Zandar's Thought Of The Day

Democrats taking over national politics + Economy tanking at breathtaking speed = Wingnut bloggers out of work.

Nobody could have predicted, etcetera, etcetera.

In Which Zandar Answers Your Burning Questions

Via e-mail, Zandardad asks:

So far I am very unhappy with some of the specifics of the stimulus plan; and I think the Democrats in the Senate really need to open up the process to get at least some Republicans on board. What do you think?

Well, the answer is yes, especially in the Senate. Republicans will filibuster, and I honestly don't think Obama's going to get every single Democrat in the Senate on board either. Mathematically he has to get some Republicans on board. That's just fact.

Pops points out David Broder's Friday column as an example of this reality. For once, he has a couple of salient points.

Last week the $819 billion tax and spending bill passed the House with all but 11 Democrats supporting it and not a single Republican voting yes. The first important roll call of the Obama presidency looked as bitterly partisan as any of the Bush years.

It was not for lack of effort on the part of the new president. Obama went to the Capitol to visit Republican as well as Democratic lawmakers, and he encouraged the Democratic draftsmen to scrap a couple of egregiously irrelevant spending programs they had penciled into the bill.

On the other hand, Broder takes those points and uses them to blame Nancy and Harry. Obama indeed reached out in a good faith effort. For his troubles, the House GOP flipped him off in a completely partisan show of disrespect.

My problem is Broder's assumption that the Republicans should be ultimately controlling this legislation. Getting some Republicans on board is one thing. Surrendering the legislation to the GOP is another. Why should Obama and the Democrats bow and scrape to the GOP? The Republicans lost the election. The people rejected them having control of the country in an unequivocal and total fashion.

Let's recall who got us into this mess in the first place: The Republicans and their $3 trillion war, years of lack of executive branch oversight, and flat out greed.

The Republicans had their chance. They had their say. And still, Obama offered them an olive branch time and time again. Their ultimate answer was a total, unanimous rejection of the bill by every single Republican in the House.

Now they are complaining about not being involved in the process of legislation they wholly struck down, in the most petulant, whiny fashion possible. Broder, being the Village Idiot In Chief, is doing their whining for them.

Pop, the GOP wants the stimulus to fail. Period. Don't fall for this bipartisanship crap. You can recognize a user and an enabler when you see one.

Turning Into A Distinct Pattern

For a political party and a President that promised "Change you can believe in" there sure has been an awful lot of news stories about politically corrupt Democrats here in the last month. Granted, most of the stuff they've done is just plain stupid (and nothing in comparison to the rank illegality of Bush/Cheney mind you) but there's a pattern here, and after ten days of the Obama administration I'm already sick and tired of it.

The ongoing "pay-to-play" investigation into Bill Richardson and Blago's impeachment are the most serious. But there's still plenty of ethical questions involving Hillary Clinton's relationship to international donors to her husband's foundation, the increasingly bizarre Caroline Kennedy/David Paterson/Kirsten Gillibrand imbroglio, and the fact that Treasury Secretary Tim Geithner can't do his own taxes correctly.

And now another major problem rears its ugly head: HHS nominee Tom Daschle has his own tax problems.

After being defeated in his 2004 re-election campaign to the Senate, Daschle in 2005 became a consultant and chairman of the executive advisory board at InterMedia Advisors.

Based in New York City, InterMedia Advisors is a private equity firm founded in part by longtime Daschle friend and Democratic fundraiser Leo Hindery, the former president of the YES network (the New York Yankees' and New Jersey Devils' cable television channel).

That same year he began his professional relationship with InterMedia, Daschle began using the services of Hindery's car and driver.

The Cadillac and driver were never part of Daschle's official compensation package at InterMedia, but Mr. Daschle -- who as Senate majority leader enjoyed the use of a car and driver at taxpayer expense -- didn't declare their services on his income taxes, as tax laws require.

During the vetting process to become HHS secretary, Daschle corrected the tax violation, voluntarily paying $101,943 in back taxes plus interest, working with his accountant to amend his tax returns for 2005 through 2007.

(Daschle reimbursed the IRS $31,462 in taxes and interest for tax year 2005; $35,546 for 2006; and $34,935 for 2007, a Daschle spokesperson said, adding that Daschle had asked his accountant to look into the tax implications of the car and driver five months before Obama won the presidency.)

The Daschle spokesperson told ABC News that the senator, facing questions from the committee, has said "he deeply regretted his mistake. When he realized it was a mistake he corrected it rapidly."

Now we see why Geithner was confirmed. Daschle had the same problem.

Is it too much to ask for the Obama guys to find people who aren't doing stupid crap like this and putting them in critical positions? Our economy is all but done, our health care system is on life support, and we've got Obama putting in tax cheats to run his damn programs?

Is it truly that hard to find decent Democrats that don't have records that make them look like Bush-era nepotists and cronies? Is it truly that hard to find decent Democrats that don't have records that make them look like Bush-era nepotists and cronies? Honestly? We've had eight years of this shit and I'm altogether sick and tired of the same excuses, the same backslapping, the same bullshit from the last eight years.

No, I don't want the Republicans back in power. Yes, I do want competent and decent Democrats in the Cabinet because I know they exist, and Obama has managed to find a lot of them to his credit. But aren't we in enough trouble here as it is, Mr. President? Don't we need a clean slate here at a time where crap like this has gotten this country to the brink of economic disaster?

Maybe I'm holding Obama to a higher standard. But frankly after Bush/Cheney nearly destroyed this country, we all should be holding our entire government to a higher standard. Period.

OK, rant over. Resume Obama administration.

StupidiNews, Weekend Edition

• Iraqi provincial elections are underway at this hour.
• Protests continue to rock Europe as the global recession deepens.
• Bolivia's lithium deposits may be the key to the electric car movement...or the largest political headache.
• US stocks muddle through their worst January in history.
• A sweeping legal ruling involving World of Warcraft could completely redefine digital copyright law.

Epic Alternative Stimulus Package Fail

Over at his new digs at The Plum Line, Greg Sargent details the analysis of the GOP's vaunted "alternative stimulus package" full of tax cuts. Only one problem: in their usual style of total incompetence and shoddy workmanship, it turns out the GOP's tax cutting stimulus would in fact raise taxes on over twenty million Americans due to failure to account for the Alternative Minimum Tax (AMT) in their version of the bill.

This is a bit in the weeds. But here goes. According to Dems on the House Ways and Means Committee who have crunched the numbers, the GOP plan, which would reduce income taxes, would as a result shove millions over on to the Alternative Income Tax rate, which would be higher for them. Dem Ways and Means spokesperson Matthew Beck emails me this statement making the case:

In 2008, 4.2 million Americans had to pay the Alternative Minimum Tax (AMT). The Republican proposal would lower marginal tax rates for individuals, but would not reduce AMT rates. Current law requires you to pay the greater of the two rates, so many of those receiving this lower marginal rate would now be held liable for the AMT.

There is no question that Congress needs to — and will — act to prevent the number of taxpayers hit by the AMT from growing to an estimated 26 million this year. However, we confirmed with the non-partisan Joint Committee on Taxation that 26 million people would still be forced to pay the AMT this year under the GOP bill. Essentially, their tax bill would give with one hand and take away with the other, leaving 26 million families without the tax cut they promised in their bill.

Make of this argument what you will, but the fact is that this is going to be an official attack line coming from the DCCC, which is right now drawing up press releases to push this line in the districts of at least a dozen House members across the country who backed the GOP alternative. The hits accuse each member of voting “to raise taxes on 22 million hard working Americans.”

That's right...by lowering tax rates for Americans but NOT the AMT rate, the GOP bill would actually drop the tax rate under the trigger point where the AMT would kick in...and 22 million Americans (families making $70k-$150k or individuals making $46,500-$75,000) would actually end up paying MORE taxes under the AMT as a result. It's a silly oversight...but it's one that would be very costly to millions of Americans.

But what did you expect from the GOP? Actual competence?

EPIC. FAIL.

More Swinging And Missing

This is starting to get ridiculous. It was one thing when Obama was complaining about Wall Street bonuses, but now Sen. Claire McCaskill of Missouri wants to cap the pay of any Wall Street executive whose company is taking bailout cash. While that's a nice thought, when you turn around and hand the same company several trillion dollars, capping executive pay in comparison looks...well...how shall I put this?

Immensely stupid. Seriously. This is not helping, guys. The problem is not that Wall Street types are making lots of money. You want to make a difference, Claire? Pass a bill that says Congress gets to fire all top management for running the company badly enough to require trillions of dollars of our tax money to save them.

Jesus, but the Democrats look like morons. C'mon guys, you can do better. Obama hasn't made many mistakes so far, but even I can see the GOP play on this one. "Why are we capping CEO pay when liberals are handing the company trillions in the first place? What kind of quid pro quo shop is Obama running here?"

And for once, the GOP would be right. The problem is not excessive Wall Street pay. The problem is the bailout.

Shouting At The Wind

What Digby said.

As we watch this legislative sausage slowly crumble, I would hope that President Obama will take his economic agenda to the American people. (And it's not going to be enough for him to ask people who've had house parties in the past to get together and talk about the president's plan.) He's needs to speak to the country directly.

I can't find any news about an impending State of the Union address (aside from this Ambinder note from last November which speculated about doing one in early February) but I think he should schedule one or something like it. The country needs to be instructed about the logic and necessity of this stimulus plan because they clearly don't fully understand it. And because of that, the Republicans are making headway with their rhetoric of "fiscal responsibility," conflating stimulus with bailouts and the rest of their destructive obstructionism.

Get on the TV. Make the case for the stimulus. Because the rest of Congress is on TV daily making the case against it.

In Which Zandar Answers Your Burning Questions

Tim over at Balloon Juice asks:

I get why Obama would tap Republican Sen. Judd Gregg (NH) for Commerce. Democrats get a 60 vote majority in the Senate, Obama gets bipartisan cred and a vetted Commmerce nominee who seems like a reasonable guy. That’s fine, but why does Gregg want the job?

It does seem like a rather nifty coup. New Hampshire Governor John Lynch, a Democrat, would then appoint a Democrat to Judd Gregg's seat, giving the Dems 60 votes in the Senate (once Al Franken is seated). So why would Gregg basically cut the GOP's throat in the Senate like that?

Whatever the pluses (e.g., he escapes a radicalized caucus that hates and abuses moderates like him), Gregg can look forward to the kind of hate that only Jim Jeffords and a sick twelve year old kid can possibly understand.

Before Judd Gregg makes up his mind, I suggest that he sit down with Graeme Frost and talk about living as a magnet for hysterical rightwing hate.

I've said before that since the GOP insists on doubling down on its massive losses, GOP moderates will simply leave the party. Gregg's been given the perfect opportunity to do so. Why shoudn't he take it? As a moderate Republican Senator, they right wingers will already hate him.

It's the wrong question, however. The one you should be asking is "If Judd Gregg voted against the EFCA, Ledbetter, and SCHIP on multiple occasions and as recently as the last couple weeks in the case of SCHIP and Ledbetter, why is he even in the running for the position?"

Honestly, what the hell business does Gregg have being Commerce Secretary if he doesn't believe in something as simple as equal pay for women? (Which is now law of the land, by the way).

No Mister Bond Market, I Expect You To Die

Much has been made of the stock market tanking in the last 4 months, but much more attention needs to be paid to the bond market.

A disappointing 5-year Treasury note auction was a less obvious, but potentially more insidious, contributor to the market's malaise. The record $30 billion auction priced with a yield of 1.82% well above expectations and up from 1.54% at last month's five-year auction, Bloomberg reports.

Prices of Treasuries with maturities of two-years and longer fell sharply in reaction to the lackluster demand for the 5-year auction, which "may signal investors will have trouble absorbing the as-much-as $2.5 trillion in debt the U.S. is likely to issue this year to pay for a $1 trillion budget deficit and programs to spur the economy," Bloomberg says.

That sentence is notable for its understatement. If the government has to pay higher yields on debt sales, the various bailouts and stimulus packages will turn out to be even more expensive than currently contemplated. And don't be fooled into the "what's bad for bonds is good for stocks" mindset; a big reason the Fed stands ready to buy longer-term Treasuries is to help keep rates down, and their failure to be more specific about those plans yesterday also contributed to weakness in fixed-income today.

Foreign investors are beginning to ignore US Treasuries, especially long-term notes. This has the potential to bring down the economy much faster than a stock market crash would. America runs on China buying our debt...and China is no longer happy with that arrangement.

Then there's the scenario where the U.S. government is forced to pay extremely high interest rates - or is simply unable to sell Treasuries - because foreign buyers go on strike. We're a long way from that "sum of all fears" outcome, but comments from Chinese Premier Wen Jiabao at Davos critical of U.S. economic policy suggest it's getting closer - especially in the wake of Tim Geithner's "manipulation" comment.

I don't think we're very far from that "sum of all fears" moment. In fact, I think there's a very good chance that we'll see foreign buyers go on a strike of sorts sometime before the end of the year.

When that happens, the real economic pain will begin in this country. Foreign investors just aren't going to be able to afford US treasury debt any longer. That will imperil our ability to pay that money back, causing a self-fulfilling prophecy that leaves us all officially broke. What happens when the US government goes belly up? The printing presses go full tilt as a last resort, and the dollar disintegrates in value.

How fast and how brutal that process is will decide if America is just crippled as a world leader or a mortally wounded third world economy.

Swing And A Miss

I like Obama. I think he's a vast improvement over Bush and McCain. I do not however think he's going to be able to fix the economy. I think we're going to crater over the next two years, and be mired in a long, multi-year recovery. Granted, that recovery might be generational under McCain instead of a decade, but it's still going to be bad.

It's going to define my generation and the next for the rest of our lives. Those of us old enough to remember the boom times of the Clinton years will have some nice stories to tell our kids.

Having said that, Obama's complaint about $18 billion in Wall Street bonuses being "outrageous" rings pretty damn hollow when economists are predicting Obama will have to lay out a staggering $4 trillion to rescue the banks.

Sorry Barack. That's a Bush-league mistake right there. That statement is going to come back and kick his ass, and deservedly so.

[UPDATE] What dday said.

There's minor value in angry missives about bonuses, but there's major value in, uh, four trillion dollars. Especially when the more elegant solution is to take over the insolvent banks and stiff the shareholders. But such things are forbidden hippie-talk.

Your Number's Up

How bad the economy do in the fourth quarter? We'll find out this morning at 8:30 AM EST. The quarterly GDP numbers are expected to show a yearly decline around 5.5%, I'm taking the high end of that at 6%. If it's significantly higher, it could be a really horrible day on Wall Street. Likewise, if the number comes in less than 5%, it could be a banner day.

I'll update the numbers as they come in.

[UPDATE] The rosiest prediction was 4%, but GDP only fell 3.8%. That's significantly better than Wall Street expected. Dow futures rocketed upwards, but quickly fell back flat as the significance of a 3.8% drop kicked in. It was bad last quarter.

It'll get worse this one. Next week's unemployment figures will most likely be brutal.

StupidiNews!

• Iraqis have erected a monument to the shoes tossed at Bush's head.
• Tensions between North and South Korea are the worst in years.
• Michelle Obama is developing her own policy advocacy role.
• Japan's manufacturing output fell by a record 9.6% in December.
• North Carolina is the latest state to consider taxing digital downloads.

The Executive Privilege Trap

Republicans are pretty confident they've got Obama right where they want him on the issue of Karl Rove's subpoena. They are betting in a face-off between the current Congress and the Bush administration, Obama will have no choice but to side with Bush on executive privilege in order to protect his own administration from the inevitable GOP backlash down the line.

The issue is likely to come to a head soon. The Justice Department is due to state its position on executive privilege to the U.S. Court of Appeals in a few weeks in response to the House's attempt to enforce its previous subpoenas for Miers and Bolten, who were subpoenaed to turn over documents relating the U.S. attorneys firings. Both refused to comply, or even show up—relying on the Bush Justice Department's sweeping position on "absolute immunity" from testifying before Congress.

Few legal observers expect the Obama Justice Department to endorse that position, but it remains an open question how the new administration will define the scope of presidential privilege. Bush's attempt to assert privilege even after he leaves office throws a new wrinkle into the dispute.

The GOP is confident that Obama will leave so many loopholes in his own administration's view of executive privilege that it will be a de facto win for Rove...and for Bush.

How will Obama respond?

Bla-gone-jevich

Blago is Bla-gone, a unanimous vote in the Illinois Senate to impeach.

Bye, Rod.

Your Zero And One Seventy-Seven Republican Party

As the Dow gives back all of yesterday's gains and then some, John Cole and the guys at Balloon Juice point out that the Republican party is now 100% committed to the failure of the American economy in order to make political gains in 2010.

Let's stop and consider this plan. They have decided that the best way for the GOP to regain their political power is to hope that millions of Americans lose their jobs, their homes, and their livelihoods just so they can blame it on Obama.

Think about that. This means in fact the Republicans are basically convinced that the economy is going to fail so badly that they believe that the risk involved in this bald-faced partisan attempt to sink the President's measure and any hope of rehabilitating the economy is less than the risk of voting for the President's measure.

As tristero puts it over at Hullabaloo:

The rejection of bipartisanship by the Republicans should be perceived in terms of their long term strategy. They know that the depression has just begun. The worse is yet to come. How bad will it be? Far worse than anyone so far has imagined, and we've all imagined it as pretty bad. It will exceed our most extreme fantasies. (In fact, my father, who turns 100 next month (!) said this is shaping up as much worse than the thirties; I think he may be right.) The GOP knows that no feasible stimulus plan, no matter how large or well-crafted, can avert catastrophe. They intend to refuse to go along with anything Obama proposes, wait until disaster hits,and then - counting on the country's short memory span as well as the complicity of the media - blame Obama, Democrats, and liberalism for destroying the economy.

In other words, the GOP is as pessimistic about the economy as I am, if not more so. They are now married to the idea that there will be a Second Great Depression, and that they are washing their hands of the economy and the American worker just so 18 months from now they can say "See, Obama destroyed this country. When the GOP was in charge, this country was wonderful!"

And I fear that tristero is absolutely right. It's one thing for me to predict the gloom and doom of another economic depression. It's quite another thing entirely to see an American political party absolutely counting on one happening in the next two to four years. So tristero continues:

Obama also knows that economic disaster cannot be avoided and that it will be far worse than anything anyone alive - other than centenarians like my Dad - has ever seen; that's why his inaugural address was so grim. He also knows that no stimulus plan will work. And he knows he will be blamed for it when the misery adds up. Therefore, he is trying like hell to get the GOP to sign up, at least partially, for his proposal so he can spread the blame, This is after all, a time-honored political tactic, used by Bush, for example, to claim bipartisan authorization for the invasion of Iraq.

Since the GOP won't ever play - they're not stupid about their self-interest, after all - what is to be done? First, like Duncan, I think the Obama administration must propose the most responsible stimulus package they can, focused entirely on serious efforts to prop up the economy rather than appeasing the Republicans' special interests. Furthermore, they must propose legislation that protects as much as possible the middle class and the poor from the economic tsunami the Bush administration unleashed on this country and that has only begun to be felt. It may not work in staving off an economic collapse, but the crash will be so bad that any amelioration of its effects will be useful.

Naturally, Obama needs to take the high road and continue to call for "bipartisanship." But, as the GOP continuously refuses to go along, the Democratic party, and progressives, must attack on two fronts. First, they must accuse the GOP of lack of patriotism, of refusing to support the president in a time of extreme crisis. Second, they must never, not for a single news cycle, let the country forget that a Republican president, and a Republican legislature is to blame for the dreadful shape of the US economy.

And really, that goes a long way towards explaining why Obama is so keen on bi-partisanship, and why the GOP is so keen on making sure Obama owns the economy over the next four years.

Eventually, somebody's going to have to level with the American people. Whoever does it first, and does it best, will be in charge once the smoke clears. Obama and the Democrats must keep that in mind.

[UPDATE] BooMan reminds us that this vote was meaningless for the GOP as it wasn't the final House vote on the plan. Where tristero opines the GOP is playing no for the long haul and playing long term, BooMan thinks the GOP is playing short ball games strictly in the short term because they have zero long term strategic moves left and are pretty much done for. The bill has to go to the Senate next week where it will be voted on, and then it must be reconciled with the House version, requiring a second House vote on the reconciled bill in February. BooMan is convinced a couple dozen GOP members will go with the Democrats on the reconciled bill, effectively ending the GOP's influence in the House during the Obama era after roughly three weeks, after which John Boehner becomes the biggest joke in Washington.

This theory too has a lot of things going for it. The House vote on the final, reconciled bill will tell us a lot. I just think that vote is going to be zero Republicans.

After all, this is the same House GOP group where all but three of them voted against the Ledbetter Fair Play Act. Maybe they're just insane and enjoy losing.

There Is Awesome, There Is Win...

...and there is this.



Obama needs to hire these guys. I don't know for what yet, but he does. He just does.

Zandar's Thought Of The Day

So, the GOP House contingent has decided that it will be the party of no quarter, no compromise, no retreat, and no surrender.

And the party of no chance of winning, too. "We voted against trying to fix this because America is perfectly fine."

I too welcome the larger Democratic majority in 2010.

Self-Defeating Prophecy

Obama signed into law today the Lily Ledbetter Fair Play Act, which among other things:

"...covers pay discrimination based on gender, race, national origin, religion, age and disabilities."

Of course this is a major problem because...

Some Republicans and business leaders have expressed concern the measure could trigger an explosion of lawsuits based on old claims, discourage employers from hiring women and undermine efforts to stem the recession.

So, Republicans argue that a law mandating among other things gender equality is bad and unneccesary in the free market because, and if I'm reading this correctly, there's already so much existing gender discrimination ingrained in the workplace that employers will have no choice but to break the law and discriminate against people based on gender in the future.

What a great bunch of guys, those Republicans.

Helpful Governor Is Helpful

Oh look, Blago's defending himself at his impeachment trial today.

He said there's been a "rush to judgment and an evisceration of presumption of innocence."

The governor said the prosecution has not proven the allegations, which are based on a criminal complaint released by federal authorities in December, when he was arrested on federal corruption charges.

"How can you throw a governor out of office on a criminal complaint, and you haven't been able to show or prove any criminal activity?" he asked.

Well, there is the whole "conduct unbecoming the Governor" thing. If they decide to impeach you on that, your appearance on The View this week pretty much cements that right there.

If It's Thursday...

...it must be time for a record number of Americans on the unemployment rolls and the worst drop in new single-family home sales in 15 years.

We're nowhere near the worst of times, folks. Not yet.

In Which Zandar Answers Your Burning Questions

Jennifer "Low-Hanging Fruit" Rubin asks: "Why do Democrats insist on dressing down in the White House?"

Zandar's answer: "Because it annoys conservatives who imply that Obama is somehow lessening the prestige of the office of the Presidency by not wearing a jacket unlike the moron who actually profaned said office over the last eight years by not following the Constitution he was sworn in to protect."

By Jove He's On To Something

Josh Marshall takes a look at this morning's NY Times story on Obama's "bad bank solution" to the financial crisis and plays the chessboard ahead a couple of moves (emphasis mine).

The message they're clearly sending is: we're not going to 'nationalize' the banks.

What I wonder, though, is whether or not we're running into a semantic dead end that is obscuring some more pertinent questions.

The core problem is that many, perhaps most of our major financial institutions are insolvent. They have more liabilities than assets. A functioning financial system requires solvent banks. And only the government has the resources to manage the massive recapitalization to get the key institutions back on their feet. At that level of generality, the issue assumes a degree of clarity.

You'd think that, but the reality is clarity is the enemy of the current financial system and the evidence is that the Obama financial team agrees with that assessment. Clarity in this situation is in fact the last thing the guru of Obama's current financial team wants to see. Former Clinton Treasury Secretary Robert Rubin was the mentor of Tim Geithner and was the guy behind the curtain for getting Clinton to sign the Gramm-Leach-Bliley Act.

Rubin's latest complaint? Telling the truth about the sharply decreasing value of toxic derivative assets banks are holding, which is basically the accounting practice of valuing these assets at what the market last paid for them, is known as "mark-to-market". And Rubin apparently is blaming this practice for the economy right now.

Robert Rubin, who quit his post as senior counselor at Citigroup Inc. this month, said an accounting rule forcing companies to mark down assets every quarter to reflect market value has “done a great deal of damage.”

“I spent my whole life at Goldman Sachs believing in mark- to-market accounting, and having said that, if you look at the experience from the last two years, I think mark-to-market accounting has led to terrible vicious cycles in asset prices,” Rubin, the former U.S. Treasury secretary, said during a discussion at the 92nd Street Y late yesterday.

Companies including Citigroup and American International Group Inc. say mark-to-market, also known as fair-value accounting, doesn’t work when few buyers are willing to trade assets like subprime mortgages. Proponents such as the U.S. Financial Accounting Standards Board say the rule adds to transparency and gives investors information about companies.

Rubin joined Citigroup in 1999. Earlier this month, he announced he won’t stand for re-election to the board. Rubin, 70, proposed that a “reserve” accounting standard be adopted, which drew applause from the audience.

Citigroup received a $45 billion bailout from the U.S. government after reporting more than $85 billion of credit losses and writedowns from investments tainted by the subprime-mortgage crisis.

People ask me "Zandar, why do you think Obama's stimulus package is going to fail?" The answer? The people giving Obama economic advice are the people who learned the game from guys like Robert Rubin. If Rubin says "Gee, wouldn't it be great if banks and other companies could pretend the toxic derivative crap on our books was worth what we think it should be worth and not the actual market value" and invent billions, if not trillions of assets out of thin air, then you have to honestly consider that Obama's crack team of financial nerds will try to convince the President that this is somehow a really, really good idea.

If Obama buys that idea, our economy is over. As it is, the 'bad bank" idea already on the front burner is a terrible one, because as Josh Marshall points out:

What that sounds like is that we'll nationalize most of the banks because we have no choice. But we'll allow the current management to run the nationalized banks and the current shareholders to own the nationalized banks.

What am I missing?

Nothing, really. That is most certainly the "logical" endpoint of the plan, banks that have their bad debts nationalized and assets privatized, under private control, with privately held stockholders.

But you combine Bad Bank with the end of mark-to-market, and the results would be catastrophic. The government under bad bank would have no choice but to overpay for the toxic crap on banks' books, and then the banks can turn around and get themselves right into the exact same mess again. Meanwhile, the American taxpayer gets stuck with a government bank full of exactly nothing. It's a back-door bailout of the banks...again.

As I've said time and time again about Obama's econ team, they are made up of the people who helped get us into this mes over the last decade or so. What makes anyone think they will be able to provide an objective solution that's good for the American people, much less a solution that actually works?

Not me. When Bad Bank fails, what then?

StupidiNews!

• The Postal Service is considering going to a five day delivery schedule.
• Russia's Vladimir Putin has some strong words for the US at Davos.
• Obama's decision to name former The Hartford exec Neal Wolin as economic legal counsel is causing an ethics stir.
• JP Morgan Chase CEO Jaime Dimon wants you to shut up about nationalizing banks already.
• Today's kids multitask more, but have more limited critical reasoning skills according to one study.

I Reject Your Reality And Substitute One Of My Own

The new reality of the House: Republicans bravely mustered their ranks and in a show of pure legislative will unanimously rejected the President's stimulus package.

They still lost by fifty-six votes.

Here endeth the lesson.

Dear America:

"Well, your new guy is nice and all, but if you don't mind we're going to go back to bombing the shit out of Gaza now. Thanks for stopping in."

--Benjamin Ben-Eliezer, Israeli Security Cabinet

Holder Cuts A Deal

A week ago, Eric Holder proclaimed loudly that "waterboarding is torture" and the GOP promptly held up his Senate Judiciary committee confirmation vote.

Until today. The committee just passed Holder this morning on a 17-2 vote. What gives? Justin Elliott smells a deal. (emphasis mine)

Sen. Kit Bond told the Washington Times today that Attorney General nominee Eric Holder privately "gave me assurances he is looking forward" on the issue of prosecutions of former Bush officials who authorized torture or operatives who carried out the policy.

The paper paraphrases Bond's remarks this way: that "Mr. Holder assured [Bond] privately that Mr. Obama's Justice Department will not prosecute former Bush officials involved in the interrogations program."

But Bond's quoted remarks are not quite so clear cut:

[Bond] added, "I was concerned about previous statements he made and others had made. He gave me assurances that he would not take those steps that would cause major disruptions in our intelligence system or cause political warfare. We don't need that kind of political warfare. He gave me assurances he is looking forward."

Mr. Bond also said, "I believe he will look forward to keep the nation safe and not look backwards to prosecute intelligence operators who were fighting terror and kept our country safe since 9-11."

Gee, there's a shocker. The GOP is crowing that Holder won't touch Bush, nor will he touch those who tortured in his name.

Which makes Obama and Holder an accessory to war crimes. It's not like Kit Bond has anything to lose politically, he's retiring in 2010.

Change you can believe in?

[UPDATE] Senate Judiciary Chairman Pat Leahy calls bullshit on the whole thing.

The implication of the piece is fairly clear: Holder promised Bond to eschew prosecutions, and Bond promised not to block his nomination. Sen. Patrick Leahy (D-VT), chairman of the Judiciary Committee -- which approved Holder today -- strongly denied that such an exchange could have occurred.

"It would be completely wrong if a senator said, 'I'll vote for you if you promise to withhold prosecution of a crime'," Leahy told me. "No senator would make a request like that. It'd be improper."

"Maybe Governor [Rod] Blagojevich [D-IL]" would have sought such an assurance, Leahy quipped. He never specifically referenced Bond, who declined to answer questions about the Times piece while leaving the Senate chamber this afternoon.

This keeps getting more interesting all the time. So why did the GOP stop blocking Holder then?

Gratitude From The Sharks

Dunno how I missed it, but this one is outright ludicrous. (h/t John Cole).

Three days after receiving $25 billion in federal bailout funds, Bank of America Corp. hosted a conference call with conservative activists and business officials to organize opposition to the U.S. labor community's top legislative priority.

Participants on the October 17 call -- including at least one representative from another bailout recipient, AIG -- were urged to persuade their clients to send "large contributions" to groups working against the Employee Free Choice Act (EFCA), as well as to vulnerable Senate Republicans, who could help block passage of the bill.

Bernie Marcus, the charismatic co-founder of Home Depot, led the call along with Rick Berman, an aggressive EFCA opponent and founder of the Center for Union Facts. Over the course of an hour, the two framed the legislation as an existential threat to American capitalism, or worse.

"This is the demise of a civilization," said Marcus. "This is how a civilization disappears. I am sitting here as an elder statesman and I'm watching this happen and I don't believe it."

It gets worse. If there's any doubt that our capitalist system is broken, infected with greed and contempt for working Americans, corrupt to the core, and self-serving and self-perpetuating, read on.

Donations of hundreds of thousands, if not millions, of dollars were needed, it was argued, to prevent America from turning "into France."

"If a retailer has not gotten involved in this, if he has not spent money on this election, if he has not sent money to [former Sen.] Norm Coleman and all these other guys, they should be shot. They should be thrown out their goddamn jobs," Marcus declared.

Earlier he argued: "As a shareholder, if I knew the CEO of the company wasn't doing anything on [EFCA]... I would sue the son of a bitch... I'm so angry at some of these CEOs, I can't even believe the stupidity that is involved here."

Audio of the conference call, which was obtained by the Huffington Post, is excerpted throughout this piece to provide a clearer insight into the pitched battle surrounding the Employee Free Choice legislation. At one point, relatively early in the call, Marcus joked that he "took a tranquilizer this morning to calm myself down."

"This bill may be one of the worst things I have ever seen in my life," he said, explaining that he could have been on "a 350-foot boat out in the Mediterranean," but felt it was more important to engage on this fight. "It is incredible to me that anybody could have the chutzpah to try and pass this bill in this election year, especially when we have an economy that is a disaster, a total absolute disaster."

Brian Marcus is a complete scumbag. Still think CEOs give a damn about the people who work for them? These guys are here plotting to destroy what's left of the right to collective bargaining in this country at a time when a vast majority of American workers have no job security, no right for recompense, and no way to better their situation.

But Marcus is right about one thing: people like Brian Marcus have presided over the demise of civilization as we know it. They just want us to pay for their mistakes and greed.

The fact the GOP and CEOs are doing everything they can to defeat the Employee Free Choice Act should let you know just how important it is to pass it.

Irony Detection Failure

I swear, Commentary's Jennifer Rubin is about the easiest target I could possibly come across. Today, she's moaning about the stimulus.

It is hard to conclude that the Democrats were actually trying to meet the President’s stated goals. There is little wonder that the President and Democrats want this voted on fast. If lawmakers, not to mention the public, figure out what’s in this they might have second thoughts. If they slow down and actually read what is in the bill, they could get the idea this is essentially one big political payoff, not a serious economic plan – and certainly not one that is targeted or temporary, as Democrats promised. (This might account for the administration’s failure to make the bill accessible despite promises of “transparency.”)

Despite the fact that Rubin (as usual) is dead wrong about both the content and the transparency of the bill, the fact anyone from the conservative side of the aisle is complaining about being railroaded into passing a bill too quickly without being able to read the fine print is hysterical in a post-PATRIOT Act world, not to mention Bush asked for the same exact fast-tracking on the TARP legislation a couple months ago.

But that hasn't occured to Rubin. Apparently, a lot of things fail to occur to her. Bonus stupidity:

What about those Democrat Blue Dogs who are supposed to be concerned about fiscal discipline? One Republican adviser was blunt, “They are all bark and no bite, and they always cave to Pelosi in the end even though the media always gives them credit for talking a good game.” We’ll see if some of the Democrats in competitive seats have the nerve to go up against the new President. I’m betting only a handful do.

Hey Blue Dogs, wake up. The GOP still hate you and will do everything they can to destroy you...so why bother to help them do it like you've been doing for the last two years?

Unemployment Jackpot

Don't trust unemployment figures. They're not telling you nearly the whole truth.

The number the news gives you is only roughly the percentage of the work force that are actively on unemployment benefits. It's not counting the people who have exhausted those benefits and are still trying to find a job, those who have stopped looking for work altogether, and those who are "underemployed"...people who are only working less than 20 hours a week and want to work full-time and are not in school. These folks are called "marginally attached workers" and are not counted by the unemployment numbers you see in the papers...the Labor Department's "U3" figure.

The much broader number the Labor Department has that DOES include marginally attached workers, called the "U6" in labor parlance, is the key to understanding how bad things really are. The worse a recession gets, the worse the non-U3 numbers get too.

For December, the U6 was 13.5%, not the 7.2% U3, and a lot of folks believe even the U6 is too low to be an accurate picture of how many folks are truly employed, as the U6 only counts the civilian work force, and not government layoffs.

The labor department changed how it counted everything back in 1990 under Poppy Bush. That's the reason you're seeing these ridiculously low unemployment rates under Dubya and Clinton...they were pretty much fake. If we were still using the old formula for unemployment, the real rate for December 2008 would have been over 17%. That's how many people are really out of work right now or underemployed, more than one in six people.

If you go on that rule of thumb that the real unemployment rate is about 2x to 2.4x the published national U3 number, the state unemployment numbers are horrifying.

States with the highest unemployment rates in December 2008:

1. Michigan, 10.6 percent
2. Rhode Island, 10 percent
3. South Carolina, 9.5 percent
4. California, 9.3 percent
5. Nevada, 9.1 percent
6. Oregon, 9 percent
7. District of Columbia, 8.8 percent
8. North Carolina, 8.7 percent
9. Indiana, 8.2 percent
10. Florida, 8.1 percent

Remember folks, these are the massaged U3 numbers, and in case of Michigan and RI, they are above ten percent...meaning that by our rule of thumb, real unemployment in those states are closer to the 20-24% range. Florida's 8.1 percent means a reality of 16-20%. California's 9.3% is 18-22% actual unemployment...and given California has about one seventh of the total population of the US, that's frightening.

In other words, there's already evidence that the real unemploment rate in this economy is far, far worse than anybody's willing to really admit. We're often told that our economy is nowhere near the Great Depression right now...with an "unemployment rate of 7.2%", we have a long way to go to the figure (actually a guesstimate) given for the worst years of the Depression Era...25% unemployment.

But we're not that far from the reality of 25% unemployment right now, today, in states like Michigan, RI, and California.

If the national U6 number keeps rocketing up as it has been in the last six months, it could reach 20% nationally by the end of the year. It's at 13.5% now.

A 20% national U6 number would mean a real, national unemployment rate of roughly 25%...depression era unemployment. And as I've pointed out, Michigan and other badly hit states will be at those Depression era numbers very, very soon.

If not already. The next batch of unemployment figures will be out next week. Stay tuned.

StupidiNews!

• The Obama stimulus package faces a full House vote today.
• The fate of Karl Rove's most recent Congressional subpoena could rest in the hands of Obama.
• Newly minted Homeland Security Secretary Janet Napolitano has ordered a US border review...of Canada.
• The Treasury's "bad bank" plan could come as early as next week.
• A new climate study suggests it may already be too late to stop global warming.

Bulk And Skull Take On The Obama Rangers

BooMan argues that Senate Republicans will want to come around and will want to work with Obama on a number of issues, mainly so they can get a say in crafting legislation and getting yummy state pork. Republicans will then want to vote for said bill. I have my doubts however, but we both agree that in the House, it's nothing but open war.

House Republican Leader John A. Boehner and his No. 2, Whip Eric Cantor, told their rank-and-file members Tuesday morning during a closed-door meeting to oppose the bill when it comes to the floor Wednesday, according to an aide familiar with the discussion. Boehner told members that he's voting against the stimulus, and Cantor told the assembled Republicans that there wasn't any reason for them to support the measure, according to another person in the room. Cantor and his whip team are going to urge GOP members to oppose it.

In a nod to the president, Boehner did point out that this is the third time that Obama has met with Republican leaders, compared with the zero meetings they've held with Speaker Nancy Pelosi (D-Calif.) — a now-familiar refrain from Republicans in the House. But Obama’s diplomacy clearly isn’t buying any votes yet.

Got that? In the House, the GOP is openly telling its membership that there is no reason to support the Obama stimulus. None. Obama is wasting the country's valuable time by talking to them. There is no reason they will support his legislation, so why bother trying to craft a bipartisan package? Granted, John Boehner and Eric Cantor are the Bulk and Skull of GOP politics anyway. I mean honestly, is there any more meaningless job than House Minority Leader when the margin the other side has is so huge, they roll you on everything? Who cares what Boner and Cannot think anyway?

And over in the Senate, Mitch is prepping the boys of Gamma Tau Moron to get Delta House.

Senate Minority Leader Mitch McConnell (R-Ky.) said on NBC's "Today" show Tuesday morning that Democrats in Congress are "drifting away" from Obama's preferred stimulus plan, which was supposed to include 40 percent tax cuts and be free of earmarks.

“Listening to what he said he wanted, we think we may be closer to that, oddly enough, than the Democratic majority, which seems to be pulling in the direction of fewer tax — less tax relief and things like fixing up the [National] Mall. You know, most people don't think that's the way we ought to spend stimulus money,” McConnell said.

As Brad from Sadly, No! says:

Dude, they want you to fail. They’re not going to do anything to help you. So just put the best policy you can out there and let that be that. If it works well then you’ll be rewarded for it. If not, then you’ll be punished. That’s politics.

If the Republicans want to be meaningless obstructionist dipsticks, let them. You have enough Democrats to get the job done. Do the job. The GOP will be forced to come around.

Is this manhandling un-American? Shouldn't we be shooting for bipartisan love here? Sure. After the GOP understands what Obama means by "I won."

Dear America:

"Now that Obama's election has proven America is free of any and all prejudice, the only real racism left is Democrats and their terrible soft bigotry of affirmative action. I promptly expect Obama to dismantle it immediately. Or you know, he's a racist."

-- Cathy Young, RealClearPolitics

More Lovely News

A record home price plunge in November, down year-over-year 18.2% from Nov 2007. No wonder January's consumer confidence numbers hit an all-time record low this week.

The light at the end of the tunnel is an oncoming train.

Snow Daze

Could be a light day for me due to bad weather. If you're in the Ohio Valley area, be careful today, we're expecting a fair amount of snow today and freezing rain on top.

StupidiNews!

• Obama's first Presidential interview was with Al-Arabiya TV as he sought to reach out to Muslims.
• More economists are putting the total bailout cost of banks at more than $3-4 trillion.
• UN officials say there is enough evidence already to prosecute Donald Rumsfeld for war crimes.
• Taliban control of Pakistan's northern Swat district enters its second year.
• Rapper Kanye West is the latest victim of "celebrity hacking."

Dear America:

"Since the Obamessiah has had his six whole days to create the universe and hasn't even fixed the economy yet, I declare him to be the worst President ever."

--Jennifer Rubin, Commentary

NIMBY'd To Death

The GOP is playing games outright now with Obama's plan to close Gitmo. The maneuver? The notion that there's nowhere in America that Obama can put these supervillains without them breaking out of prison and killing millions of Americans.

No. Seriously.

Ft. Leavenworth, Kansas, is the military's only maximum-security prison, making it a strong option for the Obama administration during deliberations on the future of Guantanamo's 240 or so remaining occupants. But not if Sen. Sam Brownback has anything to say about it. He and three House Republicans from the state already have introduced bills in Congress that would bar the government from moving detainees from Cuba to Kansas.

But Brownback isn't the only Republican taking a pre-emptive cue from Rove and offering bills to close off Obama's possible Guantanamo alternatives.

Lawmakers from South Carolina are promising a similar NIMBY fight over the Charleston Naval Brig, and California Republicans are kicking and screaming over transferring detainees to Camp Pendleton in their state.

It gets even more silly. Apparently not even the Supermax prison in Colorado can contain a Muslim guy with a box cutter.

Maybe Brownback can have a chat with Colorado Republican Rep. Doug Lamborn and Mike Coffman, since they're threatening to prevent Guantanamo detainees from being transferred to Supermax. After all, a spokesman for Colorado's Democratic governor, Bill Ritter, told the AP that "there's no reason to take a 'not in my backyard' approach."

But let's not hold our breath. It looks like Republicans are having too much fun planning their obstructionist tactics on Guantanamo.

But it's clear what the plan is: convincing your grandmother that Obama plans to put these Lex Luthor-class masterminds in her neighborhood, guaranteeing her as collateral damage for the secret Islamodeath ray the Great Brown Beturbaned Horde is building in the mountains of Afghanipakiranistan.

Of course, if we're that scared of guys with box cutters and funny names that we can't put them in Fort Leavenworth or Supermax, then in all honesty we're going to all die on Tuesday when the Legion of Doom teams up with the Brotherhood of Evil Mutants and breaks all the prisoners loose. After all, Islamofascists are the most powerful beings in the universe, they're all from Krypton and our yellow sun allows them to go back in time and kill our ancestors unless we keep Gitmo open at all costs.

Idiots.

Bloody Monday

It's earnings layoffs season on Wall Street this week, and the numbers are horribad. Caterpillar 20k layoffs, Sprint Nextel 8k layoffs, Home Depot 7k layoffs. That's just today. Wait until the retail stores start throwing around closing numbers.

Millions more on the way, folks.

Further Investigation May Be Needed

Apparently I'm not the only guy to notice Politico's sole raison d'etre at this point is to be the Village bullhorn complaining about why Obama just won't let the GOP do whatever they want.

From TPM Reader JEM ...

I'm starting to get really annoyed with most news outlets, particularly Politico, which seems to be auditioning for the role of Drudge 2.0, portraying Obama's pledge to be more bipartisan as some sort of political straight jacket. Apparently, Obama has to completely transform all of his ideas and proposals to whatever the Republicans demand if he hopes to live up to his 'promise' of bipartisanship. I hope these articles conclude that he's broken his promise by the time the stimulus passes (with more than 60 votes, mind you), just so I don't have to endure them for the next four years.

I'm not sure I'd say I'm annoyed because I'm not really surprised. But I do think it's an example of the continuing Republican tilt of much of the Capital press corps. Not in ideological terms perhaps, but in terms of whose opinions carry weight, whose matter and whose do not.

Drudge 2.0 certainly seems to fit Politico's angle these days, if not full-blown Village 2.0. It's like the site is possessed by an AI copy of Cokie Roberts and David Brooks. It really takes some work to put that much scorn into reporting everything Obama is trying to do without actually coming out and saying "We don't care very much for the man."

Government On Ice

Reports coming in this morning that Iceland's government has collapsed and has resigned in disgrace -- not just the PM mind you, the entire government -- not three months after that country's massive bank collapse.

Prime Minister Geir Haarde announced the immediate resignation of his cabinet, after talks with coalition partners failed.

Iceland's financial system collapsed in October under the weight of debt built up during years of rapid growth.

The currency has since plummeted, with unemployment soaring. The economy is forecast to shrink by 9.6% this year.

In a series of protests, demonstrators have accused the government of leading the country to ruin.

Mr Haarde told reporters on Monday: "I really regret that we could not continue with this coalition. I believe that that would have been the best result."

That would make Iceland the second country's government to fail as a result of the financial crisis, the first of course being the GOP here.

Iceland is pretty much considered to be "worst case scenario" as far as the global economic crisis on individual countries so far. The key words there are so far. There will be more Icelands out there in 2009 and 2010.

There could be a lot more.

The Next Bubble

Helicopter Ben Bernanke isn't capable of learning, I'm beginning to believe. After his predecessor Alan Greenspan created the largest bubble in history with the housing disaster in order to get us out of the post 9/11 recession, Bernanke is actually considering an even larger, even more fundamental bubble in order to get us out of this mess.

Federal Reserve Chairman Ben S. Bernanke and his colleagues may try once again to cure the aftermath of a bubble in one kind of asset by overheating the market for another.

Fed policy makers meeting tomorrow and the day after are exploring the purchase of longer-dated Treasury securities in an effort to push up their price and bring down their yield. Behind the potential move: a desire to reduce long-term borrowing costs at a time when the Fed can’t lower short-term interest rates any further because they are effectively at zero.

The risk is that central bankers will end up distorting the Treasury market, triggering wild swings in prices -- and long-term interest rates -- as investors react to what they say and do. “It sets forth a speculative dynamic that is very unstable,” says William Poole, former president of the Federal Reserve Bank of St. Louis and now a senior fellow at the Cato Institute in Washington.

The Treasury market has “some bubble characteristics,” Bill Gross, the manager of Newport Beach, California-based Pacific Investment Management Co.’s $132 billion Total Return Fund, said in December on Bloomberg Television. He echoed that sentiment last week.

“I will say, and I have said for the past three months, the governments are very overvalued,” Gross said in a Jan. 20 interview. Treasuries last year returned 14 percent, according to Merrill Lynch & Co.’s Treasury Master Index, their best performance since 1995.

In other words, whatever treasuries the US government buys will become the only game in town for investors. They will flock to them, as they already have been. But the Magic ATM of the US Government will flood the bond markets with cash. Bond prices will skyrocket. Yields will push towards zero.

The the problem starts. As investors flood the same market and push the price up even higher, the government loses control over the price. Wild swings in the bond market could lead to devastating consequences for investors, particularly long term investors. Remember folks, treasuries are what foreign investors are buying from us: the promise the Treasury department will pay them back later. If the prices go all over the place and the bond market goes nuts, we run the risk of a 1929 style crash in the bond market...and that could devastate the US economy even more.

In other words, Bernanke is playing with a flamethrower in a fireworks factory. So many mutual funds and 401(k) plans and of course foreign investors are in Tresuries right now that it's already causing a bubble. If Bernanke lets loose with the full power of the Magic ATM, we'll see another massive bubble much sooner...and the corresponding crash will be much, much worse.

But Obama can't can Bernanke now. It's far too late. Bernanke's fate is Obama's fate...and our fate as well.

Chinese Fire Drill

Roubini calls bullshit on the reports that China's economy grew at 6.8% in 4Q 2008.

The Chinese came out today with their 6.8% estimate of Q4 2008 growth. China publishes its quarterly GDP figure on a year over year basis, differently from the U.S. and most other countries that publish their GDP growth figure on a quarter on quarter annualized seasonally adjusted (SAAR) basis.

When growth is slowing down sharply the Chinese way to measure GDP is highly misleading as quarter on quarter growth may be negative while the year over year figure is positive and high because of the momentum of the previous quarters’ positive growth.

Indeed if one were to convert the 6.8% y-o-y figure in the more standard quarter over quarter annualized figure Chinese growth in Q4 would be close to zero if not negative.

Worse, China's Q1 2009 numbers will be negative. The last real bastion of positive economic growth in the global economy is about to be turned off for 2009, just when the world needs it the most.

2009 will be economic legend, like 1929 or 1945.

StupidiNews!

• A new survey of economists show only 22% think the economy will grow in 2009.
• The BBC has a controversial new documentary that takes on the dismal state of health care...in the US.
• Under Obama, states can impose tougher emission standards soon.
• Drug maker Pfizer is buying Wyeth in a $68 billion dollar deal that will cut thousands of jobs and five plants.
• The long, strange, and scary story of the Ghostbusters video game continues.

Hell Week

While last week's numbers on Wall Street were dismal, this week's earnings and 4th quarter GDP figures are going to have the market testing those late 2002 market lows.

Only 10% of the 85 S&P 500 companies that have reported so far have topped forecasts. Another 60% have met estimates and another 30% have missed, according to Thomson Reuters.

"We're in the process of absorbing just how bad the fourth quarter was," said Bernard McGinn, CEO of McGinn Investment Management. "We had a feeling things were terrible, now we're getting proof of it. The question is 'where do we go now?"

This week also brings the latest Fed policy meeting - although it's likely to be less influential than usual since the central bankers are expected to keep interest rates unchanged near zero, said Kenny Landgraf, principal and founder at Kenjol Capital Management

Investors will also digest reports on housing, consumer confidence and leading economic indicators early in the week. The end of the week brings the fourth-quarter gross domestic product (GDP) report. It's expected to have fallen by an annual rate of 5.2%, it biggest plunge in 26 years.

I honestly think the GDP numbers will be worse than this, in the neighborhood of a 6% drop or more. If that happens, we could see numbers under 7,000 very soon on the Dow.

And let's not forget, the week after will bring the January unemployment numbers.

The Sun Is Still On Fire And Hot Too

And John McCain juuuuuust can't bring himself to vote for the stimulus plan, either because it doesn't have enough tax cuts for the rich.

Sen. John McCain, Obama's opponent in the November presidential contest, said he did not believe the stimulus package did enough to create jobs.

"There have to be major rewrites if we want to stimulate the economy... . As it stands now I can't vote for it," McCain said on Fox television.

He also continued a theme from his campaign, declaring that the former Bush administration tax cuts, that were particularly beneficial to high-earning Americans, should be made permanent. The measure expires next year and Obama has said he will not seek their renewal.

Gee there's a shocker. Look for 40 other Republican Senators to do the exact same thing and blame Obama for giving them something they just can sign in good conscience. That's okay though, because the Village loves their Maverick McMaverick, all is forgiven, and he's fighting for the American people against that nasty, socialist Obama guy.

Granted, Obama just needs to flip a couple. But that's of course if Obama can keep them all on his side, which I doubt. BooMan has a pretty good theory which boils down to "the safer the district is for the Dems, the more they will support Obama." Makes sense to me.

The Senate however is a bit more complex. Many of them on both sides of the aisle will be looking to take the McCain route out...especially the ones up for re-election in 2010.

Golden State Deadbeats

Turns out the state of California is so broke, it's down to the point of actively choosing to miss payments on the billions it has borrowed over the last 18 months. (h/t Atrios):

The state's cash situation is somewhat analogous to your family emptying its checking account, drawing down the savings account to cover checks, and only having enough left to pay either the mortgage or the utility bill.

Of course you could then file for bankruptcy protection. Under federal law, the state can't do that, but it can do something you can't: Issue IOUs.

Known formally as "registered warrants," the state's IOUs are just that. Someone – a vendor, a landlord, the water company – who is owed money by a California government agency gets a piece of paper that says the state owes them money, and will pay them the amount plus interest at some point in the future.

The only time since the Great Depression that the state has issued IOUs was in 1992, and it wasn't a pretty sight. About 1.6 million of them, worth a total of $3.8 billion, were issued during a two-month budget tiff between then-Gov. Pete Wilson and legislators.

Instead of paychecks, about 100,000 state workers got IOUs, which proved somewhat harder to cash. After the first month, many of the state's major banks quit accepting the warrants, saying the 5 percent interest they were paid wasn't worth the arduous processing needed to redeem them.

And after state employees sued, a federal judge ruled that paying workers with IOUs violated federal labor law. The state agreed in 1996 to give the affected workers extra paid vacation to compensate.

If IOUs are issued this year, they won't go to state workers. They also might not be accepted by many banks.

Beth Mills, a spokeswoman for the California Bankers Association, said the group's members still had "a lot of technical and operational questions we're trying to get some resolution on" about IOUs.

Banks aren't going to want to touch these things. Not when they know California may just decide "Hey. we're a state government and we're going to decide just not to pay you."

I'm wondering how many states will have to be bailed out over the next couple of years, how many state employees will be laid off as services are curtailed or eliminated.

There are plenty of states in dire trouble where Republicans are in charge, and their solution is going to be to privatize or eliminate as many state services as humanly possible. That means a whole hell of a lot of jobs are going to be lost, despite Obama's promises to fund "shovel-ready" projects.

Of Financial Oversight, Meteor Strikes, And Modern Barn Construction

Up late tonight, but noticed this over at Atrios's place:

The Obama administration plans to move quickly to tighten the nation’s financial regulatory system.

Officials say they will make wide-ranging changes, including stricter federal rules for hedge funds, credit rating agencies and mortgage brokers, and greater oversight of the complex financial instruments that contributed to the economic crisis.

This should have been done, oh, never because this never should have been needed to be done in the first place. Remember kids, this all started with Citigroup and the Gramm-Leach-Bliley Act, which overturned Glass-Steagall, which allowed this mess to happen in the first place.

Clinton signed it into law. Bush removed nearly all the oversight from what was left in the system. It's badly needed regulatory oversight, but it's not just closing the barn door after the horses have escaped the barn, worrying about regulatory oversight right now is the equivalent of rebuilding the barn door just so you can close the damn thing at some unspecified point in the future after the barn has been hit by a meteor and not only killed the horses but flattened every building in the county.

Yes, at some point that barn door will be needed again. That's step #22,347 at this point. Step #1 is realizing that there is no barn anymore. Either Obama doesn't understand that, or he understands it all too well and he's doing what he's capable of doing at this point and getting it out of the way now.

And really, the scary part is that the horses being the financial institutions to be regulated at this point, it's really like the meteor was an evil necromantic meteor that killed the horses and raised them from the dead as Zombie Bank Horses. Zombie Bank Horses that hunger for billions in bailout money (and maybe brains.)

Yeah, I'm going to bed.

Circling The Wagons

For eight long years we've seen the GOP on the attack, time and time again. Democrats have been on the defense, but so far it's worked out: after all, Obama is President, and the Dems run both chambers of Congress. To borrow a video game term, the Dems have expertly "turtled up".

Now however, Obama understands the value of changing tactics to keep the other side off balance. He's going on the offensive, something long overdue. Earlier this week he took it straight to the GOP on his stimulus plan.

Now he's taken a shot against the bow of the big GOP boys. No, not anyone in Washington, but the Right Wing gasbag himself, El Rushbo.

Mr Obama has told Republicans in Washington to stop listening to the right-wing talk show host Rush Limbaugh, risking a new culture war with conservative voters.

His exhortation came as he enraged other Republicans by reversing George W Bush's ban on funding international aid to charities that perform or provide information about abortions.

After less than a week in office, Mr Obama's presidency is already encountering the very partisan bickering he had pledged to stamp out during his first 100 days.

He faces mounting criticism over his $825 billion economic stimulus plan, from Republican leaders who say the legislation has been drawn up without the input which Mr Obama had promised to allow them.

The president responded with a clear signal that he is prepared to ram the bill through without the bipartisan consensus he promised to construct, telling Republican leaders from the House of Representatives: "I won. I'm the president."

He then told them to break free of the confrontational mindset epitomised by Mr Limbaugh, the highest paid talk show host in America. "You can't just listen to Rush Limbaugh and get things done," Mr Obama said.

His comments followed a blunt attack on him by Mr Limbaugh, who declared on air that he hoped Mr Obama would fail as president because otherwise it will usher in socialism.

It's got the GOP on the run. Today they are scrambling to counterattack Obama, because the wingnuts know that if the GOP follows Obama's advice on this, they are done. Needless to say, the wingers are coming out swinging. Hard.

There are two things going on here. One prong of the Great Unifier's plan is to isolate elected Republicans from their voters and supporters by making the argument about me and not about his plan. He is hoping that these Republicans will also publicly denounce me and thus marginalize me. And who knows? Are ideological and philosophical ties enough to keep the GOP loyal to their voters? Meanwhile, the effort to foist all blame for this mess on the private sector continues unabated when most of the blame for this current debacle can be laid at the feet of the Congress and a couple of former presidents. And there is a strategic reason for this.

The reason is Obama is striking at the head of the snake while he has a nearly 70% approval rating. That rating has to include a fair number of Republicans...and they are ones who are probably not really happy with Rush and his buddies.

There are those that say that the more Obama attacks Rush, the more the President legitimizes Rush at a time when wingnuts are reeling and looking for a rallying point to regroup around. Obama is taking that risk.

But Rush has been around long enough that he has those who will follow him regardless. By shying away from his attacks, Obama just invites more. But by sticking it to him with a logical argument -- the argument that following El Rushbo has been fundamentally bad for the GOP -- Obama is hoping to peel off that support.

Not even Rush can say that losing the White House and Congress to the Democrats with an unbeatable margin the House and an all but unbeatable margin in the Senate has been good for the Republicans. They were beaten soundly and there is no argument here: the GOP lost.

If moderate Republicans that support Obama -- and that 68% approval rating by mathematical dint has to include millions of Republicans that support Obama -- start buying the very logical and practical argument that the tactics of Rush Limbaugh and his ilk are one of the main reason why the GOP lost in November, then Obama and the Democrats will profit in the end.

Let's face it, folks. The tactics of the GOP during the campaign season rang hollow with many Republicans and independent voters. Rush opened himself up to this counter-attack by declaring he wished Obama would fail.

It has clearly occured to a great many Republicans that if Obama fails, then America is in grievous trouble. And eight years of the Bush economy has led to not one, but two recessions now...the second of which may be another Great Depression. Obama's plan is to reach out to the Republicans who have doubts about the way the GOP handled the campaign with brutally ugly lies about Obama, and have the irrefutable evidence of the economy to back up the theory that the GOP has no right being in charge.

All I have to say is "about damn time."

Smart Bombed

BooMan analyzes good ol' Sen. Mitch McConnell's reaction to the idea of "smart power": the notion that America can project power through cultural, social, and diplomatic means (and not just military ones.) As BooMan points out:

I was watching Minority Leader Mitch McConnell answer questions from the audience yesterday during his appearance at the National Press Club. [I'm hoping to get a transcript, but you can watch the video at CSPAN] And someone in the audience submitted a question (at minute 53:15, if you're watching the video) that asked McConnell 'what is your understanding of the foreign policy concept of Smart Power?'

McConnell took a moment to collect his thoughts, and then responded:

"I'm not sure I know what that means. [It's] probably in the eye of the beholder. Um...I'm not sure I know exactly what that means. I assume it probably means...um...be careful when you..um...decide to attack, and I think most everybody would agree with that."

That was the sum total of Mitch McConnell's response.

Now, it's obvious that McConnell wasn't familiar with the term 'smart power', and he was therefore quite hamstrung in his ability to answer the question. We've all been there. Your options are to admit that you don't know the answer to the question or to engage in some bullshit. McConnell chose both options.

When you first seek to engage in some bullshit, you have to engage your imagination. In this case, McConnell had to think about what the likely source of the term 'Smart Power' might be and what they probably meant by it. We all know that attacking Iraq wasn't a 'smart' thing to do. And that seems to be about as far as McConnell's imagination could go.

It's almost a cliche, almost cartoonish. McConnell is so single-mindedly belligerent that he can't fathom America using anything other than military power for any reason.

Honestly, let's think about this. Arguably, as Senate majority leader, Mitch is the most powerful Republican out there. And yet, to Republicans, America will always be a military empire where might makes right. It's so ingrained into the Republican hawk mindset that literally, McConnell cannot even make the obvious connection about what "smart power" is, despite having been in Washington for decades, his wife being Labor Secretary and both of them being well-connected in D.C. circles.

That's the mindset of the GOP, period. Diplomacy isn't even an option, other than as something to use to cover for more military action. That's how Bush used it for eight years.

No wonder Condi Rice was considered a joke, and a former general was Bush's other Secretary of State, Colin Powell's only job was to sell the Iraq War.

It's truly an incomprehensible concept to these folks.

Money Plays, Money Pays

Obama's weekly YouTube is once again pretty dire. The President warned that his stimulus package needs to pass, or America's in trouble.

"We begin this year and this administration in the midst of an unprecedented crisis that calls for unprecedented action," he said in his weekly radio and Internet address.

"Just this week, we saw more people file for unemployment than at any time in the last 26 years, and experts agree that if nothing is done, the unemployment rate could reach double digits," Obama said.

The president pleaded for urgent action, saying, "if we do not act boldly and swiftly, a bad situation could become dramatically worse."

Obama's remarks came as he is lobbying for a quick congressional passage of a $825 billion dollar stimulus package to pump up the economy.

Obama's been repeating this almost daily now. Does it matter in the end?



The rhetoric is right, the scope is too small. We'll see.

Zandar's Thought Of The Day

The Fox News guy on the teevee says solar power stocks are a good bet right now because they are "just the kind of thing the Obama administration would waste taxpayer money on."

StupidiNews, Weekend Edition

• Pakistan says 22 people have died from a suspected US missile strike inside their borders.
• Norm Coleman loses another bid for yet another recount.
• Afghanistan stands as President Obama's toughest foreign policy challenge.
• Sweden's advice for the US economy? Nationalize the banks like we did in the 90's.
• Apple's Macintosh turns 25 this month.

The Beturbaned Brown Horde Strikes Again

Republican Congressman Steve King has Muslim paranoia and fearmongering down to a f'ckin art form, man. An art. Form.

Yesterday, President Obama signed an executive order requiring that Guantanamo Bay be closed within a year. Obama’s order has been criticized by some conservatives, such as Rep. Pete Hoekstra (R-MI), who issued a statement saying that it “places hope ahead of reality” and was “unnecessarily risking the safety of our nation.”

Discussing Obama’s plan to close Guantanamo on Mike Gallagher’s radio show yesterday, Rep. Steve King (R-IA) claimed that Obama’s actions could be “the beginning of shutting down…the activities of the CIA.” When Gallagher said that Obama wanted to “bestow American citizenship rights to somebody from another country” who wants “to murder civilian Americans,” King claimed that closing Gitmo could put 9/11 mastermind Khalid Sheik Mohammed “on a path to citizenship”:

KING: Let’s just say that, that, Khalid Sheikh Mohammed, the mastermind of 9/11, is brought to the United States to be tried in a federal court in the United States, under a federal judge, and we know what some of those judges do, and on a technicality, such as, let’s just say he wasn’t read his Miranda rights. … He is released into the streets of America. Walks over and steps up into a US embassy and applies for asylum for fear that he can’t go back home cause he spilled the beans on al Qaeda. What happens then if another judge grants him asylum in the United States and Khalid Sheikh Mohammed is on a path to citizenship. I mean, I give you the extreme example of this.

King then took a shot at efforts to increase access to health care for children, saying that if Gitmo were closed, detainees “could actually live in the United States legally, and maybe, and after Nancy Pelosi gets done with S-CHIP, they can tap into welfare while they’re at it.”

Above, Steve King's helpful hints

I think we're done here.