Calculated Risk: Looking Forward: 2006 Top Economic Stories

Calculated Risk: Looking Forward: 2006 Top Economic Stories:

"Like most investors, I expect the Fed to raise the Fed Funds rate 25 bps at each of the next two meetings to 4.75% in March. . . .

"And like many observers, I expect the Fed to start lowering rates later next year as the economy slows. But here is the surprise, I think long rates will start to rise when the Fed starts cutting the Fed Funds rate.

This will be Bernanke's 'conundrum'! As the economy slows, this will reduce the trade deficit and also lower the amount of foreign dollars willing to invest in the US - the start of a possible vicious cycle."

I think Calculated Risk is particularly clear-eyed, in this respect. The transition from Greenspan to Bernanke will raise the anxieties of investors; crisis almost always follows the advent of a new Fed chairman. And, so, March 2006 will mark a moment of anxiety. When the Fed rate is pushed from 4.5% to 4.75% at that time, or not, it will make investors nervous. The Federal debt ceiling will have to be raised in February, and there will be a political stink about that, further raising anxiety. The Treasury will start issuing 30-year bonds again, for the first time in a decade (?); a hiccup in the 30-year issue will make everyone anxious. Other things might add to the maelstrom: bankruptcy at a major corporation, civil war heating up in Iraq, etc.

Politically, Bush's support has been resting up against the dam of Republican partisanship. If you are a Democrat or an independent, you've already come to grips with the fact that the President is an incompetent, corrupt moron; if you are a Republican, you've been hiding from this essential truth. That's the meaning of Bush's persistent ~40% approval ratings. 40%: that's the bedrock Republican "majority". A creeping suspicion that the President is not just an incompetent, corrupt moron, but a weak, incompetent, corrupt moron, is eroding that dam. I don't know that the dam will burst in March 2006, but I think March 2006 will indeed witness a turning point on the economy, and possibly a dramatic turning point, that people notice. An economy that is not even "good" for Republicans will be the beginning of the Perfect Storm.

Update: It is now 2008, and I am looking back. The crack-up in the economy did not come until late 2007, but it looks to be a doozy, and, indeed, the economy's crackup seems likely to finally drive Bush's 30% approval ratings into record territory.

TomPaine.com - Iraq: Game Over

TomPaine.com - Iraq: Game Over: "'I hate to say, 'Game over,'' says Wayne White, who led the State Department's intelligence effort on Iraq until last spring. 'But we've lost it.' "

The Reality-Based Community: Hubris and the republican order

The Reality-Based Community: Hubris and the republican order: "Any given individual, institution, or party can gain at least temporary advantage by exercising less self-restraint than its rivals. But that's a risky game to play, both for the system and for the entity that chooses to push its envelope. Since an un-self-restrained power center is a threat to the entire order, the other power centers will tend to gang up against the aggressor. That, of course, is the Madisonian formula: to 'let ambition check ambition.'



So a republican political culture has the tragic hubris-breeds-nemesis dynamic built in. As Richard Neustadt said of Nixon in what seemed to be the flush of his power, just after his re-election: 'He has no sense of limits. He will be destroyed.'



No Administration, not even Nixon's, has sailed closer to the wind than Bush II. That helps explain the reaction it is now facing: from the Fourth Circuit, from the FISA Court, from various parts of Capitol Hill, and even from some parts of the conservative media-intellectual complex. I make no prediction; events are inevitable only in retrospect. But I find Neustadt's words both comforting and energizing in the current darkness."

Congress Extends Patriot Act for One Month - Yahoo! News

Congress Extends Patriot Act for One Month - Yahoo! News: "Congress on Thursday approved a one-month extension of the Patriot Act"



I think the Republicans may have made a tactical error on this one. The Senate comes back on Jan 18 and the House on Jan 26. Chances are good that the Senate will come back and punt the ball back at the House, with another extension.



The chances are also good that the Patriot Act extension will combine with the FISA controversy and Alito into a three-ring circus, with additional fireworks from Iraq or Abramoff or Plame illuminating the night sky. By shortening the extension to, effectively only a few days, the controversy is guaranteed to be overheated.

Salon.com - Daou Report

The storm may come and go, but Bush may be forever



Salon.com - Daou Report: "The third button on the Daou Report's navigation bar links to the U.S. Constitution, a Constitution many Americans believe is on life support - if not already dead. The cause of its demise is the corrosive interplay between the Bush administration, a bevy of blind apologists, a politically apathetic public, a well-oiled rightwing message machine, lapdog reporters, and a disorganized opposition. The domestic spying case perfectly illuminates the workings of that system. And the unfolding of this story augurs poorly for those who expect it to yield different results from other administration scandals."



Peter Daou concludes his piece:

"t's a battle of attrition that Bush and his team have mastered. Short of a major Dem initiative to alter the cycle, to throw a wrench into the system, to go after the media institutionally, this cycle will continue for the foreseeable future."



Daou is right.

If the Democrats do not use the Storm to go after the Media institutionally, there will be no lasting impact. Too many liberals and moderates keep waiting for the press corps to begin acting like hunting dogs with smell of blood in their nostrils. Ain't goin' happen.



Our political system's foundation is the absolute need for money to advertise. The money is spent with the Media. The need for the money corrupts every politician, in the interests of the wealthy and, especially, large corporations. "It" not Bush is the heart of this corrupt, decaying system.

The Carpetbagger Report: "the president can do whatever he wants"

The Carpetbagger Report "The warrantless-search story is now in its fifth day and I keep waiting for the vaunted White House political machine to come up with a compelling defense that doesn't include, "the president can do whatever he wants." I've seen these guys spin some pretty ugly facts — Bush, after all, won a second term despite an indefensible record on pretty much everything — and I've assumed it's only a matter of time before this NSA surveillance program had a set of talking points Republicans can repeat with a straight face.



"Except it hasn't happened. The administration has tried offering a few justifications for their decisions, but to date, none of them make any sense."



I remember someone telling me a story about an analysis he had read, concerning the revolution, which overthrew the Shah of Iran. The core of the story was a moment when Iranians looked around at one another and realized that they all wanted the Shah to go; all of a sudden, safety in numbers took over from fear.



That's what is bubbling under the surface of this "scandal": it is not just that there are no talking points, it is that there are damn few dittoheads to repeat them. The discipline of the Republican Party is giving way at this one point. Like a dam, beginning to break.

The Blogging of the President: Bush's "credulability" is eroding

Stirling Newbery, truly a national treasure, notes that Bush's "credulability" is eroding. Yes, indeed, it is . . . it certainly is.



The Blogging of the President: "The domestic spying revelations are everywhere, and rightfully so. It is one step closer to the 'Gestapo Line', that invisible division between American's believing that Bush is dealing with an extraordinary crisis. and believing that there has been an unconstitutional usurpation of our liberties. But to convince them, it requires two important perceptions be established. The first is a long train of abuses and failures, which, added together, erode Bush's credulability in the eyes of the American public.



"The second is a single example which is so vivid that even the most dedicated of right wing apologists cannot get it out of their eyes. An example that stands starkly beyond the range of acceptability. At that point, we will have crossed the Gestapo Line, and suddenly comparisons to the the most wicked regimes of the past will no longer seem specious, hyperbolic or fatuous excess, but dark warnings.





"There are three parts to this reality, the first is the obvious: that there is a moral case, not merely for ending Bush's ability to damage America, her reputation and her people, but for branding his reign as one of illegal excess that is not to be repeated. The second, flowing from the first, is the political case for ending Bush's power and position. As more people realize that no President has been given more power and achieved fewer results, that his tenure in the White House has been the most corrupt since Warren G Harding's, that he has created a government which is vast, loose and out of control - the pressure to send a signal, to ourselves and to the world will grow. This political case includes the already visible signs of public support for impeachment - currently at 32%, nearly what it was for Clinton at the very height of the trial in the Senate.



"The final piece is, of course, a legal case, that is, a way to get from here to there. "



I think his analysis is basically correct, though his optimism about the prospect of a criminal investigation to bring Bush down is unjustified.



The Democrats will need to take control of at least one house of Congress, before a serious investigation becomes a live possibility. Maybe, even then, Bush will be able to tuff it out, having Alito on the Supreme Court to approve any outrage.



Seriously, though, what the country needs is the Capone "out" -- a "sin" that the conservatives nutjobs recognize as an unpardonable outrage and involves no political controversy. A bit of corruption or rank incompetence, which the American people find unforgiveable.

Daily Kos: Bush and the Will to Power

Daily Kos: Bush Vows to Continue Secret Eavesdropping: "There appears to be no acknowledgement whatsoever of concerns voiced by critics of the program. There is the feeling in the air about all this - and perhaps it's just me - that we are being forced to a constitutional crisis by a president who no longer believes he needs to wear a mask to court public opinion. This reeks of raw will and power."

If we had a political storm and it wasn't reported, did it happen?

The one thing worse than a political storm is not having a political storm when one is desperately needed.



The truth is, Bush has to be impeached. If Bush is allowed to get away with all that he has done, without being impeached and removed from office, the American Republic is pretty much finished.



Sirotablog: How the media "authorizes" the abuse of government power: "How the media 'authorizes' the abuse of government power"

Brad DeLong: Bad Trade Deficit News

Brad DeLong's Semi-Daily Journal: Bad Trade Deficit News: "This is a much bigger piece of news than one usually gets with a monthly release--and it's not good news. Each month the trade deficit gets bigger makes it more and more likely that we will have serious macroeconomic trouble when America's savings and investment flows start to come back into balance."



Economists tend to believe in a tendency toward general equilibrium, even when the data repeatedly show them something else. And, we common people tend to interpret the "trade deficit" as an indicator of some things, which it is not. In fact, the trade deficit is a mirror of the budget deficit. The underlying reality is that the U.S. is living high on the hog, courtesy of China, who is willing to sell us all manner of manufactured goods, cheap. Anyone, who has been to Wal-Mart or Ikea or J.C. Penney's knows just how cheap. The downside to this is that manufacturing in the U.S. has been made artificially unprofitable, and manufacturing employment and investment is declining rapidly.



Will there be a day of reckoning? That, of course, is what we fear/hope on the "Coming Perfect Storm" -- that the profligacy of our ways and its unwisdom is brought home to the American People in a dramatic event. Some of us know that President Torture is the Worst President Ever(tm), but the popularity of Bush is tied very much to the price of gas and what people see on Fox News and CNN. Trade deficits sometimes do end badly, especially for "small" countries like Argentina. For the U.S. -- not so likely. This is more of a boiling lobster kind of thing -- the increasing, relative poverty of the vast majority is a gradual trend, and the vast majority is not even aware that it is a result of deliberate political choices made by people the majority [foolishly] elected.



If a crisis were to occur, it would be most likely to be caused by a clumsy attempt to change course. Sadly, Bush will most likely never be called to account for impoverishing America, except by wonky historians, who, in turn, will be marginalized as leftists in the academy. If a crisis comes, it will be because a Democratic President attempts to return the country to fiscal sanity, and the attempt goes wrong. The American People, in their wisdom, would, of course, not blame Bush.

Time quotes the White House: "The Perfect Storm has receded . . ."

TIME.com: His Search For A New Groove -- Dec. 19, 2005 -- Page 2: "The perfect storm has receded. We have better news in Iraq, oil prices are down, and Katrina has kind of fallen off the radar screen in terms of public concern."



Storm over? Not a chance.



3 more years, suckers!

Presstitutes: Pre$$titutes Salivating Over Bush's 'Rising' Poll Numbers

Presstitutes: Pre$$titutes Salivating Over Bush's 'Rising' Poll Numbers: "look at the larger media landscape and you'll understand how Republicans keep winning elections and how a bumbling frat clown can be president despite a mountain of scandals and failed policies. First, there's the massive rightwing echo chamber (FOX, talk radio, a large think-tank-trained punditry, Drudge, etc.), unmatched by the left. Second, and more importantly, there's a flock of 'neutral' reporters (Russert, Mitchell, Woodward, Blitzer, Matthews, Schieffer, Fineman, and so on) who have mastered the art of insidiously pushing pro-Bush and anti-Democratic narratives. And last but not least, there are the many clueless Democrats who still haven't figured out that those mainstream narratives are sinking their party.



And all this against a backdrop of the right assailing the 'liberal media.'



The scary question is this: is there any hope of cleaning up this fetid environment? Is there some way of altering the dynamic, of changing the pro-Bush storyline? Not if the Democrats keep acting like the media issue is a sideshow..."

Iraq Strategy: What this means

My intuition about the game Bush is playing in Iraq is that it will blow up in his face. The Iraqi Army is not being properly trained or equipped, because Bush & Co. is not planning to withdraw. The American People intend to withdraw, however, so Bush is going to pretend to withdraw, hoping things get better.

Exactly how and why this "strategy" is so dangerous, I sense, without being able to articulate the details. John Robb can articulate the details, though, which is why what he says is scary. He does not focus his attention on the kabuki dance of the PNAC (Project for a New American Century) team in Washington, as I do. He's looking at counter-insurgency strategy in Iraq, including "Iraqization" or whatever they call the idea of sending the sectarian militias in to fight the civil war against the Sunni insurgency, nee former Iraqi Army.

What this means:
"The likely outcome will be that the US will have little real value (a decrease in violence) to show for its efforts over the next year. If we do it flawlessly (which is going to be very difficult given a thinking enemy), the controlled chaos may hold long enough for the US to get most of its troops out. Here's what it means:"

What it means, according to John Robb is imminent moral collapse, meltdown, and unexpected events triggering radical policy collapse.

Sounds the political storm of 2006 is going to make Katrina look like child's play.

Fixing the Game - New York Times

Egad! This is a N.Y. Times editorial. Brad DeLong would call this shrill.

Fixing the Game - New York Times: "Mr. Bush and his team don't understand that they merely hold the current majority in a system designed to bring periodic changes in the governing party and to protect the rights and values of the minority party. The idea that the winners should trash the system to make sure the democratic process ended with them was discredited back around the time of the Bolsheviks."



Some would say that the following is actually the most shocking thing about the N.Y. Times editorial: "The Washington Post's Dan Eggen reported last week . . . "



Yes, that's right. The editorial page of the N.Y. Times has been reduced by Bill Keller to drawing upon its rival's reporting, the paper of record having no actual reporting of its own.

Getting to Yes - Why Alito needs to talk to us about the war on terror. By Dahlia Lithwick

Bork's nomination caused a political storm, and for good reason. Bork helped his storm, by being a weird, loud-mouthed jerk. Unfortunately, Alito is a mild-mannered fascist, sort of like one of those mass-murderers next door, whom stunned neighbors always describe as "quiet".



Getting to Yes - Why Alito needs to talk to us about the war on terror. By Dahlia Lithwick: "My fear is that we are all snoozing through an elaborate plan to pack the court for the Bush administration's war on terror."

Blame Bush, before he blames You

Left blogistan continues to beat up on the war Democrats and the psuedo-liberal pundits, who gave Bush cover for his war in Iraq. I fear this campaign is, itself, an instance of bad judgement. It does not anticipate the Right-wing narrative -- in fact, it may enable the Right-wing "cut-and-run" narrative, by making Democrats critical to the decision to go to war, and by minimizing the importance of Bush's incompetence and corruption in making the Iraqi reconstruction an abject failure.

In my opinion, the opposition to Bush needs to emphasize the failure of the Iraqi reconstruction as THE critical factor in making Iraq unwinnable. The Democratic thesis should be: Bush made Iraq unwinnable by his corruption and incompetence, and the U.S. must withdraw because winning is no longer an option thanks to Bush and the Republican Right.

Criticizing the bad judgement of pundits is a distraction, which will end up enabling the "cut-and-run" narrative of the Right-wing, which will blame Democrats and Iraqis for the failure in Iraq, a failure, which ought to be entirely their own.

Unfortunately, many able Left bloggers continue to focus on the bad judgement of psuedo-liberal pundits and moderate Democrats, who went along with Bush. Atrios quotes Gary Sargent, who, in turn, is responding to Kevin Drum. All are engaging in this critique of the judgement of Democrats and non-Republican pundits on the decision to go to war. The critique is spot on, on its own terms; I would not call it pointless, since it has a very sharp point; but, it is ultimately going to be strategically misguided, dividing the Left, as the larger dialogue with the Right goes on its merry way.

Atrios quoting Gary Sargent: "The decision to support or oppose the Iraq war wasn't about doctrine. It was about judgment. Many of those who backed the war fell prey not to ideology, but to a massive judgment failure."

Here's the thing: the political problem of the moment is to assemble a stable political majority, who reject Bush and the Republican Right along with him. That means finding a position, which people with radically different temperments, ideologies and points of view can arrive at and agree upon; moreover, it means establishing as "givens" (axiomatic conventional wisdom) certain facts about the past, which will prevent a majority from coalescing around the opposite political pole.

The opposite political pole is obvious, even if its actual, material existence is a couple of years in the future. It is the view that "we lost Iraq" because the Democrats did not have the will to win, and forced the country to "cut and run". It is a variant of the age-old stab-in-the-back theory, which has served right-wing causes since the beginning of time.

Focusing on the role of Bush corruption and incompetence in "losing Iraq" serves a prophylactic purpose, with regard to the Democrats-made-us-do-it cut-and-run thesis.

"Democrats supported the war and then Democrats changed their minds, we cut and ran, and lost Iraq" is the narrative sequence, which the Republican Right will use. We absolutely need to push "Bush corruption and incompetence made Iraq unwinnable", because universal knowledge of Bush corruption and incompetence in Iraq, and its role in making Iraq a hopeless cause, innoculates against "cut-and-run".

I know that many people wish that we could innoculate, instead, against foolish arrogant adventurism, or even against war and aggression. Iraq will serve that purpose as well as it can for a generation, regardless of whether the poor judgement of pundits, press and war Democrats is sufficiently indicted, or not.

But, a lot of people are tempermentally unprepared to endorse the thesis that anything is impossible. It is practically un-American to embrace the idea that something, anything is so impossibly difficult, that it is better not tried, especially if that nearly impossible thing is something idealistic and heroic in scope. To buy into the idea that the Iraq project should not have been tried, a person has to be willing to overcome this deep, cultural committment to a mythic ideal of the impossible dream. We are not going to overcome that cultural committment, that ideological tenet of Americanism, in a majority. A thesis, which requires the embrace of Iraq-was-impossible-and-should-never-have-been-tried, however accurate and practical and sensible, is a non-starter with some people, because of their psychological committment to the idea that "nothing is impossible."

In the case of the Iraq war, it may be that it was a bad idea from the outset, and it may be a good thing, if the American historical memory absorbs the wisdom that some things are not worth gambling on. Caution may need to be re-transplanted into the American character, and certainly into American foreign policy. But, whether Iraq was a bad gamble from the outset, it was made a failure with certainty by the conduct of the Bush Administration. Corruption and incompetence made failure in Iraq inevitable, even if failure was not inevitable from the outset.

Ultimately, it was right-wing Republicans, who made this war, and made it unwinnable. Better to attack them. They are the enemy. Democrats with poor judgement are, sadly or not, among the good guys.

Deja Vu: Propaganda 101 -- Stoking the Hysteria

Arthur Silber sights additional storm clouds on the horizon:



Once Upon a Time...: Deja Vu: Propaganda 101 -- Stoking the Hysteria: "when recourse to another foreign policy 'crisis' may be the only life raft Bush will be able to find, a 'limited' nuclear war may be the 'solution' to his problems Bush finally decides to utilize."



Now that Bush twisting slowly in the wind, are we in for a prolonged, simmering crisis of unpopularity? Or, something more dramatic.



But, Silber brings up another, more lurid possibility. All rewarding behavior is potentially addictive. Bush's biggest thrill in life was becoming a popular, war-time President. Could he go for a repeat? Is a confrontation with Syria or Iran on the agenda?



There have been reports of talks with the Israelis about overthrowing the government of Syria. And, now rumblings about Iran?



I doubt that either project will ever come off, but serious moves in either direction are likely to raise a renewed firestorm over the Iraq War policy.

The Washington Monthly

Corruption and incompetence rule the day, but night is coming.



The Washington Monthly: "SUNDAY'S NEWS....Today, the Washington Post revisits the story of Khaled Masri, a German citizen who was arrested, beaten, and imprisoned by the CIA for five months because his name was similar to that of an actual terrorist. Turns out he's just an ordinary schmoe.



Meanwhile, the New York Times tells us that security at Bagram Air Base in Afghanistan is so bad that genuinely dangerous al-Qaeda members held there can pick the locks on their cells and sneak out through the fence.



Finally, the Los Angeles Times confirms last week's Telegraph story that private contractors are shooting 'scores' of Iraqis just for the hell of it and pretty much doing it with impunity."