Expat Reflections

Demand Be Damned

2011-12-01T17:25:00.001Z

It looks like a good bet that unemployment benefits in the U.S. will be extended again. It’s a move that’s hard to be against, although the political parties have tussled over how or whether the extension will be paid for.

There are many positive things to say about extending unemployment benefits for people who have exhausted their standard entitlement. It is compassionate and even generous. There are people whose lives will be made at least a bit easier by this government expenditure.

But it’s a bit of a leap to say, as many politicians and even a few reporters have, that the extension actually helps the overall economy. They reason that putting more money in the hands of people is a stimulus because those people will go out and spend it. But, if you follow this assertion to its logical conclusion, what they are essentially saying is that you can put people back to work by paying them not to work. The fact is that history has shown that there is always a marked downturn in the unemployment rate when the government stops authorizing unemployment benefit extensions. While those payments are a lifesaver for many, there are also a lot of people who wait until the payments stop before they get serious about finding a new job.

The problem is that pointing out this fact makes one seem rather heartless. One sounds as though one is blaming the victim. Rather than argue over whether unemployment benefits should be extended, it would be better if there were enough jobs for everyone who wants one—and even for those who don’t want one. But the fuzzy thinking exhibited by people who say that extending unemployment payments actually helps the economy illustrates why governments find themselves in patterns that actually make the economy worse.

The notion of the government putting money in the hands of people to stimulate the economy is what is called demand-side economics. If the economy isn’t doing well, according to this view, it’s because people aren’t spending enough. The opposite approach is supply-side economics. That’s where the government increases incentives for people to work (i.e. to start or expand a business), generally through lower taxes or other government-related costs. During the good economic times of the Reagan presidency, critics derided supply-side economics by calling it trickle-down economics. But after the past couple years of demand-side policy, I think more than a few people would be happy to have been getting some trickle-down.

In a way, the economy is like a dog chasing its tail, with supply and demand alternating in a constant loop. Does it make a difference whether the government helps on the supply side or on the demand side? When you think about it, the two approaches reflect two very different ways of viewing the economy, society and our culture. One encourages people to produce something, i.e. make things or perform services. The other encourages people to be consumers, to go shopping. If you are producing something, you will likely get paid for it and become a consumer as a natural result. But when you try to get the economy going by encouraging people to consume, the problem is that the products and services that people want to consume may not necessarily be in supply. It is easier for a worker to also be a shopper than for a shopper to also be a worker.

When the government puts money directly in the hands of citizens, it may result in genuine short-term benefit and make politicians popular and ordinary taxpayers feel good but, as we have seen over the past couple of years, it doesn’t necessarily translate into lower unemployment. In fact, a large government spending spree (combined with increased economic uncertainty spurred by new massive programs like Obamacare and more complex regulations) turns out to be a disincentive for people to start or expand businesses.

That is why the sharp economic drop in 2008—which history suggests should have been followed by a similarly steep recovery—was followed by one of the weakest recoveries seen in modern times. This experience should put the final nail in the coffin of Keynesian economics, but it won’t. There’s just too much fuzzy thinking out there.

The 0.002446443 Percent

2011-11-25T14:15:00.000Z

There is something about a widespread and largely spontaneous protest movement that appeals to idealists and the young.

Much of the coverage of the Occupy Wall Street movement has reflected this. Most of what I have read has been studiously non-judgmental, if not tacitly supportive. It was a different story with the Tea Party protests of a couple years ago. Many of those people were middle-aged or elderly. The OSW protestors include lots of young people, and that fits in better with romantic notions of protest. They don’t get hit with questions about whether their movement is diverse enough or if they’re just being greedy and selfish.

But if I had protestors camped out on my lawn, I think I would rather have the Tea Party. By all accounts they took all their rubbish with them when they left and did no damage to the places they gathered.

Politically, what the Tea Party had going for it was that the participants were united around a fairly simple idea: limit the size and power of the government. With backing from the Koch brothers, this translated into an effective exercise of political power that changed the actual results of primary and general elections. You may or may not agree with the Tea Party message, but at least there is little doubt about what it wants—or doesn’t want.

Occupy Wall Street has a fairly simple message as well, but it is more of a whinge than a prescription for action. The We Are the 99 Percent web page is full of heartbreaking testimonials to the pain caused by the recession and the achingly slow and weak recovery. The OSW message is that things are not fair and people are hurting. But there is no single message coming out of the movement, that I can discern anyway, suggesting what to do to fix things.

In my previous post, I mentioned my friend Chuck, who was certain that it was only a matter of time until the collapse of the capitalist system would usher in a socialist utopia. I lost touch with Chuck many years ago, so I don’t know if he eventually settled into bourgeois life or if he is still out there laying groundwork for the revolution. Maybe he’s even moved into a tent in one of the OSW encampments. But whether he is there or not, it seems clear that many of the most passionate OSW participants are Chuck’s kindred spirits. They keep waiting for things to get bad enough so that hordes of people from all walks of life will join them in the streets and, at least tacitly, support the radical changes they have always wanted to see.

Their problem, though, is that once they start talking about concrete steps to effect their changes, most Americans will step back. Elections have consistently shown the U.S. to be a center-right country. Mainstream liberal politicians would love to harness the energy of the movement, but that only works if the politicians offer solutions to the problems being protested. And any realistic solutions will necessarily be painful and therefore not popular.

The OSW movement has gotten a lot of traction with the media because of its claim to speak on behalf of the “99 percent.” As far as I can determine, the largest OSW demonstration in New York had a maximum of 20,000 people, by the organizers’ own estimate. (Media estimates were lower.) That’s an impressive number for a demonstration, but it works out to less than 0.3 percent of the population of New York City. It may be true that 99 percent of Americans own only 65.4 percent of the country’s wealth, but in New York less than a third of one percent, at the very most, are out in the streets.

This highlights a paradox of street protests. In countries where citizens have few or no political rights, demonstrations are inherently democratic because they are the only way for people to make their voices heard. But in democratic countries where people elect their government, demonstrations are actually undemocratic because a minority are trying to exert influence out of proportion to their actual numbers.

The problems highlighted by the Occupy Wall Street movement are real and grave. Unfortunately, there is no easy or painless solution to those problems. Even more unfortunately, the movement doesn’t seem likely to coalesce around any viable solution, easy or hard.

End of the World as We Know It?

2011-11-24T15:01:00.001Z

Back in the 1980sI had a friend named Chuck, who was convinced that the corrupt, illegitimatecapitalist system would inevitably and certainly collapse under its own squalidweight by the end of the 20th century.

I never was quiteconvinced that Chuck was right, but he spooked me enough that I stayed well awayfrom the stock market during that decade, thereby missing many opportunities tomake a lot of money. I did my best not to make the same mistake in the 1990s.

AlthoughChuck’s prediction did not come true by the end of the 20th century,one might well wonder if it might not be coming true now, belatedly. In theUnited States, the budget deficit is on a track for disaster, and thegovernment seems incapable of doing anything to correct things. Unemployment isstuck at a high level, and protestors have ensconced themselves in many urbancenters to protest income inequality. In the European Union, the inability of anumber of countries to get their books in order looks as though it mayeventually bring down the economy of the whole continent. Even an economy assolid as Germany’s looks as though it could conceivably be broughtdown by its interconnectedness with its neighbors.

So is this it? Isthe whole system going to come crashing down? If so, will it lead to asocialist utopia run by Chuck and his brethren? Or will it lead to a breakdownin civilization, as we have seen in movies like The RoadWarrior? I cannot claim to have any particular insight, but my guttells me that we are not at the dawn of a new glorious socialist age, but thereare quite likely to be major, disruptive political and economic changes in ourlives in the near to mid-term. The U.S. and E.U. are both getting to the pointwhere things will either inevitably fall apart or radical changes in governmentpolicy will be instituted. Both places face looming binary choices.

TheE.U.’s choice is between 1) dismantling the euro zone by kicking the weaker countries out or abandoning the euro altogether and 2) acceleratepolitical integration so that most countries surrender all meaningful nationalsovereignty to Berlin and Paris. The U.S.’s choice, ironically, is to1) move more in the direction of the current European model, which as we can see is working really great, or 2) attempt toseriously prune the size of the federal government. In other words, both placeshave been on journeys that have gotten them to a bad place. Now their choice isto move forward or to move backward.

In the Americancase, moving “forward” might look like this. Confiscatorytaxes would attempt to narrow the deficit and shrink the income gap that theOccupy Wall Street crowds are protesting. These taxes would affect only the topearners because the government will have voter support only if most peoplecontinue to pay low or no taxes. This will ensure that unemployment stays high,so the government will try to manage a permanent low-growth economy byproviding job security for a majority but with no prospects for ever havingjobs for a minority. Given that even confiscatory taxes will not erase thedefict, inflation will become a permanent fixture, as the Federal Reserve hasno choice but to monetize the debt.

Moving“backward” would inevitably involve much pain in the shortterm, as large numbers of public employees are laid off and the social safetynet shrinks. But past experience suggests that eventually a robust economywould return, as more of the nation’s wealth is released from thegovernment and put to work by the private sector. Eventually, unemployment woulddrop to more acceptable levels.

I honestlydon’t know which way Europe is going to go. In the end, the decisionwill probably be made by German voters, who have to be getting fed up seeingtheir own economy put at risk by factors beyond their country’scontrol.

Likewise, theU.S.’s direction will certainly be determined by nextyear’s election. If the Republicans win the White House andmajorities in Congress, we can expect the sort of rolling back that has happenedin Wisconsin and was attempted in Ohio. If the Democrats—against allodds—win big, it’s hard to know what will happen.It’s difficult to imagine even a reelected President Obama andSpeaker Pelosi moving the country further to the left in the face of theDemocratic Party’s moderate faction, let alone Republican obstructionism. And those two have alreadydemonstrated that they are incapable stewards of the American economy. Theworst possible outcome will be a mixed result with continued split governmentand more gridlock.

The hard fact isthat we are left in the position of no realistic hope for a good outcome. Allwe can do is hope for the least bad outcome. Otherwise, Chuck’svision of the future may yet come to pass.

Math Lesson

2011-10-12T14:33:00.000+01:00

Let's beclear. There are three kinds of people in the world: those who are good at mathand those who aren't.

Unfortunately,politicians as a rule don't fall into the category of those who are good at it.At least that is the impression most of them give when they open their mouths.

So it wasrefreshing last month when President Obama invoked mathematics when answeringcriticism of his proposed so-called "Buffett rule." Said thepresident, "This is not class warfare; it's math." Nothing quickensmy heart more than a political leader invoking the unambiguous certainty ofverifiable arithmetic. But, as he usually does when talking about economicmatters, the president disappointed. There is nothing at all wrong with the"Buffett rule" or increasing taxes on the super-wealthy and, in fact,it's basically a good idea. They already pay the bulk of the taxes, but theycan afford to pay more. And tax rates on individuals in America are athistorically low levels. (Taxes on corporations are another matter.) But theproblem is that the tax bracket that takes in many wealthy individuals alsotakes in individuals who are operating businesses and who are not necessarilywealthy themselves.

But intrying to solve the fundamental problem of the government spending much moremoney than it takes in, neither the "Buffett rule" nor anything inthe president's so-called jobs plan does anything about that problem. There'sno point arguing over what the role or scope of government should be if a hugeportion of the government's spending has to be borrowed in the first place.There's your math, Mr. President. If you take the number of taxpayers who wouldbe affected by the president's proposed taxes on the wealthy and multiply it bythe amount of additional tax each would pay, it amounts to what pundits like tocall a rounding error in the federal budget. You would raise significantly moremoney by taking one single dollar from every man, woman and child in the countrythan you would by confiscating all the income from the super-wealthy. That isbecause the super-wealthy are such a small group. The Occupy Wall Streetprotestors keep chanting, with a bit of hyperbole, that the ratio ofsuper-wealthy to everyone else is 99-to-1. No matter how much money you takefrom that one percent (the proposal actually targets around the top two percent),it's not enough to solve the problem. And, incidentally, if the protestors aretruly distressed by the profits of brokers and banks, then the deficit shouldbe their main issue. Look at how much of everyone's tax money goes not toprograms that help people but to bankers and brokers servicing the debt.

Infairness, the president did not actually claim that his proposed tax increaseswould solve the deficit problem. They are meant only to pay for the newstimulus he wants. The president continues to focus on the next few weeks ormonths instead of on the looming disaster that is threatening the veryviability of government.

Onepolitician who does not shy away from mathematics is House Budget Chairman PaulRyan. He has proposed a very specific plan for aligning federal revenue andspending over several years. There is much to criticize in his plan, but thereason it is easy to criticize is because it is full of specifics. If thepresident has crunched his own numbers to solve the structural deficit problem,he has not shared them with the public. Instead, he diverts attention from theproblem by criticizing the opposition, for not supporting one more stop-gapstimulus proposal that even much of his own party doesn't support--and bytalking of raising taxes on the wealthy. The Washington press corps doesn't helpmuch because it is quite willing to follow each distraction the same way a dogfollows a tossed ball. It is more interested in figuring out who is"up" and who is "down" in the political battle than dealingwith the economic substance.

The realityis that, at some point, some leader is going to have to deliver some very badnews to the American people. The problem with talking about raising taxes onthe wealthy is that it gives people who are only causally paying attention theimpression that this will solve the problem. It won't. No one can blame thepresident for not wanting to be a buzz kill with the election season alreadyunderway. Assuming he understands the problem, however, he will stand a muchbetter chance at re-election if he can talk about the economic situation interms that people can understand and demonstrate leadership in confronting it.

Instead, he seems to be pinning his hopes onputting short-term blame on a party that, during his term, has held only onehouse of Congress for only one year. (He seems to have realized that too muchtime has gone by to keep blaming the previous administration, although hissurrogates continue to do so.) That will be a neat trick if he can pull it off.But even if it does, the country won't be any better off. He seems to be hopingthat, if he looks after his re-election, maybe the economy will fix itself.

Careless Policy

2011-09-19T12:48:00.000+01:00

It seems pretty clear by now that, of all the reasons for the stubborn refusal of the U.S. economy to recover strongly, one of the biggest ones is the unintended consequences of a major health care bill that hasn't even gone into effect yet for the most part.

I do not question the good intentions of the people who wrote and passed the legislation, commonly called Obamacare. But the fact is that, while the administration is obliged to do its best to defend it, this was never going to be a widely loved government creation. Conservatives hated it for a number of reasons: because it represented the kind of big government program they have long railed against and, in the end, because they were frustrated over their powerless to stop it. But the left isn't exactly enamoured of it either because it fell so far short of what they had wanted and hoped for when Democrats swept into power three years ago. Many of them, including President Obama himself, said openly that they preferred a single-payer system or, barring that, the inclusion of a "government option." What everyone got was a complicated monstrosity that resulted out of what was possible politically.

Indeed, you could go so far as to say that Obamacare was designed to fail. Republicans certainly wanted it to fail, for all kinds of ideological and partisan reasons. But liberals certainly cannot be disappointed to see it fail as well, but only to the extent that its failure might force a crisis that results in it being replaced with what they consider to be a better system, i.e. single-payer. The problem for them is, if the health care law has to be scrapped, will the country move forward to more government involvement or roll back to the old free-market insurance system? Given the current mood of the country, you would have to bet on the latter. But realistically, the likely outcome would be to repeal some of the provisions that the Republicans find most onerous and leave the rest intact. Even Republicans, the professional politicians among them anyway, tend to be loath to give up government control on things, once it has been established.

It is worth remembering that, before the passage of Obamacare, polls showed that people generally were not that unhappy with the quality of their health care. Their main complaint was the cost of it. The other general concern was the number of people without coverage. Obamacare was designed to deal with almost every problem but the one people cared about most: cost. In fact, if you deliberately tried to come up with legislation that would cause healthcare costs to rise, you couldn't do much better than Obamacare, which put more distance between the consumer and the provider--a sure recipe for raising costs. My brother, who is a partner in a company in Nevada, told me that their healthcare costs immediately jumped 30 percent on the passage of Obamacare.

If the government came to me and asked me to design an optimal healthcare system, I'm not sure what I would suggest. A truly unfettered free market will result in the lowest costs but it will leave victims among those who fall through the cracks or become unlikely victim of abuses. A completely government-run system would theoretically take in everyone but would certainly be inefficient and expensive. You may ask, who cares if it is expensive if the government is paying for it? But an expensive system eventually becomes a low-quality system. The optimal system would be one that is mostly free-market but attempts to police potential provider and drug company abuses and also subsidizes care for society's neediest--but only the neediest. Medical savings accounts are an idea that gets bruited about from time to time, and it's a good one, especially when supplemented with catastrophic insurance--which is a lot cheaper than insurance that tries to cover everything. It leaves medical choices in the hands of patients and encourages efficiency because healthcare providers must to compete directly for choices made by patients.

In the end, however, getting from the current mess to a reasonable, workable system will not be easy.

Blind Faith

2011-09-16T15:27:00.000+01:00

My cynical side strongly suspects that many American politicians regularly profess blind faith in things they do not, in their heart of hearts, really believe.

For example, I have a sneaking suspicion that there are politicians who, deep in their souls, are agnostics if not atheists but who go to church and pay lip service to religion because it is an electoral requirement to do so. Similarly, I think there are politicos who do not really believe that anything the government can do will have a serious effect on the planet's climate but who claim otherwise for political expediency.

But, in my suspicious mind, the most common article faith proclaimed by those who do not really believe it has to be the notion that the government can do anything much, if at all, to affect the economy. As far as I can see, most politicians behave as if they do not really believe that anything the government does, or does not do, has much of an effect on the economy. For those who subscribe to this view, the politician's job is basically to position himself to take credit when the economy does well and to blame others when it doesn't--and then hope for the best. Or, if politicians actually do believe that the laws and the budgets and regulations that they pass do make a difference, then they are even more cynical than I think. That means they see their main job to put off the economy's most dire problems until things fall apart on someone else's watch--after they themselves are out of office.

How else to explain the way both major political parties pay lip service to the looming failures of major programs like Medicare and Social Security but then continue to carry on business as usual and legislate with only the short term in view? A "super committee" is supposed to sort out the deficit later this year, but is there any reason to believe that its recommendations, if it can arrive at any, will be heeded any more than the last panel that was formed to deal with the problem--and was subsequently ignored?

The current deficit crisis isn't something that began only with the brinkmanship that nearly resulted in the U.S. going into default over the summer. Successive governments run by both parties have been wilfully ignoring the trajectory of federal spending for some time now.

The country's so-called leaders have gotten away with this game for a good while, but Barack Obama may be the unlucky one to have the house of cards fall down on his watch. Recessions and recoveries generally follow consistent patterns, and one of those patterns has been that the steeper the downturn, the steeper the upturn. But it hasn't happened that way this time. After a couple of years, there is almost no discernible recovery at all. Something is different this time. For one thing, the federal deficit in terms of GDP is much larger than practically ever before. For another, businesses have seen their health care costs spike up in the wake of the passage of a major bill that was supposed to rein in health care costs. And, since the law doesn't fully come into effect for a few more years, the true cost of hiring new employees is not clear for those employers who might normally be looking to expand. Money that could be spent on reducing the unemployment rate is sitting on the sidelines because of the self-inflicted wound of government-initiated long-term uncertainty. Another one-time burst of government spending, such as President Obama has proposed, won't fix that.

Did the Democrats who drafted the health care bill consider the real-world implications of what they were doing? Or did they believe that the U.S. economy would carry on (as it usually does) in spite anything they might do. If they are getting a shock that the laws they pass actually do affect the economy, think of the shock they will get when it turns out that years of spending more than the government takes in results in harsh, unavoidable austerity, in the form of steep spending cuts and/or oppressive tax rates, or rampant inflation or, in the worst case, both.

In that case, the politicians will surely follow the course that politicians usually do. They will do their best to put the blame somewhere else.

What Goes Up...

2010-11-17T15:14:00.002Z

It's a strange sensation when a place where you have lived and known well is suddenly everywhere in the news.

For example, as a student, I lived in Chile from 1977 to 1978. Generally, outside of Latin America you don't hear much about Chile unless you go looking for information. But this past year Chile has been the focus not once but twice of intense international media attention. In February there was an 8.8 magnitude earthquake centered near the city of Concepción, where I lived and still have friends. It was a very strange experience seeing so much news coverage of a place I knew so well. Then in August there was a mining accident in the north of the country, in which 33 men were trapped underground for 69 days. Again, international attention focused on Chile, reaching a media frenzy in October when they were finally rescued.

For the past eight years I have lived full-time in Ireland. It's a country that everybody knows and many people have visited. But since things quieted down in the North in the late 1990s, you don't really see or hear much news about what goes on in the country in the American or international media. But lately I am hearing about Ireland from all sorts of American, British and international news sources. And, as with the two examples above regarding Chile, it is not for a happy reason.

The Republic of Ireland is on the verge of going broke. The country has become newsworthy because, like Greece before it, it has found itself on the verge of a sovereign debt crisis. The implications go beyond the fortunes of one relatively small European country. The rising cost of Ireland's borrowing has a knock-on effect on other European Union countries, particularly Portugal and Spain, as it affects their ability to borrow as well. Ultimately, the situation threatens the euro currency, as it could lead to countries dropping the currency or countries being expelled from the euro club. Since the euro was born in 1995 (euro notes and coins have been used since 2002), member countries have learned that, when you share a currency with other sovereign nations, it puts you at the mercy of other countries.

At the moment the United States is dealing with its fiscal problems by printing money. Technically, this is called "quantitative easing," and the current second round is abbreviated as QE2, which makes it sound more like a luxury cruise than the diluting of the dollar which it actually is. Unlike the U.S., Ireland has not had the option of currency manipulation to mitigate its economic problems because it does not control its own currency. Indeed, being a euro country probably exasperated Ireland's problems in the first place because, while the European Central Bank may have kept interest rates a reasonable level for Europe as a whole, they were really much too high for Ireland's already over-heated economy. But the ultimate fault for Ireland's current mess has to rest squarely with Fianna Fáil, the political party which has led the country's government continuously for the past 13 years.

But, depressingly, it's hard to imagine that any of the other political parties would have done any better at avoiding the current crisis since their main complaint about Fianna Fáil has always been that it is too stingy. Of all the possible causes of the present mess, clearly government stinginess wasn't among them. This is a country where the politicians delight in taking the citizens' money and then handing it back to them. During the Celtic Tiger tech and housing bubble, they found more and more ways to win voter loyalty by handing out entitlements or funding schemes. The problem was that the new or expanded programs were not financially sustainable in the long run or, as it turned out, even in the medium-short run. Especially, when the banks realized (this will sound very familiar to us Americans) they had lent out a huge amount of money that was never coming back. When the whole house of cards started tumbling, it gob smacked everybody.

There is a lesson here for the United States. Of course, Ireland and the U.S. are very different in lots of ways, but one thing they have in common is that neither can defy gravity forever. The most crucial difference may be that at least Ireland has Germany to bail it out. Will there be anyone to bail out the U.S. and, if so, what will China's price be?

A Victory for Democracy

2009-12-02T15:07:00.002Z

Let us give credit where credit is due. The Obama administration eventually got things right on Honduras.

When the military removed President Manuel Zelaya in June and sent him into exile, the U.S. government echoed countries like Brazil, Argentina and Chile in calling the ouster a coup and demanding Zelaya's reinstatement. The fact is that one can argue over whether what the military did was actually a coup, but the more pertinent question was whether or not it was illegal.

The crucial fact in the matter was that the military was not acting on its own but at the behest of the Honduran Congress and Supreme Court. The soldiers were merely following orders issued by two branches of the civilian government. And were those orders legal? According to an analysis by the U.S.'s Directorate of Legal Research of the Law Library of Congress, which was issued way back in August, the order to remove Zelaya from office was legal under the Honduran constitution. What was not legal, however, was exiling the president. That is specifically prohibited by the constitution.

Zelaya was nearing the end of his term of office. He was trying to stay in office by changing the constitution with an illegal referendum. The Supreme Court and the Congress put an end to that. End of story.

In the end, the Obama administration backtracked by helping to broker an agreement between Zelaya and the Honduran government and, in the process, switching its support away from the would-be usurper Zelaya and to the legitimate Honduran government. The result is that this past Sunday an election was held. It was the same election that was always going to be held on that date. Things in Honduras are now exactly where they would have been if the constitution had been followed all along. Nearly 400 foreign observers were in the country for the election and the broad international community has endorsed them. Thanks to the U.S. government coming to its senses, an actual coup was avoided.

The Honduran episode illustrates the problem with politics generally. Many people who are politically engaged tend to back the politicians or parties that reflect their own ideology, regardless of what the law is. Manuel Zelaya is a fellow traveler of Venezuela's Hugo Chavez and his growing axis of like-minded Latin American leaders. People and governments who supported Zelaya in the controversy were backing him because of what he stood for, or stood against, regardless of constitutional law. If Zelaya had had the law on his side, then Obama would have been correct when he reflexively backed Zelaya on seeing him escorted out of the country by the military. But Zelaya didn't have a legal leg to stand on, and the State Department finally got on the right side of things.

This episode, along with the president's long, hard deliberations on Afghanistan, have shown what happens when an idealistic, well-intentioned new president comes into office. When he has to confront reality himself, he often winds up in the same exact place as the people he used to criticize.

Missing the Point

2009-11-22T16:00:00.002Z

I'm beginning to think that the Obama administration's decision to try Khalid Sheikh Mohammed in a New York federal court has the same basic motivation as its healthcare reform plan. What ties the two together seems to be a desire to make plenty of work for trial lawyers.

The administration cut off a military tribunal process that was well underway and under which KSM had essentially already pleaded guilty in order to have a civilian trial in New York. Assuming KSM and his four fellow defendants do not plead guilty in that venue (and it's hard to imagine that jihadists such as they would not leap at the opportunity to have such a world stage for airing their beliefs and trying to pick up some new converts), this will make plenty of work for attorneys, much more than a military tribunal would have. It may just be a coincidence, but Attorney General Eric Holder's old law firm, Covington & Burling, has represented no fewer than 17 detainees at the Guantanamo facility.

I resist indulging in any conspiracy theories about that, however. I thought it was a bit silly when it was about Dick Cheney and Halliburton, and it would be silly to make too much of this now. But the Obama administration has a clear bias in favor of making work for trial lawyers in general. In addition to government employees, this is one area where the administration has been successful at keeping and creating new jobs.

A common refrain among people who favor a major overhaul of the healthcare system is that health care in America is the most expensive of any country in the world. They usually add, at the same time, that metrics for healthcare quality show U.S. healthcare way down on the list, despite its high cost. The latter claim is clearly a case of fiddling with statistics. For a while New York Times columnist Nicholas Kristof kept writing that statistics showed that U.S. health care was worse than Slovenia's. Let's use a little common sense. Do you know anyone who has fled to Slovenia, or any other country for that matter, for better health care? American health care is hugely expensive but it certainly isn't of poor quality when compared to other countries.

When you listen to people talk about health care, their first concern is usually the cost of it. A secondary concern is that they may lose it or that other people may not be able to get it. Proponents of Democratic healthcare reform point out correctly that France has a very good healthcare system and that it costs less. But it doesn't follow logically that the Democratic plan will bring American healthcare costs in line with France's. Similar plans adopted by individual states have tended to make health care more expensive. The critical difference between America's and France's healthcare systems (and that of pretty much all other countries) is the amount of money spent on malpractice insurance and defensive medicine. Simply put, no other country makes it as easy to bring huge lawsuits against doctors and hospitals. If you corrected for this, America's and France's health care would cost about the same.

But, despite President's Obama's stated willingness to "talk about" tort reform, Democrats have refused to include anything that would correct this situation in any of their bills. That's not surprising since trial lawyers, as a group, are big contributors to the Democratic Party. But even Republicans don't focus on this enough. They dutifully include tort reform in their check list of ideas to demonstrate that they are not being simply obstructionist, but they don't emphasize the issue as much as they should. And, as Democrats like to point out, Republicans lack credibility on the issue because they had control of the government for years and never made a move to tackle the problem.

If some form of healthcare reform eventually passes the Congress (and it's by no means certain that it will), let's hope that the congressional system makes the result somewhat reasonable. Inevitably, no one will be particularly happy with the final version. It will be too watered down for many on the left, and those on the right will be unhappy about any increase in the burden of government on the private sector, the only place where money to pay for everything can be generated. As for individuals, some will undoubtedly be better off under a new system, but others will have their lifestyles lowered because of higher taxes and the requirement to purchase insurance they may not want. And there is no reason to believe that people will be any happier about the government's arbitrary decisions about what can and cannot be covered than they were with those of private insurance companies.

But the really depressing thing will be that, barring a miracle, this healthcare reform will completely miss the chance to target the one problem virtually everyone can agree on: health care is too expensive.

Taking Yes for an Answer

2009-09-29T13:58:00.004+01:00

Lately, when I drive to a nearby town or city, I find myself greeted by handmade signs that proclaim "NO!" to "EU Dictatorship." There are a lot of such "NO" signs around these days, but there are even more (much slicker, professionally printed) "YES" signs around.

Just as the United States is going through a sometimes raucous public discussion, featuring sometimes passionate and even hyperbolic language (death panels, anyone?), on what to do about health care, Ireland is going through its own similarly heated public debate on something called the Lisbon Treaty. The main difference between the two situations is that on Friday Irish voters will get a chance to decide what happens with the Lisbon Treaty, while in the US it is Congress that will take action (or not) on health care and, the president's shifting deadlines notwithstanding, action will happen basically whenever it happens.

The two situations make an interesting comparison. Both have stirred strong feelings on the two sides of the argument. And both ultimately come down to voters' willingness to make a leap of faith in the abilities and intentions of politicians and bureaucrats.

The Lisbon Treaty is essentially a new constitution for the European Union. It would amend the Maastricht Treaty, which has served as the EU's constitution since 1992. And just as the current stab at U.S. health care reform follows an abortive attempt several years earlier, this is not the first time that Irish voters have considered this treaty. It was submitted to them in 2001 when it was called the Nice Treaty (after the French city, not because it was particularly meant to be likable and pleasant). These treaties require ratification by every member state in order for them to go into effect, but the Irish constitution is the only one that requires them to be submitted to voter approval.

The main similarity between health care reform in the U.S. and the Lisbon Treaty in Europe is that they both involve volumes of pages of legalspeak that ordinary people (and, if the truth be told, probably most politicians) don't really understand. And so the public debates tend to be over prospective or imagined consequences rather than over specific language in the relevant documents. Many Americans worry that the health care bill is a first major step toward socialism. Many Irish worry that the new EU constitution is tantamount to a loss of national sovereignty. The "no" campaigners raise the spectre of Ireland losing its neutrality, of being required to participate in military action, of being forced to legalize abortion (which is prohibited here). Abortion has figured in the American health care debate as well. Opponents fear that, once the government is, through its funding for health insurance, calling the shots, government money will be spent on abortions -- just as Democratic administrations always restore the abortion funding to foreign aid that Republican administrations have cut off.

When the Irish rejected the Nice Treaty, it seemed to be out of frustration for not understanding what they were asked to vote on. Also, there seemed to be resentment and a sense that there was something fundamentally undemocratic about national legislatures in every other country more or less rubber stamping the new constitution without citizens of other countries getting to have a vote. But this time around, the proponents (virtually all political parties except the Socialists and IRA frontmen Sinn Féin) have framed the issue as yes means support for Europe and no means rejection of Europe. The other major difference is that Ireland is struggling through a bad recession. It's as if the strangely superstitious Irish feel that God punished them for voting no last time and so, at least the polls seem to indicate, they will vote yes this time.

In the U.S., Democrats have similarly tried to frame the health care question as yes means helping oneself and others and no means keeping the status quo -- even though not a single politician that I have heard favors the status quo. But, if opinion polls are any indication, most Americans aren't buying it at this point. Assertions that you can start up a huge new government program and still be revenue neutral are just too silly even for the dimmest of news consumers to buy. So why make that claim? Why make the issue the candor and truthfulness of reform's supporters instead of having an honest discussion of costs and benefits?

One reason is that such a discussion is awfully complicated to have on a national scale. Another is that politicians always tend to underestimate the common sense of American voters.

Humbled

2009-09-22T17:28:00.001+01:00

When Barack Obama was running for president, his opponents criticized as naive his stated intention to rely more on diplomacy and engagement, and less on sabre rattling and military force, in dealing with other countries. Obama's response was to insist that he was not talking about merely giving other countries what they want but entering into tough negotiations with them.

So far, we have reason to be concerned about the new president's negotiating skills. Our first red flag would have been the way he has negotiated with Republicans and, more importantly, with members of his own party over health care reform. While he has consistently stated his preference for the so-called public option (government-run insurance in competition with private insurance), he signalled early on that the lack of a public option was not a deal-breaker for him. This was tantamount to guaranteeing that there would be no public option. After all, why would any legislator opposed to it change his or her mind, knowing that its omission would not result in a presidential veto? Instead, once Obama had decided that the public option was not a deal-breaker for him, he could have continued to insist on it until the crucial final horse-trading and then given it up in exchange for something else he really wanted. This is what is known as a bargaining chip. Anyone who has dealt with businesses or unions or politics knows this.

Is this strange negotiating behavior indicative of how the president would deal with other countries? So far, the signs are not good. Last week President Obama announced that he was abandoning the missile shield that had been planned for Eastern Europe. Some observers thought this was a good idea. Some thought it was a bad idea. But one thing that foreign policy wonks could agree on, whatever their positions, was that Obama had given away a very valuable bargaining chip for free. Russia hated the idea of the missile shield. And America has wanted Russia's support in putting pressure on Iran to abandon its nuclear project, something the Russians have declined to give. The logical thing would have been to give every indication of proceeding with the shield but negotiating to give it up in exchange for Russian cooperation.

Now maybe this has happened. Maybe there were secret communications to this effect or some sort of understanding so that the quid pro quo is not too obvious. But so far there is not a shred of evidence that this is the case. Or maybe the Russians will decide to help out with Iran on their own, to reciprocate for Obama's gesture. It's possible, but would you be willing to bet a lot of your own money that this is the case? Barring any forthcoming evidence to the contrary, it looks like the president gave away a huge bargaining chip for free. So much for a new age of skilled diplomacy and tough negotiating.

Interestingly, when Obama sat down with ABC's George Stephanopoulos for one of his many interviews on Sunday, Stephanopoulos brought up the first summit between John F. Kennedy and Nikita Khrushchev and how Khrushchev "cleans his clock." Already at this point, Obama was visibly bristling. The reporter asked the president if he felt he had had such a moment yet. After stumbling around verbally for a few seconds and saying "I don't mean to be immodest here," Obama turned the subject back to health care, saying that he had been "humbled" by his inability to get people to understand the issue: "It's -- this has been a sufficiently tough, complicated issue with so many moving parts that, you know, no matter how much I've -- I've tried to keep it digestible, you know, it's very hard for people to get their -- their whole arms around it. And that's been a case where I have been humbled..."

This may be the first time we have seen the president to be aware of the limits of his own considerable powers of persuasion.

A Question of Trust

2009-08-19T14:25:00.002+01:00

Some people just don't trust the government.

That's not really too surprising. What interests me is that different people seem to trust or not trust the government to do certain things or to perform certain tasks. Conservatives, on one hand, seem to trust the executive branch to gather intelligence and to wage war. Liberals, on the other hand, sometimes do not, or at least not as much. When word leaked out that the government was listening in on international phone calls without a warrant (something that is not expressly prohibited by law, unlike domestic phone calls), many people screamed bloody murder about privacy violations. The government said that it was only listening in on known or suspected terrorists, but that wasn't good enough for many. As I said, some people just don't trust the government.

Interestingly, with a change in administration, the political sides' attitudes toward government snooping seem to have reversed. It was conservative Fox News that raised the alarm on the White House spamming people's email accounts, implementing tracking cookies on the White House web site for the first time and asking citizens to report "fishy" emails and other communications about healthcare reform. Liberal pundits couldn't understand what the fuss was about. If it had been the Bush administration doing the same in regards to, say, the Iraq War, things would of course have been different. Trust and distrust in the government seems to have a partisan element. Which is short-sighted. Because it is only a matter of time until the party you don't like is in charge of the government again.

Now the country is politically consumed with the topic of healthcare reform, and the political sides on government trust are reversed on this as well. One can debate the merits of the different voluminous bills working their way through Congress, but the simple fact is that, whatever bill emerges will only set in motion the new system. Many subsequent decisions will be taken up by functionaries and bureaucrats, as new agencies and mechanisms get set up. How it will all ultimately work out to the last detail is a great unknown. The most persuasive arguments by proponents of reform go something like this. A lot of people were scared about Social Security and Medicare when they were first being set up, but they turned okay and are quite popular. And this will turn out okay too, they say. Opponents of reform, at least as it currently seems to be proceeding, talk of spiralling costs, increased government debt, eroding personal choice in medical decisions and "death panels." There is absolutely no 100 percent certain way to know which vision will be closer to the truth. People who want reform are trusting the government to, at the least, not make things worse and, at the best, make things better. People showing up at town meetings and challenging their representatives do not have that trust in the government, at least as far as this particular task is concerned.

Proponents' trust in the worthiness of the undertaking clearly comes from a sincere desire to improve things. The country, they say, should at least try to solve the problems that many people encounter when dealing with the healthcare system. Opponents' distrust appears to stem from suspicions of the intent of the Democrats who control Congress and the White House. And they are correct that the ultimate goal of the strongest supporters of so-called ObamaCare is a single-payer system similar to what exists in Canada and various European countries. Skittish politicians may deny this, but activists are quite up front that this is what they want because, they believe, that would be much better than what we currently have. The president himself, albeit many months ago, has said that single-payer would be his preference.

And why do so many people oppose a single-payer system and, by extension, the bills working their way through Congress? Quite simply, they are afraid that it will make things worse and not better. They may have complaints about their insurance company or their HMO, but they think that, if they have to deal with the federal government, it will be even worse. And there is no way to prove whether they are right or wrong. A change like this involves a leap of faith.

Republicans may be thrilled by all of this because, at the moment, it is helping them politically. But they should be kicking themselves (or we should be kicking them) that they did not implement their own version of health care reform during all those years that they were in charge of Congress and the White House. But they didn't, and now the Democrats, having won big in last November's elections, are having their own go at it. As sure as Republicans are fighting against Democratic healthcare reform, Democrats would have derided Republican reform as inadequate. But a Republican version, if they had actually managed to get their act together, might have been closer to what most people actually want. People want something done about constantly rising medical costs. They want to be free of the fear of losing insurance coverage. And, I believe, most people would like to help people who do not have insurance. Now these are the very things that the president and other proponents of ObamaCare say their plan(s) would fix. But polls show that an increasing number of citizens think that Congress is currently on the road to do much more than just target these specific problems and perhaps bankrupt the country doing it.

In other words, a lot of people right now just don't trust the government.

That Brew-ha-ha

2009-08-14T16:02:00.002+01:00

During all that fuss last month about the confrontation between Prof. Gates and Sgt. Crowley, many commentators took the opportunity to proclaim, aha, President Obama isn't so post-racial after all.

At the time, I tended to agree with them but, with the passage of time and a little perspective, it seems to me that the president may have been nearly the only person in the whole country who did not see the situation in racial terms. Henry Louis Gates is a friend of his, and he reacted the same way most of us tend to react when a friend gets into a conflict. We usually don't worry about the right or the wrong of the situation. We support our friend. And we call the person who upset our friend an idiot. Or, if we are trying to sound more reasonable, we might say that he acted stupidly.

What made the president's reaction remarkable is that, for such a political animal, it seemed not to occur to him that there would be a political dimension to his reaction. A few days later, he seemed genuinely surprised that anyone would have seen the situation any differently than himself. But almost everyone did, for the simple reason that most of us don't know Prof. Gates (or, for that matter, Sgt. Crowley) personally. It wasn't simply a case of being loyal to a friend for us in the masses. So it is strange that the president did not realize that much of the country would see the incident through a white-versus-black prism, just as Prof. Gates clearly did.

But people across the country were seeing the incident through several different filters. Quite a few people specifically familiar with Cambridge and Harvard saw it through a local-police-versus-the-black-community prism. Others, who didn't want to go to the white-versus-black place, took an individual-citizen-in-his-own-home-versus-government-intrusion view. But what was interesting was how many people perceived the whole thing through a pointy-headed-elitist-academic-versus-a-working-class-man-just-doing-his-job filter. For them, the black-as-victim meme didn't quite work when it involved a world-famous academic at a prestigious university who calls the country's president a personal friend. And who wasn't picked up randomly on the street but was dealing with a cop responding to a report of a possible break-in.

The only generalization you can make about how the country reacted is that each news consumer slid the story into a template formed by their own experiences or the narratives of American society implanted on their consciousness. It wasn't so much the facts of the incident that got people's emotions going. It was the memories, personal or shared, that those facts evoked. Professional pundits and certain political operatives had a particular interest in fitting the story to a popular pre-existing narrative, which sometimes had strange results. The most surreal moment for me was watching CNN's very white Larry King more or less lecturing black libertarian guest pundit Larry Elder on not being sensitive enough to African-American history.

Let's hope that someday we finally get to the point where we can look at a situation like this and see it, like Barack Obama, as simply an incident involving two men. And let's hope that, in the meantime, Barack Obama can look at a situation like this and see it as a president.

Drug Habits

2009-08-08T13:29:00.002+01:00

People looking for encouraging precedents for heavy government involvement in health care may want to give Ireland a miss.

One of the big stories in the news, for more than a week now, is about a dispute between the government's health agency and the country's pharmacies, which has resulted a lot of pharmacies closing their doors, depriving people of medicines, even if they are willing to pay cash. A lot of people get their medicines paid for by the government, but because of the budget crisis spurred by the current recession, the government has slashed what it pays pharmacists to dispense the drugs. Irate, many pharmacists are refusing to dispense the drugs, and in some cases it is easier for them to close their doors altogether rather than deal with angry participants in various government drug plans.

It is a right mess and not at all encouraging for people who think that a "public option" will sort out the problem of health care costs. Of course, Ireland isn't a particularly useful case study for deciding what might happen in the U.S. because the countries are so different. Ireland is much smaller, culturally more homogenous and it has ceded its central banking powers to the European Union. It does not have the option of running up massive budget deficits, as the U.S. can and does, to get through tough times. But it can still give some insight as to the relative pros and cons of government programs versus free-market systems.

About a third of the Irish are government wards, for medical purposes. These include people who have what is called a full medical card (qualifying through unemployment or low income or other reasons), which pays all medical expenses, as well as people who have a GP visit card (with more liberal income limits), which is strictly for doctor visits. These programs equate more or less to a combination of the U.S. Medicare and Medicaid programs. The rough Irish equivalent of the "public option" would be VHI Healthcare, which is a government-owned insurance company, set up in 1957 as a monopoly. Interestingly, in recent years Irish politicians have nudged things in a direction completely opposite of that of today's political majorities in Washington. The insurance market was opened up to competition in 1996 with the idea that VHI might, at some point, be privatized, similar to what has happened to the government-owned telephone company (Eircom) and the government-owned airline (Aer Lingus).

Once you have a government monopoly, however, it can be hard to undo. The couple of private insurance companies that have entered the market have managed to offer lower premiums for their customers, partly through efficiencies and partly because they tend to attract a younger, healthier client base. When the government noticed this, it legislated a requirement that the private companies share some of their profits with VHI, in a plan called "risk equalization." The immediate result was that the main private company, the UK's Bupa Healthcare, immediately pulled out. Meanwhile, the premiums VHI charges have been reliably increasing from year to year. So much for a public option lowering costs.

Why would Ireland be trying to move toward less government involvement in health care anyway? Maybe it has something to do with an article last month in The Irish Independent, in which the paper detailed its own investigation into how the government health service was overpaying for drugs to the tune of 98 million euro per year. This doesn't really surprise Americans who have heard countless stories about, say, military orders for $640 toilet seats.

The basic problem is that any time large amounts of money are passing through large organizations, there is going to be a certain level of inefficiency and favoring. If the organization in question is a private company, one hopes that one or more government agencies might keep abuses to a minimum. When the organization in question actually is a government agency and subject to the whims of politicians, it gets harder. This is why, when the U.S. government decided to set up companies to be the ultimate housing lenders (Fannie Mae and Freddie Mac), they were essentially directed to make getting mortgages as easy as possible for people in the home districts, thereby contributing to the housing market meltdown. That is why, when the Pentagon says that it really doesn't need the F-22 stealth fighter plane, some politicians (like Pennsylvania military contractors' best friend John Murtha and my own senator Patty Murray) still fight tooth and nail to keep funding them because it helps, economically, folks back home and, indirectly, themselves. Can anybody doubt that, under a regime of greater government involvement in health care, there won't be members of Congress angling to get lucrative pharmaceutical contracts and other advantages for their constituents? To think otherwise represents a triumph of hope over experience.

Just as President Bush was silly to emphasize private accounts more than long-term solvency when he tried tackling Social Security, President Obama and his party are disingenuous to focus almost exclusively on insurance industry "reforms" and a public insurance option rather than actual, real ways to reign in healthcare costs, which is what most people actually care about.

Golpe

2009-06-30T18:34:00.003+01:00

If there is a no-brainer, when it comes to knowing what to think about events in small Central America countries, it is that military coups are bad. And elected governments are good.

So the forced exile of Honduran president Mel Zelaya was bad, right? Well, as my daughter says when she is asked to explain bold behavior, it's complicated.

Roberto Micheletti, who has been sworn in as Honduras's new president, says there was not a golpe, as a coup d'état is called in Spanish. And his assertion is defensible. The military was basically operating on instructions from the Honduran Supreme Court when it rousted Zelaya from his bed and put him on a flight to Costa Rica. Now there's some serious judicial activism for you.

Imagine if George Bush had decided that he wanted a third term as president and decided to hold a referendum calling a constitutional convention to amend the Constitution to get rid of that pesky 22nd Amendment. Now someone might challenge that action because the president cannot initiate constitutional convention on his own. (This is true in the Honduran constitution as well as the U.S. one. In Honduras, such a referendum has to be called by the congress.) Suppose that the Supreme Court ruled that the president was violating his authority by going ahead with the referendum anyway and that the attorney general agreed. Suppose that the people who would normally carry out the election refused because of the rulings from the Supreme Court and the attorney general. Suppose that Bush then led a group of his supporters to the warehouse where the referendum ballots were stored, had them break in and then distribute the ballots to voters. (In the Honduran case, the ballots just happened to be printed in Venezuela.) What would happen next?

In such a scenario in the U.S., presumably the Congress would impeach the president. In Honduras, the military put the president on a plane out of the country, the congress met in emergency session and designated the next in line of succession, according to the constitution, as the new president. Civilians are still in charge of the government. Presidential elections in November are still on schedule. This was not a golpe in the sense that the military seized control of the government from civilians, suspended the constitution and began ruling by decree. Arguably, the military intervened only as much as necessary so that the requirements of the constitution could be carried out.

In journalistic shorthand, however, U.S. and international radio and TV reports summarized the situation by saying Honduras had had a military coup. Since Zelaya is a political ally of Hugo Chavez (who printed the ballots for him), it is not surprising that Venezuela and Cuba condemned the military action and demanded that Zelaya be returned to power. But so did the president of Argentina and the head of the Organization of American States. And so did Barack Obama. If ever there was a moment for Obama to react to international events with his usual, initial, wishy-washy, on-one-hand/on-the-other-hand, neither-side-is-perfect approach, this was it. Instead, he followed the Chavez line and endorsed the fellow who was illegally trying to change the constitution to suit his own political ambitions.

Strangely, Obama's own secretary of state took a more balanced, realistic point of view, being careful to avoid the word "coup" because it would automatically trigger legal repercussions for Honduras. Among pundits, Mara Liasson, of National Public Radio, had the most interesting take on the administration's attitude. She suggested that the U.S. government was happy to have Zelaya out of power but didn't want to say so publicly for p.r. reasons. Lovely. An administration that says one thing and believes another.

It would be nice if Obama and crew got some clarity on the right and wrong of this situation and spoke and acted, accordingly. With regional support for Zelaya growing and Venezuela threatening its own military intervention, Obama's desire to look cool to the Latin American left might be just enough encouragement to tilt things in Zelaya's favor. And so far, Honduras's military seems to have had more respect for the rule of law than he has.

Moral Support

2009-06-23T17:02:00.002+01:00

I'm probably wrong, but I think I know the precise moment that George W. Bush won his re-election.

Of course, there wasn't really one precise moment that changed everything and determined the outcome of the 2004 presidential election. People voted they way they did because of a whole range of reasons and feelings. But there was one moment when I thought to myself, that's it, he's going to get re-elected.

It was during one of the presidential debates, and actually it was two moments or, more precisely, a series of moments. One was the creepy feeling I got when John Kerry and John Edwards answered every question they got, no matter the topic, by mentioning that Dick Cheney's daughter was a lesbian. But the moment when I really thought Bush had clinched it came when the two candidates were asked about their positions on abortion.

Now, I'm not saying that the issue of abortion determined the election. Most people don't vote exclusively based on their position on abortion or any other single issue. But I think the question revealed something about the two men. John Kerry gave a very long, convoluted answer, explaining how he was personally against abortion but that he didn't think it was right to inflict his moral positions on other people and so yadda yadda. After Kerry spent what seemed like hours trying to get himself on every side of the issue, Bush stepped up to the mic and said simply, "I'm against it." That was all.

You can make the argument that Kerry's answer was more thoughtful, more informed, more (dare I say it) nuanced. But I thought I could feel a collective frisson that said, how refreshing to hear a politician state a position so simply and directly, with no qualifiers or exceptions or weasel words to get him out of trouble later. I might be wrong, but I thought I could feel voters thinking, hey, I might not agree with this guy, but at least he says what he thinks and we know where he stands. Whatever he believes, he really believes it.

I thought I was detecting a similar moment during the 2008 presidential campaign, but I was wrong. In August, Russia invaded South Ossetia and Georgia, sending in troops and dropping bombs. Candidate John McCain immediately denounced the Russian action. Barack Obama made a statement calculated to be even-handed, saying more or less that both sides were part of the problem. It took him a few days to finally come out and say that, well, actually, the Russians were the problem and that, as McCain had said days earlier with fervor, we should stand with the Georgians. Obama's poll numbers did dip for a while, but ultimately the situation along the Russian border weighed little in voters' minds when November came around.

But we saw Obama's penchant for calculation and even-handedness in foreign affairs again immediately after the election in Iran. As Iranians took to the streets and European leaders immediately decried violence against them and spoke up for the possibility of democracy in Iran, Obama made the unconscionable comment to CNBC, "The difference in actual policies between Ahmadinejad and Moussavi in terms of their actual policies may not be as great as advertised," amounting to a virtual tacit endorsement of the current regime. He completely missed the point that people in the street were dying for their chance to have tweedle dum instead of tweedle dee. In that moment, how the outcome of the election might affect Obama's grand negotiation strategy was really beside the point.

To his credit the president, as he did in August, finally came around after a few days later. He made a statement graced with his trademark eloquence in an interview taped on Friday with CBS's Harry Smith. "And the world is watching," he said. "And we stand behind those who are seeking justice in a peaceful way." Strangely, however, those particular words did not make it onto the evening news that night. The key parts of his statement were edited out for brevity. So much for trusting Katie Couric with your news.

Meanwhile, defenders of the president went on news programs all week to counter criticism from Republicans, saying that the president had really gotten it right. The most surreal moment was when they trotted out the name of Henry Kissinger to say that even Richard Nixon's old foreign policy guru, famed for his Machiavellian instincts, had opined that Obama had hit just the right tone. The defenders seemed to imply the strange notion that America's top spokesman should hold back because the U.S. brand had been morally tarnished over the years and that the demonstrators would lose credibility or authenticity if America voiced support for them. This is completely backwards. One develops a good moral brand for saying and doing the right thing, not the other way around. Always be suspicious when people want to talk more about strategy than about what's the right thing to do.

Anyway, the fact that so many people had to be asked the question about the president's hesitancy itself demonstrates the president was slow on the uptake. And it leaves us wondering what his real values are. Does he have passionate principles that spring immediately from his heart? Or does he have only carefully worked out positions that need to be polished and tested before being fed into the teleprompter? After eight years of George W. Bush, lots of people are quite happy to have a leader who does not "shoot from the hip." But that doesn't mean we shouldn't at least wonder about our leader's aim.

Community Organizer Foreign Policy

2009-06-17T15:15:00.002+01:00

When so many commentators made a fuss over Barack Obama's statement, in answer to a primary debate question, that he would meet unconditionally with such leaders as Mahmoud Ahmadinejad, I thought it was the usual game of gotcha.

Any administration will have contacts and discussions with any government, as is appropriate for the time and situation. It seemed like a silly thing to make an issue of. But Republicans (and the Clinton campaign) were determined to use the statement to paint Obama as hopelessly naïve and not ready for primetime. When Obama eventually took office, that old issue faded somewhat, as many were struck with how consistent his policies really were with the Bush Administration's. The tone might be different, many suggested, but the substance was basically the same. Indeed, even in the case of his signature foreign policy act to date, addressing "the Muslim world" in a speech in Cairo, many pointed out that George W. Bush had said many of the same things but that the difference was that Obama was a more credible and compelling messenger.

But now, in the aftermath of the Iranian election, we are seeing more clearly the true divergence between Bush and Obama foreign policy. In this area, it is not really a question of Republican versus Democrat or conservative versus liberal. In recent history, the two philosophical poles in American policy have been the realist approach and the idealistic or ideological approach. In a nutshell, the realists deal with the world as it is and are not about trying to change it. Their stock in trade is crisis management or, even better, crisis avoidance. Deep down they feel that all nations are really pretty similar and that various national interests can be managed with enough communication and good will. The idealist/ideologues, on the other hand, believe in right and wrong. They know that some governments are intent on the destruction of their designated enemies and, if they engage in diplomacy at all, it is to ease the way for the eventual fatal blow. They think that democracy is good and authoritarianism is bad.

Clearly, Obama is at heart a realist. So was Bill Clinton and, for that matter, as was the first President Bush. Ronald Reagan and George W. Bush (at least as long as the neo-conservatives held sway) fell more on the idealist/ideologue side. Of course, this oversimplifies things. Every administration will have elements of both realism and idealism in its foreign policy. But with his tepid, lawyerly response to events in Iran, Obama has shown himself to be a realist down to his core.

It is easy to see his thought processes, as the man became famous for orating struggles for words and then concludes that he does not want to "meddle" in an Iranian election. His thinking seems to go something like this. It's not right to criticize a country's nuclear ambitions because, after all, the U.S. itself has nuclear weapons and has even used them in wartime. How to criticize another country's elections after what happened in the U.S. in 2000? Indeed, how to say anything at all very critical of Iran after the CIA's involvement in a coup more than 50 years ago? Besides, Obama's game plan is to build influence with the Iranian regime by showing it the respect that Bush never did, hence the muted U.S. response to obvious election fraud and his use of the term "Supreme Leader" (which is a title of respect rather than an official one) for Ali Khamenei.

I suppose Obama is doing the smart thing not to offer encouragement to Iranian protestors. After all, it is easier to come up with a strategy for a situation that is well entrenched and well known. If Iran should become unstable with democratic fervour, then things get more complicated. There will be new personalities to get to know and viewpoints to understand. There might be violence. Besides, what's the big deal with the election anyway? Even if it had been fair, who's to say that Ahmadinejad might not have won anyway? And, coming from Chicago, our president wouldn't find a relentless political machine and a little ballot box stuffing that shocking anyway.

If democracy were to flower in Persia, then the argument would immediately become over who could take credit for it. Many were quick to credit Obama's Cairo speech for Hezbollah's electoral setback a few days later in Lebanon. Undoubtedly, the same will be said of Iran, Obama's stated desire not to "meddle," notwithstanding. The truth is that any democratic groundswell in Iran will be due to the will and courage of the Iranian people. But some will argue, and not without justification, that Iranians could not help but be influenced by the establishment of democracy in their next-door neighbor. That would be Iraq, a country that has electoral democracy thanks, to a large extent, to that idealist/ideologue George W. Bush.

The Rainbow Tour

2009-04-08T18:08:00.001+01:00

A month ago, I wrote, "Barack Obama got elected by promoting the fact that he was not George W. Bush. Now he is governing by promoting the fact that he is not Rush Limbaugh."

Now that the president has made his first big foray abroad, I think it is safe to say that his foreign policy, like his campaign, amounts to him promoting the fact that he is not George W. Bush. After eight years of so-called "cowboy diplomacy," we are now getting community organizer diplomacy.

In the terms of coverage, what was striking was how virtually all the media outlets, even ones disposed to give him the most favourable treatment, like National Public Radio, commented on how much his appearances were like campaign events. On one level this is not a bad thing. Among the many frustrating aspects of the Bush administration was the fact that it was totally miserable about the public relations aspects of promoting U.S. foreign policy. To be fair, many of the things that Obama said in Turkey about respecting Islam as one of the world's great religions were also said by Bush. But many people around the world did not take Bush seriously, and the Bush administration did little to effectively counteract the narrative that he was on some sort of mission of Christian aggression. People are more receptive to a positive message about America vis-à-vis the Islamic world when it comes from Obama, and that is all to the good.

Indeed, Obama could have pointed to many instances in recent history when America has come to the aid of Moslems: the liberation of Kuwait in 1990 and intervention to stop massacres (by ostensible Christians) in Bosnia in 1995 and in Kosovo in 1999. And, while it may be counter-productive to bring up the Iraq war in this context, that invasion did remove a tyrant who had caused the deaths of staggering numbers Moslems, through wars with his neighbors as well as directly through atrocities committed against citizens of his own country. But Obama did not refer to this history. He essentially accepted as a given the popular image in much of the Islamic world of pre-Obama America being anti-Islam and presented himself as a break from the past.

The problem with this approach is that, while it may enhance Obama's own personal popularity with Moslems, it doesn't necessarily do much to change the perception of America in general.

Now, a lot of Americans are very happy to have a president who is popular in other countries and who attracts enthusiastic crowds wherever he goes. It certainly is a change from the last eight years. But I have seen this movie before. Bill Clinton was personally very popular in Europe when he was president. But that personal popularity did not translate into Europeans looking at the America's government or culture much differently. Many, if not most, Europeans were quite handy at compartmentalizing their admiration for Clinton as separate from their resentment of the United States in general. There is no reason to think it will be any different under Obama. Besides, popular opinion aside, virtually all countries base their policies on national self-interest and not on how much they happen to personally like the leader of the Free World. Thus, in terms of tangible results, Obama's European tour did not turn out very differently from what Bush would likely have achieved: no stimulus packages from continental Europe (which Bush probably wouldn't even have suggested anyway) and only token support for the war in Afghanistan. When this apparently meagre outcome was pointed out to administration spokesmen, they said that the president was planting the seeds for future results. We shall see, but the outcome of this G20 summit looked extremely reminiscent of the outcome of every similar kind of summit going back years. And there is no reason to think that future summits will be much different.

Still, tone and atmospherics are not completely irrelevant. And Obama's more contrite and humble manner has to be a breath of fresh air to foreign leaders. On the other hand, one has to wonder what European leaders thought of Obama actively promoting Turkish membership in the European Union, which is a matter that is pretty much an internal European issue.

In the long run, what are we more likely to remember about this first foreign trip by the president, if we remember it all? Footage of foreign crowds cheering the Obamas? Maybe. But, depending on future events, it could also be the fact that, at the very moment the president was giving a talk on nuclear disarmament, the North Koreans were sending a missile off in the general direction of Pearl Harbor.

Word Play

2009-03-27T15:11:00.002Z

In his opening remarks during his televised press conference on Tuesday evening, President Obama described his proposed budget as leading "to broad economic growth by moving from an era of borrow and spend to one where we save and invest."

As with most of the president's lines, this sounds great. But where is the saving? And where is the investing? I am not asking, in this instance at least, as someone who worries about economic sanity but rather as someone who worries about the English language.

How can anyone, even someone who is totally onboard with Obama's budget and its priorities, keep a straight face when hearing it described as representing saving and investing? The president is quite correct when he insists that borrowing and spending got us into the mess where we currently find ourselves. But let's face it, his solution is to have even more borrowing and spending. Now a lot of respected economists see massive borrowing and spending as exactly the right thing to do. Why not defend that position honestly instead of misrepresenting his strategy? Probably because the president and his advisers know full well that most people recognize intuitively that growing the deficit to be even huger cannot be a good thing in the long run. They also know that, if a politician repeats something often enough, even if it is not true, a lot of people will come to accept it as true.

When a member of the press points out the inconsistency, the president is ready with a sure-fire rhetoric deflection. Rather than defending his position, he transfers the question into the mouth of a phantom Republican critic and then pronounces that this phantom has no standing to speak because of the mess in which the Republicans left the country. There never seems to be a follow-up question about how problems stemming from irresponsible deficit spending will be solved by additional, massive amounts of deficit.

The tactic of referring to government spending as "investing" is something that has caught on in the past few years. Politicians have found that they can get away with more if they simply substitute words or phrases that have positive connotations for most people for ones that tend to get more negative reactions. For example, tired of mocking comments from skeptics every time Al Gore gave a talk during an unseasonal blizzard, people concerned about the environment shifted from talking about "global warming" to "climate change." And politicians sensitive to the public's concern about public debt found they got more mileage talking about "investing" instead of "spending." It leaves the impression that all those taxpayer dollars will eventually come flowing back, bringing lots of greenback friends with them. No, the Democrats had it right when they were in the opposition and kept talking about "pay as you go."

Now, don't get me wrong. Personally, I like the idea of spending and investing being the same thing. It means that, if I have some cash in my hand, it's really all the same whether I spend it on a Mediterranean holiday or put it in a mutual fund. Cool.

So, clearly, the investment-for-spending gambit is alive and well. The president has refined it by also making "stimulus" a synonym for "spending." Last month at the annual retreat for House Democrats in Williamsburg, the president ridiculed Republican opposition to the stimulus bill, on the grounds that it contained huge amounts of wasteful spending, by saying, "What do you think a stimulus is? It’s spending. That’s the whole point! Seriously."

It was a good applause line, given the audience, but it was the sort of one-liner calculated to drive people with analytical personalities crazy. It implied that all spending is stimulative, i.e. that the phrases "spend money" and "stimulate the economy" are essentially equivalent. True, all stimulus is spending. But not all spending is stimulus. It's like dismissing critics of junk food by saying, "What do you think nutrition is? It's food. That's the whole point! Seriously."

The truth, which Obama knows full well, is that, all things being equal, the economy will recover regardless of what the government does or does not do. Government and business collectively affect economic cycles, but no one leader or political party can override the laws of economics. All presidents who find themselves in office at this point in a recession know that their main job is to position themselves to take credit for the eventual recovery. (And, as former President Bush knows, presidents who find the end of their term corresponding with the beginning of a recession are stuck forever with the blame.) And, as the new administration has signalled clearly from the beginning, the crisis atmosphere of a recession is an opportunity to put through initiatives that might not get passed in calmer times.

But the president runs a risk. It is not beyond the capability of a government to turn a recession, especially one as serious as this one, into an unqualified disaster. There is a tipping point at which so much of the gross domestic product becomes committed to serving debt that the economy cannot recover. And, even if it does start to recover, there is another danger. In a report yesterday, the Federal Reserve indicated that it had increased the money supply by more than $33 billion. Metaphorically, the Fed has cranked up the printing presses and is churning out dollar bills, thereby reducing the value of every dollar you and I hold. This is the sort of thing that more commonly happens in Argentina than in the U.S. When the recovery does start to happen, those extra dollars out there will be like so much tinder waiting for the spark of economic growth to ignite a conflagration of inflation.

The good news is that the checks and balances of our political system may keep things from getting completely out of hand. And the American economy is so large and resilient that it usually weathers even very bad economic policy. If so, we will all be relieved and more than happy to give the president credit for ending the recession.

False Choice?

2009-03-14T18:35:00.004Z

Once in a while you hear an issue phrased in a different way than usual, and it makes you see it in a whole new light. I had such a moment the other day.

I was listening to a podcast of Dennis Miller's always entertaining radio show, and Dennis took a call from Steve in Indianapolis about the executive order to extend federal funding of embryonic stem cell research. Steve said his wife had raised the point that bald eagles' nests, and by extension eagles' eggs, are federally protected. You can get into serious trouble with the authorities for destroying the eggs. The implied question was, if the egg is not an eagle but only a potential eagle, why are human embryos not protected as well?

This sounds like a trick question. The answer would come back that the bald eagle is an endangered species. Every egg destroyed means one less eagle, causing the population to dwindle further. There is no shortage, on the other hand, of human beings. In fact, a lot of people think there are too many of us as it is and our overall numbers should be reduced.

But think about the implications of this explanation. The eagles are protected because, as a society, we have decided that their lives have value. If we didn't, we would not care whether or not they became extinct. That raises the question, do we not also value human life and, if so, does that value not extend to incipient forms of life, the same as the case of the eagle? Or is it, in both cases, simply a matter of managing population numbers?

You do not need to be some kind of religious fundamentalist to have a respect and regard for human life. And I think it is safe to assume that few would even think of using taxpayer money to experiment with human embryos if it did not potentially mean saving the lives of human beings. It is not a simple or easy moral question. Perhaps we can sidestep the moral dilemma by limiting research to embryos that would be discarded anyway. But not really, if we decide that an embryo's life was equivalent to a human life. We do not routinely harvest organs from people in comas because they would just be going to waste. We accord human life more respect than that. So there really is no way of getting completely away from the ethical question.

In the end, the decision to harvest stem cells from embryos is one of those trade-offs that we make in life. Not all of us will be totally certain that doing this is without negative moral consequence, but we hope that the good it does will at least outweigh the bad. And that is what bothered me about President Obama's remarks when he signed the executive order last Monday extending federal stem cell research funding beyond the limited lines authorized by his predecessor. He called the tension between science and morality "a false choice." One only has to recall experiments justified in the name of science, from Nazi Germany to the Tuskegee Airmen, to feel a shiver go up one's spine on hearing a national leader assert that. I'm not saying Obama made the wrong choice, only that he portrayed it as morally unambiguous and not as the trade-off it was.

Anyway, add to your presidential listening glossary the phrase "restore science to its rightful place" and substitute "funnel more money to universities," since federal funding, not federal permission, is always the issue. As it happens, a number companies (with names like PrimeCell Therapeutics, Stemnion, Cellerant Therapeutics and Geron) have been spending lots of private investor money on stem cell research for years. Private companies have never been banned from using embryonic stem cells for research. A fair amount of their research, however, has been in the promising area of adult stem cells, which avoids the moral trade-off, since these do not require a the killing of an embryo.

In Defense of 'Socialist' Europe

2009-03-12T17:27:00.002Z

Europe gets a fair amount of bashing from Americans, especially conservative ones and especially over different economic approaches. But we Yanks should be careful not to assume that we have nothing to learn from our friends on the other side of the Atlantic.

In the debate between New World and Old World, Americans point to higher taxes, higher unemployment rates and a less friendly climate for entrepreneurship on the part of Europeans. The Europeans respond by pointing out America's weaker social safety net, pockets of poverty and a less-than-universal health care system. Some Americans look wistfully at the European way of doing things and wonder why we cannot be more like them. And some Europeans look at America and wish they were starting a business or making an investment there instead of in their own country.

The fact is that different countries with different cultures and histories collectively make different choices. How a nation makes a trade-off between prosperity and security is its own business. The French, for example, have opted for a medical system that seems very good and other generous social benefits and, in turn, seem willing to tolerate a society in which a large portion of the population has guaranteed employment while a minority have permanently dim prospects for employment.

One thing that Europeans seem to understand well, however, is the danger of inflation to an economy. After all, countries like Germany can remember a time when printing money destroyed the economy. When the euro currency was founded, the requirements for participation included an annual national deficit of no more than 3 percent and a total debt not to exceed 60 percent of the gross domestic product. These were strict standards that were not easy for every country to meet, and not every country has been able to adhere to them. But say what you want about Europe's large amounts of social spending, Europeans do at least understand the importance of paying for it.

So it should be no surprise that, when the U.S. government started lobbying European governments to pass their own stimulus bills along the lines of the one passed in Washington last month, ahead of the G20 meeting to be held in a couple of weeks, the Europeans said, thanks but no thanks. Maybe they are just being cheap or stingy. But I think they are merely heeding the lessons of history and have rightly seen that this is not the right time to pile on debt that will take many years to pay off.

As The Wall Street Journal suggested this morning, Europe is actually a good test case for economic czar Lawrence Summers's assertion that every dollar of deficit spending yields $1.50 in economic growth. "If that were true," wrote the Journal, "Italy would be the richest country in Europe, instead of merely one of the most indebted."

Bank Shots

2009-03-09T17:33:00.000Z

Some tell me that there's no point in being annoyed that President Obama, who decried distractions like "lipstick on a pig" during last year's campaign, is quite willing to fuel a distraction about whether Rush Limbaugh is the de facto leader of the Republican Party. All politicians do this, these people say correctly. Republicans have made great hay, for example, out of setting up filmmaker Michael Moore as a figurehead for the Democratic Party or at least its liberal wing, even though he holds no elected office.

The point, however, is that usually presidents and their chiefs of staff and their press spokesmen do not usually get involved in this sort of thing personally. At least not after they get into office. But over the weekend the Sunday news programs were duly preoccupied with the whole Limbaugh thing. This did not entirely crowd out discussion of the economic situation, but it did cut into it.

The fact is that, of all the initiatives and announcements that have poured out of the new administration, the one that is conspicuously missing is a strategy for the credit system. And if you polled all people who pay close attention to the economy and asked them, if the administration could work on only one single problem right now, at the top of the list would be the banks. If I were a conspiracy theorist, I might even start thinking that the lack of a plan or strategy was actually deliberate, to keep the atmosphere of crisis going so that there would be less political resistance to the administration's other initiatives. But more likely it's just that the banking problem is simply not easy to solve.

Why is the banking problem so important? Because if credit started flowing again, the economy's other problems would be a lot easier to solve and, indeed, might solve themselves. John McCain might have had a political tin ear when he insisted last autumn that the fundamentals of the American economy were sound, but he wasn't really wrong. This recession was largely a self-inflicted injury caused by a housing bubble that wiped out, or at least cast doubt on, a lot of loan paper when it burst. If banks would start lending again, jobs would not be at so much risk.So what's the solution? Political opinion seems to be divided between those who see giving more money to banks as the only solution and those who want to let banks fail. The former would essentially be throwing good money after bad, and the latter would be terribly disruptive to the economy.

One thing the government could do to spur the market to help solve the crisis is to eliminate capital gains tax, at least for those buying so-called toxic assets, thereby making it worth it to investors to sort through them to find the potentially profitable ones to buy. The administration, however, is doing the opposite. It is raising capital gains taxes. When an ABC reporter pointed out to Obama during the campaign that increases in the capital gains tax have always resulted in lower revenues, he seemed surprised but unruffled. It was still a good idea, he explained, because it would be "fairer."

Something else the government could do is to intervene and force large banks to sell off profitable parts of their business until only the most untenable parts remained. In other words, make them small enough to fail. It should be lost on no one that smaller, local banks generally are doing much better than the behemoths. There is a lesson here that should be reflected in policies and laws on mergers and acquisitions, going forward.

"Wall Street" may make a good whipping boy for the economy's troubles, but the president should not forget that he will need investors (a class that these days includes most Americans) to have confidence in his administration's policies if we are going to get out of this. The stock market reaction to each of his pronouncements (one dive after another) is certainly not definitive, but it's not exactly reassuring either. After months of talking down the market, first as a candidate and then as president, he belatedly tried to talk it up last week, advising people to invest with a long view. It did not help, however, that he based this on current "profit and earning ratios." As many business writers were only too eager to point out, he apparently meant price-to-earnings ratios, the common way to determine whether a company's share price reflects its actual value.

Like a number of things that Obama says, it sort of vaguely sounded right but, in strict terms of what the words actually meant, it didn't really make any sense.

Rush to the Head

2009-03-07T16:07:00.000Z

Barack Obama got elected by promoting the fact that he was not George W. Bush. Now he is governing by promoting the fact that he is not Rush Limbaugh.

Like all good lines, that is an over-simplification. But there is an element of truth in it as well. The president's detractors say he is running a perpetual campaign. A kinder way to put it might be that he is employing tried and true public relations techniques. Indeed, President Bush's presidency might have been more popular, and maybe even more successful, if he had paid more attention to PR. One of the annoying things about Bush for his supporters was his apparent disinterest in selling his policies and positions. It wasn't that he wasn't an effective campaigner because he was. Or at least he could be, when he needed to be. The proof is that he managed a (not uncontested) Electoral College victory over an opponent who should have been a shoo-in, given the general public contentment under the administration of which Al Gore was a key part. Further proof is his even more decisive victory over John Kerry four years later. But between campaigns, Bush seemed to have little interest in explaining and persuading the public of the merits of his policies. It was as if he didn't bother because it meant subjecting himself to more interaction with the media, something he did not care for.

Bill Clinton, on the other hand, was a master of public relations. My main memory of the Clinton years is that every week there was some big announcement or ceremony, touting some new victory for the people, whether it was signing a bill into law or issuing an executive order. The funny thing is that I cannot for the life of me really remember what 95 percent of those victories were. When reflecting on the Clinton administration, I like to joke that his major domestic accomplishment was throwing a bunch of people off welfare. And this is technically true. The reform of the welfare system was a true bi-partisan victory that had much to do with the great economy the country enjoyed during the late 1990s. In foreign affairs, perhaps Clinton's most concrete personal accomplishment was his personal intervention in the Northern Ireland peace process. To this day, the man is regarded as some sort saint or idol on this island.

But when fleshing out the list of Clinton's accomplishments, we find that a lot of them come with asterisks denoting a valiant but ultimately unsuccessful effort (health care reform, Middle East peace, the Kyoto treaty) or symbolic (apologizing for slavery) or well-intentioned but misguided (don't ask, don't tell). When I have talked to friends who are ardent Clinton supporters, I sometimes ask them what they consider his major accomplishments. Usually, they mention the economy, for which he does indeed deserve credit, although he also benefited from a fair bit of luck (catching the upswing of the tech boom) and cooperation from a Republican Congress back in the days when Republicans in power actually did more than give lip service to balanced budgets.

But more often than not, when I ask that question, my friends don't list specific Clinton accomplishments. They speak of a good feeling they got from his presidency, of how good it made them feel to have someone in the White House who they felt shared their values. It is no accident that Clinton was always a popular president. Personal popularity always seemed to be very important to him. He rarely, if ever, undertook an action that would cost him a lot of his popularity. The amazing thing is that people on the left have always seemed to love him, even when he was implementing policies that were essentially Republican. He warned of looming dangers from international terrorism and from Iraq. But he never did anything aggressive or painful to try to deal with them. And, in fairness, there would have been little political will for that at the time. In contrast, his successor, in the wake of September 11, did take aggressive and painful actions that were entirely consistent with Clinton policies and assessments (bad intelligence and all) and, in the long run, took a devastating hit on his own popularity. If people thought his actions were a departure from Clinton era policies, it might be because Clinton himself was a frequent critic of them.

It will take time to judge the effectiveness of Barack Obama's policies. The first weeks of a new administration are inevitably taken up with hiring people, announcing initiatives, making policy statements and the like. All of this activity, especially given the extremely ambitious nature of Obama's plans, gives the impression of much being done. But, in the end, it will be the continuing battles fought in Congress and the real-world results of administration policy that will determine success or failure. But, like a lot of politicians, Obama and his people know that it doesn't hurt to set up a bogeyman as a false alternative to his policies. When voters are weighing the pros and cons of a political fight, all the better if they compare Obama not to Republican politicians but to a private citizen who happens to have a radio program.

Luck of the Irish

2009-03-01T13:31:00.000Z

Every few years or so, as I make my way down the narrow, windy road that leads to my house, I spy a few men in bright yellow vests filling potholes. They work for the county council and approach the job with the insouciance of people who are guaranteed a job for life and who have three times the number of bodies to do the job before them. And I think to myself, oh, elections coming up again.

Call me a cynic, but the potholes and crumbling road surface languish for months, if not years, and it is only when local elections loom that the county council seems to swing into action. To make it even more obvious, around the same time I usually get an official-looking letter in the post from our local county councillor proudly announcing that they are fixing the road, or at least some road that they think I live near.

Now politicians in democracies the world over invariably do their best to bring home the bacon to help their re-election chances, but it wasn't until I came to Ireland that the quid-pro-quo relationship between politicians and voters became so clear to me. Ireland has two major political parties and, in terms of substance, it is hard to tell the difference between the two. Fianna Fáil is invariably described as center-right and Fine Gael is always tagged as center-left. The main material difference between the two is that Fianna Fáil is usually in power, and Fine Gael usually isn't. There are probably many reasons for this, but it probably has something to do with the fact that most people are direct recipients of gifts from the Fianna Fáil government. For example, when we moved here, one of the first things my wife did was to sign up for a monthly cash payment that we were entitled to for having a school-age child. Everyone in the country gets this payment, from the multimillionaires to the unemployed. It is not means tested. During the boom years of the Celtic Tiger, more such goodies were doled out, including fee-free university education and free health care for senior citizens, which likewise are not means tested.

This all sounds great, but now the Irish economy is in serious recession and there is not enough revenue coming in to cover all these outlays the government has committed to. It has no choice but to cut back. But once a group has gotten used to a subsidy, it tends to scream bloody murder at the mere threat of having it taken away. And it doesn't help things for popular opinion when the people you are ticking off are students and senior citizens, who have more time than most people to go marching in the streets.

Unlike the U.S., Ireland has few options to deal with a budget crunch like this, thanks mainly to its membership in the European Union. It can't run up huge deficits because it had to agree by treaty to keep deficits within a certain range, as a condition of using the euro currency. And it can't simply print more money because the money supply is controlled by a European central bank. So, Ireland has little choice but to reduce its budget and/or to raise its taxes. This is simply reality and mirrors the choices most of us have in life when times are hard: either find a way to get more money or reduce our spending.

Because of its sheer size, the United States can choose to radically increase its spending even as revenues fall. It simply writes more IOUs to China and other countries and, if worse comes to worse, it can resort to printing money to cover the spending, thereby diluting the value of the dollar. But despite the massive spending, President Obama aims to halve the U.S. deficit. He bases this on growth projections that look like fantasy, given the economic situation. And he will raise taxes on businesses and the top five percent of earners. This sounds like a painless solution for 95 percent of us, but the fact is that higher business taxes generally result in higher prices and lower employment. And taxes that are not broad-based tend to have diminishing returns as the rate goes up. The calculation seems to be that, even if the economy doesn't improve for many years enough voters will be getting some gift or other, in the best Irish tradition, from the Democratic-controlled government so that they will continue to re-elect it anyway.

Ireland will inevitably have to raise its tax rates and that will not help its recession. The Celtic Tiger made a few individuals super-wealthy, but some of them will not be contributing at all to the treasury, as tax rates go up. Those ones have long since changed their tax residency to places like Monaco.

Manic Depression

2009-02-23T20:06:00.000Z

Those of us who worry about whether the White House and the Congress are doing the right things to end the recession as quickly as possible could use some reassurance.

So far it seems as though, wherever people have behaved irresponsibly and blown huge amounts of money, the government's solution is to give them more money. Bankers make zillions of loans to people who likely cannot repay them? Give them more money. Car companies run their business at a loss that shows no sign of abating? Give them more money. People take out mortgages for homes they cannot afford? Give them more money. Congress runs up huge deficits during the Bush years? Then run up even bigger deficits during the Obama years.

Okay, I'm oversimplifying. Obviously, people who look at things the way I have just described are not sophisticated enough to understand how the economy works. The experts tell us that government spending and relief for people in bad mortgages are necessary to improve things. Or, even if they aren't, then they are still better than doing nothing. If only I was smart enough to understand.

Okay, I'm not that stupid. I get it. Sometimes in your personal life you have to go into debt to buy yourself some breathing room to dig yourself out. You then work like a dog to support yourself and service your debt, but it's something you've got to do to avoid losing the roof over your head or starving. And sometimes in a crisis, people who are doing okay have to help out other people who aren't doing okay. And maybe it's not exactly fair, but we do it because it's the right thing. After all, the next time it might be us who are the ones that need help, and we have to hope that someone else will help us out if and when that time comes. I think we all get that.

So, let's put aside the question about whether the stimulus package and the mortgage bailout plan are fair. Let's just focus on whether they will actually work. Will they help the economy recover more quickly? Will they cause less harm than simply doing nothing? And, most importantly, what will enable the most people to support themselves and enjoy a rising standard of living?

If only there was some country that had gone through a similar situation and had tried a similar solution. Maybe we could learn from that experience. Even better, what if there were two countries that had similar situations and two different solutions were tried and we could see which one worked better? Wouldn't that be helpful?

Wait, there are two such countries. Wait, no, they are actually both the same country. And they are both us, the United States. We have actually been through this at least two times before. And the government dealt with the crisis very differently in each case. In 1920 there was a recession when Warren G. Harding was president. National productivity fell by 24 percent and unemployment shot up. Harding cut taxes, decreased regulation and lowered government spending. The recession ended after a bit less than three years. Now that seems like an awful long time to suffer through a bad economy. But there was an amazing period of growth from 1923 to 1929. Then another recession hit, and President Herbert Hoover raised taxes, increased government spending, regulated industry and jacked up tariffs. From 1933 Franklin Roosevelt essentially continued and extended Hoover's policies, and the bad economy lasted until at least 1939, i.e. a full decade.

The problem with comparisons like this is that there is always some difference between the two situations that proponents of one economic philosophy or another can cite to claim that the current situation is somehow materially different. Supporters of increased government spending as a solution argue that the Great Depression lasted so long, not because of increased government spending, but because FDR did not spend enough or spend it fast enough. And since it is virtually impossible to prove a negative, there is no way to say absolutely that they are wrong.

But here is something that we can say. If President Obama's strategy works, it will be the first time a government has spent its way to national prosperity. In spite of all this spending, the president has promised to cut the deficit in half by 2013. For this to work, he has to be counting on some major growth despite the fact that the government has tied up so much of the GDP. Or he is planning to close the gap by raising taxes, presumably on the wealthiest 5 percent (since he has promised that 95 percent of us will have lower taxes) or on businesses. But experience shows clearly that this is a disincentive to productivity and growth. It's hard to see how we are not headed for a decade or more of depression.

Normally, a bad economy is considered the kiss of death for a president, but the irony is that Obama might come out of this okay politically. After all, if we remember President Harding at all today, we remember him for something called the Teapot Dome scandal. And FDR is not remembered so much for how long the Great Depression dragged on under his watch but for how much he cared about the people suffering through it.

Beam Me Up

2009-02-17T17:55:00.000Z

Okay, so I thought I was so incredibly clever to have noticed the strange resemblance between Barack Obama and Lt. Commander Tuvok on television's Star Trek: Voyager. I like to think that I capture quite a bit of what is being said out there in the political realm as well as the sci fi realm, and since no one I correspond with or read had commented on this, well, I decluded myself that I had some unique grand insight. If I had bothered to do something as simple as do a Google search on the names Tuvok Obama, I would have discovered very quickly that there is a whole cottage industry out there of entire web sites devoted to this strange resemblance and what it means. I guess I should have known. This is, after all, the internet. If you can find web sites questioning whether Obama was born on American soil, then it should be no surprise that there would be some questioning whether he was even born on this planet.

For the record, the chatter seems to be evolving from whether Obama is a space alien, specificually a Vulcan, to whether he is not a hologram. That is, is he a projection of light and force fields generated by a computer to convincingly simulate a real human being? I suppose this is a form of flattery, suggesting that Obama is a bit too perfect to be real. But it can also be seen as dismissing him as an empty suit with his ideas and rhetoric pre-programmed by someone else. Presumably by Nancy Pelosi?

Econ Test

2009-02-13T19:45:00.000Z

In his inaugural speech, President Obama memorably declared, "We will restore science to its rightful place." That was great to hear. The last thing we want or need in this dangerous world is politicians that set public policy based on emotion, blind faith or superstition.

I have a humble suggestion for which science in particular his administration ought to begin restoring to its rightful place. It is the one called economics.

Now the problem with restoring economics to its rightful place is the same problem that every branch of science has. And that is the fact that not all of the scientists agree with each other. Lots of learned people with impressive sounding academic credentials keep studying the world's economies and they all keep coming up with different ideas about how it all works and what the best ways are for managing them. That is because there are limits to humans' ability to understand things as complex as the universe, the earth or what happens when lots of people start interacting with each other. But there is something that makes up for an individual human being's inability to grasp all the detail and interaction of the world around him. It is the marketplace of ideas. In other words, the fact that we don't all see things the same way or believe the same things is actually a strength, not a weakness. In the marketplace of ideas, different views of how the world works get debated and argued and their weak points get examined and then these various ideas get tested and everyone can see which ones seem to work and which ones don't.

Now, some people don't like the free marketplace. Maybe they have a particular idea they are attached to and they don't want to risk hearing or seeing that maybe it isn't right, or that there's a better one out there that would require them to give up their own cherished view of things.

Over the past several months, the reputation of free markets has taken a beating. When the housing bubble burst and when the credit system froze up and started causing the economy to strangle, a lot of people said that this just proved what they had always known or suspected: that unfettered free markets are not necessarily in the best interest of most people. More extreme people started asserting that this actually proved that capitalism was not a viable system after all and that it was finally crumbling under its own weight, just as Karl Marx had predicted.

The problem with this view is that the current situation, while aided and abetted by human greed and collective irrational behavior, can be traced directly to government intervention. That is, a government policy of encouraging and pressuring banks and mortgage companies, through Fannie Mae and Freddie Mac, to liberalize loan standards to capture as many new homeowners as possible, regardless of suitability for mortgages, drove up housing prices and resulted in the widespread irresponsible lending practices that got us where we are today. To call this a failure of the market is to call a grocer's errant thumb a failure of his weighing scale.

The real irony is that the government's solution for the economic situation we find ourselves in, which was caused by too many people spending money they didn't actually have is, well, you are probably way ahead of me. It is for the government to do the same thing but on a much larger scale than ever before. History shows that such a course can work if it is targeted and temporary, but the president's and Congress's stimulus bill is neither. Frighteningly, we seem headed down the same course as Japan in the 1990s.

It is a bit late in the day for it, but President Obama might want to look at the precedent of the last Democratic president. Bill Clinton presided over the best economy of modern times. And how did he do it? The man who famously declared in a 1996 radio address, "The era of big government is over," working with a Republican Congress, pulled back on the size of government and, for a brief time, balanced the budget. The Clinton economy did more to improve more people's lives than all the programs in Obama's bloated so-called stimulus bill ever will.

Political Enterprise

2009-02-12T13:36:00.000Z

During the presidential campaign, I got into the habit on my movie web site of referring to Barack Obama as Lt. Commander Tuvok because of the uncanny resemblance in appearance and personality between him and the Vulcan character played by Tim Russ on the TV series Star Trek: Voyager. I just noticed that someone else has seen Obama's Vulcan characteristics. On the Human Events web site, this amusing bit of artwork appeared with an article by Jed Babbin called "Trekonomics." Finally, I feel vindicated. On the other hand, I don't understand how I failed to notice that Harry Reid is really Dr. "Bones" McCoy. Will he be the one to deliver the bad news (as he did on the Iraq war) about the economy? "It's dead, Jim."

No time to waste?

2009-02-06T15:17:00.000Z

If you have made very many major purchases in your life - or if you have just spent more than a few minutes on the phone with a telemarketer - then you have probably copped on to the fact that, when the salesman tells you that you have to commit to the purchase right this minute or else, then it's probably a good idea to take a breath and refuse to be pressured.

And, if you do give in and go along with the salesman about closing the deal right this minute and then he says, oh, by the way, could you make the check out to "cash," well, then the warning bells should really go off.

George W. Bush's Treasury secretary Henry Paulson sounded like one of those high-pressure used car salesmen back in October when he went on all the Sunday interview shows to tell the country that something really, really bad would happen if he didn't get an $700 billion to use as he pleased right away. And most congressmen, as well as the two presidential candidates, fell right in line.

Now we learn that Paulson used $254 million of that money to buy equity in companies that, at the time, was worth only $176 billion, according to a Congressional oversight panel. It would be nice to find this news surprising, but it just goes to show what many of us already know well. People just aren't nearly as careful with other people's money as they are with their own. And spending large sums of money in a panic is a good way to waste some or all of it.

Does this mean that I think that Congress should be doing nothing about the economic situation? Of course not. But the country needs to be careful about doing things in a panic. One bad sign: instead of getting those emails telling me how I can get rich by sending cash to someone in Nigeria, I have lately been getting emails telling me how I can get some of the stimulus money.

Unfortunately, President Obama has been adding to the atmosphere of panic, exhorting Congress members of both parties to get on board with the stimulus plan without delay, even while reasonable people keep finding major problems with it and public approval of the plan keeps dropping. I understand why the president is doing this. He knows well that if something this large isn't done quickly, it will drag out longer and longer and become more difficult to get passed. And he probably understands that perhaps the biggest benefit of a stimulus package is, more than its financial impact, its psychological effect, that it calms markets and investors and consumers because they are reassured that the government is doing something.

But Obama is spending way more energy on trying to get something passed than he seems to be on making sure that it's a good bill. It's as if he doesn't care what's actually in the bill, just as long as enough other people like it. And by being so forceful about how dire things are and how they will get worse if a bill isn't passed, he is actually increasing jitters rather than calming them.

The fact is that we are headed for a period of more economic pain whether a huge spending bill is passed or not. And the government's ability to affect the amount and duration of the pain exists more on the side of prolonging and deepening it, by doing the wrong thing, than on the side of being able to fix it sooner. So there is probably no harm in taking a bit more time to make sure that the bill is as good as it can be under the circumstances. But it would be easier if Obama were acting more as a leader rather than a facilitator.

When politicians get wildly impatient about passing this kind of legislation and about spending this much money, it makes me think that their biggest fear is that the economy might start improving without them.

Bait and Switch

2009-02-05T14:41:00.000Z

Here's a good example of what is frustrating about politicians. It's the old bait and switch.

Yesterday President Obama pushed back against criticism of the stimulus bill, essentially erring on the side of increased government spending over tax cuts. "In the past few days I’ve heard criticisms of this plan that echo the very same failed theories that helped lead us into this crisis –- the notion that tax cuts alone will solve all our problems," said the president, "that we can ignore fundamental challenges like energy independence and the high cost of health care and still expect our economy and our country to thrive. ... I reject those theories, and so did the American people when they went to the polls in November and voted resoundingly for change."

Clearly, voters did react positively to Obama's change message. But the problem with his formulation is that, if the average consumer of news and political advertising remembers anything from Obama's campaign sound bites, it was the constantly repeated mantra that 95 percent of Americans would get a tax cut under his administration. If he made any campaign speeches promising to boost spending (over using tax cuts) to stimulate the economy, I don’t think they filtered out to too many media consumers. Obama basically ran, and ultimately won, on promises to cut taxes for the vast majority of people. The irony is that he defeated an opponent with a long and consistent history of supporting low taxes. But John McCain's message was so garbled that regular people couldn't be sure what he was promising to do.

Now, to be fair, the additional tax cuts Republicans are pressuring the president to support are for small businesses and not individuals. And, of course, the economic situation is more dire than it seemed even during most of the presidential campaign. And presidents are not obliged by any law to keep any or all their campaign promises anyway. My only gripe is that he is using the "I won" argument to justify something different than what many, if not most, people probably thought they were voting for. (People who pay close to attention to these things, on the other hand, will not have been surprised.) The irony is that, for all his talk of change, the stimulus plan not only promises more of what we had during the past eight years, i.e. running up the deficit, but does so on a more massive scale.

To the president's credit, he has not shown himself to be at all stubborn. When Canada and the European Union began whinging about the protectionism in the House version of the stimulus bill he supported, he adjusted his stance and began extolling the virtues of free trade. When he realized he had one too many tax evaders going into his cabinet (perhaps a negative editorial in The New York Times had something to do with it), he cut Tom Daschle loose and went on every TV network to take responsibility. This flexibility is either reassuring, mainly if you like his reversals, or worrying, if you are starting to think that he bends too easily out of a lack of serious personal convictions.

The Die Is Cast

2009-02-03T21:03:00.000Z

Anyone who has worked in a corporation and has at least a bit of gray in their hair knows the feeling. You've worked your butt off for years. You've paid your dues. You've done a good job. Then that big promotion or plum assignment comes up, and you just know it's rightfully yours.

But then some flashy young guy gets it. He doesn't have half your experience and hasn't actually accomplished anything to speak of. But he looks good and sounds good and the powers that be go with him because he has them dazzled.

This is certainly how Hillary Clinton felt during the primaries. (You don't have to be a woman to know how this feels, but it probably helps.) And it is certainly how John McCain must have felt in November. But that's how it goes. The presidency isn't some reward for longevity or good work or public service or even being a hero. This is a democracy, and the president is whoever the American people want at that particular moment, which comes every four years. And in November they chose Barack Obama.

With Obama's inauguration, we are at an extraordinary moment. We have elected a president who is relatively young, as presidents go, and who has an astonishingly limited amount of government service under his belt. Not only has he no previous executive experience, but he has precious little legislative experience, especially at the federal level. On the positive side, he brings much less political baggage with him than any other president in modern times. That gives him extremely wide latitude to take bold new initiatives and to build different kinds of coalitions than we have seen for a while. On the negative side, the U.S. has less idea what to concretely expect from its leader than at any time in memory. Obama has no real track record to tell us realistically what he will do. We have his campaign position and public statements, but they tend to range from the vague to the self-contradictory. In his campaign, he played to the left, but that was what he had to do to get elected. Since the election, he has sounded more pragmatic, almost like a technocrat. He has even made overtures to conservatives. The fact is, we still don't know what Obama really believes. Not in the way that we knew what Ronald Reagan, for example, really believed when he became president. In essence, we have thrown the dice and hoped for the best in a very risky period in terms of the economy and world events.

It's still early days, but the first indications are not particularly encouraging. I'm not talking about the withdrawal of cabinet nominees like Tom Daschle and Nancy Killefer or even backsliding on promises to be more transparent than previous administrations. All that is pretty much par for the course for any new administration.

I'm talking about the so-called stimulus bill passed by the House. There are economic arguments for stimulating the economy by pumping money into the hands of consumers and/or business via tax rebates or tax cuts. But only Washington politicians can be brazen enough to justify a 30 percent increase in federal spending on pet projects and call it a stimulus. The bill is so bad that not a single Republican felt uncomfortable about opposing it, even though it meant going against a popular president and risking getting blamed for a worsening economy. Obama called for bi-partisanship, but the bi-partisanship he got was in opposition to, not in favor of, the bill since even some Democrats couldn't stomach it. Meanwhile, governments in Europe that had been toasting the new president went into a panic when they realized that the bill includes protectionist provisions, directly threatening European and other economies. The fact is that, in the long run, protectionism is bad for the American economy as well.

What concerns me is not that the bill represents Obama's political and economic philosophy but that, so far, there is no evidence that he actually has one. He has ceded free rein to the House Democrats on this critical piece of legislation. This is leadership? Despite the blowback, however, Obama seems serene, saying he is confident that the bill will be improved in the Senate and in conference. Let's hope he is right and that he is crazy like a fox and will end up getting something out that will actually help the economy and not make it worse. But, at this point, that is only a hope.