TILL DEBT DO US PART

With about 6 weeks remaining before the ability of the U.S. Treasury Department to prevent U.S. national debt from exceeding the debt limit is exhausted, the prospect of a simple resolution to the problem - increasing the debt ceiling - dims with each passing day. The Republican Party insists on significant budget reductions as the price for increasing the debt limit. The Democratic Party has tried to separate the two issues by dividing the debt problem into short-term versus long-term problems. Conflation of the two types of debt problems aids the Republican Party's attack on Medicare and Medicaid, while the position of the Democratic Party suggests that it has no real plan to attack the increasing debt level. What is lost in the discussion is an historical perspective, one dating back to the late 1940s at least. Which party can be trusted to actually do something about the national debt?

Unsurprisingly, to this blogger, at least, the Democratic Party historically has reduced the public debt as a percentage of GDP when it has occupied the White House. The Republican Party - since the Reagan era - has added to the debt by leaps and bounds and has pushed the debt ever higher as a percentage of GDP. While it is true that initiatives such as FDR's and Obama's to reverse a sinking economy added to the budget defict, the gamble (and hope) was that increased economic activity would stimulate the economy and enhance government revenues so that in the long-run economic stimulus would not contribute to a permanent increase in the national debt. FDR's initiatives might well have succeeded had not the mini-recession of 1937, brought on when concern over the national debt caused FDR to reign in budget deficits caused the economy to stall. World War II rescued the economy as the America was mobilized to fight a two front war. While the 2 1/2 wars waged by Obama might seem comparable, these wars of choice have been so compartmentalized that their stimulative impact has been marginal.

Like the fate of the economy after FDR's retrenchment in the face of deficit (1937), the economy appears to be sputtering. The stimulus of 2009 and 2010 is now a spent force. Though many economists prefer a new round of stimulus, it is extremely improbable that such fiscally based stimuli would have any chance in the Republican controlled House of Representatives where any fiscal stimulus legislation would have to originate. At best, we might hope for tax incentives of the sort that saw the continuation of Bush era tax cuts, principally for the benefit of the wealthy, coupled with payroll tax rebates designed to put more money into wage-earner hands, money that has the advantage of being spent immediately as opposed to being socked away in savings accounts.

As a stimulus, the tax deal struck during December 2010 is probably a non-factor. The continuing lack of demand from a stagnant and in some areas still declining housing sector has been a big drag on the economy. The debt overhang for many wage-earners more than nullifies the stimulative effect of a few more dollars in net wages as families seek to reduce personal debt. The temporary increase in food and energy costs has further diminished the stimulative impact of a few dollars more.

Worse: the tax deal aggravates both the short-term and long-term deficit problems. In the short-run, it reduces government revenues. As a percentage of GDP, government revenue has been reduced to that of the Eisenhower era, an era pre-dating Great Society social spending. In the long-run, if the Bush era tax cuts are continued, the job impacts will remain negligible and the drag on government revenue palpable. In addition, by taking money from Social Security (to finance the payroll cut) the long-term deficit of Social Security is marginally affected.

In the meantime, QEII is ending. This monetary stimulus probably helped prop up the mortgage market by keeping mortgage interest rates lower than they otherwise might have been. And, it did stimulate American exports by causing the value of the dollar to fall (and aggravating trading partners). Fed Chairman Ben Bernanke has dismissed the prospects of further monetary stimulus by the Fed as highly unlikely.

While one might view the debt debate in the US as a highly partisan affair that amounts to nothing more than a tempest in a teapot, it is disturbing that this rancorous debate coincides with the on-going attempt to renegotiate Greek debt in order to prevent a sovereign debt default in the Eurozone. Failure to reach an increase in the US debt limit might technically lead to a default here, but is unlikely to. The US Treasury might well maintain the good faith reputation of US government debt by continuing to pay interest to Treasury bondholders. It could delay payments to vendors doing business with the US government and delay payments to Social Security recipients and to doctors and hospitals in order to avert an across the board default. Still, a Greek default and the likelihood of increased debt difficulties for the remaining PIIGS within the European Union would add stress to international finance that could well impact the United States. At the very least, it could lead to a rush of investors into US Treasury bonds and thus maintain the near zero coupon rates that Treasury has been able to maintain since 2009. This would help banks, already larger than when they were too big to fail, to muddle through despite the presence of toxic assets still on their balance sheets and the decline of bank stocks in general. On the other hand, it could lead private investors to hoard money and demand higher interest rates from many debtor nations, including the US, and thus aggravate the short-term debt burden by increasing interest payments on the debt.

What is to be done? The obvious need is to increase the debt limit in the United States as soon as possible. Some have argued that this should be increased to accomodate the desired, but at the moment politically impossible, Ryan tax cuts to the wealthy. The sooner the debt ceiling is raised, the better. But, Tea Party nonsense, the conflation of short and long-term debt by Republicans motivated by a desire to dismantle Medicare and Medicaid, and the craven inability of the Obama Administration to dig in its heels and speak truth to propaganda do not augur well for immediate resolution of the debt ceiling issue.

One scenario that might play out is the following: a Greek government increasingly rocked by widespread protests against austerity cannot push through a second round of austerity legislation. The EU balks at renegotiating Greek debt, but cannot swallow the damage to French and German banks if Greece were to default. The inability of the EU to act decisively increases the pressure on the remaining PIIGS as interest rates rise with respect to the rollover of short-term government bonds. The United States treasury is negatively impacted as well as it is forced to pay higher interest on short-term government roll-over bonds. Shorting European and American bank stocks may well ensue in order to shake out weak and weakened financial institutions. Combine this with shorts on credit default swaps and we could find ourselves back to square one. But, would a Republican House of Representatives, reluctant to pass an increase in the debt ceiling, have the courage to bail out the banks again?

What can be done? Not much if you don't have much at stake. Too many Americans have no skin in the game because they are excluded from credit markets. To the extent that Americans used their home equity as an ATM to pay down credit card debt or finance extravagant spending, such people have no stake in finance today because the ATM is out of service. Others are so far underwater in their mortgages that there really is no need to worry about further decreases in equity. True, some homeowners might fear a new wave of foreclosures as banks push foreclosures harder to meet their own capital demands. Yet, the foreclosure is fraught with delay in large measure due to the lax paperwork procedures tolerated and encouraged during the mortgage securitization boom of the early 00s. Unemploymnent might be a worry, but many large companies have enough cash on hand to weather another international financial crisis. Thus, a new round of massive layoffs probably will not ensue immediately, if at all.

What is needed is a revolt against Reagan era policies that have led to a widening gap between the rich and superrich classes as against an embattled middle class. Until we put an end to financial machinations that have seen the growth of ever more complex financial instruments that serve no apparent social utility other than to stick some unsuspecting investor or class of investors with the financial downside of casino style gambling. A new round of bank bailouts ought to lead to bank nationalizations and the breakup of mega-banks and the elimination of compensation systems that reward incompetence and feed otherwordly expectations for bonuses.

AFGHANISTAN OR BUST

In recent days, the problem of Afghanistan has arisen anew. Amidst widespread allegations and the actual disqualification of ballots from over 400 precints, the democratic deficit of the Karzai government has been brought to the fore. The American generals responsible for planning and execution of the NATO force in Afghanistan have also questioned whether there are adequate troops to carry out the war against the Taliban. With the Obama administration seemingly committed to a continuation of moderate increases in troops in the field in parallel to the development of a peace corps for Afghanistan to dispense American knowhow and expertise to needy Afghanis, critics have weighed in with questions regarding the prospects for success and the need for clear benchmarks towards assessing progress in Afghanistan.

In the face of these questions, Professor Andrew J. Bacevich, in an op ed piece appearing in the September 7, 2009 issue of the Los Angeles Times, calls upon President Obama to make the case for engagement in Afghanistan by reassuring the American public on five key points.

In Professor Bacevich's view, Obama needs to insist that "Afghanistan constitutes a vital national security interest" such that success here would "contribute materially to driving a stake through the heart of violent jihadism". Second, Obama needs to persuade us that "armed nation building ... provides the provides the most realistic and effective way to satisfy those interests". Third, Obama needs to assure us that past is not prologue. By that, Professor Bacevich, means that "the failure of past efforts by other great powers to impose their will on Afghanistan is beside the point". Perhaps most of important of all, President Obama needs to let a skeptical American public know that "the United States possesses the money, troops, expertise and will to get the job done". Finally, Obama needs to state with absolute clarity that "no other priorities, foreign or domestic, exist that outrank Afghanistan and should have first call on the resources that additional war will consume".

That's a tall order for any president to achieve, especially after the misrepresentations, distortions and outright fabrications that accompanied the Bush boondoogle in Iraq. Worse: what support could be brought to bear in support of such assertions. Specifically, what is the truth content of each of the assertions that Professor Bacevich claims are needed to stay the present course in Afghanistan or even deepen it with respect to the military side of the equation.

Does Afghanistan constitute a vital national security interest? Hardly. An argument can be made that what is most in the interests of the United States is the denial of territory to non-governmental armed groups that would be used as a staging ground for future attacks in Europe and the United States. Afghanistan under the Taliban was just such a threat. The Taliban ceded control of substantial parts of its territory to al-Quaede and allowed that territory to be used as a training grounds for the terrorists who attacked targets in Africa, the Middle East, Europe and the United States.

Today's Afghanistan clearly does not pose such a threat. However, the presence of an ongoing insurgency by the Taliban from protected bases in Pakistan's Northwest Territories and the inability of the Karzai government in Kabul to maintain the control it once exercised in territories liberated after 2001 from the direct control of the Taliban suggest that Afghanistan is again in play. Would a victory by the Taliban - at least to the extent that the Taliban regain control of Kabul and the formal tools of government - in the immediate future imply that once again al-Quaeda would gain safe haven in Afghanistan? Not necessarily.

Certainly, the ability of the Taliban to control western Afghanistan, as well as the previously uncontrollable Tajik northwest, is open to question. That it could once again - through intimidation, ideology or control of poppy distribution - gain control of largely Pashtun Afghanistan is probably well within their reach. Certainly, the corrupt Karzai government is no match to the Taliban. Nor apparently is an undersized NATO military that cannot seize and hold Pashtun provinces in play.

Still, there is no reason to assume that a Taliban in control of most of Afghanistan would once again allow al-Quaeda unfettered access to Afghani territory. And, there's no reason to suppose that American drones and bombers would allow training camps to once again flourish without challenge.

If vital American national intest is defined as the denial of safe havens to non-governmental actors such as al-Quaeda, then American self-interest is not limited to Afghanistan. Rather, it extends into the Northwest Territories of Pakistan where both elements of the Pakistani Taliban and al-Quaeda enjoy unencumbered control of nominally Pakistani territory. How does the focus on Afghanistan deal with an even greater threat posed by these lawless Pakistan territories that a sofar ineffectual Pakistani military has been unable to tame? And, how does the fragility of the Pakistani government suggest confidence that the Pakistani Taliban can not overcome recent setbacks to pose a direct challenge to the government in Islamabad and the security of Pakistani nuclear weapons?

Third, the problem facing the United States is not limited to the Afghanistan/Pakistan border regions populated by the Pashtun. Rather, the ongoing turmoil in Somalia and the inability of any government to exercise any effective control both within and beyond Mogadishu carries with it the threat that al-Quaeda will simply re-establish itself in Eastern Africa. Certainly, there is some evidence that this is the case.

Armed nation-building presumes that there is a nation to build. Critics legitimately questioned whether nation-building could proceed in Iraq where divisions among Sunni, Shia and Kurd have yet to be meaningfully resolved. Afghanistan is in even worse shape.

Unlike the presence of rich oil reserves that might tempt disparate tribes in Iraq to cooperate, there is no such resource base in Afghanistan that could lend support to the construction of a nation-state. The largely tribal nature of Afghanistan and the presence of poppy production that is certainly not in the West's interest might suggest that rather than integrate the diverse and competing tribes into a united Afghanistan we might be better off breaking this failed state and apportioning it among various existing states. Let Iran gain control of largely Farsi speaking western Afghanistan and let Tajikistan gain territory among the Tajik speaking tribes of northwest Afghanistan. Out of rump Afghanistan, why not allow the northwest territories of Pakistan, where the Pakistani government has rarely exercised any effective control in the sixty years since indepence, to merge with their Pashtun cousins and create an Afghani state in borders more in agreement with tribal and linguistic loyalties?

If one chooses to ignore the very tribal loyalties that exist in and compete against each other in Afghanistan, then the past will once again be prologue. Controlling Kabul and imposing a government their as the Soviets tried will not work. Nor were the British any better at controlling tribes opposed to foreign rule. Allowing a corrupt government such as the present Karzai government to continue to rule, even if "legitimated" by the elections of 2009, that at best seems capable only of tolerating local war lordism and rolling back promises of an end to discrimination against women does not bode well. On such a rotten basis, no nation-building can proceed. Nor is such a feeble government likely to win over a skeptical and fearful Afghani public. At least, in Iraq there was some foundation to build on, however fragile the results have been to date. To find anything comparable in Afghanistan is to look in vain for the needle in the haystack.

And, exactly how is the United States to pay for all that would be required to make Afghanistan capable of nation-state status? With the present trillion dollar deficit, anchored upon an unfunded ongoing "war" in Iraq and an economy in trouble, the United States does not have unlimited coin at its disposal to support another Iraq type war. Borrowing more on international financial markets to support necessary expenditures for national defense is not what the international community appears willing to support without question. The United States has to get its house in order before embarking on a deepening Afghanistand engagement.

Is it fair to assume that the United States has the wherewithal in terms of armed forces and military hardware to continue such a course of action? Maybe not. The all-volunteer army that the United States has fielded has been worn down with repeated rotations into and out of Iraq. To add Afghanistan to that mix risks the destruction of American military assets. Maybe men and women will be tempted to join in unprecedented numbers to fight the good battle in Afghanistan, but it is silly to count on that happening. Indeed, with NATO allies such as Germany and Britain growing increasingly squeamish with respect to their limited participation in Afghanistan, is the United States once again facing a long-term coalition of the unwilling?

Finally, why exactly should Afghanistan be elevated to the status of primus unter pares in the sphere of foreign politics? Does the possibility that the Taliban might regain control of Kabul and allow itself to be coopted by al-Quaeda to cede territory for the latter's unfettered use outweight the danger of Pakistan losing control of its nuclear weapons or Iran developing weapons of mass destruction?

And, do domestic issues such as the rickety health care delivery "system" and attempts at reform pale in comparison to the needs of Afghanistan? Or, should we forget that global warming carries with it a far greater threat than a bunch of misguided jihadis?

Yes, radical jihadis do pose a threat to the international distribution of power and wealth. But, the so-called war on terror has done little to rein in such threats. If anything, the Bush administration war on terror decentralized terror through the partial decapitation of al-Quaeda and attracted new recruits to the campaign.

To end the threat, those most immediately impacted by these jihadis will have to take steps to deal militarily with threats on their territory, much as the Pakistani government and military have slowly come to realize. In addition, autocratic governments that are unable to meet the needs of their populations need to give way to more democratically based governments. That, however, may not be possible as long as radical Islam is able to exploit specific grievances and bundle them in opposition to governments from Saudi Arabia to Indonesia. But, the alternative - an armed West rooting out radical islam while tolerating corrupt and anti-modern tenets that we in the West intrinsically oppose now and had fought against for over 500 years - hardly seems compelling. Good luck Mr. Obama if that's the flawed course you wish to follow.

WHAT WOULD JESUS DO?

The elderly woman tersely stated that her husband had been denied further medical care by the health insurance company with whom the couple had been insured. What were they to do was the question she posed to Oklahoma Senator Tom Coburn. Indeed, what were they supposed to do?

The answer supplied by Senator Coburn was as shocking as it was eye-opening. Rely on your friends and neighbors to help you in your hour of need. No matter that the cost of such help was likely to reach into the hundreds of thousands. By no means, should government be counted on to come to the rescue.

There, in a nutshell, is the sheer bankruptcy of the Republican and lunatic opposition to any change in health care as presently delivered in the United States through a variety of mechanisms. No one should have to appeal to the vagaries of individual circumstances. Alone in Alaska? Appeal to your neighbors, however few and relatively impoverished these might be. Trouble in the Ninth Ward, ask your neighbors for help.

Government exists, if it must, to provide a safety net for its citzenry. Traditionally, this was understood to mean the provision of a common defense. With most people living lives that were short and sometimes brutish, the needs of an elderly population didn't matter. Once industrialization began and life expectancies improved, the needs of the aged and those whose lives suffered from the pollution of industrial society and dangers inherent in an unregulated workplace became of paramount concern. To stave off the growing power of the working class in Imperial Germany, Otto von Bismarck crafted a social pact that sewed the seeds of the modern social welfare state. Other nations followed, and by the 1960s, most Western societies had some form of social welfare state.

The United States remained unique, however. A national health care system never emerged. What developed was an employer based health care system begun during World War II, as employers, unable to raise worker wages, offered supplemental benefits (health care and retirement benefits) as enticements. After World War II, industrial unions sought to extend such employer based health and retirement benefits. The public sector followed suit, and many working Americans enjoyed relative security during their working lives and into retirement.

For those not able to reap the benefits of union action, presidents John F. Kennedy and Lyndon Baines Johnson sought to provide a safety net for elderly citizens. Social security had already provided a modicum of economic safety, but dire health needs always remained a threat to many elderly. Passage of the landmark Medicare Act as part of LBJ's Great Society, gave protection to those elderly not protected through union or public sector agreements.

But, the poor, especially the working poor, who did not have access to unions that could extract excellent health and retirement benefits, were left to fend for themselves. Many went without health insurance and hoped that their relatively youthful age might tip the odds in their favor. Older working poor could rely on whatever care they might receive in emergency rooms at local hospitals.

Those who lost jobs or changed jobs and lost the provision of health insurance might try to cobra their benefits for a while and then seek insurance on their own in the market place. If too expensive, some might choose to forgo continued insurance coverage. Others might hope to land a job in an industry with excellent benefits.

All told, about 46 million people at present do not enjoy health insurance coverage. For some, it is an act of choice. For others, it is a question of necessity. For still others, it is an unfortuate turn of fate. For those with pre-existing medical conditions, private health insurance is well nigh impossible to find and, if available, prohibitively expensive.

The last two countries that rejiggered their health systems were Taiwan and Switzerland. The Swiss managed to rein in private insurance providers and get every one covered. No public option was offered, but restrictions were placed on health providers. Taiwan sought to create a public health system whole cloth. It studied various health care systems and crafted a program that best suited its needs and society.

For the United States, it seems unlikely that Americans could ever accept the intrusiveness of a Taiwanese style health care system where those who "overuse" medical services may be visited by a government agent in order to assess what changes might be required in order to bring medical service usage more into line with societal norms. Still, the United States could try to Swissify the American "system". It could require every American citizen to have health insurance. It could require insurance providers to end recisions and the refusal to provide or continue health care coverage to people with pre-existing conditions. It could place limits on administrative costs for private insurers that now amount to 20% of health care expenses. And, if private insurers refuse to cooperate, then it could use a public option to cover those whom the insurance industry does not want to insure and use its lower administrative costs to push down private sector costs.

The United States COULD do all that. Some of this might even emerge from the U.S. Congress this year. But, most elected Republicans do not want any change that would rein in the private insurance providers or place limits on prescription costs. Instead, as Senator Coburn made all to clear, reliance on the local community is preferable to meaningful change.

As a largely Christian nation, many of whose most outspoken adherents claim allegiance to the Republican party, it is worth asking what Jesus would do. Yes, what would Jesus do? Alas, his first task would be to visit those temples of modern Christianity and expose the hypocrisy espoused by many leading Christians. Turning the other cheek does not mean looking away from the needs of needy. It means to use whatever means necessary to alleviate pain and suffering. If government is the best available means to provide for the needs of the many, then so be it.

I got mine, screw you is nowhere to be found in the Bible - not in the Old or the New Testament. What we are reminded is that the meek shall inherit the earth. By that, I understand that those most in need and unable to fend for themselves shall be blessed because the rest of us who are more fortunate and are able to exercise some measure of control in our lives are COMPELLED to do all that we can to care for others. We are both stewards of the land and compatriots of our fellow citizens. To continue to bow before the god of capital is a violation of the Christian spirit and an invitation to Jesus to throw out the money changers and the money grubbing "Christian" capitalists who use the word to make it what it's not.

Jesus was about change, and change is what is needed now. Shame on you, Mr. Coburn. You just don't get it, do you?

LEMMINGMANIA

The dog days of August are usually a slow news period. Leading politicians go on vacation, while Congressional representatives return home to touch base with their constituents. Town halls are often a good venue for representatives to state their positions and receive feedback. Concerned constituents have an opportunity to express their views on issues that matter to them or comment on Congressional action or inaction. Rarely, do town halls get much press coverage. Not this year!

No, for the past several weeks we have witnessed irate constituents berating Democratic representatives in the House and the Senate for betraying the Constitution, taking aim at Grandma and attempting to turn the United States into a 21st century USSR. A few of the participants seemed to be in search of answers. Too often, representatives were treated to boorish individuals rude enough to shout and shove to cut off debate before it began. Many of these were egged on by media bloviators such as Rush Limbaugh. Others, perhaps, read the blogs of former Alaskan governor Sarah Palin or sought inspiration in the musing of Sen. Charles Grassley of Wisconsin who claimed that Americans had every right to be fearful of Obama style health reform. The spectre of "death panels" dooming decrepit granny to a premature death were just the tip of Republican demagogy. At the more extreme wing of the opposition, there was a display of one representative dangling from a noose.

Whew! For the mostly older participants of these angry demonstrations of know-nothingism, it is tempting to give them exactly want they want: no government run health care. Take away Medicare, the primary care vehicle for most retired persons, and let these people insure themselves in the private market. Take that you ignorant old farts!

Where would the many elderly constituents who most prominently savaged Senator Specter of Pennsylvania during not one, but two town halls be without Medicare, the last major contested innovation in the American health delivery system? Destitute. Indeed, even with Medicare, many elderly have had problems coping with infirmity in old age. Prescriptions are expensive and many have fallen through the donut hole created in the Bush era modification of Medicare to include partial government aid for prescription drugs. Medicare, at least, ensures that the elderly will receive health care that would not and could not receive through private insurance.

Lost in all the hyperbole about health care is a very simple fact. The United States is the last advanced economy to expand health coverage to all of its citizens. Every major economic competitor has some form of universal health coverage. Indeed, the last two countries to revise their health care delivery systems - Taiwan and Switzerland - did so without much of the political bile that has been spilled this past August. Taiwan took the time to study other health care systems and crafted a program best suited Taiwanese expectations. It even included health care auditors who visit those patients excessively accessing health care. Imagine that coming to an American hospital near you!

As Paul Krugman noted in today's New York Times op-ed, at best it can be argued that Obama and the Congressional democrats are steering the United States towards a Swiss style health care system where coverage is provided by private insurers. Whether there is a public option to get coverage for those individuals whom private insurers least desire to cover - those with pre-existing conditions or those facing catastrophic medical procedures - now hangs in the balance as the result of constant demagoguery. And, in the absence of a public option, what would pressure private insurers to act more reasonably and accept a Swiss style health care system?

With whom should one have a rational health care debate? Newt Gingrich? His op ed in Sunday's Los Angeles Times might have conveyed the impression that he could reasonably debate the various Democratic positions. Senator Chuck Grassley? At his outdoor address to his Wisconsin constituents, he admitted that his presence on one of the Senate committees reporting out health care legislation was essentially a stalling operation. That he confessed this while stating that American citizens were justified in fearing Obamacare ought to remove him from any bi-partisan considerations. Sarah Palin? She is a one-woman wrecking crew would shouldn't be allowed to blog, let alone get her bizarre views broadcast on a national basis.

Indeed, some of the most reasonable voices have been heard at Mr. Obama's town hall fora. It certainly is a legitimate question to ask how a public entity would impact private insurance providers, especially when the playing field might not be level. Would a public entity be allowed to lose money providing coverage for those least able to afford it or those whose medical bills would threaten private insurers? Would a public entity be subject to political tampering every time it went to Congress to make up for deficits that it could conceivably run?

There may be answers to these questions, but you won't hear them from voices within the Republican party. The Republican party - what's left of it - seems hell-bent on marching toward the sea. Lemmings everywhere unite and head toward the cliffs, and let the rest of us reform a health care delivery system on the verge of collapse.

BOOGIE WITH BURRIS

With all the hoopla surrounding the selection of Roland Burris to be the junior Senator from Illinois, it's easy to miss the larger issue at stake. Certainly, there is plenty of buffoonery to please the bloviators throughout the blogosphere. Whether it's the farcical press conferences put on by B-Rod (Rod Blagojevich, Governor of Illinois) and punctuated with poetic musings or the downhome pladoyer of Mr. Burris before whichever panel he appears, there is much to latch onto. Yet, the way Senate vacancies are filled - be it in New York, Colorado, Delaware or Illinois - both violates the spirit of the Constitution and confers advantages where none should be rendered. Enjoy the melodrama as it unfolds: to seat or not to seat Roland Burris. Whether 'tis nobler to suffer the slings and arrows of outraged and babblling Bobby Rush or put paid to perfidy and break the ban on Burris.

To provide just the barest of sketches is sufficient to provoke plenty of guffaws. On tape, now impeached Governor Blagojevich has revealed how he and many politicians of his ilk view politics. It's a question of money, power and influence. So you want to be Senator. How much is it worth to you? You want to criticize me? Well, forget about any help you might need in selling the Chicago Cubs baseball team. I will help the poor and needy and most innocent among us (children), but only if you make it worth my while. Donations gladly accepted.

Whether Mr. Burris or any of his representatives participated in preliminary talks pursuant to the auctioning of Mr. Obama's Senate seat is unclear. Certainly, he has admitted before a house committee preparing impeachment of Governor Blagojevich that he had dropped a hint to an aide six months ago that he'd like a chance to become the appointed replacement. But, that was before it was even clear that Obama was likely to win election as President and need to resign his seat as the junior Senator from Illinois. No one has suggested that Mr. Burris participated in the more recent round of bargaining that led federal prosecutor Patrick Fitzgerald to blow the lid on a brewing scandal. There just ain't no taint!

However, some have likened Mr. Burris's appointment to the ill-gotten gains from an illegal search. As most fans of Law and Order are well aware, the harvested fruits from a poisoned tree will be excluded without fail. Since the process prior to Mr. Burris's selection was tainted, any appointee should be barred from taking the seat no matter what his or her merits might be.

Does Mr. Burris merit appointment to the U.S. Senate? He does, of course, meet the qualifications to serve as a senator. His appointment, despite the refusal of Illinois Secretary of State Jesse While to certify his selection, falls entirely within the purview of the governor's power to appoint a temporary replacement when a position has been vacated as Mr. Obama's Senate seat has been. No one has claimed that Mr. Burris was selected because he was the highest bidder. Indeed, Mr. Burris had plead poverty in this regard. Even if he had been asked to contribute to B-Rod, he would not have had the means to win this particular auction!

Mr. Burris probably hasn't paid to play, but he does bring a refreshing dose of eccentricity to the position. Many commentators have pointed out Mr. Burris's seeming narcissism. Who else but a narcissist names his offspring Rolando and Rolanda? And, he does have that mausoleum adorned with chiseled resume announcing Mr. Burris as a trailblazer from his earliest days as a student at Southern Illinois University through his tenure as the first elected African-American attorney general in Illinois. Whether he blazed trails as, say, a Martin Luther King or a Rosa Parks is open to debate. Clearly, Mr. Burris parlayed his race into a winning hand in this particular instant. However, his good fortune in this regard must not gloss over the difficulty most black candidates have when running for statewide office.

But, Mr. Burris also comes across as an affable fellow, an educated everyman if you will. Flying to DC from Midway and landing at BWI on Southwest Airlines was an indirect, inexpensive and pedestrian route to Washington. Weathering the rain without raising much fuss when denied participation in the swearing in ceremony for members of the 111th Congress also helped cast Mr. Burris as a regular guy. Indeed, all of his protestations about his inability to pay to play and his apparent willingness to be forthcoming about contacts with the Blagojevich staff endears him to the public. Besides, it cannot be denied that his presence in the Senate would constitute a small step towards providing a minority voice in what is now - without Senator Obama - an assemblage without a black voice. That he is able to do so without displaying the stridency of, say, a Jesse Jackson or former Black Panther Bobby Rush speaks volumes about Mr. Burris.

However, one may judge Governor Blagojevich, he certainly is a sly fox. He outmaneovred his opponents and selected perhaps the one candidate whom the Senate cannot reject out of hand. Had Mr. Burris been Caucasian, or had he even been a she, Harry Reid would have had fewer qualms about barring him from taking his appointed seat. In this respect, being a black male was an advantage. Blagojevich knew that and thus he was quite content in reneging on his own promise not to make an appointment after his "pay to play" scheme had been outed by Patrick Fitzgerald. Still, the clever can get too clever even for themselves. Governor Blagojevich may have dared his opponents to tape away, but it is the very existence of those tapes that led the Illinois House to almost unanimously vote to impeach the governor for various acts of corruption. He will be convicted and that will be the end of B-Rod.

Burris, though, will remain. For certainly, the U.S. Senate will seat Mr. Burris. Eccentricities aside, Mr. Burris will go to Washington as the legal designee to the vacant Senate seat formerly held by President Obama. Whether he remains for two years in that post or serves only until a special election can be held is an open issue. Though it seems probable that he will remain in office until 2010, there is doubt whether he can use the power of incumbency to translate his appointment into a full six year term.

And, therein hangs the tale. As Thomas Geoghegan, labor lawyer and author of "See You in Court: How the Right Made America a Lawsuit Nation", opined in the New York Times, that the 17th Amendment to the Constitution mandates that governors "shall issue writs of elections to fill such vacancies" when Senate seats open up unexpectedly due to death, resignation, or incapacity. In practice, governors fill such vacancies by appointment and wait until the next round of Senate elections allow the vacancy to be eliminated through election. As Geoghegan argued, such practices set the 17th Amendment on its head by allowing a legal proviso which logically allowed temporary appointments by the governor until an election can fill the vacancy for the remainder of the term.

Legislatures have been unwilling to demand special elections in order to fill such vacancies. Indeed, the Illinois legislature refused to consider holding a special election for fear that the Republicans might win a seat away from a Democrat. Whatever Mr. Burris's merits may be, he clearly is a Democrat and can be counted on to support the agenda of President Obama. Even when the legislature is controlled by a party opposed to the governor and could use its authority to prevent a governor from choosing a candidate of his or her own liking (and party), legislatures have been loathe to exercise their constitutional authority. As a result, governors everywhere have acquired a power unintended by the 17th Amendment and it has allowed corrupt practices to pervert the democratic process. B-Rod was only the most blatant of abusers.

At present, there are in play four Senate seats, each held by a Democrat. Two are open because the holders of these seats were elected to the executive branch and cannot serve in both branches of government. President-elect Obama resigned his seat in December, while Senator Biden has yet to resign his. Secretaries designate Salazar and Clinton must resign their seats in order to become members of the Obama cabinet. Senator Salazar has already resigned and his seat filled by the former superintendent of Denver public schools. Governor Patterson has toyed with the notion of replacing Senator Clinton with Caroline Kennedy, though her selection has stirred much controversy, given that she has never held elective office and - like Senator Clinton - represents perhaps the continuation of a political dynasty. Senator Biden's replacement most likely will be a close associate of the senator and someone who will only serve until 2010.

What does it matter whether these vacancies are filled temporarily or for the full two-years until the next election cycle? Maybe not much, but one should never underestimate the power of incumbency. Even Mr. Burris who has had difficulty winning state-wide elections may have an advantage in 2010 simply because he is the incumbent. Most voters are reluctant to turn out incumbents. The only way for incumbents to lose their seats is through death, personal choice, or the infrequent, but powerful political tsunamis that sweep aside incumbents whether deserving or not.

2008 was just such an election, at least as regards to Republican candidates. Not even Christopher Shays, a well-respected and moderate Republican from New England, could not hold onto his seat in the House of Representatives. And other incumbents, be they Senator Coleman from Minnesota or Senator Stevens from Alaska, could not withstand the rising tide against incumbent Republicans.

To be appointed for the full two years is, then, to gain an advantage, one that might be parlayed into electoral victory when the regular electoral cycle is adhered to. Governors gain immense power in the selection process and can thus use their power to sell the seat to the highest bidder (Blagojevich), reward political cronies, perpetuate political dynasties or exercise caution and choose a relative newcomer (Michael Bennett from Colorado).

That this thwarts the democratic process is obvious. It does not create a level playing field or give the appearance of a such an open process. As such, it is yet another impediment to democracy, an impediment that could be eliminated if governors and legislatures adhered to the dictates of the 17th Amendment. So, enjoy the cirque du Burris while you can, but keep your eye on the prize, not just in Illinois, but everywhere where vacancies in the U.S. Senate arise.

MIDDLE EAST MANIA

As Israel presses on its air retaliation in Gaza, many in the world have called for a 48 hour cease-fire, a plea that the Israeli government has chosen for the moment to ignore. Writing in today's New York Times, David Grossman argues that now is precisely the time for Israel to pause its strategic campaign. Hamas cannot be driven from power by repeated air assaults on a vulnerable population. Nor can rubble be pounded relentlessly. Rocket fire from Gaza has diminished, but is unlikely to cease. Of utmost emergency is the evacuation of wounded citizens from Gaza to hospitals in Egypt and Israel. The borders need to be opened for UN emergency services. And talks brokered by Egypt or Turkey need to take place.

An unlikely scenario, perhaps, but nothing should surprise us in the Middle East. Once hopeful glimmers such as the Israeli military withdrawal and evacuation of settlers in Gaza during August 2005 and the unexpected Hamas victory in elections during January 2006 have long since been extinguished as Israel has attempted to quarantine Gaza to drive Hamas from power. For its part, Hamas has sought to use the abduction of Israeli soldier Shalit as leverage to free 1,400 Palestinian prisoners in Israeli jails. As a result, Gaza has been turned into a heavily armed ghetto whose very existence strikes fear into the heart of Israel.

In the meantime, we are treated to the blame game. Palestinians blame Israel for crimes against humanity, demand an end to the bombing, the targeted assassinations of Hamas leaders and the occupation of the West Bank. Israel blames Hamas for the resumption of indiscriminant rocket firing into southern Lebanon once it chose to let the six-month cease-fire expire.

Cooler heads might prevail, but not as long as testerone levels soar sky high. Alas, a lot of innocent people will suffer. But such is the stuff of life in the Middle East.

BAILOUTS, BALANCE SHEETS AND B.S.

The steep fall in stock markets around the world during October is troubling news in nearly every respect. Despite the efforts of central banks and individual countries to come to the rescue of banks and other lending institutions, the crisis continues to spread and deepen. No financial institution seems willing to lend substantial amounts of money to other institutions, though conservative banks in the U.S. and abroad have used their strong capital positions to take over failing institutions. Unfortunately, in the midst of this financial free-fall, the United States is engaged in a highly partisan political debate that only occasionally focuses on the problem at hand.

It was certainly unwise for Secretary Paulson to allow the proposed $700 billion rescue package to be characterized as a bailout. To an extent, it certainly was a bailout of investment banks and other financial institutions that had accumulated large amounts of worthless mortgage backed securities on their balance sheets. Allowing these entities to pawn off this "toxic waste" was certainly one way of rescuing these wobbly lending institutions that could neither lend nor repay monies from a weakened capital base.

Yet, in the political discussion leading up to Congressional approval of the revised bailout package, now laden with special sweeteners, some Republican representatives decried accounting rules as one cause of the distress. Mark to market accounting had led financial institutions to mark down the value of mortgage based securities and derivatives once it became apparent that there no longer was a market in this financial inventions. Mark to market markdowns were thus not a cause, but a reflection of the loss of value that any financial institution holding such junk had experienced. In order to fairly reflect this loss of capital on the balance sheet, these mortgage based securities were reduced in value.

To advocate, as many Republican representatives attempted, the suspension of "mark to market" accounting in favor of some alternative - mark to make believe - might have rescued some balance sheets, but would have worsened the crisis in confidence that has led to the seizure of various credit markets. Balance sheets must reflect accurately the present value of a company or corporation. To game the balance sheets or to allow questionable transactions to remain off-balance sheet items will not save the system, but merely hasten its demise.

If Enron taught us nothing at all, it should have warned us that playing fast and loose with accounting rules and resorting to off-balance sheet accounting to hide losses and inflate profits does not eliminate problems, it merely postpones them. Then, when the deceit can no longer be maintained, the collapse is inevitably short, swift and brutal.

In the current crisis, the root cause is the frivolous waste of capital on mortgage loans that could not be repaid by those agreeing to interest free subprime mortgages and the like. Once, the default rate in the subprime market exploded, it caused lenders to pause with respect to refinancing teaser lows. When those holding mortgages in need of refinancing in order to avoid the balloon payments inherent in interest-free mortgages could no longer find refinancing, they too joined the chorus of mortgage defaults.

Unlike the past, many financial institutions were not directly impacted by the increased rate of defaults in the housing sector. Most of the original mortgages, especially the questionable ones involving subprime, Alt-A and option ARM mortgages, had been sliced and diced and packaged with other mortgages in order to spread the risk. At a certain tipping point, however, no matter how much repackaging had been done, the level of risk had to increase.

At the ground level, of course, foreclosures in one community reduced the property values of all surrounding homes. This led to negative equity scenarios that afflicted even reasonable mortgages. Once the mortgage value of the house exceeded the market value, even honest people were put in a bind. They could continue to pay the mortgage, even though they were paying more than the house was presently worth, and hope for an upturn in the housing market to bail them out. They could seek to refinance their mortgages at a better rate. Or, they could walk away from the negative equity by refusing to throw good money after bad. Unfortunately, many chose the latter.

The cascading of defaults on mortgages put pressure on the lenders. Ameriquest and Countrywide were the first large lenders to go under. Indeed, Countrywide burned through a loan from Bank of America in such short time that Bank of America had to buy Countrywide in order to have any hope of recouping its investment. Later, WaMu and Wachovia, a savings and loan and commercial bank respectively, were taken over as the burden of bad loans brought down their value.

IDEOLOGICAL IDIOCY AND THE WAY FORWARD

Let the markets fall and the recriminations spread. When the House of Representatives voted down the bi-partisan bailout bill proposed by the Bush Administration and the Congressional leadership, the markets reacted as expected. They plunged! In the meantime, two banks in Europe collapsed and were taken over before the U.S. Congress voted. Anecdotal reports describe a brief collapse last week of the overnight commercial paper market, a necessary financing arm for businesses large and small to meet payroll and inventory needs while providing other firms with a temporary surplus of cash to earn interest overnight. Washington Mutual (WaMu) was taken over and sold to J.P. Morgan Chase, while Wachovia looked for salvation from Citigroup. The crisis is very real and needs to be addressed.

Unfortunately, the Republican ideologues in the House of Representatives made it clear that they were not prepared to take away down a plank that in their view was but a slide down a slippery slope to socialism. Socialism, seriously? Are the Republican representatives from the heartland so confused about the world that they would describe an equity stake in a $700 billion bailout as socialism? It's not even nationalization of an industry.

In addition, the Republican representatives proclaimed their desire for even greater deregulation and an extension of capital gains cuts towards industry. On the other hand, they were unwilling to lift a hand to allow bankruptcy judges to help filers hang on to their homes.

At least, in one small respect, the Republicans put forth a moderately interesting idea: an insurance system perhaps akin to FDIC insurance that would be paid for by the securities industry. Unfortunately, such an insurance scheme would contribute nothing to easing the current crisis. In short, the Republicans have nothing to contribute to a crisis that is the direct result of 30 years of Reaganomics.

95 members of the Democratic caucus also voted against the bailout bill. Why? Like many economists, these representatives harbored many of the well-deserved reservations about the proposed bailout. Some of these concerns were addressed partially in the modifications to the original Paulson proposal. Some were not. Other objections were trite, yet understandable in the poisoned partisan atmosphere that is the result of 8 years of Bush II misrule.

Certainly, there are plenty of reasons not to trust the Bush Administration, an administration that downplayed the seriousness of the building crisis for the past two years and through its own lack of oversight and deregulatory delusion furthered a climate of anything goes that finally brought down the financial sector when the mortgage backed securities proved nothing more than a house of cards. Besides, there is that $10 billion per month Iraq debacle that is no more closer to conclusion now than it was in 2003.

One of the primary deficiencies of the proposed legislation was its almost total failure to address what is at the heart of the current crisis: the unending procession of foreclosures in the housing sector. As long as no legislation, akin to the 1933 federal Home Open Loan Corporation that pioneered the 15 year mortgage and kept people in their homes, is proposed nothing will staunch the bleeding in the housing sector. Nor can there be any possibility of recovery in the secondary and derivative markets built entirely upon these suspect mortgages. What needs to be done is the creation of an agency similar to what FDR put into place in 1933 that kept people in their homes and took problem mortgages out of the hands of savings and loans. Until this happens, whether $700 billion will be enough to reprime the global credit markets is open to question. Certainly, the first $400 billion prior to the latest request was not sufficient.

The righteous anger against investment bankers, Wall Street wonder boys and other greed gobbling Gatsbys unfortunately has clouded the judgement of too many Americans towards the necessity for action. Shout on until the crisis begins to cut sharply into Main Street as credit tightens up even further and jobs begin to become scarce. Righteous indignation without reason is ridiculous and has been fostered by runamok Reaganism for far too long. As the echoed shouts of USA, USA peter out, so too will the industrial and financial strength of a once great country. Let them stuff that in their ballot boxes, especially in the American heartland that for too long has heaped scorn on the cosmopolitan coasts.

That John McCain has the audacity to blame this on the Democratic party for injecting partisanship into a spirit of bipartisanship after his partisan grandstanding last week is beyond repulsive. It bespeaks how low the entire Republican party has fallen. That John Boehner and his Republican lackeys want to blame a speech by Nancy Pelosi for sabotaging the bailout legislation is absurd in almost every respect. Why would the Republican party even care to listen to a speech that more or less demanded that Republicans look in the mirror and see what 8 years of their own mismanagement has wrought in order to move forward? Are their egos that fragile that they cannot accept some of the blame? Or, are they so ideologically blinded that they cannot recognize how all of this is the logical consequence of Reaganism?

It's time for the Democratic majority in Congress to assert itself and propose the necessary legislation to move this country forward and deal with the crisis in both aspects: deal with problem mortgages and bailout out - under strict conditions - the financial sector that for too long played fast and loose with bogus paper, unearned bonuses and undeserved severance packages.

If the Republicans want to vote no in the House, let them. Their votes are only important if the Bush White House wants to veto legislation passed by Democratic majorities in Senate and House. Let the Democratic members of the House and Senate have the courage to explain in clear and certain terms why this had to be done, what precautions they have taken and why their path is the best way forward. And, let the voters have the courage to overcome their own angst and righteous indignation and rationally reflect on something they might not wish to do, but realize they probably have to do.

WHO WON/WHO LOST? WE ALL DID!

As Pat Buchanan falls over himself gushing with praise for Senator McCain's performance in the first presidential debate, it is worth pondering how debates are appraised. Do we judge a debater's performance based on the arguments proferred? Do we examine the facts brought forth in support of various points? Or, do we judge a candidate's performance based on the emotional appeal mustered in support of whatever platitudes a debater chooses to highlight?

Calling these "debates" is a misnomer. Confrontation would be a much better description. Ali might not have been as powerful a hitter as Sonny Liston, but he brought a poetry to the fracas that befuddled Liston and left him helpless in the ring. So, did the street fighting McCain better the calmer, more traditionally focused debater Obama? And, how are we, the people, affected by all of this babble, bluster and bamboozle blathered by one of the two major party candidates?

However we choose to evaluate this gab fest, let's not let the facts get in the way of an analysis since the facts didn't seem to matter much at all to Senator McCain. He claimed that he had warned about Fannie Mae and Freddie Mac as early as 2005. No, Senator McCain, you didn't. You supported legislation that would have removed these two quasi-governmental private corporations from HUD supervision and placed them, along with the Federal Home Loan Bank Board, under a new independent commission. This legislation was aimed purely at the Enron-excesses of shoddy accounting that were designed to reward corporate executives with bonuses based on over-inflated and even non-existent earnings. That legislation had nothing to do with Fannie Mae and Freddie Mac's inability to raise capital to meet cash demands brought about by the cascading crisis in the credit market because of the mortgage-based securities wracked by default.

Senator McCain, despite his claim to have visited Waziristan, surely doesn't understand Pakistani politics. Former President Musharraf deposed a democratically elected government that had been mired in corruption scandals. He ruled, much as previous generals had, with the support of the Pakistani army. Was the deposed government a failed state, as McCain claimed? Hardly, though it was a corrupt regime. Was the Musharraf regime any better? Maybe. At least, it did provide stability until the anti-democratic tendencies of Musharraf brought about his rejection at elections he had tried his best to rig in his favor.

The larger point, of course, is what did 10 years of support for Musharraf yield. He did little to rein in the ISI, the Pakistani intelligence service that had long supported the Taliban in Afghanistan as long as it kept Afghanistan weak and provided Pakistan with a platform to interfere in Afghani politics. The blowback came, however, in the emergence of a Pakistani Taliban that targeted the regime in Islamabad and has succeeded in assassinating Benazir Bhutto and in truck-bombing the Marriott Hotel in Islamabad. Now, Pakistan is at risk of becoming a failed state, despite $10 billion of military assistance that did nothing to win the hearts and minds of rural Pakistanis who might have benefitted more had the United States invested in funding the decrepit public school system in rural Pakistan that, in its absence, has allowed anti-American, anti-Western, anti-democratic madrassas to flourish.

When asked about what lessons McCain had learned about Iraq, the Republican candidate once again demonstrated that he had learned nothing about Iraq, let alone Vietnam. He bemoaned the humiliation that American soldiers had felt upon their return to the United States after the debacle in Vietnam. Yet, what strategy would have provided "victory with honor" that McCain claims he seeks in Iraq? There was none. Vietnamization failed because the Vietnam War wasn't just an insurgency. It was a civil war where one side (Hanoi) had the support of two committed superpowers (the Soviet Union and the People's Republic of China) and the ability to wait out a country (the United States) that had no idea what it was fighting for in Vietnam. It certainly was democracy because not a single government in South Vietnam had ever been democratic, aspired to democracy or demonstrated the ability to run a government free of corruption.

Obama correctly pointed out that it doesn't matter what happened, failed to happened, should have happened or might even happen in Iraq. The war was wrong from the outset. It was driven by a pre-existing desire to take out Saddam Hussein. It was draped in lies, exaggeratons and outright fabrications that claimed among other things that Iraq was behind 9/11 and harbored untold quantities of weapons of mass destruction. And, it was hyped as the best way to bring democracy to a region of the world where the battle between the forces of modernity and tradition had not even been decided and where unquestioned American support of anti-democrat and corrupt regimes in Saudi Arabia and Egypt dashed the hopes of positive forces for change.

To allow McCain, as Obama did, to claim that somehow victory was at hand in Iraq only if we follow the present course because of the surge was a grievous mistake. Correctly, McCain noted that the Bush strategy of attack and withdraw was all wrong. A counter-insurgency strategy where territory was seized, held and improved in order to win over the local populace was probably a better bet. Whether it would have succeeded with the paltry amount of American troops in Iraq is dubious at best. We do know that the "surge" would not have experienced the success that McCain seeks to claim for his own without the Sunni Awakening. Paying former Sunni insurgents to fight al Qaeda in Iraq after the Sunni insurgency had grown weary of al Qaeda excesses in Anbar was a wise strategy.

Yet, where has this brought us in Iraq. Finally, after many, many months of negotiation McCain pointed to the passage of an election law which might finally lead to the holding of regional elections originally scheduled for October 2008. At the same time, though, the Iraqi Shiite dominated government is hell-bent on unraveling the Sunni Awakening by refusing to integrate the Sunni Sons of Iraq into official Iraqi police and army units. Moreover, it has expressed its desire to prosecute Sunni Sons of Iraq for earlier transgressions against the government of Iraq while members of the Iraqi insurgency.

Does this point us in the direction of "victory with honor" or keep us heading down the road to continued engagement in an unstable and fragile Iraq? In the meantime, the meltdown in Afghanistan continues. Unstated, of course, is whether the presence of NATO troops in Afghanistan is part of the problem or part of the solution. Certainly, bombing of civilians by NATO forces does not contribute to winning the hearts and minds of Afghanis. And, the lack of a sufficient level of ground forces that make it impossible for NATO to seize, hold and ameliorate territory to squelch the Taliban resurgence. Has the situation so deteriorated that not even additional forces in Afghanistan can reverse the decline, especially given the inability of Karzai to effectively govern territory held by the Afghani regime?

Unquestioned assumptions characterized the discussion of Georgia and the Ukraine. Strangely, Senator Obama expressed support for the admission of Georgia and the Ukraine into NATO, a course of action Senator McCain has advocated since his good friend Misha, the young, American educated president of Georgia, launched his foolish endeavor against South Ossetia. Why? Is NATO prepared to come to the defense of either country, especially if it recklessly decides to take action indirectly or directly against Russian forces? No. Not a single NATO country in Western Europe will ever accept mutual defense of these peripheral nations. What might work is the association and later admission of both countries into the European union in order to aid in the building of their nascent economies and the deepening of democratic tendencies in both nations. Russia might accept the latter, while it has stated categorically that it will never accept the former. Pursuing NATO membership, as Obama and McCain both advocated, would lead to a new cold war between Russia and the United States.

McCain constantly harped upon his experience; yet, he came up with comments that, at best, can be described as questionable. He claimed that Reagan's refusal to negotiate with Brezhnev, Andropov and Chernenko, as well as Reagan's unabashed support for the Strategic Defense Initiative (SDI) program that, McCain claimed, had brought the Soviet Union to its knees. This canard, constantly cited by Reaganites who apparently can't remove their own ideological blinders to analyze the crisis in the Soviet Union during the 80s, even if they read every official document released during the later Gorbachev and Yeltsin years. What Gorbachev realized was that the Soviet economy had become untenable. The rot was growing and would eventually have undermined the ability of the Soviet Union to keep pace with a rearming America. Even in the absence of the neutron bomb, the intermediate range missiles that Reagan foisted on West Germany during the early 80s, or the silly SDI program, which, to date, has been a phenomenal waste of money and still cannot shoot down a conventional missile when the launch time and trajectory are known in advance to an accuracy greater than 50%, the Soviet Union would have collapsed. Gorbachev knew this and launched perestroika and glasnost as a last ditch effort to hold together the Soviet Union. The Cold War ended when Gorbachev refused to support the rigid regime of Erich Honecker in East Berlin. Honecker was finished, the Wall came down and the Cold War concluded.

Perhaps it is a uniquely American trait to regard the entire world beholden to what an American government does or does not do. When America speaks, so the logic goes, the rest of the world ignores the United States at its peril. Well, that's true to a certain extent. The failure to monitor and deal with the subprime mortgage crisis promptly has clearly placed the world economy at risk. What the American government does or does not do will have profound consequence to not only the United States, but to the world as a whole. Yet, the American aggression against Iraq has not led to an explosion of democracy in the Middle East. Rather, it has led to a prodigious decline in American respect and prestige throughout the world. Despite Mr. McCain's boast: he can no more will victory in Iraq than he can demand respect without changing the idiocy of 53 years of Republican cold-war thinking.

Trapped in his own ideological blinders, McCain apparently can not grasp how deeply America's credibility has fallen. He promises that he will solve all of the problems America faces and deal with challenges at home and abroad. He claims direct knowledge of issues, regions of the world and leaders, both near and afar. Yet, none of this seems powerful enough to clue him in as to how appalling America's standing is. He promises a government that will never again resort to torture in order to extract whatever questionable intelligence it might receive from detainees held in Guantanomo, imprisoned on overseas bases or sent via rendition to torture friendly regimes in the Middle East. Neither he nor Senator Obama could ever contemplate the dispatch of Bush, Cheney, Rumsfeld et al to an international war crimes tribunal.

Call this a debate, a prize fight or a street brawl - whatever you will. It can't escape the judgement that the world deserves better than to listen to the pathetic patter of Senator McCain who can't seem to reconcile platitudes with his own contradictory stands. He will help veterans, but he fights a bill in Congress to ameliorate veterans' care. He wants to help America get out of its current financial crisis, but then rallies Congressional Republicans into opposing legislation supported by the White House, House and Senate Democrats and Senate Republicans all in the aim of deregulating the economy even more and reducing the capital gains tax.

Go back home, Senator McCain, to whichever house you wish to reside in. Go back now before you embarrass us worse than you already have. Your selection of an utterly incoherent governor whose rambling responses might be understandable were she lost in the Alaskan wilderness, but whose every misstep is proof positive that she has risen to her own level of incompetence is only one major stain on your claim to be able to lead. That you would deign to grandstand in Washington and indirectly help torpedo necessary legislation that may well be the only bipartisan means to stave off the complete collapse of the American economy is unconscionable. That you would claim success for its passage before it bombed on Monday is even more absurd.

Spare us any further town halls, "debates" or candidate fora. Sing, if you must, about bombing Iran. We, the rest of the world, would be better off if you confined your vocal prowess to a karaoke bar.

MELTDOWN MADNESS

After the worst week on Wall Street since 1929, it's high time adhocracy is abandoned in favor of a concerted effort at reform of the regulatory regime that by lack of sophistication or sheer inaction failed to address the gathering storm. Expect the usual blame game to dominate popular media. Success has a thousand fathers, while no one wants to admit responsibility for a disaster. Still, some lessons can be drawn without allowing the discussion to degenerate into an attack on Obama or the Bush administration.

At the heart of the current crisis is the inability of investors, businesses and other creditworthy individuals to access credit. Money has fled from the credit market into T-bills or highly sought after tangible assets such as gold and other metals. People and institutions with money to shelter have even been willing to accept a 3 month Treasury bond rate of 0.05% interest (in effect, no interest at all) or the pointlessness of tangible assets that don't pay interest (gold) or accrete appreciably in value over time.

Alas, that's not what caused the crisis, however. The credit crunch is the financial industry's response to fear. It is a fear that mortgage backed securities may not be worth the paper they are printed on. Since no one knows the real value of any of these securities no one is willing to buy these "assets" when they are put up for sale in order to raise capital to meet declining asset values in order to maintain market capitalization.

Companies that could not do this have failed. Bears, Stearns was sold on the cheap to J.P. Morgan/Chase. Lehman Brothers filed for bankruptcy and will be scooped up on the cheap by Barclay's bank. Merrill Lynch avoid ignomy, but was swallowed up by Bank of America. Morgan Stanley might be acquired by Wachovia. And Wells Fargo may come to the rescue of WaMu.

AIG apparently was so large that only the government could come to the rescue by taking over its assets. Though nationalization was not used to describe what transpired, the U.S. government essentially nationalized the largest American insurance group. The ostensible aim was to avoid a further unraveling of shaky Wall Street institutions.

Now, the Treasury Department under the leadership of Henry Paulson is mulling over what to do with the toxic waste that pollutes too many Wall Street balance sheets. These are principally the mortgage backed securities whose value no one seems able to establish since there now is no market for them. Credit default swaps are also in the news, and these seem even more difficult to price since their ostensible purpose seemed to be the creation of an asset that guaranteed "Heads I Win, Tails You Lose".

An oft-cited precedent is the Resolution Trust Corporation, a short-lived institution that disposed of assets acquired through the defaults of various savings and loans institutions commencing in the late 1980s. RTC has been held up as a model as an entity that executed its assigned task at a cost far lower than originally estimated and even managed to dispose of some assets at a profit.

The analogy is misleading in so far as RTC acquired tangible assets. It held the mortgages to commercial and private real estate that had tangible value, even if many of the final values were less than the prices at which they were held on S&L balance sheets. Tangible assets can be disposed of. Unfortunately, there is hardly anything tangible in the toxic waste held currently by too many firms on Wall Street.

Unwittingly, the RTC - in order to auction off some of its more worthless "assets" - resorted to innovation, innovation that gave rise to the current mortgage-backed securities that are at the center of today's problems. To find buyers for non-performing loans, RTC initiated the securitization of these loans. What worked then won't now since it's the very existence of mortgage-backed securities and derivatives that are secured on a very shaky foundation, the subprime, Alt-A and even ostensibly sound mortgages that have gone into foreclosure. Worse: these mortgage-backed securities are not tied to specific properties. Rather, the mortgages were sliced and diced as the originating institutions spun them off to secure more capital to make even more loans of dubious quality. Untangling this mess of who owns what is difficult at best and impossible if one desires to separate the wheat from the chaff.

The current proposal foresees a huge government effort to suck up all of the worthless junk cluttering up Wall Street balance sheets. That's a catch-all phrase for whatever financial institutions cannot unload on the market. In this respect, whether it's Fannie Mae, Freddie Mac or some other agency, the government will acquire whatever junk Wall Street wants to jettison.

One of two models could emerge. The federal government could create an entity - let's call it Goodwill Securities - that would simply accept - without cost - whatever Wall Street wants to unload. Even though the government would expend money to dispose of this junk, it wouldn't have to spend money to acquire it. On the other hand, the federal goverment could create a different entity - let's call it Salvation Securities - that would offer some value for the junk they took in. Ultimately, the government might hope that it could dispose of the junk for more than it paid to acquire the "toxic securities".

Wall Street would benefit under either model, but not to the same extent. True, Goodwill Securities would allow Wall Street to purge its balance sheets, but no money would flow back to the companies unloading these securities. With Salvation Securities, Wall Street would get some remuneration. How much will depend on what the government is willing to lay out and that may reflect not a guess as to what these "assets" might be worth, but rather what it might take to keep these companies afloat.

If that's the case, then there is a real risk of moral hazard. Rewarding the reckless executives who ran their companies into the ground and paid themselves handsome bonuses along the way is a policy that will only serve to encourage others to undertake equally risky ventures, as they know that if they screw up hugely, the government will bail them out since the collateral damage would be horrendous. Indeed, one of the lessons from the government's refusal to bail out Lehman Brothers is that its executive officers failed to screw up badly enough. Had they really messed up, the government would have come to their rescue.

As a result, something needs to be done in order to rein in Wall Street excesses without damaging the valuable functions that Wall Street does manage to perform. Alas, demagoguery will compete with sound proposals to create a more regulated, yet flexible environment. Indeed, fulmination against short sellers has led to the banning of short selling of the stock of certain financial companies. But, short sellers do perform a valuable function. Betting that a company is not as sound as it appears or wishes to present itself forces the market to take note. If the short sellers are correct, a company's problems will be aired.

So what can be done? Two thoughts come to mind. Given the constant reference to "toxic waste", it is easy to imagine the need for a National Institute of Financial Research that would be tasked with examining the ever more exotic instruments dreamed up in Wall Street's derivative, securities and credit default swap markets in order to make the assumptions and processes understandable to leading financial analysts in the industry and at universities. Armed with the authority to subpoena whatever information required in order to conduct their analyses, the NIFR could provide the American public with valuable, advance information regarding possible future risks to the financial industry.

Think of the NIH (National Institute of Health). The NIH conducts fundamental research into diseases and endeavors to develop medicines that can cope with ever mutating viruses, bacteria and other germs. In some respects, the development of ever more exotic financial instruments is but a variation of the mutating aspects of germs.

An institution such as the NIFR could and should be financed by levees on the industry itself. Surtaxes on bonuses and executive compensation, as well as licensing fees, could be assessed of corporations that wish to partake of trading in the financial sector. Such fees should be regarded as legitimate costs of doing business and might go a long way towards reigning in the excesses of Wall Street.

The remaining investment banks could and should come under much closer regulatory scrutiny and be subject to the same regulations that the commercial banking industry is now subject to. Equalization of the regulatory regime is all the more urgent given the increasing merger of commercial and investment banks as Bank of America and Wachovia acquire investment banks.

Of course, much of this remains in the abstract for Main Street. Many of us do not hold assets of more than $100,000 in banks. We are not heavily invested in stocks, bonds and securities. We are just everyday joes living paycheck to paycheck. However, what Wall Street does or does not do can have a very direct impact on Main Street. If credit dries up - as it has recently - even the most creditworthy of businesses might find it difficult to secure loans. That impacts business activity and ultimately places in jeopardy the very jobs that we rely upon to pay for the basics of living, to pay back debt and perhaps to save for retirement. Thus, we all have a vested interest that Wall Street be rescued in a responsible way.

FANNIE MAE, FREDDIE MAC AND ELMER FUDD

Senator McCain is on the stumps this week touting his support for a Senate bill proposed in 2005 that he claims would have proactively dealt with the crisis that engulfed Fannie Mae and Freddie Mac. In the right-wing blogosphere, McCain's support for the Federal Housing Enterprise Regulatory Reform Act of 2005, introduced by Senators Hagel, Dole and Sununu, has been placed on a par with his support for the surge in Iraq. Once again, Senator McCain demonstrates his extraordinary prescience in anticipating and recommending courses of action that improved a disastrous situation (in Iraq) and would have headed off the federal bailout of Fannie Mae and Freddie Mac.

Once again, oversimplification rules the land. Just as McCain's recommendation to the president that a "surge" of troops be dispatched to Baghdad in order to avert civil war and stabilize Iraq so that its politicians might be given space to achieve political reconciliation has been deemed an unqualified success in some quarters, so too his support of the Federal Housing Enterprise Regulatory Reform Act of 2005 and 2007 would have been an equally profound success had the Democrats not blocked the way.

Well, there is some truth in this. With respect to Iraq, the dispatch of additional troops to Baghdad probably helped in some small way to defuse the bloodbath that was unfolding daily on the streets of Baghdad and in other Iraqi cities undergoing ethnic cleansing. However, the willingness of Sunni tribal chiefs to put an end to the insurrection in Anbar Province and the perspicacity of American military leaders in Anbar to meet the Sunni chiefs and agree to finance the Sunni Awakening by placing former Sunni insurgents on the American payroll probably was a more important factor.

With respect to the Federal Housing Enterprise Regulatory Reform Act, it is much less clear what this act would have accomplished. Prompted by the outrage at the financial shenanigans at Fannie Mae under CEO Franklin Raines who left his position at Fannie Mae with a golden parachute after the scandals that surfaced during the first Bush Administration, Senators Dole, Hagel and Sununu proposed to place Fannie Mae and Freddie Mac, as well as the Federal Home Loan Bank Board, under an independent regulatory agency. Among other things, the legislation would have dealt with golden parachutes of the like that rewarded Raines for his incompetence and gross abuse of power.

On the other hand, the Federal Housing Enterprise Regulatory Reform Act would have been charged with seeing to the continued expansion of home ownership throughout the United States. Would this act have continued the strict lending standards usually pushed by Fannie Mae and Freddie Mac or loosened them and encouraged these agencies to guarantee subprime mortgage lending that did not meet Fannie Mae and Freddie Mac guidelines is unclear. What it did seek was to rein in Fannie Mae and Freddie Mac lobbying that had attempted to lobby Congress in order to thwart the Housing and Urban Development's (HUD) ability to investigate Fannie Mae and to gain Congressional acquiesence in corporate pursuits that Fannie Mae endeavored to follow.

An important distinction must be made. Although charged with guaranteeing mortgages privately arrived at that met Fannie Mae and Freddie Mac requirements, neither entity was a government agency. These were shareholder own corporations that performed a quasi-governmental role: a mortage guarantor that lent stability to the private mortgage market.

What Raines had done was to play loose with accounting rules in order to overstate earnings and thereby enrich himself and other senior officers of Fannie Mae. Restated, these earnings showed that Fannie Mae had not achieved the results claimed and thus the bonuses paid to its senior executives were unwarranted. In this respect, Fannie Mae was just another Enron type scandal that rocked the early Bush administration.

Like Enron, the roots of Fannie Mae's troubles lay in the regulatory lapses of the Clinton Administration which took a hands off approach to Wall Street. Coupled with the desire of a Republican controlled Congress to deregulate Wall Street wherever possible, the hands off approach of Robert Rubin, Secretary of Treasury, conspired to allow slipshod accounting practices to run amok until the bubble burst in the early 2000s.

Enter Elmer Fudd.

Sporting his double-barrelled shotgun, McCain takes aim at Fannie Mae 2008. Neither his support of the Federal Housing Executive Regulatory Act of 2005 or 2007 had met with Congressional approval. Neither a Republican controlled Congress nor a Democratic controlled Congress acted on the bill. It died in committee. Somehow, McCain construes the troubles that afflicted Fannie Mae to be the same as those that plagued Fannie Mae in 2002. Has he been asleep for six years? Did he miss everything that transpired in 2007?

What happened to Fannie Mae and Freddie Mac in many respects was collateral damaged inflicted by the subprime mortgage crisis that saw the destruction of Ameriquest, a leader in subprime mortgages, and the takeover of Countrywide by Bank of America after BofA's lending of millions of dollars to Countrywide failed to staunch the bleeding of capital in Countrywide. Neither Fannie Mae nor Freddie Mac held many subprime mortgages nor were they the guarantor of subprime mortgages, many of which were not worth the paper printed on since income verifications were largely absent and many involved financial chicanery that overstated the true value of the mortgages negotiated. Despite many Congressional leaders desire to push Fannie Mae and Freddie Mac to guarantee or even purchase outright many of these worthless mortgages, neither corporation was at risk.

However, once the subprime crisis unfolded, banks and investors grew skitterish. The collapse of the housing market as the pool of potential buyers shrank once the subprime market evaporated led to a fall in housing prices. Now, many homeowners who had good mortgages found an uncomfortable inversion in their portfolios. Too many houses were worth less than the mortgages that financed their purchase. Such negative value caused many homeowners to default on their mortgages or even walk away from negative value homes. A cascading effect began to take hold as entire neighborhoods took on more and more the resemblances of ghost towns, boarded up as lenders pursued foreclosure. Property values for the remaining homeowners declined and pushed even more homeowners into foreclosure.

For investment banks, mortgage security insurers, as well as Fannie Mae and Freddie Mac, the implosion the housing market meant that credit markets began to seize. Banks tightened lending requirements and companies that needed to borrow on the credit markets in order to shore up their own capitalization found it difficult to acquire the necessary cash. Though subprime mortgages amounted to a small percentage of the total portfolio of mortgages held by Fannie Mae and Freddie Mac, their total value exceeded the capitalization of both firms. If either firm had to guarantee these suspect mortgages, they themselves could have seen a wiping out of their own capital.

In short, the subprime crisis had morphed into a general financial crisis that dwarfed the Savings and Loan crisis of the early 1990s when the market value of assets held by many S&L's was below the value of S&L deposits. Thus, a run on the banks would have brought ruin to any entity that didn't have enough capital on hand and whose holdings were not worth near the amount of money required to indemnify depositors.

Thus, it was unsurprising that Bear, Stearns collapsed under the weight of a run on the bank. The precipitous decline in its stock valuation indicated that the market did not believe Bear, Stearns could honor its obligations.

After a pause, during which a minor bank - Indy Mac - but a major player in the subprime industry experienced a run on the bank which required FDIC intervention, the pressure built up over the summer and culminated in an attack on Freddie Mac and Fannie Mae. Bailing out these corporations only led a panicked financial industry to go after new suspects: Lehman Brothers, AIG, Merrill Lynch and possibly Morgan Stanley, which, despite posting profits, became the target of a lack of investor confidence.

Mr. McCain's support of the Federal Housing Executive Regulatory Reform Act of 2005 may have been laudatory in the abstract, but this act would have done nothing to stem the destruction wrought by the subprime crisis. Indeed, as the subprime meltdown gathered strength in 2006 and 2007, McCain lent his support once again to the Federal Housing Executive Regulatory Act of 2007 that again would not have addressed the problem at hand.

So. claim what you will, Senator McCain. None of it is compelling. It is but another attempt to present you as an all-seeing Senator who has the solution, if only we elect him president. On the other hand, Senator Obama has made specific proposals with respect to the ongoing subprime mortgage crisis and its ripple effects that you attempt to dismiss by attempting to link him to the disgraced Franklin Raines who contrary to the claims of some of your supporters is not an advisor to the Obama campaign.

You call for a 9/11 commission to investigate the current mess as if that would contribute anything to a resolution of the problem. Worse: it's ironic that the commission you tout - the 9/11 commission was virtually ignored by policymakers. Yes, it made for good press and used up a fair amount of money, but it didn't lead to the resignation of Bush administration officials who ignored the warnings before 9/11. It didn't cause the Bush administration to tender their resignations en masse. Nor did it lead to the resignation of Bush or Cheney.

While your proposed commission might meet interminably, discuss, debate and deliberate the chain of events that has brought us to the current global crisis and even produce a weighty tome amenable to holding down worthless mortgage paper, the crisis goes on. Worse: you waffle. Was it wise to bail out Fannie Mae and Freddie Mac? Was taxpayer money put to good use in buying out AIG? Frankly, I place much greater faith in President Paulson and Vice-President Bernanke who have been tasked with saving what can be saved. Yet, you're the man with a plan. Fire them all and fulminate against the greedy who walked away from the mess they wrought with millions of dollars in bonuses. Elmer Fudd would be proud.

WHAT'S UP, DOC?

What a day on Wall Street! Though the fall in the Dow Jones Industrial Average was a significant drop - about 5% - in one day, it pales in comparison to what happened in October 1987. However, that drop in the Dow occurred one year before a crucial election to replace an outgoing, lame-duck president. This drop landed in the middle of an intense political campaign where the race, as best as we can tell, is neck and neck.

Until now, the McCain/Palin campaign has used lies, distortions and fabrications to pull even and lift McCain from the dead. Yet, by wrapping himself in the economic policies of the Bush Administration and promising to continue tax cuts for the wealthy, John McCain faces a deep problem. Will an economy in free fall on Wall Street take down Main Street and expose insurmountable rifts in the conservative coalition? Or, will cultural fears dominate and allow McCain/Palin to beat the odds and win the White House?

Casting himself as the maverick, McCain promises to clear out the Aegean stalls. Today he railed against a Wall Street mentality that has turned sound investing into high stakes gambling more appropriate to a Las Vegas casino than a New York brokerage. That the architects of such risky adventures still manage to walk away with millions of dollars - fair in terms of the contracts these CEOs held, unfair in terms of the damage they have wrought - is surely an outrage. John McCain agrees and promises to deal with these malacious millionaires. But how?

Obama took pains to lay the blame for the current mess on eight years of Republican misrule in the White House. He cited a failure to exercise proper oversight and promised to deliver a much better regulatory regime should he win the White House.

Neither candidate, though, addresses what may lie at the crux of the current woes on Wall Street. Despite Obama's desire to pin this problem exclusively to the Bush Administration, its roots lie in the Reagan Revolution proper. Unfettering the economy and allowing Wall Street to design ever more exotic financial instruments that few, if any, truly understand have made it impossible for regulation to ever be sufficiently proactive to ward off periodic bubbles and busts.

As independent observers have noted, the Clinton interregnum did not diverge one bit from this aspect of the Reagan Revolution. Indeed, many of the "regulatory lapses" trace their origins to the Clinton regime. It was during the Clinton Administration after Treasury Secretary Robert Rubin won out over Labor Secretary Robert Reich that commerical and investment banks were allowed to "run amok". Accounting firms gained notoreity by facilitating ever more arcane off-balance sheet reporting. The Enron debacle that occurred during late 2001 had its roots during the Clinton Administration.

During the Democratic primary season, it was refreshing that Obama managed to put together a grass-roots funding of his campaign that was independent of democratic leaning Wall Street financiers who had aligned themselves almost exclusively behind Hillary Clinton. Without kowtowing to a whining Wall Street, Obama has appeared to be much more sympathetic to auto executive pleas for help as long as any government money is used to re-tool the automotive industry, produce fuel-efficient cars and herald a new era of innovation in an important industry. For Obama, it seems as if bail-outs must have a purpose and serve the overall interests of the American economy and not just appear to reward campaign supporters.

Still, both campaigns should read the important opinion piece that appeared in yesterday's New York Times. Composed by Tyler Cowen, economic professor at George Mason University, the article argued that it was not a lack of regulations on the financial sector that wreaked havoc on Wall Street. Rather, it was the general ineffectiveness of myriad existing regulations that failed to rein in excess financial speculation and allowed mortgage backed securities to profilerate without requiring the necessary transparency that might allow investors to accurately assess risk and the necessary paperwork to support fictitious income claims for would be home buyers.

Pushed by Senator Phil Gramm, the removal of some of the protections of the 1933 Glass-Steagall Act in 1999 may have helped break down the barriers between bankers and brokers and allowed a resurgence of the American economy, but where was the replacement regime that should have emerged to monitor the new American financial sector? The Clinton Administration didn't push for one, and Senator Gramm didn't wish one. What was left was a hodge-podge of regulations that may or may not have been adequate to deal with a housing bubble, the subprime mortgage meltdown that morphed into a general mortgage crisis and has led to weakened financial institutions reeling under credit markets that have seized up as commercial banks seek to protect themselves.

An earlier bout of financial distress culminating in the Dot-com bubble and the collapse of Enron in 2001 did lead to some regulatory reform. Despite the initial and ongoing resistance to reform measures such as Sarbanes-Oaxley have helped bring an air of transparency to corporate accounting. But, Sarbanes-Oaxley was only one small step towards an overhaul of the entire post Depression regulatory regime.

Both Palin and McCain claim that as mavericks, it will be their task to come in and clean up Washington. How they are going to succeed is dubious at best, their protestations notwithstanding. How can you, Senator McCain, clean up Washington when you are going to bring back to Washington people such as Phil Gramm whose Congressional career and subsequent Wall Street career demonstrate that they were and still are part of the problem? How, Senator McCain, are you going to clean up Washington when you so closely identify your economic policies with those currently in charge of Washington? What gives?

Perhaps we should hope that Palin DOES ascend to the Oval Office so that she can bring more of her friends and associates from Wasilla, the people she went to school with who filled important and high-paying positions in the Palin government in Alaska. After all, these people certainly had nothing to do with the financial destruction currently savaging Wall Street. Alas, Sarah, Michael Brown, the quintessential amateur, had nothing to do with Katrina devastating New Orleans. He couldn't order Katrina to turn away from the Big Easy. In the aftermath to Katrina, Brownie didn't do such a "heckuva job", and Sarah Palin's amateur hour won't save Wall Street or Main Street either.

And then, there is Douglas Holtz-Eakin. Officially, Mr. Holtz-Eakin is the chief economic advisor to the McCain campaign. In interviews, he reveals an understanding of the current mess on Wall Street that is far more nuanced than anything either Mr. McCain or Ms. Palin have offered. Mr. Holtz-Eakin proclaims that Senator McCain wants a uniform regulatory regime that theoretically would regulate equal actions equally. In other words, if investment banks want to act like highly regulated commerical banks, then they too should be subject to similar rules and regulations. In addition, Holtz-Aiken sees the need for greater transparency in order to penetrate the fog of arcana that allowed Wall Street to slice and dice securities to the point that no one, not even the originating institutions, appeared to truly understand what it was they were offering the investing public. De-toxification of these "assets" is what is required and transparency certainly is one part of the problem.

What's not transparent, though, is how exactly Mr. Holtz-Eakin's views are reflected in the mind set of John McCain. In the past, McCain has acknowledged that he doesn't really understand the economy that well. In March, he admitted to the Wall Street Journal that he is fundamentally a deregulator. Certainly, he demonstrated this during the early 90s Savings and Loan scandal when McCain, as one of the five senators - Republican and Democrat - caught up in the Keating Five scandal, urged federal regulators to back off from pursuing Charles Keating, then head of Lincoln Savings and Loan.

Even more troubling are the views of Phil Gramm, McCain's campaign co-chair and likely Treasury Secretary in a McCain/Palin administration. In the summer, ex-Senator and UBS lobbyist Phil Gramm sought to place the American malaise squarely on the shoulders of whiners. It wasn't toxic assets cluttering up the balance sheets of mortgage brokers and investment banks that were poisoning the public's perceptions of an economy that was fundamentally sound. It was an imagined state of mind that saw the United States standing on the threshold of perhaps the greatest economic challenge since the Great Depression. Who needs clarity and transparency when it's all in the mind, ya know!

So where do the views of Douglas Holtz-Eakin fit in exactly? Is he mere window dressing? Is he the fig leaf covering up the naked continuation of Bush/Cheney non-regulation and diverting attention from Senator McCain's disdain for regulation? Is he but a lone wolf sounding the right chords, but lost in a sea of other advisors such as Senator Gramm who really don't see a problem either on Wall Street or Main Street? Or, is he just another hatchet man who conjures nonsense in order to inflate the importance of John McCain by touting the latter's supposed role in facilitating the invention of the Blackberry?

Maybe the upcoming debates will provide an opportunity to see which John McCain emerges. Will it be the economic illiterate who parrots the views of advisors such as Phil Gramm and wraps it in the language of Herbert Hoover? Or, will it be the reasonable sounding, fairness espousing, complexity acknowledging economic views of Holtz-Aiken? Which McCain is it anyway? Straight talk as espoused by Holtz-Aiken or pure bull a la Gramm?

If ever Obama had an opportunity to get this campaign back on track and debate the issues, now is the time. If John McCain wants to resurrect Herbert Hoover and proclaim the underlying strength of the American economy, then it's time for Obama to become a truly hard hitting candidate. Compelling McCain to come clean would go a long way towards clarifying the stakes in this election. Pointing out the dangers inherent in allowing Bank of America to bail out first Countrywide and now Merrill/Lynch might persuade Americans of the need for greater transparency and accountability in financial transactions and alert us to future danger in letting such financial behemoths arise without an adequate oversight regime in place.

Melding FDR and JFK and presenting the warm and highly personal campaign that produces the hope and trust necessary between voter and government in order to enact legislation and rules that establish greater transparency, accountability and regulatory innovation in an Obama/Biden administration may be necessary, but it doesn't seem sufficient. Slamming McCain on specifics and holding him accountable for his deregulatory ardor might just do the trick. Of course, we could just let Elmer Fudd continue to baffle and befuddle the masses by masking the morass with more mascara.

"Nyah, what's up, doc?"