On the Contrary

The President has a “difficult” decision to make on Afghanistan.  In my mind the difficulty is in doing the right thing as opposed to the easy thing.  It amazes me that anyone listens to John McCain who is demanding we honor General McChrystal’s request, who never saw the war on the ground in Vietnam, still thinks it was winnable, and had the Iraq war totally wrong.  He and others pushing for the easy way are the same folks who told us Iraq would be a cakewalk.  After all they lament, the general in the field has spoken so why don’t you honor his request?  The answer to that is fairly straightforward:  The general was given the mission to win the war and asked what do you need?  What do you think he wants?  But one has to step back and say, how many more troops for how long, how much will that cost, and do we have both a military and a public that can support that?  Oh and of course, is it worth that cost?

Tom Friedman, in his column, Don’t Build Up, answered these questions better than I could.  Probably the most insightful part of this editorial was his assertion that all the great strides forward between warring parties has been made by them, not some outside force.  That includes the “Awakening” in Iraq when the Sunni’s were already throwing out the Al Qaeda thugs and we just leveraged them.  Makes you pause when you recognize that our partner in Afghanistan is a totally dysfunctional government.  But what I found even more interesting was politburo minutes unearth in Russia of Sergei Akhromeyev, the commander of the Soviet armed forces, speaking to the Soviet Union’s Politburo on Nov. 13, 1986 about their war in Afghanistan.

“Our soldiers are not to blame. They’ve fought incredibly bravely in adverse conditions. But to occupy towns and villages temporarily has little value in such a vast land where the insurgents can just disappear into the hills.” He went on to request extra troops and equipment. “Without them, without a lot more men, this war will continue for a very, very long time.” (Transcript of Defeat).

Sound familiar?  Why then is it the easy decision to just send more troops?  Because politically, like the Russians, it is almost impossible to recognize our limits, if necessary admit defeat, and move on.  The trouble with making the easy decision is in the details.  How is the country going to afford this while nation building at home is our top priority?  How can a volunteer military and very few continue to bear this burden?  But what about all those generals and their advice?  They want to win; it is in their blood.  They were wrong in Vietnam and they are wrong now.  They are wrong because winning on their terms simply isn’t worth what it will cost us.  This is a political decision, not a military decision and is why we do not blindly follow general’s advice as the Republicans are urging.

Will President Obama summon the courage to do the right thing, instead of some political compromise to nowhere?  Well if what you hear coming out of the White House is that there will be some compromise additional troops, then no he will not summon the courage to ignore the politics.  He will once again try to accommodate everyone, and in the end promulgate another failed policy.  Whatever he decides, he certainly will have to support what he is doing by a detailed plan on the end game.  If he actually followed Tom Friedman’s advice he would face extreme criticism from the right on being weak.  But it was false bravado and weakness from these same actors that has us bogged down in this quagmire.  Real strength would be a President who knows our limitations, decides how to best move this country forward, and ignore politics of a failed policy that will kill more young Americans.

Finally let us remember what Afghanistan is.  It is a 5^th century country run by a mobster.  The government by all accounts is part of the problem.  The Taliban are estimated at 20,000 strong and they are not some foreign invader.  Yes they are aided and abetted by Al-Qaeda, but as long as we are there, we are the issue.  So the reality is this is a 20 to 40 year problem.  We need to decrease our footprint, spend our precious treasury more effectively on keeping the Taliban out of total control, while we help in humanitarian efforts to educate the people so they can solve the problem themselves.  That is not more troops.  More troops is just kicking the can down the road over the bodies of more and more young Americans who will have died in vain.

Oh, and one more thing we continue to ignore.  The Taliban are a creature of our own creation.  We thought it was a good idea to provide religious fanatics with guns and rocket launchers so they could depose the Russians.  Maybe it wasn’t such a good idea.

As I sit here this day after Christmas in the lull between Christmas Day excesses and New Years Eve excesses, I ponder where we have been and what we have learned.  For the most part I fear we have learned nothing.  Gas prices have gone down and so the focus is completely off alternate energy and the gas hogs are motoring everywhere.  My conservative friends think if we just cut the waste in government and reduce spending we can go back to our old ways.  The problem in Wall Street much like our perceived problem at Abu Ghraib, wants to be defined as a few bad, in this case greedy, apples.  But the reality is that we facilitated that greed.  I don’t think anyone is seeing the pending disaster or that the cause of it is our wish for a free ride.

Our free ride goes something like this:  The economy will always grow if we just lower taxes, keep government interference in the market place a minimum, and then let the market place work its magic.  We don’t have to plan our future because where there is a need, the market place will swoop in and fulfill it in the most cost effective way possible.  As business thrives, our government coffers will fill and there will be money for things like roads, bridges, etc.  And oh by the way, did I forget that we should never let government do anything because they do it badly, and that we should let private enterprise service our every need.  Worked well so far hasn’t it?  As James Galbraith in his book, “The Predator State”, points out, this just let the jackals of free enterprise do things that government is suppose to do, do it poorly, and make outrageous amounts of money doing it.  In effect transfer public money to private hands.

Tom Friedman in a recent column noted the same problem (“Time to Reboot America”) when he noted that in Hong Kong he had clear reception on his cell phone, took a high speed train with continuous connectivity on his lap top to the airport, and then as he said, “Landing at Kennedy Airport from Hong Kong was, as I’ve argued before, like going from the Jetsons to the Flintstones.”  The rest of the world is developing modern infrastructure and facilities and we continue to fall behind because we don’t believe we have to invest in our future.  That investment is called taxes.  We are still in the mode of all taxes are bad and they hurt business.  Well you get what you pay for and since we have been on a personal buying jag and not investing in our country, the rubble is now for everyone to see if they are willing to look.  Problem is most aren’t willing to look.

The other extension to this free ride theory is that we are all NOT in this together.  Poor people are living out their just deserts.  They deserve their station in life because they are lazy and lack self-discipline.  There is always an element of blame in this view.  Taxes that support services for these people do nothing but enable this behavior.  It is a very self-serving view of why I have mine and you don’t deserve any of it.  Sure there are lazy and worthless people, but once they were just little kids who may not have had the advantages the rest of us did.  And more important to dashing this blame idea is that unless we all prosper, we will all decline.  As our middle class has shrunk and wealth has become concentrated in the upper echelons of our society, our economy and our prospects for the future have declined.

Think about this:  In the next few decades we will see the Chinese go to the Moon and establish a permanent base there.  We were there 40 years ago and then lost our way.  After 2010 we will have no way to get to our only achievement in man space flight, the Space Station, except hooking a ride on a Russian Rocket.  What the hell were we thinking?  While we got lost in consumerism, others have raced past us.

What really went wrong was the idea that wealth was an end in itself and that people who had it were to be admired.  Wealth became a status symbol, a proof of accomplishment.  The financial services industry grew by leaps and bounds (making money out of money) while the real economy of making things withered.   People made obscene amounts of money and tricked themselves into believing they deserved it while others wanted.  The sense of entitlement knew no bounds.  If we are going to prosper in the future, we have to shun this kind of thinking.  I am not talking about being rewarded for hard work and innovation; I am talking about making obscene amounts of money that you could not spend in a lifetime.

In summary, we can’t hope things will get better and then go back to our old ways.  As Tom Friedman put it, we need to “reboot” and rebuild.  We need a focus that says we have a national purpose and it is more than the accumulation of wealth.  It is to build a strong and vibrant nation for all our children.  This will only happen when we recognize, there is no free ride and we all have to pitch in.  The start would be to recognize that gasoline should never again be below $4/gallon.  But we aren’t there yet because you can almost hear the gasps as I suggest putting a $2/gallon tax on gasoline.  What?  And give up my cherished gas guzzling hog and my freedom to pollute the earth with it?  No we are not there yet.

As the economy continues to collapse, the plans for an economic stimulus package are slowing starting to take shape.  Well kinda, sorta.  We know that the talk is about investing in infrastructure and other rebuilding projects to get people employed  and back in the workforce.  We know that the last time “we put money directly in the hands of the consumer who know best on what to spend it”, they mainly saved it or spent it on stuff made in China which had little impact on our ailing economy.  So this time the spending is going to be more like during the New Deal, on projects to improve our society.  But what projects?

Well some of our mayors have a list of ready-to-go projects to get those old dollars flowing. The U.S. Conference of Mayors went to Capitol Hill earlier this month with a report listing 11,391 infrastructure projects proposed by 427 cities (CNN).  The mayors claimed the proposal would create 847,641 jobs in 2009 and 2010.

The problem with this list was that it was full of pork and had no integrated or coherent plan for our future.  I listened to one hilarious interview on CNN where they challenged one mayor on some of the projects.  In particular they questioned a waterslide construction in a city’s theme park.  The mayor being questioned said he could not vouch for all 11,391 projects and then the questioner pointed out this project was from his own town.  It is politics and pork as usual.  If there is going to be handouts, then I want what I can get for my community.  These are the bozos we have been electing for years that are more creatures of past business connections than pragmatic planners of our future.

What is wrong with all this thinking is that we really are in dire straights and the way we have to look at every dime we spend is how does it leverage and multiply our economy down the road.  It can’t be money just to make-work and provide jobs; it has to be jobs that lead to an improved and growing future economy.  We are once again treading on Republican conservative economic theory that says that the market place will determine an equitable distribution of benefits.  Baloney.  Government is going to have to plan very carefully how to invest our money in the future so that the jobs we create and the work we do lays the foundation for a growing and sustainable economy:  A bridge to somewhere.

This is where I have some fear about what investments we make.  Here in California, because of the budget’s shortfalls, many highway projects have been put on hiatus.  Now the conventional wisdom is that these are jobs that if we get federal help, will keep our infrastructure improvements going and employ many people.  But lets step back and think about this a little.  In an age when the future promises us $8-$9 a gallon gasoline, do we really want to focus on more HOV lanes, or do we want to rethink that investment and improve our mass transit system?  We are one of the only industrialize country that does not have a high speed rail system that would give us an option to airline travel and reduce potential terrorist attacks on our major transportation hubs (you can’t ram a train into a building unless you lay tracks to it first).

Sure there are a lot of infrastructure projects on the books that really do need to get done like improvements to waste water treatment, or repairing crumbling bridges and highways.  But the big investments we make should not be sustaining the status quo, but should be in an investment in a new future.  Thomas Friedman of the New York Times has written copiously that the future is in green energy.  This may be where we need to be investing our money.  Improving local parks may be an esthetic improvement, but are our parks going to be driving our future.  We as a people, meaning our government that represents us, needs a vision of that future, and then invests our money wisely to move us toward that future.

My point is simply this:  In the past we have let the market place take us where it wanted to and that approach has served us badly.  Now we must take charge and that requires an understanding of our realistic future.  That future includes an ever increasing competition for natural resources and a world where our ecosystem is degrading.  Good jobs and a growing economy are going to take some careful planning by all of us to invest in the kind of things that will move us forward.  I don’t think that is water slides and a new paved path through the parkway.  I think that is investment in the types of projects that have multiplier effects; for every dollar invested, it multiplies its value in the future.  We need to evaluate each project on its multiplier effect and take a long view to pick the best ways to invest our money.

Finally, if I were to pick types of projects we should be investing in, here would be my list and you have to think big:

• Transportation – Projects that recognized the use of more mass transit and reduce energy costs
• Education – Projects that make sure that higher education becomes more available to everyone.  Human capital is our most valuable resource and is our most important investment
• Healthcare – To make our businesses more competitive and to improve the welfare of our most important resource
• Energy – Projects that promote a whole new infrastructure and industry of green energy
• Aid to States – In order to keep our safety nets in place while we get things rolling again

Barack has asked his team to think big on this plan.  My only fear is that they won’t think big enough and we will spend money on the bridge to nowhere.

Most Americans are starting to understand what deep doo-doo we are really in.  This economic crisis isn’t some minor hiccup that could pass.  It could bankrupt all of us.  Tom Friedman has been trying to wake people up to the fact that next year at this time things are going to be worse, a lot worse.  In his Sunday column, “We Found the WMD”, he tried to wake up America to the problem.  They will eventually do just that as businesses close and many of us face losing our homes and economic security.  But what will come next is the anger.  In his column on Wednesday, “All Fall Down”, he started to identify what happened.

“So many people were in on it: People who had no business buying a home, with nothing down and nothing to pay for two years; people who had no business pushing such mortgages, but made fortunes doing so; people who had no business bundling those loans into securities and selling them to third parties, as if they were AAA bonds, but made fortunes doing so; people who had no business rating those loans as AAA, but made a fortunes doing so; and people who had no business buying those bonds and putting them on their balance sheets so they could earn a little better yield, but made fortunes doing so.”

But it gets worse.  He quotes Michael Lewis of “Liars Poker”, a classic if you want to know how little morality there has never been on Wall Street, how the mangers were either grossly stupid or were in on the deal and knew it would all fail, but were in it to get their loot.  And as more people start to understand that these “Lions of Wall Street’ and the wonders of the marketplace was nothing more than a ponzi scheme to screw the rest of us there is going to anger, a lot of anger.

Now the initial problem is that banks won’t loan and the theory was that if we give them an infusion of cash, then they will loan.  But the Banks know something the rest of us are ignoring:  We have only seen the tip of the iceberg.  Banks know there is still a ton of bad paper out there not yet identified, but they don’t know who has it, so they don’t want to start the flow of cash to an institution that may not be around in a couple of months.  As Tom points out, we have no choice, we have to save them or we all go down.  But it hurts to bail out the people who really caused this thing.

The real problem right now is that the bailouts are based on old economic theory that you give the markets money and then you get out of the way or you hinder the invisible hand and screw up the whole thing.  What we really need is a piece of the action where the U.S. Government (we the people) can say here, have some money, lots of money, but you morons that got us into this thing, you are fired, there will be no bonuses, and if you don’t loan x% of what we give you, we will let you fail, and oh by the way, here are the new rules you will have to operate by.  Certainly we don’t want to go overboard and stop some investing that might look risky, but may be the venture capital for the next round of innovations.  But in the short term, we are going to have to take control because you need training wheels again to relearn you are part of the human community.

But here is the real lesson as your anger grows, that will be obfuscated by our friendly conservative zealots that got us into this mess who want to “cut spending and lower taxes”:  Conservative economic theory doesn’t work.  What we have had since Ronald Reagan is a belief that government has no role.  And they have proved it by, as James K. Galbraith put it in his book, “The Predator State”, “the systematic abuse of public institutions for private profit or, equivalently, the systematic undermining of public protections for the benefit of private clients.”  They have made greed king and they have promised you a free ride with the magic of the market place and trickle down economics.  It’s low taxes and no government and everything will be fine.  Let the Masters of the Universe create wealth for all of us.  And after 28 years of this nonsense we are in deep doo-doo.

And one last thing that may really make your head spin around.  Balanced budgets may not be a good thing.  Every time we focused on reducing the deficit to zero we killed our economy (this discounts the aberations of the Clinton years when the Dot Comm bubble had revenues up).  Savings may not be related to economic health on a macro-economic level.  Government spending isn’t necessarily bad and could in fact be the path to our salvation if it is invested in our future, not some hand out, stupid frivolous war, or tax cut.  The magical hand of the market place will not insure that the just get rewarded.  Putting money in the hands of citizens is not always the best answer, and governments have a major role in determining our path forward.  It’s called planning and our future depends on it.  Please don’t fall back on old ways of thinking that have put us right where we are right now, and that is in deep doo-doo.  Politicians are only good at spouting conventional wisdom to make you feel warm and fuzzy.  The way out of our economic disaster is going to be new thinking that makes you feel very uncomfortable.  Comfort is how we got here.

Well should we are shouldn’t we?  Lets sample some opinions.  Our fun loving Republicans are against it:

“Just giving them $25 billion doesn’t change anything,” Sen. Jon Kyl of Arizona, the Senate’s second-ranking Republican, said on Fox News Sunday. “It just puts off for six months or so the day of reckoning.”

Sen. Richard Shelby of Alabama, the senior Republican on the Senate banking committee, called the plan “a road to nowhere.” He called the “Big Three” — Detroit’s three major automakers — “a dinosaur,” and said on NBC’s Meet the Press that they are “not building the right products. … They don’t innovate.”  He also called it, “unnecessary and economically harmful” and a “gross misuse of American taxpayers’ hard-earned money.”

Of course you should note that Senator Shelby has in his home state Honda, Toyota and Mercedes-Benz, foreign-owned companies that would not be eligible for bailout funds.  But if it is good money after bad what’s the point?  Some Republicans and the American Enterprise Institute say it would be better to let them go into bankruptcy and then be forced to reorganize.

The other side of this argument goes something like this:

SEN. CARL LEVIN (D-MI):  “Well, this is a national problem, first of all, without any question.  We’ve got at least three million jobs dependent upon this industry surviving.  We’ve got–this is a Main Street problem.  We’ve got 10,000 or more dealers.  They, they cover the country in every town of this country.  The auto industry touches millions and millions of lives.  One out of 10 jobs in this country are auto related.  Twenty percent of our retail sales are auto related or automobiles.  So this is a national problem.”

MR. TOM FRIEDMAN:  “You know, Carl Levin, what did he say?  He said, “You know, just give us this $25 billion and, and we’ll be OK.” Tom, if I thought with $25 billion we could save this industry, I’d be for it, OK?  But I see no plan right now, no reason to suggest that these people who have driven this industry into a complete ditch have a plan to get it out in the long term and not come back to a six, three months from now, for another $25 billion.  Show me that plan.”

And so there is truth on either side.  It is interesting that the Republicans are not that concerned about the domino effect of putting so many people out of work and maybe really driving us into a depression.  President Elect Obama weighed in on Sunday on 60 Minutes with:

“So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all the stakeholders coming together with a plan what does a sustainable U.S. auto industry look like? So that we are creating a bridge loan to somewhere as opposed to a bridge loan to nowhere. And that’s, I think, what you haven’t yet seen.”

On the issue of bankruptcy being a better solution, he said:

“Well, you know, under normal circumstances that might be the case in the sense that you’d go to a restructuring like the airlines had to do in some cases. And then they come out and they’re still a viable operation. And they’re operating even during the course of bankruptcy. In this situation, you could see the spigot completely shut off so that it would not potentially permit GM to get back on its feet.”  (He means there is no available credit to fund a reorganization because the markets have dried up).

Isn’t nice to know that we finally will have a President who isn’t reactionary and has his head squarely planted on his shoulders?  For my part, we will have to bail them out, but only with either a realistic “plan” or a “bridge”.  This is the last of the major manufacturing we have left in America and we will need it down the road.  If they go down, the impact to our economy could be catastrophic and do we really want to take that chance?  What I think is coloring everyone’s vision right now is the need to punish those who have squandered our economic might, and in this case that would be auto executives and the politicians that protected them for years.  But this is not the time to be looking for scapegoats.  It is time for solutions.

On the issue of bankruptcy and the comparison to United Airlines that went into bankruptcy and came out a better company that the Republicans like to quote (better company at least from the bottom line perspective as opposed to customer comfort).  There are two things that make this non-analogous:  First as noted by our President-Elect, there is no money out there for them to borrow to restructure while the creditors are held at bay.  Second, they make cars.  If people suspect that they could go out of business, why would buy one of their cars that may not have service or easily to obtain parts down the road?  Buying an automobile is really a long term commitment and putting that commitment at risk could just end their business.

One last thought:  Republicans are willing to let the market place play out through bankruptcy with the possibility of millions of jobs being lost and pushing us into a real depression.  Democrats want tough love, but want to be more proactive in these perilous times.  We have let the market place run free and it has gotten us into major trouble.  Maybe a little direction is not a bad thing if it works.

Oh there have been so many interesting tidbits in the news lately that I hardly know where to start.  So I will start with Wednesday and work backward:

• The brutal attack in New York by four white boys out to “f*ckup some Mexicans” was admirably covered by Rick Sanchez on CNN.  Rick tried to play down the political implications while condemning the attacks, but CNN only has to look in their own back yard to see Lou Dobbs spinning this hate.  When Ted Turner confronted Lou on his treatment of Hispanics, Lou responded by denying any such behavior.  Fat white men are the last to get it.  And of course it is political as the attacks don’t come from the left, but from the Republican right.  The xenophobia and fear that was used by the Republican Party to stir up their base is coming home to roast.  It is a grand old party isn’t it?
• Sarah Palin was being interviewed by Wolf Biltzer on Wednesday and he asked her point blank if she regretted trying to tie Barack Obama to an American former weatherman and her inflammatory language.  Her answer went something like this.  “I am still very concerned with his relationship with this individual (there was no relationship) but lets put all that behind us.”  Anybody see this is contradictory?  “I am still concerned, let’s put it behind us?”  The woman cannot think and talk in logical sentences.  Then there is the problem of checking peoples causal associations.  I am sure McCarthyism doesn’t even ring a bell with this ding dong.   I think the more exposure she gets and people see how she twist reality, the less most will accept her in mainstream politics.
• The Republicans are having a meeting of their Governors in Florida to see a way forward.  This is billed as a war between the pragmatists and the social conservatives.  The pragmatists see that the party has to modernize and move away from issues that are no longer registering with younger voters and most of the country.  They also recognize that the small government, no regulation approach is not keeping up with the times.  The social conservatives think we simply haven’t had enough of this stuff.  What I found interesting was that they wanted to learn from Barack Obama’s campaign and modernize, meaning learn how to use technology to get their message out.  But nowhere in this entire discussion did they discuss the elephant in the room:  The message is faulty.
• The New York Times on Tuesday ran a story about the wanning impact of the South in our elections (For South, A Waning Hold on National Elections).  I cannot think of a more welcome circumstance.  This part of the country is the center for the Republican base made up of poorly educated white people, evangelical Christians (mostly poorly educated white people), and the center of overt racism in this country.  This deep South voted more Republican than they did in 2004 and went almost 60% for John McCain.  Could you be more out of touch?  As the New York Times put it, “By leaving the mainstream so decisively, the Deep South and Appalachia will no longer be able to dictate that winning Democrats have Southern accents or adhere to conservative policies on issues like welfare and tax policy, experts say.”  Thank god because they have almost destroyed our country.  Here is one of the milder comments from one of the fine citizens down there, “I think any time you have someone elected president of the United States with a Muslim name, whether they are white or black, there are some very unsettling things.”  It will be nice to know that the most ignorant part of our country no longer decides who we have for President.
• And last but not least relating to our economic woes were two stories the were highly interesting and show once again we can’t let go of that old conventional wisdom that the market place knows better than government.  Right now it clearly doesn’t and Detroit wants a major bailout from the government.  Actually this is bailout number two in the current crisis.  Tom Friedman put it best in his op-ed on Wednesday (How to Fix a Flat) when he said that there needs to be strings.  These companies have made bad choice after bad choice, fought raising standards on gas mileage standards, while our Japanese friends are making money.  We have say to that it’s our money and if you want to be saved, here are the conditions.  We are now part owner.  Will the Demos finally see this and put real teeth into a bailout that gives us some say about how our money is used?  I will wait to see, but you know President Moron won’t go for it.  Sixty eight days and counting
• The other economic story is after two months Treasury Secretary Paulson is finally figuring out it is about mortgage foreclosures.  So he says he is going to shift some of that $700 billion from buying mortgages to free up credit for Americans, or some form thereof.  Once again it is wrong headed an too mild to help.  It is about the mortgage crisis, but at almost every step, we have cushioned the blow to  banks and investors from the losses they have help perpetuate.  The fear is that investors, if banks renegotiate loan terms, will sue for loss of their earnings (Lawmakers Debate Loan Modification). There are complicated arguments here about who owns the loans, but my feeling is that government needs to step in a major way and make sure the pain of these devaluating home values is felt by the investors also.  How that is done is still up in the air, but it has to be done.  Once again, against conventional wisdom, in the short term the government is going to have to stop this hemorrhaging and it will not be by assuming these loans at their original value and thus preserving the banks and their investors.  Welcome to the pain felt on Main Street guys.

There was one other story, I think on Sunday, about how the carefully choreographed Republican campaign of xenophobia and hate (remember the shots of “kill him” at their rallies as they spewed disinformation or outright lies) will in fact increase the violence (see item 1 above) and intolerance among our less educated and already intolerant population.  But I will leave that to another day.  Anybody who is still a proud Republican needs to have a brain transplant.

I have to admit, I feel fearful.  I think the whole country is feeling fearful.  The future we thought we were saving for may not be possible anymore.  If you are in my age group, which is in the early 60’s, and the stock market tanks and your home loses its value, our retirement planning will be for naught.  We are too old to wait for the system to recover.  I think many people in the country are starting to recognize what perilous times we are living in.   Then there is the anger, anger at the people who got us into this.  The trouble is, much of it is displaced.  Right now the tide seems to be turning against the $700b bailout because many want to punish Wall Street.

But when the dust settles, reward and punishment are not the critical factors right now.  The critical factor is what is the appropriate action to limit the harm that can be done if the market crashes.  The answer is nobody knows.  If the $700b plan goes forward it clearly has to have oversight and equity share for the taxpayer.  Senator Shelby, conservative Republican of Alabama, does not support it because he thinks the marketplace needs to operate to punish those that got greedy (that would be all of us).  Newt Gingrich, another free market advocate, feels the same way.  I think they are letting their conservative dogma and strict father family moral values overcome their good sense.  If we do nothing and let these businesses fail, will the domino effect make the $700b investment by us look cheap?

I think the party is over and the hangover may be a killer.  We can argue all day long about whether we need to win in Iraq and Afghanistan, but it is moot.  As Tom Friedman pointed out in his column on Wednesday (Dear Iraqi Friends), we no longer can afford to solve the world’s problems.   Our own infrastructure is in bad need of investment so that our economy can compete and grow, yet we have been on this spending and get rich (read low to no taxes) quick train demanding ever increasing returns on our investments (read more and more risk) and now we must put ourselves more in debt just to bailout our investments.  We need massive, no I mean massive, investments in alternate energy to improve not only our national security, but to create an innovative energy segment of our economy that could just pull us out of the coming recession/depression.   I won’t mention climate change because many of you are still in denial and it would be counterproductive.  We have lost our moral leadership in the world under the Republicans and George Bush.  We have lost our financial leadership in the world and the consequences of this are yet to be realized.  The party is over and the house is trashed.

But what really scares me is that most Americans still can’t see that the greedy bankers in Wall Street were just the effect of a conservative philosophy of the marketplace.  It is not just the lack of regulation; it is the belief that government is the problem, hindering the acquisition of wealth that is the badge of success and morality.  Fifty percent of our population elected and re-elected George Bush and the Republicans who have not only reigned over our downfall, they have accelerated it.  Now these same people do not hold themselves accountable and are about to elect the same power structure with John McCain and Sarah Palin to continue the debacle.  They cannot see the connection in their conservative philosophy and a government that is powerless to respond to crises.

Think about it.  If we had a government that was empowered, then we would have fuel standards today that would have forced the automakers to produce cost efficient automobiles, and also not be in such financial trouble today. But our friends, the conservative Republicans and a couple of Detroit Democrats blocked every attempt.  As Bill Clinton pointed out on the Daily show Tuesday night, if after the tech bubble in 2001, if all that money that went into the housing bubble went into alternate energy innovation, we would be the leaders in the world today.  If after the 1970 energy crisis government would have stepped in and put a $1 additional tax on all gasoline, making the automobile a less economic choice for transportation, maybe we would look more like Europe with its excellent transportation systems.  We might also have money to fund infrastructure improvements, but that would be a tax and in the Republican mantra, all taxes are evil.  Government has a very big role to play by tempering the market with a long-term view of where we need to be.

Instead we are reacting in fear and anger, looking to find someone to punish for a philosophy of greed we all bought into.  We starved government because we are selfish and that selfishness reflects itself in the conservative philosophy of minimal regulation, low taxes, small government, and our unbridled self-interest reflected in the marketplace will solve all our problems.  It is a bankrupt philosophy, but the owners of this bankrupt philosophy  fail to recognize their own part in this disaster.  We may get John McCain, a reactionary throwback to the 80’s and Ronald Reagan, Sarah Palin, a throwback to the 19th century when gutting a moose was important, and the whole Republican power structure that brought you George Bush.

My fear is becoming anger too, but not at Wall Street, but at you people who voted these people into power, cannot see the failure in your own belief system that brought this misery, and are about to make the same mistake again.  Wall Street just reflects these values.  Have you learned nothing?  Apparently not and if you win this election, my children and their children will have to pay for your stupidity and selfishness.  You are the problem.

Note:  McCain is pulling a campaign stunt by trying to cancel his debate on Friday and go back to Washington “to solve the problem”.  It started with the hope for a joint statement from both Obama and McCain initiated by Obama, but then McCain unilaterally decided only he could solve the problem.  The last thing these negotiations need is the insertion of presidential politics and a new voice in the negotiations.  It is truly sad that anybody thinks this main who has jettisoned all the beliefs that made him a maverick to gain the presidential nomination will stroll into Congress and resolve the difficulties, when most of the people there don’t like him very much.  All he did was raise the stakes and turn this into a partisan battle ground.  Now that’s being Presidential.

In the last few blogs on the economy I have pointed out how conservative thinking on the economy is outmoded and as a result is the cause of many of the problems we are now facing.  The same is true for our approach to foreign affairs and that was on display during the Russian incursion into Georgia.   John McCain came out with a bellicose, “We are all Georgians” and Sarah Palin with her statement that we might have to confront them militarily.  It is vintage 1980’s stuff that is totally removed from where the world is today.

I have maintained in earlier blogs (”John McCain Experience?” and “Ticking Time Bombs”) that the reaction exhibited by John McCain and the conservatives is cold war thinking that has not evolved as the world has changed.  My contention is that Russia may find, as we did in Iraq, that these kinds of expeditionary adventures are extremely expensive and counter productive.  While the Neocons are seeing Russia as this big monolithic threat that must be met at the door, many others are understanding this will only exacerbate things when a more cool and calculated response will be much more effective.

First and foremost this was an exercise of Russian power near their borders on what they see as an ever-increasing United States threat.  How would you feel if Russia put missiles on our borders as we are doing in Turkey?  Oh, I forgot, they did and it was the Cuban missile crisis.  Secondly have you ever asked yourself what NATO does anymore and wouldn’t you be threatened by the expansion around your borders.  Of course Russia’s move was thuggish although goaded on by Georgia’s imprudent acts in that volatile region.  It is also funded by their oil wealth which we are contributing to.  But the reality is that it was counter productive.  Consider what Fareed Zakaria said on his show GPS:

“From Caucasian countries like Azerbaijan, to Poland and Ukraine, to the Baltic republics, everyone has been rattled by Russia’s behavior, and now seek stronger ties with the West.  Europe and the United States are more united than at any point in two decades. And outside the West, no country in the world has followed Russia and recognized South Ossetia and Abkhazia.

Moscow must be looking at all this and realizing that it has racked up huge costs for little benefit.

If there were to be another cold war, the outcome is preordained. The combined GDP of the West is now $30 trillion. Russia, meanwhile, has an economy that is just under $2 trillion, and that, too, artificially inflated by high oil prices.”

Consider what Tom Friedman (“Hot, Flat, and Crowded”) said in an interview on the same show one week later:

“For me, as someone who opposed NATO expansion at the time, because I felt that it was basically saying to the Russians, look, the Cold War is over for you, but not for us. We’re going to keep pushing our alliance in your face.

At the time they were weak. And at the time, you know, the administration told us, oh, don’t worry. The Russians — they’ll accept it. They’ll get used to it.

Well, guess what. They got strong, and they were never used to it. It was a humiliation. And so, it doesn’t surprise me to see what Putin is doing today.

It’s not an excuse. Putin’s got to get out of Georgia. I think the market’s actually going to punish him a lot more than he realizes and a lot of others realize.”

The bottom line here is that John McCain’s “experienced” response, reflective of the conservative’s view of world politics, is the wrong approach that will simply make things worse.  We need to understand that the Russians have real concerns we need to not just flip off.  Second we need to understand that in a world economy, Russia’s thugism will have negative consequences for the Russians.  The last thing we need to do is start another cold war to reinforce their thugism.  Even more important, we need Russia on our side.  As Tom Friedman put it:

“I looked at the world and I said, is there any problem in the world that we can solve without Russia? Any big problem, whether it’s Iran, Iraq — is there any problem we could solve without Russia?”

Our policy in the future is not reliving the past which is what the conservative Republicans will bring us, but looking for new ways to deal with aggression in a world where that aggression is becoming more and more counter productive as our economies and the welfare of our people are more and more entwined.  Or as Fareed said,

“A calm and deliberate policy toward Moscow is what the world needs, not hysterical overreactions.”

We are not all Georgians.