Timely Fiscal Wake-Up Tour at CSU

Now seems like the right time to start talking about the financial future of government.

The Cleveland State University Levin College of Urban Affairs will be hosting the Fiscal Wake-Up Tour on October 2nd. The tour is a series of forums organized by something called the Concord Coalition. Included in that panel discussion are some experts from other think tank type organizations that work with the Concord Coalition, these include Heritage Foundation (righty), Brookings Institution (moderate to left) and the Peter G. Petersen Foundation.

Notice the event uses the word "Fiscal" in its name. This implies a focus on the other piece of the economic puzzle that will have to be addressed if this nation is able to regain its hope for future solvency. Sounds like an interesting concept to foster a grassroots level recognition and discussion of the looming crisis that is facing government at all levels. The Levin College is a respectable organization and the event holds promise to be enlightening. Details are here.

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Ole Miss Ramblings

Here we go. I doubt we'll get the same gems from this debate as we did from the 2004 debate. It seems so long since the words "hardwork" and "internets". Lehrer made the smart choice of including the global markets as part of the security of America so we should get some idea of where each guy stands.

Obama calls for oversight, taxpayer protection, limits on CEO pay and bascially the highlights of the Dodd Plan. He decides to get tough an call McCain on years of deregulation.

The political stunts never stop with McCain. He first announces that Ted Kennedy is in hospital. How wonderfully bipartisan of him. He goes to bat for the House Republicans and their crazy shock doctrine specimen of a plan.

Lehrer pulls them back to the question at hand, whether or not they support the bailout plan.

McCain compares the task at hand to the D-day invasion. Obama goes back to the lack of deregulation.

Okay we cold have spent more time on the financial bailout. Moving on to government spending.

McCain quickly gets the discussion to earmark spendings. Obama counters with McCain's support for corporate taxbreaks. The earmark things seems to be stickig, Obama looks like a deer in the headights.

***

McCain pulls out the inaccurate statement on high U.S. business tax rates paid as compared to other countries. Actually we have a higher statutory rate but pay less after all of the tax breaks. Thankfully Obama sets the record straight. McCain gets back on the sheriff of earmarks kick. Obama spars over the tax breaks to oil companies. McCain counters with the creepy laugh.

Back to the bailout and impact on the federal budget. So far I'm not bowled over. We've heard all of these points from both already. We will have to make changes blah, blah blah.

***

McCain calls Obama liberal, oohhh that's original. Jim still can't get traction on how the bailout is going to impact the federal budget. They both seem reluctant to acknowledge that the bailout and pending financial doom will severally cripple their attempts to implement their programs. McCain answers the question for Obama. Obama reminds McCain that he was present through the Bush years when the federal spending increased.

***

On to Iraq. McCain paints the predictable rosy picture. Quick! Is Al Queda shia or sunni?

Obama asks the question, has it all been worth the price. This will soon be a trillion dollar war

McCain unloads all of his ammo on Obama on his not believing in the surge. Obama reminds us the war didn't start in 2007. McCain continues to score points on his support of the surge. Obama does his best to counter. This point of the debate will be scored better for McCain. Who loves General Petraeus the mostest?

***
I have to say the debate is not that exciting but that is a good thing if you are Obama. Neither one of the candidates is running away with this thing. Such a difference when compared to the first debate in 2004.

Afghanistan is next. Obama gets a tongue lashing from McCain on being brash about military strikes in Pakistan. No mention that the current administration is already doing this! Obama hits back with a hilarious reference to McCain singing about bombing Iran. He then squares up the argument that as president you can't wait to take action if danger to U.S. troops is eminent.

Take a break, we're getting a long winded lecture from McCain on the grave nature of being commander in chief.

***

Let the Iran fear mongering begin. McCain proposes the league of justice or dmocracy or legion of doom, I'm not really sure. McCain suggests John Bolton be the first leader of this organization (not really).

Obama admits he buys into the Kyle Lieberman amendment, so sad.

Everyone agrees we can't tolerate a nuclear Iran. What is the approach to use in dealing with Iran? McCain uses about 200 too many words to explain why he will only meet with Iran only with preconditions.

Obama skillfully picks up that thread and makes his point on diplomacy with Iran much more easier to comprehend. A mcuh better counter than on Iraq or Afghanistan. Obama hits pay dirt with the McCain's Spain gaffe. They are a NATO ally.

Some one fact check the alleged Kissenger remarks on meeting with Iran.

***

McCain is certainly up on the events around the turmoil in the Caucuses. It helps when your campaign adviser lobbies for the Republic of Georgia. He just read every damn name that appears on the map of that region, what a great geography lesson.

Obama pivots very well from Georgia to the impact of prudent energy policy. I'll admit I wasn't to sure how he would handle that topic.

Are we safer now than we were after 9/11? Obama is willing to say somewhat but more work left to go.

The take away is that both candidates held their own in their own way. No one pulled away. McCain probably salvaged his reputation by showing up and debating in earnest. Obama kept McCain in his sights and did not let him get to far of an advantage. I agree with Bo Bo Brooks that this was not a game changer.

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My Proposed Addition To MOAB 2008

Let's be frank the House Republicans know that approving the President's Mother of All Bailouts plan is another stake in the heart of the free market bonanza that they so adore.  Why not just come out and state what this bailout says about the conservative view point of financial market regulation.

The original section 21- Definitions becomes Section 22.  My proposed new section is as follows:

Sec. 21  U.S. Government's Renouncement of Free Market Ideology

Recognizing the irreparable harm that deregulated markets have caused to the American financial system and taxpayer the United States government shall no longer adopt, emulate or embrace any of the following ideologies or principles in design or creation of subsequent laws governing financial or commercial activities:

1) Efficient Market Hypothesis or any other delusional belief that market prices always reflect an accurate value of an asset and that market players always act in a rational manner. 

2) Limitless use of leverage, speculation, arbitrage, hedging, short selling and securitization of debt in formulation of laws governing the financial sector or agency rule making.

3) Any other Friedmanite beliefs in weak regulatory frameworks, self regulated and self correcting markets and blind faith in an unchecked free enterprise system.  Any dependence on Reaganomics, Rubinomics or Voo Doo Economics in any shape or form.

This should dissuade the government from allowing us to get bit in the ass for at least another seven to ten years.  You know the adage, everything old is new again.

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IUOE Local 18 Loses Its Mind

The Plain Dealer covered John McCain's visit to the Cleveland area but the real story wasn't the actual visit or the prepared remarks:

Pool report: Republican presidential candidate John McCain spoke briefly this morning at a construction site at Interstate 71 and Ohio 82, where he promised to bring jobs to Ohio and accepted the endorsement of the International Union of Operating Engineers Local 18.

Unions typically endorse democratic candidates but that's quickly becoming the conventional wisdom these days. The Cleveland chapter of the International Union of Operating Engineers lent Republican John McCain their endorsement today. The sanction was given despite his party's track record of marginalizing unions and rampant support of free trade agreements. They appear to be an outlier unlike the large manufacturing unions like the UAW or other major players like the S.E.I.U. and A.F.S.C.M.E. who will most certainly put there muscle behind the Obama campaign this fall. One thing that makes the I.U.O.E different is that they are a construction union and per their website the contractors they are affiliated with are small family owned businesses. This is exactly the group of voters that McCain is trying to woo with his unrelenting "Obama will raise your taxes" mantra. That being said whatever happend to union brotherhood?

The blue collar tweekers are usually mobilized to help out the Democratic candidate but in Ohio in 2008 nothing can be taken for granted. Now I don't foresee more unions peeling off in great numbers to endorse a candidate that most likely does not have their best interest at heart but any movement from the norm is not a welcome sign. Obama will need all the support of the traditional Democratic base and then some if he thinks he is going to win the Buckeye State. Union Yes, McCain No.

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Wall St. Turd Could Sink Akron Sewer Plan

I really appreciate Michael Douglas' enthusiasm in yesterday's editorial on the bright prospects of the Akron Sewer system lease plan. Douglas whom doubles as the ABJ's editorial page editor when he's not extolling the virtues of the greater NEO region's economy thinks the time is right for leasing the City sewer system. Never mind that the financial markets are facing turmoil not seen in generations and credit is drying up faster than the Aral Sea. The Douglas piece actually points to the failing capital markets as a sweetener to completing a lease deal:

If anything, the arrangement is just the kind of pedestrian deal that investors could use, no credit default swaps, no derivatives, no financial instruments that baffle even Ben Bernanke. What appeals to investors is the steady flow of revenue, a chance to bolster the foundation of their operation.

Last I read and heard nobody wants to lend anyone money for any reason, no matter how "pedestrian" the project happens to be. As commonly mundane as public infrastructure appears to be the area of leasing public assets to private entities is still relatively new. Once again the allure of free education for Akron's youth (use of funds) has overridden the need to actually consider the potential pitfalls (source of funds) of a lease agreement.

The potential for a $200 million dollar fund that a lease deal would generate will continue to shrink as the concessions are heaped on to make it voter acceptable. The Mayor has already mentioned limiting rate increases, maintaining staffing and continuing capital improvements to the system as requirements for a potential lease deal. These will all detract from the ability of a private company to actually make money on their end of the deal and lessen the chance of finding a suitor.

Before the City can even get to the point of creating a higher education fund linked to a leasing deal the dynamics of the market will have to change considerably. Transferring public assets into the realm of private debt has already lost its cache after the events of the past week. Consider this observation from Naomi Klein writing on the condition of the free market ideology post meltdown:

For years, the global investment banks have been lobbying politicians for two new markets: one that would come from privatizing public pensions and the other that would come from a new wave of privatized or partially privatized roads, bridges and water systems. Both of these dreams have just become much harder to sell: Americans are in no mood to trust more of their individual and collective assets to the reckless gamblers on Wall Street, especially because it seems more than likely that taxpayers will have to pay to buy back their own assets when the
next bubble bursts.

In the end the idea of combining the Akron Sewer System with another regional governmental entity is the safest way to go. Not just safe but downright pedestrian.


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Throw a TARP Over It

The mania of self regulated markets is now history as the Federal Government announced the grand daddy of all bail out plans. Sec. Treasury Henry Paulson outlined with sparse detail this new tax payer funded catharsis and a asked Congress to act quickly on implementing the cleansing.

Historic Measures
All told the Temporary Asset Relief Plan (TARP) will utilize upwards of $800 billion (that's six and a half years of Iraq) to buyout bad mortgage backed paper held by the multitude of financial institutions. This doesn't include the hundreds of billions being dedicated to insuring the money market funds that are also exhibiting signs of strain despite the long held belief these funds where almost as liquid as cash.

TARP is a fitting plan for Paulson and Bernanke's attempt to cover up the carnage left in the wake of a decade of a self regulated maelstrom. Understanding the implications of this historic measure on the U.S. economic system is not easy to grasp. The plan will attempt to stanch the flow and get the markets back to terra firma. It is a rehabilitative measure not a stimulus plan for the greater economy.

The real economy has yet to stop shuddering. The indicators that us mere mortals are exposed to like unemployment and inflation are still blinking red. The just released unemployment rate for Ohio hit a 16 year high of 7.4% in August. Inflationary pressures still abound at the grocery store and the gas station. Local and state governments are all facing budgetary disasters in the next year or two if the economics that feed their coffers don't improve. My fear is that the TARP may have arrived just in time to cover the corpse of the greater U.S economy left slain on the ground. How much pain will we have to endure before it is revived?

Electionomics
I have one admonition for all of the talking heads in cablenewsland. Stop wasting time trying to determine if either Obama or McCain have offered any solutions to the current financial problems. It's not the job of a the president to personally concoct plans such as the rescue program announced this week.

What really matters is the candidate's philosophy on how the American financial system should function under a regulatory regime and what that regime (if any) should look like. We are looking for leadership under the current duress of our times not electing a newly anointed John Maynard Keynes of the 2000's. Who the next president taps to provide counsel on defining financial policies and formulating new frameworks for governance is the real indicator of economic wisdom. That's judgment we can bank on.

Which of the two men would make the right choices and pick somone like a Keynes to see past prevailing and failed philosophies (like self regulated markets) and work toward re-stabilizing the financial landscape? Everything I am observing and absorbing says that Obama is that person.

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Panic Free Market Malaise Roundup

Odds and ends on a day that hasn't stopped providing news on the financial melty-ness.

John McCain the self proclaimed ignoramus on all things economics assured us today that the fundamentals of the financial markets are sound. Why doesn't that remark provide me any comfort?  The Dow thinks otherwise and so do the employees of Lehman and the investors holding shares of WaMu and AIG.

The Dow of course is just one indicator of the health of our financial system.  Krugman and Calulated Risk are suggesting that we pay attention to the TED spread, an indicator of credit availability (liquidity).  Both agree the widening spread is an indication of more market malaise to come.

Angry Bear postulates why The Eurpoean banks don't go belly up in large numbers and at the same time.

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Fear and Loathing in My Sunday Coupons

Opening up the Sunday newspaper has never been so frightening. To my surprise the Sunday adds for Betty Crocker, Best Buy and Sears included a free DVD of the documentary movie smash Obsession: Radical Islam's War Against the West. The free sampler of the latest right-wing attempt to make us forget the other scary issues troubling Americans was apparently included in newspapers in various battleground states. I've read several posts in the blogosphere about the give away including this one at Popular Progressive that indicates up to 28 million copies were sent out in the morning paper.

Some simple checking of the movie credits on the internets reveals the backer of the project is 501(c)(3) group The Clarion Fund. The fund's website has very little information but, the motto of the group, "National Security Through Education" is prominently displayed. One only wonders what that could mean. Without having to delve any further than the movie website you can kind of guess the direction the producers of this "film" are going:

Almost 70 years ago, Europe found itself at war with one of the most sinister figures in modern history: Adolf Hitler. When the last bullet of World War II was fired, over 50 million people were dead, and countless countries were both physically and economically devastated. Hitler’s bloody struggle sought to forge the world anew, in the crucible of Nazi values. How could such a disaster occur? How could the West have overlooked the evil staring it in the face, for so long, before standing forcefully against it?

Even Glenn Beck is quoted as calling the film "...without exaggeration one of the most important films of our time". Sorry Glenn, they lose me the minute they parade out the case that radical Islam rivals the Nazi conquest of Europe and the Holocaust. Yes I'm concerned about Al Queda inspired groups and their resurgence in South Asia and the danger they pose to us at home and abroad. I'm not fucking stupid either. I'm not convinced that kaffiyeh-wearing men armed with Kalashnikovs are an absolute existential threat to the United States. That dubious honor may belong to our very own political leaders who have been frittering away our freedoms with flawed legislative maneuvers and numerous presidential signing statments.

Anyway we've seen this handy work before. Forget all the other issues that matter because certain death certainly awaits you if the Democrats win. In 2004 it was the "Al Queda wolves are hunting us down" commercial. In 2006 it was the infamous "stakes are high" nomenclature and complimentary televsion adds. Last year it was the Frank Gafney documentary that was rejected by PBS. This year's menu includes Obsession and the upcoming new release The Third Jihad. Can't wait for that one. It looks like fear is still the "little black dress" as Al Franken referred to it in his book The Truth. It goes with any occasion.

My curiousity may get the best of me and I may indulge it by watching the DVD. I may say "thanks but no thanks" and mail it back to the Akron Beacon Journal subscription office.

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Stickland's Reality Deficit

Governor Strickland announced $540 million in budget cuts to the State Budget to the chagrin of local governments and school districts all around the State. They know that the fiscal pain unlike Reagonomics will trickle down to bite them in the budgetary asses. Large counties like Cuyahoga are already contending with budget deficits in 2008 ($20 million) and onwards and this latest bad news will compound those troubles. These cuts are in addition to the first round($733 million) made this spring.

The state's Local Government Fund that reallocates State GF revenue down to counties, cites, schools and libraries is probably not in good shape. That translates into less dollars available for local services like public safety, education and social programs. According to the State Budget director, Pari Sabety all major revenue sources are off target (from GONGWER):

Director Sabety said that an ominous sign within the monthly revenue reports is the downward trend in personal income tax withholdings, which she described as "a significant negative indicator."

Ohio's dire budget predicament, while not unique among the states (see separate story), has also been underscored by recent reports on unemployment, the housing market, and other economic indicators.

"Every indicator we look at is pointing downward at this point in time," Ms. Sabety said.

The shrinking LGF allocations could be aggravated by reduced State funding in other areas to local governments and seriously hamper efforts to reign in budgets deficits at the local level. This could be referred to as a tail spin.

Our current governor is held hotage by a sinking economy and the bad tax policy choices of previous legislative sessions. One of the chickens that has come to roost is the 21% income tax reduction that was phased in over the past several years. Ted is now straddling the line between fiscal restraint and hard right taxcut mania. He has had to acknowledge the damage to the State revenue picture but admits he will not tamper with the near suicidal reduction in income tax rates, not even a temporary freeze.

"Without a doubt, if the tax reform had not taken place we would have had significant more resources for this biennial budget," he said, adding that under some estimates the cuts in that package may have reached $1.9 billion to this point. "Having said that, I have embraced the tax reform because I do believe that it is important to Ohio's future that our state be a state that is attractive to those who would invest and create jobs."

On top of that change the Commercial Activity Tax created to replace the tax on inventory and equipment lost a large chunk of its tax base last week. Raising taxes is not popular but the ability to cut State budgets will continue to negatviely impact local governments and their constituents (you and me). This puts the State's top Dem in a real bind. He will now have to fend off attacks from up and coming State Auditor Mary Taylor (again from GONGWER)*:

"The announcement today by Governor Strickland concerning the continued deterioration of the financial condition of the state of Ohio is troubling," Auditor Taylor said in a statement. She said that while the initial budget adjustments made last February entailed some cuts, "it also included a number of questionable fiscal management proposals such as Keno, delaying program expenditures from one fiscal year to the next and short-term cash management actions."

She and other top State Republicans will be prepping the battle field for the next round of state wide elections and the even the gubernatorial contest in 2010. This crowd is touting the Mechagodzilla of all tax cuts, a plan to eliminate the state income tax all together. This plan pushed by Blackwell et al at the Buckeye Institute has had some media exposure but limited examination of the consequences. The backers think the magic of the free market and the CAT (the one with an eroding base) will more than make up for the lost revenue.

Ted please come back to reality and consider freezing the income tax reduction. As unpopular and vunerable as it may make you, putting the brakes on for now could do some good. highlighting the weakness of the current plan could help demonstrate how supersizing the income tax cuts would be even more devastating to Ohio than the plan that is already in place.

* Sorry no links to GONGWER, it is a subscription only service.

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Charlie Gibson for a Day

The much awaited unveiling of Sarah Palin to the news media will begin tonight in a multi-part interview with Charlie Gibson. Now that the time of her confinement is over we can expect candidate Palin to offer up her real views on the most pressing policy questions of this election.

Is there anyone out there that doesn't think this won't be more than a " Meet the Palins" type affair? Fox News already ran one of these specials and CNN is planning to release one soon. The Associated Press has a story that touches on how ABC will package and commodify the Gibson interview into bite size ratings friendly pieces.

Gibson is having three separate interviews with Palin, ABC said. Parts of the interviews will be spread around other ABC news programs, including "Nightline" and "Good Morning America."

I'm not holding out for a hard hitting Russertesque scrubbing of her record but I can still dream. If ABC News sent the Bizarro Charlie Gibson to Alaska to interview Bizarro Hillary he would do the opposite of the real Gibson and ask hard questions that aren't about hockey or lipstick. Here are some of the questions in backwards order and quasi-Bizarro speak:

7. Will you try to have minutes of top secret Cheney Energy Task Force meetings released to the public? Why do you hate polar bears?

6. What should U.S. military do to reclaim control of Afghanistan? What is capital of Afghanistan?

5. Me want to know what contributions or edits you made to Op-ed piece on the GSE bailout that was in Wall Street Journal? Do you want to correct your statements about them being tax payer funded?

4. Me want to see if you know what the Fourth amendment (of U.S Constitution) says in regards to warrantless wiretapping. Would you ask a President McCain to revisit the FISA Reauthorization of 2008?

3. How many signing statements is too many? 800? 900?

2. How soon after December 2008 do Iraq have provincial elections? Me want to know if you think a referrendum on the status of the city of Kirkuk should be included in elections? Do you even know what that means?

1. Do you think me sexy?

Update: Andrew Sullivan links to a list of 20 questions formulated by the editors of Foreign Policy magazine. Add these to the no way in hell list.

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Lance Takes Note of Favre

It's official the boss is back. Lance Armstrong, Inc. has decided to return to professional road racing and will compete in Le Tour in 2009. The news was confirmed by LA in an interview with Vanity Fair magazine of all places. Seems fitting for the guy who always generates a lot of attention.

Rumors were abound in the cycling world that Lance Armstrong would coming out of retirement to ride with Team Astana in 2009. It looks the Favre effect is spreading to other sports, even Euro-wuss dominated road circuit. The momentum for this story has been building and started showing up in cycling mags like Velonews and amongst riders at the Vuelta (currently in its second week).

Lance Armstrong will come out of retirement next year to compete in five road races with the Astana team, according to sources familiar with the developing situation.

Armstrong, who turns 37 this month, will compete in the Amgen Tour of California, Paris-Nice, the Tour de Georgia, the Dauphiné Libéré and the Tour de France — and will race for neither salary nor bonuses, the sources, who asked to remain anonymous, told VeloNews.

Seems like a decent schedule to come back to although I don't think Paris Nice is all that exciting of a choice. As reported by Velonews yesterday he will be riding for his old team manager Johan Bruyneel. That doesn't necessarily mean the reincarnation of Lance will ride for Team Astana. He was part owner of Tailwind Sports the company that ran the Team Discovery outfit until 2007. So I think there's a good chance they will court a corporate sponsor and formulate a new team around Johan and Lance.

It would make for an interesting season. I'd never thought I'd see Contador, Cadel and Lance face off in the Alps. Of course I'll belive it when it actually happens. He may be serious about contending for his eighth Tour victory or he may crap his shorts at the top of the Col de Galibier. Either way it will be entertaining.

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GSE Bailout, the Quick Run Down

I was one of the lucky few to sit through the 11AM announcement on the 'Big Bailout' of mortgage lenders Freddie Mac and Fannie Mae. Treasury Sec. Henry Paulson gave a run down of the plan to force these two giant-ass financial institution into federal conservatorship and be privately run no more. This move represents the third or fourth wave in the housing crisis and there is more to come. As average Americans trying to enjoy the beginning of the NFL season we are left pondering the impact of this news

Here is a quick run down of the nine point plan that Paulson outlined during today's annoucement. I wrote them down myself as I listened so I'm not linking to any sources just yet. In no particular order of importance:

1. The companies will be open for business tomorrow albeit under a different structure.
2. Both GSE's can continue to issue MBS.
3. The FHFA, a newly created regulatory entity will assume oversight of both GSE's
4. The CEO's of both companies are out
5. New guys start tomorrow, they are from the financial sector.
6. Stock dividends are gone, duh.
7. A lobbying moratorium is in place, no more privte jets.
8. The Treasury will inject capital by purchasing new preferred stock and opening a line of credit.

I am missing one point in the plan from my notes but the details can be read here, here or here.

So what does this mean to the presidential election? It depends on your philosophy on private versus public enterprisewhen it comes to the housing market I guess. Maybe the real question on this dilemma can be summed up in one phrase, "it's the liquidity stupid". More on that later.

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Noun Verb Lie

I didn't think anyone could have topped the 2004 Zell Miller speech when it came to shear lunacy and a complete lack of sophistication. That feat was accomplished tonight by Rudy Giuliani's speech to the RNC. It will definitely hold a spot in the annals of GOP red meat.

A very effective delivery of insults, and lies all done with that artful lisp. Not bad for a guy who spent $48.8 million to win one lousy delegate. I also found his charges of sexism by the media ironic considering his record of marital infidelity.

Laura On George

Someone had to do it. Laura Bush was given the distinct honor of introducing her husband the Prez to the RNC tonight. I was curious to see what accomplishments she would highlight. She offered up the usual references to No Child Left Behind, African Aids Relief (PEPFAR) and some others.

There was no avoiding Iraq or Afghanistan so she used broad strokes when it came to this chapter in the Bush presidency:

"In Afghanistan and Iraq 50 milllion people are now living in freedom"

Yes freedom is certainly on the march. This report from the BBC today updates the story of a 23 year old Afghani student condemned to death for downloading an article about women and Islam from the internet.

I suggest the next president dust off copies of the books Ghost Wars and Imperial Hubris and read up on the region that will be occupying most of their time while in office.