President Obama, who has suffered relatively few setbacks in the Democratic-controlled Congress, has allowed one key administration bill -- the $96.7 billion supplemental appropriation for the Iraq and Afghanistan wars (HR 2346) -- to become a Christmas tree for other controversial "must-pass" provisions, including $108 billion for the International Monetary Fund and language keeping detainee torture photos secret.

The emergence of opposition from left and right to the expanded legislation has inspired anti-war forces to try to hand Obama his first major defeat.

In one of the ironies of the legislative process, the threat of Republicans to vote en masse against the measure has empowered the liberal wing of the House Democratic caucus, giving it potential veto power over the legislation.

A number of war critics in the blogosphere including Jane Hamsher at firedoglake.com ; buhdydharma on Dailykos.com; and Jason Rosenbaum at theseminel.com, think there is a chance to actually defeat the war-funding bill.

Other anti-war advocates in Congress privately warn that they are likely to be outmaneuvered, and that many in their ranks are not willing to deal Obama a major legislative defeat.

The legislation itself has had a short and volatile history. In the first major blow to the President, majorities in both the House and Senate last month used the bill to voice adamant opposition to plans to close the notorious Guantanamo Bay Detention Camp, "Gitmo" or Guantanamo for short, by cutting the money needed to pay for the costs of closure. The action denied Obama the ability to fulfill one of his core campaign promises.

The measure appeared headed to the President's desk for signature after it was passed by the House, 368 to 60, on May 14, with only 51 Democrats and nine Republicans voting 'no', and sent to the Senate

In late May, however, the Senate added two separate provisions, both of which have provoked a firestorm of opposition in the House. The House leadership had planned a vote on the measure last Friday, June 5, but pulled the bill when it became clear that it could be defeated.

The first new and controversial provision would authorizes $108 billion in U.S.-backed loans to be distributed by the International Monetary Fund. This money is a high priority for the President, who made the loan commitment at the April 2 Group of 20 "G-20" meeting in London -- attended by leaders of major industrialized and developing economies -- in an attempt to demonstrate U.S. support for countries struggling to stay financially afloat in the global recession.

House Republican leaders, fully aware that rejection of the IMF money would be a major setback for Obama, are calling on all GOP members to oppose the measure if it includes the IMF money.

House Republican Leader John Boehner (Ohio) told colleagues: "Just think about this a moment. We're going to provide the International Monetary Fund $108 billion that we don't have. So we're going to borrow $108 billion from the Chinese, we're going to give it to the IMF, and we're going to expect our kids and grandkids to pay for it. Americans aren't buying this. And I tell you what: Republicans in the House aren't going to buy it, either."

Further complicating the IMF issue is the emergence of a block of 41 House Democrats led by Rep. Maxine Waters (Calif.) who wrote a May 21 letter to top Democrats on the Appropriations Committee seeking changes in the IMF sections of the bill which would require the IMF a) to back off from certain austerity requirements imposed on poor countries; b) to provide more access and transparency in the loan process; and c) to use $5 billion for grants and debt relief instead of for loans. It is not clear how many of these 41 House Democrats are prepared to vote against the legislation which has not been changed to accommodate their demands.

The problems don't stop there.

The Senate, with the backing of the Obama administration, has also added an amendment that would allow the administration to keep secret photographs of U.S. torture and mistreatment of detainees and prisoners, allowing the Department of Defense to exempt such photos from provisions of the Freedom of Information Act.

Sen. Joseph Lieberman (I-Conn.), who sponsored the Detainee Photographic Records Protection Act, said the language specifically addresses a FOIA suit filed by the ACLU for the pictures: the Lieberman amendment will "authorize the Secretary of Defense, after consultation with the Chairman of the Joint Chiefs, to certify to the President that the disclosure of photographs like the ones at issue in the ACLU lawsuit would endanger the lives of our citizens or members of the Armed Forces or civilian employees of the United States government deployed abroad. The certification would last five year and could be renewed by the Secretary of Defense if the threat to American personnel continues."

The result is that HR 2346 -- combining the Iraq-Afghan war supplemental with the IMF loan money and with the detainee-photos secrecy provisions -- now faces four separate sources of opposition: First, all 178 Republican members; Second, liberal/progressive Democrats critical of the forced austerity policies of the IMF; Third, the 51 Democrats and 9 Republicans who voted against the Afghan-Iraq supplemental on May 14, before the Senate made its additions; and Fourth, members, mostly Democrats, adamantly opposed to the FOIA photo provisions.

To be certain of passage, the administration and House Democratic leaders need to be sure of 218 votes, and, without major surgery to the legislation, prospects of achieving that goal are currently dim.

According to Barney Frank (D-Mass.), chair of the House Financial Services Committee, there are two choices available to those seeking passage of the war supplemental: take out the IMF funding, or take out the anti-FOIA Lieberman amendment: "You can have the war and the IMF, or the war and the pictures," Frank told Jane Hamsher.

Frank, an anti-war Democrat who opposed the war supplemental on May 14, strongly supports the IMF provisions and will back the measure if the IMF funding stays in. He is strongly opposed, however, to the FOIA amendment, and said he has warned the Obama administration that there are so many House members opposed to the Lieberman provision that "they have no chance of passing this if the pictures are in it... There are many Democrats who are very upset about that."

If the administration and House leadership adopt the Frank strategy and eliminate the Lieberman FOIA amendment, they will still face a major hurdle.

Keeping the IMF provision in raises the likelihood that all the votes for the measure will have to be provided by Democrats. There are 256 Democrats, meaning that proponents of the bill can only afford to lose 38 Democratic votes. A total of 51 Democrats, however, voted against the measure on May 14, and another 18 voiced concerns about the practices of the IMF, for a total of 69 potential no votes -- 31 of whom would have to be persuaded to vote yes. In addition, there is the danger for the administration that some members of the Democratic Blue Dog Coalition - members representing conservative swing districts - may feel under pressure to vote no because of local opposition to foreign aid spending and to the IMF.

Some opponents of the war, including Frank and George Miller (D-Calif.) have indicated that they are prepared to support the administration and to back the bill.

The Democratic whip operation will be frantically counting Democratic votes this week to see what changes, if any, can produce a majority. One factor working in Obama's favor is that many of the critics of war spending are members of the Congressional Black Caucus and they are likely to be reluctant to hand Obama a serious defeat at this early stage of his presidency.

Conversely, if that strategy for getting to a majority fails, the administration will be tempted to drop the IMF money to get at least 140 Republican House votes. Despite their desire to embarrass the president, House Republicans, without the excuse of the IMF money, would be under intense pressure to vote for a bill providing money for American troops under fire in Afghanistan and Iraq.

A key Senate aide noted that the measure will pass in one form or another "only with great difficulty. Once Obama gets back [from overseas] he may need to be the closer and seal the deal." Supporters of the bill "lose Democratic votes on the money for Afghanistan and sure as hell won't pick up Republican votes because of the IMF money, and if this language relating to
detainee photo's isn't stripped out, they may lose a handful of more Democratic votes as well."

The pain of cutting back at the New York Times has taken on an international dimension as the paper struggles to save money everywhere, including at the International Herald Tribune (IHT), a bedrock source of information and comfort to Americans -- and to all English-speakers -- visiting or living abroad since its founding in 1887.

As the memo to IHT staff below makes clear, the New York Times management, under French law, faces many constraints in dealing with employees living in France, and cannot order pay-cuts, impose involuntary leave without pay, or lay off workers as easily as in the United States. Nor can the Times adopt the overall tough bargaining stance that it can at the New York headquarters and at the NYT-owned Boston Globe.

Martin Gottlieb, global edition editor of The New York Times with responsibility for The International Herald Tribune, declined a request from the Huffington Post to elaborate on the memo to IHT staff he signed.

"We are in discussions with union representatives about our plan for the Paris office and, in fact, it would be inappropriate to comment while those talks go on. Sorry that I can't comment further right now," Gottlieb wrote in an email.

At the end of June, the Times is expected to announce plans to start charging viewers of the paper on the web, albeit modestly. Two methods under consideration are a.) a "meter" system requiring payment by visitors after a yet-to-be-determined free level of viewing each month, or a b.) "membership" program similar to the fundraising techniques used by NPR and museums, allowing donors of various amounts differing levels of access to the Times web site. The Times site is generally agreed to be far superior to all its newspaper competitors, including the Washington Post, Wall Street Journal and Los Angeles Times.

In Boston, where the New York Times threatened to close the Globe, the Newspaper Guild on May 6 reached tentative agreement on terms calling for a significant cut in pay, forced unpaid vacation leave, and modification of the Globe's lifetime job guarantee provisions. Total union concessions at the most influential paper in Massachusetts amounted to $20 million. There is no guarantee that the union concessions assure continued publication of the Globe which faces total losses this year of up to $85 million.

The agreement is scheduled to be voted on by all the Globe's Guild employees on June 8. More specifically, it calls for an 8.388 percent wage cut, five unpaid furlough days each year, elimination of overtime, a freeze on pensions at the current level and elimination of the company contribution, the cessation of company contributions to 401 (k) accounts, elimination of banked vacation time from previous years, and elimination of company tuition reimbursement, eye care coverage, life insurance, and retiree death benefits.

In a May 20 memo to members of the Globe Guild, Boston Globe publisher Steven Ainsley warned that a Guild rejection of the agreement will result in an immediate 23 percent pay cut.

At the New York Times, which lost $74.5 million in the first quarter of 2009, the Guild accepted a five percent pay cut on May 5 after management warned that it would lay off 80 employees if wages were not reduced.

The memo to International Herald Tribune employees, co-signed by Martin Gottlieb, follows:

To the Staff:

When we wrote to you last week, we encouraged you to come forward by Friday to make voluntary contributions of CET days [vacation days held over from previous years, most likely because staff were not allowed to take them] or temporary pay reductions at this difficult economic time for the IHT. Since then we have met with you twice in groups and in many individual sessions. We appreciate the response from the many people who have come forward with contributions, either involving a salary reduction or the donation of CET days, which now tally more than 60. That is already a worthwhile contribution, given that we are told that one day of CET from each person on the newsroom payroll would be worth a total of some 23,500 Euros. All this serves -- on top of the previously instituted reduction of CET days -- as an expression of the Paris newsroom's willingness to stand by the IHT and help it financially. It also more evenly balances the salary cutbacks experienced in different offices of the IHT and The Times, which were shaped by varying laws, contracts and procedures across three continents. These voluntary contributions by the Paris staff exemplify what Bill Keller referred to in a newsroom talk at The Times Wednesday as the "spirit of shared sacrifice" reflected in the Newspaper Guild's overwhelming approval of temporary pay cuts of 5 percent covering hundreds of its members.

We appreciate as well your thoughtful questions and comments as you wrestle with the decision of what, if anything, to contribute. We want to emphasize that this decision is a personal one, shaped by individual circumstances and determinations, and that there is no single right answer. One factor that many of you have asked about is the nature of the eight layoffs proposed in Paris. Without knowing which departments they come from and how they might affect the newsroom, several of you have said, it is hard to know how to come to your best judgment. We are in the formal process of consultation with the comite d'enterprise, and for now that is all that can be said. In the meantime, we will extend the period for making voluntary contributions so that you can weigh everything and make your most reasoned decisions. Meanwhile, we welcome a continuing dialogue. Please contact either of us or Tom Redburn with any questions or simply to talk things through.

And thanks, again, for considering this request after a year in which you have risen to the occasion -- journalistically and in many other ways -- time and again.

Marty and Alison

In seven short years, the American electorate has radically changed, as voters' priorities have shifted to the economy and away from such wedge issues as abortion and gay rights, as well as away from the threat of terrorism and from the war in Iraq, according to a comprehensive survey released Thursday morning by the Pew Research Center.

From 2002 to 2009, voters' partisan identification has moved from virtual parity -- 43 percent Republican and 43 percent Democratic at the height of George W. Bush's popularity in the immediate aftermath of 9/11 -- to a massive Democratic advantage today of 53 to 36, a 17 percentage point split, by far the largest difference in the past two decades.

The Pew survey is a testament to the miscalculations of the Bush administration and of the Republican leadership in Congress. The two were handed an extraordinary opportunity to build on an outpouring of public support in the wake of the attacks on the World Trade Center and Pentagon. Instead, those chances to revive a Republican majority were squandered on a mismanaged invasion of Iraq and dissipated by ill-advised culture war offensives, as well as by disclosure of corrupt lobbying and spending scandals in Congress under Republican rule.

"There is an enormous amount of material about the deterioration of the Republican Party in this survey," Andy Kohut, who runs the Pew Research Center, told the Huffington Post. The GOP is currently 88 percent non-Hispanic white; it has grown steadily older, from an average of 45.5 years in 2000 to 48.3 years in 2009; it is increasingly dependent on self-identified white evangelicals (35 percent of today's GOP, on Southerners (39 percent of today's GOP), and on voters who describe themselves as conservative (66 percent of today's Republican electorate). Those who espouse conservative views on the family, homosexuality and civil liberties -- a population which was in the majority in 1987 -- have fallen to the 50 percent level or below, the Pew survey found.

"The Republican Party is facing formidable demographic challenges," Kohut wrote in a report describing the new Pew findings. "Its constituents are aging and do not reflect the growing ethnic and racial diversity of the general public. As was the case at the beginning of this decade, Republicans are predominantly non-Hispanic whites (88%). Among Democrats, the proportion of non-Hispanic whites has declined from 64% in 2000 to 56%, as Latinos and people from other racial backgrounds have joined the ranks of the Democrats."

The issue environment has, in addition, become much more favorable to the Democrats. When voters were asked "What One Issue Would Matter Most in Your Presidential Vote?," the number identifying Iraq and Afghanistan fell from 22 to four percent between 2004 and 2009. "Moral values" dropped from 27 percent to 10 percent during the same period. Conversely, the percentage identifying the economy and jobs has more than doubled, from 21 to 50 percent, with smaller, but still significant, gains for voters selecting health care and education as the most important issue.

"The decline in the importance of moral values as an issue in a possible election has come across the board, but the drop has been especially large among Republicans and working-class voters," Kohut wrote. "In 2004, 45% of Republicans cited moral values as their top issue; now just 21% do so, compared with 47% who mention the economy and jobs....Slightly more than half (51%) of older white working-class Republicans and leaners cited moral values in 2004; now just 23% do so."

While Republican identification has nosedived, the percentage of voters who say they are conservative has remained consistent through this decade. In 2009, 38 percent of voters described themselves as moderate, 37 percent as conservative and 19 percent as liberal -- the same split found in every Pew survey over the past nine years.

The Republican Party has been bleeding from both its conservative and moderate ranks. In 2005, 52 percent of conservatives said they were Republican while in 2009, only 41 percent of conservatives said they were aligned with the GOP. The percentage of self-identified Republicans who call themselves moderate has dropped from 23 percent in 2005 to 16 percent this year.

Among poor people, Republican support, already low, has been dropping further, while among the affluent -- those with incomes over $100,000, a traditionally Republican segment of the electorate -- Democrats have gained parity with the GOP.

At the same time, the percentage of Republican identifiers who say their own party is doing a good job in standing up for such traditional Republican issues as reducing the size of government, cutting taxes, and pressing for conservative social values has shrunk radically, from 67 percent in 2004 to 24 percent now.

While Democrats have made substantial gains in the partisan identification of voters, the party does not have a clear mandate to move to the left across the board, the survey found. Although the Pew findings represent good news for Democrats, there are some costs to their gains. Many of the new Democratic voters are not as liberal as traditional party loyalists, so that support for such initiatives as expanded health care, progressive taxation, and a stronger safety net may face opposition from within party ranks.

On the basic issues of the liberal-conservative divide, the Pew study found a level of polarization "never before seen" between Democrats and Republicans over the fundamental role of government on such questions as whether the government "should help more needy people, even if it means debt," "guarantee everybody enough to eat and a place to sleep," and should "care for those who can't care for selves." On each of these issues, Pew found, there is more than a 30 percentage point difference in the views of Democrats and Republicans.

Independent voters, many of whom have become Democratic "leaners" providing crucial margins on election day, fall right between the two partisan camps. More worrisome for the Obama administration and Democratic congressional leaders is the Pew finding that "the overall balance of public opinion on the government's responsibility to provide for the needy has shifted to the right" despite the onset of a severe recession.

The survey found that "the share of Americans overall who favor helping more needy people even if it means greater debt has fallen from 54 percent in 2007 to 48 percent today, and there is a comparable drop in the share who say the government should guarantee every citizen enough to eat and a place to sleep (from 69 percent in 2007 to 62 percent today). This rightward shift is starkest among independents. Today, just 43 percent of independents say the government should help more needy people even if it means going deeper into debt, down 14 points since 2007. And over this period the number of independents who favor guaranteeing food and shelter for all has fallen 13 points from 71 to 58 percent."

These numbers amount to a warning for the Obama administration, which so far has been able to maintain strikingly high favorability ratings while pursuing an agenda calling for a major expansion of the safety net, especially in health care.

The Pew survey did not find evidence of anti-business sentiment growing. Fully 76 percent of voters agreed with the statement, "The strength of this country today is mostly based on the success of American business" -- the same percentage as in past years.

Conversely, public support for labor unions appears to be weakening: the percentage of people agreeing that "labor unions are necessary to protect the working person," has dropped from 74 percent at the start of this decade to 61 percent this year. The decline was sharper --- from 76 to 53 percent, a 23 point fall -- among independent voters than among either Democrats or Republicans.

While large majorities of voters continue to support tough environmental regulation, there is less willingness to accept economic costs as worth the benefit of improving environmental conditions. The percentage of respondents who said "protecting environment [is] a priority even if it causes slower growth and/or job losses" dropped from 69 to 51 percent between 2002 to 2009. Similarly, the percentage of respondents who said voters "should be willing to pay higher prices to protect the environment" has fallen from 62 to 49 percent over the same period.

On cultural -- as opposed to economic -- matters however, the country appears to be moving decisively towards greater social tolerance: One of the biggest attitudinal changes over the past two decades among voters, Pew found, has been on public views towards homosexuals. The percentage of people who say "school boards ought to have the right to fire teachers who are known homosexuals" has fallen from 51 percent in 1987 to 28 percent this year. At the same time, the percentage who do not think school boards should be empowered to fire gay teachers has grown from 42 to 67 percent.

As prospective buyers circle, and as the brutal commentary of financial analysts intensifies, the end of the Sulzberger-Ochs family's 113 year control of the New York Times -- through forced sale or bankruptcy -- has become an acknowledged possibility, with some well-informed observers suggesting that insolvency may be roughly a year or two away.

If officials of the paper are forced to declare bankruptcy, it will be difficult -- perhaps impossible -- for the Sulzberger-Ochs family, which has been at the helm since 1896, to prevent the paper from falling into the hands of an individual or a corporation (for example, Rupert Murdoch and the News Corporation) whose journalistic principles are markedly different from, if not antithetical to, those that have guided the United States' dominant newspaper.

The New York Times Company, which owns the New York Times, the Boston Globe, the International Herald Tribune and 15 other daily newspapers, lost $74.5 million in the first quarter of 2009, compared to a loss of $335,000 in the first three months of 2008.

A takeover of the New York Times by an outsider would be a cataclysmic event in American journalism. Under control of the two families who have intermarried -- the Ochs and the Sulzbergers -- the Times is recognized nationally and internationally as the American paper of record, setting a standard, in the scope and the depth of its coverage, that no competitor has ever been able to match over a sustained period of time.

"The peculiar literary inheritance might make this a tricky case, as the value of the asset depends on the composition of its board," University of Chicago Law School professor Richard Epstein told the Huffington Post. In the event the company sought bankruptcy protection, the "family would surely lose control, and most of the nonvoting shareholders would be out as well."

In the case of a sale in bankruptcy, "the high bidder usually wins, and the question is whether that bidder will be able to keep the NYT's reputation. Generally, the party who can do most with the brand will bid the highest, so there is some protection. How strong? [Not very.] Think Chicago Tribune," Epstein suggested, referring to Sam Zell, the highest bidder for the Chicago Tribune and such other papers as the Los Angeles Times and Baltimore Sun, all of which have sharply deteriorated under Zell's management.

Specialists in bankruptcy law -- including Stanford's Marcus Cole, Columbia's Ed Morrison, Yale's Jonathan Macey, University of Pennsylvania's David Skeel, Berkeley's Jesse Fried, University of Michigan's John Pottow, and Yale's Eric G. Brunstad Jr. -- were exceptionally forthcoming with detailed responses to HuffPost inquiries, and all were in agreement with the view that the Sulzbergan-Ochs family could face serious difficulties holding onto the Times if the paper's finances continue to nosedive.

"These are very complicated questions, but, very generally speaking (with lots of qualifications): (1) if the NYT filed for protection under Chapter 11 of the bankruptcy code, the company would try to reorganize business and balance sheet; there would be an 'exclusivity period' under which the incumbent board and management could run the company and propose a plan of reorganization to the creditors for their approval," said Macey. "It is highly unlikely (unless there are special facts such as if the Sulzberger-Ochs family were dominant creditors as well as shareholders ) that they could retain control; (2) if instead of bankruptcy the company were simply 'put up for sale' it would have to be auctioned off to the highest bidder."

Fried pointed out that outside of bankruptcy, the Sulzberger-Ochs family could sell its own special stock, which effectively controls the company, to whomever they choose. In the event that the paper continues its downhill slide toward insolvency, such a sale would appear to be one of the few options available to the Sulzberger-Ochs family if its goal is to find an owner who will maintain the paper's values and traditions.

But, Fried added, "if the family sells the assets of the NYT, and distributes the value pro rata to all shareholders, both voting and nonvoting, they will generally have a fiduciary duty to sell to the highest bidder. If they were sell the assets at a low price to a related party, they would be sued and probably be forced to pay damages to the injured non-voting shareholders."

Similarly, if the assets were put up for sale while in bankruptcy proceedings, "the family would have difficulty disregarding the highest bidder" in favor of a bidder considered a stronger proponent of the journalistic values maintained by the family.

While views of the viability of the Times under current management vary in the community of financial analysts, some are strikingly pessimistic.

Barclays' analyst Craig Huber wrote after the NYT reported is first quarter losses: "We could argue the stock to zero given the high debt load," adding, "net debt to (operating profit) is way too high." In his analysis of the finances of the NYT, Huber contended, "In our opinion, newspapers cannot cost cut themselves to prosperity and an online-only newspaper model is not profitable, not even close."

Henry Blodget, in turn, said that if the company "can avoid burning more than $100 million of cash in the next two years, the day of reckoning will be postponed until 2011, when some of the big debts start coming due (starting with a $400 million line of credit, which, by then, will be maxed out)."

Blodget is particularly critical of the $250 million loan, and the 14-percent interest rate, the Times received from Mexican billionaire Carlos Slim. After examining all the fees and terms of the loan in Times filings with the SEC, Blodget wrote that when the loan was announced in January, "we knew then that the deal was dizzyingly expensive--the corporate equivalent of borrowing money from a payday loan shop. What we didn't know was just how expensive it was--and how many puppet strings the clever Carlos attached....this money was just about as expensive as it gets."

Morningstar's Tom Corbett did not make dire predictions, but he could by no means be described as sanguine:

"The swift and relentless decline in ad spending was more than evident in New York Times' grim first-quarter results reported April 21... Total first-quarter revenue of $609 million represents a 19% decline from the same period a year earlier. It also marks a breathtaking acceleration in the rate at which the Times' top line is hemorrhaging, both sequentially and year over year, as its once-copious flow of ad dollars continues to slow to a trickle... With little to no visibility regarding a sustained recovery in ad spending, we expect margins to continue to come under pressure, as declining revenues continue to push up against the publisher's highly fixed cost structure."

The Times is not willing to discuss the possibility of bankruptcy, or the details of the Sulzberger-Ochs family's ability or inability to control the selection of a buyer, should they decide to sell. "We are not going to speculate on that," said Catherine J. Mathis, senior vice president of corporate communications, in response to a HuffPost query. "As we've said, any change to the capital structure of the Company, including a sale of the Company, would require the approval of the family trustees."

At the NYT annual meeting last month, Arthur Sulzberger, Jr., chairman, The New York Times Company and publisher of the New York Times, told shareholders:

We know that there are considerable challenges before us, but past experience teaches us that the outcome will be determined by our ability to adhere to the formula that has successfully driven this Company for so long. That formula can be summed up in this thought: quality journalism attracts a quality audience which, in turn, attracts quality advertisers. It is this idea, expressed various ways over numerous decades, which has seen The New York Times Company through previous grim economic periods and has enabled The Times to emerge as the world's most powerful journalistic voice. Our quality journalism is the fundamental asset our shareholders have...

One of the reasons the Company has been able to weather past financial and political storms has been the steadfast support of the Ochs-Sulzberger family. On behalf of Michael Golden and myself, let me assure you that our family continues to be enormously proud of the legacy of The Times, its accomplishments, the loyalty of its readers and the role it plays to ensure a healthy democracy and a robust exchange of ideas throughout the world. And we are here to stay, continuing to build on the legacy begun in 1896 by Adolph Ochs.

Asked about the future of the company, Sulzberger declared, "This company is not for sale... The Ochs-Sulzberger family will be with the company every step of the way."

The tilt of American policy in favor of the finance industry -- reflected in the policies of recent Treasury Secretaries Timothy Geithner, Henry Paulson and Robert Rubin -- cannot be attributed to any one person or institution. The industry flexes unsurpassed muscle in the political system, backed by billions of dollars invested in candidates and lobbying, a vast grassroots lobbying network of local bankers, the growing centrality of finance in the national economy, and widespread acceptance among public officials of a pro-market, deregulatory philosophy.

"Both the end-stage Bush and new Obama administrations have been exceptionally fawning in their support of failed bankers," William K. Black, associate professor of Economics and Law at the University of Missouri-Kansas City School of Law, told the Huffington Post. "Crony capitalism is now common in U.S. finance."

Since 2000, the finance sector has funneled a total of $2.84 billion directly into the political system, $961 million in donations to candidates and political parties, $1.88 billion in publicly disclosed lobbying expenditures to influence Congress and the executive branch.

The leading firm in both lobbying dollars and campaign contributions is Goldman Sachs, which not only produced Treasury Secretaries Rubin and Paulson, but which has also begun to emerge from the current financial crisis as the top dog of Wall Street.

In 2008, the largest corporate or trade association source of campaign contributions, including employees, was Goldman Sachs at $6.9 million, followed by J.P. Morgan Chase & Co. at $5.8 million. Citigroup, $5.5 million, came in fourth; Morgan Stanley, $4.3 million, 7th; and the American Bankers' Association (ABA), $3.7 million, 10th. Over the past two decades, Goldman Sachs has been the second largest corporate contributor (including employees) at $30.9 million, beaten only by AT&T, at $40.8 million.

"When we write history books we will wonder why the government seemed to coincidentally do the things that favor Goldman Sachs and somehow in extremis get them out of trouble," Nassim Nicholas Taleb -- author of "The Black Swan" and distinguished professor at New York University Polytechnic Institute -- told the Huffington Post.

The strength of the financial sector and its interlocking allies in insurance and real estate has been repeatedly demonstrated over the past year: Despite near universal agreement that actions of the industry inflicted untold harm on the American and global economies, the Bush and Obama administrations have treated captains of finance with velvet gloves, and Congress, especially the Senate, has consistently deferred to the powerful financial lobby.

Looking over the past decade, Simon Johnson, professor at MIT's Sloan School of Management and former chief economist at the International Monetary Fund, provided a coherent, well-conceptualized description in The Atlantic of the political prowess of the banking community, a subsection of the financial industry and a community that Johnson and co-author James Kwak view as an American oligarchy.

"From this confluence of campaign finance, personal connections, and ideology there flowed, in just the past decade, a river of deregulatory policies that is, in hindsight, astonishing: * Insistence on free movement of capital across borders; * The repeal of Depression-era regulations separating commercial and investment banking; * A congressional ban on the regulation of credit-default swaps; * Major increases in the amount of leverage allowed to investment banks; * A light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory enforcement; * An international agreement to allow banks to measure their own riskiness; * And an intentional failure to update regulations so as to keep up with the tremendous pace of financial innovation."

In Congress, the big test of continued banking muscle in the aftermath of the financial collapse came on April 30. That day, the Senate voted 51-45 to kill administration-backed "cramdown" legislation which would have allowed bankruptcy judges to change the terms of mortgages, many of which were originated by what are now recognized as specialists in predatory or sub-prime lending. The Senate in effect chose to support banking interests over the interests of constituents who are in bankruptcy and facing foreclosure on their homes. "The American Bankers Association appreciates the Senate's decision," declared Floyd E. Stoner, the ABA's executive director, declared. "We are thankful that the Senate recognized [our] concerns."

While campaign contributions and lobbying expenditures are reliable measures of the leverage of the financial industry, these figures by no means tell the full story. One of the industry's most powerful tools is the vast network of community bankers who are often key members of local establishments in rural and small town America.

Ten of 12 Democratic senators who voted against the cramdown bill -- Max Baucus (Mont.), Michael Bennett (Colo.), Robert Byrd (W.V.), Byron Dorgan (N.D.), Tim Johnson (S.D.), Mary Landrieu (La.), Blanche Lincoln (Ark.), Ben Nelson (Neb.), Mark Pryor (Ark.), and Jon Tester (Mont.) -- represent states that are disproportionately rural, states in which such bankers are especially influential. Johnson and Kwak, in their May Atlantic article provide crucial additional insight. For one thing, the finance industry in recent years has become a lynchpin of the national economy:

"From 1973 to 1985, the financial sector never earned more than 16% of domestic corporate profits. In 1986, that figure reached 19%. In the 1990s, it oscillated between 21% and 30%, higher than it had ever been in the postwar period. This decade, it reached 41%. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99% and 108% of the average for all domestic private industries. From 1983, it shot upward, reaching 181% in 2007."

These findings are illustrated in the following two charts:

At a more subtle level, Johnson and Kwak describe what amounts to an ideological shift, a shift experienced most intensely in the nation's capital:

"[T]he American financial industry gained political power by amassing a kind of cultural capital-a belief system.Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America's position in the world."

All of which helps to explain Democratic Senate Whip Dick Durbin's outburst on a Chicago radio station last April 27 as he watched the steady erosion of support for the measure allowing bankruptcy judges to alter the terms of home mortgages: "And the banks - [it's] hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. They frankly own the place."

Disclosures that at least six of the 19 big banks undergoing stress testing have been ordered to acquire more capital has not assuaged critics who contend that the tests are dangerously mild.

"This stress test is the equivalent of testing the Brooklyn Bridge by running a single heavy truck on it," Nassim Nicholas Taleb, a scholar of risk and chance at Polytechnic Institute of New York University, told the Huffington Post. "Bring engineers for this stress test, not the economists who failed us."

"The fact that six banks failed the stress test is more indicative of the weakness of the banks than the strength of the stress test. Most analysts thought the stress test was pretty wimpy," said Henry Blodget, president of Cherry Hill Research and CEO/Editor in Chief of Silicon Alley Insider. "If a good number of banks hadn't failed, people would have dismissed the stress tests as propaganda. So from the government's perspective, I'd say they were about right (if any more banks had failed under those wimpy assumptions, people might have been terrified.)"

Two of the institutions told by federal regulators to expand capital in order to be able to absorb additional losses are Citigroup Inc. and Bank of America Corp. The other four have not been publicly identified.

The testing was first announced February 10. The departments and agencies involved in the testing include the Treasury, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Reserve Board.

On February 23, the Treasury announced that bank testing would begin two days later to ascertain whether the nation's 19 biggest banks had enough capital to weather "a more challenging economic environment." If not, the "institutions will have an opportunity to turn first to private sources of capital. Otherwise, the temporary capital buffer will be made available from the government," according to the Treasury announcement. Federal officials sought to soften the stigma associated with finding that a bank required a "capital buffer" from the government, noting that "this additional capital does not imply a new capital standard and it is not expected to be maintained on an ongoing basis. Instead, it is available to provide a cushion against larger than expected future losses, should they occur due to a more severe economic environment, and to support lending to creditworthy borrowers."

The results of the tests will be released next Thursday.

Critics of the stress tests argued almost from the moment they were announced that federal regulators had set standards too low, and that the regulatory staff was not equipped to deal with the complexities of these massive, multi-national institutions.

"This is a garbage in, garbage out activity to placate the public and perhaps reassure investors. It would probably be fine for a strictly US bank which was a traditional retail and commercial lender (think a Washington Mutual). But for the really big banks with capital markets operations, this is a joke," wrote Yves Smithand, on the economics blog Naked Capitalism, on February 12.

In a February 23 story headlined "As Doubts Grow, U.S. Will Judge Banks' Stability," the New York Times reported that "many economists, Wall Street analysts and even some bank executives contend that some of the banks are already effectively insolvent."

Interviews by the Huffington Post and an examination of web-based commentary published by economists and financial analysts shows that these concerns have not quieted in the two months since the tests were announced.

University of Oregon economist Mark Thoma told HuffPost that "the stress tests weren't tough enough" to begin with, "so I interpret this as saying that even with a fairly weak test, problems surface easily. Who knows what we might have found with a tougher test, and how much additional concern that might have caused."

James K. Galbraith, the University of Texas economist, was more detailed in his comments.

My sense is that the tests understate the problems because they emphasized the econometric relationships between economic conditions and assets of an assumed quality, rather than the underlying loan quality. The main procedure as I understand it was to ask the banks to simulate their own portfolios under various economic scenarios, meaning that the banks' own view of loan quality was largely accepted. Loan quality is the big problem, because if the sub-prime securities are as bad as I think, they should not be treated as securities but as intrinsically-defective instruments for which no market is likely to revive. Nor should it. Unless there was an actual audit or decent sample of the loan tapes behind the mortgages, we won't know for sure. I will continue to suspect that Treasury is resisting this step because it doesn't want to know what the evidence would show.

As the deadline for releasing the findings of the tests approaches, not only are the tests themselves under assault, but so are the mechanisms which federal officials are suggesting banks use in order to meet capital requirements.

Barry Ritholtz, writing at The Big Picture, argues that "the cure for inadequate capital is not more capital, but an accounting trick -- converting preferred stock to common.... US banks are suffering a solvency problem, and what they need is more capital, not an accounting sleight of hand. Yet that is precisely what they are getting -- the same clever financial engineering that led to the crisis in the first place. All Treasury needs is more leverage and a few derivatives and the transformation into the financial Borg will be complete."

No matter what else he achieves or where he falls short, Barack Obama can lay claim to the title of King of Corporate Subsidies.

Using any of a variety of measures, the Obama administration has broken all records in the distribution of taxpayer dollars to American businesses, primarily banks, automobile manufacturers and insurance companies.

The tidal wave of dollar bills has stunned folks on all sides of the political spectrum.

David Arkush, director of Ralph Nader's Public Citizen's Congress Watch, told the Huffington Post, "In the form they have taken to date, the bailouts appear to be classic corporate welfare: As best we can tell, the government is giving astonishing amounts of money to private corporations and demanding far too little in return."

"Forget corporate welfare," said Leslie Paige, media director of Citizens Against Government Waste, in an email to the Huffington Post: "We are now seeing full-scale corporate adoption."

While conservative critics of traditional welfare payments to single mothers have bitterly complained about the flow of federal money to the "undeserving poor," the checks, loan guarantees and other subsidies flying out the door of the Treasury, Federal Reserve and Federal Deposit Insurance Corporation dwarf the Temporary Assistance for Needy Families (TANF) program -- a.k.a welfare for poor people -- which, by the standards of AIG and Citicorp, get chump change: $23.2 billion this year.

The new Corporate Welfare - including the Troubled Asset Relief Program (TARP); the Public-Private Investment Program (PPIP); FDIC Temporary Liquidity Guarantees (TLG); the Targeted
Investment Program (TIP); the Term Asset-Backed Securities Lending Facility (TALF) etc., etc. -- goes to corporations that are principal players in the financial practices that contributed to the worst economic downturn since the Great Depression. These corporations include -- but are by no means limited to -- Bank of America, Citigroup, Wells Fargo, AIG, Morgan Stanley, J.P. Morgan, Sun Trust, State Street, U.S. Bancorp, PNC Financial Services, Capital One Financial Corp, American Express, Chase Home Finance, Countrywide, and GMAC Mortgage.

The administration is acutely aware of the political liabilities of its bailout policies. On April 14, in a speech at Georgetown University, Obama sought to provide a detailed defense of massive government expenditures to rescue failing American businesses. In that speech, the president addressed three of the most controversial issues in the bailout:

1. The $700 billion Trouble Asset Relief Program (TARP), probably the most heavily criticized program:

"The heart of this financial crisis is that too many banks and other financial institutions simply stopped lending money.... Now, I don't agree with some of the ways the TARP program was managed, but I do agree with the broader rationale that we must provide banks with the capital and the confidence necessary to start lending again. That is the purpose of the stress tests that will soon tell us how much additional capital will be needed to support lending at our largest banks. Ideally, these needs will be met by private investors. But where this is not possible, and banks require substantial additional resources from the government, we will hold accountable those responsible, force the necessary adjustments, provide the support to clean up their balance sheets, and assure the continuity of a strong, viable institution that can serve our people and our economy."

2. Why not let the overextended banks fail?

"[T]here are some who argue that the government should stand back and simply let these banks fail - especially since in many cases it was their bad decisions that helped create the crisis in the first place. But whether we like it or not, history has shown repeatedly that when nations do not take early and aggressive action to get credit flowing again, they have crises that last years and years instead of months and months -- years of low growth, years of low job creation, years of low investment, all of which cost these nations far more than a course of bold, upfront action."

3. Why not temporarily nationalize the banks?

"The reason we have not taken this step has nothing to do with any ideological or political judgment we've made about government involvement in banks. It's certainly not because of any concern we have for the management and shareholders whose actions helped to cause this mess. Rather, it's because we believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because it's more likely to undermine than create confidence. Governments should practice the same principle as doctors: First, do no harm."

The total amount of money going to prop up these banks, insurance firms and automobile companies vastly outstrips prior federal initiatives.

Estimates of current spending and liabilities run a broad gamut. ProPublica tracks only spending by the U.S. Treasury (not the Fed, FDIC, or other federal agencies), and arrives at a total figure of $1.1 trillion. CNBC calculates a much larger figure, $7.36 trillion, taking into account, a much broader "complicated cocktail of budgeted dollars, actual spending, guarantees, loans, swaps and other market mechanisms by the Federal Reserve, the Treasury and other offices of government." Bloomberg's tally is $12.8 trillion, leading the field with an accounting that covers every dollar "spent, lent or committed." Bloomberg.com put together the following table to show how it reached its conclusion (the total figure committed/spent/lent is at the top of the left column):

The following table details how the Fed and the government have committed the money on behalf of American taxpayers over the past 20 months, according to data compiled by Bloomberg.

These huge sums have left journalists struggling to find ways to put them in perspective. To start with, a trillion is one thousand times one billion, which is 1, followed by 12 zeros, or 10 to the 12th power.

CNBC has put together a slide show demonstrating that spending on the fiscal crisis -- all dollar figures are inflation adjusted -- far exceeds money spent on the Panama Canal ($7.9 billion) the first Gulf War ($98 billion), the Marshall Plan ($115.3 billion); the Louisiana Purchase ($217 billion), the Korean War ($454 billion), the New Deal ($500 billion), Gulf War II and the war on terrorism
($597 billion), Vietnam War ($698 billion), and World War II ($3.6 trillion).

The administration's largess could, of course, pay off with a full-scale realignment to the Democratic Party of the nation's CEOs. Or perhaps the CEOs would like to go a step further and align with either the Socialist Party USA or the Democratic Socialists of America, where American business might feel most at home.

At a time when New York Times managers are forcing all employees to take a five percent pay cut, and demanding even larger sacrifices from the NYT-owned Boston Globe, top executives of the beleaguered newspaper received substantial bonus and fringe benefit payments over and above their salaries, according to a proxy statement released on March 11.

These bonuses and benefits to top Times company executives have provoked growing resentment among Times staffers, and frank anger from Globe reporters who have been warned by Times executives that their paper will be folded if they do not come up with $20 million in pay cuts and layoffs.

On Tuesday, the Times disclosed a $74 million first quarter loss, 221 times larger than the $335,000 loss in the first quarter of 2008.

According to the New York Times proxy statement filed with the Securities and Exchange Commission, corporate president and CEO Janet L. Robinson received a total compensation package valued at $5.58 million in 2008, up well over a million from the $4.14 million she received in 2007, and the $4.4 million she received in 2006.

Robinson's $1 million base salary has remained the same for three years. In 2008, Robinson's total compensation included, in addition to her base salary: $1.6 million in stock awards, $1.5 million in options, a $35,000 bonus, $562,500 from the non-equity incentive plan, $898,171 from the "Change in Pension Value and Non-qualified Deferred Compensation Earnings," and "other compensation" of $46,368.

A number of NYT staffers contacted said that there was considerably more resentment voiced on the newsroom floor, and in newspaper guild meetings, about Robinson's pay than about compensation awarded to Arthur Sulzberger Jr., the NYT board chairman and publisher.

Staffers noted that even though Sulzberger received bonuses and other compensation more than doubling to $2.4 million his base salary of $1,087,000, his total compensation package has declined substantially over the past three years from $3.4 million in 2007 and $4.4 million in 2006. In addition to his 2008 base salary, Sulzberger's total compensation included a bonus of $38,045, stock awards of $54,443, option awards of $29,832, a non-equity compensation plan distribution of $597,850, a change in pension plan valuation and non-qualified deferred compensation worth $559,826, and $48,878 in "other compensation," according to the proxy.

One NY Times reporter described the empathy for Sulzberger and the antipathy toward Robinson as follows: "Arthur [and his family] own the paper, but no one expects him to be a businessman. Janet was hired to be the CEO, she should know [how to run the business]."

More importantly, according to sources, many reporters and editors are grateful to Sulzberger for refusing to impose massive layoffs and buyouts as many other newspapers have done. On Monday, when the Times newsroom celebrated winning five Pulitzer prizes, many of the speakers went out of their way to voice their support for Sulzberger. "It was surprising, and, I have to say, it was moving," said another reporter who was there.

Executive bonuses and other enhanced compensation are not sitting well at the Boston Globe, where employees have been told they must come up with $20 million annual savings, in effect cannibalizing the once-proud newspaper.

"What are they [Times executives] being rewarded for? It's just impossible to justify this kind of money going out of the door when the corporation is losing so much money," said Globe reporter Brian Mooney. "I speak for a lot of people who are just amazed at the depth and breadth of the hypocrisy here -- the liberal New York Times and the liberal Globe... at one point in the negotiations, the company proposed eliminating all sick days for Guild members, like an Alabama sweat shop."

Asked if the bonuses and extra executive compensation were appropriate at a time when employees are being forced to absorb salary cuts and joblessness, Catherine J. Mathis, NYT Senior Vice President for Corporate Communications, told the Huffington Post:

"With regard to shared sacrifice, please remember that for 2008, non-equity incentive compensation (which many think of as bonuses) for these folks was roughly half of what it was the year before and stock awards were down more than 80 percent in value. All of the Company's stock options are under water and there hasn't been a payout on the long-term incentive plan in years.

"[Sulzberger] declined to take restricted stock units and stock options in 2006, 2007 and 2008. As a result, [his] total compensation was less in 2008 than it was in 2006. In 2006 Arthur also asked that the Board limit his annual bonus to no more than his annual bonus for 2005. Most of the officers listed had not had a salary increase in three years. And while some received a bonus in lieu of salary one year, the 5% salary decrease that we announced affected all of them and more than offset any bonus in lieu of salary. All of our employees, from the top of the house on down, are feeling the pain of lower compensation."

Mathis cautioned that the total compensation numbers in the proxy report...

"...include the value of the compensation -- not the amount of cash they received. For example, they were all granted options. But those options are of value only in the stock price increases over the exercise price. The options vest over a four-year period and expire after ten years. For proxy purposes a value is assigned to the options even though the executives received no cash at the time they were granted. Similarly the change in pension value and non-equity incentive plan compensation is an assigned value, not cash the executives received."

A difficult-to-understand decision by the compensation committee, as reported in the March 11 proxy statement, was rating executive performance at "100 percent." According to the proxy:

"The Committee ties a substantial portion of each named executive officer's total potential compensation to individual performance. All executive officers, including the named executive officers, are eligible for annual cash bonuses and long-term performance cash awards that reinforce the relationship between pay and performance by linking compensation to the achievement of important short- and long-term financial, strategic, operating and individual performance targets set by the Committee in performance targets set by the Committee in the operating budget."

Asked to explain this, Mathis said. "The overall rating for executives is based on a broad set of enterprise goals, some financial and some nonfinancial. The rating applies [to] several components of our pay, including merit, bonus and stock grants. The bonus is based 75% on profit performance, only 25% on individual performance to which the rating would apply."

Mathis noted that "options are a forward looking component to our pay structure. They only have value if the stock price goes up, therefore they are based on future performance. The executive only benefits if the stock price goes up in the future due to good performance."

Last year, from January 2, 2007, to January 2, 2008, NYT stock fell by over 50 percent, from $17.45 to $7.59.

The paper's 2008 revenues, $2.95 billion, were down 7.7 percent from $3.20 billion in 2007. After reporting net income of $208.7 million in 2007, the company declared a net loss of $57.8 million in 2008.

For Sulzberger, who became NYT publisher in 1992, the circulation figures since he took over are depressing. If trends continue, weekday circulation will fall below 1 million this year.

On March 26, the New York Times announced a nine-month, across-the-board, five percent pay cut for everyone, along with 10 days of leave. Sulzberger and Robinson wrote to the staff: "The environment we are in is the toughest we have seen in our years in business."

At a staff meeting, Executive Editor Bill Keller warned that unless the Newspaper Guild agreed to the 5 percent cut, "we will face layoffs, probably on the order of 60 to 70 people." There are just under 1,300 people on the news staff.

On April 3, the Boston Globe reported that NYT officials had informed leaders of the unions representing workers at the Globe that unless they agreed to $20 million in savings through pay cuts, layoffs, and reduced pension fund contributions, the Times would shut the Boston paper down.

"Wall Street bankers supposedly back the Yankees; Smith College girls approve of them. God, Brooks Brothers, and United States Steel are believed to be solidly in the Yankees' corner... but, as they say, who can fall in love with U.S. Steel?"
- Gay Talese in "There Are Fans... And Yankee Fans"

On Thursday afternoon, some 48,271 New York Yankees fans took a break from the drumbeat of lost jobs and looming tax hikes to take in the season opener, forking over anywhere from $95 to $2,625 for a seat with a view.

As these good folks tried to get relief from endangered paychecks and rising property assessments, at least a few suffered envy and anger as they thought about the millions, perhaps even $1 billion-plus, in public subsidies that went into building the brand-new stadium.

The beneficiary of all that cash is one of the most lucrative sports operations in the country, Yankee Global Enterprises LLC, the franchise George Steinbrenner bought for $8.7 million in 1973 and turned into an empire with a value pegged, last year, at $1.2 billion.

Mayors Rudy Giuliani and Michael Bloomberg did not blink at this transfer of money to the deserving rich - George Steinbrenner and his two sons, Hal and Hugh.

Not everyone shares the Giuliani-Bloomberg view of how to spend taxpayer dollars.

Westchester County Assemblyman Richard Brodsky, the Don Quixote of sports politics, has been conducting a one-man assault on the financing of Yankee Stadium, but, so far, has little or nothing beyond few headlines to show for it.

In a series of lengthy, detailed and footnoted reports, Brodsky has tried to prove that the construction of the new stadium is, as he told the Huffington Post in characteristically moderate New York language, "the most outrageous and dishonest a deal as has ever existed," engineered by Yankee executives who are nothing more than "bullies and thugs."

Brodsky, chair of the NY Assembly Committee on Corporations, Commissions and Authorities, found that "inappropriate and secretive lobbying by highly paid and politically connected procurement lobbyists, inappropriate hiring of politically connected former government officials, disposition of public property for less than its true value, [and] interference with investigations of such behavior" produced a deal with a "total cost to taxpayers and savings to the Yankees [of] between $585 million and $826 million."

The Mayor's office, the New York City Economic Development Corporation (NYCEDC) and the NY City Industrial Agency (IDA) dispute Brodsky's calculations, and, using different accounting methods - method some challenge -- argue that the city emerges from the deal a net $59.7 million ahead.

In fact, as the baseball season starts in earnest and the basketball and hockey seasons wind down, New York got what might be described as one of the "least bad" deals in negotiating who will pick up how much of the tab for new facilities -- in the face of team owners armed with a single trump card: the threat to leave town.

Smith College economist Andrew Zimbalist, a critic of most public spending on stadiums and other sports facilities, wrote a January 22, 2006, New York Times op-ed in which he declared, "the crucial public policy question here is whether there will be a net benefit for residents of the Bronx and the other boroughs. The answer is yes."

Neil deMause, author of "Field of Schemes," a book which weighs in against sport arena financing, strongly opposes the Yankee Stadium plan. On his Website, deMause calculates that the new stadium will cost the city $691 million, NY state $115 million, the NY Metropolitan Transit Authority $53 million, and the federal government $327 million -- for a combined taxpayer bill of $1.19 billion, nearly double the $671 million cost to the team.

"The Yankees deal actually manages to be both the largest team expense on a stadium in history, and the largest public expense on a stadium in history, somewhere in the neighborhood of $1 billion," deMause told the Huffington Post. "The city gets no part of the new revenues the Yankees will reap from the stadium; the jobs created are virtually all part-time, and largely cannibalized from other stores and restaurants in the surrounding area; Bronx residents lost their only large neighborhood park [until the old Yankee stadium is demolished and replaced by a park], for at least five years; and fans got more expensive seats with a lousier view of the field. All this, so that the Yankees wouldn't move out of New York - something that was never going to happen anyway, since the entire value of the Yankees franchise is wrapped up in where they play. I'd call that a pretty lousy deal."

The New York Times, in turn, has become increasingly skeptical of the deal: "Seats for $1,500 a game? Suites fit for the royal family? A scoreboard fit for the Big Board? A fabulous steakhouse and granite ramps (no ordinary cement for this crowd)? This $1 billion-plus pavilion and park financed with a lot of taxpayer help is beginning to sound like something fit for the Wizard of Oz," the paper editorialized on January 14 .

"Mayor Bloomberg has - rightly - had to cut city budgets and increase property taxes and explain to residents how times are bad and how we all will have to share the pain. It is time for Mr. Bloomberg to make that same pitch to the Yankees. If the Yankees can sign megamillion-dollar contracts (C. C. Sabathia just landed one for $161 million over seven years), they should be flush enough to contribute more toward their new stadium and to the parks for people living nearby."

The political facts of life, however, dictate that the stadium is a done deal. Property taxes are going up, jobs are down the chute, and the Yankees will play in their new palace. If the team wants to retain support in brutal economic times, their performance Thursday afternoon is not going to help.

The Cleveland Indians crushed the richest team in baseball 10-2.

A growing number of political scientists, analysts and strategists are making the case for a realignment of political power in the U.S. to a new Democratic majority based on two trends: 1) the increasing numbers of black and Hispanic voters, and 2) a decisive shift away from the Republican Party by the suburban and well-educated constituencies that once formed the backbone of the GOP.

Arguments supporting a Democratic realignment are based on well-researched population and voting data. Nonetheless, at a time when the economy remains in crisis and when international tensions are intensifying across the globe, any claim that Democratic (or Republican) ascendance is inevitable should be viewed with caution.

In a March, 2009 51-page paper [PDF] "New Progressive America: Twenty Years of Demographic, Geographic, and Attitudinal Changes Across the Country Herald a New Progressive Majority," Ruy Teixeira makes a strong case that "progressive arguments are in the ascendancy," that demographic and geographic "trends should take America down a very different road than has been traveled in the last eight years. A new progressive America is on the rise."

To further buttress his case, Teixeira has put together "a very cool interactive map
that includes 7 levels of exit poll demographics and county-level vote shifts going back to 1988."

Teixeira is by no means alone. The New Republic's John Judis, who collaborated with Teixeira on the 2001 book The Emerging Democratic Majority, wrote an article titled "America The Liberal" the day after the November 4, 2008, election. Judis made a similarly well-argued case that the election of Obama "is the culmination of a Democratic realignment that began in the 1990s. ... The country is no longer 'America the conservative.' And, if Obama acts shrewdly to consolidate this new majority, we may soon be 'America the liberal'."

On April 9, 2009, Emory political scientist Alan Abramowitz published a paper arguing that Obama's victory "was made possible by long-term changes in the composition of the American electorate, especially the growing voting power of African-Americans, Hispanics, and other nonwhites. As a result of these demographic changes, the Democratic Party enjoys a large advantage over the Republican Party in the size of its electoral base -- an advantage that is almost certain to continue growing for the foreseeable future."

All three authors make overlapping and similar cases.

Teixeira, for example, found that in many of the fastest growing sections of the country -- including metropolitan Las Vegas, Orlando, Florida, and Virginia's northern suburbs -- Obama's margin was an extraordinary 35 to 48 points higher than Dukakis' was 20 years earlier. He concluded that "where America is growing, progressives are gaining strength and gaining it fast."

Teixeira noted that pro-Democratic minorities have, over the same 20 years, grown from 15 to 28 percent of the electorate.

Judis demonstrated that professionals have gone from a solidly pro-Republican constituency to favoring Obama by a 58-40 margin. They have also grown from seven percent of the electorate in the 1950s to a solid 25 percent of voters in 2008.

Abramowitz presented a series of tables to back up his case:

Teixeira, Judis, Abramowitz and others all back up their analyses with census data and other statistics. It is difficult to dispute Teixeira's assertion that "a new progressive America has emerged with a new demography, a new geography, and a new agenda."

From the Republican vantage point, no scenario could be better: an adversary comfortable in victory is an adversary vulnerable to defeat. After the election of 1992, many analysts -- and even many Republicans -- were convinced that Bill Clinton had cracked the Republican lock, and that conservative hegemony was at an end.

"There is no doubt that current demographic trends favor the Democrats, based on the voting preference of those demographic groups in the last election," Republican pollster Whit Ayres conceded.

But, Ayres added, "why has virtually every past prediction of a 'permanent Republican majority' or an 'emerging Democratic majority' or a 'Republican lock on the Electoral College' been proven wrong? Because those predictions are invariably based on linear projections from recent elections, and they underestimate the parties' and politicians' ability to adapt to new realities."

"Republicans had a lock on southern electoral votes, until Clinton and then Obama figured out a way to pick the lock. Democrats had a lock on the west coast, until Arnold [Schwarzenegger] figured out a way to pick the lock.

Democrats look like they have a lock on Asian and Hispanic voters, at the moment. But Republicans are looking at the same trends as Ruy [Teixeira], and we will figure out a way to broaden our appeal to those groups. Just like in economic markets, there is a self-correcting mechanism in our politics. Losing is a wonderful corrective when either party gets too far from the mainstream."

Teixeira told the Huffington Post that conservative domination from the late 1960s to the turn of the century only provides support for his argument.

"There were some real demographic trends that helped produce the rise of conservatism -- a growing middle class that was less dependent on unionized, blue-collar jobs; the movement of whites, especially working-class whites, to the suburbs in search of order, security, and living space; the increasing population of the Sunbelt and so on -- but there was also, and related to those demographic shifts, big changes in the voting preferences of key groups, first and foremost, the white working class. The shift of these voters to the conservatives was central to the rise of conservatism.

This is typically the way it is -- there are not only demographic trends that affect the size of different groups, but shifts within those groups in how they behave. Both are relevant to explaining big political changes and both can have durable effects. That was true of the rise of conservatism and it is true of the current rise of progressivism.

Asked about the potential for a conservative reemergence, Teixeira responded:

As for conservatives being able to come back by making gains among some other group besides the white working class, this is certainly possible and I assume they will try to do that. The problem at the moment is they have nothing much to sell at this point that the rising demographic groups and areas are interested in buying. And they still seem pretty far away from recognizing that fact. But eventually they will, which should lead to some modernization of their program and jettisoning of outdated ideology....But this could take a while. In the meantime, the long-term shifts I talked about in the report should continue to advantage the progressive side of American politics."

Judis told the Huffington Post that "The only circumstances that could bring back the Republicans is Obama's failure to stem the recession."

"Obama does have to succeed, and so far, he's pretty much on the right track, and the Republicans are definitely not. That suggests to me that he and the Democrats will be able to solidify their majority in 2010 and 2012," Judis said. "But again, I don't fully understand what is going on in the world, and events could defy demography."

Perhaps the strongest evidence in support of the Teixeira-Judis-Abramowitz thesis is, however, the current inability of the Republican Party to respond to market pressures. Defeat has, ironically, diminished the GOP's capacity to respond to loss. As the elected leadership gets smaller, the strength of the most dogmatically rigid and least elastic faction has grown. On issues running the gamut from immigration to the economy, this dominant faction has yet to demonstrate "a wonderful corrective" in reaction to losing. Instead, they have retreated further inside an ideological shell that began to show cracks -- Bush I in '92, Dole in '96, and Bush v. Gore -- well over a decade ago.

"If all economists were laid end to end, they would not reach a conclusion" -- George Bernard Shaw

Disagreements among the cadre of economists critical of the Obama administration's economic strategies have made it difficult to assess the viability of the recent bank-bailout proposals announced by the President and Treasury Secretary Timothy Geithner.

When, for example, Treasury Secretary Geithner on March 23 announced a new "Public-Private Investment Program" -- the latest variation of the Obama administration's bailout plan -- the normally reliable gang of critics split into two camps.

One faction, exemplified by Nobel Laureates Paul Krugman and Joseph Stiglitz, remained firmly pessimistic, arguing that the new policy would at best slow a steady march toward the cliff's edge.

"The Geithner plan is very badly flawed," Stiglitz told Reuters. "Quite frankly, this amounts to robbery of the American people."

Other concerned economists, including Nouriel "Dr. Doom" Roubini (who has often proved disconcertingly right) and Brad DeLong, Berkeley professor and former deputy assistant secretary of the Treasury under Clinton, argue that the proposal might do some real good, although their commentary is packed with caveats.

"For the economy to be viable, the financial system must be healthy. For this to occur, the system needs to be cleansed of its poorly-performing loans and so-called toxic securities backed by loans," Roubini and fellow NYU Business School Professor Matthew Richardson wrote on March 25 in a New York Daily News op-ed. "Secretary Timothy Geithner's new toxic asset plan is a serious step in the right direction."

In their Daily News piece, Roubini and Richardson warned that "[t]he government bears the risk if and when the investors take a bath on the taxpayer-provided loans. If the economy gets worse, it could get very ugly, very quickly."

On his own blog, Roubini added a crucial warning: "the Geithner plan is not an alternative to nationalization: insolvent banks should be nationalized and the Geithner plan should not apply to them. But solvent banks still need to have their toxic assets disposed of; and for these banks the Geithner plan provides a solution that - all in all - is better than the alternative."

Markets initially endorsed the Geithner plan, with the Dow gaining 497.48 points, or 6.84 percent on March 23. As is well known, however, markets in periods of crisis can be volatile: after the Great Depression began, the stock market saw sporadic, but very large hikes which quickly disappeared, including a 12.34 percent rise on Oct. 30, 1929, a 14.87 percent gain on Oct. 6, 1931, and the largest one-day gain in the Dow's history, 15.34 percent on March 15, 1933.

The March 23 rally following Geithner's "Public-Private Investment" announcement resulted, in part, from the fact that the plan eliminated much of the risk -- or gamble -- in buying banks' toxic assets. Folks buying and selling stock saw that the Geithner plan increased the likelihood of profits for investors. The announcement of the program declared that "nonrecourse loans will be made available to investors to fund purchases."

A non-recourse loan is one "in which the lender cannot claim more than the collateral as repayment in the event that payments on the loan are stopped. Thus, a group of investors may purchase an asset with a down payment and the proceeds from a nonrecourse loan. In the event that the investment turns sour, the investors are not apt to lose more than the down payment and payments already made on the loan. The unpaid balance on the loan will be absorbed by the lender."

The Geithner plan has the effect of making the purchase of toxic assets far more attractive than would be the case in a marketplace without subsidies.

Let's examine an example as described by the Treasury itself:

"Sample Investment Under the Legacy [Read Toxic] Loans Program"

"Step 1: If a bank has a pool of residential mortgages with $100 face value that it is seeking to divest, the bank would approach the FDIC.

Step 2: The FDIC would determine, according to the above process, that they would be willing to leverage the pool at a 6-to-1 debt-to-equity ratio.

Step 3: The pool would then be auctioned by the FDIC, with several private sector bidders submitting bids. The highest bid from the private sector - in this example, $84* - would be the winner and would form a Public-Private Investment Fund to purchase the pool of mortgages.

Step 4: Of this $84 purchase price, the FDIC would provide guarantees for $72 of financing, leaving $12 of equity.

Step 5: The Treasury would then provide 50% of the equity funding required on a side-by-side basis with the investor. In this example, Treasury would invest approximately $6, with the private investor contributing $6.

Step 6: The private investor would then manage the servicing of the asset pool and the timing of its disposition on an ongoing basis - using asset managers approved and subject to oversight by the FDIC."

This may seem like a huge leap, but let's see if we can compare Geithner's new March 23 "Public-Private Investment Program" to a poker game - something people are more familiar with than the offloading of toxic assets:

Normally, a poker player has to pay full value for every chip, $1 for a $1 chip, $100 for a $100 chip, and so forth. In the Geithner game, the rules are different. A player acquiring $84 worth of "chips" only puts up $6. Of the remaining $78 which S/he owes, the FDIC would provide - in the form of a nonrecourse loan --- $72, and the US Treasury would put up $6.

Let's say the player has a good night, and makes $200 over and above his/her original $84 "investment" with a total stack of $284 (his/her $200 profit and his/her initial $84 buy-in). Our happy camper then takes $84 off the top out of which s/he pays $72 back to the FDIC, and $6 dollars back to the Treasury. S/he would pocket the original $6 investment.

The remaining $200 would then be split between our talented player and US Treasury, each getting $100, good news for one and all. There are no limits on the upside: if the player has an extraordinary night and makes $10,000, s/he will get $5,000, all from an original investment of $6.

If, however, our player has a terrible night, and loses the initial stake of $84, the downside is just $6. S/he gets to gamble $84 with the worst possible outcome being the loss of $6 -- not a bad deal. If Donald Trump could offer that, his Entertainment Resorts would not have filed for bankruptcy on February 18 of this year.

*

There are a number of folks with expertise in economics who share this way of looking at the Geithner plan.

Columbia economist Jeffrey Sachs, an outspoken critic, took the poker image one step further, telling the Huffington Post: "It's as if the taxpayers, banks, and hedge funds are playing poker, but the hedge funds get to use the taxpayer's chips."

The banks, in Sachs' scenario, are the big winners:

"To understand the essence of the giveaway to bank shareholders, it's useful to use a numerical illustration. Consider a portfolio of toxic assets with a face value of $1 trillion. Assume that these assets have a 20 percent chance of paying out their full face value ($1 trillion) and an 80 percent chance of paying out only $200 billion. The market value of these assets is given by their expected payout, which is 20 percent of $1 trillion plus 80 percent of $200 billion, which sums to $360 billion. The assets therefore currently trade at 36 percent of face value.

Investment funds will bid for these assets. It might seem at first that the investment funds would bid $360 billion for these toxic assets, but this is not correct. The investors will bid substantially more than $360 billion because of the massive subsidy implicit in the FDIC loan. The FDIC is giving a 'heads you win, tails the taxpayer loses' offer to the private investors.

Specifically, the FDIC is lending money at a low interest rate and on a non-recourse basis even though the FDIC is likely to experience a massive default on its loans to the investment funds. The FDIC subsidy shows up as a bid price for the toxic assets that is far above $360 billion. In essence, the FDIC is transferring hundreds of billions of dollars of taxpayer wealth to the banks."

Henry Blodgett, editor of BusinessInsider.com, shares that view, declaring more succinctly: "the plan is yet another massive, ineffective gift to banks and Wall Street. Taxpayers, of course, will take the hit."

Along a different, but parallel tack, Daniel Gross of Slate wrote:

"Where the hell are the capitalists? Where are all the people who are willing to put their own money and that of people willing to lend them cash, at risk in pursuit of profit? Why are Wall Street's tough guys such a bunch of girly men? The Geithner plan assumes that Wall Street's bravest investors won't spend a penny or borrow unless the government is willing to cover losses, make loans, and give away extra profits. It assumes, in short, that these great businesspeople are afraid to do business."

A colleague of Sachs at Columbia, economist Massimo Morelli, told the Huffington Post that despite the massive transfer of taxpayer money to the troubled banks, he was less critical than Sachs and others, because he thinks the outcome may justify the costs:

"On average, the taxpayers lose in the sense that the Fed and the Treasury accumulate losses, while banks certainly win....[But] the injection of money into the banks may well be necessary,
and if it is, then the Geithner plan is one of the best ways to do it one can think of, because it really could stimulate private actions on multiple sides: (1) bank stocks will go up and hence the legacy loan program and the legacy security program may not need to last long; (2) the management of the private public investment funds will perhaps bring back to action some key asset managers who are now standing on the side lines; (3) the injection of federal money reduces as a side effect all kinds of interest rates and eliminates the risk of further deflation, hence the housing market starts rebounding. In summary, I think Geithner's plan seems to be aimed to maximize the probability of a significant impact on the lending and investment activities, at the cost of an initial big sacrifice in fairness." [emphasis added]

Even more supportive of the Geithner proposal is Brad DeLong, who told the Huffington Post that "from my perspective, this is an entirely reasonable way of using $100B of TARP money."

But, DeLong stressed, "The problem is that it is only about 1/8 the scale of what we need to do."

In a New York Times blog, DeLong said the goal of the plan is to boost asset prices so as to "make it easier for businesses to obtain financing on terms that will allow them to expand and hire..... When assets are seen as less risky, their prices rise. And when there are fewer assets to be held their prices rise too: supply and demand. With higher financial asset prices, those firms that ought to be expanding and hiring will be able to get money on more attractive terms."

Former New York State Commissioner of Taxation and Finance, and former deputy chief of the U.S. Congress Joint Committee on Taxation, James W. Wetzler, contended that the debate over whether the Geithner proposal gives too much to the banks, hedge funds and private equity investors misses the larger picture:

"The big issue is whether the program will have a meaningful impact in improving the economy. If so, it'll be a very good deal for the taxpayers. If not, the government will have to try something else and will have to figure out how to develop political support for that something else, raising the question of whether this program's design will adversely affect the prospects of developing political support for the something else. I think those are the right questions to ask."

Wetzler, who is now a director in Deloitte Tax LLP's Multistate Tax Controversy practice, added, in comments to the Huffington Post:

"It seems to me that one can't make informed judgments about what to do about the large banks without knowing information about their finances that relatively few people know. That hasn't stopped numerous pundits from making very strong recommendations (see Paul Krugman as an egregious example and from making sharp criticisms of the recommendations made by the people who do have the relevant information. The cacophony of criticism then undermines the success of the programs, which to a large extent depend on the restoration of confidence."

With this range of disagreement, Nassim Nicholas Taleb, the Distinguished Professor of Risk Engineering at NYU-Polytechnic Institute, wrote to the Huffington Post that the way to deal with a lack of consensus is to recognize that: "Economists always disagree ... on the wrong problems."

The decision by the Bush and Obama administrations to use taxpayer money to prop up troubled financial institutions has produced a growing populist outcry that threatens to undermine the administration's ability to win Congressional approval for future legislation to counter the recession, and/or to win approval for the record-setting $3.55 trillion 2010 budget proposed by Obama on February 26.

In effect, the Obama administration has tied itself to a policy that shows every sign of becoming an inexorably-tightening hangman's noose around the president's neck.

Not only does public anger over the current bailout strategy threaten the administration's executive authority, but it also the carries the political risk of linking the White House to the now-loathed Wall Street establishment.

Democrat Robert Shapiro, former Under Secretary of Commerce for Economic Affairs during the Clinton administration, and chairman of the economic advisory firm Sonecon argues that, by generally deferring to Wall Street leaders, the administration has become the target of populist resentment, drawing attention to the fact that many in the administration came from the financial industry, or the New York Fed -- which is closely linked to the industry, including Larry Summers and Tim Geithner. Now, Shapiro added, Summers and Geithner are in position of virtually defending Wall Street - only backing off on the AIG bonus issue, for example, when the public rose up in fury.

Shapiro argues strongly in favor of temporary nationalization of those banks which are on the verge of collapse. A full scale, short-term takeover of insolvent institutions "is the only reasonable course at this point," he said, if that means "pulling out the bad assets and the leveraged borrowed to hold them (without having to put a particular value on them), and selling what's left to a new group, under a new name or the old one. It could actually be done very quickly - so the institution is closed for a short time while the depositors' accounts are quickly transferred to the new entity."

Shapiro contends that "these institutions are so stricken that there's no other practical solution."

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There is a clear political advantage to a nationalization strategy, some argue: nationalization would penalize the banks, stockholders, and, depending on how the remaining assets are dealt with, bond holders - not, in theory, the general taxpaying public, eliminating the perception that the Obama administration is acting in league with Wall Street to the disadvantage of Joe and Jill Six-pack.

Harvard economist Richard Freeman's comments to Huffington Post reflect concern over the liabilities of the Obama administration's recent policies: "What most bothers me is that it looks as if the dead hand of Wall Street is still calling the shots. The President needs to hear from more critical folks, from the left and right, from the financial community, and from outside it, instead of folks who seemingly cannot envision a different sort of capitalism than the one that has just imploded."

Like Shapiro, Freeman suggests that the administration consider a more aggressive tack:

"I don't understand why they are afraid to follow the proven path of Sweden of nationalizing some banks, have civil servants or newly-hired folks run them and then turn them back to the private sector when they are again profitable, or in allowing some of the banks or firms to fail also, as some right-wing guys want. I doubt that AIG going belly-up would really be the end of the economic universe, as they seem to fear. They have not provided any evidence for that. They have not even shown that the money we have provided through TARP has done much good."

Nassim Taleb, author of "The Black Swan" and one of the few economists who anticipated the crisis, noted in a Huffington Post interview that the political liabilities of current administration bailout measures are double-edged -- that not only do the bailout funds reward the villains, but, by using public money, bailout appropriations force taxpayers who have played by the rules to pay the costs of others' failings.

"I mind when the government punishes people [who have shown] good discipline," he said, noting that the effect of current administration policy is to "privatize the gains and socialize the losses." Taleb is a strong proponent of bank nationalization.

Cornell economist Robert Frank, author of "Microeconomics and Behavior and The Winner-Take-All Society", in an exchange with the Huffington Post, voiced a more cautious, but by no means negative, assessment of nationalization:

"The bank bailout is a real conundrum. The people at CITI and Goldman Sachs were buying mortgage-backed bonds and then hedging them with AIG credit-default swaps [that] they had to know couldn't be honored by AIG in the one circumstance in which they'd be needed--namely, a sharp decline in housing prices. CITI and Goldman were making bundles of money on these bonds while the party lasted. Now I'm being taxed to pay for AIG bailout funds that get passed through so that CITI and Goldman lose not one penny on them. If these firms could be taken over without causing the global financial meltdown some warn about, I'd be for it in a heartbeat. Of course, a lot of smart people are calling for such a takeover, but some other smart people are warning against it. If I had to choose, I'd do it. But I know far too little about the ins and outs of global finance to have much confidence in that judgment. So, yes, Obama's in a tough position."

There is a major, ongoing debate over the pluses and minuses of nationalization. Critics of nationalization make the case that: a) the sheer size and complexity of the U.S. banking sector will overwhelm government managerial and regulatory resources; b) the scope of the undertaking will surpass the limitations and competencies of government bureaucrats; c) politicians with no expertise in high finance are ill-equipped to make banking sector decisions involving billions or trillions of dollars, and will inevitably seek to further their own parochial interests; d) there will be unintended consequences stemming from the competitive disadvantages of troubled banks not chosen for nationalization; and e) the government may fail to quickly transfer or sell reorganized banks back into the private sector.

One of the sharpest critics of nationalization is the highly-regarded Princeton economist Alan S. Blinder, a member of President Clinton's Council of Economic Advisers, and a supporter of Obama's presidential bid.

Advocates of nationalization run the ideological gamut from Alan Greenspan to Paul Krugman.
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Matthew Continetti of the Weekly Standard has a conservative take on the political dilemma arising from current bailout policy:

"Obama and Congress can fulminate, preen, and retaliate all they want. It won't solve the problem. The problem is that major financial institutions are now on the public dole, and will be accountable to the public as long as they are."

The explosion of rage over the AIG bonuses will make difficult, at best, any future effort to win Congressional approval for additional cash for the Troubled Asset Relief Program (TARP) to assist banks, automobile companies and other beleaguered institutions. The perceived misuse of federal money in bailing out AIG will almost certainly have spillover effects, dampening support for such key Obama initiatives as expanded health care, education, and a shift to green domestic energy sources, all of which will cost hundreds of billions of dollars.

The long-range threat to the Obama administration is a revival of the view widely held in the 1970s and 1980s that Democrats were irresponsible custodians of the public treasury, willing to spend money on wasteful projects, or in behalf of liberal special interest groups. That image was altered by the success of Bill Clinton in overseeing eight years of unparalleled prosperity and growth, eliminating the deficit, and paring back welfare rolls. Republicans, in turn, lost much of their standing as prudent custodians of the nation's wealth by running up immense deficits and presiding over the unfolding of the current economic meltdown.

New York Daily News columnist Michael Goodwin on Sunday suggested a revival of the Democrats' image problem:

"Obama represents a secular religion that believes, no matter the malady, Washington is the antidote. More government is the chicken soup of his tribe."

Until the 1996 passage of Clinton-sponsored welfare reform, the program was repeatedly used by Republicans to demonize Democratic spending on policies that - as the critics had it -- undermined productivity and incentives for hard work. Now, with trillions of government dollars flowing to failing firms, John Avlon of the Daily Beast wrote:

"Forget welfare queens. We've never seen an entitlement mentality quite like this-where bonuses were not rewards for work well done but guaranteed entitlements written into high-end contracts."

Nobel laureate Paul Krugman, in turn, warned on March 21 in his New York Times blog that the new Treasury plan to use Federal Reserve money and FDIC insurance to encourage private purchasers of "toxic" bank holdings, which is expected to be announced Monday, represents the victory of "zombie ideas." Krugman ominously added, "when the plan fails, as it almost surely will, the administration will have shot its bolt: it won't be able to come back to Congress for a plan that might actually work. What an awful mess."

Decisions made during the final months of the Bush administration created an environment in which the most politically connected investment banks, Goldman Sachs and Morgan Stanley, not only flourished, but saw their competitors laid waste, with firms like Lehman in bankruptcy, and others, like Merrill Lynch and Bank of America, forced to merge in desperate hope of surviving.

Two recent news stories raise some interesting questions about Goldman Sachs. In the opaque world of investment banking and federal regulation, these reports shed light on the difficulty of determining where to draw the line between routine complex financial transactions and problematic conflict of interest and favoritism.

The first story ran on the cover of last weekend's Barron's: "Resurrection on Wall Street" (subscription required). It documents in some detail the success of Goldman Sachs and Morgan Stanley as "Wall Street's sole standouts." The highly favorable story, which only peripherally refers to the government support each institution has received, concludes that they are both "making attempts to adapt to the new financial realities. Combined with the decline of their competitors, that makes them good bets for investors now." For a couple of banks trying to boost their stock, what more could you ask for?

The second story, which was covered on March 15 by most news outlets, was based on the disclosure by the American International Group, Inc. (AIG) of massive payments to domestic and foreign financial institutions, and to 20 states, using money provided by U.S. taxpayers through the federal bailout. While most news stories focused on payments made to non-U.S. institutions, fueling populist anger, one of the more interesting aspects of AIG's disclosure statement is the fact that Goldman Sachs, at $12.6 billion, is the single largest beneficiary of AIG largess.

The roots of the linkage between Goldman Sachs and AIG go back to the closing months of the Bush administration, as the financial meltdown reached crisis proportions and key decisions were made that are now reaping the whirlwind. Remember who played a key role in deciding to bail out AIG? Henry Paulson, the Goldman CEO-turned George W. Bush Treasury Secretary. Paulson, according to a September 27, 2008 New York Times piece by Gretchen Morgenson, led a team of regulators and bankers in early September to determine what to do with the most severely wounded financial institutions.
One of the participants in those meetings was Lloyd C. Blankfein, Paulson's successor at Goldman Sachs.

Out of those meetings came the controversial and heavily criticized decision to allow
Lehman Brothers, a Goldman competitor, to go belly up, and to bail out AIG. Starting with $85 billion from the Fed, taxpayers have pumped a total of $170 billion into the giant insurance company. The bailout was crucial to Goldman in that it permitted AIG to pay off its $12.6 billion debt to the firm, $8.1 billion of which was to cover AIG-backed credit derivatives.

At a hearing of the House Financial Services Committee on February 11, 2009, Goldman Sachs CEO Lloyd Blankfein denied that his firm had a major stake in bailing out AIG. Blankfein told the panel that "with respect to our dealings with AIG, we were always fully collateralized and had de minimis or no credit risk at any given moment because we exchanged collateral....We had transactions with them. And if they had gone the wrong way, they would have owed us money. We assumed they'd pay it, but if they defaulted, they wouldn't pay us. We insured against that default. We didn't win money from it. We wouldn't have made money. But it would have protected our down side."

Throughout the past six months of economic crisis, Goldman has taken full advantage of what the government has to offer. On October 28, 2008, Goldman and eight other banks were the first to receive federal bailout money under the Treasury Department's Troubled Assets Relief
Program (TARP). which was initiated by Paulson. On November 25, 2008, Goldman became the first bank in the nation to benefit from the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program (TLGP), issuing $5 billion in government-secured debt at 3.367%, substantially less than the market rate facing banks which issued unsecured debt. All told, Goldman has issued a total of $20 billion in government-guaranteed debt under TLGP. In their dealings with banks, both Treasury and the Fed have been subject to relatively minimal disclosure, in order to protect the proprietary interests of financial institutions, especially to prevent rumors of illiquidity or excessive debt from threatening a bank's viability.

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The banking and insurance industries have traditionally been among the most politically influential sectors. That was especially true during the George W. Bush years, when regulatory policies and tax legislation -- especially cuts in the rates on dividend and capital gains income -- produced a corporate bonanza. In the 2004 election, these financial interests demonstrated their gratitude by contributing hundreds of thousands to the Bush-Cheney '04 campaign. Employees of Morgan Stanley gave Bush more than any other company, $600,480; followed by Merrill Lynch, $580,004; PricewaterhouseCoopers, $513,750; UBS Americas, $472,075; Goldman Sachs, $390,600; MBNA Corp, $356,350; Credit Suisse Group, $331,040; Lehman Brothers, $329,725; Citigroup Inc, $320,620; and Bear Stearns, $309,150.

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The consequences of the decisions made in the private meetings chaired by Republican Treasury Secretary Hank Paulson back in September 2008, are just now coming to light, even if transparency is modest at best. Clearly, when regulators and the regulated are trusted to reach decisions behind closed doors -- decisions involving the financial viability of major
banks -- those who are regulated, operating out of public view, will do all they can to insure that their interests are protected.

In the face of a recession that has destroyed billions in family savings and home values, Americans remain convinced that personal initiative and hard work are the key to big rewards, and they continue to repudiate the idea of government intervention to alleviate economic inequality, according to two Pew-sponsored reports.

Not only do voters continue to be convinced, by large majorities, that they, and not government or big corporations, control their own destinies in the midst of the current recession, but they do so despite more long-term evidence suggesting that there is less class mobility in the United States than in most Northern European countries, or in Canada, and that U.S. wages have not kept up with productivity gains for the past three decades.

This conviction underpins the long-standing American hostility to a full-fledged welfare state -- along the lines of many European counties -- and underpins the lack of a strong socialist tradition in the US. It also shapes the debate over policies to deal with the current recession, including the Obama administration's rejection of bank nationalization.

A survey of 2119 respondents conducted by the Democratic firm Greenberg Quinlan Rosner Research and the Republican firm Public Opinion Strategies for the Pew Economic Mobility Project asked: "Currently the country is in a recession. Do you believe it is still possible for people to improve their economic standing?"

Eighty percent answered "yes," including 56 percent answering "strongly" in the affirmative. Only 16 percent said "no."

African Americans, Hispanics and persons under 40 were even more affirmative than the public as a whole, with "yes" to "no" ratios respectively 83-15, 86-11, and 85-13.

A report on the findings of the survey, produced by the two polling firms, declared: "In the midst of an historic economic crisis, Americans insist that, despite the recession, it is still possible for people to improve their economic standing, and most believe that they control their economic destiny. Americans believe ambition, hard work and education primarily drive mobility, rather than outside forces like the current state of the economy."

The continuing strength of what amounts to an American 'ethos' -- a dimension of what some scholars call 'American Exceptionalism' -- was evident in the following conclusions:

"Americans care more about opportunity than inequality and are far more concerned about the ability of lower-income Americans to move up the income ladder than about the persistence of upper-income Americans at the top. By a 71 to 21 percent margin, Americans believe it is more important to give people a fair chance to succeed than it is to reduce inequality in this country. Each demographic subgroup, including those at the lowest end of the economic spectrum, concurs with the majority on this issue."

What makes these findings particularly striking is the evidence that -- according to a second study, "Economic Mobility: Is the American Dream Alive and Well?," by Isabel Sawhill of the Brookings Institution and John E. Morton of the Pew Charitable Trusts -- the "American Dream" is not working as effectively as it has in the past.

According to the Brookings/Pew report, the pay-off for hard work has been diminishing. In the three decades after WWII, workers' wages rose almost exactly in proportion to productivity gains. For the past three decades, however, wage increases have fallen significantly behind productivity gains. The following Pew chart shows this spread beginning in the late 1970s and steadily growing over time.

Supporters of the theory that America is an 'exceptional' nation argue that the United States is different from other countries because a) it does not grapple with a legacy of rigid social stratification, as many other countries with formerly feudal or caste systems do; and b) that Americans' strong historic opposition to 'collectivist' forms of social intervention and a relatively greater preference for 'individualism' have led to higher levels of economic mobility than are found elsewhere.

The findings of the Pew/Brookings study, however, dispute this.

What this chart shows is that there is less mobility in the U.S. than in France, Germany, Sweden, Canada, Finland, Norway and Denmark (England has lower levels of social mobility than the U.S.); that sons are more likely to earn close to what their fathers made in the United States (after adjusting for inflation) than in most of the other developed countries cited in the study.

Despite these trends, the 'individualistic' convictions of Americans remain strong, and are powerful factors in policy decisions.

President Obama, in rejecting nationalization of banks as a way to deal with collapsing financial institutions cited the alien character of such actions to this country.

Acknowledging that Sweden had successfully nationalized banks during an earlier financial crisis, Obama noted that that not only are there vastly more banks in the U.S. than in Sweden, but "we also have different traditions in this country. Obviously, Sweden has a different set of cultures in terms of how the government relates to markets and America's different. And we want to retain a strong sense of private capital fulfilling the core -- core investment needs of this country. And so, what we've tried to do is to apply some of the tough love that's going to be necessary, but do it in a way that's also recognizing we've got big private capital markets and ultimately that's going to be the key to getting credit flowing again."

In practice, the public may be more ambivalent about activist government, and perhaps even about bank nationalization. Rasmussen Reports conducted a survey of 1,000 adults on February 3 and 4, 2009, putting the questions of nationalization in extreme terms, "Should the Government take over our banking system and have one centralized government bank?" Not very surprisingly, some 75 percent of respondents said no, only 9 percent said yes, with the remainder either declining to answer or suggesting another alternative.

A month later, Newsweek asked 1,203 adults a parallel, but much more moderate, version of the nationalization question: "Temporary nationalization is another way for the federal government to deal with large banks in danger of failing. This is where the government takes over a failing bank, cleans its balance sheets, and then quickly sells it off. In general, which do YOU think is the better way to deal with failing banks?" Again, not very surprisingly, the response was 56 percent for "nationalization where the government takes temporary control" and 29 percent for "government financial aid without any government control of the bank."

On a broader -- and perhaps most illuminating -- scale, Newsweek asked: "In general, government grows bigger as it provides more services. If you had to choose, would you rather have a smaller government providing less services, or a bigger government providing more services?"

Republicans preferred smaller government by a 67-24 margin; Democrats were the mirror opposite, choosing bigger government by better than two to one, 65-25; independents slightly favored smaller government, 45-42.

Reflecting the nation's deep ambivalence on this issue, when all the numbers are added together, the respondents split right down the middle, 44 to 44.

The news is brutal for Washington, D.C. associations which represent - and advocate for the interests of -- the nation's major industries.

The National Association of Manufacturers (NAM) and the Pharmaceutical Research and Manufacturers of America (PhARMA) have not only cancelled their annual meetings, but have laid off staff and lobbyists - as did the Council of Insurance Agents & Brokers, the Securities Industry and Financial Markets Association, and the Mortgage Bankers Association.

"The economic realities facing our members are impacting our budget and projections for the coming year," NAM president John Engler wrote to his board of directors, informing them of plans to save $2.9 million by freezing salaries and cutting the travel budget.

"Positions and functions have been consolidated, streamlined or eliminated," Engler noted, resulting in a net reduction of 17 FTE's." An FTE is corporate-speak for "full time employee."

The trade association community - a core of corporate America's power in the nation's capitol - has been decimated by the economic collapse, forced to make major cutbacks and to lay off staff. Largely overlooked in studies of lobbying, Washington trade associations are crucial to the formation of broad coalitions to fight for or against federal legislation, to developing strategies to pressure individual members of Congress, and to finance studies of the costs and benefits of competing proposals.

While tough for the folks caught in the economic undertow, these developments are music to the ears of the Obama administration.

Only slightly less pleasing to the Obama forces is the fact that the economic crisis has taken its toll on individual corporations hiring lobbyists to protect their objectives. Some Democratic firms report an uptick in new clients, but most -- speaking on background -- said that so far, 2009 has failed to significantly swell their coffers. Republican lobbyists, already out of favor because of the Democratic sweep on November 4, privately report that they are struggling to hold onto the clients they have.

No new president has taken office with as broad an agenda as Obama since Franklin Delano Roosevelt in 1933. The administration's policy initiatives will, if enacted, produce massive upheavals in major sectors of the economy, including the entire energy and health care industries. Redistributive tax proposals will further alter the bottom line of almost every individual an corporation in America.

In normal times, Obama's legislative and regulatory agenda would be a gold mine for the multi-billion dollar network of lobbyists, grassroots mobilizers, PR firms, and other specialists in the manipulation of decision-making in the nation's capital.

But the very economic collapse that has given the Obama administration the impetus for its unprecedented drive to transform the federal government -- and its relationship to the private sector -- has simultaneously weakened, and in come cases crippled, large numbers of the companies and trade associations that would be expected to line up in force against this
Democratic insurgency.

Take HealthSouth Corporation. The firm's performance is directly dependent on how much the federal government will pay for Medicare rehabilitative care -- one of the many points of contention in the Obama administration's plan for a massive expansion of access to medical care, especially for those who currently have no coverage. Noting that the details are not yet known, HealthSouth recently warned that it is "extremely important to guarantee that appropriate safeguards are put in place to ensure that payment dollars are allocated to the actual providers of quality post-acute care. To do otherwise would be problematic," repeating the firm's concern with payment issues in a conference call for investors, analysts and financial reporters.

Even as HealthSouth faces life and death decisions which are being, and will be, made by the federal government, the corporation has already had to cut spending on its Washington office from $3.0 million in 2007 to $2.2 million in 2008, and it has begun to let go some of the eight outside lobbying firms to which it had been paying a total of $1.5 million annually, as it has seen its stock fall precipitously - from $20.20 a share in the spring to the $7 range now.

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The future of the coal industry could also be determined by the outcome of the Obama administration's "cap and trade" proposal to limit carbon emissions. As in the health care sector, major coal companies are struggling with sharp drops in their share price - radically pruning the resources available to their Washington lobbying shops.

Arch Coal's stock, for example, has dropped from a high this past year of $77.4 to $10.43. Peabody Energy Corporation has gone from a high of $88.69 to a current price in the low 20s.

The stakes are so high, according to Luke Popovich, spokesman for the National Mining Association, that member companies will back an all-out effort to block what now appears to be the outline of an administration proposal that could force as much as a 65 percent reduction in the use of coal.

"It could be devastating to the coal-based sector," Popovich said.

In fact, two top trade association figures, R. Bruce Josten, executive vice president at the US Chamber of Commerce, and Dirk Van Dongen, president of the National Association of Wholesaler-Distributors, both argue that the threat of the Obama agenda has energized the business community to struggle to surmount the limitations imposed by its battered economic condition.

"There's no denying it's a tough economic time, you're going to see more corporations close, go bankrupt, which means business associations are going to see dues fall. But remember, pain is a powerful motivator -- and there is a lot of pain in the Obama budget," Josten said, contending that Obama "wants to transform energy policy with cap-and-trade that amounts to a massive tax on the American public. His tax policy is confiscatory, redistributionist and, in our view, totally counterproductive."

Van Dongen said his members have been flooding the Washington office with calls after learning that the Obama administration have made it "very clear they are trying to bring about a massive and, I think, radical transformation of the relationship between government and the economy."

Other business lobbyists were not so optimistic. "When you spend your days fighting off creditors, while the people who owe you money are ducking like crazy, it's hard to get worked up over what's going on in Washington," said one lobbyist on background. "Obama has thrown one hell of a punch, but our knees were buckling already."