Today the Fed announced it would start buying commercial paper, the short-term business loans that keep most companies running smoothly. The Fed's decision indicates its worry that the credit crunch is so severe that there would be no market at all for most businesses to find short-term credit. I spoke with two economists today, EPI's Josh Bivens and NDN's Rob Shapiro to get a sense of what's going on.

On the decision to buy purchase commercial paper, Bivens said,

"It's not how you want the economy to operate all the time, but it's a much more direct stab at the problem than the bailout bill was. We do have a real serious financial crisis going on; given the Fed's action today, it's hard for me to see how it gets much worse. I don't see the Fed going in and buying commercial paper directly unless they're really convinced it's ground to a halt. It's requiring the federal government to become the financial sector, to become the credit market, and that to me is the worst case scenario. We've probably kind of hit bottom.

If you just restrict yourself to the job market, which is most relevant to the most people … I think we'll probably have fewer jobs than we had in January of 2008 two years from now, so I think we're in [for] another year and half of outright job loss. We will start adding jobs and closing that gap just painfully slowly. If you look at the last two recessions, we had job loss that went well after the official end of the recession. Given that this is so much worse, it would be hard for me to believe that we don't see 2 -3 years of outright job loss."

Shapiro was more pessimistic:

We are probably in the deepest recession of our lifetimes, and it's going to get a lot worse. The singular feature of this crisis is that no one knows the condition of the securities held by any institution and consequently across the financial center. That's the reason why we have a serious credit problem today ... banks won't lend to other banks or financial institutions because they don't know how much bad paper they are holding. The Fed is trying, it's putting as many fingers as it can in the dike. The market for this kind of paper has declined very sharply, so they are willing now to purchase it in order to avoid large-scale bankruptcies.

Consumers, consumption spending was falling at a 3 percent annual rate in the third quarter ... you're talking about a third quarter that looks like it is contracting at a rate of about 2 percent. That's before this crisis affects investment and consumption. ... Europe is in a recession, and Europe is our single largest export market. There are only three sources of demand, consumers, business, and foreigners, so that takes out the third.

Neither man was particularly optimistic about the bailout bill's main function, TARP (Troubled Assets Relief Program). Shapiro placed a stress on transparency as a solution to financial panics, urging the Fed, FDIC and associated agencies to immediately begin identifying and publicizing which banks have sound assets and which do not. Bivens emphasized the importance of encouraging the Treasury department's new TARP Czar, Neal Kashkari, to choose the best options from the menu of choices that congress authorized, especially favoring the use of equity stakes over reverse auctions for dealing with toxic assets whose value is based on housing prices.

Both agreed on the need for an immediate stimulus legislation, with Shapiro suggesting a $200 billion investment focused on infrastructure that accomplishes energy goals, such as updating the electricity grid or building light rail. Bivens emphasized expanding "safety net programs" like unemployment insurance and food stamps, which have immediate affects, and then moving on to infrastructure needs that can be quickly identified and tackled, such as school construction. Shapiro also noted that there is an critical long-term goal to be addressed in terms of deficit reduction in the next five to six years:

"I have not been one who has thought the deficit is a serious problem at this point because the globalization of capital means you can always borrow. [But] our fiscal outlook is worsening so much, this and the bailout and the structural issue we have of boomers retiring, and the long-term impact of this crisis on global confidence in the U.S. economy ... we could have problems with people buying our T-bills. I'm not talking about cutting the deficit next year, I'm talking about putting in place policies that significantly increase revenues and reduce the rate of growth of entitlement spending ... over the next five years. [The problem is] the combination of an accelerating deficit with declining confidence in the dollar and the U.S. economy by those who have to fund it, which is not us."

The politics of a future stimulus bill seem difficult, to say the least, although a lame-duck Congress might be the best bet for passing the necessary increase in spending. Fed Chair Ben Bernanke also said later in the day that his institution would continue it's ad hoc approach to holding up the economy and hinted at lower interest rates by the end of the month. With economic indicators continuing to lag, action has to be taken, as the Fed showed today, to keep the economy from moving from worse to worst.

-- Tim Fernholz

Here's the latest thinking -- from those who think professionally! -- on military spending, the nuclear deal with India and the inter-play between public opinion and foreign policy.

• Military-Industrial complex alert. A new report from the Institute of Policy Studies calls attention to the lopsided spending ratio between funding for military forces and funding for non-military international engagement -- a ratio that has widened to 18:1 in the Bush administrations 2009 budget from 16:1 last year. -- ZA
• Nukes and Naan. For a clear and comprehensive explainer on nuclear (non)proliferation between the U.S. and India, take a look at the Council on Foreign Relations site. On October 1, Congress passed a "peaceful" U.S.-India nuclear cooperation bill, which had been in the works since 2005. While the deal ostensibly covers nuclear energy, some worry a nuclear arms race in Asia could follow this basic upheaval of a three-decade long non-proliferation effort in the region -- CP
• Growing Pains. In China, cases of HIV/AIDS are spreading beyond the normal high-risk groups of heroin addicts and rural blood sellers and into the general population, according to a study published last week in Nature. The estimated number of cases has risen 8 percent since 2005. -- DH
• It'll be a doozy, but necessary. In a Brookings Institute report, Stephen Cohen outlines how the future president should approach Pakistan, which he considers to be the most challenging foreign policy situation for the next administration. The report recommends diplomacy and economic aid, as well as a new National Intelligence Estimate "to form a common operating picture within the U.S. government." It concludes by describing the situation as needing "Herculean" multilateral effort that should be approached with modest expectations.-- SW
• El West: A Study in Contrast. Last week, Zogby and the Inter-American Dialogue published a September survey of about 5,000 national voters on Western Hemisphere policy issues. The Dialogue's president, Peter Hakim, noticed the difference between public opinion -- as gleaned from the survey -- and actual U.S. policy suggests that policy needs to catch up with our expectations or that the American public's views never really mattered to begin with. For example, 68 percent of likely voters would remove travel restrictions with Cuba, and almost as many believe the government should lift the trade embargo. The survey covers public opinion (both holistic and drawn between Obama and McCain supporters) on immigration, ethanol tariffs, the proposed U.S.-Colombia trade agreement, the possible forming of a North American Union, relations with Venezuela and more. -- CP

-- TAP Staff

Previous Round-Ups:
9/30/08
9/23/08

Via my benevolent editor, an interesting press release appeared in my inbox: this map of where foreclosures are concentrated. It may point to a reason for Obama's resurgence in Florida, Colorado, and Nevada, all battleground states where foreclosures are high. It also includes lists of the most- and least-affected congressional districts that includes at least one competitive race, John Porter's strong challenge from Dina Titus in Nevada:

-- Tim Fernholz

Andrew Sullivan, reacting to the news that Palin supporters called a black reporter a "boy" and told him to "sit down."

The ethos of Palinism - its contempt for elites, its hatred of a free press, its pathological secrecy, its demonization of "the other", its bullying of anyone in its way, and its cult-of-personality - is authoritarian. And somewhat chilling.

We've seen this kind of disdain for "elites" before. Whatever suspicion Republican hostility to "elites" engenders is confirmed by the knowing contempt with which Giuliani used the word "cosmopolitan." This hatred comes from the same place as Trent Lott complaining in his biography that the problem wasn't "integration," but that those damn Yankees were so condescending about it. The "elites" forced integration down everyone's throat, and now the "elites" are trying to force a black president down our throat too.

I'm not sure if the McCain campaign is really aware of what they are drawing forth from their supporters. They see the crowds and the enthusiasm, and maybe they can't see the ugliness. But mostly I think they don't care, as long as they win. To be sure, the attacks they are making would be leveled at any Democrat. But this Democrat happens to be a black man, and I don't think they really understand the level of primal fear and hatred they are abetting.

The question is not what will happen to Obama. Obama is well protected and will be fine. The question is what will happen to black folks lining up at the polls alongside the very people who have been told with the authority of one of America's major political parties, that the black man running for president is associated with "terrorists." What will happen when one of these people, ginned up with rage and a particular nationalistic fervor, decide to take out their anger on a real person?

--A. Serwer

Holly Yeager profiles an extremely competitive congressional race, and explores what it says about Democratic fortunes in the suburbs:

Back in 2006, it wasn't until December 11 -- and two recounts -- that Deborah Pryce, a Republican first elected to Congress from Columbus, Ohio, in 1992, was finally declared a winner in her re-election bid, fighting off a tough challenge from Democrat Mary Jo Kilroy. Pryce won by just 1,055 votes.

Pryce isn't running this year. But Kilroy is back on the ballot, giving Democrats hope they can finally grab the seat.

"She picked up from where she left off in the last race," Chris Van Hollen, chairman of the Democratic Congressional Campaign Committee, said optimistically. Van Hollen quickly added that her Republican opponent, Steve Stivers, was a lobbyist who represented banks and corporate chiefs before his election to the state Senate -- a big negative, he said, in a state where thousands of families are dealing with mortgage foreclosures.

And Paul Waldman explores the possibility of substantial voter disenfranchisement in November:

Just a couple of weeks ago, a lot of Democrats were mad at Barack Obama. John McCain had crept ahead in some tracking polls, and Obama's supporters were pleading with him to get tough and hit McCain where it hurts. Then the country's economic difficulties turned into an outright meltdown, McCain's running mate was revealed to be something of a nincompoop, and the Republican's campaign looked more and more like it was flailing about without any rationale for why its increasingly grumpy candidate ought to be elected president.

As always, subscribe to our RSS feed to receive our articles as soon as they are published.

--The Editors

At RH Reality Check, Sarah Seltzer lists the questions she'd like to see answered at a "women's issues debate," covering topics ranging from the United States' unacceptably high infant and maternal mortality rates to whether the candidates consider contraception akin to abortion to asking McCain and Obama to name female role models. That got me thinking about other under-the-radar issues I'd like to see addressed at the debates. Here are a few:

1. Several American cities have HIV-infection rates as high as some African nations. In our nation's capital, one in twenty adults are HIV-positive. You've both supported PEPFAR, President Bush's legislation to combat AIDS in Africa. What efforts will you take to fight the disease here at home?

2. Eighty-five percent of Americans live in major metropolitan regions, and the vast majority of them own cars and drive them daily. Considering the challenges we face from global warming, should Americans be encouraged to drive less? And if so, how would you support building up our public transportation infrastructure and changing the physical layout of our communities to make them more pedestrian-friendly?

3. Do you support federal paid family and medical leave?

4. Almost two-thirds of African-American children attend schools that are "minority majority." About 40 percent of them learn in classrooms that are 90 to 100 percent black. In many major cities, only about five to 10 percent of public school students are white. Is this increasing racial and socioeconomic segregation a problem for American education and for our society? If so, how should we combat it?

5. What is your view on the future of Social Security?

--Dana Goldstein

Adam Liptak has a useful roundup, noting that the Court does not have any "blockbusters" comparable to last year's Second Amendment, death penalty, and war powers decisions. There are, however, some cases that indicate the likely direction of the Roberts Court and why many of his holdings will matter more than you might think. In particular, it's important not to focus excessively on whether the Court explicitly announces the overturning of precedents. There are two examples that are instructive:

• Standing. "In Summers v. Earth Island Institute, the court will consider who has standing to challenge environmental regulations." As we've already seen with respect to church and state issues, by narrowing standing rules the Court can nominally keep important precedents on the books but make it exceptionally difficult to actually enforce them by declaring that most people don't have standing to challenge potentially unconstitutional state actions. Moreover, this narrowing of standing rules is likely to be a one-way ratchet; plaintiffs advancing claims that conservatives find sympathetic are unlikely to see their ability to bring suits affected. These cases seem technical, but substantially affect the substantive rights of individuals as well as areas like environmental policy.
• Pre-emption. "Wyeth v. Levine, concerns only implied pre-emption and is perhaps the most important business case of the term. Wyeth, a drug company, seeks to overturn a Vermont jury award of more than $6 million to Diana Levine, a musician who lost much of her right arm in a medical disaster caused by the injection of a Wyeth anti-nausea drug. Wyeth argues that it cannot be sued because it had complied with federal safety standards." Again, business cases of this sort tend to attract less attention, but making it more difficult for states to punish corporate malfeasance in the courts is a potentially very important outcome. For several of the court's conservatives, their alleged commitment to "federalism" will clash with business interests, and (especially for Roberts, Alito and Kennedy) I know how I'm betting. Also look for Breyer, at a minimum, to vote with Wyeth.

Most of John McCain's recent attack ads have included someone saying a variation on "How [bad word]" in a weird tone of injured disgust/outrage. For instance:

How disrespectful... (from the "Lipstick" ad, which was pulled from YouTube)...

How dishonorable... How Dangerous ...

And the latest, How hypocritical...

I have to imagine that weird construction is polling out the roof since the McCain ad people keep using it. It hasn't been effective in the past because, well, no one believed that lipstick ad because it was such a wild exaggeration -- anyone who saw the full context of Obama's remarks realized he wasn't talking about Palin. The dishonorable/dangerous lineup didn't work either, again, because anyone who saw the full context of Obama's remarks on Afghanistan realized that he was making a perfectly innocuous statement.

But the new ad doesn't have any outright lies (that I'm aware of right now). It does point to some exaggerations the Obama camp has put in advertising, though none so outlandish or personal as McCain's. But it's going to be hard for McCain to have it two ways in the last three weeks of the campaign: He can't deride Obama as a hypocrite even as he launches increasingly heated attacks on his character, particulary because he telegraphed his move enough for Obama to make a decent prebuttal ad.

It was a mistake for the Obama campaign to run ads that had those exaggerations -- especially as many of McCain's actual policies are unpopular -- and it's showing now. Since many voters seem to assume that politicians are lying about most things, the outrage over McCain's falsehoods was confined to high-information voters and the media, but that's where it was most effective. McCain is not going to be able to reclaim the high road in this race, so the latest ad isn't going to be a game changer. How unfortunate.

--Tim Fernholz

So you're a young Israeli teenager, at that special age when you're expected to serve in the Israeli Defense Forces, and all of a sudden, you decide you'd rather spend your summer chilling in Elat. So you tell the government you're following a religious lifestyle that doesn't allow you to join the army.

If you do all that, you might want to make sure to update your facebook page so it jibes with your story. Because if you don't, the IDF will draft you anyway:

Israel's army is using Facebook to track down draft dodgers.

The army visited the Facebook account of a teenager who was dismissed from army service after declaring she was religious despite attending a secular school, and discovered that she did not lead a religious lifestyle, Ynet reported.

Pictures on her Facebook account showed that she did not dress in a style acceptable to the religious community and that she attended parties on Shabbat. The army has since drafted her.

The teen appealed the decision but was turned down.

From an anecdotal standpoint, this is pretty funny. But broadly applied, it has some pretty frightening implications for how the government can get all up in your business.

--A. Serwer

Via Andrew, this video of John McCain asking who Barack Obama is and getting the answer "terrorist!" has been bouncing around the internets:

For this entry in the annals of amateur political psychology, take a look at McCain's face after one of his supporters shouts his answer. He looks a little surprised, no? We've wondered why the Republican nominee can gave speeches, oh, like this one, that are just brimming with easily rebutted charges, or angrily claim that he has been 100 percent honest in front of editorial board. Is it possible that he simply doesn't know what his campaign is up to? The obvious and correct response is that he is in charge of his campaign, and he is responsible at the end of the day for all its actions. McCain may simply be surprised by how far he has had to go down the road of Bush in his hunt for the presidency.

But as the McCain-Palin campaign spirals ever deeper into the gutter -- someone yelled "Kill Him!", referring either to Obama or William Ayres Ayers, at Palin rally yesterday -- take a moment to reflect on the structural factors in the conservative Republican party that essentially demand these tactics. Before this 2004, McCain was many things -- very conservative, very angry -- but he was not the type of person to attack someone's patriotism (see his very real, and very touching, rapprochement with John Kerry in the early '90).

Increasingly prescient-looking boss Mark Schmitt touched on these factors in his spring feature, "Can Identity Politics Save the Right?" But it looks like identity politics -- conservatism's only recourse in these times -- may be destroying the right instead of saving it. Some conservatives will buy this idea as well, nurturing a phoenix-like rise from the ashes creation myth for the rebirth of their movement. Tonight's debate will be a watershed: Will McCain bring these attacks to the debate, face-to-face with Obama? Can he even look him in the eye? But if McCain cannot make ground tonight, barring some major surprise, this race is all but over.

-- Tim Fernholz

P.S. See Noam Scheiber for a good run-down of tonight's options.

• Let the smears begin. John McCain and Sarah Palin have chosen, unsurprisingly, to go hard negative against Barack Obama by playing up the Democrat's "otherness." And even though McCain had previously ordered his campaign to not bring up Rev. Jeremiah Wright, Palin apparently didn't get the memo, bringing up the association in Florida today. For his part, McCain has begun to put the question directly to voters: Who is the real Barack Obama?
• Anticipating McCain's efforts to drag him into the mud, Barack Obama has begun playing up McCain's involvement with the Keating Five during the savings and loan scandal, setting up a website devoted to the subject. Meanwhile, others have asked, not unreasonably, why not bring up McCain's long association with unrepentant and remorseless criminal thug G. Gordon Liddy? Seems only fair to me.
• On Saturday The New York Times indulged the right-wing conspiracy theorists at The Corner by looking into Obama's relationship to '60's bomber Bill Ayers. Unsurprisingly, The Times found very little to implicate the two, leading Stanley Kurtz to conclude that a "whitewash" was at hand. This is, incidentally, the hip new line among professional conservatives: the public is ignorant of Obama's radicalism because the liberal media is conspiring to hide this fact from them.
• A front-page story in The Washington Post chronicles how newly registered voters are overwhelmingly Democratic, and Walter Shapiro reports on huge gap in the ground game between the Obama and McCain campaigns in Wisconsin. Meanwhile, Nate Silver looks at early voting in Georgia and and concludes "Barack Obama is winning Georgia right now" based on African-American turnout, which bodes well for him in Virginia and North Carolina.
• The RNC is filing an FEC complaint against the Obama campaign for allegedly taking foreign donations, based on a Newsweek report documenting certain donors making multiple small donations using fake names. Of course, as Tim points out, McCain has already returned a tidy sum in foreign contributions.
  
• Campaigning in California, Sarah Palin made reference to "our neighboring country of Afghanistan," while Joe McCain, John's brother, wryly observed that "I've lived here [Virginia] for at least 10 years and before that about every third duty I was in either Arlington or Alexandria, up in communist country." Why is everyone involved with the McCain campaign -- including the candidate -- so geographically challenged?
• The next time you're lounging in the teak-lined study of your coastal retreat, enjoying a fine cognac and chortling over the rubes in flyover country, make sure you read Jonathan Raban's devastating expose in The London Review of Books of how Sarah Palin's lack of interest in city planning or culture turned Wasilla, AK, into a wasteland of urban sprawl and soulless big box stores.
• We all know Republicans are bracing for a bloodbath come November 4. But it's gotten so bad that even Karl Rove projects a potential landslide for Obama that could ripple downballot.

--Mori Dinauer

Hmmm:

In 21 months, during hundreds of speeches, town halls and debates, I have kept my promise to level with you about my plans to reform Washington and get this country moving again.

McCain has yet to explain what his plan is to end the War in Iraq, or even describe what victory looks like. Politico wrote a story about the lack of specificity in his policy proposals. Also, if "level with you" means "be honest with you," he has not been very honest at all, launching numerous false accusations at Barack Obama.

We have all heard what he has said, but it is less clear what he has done or what he will do. What Senator Obama says today and what he has done in the past are often two different things. He has often changed his positions in this campaign, and the best way to determine where he would really take this country is to examine where he has tried to take it in the past. ....

McCain has flip-flopped on the Bush tax cuts, deregulation, the economy, the Colorado River compact, the experience needed to be president, the Future Combat System, lobbyists, and on how many homes he owns, among other things.

Even after he refused to lift a finger to prevent this crisis, when the crisis hit, he was missing in action. He didn't start making calls to round up votes until after the rescue bill failed in the House and the markets crashed. We continue to see the price of delay today as the markets continue to fall. Today the DOW has fallen below 10,000. And yet, members of his own party said they felt no pressure to vote for the bill. Why didn't Senator Obama work to pass this bill from the start? Why did he let it fail and drag out this crisis for a full week before doing a thing to help pass it?

Obama was on the record as early as March 2007 identifying the problems of the crisis. McCain's own actions had a detrimental effect on the legislation. Democrats voted overwhelmingly for the bill both times; it was House Republicans who failed to bring the necessary votes to pass a bipartisan bill ... after John McCain promised that he had brought them to the table.

I have made every single donor to my campaign publicly available, while Senator Obama has taken in over 200 million dollars from undisclosed sources. We have already seen the potential for fraud because of his refusal to disclose his donors. His campaign had to return $33,000 in illegal foreign funds from Palestinian donors, and this weekend, we found out about another $28,000 in illegal donations. Why has Senator Obama refused to disclose the people who are funding his campaign? Again, the American people deserve answers.

All of Obama's donors are available for public viewing at the Federal Election Commission website, and the various offshoots that make its data easier to mine. John McCain has returned $1.2 million in campaign contributions, including $50,000 from foreign nationals.

Sigh.

-- Tim Fernholz

Edward Hugh at Fisftul of Euro's has an extended post on Russia's economic downturn. Read the whole thing, but long story short, Russia is suffering a series of pretty serious economic problems. Not all of these can be blamed on the South Ossetia War, but the war didn't help; it indicated to investors that Russia was more erratic than they'd like. Hugh doesn't expect a collapse, but does foresee some pain, which the decline in oil prices will do nothing to alleviate.

On the same subject, Small Wars Journal highlights a couple of links, the first regarding an attack on Russian troops in South Ossetia (7 Russian soldiers were killed), and the second a broad piece on the economic, demographic, and infrastructure challenges facing Russia.

The upshot is that Russia shouldn't be wasting its money on power projection in South America. Russia is substantially less capable of competing with the United States now than it was in 1985, and is ill-served by a leadership that believes otherwise. The flip-side of this is that heralds of renewed Cold War rivalry in the United States need to get a grip; Russia provides no credible military, economic, or political threat to the United States, its successful invasion of Georgia notwithstanding.

--Robert Farley

So folks are of various minds about the Obama campaign's decision to unveil it's mini-documentary on the Keating 5 scandal. Does bringing up the scandal lower Obama to McCain's level, removing his advantage as the perceived "high road" candidate?

Look: Obama needs to be respond to Palin's "palling around with terrorists" crap and the McCain camp's promise that they're going to get dirty -- doing otherwise is a sign of weakness. They can't ignore McCain's speech today. But how they respond is important. They're not running commercials about Keating and they're not using it, that I've seen, in stump speeches, both of which are sticking to the campaign's successful economic message. Instead, Obama's people put together a website with a documentary and a lot of resources for people to take a look at, a striking contrast with the McCain attack ads that typically include a falsehood, a lot of dark imagery and scary music. Further, they're using it to strike a very timely economic note: McCain's emphasis on deregulation makes his current arguments about the financial crisis ring hollow.

But the target audience for this stuff is not yet the electorate at large. It's the media, high-information voters and the McCain campaign itself, and the message is: Don't get dirty, because we have laid the groundwork to hit back, Obama is not the only presidential candidate with seemingly shady characters in his background. It's already forced the McCain camp into one narrative error: While prior discussion of Keating 5 has been part of McCain's redemption story -- I made a mistake, and learned to be a maverick -- now they're arguing that McCain did nothing wrong. The inconsistency "raises questions," in that delightfully passive little cliche.

I expect that Obama will continue to focus on the economy as part of his major key strategy while this Keating 5 counter-point burbles along in minor key. The former is the most important thing he can do, but not doing the latter would be political malpractice.

--Tim Fernholz

The McCain campaign is inviting more questions about their candidates' judgment on military affairs with a new ad attacking Barack Obama for a statement about civilian casualties in Afghanistan. A partial transcript:

ANNCR: Who is Barack Obama? He says our troops in Afghanistan are
BARACK OBAMA: "... just air-raiding villages and killing civilians."

ANNCR: How dishonorable.

Just two weeks ago, Secretary of Defense Robert Gates was apologizing for an airstrike that killed 90 people. Around the time that Obama made the above statement, President Bush met with Hamid Karzai to express very public concern about civilian deaths caused by Western forces. Via Spencer Ackerman, the commander in Afghanistan, Gen. McKiernan, spoke at length at the Newseum last week about how civilian casualties harm the mission.

General Petraeus is supposedly a hero to the right, but apparently no one actually feels like listening to a word the man says. Among them, his notion that "the Iraqi people are the decisive terrain" in the battle against the insurgency and that American troops "can't kill their way out of the problem." Both of these lessons are easily applicable to Afghanistan. America can't win in Afghanistan by inflicting large numbers of civilian casualties or by ignoring the effect this has on the population whose hearts and minds are essential to success there.

Any candidate running for president should be cognizant of this.

--A. Serwer

Dana Goldstein on Colorado's strange labor-business coalition:

In an unprecedented deal between labor and business, those initiatives, and two others backed by the United Food and Commercial Workers, were pulled from the ballot last Thursday, just hours before the Colorado secretary of state's deadline for Election Day changes. Seventy-five executives at local companies, including powerhouses Excel Energy and Qwest Communications, agreed that in exchange for labor pulling the measures, business would raise $3 million to fight Amendment 47, a "right-to-work" ballot initiative that would make it more difficult for unions to collect dues from their members, effectively ending the growth of organized labor in Colorado.

Tom Schaller asks five questions about the new electorate:

For a decade, Democrats have heard promises that a durable electoral majority was just around the corner. It's easy to construct such a majority on paper: Racial minorities and young voters (those born after 1978) turn out at record levels, working-class whites suppress their socially conservative leanings to vote their pocketbooks, and suburban professionals and their spouses vote together as unified blue households. Such a coalition could obliterate the aging, white, male, socially conservative Republican base that has dominated American politics for most of the past three decades.This majority, however, is like the carrot tied in front of the donkey's nose--always just a few inches away.

And Robert Kuttner considers what needs to come next in addressing the credit crisis:

The crisis also destroys the basic business models that have proliferated in the past decade -- of having financial intermediaries invent ever more obscure securities that allow ever greater levels of pyramiding. It is the unwinding of this larger model that is causing the deeper collapse, and not merely a lack on confidence in certain exotic bonds backed by mortgages of depressed value. Hedge funds will be next, causing wider losses. The Paulson plan will take weeks to implement, and markets are already declaring a resounding vote of no-confidence.

As always, subscribe to our RSS feed to receive our articles as soon as they are published.

--The Editors

Far be it from me to start a tiff with Warren Buffett, but watch out, because it's on -- sort of. Via Marginal Revolution, some folks are using this excerpt from an interview from the Berkshire Hathaway magnate as an argument against regulation:

QUICK: If you imagine where things will go with Fannie and Freddie, and you think about the regulators, where were the regulators for what was happening, and can something like this be prevented from happening again?
Mr. BUFFETT: Well, it's really an incredible case study in regulation because something called OFHEO was set up in 1992 by Congress, and the sole job of OFHEO was to watch over Fannie and Freddie, someone to watch over them. And they were there to evaluate the soundness and the accounting and all of that. Two companies were all they had to regulate. OFHEO has over 200 employees now. They have a budget now that's $65 million a year, and all they have to do is look at two companies. I mean, you know, I look at more than two companies.
QUICK: Mm-hmm.
Mr. BUFFETT: And they sat there, made reports to the Congress, you can get them on the Internet, every year. And, in fact, they reported to Sarbanes and Oxley every year. And they went--wrote 100 page reports, and they said, 'We've looked at these people and their standards are fine and their directors are fine and everything was fine.' And then all of a sudden you had two of the greatest accounting misstatements in history. You had all kinds of management malfeasance, and it all came out. And, of course, the classic thing was that after it all came out, OFHEO wrote a 350--340 page report examining what went wrong, and they blamed the management, they blamed the directors, they blamed the audit committee. They didn't have a word in there about themselves, and they're the ones that 200 people were going to work every day with just two companies to think about. It just shows the problems of regulation.
QUICK: That sounds like an argument against regulation, though. Is that what you're saying?
Mr. BUFFETT: It's an argument explaining--it's an argument that managing complex financial institutions where the management wants to deceive you can be very, very difficult.

Here's the thing: There is a difference between regulatory oversight and regulations themselves. Buffett certainly knows more than most about the propensity of financial institutions to deceive people, but the problem here wasn't that Fannie Mae or Freddie Mac really deceived their regulators. The problem was that the regulations that would prevent the current financial crisis were not in place. Incidentally, no matter how many times people repeat the lie, Fannie Mae and Freddie Mac did not cause the financial crisis, their collapse was a result of it. They didn't own many sub-prime loans until Congress and the Bush administration urged the institutions to purchase them in late 2007/early 2008 in reaction to the collapse of the housing bubble. Last year, the two only had about a third of the Mortgage Backed Securities market share, and a smaller percentage than that of "toxic" mortgages. But this is the key thing: There were no rules against doing these things.

What kind of regulations would have helped? Well, for one, the SEC shouldn't have allowed investment banks that collapsed, as well as hedge funds, to maintain debt-to-capital rations of 30 or 40 to 1 (most banks are around 10 to 1).This fact in itself helps explain why the pop of the housing bubble has such deep ramifications across the economy. As well, bond rating firms should have been policed to avoid conflicts of interests, so that toxic CDOs weren't rated at the highest value, AAA. Predatory sub-prime loans that presumed huge increases in home equity shouldn't have been allowed, and No-Income/No-Asset loans should have been scrutinized much more than they were.

Of course, Buffet is right that we need to do a better job of policing financial firms. But that's no reason to assume we don't need to put the right rules in place to ensure that companies don't have incentives to risk much more than they can afford, and then ask the government to bail them out.

-- Tim Fernholz

The latest development in the Michael Bloomberg third term drama is that Ronald Lauder, the billionaire term limit backer who last week announced he supports Bloomberg's quest for world domination, has now changed his mind -- again. Lauder won't back Bloomie unless the addition of a third term for mayors and city council members is a one time occurrence, not the permanent law change Bloomberg is seeking. According to the Times, Lauder, who just a few days ago planned on funding commercials in support of Bloomberg, now says he'll invest in advertisements against the plan if the mayor doesn't promise to uphold the general principle of a two-term limit.

Whether or not you support term limits or a third term for Mayor Mike, it's pretty easy to see that Lauder's position is the least principled of the bunch. We can debate all day whether the New York City council or a ballot initiative should overturn term limits in the city. But the bottom line is that no man is above the law, and Bloomberg has made a smart decision not to push for an extension just for himself and other sitting politicians, but for a change that would continue on in perpetuity. For Lauder to say that he supports a third term for Bloomberg, but not for any other politician ever, is profoundly undemocratic.

--Dana Goldstein

Noam Scheiber has a fascinating profile of, yes, Sarah Palin, that you should go read. But even more interesting -- and a little creepy -- is this document [PDF] Scheiber discovered while in Alaska. It's the back of some city budget paperwork, where Palin had doodled what looks to be her early strategies for a mayoral election. It's a strangely privileged look into the ambitions of an up-and-coming politician, and a reminder of the the strange resilience of cliched political language -- "It's time for a change," "Wasilla needs a conservative choice."

--Tim Fernholz

Running down the last month of election season, things are about to get cash-money serious as every political actor in the country plows their remaining funds -- and likely some borrowed funds, though who knows with this credit crisis -- into political communications. Take a look (here for some paper filings that don't make the electronic databases) at the FEC's running file of independent expenditure reports in the last week to get a sense of the volumes of money we're talking about. One interesting tidbit: take a look at the expenditures around Marilyn Musgrave's race as a variety of Democratic interest groups weigh in, with Defenders of Wildlife, SEIU and Majority Action throwing well over $1 million in advertising dollars at the race. The Coloradan has some detail.

--Tim Fernholz

P.S. The best independent expenditure disclosure: "Pizza for canvassers."

Last week, I spoke at length with Myrna Perez of the Brennan Law Center about voter purging. While Nate Silver discusses the implications of a massive surge of African American voter registration in Georgia, there's a development in the article he links to that may be even more important for Obama's chances elsewhere.

There's nothing to suggest that this process isn’t on the up-and-up. But remember the Feb. 5 presidential primary? African Americans made up 30 percent of the 2 million votes cast.

That means, statistically, a disproportionate number of African Americans protected themselves from being purged from voter rolls for inactivity.

Of all the efforts to prevent eligible voters from being denied their chance at the ballot box, the most fundamentally successful may have been the enthusiasm Barack Obama generated during the primary season. Simply by voting, black voters in states like Virginia and North Carolina, where they turned out in record numbers for Obama, may have prevented themselves from being purged from voter rolls in advance of the election. In the end, these states are more likely to go for Obama than Georgia is.

Of course there are still systemic purges other than those based on voter inactivity that end up disenfranchising eligible voters, and these may be a factor on Election Day.

A few years back, Gal Luft wrote an article in Foreign Affairs on something called the "piracy-terrorism nexus." The idea was that piracy (which at that time was on the increase in Southeast Asia) might contribute to terrorism; terrorists and pirates might use the same funding sources, terrorists might employ tactics of piracy to attack maritime trade, or terrorists might use pirates in some kind of mega-attack on Singapore or another major container port. Nothing much ever came of the "nexus" because Malaysia and Indonesia clamped down pretty hard on piracy, and because the communities that produce pirates were never very friendly with the terrorists.

Fast forward a couple of years, and piracy becomes a big problem off the Horn of Africa. The pirates are primarily interested in financial gain; they want to ransom ships and crews for enormous sums, hopefully avoiding French commandos along the way. But, of course, Somalia has also become a center of Islamic radicalism. Just two years ago, the United States underwrote an Ethiopian proxy war designed to drive the Islamic Courts Union from power, because the ICU was suspected of connections with al-Qaeda. Oddly enough, piracy had actually gone down during the period of ICU control, because pirates often act as local militias, and these militias were weakened by the ICU. Anyway, with the ICU gone and anarchy prevailing in Somalia, pirate attacks have gone back up. It looks as if radical Islamist groups want a piece of the action. In addition to their normal 5 percent cut on local pirate ransoms, the al Shabbab group also wants some of the Ukrainian weapons that pirates seized last week:

"Al Shabaab wanted some weapons from the Ukrainian ship but the pirates rejected their demands," a local official said. "Al Shabaab went away after they were rejected by the residents and the pirates. I am sure the group is not far from the area," he added.

Via Danger Room. Also see this RAND report by Peter Chalk.

--Robert Farley

At 12:15, I'll be participating in a discussion of TAP contributor James K. Galbraith's fantastic new book, The Predator State, at my old stomping ground, the New America Foundation. Other TAP contributors involved will be Barry Lynn and Reid Cramer.

Galbraith brings his argument into the context of the current financial crisis and the presidential election in this article.

The event will be live streaming here: http://www.thewashingtonnote.com/archives/2008/10/live_streaming_1/

--Mark Schmitt.

Last week during the debate, Joe Biden made a reference to "Bosniaks," something many in the mainstream and conservative media found absolutely hilarious. Here was another example of Biden putting his foot in his mouth, the inept gaffe machine that he is. Mona Charen at National Review described a moment of mirth she shared with her family during the debate:

Our family's favorite moment last night was when Joe Biden crowed about his diplomatic skills. "I brought Serbs, Croatians, and Bosniaks together."

My son David: "Captain we've detected a Bosniak ship on our sensors." "On screen."

Oh dear! How droll! How terribly amusing!

Charen wasn't the only one who had a laugh though, Charles M. Blow of The New York Times thought the term "Bosniak" was hysterical, before the paper changed the column and issued a correction. Cokie Roberts, who is never tired of being wrong about anything, added her two cents that if Palin had used the term "Bosniak" it would have been a huge deal.

Roberts might be right, but not for the reason she thinks. Bosniak is a term referring to Bosnian Muslims, something anyone with a dictionary (or even a "Google"!) could have figured out. If Palin had used the term unprompted, that might have betrayed some actual knowledge about the region. Which could have been a big deal.

The trouble is these journalists had fallen in love with a narrative: Biden is a gaffe machine. And so they naturally assume that something they hadn't heard before had to be false or incorrect. 

Journalism is a discipline of verification, say Bill Kovach and Tom Rosenstiel, but this time people couldn't be bothered to verify. They were too busy having a laugh.
--A. Serwer

In Sunday's NYT magazine Peter Baker has a long profile of Rep. Tom Davis of Virginia and how he's giving up on Congress because it's just too partisan. An example:

The way Davis sees it, the system has become dysfunctional. Bush has so destroyed the party’s public standing and Congress has become so infected with a win-at-all-costs mentality that there is no point in staying. ... This might be dismissed if it came from a fringe player on Capitol Hill, but for years Davis was one of the rising stars, a quintessential inside player who as part of the leadership managed to steer his party to election victories in even-numbered years while working with Democrats on legislation in odd-numbered years. He ran the House Republican campaign committee for two elections and later bypassed more senior congressmen to become chairman of the House Government Reform Committee until his party lost control of Congress.

Hmm. The article refers to the 1990s as a time when legislators actually did work together. While that is certainly an arguable claim, the reader should remember that the 1990s ended eight years ago, and the early 2000s -- and Tom DeLay's autocratic leadership -- immediately preceded this story. In that time, Davis, as a member of the Republican leadership, was one of the people who made Congress more dysfunctional!

It was this Tom Davis who, as the Chair of the House Oversight