Commentary Magazine


Topic: Dow 30

Flotsam and Jetsam

Get the feeling that Michael Steele has no friends these days? “Republican National Committee political director Gentry Collins resigned from his post Tuesday morning with a stinging indictment of Chairman Michael Steele’s two-year tenure at the committee. In a four-page letter to Steele and the RNC’s executive committee obtained by POLITICO, Collins lays out inside details, previously only whispered, about the disorganization that plagues the party. He asserts that the RNC’s financial shortcomings limited GOP gains this year and reveals that the committee is deeply in debt entering the 2012 presidential election cycle.”

Get ready for a really, really tough punishment for Charles Rangel. “A House panel on Tuesday found Representative Charles B. Rangel guilty of 11 counts of ethical violations, ruling that his failure to pay taxes, improper solicitation of fund-raising donations and failure to accurately report his personal income had brought dishonor on the House. … While the committee has the power to recommend expulsion, that is highly unlikely. Ethics experts and committee members have said that Mr. Rangel, 80, is more likely to face a letter of reprimand or a formal censure.” OK, maybe just a hand slap.

Get government to downsize? Puleeze. David Malpass explains what’s so bad about the Fed’s $600B bond-purchase scheme. “By buying longer term assets, whose value will decline when interest rates rise, the Fed is engineering a fundamental change in the nature of U.S. monetary policy. This has undercut global confidence in the Fed, as reflected in high gold prices, dollar weakness, and large-scale investments abroad by U.S. companies and wealthy individuals. … Both fiscal stimulus and Fed asset purchases raise the same giant red flag. As the government expands its role in the economy, business confidence and hiring decline in the knowledge that there’s no free lunch.”

The Obama team simply doesn’t get it: once again, Secretary of Defense Robert Gates throws cold water on the use of military force for preventing Iran from going nuclear. They sure have gone out of their way to give the mullahs assurance that they can defy us without risking a military strike.

Bibi says he needs to get the U.S. bribes promises in writing. “Prime Minister Binyamin Netanyahu said Tuesday that Israeli approval of a 90-day settlement freeze was contingent upon a written US pledge regarding a package of incentives that insured his country’s security and national interests, diplomatic sources told The Jerusalem Post.” Now, there’s a “rock-solid” relationship for you.

House Dems get their anger out. “Disgruntled Democrats finally had a chance to confront Speaker Nancy Pelosi face-to-face for the first time during a raucous closed-door caucus meeting Tuesday, as defeated Rep. Allen Boyd called her ‘the face of our defeat.’ ‘We need new leadership,’ Boyd, a Florida Democrat, told his colleagues, according to sources in the room. … Pelosi, her top elected lieutenants and her aides have been scrambling to defuse discontent following the election. They are actively working to prevent a delay in the leadership vote and to deny support to a slate of proposals by moderate ‘Blue Dog’ Democrats that would weaken her hand in the minority by making top appointive positions subject to caucus election.”

Investors get jittery: “Global stock markets’ steady march higher was interrupted by concerns about growth in China, debt in Europe and the Federal Reserve’s $600 billion plan to stimulate the U.S. economy. Tuesday’s world-wide selling was touched off by a 4% stock drop in Shanghai. It spread to Europe, where markets fell more than 2%, and then to the U.S., pushing the Dow Jones Industrial Average down 1.6%, its worst point and percentage decline since August 11.”

Get the feeling that Michael Steele has no friends these days? “Republican National Committee political director Gentry Collins resigned from his post Tuesday morning with a stinging indictment of Chairman Michael Steele’s two-year tenure at the committee. In a four-page letter to Steele and the RNC’s executive committee obtained by POLITICO, Collins lays out inside details, previously only whispered, about the disorganization that plagues the party. He asserts that the RNC’s financial shortcomings limited GOP gains this year and reveals that the committee is deeply in debt entering the 2012 presidential election cycle.”

Get ready for a really, really tough punishment for Charles Rangel. “A House panel on Tuesday found Representative Charles B. Rangel guilty of 11 counts of ethical violations, ruling that his failure to pay taxes, improper solicitation of fund-raising donations and failure to accurately report his personal income had brought dishonor on the House. … While the committee has the power to recommend expulsion, that is highly unlikely. Ethics experts and committee members have said that Mr. Rangel, 80, is more likely to face a letter of reprimand or a formal censure.” OK, maybe just a hand slap.

Get government to downsize? Puleeze. David Malpass explains what’s so bad about the Fed’s $600B bond-purchase scheme. “By buying longer term assets, whose value will decline when interest rates rise, the Fed is engineering a fundamental change in the nature of U.S. monetary policy. This has undercut global confidence in the Fed, as reflected in high gold prices, dollar weakness, and large-scale investments abroad by U.S. companies and wealthy individuals. … Both fiscal stimulus and Fed asset purchases raise the same giant red flag. As the government expands its role in the economy, business confidence and hiring decline in the knowledge that there’s no free lunch.”

The Obama team simply doesn’t get it: once again, Secretary of Defense Robert Gates throws cold water on the use of military force for preventing Iran from going nuclear. They sure have gone out of their way to give the mullahs assurance that they can defy us without risking a military strike.

Bibi says he needs to get the U.S. bribes promises in writing. “Prime Minister Binyamin Netanyahu said Tuesday that Israeli approval of a 90-day settlement freeze was contingent upon a written US pledge regarding a package of incentives that insured his country’s security and national interests, diplomatic sources told The Jerusalem Post.” Now, there’s a “rock-solid” relationship for you.

House Dems get their anger out. “Disgruntled Democrats finally had a chance to confront Speaker Nancy Pelosi face-to-face for the first time during a raucous closed-door caucus meeting Tuesday, as defeated Rep. Allen Boyd called her ‘the face of our defeat.’ ‘We need new leadership,’ Boyd, a Florida Democrat, told his colleagues, according to sources in the room. … Pelosi, her top elected lieutenants and her aides have been scrambling to defuse discontent following the election. They are actively working to prevent a delay in the leadership vote and to deny support to a slate of proposals by moderate ‘Blue Dog’ Democrats that would weaken her hand in the minority by making top appointive positions subject to caucus election.”

Investors get jittery: “Global stock markets’ steady march higher was interrupted by concerns about growth in China, debt in Europe and the Federal Reserve’s $600 billion plan to stimulate the U.S. economy. Tuesday’s world-wide selling was touched off by a 4% stock drop in Shanghai. It spread to Europe, where markets fell more than 2%, and then to the U.S., pushing the Dow Jones Industrial Average down 1.6%, its worst point and percentage decline since August 11.”

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Obama’s Economy

It was supposed to be the summer of recovery. But the recovery isn’t happening, and consumers, employers, and investors have registered their votes on Obamanomics: thumbs down. The drop-off in housing sales tells us that despite historically low interest rates and available credit, consumers are nervous and lack confidence about the future. Better not to buy now. The stock market, the best indicator we have about expectations for the economy, has nosedived as well:

The Dow Jones Industrial Average stumbled back below 10000 on Thursday, an unwelcome milestone as worries about the U.S. economy increase. The blue-chip index erased early gains to finish down 74.25 points, or 0.74%, at 9985.81. The close is its first finish below the psychologically important level since July 6. …

Thursday’s stock declines came as the latest economic bad news—a stalling of manufacturing activity in the Kansas City district of the Federal Reserve Bank—added to a pile of economic warning signs in recent weeks.

Trading volumes were anemic, with less than four billion shares changing hands—below the daily average this year of 5.1 billion.

There is a political and economic way forward for Obama — not in time to spare him and his party bruising losses in November but to salvage the last two years of his presidency. First, and no easy thing for a man with a messiah complex, Obama needs to stop telling us that what he’s done has worked. It hasn’t, and it makes him look foolish. Second, he should listen to Douglas Schoen:

Mr. Obama and his Democratic colleagues also need to stop their phony populist campaign emphasizing that they have taken on the banks and Wall Street. Populism—particularly of the left-wing type that seeks to expand the role of government with redistributive fiscal policies and increases in government spending, intervention and ownership—rarely if ever works. In the absence of a successful argument for the administration’s overarching policy approach, a populist campaign would be as fruitless as blaming George W. Bush for every ill America now faces.

Beyond that, the administration must emphasize that it understands the electorate’s concern about fiscal prudence, the deficit, the debt and the need to balance the budget. The independent voters who hold the fate of the Democrats in their hands are looking for candidates who champion, in a bipartisan context, fiscal discipline, limited government, deficit reduction and a free market, pro-growth agenda. If Democrats don’t offer this, they will be branded liberal tax-and-spenders.

They are already branded the liberal tax-and-spenders, but that is smart policy and smart politics.

In the wake of the November election, there will be time for reflection, one hopes. If Obama wants to rescue his presidency and assist rather than encumber our recovery, he has to stop doing what he has been and start doing what his critics urged. After a summer of brutal economic developments and a decisive electoral defeat in November, maybe he’ll be ready. We’ll see.

It was supposed to be the summer of recovery. But the recovery isn’t happening, and consumers, employers, and investors have registered their votes on Obamanomics: thumbs down. The drop-off in housing sales tells us that despite historically low interest rates and available credit, consumers are nervous and lack confidence about the future. Better not to buy now. The stock market, the best indicator we have about expectations for the economy, has nosedived as well:

The Dow Jones Industrial Average stumbled back below 10000 on Thursday, an unwelcome milestone as worries about the U.S. economy increase. The blue-chip index erased early gains to finish down 74.25 points, or 0.74%, at 9985.81. The close is its first finish below the psychologically important level since July 6. …

Thursday’s stock declines came as the latest economic bad news—a stalling of manufacturing activity in the Kansas City district of the Federal Reserve Bank—added to a pile of economic warning signs in recent weeks.

Trading volumes were anemic, with less than four billion shares changing hands—below the daily average this year of 5.1 billion.

There is a political and economic way forward for Obama — not in time to spare him and his party bruising losses in November but to salvage the last two years of his presidency. First, and no easy thing for a man with a messiah complex, Obama needs to stop telling us that what he’s done has worked. It hasn’t, and it makes him look foolish. Second, he should listen to Douglas Schoen:

Mr. Obama and his Democratic colleagues also need to stop their phony populist campaign emphasizing that they have taken on the banks and Wall Street. Populism—particularly of the left-wing type that seeks to expand the role of government with redistributive fiscal policies and increases in government spending, intervention and ownership—rarely if ever works. In the absence of a successful argument for the administration’s overarching policy approach, a populist campaign would be as fruitless as blaming George W. Bush for every ill America now faces.

Beyond that, the administration must emphasize that it understands the electorate’s concern about fiscal prudence, the deficit, the debt and the need to balance the budget. The independent voters who hold the fate of the Democrats in their hands are looking for candidates who champion, in a bipartisan context, fiscal discipline, limited government, deficit reduction and a free market, pro-growth agenda. If Democrats don’t offer this, they will be branded liberal tax-and-spenders.

They are already branded the liberal tax-and-spenders, but that is smart policy and smart politics.

In the wake of the November election, there will be time for reflection, one hopes. If Obama wants to rescue his presidency and assist rather than encumber our recovery, he has to stop doing what he has been and start doing what his critics urged. After a summer of brutal economic developments and a decisive electoral defeat in November, maybe he’ll be ready. We’ll see.

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What Real Threats Look Like

There is a set of realities identified by the American left as threats to national, if not global, security. These include things like the U.S.’s own nuclear arsenal, the stationing abroad of some 370,000 American troops, Israel’s capable defenses, and warm weather. To call these phenomena threats is no mere act of speculation. It is a bold inversion of the truth.

Few policies boast a perfect record of 50-plus years, but U.S. nuclear deterrence has the right to do so. The American arsenal kept Russia from invading Western Europe throughout the entirety of the Cold War. Similarly, U.S. military bases, whether established in postwar Germany and Japan or set up 50 years later in the Balkans, have underwritten long-term stability in every hemisphere.

The left has ignored entirely the debt owed to Israel’s military. In 1981, the Israeli Airforce’s Operation Babylon took out Saddam Hussein’s nuclear reactor in Osirak, robbing the world’s most dangerous leader of his own deterrence capabilities. This is to say nothing of Israel’s attack on other dangerous weapons programs and of the Jewish state’s perpetual battle to defeat Islamist terrorism the world over.

As for the deadly threat of high temperatures, a 2007 study reported: “From 1979 to 1997, extreme cold killed roughly twice as many Americans as heat waves, according to Indur Goklany of the U.S. Department of the Interior.”

It is remarkable how fast these boutique “threats” fall by the wayside when the genuine article appears. Today, the AP reports, “The Dow Jones industrials plunged below 10,000 Tuesday after traders dumped stocks on worries about the global economy and tensions between North and South Korea.” Funny, you never read about a stock-market nosedive in response to a balmy June, the ongoing maintenance of American nuclear weapons, an Israeli response to Hamas, or the construction of a distant American military base.

The world sets itself on edge like this only when an unmistakable, demonstrable threat to peace emerges. We now see one in the increasing bellicosity of Kim Jong-il’s regime.

And speaking of those dangerous American military bases abroad, South Korean President Lee Myung-bak doesn’t seem to be too offended by President Obama’s declaration that “the Republic of Korea can continue to count on the full support of the United States.” When Seoul turns down that support, we can start worrying about the left’s critical-threat list. Until then, the world has some actual problems to deal with, thanks very much.

There is a set of realities identified by the American left as threats to national, if not global, security. These include things like the U.S.’s own nuclear arsenal, the stationing abroad of some 370,000 American troops, Israel’s capable defenses, and warm weather. To call these phenomena threats is no mere act of speculation. It is a bold inversion of the truth.

Few policies boast a perfect record of 50-plus years, but U.S. nuclear deterrence has the right to do so. The American arsenal kept Russia from invading Western Europe throughout the entirety of the Cold War. Similarly, U.S. military bases, whether established in postwar Germany and Japan or set up 50 years later in the Balkans, have underwritten long-term stability in every hemisphere.

The left has ignored entirely the debt owed to Israel’s military. In 1981, the Israeli Airforce’s Operation Babylon took out Saddam Hussein’s nuclear reactor in Osirak, robbing the world’s most dangerous leader of his own deterrence capabilities. This is to say nothing of Israel’s attack on other dangerous weapons programs and of the Jewish state’s perpetual battle to defeat Islamist terrorism the world over.

As for the deadly threat of high temperatures, a 2007 study reported: “From 1979 to 1997, extreme cold killed roughly twice as many Americans as heat waves, according to Indur Goklany of the U.S. Department of the Interior.”

It is remarkable how fast these boutique “threats” fall by the wayside when the genuine article appears. Today, the AP reports, “The Dow Jones industrials plunged below 10,000 Tuesday after traders dumped stocks on worries about the global economy and tensions between North and South Korea.” Funny, you never read about a stock-market nosedive in response to a balmy June, the ongoing maintenance of American nuclear weapons, an Israeli response to Hamas, or the construction of a distant American military base.

The world sets itself on edge like this only when an unmistakable, demonstrable threat to peace emerges. We now see one in the increasing bellicosity of Kim Jong-il’s regime.

And speaking of those dangerous American military bases abroad, South Korean President Lee Myung-bak doesn’t seem to be too offended by President Obama’s declaration that “the Republic of Korea can continue to count on the full support of the United States.” When Seoul turns down that support, we can start worrying about the left’s critical-threat list. Until then, the world has some actual problems to deal with, thanks very much.

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The End of the Welfare-State Model?

Stuart Varney of Fox Business News said Thursday on Fox News Special Report that what we are witnessing with the debt crisis in Greece and the swoon of the markets over the last week and a half is the end of the welfare-state model of governance. I think he’s right.

Markets are notorious for sometimes being oblivious to developments in the economy that, in retrospect, seem obvious — and then, suddenly, waking up and acting. The American economy began to slow down in the spring of 1929, for instance, but Wall Street — usually ahead of the economy — paid no attention and soared over the summer to heights unseen before. Then, on the day after Labor Day, for a trivial reason, the market panicked in the last hour of trading, and the mood turned instantly from “the sky’s the limit” to “every man for himself.” Six weeks later, the great crash of 1929 happened.

For years, democratic governments have been promising citizens ever-increasing benefits in the future to win votes in the present. What they haven’t been doing is arranging to pay for them. Instead, they have used phony bookkeeping to make things look under control. New York City did this in the 60s and 70s until one day the banks said they weren’t rolling over the city’s paper anymore. Now, Greece has suffered the same fate. It lied to the EU to get in and has been cooking the books to hide the gathering fiscal disaster ever since. The market has now made it clear that it thinks Greek bonds are for wallpaper, not investing. With more than 10 billion euros in bonds coming due on May 19, Greece had no choice but to accept draconian cuts in its benefits and strict accountability in the future to be bailed out by its euro-zone partners. They, of course, fear the collapse of the euro as a currency and a spreading contagion to larger countries that have also been doing what Greece has done for so long.

Europe would need $60 trillion in the bank, earning government-borrowing-rate interest, to fund its future welfare benefits. Needless to say, no country has four times its GDP in the bank.

In short, the market has suddenly become aware that the emperor known as the welfare state is, financially speaking, buck naked. The cost of insuring against bank default in Europe, according to Bloomberg, is now more than it was when Lehman Brothers collapsed. Other rates are nowhere near those levels, but it would not take much to set off a global panic. Markets have been down all week, and the Dow was down today by 1.34 percent, down 7 percent since Monday.

Great Britain and the United States, insulated from the crisis in Europe because they do not use the euro, have big financial promises they can’t pay for, either. President Obama, of course, wants to make more promises.

If Greece stands up to its unions and its outraged bureaucrats and reforms its ways, I suspect the current crisis will pass. But unless the rest of the democratic world reforms its ways — and soon — then, as Bette Davis famously said in All About Eve: “Fasten your seat belts. It’s going to be a bumpy night.”

Stuart Varney of Fox Business News said Thursday on Fox News Special Report that what we are witnessing with the debt crisis in Greece and the swoon of the markets over the last week and a half is the end of the welfare-state model of governance. I think he’s right.

Markets are notorious for sometimes being oblivious to developments in the economy that, in retrospect, seem obvious — and then, suddenly, waking up and acting. The American economy began to slow down in the spring of 1929, for instance, but Wall Street — usually ahead of the economy — paid no attention and soared over the summer to heights unseen before. Then, on the day after Labor Day, for a trivial reason, the market panicked in the last hour of trading, and the mood turned instantly from “the sky’s the limit” to “every man for himself.” Six weeks later, the great crash of 1929 happened.

For years, democratic governments have been promising citizens ever-increasing benefits in the future to win votes in the present. What they haven’t been doing is arranging to pay for them. Instead, they have used phony bookkeeping to make things look under control. New York City did this in the 60s and 70s until one day the banks said they weren’t rolling over the city’s paper anymore. Now, Greece has suffered the same fate. It lied to the EU to get in and has been cooking the books to hide the gathering fiscal disaster ever since. The market has now made it clear that it thinks Greek bonds are for wallpaper, not investing. With more than 10 billion euros in bonds coming due on May 19, Greece had no choice but to accept draconian cuts in its benefits and strict accountability in the future to be bailed out by its euro-zone partners. They, of course, fear the collapse of the euro as a currency and a spreading contagion to larger countries that have also been doing what Greece has done for so long.

Europe would need $60 trillion in the bank, earning government-borrowing-rate interest, to fund its future welfare benefits. Needless to say, no country has four times its GDP in the bank.

In short, the market has suddenly become aware that the emperor known as the welfare state is, financially speaking, buck naked. The cost of insuring against bank default in Europe, according to Bloomberg, is now more than it was when Lehman Brothers collapsed. Other rates are nowhere near those levels, but it would not take much to set off a global panic. Markets have been down all week, and the Dow was down today by 1.34 percent, down 7 percent since Monday.

Great Britain and the United States, insulated from the crisis in Europe because they do not use the euro, have big financial promises they can’t pay for, either. President Obama, of course, wants to make more promises.

If Greece stands up to its unions and its outraged bureaucrats and reforms its ways, I suspect the current crisis will pass. But unless the rest of the democratic world reforms its ways — and soon — then, as Bette Davis famously said in All About Eve: “Fasten your seat belts. It’s going to be a bumpy night.”

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Flotsam and Jetsam

“Recovery” means something other than a steady, predictable improvement in the economy: “The Dow Jones industrial average plunged nearly 1,000 points in afternoon trading before recovering significantly Thursday — but it was enough to sow chaos on Wall Street as traders blamed everything from a technical glitch to chaos in the Greek economy. In Washington, the sudden drop — the biggest within a single trading day in Dow history — underscored just how fragile the nascent recovery could be, as the White House tries to convince the public that signs of growth mean the economy has begun to turn the corner.”

“Transparent” means you have to be taken to court to disclose documents to congressional investigators: “Senate Homeland Security Committee Chairman Joe Lieberman (I-Conn.) and ranking Republican Susan Collins (Maine) on Thursday said they are poised to press their subpoena fight with the Obama administration into court. Lieberman and Collins, speaking separately, both said the Justice and Defense departments have been uncooperative with their efforts to obtain more information about the November 2009 shootings at Fort Hood, Texas, that killed 13 people.”

Reset” means all is forgiven: “President Obama is preparing to revive a civilian nuclear cooperation agreement with Moscow that his predecessor shelved two years ago in protest of Russia’s war on its tiny neighbor, Georgia, administration officials said Thursday. Renewing the agreement would be the latest step in Mr. Obama’s drive to repair relations between the two powers, at a time when he is seeking Moscow’s support for tough new sanctions against Iran. But word of the move has generated consternation in Congress, where some lawmakers were already skeptical of the agreement and now worry that Mr. Obama is giving Russia too much.”

“Awareness of the potential political consequences of the actions” means holy cow — the Democrats are going to get wiped out! Ohio Gov. Ted Strickland: “I think we need to proceed with some awareness of the potential political consequences of the actions that are undertaken here in Washington.”

Civility” means his critics should shut up. “Less than a week after promoting the need to treat others ‘with courtesy and respect,’ the unhappy warrior was at it again yesterday with a misleading attack on the motives of an opponent. Responding to an amendment offered by Senator Richard Shelby to limit the scope of the proposed Consumer Financial Protection Bureau, Mr. Obama said, ‘I will not allow amendments like this one written by Wall Street’s lobbyists to pass for reform.’ Mr. Civility was insulting the gentleman from Alabama, but even if delivered in dignified language, the attack was false.”

ObamaCare” means you’re not going to keep your health-care plan. Yuval Levin explains that “it turns out that several major corporations are drawing up plans to end their employee health benefits once Obamacare gets up and running. They’ve done the math and figured out that the penalty they would have to pay for dropping their workers would be much lower than the costs of continuing to insure them, and now there will be a new taxpayer-subsidized option for those workers to turn to in state exchanges, so why not cut them off?”

For the New York Times,a pragmatist” means a law-school dean (Elena Kagan) who signs an amicus brief arguing that military recruiters can be banned from campuses despite a contrary federal law. “She repeatedly criticized ‘don’t ask, don’t tell,’ the policy that bars gay men and lesbians from openly serving in the military. At one point she called it ‘a moral injustice of the first order.’  She also joined a legal brief urging the Supreme Court to overturn the law that denied federal funds to colleges and universities that barred military recruiters.”

“Recovery” means something other than a steady, predictable improvement in the economy: “The Dow Jones industrial average plunged nearly 1,000 points in afternoon trading before recovering significantly Thursday — but it was enough to sow chaos on Wall Street as traders blamed everything from a technical glitch to chaos in the Greek economy. In Washington, the sudden drop — the biggest within a single trading day in Dow history — underscored just how fragile the nascent recovery could be, as the White House tries to convince the public that signs of growth mean the economy has begun to turn the corner.”

“Transparent” means you have to be taken to court to disclose documents to congressional investigators: “Senate Homeland Security Committee Chairman Joe Lieberman (I-Conn.) and ranking Republican Susan Collins (Maine) on Thursday said they are poised to press their subpoena fight with the Obama administration into court. Lieberman and Collins, speaking separately, both said the Justice and Defense departments have been uncooperative with their efforts to obtain more information about the November 2009 shootings at Fort Hood, Texas, that killed 13 people.”

Reset” means all is forgiven: “President Obama is preparing to revive a civilian nuclear cooperation agreement with Moscow that his predecessor shelved two years ago in protest of Russia’s war on its tiny neighbor, Georgia, administration officials said Thursday. Renewing the agreement would be the latest step in Mr. Obama’s drive to repair relations between the two powers, at a time when he is seeking Moscow’s support for tough new sanctions against Iran. But word of the move has generated consternation in Congress, where some lawmakers were already skeptical of the agreement and now worry that Mr. Obama is giving Russia too much.”

“Awareness of the potential political consequences of the actions” means holy cow — the Democrats are going to get wiped out! Ohio Gov. Ted Strickland: “I think we need to proceed with some awareness of the potential political consequences of the actions that are undertaken here in Washington.”

Civility” means his critics should shut up. “Less than a week after promoting the need to treat others ‘with courtesy and respect,’ the unhappy warrior was at it again yesterday with a misleading attack on the motives of an opponent. Responding to an amendment offered by Senator Richard Shelby to limit the scope of the proposed Consumer Financial Protection Bureau, Mr. Obama said, ‘I will not allow amendments like this one written by Wall Street’s lobbyists to pass for reform.’ Mr. Civility was insulting the gentleman from Alabama, but even if delivered in dignified language, the attack was false.”

ObamaCare” means you’re not going to keep your health-care plan. Yuval Levin explains that “it turns out that several major corporations are drawing up plans to end their employee health benefits once Obamacare gets up and running. They’ve done the math and figured out that the penalty they would have to pay for dropping their workers would be much lower than the costs of continuing to insure them, and now there will be a new taxpayer-subsidized option for those workers to turn to in state exchanges, so why not cut them off?”

For the New York Times,a pragmatist” means a law-school dean (Elena Kagan) who signs an amicus brief arguing that military recruiters can be banned from campuses despite a contrary federal law. “She repeatedly criticized ‘don’t ask, don’t tell,’ the policy that bars gay men and lesbians from openly serving in the military. At one point she called it ‘a moral injustice of the first order.’  She also joined a legal brief urging the Supreme Court to overturn the law that denied federal funds to colleges and universities that barred military recruiters.”

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Is the Recession Over?

The Business Cycle Dating Committee of the National Bureau of Economic Research, which decides such things, said yesterday that it cannot yet be sure that the recession is over. But one member of the committee publicly dissented, saying that the recession actually ended last June.

So much for the idea that economics is an exact science.

Still, signs of recovery are not hard to find. The Dow Jones Industrial Average, a leading indicator, closed over 11,000 yesterday, for the first time since September 2008, at the height of the financial crisis. From its low in March 2009, the Dow has risen 68 percent. On the other hand, as economists love to say, unemployment (now 9.7 percent) remains near its peak of 10.2 percent, and most economists think it will remain high for a long time. Robert Reich, Clinton’s secretary of labor, explained why in yesterday’s Wall Street Journal.

It seems clear, though, that we are out of the worst of the woods. Banks have recovered and paid back most of the federal money pumped into them. Manufacturing has been increasing. The trade deficit has been rising, a sign of recovery.

And it is becoming clear that the Great Recession may have been a little less great than advertised, thank heavens. If 10.2 turns out to be the peak of unemployment (and, as firms start hiring again, more people, formerly discouraged, start looking for jobs, which can drive the rate back up), then unemployment this time around will not have been as bad as it was in the 1981-82 recession, when it peaked at 10.8 percent, let alone the Great Depression, when it peaked at over 25 percent. And the Dow has regained 58 percent of what it lost from it’s all-time high in October 2007, when it peaked at 14,164, to its bottom in March 2009, when it hit 6626. And did it in two and half years. By way of comparison, the Dow did not regain 58 percent of its 1929 high until 1950, 21 years later.

To be sure, September and October of 2008 were as scary a time in the American financial world as I have experienced in my lifetime — if a piece of cake compared with the winter of 1932-33. But the ensuing economic hard times were far less severe than seemed possible, even likely, in late 2008.

This country still has severe economic challenges facing it (the state and national deficits and unfunded liabilities being by far the greatest), but we’re much better off than many thought we would be a year ago.

The Business Cycle Dating Committee of the National Bureau of Economic Research, which decides such things, said yesterday that it cannot yet be sure that the recession is over. But one member of the committee publicly dissented, saying that the recession actually ended last June.

So much for the idea that economics is an exact science.

Still, signs of recovery are not hard to find. The Dow Jones Industrial Average, a leading indicator, closed over 11,000 yesterday, for the first time since September 2008, at the height of the financial crisis. From its low in March 2009, the Dow has risen 68 percent. On the other hand, as economists love to say, unemployment (now 9.7 percent) remains near its peak of 10.2 percent, and most economists think it will remain high for a long time. Robert Reich, Clinton’s secretary of labor, explained why in yesterday’s Wall Street Journal.

It seems clear, though, that we are out of the worst of the woods. Banks have recovered and paid back most of the federal money pumped into them. Manufacturing has been increasing. The trade deficit has been rising, a sign of recovery.

And it is becoming clear that the Great Recession may have been a little less great than advertised, thank heavens. If 10.2 turns out to be the peak of unemployment (and, as firms start hiring again, more people, formerly discouraged, start looking for jobs, which can drive the rate back up), then unemployment this time around will not have been as bad as it was in the 1981-82 recession, when it peaked at 10.8 percent, let alone the Great Depression, when it peaked at over 25 percent. And the Dow has regained 58 percent of what it lost from it’s all-time high in October 2007, when it peaked at 14,164, to its bottom in March 2009, when it hit 6626. And did it in two and half years. By way of comparison, the Dow did not regain 58 percent of its 1929 high until 1950, 21 years later.

To be sure, September and October of 2008 were as scary a time in the American financial world as I have experienced in my lifetime — if a piece of cake compared with the winter of 1932-33. But the ensuing economic hard times were far less severe than seemed possible, even likely, in late 2008.

This country still has severe economic challenges facing it (the state and national deficits and unfunded liabilities being by far the greatest), but we’re much better off than many thought we would be a year ago.

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A Different Kind of Danger

Yesterday, the Dow Jones Industrial Average ended down 30.49 points. Yet both the S&P 500 and the Nasdaq Composite posted gains, and market signals indicate the Dow will turn back up today to continue the advance started on Friday. But even with the recent uptrend, no one thinks the global sub-prime lending crisis is over.

The recent turmoil in the world’s equity markets is a symptom of greater dislocations. There are many causes for the recent problems—such as the mispricing of risk caused by too much liquidity—and none of them have been solved by the recent gyrations in global markets. At some point, the great economic bull run following the fall of the Soviet Union must end. There is a rhythm to economies that governments can moderate, but not eliminate.

Since the end of World War II, the United States has taken the lead in developing mutually supporting systems—embodied by multilateral institutions such as the International Monetary Fund and the World Bank—to ensure prosperity. Yet, if the shocks to this global system are too great, the network’s interconnectedness, normally a strength, becomes its weakness, as one part brings down another. As in an overstressed electrical grid, problems can first ripple and then cascade. So, for the first time in history, virtually all societies can move in sync due to the very nature of the international system we have created.

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Yesterday, the Dow Jones Industrial Average ended down 30.49 points. Yet both the S&P 500 and the Nasdaq Composite posted gains, and market signals indicate the Dow will turn back up today to continue the advance started on Friday. But even with the recent uptrend, no one thinks the global sub-prime lending crisis is over.

The recent turmoil in the world’s equity markets is a symptom of greater dislocations. There are many causes for the recent problems—such as the mispricing of risk caused by too much liquidity—and none of them have been solved by the recent gyrations in global markets. At some point, the great economic bull run following the fall of the Soviet Union must end. There is a rhythm to economies that governments can moderate, but not eliminate.

Since the end of World War II, the United States has taken the lead in developing mutually supporting systems—embodied by multilateral institutions such as the International Monetary Fund and the World Bank—to ensure prosperity. Yet, if the shocks to this global system are too great, the network’s interconnectedness, normally a strength, becomes its weakness, as one part brings down another. As in an overstressed electrical grid, problems can first ripple and then cascade. So, for the first time in history, virtually all societies can move in sync due to the very nature of the international system we have created.

If a serious global recession hits the world now, how will it affect geopolitics? For one thing, governments will have fewer resources to pursue their ambitions. A general downturn, for instance, might accomplish what Democrats in Congress and insurgents in Baghdad have failed to achieve so far: an end to the American involvement in Iraq. The war, costing about $2 billion a week, has been affordable in a booming economy. In a recessionary one, it could become a burden the public might not be willing to bear, at least at present levels. Other members of the international coalition, whose commitments already are not firm, undoubtedly would pull out. Funding for the conflict in Afghanistan could be scaled back to unacceptably low levels.

Not all the foreseeable consequences of a severe recession would be bad, however. A fall in oil and gas prices most likely would dent the plans of Russia’s Putin, Venezuela’s Chavez, and Iran’s Ahmadinejad. A decline in global consumption could mean that China’s export markets might dry up, the Chinese economy might spiral downward, and the Communist Party might lose power. The Doha Trade Round would probably fail, and globalization would stop for a long pause—as it has done so many times in the past. Countries would insource and international commerce would decline.

The biggest imponderable is how people around the world will react in a deteriorating economic environment. In today’s hyper-connected society, private citizens have more say in what goes on, even under rigidly authoritarian governments. At this point, no one knows what the mood of global citizenry would be. All we know is that if a severe recession comes, the world will still be dangerous, but the dangers will differ from the ones we face today.

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The Big Disconnect

Yesterday, Iran continued work on its first nuclear weapon, Moscow and Beijing conspired to undermine the Western democracies, and fanatics prepared their next attack on the United States. Oh, there was one other thing that happened—the Dow Jones Industrial Average crossed 14,000 for the first time. Although the index eventually ended up below that magic mark (at 13,971.55), yesterday’s was the fourth successive record close.

I think this is a form of irrational exuberance. Investors, traders, and speculators needed just 57 trading days to push the Dow from 13,000 to 14,000, and they required only 129 days to make the journey from 12,000 to 13,000. By way of contrast, it took about seven-and-a-half years for the market to climb from 11,000 to 12,000. Markets are efficient, but they still dive on the outbreak of wars, assassinations, and miscellaneous disasters. That said, today there is a huge disconnect between current events and market performance. What kind of a risk premium would accurately reflect the perilous state of geopolitics today? One restrictively high, I’d say. And the markets continue to soar. It isn’t pessimism to see a bad ending in this.

Yesterday, Iran continued work on its first nuclear weapon, Moscow and Beijing conspired to undermine the Western democracies, and fanatics prepared their next attack on the United States. Oh, there was one other thing that happened—the Dow Jones Industrial Average crossed 14,000 for the first time. Although the index eventually ended up below that magic mark (at 13,971.55), yesterday’s was the fourth successive record close.

I think this is a form of irrational exuberance. Investors, traders, and speculators needed just 57 trading days to push the Dow from 13,000 to 14,000, and they required only 129 days to make the journey from 12,000 to 13,000. By way of contrast, it took about seven-and-a-half years for the market to climb from 11,000 to 12,000. Markets are efficient, but they still dive on the outbreak of wars, assassinations, and miscellaneous disasters. That said, today there is a huge disconnect between current events and market performance. What kind of a risk premium would accurately reflect the perilous state of geopolitics today? One restrictively high, I’d say. And the markets continue to soar. It isn’t pessimism to see a bad ending in this.

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Class War 101

Yesterday the stock market edged up again, with the Dow Jones Index cruising once more toward record highs. This ought to be good news for Republicans entering the presidential season. But is it really? Although Republicans are loath to be candid on this point, a surging stock market really does disproportionately help the rich and the super-rich. The accompanying growth in income inequality is a big, ripe target for a John Edwards, a James Webb, a Barack Obama, and others who want to frame the next election around themes of rich versus poor.

For a Republican party that wants to attract the votes of Bill O’Reilly’s “folks,” extremes in income inequality aren’t getting easier to defend. Private equity deals are now roaring through Asia, often enriching a relatively small handful of the American financial elite. Until Republican politicians know how to speak with confidence about globalization, capitalism, and wealth creation, Democratic calls to punish the rich can be made without fear of rebuttal.

Even with Robert Rubin and Gene Sperling whispering in her ear, Hillary Clinton, with her hand firmly on the pulse of her pollster, remains likely to join the economic populism gang. In 1996, with Ross Perot breathing down his neck, Bob Dole, a life-long trade advocate, suddenly started talking about trade restrictions and offering second thoughts on NAFTA. There is no reason to believe Hillary is more principled.

Of course, it is not clear what exactly the economic populist proposals will consist of. A new tax on the super-wealthy is probably an inevitable plank of their platform. But in his State of the Union response, Senator Webb spoke about how much more a CEO makes than an average worker. Will he unveil a proposal, beyond raising taxes, to fix that?

What aspiring Democratic and Republican presidential candidates alike should bear in mind is that the evidence of whether class warfare “works” as an electoral strategy is mixed. A much-cited paper by a group of Columbia University professors shows it is not easy to assume that wealth or perceived inequality determines voting preferences.

Yesterday the stock market edged up again, with the Dow Jones Index cruising once more toward record highs. This ought to be good news for Republicans entering the presidential season. But is it really? Although Republicans are loath to be candid on this point, a surging stock market really does disproportionately help the rich and the super-rich. The accompanying growth in income inequality is a big, ripe target for a John Edwards, a James Webb, a Barack Obama, and others who want to frame the next election around themes of rich versus poor.

For a Republican party that wants to attract the votes of Bill O’Reilly’s “folks,” extremes in income inequality aren’t getting easier to defend. Private equity deals are now roaring through Asia, often enriching a relatively small handful of the American financial elite. Until Republican politicians know how to speak with confidence about globalization, capitalism, and wealth creation, Democratic calls to punish the rich can be made without fear of rebuttal.

Even with Robert Rubin and Gene Sperling whispering in her ear, Hillary Clinton, with her hand firmly on the pulse of her pollster, remains likely to join the economic populism gang. In 1996, with Ross Perot breathing down his neck, Bob Dole, a life-long trade advocate, suddenly started talking about trade restrictions and offering second thoughts on NAFTA. There is no reason to believe Hillary is more principled.

Of course, it is not clear what exactly the economic populist proposals will consist of. A new tax on the super-wealthy is probably an inevitable plank of their platform. But in his State of the Union response, Senator Webb spoke about how much more a CEO makes than an average worker. Will he unveil a proposal, beyond raising taxes, to fix that?

What aspiring Democratic and Republican presidential candidates alike should bear in mind is that the evidence of whether class warfare “works” as an electoral strategy is mixed. A much-cited paper by a group of Columbia University professors shows it is not easy to assume that wealth or perceived inequality determines voting preferences.

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