Bachmann was mentored by a crackpot Christian extremist professor named John Eidsmoe, a frequent contributor to John Birch Society publications who once opined that he could imagine Jesus carrying an M16 and who spent considerable space in one of his books musing about the feasibility of criminalizing blasphemy.

She was soon mobilizing against an educational-standards program called Profile of Learning, an early precursor to No Child Left Behind. Under the program, state educators and local businesses teamed up to craft a curriculum that would help young people prepare for the work force — but Bachmann saw through their devious scheme. “She thought it was a socialist plot to turn our children into little worker-automatons…”

Bachmann likewise rejected AmeriCorps as an attempt to build “re-education camps for young people, where young people have to go and get trained in a philosophy that the government puts forward,” and blasted a schools program started by Bill Clinton for trying to brainwash kids into accepting “government central planning of our economy and our way of life.”

[Bachmann] railed against various dystopian indoctrination plans, including the U.N.-inspired International Baccalaureate program, offered in some American high schools. Bachmannites despise IB because its “universal” curriculum refuses to recognize the superiority of Christianity to other religions. You and I might have thought William Butler Yeats, for example, was a great poet who died half a century before the Age of Aquarius, but [Bachmann] calls him a “New-Age Pantheism Guru” who was aggressively “undermining Christianity.”

In 2009, after she saw a news story about the Chinese calling on the world to abandon the dollar as its reserve currency, Bachmann somehow took this to mean that the Obama administration might force ordinary Americans to abandon their familiar green dollar bills for some international and no doubt atheist currency. To combat this possibility, Bachmann introduced a resolution to “bar the dollar from being replaced by any foreign currency.”

Bachmann’s anti-gay crusade in Minnesota…trying to outlaw an already outlawed practice. “This is probably the biggest issue that will impact our state and our nation in, at least, the last 30 years,” she said. She called gay marriage an “earthquake issue,” insisting that failure to pass her proposal would mean that “sex curriculum would essentially be taught by the gay community” and that “little K-12 children will be forced to learn that homosexuality is normal, natural, and perhaps they should try it.”

Bachmann’s Unrivaled Extremism — Michelle Goldberg

Speaking to a Christian radio station about gay teenagers last year, [Michele Bachmann's husband] said, “Barbarians need to be educated. They need to be disciplined, and just because someone feels this or thinks this, doesn’t mean that we’re supposed to go down that road.”

In 2004, Bachmann gave a speech warning that gay marriage would lead to schoolchildren being indoctrinated into homosexuality. She wanted everyone to know, though, that she doesn’t hate gay people. “Any of you who have members of your family in the lifestyle, we have a member of our family that is,” she said. “This is not funny. It’s a very sad life. It’s part of Satan, I think, to say that this is gay.”

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In the Washington Post, Steven Pearlstein opines over the growth of outrageous executive compensation, despite the weak economy:

The data from this spring’s proxy season is mostly in and it shows that after two years of decline, the average compensation for chief executives of the 500 largest U.S. corporations is on the rise again. According to Governance Metrics International, the average “total realized compensation”…was just under $12 million in 2010, up 18 percent from 2009…

This wasn’t supposed to happen.   The Obama administration tried to reverse this phenomenon. As I said almost two years ago:

The Obama administration is proposing two major reforms. First, shareholders get more power over how much top executives get paid. Second, the company can “claw back” some of those payments after a few years if the stock price starts to tumble.

The “clawback” provision is a good start. Empowering the shareholders is a nice idea, but it never works. Shareholders are too dispersed and diversified to monitor every executive in every company where they own stock.

Sure enough, says Pearlstein:

This year, as part of the Dodd-Frank financial reform law, companies for the first time were required to give shareholders a chance to vote up or down on executive pay in a nonbinding tally. So far, 98 percent of the votes have gone in favor of the pay packages.

But my larger point continues to be ignored:

But they — and their interlocutors in the press — are missing the real compensation problem.

The compensation that drove the crisis wasn’t in the general’s quarters. It was down in the trenches. The traders who manufactured and sold mortgage-backed securities were paid a fee every time they produced another MBS. They were not paid based on how well that MBS performed. They were compensated for quantity, not quality. They had every incentive to underprice risk and drive home prices to an unsustainable high.

The real compensation problem isn’t on the front page of the Wall Street Journal. It’s sitting at a trading desk just waiting for the next boom.

As true today as when I wrote it in September 2009.

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An estimated 3.8 million need humanitarian aid (fully half the population), according to the U.N.’s Food Security and Nutrition Analysis Unit for Somalia, which calls the crisis the worst since 1991–92. In the past six months alone, the number of people forced from their homes by fighting—between the country’s barely functional transitional government and Islamist insurgents—has grown by 40 percent, to 1.4 million. Most live in squalid camps that a new report from Oxfam calls “barely fit for humans.”

It is, however, easy to miss the bigger picture in McLure’s story. I call it “the Somalia Syndrome.” Here is how I explained it in the Hazleton Standard-Speaker in January:  

“The trouble with fighting for human freedom,” wrote H.L. Mencken, “is that one spends most of one’s time defending scoundrels. For it is against scoundrels that oppressive laws are first aimed, and oppression must be stopped at the beginning if it is to be stopped at all.”

Try telling that to George W. Bush.

When Somalia, after fifteen years of violent anarchy, finally found a government that would bring a modicum of security and liberty to its citizens, the President supported regime change because, well, he didn’t like their style. The regime’s name was the Islamic Courts Union, and as you can probably guess, Washington didn’t expect them to join the War on Terror too readily.

The Bush administration turned to Ethiopia, who invaded, triggering a civil war that is now almost three years old. One-tenth of the population has been killed. In the United States, the equivalent body count would be about 30 million.

If the aim was to get the bad guys, they missed their target. The Islamic Courts Union may not have lived up to our ideal of the separation between church and state, but they made it very clear that their first priority would be bringing social justice and peace to the country—something Somalis haven’t seen in quite some time. Moreover, it was popularly supported and just might have been Somalis’ one hope for freedom. Not to mention hundreds of thousands of Somali lives would have been spared.

If the goal was to make the United States safer, they failed even more miserably. Terrorist groups have actually increased. Whereas Somalia had little, if any, connection to al Qaeda before 2006, now the Shabab, an openly pro-al Qaeda jihadist group, is flourishing.

So let’s see, we broke international law, cost millions of people their freedom, precipitated the death of thousands of innocent lives, and made our own country less safe. Even if the Islamic Courts Union conformed to our wildest nightmare—which would contradict all historical evidence about their intent—they would be hard pressed to match that record.

It’s nothing new.

Since the end of World War II, the United States has advocated regime change whenever we didn’t like a foreign government. (Okay, we’ve been doing it longer than that, but the Cold War was when we made it a regular part of our arsenal.)

Because such parts of our history have been covert or just unpleasant memories, we brush them aside as exaggerated yarns of international intrigue, maybe even political propaganda. And so, most Americans live comfortably unaware of Somalia-like military actions that have been proven by CIA documents and the like: Iran (twice), Guatemala (twice), Cuba, Democratic Republic of the Congo, Iraq (thrice), Chile, Afghanistan, Turkey, Nicaragua, Republic of Ghana, Venezuela, and the Palestinian Authority.

With the demise of the Soviet Union, one would think such operations would lose their allure. Sadly, it seems our government learned the wrong lesson when the Berlin Wall fell. Again, when it comes to American history, we have an uncanny ability to remember only what we want to.

The conventional wisdom goes like this: After forty years of détente and containment, Ronald Reagan swashbuckled into the White House, and the Soviet Union backed down. They knew he meant business. Reagan fought them on so many fronts that, when combined with his missile shield and increased military spending, they went bankrupt trying to compete.

But numbers don’t lie, and they tell a different story altogether. The Soviet Union’s defense spending did not change much throughout the 1980s. As a percentage of GNP, it stayed about the same. No, the Soviet Union collapsed for the same reason that economists said it would: Communism does not work.

After 9/11, Islamic terrorism became Enemy #1, and the old mentality—show our strength, beat back every advance, ramp up military spending, and rub out every last anti-American regime—took hold. Washington still hasn’t learned that unfriendly governments are best beaten just as the Soviet Union was—by internal instability, not military defeat.

Still, the myth persists.

New York Times columnist Thomas Friedman put it in different terms a few months ago when he said of Iran, “When you have leverage, talk. When you don’t have leverage, get some. Then talk.” If I tell you to do as I say or I’ll invade your country, that’s leverage—but it’s also illegal, immoral, and counterproductive if my goal is to create a peaceful community. Leverage did not bring down the Soviet Union, but it did increase the body count, drain the treasury, and multiply our enemies just about every time the United States overthrew a country in the last sixty years.

The empiricist in me says things need to change.

We can start by abiding by international law, openly conversing with all nations, and ending military aid to countries that are, in many ways, worse than the countries we criticize. If you’re worried that gas prices will increase when we stop propping up, say, Saudi Arabia, don’t be. With the money we save by ending military aid, we can cut taxes at home. Not only is that an implicit carbon tax swap that helps the environment without costing economic growth, but it makes the world a safer place.

Iraq, Iran, Pakistan, and North Korea may be the most talked-about foreign problems of the last eight years, but they are symptoms of a greater ailment that has gripped our country for over sixty years. May the new Obama administration be the beginning of the end to the Somalia Syndrome.

Unfortunately, nine months after I wrote this column, it is clear that the Obama administration has fallen under the spell of the Somalia Syndrome with its exploits in Afpak. (For more details on how this disastrous policy tempted and snared them, check out Rory Stewart’s July essay in the London Review of Books.) Council on Foreign Relations expert Bronwyn Bruton draws the conclusion perfectly at the end of McLure’s article:

I think that the main thing is recognizing how little capacity we have to solve the problem in Somalia. To solve the problem would require a nation-building effort, and there’s no reason to believe it would be more successful in Somalia than it has been in Afghanistan. I think the question is: what can the international community do to get out of the way?

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Coming from one of the world’s leading experts on econometric predicting, Hamilton’s improved mood says more than all of Jim Cramer’s rants put together. He cites increased activity in the auto industry, an uptick in home sales, a slight increase in consumption, increased expectations for third quarter sales in several large industries, and significant recovery in the Aruoba-Diebold-Scotti Business Conditions Index. (Full disclosure: Frank Diebold, one of the authors of the index, is a good friend and former teacher of mine. He is also a world-class econometrician, but I have not asked him for his outlook at present.) Indeed, those are most of the important measures of whether individuals and firms are starting to spend again, which is precisely what is needed to end a recession.

Hamilton is not taking a stand on whether the recession is over and cautions that the end of “Cash for Clunkers” could prick an artificial high in auto sales, personal income still hasn’t risen, and unemployment shows no signs of falling. But the latter two usually follow on the heels of the other indicators he cites, and the positives seem to greatly outweigh the negatives. So why isn’t Hamilton’s emoticon smiling?

A lot of it has to do with the “shape” of the recession, as economists have explained it to the public of late. A “V-shaped” recession, like we used to have in the 1960s and ‘70s, implies a sudden end to the recession and a sharp return to growth. A “U-shaped” recession, like we had earlier this decade, means growth will be slow and unemployment will continue to rise for awhile even after the recession technically ends. Because consumers are still “deleveraging”—that is, because they have more debt than twentieth-century consumers had—most economists predict the latter, as spending won’t return full-force until they pay off their debt. If nothing else, such an expectation warrants a neutral face instead of a smiling face. The economy may grow again, but it’ll be a long slog before we return to the good old days.

There is, however, a third possibility: a “W-shaped” recession. Granted, it’s rare and frightening, but several well-known economists warn it is very possible. The last time it reared its ugly head was the early 1980s, when the economy dipped into two recessions within the first three years of Ronald Reagan’s first term, and before that, it was the Great Depression, when the initial recovery was brought to a halt by deficit hawks who forced Franklin Roosevelt to raise taxes and balance the budget in 1937.

Investors disagree. All summer, the story has been the stock market rally that looks to be pulling us out of the recession. After a terrifyingly close call from the collapse of Lehman Brothers to the passage of fiscal stimulus, banks have raised capital, Detroit has escaped bankruptcy, and one-by-one economic data seem to be following the stock market’s lead and forming a bottom.

But something is amiss. “We’ve never had six-month period before where we’ve lost two million jobs and the market’s gained 50%,” says Wall Street expert Barry Ritholtz. “That’s simply unprecedented.” Ritholtz thinks the rally will reverse, and if today’s dismal performance is any indication, investors should pay attention.

So who’s right? Let me first say that you should never ever make a financial decision based on my opinions. If financial economics teaches us anything, it’s that the stock market is next-to-impossible to predict, and even if it weren’t, I’m not confident enough in my financial savvy to be responsible for your risk-taking. That said, I’m with Ritholtz on this one, for the following reasons:

1. As indicated above, unemployment will remain high for some time, and with unemployment comes…
2. …foreclosures, which show no sign of slowing down. Government intervention has helped many people, but if we want to make a dent in the larger economy, stronger intervention is required.
3. A whole slew of adjustable-rate mortgages still haven’t reset—which is to say, some homeowners are about to get hit with higher interest rates—so you can expect more defaults.
4. Repeated reports indicate banks still have too many toxic loans on their books. If the Obama administration had taken the advice of many of us and run the worst offenders through FDIC receivership, we wouldn’t have this problem, but alas investors will start to get worried if these reports keep coming.
5. September is historically a bad month for the stock market.
6. Far more insiders—people who know what’s under the hood, so to speak—are selling than buying.
7. The easiest way to measure valuation is the price-to-earning (P/E) ratio. If stocks are selling for a lot more than their companies are earning, beware. The historic P/E average is 15. Right now, it’s 100+! Even if you use the more stable “operating earnings” because you think reported earnings have been depressed too low by the credit crunch, it’s still overvalued at 20+.
8. The output gap—the difference between what we should be producing and what we are actually producing—is still significant. Some economists recommend another fiscal stimulus. I worry about dynamic timing, which is economist-speak for “It took you so long to spend the last stimulus, how do I know this one won’t be delayed until the recession is over?” The last stimulus clearly boosted the economy before most of it was even spent. John Maynard Keynes would call that the result of “animal spirits”: Consumers knew the economy was about to get a jolt, so they started spending again. If the stock market dips or foreclosures increase, however, another immediate stimulus should boost “consumer confidence” like the first one did. If Congress can’t get its act together fast, though, it’ll only add excess inflation after the recession ends.

Economists have two fears: (1) From March till now, we have been in a “bear market rally,” which means the rise in stock prices has been false hope amid a longer decline. (2) The entire economy will turn down again.

The first is a financial concern, the second a broader economic one—though of course the first affects the second. I am not predicting anything, but I am saying that we should be cautious for the 8 reasons above. And I am admonishing the Obama administration and Congress for failing to prevent these fears with mortgage cramdown, a larger stimulus with fewer tax cuts and more spending, and nationalization of certain banks. As James Kwak said earlier today, the fact that the TARP loans are showing profits—which Ritholtz rightly debunked as incomplete analysis—only indicates that the government made a bad bet and got lucky. I hope they (and we) continue to get lucky, but for now I’m with Jim Hamilton: I’ll smile when we’re sure this is all over.

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