The Great Recession needs a lifeboat

The Great Recession needs a lifeboat

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Is this the end for Iran's Ayatollah?

This week's unprecedented events in Iran's streets represent a worst case scenario for the clerics and their puppets. The violence unleashed against the peaceful protesters and real martyrs of this green revolution is being amplified and twittered to all corners of the world. It's not an exaggeration to imply that Ahmadinejad is done with and the Ayatollah has clearly suffered a shattering setback.

In other news, Cuban and Venezuelan governments have jointly come out in favor of Ahmadinejad and have upheld the "ultra-democratic and fair" election results. Pathetic? Ultra.

But after watching a two-hour long, deep Iranian analysis on CNN's Fareed Zakaria where Brzezinski and other foreign policy analysts pondered the real consequences of Iran's post election struggle and Obama's position, it seems that this is beginning of the end for the Iranian regime.

The White House has been correct in their reluctance to meddle in this internal crisis in Iran. They don't want to add fuel to the hard-liners and neo-cons' fiery criticism of the West's evil involvement, a tool that has been used repeatedly to licentiously crack down the opposition.

Not only is this green revolution completely self-made, it is creating tectonic effects across the Middle East political landscape and could be a real catalyst for other clouded governments in the Arab world.

But the real question here is: Will all of this really shake up Iranian politics? The experts are hoping this will be the first and most critical blow before the beast collapses.

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The National Deficit for Dummies

I just read David Leonhardt’s column in today’s New York Times and I praise it for its easy to grasp explanation of complex economic terms when it comes to the national deficit.

For those who still believe that Obama’s stimulus bill is sinking this country into steep deficits, I invite you to read the complete column here.If you are going to skip the column, this is the national debt explanation for dummies:

The Congressional Budget Office 2001 projection for the years 2009-12 was a surplus of $800 billion. The CBO 2009 Projection for 2009-12, the most recent one, shows a different picture: a deficit of $1.2 trillion.

Leonhardt argues that the roughly $2 trillion difference between these two estimates is due to 4 categories, which have and are still contributing to this projected deficit.

Of this $2 trillion deficit, 37% come from the business cycle. It’s a reflection of both the 2001 recession and the current one which have reduced tax revenues and required more spending on safety net programs.

The second category, 33%, comes from eight years of Bush’s policies, including tax cuts for the wealthy, the cost of wars in Iraq and Afghanistan and the Medicare prescription plan. Not only did the economic growth under Bush did not generate nearly enough tax revenue to pay for his agenda, it did not cover the increased interest payments to service our national debt which Asian countries have collected.

The third comes from Obama’s extension of Bush’s policies, at 20%, which include the continuation of the wars and a new tax cut for households making less than $250,000. It also includes the Wall Street Bailout, which Bush initiated and signed and Obama supported.

Only 7% of this projected $2 trillion deficit, the fourth category, comes from Obama’s stimulus bill, of which 3% accounts for healthcare reform, education reform, and energy reform.

Furthermore, White House officials say “the president is committed to a deficit equal to no more than 3% of total GDP within five to 10 years.” Insofar, the CBO discredits this by stating that they project a deficit of at least 4% of GDP for the next 10 years. Those White House economists are really good with their deficit projections!

So next time you are discussing this administration’s budgets tirades or sensing misplaced criticism or angst, remember this report and think how unfair it would be to blame Obama for incurring gigantic deficits and compromising our prosperity. The only blame we can put on this administration is its reluctance to fix this problem.

Obama's 100 Days: A Blueprint for Success

The rating of a US president’s first 100 days in office has become a must see media show in the coliseum of modern journalism. President Obama was no exception. A recent Pew poll showed Obama’s approval ratings for the first 100 days in office higher than Reagan’s. Unlike Reagan, who did not face the biggest recession since the Great Depression, Mr. Obama encounters unprecedented challenges in both the domestic and international fronts with a scattered but determined opposition, which seems to be slowly regrouping.

With a renewed and [innovative] sense of urgency, the White House has strived in the first 100 days to make government more accountable and transparent. The impetus of Mr. Obama’s message, amplified by his weekly radio addresses, frequent press conferences including a live network show appearance gained traction in the public’s perception. There was consensus among Obama’s supporters that the administration tried, and modestly accomplished, to steer away from business as usual, at least in the exceptionally high strung corridors of government. But if success is measured by perception, intent becomes the distinctive mark by which an administration is successfully appraised. President Obama’s first 100 days in office have been characterized by a new tone, a synchronized dance, a national dialogue much too different from the previous administration, whose pigeonhole approach to domestic issues contributed to their demise.

However, many suggest that the “house upon a rock” that Obama’s White House is trying to edify is too much too soon for the immense challenges we confront. Mr. Obama faces many obstacles on his uphill battle to fix Washington and America’s image in the world, and some of these sand blocks are within his own party, whose loyalties lie more with electoral demographics than with the President’s vision.

In the international arena, Mr. Obama’s new foundation found some adherence. In his trips abroad he provided an opening for dialogue between US and Iran and other regimes, including Cuba. His decision to close Guantanamo, release torture memos, put demands on Israel, set a date for pulling troops from Iraq, send more troops to Afghanistan and kill three Somali pirates are clear measures that change is taking place, albeit slowly and cautiously.

In the domestic front, things were slightly skewed for this administration. The passing of the stimulus bill, which set the tone for his economic agenda, was met with ebullient criticism. Reactions to the banking and the auto-industry bailouts were not unreasonable and the administration’s failure to cap Wall Street bonuses diminished their leverage among the American people to deal with the overall recession.

But Mr. Obama’s first 100 days showdown is over, and the real work of government has just begun. Finding common ground for all his measures will be hard, and even though change is part of our everyday parlance, the ‘house upon a rock” vision needs walls and a roof.

Winning means losing some

A win for credit card consumers, but a devastating loss for gun control and wildlife supporters.

When the win is a devastating loss, the only option is to keep your head high and your hopes higher.

US consumers obtained a sweeping victory yesterday after the Senate passed the first credit card reform bill in decades to stop interest rate spikes and penalty fees, which hurt consumers.

The new credit card rules give consumers more transparent information to manage their debt. The bill represents the first regulatory steps the Obama Administration is taking to reform the financial system.

But this bill does not come without a price. The hidden agenda is the amendment to allow loaded and concealed weapons in national parks and wildlife refuge centers. Confused? Me too.

The amendment was added as a last action measure by Sen. Tom Coburn (R-OK) despite every legislative trick in the book by Democrats to prevent a vote on gun rights. Champions of the gun proposal relish this victory on the fact that recent Democratic ranks include senators and House members who represent Western states and more rural areas where gun ownership is popular and almost sacrosanct.

But the clear outmaneuver here is that Republicans are beginning to regroup and even if the Obama White House is lukewarm about gun control issues, the majority of Democrats see this as a devastating loss for environmental activists and wildlife supporters.

When this bill comes to effect in 2010, states will be the ones to legislate on gun control and safety, and this would clear the way for Congress to reinstate the Bush policy, which will further strip off federal responsibility to protect wildlife.

The bigger question to consider here is not whether the constitutional right to bear arms is upheld by the Federal government, but whether carrying a concealed, loaded firearm really protects lives. The reality is that this bill offers sanctuary for criminals to commit their crimes and endangers wildlife even further.

Gun control and conservation groups have urged lawmakers to insist on a credit card bill without such politically charged proposals attached to it, as in the case of a bill that grants DC full voting representation in the House, but which Republicans have attached gun rights initiatives.

This is a dirty game, attaching unrelated legislative proposals to bills, which Republicans are good at playing. Government seems to move one step forward and two steps backwards.

Waking up to Electoral Reality

Republicans are beginning to look dazed and confused. Without a leader in sight or a relevant slogan, they are still making banter and noise, desperately flocking TEA parties and resurrecting radio hosts. After many closed door sessions, they still have not produced a single counter-reformative measure that can effectively compete with Obama’s much criticized stimulus bill.

Just this week, a new Pew poll shows Obama’s approval ratings for the first 100 days in office higher than Reagan’s numbers. Unlike Reagan who did not face the biggest economic slowdown since the Great Depression, Obama’s challenge, unprecedented in all categories, seems to have propelled the opposition’s cacophony to new levels.

What Obama has to realize is that oppositions are part of the dynamics of a democracy, and that instead of creating a playing field for them, he has to govern by the ideals he was elected on. In every democratic government, oppositions get by relatively well, as long as they are productive and coherent, which has not been the case for Republicans. Image rehabilitation is only part of the medicine needed for a healthy recovery. This was the case for the Democrats in the eight years of the Bush Administration.

Finally this election was a referendum at all levels. Mr. Obama should not expect any complacency or candor from the opposition. If this is a showdown between the status quo and fulfilling the platform he was elected on, it should sink in that 58% of the electorate is banking on status quo reversal.

The Pope's Answer to AIDS: A Sermon

So the Pope makes another incongruous statement, this time about how condoms are not the answer for the prevention of AIDS in Africa, and I thought we were well into the 21st century! The moral stance on the use of condoms in church doctrine is easily becoming the last straw for many Catholics, including those who might not have been initially swayed by the whole pedophilic scandals at the beginning of the decade.

I don’t see any other religious leader out there making the same outrageous statements. I bet, if you were to look inside this pope’s private trunk you would find several items of dubious character: a flagellation whip, the Harry Potter invisible cloak, the last surviving copy of The Last Inquisitor, and the manuscript autobiography of Adolf Hitler, which nobody knows exists.

To think that Africa’s AIDS pandemic can be reduced to a version of a Sunday sermon and serve as a tool to advance erroneous church doctrine is completely out touch, out of context, and out of this world. Does he have the guts to tell Africans that mosquito nets are not the answer to malaria deaths, and that digging holes to bury themselves is a better solution? I guess his PR department is AIG insured, and in that case, the bonuses are due anyway.

Desperate times call for drastic measures

Well, here we are again. I guess it must be foolishness, because shrewdness it is not. The Administration’s saga on economic recovery earnestness continues to show a lack of traction under the current regulatory parameters of the financial system. Last night’s 60 Minutes interview with Ben Bernake, the Fed Chairman, raises the stakes even higher and confirms our worst fears: Without a carefully constructed banking bailout, the success of the recovery and stimulus bill Congress just passed is zero to none.

This comes amidst the latest financial scandal from the corridors of Wall Street. Insurance giant AIG, which has received the largest government bailout in US history, has announced it will pay $165 million in bonuses from taxpayer bailout money as part of a total payout reportedly valued at $400 million. Needless to say, AIG’s last quarter earnings showed the biggest loss in US corporate history, which of course set the stock market on a downward spin for the first week of March. Adding to the fire, is that public trust in bailouts is beginning to erode, because there is nothing more damaging and harder to restore in an economic crisis, than public perception and trust, and this is turning to be Mr. Obama’s biggest and most lucrative headache.

Taxpayers are beginning to feel that the government is helpless in finding a way out of this capitalist jungle. But holding companies accountable is not flying with Wall Street, even as many of them keep accepting bailout money. Treasury Secretary Geithner seems to have underestimated the Amazonian arrogance of corporate America, as he could not find a way for AIG to reconsider the bonus payouts. The outrage has been coming from all fronts. New York Attorney General Andrew Cuomo has requested AIG to release the names and positions of the recipients of bonuses or face being subpoenaed.

Mr. Obama has to find a way to stop the foolishness and put his government into the driver’s seat. The bonuses represent a tiny symptomatic gesture of the total conceptual failure of his government to hand out money with no structurally sound accountability system in place. By this I mean, attaching legislation to bailout funds that would modify employees’ contracts to reflect the reality on the ground: That bonuses are to be paid if and only a company earns profit. Why is this Administration so scared of bending its muscles with Wall Street when they got us into this mess in the first place? AIG’s decision to pay bonuses will be the measuring stick of this Administration’s failure to act swiftly and boldly in correcting the capitalist renegades that refuse to play by the rules.

In the end, Mr. Obama should feel like he did everything he could to avert a second depression. He should start firing people in Wall Street; he should pass legislation that would put caps on financial instruments like CDS’s (credit default swaps), which are becoming the lethal protagonists of the current credit crisis in this saga of sagas; and finally he should start announcing plans for a banking rescue that would tie all the loose ends Wall Street giants are undoing with massive payouts and corporate gimmicks.

The Case for Nationalization

This has been a very difficult week for the Obama administration. The Geithner/Summers’ economic plan, mid-way from being implemented, has come under a half-sensical attack. On one side, Republicans have unitedly opposed it as a crazy spending spree with a socialist agenda, while a vast majority of economists, many now working for Team Obama, still think it is not enough to stimulate and grow the economy. Aside from a lack of bipartisan support in Washington, many economists and analysts now believe that the real cancer of this recession lies in the banking system, and if left to its own devices, it will burn through the recovery money like gambling junkies in a casino.

Take for instance the largest banks in the US: Wells Fargo, J. P. Morgan Chase, Citibank, Bank of America and HSBC. Economists and anyone out there in their right mind know that at this point, even if questions of fairness are raised at the notion that we are feeding the capitalist canker we are trying to eradicate, the government cannot allow these giants to fail. Why? Because the cost would be unthinkable and more damaging to consumers, investors, taxpayers and ultimately the American economy. So what is Obama to do? He should carefully consider plans to temporarily nationalize the banks, by breaking them into manageable sizes. By buying their toxic assets and controlling the freefall of their stocks and the increase in net-loss derivatives he can more easily restore lending. Capping CEO pay and re-establishing some regulations is a good start, but it is not enough to restore consumer confidence.

Last year, when the Bush administration bailed out the banks the first time, the purpose of the bailout was to free up credit and allow for banks to beef up their vaults. However, instead of taking the money to address their liquidity problems, they went out on a shopping spree. Wells Fargo acquired Wachovia, J.P. Morgan bought Washington Mutual and Bank of America seized Merrill Lynch. Is there something wrong with this picture? Absolutely. These bailouts left out the government’s conditions and specifications to interpretation. This time, the Obama administration has to be stricter. How about creating a banking czar? Republicans will never agree to this, even if they cannot put together one sound economic policy and present it to the American people. But the alternative is bleaker: throwing money at the banking industry without some strings attached can make Obama seem like an appeaser, not a reformer.

Even if the American people are willing to turn a cold shoulder to Republican criticism because of their lack of better and interesting ideas, time is of the essence if the Administration is to push for a bigger, bolder and desperately needed banking rescue. Unemployment is at a 25-year high, consumer spending has been at a record low, foreign investment has dried up, and confidence is running out in the financial markets. The American people should understand that the only way to erase these assets from the balance sheets is by buying up shares. At the end, the public should realize that they are the only ones that stand to gain.

The Opposition’s Tug of Rhetoric

Yesterday’s speech by President Obama, addressed to a joint session of Congress and clearly directed at the American people, was a sour reminder of the uphill battle our nation faces toward recovery and reform. Guilty of caution to an extreme, the President managed to sound hopeful to an increasingly politically incredulous crowd. But this is insular Washington, so in my book, he gets points just by standing up there and making his case for a better future.

However clear and optimistic Obama’s message might be, there is plenty of crumbling speed ahead of us. The economy is a disaster. Unemployment will keep rising to unprecedented levels as long as credit remains frozen in the rusty pipes of the financial sector. As much as half of this downward spiral is based on fear, and as long as the American people keep stumbling upon the opposition’s misplaced criticism of the Administration’s economic reforms, the long road to recovery will seem insurmountable.

The latent defeatism of the GOP has plunged to a new low and Governor Jindal (R-LA) has emerged as their spokesperson. It is without much contemplation that the members of his party are rallying against the recovery bill’s chance to jumpstart the economy. Their fodder? That government has no place in nation-building and recovery. Of course, there is substantial evidence against this rhetoric, but in the face of political annihilation much of this verbosity has translated into little persuasiveness precisely because the GOP, the party of fiscal responsibility, has contributed to the rampant deficit and the economic tsunami we have inherited.

What should be obvious in their impertinent argument is that when government is faced with a crisis such as this one, not doing enough can be costly. We see the consequences around the world. Economic crises can weaken the middle class, obstruct development and bring chaos. The world’s biggest middle class is now in trouble and much is at stake if government does not step in. This of course, is what Jindal’s party fundamentally opposes, and their solution is more of the same: taxcuts and a hands-off approach to basic universal problems like healthcare, energy independence and education reform. Fortunately, this crisis presents an opportunity for Obama’s government to try to fix some of the fundamental problems that got us here in the first place.

When 9/11 happened and Pres. Bush rallied us against his cause for war, much of the nation gave him the benefit of the doubt. It was not until six months later that we, the American public, realized we had evidently lost control and had stepped into the biggest foreign policy fiasco this nation has ever been confronted with still no end in sight. The least this Administration deserves is a fair attempt at improving the economy with a full front-attack. And let it be clear to Jindal and his party that after two wars, Katrina, the biggest deficit in US history and six straight unbalanced budgets, they have no moral grounds to lecture the Administration on how to go about fixing the problem.

Recovery Should Be Obama’s Bait

No doubt President Obama’s first days in office have been stressful. From faulty nominations to uncooperative deals, some say it's politics as usual. The media is busy dissecting all of this, highlighting, with some merit, his inexperience in back-channel negotiation tactics. But the truth is more profound. The economy and our livelihoods are in crisis and I think it’s time for Obama to put aside his gaily efforts to be bipartisan and focus on selling his recovery bill to the American people, which finally he will do this week, with or without the Republicans on board. Ultimately we, the taxpayers, will decide in favor of it.

Republicans have been doing a great job of making this American Recovery and Reinvestment Act (stimulus bill) sound like a wasteful spending spree. For Republicans, tax cuts should be the number one ingredient in the pot. Really? And what would John Doe do with a $1,200 tax cut? Go to Disneyland? Buy a flat screen TV set? If the average John Doe is like most of us, scared and reticent, he will cautiously put that money away or use it to pay up debt. This reasoning is what Republicans don’t understand. They want to jolt the economy back to life, to the unprecedented levels of profits and growth of the past 25 years so that corporate America can go back to their old ways of doing business.

Fortunately, Obama and his team can see through the smokescreen even if some of the details don’t yet add up. He has been saying it during the campaign. America needs to fundamentally change gears when it comes to spending, profiteering, and saving if we are to learn from the deepening mess we find ourselves in. He understands exactly how we got here: on credit and by lascivious risk-taking. Wall Street got greedier and rejected conservative and sound investment policies. Their complex schemes got the better of them and they developed glaucoma in their investment decisions. When the pressure set in and the losses started to compound, whose door did they knock on? You know the answer.

I understand the argument of some, that if we grow the size of government, things will get out of hand. It is true, overseeing the debt and spending of government takes a lot of work. It requires agencies working together in efficient, transparent and harmonious ways. However, if we are to avoid the past failed attempts at recession rescue plans, like Japan’s, we need a more comprehensive approach to spending. And this bill is offering exactly that. There is plenty of smart spending, which builds upon the realization that job recreation and long-term growth can come from government taking the initiative. How? By spending on infrastructure, education, research, science and technology, energy production, reforming our tax code, our trade agreements, specially investment regulations so that corporate and government financial transactions appear, at least, transparent.

If we fail to act now in defense of our expensive healthcare system, our crippled infrastructure, our burdened education system, our costly energy system and our unregulated financial system, it will be too late and expensive in the future, and we will have no incentives. For example, our green revolution is waiting to take off, if government is willing to be the co-pilot. This recession will be not be a short one, its lingering effects will continue to sip in even as recovery efforts make their presence in urban, rural, and suburban areas across America. There is no doubt in my mind that this is the greatest human challenge Americans face, one which will claim more victims than 9/11, the Iraq and Afghanistan wars, and Hurricane Katrina combined.