Let’s Get Fiscal

Paul Krugman | NYTimes.com:

"It’s now clear that rescuing the banks is just the beginning: the nonfinancial economy is also in desperate need of help.

And to provide that help, we’re going to have to put some prejudices aside. It’s politically fashionable to rant against government spending and demand fiscal responsibility. But right now, increased government spending is just what the doctor ordered, and concerns about the budget deficit should be put on hold...." Continue Reading.

Technorati tags: Paul Krugman, New York Times, Economy, 2008 Presidential Election, Recession, Depression, United States, Layoffs, Job loss, op ed

Now That’s Rich

"One thing’s for sure: Barack Obama isn’t planning to raise taxes on the middle class, by any reasonable definition."

Paul Krugman, NYTimes.com:

"...[A]ll the evidence in the world won’t stop Republicans from claiming, as they always do, that Democrats are going to impose a crippling tax burden on ordinary hard-working Americans. But it just ain’t so."

Technorati tags: Paul Krugman, New York Times, Taxes, John McCain, Barack Obama, 2008 Election, Middle Class, Rich, Poor, Tax Policy, Pastor Rick Warren

Stupid is as Stupid Votes

Know-Nothing Politics
By Paul Krugman,
NYTimes.com

So the G.O.P. has found its issue for the 2008 election. For the next three months the party plans to keep chanting: “Drill here! Drill now! Drill here! Drill now! Four legs good, two legs bad!” O.K., I added that last part.

And the debate on energy policy has helped me find the words for something I’ve been thinking about for a while. Republicans, once hailed as the “party of ideas,” have become the party of stupid.

Now, I don’t mean that G.O.P. politicians are, on average, any dumber than their Democratic counterparts. And I certainly don’t mean to question the often frightening smarts of Republican political operatives.

What I mean, instead, is that know-nothingism — the insistence that there are simple, brute-force, instant-gratification answers to every problem, and that there’s something effeminate and weak about anyone who suggests otherwise — has become the core of Republican policy and political strategy. The party’s de facto slogan has become: “Real men don’t think things through.”...

Continue reading

Cartoon: Glen McCoy | t r u t h o u t

Technorati tags: Paul Krugman, New York Times, Republican Party, Politics, GOP, Energy Policy

A HEALTH CARE SYSTEM TO DIE FOR

By Paul Krugman - New York Times Blog

Rudy Giuliani warned us about what would happen if a Democrat wins:

You have got to see the trap. Otherwise we are in for a disaster. We are in for Canadian health care, French health care, British health care.

And that would be a terrible thing:

In "Measuring the Health of Nations: Updating an Earlier Analysis" (Health Affairs, Jan./Feb. 2008), Ellen Nolte, Ph.D., and C. Martin McKee, M.D., D.Sc., both of the London School of Hygiene and Tropical Medicine, compared international rates of "amenable mortality"—that is, deaths from certain causes before age 75 that are potentially preventable with timely and effective health care.

And you see what that tells us:

(Click Chart for Larger View)

Technorati tags: Paul Krugman, New York Times, health Insurance, Managed Care, Universal Health Care, Medicine and Health, Medicare, Republican Party, Rudy Guiliani

Progressives, To Arms!

FORGET ABOUT BUSH—AND THE MIDDLE GROUND.

Why progressives should forget the middle ground | By Paul Krugman | Slate Magazine

"Here's a thought for progressives: Bush isn't the problem. And the next president should not try to be the anti-Bush.

No, I haven't lost my mind. I'm not saying that we should look kindly on the Worst President Ever; we'll all breathe a sigh of relief when he leaves office 405 days, 2 hours, and 46 minutes from now. (Yes, a friend gave me one of those Bush countdown clocks.) Nor am I suggesting that we should forgive and forget; I very much hope that the next president will open the records and let the full story of the Bush era's outrages be told.

But Bush will soon be gone. What progressives should be focused on now is taking on the political movement that brought Bush to power. In short, what we need right now isn't Bush bashing—what we need is partisanship...."

Continue reading.

ILLUSTRATION: Slate Magazine

Technorati tags: Paul Krugman, Progressives, Liberals, Bush, 2008 Presidential Election, Partisanship

New-Fangled Bank Runs

The Krug Man reports that "new-fashioned bank runs" are "at the heart of the current financial crisis."

It's a Miserable Life
By Paul Krugman
The New York Times

Last week the scene at branches of Countrywide Bank, with crowds of agitated depositors trying to withdraw their money, looked a bit like the bank run in the classic holiday movie “It’s a Wonderful Life.”

As it happens, Countrywide’s customers were overreacting. True, the bank is owned by Countrywide Financial, the nation’s largest mortgage lender — and mortgage lenders are in big trouble these days. But bank deposits up to $100,000 are protected by the Federal Deposit Insurance Corporation. Old-fashioned bank runs just don’t make sense these days.

New-fashioned bank runs, on the other hand, do make sense — and they’re at the heart of the current financial crisis.

The key to understanding what’s happening is taking a broad view of what constitutes a bank. From an economic perspective, a bank is any institution that offers people liquidity — the ability to convert their assets into cash on short notice — while still using their money to make long-term investments.

Traditional banks promise depositors the right to withdraw their funds at any time. Yet banks lend out most of the money depositors place in their care, keeping only a fraction in cash. The reason this works is that normally a bank’s depositors want to withdraw only a small proportion of their money on any given day.

Banks get in trouble, however, when some event, like a rumor that major loans have gone bad, leads many depositors to demand their money at the same time.

The scary thing about bank runs is that doubts about a bank’s soundness can be a self-fulfilling prophecy: a bank that should be safely in the black can nonetheless fail if it’s forced to sell assets in a hurry. And bank failures can have devastating economic effects. Many economists believe that the banking panic of the early 1930s, not the stock market crash of 1929, was the principal cause of the Great Depression.

That’s why bank deposits are now protected by a combination of guarantees and regulation. On one side, deposits are federally insured, and the Federal Reserve stands ready to rush cash to troubled banks if necessary. On the other side, banks are required to keep adequate reserves, have adequate capital and make conservative loans.

But these guarantees and regulations apply only to traditional banks. Meanwhile, a growing number of unregulated bank-like institutions have become vulnerable to the 21st-century version of bank runs.

Consider the case of KKR Financial Holdings, an affiliate of Kohlberg Kravis Roberts, a powerhouse Wall Street operator. KKR Financial raises money by issuing asset-backed commercial paper — a claim that’s sort of like a short-term C.D., used by large investors to temporarily park funds — and invests most of this money in longer-term assets. So the company is acting as a kind of bank, one that offers a higher interest rate than ordinary banks pay their clients.

It sounds like a great deal — except that last week KKR Financial announced that it was seeking to delay $5 billion in repayments. That’s the equivalent of a bank closing its doors because it’s running out of cash.

The problems at KKR Financial are part of a broader picture in which many investors, spooked by the problems in the mortgage market, have been pulling their money out of institutions that use short-term borrowing to finance long-term investments. These institutions aren’t called banks, but in economic terms what’s been happening amounts to a burgeoning banking panic.

On Friday, the Federal Reserve tried to quell this panic by announcing a surprise cut in the discount rate, the rate at which it lends money to banks. It remains to be seen whether the move will do the trick.

The problem, as many observers have noticed, is that the Fed’s move is largely symbolic. It makes more funds available to depository institutions, a k a old-fashioned banks — but old-fashioned banks aren’t where the crisis is centered. And the Fed doesn’t have any clear way to deal with bank runs on institutions that aren’t called banks.

Now, sometimes symbolic gestures are enough. The Fed’s surprise quarter-point interest rate cut in October 1998, at the height of the crisis caused by the implosion of the hedge fund Long-Term Capital Management, was similarly a case of providing money where it wasn’t needed. Yet it helped restore calm to the markets, by conveying the sense that policy makers were on top of the situation.

Friday’s cut might do the same thing. But if it doesn’t, it’s not clear what comes next.

Whatever happens now, it’s hard to avoid the sense that the growing complexity of our financial system is making it increasingly prone to crises — crises that are beyond the ability of traditional policies to handle. Maybe we’ll make it through this crisis unscathed. But what about the next one, or the one after that?

Photo Credit: Paul Krugman. (The New York Times)

Also See:

• Myret Zaki | Who Will Prevent the Banks From Losing?

  Right, center and left: Myret Zaki in Le Temps, Joseph Stiglitz in The Taipei Times and Barbara Ehrenreich in The Nation decry the Greenspan debt bubble and expose its inescapable consequences....

Technorati tags: Paul Krugman, New York Times, Housing, Mortgages, Finances, Banks and Banking, Interest Rates, news, op ed

Reality Based Solutions

The Krug Man warns that "the housing slump will probably be with us for years, not months." What can we do about it? Read on.

Workouts, Not Bailout
By Paul Krugman
The New York Times

In April, Henry Paulson, the Treasury secretary, declared that all the signs he saw indicated that the housing market was “at or near the bottom.” Earlier this month he was still insisting that problems caused by the meltdown in the market for subprime mortgages were “largely contained.”

But the time for denial is past.

According to data released yesterday, both housing starts and applications for building permits have fallen to their lowest levels in a decade, showing that home construction is still in free fall. And if historical relationships are any guide, home prices are still way too high. The housing slump will probably be with us for years, not months.

Meanwhile, it’s becoming clear that the mortgage problem is anything but contained. For one thing, it’s not confined to subprime mortgages, which are loans to people who don’t satisfy the standard financial criteria. There are also growing problems in so-called Alt-A mortgages (don’t ask), which are another 20 percent of the mortgage market. Problems are starting to appear in prime loans, too — all of which is what you would expect given the depth of the housing slump.

Many on Wall Street are clamoring for a bailout — for Fannie Mae or the Federal Reserve or someone to step in and buy mortgage-backed securities from troubled hedge funds. But that would be like having the taxpayers bail out Enron or WorldCom when they went bust — it would be saving bad actors from the consequences of their misdeeds.

For it is becoming increasingly clear that the real-estate bubble of recent years, like the stock bubble of the late 1990s, both caused and was fed by widespread malfeasance. Rating agencies like Moody’s Investors Service, which get paid a lot of money for rating mortgage-backed securities, seem to have played a similar role to that played by complaisant accountants in the corporate scandals of a few years ago. In the ’90s, accountants certified dubious earning statements; in this decade, rating agencies declared dubious mortgage-backed securities to be highest-quality, AAA assets.

Yet our desire to avoid letting bad actors off the hook shouldn’t prevent us from doing the right thing, both morally and in economic terms, for borrowers who were victims of the bubble.

Most of the proposals I’ve seen for dealing with the problems of subprime borrowers are of the locking-the-barn-door-after-the-horse-is-gone variety: they would curb abusive lending practices — which would have been very useful three years ago — but they wouldn’t help much now. What we need at this point is a policy to deal with the consequences of the housing bust.

Consider a borrower who can’t meet his or her mortgage payments and is facing foreclosure. In the past, as Gretchen Morgenson recently pointed out in The Times, the bank that made the loan would often have been willing to offer a workout, modifying the loan’s terms to make it affordable, because what the borrower was able to pay would be worth more to the bank than its incurring the costs of foreclosure and trying to resell the home. That would have been especially likely in the face of a depressed housing market.

Today, however, the mortgage broker who made the loan is usually, as Ms. Morgenson says, “the first link in a financial merry-go-round.” The mortgage was bundled with others and sold to investment banks, who in turn sliced and diced the claims to produce artificial assets that Moody’s or Standard & Poor’s were willing to classify as AAA. And the result is that there’s nobody to deal with.

This looks to me like a clear case for government intervention: there’s a serious market failure, and fixing that failure could greatly help thousands, maybe hundreds of thousands, of Americans. The federal government shouldn’t be providing bailouts, but it should be helping to arrange workouts.

And we’ve done this sort of thing before — for third-world countries, not for U.S. citizens. The Latin American debt crisis of the 1980s was brought to an end by so-called Brady deals, in which creditors were corralled into reducing the countries’ debt burdens to manageable levels. Both the debtors, who escaped the shadow of default, and the creditors, who got most of their money, benefited.

The mechanics of a domestic version would need a lot of work, from lawyers as well as financial experts. My guess is that it would involve federal agencies buying mortgages — not the securities conjured up from these mortgages, but the original loans — at a steep discount, then renegotiating the terms. But I’m happy to listen to better ideas.

The point, however, is that doing nothing isn’t the only alternative to letting the parties who got us into this mess off the hook. Say no to bailouts — but let’s help borrowers work things out.

Photo Credit: Paul Krugman. (The New York Times)

Also See:

• The Hill | Gilded Age Crime: Poor Go Homeless, Wealthy Get Bailouts


• Wall Street's Grim Justice: Those Who Profited from Subprimes Now Suffer Too


• A Look at the Numbers: How the Poor Get Poorer


• Paul Craig Roberts: China is not the Problem

  "Offshoring and Free Market Ideology...."

• A debt culture gone awry - International Herald Tribune

  Hamid Varzi, "an economist and banker based in Tehran," discusses how the U.S. is viewed by the rest of the world....

• Corporate Capitalists: Government Comes to the Rescue:

  "...These corporate capitalists should be exposed when they always say that government is the problem whenever it moves to help the little guys with health and safety regulations, for example, but government is wonderful when the bureaucrats are summoned to perform missions to rescue them from their own greed and folly."

• NY Times: Watershed:

  "America needs progressive, pro-market leaders who will advance a legal and regulatory framework to reduce excesses in lending and derivatives...."

• Danny Schechter (Huffington Post): "An Entity We Can't Even See": Mythifying Markets and Mystifying The Public About The Financial Crisis

Technorati tags: Paul Krugman, New York Times, Housing, Mortgages, Fannie Mae, Politics, U.S. Government, news, op ed

The Next Narcissist-in-Chief?

It's All About Them
By Paul Krugman
The New York Times

Ask not what your country can do for you — ask what you can do for your father’s political campaign.

Last week, at one of Mitt Romney’s “Ask Mitt” forums, a woman in the audience asked Mr. Romney whether any of his five sons are serving in the military and, if not, when they plan to enlist.

The candidate replied with a rambling attempt to change the subject, but near the end he let his real feelings slip. “It’s remarkable how we can show our support for our nation,” he said, “and one of the ways my sons are showing support for our nation is helping to get me elected, because they think I’d be a great president.”

Wow. The important point isn’t the fact that Mr. Romney’s sons aren’t in uniform — although it is striking just how few of those who claim to believe that we’re engaged in a struggle for our very existence think that they themselves should be called on to make any sacrifices. The point is, instead, that Mr. Romney apparently considers helping him get elected an act of service comparable to putting your life on the line in Iraq.

Yet the week’s prize for most self-centered remark by a serious presidential contender goes not to Mr. Romney, but to his principal rival for the G.O.P. nomination.

Rudy Giuliani has lately been getting some long-overdue criticism for his missteps both before and after 9/11. For example, The Village Voice reports that he insisted that the city’s emergency command center — which included a personal suite with its own elevator that he visited “often, even on weekends, bringing his girlfriend Judi Nathan there long before the relationship surfaced” — be within walking distance of City Hall. This led to the disastrous decision to locate the center in the World Trade Center, an obvious potential terrorist target.

At the same time, Mr. Giuliani is being attacked for his failure to take adequate precautions to protect those who worked on the cleanup at ground zero from the hazards at the site. Many workers have since been sickened by the dust and toxic materials.

For a politician whose entire campaign is based on the myth of his leadership that fateful day — as The Onion put it, Mr. Giuliani is running for “president of 9/11” — anything that challenges his personal legend is a big problem. So here’s what Mr. Giuliani said last week in response: “I was at ground zero as often, if not more, than most of the workers. ... I was exposed to exactly the same things they were exposed to. So in that sense, I’m one of them.”

Real ground zero workers, who were digging through the toxic rubble while Mr. Giuliani held photo ops, were understandably outraged. So the next day Mr. Giuliani tried to recover, claiming that “what I was trying to say yesterday is that I empathize with them because I feel like I have that same risk.” But thanks to the wonders of YouTube, we can all watch Mr. Giuliani’s actual demeanor as he delivered the original remarks. Empathy had nothing to do with it.

What’s striking about these unintentional moments of self-revelation is how much Mr. Romney and Mr. Giuliani sound like the current occupant of the White House.

It has long been clear that President Bush doesn’t feel other people’s pain. His self-centeredness shines through whenever he makes off-the-cuff, unscripted remarks, from his jocular obliviousness in the aftermath of Hurricane Katrina to the joke he made last year in San Antonio when visiting the Brooke Army Medical Center, which treats the severely wounded: “As you can possibly see, I have an injury myself — not here at the hospital, but in combat with a cedar. I eventually won. The cedar gave me a little scratch.”

What’s now clear is that the two men most likely to end up as the G.O.P. presidential nominee are cut from the same cloth.

This probably isn’t a coincidence. Arguably, the current state of the Republican Party is such that only extreme narcissists have a chance of getting nominated.

To be a serious presidential contender, after all, you have to be a fairly smart guy — and nobody has accused either Mr. Romney or Mr. Giuliani of being stupid. To appeal to the G.O.P. base, however, you have to say very stupid things, like Mr. Romney’s declaration that we should “double Guantánamo,” or Mr. Giuliani’s dismissal of the idea that raising taxes is sometimes necessary to pay for things like repairing bridges as a “Democratic, liberal assumption.”

So the G.O.P. field is dominated by smart men willing to play dumb to further their personal ambitions. We shouldn’t be surprised, then, to learn that these men are monstrously self-centered.

All of which leaves us with a political question. Most voters are thoroughly fed up with the current narcissist in chief. Are they really ready to elect another?

Photo Credit: Paul Krugman. (The New York Times)

Technorati tags: Paul Krugman, New York Times, 2008 Presidential Election, Politics, U.S. Government, Elections, news, op ed

Economic Doomsday?

The Krug Man weighs in on the current financial liquidity crisis in today's Times. The really scary thing about it, according to Krugman, is that there is not a whole lot policy makers can do to remedy the situation.

I'm not panicking yet, and neither is Mr. Krugman. But now would be a great time for anyone so religiously inclined to say a prayer or two....

Very Scary Things
By Paul Krugman
The New York Times

In September 1998, the collapse of Long Term Capital Management, a giant hedge fund, led to a meltdown in the financial markets similar, in some ways, to what’s happening now. During the crisis in ’98, I attended a closed-door briefing given by a senior Federal Reserve official, who laid out the grim state of the markets. “What can we do about it?” asked one participant. “Pray,” replied the Fed official.

Our prayers were answered. The Fed coordinated a rescue for L.T.C.M., while Robert Rubin, the Treasury secretary at the time, and Alan Greenspan, who was the Fed chairman, assured investors that everything would be all right. And the panic subsided.

Yesterday, President Bush, showing off his M.B.A. vocabulary, similarly tried to reassure the markets. But Mr. Bush is, let’s say, a bit lacking in credibility. On the other hand, it’s not clear that anyone could do the trick: right now we’re suffering from a serious shortage of saviors. And that’s too bad, because we might need one.

What’s been happening in financial markets over the past few days is something that truly scares monetary economists: liquidity has dried up. That is, markets in stuff that is normally traded all the time — in particular, financial instruments backed by home mortgages — have shut down because there are no buyers.

This could turn out to be nothing more than a brief scare. At worst, however, it could cause a chain reaction of debt defaults.

The origins of the current crunch lie in the financial follies of the last few years, which in retrospect were as irrational as the dot-com mania. The housing bubble was only part of it; across the board, people began acting as if risk had disappeared.

Everyone knows now about the explosion in subprime loans, which allowed people without the usual financial qualifications to buy houses, and the eagerness with which investors bought securities backed by these loans. But investors also snapped up high-yield corporate debt, a k a junk bonds, driving the spread between junk bond yields and U.S. Treasuries down to record lows.

Then reality hit — not all at once, but in a series of blows. First, the housing bubble popped. Then subprime melted down. Then there was a surge in investor nervousness about junk bonds: two months ago the yield on corporate bonds rated B was only 2.45 percent higher than that on government bonds; now the spread is well over 4 percent.

Investors were rattled recently when the subprime meltdown caused the collapse of two hedge funds operated by Bear Stearns, the investment bank. Since then, markets have been manic-depressive, with triple-digit gains or losses in the Dow Jones industrial average — the rule rather than the exception for the past two weeks.

But yesterday’s announcement by BNP Paribas, a large French bank, that it was suspending the operations of three of its own funds was, if anything, the most ominous news yet. The suspension was necessary, the bank said, because of “the complete evaporation of liquidity in certain market segments” — that is, there are no buyers.

When liquidity dries up, as I said, it can produce a chain reaction of defaults. Financial institution A can’t sell its mortgage-backed securities, so it can’t raise enough cash to make the payment it owes to institution B, which then doesn’t have the cash to pay institution C — and those who do have cash sit on it, because they don’t trust anyone else to repay a loan, which makes things even worse.

And here’s the truly scary thing about liquidity crises: it’s very hard for policy makers to do anything about them.

The Fed normally responds to economic problems by cutting interest rates — and as of yesterday morning the futures markets put the probability of a rate cut by the Fed before the end of next month at almost 100 percent. It can also lend money to banks that are short of cash: yesterday the European Central Bank, the Fed’s trans-Atlantic counterpart, lent banks $130 billion, saying that it would provide unlimited cash if necessary, and the Fed pumped in $24 billion.

But when liquidity dries up, the normal tools of policy lose much of their effectiveness. Reducing the cost of money doesn’t do much for borrowers if nobody is willing to make loans. Ensuring that banks have plenty of cash doesn’t do much if the cash stays in the banks’ vaults.

There are other, more exotic things the Fed and, more important, the executive branch of the U.S. government could do to contain the crisis if the standard policies don’t work. But for a variety of reasons, not least the current administration’s record of incompetence, we’d really rather not go there.

Let’s hope, then, that this crisis blows over as quickly as that of 1998. But I wouldn’t count on it.

Also See:

• BNP freezes $2.2B of funds:

  "France's biggest listed bank, BNP Paribas, froze 1.6 billion euros ($2.2 billion) worth of funds on Thursday, citing the U.S. subprime mortgage sector woes that have rattled financial markets worldwide...."

• Dow Falls 387 Points on New Loan Fears:

  "Stocks on Wall Street today suffered their biggest one-day decline since February after the turmoil in the home-loan market caused renewed concerns about tightening credit worldwide...."

• Asia and the vicious cycle of bank bailouts:

  "In the past few days, a number of European banks have announced substantial losses on the US subprime and related sectors, which combined with a suspension of redemptions by various funds, caused temporary panic in money markets. Both the European Central Bank and the Fed responded by injecting liquidity into the system, but market confidence had been shaken so badly by then that dislocation in credit and equity markets became unavoidable...."

• The Unknown Candidate: Is Reality About To Crash Bushie's Wonderland?


• Bush May Try to Cut Corporate Tax Rates:

  "President Bush said yesterday that he is considering a fresh plan to cut tax rates for U.S. corporations to make them more competitive around the world, an initiative that could further inflame a battle with the Democratic Congress over spending and taxes and help define the remainder of his tenure...."

Technorati tags: Paul Krugman, New York Times, U.S. Economy, Credit, Mortgages, Hedge Funds, news, op ed

Substance Abuse

The media continues mindlessly on it's marathon disaster reportathon. The politicians continue to punt the soft ball questions tossed their way by pandering pundits. Our completely corrupted political process stumbles along its preordained path.

Paul Krugman, in todays Times op ed, reports on the continuing lack of substance in current presidential debates.

The Substance Thing
By Paul Krugman
The New York Times

"Two presidential elections ago, the conventional wisdom said that George W. Bush was a likable, honest fellow. But those of us who actually analyzed what he was saying about policy came to a different conclusion — namely, that he was irresponsible and deeply dishonest. His numbers didn’t add up, and in his speeches he simply lied about the content of his own proposals.

In the fifth year of the disastrous war Mr. Bush started on false pretenses, it’s clear who was right. What a candidate says about policy, not the supposedly revealing personal anecdotes political reporters love to dwell on, is the best way to judge his or her character.

So what are the current presidential candidates saying about policy, and what does it tell us about them?

Well, none of the leading Republican candidates have said anything substantive about policy. Go through their speeches and campaign materials and you’ll see a lot of posturing, especially about how tough they are on terrorists — but nothing at all about what they actually plan to do.

In fact, I suspect that the real reason most of the Republicans are ducking a YouTube debate is that they’re afraid they would be asked questions about policy, rather than being invited to compare themselves to Ronald Reagan.

But didn’t Rudy Giuliani just announce a health care plan? No, he vaguely described a tax cut proposal that he says would do something good for health care. (Most experts disagree.) But he offered no specifics about how the plan would work, how much it would cost or how he would pay for it.

As Ezra Klein of The American Prospect has pointed out, in the speech announcing his “plan” — and since no policy document has been released, the speech is all we have to go on — Mr. Giuliani never uttered the word “uninsured.” He did, however, repeatedly denounce “socialized medicine” or some variant thereof.

The entire G.O.P. field, then, fails the substance test.

There is, by contrast, a lot of substance on the Democratic side, with John Edwards forcing the pace. Most notably, in February, Mr. Edwards transformed the whole health care debate with a plan that offers a politically and fiscally plausible path to universal health insurance.

Whatever the fate of the Edwards candidacy, Mr. Edwards will deserve a lot of the credit if and when we do get universal care in this country.

Mr. Edwards has also offered a detailed, sensible plan for tax reform, and some serious antipoverty initiatives.

Four months after the Edwards health care plan was announced, Barack Obama followed with a broadly similar but somewhat less comprehensive plan. Like Mr. Edwards, Mr. Obama has also announced a serious plan to fight poverty.

Hillary Clinton, however, has been evasive. She conveys the impression that there’s not much difference between her policy positions and those of the other candidates — but she’s offered few specifics. In particular, unlike Mr. Edwards or Mr. Obama, she hasn’t announced a specific universal care plan, or explicitly committed herself to paying for health reform by letting some of the Bush tax cuts expire.

For those who believe that the time for universal care has come, this lack of specifics is disturbing. In fact, what Mrs. Clinton said about health care in February’s Democratic debate suggested a notable lack of urgency: “Well, I want to have universal health care coverage by the end of my second term.”

On Saturday, at the YearlyKos Convention in Chicago, she sounded more forceful: “Universal health care will be my highest domestic priority as president.” But does this represent a real change in position? It’s hard to know, since she has said nothing about how she would cover the uninsured.

And even if you believe Mrs. Clinton’s contention that her positions could never be influenced by lobbyists’ money — a remark that drew boos and hisses from the Chicago crowd — there’s reason to worry about the big contributions she receives from the insurance and drug industries. Are they simply betting on the front-runner, or are they also backing the Democratic candidate least likely to hurt their profits?

All of the leading Democratic candidates are articulate and impressive. It’s easy to imagine any of them as president. But after what happened in 2000, it worries me that Mrs. Clinton is showing an almost Republican aversion to talking about substance."

Technorati tags: Paul Krugman, New York Times, Politics, U.S. Government, 2008 Presidential Election, Presidential Elections, news, op ed

U.S. Web Lag

The French Connections
By Paul Krugman
The New York Times

There was a time when everyone thought that the Europeans and the Japanese were better at business than we were. In the early 1990s airport bookstores were full of volumes with samurai warriors on their covers, promising to teach you the secrets of Japanese business success. Lester Thurow’s 1992 book, “Head to Head: The Coming Economic Battle Among Japan, Europe and America,” which spent more than six months on the Times best-seller list, predicted that Europe would win.

Then it all changed, and American despondency turned into triumphalism. Partly this was because the Clinton boom contrasted so sharply with Europe’s slow growth and Japan’s decade-long slump. Above all, however, our new confidence reflected the rise of the Internet. Jacques Chirac complained that the Internet was an “Anglo-Saxon network,” and he had a point — France, like most of Europe except Scandinavia, lagged far behind the U.S. when it came to getting online.

What most Americans probably don’t know is that over the last few years the situation has totally reversed. As the Internet has evolved — in particular, as dial-up has given way to broadband connections using DSL, cable and other high-speed links — it’s the United States that has fallen behind.

The numbers are startling. As recently as 2001, the percentage of the population with high-speed access in Japan and Germany was only half that in the United States. In France it was less than a quarter. By the end of 2006, however, all three countries had more broadband subscribers per 100 people than we did.

Even more striking is the fact that our “high speed” connections are painfully slow by other countries’ standards. According to the Information Technology and Innovation Foundation, French broadband connections are, on average, more than three times as fast as ours. Japanese connections are a dozen times faster. Oh, and access is much cheaper in both countries than it is here.

As a result, we’re lagging in new applications of the Internet that depend on high speed. France leads the world in the number of subscribers to Internet TV; the United States isn’t even in the top 10.

What happened to America’s Internet lead? Bad policy. Specifically, the United States made the same mistake in Internet policy that California made in energy policy: it forgot — or was persuaded by special interests to ignore — the reality that sometimes you can’t have effective market competition without effective regulation.

You see, the world may look flat once you’re in cyberspace — but to get there you need to go through a narrow passageway, down your phone line or down your TV cable. And if the companies controlling these passageways can behave like the robber barons of yore, levying whatever tolls they like on those who pass by, commerce suffers.

America’s Internet flourished in the dial-up era because federal regulators didn’t let that happen — they forced local phone companies to act as common carriers, allowing competing service providers to use their lines. Clinton administration officials, including Al Gore and Reed Hundt, the chairman of the Federal Communications Commission, tried to ensure that this open competition would continue — but the telecommunications giants sabotaged their efforts, while The Wall Street Journal’s editorial page ridiculed them as people with the minds of French bureaucrats.

And when the Bush administration put Michael Powell in charge of the F.C.C., the digital robber barons were basically set free to do whatever they liked. As a result, there’s little competition in U.S. broadband — if you’re lucky, you have a choice between the services offered by the local cable monopoly and the local phone monopoly. The price is high and the service is poor, but there’s nowhere else to go.

Meanwhile, as a recent article in Business Week explains, the real French bureaucrats used judicious regulation to promote competition. As a result, French consumers get to choose from a variety of service providers who offer reasonably priced Internet access that’s much faster than anything I can get, and comes with free voice calls, TV and Wi-Fi.

It’s too early to say how much harm the broadband lag will do to the U.S. economy as a whole. But it’s interesting to learn that health care isn’t the only area in which the French, who can take a pragmatic approach because they aren’t prisoners of free-market ideology, simply do things better.

Photo Credit: Paul Krugman. (The New York Times)

Technorati tags: Paul Krugman, New York Times, Computers, Internet, Politics, US Government, FCC, news, op ed

All the President's Enablers

By Paul Krugman
The New York Times

In a coordinated public relations offensive, the White House is using reliably friendly pundits — amazingly, they still exist — to put out the word that President Bush is as upbeat and confident as ever. It might even be true.

What I don’t understand is why we’re supposed to consider Mr. Bush’s continuing confidence a good thing.

Remember, Mr. Bush was confident six years ago when he promised to bring in Osama, dead or alive. He was confident four years ago, when he told the insurgents to bring it on. He was confident two years ago, when he told Brownie that he was doing a heckuva job.

Now Iraq is a bloody quagmire, Afghanistan is deteriorating and the Bush administration’s own National Intelligence Estimate admits, in effect, that thanks to Mr. Bush’s poor leadership America is losing the struggle with Al Qaeda. Yet Mr. Bush remains confident.

Sorry, but that’s not reassuring; it’s terrifying. It doesn’t demonstrate Mr. Bush’s strength of character; it shows that he has lost touch with reality.

Actually, it’s not clear that he ever was in touch with reality. I wrote about the Bush administration’s “infallibility complex,” its inability to admit mistakes or face up to real problems it didn’t want to deal with, in June 2002. Around the same time Ron Suskind, the investigative journalist, had a conversation with a senior Bush adviser who mocked the “reality-based community,” asserting that “when we act, we create our own reality.”

People who worried that the administration was living in a fantasy world used to be dismissed as victims of “Bush derangement syndrome,” liberals driven mad by Mr. Bush’s success. Now, however, it’s a syndrome that has spread even to former loyal Bushies.

Yet while Mr. Bush no longer has many true believers, he still has plenty of enablers — people who understand the folly of his actions, but refuse to do anything to stop him.

This week’s prime example is Senator Richard Lugar of Indiana, who made headlines a few weeks ago with a speech declaring that “our course in Iraq has lost contact with our vital national security interests.” Mr. Lugar is a smart, sensible man. He once acted courageously to head off another foreign policy disaster, persuading a reluctant Ronald Reagan to stop supporting Ferdinand Marcos, the corrupt leader of the Philippines, after a stolen election.

Yet that political courage was nowhere in evidence when Senate Democrats tried to get a vote on a measure that would have forced a course change in Iraq, and Republicans responded by threatening a filibuster. Mr. Lugar, along with several other Republicans who have expressed doubts about the war, voted against cutting off debate, thereby helping ensure that the folly he described so accurately in his Iraq speech will go on.

Thanks to that vote, nothing will happen until Gen. David Petraeus, the top commander in Iraq, delivers his report in September. But don’t expect too much even then. I hope he proves me wrong, but the general’s history suggests that he’s another smart, sensible enabler.

I don’t know why the op-ed article that General Petraeus published in The Washington Post on Sept. 26, 2004, hasn’t gotten more attention. After all, it puts to rest any notion that the general stands above politics: I don’t think it’s standard practice for serving military officers to publish opinion pieces that are strikingly helpful to an incumbent, six weeks before a national election.

In the article, General Petraeus told us that “Iraqi leaders are stepping forward, leading their country and their security forces courageously.” And those security forces were doing just fine: their leaders “are displaying courage and resilience” and “momentum has gathered in recent months.”

In other words, General Petraeus, without saying anything falsifiable, conveyed the totally misleading impression, highly convenient for his political masters, that victory was just around the corner. And the best guess has to be that he’ll do the same thing three years later.

You know, at this point I think we need to stop blaming Mr. Bush for the mess we’re in. He is what he always was, and everyone except a hard core of equally delusional loyalists knows it.

Yet Mr. Bush keeps doing damage because many people who understand how his folly is endangering the nation’s security still refuse, out of political caution and careerism, to do anything about it.

Photo Credit: Paul Krugman. (The New York Times)

Technorati tags: Paul Krugman, New York Times, Bush, Politics, U.S. Government, David Petraeus, Ronald Reagan, news, commentary, op ed

No More Excuses

The Krug Man points out in today's Times op ed that "the opponents of universal health care appear to have run out of honest arguments."

The question is, what will Americans -- as in YOU -- do to demand universal health care?


The Waiting Game
By Paul Krugman
The New York Times

Being without health insurance is no big deal. Just ask President Bush. “I mean, people have access to health care in America,” he said last week. “After all, you just go to an emergency room.”

This is what you might call callousness with consequences. The White House has announced that Mr. Bush will veto a bipartisan plan that would extend health insurance, and with it such essentials as regular checkups and preventive medical care, to an estimated 4.1 million currently uninsured children. After all, it’s not as if those kids really need insurance — they can just go to emergency rooms, right?

O.K., it’s not news that Mr. Bush has no empathy for people less fortunate than himself. But his willful ignorance here is part of a larger picture: by and large, opponents of universal health care paint a glowing portrait of the American system that bears as little resemblance to reality as the scare stories they tell about health care in France, Britain, and Canada.

The claim that the uninsured can get all the care they need in emergency rooms is just the beginning. Beyond that is the myth that Americans who are lucky enough to have insurance never face long waits for medical care.

Actually, the persistence of that myth puzzles me. I can understand how people like Mr. Bush or Fred Thompson, who declared recently that “the poorest Americans are getting far better service” than Canadians or the British, can wave away the desperation of uninsured Americans, who are often poor and voiceless. But how can they get away with pretending that insured Americans always get prompt care, when most of us can testify otherwise?

A recent article in Business Week put it bluntly: “In reality, both data and anecdotes show that the American people are already waiting as long or longer than patients living with universal health-care systems.”

A cross-national survey conducted by the Commonwealth Fund found that America ranks near the bottom among advanced countries in terms of how hard it is to get medical attention on short notice (although Canada was slightly worse), and that America is the worst place in the advanced world if you need care after hours or on a weekend.

We look better when it comes to seeing a specialist or receiving elective surgery. But Germany outperforms us even on those measures — and I suspect that France, which wasn’t included in the study, matches Germany’s performance.

Besides, not all medical delays are created equal. In Canada and Britain, delays are caused by doctors trying to devote limited medical resources to the most urgent cases. In the United States, they’re often caused by insurance companies trying to save money.

This can lead to ordeals like the one recently described by Mark Kleiman, a professor at U.C.L.A., who nearly died of cancer because his insurer kept delaying approval for a necessary biopsy. “It was only later,” writes Mr. Kleiman on his blog, “that I discovered why the insurance company was stalling; I had an option, which I didn’t know I had, to avoid all the approvals by going to ‘Tier II,’ which would have meant higher co-payments.”

He adds, “I don’t know how many people my insurance company waited to death that year, but I’m certain the number wasn’t zero.”

To be fair, Mr. Kleiman is only surmising that his insurance company risked his life in an attempt to get him to pay more of his treatment costs. But there’s no question that some Americans who seemingly have good insurance nonetheless die because insurers are trying to hold down their “medical losses” — the industry term for actually having to pay for care.

On the other hand, it’s true that Americans get hip replacements faster than Canadians. But there’s a funny thing about that example, which is used constantly as an argument for the superiority of private health insurance over a government-run system: the large majority of hip replacements in the United States are paid for by, um, Medicare.

That’s right: the hip-replacement gap is actually a comparison of two government health insurance systems. American Medicare has shorter waits than Canadian Medicare (yes, that’s what they call their system) because it has more lavish funding — end of story. The alleged virtues of private insurance have nothing to do with it.

The bottom line is that the opponents of universal health care appear to have run out of honest arguments. All they have left are fantasies: horror fiction about health care in other countries, and fairy tales about health care here in America.

Photo Credit: Paul Krugman. (The New York Times)

Also See:

• "Relatively modest Cuban medical programs"

Technorati tags: Paul Krugman, New York Times, Health Insurance, Managed Care, Universal Health Care, Medicine and Health, Medicare, Bush, news, commentary, op ed

Dems Hedge on Tax Loophole

An Unjustified Privilege
By Paul Krugman
The New York Times

During the 2000 presidential campaign, Ralph Nader mocked politicians of both parties as “Republicrats,” equally subservient to corporations and the wealthy. It was nonsense, of course: the modern G.O.P. is so devoted to the cause of making the rich richer that it makes even the most business-friendly Democrats look like F.D.R.

But right now, as I watch Senate Democrats waffle over what should be a clear issue of justice and sound tax policy — namely, whether managers of private equity funds and hedge funds should be subject to the same taxes as ordinary working Americans — I’m starting to feel that Mr. Nader wasn’t all wrong.

What’s at stake here is a proposal by House Democrats to tax “carried interest” as regular income. This would close a tax loophole that is complicated in detail, but basically lets fund managers take a large part of the fees they earn for handling other peoples’ money and redefine those fees, for tax purposes, as capital gains.

The effect of this redefinition is that income that should be considered by normal standards to be ordinary income taxed at a 35 percent rate is treated as capital gains, taxed at only 15 percent instead. So fund managers get to pay a low tax rate that is supposed to provide incentives to risk-taking investors, even though they aren’t investors and they aren’t taking risks.

For example, the typical hedge-fund manager has a 2-and-20 contract — that is, he gets a fee equal to 2 percent of the funds under management, plus 20 percent of whatever his fund earns. It’s not exactly straight salary, but none of this income comes from putting his own wealth at risk. Except for the fact that he might make a billion dollars a year, he resembles a waitress whose income depends on a mix of wages and tips, or a salesman who lives on a mix of salary and commissions, more than he resembles an entrepreneur who sinks his life savings into a new business.

So why does he get the same tax breaks as that entrepreneur? Not to put too fine a point on it, why does Henry Kravis pay a lower tax rate on his management fees than I pay on my book royalties?

There’s a larger question one could ask: should we even be giving preferential tax treatment to true capital gains? I’d say no, because there’s very little evidence that taxing capital gains as ordinary income would actually hurt the economy. Meanwhile, the low tax rate on capital gains is one main reason the truly rich often pay lower tax rates than the middle class.

A couple of weeks ago, Warren Buffett pointed out that he pays an average federal income tax rate of 17.7 percent, while his receptionist pays about 30 percent.

But even those who disagree with me on the larger point, who think the special treatment of capital gains is justified, should be able to agree that treating the income of fund managers differently from the way we treat the income of everyone else who works for a living makes no sense. And that’s why it’s very disheartening to read that prominent Democratic senators are taking seriously the claims of fund managers that making them pay taxes like regular people would discourage risk-taking.

The immediate response should be: what risk-taking? To repeat: the fund managers aren’t entrepreneurs; they aren’t putting their own assets on the line.

Look, this isn’t about envy, about punishing success. No doubt many fund managers earn their pay. Some of them also give generously to worthy causes.

But closing the carried interest loophole should be a simple question of fairness: other Americans also earn their pay, but they don’t get special tax breaks. Plus, we’re talking about a lot of lost revenue due to that loophole — revenue that could, for example, be paying for the health care of tens if not hundreds of thousands of children.

And since we’re living in the real world of politics, there’s also the Republicrat issue: the hesitation of the Senate Democrats is terrible for the party’s image. It conveys the impression that they’re as beholden to hedge funds, one of the few types of businesses whose campaign contributions strongly favor Democrats, as Republicans are to the oil and drug industries.

So here’s a plea to Democratic senators on the fence: do the right thing and close this unjustified tax loophole.

Photo Credit: Paul Krugman. (The New York Times)

Technorati tags: Paul Krugman, New York Times, Hedge Funds, Taxation, Democratic Party, Politics, U.S. Government, news, commentary, op ed

America: SICKO Society

Another Krugman MUST READ op ed follows.

By the way, if you haven't yet seen Michael Moore's "SICKO" yet, do. If you see only one film this year -- see "SICKO." It ought to be required viewing for every citizen in this country.

The film will move you. It will surprise you. It will make you think. It will make you angry. Most important, it hopefully will make you DO SOMETHING: lobby your representatives loudly and ceaselessly for Universal Health Care.

Health Care Terror
By Paul Krugman
The New York Times

These days terrorism is the first refuge of scoundrels. So when British authorities announced that a ring of Muslim doctors working for the National Health Service was behind the recent failed bomb plot, we should have known what was coming.

“National healthcare: Breeding ground for terror?” read the on-screen headline, as the Fox News host Neil Cavuto and the commentator Jerry Bowyer solemnly discussed how universal health care promotes terrorism.

While this was crass even by the standards of Bush-era political discourse, Fox was following in a long tradition. For more than 60 years, the medical-industrial complex and its political allies have used scare tactics to prevent America from following its conscience and making access to health care a right for all its citizens.

I say conscience, because the health care issue is, most of all, about morality.

That’s what we learn from the overwhelming response to Michael Moore’s “Sicko.” Health care reformers should, by all means, address the anxieties of middle-class Americans, their growing and justified fear of finding themselves uninsured or having their insurers deny coverage when they need it most. But reformers shouldn’t focus only on self-interest. They should also appeal to Americans’ sense of decency and humanity.

What outrages people who see “Sicko” is the sheer cruelty and injustice of the American health care system — sick people who can’t pay their hospital bills literally dumped on the sidewalk, a child who dies because an emergency room that isn’t a participant in her mother’s health plan won’t treat her, hard-working Americans driven into humiliating poverty by medical bills.

“Sicko” is a powerful call to action — but don’t count the defenders of the status quo out. History shows that they’re very good at fending off reform by finding new ways to scare us.

These scare tactics have often included over-the-top claims about the dangers of government insurance. “Sicko” plays part of a recording Ronald Reagan once made for the American Medical Association, warning that a proposed program of health insurance for the elderly — the program now known as Medicare — would lead to totalitarianism.

Right now, by the way, Medicare — which did enormous good, without leading to a dictatorship — is being undermined by privatization.

Mainly, though, the big-money interests with a stake in the present system want you to believe that universal health care would lead to a crushing tax burden and lousy medical care.

Now, every wealthy country except the United States already has some form of universal care. Citizens of these countries pay extra taxes as a result — but they make up for that through savings on insurance premiums and out-of-pocket medical costs. The overall cost of health care in countries with universal coverage is much lower than it is here.

Meanwhile, every available indicator says that in terms of quality, access to needed care and health outcomes, the U.S. health care system does worse, not better, than other advanced countries — even Britain, which spends only about 40 percent as much per person as we do.

Yes, Canadians wait longer than insured Americans for elective surgery. But over all, the average Canadian’s access to health care is as good as that of the average insured American — and much better than that of uninsured Americans, many of whom never receive needed care at all.

And the French manage to provide arguably the best health care in the world, without significant waiting lists of any kind. There’s a scene in “Sicko” in which expatriate Americans in Paris praise the French system. According to the hard data they’re not romanticizing. It really is that good.

All of which raises the question Mr. Moore asks at the beginning of “Sicko”: who are we?

“We have always known that heedless self-interest was bad morals; we know now that it is bad economics.” So declared F.D.R. in 1937, in words that apply perfectly to health care today. This isn’t one of those cases where we face painful tradeoffs — here, doing the right thing is also cost-efficient. Universal health care would save thousands of American lives each year, while actually saving money.

So this is a test. The only things standing in the way of universal health care are the fear-mongering and influence-buying of interest groups. If we can’t overcome those forces here, there’s not much hope for America’s future.

Photo Credit: Paul Krugman. (The New York Times)

Also See:

• Health care wars and the lies the for-profit racketeers tell us:

  "As Michael Mooreís ìSickoî continues to draw crowds and spawn spontaneous health care reform advocacy groups across the country, the health care industry is planning to hit back hard...."

• Health Care Looms as Major Campaign Issue:

  "Eighteen months before the election, presidential candidates are already discussing a major overhaul to the health care system, reports Robin Toner of The New York Times. Toner writes: "Their approaches are very different, reflecting longstanding divisions between the parties on the role of government versus the private market in addressing the affordability and availability of health insurance...."

• Google vs Michael Moore:

  "In an interesting move, Google has come out against controversial documentary film maker Michael Moore’s latest documentary “Sicko” in a post titled “Does negative press make you Sicko?“....

• 'SiCKO' Builds A Movement | Campaign for America's Future

Technorati tags: Paul Krugman, New York Times, SICKO, Michael Moore, Health Insurance, Managed Care, Medicine, Health, Universal Health Insurance, Medicare, news, commentary, op ed

Sacrifice Is for Suckers

Again, people, impeachment is the only answer....

Sacrifice Is for Suckers
By Paul Krugman
The New York Times

On this Fourth of July, President Bush compared the Iraq war to the Revolutionary War, and called for “more patience, more courage and more sacrifice.” Unfortunately, it seems that nobody asked the obvious question: “What sacrifices have you and your friends made, Mr. President?”

On second thought, there would be no point in asking that question. In Mr. Bush’s world, only the little people make sacrifices.

You see, the Iraq war, although Mr. Bush insists that it’s part of a Global War on Terror™, a fight to the death between good and evil, isn’t like America’s other great wars — wars in which the wealthy shared the financial burden through higher taxes and many members of the elite fought for their country.

This time around, Mr. Bush celebrated Mission Accomplished by cutting tax rates on dividends and capital gains, while handing out huge no-bid contracts to politically connected corporations. And in the four years since, as the insurgency Mr. Bush initially taunted with the cry of “Bring them on” has claimed the lives of thousands of Americans and left thousands more grievously wounded, the children of the elite — especially the Republican elite — have been conspicuously absent from the battlefield.

The Bushies, it seems, like starting fights, but they don’t believe in paying any of the cost of those fights or bearing any of the risks. Above all, they don’t believe that they or their friends should face any personal or professional penalties for trivial sins like distorting intelligence to get America into an unnecessary war, or totally botching that war’s execution.

The Web site Think Progress has a summary of what happened to the men behind the war after we didn’t find W.M.D., and weren’t welcomed as liberators: “The architects of war: Where are they now?” To read that summary is to be awed by the comprehensiveness and generosity of the neocon welfare system. Even Paul Wolfowitz, who managed the rare feat of messing up not one but two high-level jobs, has found refuge at the American Enterprise Institute.

Which brings us to the case of I. Lewis “Scooter” Libby Jr.

The hysteria of the neocons over the prospect that Mr. Libby might actually do time for committing perjury was a sight to behold. In an opinion piece in The Wall Street Journal titled “Fallen Soldier,” Fouad Ajami of Johns Hopkins University cited the soldier’s creed: “I will never leave a fallen comrade.” He went on to declare that “Scooter Libby was a soldier in your — our — war in Iraq.”

Ah, yes. Shuffling papers in an air-conditioned Washington office is exactly like putting your life on the line in Anbar or Baghdad. Spending 30 months in a minimum-security prison, with a comfortable think-tank job waiting at the other end, is exactly like having half your face or both your legs blown off by an I.E.D.

What lay behind the hysteria, of course, was the prospect that for the very first time one of the people who tricked America into war, then endangered national security yet again in the effort to cover their tracks, might pay some price. But Mr. Ajami needn’t have worried.

Back when the investigation into the leak of Valerie Plame Wilson’s identity began, Mr. Bush insisted that if anyone in his administration had violated the law, “that person will be taken care of.” Now we know what he meant. Mr. Bush hasn’t challenged the verdict in the Libby case, and other people convicted of similar offenses have spent substantial periods of time in prison. But Mr. Libby goes free.

Oh, and don’t fret about the fact that Mr. Libby still had to pay a fine. Does anyone doubt that his friends will find a way to pick up the tab?

Mr. Bush says that Mr. Libby’s punishment remains “harsh” because his reputation is “forever damaged.” Meanwhile, Mr. Bush employs, as a deputy national security adviser, none other than Elliott Abrams, who pleaded guilty to unlawfully withholding information from Congress in the Iran-contra affair. Mr. Abrams was one of six Iran-contra defendants pardoned by Mr. Bush’s father, who was himself a subject of the special prosecutor’s investigation of the scandal.

In other words, obstruction of justice when it gets too close to home is a family tradition. And being a loyal Bushie means never having to say you’re sorry.

Photo Credit: Paul Krugman. (The New York Times)

Technorati tags: Paul Krugman, New York Times, Politics, Government, Bush, Libby, Iraq, news, commentary, op ed

America's Media Empire

The Murdoch Factor
By Paul Krugman
The New York Times

In October 2003, the nonpartisan Program on International Policy Attitudes published a study titled “Misperceptions, the media and the Iraq war.” It found that 60 percent of Americans believed at least one of the following: clear evidence had been found of links between Iraq and Al Qaeda; W.M.D. had been found in Iraq; world public opinion favored the U.S. going to war with Iraq.

The prevalence of these misperceptions, however, depended crucially on where people got their news. Only 23 percent of those who got their information mainly from PBS or NPR believed any of these untrue things, but the number was 80 percent among those relying primarily on Fox News. In particular, two-thirds of Fox devotees believed that the U.S. had “found clear evidence in Iraq that Saddam Hussein was working closely with the Al Qaeda terrorist organization.”

So, does anyone think it’s O.K. if Rupert Murdoch’s News Corporation, which owns Fox News, buys The Wall Street Journal?

The problem with Mr. Murdoch isn’t that he’s a right-wing ideologue. If that were all he was, he’d be much less dangerous. What he is, rather, is an opportunist who exploits a rule-free media environment — one created, in part, by conservative political power — by slanting news coverage to favor whoever he thinks will serve his business interests.

In the United States, that strategy has mainly meant blatant bias in favor of the Bush administration and the Republican Party — but last year Mr. Murdoch covered his bases by hosting a fund-raiser for Hillary Clinton’s Senate re-election campaign.

In Britain, Mr. Murdoch endorsed Tony Blair in 1997 and gave his government favorable coverage, “ensuring,” reports The New York Times, “that the new government would allow him to keep intact his British holdings.”

And in China, Mr. Murdoch’s organizations have taken care not to offend the dictatorship.

Now, Mr. Murdoch’s people rarely make flatly false claims. Instead, they usually convey misinformation through innuendo. During the early months of the Iraq occupation, for example, Fox gave breathless coverage to each report of possible W.M.D.’s, with little or no coverage of the subsequent discovery that it was a false alarm. No wonder, then, that many Fox viewers got the impression that W.M.D.’s had been found.

When all else fails, Mr. Murdoch’s news organizations simply stop covering inconvenient subjects.

Last year, Fox relentlessly pushed claims that the “liberal media” were failing to report the “good news” from Iraq. Once that line became untenable — well, the Project for Excellence in Journalism found that in the first quarter of 2007 daytime programs on Fox News devoted only 6 percent of their time to the Iraq war, compared with 18 percent at MSNBC and 20 percent at CNN.

What took Iraq’s place? Anna Nicole Smith, who received 17 percent of Fox’s daytime coverage.

Defenders of Mr. Murdoch’s bid for The Journal say that we should judge him not by Fox News but by his stewardship of the venerable Times of London, which he acquired in 1981. Indeed, the political bias of The Times is much less blatant than that of Fox News. But a number of former Times employees have said that there was pressure to slant coverage — and everyone I’ve seen quoted defending Mr. Murdoch’s management is still on his payroll.

In any case, do we want to see one of America’s two serious national newspapers in the hands of a man who has done so much to mislead so many? (The Washington Post, for all its influence, is basically a Beltway paper, not a national one. The McClatchy papers, though their Washington bureau’s reporting in the run-up to Iraq put more prestigious news organizations to shame, still don’t have The Journal’s ability to drive national discussion.)

There doesn’t seem to be any legal obstacle to the News Corporation’s bid for The Journal: F.C.C. rules on media ownership are mainly designed to prevent monopoly in local markets, not to safeguard precious national informational assets. Still, public pressure could help avert a Murdoch takeover. Maybe Congress should hold hearings.

If Mr. Murdoch does acquire The Journal, it will be a dark day for America’s news media — and American democracy. If there were any justice in the world, Mr. Murdoch, who did more than anyone in the news business to mislead this country into an unjustified, disastrous war, would be a discredited outcast. Instead, he’s expanding his empire.

Photo Credit: Paul Krugman. (The New York Times)

Technorati tags: Paul Krugman, New York Times, Rupert Murdoch, Wall Street Journal, Newspapers, News and News Media, commentary, op ed

It's the Policy, Stupid.

Authentic? Never Mind
By Paul Krugman
The New York Times

Rich liberals who claim they’ll help America’s less fortunate are phonies.

Let me give you one example — a Democrat who said he’d work on behalf of workers and the poor. He even said he’d take on Big Business. But the truth is that while he was saying those things, he was living in a big house and had a pretty lavish summer home too. His favorite recreation, sailing, was incredibly elitist. And he didn’t talk like a regular guy.

Clearly, this politician wasn’t authentic. His name? Franklin Delano Roosevelt.

Luckily, that’s not how the political game was played 70 years ago. F.D.R. wasn’t accused of being a phony; he was accused of being a “traitor to his class.” But today, it seems, politics is all about seeming authentic. A recent Associated Press analysis of the political scene asked: “Can you fake authenticity? Probably not, but it might be worth a try.”

What does authenticity mean? Supposedly it means not pretending to be who you aren’t. But that definition doesn’t seem to fit the way the term is actually used in political reporting.

For example, the case of F.D.R. shows that there’s nothing inauthentic, in the normal sense of the word, about calling for higher taxes on the rich while being rich yourself. If anything, it’s to your credit if you advocate policies that will hurt your own financial position. But the news media seem to find it deeply disturbing that John Edwards talks about fighting poverty while living in a big house.

On the other hand, consider the case of Fred Thompson. He spent 18 years working as a highly paid lobbyist, wore well-tailored suits and drove a black Lincoln Continental. When he ran for the Senate, however, his campaign reinvented him as a good old boy: it leased a used red pickup truck for him to drive, dressed up in jeans and a work shirt, with a can of Red Man chewing tobacco on the front seat.

But Mr. Thompson’s strength, says Lanny Davis in The Hill, is that he’s “authentic.”

Oh, and as a candidate George W. Bush was praised as being more authentic than Al Gore. As late as November 2005, MSNBC’s chief political correspondent declared that Mr. Bush’s authenticity was his remaining source of strength. But now The A.P. says that Mr. Bush’s lack of credibility is the reason his would-be successors need to seem, yes, authentic.

Talk of authenticity, it seems, lets commentators and journalists put down politicians they don’t like or praise politicians they like, with no relationship to what the politicians actually say or do.

Here’s a suggestion: Why not evaluate candidates’ policy proposals, rather than their authenticity? And if there are reasons to doubt a candidate’s sincerity, spell them out.

For example, Hillary Clinton’s credibility as a friend of labor is called into question, not by her biography or life style, but by the fact that, as The Nation recently reported, her chief strategist — a man Al Gore fired in 2000 because he didn’t trust him — heads a public relations company that helps corporations fight union organizing drives.

And where do you start with Rudy Giuliani? We keep being told that he has credibility on national security, because he seemed so reassuring on 9/11. (Some firefighters have condemned his actual performance that day, saying that rescue efforts were uncoordinated and that firemen died because he provided them with faulty radios. “All he did was give information on the TV,” said a deputy fire chief whose son died at the World Trade Center. “He did nothing.” And the nation’s largest firefighters’ union has condemned his handling of recovery efforts in the weeks following 9/11.)

But he’s spent the years since then cashing in on terrorism, and his decisions about Giuliani Partners’ personnel and clients raise real questions about his seriousness. His partners, as The Washington Post pointed out, included “a former police commissioner later convicted of corruption, a former F.B.I. executive who admitted taking artifacts from ground zero and a former Roman Catholic priest accused of covering up sexual abuse in the church.”

The point is that questions about a candidate shouldn’t be whether he or she is “authentic.” They should be about motives: whose interests would the candidate serve if elected? And think how much better shape the nation would be in if enough people had asked that question seven years ago.

Photo Credit: Paul Krugman. (The New York Times)

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Something Amiss in America

America Comes Up Short
By Paul Krugman
The New York Times

LONDON

Traveling through Europe recently, I’ve been able to confirm through personal experience what statistical surveys tell us: the perceived stature of Americans is not what it was. Europeans used to look up to us; now, many of them look down on us instead.

No, I’m not talking metaphorically about our loss of moral authority in the wake of Guantánamo and Abu Ghraib. I’m literally talking about feet and inches.

To the casual observer, Europeans — who often seemed short, even to me (I’m 5-foot-7), when I first began traveling a lot in the 1970s — now often seem tall by American standards. And that casual observation matches what careful researchers have found.

The data show that Americans, who in the words of a recent paper by the economic historian John Komlos and Benjamin Lauderdale in Social Science Quarterly, were “tallest in the world between colonial times and the middle of the 20th century,” have now “become shorter (and fatter) than Western and Northern Europeans. In fact, the U.S. population is currently at the bottom end of the height distribution in advanced industrial countries.”

This is not a trivial matter. As the paper says, “height is indicative of how well the human organism thrives in its socioeconomic environment.” There’s a whole discipline of “anthropometric history” that uses evidence on heights to assess changes in social conditions.

For example, nothing demonstrates the harsh class distinctions of Britain in the age of Dickens better than the 9-inch height gap between 15-year-old students at Sandhurst, the elite military academy, and their counterparts at the working-class Marine School. The dismal working and living conditions of urban Americans during the Gilded Age were reflected in a 1- 1/2 inch decline in the average height of men born in 1890, compared with those born in 1830. Americans born after 1920 were the first industrial generation to regain preindustrial stature.

So what is America’s modern height lag telling us?

There is normally a strong association between per capita income and a country’s average height. By that standard, Americans should be taller than Europeans: U.S. per capita G.D.P. is higher than that of any other major economy. But since the middle of the 20th century, something has caused Americans to grow richer without growing significantly taller.

It’s not the population’s changing ethnic mix due to immigration: the stagnation of American heights is clear even if you restrict the comparison to non-Hispanic, native-born whites.

And although the Komlos-Lauderdale paper suggests that growing income and social inequality in America might be one culprit, the remarkable thing is that, as the authors themselves point out, even high-status Americans are falling short: “rich Americans are shorter than rich Western Europeans and poor white Americans are shorter than poor Western Europeans.”

We seem to be left with two main possible explanations of the height gap.

One is that America really has turned into “Fast Food Nation.”

“U.S. children,” write Mr. Komlos and Mr. Lauderdale, “consume more meals prepared outside the home, more fast food rich in fat, high in energy density and low in essential micronutrients, than do European children.” Our reliance on fast food, in turn, may reflect lack of family time because we work too much: U.S. G.D.P. per capita is high partly because employed Americans work many more hours than their European counterparts.

A broader explanation would be that contemporary America is a society that, in a variety of ways, doesn’t take very good care of its children. Recently, Unicef issued a report comparing a number of measures of child well-being in 21 rich countries, including health and safety, family and peer relationships and such things as whether children eat fruit and are physically active. The report put the Netherlands at the top; sure enough, the Dutch are now the world’s tallest people, almost 3 inches taller, on average, than non-Hispanic American whites. The U.S. ended up in 20th place, below Poland, Portugal and Hungary, but ahead of Britain.

Whatever the full explanation for America’s stature deficit, our relative shortness, like our low life expectancy, suggests that something is amiss with our way of life. A critical European might say that America is a land of harried parents and neglected children, of expensive health care that misses those who need it most, a society that for all its wealth somehow manages to be nasty, brutish — and short.

Photo Credit: Paul Krugman. (The New York Times)

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