Relevant and even prescient commentary on news, politics and the economy.

Dangerous surpluses

Alan Greenspan and Naomi Klein discuss recent economic history in this interview:

I changed my mind in 2002 and 2003, largely because the whole notion of which fundamentally got me in favor of significant tax cuts without offsetting expenditures was a very special event which probably had not occurred in the United States for 150 years — namely, division of our total federal debt effectively going to zero.

I am sure Mr. Greenspan’s interviews will be popular, but the quote above was in relation to the Bush tax cuts of 2001 and his fear of surpluses.

Could someone explain to me how 6 trillion in debt could be paid down to zero in a short time frame (a decade or two?, eight years?)? He does not mention the mild recession. I believe cactus has a chart somewhere as well, but I will find it later.

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The Middle East Times reports:

June 22, 2007

BAGHDAD — Iraqi leaders beginning a weeklong China visit are hinting at reigniting a Saddam-era oil deal, though such a move is clouded by Iraq’s stalled oil law.

President Jalal Talabani this week is leading a delegation that includes the oil minister and four other cabinet members, the first Iraqi head of state visit to China since diplomatic ties were set up in 1958, China Daily reports. “We encourage Chinese enterprises to join the multinational competition for exploration of Iraqi oilfields,” said Mohammed Sabir Ismail, Iraq’s ambassador to China.

The visit will encompass a spectrum of economic meetings, but with Iraq oil sales making up 93 percent of the federal budget and in deep need of investment, the petroleum sector is likely to top the bill. Iraq produces only 2 million barrels per day (bpd) now, down from 2.6 million bpd before the war. The country is home to 115 billion barrels of proven reserves, the third largest in the world.

While Iraq’s oil sector was crippled by sanctions, Saddam Hussein also mismanaged the sector, overworking it and depriving it of needed maintenance. He did sign numerous oil deals with various countries, including China. The Wall Street Journal reports that Talabani will try to renew a $1.2 billion deal to explore an oilfield in Iraq’s southern Wasit province, first signed in 1997 with the China National Petroleum Corp. “I am looking forward to the visit and hope it will open a new phase of the bilateral relations between the two countries,” Talabani told the Xinhua news agency. Oil minister Hussain Al Shahristani said during an October 2006 visit to China that negotiations over the Ahdab oilfield were to begin.

A law governing Iraq’s oil, however, has been stuck for months in political wrangling over control of the oilfields. Any new contract depends on the oil law, which may not even be introduced to Iraq’s parliament until the end of July. Without the law to dictate investment guidelines, violence in the country has also deterred oil companies. But China, working in Nigeria’s militant-laden oil sector and genocidal Sudan, may be willing to take the risk to meet its growing demand for oil.

Comparative advantage might be decreasing for US firms. If you were an Iraqi nationalist, would you hold up the oil law, and seek a freer market for your country?

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Strategic interest and defining victory

George Lakoff offers a frame to consider about Iraq and the ME.

Greenspan’s revelation and the contracts (PSA oil contracts) need to be discussed openly. The question must be asked, “Is our military there for the sake of oil?”

I have been struck by the use of the word “victory” by the right wing, especially by its propaganda arm, Freedom’s Watch. Usually, “victory” is used in reference to a war between countries over territory, where there is a definable enemy. That is not the case in Iraq, where we have for four years had an occupation, not a “war,” and there has been no clear enemy. We have mostly been fighting Iraqis we were supposed to be rescuing. “Victory” makes no sense for such an occupation. And even Petraeus has said that only a political, not a military, settlement is possible. In what sense can keeping troops there for 9 or 10 years or longer, as Petraeus has suggested, be a “victory”?

What is most frightening is that they may mean what they say, that they may have a concept of “victory” that makes sense to them but not to the rest of the country. If the goal of the invasion and occupation of Iraq has been to guarantee access to Iraqi oil for the next 30 years, then any result guaranteeing oil profits for American oil companies would count as “victory.” Suppose the present killing and chaos were to continue, forcing us to keep our troops there indefinitely, but allowing the oil companies to prosper under our protection. That would be a “victory.” Or if the Iraqi army and police force were to develop in a few years and keep order there protecting American investments and workers, that too would be “victory.” If the country broke up into three distinct states or autonomous governments, that too would be “victory” as long as oil profits were guaranteed and Americans in the oil industry protected. And it doesn’t matter if a Republican president keeps the troops there or a Democratic president does. It is still an oil company “victory” …

Indeed, Kurdistan’s PSA contract last week with Hunt Oil suggests the latter form of “victory.” As Paul Krugman observed in the New York Times on September 14, “the chief executive and president of Hunt Oil, is a close political ally of Mr. Bush. More than that, Mr. Hunt is a member of the President’s Foreign Intelligence Advisory Board, a key oversight body.” Hunt Oil seems to have had the first taste of “victory.”

If that is “victory,” what is “defeat” and who is being “defeated?” The troops who would have to stay to protect the oil investments would, person by person, suffer defeat — a defeat of the spirit and, for too many, of the body. And most of America would suffer a defeat, especially our taxpayers who have paid a trillion dollars that could have gone for health care for all, for excellent schools and college educations, for rebuilding Louisiana and Mississippi, for shoring up our infrastructure and bridges, and for protecting our environment. Victory for the oil companies, defeat for most of America.

Global Policy Forum offers an analysis:

Our key findings are:

At an oil price of $40 per barrel, Iraq stands to lose between $74 billion and $194 billion over the lifetime of the proposed contracts (2), from only the first 12 oilfields to be developed. These estimates, based on conservative assumptions, represent between two and seven times the current Iraqi government budget.

Under the likely terms of the contracts, oil company rates of return from investing in Iraq would range from 42% to 162%, far in excess of usual industry minimum target of around 12% return on investment.

Hormats, in his visit here, said protection of energy sources was the big idea for defense as well as whatever he thought terrorists were, which he did not define.

If the premise is only ‘half right’ for Iraq, if true believers thought so many ideas actually came together for the sake of democracy, vital US interests, and humanitarian concerns as the other half of the goalposts, does it still justify the profits from the PSA’s for the 80 working oilfields and already discovered oil, and does it not poison the professed concern?

“Victory” is certainly a flexible idea, but it feels to me we are paying twice, first to be hijacked, second to be rescued.

Update:

Greenspan corrected in a follow-up interview. [Bob Woodward in Monday’s Washington Post] He was only saying that “taking out Saddam was essential” for “oil security” and the global economy.

I fail to see the difference given the way the things are working. Opportunity costs.

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Fact checking the President on SCHIP

Factcheck.org does a creditable job with quotes from President Bush’s public statements and links to real data. The summary is posted, but the links and data are worth the time:

President Bush gave a false description of proposed legislation to expand the 10-year-old federal program to provide health insurance for children in low-income working families.

He said it “would result” in covering children in families with incomes up to $83,000 per year, which isn’t true. The Urban Institute estimated that 70 percent of children who would gain coverage are in families earning half that amount, and the bill contains no requirement for setting income eligibility caps any higher than what’s in the current law.

He also said the program was “meant to help poor children,” when in fact Congress stated that it was meant to expand insurance coverage beyond the poor and to cover millions of “low-income” children who were well above the poverty line. Under current law most states cover children at twice or even three times the official poverty level.

The president also says Congress’ expansion is a step toward government-run health care for all. It’s true that some children and families with private insurance are expected to shift to the government program. But the Congressional Budget Office estimates that such a shift is relatively low considering the number of uninsured these bills would reach.

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Ramadi strategy 2006

The Ramadi strategy 2006, prior to the surge, begins success.

It’s a dilemma familiar to counterinsurgency strategists: much of the fighting in Ramadi and other places continues because of the American presence, not in spite of it. U.S. commanders tasked with clearing Ramadi, the latest insurgent hub in Anbar Province, aren’t looking to assault the city with U.S. troops. They want local security forces instead to retake the city gradually. And in recent months a group of tribal leaders in Anbar Province has been working with U.S. forces in that effort, forming a coalition of sheiks who have sent hundreds of their followers to join the Ramadi police force as well as the Iraqi army.
The Ramadi strategy, which in essence replaces U.S. troops with Iraqis even as the fight unfolds, shows some early signs of success. Despite bursts of fighting in Ramadi almost daily, schools are opening, and Iraqi police are circulating on their own in neighborhoods that were previously no-go areas. The end game is far from certain in Ramadi and other violent towns in Anbar Province like Hit and Haditha. But the plan already in motion there now means any additional combat troops President Bush may order to Iraq would be better put to use in Baghdad, which everyone agrees must be stabilized for anything else to work in Iraq.

When U.S. strategy in Iraq called for pulling American forces back to large, heavily protected bases last year,Army Col. Sean MacFarlandwas moving in the opposite direction. He built small, more vulnerable combat outposts in Ramadi’s most dangerous neighborhoods — places where al-Qaeda had taken root.
“I was going the wrong way down a one-way street,” MacFarland says.
Soon after, MacFarland started negotiating with a group of Sunni sheiks, some of whom have had mixed loyalties in the war. His superiors initially were wary, fearful the plan could backfire, he says. He forged ahead anyway.

This month’s breakthrough came when Lt. Col. Patrick Frank, responsible for west Baghdad’s dangerous Bayaa, Jihad and Amal neighborhoods, met Sept. 3 with tribal leaders belonging to the Mahdi Army at Camp Falcon, a sprawling U.S. base.To preserve the movement’s posture of not negotiating with Americans, the tribal leaders did not discuss their affiliation, but their identity was well known. “The organization we are extending our hand to is the Jaish al Mahdi,” Frank said, using the group’s Arabic name. A Sadr follower in west Baghdad confirmed that Shiite and Sunni tribal leaders were in negotiations with the Americans for a truce in the area.

MacFarland was bucking Odierno I believe, which would not have been pretty. Too bad MacFarland was not testifying about his plan instead of Patraeus representing him.

These are examples of the backbone of the army at the Captain, Lt. Col., and Col. level, where retention is severely declining. Smart people given an impossible task.

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Gallup world poll and extreme global thought

This analysis of Gallup Poll data offers insights for us to seriously think about. It also fits in with John Robb’s expert theory on terrorisms.

Often U.S. policy-makers and other intellectuals draw an analogy between the Cold War and the current “global war on terror” and recommend analogous strategies, because, after all, both conflicts battled over people’s hearts and minds. But results from Gallup’s surveys in the Muslim world point to important differences between the two conflicts and real risks in confusing them by applying similar strategies.
At the heart of the Cold War analogy is the belief that religious fanaticism fuels extremism and therefore replacing Muslims’ worldview with Western liberalism is the path to victory against terrorism. To begin to understand the danger of this diagnosis, we must first understand the factors that do and do not drive sympathy for violence.
As a starting point, Muslims do not hold a monopoly on extremist views. While 6% of Americans think attacks in which civilians are targets are “completely justified,” in both Lebanon and Iran, this figure is 2%, and in Saudi Arabia, it’s 4%. In Europe, Muslims in Paris and London were no more likely than were their counterparts in the general public to believe attacks on civilians are ever justified and at least as likely to reject violence, even for a “noble cause.”
After analyzing survey data representing more than 90% of the global Muslim population, Gallup found that despite widespread anti-American sentiment, only a small minority saw the 9/11 attacks as morally justified. Even more significant, there was no correlation between level of religiosity and extremism among respondents. Among the 7% of the population that fits in the politically radicalized category — those who saw the 9/11 attacks as completely justifiable and have an unfavorable view of the United States — 94% said religion is an important part of their daily lives, compared with 90% among those in the moderate majority. And no significant difference exists between radicals and moderates in mosque attendance.
Gallup probed respondents further and actually asked both those who condoned and condemned extremist acts why they said what they did. The responses fly in the face of conventional wisdom. For example, in Indonesia, the largest Muslim majority country in the world, many of those who condemned terrorism cited humanitarian or religious justifications to support their response. For example, one woman said, “Killing one life is as sinful as killing the whole world,” paraphrasing verse 5:32 in the Quran.
On the other hand, not a single respondent in Indonesia who condoned the attacks of 9/11 cited the Quran for justification. Instead, this group’s responses were markedly secular and worldly. For example, one Indonesian respondent said, “The U.S. government is too controlling toward other countries, seems like colonizing.”
The real difference between those who condone terrorist acts and all others is about politics, not piety. For example, the politically radicalized often cite “occupation and U.S. domination” as their greatest fear for their country and only a small minority of them agree the United States would allow people in the region to fashion their own political future or that it is serious about supporting democracy in the region. Also, among this group’s top responses was the view that to better relations with the Muslim world, the West should respect Islam and stop imposing its beliefs and policies. In contrast, moderates most often mentioned economic problems as their greatest fear for their country, and along with respecting Islam, they see economic support and investments as a way for the West to better relations. Moderates are also more likely than the politically radicalized to say the United States is serious about promoting democracy.
While the politically radicalized are as likely as the moderate majority to say better relations with the West is of personal concern to them, they are much less likely to believe the West reciprocates this concern and therefore much less likely to believe improved relations will ever come. In short, perceptions of being under siege characterize those who sympathize with extremism.

Several thoughts occur to me. I am also not an expert on these matters so I must rely on readings to try to figure out what is going on and what policy I can reasonably support.

1. I am averse to ‘global truths’ because I have never found them adequate to explain human behaviors or produce accurate planning information.
2. History often shows the deficiency of such approaches after the fact, which I will not explore on this post. Such perceptions are used to confirm a priori beliefs instead of leading to questions to be solved. Perhaps this is a matter of temperament for some, or calculation for others.
3. In a speech, asking questions of nuance is very hum drum and has no punch or ring to it. Advertising needs catchy stimuli to work, so works on our limbic system the most dramatically. As a way to develop policy…not so good.

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Pinochio becomes a real boy?

The Pinochio Law carries the fiction of companies as persons to greater depth, finally.

Last week, the British government agreed to introduce a new law titled the “Corporate Manslaughter Statute.” This law is remarkable because it attempts to make companies–not persons–criminally responsible for deaths caused by a firm’s gross negligence. In this column, I will examine the law’s structure, its history, and finally, I will ask how American law approaches the same problems the Corporate Manslaughter Act is designed to solve.

The Corporate Manslaughter Act
The British law allows the state to prosecute a corporation or partnership (an “organization” for short) for the crime of manslaughter if the organization causes the death of a person as the result of its “gross” breach of a duty owed under the law of negligence. However, in order for the state to prove its case, it must prove that a substantial element of the gross breach of duty resulted from the way in which the organization’s activities were “managed or organised by its senior management.”

The penalties for violating the act are quite interesting. First, a court can impose unlimited financial penalties on the organization, once it is convicted. Second, a court may issue a “publicity order,” which requires the organization to publicly announce (through advertisements, it seems) that it has been successfully prosecuted for corporate manslaughter and is subject to any other penalties the court may have ordered.

The third and final potential penalty is that the court can order the organization to publicly take remedial steps to correct the conditions that led to the breach of duty. This penalty could have potentially far-reaching consequences, depending on how the courts choose to interpret it. For example, under this remedy, suppose a court decides that a design defect was the result of conscious indifference to the safety of others (such as in the famous Ford Pinto case). The court could simply order a manufacturer to change the design of their product–a power that no American court currently possesses.

The Impetus for the British Law: Spectacular and Disturbing Accidents
The most direct explanation for the advent of the British law is that there have been a number of spectacular industrial and transportation accidents in the United Kingdom since the Thatcher era of privatization. This is especially true in the area of rail traffic, where the public has become increasingly uneasy about the degree to which the private train operators who took over public lines have placed profit about the public good.

The Southall rail crash of 1997, in which 10 people died in a high-speed train in London, illustrated for many the weakness of the old laws. The company that operated the train, GWT, was prosecuted for common-law manslaughter, but the case failed, despite the voluminous evidence that there was a systematic failure of safety management. Similar disasters involving ferry wrecks and gas works explosions helped reinforce the impression that corporations were not answerable in court because senior management always pointed the finger at someone else.

British versus American Law on Corporate Responsibility
In the United States, as in England, it is very difficult to hold either organizations or their officers responsible for gross negligence. For example, while many law students learn about the success civil tort plaintiffs had in suing Ford for failing to spend $13 per car to strengthen a gas tank known to be vulnerable to rear- end collisions, few learn that, at the same time, a prosecutor brought a case in criminal negligence against Ford in Indiana—and lost the jury trial.

In conclusion, the new Corporate Manslaughter Act is a fascinating experiment. Americans who are interested in deterring organizational wrongdoing should watch carefully to see how British judges apply the law, which prosecutions are and are not brought, and whether the law has a measurable, positive impact on either accident costs or liability costs. If the U.S. Supreme Court continues to cut back on the availability of punitive damages under state and federal law, perhaps the gap in deterrence–if there is one–created by the Supreme Court’s recent decisions could, in the future, be filled by something like the Corporate Manslaughter Act.

America relies on private litigation to obtain redress of harm, but this method does not regard the company as a person in the way other parts of US law allow. The British proposal allows for this viewpoint of the fiction of ‘person’ but does not have the private citizen mechanism for ‘punitive damages’ that US law allows. What do we wish for?
(BTW, I made up the title, just like The McGyver heist between Switzerland and China)

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Cherry picking facts from captured agencies

dmarek suggested this article about government functions regarding the FDA.

“The FDA doesn’t disagree with the scientific information about cherries, but it does say that cherries have not been recognized as safe and effective when used as labeled. Do we need a double-blind placebo-controlled study to prove cherries promote health?

Jeffrey May, editor of CCH Trade Regulation Reporter (the “publication of record” in the antitrust and trade regulation fields), quotes Rep. Ron Paul as saying there is a need to stop “federal bureaucrats from preventing Americans from learning about simple ways to improve their health.”

In answer, even when the FDA had 1000 agents and up to date labs in the 1990’s, it was way too busy. Now, when global sourcing makes for a lot of proven risk so far, the FDA has 422 agents and out of date labs, whose work is screened by a political appointee from the White House. Ouch!

Also, in another vein some info on treatments for PTSD is related to the issue of best practice and health care.

There is a wonderful, rigourous double blind study by a well known expert in trauma research that suggests YOGA as a form of treatment of choice for many people as opposed to more behavioral (non-motor oriented) therapies. Significant difference ( in the reducing symptoms category), but a 50% dropout rate. Behavioral techniques had significantly lessor results but a 10% dropout rate.

Mental health cannot charge for Yoga lessons however, so the study was published in a non-psych journal after being refused by professional journals. Informed consent suffers, and so do clients who are not offered reasonable alternatives. I believe informed individual consent is a very conservative viewpoint, is it not?

Blue Cross/Blue Shield in MA will not pay for EMDR, a treatment stated as one of the best practice treatments in Britain, the VA, DoD, etc. An odd world we live in.

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Air Force increase as predicted

The Foreign Policy In Focus a think tank, reports increases in the role of the US Air Force in Iraq.

These assaults are part of what may be the best kept secret of the Iraq-Afghanistan conflicts: an enormous intensification of US bombardments in these and other countries in the region, the increasing number of civilian casualties such a strategy entails, and the growing role of pilot-less killers in the conflict.
According to Associated Press, there has been a five-fold increase in the number of bombs dropped on Iraq during the first six months of 2007 over the same period in 2006. More than 30 tons of those have been cluster weapons, which take an especially heavy toll on civilians.
The U.S. Navy has added an aircraft carrier to its Persian Gulf force, and the Air Force has moved F-16s into Balad air base north of Baghdad.
Balad, which currently conducts 10,000 air operations a week, is strengthening runways to handle the increase in air activity. Col. David Reynolds told the AP, “We would like to get to be a field like Langley, if you will.” The Langley field in Virginia is one of the Air Force’s biggest and most sophisticated airfields.
The Air Force certainly appears to be settling in for a long war. “Until we can determine that the Iraqis have got their air force to significant capability,” says Lt Gen. Gary North, the regional air commander, “I think the coalition will be here to support that effort.”
The Iraqi air force is virtually non-existent. It has no combat aircraft and only a handful of transports.
Improving the runways has allowed the Air Force to move B1-B bombers from Diego Garcia in the Indian Ocean to Balad, where the big aircraft have been carrying out daily strikes. A B1-B can carry up to 24 tons of bombs.
The step-up in air attacks is partly a reflection of how beaten up and overextended U.S. ground troops are. While Army units put in 15-month tours, Air Force deployments are only four months, with some only half that. And Iraqi and Afghani insurgents have virtually no ability to inflict casualties on aircraft flying at 20,000 feet and using laser and satellite-guided weapons, in contrast to the serious damage they are doing to US ground troops.
Besides increasing the number of F-16s, B1-Bs, and A-10 attack planes, Predator flight hours over both countries have doubled from 2005. “The Predator is coming into its own as a no-kidding weapon verses a reconnaissance-only platform,” brags Maj. Jon Dagley, commander of the 46th Expeditionary Reconnaissance Squadron.
The Air Force is also deploying a bigger, faster and more muscular version of the Predator, the MQ-9 “Reaper” — as in grim — a robot capable of carrying four Hellfire missiles, plus two 500 lb. bombs.
The Predators and the Reapers have several advantages, the most obvious being they don’t need pilots. “With more Reapers I could send manned airplanes home,” says North.
At $8.5 million an aircraft — the smaller Predator comes in at $4.5 million apiece — they are also considerably cheaper than the F-16 ($19 million) the B1-B ($200+ million) and even the A-10 ($9.8 million).
The Air Force plans to deploy 170 Predators and 70 Reapers over the next three years. “It is possible that in our lifetime we will be able to run a war without ever leaving the US,” Lt Col David Branham told the New York Times.
The result of the stepped up air war, according to the London-based organization Iraq Body Count, is an increase in civilian casualties. A Lancet study of “excess deaths” caused by the Iraq war found that air attacks were responsible for 13% of the deaths — 76,000 as of June 2006 — and that 50% of the deaths of children under 15 were caused by air strikes.
The number of civilian deaths in Afghanistan from air strikes has created a rift between the North Atlantic Treaty Organization and the United States.
“A senior British commander,” according to the New York Times, has pressed U.S. Special Forces (SF) to leave southern Afghanistan because their use of air power was alienating the local people. SFs work in small teams and are dependent on air power for support.

As I have been stating for awhile, the increase in the use of the Air Force is being accelerated. The notion of drones being piloted from Nevada is more disturbing than if they were piloted from the Green Zone or the Air Force base George Bush visited recently. Still, the beat goes on and on.

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The Jester

Jester’s Court update e-mail from Fool.com.

The JC this week focuses on another acronym: PE. According to Slate.com, private equity firms have started buying up their own debt at significantly reduced prices. As the author explained, it works a little like this:

You pay your friend a few dollars so that you can host a small party while she’s out of town. You leave the pool filled with garbage, beer cans, and human waste. The next day you show up dressed as a pool cleaner and charge your friend a few bucks to mop up the mess you made.
Click here to enjoy the full article.

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