Speak no evil

Both Paul Krugman in today's New York Times and Clive Crook in this morning's Financial Times note the eerie silence coming out of the presidential campaigns on the current American economic crisis.

Krugman makes a compelling case that a President McCain would exacerbate the growing problems on Wall Street, surrounded as he is by economic snake-oil salesmen.

But, Crook really gives it to the Democratic candidates who continue to campaign on trade, when Americans are being hit not by NAFTA, but by an unregulated financial sector.

The separation of presidential politics from the troubles assailing the US economy is now verging on the surreal. With banks collapsing, the dollar reeling, the Federal Reserve making up new rules as it goes and observers discussing a new Great Depression, the presidential candidates are still on scripts they wrote a year ago. The main problem is either the North American Free Trade Agreement (Barack Obama and Hillary Clinton) or high taxes and excessive regulation (John McCain). If delivery from this ordeal depended on any of the contenders saying something intelligent about it, prudence would require that the entire country be written down to a nominal sum.

What makes this even odder is that the Democrats, at least, continue to hammer away at economic anxiety. The squeeze on "middle-class families" gives them an edge against the Republicans in November, they calculate. But they were saying this last year, and the year before - when unemployment was not rising, the economy looked pretty healthy and most Americans still did not know the difference between an SIV and a CDO. The themes are trade and jobs, shuttered factories, stagnant incomes, unlevel playing fields and labour and environmental standards. As for the complete breakdown of the credit system and the danger of a years-long Japanese-style slump - oh, yes, there's that as well.

Part of this is surely due to the fact that noone's got anything intelligent to say on the matter, Democrat or Republican. After all, with an interest rate just above 2% and the Fed bailing out unregulated investment banks, clearly nobody has a good idea about what's going on or what to do about it.

It also speaks volumes to the stranglehold finance has on American politics. No presidential candidate can call for the type of banking regulation that seems necessary in the current financial climate (and, I might add, seemed obviously necessary to many of us in the lead up the crisis).

One need only look to the right of Clive Crook's column today to find a ready rejoinder to the argument for updating banking regulation. And one cannot blame Ms. Robinson of that eminent publication, The Banker for defending the rights of her patrons to unregulated financial industry, backed by the safety net of taxpayer bail outs. But for the rest of us, the case is clear.

No presidential campaign will touch the current economic crisis. It's toxic, and there are no obvious solutions. But that silence speaks more about the root of our economic distress than anything else.

Hillary Clinton Singlehandedly Takes Out Insurgency

I don't know if you heard, yet, about comedian "Sinbad" making fun of Hillary Clinton's macho posturing on Iraq,

In her Iowa stump speech, Clinton also said, "We used to say in the White House that if a place is too dangerous, too small or too poor, send the First Lady."

Say what? As Sinbad put it: "What kind of president would say, 'Hey, man, I can't go 'cause I might get shot so I'm going to send my wife...oh, and take a guitar player and a comedian with you.'"

Apparently, this rubbed Clinton the wrong way, and she's come out with a rejoinder.

She gave reporters more details of the trip. “Part of the reason we were in the C-17 is because part of it is armored,” Clinton said. “I was moved up into the cockpit. Everyone else was told to sit on their bullet proof vests. We came in in an evasive maneuver. Those of you who have been on a C-17 or C-130 know that one of their great characteristics is that they can take off very quickly and they can maneuver agilely to avoid incoming fire. There was no greeting ceremony and we were basically told to run to our cars. Now that is what happened.”

Clinton went on to describe having to take over the controls and crash land the plane amidst a barrage of incoming enemy fire. She then carried on her back comedian Sinbad, singer Sheryl Crow, and the wounded flight crew as she singlehandedly fought off hundreds of insurgents with only her Rambo Hillary knife and her lethal martial arts.

Florida Primary Do-Over - Illegal?

The Miami Herald suggests that a do-over for the Florida Democratic primary is all but dead in the water. Most interesting, though, was the notion that a mail-in ballot would actually be illegal in Florida.

Verifying the signatures and identities of people who vote by mail -- either through a conventional absentee ballot or in the Democrats' proposed statewide mailed election -- is considered a key bulwark against electoral fraud.

''There's no authority under Florida law that would allow county supervisors of election or the state to verify signatures in an election of a state party,'' said Sterling Ivey, a spokesman for Florida's secretary of state and Division of Elections.

...

"The Department of State cannot share those signatures -- they are not public record," Ivey said. "We cannot do anything, and even the local supervisors couldn't be able to verify anything unless there was a new statute."

At the same time, the estimated cost for such a venture has quadrupled, now at $12 million.

Mark Schmitt at The American Prospect suggests that the best case scenario for Clinton is actually for the situation to drag on without resolution.

Contrary to the gullible media's belief that "time" is a "powerful ally" on Clinton's side, in fact, Clinton's only ally is uncertainty. The minute it becomes clear what will happen with Michigan and Florida -- re-vote them, refuse to seat them, or split them 50-50 or with half-votes, as some have proposed -- is the minute that Clinton's last "path to the nomination" closes. The only way to keep spin alive is to keep uncertainty alive -- maybe there will be a revote, maybe they'll seat the illegal Michigan/Florida delegations, maybe, maybe, maybe. In the fog of uncertainty, Penn can claim that there is a path to the nomination, but under any possible actual resolution of the uncertainty, there is not.

In the meantime, Ramussen Reports released the results of a new Ohio poll that shows McCain besting either Democratic candidate.

The latest Rasmussen Reports telephone survey in Ohio shows John McCain leading both Hillary Clinton and Barack Obama by identical 46% to 40% margins. In the last poll conducted before the hard fought Democratic Primary, McCain had a statistically insignificant one-point lead over Obama and a three-point edge over Clinton.

The once were two cats of Kilkenny...

Democrats of Kilkenny

John McCain's campaing loves Hillary's red phone ad. On the train today I overheard the following conversation between two very normal looking men in their mid-sixties.

First Man: Well, that preacher said some pretty outrageous stuff.

Second Man: Yeah, but he's just an empty suit if you ask me.

First Man: Yeah, I know.

Second Man: And possibly a Muslim.

First Man: Sure looks like it.

And so the mud sticks.

Michael Hirsh at Newsweek thinks McCain might win, reminding us of the cats of Kilkenny

There once were two cats of Kilkenny,
Each thought there was one cat too many,
So they fought and they fit,
And they scratched and they bit,
Till, excepting their nails
And the tips of their tails,
Insteads of two cats, there weren't any.

Den of Thieves

What can I say? You build an organization of crooks and liars, don't be surprised when you catch someone with his hand in the till.

The National Republican Congressional Committee told federal authorities that it overstated the amount of cash it held at the end of 2006 by nearly $1 million. A year later, the committee's annual report to the Federal Election Commission — which again was handled by the ex-treasurer — overstated the actual funds on hand by $740,000.

Republican officials said the former employee, Chris Ward, apparently "made several hundred thousand dollars in unauthorized transfers of NRCC funds to outside committees whose bank accounts he had access to" over several years. Most, if not all, of the smaller accounts were associated with GOP candidates or groups.

Ward, 39, "also appears to have made subsequent transfers of several hundred thousand dollars in funds from those outside committees to what appear to be his personal and business bank accounts," the NRCC said in a statement, which accompanied a briefing to reporters.

It was well noted in my office today that $750,000 is enough money to go to prison for a long time, but it's not a lot of money to disappear on. Culture of corruption anyone?

Analysis of the Democratic Primary, via Bangladesh

From an op-ed in The Daily Star, an English language daily in Bangladesh.

People are beginning to wonder which side Hillary Clinton is on. Surrounded by American flags and generals, at a March 5 press conference in Washington, DC, Hillary Clinton declared that she and Senator McCain will bring a life time of "experience" to the presidency, whereas Barack Obama will bring "a speech" -- adding that she and McCain had "passed the commander-in-chief test … as for Senator Obama, you have to ask him!"

So, according to Hillary Clinton, Republican presidential nominee Senator John McCain is more qualified to be president than Democratic Senator Barack Obama. This is as close a candidate can come to committing treason against her own party! It is one thing to question the qualification of her Democratic opponent; but it is quite unprecedented to promote the candidacy of the other party's nominee.

Unless the Democratic party elders rein in the out of control Hillary Clinton campaign, she will not only wreck her own campaign, but her party's prospects as well. Hillary is validating what her critics have always accused her of: that Hillary is a polarising figure and that the Clintons care only about themselves, not about the party. Unless Hillary is the Democratic nominee, it is as though she does not care who wins the presidency.

What happens in college stays online

My wife emailed me an article from Sunday's Washington Post about When Mom or Dad Asks To Be a Facebook 'Friend'. She found it amusing as she had just sent a Facebook friend request to my mother.

This brought to mind a conversation during last week's Institute for Politics, Democracy and the Internet. The conversation, about the ubiquity of technology, touched on the availability of personal information online, especially through the growing use of social networking platforms, and how this availability changes the way we interact with each other.

While a lot of people still think that social networking sites are primarily populated by teens, demographic research shows that the users are actually fairly evenly spread among age brackets, with teens being an overall minority.



Corporate social networking has been around for years, with sites like Facebook reaching out to businesses, and sites like Linked In established primarily to serve corporate users.

As a result, we've seen a removal of what Jung referred to as masks, or the different personas that we take on when we interact with different social groups with whom we engage. For example, in the past, one might have a work mask, a family mask, a sports-buddy mask, and a host of other masks depending on one's different social circles.

Today, though, the masks are removed. Your employer can search for your name in an Internet search engine and look up your profile on social networking sites, learning much about your personal life. I know employers who, as a rule, search for applicants' social networking profiles prior to offering an interview, and attorneys who use social networking sites to research participants in legal cases.

All of this in mind, I couldn't help but chuckle at 19-year-old Mike Yeamans who was interviewed for the Washington Post article.

"Don't get me wrong," said Yeamans, who is a computer information systems major. "I love my parents, but there are some parts of my college experience that I want to keep to myself. I chose to go away to school so I could experience a little freedom."

Perhaps Yeamans should ask Justin Seay about keeping some parts of his college experience to himself.

The root of the looming economic crisis

When I was at university, a professor described the difference in American economic attitudes today and fifty years ago. His claim was that in the 1950s, the "great American dream" consisted of owning a home, a car, and raising a family. Today, in contrast, Americans are successful when they carry six-digit debts and own nothing.

You borrow hundreds of thousands of dollars to buy a home, which you never really own (the bank owns it); you borrow twenty-thousand dollars to buy a car, which you probably sell the moment you've paid off the debt. And you carry probably two or three credit cards with revolving debt. In fact, modern Americans would be be hard pressed to have a home, car, or university education without expansive debt.

Clive Crook writes in today's Financial Times that this culture of cheap debt expectations is the root of the looming economic crisis:

The US already has what must be the world's most generous fiscal dispensation for mortgage borrowers - uncapped tax relief for owner-occupiers, plus colossal "government sponsored entities" to guarantee loans, implicitly subsidise mortgage rates and promote securitisation. This fiscal regime created an environment in which you felt a fool unless you borrowed to the hilt - not just to buy your house but to keep your equity in it to a minimum, so as to liberate cash for other purposes. This is the very root of the problem.

This environment has put the US in a precarious position - how do you back away from the recent tradition of ensuring that everyone is able to own a home without the accompanying responsibility or risk? Lenders are willing to issue bloated loans on speculation because they are able to assume that, if things don't work out, the taxpayer will step in to save the system.

Our current system of highly-subsidised consumer credit is a system that is based in market principles (consumers can borrow, but are responsible for repayment), but undercuts the risk that assures the discipline necessary to prevent overextension (government will step in to save lenders - always, and consumers - often).

As the housing market corrects itself, Americans need to take an important lesson - economic security requires discipline and responsibility. Unfortunately, this is a lesson that cannot be learned without some suffering from the current crisis. Lenders, especially, need to know that with high-risk practices comes the potential for dramatic failure. But all of us need to understand that there's no such thing as a free lunch.

Economy worse than the Whitehouse admits

Economic indicators point to an American economy worse than the Whitehouse is admitting.

"This quarter will be our weakest quarter," [Edward Lazear, chairman of the White House Council of Economic Advisers] said. "There are indicators suggesting that growth will pick up and pick up quickly. So the question is how quickly will it pick up."

He highlighted what he said was the good news in Friday's jobs report: that the unemployment rate dipped, wages grew and weekly hours stayed the same. However, the jobless rate fell to 4.8 percent in February from 4.9 percent because so many people left the labor force, perhaps discouraged by the difficulty of finding work. And average hourly earnings for jobholders rose only an anemic 0.3 percent from the previous month.

"Obviously we were disappointed," Lazear said about the job losses.

Bush focused even more on optimism than his adviser. "Our economy will prosper," the president said.

But we're seeing more than "disappointing" jobs numbers.

In fact, job numbers have been consistently worse than initially reported.

Non-farm payrolls fell 63,000 in February, the most since March 2003, marking a second consecutive monthly decline. Economists had expected an unchanged reading.

Adding to the headache for investors, January’s loss of 17,000 jobs was revised lower to a decline of 22,000 while an initial estimate of a gain of 82,000 jobs in December was cut to 41,000.

The Whitehouse and its surrogates are pointing to the slight decrease in the unemployment rate as a silver lining, but even that is more likely a sign of a worsening economy. As Sudeep Reddy wrote in the Wall Street Journal this morning,

The February unemployment rate edged down to 4.8% from 4.9%, but only because some job-seekers quit looking for work.

Reddy goes on to put the pieces together:

At the same time, housing-price declines and rising energy costs are adding to the troubles in the job market and putting at risk consumer spending, which accounts for more than 70% of economic activity.

But there's another economic factor that could turn a bad quarter for employment into a vicious circle of economic decline - the worsening housing crisis. Reddy wrote yesterday that,

Among the latest trouble signals, the number of American homes entering foreclosure rose to the highest level on record in the fourth quarter of 2007. Meanwhile, homeowners' share of the equity in their homes fell to a post-World War II low.

...

Lately, the downturn in homeowners' equity has accelerated, and it is being driven by falling home prices, which is more ominous both for consumers' net worth and for the loans collateralized by those homes. The decline could portend an increase in the delinquencies and foreclosures that have roiled global credit markets.

A decline in the availability of good jobs is going make it harder for people to keep up with payments on homes that are already a losing investment. Already, some homeowners are choosing to walk away from mortgages, despite the Bush administration's "Project Lifeline," intended to keep people in their homes.

This has the potential to accelerate a downward spiral. When people walk away from homes, the property will likely sit abandoned until the bank is forced to foreclose. During this time, the property becomes a blight on the neighborhood, bringing down the values of the surrounding properties. So those who have not walked away, may find themselves pushed closer to the brink as their home value depreciates below the value of their mortgage.

Banks will find themselves holding more and more failed lines of credit, and will be less inclined to offer credit to business sectors for expansion - both out of risk aversion and a lack of cash on hand.

DCCC Chairman Chris Van Hollen points out that, with the economy at such risk, a McCain administration would be devastating.

Now House Republicans are eager to rubber stamp a third Bush term by embracing Senator John McCain -- someone who admits to having a weak grasp of managing the economy. America cannot afford to have Senator McCain receive on-the-job training and gamble on another four years of misguided economic policies that have taken our country in the wrong direction.

It's time for a return to fiscal sanity. For too long we've suffered under Republican policies of crony capitalism and thoughtless deregulation. There are no magic beans available to save the American economy. McCain's plan to continue Bush policies giving away tax money to the wealthiest few and prolonging a poorly planned, trillion dollar war while the rest of the country suffers would harm not only our economy, but our standing in the world. And that's simply not acceptable.

Don't let McCain take the 3am call

In this morning's Financial Times, columnist Philip Stephens looks at how John McCain would handle the 3am call:

To his mind, the only thing wrong with Mr Bush’s surge in American forces in Iraq last year was that it did not go far enough. As for Iran’s nuclear ambitions, the candidate’s refrain could scarcely be clearer: the one outcome more dangerous than war would be a nuclear-armed Iran.

There are some fairly obvious snags here. Even if Iraq has drifted off the front pages, the polls show that the war remains deeply unpopular. As the Obama campaign never fails to point out, the so-called “success” of the surge is strictly relative. Certainly, fewer Americans are being killed than in 2006, but the casualty rate is little changed relative to 2005.

Nor is Iraq closer to a political settlement. The US has secured the present relative calm by arming the Sunni militias it had spent three years fighting in the aftermath of the invasion. If the Sunnis have now turned against their erstwhile al-Qaeda allies, their accommodation with the Americans represents an uneasy truce rather than anything resembling a peace. There is precious little sign either of a Sunni reconciliation with the Shia-led government of Nouri Maliki.

Mr McCain says he would stay in Iraq for 100 years if that is what it takes. I wonder for how long most Americans are willing to go on losing a US soldier every day. The opinion polls may show that many believe the surge has worked; most, though, still want the troops brought home sooner rather than later.

There are flaws too in Mr McCain’s assessment of the wider challenge to America’s security. His, like that of Mr Bush, is a Manichean view of the world in which everything is swept up into one all-embracing threat. Iraq, Afghanistan, al-Qaeda, Iran, Hamas and Hizbollah are all on the other side of a single struggle between liberty and Islamist extremism. In this, Mr McCain is making the same mistake as Mr Bush by giving a cohesion to America’s enemies that otherwise would not exist and thus inviting them to make common cause.

This, again, points to something I wrote yesterday - either Clinton or Obama would be significantly better than a McCain Whitehouse.

And this is more than simply an academic question. While many Democrats seem to be operating under the assumption that the Democratic nominee with land in the Whitehouse, McCain could be a much tougher opponent than people admit.

Head-to-head polls show a Democratic lead, but they don't demonstrate inevitability, certainly not this far out.





And McCain is certainly taking advantage of the prolonged Democratic primary battle.

"It does give me an opportunity to go around, shore up our base of support, unite our party and energize our party, and spend time –- as Charlie and I have this morning -- both with our financial backers as well as the people of the state of Florida," McCain said.

What does this mean for the Democrats? It means that, while it may be true that the prolonged contest could be good for Democrats by keeping McCain out of the news, it also means that Democrats need to fight smart. Clinton and Obama both should concentrate on selling their strengths, and their differences with John McCain.

That doesn't mean it has to be a love-fest, but it means that talking about political experience, wisdom, leadership, and ideas are important. Incessant mud-slinging may win a candidate the Democratic nomination, but it would be a pyrrhic victory that leaves the candidate, and the party, weakened in the general election. And that's the one that counts.

McCain: It's sunset in America

Who thought it was a good idea for John McCain's website to open with a splash page picturing an Arizona sunset? At 72, one would think McCain wouldn't want his website to depict the sun going down on a lifeless desert. Well, maybe that's more of that "straight-talk" we hear so much about.

Conservatives see a huge return on investment in the courts

I've written about the Roberts court's sympathy for big business, as evidenced by recent examples of the decisions that make it much harder for private individuals to take corporations to court.

Yesterday, Doug Kendall reported in Slate that it's not just that cases are going the way of corporate interests, the course of legal thought is changing as well.

It's not just particular cases that the chamber is winning, but also foundational issues that set the course of the law. Stoneridge is what lawyers call a "cause of action" case; it was about whether the plaintiffs could get into the courthouse to ensure the enforcement of the obligations that the federal Securities Exchange Act of 1934 imposes on corporations. Decades ago, the court ruled that the Exchange Act necessarily implied that victims of corporate misconduct could sue corporations for flouting the clear legal obligations that this law imposes. But starting in 1975, the court began a steady retreat from the idea that judges could "imply" a cause of action, forcing Congress to state clearly that it wants people to be able to sue. In Stoneridge, the court took this a big step further, saying in effect that people cannot sue companies to enforce an obligation under the Exchange Act that the court has not approved in a prior case. This ruling essentially freezes the enforceability of the Exchange Act.

In fact, as Kendall writes,

It is extremely hard to reconcile what the court has done in cause-of-action cases like Stoneridge with its approach to pre-emption cases like Rowe, Riegel, and Preston. In the cause-of-action cases, the court says Congress must unmistakably express its intention to allow people to go to court to enforce federal mandates. If Congress isn't crystal-clear, potential plaintiffs are out of luck. But in the pre-emption cases, the court seems untroubled by a lack of clarity on Congress' part, ruling that federal law pushes aside state actions or remedies when it's not at all certain that's what Congress so intended. There's one thing these approaches do have in common: They both favor business interests.

This should not surprise us. We've seen a similar pattern in the way conservatives approach economics. Nor, however, should this news cause us to despair. After all, while slow to change, the law is not immutable. It took decades of focused investment and activism for the right to move the courts to their present position.

But we should heed this warning as we approach the November elections. Justice Stevens will turn 88 next month. Justice Ginsberg will be a young 75 next week. By comparison, Justice Alito will turn 58 this year. Chief Justice Roberts has just turned 53 years old in January. Justice Thomas, by far the most far-right member of the court, is only 60.

The next president will, in all likelihood, appoint at least one more Justice to the Supreme Court. One more conservative Justice would push jurisprudence further to the right for generations, and, despite his reputation as a "maverick," the likelihood that John McCain would be able to appoint a centrist is close to nil. The conservative movement will not allow the possibility of a Republican president appointing someone who is not indisputable in their camp - just ask Harriet Miers.

As the Democratic primary battle shows no signs of letting up, it's important to keep in mind the ultimate goal - electing a president who will serve the interests of all people, not only the wealthy and powerful. Regardless of your preference for Clinton or Obama, either candidate would be vastly superior to a McCain administration.

Who really won last night?

Last night was a big night for Clinton. She won the Texas primary by a hair (51% to 48%), with Obama taking the major metropolitan areas of Austin, Houston, and Dallas. The dust hasn't quite settled, though, as caucus results continue to roll in. With 36% of caucus results reported, Obama is up slightly, with 52%. Of course, it's far too early to tell what the end result of the Texas caucus will be, and I would advise caution in predictions, especially with Clinton's hardball strategy to seize control of the caucus operations.



Ohio was less dramatic, as Clinton was expected to take the state fairly handily, which she did with 54% of the vote. Tellingly, Obama again won the major metropolitan areas of Cincinnati, Columbus, and Cleveland



Despite Clinton's wins, Obama continues to hold a slight lead in the number of delegates - one that remains a significant obstacle for Clinton.

Critical to Clinton's prospect of victory are the superdelegates, the nearly 800 elected officials and party leaders who can vote any way they choose. Her campaign envisions what aides call a "buyer's remorse" strategy of raising enough doubts about the first-term senator from Illinois through increasingly vigorous attacks and tougher media scrutiny to convince the superdelegates that it would be too risky to nominate him.

That reflects the recognition that it would be enormously difficult for Clinton to overtake Obama in the pledged delegates chosen by voters in primaries and caucuses. By some calculations, Clinton would need to win more than 60 percent of the vote in the dozen contests remaining between now and June 7 to catch Obama in pledged delegates -- a steep challenge given that, so far, she has won that much in only one state, her onetime adopted home of Arkansas. Even in New York, where she is a sitting senator, she won 57 percent of the vote. She won 55 percent in Michigan, where Obama was not even on the ballot.

Are we seeing a replay of the 1976 Republican primary? I don't know. A Clinton comeback could be a real blessing in disguise for Obama. As Afghanistan slips into becoming a narco-state, the Iraq war slogs on, and oil and the U.S. Dollar continue to go their separate ways, the winner of the 2008 presidential election may be the biggest loser.

The next four years may be just the time Obama needs to solidify his place as the next Reagan.

As for this morning, though, things seems to be less clear than they were two days ago. Advantage: Rush Limbaugh

Good for thee, not for me

Republican legislators seem to display a lack of consistency in their economic philosophy as they show outrage over the EADS contract to supply tankers for the U.S. Air Force.

Sen. Brownback (R-Kansas) has been a vocal proponent of NAFTA, CAFTA, the U.S.-Australian Trade Act, and free trade agreements with Oman, Chile, and Singapore. The pro-free trade Club For Growth awarded Brownback a score of 98/100 on their annual scorecard, earning him a "Defender of Economic Freedom award" from the organization.

Yet, Brownback now expresses shock and awe that the U.S. would "outsource the production" of something that could be manufactured in the U.S.

“It’s stunning to me that we would outsource the production of these airplanes to Europe instead of building them in America,” said Sam Brownback, the Republican senator for Kansas, where Boeing has a site. “I’ll be calling upon the secretary of defence for a full debriefing.”

But free trade isn't the only area of economics on which conservatives are suddenly (and conveniently) turning an about face.

In 2005, President Bush signed into law the Bankruptcy Reform Act, making it more difficult for debtors to gain bankruptcy protection under Chapter 7 of the Bankruptcy Code. This means, of course, that the rights and expectations of borrowers were changed retroactively in order to protect lenders. Conservatives argued at the time that it was necessary to protect the lending industry and to correct for fraudulent and abusive practices by borrowers.

Fast forward three years, and President Bush et al. have had a change of heart. As Democrats in Congress have prepared legislation that would allow a court to allow bankruptcy judges to modify terms of a mortgage as part of a bankruptcy restructuring.

In a statement issued Tuesday afternoon, the White House said the bill would “undermine existing contracts” and lead to tighter credit.

“These and other provisions of the bankruptcy-related provisions in the bill would fundamentally alter the expectations of parties to hundreds of thousands of home purchases after the fact,” it said. It also objected to provisions that would provide $4 billion for state and local governments to redevelop abandoned homes and provide money for homeowner counseling programs.

There is, of course, a certain consistency underlying Republican economics policy, though it isn't one of economic philosophy. It's old-fashioned crony capitalism. You can count on Republicans to be for globalization so long as it means that American corporations get to exercise something like monopoly power in the world market. But when foreign corporations begin to threaten American economic hegemony, brace yourself for Republican protectionism.

Be it inconsistent application of free trade or bankruptcy laws, Republicans have never met a special protection for business that they didn't like, private citizens be damned.

Stealing food from the poor

In the late 1990s, the government decided to reform welfare. In many states, part of this reform involved outsourcing the administration of government services to private, for-profit companies. New York Times reporter Jason DeParle looked at the result of this privatization in his 2004 book, American Dreams, and noted one company in particular that personified the mismanagement and waste that occurred because of government outsourcing - Maximus.

DeParle's research into Maximus's government contracting found widespread waste and mismanagement of taxpayer money. In 2004, he wrote for Washington Monthly,

[Maximus] spent $100,000 of program money on backpacks, coffee mugs, and other promotional fluff. It spent tens of thousands on employee entertainment. It spent $3,000 to take clients roller-skating and $2,600 for professional clowns. Though Maximus later agreed to repay $500,000 to the state and donate another $500,000 to community groups, the true extent of the waste will never be known because the records were in such disarray.

Jason DeParle was not alone in discovering shoddy - and even corrupt - billing practices by the company.

In 2007, the GAO reviewed accounting deficiencies at the Center for Medicare and Medicaid Services [PDF] and found that Maximus received over $600,000 in "questionable payments" for undocumented costs and for costs that were not part of the government contract.

Even earlier, in 1999, after "several recent media reports, including reports that questioned whether [government] funds had been used for other purposes," the State of Wisconsin's Legislative Audit Bureau found similar discrepancies in Maximus's billing [PDF] and found over $400,000 in "unallowable and questioned costs" including $950 worth of tickets to Six Flags, and $23,000 for a performance by Broadway star Melba Moore.

So what is Maximus doing now? Trying to get control of more government services. This time, the federal food stamp program.

Maximus has already been part of a disastrous food stamp privatization project in Texas. In 2005, Maximus won a $370 Million subcontract in support of the Texas Health and Human Services Commission's Integrated Eligibility and Enrollment program that outsourced eligibility and enrollment processing. The program was deemed a disaster.

Today, a cursory glance at federal lobby disclosure reports from the past few years shows that Maximus has been paying high-dollar DC lobbyists to lobby the House, Senate, HHS, and the Department of Agriculture. The topic of discussion listed on lobbying disclosure documents include: "[Temporary Aid to Needy Families] Reauthorization","Food Stamp Program", "Needs Assessment Program".

And all of this lobbying could pay off. Congress is about to go to conference on a Farm Bill. There's a provision in the House version that reaffirms current law and explicitly forbids the outsourcing of the eligibility process for food stamps to hired contractors (like Maximus).The House provision must remain in the conference report in order to protect taxpayers from getting stuck paying for Maximus's roller skating parties and Broadway Shows.

As our country heads into a rough economic outlook, putting food security for our nation's poorest children in the hands of companies like Maximus is a risk we can't afford to take.

WaPo Prescribes Amputating Arm To Cure Wart

The Washington Post features a mind-numbing editorial today in which the authors demonstrate an utter lack of understanding of civil law, regulatory policy, and administrative compensation schemes.

In the wake of the Roberts Court's 8-1 decision in Riegel v. Medtronic that found the language in the Medical Devices Amendments of 1976 (MDA) expressly preempt state tort claims, some Democrats have suggested legislation to remove the express preemption language.

The Washington Post doesn't like the path of the conservative court, or the Democratic Congress, instead suggesting that,

Lawmakers should instead consider creating a government-run compensation fund for patients harmed by medical devices, similar to the one established for those harmed by vaccines. They should also continue to strengthen the FDA through increased funding and oversight muscle. And they should return to the task of fashioning comprehensive tort reform that would significantly reduce frivolous litigation while ensuring that the rights of real victims are safeguarded.

While this type of third-way reasoning is often popular in Washington discourse, it rarely makes for good policy.

Consider the Vaccine Injury Compensation Program that WaPo uses as a model. This program was developed to provide no-fault compensation to people who had adverse reactions to vaccines. The underlying theory is that, while it's inevitable that some individuals will have an adverse reaction to a vaccine, the public health benefit of administering them to the broad population justifies the risk. Rather than simply sacrifice those individuals who react badly, though, we provide some compensation to them for "taking one for the team", so to speak.

Medical devices, on the other hand, are not vaccines. A heart catheter, such as the device at the center of the Riegel case, may save a life, but it's not necessary to prevent a pandemic. In fact, "medical device" is defined rather broadly:

A medical device is defined, in part, as any health care product that does not achieve its primary intended purposes by chemical action or by being metabolized. Medical devices include, among other things, surgical lasers, wheelchairs, sutures, pacemakers, vascular grafts, intraocular lenses, and orthopedic pins. Medical devices also include diagnostic aids such as reagents and test kits for in vitro diagnosis (IVD) of disease and other medical conditions such as pregnancy.

According to the Washington Post, manufacturers should not be liable for negligence in the design of surgical tools, wheelchairs, or heart valves. Their concern, though, isn't public health so much as it's the old canard that there exists an excess of "frivolous litigation."

I will spare you the de-bunking of this well-worn myth as you can easily find that the empirical evidence is very different from the talking points generated by American Tort Reform Association lobbyists.

But I did find it particularly unattractive that the Washington Post chose to trash one of the bedrock institutions of our democracy - the jury.

This is a favorite pastime of corporate lobbyists and right-wing statists - conjuring up tales in which a jury of dolts puts the nation at risk, and the only thing to save us is the independent wisdom of the political appointees "experts" that head a federal regulatory agency.* Justice Scalia, writes in Riegel that,

A state statute, or a regulation adopted by a state agency, could at least be expected to apply cost-benefit analysis similar to that applied by the experts at the FDA: How many more lives will be saved by a device which, along with itsgreater effectiveness, brings a greater risk of harm? A jury, on the other hand, sees only the cost of a more dangerous design, and is not concerned with its benefits; the patients who reaped those benefits are not represented in court.

But, again, as with the myth of excessive frivolous litigation, the attack on the jury system is founded in corporate public relations and misleading anecdote. These claims, however, do not stand up to the scrutiny of strong empirical research.

The truth, as I've noted before, is that right now corporate lobbyists prefer the federal regulatory state to federalism or trial-by-jury because the regulators are increasingly former industry lobbyists. And even if that were not as pervasive a practice as it has become, it's easy to lobby the head of the FDA. Doing the same with a jury is called "tampering" and results in felony charges.

The Washington Post gets it wrong because they're trying to wrap up a complex, messy issue with one quick stroke. Their solution is wrong on the facts, and wrong on the law. The express preemption language in the MDA is clearly on a collision course with justice, but the idea that an industry as broadly defined as "medical devices" should be covered by a sprawling administrative compensation scheme is to prescribe amputation to cure a wart.

Corporations may save money by eschewing accountability, but the real costs in that trade off will be borne by our most vulnerable citizens. The American legal system may be frustrating at times, but it's the most just system in the world, warts and all.

* The cynical way so-called conservatives are lately singing the praises of the federal regulatory state is really more than one should have to bear.