Iran’s parliament sacked the interior minister, Ali Kordan, an ally of President Mahmoud Ahmadinejad, for falsely claiming to have an honorary degree from Oxford University. --The Economist
"How much of a fraud is Bozell? In 1998, Bozell claimed the media weren't paying enough attention to Monica Lewinsky -- at a time when there were 500 news reports a day on the topic. Now he's alternately claiming Obama is a "socialist" and a "Reaganite." And in his column last week, he complained that a recent Project for Excellence in Journalism study overstated the extent of negative coverage of Obama by including "talk-radio hosts from Rush Limbaugh to Randi Rhodes" who are supposed to "express an opinion." But that complaint is completely false. The study in question specifically excluded talk radio. It's right there in the study's methodology: "Talk radio stories, which are part of PEJ's regular NCI, were not included in this campaign study of tone." If Brent Bozell tells you the sun is shining, you better grab an umbrella." --Media Matters for America
I will say this: yay! it's finally over. Now the media can go back to covering things even more inconsequential to our lives...Sometimes, when a political campaign has run out of ideas and senses that the prize is slipping through its fingers, it rolls up a sleeve and plunges an arm, shoulder deep, right down to the bottom of the barrel. The problem for John McCain, Sarah Palin, and the Republican Party is that the bottom was scraped clean long before it dropped out. Back when the polls were nip and tuck and the leaves had not yet begun to turn, Barack Obama had already been accused of betraying the troops, wanting to teach kindergartners all about sex, favoring infanticide, and being a friend of terrorists and terrorism. What was left? The anticlimactic answer came as the long Presidential march of 2008 staggered toward its final week: Senator Obama is a socialist.
“This campaign in the next couple of weeks is about one thing,” Todd Akin, a Republican congressman from Missouri, told a McCain rally outside St. Louis. “It’s a referendum on socialism.” “With all due respect,” Senator George Voinovich, Republican of Ohio, said, “the man is a socialist.” At an airport rally in Roswell, New Mexico, a well-known landing spot for space aliens, Governor Palin warned against Obama’s tax proposals. “Friends,” she said, “now is no time to experiment with socialism.” And McCain, discussing those proposals, agreed that they sounded “a lot like socialism.” There hasn’t been so much talk of socialism in an American election since 1920, when Eugene Victor Debs, candidate of the Socialist Party, made his fifth run for President from a cell in the Atlanta Federal Penitentiary, where he was serving a ten-year sentence for opposing the First World War. (Debs got a million votes and was freed the following year by the new Republican President, Warren G. Harding, who immediately invited him to the White House for a friendly visit.)
As a buzzword, “socialism” had mostly good connotations in most of the world for most of the twentieth century. That’s why the Nazis called themselves national socialists. That’s why the Bolsheviks called their regime the Union of Soviet Socialist Republics, obliging the socialist and social democratic parties of Europe (and America, for what it was worth) to make rescuing the “good name” of socialism one of their central missions. Socialists—one thinks of men like George Orwell, Willy Brandt, and Aneurin Bevan—were among Communism’s most passionate and effective enemies.
The United States is a special case. There is a whole shelf of books on the question of why socialism never became a real mass movement here. For decades, the word served mainly as a cudgel with which conservative Republicans beat liberal Democrats about the head. When Barry Goldwater and Ronald Reagan accused John F. Kennedy and Lyndon Johnson of socialism for advocating guaranteed health care for the aged and the poor, the implication was that Medicare and Medicaid would presage a Soviet America. Now that Communism has been defunct for nearly twenty years, though, the cry of socialism no longer packs its old punch. “At least in Europe, the socialist leaders who so admire my opponent are upfront about their objectives,” McCain said the other day—thereby suggesting that the dystopia he abhors is not some North Korean-style totalitarian ant heap but, rather, the gentle social democracies across the Atlantic, where, in return for higher taxes and without any diminution of civil liberty, people buy themselves excellent public education, anxiety-free health care, and decent public transportation.
The Republican argument of the moment seems to be that the difference between capitalism and socialism corresponds to the difference between a top marginal income-tax rate of 35 per cent and a top marginal income-tax rate of 39.6 per cent. The latter is what it would be under Obama’s proposal, what it was under President Clinton, and, for that matter, what it will be after 2010 if President Bush’s tax cuts expire on schedule. Obama would use some of the added revenue to give a break to pretty much everybody who nets less than a quarter of a million dollars a year. The total tax burden on the private economy would be somewhat lighter than it is now—a bit of elementary Keynesianism that renders doubly untrue the Republican claim that Obama “will raise your taxes.”
On October 12th, in conversation with a voter forever to be known as Joe the Plumber, Obama gave one of his fullest summaries of his tax plan. After explaining how Joe could benefit from it, whether or not he achieves his dream of owning his own plumbing business, Obama added casually, “I think that when you spread the wealth around, it’s good for everybody.” McCain and Palin have been quoting this remark ever since, offering it as prima-facie evidence of Obama’s unsuitability for office. Of course, all taxes are redistributive, in that they redistribute private resources for public purposes. But the federal income tax is (downwardly) redistributive as a matter of principle: however slightly, it softens the inequalities that are inevitable in a market economy, and it reflects the belief that the wealthy have a proportionately greater stake in the material aspects of the social order and, therefore, should give that order proportionately more material support. McCain himself probably shares this belief, and there was a time when he was willing to say so. During the 2000 campaign, on MSNBC’s “Hardball,” a young woman asked him why her father, a doctor, should be “penalized” by being “in a huge tax bracket.” McCain replied that “wealthy people can afford more” and that “the very wealthy, because they can afford tax lawyers and all kinds of loopholes, really don’t pay nearly as much as you think they do.” The exchange continued:
YOUNG WOMAN: Are we getting closer and closer to, like, socialism and stuff?. . .
“Death by a thousand cuts.” “Fire-sale liquidation.” “A vortex of selling.” No matter how people described the market collapse that hit a month ago, the message was the same: it felt like there was nowhere to go but down, and it felt like we’d be going there forever. (Given last week’s dip, it still does.) Beginning on September 29th, the U.S. stock market fell on nine of the next ten trading days, plummeting twenty-six per cent; then, after a short, sharp rally, it lost ten per cent more in less than two days. Explanations for the crash often focussed on the hysteria and panic that periodically seem to seize investors. But the madness of crowds wasn’t the whole story. In a healthy market, there are countercyclical forces—mechanisms and institutions that go against the general market trend and encourage diversity of thinking—that make it harder for feedback loops and vicious cycles to take hold. Lately, though, many of these institutions and mechanisms have become procyclical: instead of countering trends, they amplify them.
Take, for instance, the credit rating agencies, which investors rely upon for evaluations of companies’ creditworthiness and general financial well-being. They are supposed to be a kind of early-warning system for investors, evaluating the health of companies in a way that’s insulated from prevailing market trends. Yet many studies have found that rating agencies are more likely to upgrade companies when investors are bullish and downgrade them when investors are bearish. This makes rating changes less useful to investors and also means that they push the market in the direction it’s already going. On October 9th, Standard & Poor’s announced, late in the day, that it was considering downgrading G.M. That helped an already shaky market fall four per cent in the final hour of trading.
Wall Street analysts have also been good at pouring gasoline on a raging fire. Analysts’ ability to take the long view and scrutinize company fundamentals should make them a counterweight whenever investors get too giddy or too gloomy. And sometimes it works that way: last fall, when investors were still relatively optimistic about banks, Oppenheimer’s Meredith Whitney correctly forecast serious trouble for the industry. More often, though, we see what the U.C.L.A. finance professor Bradford Cornell calls “positive feedback between stock price movements and analyst recommendations.” In other words, analysts often end up following the market, rather than leading it. In the case of a sell-off, this tends to make a bad situation worse. Earlier this month, Goldman Sachs downgraded steel companies like AK Steel. A bold call, you might think, except that it came only after AK Steel’s stock had fallen nearly seventy-five per cent in two months.
Rating agencies and Wall Street analysts are always with us. But the most destructive procyclical force in today’s market is relatively new—hedge funds. There’s an irony here: hedge funds have been touted as a great countercyclical force. Because hedge-fund investors, unlike mutual-fund investors, usually can’t pull their money out on a daily basis, the funds were supposed to be able to take a longer-term view and pursue contrarian strategies (like the hedge-fund manager John Paulson’s huge bets against the subprime bubble). Because they can follow myriad investment strategies—selling short as well as going long, trading derivatives, and so on—they were supposed to add diversity to the market. And the growing influence of hedge funds did indeed coincide with a decline in market volatility. A study by the Federal Reserve Bank of Cleveland showed that hedge funds generally made markets more stable.
Unfortunately, what was true of normal markets has turned out to be irrelevant in a crisis. Hedge-fund investors can’t ask for their money back tomorrow, but they commonly can ask for it at the end of any quarter, and after the market’s tumble this summer many of them did just that—to the tune of more than forty billion dollars in September alone, according to one estimate. The funds had to raise cash to meet those redemptions, which led them to dump stocks seemingly without regard to price. This colossal liquidation led stocks with a high percentage of hedge-fund ownership to fall, in some cases, forty or fifty per cent in a matter of weeks. The problem was magnified by the fact that the funds inevitably piggyback on one another’s trades, which made the selling feed on itself. And the faster funds’ positions shrank the more shares they had to sell in order to raise cash. The process was made still more destructive by many hedge funds’ reliance on leverage—funds often make bets totalling four or five times their capital. On the way up, leverage is great for maximizing returns. On the way down, it’s great at maximizing pain.
The great paradox of the sell-off, then, is that the factors that were supposed to increase the flow of information to investors, foster long-term thinking, and encourage contrarian positions did exactly the opposite. If there’s a silver lining in all this, it’s that investors who can endure past the present moment now have the chance to buy what at least look like very cheap stocks. Still, it’s not surprising that investors have been unwilling to step up. It’s hard enough to catch a falling knife. But it’s nearly impossible when hedge funds are hurling it.
In Washington, the men’s friendship was well known, and unsurprising. Both were hard-driving, politically conservative, hot-tempered, and humorous. They had served in Vietnam and were known as independent thinkers, averse to Party orthodoxy. And although they could be self-deprecating, they had a penchant for righteousness that did not endear them to many colleagues. McCain had campaigned in Nebraska for Hagel in 1996, during Hagel’s first Senate race, which he won in an upset against Ben Nelson, the former Nebraska governor (and current Democratic senator). A photograph in Hagel’s office shows him newly elected, with the five other senators who were Vietnam veterans: McCain, Bob Kerrey, Chuck Robb, John Kerry, and Max Cleland, who lost both legs and an arm in the war. Cleland, seated in a wheelchair, has made a joke, which they all seem to be enjoying. But Hagel and McCain didn’t become close until, about a year and a half later, McCain read a story about Hagel and the Nebraska gubernatorial race in Roll Call, the Capitol Hill newspaper. As the article recounted, Jon Christensen, the onetime front-runner in the 1998 Republican primary, had attacked his opponent with a harsh negative mailer in the final days before the election. Hagel and other Party officials in Nebraska, who had said that they would remain neutral, scolded Christensen and declared that his tactics “embarrassed Nebraska.” Christensen lost by a large margin. The story quoted Hagel as saying, “The most dangerous element of our political future in this country is candidates who debase and degrade the political process by straight-out lies and misleading spots on television. It’s a cancer to our system.” Hagel told me that McCain came to his office to talk to him about the article and said, “You know, I’m really proud of you for doing that. Not many people would have done it.”
In 2000, when McCain first ran for President, Hagel was one of only four senators who endorsed him, and he became co-chair of the McCain campaign. McCain lost in the South Carolina primary after evangelicals led by Pat Robertson and Ralph Reed rallied the Christian right to George W. Bush. A smear campaign in the state suggested that McCain had fathered Bridget, the Bangladeshi orphan he and his wife, Cindy, adopted in 1993. Hagel declared that Bush had “sold his soul to the right wing” and called Bush’s campaign “the filthiest” he had ever seen. McCain was invited to speak at the 2000 Republican National Convention, and Hagel was allotted three minutes for the introduction. Moments before he was to walk onstage, a member of Bush’s team told him that he would have only ninety seconds. Hagel excoriated the man with a ferocity that McCain would have appreciated—and he delivered his three-minute speech.
After September 11, 2001, differences in Hagel’s and McCain’s views on foreign policy became sharper, and more consequential. Hagel, a member of the Senate Committee on Foreign Relations, is an ardent internationalist—“All of us are touched by every event that unfolds in every corner of the world,” he often says. An advocate for a strong military, he also believes that military force should be the last tool of statecraft. McCain has an almost religious belief in American exceptionalism and the merits of using military force to protect the nation’s interests and promote its values. (“Whatever sacrifices you must bear,” he told young men and women at the U.S. Naval Academy, in October, 2001, “you will know a happiness far more sublime than pleasure.”) In the months after the September 11th attacks, he became an enthusiastic promoter of war in Iraq. In early January, 2002, as warplanes took off for Afghanistan, McCain stood on the flight bridge of the U.S.S. Theodore Roosevelt, an aircraft carrier in the Arabian Sea, and yelled, “Next up, Baghdad!” Hagel, who was on the trip with the same congressional delegation, told a reporter, “I think it would be wrong, very shortsighted, and very dangerous for the United States to unilaterally move on Iraq.”
Despite misgivings about the Bush Administration’s buildup to war—misgivings that Hagel aired repeatedly in public—he voted for the October, 2002, war resolution. (He has since said that he regrets his vote.) On the Senate floor, he declared, “Actions in Iraq must come in the context of an American-led, multilateral approach to disarmament, not as the first case for a new American doctrine involving the preëmptive use of force.” He also expressed fear about what he calls “the uncontrollables”—the unpredictable consequences of military action—and about America’s limited knowledge of the Middle East. “How many of us really know and understand Iraq, the country, the history, the people, and the role in the Arab world?” he asked. “The American people must be told of this long-term commitment, risk, and cost of this undertaking. We should not be seduced by the expectations of dancing in the streets.” In September, 2004, he called the situation in Iraq “beyond pitiful.” Senator John Kerry, in a debate with President Bush in the 2004 campaign, quoted Hagel’s comment, which rankled Hagel’s Republican colleagues. Hagel has frequently described the Administration’s “war on terror” as ill-conceived sloganeering and has argued that, in addition to fighting terrorism, we must fight the poverty and despair that enable terrorism to flourish. In a committee hearing in early 2007, he denounced the Bush Administration’s proposed “surge” strategy, which McCain strongly supported, as “the most dangerous foreign-policy blunder in this country since Vietnam.”
