Bad Bear News

How does one characterize properly American capitalism’s current state? Its financial crisis is roughly a year old. During that time, the media have been on recession watch, predicting recession (as have I), in some cases even depression weekly, daily. Where is that recession? Looks now like we may not see one before Election Day (growth in the April-June quarter will effectively rule out the classic definition of recession—two quarters of negative growth—anytime before January 2009).

The media’s motives are transparent: they want Obama to win. As one conservative writer put it, the media believe bad economic news helps Obama because “the Democrats have all the right answers domestically and have lost presidential elections only because of national security and cultural concerns.”

So media focus on bad economic news. There’s one hiccup: suddenly high gas prices are helping Republicans because the GOP is willing to drill offshore, Democrats aren’t, and the people side with Republicans. Of course Democrats are onto this difficulty in July, and will surely finesse it by November. Sharp fuel price drops offer one solution, but then of course the economy doesn’t look so bad.

Another problem is falling housing prices. Until our homes stop losing value, people will feel bad and buy less. According to the Case-Shiller home price index, home prices in 20 major cities are down a staggering 15.8% over the past year—a Depression era rate of collapse. The latest (May) data shows continued big hits for Miami, Las Vegas, and Phoenix.

Yet the Case-Shiller survey also notes the rate of decline has slowed in each of the last three months, and that home prices actually rose in Atlanta, Boston, Denver and Dallas. The report adds that falling prices are “a necessary ingredient if the housing market's to work out its excesses and begin growing again.” No pain, no gain.

Education Failing Americans

Noting two significant studies on U.S. education, The New York Times' David Brooks says we have “forfeited” the educational achievement lead we once enjoyed over our economic rivals, and that “threatens the country’s long-term prospects.” We’ve hardly increased the population’s average years of schooling since 1970, the year the percentage of students graduating from high school peaked at 80%. The ratio has declined since. One researcher blames the problem on deteriorating family environments, which mean five year olds, the age at which Brooks says one can estimate school success with “depressing accuracy,” arrive displaying (or not) motivation, emotional stability, self-control and sociability.

Brooks believes the biggest “economic” problem America faces is our “skills gap.” He dismisses McCain’s push for school choice, including charter schools (to me, the right way to go). He says those seeking education reform must battle within the Democratic Party, the only place schools receive serious attention.

In an earlier column, Brooks praised the Education Equality Project, backed by the urban school chiefs of New York, Washington D.C., Baltimore, and Newark as well as Al Sharpton. The Project is willing to say, “Today’s school systems aren’t broken. They were designed to meet the needs of teachers and adults first, and that’s exactly what they are doing.” Brooks hopes Obama, like the Project, will put students first by enforcing accountability and backing reforms that remove failing teachers and administrators. But on education, Brooks has found Obama so far to be “all carrot, no stick.”

2008 is not 2006.

Bush continues to suffer a low presidential approval rating, just 31% according to Gallup. His approval is below the 37% rating he had in 2006, when Bush’s poor performance figured importantly in the Democrats’ crushing congressional election victory. Bush’s tenure worked against Republicans in 2006, and continues to do so in 2008.

Yet there are important differences. First, Iraq. The war there had gone badly for the U.S. during most of 2003-06 (2005 with three free elections had been a good year), and in late 2006, the bipartisan Iraq Study Commission issued a report paving the road to noble defeat. Two months later, as Bush rejected defeat in favor of his surge, Barack Obama told us, “I am not persuaded that 20,000 additional troops in Iraq is going to solve the sectarian violence there; in fact, I think it'll do the reverse.” How much has changed since.

Second, there’s the performance of Congress. In 2006, the country was tired of the congressional Republicans, in power for 12 years, and personified by the Mark Foley scandal. Now Democrats run an unloved Congress that can’t seem to do anything about the high cost of energy, with Democrats refusing to drill for U.S. oil offshore. The people want offshore drilling. Will offshore drilling as a congressional issue in 2008 rival the 2006 Mark Foley scandal, even if gas prices drop? Hard to tell.

Working for Democrats in 2008: continued bad economic news, high gas prices and recession or not. In 2006, the economy wasn’t an issue. This year it is.

Liberal Senate, Liberal Nation

Stu Rothenberg’s Political Report is a top handicapper of U.S. Senate contests. Looking at his current information, I believe the Democrats will pick up five senate seats, pushing their majority to 56. Rothenberg already awards Democrats the GOP open seats in Virginia and New Mexico, and predicts John Sununu will lose his New Hampshire seat to former governor Jeanne Shaheen.

Rothenberg rates the GOP open seat in Colorado a toss-up, but congressman Mark Udall should win and join his cousin Tom (running in New Mexico) in the Senate. I also believe the corrupt (“bridge to nowhere”) Alaska senator Ted Stevens will lose. An Obama landside threatens blue state Republicans Susan Collins (Maine), Norm Colman (Minnesota), and Gordon Smith (Oregon), all of whom will be sympathetic to an Obama agenda should they survive, along with blue state holdovers Olympia Snowe (Maine) and Arlen Specter (Pennsylvania).

With this total of 61, Obama will have a great opportunity to push past the last remaining barrier to a liberal take-over of Washington—the 60 votes required to end a Senate filibuster. Of course, the liberals will have far more control if Democrats win 9, not 5, senate seats, giving Democrats alone 60. Keep watching.

Three Thoughtful Comments

1. “the operation was a failure, but the patient has survived, and is somehow becoming healthier by the day”

From Noemie Emery, Weekly Standard:

Saddam is gone, Al Qaeda in Iraq is on the run, the Sunnis are with us, the Shia are turning against their militias, and the Washington Post is suggesting that "Iraq, a country with the world's second largest oil reserves and a strategic linchpin of the Middle East, just might emerge from the last five years of war and turmoil as an American ally, even if its relations with Iran remain warm." In other words, the operation was a failure, but the patient has survived, and is somehow becoming healthier by the day. Seldom has failure appeared quite so good. [Democrats] are caught between a public that would rather not lose a war and a base of Bush-hating, antiwar supporters to whom the idea of giving up on losing would feel like the worst loss of all.

2. “for . . . European governments . . . [t]he notion of moral hazard is . . .alien”

From Bret Stephens, Wall Street Journal:

With its July 1976 raid on Entebbe, Israel demonstrated there was an alternative to negotiating with terrorists. [Entebbe offered] the possibility that, eventually, hostage takers would realize they're in a bad business. Instead, business has boomed. In Iraq in 2005, Germany paid $5 million for the freedom of a kidnapped aid worker. The results were predictable. . .-- the 'value' of German kidnap victims has risen in the Middle East. Maybe it's par for the course that European governments should act this way: The notion of moral hazard is . . .alien to them . . . It's a different matter when Israel behaves the same way . . . in the face of terrorism. Israel still defines the standard of democratic courage by which the rest of the free world must, sooner or later, measure itself.

3. “there are severe limits to what we know and can know”

From David Brooks, New York Times:

Saying farewell to the sort of horrible social engineering projects that dominated the 20th century is [major] progress. We can strive to eliminate . . . poverty. We can take people out of environments that (somehow) produce bad outcomes and try to immerse them into environments that (somehow) produce better ones. But we’re not close to understanding how A leads to B, and probably never will be. This age of tremendous scientific achievement has underlined an ancient philosophic truth — that there are severe limits to what we know and can know; that the best political actions are incremental, respectful toward accumulated practice and more attuned to particular circumstances than universal laws.

Media in Obama’s Plane

I earlier wrote the media “want to be seen as so biased in favor of Obama that they will be blamed for (actually credited with) Barack’s win.” This is proving to be more obviouly true than even I thought.

The Washington Post’s Howard Kurtz, who covers the media, broke a story yesterday that television’s Big Three—Brian Williams, Charlie Gibson and Katie Couric—will all travel with Obama on his upcoming swing through Europe and the Middle East, including Iraq. Kurtz writes that the trip “is now guaranteed to be a major media event.” No kidding.

Kurtz adds, “Obama has been quite adept at working the media. He is on the cover of this week's Newsweek, again, after star turns on Us Weekly, ‘Access Hollywood’ (with kids) and, not so happily, the New Yorker. And the contrast with the coverage of John McCain's campaign has been striking. . . McCain's trip to Colombia and Mexico two weeks ago was barely covered, although NBC and ABC sent correspondents.”

Worse, Kurtz’ Washington Post colleague Dan Balz, in a column titled, “Why is John McCain in Colombia?”, wrote the time McCain “spent in Colombia and Mexico matters less than the message it sends -- or perhaps more correctly, the absence of a message that it sends. What is McCain trying to tell voters by this visit?” McCain gets slammed for his uncovered trip, Obama gets total coverage of his. Media bias couldn’t be more transparent.

More Support for Obama Softness

Peter Beinart, a senior fellow at the Council on Foreign Relations, is another (see the Nation’s Robert Dreyfuss) advocate for tying Obama to soft power. Beinart attacks those --as he puts it--driven by “fears of being called soft.” In Beinart’s opinion, Obama “won't lose because he looks weak. The greater danger is that he will change positions in a bid to look strong.”

Beinart, in the great tradition of Newsweek's Evan Thomas, seems to believe rewriting history is easy, because nobody knows it anymore. Here are some of Beinart’s questionable assertions:

 Beinart says President Johnson mishandled Vietnam because he feared being “destroyed” as Democrats were in the early 1950s over the loss of China. He suggests Halberstam (Best and Brightest) believed “The mid-1960s were not the early 1950s. The Red Scare was over.” In fact, Johnson feared not McCarthyism (“the Red Scare”), but as Halberstam knew and wrote, the actual loss of Vietnam, which Johnson felt would ruin him politically as China’s loss ruined Truman. Johnson lost anyway, because the Vietnam effort in the end proved too costly, something not evident to Johnson or the American people at the beginning.

 Beinart says “Democrats live in terror of being called soft” and “worry about the backlash that awaits Barack Obama if he defends civil liberties, or endorses withdrawal from Iraq, or proposes unconditional negotiations with Iran.” Beinart dismisses these worries because “the share of Americans citing terrorism as their primary concern hovers around 4%.” In fact, Beinart’s argument is embarrassing because it's hardly about a July poll; by November, people will want to know how an Obama limited to “soft” power can protect America from terrorism and from a nuclear Iran.

 Beinart says McCain has stupidly “abandoned the foreign policy center,” since Republican election winners take care “not to appear too hawkish.” In fact, Beinart is playing games, since Eisenhower, Nixon, and Reagan--all three--won partly because thay didn’t have to sell a soul on their hawkishness, no matter what Ike said about Korea, Nixon Vietnam, or what “evil empire” Reagan did in Lebanon. Obama's folks should worry that if voters want toughness, they’ll back McCain.

 Beinart says McCain makes a big political mistake by refusing to “liquidate an unpopular military intervention” in Iraq and instead working to increase U.S. forces there. In fact, Beinart is knocking a surge that brought us success that certainly helps McCain. Where’s Beinart’s head?

 Beinart says Obama, instead of worrying about being “soft,” should “articulate a vision based on the principles of global cooperation and human dignity that animated Woodrow Wilson and Franklin Roosevelt.” In fact, both these Democrats famously went to war to further American democracy, as McCain would in Iraq.

Obama and "Soft Power"

"I think Barack Obama would do wonders for America's soft power."

--Harvard’s Joseph Nye

The term “soft power” has to be one of politics’ great self-inflicted wounds. It’s supposed to mean something better than Bush’s over-reliance on force, but the words actually suggest appeasement in the face of terrorists, nuclear bomb-waving Iranians, and other threats to peace. Joseph Nye [picture] invented “soft power,” and sells it as a preferred alternative to “sticks” or even “carrots” (he believes we do better to “co-opt” our potential adversaries than hit or bribe them). Yet to me, “soft power” is like the word “wets,” the pejorative Margaret Thatcher’s supporters (later known as “dries“) threw at predecessor Edward Heath and his allies for pushing “soft” solutions.

Nevertheless, Obama supporters such as the Nation’s Robert Dreyfuss (who favorably quoted Nye above) have high hopes for “soft power”. They instead worry about the “hard power” folks now crowding around Obama.

As Dreyfuss writes:

 nowhere else are expectations as high for what an Obama presidency will mean as in foreign policy[--]the end of George W. Bush's wrecking-ball approach to world affairs. [But can] an Obama administration . . . articulate a coherent progressive purpose for American foreign policy[, since] his team appears to be falling back on the liberal interventionist notions of the 1990s that led us into Iraq. [It’s] important that progressives drive their ideas into the campaign's debates.

Dreyfuss spots these positive soft power developments:

 Obama would . . . open talks with adversaries such as Iran, Syria and Cuba; end torture and close Guantánamo; renounce unilateralism and preventive wars; . . . seek a "world without nuclear weapons,” [and] in sharp contrast to presumptive GOP nominee John McCain, . . . put the threat of terrorism in its proper perspective, elevating the importance of other threats to security, from poverty to pandemic disease to global warming.

 Obama's celebrated 2002 speech, in which he called Iraq a "dumb war" and warned that it would destabilize the Middle East and fan the flames of terrorism, was a key reason antiwar Democrats rallied to his side during the primary season.

 Obama's declaration that he'd meet with Iran's leaders sets him apart. . . Obama has been widely praised for insisting on a central role for diplomacy and negotiations, and for supporting the normally less than shocking idea that diplomats sometimes talk to adversaries and enemies.

 Progressives . . . put their faith in the senator's character and innate instincts and . . . the likelihood that he "will actually listen to foreign leaders he sees."

But Dreyfuss frets about evidence of hard power:

 Obama's team has seen the addition of . . . Madeleine Albright, . . . William Perry and . . . Sam Nunn, the promilitary conservative from Georgia.

 [there’s a] tendency to see the world in Manichaean terms. [Obama:] "I dismiss the cynics who say that this new century cannot be another [in which] we lead . . . We must lead the world."

 Obama's foreign policy team [opposes cutting] the Pentagon's bloated budget. . . even though, not counting spending on Iraq and Afghanistan, it has nearly doubled since 2000 and is roughly equal to the military spending of all other countries combined.

 Obama's . . . support for a continued arms buildup [raises] the question of whether he understands the political and economic constraints the United States will face in future years.

 he'd attack Pakistan unilaterally to take out Al Qaeda-linked forces if there was "actionable intelligence" about their location. . .

 Obama . . .impressed hawkish Jewish leaders. "I will do everything in my power to prevent Iran from obtaining a nuclear weapon. Everything in my power... everything," he said, adding. . . he supported "banning the export of refined petroleum to Iran," which . . .could lead to a US-enforced naval blockade of Iran.

Fact – (No Source) = Factoid.

In an article about pollution in China, the New Republic dropped in this eye-popping statement: “Sixteen of the 20 dirtiest cities in the world are in China.” No source, but hey, the New Republic is just a popular journal.

To find the cities listed, I went for the source. What follows is my search free of any reference to dates, though the New Republic piece did just come out.

“Voice of America” told me, “The Worldwatch Institute in Washington says 16 of the world's 20 most polluted cities are in China.” And sure enough, at Worldwatch’s site, I found the statement, “Globally, China is home to 16 of the 20 cities with the most polluted air.” But Worldwatch offered no source or study, even though a “China Watch” features prominently at its website. Since Lester Brown’s outfit is a press-friendly operation focused on getting media attention for environmental issues, I wasn’t totally surprised they offered up the eye-catching “16 of 20” sentence with no source to back it. Maybe they simply read it somewhere else?

In TIME for example? TIME oddly had the same statement as Worldwatch, but attributed it not to Worldwatch but to the World Bank, saying, “the World Bank has reported that 16 of the 20 most polluted cities in the world are Chinese.”

OK, now the World Bank's a credible source, a UN heavyweight that puts out lots of hard facts. So I went to the Bank. And in their “China Quick Facts,” sure enough appeared this similar, but slightly different, sentence, “And China has 20 of the world's 30 most polluted cities, largely due to high coal use and motorization.”

Where did that sentence come from? I searched the World Bank site. No study. No source. Just other writings using the same “fact”. Is the World Bank just another part of an echo chamber passing around the same undocumented factoid?

I don’t know. Maybe such a study exists. But I have my doubts, especially after finding Scientific American had published a study done by the Blacksmith Institute that lists the world’s 10 most polluted cities. Topping the list: Sumqayit in Azerbaijan. The top Chinese city, Linfen in Shanxi [pictured], ranks 6th, and Tianying in Anhui is 9th. Four other Chinese cities are in Blacksmith’s “Dirty Thirty”, making Chinese cities 6 of 30. Not good, but not 10 of 30 like the former USSR’s most polluted, and certainly not 20 of 30 or 16 of 20.

Whom can you trust?

A Woman Vice President

Marie Cocco is an ex-Clinton supporter who writes for the Washington Post. She is unhappy with Obama because Clinton’s former opponent has shifted so far to the right he threatens to go off the rails on abortion. Cocco first chastises Obama for “unnecessarily” endorsing Bush's faith-based initiative, which she brands “a sort of patronage program that rewards religious activists for their political support with public grants.” Cocco then hits Obama for declaring "I let Jesus Christ into my life," saying Bush already saw that as an Oval Office qualification, and “look where that's gotten us.” So when Cocco hears Obama now opposes late-term abortions granted because the woman is “feeling blue,” Cocco proclaims it makes her “see red.”

Obama doesn’t need Cocco; she’ll vote for him anyway. But he doesn’t want women drawn to a GOP ticket with a woman on it, women affected by his long, drawn-out battle with the female they thought would be America’s next president. I think if Obama picks a white male for vice president, McCain will certainly go for a woman, such as fired Hewlett-Packard CEO Carly Fiorina [pictured]. Fiorina is on top of her game economically at a time the economy is the issue. She is also Catholic and against abortion. She adds (relative) youth, vigor, pizzazz, and competence to McCain’s ticket.

Obama, who picks first, has to weigh seriously the prospect of McCain selecting a woman. 2008’s excitement came from him and from Clinton— both of them. Let the Republicans have a woman, and he gives away part of the primary excitement he generated. Obama’s solution: put a woman on his ticket. Why not Kathleen Sebelius [pictured] of Kansas, the very state Hawaii born-and-raised Obama claims as his “home” (his grandparents were from Kansas)? Sebelius is Catholic, pro-abortion, daughter of former Ohio governor John Gilligan with plenty of family and friends still in Ohio. So Obama from Hawaii gets white, Midwestern roots with Kansas, and Kansas’ Sebelius brings along Ohio, and other industrial state Catholics. If Obama is really lucky, McCain will counter by picking a dull white male, leaving Obama a corner on the excitement market without having had to bring Clintons into the White House at all.

A smart McCain will go ahead and pick a woman anyway.

Iraq Improvement Continues

Here is our latest monthly highly abbreviated version of the Iraq Index, published and updated twice a week by Michael O'Hanlon of the Brookings Institution:



Americans Killed in Action, Iraq (monthly average)
2003: 32
2004: 59
2005: 56
2006: 58
2007: 63
2008: 29
June: 19

Americans Killed in Action, Vietnam (monthly average)
1965: 128*
1966: 420
1967: 767
1968: 1140
1969: 785
1970: 413
____
* = First U.S. combat troops arrived in Vietnam, 5.3.65
Vietnam table compiled by Galen Fox using Defense Department sources.

Crude Oil Production (m. bbls./day)

Prewar Peak: 2.50
Goal: 2.20 (Revised upward, 1/08)
actual: 2.51 (6/08)

Electricity (megawatts)

Prewar: 3,958
Goal: 6,000
actual: 4,470 (6/08)

Since our last monthly report, the monthly American KIA total rose slightly from 15 in May to 19, still low enough to drop the monthly average for 2008 down to 29, the lowest monthly average for any Iraq war year. Since September 2007, a period of 10 months, the KIA total for any month has stayed below 50, averaging just 26. The longest previous stretch for such low KIA totals was 6 months in 2003. [Please note: the number of KIA is almost always lower than the media-reported total of American deaths, which covers all causes, including non-hostile. Our Iraq and Vietnam figures are KIA only.] In the most important measure for Americans, statistics show continued improvement.

In June, oil output rose from 2.50 to 2.51 million barrels a day, equaling the highest monthly total ever. Revenue from oil exports continues to hit all-time highs, with May's total the highest on record by $1 billion (June's total will grow with later sales figures added). As with oil, output for electricity increased, growing from 4,130 megawatts in May to 4,470 megawatts in June, the highest for any June since the war began and the third highest monthly total ever. Electricity output in the 4,000-4,500 megawatt range is significant because Iraq needs 8,500 megawatts to meet its demand, and gets up to 4,500 megawatts from privately-owned generators.

On the political front, the White House reported--responding to a congressional request--that the Iraqi government has made "satisfactory progress" on 15 of the 18 benchmarks laid out for the Maliki government in March 2007.

A Hopeful Fourth (for Media)

David Broader looks out from his Washington Post perch and finds a restive American right. He quotes from a Lynde and Harry Bradley Foundation tract, which “sees a real threat in such things as multilingual ballots and bilingual classes. Such accommodations to the growing diversity of the population could lead to ‘many Americas, or even no America at all. . .Historical ignorance, civic neglect and social fragmentation might achieve what a foreign invader could not.’" Broader calls this all an “unwarranted” degree of pessimism.

Broader is more optimistic. He finds “plenty of vitality” in the American system. After all, “young people. . . found their way to the polling places in record numbers this year and joined enthusiastically in many campaigns.” Well, certainly in one campaign. Broader, like Michelle Obama, feels wonderful about an America where Barack steadily approaches the White House door.

Broader concludes on this remarkable note: “I have not worried about the fundamental commitment of the American people since 1974. In that year, they were confronted with the stunning evidence that their president had conducted a criminal conspiracy out of the Oval Office. In response, the American people reminded Richard Nixon, the man they had just recently overwhelmingly re-elected to a second term, that in this country, no one, not even the president, is above the law. And they required him to yield his office.”

1974. Not just the high water mark of media power (knocking a president out of office via investigative reporting, after having knocked the U.S. out of a war via frontline reporting), but specifically the high water mark of Washington Post power (see “All the President’s Men”). Broader is full of his institution because, friends, the media is (almost) back.

Happy Fourth, David Broader and friends. The media’s Indian Summer of influence seems on its way.

The Bear Market

The stock market is a forward indicator of economic health. For that reason, today’s arrival of a bear market, as the Dow drops 20% below its all-time high last fall, is a bleak look at the future. Falling housing prices, financial sector weakness, and especially rising oil prices are taking their toll, even though the country still isn’t in recession.

Is the housing market collapse reaching bottom? No, according to the National Association of Realtors. Prices continue to fall, but in the last month for the nation, total inventory measured in months fell, and sales activity rose.

Michael Marks, writing in Forbes, has some optimistic findings on middle class income. In a late 2007 study, the Treasury Department, after reviewing the returns of 100,000 filers over 1996 to 2005, found that the same individuals from the middle quintile saw their incomes increase by 16.6% in constant 2005 dollars over the period.

As Marks said, “Wow.”