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Markets trade down another 5% and close within spitting distance of October’s closing lows seen on Oct 10. I remain decidedly negative on the market and the economy despite every effort made by global governments. In fact, the pace of the economic slowdown is quickening. It’s all about delivering and liquidity.

We have much to address, so let’s get after it.

Retail….
1. Best Buy comments that they see a “seismic slowdown” in 4th quarter projected sales. Expect to see significant sales and price cuts on electronics going into the holiday season.

2. Survey of credit card holders indicates the following: 53% have more debt than they are comfortable handling. Of that group 73% indicate that they will likely spend less this holiday season….lots of regifting….

Economy
1. Julian Robertson, one of the most highly regarded money managers of the last 40 yrs, indicates that “we have not seen the capitulation in our economy and that the foreseeable future will be a long, tough period for the American people. He also offered that Nancy Pelosi wants to throw money down the toilet to save the automotive industry. (more on this later)

2. Moody’s ratings expects defaults on distressed debt situations to almost quadruple in the next year to north of 10%. This expected level of defaults is why high yield debt is trading near a 20% yield level. Lots of RISK! Companies will be severely challenged to refinance their debt.

3. Jamie Dimon, CEO of JP Morgan, indicates that the economic recession will be worse than the credit crisis.

Auto Situation
1. Pelosi, Frank, Obama and team clearly want to see a bailout for the automotive industry with GWB’s signature. The package being discussed is $25bln but with no specifics highlighted as of yet. Expect hearings next week in Washington on this issue. From the standpoint that Uncle Sam has already committed north of a trillion dollars to the financial system, a 25bln capital injection is a drop in the bucket but it goes a lot deeper than that. First off, the cash burn rate for the Big 3 at the anemic pace of auto sales is currently 5+bln per month, so 25bln gets us to next March. Big deal.

IMO, I would not give this industry $20 without an agreement to restructure. Very simply I would propose that these automotive corporations duplicate the business model of Toyota and Honda which have domestic plants throughout the South. Not trying to be punitive but a business is not a business unless it can sustain itself.

These companies including the UAW have no choice but to accede to the demand to restructure. If they do not want to accept that model, then ….they have no other choice. The idea that we would give them a taxpayer rescue package with equity warrants and restrictions on executive compensation is a joke, or as Julian Robertson said, “throwing money down the toilet”. The UAW will kick and scream and believe me I empathize but we live in a dynamic world in which markets change. As a nation we need to accept and understand that principle if we want to compete in the global marketplace. This restructuring should have occurred years ago!!

I will say as I listen to Mr. Frank discuss this situation, he does not inspire confidence.

Housing/Wall St.
1. Hank Paulson indicated today that Treasury will not look to use any of the 700bln authorized by Congress to buy up distressed mortgage assets but would in turn utilize money not already committed to bring liquidity into the consumer asset space.

What does this mean and how did the market take this news?
–Wall St. banks and investment banks are pissed because they thought they would be able to sell distressed mortgage assets into Uncle Sam at elevated prices.

–Paulson now knows that by buying distressed mortgage assets, much like by making direct capital injections into the banks, consumer credit will not flow. WHY?? As we have been saying here at NQ, the losses embedded in the banking system likely run upwards of 1 trillion over and above the 500bln already acknowledged. Thus, any capital that goes into the banks will be used to recapitalize not to be lent out. The market took Paulson’s message as an indication that future (already embedded) losses must be greater than initially thought and thus the market sold off hard today.

–Paulson wants to target bringing liquidity into the Asset Backed Market, (remember the one where volume is down 75-80% year over year) so that credit for consumers loosens. I commend Hank for his herculean effort but I do not see this working unless the government set up a separate entity to issue loans. Will Uncle Sam run individual credit checks as well and effectively go into business vs the banks? Doubtful.

–Speaking of credit crunch, I heard a statistic today that I find hard to believe but it came from a credible source. He shared that Bank of America wrote a total of 7 Jumbo mortgages in the entire country in the month of October. (Jumbos are greater than 415k) Is that possible??

2. Why does Paulson want to target the consumer credit space? He knows that that is the next shoe to drop in terms of losses by AMEX, Visa, Master Card, Capital One, et al…

He is hoping and praying that the Asset Backed Market can restart so that these companies and other credit companies can sell loans currently on their books. We tried to cover this in our other piece as to why investors are not willing to buy these loans.

Simply put, credit cards taken out by a large number of borrowers over the last three to four years using their house as a piggy bank and now in the face of a rapidly rising unemployment rate will have severe defaults. No bid for assets like that anywhere close to where they may want to sell them.

3. Transparency
I had an exchange with a reader as to why the government is not revealing which banks have been participating in certain specific programs launched over the last few months. I made the case that the government is trying to protect the participating banks and in turn the taxpayers by not revealing the names.

The reader responded as to why and how could he ever invest in a bank. That is a very good point, investing in banks now is a much higher risk proposition because one does not know just how deep losses are in individual banks. Who does know?? Hank Paulson knows and he does not want to reveal those figures because they would further spook the markets. We got a whiff of that today.

4. Citigroup is expected to lay off 25-30% of its capital markets staff next week. The depth of this cut is truly draconian and indicates that they do not view this market downturn as merely a normal recessionary move but rather a significant fundamental shift in the Wall St. model. You know it’s broken as we highlighted in our earlier piece. Citi’s cuts confirm this.

Global Governments
1. Russia allows the ruble to move outside a trading band. The ruble gets hit hard as do Russian equities.

Read more as to “Russia Weakens Ruble to Fight Drain on Cash Reserves.”

It was the devaluing of the Russian currency back in 1998 that sparked the global financial crisis back then.

2. Could the U.S. ever lose its implicit AAA rating? There is a better chance now than a few months ago given the enormous debt that we are accruing.

Read more, as to how the “US May Lose its AAA Rating.”

Commodities
1. Oil and copper had a one-day bounce on Monday after the Chinese stimulus package was announced but they have quickly reversed course and are back down to new lows for this move. Oil closed at $55.78. Commodities are pricing in a protracted economic slowdown. I still believe that hard assets will outperform when the economy stabilizes due to a global currency devaluation.

Government Bonds
1. In a flight to quality move, government bonds rallied and rates were lower by .10 (rates down, prices up)

2. Riskier bonds are more closely tracking the equity markets given the likely increase in defaults.

3. Hearing more and more rumblings about municipal defaults. Name I heard today was City of Philadelphia.

Companies
1. GE gets its debt guaranteed by FDIC insurance. GE much like other entities that rely on short term funding will be hard pressed going forward. They are completely dependent on Uncle Sam’s backstopping short term facilities. What happens when Uncle Sam does not show up for work one day??

2. Intel cuts its 4th quarter forecast across all divisions and all geographic areas. This put pressure on the market after the close.

3. Insurance companies along with the credit finance companies have been under increased pressure and it will likely continue. Various research reports have highlighted (I should say lowlighted) Hartford Financial , Protective Life, Principal Financial, and Prudential (check with your agents if you have policies with these outfits…)

Political
The constraints on the incoming administration get tighter each and every day. The markets want discipline. In fact, I firmly believe that the market is getting tired of more and more talk of bailout packages. These packages may bring a cushion but they prolong and exacerbate the situation over the long haul. Private capital does not want to invest alongside the government.

Stimulus Package
There is little doubt that we will receive a package either before or after inauguration. The standard package that we saw last Spring is nothing more than giving a shot of whiskey to a drunk. I read the ideas proposed by HRC. There is a lot to discuss on this topic. I am all for funding projects in which the government can contract with private industry for capital improvements and infrastructure. I am not supportive of creating more government bureaucracy to manage projects.

I will save another few ideas I have for a separate article.

GOOD NEWS!!

My 4th grader received a 30/31 on his recent Math test.

Boston Red Sox “freeze” ticket prices at 2008 levels.

Hedge funds on the “hot seat” today as a number of them go in front of Congress. I would like to see some Congressman have the courage to truly get after Soros for activities and influence of MoveON.org.

All the best.

LD

Barack Obama has a coal problem. Responding to yesterday’s revelation that Barack Obama intends to bankrupt all plants that operate on energy generated from coal, Chris Hamilton, the Senior Vice President of the West Virginia Coal Association, called Obama’s comments in San Francisco “unbelievable.” I quote the West Virginia Record:

The senior vice president of the West Virginia Coal Association called Obama’s comments “unbelievable.”

“His comments are unfortunate,” Chris Hamilton said Sunday, “and really reflect a very uninformed voice and perspective to coal specifically and energy generally.”

Hamilton noted other times Obama and vice presidential candidate Joe Biden have made seemingly anti-coal statements.

“In Ohio recently, when Joe Biden said ‘not here’ about building coal-fired power plants — this is exactly what will happen,” Hamilton said. “Financing won’t be directed here. It will all go aboard for plants elsewhere in the world. The United Sates is importing more coal today from Indonesia, South Africa and Colombia than we ever have.

“If we’re going to create a situation where coal-fired power plants are at that much of a disadvantage, there will be new ones built. But as Biden said, just not here.”

In other words, the workers of West Virginia, Ohio, Pennsylvania, Indiana, Illinois, Colorado, New Mexico, North Dakota, Montana and all the other states in which coal is mined, processed and converted to electricity should be prepared to have their jobs outsourced under an Obama Presidency. That is not the change the economically battered Ohio River Valley needs. It is also not the change those of us who consume electricity need. Just imagine the cost of our energy bills if coal plants, which generates 49% of our electricity, are bankrupted and eliminated.

American Girl in Italy asks No Quarter readers to disseminate the following recording of Barack Obama’s statement on bankrupting coal plants far and wide.

And I offer more information on who will be affected by Obama’s reckless energy policy in an essay I published yesterday.

Clearly Obama’s statements will have electoral effects in West Virginia, where he has already garnered opposition from leaders of the industry that is that state’s main economic engine. But we must ensure voters in Colorado, New Mexico, Montana, North Dakota, Ohio, Indiana and Pennsylvania are armed with these facts before they cast votes tomorrow.

Sarah Palin is doing everything within her power to ensure voters in the Ohio River Valley understand the implications and ramifications of Obama’s desire to bankrupt plants relying on energy produced from coal. I quote CBS News:

(MARIETTA, OHIO) - Seizing on a newly released audio tape picked up by the Drudge Report, Sarah Palin took the opportunity here in coal country to accuse Barack Obama of “talking about bankrupting the coal industry.”

“He said that, sure, if the industry wants to build coal-fired power plants, then they can go ahead and try, he says, but they can do it only in a way that will bankrupt the coal industry, and he’s comfortable letting that happen,” Palin said. “And you got to listen to the tape.”

The audiotape Palin was referring to was recorded by the San Francisco Chronicle in a Jan. 17 interview.

“Why is the audiotape just now surfacing?” Palin asked, leading someone in the crowd to shout, “Liberal media!”

“This interview was given to San Francisco folks many, many months ago,” Palin said. “You should have known about this, so that you would have better decision-making information as you go into the voting booth.”

Marietta, Ohio, is located on the Ohio River on the border between Ohio and West Virginia. This is the perfect place to discuss Obama’s desire to bankrupt the coal industry, for many of the workers in that city and its environs earn their wages in mines and in factories reliant on coal.

And Sarah and the audience in Marietta, Ohio, are correct: we only learned about this now as a result of the venal and obsequious media’s suppression of any and all information that is unfavorable to Barack Obama. Just witness CNN’s attempt to minimize the importance of this story:

Contrary to her attempts to portray a media cover-up, audio and video recordings of Obama’s January 17 sit-down with the Chronicle editorial board have been freely available online for more than nine months.

In the interview, Obama said that his “aggressive” cap-and-trade plan would charge polluters for every unit of carbon or greenhouse gas they emit, a plan that would render polluting coal plants financially unviable.

“So if somebody wants to build a coal-powered plant, they can,” he said. “It’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted.”

In the interview, Obama also made the case for alternative energy sources, adding that he does not believe coal production will be eliminated, and that he supports carbon capture and sequestration technologies.

John McCain also supports a market-based cap-and-trade proposal to reduce carbon emissions.

Regardless, Palin sought to use Obama’s words against him in a part of the country where coal has long been king.

“He said that, sure, if the industry wants to build coal-fired power plants, then they can go ahead and try, he says, but they can do it only in a way that will bankrupt the coal industry, and he’s comfortable letting that happen.”

The media, it seems, will not inform working class voters of Obama’s attempts to eliminate hundreds of thousands of jobs and raise our electricity bills. But Sarah Palin and those who care about the economy of West Virginia and other states in the Ohio River Valley will. And so will we, for we understand that the elimination of jobs in a region of a country Obama already insulted with his comments in San Francisco about those bitter small town voters in Pennsylvania and Ohio who cling to guns and religion will not solve America’s economic woes. Indeed, it will only exacerbate the current recession.

Let us stand with West Virginia and the Ohio River Valley and defend those who rely on coal for their economic livelihood. This is certainly what Hillary would do. I quote the Sun-Times article I cite above:

After the quotes [about "bitter clingers"] surfaced on a political blog Friday, Democratic rival Hillary Clinton and GOP hopeful John McCain immediately decried them as evidence that Obama is “elitist” or “out of touch.”

“My opponent said that the people of Pennsylvania who faced hard times are bitter. Well, that’s not my experience,” Clinton told a crowd in Philadelphia. “As I travel around Pennsylvania, I meet people who are resilient, who are optimistic, who are positive, who are rolling up their sleeves … Pennsylvanians don’t need a president who looks down on them, they need a president who stands up for them.”

And yes, Barack Obama is an elitist politician who “looks down on” voters in the Ohio River Valley and in other areas of the country that rely on coal. Hillary Clinton does not, and neither does John McCain. Here is John McCain yesterday campaigning in Pennsylvania:

SCRANTON, Pa. — Campaigning in coal-rich Pennsylvania, GOP presidential nominee John McCain pledged this afternoon that if elected president, he would ensure that the U.S. exports coal overseas — something that U.S. policy already permits.

At the same time, the McCain campaign and Republican National Committee reportedly launched robocalls in Ohio, Pennsylvania and other coal states attacking Sen. Barack Obama’s position on coal.

Mocking Obama for a comment he made in an interview with the San Francisco Chronicle in January — “The only thing I’ve said with respect to coal, I haven’t been some coal booster,” Obama had said — McCain promised the audience at the University of Scranton that he’s been a proud coal cheerleader in the past, and plans to be one in the future.

“My friends, you know what Senator Obama said about a year ago, he said he had not been a, quote, coal booster,” he said, as the crowd booed. “My friends, I’ve been a coal booster and it’s going to create jobs, and we’re going to export coal to other countries and we are going to create hundreds of thousands of jobs. That’s going to help restore the economy of the great state of the Commonwealth of Pennsylvania.”

The robocalls have been placed, but we must ensure the voters understand that Obama desires to bankrupt the coal industry and increase the prices of our energy bills. We have one day, and this must be done. Circulate the video I cite above.

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[UPDATE]: Ohio Coal Association issues a scathing statement on Barack Obama’s statement. I quote:

COLUMBUS, Ohio, Nov 03, 2008 /PRNewswire–USNewswire via COMTEX/ — Mike Carey, president of the Ohio Coal Association (OCA), today issued the following statement in response to just-released remarks from Senator Barack Obama about the nation’s coal industry.

“Regardless of the timing or method of the release of these remarks, the message from the Democratic candidate for President could not be clearer: the Obama-Biden ticket spells disaster for America’s coal industry and the tens of thousands of Americans who work in it.

“These undisputed, audio-taped remarks, which include comments from Senator Obama like ‘I haven’t been some coal booster’ and ‘if they want to build [coal plants], they can, but it will bankrupt them’ are extraordinarily misguided.
“It’s evident that this campaign has been pandering in states like Ohio, Virginia, West Virginia, Indiana and Pennsylvania to attempt to generate votes from coal supporters, while keeping his true agenda hidden from the state’s voters.

“Senator Obama has revealed himself to be nothing more than a short- sighted, inexperienced politician willing to say anything to get a vote. But today, the nation’s coal industry and those who support it have a better understanding of his true mission, to ‘bankrupt’ our industry, put tens of thousands out of work and cause unprecedented increases in electricity prices.

“In addition to providing an affordable, reliable source of low-cost electricity, domestic coal holds the key to our nation’s long-term energy security - a goal that cannot be overlooked during this time of international instability and economic uncertainty.

“Few policy areas are more important to our economic future than energy issues. As voters head to the polls tomorrow, it is essential they remember that access to reliable, affordable, domestic energy supplies is essential to economic growth and stability.”

The Ohio Coal Association (OCA) is a non-profit trade association representing the interests of Ohio’s underground and surface coal mining producers. The OCA represents nearly 40 coal producing companies and more than 50 Associate Members, which include suppliers and consultants to the mining industry, coal sales agents and brokers and allied industries. The Ohio Coal Association is committed to advancing the development and utilization of Ohio coal as an abundant, economic and environmentally sound energy source.

Representing 40 coal producing companies and more than 50 associate members in related industries, the OCA will deliver many Ohio votes to John McCain.

Words do matter, I guess.

“Hillary took to the floor of the Senate today to lay out her plan for halting the economic meltdown, and her Senate staff has the video of her speech up online. … [L]isten to what she’s got to say. She’s speaking about what needs to be done NOW to address the economic meltdown taking place up on Wall Street this week. She talks in detail for over 20 minutes and dammit, it just breaks my heart that someone this capable and brilliant isn’t headed to the White House this fall.”

COMPARE AND CONTRAST: Ricki Lieberman and Ann, a No Quarter reader, strongly suggest you compare the video that NancyA has posted below with, ahem, Barack Obama’s video on “solving our financial crisis.” Obama urges everyone to “watch the ad and share it with everyone you know.” Uh, Barack, I think we’ll be sharing Hillary’s video that NancyA put up below.

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NANCYA’s post: While Senators John McCain and Barack Obama were auditioning for who could best handle a national economic emergency, Senator Hillary Rodham Clinton released the following statement from her office in Washington, DC. As usual Senator Clinton understands the dangers of this “once in a century” crisis. She calls it “the greatest market upheaval since the Great Depression”. She did the following:

…called for swift and strong action to stem the growing credit crisis on Wall Street. Assailing the Bush Administration for ignoring repeated warnings of the growing crisis and failing to provide adequate oversight of an increasingly complicated market, Senator Clinton offered a series of bold, specific proposals, including creating a new version of the Home Owners’ Loan Corporation (HOLC) to restore confidence in the market, curbing the most damaging and manipulative trading practices, providing relief to homeowners facing foreclosure, and reasserting competent federal oversight.

She outlined several proposals. Here is a list of her proposals:

* Create a new entity to buy up and quarantine toxic mortgage securities that are dragging down the markets which would allow the markets to stabilize. Last spring Senator Clinton was among the first to call for a new entity modeled after the successful Depression-era Home Owners’ Loan Corporation (HOLC) or the Resolution Trust Corporation (RTC) created after the Savings and Loan crisis.

In response, Senator Clinton outlined a series of proposals to address the crisis, a crisis she warned about during the primary:

* Place a temporary moratorium on the most abusive stock transactions, many of which involve the “short-selling” of stocks. Yesterday, Senator Clinton wrote to the Securities and Exchange Commission urging such a moratorium, saying it would provide breathing room for the markets to recover, for investors to make accurate assessments of companies and for regulators to assess what trading practices should be permanently banned.

* Convene an emergency economic summit to show the American people their government is working together. Bringing together leaders in the administration and Congress with lenders, consumer advocates, non profits, financial institutions, and all stakeholders will allow a coordinated response to the crisis.

* Aggressively pursue and encourage mortgage modifications. Senator Clinton has introduced legislation to remove barriers to mortgage modification and to encourage lenders to voluntarily work with borrowers to keep them current on payments and in their homes.

* Restore competent federal oversight of the increasingly complicated financial markets. The rapid evolution of the securities and banking industry overwhelmed the current regulatory framework, resulting in a “shadow banking system” that operates outside of oversight and without accountability.

* Require transparency and accountability on executive pay. Senator Clinton has proposed the Corporate Executive Compensation Accountability and Transparency Act to impose new transparency rules on executive pay, end the accounting techniques that hide compensation, and provide shareholders a say in executive compensation packages.

* Ensure the accountability of financial institutions borrowing money from the Federal Reserve’s new lending facilities. Taxpayers deserve to know that the companies they are bailing out are on the road to recovery and aren’t throwing more good money after bad.

Here is video of her remarks to the Senate yesterday:

The transcript of Senator Clinton’s remarks follows.

Senator Clinton: Thank You, Mr. President. We have seen the financial landscape in our country reshaped over night. The titans of Wall Street have been rendered insolvent or even bankrupt. These are firms that survived the Great Depression, World Wars, the attacks of September 11th, but were no match for a mounting credit crisis allowed to escalate in the shadows of our financial system. The Federal Government has taken over Fannie Mae and Freddie Mac. Bear Stearns had to be rescued by J.P. Morgan Chase after the federal government guaranteed J.P. Morgan’s investment. And while they’re in talks to keep part of the company viable, Lehman Brothers has declared the largest bankruptcy in U.S. history. Merrill Lynch has been purchased by Bank of America and the Federal Government has agreed to rescue AIG. This past Monday we saw the largest drop in the Dow Jones Industrial Average since 9/11. Now even money market funds are affected. For only the second time in our history, one has been valued at less than 100 cents on the dollar. Alan Greenspan has called this a once-in-a-century event. In my state of New York, tens of thousands of hard-working employees have lost their jobs. And the livelihoods of tens of thousands more who depend on Wall Street’s economy are threatened as well.

New York City and New York State, already facing serious economic and fiscal challenges, will now be forced to contend with a battered Wall Street, the lifeblood of our state’s economy. And the sudden collapse of these firms and the government takeover of some have shaken our markets and buffeted the economy as a whole.

Many are now asking, What’s next?

I know that New Yorkers and Americans are deeply concerned and more than a little bewildered. As our markets have grown more complex and interconnected globally, so too have the crises that have emerged. And we are still sorting out the details.

One of the consequences of the secrecy and lack of oversight under the Bush Administration is that we do not know what we do not know. But it is important to recognize what we do know about what went wrong so that we can assess what needs to be done right now to make it right.

What we have seen over the course of the last eight years is an administration that refused to recognize the threats lurking in our economy, no matter what lurked just beneath the surface or what problems were facing middle class families.

Now, we know that many CEO’s are paying lower tax rates than their receptionists. We know that President Bush and those who carry his mantle seek to lower those taxes even further. Middle class families have seen their wages decline even as the cost of living has skyrocketed. This administration has the worst job creation record in 70 years. Millions of families were locked into ballooning and unaffordable adjustable-rate loans as this administration stood by denying there was a crisis. Regulators and regulations designed to keep pace with the markets have been steadily chipped away by Washington Republicans even as companies experimented to the tune of hundreds of billions of dollars in ever more complex and risky financial instruments.

Now, we were reassured that the risk was too diversified and investments too sophisticated to put our economy in jeopardy. Meanwhile, behind closed doors, the cracks were showing as the value of mortgage-based securities slipped day by day by day. And the President and his supporters in Congress repeatedly chanted – and still chant the mantra today – that the fundamentals of our economy are strong.

The administration waxed philosophical when middle class families started facing foreclosures at record levels. The administration and their allies derided my proposals over the last two years to offer assistance to troubled homeowners seeking refinancing as a bailout. They dismissed my concerns and the concerns of millions of Americans even as the storm clouds gathered. They said they didn’t believe the government should intervene and provide borrowers an affordable opportunity to avoid foreclosure. Even when I and others warned the Bush Administration repeatedly from the start of this crisis that decisive action was demanded immediately to help families stay in their homes, that that was the best way to stave off a deepening economic crisis, their only responses were predictions for a soft landing and that the crisis could be contained.

Well, as I traveled throughout our country, I could see that no soft landing was forthcoming.

Many families, hundreds and even thousands of miles from Wall Street, were having their lives turned upside-down by the home mortgage crisis, and the ripple effects being felt throughout the economy, as a consequence of the broken economic policies of the last eight years.

Unfortunately, the Bush Administration waited until this past summer to admit that massive housing relief was necessary. The administration finally supported in concept much of what I had proposed: mortgage modifications, freezes for unreasonable mortgage rate increases, and an expanded role for the Federal Housing authority.

But their response was half-hearted, without adequate resources or a commitment to enforcement. And so the home mortgage crisis slowly but surely eroded the value of risky debt instruments upon which Wall Street firms were depending. The house of houses of cards began to fall. My proposals, as well as those of others, were greeted as too much, too soon. Now we are forced to reckon with too little, too late.

When giant Wall Street firms revealed their dire straits and turned to this administration for the exact same help as we had sought for middle-class families — discounted loans, loan modifications and government-backed lending to weather the storm, Adam Smith was nowhere in sight.

Taxpayers have loaned these banks upwards of half a trillion dollars. And after years of laissez-faire policies for the middle class, the Bush Administration has acted on behalf of Wall Street with the largest and most significant federal interventions in the history of our modern financial system. The largest banks in the world can have closed-door meetings with the White House and the Federal Reserve and the Treasury Department to discuss their bailout options, but millions of homeowners with mortgages worth more than their homes, or who are facing default and foreclosure, don’t have the same opportunity.

And this administration seems to be once again paralyzed.

Now, I represent both the workers and the homeowners and the investment firms. I wish we had taken action long before this for the sake of all of my constituents, but now we must have a concerted, focused effort. I don’t believe we can wait until the next president. I am extremely hopeful and optimistic that we will have a president who will work with us to resolve our economic challenges, but I don’t think we can wait.

However, I do believe we can avoid a deepening crisis. We can take steps right now to address the root causes of what is taking place in our economy to stem the tide of foreclosures and mortgage defaults and the aggregating consequences in the credit markets on Wall Street and throughout the global economy.

But we must cast aside the haphazard, half-hearted approach of this administration and bring every stakeholder to the table to seek out and implement the right solutions. We must be as vigilant on behalf of homeowners and middle class families as we are on behalf of Wall Street firms. We must chart a new course based on the facts at hand, not the ideology at work for eight long years. We’ve tried being reactive. It’s time now to be decisive.

No options should be off the fable, certainly not because they don’t fit into a narrow ideological prism that this administration abandoned — for some — at the first signs of trouble. Ideologues in Washington or in the market who thought that the only danger to the marketplace was the Federal Government are now going hat in hand to that same government seeking help to stay afloat.

So to those who suggest that the steps taken thus far are enough, let me be clear: we may need to take even more significant steps to avoid a self-sustaining cycle of depressed home prices and foreclosures with the consequent effects on the entire marketplace.

We’ve already pumped hundreds of billions of dollars of liquidity into the markets but we still cannot see the end of this crisis. The biggest problem now is that our entire financial market is anchored down by the mortgage securities that are untouchable. We’ve seen the banks and the financial institutions that had the largest exposures to these instruments among the first to fail. But now we’ve begun to see some of the mightiest institutions, even those making a profit, fall by the wayside, the market thrown into upheaval, and others the target of predatory short sellers.

The Federal Reserve has used virtually every arrow in its quiver, from rate cuts, opening its lending windows and in desperation has even created some new arrows through its new lending facilities. By some estimates, the Fed has put out more than a half a trillion dollars through discounted loans, bailouts and takeovers to stabilize the market and the economy. While necessary to prevent even deeper disaster, we’ve seen that the benefits of these actions have had limited effects.

This situation reminds me of that old fable, where people are standing by the side of a river and they keep seeing babies being rushed down the river in the current and they desperately reach out trying to save as many babies as possible. Day after day they’re reaching out. They get new tools, they build a bridge, they get a ladder, they’re constantly trying to get to those babies. They’re hoping that they can save as many, until finally somebody walks up and says, “Who’s throwing them in? Go upriver, find out what the real problem is and stop that!”

The real problem has always been the way our home mortgage system got totally out of whack with new kinds of instruments that were sold many times over with very little regard to the realities of life, human nature, and the inevitable ups and downs in the economy, with the results that until we reach in and fix the home mortgage crisis, we can bail out everybody from here till kingdom come, we will not get a handle on this economic crisis.

So here’s what I believe we should do.

First, in light of historic bank failures, even with the largest federal intervention in the history of the mortgage market, we need a government entity, a modern-day Homeowners Loan Corporation, referred to as HOLC — H-O-L-C — or we need to build on the Resolution Trust Corporation created to help deal with the Savings and Loan Crisis.

Now, I personally believe and was among the very first to suggest that a HOLC, a Homeowners Loan Corporation, could be a preferable way of unfreezing and beginning to fix our struggling mortgage market. Some of my colleagues and many other respected economists and government officials have called for the creation of an entity like the Resolution Trust Corporation, which was created after the Savings and Loan crisis to liquidate in an orderly way the virtually worthless assets that the failed S&L’s held.

Just yesterday in the Wall Street Journal, Paul Volker, and Eugene Ludwig and Nicholas Brady made such a proposal. They said a HOLC, an RTC, we’ve got to come up with an entity that will assume these debts and burdens and begin to work our way out.

Last spring when I called for a modern version of the HOLC, that’s the Depression-era entity that bought up old mortgages and issued new, more affordable ones in their stead, most people did not pay much attention. But I think it’s important to note that by the time the HOLC closed its books, that agency had turned a small profit and helped over a million people keep their homes. And this was 70 years ago. Our population has grown dramatically. So, obviously, if we did it right, we would be able to save a lot of homes. And I think if it is administered correctly it could be actually a net expenditure or even winner for the federal government.

Now, with the FHA reforms that I have long championed adopted this summer in our Omnibus Housing Bill, the FHA could be already a modern Homeownership Lender Corporation. But we need to look to new ways to revive and if necessary create a new market for mortgage securities based on sound accounting, transparent recordkeeping and responsible lending.

A new government entity like the HOLC with a focus on attacking the source of the problem can serve the purpose of clearing a lot of those toxic mortgage securities from the market. We know there will not be any semblance of a normal or orderly marketplace until we have found a way to resolve these mortgage securities that are metastasizing in the bottom of our markets. By taking this paper out of the market and quarantining it in this new entity we will be able to give the market breathing room to recover. We will also be able to set the stage for an orderly sale of these securities and in turn allow some of them to recover and actually regain some of their value. Perhaps just as importantly, not only would our financial markets stabilize but so would our housing markets.

This is an extraordinary measure but it is not without precedent. This is the greatest market upheaval since the Great Depression. We are, indeed, in a crisis, and in times of crisis there are opportunities for leadership. Congress could show the American people that leadership working with the President by embracing this bold proposal.

Second, I’m calling on the Securities and Exchange Commission to take immediate action to address the abusive and manipulative short-selling practices that are rattling the markets, threatening firms and jobs and sending shockwaves across the broader economy. I commend the SEC for yesterday tightening rules against manipulative short-selling. The SEC’s rulings are a positive step in curbing the heightened volatility casting uncertainty on domestic markets and financial institutions. However, the Commission did not go far enough.

As a Senator from New York, I have a special duty to represent the workers of the financial services industry and to try with all my might to retain New York City as the financial capital of the world. The abuses that have disrupted the markets today will impact the lives of so many far beyond New York.

So I think it’s necessary for the SEC to take steps similar to the emergency rule it imposed this past July when the Commission concluded that there now exists a substantial threat of sudden and excessive fluctuations of security prices generally, and disruption in the functioning of the securities markets that could threaten fair and orderly markets.

Conditions now pose a greater threat than they did in July, and several of the institutions that the Commission sought to insulate from abuse do not even exist or certainly not in the in the same form that they did two months ago.

So we need to stay a step ahead, not a step behind. So I urge the Commission, as I expressed yesterday in a letter to Chairman Cox, to move toward a temporary moratorium on all of the abusive and manipulative short-sale practices associated with substantial financial firms like those the Commission identified in July. A temporary moratorium would allow the marketplace to take a step back, take a deep breath, and it would allow the Commission and other regulators to identify and weed out the sources of these abusive transactions.

Moreover the Commission should give close consideration to the many calls for the immediate restoration of the uptick rule, whose repeal has been linked to the recent market volatility and proliferation. I know there are technical problems in terms of moving toward digitized trading but we ought to be able to figure out how to handle those.

Third, I’m calling on President Bush to convene an economic summit right now that brings together leaders in the administration, the Congress, with lenders, consumer advocates, nonprofits, financial institutions and all the stakeholders. Such a summit, I believe, would restore confidence, demonstrate that the entire country is focused on solving the problem we face.

Fourth, I want to propose, once again, that we aggressively pursue and encourage mortgage modifications. I’ve introduced such legislation. I believe it’s important. Ten million homeowners are under water today carrying more than $2 trillion in mortgage debt. That is a huge anchor on our markets and economy. Modification, done right, is a strategy that serves lenders and borrowers as well as the broader markets.

Fifth, it is clear that for too long the rapid evolution of the securities and banking industry overwhelmed our regulatory framework resulting in an entire shadow banking system that operated outside of oversight and without accountability. It’s not enough just to shift responsibility or move lines on a flowchart. We need a new regulatory framework. We’ve been living off of the one from the Great Depression. Now is the time to create a new framework.

Six, I proposed the Corporate Executive Compensation Accountability and Transparency Act to impose new transparency rules on executive pay and the accounting techniques, the high compensation, and provide shareholders a say in executive compensation packages.

Finally, and seventh, I’m proposing that we require any financial institutions borrowing money from the Federal Reserve’s new lending facilities to open their books and ensure accountability and transparency to identify unsound practices. These banks and other entities have tapped the Fed’s new lending windows levels for over $300 billion in capital. They’ve shifted a lot of that risk onto the backs of our taxpayers. These are unprecedented interventions and we should make sure that these companies aren’t using taxpayer dollars to subsidize golden parachutes or risky investments, throwing your good money after bad. If we’re bailing you out we deserve to know exactly your liabilities. And you have to be part of this new regulatory framework.

This crisis has not abated. It’s time for us to start acting like Americans again. There isn’t anything we can’t solve once we put our minds to it. For that we need leadership. I know that our leader, Senator Reid, has said that the Senate will remain in pro forma session. We are ready to work with the administration, to work with the other stakeholders to change course and end the failed economic policies and failure of regulatory oversight that brought us to this point.

Now there’s much more, Madam President, that we need to do. Individuals have to take responsibility. We know that. But in this dynamic environment we must work together to stabilize the market, tackle the root causes that have festered too long, and restore confidence in our economy.

We’ll weather this storm but let’s do it sooner instead of later. Let’s try to save as many boats in the water right now instead of cleaning up the wreckage on the banks. I believe we can do that, and I thank you, Madam President, for your attention, and I hope that we’ll be able to start seeing action very soon. Thank you, and I yield the floor.

After watching the video of her remarks and reading the transcript, I sit here wondering why she isn’t our Democratic presidential candidate. And I remember the sadness and hole in my heart that I felt when I returned home from Montana and knew I would not see her as our candidate or our president this year.

While this blog does NOT endorse John McCain, we are — quite frankly — in awe of his latest strategies. We have written for months and months about our concerns that Obama’s campaign is entirely reliant on developing a “cult of personality,” which has nothing to do with governance and policy deliberations.

As one example, we are quite certain that, if quizzed, Barack Obama would be unable to name the ranks in the military branches. I’m very sure that the military, at all levels, is extremely concerned about this man’s readiness to be Commander in Chief. (A caller to DCMediaGirl’s great show last night made this clear: The caller is stationed at Ft. Bragg, has twice been to Iraq, and described the conversations among soldiers about Obama’s ignorance of the military as well as Obama’s failures to even SHOW UP to talk to the military.)

In one of the last debates, when the late Tim Russert asked both Barack and Hillary who the new head of Russia would be, Obama IMMEDIATELY turned his head to Hillary, hoping — no, expecting! — that she would answer. It is frightening that such a woefully ill-prepared person would even presume to run for the presidency. He needs to learn more before running for this most important office at this most critical time.

FROM THE McCAIN CAMP:

ARLINGTON, VA — U.S. Senator John McCain’s presidential campaign today released its latest television ad, entitled “Family.” The ad highlights Barack Obama’s support for higher taxes and increased government spending that will only put more burdens on America’s small businesses and cost jobs. While Barack Obama is the biggest celebrity in the world, that doesn’t do much to help American families who are hurting from higher gas prices and the threat of home foreclosure. John McCain has proposed an “all of the above” energy plan — the Lexington Project — to produce more energy here in America, invest in renewable energy, create jobs and achieve energy independence. The ad will air in key states.

VIEW THE AD HERE: http://www.youtube.com/watch?v=_3DxDBH9nn4

Script For “FAMILY” (TV :30)

ANNCR: Is the biggest celebrity in the world ready to help your family?

The real Obama promises higher taxes, more government spending. So, fewer jobs.

Renewable energy to transform our economy, create jobs and energy independence, that’s John McCain.

JOHN MCCAIN: I’m John McCain and I approved this message.

AD FACTS: Script For “FAMILY” (TV :30)

ANNCR: Is the biggest celebrity in the world ready to help your family? The real Obama promises higher taxes, more government spending. So, fewer jobs.

· Barack Obama Has Called For Higher Income Taxes, Social Security Taxes, Capital Gains And Dividend Taxes, And Corporate Taxes, As Well As “Massive New Domestic Spending.” “Obama’s transformation, if you go by his campaign so far, would mean higher income taxes, higher Social Security taxes, higher investment taxes, higher corporate taxes, massive new domestic spending, and a healthcare plan that perhaps could be the next step to a full-scale, single-payer system. Is that what most Americans want, someone who will fulfill a Democratic policy wish list?” (James Pethokoukis, “Barack Hussein Reagan? Ronald Wilson Obama?” U.S. News & World Report’s “Capital Commerce” Blog, www.usnews.com, 2/12/08)

· Barack Obama Would Raise Social Security (Payroll) Taxes. “Obama’s proposal … would impose social security taxes on income above $250,000 per year. He would continue to exempt income between $102,000 and $250,000 from social security taxes.” (Teddy Davis, Sunlen Miller, and Gregory Wallace, “Obama Kisses Billions Goodbye,” ABC News’ “Political Radar” Blog, blogs.abcnews.com, 6/18/08)

· Barack Obama Would Raise Income Taxes. Obama: “[I] would roll back the Bush tax cuts for those making over $250,000.” (Sen. Barack Obama, CNN Democrat Presidential Candidate Debate, Manchester, NH, 6/3/07)

· Barack Obama Would Raise Capital Gains And Dividend Taxes. “Sen. Obama wants to raise the long-term capital-gains rate for families making more than $250,000 to around 20 percent or somewhat higher but not above the 28 percent level it reached during the Reagan presidency, an Obama economic adviser says. The same rate would apply to most dividend income for these investors.” (Tom Herman, “Tax Report Your Tax Bill: How McCain, Obama Differ,” The Associated Press, 6/18/08)

· Barack Obama Called For Tax Hikes On “Dirty Energy” Such As Coal And Natural Gas. Obama: “What we ought to tax is dirty energy, like coal and, to a lesser extent, natural gas.” (”Q&A With Sen. Barack Obama,” San Antonio Express-News, 2/19/08)

· In June 2008, The National Taxpayers Union Foundation Calculated That Barack Obama Would Increase Annual Federal Spending By $343.9 Billion. “NTUF’s third round of ‘costing out’ the candidates’ platforms since January 29 found that Clinton would increase yearly federal spending by $289.6 billion, compared to Sen. Obama’s (D-IL) $343.9 billion — both significantly higher totals from the last update on March 3.” (National Taxpayers Union Foundation, “As Presidential Campaign Pace Quickens, Candidates Race Ahead With Bigger Federal Budget Promises, Updated Study Shows,” Press Release, 6/3/08)

· In April 2008, The Washington Post Calculated Obama’s New Annual Spending At Close To $333 Billion. “By our calculations, using figures supplied by the campaigns, Sen. Hillary Rodham Clinton (N.Y.) has proposed new spending and tax breaks that would amount to almost $265 billion a year when fully implemented, while the initiatives proposed by Sen. Barack Obama (Ill.) total nearly $333 billion.” (Editorial, “Who’ll Cover The Checks?” The Washington Post, 4/25/08)

· Barack Obama Not “Even Trying” To Balance The Budget And “Frankly Says He’s Not Sure He’d Bring It Down At All In Four Years.” “Barack Obama says John McCain’s plan to balance the budget doesn’t add up. Easy for him to say: It’s not a goal he’s even trying to reach. Not only does Obama say he won’t eliminate the deficit in his first term, as McCain aims to do, he frankly says he’s not sure he’d bring it down at all in four years, considering his own spending plans.” (Nedra Pickler, “Analysis: Obama Won’t Try For McCain’s Budget Goal,” The Associated Press, 7/8/08)

· The New York Times’ David Brooks Said For Barack Obama To Fund His Domestic Programs, He Will Have To Break His Pledge Not To Tax The Middle Class. “Both [Obama and Clinton] promised to not raise taxes on those making less than $200,000 or $250,000 a year. They both just emasculated their domestic programs. Returning the rich to their Clinton-era tax rates will yield, at best, $40 billion a year in revenue. It’s impossible to fund a health care plan, let alone anything else, with that kind of money. The consequences are clear: if elected they will have to break their pledge, and thus destroy their credibility, or run a minimalist administration.” (David Brooks, Op-Ed, “No Whining About The Media,” The New York Times, 4/16/08)

ANNCR: Renewable energy to transform our economy, create jobs and energy independence, that’s John McCain. JOHN MCCAIN: I’m John McCain and I approved this message.

· John McCain Has Proposed A Comprehensive “All Of The Above” Energy Plan — The Lexington Project — To Achieve Energy Independence By 2025: http://www.johnmccain.com/Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm

· John McCain Believes That The U.S. Must Become A Leader In A New International Green Economy. “Green jobs and green technology will be vital to our economic future. There is no reason that the U.S. should not be a leader in developing and deploying these new technologies.” (John McCain 2008, “John McCain’s Lexington Project,” Press Release, 6/25/08)

· John McCain Will Commit $2 Billion Annually To Advancing Clean Coal Technologies. “Coal produces the majority of our electricity today. Some believe that marketing viable clean coal technologies could be over 15 years away. John McCain believes that this is too long to wait, and we need to commit significant federal resources to the science, research and development that advance this critical technology. Once commercialized, the U.S. can then export these technologies to countries like China that are committed to using their coal — creating new American jobs and allowing the U.S. to play a greater role in the international green economy.” (John McCain 2008, “John McCain’s Lexington Project,” Press Release, 6/25/08)

· John McCain Will Put America On Track To Construct 45 New Nuclear Power Plants By 2030 With The Ultimate Goal Of Eventually Constructing 100 New Plants. “Nuclear power is a proven, zero-emission source of energy, and it is time we recommit to advancing our use of nuclear power. Currently, nuclear power produces 20% of our power, but the U.S. has not started construction on a new nuclear power plant in over 30 years. China, India and Russia have goals of building a combined total of over 100 new plants and we should be able to do the same. It is also critical that the U.S. be able to build the components for these plants and reactors within our country so that we are not dependent on foreign suppliers with long wait times to move forward with our nuclear plans.” (John McCain 2008, “John McCain’s Lexington Project,” Press Release, 6/25/08)

· John McCain Will Establish A Permanent Tax Credit Equal To 10 Percent Of Wages Spent On R&D. “This reform will simplify the tax code, reward activity in the U.S., and make us more competitive with other countries. A permanent credit will provide an incentive to innovate and remove uncertainty. At a time when our companies need to be more competitive, we need to provide a permanent incentive to innovate, and remove the uncertainty now hanging over businesses as they make R&D investment decisions.” (John McCain 2008, “John McCain’s Lexington Project,” Press Release, 6/25/08)

· John McCain Will Support Alternative, Low Carbon Fuels Such As Wind, Hydro And Solar Power. “According to the Department of Energy, wind could provide as much as one-fifth of electricity by 2030. The U.S. solar energy industry continued its double-digit annual growth rate in 2006. To develop these and other sources of renewable energy will require that we rationalize the current patchwork of temporary tax credits that provide commercial feasibility. John McCain believes in an even-handed system of tax credits that will remain in place until the market transforms sufficiently to the point where renewable energy no longer merits the taxpayers’ dollars.” (John McCain 2008, “John McCain’s Lexington Project,” Press Release, 6/25/08)

· USA Today: McCain’s Prize For A Better Battery Is “Smarter Than More Bureaucratic Approaches.” “$300 million battery prize. Obama derides this as a gimmick, but McCain’s idea for developing a radically better battery for powering a new generation of cars strikes us as smarter than more bureaucratic approaches. Like the X-Prize that helped propel the first civilian aircraft into space, a reward can leverage huge private investment. The idea would be better, though, if it focused on building radically more fuel-efficient cars regardless of the technology.” (Editorial, “Mccain + Obama = A Valid Energy Plan,” USA Today, 7/3/08)

:::::::::::::::::::::::::

NoQuarterUSA Action Of The Day: We ask that you take part in the I Own My Vote Virtual Platform Committee Meeting now! It takes five minutes. Click here to start. If you have not yet signed the pledge, click here to do so.

• “Does he wear a flag pin on his lapel? Yes, but not always. Like many presidential candidates, sometimes he wears a flag pin, sometimes he wears a breast cancer awareness pin, sometimes he wears his U.S. Senate membership pin and other times he wears no pin at all.”

• “Is he a Christian? Yes. He is a committed Christian. In 1985, he began working as a community organizer with a Christian church-based group seeking to improve the living conditions in poor Chicago neighborhoods.”

The mailer missed the mark! It reminds of us those rumors, that he is unpatriotic and a Muslim, rather than dispels them. Once again our family, friends and neighbors will be discussing the rumors anew.

Here is the second mailer. Part of this mailer has an older white woman saying “I am voting for the candidate who will fix our health care system.” Today, it was revealed that a health care plan backed by the AFL-CIO and SEIU may derail Obama’s healthcare plan.

[youtube]http://www.youtube.com/watch?v=kcdnlNZg2iM[/youtube]

And now this on a union backed health care plan is called “guaranteed affordable choice”. More on that:

If SEIU and the AFL-CIO get their way, the day that all Americans have affordable insurance will be pushed into the unforeseeable future.

The labor-backed plan, which they call “guaranteed affordable choice,” would create a public program like Medicare that would allegedly compete with the nation’s 1,500 insurance companies. Americans would get tax-financed subsidies to purchase insurance from either a private insurance company or the public plan. Competition, which has never worked in the health insurance industry, would magically come to life.

By leaving the bloated insurance industry smack in the middle of our health care system, “guaranteed affordable choice” would have taxpayers and premium-payers continuing to spend hundreds of billions of dollars on unnecessary administrative costs.

The other two faces on the mailer show white older males, one a retiree and one still employed. It will evoke memories of the comments spoken in front of wealthy donors in San Francisco. Here are Obama’s exact words:

“You go into some of these small towns in Pennsylvania, and like a lot of small towns in the Midwest, the jobs have been gone now for 25 years and nothing’s replaced them,” Obama said. “And they fell through the Clinton Administration, and the Bush Administration, and each successive administration has said that somehow these communities are gonna regenerate and they have not. And it’s not surprising then they get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.”

And of course we will be reminded of Obama’s stance on NAFTA. Or were those just words and he didn’t mean it?

“While Senator Obama was telling voters he would fix NAFTA, his chief economics advisor was telling Canadians that his position was just words.

The AFL-CIO wasted their money and time. The AFL-CIO needs to go back to the drawing board on these mailers! If the mailers evoke these memories in me, what will they do for the union members and the bitter people living in Pennsylvania? All those campaign gaffes during the primaries will haunt Obama’s dream again, while I sleep peacefully at night!

The Los Angeles Times, however, is not. It is looking at Obama and his policy proposals and taking him to task over how he is going to pay for them.

In more than a year of campaigning, Barack Obama has made a long list of promises for new federal programs costing tens of billions of dollars, many of them aimed at protecting people from the pain of a souring economy.

But if he wins the presidency, Obama will be hard-pressed to keep his blueprint intact. A variety of budget analysts are skeptical that the Democrat’s agenda could survive in the face of large federal budget deficits and the difficulty of making good on his plan to raise new revenue by closing tax loopholes, ending the Iraq war and cutting spending that is deemed low-priority.

Like predecessors who also had to square far-reaching promises with inescapable budget realities, they say, a President Obama might need to jettison pieces of Obama-ism.

“I don’t think it all adds up,” Isabel Sawhill, an official in President Clinton’s Office of Management and Budget, said of Obama’s spending plans.

“There will definitely need to be a recalibration of these proposals once someone is in office,” said Sawhill, now a senior fellow at the Brookings Institution. “The fiscal situation just isn’t going to permit doing what Sen. Obama or anyone else would like.”

On Monday, Obama repeated his commitment to his agenda, as both he and his Republican opponent, John McCain, spent the day highlighting their plans to revive the economy.

McCain, appearing in Denver, said he would create new jobs and balance the budget by the end of his first term in 2013 — a claim that has drawn skepticism because he wants to extend President Bush’s tax cuts that are due to expire.

Obama said Monday that his plan would provide more help to struggling middle-class families.

“I think it is important for us to make some critical investments right now in America’s families,” the senator from Illinois told reporters in St. Louis, where his plane made an unscheduled stop to resolve a mechanical problem.

In remarks he had intended to deliver in North Carolina, Obama said his plan would “not only ensure the economic security of middle-class families in the long term, but also the need to give them a chance for some relief in the short term, to make sure that Americans aren’t just getting by but getting ahead.”

Among other proposals during the course of the campaign, Obama has said he would strengthen the nation’s bridges and dams ($6 billion a year), help make men better fathers ($50 million a year) and aid Iraqis displaced by the war ($2 billion in one-time spending). Last week, he pledged to give religious and community groups $500 million a year to provide summer education to low-income children.

Other proposals are more costly. Obama wants to extend health insurance to more people (part of a $65-billion-a-year health plan), develop cleaner energy sources ($15 billion a year), curb home foreclosures ($10 billion in one-time spending) and add $18 billion a year to education spending.

It is a far different blueprint than McCain is offering. The senator from Arizona has proposed relatively little new spending, arguing that tax cuts and private business are more effective means of solving problems.

The total price tag of Obama’s plans, according to his campaign, is $130 billion a year. On top of that, Obama is proposing a middle-class tax cut of about $80 billion a year.

Obama’s campaign says the new spending would be more than offset by cuts to existing federal programs and other savings.

“His plan reallocates what we’re spending today on the war in Iraq and wasteful and low-priority government programs into higher-priority investments in our future,” said Jason Furman, Obama’s economic policy director.

Some budget experts point to the last Democratic presidency, Bill Clinton’s, as an example of the budget pressures Obama might face.

Clinton campaigned in 1992 on a platform he called “Putting People First,” which included government spending on job training and other programs to help middle-class Americans navigate the economy. But after his election, Clinton scaled back his ambitions and made deficit-cutting a priority instead, following the counsel of advisors such as Robert E. Rubin.

Clinton wound up charting a centrist course in his two terms, and declared in 1996 that “the era of big government is over.”

Rubin is now an advisor to Obama. One of the men who also wanted Clinton to cut the deficit first was Leon E. Panetta, who eventually became Clinton’s chief of staff.

Panetta predicts that Obama is in for a similar reckoning.

“I accept that all candidates throw out a lot of proposals when they’re campaigning,” Panetta said in an interview. “You have to assume that’s all part of a campaign strategy to appeal to a lot of different constituencies that are out there. But once he enters the Oval Office, he’s going to have to make some hard decisions.”

Obama’s staff thinks that ending the Iraq war would free up money — at least $90 billion a year — that could be redirected to the new government programs. But it is unclear when that would occur. Obama has not given a clear date by which the Iraq war might end. On Thursday, he said he remained committed to withdrawing combat troops in 16 months. At a debate in September, he would not commit to pulling all U.S. troops out of Iraq by 2013.

Some budget experts say even a speedy end to the war would not give Obama much money for new programs.

“You cannot justify a longer-term commitment to a program based on a one-time saving on the war in Iraq,” said Stuart Butler, who studies domestic policy at the Heritage Foundation, a conservative-leaning think tank.

In addition, replenishing the military and rebuilding Iraq and Afghanistan are certain to become expensive priorities once the fighting stops, said Alice Rivlin, who directed the Office of Management and Budget for several years under Clinton.

“Savings from the Iraq war will not be all that great,” she said.

Other new sources of revenue in Obama’s plan include about $80 billion a year from closing tax loopholes and $100 billion from a variety of cuts in spending and revised government procurement rules.

The nonpartisan Tax Policy Center examined Obama’s plans to eliminate tax loopholes and said it could not confirm the projected savings.

“If you look at official revenue estimates, the numbers come out to be less than half of what they say they’re going to raise,” said Len Burman, director of the center and a former Treasury official in the Clinton administration, referring to Obama’s campaign staff.

McCain has cited similar proposals to free up revenue as part of his plan to balance the budget by 2013, saying he would cut pork-barrel spending and other “wasteful” programs. He says that winning the wars in Iraq and Afghanistan would generate savings that could be plowed into deficit reduction.

Unlike McCain, Obama says he could recoup about $100 billion a year by rolling back the Bush tax cuts for families earning more than $250,000 annually — but some analysts question that too.

Those tax cuts are set to expire at the end of 2010, so repealing them a couple of years earlier would hardly result in a windfall that could be used as a continuing funding source, they say.

The Obama campaign responds that tax cuts, once enacted, are usually renewed and do not expire. Therefore, they say, Obama can legitimately claim to be recouping money for other purposes by scaling back the tax cuts.

Obama has not identified new revenue sources or spending cuts to pay for some of what he wants to do.

His $10-billion fund to reduce home foreclosures, for example, is part of a $50-billion plan to stimulate the economy through increased government spending. Paying for the program through spending cuts would defeat the point of the stimulus, the campaign says.

Also complicating his plans, Obama would inherit a budget deficit projected at more than $400 billion. Another burden is the rising cost of Medicare and other entitlement programs. In this environment, new programs may prove unaffordable.

Obama is nothing but a tax, spend and subsidize politician. Can we afford this style of politics? Does he make economic sense? Health care is a priority but his plan is not a health care plan. It is an insurance plan that still leaves at 15 million people and to boot runs $1,900 per new insured more than Clinton’s plan that covered everybody.

I am also a realist. The economy is in serious trouble after eight years of mismanagement. I am not as sanguine as McCain to think that the Bush Tax cuts can be made permanent. I doubt they can. Yet they can also not be raised in this economic environment to their previous levels. Even so, spending has to be cut not increased. Neither candidate gets the equation wrong. But Obama gets both parts wrong.

From my blog, By The Fault.

“I have always opposed NAFTA.”

“I don’t think NAFTA has been good for America - and I never have.”

“Ten years after NAFTA passed, Senator Clinton said it was good for America. … Well, I don’t think NAFTA has been good for America - and I never have.” –Senator Barack Obama in Toledo, Ohio on February 24, 2008

Now in an interview with Fortune magazine out on Monday June 23, 2008, the very junior Senator from Illinois wants us to believe that was just rhetoric. He really didn’t mean what he said.

“Sometimes during campaigns the rhetoric gets overheated and amplified,” –Senator Barack Obama in a Fortune magazine interview to be published Monday June 23, 2008

Never mind the heat of battle rhetoric, how about the more reflective printed word?

In his own flyer, Obama is quoted as saying that “one million jobs have been lost because of NAFTA, including nearly 50,000 jobs here in Ohio.” But those figures come from an anti-NAFTA source, the Economic Policy Institute written by Robert Schott. Other economists have criticized that report’s methodology and its conclusions as having overstated the impact of NAFTA, rather they point to a lax enforcement of regulations that have permitted an exodus of American manufacturing jobs and primarily to China, Korea and other East Asian countries not to Mexico or Canada. Other economic studies have concluded the trade deal resulted in much smaller job losses or even a small net gain. Here’s what the Carnegie Endowment for International Peace has to say on NAFTA’s effects on American jobs:

NAFTA’s net effect on jobs in the United States has been minuscule, given the size of the U.S. economy and the importance of other trading partners.

The best models to date suggest that NAFTA has caused either no net change in employment or a very small net gain of jobs.

And that’s now after seven years of the Bush Administration failing to enforce regulations that shed American jobs. Under President Clinton, it was a far different story. Here’s Professor of Economics Brad Delong (an Obama supporter, I might add) of the University of California at Berkeley writing in July 2000:

It is time to conclude that NAFTA–the North American Free Trade Agreement–is a success.

His article largely is about the impact of NAFTA on Mexico but he finds that economic benefits accrued to all members of the trade pact. However, he does note the following:

Far from shrinking, employment in autos and auto parts in America has grown by more than twenty percent since the beginning of NAFTA. Far from falling, hourly earnings of U.S. automotive workers have risen since the beginning of NAFTA.

Even as recently as February 2008, just about the time Obama was making his comments in Toledo on how he had always opposed NAFTA, Professor Delong was writing that NAFTA was not the cause of Ohio’s woes.

And, of course, if we go back to his Senate campaign of 2004, Obama said this:

“The United States benefits enormously from exports under the WTO and NAFTA.” quoted in an article by Ron Ingram, Obama, Keyes Court Farmers, Decatur Herald & Review, on September 9, 2004. Source: Lexis/Nexis.

So he was for it before he was against before he was for it. Sound familiar? And so much for the “I never have” part of his argument.

And one more point, I may not remember what I had for lunch earlier this week, but I do remember what I have said over the years, maybe because I have core convictions and that is just it with Senator Obama, he has no core convictions. It’s always what is politically expedient for him at the time.

More on this topic and perhaps others once the full interview is out. He can excuse his “rhetoric” as a slip of the tongue but the printed word is a little harder to dismiss.

_________

From my blog, By The Fault.

A few months ago, Michael Moore’s groundbreaking 1989 documentary “Roger & Me” aired on one of the 15 HBO channels. For whatever reason I recorded it rather than watched it live, but finally got around to viewing it this past evening.

For the uninitiated, the film follows Michael Moore’s attempt to confront and interview General Motor’s CEO’s Roger Smith after the closure of a GM plant in Moore’s hometown of Flint, Michigan left 3,000 people unemployed. Hilarity ensues.

About 34 minutes into the film, I made a discovery. Moore has just been thrown out the Detroit Athletic Club where he had hoped to find Roger Smith. The film then shows interior and exterior shots of a hockey arena in Flint, Michigan with the following voiceover and dialogue:

Moore (v.o.): I wasn’t having much luck bringing Roger to Flint. The mayor, though, was having better luck with an even higher authority. He paid TV evangelist, Robert Schuller, twenty thousand dollars to come to Flint and rid the city of its unemployment plague.

Schuller (at a lectern in the arena): Tough times don’t last, but tough people do.

Moore (v.o.): Thousands filled the city’s hockey arena to hear his message of hope.

Schuller (walking around the stage): Pull your way out of poverty, but you’re not going to pull your way from poverty to prosperity until you realize that you have to be humble enough to say, “I need help!”

At this point, Moore utilizes a few still photographs taken from the event: one shows Schuller shaking hands with a black man. The other? It shows an older white woman reading a program from the event. Here’s a close-up screen grab of the program:

Oh yes, you read that right — “Flint’s attitude towards unemployment is: ‘Yes, we can!!’”

The film then goes on to show a series of shots of pollyannaish billboards that can be seen from the highway in Flint –”We’ve got a new attitude!”, “Flint is Auto This World”, “Flint Works” — along with some parting voiceover from Schuller.

Schuller (v.o.): By then what happens is you can turn your hurt into a halo! The sorrow becomes a servant. Just because you’ve got problems is no excuse to be unhappy!

Needless to say, Moore is clearly ridiculing these billboards and slogans such as “Yes, we can!!” as little more than empty rhetoric devoid of substance, opiates for the masses that project hope while government officials do nothing to actually help people. Hmmm, I’m trying to wade through the irony here of a professed Obama supporter disparaging empty political rhetoric. I’ll need a moment…

First, there’s Anglachel’s “shorter Krugman”: “Act like Democrats, not Obamacans.”

Then there’s Digby on a similar theme: “[Obama's] ‘change’ campaign may seem a bit distant and abstract in the current circumstances.” — and — “Unlike Perot, who ran as a reformer in a recessionary climate in 1992, Obama doesn’t have the decades of business experience to use as a proxy for successful economic stewardship, so he probably needs to be more explicit in his economic message now.”

And there’s my new favorite quotation: “The Democratic nomination contest is a process, not a suicide pact.”

And now here’s Paul:

A few months ago the Obama campaign was talking about transcendence. Now it’s talking about math. “Yes we can” has become “No she can’t.”

Mr. Obama was supposed to be a transformational figure, with an almost magical ability to transcend partisan differences and unify the nation. …

Well, now he has an overwhelming money advantage and the support of much of the Democratic establishment — yet he still can’t seem to win over large blocs of Democratic voters, especially among the white working class.

As a result, he keeps losing big states. And general election polls suggest that he might well lose to John McCain.

What’s gone wrong?

That, the Obamatrons say, is Hillary’s fault. It’s her negative campaigning. If only she’d get out of the way, Obama could get through to the white working class. Not so, asserts Krugman.

[M]aybe his transformational campaign isn’t winning over working-class voters because transformation isn’t what they’re looking for.

From the beginning, I wondered what Mr. Obama’s soaring rhetoric, his talk of a new politics and declarations that “we are the ones we’ve been waiting for” (waiting for to do what, exactly?) would mean to families troubled by lagging wages, insecure jobs and fear of losing health coverage. The answer, from Ohio and Pennsylvania, seems pretty clear: not much. Mrs. Clinton has been able to stay in the race, against heavy odds, largely because her no-nonsense style, her obvious interest in the wonkish details of policy, resonate with many voters in a way that Mr. Obama’s eloquence does not. …

My answer? It’s what the people of Ohio, Texas, California, and most recently Pennsylvania have said: GIVE US HILLARY CLINTON.

Give us the candidate with the “no-nonsense style” and an “obvious interest in the wonkish details of policy.”

People may get a quick high off rhetoric. But in the end they want the one who can get it done.

Read all of Mr. Krugman’s fine column today: “Self-Inflicted Confusion.”

Today oil prices hit yet another record high. Food prices are soaring. In the United States, stores are beginning to ration the sale of rice, flour and cooking oil due to food shortages. The dollar continues weaken and inflation continues to grow and only threatens to get worse. 80,000 Americans lost their jobs last month, and tens of thousands of layoffs have already been announced this month. We are in the midst of a housing crisis, a mortgage crisis, and a credit and financial crisis. The Fed had to step in and rescue one of the country’s largest investment banks. Homeowners have had their home equity lines of credit shut down. Inventories are up. You can’t pick up the Wall Street Journal each week without seeing the words “recession, depression, or crisis.” The War on Terror is far from won and we continue to suffer major setbacks in Afghanistan. The US military continues to weaken, and the Army and Marine Corps are enlisting convicted felons in order to fill their ranks. People across this country from all demographics are genuinely frightened. Yet, the only thing the House Republicans can talk about is an earmark moratorium. Eliminating earmarks tomorrow won’t solve any of these problems. Arguably, it could make some of them worse. We all know this is a gimmick. Earmark money is not “new” money put in spending bills, so what programs are they going to cut from Bush’s request to create money for a proposed stimulus check? The time for gimmicks has passed. The country has real problems and needs real leaders with real solutions. How many more House seats do they need to lose in order for them to figure this out? Wasn’t the loss of Hastert’s seat a clear signal of what awaits them in November if they don’t start offering the country a real agenda?

I agree with my friend.  Earmarks, in and of themselves, are not evil.  I believe in full disclosure.  My friend’s point is that the Congress, particularly the Republicans, are fiddling while our nation burns.  Think any of these things will be issues in the fall?