By: Carrie Budoff Brown and Mike Allen
December 30, 2008 03:38 PM EST

Setting up a clash with Senate Democrats, Illinois Gov. Rod Blagojevich announced Tuesday that he would appoint former state attorney general and comptroller Roland Burris to fill out President-elect Obama’s term in the U.S. Senate.

Saying Illinois should not be “deprived” of the representation of two senators, Blagojevich introduced Burris as “someone with unquestioned integrity.” The governor defended his decision to make the appointment as part of his gubernatorial responsibility to fill Senate vacancies.

“I would like to ask everyone to do one last thing: Don’t allow the allegations against me to taint this good and honest man,” Blagojevich said at a 3 p.m. press conference.

The move was met with a rebuke from Senate Majority Leader Harry Reid (D-Nev.), who said the Democratic caucus would refuse the appointment from a governor who stands accused of selling the position to the highest bidder.

“Under these circumstances, anyone appointed by Gov. Blagojevich cannot be an effective representative of the people of Illinois and, as we have said, will not be seated by the Democratic Caucus,” Reid said in a statement.

In addition, Jesse White, the Illinois secretary of state, said he will not certify Burris as the replacement for Obama’s seat.

For his part, Burris said it’s inconceivable that the state of Illinois should start the new Congress “shorthanded,” with just one senator.

Burris also said he has “no relationship” to charges that Blagojevich tried to sell Obama’s Senate seat for personal gain and said of the governor, “In this legal process, you’re innocent until you’re proven guilty.”

Blagojevich’s lawyer had said earlier that the governor did not plan to defy the Senate leaders and impose an Obama successor on them.

Reid (D-Nev.) has said that Illinois Lt. Gov. Pat Quinn should make the appointment, and the Senate Democratic caucus signed a letter supporting that option.

Reid said in a letter to the governor: “Please understand that should you decide to ignore the request of the Senate Democratic Caucus and make an appointment we would be forced to exercise our Constitutional authority under Article I, Section 5, to determine whether such a person should be seated.”

Blagojevich’s lawyer, Ed Genson, had told a news conference Dec. 17 that the governor did not plan to try to make the appointment. “Harry Reid said that they’re not going to accept anybody, so why would he do that?” Genson said.

Burris, 71, told reporters earlier this month that he only wanted to serve the remaining two years of the Senate term and would not run for reelection.

Burris was the first African American to be elected to statewide office in Illinois, serving as comptroller from 1983 to 1991 and as attorney general from 1991 to 1995.

He also ran against Blagojevich for the Democratic nomination for governor in 2002 – winning the support of much of Illinois African-American political establishment, including then-state Sen. Barack Obama.

Another complication in the selection is that Burris is a registered lobbyist in Illinois and Washington, D.C. His Chicago-based firm, Burris & Lebed, is registered in Springfield to represent clients ranging from Comcast to the Illinois Funeral Directors Association. In 2007, the firm was also registered to represent the Illinois Association of Mortgage Bankers. The firm is registered in both Springfield and Washington to represent MicroSun Technologies, an Illinois-based maker of battery and power supplies.

Burris’ lobbying partner is Fred Lebed, a veteran Democratic political operative who once served as executive director of the Cook County party and has also held a number of state government posts.

Blagojevich has been under pressure to resign from office, or at least relinquish his gubernatorial authority to fill Senate vacancies. He has remained in office, however, as he fights a federal corruption investigation and a legislative effort to impeach him.

The two-term governor has denied any wrongdoing.

It’s unclear whether Reid has the power to block Burris’ appointment. Senate leaders discussed the impending announcement on a conference call Tuesday afternoon.

John Fortier, a research fellow at the American Enterprise Institute, wrote in a Politico Ideas piece this month that the Senate doesn’t have the power to reject the appointment.

“The Senate would have little recourse but to seat Blagojevich, as he meets the minimum constitutional qualifications for office,” Fortier wrote of the possibility that the governor might appoint himself. “But after seating Blagojevich, the Senate could then expel him by a two-thirds vote. The seat would be vacant again, and the new governor could make an appointment. Or by then, the Legislature might have changed the law to do away with appointments, in which case the seat would sit vacant until a special election was held.

The office of the Senate historian referred questions Tuesday to the Senate counsel, saying it is a legal matter.

Adjusted for inflation, it’s at lowest since ’57

by Joel Stein

Joel Stein is a columnist for The Los Angeles Times. His e-mail address is jstein@latimescolumnists.com.

By Saeed Shah and Jonathan S. Landay / McClatchy

Take it from a Brit: Losing the No. 1 world superpower spot won’t be that bad. Really.

By Chris Ayres

December 27, 2008

There has been much talk in the media about America’s threatened superpower status — a result of its near-fatal exposure to the Kryptonite of subprime mortgages, among other factors — and how the country will inevitably find itself going the way of that other once-undefeated political juggernaut, the dear old British Empire.

To which I say: Lucky America!

I mean, yeah, it’s going to sting a bit. Losing any big, sexy-sounding job title will inevitably deliver a blow to your self-esteem. Yet it can also be liberating.

Do Tehranis and Muscovites blame Britain for the culture of mindless self-gratification that brought down the global economy? Of course not. They blame America — even though Britain is arguably the more guilty party, what with its foreign-debt-to-GDP ratio standing at an unconscionable (and, really, quite embarrassing) 490%, as opposed to the United States’ puritanical 89% (according to the 2007 “purchasing power parity” GDP and external debt figures supplied by the CIA World Factbook).

The fact is that when you’re No. 1, you always get blamed for everything. When you’re No. 3, or No. 5 — or No. 135 — you can put your hands in your pockets and whistle tunelessly with a “Who, me?” look on your face, and no one ever asks any questions.

Take Slovakia. Five years ago, Slovakia invaded Iraq. Admittedly, it did this with the help of a few other countries. But still, does Slovakia ever get the blame for all the trouble that has gone down over there since then?

Nope.

Imagine, for a moment, the relief of being simply too unimportant to be held responsible for any event of consequence. Imagine Barack Obama being roused by the proverbial “red phone” at 11 a.m. — the leaders of low-ranking countries can presumably nap until late morning — to be informed of a terrible rumpus in deepest Nmbubu-Oobu, and his only responsibility is to write a stern news release calling on Belgium to act. And when it all goes horribly wrong — as it inevitably will — all he has to do is tut disapprovingly and mutter something about those arrogant Flems in Bruges.

Being British, I speak from some experience when it comes to lost superpowerdom. I was born in northern England in the mid-1970s — a time when my grandparents still believed that Britain was the mightiest nation on Earth, even though the prime minister, Harold Wilson, was being warned that the country was facing “wholesale domestic liquidation” unless it could secure an emergency, Third World-style bailout from the International Monetary Fund.

In Britain in those days — as in America now — people bought consumer products based on patriotism. The misery! I later fell victim to this nonsense myself: My first car was an antique 1974 MGB, the electronics supplied by the pride of postwar British manufacturing, Lucas Industries. When I bought the MGB, I sincerely believed that British sports cars were the finest in the world. Then the wiring loom under the steering wheel short-circuited when I was halfway down Caledonia Road in North London and I had to jump out with my trousers literally on fire.

My next car was Japanese.

Today, of course, there are pretty much no truly British cars. And who cares? We live in an era of globalization. The Indians might own the company that makes Jaguars, but I probably have money in a pension fund somewhere that owns stock in that very same Indian company. So, in a small way, the British are still in the car business — with the added benefit that a modern Jag probably won’t cause a trouser fire.

And even if you own a “foreign” car these days, chances are that at least a few bits and pieces of it have been sourced from your homeland. That’s the way it should be: Countries that are good at one thing should concentrate on it, and countries that are bad at that same thing should stop doing it.  [See Law of Comparative Advantage - Kautzman]

Besides, abandoning consumer patriotism is as liberating as no longer being blamed for everything. It’s especially liberating when shopping for an automobile. Farewell, beige Ford Taurus! Hello, gunmetal-gray BMW M3!

Not all domestic industries suffer when a nation goes into an irreversible decline, of course. Others suddenly find themselves booming. The beleaguered American newspaper industry, for example, might very well be able to profit immensely by simply dispatching its most snide and ironically detached correspondents to the new capitals of world power, from which they will be able to report with maximum condescension about the hilarious earnestness of the locals. Mark my words: Demoralized Americans won’t be able to get enough of these reports, and thus will buy multiple newspapers every morning while traveling to work on buses and trains, having abandoned their cars when the U.S. government stopped qualifying for its bulk oil discount from the Saudis.

Not that working 8-to-7 six days a week will seem so important when you’re no longer ruling the world. If Britain’s experience is anything to go by, Americans will soon find more satisfaction by trying to break pointless world records — crossing Greenland on a pogo stick, using only one arm, while dressed in native Bolivian costume, for example — or writing absurdist comedy, or recovering from apocalyptic, three-gin-and-tonic lunchtime hangovers.

Oh yes, you’re in for a treat.

Chris Ayres is Los Angeles correspondent for the Times of London and the author of “Death by Leisure: A Cautionary Tale” (Grove Press, February 2009).

DECEMBER 27, 2008, 12:14 P.M. ET

NASHVILLE — Although the number of uninsured and the cost of coverage have ballooned under his watch, President Bush leaves office with a health care legacy in bricks and mortar: he has doubled federal financing for community health centers, enabling the creation or expansion of 1,297 clinics in medically underserved areas.

For those in poor urban neighborhoods and isolated rural areas, including Indian reservations, the clinics are often the only dependable providers of basic services like prenatal care, childhood immunizations, asthma treatments, cancer screenings and tests for sexually transmitted diseases.

As a crucial component of the health safety net, they are lauded as a cost-effective alternative to hospital emergency rooms, where the uninsured and underinsured often seek care.

Despite the clinics’ unprecedented growth, wide swaths of the country remain without access to affordable primary care. The recession has only magnified the need as hundreds of thousands of Americans have lost their employer-sponsored health insurance along with their jobs.

In response, Democrats on Capitol Hill are proposing even more significant increases, making the centers a likely feature of any health care deal struck by Congress and the Obama administration.

In Nashville, United Neighborhood Health Services, a 32-year-old community health center, has seen its federal financing rise to $4.2 million, from $1.8 million in 2001. That has allowed the organization to add eight clinics to its base of six, and to increase its pool of patients to nearly 25,000 from 10,000.

Still, says Mary Bufwack, the center’s chief executive, the clinics satisfy only a third of the demand in Nashville’s pockets of urban poverty and immigrant need.

One of the group’s recent grants helped open the Southside Family Clinic, which moved last year from a pair of public housing apartments to a gleaming new building on a once derelict corner.

As she completed a breathing treatment one recent afternoon, Willie Mai Ridley, a 68-year-old beautician, said she would have sought care for her bronchitis in a hospital emergency room were it not for the new clinic. Instead, she took a short drive, waited 15 minutes without an appointment and left without paying a dime; the clinic would bill her later for her Medicare co-payment of $18.88.

Ms. Ridley said she appreciated both the dignity and the affordability of her care. “This place is really very, very important to me,” she said, “because you can go and feel like you’re being treated like a person and get the same medical care you would get somewhere else and have to pay $200 to $300.”

As governor of Texas, Mr. Bush came to admire the missionary zeal and cost-efficiency of the not-for-profit community health centers, which qualify for federal operating grants by being located in designated underserved areas and treating patients regardless of their ability to pay. He pledged support for the program while campaigning for president in 2000 on a platform of “compassionate conservatism.”

In Mr. Bush’s first year in office, he proposed to open or expand 1,200 clinics over five years (mission accomplished) and to double the number of patients served (the increase has ended up closer to 60 percent). With the health centers now serving more than 16 million patients at 7,354 sites, the expansion has been the largest since the program’s origins in President Lyndon B. Johnson’s war on poverty, federal officials said.

“They’re an integral part of a health care system because they provide care for the low-income, for the newly arrived, and they take the pressure off of our hospital emergency rooms,” Mr. Bush said last year while touring a clinic in Omaha.

With federal encouragement, the centers have made a major push this decade to expand dental and mental health services, open on-site pharmacies, extend hours to nights and weekends and accommodate recent immigrants — legal and otherwise — by employing bilingual staff. More than a third of patients are now Hispanic, according to the National Association of Community Health Centers.

The centers now serve one of every three people who live in poverty and one of every eight without insurance. But a study released in August by the Government Accountability Office found that 43 percent of the country’s medically underserved areas lack a health center site. The National Association of Community Health Centers and the American Academy of Family Physicians estimated last year that 56 million people were “medically disenfranchised” because they lived in areas with inadequate primary care.

President-elect Barack Obama has said little about how the centers may fit into his plans to remake American health care. But he was a sponsor of a Senate bill in August that would quadruple federal spending on the program — to $8 billion from $2.1 billion — and increase incentives for medical students to choose primary care. His wife, Michelle, worked closely with health centers in Chicago as vice president for community and external relations at the University of Chicago Medical Center.

And Mr. Obama’s choice to become secretary of health and human services, former Senator Tom Daschle of South Dakota, argues in his recent book on health care that financing should be increased, describing the health centers as “a godsend.”

The federal program, which was first championed in Congress by Senator Edward M. Kennedy, Democrat of Massachusetts, has earned considerable bipartisan support. Leading advocates, like Senator Bernie Sanders, independent of Vermont, and Representative James E. Clyburn, Democrat of South Carolina, the House majority whip, argue that any success Mr. Obama has in reducing the number of uninsured will be meaningless if the newly insured cannot find medical homes. In Massachusetts, health centers have seen increased demand since the state began mandating health coverage two years ago.

At $8 billion, the Senate measure may be considered a relative bargain compared with the more than $100 billion needed for Mr. Obama’s proposal to subsidize coverage for the uninsured. If his plan runs into fiscal obstacles, a vast expansion of community health centers may again serve as a stopgap while universal coverage waits for flusher times.

Recent job losses, meanwhile, are stoking demand for the clinics’ services, often from first-time users. The United Neighborhood Health Services clinics in Nashville have seen a 35 percent increase in patients this year, with much of the growth from the newly jobless.

“I’m seeing a lot of professionals that no longer have their insurance or they’re laid off from their jobs,” said Dr. Marshelya D. Wilson, a physician at the center’s Cayce clinic. “So they come here and get their health care.”

Studies have generally shown that the health centers — which must be governed by patient-dominated boards — are effective at reducing racial and ethnic disparities in medical treatment and save substantial sums by keeping patients out of hospitals. Their trade association estimates that they save the health care system $17.6 billion a year, and that an equivalent amount could be saved if avoidable emergency room visits were diverted to clinics. Some centers, including here in Nashville, have brokered agreements with hospitals to do exactly that.

Many centers are finding that federal support is not keeping pace with the growing cost of treating the uninsured. Government grants now account for 19 percent of community health center revenues, compared with 22 percent in 2001, according to the Health Resources and Services Administration, which oversees the program. The largest revenue sources are public insurance plans like Medicaid, Medicare and the State Children’s Health Insurance Program, making the centers vulnerable to government belt-tightening.

The centers are known for their efficiency. Though United Neighborhood Health Services has more than doubled in size this decade, Ms. Bufwack, its chief executive, manages to run five neighborhood clinics, five school clinics, a homeless clinic, two mobile clinics and a rural clinic, with 24,391 patients, on a budget of $8.1 million. Starting pay for her doctors is $120,000. Patients are charged on an income-based sliding scale, and the uninsured are expected to pay at least $20 for an office visit. One clinic is housed in a double-wide trailer.

Because of a nationwide shortage of primary care physicians, the clinics rely on federal programs like the National Health Service Corps that entice medical students with grants and loan write-offs in exchange for agreements to practice as generalists in underserved areas. Of the 16 doctors working for United Neighborhood, seven are current or former participants.

Dr. LaTonya D. Knott, 37, who treated Ms. Ridley for her bronchitis, is among them. Born to a 15-year-old mother in south Nashville, she herself had been a regular childhood patient at one of the center’s clinics. After graduating as her high school’s valedictorian, she went to college on scholarships and then to medical school on government grants, with an obligation to serve for two years.

She said she now felt a responsibility to be a role model. “I do a whole lot of social work,” she said, noting that it was not uncommon for children to drop by the clinic for help with homework, or for a peanut butter sandwich. “It’s not just that we provide the medical care. I’m trying to provide you with a future.”

Despite such commitment, national staffing shortages have reinforced concerns about the quality of care at health centers, notably the management of chronic diseases. This year, the government started collecting data at the centers on performance measures like cervical cancer screening and diabetes control.

“The question is not just, ‘Are you going to have more community health centers?’ ” said Dr. H. Jack Geiger, founder of the health centers movement and a professor emeritus at the City University of New York. “It’s, ‘Are you going to have adequate services?’ ”

A deeper frustration for health centers concerns their difficulty in securing follow-up appointments with specialists for patients who are uninsured or have Medicaid. All too often, said Ms. Bufwack, medical care ends at the clinic door, reinforcing the need to expand both primary care and health insurance coverage.

“That’s when our doctors feel they’re practicing third world medicine,” she said. “You will die if you have cancer or a heart condition or bad asthma or horrible diabetes. If you need a specialist and specialty tests and specialty meds and specialty surgery, those things are totally out of your reach.”

Current wisdom has it that if there had been a few less hanging chads in Florida in November 2000, the world would be a different place.

Al Gore would have won the presidency, the Iraq war wouldn’t have happened, and several hundred thousand people who perished in that war would be alive today. That conclusion is based on the generally unchallenged belief that Iraq is George W. Bush’s war: that he and a cabal of like-minded right-wingers conceived and executed the invasion for their own ideological motives. Or, as Frank Harvey, a research professor of international relations at Dalhousie University, puts it: “A few powerful ideologues exploited public fears (and international goodwill) in the aftermath of 9/11 to amplify Iraq’s WMD threat as a primary justification for an unnecessary, preventive invasion.”

That view, notes Harvey, “has emerged as the dominant narrative for explaining the U.S. attack. It represents the prevailing consensus running through dozens of the most popular books on the Bush administration, and hundreds of frequently cited (and widely circulated) scholarly articles, media reports and blog entries on the invasion. In fact, casual observers engaged in a cursory review of the literature will find the same thesis repeated (and usually defended) by prominent scholars, journalists and Washington ‘insiders’ on the left and right of the political spectrum.”

Harvey believes the conclusion is dead wrong. In a new paper for the Canadian Defense and Foreign Affairs Institute, he deconstructs the thesis and finds it “overlooks almost all of the relevant historical facts.” More than that, he asks a simple question: Had he been elected, would Al Gore have taken the same path as George Bush? He concludes, overwhelmingly, that he would have. (more…)

HONOLULU — In the days after Barack Obama’s election as president, Rahm Emanuel, a top adviser, suggested to Gov. Rod R. Blagojevich of Illinois that Mr. Obama’s Senate seat should be filled by Valerie Jarrett, a confidante of Mr. Obama.

In that same week, as word of her potential interest in the Senate seat spread throughout the Chicago political world, Ms. Jarrett spoke with a labor union official in Illinois who said he had spoken to the governor about the possibility of appointing her to the seat. During that conversation, the union leader mentioned that Mr. Blagojevich had his eye on a possible cabinet position in the Obama administration.

The contact was among the findings of an internal report released Tuesday, compiled by lawyers for the president-elect. The report concluded that Mr. Emanuel had as many as six conversations with the governor’s office about the Senate vacancy, but that Mr. Obama had none, and that neither Mr. Emanuel, Ms. Jarrett, nor any other Obama associates had any talks about a deal in which Mr. Blagojevich would benefit from appointing someone to the Senate seat.

Mr. Blagojevich was charged by federal prosecutors in Chicago this month on a variety of corruption counts, including an alleged effort to trade the appointment to the Senate seat for a job or money. The report also disclosed that Mr. Obama, Mr. Emanuel and Ms. Jarrett were questioned by federal prosecutors last week in the corruption inquiry of the governor. Mr. Obama’s two-hour interview took place in his Chicago office, aides said, and he was not under oath or considered more than a witness in the case.

Mr. Obama did not speak about the matter on Tuesday. He continued his vacation in Hawaii, where he attended a memorial service for his grandmother, who died just before the election.

Ms. Jarrett, a longtime Chicago friend of the Obama family who will serve as a senior adviser in the White House, had no communication with Mr. Blagojevich or his aides, the report said. But it said that three days after the election, she spoke with Tom Balanoff, president of the Illinois chapter of the Service Employees International Union, about the Senate seat and the governor’s ambitions to serve in the Obama administration as secretary of health and human services.

This conversation, outlined for the first time, could be of interest in the criminal case against Mr. Blagojevich, who was recorded on the same day as the Jarrett-Balanoff meeting in wiretapped phone calls expressing an interest in a job with an arm of the union in exchange for a possible Senate appointment. According to an affidavit, Mr. Blagojevich was also captured on tape that day telling an unnamed adviser that he was willing to “trade” the appointment for the cabinet post.

“Ms. Jarrett did not understand the conversation to suggest that the governor wanted the cabinet seat as a quid pro quo for selecting any specific candidate to be the president-elect’s replacement,” Gregory B. Craig, who has been designated by Mr. Obama as his White House counsel, wrote in the report. “At no time did Balanoff say anything to her about offering Blagojevich a union position.”

The Obama transition team delayed the report’s release at the request of Patrick J. Fitzgerald, the United States attorney for the Northern District of Illinois, who wanted to interview prospective witnesses before it was made public. The delay prolonged questions on whether any Obama aides acted improperly in dealing with the governor’s office.

In the conversations with Mr. Blagojevich immediately after the election, Mr. Emanuel recommended Ms. Jarrett for the Senate seat, the report said, a position that later turned out to be contrary to Mr. Obama’s wishes.

“In those early conversations with the governor, Mr. Emanuel recommended Valerie Jarrett because he knew she was interested in the seat,” the report said. “He did so before learning, in further conversations with the president-elect, that the president-elect had ruled out communicating a preference for any one candidate.”

Mr. Emanuel was not available to answer a reporter’s questions on Tuesday, aides said, because he had left for a planned holiday trip to Africa with his family.

The report suggested that Mr. Obama had been more involved in thinking about his Senate successor than his public statements about the topic had indicated.

The report said that after Ms. Jarrett took herself out of the running for the Senate seat, citing Mr. Obama’s preference that she work for him in the White House, Mr. Obama authorized Mr. Emanuel to pass on the names of four people he considered highly qualified to take over his seat: Daniel W. Hynes, the state comptroller; Tammy Duckworth, the state veterans affairs director; and Representatives Jan Schakowsky and Jesse L. Jackson Jr., Chicago Democrats.

Mr. Obama later offered two other names, it said: Attorney General Lisa Madigan of Illinois and the Chicago Urban League president, Cheryle R. Jackson.

Those names were passed along by Mr. Emanuel in four calls to John Harris, the governor’s chief of staff, from early November through Dec. 8, one day before Mr. Blagojevich and Mr. Harris were arrested.

Mr. Emanuel, an Illinois congressman, was one of the few members of Mr. Obama’s inner circle who had a working relationship and talked occasionally with Mr. Blagojevich. But his contact with the governor was “totally appropriate,” Mr. Craig told reporters on Tuesday afternoon.

The only other name mentioned in the report was Dr. Eric Whitaker, a close friend of Mr. Obama, who was approached by a Blagojevich aide immediately after the election. The aide, the report said, “wanted to know who, if anyone, had the authority to speak for the president-elect.”

“The president-elect told Dr. Whitaker that no one was authorized to speak for him on the matter,” the report said. “The president-elect said that he had no interest in dictating the result of the selection process, and he would not do so, either directly or indirectly.”

December 23, 2008

By Eugene Robinson

WASHINGTON — Understanding isn’t the same as forgiving. The history-be-my-judge interviews that President Bush and Vice President Cheney have been giving recently help me understand why they acted with such contempt for our Constitution and our values — but also reinforce my confident belief, and my fervent hope, that history will throw the book at them.

The basic argument that they’re making deserves to be taken seriously. I don’t think either man would object to my summing it up in one sentence: We did what we did to keep America safe.

That terse formulation of the Bush-Cheney apologia leaves out important details. Cheney came into office with preconceived ideas about restoring executive branch powers and prerogatives that he believed had been lost after Vietnam and Watergate; Bush either shared Cheney’s views or was willing to go along. But the main narrative of the Bush presidency began with the Sept. 11, 2001, attacks by al-Qaeda terrorists — the worst such assault on American soil.

In a not-for-attribution chat with a member of the Bush Cabinet a couple of years ago, conversation turned to 9/11. I said something like, “I can imagine what that day must have felt like for you.” The response was immediate: “No, you can’t.”

The official went on to describe the chaos and anguish — the shock of seeing the 110-story World Trade Center towers collapse into rubble, the fear that other hijacked planes might still be in the air, the gut feeling that the president and those around him were personally under attack. The official talked of how administration officials racked their memories to think of anything they might have done differently to prevent the 9/11 attacks. I doubt that anyone in the Situation Room actually quoted Malcolm X, but essentially a vow was taken to protect the country from another assault “by any means necessary.”

These were human reactions, understandable and appropriate at the time. The truth is that the administration had missed signs that an attack was brewing — most famously, the president’s daily brief titled “Bin Laden Determined to Strike in U.S.” But these portents were lost amid the avalanche of information that buries every president every single day. Anyone in Bush’s position would have been filled with grief, anger and resolve.

Initial reactions are supposed to give way to reasoned analysis, however. For Bush and most of his top aides, this didn’t happen until far too late.

For Cheney, apparently it never happened at all. In an interview broadcast Sunday, he invited Fox News’ Chris Wallace to “go back and look at how eager the country was to have us work in the aftermath of 9/11 to make certain that that never happened again.” People have since become “complacent,” he said, but the administration’s actions have “produced a safe 7.5 years, and I think the record speaks for itself.”

That record, admirably, includes the overthrow of the Taliban regime in Afghanistan, the dismantling of al-Qaeda’s infrastructure and the killing or capture of some of the terrorist organization’s most important operatives. Shamefully, however, it also includes the violation of international and U.S. legal norms by subjecting terrorist suspects to indefinite detention and cruel, painful interrogation; the creation of a mini-gulag of secret CIA-run prisons abroad; and unprecedented domestic surveillance without court supervision — all justified, Cheney maintains, by a state of “war” that has no foreseeable end.

The Bush-Cheney record also includes the invasion of a country — Iraq — that had nothing whatsoever to do with 9/11. This misadventure has claimed more than 4,000 American lives, wasted hundreds of billions of dollars and grievously damaged our strategic position in the Middle East. In an interview with Martha Raddatz of ABC News earlier this month, Bush claimed credit for vanquishing al-Qaeda’s forces in Iraq. When Raddatz pointed out that there were no al-Qaeda forces in Iraq until after the U.S. invasion, the president answered, “Yeah, that’s right. So what?”

Here’s so what: Bush and Cheney, understandably shaken by an unprecedented act of terrorism, declared and prosecuted a “war” without specifying who the enemy is. Rather than focus on the architect and sponsor of the 9/11 attacks, Osama bin Laden, they turned away to lash out at others in pre-emptive blows that dishonored our nation’s most precious ideals.

History will note that the point of the Constitution is that the ends don’t always justify the means — and that nowhere in the document can be found the phrase “so what?”

December 23, 2008

By Steven Malanga

An international group holds an event every holiday season called Buy Nothing Day, in which members protest our consumer culture by urging shoppers to restrain for at least one day from shopping. This year, not surprisingly, the event was reportedly a smashing success. Although I imagine many shoppers took part unwillingly, having lost their jobs or witnessed the value of their assets plummet, others said they were buying nothing, or at least buying considerably less this year, in sympathy with those who were struggling.

“Even though we can afford to spend more, we’re not going to,” someone identified as Mary from Brenham, Texas told CNN. “It just doesn’t seem right to spend lots of money when so many are hurting.” Bart, the head of a nonprofit in Springfield, Missouri, told a local newspaper that with so many people struggling, “It just doesn’t feel right to go out and spend a bunch of money on Christmas gifts.” The sentiment seemed pretty much the same across the pond, where a columnist for the London Times observed that rich friends “have all cancelled their customary Christmas holidays. Sure, they could afford Tobago as usual, but this year it just doesn’t feel right.”

Not once during the dozens of stories I saw about Buy Nothing Day or about consumers’ general holiday abnegation did anyone, including the reporter or TV producer constructing these accounts, seem to consider that it might actually be counterproductive for those who can afford to spend as much or more this year on gifts to instead spend less. Indeed, many of these stories ran virtually side-by-side with gloomy reports of layoffs, retail bankruptcies, companies cutting wages and eliminating bonuses, and factories going on furloughs because of the difficult holiday shopping environment. Yet it is as if the two stories were virtually unconnected.

Why is it that in tough times it seems rational and even noble to deny oneself, even when doing so only spreads the pain? Much of the reason for this may be that we humans have been living in the modern, consumer-driven economy for just a few hundred years�”since the great leap forward of the Industrial Revolution, when technological advances greatly expanded humans’ productive capabilities, vastly increasing standards of living in the process. By contrast, we spent a hundred thousand years or so living in tribes and roving bands where existence was day-to-day and tribal members shared resources to survive. We’re still not always comfortable reconciling the consumerism that’s at the center of our economy since the Industrial Revolution with the egalitarianism of what anthropologists call our deep history.

That’s why during times of economic stress some of us still preach sacrifice and restraint because it appears unseemly to have and consume too much when others are going wanting. Doing otherwise is politically unacceptable. When President Bush, for instance, urged Americans after 9-11 to shop enthusiastically during the 2001 holiday season, critics derided him for emphasizing something as frivolous as consumerism at a time of deep national pain and introspection.

Maybe it’s best that our leaders simply lead by example rather than words. Our President-elect, for instance, is now vacationing with his family in Hawaii after spending nearly two years running a grueling campaign for office. With a hefty bank account thanks to two-best selling books, President-elect Obama isn’t about to deny his family or himself the way those British rich folks are denying themselves their Tobago vacations this year, and our citizens of Hawaii are no doubt grateful to him for his business.

Still, our press and cultural commentators have it in for anyone who spends lavishly during times like this, even if it is a business investing generously in its future. At Major League Baseball’s winter meetings in early December, a number of teams made whopping contract offers to star players who were free agents. The press subsequently roasted these free-spending teams for heaping riches on guys whose only contribution to our society is to hit a fastball at 95 miles per hour, or throw one that fast. What a strange reaction to businesses that are investing to improve their product during a downturn?”a perfectly sensible strategy if you have money to spend, talent is available and your competitors are being cautious.

The winter baseball meetings were Christmas come early for a few players, and one hopes they celebrated appropriately by spending some of their new-found wealth and in the process boosting the economy. As one of the 20th Century’s most notable non-believers, Ayn Rand, observed about Christmas, “The gift buying…stimulates an outpouring of ingenuity in the creation of products devoted to a single purpose: to give men pleasure.”

And to give them jobs. There’s still time, though just a little, to renounce your vow of moderation and buy liberally. It’s the least you can do for your fellow man.

Page Printed from: http://www.realclearmarkets.com/articles/2008/12/save_jobs_buy_something.html at December 23, 2008 – 10:59:35 AM CST

December 22, 2008

By Ed Gillespie

As the year draws to an end and President Bush enters his final month in office, there is much commentary about the Administration’s record over the past eight years. Unsurprisingly, many of these stories assail and distort the President’s record and recycle myths and unfounded allegations that have been leveled for the better part of his two terms. Historical accuracy requires a response to the litany of attacks leveled against President Bush, and while there’s not enough space to respond to all of them, here are five of the most egregious:

Myth 1: The last eight years were awful for most Americans economically and President Bush’s deregulatory policies caused the current financial crisis.

Reality:

President Bush’s time in office is ending as it began, with our economy under stress. The recession President Bush inherited as he entered office ran through the attacks of September 11, 2001, but during the recovery that followed, and due in no small part to the tax relief President Bush worked with Congress to provide, this country experienced its longest run of uninterrupted job growth – 52 straight months, with 8.3 million jobs created.

This reflected six consecutive years of economic growth from the Fourth Quarter of 2001 until the Fourth Quarter of 2007. From 2000 to 2007, real GDP grew by more than 17 percent, a remarkable gain of nearly 2.1 trillion dollars. This growth was driven in part by increased labor productivity gains that have averaged 2.5 percent annually since 2001, a rate that exceeds the averages of the 1970s, ’80s, and ’90s. In the same period, real after-tax income per capita increased by more than 11 percent, and there was a 4.7 percent increase in the number of new businesses formed. The current economic challenges, which the President and his Administration have responded to aggressively, threaten to reverse some of these gains – but the gains cannot be denied.

As for the current crisis, the President and his economic team have taken unprecedented actions to stabilize the financial sector and avert a collapse. While there are a number of causes of the housing and credit crises that are at the root of our current economic troubles, deregulation by the Bush Administration is simply not one of them. In fact, one of the circumstances that contributed to the crisis was the failure of the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which President Bush long tried to subject to greater regulation. In April 2001, three months after taking office, the President warned in his first budget that the size of the two GSEs were a “potential problem” that “could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity.” In 2003, the Administration began calling for a new GSE regulator, and over the next five years, the Administration continued to call for GSE reform only to be accused by Democrats in Congress of creating artificial fears and advocating for ill-advised proposals. By the time Congress finally acted in 2008 to provide the oversight the President requested, it was too late to prevent systemic consequences. Had the Administration’s initial reform proposals been adopted, some of today’s turmoil in our financial markets may have been averted.

Myth 2: President Bush’s tax cuts only benefitted the wealthy and were paid for by sacrificing investments in health care and education.

Reality:

There are not 116 million “wealthy Americans,” but that’s how many taxpayers benefited from the President’s tax relief. The across-the-board tax cuts provided tax relief to every American who pays income taxes, created a new bottom 10 percent bracket rate, doubled the child tax credit to $1,000, and actually increased the share of the Federal income tax burden paid by the top 10 percent of individual earners from 67 percent in 2000 to 70 percent in 2005. Furthermore, this Administration removed 13 million low-income earners from the income tax rolls completely.

The economic growth spurred by tax relief also spurred growth in Federal tax receipts. In fact, the Federal Treasury realized the largest three-year increase of revenue in 26 years, and tax receipts grew more than $542 billion between 2000 and 2007. And yes, much of that money went to investments in health care and education.

President Bush provided more than 40 million Americans with better access to prescription drugs by creating the market-based Medicare Prescription Drug Benefit. And it is one of the rare government programs that actually costs less than expected. Projected overall program spending between 2004 and 2013 is approximately $240 billion lower, nearly 38 percent, than originally estimated, thanks to the market-oriented principles included at President Bush’s insistence.

Despite the heated rhetoric over children’s health insurance (S-CHIP) legislation last year, estimates from a 2007 Federal survey show that the number of uninsured children under the age of 18 actually declined by 800,000 from 2001 to 2007. From 2007 to 2008, the number of people covered by affordable and portable Health Savings Account-eligible plans increased 35 percent. Additionally, since President Bush took office, more than 1,200 community health centers have opened or expanded nationwide, which has helped provide treatment to nearly 17 million people.

Federal spending on education has increased nearly 40 percent under President Bush. Additionally, Pell Grant funding nearly doubled during the Administration, which is expected to help more than 5.5 million students attend college in the 2008-09 school year, 1.2 million more students than were assisted by Pell Grants in the 2001-02 school year. This financial aid assistance also helps account for the fact that 66 percent of high school graduates from the class of 2006 enrolled in colleges, compared to 63 percent in 2000.

Perhaps more importantly, the President’s No Child Left Behind Act has delivered tangible results to students. Since the law was enacted, fourth-grade students have achieved their highest reading and math scores on record, eighth-grade students have achieved their highest math scores on record, and African-American and Hispanic students have posted all-time high scores in a number of categories, narrowing the gap between minority students and white students.

Myth 3: The President’s “go it alone” foreign policy ruined America’s standing in the world.

Reality:

Rarely can one see revisionist history occurring in the present, but this charge is nothing short of that. The United States acted with a multilateral coalition of partner nations to remove Saddam Hussein from power in Iraq after he failed to comply with the will of the international community, including numerous United Nations Security Council Resolutions. To ignore this fact is not only a distortion of history, but it is also an insult to the service members of our coalition partners who sacrificed their lives to contribute to the success we are now witnessing in Iraq. And in Afghanistan, approximately forty countries are currently deployed with American forces, including every one of our NATO allies.

The President also created a worldwide coalition of more than 90 nations to combat terrorist networks by sharing information, drying up their financing, and bringing their leaders to justice. To date, we have captured or killed hundreds of al-Qaeda leaders and operatives with the help of partner nations. Furthermore, the Administration established the Proliferation Security Initiative, which now includes more than 90 nations, and other multilateral coalitions to stop the proliferation of weapons of mass destruction.

The President successfully pushed for expanding NATO membership, generated international pressure on Iran to stop it from developing nuclear weapons, and organized the Six-Party Talks, which have resulted in North Korea committing to give up its nuclear weapons and abandon its nuclear programs. Verifying North Korea’s commitment will be a challenge, but at the most recent Six-Party Talks meeting, there was strong consensus among the five parties that North Korea must submit to a comprehensive verification regime that accords with international standards.

U.S. ties in Asia have been strengthened over the past eight years, and the Administration has built strong relationships with China, Japan, and South Korea, among others. We have signed an historic civilian nuclear power agreement with India, reflecting a fundamental change in our relationship. Pro-American leaders have been elected in Germany, France, and Italy. Eastern European countries such as Georgia, Ukraine, and Kosovo treasure their relationships with the United States, and no president has done more to improve health and security in the nations of Africa. We have also strengthened cooperation with Latin America, including initiatives with Brazil on biofuels and with Mexico and Central America on fighting organized crime. Finally, when the President took office, America had trade agreements in force with only three countries, versus 14 today – with three additional agreements approved by Congress but not yet in force and agreements with three countries that are awaiting Congressional approval.

Myth 4: The war in Iraq caused us to “take our eye off the ball” in Afghanistan and with al Qaeda.

Reality:

Iraq and Afghanistan are two fronts in the same war, and while the success of the surge in Iraq has been visible, we have also had a quiet surge in Afghanistan. The U.S. has continuously and aggressively fought side-by-side with Afghans and our allies to defeat the Taliban and al Qaeda in Afghanistan. The United States has provided nearly $32 billion for security, political, and economic development assistance and the international community has provided more than $55 billion to Afghanistan since 2001.

An additional U.S. Marine battalion deployed to Afghanistan in November and they will be followed by an Army combat brigade of about 3,400 troops in early 2009. U.S. forces now total approximately 31,000, and are joined by nearly as many coalition troops. The United States and our allies are working with Afghanistan to help it nearly double the size of the Afghan National Army over the next five years, from 79,000 now trained to 134,000 in 2014.

We have also deployed Provincial Reconstruction Teams to ensure security gains are followed by real improvements in daily life, and we have helped local communities strengthen their economies and create jobs, deliver basic services, improve governance and fight corruption, and build or repair key infrastructure such as roads, bridges, hospitals, and schools. More than six million children, approximately two million of them girls, are now in Afghan schools, compared to fewer than one million in 2001.

In this Global War on Terror, we do not have the luxury to fight on one battlefront at a time. To defeat the terrorists, we must fight them overseas so we don’t have to fight them here at home. Since 9/11, we have successfully captured or killed dozens of al-Qaeda’s senior leadership and hundreds of al-Qaeda operatives in two dozen countries, removed al-Qaeda’s safe-haven in Afghanistan and crippled al-Qaeda in Iraq, and disrupted numerous al Qaeda terrorist plots against the U.S., including a 2006 plot to blow up passenger planes traveling from London.

Myth 5: This Administration has been bad for the environment and ignored the problem of global warming.

Reality:

Given the liberal media’s failure to acknowledge this Administration’s true record on alternative energy, conservation, and climate change, it’s not surprising this charge has stuck. But here are some irrefutable data points: From 2001 to 2007, air pollution decreased by 12 percent, and fine particulate matter pollution is down 17 percent since 2001. Ethanol production quadrupled from 1.6 billion gallons in 2000 to 6.5 billion gallons in 2007, wind energy production has increased by more than 400 percent, and solar energy capacity has doubled. In 2007, solar installations increased more than 32 percent and the U.S. produced 96 percent more biodiesel (490 million gallons) than in 2006. The Administration also provided nearly $18 billion to research, develop, and promote alternative and more efficient energy technologies such as biofuels, solar, wind, clean coal, nuclear, and hydrogen.

This Administration has improved and protected the health of more than 27 million acres of Federal forest and grasslands, protected, restored, and improved more than three million acres of wetlands, and established the Papahānaumokuākea Marine National Monument, the world’s largest fully protected marine conservation area (nearly 140,000 square miles).

Much of the misperception about the President’s environmental record is born out of the President’s withdrawing the United States from the Kyoto Protocol, which did not include the effective participation of major developing countries such as India and China. Instead, the President worked to address climate change by launching the Major Economies Process, which convened the leaders of the world’s major economies, both developed and developing, to work on ways to further reduce greenhouse gas emissions and improve energy security without harming our economies or giving any nation a free ride. Finally, the President set the country on course to stop the growth of greenhouse gas emissions below projected levels by 2025 and invested more than $44 billion in climate change-related programs.

Some other items that are infrequently mentioned about the real record of the Bush Administration but are worth noting: Teenage drug use has declined 25 percent; in 2007, the violent crime rate was 43 percent lower than the rate in 1998; between 2005 and 2007, the chronically homeless population decreased approximately 30 percent; funding for veterans’ medical care has increased more than 115 percent; and as of 2005, the most recent abortion rate is at its lowest since 1974.

And one last fact: Our homeland has not suffered another terrorist attack since September 11, 2001. That, too, is part of the real Bush record.

More on RCP: Gas Prices Shouldn’t Set Our Energy Policy

Page Printed from: http://www.realclearpolitics.com/articles/2008/12/myths_and_facts_about_the_real.html at December 22, 2008 – 04:44:29 AM

Hong Kong

I had no idea that many of those oil paintings that hang in hotel rooms and starter homes across America are actually produced by just one Chinese village, Dafen, north of Hong Kong. And I had no idea that Dafen’s artist colony — the world’s leading center for mass-produced artwork and knockoffs of masterpieces — had been devastated by the bursting of the U.S. housing bubble. I should have, though.

“American property owners and hotels were usually the biggest consumers of Dafen’s works,” Zhou Xiaohong, deputy head of the Art Industry Association of Dafen, told Hong Kong’s Sunday Morning Post. “The more houses built in the United States, the more walls that needed our paintings. Now our business has frozen following the crash of the Western property market.”

Dafen is just one of a million Chinese and American enterprises that constitute the most important economic engine in the world today — what historian Niall Ferguson calls “Chimerica,” the de facto partnership between Chinese savers and producers and U.S. spenders and borrowers. That 30-year-old partnership is about to undergo a radical restructuring as a result of the current economic crisis, and the global economy will be highly impacted by the outcome.

After all, it was China’s willingness to hold the dollars and Treasury bills it had earned from exporting to America that helped keep U.S. interest rates low, giving Americans the money they needed to keep buying shoes, flat-screen TVs and paintings from China, as well as homes in America. Americans then borrowed against those homes to consume even more — one reason we enjoyed rising wealth without rising incomes.

This division of labor not only nourished our respective economies, but also shaped our politics. It enabled China’s ruling Communist Party to say to its people: “We will guarantee you ever-higher standards of living and in return you will stay out of politics and let us rule.” So China’s leaders could enjoy double-digit growth without political reform. And it enabled successive U.S. administrations, particularly the current one, to tell Americans: “You can have guns and butter — subprime mortgages with nothing down and nothing to pay for two years, ever-higher consumption and two wars, without tax increases!”

It all worked — until it didn’t.

With unemployment now soaring across the U.S., said Stephen Roach, the chairman of Morgan Stanley Asia, Americans — “the most over-extended consumer in world history” — can no longer buy so many Chinese exports. We need to save more, invest more, consume less and throw out most of our credit cards to bail ourselves out of this crisis.

But as that happens, we need China to take our discarded credit cards and distribute them to its own people so they can buy more of what China produces and more imports from the rest of the world. That’s the only way Beijing can sustain the minimum 8 percent growth it needs to maintain the political bargain between China’s leaders and led — not to mention pick up some of the slack in the global economy from America’s slowdown.

However, if I’ve learned one thing here, it’s just how hard doing that will be. China’s whole system and culture nourish saving, not spending, and changing that will require a huge “cultural and structural” shift, said Fred Hu, chairman for Greater China for Goldman Sachs.

In China, for instance, to buy a home you have to put at least 20 percent down, and the average is 40 percent. If you try to walk away from the mortgage, the bank will come after your personal assets. Moreover, China can’t just shift production from the U.S. market to its own consumers. Not many Chinese villagers want to buy $400 tennis shoes or Christmas tree ornaments.

Also, China has no real Social Security, health insurance or unemployment insurance. Without that social safety net, it’s hard to see how Chinese don’t end up saving most of their stimulus. “You open up the newspaper every day and you hear about this factory shutting down or that supplier going belly up,” said Willie Fung, whose company, Top Form International, is the world’s leading bra maker. “You can never be too careful in this financial climate.”

As such, “the world should not have a false hope that China can cushion the global downturn,” by stimulating its domestic demand in a big way, said Frank Gong, head of China research for JPMorgan Chase. “The best thing China can do is keep its own economy stable.”

It’s good advice. China is not going to rescue us or the world economy. We’re going to have to get out of this crisis the old-fashioned way: by digging inside ourselves and getting back to basics — improving U.S. productivity, saving more, studying harder and inventing more stuff to export. The days of phony prosperity — I borrow cheap money from China to build a house and then borrow on that house to buy cheap paintings from China to decorate my walls and everybody is a winner — are over.

December 21, 2008

BRIAN HAMILTON is chief executive officer of Sageworks Inc. Contact: brian.hamilton@sageworksinc.com

Much has been written about the economy, and, if you accept certain assumptions from what you read, you might think that we are in the midst of a global depression. It’s important to put the current economy in perspective.

Last quarter, U.S. gross domestic product fell at a rate of 0.5 percent, which means that the total value of goods and services produced in the country fell by a half of one percentage point last quarter over the previous quarter. For the first two quarters of this year, GDP grew by 0.9 percent and 2.8 percent, indicating that economic growth is relatively flat this year, but that it is not falling off a cliff.

This isn’t the first time GDP has fallen, and it won’t be the last. The last decrease in GDP was in the fourth quarter of 2007, and before that was in 2001. A decrease in GDP after almost six years of increases is not positive, but almost predictable.

Some would say that we cannot only look at GDP, so let’s look at other factors. Interest rates remain at historically low levels. Loan volume in the country, according to the FDIC and contrary to what you read about the credit crisis, actually increased last quarter compared to the same quarter last year.

How about employment? According to the Bureau of Labor Statistics, unemployment sits at 6.7 percent. At this time last year, unemployment was 4.7 percent. The decrease in employment is not favorable, but historically an unemployment rate of 6.7 percent is not close to devastating.

The 50-year historical rate of unemployment is 5.97 percent. Most economists agree that the natural rate of unemployment, which is the lowest rate due to the fact that people change jobs or are between jobs, is around 4 percent. So, today we sit at 2.7 percent above that rate.

Once again, the very recent trend is not good, but it is certainly not horrifying. Americans have good hearts and empathize with those who are unemployed, yet it would be easy to go too far in our assumptions on how the working population is currently affected in aggregate.

Look at personal income today. Personal income is income received by individuals from all sources, including employers and the government. Personal income rose last quarter compared to a year ago, according to the Bureau of Economic Analysis. Compared to five years ago, personal income has risen by 32.1 percent. Even considering that inflation was 18.13 percent in this period, people are generally making more money than they used to.

Next, there is inflation. The inflation rate measures the strength of the dollar you hold today as compared to a year ago. The inflation rate is currently 3.66 percent. Over the past 50 years, the inflation rate has averaged about 4.2 percent. Inflation remains well within control.

Now, the skeptics reading this will undoudebtly point to other (I believe, far lesser) statistics that validate their gloomy view of the economy and the direction of the country. I ask the reader: If people are employed, are making good wages, can borrow inexpensively, hold a dollar that is worth largely what it was worth a year or five years ago, and live in a country where the value of goods and services is rising, tell me exactly where the crisis is?

There is no doubt that the economy has slowed, but slowness does not equal death. It is true that the financial markets are a mess (and the depreciation of the value of equities is both scary and bad), but analysts typically go too far in ascribing the fall of the financial markets with the fall of a whole economy. The markets are an important component of the economy, but the markets are not the totality of the economy.

No one can say whether conditions will worsen in the future. However, we have learned that the American economy has been tremendously resilient over the past 200 years and will probably remain so, as long as the structural philosophies that it has been built upon are left intact.

From Rev. Wright to Rev. Warren
by William Kristol 12/29/2008

By James V. Grimaldi and Philip Rucker
Washington Post Staff Writers
Friday, December 19, 2008; A01

Former president Bill Clinton’s disclosure yesterday that foreign governments and state-sponsored agencies have donated between $75 million and $165 million to his foundation highlighted a series of potential conflicts that Hillary Rodham Clinton could face should she become secretary of state.

The kingdom of Saudi Arabia made one of the largest contributions, between $10 million and $25 million, as did the Australian government’s overseas aid program and a Dominican Republic agency that fights AIDS. The William J. Clinton Foundation also raised more than $1 million each from the governments of Brunei, Kuwait, Oman and Qatar.

The former president had resisted releasing the list of donors during his wife’s presidential campaign, but he agreed to do so when it became a possible issue as President-elect Barack Obama was considering whether to make her part of his Cabinet.

The list — containing more than 200,000 donor names — shows the extent to which Bill Clinton relied on foreign governments, especially those of Middle Eastern oil states, to establish his foundation over the past decade. In many cases, those governments have national interests that have routinely come before the State Department and other U.S. government agencies.

Obama transition officials believe Clinton’s disclosure “goes above and beyond in preventing conflicts,” spokesman Tommy Vietor said. “Past donations to the Clinton Foundation have no connection to Senator Clinton’s prospective tenure as secretary of state. Going forward, all donors will be disclosed on an annual basis, and new donations from foreign governments will be scrutinized by government ethics officers.”

The release of the Clinton donors shows for the first time the scope of his international fundraising and charitable efforts since leaving the White House in 2001. Norway and the national charitable lottery of the Netherlands gave more than $5 million, for example, and the Swedish lottery also donated. The Jamaican and Italian governments each contributed more than $50,000.

“It is going to be complex to disassociate the specialized interests of the foundation of Bill Clinton from certain foreign interests that are represented by the U.S. government,” said James Thurber of American University’s Center for Congressional and Presidential Studies. “But I think they can do it. I don’t think it is a major issue yet, but you never know, when it comes to Bill Clinton, what might come out.”

Since it was established in 1997, the Clinton Foundation has raised more than $500 million, which has financed construction of Clinton’s presidential library in Little Rock as well as charitable programs in global health, poverty, climate change and education. The donations have gone to an estimated 150 countries and provided medication to some 1.4 million people living with AIDS, according to foundation staff. In partnership with former president George H.W. Bush, the foundation also raised millions of dollars for recovery efforts along the Gulf Coast after Hurricane Katrina.

The list released yesterday includes some controversial figures and companies. Affiliates of the Korean conglomerate Hanwha — Hanwha L&C, Hanwha Engineering and Construction, and Hanwha Stores — donated about $1 million after Clinton traveled to Seoul in 2003 and appeared with Hanwha Group Chairman Kim Seung-youn. Kim has been charged and jailed in Korea on public corruption allegations.

Another donation followed Clinton’s trip to Kazakhstan in 2005 on the private jet of Frank Giustra, a financier of mining ventures. On the trip, Clinton praised Kazakhstan’s authoritarian president, and Giustra later entered into agreements to invest in uranium projects controlled by Kazakhstan’s government. Giustra donated $10 million to $25 million, and the Clinton Giustra Sustainable Growth Initiative gave between $1 million and $5 million.

A donation of more than $25,000 came from Andre Agapov, a Russian mining company owner who allegedly worked with the Russian secret police for President Boris Yeltsin.

Other contributors include Friends of Saudi Arabia and the Dubai Foundation, as well as Saudi businessman Nasser Al-Rashid, each giving more than $1 million. Haim Saban, the Egyptian-born media tycoon who funds many Israeli initiatives, gave more than $5 million.

Among the top donors were foundations created by Microsoft founder Bill Gates and his wife, Melinda Gates, and Scottish retail-clothing executive Tom Hunter. Also on the list of the biggest contributors, giving between $10 million and $25 million each, are real estate and Hollywood mogul Stephen L. Bing, New York billionaire B. Thomas Golisano, Gateway computer co-founder Theodore W. Waitt and Chicago media executive Fred Eychaner. Black Entertainment Television founder Robert L. Johnson gave more than $1 million.

Billionaire financier and political supporter George Soros and his Open Society Institute each gave major donations, while the Arkansas-based foundations linked to retail giant Wal-Mart each gave at least $1 million.

The list also includes gifts from companies damaged in the current economic meltdown, such as Lehman Brothers, Citigroup, Freddie Mac and General Motors.

Entertainment figures on the list include producer Steven Spielberg, actors Cameron Diaz and the late Paul Newman, and singers Barbra Streisand and Carly Simon. New York Yankees owner George Steinbrenner and Formula One driver Michael Schumacher also donated.

“I want to personally express my deepest appreciation to our many contributors, who remain steadfast partners in our work to impact the lives of so many around the world in measurable and meaningful ways,” Bill Clinton said in a statement. “We have just begun — and it is an honor and privilege to be on this journey alongside each and every person who is committed to our foundation’s ongoing charitable mission.”

The foundation did not release the exact amounts or dates for donations, but it did include donors who gave very small amounts, going beyond the normal requirements for federal campaign disclosures. The donors were classified by amount of their gifts, within ranges.

Clinton released more detail than that promised by President Bush, who has said he does not plan to release names of donors, or George H.W. Bush, who also received contributions of at least $1 million from Oman, Saudi Arabia and the United Arab Emirates. The elder Bush also collected more than $50,000 from Japan, Hong Kong and Thailand.

Former president Jimmy Carter’s center, which was a model for Clinton’s, releases the names of $1 million-plus donors, and they include foreign governments as well.

Research editor Alice Crites, database editor Sarah Cohen, and staff writers Matthew Mosk, Dan Morgan, Steven Mufson, Derek Kravitz and Mary Pat Flaherty contributed to this report.

This article is by David E. Sanger, Bill Vlasic and Micheline Maynard.

WASHINGTON — The White House raised for the first time on Thursday the prospect of forcing General Motors and Chrysler into a managed bankruptcy as a solution to save the companies from financial collapse.

The White House announced early on Friday that President Bush would make a statement at 9 a.m. Eastern time about efforts to negotiate a bailout for the domestic auto industry.

On Thursday, his spokeswoman, Dana Perino, confirmed growing speculation within legal circles that the president and Treasury Secretary Henry M. Paulson Jr. were considering the step.

“There’s an orderly way to do bankruptcies that provides for more of a soft landing,” Ms. Perino said. “I think that’s what we would be talking about. That would be one of the options.”

A senior administration official, however, later described that option as a last resort, to be used only if an agreement for a voluntary overhaul of the industry could not be reached.

These officials said the preferred solution would be to force a restructuring of the industry outside of bankruptcy court, extracting concessions that would make the companies more cost-competitive with foreign automakers.

In return, the Treasury would tap the financial rescue fund, called the Troubled Asset Relief Program, to make loans to the companies.

After a week of talks between the automakers and the Treasury Department over the terms of a possible bailout, Ms. Perino on Thursday said, “we’re very close.”

President Bush, speaking on Thursday at the American Enterprise Institute, an organization dedicated to free market principles, said that he had determined that the economy was too fragile to allow G.M. and Chrysler to fail. The companies have warned that will happen if they do not receive financial aid soon.

In his speech Thursday, Mr. Bush made clear that he wanted to avoid a “disorderly bankruptcy” because of “what it would do to the psychology of the markets.” But he also said he was “worried about putting good money after bad,” and suggested he would only approve a plan that allowed the auto companies to “become viable in the future.”

Mr. Bush’s comments, a month before he leaves office, made clear that he was worried by the idea of returning to Texas amid more economic chaos and the surge in unemployment that a collapse of the companies could cause.

“The autos obviously are very fragile,” he said. He added that he was concerned about what President-elect Barack Obama would face on Jan. 20. “I believe that good policy is not to dump him a major catastrophe in his first day of office,” he said.

What the White House appears to be envisaging is a package deal of concessions — and an injection of money from the TARP, the $700 billion financial bailout fund — to keep credit flowing for G.M. and Chrysler.

Taxpayer loans, the White House has said, would have first priority over all other debt. Ms. Perino said the goal was to “try to come up with something that would protect the taxpayers but not allow a collapse that would hurt everybody in America.”

But for Mr. Bush, that could be difficult to negotiate. If the autoworkers’ unions conclude they are likely to get a better deal from Mr. Obama, they are likely to stall negotiations and settle for a shorter-term loan.

After the White House raised the possibility of a bankruptcy, G.M.’s shares fell to $3.66.

Investors may have also been reacting to a report in The Wall Street Journal that said G.M. had restarted merger discussions with Chrysler. But a G.M. spokesman, Tony Cervone, said the automaker had not held any talks with Chrysler since late October, when G.M. suspended discussions because of its bleak financial condition. “Nothing has changed,” he said.

G.M. declined to comment on the Bush administration’s suggestion that an “orderly bankruptcy” was under consideration. But the company was surprised by the White House statements, according to G.M. officials who asked not to be identified because the discussions with the administration were not yet final.

The automaker’s senior executives have said repeatedly that bankruptcy was not a viable solution because consumers would be reluctant to buy a vehicle from a bankrupt automaker.

In July, CNW Marketing Research said a survey it conducted showed that 80 percent of prospective car buyers would not consider purchasing a vehicle from a bankrupt company. A more recent survey found that 51 percent of the people it interviewed said they would not buy a car from G.M. even if it received a government bailout.

“G.M. cannot afford to lose half of its prospective customers,” said Art Spinella, CNW’s president.

Spokesmen for Chrysler and Ford also declined to comment specifically on the inclusion of bankruptcy as an alternative.

Chrysler’s chairman, Robert L. Nardelli, has said that getting financing to reorganize in bankruptcy would be difficult given tight credit conditions. Ford is not seeking immediate government help.

There was no immediate comment from the United Automobile Workers union.

In a traditional bankruptcy proceeding, the U.A.W.’s contracts could be voided and the union forced to renegotiate benefits like health care.

The union’s president, Ron Gettelfinger, has said the U.A.W. is willing to make concessions if G.M. or Chrysler gets government loans that help them survive.

But Mr. Gettelfinger has said he believes that bankruptcy would cripple either company’s ability to sell cars. “There’s no question in my mind that people would not buy their vehicles,” he said in an interview.

Both companies are cutting production to stretch their available cash. On Friday, Chrysler will begin an unusual monthlong shutdown of all of its North American manufacturing plants in a bid to save money.

Legal experts said Thursday that despite discussion of an out-of-court solution, a revamping of G.M. and Chrysler might be difficult to accomplish outside of bankruptcy court, given the significant steps an overhaul would require.

“It’s not going to be easy, it’s not going to be pleasant, or palatable, but it’s the only solution that makes the least bit of sense,” said Hugh M. Ray, head of the bankruptcy practice at the Houston law firm Andrews Kurth, who has participated in major bankruptcy cases.

If the companies were to file for bankruptcy, major banks would provide financing, with federal funds as security for the bank loans for the companies to operate.

Some lawyers have suggested that the two companies could receive $25 billion, using $5 billion in federal funds to guarantee the banks’ loans, although auto industry analysts said the companies might need more.

G.M. has retained Harvey R. Miller, a longtime bankruptcy lawyer, as its adviser. It is also being advised by William Repko, an expert in restructuring with Evercore Partners who has worked with companies like United Airlines. G.M. is also working with Arthur B. Newman of the Blackstone Group.

Chrysler has retained the law firm of Jones Day to provide revamping expertise.

Mr. Ray said that a number of airlines went through bankruptcy protection earlier this decade, using federally backed loans awarded by the Air Transportation Stabilization Board, which was set up to aid the industry after the September 2001 attacks.

The board turned down United’s request, however, and the airline subsequently restructured under bankruptcy protection without federal money.

“United is still flying, and G.M. is not doing very well,” Mr. Ray said. “Their chickens have come home to roost, and now it’s inevitable” that G.M. seek bankruptcy protection, he added.

David E. Sanger reported from Washington and Bill Vlasic and Micheline Maynard from Detroit.

You probably sat in a fancier conference room the last time you refinanced or heard a pitch about life insurance. There’s a table, some off-brand mesh office chairs, a bookcase that looks as if it had been put together with an Allen wrench and instructions in Swedish.

To reach this room, you pass through a cubicle farm lightly populated by quiet young people. Either they have just arrived or they are just leaving, because their desks are almost bare. The place has a vaguely familiar feel to it, this air of transient shabbiness and nondescriptitude. You can’t quite put your finger on it …

“It’s like the set of The Office,” someone offers.

Bingo.

It is here that we find Barack Obama one soul-freezingly cold December day, mentally unpacking the crate of crushing problems — some old, some new, all ugly — that he is about to inherit as the 44th President of the United States. Most of his hours inside the presidential-transition office are spent in this bland and bare-bones room. You would think the President-elect — a guy who draws 100,000 people to a speech in St. Louis, Mo., who raises three-quarters of a billion dollars, who is facing the toughest first year since Franklin Roosevelt’s — might merit a leather chair. Maybe a credenza? A hutch?

But he doesn’t seem to notice. Obama is cheerfully showing his visitors around, gripping the souvenir basketball he received from Hall of Famer Lenny Wilkens, explaining a snapshot taken the day he played pickup with the University of North Carolina hoops team. (”They are so big and so fast and so strong, you know.”) Then, since those two items basically exhaust the room’s décor, Obama sits down on one of the mesh chairs and launches into a spoken tour of his world of woes. It’s a mind-boggling journey, although he shows no signs of being boggled — unless you count the increasingly prevalent salt in his salt-and-pepper hair. By now we are all accustomed to that Obi-Wan Kenobi calm, though we may never entirely understand it. In a soothing monotone, he highlights the scariest hairpin turns on his itinerary, the ones that combine difficulty with danger plus a jolt of existential risk. (See pictures of the Civil Rights movement from Emmett Till to Barack Obama.)

“It is not clear that the economy’s bottomed out,” he begins, understatedly. (The morning newspaper trumpets the worst unemployment spike in more than 30 years.) “And so even if we take a whole host of the right steps in terms of the economy, two years from now it may not have fully recovered.” That worries him. Also Afghanistan: “We’re going to have to make a series of not just military but also diplomatic moves that fully enlist Pakistan as an ally in that region, that lessen tensions between India and Pakistan, and then get everybody focused on rooting out militancy in a terrain, a territory, that is very tough — and in an enormous country that is one of the poorest and least developed in the world. So that, I think, is going to be a very tough situation.

“And then the third thing that keeps me up at night is the issue of nuclear proliferation,” Obama continues, sailing on through the horribles. “And then the final thing, just to round out my Happy List, is climate change. All the indicators are that this is happening faster than even the most pessimistic scientists were anticipating a couple of years ago.”

Score that as follows: one imploding economy, one deteriorating war in an impossible region and two versions of Armageddon — the bang of loose nukes and the whimper of environmental collapse. That’s just for starters; we’ll hear the unabridged version shortly.

But first, there is a bit of business to be dealt with, having to do with why you are reading this story in this magazine at this time of the year. It’s unlikely that you were surprised to see Obama’s face on the cover. He has come to dominate the public sphere so completely that it beggars belief to recall that half the people in America had never heard of him two years ago — that even his campaign manager, at the outset, wasn’t sure Obama had what it would take to win the election. He hit the American scene like a thunderclap, upended our politics, shattered decades of conventional wisdom and overcame centuries of the social pecking order. Understandably, you may be thinking Obama is on the cover for these big and flashy reasons: for ushering the country across a momentous symbolic line, for infusing our democracy with a new intensity of participation, for showing the world and ourselves that our most cherished myth — the one about boundless opportunity — has plenty of juice left in it.

See pictures of Obama’s nation of hope.

See pictures of Obama’s college years.

But crisis has a way of ushering even great events into the past. As Obama has moved with unprecedented speed to build an Administration that would bolster the confidence of a shaken world, his flash and dazzle have faded into the background. In the waning days of his extraordinary year and on the cusp of his presidency, what now seems most salient about Obama is the opposite of flashy, the antithesis of rhetoric: he gets things done. He is a man about his business — a Mr. Fix It going to Washington. That’s why he’s here and why he doesn’t care about the furniture. We’ve heard fine speechmakers before and read compelling personal narratives. We’ve observed candidates who somehow latch on to just the right issue at just the right moment. Obama was all these when he started his campaign: a talented speaker who had opposed the Iraq war and lived a biography that was all things to all people. But while events undermined those pillars of his candidacy, making Iraq seem less urgent and biography less relevant, Obama has kept on rising. He possesses a rare ability to read the imperatives and possibilities of each new moment and organize himself and others to anticipate change and translate it into opportunity. (See pictures of Obama’s nation of hope.)

The real story of Obama’s year is the steady march of seemingly impossible accomplishments: beating the Clinton machine, organizing previously marginal voters, harnessing the new technologies of democratic engagement, shattering fundraising records, turning previously red states blue — and then waking up the day after his victory to reinvent the presidential-transition process in the face of a potentially dangerous vacuum of leadership. “We always did our best up on the high wire,” says his campaign manager, David Plouffe.

Obama’s competence fills him with a genuine self-confidence. “I’ve got a pretty healthy ego,” he allows. That’s clear when he offers a checklist for voters to use in judging his performance two years from now. It’s quite an agenda. Listen: “Have we helped this economy recover from what is the worst financial crisis since the Great Depression? Have we instituted financial regulations and rules of the road that assure this kind of crisis doesn’t occur again? Have we created jobs that pay well and allow families to support themselves? Have we made significant progress on reducing the cost of health care and expanding coverage? Have we begun what will probably be a decade-long project to shift America to a new energy economy? Have we begun what may be an even longer project of revitalizing our public-school systems?”

There’s more: “Have we closed down Guantánamo in a responsible way, put a clear end to torture and restored a balance between the demands of our security and our Constitution? Have we rebuilt alliances around the world effectively? Have I drawn down U.S. troops out of Iraq, and have we strengthened our approach in Afghanistan — not just militarily but also diplomatically and in terms of development? And have we been able to reinvigorate international institutions to deal with transnational threats, like climate change, that we can’t solve on our own?”

And: “Outside of specific policy measures, two years from now, I want the American people to be able to say, ‘Government’s not perfect; there are some things Obama does that get on my nerves. But you know what? I feel like the government’s working for me. I feel like it’s accountable. I feel like it’s transparent. I feel that I am well informed about what government actions are being taken. I feel that this is a President and an Administration that admits when it makes mistakes and adapts itself to new information.’”

Can he really achieve all that? Plenty of voters will be happy if he aces only Item 1 on his list. But the essence of both Obama’s strength and his promise is that, according to a recent poll, a strong majority of Americans believe he will accomplish most of what he aims to do. For having the confidence to sketch that kind of future in this gloomy hour and for showing the competence that makes Americans hopeful that he will pull it off, Barack Obama is Time’s Person of the Year for 2008.

I. Simple Competence
In some tellings, Obama’s journey to the white house started with his little-noticed but carefully nuanced speech against the Iraq war in 2002. In other versions, it began with his electrifying address to the Democratic Convention in 2004. Those moments blazed with potential, true, but something more was necessary: a certain appetite among the electorate. The country had to be hungry for the menu he offered, and in that sense, his path’s true beginning lay in the drowned precincts of New Orleans in the sweltering, desperate late summer of 2005.

Hurricane Katrina blew away the last gauzy veil from an ugly specter of executive incompetence in American politics. When the people of New Orleans needed leadership, the Republican Administration in Washington proved useless. The Democratic governor and mayor were pitiful. At long last, our government was united — but under an appalling banner of fecklessness. The moral bankruptcy of the spin doctors was laid bare: no soul remained gullible enough to believe that Brownie was doing a heckuva job.

After Katrina, demand collapsed for the very qualities that Obama lacked as a candidate: empty boasts, finger-pointing, backstabbing and years of experience inside a government that couldn’t deliver bottled water to the stranded citizens of a major U.S. city. Spare us the dead-or-alive bravado, the gates-of-hell bluster, the melodrama of the 3 a.m. phone call. A door swung open for a candidate who would merely stand and deliver. Simple competence — although there’s nothing simple about it, not in today’s intricate, interdependent, interwoven, intensely dangerous world.

See pictures of Barack Obama’s campaign behind the scenes.

See pictures of Obama on Flickr.

His official theme was change, but a specific kind of change: the nuts-and-bolts kind you can see and measure. Voters were invited to believe because Obama kept delivering the goods. Certainly he made mistakes and gave up on some ideas while doubling back on others — his promise to stick to the existing campaign-finance system, for example. On the whole, though, he was a doer. Obama told people that a black man could win white votes. In Iowa he proved it. He said a broad-gauge campaign could win in GOP strongholds; along came Indiana and Virginia and North Carolina. He declared that a new approach to politics would topple the old Clinton-Bush seesaw, and topple it he did. He sank the three-pointer with the cameras rolling. Made a speech in a football stadium feel intimate. Some might say these are not exactly Churchillian achievements, but in the land of the hapless, the competent man is king. In the end, his campaign e-mail list numbered some 13 million people, of whom more than 3.5 million put actual skin in the game — money, volunteer hours or both. Obama’s most formidable opponent, Hillary Clinton, tried to convince voters that he was all talk and no action, a vessel empty but for intoxicating fumes. Yet he was the one whose campaign ran like clockwork, while hers was a fratricidal mess. And by Nov. 4, the strongest party in the U.S. was no longer the Republican Party or the Democratic Party; it was the Obama Party.

II. Filling the Vacuum
“A presidential campaign is like an MRI of the soul,” says David Axelrod, Obama’s chief strategist. “And one of the great revelations of this process, certainly the most thrilling revelation to me, was to learn what a great manager this guy is. We had no way of knowing that when we started. When he decided to run, we had no political infrastructure at all. There was just a handful of us, and we were setting off to challenge the greatest political operation in the Democratic Party.”

Keep in mind that Obama, as Rudy Giuliani put it at the Republican Convention in September, had “never led anything, nothing, nada” — certainly not a sprawling organization spread from coast to coast. But he did have a philosophy of leadership, which he explains like this: “I don’t think there’s some magic trick here. I think I’ve got a good nose for talent, so I hire really good people. And I’ve got a pretty healthy ego, so I’m not scared of hiring the smartest people, even when they’re smarter than me. And I have a low tolerance of nonsense and turf battles and game-playing, and I send that message very clearly. And so over time, I think, people start trusting each other, and they stay focused on mission, as opposed to personal ambition or grievance. If you’ve got really smart people who are all focused on the same mission, then usually you can get some things done.”

Stop and look back at those last few words, because they are a telltale sign of Obama’s pragmatism. A persistent question during the campaign — it became the heart of John McCain’s message in the closing weeks — was whether Obama was some kind of radical, a terrorist-befriending socialist masquerading as Steady Freddy. As he builds his Administration, though, he is emerging as a leader who just wants to “get some things done.” (Read “The New Liberal Order.”)

Obama is a businesslike boss. He prefers briefing papers tightly written and shows up for meetings fully prepared. He expects people to challenge him when they think he is wrong and to back up their ideas with facts. He’s not a shouter — “Hollering at people isn’t usually that effective,” he explains — but if he thinks you’ve let him down, you’ll know it. “What was always effective with me as a kid — and Michelle and I find it effective with our kids — is just making people feel really guilty,” he says. “Like ‘Boy, I am disappointed in you. I expected so much more.’ And I think people generally want to do the right thing, and if you’re clear to them about what that right thing is, and if they see you doing the right thing, then that gives you some leverage.”

Again, take a second to reread, this time the bit where he says “people generally want to do the right thing.” Trust of this kind has been in short supply for many years in American politics, where the dominant attitude is that every disagreement is a sign of bad faith and every opponent is assumed to be malevolent. Obama’s attitude was ridiculed as kumbaya naiveté during the campaign, but trust proved to be essential to his victory. His campaign entrusted millions of volunteers with unprecedented authority to download information about prospective voters, to assign themselves to make phone calls and canvass their own neighborhoods and apartment buildings, and to keep the campaign abreast of their progress. A typical presidential effort is top-down, intensely protective of its data and strategies. Obama’s approach seemed to court mischief or even chaos. “There was a lot of snickering among the political pros,” says Plouffe. “They couldn’t believe that we were giving people we didn’t know access to our data and trusting them to handle it honestly. But it was enormously important because it made people feel that much more accountable: ‘These are my three blocks, and everyone’s counting on me.’”

See pictures of Obama on Flickr.

See the Six Degrees of Barack Obama.

Yes, Obama could talk — like nobody’s business — but talk didn’t win the election. According to the daily tracking polls, the tumblers clicked into place precisely at the moment the financial hurricane hit, when the wizards of Wall Street proved as incompetent as Oz and neither the President nor the leaders of Congress nor the Treasury boss nor Senator McCain could deliver a rescue package. When this group failure provoked a stock-market crash in early October, Americans asked, “Can’t anybody here play this game?” Astounding as it would have seemed scant months before, their gaze fell on the one fixed point in the widening gyre: a guy named Barack Hussein Obama. (See pictures of Barack Obama’s family tree.)

III. Fear Itself
As White House Chief of Staff during the final years of the Clinton Administration, John Podesta became accustomed to short nights and emotional roller coasters. Still, he found it a bit strange to be headed to the airport in the predawn darkness of Nov. 5 — just a few hours after the election of a Democratic President. Was Obama really going to chair a major strategy session the morning after winning the longest and most grueling campaign on record? How about a day off?

Long before Election Day, Obama decided that an ordinary transition wouldn’t do. Given the shaky economy and two wars, he knew that the winner of the election — whoever it turned out to be — would face instant and daunting challenges. He wanted to be ready. “What I was absolutely convinced of was that, whether it was me or John McCain, the next President-elect was going to have to move swiftly,” Obama recalls. He deployed Podesta in midsummer to lead an unusually elaborate preparation for a possible Obama presidency. McCain accused him of overconfidence and vanity, of measuring the Oval Office drapes. To Obama, it was simply a matter of prudence. (See pictures from the historic Election Day.)

Podesta had long been planning the return of a Democrat to the White House, and his think tank, the Center for American Progress, was already preparing detailed briefings on conditions in the various departments of government. As the financial system went into free fall in September, Podesta’s team pressed the FBI to work overtime on security screenings of potential Obama nominees. Now, as he boarded a 6 a.m. flight to Chicago, Podesta carried a list of more than 100 candidates who had passed their background investigations and were ready for confirmation on Day One. Instead of taking a day off, the new President-elect celebrated his victory with a five-hour meeting.

Obama had been pondering whether he should step to center stage or wait in the wings as the turbulent last months of the Bush Administration played out. His aides were all over the map. Some advised him to go quietly about his business in Chicago and insist that America has just one President at a time. For Obama to succeed, they argued, the country needed to see his Inauguration as a clean break, a new sunrise. Others floated the idea of immediately starting the First Hundred Days, perhaps asking George W. Bush to appoint Obama’s choices to key offices so that they could get to work by late November.

Obama was leery of appearing to shoulder responsibility for problems before he had any real authority to fix them. Bush’s bank of political capital was busted, and Obama wasn’t about to take ownership of the toxic assets. On the other hand, he didn’t want to repeat the dysfunctional transition of power from Herbert Hoover to Roosevelt in the dark hours of the Great Depression. F.D.R.’s silence between his election and his Inauguration may have deepened the crisis. By 5 p.m. on Nov. 5, when Podesta walked out of that meeting — not 24 hours after the polls closed — Obama was far ahead of the normal transition process, having homed in on finalists for many of his key staff and Cabinet positions. But he hadn’t yet decided how public to be about it.

Within two days, however, events forced his hand. On Friday, Nov. 7, Obama convened a meeting of his economic advisers in Chicago, and the tone of their comments was chilling. The stock market was plunging; credit remained tight; fresh unemployment numbers were shocking. “There was just a very dramatic deterioration” in the days after the election, says Timothy Geithner, Obama’s choice for Treasury Secretary. On previous occasions when the group had gathered, someone could always be counted on to find potential upsides in dismal forecasts, while Paul Volcker, the 81-year-old former chairman of the Federal Reserve, reliably closed each meeting with a gloomy soliloquy. On this day, though, there was no positive scenario for Volcker to deflate. Everyone in the room was grim.

See pictures of the global financial crisis.

See pictures of Obama’s nation of hope.

Obama opened the meeting by reflecting on his dilemma: act now or wait until January? By the end of the session, he had concluded that, like it or not, he must “accelerate all of our timetables,” as he put it, “in appointments not just on the Cabinet but also our White House team, in structuring economic plans so that we can start getting them to Congress and hopefully begin work — even before I’m sworn in — on some of our key priorities around the economy, on laying the groundwork for a national-security team that can take the baton in a wartime transition.” There was no time for the “traditional postelection holiday.” Vacations would have to wait until Christmas.

Transition is such a gentle word. We make the transition from youth to adulthood or from the dinner table to the den. For Obama, though, the concept was freighted with danger. “He was very focused on the basic perils of the gap between the election and the Inauguration, at a time when the economy was clearly deteriorating and the markets were very fragile,” Geithner explains. In certain powerful respects, Obama felt compelled to begin his presidency immediately. Markets needed to size up his economic team and hear what he planned to do. Congressional leaders, contemplating a colossal economic-stimulus package, needed to know where he was headed. Military leaders, key allies and opportunistic enemies were all keen to know just how dovish the anti-Iraq-war President intended to be. Obama concluded that hanging back would create a dangerous leadership void in the short-term and compound his troubles come January. And nothing that has happened since that Nov. 7 decision — the crisis at Citigroup, the drama of the automakers or the assault on Mumbai — has made the transfer of power look any less perilous.

He could not have predicted when he set out to become President that he would face such circumstances. The distance from the birth of his campaign to these first days of his fledgling presidency could be counted in months but measured in light-years. When he announced his candidacy on a frigid morning in Springfield, Ill., in 2007, Iraq was a disaster, and the Dow was still headed upward past 14,000. So this moment was a test not only of his speed but also of his flexibility. Obama proved lithe, indeed, persuading Robert Gates, Bush’s Secretary of Defense, to remain in his post and asking Clinton, a constant critic of Obama’s foreign policy views during their primary battle, to be his Secretary of State. Priority 1 was the economic team, however. There his task was to find a mix of people familiar enough to signal stability but fresh enough to promise change, and to design a stimulus strategy dramatic enough to inspire markets to swallow their panic. (See pictures of Obama’s White House team.)

In the days leading up to Thanksgiving, Obama delivered. Having promised to govern from the middle, he rolled out a bright purple team of economic advisers, neither red nor blue. Geithner had served in various posts under both Bush and Bill Clinton. As president of the New York Fed, he was well known to Wall Street but relatively unknown on Main Street — just the blend of experience and newness that Obama was seeking. His budget director, Peter Orszag, had fans across the political spectrum, and his in-house oracle, Volcker, was a Democrat who fought inflation alongside Ronald Reagan. Larry Summers, named to run the economics team from the White House, was a Clinton stalwart.

Unveiling these and other picks at a series of daily press conferences, Obama assured the public that he wanted to move fast, so fast that trainloads of money might be ready for him to dispatch across the country with a stroke of his pen on Inauguration Day. The idea of another wave of spending horrifies America’s surviving conservatives, but most economists support it — some with enthusiasm, some with resignation. Obama realized that the stimulus package could be a vehicle for launching his broad domestic agenda. His ambitious campaign promises — to reform health care, cut taxes for low- and moderate-income earners and steer the U.S. toward a new energy economy — had seemed doomed by the yawning budget deficit (some $200 billion a month, according to the latest projections). But call these projects “stimulus,” and suddenly a ship headed for the reef of economic disaster might sail through Congress flying the flag of economic recovery. With even Republican economists talking about hundreds of billions in new spending, the sky’s the limit. A dream of health-care reformers — electronic medical records — is now economic stimulus because Obama will pour money into hospitals for computers and clerical workers. His tax cut is stimulus because it puts spending money in the pockets of working Americans. His pledge to repair the nation’s infrastructure is a stimulus plan for construction workers, while his energy strategy is stimulus for the people who will modernize government buildings, update public schools and improve the electrical grid.

See pictures of Obama’s nation of hope.

See pictures of Obama’s college years.

Of course, the bullet points are easy to list; far harder is the task of spending vast sums — perhaps $1 trillion over two years — efficiently, effectively and quickly enough to spur the economy. Washington’s three goblins — waste, fraud and abuse — are watching with hungry eyes. Obama has cast Orszag as a flinty keeper of the purse strings, but he has no intention of letting his opportunity go by. “I don’t think that Americans want hubris from their next President,” Obama says, noting that McCain received nearly 47% of the vote last month. However, “I do think that we received a strong mandate for change. And I know that people have said, ‘Well, what does this change word mean? You know that it’s sort of ill defined.’ Actually, we defined it pretty precisely during the campaign, and I’m trying to define it further for people during this transition,” he says. “It means a government that is not ideologically driven. It means a government that is competent. It means a government, most importantly, that is focused day in, day out on the needs and struggles, the hopes and dreams of ordinary people.”

IV. Into the Breach
More than 75 years ago, a new president took the oath of office amid economic catastrophe and admonished the nation that “the only thing we have to fear is fear itself.” Today generations of Americans are experiencing a harsh tutorial in the true meaning of that resonant diagnosis. Fear is kryptonite to the economy, which cannot operate efficiently without broad and well-founded confidence — that wise investments will gain value, that balance sheets mean what they say, that contracts will be honored and bills paid.

The events of the past autumn produced the sharpest drop in consumer confidence ever recorded, and a similar wave of fear cratered credit markets. Obama notes the very real structural flaws in the economy, but he is also aware of the role that fear plays. “Nobody trusts other people’s books anymore. And people decide, ‘Well, I’m just going to hold on to my cash for a while,’” he explains. “And that compounds the crisis. And all that results in a contraction in lending, in consumer spending, which then has a real impact on Main Street. And so what starts off as psychological is now very real.”

Just like our banks and our carmakers, America’s shattered confidence is in serious need of a bailout. And the thing about competence is that it nourishes fresh confidence. “Yes, we can” is both an affirmation of optimism and the essential claim of the competent. When the slogan is rooted in a record of accomplishment — when tomorrow’s yes-we-can is backed up by yesterday’s yes-we-did — confidence and competence begin to feed on each other. This virtuous cycle of possibility isn’t the whole of leadership, but it is an important part and perhaps the element most needed in today’s sea of troubles. (See pictures of Obama’s nation of hope.)

After the election, veteran Democratic pollster Peter Hart convened one last focus group to ask Virginia voters why a state that gave Bush an 8-point victory four years ago chose Obama by 6 points this time. Their responses clustered around the crucial connection between competence and confidence. They told Hart they were drawn to Obama’s self-assured and calming personality. They felt he was “honest,” a “straight shooter” — in other words, a person who does what he says he will do. Their confidence in Obama wasn’t starry-eyed; they hadn’t been swept away by his stadium speeches. They saw a man who can get some things done, at a time when so many of their leaders, from Pennsylvania Avenue to Wall Street, cannot. He made moderates feel hopeful, and even among many core Republicans who did not ultimately vote for him, Obama inspired admiration. Viewing these comments through the results of his national surveys, Hart discerned a surge of good feeling that he had not seen in a generation: “a sense of real hope,” he says, “and the kind of broad bipartisan support that has not been in evidence since the 1980 Reagan election.”

Obama has begun to turn his thoughts to his Inaugural Address. According to strategist Axelrod, he is looking for the right mixture of bracing and boost in a speech that will be “both sober and hopeful.” He may signal a new day by announcing a plan to stem the foreclosure crisis, which aides say is in the works. As the gray Chicago sky frowns outside his conference-room window, Obama rehearses his message. Americans “should anticipate that 2009 is going to be a tough year,” he says. Then he adds, “If we make some good choices, I’m confident that we can limit some of the damage in 2009. And that in 2010 we can start seeing an upward trajectory on the economy.”

A few days after this interview, Illinois Governor Rod Blagojevich reminded the country that some aspects of politics will never change. Government is a human enterprise, after all, and Obama, like everyone else, is bound by its limits and subject to human frailty. Nevertheless, if he has shown anything this year, Obama has made it clear that he knows how to write new playbooks and do things in new ways. Which is a compelling quality right now. His arrival on the scene feels like a step into the next century — his genome is global, his mind is innovative, his world is networked, and his spirit is democratic. Perhaps it takes a new face to see the promise in a future that now looks dark. What’s in store for Obama’s America? “I don’t have a crystal ball,” he says. But the measure of his success in menacing times can be found in the number and variety of people who consider the question with eagerness alongside their dread.

—David Von Drehle with reporting by Massimo Calabresi and Michael Duffy / Washington

See pictures of Obama’s college years.

See pictures of the Civil Rights movement from Emmett Till to Barack Obama.

Thursday, December 18, 2008

The Washington Times Editorial

By NICHOLAS CONFESSORE

ALBANY — Caroline Kennedy, the deeply private daughter of America’s most storied political dynasty, will seek the United States Senate seat in New York being vacated by Hillary Rodham Clinton.

ROD BLAGOJEVICH is the perfect holiday treat for a country fighting off depression. He gift-wraps the ugliness of corruption in the mirthful garb of farce. From a safe distance outside Illinois, it’s hard not to laugh at the “culture of Chicago,” where even the president-elect’s Senate seat is just another commodity to be bought and sold.

But the entertainment is escapist only up to a point. What went down in the Land of Lincoln is just the reductio ad absurdum of an American era where both entitlement and corruption have been the calling cards of power. Blagojevich’s alleged crimes pale next to the larger scandals of Washington and Wall Street. Yet those who promoted and condoned the twin national catastrophes of reckless war in Iraq and reckless gambling in our markets have largely escaped the accountability that now seems to await the Chicago punk nabbed by the United States attorney, Patrick Fitzgerald.

The Republican partisans cheering Fitzgerald’s prosecution of a Democrat have forgotten his other red-letter case in this decade, his conviction of Scooter Libby, Dick Cheney’s chief of staff. Libby was far bigger prey. He was part of the White House Iraq Group, the task force of propagandists that sold an entire war to America on false pretenses. Because Libby was caught lying to a grand jury and federal prosecutors as well as to the public, he was sentenced to two and a half years in prison. But President Bush commuted the sentence before he served a day.

Fitzgerald was not pleased. “It is fundamental to the rule of law that all citizens stand before the bar of justice as equals,” he said at the time.

Not in the Bush era, man. Though the president had earlier vowed to fire anyone involved in leaking the classified identity of a C.I.A. officer, Valerie Plame Wilson — the act Libby tried to cover up by committing perjury — both Libby and his collaborator in leaking, Karl Rove, remained in place.

Accountability wasn’t remotely on Bush’s mind. If anything, he was more likely to reward malfeasance and incompetence, as exemplified by his gifting of the Presidential Medal of Freedom to George Tenet, L. Paul Bremer and Gen. Tommy Franks, three of the most culpable stooges of the Iraq fiasco.

Bush had arrived in Washington vowing to inaugurate a new, post-Clinton era of “personal responsibility” in which “people are accountable for their actions.” Eight years later he holds himself accountable for nothing. In his recent exit interview with Charles Gibson, he presented himself as a passive witness to disastrous events, the Forrest Gump of his own White House. He wishes “the intelligence had been different” about W.M.D. in Iraq — as if his administration hadn’t hyped and manipulated that intelligence. As for the economic meltdown, he had this to say: “I’m sorry it’s happening, of course.”

If you want to trace the bipartisan roots of the morally bankrupt culture that has now found its culmination in our financial apocalypse, a good place to start is late 2001 and 2002, just as the White House contemplated inflating Saddam’s W.M.D. That’s when we learned about another scandal with cooked books, Enron. This was a supreme embarrassment for Bush, whose political career had been bankrolled by the Enron titan Kenneth Lay, or, as Bush nicknamed him back in Texas, “Kenny Boy.”

The chagrined president eventually convened a one-day “economic summit” photo op in August 2002 (held in Waco, Tex., lest his vacation in Crawford be disrupted). But while some perpetrators of fraud at Enron would ultimately pay a price, any lessons from its demise, including a need for safeguards, were promptly forgotten by one and all in the power centers of both federal and corporate governance.

Enron was an energy company that had diversified to trade in derivatives — financial instruments that were bets on everything from exchange rates to the weather. It was also brilliant in devising shell companies that kept hundreds of millions of dollars of debt off the company’s bottom line and away from the prying eyes of shareholders.

Regulators had failed to see the iceberg in Enron’s path and so had Enron’s own accountants at Arthur Andersen, a corporate giant whose parallel implosion had its own casualty list of some 80,000 jobs. Despite Bush’s post-Enron call for “a new ethic of personal responsibility in the business community,” the exact opposite has happened in the six years since. Warren Buffett’s warning in 2003 that derivatives were “financial weapons of mass destruction” was politely ignored. Much larger companies than Enron figured out how to place even bigger and more impenetrable gambles on derivatives, all the while piling up unseen debt. They built castles of air on a far grander scale than Kenny Boy could have imagined, doing so with sheer stupidity and cavalier, greed-fueled carelessness rather than fraud.

The most stupendous example as measured in dollars is Citigroup, now the recipient of potentially the biggest taxpayer bailout to date. The price tag could be some $300 billion — 20 times the proposed first installment of the scuttled Detroit bailout. Citigroup’s toxic derivatives, often tied to subprime mortgages, metastasized without appearing on the balance sheet. Both the company’s former chief executive, Charles O. Prince III, and his senior adviser, Robert Rubin, the former Clinton Treasury secretary, have said they didn’t know the size of the worthless holdings until they’d spiraled into the tens of billions of dollars.

Once again, regulators slept. Once again, credit-rating agencies, typified this time by Moody’s, kept giving a thumbs-up to worthless paper until it was too late. There was just so much easy money to be made, and no one wanted to be left out. As Michael Lewis concludes in his brilliant account of “the end” of Wall Street in Portfolio magazine: “Something for nothing. It never loses its charm.”

But if all bubbles and panics are alike, this one, the worst since the Great Depression, also carried the DNA of our own time. Enron had been a Citigroup client. In a now-forgotten footnote to that scandal, Rubin was discovered to have made a phone call to a former colleague in the Treasury Department to float the idea of asking credit-rating agencies to delay downgrading Enron’s debt. This inappropriate lobbying never went anywhere, but Rubin neither apologized nor learned any lessons. “I can see why that call might be questioned,” he wrote in his 2003 memoir, “but I would make it again.” He would say the same this year about his performance at Citigroup during its collapse.

The Republican side of the same tarnished coin is Phil Gramm, the former senator from Texas. Like Rubin, he helped push through banking deregulation when in government in the 1990s, then cashed in on the relaxed rules by joining the banking industry once he left Washington. Gramm is at UBS, which also binged on credit-default swaps and is now receiving a $60 billion bailout from the Swiss government.

It’s a sad snapshot of our century’s establishment that Rubin has been an economic adviser to Barack Obama and Gramm to John McCain. And that both captains of finance remain unapologetic, unaccountable and still at their banks, which have each lost more than 70 percent of their shareholders’ value this year and have collectively announced more than 90,000 layoffs so far.

The Times calls its chilling investigative series on the financial failures “The Reckoning,” but the reckoning is largely for the rest of us — taxpayers, shareholders, the countless laid-off employees — not the corporate and political leaders who led us into the quagmire. It’s a replay of the Iraq equation: the troops, the Iraqi people and American taxpayers have borne the harshest costs while Bush and company retire to their McMansions.

As our outgoing president passes the buck for his failures — all that bad intelligence — so do leaders in the private and public sectors who enabled the economic debacle. Gramm has put the blame for the subprime fiasco on “predatory borrowers.” Rubin has blamed a “perfect storm” of economic factors, as has Sam Zell, the magnate who bought and maimed the Tribune newspapers in a highly leveraged financial stunt that led to a bankruptcy filing last week. Donald Trump has invoked a standard “act of God” clause to avoid paying a $40 million construction loan on his huge new project in Chicago.

After a while they all start to sound like O. J. Simpson, who when at last held accountable for some of his behavior told a Las Vegas judge this month, “In no way did I mean to hurt anybody.” Or perhaps they are channeling Donald Rumsfeld, whose famous excuse for his failure to secure post-invasion Iraq, “Stuff happens,” could be the epitaph of our age.

Our next president, like his predecessor, is promising “a new era of responsibility and accountability.” We must hope he means it. Meanwhile, we have the governor he leaves behind in Illinois to serve as our national whipping boy, the one betrayer of the public trust who could actually end up paying for his behavior. The surveillance tapes of Blagojevich are so fabulous it seems a tragedy we don’t have similar audio records of the bigger fish who have wrecked the country. But in these hard times we’ll take what we can get.

Special election only way to keep things honest

Political leaders in Illinois may still not get it. But we do.

Gov. Blagojevich’s downfall has given the rest of the country a jaw-dropping look at how the world works in the Land of Lincoln.

And you know what? After they got past the nasty language, I doubt that the majority of them were shocked that the fix was in when it came to who would fill President-elect Barack Obama’s Senate seat.

The most shocking aspect of this tawdry affair is that Blagojevich was free to do whatever the heck he wanted.

Far as I can tell, no one complained about the lack of a credible and transparent process.

No one complained that the governor was dragging his heels.

No one ran off screaming: shakedown, shakedown!!

Despite Blagojevich’s arrogant and bullying demeanor, no one dared rat out the governor.

In fact, I would argue that Blagojevich’s colleagues weren’t surprised that he was trying to barter the Senate seat for political favors and campaign donations.

But these same colleagues are likely absolutely shocked by Blagojevich’s tackiness.

But Blagojevich apparently didn’t have time to be subtle.

He has been in the cross hairs of federal prosecutors since he took office in 2003.

Before he’d even warmed the governor’s seat, his own father-in-law, Ald. Dick Mell, who viewed his son-in-law as cocky and ungrateful, said publicly that Blagojevich was trading board appointments for campaign donations. It was beginning to look like “The People” had fallen for a rogue in reformer’s clothing.

Now it seems clear from the complaint that Blagojevich was certain he was going to be impeached and desperately needed a place to land.

“I’ve got this thing and it’s f—— golden, and uh, uh, I’m just not giving it up for f——’ nothing. I’m not gonna do it,” Blagojevich allegedly said in a call that was intercepted by federal prosecutors.

Although the legislative body that was working with Blagojevich was a war zone, no one balked at him picking the next senator?

No one suspected the investigation that was swirling around Blagojevich was a problem?

No one had the courage to demand that the laws be changed so there could be a special election?

I suspect that Blagojevich’s biggest sin, and the thing that has members of the General Assembly gnashing their teeth, is that he was so inept at the sleazy gamesmanship that is an integral part of Illinois politics.

Blagojevich was caught on tape saying: “I want to make money,” words pols dare not speak … on a wiretap.

Because regardless of how we rail against Blagojevich, at the heart of all politics is pay to play.

Yes. There’s a thin line between expectations and shakedown. But do any of us really believe that the people who raise huge sums of money for a particular political candidate aren’t expecting something for their efforts?

Do we really believe that a person who is vested with the power to give away a Senate seat isn’t going to give it to the person who will somehow do him or her the most good?

That’s why the way out of the Senate seat scandal can’t be more of the same.

With all due respect to Lt. Gov. Pat Quinn, he shouldn’t be in a position to pick the next Illinois senator.

He has served six years with the governor and didn’t have a clue as to what was really going on with the Blagojevich administration.

Hopefully, Blagojevich will resign and spare the state further embarrassment.

If he doesn’t, the General Assembly appears to be moving toward impeachment.

And a lawsuit filed by Illinois Attorney General Lisa Madigan asking the Illinois Supreme Court to remove Blagojevich from office because he is unable to serve would also pave the way for a Quinn pick.

No thank you.

Once Blagojevich is drummed out of office, the race for the Senate seat would begin anew with a fresh round of lobbying and horse trading.

Illinois voters should demand that the state hold a special election.

We’ve heard enough promises of change from enough reformers that we finally get it.

We know how Illinois works.

Froma Harrop
The Providence Journal
December 12, 2008

Have New York Democrats lost all self-respect? Their excited talk of whether Caroline Kennedy is “interested” in Hillary Clinton’s Senate seat makes you wonder. The late John F. Kennedy’s daughter has made at least one feeler phone call to New York Gov. David Paterson. And Uncle Teddy, the Massachusetts senator, is busy pulling the levers to slip her in. The seat will be vacant upon Clinton’s confirmation as secretary of state.

This unsavory spectacle has been upstaged by the wild drama in Illinois, where Gov. Rod Blagojevich is being accused of trying to sell Barack Obama’s Senate seat. The doings in New York are not blatant corruption, but they are corrosive to our democratic ideals. Lest anyone forget the point of the American Revolution, our representatives are not chosen by hereditary succession, which, to quote Thomas Paine, “is an insult and imposition on posterity.”

Of course, Caroline can ask for whatever she wants. The astounding part is that the idea of such a request hasn’t been laughed out of the news pages.

New York Mayor Michael Bloomberg, against all evidence, touts Caroline as “a very experienced woman.” Her government service starts and ends at raising private money for the New York City schools. While a worthy endeavor, it’s a socialite’s job.

For nearly four decades after her father’s assassination, Caroline commendably resisted the call to become a Democratic Party ornament. Then at the 2000 Democratic convention, she stepped on the stage to the tune of “Camelot” and, with no little presumption, thanked the American people for “sustaining us through the good times, and the difficult ones, and for helping us dream my father’s dream.” Then she introduced “Uncle Teddy.”

Women’s groups have been eager to see Clinton replaced by another female. The Feminist Majority and the National Organization for Women had already endorsed Carolyn Maloney, a congresswoman who has represented parts of Manhattan and Queens for 15 years.

But if Caroline Kennedy wants the job, all bets are off, according to Feminist Majority President Eleanor Smeal. “You’re talking to someone who thinks Ted Kennedy is the most effective senator there,” Smeal actually told the New York Times.

Here you have it. Without a second thought, feminists talk of throwing a seasoned, self-made professional overboard to make room for a Kennedy princess.

Uncle Ted has been reminding Democrats that Caroline would be backed by – as the Times straightforwardly put it – “the Kennedy family’s extensive fundraising network.” That’s nice, but this is New York state, where electing a Democrat requires no miracle.

Set aside whether any seat should be gender-specific. It certainly shouldn’t be genealogy-specific. But that’s one of Caroline’s selling points, at least from the Kennedy perspective. The seat was held for three years by her uncle Robert F. Kennedy, who was killed in 1968. For this reason, RFK’s son Robert F. Kennedy Jr. was also eying the seat for himself. (Perhaps he could be made ambassador to France, instead.)

Hey, what about the Moynihans? Democrat Daniel Patrick Moynihan occupied that Senate chair for more than 20 years. No Moynihan has yet come forward to claim it as a family possession to be handed down unto the generations.

Are we really having this conversation?

Paterson says he hasn’t decided whom he will choose, though he notes that Caroline is “thinking about” the Senate position. According to the Times, “Some influential Democrats have privately suggested that given the buzz set off by Ms. Kennedy’s emergence, the governor would have little choice but to appoint her if she decided she truly wanted the job.”

Actually, he does have a choice.

Can New York Democrats summon up some dignity? We shall see.

Kathleen Parker
The Orlando Sentinel
December 12, 2008

It always seems like fun at the time. Then the photo surfaces.

Two guys, some beer and a cardboard cutout of Hillary Clinton have created fresh grief for the young and uninitiated to Washington Rules.

In the latest blog scandal-ette, Jon Favreau, a Holy Cross valedictorian and 27-year-old wunderkind speechwriter for Barack Obama, was captured clutching the prospective secretary of state’s, um, pectoral area, while a fellow reveler, wearing an “Obama Staff” T-shirt, nuzzles Clinton’s ear and holds a beer bottle to her smiling lips.

The photo popped up on Facebook for a couple of hours before being removed … too late. The moment was captured and the rest was instant and persistent history. On the Information Highway, alas, roadkill is never really dead.

One day, Favreau was the golden boy of silken tongue. The next, he was just another dimwitted dude acting dumb.

Feminists groups such as NOW and the New Agenda are outraged that Clinton – or at least her image – is being treated disrespectfully by the boys. Conservatives are outraged that there’s not enough outrage, as would be the case were the party boys Republicans.

An attorney wrote on the Feminist Law Professors blog that Favreau should not be excused for “youthful indiscretion” and questioned Obama’s judgment “in continuing to rely professionally on someone so young and irresponsible and offensively sexist.”

FitzWalter, quickly, my smelling salts! Oh, and dust off the guillotine while you’re at it.

Only Hillary Clinton has made light of the “incident,” hereinafter known as Night of BBB (Boys Being Boys). In an e-mail to the Washington Post’s Al Kamen, a Clinton adviser wrote: “Senator Clinton is pleased to learn of Jon’s obvious interest in the State Department, and is currently reviewing his application.”

Hear, hear. Nipping nonsense in the bud is an essential skill for a secretary of state, and Clinton used her shears deftly. If anyone recognizes a little harmless male sport, it would be the bride of President “Is.” One thing is harmful; another thing isn’t.

Nevertheless, Clinton’s response has fallen short of what some deem appropriate. CNN’s Campbell Brown charged Clinton with forfeiting her feminist cred, especially after issuing her own charges of sexism throughout the presidential campaign. Now that Clinton’s a member of the Obama team, she suddenly has a sense of humor?

All of the above would be nonsense except that almost nothing any longer is. Nonsense is the new standard for controversy; and even party shenanigans qualify.

Puritans and prohibitionists would adore our brave new world of shutterbug infamy. The fact is, no one’s having fun anymore, especially in the nation’s capital, where one can’t afford to let the tongue slip or risk being caught in the crosshairs of a cell camera.

Political veterans have learned, sometimes the hard way. This new generation – the Obama cohort – needs to review the Rules. Smart grown-ups in Washington don’t get drunk in public. A glass of wine is a prop that rarely gets drained.

At a small, private dinner recently, where wine flowed freely (and no one took pictures), conversation turned to the day when politicos and others routinely enjoyed three-martini lunches. How did they do that? Not just the drinking, but the escape from scrutiny?

It was all about time. In low-tech America, people had time to sober up. There was no e-mail light blinking to demand your immediate attention, no 24/7 news producers demanding instant responses to urgent claims and counterclaims. Several hours – or even a few days – could pass before anyone had to Do Something.

For all the gratification and convenience of real-time everything, downtime was underappreciated while it lasted. Even 10 years ago, BBB would have been vaguely recalled over Bloody Marys – and quickly forgotten. Now young men goofing around are immortalized as misogynist maulers, portentous reminders to the rest of us that the gender wars won’t end until irreverence and humor are dead.

In the meantime, feminists might channel their free-ranging anger toward, say, Iran, where yet another woman recently was sentenced to death by stoning for adultery.

And Facebookers might heed the saloon owner’s orders: Check your weapons at the door. Cameras are lethal.

NEWSWEEK

Associated Press
December 9, 2008

In this August 2008 file photo, Illinois Gov. Rod Blagojevich discusses an executive order he signed that extends the language of an ethics bill passed by the House and the Senate earlier this year to include campaign contributions from large state contractors to officeholders. Blagojevich was arrested Dec. 9, 2008, on charges of conspiring to get financial benefits through his authority to appoint a U.S. senator to fill the vacancy left by Barack Obama’s election as president. (Associated Press) A look at Illinois Gov. Rod R. Blagojevich Age, birthdate: 51; Dec. 10, 1956 Home: Chicago Family: Wife, Patricia; two daughters Education: Northwestern University, graduated 1979; Pepperdine University, law degree, 1983 Experience: Elected Illinois governor 2002, re-elected 2006; served in the U.S. House of Representatives from Illinois’ 5th district 1997-2002; served in the Illinois House from a North Side Chicago district 1992-1996; assistant Cook County state’s attorney, prosecuting criminal cases. Quote: “I don’t care whether you tape me privately or publicly. I can tell you that whatever I say is always lawful.”

CHICAGO — Federal authorities arrested Illinois Gov. Rod Blagojevich today on charges that he brazenly conspired to sell or trade the Senate seat left vacant by President-elect Barack Obama to the highest bidder.

Blagojevich also was charged with illegally threatening to withhold state assistance to Tribune Co., the owner of the Chicago Tribune, in the sale of Wrigley Field, according to a federal criminal complaint. In return for state assistance, Blagojevich allegedly wanted members of the paper’s editorial board who had been critical of him fired.

A 76-page FBI affidavit said the 51-year-old Democratic governor was intercepted on court-authorized wiretaps over the last month conspiring to sell or trade the vacant Senate seat for personal benefits for himself and his wife, Patti.

Otherwise, Blagojevich considered appointing himself. The affidavit said that as late as Nov. 3, he told his deputy governor that if “they’re not going to offer me anything of value I might as well take it.”

“I’m going to keep this Senate option for me a real possibility, you know, and therefore I can drive a hard bargain,” Blagojevich allegedly said later that day, according to the affidavit, which also quoted him as saying in a remark punctuated by profanity that the seat was “a valuable thing — you just don’t give it away for nothing.”

The affidavit said Blagojevich also discussed getting a substantial salary for himself at a nonprofit foundation or an organization affiliated with labor unions.

It said Blagojevich also talked about getting his wife placed on corporate boards where she might get $150,000 a year in director’s fees.

He also allegedly discussed getting campaign funds for himself or possibly a post in the president’s cabinet or an ambassadorship once he left the governor’s office. He noted becoming a U.S. senator might remake his image for a possible presidential run in 2016, according to the affidavit. And he allegedly said a Senate seat would also provide him with corporate contacts if he needed a job and present an opportunity for his wife to work as a lobbyist.

“I want to make money,” the affidavit quotes him as saying in one conversation.

The affidavit said Blagojevich expressed frustration at being “stuck” as governor and that he would have access to greater resources if he were indicted while in the U.S. Senate than while sitting as governor.

U.S. Attorney Patrick J. Fitzgerald said in a statement that “the breadth of corruption laid out in these charges is staggering.”

“They allege that Blagojevich put a for sale sign on the naming of a United States senator,” Fitzgerald said.”

Among those being considered for the post include U.S. Reps. Danny Davis and Jesse Jackson Jr.

Blagojevich also was charged with using his authority as governor in an attempt to squeeze out campaign contributions.

His chief of staff, John Harris, also was arrested.

Corruption in the Blagojevich administration has been the focus of a federal investigation involving an alleged $7 million scheme aimed at squeezing kickbacks out of companies seeking business from the state. Federal prosecutors have acknowledged they’re also investigating “serious allegations of endemic hiring fraud” under Blagojevich.

Political fundraiser Antoin “Tony” Rezko who raised money for the campaigns of both Blagojevich and Obama is awaiting sentencing after being convicted of fraud and other charges. Blagojevich’s chief fundraiser, Christopher G. Kelly, is due to stand trial early next year on charges of obstructing the Internal Revenue Service.

According to today’s complaint, Blagojevich schemed with Rezko, millionaire-fundraiser turned federal witness Stuart Levine and others to get financial benefits for himself and his campaign committee.

Federal prosecutors said Blagojevich and the chairman of his campaign committee have been speeding up corrupt fundraising activities in the last month to get as much money as possible before the end of the year when a new law would curtail his ability to raise contributions from companies with state contracts worth more than $50,000.

According to the affidavit, agents learned Blagojevich was seeking $2.5 million in campaign contributions by the end of the year, with a large part allegedly to come from companies and individuals who have gotten state contracts or appointments.

Blagojevich took the chief executive’s office in 2003 as a reformer promising to clean up former Gov. George Ryan’s mess.

Ryan, a Republican, is serving a 6-year prison sentence after being convicted on racketeering and fraud charges. A decade-long investigation began with the sale of driver’s licenses for bribes and led to the conviction of dozens of people who worked for Ryan when he was secretary of state and governor.

FBI spokesman Frank Bochte said federal agents arrested the governor and Harris simultaneously at their homes at 6:15 a.m. and took them to the Chicago FBI headquarters.

Bochte said he did not know if either man was handcuffed or if the governor’s family was their North Side home at the time of his arrest. He did say Blagojevich and Harris both were given time to get dressed before being taken to the headquarters.

He also did not have any details about Blagojevich’s arrest, only that he was cooperative with federal agents.

“It was a very calm setting,” he said.

The governor was to appear later today before U.S. Magistrate Judge Nan Nolan to answer the charges. The time was not immediately set.

Trial judge postpones pleas

Mohammed

Carol Rosenberg
McClatchy
December 9, 2008

GUANTANAMO BAY NAVAL BASE, Cuba – Confessed al-Qaida kingpin Khalid Sheikh Mohammed and his four accused co-plotters offered Monday to plead guilty to orchestrating the Sept. 11, 2001, terrorist attacks, a move that could leave President-elect Barack Obama to decide whether to execute them.

The surprise turnabout came in what was meant to be a routine pretrial hearing.

The Pentagon seeks the death penalty for all five men. And the trial judge postponed any pleas until lawyers sort out two key issues at the first U.S. war crimes tribunals since World War II: whether two of the five men are mentally competent to join the others in admitting to their roles in the worst terrorist attacks on U.S. soil; and whether the 2006 act of Congress that created the war court allows accused terrorists charged in a capital case to submit guilty pleas, without a jury of at least 12 U.S. military officers present to hear them and the evidence.

Victims of the Sept. 11 attacks, among five the Pentagon sponsored to observe the hearings, offered opposing views on the prospect of executions.

“If there ever was a case that warranted the death penalty, this is the one,” declared Hamilton Peterson, who lost his parents aboard United Airlines Flight 93.

“They do not deserve the glory of execution,” said Alice Hoagland, whose son Mark Bingham died on the same flight, struggling with the hijackers to crash the airliner in a Pennsylvania field.

“We should ensure that these dreadful people live out their lives in an American prison, totally under the control of the people they profess to hate,” she added.

The defendants made no explicit mention of the death penalty, or “martyrdom” as Mohammed calls it, in an appearance before the tribunal judge, Army Col. Stephen Henley.

Instead, the judge asked each man whether he wanted to waive his right to challenge the charges, and whether he believed prosecutors could prove his guilt “beyond a reasonable doubt.”

“I understand,” Mohammed replied, going first. “I hope that you will assign a proceeding in the near future, as fast as possible, to get over with this play.”

Mohammed earlier had declared his distrust of the system and said he would not distinguish among any of the Americans staging the trial – from judge and defense attorney to President George W. Bush and “the CIA, who tortured me.”

The spy agency has confirmed it waterboarded Mohammed into confessing to plotting a worldwide string of terror, before his transfer to the prison camps here two years ago.

Added Yemeni Ramzi Binalshibh, accused of helping the Hamburg, Germany, suicide squad: “We the brothers, all of us, we would like to submit our confession.”

Nothing will happen soon. The judge instructed prosecutors to research and write a brief on whether the legislation that created the war court envisioned letting an accused plead guilty in a death penalty case.

Moreover, the judge said he would not accept guilty pleas from co-defendants Binalshibh and Saudi Mustafa Hawsawi until the court resolves questions on their mental capacity to stand trial.

The prison camp has Binalshibh on psychotropic drugs. He allegedly helped a Hamburg al-Qaida cell, whose members became some of the hijackers. The health issue of Hawsawi, the plot’s alleged financier, is contained in a still-classified memorandum his Army defense attorney filed with the court.

Mohammed appeared as his own attorney on Monday, his fourth hearing meant to set conditions for the joint conspiracy trial alleging the five conspired to have suicide squads hijack airplanes and then strike the Pentagon and World Trade Center.

Ultimately, the commander in chief has the last say on execution, and the case involving Mohammed and his four accused co-plotters is not likely to be settled before Bush leaves office Jan. 20.

Judge Henley disclosed the five men made their offer, signed by each alleged Sept. 11 conspirator on Nov. 4 – Election Day – after prison camp guards arranged for a rare joint meeting of the group.

WASHINGTON — Congressional Democrats were drafting legislation Sunday for tight government control of the crippled American auto industry, including the possible creation of an oversight board made up of five cabinet secretaries and the head of the Environmental Protection Agency and led by an independent chairman or “car czar.”

While the form of oversight was still to be negotiated by Congressional Democrats and the White House, the talks made clear the extent to which the auto companies would have to submit to substantial government supervision in order to receive a taxpayer-financed bailout.

Whatever oversight entity is created, it would direct the drastic reorganization plans that the auto companies have said they were willing to undertake in exchange for billions of dollars in short-term government loans to keep them in business, a senior Congressional aide said. A main factor complicating the deliberations was the imminent transition between the Bush and Obama administrations.

The discussions of how strong a hand the government should take with the auto industry came as Congressional and White House negotiators sought to put the final touches on emergency bridge loans of about $15 billion to keep General Motors, Chrysler and Ford afloat.

The final legislation is also expected to impose stringent taxpayer protections, including stock warrants that would give the government an equity stake in the three companies, new limits on executive pay and a ban on stock dividends while the loans are outstanding. One proposal would require the auto companies to seek government approval for any business transaction of $25 million or more.

Once a bill offering aid to the industry is completed by Congressional Democrats and the White House, it would still need the approval of some Senate Republicans. Senator Carl Levin, Democrat of Michigan, one of the auto industry’s biggest supporters, said on Sunday that it was uncertain whether the plan would win the 60 votes needed to advance in the Senate.

President-elect Barack Obama, whose transition team has been involved in the talks, made starkly clear in an interview and at a brief news conference on Sunday that any aid to the Big Three auto companies should not come without significant concessions.

“They’re going to have to restructure,” Mr. Obama said in an interview on “Meet the Press” on NBC. “And all their stakeholders are going to have restructure. Labor, management, shareholders, creditors — everybody is going to recognize that they have — they do not have a sustainable business model right now, and if they expect taxpayers to help in that adjustment process, then they can’t keep on putting off the kinds of changes that they, frankly, should have made 20 or 30 years ago.”

Still, the bill seemed likely to stop short of authorizing the broad powers that some lawmakers had urged to allow what could have amounted to an out-of-court bankruptcy proceeding, in which the automakers’ creditors could be forced to accept reduced payments, labor contracts could be rewritten and executives could be summarily dismissed.

Senator Christopher J. Dodd, the chairman of the banking committee that is drafting the legislation, called for the dismissal or resignation of Rick Wagoner, the chief executive of G.M., which is the most imperiled automaker.

“I think you’ve got to consider new leadership,” Mr. Dodd said Sunday in an interview on “Face the Nation” on CBS. “If you’re going to really restructure this, you’ve got to bring in a new team to do this, in my view.”

Asked specifically about Mr. Wagoner, Mr. Dodd said: “I think he has to move on.”

A G.M. spokesman, Steve Harris, said that the company was grateful for Mr. Dodd’s assistance and that it was willing to accept tough oversight, but that it retained confidence in Mr. Wagoner.

“We appreciate Senator Dodd’s support in trying to provide some assistance for the industry, but General Motors’ employees, dealers, suppliers and the G.M. board of directors feel strongly that Rick Wagoner is the right person to continue the transformation of the company that he began and has presented plans to Congress to continue and accelerate,” Mr. Harris said.

All of the proposals made clear that Congressional Democrats and the White House, furious over the need for another huge corporate bailout, intended to make the automakers pay a price far greater than the 5 percent interest on the emergency loans.

Congressional Democrats said that if any of the companies failed to meet government requirements by the end of March, the emergency loans could be called in for immediate repayment.

At the news conference in Chicago, Mr. Obama affirmed his position that it would be unacceptable to allow the auto industry to collapse. But using somewhat tougher language than he had before, he said it made “no sense for us to shovel more money into the problem” if the companies are unwilling to reorganize.

The Bush White House, in its proposal for an auto rescue plan, called for the creation of a “financial viability adviser” within the Commerce Department charged with negotiating a “long-term financial viability plan” for each of the auto companies.

If such a viability plan could not be negotiated, the White House proposal called for allowing the adviser to mandate one.

Democrats were weighing counterproposals calling for the creation of a full oversight board, made up of the secretaries of commerce, energy, labor, transportation and of the Treasury, and the administrator of the Environmental Protection Agency.

Many lawmakers in both parties say they are troubled by the Bush administration’s handling of the $700 billion financial system rescue, which Congress approved in October. Several lawmakers said they did not want to be pressured again into spending billions of taxpayer dollars to rescue private companies.

“I think Congress is tired of being stampeded,” Senator Jeff Sessions, Republican of Alabama, said on “Face the Nation.” “We haven’t even seen a bill yet. So I think there’s still a lot of skepticism out there.”

Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, on “Fox News Sunday” urged his Republican colleagues to filibuster a bailout bill. “I think this is a bridge loan to nowhere,” he said.

As lawmakers grappled with ways to aid the auto industry. Mr. Obama cautioned on “Meet the Press” that it was critical to think about both short- and long-term solutions to the nation’s economic woes. “Things are going to get worse before they get better,” Mr. Obama said.

David M. Herszenhorn reported from Washington, and Jackie Calmes from Chicago. Peter Baker and John M. Broder contributed reporting from Washington, and Bill Vlasic from Detroit.

Oversight Definition (answers.com):  In general usage, oversight usually means something that has been forgotten or overlooked. But in Congress it means just the opposite. When Congress performs its oversight functions, it is supervising, or looking over, the business of executive branch departments.

The Legislative Reorganization Act of 1946 assigned to each committee or subcommittee with jurisdiction over legislation relating to a particular agency, or with the power to appropriate its funds, the power to exercise “continuous watchfulness” over that agency. Through their oversight functions, congressional committees monitor how well agencies are administering the laws and if they are spending federal money properly. The General Accounting Office conducts regular audits of agency finances. Committees also call agency heads to testify during oversight hearings. By contrast to investigations, which are usually special hearings concerned with a single issue or event, oversight is a regular, year-to-year, ongoing procedure. Consequently, Congress’s oversight functions get less attention from the media than dosplashier investigations. (1946 and 1970)

It wasn’t so long ago that Barack Obama saw paths around many of the civil-liberty dilemmas that President Bush faced when he launched a war on al-Qaeda around the world. The freshman Senator from Illinois believed, and often claimed, that the White House could and should have avoided the shame of Guantánamo Bay, resisted the urge to engage in torture and shunned domestic eavesdropping.

Such easy exits may be harder to come by now that Obama is preparing to take over as Commander in Chief. Over the past eight years, the Bush Administration has erected a new array of military detention camps, interrogation methods and spy programs of questionable legality. During the presidential campaign, Obama promised to dismantle much of that apparatus, arguing that the Bush Administration’s walk on the dark side had eroded freedoms at home and damaged America’s reputation abroad. But doing so will take more time and prove more complicated than some of his supporters may realize.

In some ways, it makes political sense to go slowly. Ever since 9/11, Obama’s party has been squeamish about walking point on civil liberties out of fear that Republicans would wrap such a move around their necks at election time. And so, though civil libertarians may holler, the Obama team is likely to put the emphasis on national security as it begins to explore options for undoing the policies of the Bush-Cheney era. Here’s a look at what the new President may seek to change and what he may leave in place:

Torture

Once he is sworn in, Obama could simply order a government-wide halt to waterboarding and any other questionable interrogation techniques that have been judged legal during the past eight years. The Executive Order would have to be sweeping and reach deep into the government’s darker recesses. That’s because the Bush team has written so many legal memos okaying various techniques for interrogators working at a wide range of agencies. Some of those opinions have been disclosed publicly, but an unknown number remain classified. Obama will need to direct his Attorney General to issue new legal guidance that supersedes all those legal opinions, seen or unseen, if he hopes to prevent a return to such practices in the future. Former federal prosecutor and onetime trial judge Eric Holder, Obama’s pick to lead the effort as the top man in the Justice Department, earned a reputation as a relatively moderate legal thinker when serving there as a senior official in the Clinton Administration. That concerns some civil libertarians. “If you leave these on the books, you leave a bunch of loaded guns that future Presidents and agency heads can pull out and shoot when they want to,” says Anthony Romero, executive director of the American Civil Liberties Union.

Guantánamo

Obama could fulfill his campaign pledge to close Gitmo by simply issuing an Executive Order. But that would pose the question of what to do with the 225 suspected terrorists detained there who would suddenly have no home. If brought to the U.S. for trial, they would fall under constitutional guarantees of due process, which includes the right to confront their accuser and review all evidence against them. That may not fly with top terrorism hunters, who rely on informants and classified evidence. Because some of the evidence looks to have been gathered during harsh interrogations that may now be regarded as illegal and therefore inadmissible in court, building criminal cases against some detainees may be impossible. That raises the danger of avowed terrorists walking away from U.S. custody on a technicality. “These are enormously complicated problems,” says Benjamin Wittes, a Brookings Institution fellow. “It’s very easy to say, ‘Put everybody on trial.’ But we still haven’t figured out what our trial system looks like for these terrorism cases.”

And even if Gitmo is shuttered, that still leaves the matter of those militants captured more recently in the wars in Afghanistan, Iraq and elsewhere whom Obama says he intends to more fully prosecute. Such knotty questions have led some experts to bet that while he will scale Gitmo back as quickly as possible, Obama won’t fully close it in 2009. They point out that the Bush Administration has already quietly discharged some 500 of the 700 prisoners who have been held there.

Obama may opt to release dozens of others and insist that the remaining handful of high-profile cases be heard in either federal or military courts in the U.S. Already dozens of Guantánamo cases are moving through the federal court system following a pivotal Supreme Court ruling in June, and the Bush Administration is grappling with two separate rulings from federal judges ordering the release of 22 detainees.

Renditions and Secret Prisons

There is no doubt that the murkiest corner of the shadow war on terrorism has been the CIA’s kidnapping suspected terrorists and shipping them to secret prisons around the globe–where obeying the Geneva Conventions is more an exception than the rule–a practice known as rendition. Unfortunately, some of those snatched by CIA officers were innocent. German citizen Khaled el-Masri was one such victim. El-Masri was vacationing in Macedonia in December 2003 when authorities arrested him on wrongful suspicions that his passport was fake. A tragic case of mistaken identity then played out. El-Masri has the same name as an al-Qaeda operative being hunted at the time by CIA officials, and they took custody of el-Masri in Macedonia. Operatives from the agency beat and drugged el-Masri before whisking him to a secret prison in Afghanistan known as the “Salt Pit.” Eventually el-Masri’s captors realized they had the wrong man and let him go, dumping him on a mountain road in Albania.

No one knows how many suspected terrorists have been grabbed by the agency over the past eight years. Already, the CIA has transferred at least 14 detainees from secret prisons to Guantánamo. Dozens or even hundreds of others may still be imprisoned at secret CIA facilities around the world. As many as 20 may have been victims of mistaken identity, a study by the European Parliament found. As part of a broader pledge to end torture, Obama has vowed to halt the practice of rendition. But whether Obama plans to abandon the offshore facilities where interrogations have taken place remains unclear. If he does, any detainees remaining there would probably need to be relocated–possibly to Guantánamo, where their legal status would be examined anew.

Eavesdropping

Obama may leave intact, at least at the outset, one of the most controversial elements of Bush’s war on terrorism: a secret snooping program that spies on some Americans without benefit of a court order. Shortly after 9/11, the National Security Agency began intercepting communications to and from the U.S. by suspected terrorists and confederates in their network. The White House alerted key members of Congress about the program, in part because the Administration was skipping the long-standing practice of obtaining judicial approval in advance for surveillance, as prescribed by a 1974 law. When the program became public in 2005, Justice Department officials struggled to structure it to adhere more closely to existing law, but how much it was actually changed remains unclear. Not all civil libertarians were satisfied, and Obama vowed during the campaign to end warrantless wiretapping. But he is unlikely to halt the program outright; instead, he will probably ask a team of legal advisers to recommend a new approach.

Even after all these policies are modified or abandoned, Obama will face lingering questions about whether anyone should be punished for Bush-era excesses. The feds are now probing whether CIA officials knowingly destroyed tapes of illegal interrogations in 2005, and officials at Justice are looking into whether the department’s lawyers acted appropriately when they wrote legal opinions that approved waterboarding and other unconventional interrogation methods. A similar Justice Department review of attorney behavior regarding the domestic surveillance program is also under way.

Lawmakers from both parties have called for accountability in all these programs, but neither Obama nor top congressional Democrats have signaled much appetite for prosecuting Bush Administration figures once they are out of office. An incoming President will need every vote he can get on economic and energy matters, and is unlikely to spend political capital on a divisive effort to assess blame for the missteps of a previous Administration. But civil rights proponents say a full review may be the only way to ensure that such government abuses do not happen again. Vincent Warren, executive director of the Center for Constitutional Rights, says, “Criminal prosecution of some of the people involved does have a restorative aspect, and not just symbolically.” Obama will probably cooperate with congressional probes of Bush-era behavior. But he may find it trickier politically to go after officials who were, most likely, just following orders.

December 07, 2008

By George Will

WASHINGTON — Reactionary liberalism, the ideology of many Democrats, holds that inconvenient rights, such as secret ballots in unionization elections, should be repealed; that existing failures, such as GM, should be preserved; and, with special perversity, that repealed mistakes, such as the “fairness doctrine,” should be repeated. That Orwellian name was designed to disguise the doctrine’s use as the government’s instrument for preventing fair competition in the broadcasting of political commentary.

Because liberals have been even less successful in competing with conservatives on talk radio than Detroit has been in competing with its rivals, liberals are seeking intellectual protectionism in the form of regulations that suppress ideological rivals. If liberals advertise their illiberalism by reimposing the fairness doctrine, the Supreme Court might revisit its 1969 ruling that the fairness doctrine is constitutional. The court probably would dismay reactionary liberals by reversing that decision on the ground that the world has changed vastly, pertinently and for the better.

Until the Reagan administration extinguished it, the doctrine required broadcasters to devote reasonable time to fairly presenting all sides of any controversial issue discussed on the air. The government decided the meaning of the italicized words.

When government regulation of the content of broadcasts began in 1927, the supposed justification was the scarcity of radio spectrum. In 1928 and 1929, when Republicans ran Washington, a New York station owned by the Socialist Party was warned to show “due regard” for others’ opinions, and the government blocked the Chicago Federation of Labor’s attempted purchase of a station because all stations should serve “the general public.” In 1939, when Democrats ran Washington, the government conditioned renewal of one station’s license on that station’s promise to desist from anti-FDR editorials.

In 1969, when the Supreme Court declared the fairness doctrine constitutional, it probably did not know the Kennedy administration’s use of it, as one official described it: “Our massive strategy was to use the fairness doctrine to challenge and harass the right-wing broadcasters and hope that the challenges would be so costly to them that they would be inhibited and decide it was too expensive to continue.” Richard Nixon emulated this practice. In 1973, Supreme Court Justice William Douglas, a liberal, said the doctrine “has no place in our First Amendment regime” because it “enables administration after administration to toy with TV or radio.”

The court’s 1969 ruling relied heavily on the scarcity rationale. But Brian Anderson and Adam Thierer, in their book “A Manifesto for Media Freedom,” note that today there are about 14,000 radio stations, twice as many as in 1969, and 18.9 million subscribers to satellite radio, up 17 percent in 12 months, and 86 percent of households with either cable or satellite television receive an average of 102 of the 500 available channels. Because daily newspapers are much more scarce than are radio and television choices, should there be a fairness doctrine for The New York Times?

The 1969 court dismissed as “speculative” the possibility that the fairness doctrine would cause broadcasters to “eliminate coverage of controversial issues.” But the proper worry was that the doctrine would continue to stifle the flowering of controversy. A court that considers the doctrine today will note that whereas in 1980 there were fewer than 100 talk radio programs, today there are more than 1,500 news or talk radio stations.

Further subverting the “scarcity” rationale for government supervision of broadcast content, some liberals now say: The problem is not maldistribution of opinion and information, but too much of both. Until recently, liberals fretted that the media were homogenizing America into blandness. Now they say speech management by government is needed because of a different scarcity — the public’s attention, which supposedly is overloaded by today’s information cornucopia.

And these worrywarts say the proliferation of radio, cable, satellite broadcasting and Internet choices allows people to choose their own universe of commentary, which takes us far from the good old days when everyone had the communitarian delight of gathering around the cozy campfire of the NBC-ABC-CBS oligopoly. Being a liberal is exhausting when you must simultaneously argue for illiberal policies on the basis of dangerous scarcity and menacing abundance.

If reactionary liberals, unsatisfied with dominating the mainstream media, academia and Hollywood, were competitive on talk radio, they would be uninterested in reviving the fairness doctrine. Having so sullied liberalism’s name that they have taken to calling themselves progressives, liberals are now ruining the reputation of reactionaries, which really is unfair.

Program focuses on infrastructure, modernizing public buildings

Michael D. Shear
Washington Post
December 7, 2008

WASHINGTON – On the heels of more grim unemployment news, President-elect Barack Obama on Saturday offered the first glimpse of what would be the largest public works program since President Dwight D. Eisenhower created the federal interstate system in the 1950s.

Obama said the massive government spending program he proposes to lift the country out of economic recession will include a renewed effort to make public buildings energy-efficient, rebuild the nation’s highways, renovate aging schools and install computers in classrooms, extend high-speed Internet to underserved areas and modernize hospitals by giving them access to electronic medical records.

“We need to act with the urgency this moment demands to save or create at least 2 1/2 million jobs so that the nearly 2 million Americans who’ve lost them know that they have a future,” Obama said in his weekly address, broadcast on the radio and the Internet.

Obama offered few details and no cost estimate for the investment in public infrastructure. But it is intended to be part of a broader effort to stimulate economic activity that will also include tax cuts for middle-class Americans and direct aid to state governments to forestall layoffs as programs shrink.

House Speaker Nancy Pelosi, D-Calif., has called for spending $400 billion to $500 billion on the overall package. Some Senate Democrats and other economists have suggested spending even more – potentially $1 trillion – in the hope of jolting the economy into shape more quickly.

On Friday, the government reported that 533,000 jobs were eliminated in November, the largest one-month drop since 1974, raising unemployment to 6.7 percent. And last week, the National Bureau of Economic Research officially declared that the country has been in a recession since last December.

Republicans in the House oppose Obama’s plan, saying they favor a series of tax cuts that they say would put money in people’s pockets and encourage businesses to expand domestically.

Democrats said that even if a recovery act quickly passed the House early next year, it could take longer in the Senate, where fiscally conservative Republicans have expressed concern about adding to the soaring deficit with a massive new round of government spending. Even with at least 58 Democratic votes in the new Senate, Republicans could easily hold up a final vote, they said.

In his address, Obama offered the first outline of how he wants to direct the public works spending.

The largest share would go to roads and bridges and could be used to accelerate long-delayed repairs and expansions. Responding to concerns that new transportation money might be caught up in red tape at the state level, Obama said states must quickly invest in road and bridge construction and repair or lose the federal dollars.

Obama would also direct a “massive effort” to make federal buildings energy-efficient by replacing aging heating systems and installing efficient light bulbs. Obama said the effort to “green” the federal government would save taxpayers billions.

Much of the public works program would be aimed at improving technology. The government would pay for new computers in schools, new medical technology in hospitals and doctors’ offices, and a nationwide push to bring broadband to parts of the country that cannot yet access the Internet at high speeds.

This article was reported by Louis Uchitelle, Edmund L. Andrews and Stephen Labaton and written by Mr. Uchitelle.

The government’s report of a giant job loss in November, the biggest monthly decline in a generation, puts more pressure on Congress and the administration to move quickly on a stimulus package, mortgage relief and perhaps financial aid for Detroit’s big automakers.

The nation’s employers cut 533,000 jobs in November, the Bureau of Labor Statistics reported Friday.

Not since December 1974, toward the end of a severe recession, have so many jobs disappeared in a single month — and the current recession, far from ending, appears to be just gathering steam.

“We are caught in a downward spiral in which employment, incomes and spending are collapsing together,” said Nigel Gault, chief domestic economist for IHS Global Insight. “With private spending frozen, we have no choice but to rely on a stimulus package to revive the economy.”

The unemployment rate rose to 6.7 percent, up just two-tenths of a percentage point from October, but up six-tenths over the last three months. More than 420,000 men and women who had been working or seeking work in October left the labor force in November.

More significantly, the unemployment rate does not include those too discouraged to look for work any longer or those working fewer hours than they would like. Add those people to the roster of the unemployed, and the rate hit a record 12.5 percent in November, up 1.5 percentage points since September.

Noting that 1.9 million jobs have been lost since the start of the recession a year ago — two-thirds of them since September — President-elect Barack Obama invoked public spending as the best way to get a dead-in-the-water economy moving again. “This painful crisis,” he said in a statement, is an opportunity “to improve the lives of ordinary people by rebuilding roads and modernizing schools for our children,” and by investing in clean energy projects.

A goal of all this spending is to generate 2.5 million jobs over the next two years, he said, repeating an earlier pledge. Given the accelerating job losses, hitting that target would barely recover the jobs that have disappeared over the last year.

As part of Friday’s announcement, the government revised higher its estimates of jobs lost in September and October. Instead of 524,000 jobs disappearing in those months, 723,000 were lost, or a total of 1.2 million jobs in just three months. In all, jobs have been lost in each of the last 11 months.

“Obama is being deliberately unclear about those 2.5 million jobs,” said Robert Pollin, a University of Massachusetts economist. “He is not going to add 2.5 million on top of recovering the 1.9 million that have been lost so far this year.”

Despite the deterioration of the labor market, Democrats in Congress and a lame-duck president remain in a standoff over rescue measures.

At its core, the stalemate between the Republicans and the Democrats springs from fundamentally different views about the nature of the crisis and the role of government in resolving it. The White House contends that it has rightly focused on the credit and housing markets, while the Democrats see economic problems that can be resolved only through broader intervention.

New efforts to adopt a broad economic package are likely to wait until the new president takes office and Democrats have bigger majorities in Congress. That delay poses the possibility of a deeper recession, according to some experts.

President Bush, appearing in front of cameras on Friday morning at the White House, said he was “concerned about our workers who have lost jobs.” But he offered no hint of softening his opposition to either a stimulus package or a bailout of the automobile industry, saying that the measures already put in place by the Treasury Department and the Federal Reserve to ease credit problems would take time to work.

Shortly after his appearance, a White House spokesman, Scott Stanzel, dashed any expectation of a change in policy when he said that officials expected a stimulus package would “happen in the next administration.”

Support is building for a significant stimulus package as the economy slips into a deep recession. Most forecasters expect the gross domestic product to contract in the current fourth quarter at an annual rate of 4 or 5 percent, and continue to contract through most of next year, shrinking by 2 percent for all of 2009 — a contraction that has occurred only once since World War II: in 1982, a year of severe recession.

“If there was any doubt that a very large fiscal stimulus is required, then the numbers we have been getting recently should dispel that doubt,” said Jan Hatzius, chief domestic economist for Goldman Sachs. To offset the private sector retrenchment, he added, “we will need a stimulus package of $600 billion at an annual rate, or $1.2 trillion over two years.”

Economists and policy makers increasingly share his estimate of what it will take to revive America’s $14 trillion economy, with Democratic leaders talking recently about a stimulus package of $400 billion or more.

Though any broad economic package seems to be delayed, Democrats still had faint hopes of approving next week a rescue package for the car companies. Their goal would be to prevent far more rapid deterioration in the job market.

The latest job numbers were stark evidence of a breakdown in consumer spending and business investment since mid-September, when the Treasury Department and the Federal Reserve decided to let Lehman Brothers fail, delivering a shock to the financial sector. Almost simultaneously, stock prices began a free fall, undermining the wealth and the retirement accounts of millions of Americans.

“We have recorded the largest decline in consumer confidence in our history,” said Richard T. Curtin, director of the Reuters/University of Michigan Survey of Consumers, which started its polling in the 1950s.

Job loss has played a big role in this erosion, he acknowledged. But so have fewer hours of work, smaller bonuses, less overtime, falling home prices, falling stock prices and a drumbeat of job cut announcements — the most recent, this week, from big names like AT&T, Viacom, CVS, DuPont and the Avis Budget Group.

The Dow Jones industrial average, down more than 20 percent since mid-September, fell Friday morning in response to the November jobs report, but recovered later and gained 259.18 points, or 3 percent, by the end of trading, to close at 8,635.42.

With home prices still in decline, one in 10 mortgage holders was either delinquent on loans in September or in foreclosure, the Mortgage Bankers Association reported Friday. That was up from 9.2 percent in June and the highest percentage since the association began to collect this data 30 years ago.

The mortgage crisis makes lenders ever more reluctant to lend for the purchase of homes, autos and other big consumer items. In more normal times, lenders bundle these loans into securities and sell them. The buyers of these securities have disappeared in the current credit crisis, however, and the Federal Reserve is considering ways for lenders to borrow from the Fed, using the securities as collateral.

Jobs disappeared last month from every sector of the economy except health care and state government, which mainly added educators. The biggest losses were in manufacturing, construction, retailing — despite the first month of Christmas shopping — financial services, hotel and restaurant work and temporary workers. Over the course of the recession, 604,000 jobs — nearly one-third of the total — have been eliminated in manufacturing, and the Big Three automakers promise more layoffs to qualify for a federal bailout.

“Business shut down in November,” said Mark Zandi, chief economist at Moody’s Economy.com. “Businesses are in survival mode and are slashing jobs and investment to conserve cash. Unless credit starts flowing soon, big job losses will continue well into next year.”

The administration says its recent actions are beginning to make credit flow more easily. “We are pulling some very significant levers on the economy right now, through what we’re doing with Treasury and what we’re doing with the Fed,” said Tony Fratto, a White House spokesman.

Jack Healy contributed reporting.

December 04, 2008

By Froma Harrop

WASHINGTON, D.C. — America ended Prohibition 75 years ago this week. The ban on the sale of alcohol unleashed a crime wave, as gangsters fought over the illicit booze trade. It sure didn’t stop drinking. People turned to speakeasies and bathtub gin for their daily cocktail.

Prohibition — and the violence, corruption and health hazards that followed — lives on in its modern version, the so-called War on Drugs. Former law-enforcement officers gathered in Washington to draw the parallels. Their group, Law Enforcement Against Prohibition (LEAP), has called for nothing less than the legalization of drugs.

And before you say, “We can’t do that,” hear the officers out. They have an answer for every objection.

Doesn’t the War on Drugs take narcotics off the street, raising their price beyond most Americans’ means?

Obviously not. The retail price of cocaine is now about half what it was in 1990. When the value of something goes up, more people go into the business.

In some Dallas junior high schools, kids can buy two hits of “cheese” — a mix of Tylenol PM and heroin — for $5, Terry Nelson, a former U.S. Customs and Border Patrol officer, told me. Lunch costs more.

Wouldn’t legalizing drugs create new users? Not necessarily. LEAP wants drugs to be regulated like alcohol and cigarettes. Regulations are why it’s harder to buy alcohol or cigarettes in many schoolyards than drugs. By regulating the purity and strength of drugs, they become less deadly.

Isn’t drug addiction a scourge that tears families apart? Yes, it is, and so are arrests and incarceration and criminal records for kids caught smoking pot behind the bleachers. There are 2.1 million people in federal, state and local prisons, 1.7 million of them for non-violent drug offenses.

Removing the stigma of drug use lets addicts come out into the open for treatment. We have treatments for alcoholism, but we don’t ban alcohol.

LEAP’s members want to legalize drugs because they’re tired of being shot at in a war they can’t win. They’re tired of making new business for dealers every time they arrest a competitor. They are tired of busting people in the streets of America’s cities over an ounce of cocaine, while the Andean region produces over 1,000 tons of it a year. They’re tired of enriching terrorists.

“In 2009, the violence of al-Qaida will be financed by drug profits,” said Eric Sterling, head of the Criminal Justice Policy Foundation, which joined the call for legalization. As counsel to the House Judiciary Committee in the 1980s, Sterling helped write the anti-drug laws he now opposes.

Harvard economist Jeffrey Miron estimates that legalizing drugs would save federal, state and local governments $44 billion in enforcement costs. Governments could collect another $33 billion in revenues were they to tax drugs as heavily as alcohol and tobacco.

No one here likes drugs or advocates putting heroin on store shelves alongside ibuprofen and dental floss. Each state or county could set its own rules on who could buy which drugs and where and taxes levied — as they now do with alcohol.

What about taking gradual steps — say, starting with marijuana. And couldn’t we first try decriminalization — leaving users alone but still arresting dealers? Those were my questions.

The LEAP people want the laws gone, period. “We’re whole hog on it,” Nelson said. Keeping the sale of drugs illegal, he said, “doesn’t take the cartels out of it.”

Ending this “war” won’t be easy. Too many police, drug agents, bureaucrats, lawyers, judges, prison guards and sprayers of poppy fields have a stake in it. But Prohibition was repealed once. Perhaps it can happen again.

“The American people made Ford Motor Company what it is. We have nothing the public did not give us. No surplus exists for personal benefit — every surplus is provided for future use. The future is here, and we are going to do our utmost — risk everything, if necessary — to use this surplus which the public, through its dealings with us, has provided, to see if we cannot make what the country needs most — work, jobs.”
— Henry Ford, Feb. 11, 1932

This is the thanks you get for creating the middle class, Henry. In the throes of the biggest auto swoon since 1931, the headmen of Detroit go hat in hand to Washington to try to keep their once mighty industry upright for a couple of months and are treated as if they had invented the four-wheel-drive subprime mortgage. AIG torpedoes the entire economy and gets a $150 billion handout; Citigroup takes risks no sane manufacturing company would even contemplate and is rewarded with a $20 billion federal bailout. And the car guys?

The Detroit Three recently presented detailed restructuring plans to Congress — an application for loans and credit lines to tide them over until the economy rebounds. U.S. auto sales were down more than 30% in October — even Toyota wasn’t spared. Detroit wants $34 billion to shelter 3 million jobs and $300 billion worth of business. The first time the companies came calling, on Nov. 19 and 20, Congress blew a radiator. “Even though all Americans want this industry to succeed, I cannot support a plan to spend taxpayer money to bail them out” is the way Spencer Bachus, the ranking Republican on the Committee on Financial Services, got the House hearings going. The incoming Administration is not holding out much hope that Congress can find a solution in the coming weeks. Instead, it is looking at what options — and pots of money — will be available once Barack Obama takes office.

What the CEOs of the Big Three have discovered is a nation suffering Detroit fatigue. Americans may not know squat about collateralized debt obligations, but as a nation we have been defined by car worship. We are angry at our car gods — who for too many years made too many clunkers — because we have owned the Dodge Aries K cars, Mercury Montereys and Chevy Chev-ettes they produced. So the citizens and the pols are irked to have to throw these companies a lifeline, even though they probably should do it for the good of the economy. An out-of-business GM (or even a bankrupt, reorganized one) is more than just a dead factory here and there. “There are real risks of cascading bankruptcy and then supply-side seizures,” Columbia economist Jeffrey Sachs warned Congress, meaning that the ability of all car companies simply to make cars would be in jeopardy. The negative feedback in the supply chain would hurt partsmakers and dealers and even extend to retailers, restaurants and banks. But others argue that bankruptcy is exactly what GM needs, despite the dislocations.

GM, which is burning $2 billion a month, requested $18 billion in loans and credit lines — $4 billion for December. For that money, it will slash the number of plants it runs, the number of brands it makes and the number of dealers who sell them. It proposed cutting its hourly manufacturing costs in half. CEO Rick Wagoner agreed to work for $1 a year. GM’s business is going down fast because consumers are already shying away from a potentially bankrupt company — which is part of GM’s argument for immediate funding.

Ford, which is in much better fiscal shape, asked for a standby credit line of $9 billion. The privately held Chrysler is going to need a $7 billion bridge loan, and it’s willing to give equity to the government.

Importantly, all three companies promised to make money by 2012, even in a worst-case scenario of selling just 12 million cars and light trucks annually — 4 million fewer than in 2007. The key is a revamped portfolio more heavily weighted to smaller cars and crossovers, as well as to hybrids and electrics that are far more efficient than the current fleet. That’s crucial because Detroit currently loses money making cars in North America. You see the problem.

Most of these plans were on the drawing board before the global financial collapse made the situation more dire. This, in essence, is a last-chance opportunity. If Congress provides cover, the Detroit Three can try to rescale their manufacturing capacity to their respective market shares — or even below. GM, for instance, has lost 7 market-share points, falling to 22%, in the past 10 years. It plans to slash costs by an additional $7 billion by 2012. “It’s all about survival,” says Van Conway of Conway MacKenzie & Dunleavy, a crisis-management and turnaround firm in Birmingham, Mich.

(See the 50 Worst Cars of All-Time here.)

(See TIME’s Pictures of the Week.)

Resizing the business will alter the number of nameplates that the Detroit Three market and the number of dealers that sell them. GM will sell or close Saturn. Pontiac and Saab could end up joining Oldsmobile and Plymouth in the hood-ornament graveyard because the cost of supporting a brand with a small market share doesn’t make sense, nor does maintaining a dealership network created for an era when Chevy and Buick could support separate distribution systems. GM plans to reduce its dealer count 27%, to 4,700. “Certainly, having seven or eight brands for 25% of the market is far more than you need,” says Ron Harbour, the partner in charge of consultancy Oliver Wyman’s North American automotive practice.

The Detroit Three, in fact, may have to shrink to two. Chrysler, which burned through $3 billion in cash in its last quarter and has $6.1 billion left, is looking for more partners like Nissan, which is already contracted to build a small car for the company. Chrysler’s owner — Cerberus Capital Management, a New York City private-equity firm — got a lemon when it bought 80% of the company from Daimler for $7.2 billion last year. A merger could be a way out.

End of an Era
No matter what congress or President Obama does, there is one aspect of the industry that is beyond rescue. The Detroit of the American Dream, the Benevolent Manufacturing State — the big-metal, Big Labor, big-brother, bigger-than-its-britches Detroit — is deader than Studebaker.

The Benevolent Manufacturing State was the self-funded, full-employment, womb-to-tomb society — for autoworkers, auto executives, their families and their communities — that Henry Ford began in 1914 when he hiked the prevailing $3-a-day wage to $5. “Fordism” outraged capitalists; Ford viewed it as a way to make cars affordable to working people. His people. The industry sputtered during the Depression, an era that gave rise to the unions, but was revived by wartime production as Detroit’s manufacturing capacity became a vital weapon in the Allies’ arsenal. Detroit reshaped America, spurring a great migration from the South with the prospect of fair employment for blacks.

The Benevolent Manufacturing State achieved its full glory in the postwar period, a largely supply-driven era when Detroit could sell almost everything it made and could afford to give the United Auto Workers (UAW) most of what it wanted. From Linden, N.J., to Lorain, Ohio, to Long Beach, Calif., to be an autoworker was to have it made; to be an auto executive was to have made it. Detroit, says John Plant, the thoughtful CEO of partsmaker TRW, was about more than just industry: “It’s the largest experiment of social re-engineering that any country has ever undertaken.”

The death throes of the Benevolent Manufacturing State, however, have been costly. GM alone has paid out $103 billion in pension and retiree-health-care costs over the past 15 years. “The legacy costs were designed in an era when people retired at 65 and died at 66. We weren’t wrong to give it to them 30 years ago. Now they retire early and live longer,” says Conway.

What is particularly ironic about the Big Three’s situation is that the companies are now as near to their long-sought goal of parity with the Japanese firms Honda and Toyota as they are to collapse. In the past couple of years, Detroit has closed the quality gap. Its cars are competitive on engines and drivetrains and fits and finishes. Some top-class products score well with car rater J.D. Power, such as the Cadillac CTS and Ford’s new F-150. “What exposes us to failure now is not our product lineup or business plan or our long-term strategy,” GM’s Wagoner told Congress. “What exposes us to failure now is the global financial crisis.”

Next year, workers at Ford plants will earn an average $53 an hour with benefits, the result of a breakthrough industry agreement worked out with the UAW in 2007. That’s close to the $49 an hour that workers at the transplants average and far below the $71 an hour with benefits that was the old UAW wage, and that was cited by Alabama Senator Richard Shelby as a reason to oppose any bailout. And the cost differential on enginemaking between Detroit and the transplants will narrow to a couple of dollars by 2011. “You want to just choke these guys [in Congress] and take them through the 60 plants that I’ve been through and see what I’ve seen,” says Harbour.

But timing is everything. So why did it take Detroit 30 years to catch up? “Either the crisis isn’t big enough or the vision isn’t persuasive enough,” says John MacDuffie, a manufacturing expert at the University of Pennsylvania’s Wharton School of Business. Instead, during those years, the domestic auto industry has been a slow leak, skidding from one restructuring to the next, chasing its declining market share as its costs have inflated.

How the Big Three Blew It
Of all Detroit’s failures — the failure to master small cars, failure to cut costs, failure to get tough with the UAW, failure to improve fuel efficiency — the failure to learn, says MacDuffie, is perhaps its worst sin.

Experts point to GM’s interaction with Toyota at the New United Motor Manufacturing Inc. (NUMMI) plant in Fremont, Calif., as emblematic of the industry’s learning disability. NUMMI was established in 1984 as a joint venture between the two companies, using GM’s plant, the Toyota production system and the UAW workers who were already there. The plant had been one of GM’s worst; the Toyota system made it one of GM’s best.

Detroiters made the pilgrimage to Fremont en masse to see the miracle of NUMMI. Some dismissed what should have become a model for the entire industry. True, the technology wasn’t that innovative. But Toyota had made the workforce integral to improving the system. Workers were not mere labor inputs. GM had no problem understanding the just-in-time inventory system Toyota used, but executing it required a buy-in from the shop floor so that everyone was dedicated to improvement. The Toyota system, says MacDuffie, “relies on contributions from employees. It feels vulnerable, but your willingness to be open to that vulnerability is what helps you make it work.” In the 1980s and part of the ’90s, the top-down culture of the Big Three could not absorb that kind of deep trust.

MIT senior lecturer Steven Spear, a lean-manufacturing specialist who has worked on production lines at both a Detroit Three and a Toyota plant, says the problem worsened over the years as products and manufacturing inevitably got more sophisticated. Merely upgrading a Toyota, he says, requires 300 man-years of engineering. No single manager can ever understand it. “Figuring out products, markets, customers, designs, systems — what’s inherent about anything complex is that it becomes impossible. You can’t design it perfectly,” he says. What matters, he argues, is swarming problems from every direction to create high-speed, low-cost discovery and learning. And when you extend that open approach to suppliers, the path to lower-cost, better-functioning parts becomes easier too.

Management in a Mess
Detroit’s corporate culture is obviously complicit in the industry’s deterioration, just as it was guilty of creating an unparalleled manufacturing system decades earlier. The Detroit approach has been plan-command-control, stemming from that original control freak, Henry Ford. At GM, a management hierarchy that had been created by GM’s master planner, Alfred P. Sloan, in the ’20s — GM’s first and most successful restructuring — was still functioning in the ’80s. Management’s job was to create the products, design the production system and provide solutions if there were problems. Everyone else followed orders.

Failing to cure themselves of the Not Invented Here disease, Detroit’s bosses resorted to Hail Mary attempts to fix what were long-term issues. “They were constantly looking at buy, sell, hire, fire, looking to be rescued from their predicament,” says Spear. On the buy side, GM CEO Roger Smith acquired Hughes Aircraft, EDS and a 50% stake in Saab. His successors bought the Hummer, 20% of Korea-owned Suzuki and 20% of Fiat with the obligation to buy it or pay to get rid of it. (The latter course was chosen, at a cost of $2 billion.)

Ford’s owners have always had a difficult relationship with the hired help. Henry Ford II fired everybody, says Noel Tichy, a professor at the University of Michigan’s business school — including Lee Iacocca. Jacques Nasser, named CEO in 1999 to reinvent Ford, bought Volvo and Land Rover to create a luxury portfolio; he saw Ford as more than an auto company and tried to overhaul the culture. He was ousted in 2001 by Bill Ford Jr. — great-grandson of Henry — who took back the wheel for a couple of years.

The price of halfway restructurings was steep. In 1985, GM aped Japan’s practice of building global cars — the idea was to share chassis and parts across brands, a strategy that made sense at the engineering level. At the consumer level, it was a disaster. Internal clashes for control removed imagination from design, resulting in look-alike Buicks, Oldsmobiles and Pontiacs. Sales declined; cue another restructuring. The Germans, who have their own auto culture, were no match for Chrysler after they bought the company in 1998. No wonder they gave it back.

Yet there were the occasional hits that demonstrated Detroit’s deep pedigree in engineering and design. Chrysler, desperately surviving on a government-guaranteed loan, created the minivan in 1984. That same year, it launched the first modern sport-utility vehicle, the Jeep Cherokee. Throughout it all, Detroit kept its dominance of the hugely important pickup-truck market — and does so to this day.

But overall, if you build the cars you can make rather than the cars the public truly desires, you have to price them that way and use rebates to move the metal off the lots. “They are building cars that they don’t want to build. They have to build them because they have a fixed cost structure to amortize,” says Nick Gidwani, a former auto-industry investment banker with Sankaty Advisors and now head of the startup auto-sales website CarZen. Particularly after the post-9/11 sales slump, Detroit got addicted to this strategy and used it to move plenty of SUVs.

The ensuing rise in gas prices and drop in sales underscored another weakness. Although gas-eating SUVs found a sweet spot in the U.S., for Detroit to assume a world in which gas prices would remain below $2 a gal. was asinine. In Europe, gas had long sold for more than $5 a gal., and tax policy ensured that it would stay there; the growing BRIC countries — Brazil, Russia, India, China — were driving up demand. Detroit’s response was to lobby furiously against increasing fuel-economy standards instead of building more-efficient SUVs.

What’s Next
The irony about being called on the carpet in Washington is that Detroit actually has a fairly clear idea of where it’s going. Ford, for instance, under the leadership of Alan Mulally, has rationalized the company, dumping Jaguar, Aston Martin, Land Rover and some of its stake in Mazda. Volvo may be next. “We have streamlined all of the brands to focus on Ford,” he says. Ford wants to be able to create small- and medium-size cars around the world from a single global blueprint. The initial product of the One Ford strategy is the much anticipated Fiesta. It was designed in Europe and is due to arrive in the U.S. in late 2009 substantially unchanged. “Ford can win market share in small cars again,” says Harbour. There’s also a new Fusion and a new Taurus, long overdue, and upgrades to other models. As part of its 2006 strategy, called “The Way Forward,” the company has already closed 17 plants and shucked 51,000 workers.

Chrysler is a bit of a mystery. CEO Robert Nardelli has been somewhat scant on details for new products other than announcing an electric-vehicle platform that has so far not impressed anybody. No one would be surprised if Cerberus, Chrysler’s owner, announced some kind of partnership or merger before the year is out.

As for GM, its current crop of autos, including the revived Malibu, is the strongest of the Detroit Three’s fleets in North America, but it is still truck-heavy. Globally, GM is expanding in Russia and China; it is a solid performer in Europe and South America. With the advent of the Chevy Volt in 2010, the company will be in a position to lead the industry into hybrid-electric and then fully electric vehicles. “There’s enough good product in the pipeline,” says MacDuffie. “Judged against the past, it’s really impressive.”

The most important issue is cutting Detroit’s output to an appropriate level. “What we would tell a client who went from 30% to 20% [share] and they say, ‘We’re modeling now at 20%,’ I’d say, ‘Let’s model it at 16%,’” says Conway. Scaling below capacity doesn’t mean you give up on 20% or even 22% share — you can add shifts, for instance, to boost output.

Reducing capacity could also go a long way toward solving Detroit’s revenue problem. Between Detroit and the transplants, there are around 17 million units of manufacturing capacity in the U.S. In 2007 vehicle sales hit 16 million, but about 2 million of those were driven by the combination of easy credit and discount pricing. In a normal economy, the true size of the business may be closer to 15 million units. The Detroit Three simply have to generate more revenue per car and, not incidentally, a profit. Right now, the revenue gap per car is $4,000 vs. Toyota.

The competition hasn’t stood still, of course. Japanese and German makers continue to improve their products, and the U.S. customers they have won over will be hard for the home team to get back. Even as the Big Three have closed the distance over manufacturing, drivetrain and other engineering issues, another has opened up. The transplants have moved on to the sensual: the quality of materials, the look and touch of dashboard knobs, the sound a door makes, the feel of seats. Craftsmanship is the new point of difference. “The Japanese have figured out, How do we reduce friction?” notes Gidwani. “Now they are going to have to catch them in a new area.”

The real catch, though, is whether American taxpayers are willing to give the Big Three the chance.

December 04, 2008

By Carl Leubsdorf

Tuesday’s Senate runoff victory in Georgia gave Republicans a small bright spot after their devastating electoral setbacks.

But there is probably more bravado than reality in Sen. Saxby Chambliss’ claim that his triumph will ensure a “balance of government” when President-elect Barack Obama take office.

The claim stems from the fact that, without Georgia and the unresolved Senate race in Minnesota, the Democrats remain two seats short of the 60 needed to prevent procedural roadblocks by a united minority.

But the political climate and economic crisis will make it far harder for Mr. Obama’s opponents to employ the obstructionist tactics they used so successfully when Democrats enjoyed only a modest margin the past two years and the GOP held the White House.

Even Minority Leader Mitch McConnell is talking more of using the GOP’s 41 seats to influence the new president’s course, rather than block it. In fact, all signs are that the Democrats have enough votes to help Mr. Obama pass both a massive economic stimulus package and the energy and health insurance measures he pledged in the campaign.

In the House, a Democratic majority of nearly 260 members should enable the new administration to prevail consistently, even if it occasionally loses some of the more conservative Democrats.

And while Senate rules permit greater resistance, reality suggests it won’t be that easy. A main reason is that the 41 or 42 GOP senators include hard-line conservatives from heavily Republican states in the South and moderates from predominantly Democratic states in the Northeast.

At least for the first year or two, it seems unlikely that moderates like Maine’s Olympia Snowe and Susan Collins, Ohio’s George Voinovich, Minnesota’s Norm Coleman and Pennsylvania’s Arlen Specter would try to prevent votes on major Obama proposals and nominations.

Other Republicans – like Texas’ Kay Bailey Hutchison and, more importantly, Arizona’s John McCain – are likely to reflect public disdain for seeking political gain with confrontational tactics.

Interestingly, Sen. Judd Gregg of New Hampshire, the only remaining major GOP officeholder in a state once solidly Republican, has seconded the Democratic call for a large-scale stimulus program.

It’s no coincidence that he’s up for re-election in 2010.

Meanwhile, Mr. Obama has shrewdly tapped into the public mood by stressing repeatedly the need to reach across party lines. Other presidents have done so before, only to fall victim to excessive partisanship on their side or from their opposition. This time, the political fallout from such tactics might be more severe.

The question is how long Mr. Obama can benefit from such a mood. Traditionally, presidents are lucky if their honeymoons last until the August congressional recess of their first year.

Democratic pollster Peter Hart conducted a recent focus group for the University of Pennsylvania’s Annenberg Public Policy Center among “swing” voters who backed Mr. Obama. Results suggest the economic crisis may give him more time.

These voters, Mr. Hart concluded, “recognize the mess he is inheriting, and their expectations are reasonable and not excessive. The judgments about him are more likely to be based on the way he approaches the problems and not by instantaneous results.”

Ultimately, the natural political order will reassert itself. Mr. Obama’s public support may fade; Republicans will seek ways to revive their fortunes.

By the time he enters his third year in 2011, he may need 60 Senate votes more than now. But while the opposition party usually rebounds in the next midterm election, more 2010 Senate races loom on Democratic than Republican turf.

Sen. John Cornyn, the new chairman of the National Republican Senatorial Committee, will have his hands full trying to stem the Democratic tide, especially if Mr. Obama retains popular support.

Until then, Tuesday’s GOP victory in Georgia seems likely to be seen as more significant in underscoring the party’s hold on Dixie than in erecting a barrier to the new administration.

More on RCP: Austin, TX Aims to Be Green Energy Capital

Fear fuels dow’s plunge, could extend downturn

Federal Reserve Chairman Ben Bernanke tells business leaders in Austin, Texas, on Monday he will use the central bank’s resources to repair the credit markets. Asian markets fall on news TOKYO – Asian stock markets tumbled today following massive overnight losses on Wall Street and dismal economic numbers out of the U.S., a crucial export market. Japan’s Nikkei 225 stock average shed 4.6 percent to 8,011.69, and Hong Kong’s Hang Seng index lost 4.9 percent to 13,419.40. Global markets had rallied last week, but any nascent investor confidence quickly wilted after grim U.S. economic data sent the Dow Jones industrial average plummeting nearly 680 points. Australia’s central bank slashed its key interest rate Monday a full percentage point to 4.25 percent as it tries to prevent the economy from contracting. Markets in the Philippines, Taiwan and South Korea also dropped. Associated Press

Maura Reynolds
Los Angeles Times
December 2, 2008

WASHINGTON – The economy’s yearlong downturn, officially declared a recession Monday, could last well into 2009 or beyond, challenging the U.S. government to devise new responses as traditional methods show limited results.

The National Bureau of Economic Research, the private body charged with determining the onset of a recession as well as its end, said Monday that the current downturn met its definition of a recession: “a significant decline in economic activity spread across the economy, lasting more than a few months.”

The downturn began, the bureau said, at the end of 2007 as businesses started slashing jobs – which they have done every month in 2008.

The group did not say how long the recession might last, but the stock market reflected widespread pessimism. After a widely followed index of U.S. manufacturing activity fell to its lowest level in 26 years, the Dow Jones industrial average tumbled 680 points, or 7.7 percent, and the Standard & Poor’s 500 index plunged 8.9 percent.

“This downturn promises to be the worst since the Great Depression in the 1930s,” said Joshua Shapiro, chief U.S. economist at the forecasting company MFR Inc. “We’ve only just started. I can’t see bottoming out until sometime in 2010.”

The slide in stock prices ended a five-day rally, the market’s strongest in seven decades, built on hope that the incoming administration of President-elect Barack Obama could turn the economy around.

A psychology of fear has gripped businesses and consumers and is likely to prolong the recession, said Lee Ohanian, a professor of economics at the University of California, Los Angeles.

“This one has a potential to be longer and deeper than other postwar depressions,” he said. “People are very, very scared and worried. In my opinion the government has created much more uncertainty about the economy than it should have done. So it’s really hard to tell how long this recession could last.”

Government officials reiterated that they would do what was required to turn the economy around.

“While we are making progress, the journey ahead will continue to be a difficult one,” Treasury Secretary Henry Paulson said.

Federal Reserve Chairman Ben Bernanke, addressing members of the Austin Chamber of Commerce in Texas, pledged to use the central bank’s full resources to repair the credit markets and prime the economy.

But “despite the efforts of the Federal Reserve and other policymakers,” he said, “the U.S. economy remains under considerable stress.”

The National Bureau of Economic Research, a nonprofit, nonpartisan research group, was founded in 1920 to study the economy and formally designate each business cycle’s “peak” – when an economic expansion gives way to a recession – as well as each “trough,” when growth resumes after a downturn.

Since 1978, the group has had a special committee in charge of the designation process.

Although a recession is commonly defined as two consecutive quarters of declines in the gross domestic product – a measure of all goods and services produced by the economy – the current downturn doesn’t yet meet that yardstick.

The GDP shrank in this year’s third quarter at a 0.5 percent annual rate but showed growth of 2.8 percent in the second quarter and 0.9 percent in the first quarter.

The bureau, however, uses a variety of indicators, including monthly measures of employment, industrial production and personal income.

Job losses appeared to weigh most heavily. Although the economy normally must create about 100,000 jobs a month to keep pace with population growth, it has lost an average of 120,000 jobs a month in 2008 through October. The unemployment rate stood at 6.5 percent in October, and many economists expect it to climb above 8 percent in 2009.

“The committee found that economic activity measured by production was close to flat from roughly September 2007 to roughly June 2008, while activity measured by employment reached a clear peak in December 2007,” the bureau said.

The organization’s economists “judged that the weight of the evidence” suggested that the economy peaked – and the recession began – in December 2007.