Josh Marshall

Josh Marshall is editor and publisher of TalkingPointsMemo.com.

Articles by Josh

As we just noted below, it now seems much more likely than not that Kerik's "nanny" never existed. But there was some other big news today on the Kerik front that seemed to go largely unnoticed -- an article in the New York Post of all places.

There was a good deal of attention to Andrea Peyser's piece chock full of torrid and melodramatic details about the Kerik-Regan power-fling. But that's not what I'm talking about. I'm referring to the piece in the business section by Christopher Byron.

Here's the story ...

At the end of October, right about the time Kerik probably realized the DHS appointment might be coming down the pike, he resigned from the "advisory board" of a Long Island company called Defense Technology Systems, Inc. He wouldn't give any explanation to the company. And then three weeks later (about mid-November) he sent back 400,000 shares of the company's stock and coughed up a bunch of stock options they'd given him too.

Philip Rauch, who serves as the company's COO and CFO, didn't know what to make of it. And, like we said, Kerik wasn't talking. All Rauch could think of was that Kerik was trying to distance himself from Defense Systems' connections with another company called Georal Inc., a security door company in Queens. And the reason he might want to get some distance is because the head of Georal, Alan Risi, just plead guilty to padding invoices for work he'd done for the city.

(Here's a press release put out today by Defense Technology Systems, Inc., which confirms most elements of the story but seems to dispute the timing.)

So let's review. Kerik quickly cuts his ties with Company A because it does business with Company B, and the owner of Company B got caught over-charging the city and is probably going to do time.

So far so good.

But Kerik seems to have had some other connections to Georal.

When he was running the NYPD the department bought a few of Georal's security doors for pretty good money. But there was apparently no use for them; they never got installed and were eventually sent over to Riker's Island. Kerik has always insisted he had nothing to do wtih that purchase. But this summer, his successor, Ray Kelly, opened an investigation into the purchases.

And there's more.

It seems that the "advisor" who put Defense Technologies together with Georal was ... take a guess. Right: Bernard Kerik. And Rauch says he heard from folks at Georal that Kerik had a "very similar" arrangement there as he had with Defense Technologies. So, in other words, sign on as an "advisor" and get dealt in for about a kajillion shares of penny-stocks in the company.

Now, I'm just getting my footing here in the Big Apple. But I'm told by some pretty knowledgable people that big runs of penny-stocks are not infrequently used by some of your shadier business elements to cleanly move ... well, let's say 'thank you money' to politicians for services rendered. Pump the stock up a bit and there you go.

Such unfortunate manipulations of stock prices certainly do happen. Remember, for instance, that Lawrence Ray, Kerik's financial benefactor, who worked for the allegedly mobbed-up construction company in New Jersey, later got indicted in that "$40 million, mob-run, pump-and-dump stock swindle."

And the funny thing is, Mr. Ray's name comes up in this story too. According to the Post, SEC filings show that a man by the name of Lawrence Ray recently held more than 200 million shares of stocks and options in another penny-stock company called FINX Group Inc. And FINX lists Georal and our friend Mr. Risi (owner of Georal) as the sole supplier of the most of the products it sells.

Small world, isn't it?

This piece in tomorrow's Newsday has more details on Kerik and Georal, and other purchases on Kerik's watch as correction commissioner that "left [the Deputy Warden] scratching his head."

Asking whether there was ever a "nanny" in the first place would seem suddenly to have gone legit. The Times devotes a whole article to the question <$NoAd$>in Thursday's paper.

And what'd they come up with?

It's pretty hard to prove a negative. But after what seems to have been a pretty exhaustive bit of reporting, they didn't come up with any solid evidence that such a woman existed. And they came up with a lot that points in the other direction.

All there seems to be is one neighbor who remembers seeing a woman with an olive complexion playing with Kerik's children. And there's a form Kerik filled out about the nanny a few weeks ago; but that form is apparently a secret, and no one can look at it. Meanwhile, press reports attributed to Kerik's lawyer claiming the woman was from Mexico? That's no longer operative; the lawyer says he never said any such thing.

The Times seemed to talk to everyone under the sun -- family, friends, neighbors, other nannies in the neighborhood -- and they either knew nothing about a nanny or wouldn't talk.

Perhaps the most telling passage is this one, about half way through the piece ...

Last night, Mr. Kerik was told that skeptics in city government circles were questioning the very existence of the nanny, and he was pressed to provide any kind of evidence to document that she was real. But after taking time to consider the request, Mr. Kerik again decided to remain silent on the subject.

So now it seems like this whole "nanny" story wasn't just an excuse, but quite probably a lie -- one which Kerik and the White House have been pushing for days.

(Of course, it's possible the nanny really exists [see ed. note below]. But if she does, there must be something awfully unfortunate about the story to work so hard and invite such suspicion to keep the details a secret.)

And one other thing. You'll remember that a couple days ago I asked if any reporters who'd seen details that made them think the nanny story was legit could drop me a line -- not breaking any confidences or revealing any details, just to say, "Yeah, I've talked to the people involved and it's pretty clear the story checks out, etc."

Not a peep.

[Ed.Note: What remains obscure to me is this mystery form that Kerik is said to have filed last month. In a piece in yesterday's New York Post, Deborah Orin suggests that Kerik had shown the Post the form in question and that the state issued it on November 17th. But the way she phrases it is ambiguous as to what she actually saw. The Times, as I noted above, says the document is secret. But setting aside whether the name and social security number are private, it still wasn't quite clear to me from the Times article whether they had actually been able to independently verify that the form was even submitted and registered. If we're just taking Kerik's word for it, that seems pretty weak. If he really did file the form a few weeks before the need for a nanny cover developed, that suggests that there either was some nanny or some foreknowledge of a need to create a paper trail. Between those two choices, it would probably make sense to choose the more plausible, commonsense explanation -- that there was a nanny. But if there were, why all this caginess and obfuscation? And why is it that this woman seems to have disappeared without a trace, with no one available beside Kerik, it seems, who can vouch for her existence?]

Sen. Coleman gets word from HQ, turns his attention to Rumsfeld, though needlessly to say, with kid gloves for now. "Coleman says he needs more information before deciding if Rumsfeld should be held accountable for the lack of armor on military vehicles."

More on Gerald "No Gay Books in my Library!" Allen's visit to the White House, from the Anniston Star.

Late Update: One possibility, of course, is that Allen was invited to the White House because Lynne Cheney wanted to see if she could get an exemption for Sisters, the lesbian romance novel she wrote in 1981.

George W. Bush, international economist: "There's a trade deficit. That's easy to resolve: People can buy more United States products if they're worried about the trade deficit."

From comments just now in the Oval Office with Italian PM Silvio Berlusconi. And I'm told it was a bit difficult to tell whether or not he was joking.

Focused as I've been on the Kerik meltdown, I've given little attention to what will certainly be the defining issue of the next two years, for Democrats as much as the president: Social Security. Specifically, whether to phase out the program or maintain it as the anchor of retirement security in the United States.

As Paul Krugman, Kevin Drum and many others have been making clear in recent days, the entirety of the president's argument is based on a series of well-constructed lies. The president's advisors were never more truthful than they were when they compared the coming round of disinformation and fear-mongering to their public campaign in support of the Iraq war in 2002.

The Social Security "crisis" is manufactured; there is no crisis. To the extent there are long-term financing problems, the president's plan will gravely worsen them. The problem we face isn't over Social Security, which continues to run up huge surpluses (just as it was intended to under the early-80s reform), but that our non-Social Security budget continues to run massive structural deficits. Or rather, it has returned to running massive structural deficits after getting into the black in the late 1990s through the combined exertions of a Democratic president and a Republican congress. Social Security isn't the problem, but rather George W. Bush's reckless fiscal policy.

In any case, as I say, the whole thing is lies. This isn't about the program's problems but about its success. That's why the president and his allies want to phase it out. It's not about financing but about ideology.

I'm going to try to dive more deeply into the dishonesty of the president's plan and explanations of different aspects of the debate, though much of it will simply be steering readers to the most concise and straightforward explanations from other sites and sources.

Much of what we'll be focusing on here is strategy: how to defeat the president's plan, which will rip-off men and women across the country who, in President Clinton's much mocked but still apt phrase, "work hard and play by the rules."

So, a few points on strategy.

One thing that Democrats must understand is that they cannot win this battle legislatively. At one level what I mean by that is simply the math we can all see. The president has comfortable majorities in both chambers and in his first term (when he was a minority president and had smaller majorities) he commanded historic levels of party discipline. If he can hold those caucuses together, he can pass this and sign it and that's it. Doesn't matter what Democrats do.

This is, of course, obvious, as simple as the math, as I noted. But the implications for strategy are not necessarily that obvious.

As I wrote a month ago, the Democrats have to start seeing themselves as a true party of opposition in large part because of the way President Bush has reshaped the capital into something much more like a parliamentary system. There's no point in Democrats trying to improve legislation at the margins, because they won't be given any real opportunity to do so. The logic of the situation dictates coming up with an alternative plan not only to make the differences clear to voters now but to set the issue stage for the 2006 and 2008 elections.

So point one is party unity. The Democrats don't just need to keep their caucuses overwhelmingly together on this issue. They need to avoid even a single defection in the House or the Senate. From what I hear from knowledgable sources this is already pretty close to doable in the House; and probably no more than three or perhaps four are even in play in the Senate.

Such unity has the obvious advantage of giving Republicans less breathing room in putting together majority votes in both houses. But it does much more than that. Making the elimination of Social Security a strictly Republican gambit raises the political stakes dramatically. Many Republicans will be far more cautious without bipartisan cover. Democrats must deny them even the thinnest of fig leaves. Making it a strictly Republican affair will also provide valuable clarity in the coming election, rather than the muddled picture created by Democratic defections on the 2001 tax bill.

Still another important benefit is the boon it will give to Democratic morale and energy in opposition. The coming debate over Social Security could become an engine for unity or disunity for Democrats. And the leaders of the party should be doing everything they can right now to lay the groundwork for making it the former rather than the latter. And party unity is the place to start.

If everyone isn't on the same page, that disunity will exacerbate the NewDem/Labor-Liberal divide -- something Dems simply can't afford right now. If they can achieve unity, they can demonstrate to themselves that they have points of common purpose that transcend their divisions. And that realization will itself make those divisions more manageable.

Luckily, such unity should not be that hard to achieve -- for two reasons. First, very few Democrats support privatization. Second, those relatively few in the centrist wing of the party who are open to the idea in the abstract are scared off by the budget-busting debt the president wants to take on to pay for his plan.

The worst thing that can happen for Democrats is that a few of their members of congress get played for fools by signing on to President Bush's plan in the hopes that they can secure some small improvements in the legislation or reflected glory for themselves -- slightly less money carved out of Social Security, bumping up the payroll tax cap, etc. Whatever miniscule benefits could be achieved in such a fashion would be greatly outweighed by the way that it would lessen the chances for fixing the damage after the next election.

The question will be how to enforce discipline at the margins. And here Democrats should take a page from the Republican playbook in 1994 (on health care) and 1998 (on impeachment).

I think Democrats should consider pulling together the major funders of the party, the official committees, the major organizations, basically the entire infrastructure of the Democratic party and making clear to individual members that if they sign on to the president's plan to phase out Social Security, those various institutions and individuals won't fund their campaigns. Not in 2006, not ever.

Similar committments can come from voters, activists and volunteers. And free rein to primary challengers. If a couple folks lose their seats because of underfunding or tough primaries, so be it. (In a subsequent post, we'll discuss how this compares to what the House Republicans did in 1998).

It's that important. And there is an importance to unity on this issue that transcends the particular debate over Social Security.

Next, as we've discussed before, this isn't a debate about 'reform', 'privatization' or 'saving' Social Security. It's about phasing out the Social Security program, or not. Framing it any other way concedes half the battle before the fighting even begins.

(There is a subsidiary question here of whether Dems take a stand-pat stance in general, or come up with their own 'plan' to go up against the president's. That's a question we'll return to.)

Third, beware the risks of arguments about risk.

Republicans want to make this an argument about people who believe in markets and people who don't. That's not true. But Democrats can make it seem true by framing too much of the debate on 'risky scheme' lines. Letting the argument be framed that way is a losing proposition because most Americans instinctively believe in markets and largely for good reason.

The issue here isn't markets. Most Democrats favor plans that would make it easier for middle- and lower-income families to save and invest money for retirement. That would make the overall retirement picture much better.

The issue is balance and commonsense. A breadwinner with dependents who gets a lump sum salary at the beginning of the year and invests it all in a few hot start-ups doesn't believe in the market; he or she is just a fool. A wise investment portfolio is balanced between riskier and more conservative investments. The best way to make this argument (and the most valid one) is to make it clear that Democrats want people to be able to invest. That really is the path to wealth. But Social Security is different. It is, among other things, a baseline of guaranteed retirement security and income for everyone. You get it whether you retire in boom times or bust times, whether life has dealt you good cards or bad cards. The two things are simply different.

A related danger is placing too much, or rather an incorrect emphasis on the windfall of money Wall Street would make because of phasing out Social Security. This is true, of course. And it helps impugn the motives of those pushing for the abolition of the program. But fundamentally it doesn't matter.

If privatization really were a good thing for most Americans, the fact that some people would make money on it wouldn't be a reason to oppose it. The reason to oppose it is that it's a very bad deal for most Americans. The fact that lots of Wall Streeters will get rich racking up fees on these tiny accounts only serves to show why they're pushing so hard for it.

Again, it's a matter of emphasis that I fear too many Democrats miss. Focusing too much on the Wall Street windfall risks placing the emphasis of the Dems opposition on something that is, fundamentally, beside the point. It can also make the opposition appear to be based simply in bitterness or resentment.

And this brings me to my final point. Focusing on the Wall Street stuff evades the key issue. And Democrats have built up a habit of doing that a lot on many issues -- thinking they can skirt against the wind, play up ancillary issues, and generally muddle through without facing up to the heart of the matter. The reasons they've developed this habit are many and for another post. But in the case of Social Security it is almost sure to lead to defeat.

This isn't about financing. It's about whether Americans get to keep Social Security, a program of guaranteed retirement insurance, which unlike the other key elements of a good retirement plan -- investments and pensions -- cannot be taken away.

Social Security has been overwhelmingly popular for well over half a century. Nothing suggests that popularity has diminished, save scare-mongering telling people that they won't be able to enjoy its benefits.

Democrats should run into this fight, not away from it.

(Ed.Note: The following is a guest post from long-time New Republic and Slate editor Mike Kinsley, who now edits the editorial page for the LA Times. He invites your responses at michael.kinsley@latimes.com. Note too that you'll probably see this post on at least a few other blogs.)

My contention: Social Security privatization is not just unlikely to succeed, for various reasons that are subject to discussion. It is mathematically certain to fail. Discussion is pointless. The usual case against privatization is that (1) millions of inexperienced investors may end up worse off, and (2) stocks don't necessarily do better than bonds over the long-run, as proponents assume.But privatization won't work for a better reason: it can't possibly work, even in theory. The logic is not very complicated. 1. To "work," privatization must generate more money for retirees than current arrangements. This bonus is supposed to be extra money in retirees' pockets and/or it is supposed to make up for a reduction in promised benefits, thus helping to close the looming revenue gap. 2. Where does this bonus come from? There are only two possibilities: from greater economic growth, or from other people. 3. Greater economic growth requires either more capital to invest, or smarter investment of the same amount of capital. Privatization will not lead to either of these.

a) If nothing else in the federal budget changes, every dollar deflected from the federal treasury into private social security accounts must be replaced by a dollar that the government raises in private markets. So the total pool of capital available for private investment remains the same. b) The only change in decision-making about capital investment is that the decisions about some fraction of the capital stock will be made by people with little or no financial experience. Maybe this will not be the disaster that some critics predict. But there is no reason to think that it will actually increase the overall return on capital.

4. If the economy doesn't produce more than it otherwise would, the Social Security privatization bonus must come from other investors, in the form of a lower return.

a) This is in fact the implicit assumption behind the notion of putting Social Security money into stocks, instead of government bonds, because stocks have a better long-term return. The bonus will come from those saps who sell the stocks and buy the bonds. b) In other words, privatization means betting the nation's most important social program on a theory that cannot be true unless many people are convinced that it's false. c) Even if the theory is true, initially, privatization will make it false. The money newly available for private investment will bid up the price of (and thus lower the return on) stocks, while the government will need to raise the interest on bonds in order to attract replacement money. d) In short, there is no way other investors can be tricked or induced into financing a higher return on Social Security.

5. If the privatization bonus cannot come from the existing economy, and cannot come from growth, it cannot exist. And therefore, privatization cannot work. Q.E.D.

One other point that's there in the <$NoAd$>Bumiller article, though not quite centerstage, and has been dancing around the margins of much other reportage on the Cash-n-Kerik drama.

For the play-by-play and ins-n-outs and details, the nub was President Bush. He liked Kerik. He thought he was a tough guy. And he wanted to appoint him to the job. And he didn't really want to hear any objections.

One graf from the piece ...

Throughout the process, the Republican close to the administration said, everyone at the White House knew that Mr. Bush liked Mr. Kerik, placing him in the special category of "this guy's our guy." Mr. Bush admired Mr. Kerik for his service as New York City's police commissioner on Sept. 11, 2001, for his willingness to try to train the police force in Iraq and for campaigning tirelessly for the president's re-election.

(Note also in Bumiller's piece that someone seems to be leaking volubly on Al Gonzales's behalf about how much the AG-to-be grilled Kerik for skeletons in his closet; guess that didn't work that well.)

The Post puts it a little more charitably ...

In hindsight, according to people close to the White House, it appeared Bush or his aides allowed their affection for Kerik to cloud their judgment. Kerik traveled extensively on behalf of Bush's reelection campaign and became a popular figure within the president's circle. His hero status from the Sept. 11 attacks and his colorful personality, Bush advisers figured, would help inoculate Kerik from questions about his past.

Most papers have covered this point somewhere in their coverage. But none I think (correct me if I'm wrong) has devoted a whole news article to this dimension of the story, which is probably the most significant one.

Straight Outta Battery Park ... an update on 'Da Luv Shack.

A couple days ago we speculated about how Bernard Kerik could have afforded his second luxe Manhattan apartment, the one where he held his workouts with celeb publisher Judith Regan and Corrections Officer Jeanette Pinero (not simultaneously, but, it seems, and one rather hopes, serially).

Now the Times tells the story.

It's buried pretty far down in Elisabeth Bumiller's story in Wednesday's Times. But there it is. The Luv Shack was "an apartment ... donated as a resting spot for police officers at ground zero."

I guess it's like they say: 9/11 changed everything.

Another piece in the Times, by Charles Bagli, gives further details. It seems that once the 9/11 clean-up settled into a routine in the late fall of 2001, Kerik asked Anthony Bergamo, "a well-connected vice chairman of the Milstein family real estate company and a police buff," if he could rent the apartment for his own use.

"Mr. Kerik paid for use of the apartment," the article goes on to say, "but the amount was not clear. Many apartments that were available in Battery Park City after the attack on the trade center were rented at well below market rates for months afterward."

The article goes on to say that Mr. Bergamo is quite tight with the NYPD. He was made an "honorary commissioner" a few years ago and the Department licenses him to carry "a Colt .45 handgun and two Smith & Wesson handguns, a .38-caliber revolver and a 9-millimeter pistol."

A couple days ago we briefly discussed Sandy Jaques, the GOP astroturfer and Social Security privatization activist who President Bush has on his Social Security privatization panel this week.

Here's how the New York Times identifies her today: "To drive that point home this week, White House officials scheduled a single mother from Iowa, Sandy Jaques, to speak on the advantages that private accounts could offer to divorced spouses and widows."

Go Times!

Thanks to this eagle-eyed blog for the catch.