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Monthly Archives: November 2012

Request made by Dr. Gaston Saint Martin, from Chicago, IL, USA; 06/19/2012-

This is an important request. We need to know what happen with the LEGAL ACTION FILED by Dr German Pirán, against the destruction of Argentine’s currency in 2002. That was the beginning of the actual Argentine chaos.  

After so many decades of bad administrations, mistakes, anarchy, inflation and hyper inflation; Argentina enjoyed during the administration of President Carlos Menem, a little more than 10 years of economic stability.  Argentina seemed to have recovered some common sense and slowly start to rectify some chronic mistakes. Legally, and -according with Argentine’s wonderful 1853 Constitution- had fixed the value of Argentine currency (1 peso = 1 dolar). Having a true currency was the main need to have period of economic satiability. “The Argentine People” really approved that plan!  –   President Menem won every minor and mayor election, he never, ever, lost an election!   BUT once again a Coup d’état ([i]) destroyed that.   –   This time de Coup d’état was NOT military made, but done by lawyers politicians: Ricardo Alfonsín, and Eduardo Duhalde; to replace Constitutional elected President Fernando Dela Rúa, who indented to preserve the value of Argentine currency.

That civil Coup d’état join the Executive Power, the Congress and the Supreme Court of Justice to gather enough illegal extraordinary power to kill de Argentine peso, by those submissions and supremacy the life, honor, and fortunes of the Argentines were left at mercy of the government.

Please follow this link (https://usofwa.wordpress.com/wp-admin/post.php?post=76&action=edit ) to read Art, 29 of Argentine Constitution.

Without currency Argentina went into chaos. Nobody around the world could understand what happened!

Dr, Steve Hanke, (co-directors of the Johns Hopkins Institute for Applied Economics, and scholar of CATO Institute, was the economist who made the “plan 1 peso = 1 dollar” for President Menem; so he was called to inform The Congress of USA what was going on in Argentina.

Below you can read the interchange of mails between Dr. Steve Hanke and Dr German Piran.

At the very same moment Dr. Hanke presented his report to The USA Congress, www.inculturaargentina.com  published that report. Incultura Argentina is not On Line any longer, but we have re- publisher many notes at www.argentinasalvajiza2.com  


[i] Coup d’état: From Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Coup_d’%C3%A9tat)For other uses, see Coup d’état (disambiguation).

“Coup” and “Putsch” redirect here. For other uses, see Coup (disambiguation).

Not to be confused with Coup de tête (disambiguation).

coup d’état (English: /ˌkuːdeɪˈtɑː/, French: [ku deta]; plural: coups d’état; translation: strike (against the) state, literally: strike/blow of state)—also known as a coupputsch, andoverthrow—is the sudden, illegal deposition of a government,[1][2][3][4] usually by a small group of the existing state establishment—typically the military—to depose the extant government and replace it with another body, civil or military. A coup d’état is considered successful when theusurpers establish their dominance. When the coup neither fails completely nor succeeds, a civil war is a likely consequence.

A coup d’état typically uses the extant government’s power to assume political control of the country. In Coup d’État: A Practical Handbook, military historian Edward Luttwak states that “[a]coup consists of the infiltration of a small, but critical, segment of the state apparatus, which is then used to displace the government from its control of the remainder.” The armed forces, whether military or paramilitary, are not a defining factor of a coup d’état.

_____________________

RE ARGENTINE ECONOMY- STEVE HANKE 2002

 INFORME TESTIMONIAL  PARA EL CONGRESO NORTEAMERICANO

SOBRE LA SITUACION ARGENTINA,

POR STEVE H. HANKE

 —– Original Message —–—————————–

From: Dr. Steve Hanke

To: Incultura Argentina

Sent: Tuesday, March 05, 2002 7:06 PM

Subject: Re: Mr. Steve H. Hanke, re your “LEGALIZED THEFT” Forbes Magazine article

Dear Mr. Pirán,

I am pleased to learn of your legal action. I will read your brief tonight and respond shortly.

Attached is the testimony I presented today to the House Subcommittee on International Monetary Policy and Trade, FYI.

Best wishes,
Steve

__________________________

At 06:09 PM 3/5/2002 -0300, you wrote:
Mr. Steve H. Hanke

Dear Mr. Hanke:
Re: your “LEGALIZED THEFT”,  Forbes Magazine article.

Regarding your above mentioned article, which seems to be the first outstanding international report on the theft of the Reserves of the convertibility – as far as I knowplease note that a legal action based on those grounds has been filed by me, with the Argentine Federal Courts.

Further information is being furnished from <http://www.inculturaargentina.com.ar>www.inculturaargentina.com.ar in our Charlas 176ª, 199ª (includes the draft of the legal complaint) and 222ª (includes your above mentioned article).

President Duhalde initiated legal constitutional procedures to remove the members of our SUPREME COURT OF JUSTICE, in order to replace them by “loyal” Judges to guarantee the impunity of this and other MEGA THEFTS from the present and previous Governments. Your campaign in favor of the truth to be revealed in the First World is extremely important because the local press does not mention a single word on the convertibility reserves theft.

You are being extremely helpful to the argentine people, and I thank you very much.

Best regards

German R. Pirán, attorney at law and director of http://www.inculturaargentina.com.ar

Testimony

_______________________________

U.S. House of Representatives

Committee on Financial Services

Subcommittee on International Monetary Policy and Trade

5 March 2002

Steve H. Hanke

Professor of Applied Economics

The Johns Hopkins University

Baltimore, Maryland 21218

And

President

Toronto Trust Argentina

Buenos Aires, Argentina

(410) 516-7183

hanke@jhu.edu

Mr. Chairman, thank you for this opportunity to express my views on the causes of and cures for Argentina’s current political-economic crisis. I first became seriously interested in economic reform in Argentina shortly after meeting Argentina’s newly-elected President, Carlos Menem, in 1989. At that time, I concluded that, while stability might not be everything, everything was nothing without stability. To achieve stability, a cure for Argentina’s endemic inflation and unstable money was required. In consultation with some members of Argentina’s Congress, I developed a blueprint for monetary stability during 1990 with a fellow economist, Kurt Schuler. In 1991, our proposal for an orthodox currency board (Banco Central o Caja de Conversión? Buenos Aires: Fundación República) was published. In 1994, I became President of Toronto Trust Argentina (TTA), a balanced mutual fund which can invest in stocks and bonds. TTA has had a good record. Indeed, in 1996, Micropal ranked TTA as the best-performing emerging market mutual fund in the world. In 2000, S&P/Micropal ranked TTA third out of the 169 funds monitored in Latin America for the 1997-2000 period. During 1995-96, I was an advisor to the Minister of Economy, Domingo Cavallo. In 1999, shortly after president Carlos Menem suggested dollarization for Argentina, Kurt Schuler and I wrote a paper explaining how to achieve that goal, step by step. I presented the paper to president Menem in February (“A Dollarization Blueprint for Argentina,”Friedberg’s Commodity and Currency Comments Experts’ Report, Toronto: Friedberg Commodity Management, Inc., February 1, 1999, available at http://www.cato.org/pubs/wtpapers/dollar.pdf). In December 2001, I updated the case for dollarization in two papers, gave talks about dollarization in Argentina and presented my new proposal to Carlos Menem on December 6, 2001 (“Argentine Endgame: Couple Dollarization with Free Banking,” Foreign Policy Briefing No. 67, Washington D.C.: Cato Institute, December 4, 2001http://www.cato.org/pubs/fpbriefs/fpb-067es.html and “How to Dollarize in Argentina Now,” with Kurt Schuler, December 20, 2001, updated January 2, 2002, http://www.cato.org/pubs/papers/schuler-hanke011231.pdf).

All this is simply intended to inform you that I have been interested and involved in Argentine affairs for over a decade, and also to indicate what the nature of that involvement has been.

What Went Wrong in Argentina?

Anyone attempting to make sense out of Argentina’s fall from grace to economic and political chaos faces a real challenge. Most of the commentary has been, at best, confused and confusing.

The road to good health began on April 1, 1991, when Carlos Menem’s government installed what was known locally as a “convertibility system” to rid Argentina of hyperinflation and give the country a confidence shock. Under the Convertibility Law, the peso and the U.S. dollar both circulated legally at a 1-to-1 exchange rate. The owner of a peso had a property right in a dollar and could freely exercise that right by converting a peso into a dollar. That redemption pledge was credible because the central bank was required by law to hold foreign reserves to fully cover its peso liabilities.

With the passage of the Law of Public Emergency and Reform of the Exchange Rate Regime on January 6, 2002, near-dictatorial powers were conferred upon President Eduardo Duhalde and the convertibility system was swept into the dustbin. The peso was floated and is currently worth less than half of its former value.

The confusing commentary about Argentina centers on its rather unusual monetary regime, which although popular with the Argentine public, was not well understood by most economists, many currency speculators, or the International Monetary Fund.

Because the convertibility system was not well understood, it has been blamed for a number of Argentina’s ills that either had little to do with convertibility or simply did not exist. The convertibility system was the linchpin for a decade of stable prices and a solid export and economic growth performance. The price level at the end of 2001 was about where it was in 1994. Exports grew each full year of the convertibility system, with the exception of 1999. And the real GDP growth rate during the decade of convertibility was greater than any other decade since World War II.

Argentina’s monetary system from April 1, 1991 to January 6, 2002 was known locally as convertibility. It was an unusual name for an unusual system. The convertibility system was not an orthodox currency board. Rather, it was a currency board-like system: a mixture of currency board and central banking features. In writings dating back to 1991, I proposed that Argentina establish an orthodox currency board and criticized convertibility as an unstable, mixed system.

Was Argentina’s monetary system an orthodox currency board?

The three defining features of an orthodox currency board are:

  • a fixed exchange rate with its anchor currency,
  • unrestricted convertibility into and out of the anchor currency at the fixed rate, and
  • net reserves of 100 percent or slightly more of the board’s monetary liabilities, held in foreign assets only.

Together, these three features imply that an orthodox currency board is a narrowly focused, rule-bound institution. In particular, an orthodox currency board lacks the power to conduct sterilized intervention, does not lend to the government, does not regulate commercial banks, and does not act as an official or unofficial lender of last resort.

The convertibility system lacked one or more of the defining features of an orthodox currency board throughout its lifetime. Last year, when the convertibility system began encountering severe problems, the government fiddled with the exchange rate and restricted convertibility. Throughout the lifetime of the convertibility system, the Banco Central de la República Argentina (BCRA)—note that it was never officially renamed a currency board—held extensive domestic assets in addition to its foreign assets. The BCRA was initially allowed to hold true foreign reserves of as little as 66-2/3 percent of its monetary liabilities. It was allowed to hold the difference between its true foreign reserves and 100 percent in the form of Argentine government bonds denominated in foreign currency, valued at market prices. Later, the minimum ratio was raised to 90 percent, although the BCRA was allowed to breach that floor temporarily, which it did on a number of occasions, most recently from July 25 to September 7, 2001 and from December 12, 2001 until the convertibility system ended on January 6, 2002.

The BCRA was never subject to any maximum ratio of foreign reserves. In contrast, if an orthodox currency board holds reserves beyond 100 percent of its monetary liabilities, the purpose is to merely provide a small cushion to prevent reserves from falling below 100 percent. Many currency boards have held supplementary reserves of 5 or 10 percent to guard against losses, but they have not used their supplementary reserves to conduct discretionary monetary policy and have remitted to their owners all surpluses beyond what was necessary to maintain the core and supplementary reserves. Over the course of 2001, the BCRA had a ratio of true foreign reserves to monetary liabilities that varied from a high of 193 percent on February 23 to a low of 82 percent at year-end. The BCRA gained foreign reserves through the IMF loan of September 7. It lost foreign reserves by lending to commercial banks and indirectly supporting the market for government bonds, since government bonds were used as collateral for many loans.

The holding of domestic assets and the varying of the ratio of foreign reserves to monetary liabilities meant that the BCRA engaged extensively in a discretionary policy of sterilized intervention, which an orthodox currency board does not do. The problem with sterilized intervention is that it forces a monetary authority to attempt to hit simultaneously two possibly incompatible targets—an exchange-rate target and a money-supply target. The convertibility system thus eventually encountered the problem common to all pegged exchange rates: which target to hit when the two came into conflict. Argentina chose the money-supply target, which involved giving up the exchange-rate target.

Under the convertibility system the BCRA also retained the power to regulate banks, such as by setting reserve ratios. It was unofficially a lender of last resort, though it retained a constructive ambiguity about its role that reduced moral hazard risk.

As evidence of the BCRA’s hyperactivity, one has to only look at theBulletin of Monetary and Fiscal Affairs published quarterly by the BCRA. Each issue since April 1991 contained a long list of measures taken by the BCRA. If the BCRA had been operating as an orthodox currency board, these pages would have been blank.

In a 1993 book, Russian Currency and Finance, which I co-authored with Lars Jonung and Kurt Schuler, we predicted that Argentina’s monetary system would eventually behave more like a typical central bank than an orthodox currency board. After a longer delay than we ever expected, we were proved correct. Moral: An unorthodox, currency board-like system is an internally contradictory mixture of currency board and central banking elements. An orthodox currency board system is internally consistent and therefore does not encounter the same problems.

The original convertibility system began to crack in April 2001, when Domingo Cavallo, who had been recently appointed minister of the economy, sent a bill to Argentina’s Congress to change the peso’s anchor from the dollar to a 50-50 basket of the dollar and the euro. As economy minister in 1991, when the convertibility system was established, Cavallo had considered but rejected a similar idea. Also in April, Pedro Pou, the independent-minded president of the central bank who preferred dollarization to devaluation, was ousted on a pretext in favor of the more pliable Roque Maccarone.

Was the original convertibility system in effect until January 6?

By June the original convertibility system was definitively finished. Congress approved changing the exchange rate link if and when the euro ever appreciated to one per dollar. More importantly, Cavallo announced a preferential exchange rate for exports—a dual exchange rate. This was contrary both to the intent of the original convertibility system and of an orthodox currency board. Cavallo’s measures showed that the government was quite willing to tamper with the convertibility system. In previous episodes when confidence in the peso declined, the government had responded, sometimes after an agonizing delay, by reaffirming the link to the dollar and the commitment to a single exchange rate. By removing the cornerstones of the convertibility system, Cavallo left the edifice shaky.

By meddling with the convertibility system, Cavallo tightened monetary conditions. Indeed, peso interest rates shot up and remained at punishingly high levels until peso interest rate caps were imposed in December 2001.

In December 2001 the government imposed a freeze on bank deposits. It was the last straw. Angry Argentines remembered how high inflation during similar freezes in 1982 (engineered by Cavallo) and 1989 had robbed them of the real value of their savings. Cavallo and president Fernando de la Rúa resigned in the face of widespread protests.

There was another way out: official dollarization, which would have eliminated questions about confidence in the peso by eliminating the peso itself. Unfortunately, a lack of resolve by the Argentine government and a lack of support from the U.S. government prevented this economically beneficial, but politically somewhat difficult, option from being implemented either when president Menem first proposed it in 1999 or subsequently. Instead, Argentina temporized and eventually suffered both a currency crisis and a political crisis.

  Many people assert that the crux of the Argentine crisis was an overvalued peso. Supposedly, the peso’s link to the strong US dollar made the peso overvalued, rendering Argentina uncompetitive, causing the economy to slump, and forcing the government to default.

Moral: When a currency board-like system faces a crisis caused by lack of confidence in the currency, a “hard” exit, for example via dollarization, is preferable to the “soft” exits of devaluation or floating.

Was the peso overvalued?

Does the story withstand examination? A classic sign of uncompetitiveness caused by an overvalued currency is declining exports. But Argentina’s exports increased every full year of the convertibility system except 1999, when Brazil, its largest trading partner, suffered a currency crisis. Exports during the first 11 months of 2001 were 3.2% ahead of the same period in 2000. Considering that estimated real growth in world trade was only 0.9% last year, Argentina’s export performance was relatively strong. Indeed, the export sector has been one of the few bright spots in the Argentine economy. If the rest of the economy had been growing as fast as the export sector during the last two years, Argentina would not be in a recession.

In an attempt to bolster claims that the peso was highly overvalued under the convertibility system, some observers asserted, on the basis of taxi rides from the airport or other casual impressions, that prices were high in Buenos Aires, and that high prices were evidence the peso was significantly overvalued against the dollar. A recent Union Bank of Switzerland survey of prices in 58 of the world’s largest cities found that for a basket of 111 goods and services, weighted by typical consumer habits—including three categories of house rent—Buenos Aires ranked 22nd, about midway between the most expensive city, Tokyo, and the least expensive, Bombay. The survey also found those taxi rides that were allegedly so expensive cost about 8% less than in Rio de Janeiro.

There are other indicators that contradict the overvaluation story. For example, the Economist magazine’s Big Mac Index, which compares the price of McDonald’s hamburgers around the world, indicates that the peso, before its devaluation, was 2% undervalued. In 1999 the index had indicated that the peso was 3% overvalued and in 2000 it had indicated no overvaluation. Even so, from May 15, 1999 through February 2, 2002, the Economist contained twenty-six articles claiming that the economy was being dragged down by an overvalued peso. And although the Big Mac index, as well as more sophisticated estimates of equilibrium exchange rates, should be treated with great skepticism, a recent careful study of the matter using data from 1993 to 1999 indicates that the peso was always within 6% of its so-called fundamental equilibrium real exchange rate (Kalin Hristov, “FEER and Currency Boards: Evidence from the 90’s,” unpublished manuscript, Bulgarian National Bank, presented at the Centre for Central Banking Studies (Bank of England) Conference on Exchange Rates, November 26, 2001, p. 25).

Moral: Look carefully at the evidence before claiming that a currency is overvalued. For better or worse, devaluation is now a fact. The big question going forward is: Will it revive the economy? Let’s go through the arithmetic. The short-run price elasticity for Argentine exports is about -0.1. So, to stimulate exports by 1%, the real value of the peso (adjusted for inflation) would have to depreciate by 10%. Exports in Argentina only accounted for 9% of GDP last year. Consequently, if the current devaluation of 50% (the floating peso is trading at about two to the dollar) doesn’t pass through to any domestic inflation—in short, if the nominal devaluation is a real devaluation—exports will increase by about 5%. Under this optimistic scenario, the current level of devaluation would add less than a half percent to GDP—a GDP that, thanks to the new exchange-rate regime, has collapsed. And even though estimates of price elasticity cannot be treated with very high confidence, the short-run price elasticity for exports would have to be about ten times as great as its estimated value to offset the 5% officially-projected contraction in GDP this year. If you use private-sector forecasts of the Argentina’s contraction in GDP for 2002 (which are much more pessimistic and realistic than the official estimate), the elasticity would have to be even greater.

Will the devaluation restart the economy?

Moral: When considering a regime shift, use the back of an envelope and make a few calculations. The Convertibility Law gave a peso holder the right to convert a peso into a US dollar. That redemption pledge was made credible because the central bank was required by law to hold foreign reserves to fully cover its peso liabilities. It was this redemption pledge that made the convertibility set up unique and distinguished it from the typical fiat money system.

Why was Argentina’s devaluation unique?

With the repeal of the Convertibility Law, the redemption pledge was thrown to the wind and the peso holders’ claims on foreign reserves held at the central bank were revoked. Argentina’s devaluation, then, represented more—much more—than a garden-variety devaluation. It was a great bank robbery. Foreign reserves equal to 17.8 billion dollarsthat were the property of peso holders were confiscated by the government.

That was just the beginning. In addition to taking the foreign reserves from people who held pesos, the government of Eduardo Duhalde has passed other laws and issued regulations to pesofy the economy. These have annulled property rights and ignored the rule of law. The Congress acquiesced in the government’s actions by approving the Law of Public Emergency and Reform of the Exchange Rate Regime on January 6, 2002. The law transfers extraordinary powers to the President and allows him to, in effect, rule by decree for two years (when his term is scheduled to end).

 Argentina’s economy went into recession in September 1998 in the aftermath of the Asian and Russian currency crises, which resulted in a general decline in flows of investment to emerging market economies. The Brazilian currency crisis of 1999 dealt the economy another blow. Signs of recovery appeared in late 1999 and early 2000, but the incoming de la Rúa government choked the recovery by enacting large tax increases that took effect at the start of 2000. The government (and the IMF, which lent support to the government’s program) thought the tax increases were necessary to reduce the budget deficit. Instead, tax collections fell. When Domingo Cavallo became minister of the economy in March 2001, he pushed through a financial transaction tax, which was increased in August to its current rate of 0.6 percent on bank debits and credits. Although the tax rate may appear low, it is not.

Moral: In a country that fails to adhere to the rule of law, the domestic currency should be replaced with a foreign currency produced in a country that embraces the rule of law.

So, then, what caused Argentina’s crisis?

The tax increases added to the already heavy tax burden Argentines bear if they are part of the legal economy. Tax evasion is high in Argentina because the tax savings from going into the underground economy are huge. The value-added tax is 21 percent; social security and medical care taxes are 31.9 percent; and the top income tax rate of 35 percent starts at 102,300 pesos—currently less than 50,000 dollars. Compare these with US state sales taxes of 0-9 percent (there is no federal tax); Social Security and Medicare taxes of 15.3 percent; and a top federal tax rate of 38.6 percent starting at about 300,000 dollars (plus state taxes of 0-11 percent). Unlike Argentina, the United States does not tax bank credits and debits at all.

The distortions created by Argentina’s sky-high tax rates show up in the labor markets. For example, the tax wedge between gross labor costs and net wages is 42%, comparable to the largest wedges in Europe and almost double that of the U.S. It is not surprising, therefore, that the unemployment rate is relatively high and the underground economy is so vibrant.

It is also not surprising that tax revenue fell as higher tax rates aggravated the recession. Falling tax revenue made the government’s debt more precarious. Particularly after Domingo Cavallo’s changes to the convertibility system, concern about the consequences of a debt default spilled over into the currency market. Forward rates reflected an expected devaluation of the peso, and interest rates in pesos shot up to 40-60 percent. Concern about the consequences of a default also spilled over into the banking system, reflected by withdrawals of deposits and interest rates in dollars of 20-30 percent. (Most bank deposits and loans were, in fact, in dollars rather than pesos.) People feared that the government would not let the default remain compartmentalized as a problem of government finance, but would make it spill over into the rest of the economy.

Again, dollarization would have helped contain the problem, by depriving the government of a national currency as a tool for devaluation and inflation. Dollarization would not have guaranteed success—no monetary system can—but it would have improved the chances for success. It still would help today. Moral: During a recession, avoid raising tax rates and don’t “tighten” monetary conditions by meddling with monetary institutions.

The IMF’s Role in Argentina’s Crisis

During the boom years, 1990-94, when Argentina’s per capita GDP measured in dollars grew by 72.8%, the IMF played a minor role in Argentina’s economic affairs. Argentina implemented the convertibility system without the IMF’s aid or advice. Following the Mexican devaluation of December 1994, Argentina suffered a crisis of investor confidence, which it overcame by enacting policies that included a reaffirmation of its commitment to an exchange rate of 1 peso per dollar. The IMF lent Argentina funds to support these policies, and ever since has been heavily involved in Argentina. Unfortunately, the IMF threw cold water on President Menem’s dollarization proposal in early 1999. As a result, Argentina was forced to forego a much-needed positive confidence shock. When Fernando de la Rúa became president in December 1999, things went from bad to worse. His administration’s new economic plan, approved by the IMF, was supposed to lower interest rates and produce a boom by raising taxes, which was meant to reduce the government’s deficit. Its timing was awful. World interest rates in December 1999 were on the rise, so Argentina’s rates also roseand the economy slumped further into recession. Argentina was headed for a crisis of confidence, one that would plunge the economy into a deeper recession and cause debt-servicing problems. The rest is history, almost.

From there the de la Rúa administration would commit a steady stream of policy errors that would undermine the successful reforms of the early 1990s: stable money and sound banking. And during this period, the IMF stood by silently and at the same time extended more credit to Argentina.

Then, during the early days of the Duhalde government, the IMF again threw cold water on the dollarization idea. When asked about dollarization for Argentina during a press briefing on January 11, Anne Krueger, first deputy managing director of the IMF, said: “Well, my understanding at the moment is that [dollarization] is technically unfeasible. So I don’t think the authorities are thinking about it; I don’t think we are thinking about it.”

Dr. Krueger’s statement implies that the BCRA did not have enough foreign reserves to liquidate its peso monetary liabilities and dollarize the economy. According to the BCRA’s balance sheet of January 10, this was not the case, however. The BCRA’s peso monetary liabilities were 17.92 billion pesos and “pure” foreign reserves in US dollars were $14.75 billion. In addition, the BCRA had 14.96 billion pesos of domestic assets valued at market prices that could be sold to acquire U.S. dollars. Consequently, at the time Dr. Krueger made her statement, it would have been feasible for Argentina to dollarize at an exchange rate of 1 peso to 1 U.S. dollar, the rate in force under the Convertibility Law.

This, of course, leads to a number of questions. Was Dr. Krueger misinformed? Or does the IMF know something that the rest of us don’t know? In short, does the BCRA have an “Enron problem”? Either way, the IMF does not look good.

The IMF didn’t look good in Indonesia, either. When I was operating as President Suharto’s advisor in early 1998, I had recommended a currency board for Indonesia, something Suharto agreed to. The IMF went very public with an anti-currency board campaign. Part of the IMF’s attack centered on the claim that I had supposedly recommended a rupiah-dollar exchange rate of 5,000, and at that rate, the IMF concluded that the Bank of Indonesia didn’t have adequate reserves to set up a currency board.

The problem with this IMF story is that it was entirely fabricated. I did not specify a rupiah-dollar exchange rate of 5,000. Indeed, I made that clear at the time (“Voice of Suharto’s Guru,” International Herald Tribune, March 20, 1998) and have done so in many articles since.

That hasn’t stopped the IMF from rewriting monetary history in an attempt to cover up its blunders. For example, the IMF issued a 139-page working paper about Indonesia in May 2001. It was authored by Charles Enoch, Barbara Baldwin, Oliver Frécaut and Arto Kovanen, and titled, “Indonesia: Anatomy of a Banking Crisis: Two Years of Living Dangerously, 1997-99.” The authors include a largely fictive three-page account of the currency board episode. The authors assert, among other things, that I counseled President Suharto to set the rupiah-dollar exchange rate at 5,000. Not surprisingly, this account, which includes 115 footnotes, fails to document that assertion. Lies are impossible to document.

What Should the U.S. Role Be In Argentina?

The Duhalde government’s measures, especially those connected with the exchange rate and the banking system, have drawn praise from many observers as steps in the right direction. The observers are wrong. They neglect that the government’s program amounts to destruction of the rule of law, to the imperfect extent that it existed in Argentina. The government has changed the terms of some contracts between private parties, suspended the validity of other contracts, and seized wealth from some members of the public to redistribute to other members or to itself.

The Duhalde government has so disrupted rights to private property that they hardly exist any more. The government’s measures are disastrous for Argentina’s future. Without a reversal of most of the measures, Argentina will remain for years to come what it has been for more than half a century: a once-rich country that has stagnated while other countries, once poorer, surged ahead of it. If private property has no stability, there will be no reason for Argentines or foreigners to invest much in Argentina.

Observers who have praised the government’s measures have also somehow failed to notice that a depreciating peso, which is the only kind Argentina is likely to get, is massively unpopular. Since central banking was established in Argentina in 1935, the peso has depreciated against the dollar by a factor of approximately 6,000,000,000,000. In the Argentine context, a floating exchange rate has always meant a depreciating rate. The convertibility system, though imperfect, was the cornerstone of Argentina’s economic growth in the 1990s. Now that the cornerstone has been removed, much of the structure has already crumbled.

At a hearing of this subcommittee on February 6, 2002, John Taylor, the Under Secretary of the Treasury for International Affairs, remarked that he thought Argentina should have dollarized rather than frozen bank deposits on December 1. To me, it is astonishing that he did not communicate this view to Argentina’s government, since it would have carried considerable weight. Although the United States is not responsible for Argentina’s economic problems, it is in our national interest for the Treasury Department to offer advice that would promote economic growth and political stability in Argentina. The result of the Treasury’s hesitant attitude about recommending dollarization has been that Argentina is now asking the IMF and other international financial institutions for billions of dollars in new loans. Since the United States is the largest provider of funds to those organizations, if they lend to Argentina at their customary below-market rates, U.S. taxpayers will in effect be paying for the Treasury’s hesitation. This leads me to my two recommendations for U.S. policy towards Argentina.

First, recommend dollarization. As a purely technical matter,dollarization is always feasible at some exchange rate, and as Ecuador’s experience of dollarization in 2000 indicates, it is feasible even when established in the midst of political and economic chaos. The question in Argentina’s case is what exchange rate is appropriate now and, if dollarization is not adopted soon, how to determine the exchange rate that would be appropriate should a future government decide to dollarize. Dollarization remains desirable because the prospects are poor for making the peso into a stable currency that people will want to use without coercion. People trust the dollar; they do not trust the peso.

It may no longer be possible to return to an exchange rate of 1 peso per dollar, but Argentina can do what Ecuador did when it dollarized in 2000: establish a uniform exchange rate for converting local currency into dollars and apply it to all assets and liabilities denominated in local currency. This rate should not be determined mechanically, by simply looking at what exchange rate would be necessary to make the central bank’s dollar assets cover its peso monetary liabilities. The confidence that dollarization would inspire might enable dollarization to occur at an exchange rate considerably more favorable for the Argentine public than a mechanical calculation indicates.

Interest rates in pesos are far above rates in dollars because of expectations of substantial inflation. They can be adjusted as they were in Ecuador by establishing procedures for reducing nominal interest rates downward to reflect lower expectations of inflation.

My second recommendation is that the Treasury respect laws that Congress has passed, which establish the wise principle that Americans as taxpayers should not support a government that robs Americans as investors. A number of provisions of Title 22 of the U.S. Code state that the President shall deny foreign aid to governments that seize the property of or nullify contracts with U.S. citizens or corporations. These provisions also state that the President shall instruct U.S. executive directors at international financial institutions to vote against loans (except humanitarian aid loans) for such governments unless the governments have, within a specified period, provided compensation for the property taken or submitted claims for compensation to arbitration in accord with international law. The relevant provisions of Title 22 include sections 283r; section 284j; section 2370, subsection (e); and section 2370a, subsections (a) and (b).

In my view, the actions Argentina has taken should clearly trigger U.S. opposition to loans by international financial institutions to which the United States belongs. In testimony to the Joint Economic Committee on February 14, 2002, Dr. Taylor indicated that Argentina’s actions have not triggered the provisions of Title 22 because Argentina has treated all foreign investors equally. That is not the standard the provisions refer to, however; rather, the provisions are supposed to be triggered by specified violations of property rights that affect Americans whether or not other foreign investors have suffered similar violations. Mr. Chairman and members of this committee, whether the administration will enforce the laws Congress has passed depends mainly on you and your fellow legislators. If American as taxpayers end up supporting a government that has robbed them as investors in Argentina, it will send a terrible signal. Secure private property rights are an essential ingredient of our prosperity and that of every other wealthy country. To turn a blind eye to the massive violations of property rights in Argentina would not only harm U.S. investors, it would reinforce longstanding tendencies that have made Argentina a problem-prone country for most of its history. Therefore I urge you to ensure that the laws are upheld and that the United States vote against aid for Argentina from the IMF and other institutions until Argentina reverses its seizures of property or provides compensation for them.

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Debbie Wasserman Schultz
Chair
Democratic National Committee

Debbie:

If I recall well, 1796 and 1800 were also tight Presidential elections.

Inaugurated on March 4th, 1801 Thomas Jefferson was regarded as a radical by outgoing President John Adams, who did not attended the event.

Elected President Jefferson gave all us a memorable address …

Shall we, to day Democrats, and President Obama follow his example?

God Bless America

Dr. Gaston Saint Martin  (gsaintmartin@hotmail.com)


Date: Fri, 9 Nov 2012 18:20:05 -0500
To: gsaintmartin@hotmail.com
From: democraticparty@democrats.org
Subject: Thank you

Gaston — We did it! Thank you. It was a battle hard fought. We built the largest, most dynamic grassroots organization in history, and we beat back the unprecedented outside spending on the other side. On Tuesday, voters chose to move forward, giving President Obama four more years to finish what we started together.  I am so proud of the tens of thousands of supporters who made phone calls, knocked on doors till their knuckles were sore, talked to their friends and neighbors, or chipped in what they could to support President Obama and Democrats — you all made this possible. This victory is yours.  We can’t stop here. We have more battles ahead and we need to work together with President Obama to continue building an economy from the middle class out — and a country where prosperity, education, and equal rights aren’t limited to those who can afford them. So thank you, from the bottom of my heart. I will never forget the night we re-elected President Barack Obama, and I will never forget your support. All the best, Debbie Debbie Wasserman Schultz
Chair
Democratic National Committee

http://www.bartleby.com/124/pres16.html  –  CONTENTS      BIBLIOGRAPHIC RECORD

Inaugural Addresses of the Presidents of the United States.

Thomas Jefferson

First Inaugural Address
In the Washington, D.C.  ( Wednesday, March 4, 1801 )

Chief Justice John Marshall administered the first executive oath of office ever taken in the new federal city in the new Senate Chamber (now the Old Supreme Court Chamber) of the partially built Capitol building. The outcome of the election of 1800 had been in doubt until late February because Thomas Jefferson and Aaron Burr, the two leading candidates, each had received 73 electoral votes. Consequently, the House of Representatives met in a special session to resolve the impasse, pursuant to the terms spelled out in the Constitution. After 30 hours of debate and balloting, Mr. Jefferson emerged as the President and Mr. Burr the Vice President. President John Adams, who had run unsuccessfully for a second term, left Washington on the day of the inauguration without attending the ceremony.

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 Friends and Fellow-Citizens:

CALLED upon to undertake the duties of the first executive office of our country, I avail myself of the presence of that portion of my fellow-citizens which is here assembled to express my grateful thanks for the favor with which they have been pleased to look toward me, to declare a sincere consciousness that the task is above my talents, and that I approach it with those anxious and awful presentiments which the greatness of the charge and the weakness of my powers so justly inspire. A rising nation, spread over a wide and fruitful land, traversing all the seas with the rich productions of their industry, engaged in commerce with nations who feel power and forget right, advancing rapidly to destinies beyond the reach of mortal eye—when I contemplate these transcendent objects, and see the honor, the happiness, and the hopes of this beloved country committed to the issue, and the auspices of this day, I shrink from the contemplation, and humble myself before the magnitude of the undertaking. Utterly, indeed, should I despair did not the presence of many whom I here see remind me that in the other high authorities provided by our Constitution I shall find resources of wisdom, of virtue, and of zeal on which to rely under all difficulties. To you, then, gentlemen, who are charged with the sovereign functions of legislation, and to those associated with you, I look with encouragement for that guidance and support which may enable us to steer with safety the vessel in which we are all embarked amidst the conflicting elements of a troubled world.

During the contest of opinion through which we have passed the animation of discussions and of exertions has sometimes worn an aspect which might impose on strangers unused to think freely and to speak and to write what they think; but this being now decided by the voice of the nation, announced according to the rules of the Constitution, all will, of course, arrange themselves under the will of the law, and unite in common efforts for the common good. All, too, will bear in mind this sacred principle, that though the will of the majority is in all cases to prevail, that will to be rightful must be reasonable; that the minority possess their equal rights, which equal law must protect, and to violate would be oppression. Let us, then, fellow-citizens, unite with one heart and one mind. Let us restore to social intercourse that harmony and affection without which liberty and even life itself are but dreary things. And let us reflect that, having banished from our land that religious intolerance under which mankind so long bled and suffered, we have yet gained little if we countenance a political intolerance as despotic, as wicked, and capable of as bitter and bloody persecutions. During the throes and convulsions of the ancient world, during the agonizing spasms of infuriated man, seeking through blood and slaughter his long-lost liberty, it was not wonderful that the agitation of the billows should reach even this distant and peaceful shore; that this should be more felt and feared by some and less by others, and should divide opinions as to measures of safety.

But every difference of opinion is not a difference of principle. We have called by different names brethren of the same principle. We are all Republicans, we are all Federalists. If there be any among us who would wish to dissolve this Union or to change its republican form, let them stand undisturbed as monuments of the safety with which error of opinion may be tolerated where reason is left free to combat it.

I know, indeed, that some honest men fear that a republican government can not be strong, that this Government is not strong enough; but would the honest patriot, in the full tide of successful experiment, abandon a government which has so far kept us free and firm on the theoretic and visionary fear that this Government, the world’s best hope, may by possibility want energy to preserve itself? I trust not. I believe this, on the contrary, the strongest Government on earth. I believe it the only one where every man, at the call of the law, would fly to the standard of the law, and would meet invasions of the public order as his own personal concern. Sometimes it is said that man can not be trusted with the government of himself. Can he, then, be trusted with the government of others? Or have we found angels in the forms of kings to govern him? Let history answer this question.

Let us, then, with courage and confidence pursue our own Federal and Republican principles, our attachment to union and representative government. Kindly separated by nature and a wide ocean from the exterminating havoc of one quarter of the globe; too high-minded to endure the degradations of the others; possessing a chosen country, with room enough for our descendants to the thousandth and thousandth generation; entertaining a due sense of our equal right to the use of our own faculties, to the acquisitions of our own industry, to honor and confidence from our fellow-citizens, resulting not from birth, but from our actions and their sense of them; enlightened by a benign religion, professed, indeed, and practiced in various forms, yet all of them inculcating honesty, truth, temperance, gratitude, and the love of man; acknowledging and adoring an overruling Providence, which by all its dispensations proves that it delights in the happiness of man here and his greater happiness hereafter—with all these blessings, what more is necessary to make us a happy and a prosperous people? Still one thing more, fellow-citizens—a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicities.

About to enter, fellow-citizens, on the exercise of duties which comprehend everything dear and valuable to you, it is proper you should understand what I deem the essential principles of our Government, and consequently those which ought to shape its Administration. I will compress them within the narrowest compass they will bear, stating the general principle, but not all its limitations. Equal and exact justice to all men, of whatever state or persuasion, religious or political; peace, commerce, and honest friendship with all nations, entangling alliances with none; the support of the State governments in all their rights, as the most competent administrations for our domestic concerns and the surest bulwarks against anti republican tendencies; the preservation of the General Government in its whole constitutional vigor, as the sheet anchor of our peace at home and safety abroad; a jealous care of the right of election by the people—a mild and safe corrective of abuses which are lopped by the sword of revolution where peaceable remedies are unprovided; absolute acquiescence in the decisions of the majority, the vital principle of republics, from which is no appeal but to force, the vital principle and immediate parent of despotism; a well disciplined militia, our best reliance in peace and for the first moments of war, till regulars may relieve them; the supremacy of the civil over the military authority; economy in the public expense, that labor may be lightly burdened; the honest payment of our debts and sacred preservation of the public faith; encouragement of agriculture, and of commerce as its handmaid; the diffusion of information and arraignment of all abuses   I repair, then, fellow-citizens, to the post you have assigned me. With experience enough in subordinate offices to have seen the difficulties of this the greatest of all, I have learnt to expect that it will rarely fall to the lot of imperfect man to retire from this station with the reputation and the favor which bring him into it. Without pretensions to that high confidence you reposed in our first and greatest revolutionary character, whose preeminent services had entitled him to the first place in his country’s love and destined for him the fairest page in the volume of faithful history, I ask so much confidence only as may give firmness and effect to the legal administration of your affairs. I shall often go wrong through defect of judgment. When right, I shall often be thought wrong by those whose positions will not command a view of the whole ground. I ask your indulgence for my own errors, which will never be intentional, and your support against the errors of others, who may condemn what they would not if seen in all its parts. The approbation implied by your suffrage is a great consolation to me for the past, and my future solicitude will be to retain the good opinion of those who have bestowed it in advance, to conciliate that of others by doing them all the good in my power, and to be instrumental to the happiness and freedom of all.

At the bar of the public reason; freedom of religion; freedom of the press, and freedom of person under the protection of the habeas corpus, and trial by juries impartially selected. These principles form the bright constellation which has gone before us and guided our steps through an age of revolution and reformation. The wisdom of our sages and blood of our heroes have been devoted to their attainment. They should be the creed of our political faith, the text of civic instruction, the touchstone by which to try the services of those we trust; and should we wander from them in moments of error or of alarm, let us hasten to retrace our steps and to regain the road which alone leads to peace, liberty, and safety.

Relying, then, on the patronage of your good will, I advance with obedience to the work, ready to retire from it whenever you become sensible how much better choice it is in your power to make. And may that Infinite Power which rules the destinies of the universe lead our councils to what is best, and give them a favorable issue for your peace and prosperity.

Thomas Jefferson, The US President

Subject: best re election photoshops

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  • The BEST on the US ELECTIONS – A FIGHT SONG & SOME LAST THGTS — Les Miz Lives on… && Dallas Morning News Ex – Leubsdorf column & Juan Cole & THOMAS B. EDSALL and others.‏

I found this very interesting:
THE QUESTION IS NOT “WHO WINS?”; BUT, “CAN THE WINNER GOVERN?”
On Sun, 11/4/12, Tex Harris <afsatex@gmail.com> wrote:

From: Tex Harris <afsatex@gmail.com>
Subject: The BEST on the US ELECTIONS – A FIGHT SONG & SOME LAST THGTS — Les Miz Lives on… && Dallas Morning News Ex – Leubsdorf column & Juan Cole & THOMAS B. EDSALL and others.
To: “Tex Harris – AFSA” <afsatex@gmail.com>
Date: Sunday, November 4, 2012, 8:11 PM

GET INSIDE THESE US ELECTIONS>>    fyi..  cheers   Tex 

Blog by Carl Leubsdorf  —  former Washington Bureau chief of The Dallas Morning News

Both Barack Obama and Mitt Romney say their candidacies in Tuesday’s election reject the past to provide a brighter future.
More specifically, Romney rejects the course of the last four years, and Obama rejects a return to his predecessor’s policies. The president would essentially continue the path he has sought to follow in his first term, and his rival would pursue an economic approach resembling that of prior Republican administrations.
But in a larger sense, Obama, his constituency and his basic philosophy embrace the country’s future, while Romney, his constituency and philosophy exemplify a return to its past.
That statement is not meant to contend that one vision is innately superior to the other. But to an even greater degree than the 2008 contest, this election represents more than just a sharp difference in policies — rather a divide in which one side epitomizes a rapidly changing 21st century America, while the other resists that vision by invoking the thinking and images of the 20th.
In a way, it’s hardly surprising that the nation’s first African-American president — who grew up partly abroad — reflects a country increasingly multi-racial and multi-cultural. Likewise, he embraces the last half century’s enormous changes in social and sexual attitudes and seems more comfortable keeping government programs as a guarantor of domestic well-being while embracing international efforts dependent on accommodations with other, less powerful countries.
His political support comes less from a diminishing white majority than from an increasing number of Hispanics, blacks and Asian Americans, less from the steadily smaller towns and rural areas and more from the increasingly more diverse urban and suburban areas. His support is weakest where anti-minority attitudes are strongest.
By contrast, Romney represents — and openly yearns for — the simpler America of an earlier day. He and his party resist changing attitudes in social and sexual mores and seek a return to the day when Americans depended less on federal programs and pursued international leadership less reliant on other global players.
His support is overwhelmingly white, in part due to Republican policies that have driven off millions of Hispanics, who represent the nation’s largest minority group. His base is most solid in those more homogenous, less populated towns and counties between the two coasts.
Exemplifying this contrast is the fact that the last Democratic presidential battle involved an African-American man and a white woman and the president’s two most recent Supreme Court choices were women, one of them Hispanic. By contrast, the GOP’s last two presidential candidates — and its last two Supreme Court choices — were all white men.
Four years ago, it appeared the country had turned decisively away from the America represented by John McCain in 2008 and Mitt Romney in 2012. But Obama’s difficulties in overcoming the severe economic recession he inherited opened the way for a political comeback by that America, one that otherwise might have been unlikely.
Whether that stems more from Obama’s policies, his politics or underlying economic factors, this election would surely have been less in doubt had Obama been more successful in restoring economic growth and reducing unemployment.
By contrast, if the Republicans — and Romney in particular — had done more to build bridges to those expanding minorities, especially Hispanics, he might have been able to win even if the economy had rebounded more. George W. Bush’s more far-sighted advisers advised that course, and their advice remains valid today.
This year’s conflicting circumstances mean that, with just days to go, either Obama or Romney can yet win. But given demographic trends, even a Republican success won’t change the fact that the GOP’s long-term future will increasingly depend on accommodating its positions and attitudes to an America far different from the one in which many of us — including Romney — grew up.
Carl Leubsdorf is the former Washington Bureau chief of The Dallas Morning News. His email address is carl.p.leubsdorf@gmail.com.

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Click on the URL below and turn up the volume.  Great Obama Campaign parody of Les Miz..

http://www.onetermmore.com/video_subtitles.html

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Paul Krugman Blog Post.. 

November 3, 2012, 4:15 pm 426 Comments

Reporting That Makes You Stupid

Today’s Financial Times bears a banner headline on p.1: “US election hangs on a knife edge”. Aside from everything else, surely this gets the cliche wrong: you rest on a knife edge, don’t you? If you try to hang on one, I think you just cut off your fingers.

More important, though, this headline deeply misleads readers about the state of the race — and in so doing, it echoes a lot of political reporting right now. Quite simply, many of the “analysis” articles being published in these final days leave readers worse informed than they were before reading.

As Nate Silver (who has lately attracted a remarkable amount of hate — welcome to my world, Nate!) clearly explains, state polling currently points overwhelmingly to an Obama victory. It’s possible that the polls are systematically biased — and this bias has to encompass almost all the polls, since even Rasmussen is now showing Ohio tied. So Romney might yet win. But a knife-edge this really isn’t, and any reporting suggesting that it is makes you stupider.

Worse yet, some reporting tells readers things the reporters have to know aren’t true. How many stories have you seen declaring that “both sides think they’re winning”? No, they don’t: the Romney campaign is visibly flailing, trying desperately to find new fronts on which to attack Obama. They clearly know that it will take a miracle — sorry, a last-minute surge — to prevail on Tuesday. It’s OK, I guess, to report campaign spin; but surely it’s not OK to report campaign spin as the truth, which is what these stories are doing.

Again, as Nate says, it’s definitely possible that the polls are systematically wrong. The obvious ways they could go wrong, cell phones and Latinos, favor Obama rather than Romney; but maybe pollsters are overcompensating for these factors, or maybe there’s a large Bradley effect distorting poll responses. Reporting about these possibilities would be interesting.

But reporting that suggests that this is a too-close-to-call race doesn’t get at any of this; it’s just lazy, and a disservice to readers.

campaignstops.blogs.nytimes.com Original Page

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Billionaires Going Rogue

If there is one rule of thumb governing campaign finance regulation, or the lack thereof, it is that the consequences of any changes in the system are unpredictable.

In 2002, when Congress enacted the McCain-Feingold law barring large “soft money” contributions from corporations, unions and rich people to the political parties, many observers assumed that the Democrats would suffer more. The party had never fully cultivated a small donor base and had consistently been more dependent on mega-contributions than the Republican Party.

In less than two years, this assumption was proven wrong. First, in the 2004 election, small donors in droves gave their credit card numbers to the Democratic campaign of John Kerry, and Kerry was able to keep pace with George W. Bush, dollar for dollar. Four years later, the cash flow to Barack Obama swamped John McCain. The Internet, and with it the ability of campaigns to inexpensively reach millions of prospective donors, permanently transformed fundraising.

In 2010, campaign finance law was turned on its head. The Supreme Court decision in Citizens United v. Federal Election Commission, and appeals court decisions such asSpeech Now v. F.E.C., opened the door to unlimited contributions to technically independent political action committees (super PACs) from corporations, unions and individuals.

The result has been a stupefying array of PACs, 501(c)4s and 501(c)6s that even professionals can barely keep track of. The future that Buckley v. Valeo set in motion almost 40 years ago has arrived, and the current multiplicity and multidirectionality of “reform” has overwhelmed both the people and the parties.

The virtually unanimous view throughout the course of four decades of revised regulation was that the Republican Party and its candidates would be the major beneficiaries, and, so far, that has been true.

The first chart, provided by the Center for Responsive Politics, shows that outside spending tilted left in every year from 2000 to 2008, but that in 2010 — in the aftermath of deregulation — the balance skewed decisively to the right. In the current 2011-12 election cycle, it shifted overwhelmingly to the right:

The movement rightwards of almost half a billion dollars in this cycle alone — signified by the red bar on the graph representing Republican donations — is not, however, the pure gold that analysts on both sides expected.

While, the rapid growth of well-financed and autonomous competitors threatens all existing power structures, the bulk of the costs are likely to fall on the Republican Party. The right wing of the Republican Party has more disruptive potential than the left wing of the Democratic Party because it is more willing to go to extremes: see the billboards showing Obama bowing down before an Arab Sheik, or the ads and DVD claiming that Obama is the bastard son of the African American communist, Frank Marshall Davis.

There are, furthermore, structural and historical differences between the parties: the Republican Party and the conservative establishment is institutionally stronger than the Democratic Party, with an infrastructure that served as a bulwark through the 1960s and 70s – the American Enterprise Institute, the Heritage Foundationthe Cato Institutethe Olin Foundation, etc. — when Republicans appeared to be a permanent congressional minority. Its financial prowess enabled the party to enforce more discipline on its consultants and elected officials. The Republican establishment also exercises more authority over policy and candidate selection than does its Democratic counterpart.

In recent years, the Democratic Party organization has gained some strength and it plays a much more active role in campaigns at all levels than in the past, but as an institutional force capable of command and control, it remains light years behind the Republican Party.

Republicans, in contrast to Democrats, prefer hierarchical, well-ordered organizations, and are much more willing to cede authority to those in power. Democrats, despite the discipline of individual campaign efforts, tend more toward anarchy than hierarchy. Historically, one result of this partisan difference is that the Republican establishment has tightly managed candidate selection at the presidential level. With extraordinary consistency, the party has crushed insurgent candidates and selected the next in line. Ronald Reagan and Bob Dole, for example, both had to wait until it was their turn.

The Republican establishment has a full arsenal of weapons at its disposal, including endorsements, favored speaking engagements at key party gatherings, leverage over top consultants and a signaling process to show who has been anointed from on high.

The most powerful weapon of all was always the oversight exercised by party leaders over the flow of money to candidates. Every four years when the nomination process began, business leaders, Republican-leaning trade associations, top corporate law firms and investment bankers slowly formed a consensus behind a favored candidate.

The establishment snuffed out insurgencies, including candidates from the social right — Pat Buchanan, Pat Robertson and Gary Bauer — and candidates from the economic right like Jack Kemp and Steve Forbes. None of these outsiders rose past marginal status, although their presence in primary contests often forced the mainstream candidate to make concessions that proved damaging in the general election.

Compare that history of unbroken authoritarian dominance to the 2012 Republican nomination fight.

Unleashed by Citizens United, a handful of renegade billionaires made life miserable for Mitt Romney, the establishment candidate. More importantly, it only took four men — Sheldon Adelson, the Las Vegas and Macao casino mogul; Harold Simmons, a Dallas-based leveraged buyout specialist; Foster Friess, a conservative Christian and a successful investor; and William Dore, a Louisiana energy company C.E.O. – to stun traditional party power brokers during the first four months of 2012.

The millions of dollars these men put into the super PACs associated with two clearly marginal candidates, Newt Gingrich and the former Pennsylvania Senator Rick Santorum, turned the primary process into an open contest, giving full voice to the more extreme wings dominated by the Tea Party and the evangelical right.

The newly empowered billionaires are positioned to challenge the Republican Party at its point of greatest vulnerability, during the primaries. The three major party organizations — the Republican National, Congressional and Senatorial Committees – cannot, except in unusual circumstances, intervene in primaries. Those are to be decided by voters, not the party.

The new class of financial bosses, equipped to legitimate primary candidates at all levels, has no such restriction over participation in primaries. Instead, the incentives are substantial to engage full force in the nomination process where the marginal value of each dollar is higher and more likely to influence the outcome than in the general election.

These new players, along with their super PACs, undermine the influence of the parties in another crucial way. Before Citizens United, the three major Republican Party committees exerted power because their financial preeminence gave them the final word on the award of contracts to pollsters, direct mail, voter contact, and media consultants – very few of whom were willing to alienate a key source of cash.

The ascendance of super PACs creates a separate and totally independent source of contracts for the community of political professionals. Super PACs and other independent groups already raise more than any of the political party committees and almost as much as either the Republican or Democratic Party committees raise in toto.

This chart shows the rapidity of the growth of independent spending:

CLICK TO ENLARGE

And this chart shows the amounts raised so far this year by the party committees:

Note: All the Numbers on this page are for the 2012 election cycle and based on Federal Election Commission data released on October 26, 2012.

Nathan Persily, a professor at Columbia Law School and a political scientist, made the point to me with a question: “Who is the Republican Party in the Citizens United age? If you had to point to the ‘Republican Party’ would you be more likely to point to Reince Preibus (and implicitly the R.N.C.) or Karl Rove (and Crossroads G.P.S.)? I think candidates might consider Rove more important.”

Preibus is the chairman of the R.N.C.; Karl Rove founded American Crossroads, a super PAC, and Crossroad GPS, a tax exempt independent expenditure organization that is not required to disclose donors. So far in the 2011-12 election cycle, American Crossroads and Crossroads GPS have spent $174.28 million, a sum two million dollars greater than the $172.2 million spent by the Republican Congressional and Senatorial Committees combined.

By now you may have the question in the back of your mind: who cares about the political parties? Aren’t they just agents of the status quo at a time when innovative thinking is needed? Maybe diminishing their role will help lessen polarization and open up the system?

There may be some truth to this and perhaps the benefits will outweigh the costs. Conversely, the diminishment of the parties means that the institutions with the single-minded goal of winning a majority will be weakened. When parties are influential, they can help keep some candidates and office holders from going off the ideological deep end. The emergence of independently financed super PACs give voice to those with the most extreme views. An ad like this is likely to alienate as many citizens as it motivates:

A billboard in Florida shows President Obama bowing to a Saudi king and blames him for soaring gasoline prices.

Predictions are notoriously dangerous, given the multitude of possible outcomes. If the parties are eviscerated, the political system could adjust itself and regain vitality. But I doubt it. For all their flaws, strong political parties are important to a healthy political system. The displacement of the parties by super rich men determined to flex their financial muscles is another giant step away from democracy.

Thomas B. Edsall, a professor of journalism at Columbia University, is the author of the book “The Age of Austerity: How Scarcity Will Remake American Politics,” which was published earlier this year.

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Lessons learned from 2012

Here are a few of the conclusions top tacticians are already drawing. | AP Photos

By JIM VANDEHEI and MIKE ALLEN | 11/4/12

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The 2012 election will be remembered by history for its smallness in a big, historic moment: The high drama of the first debate was a rare respite from months of petty rhetoric, egged on from start to finish by gobs of money from millionaires and billionaires.

(PHOTOS: Final countdown to Election Day)

But for top leaders and strategists in both parties, the race has yielded immediate, tangible lessons that will shape the nation’s politics in the months and years ahead, regardless of who wins on Tuesday. Here are a few of the conclusions top tacticians are already drawing:

The GOP has a big-time Senate problem

The presidential race sucks up all the attention and rightly so. But the rise of anti-establishment power is killing Republican chances of winning control of the Senate. In two consecutive elections, the party had a clear shot at a majority and blew it — blew it because the party bosses in Washington have lost control over nominating contests in swing states, and seem impotent in engineering the selection of the most electable candidates.

(Also on POLITICO: Latest polls from across the U.S.)

It’s mathematically possible for Republicans to pull out the majority – but it’s just as mathematically possible they don’t pick up a single seat. And a big reason has nothing to do with opportunity; it’s all about the candidates. Think about 2010: In Delaware, Republicans rejected a slam-dunk winner in former governor and Rep. Mike Castle for a candidate who bought an ad declaring she is not a witch. They nominated one of the few Republicans in Nevada who could not beat the wounded and unpopular Senate Majority Leader Harry Reid. The reason was simple: The tea party activists didn’t give a hoot what Senate Minority Leader Mitch McConnell and establishment Republicans thought about their nominees. They wanted ideological purists, not the same wishy-washy Republicans they blamed for runaway government, even under GOP control.

Now think about 2012. In Wisconsin, former Gov. Tommy Thompson might survive – narrowly, if he does. But the same forces that swept Gov. Scott Walker into office battered the once-popular Thompson in a brutal, expensive and damaging GOP primary. In Missouri and Indiana, two states that once seemed like sure-bet wins for Republicans, the party could now lose both because two old, white, Christian men thought it was fine to weigh in on why a raped woman need not have the legal right to an abortion. No one questions their faith or sincerity on the issue. But every Republican in Washington questions their political sanity.

(Also on POLITICO: 2012 swing-state map)

Republican operatives tell POLITICO that after the election, top officials plan to enlist some of the influential outside groups representing conservative grassroots activists to see if they can help preempt the future selection of unelectable conservatives. The hitch: a lot of those groups couldn’t care less what the Wise Men of Washington want.

Democrats have a liberal problem

If President Barack Obama wins, he will be the popular choice of Hispanics, African-Americans, single women and highly educated urban whites. That’s what the polling has consistently shown in the final days of the campaign. It looks more likely than not that he will lose independents, and it’s possible he will get a lower percentage of white voters than George W. Bush got of Hispanic voters in 2000.

A broad mandate this is not.

The pressure on Obama to deliver for this liberal base will be powerful. Already, top left-wing groups are pressuring him not to buckle on a grand bargain that includes any entitlement cuts.

And if Obama wins, he will be dealing with a House Democratic caucus more liberal than he is. The past four years have decimated the once-strong bloc of conservative Southern Democrats, leaving behind a caucus more liberal than ever. By POLITICO’s count, there will likely be roughly 14 conservative “Blue Dog” Democrats in the next Congress, down from 50-plus only a few years ago.

Nancy Pelosi, who once predicted a possible Democratic takeover, is likely to find herself with small gains, if any. Pelosi might very well hang it up after the election and if she does, there will be a big fight for party leader and a big test of whether a liberal caucus will let itself be led by a moderate, Steny Hoyer, who has waited patiently for years to take over but who might very well find himself challenged by the dominant liberal wing.

The Senate races offer the perfect cautionary tale to this impulse. Democrats have a good shot in Nebraska, Missouri, North Dakota, Virginia and Indiana because they have moderate Democratic candidates and incumbents who often see the president — and the party back in Washington — as out of tune with a center-right country.

All white, mostly male won’t cut it

Even if Mitt Romney wins, the Republican Party has, at most, one more election it can compete in without addressing its gaping gap with Hispanics and women.

The demographic trends are brutal: With each passing election, the share of white voters shrinks, from 87 percent in 1992 to 83 percent in 1996 to 80 percent in 2000 to 77 percent in 2004 to 74 percent in 2008 and likely smaller this time around.

Romney, if anything, set Republicans back in their efforts to win over Hispanics. His rhetoric during the primaries – foolishly aimed at putting him to the right of Texas Gov. Rick Perry on the issue — was offensive to many Hispanics, especially first-generation voters. His absence of a plan for immigration reform until the bitter end did nothing to reverse the damage.

“If Romney loses,” said a top Republican operative, “it will be because he ran a 1992-style campaign that was aimed squarely at suburban white voters, while the president ran a campaign understanding the realities of a more diverse and far more polarized electorate. Demographic trends show we’re not far from Arizona becoming a swing state, and probably less than a generation away from Texas becoming a swing state.”

Republicans are in a box of their own making, after rejecting the advice of the George W. Bush crowd to find common ground on immigration reform. They desperately need a deal on this in the next four years so they can re-connect with a community that once was — and once again could be — open to an alliance on social and economic theology.

Obama, in seeking the endorsement of the editors of The Des Moines Register, made it clear how central the Latino vote is to his campaign. Speaking on a call that was later publicly released, he said: “[S]ince this is off the record, I will just be very blunt. Should I win a second term, a big reason … is because the Republican nominee and the Republican Party have so alienated the fastest-growing demographic group in the country, the Latino community. And this is a relatively new phenomenon. George Bush and Karl Rove were smart enough to understand the changing nature of America.”

Republicans’ gender gap with women was renewed by the regrettable comments about rape by the party’s Senate candidates in Missouri and Indiana. But Romney created some of his own problems with an antiquated view of women, in the view of some Republican critics.

GOP operatives said this problem is much easier to fix than the deficit with Hispanics, starting with less strident rhetoric and – most importantly – getting serious about nominating more female candidates. “We can turn this around as quickly as 2014,” said one longtime Republican strategist. For instance, the strategist said, GOP candidates should talk less about spending and debt as a financial issue, and more in terms of the next generation. “Romney is a technocrat, and that’s how he talks about these issues,” the strategist said. “It’s very male.”

Speed kills

For those who hate long campaigns, get over it.

The combination of increased early voting and unlimited money in politics means longer campaigns and earlier attacks.

The Obama campaign heavily front-loaded its advertising, seeking to undermine Romney’s biggest credential – his track record as a businessman and turnaround artist. Obama officials contend this was a gamble, because they were unsure that they would also be able to afford heavy media buys in September and October. It turned out that they could afford to do both.

“The early-definition strategy came from expecting that we were going to ultimately be outspent by a great deal,” an Obama adviser said. “If we were going to get this contrast drawn, and the lines of the narrative drawn, we figured that money spent in May, June, and July was going to be a lot more effective in getting that across to people, than waiting until September and October, when the debates and the conventions were dominating things.”

There’s nothing novel about defining an opponent before he or she defines themselves – but there is something novel about having essentially unlimited money to play hard earlier and late, and in between. Both parties now know they have that, at least until the courts step in and change the fundraising rules.

Precision matters, too

Win or lose, the Obama strategy in Ohio will be a case study in the politics of precision for years to come. They told us one year ago they would go nasty and narrow and could care less if people found the approach cold and calculating.

They pounded Romney early on his Bain record, to raise serious doubts about his job-creating credentials. And then they started dropping the auto-bailout bomb early, consistently and relentlessly.

They spent the vast majority of their resources targeting specific groups, but especially working-class whites in Ohio who benefited directly or indirectly from the auto bailout. As one top Obama official marveled, no one could have imagined when the president bailed out the auto industry it would not only work – but potentially win him the election.

Polls show Obama running even with working-class whites in Ohio – as much as 30 points higher than he is running in other swing states where the auto bailout is not the central focus of the campaign.

In a 50-50 nation, with technology making politics more precise by the year, this kind of micro-targeting is the new norm.

Romney has scrambled in the end to undo the auto-bailout damage.

Romney campaign sources tell us Sen. Rob Portman (R-Ohio), who was chosen as Romney’s sparring partner for mock debates and became a close and trusted adviser, argued for weeks that the campaign should take on the issue in Ohio, pointing out that Romney had proposed an alternative plan. Top Romney officials refused, insisting that voters focused on that issue had already been lost. But Portman argued many of them were working-class voters who were concerned about the direction of the country, and that Romney should at least try to make the issue a wash with them.

It’s Hillary 2016

No name benefited more from the 2012 race than the Clintons.

This was the year the long, anguished restoration of Bill Clinton was officially complete. Obama went from tolerating Bill to wanting and ultimately needing him. It was Bill, not Barack, who stole the show at the Democratic convention, and it was Bill, not Barack, who starred in one of the most popular ads of the campaign season highlighting his convention speech. Bill Clinton went from feeling frozen out to feeling loved and essential, his friends say.

But this isn’t about Bill — it’s about Hillary. The Secretary of State claims she won’t run in 2016, but those closest to her don’t buy it. And given that the favorable rating for each Clinton is in the 60-plus range, she might stroll into the Democratic nomination in 2016 if she wants it. Hillary Clinton will leave State soon, write a memoir and speak for a fee industry experts predict will exceed what George W. Bush gets on the circuit. The trick will be to stay prominent and central for the next four years without public office. But that never seems hard for the Clintons.

Ryan more powerful than ever (but for how long?)

Paul Ryan has already been told that if Romney wins, he will take the lead in the upcoming budget fights, which will be in his wheelhouse — spending, taxes and entitlements. He was put on the ticket for the sole purpose of using clout and credibility with House conservatives to help navigate the war over the fiscal cliff, and the budget battles ahead. During the grand bargain talks of the past year, Speaker John Boehner would run every detail of the proposed plan by Ryan to get his blessing before sending any private signals to the president. The reason was simple: Even before he was the running mate, Ryan controlled more votes on budget matters than the leader of his own party.

If Romney loses, Ryan will take the fight from the campaign trail back to the House, where Boehner had made clear that Ryan could get a waiver from the six-year limit on chairmanships to run the Budget Committee again. That would make it Ryan v. Obama on the fiscal cliff, the debt ceiling and entitlement reform. Some Republicans close to Boehner worry that if Ryan did return, he would be so focused on 2016 that he would be inclined to kill any deal that takes his central interest and calling card off the table. One top Republican told us that if Ryan sticks around, the chances of a grand bargain would be lower.

There is a chance that Ryan would leave the House to make money and perhaps teach, setting the stage for a 2016 presidential run of his own. He clearly enjoyed the national stage, and showed a natural ease on the stump. But he also showed his limitations, especially on foreign policy and other issues outside his comfort zone.

Ryan v. Rubio, 2016

If Romney loses, Ryan won’t be the only young conservative instantly getting talked up as the future of the party. Sen. Marco Rubio (R-Fla.) — age 41, son of Cuban immigrants who became naturalized citizens, and increasingly referred to by his groupies as the party’s greatest communicator since Ronald Reagan – has a biography and aura tailor-made to mitigate Republicans’ demographic dilemmas. When he talks about Medicare, he invokes his mom. When he brings up immigration, he starts by reminding audiences that these are human beings, often seeking a better life for their families.

“Marco has the gift to open ears,” said a top Republican consultant. “He’s the kind of Republican who can break through to a cynical electorate.” Imagine if Rubio’s Florida goes Republican and Ryan’s Wisconsin does not.

Either way, Republicans walked away from the GOP convention wishing Rubio had a bigger role in it – and in the 2012 election. Republicans close to Rubio said it’s virtually certain he will make an unambiguous play to lead the party heading in 2016 if Romney-Ryan fall short. Until then, remember McConnell is up for reelection in 2014 and is likely certain to want Rubio’s blessing for cutting any major deals, especially on a grand bargain.

http://www.politico.com/news/stories/1112/83273.html#ixzz2BFtsdN6G

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After the Campaign: What We Know

Hoyt Purvis

As the political campaigns finally wind down, there is much we don’t know, including who the presidential winner will be.

However, there is much that we do know as this campaign ends.  .

Here are some of the things we do know, not necessarily in order of importance:

1.  Campaign spending is outrageously out of control.  There are estimates that $1 billion could be spent for each of the major party presidential candidates.   The combined expenditures of super PACs, shadow money organizations, and party committees surpassed $1 billion. Total campaign spending nationally for all campaigns will be in the $6 billion range.

2.  The presidential campaigning, including primaries and pre-primaries, goes on far too long.  We have completed two baseball world series while this campaign season has been underway.  The permanent campaign has become even more permanent.

3.  We need a better balance between campaigning and governance.  The country becomes consumed by the spectacle of campaigns and not enough attention is given to setting policies and running the government

4.  Battleground states get all the attention.  President Obama has not visited Arkansas during his presidency, making it one of the “excluded eight” states.   If any of “excluded eight” were highly competitive, then Obama would most certainly have visited, but these are states where Romney is expected to win easily.  Romney has pursued a similar strategy, focusing on states where he is competitive.  He did visit Arkansas for a few hours for a high-dollar fund-raiser with no public appearances.

5.  “Binders full of women” and Big Bird may have symbolic significance but hardly rank as major issues at a time when the economy and the deficit are prime concerns.

6.  Gaffes can be telling, but we sometimes give more attention to gaffes than to misinformed positions of candidates.  Much worse and more frequent than gaffes are outright distortions in campaign rhetoric and advertising.

7.  Contrary to what many experts said beforehand, the 2012 campaign proved that debates can have a definite impact on public opinion.

8.  Unexpected developments – a hurricane, an attack on the U.S. consulate in Benghazi, a video tape of off-the-cuff remarks – can affect the political climate.

9.  Over-simplified assertions on foreign policy based much more on what the audience wants to hear rather than the realities of international relations are too readily accepted.   Speaking honestly about America’s problems and limitations shouldn’t be taboo.

10.  After lots of tough talk and criticism of Obama on Iraq, Afghanistan, Syria, Libya, etc., Romney seems to have acknowledged that there is little appetite for foreign military adventures.  In that third debate he seemed to morph from a hawk to a dove right before our eyes.

11.  Speaking of “tough,” we heard much about getting “tough” with China and accusations that the opposing candidate was “soft” on China.  Although China is a convenient scapegoat, rhetoric is cheap and unraveling the extensive connections between our two economies would be costly

12.  Sideshows get far too much attention, a good example being sideshow barker Donald Trump.  Likewise, we hear far too much from conspiracy theorists, attention seekers, and badly misguided self-righteous souls, a discouraging number of whom seem to be serving as party spokesmen or are running for state legislatures or Congress.   We should treat them like those nuts who make fools of themselves running onto football or baseball fields to gain attention.  Years ago, decisions were made not to show these idiots on TV and perhaps we could do the same with some of the political nuts.

13.  “Bailout” is not a bad word in some places.

14.  Not enough attention is paid to congressional elections in the national media.  Regardless of who is elected president, he will probably have to contend with a divided congress.  The House Republican caucus and Speaker Boehner will remain key players in showdowns over tax and spending cuts.

15.  Arguing about the past may have political benefits, but it is the future that needs attention.

16.  Hypocrisy in politics is not hard to find.

17.  Negative political advertising is not going to disappear even though most people say they don’t like it.  Ads that ignore or distort facts are plentiful.

18.  We need more pragmatism and less dogmatism in politics and government.

19.  Religious and racial prejudice are, sadly, still factors in our society, but not too long ago a presidential race between a Mormon and an African American would have been unthinkable.

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Hoyt Purvis is a journalism and international relations professor.

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And If the GOP Doesn’t Win, What Then?

Politics Nov 3 2012, 11:01 PM ET

Blog by James Fallows –  THE ATLANTIC..

Nobody knows what’s going to happen on Tuesday. (11pm Saturday update: But watching a completely-losing-his-voice Bill Clinton do a barnburner in his intro for Barack Obama in Virginia, I’m seeing an episode of Democratic “momentum.”) (And nice line in return from Obama just now: “The only Clinton workin’ harder than him is our Secretary of State.”)

But let’s do a thought experiment and assume that current probabilities hold. That would mean that Barack Obama is re-elected; the Romney-Ryan ticket is defeated; and even as the Republicans begin assessing their promising next tier of Christie-Rubio-Jindal-maybe Ryan-maybe Jeb-Bush candidates for 2016, they confront two discouraging realities. One is not having been able to beat a marginally popular president during a time of widespread economic distress. The other is seeing several big demographic blocs — Latinos, blacks, women — moving away from them.

What then? We’re getting ahead of ourselves, but as a distraction here are several messages from readers. First, from someone in the aviation world:

Presuming Mr. Obama does indeed win, I think the more interesting question is what will the Republican party do to regroup?…

The question in my mind is “is this the end of the Karl Rove Party?”   He pioneered the strategy of shifting the party right to get an energized “base,” also shifting it toward the new Know-Nothings they’ve become. [JF note: Rove and GWB also were careful to try to include Latinos as part of a new GOP big tent. That worked for them in Texas but has not lasted with their Tea Party-era, Tancredo-toned successors, which could prove one of the party’s lasting vulnerabilities.]

It hasn’t won.  Laura Ingraham’s “if the GOP can’t beat Obama with this economy, shut it down” strikes me as unintentionally prophetic.  The economy is now improving, Obama will never run again, and demographic trends are certainly against the current Republican message. What will the Republicans do?

The existence of the Tea Party faction makes this a nasty problem — any attempt by Republicans to pivot toward the mainstream will cost them factional challenges, perhaps third-party rightist candidates on the ballot.

Extending the last argument, a reader in Pennsylvania writes:

I can’t pretend to know what motivates folks like Karl Rove, but I can say with certainty, as a Democratic committeeperson here in suburban Philly, that one thing that does motivate the Democratic ground game here in Pennsylvania is the sense that an Obama victory and some key US Senate victories for Democrats could lead to the splitting apart of the Republican Party, with a possible 3rd Party movement on the right getting legs.

As Democrats we see that possible development as an obvious opening for us to pick up more Democratic victories down ballot in the next two or three elections here in PA and also in some red states.   This “long term” perspective is a very tangible motivator as we all participate in GOTV efforts here in PA over the next 3 days.

On a final note, in the midst of all the challenges facing America right now, any long drawn out effort to delegitimize Obama victory through Congress, in particular, will, in my humble opinion, only benefit Democrats in the mid-terms.

And from a reader in California:

As we come down to the wire, I sticking with my premise/intuition that 1972 will repeat in 2012.

The only doubt is whether the Dems can regain enough seats to take the house. [JF note: I am chary of predictions, but this seems very unlikely to me.] Otherwise, Obama wins well and the Senate holds, and gains a few, like Elizabeth Warren. [JF: pickups, like Warren over Brown, seem plausible at this point; net Democratic gains in the Senate a much longer shot.]

From all that I’ve read, the moderate middle (i.e. that which is not counted as the base) will mostly go to Obama. That may not include older white men, but women and minorities will more than make up for them. This despite Republican efforts to disenfranchise as many Democratic voters as possible by jiggering state voting rules.

It’s not that I have some special knowledge that others don’t. But I’ve voted in every election but one since 1968, and what stands out strongly in my memory are what I call, for lack of better term, the extremist years, when one party leaned far much in one direction, which for the moderate middle was too far away from them.

Obviously, and unendurably, the “who looks good for the 2016 race???” speculation will rev up before we have even recovered from this cycle. I am explicitly not trying to get into next-candidate thinking on either side. But the next identity of the Republican party is what a lot of people will be wrestling with, no matter how things go in three days. (And now, back to checking out that Virginia rally.)

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Political Polling Is No Longer Meaningful

Mitt Romney and President Barack Obama at a town hall style presidential debate at Hofstra University in Hempstead, New York, October 16, 2012. (Photo: Josh Haner / The New York Times) The truth is that we have no idea who is ahead in the presidential race. Opinion polling has entered uncharted territory as response rates have plummeted.

When you receive an unexpected call from a private number or 1-800 number, do you answer the phone? Most people don’t, and those who do are hardly a representative sample of the American population. Yet the results of all major political polls are based on the assumption that the 9 percent of us who answer the phone are perfectly representative of the 91 percent who don’t.

According to a report from the Pew Research Center, only about 9 percent of Americans answer the phone and respond to opinion polls. When response rates fall this low, polls tell us less about public opinion than about who answers the phone.

It gets worse. Do Democratic and Republican voters have, on average, the same numbers of phones? If Republicans have more phones than Democrats, they’re more likely to be represented in telephone polls (and, of course, vice versa).

To read more articles by Salvatore Babones and other authors in the Public Intellectual Project, click here.

Pew is a first-class nonprofit research organization that puts a premium on getting the numbers right. Most major political polls are quick-response jobs for impatient commercial organizations. Pew’s 9 percent response rate is likely better than that of any major political poll. No major political poll reports its non-response rate.

[PEW LAST POLL WAS  OBAMA 50% AND ROMNEY 475]

The Politico/George Washington University poll conducted by Lake Research Partners and the Tarrance Group publishes 329 pages of detailed poll results without a single mention of non-response. The Washington Post/ABC News poll conducted by Abt SRBI provides somewhat less detail and still no mention of non-response. There’s also no mention of response rates in the detailed results released by the Public Policy Polling poll.

Other polls do no better. The Reuters poll conducted by polling firm IPSOS makes no mention of non-response, nor does the UPI poll conducted by CVoter. To its credit, at least Gallup acknowledges in its (literally) small print that “practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.” It gives no further explanation of the potential for non-response biases.

Many of these polls, including the Rasmussen poll, use – no kidding – computerized robo-callers to poll potential voters. That’s right. Many of the poll numbers you see quoted in the news are based on data collected by robo-callers.

The truth is that we have no idea who is ahead in the presidential race. Opinion polling has entered uncharted territory. In just the last 15 years, Pew’s response rates have dropped from 36 percent to 9 percent. Rumors are that commercial political polls sometimes have response rates that are less than 1 percent. The fact that no major political poll reports its response rate is not reassuring.

We’ve been here before. In 1936, the Literary Digest poll tipped Republican Alf Landon to win a landslide victory over Democrat Franklin Roosevelt. With 2.4 million respondents (compared to 1,200 for a typical poll today), the poll had essentially zero margin of error. Nonetheless, the poll was dead wrong, because its 2.4 million respondents were not a truly random sample of the US population.

A decade later, polling was much better developed, and the 1948 elections were covered by professional polling companies. National polls confidently predicted that Republican Thomas Dewey would handily defeat Democrat Harry Truman. In one of the most famous photos of the 20th century, Truman is seen holding aloft a newspaper bearing the headline “Dewey Defeats Truman.” The problem: bad sampling, again.

In 2012, we’re right back where we were in 1936. In 1936, the problem with telephone polls was that Republicans were much more likely to have a phone than Democrats.

In 2012, it may be that Republicans have more phones than Democrats, or are more likely to answer the phone than Democrats. It beggars belief to suggest, as the polls do, that half of all Americans in 2012 are going to vote for a multimillionaire private equity executive for president. Either way, we’ll know next week.

Or maybe we won’t.

The only polls that have consistently high response rates are exit polls. These are the polls conducted outside voting stations immediately after people have voted. Exit polls are the gold standard of political polling.

The Washington Post has reported that the major news networks plan to cut back dramatically on exit polling in 2012. This is a problem because with many states moving to paper-free electronic voting, exit polls are the only way to detect errors and fraud. Without a paper trail and with no solid polling, there will be no way to know that the results reported by private voting machine operators are in fact correct.

Although not designed to catch errors and fraud, exit polls are well-suited to this purpose, as Jonathan Simon points out on BuzzFlash. Victoria Collier writes in Truthout that a lack of exit polls opens the door to vote-rigging, especially in an environment in which most voting technology companies are owned and operated by partisan (Republican) firms.

In a scenario eerily reminiscent of Jeb Bush’s role in delivering Florida to his brother in the 2000 election, it turns out that the Romney family are major investors in one of the nation’s leading voting-machine companies. Ownership is not itself evidence of an intention to commit fraud, but Republican domination of the voting-machine industrycombined with Republican advocacy of electronic voting certainly gives solid grounds for suspicion.

Exit polling provided strong statistical evidence of electronic vote fraud in Ohio that delivered the 2004 election to George Bush. Without strong exit polling, fraud (or even honest errors) will be impossible to detect in the future. Telephone polls just aren’t robust enough to provide a check on the integrity of our voting systems.

The lack of effective political polling is more than just a problem for political junkies in need of their daily news fixes. It skews our knowledge of the political process and ultimately undermines the confidence we can have in American democracy. Whether or not anyone has ever committed large-scale electronic vote fraud, if we don’t have the tools to detect it, eventually someone will.

Mitch McConnell and John Boehner’s strategy worked

by Ezra Klein

  •  Oct. 30, 2012 
I’ve spent the morning reading various endorsements of Mitt Romney for president, and they all say the same thing: Mitch McConnell and John Boehner’s strategy worked.
(Alex Brandon/Associated Press)
Okay, that’s not quite how they put it. But it’s precisely what they show. In endorsement after endorsement, the basic argument is that President Obama hasn’t been able to persuade House or Senate Republicans to work with him. If Obama is reelected, it’s a safe bet that they’ll continue to refuse to work with him. So vote Romney!
That’s not even a slight exaggeration. Take the Des Moines Register, Iowa’s largest and most influential paper. They endorsed Bill Clinton in 1992 and 1996, Al Gore in 2000, John Kerry in 2004, and Barack Obama in 2008. But this year, they endorsed Romney.
Why? In the end, they said, it came down to a simple test. “Which candidate could forge the compromises in Congress to achieve these goals? When the question is framed in those terms, Mitt Romney emerges the stronger candidate.”
The paper goes on to note that “early in his administration, President Obama reached out to Republicans but was rebuffed.” The problem, they say, is that “since then, he has abandoned the effort, and the partisan divide has hardened.” I’m not sure that’s an accurate read of the situation — Obama spent most of 2011 negotiating with John Boehner — but that’s neither here nor there. The point is that’s how the Register sees it, and it stands in contrast with Romney, who “succeeded as governor in Massachusetts where he faced Democratic majorities in the legislature.”
The Orlando Sentinel also endorsed Obama in 2008 and Romney in 2012, and their reasoning is similar to the Register’s. “The next president is likely to be dealing with a Congress where at least one, if not both, chambers are controlled by Republicans,” they write. “It verges on magical thinking to expect Obama to get different results in the next four years.”
In the New York Times, David Brooks’s endorsement is titled “The Upside of Opportunism.” The opportunism he’s endorsing is Romney’s. But the opportunism that led to his endorsement is the House Republicans’.
Predicting a second Obama term, Brooks begins with the fiscal cliff. “Obama would first go to Republicans in the Senate and say, ‘Look, we’re stuck with each other. Let’s cut a deal for the sake of the country.’ He would easily find 10 Republican senators willing to go along with a version of a Grand Bargain. Then Obama would go to the House. He’d ask Eric Cantor, the majority leader, if there were votes for such a deal. The answer would probably be no.”
Romney, Brooks says, would also begin his term by heading to Congress and asking members of the other party for cooperation on a fiscal deal. The difference between him and Obama, Brooks thinks, is that Romney would get that cooperation. So vote Romney.
There’s nothing wrong with the logic of these endorsements. Congressional Republicans really have been implacably opposed to working with Obama and that’s meant Obama hasn’t been able to get much done since Boehner was sworn in as speaker. At times, it’s been even worse than gridlock. The Sentinel notes that “with Obama in charge, the federal government came perilously close to a default last year.”
It was, of course, the Republicans who pushed the country to the brink — Obama would’ve signed a clean debt-ceiling increase at any moment, and he ended up making more concessions than any president in history to sign the final debt-ceiling increase — but it’s true that congressional Republicans wouldn’t have done that if a Republican was occupying the White House. So vote Romney.
Obama ran for president promising to break the gridlock and overcome the partisanship that paralyzes Washington. But it wasn’t up to him. The minority won’t cooperate with the majority unless they see it’s in their interests. And the Republican minority didn’t see it that way.
“The single most important thing we want to achieve is for President Obama to be a one-term president,” Mitch McConnell said. “The purpose of the minority is to become the majority,” said Rep. Pete Sessions, head of the National Republican Campaign Committee.
These endorsements are proving Republicans right. As they show, the Republican strategy to deny the president any cooperation and make his Washington a depressing and dysfunctional place has done Obama enormous political damage. In that way, the endorsements get the situation backwards.
While it’s true that President Romney could expect more cooperation from congressional Republicans, in the long term, a vote against Obama on these grounds is a vote for more of this kind of gridlock. Politicians do what wins them elections. If this strategy wins Republicans the election, they’ll employ it next time they face a Democratic president, too, and congressional Democrats will use it against the next Republicans. Rewarding the minority for doing everything in their power to make the majority fail sets up disastrous incentives for the political system. 
There are good reasons to endorse Mitt Romney for president. But if you want the political system to work more smoothly, endorsing McConnell and Boehner’s strategy over the last four years is folly.
 

Still Waiting for the Narrator in Chief

Presidents generally don’t like to admit mistakes, so it was interesting when Barack Obama owned up to one during an interview with Charlie Rose on CBS last summer. It was the job of the president, Obama said, to “tell a story to the American people that gives them a sense of unity and purpose and optimism,” and it was on this score that he had fallen short. Conservatives gleefully mocked the president, saying that the country needed jobs more than it needed stories, and the remark did seem to hint at some genuine denial. After 40-plus months of high unemployment, a president who thinks his mistakes rest not in his policy choices but rather in his ability to articulate them is probably telling himself a story, if no one else.
And yet Obama’s admission resonated with his supporters, who can be forgiven for wondering why he hasn’t been better at promoting what is, by any standard, an impressive series of accomplishments. (As the comedian Chris Rock tweeted recently: “Only Pres Obama could prevent a depression, end a war, get bin Laden, bring unemployment below 8 percent, then be told he can’t run on his record.”) In books and speeches before he became president, Obama showed himself to be an evocative storyteller; even the controversy over his memoir, in which Obama condensed some characters into one, says something about his narrative sophistication, his novelistic instinct for developing themes and characters that make his point.
All of which makes it even more baffling that Obama’s presidential alter-ego, this grayer and more somber version of his literary self, spent the past four years immersed in legislative minutiae and marching out dull slogans — “an economy built to last,” “winning the future” and so on — while failing to advance any larger theory of the moment confronting the country and what it required. “They haven’t talked about how the pieces of the puzzle fit together and move us forward from where we’ve been,” says Don Baer, who served as President Clinton’s communications director and now runs the public relations giant Burson-Marsteller. “It’s been random and unconnected.” David Gergen, who advised four presidents on communications, likens the larger story of an administration to a clothesline. “You adopt your clothesline, and then you hang all your policies from it,” he told me. “They’re missing the clothesline.”
If Obama somehow manages to lose an election that seemed well within his grasp a few months ago, this question of how he squandered his narrative mojo will pain Democrats for years to come. As with so much else about this presidency, the answers can probably be traced back to those first overwhelming months after the 2008 election. Remember that John McCain’s most effective line of attack against Obama during the campaign was that he was more of a motivational speaker than a leader. And so, having won the election and facing crises on several fronts, the president’s advisers were understandably wary of too much speechifying, which might have underscored the idea that Obama was going to orate his way through the presidency while leaving the business of governing to others. As a result, Obama spent much of his first months — the period when he might have been speaking directly to an anxious public, much as Franklin Roosevelt did in a less technological age — holed up with aides and members of Congress, rather than pushing any kind of overarching narrative.
Remember, too, that Obama and Joe Biden were the first president and vice president to be elected directly from the Senate since 1960, and most of the senior aides they brought with them came from Capitol Hill. This had real consequences. Congressional aides know a lot about how to slap around their opponents, but because they’re always either taking direction from a president or trying to thwart one, they think very little about how to build support for a governing agenda. A classic case here was the controversial stimulus measure passed in the early days of Obama’s presidency; the White House and its allies skillfully managed to win approval for nearly $800 billion in aid to states, long-term investment and tax cuts, but they gave almost no thought to whether the public understood the differences between these categories of spending or the economic reasoning behind them.

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THE QUESTION IS NOT “WHO WINS?”; BUT, “CAN THE WINNER GOVERN?”

(From Argentina, Published @ Chicago)

The Kirchners and the nature of thieves

By Marcelo Lopez Masia

I traveled to Argentine Province of Santa Cruz for the first time, ten years ago, to find out what happened to the missing billions of dollars that the Province of Santa Cruz should have from oil royalties, the very famous Santa Cruz Missing funds.

By then, the recently deceased journalist Daniel Gatti, (author of the first biography of former Argentina Presidente, Nestor Kirchner) called: “El Amo Del Feudo” (The Master Of The Manor), gave me a very special perspective about the marriage ruling from Rio Gallegos then; and Argentina later and now.

They are not rightist, nor leftist; not statist, nor privatizing. Essentially, they are thieves,” he told me.

From his point of view, it was irrelevant to search for the destination of those funds because he was convinced we would never find out what happened to such a huge mass of money.

Since then, I tried to understand the psychology of these two guys, who early in the ’80s already owned more than 20 properties, but whose greed, far away from dwindling, grew and grew, as more goods and money they possessed.

A decade ago, I hear the gullible or complicit opposition politicians repeat phrases such as: “We must make it clear to Cristina…” or “sure that the president will realize and correct… this or… that…  mistake.”

In recent weeks, I began to dive into the psychology of thieves, so I met an American writer, born in Augusta, which enlightens the key to understand this type of psychopath behavior.

Dr. Hervey Cleckley established, more than 70 years ago, how this antisocial personality disorder is generated and what the main characteristics of these criminals delinquents are. Specifically, the thieves are aggressive and irresponsible people, Dr. Hervey Cleckley states in his work “The Mask of Sanity”.

The author explains that these are people who “suffer from a pathological egocentricity and incapacity to respect, and to love others.”

Dr. Cleckley indicates: The American professional thief is “highly aggressive, impulsive, lacks feelings of guilt or remorse and are unable to create lasting bonds of affection with others (…) have emotional shallowness, and inability to learn from experience.

This sort of Yankee Nostradamus, described as early as 1941 the psychopathology acting out personality of Nestor Kirchner and Cristina Fernandez de Kirchner. This is how individuals internalize neurotic actions, and particularly hostile fantasies. Acting out refers to the free, deliberate and often malicious self-indulgence in the momentum, “particularly in the area of ​​aggression”

Have you hear any Cristina’s speeches where she ends without insults and aggressions to someone, either partners or opponents?

Conclusion: “Almost all this criminal behavior is supported by a magical significance to booster and enhance a primitive feeling of omnipotence”. This gives the thief a distorted view of reality, where the projected hostility is as a mechanism of repetitive compulsion.

Despite their ability to learn things, they do not gain from their own experience. He/she lies even when there is no logical reason to do so. The criminal-thief goal is to get more and more power, which makes him feel that he/she can decide what is bad and what is good”

To end all this with a real pearl: To understand the insane behavior of the Kirhners about their illegal income feelings by stealing rather than by effort: “the thief seems to get no satisfaction from productive work, on the contrary he/she despises and hate it!

We jump from Dr. Cleckley now, to return to the beginning, to our friend the late Daniel Gatti. He said:  “This is not a political issue, this is a matter of thieves and law; “Who wants to hear it, good! … 

Who wants to continue negotiating with them … God help us all!

Marcelo Lopez Masia.

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 The Mask of Sanity

From Wikipedia, the free encyclopedia http://en.wikipedia.org/wiki/The_Mask_of_Sanity

The Mask of Sanity, 1982 edition

The Mask of Sanity is a book written by Hervey Cleckley, M.D., first published in 1941, describing Cleckley’s clinical interviews with incarcerated psychopaths. It is considered a seminal work and the most influential clinical description of psychopathy in the 20th century. The basic elements of psychopathy outlined by Cleckley are still relevant today.[1] The title refers to the normal “mask” that conceals the mental disorder of the psychopathic person in Cleckley’s conceptualization.[2]

Cleckley describes the psychopathic person as outwardly a perfect mimic of a normally functioning person, able to mask or disguise the fundamental lack of internal personality structure, an internal chaos that results in repeatedly purposeful destructive behavior, often more self-destructive than destructive to others. Despite the seemingly sincere, intelligent, even charming external presentation, internally the psychopathic person does not have the ability to experience genuine emotions. Cleckley questions whether this mask of sanity is voluntarily assumed intentionally to hide the lack of internal structure, or if the mask hides a serious, but yet unidentified, psychiatric defect.[3]

An expanded edition of the book was published in 1982, after the DSM, the manual used in the United States for categorizing psychiatric disorders, had changed the name and standards for the classification of psychopathy to antisocial personality disorder, incorporating most of Cleckley’s 16 characteristics of a psychopath listed below.[4] The original edition of the book is no longer available.

Characteristics

Cleckley introduced 16 behavioral characteristics of a psychopath: [5]

  1. Superficial charm and good intelligence
  2. Absence of delusions and other signs of irrational thinking
  3. Absence of nervousness or psychoneurotic manifestations
  4. Unreliability
  5. Untruthfulness and insincerity
  6. Lack of remorse and shame
  7. Inadequately motivated antisocial behavior
  8. Poor judgment and failure to learn by experience
  9. Pathologic egocentricity and incapacity for love
  10. General poverty in major affective reactions
  11. Specific loss of insight
  12. Unresponsiveness in general interpersonal relations
  13. Fantastic and uninviting behavior with drink and sometimes without
  14. Suicide threats rarely carried out
  15. Sex life impersonal, trivial, and poorly integrated
  16. Failure to follow any life plan.

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