Paul Krugman was right – says former Bush official Bruce Bartlett

Everybody I know on or associated with Wall Street absolutely loathes Paul Krugman. Although their accusations usually revolve around just calling him a socialist. That is despite the fact that almost everything he’s written about turned out to be true. Rates are low and were low for years, stimulus worked although it would’ve worked better if it was bigger, etc.

I was waiting for the day when Paul Krugman will be able to say to his detractors “I told you so”, but perhaps he’s too polite. So other people do it for him. Here’s a nice summary from Andrew Sullivan. I would especially focus on the quote from Bruce Bartlett, former George W. Bush’s policy analyst:

Annoyingly, I found myself joined at the hip to Paul Krugman, whose analysis was identical to my own. I had previously viewed Krugman as an intellectual enemy and attacked him rather colorfully in an old column that he still remembers. For the record, no one has been more correct in his analysis and prescriptions for the economy’s problems than Paul Krugman. The blind hatred for him on the right simply pushed me further away from my old allies and comrades… The economy continues to conform to textbook Keynesianism. We still need more aggregate demand, and the Republican idea that tax cuts for the rich will save us becomes more ridiculous by the day.

The Business of Losing an Election

“The base and the donors went apocalyptic (on Obama) over the last few years and that was exploited by a lot of people from the conservative world. I won’t soon forget the lupine smile that played over the head of one major conservative institution when he told me that our donors think the apocalypse has arrived.” David Frum.

The most repudiated idea this election cycle is that money can buy quality product.

Romney’s loss last week has opened a peek into the Republican mentality and offered a great study of how they think and operate. Republicans approach elections like a business transaction. Their party operatives and their billionaire donors outsourced the campaign to vendors (Super PACs, unscrupulous pollsters). Donors with money met smooth-talking consultants with promises and sealed their own fate.

Continue reading →

Nate Silver should be named Time’s person of the year.

Are you surprised that Republicans are surprised they lost? If you were following the polls guru Nate Silver’s blog fivethirtyeight.com you would be.

It’s not that I was certain Obama would win. But reading Nate Silver’s estimates before the elections gave me odds to be cautiosly optimistic. The day before the election I estimated the chance of Obama winning (based on Nate’s 91%) like being all in with pocket kings pre flop. You’re in good shape and this is the position you want to be against a single opponent, but that doesn’t mean Romney can’t flop an ace. So Romney’s entire electoral calcualtion was based on flopping that ace, but they acted as if they have already won. I find such baseless certitude stunning.

But it’s not like they didn’t have their own models. Because reality has a well-known liberal bias, Republicans have retreated into their own world where their polls showed that they were leading Obama by 6-7 point margins. They called it “unskewed polls”.

“Unskewed polls” is an entirely new phenomenon that didn’t exist during any of the previous elections. 4 years of Obama presidency really did something to the minds of the right-wing bubble occupants that they have severed any and all connections to reality that they still possessed in some form prior to 2008. Unskewed polls is a way one conservative blogger (www.unskewedpolls.com) dissected the “biased”, in his opinion, national and battleground polls conducted by professional polling firms. What he did in his “unskewing” is even out the proportion of Republicans and Democrats in the polls to bring it to more “fair” ratio. For instance, most of the polls had more registered Democrats than Republicans, simply due to the fact that there are more registered Ds than Rs, it’s a reflection of the population as a whole. He wasn’t satisfied with this weighing as he considered it biased against the Republicans. So in his unskewing he brought the ratio to about even. Of course, if Romney and Obama were tied in official national polls and the sample in question had 44% Ds and 37% Rs, then, after he brings it to 37/37 in his own recalibration, Romney would lead Obama by 6 or 7 points. These are the polls that had Republicans believing, nay, knowing, that they were going to win. How else would you explain the fact that the fireworks were on stand-by near Romney headquarters in Boston and that Romney didn’t even write a version of a concession speech? He knew he was winning! It’s stunning that no one, NO ONE in his campaign had raised any doubts about the overly positive numbers. Looks like the entire campaign was only pleased to be blissfully unaware about the true state of the race, and incapable of dealing with bad news or with reality. That pre-election certitude based on make belief numbers explains the state of shock both in conservative media world and Romney’s campaign headquarters when results rolled in.

By contrast, Obama campaign has always, even when they were ahead in the polls, assumed that they were 10 points behind. I heard it from many folks in the Obama headquarters.

But back to Nate Silver.

It is rare that in our lives, and especially in our politics, one side admits to being wrong. It just never happens, because when you’re not dealing with hard sciences like math and physics, there are always ways to spin the results. Not now. Nate Silver got the Electoral Vote count 100% correct! What’s more he got his detractors to apologize and to admit that they were wrong. They even apoligized for calling Nate Silver names. This is the ultimate revenge of the nerd!

Why I think this is important, and why I think Nate Silver has to receive even more recognition is because I’d like our public, that has gotten used to base their decisions on “gut feeling” and on emotions, to reassess the nature of their decision making. We really need them to come back to reality and reason, rather than immerse in baseless hysteria cultivated by talking heads. Nate showed them how to do it – with numbers. It’s a simple skill that, for some reason, has been discarded, especially on the right, in favor of wishful thinking. In their opinion Obama simply could not win due to a number of unquantifiable factors, like energised conservative base and impossibility of a reelection of a Muslim Socialist! That was a big part of their model. The other part was cooked numbers – an especially delicious part of their delusion as they were only happy to fool themselves.

All of this makes Nate’s win unique. His is a clean victory, and the one that is acknowledged by both sides. It also is a win for a common sense over heated rhetoric. It must be brought back into our national discourse.

Who won and who lost last night

Yesterday, on my Facebook I made a prediction before the results started rolling in: Obama will win 303 Electoral votes. As of midday Nov 7th I’m still nailing it: Obama has 303 EV with Florida’s 29 still being counted. But if he ends up with 332 I won’t mind.

The fact that he won Virginia is especially sweet. I have spent an enormous amount of time in that state working with the Obama campaign. This election is the main reason I was absent from blogging for some time. Victory is everything!

I don’t even know where to begin. While many of us on the left are engaging in well-deserved gloating this morning and trashing Romney, I do feel a little sorry for him. If only his party wasn’t so extreme, he would have become the 45th president of the United States. Imagine if only he stood up to bullies within the Republican ranks: the Akins, the Mourdocks, the Rush Limbaughs. If only he found a backbone to quell the right-wing nuts circus who forced him to run on delegitimizing Obama as a citizen and as a human being. This message never stuck with the majority of the electorate, albeit it became self-evident in the right-wing bubble. They began to believe their own spin. If you repeat over and over again that Obama is a Muslim socialist not only you begin to believe it yourself, by extension you believe in impossibility of him winning the election.

As a result, the biggest loser yesterday was a wide spread Republican reliance on “gut feelings” and on unskewedpolls.com. They can create their own reality with their spin and echo chamber and they can live in it, but they can’t win elections unless they venture out of that bubble. Poll after poll days before the election was showing Obama stubbornly ahead in battleground states and yet those numbers were dismissed with a breathtaking assurance. “Romney Landslide” was predicted by many conservative talking heads (Michael Barone, Dick Morris, Karl Rove, George Will) on the eve of the election. Where do they get their numbers? I understand Karl Rove is a spinmeister, that’s what he does, but George Will? He’s usually the more reasonable and restrained one. Was wishful thinking and Obama hysteria so strong that it managed to envelop even the more analytical minds on the right? Frankly, I’m speechless! It does remind me of that Monty Python episode with Black Knight that I have posted earlier this month.

I take great pleasure that the most vicious nutjobs are gone (Todd Akin, Richard Mourdock, Joe Walsh) and I’m happy to see Elizabeth Warren win Senate in Massachussetts, Sherrod Brown in Ohio and Tim Kaine (for whom I also campaigned) in Virginia.

Math and statistics, reason and common sense prevailed last night. Small-mindedness, elitism, bigotry and stupidity lost.

Now, I will go and celebrate.

VP debate outtakes

Just a quick summary from last night’s debate:

Ryan:

1. Still no details on what loopholes he plans to close to deal with deficit. I don’t understand why everyone is still calling him a wonk. Wonks are supposed to know their issues in and out.

2. He criticized Obama for his foreign policy which can mean only one thing: Romney/Ryan want to take us to another war (with either Syria or Iran).

3. He trashed stimulus and yet asked for stimulus funds. His response: “That’s what we do”.

4. On Catholic faith and abortion: He thinks that a person’s faith can not be separated from his policies in office. (To me it was a big alarm). Expect more Scalias appointed to Supreme Courte if Romney/Ryan win.

Biden:

1. Biden had a very simple job – to come out swinging – and he got it done. The point here was not to convert those wavering independents, but to energize dispirited Democratic base and he did it.

2. He stumbled a little in the beginning when talking about attack in Benghazi. Very simple rebuttal here: 3000 Americans died on American soil in 2001, 4 Americans died in a foreign country in 2012. A tragedy? Yes. Drawing parallels between the two as conservatives love to do – foolish.

3. Finally, 47% got a mention in a very personable way – these are the people we all know.

4. I’m glad he brought up Medicare vouchers – I hope those under 55 will understand the implication of this: when they reach 65 they will be handed a voucher and be sent dealing with the insurance companies on their own. Great business model – for insurance companies.

In summary, both camps will claim victory here, but the bottom line is every guy did what he was supposed to do for their own partisans. Democrats lacked enthusiasm for the last 2 weeks and they will get it back. Republicans have their already energized base but probably haven’t won any more independents. So I give slight advantage to Biden on this. But the overall race comes down to get out the vote now.

Another victim: Jack Welch

Have you seen this editorial from persecuted minority Jack Welch?

Jack Welch claimed last Friday that the unemployment rate dropping to 7.8% one month before the election is a work of the “Chicago boys”. Today he doubles down on the preposterous claim. He first compares himself to the truth-teller in Soviet Russia and Communist China, as if this kind of dissent in those countries would land him to the pages of WSJ. Then he proceeds to show that such unemployment number can be a subject to the statistical noise – clearly a conspiracy theory! Have those guys heard of coincidence or margin of error or imperfect data? And if it is a conspiracy how do they imagined this happened? Rahm Emanuel called BLS and made them do Obama’s bidding? All involved people gather in one room, so to avoid email trace or speak in codes? Force all of them sign confidentiality agreement or just give a verbal pledge not to disclose anything? But what if there were some Republicans among those employees – what’s his contingecy plan for dealing with certain leakage from those guys? Did he conduct a background study on all those employees, from data entry to the decision makers? How, please tell me how, from logistical perspective was it done? I’d really like to know. And if they really can pull something like this off – why would then the cries of the inept government? What a buffoon Jack Welch is.

Memo To Wall Street: Victimhood is a losing trade

Major problem of the investor class these days is piles of cash and lack of investment opportunities. Major problem of middle class is lack of a stable paycheck, underwater mortgage and in many cases ruined lives. And yet it is the former who are quick to be offended and portray themselves as a persecuted minority, and it is the latter who quietly toil away paycheck to paycheck without seeking to make headlines.

For some reason it is the working stiffs who are required to view the world through the lens of hedge-fund billionaires, of self-made men, of entrepreneurs, but the opposite is not required of the billionaires. Every self-respecting billionaire has an “I lifted myself by the bootstraps from a scrappy childhood” story (even Mitt Romney has one, whose hardship included eating pasta and tuna fish as a student, the horror!). If adversity stories was something that money could buy there’s no doubt the narratives of hardship coming from the rich would make a poor man weep with empathy. But such stories, even if burnished to squeeze more sympathy from the audience, only matter, in the eyes of a self-made billionaire, when they are personal and in the past, not present day and coming from the wage-earners. Let others marvel at how hard you worked but don’t award them the same courtesy if they haven’t made it as far as you did. If somebody “didn’t make payroll” it’s almost grounds for derision in the world of Leon Coopermans. To understand and sympathize with financial titans is a poor man’s requirement, not the other way around.

The fact is our financial elite, that fancies itself to be trailblazers, rebels, brilliant innovators, have long ceased to resemble their favorite characters in their favorite movies. Somehow they lost their human qualities on the way to the top. They are now the bumptious judge in Caddyshack, the scheming Duke Brothers in Trading Places, the pretentious victims in Bonfire of the Vanities; not the scrappy ragtag team of clever misfits who take on the establishment. The financial elite demands respect, the admiration of the masses, the reverence from the government. Felix Salmon beautifully dissected the nature of their grievances – it’s part narcissism, part greed, part strategy. But somehow they look like they begin to believe their own narrative.

The revealing part of the mindset among the financial elite is a story of a letter sent by Leon Cooperman’s granddaughter to the President. Cooperman, who on many occasions compared Obama to Hitler, was upset that he didn’t get a response from the President. It’s ironic that Obama is expected to show magnanimity towards those publicly insulting him, while those who spew insults are notorious for lack of self-reflection and even a minor sense of gratitude. It was Obama administration after all that showered the financial industry with trillions of cheap credit, upheld AIG bonus contracts and did not prosecute a single person in the wake of the financial crisis. It was Obama who “stood between them and the pitchforks” in 2009, at risk of alienating his own base. He’d rather they just said thank you and went on their way. Taking offence is a crowded trade these days, but it is a sign of times.

The only people who are not offended today, or at least do not try to make headlines with their grievances – real not imagined – are those who work for a paycheck. They are too busy running on the treadmill, paying bills and keeping their heads just above water. They are too busy to write an angry editorial to Wall Street Journal and claim victimhood. But they have no shortage of advice. Edward Conard, Charles Murray know just what the working stiff needs to better his condition – self-discipline, religion and more hard work – as if it is laziness that afflicts the middle and lower-middle class.

I have no doubt that those who made it to the top, especially from a humble background, have worked very hard to get there. But what now? How does closing deals, buying companies, or making investments justify demands for public reverence? Why is it that that hunt for yield warrants more respect than the work that is done by miners in the mine or teachers in the classroom? Why is someone who does not aspire to own his own business is unworthy of sympathy? If everyone strived to be a businessman how would Leon Cooperman make his payroll?

From a strategic point of view the financial industry leaders have embarked on the losing trade. They may be frustrated, but bringing attention to their grievances will not resonate with the wider population and worse, will harm their case. They should instead lay low or play along, like in that scene in Star Wars where the rebels “arrest” Chewbacca and parade him around the enemy starship to get to the control room. Seriously, do financiers expect an unemployed worker in Ohio to feel their pain when their major headache is too much cash with nowhere to spend and being called names? Amazingly, the industry that praises itself as reality-based, Darwinian, strategic, mindful of opportunity and public mood is blind to the reality and the changing Zeitgeist around them. Wall Street, with few friends and strangely oblivious to its own toxicity, has the chutzpah to demand special treatment. It really is a losing proposition to complain about too much money on their balance sheets when half of the country is either unemployed or scraping by. For Wall Street and the hedge funds it’s time to cut the losing trade and move on.

First Presidential Debates

Romney won, hands down. Why not give him credit where it’s due? He did his best sales job, and he’s good at it. Obama, as usual, was thoughtful and fact-oriented and paused before his answers. But debate watchers wanted fireworks and Romney provided.
I hope, as Bill Maher said last night, that it’s some kind of ropeadope. Maybe Obama saves the best for last. But this just made the race more interesting.