Battle Looms in Washington Over Expiring Bush Tax Cuts, © The New York Times, July 24, 2010, by David M. Herszenhorn, excerpt quoted verbatim:

WASHINGTON — An epic fight is brewing over what Congress and President Obama should do about the expiring Bush tax cuts, with such substantial economic and political consequences that it could shape the fall elections and fiscal policy for years to come.

Democratic leaders, including Mr. Obama, say they are intent on letting the tax cuts for the wealthy expire as scheduled at the end of this year. But they have pledged to continue the lower tax rates for individuals earning less than $200,000 and families earning less than $250,000 — what Democrats call the middle class.

Most Republicans want to extend the tax cuts for everyone, and some Democrats agree, saying it would be unwise to raise taxes on anyone while the economy remains weak. If no action is taken, taxes on income, dividends, capital gains and estates would all rise.

The issue has generated little public attention this year as Congress grappled with health care, financial regulation, energy, a Supreme Court nomination and other divisive topics. But it will move to the top of the agenda when lawmakers return to Washington in September from their summer recess, just as the midterm campaign gets under way in earnest. In recent days, intense discussions have begun at the Capitol.

Beyond the implications for family checkbooks, the tax fight will serve as a proxy for the bigger political clashes of the year, including the size of government and the best way of handling the tepid economic recovery.

“It has enormous ramifications for the fall and clearly will be one of the dominant issues,” said Senator Ron Wyden, Democrat of Oregon. “This is code for the role of the federal government, the debate over the size of government and the priorities of the nation.”

At a closed-door meeting of the Senate Finance Committee on Thursday, participants said Democrats were clearly divided while Republicans wanted assurances that any bill would be developed openly, allowing them to propose amendments. In a sign of how combustible the issue could be, Senator Max Baucus, a Montana Democrat and the committee’s chairman, has so far refused to make that commitment.

Both parties are still charting strategy, but some lawmakers, Congressional aides and administration officials said Democrats must try to pass a bill before the election and not wait for a lame-duck session. “You can’t play chicken with this much of the tax system,” said a senior Republican Senate aide, who spoke on the condition of anonymity given the sensitivity of even the timing of the debate.

If no tax legislation is passed, all the major tax reductions passed under President George W. Bush in 2001 and 2003 will expire, with rates reverting overnight on Dec. 31. The top marginal income tax rate, for example, would go back to 39.6 percent from 35 percent now, with corresponding increases in rates for lower income brackets.

Given the partisan gridlock of recent months, there is a chance that the battle could go down to the last minute, or even — in the face of a stalemate — that the tax cuts could be allowed to expire completely, a development that Republicans are already heralding ominously as the largest tax increase in history and that lawmakers in both parties say could be the worst outcome.

From both political and policy perspectives, the tax issue is dizzyingly complex, and even some of Washington’s most grizzled legislative operatives say they cannot predict the outcome.

Some liberals want Mr. Obama to keep his promise to raise taxes on the rich, and the White House’s budget forecasts rely heavily on rolling the top income tax rates back to their pre-2001 levels. Some fiscal hawks warn that extending the tax cuts would add more than $2 trillion to the federal budget deficits at a time when the national debt is becoming an economic concern and a political issue. Political economists are fiercely divided.

So are Democrats. In recent days, fiscal conservatives like Senators Kent Conrad of North Dakota and Evan Bayh of Indiana expressed support for extending the tax cuts at all income levels, at least temporarily.

Senior administration officials said there was no interest in such a plan at the White House, which intends to have Treasury Secretary Timothy F. Geithner lead an effort to make the case that continuing tax breaks for the rich will not help lift the economy, but eliminating them will help reduce the deficit. ….

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Extension of Benefits for the Jobless Clears Senate Hurdle, © The New York Times, July 20, 2010, by Carl Hulse, excerpt quoted verbatim:

WASHINGTON — The Senate broke a stalemate on Tuesday over extending unemployment benefits for Americans who have been out of work for six months or more, voting to override Republican objections that the bill’s costs would add to the federal deficit.

On a vote of 60 to 40, the Democratic-led Senate agreed to cut off debate on the $34 billion plan to distribute added unemployment compensation through November for those who have exhausted their standard 26 weeks of aid.

The 60 yes votes were the minimum required to overcome the threat of a filibuster and advance the bill to a final vote, expected later on Tuesday, when it is all but certain to pass. Two Republicans, Senators Susan Collins and Olympia Snowe of Maine, joined 56 Democrats and two independents in voting for the legislation; 39 Republicans and one Democrat, Senator Ben Nelson of Nebraska, opposed it.

An estimated 2 million Americans have seen their benefits run out over the past two months while the legislation has been stalled in the partisan impasse.

“Finally, finally, finally,” said Senator Barbara Milkuski, Democrat of Maryland. She called the unemployment insurance program a social compact with American workers that means, “when you hit a speed bump and have to be laid off through no fault of your own, there will be a safety net so that you do not fall.”

Republicans said they backed the idea of extending benefits, but were determined to prevent the costs from being piled onto the mounting deficit.

“We believe the federal debt has grown to an alarming level, where it is threatening the future of our children and grandchildren,” said Lamar Alexander of Tennessee, the No. 3 Republican in the Senate.

After the Senate completes its final vote on the measure, the House must still act on it, a vote that is expected to come on Wednesday. President Obama would then quickly sign the bill into law at the White House, freeing the aid.

The Senate action came just minutes after Carte Goodwin was sworn in as the new Democratic senator from West Virginia, replacing the late Robert C. Byrd. While the seat was vacant, Democrats lacked the votes to overcome the Republican filibuster.

At age 36, Mr. Goodwin, a former legal adviser to Governor Joe Manchin III, becomes the youngest member of the Senate, replacing the eldest.

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Obama Reacts Cautiously to Hopeful BP Test Results, &#169 The New York Times, July 16, 2010, by Campbell Robertson and Henry Fountain:

NEW ORLEANS — BP said on Friday the early test results on its recently capped undersea well were heartening and there were no signs of fresh oil leaks, as the stricken well in the Gulf of Mexico held tight overnight and into the morning.

Kent Wells, a senior vice president at BP, told reporters on a conference call that the pressure inside the well had built up steadily, as engineers had hoped it would, and that engineers would continue to perform different analyses and scour video feeds from cameras to look for any underground leaks.

In Washington, President Obama hailed the development but cautioned against concluding that the corner had been turned, noting that it was still possible for there to be complications that “could be even more catastrophic” than the original leak.

Appearing in the Rose Garden before taking off for a long weekend in Maine, Mr. Obama said he and the government were staying on top of the problem and that all decisions would be based on science, “not based on PR, not based on politics.” The final solution, he noted, will be the relief wells expected to be complete next month, and then after that attention still needs to be paid to the cleanup and compensation.

“The new cap is good news,” he said. “Either we will be able to use it to stop the flow or we will be able to use it to capture almost all the oil until the relief well is done.” But he added: “It’s important that we don’t get ahead of ourselves here. One of the problems with having the camera down there is that when the oil stops gushing, everybody feels like we’re done, and we’re not.”

Mr. Obama said he planned to go back down to the region in the next several weeks and stressed again that “BP is going to be paying for the damage that it’s caused.”

Mr. Wells said that BP would take steps to resume the drilling of a relief well, which officials hope will provide a permanent solution to plugging the runaway well, which has belched millions of gallons of crude oil into the Gulf of Mexico since a fatal explosion and fire sank a drilling rig in April.

The oil stopped flowing from the well around 2:25 p.m. Thursday when the last of several valves was closed on a cap that the company installed at the top of the well last week, Mr. Wells said. Earlier in the week, Mr. Wells said that the longer the test continued, the better, because it would indicate that the pressure inside the well was holding and that the well bore was intact. On Friday morning, the live video feeds from nearly a mile undersea showed no burbling geyser of oil and gas — only cloudy blue waters and white specks floating across the screen.

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Yves Smith’s Op-Ed On Myopic Corporate Greed In Today’s NYT, Daily Kos, July 6, 2010, by Bob Swern, used with permission, quoted verbatim:

Naked Capitalism Publisher Yves Smith and financial adviser and investment newsletter publisher Rob Parenteau have co-authored an op-ed in today’s NY Times (links, below). This morning, over at her Naked Capitalism blog, Yves provides us with the backstory, along with their unedited copy: “Our New York Times Op Ed on the Corporate Savings Glut.”What it boils down to, IMHO, is when corporations are stripmining their near-record profits, as opposed to reinvesting them in times of economic downturns, the results for society are devastating.

Combine this reality with a legislative branch in complete corporatocratic rapture (i.e.: regulatory capture, deep capture), and you have the recipe for where we are with our economy, today.

I  would also posit–and I will, as I have in the past, in a follow-up diary–that the so-called financial regulatory “reform” legislation currently being “shaped” in Congress, as we blog, is not “incrementalism” at all, but (by default, due to the urgency of the situation on Main Street) virtually total capitulation to the corporate mindset described herein, too. (As I’ve stated it in comments in recent diaries that blindly support the “incremental approach” to change, in general: The “incremental” approach to change is inherently flawed due to the fact that it erroneously assumes that we have TIME to implement change, incrementally.) As Paul Volcker recently stated (whose “Volcker Rule” Yves tells us in another diary today, “Banks Already Moving To Evade Volcker Rule,” has been totally thrown under the bus), The Time We Have Is Growing Short.” (Looked at another way, do Democrats really think they’re going to be more successful at implementing their agenda with smaller majorities–at best–in the House and Senate after the mid-term elections?)As eye-opening sidebars to this, I would strongly recommend Eliot Spitzer’s piece from a few days ago at Slate.com, “How Washington blew its chance to bring real change to Wall Street;” and, Ambrose Evans-Pritchard’s column from the London Telegraph on Sunday evening, “With the US trapped in depression, this really is starting to feel like 1932.”

Meanwhile, in today’s NY Times, Yves and Rob Parenteau summarize the matter in their closing two paragraphs:

…The entrepreneurial pursuit of profitable growth has been the vital engine of prosperity since the Industrial Revolution. Yet incentives for both managers and investors now favor myopia and speculation, undermining the very operation of capitalism. We need tax and regulatory policies to counter this destructive development, along with wider recognition that government deficits are necessary and salutary if the corporate sector is under-investing to boost its short-term profits and households are prudently refusing to increase borrowing to accommodate it. When both households and businesses attempt to net save, the adoption of Austerian School (of) fiscal policies in highly leveraged economies, is well nigh certain to bring back our grandparents’ experience of debt deflation and economic depression. We must stop and seriously ask ourselves, in whose interest might these Austerian policies be? None dare call it malpractice, malfeasance, or even outright madness.

Here’s the whole piece…

(Diarist has received written authorization to reprint Naked Capitalism Publisher Yves Smith’s posts in their entirety.)

#            #            #

Our New York Times Op Ed on the Corporate Savings Glut
Yves Smith and Rob Parenteau
New York Times Op-Ed
Tuesday, July 6, 2010

Rob Parenteau and I have an op-ed at the New York Times today. Rob’s last post here argued energetically that the now-established trend of the corporate sector to save, as opposed to invest in growth, in advanced economies, and even most emerging economies, was tantamount to capitalists abandoning their traditional role. It reminded me of an article I had written in 2005, “The Incredible Shrinking Corporation,” for the Conference Board’s magazine Across the Board, on how companies were trying to starve themselves into attractive- looking performance though the then-unprecedented act of saving in a time of economic expansion, which is tantamount to disinvestment. Rob’s post made further key points about the macroeconomic implications of corporate savings (given the norm of households savings as well) and made some policy recommendations.

I wish the headline were different (“Are Profits Hurting Capitalism?“), since the article is clearly about the corporate savings glut.

Rob and I thought readers would be interested in the how the draft we submitted compared with the edited version. The draft was titled “It’s the Corporate Savings Glut, Stupid! The Hysteria of Marching to Austeria”:

A series of disappointing data releases in recent weeks, including flagging consumer confidence and meager private sector job growth, is leading more and more experts to worry that the recession in the US and abroad is coming back. At the same time, many policymakers, particularly in the Eurozone, are slashing government budgets, which they contend will lower debt levels, and thereby restore investor confidence, reduce interest rates, and promote growth.Yet many miss the fact that fiscal deficits are a nearly inevitable result of actions by corporations and households. Failure to understand these dynamics and address root causes is sure to make a bad situation worse.

Unbeknownst to most commentators, corporations in the US and many advanced economies have been underinvesting for some time.

The normal state of affairs is for households to save for large purchases, retirement and emergencies, and for businesses to tap those savings via borrowings or equity investments to help fund the expansion of their businesses.

But many economies have abandoned that pattern. For instance, IMF and World Bank studies found a reduced reinvestment rate of profits in many Asian nations following the 1998 crisis. Similarly, a 2005 JPMorgan report noted with concern that since 2002, US corporations on average ran a net financial surplus of 1.7 percent of GDP, which contrasted with an average deficit of 1.2 percent of GDP for the preceding forty years. Companies as a whole historically ran fiscal surpluses, meaning in aggregate they saved rather than expanded, in economic downturns, not expansion phases.

The big culprit in America is that public companies are obsessed with quarterly earnings. Investing in future growth often reduces profits short term. The enterprise has to spend money, say on additional staff or extra marketing, before any new revenues come in the door. And for bolder initiatives like developing new products, the up front costs can be considerable (marketing research, product design, prototype development, legal expenses associated with patents, lining up contractors). Thus a fall in business investment short circuits a major driver of growth in capitalist economies.

Companies, while claiming they maximize shareholder value, increasingly prefer to pay their executives exorbitant bonuses, or issue special dividends to shareholders, or engage in financial speculation. They turn their backs on the traditional role of a capitalist – to find and exploit profitable opportunities to expand his activities

Some may argue that lower investment rates are the result of poor prospects, but the data does not support that view. Corporate profits have risen as a share of GDP since the early 1980s, reaching unprecedented levels right before the global financial crisis took hold. Even now, US profit margins are nearly two thirds of the way back to their prior cyclical high, despite a subpar recovery.

What happens when corporations on balance are saving, and households in aggregate try to save too? Families and individuals typically tighten their belts and bolster their bank accounts in bad times; the tendency is even more acute now, since many are trying to pay down borrowings, which is a form of saving,

If households and corporations are both saving, it must be balanced by the other two sectors of the economy, the government sector and the import/expert secto(r). In other words, the foreign and government sectors must spend more cash than they are taking in. In lay terms, that means running a trade surplus and having the government incur budget deficits.

Therefore, when both domestic households and the corporate sector are saving at the same time, then you need to have a VERY large trade surplus, a very large government deficit, or some combination of the two. There is no other way to square this circle – anyone who tries to tell you otherwise does not understand double entry book keeping, which the West has used for at least the last five centuries with some success.

And what if a government embarks on an austerity program in the face of private sector efforts to deleverage? Income growth will stall, and if the austerity program is large or sustained long enough, falling household wages and business profits can result.

That result might not sound bad, since lower wages and prices would make US goods more competitive abroad. But in economies suffering from a debt hangover, as incomes fall, it becomes even harder to make payments on outstanding loans. Defaults and bankruptcies cascade through the financial system, leading to even more reluctance to borrow and lend. In other words, the result of Austerian fiscal policies, is deflation – falling wages and prices – which can easily snowball into a depression.

So rather than marching toward Austeria by pursuing what are being presented as “sustainable” or “sound” spending policies requiring immediate budget retrenchment – and such assertions can only be made by those willfully blind to the interdependence of cash flows at the macro level – we need to kill two birds with one stone. Rather than blindly marching to Austeria, we need to set fiscal policy to the task of incentivizing the reinvestment of corporate profits in business operations rather than games at the casino.

Possible measures to achieve these aims include:

1) an aggressive tax on retained earnings that are not reinvested with a 24 month period after they have been booked (this provision needs to be designed carefully to defeat efforts to circumvent it through artful accounting);

2) a financial asset turnover tax that raises the cost to management (and others) of speculating rather than reinvesting profits in productive capital investment;

3) a reinvigorated public or public/private investment program that helps speed up the shift to new energy technologies (as scaling up usually induces a drop in unit costs of production).

The entrepreneurial pursuit of profitable growth has been the vital engine of prosperity since the Industrial Revolution. Yet incentives for both managers and investors now favor myopia and speculation, undermining the very operation of capitalism. We need tax and regulatory policies to counter this destructive development, along with wider recognition that government deficits are necessary and salutary if the corporate sector is under-investing to boost its short-term profits and households are prudently refusing to increase borrowing to accommodate it.

When both households and businesses attempt to net save, the adoption of Austerian School fiscal policies in highly leveraged economies, is well nigh certain to bring back our grandparents’ experience of debt deflation and economic depression. We must stop and seriously ask ourselves, in whose interest might these Austerian policies be? None dare call it malpractice, malfeasance, or even outright madness.

The NYT op ed is here. Enjoy!

See Is Bernanke’s “Plan B” Another $2+ Trillion For Wall St.?, Evans Liberal Politics, June 25, 2010, by Bob Swern.

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Mexican Democracy, Even Under Siege, © The New York Times, July 5, 2010, by Marc Lacey, excerpt quoted verbatim:

MEXICO CITY — Campaign offices had been bombed, candidates threatened and killed, and dead bodies were even hung from bridges on the morning of the polling. But Mexico’s voters still turned out in relatively large numbers to choose new governors, mayors and state representatives over the weekend and managed to send an inspiring message amid all the violence: Mexico’s democracy, flawed as it may be, endures.

One of the nation’s most powerful factions — the country’s drug lords — had attempted to hijack the process. Through bloodshed, they managed to keep voter turnout down in some

states and scare off many poll workers, prompting one former president of the Federal Election Institute, Luis Carlos Ugalde, to lament that this was the first Mexican election in which drug dealers played a visible role in interrupting the process.But the polling went on and the results were accepted, with voters appearing to steer away from candidates with perceived links to traffickers. In the border state of Tamaulipas, the populace seemed particularly intent on declaring that drug lords should not decide elections, voting in the brother of a candidate who was murdered less than a week before Election Day by a wide margin.

Political analysts had predicted a huge win for the opposition Institutional Revolutionary Party, known as the P.R.I., which ruled Mexico for 71 years before voters broke its grip on the country’s politics a decade ago. And the P.R.I. did take nine of the 12 governorships that were up for grabs on Sunday, including in Tamaulipas.

But the clearest message that voters seemed to send was that no one party rules Mexico anymore, and that entrenched party machines no long have a lock on power. Voters were clearly fed up with the violence Mexico has experienced, interviews showed, and the fact that they turned out at all in some particularly dangerous areas was noteworthy.

Election Day in Mexico

Nudge on Arms Further Divides U.S. and Israel, &#169 The New York Times, July 3, 2010, by Mark Landler, photo &#169 N.Y. TImes/Oded Balilty, excerpt quoted verbatim:

WASHINGTON — It was only one paragraph buried deep in the most plain-vanilla kind of diplomatic document, 40 pages of dry language committing 189 nations to a world free of nuclear weapons. But it has become the latest source of friction between Israel and the United States in a relationship that has lurched from crisis to crisis over the last few months.

At a meeting to review the Nuclear Nonproliferation Treaty in May, the United States yielded to demands by Arab nations that the final document urge Israel to sign the treaty — a way of spotlighting its historically undeclared nuclear weapons.

Israel believed it had assurances from the Obama administration that it would reject efforts to include such a reference, an Israeli official said, and it saw this as another sign of unreliability by its most important ally. In a recent visit to Washington, Israel’s defense minister, Ehud Barak, raised the issue in meetings with senior American officials.

With Prime Minister Benjamin Netanyahu scheduled to meet President Obama on Tuesday at the White House, the flap may introduce a discordant note into a meeting that both sides are eager to portray as a chance for Israel and the United States to turn the page after a rocky period.

Other things have changed notably for the better in American-Israeli relations since Mr. Netanyahu called off his last visit to the White House to rush home to deal with the crisis after Israel’s deadly attack on a humanitarian aid flotilla sailing to Gaza in late May. His agreement to ease the land blockade on Gaza, which came at the request of the United States, has helped thaw the chill between the governments, American and Israeli officials said.

Meanwhile, the raft of new sanctions against Iran over its nuclear program, after the passage of the United Nations resolution, has reassured Israelis, who viewed Mr. Obama’s attempts to engage Iran with unease. Mr. Obama signed the American sanctions into law on Thursday.

“The overall tone is more of a feel-good visit than we’ve seen in the past,” said David Makovsky, director of the Project on the Middle East Peace Process at the Washington Institute for Near East Policy. “It has been more focused on making sure that the Ides of March have passed.”

He was referring to the dispute during a visit to Israel by Vice President Joseph R. Biden Jr. in March, when Israel approved plans for Jewish housing in East Jerusalem. Mr. Obama was enraged by what he perceived as a slight to Mr. Biden, and when Mr. Netanyahu visited a few weeks later, the While House showed its displeasure by banning cameras from recording the visit.

But despite the better atmospherics, some analysts said the nuclear nonproliferation issue symbolizes why Israel remains insecure about the intentions of the Obama administration. In addition to singling out Israel, the document, which has captured relatively little public attention, calls for a regional conference in 2012 to lay the groundwork for a nuclear-free zone in the Middle East. Israel, whose nuclear arsenal is one of the world’s worst-kept secrets, would be on the hot seat at such a meeting.

At the last review conference, in 2005, the Bush administration refused to go along with any references to Israel, one of several reasons the meeting ended in acrimony, without any statement.

This time, Israel believed the Obama administration would again take up its cause. As a non-signatory to the treaty, Israel did not attend the meeting. But American officials consulted the Israelis on a text in advance, which they found acceptable, a person familiar with those discussions said. That deepened their surprise at the end.

Administration officials said the United States negotiated for months with Egypt, on behalf of the Arab states, to leave out the reference to Israel. While the United States supports the goal of a nuclear-free Middle East, it stipulated that any conference would be only a discussion, not the beginning of a negotiation to compel Israel to sign on to the treaty.

The United States practices a policy of ambiguity with respect to Israel’s nuclear stockpile, neither publicly discussing it nor forcing the Israeli government to acknowledge its existence.

The United States, recognizing that the document would upset the Israelis, sought to distance itself even as it signed it.

In a statement released after the conference ended, the national security adviser, Gen. James L. Jones, said, “The United States deplores the decision to single out Israel in the Middle East section of the NPT document.” He said it was “equally deplorable” that the document did not single out Iran for its nuclear ambitions. Any conference on a nuclear-free Middle East, General Jones said, could only come after Israel and its neighbors had made peace.

The United States, American officials said, faced a hard choice: refusing to compromise with the Arab states on Israel would have sunk the entire review conference. Given the emphasis Mr. Obama has placed on nonproliferation, the United States could not accept such an outcome.

It also would complicate the administration’s attempts to build bridges to the Arab world, an effort that is at the heart of some of the disagreements between the United States and Israel.

Mr. Netanyahu and Mr. Obama will have plenty of other things to discuss this week. After several rounds of indirect talks, brokered by the administration’s special envoy, George J. Mitchell, the United States is pushing the Israelis and the Palestinians to begin direct negotiations.

Read the full article, here.

See Despite Raid, Mostly Business as Usual for Israel and Turkey, The New York Times, July 2, 2010, by Dina Kraft.

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Kagan Reminds Senators: Legislation Is Your Job, The New York Times, July 1, 2010, by Adam Liptak, photo of Elena Kagan from Wikipedia, excerpt quoted verbatim:

WASHINGTON — Supreme Court confirmation hearings are usually designed to probe a nominee’s conception of the role of the justices. But this week’s questioning of Elena Kagan turned into a tutorial on Congressional responsibility.

Over and over, Ms. Kagan reminded the senators questioning her of their own duty to pass cogent, sensible — and constitutional — laws. The Supreme Court, she said, was not created to strike down foolish measures.

On Tuesday, for instance, Senator Tom Coburn, Republican of Oklahoma, asked what should happen if Congress enacted a law requiring Americans “to eat three vegetables and three fruits every day.”

“It sounds like a dumb law,” Ms. Kagan said. But she would not commit to striking it down. “I think that courts would be wrong to strike down laws that they think are senseless, just because they’re senseless,” she said.

Ms. Kagan repeatedly said she would show “great deference to Congress.” Perhaps surprisingly, that was not what many senators seemed to want to hear. They appeared to want the Supreme Court to save them from themselves.

Richard H. Pildes, a law professor at New York University, said Ms. Kagan’s attitude toward Congress amounted to tough love. “Elena is a hard-minded person,” he said. “She’s lucid and clear and demanding of herself and demanding of others.”

“The deference to Congress that she’s talking about,” Professor Pildes added, “brings with it a real sense of the responsibilities of Congress as well.”

Asked on Wednesday by Senator Orrin G. Hatch, Republican of Utah, why, in her role as solicitor general, she had made an aggressive argument in defending a federal statute outlawing the sale of dogfighting videos, Ms. Kagan said poor legislative craftsmanship had left her little choice.

“I hesitate to criticize Congress’s work,” she said, “but it was a statute that was not drafted with the kind of precision that made it easy to defend from a First Amendment challenge.”

Ms. Kagan aligned herself with Justice Oliver Wendell Holmes Jr., who held his nose in the early years of the last century while voting to uphold statutes he thought were foolish.

Justice Holmes, Ms. Kagan said, “hated a lot of the legislation that was being enacted during those years, but insisted that if the people wanted it, it was their right to go hang themselves.”

In his memorable dissent in Lochner v. New York, a 1905 decision that struck down a New York work-hours law, Justice Holmes wrote that the Supreme Court should work hard to stay out of the way where economic legislation is concerned.

“A constitution is not intended to embody a particular economic theory,” he wrote. “It is made for people of fundamentally differing views, and the accident of our finding certain opinions natural and familiar, or novel, and even shocking, ought not to conclude our judgment upon the question whether statutes embodying them conflict with the Constitution of the United States.”

That is essentially the answer Ms. Kagan gave, in a kind of confirmation jujitsu, to questions from senators of both parties eager to see their views made into law by the courts rather than Congress.

Senator Amy Klobuchar, Democrat of Minnesota, asked about opportunities for female lawyers. Ms. Kagan agreed that society had far to go. “But this isn’t the court’s role,” she said. “This really is Congress’s role.”

What about the disparity between sentences imposed for trafficking in crack and powder cocaine, one that tends to produce racially skewed punishment? asked Senator Richard J. Durbin, Democrat of Illinois.

“It is a policy issue, quintessentially,” Ms. Kagan responded. “There’s nothing that the Supreme Court or that any court can do about it. It’s really one that Congress has to decide.”

Like judges, members of Congress also swear to uphold the Constitution, Ms. Kagan said, and they should not look to the courts to save them from their folly.

“They ought to be the policymakers for the nation,” Ms. Kagan said of legislators and other elected officials. “The courts have an important role to play, but it’s a limited role. It’s essentially sort of policing the boundaries and making sure that Congress doesn’t overstep its role, doesn’t violate individual rights or interfere with other parts of the governmental system.” ….

Read the full article here.

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Republicans Block An Extension
of Jobless Benefits Again

Democrats See Signs of Hope in Job Trends, The New York Times, June 24, 2010, by Michael Luo, excerpt quoted verbatim:

A struggling economy has historically meant trouble for the president’s party in midterm elections. So it comes as no surprise that Democrats are girding for a tough November.

They should be. The economy is slowly recovering but remains on its sickbed, and most signs still point to a rough cycle for the party. Political analysts expect Republicans to make gains — possibly significant ones — in Congress in November, threatening to retake the House and maybe even the Senate.

But digging deeper, beyond the national numbers, reveals at least a few glimmers of hope for Democrats — still fairly distant and faint, but bright enough to get campaign strategists scanning the horizon and weighing the odds.

That is because different parts of the country are recovering at different rates — and, in a bit of electoral good luck for the Democrats, some of the areas that are beginning to edge upward more quickly, like parts of Ohio, Pennsylvania and New York, happen to be in important battlegrounds for the House and the Senate.

“A lot of the trend lines are turning positive in many of these contested areas,” said Mark Zandi, a chief economist for Moody’s Analytics. “It really boils down to: Is there enough time for the trend lines to trump the still pretty difficult conditions in the minds of the voters?”

Certainly, the economy will not be the only factor voters weigh at the ballot box. There are areas that weathered the recession relatively well where Democratic incumbents are still in danger. There are also places trailing the national recovery, like Nevada and Florida, which could hurt the party.

But officials from both parties agree that the economy remains — at least, for the moment — the paramount concern for most voters. And studies have shown that local conditions influence the degree to which economic worries figure into voters’ decisions — a kind of Tip O’Neill rule of pocketbook voting.

A detailed examination of House and Senate seats in play, alongside state and local economic data compiled by Moody’s Analytics for The New York Times, yields some surprising bits of encouragement for Democrats but also adds color to the overall daunting picture confronting the party. At the very least, any such signs of hope are certain to affect the strategies being worked out now in campaigns.

Read the full article here.

Commentary by Evans Liberal Politics owner Paul Evans: I don’t quite agree with Democratic strategists’ hopes about local data helping this fall. When you turn on the world news, or even the local news, what gets quoted are the national figures. I haven’t heard that many local news anchors saying “the Ohio figures, on the other hand, show some signs of improvement.” Locally, here in Wooster, the jobs/hiring outlook, after brightening for a while, seems to have more or less frozen. I want to see, and I think America’s voters need to see, some real, genuine improvements in the national jobs numbers.

I think Democrats are blowing smoke in trying to rely on some kind of local or regional signs of brightening in the jobs outlook. Right now, for people making less than $20,000 a year, the official unemployment rate stands at 31 percent. That’s outrageous, and I don’t think Democrats can count on much relief this fall if I examine what my gut tells me is going on in local people’s minds. People used to talk about the economy with me. Now people have clammed up and seem to have just hunkered down.

It’s not pretty out there. I think Democrats can expect the vote to go accordingly, barring some kind of unforeseen improvement in the national job figures, which nobody is counting on. Moreover, I think Americans want to see some kind of real containment and cleanup success in the BP oil disaster. That has been very discouraging to me, and I would bet it is very discouraging to the vast majority of Americans. The one bright sign here is that we did do the right thing and force BP to establish the $20 billion escrow fund. I don’t know about everybody, but that made me happy for at least one day.

If Democrats want to hold onto the House, I suggest they clean up Wall Street and make some real improvements to the economy and the job figures…. or we will not have the votes to do that in the near future (after the election).

See “I am not a parasite” – funniest GOP fail of the day., Daily Kos, June 24, 2010, by SantaFeMarie, excerpt quoted verbatim:

Think Progress scores again:

Farmer who put up sign claiming Democrats are ‘party of parasites’ has taken $1 million in farm subsidies.

A Missouri farmer has parked one of those ugly semi-trailer signs on his land, facing a highway, proclaiming “Are you a Producer or Parasite Democrats – Party of the Parasites”.

See The Republican Strategy on Financial Reform: Make Democrats Look Like Patsies for the Street, Robert Reich on Evans Liberal Politics, April 13, 2010, by Robert Reich.

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U.S. Discovers Vast Riches of Minerals in Afghanistan &#169 The New York Times, June 13, 2010, by James Risen, photo &#169 MikeBonnell.com, excerpt quoted verbatim:

WASHINGTON — The United States has discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, far beyond any previously known reserves and enough to fundamentally alter the Afghan economy and perhaps the Afghan war itself, according to senior American government officials.

The previously unknown deposits — including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium — are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world, the United States officials believe.

An internal Pentagon memo, for example, states that Afghanistan could become the “Saudi Arabia of lithium,” a key raw material in the manufacture of batteries for laptops and Blackberries.

The vast scale of Afghanistan’s mineral wealth was discovered by a small team of Pentagon officials and American geologists. The Afghan government and President Hamid Karzai were recently briefed, American officials said.

While it could take many years to develop a mining industry, the potential is so great that officials and executives in the industry believe it could attract heavy investment even before mines are profitable, providing the possibility of jobs that could distract from generations of war.

“There is stunning potential here,” Gen. David H. Petraeus, commander of the United States Central Command, said in an interview on Saturday. “There are a lot of ifs, of course, but I think potentially it is hugely significant.”

The value of the newly discovered mineral deposits dwarfs the size of Afghanistan’s existing war-bedraggled economy, which is based largely on opium production and narcotics trafficking as well as aid from the United States and other industrialized countries. Afghanistan’s gross domestic product is only about $12 billion.

“This will become the backbone of the Afghan economy,” said Jalil Jumriany, an adviser to the Afghan minister of mines.

American and Afghan officials agreed to discuss the mineral discoveries at a difficult moment in the war in Afghanistan. The American-led offensive in Marja in southern Afghanistan has achieved only limited gains. Meanwhile, charges of corruption and favoritism continue to plague the Karzai government, and Mr. Karzai seems increasingly embittered toward the White House.

So the Obama administration is hungry for some positive news to come out of Afghanistan. Yet the American officials also recognize that the mineral discoveries will almost certainly have a double-edged impact.

Instead of bringing peace, the newfound mineral wealth could lead the Taliban to battle even more fiercely to regain control of the country.

The corruption that is already rampant in the Karzai government could also be amplified by the new wealth, particularly if a handful of well-connected oligarchs, some with personal ties to the president, gain control of the resources. Just last year, Afghanistan’s minister of mines was accused by American officials of accepting a $30 million bribe to award China the rights to develop its copper mine. The minister has since been replaced.

Endless fights could erupt between the central government in Kabul and provincial and tribal leaders in mineral-rich districts. Afghanistan has a national mining law, written with the help of advisers from the World Bank, but it has never faced a serious challenge.

Read the full article, here.

ALSO in World News Today:

75,000 Uzbeks flee ethnic riots in Kyrgyzstan, Chicago Sun-Times, June 13, 2010, by Associated Press, excerpt quoted verbatim:

BISHKEK, Kyrgyzstan (AP) — Kyrgyz mobs burned Uzbek villages and slaughtered their residents Sunday in the worst ethnic rioting this Central Asian nation has seen in 20 years, sending more than 75,000 Uzbeks fleeing across the border into Uzbekistan.

Most of the Uzbek refugees were elderly people, women and children, and many had gunshot wounds, the Uzbek Emergencies Ministry said in a statement carried by Russia’s RIA Novosti news agency. It said refugee camps were being set up for them in several areas of Uzbekistan.

Fires set by rioters have destroyed most of Osh, the second-largest city in Kyrgyzstan, and food was scarce after widespread looting. Triumphant crowds of Kyrgyz men took control of Osh on Sunday as the few Uzbeks still left in the city of 250,000 barricaded themselves in their neighborhoods. Fires continued to rage across Osh and shots were heard but police were nowhere to be seen.

The rioting has significant political overtones. Former President Kurmanbek Bakiyev was ousted in a bloody uprising in April and fled the country. Uzbeks have backed Kyrgyzstan’s interim government, while many Kyrgyz in the south support the toppled president.

Interim President Roza Otunbayeva blamed Bakiyev’s family for instigating the unrest, saying it aimed to derail a June 27 constitutional referendum and new elections scheduled for October. A local official in the south said Bakiyev supporters had attacked both Kyrgyz and Uzbeks to ignite the rioting.

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