ARE YOU FEELING STIMULATED YET?....Just in case you haven't heard, here's the schedule for mailing out this year's stimulus checks. It all depends on the last two digits of your Social Security number.

Sadly, I haven't signed up for direct deposit and my Social Security number ends in 72. So no check for me until June 27. Hmmph.

Thirsting for more? Here's an online calculator to help you calculate the size of your check. (Simple answer: $600/person or $1200/couple unless you make either very little money or quite a lot of money. If you owe back taxes, you're screwed.) More info here.

MONEY, MONEY, MONEY....Don't forget: it's pledge week here at the Washington Monthly! We need your help to keep the bills paid and the printing presses running, and what better time to make a contribution than now? You can donate via check, PayPal, or credit card. Just click here.

QUOTE OF THE DAY....From Sen. Jim Webb (D–Va.), responding to John McCain's claim that Webb is obstructing negotiations on a proposed new GI bill:

"He's so full of it."

According to Webb, "I have personally talked to John three times. I made a personal call to [McCain aide] Mark Salter months ago asking that they look at this." McCain is using Webb's alleged unwillingness to negotiate as an excuse not to support his bill.

THE REPUBLICAN POLICY GAP....Tyler Cowen takes a look at John McCain's health plan and is perplexed:

Trade aside, so far I've yet to see many actual policy proposals from the McCain camp. Mostly I've seen attempts to signal that they won't do anything too offensive to the party's right wing. Very few of these trial balloons seem to be ideas that McCain had expressed much previous loyalty to. I don't even think we should be analyzing these statements as policy proposals. We should be wondering why the Republican Party has given up on the idea of policy proposals.

Well, look, not to get too cynical and echo-chambery here, but isn't the answer pretty obvious? At this point, Republicans just don't have many policies to offer that people like. Healthcare? The GOP basically wants to make it less secure. Jobs? Um, free trade, anyone? Taxes? That's always a crowd pleaser, but the only taxes left to cut are those aimed at corporations and the rich. Housing? The free market will take care of things. The war? Iraq forever!

So that leaves trivia like gas tax holidays and culture war attacks on Bill Ayers and Jeremiah Wright. The more they talk about anything else, the less popular they get. So tell me: outside of the usual cultural warhorse issues (which McCain isn't very good at exploiting anyway), can you name a single major area of public concern today in which the Republican position is also popular with the public? Anybody?

IS IRAN FINALLY CHOOSING SIDES?....Hmmm. From Juan Cole, here's another tidbit of evidence that Iran has decided to abandon Muqtada al-Sadr and throw in completely with the Dawa/ISCI/Maliki government forces:

Sadr spokesman Salah al-Obeidi (al-Ubaydi) in Najaf bitterly attacked Iran, accusing it of seeking to share with the US in influence over Iraq. He pointed to the Iranian's regime's failure to condemn the long-term mutual security agreement being crafted by the Bush administration and the al-Maliki government. Al-Obeidi's angry denunciation suggests that Iran is backing PM Nuri al-Maliki and his current chief ally, the Islamic Supreme Council of Iraq led by Abdul Aziz al-Hakim against the Sadr Movement of Muqtada al-Sadr.

As always, take this with a big grain of salt. It may mean everything or nothing.

McCAIN'S HEALTH PLAN....Speaking of simple moral judgments, in the Prospect this month Ezra himself does a pretty decent job of framing John McCain's healthcare proposals this way:

Somewhere in the house, a phone is ringing. It's your old insurance company, the one you had before your employer decided to make you a contractor rather than a full-time employee. Sorry, they say, but your family just doesn't fit their risk profile. They've got nothing in your price range. What if we pay a little more, you ask, rapidly weighing the consequences of taking out another mortgage or shifting more purchases to credit. Sorry, the even-voiced representative says, this time more firmly, they really don't have anything for you at all.

It is a call — or, sometimes, merely a letter — that millions of Americans have received, particularly those not covered by large employers or the federal government. These Americans are rejected for health insurance because they were sick once, or because they're too old now, or for no apparent reason at all.

....It is not a call that John McCain has ever received....Born the son of a Navy admiral, he was cared for by Navy physicians during his childhood. After graduating from high school, he enrolled in the U.S. Military Academy, and the military's care continued until he retired from the service in 1981. In 1982, he won a seat in Congress, ushering him into the Federal Employee Health Benefits Program, and in 2001, he qualified for Medicare. When he says, "we have the highest quality of health care in the world in America," he is speaking as a man who has enjoyed a lifetime of government-run care.

That's the way to play the game. John McCain is coddled, haughty, and out-of-touch; a lifelong princeling who's completely clueless about the real problems of real Americans. More like this, please.

SIMPLE MORAL JUDGMENTS....Ezra Klein says he's sympathetic about the media's difficulty dealing with complex policy proposal from candidates. But not too sympathetic:

Policy is hard. Lots of people come to different conclusions. Unanimity is rare. Except on this gas tax holiday. Just about no one thinks it a good idea. Conservative economists loathe it, liberal economists loathe it, energy experts loathe it...it's shameless pandering of the worst sort. So is the media going to create a scandal around McCain's pander? Around Clinton's copy-pander? Will they hound them at press conferences, run segments about the derailed "Straight Talk Express," bring on pollsters to ask whether Americans are tired of being lied to?

....When confronted by the fact that their coverage of politics is frequently trivial and annoying, many in the media argue that they only report that way because the voters make their decisions based on trivial and annoying issues. But there's no doubt that, with proper press coverage, the gas holiday could be one of those trivial and annoying issues that comes to stand-in for broader character failures or narratives or whatever. It's just that the media doesn't like to deal with policy.

Yes, it would be nice if the press spent less time on inanities and more time on how candidates planned to actually run the country. But this view of the media is just too simplistic.

Like it or not, virtually every mini-dustup in a presidential campaign — Wrightgate, Tuzlagate, bittergate, Judigate, etc. — has one thing in common: it lends itself to a simple moral judgment. It helps a lot if there's also video available (or photos in a pinch), but the really important part is the simple moral judgment. That's what people react to. Cable news amplifies this tendency and makes it worse, but they didn't invent it.

And look: the blogosphere isn't much better. Take a look at the comment section of most political blogs and check out which posts get the most activity. Learned discussions of the history of the Earned Income Tax Credit? Analysis of which Shiite faction is up or down in Iraq's civil war? Nope. It's Wrightgate and Tuzlagate and bittergate and Judigate and any other post that provides an opportunity to express a simple moral judgment. Republicans suck. Dems are spineless. The media is corrupt.

And this is true even though blog readers tend to be far more wonky than the average politically lethargic American. But despite this, the blogosphere hasn't ginned up even as much outrage over the gas tax holiday as I saw from Jack Cafferty in 30 seconds yesterday. It's just hard to get too worked up over a minor political pander when we all know that responding to interest groups is what politicians do every day. It's practically in their job description.

Now, dig up a video of John McCain having dinner with some blonde bombshell oil industry lobbyist coyly telling him how much she wants to show her appreciation for his bold gas tax holiday proposal, and you've got yourself a story. Until then, CNN can put this on a 24/7 loop and it's just not going to catch on. You can't blame the media for everything.

GDP UPDATE....The preliminary first quarter GDP estimate is in:

In its latest report on gross domestic product, the Bureau of Economic Analysis reported today that the economy grew 0.6 percent over the first quarter of the year — the same rate as in the prior three months and the weakest growth since 2002.

I'm surprised. I would have guessed lower than that, so in some weird sense I suppose this counts as good news.

PLEDGE WEEK CONTINUES!....Our motto: We keep an eye on the vast right wing conspiracy so you don't have to. If you'd like us to keep doing it, how about making a contribution to keep us going? You can donate via check, PayPal, or credit card. Just click here.

In the latest installment of our VRWC watch (aka our April issue), Greg Anrig reports the surprising news that after decades of supporting school vouchers, movement conservatives are starting to lose the faith. Part of the reason is a recent batch of evidence suggesting pretty strongly that vouchers don't improve educational outcomes, but that's not the whole story. After all, as Greg points out, empirical evidence compiled by social scientists doesn't usually slow conservatives down much. There must be more to it:

Vouchers would hardly be the first conservative policy fixation to founder on the shoals of empirical evidence. Yet the conservative backers of, say, supply-side economics or health savings accounts haven't traditionally allowed hard facts to deter them. Many of the erstwhile champions of school choice are having second thoughts not only because vouchers are a policy failure, but also because they didn't materialize into the political game changer that right-wing activists were hoping for.

....In 2000, both California and Michigan offered referendums on voucher programs for all children in the state. The initiatives were defeated by margins of forty-two and thirty-eight points, respectively. Voucher supporters like to blame the defeats on well-funded teachers unions, but the law professors James E. Ryan and Michael Heise found that voucher supporters had outspent the opposition in Michigan, and both sides had spent about the same amount of money in California. They concluded that the decisive resistance to vouchers had come from suburban voters who feared that the programs would take money away from local schools and worried about the arrival of lower-income and minority students in their children's classrooms.

....Bill Burrow, the associate director of the Office on Competitiveness under the first President Bush, has noted that school choice is "popular in the national headquarters of the Republican Party but is unpopular among the Republican rank-and-file voters who have moved away from the inner city in part so that their children will not have to attend schools that are racially or socioeconomically integrated." Indeed, the term "voucher" has become so politically unattractive that in his January State of the Union address this year, President George W. Bush concocted the euphemism "Pell Grants for Kids" to propose a federal initiative to support private religious schools that has no chance of passing Congress.

In the 1980s vouchers became a major culture war issue, and it turns out that what the culture war giveth, the culture war taketh away. If you're going to make vouchers available to white kids who want to attend private schools, you also have to make them available to urban black kids who want to attend white suburban schools. And guess what? Conservative suburban parents aren't too happy about that prospect. Better not to have vouchers at all than to have vouchers that might bring inner city children into the leafy green burbs.

JEOPARDY!....Hey, a fellow Irvinite was the big winner on Jeopardy tonight. Congratulations, Tom Morris! I totally could have taken him, though. Seriously. I coulda been a contender.

REJECTING AND DENOUNCING....I'm pretty much willing to let John Cole have the last word on Jeremiah Wright and all the other lefty bugbears being peddled 24/7 by Fox News:

And you know what? They may be assholes, or jerks, or whatever term you want to use, but they sure as hell didn't run this economy into the ground. They aren't responsible for turning a huge surplus into a several hundred billion dollar deficit. I have yet to read any memos from Barbra Streisand detailing how we should spy on American citizens.

....Maybe it is because I am totally and unrepentantly in the tank for Obama, but I just can't get worked up over what his pastor said. Maybe it is because I am not religious, and I am used to religious people saying things that sound crazy. Or maybe I just refuse to spend any more time and energy getting worked up over and denouncing, distancing, and rejecting the wrong people — people who really don't matter in the big scheme of things. If you have a memo from Jeremiah Wright to John Yoo showing how we should become a rogue nation, let me know. If you have pictures of Jeremiah Wright voting against the GI Bill, send it to me. If you have evidence of Jeremiah Wright training junior soldiers on the finer aspects of stacking and torturing naked Iraqi captives, pass them on.

Until then, I just can't seem to get all worked up about the crazy scary black preacher that Obama has to "throw under the bus."

What he said.

ECONOMY UPDATE....The economy continues to suck:

In the 12 months ended in February, the Case-Shiller home price index, which measures the value of single-family homes in 10 major metropolitan regions, fell 13.6 percent, the biggest decline since records began in 1987....The slump in home prices was more severe than the worst point of the recession of the 1990s, the last time values fell so far, so quickly.

....The problems have contributed to a deepening gloom, which was reinforced on Tuesday by a grim confidence survey released by the Conference Board. The private report, which surveys up to 5,000 American households, dropped to its lowest point since March 2003, at the start of the invasion of Iraq. Americans feel worse about the economy's prospects than any time since the mid-1970s, and many are bracing for job losses.

The consumer confidence number has now dropped a staggering 28 points in just four months. And don't forget that first quarter GDP estimates come out tomorrow. Brace yourselves for more bad news.

BLEEDING....Barack Obama today denounced Jeremiah Wright's recent comments as "appalling" and "outrageous." James Joyner comments:

I'm not sure what more Obama could say, to be honest. He'll be tarred somewhat for having spent 20 years in Wright's congregation and touting him so heavily as his mentor. But this should stop the bleeding.

You betcha. I'm sure Sean Hannity and John McCain will take this straight to heart.

FAIR AND BALANCED....Yep, "beyond parody" is about right.

CRANK ECONOMICS....John McCain wants to ease up on state regulations that require health insurers to cover specific conditions. So what would happen to kids like Jake Bernard, who gets speech therapy for his cleft lip only because Florida law requires it?

Asked about the contradiction between the family on the stage and the McCain policy, McCain senior policy adviser Douglas Holtz-Eakin said that the marketplace will fill the void. If there is a demand for this kind of coverage, he said, some insurance company will offer it.

Didn't Holtz-Eakin used to be a respected economist? Now we get gas tax holidays, $5 trillion spending holes (that don't count because, for some reason, extending Bush's tax cuts just shouldn't count), airy nonsense about $60 billion in savings from eliminating earmarks, and "the marketplace will fill the void."

This is crankery. Free-market capitalism really deserves better defenders than this. I hope Holtz-Eakin at least has the good grace to grimace while he's saying stuff like this.

THE YOUTH VOTE....A year and a half ago, the New York Times took a look at the party affiliations of different generations, producing a fascinating chart that showed a tremendous movement among young voters toward the Democratic party. By 2006, Democrats had opened up a lead among 20-year-olds of 52-37, the largest measured gap ever.

So what's happened since then? Acording to Pew, the gap has gotten even bigger. In polling done over the past six months, voters in their 20s identified as Democrats by a margin of 58-33. That's a 25-point gap. For comparison, the biggest recorded gap before now was 11 points at the height of Democratic dominance during the late 40s and 13 points after Watergate. But it turns out that even Nixon couldn't come close to doing the damage to the Republican brand that George Bush has. His administration has nearly doubled the previous record.

Via Mori Dinauer, who suggests that this means at least an extra million votes for the Democratic candidate in November. And the even better news? There's a good chance it means an even bigger advantage in 2012 and beyond.

McCAIN, IRAQ, AND 100 YEARS....Steve Benen summarizes John McCain's inability to make up his mind about whether we should have a long term presence in Iraq, similar to the one we have in South Korea:

• In 2005, McCain decided Iraqis resent our military presence, so we should reject a Korea-like model for long-term troop deployment. He insisted that "U.S. 'visibility' was detrimental to the Iraq mission and that Iraqis were responding negatively to America's presence — positions held by both Obama and Clinton."

• In 2006, McCain reversed course, and embraced the Korea model for a long-term military presence.

• In 2007, McCain reversed course again, saying the Korean analogy doesn't work and shouldn't be followed. "[E]ventually I think because of the nature of the society in Iraq and the religious aspects of it that America eventually withdraws," McCain told Charlie Rose last fall.

• And in 2008, McCain reversed course yet again, deciding that we should be prepared to leave troops in Iraq, even if it means 100 years or more.
  

Foreign policy is easy when you just make it up as you go along! More at the link.

DEFENDING THE LEFT....Dan Drezner complains of unfair economic comparisons from us lefties:

An old warhorse of political economy/anti-corporate types, for example, is to say that the sales of multinational corporations exceeds many countries GDP. This is true but irrelevant — GDP measures the value-added that an economy generates per year, so the proper and correct comparison is between a firm's profits and GDP. When using that metric, corporations suddenly don't look so big.

Hold on a second. This isn't true, is it? Leaving aside trade deficits, GDP is basically consumption plus investment. If I buy a Ford Taurus for $20,000, that adds $20,000 to GDP even though Ford makes a net profit per car of about $3 these days. (In a good quarter, that is.) I don't know if sales revenue is precisely comparable to GDP, but it's pretty close. Right?

UPDATE: Right, GDP includes only sales of final goods and services, not intermediate sales. But sales revenue is still a more apt comparison than profits, isn't it?

GAS TAX DEMAGOGUERY....Yesterday was one of the more depressing days I've spent in a long time. The Jeremiah Wright dustup was the main reason, but there were others too. Like this bit of fantastical pandering from Hillary Clinton:

Senator Hillary Rodham Clinton lined up with Senator John McCain, the presumptive Republican nominee for president, in endorsing a plan to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for the summer travel season. But Senator Barack Obama, Mrs. Clinton's Democratic rival, spoke out firmly against the proposal, saying it would save consumers little and do nothing to curtail oil consumption and imports.

While Mr. Obama's view is shared by environmentalists and many independent energy analysts, his position allowed Mrs. Clinton to draw a contrast with her opponent in appealing to the hard-hit middle-class families and older Americans who have proven to be the bedrock of her support. She has accused Mr. Obama of being out of touch with ordinary Americans who are struggling to meet their mortgages and gas up their cars and trucks.

I'd say there's approximately a zero percent chance that Hillary Clinton or John McCain actually believe this is good policy. It would increase oil company profits, it would make hardly a dent in the price of gasoline, it would encourage more summertime driving, and it would deprive states of money for transit projects. Their staff economists know this perfectly well, and so do they.

But they don't care. It's a way to engage in some good, healthy demagoguery, and if there's anything that the past couple of months have reinforced, it's the notion that demagoguery sells. Boy does it sell.

HILLARY ON RACE....In the Wall Street Journal today, Gerald Seib suggests that it's not just the black candidate who ought to address the subject of race in the Democratic primary:

As fears of a racial divide move from the wings to center stage for Democrats, it has largely been Sen. Barack Obama who has been called upon to address the subject....Undoubtedly, he'll have to do so again, in the wake of an appearance at the National Press Club Monday by his former pastor, the Rev. Jeremiah Wright Jr., whose commentaries on the state of American society have done as much as anything to bring race out of the campaign's shadows.

Yet it is Sen. Clinton who now has the greater ability to ease racial tensions within her party. Arguably, she also has the greater need to do so, for her long-term standing.

The rapidly congealing conventional wisdom suggests that Obama is in deep trouble after Jeremiah Wright's remarks yesterday and needs to disown him completely. This might be true: some of Wright's comments, especially his impromptu answers to questions about AIDS and Louis Farrakhan, are obviously damaging as hell to Obama's cause.

But Seib is right: Hillary Clinton could go a long way toward easing the tension that's threatening to open a very deep breach within the Democratic Party. And she should. It wouldn't be easy: she's not a naturally gifted speaker, as Obama and Bill Clinton are, and every word she said would be scrutinized for double meaning and disingenuousness. Still, why shouldn't the white candidate talk about this too? Defend Wright where he's defensible and criticize him where he isn't. Repudiate the ugliness that's overtaken the campaign — much of it her own doing — and say plainly that it's unfair to keep pretending that Obama bears responsibility for another person's words. Take the press to task for focusing on trivia, and the public as well for holding a black preacher to a different standard than white ones like John Hagee, whose comments have been every bit as incendiary as anything Wright has said. Talk as honestly about race from a white perspective as Obama did last month from a black perspective.

It wouldn't be easy. But then, she wants to president, doesn't she? That's not a job where you get to duck the tough issues.

MORE PLEDGE WEEK....Last night, a commenter asked me why a magazine like the Washington Monthly needs to have a fundraising drive in the first place. It's a good question with a simple answer: it's because political magazines are historically unprofitable ventures. This is true of just about every political magazine you've ever heard of. Subscriptions and advertising don't come close to covering the cost of salaries, office space, printing, postage, and so forth, so we all look for additional sources of revenue, which mainly consists of foundation support and fundraising drives. Without them, we can't stay in business.

So that's why we ask for donations periodically: It keeps the magazine running and it keeps this blog on the air. So if you like what we do here, throw some coin our way. We'll put it to good use. As always, you can donate via check, PayPal, or credit card. Just click here.

Now, one way that we don't raise money is by taking bribes from shady business folks and then wrapping the cash in tin foil and stashing it in the the office refrigerator. We leave that up to guys like congressman "Dollar" Bill Jefferson of Louisiana, profiled in our current issue by veteran New Orleans writer Jason Berry. Jefferson's motivation? He did it all for his family:

By the late 1980s, Jefferson the civil rights idealist had devolved into a standard-issue machine politician. In his case, his political organization relied heavily on the Jefferson clan. Having found a reliable client in the historically black Southern University system, Bill helped his wife take a seat on the system's supervisory board, a position fraught with enough conflict-of-interest possibilities to raise a furor in any state but Louisiana. He helped his brother Archie look for investment opportunities after Archie had lost his law practice for borrowing against client accounts to support a drug habit. (The state supreme court disbarred Archie for issuing worthless checks and criticized him for "a fundamental lack of moral character and fitness.")

Jefferson's older brother, Mose, renowned for whirlwind installations of cardboard political signs about the city, began operating low-income rental properties in Central City that would dovetail with Bill Jefferson's political interests. And in the 1980s, Bill teamed up with five of his ten siblings to form Jefferson Interests, a company that ran stores specializing in appliance rentals to the poor. Jefferson even sponsored a bill that would allow such stores to file theft charges against renters who failed to return the appliances on time. The bill failed.

Read the whole thing.

PAGING ADAM SMITH....Jad Mouawad writes about oil production in the New York Times today:

As oil prices soared to record levels in recent years, basic economics suggested that consumption would fall and supply would rise as producers opened the taps to pump more.

But as prices flirt with $120 a barrel, many energy specialists are becoming worried that neither seems to be happening. Higher prices have done little to attract new production or to suppress global demand, and the resulting mismatch has sent oil prices spiraling upward.

....The outlook for oil supplies "signals a period of unprecedented scarcity," an analyst at CIBC World Markets, Jeff Rubin, said last week. Oil prices might reach more than $200 by 2012, he said, a level that would probably mean $7-a-gallon gasoline in the United States.

I imagine that a global economic slowdown will flatten oil consumption a bit over the next year or two, and eventually higher prices will rein in demand more permanently. On the other hand, we've seen oil prices double three times in the past eight years without producing so much as a blip in rising demand. So if we're in a genuine, long-term supply crunch — and all the evidence suggests we are — what price will it take to stabilize demand in its current neighborhood of around 85-90 billion barrels per year? Another doubling? Two doublings? Neither would surprise me. There are too many unknowns to pretend to have any kind of definitive guess, but still, if 2012 were an over/under bet for oil to hit $200, I'd take the under.

JOHN McCAIN'S FINANCES....Even though I've commented on this before, I didn't realize just how skimpy John McCain's financial disclosure was until I read this Moneybox piece over the weekend:

Aside from a Wachovia checking account, in which he keeps between $15,000 and $50,000 (wouldn't some of that money earn more interest in a certificate of deposit?), all of the couple's assets are in Cindy's name. John McCain's tax return is so anemic, so marginal to the couple's actual financial situation, that he doesn't even take a deduction for interest on his home mortgage. Presumably Cindy does, since disclosure forms indicate that she has several mortgages.

Can we stop pretending to be children about this? There's only one reason for a politician to make sure that all his assets are in his wife's name: it's to make sure that no one knows anything about his assets. It's not as if McCain is the first pol to try this, after all.

Is the press really going to let him get away with this?

EQUAL PROTECTION....The Supreme Court today upheld Indiana's shiny new voter ID law, a law that plainly fails to address any actual problem. Or does it? From the lead opinion:

It remains true, however, that flagrant examples of such fraud in other parts of the country have been documented throughout this Nation's history by respected historians and journalists, that occasional examples have surfaced in recent years, and that Indiana's own experience with fraudulent voting in the 2003 Democratic primary for East Chicago Mayor — though perpetrated using absentee ballots and not in-person fraud — demonstrate that not only is the risk of voter fraud real but that it could affect the outcome of a close election.

And what are the examples of voter fraud that John Paul Stevens managed to adduce to support this paragraph? Marty Lederman tells us: (1) Boss Tweed stuffing ballot boxes in 1868, (2) a case in Washington state in which one person committed voter fraud, and (3) a 2003 case of fraud in Indiana which, as Stevens acknowledges, the new law wouldn't cover because it was done via absentee ballot.

Presumably these were the best examples that anyone could come up with. And what do you conclude from them? That's easy: in-person voter fraud is vanishingly rare while absentee voter fraud is, perhaps, a problem genuinely worth addressing. Needless to say, though, Indiana's law does exactly the opposite: it requires voter ID for in-person voting and does nothing to ensure the integrity of absentee voting.

We all know why this is: it's because, as Common Cause reminds us, restricting in-person voting tends to reduce turnout among minorities, the elderly, voters with disabilities, the poor, and the young — all of which, though CC is too polite to mention it, tend to vote Democratic. Absentee voters, by contrast, tend to vote Republican.

So what's the real motivation for Indiana's law? That's pretty obvious, isn't it? And pretty shameful.

THE LATEST FROM JEREMIAH WRIGHT....Jake Tapper reports on Jeremiah Wright's speech this morning to the National Press Club:

On his contention that the U.S. government had created AIDS as a method of committing genocide against African-Americans, Wright referred to a hotly-disputed 1996 book "Emerging Viruses: AIDS And Ebola : Nature, Accident or Intentional?" by Leonard G Horowitz, which contends that AIDS and the Ebola viruses evolved during cancer experiments on monkeys.

....Wright was also asked about his relationship with Nation of Islam founder Louis Farrakhan....Farrakhan, Wright said, is "one of the most important voices in the 20th and 21st century," noting the Million Man March....."Louis Farrakhan is not my enemy," Wright said, since Farrakhan had not enslaved Africans and brought them in chains to the U.S.

Wright sure isn't doing Barack Obama any favors, is he?

TAX-O-MATIC....Yglesias on taxes:

It's absolutely crippling to any effort to outline policy with any level of ambition to concede the idea that any tax that places any burden whatsoever on the non-rich is therefore unacceptable. It's fairly easy to design revenue measures that fall mostly on the rich, but extraordinarily difficult to design measures that exclusively snag people who fit a conventional definition of rich.

Yep. And what makes this problem even worse is that the attacks these days come from both left and right. The right will claim that an increase in the capital gains tax, for example, is a dreadful idea because it affects middle-class investors — despite the fact that only about 2% of capital gains taxes are paid by the middle class. On the left, you'll get social justice environmentalists inveighing against carbon taxes or congestion taxes or gasoline taxes because they impact the poor — despite the fact that the resulting revenues are usually used for programs that directly help the poor. Rock meet hard place.

I suppose there are two possible answers to this. The first is for liberals to get better (and braver) about proposing tax hikes. I'm all ears for any bright ideas on this score. The second is to do what Republicans do: propose spending increases and just don't worry about the taxes. If the Washington Post editorial board huffs and puffs, who cares? Eventually things will work themselves out. That's not the way I'd like to see things get done in a perfect world, but we don't live in a perfect world, do we?

PLEDGE WEEK....It's fundraising time again! As you all know, since I mentioned this during our last fundraising drive, the Washington Monthly is a nonprofit organization. Ad revenue only covers a small part of our expenses, which means that we depend on contributions from readers to stay up and humming. So if you like the blog and you like the Washington Monthly, we're asking for your help again. Ten bucks, twenty bucks, fifty bucks, whatever you can afford.

You can donate via check, PayPal, or credit card. Just click here to help out.

And what kind of reporting does your contribution keep alive? This month's cover story is by Washington Monthly editor T.A. Frank, who used to work for a Los Angeles firm that specialized in the field of "compliance consulting," or "corporate social responsibility monitoring." In other words, they inspected sweatshops, both in the U.S. and overseas, to make sure they followed some minimal set of labor standards. In "Confessions of a Sweatshop Inspector," he tells us which clients were good and which ones were bad:

You may get the sense that I'm not Wal-Mart's biggest fan. You'd be right. I betray no confidence here, since Wal-Mart wasn't a client of ours while I was at my company. Nevertheless, I still got to visit plenty of its supplier factories. That's because any given factory usually has more than one customer, and during an audit we would always ask the bosses to name their other customers. Wal-Mart was often one of them. And its suppliers were among the worst I saw — dangerous, nasty, and poorly paid even by local (usually Chinese) measures. I noticed that Wal-Mart claimed to require factories to maintain decent labor standards — but why did it seem to think it could find them among the lowest bidders?

Read the whole thing to get the inside story on how compliance firms work — or don't.

QUICK HITS....A couple of quick links. First, Jeremy Manier of the Chicago Tribune has an interesting piece up about early childhood education and how Obama and Clinton compare on the issue. Click here to read it.

Second, Reed Hundt scours John McCain's website to see what he has to say about the information and communications technology sector. Answer: nothing. Though, oddly enough, he is under the impression that there's a move afoot to tax text messages and 911 calls and he aims to stop it. Good to know.

Third, Blue Girl asks, "Do you know where your food has been?" If you don't, click here.

MORE ON RATINGS....Speaking of rating agencies, I want to highlight a single passage from the Roger Lowenstein article that I blogged about below. It's about how investment bankers create complex financial instruments that receive high ratings:

Credit markets are not continuous; a bond that qualifies, though only by a hair, as investment grade is worth a lot more than one that just fails....The challenge to investment banks is to design securities that just meet the rating agencies' tests...."Every agency has a model available to bankers that allows them to run the numbers until they get something they like and send it in for a rating," a former Moody's expert in securitization says.

Go ahead and call me a rube, but is this for real? The rating agencies just hand over their models to the Wall Street rocket scientists so they can probe for every weakness and tweak every loophole in order to put together a package that — just barely! — meets the agency's parameters for a high rating? Does this sound like a recipe for disaster to you? It does to me. Is it the kind of thing you think would happen if the agencies were more interested in providing honest ratings than in attracting lucrative Wall Street business? I don't.

Maybe the real bubble of the last few years has been a rating agency bubble. And maybe now it's popped. If that's true, and if we don't do anything about it, then for a large class of investors the only realistic option is going to be a complete halt to investing in complex securities. After all, there's no way for any but the most sophisticated fund managers to understand them, and no one else can be trusted to give an honest opinion about them. And if complex instruments become too toxic for pension funds and local governments and mainstream money managers, then the market for them essentially goes away. Which is a bad thing, right? Because those complex instruments really do serve a purpose by reducing friction in financial markets and making more money available to more people.

So what do we do? Regulate the rating agencies? Demand greater transparency? Just amp up capital requirements and leave the rest alone? Or what?

THE RATING AGENCIES....In the New York Times magazine today, Roger Lowenstein takes a look at the role of rating agencies in our current credit crisis. Were they at fault because they got in bed with their customers and overrated complex new mortgage-backed securities? Or were they innocent bystanders in a world gone mad?

Proposition A gets an airing early on. Lowenstein explains that after the sudden collapse of Penn Central in 1970, new rules were put in place that effectively barred large classes of investors from buying anything other than investment grade bonds. And it was the rating agencies that decided which bonds were investment grade and which ones weren't:

Issuers thus were forced to seek credit ratings (or else their bonds would not be marketable). The agencies — realizing they had a hot product and, what's more, a captive market — started charging the very organizations whose bonds they were rating. This was an efficient way to do business, but it put the agencies in a conflicted position.

....The evidence on whether rating agencies bend to the bankers' will is mixed. The agencies do not deny that a conflict exists, but they assert that they are keen to the dangers and minimize them....But in structured finance, the agencies face pressures that did not exist when John Moody was rating railroads. On the traditional side of the business, Moody's has thousands of clients (virtually every corporation and municipality that sells bonds). No one of them has much clout. But in structured finance, a handful of banks return again and again, paying much bigger fees. A [big deal] can bring Moody's $200,000 and more for complicated deals. And the banks pay only if Moody's delivers the desired rating. Tom McGuire, the Jesuit theologian who ran Moody's through the mid-'90s, says this arrangement is unhealthy. If Moody's and a client bank don't see eye to eye, the bank can either tweak the numbers or try its luck with a competitor like S.&P., a process known as "ratings shopping."

And it seems to have helped the banks get better ratings. [Joseph] Mason, of Drexel University, compared default rates for corporate bonds rated Baa with those of similarly rated collateralized debt obligations until 2005 (before the bubble burst). Mason found that the C.D.O.'s defaulted eight times as often. One interpretation of the data is that Moody's was far less discerning when the client was a Wall Street securitizer.

....Nothing sent the agencies into high gear as much as the development of structured finance....Credit markets are not continuous; a bond that qualifies, though only by a hair, as investment grade is worth a lot more than one that just fails....The challenge to investment banks is to design securities that just meet the rating agencies' tests...."Every agency has a model available to bankers that allows them to run the numbers until they get something they like and send it in for a rating," a former Moody's expert in securitization says. In other words, banks were gaming the system; according to Chris Flanagan, the subprime analyst at JPMorgan, "Gaming is the whole thing."

Even a small tweak in a rating can make a big difference, and both the rating agencies and the banks issuring the bonds have an incentive to tweak things in the bank's favor: the bank because it makes their offerings more profitable, the agency because it makes their client happy. Whether or not the agencies are "keen to the dangers" of this, it's naive to think that it doesn't happen. It's a lot like the "Chinese wall" that was supposed to separate the supposedly independent research analysts from the investment bankers at financial services firms during the dotcom boom. Guess what? It turned out the wall was made of rice paper.

But then there's Proposition B. It suggests that the rating agencies used historical models to analyze mortgage-backed securities, and in the brave new world of subprime hegemony and structured finance, their old models broke down:

Poring over the data, Moody's discovered that the size of people's first mortgages was no longer a good predictor of whether they would default; rather, it was the size of their first and second loans — that is, their total debt — combined. This was rather intuitive; Moody's simply hadn't reckoned on it. Similarly, credit scores, long a mainstay of its analyses, had not proved to be a "strong predictor" of defaults this time. Translation: even people with good credit scores were defaulting.

Roughly speaking, Brad DeLong opts for Proposition B. He thinks the problem is that too many fund managers simply accepted ratings as a gold standard instead of doing their jobs and asking the "three standard questions" that all investors should always ask. "If you truly do not want to ask the three standard questions and evaluate credit risk you should be in U.S. Treasuries (and even there you have to assess inflation risk and, unless you are planning to hold to maturity, monetary policy risk). And if you want higher yields than Treasuries offer — well, then you are back to asking your three standard questions again."

Point taken. But I wonder if this is realistic. There are a very limited number of extremely smart people in Wall Street firms creating all these complex new financial instruments, and they're very highly motivated to make them as impenetrable as possible. The average pension fund manager or county treasurer is simply never going to be able to analyze them in any serious kind of way. It's easy to say they should, but that's like saying that our schools would be better off if every schoolteacher had a PhD. Given the current state of the art in human nature, it's just not going to happen.

So in reality, there's a large class of investors who have little choice but to trust the rating agencies. And if rating agencies have a fundamental financial interest in colluding with their clients, then that collusion is almost certain to happen. It's true that the agencies might also make innocent mistakes, but let's face it: the incentives work strongly in the direction of making all those mistakes in favor of their banking clients, not the investor community. It's possible, for example, that Moody's genuinely didn't realize that first and second loans combined were a better measure of debt stress than first mortgages alone, but that's really not rocket science. It's hard not to think that they weren't trying very hard to understand the emerging new realities. As Upton Sinclair famously said, "It is difficult to get a man to understand something when his salary depends upon his not understanding it."

So sign me up as a dissenter. Yes, investors are responsible for analyzing the risk of their investments. At the same time, when it comes to the kinds of investment vehicles routinely created today, the only realistic option a lot of investors have is to trust the advice of independent experts — ones who have their own staff of rocket scientists and access to all the underlying data that makes up a modern investment vehicle. If it turns out that those independent experts have enormous incentives to help the bankers game the system, that's a problem. And right now we're all paying a pretty big price for it.

NEXT UP: TOUCHED BY AN ANGEL?....Nick Gillespie and Matt Welch argue today that the unabashed celebration of capitalism in "Dallas" helped bring down the Iron Curtain:

In Romania, "Dallas" was the last Western show allowed during the nightmare 1980s because President Nicolae Ceausescu was persuaded that it was sufficiently anti-capitalistic. By the time he changed his mind, it was already too late — he had paid for the full run in precious hard currency. Meanwhile, the show provided a luxuriant alternative to a communism that was forcing people to wait more than a decade to buy the most rattletrap Romanian car....To this day, you can visit an ersatz "SouthForkscu" ranch in the nowheresville Romanian town of Slobozia (yes, that's its real name).

Sure, I'll buy that. Why not? I loved "Dallas" back in the day. And as N&M say, "For all the talk of boycotts and bombs, if the United States is interested in spreading American values and institutions, a little TV-land may go a lot further than armored personnel carriers."