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AT THE LATEST ANGEL'S CORNER – READERS SOUND OFF ON THE DEBT CRISIS, THE PRESIDENT, AND AN ECONOMIC PLAN FOR AMERICA

AUGUST 3,  2011

SHORT TAKES ON THE DRIFTING WRECKAGE – AT 9:35 P.M. ET:

INCREDIBLE – We have warned here about taking our eye off the foreign-policy ball as we deal with our economic woes.  I can think of no greater example of this than yesterday's hearing of the Senate Foreign Relations Committee, on Syria, one of the most important foreign challenges we have.  There are 19 members of the committee, and exactly one, Democratic Senator Bob Casey of Pennsylvania, showed up to question the U.S. ambassador to Syria, Robert Ford.  Somehow, I think some members of that committee must have some misplaced priorities.

EQUALLY INCREDIBLE – A senior Pentagon official – that means someone way up who doesn't want to be identified – warned today that the military would have to lay off thousands of people if additional cuts made possible by the debt compromise actually are made.  That additional unemployment would, of course, certainly serve our economy well, wouldn't it?  National Review pointed out that projected defense cuts are being made without any regard to strategic considerations.  I would expect that of many Democrats.  I wouldn't expect it of Republicans, but I'm afraid the green eyeshade types are becoming more influential.  I hope common sense and real statesmanship will return.

WELL, OKAY, HAPPY BIRTHDAY – The president flew to Chicago to attend a birthday party/fundraiser.  He is turning 50.  Ticket prices for the gala go for $200 through $35, 800.   All proceeds will go to the Obama campaign.  Is it unseemly, considering the real economic pain out there?  Of course it is, but politics in Chicago have never been guided by either Emily Post or the West Point honor code.  At any rate, happy birthday, Mr. President.  May you enjoy this, and your retirement at the end of next year.  There are personal benefits to both.

August 3, 2011     Permalink

COMING SOON TO A COMPUTER NEAR YOU – AT 9:21 A.M. ET:  "Cyberattack" is the term, and we've been warned by computer experts to expect that term to come up more and more in the future.  There has apparently been a major cyberattack, being reported today.  From Fox:

The world's most extensive case of cyber-espionage, including attacks on U.S. government and U.N. computers, is set to be revealed Wednesday by online security firm McAfee, and analysts are speculating that China is behind the attacks.

The spying was dubbed "Operation Shady RAT," or "remote access tool" by McAfee -- and it led to a massive loss of information that poses a huge economic threat, wrote vice president of threat research Dmitri Alperovitch

"What is happening to all this data — by now reaching petabytes as a whole — is still largely an open question," Alperovitch wrote on a blog detailing the threat. "However, if even a fraction of it is used to build better competing products or beat a competitor at a key negotiation (due to having stolen the other team’s playbook), the loss represents a massive economic threat."

Analysts told The Washington Post that the finger of blame for the infiltration of the 72 networks -- 49 of them in the U.S. -- points firmly in the direction of China.

COMMENT:  Now it is true that McAfee, which sells anti-hacking and anti-virus software, has a commercial interest in alarming stories like this, but I doubt they'd publish something of this size, and with this detail, without firm factual backing.  It's a respected company with good credibility. 

China has been the master of the cyberattack, with profound implications for our national defense, and our economic infrastructure.  This country now runs on computers.  They are vulnerable to cyberattacks, and to electromagnetic pulse attack – a nuclear weapon exploded high above the United States, which, because of the electric energy produced, could wreck a good number of our unprotected computers.

I wonder how the budget for this new kind of war will fare in today's environment.

August 3, 2011        Permalink

EGYPT INTO THE NIGHT – AT 8:57 A.M. ET:  What is it about the Arab world?  They cannot seem to get anything right.  We placed so much hope in the Arab Spring, especially as it sprung in Egypt.   Egypt is the most important Arab country, and the hope is fading each day.  From The Wall Street Journal: 

CAIRO—Mobs of ordinary Egyptians joined with soldiers to drive pro-democracy protesters from their encampment in Tahrir Square here Monday, showing how far the uprising's early heroes have fallen in the eyes of the public.

Six months after young, liberal activists helped lead the popular movement that ousted President Hosni Mubarak, the hard core of these protesters was forcibly dispersed by the troops. Some Egyptians lined the street to applaud the army. Others ganged up on the activists as they retreated from the square that has come to symbolize the Arab Spring.

Squeezed between an assertive military and the country's resurgent Islamist movement, many Internet-savvy, pro-democracy activists are finding it increasingly hard to remain relevant in a post-revolutionary Egypt that is struggling to overcome an economic crisis and restore law and order.

"The liberal and leftist groups that were at the forefront of the revolution have lost touch with the Egyptian people," says Shadi Hamid, director of research at the Brookings Institution's Doha Center. "These protesters have alienated much of Egypt. For some time they've been deceiving themselves by saying that the silent majority is on their side—but all evidence points to the contrary, and Monday's events confirm that."

And...

Elections have been pushed to November, but the liberals and the secularists appear not to have taken advantage of the delay. Instead of organizing themselves into a coherent bloc, they have set up minuscule rival parties and feuded among themselves, say analysts and diplomats.

"There is a power game going on—and the liberals and the entire secular movement are the weaker element, while the Islamists and the army are strong," said Laila Soueif, a liberal activist and human-rights campaigner who teaches at Cairo University.

COMMENT:  If Egypt goes Islamist, it will have a profound, and profoundly negative, effect on the region, on American influence, and on Arab-Israeli peace.  It could influence other participants in the Arab Spring, and we can have an even greater mess than we have now. 

However, and get out the seasickness pills for this, don't be shocked if the Western left, first in Europe, then in America, starts to embrace the move toward Islam.  Remember, there is an informal alliance between the left and the Islamists, as both have a common enemy – the United States of America.  An article in The Nation, probably this country's leading leftist magazine, praises the possibility of a new caliphate, a powerful organization of Islamic states.

Polite company will, of course, be barred from discussing any of this, as it will be labeled "racism."  No, it's not racism.  It's good, hard common sense.  We are in danger.

Our current major attention goes to Syria, where citizens are being slaughtered in the streets, with hardly a peep from the usual leftist suspects.  But as bad as the Assad regime is, we really know so little about the protesters.  They really can't be worse than the Assad crowd, but would they be any better?

August 3, 2011       Permalink

NO NAME BEATS FAMOUS NAME – AT 8:41 A.M. ET:  In the latest poll to test his popularity, President Obama still trails the now-renowened and deeply experienced anonymous Republican.  From the Daily Caller:

A generic Republican presidential candidate would beat Barack Obama by a five-point margin if the election were held today, according to a poll released Tuesday by Rasmussen.

The as-yet-unnamed Republican candidate leads Obama 47 percent to 42 percent. This is the fourth consecutive week that Rasmussen’s polling has found a generic Republican candidate with a lead.

And...

A Gallup poll of registered voters released on July 14 found a generic Republican candidate was leading Obama, 47 percent to 39 percent. Gallup noted that this was the first time the Republican candidate had held a “statistically significant lead.”

No specific candidate has yet been able to live up to the potential of the generic Republican. Though several state polls and one national poll have found specific candidates (usually Romney) leading Obama, no one has yet achieved the same six- to eight-point lead.

Maybe the Republians can just put "No name" on the ballot, and not even run a campaign.  Given the lack of artistry of recent GOP campaigns, that might be a good idea.  The campaign slogan can be, "Anonymous – better than the guy you know."  The public might buy it.  They bought Obama.

But there's also some light for an actual name:

A Quinnipiac poll of Pennsylvania voters released Tuesday found Mitt Romney edging Obama 44 percent to 42 percent, a lead that is within the margin of error.

Margin of error or not, at least that's encouraging.  Pennsylvania is a key Dem state.  If Pennsylvania goes, it's hard to see how Obama can win the 2012 election.  But remember, the election is still a year and three months off.  That's about 20 lifetimes in politics.  The Republicans can falter, and Obama, still a great campaigner, can rally.  Or maybe we'll have an economic miracle, a kind of national Apple Computer.  Don't put this one in the bank yet. 

August 3, 2011        Permalink

IT'S THE ECONOMY, SILLY PERSON – AT 8:20 A.M. ET:  It may be because the education journalists receive cause them to think of government action as the center of all things economic, but it's really the actual economy that will determine our future.  Right now that economy looks awful.  Please note that not many people in Washington are referring to the "recovery," a term used pretty loosely not long ago:

NEW YORK, Aug 2 (Reuters) - The S&P 500 turned negative for the year on Tuesday as the wrangling over the U.S. debt ceiling faded and investors turned their attention to the stalling economy.

The broad-based index fell for a seventh day and crashed through the key 200-day moving average in an ominous sign for markets. The seven days of losses mark the longest losing streak since October 2008.

"It is going to be a long week," said Jim Maguire Jr., a NYSE floor trader at E.H. Smith Jacobs. "The bid is not here in the market."

The selloff accelerated into the close as volume jumped well above average. The fall was broad-based, with four stocks falling for every one rising on the New York Stock Exchange.

The index also broke through its 2-1/2 year uptrend line from its bear market low in March 2009. Thursday was the index's worst day in a year.

Investors seemed to find little to cheer after the U.S. Senate agreed to a deal to raise the debt ceiling because of the possibility it will not stave off a downgrade of the U.S. government's triple-A rating.

"Investors have made the shift from Washington to what I'm calling economic realities," said Fred Dickson, chief market strategist at The Davidson Cos. in Lake Oswego, Oregon.

COMMENT:  It is difficult to see how this economy can make any kind of significant turnaround in time for the 2012 election.  That is especially true as Washington budgeteers are looking, with increasing lust, at the defense budget.

But defense is one of the great real stimulants to the economy.  We've said here since Obama took office that replacing the Pentagon's obsolete and worn out equipment – including planes and ships – would create hundreds of thousands of production jobs, perform an enormous service and retain expertise.  But I'm afraid Obaman ideology got in the way. 

Another ideologically unacceptable stimulant would go into action if this administration would just lift some of the restrictions on domestic oil drilling.  Al Gore might have to double his Zoloft prescription, but the economic benefits, although they might be slow in coming, could be significant.  It's pretty clear that the currently high gasoline prices are a massive foot on the neck of the economy, giving people fewer dollars to buy things other than octane.  Anyone noticing?

August 3, 2011    Permalink

AUGUST 2,  2011

SHORT TAKES ON THE DRIFTING WRECKAGE – AT 9:45 P.M. ET

A THIRD PARTY? – Former New York City Mayor Ed Koch is calling for a third party, a centrist party, to take on both Barack Obama and the Republican candidate in next year's election.  Koch, who has a long history of shaking things up politically, believes the time is right, that the public is disgusted with both parties.  He may well be right, but third party movements tend to be ideological, not centrist.  My fear is a third party, or an egotistical third candidate, like Donald Trump, can deny the GOP candidate a victory.  A third party of the type Koch envisions would need to coalesce behind a distinguished candidate with across-the-board appeal.  I know of no such person right now.  David Petraeus has been mentioned in the past, but he's just become head of the CIA, and is associated with the Obama administration.

OUR CREDIT RATING REMAINS, FOR NOW – Two credit agencies reaffirmed America's credit rating after today's debt deal was signed into law, but both warned that this reaffirmation is only temporary, and that much more remains to be done.  Both Moody's and Fitch retained the AAA rating, but Moody's gave a decidedly negative view of the financial future of the United States.  Standard & Poor's has yet to comment.  There is considerable skepticism in financial circles that the debt-reduction plan called for in the new law would actually work, or work well enough to secure America's credit rating in the future.

A PREVIEW OF COMING ATTRACTIONS –  A British parliamentary committee is warning today that Britain has so weakened its armed forces that the nation can no longer carry out its international commitments, and is losing influence.   Americans would be stunned to learned that the Royal Navy no longer has any aircraft carriers, and that Britain has given up its famous Harrier jump jets, which are also used by the United States.  This is what happens when a nation becomes a welfare state, and looks to its military as an ATM from which to grab funds for presumably more important purposes.  Expect to see warnings like this grow in the United States, as the left sees opportunities to slash the defense budget and realize their dream of a reduced America on the world stage.  Do our young people understand?

FEEDING ON OURSELVES – Newly released research says that dieters struggle to lose weight because the lack of nutrition forces brain cells to eat themselves.  This may explain the actions and mentality of many members of Congress, who are forever trying to polish up their appearance.  The moral:  Don't permit major war-and-peace decisions to be made by those who have Weight Watchers cookies on their desk.  As for the president, he is awfully thin, and I urge a congressional investigation to determine how he got that way.  If we detect dieting, a brain scan is in order.  If we see brain munching going on, our national problems are worse than they are.

August 2, 2011     Permalink

SENATE FOLLOWS HOUSE INTO THE ABYSS – AT 6:02 P.M. ET:  The Senate has passed the debt bill, and President Obama has signed it into law.  Thus, we can borrow more money.  What would you like to do with it?  I was thinking that a lovely retirement villa for the president would be a nice gesture, and would be appreciated by all.   Other suggestions are welcome.

The stock market responded to the president's signature by dropping more than two percent, or 266 points, and I don't hear anyone saying this was one of the great days in American history. 

Now the question is where the spending cuts will actually be, whether they will be maintained by future congresses, and whether they will be true cuts, or "reductions in growth," which means you spend more, but not as much as anticipated.

We have only averted a temporary default crisis.  That's really all we've done. 

August 2, 2011         Permalink

THE REPUBLICAN FOREIGN-POLICY SPLIT – AT 11:46 A.M. ET:  Senator Lindsey Graham of South Carolina appeared on television last night, and was clearly distraught.  "The Republican Party of Ronald Reagan died today," he declared.  He was referring to the House passage of the debt agreement, which leaves open the possibility of major cuts in defense.  Graham, along with John McCain, Joe Lieberman and others, militantly opposes those cuts, and correctly so.

As we reported yesterday, there is a battle on for the soul of the Republican Party.  Will it be the party of Reagan, with a strong, unyielding commitment to the defense of this country, or will it revert to being a party of green eyeshades, interested only in "no new taxes," and little beyond that?

Eli Lake, of the Washington Times, publishing, a bit oddly, in the New Republic, writes a superlative piece on where GOP presidential candidates stand on foreign policy.  I strongly recommend it.  But it left me realizing that all the candidates must answer detailed questions on their foreign-policy views.  For example, Lake reveals this about Texas Governor Rick Perry:

In 2004, Perry enticed Citgo—owned by the Venezuelan government, no friend of the United States—to expand refineries in Corpus Christi and move its corporate headquarters to Houston by putting together a grant and low-interest loan package worth $35 million. Perry also sought to persuade the Chinese telecom giant Huawei to expand its North American headquarters in Texas. Last year, the intelligence community quietly pressed Sprint not to use Huawei components in building a national 4G network, fearing the company’s close ties to the People’s Liberation Army would effectively give the Chinese government a listening post in every cell tower of the new wireless network. On August 18, eight Republican senators sent a letter to Obama administration officials warning that the deal could undermine national security. Sprint eventually complied. But, on October 1 of last year, Perry attended a ribbon-cutting ceremony at the company’s new headquarters in Plano, Texas. “Huawei has a strong, worldwide reputation as an innovator of quality telecommunications technology, with facilities spread across the globe,” Perry proclaimed.

Dave Carney, a strategist who has been with the governor for 14 years and would play a major role on a presidential campaign, defended these moves when I asked him about them. He said that it’s Washington’s job to vet corporations for national security reasons. “Has the federal government kicked Citgo out of the country?” he asked. “I haven’t seen that.” He made the same argument about Huawei, saying, “If this Chinese company is as evil as has been reported, then the federal government should step in to deal with it.”

In fairness to Perry, the responsibilities of being a governor are very different from the responsibilities of being president. And presidents’ views on foreign policy have a way of morphing once they get into office.

COMMENT:  Not a wise comment from Carney, who appears callous.  As for Governor Perry, whom I like, we need answers.  Will he see foreign policy as just another business deal, or will he understand the national security implications of every economic agreement? 

You may remember Governor John Connally, also of Texas.  He was shot in the same car when President Kennedy was assassinated in Dallas in 1963.  He made a try for the presidency in the 1970s, but came off as just another businessman who saw the world with a big dollar sign over it.  He didn't come close to the Oval Office.

So Perry needs to explain his foreign-policy views in detail.  Indeed, all the candidates must be closely examined on this subject.  We used to say that a country can survive four years of a bad domestic policy, but four years of a bad foreign policy can be fatal.  We have taken our eye off the foreign-policy ball to attend to our economic woes.  We've got to get that eye refocused again, or our children will pay the price.

August 2, 2011     Permalink 

SNIPPET OF THE DAY – AT 11:25 A.M. ET:

From The New York Times:  A California man is suing the Hilton Hotels Corporation for charging him 75 cents for a copy of the USA Today newspaper that he did not request, according to a complaint filed last week in federal court in San Francisco...The complaint asserts that the practice is not only deceitful, but also wasteful and damaging to the environment.

No doubt about it.  This is a major environmental issue.  I've always said that, especially at cocktail parties in Manhattan or San Francisco.  Darlings, you must learn to understand.

RESET BUTTON, THOUGH PUSHED, DIDN'T WORK – AT 9:39 A.M. ET:   Among Barack Obama's naive ideas when he came to office was the notion of a button that would reset our relations with Russia.  Apparently, The Gifted One felt he could do better than the evil BUSH (!!) or the more evil CHENEY (!!!!) in dealing with Moscow. 

Please take out a scrap of paper and list all the things we've gotten for pushing the reset button.  A postage stamp will do. If you don't have a stamp, one of those little bits from the shredder will also do.

This is what we've gotten.  From Fox: 

SELIGER, Russia -- Russian Prime Minister Vladimir Putin on Monday accused the United States of acting as a "parasite" on the world economy by accumulating massive debts that threaten the global financial system.

"The country is living in debt. It is not living within its means, shifting the weight of responsibility on other countries and in a way acting as a parasite," Putin told a group of pro-Kremlin youth in central Russia.

He also suggested that Washington may have been flirting with the idea of a default in order to weaken the dollar "and create better conditions for exporting their goods."

"But they had enough common sense and responsibility" to avoid a default, Russia's former president added.
Putin has repeatedly criticized the United States' recent foreign exchange policy and its tendency to cover budget deficits with treasury bills and bonds held by sovereign clients such as China and Russia.

The value of that paper will shrink if U.S. debt is downgraded by a major Western ratings agency and Putin was insistent Monday that the world should be seeking new reserve currencies for trade and savings.

"If the U.S. encounters a systemic malfunction, this affects everyone," Putin told the youth gathering. "There should be other reserve currencies."

COMMENT:  Thanks, Vladimir.  Spoken like a true friend.  In fact, there is no essential difference between Russia's attitude toward America under Bush and its attitude under Obama.  The reset button didn't light up anything.  It is the invention of a small-time Chicago politician with a golden voice who sits in the White House, doing batting practice and calling it the World Series.

August 2, 2011        Permalink

AND THE ECONOMIC BEAT GOES ON – AT 9:17 A.M. ET:  Well, as they say, it doesn't rain, it pours.  More economic bad news has come in, and it doesn't portend well for the future. 

WASHINGTON (AP) — Americans cut back on their spending in June for the first time in nearly two years and their incomes grew by the smallest amount in nine months, a troubling sign for an economy that is barely growing.

Consumer spending dropped 0.2 percent in June, the Commerce Department said Tuesday. Excluding falling prices for such items as energy and food, consumer spending would have been unchanged in June.
Incomes rose 0.1 percent. It was the weakest growth in income since September, reflecting anemic hiring this spring.

Stock futures were trading lower after the report was released.

High gas prices and unemployment have squeezed household budgets this spring, leading to tepid overall economic growth in the April-June quarter. The economy expanded at an annual rate of 1.3 percent in the second quarter after only 0.4 percent growth in the first three months of this year. The combined growth for the first six months of this year was the worst since the recession ended two years ago.

Many Americans are cutting back on purchases of cars, furniture, appliances and electronics. Consumer spending is closely watched because it accounts for 70 percent of economic activity.

Employers have responded by reducing hiring. The economy added just 18,000 net jobs in June, the fewest in nine months. The unemployment rate rose to 9.2 percent, the highest level this year.

The government issues its July employment report on Friday.

Declining growth and rising unemployment have raised concerns that the country could fall back into a recession.

COMMENT:  Fall back?  Really?  When are we going to end the fiction that the last one ended?  I know what the technical definitions say, but maybe it's time to revise those definitions.  Talk to anyone out there – small business people, manufacturers – and they'll tell you the recession has been ongoing.  Now we have the prospect that it will get worse.

The political implications can be profound, but only if the Republicans nominate a candidate with real appeal, a saleable platform, and a coherent party behind him or her.  Remember, a poor choice of candidates played a major role in denying the GOP control of the Senate in the 2010 elections.  It can happen with the presidency next year.

August 2, 2011       Permalink

GRIM ASSESSMENT – AT 8:58 A.M. ET:  A number of assessments of the debt deal are now being published.  One that reflects a common-sense, probably prevailing view, comes from Bloomberg:

The federal government looks to be getting out of the business of trying to spur the economy just as the U.S. expansion shows increasing signs of faltering.

A deal struck over the weekend to cut $2.4 trillion or more off budget deficits over a decade marks the beginning of a prolonged effort to put the government’s finances into better shape. While the immediate economic impact from the agreement is likely to be small, it will add to a reduction in growth next year of 1.5 percentage points coming from the expiration of past stimulus programs, according to economists at JPMorgan Chase & Co. and Deutsche Bank Securities.

“Over the next 10 years, there will be further spending cuts and higher taxes, and that’s not good for economic growth,” said Paul Dales, senior economist for Capital Economics Ltd. in Toronto. “It is the start of a meaningful move toward fiscal consolidation.”

The shift from stimulus to austerity coincides with a slowdown in the two-year recovery. A report last week showed that gross domestic product grew at an annual rate of 1.3 percent in the second quarter of the year following 0.4 percent in the first three months, prompting economists to warn of possible relapse into recession.
The economy will suffer another blow next year with the expiration of a temporary 2 percent payroll tax cut, an end to extended unemployment benefits and completion of the $830 billion stimulus program that President Barack Obama signed into law more than two years ago. Obama will press Congress to extend a cut in payroll taxes before the end of the year, White House press secretary Jay Carney said yesterday.

COMMENT:  It's perfectly clear that our economic distress will last for years, maybe for decades.  Reagan used to say that it's always morning in America.  Well, maybe now it's a few hours before dawn.

While it's wrong to blame President Obama for all that has gone wrong with the economy, and everything else, it is perfectly reasonable to point to this country's general decline on his watch.  A second term could even be worse.  Free of political constraints, he could try to take this country even further to the left.

Only a robust economy, not government manipulations, can get us out of this.  In the fact of economic competition from abroad, I'm not sure we know how to build that economy.  But I never lose faith in the United States of America.  We always, in the end, come through.

August 2, 2011     Permalink