This was not a good week for the Obama administration's Middle East peace efforts. Speaking alongside Israeli Prime Minister Netanyahu in Jerusalem last Saturday, Secretary Clinton seemed to be praising the distinctively partial limitations that Israel was willing to implement on settlement non-expansion. During the following days in Morocco and Cairo, she walked those remarks back, but the damage had been done.

By Thursday, the American-sponsored Palestinian President Mahmoud Abbas was sufficiently exasperated to announce that he will not be standing for re-election, and all week the media and political commentary on the U.S. approach was scathing about America's efforts--even by Middle East standards.

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Here is a scary thought. The Pareto Principle in economics says that 80% of the effects come from 20% of the causes. In practical terms it might mean that 20% of your movies at Warner Bros. would generate 80% of the revenue. Pareto himself noted that 80% of the wealth in Italy was held by 20% of the people.

This morning unemployment hit 10.2%, a 26 year high. Yesterday the Labor Department reported that productivity surged to 9.5%. The U.S. has worked hard to transform itself into a knowledge economy and companies like Google and Goldman Sachs record record revenues per worker. What if some version of the Pareto Principle begins to apply itself to employment--20% of the workers produce 80% of the GDP? Dan Greenhaus of Miller Taback & Co has the grim reality of our future.

We have argued and continue to argue that another jobless recovery is materializing and if our estimates for G.D.P. growth going forward materialize, the unemployment rate will remain at elevated levels for several years. Nearly 16 million people are unemployed right now while another 9 million are working part-time jobs because they cannot get a full-time job.

So here is the reality of life for the bottom 40% of America's families. After they pay for food, housing and transportation they have $1200 per year to spend on "discretionary items" like clothing, medicine and doctors. Never mind telephone, Internet or cable TV which are supposed to be middle class entitlements. I don't believe the 25 million underemployed people in this country are not going to sit on their hands passively zoned out in front of the TV set in the next two years, especially when they see Hedge Fund managers taking home $100 million bonuses for successfully taking down companies like Abitibi-Bowater, CIT, General Growth Properties, Six Flags and even General Motors with their brilliant government subsidized Credit Default Swaps and bond packages that forced the companies into bankruptcy.

In earlier times we had outsider artists who could articulate the rage like Woody Guthrie in the Depression.

Yes, as through this world I've wandered

I've seen lots of funny men;

Some will rob you with a six-gun,

And some with a fountain pen.

I believe it's going to take a new renaissance of rebellious artists, spiritual leaders and politicians to wake up the public to the reality of the real America. Glenn Beck has no solutions but to retreat to a fantasy world of the 1950's. The truth is that for more than half a century Republicans and Democrats alike have been prisoners of the conventional wisdom propounded by Wall Street bankers, military contractors, the Chamber of Commerce and their academic neoclassical economics enablers. The result is a hollowed out economy with no manufacturing base for exports except in making weapons of mass destruction, dependent on financial bubbles to keep the party going. Well, the party is over. Anyone who thought that just electing Barack Obama was the solution to our problems, misunderstood the institutional power of the Establishment and their conventional wisdom.

As I have said before, we are in an Interregnum where the old is dying, but the new cannot be born. Obama's election was just the start of what needs to be a new age of reform. Writing of the Progressive Era 100 years ago, Richard Hofstadter noted that the reform movement "was the effort to restore a type of economic individualism and political democracy that was widely believed to have existed earlier in America and to have been destroyed by the great corporation and the corrupt political machine."

Of course the task of Teddy Roosevelt, Upton Sinclair and the Muckrakers of 1904 was a lot easier than the task of Barack Obama. America was entering a period of technological mastery and export superiority. Jobs were plentiful. What TR had to do was break up the monopolies and end the corruption and greed in industries like meat packing and coal mining. Obama will have to do all of that (break up the Big Banks and reform the food and energy businesses), but his task will be far greater because he has to help create 30 million new jobs in the next few years. To do that we will need to remake our industrial base, because it's clear these jobs are not going to come from the existing knowledge and service economy that gets more productive by the day.

A lot of folks are declaring Obama -- who wasn't on the ballot -- the loser of the night based on two state elections, but the defeat of three anti-tax initiatives that were on the ballot in Washington State and Maine should emphasize that Grover Norquist and the anti-tax movement were big losers of the night -- and this just continues a multi-year roll of defeats.

In both states, voters rejected so-called TABOR ("Taxpayer Bill of Rights") initiatives that would have created rigid tax raising formulas that would have crippled those states' capacity to provide services like education, health care, emergency services, and public safety. Voters in Maine also rejected a proposal to slash the excise tax on new and hybrid cars, which would have undermined local revenue around the state.

Across the country, over thirty state legislatures raised taxes to deal with deficits this year and a number have specifically targeted tax increases on the wealthy - a bugaboo of the rightwing. And at the ballot, the anti-tax right has just lost and lost.

Back in the early 90s, the rightwing managed to pass a TABOR system in Colorado at the ballot box, which led to  terrible results, including large declines in K-12 funding, higher education tuition rates, and hindering the state's ability to address the lack of medical insurance coverage for many children and adults (see a PSN Dispatch on "TABOR's Disastrous Record in Colorado").  Voters partially repudiated TABOR at the ballot in 2005; when the rightwing tried to enact TABOR-like initiatives in states across the country in 2006, progressives highlighted fraud in signature collecting in multiple states and issue was thrown off the ballot in Michigan, Montana, Nevada, Oklahoma and Missouri. On Election Day, voters in Maine, Nebraska and Oregon finished the job in voting down the remaining TABOR initiatives.  And in 2008, anti-government tax measures were defeated overwhelmingly in Massachusetts, North Dakota and Oregon.

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It's 10:45 PM at the White House and I hope Barack and David Axelrod are having a beer on the second floor. One year ago they won a generational election as the anti-establishment candidate of change. Tonight, no matter how you slice it, the Democrats lost two big statehouses (New Jersey and Virginia), because they were perceived as the party of the establishment. A little more than two hours ago I read a speech by a famous investor who explained in simple terms how a Democratic Congress, in the fall of 2008 and then a Democratic administration, in the spring of 2009, got played by the oligarchs on Wall Street.

David Einhorn, who runs Greenlight Capital is a pretty smart investor. I don't always agree with him, but he gave a speech a couple of weeks ago that I hope will eventually reach the desk of our President. Einhorn's belief, like mine, is that much of the backlash flowing around the health care debate (or even tonight's election) is not really about healthcare--but more about a general sense that the average citizen is a pawn in a rigged game run by corporate special interests and a clueless Congress. The real root of the populist anger was in the bailout of the banks.

In the context of the recent economic crisis, a highly motivated and organized banking lobby has demonstrated enormous influence. Bankers advance ideas like, "without banks, we would have no economy." Of course, there was a public interest in protecting the guts of the system, but the ATMs could have continued working, even with forced debt-to-equity conversions that would not have required any public funds. Instead, our leaders responded by handing over hundreds of billions of taxpayer dollars to protect the speculative investments of bank shareholders and creditors. This has been particularly remarkable, considering that most agree that these same banks had an enormous role in creating this mess which has thrown millions out of their homes and jobs.

The critical line here is, "but the ATMs could have continued working, even with forced debt-to-equity conversions that would not have required any public funds". In other words, Goldman Sachs, Citibank, JP Morgan Chase, Morgan Stanley and Merrill Lynch bondholders might have had to convert all their debt to equity, but the system would have survived without the $700 billion tax-payer bailout. But what is Geithner proposing now?

On the anniversary of Lehman's failure, President Obama gave a terrific speech. He said, "Those on Wall Street cannot resume taking risks without regard for the consequences, and expect that next time, American taxpayers will be there to break the fall." Later he advocated an end of "too big to fail." Then he added, "For a market to function, those who invest and lend in that market must believe that their money is actually at risk." These are good points that he should run by his policy team, because Secretary Geithner's reform proposal does exactly the opposite.

The financial reform on the table is analogous to our response to airline terrorism by frisking grandma and taking away everyone's shampoo, in that it gives the appearance of officially "doing something" and adds to our bureaucracy without really making anything safer. With the ensuing government bailout, we have now institutionalized the idea of too big- to-fail and insulated investors from risk.

And Einhorn also points out that the problem of Credit Default Swaps has not gone away, it's merely been subsidized by the taxpayers while the vultures throw more companies into bankruptcy (CIT yesterday, GMAC maybe tomorrow).

The proposed reform does not deal with the serious risks that the recent crisis exposed. Credit Default Swaps, which create large, correlated and asymmetric risks, scared the authorities into spending hundreds of billions of taxpayer money to prevent the speculators who made bad bets from having to pay. CDS are also highly anti-social. Bondholders who also hold CDS make a bigger return when the issuing firms fail. As a result, holders of so-called "basis packages" - a bond and a CDS - have an incentive to use their position as bondholders to force bankruptcy triggering payment on their CDS, rather than negotiate traditional out of court restructurings or covenant amendments with troubled creditors. Press accounts have noted that this dynamic has contributed to the recent bankruptcies of Abitibi-Bowater, General Growth Properties, Six Flags and even General Motors. They are a pending problem in CIT's efforts to avoid bankruptcy. The reform proposal to create a CDS clearing house does nothing more than maintain private profits and socialized risks by moving the counter-party risk from the private sector to a newly created too-big-to-fail entity. I think that trying to make safer CDS is like trying to make safer asbestos. How many real businesses have to fail before policy makers decide to simply ban them?

Larry Summers and Tim Geithner and even Rahm Emanuel, have been so inside the Wall Street game for so long that they have no idea of the level of anger directed at the capitalists who have managed to scam a few trillion out of the public coffers with phrases like "without the banks, we would have no economy". President Obama needs to listen to other voices on the economy or else the pitchfork brigade may show up outside the White House next November. We did not elect him to bring us more of the same--more dominance of our national policy by the military industrial complex, the Big Banks, Big Pharma, Big Insurance and Big Oil.

The irony is that if Obama started kicking ass and taking names with the syncophants of the Fortune 500 that sit in Congress, I bet a lot of Glenn Beck's audience might even take notice. And surely, Axelrod doesn't plan to run the 2010 campaign without the youth vote, which was totally absent tonight. This is a teaching moment. Let's hope the President understands this.

I must say I'm worried that the Democrats are setting a trap for themselves on Health Care Reform by not really confronting the issue of cost inflation. Why does a CT Scan in America cost so much more than any other country. And it's not just scans, it's the whole range of services. Although it's very hard to find, there is certain anecdotal evidence that part of the problem is an oversupply of hospitals and medical technology providers. Take Washington, DC for example.

The Washington, D.C., hospital sector has an excess of hospital beds and a concentration of services at the high end. Four community hospitals; three academic medical centers; a large, nonacademic tertiary care hospital; five specialty hospitals; and a public general hospital all compete to serve a city with a population of only 500,000. In addition, there are two military facilities. Forty percent of patients in this market are drawn from the adjacent Maryland and Virginia suburbs.

In the Libertarian's "perfect market" pipe-dreams, an oversupply should drive down costs of individual services. But that's not what happens. Each hospital that has invested millions in buying CT Scanners must amortize the cost over fewer patients by raising the cost of each scan. The same problem is plaguing Pittsburgh.

The region's hospitals are trying to add nearly 1 million square feet of clinical space between 2006 and 2009 -- a construction boom that is raising questions about a potential oversupply of costly hospital resources...

"There happens to be a lot of construction going on, but most of it deals with aging plants and the need to stay current with advances in technology," said Ms. Riefner, who helps hospitals obtain financing for capital projects. "It's not a matter of just spending money for the sake of spending money -- they truly want to deliver the best possible care that they can."

So all the region's hospitals are caught in a technology arms race. No one is trying to figure out how many CT Scanners we need in a region and normal market mechanisms that would punish hospitals or clinics for spending too much on technology don't work because we don't have single payer system that disciplines the free market in every other developed country.

So are we about to pass a big giveaway to the hospitals, insurance companies, and pharmaceutical firms without any way to control the medical technology arms race?

We'll no doubt hear too much commentary reading too much into a few elections today in a handful of states, so it's worth stepping back to recognize the deep support for progressive policies and ideas that are increasingly dominant across our nation. Obama's election as President is one indicator of that shift, but progressive gains are reflected in the underlying support for progressive policies in poll after poll, whether in demands for greater corporate accountability, health care reform, environmental sustainability or a host of other issues.

If progressives face a challenge, it's not on allegiance to our values such as rewarding work or promoting greater justice, it's a skepticism by many independents of the effectiveness of government in accomplishing the goals shared by most of the public.

However, as the rest of this post (crossposted from PSN) will detail, if we understand the public support for progressive goals, it can inform our political messaging which should embrace a clear progressive agenda, even as we recognize that trust in government needs to be rebuilt after decades of right-wing attacks on its functioning. And we should also act with confidence, knowing that younger voters are even more progressive than their parents and grandparents, so our ability to move policy forward will only grow with each election cycle as these new progressives become a larger and larger share of the electorate.

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When ideology trumps reality, political parties enter a dead zone where no facts can be marshalled and politicians seem to live in a truth-free world. Take Mitt Romney this morning.

Romney said on CBS's "The Early Show" that the administration's stimulus plan "didn't work" and he said the reason things seem to be ticking up in the business world is because the "private sector" has regained its equilibrium on its own.

The reality as Paul Krugman points out is the opposite of what Romney contends.

Not that long ago the U.S. economy was in free fall. Without the recovery act, the free fall would probably have continued, as unemployed workers slashed their spending, cash-strapped state and local governments engaged in mass layoffs, and more.

But now, pushed by the new found Republican fear of deficits (when did that ever stop Reagan or Bush from pushing Pentagon budgets through the roof?) and centrist Democrats lack of economic literacy, the thought is: "the recessions over, lets cut spending." But Krugman points out the fallacy.

Suppose that the economy were to keep growing at 3.5 percent. If that happened, unemployment would eventually start falling -- but very, very slowly. The experience of the Clinton era, when the economy grew at an average rate of 3.7 percent for eight years (did you know that?) suggests that at current growth rates we'd be lucky to see the unemployment rate fall by half a percentage point per year, meaning that it would take a decade to return to something like full employment.

Worse yet, it's far from clear that growth will continue at this rate. The effects of the stimulus will build over time -- it's still likely to create or save a total of around three million jobs -- but its peak impact on the growth of G.D.P. (as opposed to its level) is already behind us. Solid growth will continue only if private spending takes up the baton as the effect of the stimulus fades. And so far there's no sign that this is happening.

So the government needs to do much more. Unfortunately, the political prospects for further action aren't good.

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From this morning's Washington Post.

Nearly half the members of a powerful House subcommittee in control of Pentagon spending are under scrutiny by ethics investigators in Congress, who have trained their lens on the relationships between seven panel members and an influential lobbying firm founded by a former Capitol Hill aide.

Five of the seven are Democrats. Obama and Pelosi need to clean house. Get this ethics investigation going immediately so that if they are guilty we can get new candidates in place to run in 2010. As Obama said yesterday, the task of reforming the Pentagon has just begun. What he didn't say was that the forces arrayed against that reform are mighty and corrupt.

With all the Bloviators pulling out their "Afghanistan=Vietnam" analogies, Joshua Kurlantzick writes in the Washington Post, that we should only be so lucky.

76 percent of Vietnamese say U.S. influence in Asia is positive, according to a 2008 study by the Chicago Council on Global Affairs -- a greater percentage than in Japan, China, South Korea or Indonesia. When President Bill Clinton visited Vietnam in 2000, citizens greeted him like a rock star, mobbing him whenever he stepped out in public. Two-way trade now surpasses $15 billion annually, compared with virtually nothing in 1995, the year the two countries normalized diplomatic ties. American companies have descended upon Vietnam, and last year foreign direct investment in the country tripled compared with 2007.

Ever since President McKinley sent a declaration of War against Spain to Congress in April of 1898, the Washington Establishment has equated American influence with our military power. But as Intel builds new fab plants in Vietnam, we must understand that our real influence stems from our financial and cultural power. The wars in Iraq and Afghanistan erode both of those sources of soft power.

Progressives are always asking the question "Is Obama tough enough?" To listen to Rush Limbaugh, you would think that the White House political organization is so tough Limbaugh is in danger of being packed off to a Gulag in Northern Alaska with his buddy Glenn Beck

And these guys in the Obama administration... Look, folks, Alinsky Rules for Radicals: When faced with an opponent, get rid of the opponent. You don't debate the opponent. You don't consider the opponent's ideas. You say, "I won. Screw you. Get out of the way, and whatever I have to do to get you out of the way is right." It's happening right before our very eyes...But this is how these people operate! There won't be an opposition by the time they get through.

When the schoolyard bullies like Limbaugh and Beck start whining to the teacher, you know that Axelrod and Company are doing something right. The exquisite irony in hearing Limbaugh whine that Obama will not "consider the opponent's ideas", as if Limbaugh ever gave a moment's consideration of his opponents ideas. As Vandehei and Allen point out this morning, Limbaugh and the Brownshirts are an anchor around the neck of the Republican Party.

Many top Republicans are growing worried that the party's chances for reversing its electoral routs of 2006 and 2008 are being wounded by the flamboyant rhetoric and angry tone of conservative activists and media personalities, according to interviews with GOP officials and operatives.

The Washington Post poll was very clear. The Republicans are now defined as the far right party and it scares the bejesus out of most independents.

In August, at the height of the Tea Party Movement, I counseled that the temporary gains of Republican's would turn out to be ephemeral. The new Washington Post/ABC News Poll proves my point.

Less than one in five voters (19 percent) expressed confidence in Republicans' ability to make the right decisions for America's future while a whopping 79 percent lacked that confidence.

Among independent voters, who went heavily for Obama in 2008 and congressional Democrats in 2006, the numbers for Republicans on the confidence questions were even more worse. Just 17 percent of independents expressed confidence in Republicans' ability to make the right decision while 83 percent said they did not have that confidence.On the generic ballot question, 51 percent of the sample said they would cast a vote for a Democratic candidate in their congressional district next fall while just 39 percent said they would opt for a GOP candidate.

The Know-Nothing Party known as Republican is not a credible alternative. Obama's comment to the Republicans, "Why don't you grab a mop? Why don't you help clean up? ... Grab a mop -- let's get to work!" is exactly on point.

The piece this morning on the Taliban's financial network reminds me of Napoleon's famous quote, "an army marches on its stomach". Without the up to $400 million from the opium trade, that is used to pay the fighters, the Taliban would be a far less serious threat. Although Richard Holbrooke tries to talk down the importance of the drug trade, he is really talking through his hat.

So here is a notion that might give the Afghanistan government (when there is one) some sway with the rural populace and take away the Taliban funding--make Afghanistan the center of the legal opioid industry. Since 1916 pharmaceutical firms have been manufacturing synthetic opioids for pain management. Over 200 million opioid prescriptions are filled in the U.S. annually with worldwide sales of opioids reaching $7.5 billion in 2007. Drugs like Rush Limbaugh's favorite Oxycodone are a synthesized form of one ingredient of opium. Why not form a Opium Cartel with the world's major pharmaceutical companies, use some of the billions they get from manufacturing and selling the synthetic opium and just buy up all the real stuff from the Afghani farmers? It would bind them to the central government and if the operation was supervised by the World Health Organization we could hopefully prevent "leakage" from a corrupt government , allow Afghanistan to take a tax off the top of the legitimate sales and still supply the worldwide pain management market.

From The Hill.

The Pentagon pays an average of $400 to put a gallon of fuel into a combat vehicle or aircraft in Afghanistan.

The statistic is likely to play into the escalating debate in Congress over the cost of a war that entered its ninth year last week.Pentagon officials have told the House Appropriations Defense Subcommittee a gallon of fuel costs the military about $400 by the time it arrives in the remote locations in Afghanistan where U.S. troops operate.

I wonder how much of the $400 winds up in the pocket of Halliburton or some other contractor?

This is the most frightening economic chart I have seen in the last decade.

Net private investment, which includes spending on everything from machine tools to new houses, minus depreciation, fell to 0.1% of gross domestic product in the second quarter of 2009, according to the latest government data. That's the lowest level since at least 1947.

Capitalism's most vulnerable point is the death spiral of overcapacity. In the easy credit boom times we built too many malls, too many car factories, too may fast food joints, too many houses. Now the only way for businesses and consumers to survive is too cut back drastically.

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Israel's parliament, the Knesset, reopened today after a long break for the summer and the Jewish holidays. In line with protocol, Israel's president opened the winter session and Shimon Peres had this to say on the linkage between reaching peace with the Palestinians and addressing the Iran issue:

In my opinion, if we move forwards with peace and make peace with the Palestinians, and if we start negotiations with Syria and Lebanon, we will remove the main pretext for the Iranian madness - against us and against the other residents of this region. (President Peres, October 12th in the Israeli Knesset).

Now Mr. Peres is in reality not exactly the dove he is portrayed to be (he authorized many of the settlements, he supported Israel's recent wars with Lebanon and Gaza, and he never really earned his own Nobel peace prize), but this was nonetheless an interesting acknowledgement of the linkage from Israel's head of state--and it seems to directly contradict the messaging coming from Israel's ambassador to Washington D.C., Michael Oren.

Here's Michael Oren in an interview on October 3rd for Newsweek:

Q: Do you believe that the Arab states would make their support of action against Iran contingent on progress in the peace process?

A: No, there is no linkage whatsoever. The Arab states understand that the peace process is going to take a while, and we don't have a while with Iran. The peace clock and the Iranian nuclear clock are running at completely different speeds.

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I have always thought that Robert Kaplan's The Coming Anarchy: Shattering the Dreams of the Post Cold War, written in 1994 was one of the most prescient books of the last quarter century. Interweaving environmental degradation, ethnic migrations, the rise of warlordism and many other factors, Kaplan painted an anarchic world of the future in which great state versus state conflict fought with large armies would be irrelevant--replaced by the non-state actors with religious and/or criminal motivations. This morning he describes with deep irony our lack of decent outcome in Afghanistan due to our misunderstanding of the nature of modern conflict.

In nuts-and-bolts terms, if we stay in Afghanistan and eventually succeed, other countries will benefit more than we will. China, India and Russia are all Asian powers, geographically proximate to Afghanistan and better able, therefore, to garner practical advantages from any stability our armed forces would make possible.

Everyone keeps saying that America is not an empire, but our military finds itself in the sort of situation that was mighty familiar to empires like that of ancient Rome and 19th-century Britain: struggling in a far-off corner of the world to exact revenge, to put down the fires of rebellion, and to restore civilized order. Meanwhile, other rising and resurgent powers wait patiently in the wings, free-riding on the public good we offer. This is exactly how an empire declines, by allowing others to take advantage of its own exertions.

The neoconservative scholar, Robert Kagan--a favorite of Pentagon hawks--once wrote, "Over the last six decades, it is an objective fact that Americans have been expanding their power and influence in ever widening arcs." This widening arc of empire has now brought us into the box canyon of Afghanistan, with no safe exit. I have argued for a while that the cost of empire has meant that we have sacrificed the basics of advanced societies--reasonably priced, good healthcare and education--for the burdens of being the world's unpaid cop. It was not a fair trade and Kaplan's "free riders"--China, Russia, India, France, Brazil, et al--watch from a certain remove as we spend our blood and treasure to their advantage.

This is the real conversation President Obama needs to have with the American people over the next month. I am highly doubtful that such an honest account can be had in such a highly charged partisan atmosphere. But eventually some President will have to tell the truth about the American empire project.

If this article from the U.K. Independent is true, the world financial center of gravity just moved.

In the most profound financial change in recent Middle East history, Gulf Arabs are planning - along with China, Russia, Japan and France - to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

Robert Fisk, who wrote the story is a good reporter with a lot of experience. One could argue that a good bit of the American competitive advantage over the last 30 years has been the dollars role as the world reserve currency. It has kept our interest rates abnormally low as foreign debt-holders buy U.S. treasuries. If that changes, everything changes.

If the average American worker had any economic literacy, they would look at this chart and scream, "I've been getting royally screwed since 2001!" Capitalism was not supposed to work this way--as the workers become more productive their wages fall. But of course as wages fall and layoffs grow, the working class is well aware that they can no longer borrow from their home equity or their ten credit cards and so they cut back on discretionary spending. This means that our ten years of overcapacity in what's left of our industrial plant will get worse

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A month ago, I referred to the "spooky parallels" between the Karzai government and the terminally corrupt Diem regime we found ourselves backing in Vietnam 50 years ago. Well today Peter Galbraith, the most experienced U.S. diplomat in Afghanistan was fired from his post at the U.N. station in Kabul for exposing the complicity of the head of the U.N. mission, Kai Eide, in covering up the fraud in the Afghanistan election.

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Instead of relying on the corrupted, illegitimate, and fraying central government in Afghanistan, we should work with the ethnic forces in the various parts of Afghanistan. Although we cannot come close to achieving what we did in working with the Kurds in northern Iraq, and with the Sunnis after the Awakening, these successes point to the merit of working with mono-ethnic, local forces.

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What's wrong with these two pictures? I believe there is a dangerous disconnect between the "investor class" and everyone else in the country. The S & P 500 keeps climbing and jobs keep disappearing. If this situation is not to dissolve into class warfare, our collective establishment (government and business leaders) better figure out a way to start creating jobs pretty quickly or your going to see the pitchfork brigades descend on both Washington and Wall Street. Already the signs of class tensions are high as the Pew Foundation found out last month when they asked what were the sources of conflict between social groups.

Both immigration and anger at the rich are sources of lower and middle class conflict. We don't like to use those words in America, but there is no other way to describe this. In the 1930's Depression this took two distinct paths--the Nativist/right wing vitriol of Father Coughlin and the "soak the rich" populism of Huey Long. Roosevelt had to thread the needle between fascism and socialism, but without the WPA putting people back to work, the country could have been taken over by the demagogues. God knows we have enough Father Coughlin's to staff a whole cable TV network 24-7.

Obama needs a Digital Green WPA. If we could build the Hoover Dam in 1936, we could get started now on the massive solar and wind power opportunities to put people back to work.

It has been the continuing obsession of this writer that we are entering an Interregnum, best summarized by Gramsci's description.

The old is dying and the new cannot be born;in this interregnum there arises a great diversity of morbid symptoms.

The economic collapse that we chronicled here for almost two years has exacerbated the morbidity. Demagogues like Glenn Beck have played on the confusion and uncertainty of the working class--chanelling their anger away from the capitalists and towards a young Black President--"the other". So this anger in the general populace manifests itself in strange ways--racial animus; thuggishness that leads to fame; a general anomie best described almost a century ago by Yeats.

The best lack all conviction, while the worst are full of passionate intensity.

I've been writing a book called Outlaw Blues about the century long culture war between America's artistic avant-garde and the radical right, and so I can say with some confidence that this current culture war is not new. It's been an ugly battle for 110 years since Mark Twain was denounced by the New York Times editorial page for saying, "I am an anti-imperialist. I'm opposed to having the eagle put its talons on any other land." Sometimes the artists have just left the country like in the early 1920's--escaping to Paris to avoid the religious bluenoses, the KKK and prohibition. Sometimes the artists have gone to jail, like the Hollywood Ten in 1950. But in each of the earlier periods of rising right wing repression and paranoia, the fever abated in three or four years when responsible Republican's stood up and denounced the dangerous paranoids within their ranks

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While Neo-cons acolytes like Jonah Goldberg are busy sanctifying Irving Kristol, I need to introduce a note of reality here. Irving Kristol and Milton Freidman are responsible for the mess we are in. Kristol's two tenants of the neoconservative faith were simple.

In domestic affairs the national government should shrink (by cutting taxes and business regulations)

In foreign affairs the government should grow (by becoming the world's sole military superpower).

The simplicity has a frightening economic and moral inconsistency. Obviously if you cut taxes and grow your military you are going into debt. Obviously if you eliminate business regulations, grifters (which we breed in the millions) are going to take advantage of the system. Too much debt and too many people trying to game a system with few regulators. That about sums up our economy since Kristol's ideas in the form of the Reagan era took hold. Even if Bill Clinton was able to get the debt briefly under control, he never took on the question of what we gained by spending so much money to be Kristol's "world's sole military superpower". Perhaps President Obama will be willing to answer that question. Our economic rivals give all their citizens world class health care and K-College education as a right of citizenship (paid for by taxes). They spend 5% of our defense budget on their own military.

May Neoconservatism rest in peace.