Cholera in Zimbabwe
Hundreds of people have died in the recent (entirely preventable) outbreak of cholera in Zimbabwe.
http://en.wikipedia.org/wiki/2008_Zimbabwean_cholera_outbreak
Cholera is spread by a bacteria through eating contaminated food or water. Due to the unstable political situation, Zimbabwe's previously tolerable (for a poor country) supply of safe water has gone downhill. The outbreak has now spread to towns in Botswana, Mozambique, South Africa and Zambia. Proving yet again that a badly unstable neighbor on your doorstep is just not a hot idea.
The Zimbabwe government has taken turns denying the outbreak and blaming it on a "calculated, racist, terrorist attack on Zimbabwe by the unrepentant former colonial power (the UK), which has enlisted support from its American and Western allies so that they can invade the country."
Yeah, that's it. Gordon Brown, PM Britain, has infected the Zimbabwe water supply with Cholera to make it easier for the UK to invade and re-subjugate the people of Zimbabwe. This is typical of the government there. Absolutely typical.
Mugabe has to rank as one of the most disappointing leaders in the last 50 years. He spent 11 years in prison for advocating for a free Zimbabwe as a colony it was known as Rhodesia and had white minority rule similar in very broad outline to the apartheid government in South Africa. After his release from prison he joined a rebel movement which ended in universal suffrage, and left him a hero in the eyes of many, and not just locally.
He took power in 1980. For many years he was widely regarded around the world as a fine leader by African standards. Infant mortality and young child mortality plummeted, immunization increased radically, child malnutrition fell, literacy boomed, the economy soared, education improved. In short, he appeared to be doing many of the right things for precisely the right reasons. There were certainly blips in this good story. He was intolerant of dissent and would kill to enforce that. He is violently anti-homosexual, and has used the courts to enforce that from time to time. Still, taking his record as a whole he was one of the best, if not the best of the revolutionary leaders. (I think of Mandela as a prisoner of conscience, not a revolutionary leader).
Then, starting in the mid 1990s, Mugabe moved, step-by-step, into the monster he is today. I remember I met an African woman, Nigerian I believe, at a law conference in the late 1990s. At a break I got talking to her and the topic turned to Mugabe. I was railing against his latest outrages (nothing compared to what was coming in this decade) and I remember she ended the conversation by walking away from me saying in an exasperated and angry voice, "Mugabe's not a monster." Well, she was basically correct when she said it, but in time I got much the better of the argument.
In recent years he has resorted to mass violence and mass use of food as a weapon, to maintain his iron grip on the country. As a result, Zimbabwe, once a clear post-colonial success, has gone to hell in a handbasket. It has suffered a mass inflation, gigantic food shortages, many thousands of arrests and government sponsored murders, and many other markers of a badly failed state. Mugabe apparently lost his bid for reelection, but ignored the results and imprisoned, on and off, the leaders of the opposition. He is now in the process (unsurprisingly) of shredding a power sharing agreement.
What a bitter disappointment from a man who obviously once cared deeply about the people of his country. Maybe in the fullness of time we'll learn that he has Syphilis, which has been rumored for years. That certainly wouldn't excuse any of his military and other supporters and sycophants.
What a parting gift to the world it would be for Bush to take him out before he turns over power. Mugabe IS a monster, and needs to be killed. He's in his 80s, but probably has 10 years left in him to misrule Zimbabwe and infect it and its neighbors. He must go.
Monday, December 15, 2008
Friday, December 05, 2008
June 17th, 2009.
Everyone wants to know when the economy will turn around. The answer is June 17th. Ok, obviously I can't be nearly that precise, but I expect that sometime next Summer the recession will end and growth will resume. As compared to the conventional wisdom, I am actually being quite optimistic.
Previous recessions since WWII lasted 8, 8, 16, 6, 16, 11, 10, 8, 10, 11, and 8 months (measured from the time of the peak of the economic cycle through the trough, the top through the bottom).
This works out to an average of 10.1 months per recession. That is, the average recession since World War II lasted for 10.1 months.
The shorter recessions, like the one from March 2001 through November 2001, encompassing and exacerbated by 9-11 and the one following Saddam's invasion of Kuwait in 1990, were relatively shallow. I think its a metaphysical certainty that this one will be vastly worse than the most recent two shallow recessions, because of the various aspects of the financial crisis, and the huge credit crunch which has resulted.
So this is a severe recession (I hope, the alternative is much more likely to be a second great depression than a shallow recession). Since the last two bad recessions lasted 16 months, it seems reasonable to begin my analysis by assuming that this one will last about 16 months, give or take. There are, as always, things which make this time different. More on that below.
The bad news is that this scenario is in many ways much too optimistic. Although the economy was in recession earlier in 2008, it was just barely so. Job losses were fairly small until about September of this year. Major business restructuring did not begin until about September. The tax rebates helped mitigate the recession earlier on, thus delaying the onset of business job slashing. So the adjustments that are usually made even fairly early on in a recession were not made.
But fear not. In November, the economy lost the huge number of 533,000 jobs, following a loss of 403,000 in September and 320,000 in October. Now that's job loss. Everyone expects a loss of 500,000 to 600,000 jobs in December. (These numbers are seasonally adjusted, meaning that you consider what has happened in Decembers past, which usually have an increase in jobs for the holiday season).
In any event, if you assume 500,000 jobs lost in December, that would make 1.7 million from October through December, a huge number, and likely a reasonable percentage of the total number of jobs which will end up being lost in this recession.
It took a while, but everyone has finally realized that we are in a deep recession. This much is a very good thing, as it enables businesses like auto companies, Investment Banks, and others in trouble to realize that they are and begin necessary downsizing. We are, I hope, a decent chunk of the way through that process. But more remains, not least the possibility of a chaotic Chapter 11 bankruptcy filing for GM and Chrysler, which would be so significant as to possibly throw off my timetable. We will see in the coming days and weeks if the Bush Treasury department intervenes to save them pending the new congress and administration. My guess is that they will, but you never know.
Of course I have already gone too long in this post without mentioning the credit crunch. Recessions often come complete with banking/financial crises. The S&L problems began in the early 1980s recession, and lingered almost into the early 90s recession, which had banking troubles all its own. The Great Depression, obviously, had hugely severe banking troubles. And this time around, banks are just not doing much lending about now. This is real bad, and will prevent economic recovery until banks begin lending more normally.
Business and credit conditions are probably both worse now than at any time since World War II. That's really bad and really, really scary. And it does portend a significantly longer recession than average. When you couple that with the fact that this recession started off very mildly, and only became severe about September 15th, when Lehman collapsed, you would conclude that the economy will contract all of next year. (Which it might).
There is, however, a significant upside in all of this gloom and doom. that is the completely unprecedented effort by the Federal Government to mitigate the effects of the recession. Fiscal stimulus has been incredibly lame thus far, with the rebate checks being most of it. But on the monetary policy side, the federal reserve has been extremely aggressive, cutting interest rates far and fast, injecting huge amounts of money into the financial system, buying commercial paper from businesses (essentially loaning many billions of dollars to private business), creating a Term Asset-Backed Securities Loan facility to support the issuance of asset-backed securities collateralized by student loans, auto loans and credit card loans, and much more.
Similarly, the Treasury Department has been hyperactive, as everyone knows, with the huge $700 billion appropriated for financial rescues and myriad other uses. Paulson has spent darn near $350 billion of that money and has asked Congress for permission to begin tapping the remaining $350 billion. GM and Chrysler may be the next beneficiaries of Treasury Department largess.
Taking a truly wild guess, I'd guess that 4th quarter GDP declines about 5.5%, First quarter 2009, ending March 31, 2009, declines about 3%, 2nd quarter 2009, ending June 30, 2009, declines about 3%, and 3rd quarter 2009, ending September 30, 2009, grows about 2%.
Sadly, if the recession is as short as I predict, I do think the recovery will be tepid, rather than the strong rebounds the economy used to have long ago, when factory workers were rehired when orders increased. This time around, companies will be very slow to take on new workers. Wall Street will not be growing anytime soon. Manufacturing could continue to shed workers, it wouldn't surprise me. So I predict a slow and halting recovery, which will feel much like a recession to many workers. Which is why I think the planned Obama Stimulus is significantly too small. A much larger stimulus would take out insurance against a flaccid recovery.
Everyone wants to know when the economy will turn around. The answer is June 17th. Ok, obviously I can't be nearly that precise, but I expect that sometime next Summer the recession will end and growth will resume. As compared to the conventional wisdom, I am actually being quite optimistic.
Previous recessions since WWII lasted 8, 8, 16, 6, 16, 11, 10, 8, 10, 11, and 8 months (measured from the time of the peak of the economic cycle through the trough, the top through the bottom).
This works out to an average of 10.1 months per recession. That is, the average recession since World War II lasted for 10.1 months.
According to the pertinent body, the Business Cycle Dating Committee of the National Bureau of Economic Research, this recession began in December 2007. The main reason for this determination is that the economy lost jobs each month this year (even before the financial crisis really got going). So if this recession lasts for an average amount of time, it would be over by now, or would end any day now.
This recession, however, is clearly destined to be much worse than an average recession. There's just no doubt about that. So in considering how long it will last, I'm simply throwing out the shallow recessions and considering only the severe recessions.
The two most severe recessions since World War II, working backwards, were the 16 month recession that ended November 1982 (SKY HIGH interest rates, Rust Belt, Reagan deeply unpopular), and the 16 month recession from November 1973 to March 1975 (Inflation, high oil prices, Watergate, just not a real good time to be us).The shorter recessions, like the one from March 2001 through November 2001, encompassing and exacerbated by 9-11 and the one following Saddam's invasion of Kuwait in 1990, were relatively shallow. I think its a metaphysical certainty that this one will be vastly worse than the most recent two shallow recessions, because of the various aspects of the financial crisis, and the huge credit crunch which has resulted.
So this is a severe recession (I hope, the alternative is much more likely to be a second great depression than a shallow recession). Since the last two bad recessions lasted 16 months, it seems reasonable to begin my analysis by assuming that this one will last about 16 months, give or take. There are, as always, things which make this time different. More on that below.
Based on the determination by the powers that be, mentioned above, that the current recession began in January 2008, if this recession is like the last two severe recessions, this recession could well end sometime around or shortly after May of this year, which would be 16 months after the recession began.
That's the (relatively) good news.The bad news is that this scenario is in many ways much too optimistic. Although the economy was in recession earlier in 2008, it was just barely so. Job losses were fairly small until about September of this year. Major business restructuring did not begin until about September. The tax rebates helped mitigate the recession earlier on, thus delaying the onset of business job slashing. So the adjustments that are usually made even fairly early on in a recession were not made.
But fear not. In November, the economy lost the huge number of 533,000 jobs, following a loss of 403,000 in September and 320,000 in October. Now that's job loss. Everyone expects a loss of 500,000 to 600,000 jobs in December. (These numbers are seasonally adjusted, meaning that you consider what has happened in Decembers past, which usually have an increase in jobs for the holiday season).
In any event, if you assume 500,000 jobs lost in December, that would make 1.7 million from October through December, a huge number, and likely a reasonable percentage of the total number of jobs which will end up being lost in this recession.
It took a while, but everyone has finally realized that we are in a deep recession. This much is a very good thing, as it enables businesses like auto companies, Investment Banks, and others in trouble to realize that they are and begin necessary downsizing. We are, I hope, a decent chunk of the way through that process. But more remains, not least the possibility of a chaotic Chapter 11 bankruptcy filing for GM and Chrysler, which would be so significant as to possibly throw off my timetable. We will see in the coming days and weeks if the Bush Treasury department intervenes to save them pending the new congress and administration. My guess is that they will, but you never know.
Of course I have already gone too long in this post without mentioning the credit crunch. Recessions often come complete with banking/financial crises. The S&L problems began in the early 1980s recession, and lingered almost into the early 90s recession, which had banking troubles all its own. The Great Depression, obviously, had hugely severe banking troubles. And this time around, banks are just not doing much lending about now. This is real bad, and will prevent economic recovery until banks begin lending more normally.
Business and credit conditions are probably both worse now than at any time since World War II. That's really bad and really, really scary. And it does portend a significantly longer recession than average. When you couple that with the fact that this recession started off very mildly, and only became severe about September 15th, when Lehman collapsed, you would conclude that the economy will contract all of next year. (Which it might).
There is, however, a significant upside in all of this gloom and doom. that is the completely unprecedented effort by the Federal Government to mitigate the effects of the recession. Fiscal stimulus has been incredibly lame thus far, with the rebate checks being most of it. But on the monetary policy side, the federal reserve has been extremely aggressive, cutting interest rates far and fast, injecting huge amounts of money into the financial system, buying commercial paper from businesses (essentially loaning many billions of dollars to private business), creating a Term Asset-Backed Securities Loan facility to support the issuance of asset-backed securities collateralized by student loans, auto loans and credit card loans, and much more.
Similarly, the Treasury Department has been hyperactive, as everyone knows, with the huge $700 billion appropriated for financial rescues and myriad other uses. Paulson has spent darn near $350 billion of that money and has asked Congress for permission to begin tapping the remaining $350 billion. GM and Chrysler may be the next beneficiaries of Treasury Department largess.
Although the Treasury's actions aren't classic economic stimulus per se, they will have much the same effect eventually, as they represent pumping huge amounts of government money into the financial system which will, I predict, enable a thaw in the credit freeze beginning relatively soon.
In essence, the economy is in a tug of war between the worst conditions since World War II on the one hand and by far the most vigorous government response on the other.
There is actually additional stimulus to the economy already in place. This includes: (1) the huge drop in oil prices, from a high of $150 or so to the current $45 or so. That's significant if the oil price roughly holds going forward. I would be very surprised if oil shot back up past say $70 or so in the next year, very surprised. (If I had to predict I would predict it stays fairly close to where it is now) So if oil holds nearish to the $45 level, that would amount to an approximately $300 billion per year tax cut as against the much more expensive oil earlier this year; (2) the new money which will be put in homeowners' pockets as a result of the coming refinancing boom. Interest rates have plummeted on mortgages. Even given the housing market's moribund state, and the credit crunch, many homeowners will successfully refinance.
Finally, and most significantly, Team Obama has been talking an awful lot about a very substantial fiscal stimulus which he has said he wants on his desk within the first week that he takes office! The new Congress is sworn in and starts work on January 6th. Given that Obama has a decent chunk of his team in place already, it is likely that this will be the new congress' first significant item, and conceivably Obama could have the new piece of legislation waiting for him on his desk following his inauguration speech.
There has been much speculation on the size of the upcoming stimulus package, which will be crucial in determining how much power it has to shorten/end the recession and, more importantly, to strengthen what could easily be a lackluster recovery. Obama has said that he intends the "single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s." These are encouraging words indeed with regard to the size of the upcoming stimulus package (which, I note, I have called for for many, many months!)
Speculation has been that this package would be $500-$600 billion for two years, an amount I would have considered too large 9 months ago, but I now consider somewhat too small. Still, assuming they close the deal at $500 billion over two years, that would definitely help. The GDP is now about $14.5 trillion. $250 billion per year is just under 2% of GDP. Not enough to turn an economy shrinking at 5% per year (as it is right now) into growth, but enough to give a good shove in the right direction.
Also remember that it will take time to get the spending going. The spending probably won't be at full force for about 9 months. So at the beginning of 2009 it will have little impact, but at the end of 2009 its impact will probably be more than 2% of GDP, and in 2010 will almost certainly be. So this stimulus package will really do some good by the middle-end of next year.
We have a bad housing bubble, which is another complicating factor. Traditionally, housing is a key factor in leading the country out of a recession, because lower interest rates make housing more affordable. That obviously won't work this time, not anytime soon, because there is a huge oversupply of housing relative to the demand which exists absent a belief that housing prices can only go up. So even with current mortgage rates near 45 year lows I don't expect housing to rebound anytime soon.
In conclusion, the current terrible conditions coupled with the extreme mildness of the recession in the first 6-8 months, the credit crunch, and the housing market's truly parlous state call for a long deep recession. The huge amount of governmental corrective action already taken, coupled with the Obama stimulus to come, call for a shorter, but still deep recession. I predict that these forces roughly cancel each other out, and we have a deep recession, but that it ends more quickly than the experts predict, sometime about June 2009.Taking a truly wild guess, I'd guess that 4th quarter GDP declines about 5.5%, First quarter 2009, ending March 31, 2009, declines about 3%, 2nd quarter 2009, ending June 30, 2009, declines about 3%, and 3rd quarter 2009, ending September 30, 2009, grows about 2%.
Sadly, if the recession is as short as I predict, I do think the recovery will be tepid, rather than the strong rebounds the economy used to have long ago, when factory workers were rehired when orders increased. This time around, companies will be very slow to take on new workers. Wall Street will not be growing anytime soon. Manufacturing could continue to shed workers, it wouldn't surprise me. So I predict a slow and halting recovery, which will feel much like a recession to many workers. Which is why I think the planned Obama Stimulus is significantly too small. A much larger stimulus would take out insurance against a flaccid recovery.
Blockbuster (un)employment report
As you have probably all heard, the government released a blockbuster "jobs" report today, announcing that 533,000 jobs were lost in November, 1.3 million have been lost in the last 3 months, following revisions which made really bad figures worse. The 3-month total was the third-highest three-month job loss total since WWII.
The real surprise to me is that job losses aren't at an all time record. We recently learned that a recession began in December 2007. Given that we've been in recession for almost a year and the financial crisis which heavily intensified beginning in September, I'm surprised these aren't the worst months of job loss on record. Perhaps those months are soon coming.
" According to a report by outsourcing agency Challenger, Gray & Christmas, planned job cut announcements by U.S. employers soared to 181,671 last month, the second-highest total on record."
http://money.cnn.com/2008/12/05/news/economy/jobs_november/index.htm?postversion=2008120510
So what have we here? Nearly historic 3 months of job losses, many more certainly coming. Unemployment rate is at 6.7%, but that will surely climb significantly.
As bad as these numbers are, they could (and perhaps will become) significantly worse. In a coming post I'll write about when I think the recession will end. Sooner than you think, probably around July/August of 2009.
As you have probably all heard, the government released a blockbuster "jobs" report today, announcing that 533,000 jobs were lost in November, 1.3 million have been lost in the last 3 months, following revisions which made really bad figures worse. The 3-month total was the third-highest three-month job loss total since WWII.
The real surprise to me is that job losses aren't at an all time record. We recently learned that a recession began in December 2007. Given that we've been in recession for almost a year and the financial crisis which heavily intensified beginning in September, I'm surprised these aren't the worst months of job loss on record. Perhaps those months are soon coming.
" According to a report by outsourcing agency Challenger, Gray & Christmas, planned job cut announcements by U.S. employers soared to 181,671 last month, the second-highest total on record."
http://money.cnn.com/2008/12/05/news/economy/jobs_november/index.htm?postversion=2008120510
So what have we here? Nearly historic 3 months of job losses, many more certainly coming. Unemployment rate is at 6.7%, but that will surely climb significantly.
As bad as these numbers are, they could (and perhaps will become) significantly worse. In a coming post I'll write about when I think the recession will end. Sooner than you think, probably around July/August of 2009.
Wednesday, December 03, 2008
GM gets serious
Well, I ripped Ford a new one in my earlier post, and I don't apologize. Ford should have gone further than it judged necessary, just to make crystal clear to wavering lawmakers that it was serious. GM IS serious, and apparently will run out of money by the end of the year if it doesn't receive a big infusion, quickly. GM, in contrast to Ford, which came to Congress with nothing, promised deep cuts, the elimination of divisions, namely Saturn (ouch, a good small car), Saab, Hummer (what, no political tin ear?) and Pontiac. GM said it would cut more than 20% of its remaining jobs, shut nine factories, seek to renegotiate the terms of its $66 billion in debt and push to reopen talks with the UAW to cut its labor costs.
http://www.nytimes.com/2008/12/03/business/03auto.html?_r=1&th&emc=th
Now that's more like it!!
Well, I ripped Ford a new one in my earlier post, and I don't apologize. Ford should have gone further than it judged necessary, just to make crystal clear to wavering lawmakers that it was serious. GM IS serious, and apparently will run out of money by the end of the year if it doesn't receive a big infusion, quickly. GM, in contrast to Ford, which came to Congress with nothing, promised deep cuts, the elimination of divisions, namely Saturn (ouch, a good small car), Saab, Hummer (what, no political tin ear?) and Pontiac. GM said it would cut more than 20% of its remaining jobs, shut nine factories, seek to renegotiate the terms of its $66 billion in debt and push to reopen talks with the UAW to cut its labor costs.
http://www.nytimes.com/2008/12/03/business/03auto.html?_r=1&th&emc=th
Now that's more like it!!
Tuesday, December 02, 2008
Ford has nothing. Zip. Nada.
Today, December 2, was the deadline for the automakers formerly known as the big 3 (the Desperate 3?) to develop a bailout proposal.
http://news.yahoo.com/s/nm/20081120/bs_nm/us_autos_bailout
Well, today's the big day. According to the New York Times, Ford, "wanted access to $9 billion in loans but that it could survive and become profitable in three years without the money unless the current recession 'is longer and deeper than we now anticipate.'
http://www.nytimes.com/2008/12/03/business/03auto.html?_r=1&hp
And what turnaround plan did Ford announce in exchange for its request for $9 billion in loans? The current CEO would be willing to work for $1 a year and they will sell their corporate jets. Additional specific cost cutting measures included promises of . . . promises of . . . crickets. Nothing at all.
I'm flabbergasted. And totally appalled.
First, that Ford wants the money but thinks it can survive without it is rich. If it wants an additional $9 billion in loans, it is nervous, and rightfully so. Even if it might survive without these loans, GM is in a much more precarious position, and as Ford admitted, a GM failure could cripple Ford as well if suppliers went under. Specifically, in the Times article, Ford stated, "It is in our own self-interest, as well as the nation’s, to seek support for the industry at a time of great peril to this important manufacturing sector of our economy.”
So whether it "needs" the $9 billion in loans or not (and I'm sure it does), Ford wants money for the industry. Big money.
And its turnaround "plan" that it puts forth in exchange? The 2 items mentioned, sell the corporate jets and the CEO gets no money, are so unbelievably bare it isn't funny! First, the CEO needs to go, as does the rest of top management. But forgetting that for a moment, CEO pay $1, fine. Sell jets, fine. That should have consumed, literally, the first 30 seconds of the first meeting on the subject. After that, well, talk to the unions, eliminate brands, ask Congress for legislative relief so dealerships can be cut, cut production of gas guzzlers, ask for specified funds for hybrid or electric cars, additional tax rebates for high MPG cars and electric/hybrid cars. You know, a PLAN to actually return Ford to a profitable status, where it could pay the money back to the government, hopefully with a profit on the equity stake Ford proposed the government take in exchange for the highly risky loans.
None of that was proposed by Ford. None of it at all. Even though it would be an empty threat, if I were Harry and/or Nancy, I'd publicly threaten to hold them in contempt of Congress if they didn't come up with a real plan. I'd graciously extend the deadline to Sunday evening.
Here's what Ford did say, from the above-mentioned article:
Ford also said it expects industry-wide sales of 12.5 million vehicles in 2009, 14.5 million vehicles in 2010 and 15.5 million vehicles in 2011. By way of comparison, U.S. auto sales averaged close to 17 million a year from 1998 through 2006.
The company made commitments to speed up the introduction of hybrid and electric vehicles, and added that it believes the consumer shift away from light trucks towards more fuel efficient vehicles is permanent.
And Ford pledged to reverse the decades-long trend of losing money on the production of small cars in the United States. The company said it would increase the production of smaller vehicles such as the Ford Focus to more than 1 million a year and reduce the complexity of the car's parts in order to reduce costs.
So let's see. Ford's turnaround "plan" is that the American market will recover partway back to the good old days of 1998-2006, it will speed up the introduction of hybrid and electric vehicles and lose less money on small cars. It will make small cars better and cheaper. Well that's reassuring. And a clear, specific bold plan.
Or not. The market recovery is a wish. It may very well come true, but a wish or a hope is not a plan. Speeding up electric/hybrid vehicles? Fine. Would like details, but fine, that actually does bear a passing resemblance to something that would be in a plan. And making small cars better? Forgive me, but the American auto makers have failed spectacularly here for 2 generations, literally. I wouldn't bet $9 on it, let alone $9 billion. That just barely qualifies as a wish, and certainly does not qualify as part of a plan.
This is the arrogance/denial these people are living in. I sure as heck hope GM does better.
Today, December 2, was the deadline for the automakers formerly known as the big 3 (the Desperate 3?) to develop a bailout proposal.
http://news.yahoo.com/s/nm/20081120/bs_nm/us_autos_bailout
Well, today's the big day. According to the New York Times, Ford, "wanted access to $9 billion in loans but that it could survive and become profitable in three years without the money unless the current recession 'is longer and deeper than we now anticipate.'
http://www.nytimes.com/2008/12/03/business/03auto.html?_r=1&hp
And what turnaround plan did Ford announce in exchange for its request for $9 billion in loans? The current CEO would be willing to work for $1 a year and they will sell their corporate jets. Additional specific cost cutting measures included promises of . . . promises of . . . crickets. Nothing at all.
I'm flabbergasted. And totally appalled.
First, that Ford wants the money but thinks it can survive without it is rich. If it wants an additional $9 billion in loans, it is nervous, and rightfully so. Even if it might survive without these loans, GM is in a much more precarious position, and as Ford admitted, a GM failure could cripple Ford as well if suppliers went under. Specifically, in the Times article, Ford stated, "It is in our own self-interest, as well as the nation’s, to seek support for the industry at a time of great peril to this important manufacturing sector of our economy.”
So whether it "needs" the $9 billion in loans or not (and I'm sure it does), Ford wants money for the industry. Big money.
And its turnaround "plan" that it puts forth in exchange? The 2 items mentioned, sell the corporate jets and the CEO gets no money, are so unbelievably bare it isn't funny! First, the CEO needs to go, as does the rest of top management. But forgetting that for a moment, CEO pay $1, fine. Sell jets, fine. That should have consumed, literally, the first 30 seconds of the first meeting on the subject. After that, well, talk to the unions, eliminate brands, ask Congress for legislative relief so dealerships can be cut, cut production of gas guzzlers, ask for specified funds for hybrid or electric cars, additional tax rebates for high MPG cars and electric/hybrid cars. You know, a PLAN to actually return Ford to a profitable status, where it could pay the money back to the government, hopefully with a profit on the equity stake Ford proposed the government take in exchange for the highly risky loans.
None of that was proposed by Ford. None of it at all. Even though it would be an empty threat, if I were Harry and/or Nancy, I'd publicly threaten to hold them in contempt of Congress if they didn't come up with a real plan. I'd graciously extend the deadline to Sunday evening.
Here's what Ford did say, from the above-mentioned article:
Ford said that, as a result of its turnaround plan, it believes its core North American auto operations will be break-even or profitable in 2011 on a pre-tax basis. The company had previously set a goal of returning those operations to profitability next year but dropped that target in May without giving a new one.
Ford also said it expects industry-wide sales of 12.5 million vehicles in 2009, 14.5 million vehicles in 2010 and 15.5 million vehicles in 2011. By way of comparison, U.S. auto sales averaged close to 17 million a year from 1998 through 2006.
The company made commitments to speed up the introduction of hybrid and electric vehicles, and added that it believes the consumer shift away from light trucks towards more fuel efficient vehicles is permanent.
And Ford pledged to reverse the decades-long trend of losing money on the production of small cars in the United States. The company said it would increase the production of smaller vehicles such as the Ford Focus to more than 1 million a year and reduce the complexity of the car's parts in order to reduce costs.
So let's see. Ford's turnaround "plan" is that the American market will recover partway back to the good old days of 1998-2006, it will speed up the introduction of hybrid and electric vehicles and lose less money on small cars. It will make small cars better and cheaper. Well that's reassuring. And a clear, specific bold plan.
Or not. The market recovery is a wish. It may very well come true, but a wish or a hope is not a plan. Speeding up electric/hybrid vehicles? Fine. Would like details, but fine, that actually does bear a passing resemblance to something that would be in a plan. And making small cars better? Forgive me, but the American auto makers have failed spectacularly here for 2 generations, literally. I wouldn't bet $9 on it, let alone $9 billion. That just barely qualifies as a wish, and certainly does not qualify as part of a plan.
This is the arrogance/denial these people are living in. I sure as heck hope GM does better.
Saturday, November 29, 2008
The latest federal efforts to restart our financial system
Another day, another record breaking, unprecedented, potentially insanely expensive, federal rescue.
Earlier in the week, while we were all making travel plans for Thanksgiving, the federal government announced that it was purportedly pumping up to $800 billion into credit markets, with the goal of making it easier and cheaper to get a mortgage, as well as student loans, small business loans, and, incredibly, credit card loans.
The closer I look at this seemingly breathtaking program, the less I see.
The government isn't getting into the lending business. Instead, the federal reserve "plans to purchase in coming months up to $600 billion of debt issued or backed by Fannie Mae, Freddie Mac and other mortgage finance businesses. The idea is that with this debt off of the balance sheet of these financial entities, they could more readily make mortgage loans.
I'm not opposed to this happening in a vacuum per se, but I think its hugely overblown. Are there really masses of people with reasonably good credit itching to buy a home but unable to because they can't get a mortgage? I'm willing to be persuaded, but based on what I know (which is very little) I find that really hard to believe. Perhaps the reason that home prices have plummeted is, um, because they rose so far so fast and people aren't rushing out to buy houses about now? Or because a lot of people that might have bought a house in 2008 bought it in 2006? Or because with a deep recession upon us people are waiting to make such big purchases?
By purchasing these securities, the government is hoping to lower mortgage rates as paid by would-be homeowners. That's a fine goal generally, but one thing our economy does not need about now is any incentives for additional housing stock. We already have a pretty significant overbuilding of residential real estate. Politicians are obsessed with helping homeowners, because homeowners vote, but in terms of our nation's problems, sadly, helping people buy new homes, or stay in the ones they have is actually pretty low on the list. That sounds creul, and it is, but if more houses by far were bought and sold and built that fundamental demand would require, as is 100% certainly the case, why encourage a return to the merry-go-round? Traditionally, recovery begins with a housing market revival. Happened in 2002-03, 1992-94, 1984-5, etc. That's not going to happen this time, at least I hope not. If the recovery of 2009-10 is housing led, god help us all. I say that becuase it would represent the building of another bubble rather than an expansion on solid footing.
As I have said before, Paul Krugman has said, and now Obama and many democrats, government spending, primarily on infrastructure, should lead us out of the recession. Then private investment and perhaps international trade can follow. Housing should still be a drag on the economy for at least another year and a half, and when it recovers it is highly unlikely to be a robust housing recovery.
Back to the debt securities the government is set to buy. Now this debt was implicitly backed by the government anyway. Everyone assumed it. So if the federal reserve can put it explicitly on the federal balance sheet without losing the ability to spend huge amounts of additional money if that proves necessary (and it will) that's fine by me. But for the reasons I have outlined above, this just will not be a panacea of any sort whatsoever. Where it may do some good is because mortgage rates have been dramatically lowered (they have in the last week) a new refinancing boom is underway. This will put cash in people's pockets, some of which will be saved (which is a good thing in and of itself!) and some spent, which is, right this instant, an even better thing.
The other part of the new announced program from this past week is that "the Fed will provide up to $200 billion in financing to investors buying securities tied to student loans, car loans, credit-card debt and small-business loans." (emphasis added) This part of the package I approve of, for the most part, although lending money to investors to buy these securities, as opposed to the government buying them itself, seems like a needless step. Now the government is a lender, rather than an asset purchaser. Someone explain to me why this is radically better?
Anyway, this country probably needs more student loans and small-business loans. Car loans are trickier. Car sales were quite high until recently, but have fallen off the cliff, to their lowest levels since the early 1990s. This profound shock, coupled with the myriad other problems they already had, have, as you all know, driven the big 3 to the wall (no pun intended). So a case can be made for subsidizing car loans about now. A case could be made against it, but again, I'm comfortable. The government won't lose anything like $200 billion buying these securities. Even assuming rising defaults, which seem certain, the fed will be able to recover some-most of the money it is spending, perhaps even make a profit.
Financing the purchase of securities linked to credit card receivables is a whole other matter. I'm ignorant right now, and willing to be persuaded, but at first blush that seems just nuts. Does America need more credit card lending, or does it need less? Isn't that a drug we need to wean ourselves off of? Cold turkey if necessary?
Next, I note that, "The central bank is taking several steps to avoid [certain risks]. The Treasury has agreed to absorb the first $20 billion of losses on the new $200 billion lending program for car loans, student loans, and other consumer credit." The central bank is to lend money to investors via various banks. Investors can then use the money to buy AAA rated securities tied to consumer debt.
http://online.wsj.com/article/SB122761978389056335.html?mod=todays_us_page_one
So even though it isn't purchasing the securities for its own account, the government is guaranteeing the first $20 billion of losses (the losses most likely to occur!) I wonder what interest rate the federal reserve will receive on the loans it makes to investors. This seems like a crazy, unnecessary step. What value are these investors adding, exactly, above and beyond the purchase of the securities, which the fed could do all by itself?
Finally, it is highly noteworthy that the federal reserve is paying for these new announced facilities by simply increasing the money supply! Actually printing more $20 bills is so 1980s. Now the fed will simply issue electronic credits. But the effect is absolutely identical to running the printing presses and simply printing hundreds of billions of additional dollars. It is a sign of the times that this critical fact is barely remarked upon by the press. I note that I am not too concerned about it right now. The big risk to printing more money, obviously, is inflation. And higher inflation is a real risk down the road, and we'll need to be mindful of it. But right now, not so much. A mass deflation is a bigger and vastly scarier risk. So let it be said that I approve of printing additional money as the means to pay for all this, but even I'm seriously concerned about the precedent, and about the direct harm which could come. Team Obama is going to have a hell of a job on its hands for a long long time. Even if, happy happy joy joy, the economy recovers towards the end of next year and recovers strongly, there is still going to be a massive financial mess to clean up. Bush 43 has left a terrible pile of steaming brown stuff in his wake.
Another day, another record breaking, unprecedented, potentially insanely expensive, federal rescue.
Earlier in the week, while we were all making travel plans for Thanksgiving, the federal government announced that it was purportedly pumping up to $800 billion into credit markets, with the goal of making it easier and cheaper to get a mortgage, as well as student loans, small business loans, and, incredibly, credit card loans.
The closer I look at this seemingly breathtaking program, the less I see.
The government isn't getting into the lending business. Instead, the federal reserve "plans to purchase in coming months up to $600 billion of debt issued or backed by Fannie Mae, Freddie Mac and other mortgage finance businesses. The idea is that with this debt off of the balance sheet of these financial entities, they could more readily make mortgage loans.
I'm not opposed to this happening in a vacuum per se, but I think its hugely overblown. Are there really masses of people with reasonably good credit itching to buy a home but unable to because they can't get a mortgage? I'm willing to be persuaded, but based on what I know (which is very little) I find that really hard to believe. Perhaps the reason that home prices have plummeted is, um, because they rose so far so fast and people aren't rushing out to buy houses about now? Or because a lot of people that might have bought a house in 2008 bought it in 2006? Or because with a deep recession upon us people are waiting to make such big purchases?
By purchasing these securities, the government is hoping to lower mortgage rates as paid by would-be homeowners. That's a fine goal generally, but one thing our economy does not need about now is any incentives for additional housing stock. We already have a pretty significant overbuilding of residential real estate. Politicians are obsessed with helping homeowners, because homeowners vote, but in terms of our nation's problems, sadly, helping people buy new homes, or stay in the ones they have is actually pretty low on the list. That sounds creul, and it is, but if more houses by far were bought and sold and built that fundamental demand would require, as is 100% certainly the case, why encourage a return to the merry-go-round? Traditionally, recovery begins with a housing market revival. Happened in 2002-03, 1992-94, 1984-5, etc. That's not going to happen this time, at least I hope not. If the recovery of 2009-10 is housing led, god help us all. I say that becuase it would represent the building of another bubble rather than an expansion on solid footing.
As I have said before, Paul Krugman has said, and now Obama and many democrats, government spending, primarily on infrastructure, should lead us out of the recession. Then private investment and perhaps international trade can follow. Housing should still be a drag on the economy for at least another year and a half, and when it recovers it is highly unlikely to be a robust housing recovery.
Back to the debt securities the government is set to buy. Now this debt was implicitly backed by the government anyway. Everyone assumed it. So if the federal reserve can put it explicitly on the federal balance sheet without losing the ability to spend huge amounts of additional money if that proves necessary (and it will) that's fine by me. But for the reasons I have outlined above, this just will not be a panacea of any sort whatsoever. Where it may do some good is because mortgage rates have been dramatically lowered (they have in the last week) a new refinancing boom is underway. This will put cash in people's pockets, some of which will be saved (which is a good thing in and of itself!) and some spent, which is, right this instant, an even better thing.
The other part of the new announced program from this past week is that "the Fed will provide up to $200 billion in financing to investors buying securities tied to student loans, car loans, credit-card debt and small-business loans." (emphasis added) This part of the package I approve of, for the most part, although lending money to investors to buy these securities, as opposed to the government buying them itself, seems like a needless step. Now the government is a lender, rather than an asset purchaser. Someone explain to me why this is radically better?
Anyway, this country probably needs more student loans and small-business loans. Car loans are trickier. Car sales were quite high until recently, but have fallen off the cliff, to their lowest levels since the early 1990s. This profound shock, coupled with the myriad other problems they already had, have, as you all know, driven the big 3 to the wall (no pun intended). So a case can be made for subsidizing car loans about now. A case could be made against it, but again, I'm comfortable. The government won't lose anything like $200 billion buying these securities. Even assuming rising defaults, which seem certain, the fed will be able to recover some-most of the money it is spending, perhaps even make a profit.
Financing the purchase of securities linked to credit card receivables is a whole other matter. I'm ignorant right now, and willing to be persuaded, but at first blush that seems just nuts. Does America need more credit card lending, or does it need less? Isn't that a drug we need to wean ourselves off of? Cold turkey if necessary?
Next, I note that, "The central bank is taking several steps to avoid [certain risks]. The Treasury has agreed to absorb the first $20 billion of losses on the new $200 billion lending program for car loans, student loans, and other consumer credit." The central bank is to lend money to investors via various banks. Investors can then use the money to buy AAA rated securities tied to consumer debt.
http://online.wsj.com/article/SB122761978389056335.html?mod=todays_us_page_one
So even though it isn't purchasing the securities for its own account, the government is guaranteeing the first $20 billion of losses (the losses most likely to occur!) I wonder what interest rate the federal reserve will receive on the loans it makes to investors. This seems like a crazy, unnecessary step. What value are these investors adding, exactly, above and beyond the purchase of the securities, which the fed could do all by itself?
Finally, it is highly noteworthy that the federal reserve is paying for these new announced facilities by simply increasing the money supply! Actually printing more $20 bills is so 1980s. Now the fed will simply issue electronic credits. But the effect is absolutely identical to running the printing presses and simply printing hundreds of billions of additional dollars. It is a sign of the times that this critical fact is barely remarked upon by the press. I note that I am not too concerned about it right now. The big risk to printing more money, obviously, is inflation. And higher inflation is a real risk down the road, and we'll need to be mindful of it. But right now, not so much. A mass deflation is a bigger and vastly scarier risk. So let it be said that I approve of printing additional money as the means to pay for all this, but even I'm seriously concerned about the precedent, and about the direct harm which could come. Team Obama is going to have a hell of a job on its hands for a long long time. Even if, happy happy joy joy, the economy recovers towards the end of next year and recovers strongly, there is still going to be a massive financial mess to clean up. Bush 43 has left a terrible pile of steaming brown stuff in his wake.
Monday, November 24, 2008
More Euphoria over comments by democrats.
Various democrats have tossed around gigantic amounts as the amount of money to be in Obama's stimulus package.
At a press conference today, Obama praised Summers as one of the great economic minds of our times. Even his harshest detractors will concede that.
A few months back, Summers called for a big stimulus package. Specifically, in September he testified before the House Budget Committee in favor of a second fiscal stimulus. This was before the worst of the economic/financial crisis. In October, he wrote in the Financial Times, "In the current circumstances, the case for fiscal stimulus -- policy actions that increase short-term deficits -- is stronger than at any time in my professional lifetime."
In his House testimony, he advocated infrastructure spending, aid to state and local governments, assistance with affording heating in the winter, investments in energy and renewable energy and aid to lower income families, like increased food stamps and unemployment insurance extensions.
And recently, at a conference, Summers cited a report by Goldman Sachs that suggested that the stimulus should be in the range of $500 to $700 billion, a range that I favor.
The only bad news is that in the past Summers has advocated much smaller dollar amounts than I would like, much much smaller. Since the economy and financial system is very much worse off than when he was advocating smaller amounts, I am highly confident he will quickly adapt to the new reality and be an advocate of a large stimulus.
Summers will apparently be the main architect of Obama's plan. I'm in heaven.
In another sign of panic appropriately spreading to democrats, Chuck Schumer, New York's senior Senator, said on ABC's Sunday morning talk show, said that he thinks the stimulus package has to be big, "has to be between $500 and $700 billion, and that's because our economy is in serious, serious trouble."
Wow, he gets it. Schumer's never impressed me, but these are just the numbers we should be talking about. Particularly since a smaller compromise number may in the end be necessary, we should sure as hell start big. And $500- $700 billion is big. Really big. Big enough to actually help, especially given that it will take a long time to spend that kind of money, as a fair bit of it will be for construction projects that simply cannot begin instantly.
My friends, recovery may not be right around the corner, but we can begin to glimpse its outline. Ben Bernanke, at my urging, dropped rates far and fast. I disapproved of his recent interest rate cuts on the grounds that he should keep some ammunition lying around rather than make all the cuts he can, but given the market instability, it appears that he was right and I was wrong. I would now, were I voting member, vote for an additional quarter point cut, and would thus retroactively endorse the earlier cuts.
In any event, massive monetary stimulus (as yet wholly unfelt because the financial system is all gummed up), massive assistance to the financial system (already being felt, but the job is nowhere near done) and, if all goes well, massive fiscal stimulus. The only thing that would prevent a serious recovery beginning between late Spring-Summer 2009 and Winter 2009 would be if the financial system goes from awful to god-awful. Heaven knows that's possible!!!! But if it doesn't, I'm confident we can begin a recovery. The shape it will take I know not, because it cannot be consumer driven, as many past recoveries were, is unlikely to be housing driven, as the recovery of 2003-2007 was, and the government will have to retrench after 2010. But the odds of a depression, higher than at any time since 1945 in recent weeks, are dropping fast. The appointment to the Treasury, and Summers advising Obama, materially lower those odds.
Various democrats have tossed around gigantic amounts as the amount of money to be in Obama's stimulus package.
At a press conference today, Obama praised Summers as one of the great economic minds of our times. Even his harshest detractors will concede that.
A few months back, Summers called for a big stimulus package. Specifically, in September he testified before the House Budget Committee in favor of a second fiscal stimulus. This was before the worst of the economic/financial crisis. In October, he wrote in the Financial Times, "In the current circumstances, the case for fiscal stimulus -- policy actions that increase short-term deficits -- is stronger than at any time in my professional lifetime."
In his House testimony, he advocated infrastructure spending, aid to state and local governments, assistance with affording heating in the winter, investments in energy and renewable energy and aid to lower income families, like increased food stamps and unemployment insurance extensions.
And recently, at a conference, Summers cited a report by Goldman Sachs that suggested that the stimulus should be in the range of $500 to $700 billion, a range that I favor.
The only bad news is that in the past Summers has advocated much smaller dollar amounts than I would like, much much smaller. Since the economy and financial system is very much worse off than when he was advocating smaller amounts, I am highly confident he will quickly adapt to the new reality and be an advocate of a large stimulus.
Summers will apparently be the main architect of Obama's plan. I'm in heaven.
In another sign of panic appropriately spreading to democrats, Chuck Schumer, New York's senior Senator, said on ABC's Sunday morning talk show, said that he thinks the stimulus package has to be big, "has to be between $500 and $700 billion, and that's because our economy is in serious, serious trouble."
Wow, he gets it. Schumer's never impressed me, but these are just the numbers we should be talking about. Particularly since a smaller compromise number may in the end be necessary, we should sure as hell start big. And $500- $700 billion is big. Really big. Big enough to actually help, especially given that it will take a long time to spend that kind of money, as a fair bit of it will be for construction projects that simply cannot begin instantly.
My friends, recovery may not be right around the corner, but we can begin to glimpse its outline. Ben Bernanke, at my urging, dropped rates far and fast. I disapproved of his recent interest rate cuts on the grounds that he should keep some ammunition lying around rather than make all the cuts he can, but given the market instability, it appears that he was right and I was wrong. I would now, were I voting member, vote for an additional quarter point cut, and would thus retroactively endorse the earlier cuts.
In any event, massive monetary stimulus (as yet wholly unfelt because the financial system is all gummed up), massive assistance to the financial system (already being felt, but the job is nowhere near done) and, if all goes well, massive fiscal stimulus. The only thing that would prevent a serious recovery beginning between late Spring-Summer 2009 and Winter 2009 would be if the financial system goes from awful to god-awful. Heaven knows that's possible!!!! But if it doesn't, I'm confident we can begin a recovery. The shape it will take I know not, because it cannot be consumer driven, as many past recoveries were, is unlikely to be housing driven, as the recovery of 2003-2007 was, and the government will have to retrench after 2010. But the odds of a depression, higher than at any time since 1945 in recent weeks, are dropping fast. The appointment to the Treasury, and Summers advising Obama, materially lower those odds.
Citigroup rescue
Ho hum. Another day, another historic, enormously complex and expensive financial rescue, this time of Citigroup, the most important company in the world to the US economy, oil companies excepted.
I've always thought, since I was 18, that the failure of a big bank could unleash the 4 Horsemen of the Apocalypse, as the other financial institutions they owe money to (called counterparties in the jargon) suffer from not receiving monies owed from the big failing bank. After all, if Citigroup owes Bank of America $500 million because of the expiration of a derivative contract, or because it borrowed that much money to meet reserve requirements, Bank of America can absorb that loss. But a medium sized bank would be pushed to the wall. The knock on effects when that medium sized bank can't meet its obligations, coupled with the grave uncertainty that would ripple through the financial system (worse than what's going on now, believe you me) would be devastating.
Citigroup had "more than $2 trillion in assets as of the end of the third quarter and has operations in more than 100 countries."
http://money.cnn.com/2008/11/23/news/companies/citigroup/index.htm?postversion=2008112400
Whats' more, Citigroup is widely rumored to have more than $1.2 trillion of assets off of its balance sheet.
Let's run that again. Citi has assets equal to something on the close order of 20% of the entire national debt, not counting the off-balance sheet assets! In fact, I just checked, and according to one website, the national debt is 10.6 trillion. http://www.brillig.com/debt_clock/ I just checked the Treasury Department's website, this number is correct.
Anyway, the government clearly and wisely agrees that Citi is too big to fail, and announced a massive rescue package. Here are the particulars:
1) The US Treasury and the FDIC will backstop losses against more than $300 billion in troubled assets.
According to money.cnn.com, Citi itself is on the hook for the first $29 billion in losses on the covered assets, including "mostly loans backed by residential and commercial mortgages." Citi is responsible for 10% of losses above that amount, with the government shouldering the rest of the losses. So Citi is still on the hook for potentially huge money, but the government is taking 90% of the risk. I wonder what the estimated total loss is on these loans.
In terms of the scale of the bad debts/troubled assets, According to the Wall Street Journal, Citigroup and the government have identified a pool of about $306 billion in troubled assets."
http://online.wsj.com/article/SB122747680752551447.html
I know there would be a wide range of uncertainty, but I would like to know whether we are expecting, as of now, for the government to shell out $5 billion (*yawn*) or $100 billion (OH MY GOD)?
In any event, as you can tell from my earlier comments, Citi simply cannot be allowed to fail, whatever the costs! I am not in a position to say whether I support the specifics of the investment/bailout announced, but I support the general principle.
We are living in the most dangerous economic times since 1945, by far. By FAR. Let's hope Bernanke and Paulson can keep the wheels on until the adults take over on January 20th. Where have you gone Robert Rubin, Larry Summers, etc.
Ho hum. Another day, another historic, enormously complex and expensive financial rescue, this time of Citigroup, the most important company in the world to the US economy, oil companies excepted.
I've always thought, since I was 18, that the failure of a big bank could unleash the 4 Horsemen of the Apocalypse, as the other financial institutions they owe money to (called counterparties in the jargon) suffer from not receiving monies owed from the big failing bank. After all, if Citigroup owes Bank of America $500 million because of the expiration of a derivative contract, or because it borrowed that much money to meet reserve requirements, Bank of America can absorb that loss. But a medium sized bank would be pushed to the wall. The knock on effects when that medium sized bank can't meet its obligations, coupled with the grave uncertainty that would ripple through the financial system (worse than what's going on now, believe you me) would be devastating.
Citigroup had "more than $2 trillion in assets as of the end of the third quarter and has operations in more than 100 countries."
http://money.cnn.com/2008/11/23/news/companies/citigroup/index.htm?postversion=2008112400
Whats' more, Citigroup is widely rumored to have more than $1.2 trillion of assets off of its balance sheet.
Let's run that again. Citi has assets equal to something on the close order of 20% of the entire national debt, not counting the off-balance sheet assets! In fact, I just checked, and according to one website, the national debt is 10.6 trillion. http://www.brillig.com/debt_clock/ I just checked the Treasury Department's website, this number is correct.
Anyway, the government clearly and wisely agrees that Citi is too big to fail, and announced a massive rescue package. Here are the particulars:
1) The US Treasury and the FDIC will backstop losses against more than $300 billion in troubled assets.
2) Treasury will make an additional $20 billion investment in Citi, on top of the $25 billion it already invested as part of the $700 billion bailout passed in October. So a total of an insane $45 billion has been invested into one private company. Far more may yet arrive.
The government is receiving preferred shares as compensation. $20 billion for its direct investment, and $7 billion as compensation for guaranteeing more than $300 billion in troubled loans.According to money.cnn.com, Citi itself is on the hook for the first $29 billion in losses on the covered assets, including "mostly loans backed by residential and commercial mortgages." Citi is responsible for 10% of losses above that amount, with the government shouldering the rest of the losses. So Citi is still on the hook for potentially huge money, but the government is taking 90% of the risk. I wonder what the estimated total loss is on these loans.
In terms of the scale of the bad debts/troubled assets, According to the Wall Street Journal, Citigroup and the government have identified a pool of about $306 billion in troubled assets."
http://online.wsj.com/article/SB122747680752551447.html
I know there would be a wide range of uncertainty, but I would like to know whether we are expecting, as of now, for the government to shell out $5 billion (*yawn*) or $100 billion (OH MY GOD)?
In any event, as you can tell from my earlier comments, Citi simply cannot be allowed to fail, whatever the costs! I am not in a position to say whether I support the specifics of the investment/bailout announced, but I support the general principle.
We are living in the most dangerous economic times since 1945, by far. By FAR. Let's hope Bernanke and Paulson can keep the wheels on until the adults take over on January 20th. Where have you gone Robert Rubin, Larry Summers, etc.
Saturday, November 22, 2008
Democrats' actions cause joyous optimism.
Now there's a sentence that has rarely if ever been written. Flying Pink Unicorn readers, incredibly good news is in the air all around us. This news is based on the fact that many of the members of Obama's cabinet have been either formally announced or leaked, and that congressional democrats have taken a series of encouraging steps.
First, the cabinet/White House staff. I will discuss the good news out of congress in a later post.
Right out of the gate, Obama thrilled with the appointment of Rahm Emanuel as Chief of Staff. As I wrote on November 7, I, along with a lot of others, absolutely LOVED this pick. He signalled that Obama's choices might be a lot bolder than was expected from the cautious Obama on the campaign trail. And Obama has been bold.
To start with the most significant posts in the Obama administration. # 1, obviously, is Treasury. I wanted Robert Rubin, or Larry Summers, who succeeded Rubin as Clinton's Treasury Secretary. Yesterday, to some acclaim, Obama instead went with Tim Geithner, the president of the New York Federal Reserve Bank, and by all accounts an eminently qualified man. Geithner worked in the 1990s on bailouts of Mexico, South Korea, and Indonesia. Since the first 2 of these worked spectacularly well, he has seen financial crises resolved happily. What really makes my heart sing is that his mentor is Larry Summers.
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/21/AR2008112102811.html
Summers apparently will serve as a senior economic advisor to Obama. So if I'm not getting precisely my wish of having Summers or Rubin in the post, I'm getting the next best thing, and am getting Summers as an advisor to. Color me pleased.
The second critical appointment of late may have escaped your notice. Tom Daschle, the former Senate Majority Leader (before the democrats lost the Senate majority and before Daschle lost his South Dakota Senate seat) was named as Secretary of Health and Human Services. Now why is that important, you might rightfully ask? HHS is usually considered a backwater cabinet post. Why would a former Senate Majority leader, who once had presidential aspirations, take that post? And why is it a monster huge deal? Health care reform. The Daschle appointment is hugely significant for three reasons. First, he can be of tremendous help on the health care issue of health care reform (he wrote a book about health care in the US, entitled, "Critical: What We Can Do About the Health Care Crisis). He knows his stuff. But policy knowledge is overrated.
Second, Daschle is a master politician. He knows the Senate inside and out, and knows all the players. As complex as health care reform is as a policy matter, the politics are far more important. Nancy Pelosi can pass most any health care reform she wants, short of a single payer system. She'll likely even get some Republican votes. The Senate is far trickier. There have been whispers of the Senate Democrats putting health care reform on the floor in such a way that a filibuster would not be permitted! Needless to say, for the administration to have the expertise of Daschle on the politics and the people involved is invaluable.
Third, the appointment of such a prominent figure sends a loud, clear signal that Obama is deadly serious about health care reform. I just can't believe that Daschle signed on without strong private assurances from Obama on this. Obama is telling anyone listening that he's hugely serious about a major battle for a major reform of our health care system. Emanuel is perfectly suited to lead that battle from inside the White House. Daschle is well suited to lead the political battle. Nancy Pelosi and Harry Reid seem ready for the fight. And from what I can tell, Obama will egg them on! Its very difficult not to be very optimistic, and I'm not prone to fits of wild optimism!
Of course, we couldn't seriously discuss health care without mentioning Hillary's role. As you've heard, she has apparently decided to accept the Sec State position. Now in my view although her formal qualifications are a little light, she'll be excellent. She's Hillary. She's brilliant, she knows everyone, she thinks, she talks to Bill, she'll be fine. My problem is that I wanted her leading the health care fight, and doing so from the Senate floor! This is the one area of late which was cause for pessimism, her failed attempts to gain a "promotion" within the Senate.
The long and short of it is that she sought to cut the line-- to get a far more prominent position in the Senate than her seniority would allow. I should have blogged on this, but I strongly supported her effort. Ted Kennedy (an early Obama supporter, who has never gotten along with the Clintons) and Harry Reid, would have none of it. They are smaller men for it. Kennedy, the Chairman of the Senate Committee on Health, Education, Labor and Pensions is, unfortunately, dying. It would have made all the sense in the world for him to step aside and allow Hillary to Chair that committee, seniority be damned. ( I note that Kennedy threw her a bone by asking her to lead a task force to develop a Senate Democratic Health care proposal. Lead a task force? Um, didn't she ALREADY DO THAT? At this point, she and a few staffers could write the damn report, in 3 days).
Anyway, a few weeks back, it came to light that Hillary asked Kennedy to create a special health care subcommittee for her to head, and Kennedy said no.
http://www.nypost.com/seven/11092008/news/politics/kennedy_kills_hills_hope_to_be_top_heale_137860.htm
This personal slight is a blow for health care reform, and silly at that. Thanks Ted. To the extent that Hillary was attempting to grab power for herself and away from Obama, well, so what? Obama's fine, don't get me wrong, but who's the real health care expert? Yes, I'd much rather have Hillary design my health care system than Obama, or pretty much anyone else.
What I really wanted, and which was never even discussed, was for Reid to step aside and for Hillary, despite her junior status, to become Majority Leader. She has the clout, the knowledge of the players involved, etc. She'd be a huge improvement over Reid. But that was never even discussed, apparently. *sigh*
But back to the good news. Hillary becoming Secretary of State creates Bill problems, as all of his dealings reenter the news to no good end. But Obama's chief rival becoming his face to the world, a 1/2 black man entrusting the best known woman on earth to represent the United States abroad, has all sorts of positives when you think about it. Forgetting the damn symbolism, Obama gets the benefit of Hillary's thinking and experience. And the world is told, in clear terms, that Clintonism is back. This symbol isn't so important, Obama's winning kind of turned the page on Bush. But Hillary being Sec State goes 1/2 a step further, by reclaiming Bill's legacy of working with the Europeans more, engaging with the Israel-Palestinian situation more, engaging China (one policy area I thought Bush got exactly right) and more.
Eric Holder as Attorney General is fine. I don't really know a lot about him, but he sure seems fine from what I've heard.
I object to Janet Napolitano as Homeland Security Secretary, slightly. As governor of Arizona, she would have been well positioned to challenge McCain for reelection in 2010, possibly the only democrat who could. I know little of her qualifications to head homeland security, so I can't comment.
We haven't heard a leak on defense yet. I assume Gates, the current Sec Def, will be asked to stay on. Fine with me. He's not a loyal Bushie Kool-Aid drinker. Far from it. He's serious, he's fully able, and he'll be an asset as Obama seeks to get out of Iraq (which I think Gates really wants himself) and to win in Afghanistan (where winning is in fact possible, and where I think Gates in fact wants to win). I am entirely comfortable with Gates sticking around.
Bill Richardson will be Commerce. Talk about a booby prize. This is what he gets for shilling so obviously for Hillary back when he and so many others thought she would win. He's badly overqualified for the position. I would have preferred to see him as Sec State, with Hillary leading in the Senate. Ah well, you reward your friends and punish your enemies. This is a minor reward for an enemy turned friend. Commerce is a doesn't matter, so I don't care. Its a waste of Richardson's foreign policy talents, but what can you do?
One possibility I can think of is that Obama, if all goes well, plans to dump Biden in 2012 and have Hillary be his VP. Then Richardson would move up to state.
Anyway, don't lose the forest for the trees. The media will tell you that Hillary is the most significant. She's a superstar, she's a she, State is high profile. The media will tell you that Treasury is critical. (Well, the media's dead on there). But the REALLY critical recent appointment, even more so than Treasury, where it was obviously going to be Geithner, Summers, or Rubin), the main value I have added in this post, is Daschle. Its difficult to overstate how excited I am about the Daschle appointment!!!! Obama knows the obstacles to health care reform are almost exclusively in the Senate. And his point man will be the best person he could possibly have chosen, except for maybe Hillary. Its a jolt of good news.
Now there's a sentence that has rarely if ever been written. Flying Pink Unicorn readers, incredibly good news is in the air all around us. This news is based on the fact that many of the members of Obama's cabinet have been either formally announced or leaked, and that congressional democrats have taken a series of encouraging steps.
First, the cabinet/White House staff. I will discuss the good news out of congress in a later post.
Right out of the gate, Obama thrilled with the appointment of Rahm Emanuel as Chief of Staff. As I wrote on November 7, I, along with a lot of others, absolutely LOVED this pick. He signalled that Obama's choices might be a lot bolder than was expected from the cautious Obama on the campaign trail. And Obama has been bold.
To start with the most significant posts in the Obama administration. # 1, obviously, is Treasury. I wanted Robert Rubin, or Larry Summers, who succeeded Rubin as Clinton's Treasury Secretary. Yesterday, to some acclaim, Obama instead went with Tim Geithner, the president of the New York Federal Reserve Bank, and by all accounts an eminently qualified man. Geithner worked in the 1990s on bailouts of Mexico, South Korea, and Indonesia. Since the first 2 of these worked spectacularly well, he has seen financial crises resolved happily. What really makes my heart sing is that his mentor is Larry Summers.
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/21/AR2008112102811.html
Summers apparently will serve as a senior economic advisor to Obama. So if I'm not getting precisely my wish of having Summers or Rubin in the post, I'm getting the next best thing, and am getting Summers as an advisor to. Color me pleased.
The second critical appointment of late may have escaped your notice. Tom Daschle, the former Senate Majority Leader (before the democrats lost the Senate majority and before Daschle lost his South Dakota Senate seat) was named as Secretary of Health and Human Services. Now why is that important, you might rightfully ask? HHS is usually considered a backwater cabinet post. Why would a former Senate Majority leader, who once had presidential aspirations, take that post? And why is it a monster huge deal? Health care reform. The Daschle appointment is hugely significant for three reasons. First, he can be of tremendous help on the health care issue of health care reform (he wrote a book about health care in the US, entitled, "Critical: What We Can Do About the Health Care Crisis). He knows his stuff. But policy knowledge is overrated.
Second, Daschle is a master politician. He knows the Senate inside and out, and knows all the players. As complex as health care reform is as a policy matter, the politics are far more important. Nancy Pelosi can pass most any health care reform she wants, short of a single payer system. She'll likely even get some Republican votes. The Senate is far trickier. There have been whispers of the Senate Democrats putting health care reform on the floor in such a way that a filibuster would not be permitted! Needless to say, for the administration to have the expertise of Daschle on the politics and the people involved is invaluable.
Third, the appointment of such a prominent figure sends a loud, clear signal that Obama is deadly serious about health care reform. I just can't believe that Daschle signed on without strong private assurances from Obama on this. Obama is telling anyone listening that he's hugely serious about a major battle for a major reform of our health care system. Emanuel is perfectly suited to lead that battle from inside the White House. Daschle is well suited to lead the political battle. Nancy Pelosi and Harry Reid seem ready for the fight. And from what I can tell, Obama will egg them on! Its very difficult not to be very optimistic, and I'm not prone to fits of wild optimism!
Of course, we couldn't seriously discuss health care without mentioning Hillary's role. As you've heard, she has apparently decided to accept the Sec State position. Now in my view although her formal qualifications are a little light, she'll be excellent. She's Hillary. She's brilliant, she knows everyone, she thinks, she talks to Bill, she'll be fine. My problem is that I wanted her leading the health care fight, and doing so from the Senate floor! This is the one area of late which was cause for pessimism, her failed attempts to gain a "promotion" within the Senate.
The long and short of it is that she sought to cut the line-- to get a far more prominent position in the Senate than her seniority would allow. I should have blogged on this, but I strongly supported her effort. Ted Kennedy (an early Obama supporter, who has never gotten along with the Clintons) and Harry Reid, would have none of it. They are smaller men for it. Kennedy, the Chairman of the Senate Committee on Health, Education, Labor and Pensions is, unfortunately, dying. It would have made all the sense in the world for him to step aside and allow Hillary to Chair that committee, seniority be damned. ( I note that Kennedy threw her a bone by asking her to lead a task force to develop a Senate Democratic Health care proposal. Lead a task force? Um, didn't she ALREADY DO THAT? At this point, she and a few staffers could write the damn report, in 3 days).
Anyway, a few weeks back, it came to light that Hillary asked Kennedy to create a special health care subcommittee for her to head, and Kennedy said no.
http://www.nypost.com/seven/11092008/news/politics/kennedy_kills_hills_hope_to_be_top_heale_137860.htm
This personal slight is a blow for health care reform, and silly at that. Thanks Ted. To the extent that Hillary was attempting to grab power for herself and away from Obama, well, so what? Obama's fine, don't get me wrong, but who's the real health care expert? Yes, I'd much rather have Hillary design my health care system than Obama, or pretty much anyone else.
What I really wanted, and which was never even discussed, was for Reid to step aside and for Hillary, despite her junior status, to become Majority Leader. She has the clout, the knowledge of the players involved, etc. She'd be a huge improvement over Reid. But that was never even discussed, apparently. *sigh*
But back to the good news. Hillary becoming Secretary of State creates Bill problems, as all of his dealings reenter the news to no good end. But Obama's chief rival becoming his face to the world, a 1/2 black man entrusting the best known woman on earth to represent the United States abroad, has all sorts of positives when you think about it. Forgetting the damn symbolism, Obama gets the benefit of Hillary's thinking and experience. And the world is told, in clear terms, that Clintonism is back. This symbol isn't so important, Obama's winning kind of turned the page on Bush. But Hillary being Sec State goes 1/2 a step further, by reclaiming Bill's legacy of working with the Europeans more, engaging with the Israel-Palestinian situation more, engaging China (one policy area I thought Bush got exactly right) and more.
Eric Holder as Attorney General is fine. I don't really know a lot about him, but he sure seems fine from what I've heard.
I object to Janet Napolitano as Homeland Security Secretary, slightly. As governor of Arizona, she would have been well positioned to challenge McCain for reelection in 2010, possibly the only democrat who could. I know little of her qualifications to head homeland security, so I can't comment.
We haven't heard a leak on defense yet. I assume Gates, the current Sec Def, will be asked to stay on. Fine with me. He's not a loyal Bushie Kool-Aid drinker. Far from it. He's serious, he's fully able, and he'll be an asset as Obama seeks to get out of Iraq (which I think Gates really wants himself) and to win in Afghanistan (where winning is in fact possible, and where I think Gates in fact wants to win). I am entirely comfortable with Gates sticking around.
Bill Richardson will be Commerce. Talk about a booby prize. This is what he gets for shilling so obviously for Hillary back when he and so many others thought she would win. He's badly overqualified for the position. I would have preferred to see him as Sec State, with Hillary leading in the Senate. Ah well, you reward your friends and punish your enemies. This is a minor reward for an enemy turned friend. Commerce is a doesn't matter, so I don't care. Its a waste of Richardson's foreign policy talents, but what can you do?
One possibility I can think of is that Obama, if all goes well, plans to dump Biden in 2012 and have Hillary be his VP. Then Richardson would move up to state.
Anyway, don't lose the forest for the trees. The media will tell you that Hillary is the most significant. She's a superstar, she's a she, State is high profile. The media will tell you that Treasury is critical. (Well, the media's dead on there). But the REALLY critical recent appointment, even more so than Treasury, where it was obviously going to be Geithner, Summers, or Rubin), the main value I have added in this post, is Daschle. Its difficult to overstate how excited I am about the Daschle appointment!!!! Obama knows the obstacles to health care reform are almost exclusively in the Senate. And his point man will be the best person he could possibly have chosen, except for maybe Hillary. Its a jolt of good news.
Monday, November 17, 2008
I agree with 3 blue Dudes, F*** Ralph Nader and his supporters.
http://3bluedudes.com/uncategorized/fuck-ralph-nader-and-fuck-his-supporters/
3 blue dudes is, as you may have guessed, a democratic, left leaning blog. Like them, I rarely simply post someone else's opinion. I'm trying to add value here, not be a mere compiler of news/opinion. But sometimes an opinion is just so right, I feel the need to post it.
http://3bluedudes.com/uncategorized/fuck-ralph-nader-and-fuck-his-supporters/
3 blue dudes is, as you may have guessed, a democratic, left leaning blog. Like them, I rarely simply post someone else's opinion. I'm trying to add value here, not be a mere compiler of news/opinion. But sometimes an opinion is just so right, I feel the need to post it.
I read a piece about what the author felt were myths surrounding the 2008 presidential election.
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/13/AR2008111303287_pf.html
I wrote the author of this piece an e-mail, in which I take issue with his claim that the impact of black voters on the election has been overstated. Here is that e-mail:
Mr. Cillizza: I enjoyed reading your piece, and mostly agree with it. I am an amateur left-leaning blogger (www.flyingpinkunicorns.blogspot.com), and I followed the election very closely.
I agree with your fundamental premises that:
(a) Bush was a huge drag on McCain and would have been a huge drag, and almost certainly a fatal one, on any Republican nominee; and
(b) that the election, though a solid repudiation of the GOP, was not the wipeout some have reported.
I do have a few points of criticism, however.
In 2004, Kerry received 48% of the vote. In 2008, Obama received 52.5% of the vote (as of this writing, votes are still being counted as you know). Thus Obama received approximately 4.5% more of the vote than Kerry did. Accounting for this 4.5% is a useful exercise.
1) You wrote that the widely reported wave of black voters and young people was not key to Obama's victory. This proves to be a highly debatable point at best.
As you point out, the percentage of the electorate which was black increased by two points in 2008 as against 2004.
Since 95% of black voters went for Obama, that constitutes an additional 1.9 percent of the vote for Obama. Thus, the increased share of the black vote, by itself, constitutes 42.2% of the reason for the additional 4.5% of the popular vote that Obama received. I'd certainly call that significant, hugely so. I realize that this is not perfectly valid, as surely many of these additional voters would have stayed home had Hillary been the democratic candidate for President, as opposed to voting for McCain. Looking at this another way, Kerry received 59 million and change votes, whereas Obama has received 66.7 million votes as of now, a difference of 7.7 million votes. Projecting the final electorate at 128 million votes, these additional voters, constituting 2% of 128 million, or 2.56 million votes, yielded Obama an additional 2.43 million votes, or 32% of the increase in votes Obama has received over Kerry.
You correctly point out that Obama did 7 points better than Kerry among black voters. That fact brought Obama an additional 8 tenths of 1 percent of the popular vote (.07 x .11, as I have already accounted for the increase from 88% to 95% in the additional 2%). Or in terms of raw vote totals, the 7 point improvement from Kerry to Obama in the black vote meant an additional 985,000 votes for Obama. Thus the increase from 11% to 13% of the electorate coupled with Obama outperforming Kerry among black voters resulted in a total of 2.7 points of additional vote for Obama, representing 60% of the increase in the popular vote from Kerry to Obama!! Or in terms of actual vote totals, Obama probably received 3.55 million more black votes than Kerry did, representing 46% of the 7.7 million additional votes that Obama won compared with Kerry.
Had black voters voted in the same proportion of the electorate and at the same 88% rate as they did for Kerry, McCain would have won Florida (narrowly, but he would have, I just worked it out), North Carolina (by more than 2 points) and Indiana (because Indiana was so close, any change would have tipped Indiana to McCain even though black voters were but 8% of the Indiana electorate), and Ohio and Virginia would have been much closer. In fact, by my back of the envelope calculations, Ohio would have been a nail biter, within 1 point for certain, and possibly within half of a point. Thus instead of winning 365 electoral votes, Obama would have won 312, and had to sweat Virginia and Ohio. Obama still would have won the election, but I think you underplayed the significance of the black vote.
2) Although the increase in the electorate from 11% to 13% sounds like far less than what one might have expected given the breathless media reports; (a) The categories of Latino, Asian and other also increased from a total of 12% to a total of 14%. So the increase in the percentage of the electorate which was black occurred with other minority groups increasing as well; a bigger portion of a growing and expanding pie. I realize this argument cuts both ways, as other groups increased as well. However, the number of Hispanic and Asian citizens of voting age is increasing as a percentage of the overall voting age population, significantly so, whereas (as I understand it) the same is not true of black citizens.
3) While the percentage of voters aged 18-29 only increased by one point, from 17% to 18%, this is in the context of an aging country. I do not have the pertinent demographic information at my fingertips. Suffice to say that your point that there was not a surge in young voters is not weakened by the exit polling data. However, it is abundantly clear from the anecdotal evidence that Obama benefited far more from young volunteers than did McCain. This clearly enhanced what I think everyone agrees was a superior ground game/GOTV (Get Out The Vote) effort. I can't sit here and say how many votes that added to Obama's column, but it would appear to have been fairly significant, particularly in the swing states of Pennsylvania, Ohio and Florida. I speak from experience when I tell you that Obama had an absolutely massive ground game in Pennsylvania, reaching multitudes of voters. Indeed, the exit polls for 2008 reflect that more voters reported being contacted by the Obama campaign, with 26% of exit polled voters reporting they were contacted by the Obama campaign and only 18% were contacted by the McCain campaign. 80% of voters contacted by only the Obama campaign (13%) voted for Obama, while 82% of voters contacted only by the McCain campaign (6%) voted for McCain. I would not attribute these votes directly to the ground game on a 1 for 1 basis, (if one did so the impact would be massive, potentially enough to swing the election) but surely there was a significant impact. Enthusiasm among young people had to be significant in the final vote totals. I look forward to an analysis by you, Jay Cost of Realclearpolitics, or someone far more able to analyze this point than I am.
4) As for whether a new progressive era has begun, only time will tell. You are surely right that many democrats are in somewhat marginal districts, where the national democratic brand is viewed with great suspicion, and will have to fight quite hard to maintain their seats. Being seen as Nancy Pelosi or Harry Reid's toady will not help these democrats at all. However, the margins that the democrats will have suggest that they will have votes to lose, and I would not assume nearly the monolithic Republican voting bloc as we have seen in recent years on certain issues. Freed from the need to toe the line for their leadership, more than a few Republicans in blue states, and even some in red states may decide that we need a national health care system after all, etc. I think it is very likely that the GOP will play ball on a big stimulus package, aid to Detroit, winding down the Iraq war (to the extent that Congress is relevant here), an increased minimum wage, increased regulations, and some other areas. Whether this constitutes a "progressive era" is, I concede, a debatable point.
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/13/AR2008111303287_pf.html
I wrote the author of this piece an e-mail, in which I take issue with his claim that the impact of black voters on the election has been overstated. Here is that e-mail:
Mr. Cillizza: I enjoyed reading your piece, and mostly agree with it. I am an amateur left-leaning blogger (www.flyingpinkunicorns.blogspot.com), and I followed the election very closely.
I agree with your fundamental premises that:
(a) Bush was a huge drag on McCain and would have been a huge drag, and almost certainly a fatal one, on any Republican nominee; and
(b) that the election, though a solid repudiation of the GOP, was not the wipeout some have reported.
I do have a few points of criticism, however.
In 2004, Kerry received 48% of the vote. In 2008, Obama received 52.5% of the vote (as of this writing, votes are still being counted as you know). Thus Obama received approximately 4.5% more of the vote than Kerry did. Accounting for this 4.5% is a useful exercise.
1) You wrote that the widely reported wave of black voters and young people was not key to Obama's victory. This proves to be a highly debatable point at best.
As you point out, the percentage of the electorate which was black increased by two points in 2008 as against 2004.
Since 95% of black voters went for Obama, that constitutes an additional 1.9 percent of the vote for Obama. Thus, the increased share of the black vote, by itself, constitutes 42.2% of the reason for the additional 4.5% of the popular vote that Obama received. I'd certainly call that significant, hugely so. I realize that this is not perfectly valid, as surely many of these additional voters would have stayed home had Hillary been the democratic candidate for President, as opposed to voting for McCain. Looking at this another way, Kerry received 59 million and change votes, whereas Obama has received 66.7 million votes as of now, a difference of 7.7 million votes. Projecting the final electorate at 128 million votes, these additional voters, constituting 2% of 128 million, or 2.56 million votes, yielded Obama an additional 2.43 million votes, or 32% of the increase in votes Obama has received over Kerry.
You correctly point out that Obama did 7 points better than Kerry among black voters. That fact brought Obama an additional 8 tenths of 1 percent of the popular vote (.07 x .11, as I have already accounted for the increase from 88% to 95% in the additional 2%). Or in terms of raw vote totals, the 7 point improvement from Kerry to Obama in the black vote meant an additional 985,000 votes for Obama. Thus the increase from 11% to 13% of the electorate coupled with Obama outperforming Kerry among black voters resulted in a total of 2.7 points of additional vote for Obama, representing 60% of the increase in the popular vote from Kerry to Obama!! Or in terms of actual vote totals, Obama probably received 3.55 million more black votes than Kerry did, representing 46% of the 7.7 million additional votes that Obama won compared with Kerry.
Had black voters voted in the same proportion of the electorate and at the same 88% rate as they did for Kerry, McCain would have won Florida (narrowly, but he would have, I just worked it out), North Carolina (by more than 2 points) and Indiana (because Indiana was so close, any change would have tipped Indiana to McCain even though black voters were but 8% of the Indiana electorate), and Ohio and Virginia would have been much closer. In fact, by my back of the envelope calculations, Ohio would have been a nail biter, within 1 point for certain, and possibly within half of a point. Thus instead of winning 365 electoral votes, Obama would have won 312, and had to sweat Virginia and Ohio. Obama still would have won the election, but I think you underplayed the significance of the black vote.
2) Although the increase in the electorate from 11% to 13% sounds like far less than what one might have expected given the breathless media reports; (a) The categories of Latino, Asian and other also increased from a total of 12% to a total of 14%. So the increase in the percentage of the electorate which was black occurred with other minority groups increasing as well; a bigger portion of a growing and expanding pie. I realize this argument cuts both ways, as other groups increased as well. However, the number of Hispanic and Asian citizens of voting age is increasing as a percentage of the overall voting age population, significantly so, whereas (as I understand it) the same is not true of black citizens.
3) While the percentage of voters aged 18-29 only increased by one point, from 17% to 18%, this is in the context of an aging country. I do not have the pertinent demographic information at my fingertips. Suffice to say that your point that there was not a surge in young voters is not weakened by the exit polling data. However, it is abundantly clear from the anecdotal evidence that Obama benefited far more from young volunteers than did McCain. This clearly enhanced what I think everyone agrees was a superior ground game/GOTV (Get Out The Vote) effort. I can't sit here and say how many votes that added to Obama's column, but it would appear to have been fairly significant, particularly in the swing states of Pennsylvania, Ohio and Florida. I speak from experience when I tell you that Obama had an absolutely massive ground game in Pennsylvania, reaching multitudes of voters. Indeed, the exit polls for 2008 reflect that more voters reported being contacted by the Obama campaign, with 26% of exit polled voters reporting they were contacted by the Obama campaign and only 18% were contacted by the McCain campaign. 80% of voters contacted by only the Obama campaign (13%) voted for Obama, while 82% of voters contacted only by the McCain campaign (6%) voted for McCain. I would not attribute these votes directly to the ground game on a 1 for 1 basis, (if one did so the impact would be massive, potentially enough to swing the election) but surely there was a significant impact. Enthusiasm among young people had to be significant in the final vote totals. I look forward to an analysis by you, Jay Cost of Realclearpolitics, or someone far more able to analyze this point than I am.
4) As for whether a new progressive era has begun, only time will tell. You are surely right that many democrats are in somewhat marginal districts, where the national democratic brand is viewed with great suspicion, and will have to fight quite hard to maintain their seats. Being seen as Nancy Pelosi or Harry Reid's toady will not help these democrats at all. However, the margins that the democrats will have suggest that they will have votes to lose, and I would not assume nearly the monolithic Republican voting bloc as we have seen in recent years on certain issues. Freed from the need to toe the line for their leadership, more than a few Republicans in blue states, and even some in red states may decide that we need a national health care system after all, etc. I think it is very likely that the GOP will play ball on a big stimulus package, aid to Detroit, winding down the Iraq war (to the extent that Congress is relevant here), an increased minimum wage, increased regulations, and some other areas. Whether this constitutes a "progressive era" is, I concede, a debatable point.
Thursday, November 13, 2008
Reviewing my election predictions from my huge June 14, 2008 post
Slightly revised on 11-28-08 to reflect a 7 point Obama win, as he is now up 6.7 points in votes counted as of now, so 7 is closer than 6 (which is what I used when I first posted this entry)
In that endless post, I predicted results for a ton of states. Needless to say, that post was made well before the selections of Biden and Palin, the worst of the financial crisis and before the campaign had begun in earnest.
That post assumed my prediction of an 8-point Obama win. As of this writing he is up by 6.7 points (votes are still being counted even though the winner obviously is not in doubt), so my state-by-state predictions are valid-- had Obama won by only 1, my state-by-state predictions of Obama's final margin would have been worthless.
Once again, here is my terminology. In 2004, Bush won by 3. A state that went for Bush by 8 points is red + 5: 5 points more GOP than the nation. A state that went for Kerry by 10 is blue + 13.
Obama is (as of this writing) up by about 6.7 points, 52.8 to 46.1. I am rounding up to 7 points. So a state that went for Obama by 3 is red +4.
I note one big embarrassment before I begin. I did not even consider the possibility of Indiana being a swing state. It has historically been very red, being red + 18 in 2004. I just didn't think Illinois bordering Indiana was worth anything remotely like that. I was, needless to say, badly wrong, as Indiana ended up going for Obama by less than one point, thus moving Indiana to red + 6.
That went well! I realized that Florida would be harder than other swing states due to a relative lack of Obama's best demographic groups (upscale professional whites and black voters). Frankly, everyone else that looked at this election did as well. I may have hit Florida almost perfectly, but its difficult to take too too much credit for seeing what everyone else saw.
Florida went exactly as expected. Both campaigns fought hard, McCain took a small lead when he was up a touch nationally, Obama regained the lead as he pushed ahead in the national polls, and maintained a small but very consistent lead in polling from Mid-October on. Florida went EXACTLY as the polling expected, in roaring high turnout.
2) Ohio: 20 Electoral Votes: 2004 Red + 2.5
My June prediction: Obama by 3 (thus red +5)
Actual results: Obama by 4 (thus red + 3)
Oops. Ohio went better for Obama than I expected. I was frankly mildly concerned about race here. Like Florida, Ohio was expected to be mildly difficult for Obama, was, and went almost exactly as the polls said it would. Obama was consistently up low to mid single digits in Ohio. I suppose McCain outperformed his polls by a tiny bit, but not by enough to begin to matter. My Ohio prediction was conventional wisdom 101, and we were all a tad off.
3) Pennsylvania 21 Electoral Votes: 2004: Blue + 5.
My June prediction: Obama by 14 (thus Blue + 6)
Actual results: Obama by 11 (thus blue + 4)
I predicted in June that McCain would abandon Pennsylvania fairly early on, because its blue, and expensive. I was hugely wrong here. McCain abandoned Michigan early, but fought like crazy in Pa, sending Palin in every 20 minutes and very often appearing himself. The McCain campaign spent huge amounts of money here. And what did they get for their troubles? Nothing. It was blue + 5 in 2004, and after all the campaigning and phone calls and events and tv ads, it was blue + 4 in 2008! I think its fair to say I was very right in June and Team McCain was wrong. Pa was just a bridge too far. I note that I predicted that, "the polling will favor Obama solidly here." On that prediction I was very very right. Pennsylvania polls consistently put Obama up by low to mid double digits until the final week of the campaign, at which time the McCain efforts showed up in the polls, where Obama led in the mid to high single digits. But the final result, in low double digits, was entirely consistent with my June prediction, and with the polls. The Pennsylvania gambit was a good idea by the McCain campaign as of mid-October, as they just had no way to win without it. Not that they really could have won with it, but when you have lemons, you make lemonade.
4) Michigan: 17 Electoral Votes: 2004: Blue + 5.
My June prediction: Obama by 11 (thus blue + 3)
Actual results: Obama by 16 (thus blue + 9)
Oops. I blew this prediction, from start to finish. So much for a race-related problem. I predicted McCain would make a big push in Michigan, and would more than likely abandon it early in the Fall. Well, I was right about that, yet missed the victory margin by 5 points. Or, put another way, I missed the skew towards the democrats by 6 points. That's a ton in a seemingly predictable swing state! In the end, I thought Obama would win Michigan by more than he won the nation by, and he did.
My reasoning was that the Michigan economy had been in the crapper for ages, and maybe there McCain could say hey, try something new here, your democratic governor has messed things up. And he had polled well in Michigan. But literally days after McCain pulled out he was down mid double digits in the polls, instead of high single digits. And that's where the vote ended up. I still think Michigan was a better choice than Pennsylvania. I may have missed my prediction, but the McCain campaign missed the choice.
5) Virginia: 13 Electoral Votes: 2004: Red + 5.
My June prediction: Obama by 7 (thus red +1)
Actual results: Obama by 6 (thus red + 1)
Ah, Virginia. The Old Dominion. There's very little I like better in life than being hugely right. And, well, when it comes to Virginia I was right start to finish. Spectacularly, presciently right.
Not only was I very right, but Virginia mattered hugely in the campaign because of the electoral math. As I have said in other posts (and the Obama campaign said early on), if Obama carried every Kerry state (which he was favored to and did) (252), and Iowa (which he was favored to and did) (7), flipping Virginia alone (13) would win him the election, even if he lost in Ohio, Florida, Colorado, and everywhere else. This nasty fact caused 2-months of abject panic by the McCain campaign, once they realized how serious Obama was about Virginia, and, in my opinion, was by far the largest reason for the McCain campaign's seemingly strange insistence on campaigning hard in Pennsylvania and somewhat in Iowa. Virginia was the 13 electoral votes that terrified Team McCain.
Unlike Florida, where I was just as right, but really so were a lot of other people, I broke against the great weight of conventional wisdom when I wrote my June post. At that time, most pundits agreed that Colorado was a legitimate swing state, but that Virginia was a bridge too far. The conventional wisdom was that Obama would play there, then back off, and McCain would ultimately win it, even if he lost the election. Not! In the end, it was demographics. As I noted, "Virginia has been moving towards the democrats almost by the hour for the last 12 years." Specifically, as I noted, "Virginia was Red + 11 in 1996, and Red + 8 in 2000, so it has trended blue for a while now. It moved 3 points towards blue from 1996-2000, 3 more points from 2000 to 2004, and could easily have moved that much or more since." And that's what happened. In conjunction with a monster Obama campaign effort and monster black turnout, Virginia shifted 4 more points towards blue. Why?
To put it simply, a huge chunk of voters who vote basically like Maryland (which went for Obama by 25 points) has moved in, in slow motion, since about 1995. All I predicted, in the end, was that this demographic trend would continue, that Obama would play hard for Virginia, and that any race effect in Appalachia would be cancelled out by his huge popularity in northern Virginia, where the people that vote like Maryland moved. And, as everyone else predicted, black voters would turn out in breathtaking numbers.
I also predicted that Mark Warner would win his Senate seat huge, possibly by as many as 20. That counts as a miss; he won by 31. One former governor beat another former governor by 31 points. I wonder if that's ever happened before in a Senate race.
In conclusion, Virginia went precisely as I thought it would for precisely the reasons I thought it would. When I wrote the June post, the polling average nationwide had Obama up by 3.9 points, and in Virginia, McCain was up by 1.3 (or red + 5.2). I looked past the polls, saw the demographics, predicted the all-out effort by Obama, and got the final result almost exactly right.
6) Missouri: 11 Electoral Votes: 2004: Red + 4.
My June prediction: Obama by 2 (thus red +6)
Actual results: McCain by less than 1 (thus red + 7)
I predicted Missouri would be tough for Obama, but he'd win it if he won the popular vote comfortably. So did everyone else. Everyone else predicted that Missouri has moved somewhat to the red side and is no longer a true bellwether. I even got the partisan hue, red + 7, almost exactly right. We were all correct, except that he lost it by a hair instead of winning it by a hair. Moving on.
7) Minnesota: 10 Electoral Votes: 2004: Blue + 6.
My June prediction: Obama by 14 (thus blue + 6)
Actual results: Obama by 10 (thus blue + 3)
A 3-point miss. No big. I predicted that McCain would abandon it. He largely did. The GOP held their convention there, but they still realized the inevitable. Interesting that Minnesota continues to move red. I have no idea why, I need to learn that.
8) Wisconsin: 10 Electoral Votes: 2004: blue + 3.
My June prediction: Obama by 13 (thus blue + 5)
Actual results: Obama by 13 (thus blue + 6)
Not bad I'd say! All I predicted here (as in many other states) was that the partisan hue of the state from 2004 would continue. Obama always polled well in Wisconsin. He whipped Hillary in the primary there. Anyway.
9) Colorado: 9 Electoral votes: 2004: Red + 2.
My June prediction: Obama by 10 (thus blue + 2)
Actual results: Obama by 9 (thus blue + 2)!!!!!!!
Bingo. WOO HOO. As with Virginia, I was hugely right here. Now unlike Virginia, everyone and their grandmother predicted Colorado was a swing state in 2008. But most people thought it would be much closer. Here, as in Virginia, I correctly predicted that demographic trends moving the state towards the blue side of the ledger would continue, and I was very right. Colorado was blue +2. Colorado was blue +2. Colorado's been red for a long long time, for it to be blue + 2 is astounding. According to the exit polls, Hispanics in Colorado went huge for Obama, 61-38, but that's actually a tad lower than the national results. Black voters made up only 4% of the voters. What happened in Colorado was, incredibly, Obama won the white vote 50-48. That is absolutely incredible. By way of comparison, the white vote in deep deep blue New York was only 52-46 Obama. Whites in Colorado, a traditionally red state, voted at nearly as high a rate for Obama as in blue blue blue New York. WOW.
Colorado was a part of a larger story, where the west moved hugely blue in 2008. Even the 3 west coast states, all Kerry states, moved blue. And Colorado, Nevada and New Mexico moved sharply blue.
As I wrote back in June, in 1996, Colorado was Red + 10, in 2000 it was red + 9.5, but in 2004 it shot up to red + 2, a 7 point move towards blue (and with the same GOP candidate, Bush). I figured it would go 4 more points towards blue, and it did, exactly 4 more points.
10) Iowa: 7 Electoral votes: 2004: Blue + 2.
My June prediction: Obama by 13 (thus blue + 5)
Actual results: Obama by 9 (thus blue + 2)
Ah well, I suppose being three points off on the partisan hue isn't that bad, but I feel like I was wrong here. I predicted that McCain would abandon Iowa because of his brave opposition to ethanol subsidies. I was badly wrong about that-- he even visited in the weekend before the election. I wonder if the somewhat vigorous McCain campaign in Iowa accounted for the partisan hue remaining at blue + 2 rather than than my predicted move to blue + 5. Or I could have just been plain wrong. No way to tell. But I'm taking Iowa on the chin because I was so confident that ethanol would play a gigantic role here, and it looks as if it really didn't.
11) Arkansas: 6 Electoral Votes: 2004: Red + 6
My June prediction: McCain by 5 (thus red + 13)
Actual results: McCain by 20 (thus red + 27)
Well, if you're going to be wrong, you may as well totally blow it! That's really embarrassing. At the time I wrote the June post, McCain was up 15-20 points on Obama in the polls. I thought that would drastically close. Obviously not. Obama stank up much of the south, losing former swing southern states by gigantic margins. Obviously race played a real factor, as Kerry certainly wasn't popular in Arkansas, and he hugely outperformed Obama! Instead of holding near red + 6, or maybe ticking up to red + 9, Arkansas shot up to red + an astounding 27. I knew Arkansas wouldn't really be a swing state, but being that wrong on the margin of victory is, well, not ideal.
12) New Mexico: 5 Electoral votes: 2004: blue + 2.
My June prediction: Obama by 4 (thus red + 4)
Actual results: Obama by 15 (thus blue + 8)!!
Western Oops, part I. I missed the partisan color of New Mexico, a swing state, by a mere 14 points!!! Oops!! You'll forgive me if I hide under the covers! At least I knew I had no real idea about how New Mexico would end up.
No one else as of June predicted anything like a 15 point Obama landslide in New Mexico. I badly underestimated how well Hispanics would rally to Obama. According to the exit polls, the Hispanic vote was 41 % of the vote in New Mexico! Obama won it 69-30!!! The immigration debate of 2007 did huge harm to the GOP brand among Hispanics, particularly Hispanics living near the Mexican border. This harm has the potential to be generational, like the harm done to the GOP brand by its opposition to civil rights in recent decades.
I said in June I had no confidence in my New Mexico predictions. Needless to say, to paraphrase Churchill, my utter lack of confidence was well founded. For what its worth, the conventional wisdom predicted a fairly close race in New Mexico until about the last 2 weeks, and even then almost no one was predicting the 15-point massacre handed out to McCain and Palin.
13) Nevada: 5 Electoral Votes: 2004: Blue + 0!
My June prediction: Obama by 4 (thus red + 4)
Actual results: Obama by 12 (thus blue + 5)!
Western Oops, part II. Another Las Vegas sized MISS. See New Mexico, above. The west and the south were the dramatically changed regions in 2008, with much of the south moving hugely towards McCain (more on that in a future post) and some of the west moving hugely to Obama. I thought Nevada would be very tough for Obama, and was, obviously, spectacularly wrong. Again, no one predicted anything like a 12-point win in Nevada, not even in the last few days of the campaign. But just because no one else had a clue doesn't mean I shouldn't have.
One other note on Nevada. Hispanics went for Obama by a staggering 76-22. But they were only 15% of the vote (again all this is according to the exit polls). So these 15% of voters gave Obama about a 5-point statewide lead. Black voters made up 10% of the Nevada electorate (I'm surprised it was that high!) and went 94-5 for Obama, thus giving him 4.5 additional statewide points. White voters only went for McCain 53-45, which was a touch closer than in the rest of the country. In the US as a whole, white voters went for McCain by 55-43. That Nevada whites would be bluer than the rest of America tells us something about the GOP brand out west.
14) New Hampshire: 4 Electoral Votes, 2004: Blue + 4
My June prediction: Obama by 7 (thus red + 1)
Actual results: Obama by 9 (thus blue + 2)
I was correct that McCain competed there till the bitter end. I slightly underestimated just how badly tarnished the GOP brand was in New Hampshire, a state which got to know McCain better than any other state except Arizona.
Here are the non-swing state predictions I made.
A) California: 55 Electoral votes: 2004: Blue + approximately 14.
My June prediction: Obama by 15 (thus blue + 7)
Actual results: Obama by 24! (thus blue + 17!)
To miss by that much in a state so huge is embarrassing. Its a stunning monster landslide! Why was I so badly wrong?
Apprently a fair bit of the GOP base stayed home. Even that doesn't account for the huge margin by which I was wrong. I was predicting a 7-point change in the partisan hue, which was daring. Still....
B) Texas: 34 Electoral votes: 2004: red+ 20
My June prediction: McCain by 8 (red + 16)
Actual results: McCain by 11 (red + 18)
Plenty close enough. I'm declaring victory and moving on.
C) New York: 31 Electoral votes: 2004: Blue + 22.
My June prediction: Obama by 26 (thus blue + 18)
Actual results: Obama by 25! (thus blue + 18!)
Now THAT'S what I call knowing your home state! Predicting a big landslide in New York for Obama was child's play. That I hit the partisan hue exactly is satisfying.
D) Illinois: 21 Electoral votes: 2004 Blue + 14.
My June prediction: Obama by 30 (thus blue + 22)
Actual results: Obama by 25 (thus blue + 18)
A slight miss. I guess I overestimated the home-state effect. Put another way, there are always a certain percentage that just are NOT going to vote for you.
E) North Carolina: 15 electoral votes: 2004 red +9
My June prediction: McCain by 3 (thus red + 11)
Actual results: Obama by less than 1 (red +7)
Wow did I badly underestimate how much North Carolina had changed! In June, I advocated Obama going after North Carolina, but didn't think he'd get there. I guess I've been away from North Carolina since 1996, and don't really know it anymore. Still, do note that it was red + 7. Still a long way from being a national bellweather, unlike Virginia, which is at this instant in time the closest thing we have to a national bellweather. Sorry Missouri. No love for you, Ohio.
Actual results: McCain by 5 (thus red + 12)
Not too shabby. Still, for Georgia to be red + that much means it is unlikely to go blue anytime soon, absent a big national landslide.
G) New Jersey: 15 electoral votes: 2004 blue + 9
My June prediction: Obama by 15 (thus blue +7)
Actual results: Obama by 15 (thus blue + 8)
New Jersey is right next door to my New York, and simply hasn't changed much in recent years. It wasn't too tough to predict, though of course getting the partisan hue within one point and change is satisfying. Not difficult, mind you, but still satisfying. I knew McCain wouldn't play for New Jersey, despite saying he would on more than one occasion. The McCain campaign may at times have been stupid; competing for New Jersey, requiring the expensive New York tv market, would have been suicidal. They weren't suicidal.
Slightly revised on 11-28-08 to reflect a 7 point Obama win, as he is now up 6.7 points in votes counted as of now, so 7 is closer than 6 (which is what I used when I first posted this entry)
In that endless post, I predicted results for a ton of states. Needless to say, that post was made well before the selections of Biden and Palin, the worst of the financial crisis and before the campaign had begun in earnest.
That post assumed my prediction of an 8-point Obama win. As of this writing he is up by 6.7 points (votes are still being counted even though the winner obviously is not in doubt), so my state-by-state predictions are valid-- had Obama won by only 1, my state-by-state predictions of Obama's final margin would have been worthless.
Once again, here is my terminology. In 2004, Bush won by 3. A state that went for Bush by 8 points is red + 5: 5 points more GOP than the nation. A state that went for Kerry by 10 is blue + 13.
Obama is (as of this writing) up by about 6.7 points, 52.8 to 46.1. I am rounding up to 7 points. So a state that went for Obama by 3 is red +4.
I note one big embarrassment before I begin. I did not even consider the possibility of Indiana being a swing state. It has historically been very red, being red + 18 in 2004. I just didn't think Illinois bordering Indiana was worth anything remotely like that. I was, needless to say, badly wrong, as Indiana ended up going for Obama by less than one point, thus moving Indiana to red + 6.
1)Florida: 27 electoral votes: 2004: Red + 2.5.
My June prediction: Obama by 3 (thus red +5)
Actual results: Obama by 2 (thus red + 5)That went well! I realized that Florida would be harder than other swing states due to a relative lack of Obama's best demographic groups (upscale professional whites and black voters). Frankly, everyone else that looked at this election did as well. I may have hit Florida almost perfectly, but its difficult to take too too much credit for seeing what everyone else saw.
Florida went exactly as expected. Both campaigns fought hard, McCain took a small lead when he was up a touch nationally, Obama regained the lead as he pushed ahead in the national polls, and maintained a small but very consistent lead in polling from Mid-October on. Florida went EXACTLY as the polling expected, in roaring high turnout.
2) Ohio: 20 Electoral Votes: 2004 Red + 2.5
My June prediction: Obama by 3 (thus red +5)
Actual results: Obama by 4 (thus red + 3)
Oops. Ohio went better for Obama than I expected. I was frankly mildly concerned about race here. Like Florida, Ohio was expected to be mildly difficult for Obama, was, and went almost exactly as the polls said it would. Obama was consistently up low to mid single digits in Ohio. I suppose McCain outperformed his polls by a tiny bit, but not by enough to begin to matter. My Ohio prediction was conventional wisdom 101, and we were all a tad off.
3) Pennsylvania 21 Electoral Votes: 2004: Blue + 5.
My June prediction: Obama by 14 (thus Blue + 6)
Actual results: Obama by 11 (thus blue + 4)
I predicted in June that McCain would abandon Pennsylvania fairly early on, because its blue, and expensive. I was hugely wrong here. McCain abandoned Michigan early, but fought like crazy in Pa, sending Palin in every 20 minutes and very often appearing himself. The McCain campaign spent huge amounts of money here. And what did they get for their troubles? Nothing. It was blue + 5 in 2004, and after all the campaigning and phone calls and events and tv ads, it was blue + 4 in 2008! I think its fair to say I was very right in June and Team McCain was wrong. Pa was just a bridge too far. I note that I predicted that, "the polling will favor Obama solidly here." On that prediction I was very very right. Pennsylvania polls consistently put Obama up by low to mid double digits until the final week of the campaign, at which time the McCain efforts showed up in the polls, where Obama led in the mid to high single digits. But the final result, in low double digits, was entirely consistent with my June prediction, and with the polls. The Pennsylvania gambit was a good idea by the McCain campaign as of mid-October, as they just had no way to win without it. Not that they really could have won with it, but when you have lemons, you make lemonade.
4) Michigan: 17 Electoral Votes: 2004: Blue + 5.
My June prediction: Obama by 11 (thus blue + 3)
Actual results: Obama by 16 (thus blue + 9)
Oops. I blew this prediction, from start to finish. So much for a race-related problem. I predicted McCain would make a big push in Michigan, and would more than likely abandon it early in the Fall. Well, I was right about that, yet missed the victory margin by 5 points. Or, put another way, I missed the skew towards the democrats by 6 points. That's a ton in a seemingly predictable swing state! In the end, I thought Obama would win Michigan by more than he won the nation by, and he did.
My reasoning was that the Michigan economy had been in the crapper for ages, and maybe there McCain could say hey, try something new here, your democratic governor has messed things up. And he had polled well in Michigan. But literally days after McCain pulled out he was down mid double digits in the polls, instead of high single digits. And that's where the vote ended up. I still think Michigan was a better choice than Pennsylvania. I may have missed my prediction, but the McCain campaign missed the choice.
5) Virginia: 13 Electoral Votes: 2004: Red + 5.
My June prediction: Obama by 7 (thus red +1)
Actual results: Obama by 6 (thus red + 1)
Ah, Virginia. The Old Dominion. There's very little I like better in life than being hugely right. And, well, when it comes to Virginia I was right start to finish. Spectacularly, presciently right.
Not only was I very right, but Virginia mattered hugely in the campaign because of the electoral math. As I have said in other posts (and the Obama campaign said early on), if Obama carried every Kerry state (which he was favored to and did) (252), and Iowa (which he was favored to and did) (7), flipping Virginia alone (13) would win him the election, even if he lost in Ohio, Florida, Colorado, and everywhere else. This nasty fact caused 2-months of abject panic by the McCain campaign, once they realized how serious Obama was about Virginia, and, in my opinion, was by far the largest reason for the McCain campaign's seemingly strange insistence on campaigning hard in Pennsylvania and somewhat in Iowa. Virginia was the 13 electoral votes that terrified Team McCain.
Unlike Florida, where I was just as right, but really so were a lot of other people, I broke against the great weight of conventional wisdom when I wrote my June post. At that time, most pundits agreed that Colorado was a legitimate swing state, but that Virginia was a bridge too far. The conventional wisdom was that Obama would play there, then back off, and McCain would ultimately win it, even if he lost the election. Not! In the end, it was demographics. As I noted, "Virginia has been moving towards the democrats almost by the hour for the last 12 years." Specifically, as I noted, "Virginia was Red + 11 in 1996, and Red + 8 in 2000, so it has trended blue for a while now. It moved 3 points towards blue from 1996-2000, 3 more points from 2000 to 2004, and could easily have moved that much or more since." And that's what happened. In conjunction with a monster Obama campaign effort and monster black turnout, Virginia shifted 4 more points towards blue. Why?
To put it simply, a huge chunk of voters who vote basically like Maryland (which went for Obama by 25 points) has moved in, in slow motion, since about 1995. All I predicted, in the end, was that this demographic trend would continue, that Obama would play hard for Virginia, and that any race effect in Appalachia would be cancelled out by his huge popularity in northern Virginia, where the people that vote like Maryland moved. And, as everyone else predicted, black voters would turn out in breathtaking numbers.
I also predicted that Mark Warner would win his Senate seat huge, possibly by as many as 20. That counts as a miss; he won by 31. One former governor beat another former governor by 31 points. I wonder if that's ever happened before in a Senate race.
In conclusion, Virginia went precisely as I thought it would for precisely the reasons I thought it would. When I wrote the June post, the polling average nationwide had Obama up by 3.9 points, and in Virginia, McCain was up by 1.3 (or red + 5.2). I looked past the polls, saw the demographics, predicted the all-out effort by Obama, and got the final result almost exactly right.
6) Missouri: 11 Electoral Votes: 2004: Red + 4.
My June prediction: Obama by 2 (thus red +6)
Actual results: McCain by less than 1 (thus red + 7)
I predicted Missouri would be tough for Obama, but he'd win it if he won the popular vote comfortably. So did everyone else. Everyone else predicted that Missouri has moved somewhat to the red side and is no longer a true bellwether. I even got the partisan hue, red + 7, almost exactly right. We were all correct, except that he lost it by a hair instead of winning it by a hair. Moving on.
7) Minnesota: 10 Electoral Votes: 2004: Blue + 6.
My June prediction: Obama by 14 (thus blue + 6)
Actual results: Obama by 10 (thus blue + 3)
A 3-point miss. No big. I predicted that McCain would abandon it. He largely did. The GOP held their convention there, but they still realized the inevitable. Interesting that Minnesota continues to move red. I have no idea why, I need to learn that.
8) Wisconsin: 10 Electoral Votes: 2004: blue + 3.
My June prediction: Obama by 13 (thus blue + 5)
Actual results: Obama by 13 (thus blue + 6)
Not bad I'd say! All I predicted here (as in many other states) was that the partisan hue of the state from 2004 would continue. Obama always polled well in Wisconsin. He whipped Hillary in the primary there. Anyway.
9) Colorado: 9 Electoral votes: 2004: Red + 2.
My June prediction: Obama by 10 (thus blue + 2)
Actual results: Obama by 9 (thus blue + 2)!!!!!!!
Bingo. WOO HOO. As with Virginia, I was hugely right here. Now unlike Virginia, everyone and their grandmother predicted Colorado was a swing state in 2008. But most people thought it would be much closer. Here, as in Virginia, I correctly predicted that demographic trends moving the state towards the blue side of the ledger would continue, and I was very right. Colorado was blue +2. Colorado was blue +2. Colorado's been red for a long long time, for it to be blue + 2 is astounding. According to the exit polls, Hispanics in Colorado went huge for Obama, 61-38, but that's actually a tad lower than the national results. Black voters made up only 4% of the voters. What happened in Colorado was, incredibly, Obama won the white vote 50-48. That is absolutely incredible. By way of comparison, the white vote in deep deep blue New York was only 52-46 Obama. Whites in Colorado, a traditionally red state, voted at nearly as high a rate for Obama as in blue blue blue New York. WOW.
Colorado was a part of a larger story, where the west moved hugely blue in 2008. Even the 3 west coast states, all Kerry states, moved blue. And Colorado, Nevada and New Mexico moved sharply blue.
As I wrote back in June, in 1996, Colorado was Red + 10, in 2000 it was red + 9.5, but in 2004 it shot up to red + 2, a 7 point move towards blue (and with the same GOP candidate, Bush). I figured it would go 4 more points towards blue, and it did, exactly 4 more points.
10) Iowa: 7 Electoral votes: 2004: Blue + 2.
My June prediction: Obama by 13 (thus blue + 5)
Actual results: Obama by 9 (thus blue + 2)
Ah well, I suppose being three points off on the partisan hue isn't that bad, but I feel like I was wrong here. I predicted that McCain would abandon Iowa because of his brave opposition to ethanol subsidies. I was badly wrong about that-- he even visited in the weekend before the election. I wonder if the somewhat vigorous McCain campaign in Iowa accounted for the partisan hue remaining at blue + 2 rather than than my predicted move to blue + 5. Or I could have just been plain wrong. No way to tell. But I'm taking Iowa on the chin because I was so confident that ethanol would play a gigantic role here, and it looks as if it really didn't.
11) Arkansas: 6 Electoral Votes: 2004: Red + 6
My June prediction: McCain by 5 (thus red + 13)
Actual results: McCain by 20 (thus red + 27)
Well, if you're going to be wrong, you may as well totally blow it! That's really embarrassing. At the time I wrote the June post, McCain was up 15-20 points on Obama in the polls. I thought that would drastically close. Obviously not. Obama stank up much of the south, losing former swing southern states by gigantic margins. Obviously race played a real factor, as Kerry certainly wasn't popular in Arkansas, and he hugely outperformed Obama! Instead of holding near red + 6, or maybe ticking up to red + 9, Arkansas shot up to red + an astounding 27. I knew Arkansas wouldn't really be a swing state, but being that wrong on the margin of victory is, well, not ideal.
12) New Mexico: 5 Electoral votes: 2004: blue + 2.
My June prediction: Obama by 4 (thus red + 4)
Actual results: Obama by 15 (thus blue + 8)!!
Western Oops, part I. I missed the partisan color of New Mexico, a swing state, by a mere 14 points!!! Oops!! You'll forgive me if I hide under the covers! At least I knew I had no real idea about how New Mexico would end up.
No one else as of June predicted anything like a 15 point Obama landslide in New Mexico. I badly underestimated how well Hispanics would rally to Obama. According to the exit polls, the Hispanic vote was 41 % of the vote in New Mexico! Obama won it 69-30!!! The immigration debate of 2007 did huge harm to the GOP brand among Hispanics, particularly Hispanics living near the Mexican border. This harm has the potential to be generational, like the harm done to the GOP brand by its opposition to civil rights in recent decades.
I said in June I had no confidence in my New Mexico predictions. Needless to say, to paraphrase Churchill, my utter lack of confidence was well founded. For what its worth, the conventional wisdom predicted a fairly close race in New Mexico until about the last 2 weeks, and even then almost no one was predicting the 15-point massacre handed out to McCain and Palin.
13) Nevada: 5 Electoral Votes: 2004: Blue + 0!
My June prediction: Obama by 4 (thus red + 4)
Actual results: Obama by 12 (thus blue + 5)!
Western Oops, part II. Another Las Vegas sized MISS. See New Mexico, above. The west and the south were the dramatically changed regions in 2008, with much of the south moving hugely towards McCain (more on that in a future post) and some of the west moving hugely to Obama. I thought Nevada would be very tough for Obama, and was, obviously, spectacularly wrong. Again, no one predicted anything like a 12-point win in Nevada, not even in the last few days of the campaign. But just because no one else had a clue doesn't mean I shouldn't have.
One other note on Nevada. Hispanics went for Obama by a staggering 76-22. But they were only 15% of the vote (again all this is according to the exit polls). So these 15% of voters gave Obama about a 5-point statewide lead. Black voters made up 10% of the Nevada electorate (I'm surprised it was that high!) and went 94-5 for Obama, thus giving him 4.5 additional statewide points. White voters only went for McCain 53-45, which was a touch closer than in the rest of the country. In the US as a whole, white voters went for McCain by 55-43. That Nevada whites would be bluer than the rest of America tells us something about the GOP brand out west.
14) New Hampshire: 4 Electoral Votes, 2004: Blue + 4
My June prediction: Obama by 7 (thus red + 1)
Actual results: Obama by 9 (thus blue + 2)
I was correct that McCain competed there till the bitter end. I slightly underestimated just how badly tarnished the GOP brand was in New Hampshire, a state which got to know McCain better than any other state except Arizona.
Here are the non-swing state predictions I made.
A) California: 55 Electoral votes: 2004: Blue + approximately 14.
My June prediction: Obama by 15 (thus blue + 7)
Actual results: Obama by 24! (thus blue + 17!)
To miss by that much in a state so huge is embarrassing. Its a stunning monster landslide! Why was I so badly wrong?
Apprently a fair bit of the GOP base stayed home. Even that doesn't account for the huge margin by which I was wrong. I was predicting a 7-point change in the partisan hue, which was daring. Still....
B) Texas: 34 Electoral votes: 2004: red+ 20
My June prediction: McCain by 8 (red + 16)
Actual results: McCain by 11 (red + 18)
Plenty close enough. I'm declaring victory and moving on.
C) New York: 31 Electoral votes: 2004: Blue + 22.
My June prediction: Obama by 26 (thus blue + 18)
Actual results: Obama by 25! (thus blue + 18!)
Now THAT'S what I call knowing your home state! Predicting a big landslide in New York for Obama was child's play. That I hit the partisan hue exactly is satisfying.
D) Illinois: 21 Electoral votes: 2004 Blue + 14.
My June prediction: Obama by 30 (thus blue + 22)
Actual results: Obama by 25 (thus blue + 18)
A slight miss. I guess I overestimated the home-state effect. Put another way, there are always a certain percentage that just are NOT going to vote for you.
E) North Carolina: 15 electoral votes: 2004 red +9
My June prediction: McCain by 3 (thus red + 11)
Actual results: Obama by less than 1 (red +7)
Wow did I badly underestimate how much North Carolina had changed! In June, I advocated Obama going after North Carolina, but didn't think he'd get there. I guess I've been away from North Carolina since 1996, and don't really know it anymore. Still, do note that it was red + 7. Still a long way from being a national bellweather, unlike Virginia, which is at this instant in time the closest thing we have to a national bellweather. Sorry Missouri. No love for you, Ohio.
F) Georgia: 15 electoral votes: 2004 red + 14
My June Prediction: McCain by 6 (thus red + 14)Actual results: McCain by 5 (thus red + 12)
Not too shabby. Still, for Georgia to be red + that much means it is unlikely to go blue anytime soon, absent a big national landslide.
G) New Jersey: 15 electoral votes: 2004 blue + 9
My June prediction: Obama by 15 (thus blue +7)
Actual results: Obama by 15 (thus blue + 8)
New Jersey is right next door to my New York, and simply hasn't changed much in recent years. It wasn't too tough to predict, though of course getting the partisan hue within one point and change is satisfying. Not difficult, mind you, but still satisfying. I knew McCain wouldn't play for New Jersey, despite saying he would on more than one occasion. The McCain campaign may at times have been stupid; competing for New Jersey, requiring the expensive New York tv market, would have been suicidal. They weren't suicidal.
Wednesday, November 12, 2008
The Dow is very near its lows reached just after 9-11.
The Dow Jones closed today down 411 points to 8,282. As everyone surely knows, the markets have gone to hell in a handbasket recently, on the financial crisis, the recession already underway, and fears of a godawful nasty recession.
Adjusting for dividends and splits, the Dow Jones is now lower than the adjusted level it was at shortly after 9-11.
Let me run that again. In the 7+ years since the market reopened following 9-11, the Dow has basically treaded water. I thought we were told that up until recently the economic record was good, no?
In terms of stock market returns, Bush 43's record is godawful.
The Dow, adjusted for reinvested dividends and splits, is slightly more than 20% lower than it was on Bush's inauguration day, and is only the tiniest little bit above the adjusted level immediately after it plummeted following 9-11.
Although not unprecedented, this is quite the lousy stock market performance. I remember the days when conservatives used to say that the market made a fine unbiased and merciless judge of our nation's economic policies. By that token, Bush would receive a D, and Clinton an A+. I await the first prominent conservative making that (perfectly logical) argument).
Now of course, some of my GOP oriented critics will say that 9-11 wasn't Bush's fault and the huge financial meltdown wasn't entirely his fault. Let's leave 9-11 blame for another day (I don't really blame Bush, but his people did squat beforehand). The financial crisis, on the other hand, occurred at the tag end of 8 years of GOP White House control, with the congress under GOP control for the bulk of that time and in the control of unusually cowardly democrats for the remainder. Bush got most of what he wanted on the tax, budget and regulatory front. And the results are, well, not splendid. Greenspan was a bipartisan affair, but the regulators were all GOP, all the time. Congress mostly. And we had, failure, men and women, failure. Under Clinton the dollar soared (I can remember Rockefeller Republicans talking a ton about preserving the store of value in the currency). Under Bush not so much.
When Bush took office, the dollar was at .93 dollars to the Euro (the Euro was slightly stronger than the dollar). This was basically unchanged just after 9-11, at about .92 dollars to the Euro.
The dollar closed yesterday at 1.25 dollars to the Euro. The dollar has rallied significantly since the financial crisis began, as it has hit Europe quite hard as well. Though it is powerfully interesting that the dollar RALLIED as the US-centered financial crisis exploded.
Anyway, after 2 terms, the dollar has tanked under Bush and GOP Congressional leadership.
And no wonder. Big and now MASSIVE budget deficits, big trade deficits, diminished private savings, and presto, you have a dollar rout. The wonder is that it isn't worse, and if Obama and the donkeys in Congress don't hop to it, it could get a ton worse.
The Dow Jones closed today down 411 points to 8,282. As everyone surely knows, the markets have gone to hell in a handbasket recently, on the financial crisis, the recession already underway, and fears of a godawful nasty recession.
Adjusting for dividends and splits, the Dow Jones is now lower than the adjusted level it was at shortly after 9-11.
Let me run that again. In the 7+ years since the market reopened following 9-11, the Dow has basically treaded water. I thought we were told that up until recently the economic record was good, no?
In terms of stock market returns, Bush 43's record is godawful.
The Dow, adjusted for reinvested dividends and splits, is slightly more than 20% lower than it was on Bush's inauguration day, and is only the tiniest little bit above the adjusted level immediately after it plummeted following 9-11.
Although not unprecedented, this is quite the lousy stock market performance. I remember the days when conservatives used to say that the market made a fine unbiased and merciless judge of our nation's economic policies. By that token, Bush would receive a D, and Clinton an A+. I await the first prominent conservative making that (perfectly logical) argument).
Now of course, some of my GOP oriented critics will say that 9-11 wasn't Bush's fault and the huge financial meltdown wasn't entirely his fault. Let's leave 9-11 blame for another day (I don't really blame Bush, but his people did squat beforehand). The financial crisis, on the other hand, occurred at the tag end of 8 years of GOP White House control, with the congress under GOP control for the bulk of that time and in the control of unusually cowardly democrats for the remainder. Bush got most of what he wanted on the tax, budget and regulatory front. And the results are, well, not splendid. Greenspan was a bipartisan affair, but the regulators were all GOP, all the time. Congress mostly. And we had, failure, men and women, failure. Under Clinton the dollar soared (I can remember Rockefeller Republicans talking a ton about preserving the store of value in the currency). Under Bush not so much.
When Bush took office, the dollar was at .93 dollars to the Euro (the Euro was slightly stronger than the dollar). This was basically unchanged just after 9-11, at about .92 dollars to the Euro.
The dollar closed yesterday at 1.25 dollars to the Euro. The dollar has rallied significantly since the financial crisis began, as it has hit Europe quite hard as well. Though it is powerfully interesting that the dollar RALLIED as the US-centered financial crisis exploded.
Anyway, after 2 terms, the dollar has tanked under Bush and GOP Congressional leadership.
And no wonder. Big and now MASSIVE budget deficits, big trade deficits, diminished private savings, and presto, you have a dollar rout. The wonder is that it isn't worse, and if Obama and the donkeys in Congress don't hop to it, it could get a ton worse.
GM: Thomas Friedman is precisely correct
Well I've been meaning to blog on exactly what the terms of any GM bailout oughta be. And I had an outline in my head. Then Thomas Friedman wrote exactly what I was going to say (seriously) but wrote it better. And he added in the fine idea of having Steve Jobs go run GM, which is in fact a spectacular idea, which I hadn't thought of. So I link to his column, which I would encourage you to read. I simply have nothing to add.
http://www.nytimes.com/2008/11/12/opinion/12friedman.html?_r=1&ref=opinion&oref=slogin
Well I've been meaning to blog on exactly what the terms of any GM bailout oughta be. And I had an outline in my head. Then Thomas Friedman wrote exactly what I was going to say (seriously) but wrote it better. And he added in the fine idea of having Steve Jobs go run GM, which is in fact a spectacular idea, which I hadn't thought of. So I link to his column, which I would encourage you to read. I simply have nothing to add.
http://www.nytimes.com/2008/11/12/opinion/12friedman.html?_r=1&ref=opinion&oref=slogin
Tuesday, November 11, 2008
Seriously stubborn democrats
Several news reports have stated that Bush offered some movement on the stimulus package that the democrats wanted in exchange for help in passing a free trade agreement with Colombia. Even more interestingly, there was talk of Bush asking the UAW for help on the same free trade agreement in exchange for more federal assistance to the automakers.
The democrats in congress have been noncommittal.
Incredibly, the UAW publicly rejected any such help on a free trade agreement in exchange for aid to the automakers.
http://money.cnn.com/news/newsfeeds/articles/djf500/200811111153DOWJONESDJONLINE000413_FORTUNE5.htm
The UAW spokesman said, "Colombia had the worst record in terms of murdering trade unionists and the violence has been continuing. . . . . We don't think we should be doing free-trade deals with countries that are murdering people because they're engaged in union activity."
I find it extremely hard to believe that principle is motivating the UAW. I'd like to see a poll of UAW members on this one. Gee, let's see. Government help to my employer in exchange for an insignificant free trade agreement. Not rocket science to a line worker in Michigan, is it?
The UAW has a goodly share of the blame for the looming bankruptcy facing GM, and probably Ford. They blithely negotiated salary and benefits far in excess of market rates. Now a union's job is to get the best deal for its members that it can, so my anger is not unlimited, but despite huge job losses since 1980, the UAW still seems to think that GM is the golden goose that will keep laying golden eggs. It has been more accommodating in recent years, but not nearly as accommodating as conditions would appear to require.
Of course, GM management has an unbroken record of terrible decision making and general overall idiocy since the mid 1970s. Whether it was tens of billions wasted on robots, agreeing to the insane union deals, fighting fuel standards rather than getting ahead of the problem (as the auto industry did with mandatory seat belts/air bags), keeping stodgy brands like Oldsmobile around far too long, underfunding its successful Saturn decision, and so on and so on and so on, GM management has thoroughly screwed up the company for decades. However, continuing to agree to very generous retiree benefits, and continuing to pay dividends in recent years, achieved a level of stupidity I didn't think even GM's management could manage.
GM's back is to the wall. It publicly announced it would go bankrupt next year without massive federal government assistance. I predict that such assistance will be forthcoming. I oppose such assistance, because this is not a liquidity crisis, wherein a big profitable company temporarily can't borrow any money and thus runs out of cash. Rather, this is a terribly troubled company with a thoroughly uncompetitive cost structure. In exchange for any aid, I would demand that the union contracts be torn up and renegotiated at a massively lesser cost. If the union strikes (a real possibility) I'd just shut down the company, and they'd get zip.
I find it highly unlikely that a newly sworn in President Obama would be anywhere remotely near this tough on a union. If he is, I'll be astounded, and my estimation of him will soar.
Several news reports have stated that Bush offered some movement on the stimulus package that the democrats wanted in exchange for help in passing a free trade agreement with Colombia. Even more interestingly, there was talk of Bush asking the UAW for help on the same free trade agreement in exchange for more federal assistance to the automakers.
The democrats in congress have been noncommittal.
Incredibly, the UAW publicly rejected any such help on a free trade agreement in exchange for aid to the automakers.
http://money.cnn.com/news/newsfeeds/articles/djf500/200811111153DOWJONESDJONLINE000413_FORTUNE5.htm
The UAW spokesman said, "Colombia had the worst record in terms of murdering trade unionists and the violence has been continuing. . . . . We don't think we should be doing free-trade deals with countries that are murdering people because they're engaged in union activity."
I find it extremely hard to believe that principle is motivating the UAW. I'd like to see a poll of UAW members on this one. Gee, let's see. Government help to my employer in exchange for an insignificant free trade agreement. Not rocket science to a line worker in Michigan, is it?
The UAW has a goodly share of the blame for the looming bankruptcy facing GM, and probably Ford. They blithely negotiated salary and benefits far in excess of market rates. Now a union's job is to get the best deal for its members that it can, so my anger is not unlimited, but despite huge job losses since 1980, the UAW still seems to think that GM is the golden goose that will keep laying golden eggs. It has been more accommodating in recent years, but not nearly as accommodating as conditions would appear to require.
Of course, GM management has an unbroken record of terrible decision making and general overall idiocy since the mid 1970s. Whether it was tens of billions wasted on robots, agreeing to the insane union deals, fighting fuel standards rather than getting ahead of the problem (as the auto industry did with mandatory seat belts/air bags), keeping stodgy brands like Oldsmobile around far too long, underfunding its successful Saturn decision, and so on and so on and so on, GM management has thoroughly screwed up the company for decades. However, continuing to agree to very generous retiree benefits, and continuing to pay dividends in recent years, achieved a level of stupidity I didn't think even GM's management could manage.
GM's back is to the wall. It publicly announced it would go bankrupt next year without massive federal government assistance. I predict that such assistance will be forthcoming. I oppose such assistance, because this is not a liquidity crisis, wherein a big profitable company temporarily can't borrow any money and thus runs out of cash. Rather, this is a terribly troubled company with a thoroughly uncompetitive cost structure. In exchange for any aid, I would demand that the union contracts be torn up and renegotiated at a massively lesser cost. If the union strikes (a real possibility) I'd just shut down the company, and they'd get zip.
I find it highly unlikely that a newly sworn in President Obama would be anywhere remotely near this tough on a union. If he is, I'll be astounded, and my estimation of him will soar.
Sunday, November 09, 2008
American-European relations
I've been thinking. President Obama will present an interesting and perhaps pleasant problem for Europe. From 2004-2006 Bush was the President Europeans (and their governments) loved to hate. Since 2007 there has been a charm offensive, meaning the administration has tried to be nicer. This has worked somewhat with the European GOVERNMENTS, but the people of Europe not so much. They are as anxious to see Bush go away and never come back as those Americans fortunate enough to live in blue states.
Fast forward to February 2009. President Obama is on a conference call with Angela Merkel, Prime Minister of Germany, Nicolas Sarkozy, the President of France, Gordon Brown, the British Prime Minister (who has severe political problems himself) and says, "ok boys and girls. We were stupid as all hell and very nasty to you to boot. We screwed up Iraq every which way but loose. We said do it our way or else, and you all said, "we won't." Well, Bush is back in Texas and you'll never see him again. You can pinch yourself, the nightmare is over. I just got elected easily. Now I'm asking you for more police and help in Iraq, and more TROOPS in Afghanistan. I know that more troops fighting in Afghanistan isn't popular in Europe. But its the right thing to do, so how about it? Yes, Sarkozy, that means troops ready to fight and die, not just look pretty. I just got through lecturing the Canadian Prime Minister about that, please don't make me repeat it. This is a good fight, a war that had to be fought, and now should be won for the people of Afghanistan. You too Gordon. Get your nose out of your own newspapers for a minute. You too Angela. 1945 was a long time ago. We're over it. Your turn.
Oh, and by the way Merkel and Sarkozy, I'm not finished with you. Bush was right about Iran. Just because he said it doesn't mean it wasn't true. We can't let those nutjobs get nuclear weapons. Remember, Paris is in range and all. Moscow and Beijing aren't going to pull our chestnuts out of the fire on this one. But if you three threaten hard sanctions on behalf of the EU unless Iran gets out of the nuclear business, and then follows through, that will get Iran's attention. No one wants another war in the middle east, but we really need to make sure the Iranian government doesn't get nuclear weapons. So how about it? Can you get past all of the anger and pain caused by Bush? I know its only been a few weeks, but how about you all get over it. I'm the American President, and I'm saying, America needs you. The world needs you. Please help us make the world safer and a better place. We'll work with you on global warming, now that the global warming deniers (the Republicans) are gone. What are your other priorities? We'll work with you. Want to see us squeeze the government in Sudan harder? Works for me. Can the 4 of us work together to strengthen the still critical European-American alliance? Or are all your words about how wonderful it was that I am president and Bush is gone just words?
Don't worry, I'm a patient man. I'll give you all 48 hours to give me a full and complete answer. :-)
I've been thinking. President Obama will present an interesting and perhaps pleasant problem for Europe. From 2004-2006 Bush was the President Europeans (and their governments) loved to hate. Since 2007 there has been a charm offensive, meaning the administration has tried to be nicer. This has worked somewhat with the European GOVERNMENTS, but the people of Europe not so much. They are as anxious to see Bush go away and never come back as those Americans fortunate enough to live in blue states.
Fast forward to February 2009. President Obama is on a conference call with Angela Merkel, Prime Minister of Germany, Nicolas Sarkozy, the President of France, Gordon Brown, the British Prime Minister (who has severe political problems himself) and says, "ok boys and girls. We were stupid as all hell and very nasty to you to boot. We screwed up Iraq every which way but loose. We said do it our way or else, and you all said, "we won't." Well, Bush is back in Texas and you'll never see him again. You can pinch yourself, the nightmare is over. I just got elected easily. Now I'm asking you for more police and help in Iraq, and more TROOPS in Afghanistan. I know that more troops fighting in Afghanistan isn't popular in Europe. But its the right thing to do, so how about it? Yes, Sarkozy, that means troops ready to fight and die, not just look pretty. I just got through lecturing the Canadian Prime Minister about that, please don't make me repeat it. This is a good fight, a war that had to be fought, and now should be won for the people of Afghanistan. You too Gordon. Get your nose out of your own newspapers for a minute. You too Angela. 1945 was a long time ago. We're over it. Your turn.
Oh, and by the way Merkel and Sarkozy, I'm not finished with you. Bush was right about Iran. Just because he said it doesn't mean it wasn't true. We can't let those nutjobs get nuclear weapons. Remember, Paris is in range and all. Moscow and Beijing aren't going to pull our chestnuts out of the fire on this one. But if you three threaten hard sanctions on behalf of the EU unless Iran gets out of the nuclear business, and then follows through, that will get Iran's attention. No one wants another war in the middle east, but we really need to make sure the Iranian government doesn't get nuclear weapons. So how about it? Can you get past all of the anger and pain caused by Bush? I know its only been a few weeks, but how about you all get over it. I'm the American President, and I'm saying, America needs you. The world needs you. Please help us make the world safer and a better place. We'll work with you on global warming, now that the global warming deniers (the Republicans) are gone. What are your other priorities? We'll work with you. Want to see us squeeze the government in Sudan harder? Works for me. Can the 4 of us work together to strengthen the still critical European-American alliance? Or are all your words about how wonderful it was that I am president and Bush is gone just words?
Don't worry, I'm a patient man. I'll give you all 48 hours to give me a full and complete answer. :-)
Friday, November 07, 2008
New stimulus packages, take II
As loyal readers know, I've been advocating big stimulus packages for almost a year now. And I sure as heck haven't changed my mind.
The (un)employment report, released today confirms what was already very obvious. We are in a deep recession. I suspect that it will end by around May, possibly earlier. There is already a good bit of stimulus in the pipeline. The shape and strength of the recovery, however, is yet to be seen. I am looking for stimulus packages not to end the recession, because I think it will end on its own fairly soon, but to ensure a more vigorous recovery than the last two we have had. Following both the 1991 and 2001 recessions, we had unusually slow and weak recoveries, both properly derided as jobless recoveries. Businesses order books started expanding, but they made do with the same number of workers they had, and didn't hire any new ones for quite a while, because they didn't have to. The best way to deal with that isn't big new tax breaks for new employees, as Obama proposed; all that does is make an otherwise unprofitable new hire profitable, a lousy economic policy (if not too too harmful of one). Much better is to give a quicker/sharper increase to the order books of business. And government knows precisely how to do that. Spend, spend, spend. NOT tax cuts-- these are too often saved in bad times. But government SPENDING.
Oh, one other not so minor thing. GM announced today that it would likely run out of cash early next year.
http://money.cnn.com/2008/11/07/news/companies/gm/index.htm?postversion=2008110714
Although not really a surprise, this is a disaster for the Michigan/Ohio area, and a real problem for the nation as a whole. GM and Ford are both burdened with awful labor contracts, which require wages well above what the competitive market would bear, and, worse, generous benefit packages for retirees. Since both companies have massively downsized in recent years, they both have a high number of retirees for each current worker. So the benefit payments, for pension and especially health care, are crippling the companies. Causing both to face bankruptcy early next year absent major federal help. That the lack of a national health care system that makes any sense would cause GM and Ford to go to the wall is ironic. I've been saying, since literally 1989, that they would be the biggest beneficiaries of a national health care system. They got there, but only in recent years. Management of both companies is godawful. This shouldn't be news.
Anyway, here are my stimulus plans.
Speaker Pelosi said after the election that she is hoping for Congress in an upcoming lame duck session (that is, the old Congress, not the newly elected congress) can come back and pass a stimulus package (which would have to be signed by Bush, not Obama).
http://www.sunjournal.com/story/290501-3/Business/Pelosi_weighs_stimulus_package/
The GOP apparently is dead set against any big spending package. This must must must be done, at all costs, jammed down their throats if necessary. The democrats should make the GOP actually filibuster, that is force them to actually do speeches, for weeks on end. Imagine the spectacle of the GOP inveighing against government spending and increased unemployment benefits at a time of a deep recession.
The article above spoke of possibly a $100 billion package in the lame duck session followed by a bigger one after Obama is sworn in. That works for me.
Barrack, Nancy, Harry: Here's what you should do.
1) Take what you can get from the lame duck congress. Spend as much as you can, get as much increased unemployment insurance benefits as you can. Few if any tax cuts, and only to the middle class.
2) When Obama takes office, mission number one is a massive stimulus package, heavy on infrastructure spending. My target is $400 billion over two years. A monster package. I would be willing to go up on that figure if it would help it pass. It simply has to be absolutely massive to do any real good.
The US infrastructure has been falling apart for years, much of the money would be well spent. Subways in New York City. Highways/bridges where they are needed. Road/bridge repairs. Port upgrades. Rail upgrades. Spend, spend, spend, all over the land. Don't sweat the inevitable waste. Minimize it, but don't sweat it. All these new construction and other workers will need new clothes, shoes, equipment, etc. Its the best way to quickly increase demand in the economy, which is just what the doctor ordered right about now. This recession will probably get a little worse before it gets better. Massive government spending may not be able to prevent that, but it can sure as heck make a recovery much more vigorous. Any inflationary risks are acceptable, to say the least, in an economy this bad with a still very weak financial system.
As loyal readers know, I've been advocating big stimulus packages for almost a year now. And I sure as heck haven't changed my mind.
The (un)employment report, released today confirms what was already very obvious. We are in a deep recession. I suspect that it will end by around May, possibly earlier. There is already a good bit of stimulus in the pipeline. The shape and strength of the recovery, however, is yet to be seen. I am looking for stimulus packages not to end the recession, because I think it will end on its own fairly soon, but to ensure a more vigorous recovery than the last two we have had. Following both the 1991 and 2001 recessions, we had unusually slow and weak recoveries, both properly derided as jobless recoveries. Businesses order books started expanding, but they made do with the same number of workers they had, and didn't hire any new ones for quite a while, because they didn't have to. The best way to deal with that isn't big new tax breaks for new employees, as Obama proposed; all that does is make an otherwise unprofitable new hire profitable, a lousy economic policy (if not too too harmful of one). Much better is to give a quicker/sharper increase to the order books of business. And government knows precisely how to do that. Spend, spend, spend. NOT tax cuts-- these are too often saved in bad times. But government SPENDING.
Oh, one other not so minor thing. GM announced today that it would likely run out of cash early next year.
http://money.cnn.com/2008/11/07/news/companies/gm/index.htm?postversion=2008110714
Although not really a surprise, this is a disaster for the Michigan/Ohio area, and a real problem for the nation as a whole. GM and Ford are both burdened with awful labor contracts, which require wages well above what the competitive market would bear, and, worse, generous benefit packages for retirees. Since both companies have massively downsized in recent years, they both have a high number of retirees for each current worker. So the benefit payments, for pension and especially health care, are crippling the companies. Causing both to face bankruptcy early next year absent major federal help. That the lack of a national health care system that makes any sense would cause GM and Ford to go to the wall is ironic. I've been saying, since literally 1989, that they would be the biggest beneficiaries of a national health care system. They got there, but only in recent years. Management of both companies is godawful. This shouldn't be news.
Anyway, here are my stimulus plans.
Speaker Pelosi said after the election that she is hoping for Congress in an upcoming lame duck session (that is, the old Congress, not the newly elected congress) can come back and pass a stimulus package (which would have to be signed by Bush, not Obama).
http://www.sunjournal.com/story/290501-3/Business/Pelosi_weighs_stimulus_package/
The GOP apparently is dead set against any big spending package. This must must must be done, at all costs, jammed down their throats if necessary. The democrats should make the GOP actually filibuster, that is force them to actually do speeches, for weeks on end. Imagine the spectacle of the GOP inveighing against government spending and increased unemployment benefits at a time of a deep recession.
The article above spoke of possibly a $100 billion package in the lame duck session followed by a bigger one after Obama is sworn in. That works for me.
Barrack, Nancy, Harry: Here's what you should do.
1) Take what you can get from the lame duck congress. Spend as much as you can, get as much increased unemployment insurance benefits as you can. Few if any tax cuts, and only to the middle class.
2) When Obama takes office, mission number one is a massive stimulus package, heavy on infrastructure spending. My target is $400 billion over two years. A monster package. I would be willing to go up on that figure if it would help it pass. It simply has to be absolutely massive to do any real good.
The US infrastructure has been falling apart for years, much of the money would be well spent. Subways in New York City. Highways/bridges where they are needed. Road/bridge repairs. Port upgrades. Rail upgrades. Spend, spend, spend, all over the land. Don't sweat the inevitable waste. Minimize it, but don't sweat it. All these new construction and other workers will need new clothes, shoes, equipment, etc. Its the best way to quickly increase demand in the economy, which is just what the doctor ordered right about now. This recession will probably get a little worse before it gets better. Massive government spending may not be able to prevent that, but it can sure as heck make a recovery much more vigorous. Any inflationary risks are acceptable, to say the least, in an economy this bad with a still very weak financial system.
Subscribe to:
Posts (Atom)
