Last Call

I'm hoping Marc Ambinder is smoking something, because I really have a problem believing that the state of Ohio is lost to the Dems the way Michigan was to the Republicans in 2008.

With the past few days given over to Democratic triumphalism, the reality is that the big picture remains roughly the same for Democrats. In Ohio, it's getting so bad for Democrats that the Democratic Governors Association, the Democratic Congressional Campaign Committee, and the Democratic Senatorial Campaign Committee are actively weighing their level of commitment. 

Public and private polling from the state suggests that Democrats will lose the governor's mansion, currently held by Ted Strickland, the Senate race (for an open seat that was held by a Republican), and at least four House races (OH 01, OH 15, OH 13, OH 16). Strickland's troubles have surprised some Democrats, since he's seemed to defy gravity for much of the year.

If Ambinder's right, then pulling out of the state will probably cost the Dems at least two more additional House races on top of those 4, especially OH 6 and OH 18 on the east side of the state.  It's hard to imagine, but the loss of six House seats for the Dems in Ohio alone would indicate the kind of complete tsunami election that the GOP fantasizes about daily.  It's one thing to see Steve Dreihaus go down here in Cincy, but losing six seats to the GOP at this point would leave only 4 Democrats, and if Ohio loses two congressional districts due to the Census, two of those four Democrats would be wiped out.

Pulling out of Ohio would be devastating news to Democrats in the rest of the country.  I don't see it happening.  Doing so would all but assure Ohio as a red state.

Possibly The Most Awesomely Wrong Piece Of Glibertarian Drivel Ever

CNBC's John Carney should win some sort of award for this column, and the award should involve a truckload of manure and a college economics textbook, as he declares a week after the fatal suburban gas pipeline explosion in San Bruno, California that there's no good argument for more infrastructure spending.

He lists three reasons as to why not.  Individually any of the three of them would evoke instant facepalm, but taken together they achieve some sort of resonant synthesis that creates a larger, more contextually rich epic failburger.  To whit, Reason The First:  Opportunity Costs.

The opportunity costs of using unemployed labor are not zero. The years spent building government roads and bridges are years in which the laborers are not learning marketable skills or moving to areas with better employment prospects. That is a serious opportunity cost.

One of the reasons unemployment has been so persistent is that the housing boom misdirected so many people into the construction industry, where they spent years acquiring skills the economy did not really need. Continuing this cycle of malinvestment of human capital is unfair to the workers and economically stupid. 

It is better to be unemployed than to be in construction, because if you are working in construction, you aren't in business school or learning a useful trade like "CNBC Talking Head".  In other words, since infrastructure involves teaching people how to build things, we're actually erasing more valuable information from the parts of their brains that hold other more useful skills like "collecting unemployment checks".

Reason The Second:  China.

In the first place, China is involved in its early stage build out of its national infrastructure. Of course this is far more costly than the maintenance costs faced by the U.S. What’s more, China’s infrastructure program has all the markings of a make-work program—building roads and entire cities to nowhere in order to mask serious underlying problems with its economy.

Well, there are 1.3 billion of them or whatever.  They need to do something with all that manpower.  Perish the thought that we could ever use a make-work program facing nearly 10% unemployment.  Unlike China, our economic problems are happily unmasked for the world to see.

Reason The Third is my favorite.  Who needs infrastructure, anyway?

This is probably the most common argument for infrastructure spending. The flaw in the argument is that it assumes that it is rational to maintain 100% of our current infrastructure.

Let’s assume that Frank is correct that 25% of our bridges are obsolete or structurally deficient. This indicates that the bridges should either be closed or repaired soon. The question of whether they should be closed or repaired, however, cannot really be answered because of the government’s involvement in these projects. 

A private firm would make entrepreneurial guesses about whether further investment would earn a high enough return to be justified. 

You know, government needs to be more like a private firm questioning the amount of safety and infrastructure investments along the line of say, BP or Pacific Gas & Electric.  If only government had the goal of profit motive like a private company instead of being concerned about the safety of American citizens like some useless government appendage, why we'd save a bundle of money on infrastructure costs!

Amazing stuff, folks.  Here's a guy actually questioning why the government's chief concern about infrastructure isn't profit motive.  Awesome. awesome stuff.

I can't wait until these guys are in charge of the infrastructure where you live.

Gold Rush, Part 12

Gold hit a new high today and keeps on going.

Gold swept to a record high above $1,275 per ounce on Thursday, as currency market jitters and broader economic uncertainty attracted more investors to the metal's safe-haven credentials.

Strong investment demand pushed spot silver, often seen as a cheap proxy for gold, to $20.75 an ounce -- its highest level since March 2008.

Spot gold was bid at $1,273.75 a troy ounce at 1450 GMT (10:50 a.m. EDT), compared with $1,265.65 an ounce at the close on Wednesday.

Earlier on Thursday it hit a record $1,277.70 an ounce. U.S. December gold futures also rose to a historic high.

"It's an insurance policy at the end of the day," said Robin Bhar, analyst at Credit Agricole. "All the ingredients are still there -- all the uncertainty and fear -- to keep gold underpinned."

You could have done a lot worse betting on gold after 9/11 back when it was $300 an ounce, you know.  A whole lot of people are thinking commodoties are a good place to be right now (but not oil).  Gold up, housing markets down, stocks fluctuating all over the place...look familiar?

It should.  We were here two years ago.

(No) Class Warriors

Double G argues that the populist middle-class impotent rage that Republicans are cynically manipulating into the Tea Party silliness is the root cause of the anti-incumbent wave against the Democrats this year, and he actually has an excellent point.  The Tea Party itself may be a toxic swamp of racism, hatred, scapegoating and fearmongering...but the seed of frustration that gave birth to it cannot be ignored.

It's hard to avoid the conclusion, at least for me, that, claims to the contrary notwithstanding, much of the discomfort and disgust triggered by these Tea Party candidates has little to do with their ideology.  After all, are most of them radically different than the right-wing extremists Karl Rove has spent his career promoting and exploiting?  Hardly.  Much of the patronizing derision and scorn heaped on people like Christine O'Donnell have very little to do with their substantive views -- since when did right-wing extremism place one beyond the pale? -- and much more to do with the fact they're so . . . unruly and unwashed.  To members of the establishment and the ruling class (like Rove), these are the kinds of people -- who struggle with tuition bills and have their homes foreclosed -- who belong in Walmarts, community colleges, low-paying jobs, and voting booths on command, not in the august United States Senate. 

You want to know why it's so unusual for a U.S. Senate candidate to have what Rove scorned as "the checkered background" of O'Donnell, by which he means a series of financial troubles?  In his interview with me earlier this week, Sen. Russ Feingold said exactly why.  It's not because those financial difficulties are rare among Americans.  This is why:

It's not a new thing; it's been going on for a couple of decades. If you look even in the Senate, I'm one of the very few people in there who doesn't have a net worth over a million dollars; my net worth is under half a million dollars, after all these years.

And as poor as Russ Feingold is relative to his colleagues in the Senate, he's still a Harvard Law School graduate who owns his own home and has earned in excess of $100,000 as a U.S. Senator for the last 18 years.  People with unpaid Farleigh Dickinson tuition bills and home foreclosures just aren't in the U.S. Senate.  And there are a lot of people -- those who see nothing wrong with the U.S. Senate as a millionaire's club and entitlement of dynastic succession -- who want to keep it that way. 

Americans aren't stupid.  They know the middle class is vanishing and has been for 30 years now.  It has become acute in the last ten.  They see politicians who have been in Congress for those 30 years or more, and they see that those in Congress have reigned over the largest transfer of wealth in human history from the American working class to the super-elite.

Greenwald's real argument is that with the deaths of Senators Byrd and Kennedy, the Democrats have surrendered the mantle of the party of the working class.  He has a point.  Many folks are starting to believe it.  They are getting behind Sarah Palin and Christine O'Donnell and Sharron Angle simple because they are not CEOs.

But where that breaks down is in Tea Party candidates like Carl Paladino in NY and Rick Scott in Florida, multi-millionaire businessmen who make no effort to hide their complete and utter contempt for the working class.  If it's really "screw it, the economy sucks and we need to throw everyone out" then the Democrats need to start going after folks like Paladino and Scott for their ideology.

Greenwald is right however that picking on Tea Party candidates for being average folks with average jobs is only going to harden the country against the Democrats.

You And Me And Poverty

As widely expected in this economy, the poverty numbers have made a significant jump in 2009.

The poverty rate jumped to 14.3 percent in 2009, up from 13.2 percent a year earlier and the highest rate since 1994, the Census Bureau said Thursday. Last year, a record 43.6 million people were in poverty, up from 39.8 million in 2008 — the third consecutive increase.

"The number of people in poverty in 2009 is the largest number in the 51 years for which poverty estimates have been published," the Census Bureau said.

I doubt 2010 will be any better.  Or 2011 or 2012 for that matter.  The American middle class is disappearing, and yet we're still arguing over wheter or not to extend tax cuts to the wealthiest among us at a time when taxes the rich are paying are at historic, generational lows.

The good news is the all the bickering by the GOP over the Bush tax cuts is finally, finally beginning to trigger a response from the American people.

If the Republicans win control of Congress in November do you think they will try to return to the economic policies of George W. Bush or won't they try to return to the policies of George W. Bush?

Return to policies of George W. Bush 47

Won't return to George W. Bush policies 36

 There's a reason why Republicans want to bury the Bush tax cuts discussion.  Well, the smarter Republicans anyway.  Orange Julius signaled this over the weekend, but Mitch McConnell cut him off at the knees.  Republicans keep talking about extending the Bush tax cuts, and the public is finally getting the message that the GOP wants to go back to Bush's economic policies.

The Dems need to pounce on this for the next six weeks.

Right Turn Ahead

Digby takes a look at the Ed Kilgore notion that Tea Party wins in the general will cement the crazy for the foreseeable future.

But because of the way the Democrats inevitably react to these hard right turns, the political center of gravity will be moved right once again. Indeed, I believe that one of the conservative movement's greatest strengths is its consistent ability to pull the country rightward even when they are out of power. I think this is because of their willingness to push the envelope and stick with it long enough for the public and the village to get used to it. They never stop pushing and over time, through wins and losses both, their agenda and their worldview is advanced.

You'd have to argue then that the Republicans are never really out of power then, are they? Yes, Obama's accomplished a significant amount. But when only one in four actually trust the government to do the right thing, the Republicans have successfully argued that government being government is in and of itself bad for America.

But this time could actually be worse. In my view, the combination of economic stress, a fully operational grassroots and astroturf movement and a very efficient propaganda machine could bring about a severe lurch rather than a strong pull to the right. These aren't ordinary times. Without the Democrats exerting a steady counter balance, anything could happen.

What's worse is that a number of Democrats in the House and Senate are openly agreeing with the Republicans, and the counterbalance is being thrown under the bus. Republicans fear their base and operate in order to please it. Democrats despise theirs instead and operate in spite of it. As long as that remains true, there is no counterbalance, and there hasn't been for 30 years. All the thrashing the Republican base does only keeps moving things to the right.

Kilgore points out that the Democrats are playing a different game, appealing to moderation and successfully keeping its left flank under wraps. Under normal circumstances that might seem to be the smart move. But I wouldn't be so sanguine about that. In a time of crisis, when one of the parties in a two party system is a radical, destructive force whose main claim to power is that it will stop anything the majority wants to do (thus proving that government can't do anything)being a moderate, non-confrontational alternative may not be enough to fight them off.

And again, as long as the confrontational, activist alternative is drained of power consistently by the party, there is no alternative.

In any case, I agree with Kilgore that we are coming to the destination of the wingnuts' Long March. If they are able to throw off stalwart hit men like Karl Rove, it's hard to imagine they are going to be stopped by a bunch of squishy Democrats trying hard to split the difference. But it looks like we're going to find out.

I'm personally hoping that America is going to snap out of it, realize what having these nutjobs in charge really means, and that they'll vote for the Dems...but that only works if the Dems offer a clear alternative to the Republicans. "We're not insane!" is not a platform when the other side is going to the mattresses (and lighting them on fire, and then loading the flaming mattresses into catapults and chucking them over the walls).

We're long past the time where the Dems need to show some spinal fortitude.

Well, She Lost The Lawful Neutral Vote

The similarities between Christine O'Donnell and George W. Bush are interesting.  Both are reformed, born-again college party kids who found religion after college...

But Christine O'Donnell didn't grow up in a strict religious household. For her, the turning point came in college.

While at Fairleigh Dickinson University, she told the Delaware News Journal in April 2004, she did things she now regrets. As the News Journal put it, those things were "drinking too much and having sex with guys with whom there wasn't a strong emotional connection."

She was a junior, she said in another profile published in 2006, when a friend "asked me if I knew how an abortion was performed ... She showed me the medical journals, and it was frightening."

...and both have this obnoxious binary world view.

"There's only truth and not truth," she said. "You're either very good or evil. I went back to my dorm and asked myself what I was."

O'Donnell decided then to drop her acting ambitions (she was a theater major). She became an evangelical Christian, a departure from her relatively lax Catholic upbringing. She joined the College Republicans and campaigned for the Bush-Quayle ticket. 

Look, it's one thing to reform your life and find religion.  We all deserve the chance to find our own answers to life's many questions.  What I object to is somebody using that as a basis for making laws that govern the other 310 million of us.  If she thinks that, fine.  If she's basing legislation on that, then there's a real problem.  Didn't eight years of Bush's binary world view teach us that?

If It's Thursday...

New jobless claims dropped a smidge to 450k, continuing claims revised upward last week (again) but dropped this week (again) to stay virtually unchanged at 4.49 million (again).

Only one more unemployment report before the election, September's numbers in October.  October's numbers won't be out until three days after the election, so if the numbers go up for October from 9.6%, the Dems will be in additional trouble.

The Warren Report

Elizabeth Warren will indeed be Obama's choice to run the Consumer Financial Protection Bureau...kinda-sorta.

Elizabeth Warren, who conceived of the Consumer Financial Protection Bureau, will oversee its establishment as an assistant to President Obama, an official briefed on the decision said Wednesday evening.

The decision, which Mr. Obama is to announce this week, would allow Ms. Warren, a Harvard law professor, to effectively run the new agency without having to go through a potentially contentious confirmation battle in the Senate. The creation of the bureau is a centerpiece of the Wall Street financial overhaul that Mr. Obama signed in July.

Ms. Warren will be named an assistant to the president, a designation that is held by senior White House staff members, including Rahm Emanuel, the chief of staff. She will also be a special adviser to the Treasury secretary, Timothy F. Geithner, and report jointly to Mr. Obama and Mr. Geithner. The financial regulation law delegated to the Treasury Department the powers of the bureau until a permanent director was appointed and confirmed by the Senate to a five-year term.

The decision does not preclude the possibility that Ms. Warren could eventually be named director, and at the least, she would play a pivotal role in deciding whom to appoint to the job, according to the official, who spoke on the condition of anonymity so as not to pre-empt the formal announcement. Several organizations, including ABC, reported the news of Ms. Warren’s impending appointment on Wednesday. 

All this stuff is of course to get around a guaranteed Republican roadblock of her nomination, the Republicans want to defund and repeal the CFPB almost as much as they do health care reform laws.  They don't want anyone in the government looking out for the financial consumer's interests.  They will indeed howl about this decision once it's official.

But Obama is getting things done.  Ol' Arthur Gilroy thinks the Serious Village Centrists are looking at folks like Christine O' Donnell and Carl Paladino as running the country and it's beginning to scare the hell out of the Village.  Karoli reminds us that Obama remains committed to making positive changes and improving the situation for Americans as a contrast while the wingers are busy holding ideological purity purges.

Next six weeks might get real interesting.  Could it be that the Tea Party threat is finally being noticed and taken seriously by the DC Dinner Party crowd?  They're not too fond of Obama's people, but can you imagine having to attend a Georgetown cocktail party with Rand Paul, Sharron Angle, and Christine O' Donnell and having to refer to all of them as "Senator"?

The shock of that is starting to penetrate even the Beltway Bubble, and suddenly the Village is looking a little shocked.  These guys might pull it off, and maybe through the common enemy theory, they may be looking to take on the Tea Party juggernaut.

Home, Home I'm Deranged, Part 11

The latest foreclosure numbers are grim indeed.

The foreclosure crisis has entered a new phase: The number of properties entering the foreclosure process has dropped, and now nearly matches the number of repossessions.

The number of homeowners falling enough behind on their loans to attract initial notices of default was down 30% in August, RealtyTrac said Thursday. Eventually, that should translate into fewer people losing their homes.

But lenders repossessed more than 95,000 homes -- a record -- and that was up from 76,000 a year ago.

RealtyTrac spokesman, Rick Sharga, said the initial default rate should be higher, given the numbers of borrowers who have missed one or two payments. Normally, when a third payment is missed, lenders take immediate action.

"It appears that lenders are allowing delinquencies to go on longer before they issue notices of default," he said. 

So default notices are down, but bank foreclosures are way, way up.   Banks are back to letting default notices slide again because actually foreclosing on the home locks it in as a loss for the bank.  Banks don't want foreclosed homes either...because they get stuck with an asset they can't sell, and its value loses money.

The slide in U.S. home prices may have another three years to go as sellers add as many as 12 million more properties to the market.


Shadow inventory -- the supply of homes in default or foreclosure that may be offered for sale -- is preventing prices from bottoming after a 28 percent plunge from 2006, according to analysts from Moody’s Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners.

“Whether it’s the sidelined, shadow or current inventory, the issue is there’s more supply than demand,” said Oliver Chang, a U.S. housing strategist with Morgan Stanley in San Francisco. “Once you reach a bottom, it will take three or four years for prices to begin to rise 1 or 2 percent a year.” 

The era of home equity powering the economy is dead and gone for good.  It will be decades before home prices are back where they were in 2005-2006, and they may never get there again.  Home prices at the end of this decade will be about where they are now, if not a bit less, and that will be after a long, slow climb in the second half of the Teens after we hit bottom in 2013-2014.  Frankly we may have another 15-20% drop in home prices to go, and that's going to put millions more homeowners underwater.

That of course means another lost decade as a best-case scenario, and a full-blown depression as the most likely.  You don't want to know the worst-case scenario, trust me (think Weimar Republic). Buckle in, folks.  The ratcheting downward of our standard of living is now baked into the system.

StupidiNews!

• Pope Benedict XVI travels to the UK for four days amid increasing controversy and criticism of the Catholic Church.
• In Cleveland, the FBI has arrested a Cuyahoga County commissioner on bribery charges as a result of a corruption sting.
• A coalition offensive near Kandahar in Afghanistan has met little resistance from Taliban forces.
• Treasury Secretary Tim Geithner says the US is now exploring ways to make China boost its currency to narrow the massive trade gap.
• A tech lobbying group says reducing software piracy could create half a million new jobs worldwide.