December 2008

President-elect Obama and Illinois Gov Rod Blagojevich clashed over whether to appoint Valerie Jarrett, a senior Obama adviser, to replace him in the Senate. Gov Blagojevich in a conversation intercepted by federal agents calls Obama a "motherf----r" and dismisses Obama's unwillingness to strike a deal: "F—k him." The complaint refers several times to Blagojevich's effort to win concessions from Obama in exchange for appointing "Senate Candidate 1," who is described as "an adviser to the President-elect" to Obama's vacant seat. The complaint also reports that federal agents intercepted a conversation on Nov. 12 between Blagojevich and his chief of staff John Harris in which "Blagojevich noted that CNN is reporting that Senate Candidate 1 does not want the open Senate seat." Two days before, CNN broke a story based on two Democratic sources close to Obama that Jarrett would forgo the Senate and take a job at the White House instead. The complaint states that Blagojevich and his top aide discussed trading the Senate seat for a lucrative private sector job arranged by Obama, such as the head of a foundation dependent on the government. Blagojevich also discussed the possibility of trading the seat for the position of secretary of Health and Human Services in Obama's Cabinet. Blagojevich and Harris also discussed the possibility of Obama pulling strings on his behalf to land him a position with the Service Employees International Union's Change to Win coalition. "Unless I get something real good for [Senate Candidate 1], shit, I'll just send myself, you know what I'm saying." Blagojevich said in an intercepted conversation. "I'm going to keep this Senate option for me a real possibility, you know, and therefore I can drive a hard bargain." Obama's unwillingness to trade favors enraged Blagojevich.

US Attorney Patrick Fitzgerald, who ordered the arrest of Illinois Gov. Rod Blagojevich Tuesday morning, said at his office's request the Chicago Tribune agreed to delay publication of a story that the FBI was taping the governor. According to Fitzgerald, Tribune approached federal authorities to comment on the story. "I knew if that story was published, those bugs could not be planted," he said. He asked the paper to delay publication, saying the delay would be in the "public interest." "This was an extraordinary request for us to make, and the Tribune was very gracious," Fitzgerald added. Fitzgerald noted that when the Tribune last week published the story that the governor was being taped by federal authorities, Blagojevich was intercepted telling an aide to "undo" a plan to solicit a bribe in connection with filling the Senate vacancy.

The Tribune Co.'s move into bankruptcy this week is the most prominent signal - but just one of many - that a tumultuous revolution in the news industry is accelerating. It's a predicament similar to that of the US auto industry. A long reliable business model is under threat. For newspapers, it's because consumers are migrating increasingly to the free content zone called the Internet, while traditional revenue from ads and other sources is sagging. Then come some unexpectedly sharp economic forces that have also hit car manufacturers: a recession, a credit crunch, and rising costs for raw materials. One difference, ironically, is that the media troubles are getting a lot less media attention than Detroit's bailout bid. But they are every bit as real. Media companies see the Internet as an opportunity, not just a threat. It has opened the door to new formats and a more interactive role for news consumers, and to more rapid updating of breaking news. But online, the business partnership of advertisements and news content hangs in doubt. "It's not really clear ... what the new equilibrium will be," in terms of revenue to support the labor-intensive process of news gathering, says Lee Rainie, who heads the Pew Internet and American Life Project.

[Commentary] Since the 1960s, public and private investment in energy efficiency, infrastructure, schools and the information highway have been underfunded, and absent structural reforms of the way Congress does the nation's business these priorities probably will continue to be underfunded. Devoting short-term stimulus spending to infrastructure and other needs will not address the chronic problem of underfunding. Here the states can show the federal government the way.

Most states, counties and cities, directly or through their agencies, issue municipal bonds to fund long-term, large-scale capital improvement projects like power plants, highways and school buildings. Usually these municipal bonds are tax-free. Most are either "general obligation" bonds, repayable from future general taxation, or "revenue bonds," repayable from a specific stream of income, like highway tolls. When paying for expensive projects with long-term payoffs, it makes sense for governments, like corporations and nonprofits and ordinary individuals, to borrow the money rather than to pay the entire cost upfront out of current revenues. Raising money by means of tax-exempt bonds that are paid back over years or decades permits a government to spread the costs of roads, schools and energy grids among the beneficiaries over many years, instead of forcing today's taxpayers to pay the entire cost of a project that will mostly benefit future taxpayers.

Today the federal government, unlike state and local governments, lacks the capability to borrow money by issuing bonds for particular capital improvement projects like Obama's priorities of infrastructure, school buildings, broadband and energy-efficient retrofitting. Obama knows this. That is why, during the campaign, he called for the creation of a national infrastructure bank. As Obama recognized, a national infrastructure bank would accomplish two goals at once. It would rely on bonds to provide adequate funding for major infrastructure investments without requiring massive initial payments. And an independent, nonpartisan national infrastructure bank, by choosing projects on the basis of merit, could achieve Obama's insistence that decisions should "be determined not by politics, but by what will maximize our safety and homeland security, what will keep our environment clean and our economy strong."

In order to achieve the economic goals the president-elect has announced, the new administration and Congress should act rapidly to create a national infrastructure bank.