The Republicans are having an Oktoberfest of surprises - the kind that change the outcome an election. But not in the favor of the Republicans.

Republican ex-Rep. Cunningham steered $70 million of national security work to favored military contractors. The party that pounds anyone who they don't like as traitors, appeasers and soft on military defense turns out to be war profiteering. And this is one Republican Congressman. Clerk of the House Trandahl stands at the center of the Foley scandal. A protective servant? Or player in the machine? Iraqi government removes secret police. Things are clearly going extremely well there. Meanwhile, North Korea is planning another nuclear test. That's why alarm bells are sounding - of Bush being a lame duck.

But there is another factor - one that is the chatter of right wing around the filter media. The Economy.

CBN views James Webb's campaign as an attempt to bring "Reagan Democrats" back to being Democrats over the question of "their disenfranchisement from the economy". Rather than chortling and attacking - CBN's commentators take this challenge seriously.

The obsession with gay Republicans collides with the day to day realities of the lives of the people who have supported the Republican Party.

Foley is the spark that has ignited a powder keg of discontent - but the powder is an economy which can't seem to generate good jobs at good wages and which is watching the housing market implode. The housing market was propping up, not the economy as a whole - that is being done with massive borrowing - but it was the only thread by which the benefits of that borrowed money were flowing down to the rest of the population. In an era where people's stock portfolios are, in general, below where they were in the last year of Clinton's administration - the house is how people planned for retirement.

Many of us have been warning that home appreciation equity isn't savings - it is a bet that you can force someone else to save. And you can't do that if real wages are falling, let alone the Keynesian norm of rising with inflation and productivity. Housing advocates say "they aren't making any more land" Sure they are - or rather, we are knocking down trees to put up houses, and we are building roads to go farther and farther out. Land that is viable as development is new land. More over, people in cities where developers and not residents rule the roost see their home values drop as developers shove units into every nook and cranny. More supply means that it is developers, not home owners, who get to extract the value. Home owners seemed not to have realized these facts, and instead bet that the old system of cut throat competition between school systems would continue to drive housing prices. However, almost all American pre-secondary education is below global standards, and the way we admit to college has helped drive that - with the focus of many top districts on generating a stream of elective and extra-curicular activities that are the difference between one 4.0 student and another.

Americans have failed to realize that while land is not subject to global competition educated labor is. And that global market is far more competitive than it was at the beginning of the computer and corporate build out boom that started in the early 1990s. Many people who rode that upwards - are not going to any longer.

This reality, of the implosion of the middle class dream, is the result of long standing voting habits of the American public. This is the economy we have repeatedly voted for - one which forgoes general improvements in welfare, in return for allowing more people to get way ahead. The casino economy.

However, while this was packaged as a win-win, it is, in fact, a win-lose-lose. Production is, in fact, lower than what it could be, and the ability for there to be a winner take all is a zero-sum game. This too was not clear to people for a long time, it didn't look like Bill Gates was competing with middle class people for a job. Instead middle class people saw other middle class people, and working class people, and poor people, as the threats to their existence - taxes, immigration and crime where the three code words for "other people getting ahead of me, people below me moving up, people way below me breaking in". And a country that votes on a tight treadmill of taxes, immigration and crime votes conservative when they aren't voting reactionary.

This economy doesn't generate the returns, because there is no mystical mana in the US that you can seal other people out of. The value of the dollar isn't because of anything we dig up, or grow, here. The US is no longer an oil producer. Hence neo-isolationism and neo-protectionism are roads to economic ruin. America's power comes from our ability to lead globalization. However globalization has not benefitted most people. Let's take the simplest example - supposed "lower prices". Compare the PPI plus ECI - that is the Producer Price Index plus the Employment Cost Index - that is the cost of producing goods - with the CPI - that is the cost of buying goods. What do you see? CPI has gone up faster than ECI and PPI. Take out health care and the margin is even bigger.

In short globalization has not delivered "lower prices", it has, instead, delivered slightly less high prices than before. The only people still living in the Keynesian economy, are the very wealthy. Keynesianism for the rich, Thatcherism for everyone else. Simple example: 50% down payments on "affordable" housing. Yes, you read that right. 50%.

The housing boom was the last popular thread upwards, it provided construction jobs - that is, jobs for people who don't want to work in an office and are good with their hands - and it provided a way for middle class people to cash in on the inflationary monetary policy. Take this away from the US economy, and we never really left recession, and we've had inflation on top of it. Stagflation is never popular, and yet that is exactly what most Americans have seen - a massive shift of earning power away from them, and to other people.

In economic analytic terms there is a simple reason for this, most of the American economy is no more productive than it was 20 years ago. The real productivity of much of what we do has been just slightly ahead of zero, particularly when you take out Wal*Mart's wage reduction strategies and the offshoring to China. The reason Americans aren't being paid more - is because we are doing the same things, in more or less the same ways - that we did 20 years ago. No improvements to labor and capital, no productivity rises. American wages are not going up, because American labor is not getting better, and certainly not getting better relative to the rest of the world.

Americans haven't come to a full awareness of the fact that China and India are catching up to 1980, and doing so quickly. It will take another decade before they have equalized large chunks of their economies - but that will mean that there will be more middle class people in China, than there are people in the US. More middle class people in India, than there are people in the US. The challenges that India and China face are large, but they are also known - the are following what Europe and the US-Canada economic areas have already done.

What they do know is that the last ladder out of steerage just got pulled up. And water is coming in from the sides.

But why the last few weeks? In no small part, because the top - led by Ben Bernanke more than George Bush - has decided to stand pat. At the very moment that Americans feel the land give way beneath their bank accounts - and I mean that literally - the word from the top has been a deafening silence. Congress and the Fed are involved in an intensive campaign of doing nothing. From the Fed's view point, they have killed enough of inflation to keep China and Saudi Arabia and Europe from dumping more of our dollars, without constricting business demand enough to send the economy into declared recession. However, this is playing into Bob Reich's favorite quip - "If you take John Kenneth Galbraith (then 6' 8") and I (Bob is 5' 4" on a good day) we average 6 feet tall".

Thus while Americans see a crisis - their pensions are pillaged, their home equity hacked, their health insurance booming in costs, their 401k plans pillaged - they hear no sound of urgency from Bush, the Republican Congress, or indeed any other leader from the right wing. They want Reagan to come bouncing along and give them a tax cut - that is how they scraped through before - slightly lower federal taxes and sending the wife to work. Neither is happening now.

Instead, the fear on Wall Street is that they may suffer the landing as well. It is almost to the point where we are going to have to release two sets of statistics - one for the bottom 99%, and one for the top 1%.

If the Democrats want to win power, and keep it, they are going to have to face a simple fact: to end the economic problems, the US needs to find a way to effectively tax China and the OPEC oilarchies, because this will open the log jam and allow the US and Europe to start taxing the rich - who are taxed as if they were Saudi royalty right now. Tax the concentrations of money that have piled up on the conservative "let Rome burn" economic policies of the last 30 years, and everything else gets easier. There will be painful dislocations, as many people find out that the money they thought they had gamed out of the system isn't there - but the alternative is a period of political instability culminating in a currency melt down for the US dollar.

The Chinese and the oil archies have piled up dollars as a bulwark against future dollar costs - it's time to make it so those costs come sooner, rather than later. Because if they come later, we will have to pay for them with our national forests, our economic autonomy and, in essence, our political sovereignty. This is the fate of most failed superpowers - having to sell their destiny to pay for their fate.