Monday, June 28, 2010

Robert Byrd -- Out of Office at Last

The Senate careers of Ted Kennedy, Strom Thurmond and Robert Byrd are all the evidence we need to impose term limits on Senators. While we're at it, we should limit the number of terms of Representatives to the House. The president is already capped at two terms. To make the most of enforced turnover, we should change the rules for Supreme Court Justices. Instead of a lifetime appointment, for them we should set a mandatory retirement age. Perhaps age 75. That sounds good.

Sen. Robert Byrd, longest-serving member of Congress, has died at 92

Monday, June 28th 2010

Walsh/APSen. Robert Byrd, the longest-serving member of Congress, has died at the age of 92. Related NewsArticlesSen. Robert Byrd, 92, in hospital in serious conditionThe nation's longest-serving senator had died.

Sen. Robert Byrd, the controversial 92-year-old from West Virginia, passed away earlier Monday morning.

The politician, who had served more than 50 years in Congress, had been suffering failing health for years and died at Inova Hospital in Fairfax, Va, according to a spokesman for the family.

Byrd, a Democrat, was admitted to the hospital on Sunday, his condiction considered "seriously ill."

In November, Byrd broke the record for congressional service that had been set by Democrat Carl Hayden of Arizona, who served in the House and Senate from 1912 to 1969. He was the Senate's majority leader for six of those years and was third in the line of succession to the presidency, behind House Speaker Nancy Pelosi.

A former member of the Ku Klux Klan, he was known to recite poetry, quote the Bible, discuss the Constitutional Convention and detail the Peloponnesian Wars — and frequently did in Senate debates.

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Thursday, June 24, 2010

Bad Mix -- Government, Oil and Water

Is anyone surprised? Our government analysts have more than enough trouble tracking and analyzing the past. Knowing their ability to understand what has already happened is weak, we should worry a lot when we rely on government predictions, especially when those predictions involve events or developments of unknowable dimensions. Like big oil leaks. Like Iran with a nuclear bomb.

BP Relied on Faulty U.S. Data

BP PLC and other big oil companies based their plans for responding to a big oil spill in the Gulf of Mexico on U.S. government projections that gave very low odds of oil hitting shore, even in the case of a spill much larger than the current one.

The government models, which oil companies are required to use but have not been updated since 2004, assumed that most of the oil would rapidly evaporate or get broken up by waves or weather. In the weeks since the Deepwater Horizon caught fire and sank, real life has proven these models, prepared by the Interior Department's Mineral Management Service, wrong.

Oil has hit 171 miles of shoreline in southern Louisiana, Mississippi, Alabama and northern Florida. Further, government models don't address how oil released a mile below the surface would behave—despite years of concern among government scientists and oil companies about deep-water spills.

BP's efforts to contain the spill suffered a brief setback when an undersea robot hit the cap that's channeling oil to the surface. BP was able to reinstall the cap Wednesday night.

Separately, Interior Secretary Ken Salazar told lawmakers that he is reviewing how to re-draft a moratorium on new deep-water drilling in response to a federal judge's ruling that struck down a blanket six-month drilling halt ordered by President Barack Obama last month. The Obama administration on Wednesday night asked the judge to delay his court ruling while the Justice Department appeals the decision, according to the Associated Press.

The government's optimistic forecasts reinforced the oil industry's confidence in its spill-prevention technology, leading to decisions that left both oil companies and the government ill-prepared for the disaster that has unfolded in the Gulf since April 20.

BP and government agencies responding to the spill have scrambled to assemble enough oil-containing boom and the ships and hardware needed to keep oil out of marshes and off beaches. Owen Kratz, chief executive officer of Helix Energy Solutions, one of the company's working to contain the spill for BP, said Wednesday that the industry needs to have more oil containment equipment positioned to handle a blowout – instead of building containment systems after an accident.

"We hope the best science will be used going forward in this model that MMS requires," said a spokesperson for the American Petroleum Institute.

The Obama administration has launched a major overhaul of the agency that regulates offshore oil and gas drilling in the wake of the Gulf spill. "Without question, we must raise the bar for offshore oil and gas operations," a spokesperson for the Interior Department said Wednesday in response to questions about the spill models.

BP has come under heavy fire from Congress and environmental groups for its lack of readiness to handle a worst-case spill. But that criticism has overlooked a key fact: BP was required by federal regulators to base its preparations on Interior Department models that were last updated in 2004.

The government's spill models have been at the center of years of debate among scientists that study oil spills. One study in the late 1990s used satellites to track almost 100 "drifters" set loose in the Gulf of Mexico to mimic floating oil. The paths of the drifting objects were compared with what the model predicted. After 30 days, the average discrepancy was 300 miles. "We have observed differences of some magnitude," a 2003 paper said, summarizing the study.

But the researchers, led by a team of scientists from the Interior Department's MMS, concluded that the results were "neither surprising nor disappointing," and "do not negate the utility" of the model. The scientists said the findings could lead to improvements in oil-spill modeling.

.Researchers have spent the past decade trying to improve modeling of oil spills. The biggest challenge: to update the models to reflect the new reality of deep-water oil drilling. Spills thousands of feet below the surface behave very differently than spills on the surface. Underwater currents, for example, can grab plumes of oil and transport them far from the scene of the initial spill, scientists say. Deep-water releases tend to break into smaller oil slicks, further complicating efforts to forecast where they'll go.

MMS said in early 2000, in a notice to lessees, that it planned to require oil companies operating in deep-water to use new oil-spill predictions specifically designed for deep water.

That regulation never came into effect. Oil companies today still base their contingency plans on the government's models, designed only for surface spills.

In 2001, the then-head of the MMS environmental division wrote a paper that warned "the oil spill trajectory models currently used by the oil industry for the preparation of oil spill response plans may not be adequate for deep water."

Since then, MMS researchers have experimented with new models specifically designed to simulate deep-water oil spills. In 2005, after one such experiment, the MMS modeling team wrote in a paper that "spill response plans need to be upgraded" to deal with potential deep-water releases. But the models haven't incorporated new deep-water simulations.

Questions about the industry's preparedness for a spill have come up repeatedly as Congress has investigated the response to the Gulf disaster.

House lawmakers accused BP, Exxon Mobil Corp., Chevron Corp. and other companies last week of using "cookie cutter" contingency plans that contained numerous errors and omissions.

Exxon Chief Executive Rex Tillerson pointed out that much of the company's response plan "is prescribed by regulation, including the models that are used to project different scenarios for oil spills."

The MMS spill trajectory model is known as OSRA, an acronym for "oil spill risk analysis." The model simulated currents and winds in the Gulf to calculate where oil slicks would travel over a period of three, 10, and 30 days.

That model projected that a spill of oil on the surface in the Mississippi Canyon area, located 68 miles offshore, would have just an 11% chance of making landfall in Plaquemines Parish, La., after 30 days. In reality, Plaquemines, the area hardest hit by the current spill, got its first tar balls 22 days after the explosion.

The bulk of the Gulf Coast, according to the model which projects spill trajectories for 30 days maximum, would not see oil reach shore even with a catastrophic offshore spill.

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Wednesday, June 23, 2010

Zig Orszag Adieu


Orszag Adieu

The 'cost curve' bent the budget director.

  • According to press reports, Peter Orszag has told friends that he plans to leave as White House budget director because he wants to go out on "a high note." Would that refer to the deficit, or federal spending as a share of GDP?

Mr. Orszag's 18 months on the job is typical for the head of the Office of Management and Budget, though few predecessors have had a gaudier tenure. Budget wonks always say they favor "fiscal responsibility," some more credibly than others. Yet Mr. Orszag did so while serving as an intellectual architect of the $862 billion stimulus, two budgets that boosted spending to levels unseen since World War II and ObamaCare (true costs to come, though conservatively in the range of $2.5 trillion).

Mr. Orszag's first budget proposed to bring federal spending to 27.7% of GDP, and it is projected by the Administration to remain above at least 22% for the next decade—up from the modern average of under 21%. The Congressional Budget Office's view of Mr. Orszag's budget puts the deficit at 4.3% of GDP in 2015—versus 2.6% in the baseline status quo—and then rising back to 5.6% in 2020.

Democrats on Capitol Hill and President Obama are doing most of this damage, but Mr. Orszag made one signature contribution—to wit, his claim that the only way to reduce entitlement spending was to create a new entitlement. Mr. Orszag's illusion that government can "bend the cost curve" enabled Democrats to nationalize more health-care spending while claiming to save money.

In a New England Journal of Medicine essay last week, Mr. Orszag wrote that ObamaCare "will significantly reduce costs" because "it institutes myriad elements that experts have long advocated as the foundation for effective cost control." But not according to CBO director Doug Elmendorf, who wrote recently that "Rising health costs will put tremendous pressure on the federal budget during the next few decades and beyond" and that "the health legislation enacted earlier this year does not substantially diminish that pressure."

Look for Mr. Orszag to nonetheless hit the lecture circuit as an apostle of fiscal rectitude, claiming that the only way to save America from budgetary ruin is—a tax increase. The media will treat him like a sage.

Tuesday, June 22, 2010

McChrystal Ball – Stay or Go?

Despite accomplishing nothing since Inauguration Day, Ken Salazar still has his job. The BP Gulf Oil Leak is still not serious enough for Obama to fire him for failing to properly monitor and enforce offshore drilling rules and regulations.  However, Salazar has remained upbeat and supportive of Obama.

Will McChrystal survive? If he’s canned, I think we can assume his lack of rah-rah spirit will surface as the shortcoming that did him in.

McChrystal Called to Washington to Explain Remarks

June 22 (Bloomberg) -- General Stanley McChrystal, commander of U.S. forces in Afghanistan, has been called to Washington to explain disparaging remarks he made in a magazine interview.

Defense Secretary Robert Gates said in a statement that McChrystal “made a significant mistake and exercised poor judgment” in the comments quoted by Rolling Stone magazine. He said McChrystal has apologized to him and that he recalled the general to Washington to discuss the matter in person.

The article, in the magazine’s latest edition, quotes the general and his aides as criticizing Vice President Joseph Biden, special envoy for Afghanistan Richard Holbrooke, and U.S. Ambassador to Kabul Karl Eikenberry.

As the top U.S. civilian and military officials in Afghanistan, Eikenberry and McChrystal are required to jointly implement U.S. policy in the country.

The Rolling Stone profile, titled “The Runaway General,” mentions the first meeting that McChrystal had with President Barack Obama the week after he took office. They met with a dozen senior military officials in a Pentagon room known as The Tank. The reporter of the article cites a source familiar with the meeting saying that McChrystal thought Obama appeared “uncomfortable and intimidated” by the room filled with military brass.

‘Photo Op’

The article also describes the first one-on-one meeting McChrystal had with Obama in the Oval Office four months later, which an adviser to McChrystal called “a 10-minute photo op.”

McChrystal is described by an aide as “disappointed” in this first meeting with the president. While McChrystal voted for Obama, the two didn’t connect from the start, the article says.

The general today apologized for his remarks. He issued a five-sentence statement after news organizations published excerpts from the Rolling Stone article.

“I extend my sincerest apology,” McChrystal said in the statement e-mailed by the press office of his command, the International Security Assistance Force, in Afghanistan. “It was a mistake reflecting poor judgment and should never have happened.”

Duncan Boothby, a civilian communication adviser to the general who was responsible for arranging the Rolling Stone interview, submitted his resignation today, a defense official said.

Planned Drawdown

McChrystal commands 142,000 troops in Afghanistan from the U.S. and 45 partner nations. Their aim is to reverse Taliban gains and make room for newly trained Afghan soldiers and police and their civilian counterparts to begin taking charge as the U.S. begins a drawdown planned to start in July 2011.

McChrystal is executing a strategy which took the White House months to approve. The approach involves adding 30,000 U.S. troops to carry out a counter-insurgency, which includes convincing Afghans to resist the Taliban’s takeover of parts of the country. The general said recently that this would take more time than expected.

McChrystal’s second in command is his deputy, General David Rodriguez, who oversees day-to-day military operations in Afghanistan.

The article about the general was being read far beyond Washington. The Afghan people “will be witness of more division among the U.S. and other nations’ commanders or their civilian officials,” said Zabiullah Mujahid, a Taliban spokesman.

Previous Trouble

McChrystal has been in trouble before with the administration. Obama met privately with the general in Copenhagen Oct. 2, the day after the commander delivered a speech in London in which he said the U.S. and its allies will have to “do things dramatically differently, even uncomfortably differently” to succeed in Afghanistan.

The administration was in the midst of debating its strategy in Afghanistan, and McChrystal was perceived to be lobbying publicly for his position that more U.S. and international troops would be needed to provide security and train Afghan forces.

National Security Adviser James Jones and Defense Secretary Robert Gates both issued implicit rebukes of McChrystal, saying the U.S. military’s advice to the president should be given privately.

In the Rolling Stone article, one aide calls retired four- star General Jones “a clown” who is “stuck in 1985.”

Troop Levels

McChrystal also has been at odds over the Afghan war strategy with Biden, who originally opposed McChrystal’s plan for increasing U.S. troops in Afghanistan, and with Eikenberry, who was reported by Bloomberg News in November to have expressed reservations to Obama about a military buildup before Afghan President Hamid Karzai and his government took steps to fight corruption and mismanagement.

The Rolling Stone article says at one point that McChrystal wondered aloud what Biden question he might face that day. “I never know what’s going to pop out until I’m up there, that’s the problem,” he is quoted as saying.

“Are you asking about Vice President Biden?” McChrystal says with a laugh, according to the article. “Who’s that?”

“Biden?” a top adviser to the general is quoted as saying. “Did you say: Bite Me?”

The Rolling Stone article says McChrystal spoke of feeling “betrayed” by an Eikenberry memo leaked to news organizations last year in which the ambassador criticized Karzai as an inadequate partner for the war effort McChrystal was leading.

‘Fully Committed’

McChrystal spoke with exasperation upon getting a BlackBerry message from Holbrooke during the Rolling Stone interview. “Oh, not another e-mail from Holbrooke. I don’t even want to read it,” the article quotes McChrystal as saying.

The article also quotes a McChrystal aide as comparing Holbrooke to a “wounded animal.”

“Holbrooke keeps hearing rumors that he’s going to get fired, so that makes him dangerous,” the aide said.

A statement from the U.S. embassy in Kabul said Eikenberry is “fully committed” to working with McChrystal.

“As Ambassador Eikenberry has said on many occasions, he and General McChrystal are both are fully committed to the president’s strategy and to working together as one civilian- military team to implement it,” said Caitlin Hayden, spokeswoman for the U.S. Embassy in Kabul.

She said Eikenberry planned to make no statement on the controversy.


McChrystal was ordered to appear in person at the monthly meeting on Afghanistan and Pakistan, rather than over a secure video conference from Afghanistan, as is the custom, a U.S. defense official said,. The meeting is scheduled tomorrow, the official said, speaking on condition of anonymity.

Geoff Morrell, a spokesman for Gates, said the general’s meeting with Gates is in addition to any meeting at the White House.

Gates, in his statement, said “I believe that General McChrystal made a significant mistake and exercised poor judgment in this case.”

“We are fighting a war against al-Qaeda and its extremist allies, who directly threaten the United States, Afghanistan, and our friends and allies around the world,” he said. “Going forward, we must pursue this mission with a unity of purpose.”

The chairman of the Senate Armed Services Committee, Carl Levin of Michigan, called McChrystal’s remarks “inappropriate,” and said he was “very troubled.”

Levin stopped short of calling for McChrystal to be fired. If the comments reflected a policy disagreement, the president would have “no alternative” but to fire him, Levin said. McChrystal’s comments reflect more of a “personality problem,” Levin said.

Analyst’s View

Anthony Cordesman, a military analyst at the Center for Strategic and International Studies in Washington, said he didn’t know if McChrystal would survive in his position.

“Politics are politics, and we are in the middle of an extraordinarily difficult war, and we don’t have anyone with the same skills and leadership, and people do make mistakes,” Cordesman said in a telephone interview.

Still, he said, “You are caught up in the problem that a president and an administration are dealing with a war that’s politically uncertain while his popularity is diminishing.”

The North Atlantic Treaty Organization issued a statement calling the Rolling Stone article “rather unfortunate, but it is just an article.

‘‘We are in the middle of a very real conflict, and the Secretary General has full confidence in General McChrystal as the NATO commander and in his strategy,’’ the statement said.

Captain John Kirby, spokesman for Admiral Michael Mullen, chairman of the U.S. Joint Chiefs; Colonel Eric Gunhus, spokesman for General David Petraeus, commander of U.S. forces in the Middle East, and Pentagon spokesman Geoff Morrell did not respond immediately to e-mailed requests for comment.

Obama’s BP Putsch


Is U.S. Now On Slippery Slope To Tyranny?


When Adolf Hitler was building up the Nazi movement in the 1920s, leading up to his taking power in the 1930s, he deliberately sought to activate people who did not normally pay much attention to politics.

Such people were a valuable addition to his political base, since they were particularly susceptible to Hitler's rhetoric and had far less basis for questioning his assumptions or his conclusions.

"Useful idiots" was the term supposedly coined by V.I. Lenin to describe similarly unthinking supporters of his dictatorship in the Soviet Union.

Put differently, a democracy needs informed citizens if it is to thrive, or ultimately even survive.

In our times, American democracy is being dismantled, piece by piece, before our very eyes by the current administration in Washington, and few people seem to be concerned about it.

The president's poll numbers are going down because increasing numbers of people disagree with particular policies of his, but the damage being done to the fundamental structure of this nation goes far beyond particular counterproductive policies.

Just where in the Constitution of the United States does it say that a president has the authority to extract vast sums of money from a private enterprise and distribute it as he sees fit to whomever he deems worthy of compensation? Nowhere.

And yet that is precisely what is happening with a $20 billion fund to be provided by BP to compensate people harmed by their oil spill in the Gulf of Mexico.

Many among the public and in the media may think that the issue is simply whether BP's oil spill has damaged many people, who ought to be compensated.

But our government is supposed to be "a government of laws and not of men."

If our laws and our institutions determine that BP ought to pay $20 billion — or $50 billion or $100 billion — then so be it.

But the Constitution says that private property is not to be confiscated by the government without "due process of law."

Technically, it has not been confiscated by Barack Obama, but that is a distinction without a difference.

With vastly expanded powers of government available at the discretion of politicians and bureaucrats, private individuals and organizations can be forced into accepting the imposition of powers that were never granted to the government by the Constitution.

If you believe that the end justifies the means, then you don't believe in constitutional government.

And, without constitutional government, freedom cannot endure. There will always be a "crisis" — which, as the president's chief of staff has said, cannot be allowed to "go to waste" as an opportunity to expand the government's power.

That power will of course not be confined to BP or to the particular period of crisis that gave rise to the use of that power, much less to the particular issues.

When Franklin D. Roosevelt arbitrarily took the United States off the gold standard, he cited a law passed during the First World War to prevent trading with the country's wartime enemies. But there was no war when FDR ended the gold standard's restrictions on the printing of money.

At about the same time, during the worldwide Great Depression, the German Reichstag passed a law "for the relief of the German people."

That law gave Hitler dictatorial powers that were used for things going far beyond the relief of the German people — indeed, powers that ultimately brought a rain of destruction down on the German people and on others.

If the agreement with BP was an isolated event, perhaps we might hope that it would not be a precedent. But there is nothing isolated about it.

The man appointed by President Obama to dispense BP's money as the administration sees fit, to whomever it sees fit, is only the latest in a long line of presidentially appointed "czars" controlling different parts of the economy, without even having to be confirmed by the Senate, as Cabinet members are.

Those who cannot see beyond the immediate events to the issues of arbitrary power — vs. the rule of law and the preservation of freedom — are the "useful idiots" of our time. But useful to whom?

Saturday, June 19, 2010

Should Offshore Oil Drilling Be Expanded?

Hoover Dam's Big Government Lessons

Mort Zuckerman: World Sees Obama as Incompetent and Amateur

Thursday, June 17, 2010

Obama the Vigilante

In Obama's fevered mind the future might give us regenerative medicine, educational software and intelligent prosthetics. But in his delirium he sees something standing in the way of our promising future:

Lobbyists. Especially lobbyists for the banks or the insurance industry that don't want more regulation; or the corporation that would prefer to see more tax breaks. However, among the visions dancing in his head is a vision of huge tax credits to fund the research & development of his favored technologies. It seems he's missing an epic irony -- the fact that he is the ultimate lobbyist. Appalling.

He'll sacrifice BP, possibly believing that strangling an oil company will produce a successful biomedical company. He's losing touch with reality.

The President's Animosities

Since when was the American idea us versus them?

The oil company formerly known as British Petroleum is starting to look kind of beaten up. So it goes when a business finds itself tossed into the ring with the current president of the United States.

"We will make BP pay," Mr. Obama said Tuesday night.

There is a mood in the land that BP is getting what it deserves. Maybe so. But players in the political game who've found it convenient to join the president in the BP bear-baiting should not delude themselves that BP is a free hit. In politics, nothing happens in isolation.

The beating Mr. Obama is giving BP isn't the exception. It's the rule when this president finds himself in tension with the private sector. I can't recall any previous president with this depth of visceral, antibusiness animosity.

Amid the BP crisis, the president traveled to Carnegie Mellon University to give what was billed as a major speech on the economy. In its entirety, the speech is a guided tour through Mr. Obama's mind. The pundits carping yesterday that the president's oil-spill apologia was limp—even as BP gave him $20 billion in tribute—should check out this one.

That Pittsburgh speech wasn't just about "the economy," but the way Mr. Obama sees life in 21st century America: a tooth-and-fang world of private interests in constant struggle against the benevolent goals of government. All of this described in a tone that is extraordinary for a president.

"As November approaches," the president said, "leaders in the other party will campaign furiously on the same economic arguments they've been making for decades." They gave "tax cuts . . . to millionaires who didn't need them. They gutted regulations and put industry insiders in charge of oversight."

The beating Mr. Obama is giving BP isn't the exception.

Mr. Obama believes that "if you're a Wall Street bank or an insurance company or an oil company, you pretty much get to play by your own rules, regardless of the consequences for everybody else." Al Gore campaigned hard against these same targets, but never with such ill will.

Americans, he says, want to compete but can't "if the irresponsibility of a few folks on Wall Street can bring our entire economy to its knees." A president is not some backwater pol running for sheriff. But his explanation of the financial crisis—the whole economy brought down by "a few" on Wall Street—is a scenario found nowhere outside a James Bond movie.

He punched out WellPoint and other insurers verbally for months until they dropped and the Democrats passed the president's health-care bill. And they'd better stay down. No longer, said Mr. Obama, would it be possible for people to be "thrown off" their coverage for reasons "contrived" by an insurance company.

He complains his predecessor left him with projected deficits of $8 trillion caused by unpaid-for tax cuts, a familiar analysis, except that Mr. Obama adds that the cuts were "skewed to the wealthy."

When in the Carnegie Mellon speech Mr. Obama turns from what he called "the dangers of an unfettered market" and discusses government—"only government has been able to do what individuals couldn't do and corporations wouldn't do"—he is virtually delirious with joy.

Of his proposed research and experimentation tax credit he says, "The possibilities of where this research might lead are endless." Regenerative medicine, educational software, intelligent prosthetics. "Imagine all the workers and small business owners and consumers who would benefit from these discoveries."

He then identifies what stands in the way of "a better future." It's that "there will always be lobbyists for the banks or the insurance industry that don't want more regulation; or the corporation that would prefer to see more tax breaks . . ." A president seeking tax breaks to the horizon for green industries wouldn't say this, unless whacking "corporations" was just too much fun.

The agenda Mr. Obama described at Carnegie Mellon is so vast you'd think he'd at least enlist the private sector's help. But there's nothing in the speech's enumerations to suggest any desire to have them along on these projects. If they contribute or comply, it will be out of intimidation. It's all him or the government or its "investments."

Some might say that instead of being a cheerleader for business, Mr. Obama is simply a tough-minded public official holding well-shod feet to the fire. I don't buy it. His tone and vocabulary, in use since he took office, goes beyond public policy. It sounds personal. Too personal for a president.

Populism in the United States is a trickier proposition than in, say, South America. Here, the private sector isn't automatically a suspect proposition. Bill Clinton played the populism card as well as anyone. Harry Truman and JFK had famous fights with big steel. But none of these Democratic presidents routinely pistol-whipped private interests in the language this one does. No previous president assembled a Cabinet with not one member from the private sector, as now.

The worldview in this White House is distinct and unusual. It wasn't a voting issue in 2008. The opposition should make it an issue in 2012, and this November. Since when was the American idea us versus them?

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Wednesday, June 16, 2010

Electric Dream Cars

Tesla Motors received a loan from the government of about $450 million. Based on the number of cars Tesla has sold, the loan equals about $450,000 per car. Meanwhile, the company is unlikely to become profitable anytime soon. Thus, there is no obvious reason for investors to buy this stock in the IPO.

The coming IPO of the new GM will put more pressure on Tesla. GM plans to introduce its Chevy Volt soon. Though the Volt and the Tesla are not head-to-head competitors, they are both electric vehicles with limited range and lengthy battery recharge periods.

Considering there are already some popular hybrids building market share and new electric vehicles arriving in showrooms, there is a high probability of several failures in this segment of the auto industry. The Tesla seems like a reincarnation of the DeLorean or perhaps the earlier Avanti. Both iconic. Both gone.

Tesla Motors: IPO Fueled By Glamour

Tesla Motors Inc. is a company high on glamour. The automaker, which Tuesday scheduled its initial public offering for June 29, makes "green" sports cars that run on electric power. They certainly draw the eye: Walking down Fifth Avenue last summer I met a crowd in suits cooing over one like schoolboys. The cars are not cheap: They start at more than $100,000 each.

Meanwhile company founder and chief executive Elon Musk, age 38, has been in and out of the news. He founded PayPal before selling it to eBay in 2002. He also runs rocket company Space Exploration Technologies and is chairman of solar power business SolarCity. He's engaged to British actress Talulah Riley. Director Jon Favreau recently told Time magazine Elon Musk was among the inspirations for the high-tech entrepreneur played by Robert Downey Jr. in those mindless Iron Man movies.

But as investors have learned the hard way over the years, glamour and excitement are not the same as a sound investment. Indeed the reverse is more often the case.

So should you strap yourself into this zippy little investment vehicle, or stay on the sidewalk?

Let's pop the hood.

The company Tuesday put its likely offer price at $14 to $16 a share. At the $15 mid-point,Tesla would be valued at $1.4 billion. That's quite a price for a company that has only existed for a few years and has never turned a penny of profit.

When the company awarded millions of stock options to Mr. Musk and other insiders as recently as December, it thought the fair price for those was just $6.63. As recently as March, when it awarded yet more options, the fair price was $9.96. Now it's $15. Who said we're in a bear market?

Sales last quarter, at $21 million, showed no gain over the first quarter of 2009–the depths of the financial crisis. Meanwhile operating expenses doubled to $30 million.

So far the company has accumulated $290 million in total losses, on $148 million in sales. It expects net losses at least until 2012.

To date, the company says, customers have driven Roadsters for an aggregate of about 4 million miles. But it also admits there are 1,063 of them on the road. That works out at about 3,800 miles per car. Admittedly most were sold just last year. But this still does not suggest active use.

Anyone betting on Tesla stock is gambling on the success of the forthcoming Model S. But Tesla itself warns that car "is at an early stage of development" and will not be in production until 2012. It adds that it has yet to finalize the design, or complete the engineering, manufacturing or component supply processes for the new car.

And they will not be cheap. The current Roadsters cost over $100,000. Tesla says the Model S, aimed at the "broader market," will cost about $50,000 –even after a $7,500 tax credit.

Even if electric cars take off, Tesla admits it is going to face tough competition. Daimler, Lexus, Audi, Renault, Mitsubishi, Volkswagen, Subaru, Nissan and Ford are all developing electric cars of their own. The company is trying to compete by selling cars online and through its own stores: So far there are only 12.

At $15 a share, the company will raise up to $160 million in the IPO. Toyota will invest another $50 million while Tesla is spending $42 million buying a factory from a Toyota joint venture. Meanwhile insiders are cashing out about $33 million, including $21 million for Mr. Musk. That will still leave him with a stake of about $400 million.

As with most speculative stocks, with Tesla Motors you're taking a gamble. So long as you accept that's what you're doing, have fun.

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BP's Water World

Maybe Kevin Costner's second act will play out on the stage of an oil platform in the Gulf. Here's to hoping his clean-up technology works.

BP Seriously Just Purchased 32 Oil Cleanup Machines From Kevin Costner

Posted Jun 15, 2010

How desperate is BP? CEO Doug Suttles finally agreed to purchase 32 of the miracle oil-cleanup machines touted weeks ago by Kevin Costner, according to ABC News.

"We were confident the technology would work but we needed to test it at the extremes. We've done that and are excited by the results," said Doug Suttles, BP's chief operating officer. "We are very pleased with the results and today we have placed a significant order with OTS [Costner's Ocean Therapy Solutions] and will be working with them to rapidly manufacture and deploy 32 of their machines."

The Waterworld actor was so appalled by Exxon-Valdez that he spent $20 million of his own money to develop a centrifuge that separates oil from water. His company, Costner's Ocean Therapy Solutions, is not a joke.

Says Costner: "If 20 of my V20s [machines] would have been at the Exxon Valdez, 90 percent of that oil would have been cleaned up within the week."


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Monday, June 14, 2010

BP's Troubled Waters

Obama and others are demanding cash -- now. Ironically, it may turn out that BP will hire many unemployed workers to clean the mess now accumulating in the Gulf. For taxpayers, this is good news. Instead of collecting government benefits, formerly unemployed workers might begin collecting paychecks from BP. Moreover, all the businesses harmed by the leaking oil will most likely receive full compensation from BP. Of course to ensure BP's ability to write checks to injured parties, the government should consider opening more territory to oil drilling. That way BP will have the funds to pay all its bills, even if the bills are inflated by opportunists.

BP Submits Capture Plan, Obama Seeks Escrow Account

June 14 (Bloomberg) -- BP Plc sent a revised oil-capture plan for its leaking Gulf of Mexico well to the Obama administration as the government demanded an escrow account for damages claims related to the biggest petroleum spill in the nation’s history.

BP said 53,000 barrels of oil a day can be captured by the end of June, two weeks sooner than previously proposed, according to a copy of the plan provided by the administration. BP also proposed having the capacity to get up to 80,000 barrels by mid-July. The London-based company has been collecting about 15,000 barrels a day from the leak for the last week.

The U.S. Coast Guard asked BP to capture more oil after a federal scientific panel said twice as much oil is leaking as previously estimated. White House Adviser David Axelrod yesterday called on BP to establish an escrow account for claims. Senate Majority Leader Harry Reid is requesting BP set up a $20 billion fund administered by an independent trustee, according to a draft letter issued by his office.

“We want to make sure the money is escrowed for the businesses and want to make sure the money is independently administered so it’s not slow-walked,” Axelrod said yesterday on NBC’s “Meet the Press.”

BP’s board meets today to discuss whether to reduce or defer its second-quarter dividend. The shares fell as much as 6.6 percent in London trading.

No Decision Expected

“The board will be looking at a number of options when it meets,” Sheila Williams, a spokeswoman for BP, said yesterday. “No decision is expected this week.”

Jon Pack, a BP spokesman in Houston, said he was unaware of the revised recovery plan and couldn’t immediately comment on it.

BP and the Coast Guard expect some leakage to continue at least until mid-August, when the first of two so-called relief wells can plug the bottom of the damaged well.

The company will start taking oil and natural gas from the damaged well to a ship on the surface through a separate pipe in the next few days, and a “more permanent and flexible” system with floating risers is set to begin operations around the end of the month, according to a statement today.

“Plans are being developed to further develop these systems and also for further options to provide additional containment capacity and flexibility, in line with requests made by the U.S. Coast Guard,” BP said. The company was able to capture 127,000 barrels from June 4 until June 12.

Obama Address

Obama will address the nation at 8 p.m. tomorrow, after he returns from a two-day visit to Alabama, Mississippi and Florida, said Ben LaBolt, White House spokesman.

The president is scheduled to meet June 16 at the White House with BP’s chairman, Carl-Henric Svanberg, and other company officials. BP Chief Executive Officer Tony Hayward is also expected to attend, Coast Guard Admiral Thad Allen said yesterday.

Establishing the reserve account will be a subject for “discussion,” Axelrod said. “But it has to be substantial. BP has the resources to meet the claims and we’re going to make sure they do.”

Allen said having an independent administrator for the escrow account would make sure that the response to claims “happens quicker.”

“We’ve been very concerned about the claims process,” he said yesterday on CBS’s “Face the Nation” program. “This is not a core function of an oil-producing company.”

$37 Billion Cost

The cleanup costs and legal liabilities resulting from the leak may reach $37 billion, according to Credit Suisse Group AG. BP said today it has spent $1.6 billion so far on the response to the spill.

BP fell 23.85 pence, or 6.1 percent, to 368.05 pence at 2:19 p.m. in London trading. The shares are down 44 percent since the April 20 explosion aboard the Deepwater Horizon drilling rig in the Gulf, resulting in the deaths of 11 workers.

BP’s revised plan calls for keeping more oil-recovery ships at the spill site and adding vessels that can process and shuttle the captured oil ashore.

Oil gushed from the well at a daily rate of 20,000 barrels a day to 40,000 barrels through June 3, when BP removed a kinked pipe that may have been curtailing the flow, a panel of government scientists said June 10. One research team said the rate might have been 50,000 barrels a day.

Installing Sensors

BP, at the request of the government’s flow-rate group, was installing pressure sensors yesterday on the well to help determine the leak rate, said Mark Proegler, a company spokesman.

In its application for the well, BP told the government it was prepared for a worst-case oil spill of 250,000 barrels a day.

The spill has closed as much as 37 percent of the Gulf of Mexico to fishing, cut the number of offshore drilling rigs in the nation by half and polluted 140 miles of shoreline from Louisiana to Florida.

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Friday, June 11, 2010

Investing -- Better Safe than Sorry

Klarman Tops Griffin as Investors Hunt for ‘Margin of Safety’

June 11 (Bloomberg) -- Seth Klarman almost doubled his hedge fund’s assets to $22 billion in the past two years as the industry shrank by sticking with the off-the-beaten-path investments he’s pursued since starting out in 1983.

Unlike John Paulson, who made $15 billion by betting against home mortgages, Klarman didn’t see one big trade that would profit as markets began to collapse. The founder of Baupost Group LLC focused on corporate bonds he calculated would yield solid returns even if the economy got worse.

“We didn’t have the degree of conviction Paulson had,” said Klarman, whose views are so closely watched by investors that his out-of-print book, “The Margin of Safety,” is offered on for more than $1,700. “We don’t deal in absolutes. We deal in probabilities,” he said in an interview at his Boston office.

While Klarman didn’t post the gains that made Paulson famous, he was able to raise almost $4 billion in 2008 when firms including D.B. Zwirn & Co. and Peloton Partners LLP liquidated funds. Baupost was the ninth-largest hedge-fund firm as of Jan. 1, according to AR magazine, Pensions & Investments magazine and data compiled by Bloomberg. He oversees more money than better-known managers such as Ken Griffin and Steven Cohen.

A value investor who looks for securities he considers underpriced, Klarman, 53, said he’s best at “complicated” situations where fewer investors compete for assets. Over the years, Baupost has invested in Parisian office buildings, Russian oil companies and real estate that the U.S. government disposed of following the savings and loan crisis of the early 1990s, said Thomas Russo, a partner in the Lancaster, Pennsylvania-based investment firm of Gardner Russo and Gardner.

‘Complex Assets’

“He specializes in illiquid, complex assets,” said Russo, who has known Klarman since 1984.

Baupost gained an average of 17 percent annually in the 10 years ended in December, a period in which the Standard & Poor’s 500 Index fell 1 percent a year. The hedge fund has returned 19 percent a year since it was started, even as it held more than 40 percent of its assets in cash at times.

In February 2008, when Baupost accepted new investors after being closed for eight years, Klarman bought distressed corporate and mortgage debt. The fund lost 12 percent that year, its second annual decline since inception, because it bought some of the debt too early, Klarman said. It returned 23 percent in 2009 and was up 4.4 percent through April.

“It was a wonderful time to put money to work,” said Klarman.

Hedge funds on average lost 19 percent in 2008, gained 20 percent in 2009 and were up 3.6 percent through April, according to data from Chicago-based Hedge Fund Research Inc.

JPMorgan, CIT

Among the money-making bonds Baupost purchased, according to an October 2008 shareholder letter, was debt issued by Washington Mutual Inc., whose bank unit failed in 2008 and was bought by New York-based JPMorgan Chase & Co. Baupost also acquired bonds of CIT Group Inc., a New York-based lender that emerged from bankruptcy in 2009. The fund was part of a group of creditors that made a $3 billion loan to CIT in July 2009.

Klarman, in a May 18 talk to financial advisers in Boston, cited another Baupost purchase during the crisis to illustrate the way he thinks about investing. In a series of “what if” exercises, the firm calculated how much bonds of Ford Motor Credit Co. would be worth under different scenarios, including an economic depression in which loan defaults rose eightfold. The conclusion: the bonds, then selling for about 40 cents on a dollar, would still be worth 60 cents.

Real Estate

Ford Credit had net income of $1.3 billion in 2009, compared with a $1.5 billion loss in 2008. Some of its bonds have more than doubled in price since reaching lows in March 2009, Bloomberg data show.

More recently, the fund has been looking to buy privately held commercial real estate. While the fundamentals for much of that property are “terrible,” Klarman said, such investments may pay off for those willing to wait long enough.

Prices of publicly traded real estate securities have run up too far, he said in the interview. If the firm can’t come up with enough opportunities, it may return cash to investors, Klarman said.

“At this point, the clients don’t seem to want their money back,” he added. Baupost, whose investors are wealthy individuals and institutions such as Harvard University’s endowment, currently has about 30 percent of its assets in cash.

Graham and Dodd

Klarman is a disciple of Benjamin Graham and David Dodd, whose 1934 book, “Security Analysis,” is considered the bible for value investors. Graham taught finance at New York’s Columbia University where Berkshire Hathaway Inc. Chairman Warren Buffett was his student.

Klarman wrote the preface to the sixth edition of “Security Analysis,” which was published in 2008. His own book, subtitled ‘Risk-Averse Value Investing Strategies for the Thoughtful Investor,” has become a collector’s item.

Chris Ely, portfolio manager at Nichols Asset Management LLC in Boston, tried to get the book through his suburban library system. He was the 18th person on the waiting list and after six months still hadn’t gotten a copy, he said in a telephone interview.

“Seth writes about investing better than anyone ever has, bar none,” Michael Price, the longtime value investor, said in a telephone interview. Price, who sold his former firm, Heine Securities Corp., to Franklin Resources Inc. of San Mateo, California, in 1996 for more than $600 million, is now managing partner of New York-based MFP Investors LLC.

Red Sox Partner

Klarman, who was born in New York and grew up in Baltimore, worked for Price before and after graduating in 1979 from Cornell University in Ithaca, New York. He later earned a master of business administration at Harvard Business School in Boston.

Klarman is a limited partner of Major League Baseball’s Boston Red Sox, whose principal owner is commodities fund trader John Henry. He is chairman of the board of Facing History and Ourselves, a nonprofit that encourages the study of racism and anti-Semitism in schools.

As early as January 2006, Klarman warned in a letter to shareholders about “tremendous leverage,” “untested” products such as credit derivatives, low interest rates and “a housing bubble that is starting to burst.”

‘Perennially Bearish’

Today, Klarman says he worries that the dollar could lose value and interest rates and inflation may rise. Stocks will probably provide poor returns for the next 10 years, he said.

“We are perennially on the bearish side of things,” he said in the interview.

Baupost held $1.7 billion of U.S. listed stocks at the end of March, according to its latest filing with the Securities and Exchange Commission.

“We are not against owning stocks,” Klarman said in the interview. The problem, he said, is that except for a brief time in March 2009, “stocks haven’t been at bargain prices for most of the last two decades.” U.S. stocks reached a 12-year low in March 2009.

Klarman’s views on the U.S. stock market echo those of Jeremy Grantham, chief investment strategist at Boston-based Grantham Mayo Van Otterloo & Co., who recommended investors buy stocks in March 2009 after more than a decade of saying they were overvalued. Grantham’s latest forecast, posted on the firm’s website, predicted U.S. large cap stocks would return 0.3 percent a year, adjusted for inflation, over the next seven years.

Klarman called Grantham “a very smart person” whose forecasts he watches carefully. In an e-mail, Grantham called Klarman “just about the smartest guy around.”

Credit-Default Swaps

Klarman buys put options and credit-default swaps, which he calls “cheap insurance,” to protect Baupost against risks such as a steep fall in the stock market or a surge in inflation. He currently has a put, or an option to sell a set amount of a security by a specific date, that will pay off only if interest rates go dramatically higher, he said in his Boston speech. In an October 2008 letter to shareholders the firm said it benefited from credit-default swaps, without saying what the swaps were meant to protect against.

When Klarman can’t find investments he likes, he holds cash. “We prefer the risk of lost opportunity to that of lost capital,” he wrote in his 2004 yearend letter to shareholders. In 2007, Baupost gained more than 50 percent, even as it held more than 40 percent of its assets in cash.

Bruce Berkowitz, named Morningstar Inc.’s domestic stock manager of the decade and a contributor to the latest edition of the Graham and Dodd book, said Klarman stands out among fund managers because he’s able to make money while holding cash and avoiding leverage.

“If he isn’t Elvis, he’s pretty close,” Berkowitz said.

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He Can't Walk on Water or Oil

Obama Critics Should Have Voted for Red Adair

June 11 (Bloomberg) -- The blame game is replacing baseball as the U.S. national pastime.

First it was the greedy Wall Street bankers who got us into this mess, were rewarded with a government bailout and then went back to the business of making money.

Next came the insurance companies, whose collective scalp was shaved and sacrificed for the greater good: garnering support for ObamaCare.

Now it’s the oil companies, which have joined the list of personae non grata following the BP Plc oil spill in the Gulf of Mexico.

And who’s getting the blame for the response to the BP spill? Why, President Barack Obama.

This makes as much sense as blaming the weatherman for global warming. Obama can’t plug a hole 5,000 feet below the ocean’s surface, as first daughter Malia asked him to do.

Nor can his energy secretary, Steven Chu, winner of the Nobel Prize in physics, find a quick fix to halt the flow of tens of millions of gallons of oil into the Gulf, threatening the coastline’s delicate ecosystem and the livelihood of its residents. (Chu, who won the Nobel for “the development of methods to cool and trap atoms with laser light,” knows more about black holes than well holes.)

Screeds accusing the president of being detached or disengaged since the April 20 explosion and subsequent collapse of the Deepwater Horizon oil rig are about style, not substance. Frustration has given way to blame from both sides of the aisle. If the public wanted an ace fighter of oil-well fires and blowouts, they should have voted for Red Adair.

Misplaced Anger

“It is better to be angry at Obama for his health-care and labor policies, not this,” writes Richard Epstein, professor of law at the University of Chicago, in a June 7 column for

Epstein’s on to something. Blaming the president for failing to halt the oil spill is unwarranted. Let’s look at some areas where blame is more appropriate.

1. Labor Policies

I doubt Epstein was echoing the view that the president isn’t doing enough to create jobs. The Oval Office isn’t an employment office. Government’s role should be to foster an environment that encourages the private sector to create jobs. Raising the cost of hiring isn’t a winning strategy.

The civilian unemployment rate topped out at 10.1 percent last year, below the 10.8 percent peak during the 1981-1982 recession. Teen unemployment set a record, however, rising to 27.6 percent in October, the highest in the 62-year history of the series. Raising the minimum wage to $7.25 last year, the third step in a three-year $2.10 increase, didn’t help.

Minimum Wage, Maximum Pain

I’m always reminded of my late friend, economist Bob Laurent, when discussions about the minimum wage come up. Bob would ask, “Why raise the minimum wage to $5.00? Why not raise it to $100 and make everyone rich?”

Answer: Because there’s a cost. Putting a floor under the price of labor -- setting it above the equilibrium price -- results in increased supply (more people willing to work for an above-market wage) and reduced demand as employers consolidate the functions of low-wage workers. Unemployment goes up.

Obama didn’t sign the minimum wage increase into law as president; he did vote for it as a senator from Illinois. During the campaign, he promised to increase it to $9.50 by 2011.

Maybe the president will be too preoccupied crafting Son of Stimulus to keep his promise and deny more young Americans a start in the work world.

2. Health Care

Just what the U.S. needed: another entitlement program that promises more than it can deliver. The U.S. was already facing an unfunded liability for Medicare and Social Security -- the difference between benefits promised to current and future retirees and the taxes and premiums collected -- of more than $100 trillion in today’s dollars, according to the 2009 Social Security and Medicare Trustees reports. That was before universal health care became the law of the land.

Few would object to the goal of providing universal access to health care. Everyone should object to the failure of the health-care plan enacted earlier this year to do the one thing that would lower costs: Make the price of health care transparent to consumers.

While individuals and small businesses will be able to choose a plan on health-insurance exchanges, they will still be divorced from the cost of health-care services. Who among us really knows what a colonoscopy costs?

3. Foreign Policy

Obama seems to have difficulty differentiating between our strategic allies and enemies. The “special relationship” between the U.S. and the U.K., a phrase coined by Winston Churchill in his 1946 “Iron Curtain” speech, has gotten less special in the 16 months since Obama took office. Obama’s tactless gesture of shipping a bust of Churchill back to the U.K. was symbolic of the deteriorating ties.

The president claims that brokering a Mideast peace deal is a “vital national security interest” for the U.S. In other words, our security depends on the creation of a Palestinian state.

That’s pretty much what Arab leaders have been telling their populations for decades to deflect attention from their lousy leadership. It’s easier to convince the masses that the problem is an external oppressor and two small pieces of land, one on the West Bank and the other on the Mediterranean Sea, than let them face an uncomfortable reality: The Arab world had no interest in building a real state in Gaza, as opposed to a terrorist outpost, after Israel withdrew completely in 2005.

Criticism of Obama’s handling of long-time allies is justified. Those who blame him for not commandeering BP’s underwater robots should take a deep breath and find some serenity. They should accept what the president can’t change, challenge him for what he can and have the wisdom to know the difference.

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Wednesday, June 09, 2010

Closing in on closing the Gulf oil leak

Efforts to drill the relief well are underway. Capturing the escaping oil is working, and soon the process will improve to the point where it is capturing virtually all the oil. British Petroleum has responded to the Gulf catastrophe with speed and growing success. The company is gaining control over a bad situation. But it is moving toward the resolution of the crisis.

Not that stock investors have noticed. The price of BP shares fell below $34 when trading began today. That's a drop of more than 45% from its 2010 peak of $62.

BP earns more than $20 BILLION a year, which means it is prepared and capable of paying the full cost of cleaning the mess made by the leaking oil. Meanwhile, BP is a British company, which means the president of the US and the US government have little to say about the company's management outside of enforcing drilling and safety rules.

Investigations of the operation of the Transocean rig show its managers were attempting to following mandated safety and drilling rules. The operators may have made errors, but they were, nevertheless, attempting to operate according to regulatory requirements.

It is beginning to appear that the regulations themselves were the weak link in this chain.

BP says 'virtually all' oil to be captured soon

June 8

GULF SHORES, Ala. (AP) - A top BP executive says the company expects to be capturing virtually all the oil leaking from the Gulf floor by early next week.

Chief operating officer Doug Suttles told The Associated Press on Tuesday in Gulf Shores, Ala., that the flow should decrease "to a relative trickle" by Monday or Tuesday.

President Barack Obama plans to visit the region the same days.

Suttles says a second pumping ship should improve the process. And he says a new containment cap being built will seal better and reduce leakage.

He says BP believes the oil now washing up on the coast was spilled soon after a rig exploded about 50 days ago and sank.

Suttles says oil will probably continue to wash up for about the same period after the well fully shuts down.

A relief well expected to stop the flow is expected to be done in August.

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Tuesday, June 08, 2010

The Peter Principle Updated by Obama

President Obama is not in charge. It is beginning to appear that some people are noticing. For a long time he disguised it well, but despite his manner of speech, he's a bumbler. Whether the problem is oil leaking in the Gulf of Mexico or muslims who want to destroy Israel and drive all Jews out of the middle east, his inability to project power has convinced the worst people in theworld that he is an incompetent wimp.

Spill reveals Obama's lack of executive experience

In mid-February 2008, fresh from winning a bunch of Super Tuesday primaries, Barack Obama granted an interview to "60 Minutes" correspondent Steve Croft. "When you sit down and you look at [your] resume," Croft said to Obama, "there's no executive experience, and in fact, correct if I'm wrong, the only thing that you've actually run was the Harvard Law Review."

"Well, I've run my Senate office, and I've run this campaign," Obama said.

Seven months later, after receiving the Democratic presidential nomination, Obama talked with CNN's Anderson Cooper. At the time, the news was dominated by Hurricane Gustav, which was headed toward New Orleans and threatening to become a Katrina-like disaster. "Some of your Republican critics have said you don't have the experience to handle a situation like this," Cooper said to Obama. "They in fact have said that Governor Palin has more executive experience. ..."

"Governor Palin's town of Wasilla has, I think, 50 employees," Obama answered. "We have got 2,500 in this campaign. I think their budget is maybe $12 million a year. You know, we have a budget of about three times that just for the month. So, I think that our ability to manage large systems and to execute, I think, has been made clear over the last couple of years."

Obama ignored Palin's experience as governor of Alaska, which was considerably bigger than the Obama campaign. But his point was clear: If you're worried about my lack of my executive experience, look at my campaign. Running a first-rate campaign, Obama and his supporters argued, showed that Obama could run the federal government, even at its most testing moments. He could set goals, demand accountability, and, perhaps most importantly, bend the sprawling federal bureaucracy to his will.

Fast forward to 2010. The oil leak in the Gulf of Mexico is gushing out of control. The Obama administration is at first slow to see the seriousness of the accident. Then, as the crisis becomes clear, the federal bureaucracy becomes entangled in itself trying to deal with the problem. "At least a dozen federal agencies have taken part in the spill response," the New York Times reports, "making decision-making slow, conflicted and confused, as they sought to apply numerous federal statutes."

For example, it took the Department of Homeland Security more than a week to classify the spill as an event calling for the highest level of federal action. And when state officials in Louisiana tried over and over to win federal permission to build sand barriers to protect fragile coastal wetlands from the oil, they got nowhere. "For three weeks, as the giant slick crept closer to shore," the Times reports, "officials from the White House, Coast Guard, Army Corps of Engineers, Fish and Wildlife Service, National Oceanic and Atmospheric Administration and Environmental Protection Agency debated the best approach."

The bureaucracy wasn't bending to anyone's will. The direction from the top was not clear. And accountability? So far, the only head that has rolled during the Gulf crisis has been that of Minerals Management Service chief Elizabeth Birnbaum.

But during a May 27 news conference, Obama admitted he didn't even know whether she had resigned or been fired. "I found out about it this morning, so I don't yet know the circumstances," the president said. "And [Interior Secretary] Ken Salazar's been in testimony on the Hill." Obama's answer revealed that he hadn't fired Birnbaum, and he couldn't reach a member of his Cabinet who was a few blocks down Pennsylvania Avenue.

Given all that, perhaps candidates in future presidential races will think twice before arguing that running their campaign counts as executive experience.

A few days before Obama won the White House, Bill Clinton joined him for a late-night rally in Kissimmee, Fla. Clinton, who became president after 12 years as a governor, told the crowd not to worry about Obama's lack of executive background. Given the brilliance of Obama's campaign, Clinton said -- and here the former president uncharacteristically mangled his words a bit -- a President Obama would be "the chief executor of good intentions as president."

Chief executor of good intentions? Perhaps that's what Obama is now. But with oil gushing into the Gulf, that's just not good enough.

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Monday, June 07, 2010

BP's Crude Solution

BP is capturing more than half the oil spewing from the well and when its current effort is in high gear, it might catch ninety percent of the escaping oil.

BP Increases Oil-Capture Rate; U.S. Braces for Siege

June 6 (Bloomberg) -- BP Plc said it is capturing more of the oil spewing into the Gulf of Mexico from its damaged well as U.S. officials said they expect the battle against pollution from the disaster to continue for months.

“This is a siege across the entire Gulf,” U.S. Coast Guard Admiral Thad Allen said on CBS’s “Face the Nation” broadcast today. “There will be oil out there for months to come. This will be well into the fall.”

BP said it captured 10,500 barrels of oil from its leaking well yesterday, up from 6,077 barrels in the previous 24-hour ending at midnight June 4. The well was estimated by government scientists to be gushing 12,000 to 19,000 barrels a day. The spill is the worst oil spill in U.S. history.

A “cap” over the well is capturing “probably the vast majority” of the leaking oil, Chief Executive Officer Tony Hayward told the British Broadcasting Corp. today in an interview in London. BP is preparing a second system to capture even more oil that will be implemented within the week, he said. BP plans to swap out those temporary systems with one that is more hurricane-proof by the end of the month.

The well began gushing oil after the Deepwater Horizon rig BP leased from Transocean Ltd. exploded on April 20 and sank two days later, resulting in the deaths of 11 workers. The leak is 40 miles (64 kilometers) off Louisiana’s coast under about 5,000 feet (1,524 meters) of water.

Oil Ashore

Gulf winds are moving the oil now in the water closer to the coasts of Mississippi, Alabama and Florida, according to Allen. He said oil in tar balls and patties is affecting areas from western Mississippi to Pensacola, Florida.

The spill, which has cost BP more than $1 billion, has soiled about 140 miles of shoreline in Louisiana, Alabama and Mississippi, along with some 80 miles in Florida, the Coast Guard said yesterday.

Oil that washed ashore on beaches in Florida’s northwest Panhandle region was quickly removed, and crews are attacking tar balls that are left on the sand, Florida Governor Charlie Crist said on CNN’s “State of the Union” broadcast. A cleanup command post has been set up in Pensacola, he said.

More oil is expected to arrive in northwest Florida within the next three days, according to a statement today from the Florida Deepwater Horizon Response team, which cited National Oceanic and Atmospheric Administration forecasts.

Slow Payments

Mississippi Governor Haley Barbour said state beaches remained clear of tar balls or other deposits, though he fears tourists will still stay away because they think the coast from Florida to Texas is “ankle-deep in oil.”

Both Crist and Allen faulted BP for taking too long to compensate businesses and workers for losses tied to the oil.

“We want these claims to be responded to much more quickly,” said Crist said on CNN. “These people need help. And we have to be there to try to make them as whole as we can during this very difficult process.”

President Barack Obama’s moratorium on offshore drilling, which has idled 33 deepwater rigs in the Gulf of Mexico, will cost as many as 6,000 jobs this month and 20,000 by the end of next year, Louisiana Governor Bobby Jindal said in a letter to Obama on June 2.

Lost Livelihoods

Mississippi Governor Haley Barbour today endorsed the call by Jindal to resume offshore drilling in the Gulf, which produces 30 percent of all U.S. oil and gas. If not, rigs in the region will be moved to oil fields overseas, further delaying the resumption of drilling in the Gulf, he said.

Obama said communities along the Gulf Coast suffering because of the oil spill will be “made whole” with payments from BP and government aid. In his weekly address on the radio and Internet, which was taped June 4 in Grand Isle, Louisiana, Obama said livelihoods that have spanned generations are in danger of being lost.

BP has paid about half of the 35,000 claims submitted by Gulf residents and companies for income lost because of the spill, Darryl Willis, vice president of resources at BP America, said yesterday on a conference call. BP is awaiting documentation before it can pay the remaining claims, he said. Willis said the company’s spending on claims through June may top $84 million.

BP said it will continue to try increasing the amount of oil it is capturing with its latest containment system.

Still Leaking

“I’d like to see us capture 90-plus percent of this flow,” Doug Suttles, BP’s chief operating officer for exploration and production, said June 4 on CBS’s “Early Show.” “That’s possible with this design.”

The oil is funneled to a drillship at the surface that can capture and separate as much as 15,000 barrels of oil, gas and water a day, Kent Wells, a BP senior vice president, said in a conference call with reporters last week.

Jagged edges left when the pipe was cut for the containment cap may prevent a tight seal and allow some oil to continue leaking, Allen said. Government scientists expected the cut, which removed a kink in the pipe, to increase the flow of oil by as much as 20 percent.

“History has taught us to be cautiously optimistic, not overly optimistic,” Dan Pickering, an analyst at investment bank Tudor Pickering Holt & Co. in Houston, said. Capturing 90 percent of the flow would be a “huge home run,” he said.

Kuwait Investment Authority, the country’s sovereign wealth fund, isn’t considering selling its 1.75 percent stake in BP and believes there is no threat to the company’s future as a result of the spill, the Al-Rai newspaper reported today.

‘First Call’

Hayward told investors June 4 on a conference call the spill has the “first call” on the company’s funds and financial consequences of the spill will be “severe.”

Allen said relief-well operations to stop the leak permanently will involve pumping mud to reduce pressure and placing a cement plug. He said this effort will be the “bottom kill exercise.”

“In the long term, the threat from this well will not go away until the relief well has been drilled, pressure has been taken off and the well has been plugged,” Allen said. “In the meantime, we need to optimize our containment efforts.”

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Friday, June 04, 2010

BP -- Better Plans -- Maybe Success This Time

The latest attempt to stop oil from flowing into the Gulf is showing some promising signs.

BP's cap funneling oil to the surface-Coast Guard

Fri Jun 4, 2010 10:08am EDT

* Cap on leak, funneling fraction of oil to drillship

* BP hopes cap will eventually capture 90 pct of oil

HOUSTON, June 4 (Reuters) - BP Plc.'s containment cap over its stricken Gulf of Mexico well is collecting about 1,000 barrels per day, the top U.S. official overseeing the cleanup effort said on Friday.

A top BP executive overseeing containment efforts told CNN earlier that as that collection rate increases, it could corral "90-plus percent" of the oil.

One thousand barrels is a small fraction of the 19,000 barrels per day that the U.S. government has estimated could be gushing from the well, but the amount should increase as BP closes vents at the bottom of the cap to trap more oil, Coast Guard Admiral Thad Allen told reporters in a conference call.

"Sometime later today we'll probably be able to get ... an approximation of how much oil we are capturing," he said.

The containment cap is BP's latest attempt to trap oil, after its' "top kill" plan to plug the well failed on Saturday. BP's strategy is now to trap the oil at the well and funnel it to a tanker on the surface until it can drill a relief well to staunch the flow, which could take until mid-August.

Doug Suttles, BP's chief operating officer of exploration and production, told CNN earlier on Friday that the containment cap "should work."

"I'd like to see us capture 90-plus percent of this flow," Suttles said. "I think that's possible with this design."

Both Allen and Suttles said BP would continue working to seal the cap on jagged remnants of a pipe on equipment at the wellhead.

"Of course what we have to do is work through the next 24 or 48 hours to optimize that. But that would be the goal ... We want to stop this oil from spilling to the sea," Suttles said.

Suttles was the first BP official to publicly discuss the cap -- its latest attempt after a series of failures to try to contain a gushing oil and gas leak in the Gulf of Mexico.

BP spent Thursday lowering the cap onto the jagged remnants of a pipe that had been sheared from the top of equipment at the wellhead.

A rubber seal on the bottom of the cap is intended to capture most of the oil, but some is still expected to escape.

Meanwhile, drilling continues on two relief wells expected to intercept and plug the leaking well far beneath the seabed. Drilling began May 2 on the first relief well and May 16 on a second. Both are expected to be finished in August.

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Wednesday, June 02, 2010

Talking Turkey

Erdogan and the Decline of the Turks

When I asked the prime minister about stories alleging a U.S.-Israeli murder and organ selling scheme in Iraq, he could not bring himself to condemn them.

Israeli special forces and their commanders were apparently shocked to find their boarding attempt on the Mavi ("Blue") Marmara met with violence. They should not have been. I have no doubt that the Turkish "peace activists" aboard the ship regarded Israeli troops as something akin to the second coming of Hitler's SS.

To follow Turkish discourse in recent years has been to follow a national decline into madness. Imagine 80 million or so people sitting at the crossroads between Europe and Asia. They don't speak an Indo-European language and perhaps hundreds of thousands of them have no meaningful access to any outside media.

What information most of them get is filtered through a secular press that makes Italian communists look right wing by comparison and an increasing number of state (i.e., Islamist) influenced outfits. Topics A and B (or B and A, it doesn't really matter) have been the malign influence on the world of Israel and the United States.

For example, while there was much hand-wringing in our own media about "Who lost Turkey?" when U.S. forces were denied entry to Iraq from the north in 2003, no such introspection was evident in Ankara and Istanbul. Instead, Turks were fed a steady diet of imagined atrocities perpetrated by U.S. forces in Iraq, often with the implication that they were acting as muscle for the Jews.

The newspaper Yeni Safak, Prime Minister Tayyip Erdogan's daily read, claimed that Americans were tossing so many Iraqi bodies into the Euphrates that local mullahs had issued a fatwa ordering residents not to eat the fish. The same paper repeatedly claimed that the U.S. used chemical weapons in Fallujah. And it reported that Israeli soldiers had been deployed alongside U.S. forces in Iraq and that U.S. forces were harvesting the innards of dead Iraqis for sale on the U.S. "organ market."

Prime Minister Tayyip Erdogan (left) has distanced himself from allies such as the U.S. and curried favor with the likes of Iran's Mahmoud Ahmadinejad.

The secular Hurriyet newspaper, meanwhile, accused Israeli soldiers of assassinating Turkish security personnel in Mosul and said the U.S. was starting an occupation of (Muslim) Indonesia under the guise of humanitarian assistance. Then U.S. ambassador to Turkey Eric Edelman actually felt the need to organize a conference call to explain to the Turkish media that secret U.S. nuclear testing did not cause the 2004 Indian Ocean tsunami.

One of the craziest theories circulating in Ankara was that the U.S. was colonizing the Middle East because its scientists were aware of an impending asteroid strike on North America.

The Mosul and organ harvesting stories were soon brought together in a hit Turkish movie called "Valley of the Wolves," which I saw in 2006 at a mall in Ankara. My poor Turkish was little barrier to understanding. The body parts of dead Iraqis could be clearly seen being placed into crates marked New York and Tel Aviv.

It is no exaggeration to say that such anti-Semitic fare had not been played to mass audiences in Europe since the Third Reich.

When I interviewed Prime Minister Erdogan (one of several encounters) in 2006, he was unabashed about the narrative.

Erdogan: "I believe the people who made this movie took media reports as their basis . . . for example, Abu Ghraib prison—we have seen this on TV, and now we are watching Guantanamo Bay in the world media, and of course it could be that this movie was prepared under these influences."

Global View Columnist Bret Stephens explains why Israel's best friend in the Middle East is now an adversary.

Me: "But do you believe that many Turks have such a view of America, that we're the kind of people who'd go to Iraq and kill people to take their organs?"

Erdogan: "These kind of things happen in the world. If it's not happening in Iraq, then its happening in other countries."

Me: "Which kind of things? Killing people to take their organs?"

Erdogan: "I'm not saying they are being killed. . . . There are people in poverty who use this as a means to get money."

I was somewhat taken aback that the prime minister could not bring himself to condemn a fictional blood libel. I should not have been. He and his party have traded on America and Israel hatred ever since.

There can be little doubt the Turkish flotilla that challenged the Israeli-Egyptian blockade of Gaza was organized with his approval, if not encouragement. Mr. Erodogan's foreign minister, Ahmet Davutoglu, is a proponent of a philosophy which calls on Turkey to loosen Western ties to the U.S., NATO and the European Union and seek its own sphere of influence to the east. Turkey's recent deal to help Iran enrich uranium should come as no surprise.

Sadly, Turkey has had no credible opposition since its corrupt secular parties lost to Mr. Erdogan in 2002.. The Ataturk-inspired People's Republican Party has just thrown off one leader who was constantly railing about CIA plots for another who wants to expand state spending as government coffers collapse everywhere else in the word. What's more, Turks remain blind to their manifest hypocrisies.

Ask how they would feel if other countries arranged an "aid" convoy (akin to the Gaza flotilla) for their own Kurdish minority and you'll be met with dumb stares.

Turkey's blind spot on the Kurdish issue is especially striking when you recall that Turkey nearly invaded Syria in 1998 for sponsoring Kurdish terrorism. Kurdish separatist leader Abdullah Ocalan then bounced around the capitals of Europe, only to be captured in Kenya and handed over to the Turks by the CIA. Turkey's antiterror alliance with Israel and the U.S. couldn't have been more natural.

Yet Prime Minister Erdogan was one of the first world leaders to recognize the legitimacy of the Hamas government in Gaza. And now he is upping the rhetoric after provoking Israel on Hamas's behalf. It is Israel, he says, that has shocked "the conscience of humanity." Foreign Minister Davutoglu is challenging the U.S: "We expect full solidarity with us. It should not seem like a choice between Turkey and Israel. It should be a choice between right and wrong."

Please. Good leaders work to defuse tensions in situations like this, not to escalate them. No American should be deceived as to the true motives of these men: They are demagogues appealing to the worst elements in their own country and the broader Middle East.

The obvious answer to the question of "Who lost Turkey?"—the Western-oriented Turkey, that is—is the Turks did. The outstanding question is how much damage they'll do to regional peace going forward.

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Criminals Commit Crime

Of crime, poverty and character: Economic desperation doesn't breed violence

This a good news, bad news column. The good news is that crime is again down across the nation - in big cities, small cities, flourishing cities and cities that are not for the timid. Surprisingly, this has happened in the teeth of the Great Recession, meaning that those disposed to attribute criminality to poverty have some strenuous rethinking to do. It could be, as conservatives have insisted all along, that crime is committed by criminals. For liberals, this is bad news indeed.

The figures are rather startling. From 2008 to 2009, violent crime was down 5.5% overall and almost 7% in big cities. Some of those cities are as linked with crime as gin is with tonic or Barack Obama with political opportunism. In Detroit, for instance, with the auto industry shedding workers, violent crime was down 2.4%. In Washington, murder was down 23.1%, rape 19.4%, and property crime 6%. Stats for political corruption are not available.

Probably the most surprising numbers come from Phoenix, which thought of itself as sinking in a sea of supposedly immoral and rapacious immigrants, all of them illegal and all waiting for nightfall and the chance for a nifty burglary or home invasion. If so, the crime reporting system has virtually collapsed. To the surprise no doubt of local TV news anchors, violent crime was down almost 17%. Back at 11.

What's going on? A number of things, say the experts. As is always the case, the police credited the police for magnificent police work, while others cited the decline in crack cocaine usage. Those answers, though, are only partially satisfying because, believe you me, if and when crime begins its almost inevitable ascent, the very same police authorities will blame economic or social conditions beyond their control - not to mention the inevitable manpower shortage.

Whatever the reasons, it now seems fairly clear that culture -- not economics -- is the root cause of crime. By and large everyday people do not go into a life of crime because they have been laid off or their home is worth less than their mortgage. They do something else, but whatever it is, it does not generally entail packing heat. Once this becomes an accepted truth, criminals will lose what status they still retain as victims.

This is not as outlandish as it may seem. After the Watts riots of 1965 (34 dead), someone determined that the mobs looted only those stores owned by the miserly and the mean. In other words, the storeowners had it coming and the rioters, which is to say the criminals, were just getting some justice, often in the form of a TV set.

Two years later, in the immediate aftermath of the Newark riots (26 dead), someone conducted an unscientific survey of looted stores. No pattern was detected. Generous owners were trashed. Good guys suffered. The mob was not administering justice. It was getting stuff for free.

A good deal of social policy was predicated on such an outlook. It made victims of criminals and criminals of victims (all wealth comes from theft, etc.) - and in so doing, insulted the law-abiding poor who somehow lacked the wit to appreciate their historic plight. This ideology was mocked by Stephen Sondheim in his lyrics for the "West Side Story" song "Gee, Officer Krupke": "Dear kindly Sergeant Krupke, you gotta understand, it's just our bringin' up-ke that gets us out of hand. Our mothers all are junkies, our fathers all are drunks. Golly Moses, natcherly we're punks!" In other words, all the gang members were the unavoidable products of their environment.

Common sense tells you that the environment has to play a role and the truly desperate will sometimes break the law - like Victor Hugo's impoverished Jean Valjean, who stole bread for his sister's children. But the latest crime statistics strongly suggest that bad times do not necessarily make bad people. Bad character does.

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Tuesday, June 01, 2010

Islamic Jihad -- By Any Means Available

The mushroom cloud threatening the world today is not from a nuclear bomb, though that danger is part of the islamic arsenal. The big threat today is from something much closer to the oil leak in the Gulf. Something bad is seeping into the environment. The bad thing is the slow steady spread of islam and sharia law in our part of the world.

The 'peaceful' Jihad in America

June 1, 2010

Most Americans don't realize that jihad is about much more than terrorism.

Even the terrorists don't blow up buildings for the sake of blowing up buildings. There is method in their madness.

Jihad is not mindless mass-murder, nor is it a syrupy "internal struggle to become a better person." No, jihad is the mission to establish and spread sharia.

The installation of Allah's law, believed by Muslims to be a divine injunction, is the necessary precondition to the creation of Islamic societies. While it can, and often is, waged forcibly, Islamists don't resort to violence (or, at least, to more violence) where surrenders, appeasements and capitulations are available.

And al Qaeda is merely an offshoot of the central Islamist group, the Muslim Brotherhood, or Hizb al-Ikhwan al-Muslimin. Founded in 1928, the Ikhwan's motto to this day remains, "Allah is our objective. The Prophet is our leader. The Koran is our law. Jihad is our way. Dying in the way of Allah is our highest hope."

In 1991, Mohamed Akram, a US-based chieftain of the Brotherhood, penned a memo for the eyes of the central leadership in Egypt. Later seized by the FBI, this self-described "Explanatory Memorandum on the General Strategic Goal for the Group in North America" outlined the game-plan for what the organization regards as its "civilizational" war against the West:

"The Ikhwan must understand that their work in America is a kind of grand jihad in eliminating and destroying the Western civilization from within and sabotaging its miserable house by their hands and the hands of the believers so that it is eliminated and God's religion is made victorious over all other religions."

Nor was there anything new about this "grand jihad." During a post-9/11 raid, Swiss authorities found a similar smoking gun -- a methodical plan for the long-term "cultural invasion" of the West -- written by Brotherhood theorists in 1982.

As a matter of fact, this sabotage strategy has been in place for nearly half a century. Its bottom-up elements stress Islamist domination of Muslim education, mosques and community centers. From these bases of operation in every city, the Brotherhood's method is not terrorize but to slipstream behind Islamist terrorists, assuming the posture of "moderates."

The goal is to seep sharia -- Islam's totalitarian legal code that governs not just the spiritual realm but all aspects of life -- into our politics, law, financial system, educational institutions, labor negotiations, familial relations, and all facets of our domestic and foreign policy, from health care to engagement with Iran.

Yes, 31 years after the Iranian revolution, 17 years after Islamists declared war on the United States by bombing the World Trade Center and nine years after the 9/11 atrocities, the American people are still in the dark about the daunting challenge we face. Under jihadist siege for decades, we still don't even get what jihad is and why it isn't just about "violent extremists" -- the politically correct term now used by government officials in their desperation to bleach the Islam out of Islamist terror.

Two years ago, I wrote about this ethos of conscious avoidance in "Willful Blindness." But that was a memoir about trying to confront international terrorism as a federal prosecutor in the 1990s. The forces arrayed against us are much more extensive and insidious than al Qaeda, and they are not just pressing the limitations of our criminal-justice system.

The game-plan being executed against us targets American constitutional democracy itself, taking aim at its core principles of individual liberty.

Lavishly backed by Saudi billions thanks to a decades-old partnership with the kingdom, the Brotherhood is now raising, in our midst, its third generation of operatives and sympathizers. Its tentacles include such high-profile organizations as the Council on American-Islamic Relations, the Islamic Society of North America and the Muslim American Society (the Brotherhood's semi-official American branch).

Our opinion elites are only too happy to take at face value the claims of these groups to be "moderate." Indeed, our government, media and academies are reluctant to discuss Islam honestly, let alone Islamist ideology.

And effectively allied with the jihadists is the hard left across the West. For all their differences (e.g., on abortion and the rights of women and homosexuals) Islam and the Left are in essential harmony when it comes to their vision of authoritarian government and their perception of the immediate obstacle to their designs: American constitutional democracy.

What the global Islamist project is doing, and how, are the subjects of my new book, "The Grand Jihad: How Islam and the Left Sabotage America," published last week. It is the story of the ideology that not only fuels anti-American terror but stokes a sedulous jihadist campaign to Islamicize our society -- not without firing a shot, but by capitalizing on the shots that have already been fired.

A grand jihad is hell-bent on sabotaging America. We ignore it at our peril.

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