The next economic crisis

PAUL KRUGMAN
THE NEW YORK TIMES

November 29, 2008

A few months ago, I found myself at a meeting of economists and finance officials, discussing – what else? – the crisis. There was a lot of soul-searching going on. One senior policy-maker asked, “Why didn't we see this coming?”

There was, of course, only one thing to say in reply, so I said it: “What do you mean 'we,' white man?”

Seriously, though, the official had a point. Some people say that the current crisis is unprecedented, but the truth is that there were plenty of precedents, some of them of very recent vintage. Yet these precedents were ignored. And the story of how “we” failed to see this coming has a clear policy implication – namely, that financial market reform should be pressed quickly, that it shouldn't wait until the crisis is resolved.

About those precedents: Why did so many observers dismiss the obvious signs of a housing bubble, even though the 1990s dot-com bubble was fresh in our memories? Why did so many people insist that our financial system was “resilient,” as Alan Greenspan put it, when in 1998 the collapse of a single hedge fund, Long-Term Capital Management, temporarily paralyzed credit markets around the world?

Why did almost everyone believe in the omnipotence of the Federal Reserve when its counterpart, the Bank of Japan, spent a decade trying and failing to jump-start a stalled economy?

One answer to these questions is that nobody likes a party pooper. While the housing bubble was still inflating, lenders were making lots of money issuing mortgages to anyone who walked in the door; investment banks were making even more money repackaging those mortgages into shiny new securities; and money managers who booked big paper profits by buying those securities with borrowed funds looked like geniuses, and were paid accordingly.

Who wanted to hear from dismal economists warning that the whole thing was, in effect, a giant Ponzi scheme? There's also another reason the economic policy establishment failed to see the current crisis coming. The crises of the 1990s and the early years of this decade should have been seen as dire omens, as intimations of still worse troubles to come. But everyone was too busy celebrating our success in getting through those crises to notice.

Consider, in particular, what happened after the crisis of 1997-98. This crisis showed that the modern financial system, with its deregulated markets, highly leveraged players and global capital flows, was becoming dangerously fragile. But when the crisis abated, the order of the day was triumphalism, not soul-searching.

Time magazine famously named Greenspan, Robert Rubin and Lawrence Summers “The Committee to Save the World” – the “Three Marketeers” who “prevented a global meltdown.” In effect, everyone declared a victory party over our pullback from the brink, while forgetting to ask how we got so close to the brink in the first place.

In fact, both the crisis of 1997-98 and the bursting of the dot-com bubble probably had the perverse effect of making both investors and public officials more, not less, complacent. Because neither crisis quite lived up to our worst fears, because neither brought about another Great Depression, investors came to believe that Greenspan had the magical power to solve all problems – and so, one suspects, did Greenspan himself, who opposed all proposals for prudential regulation of the financial system.

Now we're in the midst of another crisis, the worst since the 1930s. For the moment, all eyes are on the immediate response to that crisis. Will the Fed's ever more aggressive efforts to unfreeze the credit markets finally start getting somewhere? Will the Obama administration's fiscal stimulus turn output and employment around? (I'm still not sure, by the way, whether the economic team is thinking big enough.)

And because we're all so worried about the current crisis, it's hard to focus on the longer-term issues – on reining in our out-of-control financial system, so as to prevent or at least limit the next crisis. Yet the experience of the last decade suggests that we should be worrying about financial reform, above all regulating the “shadow banking system” at the heart of the current mess, sooner rather than later.

For once the economy is on the road to recovery, the wheeler-dealers will be making easy money again – and will lobby hard against anyone who tries to limit their bottom lines. Moreover, the success of recovery efforts will come to seem preordained, even though it wasn't, and the urgency of action will be lost.

So here's my plea: Even though the incoming administration's agenda is already very full, it should not put off financial reform. The time to start preventing the next crisis is now.

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me@rescam.org

Changes for the better in Pakistan

JIM HOAGLAND
THE WASHINGTON POST

December 1, 2008

'This cannot be,” Henry Kissinger once muttered in exasperation when an unexpectedly positive development occurred during a Democratic administration. “The wrong people are doing the right thing.” I have thought of the Kissinger anomaly in recent weeks while watching Pakistani President Asif Ali Zardari confound the low expectations he inspired when he took charge of the most dangerous place on Earth in September. Zardari is the corruption-tainted amateur politician who became president in the wake of the assassination of his wife, Benazir Bhutto, last year. He seemed absolutely the wrong man to handle Pakistan's nuclear weapons and its collapsing economy, and to deal with his country's support for Islamic terrorist networks. But Zardari has tackled those problems with courage, and pushed for greatly expanded trade and other business links with India. The Bush administration helped the Pakistani leader, in a perverse way, by making clear the limits of U.S. support for him without significant reform.

That initial progress now stands at risk. The multiple terrorist attacks in Mumbai could undo Zardari's initiatives and bring India and Pakistan back to war footing. Without citing proof, India's foreign minister is suggesting that “elements with links to Pakistan” carried out the butchery in India's financial capital. But it has yet to be shown that Zardari's government had any role in the attacks. He – and India – have everything to lose by going back to confrontation. Undermining Zardari's outreach could be the goal of the terrorist assault. Peacemakers are blessed in the Bible. But in turbulent areas such as the Middle East and South Asia, they are more frequently targeted. Gunmen cut down Israel's Yitzhak Rabin, the Palestinian envoy Said Hammami, Jordan's King Abdullah I and many others only when they sought peace, not when they made war. We don't know if the Mumbai murderers were targeting Zardari by ricochet. But these attacks – part of an upsurge in terrorist violence that has struck India's cities in the past two years – carry the trademarks of extremist “fedayeen” groups based in Pakistan and Pakistani-controlled Kashmir.

Zardari has been poking at a snake with a stick. As part of his opening to India, he has scaled back support for Kashmiri separatists – despite the fact that Kashmir is the mobilizing issue used by the Pakistan military to maintain its domination of the country's politics and government budgets.

Three days before the Mumbai atrocities, Zardari disbanded the political wing of the military's notorious Inter-Services Intelligence agency, a conduit for support to Kashmiri, Afghan and other terror networks. Earlier he backed counterinsurgency operations in tribal areas infested by the Taliban and al-Qaeda, and is cooperating tacitly with U.S. Predator strikes against the Islamic extremists.

This is the same Zardari who spent more than a decade in Pakistani jails on corruption charges and allegedly displayed such rapacious designs on public funds while his wife was prime minister that he was nicknamed “Mr. 10 Percent.” But now he is scrambling to fill the national pocketbook to meet Pakistan's import bills and a government payroll that goes disproportionately to the country's bloated military. The same driving force – the love of money – pushes Zardari toward statesmanship and perhaps keeps the coup-prone army from overthrowing him. A quiet shift in U.S. policy simultaneously contributes to Pakistani desperation and boldness. The Bush administration lavished billions on Pakistan while it was ruled by Gen. Pervez Musharraf, whose continued survival became President Bush's top goal. Poorly advised by the State Department and the CIA, the president let the clever generals of Pakistan swindle him. Zardari, however, is clearly expendable to Washington. He can be allowed to fail. And because of his reputation, no government can afford the political costs of being taken to the cleaners by Mr. 10 Percent. When Zardari asked several countries to make an emergency $100 million transfer directly into the Pakistani Central Bank earlier this month, the answer was uniformly no, diplomatic sources say. He was told he would have to go to the International Monetary Fund, which gave Pakistan a $7.6 billion loan last week subject to intrusive monitoring and other conditions. The incoming administration of Barack Obama should follow this same path. Financial aid to Pakistan must now be channeled multilaterally, ideally through nongovernmental organizations that practice strict accountability. And Obama should not repeat his vague campaign statements that indicated he might swap assistance to Pakistan on Kashmir in return for help in finding Osama bin Laden. That would resume the self-defeating bribery and bartering that failed under Bush, and pour oil on a burning fire.

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me@rescam.org

Stopping Iran from reaching its goal

DAVID IGNATIUS
THE WASHINGTON POST

December 1, 2008

Absent some last-minute fireworks, President Bush will leave office with a kind of double-failure on Iran: Administration hard-liners haven't checked Tehran's drive to acquire nuclear weapons technology, and moderates haven't engaged Iran in negotiation and dialogue.

The strategic balance between the two countries is the opposite of what Bush had hoped to accomplish: Iran is stronger than it was eight years ago and the United States, fighting costly wars in Iraq and Afghanistan, is weaker. Iran spurns America's carrots, and dismisses its sticks.

President-elect Obama wants to open a serious dialogue with Tehran. That's a worthy aspiration, but there's little reason now to believe that it will succeed. Iranian officials are bellicose in public, and privately even the advocates of negotiation warn that the time may not be ripe for a broad strategic discussion. Iran is heading toward a presidential election of its own next June, which will complicate any diplomatic opening. And as the clock ticks, Iran moves inexorably toward becoming a nuclear weapons state. Despite four U.N. Security Council resolutions condemning the Iranian program, the West seems powerless to stop it. To see how the strategic situation with Iran has worsened, it's useful to recall what has happened over the past eight years. Graham Allison, the director of Harvard's Belfer Center for Science and International Affairs, suggested this accounting during a meeting this week in Cambridge.

Let's start with centrifuges, the crucial technology for enriching the uranium fuel needed for a bomb. When Bush took office in 2001, Iran had no known centrifuges in operation. Today, Iran is operating about 3,850 centrifuges, with plans to add approximately an additional 3,000, according to the International Atomic Energy Agency. Now let's consider the enriched uranium itself. When Bush took office, Iran had none. By this month, the IAEA reported, the Iranians had 1,390 pounds of low-enriched uranium. That's enough to make one nuclear weapon, after this feedstock has been enriched further with additional passes through the centrifuges. What about the missile systems that could deliver a nuclear weapon? Iran has continued over the past eight years to expand its arsenal of ballistic missiles. The Shahab-3 has a range of about 1,300 miles, which could target Israel and countries in Eastern Europe. Iran is also developing a longer-range Shabab-6 intercontinental ballistic missile with a range of 6,200 miles that could, in theory, reach parts of the United States. A disturbing test of Iran's missile technology and the robustness of its command-and-control systems came in the summer 2006 war in Lebanon. Tehran's proxy army, Hezbollah, was able to keep firing its Iranian-supplied missiles at Israeli population centers despite several weeks of aggressive Israeli attacks. It's impossible to say whether Iran's march toward nuclear-weapons capability could have been stopped by diplomacy. But there hasn't yet been a good test. Because of bitter infighting within the Bush administration, its diplomatic efforts were late in coming and, once launched, have been ineffective.

Bush stayed on the diplomatic sidelines for more than five years. A 2003 Iranian overture for a “grand bargain” that would address the nuclear issue went unanswered. Britain, France and Germany (the so-called EU-3) were left alone to try to negotiate a compromise. They concluded the Paris agreement of Nov. 14, 2004, in which Iran agreed to suspend its enrichment efforts. But without U.S. support, this deal withered, and the Iranians resumed enrichment in August 2005. Bush finally agreed to join the nuclear talks in 2006, but only if Iran agreed as a precondition to halt enrichment. Not surprisingly, that diktat went nowhere. The administration effectively dropped this demand this year, sending Undersecretary of State William J. Burns to join a EU-3 meeting in Geneva with Iranian representatives. Bush also missed the chance to engage Iran in a constructive dialogue about the future of Iraq. Iran's supreme leader, Ayatollah Khamenei, agreed to send his top negotiator, Ali Larijani, to Baghdad for talks with the United States in March 2006. That upset Iranian hard-liners, but they needn't have worried. The administration backed out. It's easy to criticize the Bush record on Iran. But anyone who thinks it will be easy for Obama to make a breakthrough hasn't been paying attention. Iran moves closer every day to becoming a nuclear weapons power. It views America as an aggressive adversary that wants regime change, no matter what Washington says. Dialogue is worth a try, but Obama and his advisers should start thinking about what they will do if negotiations fail.

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me@rescam.org

Stressed parents cry out for help

LEONARD PITTS JR.
THE MIAMI HERALD

December 1, 2008

At one level, it sounds like a very bad joke.

In September, a safe haven law took effect in Nebraska allowing parents to leave their children at hospitals without fear of prosecution. This, as a means of saving the lives of unwanted newborns who would otherwise be left in garbage heaps and motel rooms or simply murdered outright. Nebraska was the last state in the union to pass such a law, and unlike the other 49 states, it did not limit the ages of children that could be legally abandoned. You've heard what happened next: 36 kids have since been left at Nebraska hospitals. Most were older than 11. Some had severe mental and behavioral problems. Some had been transported hundreds of miles across the country by parents desperate to be rid of them.

A few days ago, Nebraska amended its law. It now requires that abandoned children be less than 30 days old. As I said, there is a bad joke here. After all, what is more common than the parental lament of being driven crazy by children? But if you know what these parents have been through, you know there's nothing funny here. I testify from experience. When she was a teenager, my stepdaughter – she is 31 now and doing better, thank you – was a hellion. She was violent, she stole from the house, she was a chronic runaway, shoplifter and liar. Four days after Christmas the year she turned 18, she gave birth after a pregnancy she had kept secret. You can imagine what a lovely surprise this was. All that to say, I know how desperately a parent will cast about for ways to “fix” an unruly child, how you pray for her, seek therapy for her, use tough love on her, try reasoning with her. I know how helpless a parent feels when none of it works, when a child absolutely refuses to be fixed and you come to realize you have to make a choice between saving her and saving yourself and everyone else in the house, because she is a disruption, a source of stress, a wrecker of peace. Most of all, I know how she makes you question yourself, indict yourself, condemn yourself and feel so utterly, abysmally alone because, surely, no one else in the world has a child like this.

No, not every child abandoned in Nebraska has a behavioral problem. An out-of-work widower dropped off nine kids because, he said, he could no longer care for them. On the other hand, one of the other kids abandoned in Nebraska was an 11-year-old who had threatened to kill his mother and his siblings. I don't blame Nebraska for pulling up a drawbridge it never intended to lower. But I submit that what happened in the Cornhusker State is indicative of a desperation we see and hear too little about except as an afternoon talk-show curiosity. But someone other than Maury Povich needs to be paying attention to this. Our legislatures need to. So do our governors and religious leaders. Something is wrong when so many parents are so eager to abandon so many children. In constructing my recent series of columns on “What Works” to save at-risk kids, I remember being struck by the number of special programs and schools I encountered whose success owed in part to the fact that they offered counseling to troubled kids. But maybe you shouldn't have to go through a special program or school to have that service available. Maybe it should be offered on a general basis through all our public schools. And maybe the states should re-evaluate what other services they offer to families with troubled children.

And do so with an urgency.

Because what happened in Nebraska constitutes a message from overstressed parents, one we ignore at our own peril. It is not a complicated message. On the contrary it is as simple and succinct as a word: Help.

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me@rescam.org

Terrorism is back on the front page

By Eugene Robinson
THE WASHINGTON POST

December 2, 2008

A concept that excludes nothing defines nothing. That's why one of the most urgent tasks for President-elect Barack Obama's “Team of Rivals” foreign policy brain trust is coming up with a coherent intellectual framework – and a winning battle plan – for the globe-spanning asymmetrical conflict that George W. Bush calls the “war on terror.”

Terrorism (for the umpteenth time) is a tactic, not an enemy; Bush might as well declare war against flanking maneuvers or amphibious landings. Everyone knows what Bush is trying to say, and no one can deny the potential of terrorist attacks to destroy lives and change the world. Few would doubt that a line can be drawn between the Sept. 11, 2001, terrorist attacks and last week's bloody rampage in Mumbai. But is it a straight line or a zigzag? Is it bold or faint? Continuous or dotted?

The Bush administration takes the position that all terrorism is evil, and that therefore all terrorists are evil. That black-and-white view is obviously correct, but it doesn't take you very far toward useful policy choices. Being firmly opposed to rainy days won't keep you dry in a storm.

The fact that all terrorism is evil doesn't mean that all terrorism is alike. I'm confident that Obama understands this distinction, but not that he has worked through all its implications.

At Monday's news conference, Obama introduced Hillary Clinton as the new secretary of state, Robert Gates as the continuing secretary of defense, retired Gen. James Jones as national security adviser, Eric Holder as attorney general, Janet Napolitano as secretary of homeland security and Susan Rice as ambassador to the United Nations – a remarkably diverse group, including just two white males, that proved Obama's intention to show a different American face to the world.

But then a reporter asked the president-elect a particularly inconvenient question: During the campaign, Obama claimed the right for U.S. forces to go after terrorists inside Pakistan. Does the Indian government – which believes the Mumbai killers launched their assault from Pakistan – have the same right?

Obama refused to answer, saying only that he recognizes India's right to defend itself and supports the government's efforts to track down those responsible for the Mumbai atrocity. Soon, though, it will be his responsibility – and that of Clinton, as the new architect of U.S. diplomacy – to find a way out of this kind of logical cul-de-sac.

In his opening statement, Obama vowed to continue the fight against “those who kill innocent individuals to advance hateful extremism.” Is that his definition of terrorism? Is any one-size-fits-all definition sufficiently flexible to allow U.S. special forces to go after Osama bin Laden but also to keep nuclear-armed India out of nuclear-armed Pakistan?

No one asked Obama about another of his campaign promises – to promptly close the GuantÁnamo prison camp, where “war on terror” detainees have been held without formal charges, adequate legal representation or any meaningful right to prove their innocence. Holder has been a vocal critic of the Bush administration on issues of torture and indefinite detention. Soon, it will be his job to figure out how to deal with the remaining detainees – some of whom may indeed be innocent, many of whom surely are not – within legal norms consistent with both the nation's honor and its citizens' safety.

Holder will also be key in shaping any effort to investigate possible “war on terror” abuses that have not yet come to light. And he and Napolitano will be responsible for surveying the newly redrawn line between privacy and security – and deciding whether the Bush administration went too far in asserting the right to eavesdrop on private communications and collect personal information.

For Gates, who said he felt it was his duty to stay on at the Pentagon, winding down the occupation of Iraq might be the easy part. Obama described Afghanistan as “where the war on terror began and . . . where it must end.” If Obama meant to confine the “war on terror” to just this one theater, it was a smart move. But U.S military thinkers have yet to come up with a workable plan for prevailing in Afghanistan, to say nothing of the resources needed to make such a plan work.

There might be other issues that Obama and his team would like to tackle first. But as the carnage in Mumbai reminds us, terrorists don't wait their turn.

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me@rescam.org

Good Thing No One Listens to Records Anymore: "Atlantic Hurricane Season Blows Away Records" --Associated Press

Gunns Don't Kill People, Gunns Rob People: "Gunn Pleads Guilty to Robbery Charge" --Paris (Texas) News

The Same Thing He Says About Everything Else: 'Arf!': "What Your Dog Says About You" --Forbes.com

Maybe With His New Job, He Can Afford Tires and Air Conditioning: "Richardson Seen as Tireless, Warm" --Boston Globe

Everything Seemingly Is Spinning Out of Control: "Russia Turns Away From Vodka in Hard Times" --Daily Telegraph ++ "Vatican Warns That Mobile Phones Threaten the Soul" --Cellular-News.com

News You Can Use: "Tips to Stop Wild Turkeys From Terrorizing You" --Boston Globe Web site

Bottom Stories of the Day: "Obama Doodle Not for Sale, Owner Says" --Chicago Tribune

(Thanks to The Wall Street Journal's James Taranto)

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Bush, Obama, Congress show common sense

San Diego Union-Tribune editorial

December 5, 2008

Executives from General Motors, Chrysler and Ford once again beseeched Congress for help yesterday, warning of the catastrophe that allegedly awaits the U.S. economy if the Big Three are allowed to fail. But to the relief of taxpayers and those who still believe in free-market economics, it looks increasingly likely that the Big Three are not going to get what they want. Instead, the Bush administration, President-elect Barack Obama and a majority of Congress appear to share the common-sense view that bailing out failing corporations just doesn't make sense.

As a result, it now appears that GM and Chrysler will be willing to go along with what's being called a “prepackaged bankruptcy,” in which key parties agree ahead of time to a complex, Chapter 11-style proceeding. The theory is that this approach would allow automakers to win broad concessions on pay, benefits and job rules from the United Auto Workers union while also tweaking the usual bankruptcy rules in a way that would minimize the ripple effects a Chapter 11 declaration would have on potential car buyers and on the vendors who supply automakers.

Advocates say this would allow GM and Chrysler to downsize rapidly and finally morph into truly competitive players in the global auto market. Ford could piggyback on the UAW concessions and also shape up.

We aren't sure this would work. Nevertheless, it is vastly preferable to the Big Three's push for the U.S. Treasury to simply give them $34 billion in loans – on top of $25 billion in “modernization” funding handed over earlier this year – on the theory that their present problems are just an aberration that will soon blow over, at which point the loans would be repaid.

That is a fantasy. The Big Three's problems have been obvious – and unaddressed – for decades. The unsustainability of the status quo is reflected in the fact that by reasonable accounting standards, GM's and Chrysler's present total market value is zero – $0.

A “prepackaged bankruptcy” is also vastly preferable to House Speaker Nancy Pelosi's push for big loans to be given in return for a federal takeover of the automakers in which government bureaucrats would decide what brand lines to eliminate and which new cars and technologies to embrace.

Given these same federal bureaucrats' role in Detroit's decline, this is an astonishingly bad idea. Their dubious classification of sport utility vehicles as trucks under federal mileage laws encouraged Detroit to focus on producing the profitable gas guzzlers instead of more efficient models – all but ceding a huge field to Japanese automakers. Now we're supposed to trust these bureaucrats to rebuild an industry they helped drive off a cliff?

A much better idea is for the current president, the next one and all the responsible members of Congress to lay down the law. GM, Ford, Chrysler and the UAW must be told the status quo is gone, never to return. They can either try to constructively fashion a transition to a new era – or watch the old era die.

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A major victory for the U.S. in Iraq

CHARLES KRAUTHAMMER
THE WASHINGTON POST

December 5, 2008

The barbarism in Mumbai and the economic crisis at home have largely overshadowed an otherwise singular event: the ratification of military and strategic cooperation agreements between Iraq and the United States.

They must not pass unnoted. They were certainly noted by Iran, which fought fiercely to undermine the agreements. Tehran understood how a formal U.S.-Iraqi alliance endorsed by a broad Iraqi consensus expressed in a freely elected parliament changes the strategic balance in the region.

For the United States, it represents the single most important geopolitical advance in the region since Henry Kissinger turned Egypt from a Soviet client into an American ally. If we don't blow it with too hasty a withdrawal from Iraq, we will have turned a chronically destabilizing enemy state at the epicenter of the Arab Middle East into an ally.

Also largely overlooked at home was the sheer wonder of the procedure that produced Iraq's consent: classic legislative maneuvering with no more than a tussle or two – tame by international standards (see YouTube: “Best Taiwanese Parliament Fights Of All Time!”) – over the most fundamental issues of national identity and direction.

The only significant opposition bloc was the Sadrists, a mere 30 seats out of 275. The ostensibly pro-Iranian religious Shiite parties resisted Tehran's pressure and championed the agreement. As did the Kurds. The Sunnis put up the greatest fight. But their concern was that America would be withdrawing too soon, leaving them subject to overbearing and perhaps even vengeful Shiite dominance.

The Sunnis, who only a few years ago had boycotted provincial elections, bargained with Prime Minister Nouri al-Maliki, trying to exploit his personal stake in agreements he himself had negotiated. They did not achieve their maximum objectives. But they did get formal legislative commitments for future consideration of their grievances, from amnesty to further relaxation of the de-Baathification laws.

That any of this democratic give-and-take should be happening in a peaceful parliament just two years after Iraq's descent into sectarian hell is in itself astonishing. Nor is the setting of a withdrawal date terribly troubling. The deadline is almost entirely symbolic. U.S. troops must be out by Dec. 31, 2011 – the weekend before the Iowa caucuses, which, because God is merciful, will arrive again only in the very fullness of time. Moreover, that date is not just distant but flexible. By treaty, it can be amended. If conditions on the ground warrant, it will be.

True, the war is not over. As Gen. David Petraeus repeatedly insists, our (belated) successes in Iraq are still fragile. There has already been an uptick in terror bombings, which will undoubtedly continue as what's left of al-Qaeda, the Sadrist militias and the Iranian-controlled “special groups” try to disrupt January's provincial elections.

The more long-term danger is that Iraq's reborn central government becomes too strong and, by military or parliamentary coup, the current democratic arrangements are dismantled by a renewed dictatorship that abrogates the alliance with the United States.

Such disasters are possible. But if our drawdown is conducted with the same acumen as was the “surge,” not probable. A self-sustaining, democratic and pro-American Iraq is within our reach. It would have two hugely important effects in the region.

First, it would constitute a major defeat for Tehran, the putative winner of the Iraq war according to the smart set. Iran's client, Muqtada al-Sadr, still hiding in Iran, was visibly marginalized in parliament – after being militarily humiliated in Basra and Baghdad by the new Iraqi security forces. Moreover, the major religious Shiite parties were the ones who negotiated, promoted and assured passage of the strategic alliance with the United States, against the most determined Iranian opposition.

Second is the regional effect of the new political entity on display in Baghdad – a flawed yet functioning democratic polity with unprecedented free speech, free elections and freely competing parliamentary factions. For this to happen in the most important Arab country besides Egypt can, over time (over generational time, the timescale of the war on terror), alter the evolution of Arab society. It constitutes our best hope for the kind of fundamental political-cultural change in the Arab sphere that alone will bring about the defeat of Islamic extremism. After all, newly sovereign Iraq is today more engaged in the fight against Arab radicalism than any country on Earth, save the United States – with which, mirabile dictu, it has now thrown in its lot.

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me@rescam.org

Let's Hope It Defies the Warning: "Obama Warns Economy to Worsen Before It Improves" --Associated Press
Things Aren't Working Out on Earth: "GM Will 'Explore Alternatives' for Saturn" --Wichita (Kansas) Business Journal
We Hope It's Not Our House: "Major Reorganization at Random House" --New York Times Web site
Help Wanted: "Police Seek Roadside Rock-Throwers" --Grand Rapids Press
Everything Seemingly Is Spinning Out of Control: "Santa and Three Elves Attacked at Fake Lapland" --Daily Telegraph (London)
News You Can Use: "New U-M Web Site Compiles Information We All Can Use" --Ann Arbor (Michigan) News
Bottom Story of the Day: "John Kerry Cranky Over Barack Obama's Hillary Clinton Pick" --Boston Herald

(Thanks to The Wall Street Journal's James Taranto)

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Governor's troubles are not Obama's

CLARENCE PAGE
CHICAGO TRIBUNE

December 10, 2008

A network news producer based in New York wanted to get my reaction to the arrest of Illinois Gov. Rod Blagojevich, except that she had a problem. She was reading the criminal complaint while she was trying to talk to me. She couldn't stop gasping.

“I'm sorry,” she said. “This is . . . unbelievable!”

That's OK, I assured her, “Take your time. I'm a Chicago journalist. I am accustomed to the unbelievable.”

That's why I came to Chicago several decades ago. It was a great news town. It was a town with gangsters and hardball politics in a state where corruption often came with a little extra zing to it.

My colleagues from more sedate little towns like New York or Los Angeles sound shocked to hear that our Democratic governor has been arrested. For Chicagoans as jaded as I, the news is like the gambling in “Casablanca.”

I arrived, for example, at about the time in 1970 that Paul Powell, a former state speaker of the house and secretary of state, was found after his death to have hundreds of thousands of dollars in embezzled cash stashed in shoe boxes in a hotel room. Most recently, our former Republican Gov. George Ryan has been serving a 6 1/2-year stretch in federal prison for fraud and racketeering.

We've had more than four years of scandalous headlines tied to our current governor or his associates. The stories include 13 indictments or convictions related to illegal kickbacks, sweetheart contract deals and shady hiring practices.

So there was a sense of the other shoe dropping when the feds came for the governor. I was shocked not so much by the allegations of criminal conduct against Blago as by the audacity in the details, including the absence in the allegations of any apparent realization that he might get caught.

U.S. Attorney for the Northern District of Illinois Patrick J. Fitzgerald, bolstering his reputation as a modern-day Eliot Ness, says the governor treated his office like a personal ATM machine. The charges include conspiracy to in effect sell President-elect Barack Obama's Senate seat to the highest bidder. He had hoped to parlay the offer into a possible ambassador's post, secretary of Health and Human Services or some high-paying job in a nonprofit or an organization connected to labor unions, prosecutors said.

He also tried to gain promises of money for his campaign fund, the feds said, and suggested that his wife could be placed on corporate boards where she might earn $100,000 or more.

But while reading the 76-page criminal complaint, I almost spit out my morning coffee when I saw that Blagojevich allegedly tried to shake down owners of the newspaper where I work – and in connection with the editorial board of which I am a member.

In exchange for state assistance with the sale of Wrigley Field, according to Fitzgerald, Blagojevich wanted the firing of members of the Chicago Tribune's editorial board who had criticized him. Didn't anybody tell Blago the old line about how you don't make an enemy out of people who buy ink by the barrel? Nothing should delight an editorial writer more than the knowledge that he or she has been a burr under the saddle of the brazenly corrupt.

Yet if the charges are true, years of scandalous stories, scathing editorials and a record low approval rating of 13 percent in a recent Tribune poll barely slowed the governor down. Most of the allegations occurred in the past few months, as if nearly four years of known federal scrutiny actually had made him more flamboyant in his excesses.

How much impact will the governor's troubles have on President-elect Obama? Probably not much. Fitzgerald did Obama the large favor of noting in his news conference that, “We make no allegations that he (Obama) was aware of anything.”

It was also fortunate for Obama that this story broke after the election. The campaign of Sen. John McCain, who made a crack during a presidential debate about not taking ethical advice from a “Chicago politician,” might well have gone wild with guilt-by-association charges against Obama's party affiliation with Blagojevich.

But from the Chicago point of view, Obama and Blagojevich occupy two opposing worlds of Democratic politics that work together out of convenience. Obama launched his political career among the Hyde Park and Lakefront independents. Blago came straight out of what's left of Chicago's old Bungalow Belt machine.

It is not uncommon to build winning coalitions in Illinois politics by making friends or, at least, neutralizing your rivals in both factions. Blagojevich's troubles will test how well Obama kept his own hands clean on his way up, even as Blago was slipping down.

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Cutting the world's nuclear arsenals

JIM HOAGLAND
THE WASHINGTON POST

December 15, 2008

The power of the presidential jawbone atrophied under his two immediate predecessors. But Barack Obama has shown that he will employ subtle threats, brazen promises and words-at-large as his ambassadors in pursuit of personal and national goals.

It is not a matter of being good at speechifying, which Obama certainly is. It is a matter of calculating – where Obama also excels – the precise effect of words unleashed in presidential addresses, news conferences and on-the-hoof occasions. They all shape the battlegrounds on which a national leader must fight.

As president-elect, Obama concentrates on the immediate economic challenges overwhelming Washington. For an example of Obama's skillful alternation of verbal persuasion and coercion, check out a video clip or text of his admonitions to U.S. automakers on last weekend's “Meet the Press.”

In office, he should exercise this talent in foreign affairs, and quickly. He should schedule a major address that will demonstrate American willingness to take leadership in achieving two related goals: Reducing the dangers that nuclear weapons pose for all nations, and improving U.S. relations with Russia.

Both are long-term and uncertain projects that must be handled with great care. But making clear his intentions to pursue them from the outset would enable Obama to gain increased international support and understanding for more immediate goals such as dealing with Iran, North Korea, Afghanistan and the turbulent area on Russia's borders known as the “Near Abroad.”

George W. Bush never cottoned to that approach. He habitually painted opponents into corners from which he offered no escape, and treated allies on “take it or leave it terms.” Bill Clinton's ability to jawbone opponents and supporters alike suffered from an imbalance in the other direction, and from the impaired credibility that dogged his presidency.

But an excellent model – and a promising vehicle – are both available to Obama to change this state of affairs: John F. Kennedy's much-heralded commencement address at American University in June 1963. It is worth rereading, and rewriting, for our times.

Kennedy's endorsement of “general and complete disarmament designed to take place by stages” provided impetus to a partial ban on nuclear testing. And he went on, speaking as if in sorrow and not in anger, to advise Americans not to overreact to a spate of hostile actions and paranoia by the Kremlin. “It is discouraging,” he continued, “to think that their leaders may actually believe what their propagandists write.”

It is advice worth emphasizing anew as Vladimir Putin blusters on in rancid tones about American perfidy in Georgia and the supposedly threatening missile defenses in Europe. Challenging Putin to join the United States in scaling back the deployment, development and size of nuclear arsenals – to commit to “general and complete disarmament designed to take place by stages” – should be an early policy step by the incoming Obama administration.

An appropriate vehicle for this effort is the Global Zero initiative, originally proposed by George Shultz, Sam Nunn, Bill Perry and Henry Kissinger and which expanded into a worldwide movement last week with media presentations in Paris, Moscow and Washington.

Shultz and Nunn have been particularly active in pressing other world leaders on the idea of abandoning nuclear weapons – with admittedly mixed results. When they tried out the idea on Putin in a private meeting in July 2007, the Russian scoffed at the proposal as just another U.S. trick to weaken his country, according to two accounts of the meeting.

And in his welcome to the Global Zero meeting in Paris last week, Gerard Errera, the secretary-general of France's foreign ministry, elegantly coupled his country's commendable record of downsizing its nuclear arsenal to a clear intention not to give it up totally for a long time – if ever.

So Obama has much room for maneuver in taking on leadership of the nuclear disarmament movement and perhaps much to gain in fortifying the U.S. position on limiting Iran's nuclear weapons ambitions.

The room for a multilateral solution to the Iranian deadlock may have increased last week with a decision by the European Union to join the funding of a nuclear fuel bank to be administered by the International Atomic Energy Agency.

This idea, which had already attracted funding from the United States, is a promising brainchild of Nunn's Nuclear Threat Initiative, and is also backed financially by billionaire investor Warren Buffett – a man who calculates his dollars as carefully as Obama calculates words.

Timing is everything. Seize the day, Mr. President-elect.

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me@rescam.org

Too Much Information: "Obama: I Probed Myself and I'm Clean" --NewsMax.com

The Timid Ones Remain Under Suspicion: "Obama Says Confident Staff Clear in Ill. Scandal" --Associated Press

'Let Them Eat Cake': "State Asks Powerless to Remain Patient" --WBUR-AM/FM Web site

Everything Seemingly Is Spinning Out of Control: Giant Black Hole Found at Heart of Milky Way" --FoxNews.com ++ "Big Cat Bites Santa During Photo Shoot at NJ Store" --Associated Press

News You Can Use: "Lesson 1: Don't Drive Into Parked Police Car" --San Francisco Chronicle

Bottom Stories of the Day: "Canadian Productivity Continues to Lag" --Canwest News Service ++ "Gore Urges Quick Action on Climate Change" --Associated Press

(Thanks to The Wall Street Journal's James Taranto)

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