Unemployment rate now at 9.4%: What does that say about the stimulus?

Back in January 2009, when the administration-elect was selling its stimulus plan, it released a report authored by Christina Romer and Jared Bernstein. I mentioned the report here. (The link to the report in that post doesn't work anymore but you can find the report here.) I think it's time to see whether we can determine if the stimulus is having the projected effect. The report included an unemployment graph that (almost) allows for this kind of accountability assessment:

There are, however, some fuzzy things about making this comparison:

1) Unemployment numbers come in two varieties: regular and seasonally-adjusted. I don't know whether the projected numbers are regular or seasonally-adjusted, so I don't know which of the actual numbers to use for comparison;

2) I don't know exactly what the projected timeline is. I mean, does the hash mark for "Q1" mean January 1? or does it mean the end of Q1, i.e. March 31? One's comparison could be off by as much as 3 month, given this ambiguity. I would assume that the Q1 hashmark marks the start of Q1, except that the graph projects the effect of the stimulus beginning right at Q1 2009, before the new administration was sworn in, and weeks before a stimulus plan could or would be in place.

3) Since the stimulus plan wasn't signed into law until February 17, 2009, its effect starts later than what is depicted in the graph (unless the Q1 hash mark is supposed to designate the end of Q1).

4) As always the case with projections, maybe projected rate without the stimulus wasn't pessimistic enough and, thus, maybe the stimulus if helping more than we can see.

Given all the fuzziness, I'm not drawing any conclusions yet.

I do note, though, that the current 9.4% is much higher than the projection depicted on this graph, even without the stimulus spending. This table from the Bureau of Labor Statistics (the source for the 9.4% number) shows unemployment rates by month since 1999:

The report includes this footnote explaining that the projection in the graph might be too low:

Forecasts of the unemployment rate without the recovery plan vary substantially. Some private forecasters anticipate
unemployment rates as high as 11% in the absence of action.

I appreciate that the report didn't use the scariest prediction available to make the case for the plan, but it's looking like the private forecasters were closer to right.

[Update: I meant to note about the table that the unemployment numbers track relatively well with the projections (sans stim) in the graph until the latest number which is much higher than the projection.]

Bringing home the bacon. Or not. (Three bacon posts in a row. Thank you very much.)

Here's where we're at on unemployment: 9.7% for August 2009. (This is from the Bureau of Labor and Statistics.)

And to refresh recollections, here's the projected unemployment graph from the Romer/Bernstein report used to justify the stimulus bill. (This is the third time I've posted this graph. Previous posts on the topic from June 5, 2009 and January 16, 2009.)



I'll leave it to economic historians to say whether the stimulus has helped with unemployment. This much is clear: we have not seen a downward turn to the unemployment rate yet; the report projected that we would see a relatively sharp turn by now. Of course, things may have been worse than was understood when the report issued in January 2009 and the stimulus money may be being spent more slowly than the plan provided.

Yesterdays economic news - good news or bad news?

I will admit, I don't understand economics. Especially when it concerns what is or isn't good for the average American. So an article in today's business section of the DMN has me even more confused. My comments are in red...

U.S. companies add 211,00 jobs (this sounds like good news)

Unemployment dips again, (more good news I think); strong report triggers worries on Wall Street (uh oh, that doesn't sound good - must be bad news)

"American employers added 211,00 workers in March, and the unemployment rate matched a four-year low, capping the best first quarter for hiring of any year since 2000 (this is obviously good news). The unemployment rate dipped to 4.7 percent, from 4.8 percent in February, the Labor Department reported Friday (confirmation of good news). 'Let's face it, 211,000 jobs at this stage of the employment cycle is pretty darn good,' said David Wyss, chief economist of Standard and Poor's (an expert agrees that this is good news). The strong employment data triggered a decline in the stock and bond markets (uh oh, I guess it was bad news) as investors fretted that businesses' growing appetite for workers might drive up wages (good news for workers) - and inflation (never good news) - and make it more likely the Federal Reserve will keep raising interest rates (ok, I KNOW that high interest rates are not good for anyone, correct?)."

After reading just this part of the article, I have no idea if the news was good or bad. Maybe good for workers (more jobs, growing business, higher wages) but bad for investors (growing business, higher wages, higher inflation). The bottom line appears to be that what is good for investors isn't good for average American. Or, stated another way, low unemployment and more jobs created is bad for Wall Street but good for average Americans. My head is spinning.....I don't know what is good or bad, what economic news I should be happy about or sad about.

Maybe I should just skip the business section from now on and concentrate on easier subjects, such as immigration.

Why We're Liberals: A Political Handbook for Post-Bush America

I read Why We're Liberals by Eric Altermann in part because of that Mamet essay that I found to be completely incoherent. I couldn’t follow what it was Mamet thought liberalism was and what exactly he was rejecting. Nothing he said sounded like liberalism, as I view it. That made me wonder whether I was making up a liberal philosophy that didn't match what other people believe liberalism is. But Alterman crystallizes it thusly (and this does match my idea of it):

Liberalism’s bedrock belief in personal freedom, of thoughts, of expression, and of action is derived from and defined by the philosophers of the eighteenth-century Enlightenment and its children, a group that includes [Locke, Voltair, Hume, Jean-Jacques Rousseau, Kant, Adam Smith, Jefferson, Paine and James Madison.] A liberal society strives to maximize these freedoms for the largest number of citizens while at the same time protecting the rights and interests of the minority, whose ideas of personal freedom may conflict with those of the majority. This focus on the freedom and the personal dignity of the individual fundamentally distinguishes liberalism from the tenets of both the religious right and the Marxist left, which stress instead unquestioned obedience to a higher authority for the benefit of the collective. Liberals find inherited and unquestioned belief systems – whether imposed by the Bible, the Koran, the Dialectic of History, or the Fatherland – to be anathema.

I wanted the whole of the book to be an unpacking of this: to walk through each of those philosopher/thinker's contributions to the liberal manifesto; to track its evolution; to compare and contrast it to conservative ideology; to describe how liberal ideals are reflected in policy.

But no. The lion’s share of the book is a listing of the nasty things right wing pundits accuse liberals of, followed by Alterman’s debunking or response. Altermann spends more space laying out the outrageous things the right wing pundits have said, than in his responses. My goodness. It truly is amazing to behold what comes out of the mouths of Ann Coulter, Rush Limbaugh, Sean Hannity and Bill O’Reilly.

Nevertheless, I don’t regard this as particularly useful in answering the question of “why we’re liberals”. Essentially, Alterman answers the question “why don’t we agree with Coulter, Limbaugh et al?” I didn’t need to read his book for that.

And it is filled with logical fallacies. For example, he purports to point out that conservatives are hypocrites because red states are higher in a whole host of metrics of bad behavior (related to crime, substance abuse and sexual promiscuity), while at the same time supporting tough agendas against such behavior. Here is one example of the 16 presented: The per capita rate of violent crime in red states is 421 per 100,000. In blue states, it's 372 per 100,000. That doesn't prove that red state folks are hypocritical. Maybe these states have a larger crime-committing population and that affects their attitudes about crime and leads them to choose candidates with a tough-on-crime policy agenda which is typically the Republican candidates. Or maybe policies in blue states actually lead to lower crime. We can't tell. But we can tell that this stat is not proof that conservatives are hypocritical.

Still, there is interesting stuff in the book. For example, Alterman notes the fruits of liberal policies that other countries have reaped:

The workers of France, Belgium, Ireland, the Netherlands, and Norway all ... enjoy higher productivity per hour worked than do U.S. workers. The reasons for this are myriad, but almost all of them contradict conservative conventional wisdom. According to conservative ideology, high tax rates are supposed to kill personal initiative and depress growth, but they are much higher and more progressive across Europe than in the U.S. Welfare payments – again, allegedly the means by which the personal initiative of poor people is destroyed – are based in Europe on universal entitlements, with little, if any, means-testing. Finally, union membership, also the bane of conservative propagandists in the United States, ranges from 70 percent of the workforce in Norway to over 95 percent of the workforce in Finland, more than six times its level in the United States.

While these societies are hardly utopias – much of Europe remains riven by apparently insoluble Islamic immigration crises and relatively high unemployment – the benefits provided by many if not most of these societies would, for most Americans, prove a wonder to behold. Despite the fact that Americans work nearly four hundred more hours a year than those famously industrious Germans, and more than workers in virtually every western European nation by a considerable margin, these same states somehow sponsor far more generous programs of training and job mobility, and pay generous unemployment benefits. Families receive periods of paid maternity and paternity leave. Europeans also enjoy high-quality public health and education provisions, and all manner of public services, from parks to efficient and inexpensive public transportation systems, that are not available anywhere in the United States. To give just one example, Denmark spends nearly one-third of its gross domestic product on government-run benefits and taxes its citizens at an equivalently high rate. Its top bracket is 63 percent, nearly double the highest rate in the United States. With these revenues, the state spends more than 5 percent of its GDP on the unemployed and more than 2 percent alone on its “flexicurity” label market programs to help retrain displaced workers. This compares with a feeble 0.16 percent in the United States*, which is by far the lowest in the Organisation for Economic Co-operation and Development (OECD). Partly as a result, in mid-2006 Denmark’s unemployment rate was just 3.6 percent, well below the 4.7 percent in the United States. According to the Economist Intelligence Unit, Denmark’s “Quality of Life” index proved superior to that of America as well, with advantages like universal health care and day care, and a poverty rate of just 4.3 percent, compared with 17.1 percent in the United States. (America has the second-worst record among OECD nations.) Meanwhile, Denmark is, at this writing, enjoying a small budget surplus, equal to approximately 0.65 percent of its GDP. The United States, meanwhile, is saddled with ever-exploding deficits, currently reaching 4.5 percent of GDP, and rising.

[Skipping a similar case for Finland]

American’s...welfare system, even in its most generous incarnation, raised poor incomes only moderately, and reduced the proportion of adults in poverty from 26.7 to 19.1 percent. In Germany, France and Italy, meanwhile, the proportion of adults in poverty hovers at around just 7 percent. . . . [W]hile roughly a quarter of all American children are condemned to grow up in poverty, the analogous proportions for the countries cited above are just 8.6, 7.4 and 10.5 percent. The lack of progress in this area in the United States is one reason American conservatives insist on making these programs so stingy. The truth is that, when it comes to social mobility, these European nations prove far more successful in providing what might be called “The Nordic Dream”. . . than the romantic notion of “the American Dream” that schoolchildren are taught to cherish. . . . According to two separate studies based on a set of data collected over a period of five decades the Nordic countries enjoy considerably greater degrees of social mobility than do Americans. In the United States, a son’s earnings are more than twice as likely to be closely related to those of his father than in most Nordic nations, and even Britain does a much better job at offering second-generation earners a higher probability of economic improvement than does the United States.

* I can’t tell from the text or the endnotes whether this figure for the U.S. takes into account the spending at the state level.  If not, he's probably not making an apples to apples comparison with the other countries.

Now, I think I know at least one of the things Scooter and Michael are thinking: “yeah, but what about the GDPs of those countries? GDP provides a picture of a nation’s wealth-generating engine (and we care about this because presumably wealth is a good thing) and the more socialist-tending a country is, the more anemic its economic engine. The purer capitalism is, the cheaper goods and services are, making more of them available to more people.” So here you go. I’ve plotted GDP per capita of the countries mentioned in the above quoted passages:

This shows that it is true that the U.S.’s GDP per capita is higher than almost all of these countries.

But the thing that I always wonder, and I think this is at the heart of liberal philosophy, is whether a more dynamic economic engine is the be-all end-all. Are human beings better off as a result of this better engine? To what extent does having access to cheaper, more plentiful goods provide real benefit?

What would be a key measure of the health and well-being of humans? How about life-expectancy? It’s not perfect or complete, but it must be a measure of the well-being of a species, reflecting intrinsically the degree to which basic needs for food and shelter are met and the level of health enjoyed (and that intrinsically reflects the level of stress the species endure, i.e. how difficult it is for us to meet our needs).

Below I add the life expectancy, in purple in the foreground, from each of these countries.
Let's take a look at the linear regression trend lines for GDP per capita and life expectancy.

Life expectancy varies inversely to GDP per capita.  It appears that the more productive we are the sooner we die. (And perhaps the farther we tend toward pure capitalism, the more stressful life is and the sooner we die?)

Let me acknowledge there are plenty of problems with my exercise, and I'm only offering it as a starting point for consideration. I'm open to any suggestions as to how to improve it. A few of the problems I recognize are:

a) my method of selecting the countries to include (i.e. the ones mentioned in these few paragraphs of Alterman’s book) may not be yielding a true picture of anything; I should re-do this using all countries. I would hypothesize that at the lowest end of the GDP spectrum we’d see the opposite trend: life expectancy increases with increasing GDP.

b) to show a correlation between purity of capitalism and life expectancy, I would need some way to characterize and quantify the degree of socialism within each country. By simply using Alterman’s list of countries providing lots of benefits, I’ve taken a short-cut that yields results that may not bear out with a more complete data set. Obviously, there are other countries that are are closer to pure socialism than these.

c) GDP per capita isn’t the sole measure of economic well-being.

d) length of life isn’t a full measure of the quality of life.

e)  correlation is not cause-and-effect.

No doubt, something like this, but with much greater rigor, has been done by economists.  Still, it's fun to play...

The data for the charts above is here:
The data comes from the CIA's World Factbook: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html

GDP is here:  https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html
Life expectancy is here: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2102rank.html

Back to Why We’re Liberals, here are a few more factoids:

• The United States is the only wealthy industrialized nation not to legislate any paid time off and holidays for its workforce.
  
• The United States and South Africa are the only two developed countries in the world that do not provide health care for all of their citizens.
  
• Gay marriage is the law in Belgium, the Netherlands and even Catholic Spain, while gay civil unions are officially recognized by Norway, Sweden, Iceland, France and Germany.

Some might assert that we needn't look to other countries to suggest what our own policies should be.  But I think these types of things are relevant to how countries will compete for the best workers, in the coming decades as nation states (and therefore citizenship) grows less relevant.

The book raises many other topics worthy of discussion, but they'll have to wait for another day.

[Update: see above]

Blaming a bad economy on Obama

Michael launched the first strike on what we'll see alot from the right: blaming Obama for a bad economy. So let's just take stock today, shall we, so we don't forget where Bush left us or try to rewrite history:

Come January, President Obama will inherit the weakest U.S. economy in 25 years, with output shrinking, unemployment rising, the federal deficit out of control and a financial system on government life-support. The new president will probably spend his first year in office careering from crisis to crisis, throwing lifelines to hard-hit households, local governments, industries and developing countries.

Oh yeah, and an unemployment rate that's at 6.5%.

Nothing a little chemo won't help

From VDH:

...


Unemployment is still below 7%. Inflation is low. So are interest rates. GDP did not go negative by much in the last quarter. The point is that we are not yet in an era of 1929-39 by any means.



There are enormous natural stimuli underway: in 2009 over a trillion dollars in national fuel savings will occur if energy prices stay below $50 a barrel. Indeed, they may drop even further, given slack world demand and enormous efforts at new discoveries the last five years. The price of housing is approaching, or indeed in some places below, the actual cost of replacement; so we may see millions of first-time buyers find their initial homes affordable in a way that had not been true in a quarter-century.



As bad as the condition that confronts the US, we are better off than most others. The EU owes $5 trillion in debt abroad, most of it uncollectible. Its members are at each other’s throats; higher unemployment and static demographics ensure there is not to be likely as much resilience and rebound as here in the US.


Russia, Venezuela, and Iran—as one-trick-pony oil exporters—are going broke and lowering their global mischievous profile. China is paranoid that its exports are ossifying when they must grow at 10% per annum if millions of new workers are to be incorporated into the work force. China has a multi-trillion-dollar rendezvous with unionization, environmentalism, suburban blues, and massive inputs in infrastructure.


Rather than look simply at our own dismal fiscal stats, instead, ask more germane philosophical questions: which country is more likely to remain politically stable during the global upheaval? Who encourages advancement more through meritocracy rather than nepotism or class and tribal affiliations? What nation will be the least likely to sink into work stoppages, religious and racial sectarianism, and violence? What country does foreign capital seek out to ensure safety in these unsettled times? Where are new ideas and products meeting the lesser resistance and accorded the greater compensation?


I think, in fairness, the US stands alone in most of the above categories that ultimately translate into superior economic growth. What we are seeing is a sort of global chemotherapy almost spontaneously occurring to destroy the cancer of speculation, fraud, huge borrowing, and creative accounting and to restore trust into the system. This naturally toxic medicine of deflation, doubt, timidity, and regulation may destroy some hosts, even as it takes out the cancer that started on September 14. Yet the US is in the best position to survive the toxicity and emerge on the other side of the treatment in remission and healthy.

Another unemployment chart

Dshort.com has this graph showing unemployment percentage along with the S&P through history:
It's harder to compare different periods since they're not stacked on top of each other as they are in graphs we've posted today. But it provides a good sense of perspective.

Unemployment and accountability

I see that Mankiw has been keeping an eye on unemployment relative to the predicted path in the report supporting the stimulus plan, like I have been. Apparently, he started this in May. He's doing it better too, of course. I swear I hadn't seen his May post when I posted in June and September.

Minnesota's unemployment

We're not doing so well here.

Minnesota's unemployment rate for February was 4.6 percent, up one-tenth of a point from January. The labor force participation rate slipped two-tenths to 72.4 percent and the employment-to-population ratio dropped three-tenths to 69.1 percent. These are the lowest both measures have been in Minnesota since 1989.

From the Minnesota Department of Employment

Mankiw on Obama's econ team

Mankiw looks at statements made by members of Obama's economic team and finds they're dead wringers for right wingers:

What would you call a group of economists who are skeptical of regulating mortgage markets, who think unemployment insurance and unions increase unemployment, who say that tax hikes retard economic growth, and who believe that the recovery from the Great Depression was a monetary phenomenon rather than the result of New Deal fiscal policy?

No, it is not a right-wing cabal. It's Team Obama.

Reich on extent of debt

Robert Reich says bad mortgages are only part of the debt picture. I don't expect his proposed solution (extend unemployment insurance, freeze mortgage rates, stimulus package) will seem like a good idea to all, but still his portrayal of the larger picture of debt is probably right.

Financial Crisis and Security Risks

Stratfor’s Report this week is a little self-serving but:

By Fred Burton and Scott Stewart

As anyone with a stock portfolio knows, it is a rough time for the markets. With many portfolios down 50 percent or more, this large loss of equity and wealth has been very difficult on individuals and corporations. The problems, of course, have not been confined to the stock markets. With property values plunging and variable-rate mortgages ballooning, many homeowners are also caught in a bad situation — the number of homeowners behind in their mortgage payments has been increasing and the number of foreclosures has grown. Unemployment is also an issue. According to the Bureau of Labor Statistics, in January 2009 there were 2,227 mass layoff actions in the United States involving 237,902 workers.

Significantly, the financial crisis is not just restricted to the United States — it is a global event that is also having a severe impact on economies in Europe, Asia and the developing world. Things are tough all over, and this financial strain will create some large security problems for corporations and governments.

Threats to the Bottom Line

During times of financial hardship, companies often have to make cuts like the aforementioned layoffs. When companies plan cuts, they often focus on eliminating those corporate functions that do not appear to be contributing to the company’s profitability. And one of the first functions cut during tough times often is corporate security. A security department typically has a pretty substantial budget (it costs a lot for all those guards, access-control devices, cameras and alarms), and security is usually viewed as detracting from, rather than contributing to, the company’s bottom line. The “fat” security budget is seen as an easy place to quickly reduce costs in an effort to balance the profit-and-loss statement.

This view of security is due to a number of factors. First, it must be recognized that there are certainly some security programs that are indeed bloated and ill-conceived that have consumed far too many corporate resources for the results they produce. Furthermore, there is a long tradition of corporate security directors who are not good communicators and who do not take the effort to educate upper management about ways their programs contribute to corporate goals. However, even when a security director has an effective program and is a good communicator, it can be very difficult to quantify the losses that the corporation did not suffer due to the presence of effective security measures. The lack of losses and incidents due to a robust security program can be interpreted by some to mean that there is no threat to guard against. Indeed, effective security can make it appear that there is no need for security, a paradox we have also seen in the historical pattern of U.S. government security funding — a pattern that has resulted in a number of disastrous attacks against U.S. embassies.

In times of economic hardship, the relentless focus on operating expenses and even corporate cutbacks can lead to definite security challenges. As we discussed last November, one of these problems is workplace violence, but during times when people are hurting financially, issues such as employee theft, fraud and product theft by non-employees must also be carefully monitored.
However, while the theft of a tractor-trailer full of computers or flat screen televisions can quickly get someone’s attention, there is a far more subtle, and no less dangerous, threat lurking just under the surface. That threat is espionage — both corporate and state-sponsored.

The Human-Intelligence Process

Espionage is always a problem corporations must face. Competitors, criminals and even foreign governments often seek ways to gather proprietary information from companies, sometimes to boost their own operational capacities (e.g., to apply critical or emerging technologies to their weapons programs) and sometimes to sell on the open market.

Once a company has been identified as having the information sought, the first thing the human-intelligence practitioner will do is look for weak links in the targeted company’s operations. If the required information is readily available, there is no need to undertake a time-intensive and costly operation to retrieve it. Indeed, it is shocking to see the amount of sensitive and critical information that is openly available on the Internet and in research libraries, or that is freely given out at technical conferences.

When open source collection efforts fail, more invasive measures must be employed. Sometimes the required information can be obtained via technical surveillance. A faulty information technology system, for example, can expose the company’s secrets via remote electronic intrusion conducted from a continent away. Other times, information can be obtained by eavesdropping on telephone calls made by corporate leaders or by using other technical surveillance measures.

However, technical surveillance has its limitations, and sometimes critical information must be obtained through human intelligence, which means obtaining the required data from an employee working within the targeted company. Due to human nature, human-intelligence practitioners use the same time-tested principles in the recruitment of corporate sources that they use when recruiting sources in the government sector. (The risks associated with obtaining unclassified proprietary information from private companies are often far less than those associated with obtaining classified information from government agencies or national research laboratories.)

The first step in the human-intelligence process is called spotting. This is when the human-intelligence practitioner attempts to identify those workers who have access to the required information. Then the practitioner conducts a thorough examination of the backgrounds and situations of the employees who have that access in an effort to determine which employee is most vulnerable to exploitation. Employees who are in dire need of extra cash to maintain extravagant lifestyles or to support drinking, drug or gambling habits, or those who are hiding extramarital affairs or other secrets that can be used for blackmail, make prime candidates. A background check might also reveal that a certain worker is angry with his or her employer over issues of salary or placement in the company. There also are employees who disagree ideologically with the product their company makes or the process the company uses to produce it. Finally, there are the employees whose egos are so big that they might be willing to risk committing industrial espionage just to prove they can get away with it. Robert Hanssen, an ex-FBI special agent accused of selling secrets to Russia, was motivated by the belief that he was above the system and could commit espionage without being caught.

Of the four major motivations for committing espionage — money, ideology, compromise and ego (known to security officials as MICE) — money has proven to be the No. 1 motivation, though two or more motivations can be used to turn an employee. More often than not, simple bribery is sufficient to obtain the desired information, especially if the employee is living beyond his or her means for one reason or another. Outside agents looking to turn an employee can also use blackmail (“compromise” in the MICE acronym). Demanding proprietary information in exchange for not exposing a personal secret, for instance, is a cost-effective approach that also allows the agent to return again and again to the same source. This method is a bit riskier, however, since it can cause more resentment than other means and make the source more likely to rebel. However, sexual entrapment and blackmail is still widely used as a recruitment tactic, one that has been used with great success in recent years by the Chinese government against targets such as Japanese and Taiwanese government officials, FBI special agents — and foreign businessmen.

Emphasizing the ‘M’

Once the practitioner has identified the weakest link, decided on the approach to take and made a specific plan on how to proceed, the next step in the human-intelligence process is to actually approach the employee and “pitch” him or her. This step is often a gradual effort to establish a relationship of trust between the practitioner and the employee, and contact can begin gradually with requests for small, seemingly harmless bits of information such as internal phone numbers. In this approach, known as the “little hook,” the employee is offered “gifts” in exchange for these favors. The requests gradually become greater in scope until the targeted information is obtained. Other times, the pitch is far more blatant and the human-intelligence practitioner does not take the time to establish a relationship or gradually recruit the target. Instead the practitioner makes a flat-out cash offer for the required goods or shows the target the evidence that will be used for blackmail.

In the current economic environment, with many 401(k) plans now more like 201(k)s, stock options severely underwater and homeowners facing foreclosure, cold hard cash — the M in MICE — is an even more attractive approach. In fact, with employees seeing their investment accounts decline dramatically, and perhaps even facing the possibility of home foreclosure, it is not at all unreasonable to anticipate that companies and foreigners will face a windfall of walk-in sources who will volunteer to sell critical information — and in such a buyer’s market, information can often be bought at fire-sale prices. Employees attempting to sell proprietary information are somewhat common; one of the most publicized examples of this in recent years was the disgruntled Coca-Cola Co. employee who was arrested in July 2006 after attempting to sell Coke’s recipe to rival soft drink company Pepsi.

Mass layoffs also complicate the equation, especially when some of the employees being laid off have access to critical information. If measures are not taken to ensure that the information is protected, the information could easily find itself in the hands of competing companies or even foreign intelligence services.

Not Just a Corporate Concern

The current financial crisis — and vulnerability to espionage — is not just confined to the private sector. There are many federal government employees in the United States who have watched their investments in the stock-based funds of the government’s Thrift Savings Plan wither on the vine over the past two years, and judging from the performance of foreign stock exchanges, the investments of employees in other governments have followed suit. Additionally, government employees tend to live in places with very expensive real estate, like Washington, London, Paris and Tokyo. This means that a foreign intelligence officer armed only with a briefcase full of dollars, euros or yen can make a substantial amount of money. With many corporate security departments being cut to the bone, many internal security services focused on the counterterrorism mission and many law enforcement agencies chasing white-collar criminals, it is a good time to be in the intelligence business.

One day we will look back on this time through a counterintelligence lens and see that, although it was a time of bear stock markets, it was a tremendous bull market for practitioners of human intelligence.

This report may be forwarded or republished on your website with attribution to www.stratfor.com

Reich on TARP and Obama's team on stimulus

Robert Reich has a post at TPM discussing TARP:

It's difficult to make the case that the first $350 billion bailout of Wall Street -- so-called "TARP I" -- fulfilled its goals, unless one argues that the Street would have imploded without it, which is pretty much what Hank Paulson is saying these days. And since it's impossible to prove a counter-factual, especially when the Treasury was never clear about TARP I's goals to begin with, Paulson may have a point. But the easier and probably more correct argument is that American taxpayers wasted $350 billion.

He then goes on to recommend some prudent restrictions on the TARP II money. Two of his suggestions:
1) Don't buy stock in the banks. This one surprised me because I had believed that buying stock in the banks (so we have something to show for our "investment") was better than just handing them money, but Reich makes the case that such money simply disappears.

2) Limit compensation to execs to 50% of recent years since they've already been over-compensated for performance that was based on false premises and fraudulent assertions.

I'm trying to ignore the TARP and stimulus fiascoes because if I look directly at them, I get ill.

Here is a report from Obama's team on the predicted impact of the stimulus on jobs. The report contains this graph that compares predicted results to what would happen in the absence of Obama's stimulus plan:
At peak, that's a 1% difference. That doesn't seem like much to me. The endnotes point out that some estimates show the unemployment rate, sans stimulus, to be as high as 11%, so the peak difference might be more. Maybe the way to look at it is that over the period they show (we won't be back to 5% rates until 2013, stimulus or no), that difference affects a lot of lives and has a big economic impact. Tim Fernholz at Tapped has coherent thoughts about this jobs report and provides the link to the report.

Picking up after Douthat. This time: the Ground Zero mosque/community center.

Ezra on the coverage of the mosque, here:

You get a lot of these mini-manias in the 24-hour news cycle, and it's always hard to say which you should take seriously and which you should ignore. After all, if you jump on everything that cable news makes into a big deal, you've become part of the problem, because you're helping the story along. But you don't want to just dismiss everything, either. The test I try to use is this: Could I imagine a world in which this thing was happening but no one ever thought to comment on it?

Well, yes. I can't imagine that world for unemployment, or financial-regulation reform, or the Afghanistan Wikileaks. But it absolutely could've been the case that Imam Feisel Abdul Rauf decided to build an Islamic community center and no one really noticed, or cared, and maybe a few local politicians from both parties showed up to help cut the ribbon. As it happened, a few opportunists went after it, which brought it to the attention of a few sensationalistic media outlets, and then some opportunistic politicians jumped on board, and then their colleagues felt compelled to comment, and then more legitimate media outlets had something to cover, and on and on. The story is a story because of the incentives of the people making it a story, not because there's something about an Islamic community center a few blocks from Ground Zero that just screams out for national attention.

Don't believe me? Then ask yourself why you've never heard anyone complain about the halal food carts parked outside the Ground Zero construction site. This didn't need to become a polarizing national issue. It was made into a polarizing national issue. And now the only thing to do is to wait for it to pass.

I'm inclinded to follow Ezra's example and not discuss the mosque mess, but, offline, Michael requested my response to Douthat's mosque piece, so I'll indulge him.

Douthat makes two common mistakes:

1) Treating the 9/11 terrorists as if their behavior informs us about Islam. It doesn't, any more than the bombing of abortion clinics by self-proclaimed Christians informs us about Christianity. There is an America that cannot get this concept through their heads and therefore insist on treating Muslims as a special class who are always suspect, who are not entitled to the freedoms that our country promises, who have to prove their trustworthiness in a way that non-Muslims do not, who are expected to employ more "sensitive" antennas than non-Muslims. It's THAT America that scares the sh*t out of me.

2) Watching and reading news stories and drawing the conclusion that what isn't presented there doesn't exist -- that if news stories don't present images and sound bites of Muslim Americans decrying the 9/11 terrorists, then that means Muslim Americans accept, support, and are in agreement with the 9/11 terrorists or other radicals. Douthat, and everyone else, needs to appreciate that the media doesn't give time or space to people spouting reasonable, temperate sentiments, so Muslims with reasonable, temperate sentiments are not going to be appearing in news stories or as talking heads in the proportions that they exist in the world. The Muslims being quoted or trotted out for inflammatory comments in news coverage are not a representative sample and that's what gives Douthat the impression that they "too often" do what they do. The real "too often" is that the news finds and quotes these folks but fails to quantify how prevalent their positions are. Also, "too often" the media automatically associates the views of an individual with those of an organization to which he/she belongs.

I don't know anything about Craig Berger writing at Future Majority, but he has already written a rebuttal to Douthat that addresses these points. He does a good job of putting the shoe on the other foot to illustrate the absurdity and unfairness of having an attitude that the events of 9/11 should have a bearing on selection of a mosque location.

I'm still calling him DOUGH HAT in my head. Will someone correct me if I've got that wrong, please? It's hard not to think derisively of someone you're calling DOUGH HAT.

Re: Unemployment rates

I recall from my college days that most economists consider 4% to be "full employment." Theory being that those last 4% are just unemployable for whatever reasons.

Texas unemployment rate drops to (from what I heard is) a 30 year low

From the Chronicle.

Stratfor: Trouble Brewing in Georgia

Per Stratfor Alert:

Summary

Georgian opposition movements have planned mass protests for April 9, mostly in Tbilisi but also around the country. These protests could spell trouble for President Mikhail Saakashvili. The Western-leaning president has faced protests before, but this time the opposition is more consolidated than in the past. Furthermore, some members of the government are expected to join in the protests, and Russia has stepped up its efforts to oust Saakashvili.

Analysis

Related Link Intelligence Guidance (Special Edition): April 8, 2009

Opposition parties inside Georgia are planning mass protests for April 9, mainly in the capital city of Tbilisi but also across the country. The protests are against President Mikhail Saakashvili and are expected to demand his resignation. This is not the first set of rallies against Saakashvili, who has had a rocky presidency since taking power in the pro-Western “Rose Revolution” of 2003. Anti-government protests have been held constantly over the past six years. But the upcoming rally is different: This is the first time all 17 opposition parties have consolidated enough to organize a mass movement in the country. Furthermore, many members of the government are joining the cause, and foreign powers — namely Russia — are known to be encouraging plans to oust Saakashvili.

The planned protests in Georgia have been scheduled to coincide with the 20th anniversary of the Soviet crackdown on independence demonstrators in Tbilisi. The opposition movement claims that more than 100,000 people will take to the streets — an ambitious number, as the protests of the past six years have not drawn more than 15,000 people. But this time around, the Georgian people’s discontent is greatly intensified because of the blame placed on Saakashvili after the Russo-Georgian war in August 2008. Most Georgians believe Saakashvili pushed the country into a war, knowing the repercussions, and into a serious financial crisis in which unemployment has reached nearly 9 percent.

Georgia’s opposition has always been fractured and so has only managed to pull together sporadic rallies rather than a real movement. But the growing discontent in Georgia is allowing the opposition groups to finally overcome their differences and agree that Saakashvili should be removed. Even Saakashvili loyalists like former Parliament Speaker Nino Burjanadze and former Georgian Ambassador to the United Nations Irakli Alasania have joined the opposition’s cause, targeting Saakashvili personally. The problem now is that opposition members still do not agree on how to remove the president; some are calling for referendums on new elections, and some want to install a replacement government to make sure Saakashvili does not have a chance to return to power. But all 17 parties agreed to start with large-scale demonstrations in the streets and go from there.

If the movement does inspire such a large turnout, it would be equivalent to the number of protesters that hit the streets at the height of the Rose Revolution, which toppled the previous government and brought Saakashvili into power in the first place.

Saakashvili and the remainder of his supporters are prepared, however, with the military on standby outside of Tbilisi in order to counter a large movement. During a demonstration in 2007, Saakashvili deployed the military and successfully — though violently — crushed the protests. But that demonstration consisted of 15,000 protesters; it is unclear if Saakashvili and the military could withstand numbers seven times that.



(click image to enlarge)

[not really--click on link for map.]


There is also concern that protests are planned in the Georgian secessionist region of Adjara, which rose up against and rejected Saakashvili’s government in 2004 after the Rose Revolution. This region was suppressed by Saakashvili once and has held a grudge ever since, looking for the perfect time to rise up again. Tbilisi especially wants to keep Adjara under its control because it is home to the large port of Batumi, and many of Georgia’s transport routes to Turkey run through it. If Adjara rises up, there are rumors in the region that its neighboring secessionist region, Samtskhe-Javakheti, will join in to help destabilize Saakashvili and the government. Georgia already officially lost its two northern secessionist regions of Abkhazia and South Ossetia to Russian occupation during the August 2008 war and is highly concerned with its southern regions trying to break away.

These southern regions, like the northern ones, have strong support from Russia; thus, Moscow is square in the middle of tomorrow’s activities. Russia has long backed all of Georgia’s secessionist regions, but has had difficulty penetrating the Georgian opposition groups in order to organize them against Saakashvili. Though none of the 17 opposition groups are pro-Russian, STRATFOR sources in Georgia say Russian money has been flowing into the groups in order to nudge them along in organizing the impending protests.

Russia has a vested interest in breaking the Georgian government. Russia and the West have been locked in a struggle over the small Caucasus state. That struggle led to the August 2008 Russo-Georgian war, after which Moscow felt secure in its control over Georgia. Since Russian President Dmitri Medvedev and U.S. President Barack Obama met April 1 and disagreed over a slew of issues, including U.S. ballistic missile defense installations in Poland and NATO expansion to Ukraine and Georgia, Russia is not as secure and is seeking to consolidate its power in Georgia. This means first breaking the still vehemently pro-Western Saakashvili. This does not mean Russia thinks it can get a pro-Russian leader in power in Georgia; it just wants one who is not so outspoken against Moscow and so determined to invite Western influence.

The April 9 protests are the point at which all sides will try to gain — and maintain — momentum. The 2003 Rose Revolution took months to build up to, but the upcoming protests are the starting point for both the opposition and Russia — and opposition movements in Georgia have not seen this much support and organization since the 2003 revolution. April 9 will reveal whether or not things are about to get shaken up, if not completely transformed, in Georgia.

Stratfor on Israel/Hamas

Because Stratfor lets me:

Israel is now in the 13th day of carrying out Operation Cast Lead against the Palestinian Islamist movement Hamas in the Gaza Strip, where Hamas has been the de facto ruler ever since it seized control of the territory in a June 2007 coup. The Israeli campaign, whose primary military aim is to neutralize Hamas' ability to carry out rocket attacks against Israel, has led to the reported deaths of more than 560 Palestinians; the number of wounded is approaching the 3,000 mark.

The reaction from the Arab world has been mixed. On the one hand, a look at the so-called Arab street will reveal an angry scene of chanting protesters, burning flags and embassy attacks in protest of Israel's actions. The principal Arab regimes, however, have either kept quiet or publicly condemned Hamas for the crisis — while privately often expressing their support for Israel's bid to weaken the radical Palestinian group.

Despite the much-hyped Arab nationalist solidarity often cited in the name of Palestine, most Arab regimes actually have little love for the Palestinians. While these countries like keeping the Palestinian issue alive for domestic consumption and as a tool to pressure Israel and the West when the need arises, in actuality, they tend to view Palestinian refugees — and more Palestinian radical groups like Hamas — as a threat to the stability of their regimes.
One such Arab country is Saudi Arabia. Given its financial power and its shared religious underpinnings with Hamas, Riyadh traditionally has backed the radical Palestinian group. The kingdom backed a variety of Islamist political forces during the 1960s and 1970s in a bid to undercut secular Nasserite Arab nationalist forces, which threatened Saudi Arabia's regional status. But 9/11, which stemmed in part from Saudi support for the Taliban and al Qaeda in Afghanistan, opened Riyadh's eyes to the danger of supporting militant Islamism.

Thus, while Saudi Arabia continued to support many of the same Palestinian groups, it also started whistling a more moderate tune in its domestic and foreign policies. As part of this moderate drive, in 2002 King Abdullah offered Israel a comprehensive peace treaty whereby Arab states would normalize ties with the Jewish state in exchange for an Israeli withdrawal to its 1967 borders. Though Israel rejected the offer, the proposal itself clearly conflicted with Hamas' manifesto, which calls for Israel's destruction. The post-9/11 world also created new problems for one of Hamas' sources of regular funding — wealthy Gulf Arabs — who grew increasingly wary of turning up on the radars of Western security and intelligence agencies as fund transfers from the Gulf came under closer scrutiny.

Meanwhile, Egypt, which regularly mediates Hamas-Israel and Hamas-Fatah matters, thus far has been the most vocal in its opposition to Hamas during the latest Israeli military offensive. Cairo has even gone as far as blaming Hamas for provoking the conflict. Though Egypt's stance has earned it a number of attacks on its embassies in the Arab world and condemnations in major Arab editorial pages, Cairo has a core strategic interest in ensuring that Hamas remains boxed in. The secular government of Egyptian President Hosni Mubarak is already preparing for a shaky leadership transition, which is bound to be exploited by the country's largest opposition movement, the Muslim Brotherhood (MB).

The MB, from which Hamas emerged, maintains links with the Hamas leadership. Egypt's powerful security apparatus has kept the MB in check, but the Egyptian group has steadily built up support among Egypt's lower and middle classes, which have grown disillusioned with the soaring rate of unemployment and lack of economic prospects in Egypt. The sight of Muslim Brotherhood activists leading protests in Egypt in the name of Hamas is thus quite disconcerting for the Mubarak regime. The Egyptians also are fearful that Gaza could become a haven for Salafist jihadist groups that could collaborate with Egypt's own jihadist node the longer Gaza remains in disarray under Hamas rule.

Of the Arab states, Jordan has the most to lose from a group like Hamas. More than three-fourths of the Hashemite monarchy's people claim Palestinian origins. The kingdom itself is a weak, poor state that historically has relied on the United Kingdom, Israel and the United States for its survival. Among all Arab governments, Amman has had the longest and closest relationship with Israel — even before it concluded a formal peace treaty with Israel in 1994. In 1970, Jordan waged war against Fatah when the group posed a threat to the kingdom's security; it also threw out Hamas in 1999 after fears that the group posed a similar threat to the stability of the kingdom. Like Egypt, Jordan also has a vibrant MB, which has closer ties to Hamas than its Egyptian counterpart. As far as Amman is concerned, therefore, the harder Israel hits Hamas, the better.

Finally, Syria is in a more complex position than these other four Arab states. The Alawite-Baathist regime in Syria has long been a pariah in the Arab world because of its support for Shiite Iran and for their mutual militant proxy in Lebanon, Hezbollah. But ever since the 2006 war between Israel and Hezbollah, the Syrians have been charting a different course, looking for ways to break free from diplomatic isolation and to reach some sort of understanding with the Israelis.

For the Syrians, support for Hamas, Palestinian Islamic Jihad and several other radical Palestinian outfits provides tools of leverage to use in negotiating a settlement with Israel. Any deal between the Syrians and the Israelis would thus involve Damascus sacrificing militant proxies such as Hezbollah and Hamas in return for key concessions in Lebanon — where Syria's core geopolitical interests lie — and in the disputed Golan Heights. While the Israeli-Syrian peace talks remain in flux, Syria's lukewarm reaction to the Israeli offensive and restraint (thus far) from criticizing the more moderate Arab regimes' lack of response suggests Damascus may be looking to exploit the Gaza offensive to improve its relations in the Arab world and reinvigorate its talks with Israel. And the more da mage Israel does to Hamas now, the easier it will be for Damascus to crack down on Hamas should the need arise.

With Saudi Arabia, Egypt, Jordan and Syria taking into account their own interests when dealing with the Palestinians, ironically, the most reliable patron Sunni Hamas has had in recent years is Iran, the Sunni Arab world's principal Shiite rival. Several key developments have made Hamas' gradual shift toward Iran possible:

1. Saudi Arabia's post-9/11 move into the moderate camp — previously dominated by Egypt and Jordan, two states that have diplomatic relations with Israel.

2. The collapse of Baathist Iraq and the resulting rise of Shiite power in the region.

3. The 2004 Iranian parliamentary elections that put Iran's ultraconservatives in power and the 2005 election of President Mahmoud Ahmadinejad, whose public anti-Israeli views resonated with Hamas at a time when other Arab states had grown more moderate.

4. The 2006 Palestinian elections, in which Hamas defeated its secular rival, Fatah, by a landslide. When endowed with the responsibility of running an unrecognized government, Hamas floundered between its goals of dominating the Palestinian political landscape and continuing to call for the destruction of Israel and the creation of an Islamist state. The Arab states, particularly Saudi Arabia and Egypt, had hoped that the electoral victory would lead Hamas to moderate its stance, but Iran encouraged Hamas to adhere to its radical agenda. As the West increasingly isolated the Hamas-led government, the group shifted more toward the Iranian position, which more closely meshed with its original mandate.

5. The 2006 summer military confrontation between Hezbollah and Israel, in which Iranian-backed Hezbollah symbolically defeated the Jewish state. Hezbollah's ability to withstand the Israeli military onslaught gave confidence to Hamas that it could emulate the Lebanese Shiite movement — which, like Hamas, was both a political party and an armed paramilitary organization. Similar to their reaction to the current Gaza offensive, the principal Arab states condemned Hezbollah for provoking Israel and grew terrified at the outpouring of support for the Shiite militant group from their own populations. Hezbollah-Hamas collaboration in training, arms-procurement and funding intensified, and almost certainly has played a decisive role in equipping Hamas with 122mm BM-21 Grad artillery rockets and larger Iranian-made 240mm Fajr-3 rockets — and potentially even a modest anti-armor capability.

6. The June 2007 Hamas coup against Fatah in the Gaza Strip, which caused a serious strain in relations between Egypt and Hamas. The resulting blockade on Gaza put Egypt in an extremely uncomfortable position, in which it had to crack down on the Gaza border, thus giving the MB an excuse to rally opposition against Cairo. Egypt was already uncomfortable with Hamas' electoral victory, but it could not tolerate the group's emergence as the unchallenged power in Gaza.

7. Syria's decision to go public with peace talks with Israel. As soon as it became clear that Syria was getting serious about such negotiations, alarm bells went off within groups like Hamas and Hezbollah, which now had to deal with the fear that Damascus could sell them out at any time as part of a deal with the Israelis.

Hamas' relations with the Arab states already were souring; its warming relationship with Iran has proved the coup de grace. Mubarak said it best when he recently remarked that the situation in the Gaza Strip "has led to Egypt, in practice, having a border with Iran." In other words, Hamas has allowed Iranian influence to come far too close for the Arab states' comfort.

In many ways, the falling-out between Hamas and the Arab regimes is not surprising. The decline of Nasserism in the late 1960s essentially meant the death of Arab nationalism. Even before then, the Arab states put their respective national interests ahead of any devotion to pan-Arab nationalism that would have translated into support for the Palestinian cause. As Islamism gradually came to replace Arab nationalism as a political force throughout the region, the Arab regimes became even more concerned about stability at home, given the very real threat of a religious challenge to their rule. While these states worked to suppress radical Islamist elements that had taken root in their countries, the Arab governments caught wind of Tehran's attempts to adopt the region's radical Islamist trend to create a geopolitical space for Iran in the Arab Middle East. As a result, the Arab-Persian struggle became one of the key drivers that has turned the Arab states against Hamas.

For each of these Arab states, Hamas represents a force that could stir the social pot at home — either by creating a backlash against the regimes for their ties to Israel and their perceived failure to aid the Palestinians, or by emboldening democratic Islamist movements in the region that could threaten the stability of both republican regimes and monarchies. With somewhat limited options to contain Iranian expansion in the region, the Arab states ironically are looking to Israel to ensure that Hamas remains boxed in. So, while on the surface it may seem that the entire Arab world is convulsing with anger at Israel's offensive against Hamas, a closer look reveals that the view from the Arab palace is quite different from the view on the Arab street.

Heroes: Susan Retik and Patti Quigley

In the midst of all the hatred and vitriol and Islamophobia and Koran-burning, my faith that humans can behave humanely was restored by Susan Retik and Patti Quigley, whose husbands died in the 9/11 attack.

So at a time when the American government reacted to the horror of 9/11 mostly with missiles and bombs, detentions and waterboardings, Ms. Retik and Ms. Quigley turned to education and poverty-alleviation projects — in the very country that had incubated a plot that had pulverized their lives.

The organization they started, Beyond the 11th, has now assisted more than 1,000 Afghan widows in starting tiny businesses. It’s an effort both to help some of the world’s neediest people and to fight back at the distrust, hatred and unemployment that sustain the Taliban.

Kristof tells their story here.

Bredesen Brilliant?

From cnsnnews:

Tennessee Gov. Phil Bredesen, a Democrat, said he might turn down a portion of the $787 billion economic stimulus package that applies to unemployment benefits, because of the conditions attached to the money, The Tennessean reported.