Dunn & Bradstreet illegally profiting from Central Contractor Registration (CCR) profile data

VSBA update on our Dunn & Bradstreet (DNB) Probe:

Via extensive research via Central Contractor Registration (CCR), Defense Logistics Agency (DLA), and General Services Administration (GSA), VSBA has confirmed the following:

Dunn & Bradstreet has allegedly been selling, via Hoovers and other information outlets; prospective contractor information obtained via the CCR requirement to submit company data to obtain a DUNN No. – in violation of Federal Acquisition Regulations (FAR) and other federal laws. We will be publishing the entire story on the VSBA Blog along with details, including the referenced regulations and DNB contract, after the Thanksgiving holidays.

– The Voice of Small Business in America, One Voice…

ISSUE STATEMENT NO. 4011: GETTING BACK TO BASICS ~ Wilfong

WILFONG’S THOUGHT OF THE DAY

April 5, 2009 2:59 PM ESTTO  A SELECT FEW:

IN DIRECT RESPONSE TO H.R. 1842

Words like “using the Small Business Administration entrepreneurship development programs as a catalyst for job creation for fiscal years 2009 and 2010”,  as found in H.R. 1842 are pretty, and good sounding.  But, we need to “get back to basics”.  We need to call them what they are, and get to doing what existing laws already call for.  We need to MONITOR and ENFORCE the laws currently on the books.  And, we need to call “Minority Development Programs” just that.  The same is true for “Woman-Owned Business Programs.”

Either Minorities and Women are discriminated against because of their race or gender, or they are not.  WE know they are.  Others need to fess up to it.  We either meet the standards of Adarand, or we don’t.  If we meet the standards of Adarand, we don’t have to worry about Rothe.

That theme is gonna be the basic one for the upcoming Spring Session of “Wilfong’s School for Advanced Small Business Studies”.  We’re gonna cut through the gobbled-gook and get to the nitty-gritty.   We’re gonna call them like we see them.  And, we’re gonna demand Change.

We’re gonna re-establish the theme that “Small business is the engine that drives America.”  As such small business establishes the monster share of new jobs created in this country.   Realizing that, one understands that if you take care of small business, you take care of creating jobs.  This is true in the minority community.  This is true in the general community.

So, what’s the problem?  Well, we kinda, sorta, lost our way.  We got confused and nonplussed by The Adarand Decision, back in the mid-90s.  In trying to dodge the bullets, we got away from our mission.  We forgot the things we established back in 1978, when Congress enacted Public Law 95-507.  We sought to go “race-neutral” in fear that The Adarand Decision would embolden those who sought to “do away with programs designed to assist Minorities”.

They can try all they want to.  But, they will not succeed, not IF we’re able to establish that racial discrimination is still alive in America.  If we can’t establish that fact, then we can’t have “race-based” programs to ameliorate the condition.  If it is not a fact, then we don’t deserve to have the programs.

Let’s look at Adarand, and what it said.  In essence Adarand said, “Look, we hear you when you say ya’ll are being discriminated against, and that discrimination is causing you not to be all that you can be, as guaranteed by the United Constitution.  But, you need to establish that fact, and support the fact that this denial of your right to equal protection under the law is a compelling reason for the United States Government to provide remedial measures to correct the situation”.

DUH…If we can’t do that, then perhaps we don’t deserve the programs.

Change the Wilfong language above to legalese and see if your interpretation is any different.  Basically, the Supreme Court said that strict scrutiny shall apply to those programs which provide for the use of racial or ethnic criteria as factors in determining who shall benefit from the awarding of contracts. The Court said such programs would satisfy “strict scrutiny”, if they serve a “compelling interest” and are “narrowly tailored” to the achievement of that interest.

Shortly after the Adarand decision, then, President Clinton vowed “to fight to preserve federal affirmative action programs that give preferences to Blacks, Latinos and other minorities..”. “Despite great progress, discrimination and exclusion on the basis of race and gender are still facts of life in America. I have always believed that affirmative action is needed to remedy discrimination and to create a more inclusive society.”  Right on, Mr. President, we shouted.  But, then he did a two-step. He yielded to the darker side of our country.  And, he started looking for “race-neutral” stuff.

Contrary to Clinton’s intimation, the Court did not find that “affirmative action is not needed”. The Court just decreed that, as to minority business programs, it must be “narrowly tailored”, and established certain “predicate actions” that must be taken. Justice Sandra Day O’Connor, and the rest of the majority, required that the “strict scrutiny” standard be applied to any such programs. The Court even found that, when race-based action is necessary to further a compelling interest, it is perfectly within constitutional constraints, if it satisfies the “narrow tailoring” test, the Court has set out in previous cases. Fair enough, we can handle that.

Justice Sandra Day O’Connor said “The unhappy persistence of both the practice and the lingering effects of racial discrimination against minority groups in this country is an unfortunate reality, and the government is not disqualified from acting in response to it.” It would have pleased us more if she had used that awareness to find it in herself to vote for us, rather than just recognizing it, and throwing the ball back into someone else’s court. But, she left the door ajar. Our elected representatives could have kicked that door wide open.

Quit playing with “race-neutral” wordage and call it like it is.  Racial discrimination is still alive in America.  We need to surround it, and cut its head off.  We need to quit dodging the use of, and emphasize the use of language, which describes what we’re hoping to accomplish.   MSB/COB- Minority Small Business/Capital Ownership Development is what P.L. 95-507 was all about.  That is what the section of SBA that dealt was called, for many, many years.  That’s what its name ought be changed back to.

The purpose of the 8(a) Program was to promote the competitive viability of firms owned by socially and economically disadvantaged individuals through the provision of contractual, financial and technical assistance as may be necessary.  We used to do that at SBA.  We knew what our mission was.  And, we pursued it vigilantly.

You SBAers of today, get back to that mission.  As stated above, the Supreme Court established in Adarand that race-conscious methods may be employed as long as the program in which they are used, can stand the strict scrutiny test and are based upon a compelling interest of the Government. The United States Congress did extensive fact-finding and predicate study work prior to passing Public Law 95-507. We were fortunate to have given testimony and submitted evidence in those proceedings. It was part of our finest hours.

Will these things be talked about on The Hour…..heck, yes…

###

Mr. Hank Wilfong as an editorial writer for the 8-PAC Eagle. Mr. Wilfong is one of the most prolific and impassioned independent political minds working today. The President of the National Association of Small Disadvantaged Businesses (NASDB), he is a charismatic and articulate speaker, not afraid to use the vernacular that sparked a movement by disadvantaged small business some 20+ years ago. Hank Former is a former Appointee of Governor and President Ronald Reagan; Member, Bush-Cheney Transition Team-Small Business Advisory Group; and, Co-Chair, Obama Unity Committee/Black Republicans for Obama.

THE WILFONG HOUR

EVERY MONDAY | – 1PM EST–12 NOON CST  ~ Dial-in Number: (218) 339-2626 (The Participant Access Code is: 408191#)

Lawmakers Call for Renewal of Job Creating Small Business Programs

WASHINGTON, D.C. – A Congressional panel today took the first step toward updating key Small Business Administration (SBA) programs that provide counseling and technical services to budding and established entrepreneurs. During a hearing of the House Small Business Committee’s Subcommittee on Rural Development, Entrepreneurship and Trade, Members of Congress said that the SBA’s Entrepreneurship Development (ED) programs are needed now, more than ever, given the economic strains that small businesses currently face.

“The Small Business Administration’s Entrepreneurial Development Programs offer services that can make the difference between whether a new venture fails or gets off the ground and creates new jobs,” said Subcommittee Chairman Heath Shuler (D-NC). “Businesses that use these services are twice as likely to succeed. The legislation we are considering today will strengthen these programs, so that entrepreneurs can access additional information and services that help them build their businesses.”

The legislative hearing examined seven pieces of legislation, each of which is designed to improve ED Programs at the SBA. The SBA’s ED Programs are administered through public-private partnerships and offer a range of services to small business owners and, in some cases, focus resources and assistance on specialized groups of entrepreneurs. The agency’s Small Business Development Centers (SBDCs) foster economic development through a network of one-stop business assistance centers that offer financial, marketing, production, planning and technical guidance. Women’s Business Centers (WBCs) target Entrepreneurial Development services to female entrepreneurs, while the SBA’s Office of Veterans Business Development provides customized assistance for veterans. It is estimated that in 2008 alone, ED programs pumped $7.2 billion into communities across the country and laid the groundwork for 73,000 new jobs.

“The SBA’s portfolio of entrepreneurial development services can assist all entrepreneurs in developing and executing business plans and spurring job growth,” Shuler noted. “These programs also help business owners with unique challenges, like veterans, Native Americans and women.”

In addition to reauthorizing and strengthening existing ED Programs at the agency, the package would create new grant programs for Native American business owners and veteran entrepreneurs. The legislation would also expand access to entrepreneurial development program materials through the use of technology. The bill would expand the use of distant learning to make it easier for business owners to remotely access entrepreneurial training content.

“In rural districts, like mine, the nearest Small Business Development Center can often be far away,” Shuler said. “The legislation the Committee examined today would harness current technology to better assist small business owners in rural and underserved areas.”

The SBA’s Entrepreneurial Development programs have not been updated since 1999, making the legislation potentially the most significant update to the SBA in a decade. The bills are expected to be marked-up in the Subcommittee following the Easter District Work Period, after which they would be considered by the entire House Small Business Committee.

###

Deficit Trajectory: $1 Trillion per year for 10 years

(AP) – President Barack Obama’s budget would generate deficits averaging almost $1 trillion a year over the next decade, according to the latest congressional estimates, significantly worse than predicted by the White House just last month.

The Congressional Budget Office figures, obtained by The Associated Press Friday, predict Obama’s budget will produce $9.3 trillion worth of red ink over 2010-2019. That’s $2.3 trillion worse than the White House predicted in its budget.

Worst of all, CBO says the deficit under Obama’s policies would never go below 4 percent of the size of the economy; figures that economists agree are unsustainable. By the end of the decade, the deficit would exceed 5 percent of gross domestic product, a dangerously high level.

The latest figures, even worse than expected by top Democrats, throw a major monkey wrench into efforts to enact Obama’s budget, which promises universal health care for all and higher spending for domestic programs like education and research into renewable energy.

The dismal deficit figures, if they prove to be accurate, inevitably raise the prospect that Obama and his allies controlling Congress would have to consider raising taxes after the recession ends or paring back his agenda. But without referencing the figures, Obama insisted on Friday that his agenda is still on track.

“What we will not cut are investments that will lead to real growth and prosperity over the long term,” Obama said. “That’s why our budget makes a historic commitment to comprehensive health care reform. That’s why it enhances America’s competitiveness by reducing our dependence on foreign oil and building a clean energy economy.”

Many Democrats were already uncomfortable with Obama’s budget, which promises to cut the deficit to $533 billion in five years. The CBO says the red ink for that year will total $672 billion.

The worsening economy is responsible for the even deeper fiscal mess inherited by Obama. As an illustration, CBO says that the deficit for the current budget year, which began Oct. 1, will top $1.8 trillion, $93 billion more than foreseen by the White House.

The 2009 deficit, fueled by the $700 billion Wall Street bailout and diving tax revenues stemming from the worsening recession, is four times the previous $459 billion record set just last year. The CBO’s estimate for 2010 is worse as well, with a deficit of almost $1.4 trillion expected under administration policies, about $200 billion more than predicted by Obama.

By the end of the decade, the deficit under Obama’s blueprint would go back up to $1.2 trillion. Long-term deficit predictions have proven notoriously fickle – George W. Bush inherited flawed projections of a 10-year, $5.6 trillion surplus and instead produced record deficits – and if the economy outperforms CBO’s expectations, the deficits could prove significantly smaller.

Democrats in Congress are readying Obama’s budget for preliminary votes next week, and they promise to cut the deficit in half within five years. Democrats are likely to curb somewhat Obama’s request for a 9 percent increase in non-defense agency budgets.

Obama’s $3.6 trillion budget for the 2010 fiscal year beginning Oct. 1 contains ambitious programs to overhaul the U.S. health care system and initiate new “cap-and-trade” rules to combat global warming.

Both initiatives involve raising federal revenues sharply higher, but those dollars wouldn’t be used to defray the burgeoning deficit. Republicans say Obama’s budget plan taxes, spends and borrows too much, and they’ve been sharply critical of his $787 billion economic stimulus measure and a just-passed $410 billion omnibus spending bill that awarded big increases to domestic agency budgets.

The administration says it inherited deficits totaling $9 trillion over the next decade and that its budget plan cuts $2 trillion from those deficits. But most of those spending reductions come from reducing costs for the war in Iraq.

Inside Man

Commentary by Margaret Carlson

(Bloomberg) — Treasury Secretary Timothy Geithner never looks so tall as when he’s sitting down. Sketching a diagram about the nation’s banks on a legal pad in Bloomberg Television’s green room this week, he showed he’s at his most impressive when the cameras are off.

Geithner had just finished one of his better interviews, an hour-long sit-down with Charlie Rose in Washington. It proved to be a good setting — Rose’s questions are so long that Geithner looked pithy by comparison.

Here’s Geithner’s problem: He’s an Inside Man. Inside Man has the brain of Einstein and the presence of a flea. Inside Man can’t catch a break in our telegenic age. Even friends are taking after Geithner, from Paul Krugman of the New York Times to Kent Conrad, chairman of the U.S. Senate Budget Committee. On March 9, Obama’s friend, Warren Buffett, said the economy has “fallen off a cliff,” and criticized the message about how to save it as “muddled.”

Last weekend Geithner was lampooned on the “Saturday Night Live” TV show. After describing our dire situation, the actor playing Geithner offered $420 billion to the first person to come up with a plan to solve the banking crisis. He fell for the Nigerian prince, offering to send him an immediate down payment.

Geithner was known as a genius when he was at the New York Federal Reserve Board, ground zero for Inside Man. Washington, however, is the sole province of the Outside Man with a larger- than-life demeanor, utter conviction, and immediate solutions. You don’t have to be right to have a long ride here. Outside Men admire — and recommend — each other all the way to the top.

Fierce, Not Bold

Outside Man doesn’t have to come up with bold plans. He just has to be fierce about them. Former Defense Secretary Donald Rumsfeld got sky-high ratings for his televised briefings from the Pentagon and instilled fear in smarter yet quieter Bush administration officials like Condoleezza Rice, not for getting the Iraq War right but for dodging responsibility by waxing poetic over known knowns and known unknowns.

Hank Paulson, playing the football lineman he once was, tried to barrel through a $700 billion giveaway to his pals on Wall Street with no strings attached, on the basis of a three- page proposal. We’re still paying the price for Paulson’s letting the toxic securities stew in their own juices for months by refusing to isolate them in a bad bank or come up with a pricing mechanism.

No Doubt

Doubt is Outside Man’s enemy. CNBC’s Jim Cramer, presently the Obama administration’s most strident critic with a microphone, is funny, quick, entertaining, and frequently wrong as he conveys complete certainty about that which there can be none.

Conducting a carnival of animal, clown and other noises each night with a language only those who belong to the Church of Mad Money can understand, Cramer was a king during the years when the Dow approached 14,000, although he was off on many calls. Recently, he’s been as toxic as the derivatives Paulson left in Geithner’s in-box.

Shortly before Bear Stearns collapsed, Cramer said he believed in the Bear franchise. “At 69 bucks, I’m not giving up on the thing!” he said.

On the network of the Money Honey, which feasts on Geithner’s stumbling performances every day, geniuses extolled the virtues of Lehman Brothers shortly before it went poof.

If you are in favor of doing something to right the sinking ship of the economy (as opposed to the Republican plan of letting it fix itself with a few tax cuts), Geithner’s done nothing worse than express himself poorly and look like Eddie Haskell.

Mumblers, Bumblers

The question remains: Does Geithner need to recover from his halting public presentations and the all-too-accurate imitation on SNL before the economy can?

Fortunately, there is a long history of less-than-great communicators managing to communicate. People get used to mumblers and bumblers like George W. Bush, Barney Frank, John McCain and Al Gore (the communicating comeback of the decade.) Some great communicators — Mike Huckabee and Sarah Palin, another victim of SNL — don’t make it. Sometimes it’s the steak not the sizzle.

By yesterday, things seemed to be looking up, at least on the financial networks. Charlie Rose may be long-winded but he’s also soothing, and in one hour on his program, Geithner came across as someone on top of the situation. Geithner’s been crucified by the Dow slipping. It helped that the index rallied almost 400 points on Tuesday.

Then There’s Obama

And then there is Geithner’s boss, Barack Obama. Although he has the wordiness of a professor — the classic Inside Man — he has the charisma of an Outside one. Republicans portray the president, with each passing day and every decline in the S&P, as more and more responsible for the current crisis. Yet when Obama spoke to Congress two weeks ago, people told Gallup afterward that they felt more confident. In a recent Quinnipiac poll, 57 percent said they approve of the job Obama is doing handling the economy.

Geithner wouldn’t sign his bank bailout sketch so I could do my part to stir up economic activity by listing it on EBay. Inside Men don’t make nice, or need to. They’re not running for office, just running to save the world.

(Margaret Carlson, author of “Anyone Can Grow Up: How George Bush and I Made It to the White House” and former White House correspondent for Time magazine, is a Bloomberg News columnist. The opinions expressed are her own.)

Legislation to Yields Nearly $21 Billion in New Loans and Investment for Small Businesses

Download: 111th Small Business Committee Rules

Download: 111th Congress Small Business Committee Oversight Plan

WASHINGTON, D.C. -Rep. Nydia Velázquez (D-NY), the Chairwoman of the House Committee on Small Business, released the following statement following passage of the American Recovery and Reinvestment Act:

“The passage of this legislation is a victory for struggling entrepreneurs.  America’s small businesses have led our nation out of previous economic downturns and, given the right tools, they can do so again. 

“This package will use the Small Business Administration (SBA) to help small firms in three key ways.

“First, this legislation will make affordable credit available to small businesses.  The legislation will reduce to zero the fees on SBA-backed loans.  This will immediately make credit more affordable for small firms.  Importantly, we were able to ensure the priority for the fee reduction program is small business owners. 

“In addition, the legislation raises the portion of a loan that the Small Business Administration may guarantee.  Raising the guarantee directly encourages banks to lend, opening lines of credit to small businesses.

“The bill also contains provisions to unfreeze the secondary market for SBA-backed loans.  With the secondary market frozen, banks have been stuck with loans on their books, preventing them from lending to small businesses.  Fixing the secondary market will allow credit to flow and small firms to make investments that create jobs.

“Second, the bill will help small firms that are struggling with existing debt. The measure will establish a new ‘Small Business Stabilization Financing Program’ program at SBA.  This program will provide crucial support to those small businesses that are having trouble making payments.  Our Committee has heard from many firms who could be viable and grow again if they could only buy a little time.  This new program was designed with these firms in mind.  The conference report will also allow small firms to refinance existing debt through the SBA’s 504 lending program.  This will make debt more manageable for struggling firms.

 “Third, the legislation will spur investment in high-growth, small firms.  Specifically, the bill will streamline the Small Business Investment Company (SBIC) program to allow them to invest more flexibly. Simply put, SBIC’s will be able to invest more in firms already in their portfolios and expand their portfolios to invest in more firms. 

“Taken together, these initiatives are expected to result in nearly $21 billion in new investments and lending for small businesses, spurring the creation of 634,000 jobs.

“Last, but certainly not least, the recovery package targets much need tax relief to cash-strapped businesses.  This will put more money into the hands of small businesses, this year, so they can grow and create jobs. 

“All of these are important and necessary steps, and I look forward to seeing this bill enacted.  Still, more must be done.  In coming weeks, our Committee will continue working to assist small firms.  They are the backbone of our economy and we must continue fighting for them in Washington.” 

Summary

Small business provisions in the conference report for H.R. 1 will:

• Reduce to zero fees on SBA-backed loans.  At the urging of House Members, the conference report includes language requiring that fee reductions go to small business borrowers.
• Raise the percentage of a loan that the Small Business Administration (SBA) may guarantee from 85 percent to 90 percent, encouraging banks and private lenders to reenter the market for SBA-backed loans.
• Establish a new “Small Business Stabilization Financing Program” that will allow SBA to make no interest loans to firms that are struggling to make payments on existing debt.  
• Unfreeze the secondary market by allowing “broker-dealers” of SBA-backed loans to take out additional loans from SBA in order to purchase additional loans off banks’ books.  This will provide banks with liquidity so they can lend to small businesses again. 
• Allow SBA to guarantee existing debts in loan pools that are currently unguaranteed.  This, too, will provide liquidity in the secondary market so that banks begin lending again.
• Allow small businesses to refinance existing debts under the SBA’s 504 program.
• Streamline the Small Business Investment Company (SBIC) program to provide fast growing companies with equity capital they need to grow and create jobs.
• Ensure oversight by requiring the Government Accountability Office (GAO) to report to Congress on the implementation of the small business lending provisions in the stimulus.
• Provide $15 million to the SBA’s surety bond program, including larger bonding authority, to help small firms obtain construction related projects.

Provide $30 million for the SBA’s microloan program, which provides loans and technical assistance for low income entrepreneurs and laid-off workers who are starting their own business.

Obama picks Gregg for Commerce

By David Rogers

(POLITICO) Sen. Judd Gregg will be nominated as the new Commerce secretary Tuesday morning, giving President Obama a fresh independent voice in his Cabinet but at a huge cost to Republicans and the larger Senate.

The run-up to the nomination has focused on backroom deals, from New Hampshire’s statehouse to Washington, to preserve the balance of power in Congress. And Tuesday’s White House announcement is expected to be accompanied by one by New Hampshire Gov. John Lynch that will ensure that Gregg’s seat won’t switch to the Democrats before the 2010 elections.

But lost in the shuffle is the greater dynamic: Gregg himself and the fact that Obama, while talking a good game about bipartisanship, is draining the Senate of the very talent he needs to achieve this goal.

To a remarkable degree, Gregg has served as a trusted, behind-the scenes consigliore for every leader since the mid-’90s, from Mississippi’s Trent Lott to Bill Frist of Tennessee and now Kentucky’s Mitch McConnell. He is that Washington rarity: someone who thinks-often out loud- about issues but can also operate privately in giving advice and respecting the discretion of leaders.

“When everyone had said their piece, I would always turn to Judd and say, ‘Give us the contrarian view,’ and he would,” Lott told Politico. “He was loyal to his friends and not to have him, the Senate will be a lesser place. There’s that old joke when a House member goes to the Senate, the intellect of both bodies goes up. Well when Judd Gregg leaves, the Senate’s intellect will go down.”

Gregg’s record-in the House, as New Hampshire’s governor, and for 16 years in the Senate-has always been that of a fiscal conservative, albeit with more independence with time. Obama’s historic election and the immense economic dangers now facing the nation have clearly influenced his outlook, just as they have been two recurring themes in recent interviews.

“His election confirms our creed…His Inauguration is a renewal event,” Gregg said of the new president in December. More recently, he was impressed by Obama’s analysis of the economic crisis before a Senate Republican luncheon last week.

“His presentation was a tour de force. It was surely impressive and it was comprehensive,” Gregg said later. “I felt much better he had such a comprehensive understanding of what I see as the issue. He’s clearly moving forward aggressively on all the different fronts.”

For Gregg to cross over now and join the administration will make it harder for his fellow Republicans to demonize Obama and refuse to give the new president the running room he needs to put together his economic recovery plan.

Gregg has been critical himself of major elements in the president’s stimulus bill and argues for a greater emphasis on the housing crisis. But for him to be in the Cabinet, when the plan is actually implemented, could reassure Senate moderates that they can take a chance on the proposal.

“It’s a huge loss for the Senate. His institutional knowledge, political savvy, and financial expertise are irreplaceable,” said Sen. Susan Collins (R-Maine.) “But yes, it would make me feel better to have him there.”

A former Budget Committee chairman, Gregg has dealt with business-labor issues as a senior member of the Senate Health Education and Labor Committee, and from his perch on the Senate Appropriations Committee, he has a long familiarity with Commerce’s budget.

The Appropriations panel is also a common political base for Gregg and Senate Majority Leader Harry Reid (D-Nev.). The two men, who share the same mix of humor and irascibility, have grown closer over time and Reid included Gregg on a delegation to Central and South America two years ago.

Obama’s gain is not just a loss of Republicans but Reid too. And it follows on Obama’s decision to tap Colorado Sen. Ken Salazar for Interior secretary, costing Reid a faithful Democratic lieutenant who served as his eyes-and-ears in the caucus.

Much as Gregg’s departure makes it easier for Democrats to capture his seat next year, he is also the type of person Democrats need across the aisle to help craft compromises and corral Republican votes.

Those compromises are more difficult now because the number of GOP moderates is in steady decline. A year ago, Sen. Gordon Smith (R-Oregon) was a reliable centrist vote on the Senate Finance Committee. He’s gone now, which is why the White House and Finance Chairman Max Baucus (D-Mont) had to go to such lengths to secure the vote of Sen. Olympia Snow (R-Maine.) last week.

Gregg played precisely this role in building support for the Treasury’s financial rescue package last fall. Again he worked with the Obama team in holding onto Republican votes in a messy fight last month over the release of the second $350 billion.

“There aren’t many people who can made a deal and bring votes too. Gregg can,” said a Democratic aide. Asked if Obama was making his job harder by taking Salazar and now Gregg, Reid seemed amused-but didn’t dismiss the notion out of hand. “Others will show up,” he said smiling.

In turn, leaving the Senate for a Cabinet post will surely cost Gregg some of his precious independence. Much depends on what discretion Obama gives him to play a role in fiscal policy outside Commerce’s domain and to speak up when he disagrees with the direction taken by the administration.

With New Hampshire trending toward the Democrats, Gregg faced what promised to be a difficult re-election campaign in 2010. But he was no means doomed, given his political heritage in New Hampshire and standing on Appropriations where he has brought home money for his state. And as a former governor, he appears to have been attracted by going back into more of an executive role.

Obama’s Cabinet already has two Republicans: Defense Secretary Robert Gates, who was appointed by President George W. Bush and then asked by Obama to remain; and former Rep. Ray LaHood of Illinois, who chose not to run for re-election last November and was going home, when tapped as transportation secretary.

Neither comes close to the Republican leadership credentials of Gregg.

McConnell: GOP Needs a Better Sales Job

By Marc Ambinder

(The Atlantic) Here is the basic diagnosis of what ails the Republican Party from Dr. Mitch McConnell, the Senate minority leader.  The internal organs are fine. No problem with the composition of the blood that pumps through the party’s activist veins. The brain is top-notch — Republican ideas are well considered, broadly desired, and politically feasible. The body, however, looks ragged; the accent is too…regional (Southern?). The GOP needs to get some exercise. It needs a jot of cologne here, and maybe a hair transplant there.  McConnell subscribes to what might be called the “sales job” theory of Democratic dominance. That is — the message is fine; the techniques used to communicate it are not. The “sales job” theory is quite attractive to many Republicans because it relieves them of having to question whether Americans, at their corps, are beginning to distrust what the party stands for, what the party does, who the party is. What a relief! All that’s need are some cosmetics. Maybe it’s Mabeline. McConnell’s view is shared by many Republican current office-holders. It is not the view that Republican strategists tend to hold, and it certainly is not the view of the younger conservative intellectuals, like the Atlantic’s own Ross Douthat and Reihan Salam. The massive data compiled by Gallup about party identification suggests that the party has an identity problem.

Other evidence, including exit polls from 2006 and 2008, locate this problem at a microskeletal level: it cannot deal with globalization, with a flat world, with religious diversity, with institutional decay. Since the 1960s, the GOP’s DNA has dutifully replicated activist cells to inflame and attack on culture, and Democratic efforts to minimize the demands and pressure of culture haven’t worked. The selection of Sarah Palin got them replicatin’ again, but then reality — in the form of a global economic crisis — intruded, and Republicans couldn’t fight their way out of a plastic bag.

In his speech to the Republican National Committee today, McConnell offers mostly placebos.

“The first task, in my view, is to find the voters who’ve left the party. As we do this, the temptation for some will be to run from our principles or to dilute our message. I think that’s a temptation we need to resist. These people were Republican for a reason. You don’t get them back by pretending to something else. And you certainly don’t gain voters by running away from the ones that are most loyal. But it’s clear our message isn’t getting out to nearly as many people as it should. We need to give voters who’ve turned away a reason to take another look. And that takes a lot of work.”

He makes an interesting point about religionism; the sales job is the problem, not the product.

“We all hear a lot about how these things have affected our party in particular. We’re all concerned about the fact that the very wealthy and the very poor, the most and least educated, and a majority of minority voters, seem to have more or less stopped paying attention to us. And we should be concerned that, as a result of all this, the Republican Party seems to be slipping into a position of being more of a regional party than a national one. In politics, there’s a name for a regional party: it’s called a minority party. And I didn’t sign up to be a member of a regional party. I know no one in this room did either. As Republicans, we know that commonsense conservative principles aren’t regional. But I think we have to admit that our sales job has been. And in my view, that needs to change.”

McConnell says that Republicans need to better explain their principles, because “too often we’ve let others define us. And the image they’ve painted isn’t very pretty. Ask most people what Republicans think about immigrants, and they’ll say we fear them. Ask most people what we think about the environment, and they’ll say we don’t care about it. Ask most people what we think about the family, and they’ll tell you we don’t — until about a month before Election Day.”

Easier said that done; what, again, are those principles? Who made the decision to run against immigration? Which party decided that global warming was a liberal conspiracy? Who intervened in the Terri Schiavo case?  All of this is to say that Democrats might not be responsible for voters who conclude that Republicans are all these things. The party’s leadership, responding to a variety of pressures, chose to follow certain courses of action. The art of marketing had little to do with it.

“We need to communicate our ideas to everyone who ran away from the Republican Party in November — and to many others. And we need to show them that our policies are developed with a human being in view, not just an abstract principle. As we do this, we should avoid the false choice of being a party of moderates or conservatives. America is diverse. The two major parties should be too. But this doesn’t mean turning our backs on commonsense conservatism, or tailoring our positions to suit particular groups. Our principles are universal. They apply to everyone.”

These principles are what, specifically? And how universal are they?

“Every so often, there comes a time when a political party has to reexamine itself. For Republicans, now is such a time. For some, the work might seem daunting. It shouldn’t — because there are signs that a revival is already taking place.”

McConnell runs down some suggestions.

“Republicans need to explain that when it comes to government spending, it should be limited. And the taxpayer’s burden is our first concern, and that we support programs that create the conditions for individuals and families to flourish. On education, we need to explain that inner-city parents have the same rights to a good education for their kids that suburban parents do — and show them that Republicans will fight this battle until it’s won.”

“Workers need to know that we’re not anti-union — we’re pro employee. That means that when it comes to union elections, Republicans will protect a worker’s right to a secret ballot. On healthcare, we need to explain to people that the best health care in the world is worthless if people can’t afford it — and that Republican policies will drive down costs.”

“On energy independence, Republicans need to explain that our approach is the balanced one. If our twin goals are to keep prices low and reduce our dependence on foreign sources of oil, then we need to produce more, conserve more, and invest in the alternative and renewable fuels of the future. The Republican concept of finding more and using less is simple and sensible. People need to know about it. And on the environment, Republicans need to explain that the most effective way to protect the environment is to match our desire to protect it with our desire for prosperity.”

The deal here is that none of this language is new. Republicans have been saying these things for years. Back to the Gallup data: voters identify with the Democrats precisely because of what Republicans stood for; because of the choices their party made in the early part of this decade. Who in the party will make the modest suggestion that maybe it’s time the party stood for something different?

American Recovery and Reinvestment Act of 2009 (H.R. 1)

HIGHLIGHTS

1.  GREEN JOBS ACT: $500 Million
In 2007,  the Green Jobs Act signed into law. The Act authorizes federal support for green-collar job-training programs. But last year, Congress failed to appropriate the money. Now, President Obama and the House want to invest $500 million in these programs.

2.  WEATHERIZATION: $6.2 Billion
President Obama’s recovery package contains the largest weatherization investment in history, as well as funding for a number of other programs that will increase the energy efficiency of America’s buildings. Upgrading our buildings so that they protect us better from the weather means we can spend less energy heating and cooling them.

Download: American Recovery and Reinvestment Act of 2009

SUMMARY

H.R. 1 would specify appropriations for a wide range of federal programs and would increase or extend certain benefits payable under the Medicaid, unemployment compensation, and nutrition assistance programs. The legislation also would reduce individual and corporate income tax collections and make a variety of other changes to tax laws.

Assuming enactment in mid-February, CBO estimates that the bill would increase outlays by $92 billion during the remaining several months of fiscal year 2009, by $225 billion in fiscal year 2010 (which begins on October 1), by $159 billion in 2011, and by a total of $604 billion over the 2009-2019 period. That spending includes outlays from discretionary appropriations in Division A of the bill and direct spending resulting from Division B.

In addition, CBO and the Joint Committee on Taxation (JCT) estimate that enacting the provisions in Division B would reduce revenues by $76 billion in fiscal year 2009, by $131 billion in fiscal year 2010, and by a net of $212 billion over the 2009-2019 period.

Combining the spending and revenue effects of H.R. 1, CBO estimates that enacting the bill would increase federal budget deficits by $169 billion over the remaining months of fiscal year 2009, by $356 billion in 2010, by $174 billion in 2011, and by $816 billion over the 2009-2019 period.

CBO anticipates that implementation of H.R. 1 would have a noticeable impact on economic growth and employment in the next few years. Following longstanding Congressional budget procedures, however, this estimate does not address the potential budgetary effects of such changes in the economic outlook.

CBO has reviewed the nontax provisions of the bill for mandates as defined in the Unfunded Mandates Reform Act (UMRA). Those provisions contain both private-sector and intergovernmental mandates, with costs that CBO estimates would likely exceed the annual threshold established in UMRA for the private sector ($139 million in 2009, adjusted annually for inflation) and with costs that would be well below the annual threshold established for state, local, and tribal governments ($69 million in 2009, adjusted annually for inflation).

JCT has reviewed the tax provisions of the bill and has determined that they contain no intergovernmental mandates as defined by UMRA; it has concluded that they contain one private-sector mandate and that the costs required to comply with the mandate would significantly exceed the annual threshold established for private-sector mandates for 2009 and each of the following five years.

An ode to the FED: Frostbite victims tend not to dwell on the summertime perils of heatstroke

“The world ran out of trust in 2008- but there is no shortage of money because the Fed is printing like mad.  It’s the wrong approach, with potentially dire consequences“ – says James Grant

It is a sorry place at which we Americans find ourselves this post Obama inaugural.  The biggest names on Wall Street have gone to their rewards or into partnership with the U.S. Treasury. Foreigners stare wide-eyed from across the waters. A $50 Billion Ponzi scheme (baited with, of all things in this age of excess, the promise of low, spuriously predictable returns)?  Interest rates over which tiny Japanese rates fairly tower?  Regulatory policy seemingly set by a weather vane? A Federal Reserve that can’t make its mind:  Is it in the business of central banking or of central planning?  And to think – our disappointed foreign friends mutter – all of these enormities taking place under a Republican administration.

Trust itself entered a bear market in 2008, complementing and perhaps surpassing the selloffs in stocks, mortgages and commodities.  Never to be confused with angels, we humans seem to outdo ourselves when money is on the line.  So it is that Bernard Madoff, supposed pillar of the community, stands accused of perpetrating one of the greatest hoaxes since John Law discovered the inflationary possibilities of paper money in the early 18^th century.

Barely nudging Mr. Madoff out of the top of the news was the Federal Reserve’s announcement last Quarter that it intends to debase its own paper money.  The year just ended has been a time of confusion as much as it has been of loss.  But here, at least, was the bright beam of clarity.  Specifically, the Fed pledged to print dollars in unlimited volume and to trim its funds rate, if necessary, all the way to zero.  Nor would it rest on its laurels even at an interest rate low enough to drive the creditor class back to work.  It would, on the contrary, “continue to consider ways of using its balance sheet to further support credit markets and economic activity.”

Wall Street that day did handsprings.  Even government securities prices raced higher, as if somehow, Treasury bonds were not denominated in the currency with which the Fed had announced its intention to paper the face the earth.  Economic commentators praised the central bank’s determination to fight deflation – that is, to reinstate inflation.  All hands, including then President-elect Obama, seemed to agree that wholesale money-printing was the answer to the nation’s prayers.

One market, only, registered a protest.  The Fed’s declaration of inflationary intent knocked the dollar for a loop against gold and foreign currencies.  In many different languages and from many time zones came the question, “Tell me, again, now that the dollar yields so little, why do we own it?”

It was on Oct. 6, 1979, that then-Fed Chairman Paul A. Volcker vowed to print less money to bring down inflation.  So doing, he closed one monetary era and opened another.  With the recent promise to print much more money, the Federal Reserve of Ben S. Bernanke has opened its own new era.  Whether Mr. Bernanke’s policy of debasement will lead to as happy an outcome as that which crowned the Volcker anti-inflation initiative is, however, doubtful.  Whatever the road to riches might be paved with, it isn’t little green pieces of paper stamped “legal tender.”

Our troubles, over which we will certainly prevail, stem from a basic contradiction.  The dollar is the world’s currency, yet the Fed is America’s central bank.  Mr. Bernanke’s remit is to promote low inflation; high employment and solvent finance-in the 50 states.  He wishes the Chinese well, of course, and the French and the Singaporeans and all the rest besides, but they don’t pay his salary.

They do, however, buy the U.S Treasury’s bonds, which frames the emerging American dilemma.  If the Fed is going to create boatloads of depreciating, non-yielding dollar bills, who will absorb them?  Who will finance the Obama administration’s looming titanic fiscal deficits?  Who will finance America’s annual surplus of consumption over production (after 25 more or less continuous years, almost a national trait)? Inflation is a kind of governmentally sanctioned white-collar crime.  Every crime needs dupe.  Now that the Fed has announced its plan to deceive, where will it find its victims?  Mr. Bernanke has good reason to worry about the economy.  We all do.  In the boom, superabundance of mispriced debt led countless people down innumerable blind investment alleys.

E-Z credit financed bubbles in real estate, commodities, mortgage-backed securities and a myriad of other assets.  It punished saving and encouraged speculation.  Imagine a man at the top of a stepladder.  He is up on his toes reaching for something.  Call that something “yield.”  Call the Stepladder “leverage.”  Now kick the ladder away.  The man falls, pieces of debt crashing to the floor around him.  The Fed, watching this preventable accident unfold, rushes to the scene too late.  Not only did Bernanke et al. not see it coming, but they actually egged the man higher.  You will recall the ultra-low interest rates of the early 2000s.   The fed imposed them to speed recovery from an earlier accident, this one involving a man up on a stepladder reaching technology stocks.

The underlying cause of these mishaps is the dollar and the central bank that manipulates it.  In ages past, it was so simple.  A central banker had one job only, and that was to assure that the currency under his care was exchangeable into gold at the lawfully stipulated rate.  It was his office to make the public indifferent between currencies or gold.  In a crisis, the banker’s job description expanded to permit emergency lending against good collateral at a high rate of interest.  But no self-respecting central banker did much more.  Certainly, none arrogated to himself the job of steering the economy by fixing an interest rate.  None, I believe, had an economist on payroll.  None facilitated deficit spending by buying up his government’s bond.  None cared about the average level of prices, which rose in wartime and sank in peacetime.  It sank in peacetime because technological progress and the opening of new regions to agricultural production made merchandise and commodities cheaper and more abundant.

Not everyone agreed that these arrangements were heaven-sent.  In comparison to the rigor of the gold standard, paper money seemed, to many, and intelligent and forgiving alternative. In 1878, a committee of the House of Representatives was formed to investigate the causes of the suffering of working people in the depression that was five years old and counting.  Not a few witnesses pleaded for the creation of more greenbacks.  They asked that the government not go through with its plan to return to the gold standard in 1879.  But the nation did return to gold – it had financed the Civil War with paper money – and the depression ended in the very same year.

Gold is a hard master, and a capricious one, too, insofar as growth in the world’s monetary base depends on the enterprise of mining engineers.  But, as we have seen lately, there is no caprice like the caprice of sleep-deprived Mandarins improvising a monetary solution to a credit crisis (or, for that matter, of fully rested Mandarins setting interest rates by the lights of their econometric models).

The times were hard in the 1870s and, for that matter, again in the 1980s, but Americans repeatedly spurned the Populist cries for a dollar you didn’t have to dig out of the ground but could rather print by the job lot.  “If the Government can create money,” as hard-money propagandist put it in an 1892 broadside entitled “Cheap Money,” “why should not it create all that everybody wants?  Why should anybody work for a living?” And-in the most prescient rhetorical question-he went on to ask,”Why should we have any limit put to the volume of our currency?”

A couple of panics later, the Federal Reserve came along – the year was 1913.  Promoters of the legislation to establish America’s new central bank protested that they wanted no soft currency.  The dollar would continue to be exchangeable into gold at the customary rate of $20.67 an ounce.  But, they added, under the Fed’s enlightened stewardship, the currency would become “expansive.” Accordion-fashion, the number of dollars in circulation would expand or contract according to the needs of commerce and agriculture.

Elihu Root, Republican senator from New York, thought he smelled a rat.   Anticipating the credit inflations of the future and recalling the disturbances of the past, Mr. Root attacked the bill in this fashion “Little by little, business is enlarged with easy money.  With the exhaustless reservoir of the Government of the United States furnishing easy money, the sales increase, the businesses enlarge, more new enterprises are started, the spirit of optimism pervade the   community. “Bankers are not free from it,” Mr. Root went on.  “They are human.  The members of the Federal Reserve board will not be free of it.  They are human….Everyone is making money.  Everyone is growing rich.  It goes up and up, the margin between costs and sales continually growing smaller as a result of the operation of inevitable laws, until finally someone whose judgment was bad, someone whose capacity for business was small, breaks; and as he falls he hits the next brick in the row, and then another, and then another, and down comes the whole structure.

“That, sir,” Mr. Root concluded, “is no dream.  That is the history of every movement of inflation since the world’s business began, and it is the history of many a period in our own country.  That is what happened to greater or less degree before the panic of 1837, of 1857, of 1873, of 1893 and of 1907.  The precise formula which the students of economic movements have evolved to describe the reason the crash following the universals process is that when credit exceeds the legitimate demands of the country the currency becomes suspected and gold leaves the country.”

Little did Mr. Root suspect that the dollar would lose its gold backing altogether – that starting in 1971, there would be nothing behind it more than the good intentions of the U.S. government and (somewhat more substantively) the demonstrated strength of the U. S. economy.  Still less could he have guessed that the world would nonetheless fall in love with that uncollateralized piece of paper or – even more astoundingly-that the United States would enjoy so great a reservoir of good will that it would be allowed to borrow its way to a net international investment position of minus $2.44 trillion (17.64 trillion of foreign assets held by Americans vs. $20.08 trillion of American assets held by foreigners).  “It goes up and up,” Mr. Root said of the inflationary cycle, but just how high he could not have dreamt.

Knowledge of the precepts of classical central banking prepared no one to understand, much less anticipate, the Fed’s conduct in the credit crackup.  The central bank is lending freely, all right, but not at the stipulated “high” interest rate.  As a matter of fact, it is starting to lend at a  rate below which there is not positive rate.  The gold standard was objective.  Modern monetary management is subjective (under Alan Greenspan, it was intuitive.) The gold standard was rules-based.  The 21^st century Fed goes with what works – or seems to work.  What it hopes is going to work for the fellow who fell off the stepladder is more debt and more dollars.  Just how much of each can be found every Thursday evening on the Fed’s own Web site.  Open up form H4.1 and prepare to be amazed. Since Labor Day, the Fed’s assets have zoomed to 2.31 trillion form $905.7 billion.  And what is the significance of this stunning rate of asset growth?  Simply this:  The Fed pays for it assets with freshly made dollars.  It conjures them into existence on a computer; “printing” is a figure of speech.

In this crisis, the Fed’s assets have grown much faster than its capital.  The truth is that the Federal Reserve is itself a highly leveraged financial institution.  The flagship branch of the 12-bank system, the Federal Reserve Bank of New York, shows assets of $1.3 trillion and capital of just $12.2 billion.  Its leverage ratio, a mere $0.9%, is less than one-third of that prescribed for banks in the private sector.  Such a thin film of protection would present no special risk if the bank managed by Timothy F. Geithner, The Treasury secretary-designate, owned only short-dated Treasuries.  However, the mystery meat acquired from Bear Stearns and AIG foot to $66.6 billion.  A write down of the 18.3% in the value of those risky portfolios would erase the New York Fed’s capital account.  In congressional testimony eight years ago, Laurence Meyer, then a Fed governor, tried to allay any such concerns (which then must have seemed remote, indeed). “Creditors of central banks….are at no risk of a loss because the central bank can always create additional currency to meet any obligation denominated in that currency,” he soothingly reminded his listeners. Yes, today’s policy makers allow, there are risks to “creating” a trillion or so of new currency every few months, but that is tomorrow’s worry.  On today’s agenda is a deflationary abyss.

But the seasons of finance are unpredictable.  Prescience is rare enough in the private sector.  It is almost unheard of in Washington. The credit troubles took the Fed unawares.  So, likely, will the outbreak the next inflations.   Already the stars are aligned for a doozy.  Not only the Fed, but also the other leading central banks are frantically ramping up money production. Simultaneously, miners and oil producers are ramping down commodity production-as is, for instance, is Rio Tinto, the heavily encumbered mining giant, which the other day disclosed 14,000 layoffs and a $5 billion cut back in capital expenditure.  Come the economic recovery, resource producers will certainly increase output.  But it is far less certain that, once the cycle turns, the central banks will punctually tighten.

The public has been slow to anger in this costliest and scariest of post World War II financial crises.  Wall Street and the debt ratings agencies have come in for well deserved castigation.  But pointing fingers rarely find the Federal Reserve, whose low, low interest rates helped to set house prices levitating in the first place.  After Mr. Bernanke gets a good night’s sleep, he should be called to account for once again cutting interest rates at the expense of the long-suffering (and possibly hungry) savers.  He should be asked to explain how the central-banking methods of the paper-dollar era represent any improvement, either in practice or theory, over the rigor, elegance, simplicity and predictability of the gold standard.  He should be directed to read aloud the text of critique by Elihu Root and explain where, if at all, the old gentleman went wrong.  Finally, he should be directed to put himself into the shoes of a foreign holder of U.S. dollars.  “Tell us, Mr. Bernanke,” a congressman might consider asking him, “If you had the choice, would you hold dollars?  And may I remind you, Mr. Chairman, that you are under oath?”

Burris sworn in

(Chicago Tribune)

Marking the end of a bizarre political odyssey, Roland Burris was sworn in as the junior senator from Illinois today, taking his place among a body that not long ago vowed to bar him from its ranks.

Burris took the oath of office in the Senate chamber this afternoon, little more than week after Democrats rejected his credentials as a senator because he was appointed by embattled Illinois Gov. Rod Blagojevich.

In sharp contrast to the scene last week, when a disappointed and defiant Burris held a lonely news conference in the rain outside the Capitol, today he was surrounded by fellow Democratic senators, who shook his hand and congratulated him.

Illinois Sen. Dick Durbin, who previously joined Senate leadership in a bid to block Burris from assuming office, escorted the former Illinois comptroller to the front of the chamber. Burris held a large Bible in his hand. Vice President Dick Cheney administered the oath shortly after 2 p.m. Senators erupted in applause and members of the gallery above cheered.

Durbin then praised Burris in a lengthy speech on the Senate floor.

“Roland Burris is a good man and a dedicated public servant,” Durbin said. “I know this was a rocky road.”

After the ceremony, Burris emerged from the Senate chamber, surrounded by friends, family, reporters and cameras. When asked how he felt, he said: “Terrific! Terrific!”

The swearing-in ceremony then was repeated for friends and family in the Old Senate Chamber.

The new senator takes his place as the only African-American in the body.

Senate Majority Leader Harry Reid, who last month publicly declared that no Blagojevich appointee would be seated to replace Barack Obama, said in a statement: “There are many paths to the United States Senate. It is fair to say that the path that brought our new colleague from Illinois to us was unique. Whatever complications surrounded his appointment, we made it clear from the beginning — both publicly and privately — that our concern was never with him.”

Stabenow Pushes Legislation that Invests in Green Technology and Creates Middle-Class Jobs

FOR IMMEDIATE RELEASE

January 14, 2009

Contact: Press Office

Phone: 202-224-4822

Encourages President-elect to Use Legislation as Framework in Economic Recovery

WASHINGTON -U.S. Senator Debbie Stabenow (D-MI), a member of the Senate Finance and Energy Committees, today announced her Green Jobs and Infrastructure Act (S.224) that would create middle-class, green jobs by investing in green technology here at home. Stabenow sent a letter today to President-Elect Obama encouraging him to use her bill as a framework in the economic recovery package. Stabenow also led a coalition of 18 Senators who sent a similar letter to Senate Majority Leader Harry Reid and the Senate Appropriations Committee back in December.

“By making real investments in the domestic production of advanced batteries, and other alternative energy technologies, we can create good-paying, middle-class American jobs,” said Stabenow. “This legislation will invest in green technology, innovation and production, here at home, to ensure we don’t move from a dependence on foreign oil to a dependence on foreign technology.”

This major national investment in green manufacturing, advanced batteries for vehicles, energy efficiency and green job training could create or retain more than 1.2 million jobs, including 60,000 direct jobs in construction and 274,000 direct jobs in manufacturing. Such an investment could also generate $2.3 billion in residential and commercial energy savings and $120 billion in industry revenue from increased demand for products and services.

Specifically, this legislation includes:

Clean Tech Manufacturing Incentives (loans)

Aims at helping our manufacturing sector retool or invest in new plans to produce clean technology and low carbon products or invest in new plants to produce these products and operate more efficiently. This will rebuild domestic manufacturing and create more than 250,000 direct manufacturing jobs, as well as and additional 725,000 indirect jobs.

Advanced Batteries (at least $1 billion)

Increases research and production of advanced battery technologies, including lithium ion batteries and hybrid electrical systems. Without these critical investments, the United States will fall behind our trading rivals in what promises to be one of the most important technologies of the future – advanced batteries.

Green Jobs Workforce Training Program ($625 million)

Provides competitive grants to non-profits and private partnerships to train workers that will lead to an expanded energy efficiency and renewable energy industry workforce. This investment could create millions of jobs over the next ten years.

Energy Efficiency and Conservation Block Grants ($10 billion)

Provides cities, counties and states with resources needed to promote alternative energy usage and energy efficiencies. These block grants will get locally driven projects off the ground and have the potential to create 60,000 jobs in construction and installation over the next year, 24,000 jobs in material manufacturing as well as an additional 183,600 indirect jobs in other sectors.

Stabenow’s bill is part of her broader 21st Century Green Manufacturing Plan that will invigorate the economy. Stabenow’s plan also includes her Green-Collar Jobs Initiative, which was included in the Senate Budget Resolution last year, as well as tax incentives and other programs that create quality green-collar jobs, address global competitiveness, develop clean technology, and increase our energy security.

Full text of the letter to President-elect Obama below:

Download: Stabenow Letter to Obama

January 14, 2009

President-Elect Barack Obama

Obama Presidential Transition Office

451 6th Street, NW

Washington, D.C. 20001

Dear President-Elect Obama,

As Congress and the new Administration work together to evaluate options for reinvigorating the struggling economy, I write to urge you to include my bill (S.224), the Green Jobs and Infrastructure Act of 2009 to stimulate new green jobs in the economy. These programs will not only invigorate the economy and create quality green-collar jobs, but they will increase our energy security, and play a critical role in our transition to a clean energy economy by reducing greenhouse gas emissions.

This major national investment in green manufacturing, energy efficiency and job training could create or retain more than 1.2 million jobs, including 60,000 direct jobs in construction and 274,000 direct jobs in manufacturing. Such an investment could also generate $2.3 billion in residential and commercial energy savings and $120 billion in industry revenue from increased demand for products and services.

The priority green job programs for economic recovery legislation are:

1) Clean Tech Manufacturing Incentives (loans)- We need a 21st century plan for manufacturing, and the production of new clean technology and low carbon products is not only a necessity for the environment but an economic opportunity. Therefore, a large-scale loan program aimed at helping our manufacturing sector retool or invest in new plants to produce clean tech products and operate more efficiently should be part of an economic stimulus. This will rebuild domestic manufacturing and create more than 250,000 direct manufacturing jobs, as well as an additional 725,000 indirect jobs.

2) Advanced Batteries (at least $1 billion)-As we move towards a low carbon economy, the electrification of vehicles is a priority. However, we cannot move from a dependency on foreign oil to a dependency on foreign-made technology. We therefore request that you allocate at least $1 billion for grant programs to help incent the domestic manufacturing of advanced batteries that were part of the Energy Independence and Security Act of 2007 (P.L.110-140). This will help jump-start the industry and build a globally competitive green vehicle technology workforce.

3) Energy Efficiency & Conservation Block Grants ($10 billion) – This program, modeled after the successful Community Development Block Grants, would provide support to cities, counties, states and tribes for on-the-ground efforts to achieve greater energy efficiency, increase the use of renewables, and lower greenhouse gas emissions. Our cities drive our national economy, accounting for more than 75 percent of economic output. This makes cities the cheapest, easiest places to save energy. Funding this program will help get locally driven projects off the ground, saving both money and energy, with the added benefit of immediately putting people to work. These block grants have the potential to create 60,000 jobs in construction and installation over the next year, 24,000 jobs in materials manufacturing, as well as an additional 183,600 indirect jobs in other sectors and could generate up to $2.3 billion in energy savings each year.

4) Green Jobs Workforce Training Program ($625 million)-A major national investment in renewable energy and energy efficiency could create millions of jobs over the next ten years. According to the National Renewable Energy Laboratory the lack of skilled workers is the largest non-technical barrier to the advancement of renewable energy and energy efficiency technologies. Training America’s workforce in energy efficiency and renewable energy is a winning strategy. Our economy will benefit by the investment in high-growth and demand fields. Our manufacturing sector will benefit from keeping these jobs in the United States. And finally, families from all socio-economic backgrounds will benefit from good-paying, high-skilled jobs and reduced energy bills.

This investment would create millions of new jobs in the immediate future, help end our dependence on foreign oil, rebuild our manufacturing sector, and reduce greenhouse gas emissions. We urge you to support funding for these policies in a comprehensive economic recovery act.

Sincerely,

U.S. Senator Debbie Stabenow

Entrepreneurs discuss state of the economy, policies to promote growth

For Immediate Release

News from the Committee on Small Business

Nydia M. Velázquez, Chairwoman

January 14, 2009 (202) 226-3636

Committee Explores Role of Small Business in Economic Recovery

WASHINGTON, D.C. – As talks on economic recovery legislation continue, a key Congressional Committee today heard about the issues that small businesses face in weathering the economic recession and helping to lead the nation toward economic recovery.  As the backbone of the economy, creating 80 percent of all new jobs and driving innovation in virtually every field, small businesses will be vital to the nation’s economic turnaround.

“Small businesses will be instrumental to our nation’s economic recovery,” said Congresswoman Nydia M. Velázquez (D-NY), Chairwoman of the House Small Business Committee.  “It is important that, as Congress moves forward in preparing economic stimulus legislation, we craft policies that help small businesses stay afloat and play their traditional role of a catalyst for new jobs and economic recovery.”

Entrepreneurs from a wide range of economic sectors appeared before the Committee to discuss how various policies could contribute to economic growth and recovery.   Industry experts testified to how infrastructure projects not only benefit companies that obtain contracts for public works, but also discussed how strengthened infrastructure can promote the nation’s long term economic health.  Similarly, panelists said the deployment of broadband and advanced communications services can create immediate job growth, while providing long term productivity benefits.  Construction and energy industry representatives described the steps Congress could take to help them play a role in economic recovery.  Concerning frozen financial markets, the witnesses also urged Congress to better leverage the Small Business Administration to restore lending and help unlock credit markets.  Taken together, the panelists made the case that any recovery plan must address the needs of this nation’s entrepreneurs.

“As we work to fix our ailing economy, we must not forget that our prosperity begins with Main Street entrepreneurs in communities across the country,” said Chairwoman Velázquez. “If we are going to bring our economy back on track, we’re going to need to promote innovation and job creation for our nation’s small businesses.”

The hearing comes as Congress is working to prepare legislation to jump-start the nation’s economy.  With the country reeling from soaring unemployment, and the National Bureau of Economic Research having officially declared the nation in a recession, Congress is expected to move economic stimulus legislation shortly.

Snowe, Kerry, Landrieu Tout Bipartisan Bill to Provide Immediate Tax Relief for American Small Businesses

Washington, D.C. – Senator Olympia J. Snowe (R-Maine), the Ranking Member of the Committee on Small Business and Entrepreneurship, Senator John Kerry (D-Mass.), the outgoing Chairman of the Committee, and Senator Mary Landrieu (D-La.), the incoming Chair, today introduced the Small Business Act of 2009. This bipartisan legislation provides immediate tax relief for small businesses making vital investments in new equipment to further weather the current economic storm.

“Expensing has long served as a critical tool to grow the economy and create new jobs. At a time in which we find ourselves in a recession and our nation’s small businesses are having trouble finding capital to make job-creating new investments, we simply cannot allow this tax incentive to expire,” Senator Snowe said. “By increasing small business expensing and establishing a five year carryback for net operating losses, this measure will pack a powerful punch and assist America’s 26 million small firms that represent 99.7 of all employers.”

“This law has helped small businesses acquire the tools they need to thrive and grow,” said Senator Kerry. “Extending the provision isn’t only justified, it’s sorely needed in an economic climate where small businesses are hurting.”

“It is my hope that Congress will move quickly on this legislation to ensure that our nation’s small businesses can weather the current economic downturn,” Senator Landrieu said. “By increasing the expensing limits and extending the net operating loss carryback period, we can provide timely and much needed relief to our small businesses.”

Last year, Congress passed and the president signed into law the Economic Stimulus Act of 2008, which allowed American small businesses to expense up to $250,000 of their investments, including the purchase of new equipment through 2009. The Snowe-Kerry initiative would extend Section 179 of the tax code, increased small business expensing, through 2010 and establish a five year carryback for net operating losses.

Open Letter to Congress: Keep the Economic Stimulus Bill Earmark Free

January 3, 2009

The Honorable Al Green + The Honorable Sheila Jackson Lee
House of Representatives
425 Cannon House Office Building
Washington, DC 20515‑4309

Re: Keep the Economic Stimulus Bill Earmark‑Free

Dear Representatives:

As a concerned constituent, I am writing to urge you to keep any economic stimulus bill earmark‑free.   With estimates of a possible stimulus bill running as high as $850 billion, it is essential that these spending decisions be made on need and merit, not political muscle.

That is why I request the following:

1. That you pledge to keep any final stimulus bill earmark‑free.
2. That you prominently publish on your website all project requests you receive.

Taxpayers are in the midst of an historic economic crisis.  Any further stimulus efforts must be undertaken in an open, transparent manner.

Thank you for considering my request.

Sincerely,

Rudy Sutherland | Small Business Owner & Evangelist

8-PAC

A Small Business Perspective on the “Troubled Asset Relief Program” (TARP) and Fannie Mae and Freddie Mac

By Samuel D. Bornstein

Introduction

The survey, conducted by the National Association for the Self-Employed (NASE) in coordination with Prof. Samuel D. Bornstein and Jung I. Song, CPA of Bornstein & Song, CPAs and Consultants, is the first to provide dramatic evidence of small business involvement in the “toxic” mortgage crisis.  One key goal of this survey was to shed light on research completed by Prof. Bornstein that a significant number of small businesses are at-risk of mortgage default, due to the fact that they have “toxic” mortgages such as Alt-A, Alt-A ARMs, Option ARMs, Interest-Only, etc.  Whereas subprime mortgages were issued to borrowers with low credit scores, these “toxic” mortgages were targeted to small business owners who were prime and near-prime borrowers.

The results of this survey should highlight the fact that small business holds the key to mitigating the losses on the defaulting “Troubled Assets” in the TARP and Fannie Mae and Freddie Mac.

Background:   “Perfect Storm”, Small Business, “Toxic” Mortgages, and the TARP

During the period 2002 to 2007, it was estimated that 80 percent of homeowners refinanced their homes.  Booming home values and weak or non-existent mortgage underwriting standards provided the “perfect storm” where both lender and borrower were happy.  Small business owners were drawn into these mortgages to quench their continuous need for capital and prompted easy access to cash.

Small business owners were attracted by the initially enticing “teaser rates” with low monthly mortgage payments but were unaware of the “payment shock” that would follow at “Reset”.  They were especially targeted for these loans which required little or no documentation of income which appealed to many small business owners who previously were unable to qualify.  It was too-good-to-be-true.

Small Business Holds Approximately 3,709,800 of “Toxic” Mortgages

According to this survey, it is estimated that 3,709,800 small business owners hold Alt-A and other “toxic” mortgages that are scheduled to “Reset” beginning in 4^th Quarter 2008 and continue through 2012.  These small business owners will be at-risk for “payment shock” and default as their monthly mortgage payments skyrocket.

According to Inside Mortgage Finance, a trade publication in Bethesda, Maryland, “toxic” mortgages total approx. $1 trillion. The magnitude of this crisis exceeds the subprime mortgage crisis which had $855 billion of subprime loans outstanding.

The resulting defaults will be the cause of the upcoming second “tsunami” wave of foreclosures that will dwarf the subprime crisis and will take many homeowners and small business owners.

“Toxic” Mortgages are the “Troubled Assets” in the TARP

These “toxic” mortgages are the underlying assets which are the basis for the mortgage backed securities and other derivative investments that are the “Troubled Assets” of the TARP and leveraged into investments valued in the trillions of dollars worldwide.

To date, Moody’s, S&P, Fitch, and other rating agencies have already downgraded Alt-A and other “toxic” mortgages which have resulted in hundreds of billions of dollars of losses.  There is more to come.   Many of these mortgages have already defaulted and losses are expected to surpass the levels of the subprime foreclosures.

“Toxic” Mortgages: Impact on Fannie Mae and Freddie Mac Losses

Since the US government is now covering the losses of Fannie Mae and Freddie Mac, the enormity of the impending losses of these “toxic” mortgages should draw attention to the fact that small business owners hold a significant portion of these mortgages that are expected to default.

Fannie and Freddie maintain investment portfolios that are burdened with these “toxic” mortgages.  In November 2008, Fannie Mae and Freddie Mac released third quarter 2008 results which showed losses of $29 Billion and $25 Billion, respectively.  According to Fannie Mae and Freddie Mac, the higher risk loan types, such as Alt-A, Option ARMs, Interest-Only, etc. were responsible.

Fannie Mae reported “toxic” mortgages, representing approximately 28 percent of the single-family mortgage portfolio accounted for approximately 72 percent of single-family mortgage losses.

Freddie Mac reported “toxic” mortgages representing approximately 10 percent of the single-family mortgage portfolio accounted for approximately 50 percent of single-family mortgage losses.

The Economic Impact of Small Business Mortgage Defaults on Job Losses

It is a tragedy when an individual borrower defaults on the mortgage and loses his/her home.  The tragedy is magnified when the borrower is a small business owner, employing from 1 to 10 employees.   The loss of jobs related to mortgage defaults and the resulting business failures will further weaken our economy and prolong the recession.

Job retention is as important as job creation.  The small business owners are at great risk for their survival, as they must contend with personal and business debt, the recession, and the continuing forces of small business failure which have been exacerbated by the credit crunch and financial crisis.

In good times, small business operates under a cloud of risk for small business failure.   According to Dun & Bradstreet, small businesses have only a 37 percent chance of surviving four years.  The failure rate for new small businesses is approximately 70 to 80 percent in the first year, and only about half of those that survive the first year will remain in business the next five years.  An economic downturn will dramatically increase the rate of small business failure and job losses.

Conclusion

Small business is the job creation engine of our economy.  Proactive efforts must be taken to provide small business owners with immediate and specific financial guidance, combined with other measures, to avoid default on mortgages and other debts in this critical and challenging financial crisis.

~

Summary of Survey Results

This NASE survey was directed to its members who are self-employed small business owners. According to a report prepared for the Small Business Administration’s Office of Advocacy, the number of self-employed small business owners reached 16.2 million in 2007.  It is useful to extrapolate the results of this survey using this number to determine the number of self-employed business owners who are At-Risk of default, foreclosure, and business disruption or failure.

“Toxic” Mortgages and Reset:

• 22.9 % (3,709,800* At-Risk) of all self-employed business owners used risky or “toxic” mortgages or refinancing that are scheduled to “Reset”.

Note: Although Fixed-rate mortgages are not “toxic” mortgages, they are at-risk of default due to the economic crisis and small business failure.

• 19.2 % (3,110,400* At-Risk) of all self-employed business owners are at-risk of “payment shock“. They do not know the monthly mortgage payment that they will be required to pay at “Reset”.
• 18.4 % (2,980,800* At-Risk) of all self-employed business owners are very worried about the monthly mortgage payment due at “Reset”.
• 7.9 % (1,279,800* Immediate Risk of Default) of all self-employed business owners have already missed one to three or more monthly mortgage payments at this date before the expected resets in 2009 to 2012.

Small Business Financing:

Each type of financing has inherent risks which put the small business owner at-risk of failure.  In this financial meltdown, home equity financing and lines of credit have been frozen or withdrawn, while credit card debt has been subjected to extra fees and higher interest rates. These forms of financing may become unavailable or too expensive to maintain which will lead to small business failure.   Credit card debt will be the next bubble to burst in the economic crisis.

• 33.9 % (5,491,800* At-Risk) of all self-employed business owners used their home for mortgage or refinancing to get cash for personal or business expenses.
• 49 % of all self-employed businesses used various forms of debt (mortgage, home equity, credit card, etc) to start their businesses. Credit Card Debt was 27.9 % of total debt.
• 66.9 % of all self-employed businesses used various forms of debt (mortgage, home equity, credit card, etc) for additional cash for their business operations.  Credit Card Debt was 39.3 % of total debt.

* Based upon 16.2 million in 2007 according to a report prepared for the SBA Office of advocacy.

Link: http://www.sba.gov/advo/research/profiles/08us.pdf

About the Author:

Samuel D. Bornstein | Professor of Accounting and Taxation | School of Business, Kean University, Union, NJ

Bornstein & Song, CPAs & Consultants, Oakhurst, NJ

Phone: (732) 493-4799

Email: bornsteinsong@aol.com

2009 SBA Agenda: Office of Minority Small Business Development

(Senator John Kerry)… All Americans deserve to be given an equal opportunity to pursue the American dream and a top priority for the Committee on Small Business and Entrepreneurship is to foster entrepreneurship across all sectors of our society. However, while Hispanics are opening businesses at three times the national average and entrepreneurship has spurred the expansion of the black middle class, minorities are receiving disproportionately fewer small business loans and federal contracts than non-minority business owners.

The Committee is working on bipartisan legislation that will create an Office of Minority Small Business Development at the Small Business Administration to advocate on behalf of minority-owned small businesses, increase the number of loans they receive, and ensure they have a level playing field to win federal contracts. Additional legislation will help foster entrepreneurship as a career option for minority students by providing competitive grants to Historically Black Colleges and Universities, Tribal Colleges and Hispanic-Serving Institutions to develop entrepreneurial curricula and increase the number of minority-owned small businesses in the 21st century.

Players:

• Small Business Administrator, Karen Gordon Mills 
• Chairwoman of the Senate Committee on Small Business and Entrepreneurship, Sen. Mary Landrieu (D-La.) 
• House Small Business Committee, Chairwoman, Nydia M. Velázquez (D. Ny)

The stage is set…

8-PAC Weekly Wastebasket: Banking Bailout Bucks

This week the Treasury Department released $125 billion of the $700 billion bailout package to nine banks. This cash infusion will buy taxpayers preferred shares in the banks and increase the capital and liquidity at those institutions. Already, more than thirty banks have received or been promised $163 billion.

But what are taxpayers really getting for this money? The promise that was made in the bailout was that if taxpayers provided cash to relatively healthy banks, these banks would start lending again, defrosting of the frozen credit markets.

But because Treasury wants the banks to take the money, they have attached fairly weak strings. There is no actual requirement to lend the money provided by the feds and there are some weak restrictions on executive compensation. While Treasury has begged the banks not to sit on the money, it is entirely up to them whether they actually use it to lend more money out, or pay dividends, or use it as a cushion. And so far, the money is going to pay either bank dividends, satisfy old debts, or to shore up their bottom lines, none of which address the underlying problem of the frozen credit markets. We get it-banks are a business and see their job as looking out for their shareholders.   But now that taxpayers are significant investors, they should be working in the nation’s interests as well.

Government officials have been quick to point out that they don’t want the strings attached to the funds to be so onerous that no one wants the money. Last week, Neel Kashkari, the official charged with managing the bailout, warned the Senate Banking Committee that “if we came in with very specific guidance on you must do this, you must do that, we were afraid that we would discourage firms — discourage healthy institutions from participating.”

But there is a difference between onerous and non-existent. We can’t afford to provide money for nothing. The banks and other borrowers are asking taxpayers for the money, they need to have some responsibility too. Using nearly half of the $163 billion to pay dividends to stockholders, instead of kick-starting the credit markets, leaves taxpayers with the short-end of the stick.

Another reason to have strings attached is that easy money attracts flies. Already, non-financial sector industries, such as the automakers, are lining up for dollars. And many in the government seem to be inclined to help, arguing that since the automakers have financing arms they are banks – except of course their main business is to make cars.

By moving into other sectors of the economy, Uncle Sam is poised to enter the tricky world of picking winners and losers among industries. Helping banks is one thing – money is fungible and providing cash infusions provides grease for the whole financial system. But deciding to directly bailout American automakers could lead down the primrose path for cash injections into large sectors of the economy. Now that taxpayers have invested $700 billion as part of our efforts to limit this economic downturn and get our economy back on track, government officials and congressional leaders need to send a resounding message to Wall Street-stop sitting on your hands and get back to work. Any bank that takes a piece of this $700 billion pie must make it their patriotic duty and start moving the money again.

Let us know what you think.

Sen. Stevens guilty on all counts, career in peril

Sen. Ted Stevens, R-Alaska, and his wife Catherine Stevens, arrive at Federal Court in Washington, Monday, Oct. 27, 2008, Monday, Oct. 27,2008. Stevens was convicted of lying about free home renovations and other gifts he received from a wealthy oil contractor. (AP Photo/Manuel Balce Ceneta) 

Alaska Sen. Ted Stevens was convicted of seven corruption charges Monday in a trial that threatened to end the 40-year career of Alaska’s political patriarch in disgrace. The verdict, coming barely a week before Election Day, increased Stevens’ difficulty in winning what already was a difficult race against Democratic challenger Mark Begich. Democrats hope to seize the once reliably Republican seat as part of their bid for a filibuster-proof majority in the Senate.

Stevens, 84, was convicted of all the felony charges he faced of lying about free home renovations and other gifts from a wealthy oil contractor. Jurors began deliberating last week. Visibly shaken after the verdicts were read – the jury foreman declaring “guilty” seven times – Stevens tried to intertwine his fingers but quickly put his hands down to his side after noticing they were trembling. As he left the courtroom, Stevens got a quick kiss on the cheek from his wife, Catherine, who testified on his behalf during the trial. He declined to talk to reporters waiting outside.

Stevens faces up to five years in prison on each count when he is sentenced, but under federal guidelines he is likely to receive much less prison time, if any. The judge originally scheduled sentencing for Jan. 26 but then changed his mind and did not immediately set a date. The monthlong trial revealed that employees for VECO Corp., an oil services company, transformed Stevens’ modest mountain cabin into a modern, two-story home with wraparound porches, a sauna and a wine cellar.

The Senate’s longest-serving Republican, Stevens said he had no idea he was getting freebies. He said he paid $160,000 for the project and believed that covered everything. He had asked for an unusually speedy trial, hoping he’d be exonerated in time to return to Alaska and win re-election. He kept his campaign going and gave no indication that he had a contingency plan in case of conviction.

Despite being a convicted felon, he is not required to drop out of the race or resign from the Senate. If he wins re-election, he can continue to hold his seat because there is no rule barring felons from serving in Congress. The Senate could vote to expel him on a two-thirds vote. “Put this down: That will never happen – ever, OK?” Stevens said in the weeks leading up to his trial. “I am not stepping down. I’m going to run through, and I’m going to win this election.”

 

Democrats have invested heavily in the race, running television advertisements starring fictional FBI agents and featuring excerpts from wiretaps. Stevens’ conviction hinged on the testimony of Bill Allen, the senator’s longtime drinking and fishing buddy. Allen, the founder of VECO, testified that he never billed his friend for the work on the house and that Stevens knew he was getting a special deal. Stevens spent three days on the witness stand, vehemently denying that allegation. He said his wife, Catherine, paid every bill they received.

 

Living in Washington, thousands of miles away, made it impossible to monitor the project every day, he said. Stevens relied on Allen to oversee the renovations, he said, and his friend deceived him by not forwarding all the bills. Prosecutors used a barrage of witnesses to question how Stevens could have been in the dark about VECO’s work on the project. VECO employees testified to seeing Stevens at the house. One left him a company business card. Stevens sent thank you notes to others.

 

Stevens’ conviction is the highlight of a lengthy FBI investigation into Alaska corruption, but prosecutors noted that it is not the end. Stevens’ longtime Republican colleague, Rep. Don Young, remains under investigation for his ties to VECO. Stevens’ son, Ben, a former Alaska lawmaker, is also under investigation. Stevens is a legendary figure in Alaska, where he has wielded political influence since before statehood. His knack for steering billions of dollars in federal money to his home state has drawn praise from his constituents and consternation from budget hawks.

 

There was no immediate word on Stevens’ campaign plans. His spokesman, Aaron Saunders, did not immediately return a message seeking comment on whether Stevens would stay in the race. In Alaska, the Democratic Party issued a statement calling for Stevens to resign immediately. “He knew what he was doing was wrong,” the party said. “But he did it anyway and lied to Alaskans about it.”

 

Stevens is the sixth senator convicted of criminal charges. The last previous one was Republican David Durenberger of Minnesota, who was indicted in 1993 on charges of conspiring to make fraudulent claims for Senate reimbursement of $3,825 in lodging expenses. He later pleaded guilty to misdemeanor charges and was sentenced to one year of probation and a $1,000 fine.

 

The jurors left the court without comment. Said U.S. District Judge Emmet Sullivan: “The jurors have unanimously told me that no one has any desire to speak to any member of the media. They have asked to go home and they are en route home.” The jurors had been shuttled to and from the proceedings each day by court officials.

Election 2008: Muscling Up the Majorities

  

Download: CQ’s Current Projections

By Bob Benenson

(CQ) Elizabeth Dole enjoys political assets that most of this year’s congressional candidates can only dream of: She’s a household name in her native North Carolina, because she’s been a force to be reckoned with in national Republican policy and political circles for four decades. Her portrait hangs among those of the past secretaries at two Cabinet departments. Six years in the Senate meant she could readily raise $14 million to seek a second term. And she’s running in a state that has been steadily moving toward dominance for her party.

So how is it that Dole may well be toppled next week because of a pair of old guys in rocking chairs at a country store?

Because the men were actors hired by the Democrats this summer to star in one of the year’s more talked-about television spots – an advertisement that, by its very existence as well as its apparent effectiveness, symbolizes the extraordinarily strong position the Democratic Party has put itself in for the final fortnight of this year’s Senate and House campaigns. The ad crystallized, in 30 seconds, four of the party’s main arguments against Dole. One actor asserts that she “is 93,” then points to her ranking as one of the least effective senators in a survey by a nonpartisan political Web site. “I’ve read she’s 92,” says the other, citing a calculation that she’s voted that high percentage of the time in support of President Bush. But the implications, of course, are that the senator (who’s actually 72 years old) is way past her prime and a carpet-bagger more comfortable in Washington, and they are hammered home in the final lines. “What’s happened to the Liddy Dole I knew?” says one man. “She just not a go-getter like you and me,” says the other.

When the Democratic Senatorial Campaign Committee decided in August to dip into its exceptionally flush coffers and buy some TV time for the spot, Dole was a solid favorite to win re-election. But the DSCC’s targeted investment produced an impressive and immediate return. Polling showed such a pronounced downturn for Dole that she decided to stay home and campaign rather than attend the Republican National Convention, where she’s been a presence since the 1970s. And challenger Kay Hagan, a relatively obscure state senator who was actually the Democrats’ fifth choice to make the race, suddenly appeared to have the political wind at her back. Contributions started rolling in, voters and reporters started taking her more seriously – and the momentum has never faded, so that Hagan is now even or ahead in the polls in what has become one of the hottest Senate contests of the year.

Similar stories have cropped up all across the country this fall, where waves of support for Democrats who had not been seen as competitive have put the party in position to potentially secure a “filibuster-proof” majority of 60 or maybe even more Senate seats on Nov. 4 and also pad its House majority by as many as two dozen. The reasons go beyond the flagging popularity of the Republican “brand,” which has been in evidence all year, and the coattails of Barack Obama , who appears well-positioned to win back the presidency for the Democrats next week with a clear-cut majority in the Electoral College. The GOP has been on the outs with the public in plenty of other election years, and the opposing party has not positioned itself to capitalize on the opportunity the way it has now.

What’s different this time is the increasingly aggressive and agile tactical savvy of the Democrats’ congressional campaign operatives, who committed early on to “expanding the playing field” of competitive races in 2008 – and have shown they know how to pounce whenever they see an opportunity. The result has been one of the party’s best years in decades for candidate recruiting, fundraising and media strategy.

Takeover Targets

One consequence is that North Carolina is one of the states – along with two others in what had been seen as the reliably Republican South – where surging Democratic challengers are boosting hopes of the biggest senatorial gain by a single party since the 1980 Reagan landslide, when the GOP picked up a dozen seats. That is the outside limit of the Democrats’ aspirations this time, but they are off to a fine start. There’s a chance they could lose a single seat (in Louisiana) but are favored at the moment to take at least five seats away from the Republicans – in Virginia, Alaska, Colorado, New Hampshire and New Mexico. Four more races are tossups – in Mississippi, Minnesota, Oregon and Dole’s North Carolina. And Democrats are still within striking distance in three other states: Maine, where a hard-fought race has been under way for two years, and in contests that have only recently become genuine opportunities for the party in Kentucky and Georgia. Polling shows that Louisville nursing-home entrepreneur Bruce Lunsford is closing in on Minority Leader Mitch McConnell, and former state Rep. Jim Martin of Atlanta is breathing down the neck of incumbent Saxby Chambliss. Both challengers moved into serious competition with the help of some venture capital from the DSCC; now, the campaign organization has enough money to make a heavy investment in both upset quests in the final days.

The parallel Democratic organization in the House, known as the Democratic Congressional Campaign Committee, has been at least as enterprising in pursuing takeover opportunities in districts where Republican control long appeared firm. The party has pulled into a clear lead in eight districts now represented by Republicans – seven of which were carried by President Bush in 2004: in Alaska, Staten Island, rural Arizona, exurban Chicago, the Virginia suburbs of Washington and two seats in and near Orlando. Bush lost the eighth, in upstate New York, by only 2 percentage points. Contests in another 17 districts now held by Republicans are going right down to the wire as true tossups; in almost two dozen more races for GOP-held seats, the incumbent party has only a slight edge, and a Democratic takeover is highly plausible. Of these 40 races, 36 are in districts that favored Bush over John Kerry four years ago. What that means is that the Democrats are again taking the fight to Republicans on their own home turf even after taking away 33 seats from the GOP in the midterm election and subsequent special elections – with 23 of those victories in districts that wanted Bush re-elected.

At the beginning of last year, Republican campaign strategists started planning for the 2008 House campaign with hopes of a comeback. Freshmen are typically the category of lawmaker most vulnerable to defeat, because they have not had much time to capitalize on the benefits of incumbency by making themselves familiar to their constituencies and bringing home legislative victories and parochial favors – which is why a good number of members first elected in big partisan “swing” elections such as 2006 are often swept out by a reverse tide two years later. But that is not the case this year, in part because Democratic leaders acted swiftly to give members of their big freshman class helpful committee assignments, prominent roles in promoting popular pieces of legislation and early assistance in planning and raising money for their re-election campaigns this year. Of the 33 seats that have gone Democratic since the fall of 2006, only one is rated as even leaning toward a Republican take-back. And that is the South Florida seat where freshman Tim Mahoney – who won mainly because the incumbent, Mark Foley, was exposed as making inappropriate advances toward underage male congressional pages – has recently become embroiled in his own scandal involving extramarital sex and a congressional employee.

Big Picture Meets Ground Game

Just four years ago, you could have gotten pretty long odds in Las Vegas that 2008 would pan out this way for the Democrats. Back then, Bush won by the narrowest margin ever for a re-elected president but nonetheless declared the outcome a clear mandate for his agenda, including his handling of the Iraq War. Democrats held fewer Senate seats than at any time since Herbert Hoover was president, and in the House, GOP leaders were boasting that they would soon be known as the permanent majority. Without a doubt, the degree to which the reach of these Republican leaders exceeded their grasp has fueled the Democrats’ current momentum in congressional politics. Angry voters appear prepared to complete the purge of Republicans from power that began when they were stripped of their House and Senate majorities two years ago.

Public approval ratings for Bush and for Republicans in general have been driven down to near-historic lows. Key factors include smoldering resentments over the war, worries about other international hot spots such as Afghanistan and Iran, government failures in the wake of Hurricane Katrina in 2005, high gasoline prices, corruption scandals that tainted the GOP image – and now, crowding out all of that for the electorate’s attention, an economy spiraling into what many economists say will be the worst recession in decades. Yet it is hard to imagine that the long-beleaguered Democrats could have advanced so far so fast had the Republicans’ decline not coincided with the rise of a new cadre of creative and hyper-aggressive campaign strategists, who emerged at the right place and the right time for their party.

There was no shortage of Democrats who voiced their doubts about former Vermont Gov. Howard Dean when he was elected chairman of the Democratic National Committee in 2005, a year after his bid for the presidency as a white-hot liberal activist flamed out. Yet Dean quickly set out to prove himself to be a pragmatic and visionary political field general. His trademark innovation was what he dubbed the 50-State Strategy, aimed at rebuilding Democratic organizations in every corner of the country – even in reliably “red” Republican places where his party had withered.

The notion of spending precious time and relatively scarce money trying to revive the Democratic Party in, say, rural South Carolina was derided by some party activists, who argued that all the resources should be focused on tipping the balance in traditionally competitive “battleground” states and districts. But such criticisms of Dean are rarely heard these days as Democrats compete for congressional seats in states and districts – from Mississippi to Nebraska to Alaska to a pair in South Carolina – that have long been out of play for the party. Dean’s program has dovetailed neatly with the campaign strategy of Obama, the first-term Illinois senator whose presidential campaign has focused on taking the fight to the Republican nominee, Sen. John McCain of Arizona, in a dozen or more states that Bush carried four years ago. Two of those states, Virginia and Indiana, last voted Democratic for president in the 1964 Johnson landslide.

Meanwhile, the “ground game” of picking Republican districts to target, and recruiting and raising money to back the challengers, has been handled adeptly by the lawmakers put in charge of the party’s national campaign committees. Charles E. Schumer of New York is running his second campaign for the DSCC; Chris Van Hollen of Maryland is at the helm of the DCCC after acting as top lieutenant in 2006 to Rahm Emanuel of Illinois, who now chairs the House Democratic Caucus. The impression that these campaign organizations have run rings around their GOP counterparts, the National Republican Senatorial Committee and the National Republican Congressional Committee, is reflected in a race-by-race assessment of the campaign. In a year when Republicans are defending 23 Senate seats to the Democrats’ 12, there are a dozen highly competitive races for GOP-held seats but only one race where a Democrat is facing any serious competition. And in that one, in Louisiana, Mary L. Landrieu appears to have a solid lead.

There is also a dramatic competitive imbalance in the national House campaign. There are 48 races for Republican seats in which Democrats are highly competitive – meaning the race is leaning their way, is a tossup or is leaning only slightly to the GOP – while the GOP is similarly in the running in 20 Democratic-held districts. The Democrats are also waging a much longer list of plausible, if long-shot, takeover bids: 25 of them, compared with 14 potential upsets in the sights of the GOP. Taken together, the Democrats have put 73 Republican seats in play while defending against GOP challenges for just 34 of their own seats. Fifteen seats appear to be the minimum Democratic pickup. Even retiring Rep. Thomas M. Davis III , who ran the NRCC’s successful campaigns in 2000 and 2002, has publicly predicted another double-digit setback for his party. And one of the GOP seats most likely to fall is Davis’ own, in the Northern Virginia suburbs, where the Democrats have rapidly gained ground over the past few years. Gerry Connolly, who as chairman of the Fairfax County Board of Supervisors is highly familiar to most of the district’s electorate, is the clear favorite.

The Democrats currently control 236 House seats, if you include the reliably Democratic Cleveland-area seat left vacant by the death in August of Stephanie Tubbs Jones , which is guaranteed to stay in the party’s hands. If the Democrats gain 20 more, they will match the number they held in 1994, just before they began their dozen years in the minority.

Striking While the Iron Is Hot

It is possible for events to drastically shift the partisan outlook in the course of a two-year campaign cycle. That was the case in the run-up to the 2006 election, which began with the Democrats licking their wounds after their 2004 setback and ended with the party winning control of Congress. Yet the degree of partisan competition, even in the most tumultuous political climate, is actually determined to a great extent by the tactical moves executed early in each cycle by the campaign strategists – especially moves to ensure that they have the best possible candidates for takeover opportunities and have inoculated as many of their own incumbents as possible from serious challenges. It is, of course, easier to recruit challenger candidates and persuade incumbents to stick around for another election when circumstances are working in one party’s favor. One early warning sign that Republicans were not optimistic about their 2008 prospects was the large number of GOP incumbents who announced that they were heading for the exits this year. In the House, 25 of the Republicans elected two years ago – one out of eight – have announced or executed their departures from public service. But only three House Democrats are retiring. In the Senate, five of the 23 Republican senators whose terms expire this year are retiring, but no Democrat is stepping down.

And three of the five open Senate seats are likely to be taken over by Democrats. In Virginia’s battle between former governors, Mark Warner is an overwhelming favorite to defeat James S. Gilmore III for the seat John W. Warner is relinquishing after five terms. Rep. Tom Udall has almost as daunting a lead in his quest for the New Mexico seat being left open after six terms by Pete V. Domenici. Rep. Mark Udall, a cousin of the New Mexico front-runner, has an only slightly more competitive race for the Colorado seat Wayne Allard is vacating after two terms. These contests point to a signal achievement by Schumer and his DSCC staff, who have done a much better job than their Republican rivals of recruiting top-tier candidates for takeover bids. Along with Warner and the Udalls, the Democrats persuaded former Gov. Ronnie Musgrove to challenge the recently appointed Republican Roger Wicker , creating a tossup in what has been reliably Republican Mississippi; former Gov. Jeanne Shaheen is now favored to avenge her narrow loss six years ago to John E. Sununu in New Hampshire; Al Franken, the well-known comic entertainer, is in a too-close-to-call race against first-termer Norm Coleman in Minnesota; state House Speaker Jeff Merkley has emerged as a serious threat to deny Gordon H. Smith a third term in Oregon; and Mayor Mark Begich of Anchorage, Alaska, is in position to oust Ted Stevens , who is not only the longest-serving Republican senator in history but also the first senator to be tried on federal criminal charges in three decades.

Even the recruiting of Hagan in North Carolina is something of a triumph, signaling that the party had a deep enough bench of viable challengers in the state even after the governor, a former governor, the state attorney general and a congressman all passed on the race. Over at the National Republican Senatorial Committee, Nevada’s John Ensign had much more limited recruiting success. The best they did was to persuade a Louisiana Democrat, state Treasurer John Kennedy, to switch parties to run against Landrieu. After a series of stumbles, the best recruit they could find in New Jersey – where 84-year-old Democrat Frank R. Lautenberg has never been very popular – was Dick Zimmer, a three-term congressman in the 1990s who lost his last Senate race by 10 points, a dozen years ago, and then failed to win his old House seat back in 2000. Unable to recruit anyone in GOP-leaning Montana to take on Finance Committee Chairman Max Baucus, the party ended up watching as the primary was won by an 85-year-old perennial candidate who has sometimes run for the Green Party. In Iowa the nomination went more or less by default to businessman Christopher Reed, who had raised all of $47,000 through the end of last month to take on Tom Harkin, who has never won more than 56 percent of the vote in four Senate elections. In South Dakota, where Tim Johnson won six years ago by 524 votes – but then became something of a folk hero by surviving a near-fatal brain hemorrhage – the challenger is an obscure state legislator, Joel Dykstra. Republicans are not even fielding a sacrificial lamb against Mark Pryor’s bid for a second term in conservative-leaning Arkansas.

On the House side of Capitol Hill, the Democratic campaign strategists entered this campaign cycle facing a more treacherous political landscape than their Senate colleagues. Their first priority was to shore up the 30 Democrats who won Republican-held seats in 2006 to make sure as few as possible ended up labeled “one-term wonders.” And they wasted no time doing so. In February 2007, just a few weeks after the 110th Congress was sworn in, the DCCC announced the names of the first 29 enrollees in its “Frontline Democrats” program, which provides fundraising and logistical assistance to the incumbents deemed most vulnerable to Republican challenges.

Money Changes Everything

The party’s admonitions to those candidates to raise money early and often paid off grandly. Kirsten Gillibrand of New York’s Upper Hudson Valley led the 2006 Democratic takeover winners with $4.4 million in receipts during her first 21 months in office. Four others – Ron Klein of southeastern Florida, Joe Sestak and Patrick J. Murphy of suburban Philadelphia and Mahoney of South Florida – had raised $3 million by the start of this month, while 12 others raised more than $2 million for their campaigns. All raised more than $1 million, except Iowa Democratic freshman Dave Loebsack – and he is nonetheless heavily favored to defeat an underfunded Republican challenger. Gillibrand has needed all that money, as she is trying to fend off the best-funded Republican challenger: Sandy Treadwell, a General Electric Co. heir who has poured $4.4 million of his fortune into his bid and raised roughly $1 million in donations. The only other member of the Democratic freshman class who’s been outraised by his opponent is Christopher Carney of northeastern Pennsylvania, whose $2.2 million take put him almost $300,000 behind challenger Chris Hackett. Most of the Democratic incumbents have huge advantages in campaign money over their Republican opponents.  

The DCCC also geared up early for its campaign to expand its majority with its “Red to Blue” program to target ripe takeover opportunities. Starting with a modest initial list of 10, the Red to Blue program now is providing assistance to 63 candidates – 22 of them in open-seat races and the rest challenging Republican incumbents. These direct-assistance programs, though, are only part of the Democrats’ arsenal in the individual Senate and House campaigns. They have also run up huge fundraising advantages of their own over their Republican counterparts. The DSCC through Sept. 30 had raised $103 million, swamping the $68 million brought in by the NRSC. The numbers were similarly disparate on the House side: $130 million for the DCCC to $103 million for the NRCC. This has given the Democrats a huge advantage in the number of races in which they can intervene with independent expenditures on behalf of their candidates and in how much they can spend in each race. The result is that many Republicans are fending off what amounts to a 2a?`againsta?`1 attack. Some examples:

 

• The DCCC, through Oct. 21, put $1.7 million into independent expenditures in the sprawling northeast Arizona district where former state Rep. Ann Kirkpatrick had raised almost $1.6 million through Sept. 30 for her own campaign to succeed retiring Republican Rick Renzi . The GOP nominee, mining industry lobbyist Sydney Hay, raised $523,000 for her campaign and received no independent expenditure assistance from the NRCC.
• The DCCC put more than $1.7 million in the southern North Carolina district where Democrat Larry Kissell, a social studies teacher, is running in a rematch of the 2006 race that he lost to Republican Robin Hayes by just 329 votes. That has closed the spending gap in the race, as Hayes has raised $3 million for his own campaign treasury to $1.1 million for Kissell’s.
• The two Ohio state senators running for the seat left open by retiring 18-term Republican Ralph Regula have been competitive in their own campaign fundraising, with Democrat John A. Boccieri reporting $1.5 million in receipts, to $1.1 million for Republican Kirk Schuring. But the DCCC is hoping to tip the scales with $1.3 million in independent expenditures in the district.

 

These are just the most expensive of the DCCC’s independent-expenditure campaigns in 13 individual districts that topped $1 million by Oct. 21. The NRCC, at that point, had no seven-figure expenditures. All told, the DCCC had made independent expenditures in 50 House contests, compared with 26 by the NRCC.