Apparently, as part of their greater mission to save the world and make billions in the process, Google has taken it upon itself to save Journalism and Newspapers. At least, that’s the contention of this James Fallows cover story for the Atlantic this month.

This may seem odd since people like Rupert Murdock have been blasting Google for the downfall of the traditional newspaper business model; Google’s CEO Eric Schmidt has even described their reputation as “the vulture picking off the dead carcass of the news industry”.  But, from Google’s perspective, which I mostly share, they are helping the news industry by feeding them traffic. According to comScore 35-40% of all traffic to major US news sites come from search engines. The problem with this analysis is that, even after the tremendous growth in readership over the past 15 years, online ad revenues only account for about 3-5% of total revenue.

Google’s Chief Economist, Hal Varian, has a great slide show that explains the problem well. Traditionally, this is what a newspaper’s (and generally most print publications) balance sheet looks like:

Like the slide says and shows, printing and paper are more than half the cost component of putting out a publication. Internet distribution will cut that significantly, but not entirely, because you still have server costs. But now take a look at this next slide showing ad revenue as a %, and by type:

Internet advertizing is little more than a rounding error. If you are Google, picking up this spare change amounts to billions of dollars, but no news organization, not even Reuters or AP, has that much of a presence on the internet.

Here is where things start to get really interesting. If one can’t find good, accurate, and interesting information, they will not search for it. Therefore, the Google-Content relationship is symbiotic, and to help Google has lead three initiatives that they believe will help the digital transition easier to bare.

The first are ‘Living Stories’. In essence this is a subject based aggregator that any individual organization can use to pull together all of the related stories into a narrative through time. To me this is an algorithmic Wikipedia. A very good idea, but again one that does not pay.

The next project is called Fast Flip. The basic premise is to recreate a magazine feel of flipping through pages. This attempt, like living stories, while being interesting, does not attempt to answer the basic question of generating more revenue from its readers.

However, the last initiative has more than a little promise, YouTube Direct. It allows sites to directly implement the YouTube video service on their site, complete with back linking, while Google pays the hosting and serving costs. Now it’s important to be aware that YouTube is a huge money pit at Google, the bandwidth costs alone are staggering. But Video presents a gigantic revenue opportunity. Video usually gets around $18-23 per 1000 people for a 30 second spot on TV. Yet, unlike display ads, 30 second video ads get the same price per 1000 people online as they do in the traditional television format. This is why Hulu is a profitable enterprise, because the ad rates are substantial enough to warrant a large upfront investment in content, licensing fees.

That is why YouTube Direct holds promise, because video, even online, is sufficiently monitizable. That doesn’t mean it’s a sure thing, Wired tried to start a TV show and failed, the NYT tried a Discovery partnership to create a TV Channel which also failed. Implementation matters. But unlike the technical and tactical tweaks proscribed above, and tried before, this allows for experimentation at very low costs, but in a format that has large revenue opportunities.

What Happens When the Problem is Bigger Than You?

During subsequent reader follow-ups to James Fallows people pointed out that changing copyright standards are having powerful effects as well. And none of this has touched on the inane idea of using ‘click-through’ a good measure of ad effectiveness.

My point is that Google did not bring about this sea-change, and Google cannot drain the ocean. Craigslist and eBay broke the classified world into pieces, that’s not coming back. No one ever paid for general news content through subscriptions, hell they didn’t even fully pay for physical product at the newsstands, so why would they now?

The extinction level problem for newspapers and all print publications is one of high-impact brand-awareness display advertizing. A strong national and retail ad-buy has typically supplied 60-80% of the revenue. There are no measures on print ads, just ‘impressions’. Introducing people to new products and services is not something that can be done with an algorithm. A ‘click-though’ only shows the last step in the sales funnel, but no one is going to buy your product, or use your service if they have never heard of you.

Forget the iPad and Kindle, forget pay-walls (unless your highly specialized in some area, like Business), if NYT, Rupert Murdock, and thousands of journalists want to see the news business continue, creating a higher-value digital ad unit is the best, if not the only, way forward. Google can’t do that for you, because it’s not their business, it’s not what they do, and it’s not their responsibility.

It official Rupert Murdock is setting his British Flagship papers of Record the Times and The Sunday Times behind an internet paywall. He announced this last summer, and by June it will be a reality. What’s interesting is that there is no attempt to adopt the price point to the audience or the papers content. Nope, as Michael Wolf, Murdock Biographer, said it:

His plan is not to create an online business or, even, to realize significant additional revenues from online readership. The plan is to get you to read newspapers—as in papers.

Basically he is set to charge you the price of a newspaper regardless of the medium, so you are really better off just buying the dead-tree version. To Murdock, who hates all things digital, the Web is just a value add, similar to the DVD inserts that he uses to goose newsstand purchases. This is a bold-faced effort to thwart the online news business, plain-n-simple.

Needless to say, I doubt that this will work. Jeff Jarvis put it best when he said this:

By building his paywall around Times Newspapers, he has said that he has no new ideas to build advertising. He has no new ideas to build deeper and more valuable relationships with readers and will send them away if they do not pay. Even he has no new ideas to find the efficiencies the internet can bring in content creation, marketing, and delivery.

Instead, Murdoch will milk his cash cow a pound at a time, leaving his children with a dry, dead beast, the remains of his once proud if not great newspaper empire.

Some have argued that in order for this to work, financially speaking, a conversion of around 5-10% would be sufficient. Because online advertising is so meager, and the additional cost savings of not printing and distributing paper are so great.  But I will take a bet that he doesn’t crack 3% conversion on digital subscriptions. Less than 1% have expressed a willingness to pay for online content, and my suspicion is that many of those willing to pay, are willing to pay for things like the FT and the WSJ, highly niche journalism; not competitive journalism like what is found in the Times, Sunday Times, Independent, Guardian, BBC,  AP, Reuters, AFP, ect.

All of this is still beside the point; Murdock doesn’t care if his papers make a single dime. They are underwritten by the rest of his media empire: SkyTV subscription fees, Fox News Spot Advertising, Box Office Ticket Sales and DVD Sales of Avatar and Transformers will keep his papers alive, because he loves them. But for the industry, this is a losing proposition, a way to somewhat delay the inevitable.

Ian Grayson is one of the few people arguing that this will work. He makes 4 points, which are worth sorting through.

1. News ain’t news: It’s true that general news has become a commodity on the internet, but it’s wrong to put all news in the same category. While it’s unlikely anyone will pay for celebrity gossip and coverage of breaking events, quality journalism is a very different deal. People who value well written stories, quality audio visual resources and informed comment will be happy to pay for it.

Writing is very much a commodity, the glut of talented writers killing themselves to get noticed, with excellent credentials, had never been greater. The competition among writers, with HD cameras in tote, makes fencing off any group a losing proposition for that group.

2. A one-stop destination: Newspapers work because they bring multiple elements into a single, easily digestable whole. Sure, some of it might be available in other places on the internet, but having content filtered, edited and presently as a whole makes it vastly more usable. It’s called adding value.

Adding value within the medium is exactly what Huffington Post, Newser, and Google News do, to a far better degree than any newspaper site in existence today. How a site, run by a man who hates the internet, and doesn’t know what Google does, will outwit the digital natives, seems more than far-fetched.

3. New platforms: Attention is focused on Apple’s iPad and its clear that it (or future devices like it) will provide a new and compelling way to enjoy news content. Having a slickly presented package of news delivered to such a device will be so compelling people will pay for it

.
The iPad does nothing new. The other tables do nothing new, that a laptop can’t do today. If you haven’t been able to innovate for the internet, why is a new device going to save you? How is it different?

4. Quality versus quantity: There’s no doubt that traffic to the websites of The Times and Sunday Times will drop dramatically once the paywall is in place. However the traffic that remains will be vastly more valuable. Rather than getting excited about millions of visitors who come to the sites briefly before clicking away, the papers will have a core group of loyal readers that will visit on a regular basis. Such a group is much more attractive to advertisers and therefore far more lucrative for publishers. Less can be more.

This is an interesting point. It is true that paying website visitors do yield a higher CPM rate than non-subscribers. This is true for two reasons. One is that they are considered a captive audience, more attuned to the site’s brand, and therefore its brand contextual advertising. And two, is the known demographic profile. But there is no reason why you could not create a similar situation behind a free registration wall, rather than a pay wall.

My position is this: People will not pay for the news because they have never paid for the news, ever. When people had subscriptions to newspapers they were paying for delivery/distribution and a small part of the paper costs. (Many times subscription fees did not even cover that cost) But the CONTENT has been paid for by advertising (or patronage) for as long as the newspaper has been in existence. To now say, oh readers have to pay for content, because they OUGHT to pay is ridiculous, emotional entitlement is not economics.

So what would I do instead?

I’ll tell you tomorrow….

I haven’t been able to write very much in the past few months because my life has been quite topsy-turvy. (It’s now fully on the upside!) Lots of things have happened both in the media world (Sun Times and NYT going pay wall, Time Warner’s ABC blackout) and in the political world (Health Care Passed?!?! And Bibi got smacked) that I haven’t had time to comment on, and it’s a bit late now.

But one meme that has been floating around are bloggers most influential books, and on that note I’d like to share mine.

The Books Everyone Should Read:

White Tiger (Adiga) – A story set in modern day India, it’s a morally and ethically ambiguous story about what it means to be an Entrepreneur in an emerging economy. Extremely funny, it doesn’t pull punches and places the reader face-to-face with the reality of a globalized world. Its Fucking Amazing!

Small Gods (Terry Pratchett) – A wry mocking take on organized religion, its humor is priceless and very very British. Yet, his understanding of faith and devotion are quit sincere.

The Hitchhikers Guide to the Galaxy Series (Adams) – This book more than any other took the mundane and made it fantastic. It puts life into perspective and lets you laugh at it all. Plus, it doles out the greatest pearl of wisdom in the galaxy, no matter what happens: Don’t Panic.

The Books the Made Me Smarter:

Calculus (Stewart) – This text book taught me a new way of looking at math, and revealed the awesome power of mathematical logic and analysis. I can unequivocally say that this book made me ‘smarter’.

The Lives of the Renaissance Painters, Sculptures, and Architects (Vasari) – Discussing not only their biographies but also their techniques, this 2 volume set explains why these people were so special, and what it took to make their master pieces possible.

I Claudius (Graves) – A historical fiction told in the form of an autobiography (which did exist) by the Emperor Claudius. Its masterfully tells the ins-and-out of the Julio-Claudine dynasty from August to Nero.

The Books that Changed the Way I Thought:

Jefferson V Hamilton (Cunningham) – Drawing directly from their own writing the early ideological struggles for the creation of the constitution come into sharp focus, and made me move from a Hamiltonian to a Jeffersonian perspective.

The Prince (Machiavelli) – This changed the way I looked at international relations and politics from one of ‘right’ and ‘wrong’ to one of game theory.

Politics and the English Language (Orwell) – In addition to the Prince this book changed the way I view politics. And much like my Calculus book this book revealed the awesome power of words.

Capitalism: The Unknown Ideal (Rand) – This was the first Rand book I read, and it’s still my favorite.  Far better than her fiction, this book simply lays out her philosophy and makes a rational argument that is impossible to dismiss with ad hominem arguments. (It amounts to Nietzsche-simplified)

Honorable Mentions:

The Iliad and the Odyssey (Homer) – Most of western civilization’s art and literature stem from this set of works. If you aren’t familiar with them, you have a huge gap in your education.

Othello (Shakespeare) – It’s my favorite play, bar none, but I can’t say it really influenced me in anyway; except to read more Shakespeare.

Jonathan Rauch has a piece up in the National Journal in which he, reluctantly, endorses the current Senate Health Care Reform Bill. Clive Crook and Andrew Sullivan both concur, but it’s Rauch who makes the best argument, and he makes it from the Deficit and Cost perspective:

Although long-term budget projections are squishy, the Congressional Budget Office’s are the best we have to go on. Notably, CBO scored the Senate bill as deficit-neutral (actually, it would slightly reduce the deficit) over the reform’s second decade after enactment, which is well beyond the window of cost-shifting and timing gimmicks. We could do worse, and possibly will do worse next time around.

And what about bending the cost curve? Health care inflation devours wages, burdens employers, and could eventually bankrupt the government. A reform that fails to grapple with the cost problem, the critics say, is not worth having. I agree.

…

Most economists believe that two pervasive market distortions fuel health cost inflation. The first is Medicare’s fee-for-service payment system, which pays providers based on the number of procedures they perform, rewarding inefficiency. The second is the tax deductibility of employer-provided health insurance, which subsidizes high-cost policies, hides the costs of those policies from employees, and denies employees the opportunity to shop around.

Both distortions inhibit market discipline, and both originate with bad government policy. If socialized medicine is state payment for most health care, then the country is there already: When the value of the employer tax subsidy is included, the government (federal and state) pays for almost 60 percent of all U.S. health care, according to Paul Van de Water, an analyst with the Center on Budget and Policy Priorities. Dealing with Medicare and the employer tax deduction is therefore crucial to cost control.

…

As for the employer tax break, the Senate bill docks it. Not a ton. Only high-premium policies covering a minority of workers would be taxed. But even the limited tax is very important, for several reasons.

Crucially, the threshold for taxation would not rise as fast as health inflation. Translation: Gradually more and more employer-provided policies would be taxed. The change would be incremental, even glacial — but slow seems to be the only pace with which Americans are comfortable.

Moreover, after reform is enacted, the taboo on taxing employer-provided health benefits will be shattered once and for all. From then on the question will be how much to tax, not whether. A door that had been welded shut will have been pried open. The country will be able to have a new kind of discussion, one in which the tying of health insurance to employment — which is insane, when you think about it — is no longer sacrosanct.

…

Taken together, these measures could set in motion a virtuous cycle. As health costs rise, more employer-provided health plans become taxable, giving employers an incentive to find cheaper plans. As employer-provided plans grow less generous, more employees have an incentive to take a tax credit and shop around, and, as premiums rise, more qualify to do so. Little by little, insurance coverage shifts toward an individual-based, consumer-driven market. And the faster health insurance costs rise, the faster the transition happens. The disease triggers its own antibodies.

Again, no guarantees. The transition would be very gradual, and political blowback could easily disrupt it. But the point is that the reform contains a pathway to sanity. No one can say that about the status quo.

This is much better way of making the argument I was attempting to make here.

If the GOP were serious in their Health Care Reform critique, socialism!, they would propose how to slowly END Medicare. But that’s not their position; no Scott Brown, Michael Steel, and Jim deMint have all made defending Medicare, of any cuts, a central tent pole of their argument. I suppose that this is to be expected from the people whom passed Medicare Part D, which as it happens cost MORE than the bill currently before Congress. Yet, Medicare Part D was passed without a funding mechanism, blowing a ‘doughnut’ hole in the deficit.

So our option is pass this bill, or stay with the status quo.

If we pass this bill there is a decent, better than even, chance that Health Care costs can be contained, and those costs will be funded, without a huge and growing deficit. (Yes, taxes will be higher) If we do not, we will ASSURDELY have an exploding deficit, and Health Care related costs will continue to retard the growth of the economy, until most likely, a posse of Bond Traders from China and the Middle East shout ‘No Joy’ and all those economic calamities that the GOP is warning about, dollar collapse, stagnation, inflation, unemployment, ect., come into full fruition.

Pass. The. Damn. Bill.

It looks the NYT’s wants to raise a pay-wall starting in 2011. Borrowing from the FT-model, the NYT will allow lite-users the ability to read a number of articles a week/month for free, and then ask for payment beyond that. As you may know, I am skeptical that this will work.

First and foremost, as many others have said before, the FT and the WSJ, the only two papers to have successful online pay models, offer a monetizable news/information service. Bloomberg, another monetizable information provider, gets the vast majority of its revenue from very expensive terminal subscriptions. The key to these services is that only a very small cadre of people care about the stories that get reported; at the WSJ they even have a saying, the smaller the audience the more valuable the information. It’s so valuable, that typically these information providers have their subscriptions paid directly by the companies on which they report, who then turn around and report the subscription cost as a business expense.

However, the NYT doesn’t provide this type of journalism. It provides general interest stories, which are also covered by countless rivals. In fact, as most bloggers point out, there is almost no story in the NYT that isn’t also covered at least by Reuters, AP, and AFP as well. Because of the overcrowded market for general interest news, Reuters has actually taken to paying large traffic-directing aggregators, like The Drudge Report, to favor linking to their stories over the competition; the diametric opposite of a pay-wall.

Yet, despite all that, it seems that Arthur ‘Pinch’ Sulzberger, Jr. is playing follow the leader, and imitating Rupert Murdock’s plung into the pay-wall.

Which brings up my second criticism, that there is no business logic behind this move, other then they need more money. Historically, subscription revenue, $600-a-year for the NYT, do not even cover the paper and delivery costs associated with their production. (Econ: Price = MC) It was the combination of classified and display ads that subsidized the entirety of the Newsroom, and helped defray the printing costs. The problem, as I have laid out in detail before, is that digital ad prices are drastically lower then print ad prices per-impression. So while the NYT, the Post, the IHT, ect have never had a larger readership in all their history, they are going broke faster than they can grow.

This economic reality is not addressed by either Murdock or Sulzberger.

For Murdock it does not matter, his papers can be subsided by the rest of the News Corp, as I understand Fox News is raking it in, and Avatar is busting the box office coffers in full 3D glory. As the FT reported when Murdock announced the pay-wall idea at the end of Q3, News Corp is a family operation:

Profits staged a double-digit rebound in the three months to September 30, with 85 per cent of operating income now coming from cable channels including Fox News and its Hollywood studio…

Group revenues fell 4 per cent, dragged down by a $300m decline in its newspaper portfolio, which stretches from the Sun in London to The Wall Street Journal in New York. Operating income from newspapers and information services fell from $134m to just $25m, or 2.4 per cent of total profits.

…

The cable networks division secured its place as News Corp’s biggest profit engine, raising operating income by 41 per cent to $495m, owing largely to Fox News.

Fox film studio profits rose 56 per cent from the box office success of Ice Age: Dawn of the Dinosaurs and DVD sales of X-Men Origins: Wolverine. (Bolds Mine)

Lucky for the WSJ, The Times, The Sun, and The Post Murdock loves newspapers, and will prize them above all else as long as he is alive. It’s just in the man’s blood.

Sulzberger, on the other hand, does not have that luxury, even if he shares Murdock’s blood-for-ink preference. No, the NYT lives and dies on it’s own. Which is why the absence of a REAL business plan and rational for this pay-wall is so troubling. It does nothing to address the advertizing decline. They have not answered how this pay-wall will be more successful than its ill-fated Times-Select, which held opinion behind the pay-wall. And yet, here we go again, and it’s the same guy making this decision as made the last pay-wall decision, that all went nowhere; and who also made the call to buy a huge chunk of Manhattan Real Estate, burdening the company with massive debt, that it can ill afford. And for these reasons, I have to agree with Michael Wolff, that Pinch has to go, if the NYT is expected to save itself. Just because your family owns the paper, does not mean you know how to run the paper.

Finding a way to drive subscription revenue from online sources is not a bad idea, I’m simply saying that borrowing the FT-model and hoping it will auto-magically work, ain’t a good plan. Adding value and charging for that, might work. Creating new ad units, or interactive advertizing, also might work. But rather then innovating, or trying something new, they are dusting off the old, calling it new, and praying that it will work…somehow.

…good luck with that.

After the euphoria of the 2008 elections, Obama’s first year in office was going to feel like the end of a sugar-high no matter what he did or how well it was done. In the era of 20min news cycles a year can seem like an eternity, but in reality it’s a very short-time. Even so, after 12 months of hard slogging Obama’s promise seems quite dulled by political reality. All the while certain segments of American Society either believe the end of America is imminent, or are willing its end to be, if only to hang it on Obama’s (and the liburls) head.

The feeling now might be that Obama is down in the polls and the Dems are heading for a gutting in November. Part of this is simply the magnitude of problems faced upon entering office. But can anyone name one thing that Obama wanted that he didn’t get? (Maybe the public option, but he never fully committed to the idea publicly). A new Supreme Court Justice, a stimulus, and eventually (after 30 years and many months) a landmark healthcare reform; it hasn’t been easy, or neat, or clean, but ‘he will has been done’.

Though far from perfect and incomplete; 2009 seems to be a hugely successful year.

The Domestic Economy

The TARP, the auto-bailout, ‘stress-tests’, and the stimulus were all measures taken to stabilize an economy that was still mostly in a panicked freefall when Obama first entered office last January. That panic has now subsided, the market has rebounded.

This may seem like a small thing but it’s not; namely, because it ‘cost’ almost nothing. The TARP specifically has come back almost in full, with the exception of the money that went towards the Auto-bailout. These measures, combined with the stress test, did one thing: suture the large banks structural wounds.

It was in fact the Treasury and the Fed, under the TAF, that extended the real lifeline to unload trillions of dollars worth of mortgages, aka the transfusion. In a rough and ready sense, the Fed became the new Fannie and Freddie, buying up all of the mortgage securities off the bank’s balance sheets. This allowed them to fix their capital positions, but we have no idea what these MBS’s are worth, or what was paid for them, nor to whom. This is quite worrying, but the Fed’s intransience has been a problem for nearly 100 years now, and this is nothing new. (Though, in light of the unending revelations regarding AIG use of bailout money to pay off counter-parties at 100 cents on the dollar, this problem could come under a bright light very soon, see below.)

Yet, any fears that we ‘spent’ trillions of dollar is simplistic, we lent trillions of dollars, mostly to home owing American Residents. Worst case the Fed *could* hold the mortgages until maturity, and vast majority will pay-out.

Because of its balance sheet expansion, and its Zero-Interest-Rate-Policy (ZIRP) the Fed has also devalued the dollar relative to the rest of the world (save China). This has let housing get a floor under itself, and allowed for the first expansion of American Exports in nearly 20years. Some say that Fed actions have only served to re-inflate a real estate bubble that they largely created themselves. Perhaps true, but the immediate worry is the Fed’s ability to deal with yet ANOTHER crisis, if it doesn’t unload at least some of the assets it has taken onto its balance sheet, and interest rates still at zero, this is an acute worry.

In other words, the fire is out, but smoke and water damage remain and there is no more water in the tower, to fight another fire. This has not been dealt with at all. Many people, from Barry Ritholtz to the Cunning Realist have been livid with the Obama administration’s lack of cleanup in the financial sector. These are the ‘independents’ whom supported Obama last year, but where likely Regan-iets 20 years ago. This to me, is the issue where most of the independent support has left the great Hope-n-Changer, to disillusionment.

Healthcare

The reason why it has not been dealt with was twofold, first the economy is/was still fragile, and second health-reform was put upfront in year one, where it was deemed politically safer to make concessions to get a bill completed.

Healthcare was placed first because it, like the banks, was declared ‘too-big-to-fail’. It was a Dem goal since the 1970’s and was the main unifying feature of the Democratic Primary. It was the one thing all Democrats wanted. But as a result of healthcare being a ‘must-pass’ priority you also allow yourself to be extorted, and that has been the biggest failing of this whole process. Repeatedly, things have been removed (Medicare expansion, public option) or added (no abortion funding for anyone ever from any plan that receives any government money) that make the legislation better for ONE person, regardless of what the other supporters think. Thus, the least committed are the most influential.

Once the tea-party protests in August hit fevered pitch, it became impossible for any member of the GOP to vote in favor or help in anyway. Cutting themselves out has meant that NO GOP proposals entered the legislation. Tort reform, interstate competition, even expanding HAS’s were never mentioned. The GOP believes that this stance will pay dividends in the Congressional races later in 2010, perhaps it will; but it still seems like winning a battle but losing the war.

Healthcare reform will pass and entitlements have this funny habit gaining popularity, see Social Security and Medicare. Furthermore, the crux of the GOP argument has centered on the expense and the deficit. By all accounts, including the CBO, the bill reduces the deficit, and starts to ‘bend-the-cost-curve’. If EITHER happens, the Democratic Party can claim victory, and cast the GOP as a do-nothing party, that would allow us to slowly bleed to death, rather than take corrective action. (Framed as a policy doctor, this will be a damaging line of attack)

The GOP can only win the war, hold POTUS and a majority, if everything fails. But since this was a must win/will win for Democrats this isn’t going to happen. The bill will pass, Obama will sign it, and short of catastrophe will reduce the deficit and will reduce costs. This will be certifiable. The more you yell socialism the less impact it will have, especially in light of expanded coverage/reduced cost reality.

The 2010 Elections

Lastly, Obama decision to move healthcare first, and let financial reform wait until 2010 has a brilliant political strategy implication; true the economy was weak this past year, and yes healthcare reform was more politically fraught, but financial reform has a wonderful populist feel to it.

Healthcare had to be passed by Congress; it’s simply the name of the game, and rules we live by. But Obama runs the executive branch and all its departments. Many things can be changed by executive order and fiate through the SEC, the FTC, Treasury, FDIC, ect. Congress on the other hand gets to play the role of vender of constituent anger. A few round of banker-bashing and popular sentiment is apt to switch sides rather quickly. If the GOP joins in the bashing fine, but the Dems still control congress and will be running the show. If they don’t, and play defenders of the rich (or defenders of capitalism, or fighters of socialism) it would square nicely with a narrative of protecting corp interest, along with their obstinacy on healthcare reform.

In other words, the GOP will have to be onboard with the Dem financial reform agenda or risk a rift within the party between the Tea Party and the GOP faithful. (Which they may face anyway if they go along with the Democrats) The point is this: financial reform is Uber-popular and populist. By pushing it to 2010, Obama has given the Dem a rallying call to unite behind after the monumental effort it took for healthcare. But this particular call helps to not only gin-up the Dem base, but it places the GOP on tenuous footing. Go along and lose the Tea Party Base, or fight and most likely lose independents.

It’s a beautiful divide and conquer strategy.

Of course one should still account for the unknowns. Namely, that Obama has Ben up for reappointment to the Fed, and Tim Geithner was his first choice to head up Treasury. It the hearings start to tarnish those two and their major roles in putting out the fire, this could al backfire on the Dems and the Administration. Only time will tell.

Check, but not Mate

As the out party the GOP has made quite a stir in the media, and whipped their base into activity on par with what Obama was able to achieve in his campaign run. Yet, policy wise they have stopped, improved, and hindered nothing. Furthermore, by stoking the base as they have, base elements have come to personify the party in the public imagination. Old and white are the adjectives most likely to be used to describe the GOP. In 1980, that won the election, in 2009 your John McCain.

Based to pure political tectonics, the GOP will pickup seats in 2010. It will be a limited victory. But look to 2012 and the picture darkens again. The one true leader of the GOP, is giving the Keynote at the 1^st ever Tea Party Convention, which is looking more-and-more 3^rd party, everyday. Then you have Mittens, Huck, and Tim each of whom is untenable to at least one major GOP constituency. Suddenly, in a flash of neon colors it says 1992 all over again.