Feb. 24

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New Senate: DEM 49             GOP 51

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Dem pickups: (None)
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Gates Pleads Guilty

Rick Gates, Donald Trump's one-time deputy campaign chairman, has pleaded guilty to lying to the FBI and participating in a financial conspiracy with former Trump campaign manager Paul Manafort. The assumption that most observers are making is that he has flipped and will cooperate with special counsel Robert Mueller. It is fairly clear why he would flip. Mounting a serious defense could cost millions of dollars, and although Gates is rich, he is not that rich. Worse yet, he would almost certainly lose in court and could be hit with decades in prison. He apparently decided that the deal Mueller offered him was worth it.

A more interesting question is why Mueller made the deal. He could have sent Gates up the river for a very long time. There are at least three potential reasons Mueller might be interested on having Gates spill the beans:

Any of these could be worth it. Even if Gates knows only about Manafort's financial crimes committed 10 years ago, that would put a lot of pressure on Manafort. If some of the crimes were state crimes (e.g., evasion of state income taxes), Virginia AG Mark Herring could indict Manafort for them, eliminating Manafort's hope of getting pardoned. In any event, Gates' plea is a big deal and if Manafort also flips, that would be a gigantic deal and might cause Trump to try to fire Mueller.

One of the most interesting things about the latest indictments is that they give a window into how thorough and careful Mueller's team of experts on money laundering has been. Reduced to its core, what Manafort and Gates did was help various authoritarian strongmen polish up their images. They were paid tens of millions of dollars for their work, and they hid nearly all of it in offshore bank accounts in places like Cyprus, the Grenadines, and the Seychelles. After that, they bought U.S. real estate worth millions of dollars, paying for it in cash drawn from the offshore bank accounts. To top it off, they went to U.S. banks with phony profit and loss statements (technically called "bank fraud") and got big mortgages on the properties. Manafort, in particular, then splurged with the cash he got from the banks. Some of Manafort's expenditures documented in the indictments include:

Of course, Manafort had to pay interest on all his loans, but he had enough cash to do that for a while and no doubt hoped business would pick up in the future. But in any event, there were those nice piggy banks in the aforementioned islands. Gates wasn't as much of a big spender as Manafort. He just kept his money in the offshore banks for the most part, but he lied about it on his tax returns, in particular when answering the question: "Do you have any foreign bank accounts?" Ultimately, checking the wrong box there is what may send him to prison.

Manafort was not a happy camper about Gates' defection. After it was announced, Manafort said: "I had hoped and expected my business colleague would have had the strength to continue the battle to prove our innocence. For reasons yet to surface he chose to do otherwise. This does not alter my commitment to defend myself against the untrue piled up charges contained in the indictments against me." (V)

Manafort Bribed European Politicians

A new indictment against Paul Manafort was unsealed yesterday. It accuses him of paying more than $2 million to certain senior European politicians for taking positions favorable to his client, former Ukrainian President Viktor Yanukovych, who is generally regarded as the puppet of Russian President Vladimir Putin. The politicians appeared to be taking a principled stand in favor of Yanukovych, but were actually on Manafort's payroll. The indictment of Manafort says that he concealed what he was doing, lied about it to investigators, and failed to register as the agent of a foreign government. (V)

GOP Spins Wheels on Gun Control

There is enormous pressure on Republicans—who, you may have heard, control the White House and both houses of Congress—to do something about all the mass shootings. But the devil, as they say, is running the NRA. Oops, wait, no—the devil is in the details. Yes, that's it. Consequently, none of the proposals out there are gaining much traction. A rundown:

What this all shows is that while the pressure on the GOP to do something about gun violence is intense, the pressure on them to maintain the status quo is also intense. The NRA's Wayne LaPierre, who is paid a million bucks a year to lobby for the Second Amendment, has gone into his full-court-press defense. Speaking at the Conservative Political Action Conference on Thursday, he declared that:

The elites care not one whit about America's school system and schoolchildren. I hear a lot of quiet in this room, and I sense your anxiety. And you should be anxious, and you should be frightened. If they seize power, if these so-called 'European socialists' take over the House and the Senate, and God forbid they get the White House again, our Americans freedoms could be lost and our country will be changed forever.

It takes brass to interpret a stony silence from the crowd as a sign of support, but there it is. And this quote was before LaPierre really went off the rails and started ranting. He was happy to advise the crowd exactly who was primarily to blame for all of this "socialism": George Soros, Michael Bloomberg and Tom Steyer. It's probably just a coincidence that all three of those "conspirators" are Jewish. That said, LaPierre also named a fair number of co-conspirators, only some of them Semites, including the FBI, the CIA, the Justice Department, the Environmental Protection Agency, the Democrats, the media, Hollywood, liberal universities, Black Lives Matter, and Rep. Keith Ellison (D-MN). He seems to have forgotten only the boogeyman, the Illuminati, and "that loud music those kids are listening to these days."

The upshot is this: The GOP is currently caught between a rock and a hard place. Or maybe a bullet and a hammer would be the more apropos metaphor. They are going to make a public show of "working" on the problem, and then are going to try to do as little as they can—and very possibly nothing—in order to try and keep people on both sides of the issue happy. If H. L. Mencken were still around, he might wryly observe that that the only thing more addictive than opioids is NRA cash. (Z)

Trump Wants to Impose Tough Tariffs on Imported Steel and Aluminum

Three sources have told Bloomberg News that Donald Trump wants to slap a tariff of 24% on steel entering the United States and a tariff of 10% on aluminum. If he were to follow through, China would almost certainly retaliate in one form or another (e.g., putting a tariff on Boeing aircraft or John Deere farm equipment). This could easily lead to a trade war, with uncertain consequences. At the very least, tariffs on steel and aluminum would raise prices in the U.S. on everything from beer cans to cars.

In addition, there could be geopolitical fallout. At some point, Trump may need to put pressure on Rocket Man, and the only country that could do that is China, which supplies almost all of North Korea's oil. Antagonizing China over tariffs is not likely to lead to better cooperation on issues like North Korea.

Section 232 of a long-forgotten law, the 1962 Trade Act, gives the president the power to unilaterally impose tariffs in some circumstances without congressional approval, so if Trump decided he wanted to do this, he would probably get away with it. Nevertheless, cooler heads in the administration are warning him that there could be far-ranging consequences that would damage the U.S. in the long run. But Trump is not someone who thinks much about the long run. He does think a lot about what blue-collar workers in the Midwest like to hear, though. (V)

Voting Systems Are Still Far from Safe

In case we did not already have enough of them, a new threat to election security has now come to light. For years, the manufacturers of voting machines have been saying that the machines are safe because they are not connected to the Internet. But closer examination shows that the machines and the voting system as a whole are still very vulnerable. Many voting machines are indeed not connected to the Internet, but they contain internal telephone modems so they can call city and county election centers and report their results. These modems use the telephone system—often the cellular telephone system—and that makes them just as vulnerable to Russian or other hacking as if they were on the Internet.

Why? First of all, if there is a modem used to call out, it is possible that a hacker could also find a way to call in, log onto the voting machine (which after all, is just a computer with a touch screen, like a big iPad). Manufacturers say this can't be done, but most experts don't agree. A hacker who logged in could change totals without any fear of being detected. In fact, even if a hacker didn't change anything but simply caused a message to appear on the screen (or somewhere it could be found) reading: "Greetings from Boris Botski," it would wreak havoc by making it clear that a (Russian) hacker got in, thus undermining faith in the election, even if nothing were changed.

A second problem is that some voting machines call city or county offices on the cellular network. For administrators, this is much easier since they don't have to connect a landline to each machine, of which there could be dozens in a big polling place. Here, a hacker with a large-enough budget and a fair amount of expertise (think: the Russian government, not some 400-pound kid sitting on his bed), could erect a fake cellular station near selected polling places. When the voting machines turned on their modems to call home, the calls would be picked up by the fake cell towers rather than the real ones. The software in those towers could modify results before forwarding them to the place they were supposed to go. Needless to say, the manufacturers pooh-pooh this idea, but experts are far from sure.

Third, once all the polling places have reported up one level, the totals typically get sent to county and state elections centers. Those computers are most definitely on the Internet, and could be penetrated and malware placed on them that could alter results.

Finally, these hacks affect only the election totals. The method the Russians used in 2016 was different. They penetrated the voter database systems. Potentially, a hacker who got in there could eliminate voters from the rolls in precincts known to heavily favor the party the hacker was trying to damage. When those voters showed up to vote, they would be told they couldn't vote. That is almost as good as erasing that person's vote after it is cast. In theory, such voters can cast provisional ballots, but that is only possible if the voter knows this and demands it. In some cases, the voter is then required to go to the county registrar within a few days with proof of eligibility. For busy people, many of them may not bother.

In short, we still have a big problem and it is inconceivable it will be solved before the 2018 elections. It will only be solved before 2020 if election officials come to believe there is a big problem and legislators decide to appropriate money to fix the problem. Don't hold your breath. (V)

Democrats' Eyes Are on California This Weekend

The nation's Democrats, on the whole, loathe Donald Trump in a way that they have not loathed any other president in a long time (even Richard Nixon or George W. Bush). This will play a big part in fomenting a Democratic wave later this year, if one does indeed build. However, the Party's biggest obstacle may be itself, because beyond the near-universal Trump disdain, there is much that divides the blue team. Those looking for insight into whether those differences can be overcome or not will be watching closely this weekend, as California Democrats hold their annual convention in San Diego.

An event like this, which is about as inside baseball as it gets, largely attracts two kinds of individuals: party professionals and activists. That means that the Clinton-Sanders divide that has plagued the Democrats for years will be baked into the proceedings. The four keynote speakers: Sens. Kamala Harris (D-CA) and Jeff Merkley (D-OR), along with Los Angeles Mayor Eric Garcetti and billionaire environmentalist Tom Steyer are not likely, as a group, to do much to heal that divide, as two are more in the activist mold (Merkley and Steyer) and two are more in the moderate/institutionalist mold (Harris and Garcetti).

The attendees at the convention will also have plenty of other things to argue about: a gaggle of contested primaries, an ongoing sexual harassment scandal in the state legislature, and whether or not to support single-payer healthcare. Party officials will also try to "manage" some of the upcoming primary battles by helpfully pointing out that if there are six Democrats and two Republicans running for an office, California's jungle primary system could well leave the two Republicans and none of the Democrats standing in the final round. In short, as one insider put it, "the gloves are coming off." What happens this weekend, and what happens in the next several weeks in the Golden State, as things shake out, should afford great insight into the current state of the Democratic Party. (Z)

Military Parade Is a Go

Despite his recent transition into a career in politics, reality television star Donald Trump has not lost his love for drama and spectacle. Once he saw a French military parade, in honor of Bastille Day, he decided that he had to have one of his own. The proposal has been slammed for being a waste of time and money, for being inappropriate, and for being crass and vulgar. The folks who raised the latter complaints apparently forgot who they were talking about, since "crass and vulgar" is practically Trump's mantra. In any event, Trump has ordered the Dept. of Defense to draw up a plan for the event, to be held on Veterans' Day.

Given that Trump's entire political career has been built on challenging the conventional wisdom, it's no surprise that he has decided not to listen to the chorus of naysayers. And when it comes to "accomplishing" things that can be done with a stroke of his pen, he rarely changes course. Undoubtedly he is already dreaming of putting up some pictures on Twitter, liberally supplemented with #MAGAs and other jingoistic sentiment. So, on November 11, we will learn if it's true that everybody loves a parade. (Z)

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