Earlier today I received the following email from an admirer:
You are a disgusting pig. I pray to God that you get brain cancer."
This was noteworthy on several levels. First, I don't even know the person who sent this. Typically, I need to know someone for a while before they reach that kind of conclusion. Second, the recent economic shocks have not, as one might have hoped, sent a message to America that we are all in this together and it is time for a new civility in public discourse. Third, for sure I will never use my cell phone again without a hands free device.
My fan was responding to a quotation attributed to me that appeared in the New York Times. The article, by the dependably insightful Helene Cooper, was entitled "A Test for Obama's View of a One-Term Presidency." It was an otherwise excellent piece which addressed Obama's stated desire to be a good one-term president rather than a mediocre two-term president. Its point was that the current challenges faced by the United States may force him to choose between these two options because of the fearsome demands running for re-election is likely to make on his time and thus his ability to effectively lead the country through and out of the current, enduring, complex economic crisis.
Personally, as I have stated before, even the president's most ardent supporters have to acknowledge the realities of a modern presidential campaign: He must work tirelessly to raise perhaps $1 billion and then spend essentially a year fending off attacks and implementing a complex, demanding strategy likely to be so taxing that it will be very, very difficult for him. Oh yeah and he also needs to give the rescue of the U.S. economy the attention it warrants. I'm a supporter of the president and I think he is a considerably better choice to hold the office than anyone who is a declared Republican candidate for president or who has been mentioned as a potential such candidate. In some extreme cases, the Republican candidates would have me shopping for real estate in New Zealand.
That said, the Times article due to the limits of space involved truncated one of my views in a way that I believe triggered the brain cancer greeting I received this morning. The story said:
Mr. Obama, Mr. Rothkopf argues, has to focus in the next 18 months on getting the economy back on track for the long haul, even if that means pushing for politically unpalatable budget cuts, including real - but hugely unpopular - reductions in Social Security, other entitlement programs and the military."
While everything in this statement is true with respect to my views, it is distorted because it refers to only part of what I said when I was interviewed. The question posed to me was, to paraphrase, "How does the president get a meaningful deal done and what would the deal look like?"
My response was that in order to address our twin crises--- unemployment and the deficit -- he would have to seek to produce significant, job-creating stimulus and in exchange for that, which will be resisted by the Republicans, do a serious budget deal. That serious deal in turn would have to involve painful concessions on entitlements by the president and the Democrats in order to win Republican concessions on increasing revenues and producing meaningful defense cuts. While such an approach sounds implausible, it is also the only way for America to get back on our feet.
Reasonable observers -- and even angry, frustrated, hurlers of invective at strangers -- will have to admit that regarding all the elements of such a grand bargain there are ways to approach the problem that could appeal to both sides, to reason and stay within the rules of arithmetic (the real kind you learned in elementary school, not the Washington variety). So, for example, you could produce a stimulus that made sense to fiscal conservatives by embracing and building up ideas like an infrastructure bank that would use limited federal funds leveraged up by major private investment to provide the urgently need renovation America's transportation and IT networks require. It's an idea that is supported by both the AFL-CIO and the U.S. Chamber of Commerce, and by Sens. John Kerry and Kay Bailey Hutchison. You could also move investment spending onto a capital budget thus forcing the Congress to treat money that is likely to bring a return differently from that which is going straight out the window … as companies already do.
On the budget deal, any superficial consideration of our debt problems has to acknowledge that the current structure of our entitlement programs is unsustainable. Further, proposals like raising the retirement age or reducing benefits for rich people who don't need them or creating more competition and fairer pricing, make sense in any case. Personally, just so you know where I am coming from, I believe the only way we will get there is some kind of new, national single-payer plan that encourages competition … see, for example, how they handle this in Switzerland. But since that's not going to happen soon, we should consider some of these other basic steps. And one reason we need to is in order to pry loose more revenue. We're going to have to accept a value-added tax (VAT) and/or a carbon tax very soon. We can trade some of those revenues for tax reform that the Republicans want, especially for a corporate tax code simplification that will help attract needed foreign investment to the United States. Should the Bush tax cuts be allowed to expire? Of course. Urgently. It was a mistake to extend them. It was a mistake to implement them in the first place. And America needs to get over the idea that we need to spend more than every other country in the world on defense added up in order to be secure. Want a place to start there? Let's get the heck out of Afghanistan and Iraq ASAP.
The point is, my quote in the Times offered only a shard of my views, and one that might understandably offend when taken out of context. That said, when put into context, I am sure there is something in my views to offend everyone. Going forward we need to look for that. If everyone is howling, then we are probably doing something right.
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Think regulatory oversight of credit rating agencies is going to increase in the months ahead? Think Washington is going to put Standard and Poor's through the ringer as a consequence of its downgrade decision? It is as certain as the fact that in lieu of vision, courage, and action, the political swamp rats of D.C. will play the blame game while trying desperately to change the subject from the current crisis.
Think the decision of Treasury Secretary Timothy Geithner to stay on through the election will fill the markets with confidence? Geithner is earnest, incredibly hardworking, and intelligent, but he has been snake-bitten from the start and the president is misreading the mood of the markets and voting public if he thinks that what this situation calls for is "staying the course." That's a mistake that's been made before … and it would be a stark irony if in his efforts to avoid being a one-term president like Jimmy Carter, President Obama instead became one like George H.W. Bush.
Think the intervention of the European Central Bank to prop up the debt of Italy and Spain is going to restore investor confidence in the eurozone, or is its action more like that of a drowsy emergency room doctor in the middle of a long shift waking just long enough to place a few Band-Aids on the gunshot wounds of several recently admitted critical-care patients?
Think the fact that the U.S. Congress being in recess at a time of great risk to the nation is a big story … or is it a bigger story that most Americans think that is a net positive, given how unlikely it is that the petulant children of the U.S. Congress would be likely to get anything positive done were they actually in their offices working?
Think that with the great economies of the world circling the drain that profound security and humanitarian concerns will fester and worsen -- from famine in East Africa to Iran's nuclear program to the mess in Afghanistan that took such a tragic toll this weekend (undoubtedly thanks to the support the Taliban receives from elements in the government of Pakistan)?
Moments like this will get you thinking. Unfortunately, most of the thoughts that are likely to cross your mind are unsettling ones. In many ways this moment is more complex and daunting than the crisis in 2008 and 2009. Because back then there was a pervasive sense that we would and should do anything in our power to avoid a global economic meltdown. Not that we actually did do what should have been done. But at least we felt like everyone was pulling in the same direction.
Now, not only is Europe as riven with political divisions as is the United States, but there is a widespread belief that certain types of actions are off the table either because we tried them and they didn't seem to work the last time around or because they seem to be politically not viable. I would argue, however, that while this may be the conventional wisdom, we all need to work to undo it at the earliest possible moment.
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A couple of years ago, in the wake of the market shocks of 2008, a colleague and I went around the world speaking to business and government leaders. In every conversation, the question was: "What's next?" We responded by saying that the answer was better described with letters than numbers.
We then drew out on a sheet of paper a few letters: a "V", an "L", a "U", a "W," and a backwards "J". The idea was that each represented a graph of the path the U.S. economy would take. A "V" was a pretty conventional path for a downturn with a fall followed by a rebound with a similar slope. An "L" was a kind of disaster scenario. It meant that, like the old woman in the television commercial, once the market had fallen, it couldn't get up. A "U" was a "V" with a longer period at the bottom, during which the economy was in a recession. A "W" was the tease and then heartbreak of the double-dip. And the backwards "J" was perhaps the most troubling of all because it also seemed the most realistic: the market would fall, be kept down for a protracted period and then, when it recovered, it would not recover to the levels it had enjoyed before. It suggested that this crisis was not just a momentary problem but a watershed and that, afterwards, America would not be the same again.
Well, our presentation would be a lot shorter today. Now, for the economy as a whole, we have two choices: a "W" or something that is a combination of the "W" and the backwards "J" -- call it an "unfinished W." Because, denials of the politicians and pedants aside, in real world terms, most Americans at least feel like they are entering the double dip, the downturn we were promised would not happen. The only real question now is whether the recovery that comes brings us back up to past levels or whether it only gets us part of the way there to a future of protracted slower growth.
In looking for the reasons why we are where we are, we gain some insights into which of these patterns we are most likely to follow. For example, there is the old algebraic formula that has once again seemed to govern here in the U.S., even though its meaning has seemed to change over the years.
The formula is R + D = W. In it, R + D represents America's political arithmetic of Republicans plus Democrats. Interestingly, however, W is a variable that has meant different things for different eras. Initially, the W stood for the wins the U.S. was racking up economically and otherwise worldwide. Our political system in this era worked out to being a net advantage for the U.S. -- always fractious but at critical moments, from commitments to war to the New Deal to the Great Society, capable of coming together to make elevating, energizing decisions.
In a later era, during the first decade of this century, with Democrats and Republicans almost evenly divided and new media and national attitudes reducing much of the political debate into a bitter, lowest-common-denominator stew flavored with acrimony and big floating chunks of foolishness, the "W" ended up standing for the middle initial of the then-president of the United States. In that case, the "W" no longer meant a win but, rather, a president who was both fiscally and internationally reckless.
Now, the W refers to a situation in which R and D end up cancelling each other out or producing a net negative result. The political process has produced measures that either compound problems or fail to address them. And the market, sensing the problem here, and seeing similar formulas that have zeroed-out leadership, decisiveness and progress elsewhere, has slammed us back onto a vertiginous downward trajectory.
Are there other factors fueling the downturn? Macro cycles? Core economic problems? Yes, of course. But in Europe, the U.S., and Japan, one common denominator is that the current round of concerns is dominated by the economics of failed leadership. When we went around saying it wasn't numbers but letters on which people should focus, we didn't know it but we were making an important point: the point that you have to look past the simple arithmetic. It's not economics but politics that seems to be driving this current phase of the crisis.
The inability of America to come together to fund the government programs and reforms demanded by recovery, the inability of Europe to address its own structural flaws, the inability of Japan's diet to produce any consistent series of major decisions to fuel change and compensate for the country's demographic and other great challenges -- these factors have led markets to think that the growth many companies have enjoyed the past couple years, the energy seen in emerging markets, the massive amount of capital available in the world, would not enough to fuel real, serious recovery.
All that said, while it is a "W" or an "unfinished W" for the economy as a whole, for the bottom third of the population, it is a "U" or, worse, an "L." They never rebounded even slightly. They have fallen away from the top of society like the jettisoned booster of a Saturn V rocket. And partial recovery hasn't helped them a bit. For them, even the misleading uptick in the middle of a double dip would have been encouraging. But it never came, and now, wherever they look, the numbers don't add up and the letters they see spell out a bleak future. That will remain the case until, once again, adding R and D in the same equation produces the positive by product of cooperation, compromise, reason, and good faith.
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Happy birthday, Mr. President.
Admittedly, there has not been a lot to celebrate lately.
With market losses in this slide now exceeding the 10 percent level, so-called correction territory (London's FTSE is down over 11 percent since April), weak employment numbers in the United States, troubling global economic indicators wherever you look, the Arab Spring stalling, the Libya intervention in slow motion, AfPak a source of deep worry and frustration, China rising, global warming, Justin Bieber, the bad reviews received by Cowboys & Aliens, it might well be, Mr. President, that you feel like there is very little to celebrate.
Well, not only do I think you've got a wide range of accomplishments that deserve celebration, but I think it is high time that those of us who actually believe government can do some good start making our case as actively as are those who are simultaneously talking it down and taking it down. That's why every week until I run out, I'm going to try to focus on at least one significant area of accomplishment, a success story.
This week, the gift wrapping around the success story is that which comes hard to some of us up here in the blogosphere's peanut gallery: an admission that I was wrong. Now readers of this blog will be the first to note that I'm wrong all the time. But in this instance, I am even willing to acknowledge it.
When you announced your National Export Initiative, I thought it was just a rehash of the National Export Strategy we did back in the Clinton days. What's more, since I thought the administration did very little on trade policy in its first year or two, I felt that the announcement, made in your 2010 State of the Union, was little more than a rhetorical device, that there was not meat on its bones nor was there likely to be any.
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Enough is enough. After remaining divided on this issue for too long, it is time to take a stand regardless of the political consequences.
It is time to join with those who have already had the courage to weather the inevitable criticism from a biased, bought, and paid for press corps that is part of the greater problem we face.
It is time to end the double standard that for far too long has guided and distorted America's policies in the Middle East.
You all know the story: For decades, special interest-driven ties have enabled a small lobby in Washington to embrace policies that have cost America dearly and today, increasingly put our national security and national prestige at risk. We have for too long supported Middle Eastern political leaders who themselves represent comparatively small populations with dubious historical claims on the land they control and extreme religious agendas. These so-called allies have not only implemented unfair policies that have earned criticism around the world, they have actually implemented apartheid-like segregation of the people they govern. Minority interlopers have unjustly appropriated power, held it by force, and often brutally oppressed majorities that deserve better.
While this is our policy for a subset of the Middle East, for others in the region we are much less accommodating. We are constantly haranguing them, criticizing, demanding that they achieve an ever-higher standard of behavior … even though their historical claims on the region are every bit as great as those we coddle, even though in many ways they have served America more reliably than those we prop up with our military aid, even though they are in many ways the source of the region's vitality and have the clearest vision as to how it might break out of the economic and political crises that torment it.
The cost of this double standard is painfully apparent today. Just look at the headlines. In Syria, all America can do is make earnest but impotent shows of solidarity with opposition leaders and search for new adjectives to add to our denunciations of the illegitimate Assad regime. But because of our double standard, because of the fact that we dare not call out the Arab nations we have supported for so long at such a high cost, because we can't count on them as our allies to do the right thing and add pressure on Assad to go, we are forced to treat this grave humanitarian crisis as though it were happening on the moon, far from any real ability of us to influence it.
Yes, the Syria crisis does, as is often noted, illustrate the greatest of the many follies associated with the frustrating saga of Western intervention in Libya. That is, of course, that by intervening in Libya ineffectively, we have now made it impossible for anyone to believe we will intervene anywhere else, even when, as in Syria's case, more credible threats of punishing Assad would have been helpful arrows to have in our quiver.
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"I don't think most people in Washington have any idea of the damage that has been done in the past few weeks to America's brand around the world." So observed today one of the keenest observers of Washington I know, a major international figure who is regularly in touch with heads of state, finance ministries, and financial institutions worldwide. He says they are shocked and worried by what they have observed over the past several months.
While some in Washington are congratulating themselves for the debt-ceiling deal, they are failing to recognize the toll their debate has taken. Rather than restoring confidence in a United States returning to sound financial principles, they have revealed -- both in their actions of the past few months and in the cynical, half-baked nature of the deal that has been struck -- profound flaws in the character of our system and our leaders.
A downgrade may come or not. Certainly, if the ratings agencies stick to their guns and assess whether real progress has been made in controlling the growth of U.S. indebtedness, one is imminent. This deal, as has been noted by observers such as Gang of Six member Sen. Tom Coburn, a Republican respected by Democrats for his straight shooting on these issues, is less than meets the eye. It neither produces really meaningful savings nor does it actually lock us into a process that is certain to produce meaningful savings in the near future. There are too many accounting tricks and loopholes, too many hard choices sidestepped and pushed off to the future.
In fact, the deal is really an almost perfect manifestation of what might be considered the ultimate legislative form of double negative: the compromised compromise. Finding common ground is healthy. Providing both sides with cover but taking no real steps to advance either of our national necessities -- promoting growth or reducing the deficit -- is quite another matter. The result is much more of a muddle than it is, as advertised, a triumph for the middle.
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Celebrating the pending debt-ceiling deal is like a cancer patient in a burning house surrounded by hostile troops celebrating finding his empty wallet. It is not only a solution to a self-created, third-order problem; it is one that is not just inadequate to addressing the really serious challenges at hand; it has almost nothing to do with them.
While criticisms of the deal that note that it barely makes a dent in the debt and buys into spurious principles about how to actually balance the debt are perfectly fair, there are three much bigger problems associated with the proposed agreement.
The first, of course, is that it reveals what a hopeless mess the U.S. political system is. It does so via the process that got us here, the problem being addressed, and the deal's reliance on numerous tell-tale standards of Washington nonsense -- such as the very long-term nature of the cuts or the reliance on yet another committee to address what couldn't be resolved. This would be worrisome in any case. But it is made more troubling because of the other two major problems with the deal.
The second problem is that the deal is more than an agreement to minimal debt cuts, a convoluted process that is more likely to invite mischief among our political class than it is to make a sensible dent in our national debt, and a concession to extremists whose values will bankrupt much of the United States while handing over even more of the national patrimony to a super-empowered elite. It's that it also carries with it an invisible unspoken rider. The rider is that, since this process was so traumatic, the likelihood that any new spending program of size or new revenue program is off the table for the next 15 months or so … despite the fact that the staggering U.S. economy needs both.
(And for those who think the president has scored a "victory" by getting an extension of the debt ceiling through the end of 2012 -- think again. First, there will be plenty of other opportunities for further standoffs in the normal budget process. Secondly, what the president gave up in exchange for this is a process in which the failure to agree on a path forward guarantees nothing but cuts to the budget … not smart ones as much as mutual punitive ones. Thirdly, the deal probably is not big enough to avoid a downgrade.)
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While President Obama's comments on the debt ceiling standoff on Friday morning were pretty much a non-event, there was one thing he said that was so dead on target it is likely to live on. When -- and I don't think it's "if" -- the U.S. gets downgraded, it will not be because the United States does not have the ability to meet our obligations it will be because the U.S. does not have a AAA political system.
While the president meant this as a commentary on the current situation, the more disturbing element of the comment is that the flaws to which he was referring to are likely to endure and exacerbate the economic problems already burdening the nation. It would be a mistake to think that those flaws are simply a matter of the misguided views of one party or another or even the extremism of one wing or both.
The system is fundamentally structurally damaged. While we would benefit from having a third party, plans to introduce a third party candidate for president ignore the fact that our more urgent need for a third party is in the Congress. Further, adding parties won't address the money cancer that has corrupted the system and which is getting worse with each passing election's growing demands for more and more cash.
In addition, the structural problems are more deeply ingrained in the processes that drive the political system, such as having an upper house of Congress that requires supermajority votes to get almost anything done and yet also allows individual senators to hold up nominations for critical offices indefinitely without rationale. Budget problems are associated with Byzantine collection of appropriating and authorizing committees and made worse by the self-interested behavior of chairs and ranking members who see the gavel as an ATM card that enables them to fund campaigns and stay in power.
No, as President Obama rightly observes, when the downgrade comes it is likely to be less due to the size or cost of our government than it is its shape, structure and the personalities of those who are mismanaging it. But we shouldn't let ourselves off the hook so easily. Those personalities serve at the behest of the American people and to the extent those people do not demand productivity and reason from their representatives then ultimately the downgrade is a verdict about the judgment of the U.S. electorate.
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David Rothkopf is the CEO and Editor-at-Large of Foreign Policy. His new book, "Power, Inc.: The Epic Rivalry Between Big Business and Government and the Reckoning that Lies Ahead" is due out from Farrar, Straus & Giroux on March 1.