Republican plans to keep their tenuous hold on power by preventing people from voting

April 23, 2007

Texas Proposes TWO Poll Taxes, Same Requirements Kept Tens of Thousands Off Medicaid Rolls

By McCamy Taylor

Today's Fort Worth Star Telegram has an excellent editorial about two bills in Texas which Republicans have introduced in an attempt to protect their majority in the state legislature. The two bills would require voters to provide (at minimum) a certified birth certificate in order to register to vote and a photo ID such as a driver's license along with a voter registration card in order to cast a vote. Ironically, federal Medicaid requirements passed last year that recipients show a certified birth certificate and a photo ID have lead to tens of thousands of people being denied benefits to which they were entitled.

Recall that Tom Delay is under indictment for orchestrating a scheme to funnel corporate money into state races (illegally) to help the GOP take over the Texas legislature so that the state could be redistricted to help the GOP retain control of Congress. The plan backfired. Delay got caught. The Republicans lost Congress last fall. However, the Texas Legislature is still in the hands of the GOP and they would like to keep it that way.Therefore, they have introduced two bills that will make it much harder for people to vote.

Two bills are scheduled for debate Monday in the lower chamber: House Bill 218, which would require a photo ID along with a voter registration card to cast a ballot, and HB 626, which would require a certified copy of a birth certificate, passport or naturalization certificate to register to vote.

Opponents, who promise an intense floor fight, note that such requirements put undue hardships particularly on ethnic minorities, the elderly and the poor. They also say that these bills were introduced because these citizens are also believed to trend toward voting Democratic.

Considering the cost of certified copies of documents, these bills are, in effect, proposing a new poll tax. A certified copy of a birth certificate costs $23; a passport is $85; a naturalization certificate is $200.

There are several problems that are immediately apparent with these bills. The most glaring is the requirement for a minimum of a certified birth certificate for registration and a driver's license to cast a vote. Last year the federal government passed a law requring that people registering for Medicaid present a certified birth certificate or other documents as above.

A new federal rule intended to keep illegal immigrants from receiving Medicaid has instead shut out tens of thousands of United States citizens who have had difficulty complying with requirements to show birth certificates and other documents proving their citizenship, state officials say.

Florida, Iowa, Kansas, Louisiana, New Mexico, Ohio and Virginia have all reported declines in enrollment and traced them to the new federal requirement, which comes just as state officials around the country are striving to expand coverage through Medicaid and other means.

Think about it. If people are unable or unwilling to comply with the requirements government sets in order to get health insurance (that they may desperately need) what are laws requiring a certified birth certificate to register and a drivers license to vote going to do to voter turn out? You do not need to have a degree in political science to figure that one out. High voter turn out last fall was credited with Democratic gains across the country (including Texas). Supressing voter turnout---especially among those who will have the hardest time coming up with the money to pay for a certified birth certificate and among those who may not drive--will improve Texas Republican's chances of holding on to the state Legislature in a year when no Bush will head the ticket.

However, there may be more to these two vote supressing bills than a mere instict for self preservation on the part of the Texas state Republican legislators. The Bush administrations' efforts to create the illusion of a vote fraud crisis has been a failure. The Election Assistance Commission which was supposed to uncover widespread vote fraud, instead found little or no vote fraud (except with absentee ballots, which tend to favor Republicans). The Bush administration tried to supress the report.

And two weeks ago, the panel faced criticism for refusing to release another report it commissioned concerning voter identification laws. That report, which was released after intense pressure from Congress, found that voter identification laws designed to fight fraud can reduce turnout, particularly among members of minorities. In releasing that report, which was conducted by a different set of scholars, the commission declined to endorse its findings, citing methodological concerns.

Worse yet for the Bush administration, as part of the Gonzo-gate scandal, it has become apparent that federal attorneys were pressured to prosecute people who made simple errors in filling out voter registration forms or in casting votes in order to inflate the non-existent problem of vote fraud. Biskupic of Wisconsin has come under particular fire for his excessive and often unsuccessful prosecutions in this area. Stellar prosecutors in New Mexico and Washington were dismissed because they would not act more like Biskupic.

With the war in Iraq continuing to anger voters and the tide of public opinion turning towards the Democrats according to a recent national poll, how are the Republicans to keep from having more losses in 2008? One way is to keep control of state governments that are already in Republican hands. To do that, they need to supress Democratic voter turnout in those states. The most reliable way to do that is to make voters pay money and present documents and stand in line and jump through as many hoops as possible in order to vote.

The problem with the poll tax--a law that requires that a voter pay a fee or do something that costs money in order to vote--is that it is illegal. Courts have traditionally ruled against them. The problem with getting a poll tax in place in a state like Texas is the Voting Rights Act which assumes that any law which a state like Texas or Georgia or Mississippi passes that relates to voting will be illegal and therefore the Department of Justice must sign off on it.

Under John Ashcroft and Al Gonzales this has not been so much of a problem. The Bush administration Justice Department has overruled its own career lawyers and rubber stamped Voting Rights Act violating laws in Georgia (its poll tax) and in Texas (the redistricting). It has been up to the courts to set things right. Below are links to several of my journal entries at Democratic Underground about this topic.

However, the courts are getting stacked with a bunch of Federalists, which is why I called this journal entry SCOTUS Votes 5:4 to Uphold Voting Rights Act: Democracy By a Thread

Thanks to Ashcroft's non-enforcement and the climate of Anything Goes, election fraud reached epidemic proportion in 2004, with bogus voter registrations in which Democrats found their registration forms shredded, more questionable E-voting and, of course, Ohio Secretary of State Blackwell's blatant disregard of the Voting Right's Act. He broke the law so many times, it was ludicrous---and the Department of Justice looked the other way in every single instance, because everything Blackwell had done favored the Attorney General's boss.

Now, thanks to this laissez-faire attitude, the gloves are off. State legislatures in the Carolinas, Georgia, Florida and Ohio have passed laws that violate the Voting Rights Act. Not only has the Department of Justice failed to act, it actually rubber stamped a photo ID law in Georgia that the federal courts later struck down as amounting to a poll tax. Secretaries of State in Ohio and California are actively disenfranchising voters--and no one is acting to defend the voter's rights. Not the Department of Justice, not the Republican controlled Congress.

The only federal governmental body left that seems to believe that the Voting Rights Act is still the law of the land is the judiciary. And even at the Supreme Court of the United States, it is a 5 to 4 decision. One more Justice, and the Voting Rights Act will be dead in our lifetime, whether or not Congress ratifies it again.

Unfortunately, we may fast be approaching the tipping point with the SCOTUS. In the Texas redistricting case, the Court split its decision. What will the presence of Alito mean? Last fall the court let stand an Arizona law requiring that people show photo ID in order to cast a vote. What if Stevens or one of the older more liberal Justices retires suddenly and W. has a chance to replace him? Will the GOP get a SCOTUS approved poll tax for voter registration, too? What will this double hurdle do to voter participation?

I believe that the two bills under consideration in the Texas House may well be part of a larger scheme orchestrated by people like Karl Rove to get a poll tax law--or two-- before a new, more conservative Supreme Court. Now, in order for this plan to work, Al Gonzales will have to do what he does best. He will have to hinder the Voting Rights division at the Department of Justice, since Texas is one of the states which is automatically subject to federal scrutiny. Although these laws are almost certainly going to suppress Democratic voter turnout--just look at what similar laws did to Medicaid enrollment--and although there is no proof that there is any need for theses laws, we can anticipate that the Department of Justice will rubber stamp them, if they make it through the Texas Legislature.

At that point, they will be subject to state and then federal court challenge. If the Republicans can get the new Roberts court to make a ruling that says "It is perfectly ok to demand that voters attempting to register must furnish documentation costing this much money even in the absence of any proven threat" then we will see a flurry of poll tax laws being proposed all across the country. They will become the "No gay marriage" bills of the second half of this decade.

Read the comments section at the end of the Fort Worth Star Telegram editorial. There is a hard core faction of the Republican base that it absolutely outraged that minorities and poor people and the disabled get to cast the same vote that they are allowed to cast. They take delight in the thought of stripping someone else of a vote. These are the people whom Karl Rove and the RNC are attempting to appeal to with their flurry of new and improved poll taxes.

Ideally, these two laws should be shot down in the Texas legislature. I hope that by the end of the week, they will have been forgotten. I worry that they are part of a larger scheme dreamed up by Rove and Co. and that we will be hearing a lot more about them in the months to come.

Here is a link to Sonias running thread about these bills over at DU

URL

Zionism its Role in World Politics

Şenay Yeğin

Tuesday , 24 April 2007

Author: Hyman Lumer. New York: International Publishers, 1973. 152 pages. ISBN 0-7118-0383-X

In the 8th Century, after the exile of Jews from Jerusalem by the Romans, the word “Zion” has been uttered by the Jews to emphasize their longing for the Promised Land: Palestine. Today, the word Zion is being used as a modern term, Zionism which is the name given to the movement of the Jews who are in Diaspora to gather on the land of Palestine again. Zion has become an ideology as Zionism; but it did not serve to the civilization development in the Middle East. Instead Middle East came out to be a deadlock. Is it a deadlock because of pure Zionist intentions or imperialist missions? The American Marxist Hyman Lumer in his book “Zionism Its Role in World Politics” answered this question by defining Zionism as a nationalist movement serving to imperialism and US aims over the oil territories.

It is easy to understand the message that Lumer tries to give from the cover of the book on which there is a shape of world circled by “Zionism”. Lumer’s thesis in his book is that Zionism is not only gathering of Jews in the Promised Land but its support to imperialism which is a big actor in world politics. In the first part of his book, Lumer introduces Zionism by explaining its roots and nature, its contribution to the establishment of Israel, and its socialist side. In the second part, his emphasis is on the purpose of Zionism which is being in the service of imperialism. He supports his arguments by questioning how Zionism got support from imperialist powers, what kind of an expansionist policy it had and its imperialist policies over Africa. In the third part, Lumer elaborates on the Zionist organizations in the US and on the role of monopoly capital. In the next part, he emphasizes that Zionism was a nationalist movement and he explains that Zionism’s reaction was the formation of a fascist organization, the Jewish Defense League. In the fifth part, he points to the Soviet Jews in Israel and in the last part; he emphasizes the reaction of Jews in the US and in Israel to Zionism.

In the first part, Lumer defines political Zionism by the creation and perpetuation of a Jewish state and makes a distinction with its religious definition which is the belief in an eventual return to the Holy Land upon the coming of the Messiah. The two most important forerunners of Zionism were Leon Pinsker and Theodor Herzl who wrote books about it after the development of anti-semitism with the upsurge of imperialism and racism in the 19th Century. According to Lumer, as a political ideology Zionism was based on two points which were that the Jews throughout the world form a nation and that anti-semitism is eternal. He emphasized that Zionism is not only an ideology, but it is also an organized movement which is based on the principle of the establishment of a state which is purely Jewish to escape anti-semitism. However while escaping anti-semitism; Lumer emphasizes that Jews treated Israeli Arabs as second-class citizens.

In the first part, Lumer emphasizes that there were also socialist trends in a nationalist movement like Zionism in the beginning of 1900s. The supporters of socialist Zionists in the tsarist Russia had gathered under organizations like Workers of Zion which supported a socialist Jewish state in Palestine. Moreover Lumer emphasizes that today; there are socialist developments in Israel like kibbutz, which is the communal enterprise whose members in return provided only by the necessities of life. He emphasizes that 58.5 percent of Israel’s economy is private sector which belongs mostly to foreign capital.

In the second part of the book, Lumer is supporting his argument that, Zionism is serving to imperialism because of Israel’s will of all of Palestine, its expansionist policies and its relations with Africa. Israel willed not only to possess their homeland but all of Palestine. Herzl wanted Jews to be backed by imperialist countries such as the Ottoman Empire, Germany, Russia and France for possessing the land of Palestine. Other than these countries Britain and the USA supported Jews for their mission, too. By the Balfour Declaration in 1917, with the invasion of Palestine by Britain, Jews were assisted by Britain. Besides Britain a committee in the USA, American Emergency Committee for Zionist Affairs, was founded for the establishment of a Jewish commonwealth.

Between 1958 and 1966, Israel implemented expansionist policies; forming ties with 39 countries in Africa, 23 in Latin America, 11 in Asia and 8 in Mediterranean. Israel supported French imperialism against the independence movements of Algerians and it joined to Britain’s and France’s invasion of Egypt in 1956. In 1958, after the leadership of an anti-imperialist regime in Iraq, Israel supported Britain and US when their troops landed to protect Jordan and Lebanon from the regime. In 1967, Israel used its expansionist policies by invading Egypt. However its expansionist policies were not only for Arab countries but also for African countries. Israel was basically an associate of South Africa which had an apartheid regime. However, it gave military aid to national liberation fronts in Africa for presenting Israel as a socialist but not communist and more acceptable than imperialist powers.

In the third part, Lumer emphasizes that Zionism is in association with the US by explaining Zionist organizational movements there, US aid to Israel and its dependence on US capital. In the US, Zionism did not have many followers in the beginning of the 19th Century, because the ones who did not support it thought the return to the homeland could only occur by the upcoming of the Messiah. However after the Holocaust and the upsurge of Jewish nationalism, organizations were founded some of which were Women’s Zionist Organization of America, Zionist Organization of America and United Labor Organization of America. Moreover, the US Jews aided Israel’s political parties and the institutions that support their policies since the establishment of Israel, under the umbrella organization called The United Jewish Appeal. Furthermore, Lumer emphasizes that US imperialism shows itself in the Israeli economy, by saying that a vast part of investments are owned by Ford, Motorola and other US companies. Eighty percent of Israel’s foreign debt is also owned by US government which makes Israel dependent on the foreign capital of the US imperialism. Moreover, the main point of the book is given in this part which is that US is trying to use Israel as a weapon against Arab liberation movement and its threat to US oil investments by making it dependent on its capital. Especially after the 1967 war with Egypt Israel became highly dependent on US.

Besides, Lumer’s emphasize on Israel’s dependence on the US capital, in the fourth chapter, he raises the point that Zionism became a reactionary movement and that it supported racism by forming an ultra-racist organization which tried to combat Soviet Russia, blacks and Arabs. According to Lumer, if a country is capitalist it uses racial or nationalist oppression to prevail its exploitation. For the Jewish question, there are Marxist and Zionist views. According to the Marxist point of view Jewish question is based on the recognition of the class roots of anti-semitism and working class unity. On the other hand, the Zionists view anti-semitism as everlasting and a distinctive form of repression. Moreover, he gives the example of the Soviet Russia which resolved the Jewish question by eliminating the capitalist roots of racism. According to Lumer, the incline of Jewish nationalism after the 1967 war caused the establishment of Jewish Defense League (JDL) in 1968. The shift to right among Zionists is being criticized by Lumer. He says that racism fosters the exploitation of workers and anti-semitism only occurs in the societies of class exploitation. According to Lumer, it was a reactionary movement that was founded for protecting Jews from blacks in New York. JDL was found guilty because of the bomb attacks. Some of the targets of the attack were against Soviet News Agency, Soviet Embassy, and Palestinian Liberalization Organization. Moreover, Lumer emphasizes that JDL was used as a tool for CIA’s anti-Soviet operations.

In the fifth part, Lumer singles out the point that the difficulties that Jews came across in the Soviet Union are only lies. The Jews in the Soviet Russia came across with Zionist hostility especially after the 1967 war. The Soviets were accused by implementing discriminatory laws to the Jews like not allowing them leave the country or by forcing them to carry domestic passports to expose Jews to discrimination. In the Soviet Russia, Jews’ religious freedom was restricted, too. However, Lumer emphasizes that the United Nations Declaration of Human Rights invoked the Soviet Jews to immigrate to Israel. However after the immigration Jews wanted to return to Soviet Russia, because it was hard to live in a capitalist system. Moreover, he points out that there is a big lie which claims that the Jews in the Soviet Russia were treated intolerably by the Russians.

In the last part, Lumer is making emphasize on the point that there is a rising opposition to Zionism in the USA and Israeli policies in Israel. There is an incline of peace movements in Israel which are usually against Israeli imperialist policies. The opposition in the US is generally among the young Jews who have leftist political views. It is not only among Jews but also among non-jews, too.

As far as Lumer has Marxist point of views and that he was one of the editors in the Political Affairs Magazine which is a publication of the Communist Party in the USA, it must be considered that a Marxist point of view can not be neutral for criticizing a nationalist movement of the Jews. It must be noted that this book was published in 1973, while the Soviet Union was still alive. So as a Marxist author in a capitalist country, the longing for a communist regime and also criticizing Zionism as a servant of imperialism are both inevitable. However, when the policies of Israel are compared with its current policies, it is noteworthy that Israel is still making attempts to invade its neighbors and it is still a major ally of the US.

Sami Al-Arian's wife speaks on husband's incarceration

Audio Interview
Audio, Crossing the Line, 23 April 2007

Sami al-Arian (Arab American News)

Professor Sami al-Arian has been incarcerated for over four years in federal custody. Although he was acquitted of all charges to ties with a Palestinian "terrorist" organization, a Federal judge remanded him indefinitely.

EI contributor and producer of the weekly podcast Crossing the Line Christopher Brown interviews Nahla al-Arian, the wife of Sami al-Arian, as she discusses his current situation, and the affect that a recent 60-day hunger strike had on him and his family.

Listen now [MP3 - 8.1 MB, 17:44 min]

Health Care Alert

Sign this now!

We Need Real Universal Health Care Coverage

By John Conyers

Created Apr 23 2007 - 11:54pm

The health care crisis we face today affects everyone, overwhelming America's workers and businesses. Many low-wage earners do not receive health benefits and cannot afford insurance. Higher salaried workers know that the cost of their health insurance may lead to the next round of layoffs.

More than 46 million Americans lack basic health care coverage. Millions more face high deductibles and staggering costs leaving essential care out of reach.

We can no longer seek gradual reforms or provide insurance companies with financial incentives to solve the problem. The time has come for a single payer national health care system that provides complete care to all Americans.

Since the 2006 elections, we have heard plenty of new voices calling for universal health care. Unfortunately, many of these claim to be universal health care, but are merely bandaids to the problem.

One proposal has the federal government giving billions of dollars to insurance companies to cover the uninsured. Other proposals only cover children or shift the entire burden of healthcare to employees in the form of health savings accounts.

Unfortunately, patchwork fixes like these will not work. The only way to provide a lasting solution to our health care crisis is through single payer universal health care. We must not let the movement toward universal health care be co-opted by proposals that serve to enrich those seeking to extend the status quo at the expense of true reform.

To address this need, I have introduced H.R. 676, the United States National Health Insurance Act. My bill would create a single payer universal health care system by strengthening and extending the Medicare program to cover all Americans.

Please help me enact this important legislation by signing this statement of support [0]. We must have real reform through a single payer universal health care program if we are to solve our nation's health care crisis.

Inflation: The Latest US Import?

United States

April 20, 2007

By Richard Berner | New York

By any metric, US “core” inflation cooled significantly in March, renewing hopes for Fed ease and re-igniting risk appetite in global markets. Measured by the CPI, core inflation slowed to 2.5% in the year ended in March from 2.7% in February. Likewise, we estimate that measured by the core personal consumption price index (PCEPI) — the Fed’s preferred measure — core inflation slowed to just 2.1% in March. Both readings are fully 50 basis points (bp) below their peaks of last September, apparently putting inflation on track to come in at rates consistent with what the Fed deems to be price stability.

However, I think the March readings may represent a lull, and that some inflation risks are rising again. Like many other things these days, those risks are no longer entirely home grown; as in the 1970s, we may now be importing them from abroad. The upshot: Inflation has peaked, in my view, but there will continue to be flare-ups and the decline will still be gradual. Here’s why.

There’s no mistaking the decline in core inflation measured by the CPI over the past six months. While surging energy quotes drove up the headline rate to a 2.8% year/year gain in March — a seven-month high — the core rate decelerated to a ten-month low. Yet, three factors that depressed core prices in March were likely transitory, and all three may reverse in April. Seasonally adjusted hotel room rates plunged by 2.3%, as the actual increase failed by far to match the normal seasonal pre-vacation gains. Although such rates measured by the CPI rose just 1.3% from a year ago, hotel industry revenue per average room data suggest gains of 6-8%, so a rebound in the CPI version seems likely next month. Ditto for the 1% decline in apparel prices: This year they failed to match the normal increases accompanying the introduction of spring lines, and we suspect that a rebound is likely soon. Third, medical care goods quotes (mostly for prescription drugs) fell by 0.3% in March, marking the fourth decline in the last five months. With wholesale drug prices up by 3.5% in the last year, a rebound here also seems likely.

More important, several global factors seem likely to contribute to US inflation over the next few months. Among them: Strong global demand and limits on supply are boosting food and energy quotes. Energy quotes declined at an 11.5% annual rate in the three months ended in December, but jumped at a 22.9% annual clip in the three months ended in March. Food prices, meanwhile, have accelerated from a 2% annual rate in the September-December span to a 3.9% annual rate in the past three months. We believe that sellers typically pass some of these price hikes through to core prices with roughly a 2-4 month lag, via transport fares, some rents, and other goods and services. Just as the energy price declines of late last year may thus have modestly cooled core inflation in the past few months, so will the recent acceleration likely, if temporarily, refuel the core composite in coming months.

Perhaps more lasting, US consumer import prices are accelerating and the dollar’s recent decline may magnify their faster rise. Over the year ended in March, import prices for consumer goods other than motor vehicles and parts accelerated to 1.8%, the fastest pace in more than eleven years. The acceleration was broadly based, including in prescription drugs (from -0.9% to +2.5%, a 340 bp acceleration); toiletries and cosmetics (to 2.1%, a 200 bp swing); household goods (1.6%, a 140 bp swing); toys and sporting goods (up 140 bp to 1.4%). The dollar’s decline probably influenced that acceleration; over the past year, the Fed‘s broad, nominal trade-weighted dollar index declined by 3.4%. Not all of the dollar’s recent decline has yet shown up in quotes for imported goods, however. If the dollar continues to slide, especially against the Asian currencies and to some extent Europe, as we suspect, import prices likely will accelerate further, and add a tenth of a percent or two to consumer inflation.

Importantly, the slipping dollar isn’t the whole story. The boost to inflation from a weaker dollar has dwindled over the past two decades, reflecting weakening links between exchange rate changes and import prices and ultimately consumer prices. Several Fed economists in a paper last year found that the decline is a global phenomenon. Across G7 currencies, their work suggests that exchange rate pass-though to import prices has declined to 40% over the past 15 years from 70% in the 1970s and 1980s, and in the US, it has declined to only 30% (see Jane Ihrig et al. “Exchange-Rate Pass-through in the G7 Countries,” International Finance Discussion Paper 851, January 2006). That is, a 10% sustained depreciation in the dollar might, other things equal, boost the import price level by 3% over a 2-3 year period.

The empirical fact that such exchange-rate “pass-through” has apparently weakened over the past several years, like the flattening in the Phillips curve, may reflect good monetary policies. As well, it probably results from the globalization of markets and production that has promoted “pricing to market.” That is, exporters not wanting to surrender market share have more closely matched domestic-origin prices in setting their export prices in foreign currency, and they tend to hedge their currency risk either ‘naturally’ by sourcing abroad or financially. That probably muted the pass-through and lengthened the lags from currency moves to changes in relative prices long before the dollar began its descent.

Notwithstanding disinflationary monetary policy, I also suspect that the pass-through link varies with the cyclical state of the global economy and inflation expectations. Considering those factors, the weaker dollar may explain half the recent increase in import prices. And the booming global economy may have accounted for the other half, by increasing the pricing power of exporters to the US. Looking ahead, the combined effect of the dollar’s decline and the global boom on US inflation now could be larger than it was over 2002-04 (for more discussion, see “The Dollar and Inflation,” Global Economic Forum, May 5, 2006). The cyclical state of the domestic economy also matters for assessing the impact of all these global factors on US consumer price inflation. Despite the sluggish pace of US economic activity over the past year, the level of resource utilization is still high, and sellers may thus succeed in passing such price hikes through to consumer inflation.

Global factors — higher energy and import quotes and a weaker currency — may also contribute to US inflation by reviving inflation expectations. So far, however, there’s little sign of that: Inflation compensation measured by 10-year TIPs spreads plunged by 10 bp on this week’s good inflation news, to 240 bp. To be sure, the reaction in distant-forward breakevens was more muted, amounting to 3-4 bp, hinting that these developments haven’t much altered market participants’ underlying inflation expectations. In mild contrast, survey-based inflation expectations, such as the measure of 5-10 year expectations compiled by the University of Michigan ticked up to 3% in March. But it’s early days for assessing the impact of these developments on expectations.

The most important factor affecting inflation expectations is back home: The Fed. Clear goals and objectives and a straightforward sense of how the Fed will get there are both critical to anchoring longer-term inflation expectations. And by an large, the Fed has been successful in doing exactly that over the past several years. Lately, however, when the Fed says inflation is too high, market participants aren’t sure how to calibrate such statements. That’s partly because there has been some ambiguity over the Fed’s implicit inflation objective.

Officials have described their preferences in terms of a 1% to 2% “comfort zone” for core PCE inflation, but for three years, core PCEPI has run above the upper end of that zone. Many market participants thus assume that officials’ de facto target is 2% and not the 1½% mid-point of the “comfort zone.” If the Fed were clearer about this critical issue — whether they pick one or the other — I think it would more firmly anchor inflation expectations. Personally, I prefer 2%, because it builds in a bigger cushion for measurement error and disinflationary shocks (see “More Clarity, Less Guidance From the Fed,” Weekly International Briefing, March 30, 2007). Either way, together with a set of global factors potentially pushing up inflation expectations, lingering questions about the Fed’s objectives may translate into market uncertainty, pushing up term premiums and steepening the yield curve.

That steepening seems to be irregularly underway, and is becoming a popular trade. Some investors are assuming that the Fed now has a green light to ease and thus look for a bullish re-steepening. Fixed-income markets now discount a better-than-even chance of a cut by September for the first time in about a month. Don’t count on it: “Base effects” may cap year-on-year inflation for now, since comparisons with last spring are tough. But one month’s good inflation data won’t likely be sufficient to convince the Fed that the risks are balanced, and officials also may worry that global fundamentals are no longer disinflationary. Instead, the curve may steepen bearishly as term premiums rise and inflation prints turn a bit less favorable. Investors in that context should also consider TIPs. They’re more attractive now with some inflation upside, and seasonal “carry” is now relatively favorable (because TIPS are priced off the headline CPI before seasonal adjustment, and the seasonal upswing in gasoline and energy quotes is still underway). According to Morgan Stanley Interest Rate Strategist George Goncalves, 10-year TIPS are priced for a widening of about 12 basis points from current levels. I’m willing to bet that inflation surprises could easily take spreads higher.

There are risks in both directions, however. A rebound in inflation could quickly undermine today’s financial-market bullishness. The threat of protectionism could add another layer of risk to the inflation outlook, because it would block competition in US markets from cheaper overseas goods and services. Escalating protectionism, moreover, might extend and/or intensify the dollar’s recent decline. Perhaps the biggest irony in this context is that while many believe that globalization will be eternally disinflationary, courtesy of ever more tightly-integrated global supply chains and other global spillovers, globalization in these circumstances may have — at least for now — turned into an inflation tailwind.

Richard Berner

George McGovern: "I Expect To See Cheney And Bush Forced To Resign"

George McGovern: Cheney is wrong about me, wrong about war

The 1972 presidential nominee strikes back at the vice president for comparing today's Democrats to the McGovern platform.

By George S. McGovern

GEORGE S. MCGOVERN, a former U.S. senator from South Dakota, was the Democratic nominee for president in 1972.

April 24, 2007

VICE PRESIDENT Dick Cheney recently attacked my 1972 presidential platform and contended that today's Democratic Party has reverted to the views I advocated in 1972. In a sense, this is a compliment, both to me and the Democratic Party. Cheney intended no such compliment. Instead, he twisted my views and those of my party beyond recognition. The city where the vice president spoke, Chicago, is sometimes dubbed "the Windy City." Cheney converted the chilly wind of Chicago into hot air.

Cheney said that today's Democrats have adopted my platform from the 1972 presidential race and that, in doing so, they will raise taxes. But my platform offered a balanced budget. I proposed nothing new without a carefully defined way of paying for it. By contrast, Cheney and his team have run the national debt to an all-time high.

He also said that the McGovern way is to surrender in Iraq and leave the U.S. exposed to new dangers. The truth is that I oppose the Iraq war, just as I opposed the Vietnam War, because these two conflicts have weakened the U.S. and diminished our standing in the world and our national security.

In the war of my youth, World War II, I volunteered for military service at the age of 19 and flew 35 combat missions, winning the Distinguished Flying Cross as the pilot of a B-24 bomber. By contrast, in the war of his youth, the Vietnam War, Cheney got five deferments and has never seen a day of combat — a record matched by President Bush.

Cheney charged that today's Democrats don't appreciate the terrorist danger when they move to end U.S. involvement in the Iraq war. The fact is that Bush and Cheney misled the public when they implied that Iraq was involved in the terrorist attacks of 9/11. Iraq had nothing to do with the attacks. That was the work of Osama bin Laden and his Al Qaeda team. Cheney and Bush blew the effort to trap Bin Laden in Afghanistan by their sluggish and inept response after the 9/11 attacks.

They then foolishly sent U.S. forces into Iraq against the advice and experience of such knowledgeable men as former President George H.W. Bush, his secretary of State, James A. Baker III, and his national security advisor, Brent Scowcroft.

Just as the Bush administration mistakenly asserted Iraq's involvement in the 9/11 attacks, it also falsely contended that Iraq had weapons of mass destruction. When former Ambassador Joseph Wilson exploded the myth that Iraq attempted to obtain nuclear materials from Niger, Cheney's top aide and other Bush officials leaked to the media that Wilson's wife was a CIA agent (knowingly revealing the identity of a covert agent is illegal).

In attacking my positions in 1972 as representative of "that old party of the early 1970s," Cheney seems oblivious to the realities of that time. Does he remember that the Democratic Party, with me in the lead, reformed the presidential nomination process to ensure that women, young people and minorities would be represented fairly? The so-called McGovern reform rules are still in effect and, indeed, have been largely copied by the Republicans.

The Democrats' 1972 platform was also in the forefront in pushing for affordable healthcare, full employment with better wages, a stronger environmental and energy effort, support for education at every level and a foreign policy with less confrontation and belligerence and more cooperation and conciliation.

Cheney also still has his eyes closed to the folly of the Vietnam War, in which 58,000 young Americans and more than 2 million Vietnamese died. Vietnam was no threat to the United States.

On one point I do agree with Cheney: Today's Democrats are taking positions on the Iraq war similar to the views I held toward the Vietnam War. But that is all to the good.

The war in Iraq has greatly increased the terrorist danger. There was little or no terrorism, insurgency or civil war in Iraq before Bush and Cheney took us into war there five years ago. Now Iraq has become a breeding ground of terrorism, a bloody insurgency against our troops and a civil war.

Beyond the deaths of more than 3,100 young Americans and an estimated 600,000 Iraqis, we have spent nearly $500 billion on the war, which has dragged on longer than World War II.

The Democrats are right. Let's bring our troops home from this hopeless war.

There is one more point about 1972 for Cheney's consideration. After winning 11 state primaries in a field of 16 contenders, I won the Democratic presidential nomination. I then lost the general election to President Nixon. Indeed, the entrenched incumbent president, with a campaign budget 10 times the size of mine, the power of the White House behind him and a highly negative and unethical campaign, defeated me overwhelmingly. But lest Cheney has forgotten, a few months after the election, investigations by the Senate and an impeachment proceeding in the House forced Nixon to become the only president in American history to resign the presidency in disgrace.

Who was the real loser of '72?



THE VICE PRESIDENT spoke with contempt of my '72 campaign, but he might do well to recall that I began that effort with these words: "I make one pledge above all others — to seek and speak the truth." We made some costly tactical errors after winning the nomination, but I never broke my pledge to speak the truth. That is why I have never felt like a loser since 1972. In contrast, Cheney and Bush have repeatedly lied to the American people.

It is my firm belief that the Cheney-Bush team has committed offenses that are worse than those that drove Nixon, Vice President Spiro Agnew and Atty. Gen. John Mitchell from office after 1972. Indeed, as their repeated violations of the Constitution and federal statutes, as well as their repudiation of international law, come under increased consideration, I expect to see Cheney and Bush forced to resign their offices before 2008 is over.

Aside from a growing list of impeachable offenses, the vice president has demonstrated his ignorance of foreign policy by attacking House Speaker Nancy Pelosi for visiting Syria. Apparently he thinks it is wrong to visit important Middle East states that sometimes disagree with us. Isn't it generally agreed that Nixon's greatest achievement was talking to the Chinese Communist leaders, which opened the door to that nation? And wasn't President Reagan's greatest achievement talking with Soviet leader Mikhail Gorbachev until the two men worked out an end to the Cold War? Does Cheney believe that it's better to go to war rather than talk with countries with which we have differences?

We, of course, already know that when Cheney endorses a war, he exempts himself from participation. On second thought, maybe it's wise to keep Cheney off the battlefield — he might end up shooting his comrades rather than the enemy.

On a more serious note, instead of listening to the foolishness of the neoconservative ideologues, the Cheney-Bush team might better heed the words of a real conservative, Edmund Burke: "A conscientious man would be cautious how he dealt in blood."

Inflation panic grips Fleet Street

23.04.2007

by John Stepek

It really is fascinating to watch how the Bank of England’s breach of what is, after all, a fairly arbitrary inflation target, suddenly has previously sanguine economic forecasters throughout the press shrieking for immediate action.

In fact, one of the biggest advocates of the “it’s different this time” theory, Times commentator Anatole Kaletsky, this morning calls for a half-point hike in interest rates next month to show that the Bank is serious about controlling inflation.This is from the man who continually berates and belittles the European Central Bank for keeping on raising interest rates, decrying the ECB’s rather stern line on money supply as old-fashioned.

It’s no surprise Mr Kaletsky is calling for tougher action - low or apparently non-existent inflation forms the basis of his “low rates forever” economic utopia. If inflation isn’t dead after all, then the Bank needs to take control right now before the pillars of debt propping up his dreams of a new era are kicked away.

Trouble is, it’s already too late...

So why is Anatole Kaletsky calling for a half-point interest rate rise next month? His arguments are sound enough.

He points out that some people would argue that the $2 pound should ease inflationary pressures in the economy, meaning the Bank can tread carefully on interest rates. But as he argues, the strength of the pound (remember, sterling was challenging the $2 mark just at the end of last year, so this isn’t a short-lived spike) should already have curbed inflation. The fact that it hasn’t “suggests that underlying inflationary pressures are much stronger than the Bank of England and the markets expect.”

Eventually, the spectre of soaring inflation would make sterling less, not more, attractive. This could lead to a sharp fall in the pound, thereby sending inflationary pressures even higher.

Much of this depends on whether the markets believe that Mervyn King and his colleagues on the Monetary Policy Committee really have any control over the UK economy. So Mr Kaletsky says that the Bank really needs to hike fast now, to safeguard its credibility.

It’s nice to see he’s finally caught up with reality - but the trouble is, it’s too late now. The time for half-point hikes was long ago - a half-point before Christmas, or in summer last year, for example, might have helped offset some of the pressure we’re seeing now. But the truth is, the Bank sealed the fate of the UK economy when it made that terribly timed, highly divisive decision to cut the base rate by a quarter point way back in August 2005, just as annual house price growth was on the verge of flattening.

That was the moment at which the Bank lost its credibility. Governor Mervyn King was outvoted, showing he didn’t have a handle on the rest of the MPC. Meanwhile, the markets, the population and anyone else who was watching realised that the real nature of the MPC was not to control inflation, but to avoid a recession like the plague. Just like its counterpart in the US, the British central bank had no intentions of spoiling the economic party; just like the Fed, the whole idea was “no recession under my watch.”

Eddie George, the former BoE governor, has already admitted that when he slashed rates to historic lows near the turn of the century, he was desperately trying to avoid a recession. He’s acknowledged that rates couldn’t possibly have stayed that low long term; but that this was a problem for his successors to deal with.

What no one seems to understand - or want to understand - is that the wider economy is not too different to running your household finances. If you spend more than you earn for a prolonged period of time, enjoying the good life while your household balance sheet hollows itself out (a period we shall call, for talk’s sake, a ‘boom’); then at some point in the future, you have to rebuild that balance sheet - start taking sandwiches to work, holiday in Sidcup rather than Sydney, take the kids out of Eton and send them to the local sink school (this period we shall describe as the ‘bust’).

The more profligate you were during the boom, the more thrifty you have to be during the bust - and clearly, the more painful the transition to a lower standard of living.

Here in the UK, we’re sitting on consumer debt of around £1.3 trillion. That’s some boom. And now we’re heading for the bust to match.

Just before we go, another argument in Mr Kaletsky’s piece is that the euro’s strength is more important to the strength of sterling than UK rates. If, he says, the ECB keeps hiking rates and the US economy keeps weakening (which he finds unlikely, but we believe is pretty much inevitable), then the euro will probably keep rising, and sterling with it - which could mean we see the pound hit levels as high as the $2.20 to $2.50 “that it occupied for most of the 1970s and early 1980s.”

We couldn’t help but be reminded of something he wrote only back in December, when the pound was challenging the $2 mark again. At that point, he argued blithely that the dollar was now the buying opportunity of the century – or at least the next 25 years.

In fact, we quote: “if [sterling] falls below $1.95, it has nowhere to go but down… if the pound tests the $2 barrier and then falters, it will be time to take a flutter, if not mortgage your house.” (You can read the original piece here: Demise of the dollar is greatly exaggerated.)

Sterling fell as low as below $1.93 in mid-January, and again at the start of March. We‘re hoping that no one literally staked the roof over their heads on a strong dollar.

Turning to the stock markets…

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The FTSE 100 ended Friday 46 points higher, at 6,486, with support coming from miners and M&A targets such as Alliance Boots and Standard & Chartered. Mining stocks Xstrata, Lonmin and Vedanta Resources all benefited from the rising copper price. For a full market report, see: London market close.

Elsewhere in Europe, the Paris CAC-40 ended the day 109 points higher, at 5,938. In Frankfurt, the DAX-30 was 99 points higher, at 7,342.

On Wall Street, the Dow Jones ended the day at a fresh record closing high of 12,961, having added 153 points as the likes of Caterpillar reported expectation-beating results. The tech-heavy Nasdaq climbed 21 points, closing at 2,526, and the broader S&P 500 ended the day 13 points higher, at 1,484.

The Nikkei closed flat today at 17,455 - an increase of just 2 points - having fallen back from an earlier high of 17,656.

Crude oil had fallen back to $63.75 this morning, whilst Brent spot was 12c lower at $66.21.

Spot gold was little changed from its price in New York late on Friday, last trading at $691.90. Silver, meanwhile, was last quoted at $13.88/oz.

And in what is set to be the world's biggest-ever financial services takeover, Barclays agreed to buy Dutch bank ABN Amro Holding NV for 67bn euro today. However, ABN Amro may still receive a rival bid from Royal Bank of Scotland, Santander and Fortis, with whom it is meeting up today. Barclay's shares had risen by as much as 1.5% in London already today, whilst ABN Amro's were up 2.4% in Amsterdam.

And our two recommended articles for today...

What has the independent Bank of England given the UK?
- Ten years ago this May, the current Labour administration swept to power and announced operational independence for the Bank of England. Since then, the Bank has built up a reputation for inflation-busting. But one $2 pound and one explanatory letter to the Chancellor later, maybe it's time to reconsider. For Adrian Ash's analysis of what the Bank has done for Britain - and what it's likely to do next, click here: What has the independent Bank of England given the UK?

Why tourists are holidaying in hospitals
- With the growing popularity of medical tourism, a new generation of travellers is as likely to return home with a new hip as a tacky souvenir. In this MoneyWeek article, just available to non-subscribers, we pick three of the sector's fittest firms: Why tourists are holidaying in hospitals

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