Another One Bites the Dust

I thought it would never happen. Today, however, Attorney General Alberto R. Gonzales announced his resignation effective September 17. I would have assumed this was just another rat leaving the sinking ship that is the Bush administration, but for one curious note in the NY Times report this morning:

As late as Sunday afternoon, Mr. Gonzales himself was denying through his spokesman that he was quitting. The spokesman, Brian Rohrekasse, said Sunday that he telephoned the attorney general about the reports of his imminent resignation, "and he said it wasn’t true — so I don’t know what more I can say."

It could well be that Gonzales' spokesman was just lying--we have come to expect such antics in this administration, which has shown time and time again that they only care about putting out the right "message," not telling the truth. On the other hand, it could be that Gonzales lied to his spokesman, revealing just how shut out are those outside this administration's inner circle. Or perhaps Gonzales himself did not know the truth until last night, which would imply the move was Bush's decision, not Gonzales'--perhaps, with the departure of Karl Rove, Bush's remaining team felt less loyalty to Gonzales and no longer wanted the liability.

At any rate, it is a pleasure to see Alberto "Torture Memo" Gonzales head off to the ash-heap of history.

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This is awesome

This has to be the only object in existence to contain the signatures of Nancy Pelosi, Tony Snow and Bill O'Reilly. It might be worth a bid if you have oodles of money. Find the auction here.

Go Stephen!

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Good news

No doubt most of you (here in California anyway) have heard of this awful scheme, drafted by a Republican lawyer, to split California's electoral votes by district. This is going to be on the ballot next summer (if I recall correctly) and it's a terrible idea that will make it impossible for a Democrat to be elected president in 2008.

Well, just recently, our governor gave the idea a bit of a cold shoulder. Let's hope he stays that way. In the meantime, spread the word about how awful an idea this is.

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Bush Implies We Never Should Have Left Vietnam

Leave to Pea-Brain Bush to learn exactly the wrong about Vietnam in relation to Iraq. Bush today compared Iraq to Vietnam (see CNN.COM story here). I doubt there any people left who would think for a second, "Oh thank goodness! Bush finally gets it!" Just in case there are, guess what, he doesn't.

Did Bush see the similarities between the manufactured Golf of Tonkin Incident and Colin Powell's trip to the UN with the mysterious little test tube of white powder? Nope.

Bush thinks that the lesson to learn from Vietnam is that we pulled out too soon!! He argues that our pull out from Vietnam had a price that was paid by millions of innocent South East Asians. Sure that version of events may play well in certain neighborhoods in Southern California (Vietnamese exiles) or South Florida (Cuban exiles) but it's pure idiocy.

As long as the US was involved in Vietnam civilian casualties were through the roof. Millions of Vietnamese in both the North and South died or disappeared during our involvement in that war. Only in Cambodia did the death toll spike after we left because of Pol Pot's killing fields. Of course, we supported Pol Pot during that period because he was fighting the Vietnamese communists so...

If we had pulled out in 1969, SE Asia would have had major problems. If we had pulled out in 1980 SE Asia would have had major problems. As it was, we pulled out in 1975. And when we did, South Vietnam, Cambodia and Laos quickly fell to the communists in those countries. But it is likely that the same would have happened in 1969 or 1980. The are only two real differences that I can imagine resulting from a different pull out time.

One is how many Americans would have died. The second, is how long the region would have had to recover since our pull out. As it is, Vietnam is rapidly reforming, increasing its trade with the outside and becoming a China-like Communist regime in name only. Cambodia is beginning to put the Killing Fields tragedy behind them. These changes took time to happen and could only begin to happen once we pulled out.

By making this statement, Bush has shown (yet again) what an amazingly third rate intellect he really is.

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A different kind of CFC problem

Stock in Countrywide Financial Corporation has lost half its value since January, and the they have now drawn down an $11.5 billion line of credit to shore up liquidity problems. Moody's Investors Service has reduced Countrywide's credit rating to what the Wall Street Journal describes as, "the lowest investment-grade level, Baa3." A Merrill Lynch analyst openly speculated today on the possibility that Countrywide might go bankrupt. Presumably that event is still considered quite unlikely... but what would it mean for those of us who have mortgages through Countrywide?

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The Mosque at Samarra, The Surge, and the Yazidi Massacre

On February 22, 2006 Sunni insurgents blew up the Great Mosque at Samarra, Iraq. This bombing and the violent response by Shiite militias is widely seen as moment when Iraq officially descended into full blown civil war.

The violence that has continued to rise with this civil war was supposedly the reason for the "surge" strategy. A major part of that strategy was concentrating US troops on the areas around Baghdad and gradually expanding a zone in which something like a secure environment could be established. Another part of the strategy was cracking down on the Shiite militias and reaching out to Sunni Arab tribal leaders in an effort to marginalize Al Qaeda units that operated in Iraq since the 2003 invasion. Sounds reasonable but the fear was that this would merely shift the violence to other areas. Well guess what...

Last week, Sunni insurgents massacred hundreds of a Kurdish speaking religious minority called Yazidis who live in villages near Mosul. Iraqi Kurdistan had been fairly quiet. The massacre may be intended to bring the Kurds fully into the civil war and further force Iraq into unmanageable chaos. The Kurds' leaders seem on the verge of obliging them. I've heard radio reports about this where Kurdish leaders vow to send the Peshmerga (Kurdish militias) into the suspected home villages of the massacre's perpetrators.

The parallels between the Yazidi massacres and the Samarra Mosque are striking. Al Qaeda is on the verge of being marginalized in the Sunni areas. So they provoke a war between the Sunni Arabs and the Kurds.

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A Very Tough Ride

We are in for a tough ride. Take a look at the latest Ivy Zellman Report. It shows when all the ARMS are going to be resetting. It is an ugly graphic. So here is my question: What will that do to all of us and our 401Ks? I am not even looking at what has happened to mine these past weeks.

I am not an expert on the inner machinations of the Federal Reserve. But I am going to try and explain this in very clear terms. US sub-prime loans were packaged into investment tools such as bonds and hedge funds. These were then sold to investors. The bet was that the original borrowers (i.e. new home owners) would pay back their loans and investors would get the interest or the profit from having sold their share of the investment. When an investor (be it an individual or an institution) cashes out of such an investment, the bank goes into its safe (currency reserves) and gets the cash and gives it to the investor. All banks are required to keep a certain level of cash reserves on hand for just such events. However, when too many people or institutions want cash at the same time, the bank’s reserves run low and the bank has to borrow cash from another bank. When a bank borrows, it has to pay interest to the lending bank, just like anyone else. The FED likes to keep this overnight lending rate at 5.25%.

So with that info allow me to move forward. Investors around the world invested in U.S. mortgage backed securities, those sub-prime loans I mentioned above. One investor was Paribas. Paribas then sold those securities to its clients. However, last week, many of its clients wanted to cash out. Paribas risked running out of cash. So it suspended trading in the three funds that were exposed to the U.S. sub-prime market. This means that they halted redemptions. No more cashing in on investments that were tied to mortgage backed investments. This caused a panic as it was a public acknowledgement that the bank 1) couldn’t re-sell these investments to raise the cash to pay off investors and 2) that the bank had so many investors who wanted out of these securities (referred to as “distress selling”) that it didn’t have enough reserve to pay them off. Paribas needed more dollars. 3) the crash of the Sub-prime lending market in the U.S. is going global. This is very, very bad. Can you say “WORLD RECESSION”. For a good article on what this is doing to the global economy, see From The Australian .

In the sort term, this Paribas crisis, like the Bear Sterns crisis before it, drove the over-night lending rate for dollars up above the FEDs 5.25%. This threatened the trust that people have in the investment system. The level of trading is being driven by fear more than by calculated thinking. So, to make sure that there wasn’t a run on Paribas and to keep the overnight lending rate close to the5.25% target, the European Central Bank injected $154 billion into the market and the FED injected as additional $74 billion. The Bank of Japan and Reserve Bank of Australia also participated. They basically bought these crappy sub-prime securities from the bank with dollars.

What the ECB and the FED did as arrange a "Repo" or repurchase agreement. In short, the FED purchased $74 bil. in these mortgage backed securities from the Europeans with the understanding that once the European market stabilized, the Europeans would buy them back.

So logic will tell you that the value of the dollar against the EURO must have been affected. And you would be correct. Take a look below.

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The Mother of All October Surprises?

Wow. NY Times reports the Bush Administration is preparing to declare the Iranian Revolutionary Guard a terrorist organization. The Bush Administration continues to lay the groundwork for the use of force against Iran. Will they really to do it? I am starting to believe it now. Could plans for a military strike against Iran be Karl Rove's parting pièce de résistance for the 2008 Republican campaign?

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Violence In Iraq

Since we are into tables (I love tables and charts! They are the best part of data analysis!), I wanted to add a few here. In my previous comments I mentioned the number of Insurgent attacks. So I started thinking about trend lines for attacks in relation to lines for casualities. These numbers come from various indicies published by the Brookings Institution and from The U.S. Defense Department. So my numbers may be a bit different from those presented by Dr. S. It is really hard to get solid numbers as war is chaos. So counting the costs is something of an imprecise science. But I think these are accurate enough to get the idea.



I was surprised to see that the number of attacks as remained fairly stable even in the number of U.S. military casualities has been jagged.

I also wanted to add something here about Iraqi Civilians. They tend to be forgotten in these disucssions. But they are paying dearly in blood for this war.

* numbers before Jan 06 exclude Murders. Numbers from Jan 06 forward include all violent causes. The justification provided by Bookings is that at this point, there is little or no difference between murder and death caused by the war itself. That is telling.

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Casualty Rates in OIF

I located some solid data on troop strength from globalsecurity.org, which is usually a reliable source. What strikes me is that the U.S. force level in Iraq appears to have remained fairly stable: in terms of raw numbers, the "surge" is not particularly significant.


Not surprisingly then, when one normalizes the data by force level to look at the casualty rates (percentage of deployed troops killed or wounded), the graph looks almost the same.

[Data from http://icasualties.org/oif/ and http://www.globalsecurity.org/index.html]
Click to enlarge images

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He's Roving Again

OK, who wants to bet that Rove resigned from his post as White House Chief Advisor in order to begin his dirty tricks campaign against Clinton, Obama, and Edwards and to promote Romney? Now that the Iowa Straw Poll is over, and Thompson is withdrawling, the Republicans have to start focusing on a viable candidate. That is where Rove will concentrate his efforts. On the side, he will deal with Congress.

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Another Grim Update

This is an update to two earlier posts (Dec 2005 and Nov. 2006) concerning the mounting casualties in Iraq. While the Bush Administration attributes the rising casualties to the troop "surge," it is worth observing that it also continues a trend reported on this blog for a couple of years.

Data courtesy of icasualties.org
[Click to Enlarge Image]

Total U.S. soldiers killed: 36,83
Total U.S. soldiers wounded: 27,186

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Bob Allen

So in case you missed it, the Daily Show had an excellent report about the misadventures of Florida State Senator Bob Allen. You know ... the guy who offered an undercover police officer $20 so he could perform oral sex on the officer ... and then (if that wasn't bad enough) blamed the situation on being afraid of black guys.

Crooks and Liars has the video of the Daily Show's rundown. Don't miss John Oliver's alternate alibis. Beautiful.

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Vote Swapping Vindicated. mostly.

Remember the vote trading sites that sprang up during the 2000 election? They tried to pair up Nader supporters in swing states with Gore supporters in solidly Democratic states, and have them pledge to swap or exchange votes--thereby helping guarantee the 5% that Nader was seeking without damaging Gore's chances of winning. A few hundred of these in Florida might have tipped the race, but that did not occur.

Well, a court case wending its way through the judicial system finally reached partial resolution yesterday. The U.S. Ninth Circuit Court of Appeals ruled that the 2000 vote swapping sites were not "vote-buying" and were protected by the First Amendment... at least to the extent that California Secretary of State Bill Jones' threatened lawsuits (which shut down at least one site) were not sufficiently tailored to achieve the state's legitimate purposes (preventing vote buying).

Because such vote swaps were unverifiable and unenforceable, the idea is nifty but will never go anywhere. Only relatives and close friends who trust each other can likely make such things work, and that necessarily means a small scale. Still, the existence of these sites illustrates how voters in states with solid majorities that tilt toward one party or the other feel disenfranchised, no matter which side they are on.

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Et tu, Iowa?

So South Carolina has just voted to bump its Republican primary to January 19th from Jan 29th. The local Democrats are expected to follow suit. New Hampshire is scheduled for Jan 22. Since NH state law requires it to be first in the nation, it will move its date earlier. Other states are expected to follow. If NH moves before Iowa (now scheduled for 1/14), Iowa will feel obliged to move. And Nevada, which was to fall between Iowa and NH, will also move. Feb 5th is now so popular that 20 states have their votes that day - including big states like CA and NY. The parties have tried to forbid earlier primaries by claiming they won't seat delegates, but nobody takes that threat seriously. Besides which, the main benefit of the early votes was always the public perception of being a winner, not the delegates.

The danger is rising that primaries may spill into late 2007. It's an idiotic game of chicken. Everyone knows what is causing it: Iowa and NH want to keep their privileged first-in-the-nation position, and other states want to to intrude upon it. This is a classic case of American politics gone stupid, where everyone sees the problem and nobody dares to try to fix it. It's related to the gridlock phenomenon that others have talked about.

So, what is the solution?
Possibilities:
1. Federal law barring any presidential primary election before March 1st. There might be constitutional issues with that, but I think it could be made to pass muster.
2. Create rotating regional primaries of some kind.
3. My suggestion: 2 years before each presidential election date, pick dates and order of primaries and caucuses by random draw.

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Is Gridlock a Problem for Democracy?

To address this question we have a rough idea of what we mean when we say "democracy." Many people think that democracy is "rule of the majority." But many governments enact policies with broad even majority support without anything resembling what we would recognize as a democracy. Consider as examples the populists dictatorships of Juan Peron in Argentina or Kemal Ataturk in Turkey. Even brutal dictators often may have majority support particularly during war time. Of course it is difficult to poll such dictatorships so these are just guesses on my part but I think they are reasonable guesses, at least for purposes of making the point on a blog.

If simply enacting the policies that a majority would support isn't sufficient for democracy, what things are common to all democracies that we can use to define them? Minority protection is actually the foundation of democracies. That is, people with minority opinions/preferences are protected from what the US Founding Fathers called the "tyranny of the majority." Minority protection features are found in nearly every democracy. The UK may be an exception but in practice minority views are reasonably protected most of the time.

By far the most common way to protect minority views is to establish legislative institutions that require super-majorities to pass laws. This can take the form of bicameralsim legislatures in which power is more or less balanced between the chambers as in the US, Germany or Australia. It can also take the form of establishing electoral systems that encourage the proliferation of parties as in such multi-party parliamentary systems as Belgium, Denmark, Israel or Italy. You can even see both as in Germany.

The reason bicameralism protects minority views is that it tends to be based on different electoral systems, election timing and or districts/constituencies. The result is that it is more difficult for a single party representing a narrow constituency to gain control of both chambers at the same time. It forces compromise.

The reason that adding more parties to the system protects minority views is that it makes it unlikely that a single party would win enough votes to win a majority of the seats on its own. It prevents one party from having all the power. It forces compromise.

Forcing compromise in legislative often means that some laws fail to be passed because a compromise cannot be made. Failure to make a compromise is not necessarily a failure of character. It is more likely a reflection of legitimate differences in the policy preferences of constituencies who agreement is required to pass a new law.

And that is gridlock. Is it bad for democracy? No. Indeed, it is a very common consequence of one of the fundamental concepts of democracy itself: minority protection.

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Why Adding a Party Will Not Reduce Gridlock

There are many people out there who blame gridlock on the two party system. "If only there were a viable third party," they cry, "then we could get Congress to do what really needs to be done."

But will adding another party change things? Suppose we add a third party to the left of the Democrats (the Green option). Suppose further that it is wildly successful and manages to get a a quarter of the seats in the House at the expense of the Democrats. The Republicans have roughly half of the seats and the Greens and the Democrats together have roughly half the seats. Suppose that in the Senate the Greens manage to get a few seats, again at the expense of Democrats, but the Republicans retain roughly half. In this scenario, all that has been done is that the left of both houses of Congress has been divided, forcing a compromise between the Greens and Democrats prior to any attempt to get bills passed. In short, this has added yet another bargaining step to the legislative process. This will make changes smaller, less frequent and slower to enact.

Suppose we add a party in the middle (the Ross Perot/Jesse Ventura option). In this situation, the party in the middle might become a kind of legislative king maker. However, it would require that either the Democrats or Republicans would have to make a deal with the middle party to get things passed.

Both of these scenarios leave out the President who has a veto. Adding a third party to Presidential competition is extremely unlikely so long as we continue to have a single individual serve as president (I can elaborate upon request). Suppose the Democrats and Greens (or Middle party) strike a deal and pass a new law. The Republican President vetos the bill and the Republicans in Congress are still strong enough to preserve the veto.

What really brings on our gridlock is not the number of parties (actually two parties is about as good an environment as you can hope for if you want to minimize gridlock and still preserve democracy). Rather our multi-stage legislative procedure is the root of gridlock. For a bill to become a law, it must gain at least a majority in the House and Senate (often a 3/5 majority in the Senate if one party is willing to filibuster) pluss the consent of the President. That is effectively a tri-cameral legislative process. The only times this is circumvented and gridlock goes away is in the unlikely event of a single, unified party gaining control of all three.

Adding more parties will not change this. It could make it worse.

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Median Voter Theory

The following graphs (which required a fair bit of work) display the percentage of the U.S. House and U.S. Senate held by the majority party in the past 110 Congressional sessions. (Figures reflect biennial election results only, not subsequent deaths or defections.) You can click on the graphs to enlarge them.



Let me draw your attention to a pattern: the House and Senate have gradually become more evenly divided over time. This suggests to me that the Democratic and Republican parties have become quite good at competing with each other. We have entered an era where razor-thin majorities become the norm.

Although the Democratic and Republican party platforms have much in common, especially when compared to divisions among European parties, there are still significant differences between them. They have not fully converged to the views of the median voter, but appear instead to have converged to a state of constant polarization; other forces are still at work keeping the parties some distance apart.

Given the supermajority rules of the Senate, has the efficiency of the major party duopoly condemned us to an era of partisan gridlock? Is this a flaw in Madisonian Democracy?

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2008 Scenarios

Possibility of a Tie in the Electoral College:
All results same as 2004 except:
1. Dems win IA, NM, and NV
2. Dems win IA and AZ
3. Dems win Ohio but lose DE or NH
4. Dems win Ohio and IA but lose WI
5. Dems win FL but lose WI
(note: currently, Dems win a tie b/c Dems control 26 state delegations, GOP control 21, and 5 are tied)

Dems win election:
All results same as 2004 except:
1. Dems win CO, NM, and NV
2. Dems win MO and IA
3. Dems win VA and either NM, NV, or CO
4. Dems win Ohio
5. Dems win FL

Dems lose election:
All results same as 2004 except:
1. Dems in CO and IA

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Six Percent

On July 19, the Dow Jones Industrial Average crossed 14000 for the first time--but now it has now fallen 800 points. The S&P 500 also reached a record high on July 19 at 1553--but has now plummeted 100 points. The Nasdaq Composite index also peaked on July 19 at 2,718--but has now fallen 170 points. In other words, all three major U.S. stock indices peaked simultaneously and have now fallen 6% or more in just eight trading days.

Worldwide we see the same thing. The Australian Stock Exchange index (S&P/ASX 200) suffered same percentage fall from its high on July 24, including a 3.3% plunge yesterday unequaled since Sept 17, 2001. The FTSE 100 in London was trading at or near record highs throughout most of July, but since July 20th it has also fallen over 6%. Similarly, the Nikkei 225 fell the same percentage over the same period.

I am no expert, so perhaps this means nothing, but I am concerned that this might be the leading edge of a worldwide slump. If so, I wonder what effect that might have on the U.S. Presidential primaries next year. Traditionally, a faltering economy is good for the opposition... could the Democrats take the White House but lose Congress?

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