US suffers as Bush’s gamble fails

US suffers as Bush’s gamble fails
By Philip Verleger
Published: September 25 2005 19:18 | Last updated: September 25 2005 19:18. Copyright by the Financial Times

After his 1964 landslide election, President Lyndon Johnson gambled that the US economy could support a war and his Great Society programme. He lost. The expenditures exceeded economic capacity. Shortages occurred, prices rose, and a 15-year inflationary spiral began. Within two years, the Federal Reserve had to intervene by raising interest rates. Economic growth stopped and harsh economic conditions brought an end to Johnson’s dreams.

Forty years later, another president from Texas made another wager: betting the US could fight a war, reduce taxes and avoid conserving energy. He also lost. Over the next two years, President George W. Bush will see inflation return and the Federal Reserve Board act to offset his profligate energy and fiscal policies.

Johnson’s hope that the US economy could sustain the Vietnam war and domestic economic expansion ended when US industry failed to meet military and civilian demands. Unfinished aeroplanes sat waiting for galleys and other gear needed to complete them. Homes stood unfinished as builders waited for lumber, plumbing and other finishings. Prices rose. The Federal Reserve took matters into its own hands when Congress refused to reduce the growing deficit. In 1969, as they made way for the incoming Nixon administration, Johnson’s departing economic advisers noted ruefully: “In the absence of a full measure of timely fiscal restraint, an undue share of the burden of dampening the excessive expansion fell on monetary policy.”

Today, President Bush is in a similar situation. He and his advisers also gambled, although in a different game. Johnson tried to provide guns and butter without raising taxes. George Bush tried to serve up large tax cuts without reducing spending or addressing the nation’s rapacious thirst for motor fuels, particularly gasoline.

The Bush wager failed when Hurricanes Katrina and Rita destroyed a large part of the US Gulf coast. The storm put additional strain on an economy operating near capacity, while simultaneously closing part of the nation’s petroleum refining and natural gas industries. The extensive damage has forced the government to enact large spending increases to rebuild communities and support displaced individuals.

This is a classic Keynesian stimulus package. Given the state of the business cycle, inflation can be expected to rise even without offsetting reductions in government outlays. The huge rebuilding requirements will send prices up and create shortages for materials, capital equipment and critical labour resources. Home builders already report a wide scarcity of plywood.

The loss of natural gas supplies adds to inflationary pressures. Katrina and Rita destroyed perhaps 5 per cent of the nation’s natural gas supply, causing large price increases. Heating bills could double this winter. Furthermore, the cost of goods manufactured using natural gas, such as PVC pipe, will climb sharply even before rebuilding efforts boost demand.

The economic stimulus will also put pressure on petroleum markets. The economic spur from reconstruction will heighten gasoline and diesel demand. But the increase cannot be met because of storm damage to US refineries. Thus, Katrina and Rita will leave a legacy of much higher gasoline and diesel prices in 2006. These price hikes could have been avoided had we pursued a programme to limit increases in motor fuel consumption.

Here, too, George Bush made a bet. Efforts to tighten fuel economy standards for new vehicles were rejected when his energy programme was introduced and Congress refused to change it. The president declined to push a gasoline tax following 9/11. He wagered that an already stretched refining industry could meet mounting gasoline demand, which is largely linked to American affinity for large SUVs and trucks. The president and his advisers understood that the higher demand would require US refineries to operate at maximum capacity. They knew no new refineries were being built. They also knew no new offshore facilities capable of meeting EPA standards had been constructed. Not until this summer, after months of the industry operating flat out, did they realise new capacity was necessary.

The president lost this gamble as well when the two hurricanes hit the Gulf coast, taking a severe toll on the refining industry. It may take a year or more to bring it back to its pre-Katrina state. Until then, supply will be lower and prices much higher. Although the calculations are hard to believe, econometric models suggest retail gasoline prices might need to double by next summer to maintain market balance. The price rise will add to inflation.

There is only one end to this scenario: higher interest rates. A vigilant Federal Reserve Board will have to boost rates to suppress demand, just as during the Johnson administration. The pressure for higher rates will be even greater given the forthcoming retirement of Alan Greenspan as Fed chairman. His replacement will need to convince financial markets that the Board remains determined to keep inflation in check. The consequences will be a slowdown or worse.

As the rebuilding effort slows, high interest rates and high gasoline prices may pull the economy into recession. Like President Johnson, President Bush took a chance and lost.

The writer is a senior fellow at the Institute for International Economics

Bush battles to turn second term into reform legacy

Bush battles to turn second term into reform legacy
By Caroline Daniel
Published: January 30 2006 20:51 | Last updated: January 30 2006 20:51. Copyrighted by the Financial Times

President George W. Bush likes to say that his job is to confront big problems, not leave them to those who follow. As he prepares to deliver the State of the Union address he has been forced to tackle the issues bequeathed him by the man who has occupied the White House for the past five years: himself.

The sixth year of a two-term presidency is a critical time. It offers a last chance to shape the domestic political agenda and exploit the bully pulpit of moral leadership before attention is diverted to the succession battle. The approach of mid-term elections is making the opposition party unco-operative and the governing party timid and disinclined to embrace radical initiatives.

For Mr Bush, the chief constraints are managing the fall-out from his signature first-term policies. A combination of the Iraq war, the war on terror and his tax cut agenda have left him with a swelling budget deficit that limits his room for manoeuvre domestically. An already uncertain outlook for the economy grew cloudier still on Friday, when data showed the economy grew at 1.1 per cent in the fourth quarter, the slowest rate for three years.

“The president faces a unique challenge,” says Charlie Cook, editor of the Cook Political Report. “There is little new or different he can do about Iraq or energy costs. Iraq, Hurricane Katrina and healthcare costs are blowing the lid off the federal budget. There is no money left for any big bold programme and his party’s narrow majorities and scandals make getting anything big through Congress extremely difficult.

“Beyond looking for policy initiatives that cost little or no money, the president has to figure out how to tread water while making it look like he is doing the butterfly stroke.”

Such political calisthenics are not simply a contrast with the vaulting ambition of his first term: they are a direct result of it. In his first State of the Union in 2002, he declared that North Korea, Iran and Iraq “constitute an axis of evil, arming to threaten the peace of the world” and pledged both the largest increase in defence spending in two decades and a doubling of funding for homeland security.

A year later he solemnly prepared the nation for war against Iraq while also pursuing an adventurous domestic agenda: calling for tax cuts to be made permanent and for Medicare reform backed by an additional $400bn in spending. In 2004, an election year, constraints were more obvious but he still unveiled plans for immigration reform. In 2005, his boldness returned with a controversial pledge to overhaul Social Security, the state retirement system, by cutting future benefits and introducing private accounts.

Such flourishes are beyond him this year. As he scans the sea of congressmen and flashes a grin at the Supreme Court justices (including John Roberts, his own appointee) he will focus less on new adventures than on defending old decisions. Most important will be the need to stay the course in Iraq and a defence of how he has chosen to prosecute the war on terror.

Although officials shun comparisons with Bill Clinton’s second term, mocking Mr Bush’s predecessor as the “school uniform president” for small but symbolic wheezes, Mr Bush is expected to outline policies for health savings accounts, improving science and technology education, energy independence and more renewable fuels, and a new policy on nuclear fuel reprocessing: small-bore policies from a big-gun president.

This shift to a minor key is typical of second-term presidents. The sixth year of a presidency is tough – both Mr Clinton and Richard Nixon were impeached in theirs. Even those who avoid that fate are moving inexorably into lame-duck territory. “Second-term presidents typically don’t have much leverage with Congress. It is hard to think of any second-term State of the Union that led to a major shift in domestic policy,” says John Pitney, professor at Claremont McKenna College in California.

Second, the congressional and gubernatorial elections in November impose their own limits. “This is a president with a penchant for big institutional change issues, who is bumping up against Congress, [which wants] a narrower and play-it-safe agenda,” says Bruce Josten, vice-president for government affairs at the US Chamber of Commerce. “And then you overlay that with the congressional calendar. You could get below just 80 session days this year.”

The paralysed Republican leadership, which could not deliver Mr Bush’s agenda last year, will remain distracted by Washington’s current lobbying scandal. “[The president’s] problem is the other end of Pennsylvania Avenue. With all the focus on Bush’s approval ratings and Iraq, that is a bigger problem than anyone realises: the inability of the Republicans in Congress to do anything,” says Vin Weber, a Republican strategist.

As a result the president must deal with a mass of policies left over from 2005 before he can even think about staking out fresh ground. Mr Josten cites tax, the Patriot act, the pension bill and a massive new lobbying reform measure.

“We will start the real second session at the end of March or April,” he says, noting that, four months into the government’s fiscal year, Congress has yet to approve a modest package of spending and tax cuts left from last year.

Third, Mr Bush needs to rebuild his own credibility after his toughest year in office. His negligent handling of Hurricane Katrina, when he was slow to recognise the scale of the disaster, dented his image of managerial competence. As his poll numbers slumped to a low of 37 per cent in November – down from 57 per cent on re-election – a man who had once had a “shoot first, aim later” confidence had looked increasingly unhappy in his own skin. And presiding at dozens of town-hall meetings to sell social security reform made him look like a political Scrooge.

“They [White House advisers] know they still have to do more to raise and spend the president’s political capital,” says Tucker Eskew, a political consultant who worked for Mr Bush in the first term.

So the White House is attempting to present the lack of an expansive domestic reform agenda as a sign of fiscal frugality, in part to appease conservatives. An administration that has generally been slow to express contrition is admitting that mistakes were made in Iraq and that Mr Bush has to project realism about the pace of progress there.

“They have learnt from a difficult year and you saw that with the Iraq speeches. There is a risk of appearing rigid and he understands the bully pulpit has got to have wheels and he needs to be seen to be adjusting,” adds Mr Eskew. Crucial to the fightback plan is national security, which forms the core of the second-term agenda. Karl Rove, Mr Bush’s chief political adviser, has made clear that the strategy is to marginalise the Democrats by making them fight on territory where the Republicans have an advantage. He told the Republican National Committee last week that the two parties had fundamentally different perspectives on the issue. “Republicans have a post-9/11 view of the world and Democrats have a pre-9/11 view of the world. That doesn’t make them unpatriotic...but it does make them wrong, deeply and profoundly and consistently.”

Even what at first looked like a serious setback – the disclosure that the National Security Agency had spied inside the US without a warrant on those suspected of ties with al-Qaeda – has been seized on as ammunition by a White House confident that it is in tune with the American people on this point. Advisers have launched a communications offensive, aimed at depicting Mr Bush as America’s protector as well as burnishing his tarnished image as a strong leader, a commander-in- chief willing to make hard decisions.

“Revelations in the New York Times do not typically work to the administration’s advantage,” says Mr Pitney, “but this is proving to be an unexpected benefit. They are confident they can frame the issue in the way that helps them politically. Republicans have owned national security issues since Dwight Eisenhower in the 1950s.

The approach reinforces Mr Bush’s strongest suit: the war on terror. Asked if his policies on terrorism and national security had made America more secure, a Los Angeles Times/Bloomberg News poll last week found 52 per cent agreed and 21 per cent disagreed. Some 48 per cent approve of his handling of terror while 49 per cent disapprove – his highest rating on any issue.

But the strategy risks rejection by a public that wants the president to focus on domestic issues and a business community anxious to see him offer strong leadership on tax reform and other corporate concerns. The potential pitfalls were evident in the reaction to a speech this month by Andrew Card, chief of staff, to the US Chamber of Commerce.

Mr Card spent more than half the address discussing the war on terror. Not a single domestic initiative was mentioned. He closed by describing a picture that hangs in the office of Donald Rumsfeld, defence secretary. It is an old image of Uncle Sam, bearing the legend: “We are at war, what are you doing to help?” The intended crescendo elicited barely civil applause. It was left to Tom Donohue, Chamber president, to put a brave face on matters, thanking Mr Card for reminding them all of the “larger context”.

At a White House press conference last Thursday, however, Mr Bush’s body language proclaimed how comfortable he is on this terrain. There were no inappropriate smirks or verbal stumbles as he invoked his executive power to deny calls for the release of Hurricane Katrina-related White House documents and defended the NSA surveillance as lawful. “I think Bush wins this fight,” says William Kristol, editor of the conservative Weekly Standard.

But will it be enough? On almost every other issue his ratings are meagre. On Iraq, 41 per cent approve of his handling of the war, 56 per cent do not. On healthcare – now the highest priority for Americans after Iraq – he did even worse. Democrats were twice as trusted as Mr Bush. Only 27 per cent approved of his handling of the issue. On the economy, only 37 per cent approved of his performance. After a robust 10 quarters of growth, 47 per cent think the economy is worse than in 2001.

As Mr Bush’s advisers know, his legacy depends on the economy and events overseas. How he manages the gradual withdrawal of troops from Iraq this year will be one test. Another is Iran, where his resolve as commander-in-chief could soon be tested if Tehran begins full-scale uranium enrichment despite international pressure. The military is stretched. After a 40 per cent jump in defence spending since 2001, over the next five years the Pentagon faces cuts of $32bn.

Mr Kristol argues that the most critical part of the speech will be the passage on Iran. “People got caught up in the pseudo-apologies and new frankness. That doesn’t matter that much really when you have 140,000 troops fighting in Iraq and the most radical regime in the Middle East wanting nuclear weapons and there are new terrorist threats. Reality trumps optics . . . It is a very fluid and uncertain moment and Bush still has the chance to shape the agenda.”

Mr Bush’s actions in the last two months have helped stem the slide in his approval ratings. In his first term, he was able to defy conventional wisdom. The speech could help determine whether he will be able to do so in his second.

DEMOCRATS LAND PUNCHES BUT REMAIN DIVIDED

By Holly Yeager in Washington

When Democratic leaders tapped Timothy Kaine, the new governor of Virginia, to deliver their party’s response to the State of the Union address, the choice seemed to make good sense.

Elected last November in a Republican-leaning state, Mr Kaine is a fiscal conservative who is comfortable talking about his Roman Catholic faith – just the kind of image many Democrats think they need to project if they are to take back power in Washington.

But Mr Kaine’s selection provoked an angry backlash in some liberal circles, with activists and bloggers crying out for someone who would present a tougher critique of President George W. Bush, especially on the Iraq war.

“This is the Democrats’ only opportunity to face off directly with Bush on national TV and they are going to blow it!” read one blog post. Why give such a platform to a governor without a voice on foreign policy, they asked, when John Murtha, a leading Democrat on defence issues who has called for an immediate withdrawal from Iraq, was available?

That dust-up illustrates the current strains within the Democratic party, in which centrists such as Mr Kaine are clashing with others who want to stick to the party’s more traditional positions. Those tensions help explain why Democrats have failed to put forward a detailed agenda, in spite of promises to offer a unified campaign manifesto akin to the Contract with America that helped Republicans take control of the House of Representatives in 1994.

A similar dynamic can be seen in Democrats’ stance toward Mr Bush’s nomination of Judge Samuel Alito to the Supreme Court. While leading Democrats fear he would curtail abortion rights and expand the power of the presidency – and vowed to vote against him when his nomination goes to the Senate floor today – they decided against more aggressive moves to block him, worried that they would be seen as obstructionist.

But late last week, John Kerry, the 2004 presidential candidate who is weighing another run in 2008, heeded the call of liberal activists and promised to try to filibuster the nomination. Keen not to be outflanked on her left, Hillary Clinton, the frontrunner among potential Democratic presidential candidates, quickly said she would support Mr Kerry’s move.

In a week-long series of “pre-buttals” to the president’s address, top Democrats have attacked the Bush administration on a wide range of issues, including the conduct of the war, homeland security, healthcare, energy costs and the economy, while calling for fresh attention to education and national competitiveness.

Democrats may have some time to spare before they are required to get more specific. Newt Gingrich’s Contract with America was issued far closer to election day, and Democrats have been scoring well with their current tactic of linking a series of recent scandals to what they call a Republican “culture of corruption”.

A Los Angeles Times/Bloomberg poll last week found that 47 per cent would vote for a Democratic candidate for Congress if elections were held today, while 35 per cent would vote for a Republican. As long as the Republican scandals are in the news, says Stuart Rothenberg, editor of a Washington politics newsletter, it makes sense for Democrats to keep them as the focus of their 2006 campaign rhetoric.

Republicans have begun to counter-attack, trying to paint their opponents as a party without an agenda. But, in spite of their efforts, there is a growing sense that victory in November could be within the Democrats’ reach. This week’s edition of National Journal, a Washington magazine, depicts Mr Reid and Nancy Pelosi, the Senate and House minority leaders, as the new king and queen of Capitol Hill. The cover story’s title: “What If?”

‘THE CIVILISED WORLD FACES UNPRECEDENTED DANGERS’

State of the Union speeches usually lack the sweeping rhetoric of inaugurals and descend into a shopping list of ambition, policy initiatives and political platitudes designed to lever the watching congressmen to their feet as often as possible, writes Caroline Daniel. Vin Weber, a Republican strategist, observes: “There are memorable lines from these speeches, but not memorable speeches.”

President George W. Bush’s memorable lines have been more consequential than those of many presidents, from setting out the case for war in Iraq to grand plans to overhaul pensions. Here are a few:

2002

“Our goal is to prevent regimes that sponsor terror from threatening America or our friends and allies with weapons of mass destruction.” North Korea, Iran and Iraq “constitute an axis of evil, arming to threaten the peace of the world”.

“My budget includes the largest increase in defence spending in two decades because, while the price of freedom and security is high, it is never too high . . . my budget nearly doubles funding for a sustained strategy for homeland security.”

“As we gather tonight, our nation is at war, our economy is in recession and the civilised world faces unprecedented dangers.”

2003

“Today the gravest danger facing America and the world is outlaw regimes that seek to possess nuclear, chemical and biological weapons . . . Tonight I have a message for the brave and oppressed people of Iraq. Your enemy is not surrounding your country. Your enemy is ruling your country . . . If Saddam Hussein does not fully disarm, for the safety of our people and for the peace of the world, we will lead a coalition to disarm him.”

Said with a somewhat sinister chuckle while highlighting success in targeting al-Qaeda’s leadership: “Many others have met a different fate. Let’s put it this way – they are no longer a problem to the US.”

“Healthcare reform must begin with Medicare. My budget will commit an additional $400bn over the next decade to reform and strengthen Medicare.”

2004

“Key provisions of the Patriot Act are set to expire next year. The terrorist threat will not expire on that schedule . . . You need to renew the Patriot Act.”

“Having broken the Ba’athist regime, we face a remnant of violent Saddam supporters . . .  these killers joined by foreign terrorists are a serious and continuing danger. Yet we are making progress against them. The once all-powerful ruler of Iraq was found in a hole and now sits in a prison cell.”

2005

“One of America’s most important institutions – a symbol of trust between generations – is also in need of wise and effective reform. Social Security was a great moral success of the 20th century and we must honour its great purposes in this new century. This system, on its current path, is headed towards bankruptcy.”

“America’s immigration system is outdated, unsuited to the needs of our economy and to the values of our country.”

Cut, Thrust and Christ - Why evangelicals are mastering the art of college debate.

Cut, Thrust and Christ
Why evangelicals are mastering the art of college debate.

By Susannah Meadows
Newsweek
Feb. 6, 2006 issue - When you believe the end of the world is coming, you learn to talk fast. On a Friday afternoon the debate team from Liberty University, Jerry Falwell's fundamentalist Baptist college, is madly rehearsing for the tournament about to begin. This year's topic: should the United States increase diplomatic and economic pressure on China. They may just be practicing, but you wouldn't know it from the menacing mosquito-buzz rising as all 20 debaters read their speeches at once, as fast as they can. Policy debate on the college level has become a rapid-fire verbal assault, an arguments-per-minute game, that sounds more like the guy at the end of the car commercial than an eloquent Oxford intellectual. There is tension and more than a little spittle in the air. The Liberty team is currently ranked No. 1 in the country, above Harvard (14th) and all the other big names. But for the evangelicals, there's a lot more at stake than a trophy. Falwell and the religious right figure that if they can raise a generation that knows how to argue, they can stem the tide of sin in the country. Seventy-five percent of Liberty's debaters go on to be lawyers with an eye toward transforming society. "I think I can make an impact in the field of law on abortion and gay rights, to get back to Americans' godly heritage," says freshman debater Cole Bender.

Debaters are the new missionaries, having realized they can save a lot more souls from a seat at the top—perhaps even on the highest court in the land. "Evangelicals have always wanted to persuade people to the faith," says John Green, a senior fellow at the Pew Forum on Religion and Public Life. "The new thing is that evangelicals want to be more involved in the world now. Conservative Christian leaders would like to have a cadre of conservative Christian attorneys, who then become judges, politicians and political appointees." At Patrick Henry College, an evangelical school outside Washington, D.C.—where 30 percent of the student body engages in some form of debate—the president is so committed to producing leaders that he's also the moot-court coach. Baptist Cedarville University in Ohio just tripled its budget for debate scholarships. Falwell's school, in Lynchburg, Va., pours a half million dollars into the debate program every year, with the goal of eventually flooding the system with "thousands" of conservative Christian lawyers. "We are training debaters who can perform a salt ministry, meaning becoming the conscience of the culture," says Falwell, who is also hoping the team will elevate the humble academic reputation of Liberty itself. "So while we have the preaching of the Gospel on the one side—certainly a priority—we have the confronting of the culture on moral default on the other side."

The Liberty squad, which can spend 40 hours on debate prep the week of a tournament, is by far the most successful of the evangelical debaters. And among their secular opposition, they're widely respected—notwithstanding the times they've quoted dubious sources, such as PatRobertson.com. But part of the reason Liberty is at the top is that it hits as many tournaments as it can, racking up the points that determine national rankings. While the powerhouses like Harvard and Northwestern concentrate on nabbing the prestigious varsity titles, Liberty is competitive at all three levels—varsity, JV and novice. "They're tough. [But] we're not afraid to debate Liberty," says Harvard coach Dallas Perkins Jr., whose varsity team was beaten by Falwell's last month.

Karl Rove was impressed enough by the squad that he tapped Liberty coach Brett O'Donnell to prep George W. Bush for all three presidential debates in 2004. O'Donnell briefed the president on his nonverbal tics. "They didn't listen to me until after the debacle," says O'Donnell, of Bush's awkward first debate performance. O'Donnell, who recently started his own consulting business, has already been contacted by two potential Republican candidates about the 2008 race. If all goes well, maybe he'll get some business down the road from some ex-students.

Correction: In the original version of this report, NEWSWEEK misquoted Falwell as referring to "assault ministry." In fact, Falwell was referring to "a salt ministry"—a reference to Matthew 5:13, where Jesus says "Ye are the salt of the earth." We regret the error.

© 2006 Newsweek, Inc.

The Political Power of Truth

The Political Power of Truth
In recent years, failure and incompetence have been trounced by fear at the ballot box. But reality may be making a comeback.

By Jonathan Alter
Newsweek
Feb. 6, 2006 issue - Strangely enough, we may look back on Thursday, Jan. 26, 2006, as the day America found its moral compass, long buried at the bottom of the national dirty-linen bag. To win the midterm elections in November, the Democrats, whose motto might as well be "So Lame for So Long," will need to make sure the country focuses on that compass. By "moral" I'm not talking just about the "culture of corruption" in Washington. I'm talking about restoring a reasonable respect for at least minimum standards of truth.

As usual, the iconic moment took place not in the capital but at the heart of the entertainment-industrial complex—in this case, "Oprah." As it happens, I had just been to a screening the night before of "Thank You for Smoking," the forthcoming movie based on the Christopher Buckley book. The story is a hilarious and gloriously politically incorrect sendup of Washington's culture of shameless spin. But the theme depressed me. The satire was all too real—more proof that "truth" and "reality" were not just pretzels to be twisted for commercial purposes but thoroughly devalued coins of the media and political realm. James Frey and Doubleday were just the latest to lie all the way to the bank.

Until Thursday. Something happened in that studio that went beyond "good TV." Such is the power of Oprah that her moment of truth seemed to shame the American public into more respect for the actual facts of a situation. As if to prove the synchronicity, there was even some truth breaking out in the White House press room at the very moment Oprah was airing live in the Midwest. Reporters were pressing President Bush hard. James Gerstenzang of the Los Angeles Times asked Bush if he subscribed to President Nixon's notion that "when the president does it, it's not illegal." This was, indeed, the essence—the truth—of the president's position on the National Security Agency's warrantless eavesdropping, which violates a 1978 law. Instead of the issue being framed in Karl Rove's phony and demagogic terms—where anyone who opposes the president's power grab doesn't want to protect us from Al Qaeda—we were edging our way toward a more accurate depiction of the controversy.

The news conference wasn't a complete truthfest. No reporter managed to ask the president about his statement of April 24, 2004, when Bush told a Buffalo audience: "Any time you hear the United States government talking about wiretap, it requires—a wiretap requires a court order. Nothing has changed, by the way. When we're talking about chasing down terrorists, we're talking about getting a court order before we do so." This statement was false, and Bush knew it when he said it. The president lied in Buffalo, just as surely as Bill Clinton lied when he said: "I did not have sexual relations with that woman, Ms. Lewinsky." Of course, Bush's Buffalo lie got a tiny fraction of the airplay of Clinton's Lewinsky lie.

The reason goes beyond Clinton's more colorful finger-wagging and sex with an intern. For four and a half years, Bush has politicized 9/11. His political motto has been "The only thing we have to use is fear itself." He was at it again last week, claiming with zero evidence that congressional scrutiny of the illegal NSA wiretapping would "give the enemy a heads-up on what we're doing." The media and the Democrats have both been intimidated by this devastatingly effective political strategy. It won the 2002 and 2004 elections for the Republicans and will continue to be their game plan for this November.

At first glance, making the Democrats seem soft on "terrorist surveillance" looks like another winner for the GOP. For Democrats to explain that they don't oppose all eavesdropping but object to the way it was done is a two-step answer that's too complicated to fly. A better approach would be to argue that Bush's NSA program has been a failure because it has threatened civil liberties and violated the law without doing anything to catch Osama bin Laden. The NSA obviously hasn't been eavesdropping on the right suspects.

This would fit with the Democrats' idea of fighting fear with failure—Bush's failure. New polls show his approval ratings in the dismal low 40s, with strong majorities believing he has failed on every score except keeping the country safe. (A majority of those polled not surprisingly support Bush on eavesdropping on terror suspects domestically. So do I. But when the constitutional questions are raised, his numbers drop.) To confront the security issue, Wesley Clark is chairing a PAC to help the nine Iraq and Afghanistan combat veterans running for Congress as Democrats (versus one as a Republican). The idea is to adopt the Rovean strategy of attacking your opponent's strength.

Will it work? In recent years, failure and incompetence have been trounced by fear at the ballot box. The former is based on reason and an examination of the facts; the latter on emotion, with 9/11 as a trump card. But now reality may be making a comeback, as Bush's authority breaks into a million little pieces.

© 2006 Newsweek, Inc.

Greenspan's Real Legacy

The standard story of his Fed tenure is deficient because it ignores the major transforming event, which is disinflation.

By Robert J. Samuelson
Newsweek
Feb. 6, 2006 issue - No man's reputation is safe on his retirement, and so it is with Alan Greenspan's. History's verdict will await subsequent events that reveal the long-term consequences of his 18 years as chairman of the Federal Reserve. But until then, it's silly to discount (as The Economist recently did) his apparent accomplishments. Doubters should consult standard economic statistics covering his tenure since 1987:

The U.S. economy (gross domestic product) has expanded 72 percent, and its growth rate has outstripped that of virtually every other advanced country. The number of payroll jobs increased by 32.1 million (31 percent) from August of 1987 (Greenspan's first month) to December 2005. There have been only two brief recessions, those of 1990-91 and 2001, lasting a total of 16 months. Business productivity has risen about 50 percent since 1987. Interest rates dropped from 8.39 percent on 10-year Treasury bonds and 9.31 percent on 30-year mortgages (1987 averages) to 4.5 percent and 6.1 percent. The Dow Jones industrial average quadrupled from 2,680 on Greenspan's first day (Aug. 11) to 10,919.

The tricky question is how much credit Greenspan deserves. Not all, of course. The U.S. economy's vibrancy and flexibility (a favorite Greenspan word) explain much. But some credit, for sure. Two months into Greenspan's tenure, the Dow Jones industrial average plunged 22.6 percent on a single day (Oct. 19). By lowering interest rates, the Fed helped avert a crisis of confidence. Something similar happened in the 1997-98 Asian financial crisis. Easier money helped sustain the U.S. expansion—and prevent a global slump. So goes a standard accounting of Greenspan's stewardship.

It's deficient. What it omits is disinflation, the decline of inflation from 13.3 percent in 1979 to today's low levels. Disinflation has been a transforming, if underappreciated, economic event. Among other things, it partially explains: the bull market of 1982-2000 (in August 1982, the Dow was as low as 777); the U.S. consumption boom (since 1982, the personal- savings rate has fallen from 11 percent of disposable income to zero); huge trade deficits, and the recent housing boom.

Lower inflation meant lower interest rates. Lenders and investors required less to offset the eroding value of their money. With lower rates, investors switched money to stocks from bank certificates of deposit, Treasury securities and money-market funds. Stock prices rose. As they did, people felt wealthier and spent more of their incomes—or borrowed more (falling interest rates didn't hurt). Lower inflation and surging stocks restored overseas confidence in the dollar. To invest here, foreigners bought more dollars. Its exchange rate rose, making U.S. exports less competitive and U.S. imports cheaper. Trade deficits ballooned. The housing boom has been a later disinflation effect, because home-mortgage rates fell steeply from 2000 to 2005.

Granted, this thumbnail history oversimplifies. It excludes critical events, trends and caveats. Yes, speculation in tech stocks propelled the market in the late 1990s. Still, the history captures the broad contours of Greenspan's tenure. But disinflation was not a spontaneous event. It resulted mostly from the Fed's conscious policies, first under Paul Volcker and then Greenspan. It is their largest triumph, even if Greenspan had help from new information technologies (aiding firms to cut costs), greater globalization (keeping prices down) and intensifying competition (doing the same).

The Economist and others criticize Greenspan for holding short-term interest rates too low and, thereby, feeding the late-'90s "stock bubble" and now a "housing bubble." What these criticisms miss is that the stock and housing markets respond mainly to long-term interest rates (on bonds, mortgages). In turn, these long-term rates reflect inflationary expectations and other factors that, frankly, aren't well understood. The Fed directly sets only the overnight Fed funds rate. Greenspan himself has expressed surprise that long-term rates have stayed so low, especially since the Fed has raised the Fed funds rate to 4.25 percent from 1 percent in mid-2004.

None of this secures his reputation. Although disinflation has delivered huge benefits, it has also left those big potential problems: heavily indebted consumers; a possible housing "bubble"; massive trade deficits. These problems may gradually work themselves out, as Greenspan and his successor, ex-Princeton economist Ben Bernanke, hope. But they clearly put a premium on Bernanke's early performance.

On the one hand, he has to establish his anti-inflation "credibility." If he doesn't, confidence could suffer. Investors might sell bonds, sending long-term interest rates up. Traders could dump dollars, sending the dollar's exchange rate down. There would be ripple effects on the stock market, consumer spending, housing, manufacturing and jobs. Some economists think Bernanke will have to raise the Fed funds rate more than Greenspan in similar circumstances just because he's new. On the other hand, if he raises rates too much, he might also trigger a slowdown or recession. Greenspan has left his successor in a delicate spot, and how well Bernanke does will affect both their reputations.

© 2006 Newsweek, Inc.

State of Illusion By Anna Quindlen

State of Illusion
Many Americans have this sense of profound malaise. Of course, that's the ailment that dare not speak its name (and not just because it's French).



By Anna Quindlen
Newsweek
Feb. 6, 2006 issue - Pity the poor presidential speechwriter. Each year, as a cold gray sky lowers over the White House, the State of the Union address also looms. Once, a captive television audience could be taken for granted, but now, when cable makes it possible to eschew the pre-empted networks for reruns of "CSI," it's hard to say if there will even be warm bodies in the cheap seats at home. And there is that pesky introductory sentence, the one that traditionally goes something like this:

"My fellow Americans, the state of the Union is ... "

Confident. Strong. Stronger than ever.

Dire. Disturbing. Disastrous.

Those last three are the ones the speechwriter will never use. But at the moment they're far closer to the truth.

Let's begin with the war in Iraq. Some complain it was poorly planned. The truth is that it wasn't planned at all. Now that Saddam Hussein is gone, it's hard to understand how an additional year or two of casualties will make a difference in the outcome for the average Iraqi. There's been a flurry of recent rhetoric about a schedule, an endgame, an exit strategy. Some members of Congress and even some in the administration figured out that was necessary; the polls told them so. The result is that sometime in the foreseeable future the war in Iraq will end, not with a bang but with a whimper, having created an entire new generation of terrorists galvanized by an incursion not even its creators can deconstruct convincingly.

The war at home, on the other hand, has not been joined, except for the war on civil liberties, in which the administration justified illegal wiretaps in the name of national security. (Big Brother is indeed watching.) Meanwhile, there's been little listening to an entire section of the country laid waste by Hurricane Katrina. Block upon block of one of America's great cities, New Orleans, looks like a set piece for a sci-fi film about a nuclear blast. Instead of creating and leading an aggressive and innovative Marshall Plan for the area, calling together the corporate executives and lobbyists who are his most loyal constituency and who actually know how to get things done, the president went AWOL: absent without leadership.

Congress is now trying to figure out what went wrong, and the White House has stepped up—not to save the region, but to save itself. Officials are claiming they can't release documents about the bureaucratic disaster because of executive privilege. Americans of a certain age are familiar with executive privilege; it's what Richard Nixon cited when he was using the White House as his own private political boiler room. The result is that Americans are on notice that if their community is destroyed, the government will work hardest to save its own skin.

Of course, most Americans have come to realize that in a hundred little ways. There's a critical disconnect between the people in Washington and the people elsewhere. It is occasioned by the knee-jerk schisms along party lines, the bloviating speechifying that is so set to music (or TV time) it seems computer-generated, the public political dance of the sort that just took place between the Senate Judiciary Committee and Supreme Court nominee, as scripted, surreal and empty as a bad experimental play. Just consider this: the White House had a candidate for the high court so spectacular that it wanted to be certain that no ordinary person could get an idea of where he stood on anything.

There is also a schism between how most people live and how Washington power types behave, between second jobs and pink slips, cronyism and junkets. And there is a sense of the good life built on sand. Personal savings are at a record low. Household debt is at a record high. If housing values drop, the junk bond of our time is the suburban house bought with a no-money-down mortgage during the boom.

Pity the poor speechwriter. This is a moment that calls for eloquence and audacity, but this president has a knack for thinking small. He is, after all, the man who first greeted Katrina, the greatest national disaster in the country's history, by talking about pounds of ice. Wrong thirst. The young, the poor, the outsourced, the uneducated, the overqualified: so many Americans have this sense of profound malaise. Of course, that's the ailment that dare not speak its name (and not just because the word is French); look what happened to Jimmy Carter when he dared to talk of a national "crisis of confidence." He found himself traded in for the so-much-cheerier "morning in America."

It's not morning. It's not even afternoon. There's not much union in the state, just one fissure after another. Of course, that won't play, so instead it's more of the same: new programs that feel old, old programs that feel over and the ubiquitous assertion that we will prevail. Just for a moment forget the combat deaths, the killer hurricanes, the illegal wiretapping, the internecine warfare, the political indictments, the overdue bills, the clueless leaders, and repeat after me: Confident. Strong. Stronger than ever. Do you feel it? Do you feel it? Nope, me neither.

© 2006 Newsweek, Inc.

Atheist's suit challenges priest, calls Jesus a fable

Atheist's suit challenges priest, calls Jesus a fable - January 22, 2006

BY NICOLE WINFIELD

ROME -- Lawyers for a small-town parish priest have been ordered to appear in court this week after the Roman Catholic cleric was accused of unlawfully asserting what many people take for granted: that Jesus Christ existed.

The Rev. Enrico Righi was named in a 2002 complaint filed by Luigi Cascioli after Righi wrote in a parish bulletin that Jesus did indeed exist and that he was born of a couple named Mary and Joseph in Bethlehem and lived in Nazareth.

Says Gospels are wrong

Cascioli, an atheist, says Righi violated two Italian laws: so-called abuse of popular belief, in which someone deceives people, and impersonation, in which someone gains by attributing a false name to someone. Cascioli says that for 2,000 years, the Roman Catholic Church has been deceiving people by furthering the fable that Christ existed and he says it has been gaining financially by impersonating as Christ someone named John of Gamala, the son of Judas from Gamala.

He asserts that the Gospels -- the most frequently cited testimony of Jesus' existence -- are inconsistent, full of errors and biased, and that other written evidence is scant.

Italian prosecutors initially tried to have the case dismissed, saying no crime could be verified.

But Cascioli challenged them, and Judge Gaetano Mautone set a hearing for Friday in Viterbo, north of Rome, to discuss preliminary motions in Cascioli's bid to have court-appointed experts review the data and determine if Jesus really did exist.

Cascioli, 72, said he decided to pursue the case against Righi, a priest in the village of Bagnoregio, because the cleric had written in the parish bulletin that Jesus existed.

'No real doubt'

Asked why he went after Righi and not any number of bishops, cardinals or even the pope who have asserted the same thing, Cascioli said it didn't matter who he named.

''When one demonstrates that Christ didn't exist, attacking a simple priest is the same thing as attacking a bishop or cardinal.''

Righi declined to be interviewed on the advice of his lawyers. But in a recent issue of his parish bulletin he argues that the existence of Christ is ''unmistakable'' because of the substantial historical evidence -- both pagan and religious -- testifying that he indeed lived.

R. Scott Appleby, a professor of church history at the University of Notre Dame, concurs. There's ''no real doubt'' Jesus existed, he said.

''But what Jesus of Nazareth did and what he means is a different question,'' Appleby said. ''But on the question of the existence, there is more evidence of the existence of Jesus of Nazareth than there would be for many other historical people who actually existed. Not only did Jesus actually exist, but he actually had some kind of prominence to be mentioned in two or three chronicles.''

Hoping for a miracle

Cascioli says he recognizes that his case has a slim chance of succeeding in overwhelmingly Catholic Italy, but not because his argument is lacking.

''We aren't optimistic -- unless the Madonna makes a miracle, but I don't think that will happen,'' he joked.

Copyright by the AP

When Harry Met Larry - Heath Ledger and Jake Gyllenhaal romp in 'Brokeback Mountain.'

When Harry Met Larry - Heath Ledger and Jake Gyllenhaal romp in 'Brokeback Mountain.'
By Liz Langley, Copyright by AlterNet. Posted January 26, 2006.

It's a cliche that men are loony for lesbians. So why is it taboo for women, like me, to swoon at the sight of two guys having sex?

When the movie "My Own Private Idaho" came out in 1992, I was just giddy with excitement, somehow having gotten the idea that it was going to be a sweeping epic tale of love among gay hustlers, a blend of "Gone with the Wind" and "Midnight Cowboy."

It starred Keanu Reeves, who had that cutest-boy-in-the-class smile that always ensured there wasn't a dry seat in the house, and the brooding, breathtaking River Phoenix, who always seemed to be looking to some far horizon, nursing a secret wound, even if he was on the cover of Teen Beat.

The idea of two such heavenly creatures in a love story with each other was the most potently sensual thing I could imagine.

I was wrong about "Idaho." It had some sweet moments but wasn't quite the big romance I'd hoped for, plus it was confusing, and I remember that when I got up to leave the theater, my butt was asleep. I'd have to wait over a decade for the epic gay romance that was more what I had in mind, which would turn out to be "Brokeback Mountain." I watched it as though I'd been taxidermied, hardly breathing for the intimacy, crying until my sleeves were black with eyeliner (I forgot the Kleenex), being annoyed that the shiny screen obscured the allegedly graphic sex (which I still haven't seen) and wondering, though not very seriously, if there was something wrong with me.

Thirteen years is a long time to think you're probably the only woman in the world who finds two men in bed together a very sexy thing. In all that time, I read only one story expressing similar sentiments, but as I recall, it focused more on gay porn, which I have no problem with. But I wanted more romance! passion! words!

There is the threadbare cliche of men being loony for lesbians, which has become a cultural joke on a par with their inability to ask for directions, but one never hears it asserted in the reverse. It felt like a lonely little kink.

Why seeing two men together strikes me as both so sexy and so sweet, I'm unsure. It could be sheer novelty, that there's no subtly threatening presence of another woman, the predictable yen for something I can't be a part of, or wanting to see more of what I don't have (if I want to see naked girl, fergodsake, I can stick my head down my dress).

Or it could be because male-male love scenes must focus on male sensuality; male-female love scenes always seem to focus on the woman. Our bodies are always lauded as being the more elegant of the genders, but I think it's just because we're missing the centerpiece, so the table looks a little neater.

Men's narrow hips and soulful eyes are just as sweet as our napes and tresses. Plus, I would argue that the male pelvic area -- that V-shaped space above the pubic region -- is the most beautiful thing in the world, and that includes cupcakes, butterfly migrations and beach homes with keys under the mat.

And sensuality isn't just physical -- it's something people radiate, a reflex of gratitude for some stimulation -- a moan, a sigh, a laugh. Men have more of this gorgeous responsiveness than they often allow us to see, so when it's focused on so closely, it's extremely powerful.

Then there's the simple answer: If you double up the sugar, the cookie tastes twice as good. This is known in academia as the Double Stuff Tautology.

Whatever the reason, I recently learned that I'm not the only woman who finds two guys together at least somewhat knee-buckling. Using "Brokeback" as an excuse, I brought it up in live conversation and via email with girlfriends and drew at least some agreement. Most of the girls I mentioned it to didn't seem to care what Heath and Jake were doing, though, as long as they got two hours of Heath and Jake.

So on one hand, I feel like I outed myself, but as what? A woman who likes men? When I think of it that way, it doesn't seem like a big deal -- but that's always how it is on the other side of a confession. Secrets are like splinters; once they're out, it's hard to imagine that something so small could cause all that trouble.

Still, since the confessional is an eternally strong career move, I see a new niche for myself: rewriting the great romances with men in all the roles. Check it out: two guys share a ride to New York and end up becoming good friends, only they realize they can't be friends because one always wants to sleep with the other. In the end, of course, they fall in love and everything works out. I think the world is ready for When Harry met Larry.

Liz Langley is a freelance writer in Orlando, FL.

Using Our Fear

Using Our Fear

By Eugene Robinson
Friday, January 27, 2006; A23

Once upon a time we had a great wartime president who told Americans they had nothing to fear but fear itself. Now we have George W. Bush, who uses fear as a tool of executive power and as a political weapon against his opponents.

Franklin D. Roosevelt tried his best to allay his nation's fears in the midst of an epic struggle against fascism. Bush, as he leads the country in a war whose nature he is constantly redefining, keeps fear alive because it has been so useful. His political grand vizier, Karl Rove, was perfectly transparent the other day when he emerged from wherever he's been hiding the past few months -- consulting omens, reading entrails -- and gave the Republican National Committee its positioning statement for the fall elections: Vote for us or die.

Democrats "have a pre-9/11 worldview" of national security that is "deeply and profoundly and consistently wrong," Rove said. The clear subtext was that Americans would court mortal danger by electing Democrats. Go forth and scare the bejesus out of them, Rove was telling his party, because the more frightened they are, the better our chances.

To cultivate fear for partisan gain is never a political tactic to be proud of, but Rove's prescription of naked fearmongering is just plain reprehensible when the nation faces a shifting array of genuine, serious threats. This is a moment for ethical politicians -- and, yes, these days that seems like an oxymoron -- to speak honestly about what dangers have receded, what new dangers have emerged, and how the imperatives of liberty and security can be balanced.

From the likes of Rove, I guess, we shouldn't expect anything more noble than win-at-all-costs. But we do have the right to expect more from the president of the United States, and while Bush gives off none of Rove's Sith-lord menace, he has made the cultivation of fear a hallmark of his governance.

At his news conference yesterday, Bush was asked again about the domestic surveillance he has ordered the National Security Agency to conduct without seeking warrants -- a program that seems to violate the law. In his meandering answer, the president kept throwing in the phrase "to protect the American people." I suspect that's a line that tests well in focus groups, but it doesn't really say anything. The fact that we expect any president to protect us does not obviate the fact that we expect any president to obey the law.

Bush mentioned the new tape from Osama bin Laden that surfaced the other day, calling it a reminder that we face "an enemy that wants to hit us again." That's certainly true, but the warning would carry more gravitas if Bush and his administration didn't brag so much about how thoroughly al Qaeda has been routed and decimated. Is anybody keeping track of how many "No. 3" or "No. 4" al Qaeda lieutenants U.S. forces claim to have eliminated?

And Americans would be better able to measure the threat from bin Laden if Bush and the rest of his administration didn't argue -- when it gives them an edge -- that Iraq is the "central front in the war on terrorism." If Iraq is the main event, then bin Laden, huddled in some cave in northern Pakistan, must be just a sideshow, right? But of course he's not a sideshow, he's the author of the Sept. 11 attacks, so what does that make Iraq? The answer seems to depend on whether, at any given time, Bush believes that cultivating fear of bin Laden or stoking fear of a terrorist spawning ground in Iraq would better help his administration achieve its ends.

The thing is, fear works. The administration successfully invoked the fear of "mushroom clouds" to win support, or at least acquiescence, for the invasion of Iraq. By the time it was clear there were no weapons of mass destruction, the fear of losing to terrorists on the "central front" had been given primacy. We stopped hearing the name bin Laden so often -- no need to bring attention to the fact that he remained at large -- until reports emerged of secret CIA prisons, torture and domestic spying.

Bin Laden does remain a threat. He would hit the United States again if he could. We do expect the president to protect us. But a great wartime leader rallies his citizens by informing them and inspiring them. He certainly doesn't use threats to our national security for political gain. He doesn't just point at a map and say "Boo."

eugenerobinson@washpost.com
© 2006 The Washington Post Company

Bush once again playing on fears of U.S. public

Bush once again playing on fears of U.S. public

BY LEONARD PITTS JR.
lpitts@MiamiHerald.com

Karl Rove said in a speech last week that this year's midterm election will be about security. So you know it will be about fear.

It would be nice to be able to take President Bush's chief political advisor at his word. Consider where we stand 52 months after the terrorist attacks of Sept. 11, 2001.

Hurricane Katrina has shown that the government could not effectively manage a catastrophe whose place and time it knew in advance. The same storm revealed that first responders are still unable to communicate because their radios are incompatible, four years after the inability of emergency agencies to speak with one another emerged as one of the signature failings of Sept. 11. Meanwhile, questions remain about the efficacy of airport security. And just last month, members of the Sept. 11 commission, five Republicans and five Democrats who were tasked with investigating the tragedy, gave the government failing grades in its response to the terror threat.

CODE WORD

So yes, a national conversation about security could hardly be more timely. But it would be nave to think that's what Rove meant when he addressed the Republican National Committee in Washington Jan. 20.

Experience tells us that with this crew, ''security'' is just a code word for fear. So this election will hinge on making people think terrorists are going to get 'em if they don't vote Republican.

In a sense, you can't blame Rove. With apologies to Garrett Morris, fear ''been beddy beddy good'' to the White House. That's why Sept. 11 has become Team Bush's fallback position, its default reply to every hard question.

A ruinous war fought under false pretenses? Sept. 11.

Indefinite detention of alleged terrorists? Sept. 11.

Torture? Sept. 11.

The right of the people to dissent? Sept. 11.

Spying on Americans in violation of federal law? Sept. 11.

A growing record of incompetence and lies? Sept. 11.

Fear is the president's Get Out Of Jail Free card. It works because panicked people are not thinking people. If you can convince them Osama bin Laden is coming up the driveway and only you can save them, they'll turn a blind eye while you break the law, steal their rights, rape the Constitution itself.

LIKE SHEEP

So while this willingness to use fear as a tool of manipulation is distressing, what's more distressing is the willingness of some to be manipulated. Consider the howls of outrage you don't hear as rights are abrogated and laws broken. Fear makes us sheep. And as the campaign begins, you have to wonder if Democrats will challenge us to be more than that. Or if they will again be caught with their pants down, playing Wile E. Coyote to the GOP's Roadrunner. One recalls 2004 and the neat bit of political jujitsu by which surrogates for the presidential candidate who avoided combat in Vietnam managed to make a political liability of his opponent's voluntary service there, even though said service won him a Silver Star, a Bronze Star and three Purple Hearts.

The shamelessness of Team Bush is not to be underestimated.

Ultimately, though, my concern is not the Democrats. Because what is at stake this year is not the fortunes of a party but the character of a nation. The choice is simple: remain true to the ideals that have guided us for 230 years or surrender them on the altar of expedience because we were too scared to live up to them.

Make no mistake: America is not for wimps. It takes guts to be an American, to believe in the rule of law, the freedom of dissent, the dignity of woman and man even when -- especially when -- it is more expedient not to. To be an American is to commit a daily act of faith.

Or as Colin Powell said, the day after the Sept. 11 attacks, ''We're Americans. We don't walk around terrified.'' Too bad his own party is so intent on proving him wrong.

© 2006 MiamiHerald.com and wire service sources. All Rights Reserved.

President Jonah by Gore Vidal

Published on Saturday, January 28, 2006 by TruthDig
President Jonah
by Gore Vidal
 
While contemplating the ill-starred presidency of G.W. Bush, I looked about for some sort of divine analogy. As usual, when in need of enlightenment, I fell upon the Holy Bible, authorized King James version of 1611; turning by chance to the Book of Jonah, I read that Jonah, who, like Bush, chats with God, had suffered a falling out with the Almighty and thus became a jinx dogged by luck so bad that a cruise liner, thanks to his presence aboard, was about to sink in a storm at sea. Once the crew had determined that Jonah, a passenger, was the jinx, they threw him overboard and—Lo!—the storm abated. The three days and nights he subsequently spent in the belly of a nauseous whale must have seemed like a serious jinx to the digestion-challenged whale who extruded him much as the decent opinion of mankind has done to Bush.

Originally, God wanted Jonah to give hell to Nineveh, whose people, God noted disdainfully, “cannot discern between their right hand and their left hand,” so like the people of Baghdad who cannot fathom what democracy has to do with their destruction by the Cheney-Bush cabal. But the analogy becomes eerily precise when it comes to the hurricanes in the Gulf of Mexico at a time when a president is not only incompetent but plainly jinxed by whatever faith he cringes before. Witness the ongoing screw-up of prescription drugs. Who knows what other disasters are in store for us thanks to the curse he is under? As the sailors fed the original Jonah to a whale, thus lifting the storm that was about to drown them, perhaps we the people can persuade President Jonah to retire to his other Eden in Crawford, Texas, taking his jinx with him. We deserve a rest. Plainly, so does he. Look at Nixon’s radiant features after his resignation! One can see former President Jonah in his sumptuous library happily catering to faith-based fans with animated scriptures rooted in “The Simpsons.”

Not since the glory days of Watergate and Nixon’s Luciferian fall has there been so much written about the dogged deceits and creative criminalities of our rulers. We have also come to a point in this dark age where there is not only no hero in view but no alternative road unblocked. We are trapped terribly in a now that few foresaw and even fewer can define despite a swarm of books and pamphlets like the vast cloud of locusts which dined on China in that ’30s movie “The Good Earth.”

I have read many of these descriptions of our fallen estate, looking for one that best describes in plain English how we got to this now and where we appear to be headed once our good Earth has been consumed and only Rapture is left to whisk aloft the Faithful. Meanwhile, the rest of us can learn quite a lot from “Dark Ages America: The Final Phase of Empire” by Morris Berman, a professor of sociology at the Catholic University of America in Washington, D.C.

I must confess that I have a proprietary interest in anyone who refers to the United States as an empire since I am credited with first putting forward this heretical view in the early ’70s. In fact, so disgusted with me was a book reviewer at Time magazine that as proof of my madness he wrote: “He actually refers to the United States as an empire!” It should be noted that at about the same time Henry Luce, proprietor of Time, was booming on and on about “The American Century.” What a difference a word makes!

Berman sets his scene briskly in recent history. “We were already in our twilight phase when Ronald Reagan, with all the insight of an ostrich, declared it to be ‘morning in America’; twenty-odd years later, under the ‘boy emperor’ George W. Bush (as Chalmers Johnson refers to him), we have entered the Dark Ages in earnest, pursuing a short-sighted path that can only accelerate our decline. For what we are now seeing are the obvious characteristics of the West after the fall of Rome: the triumph of religion over reason; the atrophy of education and critical thinking; the integration of religion, the state, and the apparatus of torture—a troika that was for Voltaire the central horror of the pre-Enlightenment world; and the political and economic marginalization of our culture…. The British historian Charles Freeman published an extended discussion of the transition that took place during the late Roman empire, the title of which could serve as a capsule summary of our current president: "The Closing of the Western Mind." Mr. Bush, God knows, is no Augustine; but Freeman points to the latter as the epitome of a more general process that was underway in the fourth century: namely, ‘the gradual subjection of reason to faith and authority.’ This is what we are seeing today, and it is a process that no society can undergo and still remain free. Yet it is a process of which administration officials, along with much of the American population, are aggressively proud.” In fact, close observers of this odd presidency note that Bush, like his evangelical base, believes he is on a mission from God and that faith trumps empirical evidence. Berman quotes a senior White House adviser who disdains what he calls the “reality-based” community, to which Berman sensibly responds: “If a nation is unable to perceive reality correctly, and persists in operating on the basis of faith-based delusions, its ability to hold its own in the world is pretty much foreclosed.”

Berman does a brief tour of the American horizon, revealing a cultural death valley. In secondary schools where evolution can still be taught too many teachers are afraid to bring up the subject to their so often un-evolved students. “Add to this the pervasive hostility toward science on the part of the current administration (e.g. stem-cell research) and we get a clear picture of the Enlightenment being steadily rolled back. Religion is used to explain terror attacks as part of a cosmic conflict between Good and Evil rather than in terms of political processes.... Manichaeanism rules across the United States. According to a poll taken by Time magazine fifty-nine percent of Americans believe that John’s apocalyptic prophecies in the Book of Revelation will be fulfilled, and nearly all of these believe that the faithful will be taken up into heaven in the ‘Rapture.’

“Finally, we shouldn’t be surprised at the antipathy toward democracy displayed by the Bush administration…. As already noted, fundamentalism and democracy are completely antithetical. The opposite of the Enlightenment, of course, is tribalism, groupthink; and more and more, this is the direction in which the United States is going…. Anthony Lewis who worked as a columnist for the New York Times for thirty-two years, observes that what has happened in the wake of 9/11 is not just the threatening of the rights of a few detainees, but the undermining of the very foundation of democracy. Detention without trial, denial of access to attorneys, years of interrogation in isolation—these are now standard American practice, and most Americans don’t care. Nor did they care about the revelation in July 2004 (reported in Newsweek), that for several months the White House and the Department of Justice had been discussing the feasibility of canceling the upcoming presidential election in the event of a possible terrorist attack.” I suspect that the technologically inclined prevailed against that extreme measure on the ground that the newly installed electronic ballot machines could be so calibrated that Bush would win handily no matter what (read Rep. Conyers’ report (.pdf file) on the rigging of Ohio’s vote).

Meanwhile, the indoctrination of the people merrily continues. “In a ‘State of the First Amendment Survey’ conducted by the University of Connecticut in 2003, 34 percent of Americans polled said the First Amendment ‘goes too far’; 46 percent said there was too much freedom of the press; 28 percent felt that newspapers should not be able to publish articles without prior approval of the government; 31 percent wanted public protest of a war to be outlawed during that war; and 50 percent thought the government should have the right to infringe on the religious freedom of ‘certain religious groups’ in the name of the war on terror.”

It is usual in sad reports like Professor Berman’s to stop abruptly the litany of what has gone wrong and then declare, hand on heart, that once the people have been informed of what is happening, the truth will set them free and a quarter-billion candles will be lit and the darkness will flee in the presence of so much spontaneous light. But Berman is much too serious for the easy platitude. Instead he tells us that those who might have struck at least a match can no longer do so because shared information about our situation is meager to nonexistent. Would better schools help? Of course, but, according to that joyous bearer of ill tidings, the New York Times, many school districts are now making sobriety tests a regular feature of the school day: apparently opium derivatives are the opiate of our stoned youth. Meanwhile, millions of adult Americans, presumably undrugged, have no idea who our enemies were in World War II. Many college graduates don’t know the difference between an argument and an assertion (did their teachers also fail to solve this knotty question?). A travel agent in Arizona is often asked whether or not it is cheaper to take the train rather than fly to Hawaii. Only 12% of Americans own a passport. At the time of the 2004 presidential election 42% of voters believed that Saddam Hussein was involved in 9/11. One high school boy, when asked who won the Civil War, replied wearily, “I don’t know and I don’t care,” echoing a busy neocon who confessed proudly: “The American Civil War is as remote to me as the War of the Roses.”

We are assured daily by advertisers and/or politicians that we are the richest, most envied people on Earth and, apparently, that is why so many awful, ill-groomed people want to blow us up. We live in an impermeable bubble without the sort of information that people living in real countries have access to when it comes to their own reality. But we are not actually people in the eyes of the national ownership: we are simply unreliable consumers comprising an overworked, underpaid labor force not in the best of health: The World Health Organization rates our healthcare system (sic—or sick?) as 37th-best in the world, far behind even Saudi Arabia, role model for the Texans. Our infant mortality rate is satisfyingly high, precluding a First World educational system. Also, it has not gone unremarked even in our usually information-free media that despite the boost to the profits of such companies as Halliburton, Bush’s wars of aggression against small countries of no danger to us have left us well and truly broke. Our annual trade deficit is a half-trillion dollars, which means that we don’t produce much of anything the world wants except those wan reports on how popular our Entertainment is overseas. Unfortunately the foreign gross of “King Kong,” the Edsel of that assembly line, is not yet known. It is rumored that Bollywood—the Indian film business—may soon surpass us! Berman writes, “We have lost our edge in science to Europe...The US economy is being kept afloat by huge foreign loans ($4 billion a day during 2003). What do you think will happen when America’s creditors decide to pull the plug, or when OPEC members begin selling oil in euros instead of dollars?...An International Monetary Fund report of 2004 concluded that the United States was ‘careening toward insolvency.’ ” Meanwhile, China, our favorite big-time future enemy, is the number one for worldwide foreign investments, with France, the bete noire of our apish neocons, in second place.

Well, we still have Kraft cheese and, of course, the death penalty.

Berman makes the case that the Bretton-Woods agreement of 1944 institutionalized a system geared toward full employment and the maintenance of a social safety net for society’s less fortunate—the so-called welfare or interventionist state. It did this by establishing fixed but flexible exchange rates among world currencies, which were pegged to the U.S. dollar while the dollar, for its part, was pegged to gold. In a word, Bretton-Woods saved capitalism by making it more human. Nixon abandoned the agreement in 1971, which started, according to Berman, huge amounts of capital moving upward from the poor and the middle class to the rich and super-rich.

Mr. Berman spares us the happy ending, as, apparently, has history. When the admirable Tiberius (he has had an undeserved bad press), upon becoming emperor, received a message from the Senate in which the conscript fathers assured him that whatever legislation he wanted would be automatically passed by them, he sent back word that this was outrageous. “Suppose the emperor is ill or mad or incompetent?” He returned their message. They sent it again. His response: “How eager you are to be slaves.” I often think of that wise emperor when I hear Republican members of Congress extolling the wisdom of Bush. Now that he has been caught illegally wiretapping fellow citizens he has taken to snarling about his powers as “a wartime president,” and so, in his own mind, he is above each and every law of the land. Oddly, no one in Congress has pointed out that he may well be a lunatic dreaming that he is another Lincoln but whatever he is or is not he is no wartime president. There is no war with any other nation...yet. There is no state called terror, an abstract noun like liar. Certainly his illegal unilateral ravaging of Iraq may well seem like a real war for those on both sides unlucky enough to be killed or wounded, but that does not make it a war any more than the appearance of having been elected twice to the presidency does not mean that in due course the people will demand an investigation of those two irregular processes. Although he has done a number of things that under the old republic might have got him impeached, our current system protects him: incumbency-for-life seats have made it possible for a Republican majority in the House not to do its duty and impeach him for his incompetence in handling, say, the natural disaster that befell Louisiana.

The founders thought two-year terms for members of the House was as much democracy as we’d ever need. Therefore, there was no great movement to have some sort of recall legislation in the event that a president wasn’t up to his job and so had lost the people’s confidence between elections. But in time, as Ecclesiastes would say, all things shall come to pass and so, in a kindly way, a majority of the citizens must persuade him that he will be happier back in Crawford pruning Bushes of the leafy sort while the troops not killed or maimed will settle for simply being alive and in one piece. We may be slaves but we are not unreasonable.

One way that a majority of citizens can help open the road back to Crawford is by heeding the call of a group called the World Can’t Wait (see their website, worldcantwait.org). They believe that the agenda for 2006 must not be set by the Bush gang but by the people taking independent mass political action.

On Jan. 31, the night of Bush’s next State of the Union address, they have called for people in large cities and small towns all across the country to join in noisy rallies to make the demand that “Bush Step Down” the message of the day. At 9 p.m. Eastern Standard Time, just as Bush starts to speak, people can make a joyful noise and figuratively drown out his address. Then on the following Saturday, Feb. 4, converge in front of the White House with the same message: Please step down and take your program with you.

Copyright © 2006 Truthdig, L.L.C.

Smoking opponents' hypocrisy stinks

Smoking opponents' hypocrisy stinks
Copyright by the Chicago Sun Times
January 25, 2006

The dangers of smoking get plenty of coverage in the media. Smoking can kill: Secondhand smoke is hazardous to your health, and in many parts of our country smoking is banned in restaurants, bars and within 15 feet of buildings. In our almost frenzied drive to eradicate smoking, we seem to be ignoring the potential dangers and deadly effects of alcohol. Having, at one time, spent many years in the bar and nightclub business, I can attest to the tragedies caused by alcohol: broken marriages, lost businesses and jobs, disintegration of pride and character and domestic abuse fueled by alcohol and sometimes resulting in murder.

Secondhand smoke? What about secondhand alcohol? How many drunken drivers kill people in America every day? I'd venture to say that it's more than those who die from secondhand smoke, and these deaths are on record and indisputable. The smoker who is a controlled and moderate drinker doesn't leave a bar and take a puff of his cigarette, saying, ''One for the road,'' then drive off and kill three people!

Drinking is socially acceptable. Smoking isn't. Why is that? One day smokers might be able to light up only in their cars or homes, but God forbid we should bring back Prohibition. Is part of it political? There are enough people to support and applaud anti-smoking campaigns, but where are the anti-alcohol advocates? After all, we can't stop serving champagne cocktails, wine and martinis at summit meetings or any other political gathering. That's preposterous, isn't it? We can drink six vodka martinis, buy a gun to kill someone -- having the right to bear arms -- drive our cars over the speed limit on the expressway in poor weather conditions, but smoking can kill you. There's something wrong here.

I am both a smoker and a drinker (only beer) and I consider both habits relaxing and enjoyable. So I'm not suggesting that we ban alcohol. It just irritates me that others victimize smokers with their paranoia and obsessive-compulsive campaigns to ban smoking, yet say little or nothing about the potentially devastating effects of alcohol.

Nonsmokers who wave their hand to ward off smoke from my cigarette -- as they gulp down their sixth Jack Daniels and Coke, and breathe their alcoholic breath in my direction -- annoy me! If they can enjoy their deadly habit, why can't I?

Ian Cameron,
Maywood

This year, resolve to solve many of my problems

Richard Roeper

This year, resolve to solve many of my problems

January 3, 2006

BY RICHARD ROEPER SUN-TIMES COLUMNIST Copyright by te Chicago Sun Times


Welcome to the first real day of 2006!

All this week, you'll see the signs that it's a brand new year: The health clubs will be jam-packed, as millions of Americans try to drop the same 20 pounds they vowed to lose last year around this time. Longtime smokers will be chomping on Nicorette as they try to kick the habit once and for all.

Lots of lunchers will be ordering the "heart healthy" selections from the menu. Gotta watch that cholesterol in '06!

Maybe there's a new "Swear Jar" at home, with Mom or Dad contributing a dollar every time a bad word escapes their lips.

And so it goes. For the next few days or weeks, half the people you know will be trying to do SOMETHING that will make them healthier, happier, more decent human beings.

I'm all for this -- not for myself, but for everybody else in the world. (Any resolutions I've made, I'm keeping to myself. I think that's the first step in making them a reality.) As we begin another year on this planet, I'm sure many of you have been wondering, "What can I do to make Richie happier this year? How can I make a contribution that will improve the quality of his life?"

First of all, don't ever think that you're just one person and you can't make a difference. You can. Even if we never cross paths in 2006, there are things you can do that will contribute to the greater good of Chicago and to the world at large -- and somehow, in that special way of mine, I'll know about it.

So let's make that list of New Year's Resolutions for 2006.

Not for me. I'm good. These are for you.

And that guy over there.

Say you want a resolution


1. Keep the cell phone chatter to a minimum.

2. When you are on the phone in a public place, YOU DON'T HAVE TO YELL.

3. Don't cross the street and give me a dirty look when I'm the one who has the left-turn arrow.

4. If you're in the service industry and I say "Thanks," grunting "Mmm-hmm" is not the way to go. Try a hearty "You're welcome!" It's so much more satisfying.

5. When visiting the downtown area with friends, do not walk six abreast like you're the "Reservoir Dogs" as you chit-chat and leisurely enjoy the sights. It clogs up the foot traffic behind you.

6. The gum-cracking? Not so attractive. Especially on the phone.

7. Speaking of phone etiquette: Try not to use up all 90 seconds on the voice-mail. Get to the point and get off. Thanks!

8. Even if you think you don't need deodorant every day, humor me and put some on. AFTER you've taken that morning shower.

9. See if you can enjoy the concert without singing along with every song at full voice. I paid the $125 to hear Coldplay -- not Coldplay plus some guy named Jimmy in the 14th row.

10. The following movie has been rated R. Leave the little ones at home. If you can't find a sitter, here's an idea: Stay home.

I'm starting to feel better about this year already, aren't you?

Resolved: Make Rich happy


11. When sending e-mails to me, please keep in mind that I've heard each of these comments at least a thousand times:

a. "You should stick to reviewing movies, because you know nothing about sports (politics, music, religion, life)."

b. "Next time you write a column on this topic, why don't you do a little research?"

c. "Your column is so biased."

d. "I never write to old media people, but after reading you today, I just had to let you know . . ."

Great. Thanks. Got it.

12. Punctuality is sexy. If you're going to be more than 10 minutes late, call and provide an update.

13. Have a mint! It's great for your breath. No, really. I insist.

14. To the fine folks working security at the airport: After you've told me to remove my shoes and my belt, after you've gone through my carry-on bag and left everything in a mess, after you've wanded my computer and patted me down -- at least thank me for putting up with a bunch of crap that has nothing to do with fighting terrorism.

15. I know how to shop. I know where to find you if I need you. You don't have to follow me around the store while peppering me with comments like, "Those are 40 percent off," and, "Do you need to try those on?" Thanks.

16. That sidewalk in front of your business? Next time it snows, don't be afraid to shovel the whole thing, not just a path wide enough for a Pomapoo.

17. See, you're the cabdriver and I'm the passenger, which means you're the one who should have change for a $20.

18. Easy with the text-messaging to others when you're talking to me. It's kind of, what's the word? Oh yeah: Insulting.

19. You don't have to forward that wacky video clip, that virus warning or that crazy dirty joke to me. You really don't.

20. Remember, on many days, this is a HUMOR COLUMN. You're not always supposed to take every single line so literally.

Happy Happy!

Gays praise long-awaited anti-bias law

Gays praise long-awaited anti-bias law

January 1, 2006
Copyright by The Chicago Sun-Times

BY ANNA JOHNSON

Tim Pierce hopes he never has to depend on a new state anti-discrimination law protecting gays and lesbians. But if he does, he's glad the protection is there.

The 39-year-old university instructor and his partner live in Oswego, a town about 40 miles west of Chicago and one of several in Illinois that didn't have laws protecting gays and lesbians. That is, until now.

Today, a state law prohibiting discrimination based on sexual orientation and gender identity will become a reality, nearly a year after Gov. Blagojevich signed it into law and more than three decades since state lawmakers first debated it.

''I'm hoping people won't need to rely on the law,'' said Pierce, also president of a gay rights organization in Joliet. ''But in instances where someone is denied housing or a job, they have an avenue to take that they couldn't before.''

Illinois joins 16 other states that have laws banning discrimination based on sexual orientation.

''Illinois is not a trendsetter, but it's not a right-winger,'' said Rick Garcia, political director for Equality Illinois, a gay rights group. ''We're not Massachusetts or California, but we're certainly not Alabama or Tennessee. . . . Illinoisans are reasonable people. We are cautious, but we want to do the right thing.''

Some opponents worry that the law will put Illinois on the path to legalizing gay marriage, a concern advocates dismiss.

Cities took the initiative

The battle to ban sexual-orientation discrimination in Illinois began in the mid-1970s, when the first bills were introduced in the Legislature.

Though bill after bill went by the wayside, communities began amending their own anti-discrimination laws to include sexual orientation. Champaign was the first in 1977, followed by Urbana, Chicago, eight other cities and Cook County.

Chicago-based Equality Illinois joined the fight in the early 1990s. It took more than a dozen more years for legislators to make it happen.

For Garcia, the battle has been long and frustrating, but he doesn't want to complain -- too much.

''It took 30 years for [the Legislature] to pass something as simple as protecting people on the basis of sexual orientation,'' Garcia said. ''On one hand, the Illinois General Assembly should be commended for recognizing all Illinoisans should be treated the same. But on the other hand, what the hell took so long?''

AP

'Cheney's Law' gives absolute power

'Cheney's Law' gives absolute power

Copyright Chicago Sun Times


December 30, 2005

BY ANDREW GREELEY


The controversy about spying on the American people fails to understand the implications of "Cheney's Law" -- the president of the United States has unlimited power in his role of commander in chief to do whatever he deems necessary in a time of war. He can intern prisoners without trial, approve the kidnapping of suspected enemies, send these suspects to prisons in foreign countries where they will be tortured, deny the right of habeas corpus, even nullify laws Congress has passed. He needs no permission from Congress or the courts to engage in any of these activities. The president, in other words, is the maximum leader at any time that he decides it is appropriate for him to exercise ultimate power in the United States.

Vice President Dick Cheney has argued this with considerable vigor and persuasiveness. Indeed, he argued it even before he was vice president. The current White House has obviously bought it.

Those who argue that it would not be difficult for the National Security Agency to obtain permission from the secret court to eavesdrop on American citizens miss the point of the controversy. The issue is not the National Security Agency. The issue rather is that those who revealed the domestic spying have dared to challenge Cheney's law.

There are historical grounds that lend some support for his draconian theory. President Abraham Lincoln suspended the right of habeas corpus during the Civil War. President Franklin Roosevelt interned thousand of Japanese Americans during World War II, acts of which later Americans became ashamed. Nonetheless, the response is that in times of crisis, a president must do what he has to do. And how long does the crisis last? Apparently, as long as the president says it lasts. When will the so-called war on terrorism cease? Arguably never. Thus, the president will possess absolute power to ignore existing laws, Congress, the courts and the Constitution itself indefinitely.

There is political wisdom in Cheney's law. While law professors, liberals, some journalists and some clergy are deeply concerned about the Bill of Rights, it means very little to the average person whose civil liberties have never been endangered. Moreover, when someone questions the absolute power of the commander in chief, President Bush can always play the "fear card." The successors of the 9/11 terrorists are still all around us. The absolute power of the presidency is essential to fight them off. Whether the "fear card" still has political clout remains to be seen. However, it has worked every time the president has played it. What better way to boost your approval ratings than by running against the American Civil Liberties Union and the Bill of Rights?

It would be very helpful to know how many conspiracies have been nipped in the bud by the measures justified under Cheney's law (and its spawn, the Patriot Act). The only answer seems to be Cheney's remark that it's not an accident that there have been no attacks since Sept. 11. National security, we are told, does not permit such chapter and verse.

How convenient. One might ask whether the founding fathers would agree that the commander in chief was in principle a leader with absolute powers. George Washington does not seem to have thought so.

Under Cheney's law, therefore, the president isn't a constitutional leader but in effect a military dictator, not notably different from Fidel Castro or Hugo Chavez -- not to mention other military dictators in ages past. We must trust his virtue and restraint and that of those around him to assure us he won't abuse his absolute power. He is, after all, a God-fearing man who prays over all his decisions. This is pretty thin armor.

The only way to defeat Cheney's law is to elect a Democratic Congress and threaten impeachment for high crimes. Would the Democrats run on a platform of supporting the Bill of Rights? Are they capable of being so "unpatriotic''?

Could a commander in chief nullify such an election in a time of war? One would hope the president and vice president would not extend Cheney's law that far. A year ago I would have thought that such a suggestion was from the lunatic fringe of blog writers and e-mail nuts. Now I'm not so sure. Power corrupts and absolute power corrupts absolutely.

Why the bears are brandishing their history books

Why the bears are brandishing their history books
By John Authers
Published: January 28 2006 02:00 | Last updated: January 28 2006 02:00. Copyright by the Financial Times

Are we in a bear or a bull market? There are always differences of opinion over the future course of stocks. It is unusual to argue over whether the stock market is locked into a down cycle or is moving forward.

But the bizarre start to the year allows for both interpretations. The market leapt in the first week on the back of optimism that the Federal Reserve would stop tightening monetary policy sooner than many people had expected, and the Dow Jones Industrial Average passed 11,000 for the first time in 4½ years. As 11,000 had functioned as an uncrossable barrier for the Dow during rallies last year, the hope was that the market was ready to move on with the next phase of its bull cycle.

Instead, last week saw dramatic sell-offs in response to corporate earnings announcements. Less than two weeks after the Dow passed 11,000, we were back below 10,700 and in the negative for the year.

Stocks made headway again this week, and the Dow re-crossed 10,900 in early trading yesterday, despite surprisingly bad numbers for US gross domestic product growth during the fourth quarter. But was this the aimless volatility of a directionless bear market, or a bull market regrouping?

You can present the data to support either secular interpretation. If you believe in a secular bear market, it started in early 2000. None of the major US indices has yet returned to their highs of the turn of the millennium. Or you could say that the bottom in 2003, at which point the S&P had roughly halved, signalled the beginning of a bull market, which is encountering turbulence at the moment.

The strength of the economy and corporate earnings, combined with more reasonable valuations, are all taken as pointers that the market is now on a well-supported advance.

But the evidence from history suggests that we are still in a bear market.

Earnings are on course to log their tenth successive quarter of double-digit growth. This is often cited as cause for optimism, although earnings last year would have been less impressive without the exceptional gains made by the energy sector.

This is not quite the bull point it appears. Ed Easterling, of Crestmont Research, who is convinced the market is still in a bear cycle, shows that the relationship of economic growth - which correlates over time with earnings growth - with bull and bear cycles is counter-intuitive.

According to his analysis of historical data, during bear markets, stocks decline on average 4.3 per cent a year while nominal GDP grows 6.9 per cent. In bull markets, when stocks rose 14.6 per cent per year, nominal GDP growth was lower, at 6.3 per cent.

Breaking earnings per share growth into decade-long periods, he found that the 1960s, 1980s and 1990s all saw average earnings growth of between 5.6 and 5.9 per cent. As earnings growth so far in the 2000s has averaged 7.5 per cent, we are overdue to regress to the mean.

Downswings in earnings per share last 1.6 years on average, and bring an average decline of 15 per cent. If that happens, price-earnings multiples will have to expand to the low 20s - above the historical norm - for the stock market merely to stay where it is now until 2008. So Mr Easterling may be right to believe in a bear market.

The dramatic reactions registered over the last week to earnings numbers that were sometimes even ahead of Wall Street consensus estimates adds more weight to the bear market hypothesis.

Current valuations embody a lot of optimism on earnings: it is a stretch to expect multiples to expand as earnings go down. Research by Abhijit Chakrabortti, of JPMorgan, on stock market corrections (where the S&P 500 falls by at least 10 per cent) provides more gloomy reading. He believes a "momentous" market correction is on its way, and that earnings disappointments provide the final necessary catalyst.

On his reading, another catalyst is already in place. Of the last 10 corrections, seven occurred when interest rates were rising, or when the Fed had just finished tightening.

Historically the market declines badly at the end of a Fed tightening cycle. And almost everyone expects the Fed to stop tightening sometime this year. So it looks like we can expect the directionless choppiness of January to continue a while longer. The bears are still in charge.

Why investors should maintain plenty of cash in their portfolios

Why investors should maintain plenty of cash in their portfolios
By Philip Coggan
Published: January 28 2006 02:00 | Last updated: January 28 2006 02:00. Copyright by the Financial Times

Last week, I spelt out why the "new bulls" believe the future could be rosy for both economies and the stock market. In essence, they argue that the emergence of India and China is boosting output and profits while keeping the lid on inflation.

Now it is the turn of the bearish case. Their argument is based on the presumption that the excesses of the dotcom bubble have not been shaken out of the system. Shares may have fallen a long way between March 2000 and March 2003, but they never reached a level that could be called cheap in historical terms.

That is because the central banks stepped in to protect the economy by cutting interest rates. That seemed good at the time; a sharp recession was avoided, as was the kind of financial crisis that was associated with past bear markets. But the bears argue this was the equivalent of a drunk having another beer to stave off a hangover; it may feel better in the short term, but in the long run the headache will be worse.

The bears believe central banks have stimulated another bubble - in the housing market - to replace the technology boom. Rising house prices have boosted the confidence of consumers and kept them spending, despite the loss in their equity wealth between 2000 and 2003.

In terms of where we go from here, the bearish camp tends to split in two. One half believes inflation is the inevitable result. Indeed, that group believes we are already experiencing inflation; it is simply not being picked up in the official statistics. They are contemptuous of "core" inflation measures that leave out vital items such as energy and food, and argue that we should pay a lot more attention to asset and commodity prices, particularly gold.

The steady rise of gold is a sign, they believe, that investors are worried about inflation and are seeking safety in the one true source of value. Paper money, they argue, always depreciates to its intrinsic value, that is, nothing.

The Federal Reserve, the bears say, has consistently intervened to rescue markets when share prices are falling sharply but has refused to puncture bubbles, whether in technology stocks or in housing. The result has been the "Greenspan put", the increased willingness of investors to take risks because they believe the Fed is underwriting asset values.

Eventually, the bears argue, high debt levels will overwhelm consumers. When it does, the Fed, under new chairman Ben Bernanke, will allow a "helicopter drop" of money into the US economy. The resulting inflation will alleviate the debt problem but result in a collapse in the dollar and cause substantial damage to the portfolios of those invested in cash or bonds.

The other half of the bearish camp agrees that high debt levels are a problem. But they argue that central banks will prove powerless to stop deflationary forces, just as the Bank of Japan failed in the 1990s. The result will be a deflationary depression. This camp believes one should own government bonds and large amounts of cash in case of a collapse in the banking system.

This is one problem with accepting the bearish argument: it results in two completely divergent investment approaches.

How do bears deal with the bullish arguments advanced last week?

They argue that equities may look cheap relative to bonds, but this is a faulty analysis based on a shaky theory and selective analysis of the data.

The so-called earnings yield ratio is a case in point. Why should falling bond yields be good for equities? If yields are falling because inflation expectations are lower, then forecasts for nominal earnings growth should be reduced. And if yields are falling because the economy looks weak, then expectations for real profits growth should decline as well.

Andrew Smithers of the consultancy Smithers & Co says the only useful valuation approaches are the Q ratio (which compares share prices with the replacement cost of net assets) and the cyclically adjusted price-earnings ratio. Both make equities look expensive.

As for the recent profits rise, the bears argue this is more cyclical than structural. At the top of the cycle, one should be paying lower-than-average valuations for equities, not higher.

On the role of India and China, the bears tend to divide. Some see the Asian story as the latest of the "different this time" arguments that regularly lure investors into overpaying for assets; others see Asia as the force that will cause the eventual deflationary bust.

So how can we compare the two arguments? I think there is merit in the case that easy money has been pushing up the prices of financial assets. Why else would gold, index-linked gilts and emerging markets all be going up?

These benign conditions may not last. Mervyn King, the governor of the Bank of England, worried in a recent speech that the low level of yields was unsustainable and could lead to disruption in financial markets.

The governor was non-committal about the timing and this remains a problem for many of the bearish arguments; people have been warning about the risks of high debt levels for a very long time, without an apocalypse occurring.

Nevertheless, before we reach the paradise foreseen by the bulls, I find it hard to believe there will not be a significant market setback. And that is why investors should keep plenty of cash in their portfolios.