2012 Election Change: Obama’s “Narwhal” and “Cave”

What happened in 2012? How did Obama convincingly overcome the worst economy an incumbent president had faced since 1940? To simplify, Obama did so via the better preparation incumbency makes possible. He did what Bush did in 2004--he used time and money to build the better general election campaign while opponents were still fighting through primaries. Time and money built better organization employing superior technology. It’s also true superior resources enabled incumbents Bush and Obama to employ effective “define him before he defines himself” negative campaigns.

Stephanie Cutter

Still, Obama deserves credit for mounting the most sophisticated targeting of individual voters in the history of politics. Sasha Issenberg, in “Slate,” had an early look at just how precisely Obama’s team could work its magic:

On Jan. 22, [2012,] a young woman in a socially conservative corner of southwestern Ohio received a blast email from Stephanie Cutter, a deputy campaign manager for Barack Obama. Years earlier, the young woman had registered for updates on Obama’s website[. Then] she received from Obama and his Organizing for America apparatus [email] appeals to give money and sign petitions.

Cutter’s note was different. She boasted of a new administration rule that would require insurance plans to fully cover contraception as part of the president’s health care reform law, and encouraged her recipients to see the policy as reason to rally around Obama’s re-election. “Think about how different that is from what the candidates on the other side would do,” Cutter wrote. “Our opponents have been waging a war on women’s health—attempting to defund Planned Parenthood, overturn Roe v. Wade, and everything in between.”

It was a message that sat well with the young Ohioan who received it. She was single, liberal, sensitive to medical costs—but she had never told the campaign any of those things, and the one piece of information she had provided (her ZIP code) could easily mark her as the type of traditionalist Midwestern woman who would recoil at efforts to liberalize access to birth control. Indeed, she found it hard to believe that many other residents of her ZIP code would look as favorably upon a rallying cry to defend Planned Parenthood as she did.

Issenberg reported just how Obama’s project--code-named Narwhal (a predator white whale only found buried under the polar ice cap)--linked completely separate sources of information so that every fact gathered about a voter became available to every part of the campaign. That meant the person crafting a provocative email about contraception would reach women that data-mining targeters had already pinpointed as likely supporting Obama’s views.

Already by early 2012, Issenberg realized Obama’s team could target online communication as sharply as had traditional human canvassers. It used extensive predictive models of individual attitudes and preferences to find friendly recipients. In the Cutter blast mentioned above, the campaign only pulled email addresses of women with flags marking them as likely pro-abortion rights. Narwhal also helped canvassers knock only on doors of known Obama supporters, and if a donor had given the maximum permitted $2,500, emails would stop requesting money and ask for volunteer time instead.

Rob Bluey leads the digital-media team at the Heritage Foundation. Shortly after the election in the Atlantic, Bluey wrote about another face of the Obama high-tech operation, “the Cave.” As with the movie “Moneyball,” the Obama folks focused on data that would give them an edge. The campaign left nothing to chance. Each night in the final stretch of the race, Obama's “Cave” analytics team ran 66,000 simulations through its computers to have a fresh perspective on the battleground states.

That real-time data then drove decisions on how to spend money to greatest effect. As Obama's campaign manager Jim Messina said of his campaign, "We were going to demand data on everything, we were going to measure everything. We were going to put an analytics team inside of us to study us the entire time to make sure we were being smart about things."

The Obama campaign excelled at using emotion to persuade voters -- ironically while relying on team of self-described nerds in their Chicago headquarters who helped optimize emails, build polling models, unfold a communications strategy, and create a social-media army, using analytics to make the campaign better.

Bluey tells us that after the campaign ended, Patrick Ruffini and his team at “Engage” put together a slideshow about Obama’s nerds titled INSIDE THE CAVE (PDF here). What follows is from Ruffini’s slide show.  

“The Cave” was home to the campaign’s Analytics team, where behind closed doors, more than 50 data analysts used Big Data to predict the individual behavior of tens of millions of American voters. Despite being evenly matched financially, Obama for America (OFA) conceived of and built an operation 4 times the size of its competition:

OFA didn’t hire your typical political staffer. They went directly to Silicon Valley, to Fortune 500 data analysts, and to academia.

The Analytics team used its data to allocate resources in real-time:

 • In Ohio, OFA had ballot test data on 29,000 voters, more than 1% of the electorate, allowing for deep demographic analysis.

• The final simulations were accurate to within 0.2% in Ohio and 0.4% in Florida, but were 1% too cautious in Colorado.

OFA measured the electorate not with a national poll, but rather with a “Battleground States Survey”--a single poll taken across battlegrounds (CO, FL, IA, MI, NV, NH, NC, OH, PA, VA, WI) initially once every three weeks, then 2 per week in final 2 months. They used “State Tracking Polls,” three-day rolling samples of 500-900 voters in each state. And the Cave’s Analytics Department had its own live callers making 8,000 - 9,000 calls per night, providing large sample sizes with short questionnaires.

Cell phone use changed everything. With cell phone-only households approaching a third of the electorate, traditional polling began to fail. The final “RealClearPolitics” average showed Obama up only +0.7%, but the actual result was Obama +3.9%, an error influenced by missed cellphones.

Traditionally, "voter identification" means contacting most or all individual voters in a state to identify "get out the vote" targets. The Obama campaign's approach was different: they called very large random samples of voters to develop statistical models that generated scores applied to all voters, then used in get-out-the-vote and persuasion targeting. Here’s an example:

In late October, Hamilton County (Cincinnati) releases the names of 103,508 people who voted early. Armed with Obama support scores for every voter in Ohio, Analytics director Dan Wagner matches these voters to the model. 58,379 of them have Obama support scores of 50.1 or more, for a projected raw vote lead of 13,249 in the county.

Obama’s support models could change to reflect shifts in public opinion. OFA also had a “persuadability” score that modeled how susceptible an individual was to changing his or her mind based on campaign appeals. OFA built a tool for looking at the coverage of speeches in local newspapers so it could break down by geographic region how people reacted and which parts were quoted most. Speechwriters then knew how to tailor messages to convey what they actually wanted to get across.

OFA turned around initially weak fundraising and raised $1 billion by sending a lot more email than 2008 (404 national fundraising e-mails in 2012); it tested everything, and; it made people think they were going to lose. From the tests, “We basically found our guts were worthless." Ugly stuff won, like emails with yellow highlighting. “Quick Donate” (credit card info stored for one-hit; app on mobile) yielded 1.5 million users and $75 million that would not have been raised without the program. Donors gave 4 times as often and gave 3 times as much.

Tests on their donation page resulted in a 49% increase in their conversion rate. And by making the donation platform 60% faster, they drew a 14% increase in donations (speed matters). They found “you can get more users to the top of the mountain if you show them a gradual incline instead of a steep slope.” The end result of all their work was:

The Cave developed a “Call Tool” that allowed supporters in non-battleground states to use their home phones to call voters in battleground states.

Even though Hurricane Sandy caused critical infrastructure to go offline, because OFA had prepared for the worst, the team was able to keep its site up.  

What else did the Cave yield?

• 1.2M active Facebook app users
• Use of a single app throughout the campaign, allowing the Cave to build up a massive install base and add features down the road
• 34M+ fans on Facebook
• 98% of the U.S. Facebook population were friends with someone who liked Barack Obama
• 24M+ followers on Twitter 30-40 tweets from @BarackObama daily

All this accomplished with an incredibly lean social team of 4 people.

OFA (with the Democratic National Committee) became the first political campaign in history to spend more than $100 million on online advertising, with digital's share of the media budget 21%. Online Ads drew direct responses, with ads featuring Michelle Obama performing best. OFA got more money by asking people to sign up first then immediately skipping those people to a donation page, not by starting with a donation page.  

How Did OFA Innovate?
 

How did OFA reach youth?

Approaching the 18-29 year old demographic, OFA came to the startling discovery that while 50% of their targets were unreachable by phone, 85% were friends with an Obama 2012 Facebook app user. So they launched “targeted sharing” to Facebook friends who were voters in swing states. Like Quick Donate, integration with the rest of the technology stack was key. Users received an email requesting that they contact six specific friends, providing them their names and photos. As a result, 600,000 people reached 5 million voters, and 20% of those 5 million took some action, such as registering.  

How did OFA buy TV?

OFA built a technology known as Optimizer to buy television ads in the same way that you should buy online ads, by focusing on audiences, not channels. It collected data about supporters’ TV viewing habits in coordination with a company called Rentrak; then for each channel and time in a swing state, they projected how many targeted voters were watching specific shows at a specific time, and; they went after the shows deemed most cost-effective.

OFA believes Optimizer made the TV buy as a whole 10-20% more efficient--the equivalent of $40 million to $80 million in added media. Optimizer meant buying micro-audiences no one else would think to buy, spending less per ad. At one point, the Obama campaign was up on 60 different channels compared with the Romney campaign's 18 during the same time period.  

Real-Time Analytics Overtakes Polling

The Cave’s trend towards real-time analytics, and towards treating voters as individuals rather than as members of crude subgroups within a poll sample, should continue to evolve. Future campaigns will better understand and model the relationship between online conversation and public opinion. In four years, the media will stand up their own “Caves” to better understand how voters are moving in real time. And in eight years, “We will have difficulty telling a Field Director apart from a Digital Organizing Director. They are one and the same in future campaigns.”

Holy Ghost! Brooks, New York Times, Place Christ in Greece!

Michael Peppard

The following is from an article by Michael Peppard in the liberal Catholic journal Commonweal:

David Brooks's [June 14] column is vintage Brooks [offering] sweeping, general prescriptions for our societial ills. . . "religion" used to play a more "dominant role in public culture," and that such a role supported a "moral status system" that provided a check on the "worldly status system." Back in those days. . . the "culture was probably more dynamic" and -- it goes without saying -- better.. . . Along the way, [Brooks] quotes from the sourcebooks of Judeo-Christian culture (Hebrew Bible and New Testament), which is what he means by "religion.” . . .

But then there's this doozy of a blunder:

In Corinthians, Jesus tells the crowds, “Not many of you were wise by worldly standards; not many were influential; not many were of noble birth. ..."

Where to begin analyzing this unbelievable error?! Until proven otherwise, I'm going to go ahead and pronounce it the most ironic fact-checking oversight in the history of the esteemed New York Times.

To anyone formed in the Judeo-Christian heritage, the one so exalted by Brooks, it is self-evident that Jesus did not go to Greece or author 1 Corinthians. It's almost pre-rational: . . . Jesus barely left Galilee and did not author anything. . . during a piece lamenting the declining influence of religion, Brooks reveals his own stunning ignorance of . . . Judeo-Christian sources . . .

I have great respect for [fact-checkers] at the Times. . . But in this case, a group of fact-checkers -- multiple people -- read over this sentence, and not one of them stopped the error. What that reveals is profound: the staff at the Times is not as secular as we think they are. They are even more secular than we think they are.

To not know that Jesus did not speak to people in Greece would be like . . . charting Columbus's voyage on the Mayflower; assigning the wrong author to the Emancipation Proclamation; praising Malcolm X's "I Have a Dream" speech; recounting Kennedy's trip to China; or commemorating Bush's "Mr. Gorbachev, tear down this wall" moment. All of those errors are unimaginable.

[As for] the fact-checkers, we find that [Brooks'] comical irony becomes a kind of tragic irony. The group of fact-checkers has embodied the very absence of Judeo-Christian culture bemoaned in the column itself.

Middle class jobs: it can be better.

Walter Russell Mead

We know the economy isn’t creating jobs fast enough to help the American middle class. Also, progressive guru Paul Krugman tells us a job-killing information economy will force the middle class to depend instead on “guaranteed income.”

It’s time for some optimism.  It’s time for Walter Russell Mead, who takes on Krugman’s bleak dystopia of a nation that:

would start looking more like California and New York City: unbridgeable class divides, huge inequality, fountains of innovation, and tiny islands of great wealth and privilege surrounded by proles on the dole. [emphasis added]  Inside the glittering bubble, the digirati and their courtiers would live lives of intense purpose and excitement. . . To have a life where your work means something and your hands help steer the world would be the exclusive privilege of a tiny handful of enlightened, intelligent, and energetic people.

And outside the bubble:

as in the public housing projects and other warehouses where we store “surplus” people today, the most acute form of poverty and deprivation will not be the lack of food, clothing or even shelter. It will be a lack of social connection, of independence founded on achievement, on the human dignity that comes from doing work. Bellies will be full, but lives will be empty, and with that emptiness will come ills of every kind: addiction, brutality, ugly, and stunted sexual and emotional lives for many, neglect of the young and the old.

California. New York City. How about Latin America, the traditional hacienda world of a small wealthy class surrounded by a sea of peons? Latin America is making progress, yet all Latin America is still more unequal than the U.S. But with the haciendaization of our nation, for how long?

In contrast to Krugman’s bleak nation, Mead sees:

The information revolution . . . raising productivity in manufacturing as well as in data processing. [While a] labor surplus is depressing wages or keeping them from rising. . .prices are also stagnant or even falling for many of the things we need most.  Anything having to do with information processing and computers is getting cheaper and better. . .this creates . . . an opportunity to build something new. . . to launch new businesses and careers meeting human needs . . .

previous versions of America’s prosperous middle class economies rested on a creative mix of far-sighted government policy and private initiative. . . people still want to make a living and to improve their situation in life. If the opportunities are there, the people will move.

Mead, an ex-New Deal-type liberal, provides activist “do something” policy recommendations:  

First, make hiring easy and cheap.

Jobs policy today must also be about small business policy and about promoting and facilitating entrepreneurialism. . . we must lay the foundations of the industries and jobs of the future. Today’s employment policy descends from the . . . industrial age when most jobs came from large, well established corporations and jobs were often for life. Making retirement, health care and social insurance dependent on employers [today makes] it harder for start ups to hire people. . . the employer’s share of social insurance should be partly or wholly paid by the government out of general tax revenues. . . Aid can be targeted more effectively to low income workers.

Second, put . . . small business and entrepreneurship front and center. 

better credit conditions for individual businesses and small, service-focused enterprises[; an] educational system [that teaches] kids to be more creative and entrepreneurial, with less emphasis on order, conformity and moving in lockstep through the grades[; a g]overnment . . . legal and regulatory landscape [favorable to] small business. . . we need thinkers, tinkerers, and inventors who can find thousands of new uses for the extraordinary tech and software capabilities pouring into our world.

Third, we need to feed the state to the people even as we individualize its services.

[turn] bureaucratic government institutions into voucher-based programs will both stimulate the rise of a new type of service-oriented industry and provide better[, cheaper] government services. . . the charter school and school voucher movement. . . [U]nemployed. . . have the choice of which firm would both process your benefits and help you find new work. . . grandma becomes disabled and is entitled to insurance or Medicare payments, perhaps her family should be able to offer those services themselves.

In sum, Mead believes

Giving people more control over their lives, encouraging greater creativity and initiative in the provision of necessary social services and shifting from the top down bureaucratic structures of the industrial age to the more flexible and effective methods of the new era will help us create new jobs, new industries and new ways of thinking about how people interact with the state and with the economy[, creating a] more deeply human society.

What’s happening with the middle class?

The National Journal’s Ronald Brownstein has written up his publication’s detailed survey of the American middle class.

Here some major findings:

• We’re middle class--almost two-thirds of households earning between $50,000 and $100,000, just under 45% of households earning $30,000 to $50,000, and an equal share of those over $100,000 all identify as middle class. 

• Upward mobility--nearly three-fourths of minorities believe they will rise; whites, by contrast, are split 50-50, with little difference between those with or without a college degree. 

• Downward mobility--59% of respondents voiced concern “about falling out of [their] current economic class over the next few years,” with 28% “very” concerned; 64% of minorities expressed anxiety along with 57% of whites, half of adults under 40, 72% among those in their 40s, 65% in their 50s, and a high 76% of over-40 workers without a college degree, with 45% of those “very concerned.” 

• Why fall--52% fear losing their job or other source of income. 

• Bleak view--almost eight times as many felt more Americans recently had “fallen out of the middle class because of the economy” than had “earned or worked their way into the middle class.” 

• “Middle class” means--security (“having the ability to keep up with expenses and hold a steady job while not falling behind or taking on too much debt”--54%) more than advancement (“having the opportunity for financial and professional growth, buying a home, and saving and investing for the future”--43%). 

• Importance of education--to stay in or reach the middle class, half said it’s best to help people attain “a higher level of education,” but just 21% felt it was “very realistic” that they could save enough to pay for their children’s college education; nearly twice as many thought it wasn’t; 49% said it was a realistic goal for “only the upper class.” 

• Living on the edge--fewer than a fifth of middle-class Americans ages 40 to 59 said it was “very realistic” they could save enough for retirement; fewer than half of full-time workers said it’s “very realistic” that they’ll enjoy job security. 

• What they want--38% want government “making higher education more affordable and accessible;” 40% want business “hiring more people and paying higher wages and better benefits.” 

• Unhappiness with Obama--Just 40% said the president’s policies “helped to avoid an even worse economic crisis and are fueling economic recovery,” while 47% felt his policies had “run up a record federal deficit while failing to significantly improve the economy.” Three-fifths of nonwhites were positive; 55% of whites were negative. 

• Who is helping?--49% said “business owners in your area” were making things better; only 16% said businesses were making things worse. 

• Who’s to blame?--54% fault “elected officials making the wrong policy decisions,” way over the 17% who blamed “the economic impact of technology and globalization.” 

What does this all mean? Progressive guru Paul Krugman would have us thinking that education won’t solve our problems, that technology will make workers obsolete with or without college degrees, that the jobs just won’t be there.

Our middle class, though deeply concerned, is more optimistic. It believes in education, only worrying it cannot afford college for their children. The middle class wants jobs, and it wants the security of knowing jobs will be available. It likes small businesses that generate jobs. And the middle class is upset--rightly so, I would say--about “elected officials” who can’t seem to make the economy work.

Who is right, the scholar or the masses?

U.S.: Where are the entrepreneurs?

Our previous post mentioned the burdens progressives such as Paul Krugman want to place on entrepreneurs. Now a new Barclays study finds developing countries are already far ahead of the U.S. when comes to entrepreneurial wealth creation:

The above chart is a stunning indictment of the U.S.’s declining ability to nurture entrepreneurs. Worldwide, 40% of millionaires (those with investable assets of $1.5 million or more) cited a "business sale or profit" from their business as their source of wealth. Only a quarter of the millionaires cited inheritance as their wealth source. In the Asia-Pacific region, 57% cited business sale or profit as a source of wealth, in South Africa 68%, and in Latin America 58%. Even in slow growth “old Europe,” entrepreneurs are twice as lively as their U.S. counterparts.

In the U.S., only 21% of millionaires cited business sale or profit as their source of wealth. A much larger percentage cited saved earnings or personal investments. And there is further proof the entrepreneurial spirit lags at home. A Kauffman Foundation report on the U.S. found there were just 514,000 new business owners a month in 2012, down from 543,000 in 2011. The 2012 numbers marked the lowest in five years. Also, the Hudson Institute reported that brand-new companies added only 2.34 million jobs in 2010; new companies had on average added 3 million new jobs a year going back to 1977.

Put the Middle Class on the Dole?

In a column entitled “Sympathy for the Luddites,” New York Times progressive columnist Paul Krugman bleeds for those who oppose technological progress. He, like the Luddites, blames entrepreneurs who are trying to keep business competitive. To Krugman,

the only way we [can] have anything resembling a middle-class society [is] by having a strong social safety net, one that guarantees not just health care but a minimum income, too. . . that safety net [will] have to be paid for via taxes on profits and. . . investment. [emphasis added]

Krugman is making two points: 1) liberals have no job-creation strategy, instead the state should put the middle class on the dole, and 2) there is at least one Nobel-prizewinning economist who can’t grasp that U.S. business is nowhere near large or successful enough to finance complete middle class dependency. But if business could guarantee middle class incomes to all, permanent middle class dependency would keep Democrats in power forever. Heaven on earth.

Here’s the positive I carry away from Krugman’s “dream”-- progressives are increasingly accepting we are in a job creation crisis. Nelson D. Schwartz, also in the progressive New York Times, writes:

overall employment in the United States remained 2.1% below where it was at the end of 2007. . . By comparison, over the same period, between December 2007 and March 2013, the number of jobs was up 8.1% in Australia; Germany, the biggest economy in the troubled euro zone, has managed a 5.8% gain in employment. . . Canada, Sweden and even Britain, which is trapped in yet another recession, have enjoyed healthier job gains than the United States. In fact, of the nine countries surveyed. . . only perennially-troubled Italy and Japan performed worse.

Schwartz quotes Harvard economics professor Lawrence F. Katz saying, “The United States is way below where it should be. We had a massive downturn and a tepid recovery.” Schwartz adds the strong job market that is Federal Reserve chairman Ben Bernanke’s key focus remains “out of reach.”

One study Schwartz found reports that over half of the recent variation in employment trends between the United States on the one hand, and Canada and Germany on the other, are traceable to construction. U.S. construction jobs are still nearly two million below their 2007 total. Other countries have generated jobs through exports, with Germany’s economy until recently powered by machinery, cars, and other high-end manufacturing product exports, and with Australia greatly helped by China’s booming demand for raw materials.

“MarketWatch’s” Ruth Mantell makes the same point as Schwartz, with a graph showing that despite employment growth, there are still about 1.9 million fewer private nonfarm jobs in the U.S. than when the recession began in late 2007:

And Mantell has a second graph illustrating how poorly average income has done in relation to overall economic growth (GDP) and especially in relation to the stock market.  Hard times for the people, and for their households:
  

Stocks have boomed and households have recovered the wealth that was lost in the recession (gaining about $3 trillion in the year’s first quarter to reach $70.3 trillion), but once you factor in inflation, net worth is about 8% below a pre-recession peak.  Still, Mantell reports, home-mortgage debt has declined, and Americans at first quarter’s end were the least leveraged they’ve been since the fourth quarter of 2005.

Even as liberals have come aboard the "economy sucks" train, conservatives continue banging away at America’s inability to create jobs.  Edward Lazear is a former Council of Economic Advisers chairman now at Stanford’s Hoover Institution. He writes that the best measure of a strong labor market is

the proportion of the population that is working, not the proportion that isn't. In 2006, 63.4% of the working-age population was employed. That percentage declined to a low of 58.2% in July 2011 and now stands at 58.6%. By this measure, the labor market's health has barely changed over the past three years.

Lazear mentions the constant debate over whether the headline unemployment rate, "U3," which measures the number actively seeking work but do not have jobs, is more--or less--valid than "U6," which adds in unemployed who have dropped out of the labor market and are not actively seeking work because they are discouraged, plus those working part time because they cannot find full-time work.

Lazaer advocates setting aside this debate, and focusing instead on the employment-to-population ratio, because it goes straight to the bottom line. It measures the proportion of potential workers actually working (chart).

As Lazear’s chart shows, while the unemployment rate has fallen over the past 3½ years, the employment-to-population ratio remains constant at about 58.5%, well below its prerecession peak. As all agree, the U.S. is not getting back jobs lost during the recession. Lazear thinks that at current rates, more than a decade wil pass before the economy returns to full employment.

Yet while Krugman wants to put the middle class on the dole, Lazear says current government dependency programs are slowing down a return to work. He points to research that suggests

because government benefits are lost when income rises, some people forgo poor jobs in lieu of government benefits—unemployment insurance, food stamps and disability benefits among the most obvious. The disability rolls have grown by 13% and the number receiving food stamps by 39% since 2009.

These disincentives to seek work may also help explain the unusually high proportion of the unemployed who have been out of work for more than 26 weeks. The proportion of unemployed who are long-termers reached 45% in April 2010 and again in March 2011. It is still above 37%. During the early 1980s, when the economy experienced a comparable recession, the proportion of long-term unemployed never exceeded 27%.

Agreement: we have a no-jobs problem.

Agreement: government wants to put unemployed on the dole, not help entrepreneurs create jobs.

Disagreement: progressives say “good,” conservatives say “bad.”

U.S. job creation: steady but slow.

The U.S. created a net 175,000 jobs in May, exceeding the 164,000 economists forecast. The labor force surged by 420,000, pushing up the civilian participation rate, now at 63.4%, for the first time since October.  Meanwhile, the unemployment rate edged up to 7.6% from 7.5%. This is good news because it meant more people believe more work is available, so are entering the labor force in search of work.

Still, the true unemployment rate remains stubbornly high at 13.8% — down from 13.9% in April — if everyone who wants a full-time job but can’t find one is included. Millions of Americans still cannot find work nearly four years after the recession ended.

One thing that’s bolstering the economy: a sharp decline in layoffs. The percentage of the workforce losing jobs has fallen near an all-time low. Even as companies won’t hire as many people as expected at this stage of a recovery, they also won’t cut workers loose.

“The labor market continues to trudge forward at a solid, though unspectacular, pace — not unlike the economy as a whole,” said Jim Baird, chief investment officer for Plante Moran Financial Advisors. And Dan Greenhaus, chief global strategist at BTIG LLC, added the jobs report “does nothing to change the broader view that the Fed [Federal Reserve Bank] is set to steadily reduce its pace of asset purchases . . . and that all else equal, good news should be taken as good news.”

Translation of the Greeenhaus comment: job growth isn’t large enough to excite the Fed, therefore Wall Street will keep investing in a stock market propped up by continued Fed low interest rate policies.

And that’s “good news”--for Wall Street.

Watergate and IRS Scandal--the Parallels

Here’s the truth. Republicans aren’t likely to impeach Barack Obama for misusing executive power in the Internal Revenue Service (IRS) scandal. There won’t be a secret taping system, or even DNA on an unwashed dress, to provide the “smoking gun” of presidential guilt. But impeachment aside, there are parallels between Nixon’s Watergate and the scandal touching our current leader.

The origin of the IRS scandal seems traceable, as conservative attack dog Dick Morris suggests, to the Supreme Court’s January 21, 2010 decision in Citizens United v. Federal Election Commission. According to Morris, IRS at the time was already going after Obama enemies. The IRS had in 2009 acted against pro-Israeli settlement non-profits thwarting Obama administration efforts to halt West Bank settlement expansion. Why not just use the IRS to frustrate anti-Obama non-profits seeking to take advantage of the Citizens United ruling?

We know how much the 5-4 Citizens United decision upset the president. With the Supreme Court justices sitting directly in front of him just 6 days later, Obama attacked “the law of the land” head-on in his state of the union address, even drawing a “not true” response from associate justice Samuel Alito, one of the 5-person majority Obama confronted.

How easy was it to sic the IRS on conservative organizations taking advantage of Citizens United v. Federal Election Commission? Too easy. Lois Lerner, head since 2002 of the IRS Exempt Organizations Division that would oversee denying tax-exempt status to conservatives seeking to benefit--to Obama’s detriment--from the new ruling, had for 20 years before that been with the very same FEC that was on the losing end of Citizens United.

Lerner at the FEC had established a record of going after conservative organizations. And she is married to a partner (in the D.C. office) of a law firm that hosted an organizing meeting at its Atlanta headquarters for people interested in helping with voter registration for the Obama re-election campaign, a firm with another partner that even before the Citizens United ruling came down in 2010, Obama had already appointed as U.S. ambassador to Singapore.

As Obama’s anger after coming out on the losing end of the Citizens United decision led him to take (unproven conjecture, yes) extra-legal action using compliant lawyer-civil servants working nearby, so too did Nixon follow a similar path in 1971, after New York Times’ publication of the leaked Pentagon Papers.

The New York Times’ publication showed China’s leaders, whom Nixon so wanted to impress on the eve of national security advisor Henry Kissinger’s highly secret trip to Beijing to secure an invitation for Nixon to visit China, that the American president could not keep crucial national secrets. Nixon’s fury led directly to formation of the “Plumbers” (they fix leaks, ha, ha), an extra-legal unit drawn from nearby ex-CIA and FBI types who, one year later, attempted to bug the Watergate phone of Democratic Party chairman Larry O’Brien.

China’s Economic Empire

Source: New York Times, 6.2.13                                                  Hit to enlarge.

Heriberto Araújo and Juan Pablo Cardenal, authors of China’s Silent Army: The Pioneers, Traders, Fixers and Workers Who Are Remaking The World in Beijing’s Image, have digested their findings into a significant New York Times article. Stripped to its bare-bones essence, Araújo and Cardenal are suggesting China is taking over the world economically, in the manner Japan had seemed to threaten to do in the 1980s:

• By buying companies, exploiting natural resources, building infrastructure and giving loans worldwide, China is pursuing economic domination, its essentially unlimited financial resources threatening to obliterate any Western firm competitive edge, to kill jobs, and to blunt criticism of China’s human rights abuses. 

• Using over a billion Chinese savers’ forced deposits, China Inc. is able to control oil and gas pipelines from Turkmenistan to China, from South Sudan to the Red Sea, from the Indian Ocean to Kunming via Myanmar, and from Siberia to northern China, while undertaking huge hydroelectric projects like the Merowe Dam on the Nile in Sudan, Ecuador’s Coca Codo Sinclair Dam, and 200+ other dams across the planet (see chart). 

• China is the world’s leading exporter; it surpassed the United States as the world’s biggest trading nation in 2012, it is the leading trading partner of Australia, Brazil and Chile as it pursues iron ore, soybeans and copper, buying natural resources and food, ensuring that China’s urbanization and its exports acquire needed resources. 

• China’s annual investment in the European Union grew from less than $1 billion annually before 2008 to over $10 billion in 2012 (33% of China’s foreign direct investment), and in the United States, from under $1 billion in 2008 to $6.7 billion in 2012. 

• China’s foreign direct investment is projected to reach as much as $1 trillion to $2 trillion by 2020; China currently manages Greece’s main cargo terminal in Piraeus, has a 10% stake in London’s Heathrow, is the main foreign investor in Portugal’s power-generation sector, and owns 7% of France’s Eutelsat. 

• Neither Germany, which accounts for nearly half of the European Union’s exports to China, nor the European Union itself, are unlikely to force China into leveling the playing field or guaranteeing trade reciprocity, even as China buys Volvo and German equipment manufacturer Putzmeister. 

• China is the biggest investor in Germany in terms of the number of deals, looking for companies like Putzmeister with world leadership in niche markets, enabling China to absorb Western know-how on branding, marketing, distribution and customer relations. 

• Greenland, controlled by Denmark, last year passed legislation to allow into the region Chinese workers who earn less than the local minimum wage, so that China can undertake the costly exploitation of Greenland’s mining resources; Greenland’s leaders believing its exploitation might never occur without Chinese involvement. 

• The U.S. seems an exception, pushing a Trans-Pacific Partnership apparently to contain China by restricting membership to countries that support free competition, labor and environmental standards and intellectual property rights, and it has refused contracts to Chinese telecom giant Huawei. 

• In Canada, Obama’s refusal to approve the Keystone pipeline has caused Prime Minister Stephen Harper to turn to China, including construction of a pipeline through British Columbia despite environmental group opposition, and facilitating China’s $15.1 billion takeover of Canadian energy giant Nexen, even as closer economic ties have reduced Canadian criticism of China’s human rights record, a 180-degree turn given that Canada used to attack fiercely China’s handling of dissidents. 

• Chinese accumulated investment in Australia by 2012 surpassed $50 billion, increasing 21% from 2011, and while Australia’s trade portfolio remains diversified, China’s share is growing rapidly. 

• Chinese loans are even more significant in dollar terms than direct foreign investment, providing billions to countries to acquire Chinese goods, finance Chinese-built infrastructure, and start projects in the extractive and other industries; between 2009 and 2010, China was the world’s largest lender, doling out $110 billion, more than the World Bank. 

• Chinese loans are crucial in countries facing Western or UN loan cutoffs, countries like Angola, Ecuador, Venezuela, Turkmenistan, Sudan and Iran, where China steps in without political or ethical strings attached.

Country Back to “Disapproving” Obama’s Job

Obama’s approval ratings are once again “upside down.” In the RealClearPolitics average of national polls, Obama is currently at 46.6% approval, 49.3% disapproval, for a net disapproval average of 2.7%. Obama’s numbers first went negative five days ago.  It is also significant that the two daily tracking polls--Gallup and Rasmussen--collectively for the first time today show their 3-day averages in negative territory.

In Obama’s first term, his numbers did not go “upside down” until 16 months after his election (v. 6 months this time).

With the exception of April Fool’s Day this year, Obama’s in negative territory for the first time since his September 6 acceptance speech at the Democratic National Convention last year sent his approval rating “rightside up” for the next eight months, carrying him through the election, and to a post-election high of +12.4% (54.0% approval/41.6% disapproval) last December.