Another Unnecessary Death

I talked to a woman today who's losing her daughter to breast cancer. We'll soon have another preventable death and another set of motherless kids.

Let's call the daughter Holly. Holly has four children. Holly got divorced. Holly had no health insurance. So when she felt a lump in her breast, Holly didn't go to the doctor. There would have been the visit, then referral to a specialist, then all sorts of tests. That kind of stuff is expensive. She'd had a lump that wasn't malignant before. Maybe she would get lucky again, she hoped. Maybe she could save some money she and the kinds really needed.

But maybe didn't happen this time. When Holly's mother finally found out she told her to go; she would pay for it. By then several months had gone by. The news was bad. The cancer is in both breasts and the lymph system. Holly was told she had only weeks to live, no more than a month.

But Holly is a fighter. She's a former top high school athlete and still has a competitive streak. Her mother is going to borrow money for a desperate operation. They're going to remove both breasts, a lot of skin and many lymph nodes. Then she'll have massive radiation. There will be a lot of sickness and excruciating rehab. The prognosis? This will probably delay her death by two or three years. As extensively as the cancer has spread there's almost no hope of getting it all. It's probably in her thoracic organs. But there might be a 1% chance of longer-term survival. And a couple of more years for the kids to have a mother will be good, too. After all, the youngest is only three.

On a national news show yesterday I saw a wealthy attorney whining about the Obama proposal to let income taxes for those earning at least $250,000 a year return to their pre-Bush levels, going up 4% to fund a $600+ billion reserve to get a national health insurance program off the ground. He complained it would "destroy my American dream." Cry me a river, bub. Take one more DUI case a year if you're so down about paying an average extra $1,100 in taxes after deductions out of your $300,000 income. What about Holly's American dream? What about her kids? What about the 50 million (and rising) other Americans in the same boat? How many more thousands must die for no good reason? I often wonder what planet people like that attorney come from.

Obama Rides Wave of Popular Support

Heading into President Obama's quasi State of the Union Address Tuesday night, the national mood was definitely in his favor. The country was ready to trust him on a recovery plan. They wanted him to pursue the agenda he campaigned on and prioritized that much higher than working with Republicans. After the speech, those sentiments had only increased. Obama laid out a massively ambitious set of issues and seems set to move on multiple fronts while the public's support is high.

On this link you can find the results of the pre-address New York Times/CBS News poll. Reception for the speech itself, based on a scientifically selected sample of 534 watchers by CBS News can be found here.

Here are some key findings before the speech. First, for Obama's overall job approval ratings, 63% approved, 22% disapproved and 15% weren't sure. The President definitely won the public perception contest over the stimulus package. 74% felt Obama was trying to work with Republicans but only 31% felt the Republicans were trying to work with him.

Even though 67% felt the recession would last at least two years more, 77% were optimistic for improvement during the next four years under Barack Obama. 65% felt Obama had the same priorities as they and 83% believed he cared about people like them. 77% felt he was trying to bring real change, and 76% were confident he would make the right decisions on the economy, even though 54% thought it might take two years or more to see real progress.

The public did not trust Obama's congressional opposition. Only 29% felt congressional Republicans opposed the stimulus out of genuine concern it would be bad for the economy. 63% felt their opposition was for "political reasons." When asked whether Obama ought to work in a bipartisan way or stick to the policies he promised in the campaign, 56% said stick with his promises and 39% said be bipartisan. On the other hand, a whopping 79% said congressional Republicans should be bipartisan while only 17% wanted them to stick to their campaign positions. It is pretty clear the American people no longer have confidence in Republican economic orthodoxy. 65% of the respondents WERE concerned about the increasing national debt, but 74% felt it was more important to combat the recession than deal with the debt right now.

Reaction after the speech accentuated the views already in evidence. 63% approved of Obama's plans for dealing with the economy before the speech. That rose to 80% after it. 71% had been optimistic about Obama's presidency beforehand and 80% after watching the address.

The Republican rebuttal delivered by Louisiana Governor Bobby Jindal was panned by most observers. See the analysis of conservative columnist David Brooks on the Jim Lehrer show here. Not only were there bizarre references to volcanoes and Hurricane Katrina, but the overall message seemed to be the same tired mantra the electorate rejected by 9 million votes in November--the idea that no matter how bad things get the government ought to just sit on its hands and do nothing. With Obama's galvanizing blend of inspiration and intellect running up against this kind of opposition it would not be surprising to see further Democratic gains in the next election cycle. Without a message the public agrees with, the presence of mind to change it or credible messengers to deliver it, the GOP may have to continue to lose ground for some time more before it can hope to recover its fortunes.

California Budget Dreamin'

Now that the California budget is at long last passed it is a good idea to take stock of the state's dysfunctional system. It took about $12.5 billion in tax increases, $15 billion in spending cuts and $11 billion in borrowing against future lottery revenues to patch things up for now. Some $26 billion in federal stimulus money may take much of the sting out of it this time, but that cannot be counted on as anything but a one-time windfall.

There is plenty of blame to point at. By passing Proposition 13 back in 1978, Californians guaranteed that revenues would fluctuate a lot. When the economy is good, sales and income tax revenues soar. When recession hits, they plummet.

Californians have also tied up large amounts of state spending through passing propositions. Items from school funding to children's programs to highway and prison construction have received set-asides. Such formulas restrict flexibility, especially when times get tough.

Gerrymandering the state Assembly and Senate districts into safe seats to protect the incumbents in both parties has resulted in a state legislature dominated by politicians from the far left and far right. They find it ideologically extremely difficult to compromise, and the voters of such districts also want true believers who will not compromise.

Legislatures and governors have too often spent all the revenues in good years (Democrats) or returned it all in tax refunds (Republicans), leaving no reserve to cover deficits when the economy inevitably slumps.

Term limits have ensured that inexperienced legislators are running the show, leaving lobbyists, aides, bureaucrats and the governor's office staffers in the driver's seat rather than the representatives of the people.

Finally, the absurd 2/3 requirement to pass a budget makes it all but impossible to secure agreement. It only happened this time when a couple of holdout Republicans held the rest of the state up for ransom to their particular pet concerns. See the LA Times on this.

In terms of solutions, the passage last year of Proposition 11 may help to elect more moderates to the legislature. This would put redistricting in the hands of a commission instead of the lawmakers themselves, beginning in 2012. There are safeguards to try to make the commission balanced between partisans and independents. Hopefully it will work out. No one knows for sure.

Part of this year's settlement is Proposition 1A, which would require spending stay in line with inflation and economic growth, and put surplus revenues in good years into a "rainy day fund." I hate to see mandatory formulas, but it could be that something like this is necessary. We'll see if the voters approve it on May 19. You can find this and some other reform ideas in an article by George Skelton here.

And last, there appears to be a serious effort afoot to qualify an initiative to allow the budget to be passed by a majority, or a 55% majority at worst. Arkansas and Rhode Island are the only other two states needing a supermajority to enact a budget. Assembly Speaker Karen Bass of Los Angeles has announced support for a 55% requirement, and Sacramento Democratic activists will likely soon be busy gathering qualifying signatures.

Republicans, in the minority in California, are understandably strongly opposed. But that is what a democracy is. If the Democrats could pass a budget with their votes alone they would own it. Their record would stand or fall on its success. That, combined with the redistricting reform, could give the Republicans an opportunity to gain a majority in a competitive election. As it is, the legislature is frozen into a 60-40 party ratio. The Democrats do not have the votes to pass a budget without being held up by a handful of renegade Republicans, and the Republicans can only stop a budget or leverage a few items in exchange for a couple of votes. The people deserve better.

Burris: Get Out

Pressure increased on newly-appointed Senator Roland Burris (D-IL) to resign today as more revelations surfaced and his own story changed once again. He should heed the calls and get out. The Senator is an embarrassment to the state and a disgrace to the office.

You can read the latest on this in his hometown paper, the Chicago Tribune. You can read another Tribune story on Illinois Governor Pat Quinn's blunt call for Burris to resign here.

At first Senate Democrats vowed they would not seat anyone appointed by soon-to-be-impeached Governor Rod Blagojevich. But Burris received outspoken support from African-American politicians. And he said he'd had no contact except one call from the Blagojevich camp. He said there was no mention of money because "he didn't have any."

Now it seems there were many calls between Burris and the Blagojevich camp. Several of these were to Ron Blagojevich, the former governor's brother. Burris then admitted he did try to raise some funds for the falling governor, but had not been successful. There have been calls in the Illinois Legislature to charge Burris with perjury.

Governor Pat Quinn, who succeeded Blagojevich after his impeachment and removal, was direct after these revelations. "I would call on my good friend, Sen. Roland Burris, to put the interests of the people of the Land of Lincoln first and foremost, ahead of his own, and step aside and resign from his office." He called Burris' acceptance of the appointment a "giant mistake." Burris' chief of staff Darrell Thompson has abruptly left the senator's service.

More ominous news came from Robert Gibbs, President Obama's Press Secretary. Saying the appointment was approved based on statements and testimony to the impeachment committee, Gibbs mentioned, "It has been reported extensively some of the stories seem at variance with what's happened and that the president is supportive of an investigation that would get some full story out." He advised, "I think it might be important for Sen. Burris to take some time this weekend to either correct what has been said and certainly think of what lays in his future." If that sounds like a threat I believe that is because it is so intended.

Given the thrust of his campaign and the delicate complexity of the issues ahead of him Obama needs honesty and openness in his old Senate seat. No taint can be tolerated. There is little doubt that the days of Roland Burris in the U.S. Senate are now numbered. His ambition for the position led him to compromise his ethics to get it. That will now cost him what he so prized, as it should. The only question is whether he will spare himself and Obama added embarrassment or whether he will go down in a blaze of scandal. One can only hope for the former, though given the record of his recent judgment the latter unfortunately remains a real possibility.

Canada Gets It Right

The American financial system, economy, housing and equity markets continue to plummet. With President Obama's signature on the stimulus today, immense efforts are now underway to unfreeze credit and jolt demand back into place. Meanwhile, north of the border, our unpretentious Canadian neighbors furnish an example of responsible, comprehensive thinking we would do well to emulate.

We have brought most of our current woe on ourselves by following foolish ideology and by our unwillingness to address critical issues. Newsweek's insightful foreign affairs columnist Fareed Zakaria profiles how Canada gets it right in "Worthwhile Canadian Initiative" in the magazine's February 16 issue. You can go to the original here.

For starters, Canada refused to go along with the deregulate at all costs banking ethic. As Zakaria reports, "Canadian banks are typically leveraged at 18 to 1--compared with U.S. banks at 26 to 1 and European banks at a frightening 61 to 1." As a result, Canada is the only country, "in the industrialized world," that, despite crisis all around it in the past year, "has not faced a single bank failure, calls for bailouts or government intervention in the financial or mortgage sectors." Canada's banking system is currently rated "the healthiest in the world" by the World Economic Forum. Ours comes in at number 40. Its largest bank, Toronto Dominion has gone from the 15th largest bank in North America a year ago to number 5 now. Why? "It hasn't grown in size; the others have all shrunk."

Canada has also confronted serious fiscal issues our politicians have been afraid to tackle honestly. For one, it's "had 12 years of budget surpluses and can now spend money to fuel a recovery from a strong position." Its counterpart to our Social Security has been put on a sound actuarial footing. Its integrated health system costs just 9.7% of GDP, compared to our 15.2%, and delivers far better results in terms of longevity and healthy years of life. An ominous result is that, "American car companies have moved so many jobs to Canada to take advantage of lower health-care costs that since 2004, Ontario and not Michigan has been North America's largest car-producing region."

Canada also has a far more intelligent immigration system. "Visas are awarded on educational level, work experience, age and language abilities. If a prospective immigrant earns 67 points out of 100 total (holding a Ph.D. is worth 25points, for instance), he or she can become a full-time, legal resident of Canada." Microsoft recently opened a research center in Vancouver to, the company announcement said, take advantage of "highly skilled people affected by immigration issues in the U.S." As Zakaria puts it, "So the brightest Chinese and Indian software engineers are attracted to the United States, trained by American universities, then thrown out of the country and picked up by Canada--where most of them will work and pay taxes for the rest of their lives."

There are a lot of good examples to be found in our quiet neighbor to the north. We would do well to carefully study their model for application to some our own difficulties with finance, housing, competitiveness, health care and immigration. Feelings of superiority and a refusal to learn from others are dubious luxuries we can ill afford in these times.

Prosecutions of Bush Administraton Figures?

The real question is not whether the U.S. government kidnapped people from foreign countries without extradition, tortured captives, turned others over to third parties for torture, engaged in illegal surveillance of American citizens on U.S. soil, held suspects without due process, and lied about what it was doing. No, none of that is even in question anymore. The real question is, what should we do about the Bush Administration's violations of treaties, laws and the Constitution?

Opinion is divided on the matter. It runs the entire gamut. Representative Henry Waxman would like to send people to jail. Senator Patrick Leahy, Chair of the Judiciary Committee, wants to hold congressional inquiries with the power to grant immunity to those who testify. President Obama says, "no one is above the law," but by saying he wants to, "look forward, not backward" he signals his preference not to delve into these matters. Speaker Pelosi said impeachment and presumably prosecutions are "off the table." They could derail the Democratic legislative agenda. That explains Obama's reluctance, too. They have a lot of big issues to solve and do not want to expend precious political capital. Most Republicans have made it clear they are vehemently opposed to any investigation or proceedings. Some, such as GOP congressional leaders warn it would become a partisan "witch hunt" that would take over our political discourse and irrevocably poison interparty relations. The former president and vice president and the hard core right feel that whatever was done was completely justified on an 'end justifies the means' argument.

Each of these is a valid argument from its own perspective. Congressional investigations would initiate a partisan cat fight. This might well delay or gum up the Obama administration's legislative program. It would certainly spark heated debate over the airwaves and throughout society. But to do nothing is to excuse, condone and perhaps encourage more wrongdoing. What is the right thing to do?

The right approach is to leave Congress and the President out of it and turn the Justice Department loose on it. If crimes have been committed then the place for them is court. Leave the politics to fall where they may.

If these depredations were committed by organized crime or common thugs, what would the response be? Would there be anyone arguing against prosecuting kidnappers, trespassers, peeping toms, identity theft hackers and sadistic torturers? Of course not. To argue the contrary is to accept Richard Nixon's famous dictum, "If the president does it, it's not illegal." The next step after accepting that is totalitarianism.

I felt for a long time that Gerald Ford's pardon of Nixon was warranted. The nation had been through a year and a half of debilitating fighting over Watergate. I felt it was time to get it behind us and let the healing begin. I felt being forced to resign was punishment enough for someone as compulsively ambitious as Nixon.

But today I feel I was wrong. Important people in his administration drew the opposite conclusion, that the President's power to do whatever he pleased, legal or not, had been compromised and needed to be restored. Twenty-six years later, Dick Cheney and Donald Rumsfeld came back to get to work on that. And George W. Bush fell right into line with them. After all, not even Nixon had to suffer the personal humiliation of prison. Immense power beckoned without personal risk. That is why criminal investigations must go forward. There has to be a personal deterrent for people contemplating serious crimes. Any conservative would normally agree with that.

So no, dispense with congressional investigations. They are toothless and can only detract from the critical reform and recovery legislation the country needs. Keep the current President out of this. Neither does he need distraction from his primary duties and responsibilities. Let the Justice Department under Eric Holder begin building criminal cases. If sufficient evidence turns up, file charges. If former officials are convicted, send them to prison. If the often self-proclaimed greatest democracy in the world shrinks from enforcing its own laws and Constitution against the powerful, then what is it, really?

Enough of Bipartisanship

OK Barack; nice try. You did what you could. It's already time to chuck this bipartisanship kick and get on with doing what the country needs done. Yes, it is true the country wants a more civil tone in politics. People really are sick of the name-calling and smear tactics. Your campaign victory helped demonstrate that, as you stuck to the issues and won while your opponents called you a terrorist, communist, socialist, traitor and more.

That is all to the good. But do not make the mistake of confusing style with substance. For God's sake yes, the American people are ready for principle and civility in public discourse. They are fed up with paranoid rantings. They want to hear rational discussion between politicians and between the two parties. But that does not mean they want to be governed any longer by quack Republican ideology that doesn't work. As you say yourself, "We cannot go back to the failed policies of the past eight years. That's what the election in November was all about."

You bet it was. According to Gallup, barely 24% of the American people now identify themselves as Republicans. The people favored your stimulus approach over the Republicans' by 26%. In the past two election cycles not one Democratic House or Senate seat has been won by a Republican, even in cases where the incumbent was not running. In contrast, Democrats have picked up 52 Republican seats in the House and 14 in the Senate. So where, exactly, do you see a groundswell of public sentiment to water down your proposals with theirs? The American people can't get rid of them fast enough.

You went to their caucuses. Before you had even set foot in them their leaders were publicly calling for all their members to vote no. You invited them to the White House. You made changes on the spot for them. You directed your congressional allies to accept fifteen of their amendments. In the Senate negotiations you agreed to include the Alternative Minimum Tax fix in the plan, cutting $70 billion from the House package to accommodate it, even though the GAO said it would have no stimulative effect. You allowed them to cut $40 billon from aid to the states and $16 billion from education construction. Surely you do not believe the stimulative effect is stronger for having made these compromises.

In return you got no Republican votes in the House, and the three Northeastern Republican Senators who would probably have voted for it anyway. After the way they have destroyed the budget and national economy, why not do what is best and if they want to stop it then make them actually bring in the cots and filibuster the old fashioned way. Make them hold the floor and explain why they stand in the way of a national recovery bill in the midst of the worst crash since the Great Depression. In no time you'd have 300 seats in the House and 70 in the Senate.

The GOP is not going to change. They despise what you stand for. They are still spouting Hooverism in 2009. They will take as many concessions as you will give but they still will not support you. You are like a man who wants to give water to thirsty people. They believe in giving dirt. For most of the past thirty years they have been following this prescription and the nation is choking to death. Their theory is bunk and yours is right. You accomplish nothing by compromising, mixing their dirt in with your water and ladling out mud. It earns you none of their gratitude. They can't stand to see their dirt diluted in this way.

Yes, by all means keep inviting them over. Refer to them respectfully in public and private. When they come up with good ideas go ahead and include them in your initiatives and give them credit when it is due. But you can stop letting them change things just for the sake of letting them have their way on something, in the mistaken notion it will make them more tractable on something else. They are incredibly set in their views and will not be moved on policy.

So give it up. Enough of bipartisanship; there is no bipartisanship with this crew. Just vote in what you need done. You and your party were decisively elected for a reason; the American people neither believe in nor want Republican solutions. They have had enough of them, thank you.

What Would Lincoln Do?

Today, February 12, is Abraham Lincoln's birthday. The future Sixteenth President was born in a hovel in backwoods Kentucky on this day 200 years ago. To mark the occasion there is a tremendous article by David Von Drehle in the new edition of Time Magazine entitled "What Would Lincoln Do?" It's the kind of treatment thoughtful people ought to read. You can find it here.

Naturally, most of the analysis of Barack Obama's historical significance has concentrated on his status as the first black president. That status cannot help but associate him with Lincoln. "And," as Von Drehle writes, "this already keen interest has been further stoked by what Lincoln Bicentennial Commission executive director Eilenn Mackevich calls an 'Obama wind.' The new President, another slender fellow from Illinois, has been busy reading about Lincoln, quoting Lincoln, evoking Lincoln. The Lincoln Memorial was among Barack Obama's first stops in Washington, and when Obama was sworn in last month it was, for many, the culmination of a long march that began with Lincoln's Emancipation Proclamation."

But the Time article asks us to take a look at a different facet of how the two are similar, and that is in economics. "Long before he gave his first speeches about Union or slavery, Lincoln was a crusader on questions of economic development and banking. He cut his political teeth on conditions painfully topical for us today: an economic crash that left the young legislator struggling to shore up a failing bank while arguing for government spending on public works."

He was familiar with the cycles of boom and bust, having seen "major economic crashes" in 1837 and 1857. "He believed that government had a leading role to play in building the infrastructure of a growing economy. But the guiding principle for all of it, the whole reason for the nation's being, was that "equal chance," the humble citizen's right to get ahead." And it was public action that would help make that possible. He saw what had happened in New York with the completion of the Erie Canal connecting the Atlantic with the Great Lakes. "Attacked and derided as government waste, the Erie Canal was carrying more freight within a few years than the entire Mississippi River." It made New York the megalopolis of the continent and brought opportunity to formerly isolated farmers and craftsmen through the ability to use it to "move their produce to distant markets."

In the 1837 crash, "Financial markets froze, government debt soared, public opinion soured on the maneuverings of bankers and the schemes of politicians." Yet, "at the risk of his budding political career, Lincoln struggled to save the canals and the railroads." He maintained, "The way to save the system was to pump more money into it." Like a stalled steam engine, he likened the economy to being at a "dead point." From there, he said, even a single turn is "extremely difficult," but jolt it back to life and it quickly regains momentum.

His activist economic legacy as president was practically unprecedented. Von Drehle points out that Lincoln, "worked an unprecedented economic transformation on the country," marked by "creative finance, large ambition and the spirit of economic advancement." He introduced an income tax, large-scale bond sales, paper currency and new controls on banks to fund the Civil War. In the midst of it he sponsored the Homestead Act, the Morrill Land-Grant College Act and the Transcontinental Railroad. These brilliant initiatives are paying dividends still today. He even continued construction on the Capitol Dome. It is easy to draw the similarities between Abraham Lincoln's public infrastructure and finance activism and that which Barack Obama seeks to do in the difficult straits of 2009.

No doubt Old Abe would be fascinated if he could come back today and see the first president of African descent ensconced in his former digs. He would surely be proud to learn the fellow is from Illinois. But he might be just as gratified to see his twenty-first century successor turning to the same kinds of opportunity and stimulus-creating ideas he pioneered back then, and against opposition just as dead-set against the very principles. It is easy to imagine the Rail Splitter nodding that big, shaggy head of his in approval.

A Close Call at the Post Office

Today I went to the post office to mail Valentine's Day parcels to my two grown daughters. Yesterday I had some fun putting together the gift boxes. My wife had bought the cards, but I got to go to the gift shops and find some cute and interesting knickknacks to go along with them. I also got a box and some packing material. I found another box of the right size, some packing tape and some of those styrofoam "peanuts" that had been sitting in a plastic trash bag out in the garage since we moved into the house ten years ago.

This all didn't feel like work; it was a labor of love. I enjoyed wrapping, bagging and addressing everything while I put dinner in the oven and watched the news and the president's press conference. I smiled to myself imagining their reactions when they get the packages and open each item. The intensity changes from when they are rambunctious little ones and you're in your twenties but not the satisfaction. My wife was at her district's board of education meeting so it was just me at home until about 9:00. Anyhow, I had everything packed and in the car ready to go for when I left for work this morning. All I needed was the postage and to send them off.

So after work I drove south on Mooney, the main commercial artery of town, past the Visalia Mall and turned right to get into the post office on Beech Street. The main entrance was boarded up with plywood. Oh, that's right, I remembered reading in the local paper about the 77-year-old woman who drove her car through the exterior and interior sets of glass doors and aluminum framing right into the service line. "No window service until further notice at this location" read a sign on the auxiliary entrance. You can still check your post office box or drop a letter in a slot there, but that's about it.

Well, I should have thought of that. So now, do I go to the main station downtown or the satellite one on Akers Street? I figured downtown would be too crowded on the lunch hour and headed out to Akers Street.

The line was long there but the company was nice. I got in line behind an older guy with an Alaska hat on and we struck up a conversation. He'd retired from up there and is 75 now. He'd also come from the Beech Street post office. We talked a little about the damage at the other location. We did the usual speculating about how the woman must have thought she was hitting the brake as she pressed the accelerator. He said, "I hope I have the good sense to recognize when I can't safely drive any more."

I pointed out one postal service employee working at one window who normally works at Beech Street. The lady behind us in line pointed out that he was setting up his register there the morning the lady drove into the lobby. Fortunately it was fifteen minutes before opening. A little later and she would probably have plowed through a waiting line of customers. As it was, he had just turned back from the counter when her car came crashing through. She went all the way up to the counter, damaging it and smashing his computer. If he'd stayed there a few seconds later he might have been seriously hurt.

The woman in line said the driver had actually been confused and thought the glass wall was an opening she was supposed to drive into. When the police got there she wasn't sure what had happened or how she got into an accident. Kind of makes me grateful to have gotten though another day. You never know what could happen to you on any given day. Or from moment to moment, for that matter. It also makes me wonder if there isn't something we ought to be doing to make sure people are fit to be driving.

Oh well, the main thing is I can already imagine the smiles on my girls' faces when they get their little care packages from Mom and Dad. It was a good day.

What the Stimulus Cuts Mean

Now that we have some numbers on the Senate compromise for the Stimulus Package I feel I can make some comments. Moderate Republican Senators Susan Collins and Olympia Snowe from Maine and Arlen Specter from Pennsylvania emerged from negotiations with twelve to fifteen moderate Democrats led by Ben Nelson of Nebraska and announced agreement had been reached to cut some $110 billion from the Stimulus Bill passed by the House. Because the Republican leadership has said it will filibuster if the Democrats cannot get 60 votes the Democrats needed at least two Republicans to cross party lines.

The Senate version, to be voted on Tuesday, comes to $827 billion. That's actually more than the House's $819 billion. That's because the Senate version includes the annual extension of relief from the Alternative Minimum Tax for inflation. The House version did not include this, and in order to reconcile the two bills either the House will have to cut over $90 billion from what they have already approved or the Senate will have to restore some cuts. Of course, that is all up to the three Republican crossovers. Any two of them could scuttle the whole deal.

The caucusers pruned the easy, low-hanging fruit, of which there was precious little in this bill compared to the usual Washington budget offering. Nobel economist Paul Krugman mentioned tonight it was less than 2%. At any rate, 83% of the $110 billion in cuts come from seven items. They are: Aid to State Education Budgets $20 b, Aid to States $40 b, School Construction $16 b, State Incentive Grants $ 7.5 b, Higher Education Construction $3.5 b, Federal Building Greening $3.5 b, and aid to implement No Child Left Behind $600 million.

These are not cuts of "pork barrel spending." Except for the Federal Building Greening, which of itself is a wise investment that will pay for itself in a few years while helping clean the air, they all represent programs directly related to saving or creating jobs by getting fiscal aid to states hard-pressed by the recession. Forty-six states face deficits due to the recession. On Meet the Press this morning Rep. Barney Frank (D-MA) said, "That's the wasteful spending that my colleagues are talking about. Money to go to the states to stop them from laying off cops and firefighters, money to help keep teachers going. Those are jobs."

His counterpart on the program, Sen. John Ensign (R-NV) pooh-poohed Frank's contention. "You know, that's just fear mongering. We're not going to be doing that in any of the states. (The states') budgets are bloated, the federal government's budget is bloated. What we should be doing is cutting back." You can read a synopsis and see the comment here

As so often seems to be the case, the Republican is wrong not only on the economics but also on the facts. The Center on Budget and Policy Priorities reports that already

Florida has cut aid to local school districts for the current year by $140 per pupil. South Carolina has cut per-pupil funding by $95 in the current year. Maine has cut K-12 funding about $140 per pupil; this comes on top of education cuts earlier this year that were targeted to reduce specific programs. Georgia’s governor has proposed cutting aid to local school districts for the current year by $115 per pupil, and for the coming fiscal year by $189 per pupil.

The report mentions an additional twenty-three states in the process of initiating drastic education cuts of their own. It then concludes,

State deficits over the next two and a half years are likely to total more than $350 billion. With education accounting for such a large share of state general fund budgets, it is difficult for states to avoid these types of damaging cuts — which will only get deeper as the recession continues. The federal government, which can and should run deficits during a recession, could provide assistance to states to help them avoid these actions.

And this is only the effect on education. With deficits like these in prospect there are likely to be similar pressures on law enforcement, sewers, water, parks, libraries, public health and all the other things state governments do. Sen. Ensign and his ideological soul mates may think cutting these appropriations will save money, but in the long run they will cost a great deal of it when states, counties, cities and school districts have to lay off hundreds of thousands of workers to balance their budgets.

If the Stimulus package passes in its present form expect a hue and cry from desperate governors (including big-state Republican heavyweights Arnold Schwarzenegger of California and Charlie Crist of Florida who have already spoken about the critical need for these funds) demanding reinstatement. Economist Krugman also said the package may already be too small as it is. He reported consumer spending is expected to be off $2.8 trillion in the coming two and a half years and the Stimulus is now at barely $800 billion. For these reasons I do not believe all these cuts will ultimately stand.

Recession Economics 101

I am waiting for more definitive information to come out on the Stimulus compromise before offering a more detailed analysis of it. Word tonight is that moderate Republican Senators Susan Collins, Olympia Snowe and Arlen Specter, meeting with about a dozen Democratic moderates have cut about $110 billion off the Administration proposal, to about $780 billion. I will want to see what has been cut and what retained before commenting.

The debate so far clearly demonstrates that the lion's share of remaining Republicans have learned nothing from their disastrous mismanagement of the economy over the past eight years and indeed the impetus of the past twenty-eight.

Let me see if I can make this simple. An economy goes into a recession because people are not buying enough. In other words, demand is low. When sales go down companies cut back production (or orders if they are retailers, or services if they are a service provider, and so on) and labor costs, because there are not enough sales to justify full production or service and therefore not enough work to justify a full payroll.

The people who are laid off lose their income and cut back drastically on their spending. If this happens to a lot of people it means still less demand, requiring further cuts in production and employment across the economy. It becomes a "downward spiral." That is what we are in now. The Labor Department reported today that job losses accelerated to 598,000 in January, the fourth worst month ever recorded in U.S. history. We have lost 3.6 million jobs since the beginning of the recession, more than half of these in the past four months.

On top of that, once people sense the economy is in recession even those with jobs spend less. They fear they may be next to be laid off, so they save any extra money to get them through hard times should they lose their jobs. This depresses demand even more.

In our present particular case we also have the added burden of the housing bubble and related financial crash. Banks lost so much money making foolish loans they are cash-poor and gun shy about making new loans. People have little or no equity in their homes to secure new loans anyway. And companies see little reason to borrow to expand in an economic climate with no demand for their goods or services, even if the banks would make it available at reasonable rates, which they are not.

What did President Bush try to do about this? He passed a $170 billion stimulus plan based on tax rebates a year ago, in February, 2008. The recession has only deepened since. That is because people, with recessionary expectations, did not spend the money. They saved it or used it to pay down things like credit card debt. Next he led a $700 billion effort to subsidize and partially nationalize, at least temporarily, the financial industry. Half of that has been committed, and it has accomplished little as well, since there were no sensible requirements that the banks use the money to lend to people or to avoid wasting it on bonuses to the super rich, junkets and such.

So, what did Senators McCain, Kyl, McConnell, Graham and most other Republicans do? Thirty-six of them voted in favor of McCain's amendment to get rid of almost all the spending in Obama's recovery bill and just have tax cuts. That is thirty-six of the forty-one, or almost 90% of them, voted to reinforce failure by continuing to do what did not work last time, or the time before that, or the time before that. They do not learn because they have their beliefs, which are impervious to results.

What Obama and most Democrats want to do is to get spending going in the economy by having the government do it. If business can't, the banks won't, and consumers either cannot or dare not, who else is there to restore demand? That's right, only the government in such a climate can spend the kinds of sums necessary to increase sales for goods and services which will result both in the direct creation and restoration of jobs and the breaking of the recessionary cycle. The theory behind this has been established for over seventy years and has been successful in overcoming many recessions over the decades. Look up a selection of biographies of economist John Maynard Keynes here.

Wall Street Whistle Blower Vindicated

Harry Markopolos is not a household name, but he soon could be. For nearly ten years the investor and former securities industry executive and fraud investigator carried on a fruitless campaign to get federal regulators to thoroughly examine the dealings of now-disgraced pyramid scammer Bernie Madoff. Now that Madoff's $50 billion Ponzi scheme has been revealed, Markoplos is seen as something of a prophet. He testified before the House Financial Services subcommittee this week. You can read the Los Angeles Times story about it here.

"The SEC was never capable of catching Mr. Madoff. He could have gone to $100 billion," Markopolos told the subcommittee. "It took me about five minutes to figure out he was a fraud." Markopolos came to that conclusion in 2000, based on comparing the strategy Madoff touted with the results he claimed he was getting. It just didn't add up.

Markopolos and his team of four investigators found 29 separate "red flags" about the Madoff operation. Over the years he delivered his findings and evidence to the Securities and Exchange Commission, former New York Attorney General Eliot Spitzer and the Wall Street Journal. Markopolos was not reticent about the reasons he feels no investigations were launched. He cited the incestuous pattern of former Wall Street figures regulating their own industry before cycling back into the business.

Markopolos testified, "The SEC is captive to the industry it regulates and is afraid." As a one-time chairman of the NASDAQ stock market and a member of the SEC Advisory Committee, Madoff was, "one of the most powerful men on Wall Street and in a position to easily end our careers or worse." For this reason, he said, "the agency is busy protecting the big financial predators from investors," and, "roars like a lion and bites like a flea."

SEC Division leaders Linda Thomsen and Lori Richards and industry self-regulator Stephen Luparello were heard by the committee last week, in performances that left the congressmen, "scarcely satisfied," according to the Times, and legislators of both parties are calling for a major shakeup. Markopolis pointed to the Financial Industry Regulatory Authority as, "very corrupt." It was headed by Mary Schapiro until December. She is now the Head of the SEC.

What Obama Should Do Next

Thus far it appears the Republicans are getting the better of the stimulus bill debate. The Congressional GOPers are both nit-picking it on details and attacking its basic premises, contending as always that spending is bad and tax cuts are good. Even though a tax cut never built a highway or a bridge, if President Obama is not able to recapture the initiative in this debate the Republicans just may succeed in gumming up the works and stymieing Obama on his biggest initiative right out of the gate. They would like nothing better than to do this, for they would seem powerful and he crippled and ineffective for a long time to come.

For his part, Obama, due to his continuing efforts to woo Republicans and foster bipartisanship, cannot use his strongest argument, the one that was so effective in the campaign. If he wanted to skewer the naysayers all he would need do would be to remind Americans that these same people and their discredited philosophies were what got us into this mess in the first place. We have followed their prescription of cutting taxes and domestic programs while deregulating business and fighting unnecessary wars and have achieved the customary results. Anyone who would turn the economy back over to them after the last eight years must have a short memory indeed.

But he can't really talk like that if he wants to preserve any chance of bipartisanship going forward. They know this, and thus their cooperation will come with a higher price than it would otherwise bring. So they find fault with the specifics they can. Obama said today in an interview with NBC anchor Brian Williams that the total of all the spending components that anyone has objected to so far accounts for less than one percent of the package. But it is the continuing dynamic of them finding fault that is the primary story.

Obama needs to turn that around with an attention-getting part of the bill that will get people excited. Computerizing medical records, as smart and needed as that is, does not cross the excitement threshold. Neither does weatherstripping and insulating federal buildings. People want to see tangible evidence of activity, and that usually means construction, a lot of it. Obama will make a good splash tomorrow by announcing a cap on salaries for companies that have taken federal bailout money. That will play well because people are extremely angry at fat cats who've fed at the public trough and kept on with business as usual. But he should also find a visionary part of the stimulus to stand as his poster child for the public relations war now underway. Franklin Roosevelt did that with the Grand Coulee Dam and Jack Kennedy with the space program in their days, for instance. Obama would be wise to target from among the projects in his bill a 21st century equivalent.

One can hardly fault the Republicans for pushing for what they believe in, nor Obama for trying to change the partisan climate. But at some point something will have to give. Either the Republicans will need to offer meaningful cooperation or Obama will have to order the Democratic majorities in Congress to start steamrolling them and let bipartisanship be damned. If their price for partnership is a continuance of Bushism that should be a price Obama refuses to pay. That is not what a majority of nine million Americans voted for three months ago. If the president crosses the aisle too far that gurgling sound you hear will be the sound of change you can believe in sinking into the swamp of disillusionment. He should never forget one thing; he and his party won the election, and they won it big.