Seniors Are Scared of Obamacare...and They Should Be

I first heard Dick Morris make this point. The main reason, electorally, that Obamacare is falling apart is that the elderly are rejecting in great numbers. Morris cites a poll in which elderly reject the plan by about 16 points. This is a massive political problem because folks over 65 have about a 70% voting attendance. About 30% of all health care expenses are spent on the last year of someone's life. So, it is the elderly that are the most affected by any health care reform idea. Frankly, the elderly are rejecting Obamacare with good reason.

First, President Obama has proposed, along with the Democrats in Congress, have proposed to pay for some of the health care reform with cuts in Medicare.

Nobody is talking about reducing Medicare benefits," Obama said. "Medicare benefits are there because people contributed into a system. It works. We don't want to change it. What we do want is to eliminate some of the waste that is being paid for out of the Medicare trust fund that could be used more effectively to cover more people and to strengthen the system."

Such assurances haven't stopped Republicans from stepping up their criticism.

"Using massive cuts to Medicare as a way to pay for more government-run health care isn't the kind of change Americans are looking for," Senate Republican leader Mitch McConnell of Kentucky said Thursday in a speech on the Senate floor. "Americans want savings from Medicare to be used to strengthen Medicare, not to create a system that would ... lead to a government takeover of health care."

While the President continues to insist that Medicare cuts won't lead to cuts in Medicare benefits, it's hard to see what else that would lead to. By cutting the fees paid to doctors for Medicare patients, that will eventually lead to less doctors accepting Medicare. The elderly should be worried that cuts in Medicare will lead to cuts in Medicare benefits because there's really nothing else that could happen.

Of course, the fear only starts in the cuts in Medicare. Pages 425-430 mandates advanced care planning for seniors. This will mandate that seniors meet regularly with a counselor to plan for their treatment as they near death. On page 429, the Advance Care Planning Consultant will be used to dictate treatment as patient's health deteriorates. On page 430,the government will decide what level of treatments you may have at end-of-life. This is mandated so this is no option. This is a requirement. Since most health care costs come at the end of life, they will be the first to be rationed.

Pages 272-274 analyzes and studies the treatment of cancer. Within this section, the bill mandates this...

The Secretary shall conduct a study to determine if costs incurred by hospitals exceed costs incurred by other hospitals

It's followed by a section on AUTHORIZATION OF ADJUSTMENT. As such, this section will lead to the rationing of cancer care.

On page 268 the bill even regulates the sale and rental of electric wheel chairs.

The reality is that elderly are very worried about what effect this bill will have on them, and they should be. This bill will ration care and since an enormous amount of care happens at the end of life it will be that care that will be rationed first. The bill will cut Medicare costs and that means cuts in Medicare benefits. It will force seniors to see advance care consultants and it will even have government bureaucrats make decisions for end of life. It even regulates electric wheel chairs.

Why Employer Funded Health Insurance is So Corrosive

In an earlier post, I gave my policy ideas for fixing our health care system. In my hypothesis, I made the point that the nexis of many of our structural problems in health lie in the fact that employers are the ones that overwhelmingly provide health insurance. I think it's important to expand on what exactly is so corrosive with having a system in which employers provide health insurance for their employees.

First, we've all likely heard politicians bemoan the fact that someone can't "take their health insurance with them" when they leave their job. Of course when someone bemoans this problem, they are bemoaning the wrong problem. After all, the reason that employees can't "take their health insurance with them" when they leave their job is because their employer is the one that negotiated the insurance deal. The insurance plan is the property of the company not the employee. Of course, the employee can't take their plans with them since the plan isn't their property. So, the problem isn't that employees can't take their insurance with them, but that we have employers provide insurance for their employees. The second reality causes the first problem.

Then, we've all heard of the so called gold plated insurance plans. These add hundreds of billions in medical costs yearly because they cover just about any medical procedure including regular check ups. Imagine how large automotive costs would be if everyone had car insurance that included oil changes, tire reallignments, and new windshield wipers. One of the reasons that health care costs are so expensive is that the patient is rarely a consumer. That's because most patients have nearly all hospital visits covered entirely by someone else. Patients never question the costs of tests, procedures, and everything else related to their visit. That's because they don't pay for it anyway. If car insurance covered oil changes, oil changes would become exponentially more expensive. That's because no one would ever question the cost of the oil change.

So, why are so called gold plated insurance plans so prevalent? They are provided by employers. In fact, they are often used as part of the selling point to recruit potential employees. Since health insurance isn't taxed, the employee has absolutely no motivation to get anything but a gold plated health insurance plan. Since employers provide most health insurance plans, gold plated plans become the standard. By doing so though, we also create a system in which costs are simply unsustainable.

Finally, employer funded health insurance also contributes to the enormous power of the insurance companies. That's because the patients become by standards in the health process. The insurance is provided by someone else. As such, the one in a position to control the insurance companies, the patient, has little power to control them. The patient can't leave the insurance company if they are unhappy. It wasn't their choice to use the company in the first place. It was the choice of their employer. I have documented several cases of corruption by the insurance companies against doctors. In fact, an insurance company insider once admitted that it's standard practice to shred doctor's bills. That's because they've found that only 80% of doctors notice that they haven't been paid. (likely because doctors are so busy that they don't always keep good track of their bills) The check against waste and corruption is the patient. If an insurance company mistreats your doctor, the patient leaves and finds another insurance company. Of course, if the insurance company is chosen for you, then you can't leave. The system of employer funded health insurance encourages more power in the hands of the insurance companies and less power in the hands of the doctors, and that's what leads to this waste and corruption.

So, it is for these reasons that I believe that our health care system won't be fixed until we find a way to lessen the influence of employer funded health insurance. Once again, here are my recommendations.

Meet the New Executive Human Resources Director: Barney Frank

The House passed the most sweeping regulatory bill on limitations of executive pay today.

The House approved a measure Friday that would put new constraints on executive
pay, capitalizing on outrage over multimillion-dollar bonuses to Wall Street executives whose firms were bailed out by taxpayers.

The measure, which applies to any firm with more than $1 billion in assets, passed 237 to 185, with most lawmakers voting along party lines. The Senate will not take up a similar measure until after it returns from its August recess in September.

The bill, introduced by Representative Barney Frank, Democrat of Massachusetts, would let regulators ban risky incentive-based pay that could have an adverse effect on the financial system.

This bill would give the Congress all sorts of new power to regulate salaries, bonuses, and other benefits packages (like the hated golden parachutes) of any individual deemed an "executive". The good news is that this bill has a slim to no chance of becoming law. The bad news is that our legislators are so drunk on power that they think that this is part of their job description.

It's important to note that Frank's bill wouldn't merely regulate the executive pay of those companies that have $1 billion and more in assets. There is so much troubling in this bill. First, Frank is trying to use class warfare by attacking a class of people that have little sympathy anywhere, executives. By attacking executives, a class no one likes, the Congress can do something that is entirely not their business.

There is absolutely nothing in the Constitution that could reasonably give Congress the power to tell a private company how much to pay any of their employees, executives included. Yet, that's what Congressman Frank has purported to do and he found 236 other lawmakers that agree with him. There's no doubt that many executives are over paid and often paid handsomely for incompetence. There's also no doubt that fixing this is entirely up to the private market and not the federal government.

The negative unintended consequences are numerous. This will no doubt drive executive talent to foreign firms not under this regulation. American companies will simply not be able to compete in the word market place for executive talent. If you were an executive would you work at a firm in which Barney Frank could dictate how much money you can make, when another firm of equivalent credentials doesn't have the same restrictions?

Of course, once the Congress gets its meathooks into executives that definition will continue to expand. If Congress is given any power to regulate executive pay it's not long before executive are defined to include more and more private employees. Of course, power is like a drug. Give Congress this power and it only feeds their monster and their thirst for more.

This is yet another example of why I see class warfare as such a corrosive tactic. Frank capitalizes on the natural disgust and envy for executives and he uses that to give him and his colleagues power none of the founding fathers intended. He uses this envy to craft legislation that will make firms less competitive, give government even more power, and opens the door to give it even more power. We can all only hope that this dies a fast death in the Senate

Council Winners

The Council has spoken again. This week, I'm an also ran but it's an honor just being nominated, even if I nominate myself.

Winning Council Submissions
First place with 2 points! – The Razor - Waging Lawfare: A Call To Arms
Second place with 1 2/3 points – Joshuapundit - Bigotry In Basic Black
Third place with 1 points – (T*) – Right Truth - Advice to Sergeant Jim Crowley
Third place with 1 points – (T*) – Bookworm Room - Make me Well
Fourth place with 2/3 points – Soccer Dad - It’s the speeches stupid
Fifth place with1/3 points – (T*) – The Provocateur – The Definitive Dossier on the House Health Care Bill (Pages 1-500) Part
Fifth place with 1/3 points – (T*) – The Colossus of Rhodey - Common sense on the Gates arrest
Winning Non-Council Submissions
First place with 2 points! – Michael Yon - An Artery Of Opium, A Vein Of Taliban
Second place with 1 2/3 points – (T*) – Heretical Ideas - Is Barack Obama An American Citizen?
Second place with 1 2/3 points – (T*) – American Thinker - Hoven’s Index : The First Six Months
Third place with 1 points – (T*) – The Daily Beast - The Man Who Let Mengele Get Away
Third place with 1 points – (T*) – Yourish.com - Obama insults the entire medical profession
Fourth place with 1/3 points – (T*) – Dick Morris - Socialism Doesn’t Work-Even in China
Fourth place with 1/3 points – (T*) – Wendy Kaminer @ The Atlantic - Law Students Flunk Academic Freedom 101
Fourth place with 1/3 points – (T*) – Ludwig von Mises Institute - The Second Coming of Keynes

Video, Quote, and Word of the Day

irenic

promoting peace

The vision that you glorify in your mind, the ideal that you enthrone in your heart - this you will build your life by, and this you will become.
James Allen

Energy Committee Secures Health Care Deal

Henry Waxman was able to pull Blue Dogs and liberals together to cut a deal to secure passage of the health care bill out of his Energy Committee just a couple hours ago.

Liberals and a small core of conservative Democrats set aside long-standing ideological differences early Friday to cut a deal that should allow the House Energy and Commerce Committee to approve a sweeping health care bill, breaking a two-week deadlock that threatened President Barack Obama’s top domestic priority.

Blue Dog Democrats on the committee, who are the linchpin in the House health care debate, agreed to allow their liberal colleagues to cut billions from existing government-funded health care programs in order to restore some $50 billion to $65 billion in subsidies set aside in the bill to help middle-income families purchase coverage.

This final agreement should clear the way for committee passage later today. Energy and Commerce is the last of the three House committees to consider the bill, so passage will put the package in the hands of party leaders for a titanic fight when Congress returns in the fall over the government's role in health care.

In the meantime, Waxman also lost one moderate Blue Dog out of his coalition, Rep. Zach Space. That means only three of the seven Blue Dogs on the committee have signed on. Despite this agreement, I am still of the opinion that the bill, in its current form, has little to no chance of becoming law.

The bill will have now passed out of three House committees. The Blue Dogs are still not all on board. If the Energy Committee is an indication, slightly more than half are still voting against the bill. The liberal wing is also not that happy with the new bill. It's unclear how many of the full chamber will be lost when it comes to a full vote. You're probably looking at between 25-30 Blue Dogs that will vote against this bill. Only 39 Democrats can vote against the bill and still have it pass. (if the Republicans vote in unison against it) So, passage out of the House is by no means a certainty.

Things are even more murky in the Senate. There, there isn't even a bill yet. Right now the bill has to walk a very tight rope between the liberal and moderate wing of the party. It has barely enough support to pass out of the House. Democrats can only hope for that kind of "success" in the Senate. Then, it still has to be reconciled and maintain that support.

I haven't even started talking about the month break yet. Now, lawmakers will go back to their districts and hear from their constituents. The bill is a lot less popular in the country than it is in the Democratic caucus. Furthermore, we'll have two more jobs numbers before there is a vote. If we're still losing 400,000 or more for the month of August (numbers that would come out the first Friday of September), then, in my opinion, all hope for passage of health care reform this year would be lost. The economy would be judged to still be in free fall and there'd be no confidence in any of the president's agenda at that point.

Support for both the president and this bill is falling and the momentum is against it. It's months before it winds up being law at best. So, between now and then, something must change to turn around the momentum. So, the message will need to be recalibrated, if you will, or the economy will have to show a remarkable turnaround. If not, the bill, as it stands now, will still not pass.

Nancy Armstrong RIP

I received very sad and tragic news yesterday. On Wednesday, Nancy Armstrong, who blogged at Ms Placed Democrat, was found dead at her home in Wichita, Kansas. Nancy and I allied on some stories about ACORN. I got to know her in the last month or so. She broke several important stories on the subject including the corruption in St. Louis I referenced on occasion. She broke several other stories including connections between ACORN and the Obama administration and was never credit for it. She told me that such recognition wasn't as important as the truth coming out.

Both Nancy and her husband were veterans of the military. She is survived by her husband and two children. Nancy was full of life with many fascinating plans, including a potential run for Congress, and so her death is a total shock to everyone that knew her.

I only got to know her in the last month or so and so I might not be the best person to write a eulogy. I can say that everyone that I've spoken with that knew her well is totally devastated. I enjoyed every conversation I had with her and I know that I will miss her. To her family and friend, she will be in my thoughts and prayers. May you rest in peace Nancy.

The Cash For Clunker Debacle

With the loan modification program the problem so far is that the program is so complicated, confusing and convoluted that it's hard to get any loans approved under the program. As such, a program that was supposed to save millions of homeowners from has saved a fraction of that. The cash for clunkers program has a totally different problem. It's so lucrative and straight forward that it's exceeded demand and is now out of money. This was supposed to be a $1 billion program in which car buyers traded in their older cars for new fuel efficient vehicles and received a $4500 credit from the dealership that would be applied to the new purchase. The program was supposed to last until the fall. It appears to have run out of money in four days.

Now, dealers are scrambling to get their money. Dealers would give a credit to the buyer and then go to the government to get that same $4500 back. If the $1 billion has run out and a dealer still hasn't received their money from the government, they're stuck. Furthermore, all the major car companies have taken out significant ad time for this program. Now, all of that is on hold.

Meanwhile, dealers are scrambling to make sure that they receive their money from the government. After all, the so called "clunkers" aren't worth anywhere near $4500 and if they don't get their money from the government, most of the cars they sold under the program would have been sold at a loss. Now, the program has been official suspended, indefinitely, as of midnight.

So, now a program that dealers and car makers thought they would be using for months is cut off in a matter of days. There are already law makers that are calling this a shining success. If you give anyone a good enough deal, they will take it. In this case, the government was literally giving a billion dollars to anyone who wanted to buy a car.

Of course, this was a success. People were getting a $4500 subsidy from the government to buy a car. That doesn't mean it will stimulate the economy. If you want to put money into people's pockets, just cut their taxes. Instead, the government came up with a scheme that would do something similar only in a much more confused way. Now, after overwhelming sales for five days, the whole program is confused and in chaos. A lot of car dealers will be left holding the bag on worthless cars they gave a $4500 credit for. That's not necessarily stimulative. A lot of car makers will have spent money on ad buys that are no longer valid. That's not necessarily stimulative.

Morning Market Report

There's breaking news. The Gross Domestic Product number came out and the economy contracted by one percent over the second quarter. (April through June) The consensus number was that the economy would contract by 1.5%. This is the most promising economic news in months. This is the fourth straight quarter of contraction which used to be a technical definition of a depression. (though most people don't consider that the definition anymore) Also, with a h/t to a reader, the first quarter GDP was revised to a drop of 6.4% from 5.5% originally. Of course, expect this number to be adjusted as well.

So, it's perplexing that the major indices have lost value since the announcement an the Treasury bonds have gotten better. The Dow, S&P, and NASDAQ were all up about a half a percent and now they are down slightly. Meanwhile, the Ten year Treasury Bond is now at 3.58% whereas it was trading at 3.64% before the announcement.

According to CNBC, this may be a clear case of buy on rumor and sell on news. While the numbers were better than expected, it appears that traders were already expecting them. The market has gained more than ten percent in about two weeks, and so it's possible that a better number was necessary to keep the momentum going. Either way, expect some volatility today.

Meanwhile, oil is trading down at $66.25 after testing $67 per barrel before the number came out. The Dollar is down against most other currencies though somewhat marginally. Against the Euro, the Dollar is down .31%, it's down .01% against the British Pound, down .17% against the Japanese Yen, and it's down .04% against the Canadian Dollar.

Stock indices were up across the board in the Far East and the exact opposite in Europe. The Hang Seng in China was up 1.68%, the Japanese NIKKEI was up 1.89%, and the Straits Time Index in Singapore was up .89%. In Europe, the British FTSE was down .27%, the DAX in German was down .64%, and the Spanish index was down .41%.

In individual stock news, Chevron is the biggest story. Its earnings fell 71% and they were weaker than estimates. Estimates had their earnings at 91 cents a share and they came in at 86 cents per share. Earnings were "only" 1.75 billion Dollars in the quarter. General Electric is also up after a Goldman Sachs upgrade.

Disclosure:

All information here is meant for informational purposes and not meant as an endorsement of an investment and shouldn't be taken as such. I am NOT a licensed investment professional and all investment strategies should be made on a personal level.

Video, Quote, and Word of the Day

aver

to assert as true

I write down everything I want to remember. That way, instead of spending a lot of time trying to remember what it is I wrote down, I spend the time looking for the paper I wrote it down on.
Beryl Pfizer

The Drip, Drip Toward Infamy

Today, the New York Times provided a report that confirms what a lot of people have suspected.

Manny Ramirez and David Ortiz were among the 104 major league players listed as having tested positive for performance-enhancing substances in 2003, lawyers with knowledge of the results told The New York Times.

The two were key members of the Boston Red Sox World Series championship teams in 2004 and 2007.

The lawyers did not name the substances Ramirez and Ortiz tested positive for, The Times reported.

On Thursday, before the Red Sox-Athletics game at Fenway Park, when Ortiz was asked about the 2003 drug test, he told The Times: "I'm not talking about that anymore," he said. "I have no comment."

This latest revelation should put to rest any belief that Ramirez' recent positive test was an anomaly. As for Ortiz, if this report is accurate that means that his entire career has been manufactured. Ortiz was a marginal player until he arrived in Boston in 2003 and his stats exploded. To put it into perspective, in all his time in Minnesota, seven years, he only had 57 home runs total. He had 31 homers in 2003 and 30 or more for five straight years in Boston. Yet, his time in Boston coincides with this positive drug tests.

This indicates that Ortiz was a marginal player that struggled to make a major league roster. Then he began cheating and he wound up being a perennial All Star. Much like Eric Gagne, there is now strong evidence that Ortiz manufactured a career and a life by cheating. If the timeline is accurate in both the Mitchell report and in this latest revelation, then both were marginal players, began cheating, and turned into perennial all stars. Both wound up in the record books, made tens of millions, and Ortiz even won two World Series titles during periods when they cheated. (again assuming everything is accurate)

To put this into perspective, this latest revelation should makes both World Series titles by the Red Sox totally corrupted and thus ought to be voided. Both Ramirez and Ortiz were the two heavy hitters in the middle of that line up for both titles. If they cheated to produce their numbers, then how else should we treat those titles.

The problem with all of these after the fact revelations is that in reality almost everything that happened in the fifteen years or so that steroids were prevalent renders almost all results worthless. If we knew the full truth, then we'd likely find out that major stars on almost all World Series winners were cheating. If cheaters were major contributors to a World Series title, how can it be judged as anything but tainted?

For baseball, this all couldn't be happening in a worse way. The sport would like nothing more than to move forward. Instead, we are treated to random revelations that remind everyone just how corrupt it all was for years. Unfortunately, the whole thing is much deserved. The sport pretended that none of this was happening when systemic steroid use lead directly to more homers and that lead directly to more fans. Now, some would like to move on and forget that anything happened. Of course, that's impossible. Baseball reaped the financial rewards of mass cheating in the form of more fans. The powers that be took on a see no evil hear no evil approach. The sport is now in an untennable position. Fifteen years produced so much cheating that everything that happened at the time is ultimately rendered worthless. All records and championships are rendered meaningless. How does the sport move on from there? The sport would like to put that inconvient fact behind it quickly but instead we have a drip, drip of bad news that comes out and it reminds us all just how bad it was.

Blogging as Propaganda

Today on the conservative blog, Hot Air, had this story about initial weekly jobless claims. The story's thesis: this new report is further evidence that Obama's employment strategy is failing. The story points out that jobs report was up 25 thousand jobs from the previous week. The story does mention that jobless claims are down but dismisses that as inconsequential.

Put away the streamers and stop the chorus from singing “Happy Days Are Here Again,” at least for a while. Bloomberg reports that initial jobless claims rose again last week by 25,000 as more that 584,000 Americans applied for unemployment benefits for the first time. While the four-week average of initial jobless claims dropped, this increase hints at continued escalation of the national unemployment rate:

...

We may be seeing less firing, but we’re still seeing plenty of it. More than a half-million people had to apply for unemployment last week, which means that we’re not seeing new jobs created.In fact, I’d challenge the notion that we’re seeing less firing. The four-week average hit 559,000, and last week’s number was 554,000. The latest figure will push the average higher in the next couple of weeks, which is what happens when the rate of claims increases.

Now, this story is peculiar on many levels. First, jobless claims is a very technical economic statistic. Unless you cover it regularly, you shouldn't draw any conclusion from it. After all, it comes out every week. How much could something that only measures a week's worth of activity tell us? If you are going to make analysis about jobless claims, you should be reporting on them regularly. That's not what Hot Air does, they only report on jobless claims in random times. No doubt those times match up with bad news for President Obama. Here's what the piece at Hot Air didn't mention. This is the fourth week in a row that jobless claims are under 600,000. It is, however, the second straight week they have increased. So what does that mean? Your guess is as good as mine which is why I wouldn't draw a conclusion from this week's numbers one way or another. So, why would Hot Air draw a definitive conclusion on a random weekly number? It's because the conclusion is much more propaganda than opinion based on fact.

Conservative blogs were doing something similar with the monthly jobs numbers for a while as well. Here were the job losses from February to May of 2009, 710,000, 663,000, 539,000, and 345,000. Now, there's a pattern there and that pattern was that things were improving. (that pattern was of course broken in June when numbers when the Bureau of Labor and Statistics reported a loss of 477,000) If you were to report the jobs numbers honestly, you would have to acknowledge that things were getting better. That's especially true following the May numbers. That's because not only did they show a marked improvement from April, but they beat estimates by over one hundred thousand jobs. How did the same Hot Air cover those numbers? They selectively isolated the unemployment rate, which was higher than expected, and focused on that.

The unemployment numbers for May hit earlier this morning, and it looks like Barack Obama didn’t save many jobs at all. Despite claims from both Obama and VP Joe Biden that the Porkulus package had saved 150,000 jobs, unemployment went up another half-percent to 9.4%, setting a new record for the past quarter century. Unemployment rose across a broad spectrum of demographics, too:

Of course, no one could honestly analyze the May jobs numbers and conclude they were bad or bad for the president. They improved by about two hundred thousand from the previous month and they beat estimates by more than a hundred thousand. Anyone who at the time was pushing a narrative that these numbers were evidence of Obama's failing economic policies was engaging in pure rank propaganda.

Liberal blogs are of course notorious for engaging in rank propaganda. Daily Kos once touted that Olbermann had beaten O'Reilly in the ratings. They never mentioned that on that particular day Olbermann appeared on the flagship NBC station while O'Reilly was on cable. For years, liberal blogs would cite any source, no matter how obscure, that claimed that Bush lied about anything: Iraq, the economy, the GWOT. It was the liberal bloggers that couldn't get enough of the so called "Downing Street Memo" which purported to prove that Bush lied. Of course, this memo was actually the opinion of a single official in the British Intelligence service and not a fact as the bloggers claimed.

The issue of polling is another way in which both sides of the blogosphere engage in propaganda. It's usually done when polls are isolated that show a particular side more favorably. For instance, Republicans have come to treat Rasmussen's polls as the gold standard. That's because Rasmussen's polls have always found Obama's support to lack that of most other polling. Now, that doesn't mean that Rasmussen is wrong, and I've referenced Rasmussen's polls before as well, but isolating a Rasmussen poll and using it as the thesis of a story is totally misleading. So, of course, liberal blogs have taken to attacking Rasmussen.

Some commentators on the right have been pointing to an interesting number that
has been coming from the Rasmussen daily tracking poll, which Rasmussen bills as the "Presidential Approval Index," which Scott Rasmussen only began bringing out
in late 2008. The key questions then are: What is this number, and is it a valid measurement of real popularity? In an interview today with TPM, Rasmussen defended the index's validity against some harsh criticism, saying that intensity of opinion -- the true figure measured by his index -- does indeed matter.

The thing to remember is that this is not simply subtracting all the respondents who disapprove of President Obama from the people who approve. Instead, Rasmussen takes the numbers who strongly approve or disapprove, and then performs this math. As of today, that index number is -10, compared to an overall rating of +1 in Rasmussen's daily tracker.

It would seem at first glance that this number can skew negative -- that is, the people who disapprove of a president are inherently more likely to feel strongly about it, compared to a certain level of lukewarm support for a president. For example, the 2004 exit poll put George W. Bush's strong approval at 33%, to strong disapproval of 34%. But his overall approval was 53% to disapproval at 46%, and he was re-elected 51%-48%.

It's very dubious to have a blogger question the professional judgment of a pollster. Josh Marshall of Talking Points Memo blogs professionally. Meanwhile, Scott Rasmussen polls professionally. I would trust Rasmussen's judgment over Marshall's for the validity of the poll.

To me it's dubious to create a narrative based on polling to begin with. It's even more dubious to focus on one poll, whichever side you are on. Real Clear Politics has a collection of polls that continues to show solid support for the president however it also shows that support has significantly eroded over the last few months. Focusing on polls appears to be beside the point. If health care doesn't pass, the president's poll numbers will fall precipitously. It won't merely be Rasmussen that shows bad poll numbers but everyone. If, on the other hand, the economy turns around, and especially if health care passes, even Rasmussen will show positive numbers. So, why the fixation on polls? It's because there are so many out there that a propagandist can always find a poll that will affirm their pre determined opinion.

Unfortunately in two plus years of blogging I have come to the conclusion that for the most part most bloggers are much more propagandists than they are journalists. Many more bloggers use their blogs to push an agenda rather than to report. They mask opinion that are dressed up to appear as facts. Ironically enough, blogs sprouted in large part because citizens believed that the MSM was engaging in this very behavior. As it turns out, most bloggers are no better than the media they despise only they don't write nearly as well.

Hubris and Naivete Are Bring the President Down

I don't know the president and so I want to be careful in making character observations. That usually requires reading some one's mind. Instead, I want to analyze his actions which I believe speak for themselves. Right now, health care reform is on life support. If that doesn't pass, it will also spell doom for cap and trade. Without either initiative passing, the president will face mid term elections in which we'll have near double digit unemployment, near two trillion dollars in deficits, and no major legislative accomplishments. That will create a bloodbath for any Democrat running in November of 2010.



It's nothing short of remarkable that only six months ago President Obama had near 80% approval ratings. Now, he is about to be so politically damaged that he may never recover. How did this happen? In my opinion, it's a combination of hubris and naivete. The president exhibited his first fatal sign of hubris in only his second day in office. That's when he signed an executive order to close GITMO a year from that day. It's now clear that he had no plan to close it and the plans he had for it's closure were terribly naive. It's ironic and scary that GITMO hasn't yet affected him politically. That won't happen until early next year. That's when he will either force terrorists on towns and cities that don't want them or he will go back on his publicized promise.



Either way, proclaiming that he would close GITMO in a year with no plan to close it showed not merely arrogance but fatal hubris. It's exactly that sort of a public promise that comes back to haunt presidents. Yet, the president made it confidently in only his second day on the job.



When the stimulus was being debated, President Obama famously, in an exchange with Eric Cantor, proclaimed "I won so I trump you on that". The stimulus passed with only three Republicans voting for it in either chamber. By doing so, he took total ownership of all its effects. Had President Obama tried to incorporate some Republican ideas he would have split the Republicans. He would have gotten about half the Republican chamber to sign on. By doing so, they would have shared in its effects. Now, he owns its effects. As such between the ballooning deficit, the growing unemployment, and the stagnating economy, the President alone is being held responsible. Had he tried to include Republicans their ideas would have been included and they would have shared responsibility for its effects. That he didn't is another sign of both political hubris and naivete.



The president also totally misread the political landscape. The president was elected on a moderated message. His most famous line was "I do what works". He was supposed to be post partisan, post racial, and pragmatic. Yet, he's governed as a liberal if not far left. Did he really think his mandate was to move the country this far left? Did he not understand the theme of his message? The president furiously denied the National Journal's poll that rated him the most liberal Senator in 2007. He fought hard to present an image of moderation. Yet, his entire agenda has been liberal to far left. How did he think this was going to work? That's both full of hubris and naivete.



Then, there's the price tag on all of this. Brit Hume made an excellent point about this. By passing the massive stimulus, he made it harder to pass any other big spending item. He moved forward with a $787 billion stimulus even though he had a trillion dollar health care bill and a three and a half trillion dollar budget he still wanted to pass. Did he really think that he could pass all this spending all at once?



Because the stimulus was so expensive, the president made a promise not to allow health care reform to add to the deficit. As such, in order to sell health care reform he must raise taxes on someone. A marginal tax increase on soda, cigarettes, or beer won't be enough. He'll have to raise some one's margins on their tax rate. That's rarely popular and just as rarely that becomes law. Walter Mondale ran on a platform of raising taxes. He lost 49 of 50 states. Did President Obama really think he'd be different? Such an assertion is both full of hubris and naivete.



Then, he let the Congress write the details of the bill. He merely set out broad parameters. Congressional leaders are entirely made up of far left liberals. So, what kind of a bill did he think would come out? Did he really think the public at large would like a bill framed by the likes of Henry Waxman, Nancy Pelosi, and Ed Markey? Does the president really not realize that despite his election the country is still center right not far left? So, when far left folks are the major players in crafting legislation is he really surprised the country is rejecting the legislation?



Did he really not understand the make up of the legislature? Between the Congressional Black Caucus, the Congressional Hispanic Caucus, the liberals, and the Blue Dogs, the Democrats are a very loose combination of parts. Trying to craft legislation that will appease enough of them to get a majority. Yet, despite this fact, the president not only made health care reform, the most complicated piece of legislation in decades, his first major priority, but he had the liberal wing write it. Did he really think that the moderate Blue Dogs would just roll over when presented with a big government takeover of the health care system? The legislative mess we are seeing now is entirely due to the complete lack of planning done in March, April and May. Where were the Blue Dogs in negotiations when this bill was just being crafted? Because they weren't included in that, they public opposed it when it was released. Was the president really surprised by how this played? If he was, it's another sign of both fatal hubris and naivete.



Going forward, the president will either learn his lesson or continue to exhibit both hubris and naivete. It's very simple. His liberal agenda is done, it's over. It has no chance of passing and if it does it will be roundly rejected by the public.

The president has a chance to right the ship. It should be clear to him that his liberal agenda isn't going to work. He can allign himself with the Blue Dogs and the Republicans and pass energy reform, health care reform, and education reform with that alliance. It won't look anything like what he wants currently, but if he's truly for "what works" then he has a path to get things done. If not, he will continue to exhibity fatal hubris and naivete that will ultimately doom his presidency.

Walmart, the Olympics, and the Chicago Way

Two local stories I have recently been covering, the Olympics and Walmart's proposal to put a store in the Chatham neighborhood, have finally crossed over and affected each other. Yesterday, Alderman Richard Mell (the father in law of former Governor Rod Blagojevich) decided to move the decision on Walmart's proposal from his own Rules Committee to the Finance Commitee which is run by Alderman Ed Burke. The City Council is ready to break until September. The Internation Olympic Committee will make its final decision for 2016 on October 2nd. Alderman Burke characterized to the Chicago Sun Times the chances of a vote on this matter prior to October 2nd this way.

I doubt that it will.

Alderman Burke also made it plainly clear what the problem with the proposal is.

Chicago is a strong union town...They can build 14 stores here. All they have to do is make a commitment to the rights of working men and women in Chicago to organize.

Walmart, as I've pointed out, is committed to providing 500 UNION jobs to build the store. Walmart, however, resists unionizing its store employees. Of course, this whole thing has been much more about perception than reality from the beginning. The unions are a critical part of Daley's Olympic coalition and he's been able to keep labor peace in preparation for the bid vote. Wal-Mart's approval would jeopardize all that and create unneeded chaos in anticipation of the vote.

Meanwhile, a poll conducted on July 27th found that not only did nearly 80% of residents favor the Walmart but it was favored handily in each and ever ward, including those run by Mell and Burke. In fact, the worst performing ward was the 37th which had Walmart favored 57-35, and that's the ward where this proposal fared worst. (incidentally Burke's ward favored Walmart 7014 and in Mell's ward Walmart was favored 62-25) That should put some context on Alderman Burke's statement that this is "union" town. The results show that the folks want the jobs, union or not, and they want the cheap groceries, clothes, and other retail items that the Walmart store would sell.

What Alderman Burke is really saying is that this is a union City Council. There's no doubt about that. In other words, what Burke, Mell, and Daley are really saying is that in order to play ball with them you must be ready to unionize. The fact that the building a 150000 square foot superstore on any area that is now dirt is economically stimulative by any measure is beside the point. The politicians of this city have their allies and those allies are against Walmart. That's really all that matters. This isn't about good policy, good economics, or listening to the people. Instead, it's about pleasing a constituency even if that constituency represents a 20% minority of all the citizens of the city.

If you read the tea leaves though, this is also the most cynical of political stunts. Walmart will get its Chatham location later or sooner, mostly later, but they'll get it. There's too much media attention and there's too much public demand for it. The council will just stall and delay long enough to appease their major constituency, the unions. More than that, they'll stall them long enough for the IOC to have its vote. Once Chicago is chosen in 2016 then the unionize can stomp and shout and it won't matter because the city has already been chosen. That's really what this is all about. This Walmart proposal threatens a major player in the Olympic bid and so their proposal must be delayed long enough for the Olympic bid to be decided. After that, the politicians will likely throw the unions under the bus in favor of public opinion. The politicians will eventually do the right thing, but first the IOC must vote on the Olympic bid. Welcome to the Chicago way.

Morning Market Report

Yesterday, the major indices were changed only marginally again for the second day in a row. Today, however, all three look up nearly a full percentage point at the open. The Dow will likely open above 9100 and the NASDAQ might test 2000 before the end of the day. There's going to be a lot of earnings released today. Cigna, Kodak, Walt Disney and Exxon Mobil all report earnings today.

At the same time, Treasury bonds are starting to have their rates inch toward critical levels again. The ten year is pushing 3.7% this morning. The yield spread is 2.52% as the two year has shown much quicker rise in its rate than the ten year over the last week or so. The two year is now trading at 1.17%. That's after a lukewarm auction a couple days back started the weakness.

All major indices in both Europe and the Far East were up. The Hang Seng in China was up .49%, the NIKKEI in Japan was up .51%, while the Straits Time Index in Singapore was up 1.23%. In Europe, the FTSE in London was up 1.53%, the DAX in Germany was up .78% and the Spanish Index was up 1.23%.

After a few days of losses, oil is trading up this morning currently at $64.64. The Dollar looks to be trading down against most major currencies this morning. Against the Euro, the Dollar is down .06%, it's down .65% against the British Pound, and it's down .68% against the Yen.

There's two pieces of breaking news. The weekly jobless claims came out. They rose a bit more than expected however they have stayed below 600,000 people every week of July.

The number of Americans filing claims for jobless benefits last week held below levels seen in late June, before auto-related distortions set in, indicating firings are slowing as the economy stabilizes.

Applications rose by 25,000 to 584,000 in the week ended July 25, higher than forecast, figures from the Labor Department showed today in Washington. More than 600,000 claims were filed every week last month. The number of people collecting unemployment insurance decreased for a third week.

Meanwhile, Exxon Mobil came out with its quarterly earnings and they missed the mark.

Exxon Mobil Corp., the largest U.S. oil company, reported a third straight drop in profit after shrinking demand for diesel, gasoline and natural gas pulled down energy
prices.

Second-quarter net income fell 66 percent to $3.95 billion, or 81 cents a share, from $11.7 billion, or $2.22, a year earlier, Irving, Texas-based Exxon Mobil said today in a statement. Per-share profit excluding legal costs related to the 1989 Valdez oil spill was 84 cents, 15 cents below the average of 16 analyst estimates compiled by Bloomberg.

My analysis:

It looks to be another wild day on Wall Street. I believe that the couple days of mild changes are over.

Health Care Reform is Still on the Ropes

Just as Henry Waxman seemed to appease the center with a deal with the Blue Dogs, that same deal has a potential of a "rebellion" from the left.

House Speaker Nancy Pelosi spent half of Wednesday finalizing a deal with the Blue Dogs — and the other half quelling a brewing rebellion among progressives who think conservatives have hijacked health care reform.

Liberals, Hispanics and African-American members — Pelosi’s most loyal base of support — are feeling betrayed after House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) reached an agreement with four of seven Blue Dogs on his committee who had been bottling up the bill over concerns
about cost.

The compromise, which still must be reconciled with competing House and Senate versions, would significantly weaken the public option favored by liberals by delinking reimbursement rates to Medicare.

One of the concessions that the Blue Dogs were able to negotiate was a weakening of the "public option". This is a cause celebre among those on the left, and certainly the far left. With it weakened, it's unclear how many of them will vote for the deal, and there's a lot more liberals in the caucus than there are Blue Dogs. So, it appears to coax the middle, Waxman, Pelosi, et al may have lost the left.

Furthermore, the deal in the Energy Committee was cut with only four of the seven Blue Dogs on the committee. That's enough, if Dems hold everyone else, to pass it out of the Energy Committee. It's still unclear how many of the full 52 Blue Dogs are on board with this deal. It's even less clear just how many liberals will be held with this deal.

So, ironically enough, this deal might wind up meaning less votes in the Democratic caucus. It points out two significant problems. The first is structural. This shows again the problem that Dick Morris pointed out first. The Democrats are a collection of factions and it's nearly impossible to craft legislation that will appease them all. (or at least enough of them to get a majority) Between the Congressional Black Caucus, the Congressional Hispanic Caucus, the Blue Dogs, and the liberals that's a lot of people to keep happy. It turns out that it's too many people to keep happy and the Democrats simply can't find a majority on any piece of legislation.

Even more troubling for those in charge, it appears that there is no leadership. How in the world did Waxman secure this deal without making sure the liberal wing would be on board? Furthermore, if the public option is a deal breaker why is Baucus negotiating a coop in the Senate? Even if Baucus figures out how to make a deal with his committee and gets it passed out of his committee, the liberals clearly wouldn't be on board. It looks as though the Democrats aren't talking to each other. People are making deals without knowing the numbers. That's chaos and a total failure of leadership.

Earlier, I said that this deal got them some momentum back. I'm changing my analysis. This deal is symptomatic of the total chaos that the Democrats are governing with.

Video, Quote, and Word of the Day

apogee

the highest point

At bottom every man knows well enough that he is a unique being, only once on this earth; and by no extraordinary chance will such a marvelously picturesque piece of diversity in unity as he is, ever be put together a second time.

Friedrich Nietzsche

Council Submissions

Council submissions are up.

Council Submissions
The Provocateur – The Definitive Dossier on the House Health Care Bill (Pages 1-500) Part
Wolf Howling - Gates & The Politics of Race
Joshuapundit - Bigotry In Basic Black
Rhymes With Right - Time To Fix The Texas Social Studies Curriculum
Right Truth - Advice to Sergeant Jim Crowley
The Glittering Eye - Is Technology Responsible for Rising Healthcare Costs?
The Colossus of Rhodey - Common sense on the Gates arrest
Mere Rhetoric - One Jerusalem Conference Call With George Gilder: Israel Is The “Crucial Battlefield For Capitalism In The World”
Soccer Dad - It’s the speeches stupid
Bookworm Room - Make me Well
The Razor - Waging Lawfare: A Call To Arms
Non-Council Submissions
Submitted By: The Provocateur – Dick Morris - Socialism Doesn’t Work-Even in China
Submitted By: Wolf Howling – Wendy Kaminer @ The Atlantic - Law Students Flunk Academic Freedom 101
Submitted By: Joshuapundit – Michael Yon - An Artery Of Opium, A Vein Of Taliban
Submitted By: Rhymes With Right – Rge Free Market Warrior Blog - NOW WE ARE THE STORY
Submitted By: Right Truth – Digger’s Realm - DHS Launches New Website – Top Stories Include Saving Bald Eagles
Submitted By: The Glittering Eye – Heretical Ideas - Is Barack Obama An American Citizen?
Submitted By: The Colossus of Rhodey – The Daily Beast - The Man Who Let Mengele Get Away
Submitted By: Mere Rhetoric – Ludwig von Mises Institute - The Second Coming of Keynes
Submitted By: Soccer Dad – Yourish.com - Obama insults the entire medical profession
Submitted By: Bookworm Room – American Thinker - Hoven’s Index : The First Six Months
Submitted By: The Razor – Dave Price – Dean’s World - Choice and Risk

Deconstructing the Corruption Between Senator Conrad and Countrywide

In mortgages, anything can make a difference. The same person could qualify for a loan if the property is a single family unit and get denied if that becomes a townhome or Planned Unit Development. A loan could hinge on whether or not a condominium has four stories or less or five stories or more. While standards became quite loose over the previous five years, it's important to understand that tens of thousands of rules exist in the mortgage world. Everything I just described concerns rules for RESIDENTIAL properties. Commercial properties are a totally different world.



The two types of properties are explained by their names. Residential properties are done on properties in which people live. Commercial properties are properties are bought and sold mostly for commerce. When it comes to multi units, the break point is clear and it's defined. Four units and less are residential properties. Five units and more are commercial properties.



When it comes to commercial properties, the loan done is a totally different animal from a residential loan. Not only are rates two and three points higher, but the terms are almost always a variable rate, with a pre payment penalty, and often a balloon payment at the end. None of those things are common on a residential loan. Terms are only one difference in the two types of loans. In a commercial loan, a borrower is usually asked for at least three years of their full tax returns. In residential loans, a w2 borrower can usually get away with their last two w2's. Furthermore, a rent roll is required on a commercial property along with leases. A residential loan only requires the leases. Commercial loans also require significantly more detailed appraisals which can start at $1000 (and run to $5000 and even more at times) whereas the residential appraisal will usually cost $300-$400. Finally, commercial loans require much greater down payments and much lower loan to values on refinances than residential properties.



Yesterday, it was reported that both Senator Conrad and Senator Dodd were aware of their sweetheart loans with Countrywide. What was mentioned in passing were the details of one of the transactions by Senator Conrad. On one occasion, Countrywide treated an 8 unit property as a residential loan. Senator Conrad downplayed the favoritism.

Conrad's spokesman, Chris Gaddie, said Monday that the senator "never asked for, expected or was aware of loans on any preferential terms" and has "worked overtime to set the record straight."

"He went with Countrywide simply because they already had his financial information," Gaddie said. He added that a Countrywide official had told Conrad that "it is not unusual for them to make exceptions for good customers if they could sell the loan in the secondary market. We now know that they did sell the apartment building loan in the secondary market."

This statement is not only peculiar but a total falsehood. The only question is whether Conrad is perpetrating a lie on the voters, Countrywide is perpetrating a fraud on another bank, or Countrywide lied to Conrad. First, it's very peculiar to have a borrower speak about the secondary market. I don't know too many borrowers that know their loans are sold in the secondary market. Those that do don't care. So, why did Senator Conrad care enough to have his spokesperson point it out in downplaying the favoritism?



That's not answerable yet because Conrad hasn't elaborated on this and no one has asked him directly. That said, an eight unit property would NEVER be included in a portfolio of residential loans to be sold in the secondary market if everything was done legitimately. I don't believe that this loan was sold, but if it was, then either the buyer of the package that included this loan was incompetent or they were defrauded. In fact, I wrote a piece about just such a fraud involving a package of small business loans. Presumably, Countrywide gave the Senator favoritism because they wanted something. Whoever bought this loan, among a package of loans, wouldn't be expecting the same sort of quid pro quo. If they did, then we're dealing with all sorts of corruption. Either way, if this loan really was sold, as Conrad's spokersperson suggests, then that sale must be investigated by both the SEC and Justice immediately for fraud. That's because a commercial property was done as a residential loan. If a bank did this loan this loan this way, that's their business. If they sold it, they better have disclosed that or it is fraud.

Most media is reporting that it was Countrywide's rules that limited residential loans to four units or less. That's misleading. That's a mortgage rule. As such, this commercial property would be included with residential properties in a package that is only supposed to be residential loans and properties. That would be fraud and it would serious and significant fraud. If Conrad's spokesperson's statement is accurate, they have accidentally informed the public of massive fraud.

Another possibility is that Countrywide lied to Conrad in trying to explain why they were giving him such a bargain. Finally, Conrad may just be lying to the public. Either way, there's no way this loan was sold in the secondary market if that transaction was done legitimately.

The loan was only $96000 and so the monthly savings were likely only $300-$400 per month. The savings are not the issue. This was a refinance and so Conrad was probably familiar with the process of financing a commercial loan. He had already financed this property at least once, and so it's hard to believe that he didn't know just how good a deal he was getting. Doing a commercial property as a residential loan is not some small giveaway. This breaks a clear, straigthforward, and standard rule that all mortgages are supposed to follow. Never, during the most obscene times of the mortgage industry did banks ever allow for eight units to be financed as residential properties. That Conrad's loan was given such special treatment is something that must be investigated fully. A bank doesn't violate such an important rule without expecting something tangible in return. So, the question remains what did they expect and what did Conrad give them.

Some Quick Early Thoughts on the House Health Care Agreement

So far, we know a lot less about the reported compromise between Blue Dogs and the Dem leadership on health care bill in the Energy Committee. We know that the Blue Dogs on this committee have announced that a deal has been cut. We know that under this deal the price tag of the bill will get cut by $100 billion over the next ten years. We know that there will be more emphasis on hospitals in rural areas. We also know that companies with payrolls of $500,000 and less will be exempt from being mandated to provide insurance. There will also be some changes to the public option though those changes aren't clear.



Here's what we still don't know. We don't know when any health care bill will be voted on the full House. The Blue Dogs have gained a commitment not to have a full vote before the break. The current plan is to vote on it in September after the House comes back from break. Of course, in political terms a month and a half is an eternity and anything can happen prior to that. We also don't know the details of the bill that will come out of the Energy committee. Most importantly, we don't know what if anything will come out of the Senate.



The only bill that has been released in detail is this House bill. The only full released bill is nothing short of a monstrosity. It includes at least ten new government regulators. It creates a health care exchange that will be regulated by one of these regulators. All health care providers will be forced to be part of this exchange if they use or provide insurance in their business. As such, almost the entire health care field will now be regulated by a yet created new government regulator. It includes regulation and rationing of cancer care, end of life care, and even electric wheelchairs. It forces audits on any company or individual that self insures. It mandates the government to see patient records, bank statements, and tax records. It even sets salaries for doctors. These are just a few of the "highlights" of this monstrosity of a bill.



So, if what comes out of the Energy Committee is largely a mirror of what is now the only full bill, with the changes mentioned earlier, the Blue Dogs will have betrayed the principles they have professed to believe in. They will have been exposed as much more Democrats than fiscal conservatives. The current bill is not fiscally conservative. The changes made will not make it fiscally conservative. For instance, the Blue Dogs screamed that they wanted to see more in the bill to "control costs". Yet, there's ZERO in the House bill, so far, to deal with tort reform. The hundreds of billion spent in unnecessary tests to protect doctors against potential lawsuits are NOT currently addressed. If the Blue Dogs sign onto a bill without tort reform, they will have betrayed their fiscally conservative principles.



Politically this is a small victory for the President but it is still very small. No bill will be voted on in either chamber before the August break. That means that at least two more sets of jobs numbers will come out before the vote, and the legislators will go home to hear from their constituents before voting on any final bill. If the bill doesn't change markedly from the current version, they will get an earful. The rationing, government control, and ACORN giveaways are only now being analyzed. The changes that the Blue Dogs received will be marginal outliers if the final bill continues to include the basic tenets of the current House bill.



So, the Democrats and the President have extracted a change in momentum but I still believe it is short term and temporary. The trend continues to be against health care reform. It doesn't appear as though the Democrats have any desire to really moderate health care. Until and unless they do, health care reform will not happen. It remains to be seen if what comes out of the Energy Committee will be real moderation or merely window dressing. That will determine just how close we are to passing health care reform.

The Velocity of Money and the Chatham Walmart Proposal

I have spoken on more than one occasion about the velocity of money. The velocity of money is essentially how many times a given dollar is spent during a fixed time period. During periods of economic contraction, like now, velocity of money is low. That's because people are scared and they hoard every dollar they can get their hands on. In my opinion, the key to any stimulation is to increase the velocity of money. Once velocity of money increases the economy will recover.

Right now, Walmart is sitting on tens of millions of dollars that the company has earmarked to build and operate a store in the Chatham neighborhood of Chicago. If that store is given the go ahead to get built, Walmart will immediately sign several project managers. That team will move forward with acquiring all appropriate permits. Once those are secured, Walmart will break ground on a 150,000 square foot superstore. Building this project will require hiring about 500 UNION contractors, construction workers, electricians, plumbers, etc. Those companies will have to buy equipment, parts, and material. The folks hired will have to get to work somehow. They will have to eat lunch in the area.

Then, once the store is built, there will be 400 people hired to operate it. It will sell everything under the sun and will attract thousands of shoppers daily. Now, let's think about this. The current scenario has Walmart's money sitting in a bank account. How quick is the velocity of money in that scenario? The second scenario has that money being spent on labor, parts, equipment, etc. It is a scenario in which those hired will themselves need to buy parts and equipment. It will mean that 400 people currently sitting at home will be going to a job everyday. They will either drive costing gas or take public transportation putting money into the coffers of the city. In either scenario, they will be spending more money than they are now as well as receiving a paycheck.

I haven't even begun to discuss the velocity of money created once the store is built. There will be electricity, gas, and water bills that will all be paid. There will be 500 new paychecks to receive. All those people will need to come to work. So, they will spend money on either gas or public transportation. (unless they walk which some will) With more money in their pockets, these employees will spend more money on things they need and want. I haven't even mentioned the enormous velocity of money created by Walmart increasing their orders of goods to stock the store and then having those goods get bought.

The velocity of money increase in building and operating this Walmart superstore is exponential. Tens of thousands of businesses and individuals will see business transactions in crease as a result of it being built and operated. Instead, right now, only two entities see any transactions, Walmart and the bank their money is at.

It sounds so simple. What the city, and country, need right now is to increase the velocity of money. We need people to spend and invest more. That's what this Walmart proposal would do, and it would do it in an enormous way. Unfortunately, a theoretical increase in the velocity of money does nothing. So, until the politicians in Chicago brush up on their economics, the velocity of money that this Chatham store would provide won't happen.

My One and Only Post on Birthers

I never really worried about the so called controversy of th birth of President Obama because I am no fan of conspiracy theories. In order to believe that President Obama wasn't born in Hawaii, you not only have to believe that a conspiracy is being created involving an entire state's bureaucratic apparatus, but you also have to believe that President Obama has been lying, or lied to, since he was a child. After all, he's maintained he was born in Hawaii since he was a kid. Either he was claiming this lie long before he wanted to be president, or his entire family lied to him about his place of birth.

I haven't followed the dispute closely however there is a birth certificate on file that was released. Birthers claim that the one released isn't the official birth certificate and claim there is a longer form that is supposed to be on file. The state of Hawaii says that the form in question is no longer available because the state went paperless about seven years ago and that form is no longer on file.

The so called controversy is not the issue. If you believe in conspiracy theories, this one is one you will enjoy. The problem is the conspracists are a cancer to anyone around them. If birthers gain any sort of mainstream attention they will decrease the legitimate criticism of President Obama. That's because any criticism will be tied to the conspiracists and dismissed as illegitimate.

The question is why the controversy is gaining attention again. Lou Dobbs started it last week by doing an entire show on the controversy. Of course, Dobbs is watched by about four people so his broadcast on its own didn't cause new media attention. His show lead to Politico doing a series of stories on the issue. Since then, O'Reilly covered it once and plans on covering the issue again. Politico claims that birthers are an issue that Republican law makers have to prepare for. They create a political conundrum for politicians who have to straddle between signing onto a conspiracy theory and alienating part of their base. Politico also claims that a birther leader has stated that Republican leaders are supporting them.

I haven't attended enough Republican townhall meetings to know if birthers are becoming a mainstay. Though, this particular confrontation has become a viral sensation.

It's very possible for a small group of people to look larger by simply being noisy. I doubt that "truthers" account for any more than a handful of the public at large and the Republican party. They can certainly appear more mainstream by showing up at townhall meetings like the video and speaking up.

What is clear is that the whole movement is nothing more than a corrosive cancer to the Republican party and conservatism in general. The more actual power and influence it gains the worse it is for the Republican party. Any mention of this conspiracy theory only goes to the perception that Republicans are unfairly attacking the president. Right now, the president is ready to implode all on his own.

The only thing that will save him is the implosion of his opponents. Being attached to this conspiracy theory is one way for the Republicans to implode. So, while I don't believe the movement is anything as large as the perception being created by Politico, the perception that they are infiltrating the party is something for leaders to be concerned about.

Party leaders are caught in a difficult position if media attention continues. Coming out forcefully against the conspiracy only gives it legitimacy. Saying nothing raises questions that they believe it as well. The best thing is for this movement to back under the same rock it was under until about a week ago. It's unlikely that current media attention will be anymore than a passing fad. So, the best thing to do is for everyone to ignore the current media attention and wait for it to go away. Hopefully, no one encourages these folks as that's the only thing that will keep them active.

Mayor Daley + 2016 Olympics = Gasoline + Fire

If the old adage is true that absolute power corrupts absolutely, then the last thing the all powerful mayor of Chicago needs is the Olympics to preside over. The ability to control every aspect of the Olympics is nothing more than sending a devious kid into a candy store with money for our mayor. The budget for the games, currently, is roughly $4.8 billion. It includes the building of 16 new venues. A new 70,000 person stadium will be built in Washington Park for the opening and closing ceremonies. (and then summarily torn down after the Olympics though not before creating irreversible damage to the park)Michael Reese hospital has already been sold and planned to be torn down to build the Olympic Village. It will consist of redesigning nearly all parts of the city.

The mayor of Chicago, Richard M. Daley, already runs this city much like an electoral monarch. The city council is little more than a rubber stamp on any issue he deems important. Examples of "close" elections have Daley winning 70-30. In the city of Chicago, Daley is a lot less like a mayor and much more like a King. Now, we're going to give him a project, lasting eight years, the size and scope of which we've never seen on this scale in this city since the fire of the late 1800's.

In 1995, the mayor announced plans to build Millenium Park. That project ran four years behind schedule and cost about four times as much as it was originally budgeted for. That project was also about one twenty fifth the budget of the Olympics.

Our mayor is corrupt and runs this city like a political machine. More than that, his corruption and addiction to power has grown more troubling and enormous over the last five years or so. There are those, folks I disagree with, that believe that some corruption is necessary to run a city the size of Chicago. Some point to San Francisco as a city without the sort of corruption of Chicago and point to utter incompetence. Yet, no one doubts that Daley's corruption has now crossed into a counter productive area.

The case of the sale of parking meters is an example of this. Desperate for cash, the mayor agreed to sell the rights to operate the city's parking meters to a private company. Rates for parking have gone up exponentially since then. The city has massive and unsustainable budget shortfalls simply from running the city's normal everyday business. Now, we're going to hand Daley the power of running the Olympics as well. That's simply a disaster in the waiting.

Let's make things clear. Chicago Olympics 2016 is technically a private organization that is supposedly independent of the mayor. Technically, though, the mayor just put his recently former Chief of Staff, Lori Healey, to head the Olympic Committee. So, any supposed separation is nothing more than a farce. Make no mistake, if the Olympics comes to Chicago in 2016, Richard M. Daley will be the CEO, CFO, and COO of its planning and execution.

He will have the full scope and power of the city's government apparatus to implement it all as he sees fit. Between income, property, and sales taxes, Daley will have a nearly unlimited tax base to operate the games. No one will ever have to know just how dirty and corrupt things are getting because tax increases will never have to be specifically earmarked for the Olympics.

The concept of TIF's (Tax Increment Financing) is just one example of a way in which Daley can use the enormous size, scope and complexity of the city's government structure to control the Olympics and hide corruption. TIF's cap the amount of property taxes that go to their intended purpose: schools, trash removal, etc. The rest goes into a slush fund for the mayor to use as he sees fit. So, Daley can raise property taxes in perpetuity and no one will ever know that it will go to feed the corrupt monster of the Chicago Olympics.

The 2016 Olympics will guarantee billions, if not, tens of billions in contracts that the city will have to dole out for construction, security, street cleaning, etc. There is already a standard operating procedure for how these sorts of contracts get doled out now. They go to Daley's friends, admirers, and allies. Only now the budget is infinitesimal compared to what it will be if the Olympics comes here.

Bringing the Olympics to Chicago will allow a corrupt mayor to run the city in the same corrupt manner only with an exponential new sets of resources, responsibilities, and powers. Is that really what the city wants? That seems to me to be pouring gasoline on top of a fire.

Morning Market Report

There's two pieces of breaking news. First, Yahoo and Microsoft have reached a deal for an Internet search partnership.

Microsoft has reached a deal with Yahoo for an Internet search partnership, ending years of back and forth negotiations.


The agreement announced Wednesday gives Microsoft access to the Internet's second-largest search engine audience.

It adds a potentially potent weapon to Microsoft's Internet arsenal as the software maker girds for an online assault against Google.

The partnership was quite as sweeping and expansive as analysts expected, however, an Yahoo's shares are currently trading down about 7% on the news.

Meanwhile, durable good orders were down 2.5%, the most in five months.

New orders for long-lasting U.S. manufactured goods fell more sharply than expected in June, notching their biggest decline in five months as demand for communications and transportation equipment slumped, a government report showed on Wednesday.

The Commerce Department said durable goods orders fell 2.5 percent, the largest drop since

January, after rising by a revised 1.3 percent in May, previously reported as a 1.8 percent surge. This was worse than market expectations for a 0.6 percent decline. Orders had advanced for two straight months.

New orders excluding transportation unexpectedly rose 1.1 percent in June, after climbing by 0.8 percent in May

There was about a $40 billion auction in 2 year Treasury bonds yesterday that was lukewarm. Treasury yields rose to 1.08% before settling at 1.10%. They are trading this morning at 1.10%. The rates on longer term yields are trading better this morning however. The Ten year is at 3.64% and so the yield curve between the two year and ten year is down to 2.54%.

Indices were mixed, marginally, yesterday. The Dow and S&P were down slightly while the NASDAQ was up slightly, .4%. This morning, all three are trading down this morning following the durable goods numbers. All three look like they will start down between a half and a full percentage point.

Meanwhile, in China, investors are worried things are going too well. A very strong Initial Public Offering for China State Construction Engineering Corp sparked worries that the market is headed toward a bubble. The Chinese index, up about 90% year to date, was down about 5% yesterday. The Hang Seng, another Chinese index, was down 2.37%. Not everything was bad yesterday in the Far East. The NIKKEI in Japan was up .26%, however that was the only index that was up. The Straits Time Index in Singapore was down .76%. In Europe, it was the reverse. The Spanish index was down .31% but that was the only index down. The FTSE in London was up .93% and the Dax in Germany was up 1.8%.

Oil is giving a lot back today. It's trading at $65.60 down $1.60 a barrel. The Dollar is mostly better today. It's up .33% against the Euro, .04% against the British Pound, and up .26% against the Japanese Yen.

My Analysis:

There's so much competing data that the market will humble most prognosticators. I still believe that the market will shave 10-15% in the intermediate term, through the end of the Summer, but right now the only thing that appears safe is volatility in the markets.

A Few Quick Thoughts over the Bruhaha Over the Bonus of Andrew Hall

There's a business story causing some stirs in certain circles. It involves the oil trader Andrew Hall. Hall works for a subsidiary of Citigroup. He made this subsidiary, and by extension Citigroup itself, about $600 million in 2008. According to his contract, he is thus owed $100 million. Now, he's looking to collect.

And after placing a few multimillion pound bets on behalf of his employer, he is said to enjoy practising calisthenics with a ballet teacher.

But now, British-born oil trader Andrew Hall is at the eye of a deadly serious storm over Barack Obama's attempts to rein in the pay of America's top
bankers.

Hall, 58, is in line for a $100million bonus from his employer Citigroup.

.

Normally this wouldn't be a big deal. After all, Hall is only asking for what his contract specifies he should get. Yet, these aren't normal times and Citigroup is no normal company anymore. That's because Citigroup took about $30 billion in bailout funds. As such, before Hall can get his bonus, the pay czar, Ken Feinberg, must approve it.

This is now the world we live in. Hall earned every penny of his bonus. He made his employer, Citigroup, a lot more than the $100 million he asking for. Hall is an oil trader. He bought absolutely no mortgage backed securities. He engaged in absolutely none of the business that got Citigroup into trouble. Hall had nothing to do with any of Citigroup's problems.

In fact, Hall, one could say, was a bright spot in an otherwise cloudy year for Citigroup. Yet, that doesn't mean the bonus he is entitled to will actually be paid. First, the pay czar has to approve it. Never mind that this bonus is written into the contract that Hall signed with Citigroup. Never mind that if Citigroup is unable to pay bonuses, they will cease to function. Before this successful oil trader gets money owed to him, Citigroup must get permission from the government. Does anyone else see this as totally absurd and no environment for growth.

What's worse is that some in the media are trying to demonize Hall for demanding what's his. I saw Stephen Moore of the Wall Street Journal last night suggesting that such a massive bonus shouldn't be requested from a company that requested bailout funds. Of course, the only way to have voided this contract was for Citigroup to file for bankruptcy. That didn't happen. They received a bailout. That means the contract is still valid. Hall deserves what he earned, and he shouldn't be demonized for asking for it even if his employer begged the government for money.

Video, Quote, and Word of the Day

sapid

having flavor

Ambition is the path to success. Persistence is the vehicle you arrive in.

Bill Bradley
About: Ambition quotes.

Some Thoughts on Conrad, Dodd, and the Friends of Angelo

Some folks are calling yesterday's Ethics Committee hearing as a breaking news. At this hearing, Robert Feinberg, a loan officer at Countrywide, testified that not only did both Dodd and Conrad receive favorable terms on their mortgages under a program known as Friends of Angelo, but they both knew that they were receiving favorable terms not available to the general public. This really isn't news. It was never in doubt that Dodd and Conrad both received favorable terms under this program. The two Senators acknowledged this. They just both claimed that they didn't know they were getting favorable terms.

This is of course absurd. A bank isn't going to give a powerful person favorable terms on their mortgage without telling them. The whole point is a I'll scratch your back and you'll scratch mine transaction. There's no point to giving a powerful person better deals if they don't know they're getting the better deal. Obviously, the bank wants the powerful person to know they are taking care of them. That can't happen if the powerful person doesn't know they are being treated well. So, the two Senator's assertions that they didn't know was always absurd. Mr. Feinberg merely confirmed what everyone should have already known.

What's really shocking is what was buried in the story. The first revelation Feinberg says was not accurate. Apparently, it is being reported that Senator Dodd listed both his home in Connecticut and in Washington D.C. as primary residences. Of course, you can't have two primary residences. You can only, according to mortgage rules, primarily live in one home. This property, be it a home, condo, etc., would receive the best rates. All other properties would have slightly worse rates. That's because if things go bad you would stop paying on all secondary properties first. You'd never want to stop paying on your primary residence because if that is foreclosed on you'd have no place to live. If Dodd did in fact list both homes as primary residences that's fraud. More than that, this sort of fraud is known as "occupancy fraud" and it was the second biggest fraud problem in mortgages behind fraud on income and assets. It's important to note that Feinberg, the loan officer, disputes that this occurred.

Conrad's revelation is far more serious. Conrad was attempting to finance an eight unit building. That is a commercial property. The financing on such a building is much more difficult and has significantly worse rates. He was given an exception and was allowed to finance this building as a residential property. If that's the case, that is fraud on a grand scale.

The favoritism shown to Dodd likely saved him a quarter to a half a percent. The favoritism shown to Conrad likely saved him two to three percentage points if it's accurate that he was allowed to finance his commercial property as a residential property. Conrad's people explained it this way.

Conrad's spokesman, Chris Gaddie, said Monday that the senator "never asked for, expected or was aware of loans on any preferential terms" and has "worked overtime to set the record straight."

"He went with Countrywide simply because they already had his financial information," Gaddie said. He added that a Countrywide official had told Conrad that "it is not unusual for them to make exceptions for good customers if they could sell the loan in the secondary market. We now know that they did sell the apartment building loan in the secondary market."

That's just non sense. There's no way a secondary market would buy a residential loan on a commercial property. The rules are very clear and cut and dry. Residential properties are four units and less. His property was eight units. So, if he got a residential loan on this property, there's no way it was sold on the secondary market. Secondary market players often buy in bulk. As such, this loan would have either been packaged with other residential loans. In that case, a commercial property would have been included in a portfolio of residential properties. Or, it would have been packaged with other commercial loans. In that case, this particular loan would have had much more favorable terms than the rest of the portfolio. In either case, if what Conrad's people are saying is true, and this was sold in the secondary market, it was done fraudulently.

The Definitive Dossier on the House Health Care Bill (Pages 1-500) Part III

I'm going to combine two parts into one post because they are both small enough. So, for the third part, I will analyze the new taxes in the bill as well as community group benefits.

Now, specific tax increases are NOT in this bill. Those still haven't been finalized. What's in this bill are requirements of both employers and employees that amount to either extra costs or penalties. The end result is the same. This can be found on pages 149-170. It starts with the section entitled "employer contribution in lieu of coverage".

The taxes are levied both on small businesses and on individuals. All businesses with revenues of $250,000 and more would now be required to provide health insurance for their employees. These insurance plans would then have to meet the standards set out by government bureaucrats. Any business that makes $400,000 and more in revenues will be penalized an extra 8% payroll tax if they don't comply with this new regulation. Any business with revenues of $250,000-$400,000 would be levied a payroll tax of 2-6% on a sliding scale if they don't comply with the new regulation. Meanwhile, individuals that don't get insurance that meets the criteria of the government will be levied a 2.5% pay roll tax. Finally, on page 170, all resident aliens are exempt from everything I just listed.

Also in this bill are references to "community group benefits". For instanc, on page 472, the bill says "payment to community based organizations". On page 469, payments are earmarked for "community based home medical care." On page 95, the bill authorizes the Secretary of Health and Human Services to conduct community outreach to sign up folks in underserved areas. Of course, community based groups will be contracted out to sign up all these folks. On page 321, the bill mandates that hospital expansion face "community input". Now, "community based" is a broad term and is really not very defined in the bill. I believe that most conservatives will see "community based" as a code word for ACORN and other such groups.

Here are the analyses for parts I and part II.

Morning Market Report

The markets might finally be poised to take a breather. All three indices are down between a half and a full percent in pre market trading. The Dow and the S&P were up just slightly a bit less than a quarter of a percent on the Dow and about a half a percent on the S&P while the NASDAQ was down slightly yesterday. Deutshe Bank's shares were sent lower after it announced it set aside $1.4 billion for bad loans, more than analysts expected.

Office Depot, Viacom, and Unisys lead the company coming out with earnings today. The S&P/Case Shiller Index, which measures the value of single family homes, will come out in about fifteen minutes. There's been a lot of good housing news lately and so this will likely be viewed with great interest.

The Ten Year U.S. Treasury is trading below 3.7% at 3.68% again. More of the record $115 billion in Treasury Bonds will be auctioned off today. Oil is back below $68 per barrel currently at $67.84 a barrel. Currencies are all fairly flat so far. The Dollar is up .01% against the Euro, down .03% against the British Pound, and and down .59% against the Yen.

Meanwhile, around the world, the Chinese Hang Seng continues its climb up 1.84%, the Japanese NIKKEI was basically even down .01%, while the Straits Time Index in Singapore was up 1.84%. In Europe, the British FTSE was down .8%, the German DAX was up .48%, and the Spanish index was up .68%.

Disclosure:

All information here is meant for informational purposes and not meant as an endorsement of an investment and shouldn't be taken as such. I am NOT a licensed investment professional and all investment strategies should be made on a personal level.

Blowing the Whistle: The Retaliation Against Charles Rehberg and Dr. John Bagnato

After nearly two years of investigating non profit hospitals, Albany, Georgia surgeon Dr. John Bagnato and his accountant, Charles Rehberg, were convinced that they had uncovered systemic corruption in the non profit hospital system. While their investigation encompassed the non profit health care system as a whole, its nexis began at the local non profit hospital, Phoebe Putney. The two of them were certain that they found irrefutable evidence that Putney was making hundreds of millions each year, charging unnecessarily high fees to their poor patients, all while their executives enjoyed handsome compensation and the hospital paid no taxes because of its non profit status. In February of 2004, the two of them decided to get this message out. In that month, on multiple occasions, Charles Rehberg ANONYMOUSLY sent out faxes to local business leaders and politicians.



Word eventually got back to the powers that be at Phoebe Putney. The hospital reached out to the local District Attorney, Ken Hodges. Hodges began investigating the source of the faxes. In order to subpoena records from local phone companies like Bell South, Hodges claimed that a grand jury had convened. In this way, he intimidated these local phone companies into providing private information on Charles Rehberg. This was all totally untrue. Hodges never convened a grand jury because he wasn't investigating a criminal matter. He was, acting as an agent of the state, investigating a private civil matter on behalf of one party, Phoebe Putney, and he was in fact lying in order to get documents for the investigation.



While it took a matter of weeks for Hodges and his investigators to figure out the source of the faxes, nothing was done with the information yet. In the meantime, Rehberg and Bagnato reached out to class action attorney Dickie Scruggs. They convinced Scruggs to file a class action law suit on behalf of the indigent against the non profit hospital system. The lawsuit was in the final stages of being filed in September when Phoeb Putney filed a $60 million civil lawsuit against Charles Rehberg. Phoebe Putney called in the press and held a press conference to announce their claim which included such charges defamation of character and harrassment. The suit at this point was only against Rehberg at this point because it was he that actually sent the faxes.



At this point, Dr. Bagnato was the Chief of Surgery at Albany Surgical which operated out of Phoebe Putney. Because Rehberg had sent these faxes on both their behalf, Dr. Bagnato felt he should be on the suit. He also felt that if their chief surgeon was included on this suit, that would put the hospital back on its heels so to speak. As such, prior to the case reaching court, Dr. Bagnato filed to include himself on the defense. As such, he was added as a defendent. In Georgia, there is a tough anti SLAPP law (Strategic Legislation Against Public Persona). This is a law that protects those that face lawsuits merely as a way to stop an individual from continuing a public campaign against another entity, like a whistle blower. In March, Rehberg's attorneys filed this order. Phoebe Putney had ten days to respond. Their attorneys missed the deadline and as a result the case against Rehberg and Bagnato was dismissed.



At about this time, a criminal investigation of both Bagnato and Rehberg was started. Because the evidence that began this investigation was initially collected by Hodges in his investigation of the civil claim, he was forced to recuse himself. The Attorney General of the state, Thurgood Baker, stepped in and chose Kelly Burke a District Attorney from a near district.

In December of 2005, Dr. Bagnato received a phone call from a reporter at WALB, a local television station. The reporter informed Bagnato that he and Charles Rehberg were about to be charged with burglary, aggravated assault and breaking and entering. Dr. Bagnato was stunned. He asked who's home he was charged with breaking into. The home was of Jim Hotz, a member of the board of Phoebe Putney. The next day, upon the advice of his attorney, Dr. Bagnato turned himself into local police. He was booked, fingerprinted, and had his mugshot taken. Over the next few months, the case was dismissed and refiled because technicalities caused it to be thrown out. Finally, in May of 2006, the case went before a judge for an initial hearing. It was immediately thrown out because it lacked specificity. In layman's terms, the who, what, where, how and why were missing from the charges. In other words, the prosecutor, Kelly Burke, after nearly two years, four times filing charges, couldn't explain to the court when these two broke in, how they broke in, and what they did after they broke in.

As it turned out, these charges were totally bogus. All of it came from the words of Phoebe Putney investigators. There was no police report of this alleged incident and in fact the police never investigated the matter. The investigator for the District Attorney, James Paulk never spoke with Hotz. In fact, Hotz later testified that neither Bagnato or Rehberg had ever been in his home. As such, not only were these charges made up out of whole cloth but prosecutors couldn't even figure out how to make them sound believeable. (as such they lacked specificity) The whole thing was so absurd that Bagnato and his lawyers struggled not to break out in laughter during the proceedings as Burke presented what amounted to legal nonsense. While the court proceedings were amusing, it culminated a legal bill of six figures for Dr. Bagnato.

At about the time the criminal charges were being, Phoebe Putney began proceedings for medical peer review against Dr. Bagnato. Multiple nurses accused Dr. Bagnato of being tyrannical and difficult to work with and such the medical charge was that he was a "disruptive physician". In one case cited, Dr. Bagnato was late for case and when questioned about his tardiness Dr. Bagnato responded by saying, "what are you gonna do indict me?". (referring to the ongoing criminal case I just wrote about) Because nothing cited could be linked to any sub par patient care, the medical peer review eventually went nowhere and was dismissed as well. Though, again, Dr. Bagnato was forced to spend hundreds of hours to defend himself.

In July of 2007, Dr. Bagnato asked for and received a change in his status at Phoebe Putney. Instead of having hospital privileges he merely was a consulting physician. In the next year and a half, he would only work at the hospital an average of once every two months. Because of the changing landscape of insurance, Dr. Bagnato felt, in December of 2008, that he needed to get full privileges back at Phoebe Putney. (Phoebe Putney is by far the biggest hospital in Albany and it has the most diverse set of medical resources in the area) At this point, the administration again began a medical peer review proceedings against Dr. Bagnato for being a "disruptive physician". Because this review is still ongoing, Dr. Bagnato wouldn't comment any further on the matter.

Conclusion:

Everything I just relayed has been reported in one capacity or another in the local and state media. In fact, it is now the subject of the documentary Do No Harm. As such, both Phoebe Putney and Ken Hodges have received a plethora of bad press. So, why did they pursue all of this? According to the watch dog group, Georgia Watch, the billing practices of Phoebe Putney have improved over the last couple years after this came out but they still have a long way to go. The hospital continues to make hundreds of millions yearly and, despite the bad press, it continues to operate in largely the same manner as before Bagnato and Rehberg went public. No one else at the hospital, however, has stepped forward from hospital staff to back up Dr. Bagnato.

When a whistle blower steps forward and goes public with corruption, the target of the corruption can and will survive if they limit the damage to one or a few whistle blowers. That's why whistle blowers are almost always the target of significant retaliation. The retaliation isn't for the benefit of the whistleblower but rather for the benefit of other potential whistle blowers. That's exactly what happened here. Dr. Bagnato faced civil, criminal and professional retaliation in the aftermath of his stepping forward to blow the whistle. The reason that I view whistle blowers so heroically isn't because they step forward and report corruption. That's simply the right thing to do. The reason it takes so much courage is that blowing the whistle means that you will face retaliation and that retaliation will be significant. The point is to break the whistle blower. By doing so, a message is sent to anyone else that dares do the same. On top of this, by breaking the whistle blower, that same whistle blower loses credibility. People lose their jobs, they get kicked out of school, and they even get prosecuted. That's what happens to whistle blowers.

Most shameful is this. Thurgood Baker is now running for Governor of Georgia. Ken Hodges is now running for Attorney General. Kelly Burke continues in the same position of District Attorney. Both have legitimate chances to win even though there is absolutely no doubt that all three are corrupt. There is no other way to view it. They pursued a case even though all three knew it was fabricated. Worse yet, they didn't even fabricate it well. Now, one may be the next governor of Georgia and the other maybe the next Attorney General. Potentially, the next Chief Executive and Chief Law Enforcement officer of the state of Georgia will both be, beyond a shadow of a doubt, corrupt. If that happens, it will be to the unacceptable shame and apathy of both the voters and media of Georgia.

For the full and inside story of the making of the documentary Do No Harm check out this link.

The Confusion of Paul Krugman

The only reason that I write about Paul Krugman as often as I do is because I am stunned and amazed that this individual is not only a New York Times columnist but an economics professor at Princeton, not to mention a Nobel Prize winner. It appears tha multiple institutions are willing to pay this man hundreds of thousands of dollars yearly to speak in gibberish. About a month ago, Krugman blamed some obscure law created in the Reagan administration for the current financial crisis. In fact, Krugman is determined to do everything he can to try and muddy Reagan's record for years.

It's also important to understand that universal health care, in its current House form, is a pillar in Krugman's big government liberal vision. This is, after all, the same Paul Krugman that screamed and yelled that the stimulus wasn't big enough. He suggested a stimulus as large as $5 trillion to turn the economy around. Krugman is a true believer Keynesian. Krugman is also a classic liberal that believes the U.S. should become an exact replica of most of Western Europe.

So, Obama's health care reform would be a major pillar in Krugman's dreams of seeing the U.S. turn into a socialist Democracy like France. The problem is that the Blue Dogs have stopped it in its tracks just as it was on the verge of passing. Krugman simply can't imagine that someone, especially a Democrat, could possibly be against his vision of health care reform, and so, naturally, he thinks the Blue Dogs are confused. Of course, what's really confusing is his attack on the Blue Dogs. First, Krugman starts with the four pillars of health care reform: regulation, mandates, subsidies, and competition. Now, if these are the four pillars, everyone must have been keeping them under wraps because this is the first that these four have been referenced together.

Obama has said the pillars are everyone is covered, costs get curbed, and no increase to the deficit. Obama's pillars are statements of purpose. Krugman's pillars are statements of policy. So, the first question is why are the four pillars Krugman references the key to successful health care reform. On top of this, Krugman has a peculiar view of these policies. \Krugman's idea of "competition", for instance, is the inclusion of the public option into the health insurance market. Our country already has over 1300 health insurance companies and yet Krugman never explains how one more will suddenly be the key to competition.Krugman doesn't even address that because he just assumes that his vision is right.

Krugman then acknowledges that health care reform will cost a trillion dollars over the next ten years, raise taxes, and then mentions there will be savings elsewhere to cover some of the shortfall. Then, he chastises the Blue Dogs for being concerned not only with the massive bill but with some of the ways that this bill will be paid. What Krugman never squares is how the same bill can increase costs by one trillion dollars over the next ten years and still be cost effective. Krugman doesn't seem to realize that if a bill costs a trillion dollars over the next ten years it isn't cost effective.

First, Krugman calls the Blue Dogs hypocrites for not speaking out on run away spending back in 2001 when the Republicans were in charge. This is turning into a worn out and boring attack. No matter who proclaims that we have too much government spending is immediately taken to the woodshed because they weren't this vocal eight years ago. As Bill O'Reilly likes to say, that is excusing bad behavior by pointing to worse bad behavior. If no one is allowed to question runaway spending now unless they also questioned it in 2001, then no one will question it and our government will spend with absolutely no limits. He also proclaims that these deficit hawks signed onto a $1.35 trillion tax cut which he claims added $1.35 trillion to the deficit. Of course, that's nonsense. Governmnet revenue increased by 20% in Bush's term. What added to the deficit was runaway spending. Though, Krugman's disgust for allowing people to keep more of their money is evident in that statement.

Then, Krugman can't seem to understand why the Blue Dogs are worried that the House bill forces almost all businesses to provide health insurance for their employees.

But Blue Dogs have also been complaining about the employer mandate, which is even more at odds with their supposed concern about spending. The Congressional Budget Office has already weighed in on this issue: without an employer mandate, health care reform would be undermined as many companies dropped their existing insurance plans, forcing workers to seek federal aid — and causing the cost of subsidies to balloon. It makes no sense at all to complain about the cost of subsidies and at the same time oppose an employer mandate.

So what do the Blue Dogs want?

Maybe they’re just being complete hypocrites. It’s worth remembering the history of one of the Blue Dog Coalition’s founders: former Representative Billy Tauzin of Louisiana. Mr. Tauzin switched to the Republicans soon after the group’s creation; eight years later he pushed through the 2003 Medicare Modernization Act, a deeply irresponsible bill that included huge giveaways to drug and insurance companies. And then he left Congress to become, yes, the lavishly paid president of PhRMA, the pharmaceutical industry lobby.

So, of course, Krugman thinks that anyone that takes a position opposite of his must be a tool of corporate interests. I don't know the CBO study he references but there are other reasons besides government revenue to oppose mandating that all employers have to provide health insurance for their employees. For one, this is a massive burden for small business owners and will likely cost millions of jobs. For another, this is a massive intrusion on freedom. Neither of those reasons necessarily have anything to do with being a tool of corporate interests. Krugman finishes the piece with this point.

Now, however, they face their moment of truth. For they can’t extract major concessions on the shape of health care reform without dooming the whole project: knock away any of the four main pillars of reform, and the whole thing will collapse — and probably take the Obama presidency down with it.

Is that what the Blue Dogs really want to see happen? We’ll soon find out.

Of course, that's both correct and misleading. The Blue Dogs have a fundamental problem with the vision of health care reform that President Obama has. They don't believe it limits costs, encourages competition, and won't add hundreds of billions to the deficit. If the only health care reform is Obama's health care reform, then, yes, they do want to kill it. They have a totally different vision for health care reform. It would focus on moving away from employer sponsored health care, tort reform, and attacking corruption and waste. That, apparently, is something that Krugman can't imagine because, apparently, the only vision for health care reform is Krugman's vision for health care reform.

Obama's Failing Domestic Agenda = Improving Economy?

If you're a conservative, there probably is no question mark at the end but an exclamation point. Is this correct? Let's examine the situation.

First, there's no doubt that the disintegration of health care reform, in its current form, will be a blessing for our economy. Right now, about 11 million small business owners are facing the prospects of either a new tax or being forced to provide health insurance for their employees. There are roughly 27 million small businesses in this country, any business with 500 and less employees. About 40% of those don't currently provide health insurance to their employees. So, about 11 million small business owners are facing increased costs one way or another from health care reform, in its current form.

On top of this, everyone making $350,000 and more is facing a tax increase to pay for it. Also, any individual that currently doesn't have health insurance will be mandated to get it. If they don't, they will face a penalty. Most of these folks will qualify under Medicaid, but about 11 million won't and currently don't have health insurance. All those folks will face the equivalent of a tax increase. We are now looking at nearly 25 million people that will see their taxes increase as a result of health insurance increases.

Furthermore, while the president claims that health insurance reform will pay for itself, there's never been a government program that has come in at budget. As such, most people expect deficits. Not least of this are the U.S. Treasury bond markets. There's no doubt that the spector of another massive government program is putting upward pressure on Treasury Bond rates. With that spector gone, you can bet that rates will see at least some improvement. With better Treasury bond rates, we'll see all borrowing rates improve: mortgages, commercial paper, car loans, and student loans. Better borrowing terms are of course quite stimulative.

Cap and trade is another contractionary policy. It's unclear just how much, if any, it will add to the deficit but companies having to scramble to figure out new manners in which to create energy will increase business costs, energy costs, and people's energy bills. All of these are contractionary. So, if health care reform gets killed, that will make it almost certain that cap and trade will go the same way.

The most important battle for the economy though is going to be on the budget. It is the bloated budget in particular that is putting the most upward pressure on all interest rates. If the Blue Dogs kill health care reform, they will likely become emboldened and take a hammer to the budget as well. If they show a backbone on the budget, we might see a much smaller budget come fiscal 2010. That would mean that the deficit would be nowhere near the $2 trillion it is estimated. Treasury bonds are both long term and forward thinking. If health care reform is defeated, that bodes well for a much tighter budget. That will mean that Treasury bond rates will likely improve. This, in turn, will reduce borrowing costs across the board since almost all interest rates take their cue from the U.S. Treasury Bond.

The defeat of President Obama's massive health care overhaul will likely lead to a battle within the Democratic Party over the nature of their spending. If the Blue Dogs win on health care, they are much more likely to win on the budget. Then, the country is much more likely to see tighter and leaner budgets. We might even see legislation that outlaws future bailouts though that has significantly less chance of passing.

All of the things I mentioned would be excellent for the economy, but we'd also see a weakened and wounded president. We'd have a president that is unable to do much of anything. He'd essentially be dictated to by the moderate wing of his party and the other party. There are still many dangers ahead. We still have another round of foreclosures starting sometime in the next six months. If, and more likely when, they happen, rather than being able to respond, the president will merely be blamed and his political clout further diminished. So, as our economy goes through another dip, the president will be impotent to do anything. While some may cheer that, it's not a good place to be to have another economic disaster while the president has no political capital to act.

So, while I believe that in the short term, Obama's failed domestic agenda would equal a better economy. In the long term, it might spell disaster. Much better of course would be to have a president who's agenda would help the economy and so we wouldn't have to root for its failure.

Video, Quote, and Word of the Day

sedulous

diligent

Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius - and a lot of courage - to move in the opposite direction.

E.F. Schumacker

Current Health Care Reform is a Political Cancer

There are all sorts of things that one can learn by having a statcounter on their web site. For instance, after I published this piece in which I listed the page numbers along with some of the most insidious portions of the House health care bill, I received an interesting set of hits from google searches. Almost immediately, I got an enormous amount of hits with the search term (page 425 health care bill). Page 425 creates "advanced care planning consultation" and thereby sets regulations for treating those near death. In other words, it rations the care of those near death. Then, there's page 268 where the government regulates the purchase and rental of electric wheel chairs. Page 272 is where care for cancer patients is rationed. These are just a handful of over 1000 pages in this bill.

I bring this up because most people still don't know what is specifically in the bill but they are starting to find out. Imagine the uproar when the media starts to actually do a few reports on pages 425-430 of this bill. The bill is being rejected by the public and they still haven't heard details about it. The details are worse, much worse, than even the summaries and analysis so far.

Already, the only thing that has really happened in the debate over health care is to put on display the massive schism that exists in the Democratic party. Does anyone really believe that having Blue Dogs come on television to trash their leadership's legislation while proclaiming they haven't been treated honestly helps the party? Does anyone really believe that Nancy Pelosi and Henry Waxman threatening to by pass committees helps anyone in the Democratic party?

The latest dust up involves Pete Orszag proclaiming that the CBO wasn't measuring the bill in a holistic way when they determined that IMAC (the Independent Medical Advisory Council). Now, is it really a wise political strategy for the White House' top accountant to take on the top accountant in the nation?

Worse yet for the White House, as things have fallen apart, the president has only doubled down on the health care bill. He has been talking about it non stop for almost two weeks. (with a small break to handle his gaffe about Professor Gates) He's doubled down on a bill no one likes and has no hope of passing.

Again, keep in mind that the analysis of what's actually in the bill has only just started. Soon, we'll stop talking about rationing as a theoretical concept and point to page 425 where health care for the elderly is actually rationed.

If you were to draw up a political disaster, you really couldn't draw it up any better, or worse depending on your perspective. The party is fighting itself. They are fighting independent auditors that have reputations far better than them. The public doesn't like the bill. The bill is awful, and sunshine is only just beginning to be lit. Yet, the once popular president has decided to expend the maximum amount of political capital on this dying and very unpopular bill.

In the next couple weeks, we're going to stop analyzing just how bad this bill is because it will soon be overkill. Then, we'll analyze just how bad the damage is to the Democratic party. It's nothing short of a political cancer. Nancy Pelosi, Harry Reid, President Obama, Henry Waxman, and Max Baucus have all had their political reputations tarnished significantly and permanently by this whole fiasco. The party is fighting itself. They are trying to steamroll a bad bill no one likes on their caucus and the country. Worse yet, even though they are determined to use every underhanded and dirty trick they can think of, they will FAIL. They are all staking their political reputations behind a bad bill, a bill everyone hates, and a bill that won't pass.

I surmised about a week ago that the president should scrap this effort and start anew. Instead, he is determined to move forward full steam ahead. That's simply the equivalent of staying on the beach even after you experience sun burn. There is no good that can come of this. He can only continue to damage his reputation, lose credibility, lose favorability, and lose precious political capital he'll need for the next fight.

The Definitive Dossier on the House Health Care Bill (Pages 1-500) Part II

In the first part, I analyzed the new government controls of the House health care bill. In this part, I will analyze the ways in which the plan will ration health care.

The nexus, so to speak, of rationing in health care starts at the bottom of page 27 and goes through page 30. That section is entitled, essential benefit package defined. This describes all those health procedures which will be deemed "essential". In the next section starting on page 30 entitled, Health Benefits Advisory Committee, this creates yet another bureaucracy that will deem which procedures are in fact "essential". in the previous part, I also mentioned page 335. On this page, there is the establishment of the "Outcome Based Measures". This will be a quantitative analysis of all procedures to measure their cost effectiveness. In other words, if there are two procedures to combat the same malady and one costs $10000 and the other costs $5000 and they both save lives at the same rate, the "Outcome Based Measures" will deem the second more cost effective. This same committee will then outlaw the first procedure. So, if a procedure is not deemed "essential" and is not deemed cost effective, it will be eliminated.

Keep in mind just how corrosive this can be. As procedures evolve they get better. Some new heart transplant might initially not see good results. Yet, as doctors perform it, study it, and trade information back and forth, it gets perfected. In the system dreamed up by the Congress, that won't happen. That's because the committee will render it obsolete before any such procedure has a chance to evolve.

The most insidious portion of this bill is found on pages 425-430. I mentioned it in the section on government control. This portion of the bill regulates the manner in which those near death will get treatment. Combine this with the "Outcome Base Measures" and this is where you will find the nightmare scenarios of the 80 year old not getting their hip replacement. Since that is likely to not be "cost effective" and "essential", it will likely be made obsolete.

Pages 272-274 deal with studying and analyzing care for cancer patients. There are several frightening parts of this section but here's the most frightening.

The Secretary shall conduct a study to determine if costs incurred by hospitals exceed costs incurred by other hospitals

The next section after this quotation is entitled, AUTHORIZATION OF ADJUSTMENT. As such, first the HHS Secretary will study if hospital patient care is cost effective and then the HHS Secretary will be given authority to adjust the cost structure of all hospital deemed not cost effective. As such, if your cancer treatment center is deemed not cost effective, the HHS Secretary will have power to adjust its cost structure and that means to decide which procedures can continue and which can't.

To understand just how intrusive this rationing gets, on page 268 the government is give authority to regulate the rental and purchase of power driven wheel chairs. In other words, even power driven wheel chairs will be rationed.

Finally, on page 241 (also mentioned in the previous part) the government sets rates that doctors can make. According to the language, there will be little difference among specialties. As such, neurosurgeons won't be able to make much more than other specialties. Because some specialties like neurosurgeons require significantly more schooling, new potential doctors will have less motivation to go into those fields. By creating a disincentive for many specialties, we'll have less of those specialists. With the power to regulate "essential" and "cost effective", the government will be forced to cut many procedures in those specialties because there will simply not be enough doctors to perform them.

Here is the previous part again. In part III, I will analyze the new tax outlays on individuals and small business owners that will be created by this plan.

Morning Market Report

It was a monster week last week. Most of the idices gain north of 7% for the week. Futures are currently marginally up, about a quarter of a percent. Aetna just released their numbers and they were well below expectations. That stock is down nearly 8% prior to the opening. Earnings will continue to come fast and furious this week. About 30% of the S&P 500 will report this week. Then, next week all eyes will be on Friday morning when the unemployment numbers come out for July.

Markets in the Far East were all higher. The Hang Seng in China was up 1.35%, the NIKKEI in Japan was up1.45%, while the Straits Time Index in Singapore was up 1.71%. In Europe it was also mostly positive though not nearly to the same intensity. In London, the FTSE was up .08%, the DAX in Germany was up .7%, while the Spanish index was up 1.2%. The Swedish index was the only in both Europe and the Far East to be down and it was down 1.36%.

Crude oil has climbed over $68 ber barrel. It's currently trading at $68.22. Meanwhile, Treasury rates continue to climb. The Ten year is currently trading at 3.72%. The spread between the 2 and 10 year is 2.66% and that also inches higher. The yield spread measures the likelihood of future inflation. It reached record highs of 2.75% and is now inching toward that record again. Meanwhile, an enormous amount of Treasuries will be auctioned off this week. $115 billion in Treasuries will be auctioned off this week.

The Dollar is mostly weaker. It's off .4% versus the Euro, down .42% versus the British Pound, and off .34% against the Yen.

My analysis:

Watch the Ten year bond. If this rally causes the Treasury bond to approach 4%, it will be short lived because borrowing costs will simply be too high to sustain it.

Disclosure:

All information here is meant for informational purposes and not meant as an endorsement of an investment and shouldn't be taken as such. I am NOT a licensed investment professional and all investment strategies should be made on a personal level.

Video, Quote, and Word of the Day

legerdemain

sleight of hand

One piece of log creates a small fire, adequate to warm you up, add just a few more pieces to blast an immense bonfire, large enough to warm up your entire circle of friends; needless to say that individuality counts but team work dynamites.

Jin Kwon

The Definitive Dossier on the House Health Care Bill (Pages 1-500) Part I

Introduction: Trying to analyze a one thousand page plan is difficult enough. As such, I will take the first 500 pages first. Even then, it would be way too long a post to analyze all five hundred pages all at once. There are four major points of emphasis: government control, rationing, taxes, and community group benefits that I will analyze. I will take those in four parts. First, let's talk about government control. Also, I will reference pages in the bill which you can find at this link.

...

The president has proclaimed on numerous occasions that if you like your health care plan, you need not worry because it WON'T change. Is this true? A thorough analysis of the bill leaves a lot of doubt.

The nexis, if you will, of government control starts on page 72 and page 84. Those two pages establish the government health exchange, define the government's role in it, and define what providers must enroll in it. The health care exchange will be administered by a new bureaucracy, the Health Choices Administration. Any insurer, health practitioner, or hospital in the health care exchange will be subject to the regulations of the exchange as laid out by the Health Choices Administration.

Who needs to be in the exchange? Any health care provider that provides health care that is paid in whole or in part by a third party must be in the exchange. In other words, any hospital that accepts insurance must be part of the exchange. All insurance companies must be part of the exchange. Chiropractors, laser surgeries, and other procedures that don't accept insurance would not be part of this exchange. As such, almost the entire health care industry would fall under the control of the health care exchange. The health care exchange would now be regulated by the Health Choices Administration.

As such, it is totally misleading to say that if you like your health care it won't change. That's only if your current health care plan conforms to whatever regulations are created by the Health Choices Administration.

The control only begins there. A lot of businesses and organizations are self insured. For instance, IBM has created its own insurance company for its employees. Several other companies as well as other groups like churches have also created an insurance company for their members or employees. Since they are self insured, they are not subject to this health care exchange. Remember, the exchange is only for those that have third party costs. Now, the hospitals that IBM employees go to would almost certainly be part of the exchange but that's another story. For those types of companies and groups, on page 22. Those employers, and other organizations that self insure, will then be mandated to a government audit. These audits will measure: financial solvency, their ability to pay the premiums, the extent to which ratings rules will cause adverse selections of their groups in the market. In other words, the government will audit all self insured organizations to make sure their health insurance plan is up to par as the government measures par.

Then, there is the introduction of an alphabet soup of new government bureaucracies to regulate health care. These new bureaucracies include: the Telehealth Advisory Committee, the aforementioned Health Choice Administration, the Independent Medical Avisory Council, the the Office of Civil Rights, the Office of Minority Health, the Public Health Investment Fund, and the Health Affordibility Administration. All of these new bureaucracies will have new regulatory authority over the administration of health care. In all, the bill creates 53 new bureaucracies.

The most insidious government control comes in pages 425-430. Here, the government will regulate "advanced care planning consultation". In layman's terms, the government will regulate how older folks will be treated and by so doing, just how much treatment will be provided to them. (I'll get more into this in the rationing portion but in here is language that will mandate that health care be provided if it isn't cost effective)

On page 335, there is the "Outcomes Based Measures". This will measure the cost effectiveness of all procedures done in the country. (this will also be revisited in the rationing portion) In other words, the government will do sort of health care polling of all procedures to determine if they are worth the cost. Of course, in order to do that, the government has to have access to the medical records of all procedures. This pages creates this"outcomes based measures" and by so doing, gives the government that access.

On pages 57-59, there is the establishment of the standardization of electronic administration. This will provide such things as real time determination of an individual's financial responsibility at the point of service, harmonize all common data points across administrative and clinical transactions, and describe all data points in unambiguous terms. On page 58, a National Health Care ID card is created. This card will be used by the government to create the ability to make real time financial determinations of a patient. As such, this will give the government real time access to bank statements, investment accounts and anything else necessary to make this decision. Thus, we finish off the Orwellian takeover of health care by the government.

On page 195, the Health Choice Administration is given access to the tax records of all Americans in the health care exchange. Here is the relevant text

The Health Choice Act of 2009, shall disclose to officers and employees of the Health Choice Administration, or such state based health insurance exchange, as the case may be, return information of any tax payer whose income is relevant

Finally, on page 241, government bureaucracies will set salaries for doctors. Here is the relevant portion.

...Service categories established under this paragraph shall apply without regard to the specialty of the physician furnishing the service.

Here is the second part on rationing.

Deciphering Conrad's Statement on Health Care

Kent Conrad made a startling and curious statement on health care today.

Senate Democrats are going to need help from Republicans to get President Obama's ambitious plan to reinvent the health care system over the goal line, a top lawmaker acknowledged on Sunday.

"Look, there are not the votes for Democrats to do this just on our side of the aisle," said Sen. Kent Conrad, the chairman of the powerful budget committee.

Even though the Democrats enjoy a majority in the Senate, some are skittish about the financial or political costs of the proposals.

And Republicans said they will continue their opposition to a plan they claim is simply a government takeover of private decisions.

It's important to put this into context. Social Security passed with nearly unanimous Republican support. Medicare passed with about half of the Republican voting with most Democrats. Sweeping health care reform would be legislation on the magnitude of those two. Democrats would be taking an enormous political risk if they passed this without significant Republicans on board.

At the same time, Conrad isn't merely saying that Democrats don't want to pass health care reform without the Republicans but he's saying he doesn't have the votes in the Democratic caucus. Democrats, of course, have 60 votes in the Senate. That means several Democrats are refusing to get on board.

This has two significant consequences. First, it means that significant numbers of Democrats are aware of the historical context I just laid out. Significant numbers of Democrats are unwilling to put their political hides behind without some Republican cover. Second, this is yet more evidence that health care reform, in its current form, is dead.

Imagine you're a Republican and you just heard what Conrad said. You now know that if your caucus unites against the current plan IT WON'T PASS. What exactly are you going to do if you're Mitch McConnell? In fact, that's exactly where the Republican caucus is at right now.

At this point, speaking about the current health care reform is elementary. We will all do it. I will do it. Make no mistake however, we are all debating a piece of legislation that won't pass. That doesn't mean sweeping health care reform won't pass, but it won't pass in any form near where it is now. Enough Democrats aren't willing to risk their political future on the current legislation. Republicans are NOT going to suddenly get on board. As such, we have put yet another nail in the coffin of the current health care reform bill.

The Obama Presidency and Liberalism

I think it's fair to say that the Obama presidency could be viewed as a controlled experiment on the worthiness of liberalism. With a very liberal president and overwhelming Democratic majorities, America is going to get a heavy dose of liberalism until at least 2010. (unless that is the President has a moderate epiphany as I suggested) Yet, if the president continues on his current path, he will also lead an imprint for history to judge liberalism in America.

So far, that judgment is incomplete but it's also near an incomplete failure. We first started with the stimulus. On the economy, the president famously said, "only government has the resources to jolt our economy back into life". He went on to say, "Tax cuts alone can't solve all of our economic problems" and so totally rejecting the conservative fiscal solution to an economic recession. Nothing could be more liberal than seeing the government as the driver of economic growth. So, he passed his $787 billion stimulus. Its results so far have been well documented. Our unemployment rate is inching toward ten percent. Our deficit is nearing two trillion dollars and we've only spent one tenth of it. Meanwhile, the president took over several banks, two auto companies, and an insurance company. One way or another, the outcome of all this government intervention will also be a historical judgment on liberalism as well.

In fact, though, the greatest judgment against liberalism so far has been the president's total inability to move his agenda going forward. In fact, despite overwhelming popularity, he barely got the stimulus through. Since then, he's been totally impotent. Things don't look to get any better. Cap and trade barely passed the House and the Senate has no plans to take it up anytime soon. Health care reform is in even worse shape. What sort of a judgment on liberalism is it if the liberal party has veto proof majorities in both chambers and still can't pass a liberal agenda? One might ask if liberalism can't pass now when will it pass.

Even lesser known policies like his $75 billion loan modification plan have been colossal failures. It's important to point out again that this judgment is still incomplete. The economy could have a stunning turnaround and by this time next year our unemployment might be in the 6's. GM and Chrysler might both be profitable by 2012 and the government will have sold its shares by then. In light of all of this, the president will then be able to pass sweeping health care, energy, and education reform. In 2012, we'll be a liberal nation and history's judgment on liberalism in America will be a glowing success. It's still early and so the judgment is incomplete.

There will also be those liberals that will claim that the Bush presidency was a failing referendum on conservatism. That is a popular and totally inaccurate argument. There are some liberals that claim the tax cuts caused the recession we are in now. That's just ludicrous. The tax cuts were enacted in 2001-2003. The recession didn't occur for five years. The two have nothing to do with each other. Others proclaim that deregulation caused the meltdown. Of course, it wasn't a lack of regulation but a lack of enforcement that lead to the crisis. It isn't a conservative policy to look the other way on mass fraud, but a bad policy. In fact, most of Bush's biggest problems came from embracing liberal ideas, big budget deficits, bloated government programs and bailouts. In fact, history's judgment on conservatism should already be written with the wildly successful Reagan presidency. Yet, those with an agenda attempt to cloud the issue. Our economy came out of a recession because government shrank, regulations were slashed, and taxes were cut. Yet, some cloud the issue and leave that debate open still.

Make no mistake, by November 2010, and certainly November 2012, history will be ready to judge liberalism as well. While its currently incomplete, the judgment so far is a total failure.

Sarah Palin: Tomorrow is the First Day of the Rest of Your Life

Sarah Palin has only hours left as a public official, and starting tomorrow she will merely be a private citizen. Her political opponents will never admit but Governor Palin has travelled a remarkable and unique journey. Furthermore, her future, political and otherwise, is entirely open and she can do just about anything that she wants to do moving forward.

In fact, starting Monday July 27th, it's going to be very good to be Sarah Palin. Her immediate plans appear to be writing a book, making speeches, and campaigning for candidates that she feels represent the political philosophy and values that she finds important. Compared to the brutal avalanche of media scrutiny and endless stream of ethics investigations, all these activities would define a cushy job.

As for Palin's future, she has the opportunity to do just about anything that she wants to do. It's possible she'll retire quietly to Wasilla and simply spend time with her family. It's also possible that one day she'll run for President. Liberals will mock this idea, but Sarah Palin has defied odds most of her life. She won a state championship on a bad ankle. She became a major almost by accident. She was forced into blowing the whistle on corruption within her own party and then she beat a long term incumbent to become Governor of Alaska.

The idea that she can't be president is held only by those that fail to recognize all that she has already accomplished. They are the folks that dismiss everything she is and has done as merely being in ALASKA. To them, good governance in ALASKA is simple and so Governor Palin really hasn't done anything. Those folks won't end their obsession with mocking and demeaning her just because she is no longer a public official. Most of those folks also have resumes significantly less impressive than the Governor's.

Still, I suspect that moving from Governor Palin to private citizen Sarah Palin will be a relief and a welcomed tamp down in stress. I also predict that no matter what she does moving forward the future is very bright for Sarah Palin.

CBO: IMAC Only Marginal Savings

For the last week, the president has been touting the Independent Medical Advisory Council as a means of saving significant money in Medicare. According the the Congressional Budget Office, those savings will be anything but significant. The CBO estimates that the savings would be $2 billion over the next ten years.

According to the President's plan, IMAC would be a committee of five industry experts like doctors. They would be appointed by the President and face approval by the Senate. IMAC would be put into place in 2015 and savings recommendations wouldn't go into effect until 2016 at the earliest.

The CBO's main reasoning for the modest reduction in savings is because the House bill already calls for serious cuts in Medicare. As such, the CBO doesn't see IMAC as presenting anything substantial above and beyond the savings the plan already calls for. The CBO only does estimates for ten years out. The CBO did say that it believes there would be increased but "modest" savings in Medicare costs ten years out and further.

Politically, this of course another haymaker in any plans of health care reform. It's especially damaging because the president has referenced IMAC repeatedly in the last week or so as a major compromise toward the eventual passage of sweeping reform. The CBO has determined that this compromise is little more than a marginal idea.

Now, while the numbers determined by the CBO will make the headlines, the CBO also gave ideas for serious and substantial savings in health care costs: moving away from fee for service and moving toward and moving toward one that pays for value, penalties for substandard care, bonuses for performances, higher co pays, and tighter management of bonuses.

I'm already convinced that health care near its current form will NOT pass and this just puts another nail in the coffin. The CBO ideas have some merit but most are easy to put on paper and much more difficult to execute.

Video, Quote, and Word of the Day

peripatetic

travelling from place to place

Democracy is when the indigent, and not the men of property, are the rulers.

Aristotle

The President Steps into a Giant Political Landmine

It's now day three of the Gates/Crowley arrest moving from a marginal local story to the number one national story. That happened when, while acknowledging one party was a friend and not having all the facts, President Obama proclaimed that the Cambridge police "acted stupidly". The next day the president stuck to his guns and even acted surprised that his comments raised such an uproar. Yesterday, he attempted to tamp down the pressure by sort of apologizing and calling both parties for a sit down.

So far, that has done little to tamp down the controversy. This continues to be the number one story on cable and it may be that way another couple days. All of this couldn't have come at a worse time. The president is losing popularity and even more losing popularity on his health care bill. Both appear in free fall. Meanwhile, the national conversation has turned to a story in Cambridge, Massachusetts.

Cable news is a peculiar thing. The story is pretty simple. The professor, Henry Gates, was locked out of his home. He broke in. His neighbor saw this and called the cops. The cops, who had a prior break in at that home earlier in the day, responded. There was a confrontation and Professor Gates was arrested. Then, the president responded to a question at his health care presser by blaming the cops. Then, after this created a firestorm, he walked this comments back. That's it. Yet, if you watch cable news enough, this narrative gets repeated over and over.

That's bad news for the president. He wants the narrative to be about health care. Yet, as we get into a crucial period, the narrative is about something totally different. Worse yet, the president is nearly universally condemned for his initial comments. Even his non apology leaves plenty to be desired. The president has again been caught straddling nuance in a way that no one can be happy with. As Mark Steyn aptly put it, the same person that wanted to stay neutral as Iranian police beat up protestors had no trouble condemning the cop in an incident he didn't witness.

In walking his comments back, the president said his comments were misconstrued as condemning the Cambridge police department. However did we construe his comments like that? It must have been between where he called said that the Cambridge police department acted stupidly. Maybe in Hyde Park saying you acted stupidly is a compliment but in the rest of the country that's an insult.

So, now, the administration has to deal with the media being fixated on a story in a small well to do suburb of Boston. In a loop, we hear that the president characterized the actions of a white cop as "acting stupidly". Then, we all hear the non apology, apology, and on and on it goes. In a few days, this will all end. Instead of focusing on health care, the president is caught on the wrongside of most cops and in the middle of a story that involves our ugliest sentiments on race and class. In the meantime,his approvals will drop another few points. A few more points will be shaved from the health care proposal. Meanwhile precious time will be used up that could have been spent selling health care. For now at least, there's nothing the president can do about it.

Some have speculated as to why the president commented as he did. I won't do that. I'll just say he acted stupidly.

Some Perspective on Alderman Mell and the Walmart Proposal

Several years ago, I had a client that did a lot of work in the Phillipines and Thailand for Motorola. He told me the difficulty that Motorola had in doing business in a country like the Phillipines. That's largely because Motorola has a strict policy against being involved in illegal activities like bribery. Of course, when doing business in the Phillipines, that was simply a normal part of doing business. So, Motorola would use intermediaries and other agents in order to avoid directly paying bribes. You can imagine how such an environment is for a private company to do business in. In fact, there is one common threat with any third world nation and that thread is corruption. Economies simply can't expand and prosper if in order to business several government officials have to be paid off in the process of every deal.

For nearly four years, Walmart has attempted to get a project approved by the city of Chicago to build a superstore in the Chatham area. For four years, that request hasn't merely been denied but it hasn't even been given a vote. Never during that period of time has any politician given any reasonable explanation for why their request has been stalled. In Walmart's only store in Chicago, the store has generated just over $10 million in tax revenue in about two years. It has employed 400 people. Furthermore, a Bank of America, Dunkin Donuts, among more than a dozen other retailers have built commercial space in the area since the Walmart went up. Despite this, their request continues in limbo with absolutely no explanation for when it will move forward and why it hasn't yet.

Now, I don't mean to suggest that the city of Chicago is anything like the third world, however, I will suggest that politicians with agendas besides the growth and prosperity of the areas they serve only hurt the economy as a whole. It is in that context that we should view the fight over the Walmart in Chatham on 83rd and Stewart. Walmart is willing to build 150 thousand square foot store. They are ready and willing to hire about 400 UNION employees all from the Chicagoland area. They can even finance the project all entirely with their own money. Then, they'll hire about 500 employees to operate the store. The citizens of the area want the store. A poll by McKeon & Associates in June, 2007 found that 82% of the residents the ward wanted a Wal-Mart Supercenter. Finally, the area where the store will be is a plot of dirt currently.

Yet, we are headed into the fourth year that Walmart has lobbied to get permission from the city to build the store. The man currently most responsible for holding this up is Alderman Richard Mell. Walmart's bid for approval is stuck in the rules committee he heads. Most have speculated that his motivation have to do with Walmart's refusal to unionize. Of course, this is strictly speculation. That's because all major media in Chicago, including both newspapers the Sun Times and Tribune, have attempted to reach out the Mell and he refuses to explain exactly why their bid is still not moving forward.

Let's lay the cards on the table. Walmart's survival is NOT tied to the store here in Chicago. They will continue to make billion dollar profits yearly with or without. In fact, their spokesperson, Tara Steward, told me diplomatically that Walmart is determined to build the store because they've been in the neighborhood and they've received overwhelming support of the project by the residents. The alderman in the area, Howard Brookins, fiercely supports the project. Chicago's current unemployment rate is north of 10%. Even if Walmart's superstore gets built, the effect on overall unemployment will likely only change marginally. As such, the effect for both entities, Walmart and the city of Chicago, will be marginal.

What this fight is though is a microcosm of a city that welcomes business in a "boy's club" manner. If your business is a friend of the city, the city welcomes you with open arms. If you're deemed a villain, like Walmart has been, then the city does all it can to make your entry into the city painful. Walmart has created a full throttle Chicago media campaign to drive their message home to local residents, but how many businesses can afford the sort of campaign that Walmart is engaged in. Furthermore, how many companies can afford the long battle that Walmart is determined to win?

What this battle clearly shows is that Chicago politicians have created an environment that is not business friendly. It may NOT be on the scale of pay offs to government officials. (though I bet some would argue) Still, when politicians make conducting business painful and expensive, it hurts business in their locality. All Richard Mell has done is told all businesses that the only ones welcome are those the politicians deem worthy. Just try and imagine an economy in which the only business done is that done by those with connections to local politicians. That's the message of the fiasco surrounding the Walmart. The politicians of the city of Chicago are telling businesses that the only businesses that will go up are their kind of business. That's corrupt and corruption breeds economic stagnation.

"Highlights" from the Health Care Bill: Pages (1-500)

I just received a summary of the first five hundred pages of the health care bill. Here are some highlights.

Page 22: Mandates audits of all employers that self-insure.

Page 29: First reference to rationing

Page 30: The Health Benefits Advisory Committee will be created to monitor and recommend health care treatments and benefits

Page 50: All non-US citizens, illegal or not, will be provided with health insurance.

Page 58: Every person will be issued a National ID Healthcard and the government is granted REAL TIME access to YOUR FINANCIAL STATEMENTS

Page 72: All private healthcare plans must conform to government rules to participate in a Healthcare Exchange

Page 84: All private healthcare plans must participate in the Healthcare Exchange

Page 124: No company can sue the government for price-fixing. No "judicial review" is permitted against the government monopoly.

Page 149: Any employer with a payroll of $400K or more, who does not offer health insurance, pays an 8% tax on payrol

Page 150: Any employer with a payroll of $250K-400K or more, who does not offer health insurance, pays a 2 to 6% tax on payroll

Page 167: Any individual who doesn’t' have acceptable health insurance (according to the government) will be taxed 2.5% of income.

Page 170: Any NON-RESIDENT alien is exempt from individual taxes

Page 195: Officers and employees of Government Healthcare Bureaucracy will have access to ALL American financial and personal records.

Page 239: Bill will reduce physician services for Medicaid. Seniors and the poor most affected

Page 265: Government mandates and controls productivity for private healthcare industries.

Page 268: Government regulates rental and purchase of power-driven wheelchairs.

Page 270: Requires that Ambulatory Surgical Centers submit cost data to the Secretary of Health and Humans Services for "analysis".

Page 280: Hospitals will be penalized for what the government deems preventable re-admissions.

Page 318: Prohibition on hospital expansion. Hospitals cannot expand without government approval.

Page 335: Government mandates establishment of outcome-based measures, cost effectiveness which eventually means rationing

Page 341: Government has authority to disqualify Medicare Advantage Plans, HMOs, etc

Page 354: Government will restrict enrollment of SPECIAL NEEDS individuals.

Page 379: Creation of the Telehealth Advisory Committee

Page 425: Government provides approved list of end-of-life resources,

Page 427: Government mandates program that orders end-of-life treatment

Page 429: Advance Care Planning Consult will be used to dictate treatment as patient's health deteriorates.

Page 430: Government will decide what level of treatments you may have at end-of-life.

Page 489: Government will cover marriage and family therapy.

Page 494: Government will cover mental health services: defining, creating and rationing those services.

Read all the summary here.

Update

Some are saying they can't open up the link. As such, here is the text of the bill.

Here is a full dossier of pages 1-500.

Professor Gates, Race and Class

I must confess. I didn't really pay attention to the case of the arrest of Professor Gates until after the president addressed it in his press conference. That's probably why I didn't notice right away just how explosive his statement was at the press conference. After all, I didn't see why it was such a big deal that a professor got arrested for disorderly conduct. In some places, that's considered a good night out. Call me naive but the issues of race and class weren't obvious to me until after the president turned it into the number one story on television.

Earlier, I spent sometime reading how prominent blacks and whites analyzed the case. I was pleasantly surprised to find out that the analysis didn't actually break down along color lines. What wasn't surprising was that no matter what side of the line the analysis was on, the issue of race was the central part of the analysis either way. Here is how African American professor William Leon characterized it.

There has been a rush to judgment by many who should know better. To immediately place Dr. Gates’ unfortunate arrest into the category of “racial profiling” does a great disservice to the volumes of cases that fit the accepted definition.

Sgt. Crowley was not passing by Dr. Gates’ home and upon seeing a Black
man in a White neighborhood decided to investigate this seemingly strange occurrence. Sgt. Crowley was responding to a reported breaking and entering at Dr. Gate’s residence. Most police officers will tell you, safety first; better to be tried by twelve than carried by six. Sgt. Crowley’s primary concern was to ensure that there were no perpetrators on the scene and that the gentleman that he encountered (Dr. Gates) had every right to be there. It is also important to have some understanding of police procedure in these types of situations before passing judgment on what transpired.

At one point Dr. Gates is alleged to have said to Sgt. Crowley that he (Crowley) had no idea who he was messing with. Is it possible that this question may provide some insight into how this circumstance escalated to the point that it did? It is incumbent upon all citizens, no matter what their status or station in life to obey the legitimate
commands of the police. One must never underestimate the blindness that attends
arrogance.

Here is how African American actor Jeffrey Wright characterized it.

President Obama expressed what many Americans feel regarding the recent arrest of Harvard professor Henry Louis "Skip" Gates -- that the Cambridge, Massachusetts, police responded "stupidly."

Obama is catching some flak for that, but I applaud him for having had the courage to speak his heart and mind.

I wonder if the president himself has ever experienced the blunt end of racial profiling, or if he personally knows of anyone other than Professor Gates who has. Among African-American males in this country, the small minority is those who have not or do not.

Race baiter Mary Mitchell merely hints that racism was at play.

As a homeowner who has had a break-in, I can't get too worked up over what happened to Harvard Professor Henry Louis Gates Jr.

Notable African Americans across the country are expressing outrage that Gates,who is considered to be a leading African-American intellectual, was hauled off to jail for trying to get into his own house.

But let's look at this from another angle.

This is a case of no good deed goes unpunished.

I wish someone had been watching when thieves broke into my house and made off with everything they could carry.

But like so many other communities in America, we live in neighborhoods of strangers.

That's probably why the woman who called 911 on Gates didn't simply walk over and ask if she could help.

What she saw was two black men acting suspiciously.

What Gates saw was racial profiling.

Blogger Patterico takes race from the other side.

Racism is simply a form of stereotyping. Stereotyping occurs when one says: because of my past experiences with people from your group, as well as things I have heard about people from your group, I am forming a firm opinion about you.

Racism is simply one form of that attitude, in which “people from your group” means “black people.”

Oddly, however, many black people feel perfectly comfortable engaging in a similar form of stereotyping, in which “people from your group” means “police officers” or “white people” — or, best of all, “white police officers.” Apparently, stereotyping those groups is a laudable pursuit.

The Henry Louis Gates arrest is yet another reminder of how quick some black people are to leap to unflattering conclusions about others based on scant evidence.

I personally think this case has a lot more to do with class than it does with race. After all, would we really be talking about this had Professor Gates been Henry Gates, the blue collar laborer. The only reason that some people's sensibilities were so damaged by this incident wasn't because Professor Gates is black. It's because he's a prominent professor. In fact, Mitchell implies that what happened to Gates happens to poor black folks regularly with no one noticing.

Maybe a better way to look it is that it's the combination of race and class. Those that believe that Professor Gates was wronged believe that Officer Crowley would have treated a white professor differently. Of course, to know this they would need to get into his mind and heart and neither anyone but Officer Crowley can do. Those that defend the officer believe that Professor Gates wanted to be treated differently because he's a professor. Of course, again, we'd need to get into his head to know this.

What's truly unfortunate about this incident is that an ugly confrontation between two individuals has divided the nation on race and class. Worse yet, the roots of the incident had little to do with both. They've been brought to the front because in this country when a successful black person is arrested by a white cop we can't help but frame it in the context of race and class.

Confrontation Brewing in Honduras (UPDATE)

The deposed leader of Honduras, Jose Zelaya, is right now standing on the Nicaraguan side of the border of Honduras and Nicaragua on his cell phone with a series of supporters presumably in preparation of re entering the nation.

Estoy en la zona intermedia en la frontera de Nicaragua” declared ousted Honduran president Manuel Zelaya, on video broadcast around the world, while speaking with someone reported to be from his family, whom he had hoped to meet at the border. Zelaya is, as of 15:55 EDT, today, about to re-enter Honduras from the territory of Nicaragua, amid a “caravan” of supporters. It is thought to be possible he is communicating with Honduran security forces.

Zelaya was ousted by a military intervention in June, after a ruling from the
nation’s highest court found that his attempts to organize a referendum to alter the constitution and serve a third term were illegal. The governments of the US and the EU, as well as diplomats from the UN and other international bodies, have called the military intervention illegal, despite Zelaya’s actions having been judged to be outside his constitutional authority.

His critics, and those who set up the interim government, say the Honduran constitution does not have any formal process for impeachment and that actions judged illegal by the courts amount to a “self-implementing” removal from office. Zelaya’s defenders, and observers in the international community have said Zelaya was not found guilty of crimes, but was simply told his hopes of organizing a referendum to allow for a third term were not to be realized.

The current interim president, Roberto Micheletti, has pronounced that he would arrest Zelaya if he tried to re enter. Police have been dispatched to the border and so this appears to be a Mexican stand off of the highest order brewing. This is a breaking story and so details are still coming.

(Update)

Now there are reports of tear gas fired.

Clashes erupted on the Honduran border Friday as ousted President Manuel Zelaya arrived just meters away in Nicaragua ahead of an expected showdown in a second attempt to return to power.

Zelaya arrived at Las Manos, on Nicaragua's border with Honduras, at around midday (1800 GMT) as anti-riot police fired tear gas on hundreds of his supporters massed on the other side.Zelaya supporters, including some armed with stones, faced off with hundreds of soldiers and anti-riot police, while the Honduran government imposed an 18-hour curfew in border areas.

...

Update

CNN is reporting that Zelaya has now just crossed into Honduras.

Ousted Honduran President Jose Manuel Zelaya walked under a border chain Friday and returned to his country nearly a month after being removed by a military-led coup.

Zelaya was surrounded by supporters as he attempted to fulfill a vow to return after being removed by a military-led coup in June.

His arrival at the border came minutes after police and soldiers fired on his supporters in El Paraiso, CNN en Español correspondent Jorge Jimenez said. Two people were wounded, he said.Neither the shooting nor the injuries could be independently corroborated.

The police and soldiers fired tear gas at the demonstrators for about 15 to 20 minutes before letting off a barrage of 15 to 20 shots, Jimenez said.

...

(UPDATE) Zelaya only took a "symbolic" step into Honduras according to Steve Harrigan. Zelaya continues to be on the Nicaraguan side of the border.

Council Winners

There is victory for my ACORN piece in the latest Council voting. As always, it's an honor just being nominated even if I nominated myself. Here are the full results and check out the intro by the watcher at the link.

Winning Council Submissions
First place with 2 2/3 points! – The Provocateur - Note to the Conservative Media…Here’s How You Bring Down ACORN (and the President With Them)
Second place with 1 1/3 points – (T*) – Joshuapundit - Netanyahu And Lieberman Tell Obama: ‘Jerusalem Is Not Negotiable’
Second place with 1 1/3 points – (T*) – Soccer Dad - Childhood’s end
Third place with 1 points – Rhymes With Right - My Final Reason For Opposing Sonia Sotomayor
Fourth place with 2/3 points – (T*) – Right Truth - Thou Shall Not Lie
Fourth place with 2/3 points – (T*) – Bookworm Room - The world gobbles up blood libels against Israel
Fifth place with 1/3 points – The Glittering Eye - How Not to Argue
Winning Non-Council Submissions
First place with 2 points! – Ted Nugent/Human Events - Obama, Churchill and Zelaya
Second place with 1 1/3 points – (T*) – Keith Hennessey - 20 questions for the President’s press conference
Second place with 1 1/3 points – (T*) – New Atlanticist - Will COIN Work in Afghanistan?
Third place with 1 points – (T*) – Stumbling on Truth - Health Care Mythology
Third place with 1 points – (T*) – Economist.com - What went wrong with economics
Third place with 1 points – (T*) – Elder of Ziyon - Iranians rape virgin girls before executing them
Fourth place with 2/3 points – Dr. Melissa Clouthier - Health Rationing & You!
Fitfh place with 1/3 points – Real Clear Politics - The Three Big Lies of Obama Care

Democratic Leadership Vs. the Blue Dogs

I think most of us expected for Republicans to battle it out ideological in the aftermath of their stunning defeat in 2008. I'd be hard pressed to imagine that anyone would have thought that there would be a political civil war not six months into the new administration. Though, to be fair, Dick Morris predicted just such a problem when he analyzed the make up of the Democratic party.

The problem is that the Democratic party is a series of factions and those factions have competing agendas. The far left lead by Nancy Pelosi have totally different legislative goals than the moderate and conservative Blue Dogs. Then, there are the Congressional Black and Hispanic Caucuses which also represent their own interests. Now, enter the very complicated nature of health care reform. Is anyone really surprised that Democrats are having problems coalescing around a bill?

If you allow the Blue Dogs to lead in crafting the bill, the Pelosi wing won't be on board, and vice versa. Right now, it's vice versa but Democrats were always going to have problems. It's one thing to have competing wings create chaos on crafting legislation. That can look ugly as it happens but it's also part of the problem.

What's happening now is a full civil war. The Blue Dogs are accusing the leadership of not negotiating in good faith. Meanwhile, the leadership is trying to strong arm the Blue Dogs into falling in line with a bill they hate. That all has now taken on more significance. First, Speaker Pelosi suggested that the health care bill would skip the energy and move directly to the floor. The blue dogs were holding up the bill in that committee and refusing to sign on. Now, Henry Waxman, head of this committee, has made the same threat.

A key House committee chairman on Friday threatened to roll over moderate Democrats who are holding up the health care reform bill and bring the package straight to the floor.

The statement underscored the deep divisions the health care reform debate is causing in the ranks of the Democratic Party.

Fiscally conservative Blue Dogs are holding up the bill in the House Energy and Commerce Committee over cost concerns and other issues. But Chairman Henry Waxman, D-Calif., on Friday accused those Democrats of empowering Republicans.

"I won't allow them to turn over control of the committee to the Republicans," Waxman said, threatening to bypass the committee process.

This is the political version of eating your own. The only clear winners in this fight are the Republicans. The only clear losers in this fight are the Democrats. The only question is which of the Democrats will lose more. What is clear is that there is total chaos and disruption within the Democratic party.

It's really baffling that the leadership would ratchet up the pressure in this way on members of their own caucus. First, the Blue Dogs have indicated they would vote against this bill. Even if it bypasses committee, they still have enough votes to kill it. More than that, such heavy handed tactics against their own only create even more schisms within the party.

What's more stuning is that even if this stunt happened to get a bill through the House, it would still be months away from actually having binding legislation. The Senate is nowhere near moving forward. Even if both Waxman and Pelosi by passed the committee and strong armed enough members to pass the bill, the health care debate would only get started. As such, the leadership would look like bullies steam rolling their bill past its caucus that has serious problems with it. That's the perception they'd create while it's debated nonetheless for several more months.

Interview after interview would likely characterize this move as exactly the sort of cynical tactic that everyone hates. That would be the perception they'd create. Even the suggestion that leadership would by pass the committee smells of a leadership that is in full panic mode. It appears as though Democratic leaders have hit an impasse and they can't figure out how to move forward. Instead of making the necessary compromises needed to get enough votes to pass the bill, they want to circumvent the process in the desperate attempt that the stunt will get enough votes.

Video, Quote, and Word of the Day

imbroglio

a misunderstanding

Many politicians are in the habit of laying it down as a self-evident proposition that no people ought to be free till they are fit to use their freedom. The maxim is worthy of the fool in the old story who resolved not to go into the water till he had learned to swim.

Thomas Macaulay

Some Thoughts on Professor Gates, Officer Crowley, and President Obama

By now, most of the country knows, generally, what happened. Professor Gates locked himself out of his house. He broke in. His neighbor saw this and thought it was suspicious. The police received a call about a suspected break in. The police showed up at Professor Gates' home. There was a confrontation, an argument, and then he (Gates) was arrested for disorderly conduct. Then, at his latest press conference, the president first said that he didn't have all the facts and still proceeded to say that the Cambridge police acted "stupidly".

First, politically, this was simply boneheaded. The Cambridge police department naturally took offense. They are vocal in their disgust.

Many police officers across the country have a message for President Barack Obama Get all the facts before criticizing one of our own. Obama's public criticism that Cambridge officers "acted stupidly" when they arrested black Harvard professor Henry Louis Gates Jr. could make it harder for police to work with people of color, some officers said Thursday.

It could even set back the progress in race relations that helped Obama become the nation's first African-American president, they said.

So, now what for the president. First, he's thrown off message. He no longer is talking about health care but instead trying to explain himself about a matter that has no political relevance. Second, he now is on the opposite end of law enforcement. Is that a place he wants to be in?

This is a pretty obvious point. If your first statement is "I don't know all the facts", you had better not offer an opinion. That's because once more facts come out they could easily contradict your conclusion. We still don't know all the facts and so all of us should be careful in weighing in with an opinion. Characterizing someone as "acting stupidly" as the president did demeans the individual and makes a pretty strong judgment of another individual. When you do that without all the facts, that is terribly unfair, especially from the bully pulpit of the presidency.

I think its safe to say that its unfortunate that the professor was arrested. The whole incident is unfortunate but we should all be careful in assigning blame without all the facts. By weighing in so one sided, the president has elevated this story. He has inserted himself, and in no way does that help the situation or his own political standing.

The Stunning Hubris of Speaker Pelosi

For the last couple days, Speaker Pelosi has continued to boast confidentally that she has the votes to pass health care reform out of the House before the August recess. This always seemed like a peculiar pronouncement because as she has made it, Blue Dogs have taken to television all over the place to proclaim they can't vote for the bill in its current form. To me at least, this appeared to be a lot more wishful thinking than reality. Now, we have a new development.

House Speaker Nancy Pelosi has set the legislative throttle at full-speed-ahead as she plans to bring health care reform to a floor vote by the August recess, a move that could inflame tensions in the party and imperil the bill's passage since fiscally conservative Democrats say they're still not satisfied.

Senate Majority Leader Harry Reid on Thursday announced that the Senate would wait until after recess to bring the bill to a vote, and President Obama said it was "OK" to miss his deadline so long as lawmakers are working in earnest to reach a compromise.

Reid's announcement led some members of the House to wonder why Pelosi feels it's necessary to hold to a deadline that's already been broken.

It's hard to imagine what the Speaker thinks this will accomplish. Even if she's successful in twisting arms, Health care will be nowhere near passing even if it got out of the House. A bill hasn't even been introduced in the Senate.

Then, all those that got their arms twisted in the House will face angry voters when they get back home. On top of it, the Speaker will appear to be drunk on power and out of control. She'll look like she's more concerned with getting her agenda through than respecting centuries of legislative protocol.

All of this would be of minor consequence if she had some tangible legislative accomplishment to show for it. She won't. She'll likely tout the passage of sweeping health care back home. In San Francisco, they might even cheer her. In the rest of the country, the current legislation is unpopular and getting more unpopular by the minute. Furthermore, passing a bill out of the House is not much of an accomplishment.

Then, there's the chance that she'll twist arms and not twist them hard enough. That's very similar to a no confidence vote in a parliament. The leader can't proclaim to have the vote, bring it to the floor, and then have that vote fail and keep her power.

In fact the idea is so ludicrous it seems impossible that she'll follow through. So, why even put out a statement that she's thinking about it? If she changes her mind, her credibility looks weak. None of what is being reported is rooted in either good politics or good policy. It all is rooted in out of control hubris.

Morning Market Report

The bulls just finished up in Pamplona and they appear to have moved to the U.S. markets. The NASDAQ experienced its twelfth straight up day. The Dow crossed 9000 for the first time since January 6th. All three indices were up over two percent yesterday. The driver yesterday was a positive June housing sales report.

According to a Thursday announcement by the National Association of Realtors, the existing home sales in the US jumped 3.6 percent in June to a seasonally-adjusted annual rate of 4.89 million units, from the May figures of 4.77-million-unit annualized rate.

Sustained by the sale of low-cost and foreclosed houses, the rise in home sales - which marked the third monthly rise - is a small yet optimistic trend, depicting that the four-year slump in the housing sector, that gave impetus to the financial downturn, is likely coming to an end.

Anecdotally, I haven't seen anything but a tightening of credit. I don't know how much of this is from short sales and sales of foreclosed homes. It is the third straight rise in a row and that speaks for itself.

Markets are down just slightly at the open and so we'll see. There's breaking news. Warren Buffett just said that "inflation is a very real threat". That's really not breaking news. All you need to do is look at the yield spread between 2 and 10 year U.S. Treasury bonds. They are currently at 2.63%. The record in June was 2.75%. This is an extraordinary spread and points to the sort of fear that Buffett was speaking about.

World markets were mostly up today. The Far East was up all around. The Hang Seng in China was up .83%, the NIKKEI in Japan was up1.55% and the Straits Time Index in Singapore was up 1.95%. Europe was slightly more mixed. The FTSE in London was .48%, while the DAX in Germany was down .14%, and the Spanish index was up .69%.

Crude oil is now pushing $67 a barrel at $66.85 and it has gained about ten percent now in about a month. The Ten Year U.S. Treasury is at 3.67% and all bonds around the world saw their rates go up just slightly anywhere between two and four basis points.

AMEX, Amazon, and Microsoft all reported earnings after the bell yesterday and they all disappointed.

My analysis:

What I've seen of the mortgage market tells me nothing of what these housing numbers say. Still, they are what they are. I don't believe in green shots. So, the most important number is the jobs number coming out August 7th. We'll see how that looks.

Disclosure:

Everything in this space should be taken as information only. All opinions are my own only and should NOT be taken as an endorsement or investment strategy. I am not a licensed investment advisor and nothing here should be taken as investment advice.

The Inside Story of Do No Harm II

It appears that this will not be all that we will see of the film Do No Harm. The film, which chronicles the story of whistle blowers John Bagnato and Charles Rehberg, had been stalled prior to release due to a dispute over scenes used in the film that originally aired on newscasts on the Albany, Georgia station WALB. I received an email from Jim Wilcox, station manager of WALB, this morning letting me know that the dispute has been settled and the station is releasing its footage. So, the movie can be shown around the country as planned. Look for it near you.

For the whole inside story behind the movie, and the election it might affect, please read the Inside Story of Do No Harm.

The Issa ACORN Report: A Full Analysis

A reading of the Committee on Oversight and Government Reform report on ACORN leaves only one conclusion, ACORN is a criminal enterprise. In fact, the only doubt, according to the committee, that ACORN is not RICO was a debate late in the report whether it is technically an organization. The evidence gathered by the committee is damning. The committee quoted several news sources, "insiders", Marcel Reid, Karen Inman, Anita Moncrief, and the law firm of Harman, Curran, Spielberg, and Eisenberg. HCSE was retained by ACORN as outside legal counsel. Ironically enough, a lot of the most damning evidence came from investigations that HCSE did and the conclusions they published.

It's both amazing and shocking just how much criminality grew out of the embezzlement perpetrated by Dale Rathke. Dale Rathke, again, is the brother of long time ACORN CEO Wade Rathke. The embezzlement itself, which occurred between 1999-2000, was of course criminal. The criminality only began there. The committee referenced an email that I have also published in pointing out that eight individuals were made aware of the embezzlement, Steve Kest, Jon Kest, Madeline Talbott, Keith Kelleher, Mike Shea, Zach Polett, Helene O’Brien, Amy Schur, Liz Wolff, and Beth Butler. All swore to keep it quiet and had things worked out no one would have known about the embezzlement. All are the top eight people currently in ACORN. (make no mistake Bertha Lewis, the current CEO, is a figurehead and mouthpiece)

By keeping the embezzlement quiet, ACORN then violated other tax laws. ACORN is a tax exempt organization. As such, ACORN is mandated by law to report violations like embezzlement. By keeping it quiet, they violated laws that governed their tax code. The criminality only started there. ACORN also violated, according to the report, ERISA (Employment Retirement Income Act) laws. They did this by moving money out of multiple pension funds to cover shortfalls created by the embezzlement itself. The cover up of the embezzlement also violated the fiduciary responsibility that ACORN has a corporate entity.

The committee also referenced these violations of the law: voter registration fraud, tax fraud, embezzlement, and misuse of tax payer funds. The voter registration fraud has been well publicized. ACORN gets paid by the government and non profits to register new voters to vote. On a systemic basis, ACORN signs up non existent voters. The committee pointed out that this had to do with low base pay combined with pressures of quotas, lax oversight that lead to the hiring of criminals, and poor managerial control.

About half the report was used to detail the manner in which ACORN comingles funds and misuses tax funds. In the report, ACORN claims that CCI (Citizens Consulting Inc.) is a separate entity and that ACORN is merely a client and partner. The committee wasn't buying this characterization. CCI was run for a long time by Dale Rathke, admitted embezzler and brother of Wade Rathke. Furthermore, CCI board members are members of the board of ACORN and its affiliates. The committee found nearly two hundred bank accounts at one bank all controlled by CCI. These bank accounts were tied to ACORN and many of its nearly 400 affiliates. These affiliates are of all stripes in terms of tax codes. As such, some are non profit and others are for profit. By having all their money controlled by one entity. This creates a lack of transparency, and it's impossible, according to the findings of HCSE, to know that funds aren't being comingled between 501 (C)3's and 501 (C)4's.

The misuse of funds only begin there. Former Project Vote employee, Anita Moncrief, said that when she worked there that ACORN and Project Vote shared an office and that employees routinely did work for both organizations at once. This is important because Project Vote's tax status means they must be non partisan. This clear rule wasn't merely violated but trampled. Zach Pollett, ACORN's political director, is also the executive director of Project Vote. In other words, the same person that was in charge of ACORN's political activities is the main person in charge of the group that is supposed to avoid partisan political activities. Numerous memos and emails were cited in which Pollett referenced Project Vote as part of an overall political strategy.

Furthermore, ACORN shared their email lists with the campaigns of John Kerry, Hillary Clinton and Barack Obama.

The conclusion of the report is much like the conclusion of ACORN 8 spokesperson Michael McCray.

Thus, no one really knows how much ACORN is actually worth and how much non-profit –vs– for profit funding has flown through ACORN unless and until there is a forensic examination and independent audit. We know that all funding flowed through Citizen’s Consulting Inc. (CCI). But CCI claims to be a private company – but it is really the financial management division of ACORN.Ultimately, their must be a forensic examination and audit of ACORN. Otherwise know one will ever know for sure how much went into ACORN, how much money was co-mingled at ACORN or how much money was embezzled from ACORN. It’s just that simple.

ACORN Housing Corp. gets about 40% of its funding from the federal government. ACORN Housing Inc. is one of the most powerful units of ACORN. That's what we're dealing with. On the one hand, we have an organization that receives tens of millions yearly in federal funds. On the other hand, it routinely commits and covers up millions in crimes. It has created a structure that makes tracking money nearly impossible. It routinely comingles funds between units of differing tax structures. Finally, it routinely uses funds for activities they were NOT intended for, including tax dollars.

As such, the only way to know for sure just what is going on is through a thorough Congressional investigation that includes a thorough forensic audit. That's what Michael McCray and ACORN 8 have called for, and it's now what Darrell Issa and his committee have called for. Now, it's time for the public at large to demand the same.

Act 2: Meltdown or Reinvention

Let's call tomorrow July 24th, 2009 act two of the Obama presidency. That's because today it became official that health care reform won't pass in its current form. With the end of liberal heath care reform, let's call this the official end of the liberal Obama presidency. Now, the president has one of two paths to go moving forward. He can either insist on moving forward with his liberal agenda and turn his presidency into a joke, or he can reinvent himself.

The president's poll numbers are falling precipitously. Furthermore, each and every one of his major policy initiatives poll even worse. Health care, in its current form, will NOT pass. If the president insists on moving forward with it in this form, then the rest of his agenda will fall apart with it. Cap and trade won't be looked at for several more months. That is about as popular as health care reform. Congress men and women will go home over August and they will speak to constituents. You can bet they will get first hand knowledge of just how much the public dislikes the entire Obama agenda. In fact, here is one example of Missouri Democrat Russ Carnahan.



Now, the example that President Obama should follow is Bill Clinton. Clinton similarly suffered a major defeat in 1993 on health care. That lead to a massive electoral defeat in 1994. Then, Bill Clinton reinvented himself as a moderate. He passed a capital gains tax cut, welfare reform, balanced the budget and enjoyed huge popularity for the rest of his presidency.

President Obama needs to realize, sooner better than later for his sake, that his liberal presidency is over. If he continues to insist on a liberal agenda, it will get rejected. Then, in November 2010, he will have a nearly two trillion dollar deficit, ten percent unemployment, and no major legislative accomplishments heading into the mid term elections. Then, the Republicans will sweep the elections and he will have no choice but to govern as a moderate anyway.

If the president is a shrewd politician, he will come back from the August recess and get together with Blue Dogs and Republicans and pass sweeping MODERATE health care reform. With that legislative victory, he can regain his presidency. I have called the Blue Dogs the Congressional rainmakers. That's what President Obama needs to realize sooner rather than later if he wants his presidency to be compared with that of FDR and not Jimmy Carter. The president isn't going to pass anything without their approval. That isn't going to happen with a liberal agenda. The road to a successful Obama presidency is still clear and that road is moderation. The only question is whether or not the president will reinvent himself.

Video, Quote, and Word of the Day

cynosure

center of attention

The world is governed more by appearances than realities, so that it is fully as necessary to seem to know something as to know it.
Daniel Webster

"ACORN is a Criminal Organization"

I just received an advanced copy of a report to be released by the Republican Committee on Oversight and Government Reform and its conclusion is that ACORN is a criminal organization. None of this should surprise anyone that has read my blog for a while as I have tracked much of what is in this report. First, here are some of the highlights.

Labor organizations, unions, and other tax-exempt entities stretched Chicago-style political manipulation and back room schemes beyond Illinois to other state-wide and national campaign efforts. In the State of Ohio , where ACORN directors drafted a political plan contained in this report, overt partisan goals are enumerated. The ACORN Ohio Political Plan states: ACORN will target three competitive Ohio congressional districts as well as a half dozen state rep seats nested within the districts. Our electoral work will mobilize and educate voters [and] our paid professional canvass will execute tightly managed Voter ID and GOTV canvasses moving our core constituency of base and swing voters to the polls to vote for the candidates who most closely align with a progressive Working Families Agenda.

...

Committee investigators have documented ACORN’s use of charitable contributions against donor intent, typified by ACORN’s secret transfer of donor funds to recover losses due to embezzlement. Moreover, ACORN comingles the accounts of federally-funded affiliates with politically-active affiliates and lacks sufficient oversight to safeguard taxpayer and donor interests, even though it receives millions of federal dollars.

...

Committee investigators have concluded that ACORN plundered employee benefits and violated fiduciary responsibilities under ERISA by relieving corporate debts through prohibited loans to a related party. Moreover, ACORN affiliates lack independent control of their own assets and maintain shoddy accounting practices that serve to hide ACORN’s secret and illegal use of monies. ACORN conspired to conceal information concerning prohibited transactions from its board in violation of its corporate charter. ACORN’s termination of board members who sought to uncover its illegal activities perpetuates a cover-up at the expense of adherence to its own bylaws.

...

ACORN failed to observe its corporate articles by loaning money without proper legal documentation, by ignoring its duties under the corporate bylaws, by misusing corporate funds, and by terminating its members without honoring the process setup in its Articles of Incorporation. ACORN has not complied with IRS filing requirements or ERISA

...

An essential aspect of Project Vote, CCI, Citizens Services Inc. (“CSI”), Communities Voting Together (“CVT”), and other ACORN affiliated 501(c)(3)s is to promote desirable governmental policies consistent with its objectives through legislation. ACORN and its affiliates cannot delineate their 501(c)(3) work from their non-501(c)(3) work. Ignoring ACORN’s nonprofit protections reveals the same individuals made strategic decisions about which regions do 501(c)(3) versus non-501(c)(3) voter registration work. Lobbying is a substantial part of what ACORN does.

It has endorsed Senator Sherrod Brown (D-OH), Representative Albert Wynn (D-MD), and Representative Donna Edwards (D-MD). ACORN keeps donor records from the Clinton , Kerry and Obama campaigns with the intent to engage in prohibited communications. ACORN receives federal funding yet engages in improper lobbying. ACORN and its nonprofit affiliates do not have separate accounts. Neither ACORN nor any of its affiliates have properly reported their political activities to the IRS.. These harms fly under the legal radar because the IRS rarely checks for compliance. The “no substantial part” test is rarely enforced and the accounts of ACORN and its affiliates are illegally commingled.

Most of the information gathered here corroborates things I have written about. The report details the embezzlement of Dale Rathke which they have amounted to $948,607.50 (that's the first time an exact amount has been enumerated). The committee detailed how Dale's brother Wade, the long time CEO of ACORN, covered up this embezzlement. The committee talked about how a funder loaned ACORN money to cover past due taxes. The report details a loose structure of 361 separate organizations in which money moves in manners that the committee characterizes as "money laundering".

The committee also identifies both Project Vote and Communities Working Together as two affiliates that ACORN uses to circumvent tax and election laws to use partisan election activity by organizations that have a tax structure that only allows non partisan work. In this activity, ACORN itself will endorse a candidate and they are allowed because they are a 501 (C)3. Then, Project Vote and CWT go out for voter registration efforts. Of course, these two only engage in these activities in areas favorable to candidates endorsed by ACORN itself.

Finally, the committee found that the board make up of many of these 361 separate organizations was often made up by the same set of people in what Congressman Steve King characterized as a "copy and paste" pattern. The committee also alleges a misuse of pension funds in what amounts to ERISA violations. (I touched on that here.)

The most serious charge is that ACORN misused tax funds for partisan political purposes. Here's how the committee characterized this.Committee investigators have unearthed documentation that ACORN and its affiliates conducted meticulous research that fed aggressive campaign initiatives designed to elect Democratic candidates in targeted races. ACORN forged both formal and informal connections with former Illinois Governor Rod Blagojevich, Ohio Senator Sherrod Brown and President Barack Obama, among others. Each of these campaigns received financial and personnel resource contributions from ACORN and its affiliates as part of a scheme to use taxpayer monies to support a partisan political agenda.

These actions are a clear violation of numerous tax and election laws. Documents contained in this report reveal ACORN’s political agenda. ACORN’s 2005-2007 Strategic Plan states that “just as important as . . . mobilizing existing progressive voters, ACORN and similar groups actually create new progressive voters.” In the same document, ACORN acknowledges that its “issue campaigns play the dual role . . . of attracting new members, and educating or politicizing existing members..” One particular issue where ACORN claims success is “fighting key elements of the national Republican program.”

As I've said, while everyone focuses on the non existent voter fraud (it's actually voter registration fraud) and census activities, most people miss their most significant illegal activity. That is the manner in which ACORN takes money for one purpose comingles that money and then uses it for another purpose. In this report, the committee alleges that tax payer money wound up being used for partisan political purposes.

Finally, here is ACORN's statement in response to the report.

We are busy fighting to stop the foreclosure crisis, to win quality affordable health care for all Americans and to build a stronger economy for working families, so we haven't had the opportunity to read Rep. Issa's screed at length.

Epilogue:

A source recently told me that in a board meeting last fall, Bertha Lewis told ACORN members that in response to the embezzlement investigation, ACORN had hired Mesirow Financial to do a full audit of the organization. The only problem is that Mesirow Financial is NOT a CPA firm and thus wouldn't be capable of such an audit.

President Obama Needs to Embrace Wyden/Bennet or Health Care Will be His Waterloo

I believe that Bill O'Reilly did sum up the president's health care plan the best. He simply couldn't understand how any of it will work. That's because the president is either misguided or disingenuous. He makes outlandish claims about how everyone will be covered, costs will go down, services will stay robust, and no one will lose the health care coverage they currently have. At the same time, while this plan means a massive expansion of government control, he actually claimed that government won't get in between the doctor and patient. You can see why O'Reilly was so confused.



The Democrats face a serious political problem. Democrats control all levers of government. At the same time, the conservative ideology controls the House and in the Senate the ideologies are very close. Certainly, there are NOT 60 liberal votes in the Senate if they are needed to avoid a filibuster.



Now, when the president was popular, Nancy Pelosi could whip up the Conservative Blue Dogs and put them into line with liberal bills. Now, the president's popularity is in question. The popularity of the current health care bill is NOT in question. The public doesn't like it very much.



Yesterday, the Speaker proclaimed that she had the votes to get the current house version of health care reform passed. Today, the key committee again delayed its mark up session. Here's the bottom line. The Blue Dogs are NOT going to get on board with anything near what is currently in the House. Now, Senator Reid says that no bill will be created before the break and that echos thoughts by Senator Durbin.

The president needs to come to terms with reality. The current vision for health care reform doesn't have the votes. No matter what he does going forward will not suddenly reverse the momentum against it. His plan has been exposed as little more than a massive expansion of power and government scope. In a battle of party versus ideology, ideology won.

If the president wants to pass sweeping health care reform, he should look at a bill that has been stuck in committee. That bill is jointly sponsored by one Democrat and one Republican, Ron Wyden and Robert Bennett. The president wants universal coverage, lower cost, and to allow all those happy with their coverage to keep it. This bill would do the first two and can do the third. Here are some highlights.

All employers, along with individuals and the government, will share the responsibility of financing health care. During a two-year transition period, employers who provide employee health benefits would be required to convert their workers' health care premiums into higher wages. Employers who don't currently offer health benefits would have to make phased-in "Employer Shared Responsibility Payments," which would be used to provide financial assistance to individuals and families of modest income. After two years, all employers would make "Employer Shared Responsibility Payments." These payments would reflect the relative ability of small and large employers and low- and high-wage industries to make such payments, and would have no direct impact ON the coverage that is available to their employees.

Employees, in turn, would be required to purchase private health coverage with their higher wages. To ensure that it's affordable, the plan would fully subsidize the premiums for those who live below the poverty line. Those people between 100 percent and 400 percent of the federal poverty line would also receive subsidies on a sliding scale to help pay their premiums.

Individuals would choose from a variety of private plans offered in their state. State-based Health Help Agencies (HHAs) would guide individuals through the enrollment process. These agencies would also provide consumers with unbiased information about competing private health plans and determine premium reductions that will ensure every American can afford their health plan. HHAs would ultimately lower administrative costs by coordinating payments from employers, individuals and the government.

As for the insurance companies, they would no longer be allowed to "cherry pick" their customers. Under the current system, insurance companies can pick and choose which customers they sign up -- typically the healthy ones -- and send those in fragile health to government programs more fragile than they are. The Healthy Americans Act stipulates that insurance companies be required to cover every individual who chooses to enroll and that they be prohibited from raising prices or denying coverage if individuals are sick or are at risk of becoming sick. Previous and existing health problems, occupation, genetic information, gender and age could no longer be used to determine eligibility or the price paid for insurance.

I don't want to make it seem as though I endorse this plan. I don't though there is a lot that I like in it. Instead, I want to point out that right now the dynamics of the legislature mean that any plan that would pass would look much more like this plan than what the president is trying without hope to get passed. This bill would mandate coverage of everyone. This plan would move much of our population from employer funded health insurance to individually funded health insurance. It would convert health insurance into higher wages. Both employers and employees would share in the cost of health insurance. This is the sort of idea that would get enough votes to pass.

The basic political problem is that while the president claims that his plan will lower costs, the public, and enough of the legislature, don't believe him. He can either continue to push forward hoping that somehow if he continues to say the same thing people will suddenly see "the light". On the other hand, he can take a step back and realize that the current path simply will not work. If the president were to embrace something like the Wyden/Bennett bill, that is something that could pass and he would get his sweeping health care reform. Now, we will see if President Obama is an ideologue or a shrewd politician. If he pivots and moves toward something like Wyden/Bennett, he'll get sweeping health care reform. If not, health care reform will fall apart and his presidency will be significantly damaged with it.

UPDATE:

Both Pelosi and Reid have now backed away and health care reform doesn't look to move forward prior to the August break.
Also, check out this video on the topic.

Morning Market Report

The Dow and S&P both took a breather yesterday however the NASDAQ index was up for the eleventh straight day. The first two appear up a bit less than half a percent at the open while NASDAQ's streak will be jeopardized as that index looks to open down about a half a percent.

Earnings continue to be the main driver of the market. Ford posted better than expected earnings though their numbers are slightly inflated by debt restructuring. 3M and AT&T also beat estimates. Meanwhile, UPS' earnings were in line with estimates but the stock fell due to a sour outlook by the company for the rest of the year.

In breaking news, jobless claims rose off recent lows to 554,000 though that number is distorted by a plethora of auto plant closures.

The number of Americans filing claims for unemployment benefits jumped last week from a six- month low as distortions, caused by shifts in the timing of auto plant shutdowns, subsided.Applications rose by 30,000 to 554,000 in the week ended July 18, in line with forecasts, figures from the Labor Department showed today in Washington. Claims had fallen by 93,000 over the previous two weeks.

The number of people collecting unemployment insurance decreased to the lowest level in three months, also reflecting seasonal issues surrounding closures at carmakers.

“The level of initial claims is still consistent with deep job losses but smaller than we saw in the first months of this year,” Zach Pandl, an economist at Nomura Securities International Inc. in New York, said before the report.

The markets in the Far East were mostly up. The Hang Seng in China was up 2.96%, the NIKKEI in Japan was up .72%, and the Straits Time Index in Singapore was up 1.39%. Europe was much more mixed. The FTSE in London and the DAX in Germany were both down just slightly at down .08% while the Spanish index was up .81%.

Treasury bonds are slightly improved today. The ten year is trading at 3.54% trading down just a bit less than one basis point. (one percent) The yield spread between the 2 year and ten year continues to be right at 2.6%. Oil is trading slightly down today but is still above $65 a barrel where it crossed at the end of the day yesterday.

The U.S. dollar looks to open generally better. It is up .21% against the Euro, up .15% against the British Pound, and up .85% against the Yen.

Disclosure:

Everything in this space should be taken as information only. All opinions are my own only and should NOT be taken as an endorsement or investment strategy. I am not a licensed investment advisor and nothing here should be taken as investment advice.

Obama's Presser: The Review

I suspect that the ratings on this presser will be the worst of all that he's held. This was boring and only got worse as he went along. He used all sorts of fuzzy math. For instance, he claimed that he inherited a 1.3 trillion dollar deficit. I don't believe that's even close to accurate and I suspect that AP will point this out as one of many errors. He also claimed that had he not done anything with the budget that the deficit would be 9.5 trillion dollars over the next ten years. His budget will will "only" create a deficit of 7.3 trillion dollars over the next ten years. Now, I don't know where he came up with the first number, but I think it was out of thin air.

The president also claimed that we'd all get health care, it would cost less, and the government would not get into the way of decisions between patients and doctors. This is a total fantasy. Jake Tapper asked what sacrifices Americans would make in implementing the plan. The president said that those that engage in unhealthy behavior would sacrifice their unhealthy behavior. If you can explain that, please leave me a comment. In fact, his whole entire narrative tonight was a fantasy. More people would have health care, everyone's health care costs would be less, and at the same time no health care procedures would be cut.

What the president can't explain is how he plans on managing this. Bill O'Reilly just finished screaming that he doesn't understand the president's plan. That's because there is no plan. There is only a series of wish lists. Then, he spent ten minutes going on and on about how we will get there. We aren't going to get there because what he thinks his plan will do is IMPOSSIBLE.

That's why O'Reilly doesn't understand what his plan is. It's because there is no plan. The "plan" is a series of wish lists with no way to get there.

California's Con/Con?

Just this week it appears that California's legislature finally compromised on a budget that would fix the shortfall in the short term.

Gov. Arnold Schwarzenegger and California legislative leaders Monday said they reached a compromise to close the state's $26 billion budget shortfall.

Under the plan, state lawmakers would cut $15 billion in spending. The rest of the gap would be filled by taking funds from local governments and through one-time fixes and accounting maneuvers. The deal must still be approved by rank-and-file legislators, who are expected to vote on it Thursday.

"We have accomplished a lot in this budget," Mr. Schwarzenegger told reporters after lawmakers struck the deal Monday evening. "We dealt with the entire $26 billion deficit," he said.

While this gives the state's budget a reprieve in the short term, it does nothing to solve the plethora of structural problems that have afflicted the state to put into this position. A movement is growing in the state that will attempt to tackle that problem. That movement is the movement for a Constitutional Convention. This movement is a coalition of activists and think tanks that include the New America Foundation, the Bay Area Council, and Common Cause among a coalition of groups that includes conservatives, liberals, business leaders, and localities. The current California Constitution is nearly two hundred years old, it's the third longest Constitution in the WORLD, and it's been amended about 500 times. So, there are four structural problems that need to be attacked.

1) Budgetary Rules:

The budgetary rules favor waste, corruption, and inefficiency. For instance, all budgets must pass with a two thirds majority. That makes it nearly impossible to make unpopular cuts. The budget is NOT performance based. In other words, departments have no metrics to judge performance. In a performance based budget, department heads lay out quantifiable goals and those that meet goals earn more money in their budget in future fiscal years. In California, department budgets merely grow as a factor of inflation, and as department Secretaries propose new programs money is earmarked into their budgets for those programs as well. This creates a vicious cycle of an out of control government. Cutting budgets is near impossible because getting two thirds of legislators to agree. Growing budgets is much easier since it only takes a good sounding idea from a Secretary. In Texas, the state has something known as the sunset commission. In that state, all new programs go away after twelve years unless a specific act of the legislature. The state of California has no such commission.

2) The Initiative Process:

Right now, the process for introducing a budget initiative onto the ballot favors wealthy special interests and they're made nearly impossible for the average citizen to succeed. In order to get an initiative on the ballot, an idea must be drafted and presented to the Attorney General's office. That proposal is reviewed and then the Attorney General's office draws up the language for the initiative that will be used if it winds up on the ballot. At this point, supporters have 150 days to gather about 800,000 signatures for this initiative. Of course, such a task takes millions of dollars and hundreds of man hours. As such, an ordinary citizen would never get their initiative on the ballot.

3) The Relationship Between the State Government and Localities:

Over the last several decades, the government in Sacramento has usurped more and more power from counties and localities. More and more, property taxes go to the state first before being filtered back to the localities to pay for schools and roads. Once Sacramento gets its hands on any money they filter it back to counties and localities with all sorts of strings. In fact, part of this budget compromise was Sacramento agreeing not to enforce a mountain of mandates they have created onto localities. Right now, Sacramento mandates all sorts of things like earthquake preparedness in schools, lawn care, among thousands of things that cost not only the localities but Sacramento itself billions to enforce. One idea is one implemented in the Constitution of the state of Illinois known as Home Rule. This lays out a clear framework for the responsibilities of local governments and mechanisms to make sure that all monies are raised and kept in those localities for those responsibilities. There is no such provision in California.

4) Elections:

Right now, between Gerrymandering and the primary structure, California has created a system of elections that not only favor the incumbent far too heavily but to favor the extremes. Most California districts have closed primaries. As such, the only ones allowed to vote in these primaries are those registered for a particular party. Since the primary voters more often than not represent the extremes, the extreme candidates win most often. On top of this, decades of Gerrymandering, fixing districts to favor a party, leave the general election nothing more than a foregone conclusion.

Several proposals have been suggested to fix this. First, the Constitution could mandate open primaries where anyone can vote in any party's primary. Another idea is called the top two primary. In this idea, the two people that got the most votes from all the primaries would face off. In such an idea, two candidates from the same party could wind up facing each other. Whereas the most extreme would likely have gotten the most votes in the primary, in the general election the more moderate candidate would be favored.

A third idea involves regional proportional representation. In this idea, the legislature would still be unicameral (just one house) but the representatives would be split into two categories. One set of representatives would represent districts. The other set would represent regions of the state. For the second group, all parties would submit a list of candidates. Then, the voters would vote for a party not for an individual candidate. Then, the parties would fill these seats based on the proportionality of their vote. This would by pass Gerrymandering and give third parties some representation in the legislature.

The Mechanism of the Constitutional Convention:

The key for any successful Constitutional Convention is to make sure that delegates are free of political and special interests. That's why this Constitutional Convention proposal will be a Citizen Convention. It's a concept known as deliberative democracy. It works much like polling. A random set of citizens would be selected and those citizens would accurately reflect the demographics, income, and political ideology of the state as a whole. Then, for each district (80 in total), two hundred people that represent the make up of the state will be sent a letter from each district. ( in other words all two hundred won't be conservatives, African Americans, wealthy, etc.) Those two hundred would then meet at a central location and out of those two hundred five will be chosen for the convention. Then, five people from each district will represent at the state's constitutional convention. The delegation will set rules but those rules will only be in the framework of fixing the four things I spoke about. This delegation would have subpoena power and so experts, special interest leaders, and anyone else the delegation sees fit will present their ideas in front of the delegation. After the ideas will be heard, the delegation will vote, under rules they designed, on a new Constitution.

This is a philosophy that has tried and worked in New Orleans in the aftermath of Katrina, in New York following the 9/11 attacks, and in New Jersey to address property tax reform. Supporters of the Constitutional Convention believe in the process more than anything, though they each have ideas that they'd like considered in the convention. They believe that if regular citizens are chosen at random for a convention, that would by pass the special interests. Ordinary citizens with no agenda are the best people to make these decisions. The individuals would have the time to get educated and with subpoena power, they would have access to all sorts of experts from a variety of different perspectives. (all delegates would get paid throughout the process and the total cost for the entire convention would be about $25 million and it would come from the general fund)

What's Next:

The coalition expects to present its formal idea to the Attorney General of California in September. They expect the Attorney General's office to review the proposal. Then, signatures will need to be signed. The same problems that are currently in the Constitution will face the coalition. It will take somewhere around $6-7 million to get these signatures. Furthermore, the coalition faces a current Constitutional dilemma. Currently, the citizens can't call for a Constitutional Convention. Only the legislature can do that. As such, the coalition will have to have two ballot initiatives. The first changes the Constitution to allow the citizens to call for a convention. The second actually has the citizens call for one. Then, the initiative would go on the ballot in November of 2010.

Most Gubernatorial candidates including Meg Whitman, Gavin Newsom, Tom Campbell, and Jerry Brown have publicly supported this convention. (Arnold Schwarzenegger also agrees with it but he can't run again) Supporters believe that if they can get the signatures, the two initiatives should pass with a healthy margin. Still, the battle to transform California's political structure has just gotten started.

Video, Quote, and Word of the Day

plaudit

enthusiastic approval

There is nothing more dreadful than imagination without taste.
Johann Wolfgang von Goethe

Council Submissions

Here are this week's submissions.


Council Submissions
The Glittering Eye - How Not to Argue
Rhymes With Right - My Final Reason For Opposing Sonia Sotomayor
Joshuapundit - Netanyahu And Lieberman Tell Obama: ‘Jerusalem Is Not Negotiable’
The Provocateur - Note to the Conservative Media…Here’s How You Bring Down ACORN (and the President With Them)
Bookworm Room - The world gobbles up blood libels against Israel
The Razor - Home Buyer’s Lament
Right Truth - Thou Shall Not Lie
Mere Rhetoric - The “No Spyware For Dictators” Anti-Nokia, Anti-Iran Protest In Downtown LA [Gallery]
The Colossus of Rhodey - Nation’s pre-eminent black scholar arrested, claims racism
Soccer Dad - Childhood’s end
Non-Council Submissions
Submitted By: The Glittering Eye – New Atlanticist - Will COIN Work in Afghanistan?
Submitted By: Rhymes With Right – Dr. Melissa Clouthier - Health Rationing & You!
Submitted By: Joshuapundit – Ted Nugent/Human Events - Obama, Churchill and Zelaya
Submitted By: The Watcher – Keith Hennessey - 20 questions for the President’s press conference
Submitted By: The Provocateur – Real Clear Politics - The Three Big Lies of Obama Care
Submitted By: Bookworm Room – Stumbling on Truth - Health Care Mythology
Submitted By: The Razor – The New Yorker - Cocksure
Submitted By: Right Truth – Townhall Thomas Sowell - Medical Care Confusion
Submitted By: Mere Rhetoric – Rosner’s Domain - Does Obama understand Israeli politics?
Submitted By: The Colossus of Rhodey – Economist.com - What went wrong with economics
Submitted By: Soccer Dad – Elder of Ziyon - Iranians rape virgin girls before executing them

Some Perspective on Obama, DeMint, and Health Care Reform

Yesterday, I wrote that Senator DeMint had made a mistake by proclaiming that failure on health care reform would be President Obama's waterloo. The reason is that this statement allowed the president to try and change the dynamics of the debate by claiming that opponents were politicizing the health care debate. (Via Jammie Wearing Fools) Now, we have this from Senator Chuck Grassley.

Let's just lay everything on the table," Grassley said. "A Democrat congressman last week told me after a conversation with the president that the president had trouble in the House of Representatives, and it wasn't going to pass if there weren't some changes made ... and the president says, 'You're going to destroy my presidency

Some have claimed that this vindicates DeMint.

Consider this a complete vindication of DeMint’s point, which Obama pretended to take such offense at, that if the GOP defeats ObamaCare “it will be his Waterloo, it will break him…” Evidently The One couldn’t agree more,

I disagree. DeMint's statement was not only cynical but reckless. It did give Obama an opening. This latest revelation does close the hole on this opening however. President Obama can no longer hold the moral high ground and claim that his opponents are playing politics with health care. President Obama sees health care in just as cynical a political view as DeMint does. If he insists on attacking DeMint on this that will backfire and boomerang.

There also those speculating that believe that health care reform's death will be the Waterloo of the Obama administration. I think that's premature. It will be a huge blow. I believe it will crush his administration until at least November 2010. Keep in mind that Bill Clinton suffered a similarly massive blow on the same subject. He figured out how to react. What this will mean is that if President Obama wants his presidency to be successful, he'll have to reinvent the presidency in a manner that will be much more bi partisan and centrist. Health care's defeat will mean the defeat of Obama's LIBERAL presidency.

A Troubling Meeting

(H/T to Hot Air) It was first revealed by President Obama in an interview with Meredith Viera. He mentioned, in passing, that he recently met with Congressional Budget Office director Doug Elmendorf.

The same story was picked up by Megyn Kendall of Fox News. Here's how the president characterized the meeting.

Adding to the suspicions about the bill are reports of a meeting held at the White House with a group that included Congressional Budget Office Director Dougles Elmendorf, who upset Democratic supporters of the plan by putting the $1 trillion-plus price tag on it, sending shock waves through Washington and beyond.

It's very unusual for the CBO director, who is appointed by the majority party to serve as the official numbers cruncher, to go to the White House, and Elmendorf's visit raised questions about whether he was being pressured to revise his dire analysis.

A White House spokesman said that Elmendorf was invited to be one of the participants at the meeting because he, like the president, is serious about bringing down costs.

"If someone thinks it's inappropriate for the president to meet with the CBO director, that's unfortunate," White House spokesman Reid Cherlin told FOX News.

Now, this could have been an innocent meeting in which the president was trying to gather information about ways in which his health care proposal could cost less and bring costs down. In fact, that's essentially how the Director himself described the meeting.

This morning President Obama said that he had met with the Congressional Budget Office regarding cost savings in health reform legislation. A number of people have asked me what happened, so here’s the story:
I was invited to the White House to meet with the President, his key budget and health advisers, and some outside experts. The President asked me and the outside experts for our views about achieving cost savings in health reform. I presented CBO’s assessment of the challenges of reducing federal health outlays and improving the long-term budget outlook while simultaneously expanding health insurance coverage–just as we had explained these challenges in a letter to Senator Conrad and Senator Gregg last month. I also described CBO’s view of the effects of the health legislation we have seen so far, as I did last Thursday in a hearing at the Senate Budget Committee and a mark-up at the House Ways and Means Committee. In addition, I discussed various policy options that could produce budgetary savings in the long run, drawing on CBO’s Budget Options for Health Care released in December, our letter to Senators Conrad and Gregg last month, and my comments last Thursday. Other participants in the meeting expressed their own views on these various topics.
People have asked whether it was exciting to meet the President and be in the Oval Office: Yes, and my kids will be jealous when they get back from summer camp and hear about it. Of course, the setting of the conversation and the nature of the participants do not affect CBO’s analysis of health reform legislation. We will continue to work with Members of Congress and their staffs, on both sides of the aisle, to provide cost estimates and other information as health reform legislation is considered.

So, everything appears above board. Still, this leads to all sorts of troubling questions. Unfortunately, this was a closed door meeting and so if it was used as some sort of meeting of intimadation we'll never know unless Elmendorf blows the whistle. It's important to understand that the CBO is an arm of Congress not the president. More than that, it's most important that the CBO be as independent and objective as possible. Such meetings, create the appearance of impropriety even if nothing untoward occurred.

Several former Bush administration officials, including Dana Perino, have said in the last couple days that no one in the administration ever met with the CBO director. In the meantime, Bob Beckel, Democratic operative, said that when he worked in the White House he met with CBO staffers regularly. Something is amiss. No one can find another example of a President ever inviting the CBO director to a private meeting in the White House. That is the real problem. Such a high level contact in such a setting is totally inappropriate. If all the president wanted was some guidance on ways to improve health care there were many ways to get that from the CBO. He invited its director to a private meeting in the White House. That raises the spector that this meeting was about a lot more.

The Fed's Red Herring

During Congressional hearings yesterday, the Federal Reserve Chairman, Ben Bernanke, was again questioned vigorously by Congressman Ron Paul regarding more transparency at the Fed. Congressman Paul has introduced H.R. 1207 which would demand more transparency from the Federal Reserve. Currently, and shockingly, the assets, liabilities, and other investments of the Federal Reserve are not open to public scrutiny nor to the scrutiny of just about anyone. No one outside the circle of the Federal Reserve has any idea just how much, and what make up, the current investment portfolio of the Federal Reserve is and how it's doing. Here's how Bernanke justified the limited scrutiny of the Federal Reserve.

We have recently taken additional steps to better inform the public about the programs we have instituted to combat the financial crisis. We expanded our website this year to bring together already available information as well as considerable new information on our policy programs and financial activities.2 In June, we initiated a monthly report to the Congress (also posted on our website) that provides even more information on Federal Reserve liquidity programs, including breakdowns of our lending, the associated collateral, and other facets of programs established to address the financial crisis.3 These steps should help the public understand the efforts that we have taken to protect the taxpayer as we supply liquidity to the financial system and support the functioning of key credit markets.

The Congress has recently discussed proposals to expand the audit authority of the Government Accountability Office (GAO) over the Federal Reserve. As you know, the Federal Reserve is already subject to frequent reviews by the GAO. The GAO has broad authority to audit our operations and functions. The Congress recently granted the GAO new authority to conduct audits of the credit facilities extended by the Federal Reserve to "single and specific" companies under the authority provided by section 13(3) of the Federal Reserve Act, including the loan facilities provided to, or created for, American International Group and Bear Stearns. The GAO and the Special Inspector General have the right to audit our TALF program, which uses funds from the Troubled Assets Relief Program.

The Congress, however, purposefully--and for good reason--excluded from the scope of potential GAO reviews some highly sensitive areas, notably monetary policy deliberations and operations, including open market and discount window operations. In doing so, the Congress carefully balanced the need for public accountability with the strong public policy benefits that flow from maintaining an appropriate degree of independence for the central bank in the making and execution of monetary policy. Financial markets, in particular, likely would see a grant of review authority in these areas to the GAO as a serious weakening of monetary policy independence. Because GAO reviews may be initiated at the request of members of Congress, reviews or the threat of reviews in these areas could be seen as efforts to try to influence monetary policy decisions. A perceived loss of monetary policy independence could raise fears about future inflation, leading to higher long-term interest rates and reduced economic and financial stability. We will continue to work with the Congress to provide the information it needs to oversee our activities effectively, yet in a way that does not compromise monetary policy independence.

In other words, there's already plenty of transparency and any more would make the Federal Reserve politicized. The Chariman worries that if the Congress knew too much, they would try and influence monetary policy. Keep in mind that the portfolio of the Federal Reserve is likely in the several trillions. Yet, the same Federal Reserve would like absolutely no sunshine on exactlyt the make up of this portfolio because they worry that too much sunshine might politicize their decision making process.

This is a total red herring. The Federal Reserve chairman and all the Governors are selected and their terms are four years. The testimony the Chairman just gave is a regular occurrence. Of course, it's very difficult to question an individual when you really don't know exactly what he's doing. There's already some political pressure on the Fed. Yet, they are a totally independent financial institution. The decisions of the Chairman and the board are final. Short of corruption, removing any of them prior to the end of their terms is nearly impossible.

Sunshine influencing monetary policy is much more perception than reality. Sure, Congress can pontificate and bloviate. They can do that now. Frankly, most of them wouldn't have the first clue what any of the numbers mean anyway. The decisions of the Fed and its board are final and independent. Yet, transparency is critical. The Federal Reserve holds onto trillions of dollar investments. The bank literally controls and manipulates the money supply. Yet, the people of this country have absolutely no idea what's going on. We don't know how much is in the portfolio. We don't know how it's made up. Near daily, the Federal Reserve manipulates the money supply by buying and selling securities. Yet, the public doesn't know. That's neither open or transparent. In fact, the Federal Reserve operates as monetarial MONARCH. Transparency would be the first step toward reducing its power, and that's what this anti transparency stance is really all about.

Morning Market Report

All major indices were up for a seventh straight day yesterday. That may all end today. Futures looked down slightly and then both Morgan Stanley and Well Fargo announced their quarterly earnings. Morgan's losses were worse than expected. Wells appears to have beaten estimates but markets are concerned about its "sustainability". In other earnings news, Caterpillar's earnings were weaker than expected while Boeing beat estimates. All three indices look to be down about a half a percent at the open. Also, GE Capital is in final stages of negotiations with the Treasury to exit TALF.

The markets in the Far East were mixed. The Hang Seng in China was down 1.3%, the NIKKEI in Japan was up .74%, and the Straits Time Index in Singapore was down .14%. The markets in Europe, however, were all down. The FTSE in London was .35%, the Dax in Germany was down .52%, and the Spanish index was down .61%.

Meanwhile, oil is giving back most of its gains from yesterday. It's currently trading at $64.18 per barrel which is about where it was trading prior to the opening yesterday. The Dollar looks to be mixed. It's up against the the Euro just slightly, .0044%, up against the British pound by .43%, but down against the Yen by .48%.

Meanwhile, bond rates are slightly up today but that follows huge drops in rates yesterday. Currently, the 10 year U.S. Treasury is up just less than two basis points but it's also currently traded at 3.49%. The Ten Year has dropped 20 basis points in less than a week. The yield spread is down just slightly to 2.58% (it was 2.6% two days ago) The yield spread measures the potential of future inflation.

My analysis:

I think this party will end sometime in August. First, we still have employment numbers on August 7th. Second, the administration has delayed release of its quarterly budget. That's supposed to come out sometime in August. The overwhelming speculation is that the government's budget is worse, possibly much worse, than earlier estimates. Until then, earnings will still drive the market.

Disclosure:

Everything in this space should be taken as information only. All opinions are my own only and should NOT be taken as an endorsement or investment strategy. I am not a licensed investment advisor and nothing here should be taken as investment advice.

Fun With Numbers: The Chatham Walmart Proposal

I have a stimulus proposal. It's a 150,000 square foot superstore. The construction would require 500 UNION contractors, electricians, construction workers, etc. The construction project would keep these 500 employed for about a year. Once built, the superstore would employ another 400 employees to operate it. This project would be entirely privately financed and would require absolutely no public funds. In fact, this private entity has all the cash available. This is important because in the current commercial mortgage market trying to finance such a project is very difficult. For instance, my mayor's (Richard M. Daley) nephew, Robert Vanecko, attempted to fund a similar, though much smaller, project and was unable to secure financing in this market. That won't be an issue here because this private entity has cash on hand to fund the entire project themselves. This project is SHOVEL READY. In fact, as soon as the city council approves the project, all that needs to happen is securing the proper permits and then they'll break ground on the superstore. In fact, several project managers would be hired immediately even while the permits are gathered. So, this project would produce jobs immediately. Finally, the area where this superstore would be built is currently occupied by dirt.

Of course, I am describing the proposal by Walmart to build its second superstore in the city of Chicago. Chicago's latest unemployment rate is 10.3% and climbing. So, a project that would employ 500 UNION workers to build a superstore and then 400 more people would be hired to manage and operate the store is one that would have plenty of takers. There's more. This store would be placed on 83rd and Steward in the Chatham neighborhood. According to Walmart's records, which measured the receipts from credit cards and checks, the three zip codes that surround this proposed location spent $80 million at Walmart stores in the suburbs, In fact, according to the same records, Chicagoans spent $500 million last year in suburban Walmarts. (keep in mind the real receipts are much higher because cash payments can't be measured)

Chicago has one Walmart currently. That store is on North Avenue and Cicero. (4600 W. North Avenue) In the two years since that store was completed, a Menard's, Bank of America, Dunkin Donuts, among several strip stores have since been built. That store, slightly smaller and without groceries (like what would be proposed), has generated $10.3 million in tax revenues for the city, county and state.

The reason that I love to use a plethora of numbers in my stories is because numbers don't lie. The numbers are clear and they are unmistakable. Walmart would create jobs. It would create revenue for the city. In fact, it would keep revenue in the city that is currently moving to the suburbs. If you don't believe the numbers, then just think about this. In order to believe that Walmart wouldn't stimulate the Chicago economy you would have to believe that a plot of dirt is more economically stimulative than a 150,000 square foot super store.

So, why aren't the folks at Walmart not working right now to gather the proper permits to begin building? It's because powerful Alderman Richard Mell has buried their proposal in his rules committee. Chicago politicians have a long history of connections to the unions. That's why Chicago politicians hate Walmart. Walmart employees are NOT unionized. Yet, that's why I capitalized unions in pointing out that constructing the superstore would employ strictly union employees. In other words, the same people that are trying to protect union jobs are, ironically enough, costing 400 union jobs that would be needed to construct the project. As such, even protecting the unions becomes a lot more perception rather than reality. Ultimately, this is nothing more than demonizing Walmart.

If the Chicago economy had 4% unemployment that would be one thing. It doesn't. Chicago's unemployment crossed 10%. Here comes Walmart presenting a SHOVEL READY project that they're willing to finance all on their own. (the city can contribute up to $10 million to encourage business construction) They've even committed to hiring up to 500 UNION workers to build this store. Still, that's not enough. Their proposal isn't allowed to see the light of day while a powerful politician buries the proposal. What does Mell have to say for himself? Not very much, that's what. He ignored my email just as he ignored the call of the Chicago Tribune when we both asked the same question. Why are you against this proposal?

This is what happens when politics trumps policy. There's a plot of dirt there now, and Walmart wants to put a 150,000 square foot super store there. They want to pay each and every dime to build and maintain the store. They want to hire UNION workers to build it. They want to hire hundreds of people to operate the store. Finally, if it's not built, Chicagoans will simply spend $500 million in Walmarts in the suburbs. Talk about a no brainer. That's only if you have the best interest of the citizens of Chicago in mind. I'd like to believe that Richard Mell has the citizens of Chicago's best interest but not only does he refuse to allow this proposal to even receive a vote but he refuses to even explain himself.

Senator DeMint Opens The Door...

Winston Churchill once said, "Never murder your opponent when he is committing suicide". What he meant was that when your political opponents are fighting amongst themselves, generally acting chaotically, and acting incompetently that's the time to stand back and stay above the fray. Under no circumstances should you get in the mud with them. Senator Jim DeMint should have heeded Churchill's advice. That he didn't gave President Obama the political opening to try and change the dynamics of the health care debate. A couple days back, Senator DeMint famously uttered these words.

if Republicans “able to stop” President Obama’s push for health care reform “it will be his Waterloo.” “It will break him,

If anyone has been listening to the president in press conferences the last two days, you'll have noticed that he has referenced this line each and everytime. Never did he mention DeMint by name. Once President Obama quoted the line back. Another time, he merely said that some are playing politics with health care. President Obama has incorporated this comment into the narrative he's using in selling health care reform now. In fact, here's the email I just received from the Obama administration.

Last week, Republican Senator Jim DeMint made it pretty clear why the opponents of health care reform are fighting so hard. As he told a special interest attack group, "If we're able to stop Obama on this, it will be his Waterloo. It will break him." Here's how the President responded:

Think about that. This isn't about me. This isn't about politics. This is about a health care system that is breaking America's families, breaking America's businesses and breaking America's economy. And we can't afford the politics of delay and defeat when it comes to health care. Not this time, not now. There are too many lives and livelihoods at stake.

With Congress only days away from finalizing their plans for reform, it's time to
stand up with the President and fight back against this disastrous brand of old-style politics. So we need as many people as possible to publicly support the President's principles for health care reform and call on Congress to act.

For the better part of a month, the Democrats were fighting amongst themselves. They were fighting over what tax to raise, what service to cut, and whether or not to include a "public option". There was no bill and the whole thing looked like a mess. The whole thing was a mess.

Meanwhile, Republicans were standing back. Some presented their own ideas. The bemoaned the lack of bipartisanship. They bemoaned the increased costs of the plan, the lack of choice, and more recently parrotted the findings of the CBO. It all almost seemed like perfectly crafted political kabuki theater.

Then, DeMint opened his mouth and allowed for an opening. It remains to be seen if this will change the dynamics of the debate, and I personally don't think it will. That said, there shouldn't even be any speculation. First, DeMint's sentiment is very cynical. That's not to say that DeMint is the only cynic in the Senate. It's also a rookie move by a veteran politician. DeMint is no rookie. If that's how he felt, he should have never allowed that sentiment on the record.

Now, the president is attempting to use it to change the dynamics of the debate. He's trying to regain the moral high ground. Given the sentiment of DeMint, he has a point. Obama's health care reform package is unpopular. President Obama, on the other hand, is still popular. Republicans should be attacking the proposal not the president. Senator DeMint should have heeded Churchill's advice.

Video, Quote, and Word of the Day

traduce

to vilify

Forgiveness is the fragrance that the violet sheds on the heel that has crushed it.

Mark Twain

Next Stop the Incompetent Label

In the span of two days, the administration has blown through two deadlines without producing a report. Yesterday, we marked ninety days since the President asked for his cabinet members to each produce a report that would lead to a reduction in administration spending of only $100 million. That report was due in 90 days. Yesterday, absolutely no report was produced. Meanwhile, a panel was supposed to produce an interim report on progress toward closing GITMO today. That report will also not be filed.

An Obama administration panel will miss a Tuesday deadline to report on its efforts to meet President Obama’s directive to close the detention center at Guantánamo
Bay, Cuba, by January, administration officials said on Monday.

The officials said that a task force reviewing detention policy would need another six months to complete its report and a second group, reviewing interrogation policy, would need two more months to finish its report to Mr. Obama.

Senior administration officials said at a briefing for reporters that the missed deadlines did not mean the administration was bogged down in its effort to close the prison, which now holds 229 men suspected of terrorism.

The president's plan for stemming foreclosures has also been an abject failure.

The Obama administration’s $50 billion program to curb foreclosures isn’t working, and the White House knows it.

Administration officials blame the mortgage servicers charged with carrying out the mortgage modifications and refinancing under the federal program. Many of their Democratic allies on Capitol Hill back them up, but others are criticizing the White House for fumbling the execution. Whatever the reason, the program hasn’t stopped the rising tide of foreclosures: Experts predict that at least another 2 million homes will be lost this year, and the administration’s plan has so far reached only about 160,000 of the 3 million to 4 million homes it was supposed to protect over the next three years.

That’s bad news for the economy — and bad news for the Democrats.

Here's how DEMOCRATIC Senator Chris Dodd characterized the problem.

I’ve had a lot of frustrations in trying to come up with plans that work,” Dodd, a Connecticut Democrat, said during a break in a hearing on the programs today in Washington. “I’m concerned that we’re just going through the motions. I don’t
get the sense of urgency.”A Bank of America Corp. executive told Dodd’s committee that the administration stokes “confusion and delay” among lenders when it announces anti-foreclosure plans before completing the program details, while Senator Richard Shelby of Alabama complained that the programs have fallen short of goals.

Meanwhile, Joe Biden, who himself is an endless stream of embarrassing gaffes, proclaimed on television that the administration misjudged the severity of the recession. That's why the administration predicted 8% unemployment without the stimulus and now it's 9.5% with the stimulus. At the same time, not even $100 billion of the $787 billion stimulus has been spent.

If we get to the summer recess and no headway has been made on health care reform, then during the summer recess will bring more and more calls by pundits of the "incompetent" label in characterizing the Obama administration.

In fact, I challenge anyone to show how Obama has shown competence in doing anything well but speechifying so far in his presidency. The only piece of legislation he passed was the stimulus. At his most popular, he barely got it through with 3 Republicans on board. It's true that all his initiatives are still incomplete. Yet, if you were to give a grade in execution on the stimulus, his mortgage bailout, GITMO, and all his legislation you'd have to give F grades for everything but cap and trade.

Even cap and trade, while it was passed in the House, has little hope of passing in the Senate. Furthermore, almost no one likes the bill that was passed. Here's how Tom Friedman characterized the bill.

There is much in the House cap-and-trade energy bill that just passed that I absolutely hate. It is too weak in key areas and way too complicated in others. A simple, straightforward carbon tax would have made much more sense than this Rube Goldberg contraption. It is pathetic that we couldn’t do better. It is appalling that so much had to be given away to polluters. It stinks. It’s a mess. I detest it.

Friedman, mind you, supports cap and trade. I'd be hardpressed to find anyone strongly believes in the legislation that passed the House. As such, even the one piece of legislation that has seen any movement is a piece of legislation almost no one likes.


So, with no real legislative victories to speak of, no initiatives that are successful, if the president isn't able to move forward on health care, then we are going to start hearing more and more people in August label him INCOMPETENT. That is, frankly, a devastating label.

Health Care Reform Postponed Indefinitely

The House Energy and Commerce Committee cancelled a scheduled "mark up" today.

A key House committee on Tuesday indefinitely postponed voting on health care reform legislation, after Democratic leaders were unable to line up enough votes from moderate members of their own party.

The House Energy and Commerce Committee canceled the session as it faced serious concerns about the legislation from fiscally conservative Blue Dog Democrats, who hold a large number of seats on the panel. The Energy and Commerce Committee is the only House panel with jurisdiction over health care that has not completed writing its version of the reform bill.

Mark up is when a bill is written in earnest, amendments are voted on, and the bill is then voted in during Committee. This process has not only been postponed, but postponed "INDEFINITELY". This particular committee holds a significant number of Blue Dogs. It appears their concerns mean that there are simply not enough votes to pass this out of committee. That indicates that the Blue Dogs are NOT on board. That this has been postponed INDEFINITELY means that all parties are nowhere near an agreement.

This means any hope of passing health care reform (know called insurance reform by the president) by the August recess is over. This puts health care reform in dire trouble. Now, health care reform is dependent on tangible evidence that the economy is recovering.

The first potential for tangible evidence is the July job's numbers on August 7th. Of course, it could be a death blow. If July's numbers are worse than June's (477,000 in June), then you can bet that President Obama's fading approval numbers will fade to critical levels. At that point, this sweeping reform becomes a non starter until his numbers improve. When that would happen is anyone's guess.

Ultimately, I stand by my prediction. If July's numbers are worse than June's then the president won't pass any of his reforms until after the November 2010 elections.

What Bernanke Hasn't Answered Yet

Ben Bernanke has taken to the Congress and the media to try and assure the country that when the time comes he will do all that he can to avoid inflation. These steps include: raising the Fed Funds Rate, reduce their balance sheets by about $200 billion, increasing the interest the Fed pays on reserve, and fourth they will sell back some of the securities they have bought, both recently and in the long term. All of these would be effective tools in curbing potential and likely upcoming inflation.

Yet, Bernanke still hasn't explained the conundrum he faces. Here is how Bernanke views the intermediate future of the U.S. economy.

Federal Reserve Chairman Ben Bernanke on Tuesday said the outlook for the long-suffering U.S. economy appears to be improving and the U.S. central bank was carefully reviewing ways to withdraw its massive monetary policy stimulus when conditions permit.

Bernanke repeated the Fed's forecast that the economy should start growing again in the second half of this year, but he warned growth would be slight, leading to higher unemployment.

...

The nation's unemployment rate climbed to a 26-year high of 9.5 percent in June. The Fed says it could rise as high as 10.1 percent this year, and stay elevated into 2011. The post-World War II high was 10.8 percent at the end of 1982, when the country had suffered through a severe recession.

Bernanke predicts that GDP will again grow before the end of the year while unemployment will rise through at least the end of 2010, and even longer. Let's assume for a minute that his predictions are correct. As the economy begins to grow, so to will inflation grow. There's at least a year lag between economic growth and job growth. Yet, inflation fears are real and significant.

So, that means that inflation will also begin to grow sometime in 2010. By Bernanke's own words, that would mean that sometime in 2010 he would began to implement some or all of the techniques that he has outlined. All of these techniques would infact tame inflation. They would also be contractionary.

By Bernanke's own words, he will begin sometime in 2010 to raise the Fed Funds rates. Sell back securities, and raise rates paid to banks for parking their money. That will increase borrowing rates for both banks and consumers. It will also raise rates for banks to park their money. That is a combination of contrationary activities all at once.

The only thing he's quantified is the reduction in balance sheets, $200 billion, but we can all bet that these activities will be significant. We know this because Bernanke has addressed these moves well in advance. That's how serious he takes potential inflation. But if he's making borrowing more difficult, and encouraging banks to keep their money idle, isn't he significantly contracting the economy just as it's slowly recovering? If he's doing that, isn't he fixing inflation by throwing the economy right back into a recession?

So far, Bernanke hasn't squared these two issues. If he sees a slow recovery and at least a year lag in unemployment, and yet he also sees serious inflation ahead, then all problems won't be solved at once. All that Bernanke showed with both his current testimonly and his oped is that he's in an untennable position. No matter what he does he will create another economic calamity with his actions.

Morning Market Report

Markets were up across the board for a six straight day. The Dow is now up for the year. Furthermore, Caterpiller is leading the way of another strong day of earnings. There will also be a plethora of companies announcing after the bell. In the middle of it all, Fed Chairman Ben Bernanke will be testifying. So, the day will not be short on excitement.

Meanwhile, bonds got better yesterday which indicates that money wasn't merely transferred but moving into the market from the sidelines. Though, today, most U.S. Treasury bonds are giving back most of what they gained yesterday. The 10 year U.S. Treasury bond is currently trading at a rate of 3.65%, which is what it opened at yesterday. The yield spread between the two year and ten year is 2.65%. That's dangerously close to the all time record of 2.75%, which occurred in June. This continues to signal serious inflation ahead. (incidentally here is how Bernanke says he will deal with that)

Oil continues it's troubling climb. It's now trading just below $65 per barrel at $64.96/barrel. The markets in the Far East were mixed. The Hand Seng was even. The Japanese NIKKEI was up 2.73% while the Straits Time Index in Singapore was down .07%. Europe was a different story with every single index up. The FTSE in London was up 1.14%, the DAX was up1.79%, and the Spanish index was up .54%.

Most major currencies are having a fairly mild day. The Dollar and British Pound are nearly unchanged, the Dollar is up .15% against the Yen, and the Dollar is down .04% against the Canadian Dollar.

Meanwhile, CIT made it official. They were able to secure about $3 billion in financing giving the company a temporary lifeline. Most analysts DO NOT believe that this is a permanent fix. Instead, this gives CIT room to breathe for a few months to figure out how to restructure the company.

Bernanke's oped talked about the numerous ways in which he can tighten the money supply when its necessary. He lists no less than five different tools. The layman will likely not understand any of them. I certainly gained even more appreciation for the enormous power the Fed has. What Bernanke didn't address is the contractionary effect of any and all of these policies. No one can doubt that Bernanke can and will, if he feels it necessary, do many things to curb inflation when he feels the time is right. What I would ask is how he could insure that all of these measures wouldn't put us right back into a recession. The problem I see was not addressed by Bernanke. Inflation will begin to sprout as the economy recovers. That doesn't mean it will have already recovered. So, if Bernanke begins to contract the money supply aggressively, wouldn't he throw the economy back into recession? Bernanke said nothing about this.

The markets continue to seem to have the winds behind them. Earnings continue to be strong. All eyes will be on Bernanke's testimony.

Disclosure:

Everything in this space should be taken as information only. All opinions are my own only and should NOT be taken as an endorsement or investment strategy. I am not a licensed investment advisor and nothing here should be taken as investment advice.

Reporting From The Forum on Proposed 2016 Olympics (Update)

Update: A reader has helped me with a name that slipped my own mind originally and I want to update the piece.

Tonight, I attended the forum on the proposed 2016 Olympic bid in Chicago. The event was held at the Center on Halsted in the Lake View area of Chicago. (the neighborhood I live in) Both sides were represented. Four representatives of 2016 Chicago represented those trying to bring the games here. Meanwhile, the opposition was represented by Tom Tresser of No Games Chicago. Erma Tranter, President of Friends of the Parks, presented her group's view of the potential impact of the games on our parks and greenery.

First, each of the three sides took fifteen minutes for a fifteen minute power point presentation. Former Olympic wrestler, Jim Scherr, represented the folks supporting the 2016 bid first made an economic argument. he said that the bid would bring in $2.2 billion in revenues for the city and businesses in the area. It would create 315,000. The bid would NOT cost the tax payers one single dime. All of it would be financed through private financing. They said that the games in Los Angeles in 1984, Atlanta in 1996, and Salt Lake City in 2002 all didn't cost the tax payers any money.

He then played a video which featured a dozen young athletes. He talked about the unique experience that the Olympics would provide and the inspiration it would bring to tens of thousands of inner city youths.

Next, the lady representing concerned citizens for parks and recreation spoke. Her main concern was regarding Washington Park. The park was built and designed by legendary landscape architect Frederick Law Olmsted who also designed such landmarks as Central Park. Washington Park would be home to the temporary 80,000 some seat stadium that would host the opening and closing of the games. Washington Park currently hosts all sorts of sports leagues like baseball, soccer, lacrosse, and even cricket leagues. It's in a relatively poor area of the South Side of Chicago, and is among the most significant landmarks in the area. This TEMPORARY stadium would damage the park in a very permanent and significant way. This beautiful park would likely be left to something bland and even ugly. Other parks that would face significant disruption would be Jackson Park and Garfield Park. On the other hand, Grant Park would face no permanent disruption at all. Lincoln Park would face a small disruption to an area designed for the birds. To no one's surprise, the first three parks are in poor areas while the two that won't have any serious permanent damage are in wealthy areas.

Tom Tresser's message was very clear. The folks running this bid, Richard Daley and co., are corrupt and incompetent. Their numbers are NOT to be trusted. For instance, the study that claimed that more than $2 billion would be created and 300k plus jobs with it was sponsored and paid for by the bid. He pointed out that the Montreal games in 1976 were 11.9 times over budget, Salt Lake City games ran 2.5 times over budget, the Athens games were 2.4 times over budget, the Turin games in 2006 wre 1.7 times over budget, the Beijing games cost $40 billion (with no known original cost estimate), the Vancouver games in 2010 are already 10 times the original budget, the London games in 2012 are already 3.7 times the budget.

There is also major controversy over Michael Reese Hospital. That land will be used for the Olympic Village. Then, it will be sold. So, those from the 2016 bid say that the city won't lose money on the deal. Meanwhile, Tresser said that the budget can't be trusted because the $86 million expense isn't in the budget for the games. It was also pointed out that the Los Angeles games used all the existing stadiums in Los Angeles. Meanwhile, Chicago would be building several new stadiums including the massive 80k plus stadium that would be torn down immediately following the games.

The issue of TIF's (Tax Increment Funds) also became a point of contention. This is essentially a tax accounting trick. What happens with a TIF is that property taxes are capped at a certain amount. Then, any tax money over that goes into a slush fund. So, for example let's say the tax in a condo building are capped at $2000. What this means is that up to $2000 goes to local schools, garbage clean up, etc. The rest goes into a slush fund for the mayor to spend in whatever way he wants. Tresser believes his group has already found $1 billion in TIFs earmarked for the games.

Ultimately, this debate comes down to credibility. All sides presented strong arguments. There's no doubt that if the games are built and produced efficiently that this will be a boon for the city not only in terms of tourism and entertainment but in income. At the same time, opponents are right. If the games are run in the same corrupt manner that the city has been run for a decade and more, it won't come in within the budget restraints. Furthermore, the citizens won't likely know that things will go over budget. They likely won't even know that taxes will be raised to pay for it. These TIFs are difficult to follow. Funds are comingled. Taxes would be raised will in advance of the Olympics. No one would ever claim they were raised for the Olympics specifically. Furthermore, the taxes would likely be property taxes which are very easy to manipulate.

My own personal opinion is that if this is a matter of credibility then we must all say no. To say yes to the Daley administration yet again despite all that we know. In fact, Tresser, on at least five occasions, referrred to Daley by the moniker corrupt. No one supporting the bid ever challenged this characterization. Instead, their defense was that the bid was a private non profit effort that is separate from the mayor's office. The bid is being lead by Lori Healy, who took over the bid following a stint as the mayor's Chief of Staff. The only thing more ludicrous than the idea that Daley won't be running this operation is the idea that he isn't corrupt.

Romney 2012? Two Words: Romney Care

The last few days conservatives have begun to demonize the health care system in Massachusetts. That's because, in the view of many conservatives, Massachusetts' health care system is congruent to the health care system that President Obama is attempting to construct. That's simplified. Here's how it's similar. It requires every citizen to have health insurance. It requires all employers, but the smallest, to provide health insurance to their employees. Finally, those that don't make enough money have their insurance subsidized. Here's how it's different. It has no public option.

Here's the important point. Universal health care in Massachusetts has FAILED.

The new state budget in Massachusetts eliminates health care coverage for some 30,000 legal immigrants to help close a growing deficit, reversing progress toward universal coverage just as Congress looks to the state as a model for overhauling the nation’s health care system.

Gov. Deval Patrick wants to restore $70 million to partly cover legal immigrants. The affected immigrants, permanent residents who have had green cards for less than five years, are now covered under Commonwealth Care, a subsidized insurance program for low-income residents that is central to the groundbreaking health care law enacted here in 2006.

Critics of the cut, which would save an estimated $130 million, say it unfairly targets taxpaying residents and threatens the state’s health care experiment at a critical time.

It's failure is the real world example of what happens when you add people to the system without adding doctors. That's what opponents of the current plan say. What the president says is that we already give those people care and without insurance they cost more to the system. Interestingly, and ironically, here's what the Governor Mitt Romney said when he was about to sign his version of universal health care.

Medical care for Massachusetts patients who lack health insurance is paid for by businesses. Companies -- mostly ones that already offer coverage to their employees -- subsidize a fund that pays for so-called "free" care when uninsured people end up in hospitals.

"We're spending a billion dollars giving health care to people who don't have insurance," Romney says. "And my question was: Could we take that billion dollars and help the poor purchase insurance? Let them pay what they can afford. We'll subsidize what they can't."

Replace Massachusetts with the U.S. and Romney with Obama and there's almost no difference between the way Romney sold his form of universal health care and the way the current president is selling his.

Is there any doubt that Republicans hate Obamacare? They don't merely hate it but with a passion. What's the signature piece of legislation for Mitt Romney? It's his version of universal health care.

While they aren't identical, they are plenty similar. It's failure in Massachusetts speaks for itself. Just today I see that Rasmussen has Mitt Romney leading among Republicans. Give me a break. Romney is supposed to be the fiscal conservative standard bearer and his signature policy is breaking the state's bank. I'm supposed to believe that three years after waging a fierce battle to keep universal health care from being imposed on the nation, the very same party will choose as its standard bearer the man that imposed it on his state. I don't think so. Romney's chances for 2012 went by the way of Romney Care.

$23 Trillion?!?!?!

As if the president hasn't been having a hard enough time lately, the Inspector General for TARP, Neal Barofsky, is about to release his scheduled report tomorrow and he claims that TARP and other bailout programs could cost as much as $23 trillion.

A series of bailouts, bank rescues and other economic lifelines could end up costing the federal government as much as $23 trillion, the U.S. government’s watchdog over the effort says – a staggering amount that is nearly double the
nation’s entire economic output for a year. If the feds end up spending that amount, it could be more than the federal government has spent on any single effort in American history.

Now, defenders of TARP and other bailout programs proclaim that the figure that Barofsky uses is a worst case scenario. Fair enough, TARP and all the other bailouts might "only" cost $12 trillion.

Some have characterized this as showing just how massive the problem is. That's nonsense. Our GDP in a year is about $14 trillion. This started out as a way to try and stop the bleeding. Then, the government couldn't say no to anyone. The automakers came with their hands out and we gave them money. AIG came with its hand out and we gave them money. Struggling borrowers came with their hands out and we gave them money as well.

What this number really puts into perspective is the size and scope of the massive government expansion that has occurred since September. Bailouts, stimulus, TARP, TALF, loan modification programs all have a real cost. That cost may not reach $23 trillion but it is staggering.

Video, Quote, and Word of the Day

arcanum

a secret

Don't be afraid to take a big step if one is indicated. You can't cross a chasm in two small jumps.
David Lloyd George

Fun With Numbers: Budget Cuts, Deficits, and Interest

Today is the day that Cabinet secretaries are supposed to present budget cuts to the president in order to save $100 million dollars, together, from their combined budgets. So far, the administration has not released those budget cuts. At the same time, the interest on our budget deficit, financed through bonds, costs the country $100 million DAILY. In other words, if the White House finds these cuts, and they're put into effect, then they'd find enough savings to pay for one day's worth of interest in the debt the government pays each and everyday.

If ever there was a numerical indictment of just how poorly our government manages its finances, it's these sets of numbers. Our deficit recently crossed $1 trillion. The administration is delaying releasing the numbers from the last quarter. Our budget deficit will likely be north of $2 trillion for the entire year. Our debt is so large that the daily interest we pay is $100 million. Yet, our government, hopefully, will figure out today how to save $100 million for the year in other parts of the budget.

Despite Public Confidence: Health Care Reform is in BIG Trouble

The president has proclaimed that no one should doubt he and his allies and their ability to produce sweeping health care reform. Certainly, the president must put on that public face. Furthermore, the president is supremely confident and so I don't doubt that he believes that he will be able to pull this off. In reality, there continues to be more and more roadblocks. The most recent setback is this poll by WAPO showing the president's approval on health care slipping below 50%.

Heading into a critical period in the debate over health-care reform, public approval of President Obama's stewardship on the issue has dropped below the 50 percent threshold for the first time, according to a new Washington Post-ABC News poll.

Then, the Associated Press is reporting that the White House is delaying release of the latest quarter's budget numbers. (raising speculation that our deficit is large, even MUCH LARGER, than predicted by the administration)

The White House is being forced to acknowledge the wide gap between its once-upbeat predictions about the economy and today's bleak landscape.

The administration's annual midsummer budget update is sure to show higher deficits and unemployment and slower growth than projected in President Barack Obama's budget in February and update in May, and that could complicate his efforts to get his signature health care and global-warming proposals through Congress.

The release of the update — usually scheduled for mid-July — has been put off until the middle of next month, giving rise to speculation the White House is delaying the bad news at least until Congress leaves town on its August 7 summer recess.

Then, OMB director Peter Orzag foolishly left open the possibility that under the public option there might be tay payer funded abortions.






The final voting on any bill is likely to be razor thin. Those that support the Democrats' health care bill likely would support tax payer funded abortions. Those on the fence are much more likely to be swayed against it if this provision is in there than the opposite. So, all the White House is doing by being wishy washy on this issue is making it more difficult to pass a final bill.



Then, the nation's governors held their annual meeting and many expressed serious reservations about health care reform and their financial strains on their states.

The nation’s governors, Democrats as well as Republicans, voiced deep concern yesterday about the shape of the healthcare bill emerging from Congress, fearing that the federal government is about to hand them expensive new Medicaid obligations without providing the money to pay for them.


The role of the states in a restructured healthcare system dominated the summer
meeting of the National Governors Association here this weekend - with bipartisan animosity voiced against the Obama administration’s plan during a closed-door luncheon Saturday and in a private meeting yesterday afternoon with the secretary of health and human services, Kathleen Sebelius.

Most devastating is the revelation that twenty freshman Democrats have come out in unison against the plan to raise taxes on the superwealthy and the weekend confirmation that the Blue Dogs have banded together against the current proposal.

Twenty freshman Democrats, led by Rep. Jared Polis (Colo.), have threatened a revolt against the $544 billion worth of tax increases spelled out in the House bill — one of the two revenue pillars holding up the Democrats' promise of producing a “deficit-neutral” healthcare bill that is expected to cost more than $1 trillion.

...

Committee Chairman Henry Waxman (D-Calif.) has vowed to finish his markup by midweek as promised. But the Blue Dogs have said they have enough votes to kill the bill in committee if changes aren’t realized. And on issues where the committee lacks jurisdiction, such as the tax portion, Blue Dogs have warned that there are enough votes to kill the bill on the floor as well.

As such, right now the Democrats simply don't have the votes to pass what has been presented.



Furthermore, the CBO has calculated that the current proposal also will add $239 billion to the deficit over the next ten years. The White House disputes this calculation because it includes $245 billion in payments from Medicare to doctors to cover shortfalls. They did this to get crucial support from the American Medical Association. The AMA was concerned that the health care reform package would squeeze doctors even further when treating medicare patients. Of course, this payment IS IN THE BILL. The Democrats are trying to remove it from the budget as if it were removed it wouldn't be paid. All of this is very critical because the president assured America that he wouldn't sign any bill that would add further to the deficit.



Put all of this together and fifteen days before the summer recess we're nowhere near passing health care reform. The President and the Democrats will put together a full court media and legislative press on health care reform this week and until the recess. Of course, it's totally unclear just how they will resolve the issues at hand.



They currently are nowhere near the votes to pass what's been put forward. As such, if something were to pass, something different would have to emerge and move through both houses by August 7 (which is my birthday). August 7th also happens to be the day that July's employment numbers come out. If July's jobs numbers are poor, that will make health care reform nearly impossible. The president's popularity will erode even further. Americans will have serious questions about whether or not his vision will work. Furthermore, most people will demand job creation not health care reform.



In my estimation, health care reform is on life support.



Finally, here is my blue print for health care reform.

Morning Market Report

After a monster week, the markets look up slightly again this morning again at the pre open. The futures are all trading somewhere around a half percent higher at the open. After striking out with the government, CIT is near an agreement with its creditors to renegotiate its debt and avoid bankruptcy. The deal would be worth about $3 billion according to sources close to the negotiations. CIT has about a billion worth of debt coming due in about a month and was facing the risk of bankruptcy if a deal wasn't struck.

Asian markets were all over the place. The Hang Seng in China was up 3.7%, the NIKKEI in Japan was even, while the Straits Time Index in Singapore was %up 1.04%. Meanwhile, European markets all posted solid gains. The FTSE in London was up 1.37%, the DAX in German was up 1.38%, while the Spainish Index was up .77%.

Bonds continue to move their rates up. The Ten year U.S. Treasury will likely push 3.7% today. It's currently trading at a rate of just over 3.68%. Most bond rates were up 2-3 basis point (2-3 hundredths of a percent) on the world markets.

Crude oil continues its push up after recently touching below $60 a barrel. It is now just over $64 a barrel. The U.S. dollar is mostly lower. It's down .85% against the Euro, 1.09% against the British pound, and .75% against the Canadian dollar, but is up .3% against the Yen.

My analysis:

If world markets are any indicator, the equity market in the states should have a good day. Most of the momentum is behind their back. Earnings have generally been better than expected. CIT has all but secured financing to avoid bankruptcy and last week the major indices were up.

The earnings season may have been a benefactor of dire expectations. The earnings weren't generally so much good as they were much better than expected. This has caused markets to jump. Of course, better than expected earnings this quarter mean bigger expectations for quarter three. Markets are all about expectations and this past earnings were better than expected.

Disclosure:

Please note, I am not an investment professional, though I have spent more than a decade working in the financial world. None of this analysis is meant as investment advice. All investment decisions should be made in lieu of each person's personal financial situation. Nothing written here should be misconstrued as investment advice.

Some Thoughts on the Alleged ACU Pay to Play Scheme

The weekend began with this shocking revelation.

The American Conservative Union asked FedEx for a check for $2 million to $3 million in return for the group’s support in a bitter legislative dispute, then the
group’s chairman flipped and sided with UPS after FedEx refused to pay.

For the $2 million plus, ACU offered a range of services that included: “Producing op-eds and articles written by ACU’s Chairman David Keene and/or other members of the ACU’s board of directors. (Note that Mr. Keene writes a weekly column that appears in The Hill.)”

The conservative group’s remarkable demand — black-and-white proof of the longtime Washington practice known as “pay for play” — was contained in a private letter to FedEx , which was provided to POLITICO.

(Here's the letter)
It should be noted that all of these are still allegations however the letter is pretty clear and indefensible.

The whole thing started over a law currently working its way through Congress that would have given Fedex' union more power. In the letter, the ACU (American Conservative Union) first tells the folks at Fedex that they agree with their position, and given their conservative anti union, that seems natural. The ACU then listed a series of things they would do for Fedex. Finally, the ACU listed the costs they expected to pay for their services.

Fedex never responded and two weeks later the ACU switched positions and sided with Fedex' main rival UPS. The details of the policy involved are bland and ultimately mostly important to Fedex and UPS. The allegations are as shocking as they are troubling.

Most people probably haven't heard of the ACU, however they are the main sponsor of the year Conservative Political Action Conference. CPAC is the biggest, and most important, gathering of conservatives. If they're corrupt, that is a shocking blow to the conservative movement. Among the signatories of the second letter is Grover Norquist, founder of Americans for Tax Reform. Norquist is one of the most influential fiscal conservatives in the country. It's unclear if Norquist knew about the earlier offer by the ACU to Fedex though he's at least tainted by association now. (Norquist is on the board of the ACU)

This is yet another example that politics is a lot less a battle of policies and ideas, and much more a battle between those on the inside and the rest of us. The ACU appears to represent those with connection, on the inside, than those who believe in small government. It's not only unacceptable but despicable and frankly, no one should attend CPAC if ACU is associated with it in the future. It goes without saying that the group must not be supported or acknowledged any longer in any way.

Here is the statement from the ACU. Their claim is that it David Keene, its chairman, was acting on his own in the second letter to UPS even though ACU's letterhead, along with letter head from several other organizations, is on the letter.

Video, Quote, and Word of the Day

cornucopia

an abundance

When you come to the end of all the light you know, and it's time to step into the darkness of the unknown, faith is knowing that one of two things shall happen: Either you will be given something solid to stand on or you will be taught to fly.

Edward Teller

This Ad is Devastating and Here's Why

(H/T to Real Clear Politics) I try not to comment on advertisements but this one is so devastating that it warrants some commentary.



In business, and in life, there is a concept that everyone should follow, manage expectations. If you promise someone that something will get done in two weeks and it's done in three you look like an incompetent. If, on the other hand, you promise it done in four weeks and it's done in three you're a hero.

The president made all sorts of unrealistic promises when he tried to sell the stimulus. He promised that unemployment would hit 8% without it. He promised that the money would get out the door immediately. He promised that it would save or create 3-4 million jobs. Instead, unemployment is at 9.5% and climbing. One tenth of the money has been spent in six months. Finally, two and a half million jobs have been LOST since the stimulus was passed, and counting. There's nothing worse than making a series of promises that you don't deliver on. The president is finding this out the hard way.

The reason this ad is so devastating is because it condenses all those empty promises into a minute and a half. The ad is so devastating because it simply captures just how poorly President Obama mismanaged expectations.

Walmart, the Unions, and the Chicago Way

WalMart's history with the city of Chicago is long and often contentious. So far, the city has two WalMart stores. That's only because WalMart has done an enormous amount of lobbying, and because the store chain didn't give up after being roundly rejected many times. WalMart often has problems finding their way into urban areas. That's because those areas are often run by Democrats. Those same Democrats are often tied to unions. Unions hate WalMart. First, WalMart refuses to unionize itself. Second, their superior price structure becomes an unacceptable alternative to unionized stores. For instance, here in Chicago, too many WalMarts would become a serious problem for the unionized grocery chains of Jewel and Dominick's. That's why the city of New York has zero Walmarts. The Democratic dominated city council has far too much power to approve one.

It's easy to demonize WalMart during good economic times. Here's how WalMart opponent, city council woman Helen Schiller characterized her opposition in 2004.

We are dealing with a huge company with a long history of predatory practices," Alderman Helen Shiller argued during the meeting Wednesday, also accusing Wal-Mart of not providing its employees adequate health care.

"They count on the city to provide assistance to their workers," she said. "We are creating more loss than gains."

Such demonization, no matter how non sensical, is much easier during good economic times. No one notices the economic loss that a lack of a WalMart superstore brings when jobs are plentiful. In 2004, they were. Of course, it isn't, in my opinion, mere coincidence that supporters of proposed WalMarts are almost always the alderman that serve that particular neighborhood. For instance, in 2004, the most vocal supporter of the WalMart project was alder woman Emma Mitts. That WalMart, now a reality, was to be put up in her ward. It's almost always those that represent districts not directly affected by the WalMart that oppose it. That way they can get in bed with their union supporters without necessarily hurting their own constituents that much.

So, now we have the exact same scenario. Another WalMart is being proposed and it's being proposed in the area represented by alderman Howard Brookins of the 21st Ward. Brookins is the biggest supporter of the proposed WalMart. The proposed WalMart will be placed where there is currently an empty lot. It will employ 500 people, not to mention all those that will be needed just to build it. The city of Chicago's unemployment rate is north of 10% currently. So, unlike 2004, it's much more difficult a job creating project like building a WalMart.

So, what's a politician, tied to the unions, to do? They simply ignore the media entirely. Currently, the rules committee, chaired by powerful alderman Richard Mell (and father in law of disgraced former Governor Rod Blagojevich), has buried the proposal. The editorial board of the Chicago Tribune attempted to contact Mell to find out why it's still stuck in the committee. Mell ignored their attempted contacts.

That's not surprising. Chicago politics works like a giant boy's club. If you're in the club, you get preferential treatment. Nosey reporters are NOT part of the club. Instead, adoring reporters that look the other way are part of the club. That's why John Kass is so reviled by most of Chicago political class. The unions and Chicago's politicians have a very cozy relationship. Alderman Mell is really no longer answerable to the voters. That's because winning elections is no longer in doubt. What are the chances that a legitimate candidate would ever be able to orchestrate a campaign against such a powerful alderman? Instead, Mell is answerable to his allies, allies like the unions. Alderman Brookins, and his constituents, are simply not as powerful and as allied to Mell as the unions are. That's why WalMart's proposal continues to be buried.

President Obama's Foreclosure Nightmare

Let's make some stipulations. President Obama didn't create the foreclosure nightmare. Instead, he walked in while it was unfolding. That said, it will be his nightmare because among the first things he did was create loan modification program that he, himself, said would save nearly ten million people from foreclosure. The president held a press conference, and he said it would cost about $75 billion. As soon as he did all of this, he took ownership for the rising foreclosure crisis. The opinions of what to do about rising foreclosures are plentiful. For instance, those like me would say that you do nothing. Let the homes get foreclosed on naturally because that's the only way the market can bottom out. Then, there are those like ACORN and the Center for American Progress that say not enough is being done. For instance, earlier this year the so called cramdown rule, championed by Dick Durbin, was filtering through Congress and didn't get passed. Cramdown would have allowed bankruptcy judges to force loan modifications on any homeowner in bankruptcy.





What is clear now is that so far the administrations efforts have been akin to putting a band aid on a heart attack. To understand just how corrosive this problem is you must first understand that it is very layered. Second of all, even while the president's efforts have so far been largely useless all of the negativity of the efforts are in play.





Right now, there are four main drivers of future foreclosures: continuing resetting of adjustable rate mortgages, continued growth in unemployment, resetting of Option Arms, and balloon payments coming due on commercial mortgages. So far, the president has done a little bit to limit the first problem and nothing to limit the other three.





ARM's Resetting:





Here's a graph that illustrates the problem.



In this Politico piece, a Harvard economist makes this assertion.

Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies, said that while the Obama plan was well-crafted for the issues at hand in February, the cause of foreclosures has changed. Now they are less about the
creative, variable-rate loans that buried many homeowners and more about an
unemployment rate that has even those with fixed-rate loans struggling to keep up.

“The issues have changed, and in some ways the solutions haven’t kept up with the problems,” Retsinas said. “The most effective intervention would be to put people back to work.”

At this moment, he's right, however that's sort of a misleading assessment. Right now, the main foreclosure problem is unemployment. People can't pay their mortgages because they don't have work. ARM's resetting is NOW not as big a problem because in 2009 there aren't that many resetting. What will happen in 2010? There will be a lot more. So, in fact, come 2010 resetting ARM's will again become a driving force in the foreclosure mess.



The president's foreclosure prevention plan was mainly supposed to deal with resetting arms. That's because those getting a loan modification were supposed to show a "hardship". There's a built in hardship when you see your payment go up several hundred dollars monthly. It's also supposed to deal with the problem of underemployment. There's also a built in hardship when you see your income go down a few hundred dollars monthly.



The problem is that the president's plan was implemented very haphazardly. Banks are confused. The rules are unclear. Their departments aren't equipped for hundreds of thousands of struggling borrowers all demanding loan modifications all at once. As such, very few have been done compared to the growing numbers of foreclosures. Now, everyone is pointing fingers at everyone else.

The White House realizes the stakes. Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan took the 27 participating servicers to task in a July 9 letter to their CEOs, telling them to add more staff, improve training, create an appeal path for borrowers dissatisfied with the service and fulfill other measures to do more modifications, better.

The servicers were told to designate a liaison with the administration who will meet with Treasury and HUD on July 28. The servicers have to tell the administration by July 23 what specific steps they’re taking to improve performance.

In addition, the administration announced that next month it will start publishing company-by-company results, including how many modifications each servicer has made and how quickly. At the least, that will give policymakers ammunition to shame recalcitrant lenders.

“We think that that type of disclosure, servicer-by-servicer, will be important to spurring greater activity on their part,” Herbert Allison, assistant treasury secretary for financial stability, told Dodd’s committee.

It speaks to how terribly chaotic the system is when the administration puts a gun to bank's heads and still loan modifications aren't getting done. since I've begun to analyze the failures of Obama's loan modification program, I've identified the main culprit that this is a whole new industry being created from scratch. It's going through the same problems that any industry would in its infancy, growing pains. Up until this year, there were a few thousand loan modifications done yearly. Now, the administration wants there to be several million. Such a revolutionary change doesn't happen overnight and without serious problems. Of course, the problems of foreclosures can't wait until everyone involved figures out how to work them.



Joblessness:



I think everyone has heard that our unemployment rate is 9.5%, but in the context of the foreclosure problem, that number is misleading. It doesn't include those that took on less paying jobs, part time jobs, and those that quit looking. When you figure out underemployment, the number approaches 20%. Many of those folks are property owners and thus all in danger of being unable to pay their mortgage.



There is little the government can do to make sure that someone unemployed pays their mortgage on time short of creating an environment conducive toward job creation. Right now, things are bad and getting worse. That's why Mr. Retsinas was so focused on jobs. In that respect, he's right. If job losses continue to grow with no end, that will spill into a foreclosure mess and there's nothing the federal government will be able to do. While, I believe that unemployment benefits can be included in loan modification income, almost no one that relies on unemployment would qualify for a modification. The stunt in income would be too great.



So, unless jobless rates are curbed soon, that will continue to spill into higher foreclosure rates. All of it is a vicious cycle. If foreclosures are exploding that is a cancer to the rest of the economy. Unemployment works much the same way. Most expect unemployment to cross 10%, some 11%, and others into the teens. Foreclosures will be a variable of that.



Option ARMs



Here's a loan that most have never heard of. How about this? The three biggest players in option arms were: Bank United, Washington Mutual, and Countrywide. It's NOT a coincidence that all three are no longer in existence. That loan product brought all three to their knees.





That's a graph of Option ARMs, specificially, adjusting. You'll notice that a fair few have adjusted so far but that is about to change with its zenith happening in 2011.

First, Option ARM's no longer exist. They were a gimmick loan who's fatal flaw was exactly the current economic climate.

It worked like this. For the first five years, the borrower was allowed to make a payment that had no relation to the interest rate they were charged. The payment wasn't merely small but tiny. For instance a $300,000 mortgage would have a payment of just over $1000. (the small payment is made up at the end of the loan with a concept known as negative amortization) After five years, it adjusted and reset to track the rate and the current payment. Since the first five year's payment didn't track the rate, that payment almost always built negative equity. As such, the borrower would owe more after five years than they started. So, any option arm that adjusted would have an obscene payment shock. (payment shock is when payment adjusts up. Obscene is when it adjusts up a LOT)

Well, starting in 2010, all of 2011, and most of 2012, we'll have at least $10 billion monthly adjust. While that is a relatively low number, an enormous amount of these will go into default unless drastic measures are taken. Remember, the president's play is only $75 billion. Most of it is supposed to run out at the end of 2010. Furthermore, Option ARMs aren't even a part of the plan. So, starting in a couple months, we'll see about $10 billion in foreclosures monthly that no one has been paying attention to. There's about $500 billion in Option Arms that will adjust in total. Most of those borrowers are stuck. Their balances have gone up while their values have gone down. As such, they can't sell. They can't refinance either. It's unclear if they can modify. That's what Bank United attempted to do on a mass scale and still went under.

Commercial Mortgages:

The most underreported looming problem is that of commercial mortgages. Congress woman Maloney recently held a hearing on the problems faced in commercial mortgages. The numbers are frightening. In 2007, $488 billion in commercial loans were financed, $143 billion in 2008, and $15 billion year to date. Furthermore, there have been ZERO commercial mortgages securitized year to date. As such, there is no commercial mortage securitization market. If you were to do a commercial mortgage, the bank would have to hold it. Imagine asking a local bank to finance a hundred million dollar property. That's just far too much to put into one loan. That's why financing of $50 million and more are nearly non existent.

The problem isn't simply that multi units, warehouses, and office buildings aren't financed and sold. The problem is much bigger than that. Many commercial loans are done as balloon loans. That means that while they are calculated as though it is a 25 or 30 year loan, they are due after 3,5, 7, or 9 years. At that time, there is a massive, or balloon, payment for the remaining balance. So, the holder of a commercial mortgage needs to sell or refinance before the balloon is due. If not they either face a massive payment or foreclosure.

Of course, commercial loans are NOT part of the president's loan modification program. In fact, it's problems have almost been entirely ignored. I'd challenge anyone to even find a time when someone in the administration even talks about the problems in commercial mortgages. According to testimony, starting in 2010, commercial mortgage balloons will come due with the zenith in 2012. (an estimated one trillion dollars of balloons coming due in that year)

Let's think about that. Normal ARM's will increase their adjustment in 2010, Option ARM's will have their adjustment zenith in 2011, and commercial mortgages will have their zenith in 2012. So far, his plan is a largely impotent $75 billion program to modify mortgages and a stimulus package that has done little to stem joblessness. That's what I would call a NIGHTMARE.

Moral Hazards:

I first heard about loan modifications last fall. I immediately had a problem with them as a matter of policy because there is an inherent moral hazard. What I mean is that loan modification reward exactly the sort of behavior we want to punish. Here's how loan modifications work. You are struggling to make the payment on your mortgage. As such, the bank modifies your payment to something you can afford. The rates on these modifications can be as low as 2%. As such, if you have a modified loan, your rate is very likely to be better than that of someone with perfect credit. How's that for fair?

Banks are very aware of this built in moral hazard. That's one reason that loan modifications have been slow in coming. They don't want word spreading that loan modifications are a legitimate option for struggling borrowers or soon everyone will want one and suddenly everyone struggling is demanding their 2% mortgage. Suddenly, everyone is figuring out how to be struggling to get their 2% mortgage.

In fact, that's the Obama vision. He may not say it but if his plan works out 7 million people who have mortgages they can't afford will get mortgages better than those that can afford them. Remember, loan modifications are based on hardship. That means if you can afford your mortgage, you have no hardship. Isn't getting an affordable mortgage what we want to encourage? If your credit is perfect, mortgage is affordable, you have plenty of money in the bank, see if you can get a 2% mortgage. Remember, Obama doesn't go as far as want. Some want modifications to include a reduction in balance. In other words, if you're really struggling, then you won't owe $300,000 but say $250,000. See if you have perfect credit and ask if your bank will reduce your balance as a result.

That creates an upside down and perverse mortgage market. The most irresponsible are the ones rewarded the most. That's a moral hazard.

Now, moral hazard is a legitimate problem, but if we avoid a foreclosure crisis, some would say it's worth it. That's not what's happening. Instead, foreclosures are exploding all while the administration ramps up efforts to reward bad behavior. Remember, both Treasury and HUD are about to put extra pressure on banks to hurry up and approve more loan modifications. So, lot's more irresponsible borrowers will be rewarded all while foreclosures explode anyway. The administration will create a massive moral hazard with hundreds of thousands of homeowners being saved from themselves all while doing little actually solve the foreclosure crisis. I'd call that a nightmare.

President Obama's Hurry Up and Wait Health Care Policy

President Obama was out front this weekend again proclaiming that we have no time to waste in passing health care reform.