Rx for Capitalism

There were two significant ironies this week. The first was that I finished the last chapter of the biography of Ayn Rand, Ayn Rand and the World She Made by Anne C. Heller on the very same weekend that the Democrats stitched together the 60 votes in the Senate that were needed to pass President Obama’s Health Care Bill. Ayn Rand was the stalwart defender of capitalism, liberty and individualism in the 20th century and along with William F. Buckley and Milton Friedman ranks among the intellectual giants that fought against the evils of collectivism.
Rand was a Russian Jewish immigrant that saw firsthand the corruption of collectivism in Soviet Russia as she witnessed the destruction of her father’s livelihood at the hands of the Russians when they drove her father’s drugstore out of business twice. Today her seminal works, Atlas Shrugged, The Fountainhead, and Anthem sell very well. Rand had her flaws and Heller fairly raises them in her book. She was given to black and white thinking. She could be irascible and cut off friends and relatives that rubbed her the wrong way. She did not stay faithful to her spouse. Still, her value as a backbone of capitalist thinking cannot be underestimated. And this biography comes at a time when capitalism is under the most severe full frontal assault since the 1930’s. The Health Care Bill threatens almost 20% of our economy with a government takeover. The EPA with its December 7 pronouncement to regulate carbon emissions and international bureaucrats in Copenhagen are threatening our economy with impossible burdens in the name of preventing climate change. Capitalists are being punished through higher taxes and a verbal assaults from the Obama Administration with bankers being labeled as “fat cats” and insurance companies accused using “smoke and mirrors” to stop reform. It is almost as if an Ayn Rand novel is unfolding in real time before our very eyes, with Harry Reid and Nancy Pelosi starring as the bad guys.
The second irony is that it was Nebraska’s Senator Ben Nelson that caved in to give the Democrats a filibuster proof majority. This is Nebraska, the epicenter of self reliance, the same state that gave us Willa Cather, author of Oh Pioneers! This is the land that epitomizes rugged individualism. If Nebraska is responsible for handing over such a large chunk of our economy to the feds, is there any hope left?
Yes, Ayn Rand could be insufferable and doctrinaire at times, but we sorely need someone of her fortitude and intellectual reach today to defend capitalism and freedom.

Obama a Man of Science or the New Religion?

It’s just not that long ago that the Left was ranting over conservative Republicans supposed assault on science. The claim was that the Republican party had largely been taken over by fundamentalists and creationists. Some school districts were required to teach Darwinism side by side with creationist theory. Other groups attempted to get the National Parks to carry creationist literature in their bookstores. The Left fanned fears that Intelligent Design proponents were undermining hard science and over the last few years, several dust-ups occurred in which we were re-fighting the Scopes Trial.

While I am a conservative Catholic, I am a strong believer in science, the scientific method, hard analysis, and hypothesis testing to explain phenomenon in the natural world. Conservatives have gone off the rails attempting to supplant scientific knowledge with a fundamental biblical explanation of the natural world and a literal interpretation of the Bible. These people undermine our credibility as conservatives and they muddle the notions of traditional conservative values embodied in scripture with explanations and models for how the natural world was created and evolved.

True science involves continuous hypothesis testing and challenge to conventional wisdom. It involves constant reassessment and reinterpretation of data as new data becomes available and as old data is reexamined. All good scientists challenge conventional wisdom. Truly great scientists are not afraid of the challenge of others—indeed, an intellectually pure scientist is passionate about finding one thing—the truth and great scientists sometimes “eat their own children” and revise their own view of the world as new knowledge is gained.

The Left is correct to be concerned about fundamentalism thinking attempting to fence in science. They occupy two different realms (not necessarily incompatible with one another in my view) and they should stay that way.

But now the Left has adopted a religion of its own that it has deemed beyond the challenge of science and it is just as pernicious as the Creationists—Global Warming.

The science of Global Warming is difficult and complex. It involves interpreting data of thousands of years of history in which even without man’s influence, global temperature changes were subject to wide fluctuations. It involves teasing apart natural and potentially man made environmental changes. The questions are large and complicated. Is the globe getting warmer? Is this a normal cycle? Is it bad for everyone or just for some? Even so, can we do anything about it that will have real impact?

Al Gore, the great messiah of this religion, famously proclaimed that “the debate is over” in promoting his movie “An Inconvenient Truth.” That should have been the tipoff—for in science, the debate is never truly over.

And now the great arbiters of Global Warming, the IPCC (Intergovernmental Panel on Climate Change), have been caught suppressing the work of scientists that present a challenge to the religion of the Left, and further were caught enhancing the effect of temperature change. This is important because the IPCC is highly influential and is the group of scientists that policymakers have been relying on to make their case that governments should exert greater control over CO2 emissions. The emails system of the IPCC was hacked into and these rather startling emails were exposed. The UK Telegraph called this the “worst scientific scandal of our generation.” This scandal has powerful implications for the discussions of the upcoming Copenhagen summit and the “Cap and Trade” bill under which will be asked to make enormous economic sacrifices for the new religion.

And what is the response from our new administration? Largely silence, which is odd on the eve of the Copenhagen Summit. John (Mr. Population Control) Holdren dismissed it as something that affected a small number of scientists. Barbara Boxer attempted to turn it around and attacked the hackers, calling it “email theftgate”. The mainstream media has mostly delegated it to about page 25.

This is an issue that has profound implications for our country, our economy and the relative power between the private and public sector and relationships between nations. In the end, its resolution will have much more international import than the Iraq War. The Left caterwauled that Bush Administration manipulated evidence over WMD to justify the invasion of Iraq (although there was no direct evidence of this). But here we have a smoking gun that shows that the “scientists” – the high priests of this religion-- have manipulated and suppressed evidence and yet our scientific president is silent.

Mr. President, the debate is not over. With this much at stake and so many open questions, it cannot be. If you truly are a proponent of science, you must express your outrage over this scandal. But I suspect you, like the others on the Left, simply wish to supplant the religion of the fundamentalist right with your own.

Half a Loaf

After over 90 days of agonizing, President Obama finally made his decision on Afghanistan this week. Over 3 months after General McChrystal asked for 40,000 troops to support his strategy to reverse the gains made by the Taliban, President Obama agreed to send ¾ of the requested troop levels. This is the first major decision by Barack Obama for which he will be held accountable, and, coincidentally, was made in about the same amount of time it took to pick the Obama family dog. We’ll see how he does when real events force Obama to make a decision in less than 90 days.
Is this a good decision or not? I have no way of knowing, but I am skeptical. McChrystal is on the ground and in the best position to know whether 40,000 is the right number. It may very well be that the job simply cannot be accomplished with 30,000 and we might as well pack up and go home. Often, the outcomes of these types of decisions are more like step functions. 40,000 may be the minimum needed to be successful.
But leaving that aside for a moment, announcing to the world that you plan we plan to exit in 2011 risks negating much of the benefit of the surge. We are fighting an enemy whose very strength is the ability to ebb and flow, disappear for long periods of time and then re-emerge. They have more tolerance for a long, drawn out affair than we do. If I were a Taliban leader, my message would be, “Akhmed, take a sabbatical for awhile. Go find a little fishing hold in Western Pakistan. We’ll see you in about 14 months and we can shoot a few Americans in the back as they are packing up.” So, by setting a goal of leaving rather than winning, it is more likely that we will have wasted blood and treasure and much of Afghanistan will be back in Taliban hands within 36 months.
I also find it highly ironic that Obama and the Dems fought Bush tooth and nail against the surge in Iraq, declared Iraq lost and we are now employing precisely the same strategy in Afghanistan.
Still, I have to give him some credit. Nearly a year in and Obama has yet to make a decision that leans hard against the left wing faithful. This is as close as he has come so far. With the Democrats almost certain to take a thumping in the midterm elections, Obama will need to get more comfortable with governing from somewhere closer to the middle. This is almost a certain result, even if we have to drag him kicking and screaming.

Condoms and Chocolate Milk

Some random thoughts and observations on the absurdities of living under modern liberalism from past week's news:

The nutrition Nazis at various school districts are banning chocolate milk from our schools, citing its high sugar content. The ACLU has been successful in getting condom distribution programs in many school districts. So our kids cannot buy a carton of chocolate milk for lunch at school but they can get condoms.

I’m not sure why Eric Holder thought that bringing KSM to New York for a civilian trial was such a dandy idea. New Yorkers are concerned that it will highlight the city as a terrorist target. It provides KSM with a pulpit from which to spew his hateful view of the world, and will be a terrific recruiting tool for Al Qaeda. Finally, this is a man whose life mission is to destroy the U.S. Why do we offer him the protections of our civilian legal system? Can Mr. Holder explain why this is the best possible option?

Last week, Obama implored us not to “rush to judgment” about Islamic fundamentalism’s role after Nidal Hasan brutally gunned down our soldier’s at Fort Hood. This is the same person that told us that he didn’t know what the facts were but that the Cambridge police acted stupidly when they arrested Henry Louis Gates. Again, Islamic terrorists get deferential treatment while the folks that are there to protect us are presumed guilty.

Months after General McChrystal asked for 40,000 more troops, we still don’t have an answer from our commander-in-chief on his troop request to prosecute the “necessary war.” In my business, not making a decision is making a decision. Is it me, or is there something inverted about an administration that is more decisive about limiting executive pay than winning a war?

Dick Durbin (D-IL) is tripping over himself trying to get the Gitmo detainees housed in Illinois because it will create jobs. That is about as crazy a rationale for exposing us to an increased security risk as I’ve ever heard.

The New York Times today carried the headline, “GM Shows Sign It Is Recovering Despite New Loss: White House is Pleased”. Doesn't the juxtaposition of those statements and the tone of them together sound weird to you? To my ear, it was eerily imperious. Perhaps the Times sees why the White House is pleased; we are ever closer to the Marxist utopia with the government owning the means of production.

Meanwhile, President Obama was caught on film bowing to Emporor Akihito in Japan. He was similarly seen bowing to the Saudi King last April. I’ve adjusted my expectations. At least he has not apologized for Hiroshima—yet.

The flu season is in full swing and we still don’t have enough H1N1 vaccine to go around. Just imagine the scathing editorials at the Times if this had been the case on George Bush’s watch.

Rocket Men

While it is true that liberty and limited government are values that are deeply ingrained in my being, there are problems that are appropriate for government to solve. Indeed, there are problems that only government can solve. The problem is that they are limited in scope and duration and there are so few models for success. In the current health care debate, for instance, an easy way to puncture the arguments of the left is simply to ask, “What is your model for success?” Amtrack? The US Postal Service? Public Housing? Public Education? The Department of Energy (founded by Jimmy Carter 30 years ago with the goal of getting us off oil)? If you use the terms and phrases “innovative, “creative,” “sense of urgency,” “results,” “dedicated professionals,” or “accountability” in connection with any of these endeavors, your friends will quietly sidle away from you at cocktail parties.

But one such resounding success was NASA’s Apollo project. I have just finished, the book “Rocket Men: The Epic Story of the First Men on the Moon” by Craig Nelson. It recounts the story of the first moonshot, one of the signature achievements of the United States and, really, of mankind in the 20th century. It represents one of the finest arguments against libertarians like me. The first moonwalk is perhaps the finest accomplishment of any government agency, ever, and will likely never be eclipsed.

The book takes us through the commitment of John F. Kennedy to land a man on the moon and safely return him by the end of the decade. This was a formidable goal, as the U.S. fell behind the Soviets as our Cold War adversaries successfully launched Sputnik and put the first man into space. Eventually, we scrambled to catch up and overcame numerous technological setbacks and the tragic fire of Apollo 1 to put Neil Armstrong on the moon in July of 1969. What struck me about the success of Apollo is that NASA behaved quite differently than most government bureaucracies—people worked with real passion and dedication, there was a real sense of urgency, problems were solved creatively, the entire program was fraught with risks. Yet, in many ways, NASA behaved more like a private, profit seeking enterprise than a lethargic leviathan that we see in most modern government agencies where risk taking and urgent problem solving and creativity give way to inflexible rules and procedures, indifferent staff, and the protection of certain select constituencies.

Take, for example, this quote from Rocket Men:

And that’s why they worked those sixteen hour days and eight day weeks…’those people were the reason that you could get almost anything done. There was never a paucity of ideas. Imagination was rampant, and most of it very good imagination on how to solve problems. And a group of people could get around the table, work together, and in a noncompetitive—it seemed noncompetitive, at least at the time—and the sum of the output of that table was far greater than just the individual parts that were there. It was really an exiting time to be involved. And that’s why Apollo 13 was saved. That’s why Apollo 11 landed at the time it did. It’s really why any of the in-flight emergencies were dealt with successfully, is because the people could get together and figure out how to solve the problem.’


When was the last time you heard those things said in connection with a government project? Sixteen hour days? Imagination? Ideas? Problem solving? The only time you typically see government workers or legislators working sixteen hour days is when they are attempting to jam through a big tax increase.

What made the Apollo program different and what lessons can be drawn from it?

First, there was a clear, measurable and unambiguous goal in mind-land a man on the moon and return him safely to earth. Goals such as ending poverty, advance the national, economic and energy security of the United States (DOE website) and other such goals are too broad, too quixotic, and, therefore, unachievable. Almost by definition, they perpetuate a bloated, aimless bureaucracy. Sometimes, it can be even worse. The Federal Reserve’s dual mission of creating maximum employment and stable prices is inherently conflictual. Apollo had a very discrete mission and it was easy to ascertain whether we had achieved it or not.

Second, the program involved technology and competition with an adversary that had at least some military aspects to it. The Apollo program had a sense of urgency to it because the Soviets were ahead of us in space exploration at the time. The Soviets launched a satellite first and put the first man in space. Our national pride was wounded, and indeed, some saw the Soviet conquest of space as the beginnings of an existential threat. We were powerfully motivated and directed to catch and surpass the Communist regime. In other words, as in the private sector, surpassing a competitor was an important aspect of the mission.

Third, and most importantly, the program did not involve a wealth transfer from one group to another. As a result, the program did not create a large constituency of entitlement holders and a large lobbying force. Sure, there were some direct and indirect financial beneficiaries, but it was not so large as to create an effort to grow an ever enlarging pool.

I highly recommend Rocket Men. It is a reminder of how rare it is that a government endeavor actually achieves what it sets out to accomplish.

Jack and Squat

As if almost on cue, the Nobel committee this week served up another softball for this blog. Just last week, Saturday Night Live skewered Obama with a parody on his lack of achievements [see Youtube http://www.youtube.com/watch?v=YT5Kl38fSVY or search SNL Obama Do Nothing skit]. A liberal politician should take heed when SNL, Jon Stewart and Conan O’Brien are taking potshots at you.

The Nobel Prize just rounds out a legacy of nonaccomplishment for Obama. Other than winning elections, his resume has been completely void of actual, tangible results. As a community organizer, no one has come forth with anything one can call an actual achievement. As both a State Senator and US Senator, he sponsored not a single piece of legislation. As a professor, no original published works carry his name. No one in recent history has attained as high of a station and gotten more accolades on such a flimsy record of concrete results. In the business world that I inhabit, any job candidate must credibly reel off a series of actual, quantifiable achievements if he or she wishes to be a serious candidate for the job. For the Nobel committee, however, aspirations and great speeches are apparently enough.

So, what exactly did Obama do to deserve this distinguished award? Let us look at the statements of the Nobel Prize committee itself for the answer. In its press release, the committee singled out Obama for, “for his extraordinary efforts to strengthen international diplomacy and cooperation between peoples. The Committee has attached special importance to Obama's vision of and work for a world without nuclear weapons.” Again, maybe I’m missing something, but so far, the actual accomplishments of the Obama administration have been to (i) send the mullahs in Iran a holiday video greeting, (ii) paid our UN dues and joined the Human Rights Council (along with other zealous defenders of human rights such as Russia, Cuba, Saudi Arabia and China), (iii) kicked off his presidency with a European apology tour, telling them that “America has been arrogant and has even ridiculed” its European allies, and (iv) permitted the investigation of whether the CIA caused undue discomfort to Khalid Sheik Muhammed and his cronies in attempting to gain intelligence from them. One would think that to win a Nobel Prize, you would have to come up with at least one signature achievement of some import. However, we are no closer to a Middle East peace accord, no closer to a stringent verifiable nonproliferation regimen, no closer to defeating the Taliban in Afghanistan, or advancing women’s rights (as an aside, I find it interesting that NOW found time to scold David Letterman for his “promotion of a hostile work environment” but they still have yet to utter a word about how women are treated in the Middle East). In fact, under the Obama administration, America has not entered into a new material accord with anyone, nor has America brokered a peace deal between any two parties in discord.

The committee singles out our president for his “vision of a world free from nuclear arms [and he] has powerfully stimulated disarmament and arms control negotiations”. This is almost a parody in itself. Obama made his high minded vision statement about a world free of nuclear weapons concurrent with the disclosure of the Iranian facility at Qom was made public. No actual steps were taken by Western leaders (other than to talk to the Iranians and give them time to hide things before the IAEA came to visit). Perhaps Barack will someday persuade the mullahs to give up their nukes, but so far, the centrifuges are still spinning. If actual tangible achievement counted, surely Ronald Reagan would have gotten a Nobel. Under Reagan, more verifiable arms control agreements involving the dismantling of more kilotonnage and throw weights than any other world leader. But this award is not about achievement. It’s about politics. It’s about the Norwegian committee blessing Obama’s vision for America as the semi-European nanny state, where all states, no matter how odious have equal standing, where democracy is only one of many equally plausible ways of organizing a state and governing peoples, where the state, not individuals are responsible for the well-being of its citizens, and where aggressive, hostile, and tyrannical regimes are faced with letters of disapproval, carefully crafted by large committees. It is a world in which two of the world’s leading democracies—the US and Israel are roundly condemned, while the world’s worst dictators are free to acquire weapons to threaten and destabilize the world. We have gone from Ronald Reagan’s vision of the “shining city on the hill” to the vision of Obama, “we’re sorry we’ve been so arrogant in our promotion of liberty, democracy and free enterprise.” This is why the European on the Nobel committee is so willing to overlook that nagging little detail about not having any achievements. They love his, well, European vision for America.

Games and Bombs

The rejection of Chicago as the site for the 2016 this week represents the latest setback for the Obama administration. With as many domestic and foreign challenges facing this administration, I was frankly surprised that the administration decided to spend political capital to attempt to snare the Olympics for Chicago. The city itself was divided as to whether it really wanted the games. After nine months on the job, Obama’s star power was beginning to show signs of wear and he needed a win at this juncture. It seemed to me that the Olympic push had only small upside potential and large downside risk for the president. And alas, after a personal plea by Obama, the Olympic committee promptly scratched Chicago after the first round.
On the surface, this doesn’t seem like a major blow to the administration, but on a closer look it is deeply symbolic of what is wrong with this administration and does not portend well for the immediate future of his administration. Here’s why.
Obama has come an astonishingly long way on rhetoric. His golden tongue was super b in rallying the faithful during the election. At a time when the country was in a state of fright over its fracturing financial system and exhausted from its war in Iraq, Obama’s cool demeanor and mantra of hope and change and high sounding ideals had pundits swooning. At the inauguration, they immediately began drawing analogies between Obama and FDR and Lincoln. We wanted to believe.
There is an ocean of difference, however, between giving a speech and spouting ideals and actually getting things done. The missing ingredient in Obama’s background is negotiating experience. He has none. No one has been able to tell me exactly what he accomplished as a community organizer. He had no legislative accomplishments to his credit. And certainly being a lecturer to a bunch of 20 somethings does not give you one iota of experience at negotiating. Making a case is one thing. Controlling events and negotiating for the support of other key players is another.
As a result, we are beginning to see this administration grind to a halt. It was naked and exposed for all to see during the UN meeting last week. In very lofty and idyllic terms, Obama spoke about the vision of a world without nuclear weapons, a high minded ideal about which there is little disagreement. Yet, the very next day, when faced with the actual, real concrete evidence of the crazed mullahs in Iran blatantly ignoring the West with incontrovertible evidence that their nuclear weapons program is humming along, Obama seemed disjointed and out of step with our European allies. Britain and France both spoke about “lines in the sand” and deadlines. Obama mumbled something about Iran “having to live up to its international obligations.”
This was the perfect forum to present a pre-negotiated orchestrated united front to Iran. After all, we had only the week before given the Russians a huge concession by scuttling our plans to put missile defenses in Poland and the Czech Republic.
But the only concrete action we received from others was a commitment by Iran to talk about the program, and by Russia to consider sanctions (not commit to them, mind you, but to commit to consider them). Iran promptly fired off a bunch of missiles just to let us know what they think of all this.
This is all symptomatic of an individual and an administration that has no experience in getting things accomplished. Obama much prefers grandious speeches to the hard, grinding work of negotiating and making deals. In the health care reform push, Obama’s efforts have been to ramp up the speaking circuit. Obama believes that if he just says it often enough and in an eloquent enough fashion, people will see the sense in it. But the art of getting things done involves getting people to do things they don’t really want to do. It involves cajoling, bribing, threatening, pushing at many levels to get what needs to be done. And it needs to be done in a coordinated fashion with nothing left to chance.
The issues we face with Iran are deadly serious. We failed to stop North Korea from getting the bomb. And now we are arguably faced with the most odious regime since the Nazis on the brink of becoming a nuclear power. The actions of the West over the next twelve months could easily change the history of the world. It is time to stop campaigning and get to work.

Harnessing the Good Guys

It’s been an interesting few months in Obamaworld. The Obama Justice Department now wishes to conduct criminal investigations into detainee treatment following 9/11. Apparently, Eric “We Are a Nation of Cowards” Holder is disturbed that CIA personnel roughed up Khalid Sheik Mohammed and some of his cronies after they murdered 3,000 of our citizens in 2001 in an effort to learn more about Al Qaeda and its plans. Evidently, burning, beheading and maiming is fair practice for the bad guys, but making the bad guys extremely uncomfortable is out of bounds for us.

Last month, Congress voiced its extreme displeasure with Dick Cheney’s authorization of hit squads of CIA operatives that were to be deployed in Pakistan to take out high level Al Qaeda figures. Apparently, it is fine to take them out with drones (thereby risking collateral damage), but taking them out face to face at close range is impermissible.

What is interesting to me is that these positions follow closely on the heels of Obama’s off the cuff remark in his press conference that the Cambridge police had acted “stupidly” by arresting Henry Louis Gates for being disruptive when police were called to his residence responding to a call regarding a potential break-in. After leaping to the conclusion that the Cambridge police acted stupidly, our “post-racial” president then went even further and initially asserted that this incident was about race. Finding himself caught in this entanglement, he tried to slither out from under the controversy by stating that he “could have calibrated his words more carefully” (how Clintonian) and then tried to whitewash it all using Rodney King (“can’t we all just get along”) diplomacy at the infamous “beer summit”.

What does the Gates incident have to do with how we deal with international terrorists? Quite a bit, actually. Taken together, they speak volumes about how Obama and his advisors view the world. In Obamaworld, the guys that are charged with protecting us are the ones that need to be restrained, collared and contained. They must abide by a strict set of rules, and in some cases, even abiding by the rules may not be enough. In the Gates incident, the police officer in question was not shown to have violated any rule or procedure. In the case of Khalid Sheik Muhammed, the alleged wrong was that he was threatened with a drill. Now, it might be different if they actually harmed KSM with it, but it’s hard for me to feel a great sense of injustice because the mastermind of the most bloody attack on U.S. soil was shown how a drill works. Obama and his crew seek to impose strict rules on the good guys. The bad guys get to do whatever they want.

The whole Gates incident gives us a peek at how Obama thinks about the world. Think about it for a moment. That press conference was extremely revealing. Obama (a Harvard educated lawyer) said, “I don’t know what the facts are, but the white cop was wrong.” That is Obama’s starting point. The guy in charge of protecting our lives and property was presumptively wrong.

Similarly, that is the mindset with international terrorism. The terrorists need to be protected from the guys that are in charge of protecting us—just to make sure they don’t get overzealous. The guys at the CIA are wrong. They need a labyrinthian set of rules to follow when interrogating the most evil guys on the planet. Eventually, the lawyers in Obamaworld will come to develop a code of permissible conduct for our CIA operatives.

It’s one thing to question a little dust-up between a Cambridge cop and a Harvard professor where no one got hurt, but Holder and his staff apparently don’t realize that his crusade will lead to an upgrade of Al Qaeda’s training manual.

The Stoning of Soraya M.

The recent uprising in Iran has been labeled by some as the “lipstick revolution.” While the spontaneous rebellion following the Iranian elections has quieted over the past week, it was apparent that many of the malcontents taking to the street were young women. Indeed, the icon of these street protests was Neda (or “voice”), the young Iranian woman that was gunned down and whose gruesome death was seen over the internet across the globe. My last post questioned why Western feminists have been so silent in the face of a regime and religion that so tramples on women’s rights.

It was timely that I saw the recently released film “The Stoning of Soraya M.” last weekend, and I highly recommend it. The movie is about a young Iranian woman who is unfairly accused of adultery and framed by her husband, a no-account scoundrel that wishes to unload his earnest, hardworking wife for floozies. In the West, an unscrupulous oaf can do this simply—by divorcing, dividing family property and paying the requisite maintenance and child support. It may be unpleasant for the woman, but she will get on with life.

But under Sharia law, it is another matter. In the film, the husband is able to arrange the stoning of his wife by co-opting a false witness, manipulating Sharia law and the local mullah. This is permitted to occur as a consequence of misogynist religious doctrine, the welding of law and religion, and the unchecked power of local religious leaders. The final scene is jarring—a graphic barbaric and brutal execution of a beautiful young woman in which her father, sons, and husband, along with the rest of the community all partake.

Although the actual incident upon which the film was based took place in the mid 1980’s, stoning continues to be a staple enforcement mechanism for sexual mores in the Islamic world. In a widely publicized case last year a 13 year old rape victim was stoned to death when her family reported the rape and she was accused of adultery.

In a sad coincidence, The Stoning of Soraya M. was released within 30 days of the slaying of Neda. That a segment of this culture society uses violence and threat of violence in a most barbaric way to prevent women from exercising their sexual freedom, shoots them for expressing themselves politically and beats them for not adhering to the Islamic dress code is astonishing to me. And, as I observed in my last post, what is more astonishing is the silence from Western feminists. And I also remind you that this is a culture that President Obama is tripping over himself to engage and show respect. The oppression of women by societies like Iran’s is on par with how blacks were treated in the deep South in the 50’s or in South Africa under apartheid. Why is the world so tolerant of it?

Where is NOW?

Although I believe that the correct posture of the Obama administration in the current Iranian crisis is circumspection, I believe it is high time for private citizens to voice their support for the currents of change in Iran.

In particular, I have observed with interest that it is women, particularly young women that appear to be at the center of this nascent movement. Women are defying the regime, marching in the streets, chanting, pushing back their head scarves, sporting the green markings signifying the movement. As I noted in my previous posting, the demonstrations are about much more than which stooge of the mullahs gets to be president. It is about giving voice to the people, and in particular, women. In watching some of the video that has made in out of Tehran, I saw young women bravely absorbing the thuds of the batons, being kicked, shoved and brutally pummeled by the thugs that run this government. These women want a voice. They want to be educated. They want to be full and equal citizens. I read “Reading Lolita in Tehran” a couple of years ago. It highlighted this sick and decrepit society that forces young women into hiding so they can read the world’s great literature. It is a pathological system that permits women to be stoned and beaten for being out with a man alone.

Yet, where is NOW? Where is Susan Sarandon? Where is Barbara Streisand? Where is Anita Hill? Where are all these folks? I went to the NOW website today. There are little stories about reproductive rights, discrimination and the murder of Dr. Tiller. That is all fine. Women are being beaten in the streets of Tehran today and there is not one word on the NOW website in support of these women. The misogynist Iranian regime will deprive women of THE RIGHT TO READ A BOOK, let alone permit women to exercise reproductive rights. And yet the silence from the feminist left in this country is deafening.

Well, this bald, fat, middle aged white conservative stands with you today, ladies. You deserve a future. You deserve a voice. You deserve to have the freedom to be educated, to be with who you want to be with, and to be full participants in your society. And I hope you get it. It’s a shame that your sisters here don’t share the outrage with me.

Hope and Change

Watching the news that has come out of Tehran has been intriguing to me. Not since the protests of 20 years ago at Tiananmen Square have I felt such a glimmer of hope for a people as I do now. Iran is not simply a country—it is a civilization suffocating under the rule of the clerical tyrants that have been in charge for 30 years. I see the prosperous, progressive society it could become. Unfortunately, the most likely outcome is that it will end as it did in China, precisely 20 years ago, with the regime resorting to naked force to silence the people. But I do hold out a glimmer of hope, and if there is any hope at all, we must stay out of it.

In this instance, President Obama is doing precisely the right thing--- say as little as possible. His remarks have been carefully restrained and circumspect. He has been careful not to be seen as taking sides. And his foreign policy team has been careful not to be seen as tilting one way or the other.

Unfortunately, John McCain has been railing that Obama has abandoned fundamental principles about human rights. Hogwash. What McCain simply doesn’t understand is that the mullahs have made a career out of vilifying the Great Satan. They need to demonize us. Any overt interfering and taking sides will give them exactly the excuse they need to exert force against their own people. We shouldn’t be cheerleading anybody. Obama is entirely correct when he says that, “Although there is amazing ferment taking place in Iran, the difference between Ahmadinejad and Mousavi in terms of their actual positions may not be as great as advertised.”

I have been (and undoubtedly will continue to be) critical of Obama’s approach on many economic and foreign policy issues. But on this particular day on this particular issue, I’m glad that Obama, not McCain is at the helm. McCain does not understand that the protests are not about a particular candidate. The protests are about an Iranian people that want a voice in their own future. The mullahs are dying for us to pick a side. If there is any hope that now or in the near future for a second Iranian revolution, we must be silent.

Making Progress

I’ve been following President Obama’s “Muslim Outreach” program with a high degree of interest as I believe that reducing the tension between Islam and the West is one of the single dominant themes of our time. I admit I have been pretty skeptical since Obama’s opening act included a Grand Apologia in front of European audiences and a fawning videotape sent to the mullahs in Iran, purportedly designed to open dialogue with them.

But I have to say, I give Obama’s Cairo speech this week a B. He appears to be making some progress. At least he didn’t bow to any Saudi kings on this trip, apologize directly for America’s misbehavior, or completely throw the Israelis under the bus. And I give him credit for at least explicitly putting forward the checklist of items that will need to be tackled if there is to be peaceful coexistence between the West and Islam.

And while he should be congratulated for identifying the issues that cause friction between Islam and the West, his approach will fail unless it contains two key elements that are essential in relationship: reciprocity and accountability.

It is all fine, well and good to attempt to come to some sort of rapprochement with Islamic nations, and to take affirmative steps to achieve that. But such unilateral steps will be futile unless the Islamic world wants to take similar steps. Obama commented that “some in my country… view Islam as inevitably hostile not only to America and Western countries, but also to human rights.” Islam needs to demonstrate concretely that this view is incorrect. But Islamic leaders were strangely silent following 9/11 and the murder of Theo Van Gogh. They took no steps to assist when their Arab brethren were being ruthlessly slaughtered in Bosnia and Iraq. Muslim protesters only come out when their sensibilities are offended by cartoon depictions of Allah with a bomb in his turban or when people like Geert Wilders observe the connection between Islam and violence.

It is fine for Obama to try to improve the West’s image with the Islamic world, but the Islamic world has a way to go in improving its image with the West. To many in the West, Islam conjures up images of extreme violence, intolerance, tyranny, opposition to scientific progress, and misogyny. These images did not arise out of thin air—they are based on the experiences observed by the West. If the Islamic world continues to embrace intolerance, violence and tyranny, no rapprochement with the West will be possible unless the West chooses to accede to these elements of their society. So while I applaud an effort undertaken to reach out to the Islamic world, the Islamic world must reciprocate and it must reciprocate by forcefully denouncing those elements of its society and culture which are an anathema to the West.

The second issue I have with Obama’s approach is accountability. While he stopped short of blaming America, he attributed the problems in the Middle East to, “tension that has been fed by colonialism that denied rights and opportunities to many Muslims, and a Cold War in which Muslims were too often treated as proxies without regard to their own aspirations.” In other words, Muslims are historical victims. And this is the biggest reason why I remain skeptical of the Obama approach. Victim hood of white colonialism remains hardwired in the DNA of the Democratic platform, both domestically and internationally. We will make no progress until the Muslim peoples reject victim hood and take responsibility for their own societies and outcomes. By casting them as victims, Obama is perpetuating their own powerlessness vis-à-vis their purported oppressors whether it is the Israelis or, more accurately, their own political and religious tyrants that enslave them.

I applaud Obama’s efforts to bridge the gap between the Muslim societies of the Middle East and the West. I agree that George Bush could not have given this speech. But real relationships are based on reciprocity and accountability and thus far Obama has been reluctant to demand either from the Islamic world.

Playing Hardball

Barack Obama came to office as an untested one term senator and a one term state senator. He had no legislative accomplishments to his name and no executive experience. So it was natural that we would question whether he was tough enough for the top job in Washington.

His first priority after assuming office has been handling the banking crisis and the economy. In this arena, he had his artillery tubes trained on the villains he deemed responsible for the mess—the bankers. He immediately went after the highly paid executives of financial institutions, capping their pay, and in the case of AIG, threatened to “pursue every legal avenue to block [these] bonuses and make the American taxpayer whole.” At one point in addressing AIG, Obama lost his voice and commented, “excuse me, I’m choked up with anger here.” His treasury department let it be known that as part of the regulatory overhaul, they will be focused regulating and limiting executive pay in financial institutions, and hinted that regulation of executive pay might not end there.

Having put the financial executives in their place, Obama next focused on the auto industry, and in a stunning exercise of government power, pressured GM CEO Rick Wagoner to resign. I don’t know whether Wagoner was performing well or not under the circumstances, but it seems to be somewhat heavy-handed for the government to meddle in corporate governance in a for-profit enterprise. Immediately after Wagoner’s ouster, Tim Geithner then let it be known that he would not hesitate to pressure a bank CEO to resign.

Team Obama has no qualms about pushing around corporate CEOs. In addition to their shareholders and boards of directors, corporate leaders now need to worry that their performance will be assessed by the bureaucrats in Washington and that they will be unceremoniously shoved over a cliff. And if you happen to run a large financial institution, you now have your pay limited and you effectively serve at the pleasure of the Secretary of the Treasury. I thought they did this kind of thing only in the old U.S.S.R. This is real hardball. By strong-arming them, firing them, and taxing them, Team Obama has shown that it can and will play tough with the “recklessness and greed” in the corner suite.

Unfortunately, the tough talk and tough action seems to run out of gas when we’re talking about the murderous thugs overseas that have threatened us and our allies. The steely gaze averts when confronting dictatorial thugs bent on acquiring the means to inflict mass murder. Both Iran and North Korea have cavalierly ignored multiple UN resolutions with respect to their nuclear programs and have essentially dared us to do anything about it. The same Team Obama that demonstrated flinty resolve in dealing with American CEOs has shown quite a different tone when it comes to our adversaries.

With Iran, a country that has threatened the existence of one of our closest allies and continues to speed along on its project to acquire the means to do it, President Obama has elected to reach out to them. In a videotaped message to Iran last, he gushed effusively about the accomplishments of their culture (without a footnote about the part that promotes beating women) and wished them happy holiday in Farsi. The response was an immediate rebuff from the mullahs, a diplomatic b—ch slap. Worse, the Financial Times last week reported that the Obama administration is seriously considering accepting Iran’s nuclear enrichment program as a fait accompli. In other words--Israel, you’re on your own. There will be no response from the U.S.

The Bush administration dropped North Korea from the terrorist sponsor list last year in hopes of wooing them to the six-party talks. The North Koreans have, in response, re-commenced their game of cheating and backpedaling on their commitments. This week, they once again stuck a finger in the eye of the Obama administration by firing a missile over Japan. When questioned about the impending launch last week, Robert Gates said meekly, “I would say we’re not prepared to do anything about it.”

So much for the Axis of Evil. It appears that we will simply offer no resistance to a nuclear North Korea or a nuclear Iran. Iran will be permitted to keep the centrifuges humming and North Korea will continue to gain concessions from the West without ANY meaningful concessions in return.

When Obama talked about $170 million in AIG bonuses, the rage in Obama’s face was palpable—you could actually see the veins pop out in his neck. He commits the full force of his administration to keeping capitalists in line and has no hesitation to use all legal and political means to make sure corporate executives reign in greed and recklessness. And he doesn’t flinch when he threatens other CEOs with the

In this administration, though, regime change is reserved for the capitalists. Confronting regimes that each have promised to incinerate a close ally of the U.S. is another matter. With rogue regimes, the Obama rage vanishes like smoke on a windy day. I don’t know how you even compare $170 million in bonuses with the idea that a madman has or soon will have the means to destroy Seoul or Tel Aviv (or New York or Washington D.C.). So far, the response from Team Obama has been a video postcard wishing them well and hoping they have a nice holiday.

Just Wonderin'

I’m really trying to figure this all out, but some of this just doesn’t make sense to me. These are just a few random observations that are causing some serious cognitive dissonance.

-The Obama administration is seriously considering slashing funding for “unproven missile defense technology” (at the same time North Korea is threatening to lob a missile over Hawaii) but at the same time believes that it is essential to spent billions on unproven “green” technologies and unproven stem cell research.

-Obama seeks to create a “post-bubble” economic model, one that doesn’t rely for growth on “just on an overheating housing market, or people maxing out their credit cards” but instead wishes to build it on the pillars of a government spending bubble with the government maxing out on its credit card.

-After at least 60 released Gitmo detainees returned to terrorism, the Obama administration is so confident in its vetting process that it now wishes to release some of the Gitmo inmates on U.S. soil (and give them government benefits).

-Barack Obama has never worked in business, and has been in his job less than 100 days, terminates his first employee this week—a CEO of a publicly traded company.

-GM is out of cash and teetering on bankruptcy and the Obama administration promptly hands it a new obligation—stiff new fuel efficiency requirements, which will require substantial cash investments.

-The Obama Administration hammered John McCain’s support of taxing health benefits in the waning days of the campaign and filled the airwaves with sharp ads claiming McCain wanted to take health care benefits away. Just a few days ago, this headline appeared in the New York Times:

Administration Is Open to Taxing Health Benefits

These are just a handful of things I’ve been trying to reconcile lately. It hasn't been easy.

Shock and Awe

My recent relative optimism took a pretty good body blow this week. Despite the Dow’s first back to back positive weeks since May, the brouhaha over the AIG bonuses threatened to impair much of the progress we have made in recent months.

There is no other way to color it. This was a painful spectacle to watch. Instead of carefully considered, thoughtful, sober approach—you know, the kind of thing that we were promised during the campaign, the outcome was policy born of rage. It was exactly what the Founding Fathers feared in a democracy—mob rule.

At issue is whether employees should be paid their 2008 bonuses, rightfully earned under the existing AIG compensation program. Unfortunately, some of these bonuses were rather large (by the standards of the current administration anyway) and many were to be paid to individuals that worked in the business unit that ran AIG aground. I fully understand the revulsion at using tax dollars that were used to bail out AIG to pay these executives. It was an unfortunate consequence of keeping AIG out of bankruptcy and is fundamentally unfair.

As AIG began collapsing last fall, the government had two bad choices available to it: permit AIG to go into bankruptcy or prop it up in some way. There were no other choices.

A bankruptcy in many ways would have been far simpler. The US Bankruptcy Code provides a scheme and a set of rules by which the bankrupt entity will settle up its claims, including executive bonuses and “stay” bonuses—amounts that can be paid to executives to induce them to stay at the bankrupt company and help it work out of its problems. Congress would not have to decide anything about these bonuses. That would have been left to the bankruptcy court.

The government chose not to permit AIG to enter bankruptcy. Because of the intricate interrelationships between AIG and other financial institutions, permitting AIG to go into bankruptcy risked dragging other financial institutions into a vortex which might have caused a total collapse of the financial system. It was like a string of mountain climbers all tethered together. If one went over a precipice, the whole string may go down. So while it would have made dealing with the bonuses easier, the cost may have been unimaginable.

In life, there are tradeoffs—we rarely get the full result we want. Here, the government could have let AIG fall into bankruptcy and let bankruptcy rules deal with the bonuses. Or it could have kept AIG out of bankruptcy with the unfortunate by-product of it remaining liable for the bonuses. Instead, the government decided it could have it both ways. In a grotesque exercise of raw government power, the government decided that it was going to TAKE the bonuses by imposing a retroactive 90% tax on them. This is one of the most egregious naked grabs for private property and intrusions into the contract rights in recent memory.

I find it ironic that President Obama, a law professor, has twice taken positions which effectively take freedom of contract out of the hands of private individuals and hands it to the government. Under the mortgage bailout plan, he has advocated giving bankruptcy judges the power to rewrite mortgages. And now, he advocates blowing up private contracts between a company and its employees.

The exercise of brute force by the government here is real shock and awe.

The Right Guy

Sometimes it’s hard not to believe in Providence. Tonight I watched the 60 Minutes interview with Ben Bernanke and came away feeling that we are simply blessed to have him. While most people have suffered some measure of pain in this downturn, I believe most people have very little idea of the magnitude of the disaster that we likely averted because we have Ben. And then it occurred to me that this is the second big disaster in the last twelve months that was averted because we had just the right person at just the right place at just the right time.

On January 15, Flight 1549 took off from LaGuardia and hit a flock of birds, knocking both engines out. At the controls was Chesley Sullenberger, a pilot with over 40 years of flying experience, a graduate of the U.S. Air Force Academy, a safety instructor, a glider and accident investigator. He has had a pilot’s license since the age of 14. With no other viable options available to him, “Sully” landed his Airbus A320 safely on the Hudson, saving the lives of all on board. In retrospect, “Sully” had been training his entire professional career for just this event. The term “perfect storm” has become a cliché, but Sullenberger was a “perfect storm” of training and expertise to face just that moment. There are 155 people are alive today because this one person had spent his entire life training to face a critical challenge.

After watching Ben Bernanke this evening, I felt the same way. We are facing unprecedented challenges in the financial markets and in the economy. Not since the 1930’s have we looked financial catastrophe so closely in the eye. We were very close to a complete and total economic shutdown last fall. Again, as with Flight 1549, it was as if God had chosen the right person to be at the right position when this all occurred. Bernanke has a brilliant mind, an easy demeanor, and a personality that exudes genuineness. He is one of the nation’s leading scholars on the Great Depression. While Alan Greenspan had a reputation of being imperiousness and often purposely used the language of obfuscation, Bernanke gives the impression of being more humble and open.

After watching the interview with Bernanke, I realize that there are times in history when it is hard not to see Providence at work. The human misery of the Great Depression was incalculable. It was a global catastrophe that led to disruption of millions of lives and it permitted the rise of fascism that killed millions. With Ben Bernanke at the controls at the Fed, he is determined not to allow the kind of policy mistakes that allowed that downturn to spin out of control. Similarly, with another pilot at the controls of Flight 1549, 155 families would likely still be in mourning.

Two amazing men trained for a lifetime for one crucial moment in history.

Never Say Never

Last week, I committed an act that may ban me from future Republican gatherings, permanently block me from Rush Limbaugh’s website, and subject me to being smeared as a heretic. It was a most heinous act, almost too shockingly disturbing to admit to publicly---I actually visited the Clinton Library while visiting a friend in Little Rock. Even more damning, I actually enjoyed it.

Now, when Clinton was president, I held highly contradictory views of him. During the Clinton Administration, I had this vague feeling that I was being sold something all the time. Listening to Bill Clinton was kind of like being around a used car salesman in a bad leisure suit. You knew what was going on and it felt a little greasy, but you kind of accepted that this is just how the game is played. His dalliances with women that bordered on trailer trash and his less-than-credible, “I didn’t inhale” claims were unbecoming of a chief executive and signaled a lack of self control. The affair with Monica Lewinsky and the scandal and drama that unfolded was pretty revolting. The affair itself didn’t bother me—people have their own peccadilloes. It was the lying under oath to a Grand Jury that was reprehensible. Still, I didn’t have the burning hatred for Clinton that many Republicans did. Neither did I think he was one of the greatest presidents of the 20th century. My overall view was that he inherited an economy in ascent and in general, didn’t do much to screw it up. In foreign affairs, I thought him a bit timid, lobbing a few missiles from afar at our real enemies--Al Qaeda and Saddam Hussein, while putting our troops in harms way where we had no dog in the hunt—Somalia and Haiti. And most disconcertingly, he was slow to act during the genocide of Bosnia-Herzegovina, and did nothing at all when hundreds of thousands perished in Rwanda. On balance, I thought him to be an O.K. president, but just that.

Shockingly, though, while strolling through the library with the photos, and media displays and artifacts, a wave of nostalgia washed over me. That’s right- nostalgia. Never in a million years would I have expected to feel this way over the Clinton years. As I strolled through the panoramas and reviewed events of the Clinton administration, it was natural to contrast them with what is going on under the new Democratic administration. With some perspective, I have come to the conclusion that Clinton was shady and slippery when it came to dealing with matters in his personal life, but in matters of policy, he was pretty principled, at least as far as politicians go. At his core, Clinton was a believer in free markets, free trade, and limited government. He was willing to spend political capital pushing back on his own party to accomplish objectives consistent with those core principles. By passing Welfare Reform and shepherding NAFTA through, Clinton demonstrated his willingness to lean against important elements of his constituency. NAFTA and Welfare Reform would be crowning achievements in any Republican administration and far outshine anything George W. Bush was able to accomplish on the domestic front.

This is in stark contrast to our current administration, which has demonstrated a willingness to be slippery on matters of policy and has yet to demonstrate in any way that it is willing to lean on the more liberal elements of its constituency. Is there any policy position that the administration has taken that Ted Kennedy would object to? Obama talks up bipartisanship, but stiff-armed the Republicans in passing the stimulus bill. He talks about stimulus, yet not much in the recently passed spending bill has anything remotely to do with real stimulus. He talks about tax cuts for 95% of Americans, but the bulk of it is really just a transfer payment. If you are not paying taxes and only receiving a check, that is welfare, not a tax cut. Most egregiously, he claimed last week that the budget stimulus bill was free of earmarks, which brought a snicker from the audience. The “earmark free” stimulus was chock full of earmarks, containing pork barrel projects such as a as a $950,000 convention center in South Carolina and the biggest knee-slapper of all--$1.8 million set-aside for pig odor research in Iowa. I’m not opposed to the pig odor research per se, but we’d get more mileage out of it if we started in Washington. Obama has learned that labels matter, and if you name something different than what it actually is, you can throw them off the trail for awhile.

In the opening weeks of his administration, Obama has taken immediate and concrete steps to neutralize several of Clinton’s most important accomplishments. The stimulus package effectively gutted welfare reform and signaled to the world that this administration is willing to see our commitment to free trade erode by permitting the “Buy American” provision in it. In one of the media presentations at the Clinton Library, I even heard Clinton’s semi-famous speech proclaiming that “the era of big government is over.” I almost could hear Obama’s voice in the background singing, “We’ve only just begun.” I’m starting to come around to the point of view that Clinton’s sleight of hand in his personal matters were pretty venial sins after all, especially in contrast to the verbal deception that is going on now.

I never thought I’d ever say this. But, Bill, I miss you.

10 Things to be Happy About Despite the Depression.

In my last posting, I argued that the economic downturn that we were experiencing was not just your father’s recession. This contraction is more properly classified as a depression, although this classification does not necessarily imply that we are doomed to a 1930’s or even a Japanese type decade-long economic setback. It simply means that this will be a severe contraction and that the spending, taxing and regulatory choices of the Obama administration will have a profound effect on its duration and depth. Although we are relatively early in the game, I am not entirely encouraged by what I am seeing. But to dispel the notion that I am a reflexively gloomy whenever liberal Democrats are in charge, I decided to take a slightly different tack. My comments in this post are largely inspired by the most recent issue of Barron’s magazine. As soon as I got home with my newsstand issue last week, I opened it and frantically began to search for any article—any at all—that had the slightest bit of good news. Aside from the price of gold, not a single analyst had anything hopeful to say about the near term prospects of any asset class or for the economy as a whole. It was doubly depressing to think that my wedding ring and my fillings are now probably worth more than my 401(k). So after reading Barron’s and listening to the funereal message of our president, I thought it appropriate that somebody, somewhere needed to say something positive about living in this era, and I might as well be the one to take a stab at it.

Here is my top 10 list of things to be [at least moderately] happy about despite the depression:

• Getting from place to place is easier. Three years ago, taking my kids from home to school in the morning was a real hassle. My neighborhood was a frenzy of activity in the morning. It was like traveling 3 miles in a construction zone, getting stuck behind dump trucks, waste hauling trucks, and lumber trucks. Construction crews would halt traffic on side streets to haul in materials to build yet another McMansion. Since last summer, all this has gone away. Now, the morning trip to school is like a summer drive on a country highway. Similarly, the airports are now a breeze to navigate through. My family and I took a trip to New York in last December—normally a stressful, jam-packed adventure elbowing your way past bustling people with luggage and shopping bags full of Christmas gifts and businesspeople and lawyers scrambling to get year-end deals done. This year, we breezed in and out and I have to say it was a great deal more pleasant.
  
• Schadenfreude. OK, OK, I admit it. Some of these investment bankers, hedge fund managers and other financial pros that you knew weren’t any smarter than you were making millions, pounding their chests and proclaiming themselves to be wizards. Well, many are now half-wizards at best, and some, we learned, weren’t really wizards at all—just guys that got a little lucky and some were out and out frauds. I’m as staunchly capitalist as anyone, but there is something perversely gratifying to see some of these folks take off the tall pointy wizard hats and mow their own lawns, and to see the real frauds go to jail.
  
• We may be healthier in the long run. There has been a raft of recent research demonstrating that retirement isn’t really good for you—mentally or physically. People do better when they continue to work and are engaged in productive activities. We need a purpose in life and a routine. For many, retirement is a road to physical and mental deterioration. The deflation in our asset values means that we will have to work longer to make up the gap. The demographers are telling us that there will be a projected labor shortage in the coming years as baby boomers reach “normal” retirement age. Ultimately, baby boomers will work longer, and it will be to everyone’s benefit. It will ameliorate the labor shortage and extend their productive lives and overall it will be to everyone’s benefit.
  
• Better relationships. Shared misery creates a bond between people. I learned this when I played high school and college football. Going through training camp in the hot August sun with coaches yelling at you for 8 hours or more a day created a bond among us that, in some cases, lasts to this day. Today, the misery and pain of this depression has brought me closer to many of my friends and acquaintances. Nearly everyone I know has suffered some degree of pain and loss. Many have lost jobs, have had their assets severely impaired, and are experiencing a great deal of anxiety about the future. Going through that together (dark humor and alcohol helps) means that pretenses are dropped, more personal stories are shared, and our fears are talked about more openly. When your neighbor is doing very well and you’re not, it’s very painful. When we’re all suffering, we tend to draw closer. It’s human nature.
  
• Restoration of old fashioned values. The days when you could work at a job for two weeks and buy a house with no down payment are gone, as is the ability to refinancing the “equity” out of your house so you can buy big screen TV’s, Caribbean cruises and the like. We will go back to a time when newlyweds lived frugally for several years to scrape up a healthy down payment and get a mortgage they could really afford. We will be forced to budget and live more responsibly. When we move into higher lifestyle stations, we will do so the old fashioned way—by working, saving and investing, getting promotions and starting our own businesses and not simply on abnormally high increases in our home equity.
  
• Reordering capital flows. Our government created the conditions that enabled this catastrophe to occur. Through tax (mortgage deductions and other tax breaks) and regulatory policies (CRA and Freddie Mac) and by keeping interest rates too low for too long, Uncle Sam fathered the bubble. The government’s fetish with individual home ownership distorted the market and ushered in this cataclysm. We have now learned that there is a large segment of the population that SHOULD NOT own homes and should be renters instead. These individuals were in no way able to absorb the risks of asset ownership. Additionally, government incentives diverted too much capital into residential real estate, which is an unproductive asset. Once again, the people that the government purported to help have been among the most damaged in this crisis. They will lose their homes and have their credit histories damaged. But that is why the phrase, “I’m from the government and I’m here to help you” is such a ubiquitous joke. Hopefully when this all rebalances, we will have a healthier allocation of capital into productive assets and people that should be renters will stay renters.
  
• Birth of some wonderful businesses. I noticed in my business career that many, many companies had their origins in the period from 1980-82. Many were started by middle managers that were downsized from their employers. One in particular was fired by a large cosmetics company at a time when he had 5 children and a wife that didn’t work. For him, starting his own company was not just a matter of scratching an entrepreneurial itch. It was a matter of survival. Somehow, he survived and today has a very nicely profitable little company, and he is much better off than if he had remained with his old employer. Orbitz, HP, FedEx and CNN are just a few examples of companies that were born during recessions and this one won’t be different. There will be the brave few that will see this as a time of great opportunity and they will be rewarded for doing so.
  
• Reallocation of human capital. I know that it is painful, but there were a lot of people with great quantitative skill employed by Wall Street and creating no value for our society. Lured by supersized salaries, these people were employed by Bear Stearns, Lehman Brothers and other similar organizations, putting together the subprime securitizations that were at the root of this mess. Those jobs are gone for good. Thousands of these people and others like them will have to find something else to do. Hopefully, some of them will decide that they need to teach. Wouldn’t it be great for our educational system if some of these talented individuals found their way into the classroom? Many will be forced to take steps they should have taken anyway. On a recent trip, I struck up a conversation on the airplane with a middle aged African American woman. She was just returning from a successful job interview for a job as an information technologist with a university in Arkansas. She had been laid off by a bank from her position as a check processing supervisor. The layoff forced her to look for a job—which she found in short order. She will be taking a position that is more commensurate with her skills (she had an IT degree), has better pay, is more interesting, and is in a warmer place to boot. There will be many like her that will be redirected to a better life.
  
• Perhaps a cleaner environment. China’s environmental problems are overwhelming. Ours are difficult even though we have been working at it more or less for a couple of decades. This pause in economic growth may give us some breathing room to develop solutions to some of those problems. For a little while, there will be fewer planes in the air, cars and trucks on the highway, and factories will be spewing fewer pollutants (although that will be offset somewhat by China keeping some inefficient factories going). It may be beneficial to slow things down while we work on technologies to solve these problems.
  
• Finally, fewer shark attacks. CNN ran a little story last week that noted that since the recession started, researchers have seen a sharp drop in shark attacks on humans. The researchers believe that it is a direct result of fewer people vacationing and being in the water. I wonder also whether releasing stress hormones additionally makes us less tasty. While being consumed by a bear market is no fun, being eaten by a shark is worse.

On balance I would not argue that this is a good tradeoff. The depression will inflict a great deal of misery and leave permanent scars, and will be particularly harmful to many baby boomers. But there will be some salutary side effects to soften the blow, and we should keep them in mind and enjoy them. I am particularly pleased that a number of my friendships have been enhanced over the last 6 months. Just the other day, a partner in a large law firm asked me how long I thought this would last and if I thought we would ever recoup our losses in the market. “I think guys like you and me are pretty much screwed in the long run,” I said, patting him on the shoulder, “Not only have we taken current losses, but Big Brother now thinks we haven’t paid nearly enough. But I’m still your friend and I still luv ya’.”

ARE WE IN A DEPRESSION?

One night last fall, after witnessing several days of horrendous losses in the stock market, I woke up about 2 am and flipped on the TV in the basement to see if the Asian markets were settling down at all. My worst fears were confirmed. The Asian markets were tanking again-badly. I went upstairs, got out a little glass and poured myself a shot of Jack Daniels and took a sip. “This time, it’s different,” I thought, “Life is going to change.” It was like being an eyewitness to a bloody accident on the highway.

Few public figures have been willing to say the word. On Feb. 4, Gordon Brown, prime minister of Great Britain made a comment in which he spoke of pulling the world out of depression. His handlers scrambled and said it was a slip of the tongue, but the damage had been done. The quote ricocheted around the world. Richard Posner has publicly stated that he believes that we are indeed in a depression and in a few months he will be releasing his new book, “A Failure of Capitalism: The Crisis of ’08 and the Descent into Depression.” Most other economists and commentators have been more circumspect and careful about using the term. And, while there are different definitions of a depression, I define it as a deep and persistent economic downturn that damages well-run companies and prudent individuals along with the rest, and which cannot be solved with traditional monetary and fiscal measures alone. A depression leaves lasting scars and a forever altered landscape. But I think a depression is exactly what we are experiencing and here’s why:

• The suddenness and ferocity of the downturn. Although the rumblings of stress in the financial markets had been with us since August of ’07, hell really didn’t break loose until Lehman was permitted to fail. The severe restriction of credit availability whacked the economy immediately with full force. Economists and policymakers were caught flatfooted and have consistently underestimated the depth and breath of the damage. The Fed and Treasury both missed it. Ben Bernanke admitted that he underestimated the scope of the subprime problem And consider this quote from Treasury Secretary Henry Paulson in April of ’07, "I don't see (subprime mortgage market troubles) imposing a serious problem. I think it's going to be largely contained." Today, Paulson’s quote, along with the “Mission Accomplished” banner at the conclusion of the initial phase of the Iraq war will certainly make the top 10 misjudgments of the decade. Almost all sectors have been pounded—manufacturing, services, retail, tech—you name it. We have had the worst 3 months of job losses in 45 years and even the most optimistic forecasters are talking about ’09 as a lost year. The speed and scale of the downturn are almost unprecedented.
  
• Systemic triggers. Most recessions, by accident or design, are Fed created. In the usual scenario, momentum in the economy builds, slack comes out of the system, labor demands higher wages, producers demand higher prices. Inflation begins to set in and the Fed raises rates to cool things down. Because of the time lag (6 months to a year) before interest rates take effect in the economy, the Fed cannot calibrate perfectly and often overshoots, squeezing too hard and pushing us into recession. The Fed will then lower rates to spur credit creation, and lowering interest rates along with tax cuts typically work. And then the cycle begins all over again. That’s not what happened here. Our current downturn was triggered by asset deflation and a credit crunch, and so is fundamentally different than the past several recessions.
  
• Deflation signs. The inflation numbers came in at the lowest level in 53 years last week. Economists aren’t seeing serious deflation in the economy---yet. But I am seeing little indications of deflation beginning to pop up. Law firms have frozen billing rates, and sometimes lowered them. Retailers have slashed prices. Even the local delis are offering “recession fighting new lower prices”. ACCO recently announced steep pay cuts for its workers. In short, very few players in the economy have any pricing power at all. If significant deflation takes hold, look out.
  
• Worldwide reach. This contagion is truly global. When Northern Rock failed, it made the papers, but few saw it as a harbinger of what was to come. Asia and Europe are contracting, with Japan in particular showing a sharp decline. Eastern Europe is close to defaulting on its debt and Western European banks are holding lots of Eastern European paper. Iceland is insolvent. Ireland is nearing default on its debt despite the fact that just a short time ago Ireland was a darling performer in the world economy. Because the rest of the world followed us right down quickly, exports aren’t going to be much help in getting us out of this. This is truly a global phenomenon.
  
• No consumer help. The consumer is severely wounded and is not likely to lead the way back. No one is spending. We all have holes in our balance sheets. Most ordinary Americans have wealth in 2 principal assets—their home and retirement account and both have taken heavy hits. Because of this and because of the generalized fear, consumers aren’t spending. Indeed, consumers saved rather than spent 87% of the tax rebates that the Bush Administration authorized to help jumpstart the economy. Since the American consumer represents roughly 60% of our economy (and therefore a significant factor in the world economy), the consumer will be unable to spark a comeback anytime soon.
  
• Fear. If you don’t have at least some fear in this environment, you are either so wealthy that it really doesn’t matter or you have a mild mental illness. This is an area in which the new administration has been woefully inadequate. Instead of reassuring us, Obama’s message of hope has been inverted. By using the politics of fear to get the stimulus package through, he is has stoked anxiety and panic. Instead of saying, “We will get through this together,” he has chosen the language of fear. He warned of a “catastrophe” if the stimulus bill didn’t pass immediately and without debate and warned that we may go into an irreversible tailspin. Maureen Dowd, Bill Clinton, Robert Schiller, and the Wall Street Journal have all commented on Obama’s fear mongering. He needs to project hope and calm reassurance. We don’t need to be reminded of the potential for dire consequences.
  
• Vibes from the front. Last December, I attended a large function sponsored by the Turnaround Management Association, a trade group comprised primarily of consultants and other professionals that assist companies in crisis. Ordinarily, a downturn is met with some glee at these events for it translates into more billable work for its members. But this time, I noted a very different tone in my conversations. “This time, it’s different,” was most common reaction. There was a somberness in the room that I had not seen before. You know it’s bad when the workout guys look shell-shocked.
  
  Taken together, I believe that we are in a depression—a multiyear swoon that will be very painful for us and will leave permanent changes in our society. A few like Richard Posner have had the courage to say it and Gordon Brown said it by accident. But it is clear that this is an episode that will inflict a great deal more pain before it’s over. I, for one, am willing to call it by its proper name.
  
  Now that you know where we are, if you are interested in very readable books on the Great Depression era, I highly recommend The Worst Hard Times by Timothy Egan (focused on the Dust Bowl) and The Forgotten Man by Amity Schlaes. Both are quite good and will give you an appreciation for our ultimate fortitude and ability to persevere in a pretty harsh environment.
  
  All is not lost, however. Stay tuned. We will get through this and next week, I will give you my list of things to be happy about despite the fact that we are in a depression. Remember that after 9/11, we all feared that massive terrorist attacks would be regular occurrences. 9/11 hurt a lot of people and caused some permanent changes in our society, but none of the worst things that we feared ever happened. That is what I predict the ultimate endgame of this depression will be like.
  

A Pattern

"God Damn America."

Jeremiah Wright



"For the first time in my adult life, I am proud of America."

Michelle Obama



"America is a nation of cowards when discussing race issues."

Eric Holder

What do these three people have in common? They either are or have been close personal advisors to President Obama. When they speak to him, he listens. Individually, these statements are bothersome. Taken together, they are warning signs of a potentially troubling pattern.

Eric Holder is a very smart, very well educated man, and a lawyer by training. He is a person that understands that words have meaning. He is not just some over the top, hyperbolic preacher, or a person whose words can be explained away by saying that they were taken out of context.

He couldn't be more wrong. It is a mark of maturity and greatness of this country that we elected an African American as our chief executive. And it is the supreme irony that he has his position because of our maturity and greatness. Racial issues were discussed in the main stream media and in the blogosphere throughout the campaign and we faced those straight up. The Bradley Effect turned out to be as relevent as Y2K-- a whole lot of nothin'. As a country, we finally and conclusively determined that race didn't matter.

America has lost a measure of confidence in this financial crisis. We will in time get it back. Especially at this time, we need to have people around our president that will remind him (and us) of our greatness-- not insult us in the most vile way. We have our faults, but cowardice isn't one of them.

READY TO LEAD?

We were all tired of George Bush and after bungling Iraq, the response to Katrina, and the initial phase of the market meltdown, and last November we gave a big thumbs down to Bush and his fellow Republicans. Barack Hussein Obama won last November’s election on the themes of hope, competence, judgment, bipartisanship and a commitment to use facts, reasoning and science to guide his thinking rather than pure ideology. Although I have generally voted Republican, even I had hope that Obama would be different. In the opening weeks of his presidency, he had an opportunity to calm and anxious and scared nation and jittery markets by demonstrating that he was in control and that meant what he said. Instead, he whiffed. As his first month comes to a closes, he has given us substantial evidence that our worst fears were true—that Barack is an inexperienced freshman senator with strong and very partisan liberal instincts.

As a U.S. senator and state senator, he had no major legislative accomplishments to his name so it is no surprise that when the opportunity to lead on one of the most pieces of legislation in 50 years came about—he punted to Nancy Pelosi. What came back was predictable. Very few credible economists have been very enthusiastic about the pending Stimulus Bill (see Becker Posner blog link). It was as if Nancy gave a loud whistle in the halls of Congress and announced, “Hey, boys, you’re gonna have one shot to get all of your pet projects in one big package so hurry up and get it in while the gettin’s good!” So, instead of a stimulus bill that we could all live with (mostly public works projects sooner rather than later), we have a liberal grab bag of nonsense like money for the National Endowment for the Arts, a huge Big Brother database to lay the infrastructure for government run healthcare, “fish barriers”, and most dangerous of all a “Buy American” provision (thankfully, though, watered down). It is very little stimulus and very little this year. Scores of economists took out full page ads and asked him to slow down, clean this up and get it done right.

But not to be deterred by reason and having a bill that was not defensible on its merits, Barack resorted to old rhetorical gimmickry to sell the hurry up Pelosi-made product— using the politics of fear and by knocking down straw men. “If we don’t act immediately,” he said, “our nation will sink into a crisis that, at some point, we may be unable to reverse”. Huh? All because we don’t have fish barriers, STD prevention, and a few off-broadway plays? What happened to “the only thing we have to fear is fear itself?” His other ploy was to go partisan and attack straw men, claiming that “tax cuts alone can’t solve all of our problems”. He is correct, but no one is actually claiming that tax cuts are a cure-all for this crisis. His pre-election promise to work for bipartisanship evaporated quickly and the Stimulus Bill received a grand total of 0 votes. In the middle of all this Senator Gregg bugged out as Commerce Secretary, citing “irresolvable conflicts.” He knows where Team Obama is headed. So much for reaching across the aisle.

The other disaster of the week was Tim Geithner’s bank bailout plan –the Unplan. After hammering away at Bush (justifiably so) for invading Iraq without a plan, one of Team Obama’s first trips to the plate saw the indispensable Geithner present a “broad outline” with very little details. Not surprisingly, the market tanked with one commentator referring to the Unplan as “Shock and Ugh”.

These blunders came on the heels of the capping executive compensation for executives at financial institutions at $500,000, which I guess is designed to punish all financial institutions for the bad judgment of John Thain who accelerated bonuses and then spent an egregious amount of money refurbishing his office. I understand the point, but right now, we need the best management talent available at these floundering behemoths. I don’t know about you, but if I were on a plane landing on the Hudson, I wouldn’t want a pilot that was subject to a salary cap because he’s “just a glorified bus driver.” These are large, complex organizations with monumental problems that have thousands of employees, and they are vital to the resuscitation of our economy. Why would you want to ensure that you can’t attract first rate talent to fix them?

After the events of this week, I was able to come up with a couple of proposals. First, the Stimulus Bill should reserve approximately $250 billion and contain a provision whereby an aircraft carrier takes $100 bills out to the middle of the Atlantic and shovels them into the ocean. A second carrier would clean them up, dry them, take them back to the mainland and distribute them at centers in large cities. The way I figure, an aircraft carrier has upwards of 5,000 crew and airmen. Then we would know with certainty that at least 10,000 jobs will have been created and the money would have gotten into the hands of individuals other than government bureaucrats.

My second recommendation is a new SEC rule which would provide that if the Dow drops more than 100 points during the presentation of any government official, the presentation must immediately cease and desist. It was unnerving to watch a split screen with Timothy Geithner speaking on one side and the Dow plummeting on the other. The 100 point gag rule would act as a circuit breaker which would require would ensure that a government official would be required to shut up and stop doing damage to our already decimated 401(k)s.

Between the tax problems of his cabinet nominees, the lack of planning for the Gitmo detainees once it is closed, and the sketchiness of Geithner’s Unplan, the Obama administration has not demonstrated the great leap forward in competence that we hoped for. He has given in to his shopworn liberal Democratic instincts, and has refused to push back at Congress. He promised to deliver more than politics as usual. Our national crisis demands it. He can do better than this.