Good State, Bad State. When the DCI survey participants were asked to name the most favorable state business climates, Texas got the highest overall score, followed (in order) by North Carolina, Georgia, Florida and Tennessee (tied), Nevada, and South Carolina.  When participants were asked to name the least favorable state business climates, California topped the list, followed (in order) by New York, Michigan, New Jersey, Massachusetts, Illinois, and Oregon. ---  Source: “A View from Corporate America: Winning Strategies in Economic Development Marketing,” Development Counsellors International, July 2008.

Ever mindful of the danger that George Bush will lead us down the road to Socialism, we will be monitoring this very closely.  ---BARNEY FRANK, responding to a speech by US Rep Jeb Hensarling warning about the bailout's socialistic tendencies.

More Government, Please. Craig Overmiller's Austin-based company has nothing to do with banking, politics or Wall Street.  ... As co-founder of Texas Solar Power (no SBIR), Overmiller has plenty to gain — or lose. Included in the Emergency Economic Stabilization Act of 2008 is an extension and expansion of a solar power investment tax credit for consumers and businesses that Overmiller estimates could add $2 million a year to his company's $6 million in annual sales. [Bob Keefe, Austin American-Statesman, Oct 3]

"Bailout is from when I was against the bill," the veteran South Florida Republican jokingly corrected her. "Now it's economic rescue legislation. You gotta get the lingo."  Ros-Lehtinen's new perspective was one congressional leaders were hoping other lawmakers shared as well. After three days back home, ...  [Allan Fram, AP, Oct 3]

$100B Here, ... the newly added tax provisions of the bill alone will cost the government an additional $110.4 billion by 2018, according to a just-released study by Congress' Joint Committee on Taxation. Only $3.4 billion of that is related to the "bailout" portion of the bill. The AMT fix and the extension of certain tax incentives will cost $107 billion over the next 10 years. [Forbes, Oct 2] ... and pretty soon you're talking real money.  Each $100B means $300 for every head of the population. If the flat-taxers got their wish, babies would pay the same $300 as Bill Gates, although they fantasize that a "democratic" flat-tax government would resist the urge to buy votes with handouts.

The Senate saw fit to dig the national economic hole a little deeper by adding "sweeteners" to the bailout bill, and then congratulated each other on their bipartisanship.

The global financial system is out of control, and in Washington no one is in charge. ... America's reputation may not recover from having forfeited leadership at the time when its leadership is most desperately needed to restore confidence in a panicking world. This is not the pragmatic, courageous America we thought we knew. [Camilla Cavendish, The Times, Oct 1] ...  The era of the self-regarding, massively self-rewarding independent investment banker, the financial colossus of the past few years, is over. ...  The centre of financial gravity has abruptly shifted to Washington. .... The writer and economist John Kenneth Galbraith identified the essential ingredient of financial feel-good: “Speculation on a large scale requires a pervasive sense of confidence and optimism and conviction that ordinary people were meant to be rich. [Ben Macintyre, The Times, Oct 1]

President George W. Bush used Monday's drop in equity markets to argue the need for quick congressional action on a rescue plan, and said his advisers will begin working with Congress on a new solution  [Wall Street Journal, Sep 30]  The good and the bad news is that he long ago lost any audience. 

The extension of the research-and-development tax credit didn't make it through the House as it usually does, as Democrats leaned toward PayGo instead of merely adding to the deficit with every handout. Tax credits for renewable energy sources gut hit the same way. The House and the Senate conceded Monday that they were in a stalemate over proposals to provide tax incentives for the production and use of renewable energy, leaving the future of the nascent industry in limbo. [Robert Pear, New York Times, Sep 30]

[SECDEF Gates] challenged those who advocate investing in smaller numbers of higher-technology weapons in a belief that war can be revolutionized, fought at long distance with American forces never getting bloodied. [Thom Shanker, New York Times, Sep 30]

Rescue and Decline. The politicians happily trumpet their saving the banking system. Actually, they did the thing it is easiest for politicians to do: divide other people's money in a compromise that gives something to anyone with a veto power. They made no effort to raise the money except form vague ideas about the government making money on the deals or taxing the banks (and their lobbyists) five years or more from now. The Europeans and the Asians aren't so convinced, and their markets started down Monday morning (where they are).  Anyway, the free lunch is a mirage as The success of the pending rescue of the U.S. financial system probably depends as much on the central banks of China and the Middle East as on Congress and the Federal Reserve, because The U.S. is turning to foreign governments and other overseas investors to buy a good chunk of what could total $700 billion in Treasury debt expected to finance the bailout. ...  an unmistakable sign of U.S. economic decline [Bob Davis, Wall Street Journal, Sep 29]

Purely Political. On one side [of the SBIR debate] are folks like John Butler, chief scientist and a principal at Image Acoustics in Cohasset, MA. Butler says the SBIR funds account for as much as 70 to 80 percent of the budget for his five-person firm, which designs underwater sound transducers for the Navy. [Jon Chesto, Quincy Patriot Ledger, Aug 24, 08] The government SBIR data bases show Butler's firm with about $5M SBIR since 1997 which is enough to support most of five people full time. Although there is nothing obviously wrong with the company, will such a firm and its technology ever make an economic return that justifies calling the $5M an "investment"? The public may never find out since the firm is private and the government managers have an incentive to ignore the ROI question as long as they get the contract R&D they are paying for. But, of course, the SBTC wants to largesse to continue. To that end, its honcho Jere Glover (tireless SB advocate) published a piece in the Buffalo News [Sep 22] touting the program's success in helping 17000 firms nationally with 3000 New York firms getting $1B.  And the investment has paid off: The program’s firms employ 1.5 million people, including 450,000 scientists and engineers, and have received 84,000 patents, far more than American universities over a similar time period. What Glover doesn't say is that the same money would have supported the same number of jobs and patents wherever it was spent and he offers no evidence of any significantly higher economic return than would have happened anyway with the money in open competition for R&D "investment" by the federal agencies (which wouldn't be expected to come up with much economic return anyway). The bottom line: the case for SBIR remains purely political.

Bernanke and Paulson should have made outrageous promises at the hearings and argued there is no way this will cost the taxpayer $700 billion, that the taxpayer will in fact make money. That works much better on the American psyche. America loves buying lottery tickets. Think of the bailout as a lottery ticket with much better odds. [Deal Journal at wsj.com, Sep 26]

How directly will small business lending be affected by the ongoing financial crisis and forthcoming bailout? The evidence is mixed. Treasury Secretary Henry Paulson told Congress that the $700 billion plan was needed "in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families' financial well-being, the viability of businesses both small and large, and the very health of our economy." Business owners with bad credit, unproven ventures, or companies tied to troubled industries such as housing have had a particularly hard time borrowing, but many banks still want to lend to established firms with good credit and collateral. There's no question some companies are having credit cut off. In Ohio, banks are refusing to renew lines of credit and calling in loans made to decades-old family businesses that are current on payments, according to Dayton bankruptcy and workout attorney John Rieser. (Source: BusinessWeek) [Investor Daily Guide, Sep 26]

Creative accounting, I love it. “Kenny Boy” would be proud.  Comment by Wendy Gramm (not verified as the real Wendy Gramm of Texas)- September 26, 2008 ...  a $700 billion price tag, and it will mean a huge amount of government spending. However, due to accounting rules it likely won’t have any effect on the 2009 budget deficit.  In congressional testimony earlier this week, Peter Orszag, director of the nonpartisan Congressional Budget Office, told lawmakers that the program should be treated on net-expected-cost basis. The cost wouldn’t be recorded as gross outlays, but as “the purchase cost minus the expected value of any estimated future earnings from holding those assets and the proceeds from the eventual sale of them.” Since the value of the assets will be set by what the government pays, the program should at least be budget neutral in the near term. [Real Time Economics, Wall Street Journal, Sep 26] The government pays real money for junk of unknown value and treats it as a capital investment, not consumer spending. Which would be normal at IBM, but the government doesn't do capital budgeting, unless the payout is so big and controversial that some way is needed to hide its current effect. There's also the danger of convenient memory when the eventual sale produces revenue and the Congress treats it as current income to cover its astronomical budget deficits of FY2015. Keep it simple: make any outlay a current outlay.

Bailouts Take Priority. proposed 2009 increases for key science agencies such as the NSF and DOE’s Office of Science could be on hold until next spring. [AAAS, Sep 25]

Payback Time. Bush-Cheney had a fun five years peddling their monarchic programs to a docile Republican Congress with a bare minimum of facts and a generous portion of disdain for the Legislative Branch. Now the president-king says "pony up $700B immediately so I can do my thing for the bankers." Only our way, say both parties in Congress; anyway, why should we believe you about the urgency? We've heard your wolf cry and seen your act before about invasions and eavesdropping.

Bush warns of ‘long and painful recession’ in the American political urge to stop any recession, this time at the cost of borrowing another $700B.  Classic 'kick the can' in the model that America is so strong that it can do anything it wants with no serious consequences at least in the present. How much patience do they think our creditors have?  How can we demand that our politicians think of the long term? 

Above all, please, competence.  Mr Paulson was personally responsible for suddenly turning the painful but manageable credit crunch that had been grinding away 18 months in the background of the US economy into a global catastrophe. Mr Paulson's appearances on Capitol Hill, marked by the characteristic Bush-era combination of arrogance and incompetence, ...Henry Paulson is to finance what Donald Rumsfeld was to military strategy, Dick Cheney to geopolitics and Michael Chertoff to flood defence. .... as US Treasury Secretary he does not know what he is doing. His recent blunders, starting with the “rescue” of Fannie Mae, have triggered unintended consequences around the world, resulting in the death-spiral of financial values. But last Friday Mr Paulson outdid even these Rumsfeldian achievements, when he demanded $700 billion from Congress for a “comprehensive and fundamental” solution to the global financial crisis, without apparently having any idea of what he would actually do. The good news -   his blunders no longer matter very much.  [Anatole Kelstsky, The Times, Sep 25]

Obama says middle-class tax cuts are "absolutely necessary" for an economy that could be sliding into recession. [AP, Sep 23]  Great, another big class of earners citizens who won't have to pay for the gigantic deficits. Borrow our way to prosperity for all and sundry. Whom, then, shall we tax for our spending, including the Iraq war, on behalf of those all and sundry? Ah, of course, we'll cut $10B in "pork" to balance the $700B for financial bailouts. What's pork? Money spent in some other district for the kind of things we elect our representative to get for us.

Bailout Plan #23 The Meltzer Plan Talking on the NewHour, economist Allan Meltzer says he does not like the Treasury Plan to end the financial crisis and proposes an alternative:   if they're going to do something, then what they ought to do is make loans, which the financial institutions have to repay with interest. And if you think -- that's an idea which the Chileans have used in a bigger crisis than this for them in 1982, and it worked for them. People paid back the loans. They weren't allowed to pay dividends until they repaid the loans. They weren't allowed to take bonuses until they repaid the loans. I think that's the way -- if we're going to do this, then that's the way we should do it. [Greg Mankiw's blog, Sep 24]  Everybody's got a plan, but the Dems in Congress say that no plan is going anywhere until the Republicans support it.

Obama said he would slash federal spending on contractors by 10% and saving $40 billion.   Unfortunately for his plan, the contracts most likely to be cut are out in the country where he is running against Washington, and the Beltway Bandits will do fine. The good news for him is that the people out there don't know those realities.

More Silly Speech. McCain, who only a week ago said the economy was fundamentally sound, now says the U.S. financial system is facing a major crisis. ... "the most serious crisis since World War II." But, there's still the free lunch.  he would not raise taxes [which] in tough economic times that makes problems worse.  [AP, Sep 22] Borrow a trillion more dollars (from some fools) and offer no provision for repaying it. How much more would your bank extend your credit line if you took the same approach?  Apparently infinitely, since such overlooking of credit rating got us in this mess in the first place. Remember to vote Nov 4 for the lesser fool since the the candidate is likely to make equally silly speech.

Windvane McCain, the former anti-regulator,called for greater oversight of the Bush administration's proposed bailout of U.S. financial markets, saying the massive $700 billion plan being crafted by Treasury Secretary Henry Paulson needed broader supervision. [AP, Sep 22]

A Lobbyist's Dream. Stand aside or you'll get trampled by the lobbying rush in Washington as Congress and the Treasury write a panic bailout plan in the heat of a presidential campaign. Time is short and the stakes are huge.

More Free Lunch. a $700 billion financial markets rescue plan to Congress where Democrats immediately questioned its impact not only on Wall Street, but on homeowners and taxpayers as well.  ... with a provision that Decisions by the treasury secretary related to the buyback program could not be reviewed by any court. [AP, Sep 20] A get-well card for financiers,  something for workers and home buyers, some pork just to taunt McCain, and no one has to pay a penny in additional taxes to fill the hole. It will as Bill Clinton said, "blow a hole in the deficit."  But the negotiations have just begun and the courts have a way of finding themselves a role when an authority-happy Executive conspires with Congress to curtail what the courts may see as a Constitutional right by some future damaged claimant.

despite the abracadabra routine being staged in Washington, the stock market hasn't suddenly become predictable, and the future hasn't become miraculously clear. One of the only certainties is a mushrooming Federal debt as the Treasury borrows to fund the bailout of Wall Street's shameful bacchanalia. [Jason Zweig, Wall Street Journal, Sep 20]

Want More Casino Markets? McCain said Friday the Federal Reserve needs to stop bailing out failed financial institutions. .... the Fed should get back to what he called "its core business of responsibly managing our money supply and inflation."  [AP, Sep 19]  Uh, nice idea in a "normal" financial world. But had he heard that the credit markets had frozen up for lack of trust in any financial institution's credit worthiness?  And if so, does he have a good alternative to some kind of government intervention? Since before 1844 central banks have been in the business of managing financial crises. That's what they do. Milton Friedman is spinning in his grave. The prevention of large-scale bank failures--"bailouts," in McCain's terms--is an essential part of responsibly managing the money supply. John McCain does not know that. And nobody working for John McCain knows that [Brad DeLong, Sep 19]   Has he forgotten his role in the S&L crash of the 1980s and his patron Charles Keating in a similar atmosphere of loose regulation of financial markets? Is he for more or less such loose regulation that led to undercapitalized firms guaranteeing credit default swaps (and other dazzling derivatives) when they had not the means to deliver on their contractual obligations? No shortage of armchair generals though. But it’s no use whining about the prospect of a financial rescue plan. Today’s U.S. political system isn’t going to follow Andrew Mellon’s infamous advice to Herbert Hoover: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” The big buyout is coming; the only question is whether it will be done right. [Paul Krugman, NY Times, Sep 19] Shortly after McCain's quip, Bush announced a broad government rescue plan and acknowledged that it will put a significant amount of taxpayers' money on the line, and with the usual straight face Rep. Roy Blunt, the No. 2 GOP leader in the House, suggested the rescue can be handled without a tax increase.  Hundreds of billions for bailout and not a penny for taxes - sounds like the Democratic Republican Jefferson.  What magic; another free lunch  from supply-side economics.  The president has never told Americans they cannot have it all; and, indeed, this trust-fund baby who never had to balance a personal budget led the way. In his term of office, he has added a staggering $32 trillion to the unfunded government liabilities future generations of Americans will have to bear. And he has borrowed and borrowed from the Chinese to ensure that the consequences of his fiscal madness will never come back to punish him. [Andrew Sullivan, The Sunday Times, Sep 21]

foreign purchases of U.S. assets bankroll the deficit spending of the U.S. government and consumers. For approximately forever, economists have warned foreign investors will finally lose patience with the game. That day has stubbornly not arrived, as U.S. markets have long been the safest, deepest, most-liquid markets in the world. Someday, however, if and when democracy arrives in those places, "These countries will face a political and economic reckoning, when their own citizens will ask why they're sending cash to the Americans so it can be lost in risky derivative instruments," says Joseph Brusuelas, chief economist at Merk Investments, an investment-advisory firm [Mark Gongloff, Wall Street Journal, Sep 19]

Think this is pain? The broad U.S. stock market has fallen about 5% this quarter. Worst Crisis Since '30s, With No End Yet in Sight But it is the best performing in the world (at least in dollar terms), according to Standard & Poor's. A motley crew, including Norwegians, Brazilians and Russians, has suffered drops of 35% or more.  So much for the rest of the world decoupling from a struggling American financial market.  The supply siders get their wish:  A slowdown in tax revenue in 2009 could do more damage than the bailouts, a senior administration official said. "The much larger effect is what's going on with the overall economy and the effect on receipts," the official said. "It traditionally has gone up or down by hundreds of billions" based on swings in the economy. "That's what we're most concerned about anytime we estimate."  [Wall Street Journal, Sep 18] The administration sent out its least credible spokesman (the guy with a 30% approval rating) to declare that it was concerned and was working the problem.  The Republican presidential candidate said he would fire the SEC Chair, a former Republican Congressman, reminding us that Bush's first SEC Chair was also fired. Maybe the good news is that the administration point man got to be the boss of Goldman- Sachs, as did one of his predecessors, also highly regarded as an adult in a crisis. McCain, long an advocate of small government and less regulation, moved sharply toward the other end of the spectrum this week, promising to crack down on "the greed and mismanagement of Wall Street and Washington." In the text of a speech he delivered Tuesday in Florida, Sen. McCain said, "In short order, we are going to put an end to the reckless conduct, corruption, and unbridled greed that have caused a crisis on Wall Street."  [M Phillips et al, Wall Street Journal, Sep 18] Meanwhile, a McCain business advisor, Carly Fiorina said neither McCain nor Palin was ready to run a big business like HP.

The media is turning the news into a presidential video game. "Hurricane Ike" or "Wall Street Meltdown" appears onscreen, and the media boots up Barack Obama and John McCain to see how well they talk the problem. Mostly they are speaking gobbledygook about things they barely understand. Whatever a credit default swap is, I'm against it. The public is left to wonder if they are voting for a commentator in chief or commander in chief. [Daniel Henninger, WSJ, Sep 18]

An Opening is what Obama drove through when McCain said he would fire the SEC Chair:  I think that's all fine and good but .... In the next 47 days you can fire the whole trickle-down, on-your-own, look-the-other way crowd in Washington who has led us down this disastrous path. Don't just get rid of one guy. Get rid of this administration. Get rid of this philosophy. Get rid of the do-nothing approach to our economic problem. [AP, Sep 18]  McCain should have known better; the problem isn't any individual appointee but the structure of the regulatory system. We've gone from too much to too little as the nature of the financial system adapted to the technology of instant money transfers in the hands of more imaginative manipulators than the government has checkers that could stay in the game with them. After all, they love Reagan's idea that government isn't the solution, government is the problem. 

Rescuing financial giants, an endless war in Iraq, stimulating the economy - at least a trillion dollars - all as though the money borrowing well was bottomless. And they call themselves "conservatives."  Eventually we will pay for it all as the government debauches the money by simply creating more of it since they have not the will to raise the needed taxes to pay for it. There never was a free lunch. 

The Senate passed a $612B defense budget which the Center for Defense Information notes is only the larger part of the national defense spending of $850B after adding in such items as Iraq war supplementals, Homeland Security, Veterans Affairs, and a proportional part of the national debt interest. [data from Winslow Wheeler, CDI]  The SBIR advocates have a response: we want a bigger share of the bigger pie.

The $850B national security spending piles on even more national debt as the Masters of the Financial Universe commit unknown billions at a whack to stabilize the financial markets after the orgy of dicey mortgages and credit default swaps in which no one knows the degree of exposure to more tens of billions. Plus: Support seemed to be growing quickly on Capitol Hill for $25 billion in loan guarantees to assist the auto industry.  [NY Times, Sep 18]  Anyone longing for the brief days of Y2K budget surpluses that were paying down the national debt?  Although the adults at the time knew that the dot.com magic could not last forever, they were at least using the temporary capital gains tax revenue to prepare for the coming rainy days.

More Government, Please.  Minnesotans are jittery about the state of the economy and are convinced the federal government isn't doing enough to help them out. [Minneapolis Star Tribune, Sep 16]  Does that portend a Franken victory for the Senate seat because Republicans don't want the government to help people?  Or is it just the old adage that people want more government than they are willing to pay for?

A Few Months Only. Gail and Jim Greenwood announced in a recent newsletter that: 'We have just heard that Congress has taken a stop-gap step of continuing the SBIR program "as is" through March 2009.' [SBIR Alerting Service, Sep 5]  Do a Sarah - ask for your share of the  pork pie before you later claim that you hate pork. Tell your Congresscritters that if a little bit is good, a whole lot is better, even if you cannot prove that the good was reaped by anyone except you.

NIH has awarded its first round of EUREKA grants for exceptionally innovative research. A total of $42.2 million was awarded to 38 projects. [AAAS]

neither candidate has the vaguest idea how to get the budget under control [Irwin Stelzer, Weekly Standard, Sep 12]  All beneficiaries want more and all taxpayers to pay less. And the candidates assure the public that they can have more government than they are willing to pay for. Whom do we blame for the ills of our highest political goal - self-government?

But just as the triumph appeared to be complete the innermost sanctum of the global capitalist system suddenly collapsed. [Anatole Kaletsky, The Times (London), Sep 12]  Surely if it OK for government to bail out big banks, it is OK to distort federal R&D by forcing it to subsidize uncompetitive small companies.

Fill Every Wish, It's an Election. The CBO said the fiscal 2008 U.S. budget deficit will be more than double the 2007 figure.  [WSJ, Sep 10] As the candidates tout great programs to shower on today's voters. But There are real worries the government can't cure. The global economy is slowing. Credit is tight. Stocks are not cheap - adjusted for inflation, the S&P 500 is as expensive relative to its trailing earnings as it was in August 1987 or March 2000, just prior to very bad market periods.  [Wall Street Journal, Sep 10]

worth overdoing? Here's a prediction: The media will report today that the federal budget deficit is big and getting bigger. What most of them won't report, alas, is that the cause of these deficits is an explosion in federal spending. The era of big government is back, bigger than ever. The real news in yesterday's Congressional Budget Office semiannual report is that federal expenditures on everything from roads to homeland security to health care will on present trends reach 21.5% of GDP next year. That's a larger share of national output than at anytime since 1992. If the cost of the federal takeover of Fannie Mae and Freddie Mac prove to be large and are taken into account, next year federal outlays could be higher as a share of the economy than at anytime since World War II. (Source: Wall Street Journal) [Investor Guide Daily, Sep 10] Can you think of any great ideas for more and bigger federal programs?  Anything worth doing is worth overdoing? If you want more federal program stuff, how do you propose to pay for it other than cutting somebody else's bigger and better program?

many American voters wish the U.S. industrial economy of the 1950s and '60s could be restored, and with it the sweet deal unskilled workers enjoyed. Politicians fail to pander at their peril, and globalization is often held at fault for economic insecurity.  .... [Obama's economist] Goolsbee says: "the last eight years' degradation of the budgets for science and its general politicization are so upsetting. The government's commitment to investment in advanced training of our own people has plummeted, so now something like two-thirds of those gaining science and engineering PhDs here aren't U.S. citizens. For many years America led globally in the percentage of 25-year-olds with college degrees. Now the U.S. is 31 in the world--right behind Bulgaria and right above Costa Rica. but then  Generations of the best and the brightest have come and gone in Washington, DC, usually without effecting significant changes.    [Mark Williams, MIT Tech Review, S/O 08]

Dig, Dig, Dig the Hole.  With the economy the No. 1 issue just eight weeks from Election Day, majority-party Democrats are trying to push a second stimulus package through Congress to follow the tax rebate checks sent out earlier this year. [A Taylor, AP]  and the next president is likely to face a shortfall in January of well over $500 billion, congressional budget analysts said [L Montgomery, WashPost]

The cost of the government’s [FNMA] intervention could rise into tens of billions of dollars and will probably be among the most expensive rescues ever financed by taxpayers. [New York Times, Sep 7]  Meanwhile, both presidential candidates have great plans to re-vitalize the US economy by .... pumping in money they don't have. Tax cuts or stimulus have the same effect: economic activity from borrowed money. Just like improving your family life with your credit card. How and when will it be re-paid? That's for some future election. But since the voters don't want to hear about responsible austerity, the only recourse is printing money - inflate away the debt, what governments have done for centuries. The deed will be showcased as reducing the debt as a percentage of GDP which will grow faster than real GDP by the degree of price inflation.

Plans Galore. We now have a significant advanced technology trade deficit, a turnaround from the surpluses we ran in earlier decades. In 1980, the U.S. share of world advanced technology exports was a robust 29 percent; in 2005, the most recent data show, that was down to an anemic 12 percent. .... the number of Chinese undergraduates with degrees in the natural sciences and engineering has gone from half that of the United States twenty years ago to more than twice that of the United States now.  ... The president ended up opposing most of the funding increases he had originally called for in his initiative.   ...   not a difficult issue to explain to voters, and the amounts of money involved are not large in the context of a $3 trillion budget.  [Norman Ornstein, AEI, Aug 8]  Every wonk has an imperative agenda for the nation that will require only a small fraction of the federal budget. But the number of wonks multiplied by their small budget fraction would overwhelm the available money. Oh yes, and wouldn't more SBIR be a great idea?

I have now watched a brace of US presidential nominating conventions. This has been a truly mind-numbing and depressing experience - a complete triumph of appearance over substance [William Buiter, Financial Times, Sep 5]

Change and No Change. Let me just offer an advance warning to the old big-spending, do-nothing, me-first, country-second crowd: Change is coming.  So says the candidate of the party that has held the White House for eight years and the Congress for ten of the last twelve years. Tom Toles's cartoon [Washington Post, Sep 5] has the candidate say Watch out Mr Bush! With the exception of economic policy and energy policy and social issues and tax policy and supreme court appointments and Rove-style politics, we're coming there to shake things up! You don't need a long memory to remember that W also promised a better Washington. Go ahead and vote for your favored blatherer, but don't expect the vested leopards that drive federal policy to change their spots.

Don't Share  I. A federal jury in Knoxville, Tenn., convicted a retired university professor on conspiracy, wire fraud and export control charges yesterday for improperly sharing sensitive technology with students from China and Iran.  Plasma physicist J. Reece Roth faces more than a decade in prison when he is sentenced early next year. Prosecutors say the professor emeritus at the University of Tennessee exchanged restricted military data with foreign research assistants and traveled overseas with electronic versions of sensitive materials on his laptop computer. ... among the first in which the government sought to punish a defendant for distributing scientific know-how rather than equipment to foreigners studying at universities with military research contracts.  [Carrie Johnson, Washington Post, Sep 4]

Federal funding of academic science and engineering (S&E) R&D failed to outpace inflation for two consecutive years, says NSF.  [SSTI, Sep 3]  The really bad news is that the nation's finances should require a third and more year of relative shrinkage. Unless we just keep muttering "growth" as the escape route. For if real growth doesn't happen, we would have to shrink the debt by moving the decimal point(s) with hyperinflation. More really bad news comes from the realization that we don't know where the required growth would come from. We just require our politicians to keep saying it without having any credible policy for achieving it.

“Citizens”, he remarks with justice, “yearn for a restoration of a mythical Old Republic. Yet one might as well hope for the revival of the family farm or for physicians to resume making house calls.” Beginning with the election of John Kennedy, he writes, “the occupant of the White House has become a combination of demigod, father figure, and, inevitably, the betrayer of inflated hopes.”  [The Economist reviewing Bachevich's The Limits of Power, Aug 30]

if the present New Orleans is to remain viable, it will be because federal money makes it so.  Just add it to the list. Final liability for more and more of life's risks is being assumed by the federal government ...  Voters and officials in New Orleans still view it as a "problem," of course, when apartment building owners can't find insurance at an affordable price. A better word would be "solution." What is the function of insurance, after all, but to provide price signals to encourage safe choices over dangerous ones?   [Wall Street Journal, Sep 3]  It extends the reach of the idea that anything bad should be illegal and anything good should be done by the government. Insuring vulnerable property owners and pushing money to high tech small business - both flying in the face of sensible free-market economics.

A recent paper by Zoltan Acs, Wiliam Parsons and Spencer Tracy, published by the SBA's Office of Advocacy, confirms this belief by finding that a very small percentage of firms are responsible for almost all revenue employment growth in the U.S. These high-growth firms can exist in any industry, but on average, they are younger than the average business. Still, the average age for a high-growth firm is 25 years, older than the nascent businesses that are the focus of much TBED activity and regional growth strategies. The study suggests that regional and state policymakers should follow a balanced approach that supports both new and expanding businesses. ... builds on research done by David Birch, who developed the concept of gazelle firms in the 1980s and 1990s ... The researchers suggest that, in light of this data, local economic development organizations should put more effort into cultivating high-growth firms, rather than focusing exclusively on entrepreneurship. [SSTI, Aug 13]

If  Obama becomes the next president, Rep. Zoe Lofgren, D-Calif., believes key appointments for high-tech sector prosperity will be within the SEC. "There have been a lot of problems there," she told a technology forum. A perceived failure to appropriately regulate markets has led to serious economic challenges, she said, noting that the next administration must provide relief for start-up companies and young innovators. ... She also told a crowd that it is crucial for Congress to pass legislation to update the U.S. patent system next year.  [Tech Daily Dose, Aug 26]  Note that "relief" does not imply handouts of money.

the war in Georgia isn’t that big a deal economically. But it does mark the end of the Pax Americana — the era in which the United States more or less maintained a monopoly on the use of military force. And that raises some real questions about the future of globalization.  [Paul Krugman, New York Times, Aug 15]

Keep the Subsidies Flowing. U.S. solar-energy companies that do business primarily in America would suffer most if Congress fails to renew expiring federal tax credits for solar energy.  .... Lawmakers are expected to mount an 11th-hour effort in September to reach agreement on a tax package for solar and other renewable energy sources before suspending their work, possibly until 2009.  .... Interest in solar energy as an electricity source has taken off in recent months, from large-scale utility projects to rooftop installations at retail outlets, ... But representatives for Macy's and REI said any plans to install rooftop solar systems in 2009 will depend upon whether the tax credit is available. .... The solar tax credits are widely supported, but Senate Republicans have blocked the broader tax bill because they object to Democrats' use of loophole-closers and tax increases to offset the cost of tax incentives for renewable energy and other tax cuts.  [Martin Vaughn, Wall Street Journal, Aug 27]

Who's Techier? Clearly the McCain campaign has been thinking about technology-related issues even if the candidate himself isn't the most tech-savvy person around. I don't think that the McCain campaign has gotten enough credit for delving into these issues and staking out responsible positions in detail. ... Give Obama some credit though. His campaign has done well in leveraging technology for partisan political purposes. He danced rings around Hillary's campaign and he's still managed to stay a bit ahead of McCain's team. Obama should certainly be given credit for running such a tech-savvy campaign. [Jim Lynch, Extreme Tech, Aug 22] But using tech in campaigning doesn't say much about likely policy stances after the election. Our last two presidents differed dramatically: Clinton the wonk loved and understood government tech investment programs, while W the playboy adored free-markets. 

Unfortunately many in our Insider network feel that the House is in no mood to compromise with the Senate. The House bill, H.R. 5819, had overwhelming support comprised of 368 Ayes, 43 Nays and 20 No Votes. That translates to a bipartisan vote of 219 Democrats and 149 Republicans voting in the affirmative. "With numbers like that, why should we compromise," said a House source wishing anonymity. I responded to my source, "you should compromise because your constituents want you to." That provoked a slight laugh and end of conversation. [SBIR Insider, Aug 20]

Anywhere, One-Hour Delivery. It's not quite a "death ray" but it's the closest existing technology can get to that fantasy weapon. Still, skeptics roll their eyes and say that the report's authors are like a bunch of junior high school boys who have seen all the James Bond movies and believe that if a weapon can be built, it must be built.  [Mark Thomas, Time.com, Aug 23]  To pay for an open-ended "national imperative" program, the advocates might suggest: a) cost is irrelevant for national imperatives, b) cut somebody else's obviously less important program(s), 3) raise all national taxes by 1%. But, the most important question of all: a hammer is worthless if you can't find the nail.

Kings Dodge Debts. Will the U.S. Treasury repudiate its obligations to its creditors, be they citizens or investors around the world? Most observers would answer "no" without hesitation. But Congress, with the complicity of the White House and the Fed, has arguably embarked on a stealth repudiation. In his famous treatise, "The Wealth of Nations," Adam Smith noted there had never been a "single instance" of sovereign debts having been repaid once "accumulated to a certain degree." We may have reached Smith's threshold. The bond markets are certainly not protecting creditors from the risk of what Smith called "pretended payment" through inflation. Nor did they do so until far into the great inflation of the 1970s. Not until late 1977 and into 1978 did the bond market fully incorporate the reality of the debased dollar, by demanding higher long-term interest rates. (Source: Wall Street Journal) Moneylenders through history know that kings don't repay deep debts.

Shovel in Hand. Obama is proposing to use the government to remake economic policies in a way that Washington hasn't seen in decades. If the economy is faltering when he takes office Obama would push a $115 billion stimulus plan, aides say. [Wall Street Journal, Aug 26]  When you're in an economic hole, keep digging?

Security First and Always. rarely has such a reasonable aim been so self-defeating. The system of export controls, known as the International Traffic in Arms Regulations (ITAR), is managed with almost comic zeal by the State Department. Anything that is part of a satellite assembly needs vetting—even if it is as common as a lithium-ion battery, as insignificant as a screw or as innocuous as a stand for a satellite. The cost, delays and inconvenience of dealing with the American space industry are exasperating enough to send its foreign partners into orbit. [The Economist, Aug 21]  The best friend of the Ministry of Defense, any where, is the MOD of any opponent, real or imagined.

The state cannot accept the Awakening. Their days are numbered. ---- SHEIK JALALADEEN AL-SAGHEER,   a leading Shiite member of Iraq's Parliament, on a crackdown on the Awakening movement, in which groups of U.S.-funded former Sunni insurgents organized citizen patrols to help stabilize the country. [Time.com, Aug 22]  And while the "peace" in Iraq may be falling prey to internal competition, the NATO leaders in Afghanistan are calling for more brigades. But from where will the several national command authorities get them? Maybe we could back up to 2002 and realize we were misunderestimating the nature of the militancy in the Muslim world. That since we had a dominance in military forces, they were the best and obvious solution.  A man has a hammer sees the world as a row of nails. And a president with no international scars is easy prey for insiders with a theory and an agenda.

the highest levels of most of the agencies would welcome the disintegration of SBIR, and look for any reasonable excuse to regain total control of their 2.5%, not to mention their admin overhead.  Please remember that this attitude is not at the level of folks you deal with.  Most of the SBIR program managers are major supporters of the program, and want to see it benefit the small businesses and their agencies.   But the lower levels have no say in the politics of SBIR. Anyway, Both the House and the Senate want to see the program continue, and will very likely become very "exercised" if an agency tries to reduce, or pull out of the program.  [Rick Shindell, SBIR Insider]

Their message (of the movie, "I.O.U.S.A.,"): You probably know that the national deficit stands at $9.6 trillion and rising. What you don't know is how bad things really are. If you include all the unfunded entitlement obligations -- Social Security, Medicare, Medicaid and so forth -- we are actually in a $53 trillion hole, Walker says. And it will only get deeper as we get older.  [Frank Ahrens, Washington Post, Aug 17]  Speed up the decline: keep seeking your handouts for work that uses rather than creates wealth!

The state of Maine has given out $30 million in the first round of grants authorized by Pine Tree State voters last fall as part of a $50 million technology bond bill. [Mass High Tech, Aug 12]  One company had one Phase 1 SBIR.

The problem is fear: private-sector finance has dried up because investors, burned by their losses on securities that were supposed to be safe, are now reluctant to buy anything that isn’t guaranteed by the U.S. government.   ....  Fed policy hasn’t done anything to encourage private investment. .... What more can policy do? The Fed has pretty much used up its ammunition: nobody thinks that additional interest-rate cuts would accomplish much  [Paul Krugman, New York Times, Aug 4]   And more handouts like SBIR are not the answer either. If the investments don't go to innovations that will attract private investment, they are just a temporary jobs program. Worse, the temporary jobs will simply be diverted from more competitive companies that would have otherwise got the business. No net gain, and possibly a net loss.

Using new DNA technology, the Federal Bureau of Investigation analyzed the anthrax strain sent to victims of the attack and linked it to the spores handled by Dr. Ivins, according to federal officials close to the seven-year investigation.    .... prosecutors may move quickly to unseal evidence against him and formally close the case after senior Justice Department officials sign off on a decision to dismiss the grand jury. [Wall Street Journal, Aug 4]  How convenient: blame the dead man and close the case as a success. The Navy tried that several years ago until the dead man's relatives objected in the press. But the evidence is still rather circumstantial and not ready for a trial where the standard is "beyond a reasonable doubt." , says [Scott Shane, New York Times, Aug 4]

Energy Independence, Lower Gas Prices, Drain America First, Windfall Profits Tax.  More and Cheaper Oil, Now.  Politicians reach for the handiest policy and slogan as they hear the cries of the oil consuming public. The states of the upper Midwest combined to support offshore drilling, since no harm will come to Minnesota or Michigan from the inevitable big spills. The president chimes in with a pander. Anybody thinking long term about American energy or how economics works? Not in the political arena where today's votes far outstrip the importance of tomorrow's energy picture. In yet another wish to repeal the laws of economics. [Arizona] Congressman Jeff Flake is among Republicans asking President Bush to call a special session of Congress in August to deal with high gasoline and oil prices. [Phoenix Business Journal, Aug 1] Just don't ask them what laws of economics they would substitute.

Pressure for action to revive the economy grew on Friday as a new report showed the unemployment rate rose in July to 5.7 per cent – its highest for four years – and the number of jobs fell for a seventh straight month. ...  Democrats in Congress renewed their call for a second fiscal stimulus package. Barney Frank, chairman of the House financial services committee, said it should include “increases in the federal share of Medicaid, significantly increased funding for home energy assistance and food stamps, and other measures which will provide badly needed stimulus for our economy and help state and local governments and individuals improve the quality of their lives”.  [Financial Times, Aug 2] When the business cycle cycles, do you expect the government to do something to stop it, or will you trust the built-in stabilizers?   If you want action, what did you have in mind that won't make the long term problem worse?  Are you patriotically buying government bonds at low interest rates so the government can afford to borrow more to pay stimulus handouts?  Or do you have a great idea how the government can sponsor a great innovation by handing you no-load investment money?

Who robs Peter to Pay Paul expects the support of Paul. Robin Hood Obama called for a $1,000 "emergency" rebate to consumers to offset soaring energy costs amid fresh signs of a struggling economy with the nation's unemployment rate climbing to a four-year high.  ... would be financed with a windfall profits tax on the oil industry.  [AP, Aug 1]  Windfall profits tax works like voiding a patent: having taken a risk to develop something profitable, the entrepreneur forfeits part of the profit for a political purpose. It changes the rules of a game during the play to profit some external entity. Besides, in this oil game there is no windfall since supply and demand factors have not been changed by any surprise externality. The only fair profits tax would tax return on investments made after the effective date of the law (which would be a boon for lawyers and accountants).  Absent any evidence of price collusion, it's just political confiscation, as we accuse Hugo Chavez and Fidel Castro of the same.  If you expect to depend on a patent for your future profits, you should oppose excess profits taxes on principle.

Food industry representatives and public health officials called on members of Congress to address failures in the nation’s response to the salmonella outbreak linked to fresh produce. [New York Times, Aug 1]  Business wants less government, until something goes wrong. Then they want more. What they forget is that every time government has to fix a perceived problem (like SBIR), the solution becomes a permanent government department with stout defenders in Congress.

National Security State Alert. Federal agents may take a traveler's laptop computer or other electronic device to an off-site location for an unspecified period of time without any suspicion of wrongdoing, as part of border search policies the Department of Homeland Security recently disclosed. Also, officials may share copies of the laptop's contents with other agencies and private entities for language translation, data decryption or other reasons  .... The policies cover "any device capable of storing information in digital or analog form," including hard drives, flash drives, cellphones, iPods, pagers, beepers, and video and audio tapes. They also cover "all papers and other written documentation," including books, pamphlets and "written materials commonly referred to as 'pocket trash' or 'pocket litter.' " [Wash Post, Aug 1] Your normal Constitutional protection against unreasonable search and seizure does not apply. They do not have to justify the seizure to you, or apparently anyone else. They claim to be looking for extreme dangers to national security, especially terror manuals and child pornography. But once a government agency gets a license to snoop, .....

Not Without Us You Don't. The Constitution checks and balances roiled the president-king's marvelous invention of a new intelligence organization for the government. The White House's intelligence-agency overhaul drew immediate fire  from lawmakers in both parties, who complained that the administration sidelined Congress while it crafted the largest rewrite of spy powers in decades. [Sioban Gorman, Wall Street Journal, Aug 1]

Instead of conducting witch hunts, we should consider bipartisan legislation to reduce the price of gas, reduce crime and secure the borders.  - House Republican LAMAR SMITH, blasting his Democratic colleagues on the Judiciary Committee for voting to cite former top White House aide Karl Rove for contempt of Congress [Time, Jul 31] Empty speech to stroke the lighter thinkers, presumably in his district as a Republican argues for more government intrusion. Reducing the price of gas may make things worse by encouraging demand [Econ 101],  federal legislation won't do much to reduce crime [a true Republican wants the death penalty for every crime, a scheme that the English abandoned a long time ago], and legislation to secure the borders already exists [although there is no consensus about immigration]. Note that the Republicans believed in witch hunts when they had the Congress and Bill Clinton had the White House. Can't we elect adult politicians?

While the house crumbles, the elders are scrapping over the candy. As Congress begins a five-week break without passing legislation to address high gasoline prices, Democrats and Republicans are fighting for the political high ground in the energy debate.  In a flurry of ads and on the campaign trail, Republicans are pounding Democrats for failing to allow votes on lifting a federal ban on oil and gas drilling in offshore areas to boost domestic production. Democrats are accusing Republicans of blocking renewable-energy initiatives and protecting wealthy oil companies at consumers' expense.  [Lueck, MacKinnon, and Power, Wall Street Journal, Aug 1] Anything to avoid the realities of energy economics.  A McCain campaign ad says that gas prices are high right now because “some in Washington are still saying no to drilling in America.” That’s just plain dishonest: the U.S. government’s own Energy Information Administration says that removing restrictions on offshore drilling wouldn’t lead to any additional domestic oil production until 2017, and that even at its peak the extra production would have an “insignificant” impact on oil prices. [Paul Krugman, New York Times, Aug 1]

The Kerry-Snowe SBIR Reauthorization Bill unanimously passed the Senate SB Committee with something for everybody except the federal agencies and the taxpayer. The Committee website says:  Reauthorizes SBIR and STTR for 14 years; a compromise on the issue of the participation of companies majority owned and controlled by multiple venture capital companies, allowing NIH to award up to 18% of its SBIR dollars to companies majority owned and controlled by multiple VCs and the other ten SBIR agencies to award up to 8% of their SBIR dollars; Increases the SBIR allocation from 2.5% of SBIR agencies’ extramural R&D budgets to 3.5% over 10 years, for all SBIR agencies except HHS/NIH; Doubles the STTR allocation from 0.3% of STTR agencies’ extramural research and development budgets to 0.6% over the course of 6 years;  Increases the award size guidelines for the SBIR and STTR programs from $100,000 to $150,000 for Phase I and from $750,000 to $1 million for Phase II in line with the recommendation of the National Academy of Sciences; Attempts to increase geographic participation, particularly in rural states, by reauthorizing through 2014 and enhancing the FAST program and the Rural Outreach Program; Calls for better and streamlined data collection and assessment; protections to address jumbo awards.  The usual political blather about unleash the ground-breaking innovation potential of our nation’s small businesses; pump another $1 billion into our small business economy. At a time when the nation is struggling to cope with skyrocketing energy prices and a slumping housing market, do everything within our power to help small businesses drive economic recovery; SBIR program has been a resounding success, garnering high praise from the National Academy of Sciences in a recent comprehensive report on the program. Approximately 1 in 4 SBIR projects will result in the sale of new commercial products or processes. All convenient half-truths, the kind that power the passage of government handout programs. And in Kerry's opener: while I don’t ask anyone to love the VC compromise, or even the bill, I do hope that you will recognize that everyone got some of what mattered to them.  SBIR Insider Rick Shindell offers a copy of the bill before it hits Thomas at www.zyn.com/sbir/insider/s3362_bill.pdf   No, it's not the new law, only the Senate's proposition to be reconciled with the different House version.

DOD Rule on Export Controls. The DOD has issued an interim rule that addresses requirements that contractors must follow to comply with export control laws and regulations on DOD contracts. Export-controlled items include information and technology, such as software. DOD had published a proposed rule in July 2005 and a second, revised version in August 2006. Since the latest version is an "interim rule," it is still open for comment. Also open for comment, until August 18, are the Commerce Department's deemed export regulations. [AAAS, Jul 30]

The demise of the Doha trade round is another blow to the struggling world economy, and there's plenty of blame to go around. But the crucial question going forward is whether this is merely a temporary setback, or if it marks the end of the post-World War II free-trade era that has done so much to spread prosperity. .. In 1990, trade represented about 40% of world GDP, according to the World Bank. By 2004, trade exceeded 55% of world GDP, and the global economy had expanded by 50%.  .... The real battle is between those who want to expand this era of global trade and prosperity, and those who want to carve out their own protected niches. [Wall Street Journal, Jul 31]

Send Another $171B. The Bush administration expressed confidence that the US would be able to maintain its top-notch credit rating even as the government scrambles to find new ways of expanding debt sales to cope with soaring budget deficits. "It is a huge advantage to have that AAA-status and we are committed to that," Anthony Ryan, Treasury's acting undersecretary for domestic finance, told reporters as he unveiled plans for financing $171 billion in borrowing during the current July-September quarter, the second highest total on record. Those borrowing needs have exploded this year as the government has had to cope with a sagging economy and the need to finance more than $90 billion in economic stimulus payments made over the past three months to individuals in an effort to keep the country out of deep recession. [Yahoo Finance]  Please enlarge our credit card limit! Again.

Silly Speech Season. Obama said he offers fundamental change from reckless Republican economic policies that he contended have hammered middle-class families and would continue under Republican rival. [AP, Jul 30] And what economic policies does he have in mind that he can actually influence in a way that actually makes some difference?  Bail out silly home buyers and their silly lenders who sold the mortgages to sillier traders?  Lower interest rates than nearly nothing already?  Lower taxes that drive up the government debt?  High tariff walls to discourage international trade and bring back the Great Depression?  Bill Clinton's 1993 idea was a tax increase coupled with a spending decrease, after which the 1990s boomed, despite Congressional Republican refusal to cast even one vote for such responsible policy, and left W with a big temporary surplus that was reducing the national debt.  That was anaethma for W whose great economic plan was to cut taxes, start wars, and balloon the deficit.

July 31 the only former president to return to serve in the Senate, died. - Andrew Johnson, 1875. 

Kerry's Senate SB Committee will have mark-up session for an SBIR bill this morning [Jul 30]. That's usually a rubber stamp for a deal worked out among the interested parties.  Any national goal and benefit comes second. Too bad, but that's the way democracy works. At least the winners will no doubt see a clear national benefit. Whatever the Senate deal there still remain the House and the President to be satisfied. The free-market president-king opposes such programs on principle.

Good intentions led to bad outcomes: an old story. .... Congress's response to the present [housing/finance] crisis is, not surprisingly, more of the same. ...  When tomorrow's housing crisis occurs, we will probably find its seeds in the "solution" to today's.  [Robert Samuelson, Wash Post, Jul 30]  If you're a Congresscritter wanting re-election, it pays to stick with conventional "more is netter" on apple pie, small business, and home ownership.

When a politician declares "war on [you name it]", it little more than sloganeering. Cancer, drugs, poverty, terror.  Now, the nonpartisan Rand Corp. also contends that the administration committed a fundamental error in portraying the conflict with al-Qaeda as a "war on terrorism." The phrase falsely suggests that there can be a battlefield solution to terrorism, and symbolically conveys warrior status on terrorists, it said.  "Terrorists should be perceived and described as criminals, not holy warriors," authors Seth Jones and Martin Libicki write in "How Terrorist Groups End: Lessons for Countering al-Qaeda," a 200-page volume released yesterday  [Joby Warrick, Wash Post, Jul 30]  A little late, although any such suggestion would have been summarily rejected by the cavaliers Cheney-Rumsfeld advising their amateur king. Rand's advice will be summarily rejected by the substantial American element that believes that America's military power can better solve international dilemmas than any diplomatic or law enforcement approach.

In this sluggish economy, there is one sure-fire growth business in the next few years: government debt. With the federal government now projecting record deficits and the housing bill being shepherded through Congress allowing for an increase in the debt ceiling, the bond market is almost certain to be hit with a wave of Treasury supply over the next few years. [David Gaffen, Wall Street Journal, Jul 30] If the government debt financing keeps growing at $400B a year, unless China keeps buying and storing it, interest rates have to rise to induce the public to buy the notes.

 Note to the Next President Can someone who has never touched a computer truly be in touch with what's going on in the world?  [Lee Gomes, Wall Street Journal, Jul 30]

Savior Syndrome.  Obama blamed "irresponsible decisions" by the Bush administration and Wall Street for the country's economic woes as government officials said the budget deficit would soar to record heights next year. ...  Obama said the economy needs both short- and long-term fixes, including another round of "stimulus" measures from Congress to revive the economy and a longer-term focus on renewable energy to curb high gas prices and on universal health care to trim costs. He said he would move "rapidly and vigorously" to respond. [AP, Jul 28] Baloney!  Eight  years ago Bush would save us by giving us back the government surplus in trickle-down taxes. Then he also handed out trillions in new Medicare and started a trillion-dollar war, but none of his "irresponsible decisions" lacked Congressional Democratic consent. The latest measure is another surge, one of which Bush widely boasts of , the national deficit (one year's shortfall) surge past a half-trillion dollars next year [AP, Jul 28] It's too easy to blame one administration for the economic woes, whatever they are, when we went along with every step. Neither Obama nor McCain has any magic solution to the economic welts we laid on our own backs by insisting that our own representatives give us what we want with a story that we deserve and can afford it.

When a reporter noted that in America reporters were permitted to see witnesses and evidence, a spokeswoman for the Office of Military Commissions at the Pentagon responded, “This is not America.” ....   Asked about the unusual circumstance that an employee was on trial while a man who may have been his boss had been released, a Pentagon spokesman said, “The transfer of detainees takes various factors into consideration,” including a receiving country’s promise “to mitigate the threat.” .... “Where else in the world,” Mr. Wizner said after court one day, “is someone being prosecuted for a crime who is already serving a life sentence and will continue to serve one if he’s acquitted?”  [William Glaberson, New York Times, Jul 29]

Dr No. [Repub Sen-OK] Coburn believes that many lawmakers propose duplicative programs without any way of measuring their effectiveness. .... "What do the constituents in your state expect of you? I believe they expect me to get some things done. I don't believe they're looking for 'no.' They're looking for 'yes,' " said Sen. Ben Nelson (D-Neb.), who fought Coburn last year over an earmark for a Nebraska-based military contractor. [Paul Kane, Wash Post, Jul 28]

Energetic Posturing.  Both sides had their moments posturing on energy policy and their failure to agree led to re-assuring inaction. The Republicans blocked the Democrats' silly anti-speculator provision and got to pronounce their silly "drill more, use less" plan. No one was hurt in the skirmish.

[Congress] overwhelmingly passed a broad package of housing legislation, hoping to send a calming message to financial markets and voters amid the ongoing deterioration of the housing market and a growing number of bank failures. [Wall Street Journal, Jul 27]  Bush says he'll sign the $300B handout. Paying for it?  You betcha - the national credit card. But how long will  another $300B debt add-on calm the financial markets? Only in the short term, but Congress considers that just right palliative for the pending election. Oh yes, if that kind of handout is OK, surely diverting a couple of billion a year from federal R&D into uncompetitive small businesses is also OK.

Taxes are going to rise. But we can't be certain of how much or for whom. All we know is that the presumptive nominees for both parties have miraculously found a way to offer tax cuts to the vast majority of all taxpayers. The rich aren't included in this, of course. But it doesn't matter. Their votes alone won't elect anyone president. Instead, both candidates rely on taxing the income of the most wealthy to provide tax cuts for everyone else — the more than 95 percent of all households that aren't considered wealthy. The candidates make these offers in spite of the rising federal deficit, the rising cost of imported energy, our balance of trade, the soaring cost of Medicare, the declining dollar and the ongoing cost of the war in Iraq. ... In other words, the candidates from both parties have close ties to the Tooth Fairy. [Scott Burns, Jul 27]  Don't blame the politicians since they just tell us what we want to hear. Isn't that what "represent" means?

Add that the Republicans are no longer in a position to chide Democrats for being wild-eyed spenders, for subverting the free-market system and for favouring heavy-handed regulation. President George W Bush has presided over the most expensive expansion of the welfare state since the days of Lyndon Johnson’s Great Society programmes, acquiesced in elaborate plans to bail out troubled financial institutions rather than leave their fates to the market, and along with his Treasury secretary, Hank Paulson, has rolled out myriad regulations covering short-selling, capital requirements and conduct of mortgage brokers, to mention only a few. Bush has also approved a stimulus package designed to shore up consumer spending, proving that Richard Nixon was on to something when he said “We’re all Keynesians now”. [Irwin Stelzer, The Sunday Times, Jul 27]

The Democratic Impulse.  Then there is politics. The Congress party, which leads India's fragile governing coalition, is expected to loosen the purse strings before a general election that must happen by May. It already won approval of a debt-cancellation package for many of India's impoverished farmers. [Jackie Range, Wall Street Journal, Jul 28]  Stand by for SBIR renewal since it meets the criteria for a government program: feeds a myth, has a constituency, does little harm, and needs no annual appropriation. The fact that it does little (and economically unmeasured) good matters little.

“Political risk is rising,” he added. “There is a good deal of understandable anger in the market towards Russia,” Roland Nash, head of research at the Renaissance Capital brokerage in Moscow, wrote in an investor note Friday. The combination if denying a work visa to the BP head of a joint BP-Russia venture and Putin's five sentences critical of a Russian steel company that immediately lost $6B market cap is part of nationalism as the public policy driver in KGB-controlled Russia. [New York Times, Jul 26] It has been cast as a titanic struggle between Russian national interests and Western business. But the reality is that the four oligarchs who control AAR, BP's Russian joint venture partner, are deeply plugged in to some of the West's most prestigious corporations and institutions, at the highest levels. [Tim Klein, The Times (London), Jul 26]  If Russian money is investing to the control level outside Russia, why, when there Russia lacks so much economic development? What do they know that we are not thinking of?  Beware any dealing with Russian enterprises in a place that has no rule of law but does lust for international power.

The housing and financial crisis is powering a new wave of government regulation. The result is a major challenge to the deregulation that has defined U.S. governance for much of the past quarter-century since the "Reagan Revolution." ... In fact, some proponents today of a bigger oversight role for government are Republican heirs to the legacy of President Reagan.  [Wall Street Journal, Jul 25]  When private wealth leads to public squalor, ...  [JK Galbraith, The Affluent Society]

Expecting State Help? States are being forced to slash spending and cut jobs in order to close a projected $40 billion shortfall in the current fiscal year. That gap is the result of broad economic weakness at the state and local levels that could cause pain throughout this year and into 2010, a report found. [C Dougherty, A Merrick, and A Troianowski, Wall Street Journal, Jul 24]  Smilingly, the federal government has no such problem, despite being deep in a mounting debt, it soldiers on with help programs like $300 B for A sprawling bill that reaches deep into the U.S. housing industry is close to becoming law. The bill, which began seven months ago as a modest attempt to help struggling homeowners, will now likely touch a vast array of borrowers, lenders and investors. ... As a result of the bill, Congress will raise the national debt ceiling to $10.6 trillion [D Paletta and J Haggerty, Wall Street Journal, Jul 24] That's approaching one GDP and three times the government's usual annual spending. And the longer the line of programs, the longer the line of supplicants wanting a piece of the pie, including the SBIR supplicants. And since SBIR's basic argument is "fair share", why not? The Wall Street Journal editors, unsurprisingly, oppose the bailout of reckless lenders and borrowers since the WSJ's people don't need reckless loans for their homes.

And how will all that debt be serviced? Either interest rates or inflation rates will have to rise. Or both, since the politicians don't have to take the blame for either.

Rooster Brags on Sunrise. McCain credited the recent $10-a-barrel drop in the price of oil to President Bush's lifting of a presidential ban on offshore drilling [AP, Jul 23] A modern Republican, of course, wants to drill anywhere a profitable drop of oil can be extracted, privatizing the profit and socializing the external costs. That means you pay for the clean-up after they Drain America First. 

Farmers and ethanol and other biofuel producers are lobbying to keep the existing mandates in the face of the recognition of a real cost in diversion from food production. [David Streitfeld, New York Times, Jul 23]  Imagine that: beneficiaries want to keep the handout flowing despite a recognition of an economic loss. SBIR advocates have fellow-travelers on the road to tapping the Treasury.

Neither Knows Business, since both candidates have been full time government.  Some 10.7% of registered voters own a small business—only a whisker less than the 11.9% who belong to a union. ... A recent poll of small-business owners found that 80% had little idea what either candidate might do for them. [The Economist, Jul 19]

as the late Senator Daniel Patrick Moynihan once said, “you can’t solve a problem until you can measure it.”  [The Economist, Jul 19] Although the citation was about poverty, Moynihan's rule applies to most go