this past week alone, as they announced layoffs of 52,000 employees. (The New York Times has a very long article today on the decline of Citigroup.)

Last week, the price of oil fell below $50 a barrel, down from a high over $147 in July. While a drop in oil prices would ordinarily be considered a good thing for the economy, in this case it reflects a pessimistic forecast for economic growth and hence oil demand. (It also suggests a large speculative element in the run-up of prices earlier in the year.)

To summarize, everything that you DON’T want to go up is now looking like a hockey stick on the charts. And everything you DON’T want to go down is dropping off a cliff.

For example, the differences over time between rates on corporate bonds and risk-free Treasury bonds look like this:

And here is the trend in retail sales:

That 8.8% real decline in retails sales in October was the largest since records have been kept. (Consumer spending constitutes 70% of GDP in the US.)

It is easy right now for me to imagine scenarios where things get a lot worse. It is hard to come up with scenarios for things bottoming out any time soon.

This is my big worry right now. The US is “over retailed” (i.e., we have far more retail sales capacity than we do sustainable demand). That suggests a lot of retailers will be going out of business. Right now, a lot of them are barely hanging on hoping that a decent fourth quarter (holiday sales) will save them. To do that, they are slowing or stopping altogether payment to suppliers. But as the chart above shows, we know the fourth quarter is going to be disastrous. That will drive a lot of retailers under. And because their suppliers, too, have been barely hanging on and have been strung out by their customers, a lot of them will also go out of business. And no one is going to be getting a line of credit to save them – the credit markets have dried up. In other words, this is more likely the beginning of the bad news, not the end of it.

On the other hand, I don’t see what stops the free-fall right now. What’s the scenario for a turn-around any time soon? It’s hard for me to come up with an even-remotely plausible scenario.

Making matters worse is the fact that President Bush and Treasury Secretary Paulson have essentially checked out and it is still two months before Obama is sworn into office. That is an eternity under current circumstances.

All of which suggests, President Obama and new Congress will need to take very dramatic action immediately upon taking office. Previous forecasts and plans are irrelevant.

More on what to do in my next post.

Thursday, November 20, 2008

obama's use of complete sentences stirs controversy

From Andy Borowitz:
NOVEMBER 18, 2008

Obama’s Use of Complete Sentences Stirs Controversy
Stunning Break with Last Eight Years

In the first two weeks since the election, President-elect Barack Obama has broken with a tradition established over the past eight years through his controversial use of complete sentences, political observers say.

Millions of Americans who watched Mr. Obama's appearance on CBS' "Sixty Minutes" on Sunday witnessed the president-elect's unorthodox verbal tick, which
had Mr. Obama employing grammatically correct sentences virtually every time he
opened his mouth.

But Mr. Obama's decision to use complete sentences in his public pronouncements carries with it certain risks, since after the last eight years many Americans may find his odd speaking style jarring.

According to presidential historian Davis Logsdon of the University of Minnesota, some Americans might find it "alienating" to have a President who speaks English as if it were his first language.

"Every time Obama opens his mouth, his subjects and verbs are in agreement," says Mr. Logsdon. "If he keeps it up, he is running the risk of sounding like an elitist."

The historian said that if Mr. Obama insists on using complete sentences in his speeches, the public may find itself saying, "Okay, subject, predicate, subject predicate - we get it, stop showing off."

The President-elect's stubborn insistence on using complete sentences has already attracted a rebuke from one of his harshest critics, Gov. Sarah Palin of Alaska.

"Talking with complete sentences there and also too talking in a way that
ordinary Americans like Joe the Plumber and Tito the Builder can't really do
there, I think needing to do that isn't tapping into what Americans are needing
also," she said.

Sunday, November 16, 2008

the two trillion dollar deficit

I’ve always been a deficit hawk, favoring fiscal responsibility and balanced budgets. It has driven me nuts over the past seven years to see the hard-earned federal budget surpluses bequeathed by Bill Clinton squandered and replaced with over $4 trillion of new federal debt. Future generations of taxpayers got nothing for that debt that they will eventually have to repay (or at least pay the interest on) – it went to the Iraq war and tax cuts for the rich. Among other things, it helped fuel our unsustainable credit binge and reduced our policy options in the (inevitable) event that the bubble burst.

Well, it has burst.

Generals are not the only ones with a tendency to fight the last war. As much as it pains me to write it, this is no time for fiscal responsibility. The time for that was when the bubble was inflating not when we are standing on the precipice of a depression.

Some background on the deficit: For the fiscal year ended September 30, 2008 (fiscal 2008), the US government for the first time in history
added over a trillion dollars to the federal debt. That includes a variety of special appropriations that are excluded from the budget deficit calculations that you generally see reported. Officially, the fiscal 2008 deficit was “only” $455 billion. But that nets out a $183 billion Social Security surplus and it doesn’t include a variety of non-budgeted expenditures and financing operations. To understand the difference, just look at reported federal deficits vs. the increase in the national debt:

For example, it was reported last week that the Treasury would have to borrow $550 billion during the current quarter. Over half a trillion dollars in just one quarter. That includes things like the Fed’s liquidity operations, and it is $408 billion higher than the Treasury estimated in July. Goldman Sachs estimates that the Treasury will have to borrow over $2 trillion in the current fiscal year to fund economic rescue operations. These estimates are almost certainly low. It was reported last week that in October, the first month of the current fiscal year, the federal deficit was over $237 billion. One month. The nonpartisan Committee for a Responsible Budget estimates all the government economic and rescue initiatives, starting with the $168 billion in stimulus checks issued earlier this year, already total $2.6 trillion. Read that again: $2.6 trillion ALREADY committed to rescue initiatives. (The Fed has lent out over $2 trillion to financial institutions – although it isn’t revealing the recipients or any other details like the collateral or loan terms. Bloomberg is suing to get that information.)

By any measure, these are staggering numbers.

So we should be trying to reduce the deficit, right? Wrong. Not now. Not any time soon.

Even as we are struggling to contain the worst financial crisis since the Great Depression, the "real" economy is falling off a cliff. If there was any doubt before, this week's economic news has confirmed that we are in the midst of what will almost certainly be the worst economic downturn since the Great Depression. The Labor Department reported that jobless claims increased last week by a seasonally-adjusted 516,000, only the second time since 1992 that claims have topped 500,000. The four-week average of claims increased to 491,000, the highest level in more than 17 years. Jobs have declined for 10 straight months. Retail sales for October decreased by 2.8% from the previous month and 4.1% from October of 2007. On an inflation-adjusted basis, retail sales declined by 8.8% from a year earlier, the largest such decline since the Census Bureau started keeping records. These figures include a year-over-year drop in autos sales of 23.4%. Retail sales are a key portion of consumer spending and consumer spending accounts for about 70% of the country's gross domestic product.

As Paul Krugman
wrote in the New York Times this week, under these circumstances policy an aggressive fiscal policy is needed:

We are already, however, well into the realm of what I call depression economics... in which the usual tools of economic policy... have lost all traction. When depression economics prevails... virtue becomes vice, caution is risky and prudence is folly.... [T]he effective federal funds rate ... has averaged less than 0.3 percent in recent days. Basically, there’s nothing left to cut.

And with no possibility of further interest rate cuts, there’s nothing to stop the economy’s downward momentum. Rising unemployment will lead to further cuts in consumer spending, which Best Buy warned this week has already suffered a “seismic” decline. Weak consumer spending will lead to cutbacks in business investment plans. And the weakening economy will lead to more job cuts, provoking a further cycle of contraction.

To pull us out of this downward spiral, the federal government will have to provide economic stimulus in the form of higher spending and greater aid to those in distress — and the stimulus plan won’t come soon enough or be strong enough unless politicians and economic officials are able to transcend several conventional prejudices.

One of these prejudices is the fear of red ink. In normal times, it’s good to worry about the budget deficit — and fiscal responsibility is a virtue we’ll need to relearn as soon as this crisis is past. When depression economics prevails, however, this virtue becomes a vice. ...

Another prejudice is the belief that policy should move cautiously. In normal times, this makes sense: you shouldn’t make big changes in policy until it’s clear they’re needed. Under current conditions, however, caution is risky, because big changes for the worse are already happening, and any delay in acting raises the chance of a deeper economic disaster. The policy response should be as well-crafted as possible, but time is of the essence.

Finally, in normal times modesty and prudence in policy goals are good things. Under current conditions, however, it’s much better to err on the side of doing too much than on the side of doing too little. The risk, if the stimulus plan turns out to be
more than needed, is that the economy might overheat, leading to inflation — but
the Federal Reserve can always head off that threat by raising interest rates.
On the other hand, if the stimulus plan is too small there’s nothing the Fed can
do to make up for the shortfall. So when depression economics prevails, prudence
is folly.

What does all this say about economic policy in the near future? The Obama administration will almost certainly take office in the face of an economy looking even worse than it does now. Indeed, Goldman Sachs predicts that the unemployment rate, currently at 6.5 percent, will reach 8.5 percent by the end of next year.

All indications are that the new administration will offer a major stimulus package. My own back-of-the-envelope calculations say that the package should be huge, on the order of $600 billion.

So the question becomes, will the Obama people dare to propose something
on that scale?

Let’s hope that the answer to that question is yes, that the new administration will indeed be that daring. For we’re now in a situation where it would be very dangerous to give in to conventional notions of prudence.

As far back as July – before the financial crisis fully manifested itself – PIMCO’s Bill Gross, the best bond fund manager in the country, wrote in his monthly Outlook commentary that the next president (who he assumed would be Obama) would and should run a deficit of at least a trillion dollars. His piece, which now looks prescient – and conservative – took the form of an
open letter to President Obama:

You have inherited a mess. Your predecessor, fixated on emulating a former Republican icon from a far different economic era, chose to emphasize tax cuts for the rich and excessive consumption for all Americans. He promoted deregulation and free markets when, in fact, the markets and their institutions needed tough love. Over eight years, he failed to put forth a coherent energy policy. He needlessly invaded Iraq and lowered worldwide esteem for this nation as a symbol of freedom and benevolence.

But enough about W’s spilt milk. I’ve already ticked off so many readers that they’re questioning my Republican Party voter registration. What do I think you should do as the new President to rectify this mess? All I know is that any solution will come with a high price tag. Although your campaign slogan says “Yes we can,” I have my doubts. Granted, you’re going to raise tax rates on the rich, give a break to the lower/middle class and rebalance the scales of economic justice somewhat. I myself won’t enjoy paying that near 50 percent marginal tax rate after you remove the current cap on the payroll tax, but my wealthy neighbors and I in Newport Beach should just look at it this way: we’ve had an eight-year lease extension on the “high life.” Now it’s time to give something back and I suspect we won’t be working any less hard. That ol’ Laffer Curve has a certain logic to it, but it only makes sense at the upper margin. People did work less at confiscatory tax rates imposed pre-Thatcher/Reagan but once they got down to 50 percent or lower, it was all gravy – promoting conspicuous consumption as opposed to higher productivity and overtime at the office. …

Anyway, so you’re gonna do the tax thing, Mr. President, and throw in some form of
universal healthcare to boot … In addition, you’ll need to provide some immediate relief to homeowners … By January, home prices will be down another 10 percent or so and our Japanese-style property deflation will be in full stride. …

But you’ll have your tax bill and your healthcare bill and your housing fix, and somehow it’ll all be paid for by wealthy hedge fund managers, oil companies or, pray tell, a robust economy that’s creating good jobs at home instead of exporting them abroad. Uh, I don’t think so, Mr. President. That’s where the “yes we can” morphs into “no we can’t.” Not that you won’t accomplish most of that – the robust economy and the good jobs notwithstanding. It’s just that you won’t be able to pay for it and it’s better to admit it now as opposed to later. No David Stockman confessions in your administration. You’re smarter than Ronald Reagan and too nice of a guy to distort reality like King George. So let’s start out by dropping all of that “budget neutral” rhetoric and admit where we’re headed. Your administration will produce this nation’s first trillion dollar deficit!

While the Republicans will blame you for years and label you “Trillion Dollar Obama” in future campaigns, there is in fact not much that you or any other President can do. You’ve inherited an asset-based economy whose well has been pumped nearly dry with lower and lower interest rates and lender of last resort liquidity provisions that have managed to support Ponzi-style prosperity in recent years. Foreign lenders have cooperated by purchasing Treasuries at yields which when combined with dollar depreciation have resulted in negative returns on their money. Even if these charades continue (and they may not), their stimulative effects – their magical powers to transform a 110-pound weakling into a Charles Atlas/Arnold Schwarzenegger mensch of an economy – are gone. What you need now is fiscal spending and lots of it. No ordinary Starbucks will do, Mr. President, you need to step up for a six-pack of Red Bull.

[T]his economy will need an additional jolt of $500 billion or so of government spending real quick. It must replace both reduced residential investment and consumption whose decline has placed the U.S. economy near, if not in a recession. Some quick math for you Sir: gross private domestic investment (machines, houses, inventories) has declined by $200 billion since its peak in late 2006. Due to higher unemployment and energy costs, domestic consumption will soon be $300 billion less than it should be if we are to return to historical economic growth rates. According to that old C + I + G formula (scratch the trade deficit for now) when C + I is reduced by $500 billion, then G should increase by that amount in order to fill the gap. The G, Sir, is you – the government deficit, the fiscal stabilizer popularized by Keynes following the Depression. And since the fiscal deficit for 2008 is likely to press $500 billion even before you take the oath of office, well there you have it: $500billion + $500 billion = $1 trillion big ones …

In the final analysis I wonder why you or anyone else would want to be President in 2009. …

Bear in mind, this was written back in July – a lifetime ago in this economic crisis (and four months before Obama won the election). Gross assumed a $500 billion baseline deficit and $500 billion in fiscal stimulus. Krugman is now assuming the need for at least $600 billion in stimulus – apart from financial rescue operations. Morgan Stanley’s chief economist is now saying the 2009 budget deficit could be close to $2 trillion, or 12.5 percent of GDP (more than twice the record of 6% set in 1983). The limitation is really our ability to intelligently spend the money. These deficit levels are already baked in, and Obama doesn’t even get sworn in until almost three months into the fiscal year. (Although that isn’t keeping the crazy right from pre-emptively blaming Obama for our economic problems. Even though we are already about a year into the current economic downturn, and Obama is still two months away from being sworn into office, Rush Limbaugh is already calling this, “the Obama recession”.)

Conservative pundits are warning Obama and Congressional Democrats not to “overreach.” I’m sure they are offering this advice in the best, long-term electoral interests of their Democratic “friends.” But let’s hope the Democrats don’t take it. The risk is that Obama and Congress don’t do enough. Or that they squander the stimulus on transfer payments and pork. The social safety net needs to be strengthened and a lot of people are going to need temporary help. And a certain amount of pork is inevitable – as AIG (among others) has demonstrated, the private sector wastes a lot of money, too.

Some unnecessary public works projects are probably better for the economy than billions of dollars in Wall Street bonuses. But the need for stimulus comes at a time when we also need to make some very large investments in infrastructure, energy efficiency and alternative energy. It would be a shame if we failed to seize the moment. In this crisis there lies an opportunity.

I passed along this quotation from Obama (from an interview with Joe Klein in TIME) previously. But it is worth revisiting because it summarizes well the need and the opportunity:
“[T]he engine for economic growth for the last 20 years is not going to be there for the next 20, and that was consumer spending. I mean, basically, we turbo-charged this economy based on cheap credit. Whatever else we think is going to happen over the next certainly 5 years, one thing we know, the days of easy credit are going to be over because there is just too much de-leveraging taking place, too much debt both at the government level, corporate level and consumer level. And what that means is that just from a purely economic perspective, finding the new driver of our economy is going to be critical. There is no better potential driver that pervades all aspects of our economy than a new energy economy.”

Let’s hope we are able to seize the opportunity.

And don’t worry about those two trillion dollar deficits.

Friday, November 14, 2008

wow! america is cool

Obama cool …

Garrison Keillor from
Wow! America is cool
We are being admired by Swedes! We don't have to pretend we're Canadians. We elected Barack Obama!

By Garrison Keillor

Be happy, dear hearts, and allow yourselves a few more weeks of quiet exultation. It isn't gloating, it's satisfaction at a job well done. He was a superb candidate, serious, professorial but with a flashing grin and a buoyancy that comes from working out in the gym every morning. He spoke in a genuine voice, not senatorial at all. He relished campaigning. He accepted adulation gracefully. He brandished his sword against his opponents without mocking or belittling them. He was elegant, unaffected, utterly American, and now (Wow) suddenly America is cool. Chicago is cool. Chicago!!!

We threw the dice and we won the jackpot and elected a black guy with a Harvard degree, the middle name Hussein and a sense of humor -- he said, "I've got relatives who look like Bernie Mac, and I've got relatives who look like Margaret Thatcher." The French junior minister for human rights said, "On this morning, we all want to be American so we can take a bite of this dream unfolding before our eyes." When was the last time you heard someone from France say they wanted to be American and take a bite of something of ours? Ponder that for a moment.

The world expects us to elect pompous yahoos and instead we have us a 47-year-old prince from the prairie who cheerfully ran the race, and when his opponents threw sand at him, he just smiled back. He'll be the first president in history to look really good making a jump shot. He loves his classy wife and his sweet little daughters. He looks good in the kitchen. He can cook Indian or Chinese but for his girls he will do mac and cheese. At the same time, he knows pop music, American lit and constitutional law. I just can't imagine anybody cooler. Look at a photo of the latest pooh-bah conference -- the hausfrau Merkel, the big glum Scotsman, that goofball Berlusconi, Putin with his B-movie bad-boy scowl, and Sarkozy, who looks like a district manager for Avis -- you put Barack in that bunch and he will shine.

It feels good to be cool and all of us can share in that, even sour old right-wingers and embittered blottoheads. Next time you fly to Heathrow and hand your passport to the man with the badge, he's going to see "United States of America" and look up and grin. Even if you worship in the church of Fox, everyone you meet overseas is going to ask you about Obama and you may as well say you voted for him because, my friends, he is your line of credit over there. No need anymore to try to look Canadian.

And the coolest thing about him is the fact that back in the early '90s, given a book contract after the hoo-ha about his becoming the First Black Editor of the Harvard Law Review (FBEHLR), instead of writing the basic exploitation book he could've written, he put his head down and worked hard for a few years and wrote a good book, an honest one, which, since his rise in politics, has earned the Obamas enough to buy a very nice house and put money in the bank. A successful American entrepreneur.

The last American president to write a book all by his lonesome self, I believe, was Theodore Roosevelt, who, on graduation from Harvard, wrote "The Naval War of 1812," and in my humble opinion, Obama's is the better book for the general reader, but you be the judge.

Our hero who galloped to victory has inherited a gigantic mess. The country is sunk in debt. The Treasury announced it must borrow $550 billion to get the government through the fourth quarter, more than the entire deficit for 2008, so he will have to raise taxes and not only on bankers and lumber barons. His promise never to raise the retirement age is not a good idea. Whatever he promised the Iowa farmers about subsidizing ethanol is best forgotten at this point. We may not be getting our National Health Service cards anytime soon. And so on and so on.

So enjoy the afterglow of the election a while longer. We all walk taller this fall. People in Copenhagen and Stockholm are sending congratulatory e-mails -- imagine! We are being admired by Danes and Swedes! And Chicago becomes the First City. Step aside, San Francisco. Shut up, New York. The Midwest is cool now. The mind reels. Have a good day.

the opposite of Obama cool, from The Times (UK):
With Russian tanks only 30 miles from Tbilisi on August 12, Mr Sarkozy told Mr Putin that the world would not accept the overthrow of Georgia’s Government. According to [Sarkozy’s chief diplomatic adviser], the Russian seemed unconcerned by international reaction. “I am going to hang Saakashvili by the balls,” Mr Putin declared.

Mr Sarkozy thought he had misheard. “Hang him?” — he asked. “Why not?” Mr Putin replied. “The Americans hanged Saddam Hussein.”

Mr Sarkozy, using the familiar tu, tried to reason with him: “Yes but do you want to end up like [President] Bush?” Mr Putin was briefly lost for words, then said: “Ah — you have scored a point there.”

Tuesday, November 11, 2008

bailout blues

Yesterday was full of yet more truly boggling bailout news.

The Washington Post reported that those “fiscal conservatives” in the Bush administration managed to slip by a
stealth $140 billion tax break for the financial industry in the fog on the financial bailout:

The financial world was fixated on Capitol Hilll as Congress battled over the Bush administration's request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention.

But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion.

By way of comparison, during the campaign Obama proposed spending $150 billion over ten years to help wean our economy from fossil fuels. That sounds like a lot of money, but it is the equivalent of a mere “five sentence notice” providing the financial industry with yet another massive tax break. “How are we going to PAY for all of Obama’s proposals?,” reasonable people ask. Another financial industry tax break … not so much.

Another way of thinking of Obama’s decade-long transformation of America’s energy economy: The cost of bailing out ONE insurance company that is not even subject to federal regulation. It was reported yesterday that the cost of bailing out one company – ONE COMPANY – AIG has now reached $150 billion. Because of its counterparty exposure on derivatives that the federal government was prohibited from regulating:
The federal government announced on Monday an overhaul of its bailout of the insurance giant American International Group, saying it would purchase $40 billion of the company’s stock, after signs that the initial bailout was putting too much strain on the company. …

When the reorganized deal is complete, taxpayers will have invested and lent a total of $150 billion to A.I.G., the most the government has ever directed to a single private enterprise.

Some might say, if a company is too big to fail … it is too big. But that would be interfering with the “free market.”

Oh, and did I mention that HALF of the bailout funds going to the nine biggest banks – funds that were supposed to free up the credit markets and get banks lending again – will be paid out to shareholders as dividends over the next three years:

U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years.

The government said it was giving banks more money so they could make more loans. Dollars paid to shareholders don't serve that purpose, but Treasury officials say that suspending quarterly dividend payments would have deterred banks from participating in the voluntary program.

Critics, including economists and members of Congress, question why banks should get government money if they already have enough money to pay dividends -- or conversely, why banks that need government money are still spending so much on

Treasury Secretary Paulson’s primary concern throughout this crisis, apparently, has been to avoid making the federal bailout too painful for bank shareholders. If the big, bad Democrats in Congress hadn’t insisted on equity in exchange for bailout funds, Paulson would have just given the banks a disguised equity infusion by overpaying for bad assets. For example, we wouldn’t want to “penalize” bank executives for the rewards they have “earned” for their brilliant risk-management strategies:
Financial giants getting injections of federal cash owed their executives more than $40 billion for past years' pay and pensions as of the end of 2007, a Wall Street Journal analysis shows.

The government is seeking to rein in executive pay at banks getting federal money, and a leading congressman and a state official have demanded that some of them make clear how much they intend to pay in bonuses this year.

But overlooked in these efforts is the total size of debts that financial firms receiving taxpayer assistance previously incurred to their executives, which at some firms exceed what they owe in pensions to their entire work forces.

you don’t even want to KNOW where the $2 TRILLION in Fed bailout funds are going. (If you are having trouble comprehending these sums, just think of it as roughly one Iraq War.) Even if you DID want to know, they aren’t telling (presumably because it might cause you to “lose confidence” in the recipients – so you can just lose confidence in the entire system, instead). From Bloomberg:
The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

I feel like I’m coming off as some kind of raging populist. But, seriously, when President Obama takes office and starts talking about things like extending unemployment benefits and children’s health insurance and other economic stimulus measures, we’re going to have to endure a lot of hand-wringing over the cost of those initiatives. Because the recipients don’t have the ability to bring down the global financial system. But let’s put the cost in perspective.

No wonder Obama was elected. Chris Rock
summed it up:
"[Bush has] made it hard for a white man to run for president. People are saying, 'After Bush, I'm not sure we can take another chance on a white guy."

barack and bruce

Obama isn’t even president yet and already we are getting a new Springsteen album out of the deal:

Bruce Springsteen will likely release a new album next year to coincide with the inauguration of president-elect Barack Obama.

The veteran rocker, who campaigned tirelessly on behalf of the 44th president of the
United States, will release his 16th album in January. Billboard reports that the follow-up to last year's acclaimed
Magic will probably contain the song Workin' On a Dream, which The Boss premiered at an Obama rally in Cleveland.

change we can believe in.

Monday, November 10, 2008

has the entire country gone mad?

If you haven’t already done so, download DJ Z-Trip’s 54-minute Obama Mix (it’s free – and fun).

And this makes a
great screensaver.

As a nice soundtrack to the beginning of the Obama era, I recommend this CD by Michael Franti & Spearhead, “
All Rebel Rockers”.

[click to enlarge]

[visit and the Salon cartoon archive]

yes we did

By now, you have probably read or heard some variation of this:

Rosa sat so Martin could walk

Martin walked so Obama could run

Obama ran so our children could fly …

Andrew Sullivan at his Atlantic blog summarized at least one element of my post-election emotions:

Knowing that the Bush-Cheney-Addington axis will be forced out of power is an immense, slackening relief. I've felt compelled by politics these past few years in ways I don't like or enjoy. With men and women finally back in power I can trust to act reasonably and ethically and within the rule of law, I feel less hesitation in getting on with life.

I woke up on election day at the Marriott Residence Inn in Billings, Montana. Thanks to our friends Nick and Leslie Hanauer, I spent election day and the two previous days doing get-out-the-vote (GOTV) work in Billings. Why Montana? It was the closest “toss-up” state to Seattle. (We need to abolish the Electoral College and go to a direct popular vote for the president. Every vote in the country should count, not just the chosen few blessed to live in battleground states.) There was no doubt in my mind Obama would win the election. But I was going for a mandate and part of how that mandate would be judged was the visceral, visual image of the red/blue map of the country.

Here is the final map of the Obama win:


[Note: Obama even got one electoral vote from Nebraska. It is one of only two states – Maine is the other – that divide the electoral vote by Congressional district. Neither state had actually split their vote previously. This time around, Obama won Nebraska’s 2nd CD, which basically consists of Omaha. I guess that was the Warren Buffett vote.]

Think how much bluer it would look if that huge state of Montana at the top of the map nearly joined together Baja Canada in the West with the upper Midwest and East Coast states that went for Obama.

The final vote in Montana was McCain 50% and Obama 47% (Ron Paul was also on the ballot). That made Montana one of the biggest swings from 2004 – Obama’s margin improved by 17 percentage points over Kerry in 2004.
Daily Kos shows the improvement from 2004 in all 50 states (based on preliminary returns):

AL: D+4
AK: R+5
AZ: D+2
AR: R+11
CA: D+14
CO: D+12
CT: D+11
DE: D+16
DC: D+6
FL : D+8
GA: D+12
HI: D+36
ID: D+12
IL: D+14
IN: D+22
IA: D+10
KS: D+9
KY: D+4

LA: R+4
ME: D+9
MD: D+10
MA: D+1
MI: D+13
MN: D+7
MS: D+6
MO: D+7
MT: D+17
NE: D+17
NV: D+14
NH: D+8
NJ: D+8
NM: D+16
NY: D+7
NC: D+12
ND: D+20

OH: D+6
OK: Even
OR: D+11
PA: D+8
RI: D+7
SC: D+8
SD: D+14
TN: R+1
TX: D+11
UT: D+17
VT: D+15
VA: D+13
WA: D+10
WV: Even
WI: D+13
WY: D+8

An impressive 26 states show double-digit improvement over 2004. If you take out the home states of McCain and Palin, the Republicans improved their margins in only two states (Louisiana and Tennessee – Tennessee increased its Republican vote by only by one percentage point and Louisiana was almost certainly affected by the reduction of the African-American population as a result of the Katrina disaster). Another two states (Oklahoma and West Virginia) were basically even with 2004.

The New York Times shows the change from 2004 county-by-county. If it isn’t obvious, blue shows counties where Obama did better than Kerry – red show counties where he did worse.

[click to enlarge]

Basically, Obama did worse only in parts of Appalachia, the Ozarks and the Deep South (hhhhmmm, I wonder what those areas might have in common).

I like this
cartogram which shows the results by shades of blue and red and weights counties by population:

One thing this election did was demonstrate the amazing gains in the art and science of polling. I gained an appreciation for some of the difficulties of polling when we were knocking on doors in Montana. We were supposed to indicate on our sheets whether people were intending to vote and whether they supported Obama, McCain or were undecided. But in many cases after the door closed we would look at each other and ask, “What the heck was that one? Oh, well, let’s just put it down as ‘undecided’.” But the professional pollsters were amazingly accurate.

The final tally isn’t in yet, but it appears the current popular vote percentages were roughly Obama 52.6%, McCain 46.1. Four major pollsters called it almost exactly. Final polls by Pew and Rasmussen were Obama 52/McCain 46. CNN/Opinion Research and Ipos/McClatchy were Obama 53/ McCain 46. The final Real Clear Politics poll-of-polls was Obama 52.1/McCain 44.5. The final poll-of-polls was Obama 52.0/McCain 44.4. Overall, quite impressive.

The award for predications goes (not surprisingly) to the amazing Nate Silver at whose final prediction was Obama 52.3% and McCain 46.2% (I was thinking of sending out a post the night before the election with my own predictions, but I realized I would probably end up just defaulting to Nate’s predictions). He got every state right except Indiana (and the one Nebraska Congressional district). (His final prediction for Indiana was McCain 50.0%/Obama 48.4%. The actual result in Indiana was Obama 49.9%/McCain 49.0.) And, note, this is the first election cycle where Nate has directed the statistical skills he has honed in baseball to the new arena of politics. (Last month, New York Magazine published a good profile of Nate.) Of course, most of the input to his statistical model is polling data and to that extent it is only as good as the underlying polling data.

A couple of other points to note from the polls: There wasn’t a “Bradley Effect” (i.e., white voters lying to pollsters about their racism). That doesn’t mean there weren’t racist voters – just that they didn’t lie to pollsters about their voting intentions. There also doesn’t appear to have been a “cell-phone effect” (polls skewed because of cell-phone-only voters who pollsters miss). Of the four leading pollsters who basically called the result right on, three did not include cell-phone respondents (only Pew did).

It’s been amusing to see some Republicans in denial trying to claim that this election does not represent an Obama or Democratic mandate. Robert Novak is typical when he
claims that Obama hadn’t “received a broad mandate from the public.” That is just silly.

George Bush declared a "mandate" from the people when he won in 2004 by a mere 35 electoral vote-margin. He did so despite barely eking out a majority with 50.7% of the popular vote -- only a 2.4% margin over John Kerry, the narrowest win for any elected incumbent seeking reelection since Harrison beat Cleveland in 1888.

Obama sailed over John McCain with a clear majority of almost 53% of the popular vote and a margin of victory in the popular vote of over 6%. His 7.4-million vote margin of victory was more than twice that of his predecessor. And his electoral-vote total was over twice that of McCain (his electoral-vote margin of victory was over five times that of Bush). Obama's win was a landslide by contemporary standards.

Actually, it has been 20 years since a president won with over 52% of the vote -- George H.W. Bush in 1988 (who won with 53% -- just barely more than Obama’s margin). You have to go back to 1964 for a Democratic win greater than 52%. Even in 1996, Bill Clinton only got 49% of the vote.

Reagan won with only 50.7% in 1980, but I seem to recall that was trumpeted at the time as a huge “Reagan Revolution” (because Republicans also ended up 53 seats in the Senate, although they still trailed by a large margin in the House). Gringrich’s big “Republican Revolution” in 1994 left Republicans with 230 seats in the House. The next Congress will have at least 255 Democratic House members and at least 57 Democratic Senators – more than any Republican majority in recent decades. So if 1980 represented the “Reagan Revolution” with his 50.7% win and 53 party members in the Senate, and 1994 represented a “Republican Revolution” with 230 Republicans in the House, what do you call an Obama win with close to 53% of the vote, at least 57 Democrats in the Senate and at least 255 Democrats in the House?

Obama won ALL the states that were considered “battleground” states. Indeed, if you look at the 11 states that either Bush or Kerry won in 2004 by less than five percent (Wisconsin, Iowa, New Mexico, New Hampshire, Ohio, Pennsylvania, Nevada, Michigan, Minnesota, Oregon, Colorado) , Obama carried them ALL. And he added the formerly solid-red states of Virginia, North Carolina and Indiana (which has only gone Democratic once since 1936 – in 1964) and almost snagged Missouri (losing by less than 5000 votes).

Remember how during the primaries the media narrative was that Obama had a “problem” with [fill in the blank] … Hispanics, Catholics, Jews, women, whites, etc.?

Let’s look at a few of those groups (as much as I hate group identity politics). Per the
exit polls:

Those Hispanics who supposedly wouldn’t vote for an African-American voted for Obama by more than two-to-one, 67 to 31 (Kerry won that group
in 2004 by only 53 to 44). Even in Florida, Hispanics (dominated by traditionally-Republican Cuban exiles) voted for Obama by an astonishing 57 to 42 (Bush won that group in 2004 by 55 to 44).

Obama won 54% of Catholics (Kerry – a Catholic himself – won only 47%).

Obama won 78% of the Jewish vote (Kerry won only 74%). (Any Jews who were concerned about whether Obama was sufficiently “pro-Israel” can take heart in his appointment as chief-of-staff of Rahm Emanuel, who was a civilian volunteer in the Israeli Defense Forces during the first Gulf War.)

Obama won among women by 56 to 43, and even won among men 49 to 48%. (Kerry won women by only 51 to 48 and lost among men by 55 to 44.) The toughest demographic for Democrats has always been white men. Obama lost that group by 57 to 41. That sounds bad. But Kerry lost that group 62 to 37. Even Bubba Clinton in his
big election victory of 1996 won only 38% of white men. Yes, that’s right: Obama won a higher percentage of the white male vote than Bill Clinton did in 1996.

While we’re at it, I guess we should note that Obama won among Asians by 63 to 34.

Obama won that critical group of voters who call themselves independents by 52 to 44. (Kerry barely won that group, 49 to 48.)

Even those making over $200,000 went for Obama 52 to 46.

Remember during the primaries we were told Obama couldn’t win Pennsylvania – where McCain staked out his last stand during the general election? Obama won it by 11 points.

The most amazing outcome of the election: Obama carried the youth vote (under 30) by more than two-to-one – by an overwhelming 66 to 32. The only age group McCain won was the over 65 crowd (53 to 45). Obama also won among voters at every education level (he won whites with post-graduate degrees by 10 points), but McCain won whites with no college education by 58 to 40. So basically, McCain was left with old guys and poorly-educated whites.

This does not bode well for the future of the Republican Party. In the music industry it is understood that most people stick for the rest of their lives with the same music they were listening to in their 20’s. Similarly, voters tend to stick with the party affiliation they adopt in their 20's. Most of the young voters who went for Obama by more than two-to-one will probably stick with the Democratic party for the rest of their lives.

In the past, this generational effect was relatively minor. In the 70’s, young voters were liberal and Democratic, and in the Reagan years, young voters were actually conservative and Republican. But their vote didn’t vary from the overall vote by a very large margin. A Daily Kos
post shows the percentage of the youth vote won by the Democratic candidate in the past nine elections:

youth vote/overall vote
1976: 51%/50%
1980: 44%/41%
1984: 40%/40.4%
1988: 47%/45.5%
1992: 43%/42.9%
1996: 53%/49.2%
2000: 48%/48.3%
2004: 54%/48.1%
2008: 66%/52%

Prior to this year, in the eight presidential elections since 18 year-olds got the vote, the youth vote varied from the overall vote by less than two percentage points on average. This time, they went Democratic by an overwhelming 34%. That has to be the biggest story of this election.

Similarly, the suburbs have long been considered a Republican bastion. But this year, Obama won 50% of
suburban voters. Republicans still dominate in rural areas but less than 20% of the American population now lives in rural areas and their numbers are shrinking.

Sarah Palin and her ilk might consider the “Real America” to consist of old, poorly-educated rural whites. But the country is becoming increasingly urban and increasingly diverse with higher levels of education. Whites made up a smaller proportion of the electorate this year than at any point going back to the first exit polls; they were 74 percent of voters this year, down from 77 percent four years ago and a high of 90 percent in 1976. Almost half of American children under the age of five are non-white.

We have seen the future of America. And it looks a lot like Barack Obama.

On June 3rd, I booked air and hotel reservations for our family to travel back to DC for Obama’s inauguration. (That month I also made a few bets that Obama would win with at least 300 electoral votes.) So, how many people do you figure can fit on the Capitol Mall? Whatever it is, we’ll find out.

As I post this, it is 70 days, five hours and 39 minutes until Obama’s inauguration (but who’s counting).

Friday, November 7, 2008

obama gets it

From an interview with Joe Klein in TIME: A perfectly concise diagnosis of and prescription for the current state of our economy:
“[T]he engine for economic growth for the last 20 years is not going to be there for the next 20, and that was consumer spending. I mean, basically, we turbo-charged this economy based on cheap credit. Whatever else we think is going to happen over the next certainly 5 years, one thing we know, the days of easy credit are going to be over because there is just too much de-leveraging taking place, too much debt both at the government level, corporate level and consumer level. And what that means is that just from a purely economic perspective, finding the new driver of our economy is going to be critical. There is no better potential driver that pervades all aspects of our economy than a new energy economy.”

headlines from around the world

An amazing collection of headlines from around the world.

Tuesday, November 4, 2008

president-elect barack hussein obama

[click to enlarge]

Monday, November 3, 2008

eisenhower, nixon, goldwater & reagan for obama

Dwight Eisenhower’s granddaughter, Susan Eisenhower.

Richard Nixon’s daughter,
Julie Nixon:

Barry Goldwater’s granddaughter,
CC Goldwater.

Ronald Reagan’s son,
Ron Reagan.