Economist John Kenneth Galbraith Dies

Canadian-born economist and former ambassador to India John Kenneth Galbraith died Saturday at the age of 97. Among the many accomplishments in his long career was the enormous contribution he made as a lead architect of the Great Society programs that became in their sweeping scope a monumental legacy of ambitious government action in the last half of 20th Century America. In that endeavor, Dr. Galbraith extended the reign of Keynesian economics as a foundation of fiscal policy, assuring that hundreds of millions of Americans would live in a nation whose government chose to engage a long-term, enduring fight against poverty that Classical economists and their political proponents believed was an unnecessary, inappropriate, and counter-productive role for government. The great Keynesian economists ruled the era from Franklin Delano Roosevelt on, however, and Dr. Galbraith was at the forefront of their work with Presidents and Congresses throughout the latter half of the last century. Galbraith's contribution to the Great Society was so significant that he shaped the speech that President Lyndon Johnson would make to the American people explaining this new, vigorous engagement of the U.S. government in building a modern nation where the power of the private sector was unleashed through the standing commitment of the state to its people and its businesses. Ultimately, Galbraith would break ranks with President Johnson because of the latter's prosecution of the war in Vietnam.

Although many outsiders and even a number of economists consider Galbraith the standard bearer of "liberal" economics, his was a far more complex view of the science of human action, as his contemporary Ludwig Von Mises described their shared field of endeavor. From his work in the World War II Office of Price Administration, Dr. Galbraith developed a sweeping prescription for national economic growth that advocated allowing oligopolies to form as a means of encouraging rapid technological innovation in part through economies of scale. Coupled with a benign government stance toward industrial concentration would be what he called "countervailing institutions" to act as buttresses against potential abuses by the oligopolies. Many believe that it is exactly this model that countries like Japan and others in Asia followed in the later 20th Century. In the United States, the great military/industrial complex was in large part an application of this concept of guided market concentration being allowed to play out to generate technological advancement, huge numbers of high-paying jobs, and economic dominance on the world stage.

Galbraith earned no small amount of disdain from peers for his 1958 book, The Affluent Society, in which he tore down what he called the "myth" of consumer sovereignty in the American economy. He continued to upset standard models of economics in his 1967 book, New Industrial State, in which he argued that the paradigm of "perfect competition"—long used as the basis for modeling most market structures—was wholly inadequate for describing the real world of firms. In that book, he argued that many industries are characterized by firms more like oligipolies that engage in fierce competition for market share, expanding both horizontally and vertically in a process that ultimately makes them institutions separate from even their owners. It was this approach that led to modern-day emphasis, even in principles of microeconomics classes, on a market structure now called "monopolistic competition," perhaps the most interesting of all market structures because of its topical aspects such as strategic pricing, marketing, and market contestability.

Dr. Galbraith was vitally active even into his last years, writing and making public appearances. He was, at the time of his death, professor emeritus at Harvard University.

John Kenneth Galbraith has now passed from this good Earth that he made better for his intellectual contributions; and because of those great and good contributions, he will stand forever as the powerhouse luminary of the theory and practice of economics of the last half of the 20th Century, that amazing era after the failed Classical economists of the 19th Century had been chased fully into the shadows and before their spiteful and equally failing Right-wing successors would return from the depths of deserved repudiation to diminish the world of the 21st Century.


The Dark Wraith gives a moment of silence in respect for Dr. Galbraith.

The Written Peace: Open Forum of April 28, 2006

High time it is we had an open forum here, moving on as we should from the grim news of the day to the even grimmer news of tomorrow and the next day and the next.

A warm welcome is extended to the new commenters here, among them Father Tyme and blackdog, both of whom tend to be found in other quality joints like BlondeSense. We also have as relatively new regular commenters here ballgame and Stephen Benson, along with Ralph Hitchens. Kathleen Callon of Kat Callon and Rhodian Attic is now gracing The Dark Wraith Forums, as is Dave of Dave's Big Beef and Texas Shiva of Hole in the Bucket, who was gracious enough to use as the header on her blog a graphic I designed for her entry on blogScream.

Speaking of which, I quietly and without fanfare herewith note that the blogScream News Wire service passed the one year mark online as of this month. There are currently 27 regular syndicate members and two guest members in the news cycle, and the daily feed is seen by well over seven thousand people every day.

And if I haven't said so lately, I am ever grateful to the long-standing regular and occasional commenters here at The Dark Wraith Forums: non-bloggers My Pet Goat and OddJob are as close to Ancient Ones as we get around here, as are elf and charliepotato. Others include Gary of American Agenda, Peter of Lonetree and Liz of BlondeSense, Wild Clover of Clover's Field, meEE of Eternal Ecstasy, karen m of Evil Mommy, our old friend The Fat Lady Sings, our equally old friend SB Gypsy of The Gypsy's Caravan, Old White Lady of It's morning somewhere, the venerable Eric Hopp of Oh Well: A Commentary, the hard-driving PoliShifter of Pissed on Politics and Revolutionary Paradigm, our very own fairly people-friendly Stealth Badger, and the ever enjoyable Trailer Trash.

I should also give congratulations to Jen of donkey o.d. for recently crossing the 100,000 hit mark. Jen contributes at Night Bird's Fountain, where you can also find Barbi, Lizzy, dorsano, DeLLBerto, Cyn_NY, Bergs, Karen, and a cast of thousands doing some great blogging.

Among the new entries in the Dark Wraith's BlogRing are the delighful An Angry Old Broad, Scott at Macaroni Duck (don't ask me what it means; I haven't a clue), Fred Bieling's blog Making Conservatives Cringe, Mixter's Mix, and Neil Shakespeare (no relationship to Shakespeare's Sister... at least I don't think there is, anyway).

Also, Brian Keeler, known previously as NYBri, is running for the New York Senate in the 41st District. He'll need some votes. His Campaign Website has the specifics on his candidacy; so if you're in the 41st District in the State of New York, or if you're interested in the politics and issues in that part of the country, go and see what Brian has to say.

Finally, as far as links and such are concerned, I do want to welcome the new advertisers here at The Dark Wraith Forums. LegalZoom.com, started by attorney Robert Shapiro, is an online legal document service center, providing quality legal documents and document services at a fraction of the cost of an attorney. LegalZoom even reviews documents before returning them to the customer. Love and Pride is the number one online retail store for jewelry and accessories for the LGBT community. If those don't spur the rampant consumer in you, at least get some Starbuck's Coffee or something from Barnes & Noble for Mother's Day.

Enough commercialism. Let's talk topical news.

President Bush says he doesn't want to see a windfall profits tax imposed on the big oil companies, but he wants them to do what's right and invest in more oil exploration, new pipelines and refineries, and some new technologies. Meanwhile, the Republicans on Capitol Hill are still talking about sending every American a $100 check to ease the pain of high gas prices. So here we go again: money handed out like water (this time rather blatantly to buy votes) with no offsetting revenue for the federal government. Of course, the Senate is getting butch with OPEC and the oil companies, demanding something or other along the lines of accountability for something or other. Good theatre all around.

And while we're at it, suffer me a note on alternative energy resources, a rant that does nothing to mitigate my complete understanding that we need to get moving on alternative energy sources. My point here is that we need to do so without wearing economic, financial, and environmental blinders. None of the alternative sources of energy now on the table—and I mean none of them—come without extraordinary costs, the bulk of which are hidden. Take, for example, hydrogen for fuel cells. Hydrogen is generated by breaking down water, a process that requires a substantial energy input. The major proponents and firms pushing this technology have one and only one long-term source in mind for the input energy: nuclear power. Although other sources of energy do exist for extracting the huge amounts of hydrogen that would be needed in a hydrogen fuel cell driven economy, that's not where the big cats are looking. They have their eye right on nuclear power plants doing the work. Even the Department of Energy sneeks this point in at its Hydrogen, Fuel Cells and Infrastructure Technology Program Website. Go way down to near the bottom of the drool page, and you'll see the casual mention of nuclear energy in the context of the infrastructure for hydrogen generation. Unfortunately, other methods of getting massive amounts of hydrogen often involve some process that starts with a fossil fuel, with the idea being that the break-up of the hydrocarbons will release the hydrogen for capture. The problem is the by-products: reduced carbon compounds. The oil and gas industry claims all this carbon can be "sequestered" deep underground, but private scientists and the Department of Energy call such plans "very high risk."

Okay, there's always ethanol. The problems with this alternative energy source, especially for motorized vehicles, are many; but one of the issues that bothers me the most is a miscalculation problem very common in analyzing new projects. For every field that is planted to corn for ethanol production, that field is lost to other uses. This in economics is called opportunity cost—the cost of the best or highest-value opportunity foregone by committing to an action. The opportunity cost of standing in line to get a cheap price on some product is the value of your time at labor. If you can make $10 an hour at your best work, standing in line for half-an-hour to save some money costs you $5 in opportunity cost. That's a cost that never shows up in a receipt or a bill, and it's money that you never actually see leave your pocket; but it's a cost nonetheless. And opportunity costs often are the dominant costs in overall economic cost structures.

My favorite story about opportunity cost being unrecognized is the one about when I was teaching at a prestigious private college, and the city mayor and her finance chief came to speak about their plan for a new sports stadium in town. After the finance fellow had presented the numbers to all the wide-eyed business students and faculty, I asked him why there was no cost included for the land. "Oh, we own the land the stadium's going to be built on," he answered. I could see the look on his face: he had enough training in economics and managerial finance to know that he was about to get eaten alive for not including an opportunity cost. Yes, the land was not going to be purchased, but that didn't mean it wasn't a full-blown cost of the project since the land, by being committed to the stadium, was therefore unavailable to be sold, leased, or put to any other use. That was the beginning of the litany of hidden costs not included in the mayor's grand stadium plans. Not one hour of the cost of all the city workers being used to plan and execute the project had been included. The calculations also excluded all the physical and human capital facilities of the city, its law enforcement division, and its utility companies. These were costs to which the city had already committed, and they would stand as draining parasites in near perpetuity.

There's opportunity cost in action. So when you're thinking about alternatives to fossil fuels, don't just think about direct costs; think about total economic costs. We must indeed move on from fossil fuels, and we need to get started right away. Just don't think that it's going to be a relatively painless matter. The transition is going to hurt like Hell, and it's going to be expensive far beyond what the direct cost numbers indicate. It's not just a matter of, "How much do I write the check for?" It's also a matter of "What's the value of what I have to give up to do this?"

The numerical answer, honestly calculated, to that second question will probably dwarf the numerical answer to the first question.

Economics is not called "the dismal science" for nothing, you know.



Every topic is open for discussion. We'll be having some rousing rounds of the Hokey-Pokey later in the evening; and if the crowd feels up to it, we might even keep the espresso bar open all night. And to celebrate President Bush's stance that the Star Spangled Banner should be sung only in English, we might try a chorus of that great American song in several alternate languages, including Yiddish, Mandarin Chinese, and Creole. That ought to mess with some xenophobes' minds big time.

Say what you have to say, be as frisky as you like, but make sure the last one out turns off the lights and kills the neon "No Loitering" sign. And for Heaven's sake, someone please make sure to carefully put away that new copy of Binary Su Doku for Hegelians I just got at Western Zen Online.



The Dark Wraith awaits the rush.

Inflammatory Opinion: One Thousand Fifteen

On July 14, 2003, columnist Robert Novak, in his article entitled, "Mission to Niger," wrote the following words: "Valerie Plame is a [Central Intelligence] Agency operative. Two senior Administration sources told me..." In the White House press briefing of September 29, 2003, Press Secretary Scott McClellan said, "[T]hat is not the way this White House operates. The President expects everyone in his administration to adhere to the highest standards of conduct. No one would be authorized to do such a thing." Mr. McClellan later in that press briefing went on to say, "[T]here's been no information that has been brought to our attention, beyond what we've seen in the media reports, to suggest White House involvement," and he demanded of reporters questioning him, "Do you have specific information to suggest White House involvement?" None did at the time, although such evidence would ultimately surface in grand jury testimony, principally about the activities of I. Lewis "Scooter" Libby and more recently in court filings that note the involvement of Vice President Richard Cheney and President George W. Bush in what might have been an effort to discredit Ms. Plame's husband, Joseph Wilson, whose article in The New York Times disputed Administration claims that the regime of Saddam Hussein had sought to purchase unrefined, "yellowcake" uranium from Nigeria.

Mr. Novak outed Ms. Plame 1,015 days ago.

Based in part on a subsequent complaint filed by the Central Intelligence Agency, the Justice Department agreed to launch an investigation into who within the Bush Administration disclosed the name of a CIA agent. On December 30, 2003, then-Attorney General of the United States John Ashcroft announced at a news conference that he was recusing himself with respect to that investigation, and he publicly named Assistant Attorney General James Comey as Acting Attorney General to oversee the matter. Mr. Comey at that same news conference named Patrick Fitzgerald, U.S. Attorney for the Northern District of Illinois, as the lead prosecutor and investigator.

That was 846 days ago.

Facts
Mr. Fitzgerald was given no independent budget, and his work was overseen by the office of Mr. Comey, a political appointee.

Mr. Libby, who served as an adviser to Vice President Cheney, was indicted on five counts in October of last year. Not one of those charges involved the disclosure of the name of Valerie Plame; all were instead because, as Mr. Fitzgerald said upon announcing the indictment, "[Libby] lied about it [the disclosure of Plame's name and status] afterwards, under oath and repeatedly."

To date, in the matter of the disclosure of the name of an American spy—a non-official cover (NOC) operative working through a front company tracking global trafficking in weapons of mass destruction—Mr. Libby is the only individual who has been indicted, and his indictment, again, had nothing to do with the disclosure of Ms. Plame's name and work. To date, the only individual to have served jail time was an employee, Judith Miller, of The New York Times, who was found in contempt of court for declining to reveal her journalistic source to a grand jury. In this latter side story, Mr. Fitzgerald's work has been to the entirely successful effect of ending the long-standing presumption among reporters that they had at least some affirmative defense against being compelled to violate confidentiality agreements with the sources for their stories, particularly with respect to government wrongdoing.

Mr. Libby will not go on trial until January of next year, and when he does, that trial will be before U.S. District Judge Reggie Walton, perhaps best known for dismissing the case brought by FBI whistleblower Sibel Edmonds. Judge Walton in that case agreed with then-Attorney General John Ashcroft, representing the United States in defense against Ms. Edmonds' suit, that the need of the FBI to protect 'state secrets' superceded Ms. Edmonds' right to redress through the courts. This, of course, explains Mr. Libby's recent motions to compel discovery on literally thousands of government documents: should Judge Walton agree that a document critical to Mr. Libby's defense cannot be subpoenaed because of a government claim of state secrets privilege, the defense can immediately move for dismissal of charges.

From only months after Mr. Fitzgerald's appointment, the litany of rumors about indictments of senior Administration officials came and went. In the wake of the Libby indictment, the rumor mill began anew with fresh and fertile vigor: media outlets were speculating that Karl Rove might be soon be indicted, despite U.S. Attorney Fitzgerald's own statement that, "[T]he substantial bulk of the work of this investigation is concluded." The fact that Mr. Fitzgerald has subsequently brought matters related to this investigation before a new grand jury should not be interpreted as any indication that he plans to bring further indictments: Mr. Fitzgerald predicated his declaration that the bulk of the investigation had concluded by stating flatly, "[V]ery rarely do you bring a charge in a case that's going to be tried in which you ever end a grand jury investigation." In other words, the prosecutor was pointing out that, during a federal trial, it is standard procedure for the prosecution to have a grand jury readily available should the need arise during the course of the legal proceedings.

The speculation rages on to this very day, with major focus on Karl Rove, who was supposedly the subject as recently as last week of evidence presented by Mr. Fitzgerald to a grand jury.

Analysis
The criminal justice system of the United States is motivated by three fundamental goals: certainty, severity, and celerity (swiftness). In plain English, if you break the law, you're definitely going to get punished, it's going to hurt like Hell, and you're going to get it right now. Failure in practice to achieve any one of these three goals corrodes the case under consideration and, more deeply, the confidence in and reliability of that system of criminal justice. That, at least in the United States, is why we allow prosecutors what sometimes appears to be abusive leeway (particularly in grand juries), why we legislate prison sentences that constitute significant percentages of human lives, and why we strive for speedy trials. Whether or not this is a good system is irrelevant: this is what we strive for in this country, and this is what we achieve every day of every year as we prosecute and punish thousands upon thousands of Americans.

Alleged crimes committed against the United States in the outing of Valerie Plame happened well more than a thousand days ago. Subsequently, further crimes may have been committed in covering up the principal crimes. I. Lewis "Scooter" Libby will stand trial nearly thirteen hundred days after the commission of the principal crime alleged by the CIA in its original complaint submitted to the Justice Department. Almost thirteen hundred days. This is the celerity of geological processes more so than that of an effective criminal justice system.

And yet, somehow, some mainstream media outlets and a number of bloggers still stand ready to declare with every court filing by Mr. Fitzgerald that further indictments are just days or hours away; and some of the attendant analyses have become increasingly at odds with basic reasoning. Perhaps the most stunning example of hope trumping forensic integrity in journalism was offered on April 19, 2006, by Sydney Blumenthal, writing for the Guardian Unlimited. Beginning in earnest with near-Armageddon terminology, Blumenthal launches into hopeful speculation about "...events that could truly shake the Bush White House to its foundation." Mr. Blumenthal moves on with that premise, starting with praise for Fitzgerald's recent conviction of former Illinois Governor George Ryan on 18 counts of corruption, a prosecution that ended the globe-threatening scourge of selling commercial driver's licenses to unqualified people. The fall of ex-Governor Ryan was attended by the return to power of the Illinois Democratic machine and its union allies, who together made systemic, massive corruption forever the world-renown landmark of Chicago. Current Governor Rod Blagojevich has already become embroiled in scandal the scale of which dwarfs that of his predecessor, as the Democrats sink their teeth ever further into one of the state's few remaining pools of money, the state's teacher retirement fund, giving every indication that they plan to suck it down to insolvency. Excellent prosecutorial work: nail a small-time corruption scandal and leave in its wake sleaze on stilts. And as an aside, little media attention ever came of the violent harassment of the lone dissenting juror in Ryan's trial, a woman who was eventually—perhaps because she wasn't going along with the Fitzgerald's pre-determined script—dismissed by the judge because she had previously had "brushes" with the law for which she was never convicted, but which she didn't note in a prospective juror questionnaire. Is that outrageous and unfair jurisprudence? Certainly not: it's Chicago jurisprudence; and the point is that a U.S. attorney can run an investigation, drag powerful politicians into a maelstrom of media lynching, and secure convictions at will when he wants to. God help anyone who ends up in the earnest gun sights of a federal prosecutor. The odds of surviving as a non-convict are truly miniscule.

That, of course, must be taken in the context of expenditures by the U.S. Attorney under consideration: in the first 15 months of Mr. Fitzgerald's investigation of the Valerie Plame scandal, he was reported to have spent $723,000. That works out to a daily burn rate on funds of about $1,600, which would cover a couple of attorneys, a handful of paralegals and other investigators, photocopying, and some meal expense vouchers at Mabel's 2Go Burger Trough. It does not work out to an Earth-shattering federal investigation of the Executive Branch of the government of the world's most powerful nation.

Blumenthal is undeterred by where the facts on the ground actually point: he hinges a possible impending indictment of Rove on Fitzgerald's recent filings in the Libby case, which reference Rove as a 'subject' of the on-going inquiry. Being a 'subject' in a criminal investigation is one step short of being a 'target' of investigation. Rove is not one of those unfortunate souls with the label 'target' on his forehead; and it is altogether disingenuous not to point out that prosecutors are more than willing to label anyone a 'subject' whose testimony might eventually be required. That's how law enforcers keep useful citizens compliant; but noting breathlessly that Rove is a 'subject' does not point the way to some pulsating beacon of hope for his immediate, or even eventual, indictment. It just doesn't.

More in-depth analysis by such journalistic resources as Editor & Publisher seems to indicate that Fitzgerald is building a case against Rove and perhaps others based upon grand jury testimony given by none other than I. Lewis "Scooter" Libby, himself. The filings Mr. Fitzgerald has delivered to date are genuinely unclear with regard to his intentions beyond the prosecution of Libby. It is entirely reasonable to hope, however, that a seasoned federal prosecutor would not be seeking the conviction of an indictee on charges of obstruction of justice and perjury while at the very same time be planning to use that person's testimony in a case against others. Perjury is the express lane to eviscerated credibility in a court of law, and a convicted perjurer is completely and utterly destructible by opposing counsel. Fitzgerald may be gaming the media and the anti-Bush crowd, but he is most decidedly not stupid. Even so much as associating Libby with accusations against others could come back like an explosive boomerang were subsequent prosecutions to include allegations that a convicted Mr. Libby had made.

Conclusion
U.S. Attorney Patrick Fitzgerald is not the salvation of America from the Bush Administration, one of the few Presidencies in U.S. history that drifts perilously close to being a criminal enterprise. Mr. Fitzgerald has secured a five-count indictment against a man whose name three years ago would have been unfamiliar to all but the most serious policy wonks. That's all Mr. Fitzgerald has measurably accomplished in 846 days; and even if Mr. Fitzgerald were tomorrow to announce indictments of far better-known officials of the Bush Administration—men such as Karl Rove and Dick Cheney—along with a far lesser known host of minor, shadowy neo-conservatives, thugs, and common liars within the White House, the history of the future would not change materially. The war in Iraq has already become a part of the American experience for years to come, and some 2,500 American soldiers will not suddenly come back to life. The federal budget surpluses of the Clinton Administration have been squandered, and the national debt, instead of being paid down as it could have been, now threatens to push against a mind-numbing ten trillion dollars. A phony "debate" about the future of the Social Security Pension Fund prevented prudent, actuarially sound adjustments that would have ensured solvency of the Trust well into the second half of the century. The federal judiciary has been filled with judges some have described as a frightful cabal of Dominionists who will ensure that, generations after the current minions of neo-conservativism and theocratic enlightenment have been hanged, their policies will still be shaping the rule of law in the land. And the Supreme Court now has a density of extremists sufficient to guarantee that the civil rights and liberties long assumed to be a progressively more expansive part of the privileges of American citizenship will vanish over the coming years.

In other words, the rule of law was in the end no vanguard against the onslaught of those with a new vision of America, that shining beacon of liberty now and after this era the pious and corrupted land of the less-than-free, a nation felled by men and women no force on Earth could stop before they had wrought their destruction.



In the gathering and permanent night of America, the Dark Wraith has spoken.

---

Other articles by the Dark Wraith on this topic:
◊ The Valerie Plame Scandal:  Part I   Part II   Part III
◊ The Color of Whitewash

Pulp Economics: Oil Quiz

For quick information and sheer entertainment, nothing beats a pop quiz, especially one that deals with a timely, fun, and altogether exciting topic like petroleum products. Herewith presented is the second Pulp Economics Quiz: each question is worth 20%, and there will be no curve applied to scores.

Click here to open the Oil Quiz.

Enjoy.

Analysis: Budget Deficit Projected to Reach Near-Record for 2006

Blaming the costs incurred in the rebuilding of the Southeast from Hurricane Katrina as well as the budget drain from the Global War on Terror, the Bush Administration announced this week that the federal budget deficit for 2006 would reach an estimated $423 billion, close to the record set in 2004 of $433 billion dollars and considerably higher than estimates made as recently as early last month by both the White House and the Congressional Budget Office that the budget deficit would be considerably less. Bush Administration officials had maintained that they would be able to halve the current level of red ink by 2009, a goal that appears substantially more unattainable with the latest admission that federal revenues continue to lag far behind expenses. As recently as March 3 of this year, the Congressional Budget Office was projecting a notably lower federal budget deficit for fiscal 2006: the baseline deficit for all of 2006 was projected at that time as $336 billion, but it was then revised to $371 billion in line with the President's budget projections. Adding to the evidence that federal revenues are severely and unexpectedly lagging behind expenditures, Reuters is reporting that, contrary to Wall Street economists' expectations that federal revenues would fall short of expenditures in March by about $73 billion, in actuality the deficit for March hit almost $85.5 billion, following on the heels of a record shortfall of $119.20 billion for February.

In an effort to downplay the dramatic loss of budget discipline during the past five-plus years of Republican control of the Executive and Legislative Branches of the federal government, U.S. Treasury Secretary John Snow in December of last year claimed that the budget surpluses in the final years of the Administration of President George W. Bush's predecessor, Bill Clinton, were a "mirage," pointing to allegedly "anomalous" tax revenues in the final years of the 20th Century. The numbers tell a far different story, however: the gap between expenditures and revenues had been closing throughout the Clinton Administration, ultimately culminating in revenues exceeding expenditures in both 1999 and 2000. The surplus immediately fell in 2001, and went into deficit territory the next year—where it had been for Clinton's predecessors—then growing progressively more negative every year until 2005, when the deficit shrank somewhat. With the 2006 estimate, the mounting red ink has resumed its spiral. The graphic below is a revision of one published here at The Dark Wraith Forums last December based upon federal budget figures through 2004. The graphic below updates the depiction with current data and projections provided by the Congressional Budget Office.


The fiscal discipline of the Clinton Administration is starkly evident in contrast to that of both the prededing and the successor Administrations. The surpluses of the final years of the Clinton Administration were the culmination of a long-term effort to clear out the deficits that had been the legacies of both Ronald Reagan and George H.W. Bush. Strikingly, as soon as the second Bush Administration took office in 2001, the hard-won gains began to vanish, and by the second fiscal budget of George W. Bush, the deficits had returned. Three rounds of tax cuts by the Republicans in Bush's first term correlate strikingly with the clear shortfall of federal tax revenues against expenditures; and in the face of what is now projected to be a near-record budget deficit for the current year, Mr. Bush is calling for making permanent the tax cuts of his first term. The graphic below focuses the previous graphic on the federal budget surpluses and deficits during the Clinton and Bush Administrations, overlaying each with its associated trendline.


Using aligned years for each Administration's budgets, the trendline for the federal budget deficits and surpluses of the Clinton Administration has a slope of approximately $69.9 billion, meaning that revenues were growing faster than expenditures by an average rate of almost seventy billion additional dollars per year during the years 1993 to 2000. The trendline for the federal budget surpluses and deficits of the Bush Administration has a slope of —$93.5 billion, meaning that expenditures have been outstripping revenues at an average rate of more than ninety-three billion additional dollars per year during the years 2001 to 2006 (with the last budget deficit as currently forecast).

The graphic at left shows the top personal marginal tax rates for the years 1993 to 2006. The three rounds of tax cuts during the first term of the Administration of President Bush are evident. After years of holding steady at 39.6 percent, the marginal tax rate paid on ordinary income by the wealthiest Americans began to slide precipitously shortly after Mr. Bush assumed office and continued to decline with successive rounds of tax cuts until the rate settled at its current level of 35 percent. In addition to the benefit of these tax rate reductions on ordinary income, taxes at the federal level on other sources of income declined, as well. As far as only the top marginal tax rates are concerned, though, for the period from 1993 to 2006 the simple correlation coëfficient between the top marginal tax bracket and the budget surplus/deficit equals 0.754. The square of the Pearson product moment correlation coëfficient for the period under consideration equals a striking 0.574. This Pearson coëfficient is frequently called "r-squared"; in the present analysis, the derived value means that well over half of the variation in federal budget deficits and surpluses over the past 14 years can be explained by changes in the top marginal tax rate on ordinary income, and all of those changes occurred during the Bush Administration, when the Republican Party controlled the White House and both houses of Congress.

The Republicans have no one to blame but themselves for the budget deficits that they, and they alone, have created. Under the Clinton Administration, the United States had recovered from the legacy of budget deficits left by Ronald Reagan and George H.W. Bush; and despite continuing claims on the White House Website with sub-titles such as "The President's Tax Relief Has Helped Spur America's Economic Momentum," the mounting budget deficits have left the United States once again falling deeper and deeper into debt, with a troublingly large proportion of the on-going shortfall being covered by foreign interests: as of the end of 2005, the external debt of the United States stood at $9.56 trillion.

If any hope can be found in this multi-year federal budget catastrophe, it is in the growing possibility that the scandals now engulfing the Bush Administration and its Republican allies in Congress will lead to a voter backlash at the polls in November of this year, at which time the Democrats could return to power in both the House of Representatives and in the Senate. Although the prospects for subsequent impeachment of President Bush and Vice President Cheney are rather remote, the American electorate will have the opportunity in November of 2008 to remove from the White House the fiscally reckless Republicans and replace them with Democrats who can once again, as they did in the 1990s, rescue the nation from the consequences that are the consistent legacy of Republican Administrations.


The Dark Wraith will share with many other Americans the hope that our collective handbasket will not have reached its destination before that glad time arrives.

Special Analysis: A Tactical Decision before the End Game

This post explores a possible situation that could arise within the next year. A series of events constituting what could be considered maximum political damage to President Bush and the Republican Party is set forth. Each event has some greater or lesser chance of actually coming to fruition. Tactical responses by Mr. Bush are assumed to be rational and to the end of minimizing the damage wrought. Having set forth this assumed sequence of events, a question is then posed concerning what response at one critical step is best from the perspective of George W. Bush, given that events will have otherwise overwhelmed successful countervailing responses on his part. Readers are encouraged to offer thoughtful consideration concerning the optimal decision for Mr. Bush to make.

Event One: Severe erosion of Mr. Bush's popularity specifically, as well as that of the Republicans in Congress generally, indicates by early October of this year that the up-coming November elections will result in the Democrats acquiring solid control of both Houses of Congress.

Event Two: Attempting to avert the disaster to the Republican Party, Vice President Richard Cheney resigns for health reasons before the election, and Mr. Bush exercises his power under Section 2 of the 25th Amendment to the Consitution of the United States, appointing a successor who is relatively untainted by scandals engulfing other members of the Bush Administration. Because the Republicans are still in control of both Houses of Congress at the time Mr. Cheney resigns and his successor is nominated by Mr. Bush, the new Vice President is easily and very quickly confirmed.

Event Three: Republican efforts to turn around public disgust with their rule in Washington are wholly unsuccessful, and the Democrats rout the Republicans in the November elections, taking solid majority control of the House of Representatives and the Senate.

Event Four: Almost immediately after Congress re-convenes in 2007, bitter anger on the part of Democrats spills out in multiple investigations, culminating in articles of impeachment being approved by the House, followed by an ugly Senate trial at the end of which President George W. Bush is convicted and removed from office.


Now, return to Event Two. By having Dick Cheney resign, the strategists for Mr. Bush have accomplished two important goals in the gathering storm: first, they have denied the Democrats the easier of the two targets of impeachment; second (and far more importantly), they have ensured that Bush's successor is still one of their own. To this second point, had Mr. Cheney remained and been impeached either before or concurrently with Mr. Bush, the Presidential Succession Act of 1947 would have directed that the Speaker of the House become President. Given that the Democrats would be in control of that body in 2007, the President until November of 2008 would then have undoubtedly been a Democrat. But by the timing of Mr. Cheney's resignation, the Republicans have ensured that they will remain in control of the Executive Branch of the United States government through 2008.

The question is now obvious:

Whom should George W. Bush appoint as successor to Richard Cheney as Vice President of the United States?



The Dark Wraith trusts readers see this as an important matter to consider.

Special Graphic Post: A Note on Infant Mortality Rates

The graphic below is derived from estimates as of March 29, 2006, provided by the CIA World Factbook. The depiction below is for the 50 nations with the lowest infant mortality rates, and the numbers represent deaths per thousand live births. Readers are encouraged to scroll down this large graphic and review the rankings of nations, noting anything of particular interest in those rankings.



The Dark Wraith invites careful consideration of the implications.

Analysis: Currencies of War

The recent relative quiet among the nations of the West concerning Iran's on-going nuclear program should be no comfort to those hoping that a war with Iran will be averted. The United States is, to some extent, a peripheral player for the time being in the on-going negotiations, despite the public statements of Bush Administration officials trying to demonstrate the vital activity of the U.S. in the negotiations between the European Group of Three nations and Iran. The United States will play no small role in the coming months, but its most important function will be as the effective guarantor of military firepower. To this end, the United States has recently begun a typical propaganda campaign predicating war: it has released to the media descriptions of new weaponry, with the media's compliance intended to inform Iran of new destructive capabilities the U.S. will bring to bear in a war. Specifically, the Chicago Tribune and the Washington Post, among other media outlets, featured descriptions of an up-coming prototype test of a massive chemical bomb called "Divine Strake." As a conventional alternative to a nuclear "bunker buster," the purpose of releasing information about the bomb was to let Iran know that its underground research and development facilities are destructible even in the event that an attack on them uses no nuclear bombs, which might otherwise be the only means by which hardened, underground facilities could be severely compromised. This use of information to warn an actual or potential enemy has a long history, with an example from the recent past being the Massive Air Ordnance Blast (MOAB) bomb the Pentagon presented to the media on the eve of the U.S. attack on Iraq in mid-March of 2003. Neither MOAB nor the Divine Strake exists in isolation, of course, but rather within a vast arsenal inventory. Detonated above ground level, the Massive Air Ordnance Blast weapon is a hugely powerful bomb that creates destruction by depleting a large area beneath it of oxygen as it uses atmospheric resources within its detonation shell. Divine Strake is the ground penetrator complement, offering a conventional weapons option to destroy hardened facilities beneath the surface. The extent to which either of these two weapons is particularly effective is not as important as the extent to which an enemy believes they pose unacceptable risk of catastrophic damage in a military confrontation.

Each of these two weapons has been described publicly for a propaganda purpose; the descriptions of their destructive power are to the end of marketing a target audience: in the case of MOAB, the Iraqis were served notice of a weapon that would effectively and nearly instantaneously eliminate any concentrated defensive position of infantry and mechanized units; in the case now of Divine Strake, the Iranians are being served notice that the American (and, therefore, any alliance forces) arsenal now includes a weapon that can destroy their hardened, underground nuclear research and development facilities. To the latter audience, then, Divine Strake lowers the threshold at which attack becomes viable: up until now, it was presumed by many that an attack capable of degrading those facilities would necessarily entail the use of nuclear weapons to penetrate and destroy the underground bunkers, but the possible need to use nuclear weapons in the attack was, in itself, a deterrent to the attack. Now, however, the Pentagon is letting the Iranians know that nukes will not necessarily be required, which means the resistance by allied forces to an aggressive attack against Iran on the grounds that it would require the use of nuclear weapons is no longer a show-stopper.

Iran, for its own part, has engaged the same war of images and rhetoric. Just-completed war games by the Revolutionary Guards featured photos and glowing descriptions of the success of a number of new weapons ostensibly built in its own defense industry, which was developed as a result of its 1980s war with Iraq. Among the weapons featured during the games was a high-speed torpedo the Iranians call "Hoot": such a torpedo signals not only the West but the entire world that Iran intends to menace the vital oil tanker traffic in the Strait of Hormuz should war break out between Tehran and any Western alliance. This torpedo would complement the Iranian arsenal of Chinese-made Silkworm missiles already poised to destroy maritime traffic, military or civilian, in the Strait. Among other new weapons touted by the Iranians during the war games were the radar-evading, multiple-independently-targetable warhead Fajr-3, and the medium-range land-to-sea Kowsar missile, along with yet another apparently improved version of the Shahab 3, a delivery vehicle in developmental transition from a regional danger to a missile that could possibly throw nuclear payloads into European capitols, putting it into the Mark IV class and putting Iran on the map of only a handful of nations that could project destructive force extra-regionally.

But despite the representations in the Iranian media that the nation's arsenal now includes weapons that can not only deliver considerable firepower but do so with sophisticated radar-evasion and counter-measures technology, there is no evidence that Tehran can test the capabilities of its devices with anything other than its own, possibly weak defenses, radar, and counter-measures, which leaves the nations planning attack with little reason to alter a course that might already be set for war despite any concessions Iran might make or that its supporters, Russia and China, might offer in guarantees on the Persian nation's behalf with regard to the non-weapons nature of its nuclear research and development program.

This is not to say that Iran will be as easy to overrun as Iraq turned out to be: Iran has a far more developed military capability that has been unhampered by the crippling sanctions imposed on Iraq after the first Persian Gulf War. Aside from the possibility of brutal infantry and artillery warfare, Iran's new weapons systems could very well cause significant damage to military assets of the attacking nations. The particular focus on missiles dedicated to maritime targets during demonstrations in Tehran's recent war games indicates that both military and civilian ships are at no small risk of destruction. Even the robust defense systems common on modern U.S. aircraft carriers and other warships can be overwhelmed by incoming fire, and this is particularly true if the advertised velocity of attacking torpedoes is in excess of 220 mph as Iran claims in the case of the Fajr-3. Moreover, whether or not land-to-land missiles in Tehran's arsenal are particularly accurate, using them against densely populated areas like the Green Zone in Baghdad or the center of Tel Aviv will result in large-scale property destruction and loss of life, even if—as could be the case—casualty rates among allied combatants remain relatively modest.

Having in the above exposition set forth a few of the many weaponry-related parameters facing the forces possibly preparing for an attack on Iran to the putative end of destroying its alleged nuclear weapons production program, this article finishes by addressing not why this war is so likely, but why it is not. The concern among some is that, because Iran has claimed that it will soon open an oil bourse of its own, and that contracts on this platform will be denominated in euros rather than dollars, the United States must necessarily attack Iran in order to prevent a major challenge to the pre-eminence of the American dollar as the denominating currency of choice in global trade. As a backdrop to this proposition, the fact that Saddam Hussein had made plans to start euro-denominating Iraqi oil contracts has led some to hold that the real reason the United States attacked Baghdad was to the end of preventing this from happening. Fueling current worries are articles such as one in late March published in Khaleej Times claiming that Arab nations like the United Arab Emirates and Saudi Arabia are already in the process of unloading American dollars in favor of euros.

In and of itself, news like this isn't particularly significant. Its primary purpose is to affect the political climate in the United States: Khaleej Times, cited above, is a quasi-governmental news media source to some extent known for the occasional story intended to stir up sentiments about this issue or that matter of concern to the rulers in the United Arab Emirates. However, the current situations, both with respect to the prospect of war with Iran and with respect to the matter of the currency that will denominate international commodity contracts in the years to come, call for some reconsideration of the events that led up to the on-going war in Iraq.

Such a re-assessment must begin with how the denominating currency matter played as a motive for invading Iraq. Saddam Hussein's plan to begin denominating Iraqi oil contracts in euros instead of dollars was transparent; but the impact would not have been significant because Baghdad was selling oil only through the UN-sanctioned oil-for-food program, so Iraq's contribution to the world supply of oil being extracted and refined into usable fuel products was minimal. Saddam's Iraq was no longer the major petroleum supplier on the world stage that it once had been, so any level of contracts suddenly switching away from dollar valuation would have been fairly insignificant in the large scheme of international trade.

The shift would, nevertheless, have had some notable impact insofar as it would have opened a door for wider consideration of the euro as a denominating currency, especially for those disinterested in allowing the United States to have a technical hegemony merely by virtue of the central importance of its currency in global commodity trading. Realistically speaking, some "market basket" of currencies might be an ideal endpoint for many countries and companies in their global buying and selling arrangements, but as the standardized, globally accepted replacement for the U.S. dollar as the denominator, such a market basket valuation mechanism is still at least a few years (and probably more) away.

As international trade now stands in the here and now, the U.S. dollar is not the currency of choice because the United States is some big, nasty, schoolyard bully; it is instead the attractive currency because it is the powerhouse: the amount of dollar-valued contracts (and therefore, assets) across the globe is simply staggering. Both as a stock of value and as a medium of exchange, the greenback is light-years beyond any other currency on planet Earth. That's the reality, not some speculative claim.

The U.S. dollar is implicitly backed by a staggeringly massive, deep, long-standing government and a military umbrella second to none. The dollar is also backed by a nearly incalculable present value of future expected cash flows from American enterprise and labor; and of no insignificant importance, that dollar is backed by the indisputably most powerful engine of internal tax revenue generation and external war-making power the world has ever seen. The greenback has been around as a sign and symbol of the continuity of the United States in its sovereign status for scores of years. No currency on Earth can compare to it—not in level, not in depth of markets, not in assuredness that claims it represents on the central bank of the United States will be satisfied.

All of the above is not to wave some "We're Number One" flag. It's simply the reality, and it's a reality that the United States government is not alone in grasping fully. Any nation that would fancy otherwise does so at its own peril and at great threat to the currency it would pretend to the summit.

The Europeans are not stupid. Their halls of finance are staffed by some of the most brilliant, some of the savviest, some of the most cultured men and women the world has ever known. As great as the United States is in its fine moments, Europe is a continent of nations whose peoples have continuous legacies going back thousands of years. These are people who understand the great experiment now underway in the union of the European nations. The 21st Century will be better for a great counterbalancing force against the twin dynamics of the U.S. and China, as well as against and with the lesser but still important dynamics of emerging nations and economic trading regions. The series, "The 21st Century," sets forth some of the perils the European Union faces from the designs of the American neo-conservatives and the planners in the Pentagon. It remains the case that this union of the European nations can meet the challenges of dispiriting forces from abroad, but perhaps recent thoughts and concerns will in the end overwhelm optimism about and hope for Europe.

That caution being noted, with respect to their full understanding of how to conduct their respective and integrated portfolio of finance, though, the Europeans know very well that their new currency, the euro, is in no way, shape, or form up to handling the enormous, constant, day-in-day-out, year-in-year-out task of being the denominator in any large-scale global market: the euro hasn't been around nearly long enough; the understanding of what it really is will continue to evolve, particularly as new nations are added to the European Union and as the central bank more fully defines and asserts its role; and the sheer depth of value carried in the amounts of it in circulation just doesn't exist yet. And those factors will remain possibly for years if not a decade or more the combined and profound deterrent to using the euro as a perfect or even preferred substitute for the greenback in international trade. The euro just cannot of its own sovereign backing handle the massive currents of modern trading. It simply can't.

Neither, of course, can the yuan; and part of this is because the yuan has been used by the Communist Chinese Party as a toy for internal growth at the expense of other nations, most particularly the United States. Pumping yuan out in staggering amounts for years has done nothing to increase the depth of the yuan; in fact, it has had the opposite effect, and it's only a matter of time until that "miracle growth" of the Chinese economy (nearly 10% by some estimates) evaporates into a spiraling, destructive inflation that only the most draconian of Chinese central bank monetary policy regimes could bring under control. Astute analysts must be as unimpressed by China the miracle economy as by China the nascent bastion of Asian freedom: sustainable real growth and sustainable civil freedom remain illusions in China, despite hopes of naïve, post-Communist Era internationalists. The sinophiles of the West may very well come to be sorely disappointed by the outcomes of the great Chinese experiment in market reforms shallowly cast as the precursors to political and human rights reforms. In the final analysis, even setting aside the wasted prayer of burgeoning, democratic processes and open, liberal society in China, no international trading regime worth its salt would be interested in denominating anything important in yuan.

And no European finance minister in his or her right mind would be interested in having any major global commodity market use the euro as the denominating currency, either. Germany—the 800 hundred pound gorilla of finance in the EU—is rumored to have already told the Iranians to lay off this idea of a Tehran oil bourse running its show in euros; and this is no mere result of idle European aversion to the limelight or fear of offending the Americans: the euro in an Iranian oil bourse would put the European central bank front and center in a world well beyond its current capacity. The market for euros just isn't deep enough, and an entire oil trading circuit jumping up and down on such a fragile platform would put the European currency structure (and therefore the emerging, unified European economy) at great and unnecessary risk of effectively becoming a financial derivative hedging a wildly price-volatile commodity.

This does not mean some Arab nations will not make aggressive moves to switch from dollars to euros for at least some of their reserves and transactions. Following in the footsteps of Iran, which switched from dollars to euros in 2002, Syria recently announced that it was moving from denominating foreign currency transactions in dollars to euros, largely as a reaction to recent pressures placed upon it by the United Nations concerning political meddling in the affairs of Lebanon, pressures the leadership in Syria believe are the work of the United States acting on orders from regime-change advocates in Israel. Such moves to euros are in some ways symbolic, but even to the extent that they represent real change in the covenants of international contracts, they are minor when measured against the total value of all contracts forming and outstanding.

The Iranians are planning to do something no one wants them to do, just like Saddam before them. Although not the principal reason the American neo-conservatives are interested in the war, to the end of preventing a wholesale flight to euro denomination of inordinate numbers of commodity contracts, the Europeans are going to be on the bandwagon to bomb Iran back to Hell.

And they really are on that bandwagon. They have recently rejected without even summary consideration a six-point proposal passed by Tehran through the Russians, and they've been a willing conduit for "intelligence" information out of Tehran that has the heavy-handed smell of an Iranian dissident group (possibly connected in some way to the family of the former Shah) operating out of Paris.

This whole complicated situation raises the entirely disturbing possibility that the American neo-conservative warhawks who still infect the halls of power in Washington were not so all alone in their desire to invade Iraq back in 2003. It is entirely possible that there were forces within the European Union that were willing to tacitly go along with the invasion while presenting an exterior appearance of moral outrage for the consumption of domestic constituencies.

Worse, there is no reason to believe that the Europeans and their central bank are any more excited now about having the euro take the stage than they were three years ago.

Concerns deepen even more, though, as the long-standing power of the dollar becomes subject to more and more erosion, both materially and in the perception of the world at large. The new Chairman, Ben Bernanke, of the Federal Reserve behaves like some political shill with not a clue as to how to command respect in either global or domestic financial markets. Already, his official documents are getting well-deserved derision for their transparent political bias, and he appears to be unconcerned about the high-stakes danger his weakness of independent will could create for the international confidence in the dollar.

Should the global markets, because of the combination of inadequate individuals in the government and a Fed Chairman too much a political hack to do what needs to be done, truly lose confidence in the power, endurance, and long-term stability of the U.S. dollar, all bets are off—at least in the long run—on the dollar as the global denominating currency for the 21st Century; and should the dollar be abandoned, the alternatives will offer the safety of an illusion right before they, too, collapse just like the greenback from which traders jumped in absolute desperation.

Fortunately, wholesale abandonment of the dollar is a remote possibility. A war against Iran will ensure that remains the case, and this will not be because the American neo-conservatives are particularly concerned about such an event: they—the architects of this era of degraded American status in the world, huge and persistent federal budget deficits at home, and a progressively more menacing presence to both peoples of other countries and citizens of the United States—care only about control of resources, land, and ideas across the globe. Money is an incidental concern to those driven to power by the frightful demon of some sense of destiny. For the Europeans collaborating to agitate to yet another war, alliance with these neo-conservatives is a matter not of ideological compatibility so much as it is a situation of necessity if the EU is to emerge strong in both sovereignty and currency to confront both the United States and China on the battlefield of resource, land, and ideological control in the decades to come.

But although the motives may be different, the alliance of the United States and the European Union in this coming moment will nonetheless serve to bring more bloodshed and destruction to a century already born from the womb of nearly incalculable catastrophe and wholly wanton war.



The Dark Wraith has spoken.

Analysis: Index Portfolio Performance during the Bush Administration to Date

As of Friday, March 31, 2006, Republican George W. Bush had been President of the United States 1,896 days. Other than for a brief period in mid- to late-2001, when a Senate Republican became an Independent, both Houses of Congress have been controlled by the Republican Party to which Mr. Bush belongs. During this period, economic policy has been indisputably under the control of President Bush and his Republican Party in the federal legislature. Because of this absolute, one-Party control of the Executive and Legislative branches of the United States government, the Democrats have had no control over nor material say in the formulations of economic policies and the federal budgets arising therefrom. In particular, responsibility for the spiraling, year-over-year federal budget deficits that have hallmarked the reign of the Republicans rests squarely with the Republican Party, its legislators in Congress, and the policy-makers in the White House, including George W. Bush, himself.

The argument that the fiscal health of the public sector has faltered to the benefit of the private sector does not hold water. From the first day of trading, January 22, 2001, after President Bush became the 43rd President of the United States, until the last day of trading prior to the publication date of this article, the performance of the major stock markets—measured by the index portfolios of the Dow Jones Industrial Average, the Standard & Poor's 500, and the NASDAQ Composite—has been nothing short of a debacle, offering compelling testament to the real erosion of the capital stock of the nation as measured by the value of equity holdings in three broad-based portfolios formed from well-known indices.

January 22, 2001 was the first day of trading after Mr. Bush became President. Three major indices stood at the following levels at the close of trading on that day:

January 22, 2001, Index Closing Values
     Dow Jones Industrial Average: 10,578.24
     Standard & Poor's 500: 1342.9
     NASDAQ Composite: 2757.91

At the close of trading on Friday, March 31, 2006, these same three averages stood at the following levels:

March 31, 2006, Index Closing Values
     Dow Jones Industrial Average: 11,109.31
     Standard & Poor's 500: 1294.83
     NASDAQ Composite: 2339.79

If an investor were to have formed a portfolio based upon each of these three indices and managed each portfolio in terms of composition and balance to mirror the relevant index, the investor would have earned the following total nominal returns on investment over the 1,894 days from January 22, 2001, to March 31, 2006:

Total Nominal Portfolio Returns over 1,894 Days
     Dow Jones Industrial Average: +5.02%
     Standard & Poor's 500: —3.58%
     NASDAQ Composite: —15.16%

Expressing these returns on an annualized (that is, "percentage return per year compounded") basis, the nominal results just presented are as following:

Annualized Nominal Portfolio Returns over 1,894 Days
     Dow Jones Industrial Average: +0.95% per year
     Standard & Poor's 500: —0.70% per year
     NASDAQ Composite: —3.12% per year

The above are nominal (that is, "not corrected for inflation") results. Taking into account the erosion of purchasing power (that is, "the effect of inflation") on portfolio values over the holding period requires adjusting each of the current values to its equivalent value on January 22, 2001. From the Bureau of Labor Statistics Consumer Price Index data for January 2001, the CPI stood at 175.1, and for February 2006, the CPI stood at 198.7. The March 2006 figure can be estimated by various methods, and here, a conservative projection of 199.1 is derived from the three-month moving average of the CPI, implying a modest annualized inflation rate for the month just ended of 2.4 percent. The chart below shows the month-by-month annualized inflation rates for 2005 and 2006 to February, along with the attendant three-month moving averages.


Expressing the closing portfolio values as of Friday, March 31, 2006, in terms of their January 2001 purchasing power equivalents yields the following:

January 2001 Real Value Equivalents of March 31, 2006, Index Values
     Dow Jones Industrial Average: 9770.42
     Standard & Poor's 500: 1138.78
     NASDAQ Composite: 2057.80

The total real return on investment for each portfolio is then the quotient of the January 2001 index value when divided into the adjusted March 31, 2006, value:

Total Real Portfolio Returns
     Dow Jones Industrial Average: —12.05%
     Standard & Poor's 500: —15.20%
     NASDAQ Composite: —25.39%

Finally, expressing these real returns on an annualized (that is, "percentage return per year compounded") basis, the total real return results just presented are as following:

Annualized Real Portfolio Returns
     Dow Jones Industrial Average: —1.52% per year
     Standard & Poor's 500: —3.13% per year
     NASDAQ Composite: —5.49% per year

All of the results above are summarized in the following chart:


The total and annualized real returns to the selected portfolios are presented below in graphical form:

   
An investor forming a portfolio tracking the Dow Jones Industrial Average from the beginning of the Bush Administration in January of 2001 until March 31, 2006, would have suffered a loss in total real value of the portfolio of more than 12 percent, which is equivalent to a compounding rate of loss in purchasing power of the portfolio over the term of the Bush Administration of one-and-a-half percent per year; the investor forming a portfolio tracking the Standard & Poor's 500 over that period would have suffered a loss in total real value of the portfolio of more than 15 percent, which is equivalent to a compounding rate of loss in purchasing power of the portfolio over the term of the Bush Administration of more than three percent per year; and the investor forming a portfolio tracking the NASDAQ Composite index over that period would have suffered a loss in total real value of the portfolio of more than 25 percent, which is equivalent to a compounding rate of loss in purchasing power of the portfolio over the term of the Bush Administration of five-and-a-half percent per year.

From a well-balanced portfolio of the common stock of reasonably low-risk, very large public corporations to an equally well-balanced portfolio of the common stock of relatively riskier, small-cap public corporations, common stock—called equity—has offered significantly negative real returns during the tenure of the Bush Administration. The securities markets do not make political assessments based upon biases for one party or the other: billions of shares of stock trade each day, and the total value of these trades is an order of magnitude or more greater than this. Over the period of the past five-and-a-quarter years, the absolute control of the government by the Bush Administration and its Republican allies in Congress has been subject to an on-going, objective assessment by the securities markets of the United States, and the result to date of that assessment is that the American economy, as represented by the market values of stocks of large, medium, and small companies, has eroded undeniably and markedly.

Regardless of how large the nearly daily dose of good economic news the Bush Administration induces the mainstream media to repeat, the Administration can neither manipulate the stock market data, nor can it find a scapegoat for the broad-based, long-term depletion of private equity value its policies have caused. For the average American who contemplates retirement in part or in whole based upon investments made and held in the stock market over many years, the Bush Administration's record is nothing short of catastrophic in terms of the financial security for what will be generations of citizens in their retirement years. For most, however, the full realization of the value lost and the disrupted, nearly irreparable damage to future capital appreciation of their investments in the stock markets will come only after the era of the neo-conservatives has come to an end.

In that regard, then, the architects of this malfeasance visited upon the American people will be able to go to their own retirements relatively unscathed by the wrath of retirees of the future realizing as they will that their relative poverty in their declining years is directly attributable to the men and women of this early part of the 21st Century—men and women who will, themselves, live in fair comfort as those for whom they had such grave responsibilities suffer substantially in that degraded time to come.



The Dark Wraith in that grim future will offer unhelpful reminders to citizens as they pay the price for the folly of having trusted Republicans one too many times.