Israel, Marshall, and Truman

In today's Washington Post, Richard Holbrooke recalls America's response to the declaration of Israel's creation. He says that most of the "wise men" at the State Department opposed immediate recognition of Israel, because it would create so many problems with the Arabs. Defense Secretary Forrestal said there were 30 million Arabs [with oil] and 600,000 Jews [with no oil]. Secretary of State General George Marshall led the argument against immediate recognition. Clark Clifford, Truman's domestic political adviser, led the argument for recognition. Holbrooke, who wrote Clifford's biography says that domestic politics were not important, i.e., the Jewish vote. He might be biased.

Only with great effort was Secretary Marshall persuaded not to make a public stink when Truman recognized Israel, and then Truman went ahead and did it. It's still questionable whether this was the right decision. Clearly it's been good for Zionist Jews in America, who interestingly according to Holbrooke did not include the Jews who owned the Washington Post and the New York Times. But it's not so clear that it's been good for America as a nation. No doubt today's high price of gasoline is in part due to Truman's decision to side with Israel over the Arabs. And of course we have over 100,000 troops in Iraq doing something that is in part motivated by the defense of Israel. Both Hillary and McCain continue to pander to the Jewish vote by threatening to destroy Iran, which is the new target for Israel, now that the US has neutralized Iraq's threat to Israel.

But it's a never ending struggle for the US to defend Israel. Just in the last 24 hours Lebanon has threatened to blow up again. Will Bush "stay the course" in Lebanon, too, or will he follow Reagan's example and stay out?

Was Reagan So Great?

In this election year the Republicans often look back nostalgically to Ronald Reagan as the example of what a President should be. There are many, but two who love him are George Will and Peggy Noonan. Let's look at the record.

1) Reagan did not fight in World War II. Almost everyone fought in World War II, the last "good" war, the greatest generation. He had himself declared legally blind so that he could not fight, but he did become an Army officer who made movies in California for the military.

2) Reagan was divisive. His intra-party fight with Gerald Ford for the nomination in 1976 probably led to Jimmy Carter's election. If Ford had been uncontested for a second term, he probably would have won.

3) Reagan's election over Jimmy Carter in 1980 got a big boost from Ayatollah Khomeini and the other Iranian mullahs. The Iranians hated Jimmy Carter because he stood by the Shah and allowed him to have medical treatment and refuge in the US. Thus, they took over the US Embassy in Tehran and refused to let the hostages go while Carter was still President. They used the hostages as pawns to get Jimmy Carter out of office. Thus, Reagan was the Iranians' candidate. He probably could have won the election without Iranian support, but the hostage crisis helped his campaign enormously by hurting Carter enormously. The hostages were released within hours of Reagan taking office. We'll never know, but it's possible that the Iran-Contra scandal was the result of Reagan's trying to repay the Iranians for their support in the 1980 election.

4) He turned tail and ran out of Lebanon after the Marine barracks were blown up. All the Republicans talk about how brave Reagan was to stand up to the Russians, but they don't talk much a Lebanon, which is more closely comparable to the Iraq war today. He did not "stay the course" in Lebanon; after the massive Marine casualties, he brought the troops home quickly and left Lebanon to descend into civil war. Maybe Reagan was brave to stand up to the Russians, but Gorbachev was a new kind of Soviet leader, much more open to the West than his hard-line predecessors. At a summit in Iceland, Reagan is reported to have reached an agreement to totally dismantle the US nuclear arsenal before Richard Perle talked him out of it.

Does Reducing Taxes Increase Revenues?

This morning in a debate on CNBC about tax policy, CNBC rolled out the old Laffer-curve argument that reducing taxes increases revenues. They showed this graph, which appears about 6:18 into the video. In it, you can see that when capital gains taxes were reduced, there was a spike in tax revenues. What they didn't mention is that the spike was quickly followed by a drop off to normal levels. What that shows is that legislating is a relatively slow process. When lower capital gains rates are being discussed, wealthy people hold off on realizing profits until the new lower rates are in effect. Then they do some profit taking on which they can pay the lower rates. A lot of the assets sold are probably ones that have been held a long time and perhaps would not otherwise have been sold.

Another factor as tax rates become even lower is that it encourages speculation. If there's little or no capital gains tax, it encourages people to "speculate" for short term gains, not "invest." Hence, there is more churning and more taxes on more individual transactions.

Reagan's belief in the Laffer-curve showed that his Alzheimer's had set in while he was still President. And for those crazies who still believe in it, it just shows that they are crazy. There probably is some very high level where the Laffer hypothesis applies, close to a 100% tax rate, but that it largely irrelevant in today's world.

Taxpayers Subsidize Richest Americans

The NYT reports that several hedge fund managers took home over a billion dollars in pay last year. It says, "Combined, the top 50 hedge fund managers last year earned $29 billion." Interesting that the $29 billion figure almost exactly matches the $30 billion bailout of Bear Stearns. It's more than a coincidence.

The hedge funds don't really do much useful. They don't make anything; they don't start businesses. They don't even pretend to make businesses more efficient, as private equity funds claim to do. They are basically gambling institutions, betting on various, esoteric market fluctuations. So, when they win, somebody else loses, because they are not creating wealth; they're just taking somebody else's wealth. So, the winners made $29 billion and the losers got bailed out to the tune of $30 billion by the taxpayers. The taxpayers are contributing to the unprecedented transfer of wealth from the lower and middle classes to the super rich.

Carter's Courage

Jimmy Carter has a lot of courage to take on the American Jewish community's virulent, racist, Zionist, hate-filled campaign against the Palestinians. This blog by Marc Ginsberg is just one example of the hate expressed toward him by Jews. Don't be fooled by the "more in sorrow than in anger" tone of the blog. It's a hate screed. The ironic thing is that as the Jews have garnered more and more power in the US, so that both the Republican and Democratic parties support Israel unquestioningly, the US has lost more and more power in the world, partly because of the hateful, racist, Israeli-inspired policies it pursues in the Middle East.

Maureen Dowd, Deer Hunter

Maureen Dowd's column in the NYT is the first I have seen that mentions the "Deer Hunter" movie. She says Pennsylvania is Deer Hunter country. What does this mean if it's not something weird having to do with bitterness and guns. Is it common for Pennsylvanians to play Russian roulette? Do they just naturally love Russian roulette like they love their God? Did Maureen and Hillary learn to play Russian roulette with their dads out behind the vacation cabins their grandfathers built? I don't think the characters in Deer Hunter would have been playing Russian roulette if they hadn't been messed up by the Vietnam war and faced a pretty depressing situation at home in Pennsylvania.

New Jewish Lobby

The Washington Post reports that liberal Jews have created a new lobby, J Street, to compete with AIPAC. This sounds great; we'll see how it works in practice. It seems true that there is much more political debate about Israel's future in Israel than there is in the US, where AIPAC is the only Jewish lobby, and AIPAC means Zionism supported 100% by the US.

Here's Mother Jones report of the new lobby.

McCain and Charlie Black

The NYT features lobbyist Charlie Black's prominent role in John McCain's presidential campaign. I didn't know that he got his start with Jesse Helms, Lee Atwater, and other assorted right wing zealots. Not a good sign for me, since Jesse was a virulent hater of the State Department and an author of the Helms-Burton Act, which was one thing that encouraged me to get out of the Foreign Service.

While I was assigned to the US Embassy in Rome, an Italian contact whose little daughter had been denied a US visa under the Act remarked to me about how it penalized the children of those it targeted. I found its operation to be very similar to the way the Nazis targeted Jews in Italy during World War II as described by Herman Wouk in Winds of War and War and Remembrance. I was not happy that the US was punishing children for the "sins" of their parents.

Plus, as I said earlier, I am not happy about lobbyists having big roles in presidential campaigns, especially of someone like John McCain, who claims to be the king of straight talk. The Black connection seems to indicate that McCain has swung hard to the right. I worry that although he has a history as a maverick, he was neutered by George Bush in the 2000 campaign when Bush beat him in South Carolina by claiming that McCain's adopted daughter was actually a black bastard conceived out of wedlock. Now, to see McCain fawning over Bush is more than I can take. Plus, I hate seeing him get his Middle East policy whispered in his ear by Israel hawk Joe (Bomb Iran) Lieberman.

Barack, Hillary and the Deer Hunter

All of this political talk about Obama's description of Pennsylvanians as turning to religion and guns because they are bitter about how life has treated them sounds like it's straight out of the movie "The Deer Hunter." I find it strange that none of the talking heads I have heard have mentioned the movie. It's probably because it's about the Vietnam war and nobody except John McCain was involved in it. McCain's experience was hardly typical; he had little in common with the characters in the movie although they also were POWs. McCain came from a patrician family; his father and grandfather were admirals. Like John Kerry (not one of my favorites) he became a Congressional military aide when he came back from Vietnam. He didn't go back to a working class family in a steel mill town. As a returning hero, he didn't have any moral qualms to deal with when he came back, unlike the average grunt who was fighting in the jungles of Vietnam one day and back on his hometown streets two or three days later amongst cohorts who had avoided service in Vietnam. I don't think there are many ordinary Vietnam vets among the talking heads on TV. One is Sen. Chuck Hagel, but he's the exception who proves the rule, and I don't think he was on today. I think it is significant that he has not endorsed McCain, a fellow Republican and Vietnam vet.

If Hillary knew about the movie, she would probably see herself as the Meryl Streep character, but she is more like the wealthy Meryl Streep character in "The Big Chill," who owns the ante-bellum plantation house in South Carolina where the movie takes place.

Anyway the Deer Hunter is certainly about Pennsylvania and guns, and to a lesser extent about religion. Ironically, Obama doesn't seem to know about it either. He could simply reply to Hillary that if she doesn't understand what he is talking about, she should watch the Deer Hunter.

House Value Graph

Just for anybody who missed it, here's the Shiller graph of the bubble in house prices. It looks like something unprecedented has occurred, so that unwinding or popping the bubble may take a while and be fairly disruptive.

The Fed and the Markets

Although I have been critical of the Fed for not worrying more about inflation, there's no doubt that its main concern should be to avoid a financial meltdown that could lead to a depression or a breakdown of the financial markets. My main complaint is not with the Fed, but with Congress and the Administration for cutting taxes on the wealthy so drastically while waging very expensive wars in Iraq and Afghanistan. They are shuffling money by the handfuls from lenders in China to Republican war profiteers, including Dick Cheney.

The Fed may have prevented the onset of a major financial crisis due to the subprime mortgage situation. Nevertheless, America is still sitting out there -- exposed because of its huge indebtedness. Runaway inflation will reduce the size of the indebtedness over time, but not in the short term (hopefully). Therefore, we remain at the mercy of the Chinese and the Arabs, our largest creditors. It's unlikely that they want to destroy the US for financial reasons; they would stand to lose a lot of money by doing so. But if the political/military situation goes downhill, they might try to destroy the US economy for geopolitical reasons. China is now feeling a lot of international pressure over Tibet, as well as the traditional US pressure over Taiwan from the Republican right. There is some small risk that China could retaliate by dumping all of its US dollar investments, triggering a collapse in the dollar's value and perhaps pushing American interest rates into the stratosphere.

Alan Greenspan claims in the Financial Times that he's not responsible, and he's not the worst culprit, although the FT columnists have some legitimate gripes about his performance. But one thing he did which was very bad was to come out in favor of the dangerous Bush tax cuts because he claimed he was afraid that America would end up paying off its debt. In retrospect his claimed fears had no merit, and were no doubt expressed to please the political powers, Bush and company. By sacrificing his integrity for political expediency, he ensured his share of the blame for America's financial debacle.

Lobbyists and Presidential Candidates

Two recent articles illustrate the extent to which lobbyists dominate Presidential campaigns. One hope for Obama is that he may be less influenced because he has been in Washington for less time and thus the lobbyists have had less time to get control of him.

The New York Times reported on the role of Hillary Clinton's chief strategist, Mark Penn's, lobbying firm's role in getting US approval of the Columbia free trade agreement. It sounds like his firm, Burson-Marsteller, has lost its contract with Columbia at the same time Mark Penn has lost his position with Hillary's campaign.

Meanwhile The Nation reports on the role of the lobbying firm of one of John McCain's insiders, Charlie Black, in making Ahmad Chalabi one of the most important men in Iraq. Black is a principal at Black, Kelly, Scruggs & Healey, another one of the most powerful lobbying firms in Washington, which is also owned by Burson-Marsteller.

It looks as if Hillary and McCain are not masters of their own destinies, but are rather tools of backroom masterminds intent on bringing Washington under their control. It appears that Burson-Marsteller is America's Rasputin.

Israel, Jews, and the US Election

It appears that there are a substantial number of American Jews who oppose Barack Obama because of what they perceive as his position on Israel, as reported by The Nation in "(Some) Jews Against Obama. As the article points out, there is no basis for most of their concerns. This was followed up by a Nation article on "Smearing Obama" that said a particular target of the false smears against Obama were directed at Jews.

Meanwhile, Mother Jones reports that Hillary is pandering to American Jews and Israel by taking a position that Israel should have "an undivided Jerusalem as its capital." This appears to mean that she believes the Palestinians have no right to any part of Jerusalem. By deciding one of the major issues beforehand, this makes talks on peace between Israel and the Palestinians virtually pointless. The problem with Hillary's position on Jerusalem is illustrated by Helena Cobban's recent posting on Jerusalem, for example.

Finally, John McCain's recent visit to Israel appeared designed to pander to American Jews. Besides visiting the Holocaust memorial in his yarmulke, he seemed to be getting his foreign policy advice from Sen. Joe Lieberman, who advocates an American war with Iran on behalf of Israel. The sight of Joe whispering in John's ear about what to say about al-Qaida in Iraq was not a pretty sight.

I'm reminded of the movie Bulworth, where Warren Beatty's senator character says something like, "My staff knows they always have to put the rich Jews on my campaign schedule." Hillary and McCain need that "rich Jew" money. Obama has enough money coming in from regular people that he doesn't have to pander to any particular group. Thus, it appears that the Jews fear him because they are afraid that they can't control him, as they do Hillary, McCain, and most Presidents, certainly including George Bush, whose Middle East policies are blatantly pro-Israel, to the point of arming Fatah Palestinians in the hope that they will kill Hamas Palestinians.

Wall Street vs. Main Street

The economy lost 80,000 jobs and the stock market barely went down. To me this signifies the disconnect between Wall Street and Main Street, the rest of the country. It's fairly typical that bad news for middle America is good news for Wall Street, but with everybody concerned about the financial turmoil on Wall Street and the potential recession for the whole country, that attitude is particularly poignant. Wall Street is happy that jobs are being outsourced to China and India because it reduces labor costs. Detroit and the rest of the rust belt is already suffering from this Wall Street attitude, but the pain is spreading to the rest of the country outside of the playgrounds for the rich, like Manhattan, Beverly Hills and Aspen. Meanwhile, the fat cats on Wall Street, who got us into this mess, just got bailed out to the tune of $30 billion or more, while the average Joe, who has just been minding his own business, will get a tax rebate of $600 or so.

Pimco Loses Confidence in Bernanke

It's not a good sign when Bill Gross of Pimco, probably the foremost bond trader in America, loses confidence in Bernanke, as he has according to this Bloomberg report. Gross does not think that Bernanke is committed to fighting inflation. Bernanke is more concerned about cutting interest rates to keep the stock market up, which seems to be working, since it's up over 100 points at the moment. But what's best for America's future? Probably not another stock market bubble.

Bill Kristol's Patriotism

Bill Kristol's op-ed in the NYT criticizes Barak Obama for making a point of not wearing a flag pin in his lapel. I guess the NYT is printing Kristol to show how open minded it is. It just happens that I agree with Obama on this issue. In the old days when American presidents were patriots they earned military decorations, and chose to wear them or not, depending on their personal attitudes toward public displays.

The most notable example is probably President Lyndon Johnson's Silver Star, a lapel pin that he wore most of his life, although it was probably undeserved. See this CNN story. Many true heros feel no compunction to wear their decoration, believing modestly that their actions were more important than any display. Because most of the politicians in Washington today were cowards who failed to serve their country, they don't have any military decoration to wear and therefore have chosen to wear the flag. No modesty for the Republicans!

I'm guessing that Bill Kristol is not a combat veteran, and probably not a veteran at all. He's a flag man, and a typical Republican coward, who has no hesitation about sending our troops to fight in Iraq, although he would not go himself. Barak Obama shows his patriotism and courage by standing up to cowardly bullies like Bill Kristol.

I still have bad memories of seeing Zbigniew Brzezinski introduce Vice President Al Gore to an audience of Polish World War II veterans at the Ambassador's residence in Warsaw, Poland. Brzezinski introduced Gore as a Vietnam veteran. The Polish veterans greeted the introduction with applause, but the Americans murmured, "Doesn't he know that President Clinton didn't serve in the military?" Military service is no longer admired in the US, especially by slackers like William Kristol.

Bushies Gut Non-Proliferation Effort

Just for the record, I worked with Linda Gallini and Dean Rust who are mentioned in this Mother Jones article about the Bush Administration's true believers who gutted the US non-proliferation efforts.

Will America Repeat Japan's Recession

The recession that Japan experienced in the 1990s, and that still pervades Japan today, started out in a very similar way to the way the subprime mortgage/credit crunch started in the US. The real estate market was in a bubble, and when that burst, the banks' problems made it worse. The NYT looked at the similarities and found that a better response by the US will prevent us from following Japan's downward trend.

The people whom the NYT interviewed are probably smarter than I, but I am not so sure we can beat the downturn without following the Japanese example, although I don't think we should be doomed to stay in the doldrums for a decade as the Japanese have been. The NYT sees the big difference as fiscal policy. The Japanese used only monetary policy -- keeping interest rates at almost zero for almost a decade -- but apparently not so much fiscal policy.

First, the fact that the Japanese have kept interest rates at almost zero demonstrates the limits of monetary policy as practiced by the Fed. Secondly, the Republican tax cuts mean that we have been running our fiscal policy as if we have been in a recession for the last seven years. Now that we are in one, inplementing a strong anti-recession fiscal policy is likely to ignite inflation, because we are not starting with a balanced budget. We are starting with a budget already badly in the red. Printing money is a recipe for inflation.

I don't think the Republicans care much about inflation, because it allows them to decrease the value of the debt they have run up the last seven years. It allows them to pay if off in cheaper dollars. Of course, for everyone else, it means that they are stuck with cheaper dollars when they get paid, when they buy things and for everything else.

The lesson of inflation, and low interest rates in general, is don't save. Spend what you've got and borrow at low interest because you can pay it back in cheaper dollars. But look at Latin America: the chickens come home to roost. People won't invest in your country, because their investments lose money as the inflated currency depreciates. We are already seeing foreigners (Chinese, Saudis) talk about diversifying out of the dollar into the Euro or a basket of more stable currencies. At some point, inflation and the depreciating dollar will force interest rates to rise, back to the high rates of old days (the 1970s) of 15-20 percent, or more if things get really bad. Such high rates are very bad for domestic business. Maybe globalization will make the coming scenario different from the 1970s scenario, but it will be a first test; so, who knows.

I would like to know what Paul Volker thinks, who got us out of the 1970s stagflation painfully, but successfully.

Tom Friedman on Israeli Attitudes toward Race

Tom Friedman deals with Israeli attitudes toward race in his book From Beirut to Jerusalem, first published in 1989. Since he's Jewish, I cite him as someone who should not be anti-Semitic. On page 269 of my paperback copy, he says:

The Lebanon invasion [in the 1980s] reopened the fundamental division in Israel over the questions: What kind of society is Israel to become? What kind of values does it stand for? Is it going to be a Jewish South Africa, permanently ruling Palestinians in West Bank homelands, is it going to be a Jewish Prussia, trying to bully all of its neighbors, or is it going to be a state with borders that will be based solely on considerations of what will preserve a secure, democratic, and Jewish society at peace with its neighbors?

These are almost exactly the same questions Jimmy Carter raised in his book, Peace Not Apartheid, and for which he was severely chastised by the Jewish community.

Friedman also deals with Israeli attitudes toward the Holocaust a few pages later. He describes how fatalistic and pessimistic Israelis are, in part because of their connection to the Holocaust. But then he says:

If Israel wasn't founded on the basis of such a fatalistic outlook, then how did it take over? ... In the early years of the state of Israel it was common for nativeborn Israelis to feel contempt for the Jews who died in the Holocaust, and even for some of those who survived, because they were viewed as sheep who simply went off to slaughter, while the Zionists were men of bold initiative, who went ou and found the British and Arabs and built a Jewish state.

Ruth Firer, an Israeli who came to Israel from Poland via Siberia during World War II said:

"When I was a student here [in Israel] in the 1950s, the Holocaust was a family secret -- a shame.... The feeling, the whole atmosphere, was that the future must triumph over the past. All of us, parents and kids, tried to cover up what had happened. When we taught the Holocaust then, we taught the heroism of the Warsaw Ghetto -- that was it."

Friedman continues:

The change began, I believe, with the trial of Nazi war criminal Adolf Otto Eichmann in 1961, which brought both the Holocaust and the survivors out of the Israeli closet.... Today -- unfortunately -- the teaching of the Holocaust is an essential element of Israeli high-school education and in the Israeli officers' course. No one goes to Kibbutz Degania [an early kibbutz founded in 1909] anymore. Most Israeli younsters I met had no idea what it represented. dEgania is not viewed as the gateway to Israel. Instead, that role has been taken over by Yad Vashem, the massive hilltop memorial in Jerusalem honoring the 6 million Jews killed in the Holocaust.... Israel today is becoming Yad Vashem with an air force. The past has caught up with the Zionist revolution and now may be in the process of overtaking it. The Holocaust is well on its way to becoming the defining feature of Israeli society.

Republicans Are the New Communists

Rice's decision to call the US's UN Amb. Khalilzad on the carpet, as reported by Reuters, for appearing publicly with the Iranian ambassador at Davos smacks of the old Communist methods. Condi should know them well, since she used to be a Soviet analyst. She was probably under pressure from the right-wing apparatchiks like John Bolton, who emulate the methods of the old Soviet Union to maintain thought control.

While on the subject of X is the new Y, it looks like Israelis are the new Nazis. The turmoil in Gaza, with imprisoned Palestinians breaking out into Egypt, has shown that Gaza is the new Warsaw ghetto. Jews have all kinds of racist profiling methods that they use against Palestinians and other Arabs, but locking them in the Gaza ghetto is clearly reminiscent of Nazi policies against Jews during World War II. The race hatred that is seething in Israel is hard to fathom.