Europe’s $1 Trillion Bailout
Europe’s $1 Trillion Bailout
Can Germany Keep the EU Afloat?
With billions of dollars pledged to keep Greece and the entire eurozone from drowning financially, Germany has been pushed to take a leading role in the future of the EU.
Euro bailout: German Chancellor Angela Merkel, right, and Vice Chancellor and Foreign Minister Guido Westerwelle address a news conference after a special German cabinet meeting at the Chancellery in Berlin (May 3, 2010). Ms. Merkel and Mr. Westerwelle announced that Germany would support the $1 trillion European Union financial aid package.
Source: Andreas Rentz/Getty ImagesNormally, the sun-drenched streets of Athens in late spring would be filled with visitors arriving by cruise ship to admire ancient ruins, stroll city streets and beautiful sandy beaches, or browse shops and partake of the local cuisine.
Instead, usually bustling hotels remain largely vacant as a result of the widely reported escalating violence that has overtaken the nation during its prime tourism season.
Frustrated by the devastated economy and newly accepted austerity measures, gas-masked Greek citizens armed with sticks and hurling Molotov cocktails at cars and buildings roam the streets, smashing shop windows and torching businesses. An angry mob of tens of thousands even set fire to a bank, killing three employees and seriously injuring four others, including a police officer who protestors fire-bombed and left burning in the street.
Because of its rapidly deteriorating economy and inability to meet ballooning financial obligations, Greece hesitantly struck a deal with the European Union and International Monetary Fund (IMF) for a massive $1 trillion bailout. The three-year Financial Stabilization Mechanism shores up $670 billion from the EU, along with $370 billion from the IMF for Greece as well as other eurozone countries. Member-states that fail to curb their spending habits under the rescue program face debt restructuring, or expulsion from the eurozone.
In an unprecedented additional move, the European Central Bank announced it would buy faltering states’ private and government debt in an attempt to calm markets by reassuring investors. Germany bought the largest share—$652 billion.
European officials are nervously aware that the problem could spread to Portugal, Italy, Ireland and Spain, which could destabilize the euro and world markets while tainting the European Union’s prestige.
As EU power brokers, mainly France and Germany, scramble to avert an all-out debt crisis within member-states, leaders are between a rock and a hard place—forced to weigh financial self-preservation against sustaining dependent nations. In effect, the trillion-dollar stopgap seemingly puts a band-aid on a gaping wound of rampant overspending.
During a Confederation of German Trade Unions (ETUC) conference in Berlin, The Associated Press quoted German Chancellor Angela Merkel as saying, “We didn’t do more than buy time to get the differences in competitiveness and budget deficits of euro zone countries in order.”
Yet, if billions of dollars are only a makeshift fix, what further drastic measures will EU member-countries have to take to survive future crises?
Reluctant Involvement
The concerted effort among member-states in the European Union has not been without problems. Analysts fear the trillion-dollar safety net may fail to help geographically disadvantaged countries with non-competitive economies to meet the zone’s stringent monetary requirements.
Despite their cooperation in rescue efforts, the Netherlands, Austria and Germany are not pleased with bailouts or debt restructuring. The German populace in particular resents being Europe’s “cash cow” for fiscally irresponsible and economically uncompetitive countries. A recent poll revealed that 59 percent of Germans think Berlin should return to its pre-euro currency and its own central bank—the well-established deutschmark and Bundesbank—and one in every three Germans believes the euro will not survive the next decade.
According to analysts, however, the economic and political cost of reconstituting a new European Union based on Germany’s historically stable currency would pale in comparison to the future burden of financing the eurozone’s $3.8 trillion debt load. So it appears Germany may well have to bear with the struggling union.
Still, the German economic powerhouse is taking a hard-line stance against paying for others’ mistakes. In an interview with the Berlin newspaper Bild am Sonntag, Chancellor Merkel said that in the future countries should face sanctions and be stripped of EU voting rights if they fail to adhere to euro Growth and Stability Pact rules on debt. During another interview, she said they should face expulsion from the union itself.
Upset with Germany’s reluctance to help Greece, French President Nicolas Sarkozy threatened to leave the eurozone if Berlin refused to stay the course with its commitments pertaining to the bailout.
“History tells us that one way or another, Germany is going to have to open its wallet to end this crisis, as it has so often in the past,” a BusinessWeek editorial stated. “But simply handing out money won’t fix the imbalances that caused the crisis. For years, skeptics in the U.S. and Britain have argued that the euro experiment was doomed to fail. Now even true believers are concerned that something must be done, and soon, to relieve the mounting stresses on the system.”
After the EU passed the mammoth rescue package to prevent a financial pandemic, ripples of fear and waning investor confidence continued to spread through world markets. With the euro at a new four-year low and moving toward parity with the American dollar, investors globally are seeking more secure markets—stalling growth for the eurozone.
“It’s not just a European problem, it’s the U.S., Japan and the U.K. right now,” Ian Kelson, a bond fund manager in London with T. Rowe Price said in The New York Times. “It’s across the board.”
Solidarity Needed
But it is not just political leaders and analysts that are concerned about the far-reaching implications of Europe’s financial turmoil.
With the deepening global economic meltdown, Pope Benedict XVI continues to emphasize a need for a change in approach to government and the economy.
“The crisis and the difficulties that international relations, states, society and the economy are currently going through…are largely due to a lack of trust and of adequate aspiration toward solidarity,” he said to members of the Vatican foundation Centesimus Annus, a group formed to promote the church’s social doctrine (AP).
In early May, at the 16th Pontifical Academy of Social Sciences conference, themed “Crisis in a Global Economy – Re-planning the Journey,” the pope said the current economic system “driven by self-interest and profit-seeking” is incapable of regulating itself “apart from public intervention and the support of internalized moral standards” (Zenit).
The conference title came from a line in the pope’s 2009 encyclical letter, “Charity in Truth,” in which Pope Benedict stated, “The current [financial] crisis obliges us to re-plan our journey, to set ourselves new rules and to discover new forms of commitment, to build on positive experiences and to reject negative ones.”
In the same letter, Pope Benedict described a solution: “In the face of the unrelenting growth of global interdependence, there is a strongly felt need, even in the midst of a global recession, for a reform of the United Nations Organization, and likewise of economic institutions and international finance, so that the concept of the family of nations can acquire real teeth.”
In the past, the Vatican has repeatedly played a role in helping unify Europe—often with Germany at the helm—and will inevitably do so again.
To understand more about the historical role of religion in European politics and how it will again influence the continent, read “‘A True World Political Authority’...With ‘Real Teeth’ – History and Prophecy Align.”
No Jobs
No Jobs
Everyone knows that the United States is bleeding jobs. According to one new study, the private sector in the United States has lost 10.5 million jobs since 2007. The U.S. economy lost 125,000 more jobs during the month of June. Approximately a million frustrated American workers have simply dropped out of the employment market altogether over the past two months. But the question not enough people are asking is why so many jobs are being lost. Yes, the large global corporations have been sending millions of jobs overseas where labor is far, far cheaper. And yes, the U.S. government has accumulated so much debt that it is absolutely suffocating the U.S. economy. But there is another very important factor that has been largely overlooked. Traditionally, about 75 percent of all new jobs are created by small businesses. But today, hundreds of thousands of small businesses are being strangled out of existence by all of the oppressive taxes, fees, rules, regulations, paperwork and demands that government keeps imposing on them. In such a repressive environment, it is getting close to impossible for small businesses to thrive, and if our small businesses can't succeed, then we simply are not going to see a lot of jobs being created.
You see, the truth is that over the past several decades the game has become dramatically stacked in favor of large businesses. Big corporations have the money to lobby Congress and other governmental institutions, they get almost all the tax breaks and they are the only ones who get bailouts. They even "help" write legislation on the federal level.
Many times large corporations will even lobby for more regulations for their own industry because they know that they can handle all of the rules and paperwork far easier than their smaller competitors can. After all, a large corporation with an accounting department can easily handle filling out a few thousand more forms, but for a small business with only a handful of employees that kind of paperwork is a major logistical nightmare.
When it comes to hiring new employees, the federal government has made the process so complicated and so expensive for small businesses that it is hardly worth it anymore. Things have gotten so bad that more small businesses than ever are only hiring part-time workers or independent contractors.
So what we actually have now is a situation where small businesses have lots of incentives not to hire more workers, and if they really do need some extra help the rules make it much more profitable to do whatever you can to keep from bringing people on as full-time employees.
In a recent article for the Las Vegas Review-Journal, Wayne Allyn Root described what he is hearing from his friends who are small business owners....
I've polled all my friends who own small businesses -- many of them in the Internet and high-tech fields. They all agree that in this new Obama world of high business taxes, income taxes, payroll taxes, capital gains taxes, and workers compensation taxes, the key to success is to avoid employees. The only way to survive as a business owner today is by keeping the payroll very low and by hiring only independent contractors or part-time employees provided by temp agencies.
Can the U.S. economy thrive in such an environment?
Of course not.
Small businesses are slowly being strangled out of existence.
Unless something changes quickly, small businesses are going to continue looking for ways to shed employees rather than hire them.
In the article referenced above, Wayne Allyn Root explained why this is true....
My small business-owning friends aren't creating one job. Not one. They are shedding jobs. They are learning to do more with fewer employees. They are creating high-tech businesses that don't need employees. And many business owners are making plans to leave the country. In a high-tech world where businesses can be run from anywhere, Obama has a problem. His one-trick pony -- raise taxes, raise taxes, raising taxes -- is chasing away the business owners he desperately needs to pay his bills.
The U.S. government has become like the 500 pound fat guy who jumps on a horse and then gets angry when it won't move.
Passing even more ridiculous regulations and raising taxes even higher is not going to fix business in America.
The burdens we have placed on our small businesses have gotten worse under every single presidential administration of the past several decades. Now our great economic machine has become so overburdened and so tired that it is simply refusing to move.
And this is not a short-term problem either. Yes, we have lost a ton of jobs since the beginning of the "Great Recession", but our problems go back a lot farther than that. The reality is that the U.S. population has grown by about 25 million people since they year 2000, and we needed to create millions upon millions of new jobs to support that increased population. Instead, we have lost a total of 3 million jobs since 2000.
Needless to say, that is not a good trend.
There are simply not enough jobs for everyone.
Today, there are more than 5 unemployed Americans for every single job opening.
It is becoming harder and harder to find a job, and the number of Americans who are chronically unemployed is absolutely exploding.
In America today, the average time needed to find a job has risen to a record 35.2 weeks.
There are millions of Americans out there tonight who feel like punching the walls or drinking themselves under the table out of frustration because they can't find a job.
And many of those who are "chronically unemployed" are about to experience even more pain.
So far, the U.S. Senate has refused to extend long-term unemployment benefits for about 1.3 million Americans. Without this assistance, these Americans and their families will be forced to survive on food stamps and whatever else they can scrape together.
The tent cities that are popping up all over the United States are about to get a lot more crowded.
So is there much hope that this is going to turn around any time soon?
Unfortunately, no.
Big corporations are not going to pay U.S. workers ten times more money than what they are paying employees in Malaysia, China or the Philippines just because they feel sorry for them.
Small businesses are not going to hire a lot more workers as long as things stay the way that they are. In fact, many small businesses are going to continue to look for ways to cut employees.
The public sector is the one place that had been hiring more workers, but due to growing concern about exploding budget deficits, there isn't going to be a lot of additional hiring in the public sector either.
The truth is that there is not a lot of reason for optimism right now. The U.S. economy is being battered by a host of economic problems, and with each passing week even more economists warn that we are likely headed for the second half of a double-dip recession.
So if you still have a job, be thankful. If you don't have a job, you are probably going to have to get really creative.
Times are tough and they are going to get even tougher. But it is in the midst of challenging times that we find out who we really are.
The Death Cross
The Death Cross: Another Sign That We Are On The Verge Of A Recession?
The Standard & Poor's 500 50-day moving average stands poised to cross beneath the 200-day moving average. To those in the financial industry, this is known as a "death cross", and it is a very powerful indicator that we could be entering a bearish period. So is this yet another sign that we are on the verge of a recession? Well, anyone who has spent much time trying to interpret financial charts will tell you how inexact that science can be. Financial markets can be wildly unpredictable, and there is always a tremendous amount of manipulation going on behind the scenes. However, when you add this impending death cross with all of the other signs that we could be entering a recession, there certainly seems to be reason for alarm. The truth is that financial markets across the globe are full of fear and panic right now. In fact, as noted in another article, the dominant force in world financial markets in 2010 is fear. When fear rules, markets become very volatile and they can fall very quickly. Anyone who has spent much time trying to squeeze profits out of world financial markets knows that they tend to fall much faster than they ever rise. So are we now approaching one of those times of panic when financial markets across the world fall at breathtaking speed?
Well, the truth is that nobody knows. Anyone who says that they can predict these things with 100 percent certainty is either a liar or they are unbelievably rich.
But certainly the mood in the financial markets is grim. If a death cross does happen on the S&P it is going to make things even more tense.
For those not familiar with investing terminology, Investopedia defines a "death cross" this way....
A crossover resulting from a security's long-term moving average breaking above its short-term moving average or support level.
In this case, the death cross would be happening on the S&P 500, which is a weighted index of the prices of 500 large-cap common stocks actively traded in the United States. The S&P 500 is one of the most commonly used benchmarks for the overall U.S. stock market.
So how soon could we see a death cross on the S&P 500?
Well, some analysts believe that it could happen almost at any time....
"Because the market has moved down so violently, it's brought about the likelihood of the Death Cross occurring much more rapidly," Abigail Doolittle, the founder of Peak Theories Research, was recently quoted by CNBC as saying. "It now appears it could be only a day or two off if downward momentum continues."
But hopefully most of you that are reading this are not even in the stock market at this point anyway.
The truth is that the "rally" that we have witnessed in the financial markets has been nothing more than a "sucker's rally".
The fundamentals of the marketplace have not changed.
The U.S. housing market continues to teeter on the brink of disaster.
The sovereign debt crisis is worse now than it ever has been.
In fact, just about every economic indicator you could name is pointing to difficult times ahead.
So there was really no fundamental reason why we should have even seen such a rally.
But even with the recent rally, the stock market still has not been producing good returns.
So often you hear people giving advice that goes something like this....
"If you are going to get into the stock market just keep your money in there and ride out the hard times because in the long run things always go up".
But do they?
The truth is that some people have done well, but overall inflation-adjusted returns from stocks over the past ten years have been pretty close to zero.
So if the stock market is a game that you want to play, you had better really know what you are doing (or hire someone else who does), because it can be a very cruel game for amateurs.
What does seem certain is that with so much tension in world financial markets right now, we are likely to continue to see an extreme amount of volatility in the marketplace. In such an environment, even the slightest piece of good news or bad news can set off incredibly wild swings.
It is a very exciting time for those of us who follow the financial news, but for those seeking to actually squeeze some profits out of the marketplace, times such as these are not easy.
Financial 'Reform' or Financial Revenge?
By Robert Samuelson
"The reforms making their way through Congress will hold Wall Street accountable so we can help prevent another financial crisis like the one that we're still recovering from."
It is a myth to think that the new financial "reform" legislation, assuming it passes the Senate, will insulate us for all time against financial panic and crisis. Great crises of the sort that occurred in 2008 and 2009 are usually separated by many decades, and so it will be hard to determine how much real protection the law provides. But the underlying ingredients of financial panics are always the same -- uncertainty, ignorance and fear -- and no law can permanently abolish these.
We have had recent reminders of just how quickly surprises can happen. On May 6, American stock prices dropped a scary 5 percent in a few minutes. Some blue-chip stocks momentarily fell to a penny. The collapse still isn't fully understood, though it's widely attributed to an interaction between computerized trading strategies (where computers automatically buy and sell stocks) and different securities markets. Another financial scare has arisen in Europe: Greece's near default. It could lead to a major banking crisis if fears that other governments might default cause big losses for banks that hold government bonds.
Most financial shocks don't become panics. These are prevented through some combination of the self-correcting markets, industry policing and government regulation. But the paucity of panics should not prevent us from recognizing the vulnerability of a financial system that is global and dependent on complex technologies. At the end of 2009, for example, Americans owned $18 trillion in foreign assets (stocks, bonds, real estate, entire companies) and foreigners owned $21 trillion in American assets. Neither investors nor regulators can anticipate every threat to this massive, fluid system.
What the new legislation might do is reduce the odds that the next crisis will be like the last. It might, as its advocates claim, largely dispose of "too big to fail." During the crisis, the government faced the distasteful choice of rescuing teetering, huge financial institutions (Bear Stearns, AIG) or allowing a sudden bankruptcy (Lehman Brothers) to stoke panic by inflicting losses on other banks and investors. To avoid this dilemma, the legislation does two things.
First, it would police big financial institutions more closely. Until now, the Federal Reserve has supervised bank holding companies such as Citigroup. Some major institutions -- such as AIG, mainly an insurance company -- virtually escaped federal regulation. Under the legislation, the Fed could examine and regulate any hedge fund, insurance company and financial services firm whose failure might imperil the entire system.
Second, if tougher regulation and capital requirements don't prevent fatal losses, the legislation creates an orderly way for institutions to close. They would shut down gradually to avoid market disruptions; if they need cash, the government might supply it temporarily. But the losses would ultimately be borne by shareholders, lenders and the Federal Deposit Insurance Corp., which is supported by fees on banks. (If the FDIC were overwhelmed, taxpayer funds would presumably be used.)
The trouble is that -- contrary to conventional wisdom -- "too big to fail" was just a symptom of the crisis, not its basic cause. That was old-fashioned bad lending: home loans to borrowers who couldn't repay. The panic arose because no one knew the size or location of the losses, now estimated to exceed $1 trillion. Ironically, the legislation may weaken the government's ability to quell future panics by restricting -- in highly technical ways -- the Fed's authority to lend to panic-stricken institutions in the midst of crisis.
The legislation has other gaps. It doesn't settle the future of Fannie Mae and Freddie Mac, the federally created housing agencies whose lax practices contributed to the crisis. Nor is there much to revive private-market securitization -- the bundling of individual loans (home mortgages, auto loans) into bonds. This major source of credit has collapsed, down more than 90 percent since 2006. One weakness was that rating agencies (Moody's, Standard & Poor's) never verified the reliability of individual loans. The result: "liar loans" with inaccurate information. But the legislation doesn't require rating agencies -- or anyone -- to do selective audits of individual loans. Without that, investors may shun most "securitizations."
What's called "financial reform" has twin motivations: to stabilize financial markets and to punish "Wall Street" for the crisis. So much in the legislation (a consumer protection agency, restrictions on "proprietary" trading by banks) is left to regulators that no one can now know the full outcome. It could be greater stability, overregulation or a scattering of risky activities into lightly regulated institutions. History will judge whether this qualifies as genuine "reform" -- or just revenge.
Welcome to the Double-Dip Recession
By Louis Woodhill
Whether or not the National Bureau of Economic Research ultimately agrees, we are now entering the second dip of a double-dip recession. This is because jobs are what really matter to most Americans, and the employment situation is getting worse, after a scant four months of getting better.
From a theoretical point of view, another recession is what we should expect right now. This is because both GDP and employment are driven by private business investment, and huge tax increases on both business income and capital investment are now only six months away. However, the oncoming recession is also visible in the numbers.
In terms of total employment (BLS Household Survey), there have been nine recessions since 1950. The current downturn is the worst by far. Total employment declined for 25 months from its peak in November 2007, and the total job loss in percentage terms (5.93%) was nearly twice as great as that of any previous post-war recession. The recovery from the employment downturn has also been the most anemic. If the average rate of increase in total employment seen in the past six months were to be sustained (which it probably will not be), it would take until March 2013 to get back to the number of jobs that we had in November 2007. In the meantime, the number of working-age Americans would have increased by almost 10 million.
It is illuminating to compare the current recession with what had previously been considered the most severe post-war downturn, that of 1981-1982. Both recessions were caused by a sudden, sharp decline in the velocity of money. Although only 2.00% of total jobs were lost during the 1981-1982 downturn, the decline in jobs lasted almost as long (20 months vs. 25 months) and the peak unemployment rate was actually higher than that of the current recession (10.8% vs. 10.1%).
The striking difference between the 1981-1982 recession and the current one is in the speed of recovery. By six months after the December 1982 jobs trough, 79% of the lost jobs were back. This time, it's only 15%. During the fifth and sixth month after the employment trough in December 1983, the total number of jobs increased by more than 1%. In contrast, over the past two months, total employment has actually declined by 0.25%.
In the past six months, the "Real Dow" (the Dow Jones Industrial Average divided by the price of gold) has declined by 17.4%. During the same period, the monetary base, which provides the basic "fuel" for demand, has fallen by 1.18%. In contrast, over the comparable period during the recovery from the 1981-1982 recession, the Real Dow was up by 28.4% and the monetary base had increased by 4.00%.
These falling indicators, plus the contraction in total employment during the past two months, suggest that we are heading into another recession - the dreaded "double dip". Unless policy changes are made, the best we can hope for is another "jobless recovery", like the one from the last recession, that of 2001-2002.
What policy changes would be likely to give us a strong recovery in employment? Again, a comparison between the current recession and the sharp downturn of 1981-1982 is illuminating.
After the 1981-1982 recession, total employment began rising the moment that Ronald Reagan's permanent, across-the-board tax cuts were fully in effect (January 1, 1983). Within seven months, all of the lost jobs had been recovered.
In contrast, the current recession has been fought with "stimulus", first $168 billion from Bush and then $782 billion from Obama. The result has been the longest and deepest slide in total employment since the Great Depression, followed by the slowest jobs recovery on record, followed by what is shaping up as another employment downturn. Based upon the evidence, it is more logical to conclude that "stimulus" destroys jobs than that it creates them.
If we want to pull out of the current dip, we will have to cancel all of the tax increases scheduled for January 1, 2011. If we want a strong jobs recovery, we will have to cut taxes from where they are now, starting with the corporate income tax.
The moral of A Tale of Two Recessions is, "tax cuts create jobs, ‘stimulus' does not".
Louis Woodhill (louis@woodhill.com), an engineer and software entrepreneur, is on the Leadership Council of the Club for Growth.
Window Is Closing for Jobless Numbers......
Window Is Closing for Jobless Numbers to Rescue Democrats
By Peter Brown
Peter A. Brown, assistant director of the Quinnipiac University Polling Institute, is a former White House correspondent with two decades of experience covering Washington government and politics. Click here for Mr. Brown’s full bio.
Time may be running out for the Obama administration to convince voters that the economy is recovering quickly enough to merit giving the president’s congressional allies the votes this November that will allow him and them to run the country for the next two years.
- President Barack Obama speaks about the monthly employment numbers flanked by Treasury Secretary Tim Geithner (2nd L), Commerce Secretary Gary Locke (L) and Agriculture Secretary Tom Vilsack on July 2, 2010 at Andrews Air Force Base. (Photo by Mandel Ngan/Getty Images)
Although President Barack Obama took time out to make the case that Friday’s unemployment numbers for June were more proof that things are much better than when he took office, that is not the operative political question.
The more important one is this: Do voters believe the president’s policies have reinvigorated the economy enough since he took office in the midst of the financial crisis, or have his actions been responsible for the tepid recovery from what many consider the stiffest recession since the Great Depression?
Like it or not, voters will base their decision on their feelings about job security – theirs and that of their friends and relatives. The best gauge of that sense of security is the number of jobs created and the unemployment rate. That’s why the government jobs report released on the eve of the holiday weekend was so important and provided more evidence that the political window for the White House to turn around the economy by the November elections is closing.
Yes, there was an increase of 83,000 private-sector jobs, and that is certainly better than a loss. And, the unemployment rate did drop to 9.5% from 9.7%. But he report also showed a net loss of 125,000 jobs, due to the expected elimination of 225,000 temporary Census jobs.
Glossing Over Problems
Putting the best face on it, Mr. Obama emphasized the report marked the sixth consecutive month of job growth and glossed over the data that are problematic for Democrats’ political fortunes.
Most of all, the numbers are generating much comment from analysts that the economic recovery may be running out of steam and opening the door for a double-dip recession in which the economy could rise for a bit and fall again before pulling out of the slump.
The political risk for Obama & Co. is that voters view the country as having yet to recover from the recession. While they’re technically incorrect because the economy is growing, albeit slowly, the latest numbers certainly are not going to change their minds.
First of all, economists say that the country needs to create about 150,000 private-sector jobs a month just to keep up with population growth, and the 33,000 created in May and 83,000 in June fall far short of that threshold.
Secondly, the unemployment rate dropped only because about 650,000 people who had been in the job market stopped looking for work last month, apparently due to poor prospects. When things get better, these folks are likely to re-enter the job hunt and push the unemployment rate higher, possibly closer to the election.
Voters’ Perceptions
When it comes to voters, the economic statistics that matter are the jobless numbers and unemployment rate. Even though economists say that those numbers are a trailing indicator of the economy, history suggests they are the ones that shape voters’ perception of the economy.
For example, although the country has been out of a recession – defined as two consecutive quarters of negative growth – for some time, voters see things differently. A Quinnipiac University national poll released May 26, little more than a month ago, found that 74% of voters thought the U.S. was still in a recession. That compares with 71% who felt that way in May of 2008, when things were getting worse, not better.
The question that voters will answer in November is whether the Obama approach – the $787 billion economic stimulus program as well as increased regulation of and higher costs for business in order to provide services such as the health care overhaul – has done the job and shows evidence of being a long-term success.
Republicans argue that the economic recovery has been much slower than in past recessions because the stimulus spending hasn’t worked and Obama policies are a disincentive to business to hire workers, even though most corporate balance sheets are in good shape.
And that is why the unemployment numbers are so crucial to the political conversation. The election is now just four months away. That means there are only three more unemployment reports left–the October report comes out three days after the November election–to provide the kind of evidence of success the White House needs to make its case.
Cold War heats up a bit
RUSSIAN SPIES
Cold War heats up a bit
BY CARLOS ALBERTO MONTANER
The news about the Russian spies uncovered in New York, beyond the comedic aspects of the episode, is a mine of interesting information and analysis. The first thing that needs to be discarded is the naive notion that the Cold War is over.
That's not true. Espionage services have their own internal dynamics, which generate their own inertia.
When Lenin took power in 1917, he built the Cheka, his fearsome political police, on the foundations of the czar's very efficient Okhranka. For a while, the methods, and even the agents, were the same. Later, the organization changed name as the struggle for power generated new actors, but without giving up the original imprimatur of czarism. The Cheka became the GPU, then the NKVD, later the KGB and now the Foreign Intelligence Service, the SVR.
This intelligence corps, organized after the end of communism, the disappearance of the Soviet Union, and the rejection of Marxist superstitions, planted the 10 agents in the United States. Why did it do that, if the Russians had already discarded their project of world conquest and even got rid of a few expensive and useless satellites? They did it because those were the methods they had been using for a long century.
With the right lobe of the brain, they understood that communism was a failed project and Marxism a grave intellectual error, but with the left one they continued to suspect the West, especially the United States, and felt the need to combat it, without knowing why. I suppose that during the spies' interrogations a few psychiatrists will sit next to the FBI agents to study this fascinating variety of ideological schizophrenia.
In the group there is a Latin American woman who doesn't quite fit into the operation, Mrs. Vicky Peláez, a Peruvian journalist for El Diario-La Prensa of New York. She was rounded up along with her husband, who calls himself Juan Lázaro Fuentes and passes himself off as a Uruguayan, although he seems to be a Russian. Peláez was a very radical columnist, viscerally anti-American, and a defender of the FARC narcoterrorists, the Shining Path guerrillas, and the Cuban dictatorship.
What was that couple doing amid a bunch of Russians disguised as Americans? Maybe they coincided only in terms of their source of income. According to the charges, SVR agents slipped them briefcases with cash in public places in Latin America. Was the money only for them or did they have to share it with the Russians planted in the United States?
In any case, what's interesting about Peláez and her husband is not the services they rendered to Moscow but the role they played in the Cuban-Venezuelan propaganda circuit. Post-Gorbachev Russia no doubt has cancelled its communist model and its plans for world domination, but the Chávez-Fidel duo hasn't.
Absurd and delirious though it may seem, Chávez proposes to create a communist state just like the one the Castros built in Cuba, while the two countries engage in the task of conquering first Latin America and later the rest of the world. No sensible person doubts that they will fail in that endeavor, but history is full of enlightened madmen who, every so often, drag their people in the direction of catastrophe.
It is within those plans that Peláez and her husband played a role. What role? Very simple: agents of influence. The two were part of a propaganda circuit created by the Cuban services decades ago, today utilized by the Venezuelans as part of the political joint venture the two countries have formed, a circuit devoted to disseminating information, defending causes, attacking adversaries and denigrating countries and ideas, as part of the grand strategy of demolition of the ``bourgeois democracies'' and their replacement by collectivist, single-party societies.
That circuit exists from Mexico to Argentina, even in Spain and France, and in each country there is one or several Peláezes integrated into the chorus directed from Havana and Caracas.
What's odd is why Moscow paid these Cuban-Venezuelan agents of influence. Did Cuba lend Moscow these two agents of influence to facilitate the job of channeling funds that had been previously ``laundered'' in Venezuelan banks? Are they part of a greater transaction that includes other exchanges of favors? Did the couple serve two masters at the same time, the Russians for money and the Cuban-Venezuelans for ideologic devotion? Surely we'll have answers soon.
Obama's worst foreign-policy mistake
By Mitt Romney
Given President Obama's glaring domestic policy missteps, it is understandable that the public has largely been blinded to his foreign policy failings. In fact, these may have been even more damaging to America's future. He fought to reinstate Honduras's pro-Chávez president while stalling Colombia's favored-trade status. He castigated Israel at the United Nations but was silent about Hamas having launched 7,000 rockets from the Gaza Strip. His policy of "engagement" with rogue nations has been met with North Korean nuclear tests, missile launches and the sinking of a South Korean naval vessel, while Iran has accelerated its nuclear program, funded terrorists and armed Hezbollah with long-range missiles. He acceded to Russia's No. 1 foreign policy objective, the abandonment of our Europe-based missile defense program, and obtained nothing whatsoever in return.
Despite all of this, the president's New Strategic Arms Reduction Treaty (New-START) with Russia could be his worst foreign policy mistake yet. The treaty as submitted to the Senate should not be ratified.
New-START impedes missile defense, our protection from nuclear-proliferating rogue states such as Iran and North Korea. Its preamble links strategic defense with strategic arsenal. It explicitly forbids the United States from converting intercontinental ballistic missile (ICBM) silos into missile defense sites. And Russia has expressly reserved the right to walk away from the treaty if it believes that the United States has significantly increased its missile defense capability.
Hence, to preserve the treaty's restrictions on Russia, America must effectively get Russia's permission for any missile defense expansion. Moscow's vehemence over our modest plans in Eastern Europe demonstrate that such permission would be extremely unlikely.
The treaty empowers a Bilateral Consultative Commission with broad latitude to amend the treaty with specific reference to missile defense. New START does something the American public would never countenance and the Senate should never permit: It jeopardizes our missile defense system.
The treaty also gives far more to the Russians than to the United States. As drafted, it lets Russia escape the limit on its number of strategic nuclear warheads. Loopholes and lapses -- presumably carefully crafted by Moscow -- provide a path to entirely avoid the advertised warhead-reduction targets. For example, rail-based ICBMs and launchers are not mentioned. Similarly, multiple nuclear warheads that are mounted on bombers are effectively not counted. Unlike past treaty restrictions, ICBMs are not prohibited from bombers. This means that Russia is free to mount a nearly unlimited number of ICBMs on bombers -- including MIRVs (multiple independently targetable reentry vehicles) or multiple warheads -- without tripping the treaty's limits. These omissions would be consistent with Russia's plans for a new heavy bomber and reports of growing interest in rail-mobile ICBMs.
Under New START, the United States must drastically reduce our number of launchers but Russia will not -- it already has fewer launchers than the treaty limits. Put another way: We give, Russia gets. And more troubling, the treaty fails to apply the MIRV limits that were part of the prior START treaty. Again, it may not be coincidental that Russia is developing a new heavy-load -- meaning MIRV-capable -- ICBM.
New-START gives Russia a massive nuclear weapon advantage over the United States. The treaty ignores tactical nuclear weapons, where Russia outnumbers us by as much as 10 to 1. Obama heralds a reduction in strategic weapons from approximately 2,200 to 1,550 but fails to mention that Russia will retain more than 10,000 nuclear warheads that are categorized as tactical because they are mounted on missiles that cannot reach the United States. But surely they can reach our allies, nations that depend on us for a nuclear umbrella. And who can know how those tactical nuclear warheads might be reconfigured? Astonishingly, while excusing tactical nukes from the treaty, the Obama administration bows to Russia's insistence that conventional weapons mounted on ICBMs are counted under the treaty's warhead and launcher limits.
By all indications, the Obama administration has been badly out-negotiated. Perhaps the president's eagerness for global disarmament led his team to accede to Russia's demands, or perhaps it led to a document that was less than carefully drafted.
Whatever the reason for the treaty's failings, it must not be ratified: The security of the United States is at stake. The only responsible course is for the Senate to demand and scrutinize the full diplomatic record underlying the treaty. Then it must insist that any linkage between the treaty and our missile defense system be eliminated. In a world where nuclear weapons are proliferating, America's missile defense shield must not be compromised. As currently drafted, New START is a non-starter.
The writer was governor of Massachusetts from 2003 to 2007.
The new frontier: 'Covering' conservatives
By Jonah Goldberg
And just what is the conservative beat?
Well, according to many of the nation's leading editors, it's that shadowy, often-sinister world where carbon based-life forms of a generally humanoid appearance say and do things relating to, and supportive of, conservative causes and the Republican Party. These strange creatures have been observed using complex tools, caring and nurturing their young and even participating in complex social rituals. Most worship an unseen sky god that traces its roots back to the ancient Middle East. Even more astounding, these creatures are having a noticeable impact on American politics.
And that is why many of our leading journalistic enterprises have found it worthwhile to assign full-time reporters to the task of spelunking through the dark caves of conservatism to better understand these fascinating, if vaguely worrisome, beings.
The 'party of Mordor'
As for Weigel, though he officially resigned from the Post, theories still abound about whether he really jumped from his perch there or was pushed. Either way, the reason he had to go stemmed from comments he made in an off-the-record online chat group for liberal journalists. He said he hoped that Internet phenom Matt Drudge would "set himself on fire" and that Rush Limbaugh should drop dead.
Conservatives, according to Weigel, are obsessed with protecting "white privilege" and are bigots for opposing gay marriage. The GOP is the "party of Mordor" and, if left unchecked, will one day deliver the West into the hands of Sauron. (Not really, but if you read between the lines, it's in there.) Note: Weigel's actual work product was far more balanced and seemingly open-minded than what you'd expect knowing his private views.
The incident has sparked a lot of discussion over how mainstream journalistic institutions such as The Washington Post and The New York Times should cover conservatives. Even if you leave aside the ancient arguments about media bias, this is still an old debate. In 2004, the Times assigned a reporter to cover conservatives full-time in order to better inform their readers and staff how the conservative movement works.
"We wanted to understand them," explained editor Bill Keller. The Times' ombudsman later observed that the "decision not to create a liberal beat, it seems to me, reflected the reality that the Times' coverage of liberals had no gaps similar to those in its reporting on the conservative movement." Translation: The Times is staffed almost entirely by liberals and their news judgment flows directly from that fact.
Many mainstream news outlets have been caught flat-footed on some major stories in recent years precisely because of this attitude.
For instance, Van Jones, the White House "green jobs czar," was brought down by controversies that went ignored by most leading news outlets but were widely covered by (the hugely successful) Fox News and the thriving conservative press. It seems at times that if conservatives consider something big news, the editors at such places as the Times and the Post must first conduct an anthropological analysis: Why are these right-wing natives so upset?
It's difficult to exaggerate how bizarre this predicament is. In America, self-identified conservatives outnumber self-identified liberals by 2 to 1. And yet many of our leading journalistic bastions have found themselves stuck in something akin to media monasteries with a Fort Apache complex.
Now The Washington Post is scrambling to figure out how to cover conservatives. Part of the reason the Post looks so lost is that it seems apparent that it thought it was hiring a conservative to cover conservatives when Weigel was more like a libertarian-leaning liberal with a good conservative phrase book and a dashing right-wing pith helmet. A registered Republican, Weigel nonetheless voted for Barack Obama, John Kerry and Ralph Nader for president. Meanwhile, left-wing groups who find the news media insufficiently liberal are now clamoring for their own reporters to cover the "liberal beat."
Lefty, meet righty
What a strange hot mess the press has gotten itself into. And there are no easy answers about how to clean it up. One solution, offered by The Washington Examiner's Byron York: Hire a lot more openly ideologically committed — and fair-minded — reporters, but with one caveat: Have the conservatives cover the liberal beat and the liberals cover the conservatives. York rightly notes that a little ideological distance tends to temper the cheerleading. It's a good idea.
But here's some even simpler advice for liberal editors unwilling to break out of the bunker: Just try to keep in mind that these strange alien creatures are also potential customers.
Jonah Goldberg, a member of USA TODAY's Board of Contributors, is a visiting fellow at the American Enterprise Institute. (David Weigel was a USA TODAY editorial page intern in 2004-05.)
i can’t wait for the volume this fall either!! Another good video, i really enjoyed the way you explain.
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