The bad news about the U.S. Congress is that nothing is what they do best. The good is that most important thing they can do in the year ahead is nothing.
Now, this is not me channeling my inner Rick Perry. I don't think that government ought to be irrelevant. Rather, this is a simple statement of fact. While this Congress has demonstrated itself to be grid-locked, brain-locked, inept, and hopelessly corrupt, it may be more than just the Congress that an ill-informed, apathetic, impulse-driven American electorate deserves. It may actually be the Congress we need.
Because right now the single best way for the U.S. Congress to fix the deficit debacle that it created is to continue to behave in the partisan, ideological, childish, and irresponsible fashion that has become their hallmark. If they do, they will do more to cut the deficit than any number of over-hyped, under-performing committees could even dream of.
By remaining frozen as they have been in the headlights of the oncoming 18-wheeler of euro-style economic calamity that is bearing down on America, this group of empty suits may actually not only miraculously avoid becoming historical road-kill, they may actually end up in the Do Nothing Hall of Fame.
How? It's simple. By failing to address the deficit in the supercommittee, our current Congressional "leadership" has effectively ensured that the single most important item on the legislative and national agenda for 2012 is the expiration of the Bush tax cuts at the end of this year. And the very best way for America to cut its deficit and bring its house back in order after the wanton profligacy of the past decade is to simply let those cuts expire. Which will happen if this Congress plays to type and does the nada it does so well.
There is no single budget factor that can make as big a difference as simply letting these ill-conceived cuts lapse. Projections by the Committee for a Responsible Federal Budget show that over the next forty years, no single factor will contribute more to our growing deficit. According to the Congressional Budget Office, letting the tax cuts lapse would immediately restore $380 billion dollars a year in revenue and would, therefore, cut the deficit by $3.8 trillion dollars over the next decade, fully 50 percent more than the $2.4 trillion in total deficit reduction that was the goal of the debt limit deal.
Letting them lapse would also not have an unduly burdensome impact on American voters, simply restoring tax rates to where they were a decade ago. Further, as the dismal economic performance of the decade since the cuts were introduced shows, they actually have not had the stimulative effects they were touted as offering.
In fact, if you look at the huge and ever-growing cost to the United States of the cuts, it is very clear that they and not the 9/11 attacks were the most destructive event to hit the country in 2001. Compound them with the costs of our two misguided wars in the Middle East and you have destruction to America's financial condition, economic prospects, role in the world and national strength that no terror group or competing national power has been able to achieve in America's modern history.
The question of course, is this Congress up to the task at hand. Will they fight and bicker and then ultimately end up so divided that they do not pass an extension. As that great Washington oracle the Magic 8 Ball used to say, "Signs point to yes."
After all, this Congress -- in the midst of a great economic crisis -- has not managed to meet its fundamental obligations to pass a budget in 19 months. The Senate has not actually passed a budget in regular order in over 90 months. (The last time a Congress submitting all its spending bills by the mandated October 1 deadline was 1998.) A big job creation bill? No. An up or down vote on Simpson-Bowles? Nope. A major infrastructure initiative? Not. Something to deal with the mortgage crisis that started all this in some meaningful way? Get real. Something minor but promising? Wishful thinking.
That's why this year could be this Congress' most productive ever. Because not only could they undo one of the greatest mistakes of America's recent past by continuing their game of statues, they could add to the victory by letting the automatic cuts that should be triggered by the supercommittee's failure stand. Of course, these fraudsters have learned well from their sponsors on Wall Street and they never actually believed in that "fail-safe" mechanism anyway, figuring they would undo it later. But what if they can't even do that. More savings. And for those who argue the U.S. defense department can't afford $600 billion in cuts...and with all due respect to Leon Panetta who is a great public servant and will be a terrific Secretary of Defense...nonsense. That's a 10 percent cut which would still leave us spending more on defense than virtually every other country in the world added up...and something like 10 times more than any of our nearest rivals. Somehow I think we can handle it. Somehow I think we must.
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Folks, I think we've been had. Worse we've been snookered by a group of guys in the U.S. Congress who are not exactly known for their cleverness. Think about it: we have this oxymoronic supercommittee that has been set up so that if the members fail to do what we ask of them, we are actually the ones who are penalized (through automatic wholesale cuts to government programs, some loved by Dems, some loved the GOP). Shouldn't the members have been forced to sign a deal that said that if they didn't reach a deal by the deadline that they would resign? Shouldn't they actually have some skin in the game?
Trust me, if these dithering poseurs were actually accountable for their own failure to do what they have been hired to do, perhaps they might take the job at hand more seriously. Maybe they are too busy with their insider trading to be bothered with little stuff like the future of the republic.
It's not like the job is actually that tough. They are only being asked to cut the deficit by the equivalent of $120 or so billion a year for a decade. That may sound like a lot but it's out of a $3.7 trillion budget. So it's about 3 percent of the total. And that's including the radical possibility that we actually consider solving the problem by raising revenues a weensy bit. After all, the amount in question is less than we are spending each year on the two wars we don't want to be fighting any more in the Mideast.
Can you imagine what would happen to, say, a mid-level corporate drone who when asked to cut three percent from his budget said he couldn't do it? He'd be canned before he was able to simper his first excuse. And that's just what should happen to these guys.
To put their bungling in perspective, consider for a moment that in today's news alone we have reports that historical enemies India and Pakistan have managed to hammer out an agreement normalizing trade relations, that Syria's neighbors have reversed their behavior of decades and started to pressure the Assad regime to pack it up, that even the Greek and Italian governments are making progress dealing with crises that they have let fester for years. In other words, government officials in other countries are at least showing signs of trying to grapple with tough issues albeit with varying degrees of success.
But here in Washington, the supercommittee and the Congressional leaders to whom they feel they report (they actually report to us, but that's seemingly beside the point to them) haven't thought saving the U.S. economy from yet another crisis of confidence in the markets not to mention the other grave consequences of continued fecklessness was important enough to get around to with only a week left to go on the clock. Insiders in both parties are giving up hope for a deal (although my money is still on a last minute faux-deal that is both small and meaningless when scrutinized). And for everyone involved, the expectation is that they can blame it on the other side and go on with business as usual.
If we, the American people, had any sense of urgency ourselves, we would put an end to that complacency in the one way we can. Should this process fail, we should start a significant public movement to vote out the current Congressional leadership and every single member of the supercommittee ... and to send a strong message that the next Congress needs a change of management regardless of who wins. These guys have disqualified themselves from further consideration as "leaders." They can't do it. They won't. They will have had their shot and failed. And should they not rise to this particularly important moment, we need to recognize that unless we fire them for their incompetence that future generations of congresspeople will feel that they too can pose and pontificate and fail with impunity ... thus producing the kind of institutional breakdown that unchecked will do more to undercut American power than two centuries of international adversaries could muster.
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So let me see if I understand this latest round of eurozone mania. The crack dealers and the police have gotten two junkies onto methadone and we are supposed to celebrate? The junkies are still hooked. The dealers are still peddling their poison. The cops are still unable to address the core issues that are key to solving the long-term bigger drug problem. There's no political leadership to speak of the question. And therefore, no real progress has actually been made. Yet, down at Delancey's bar and stock exchange it's drinks all around.
What the heck, folks? Do we need to shove markets into a cold shower of perspective every day now? They veer from irrational fear to irrational exuberance with such regularity that I am starting to think that the solution to Europe's financial problems -- for which the above was an ever so subtle metaphor -- may actually be drugs. Like lithium maybe.
Today, the markets swing back to hope because Italy has taken steps to embrace austerity, Don Bunga Bunga is headed his next career as a professional defendant, and the Greeks and Italians both seem to be opting for technocrats to right their capsized economies. That these same technocrats bought into the mainstream delusions and misrepresentations and miscalculations that led to these problems in the first place is no matter. All that markets care about is that it seems like they will follow the banks' prescriptions for preserving bank cash flows at the expense of the people of their home countries. Or as it was put in my favorite tweet of the morning, from Dave Johnson retweeted by Markos Moulitsas, founder of the Daily Kos, "Greek PM says let PEOPLE vote, immediately booted, replaced by a BANKER."
(It's remarkable that the "moral" obligation of countries to repay debt that never should have been made available to them in the first place is actually so immoral -- both because it rewards enabling malefactors and because it penalizes innocents. The banks again make money coming and going as they did playing both sides on the volatile trading in between. Wouldn't the world be a better place if those who underwrote government debt couldn't also engage in trading it -- which creates the opportunity to profit from deals they might not otherwise do? I'm just saying...)
Meanwhile there is still no progress on the eurozone's larger structural issues. There is still no consensus about how to restore growth to the damaged economies of the south and those nearby who they are dragging down. There has really been no change ... except for the worse ... with regard to the financial soundness of many of Europe's big banks. There is still no orderly path by which a country can opt out of the eurozone ... even though the existence of such a path would have helped nip this problem in the bud even before it began. There is still no clarity about whether or not the countries of Europe want the ECB to have the resources and regulatory tools needed to actually effectively play the role of lender of last resort. And frankly, it seems ever less likely that the IMF will actually get the additional capital it needs to play the role for which it was envisioned.
Look, I've dated people who were more or less bipolar. I learned a few things from the experience. One was that while you were in the relationship it made sense to try make the most of the highs. They could be great. But I also learned that the lows were when you had moments of real clarity about the unsustainability of it all. The highs would always be a lie until you fixed the core problem. I also learned that took time and patience and often a radical restructuring of the relationship...by which I mean I discovered how healthy an exit can be for all interested parties. (On this point, see Paul Krugman's very good piece today entitled: "Legends of the Fail.")
I also discovered that you can't live on the roller coaster forever. It's just too damn exhausting. That's how I'm starting to feel about this problem in the Eurozone. And I am inclined to think that's how the world is starting to feel too. Patience with authorities who don't deal with the big issues and seek to frame every minor triumph as something larger than it is will wear thin. It won't just be the Papandreous and Berlusconis who won't survive all this. Absent real progress on the bigger issues, Eurocrisis fatigue will soon start doing in the Merkels, Sarkozys, and Camerons. That's the one thing that is clear. One way or another, as far as this crisis goes, it's probably best to stand clear of the door marked "Exit."
I'm still waiting for the phone to ring and the editors of Time Magazine to ask me who the pick should be for Person of the Year. This will be one of those years when it's a concept choice, of that I'm certain. You know what I mean, when the choice is a group of people or a home appliance rather than one big name recipient. The only question in my mind is whether you call 2011 "The Year of the Mob" -- which is a bit uncharitable to some of the public demonstrations that championed important values with great courage...or "The Year of the Masses" or "The Year of the Street." That covers everything from the Arab Spring to Occupy Wall Street, from demonstrations in Athens against fiscal mismanagement and the burdens of austerity to those in London against raised tuitions, from the truckers strike in Shanghai to the mobs in State College Pennsylvania protesting the ouster of Joe Paterno or, one hopes, protesting the university looking the other way against charges of child abuse.
And of course, the ultimate example of mob mentality would be the performance of world markets, stampeding as though they were not on Wall Street but in the streets of Pamplona, rampaging from one crisis to another with precious little regard for facts, the long-term, fiduciary responsibility, or anything but the trade of the moment. As a consequence of this phenomenon and with an eye toward the uncertain outcomes of some of the other public demonstrations of the year, this might also be the year the editors run a thought provoking sidebar headlined "RIP: The Wisdom of Crowds." Because comforting as that notion was, crowds are only wise if all in them have equal access to the same information, have equal capacity for evaluating that information, have equal ability to move at the same speed, are playing on a level playing field. And as we know, they don't which is why the only people who still believe in efficient market theory are the ones who are peddling the old textbooks and academic papers they wrote about it. I certainly don't know a single major investor who believes in the idea.
Sadly, of course, we don't get to pick the winners of such illustrious prizes here at tiny FP. So, we have to make up our own awards that capture the spirit of the moment. Fortunately, this gives us more latitude. We don't have to limit our choices to people. We can go deeper. And in this case, that's precisely where we will go.
And that's why I would like to take this opportunity to announce our (my) selection for FP's First Annual Gland of the Year Award. While the competition in this year of Kardashian marital hijinks, Bunga Bunga parties, and the patter of little feet in the Élysée Palace was fierce, once again the winner trumped by a wide margin the runners-up, which as usual included a variety of reproductive glands from many lands not to mention several organs that happened to get votes despite not actually being glands --including the heart and the brain. And that winner, by a wide margin, explaining everything that happened in the global street and once again dominating (and making havoc of) global affairs is ...the Adrenal Gland.
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Europe is a generalization. As recent events have demonstrated yet again, sharing a continent with someone doesn't necessarily make you their countryman … or even capable of cooperating with them when it is in your mutual self-interest. Yet, despite all evidence to the contrary, when we talk about the crisis in Europe, we talk about it as if it were a Europe-wide crisis. Worse, recently, political opportunists on the right have begun to argue that the problems in Greece, Italy, and Spain are an indictment of Europe as a whole and of "European" ideas like the welfare state.
But of course, the economic mess in which the Greeks, the Italians and others find themselves has nothing to do with their being European. It has to do with them being financially irresponsible. It has to do with them being baited into reckless practices by bankers with whom they were too cozy … and who themselves were so eager to lend that they suspended sensible risk assessment practices. Admittedly, the problems within these states have pan-European consequences and they have revealed serious shortcomings both within European Union institutions and among EU leaders. But it would not only be misleading to lump all the countries of Europe into one basket in terms of the issues that have been raised, it would also obscure the fact that within Europe itself exist superb examples of what these floundering countries might aspire to. (And the contrast between the success stories and the failures needs to be understood to begin to grapple with the real problems of economic and political integration that have not been sufficiently addressed to date in the context of the European Union.)
What's more, Europe's success stories not only quash absurd assertions that having a state with a strong social safety net is the problem, they offer examples that might be well followed outside Europe; say, in the United States, home to another broken, corrupted version of capitalism.
It is a point that Jeffrey Sachs absolutely correctly noted on "Morning Joe" this morning and that needs to be better understood. Not only is the "European model" or "Eurocapitalism" not dead -- it, to the extent it is defined by Europe's best performing countries, may well be the solution to balancing every state's desire for growth, their need for fiscal responsibility and the obligations of a moral, equitable, empowering social contract.
So, to begin where much of today's discussion stops, there are a group of high-performing northern European countries that rate higher than the United States or Southern Europe on the "Sovereign Fiscal Responsibility Index." Estonia ranks number 3 after Australia and New Zealand. Sweden is 4. Luxembourg is 6. Denmark and Britain are 8 and 9. Poland, the Netherlands, Norway and Slovakia are 13, 14, 15, and 16. Austria is 21, Finland is 22, Germany is 25, Italy is 27, and the United States is 28. Iceland, Greece, and Portugal are 32, 33, and 34. The SFRI report notes that in terms of "fiscal space" the amount of additional debt a country could add before getting into trouble "Scandinavian countries as well former British colonies appear well positioned with fiscal space in excess of 100 percent of GDP." They add that "Central and Northern European powers are currently in decent shape" but that "the PIIIGS" are already close to their debt limits and that the United States in the space just above that but at risk of deteriorating.
But these countries are not fiscally responsible at the extent of promoting either growth or providing social services. For example, Finland, Luxembourg, Germany, and Sweden all grew substantially faster than the United States in 2010. The United States ranks worse than Norway, Belgium, the Netherlands, and Finland in the OECD education rankings with countries like Germany, Estonia, Switzerland, Poland, and others finishing ahead of the United States in math scores. Virtually all northern European countries, plus Germany and Britain, have lower unemployment than the United States. Further, Europe's composite GINI (inequality) score is better than the United States with both northern and southern countries finishing well ahead of the United States, which ranks between Jamaica and Cameroon. And whereas the U.S. only invests 2.4 percent of GDP in infrastructure, Europe on the whole invests 5 percent.
And as I pointed out in the New York Times piece I did a couple weeks ago "Redefining the Meaning of Number 1" most of these countries in the northern and central parts of Europe finish well ahead of their struggling neighbors and the United States in terms of quality of life rankings. They achieve success and a balance between growth and fulfilling the terms of a robust social contract by performing neat tricks like guaranteeing health care to all and still spending a smaller percentage of their GDP on health than the U.S. and by relying on collective security to allow them to spend less on defense.
The point is that some parts of Europe are not only working well, but can be examples worth emulating -- both by the continent's more reckless debtors and the United States itself.
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Perhaps by the time you read this, the asteroid named 2005 YU 55 will have sped past the earth, missing the top of your head by like 200,000 miles, which is nothing in astronomical terms. In fact, given that most items in space are light years apart, the near rendezvous with the 1,300 foot wide chunk of rock and ice is essentially the same thing as a direct hit.
Yet, because astronomers have told us not to worry, I haven't noticed long lines of cars heading out of the city and up toward higher ground. I don't recall reading about a run on hard hats or Bruce Willis and Ben Affleck heading into outer space to save us. There's been no panic. Even though a slight miscalculation on the part of the astronomers who track space rocks could have left us vulnerable to a devastating direct hit. This rock the size of skyscraper would obliterate a city if such a collision were to take place, even one of considerable size that has -- cockroach like -- resisted many other attempts by nature to dispose of it, like Los Angeles.
But despite the fact that many of them grew up lonely in musty-smelling rooms chock-full of collectible action-figures from Battlestar Gallactica and large wall calendars counting down the days before the next Comic Con, we take the reassuring words we have heard from our astronomers to heart. (Haven't we seen the movies, folks? Don't we realize that all abuse these nerds must have suffered in high school scarred them and left them with plenty of motive to drop a decimal place or two, move to a shack in the Rockies and watch the unhappy ending while snuggly tucked under their Luke Skywalker sheets?)
Jay Melosh, who I am hoping is actually a perfectly normal guy who played baseball and has gone on dates, is one of those "experts" upon whom we are relying. He is, according to the Los Angeles Times, a specialist in "impact cratering." What motivates a guy to choose such a life's work? It's probably better that we don't ask. Because we want him to be right. We need him to be right. After all, he is one of those whose words we find comforting enough to allow us to go about our business while 2005 YU55 hurtles straight at us. "This one," Melosh said, "would be a city-buster, but would not wipe out civilization."
What a relief. It would only destroy everything in a 60-mile wide radius if it hit land or create a monster tidal wave 200 feet high if it fell into the sea.
But we take him at his word because he's an expert. (Admittedly one who is far from both big cities and tidal-wave vulnerable shorelines.) Experts like him are telling us not to worry. And once again, trusting souls that we are, we are buying it.
We just have to hope that these experts are better than the experts who told us that deregulating international financial markets or allowing banks to cook up all sorts of derivative markets without any adult supervision would make us all safer. We have to hope that they are smarter than the experts that told us that bankers could be trusted to "self-regulate." We have to trust that they know more than the geniuses who got paid tens of millions to watch after other peoples money and who assured them the best place for it was with Bernie Madoff or in MF Global Holdings.
We have to trust that they are more attuned to reality than those who even now still suggest that once-in-a-hundred-year financial catastrophes occur every 100 years even though we could well be on the verge of our second such event in 3 years any minute now.
No, surely these underpaid socially-ostracized geeks whose word we are taking at face-value about the future of civilization must be better than all those Armani-suited, Harvard-educated millionaires who collect supermodels like the rest of us collect lint in our navels. Or the highly touted geniuses who regulate financial markets or the glamorous billionaire publishing magnate politicians who tell us not to worry they will return Italy to its former glory. Or the air traffic controllers who manage to keep the near-misses to a bare minimum. Or the highly-trained NFL or FIFA referees who never get one wrong. Or the doctors who never make a wrong diagnosis.
No, these are experts. We have nothing to worry about. Having said that, I have two final points for you. One, the next time you see a nerdy little kid who has taught himself elfin and can recite verbatim all the dialogue from the entire Lord of the Rings trilogy, hug him. He needs love. He needs to feel like he and the rest of civilization have at least something in common. And while you're at it, buy him an extra battery or two for his calculator. And two, having thought about how well the best experts are doing for us protecting us from global financial calamity and ensuring safe outcomes in other expert-dependent government systems from healthcare to transportation, I'm writing this from a secure corner of my basement. While wearing a snorkel.
Please don't tell anyone. I'm not a spoilsport. I don't want to ruin anyone's weekend.
I know we are all celebrating. The European Union has a deal! This could be the biggest month in almost 80 years at the New York Stock Exchange. The U.S. economy grew at a sizzling 2.5 percent last quarter. Pop a cork! Time to order your Maserati from the same place the broke Italian government seems to be buying theirs.
Happy Days are....
Ok, enough snark. Our little secret is that there is actually not much to celebrate in all this. Yes, the European Union struck a deal to deal with some of its immediate problems. Of course, when you look at the deal, you see that there are plenty of loose ends. And that the deal doesn't address the fundamental structural problems the EU face. And that the deal doesn't address the impact austerity programs and tightening capital flows will have on countries like Spain and Italy ... or what they may mean for their debt problems and how it may make future problems more likely. Nor does the deal reduce many of the fault lines in the foundations of European banking ... under-reported risk, faux-stress tests, debts soon to go bad. Nor does it address the problems in global derivative markets that have existed since well before the crisis of 2008-2009 and about which serious measures have yet to be taken.
While the deal does have the advantage of finally getting the banks to recognize they have to pay a price for their lending recklessness ... for being the pushers that helped get these crack-addict countries hooked on easy debt and look-the-other-way terms, it simply is the latest last-ditch halfway measure to be cooked up by the financial wizards of Europe. Remember when some among their numbers they were called the Gnomes of Zurich? Garden gnomes would do a better job.
As for the good month on the stock market, we all know better than reading too much into that, don't we? Don't we? There are schools of fish that are more rational than the stock market. Further, while they look all beady-eyed and serious, Wall Street players are as deeply biased toward childish optimism as they are toward over-reaching greed. We all need regular reminding of this. That's why I keep on my desk, as I have said before, a little cartoon given to me by a very smart Wall Street guy that shows Peter Pan flying out the window with Wendy and her brothers and Peter says "We're going someplace where everything is wonderful and nothing has anything to do with reality" and the littlest boy whispers to his brother, "You mean we're going to Wall Street?"
Finally as for that caffeine jolt of 2.5 percent growth last quarter let's remember the following: First, we have a recent track record of over-estimating our quarterly growth and then adjusting the numbers downward when no one is looking. Second, I was just kidding about that being a caffeine jolt. It will have precisely the same stimulative effect on job-creation as the average episode of "Two and a Half Men" will have on your cerebral cortex. It's a big dubious nothing burger ... or to be fair, a not-so-much burger ... like one of those black bean things you get a health food restaurant, you know, the kind that looks and tastes as if its last owner was a dyspeptic cat.
Which is not to say that you shouldn't enjoy the little economic sugar rush if you want. Go for it. There's no reason to dwell on the fact that on other fronts, the economy is sclerotic, leaders in Europe, the United States, and Japan don't know how to play well together, the banking system is still the same old casino full of hucksters, egomaniacs and some folks who just plain belong in the slammer. Why ruin your weekend thinking about how we still aren't dealing meaningfully with the big problems on the either side of the Atlantic? Or in Japan. Or in the emerging world.
Go on folks, let a smile be your umbrella. You know just how dry that will keep you, right?
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Little could seem so remote from one another than the 9-9-9 tax reform plan of Herman Cain and the chants of the "other 99 percent" as they occupy Wall Street. One is the politically motivated brain-child of a millionaire businessman while the other is a product of the barely contained anger of young people frustrated by the corruption and inequity inherent in the global politics and business today. Yet these two movements are actually linked together in more ways than you might think, nine to be exact:
1.) Both are products of the politics of alienation. Vast majorities on the right and left feel that the system is no long the means by which we fix our problems -- it is the problem. They feel that politicians and Wall Street and big business are self-dealing and leaving the vast majority of Americans
2.) Both are fueled by a belief that the American dream is broken. The self-dealing has essentially gutted the promise of a better future for all those willing to work for it. The essentials of that dream -- a home, the value one can build in that home, rising wages, a better tomorrow for our kids -- they're all gone or compromised for most Americans. For those who didn't go to college there was once an opportunity to join the middle class and have a life of dignity -- also gone. The idea of retiring seems also destined to soon become an exhibit in the Smithsonian as few Americans indeed will be able to afford it.
3.) Both turn on a common theme -- driven by an intense indignation at inequity. It's not just that they system is broken, as Nick Kristof writes compellingly in yesterday's New York Times, it is that it has been gamed. A tiny few benefit and the rest of us of the country -- the 99 percent, the residents of Main Street -- are falling hopelessly, helplessly behind.
4.) Both a reactions against "the establishment" -- although different halves of the establishment. The Tea Partiers think government is the problem. The Occupy Wall Street crowd think it's the financial community or big corporations. The reality is that it is the collaboration between the two for decades (centuries actually) to change the rules of the system to give monied interests the upper hand, a free ride, bailouts when they need it (even when average home owners get nothing), etc.
5.) Both have "good hooks" -- they are easily digested, communicated, understood. The reason that 59 point plans and 1000 page pieces of legislation get no traction is that they are difficult to communicate, understand, debate effectively. Condemn Cain or the protestors all you want, they are connecting because they are dealing at a visceral level with a problem that actually lives in people's guts.
6.) Neither is truly radical. One is the defense of the status quo dressed up in the garb of "change" (where have we seen that before?). The other is unfocused anger. Radical would require an effort to really, truly and deeply challenge and change the system -- to get money out of politics through federally financed elections, to limit the size of banks, to demand transparency and tighter regulation of derivative products, to effectively challenge corporate compensation systems, to toss out the current tax code and start over with something simpler...and, sorry Herman, fairer. We are at a time that demands real, constructive radicalism, a willingness to question everything, to embrace "dangerous' ideas, to ask why we have markets, why we have the system of government we have, what our collective goals are, what our core political philosophies are and to be willing to remake and rebuild those institutions and systems and processes that don't conform to our vision and our ideals
7.) Both are preludes to real change -- but neither in its current form is the ultimate vehicle for that change. Because there is no "ask" for the Occupy Wall Street people, because 9-9-9 doesn't add up and would be deeply unfair to poor and middle income Americans, the movements are more noteworthy for what fuels them than where they are going. The frustration will either lead to a real constructive change agenda...or it won't, problems will deepen...and the real call for change will come more emphatically later.
8.) Each is being misinterpreted by the other. The Occupy Wall Streeters are not, as accused by the right, "anti-American." At their core what they are doing is as fundamentally American as can be. The Tea Partiers may not be my cup of...well, they may be hard for me to swallow...but they do have a legitimate beef that the government needs to operate in their interests and within its budget. That's not to say one side will agree with the other...it's to say that both should listen carefully for what is the same in their arguments. (So too should politicians on both sides who are too quick to view all this as politics as usual...and to play it as such.)
9.) Both should be welcomed by everyone -- they are a sign of long-overdue activism. Now the job is to translate that activism into meaningful change...which I think may require a very different set of political leaders and parties than we have today.
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If you have been wondering where America's Commerce Secretary was, I have finally found the answer. Hillary Clinton ate him.
The evidence for this assertion is that once again Hillary Clinton has demonstrated just the kind of leadership and insight into international economic policies that one might hope for from a Commerce Secretary if Congress actually thought the position important enough to confirm one.
Of course, I am kidding. About Hillary Clinton eating the Commerce Secretary. Not about anyone thinking the job was important enough to fill. Clearly, the Republicans in Congress don't seem to think that confirming a business leader like John Bryson to add needed heft and his considerable and useful experience to the President's team is a good idea in the middle of the kind of economic crisis we are currently enduring.
No, I make the comment about Clinton because once again she has stepped up and shown herself to be both an innovative Secretary of State and President Obama's most valuable cabinet member. For the second week in a row she is devoting her Friday to demonstrating how central she sees economic work to be to the job of the State Department and the international standing of the United States. Last week, the interaction turned on a meeting with the President's job council at which the focus was how to help America grow through international economic engagement, such as the smart initiative led by her Under Secretary Bob Hormats to promote more foreign investment in the United States. (It's what I call the OPM Stimulus...in which OPM stands for "other people's money.")
Today, Clinton spoke at the Economic Club of New York, delivering a speech entitled "Economic Statecraft for a New Era." The speech is part of a series of four she is delivering on key themes of this key dimension of the administration's foreign policy agenda. As she noted in the speech, according to a pre-delivery draft I reviewed:
...Economic forces are transforming foreign policy realities around the globe. We have seen governments toppled by economic crisis. Revolutions born in a Tunisian marketplace have swept across an entire region. Europe faces its strongest test in a generation, thanks to recession and debt. And everywhere I travel, I see countries gaining influence not because of the size of their armies, but because of the growth of their economies.
She then went on to say,
Simply put, America's economic strength and our global leadership are a package deal. A strong American economy has long been a quiet pillar of our power in the world. It gives us the leverage we need to exert influence and advance our interests. It gives other countries confidence in our leadership and a greater stake in a deeper partnership with us. And over time, it underwrites all the elements of "smart power": robust diplomacy and development and the strongest military the world has ever seen.
The speech turned on four key points -- that the administration is "updating foreign policy priorities to include economics every step of the way", that the State Department is "honing" its "ability to find and execute economic solutions to strategic challenges" (from energy to supporting democracy in the Middle East), that the Obama team is "modernizing our agenda on trade, investment and commercial diplomacy to deliver jobs and growth", and that they are focusing on the challenge of growing wealth being wielded by state controlled funds and companies.
That a Secretary of State asserts an economic agenda is not news. Clinton's predecessors have regularly done so and the reality of course is that economics has always played a big role in foreign policy from wars fought over oil to the centrality of revitalizing economies to enhance security as during the Marshall Plan. That a leading figure in a government whose fate depends on job creation and restarting growth would raise such an issue is also not that shocking. What makes this speech different is that Clinton is not just talking the talk she is walking the walk, restructuring State to enhance its economic resources significantly, placing economic issues more central to our policies in places like the Middle East where promoting reforms that create opportunity is seen as a better alternative than say, invasion, when it comes to enhancing stability, mobilizing her team and embassies around the world on these issues and simply by actually credibly engaging with the business community in a way that has eluded many of her predecessors.
Like her excellent Hong Kong speech regarding the administration's "pivot" toward Asia-another element of foreign policy with important economic consequences and in which economics is among the most vital levers -- the New York Economic Club leader provides among the very best examples of the Obama Administration taking its international economic policies and putting them in a coherent framework. Take Clinton's good work in this regard, the recent trade deals and Tim Geithner's excellent and, one might add, courageous engagement with the Europeans in the recent crisis, and you have the most impressive sustained international economic initiative the U.S. has mounted in years.
And early in this administration it was hardly a foregone conclusion there was ever going to be such an initiative. I recall eating a soggy tuna fish on whole wheat toast sandwich in the White House mess with a former senior Obama official who said, "this administration isn't like we were back in the Clinton administration. Back then, international economics was one of our central priorities. Today, it seldom comes up except in terms of financial markets." That was in the wake of the 2008-2009 crisis and the focus on stimulus and health care had put domestic issues center stage. Inevitably however, what has happened is that the administration has come to realize that there are no such thing as domestic economic issues that don't have important international components -- nor are there security interests worldwide without economic components.
The Clinton speech therefore is not only a sign of a successful Secretary of State continuing to work to reinvent the department she leads -- to "think different" in the words of Steve Jobs which she quoted in today's remarks -- it is also the sign of an administration maturing and developing better priorities and vital competencies where they are needed. (Although it still might help to have a Secretary of Commerce. I'm just sayin'...)
In fact, the Clinton speech has to be seen as a big success except for one egregious error. Seeking to describe the changes she seeks within State, Clinton asserted, "We need to be a Department where more people can read both Foreign Affairs and a Bloomberg Terminal." I get the bit about a Bloomberg Terminal. But I think she misspoke. A really forward-thinking State Department should probably be turning to a different foreign policy-focused media organization, don't you think?
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I have had two really scarring experiences in my time. One was my childhood. The other was my adult life.
As a child, despite growing up in Beaver Cleaver's America with two loving parents, generally hygienic siblings, and the usual allotment of hamsters, turtles, cats, and a dog, there was still plenty of room for psychological trauma. Most of it came subtly but the damage has been irreversible (as my wife and children will attest). For example, I would bounce in the house beaming to report my grades, be asked how I did, describe the triumph of all As and a B and then, after a long pause, be greeted with "What was the B in?"
As an adult, well, it's much too complicated to go into here. But certainly one scarring experience was working in the United States Department of Commerce. For one thing, the inside of the Commerce Building was so dark, featureless and cavernous that it actually became a kind of spiritual black hole, sucking the souls out of its occupants with a ruthless efficiency that calls to mind a kind of industrial-strength version of the movie Poltergeist. Next, while you may have heard of Churchill's famous description of Russia as a riddle wrapped in a mystery inside an enigma, well Commerce was a backwater wrapped in a bureaucracy inside a dysfunctional political system.
On top of that, I was largely involved in trade policy which involved making assertions about which we had no substantiation in support of policies we were not sure would work while hoping the negative consequences would not be so bad. And as it turned out, while my pro-trade reflex is still intact, it has over the years been tempered by the kind of caution blended with cynicism that can only come from exposure to the hype associated with the economic benefits associated with trade deals.
So, in short, not only am damaged goods but I have special experience which may account for how underwhelmed I am by the just achieved trade deals with Korea, Colombia, and Panama. I mean I know people are celebrating. I even have friends who are and I don't want to spoil their fun. So I offer my psychological history as a kind of an excuse for being a spoil-sport.
Not that these deals aren't net net a good thing. They are. The Korea deal is even potentially economically significant ... in a smallish kind of way. And there are those 70,000 jobs the administration is claiming will be created by the $13-15 billion in new exports the deals might help generate. But I can't help but think this is all pretty weak beer and that these deals are more like a throw-back to a bygone era of activist trade policy than they are indicator of some new push toward opening global markets.
In a way, not only are these Bush Administration policies come to long overdue fruition, but they kind of feel like they are simply the last spasm of 1990s trade liberalization.
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I'm feeling curiously optimistic this morning which has me thinking it may be time for a CAT scan.
But I can actually see a way that things don't turn out so bad for the world.
First, to deal with the wolf closest to the sled, the Europeans will have to get their act in order. While they have thus far resisted this tooth and nail, I've heard some modestly encouraging rumblings from folks in the center of the negotiations. I want to point out the people with whom I have been speaking are not terribly optimistic themselves. But they have offered a few crumbs of optimism for those of us who starved for it to scarf up.
First, in the words of one participant, European leaders have begun to work themselves through "the stages of grief associated with the crisis. First, even just a few weeks ago, they were purely in denial. Then, they entered a phase of denial in which it was clear they didn't even believe their own denials. Finally, last week we entered what might be called the ‘silly ideas' phase. And I am hopeful that means now we can get down to serious ideas."
What kind of ideas? Coming up with a program that takes a big chunk, perhaps $250 billion, of ESFS money and uses it as "equity" in funding a "firewall" that might then include a trillion or so capital available to the ECB in the event a big economy -- Italy or Spain -- stumbles. The plan would also need other elements such as Europe dealing with the structural issues associated with achieving something like monetary union and a recognition that no firewall can protect against all threats, especially those that could be associated with a fixation on austerity. Governments in Europe need to focus on getting growth restarted in places like Spain or Italy or bigger problems are inevitable. A final element of an effective plan would then include a significant recapitalization of the IMF which currently is not funded properly to deal with the new forms of risk and contagion which confront global markets.
At some point, banks will need to pay for the insurance policies they are expecting their governments to provide for them and whether that is done by a Tobin tax or some levy on non-deposit liabilities, grappling with that issue will be key to winning political support for further government involvement. And while countries and the IMF are at it, they ought to start to tally what sovereign exposures are to those "implied liabilities", their unwritten but real "obligation" to bail out the too big to fail institutions that are the nuclear charges set at the fault lines of the global economy.
That might in turn trigger a recognition that we will not be well and truly out of the woods of this crisis until we demand more transparency from these banks in terms of their liabilities (including counter-party risks in all manner of derivative transactions), regulations that enforce responsible provisions for dealing with those risks, and perhaps even globally agreed upon limits on the size and activities of such institutions.
But one step at a time. While the insiders with whom I spoke were only cautiously optimistic that progress might be made on putting together an interim solution-firewall for Europe -- or to be more accurate, while they did not outright dismiss the possibility -- they did emphasize that there was a long way to go, the Germans and the French were not playing nicely with each other, and there were deep cultural barriers to even having an intellectually honest conversation among the players about what ails them.
Still, since the focus is optimism, another encouraging sign were the glowing reports I have been hearing of the work that both new IMF Managing Director Christine Lagarde and U.S. Treasury Secretary Tim Geithner having been doing trying to hammer some sense into Europe's fiscal policy pygmies. No, not pygmies ... lemmings. Well, blundering action-phobic bureaucrats. (The problem, according to a friend, is "lots of leaders, not enough leadership.") By one account, about a third of the progress made during the last few weeks is due to circumstance, the growing direness of the situation, and the rest is due to the compelling arguments and forceful interventions of Lagarde and Geithner.
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The mantra in Washington these days is "jobs, jobs, jobs." Then, today, for a brief moment, the focus shifted -- to Jobs.
The reaction to the death of Steve Jobs has been remarkable for both what it says about the man and our times. But it is also resonant because of a message it has sent that has yet to be received, it seems.
It has already been observed that it is stunning to see such a seemingly heartfelt, widespread sense of loss and emotion for the death of an American CEO at a moment when Americans are finally and understandably taking to the streets to protest what is seen by demonstrators to be the hostile take-over of the U.S. economy by big business interests.
Somehow, Steve Jobs transcended his role as a business man in much the same way that for many the products his company produces have transcended being seen as mere devices, workaday slabs of technology. Some of that was due to great marketing, of course. But there's nothing inherently wrong with that. Marketing does not work if it doesn't ring true or if the promises made to consumers are not kept by manufacturers. And some of the Steve Jobs difference was due to a willingness to set aside knowledge of the company and its founder's missteps or hard-ball, sometimes, arrogant business tactics. But again, such facts are not easily set aside unless they are overshadowed by other factors.
In the case of Jobs, what set him apart was not just that he was a visionary or that he was successful. There are plenty of other tech titans who made billions who could drop dead tomorrow with nary a notice in the paper or a teardrop being shed outside their immediate families. In some cases, you might even hear the faint sound of cheering within their immediate vicinity.
It was not just that he was a good-looking, thoughtful, articulate spokesperson who combined just the right elements of geek and master of the universe, of everyman and of being the Willy Wonka of the digital era. Because good spokespeople for industries come and go, yet how many of even the very best would have prompted local television stations to pre-empt programming to run announcements of their demise as did my local station in DC, last night?
No, part of what set Steve Jobs apart was that he delivered on a promise that was bigger than any he or Apple or his industry could have made. He delivered on the promise of the future.
Among the most unsettling aspects for this particular observer of Jobs obituaries are the line that reads "1955-2011." Because 1955 doesn't seem that long ago to me. It is, in fact, the year I was born and I for one, am resolutely convinced that I am not old enough for an obituary. But that shared birth year also lets me understand a bit of where Jobs was coming from. It came from a childhood marked by grand promises associated not just with living in the richest and most powerful country in the world at the time of seemingly never-ending ascendancy but with serial technological breakthroughs. There were spaceflights and satellites and color televisions and 8-track tapes and polyester and TV dinners and Tang and oral polio vaccines and computers the size of your high school auditorium. And when there was a lull in innovation there was the Jetsons or "Time Tunnel" or "Star Trek" to double down on the promises.
And then we grew up and we waited for the flying cars to come.
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Daniel Yergin's latest book, The Quest: Energy, Security and the Remaking of the Modern World would have been essential reading for energy industry insiders simply as a consequence of Yergin's status as one of the field's foremost commentators and analysts. He is, after all, the author of one award-winning volume on the subject, The Prize, not just a great history of energy but one of the best history books of any sort of the past quarter century or so. And he has built an important energy consultancy that every year convenes many of the industry's most important leaders for a week of must-attend discussions.
But this new book is such an exceptional achievement, a work of scholarship that is full of compelling story-telling, an exploration of some of the most vital issues of our time that frames them in a sound history and penetrating analysis, that its publication has much greater resonance. Appearing at number four on the New York Times best-seller list in its first week on the market, showered with well-deserved critical acclaim, the book is essential reading for policymakers, business leaders, and anyone in the public who wants to understand forces that are transforming global politics, driving the rise of some nations and conflicts among others.
As someone who in his spare time runs a consultancy with a considerable energy practice, I was drawn to the book for professional reasons but I have to be clear, I'm going to recommend it to many people I know in Washington because not only does it address issues that link politics, economics, business, today and tomorrow -- but it does so with unusual objectivity and wisdom. It's rather long, but not only is it a read that offers plenty of rewards but it is likely to be a book to which readers will return over and over. (Which is why, if you want my unsolicited opinion, you should buy a hard copy. Easier to dip in and out of.)
I particularly was struck with its core theme -- that while headlines blare of an energy revolution and great paradigm shifts, real change in this field happens gradually. The search for breakthrough technologies is not only not unique to our time; virtually everything that is buzzworthy and "new" today has roots that stretch back a century or so if not longer. That said, although a realist about the pace of change, Yergin is keenly aware of the profound shifts that are taking place as well as those that make take decades more to unfold. He proves the adage that the best guides to the future are those who understand the past well.
To get a better understanding of Yergin's views as they pertain to the issues of greatest important to the readers of Foreign Policy -- and because I always welcome the chance to discuss these issues with Dan -- I sat down with Yergin for a conversation about the book, its key conclusions, and his views on the state of energy politics and economics at the moment. We covered a great deal of ground, highlights of which will be covered in two parts. Today, the discussion focuses on some of the core ideas in Yergin's book, those pertaining to the search for new ways to provide the energy the planet needs. In Part II, the discussion turns to the geopolitics of energy in the century ahead.
David Rothkopf: Early in the Obama administration there was a sense that a new energy paradigm was going to be central to American growth, and the president himself was framing new approaches to energy as a primary driver of the next phase of U.S. growth. Yet more recently, expectations have been dramatically reset. What do you think is behind that change?
Daniel Yergin: We have gone through periods of great optimism about how quickly a transition to a different kind of energy system can come about. But our $65 trillion global economy rests on a very big and complex energy foundation. And it's governed by two laws. One is the law of long lead-times. Because of the scale and nature of energy, it doesn't change overnight. And the second is the law of scale. To be significant, it has to be large. And the renewable sector, the alternative sector, is still developing within those constraints. It's certainly a lot farther ahead than it was a decade ago, and indeed it has become a big business and a global business in its own right. But, when you look out 15 or 20 years based on what we know, our energy mix won't change too dramatically. It's really around 2030 that we could see the really significant changes.
DR: Is that because 20 years from now we're going to have great breakthroughs; 20 years from now we will have scaled up to the point that the breakthroughs are possible; or because 20 years from now, we'll all be dead or retired?
Read the rest of the interview here.
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While America sleeps, I awake early this morning on the banks of the Isis River, here in Oxford, England. Outside my window are the dreaming spires of the university has been here for the last 12 centuries or so dominated, from where I sit, by the weatherworn dome of the Radcliffe Camera. The Rad Cam, as it is known, is a massive, round library built by John Radcliffe, physician to William & Mary, and a man known as much for his fondness for good drink as he was for his medical accomplishments.
Another thing for which old Radcliffe was known was his apparent allergy to reading which led him to actually keep an alarmingly small library for a doctor thus creating some considerable amusement among his friends and colleagues when he endowed the library that ultimately became the russet-colored landmark I can see outside my window at the moment.
This phenomenon of making a bold gesture in the opposite direction of your fundamental impulses is known in the psychological line as reaction formation. It is what causes people who hate to fly to get their pilot's licenses and people with a fear of big cats to become lion tamers. It may also be to the old "there's no zealot like a convert" phenomenon or the fact that many people who were once fat become the most intolerant sort of fattists.
I can check at least two of those boxes and, although I haven't piloted a plane for years, I still have more than the usual intolerance for fatsos. This is due to the fact that up until two years ago I weighed 75 pounds more than I do today and if I didn't allow myself the privilege of being critical of those who are unable to push away from the table at the proper moment, than I fear I will be sucked back into the gravitational pull of my old midsection -- which, as it happens, bore a remarkable resemblance to Radcliffe's monument to himself over there in the shadows of the Bodleian. (In terms of roundness and prominence ... not orangeness.)
As a consequence of this particular one of my many defects ... and six years spent on the advisory board of the Johns Hopkins Bloomberg School of Public Health ... I am acutely aware of the threat posed to America's health, finances, and general appearance by the obesity epidemic that has swept the country. Today the obesity rate in the United States is ten times that what it is in say, Japan. Fully a third of Americans are obesity and the costs to the country of caring for these self-indulgent loads is breaking us as surely as would giving them all piggy-back rides. In fact, that's what we are doing ... because they will require more doctor's care, medication, time in hospital, treatment for diabetes, for heart disease, cancer and countless other maladies brought on by over-eating ... we're all going forced to carry them on our fiscal backs for the next few decades.
For this reason, it was with great admiration and delight that I read of Europe's latest innovation that America should immediately and unhesitatingly adopt. As usual, it comes from the smarter half of Europe (the cooler, northern portions) which, while not necessarily the half where I would prefer to spend my summer vacations, does regularly come up with good ideas that are worth adopting (the Magna Carta, the location of the ignition on the Saab, many kinds of herring, that kind of thing). In this case, it is the Danes who have made the latest breakthrough. It is described in an article in the Guardian entitled "Body blow for butter-loving Danes as fat tax kicks in."
As of today, "Danes who go shopping today will pay an extra 25p on a pack of butter and 8 p on a packet of crisps, as the new tax on foods which contain more than 2.3% saturated fats comes into effect. Everything from milk to oils, meats and pre-cooked foods such as pizzas will be targeted. The additional revenue raised will fund obesity fighting measures." Apparently ... and without a hint of irony ... the country that led the way on this was Hungary, land of my grandmother's matzoh balls, which "recently imposed a tax on all foods with unhealthy levels of sugar, salt and carbohydrates, as well as goods with high levels of caffeine."
This resonates here in Britain, which is the tubbiest country in Europe with, according to estimates cited in the article, 70 percent of the country destined to be obese or overweight by mid-century, which does not bode well in the looks department for a country that is already known for bad teeth and fly-away hair. And it should resonate in America, land of the Fat Burger and KFC's double down sandwich consisting of two pieces of fried chicken on either side of a bacon cheeseburger.
We love you Chris Christie. We feel your pain. And we have to help you. The United States needs new taxes like it needs about an hour a day in the gym. This is a place to start. It is good public health policy. It is good fiscal policy. And it resonates with the words of one of England's great thinkers, worth recalling as I look out over dawn at the world's greatest university. It was Kate Moss, I believe who said, "nothing tastes as good as being thin feels."
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A voice of reason and leadership has emerged in recent days among those addressing the economic crisis in Europe, currently the most urgent and dire challenge facing the international community.
Unlike in the past, that voice is not however, the president of the United States, who has remained strangely quiet on this subject despite its direct implications for virtually all of the core U.S. economic issues that are his stated top priorities. Nor is it that of his secretary of the treasury who, though more visible on this issue recently, has not instilled confidence with statements that have, for example, asserting that under no circumstances would European leaders let their institutions fail, even though that has been precisely what they have been doing for years now.
Instead, the new voice comes from rather unlikely roots -- a scandal-rocked organization whose future value to the international community had, in the not-so-distant past, been questioned and a prior post that can only be seen as a potential drag on her credibility.
That voice however, belongs to IMF chief Christine Lagarde, and it has been so direct and crystal clear, so unafraid and so thoughtful, that within mere weeks of assuming office she has quickly gained recognition as one of the most important of the world's leaders.
Take her most recent remarks on the euro crisis and its international implications. In the first instance, she has crisply and accurately warned that a "vicious circle is gaining momentum" that could not only upset european efforts at bailing out its weakest economies but that also poses a threat to the world's financial system and to many of its so-called strongest economies, such as those that are the engines of european growth and that of the United States. At the center of that vicious circle she placed "political dysfunction" that had produced what has amounted to policy paralysis and may have us on the verge of a "dangerous new phase" of this on-going economic calamity.
Further, even as Central Banks agreed to pump in more money to prop up faltering banks, she suggested more might be needed. "Balance sheet uncertainty" was the immediate culprit, she observed, noting it existed at the government, bank and household levels. She accurately cited this as the core risk we face but then, with wisdom greater than most European and American political leaders, noted that debt solutions should not be so severe that they undermine the equally crucial issue of growth in Western economies.
She specifically and directly assailed "fiscal austerity that chips away at social protections; perceptions of unfairness in Wall Street being given priority over Main Street; and legacies of growth in many countries that predominantly benefited the top echelons of society." One can only hope her remarks resonated with all her new neighbors in Washington.
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If mathematics is the universal language, here are a few numbers that should communicate volumes to all:
That's the approximate number of employees in the CIA's Counterterrorism Center. And according to the Washington Post's lead story today, that means more people are now doing counter-terror work for our Central Intelligence Agency than there are as members of al Qaeda. How's that for a tenth anniversary message about America's response to the 9/11 attacks? Personally, I think it is just great and an appropriate use of U.S. national security resources, these couple of thousand of people will do vastly more to contain the terror threat than most of the hundreds of thousands we deployed in old-style land ground wars in the Middle East.
As it happens, 2000 is also the estimated number of militants and civilians killed by U.S. drone attacks. The use of drones along with the application of intelligence assets above are among the ways America is better learning how to contain the terror threat. Of course, the civilian death toll, the violation of the air space of sovereign nations and the moral implications of rich nations being able to wage war against poor ones without putting the lives of their own people at risk are all questions hanging in the air like the drone that circled above Osama bin Laden's residence in the hours before he died.
That, of course, is the current jobless rate in the United State, an ominous figure as we enter this Labor Day weekend. But much worse are numbers like...
16.7 and 16.4
Those respectively are the official numbers regarding unemployed blacks and unemployed young people in America. In cities like Detroit, Cleveland, and Milwaukee, old hubs of the industrial Midwest, the official numbers are above 25 percent. And of course, being official numbers, we know they are wrong. They don't include those who have stopped looking for jobs and dropped out of the labor force altogether. They don't include the under-employed. The real numbers are much higher. In fact they are so much higher that they are not actually numbers any more. They are a social crisis, a breakdown that is tearing apart the fabric of America, crushing hopes and inviting backlash of a type we haven't seen in decades. Which leads us to...
Which is the gut-wrenchingly high ... appalling ... failure-of-our-system type .... percentage of black young people who were out of work in August. And all these unemployment numbers lead us in turn to...
0 and 0
Which is both the number of net new jobs created in August ... and also happens to be Barack Obama's percentage chances of re-election if these job numbers do not improve measurably over the next 12 months. Having said that, it's always good to have a Plan B in mind. Which explains, I suppose, why White House chief of staff Bill Daley reportedly arranged a below-the-radar retreat in June for his senior team at Fort McNair with historian Michael Beschloss as a guest speaker to help answer the one question on everyone's mind: "How does a U.S. President win re-election with the country suffering unacceptably high rates of unemployment?"
51 and counting
That's number of months since George W. Bush's EPA Administrator Stephen Johnson said that existing Federal smog standards "do not adequately protect the public." It's "and counting" because today President Obama put a stop -- until at least after the 2012 elections -- to the EPA's plan to issue new ozone standards despite the fact that his own EPA team had been working on them intensively for over two years now. The EPA has said (in each of the past four years) that a new smog standard would provide between $13 billion and $100 billion in health benefits at a cost of $19 billion to $90 billion. Further, the pushback leaves the U.S. again lagging on a global environmental regulatory issue -- ozone -- gaining in importance almost everywhere else. It is also a sign that the President (see the above numbers) is starting to see everything to through the lens of the above job numbers (and his poll numbers that are directly linked to them.) For their part, Republicans on the Hill and corporate voices up and down K Street that have been hammering home the point about potential job losses associated with the possible new regulations were heard cheering. Congressman Fred Upton, the House's energy honcho calling it a "welcome breakthrough."
If you're like many people in the White House, you cringe every time you hear the term "leading from behind." It's become one of the slams du jour here in Washington. But, you have to admit, at least it implied there was some leading happening somewhere.
Watching the clown college that is modern Washington during yesterday's speech scheduling follies, it is clear our glittering prizes are leading us nowhere fast. That's bad for the economy. Bad for the American people. Bad for the world. But having said that, given the visionless self-absorption these folks are currently displaying, I'm not sure we would want to follow even if they knew where to go.
The spat over scheduling the President's address next week was a combination of politics as usual, shoddy planning, pettiness and slapstick comedy. Frankly, I'm not sure Speaker Boehner did his party any favors by booting the President to next Thursday. If he had let him go as scheduled, the Republican debaters who would have followed him on the air could then have torn his speech apart before a national audience thereby upstaging him and giving their alternative views greater visibility at the same time. That said, isn't it time we had a moratorium on tearing ideas and opponents apart for a while. Isn't this one of those "we're all in this together moments?" Maybe we ought to just listen to each other for a while ... and if the pols don't come up with any good ideas, then maybe we should listen to see if someone else does.
For that reason, I am really looking forward to the Republican debate, Governor Romney's scheduled economic speech, the President's jobs speech, and the newly scheduled jobs speech from Speaker Boehner in the hopes that a few ideas may emerge that are of material significance to the economy. But I will admit I am skeptical.
Every sign is that -- as was the case for Herman's Hermits with regard to Mrs. Brown's lovely daughter -- the second verse will be the same as the first (as will be, I fear, all subsequent verses). We'll get tired rhetoric and demagoguery flavored with idea-bits, school-uniform sized initiatives that are almost always less than meets the eye.
The Republicans at the debate will call for cutting the deficit without raising revenues or really scrutinizing defense spending. And the President will offer an array of earnest, modest ideas that may, based on current rumors, produce a million new, primarily short-term jobs. He probably won't make any bold new revenue proposals or for that matter any bold proposals of any sort. He certainly won't volunteer needed cuts to entitlement programs. We'll get a too small infrastructure initiative, too little stimulus, too many compromises. We'll welcome his seriousness and to the extent Mitt Romney, Rick Perry, and other individual Republican candidates also provide concrete, job-creating ideas that will be more than welcome, it will be essential to having any kind of constructive public policy dialogue in the next few months.
I worry this will be the case in part because I am getting the impression that some of the President's advisors are recommending he only make proposals that can actually pass. This in turn leads to a lot of folks around the President negotiating with themselves before they even start discussions with the opposition. This dilutes everything.
It's how we are likely to end up with a million dollar patch for a 25 million job hole. And since Hill Republicans will clearly oppose much of it from, the pre-digested compromises will only succeed in producing in smaller failures rather than the larger variety.
As Eugene Robinson wisely noted in the Washington Post earlier this week, the President needs to recognize this, make the best case he can for the big ideas we need to the Congress and then, if they drop the ball as they very well might, then he should plan on taking his ideas not just to the dysfunctional Congress but to the American people. He and those around him should believe in his ability as a leader. He should be out there pushing for a really big infrastructure program, a major investment in American competitiveness through committing to building the next generation smart highway system, smart energy grids, advanced air traffic control network, the underpinnings for our IT future. He should be talking only in terms of programs that created multiple millions of jobs while enhancing productivity and helping to attract new investment. If it means a payroll tax holiday and a repatriation of earnings plan that works, he should go for it. If it means major regulatory reform to accelerate projects waylaid by sluggish approval processes, he should make it happen. But please, frame it in a vision, paint a picture of what America can do to lead again in the world.
He should plan on spending the next 12 months out on the road selling his big ideas directly to the American people so the next election is a ratification of his vision and a mandate for his action. It is literally the only path out of this mess.
We have to recognize that will take a year. Will markets tolerate it? Of course, they will. Especially if they see some kind of real big thinking going on. Especially if real progress seems possible in the foreseeable future. And I continue to hope that President Obama's likely opponent will be Mitt Romney or some other responsible actor and that the ensuing debate might actually be considerably more rational and thoughtful than the food fight that seems to be taking place up and down Pennsylvania Avenue these days.
Finally, to those of you who say Obama is too measured or Romney, for example, is too bland, it's worth remembering that the modern president who may have done the most creating the infrastructure we have today, laying the foundation for modern American competitiveness, was also accused of both traits. His name was Dwight Eisenhower and it is only half a century later that people truly began to appreciate the consequences of what he accomplished with America's highway system, air traffic system, aerospace industry, even some of the foundations of our venture capital system. He wasn't a career politician. He wasn't a charismatic speaker. He was just serious and dogged and experienced. He was also, of course, the one thing that seems in shortest supply these days. He was unquestionably and down to the marrow of his bone a leader.
And if they don't make them like that any more we are all in deep, deep trouble.
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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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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President Obama and Speaker of the House Boehner both wasted their opportunities to address the American people Monday night. They repeated familiar formulations, made no progress, offered no hope. Indeed, they offered the American people a display of empty petulance that will only confirm their darkest fears that Washington is now hopelessly broken. Obama's call for compromise and balance was far more lucid, rational and constructive, but, even as one who is very supportive of the approach offered by the President, watching the remarks I was forced to acknowledge that neither man led us one inch closer to the resolution of the unnecessary, man-made crisis that now holds the United States and the global economy in its thrall.
As Melissa Harris-Perry stated accurately in wrap-up comments on MSNBC, if this kind of display served anyone at all, it was the Republicans who argue that government is the problem. To them, it hardly matters that they are the ones who have guaranteed that theirs is a self-fulfilling prophecy. Which of course, would be just breathtakingly cynical were it not so dangerous.
It's dangerous of course, because government is not the problem. Indeed, for those who expect a functioning national defense, or stewardship of our national resources, or care for those who cannot help themselves, or education for our children, or the infrastructure we need to compete in the world, government is an essential part of the solution. In fact, in times like these, it is an even more important part of the solution than it is when the economy is more robust.
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This week marks the premiere of the eighth installment of the most successful series in movie history. As such, it offers a useful comparison in the differences between what makes a successful summer blockbuster in Hollywood and what makes for one in Washington, DC. Here are the top ten:
10. Too Few House Elves in Washington (Too Many House Death Eaters)
Oh Dobby, Dobby, if only there were a man in Washington of your stature. Poor Dobby who died, according to his epitaph, "a free elf" was cranky and even less photogenic than Anthony Weiner, but he had heart and courage and took risks for those he served in ways that none on Capitol Hill seem to even comprehend. Meanwhile, there are far too many Death Eaters up there on the wrong end of Pennsylvania Avenue, swirling around in service of He Whose Name Cannot Be Spoken (Grover Norquist) regardless of the pain it may bring to those who actually elected them. (Norquist may succeed with anti-tax religion in doing what the leadership of the Soviet Union could not -- bankrupting and thus breaking America.)
9. Even Hollywood Accounting is Better Than How They Do Math in DC
Hollywood is famous for skimming and double-entry book-keeping but even they know it takes both revenues and sensible spending to balance a budget. And they sure have their focused fixed securely on the bottom line on ways that would be revolutionary in DC. Meanwhile back in our nation's capital it would take a Defense Against the Dark Arts teacher with more gifts than Mad Eye Moody to combat the trickery that has in just over a decade transformed a budget surplus into a $1.6 trillion annual deficit. (Face it: Threats to downgrade U.S. debt aside, the real story is that Moody's and S&P haven't trash-canned America's Triple A rating yet. America is ... very lucky ... to still coasting on the reputation of past generations of leaders.)
Read the full list here.
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Last night I attended a dinner of old Washington hands. Some had served in high government offices, some were lobbyists, some were think tankers, some were still running for office, others were active in campaigns of one sort or another. These were seasoned players who had seen it all … and there was fear and outrage in their eyes.
They felt the leaders of both parties had lost any sense of accountability. They were appalled by the degree to which, at a moment of national crisis, twisted notions of ideological purity and cynical politics had obliterated any focus on solving the problems at hand, on public service. Whether or not the country averts fiscal default, that we had come to this point was a sign to all that a leadership default had already taken place.
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On Monday, there was some throat clearing in debt crisis discussions in Washington and in Europe. The theatrics came from the one participant common to both discussions, one who had been omni-present but comparatively quiescent for the past few weeks.
This participant hasn't made headlines in the way that Barack Obama, John Boehner, Jean-Claude Trichet, or Georges Papandreou have recently. In fact, the participant has been virtually silent compared to the loudest, most flamboyant participants in the budget debates, the Eric Cantors and the Silvio Berlusconis. But yesterday, this participant said in its unmistakable, firm, monied accent:
I am here, I have been listening, I have watched your one-step forward, two-steps back, approaches, heard your ideological posturing, listened to your threats and I have one thing to say, none of you powerful men and women are as powerful as I am, none of you will have the last word on this. You will produce the outcome that I want or I will produce an outcome that you dare not contemplate. And I am not a politician. This is not empty rhetoric. I have no constituents to report to but myself. I have a long-term perspective that lets me absorb short-term pain. And, one more thing, I'm the one character that you don't want to tangle with in the fight. Make no mistake about it. I am the craziest guy in the room. I will move so fast, respond with such fury to what you may see as a casual throw-away comment or just another minor delay, that you won't know what hit you. But you will all be gone, out of work, forgotten or worse, remembered badly. Remember, I am the guy who made Herbert Hoover who he is today. And then you will ask yourself, why didn't we listen to him? "
This previously relatively soft-spoken guest didn't have to raise his voice to send this message … but the other participants really did have to listen to hear it. What we all should fear is that some ignored it, were too entranced with the sounds of their own voices to get the message.
The player who spoke out was, of course, the markets. The sharp drop in world stock markets and the spiking of the rates at which countries like Italy could borrow may have come primarily as a result of the concerns that arose late last week about the ability of Italy's political "leaders" to manage that country's debt burdens. But it was a message also to the participants in U.S. debt discussions. It said:
You toy with deadlines at your peril. Today was 150 points. But at some moment between now and August 2 if I see this coming off the tracks, I will speak much more loudly and remind you that I am the biggest narcissist among all of you preening narcissists. I am the market. You think it is about you and your politics and your sound bites and your next tweet. But it is always about me."
The message sent was that the next intervention of this cigar-chomping fat cat to the budget talks may come at any moment and it may feel like a sharp-right to the kisser. It could be 450 points that time. Or it could be 700. And it could say, in no uncertain terms: "Remember that Lehman Brothers moment? That was nothing."
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Here at Les Recontres Economiques d'Aix-en-Provence we are ostensibly discussing "The States of the World" but in reality the buzz around the event is about the global economic ugly pageant. Although much of the conversation among delegates --whether at the venerable conference sites like the law school of the Universite Paul Cezanne or the local outpost of Sciences Po -- focuses on the harrowing state of the Eurozone, one can regularly hear concern expressed for the other contestants in the current perverse competition among the world's economies.
To understand the competition, you just have to understand the old joke about the group of friends whose picnic is disturbed by a hungry grizzly bear. As the friends bolt from their campsite, one stops to put on his sneakers. The others ask what he is doing, worried that he will never be able to outrun the bear if he stops. The one in the sneakers observes as he starts sprinting away, "I don't have to outrun the bear, I just have to outrun the rest of you."
So it is now with the global economic ugly pageant. While most of the major economies of the world are spluttering and the possibility of an unprecedented geoeconomic disaster remains palpably real, what money there is does have to go somewhere. That place is likely to be the least ugly of the world's economies. In other words, absent a true safe haven, capital will seek the safest haven of those available. It's one reason the dollar has done fairly well recently, for example. While the U.S. government seems to do everything in its power to screw things up economically, investors buy dollars because the managers of the world's other big currencies, the Europeans and the Japanese, are screwing things up worse.
The question now is will our "luck" remain the same going forward? How will the world's economies fare in the next round of this contest? Here's the current betting line based on my scientific eavesdropping on conversations here in Provence, appropriate discounting for self-interest and biases of the speakers and my own reading of the tea leaves that get floated as economic news in the world's newspapers. (Note: I am focusing only on national and regional economies here. Suffice it to say that almost certainly the big losers of the coming months -- whether policymakers accidentally blow up the world economy or they dodge disaster through a judicious combination of austerity and stimulus -- will be the poor. They have no voices advocating for them (as do, for example, the makers of private jets currently lobbying to keep the corporate tax breaks their purchasers receive under present U.S. law). Austerity programs will squeeze them further. Disaster will crush them. And almost certainly the biggest winners will be big corporations and the super-rich who will venue-shop and use their access to cash to buy up devalued assets including fire-sales among privatizing formerly state-owned bric a brac like roads, ports, powerplants and water rights.)
Do you think somewhere in the mind of Christine Lagarde, the newly appointed head of the International Monetary Fund, there is a voice that recognizes the truth?
Lagarde is, as noted here before, a good if not optimal choice for the job, and it is certainly about time that a woman held the post. She also understands the players and the stakes and will no doubt work tirelessly to avoid the potential new global financial crisis that is the first item of business awaiting her at her new desk. Indeed, she has already started to do so.
But do you think that, despite a career that has seen her excel in the centers of orthodoxy and the established financial system, she is aware that there are other legitimate options besides those currently being proffered to Athens? Other ways to go that deviate from the conventional wisdom about what the system will and will not tolerate?
Do you think she recognizes that there are some perfectly credible reasons that Greece should consider defaulting and taking its chances as the first state to vote itself off the euro-island?
The pressure on the Greek leadership is enormous. From the other leaders within the eurozone and from the financial community, the relentless refrain is to tighten the national belt, to take the pain, to accept 40 lashes for their profligacy. From the people of Greece, the pressure is to protect their lifestyles, the services they count on, their jobs, their futures.
The formula being offered by the rest of the eurozone is to restructure, forcing Greece to borrow more to meet obligations and then using the new funds to pay lenders. There will no doubt be some restructuring and postponing of some debt. But the real question is this: Should the borrowers be the only ones on the hook here? Should the lenders bear any responsibility for the situation? Should they also accept a burden of pain?
And that then leads to another question: What is the best path for the people of Greece? Do what the lenders want, and the result will be years of recession and deprivation. Is that the only possibility? Can Greece dare default and not pay the debt and break away from the eurozone and not feel as much pain? Can they do it and recover faster?
The conventional "wisdom" is no. Default is too costly. But very often in the past, the warnings about default have proved to be much like the warnings of parents who threaten their children by counting to three. The approach is effective. The threat of what might come after three is too great to contemplate. The children usually give in before discovering that the vast majority of parents have little plan for what happens after three and would never do anything too grievous to their children under any circumstances.
Ask the people of Argentina. They ignored warnings and told the financial community to stuff it when they were too deeply underwater to breathe anymore. The warnings were dire. And the country faced tough times … before recovering far more rapidly than was considered possible.
So long as the lenders do not agree to take a haircut, there are very good reasons that many among the Greeks will argue that they should do nothing. Borrowers bear liability in lending. That is, of course, standard. But they do not bear exclusive liability, especially in cases where lending to those borrowers is clearly and obviously excessive and the lenders should know better. That is the case not only with Greece but with many other nations right now. The borrowers counted on the "nations do not go bankrupt" principle to pile on. And the eurozone financial gurus watched as excess put the entire euro experiment at risk, often in violation of underlying terms of the European agreements -- and they did nothing. Greece bears huge responsibility for its waste and excess. But so too do its enablers, whether from the financial community or the policy community.
Greece could default and might possibly be able to eke out a recovery somewhat more rapidly and without the domestic political costs were it to do so. And because it is a real possibility (unlike the insanity of America not lifting its debt ceiling), the new IMF chief needs to consider the forces that might bring it to pass carefully: to think beyond the numbers to the politics and the human costs and the reasons that perhaps a growing number in Greece will feel abused by the system.
Not because that's the right way to go for anyone. But because it is a set of concerns she is likely to face again and again in her new post as she seeks to help stabilize an international system in which the very system that produced her is far more responsible for the excesses and abuses that are currently troubling it than most among its leaders are willing to acknowledge.
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Thomas Straubhaar, a top economist from Germany, attacked U.S. credit agencies after they lowered Greece's credit rating to junk status, down there with the Pakistans of this world. In fact, in the spirit of Greek street protesters, Straubhaar called for the "violent overthrow" of the credit rating companies like Moody's or Standard & Poor's, arguing that these companies actually undermine stability in markets.
Come on, Thomas, don't shoot the messenger. The problem isn't the credit rating agencies -- although one does wonder if they don't have itchy trigger fingers after having been late with their warnings during the 2008-2009 phase of the current protracted economic crisis.
The problem isn't the Greek finance ministry. The problem isn't the Greek legislature. The problem isn't the Europeans who are being dragged kicking and screaming toward helping Greece. The problem isn't even Goldman Sachs and the other banks who lent Greece more money than they could afford and even helped them hide a bunch of the financings off the books.
Nope, the problem is Greek nuclear scientists and radical terror groups affiliated with the Greek intelligence services -- or rather, the lack thereof.
Because if Greece had nuclear weapons and crazed terrorists hiding in every luxury housing development, you can bet we wouldn't be going through this long drawn-out process of figuring out whether the country was going to default or not.
We know this because of Pakistan. Pakistan is an absolute financial basket case. It is in many respects in as bad a shape as Greece -- and in some it is even much worse off. But do you hear anyone talking about Pakistan's financial problems? Heck no.
Of course, talking about Pakistan's financial problems is like talking about whether Anthony Weiner's socks match. It's not exactly the first issue that comes to mind. Having said that, the reason we are not sweating the meltdown of Pakistan's financial markets is that there is no way the United States or the world would let it happen. Because a financial collapse could trigger the kind of unrest that would put Pakistani nukes at risk, and that's just not tolerable. So the United States pumps billions into Pakistan knowing full well that it is this aid that helps keep the ship of state afloat. (And, money being fungible, if it also pays for expanding Pakistan's nuclear arsenal … well, apparently we're willing to look the other way. Again.)
Once again, one of the main messages of modern international affairs comes through loud and clear: Nukes pay. From Pyongyang to Tehran, enterprising leaders know that the easiest way to boost your country's profile, gain political leverage, and win cash and prizes is to toss a little enriched uranium in the old Cuisinart, let the satellites take a few snaps, and start rattling your radioactive saber.
The problem with Greece is that if the economy collapsed, if the government collapsed, if the country descended into chaos, no one is worried that a nuclear catastrophe would follow. An ouzo-induced hangover maybe -- which can be a pretty horrific thing -- but it's the specter of a mushroom cloud that really is the attention grabber.
Admittedly, if Greece goes down and takes a few big French banks with it (as the ratings agencies warned this week) and markets get jittery and the firewall around Spain gives way and then a bunch more French and maybe German banks fail and a new global banking crisis and maybe a depression ensues -- well, that would be bad. And would produce instability in many corners of the world, including, possibly, in Pakistan. And if the downturn is bad enough it might force the U.S. and others to give less the next time Club Nuke comes to extort. So, well, yeah, that would be worse.
But, that's all speculation. What we know for sure is this: If there were a centrifuge or a hundred under the Parthenon, the Greek government would right now be sitting on piles of cash and not squirming, knowing that their fate depends on the famously warm hearts and generosity of the German people (among others).
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An earthquake registering 9.1 on the political Richter scale rattled the White House today. It was the latest unemployment rate, and combined with this week's bad news elsewhere in the global economy -- from the stock market to housing markets, from Greece's downgrade to food price inflation predictions -- it may not have leveled the president's reelection prospects, but it certainly has begun to level the political playing field in the United States.
That's too bad because the people most likely to gain from economic shocks that batter the president are actually the people least likely to be able to help the United States deal with the consequences of those shocks. On the other hand, people whose economic advice I have always been somewhat wary of because they are often a bit too ideological for my taste -- Paul Krugman and Robert Reich -- have published pieces this week that have me thinking they get it in a way that neither President Obama nor his arithmetically challenged Republican opponents do.
Reich's piece, published in the Financial Times, and Krugman's, appearing in his usual column at the New York Times, coolly and accurately assess the problem the United States is facing right now. Both are worth a careful read.
Essentially, the point of both is that the U.S. is having the wrong debate about the wrong problem right now. First, the battle over raising the debt ceiling a complete fraud that will be resolved shortly because no politician in his right mind … nor even all the rest of them … would ever want to be accused of lighting the fuse that led to blowing up the United States' credit rating. Next, however, and more importantly, as Krugman argues especially effectively, the most critical issue is not the deficit at all. It is jobs and related issues associated with restoring growth to the U.S. and hope to average Americans.
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The coming depression was avoidable. The instability it will trigger, turning fragile regions from the Middle East to China to the United States' inner cities into caldrons of violence, was avoidable. The nationalism and fear-driven politics it will produce were avoidable.
All it would have taken was honesty, courage and a shred of decency from the leaders of the world's most important economies -- the honesty to acknowledge that the numbers didn't add up and that old approaches weren't working, the courage to ask as much of their rich benefactors as they do of the weakest in their societies, and the decency to step outside themselves and their narrow self-interests for long enough to do what was right no matter the political cost.
But the politicians were dishonest, timid and self-serving. Even today, with the world teetering on the brink not of a gentle-sounding "double dip" but of something much worse, they are collectively whistling past the graveyard.
Yesterday, U.S. House Budget Committee Chairman Paul Ryan accused the White House of engaging in demagoguery about cuts to Medicare. What dark irony. Because whatever the demagoguery of the White House ... and no doubt there is some there, is there any as reckless as that of so-called "deficit hawks" like Ryan who decry the United States' fiscal mess but who simply refuse to consider the absolutely essential revenue side of the equation? They would sacrifice the entire U.S. economy and in particular the welfare of the neediest in the United States to their own misguided ideological purity.
We have seen misguided ideology driven frenzies in U.S. politics before. But when you think about it none -- and I include McCarthyism on the list -- were as potentially damaging to so many Americans as this one.
But the problem is not just with Republicans. Democrats are not serious about making the cuts that are necessary. And neither side has been serious about addressing the underlying problems-associated with housing markets and under-regulated, risk-happy financial markets-that led to the last crisis and will ultimately fuel the coming one.
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Barack Obama would be vastly more successful as president and the United States would have substantially better prospects to regain its international leadership if someone would remind the president just why he was elected.
By 2008, the American people wanted a change. George W. Bush had put in place reckless and expensive international policies that made Americans feel dirty and did not make us appreciably safer. At home, he had advanced an imprudent domestic agenda that catered to the few, undercut our competitiveness, failed to address our energy dependency, and put America at fiscal risk. The issues he did not address effectively -- from climate change to effectively countering unfair trading practices from overseas -- compounded the problem.
Barack Obama ran against these policies and was clearly elected to offer an alternative to them. While he does seem to be making good on one dimension of his promise of change-getting us out of Iraq -- on the vast panoply of issues where the real risks confronted by America were related to wrong-headed Bush policies, Obama has either done little or exacerbated the problems set in motion by the preceding administration.
Have we been wrong? Was George W. Bush such a powerful intellectual force, such a giant of American politics and global statesmanship, that Obama is doomed to labor in his shadows, trapped and dictated to by his titanic example?
On the issue of the day, for example, fixing America's huge fiscal problems let's be clear, the fastest, best, simplest way to make the most headway remedying our imbalances is to simply repeal the Bush tax cuts. But not only has Obama not done so but when the cuts were set to expire he collaborated to extend them and claimed it as a victory. The Republicans argue these tax cuts are essential for American growth. But the reality is that the decade since they were instituted was the first in American history in which we saw virtually no job growth and it was one in which we saw America go from a healthy fiscal situation to one in which the country is seriously at risk.
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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.