There has been a dust up over the new politics. With Begala quipping that Dean is paying people to pick their nose.

First Begala apologizes both at the beginning and end of this post - to Zack and to the organizers in general. He admits it was a "smart ass quip" that he regrets.

Second he believes that the void is "message" - he and carville are pushing the idea of "progressive patriotism" as the basic meme. Good old fashioned TR New Nationalism type images there. He also notes that the state program isn't that cheap, but it isn't the cause of the budget void at Dean's DNC.

Sure this is a turf war, and like all turf wars it comes down to who gets the check to do what everyone knows needs to be done - which is why turf wars are so vicious, everyone knows that who gets the check is largely arbitrary. It's like getting into med school, there are three over qualified applicants for every slot, so people sandbag each other.

But then he goes back to quippery:

"I've lived almost my entire life in red states -- not Berkeley, not Burlington -- but Texas and Virginia."

Hey Begala - California has been turned blue. It was for a long time part of the Republican coalition. Gave the second half of the 20th century two Republican Presidents and a Republican Chief Justice of the Supreme Court. It was the home of the Republican Tax Revolt. It has continued to elect Republican governors. If California is blue now, it is because it has been flipped.

Ditto Vermont. Vermont was, until not that long ago, a Republican State - like next door New Hampshire, now also turning blue.

Texas and Virginia have, by contrast, turned red over the course of the last 30 years. Texas gave the US a Demcratic Vice President under FDR, an another who went on to become President. Virginia, likewise, was a reliable Democratic state in the Presidential coalition, even as the deep south slipped away.

So on one hand Begala's appeal is that he is an ideolog at heart. He is one who, however, lives in the top down media age - which is dying - and he is one who lives in an age where democratic bastions turn republican. He is, fundamentally, in the era of Reagan and Gingrich.

In this era, it is about the air war. Total superiority on the airwaves is what it is about. And don't doubt the air waves now - Mass Media Moves the Majority - it is that that rouses people. To take an example: I can't tell you how many phone calls I have gotten because the Lowell floods are in the news - I'm up on higher ground. It was last year when a snap freeze caused a pipe to burst and some tree roots backed up my sewer that I, personally, had water problems. But my personal problems aren't news - the destruction of the floods in this area isn't to be understated, people have lost everything. But even my friends and acquaintances know more about Lowell the dateline, than Lowell the place I live in. And I am an internetizen.

The other part of Begala's basic frame comes from his last quip - where he criticizes people who have lived in "Berkeley and Burlington" rather than "Texas and Virginia". Note, first, the apples to oranges comparison. One can live in Austin Texas and be in a relatively progressive bubble. There are plenty of Virginia commuters who really live in Washington DC, and are more in the bubble than anyone in Berkeley is.

But note the bigger difference: California used to be a Republican State - in fact, California Republicans Nixon and Reagan were in every Presidential election but 1964 from 1952 to 1984. Before he was a liberal chief justice, Warren was a California Republican governor and Vice-Presidential candidate. That means that California Republicans headed two of the branches of government. California was the base for the Prop 13 tax revolt. Vermont used to be the solid center of ordinary Repbulicanism. Was the birthplace of a Republican President - though he rose to prominence in Massachussetts. It still elects Republican governors.

We all know how Texas has turned and how Virginia as well used to be mainly Democratic, even as the rest of the deep south slipped away.

Berkeley and Burlington may be the homes of techno optimists, for the same reason that Arlington and Austin are the homes of media-pessimism. In Burlington and Berkeley - and I might add Boston - the world looks as if it is turning Blue, and that it is better to be dead than Red. It looks like all that needs to be done is draw people into the new internet world, into the 21st century, and the Republican mantras will fade away, because they are fights over things that don't matter. What matters is the future.

So on one hand it is a good thing that we've reached the stage where when an insider makes a smart ass quip, he gets his ass kicked hard enough to start behaving like an adult. It's also heartening to see that Begala has substance beneath the veneer, and basic root of that substance is not that far different. One could, and the Democrats Begala's quip on nose picking was met with a torrent of anger. In no small part because it was field organizers who fought the civil rights battles that are the mythic heart of present day social progressivism. It's like knocking minutemen in Massachusetts, Texas Rangers in Dallas, or taking a piss on a town's World War II memorial - it just ain't smart.

To his credit Begala apologizes. And in his answer are both the points that unite, and divide, Begala and his world from Exley and his.

have, done a lot worse than "Progressive Populism" as a message.

But it is also important to realize that while Begala's instincts may be for a more Progressive America - his reflexes are trained by having large gobs of manure hurled at him from a Lee Atwater made Howitzer, backed by a ton of money. And by a world that is rolling Reagan Red, not blushing bush-bashing blue.

Since media is still powerful, and since much of the country still lives in Bushistan, Begala's serious points need to be taken seriously. On the other hand, Deans willingness to hire young political guns from the internet is essential - how else are people going to be able to enter into politics, unless the can make their livelihood in it? Perhaps Begala's "crisis" is that there isn't enough money left for him after paying dozens of Tim Tagris. Begala's a blue chip political investment, all the value is priced in. But the young guns - that's venture capital, and some of them are going to return thousands of times what they cost.

Begala's world is where an election is fought over the 10% of districts decided by 10% of voters that are marginally attached to the political system. They can drop off if there is "no reason to vote". They can only be reached by word of mouth from people who watch the news more regularly. They vote, and poll, their pocketbook - gas prices, consumables, availability of jobs. They don't have a great ideological attachment, and they need constant "bucking up" to keep their morale high. Often the are more patriotic than political, and believe in their hearts that Congress could meet for about a month every year and then go home. They may be right about the world, maybe American Idol is more important than Bush's latest speech. It certainly looks and sounds better.

In that world a barrage of media changes people's minds, and they change the minds of that marginally attached voter. It is about saturation, the point where 90% of the electorate is fed up with the ads, is the point where the last 10% has finally been influenced by them. It takes a lot of mass media to get inside the skulls of this least participatory 10%.

Thus for Begala "Control of the House" rests on that media bombing campaign. He sees it as a powerful weapon. In reality, it is nothing of the sort, and is, instead, as vulnerable as a blimp would be to an F-14 Tomcat.

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The reality is that Begala's weapon is a pistol - he can shoot it at the map and put a hole in one congressional district. Maybe a full magazine will make it 10 districts, or 25. But that is it, it is a retail attempt to locate districts that swing the election. This is why there is such despair among consultants, as the price of barrages has gone up, and the country has gotten more geographically hardened politically, it gets harder and harder to swing an election. Just two months ago, most insider Begala types were saying that the Republicans would probably hold both houses of Congress.

What people don't realize is that this is normal for Congress. Look back over the 20th century, and you find that normally only a few seats change hands. The House itself doesn't change hands with a few seats - instead, it tips with large shifts. The DLC-DCCC-DSCC strategy of trying to incrementally win back the House a few seats a year may have looked like the "safe" play, but in fact, it was quite radical - it had never been done before.

What made them believe in it was Clinton, and the success of Democats in off year elections. It seemed to them that if only every election could be made into an off year local election - about who would build the most schools, deliver the best services - then the Democrats could do as well on year as they had done in off years. The problem is, this is the strategy of the out party trying to grab a seat or three - the LaGuardia "there's no Democratic or Republican way to collect the trash". It led to candidates who ran away from the party and its identification, away from progressivism, and into elections that turned on narrower and narrower issues among narrower and narrower constituencies.

The reality is that the house changes hands on big shifts - 1930 and 1932 combined, 1994 - these are the normal way to shift power - convince a different 5% of the country, an identifiable 5%, that their interests are with the other party.

These people are influenced by television, but not by the ads. They are also influenced by their friends and neighbors, but not necesarrily geographic friends and televison watching neighbors. They have an ideology, they aren't marginally attached to the political system, they are often quite political. But they are marginally attached to their party system. Some of them walked to vote for Perot, some even twice - that is 6% of the electorate. Some of them have voted for independent candidates for governor. That's another 3% of the electorate. If this roughly 10% of the population can be split, instead of roughly 50-50 as they are now, to 70-30 Democratic, that is the same net effect as overwhelmingly winning the air war. And you don't have to keep renting their votes every cycle. They can't be easily turned by Bush dumping a ton of money on their districts. They aren't quite that localized.

Now you can see why the South offers a hypnotic appeal to the media campaign - a disproportionate number of districts decided by the anti-political swing voter are in the South, and are socially conservative. This the Airwave War party is one that stands for renting swing with the wind voters. The only reason they are looking beyond that now is that the mood of the country is so anti-Bush, and anti-Delay, even if they don't know Delay's name - that they see a chance of making bigger in roads.

But the other Party, and the other strategy, isn't in the South. The people who are marginally attached to the Republican Party disproportionately live in the Northeast - in Connecticut, Pennsylvania, Maine - in the upper Mid-west, and in the Southwest. The reason the Republicans are gambling with immigration, is that the good people of nowhere Nevada are paying very high gasoline prices, and not getting oil pumping profits. The republicans need a good round of crypto-racism to get them to show up to the polls. And if these people don't show up, then the rising urban centers of Phoeniz, Las Vegas, Albuquerque will swing Nevada, Arizona and New Mexico to the Democrats. The hispanic vote will put California out of play, and it will put Colorado - which has trended heavily Republican in the last 20 years - back into play. This list of districts - which Matt Stoller and I identified back in 2003 - would, alone, give the Democrats a narrow majority in the House and a stronger one in the Senate. 10 Republican Senators live in these areas - Collins, Snow, Chaffee, Santorum, Specter, Voinovich, DeWine, Ensign, Kyl, McCain, Allard. If the Democrats can be the natural replacement for these senators when the seat becomes open, as the Republicans became the natural replacement for Souther Democrats like Breaux, Hollings, Byrd - or be able to flip or defeat 2 or 3 - that is the backbone of a long run of control of the "World's Greatest Deliberative Body".

The last important area was the upper mid-west, which began trending red, but is now headed back to the Democratic column, because even farmers are beginnig to realize that where ever the "Free market" is, it isn't in their home towns. The Republicans are, again, gambling on ethanol subsidies as a vast bribe to keep Iowa onside.

Adding up these seats in 2003, we found that there were 40 House seats which, if the identifiable second ring suburban, and microurban constituencies could be shifted, would result in a new Democratic majority in the House. This advice was ignored in 2004, in no small part because 2004 was the "last push over the top" for the strategy of winning over the apolitical 10%. The Republicans proved that swift boating through astro-turf still works. Lee Atwater's dead hand almost wrote the copy.

Having been one of those "desktop strategists" who saw media and money consultants come in and turn a front runner into a laughing stock, and then seeing it again in a Congressional race where a slick media and money consultant came in, quit when he couldn't raise enough money, and left the candidate to get only 3% more of the vote than a guy running on legalizing pot had a few years before - Begala should be carefully about spraying accusations. The media and money consultants have presided over the longest time out of Congresional power for the Democrats since the 1920's. They have lived off of the Clinton political dynasty - but Clinton never won, or even held, a house of Congress on his coat-tails. That puts him behind Albert Gore, whose coattails brought the Democrats all too brief control of the Senate.

As a "desktop strategist" - I suppose that means I can use a spreadsheet and understand basic addition, subtraction and a few simple statistical functions that rely on basic addition and subtraction - these numbers were as plain as day in 2003, and they are equally plain as day now. The people who will give control of Congress back to a progressive Democratic Party aren't in Lousiana. They aren't in Alabama. They aren't in North Carolina for the most part. They aren't in the Southern states over all - though a national shift will be visible everywhere.

But they are in Montana. Ohio. Iowa. Arizona - states seen as reliably Red.

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What Begala and Carville did not see, nor did anyone inside the top down media bubble, is that there is a new economy. The people attached to that new economy, even if they are not liberals or Democrats, are not attached to the war for oil economy, except in so far as they directly work for the military-industrial complex. Want to meet an anti-government libertarian? Call up Raytheon's missile systems department and ask to speak to one of the engineers. The reality of the new economy is that the people in it aren't old line union Democrats who want a "super-union rep", they are people who are much more akin to the ground level populists of the last century, who see control over rights of way, and access to the money needed to start businesses, as being the key questions.

Back then they were populists and "Silver Republicans". If you do a close reading of "The Wizard of Oz", you will know they hated "The Wicked Witch of the East" - that is the banks - and the "Wicked Witch of the West" - that is, the railroads. Liquidity and rights of way.

In our own time the fight over "Net-Neutrality" is a right of way fight, and even anti-Democrat libertarian constituencies have lined up against the Big Telecom bill that the Republicans have put foward, and voted for almost to a man. It is why artists, who are, like farmers, beholden to rights of way

This new economy is the heart of the New Politics - one which is driven by urgency, connection and psychographics, rather than the complacency, alienation and demographics of the old media politics. Look a the Republican churn of bills and amendments now - they are having to pander to their base, and that base is outraged at people who speak spanish, gay men who want to get married, and umm. Well people who speak spanish.

Begala comes out of a word where this is the game, and who are frigthened and demoralized because our outrage factors - say CEOs who make hundreds of times what even professionals make - don't seem to have the same "umph". Only gas prices seem to reach down into the marginal world of the apolitical. What is a party to do, if it wants to fight over a group of people who are socially reactionary, but like big spending government, when faced with a socially reactionary, but borrow and squander governing party?

The reason those on the internet are far more optimistic, is they see a different group of people in play. They see people who use the internet to get jobs, get sex, get community who are outraged about having to pay a Telecom Tax. They see people who are going from pink collar and blue collar jobs into white collar back office jobs. They see people who are entering the 21st century, a century where we are going to stop using rocks to power our economy. Begala wants to win over voters driven by neaderthal instincts, the new politics wants to finally put an end to the stone age.

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So it is important to see through these differences of mileu and time, because Begala is, at bottom, one of us ideologically. And when he can see the new ways beginning to work, he will use them and join in them. Carville and Begala have been taking punches in that world for a long time, hoping to be able to deliver a bunch back. The differences between them and the new political world go deeper than tactics, even deeper than strategy. But they don't go to the level of basic outlook.

The reality is that the mass media world is going to continue to shrink, and it is going to continue to favor the Republican faux-outrage for some time. Peter Daou of the Daoureport has made this one of his long running themes - top down media supports the better top down party in an energy and media alliance that is seen the world over. Their economy is about turning gas into consumption, and the top down media, deep in its spine, is about telling people to do this, and how to do it most profligately.

Peter's "Triangle model" is where Begala needs to get to - and remember Peter is an insider, who did this for the Kerry campaign. Don't listen to the financial consultant who dabbles in politics like me, listen to one of Kerry's top internet guys - only by combining the power of many to many media with the power of one to many media in pursuit of a governing idea will there be a shift in the political landscape that will allow Democrats to actually be Democrats.

Begala looks back at Clinton and the 1990's when "hope" was seen as the way of replacing outrage as the way of moving the country politically. Well one of the products of that was the internet society - the people that Begala is pushing away from the table are the people who are children of the political and economic environment that Bill Clinton and Albert Gore worked to create. It isn't the way that Begala and Carville thought it would go down, but the new politics is a direct descendent, not of "triangulation" but of cross the bridge to the 21st century. And now that we are here, the 21st century needs to evolve towards the distant, but visible, 22nd century economy that will supplant the oil and broadcast economy with one based on wave and wire connection and production.

The next step in this transformation politically is to change the map of the US politically - flipping the northern moderates, the southwest boomburgs and the upper heartland. These areas fundamentally are not going to do well in a world run by OPEC, Exxon and Clear Channel. These areas do not share Bush's obsession with neo-colonialism, nor the economic "trickle down" top down model. They have people who are energetic and active, but who are blocked by money that is locked up at the top, and by rights of way that are being fenced in.

This map does not ignore the south, but it does not see the Southern Swing Voter, as the model voter. It does not see the airwave saturation campaign as the future, but as a component of the present. A component that consumes huge amounts of money and delivers few returns.

Instead of bashing the new politics, Begala needs to embrace it. He, personally, would find a warm reception. He and Carville are heros to many of the people in it. If Begala were to go to Yearly Kos they wouldn't find a hostile reception, but instead, a large group of people who take inspiration in "Fight Back" and the ragin' cajun.

But first both sides, but the insiders particularly, have to stop getting into what Duncan Black calls "The Lump of Campaign Money Fallacy..." that "...seems to have infected most of Washington" - that there is only so much money to be raised, and the fight is a zero sum way of how to spend it.

Have you noticed something?

Check out this graph.

Inflation has been redefined in the business press as "core inflation". That is, energy inflation doesn't count any more for public discussion. This is an interesting caveat. As anyone who follows bls statistics knows "core inflation" is an inflation number without energy, the argument being that this "strips out" the "volatile" food and energy sector. However, this is doubly dishonest. First, food and energy have been running ahead of the rest of inflation for some time now, second there are simple financial formulas to get rid of what is called "marginal behavior". If people want to know what the "non-volatile" number for inflation is, then the simplest tool is to take a moving average, not to remove particular components. If one wants a more sophisticated tool, one can take kendall's tau of the inflation series over time – which is a statistical tool to find the correlation between two data sets removing the differences in volatility from both. Finally one could apply GARCH – an algorithm for analyzing numbers that are not only volatile, but have changing rates of volatility.

The above graph is the ratio between CPI-U and its "core" number, and CPI-W and its core number. If removing "Core" inflation was simply removing a series that was simply stripping out volatility, one would see the same curve, – as it was in the 1990's – then you would see rises and falls above and below a mean value.

In 1983 the asset inflation in housing was removed from CPI. This has the effect of allowing booms to go on longer, because it eliminates the "housing bubble" effect, and thus allows the Fed to keep interest rates lower long, and it means that recessions will be slower to recover from, because when housing bubbles "pop" that doesn't show up as a drop in inflation. It has also masked the massive housing bubble that we have now. This is important because money is created when banks lend, they can lend based on assets, and housing asset prices are counted there. This may sound simple, but it is John Kenneth Galbraith who noted that "the process by which banks create money is so simple, the mind is repelled."

The net effect of this is that the money supply is based on asset inflation, but the interest rate is not. This has created a perverse incentive for administrations and the Federal Reserve – allow housing inflation. Since housing does not generate export, but, on the contrary creates import demand for energy and consumer goods such as home electronics – the net effect of this is to increase the money supply, which drives general inflation, and to increase the trade deficit.

There have been calls for consumption taxes, but this is backwards, the better mechanism – the free market one – is simple to make it so that the Fed is no longer allowing asset inflation in the first place. Otherwise what one is really doing is using home owner equity as a means of creating money to speculate with.

This may sound complex, but the effect is visible: an ever growing trade deficit, as more and more effort is poured into housing, which runs well ahead of inflation, and that housing creates demand for imports, both by creating the desire, and providing a "wealth effect" to fund it with. That's demand in economics – desire plus money.

The redefinition allowed inflation numbers to be reduced – very important both for consumer and business confidence, and because the government is "on the hook" for inflation in the form of Social Security – lower inflation means smaller Cost of Living Adjustments to Social Security. This means smaller social security checks.

However, even this adjustment is no longer enough – instead, inflation is, effectively, being redefined again to exclude energy costs. Energy inflation no longer "counts" for considering economic condition. This means there is a direct transfer of real wealth from everyone else, to energy producers. Don't blame Exxon for high energy prices, blame policy which now has the implicit objective of transferring money to energy producers, without any requirement that they reduce inflation.

There is a good reason for this. Energy producing nations provide much of the liquidity to cover our trade deficit. They will want an assurance that we are not going to tax them in order to fund our deficits, or indeed anything else. This indicates that a fundamental mechanism of neo-liberalism is dead. Namely, that developed nations will not impose self-discipline to prevent energy prices from going up.

To explain, between 1982 and 1998 an important pillar of policy in the G-8 was not to import more energy from OPEC and other energy producing nations than they exported. The idea was that this would squeeze energy exporters, and prevent them from gaining too much control over the world financial system. For what ever the problems with this system, it worked – energy prices marched downward, and with them commodity prices. While the gold bugs are screaming about it now, the current trend of energy getting more expensive than other goods began with the response to the Asian financial crisis, and somewhere in 2003 the decision was made, or not made, to restrain federal spending in the US, or use monetary or tax policy, to bring the movement of energy inflation back into line. This has become general commodity inflation – gold, steel, copper and so on.

This means that this new "redefinition" of inflation is directed at keeping the holders of US instruments, namely energy exporters who don't have stake holders, and so can invest abroad, not at any underlying fundamental irrelevancy of energy to general inflation. Or as Barry Ritholtz puts it "Inflation is fine so long as you don't move or eat."

In short, since 1983 we have been pretending that housing inflation doesn't count, and now even that isn't enough, and we are having to pretend that energy inflation doesn't count either. The first allows loose money, but creates excessive energy demand. This worked so long as policy kept inflation prices in line. Now policy has let the energy genie out of the bottle, and is trying to hide behind a talking point that is rotten to the core.

The first redefinition produces chronic current account deficits, because it shifts efforts from production, to consumption. It also creates a pool of easy money looking for returns. The second shifts real wealth from the US and developed nations, to energy producers and resource producers. This produces wealth in poor countries - among those who control the energy supplies. This is why Putin of Russia is becoming more and more aggressive, this is why energy socialism is sweeping Latin America - because there is a fight to use that energy money to do more than buy luxuries for the upper classes. In places like Dubai, there is the reverse effect - conspicuous super-consumption by the small elite that receives all of the oil revenues.

This is creating a more and more unstable situation, as the financial power in the world is flowing to groups that do not have an interest in the political or economic stability of the developed world. Far from being a "clash of civilizations", our present problems are driven largely by a series of attempts to delay dealing with problems.

Perhaps that was the right decision in the early 1980's, as many technologies required to move away from a petroleum driven economy were in their infancy. But in the present, it is a bad decision, because it leads down a road that is more costly than the other choices - the opportunity cost of building mcMansions and inflation wagons, that's SUVs - is very high at this point.

The continual repetition of "core inflation remains tame" is not a good sign, because industrialized nations make "core" items, and import "non-core" items. One man's inflation is another man's pricing power - saying "core inflation remains tame" is another way of saying that manufacturing does not have pricing power globally.

This leads into a discussion of currencies, and why the current currency problem is the result of this basic dynamic of needing to appease bond holders with oil revenues.