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.
Win McNamee/Getty Images
It's a comedy. It's a tragedy. No one is sure who deserves top billing. There's a massive debate over what would constitute a happy ending. The frenzy over the edition of Cirque du So Lame headlining in Washington has turned everyone into a theater critic. Jackie Calmes, writing in the New York Times, sent the White House into a tizzy, for example, with her assertion that President Obama has in fact become a supernumerary in the current drama.
Personally, I think the whole thing was scripted not by Boehner nor Reid nor Norquist nor even by the elusive Master Teabagger writing from his secret retreat somewhere near Black Helicopter, Montana, but by Eugene Ionesco, writing in Paris in the late 1950s. Back then, the play was called "Rhinoceros" and with it Ionesco helped introduce the public at large to the theater of the absurd in much the same way the denizens of the swamplands of the Potomac are doing for America and the world today.
In the original version of the play, a town is gradually destroyed as each of its citizens, save one independent minded fellow with a healthy appreciation for wine and conversation, is transformed into a rhinoceros. Ionesco captured the thrust of what he was getting at in an interview for Le Monde in January of 1960 when he said:
I have been very much struck by what one might call the current of opinion, by its rapid evolution, its power of contagion, which is that of a real epidemic. People allow themselves suddenly to be invaded by a new religion, a doctrine, a fanaticism. ... At such moments we witness a veritable mental mutation. I don't know if you have noticed it, but when people no longer share your opinions, when you can no longer make yourself understood by them, one has the impression of being confronted with monsters-rhinos, for example. They have that mixture of candour and ferocity. They would kill you with the best of consciences."
That was all half a century ago and in France both of which would in other moments make it all seem wildly alien to most Americans. But despite Ionesco's own observation that "you can only predict things after they have happened" he would see much that is painfully familiar in Washington today. Lines from "Rhinoceros" ring as true in 2011 as they did 51 years ago (when the play was seen as an allegory about the rise of extremist movements like Nazism).
"There are many sides to reality," he wrote as if prescribing the game plane adopted by many players in the current battle over the role and size of American government, "Choose the one that's best for you." Surely, this approach, used by everyone in this town in which the most dangerous entitlement program is the one that leaves everyone believing they are entitled to their own facts, is taking the theory of relativity to new depths, previously unimagined by science.
Or, as the United States hurtles toward outcomes that were once unimaginable -- like debt downgrades and withering gridlock in what was once the world's most outstanding set of government institutions -- Ionesco offers the following dry acceptance of what follows when the absurd becomes the commonplace: "I can easily picture the worst, because the worst can easily happen."
In Washington today, the rhinoceroses are winning. Our extremists are not murderers like the jihadists we are at war with or Anders Breivik, but they are nonetheless at work on America's political system in a way that follows the pattern about which Ionesco warned. They promote a doctrine that is a kind of solvent for facts-breaking them down and distorting them until they become unrecognizable. They argue in the true absurdist tradition that somehow they offer a superior form of mathematics that involves only subtraction. They deny history-whether it is the compromises of Reagan, the big-government spending of every recent Republican president, the debt-ceiling extensions of the past, or the culpability of failed Republican tax cuts and spending n unnecessary wars for creating the problem we face. They view reason and compromise as weakness. And they claim they are helping those who they are irreparably hurting.
Magnificently ... from an absurdist perspective...they are combining inexperience, ignorance, intolerance and intransigence into a formula by which they are setting the rules for America. They recognize that, as military strategist Ed Luttwak once observed to me, "In most wars, it's the dirtiest fighter...or the craziest...who sets the rules of the game." Regardless of the final outcome of the debt ceiling drama, a few things are emerging as new realities in Rhino DC:
It was all put into perfect perspective for me in a conversation with one of the most experienced diplomats currently resident in Washington who, after expressing deep concern over the current follies on the Hill, recounted a cartoon that had recently run an international newspaper which showed Hamid Karzai and another leader from the region reading headlines from Washington and wondering aloud whether America was ready for democracy. Or, as Ionesco, observes in "Rhinoceros", "Lunacy is lunacy and that's all there is to it."
Alex Wong/Getty Images
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.
China Photos/Getty Images)
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.
SAUL LOEB/AFP/Getty Image
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.
Milos Bicanski/Getty Images
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.
Tom Pennington/Getty Images
With the news this week that the Fed pumped money into European institutions during the darkest hours of the recent and continuing economic crisis without so much as a press release or a demand for better cheese prices, it is clear that even with all those big geopolitical shifts we have been hearing so much about, the United States remains the world's sole Schmuck Superpower.
Oh sure, whoever it was that was stamping "Approved" on all those requests at the Fed's "Foreign Banks Only" teller window no doubt thought it was in the self-interest of the United States to keep the global economy from imploding. But look at all the grumbling that Europeans do when asked to help preserve their own common currency and the economic health of their own neighborhood. Or, if you wish to look in the other direction, consider the not exactly Kumbaya spirit of the currency "wars" that define trans-Pacific monetary relations. In the end, you've got to wonder, what're we thinking? After all, if China is the country sitting on the biggest pile of cash and the EU is China's number one trading partner, shouldn't they have responsibility for footing the bill for all those overly cushy European pension plans that promised retirement seemingly within weeks of graduating from college?
Beijing appears to have enough money to commit $1.5 trillion dollars to prime the pumps for seven "strategic" industries (as they announced they were considering doing this week)… while we don't seem to have enough cash to pay for extending unemployment benefits for victims of the economic downturn. Mull that one over for a second: We have enough money to bail out big European financial institutions and their fat, happy shareholders, but not enough to help out struggling American families? We're paying for euro problems and unwinnable wars in the Middle East and China is saving its yuan for other activities -- like figuring out how to clean our clocks in the global marketplace of five minutes from now?
We are not just the uncontested Megapower of Schmuckdom, we are a deeply confused nation led by people with profoundly twisted priorities -- who clearly believe they report to higher powers than mere American citizens.
Today we discovered that U.S. unemployment is at 9.8 percent, that we have broken the 1980's record for most consecutive months of unemployment above 9 percent, and we are nonetheless forced to stomach the current charade on Capitol Hill in which the Republican party fights for tax cuts for millionaires while callously allowing Americans in need twist in the wind. All this, while it turns out that across town in the Fed's corner of Foggy Bottom it doesn't even take a vote to provide handouts for rich foreigners in want?
Where are the pitchforks and torches people? Where is the outrage? Don't tell me that's what the Tea Party was about. The Tea Party was clearly all tiny plastic tea cups and doilies when it comes to the real issues America faces. Otherwise, wouldn't all those champions of average Americans actually be championing the interests of average Americans right now?
On a separate point, what does it say about the idea of "European Union" that as soon as troubles bubbled to the surface in a couple countries, the discussion turns to a question of whether the Germans are likely to bail on the whole idea? Or see today's New York Times piece on the North-South divide in Europe. The reality is that the "European Union" might be a nice branding idea, but it's purely an aspirational one and seems to actually be getting farther away from a reality every day.
It took the United States 100 years and the bloodiest war in the history of mankind to finally buy into the idea that we were all in it together. The Europeans have had plenty of wars, but since around the time of Charlemagne, none of the battles were won by those fighting for the principle of unification. (Given the goals of the unifiers, from Napoleon to Hitler, that's not such a bad thing.) In fact, it was always those who wanted to unite Europe that were defeated. Ultimately, when they accepted the idea of knitting themselves closer together it was based primarily on the idea that finding shared economic interests might keep them from each others' throats and it came, even in its most advanced forms, with multiple caveats, exclusions, and protestations that real independence laid beneath the fragile superstructure of links.
So we are faced with the prospect that the wheels might come off the eurozone cart sometime soon and what do you think we'll see when that happens? Do you think we'll see the Chinese volunteer to come in and help clean up the mess? No? Not even as a way of thanking the Europeans for siding with them recently in Seoul when they decided to make the G-20 meeting about U.S. monetary policy mistakes rather than Beijing's manipulations? Or, alternatively, do you think we'll see a call for the United States to help out again, to dig into our own pockets to help solve European economic and social problems, while we fail to take even the minimum required steps to take care of our own?
Spencer Platt/Getty Images
As I was leaving Paris on Tuesday morning, the city was hunkering down preparing for another national strike. Transport workers were going to be expressing their dissatisfaction with adjustments in their pension schemes through making commutes to the city and travel across France very difficult. But it was only the latest in a series of such protests. The country that gave the world the word aplomb responded with plenty of it, some workers staying home, others finding others means of transportation, and one seasoned Parisian explaining to me that "we have to get used to this, there will be many more to come before all this is over."
What is "all this?" He was speaking of French political battles, but he could just as easily be addressing the current wave of coming to grip with fiscal realities that is buffeting Europe, causing protests from Greece to Britain. Indeed, as Europe seeks to address the underlying causes of the crisis that nearly sent world markets into an even deeper tailspin months ago, it is clear that so much belt-tightening needs to be done and so many programs that have been taken for granted will need to be cut, that for all Europe there will indeed be many more strikes and protests to come.
In Britain, which I visited before my stop in Paris, the news was dominated by headlines from the Conservative Party Conference and the backlash to the announcement by Chancellor George Osborne that child benefits for wealthier families would have to be cut back. Notably, and with considerable courage, equanimity, and grace, Prime Minister Cameron did not sidestep the issue and indeed pushed in his keynote address for more resolve to undertake even the painful reforms that would be necessary to restore British fiscal health. "I'm not saying this is going to be easy, as we've seen with child benefit this week. But it's fair that those with broadest shoulders should bear a greater load."
At the core of his deservedly well-received speech was the message that in order to cut a deficit of 155 billion pounds, sacrifices were required, regardless of their political costs. Furthermore, and importantly, he suggested this was a national challenge, not just one for the government, "The point I want to make is this, the state of the nation is not just determined by government and those who run it. It is determined by millions of individual actions, by what each of us do, and what we choose not to do."
In today's Washington Post, Ruth Marcus, has an excellent piece entitled "The True Conservatives: Britain's Realists vs. America's Wishful Thinkers" in which she wishes that she could summon up Christine O'Donnell-like witchcraft to transform American conservatives into British Tories. She makes a powerful point. But she does not go far enough. Because if we are conjuring here, let's transform the Democrats too, please.
RICHARD BOUHET/AFP/Getty Images
Since that flickering neon sign in the West Wing says "vacancy," it's probably worth doing a little thinking about the wrong ways and the right ways to make mid-term personnel moves.
The rumors about who might replace Larry Summers have suggested (see the Wall Street Journal) that the president is making one classic error: focusing on specific traits rather than focusing on a specific person. It may well be that picking someone who is a woman and has business leadership experience is a good idea ... but over-emphasizing one or two traits often leads to ignoring real deficiencies or people with special gifts. (Similarly, for example, making the same mistake in reverse, blocking lobbyists from jobs in the administration was not only stunningly hypocritical when hiring their employers or the people they lobbied was commonplace, but it deprived the administration of some talents they could really have used.)
Taking another seeming pattern of this White House, hiring from within -- while sometimes the exact right thing to do (see below) and often a boost for team morale -- also perpetuate problems that exist and quash changes that may be desirable. It ensures having candidates who know players and processes and who are known commodities, but the benefits shouldn't be overestimated. New jobs change people, all new jobs have learning curves and sometimes fresh blood and/or special stature may be more important than minimizing the upheaval associated with a change.
In other words, the evidence from the few changes that have already been made within this administration (the new DNI, replacing McChrystal, replacing Orszag, replacing Romer, the buzz about the slot atop the NEC or who might replace Rahm Emanuel, etc.) has revealed worrisome personnel predispositions. With all the changes likely to come, those predispositions could significantly weaken the administration. Alternatively, learning the lessons of mid-term replacements past might well help Obama 2.0 be full of the kind of big, positive changes we all can believe in.
Let's look at the past few presidencies and see if there aren't some useful lessons related to a handful of midterm hires that have been successful:
Brendan Smialowski/Getty Images
It says something about how tough things are at the White House these days that Summers is departing it for the warm embrace of Harvard, the site of his last great controversy. However, it also says something about the depth of Summers's relationship with the school and that some of the smartest people in the world so appreciate him, despite it all.
He is an exceptional man and it is a pity that Obama's bungled response to a reporter's question yesterday precipitated this hasty and mismanaged announcement. But Summers is also a cautionary tale. He, like all of us in the Clinton administration, received great acclaim for economic successes that were more the result of circumstances than White House policies. And now he -- despite equally thoughtful and energetic efforts in this administration -- is on the receiving end of criticism for economic conditions over which no president could have much control.
Live by people's overestimation of the power of the presidency, die by the people's overestimation of the power of the presidency.
For Obama, PR gaffes aside, the coming changes at the top of his team are staggering: Summers, Emanuel, Gates, in all likelihood Jones, probably Axelrod, etc. The economic team has already seen particular upheaval, with the departure of Peter Orszag and Christina Romer just two of the big names. It will be a true test of Obama to see if he really hits his own reset button in a meaningful way with big-time appointments or whether he will choose the path of least resistance and pick loyalist insiders.
So far it looks like he has been leaning toward insiders ... but hopefully that will change. Because even if the influence of the White House is less than either its critics or supporters make it out to be, it does make a difference. And now the president has the chance to start bringing in the kind of business and market savvy outsiders that could be a real team of rivals and a richer, more diverse, brain trust than he has had working for him thus far.
FENG LI/AFP/Getty Images
Normally, were I to find myself inclined to agree with John Boehner, my first impulse would be to call a neurologist and arrange for a CAT scan. There are few more compelling reasons for America to resist turning the House of Representatives back to the Republican Party than the prospect of Speaker John Boehner. What could be more cynical than elevating a man to the third most powerful post in the land whose primary contribution as a politician -- beyond illustrating the perils of over-tanning -- has been his vigorous commitment to doing nothing? In the chamber that made Daniel Webster great, he is the Jerry Seinfeld -- except instead of creating a sitcom about nothing, he seems dedicated to an effort to create a Congress about nothing.
Yet, today, by accident, he stumbled upon an idea that had some merit. He advocated the resignation of Tim Geithner as treasury secretary. Boehner's reasoning was, as usual, not reasoning at all but pure, undistilled partisan boojwah. But the idea that the time has come for a change atop Obama's economic team is absolutely right.
Obama made a concerted effort to hire the best and the brightest and I consider both Tim Geithner and Larry Summers to be members of that group. What he neglected to do, however, was to hire the most compassionate or empathetic. (As I have said before, when David Halberstam coined the phrase "the best and the brightest" it was not a compliment but a cautionary term.)
This county is in a dark place economically unlike any I have seen in my half century or so of life. While I worry about the fiscal deficit and the trade deficit, we have seen those before and handled them. The more serious deficit we face is one that cuts to the very core of America's character: it is an optimism deficit.
Darren McCollester/Getty Images
While the announcement of the resumption of direct talks between the Palestinians and the Israelis is certainly an encouraging one, the buzz since the talks were scheduled has definitely been downbeat. Chalk it up to expectation management or perhaps just a bout of skepticism given the past history of talks between these two sides, but while all but genuine enemies of peace welcome the talks, few expect them to produce a breakthrough.
Further, the talks themselves run counter to a trend that has many in the world worried. A "be careful what you wish for" moment has arrived. For all those who wanted America to stop meddling beyond her borders, less meddling is just what they're getting. Or at least less effective meddling ... which is to say less well-funded meddling backed by much less political will to meddle back home.
Veteran Mideast watchers are in fact, worried that the United States is losing overall influence in the region because our body language in the region is so bad. Sure, we've added substantially to our force structure in Afghanistan, led the move to place targeted sanctions on the Iranians and pushed for this new round of direct talks. But at the same time we're sending another message with the final pull out from Iraq, the waning support for our presence in Afghanistan, the clear lack of appetite for any military confrontation with the Iranians or anyone else.
At the same time, in Latin America, there is a general sense America has become disengaged except to the extent that we have beaten up the Brazilians for coloring outside the lines on Iran. In Africa, America continues to do little beyond lip service and as in Latin America, even friends of the U.S. figure they had more attention from the Bush Administration. In India, it's the same. The president is heading there. But the Indians wonder what, if anything, the Americans are inclined to deliver to strengthen the relationship -- especially since what Bush gave, the nuclear deal, was so important to New Delhi. The Chinese watch America bogged down in Afghanistan and Pakistan and realize that given our limited bandwidth, it restricts our ability to effectively deal elsewhere. The Europeans are happy with this stance ... the Russians especially so.
The question on the mind of the world is, "has America changed?" On my last trip to Asia, the question I got most often was "when are things going to get back to normal." They meant the economy, of course. When would we become the locomotive we once were for global markets? But it extends beyond that. They worried that the world's policeman might be calling in sick at just the wrong moment in the near future.
I can't wait for Barack Obama's second term.
Oh I know, 2013 is a long time from now and it would be nice to have decisive leadership to help deal with the odd double dip recession, Iranian nuclear threat, massive fiscal imbalance, remaking of the world order, that sort of thing.
But honestly, I just don't expect it. It is clear from events of the past few weeks that while it's July in most of America, it's already November in Washington. Every decision is cast in the context of the mid-term elections. No risk is too small to sidestep. No decision is too trivial to triangulate.
Getting reports of growing unemployment rolls? Compounding them with signs of sluggish growth and appalling developments in the housing market? A time for action? You might think so. But instead this president and this Congress hem and haw and propose effectively nothing. It's not just the Republicans blocking with appalling callousness the extension of unemployment benefits (while also fighting hard to ensure that big banks don't have too much of a tax burden). It's that the Democratic leadership is content to let the Republicans beat back the bill figuring they can use it against them in the election.
Lost in all this? Oh, right, the 9.5 percent of Americans who are "officially" unemployed not to mention the almost equally large number who don't make it into government statistics.
Is the reason for this fear of the exploding budget deficit? While one can debate the merits of government intervention vs. battling that deficit, we know the president and his team are not letting the economically disenfranchised suffer purely for reasons of economic orthodoxy. We know because there are no moves to do anything about the deficit either, other than some not terribly believable statements at the recent G20 Summit by the president that he'd hold the rest of the world to their word that they address deficit problems. In fact, credible rumors have it that Peter Orszag left in part because he did not get a warm fuzzy feeling from the president that he was going to do anything about deficit reduction any time soon.
On energy, we had a White House meeting with congressional leaders this week that featured the passionate leader of the Senate on these issue, John Kerry, offering to compound past compromises with future ones and observations by participants that despite the president's statements regarding wanting a price for carbon there was no real belief he was going to go to bat for anything on this front prior to the election.
On Afghanistan, following the musical chairs at HQ, we returned to the doubletalk about deadlines that aren't deadlines and exits that aren't exits and commitments that aren't really sustainable commitments?
SAUL LOEB/AFP/Getty Images
In yesterday's post, I noted some of the most relevant developments in the political world that've occurred recently. But we're hardly out of the neck of the woods. The summer of 2010 promises to be an ... interesting time.
As promised, here's an idea of the potential Black Swans to come:
1. Wars of Summer, Part I: The Koreas
As we've seen just in the past couple of days, "engagement" doesn't seem to be doing the trick with North Korea. When you have two countries that have been pointing guns at each other for half a century and one of them is run by the kind of guy who makes Mahmoud Ahmadinejad look like Albert Schweitzer trouble is always just a Dear Leader moodswing away. When one of those countries starts firing torpedoes at the other, that raises the temperature a bit ... and when that same country has a diplomatic tantrum because its neighbor actually doesn't like having its ships sunk, you get a sense of how off-balance and dangerous the whole thing is. (You also get dictionary editors everywhere rushing to insert North Korea's reaction into the official definition of chutzpah right where "burying your husband in a rented suit" used to be.) While most people assume this is just one of those periodic Korean peninsula hiccups, you never know.
2. Wars of Summer, Part II: Somalia, Yemen, etc.
These places are just two examples of plenty where conditions are chronically horrible and getting worse. If you're going to worry about the Koreas where the stakes are high and both sides would pay an unimaginable price for a conflict, don't rule out conflicts in places where everyone has a gun and life is cheap.
3. Wars of Summer, Part III: Israel, Syria, Lebanon
Speaking of places not to rule out, over the years few places have proven themselves more reliable breeding grounds for warfare than the borders of the state of Israel. And tensions are rising along the most northern of these as we speak. The Israelis are worried about growing stockpiles of missiles being deployed in Lebanon, new missile capabilities in Syria and Iranian mischief in both places. Of all the possibilities for tensions turning to a shooting war this summer, this one may top the list. And, what a great distraction it would make from Iran's nuclear issues (or what great cover for an Israeli strike against the Iranians who are paying for the missiles and underwriting Hezbollah trouble-makers in Lebanon and elsewhere).
4. The Other "Big Spill"
While Washington works itself up into a lather over the spill in the Gulf, it effectively ignores a much bigger catastrophe. A recent NPR report indicated that the amount of man made pollutants that have flowed into the Gulf during the current crisis flow into the air every 2 minutes or so. That's 30 crises like this an hour. 360 a day. Over 1,000 a month. That means this summer there will be 3000 crises like this offshore drilling calamity ... and throughout this period the likelihood that the U.S. government or the world move any closer to addressing this much larger, much less photogenic disaster is pretty close to zero.
5. The Financial Crisis They Call "The Big One"
Remember the financial crisis that took down Bear Sterns? Now we look at that as only prelude. Remember the one that took down Lehman, Merrill and AIG? Perhaps we'll look at that as just the appetizer. Because with the world economy now trembling at the thought of further deterioration in the Eurozone, it wouldn't take much to send us into territory that was unimaginable even two years ago. Likely? No. But possible? Well, let's see, Japan has a debt to GDP ratio that is worse than most of Europe's. What if the markets sour on lending them any more money? What if that takes down some of their banks and they start calling in IOUs and cut lending in places like China? Tim Geithner said this week that overall China's economy is not a bubble. Maybe so. But that doesn't mean it doesn't have some pretty big bubbles in it (see: real estate).
6. The Dem Rebound
The big political story in the United States is supposed to be the losses Dems will suffer in mid-term elections in November. Big time members of the punditocracy are calling for a big swing to the right, a likely Republican take-over in the House and even the possibility of one in the Senate. But by the end of the summer, once campaigns have started in earnest, the loony, fringy, dysfunctionality of the "just say no" party will be revealed and the big surprise U.S. political story of the year will start to take shape. The Dems may have modest losses in November, but it won't be anything like the washout the chattering classes expect.
7. Argentina's Surprise Victory
Despite Lionel Messi's dominance on the soccer field, Argentina won't win the World Cup this year. That'll be Spain. But maybe as the summer ticks on a few more people will start to realize that having done everything wrong and utterly alienated the financial system by telling the big banks to take a hike a few years ago, Argentina is actually having something like a recovery worthy of a tango. Oh, all is not rosy to be sure, but take a look at its per capita GDP in purchasing power parity terms. It just passed Chile to be number one in Latin America (according to Latin Business Chronicle). Between this and the U.S. dollar strengthening despite the fact that the U.S. has also done practically everything wrong (and China's flourishing for years despite its penchant for, how shall we put it, well, communism) who knows... this could be the summer that moral hazard makes its long awaited big comeback.
8. Someone Writes the Truth About Financial Reform
This is the least likely black swan on this list. But it is possible that once financial reform passes later this summer and is signed into law that someone will note that "the most sweeping financial reforms since the Great Depression" actually don't amount to much when it comes to fixing the problems we face. Mortgage defaults, unregulated global derivatives markets, unintended consequences of interconnectivity of markets, lack of global regulatory mechanisms, failure to address the trading culture's perversion of finance, etc... this is like the health care bill and Beatlemania: not the real thing, just an incredible simulation.
9. The White House Gets Humble
Ok, maybe I'm wrong. Maybe this is the most improbable of the Black Swans. But the folks in the White House are good people at heart and smart ones. Sooner or later they will realize that their mixed, incomplete record in office trumps the historic nature of their victory and that a little humility is in order ... if not because they feel that way then because by alienating even their most enthusiastic supporters they are doing themselves great political damage. As for the American people, they would do better with more realistic expectations. We all want Washington, Lincoln or Roosevelt whenever we elect a president. But the vast majority of the time we get Chester A. Arthur. Bush was Chester A. Arthur. Clinton was Chester A. Arthur. And in all likelihood Obama will end up being Chester A. Arthur.
10. Iran Cooperates
Ok, never mind. This one is most likely. But the dangerous twist here is that cooperation from Iran is actually just them buying time to move toward their goal of possessing nuclear weapons technology. The only thing that will stop them from such a stalling course is if they are much further ahead of schedule than we think and that the big black swan of this summer will be the announcement that the world's largest state sponsor of terror will actually have gone nuclear.
ATTA KENARE/AFP/Getty Images
You've got to love the 21st Century. So many interesting and unexpected twists and turns ...
Here are just a few from the past few days:
1.) From the Mother of Parliaments, Labour Pains and Something Newish
From the country that gave us Marmite and the Austin Healy comes further proof of British innovation via a watershed election that produces the ultimate in 21st Century outcomes. After much chatter about the parts of the election that were copied from the broken U.S. political system, comes the unexpected twist of a result that American voters could only dream of: an election in which all the candidates lose. What better way to express public discontent with politicians? And really, isn't it much better than the Lib Dem victory so many people hoped for? That would have just been splitting the difference between two parties that weren't very different in the first place. The hung parliament expresses and institutionalize public disgust in ways only possible in the United States by voting professional wrestlers and stand up comics into office.
2.) And Yet, The British Vote Is the Second Most Important Election in Europe This Week
Gordon Brown squanders 13 years of Labour rule, the Lib Dems challenge the status quo and the Tories get by some measures their best result in almost 80 years and the whole thing is trumped by regional elections in Germany. Why? Because if those elections are seen suggesting a growing sentiment among Germans to further distance themselves from their EU obligations then they raise the likelihood of further unraveling in the Eurozone. Indeed, it may be seen by some as the latest evidence that the EU experiment is failing. And who can blame the Germans for not wanting to pay for extended vacations for Greek government officials with plush compensation packages after all those years the Greeks have soaked the Germans when they came to visit on their own vacations?
3.) Which Would Mean...
There is a wonderful irony hidden in Germany's reluctance to bail out its EU cousins. Could it be that the biggest problem Europe faces in the 21st Century is Germany's inclination to mind its own business? That the greatest German threat is that they actually focus their attentions within their own borders? All of a sudden the 20th Century seems so much longer than just 10 years ago. And although the German parliament voted for the bailout, German politicians will spend weeks interpreting the results of the local elections to see whether they indicate a growing resistance to such initiatives in the future.
4.) But One Continent's Crisis is Another's Boon, Part I
Of course, if we were to play out the current European crisis, we see not just problems for Europe but potential benefits for others -- benefits that is if you overlook the giant threats to the entire world economy. For example, if Greece is just Bear Sterns and Spain is Lehman Brothers and the U.K. is A.I.G...well, you get my point. Greece is floored by the Ouzo Crisis and the rest of Europe wakes up with a hang-over ... or much worse. Markets are jittery. The Eurozone is unwilling or unable to defend itself against those doubts. And the Euro itself continues to weaken for months and months to come. That's a passel of bad news in the increasingly irrelevant coulda-been capital of Europe, Brussels, and its resident bureaucrats and its lousy for European markets and economic performance but, come on, Europe, don't just think about yourselves. For example, think about the happy Chinese. The Euro going down means the RMB goes up ... and all of a sudden the Chinese currency is automatically "adjusted" for a big chunk of the world economy and the United States loses an ally in its pressuring Beijing. After all, why pressure the Chinese now when they will need their investment flows more than ever.
5.) But One Continent's Crisis Is Another's Boon, Part II
While the United States may not like that particular benefit for the Chinese, don't despair, America. There's plenty of good news here for everyone. Oh sure, a falling Euro means a rising dollar and that may be bad for our trade balances ... but we've learned to live quite happily with trade deficits for decades now. Let's keep our eye on the silver linings. The Euro falls and the dollar rises. Investors, like the Chinese, can no longer so easily make rumblings about a new reserve currency. When it comes to the dollar, the old Thatcher-era Acronym get's dusted off. TINA: There Is No Alternative. As Europe struggles...even if the U.S. does somewhat as well ... the dollar will be seen as the only true safe haven (other than Gold which continues to rise). Investor interest in U.S. securities markets ... even U.S. Treasuries ... and U.S. real estate markets goes up. And given the correlation between the price of the dollar and the price of oil ... and faltering demand in Europe ... the price of oil goes down, thus partially blunting the upside pressure on our trade deficit while also taking the air out of inflation's tires.
Imagine just 12 months ago if someone had told you that the dollar might be heading up right now ... and that it might be doing so for quite some time? Imagine if someone had told you that the United States could do everything "wrong" -- build huge fiscal deficits, build huge health care related deficits, spend fecklessly, endure a massive financial crisis to corruption, greed and regulatory incompetence, respond with massive deficit-building stimuli, bailout companies left and right-and that at the end of it all markets would "reward" them.
You don't get to be the head of a country without a little luck being thrown in the mix. (Except in the U.K. where the "winner" of the current "none of the above" referendum is almost certain to face horrific choice, be put in the position of taking much away from his "supporters" and go down in history as a victim of circumstance.) But, Barack Obama clearly has a guardian angel somewhere. He might well someday be seen as having faced a series of crises that actually end up leaving the United States --at least temporarily -- strengthened. Actually, it'll only be temporary...but it could leave us with a little breathing room to get our own house in order.
Unless it ushers in a global depression.
But why think about that? It's such a last century sort of a downer. This is The Silver Lining Century. So kick back, relax, go long the dollar, don't worry about your credit cards America and, while you're at it, keep buying up that vacationland in Siberia. Because as we have discovered, all it takes to make other brewing disasters -- like global warming -- our friends, is that perfect combination of a good attitude and a willingness to overlook the misfortunes of others.
Jeff J Mitchell/Getty Images
U.S. consumer confidence got a boost this month with the Conference Board's index rising six points, to 52.5 from 46.4 in February -- which just goes to prove once again consumers are dopes.
Me, I can't help but notice that:
And so, as we say on Passover, "What makes this recovery different from all other recoveries?"
Could it be that it is not really a recovery at all but just a respite between economic calamities? (My theory is that those free-spending Republican National Committee fund-raisers were in that S&M strip club for an economic briefing.)
I don't know about you but I'm going down into my basement until those consumers come to grips with reality. (Why do we even measure consumer confidence anyway? Isn't it the irrational exuberance of consumers that usually gets in trouble in the first place?) Maybe I'll watch an old Marx Brothers movie. As Groucho once said (no doubt referring to a consumer),"He may look like an idiot and talk like an idiot but don't let that fool you. He really is an idiot."
Or maybe I'll just read a book (like Michael Lewis' great The Big Short which will have all of you understanding the on-going nature of the financial con-game and joining me in my basement in no time.) Because as Groucho also said, "Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read."
Spencer Platt/Getty Images
Admittedly, it's only March and early March at that. Still the year has been full of surprises so far on the Washington politics and international policy beats. So, it's only fair that the surprise winners get the credit they so richly deserve. Here are ten of them, in no special order:
Chris Hondros/Getty Images
Remember the scene in Annie Hall in which Woody Allen and Diane Keaton are talking and there are sub-titles indicating what they really were thinking? I regularly wish such a thing were available when listening to politicians speak. Not always, because frankly most of the time that politicians speak the best filter is ignoring them altogether. But Barack Obama is the president of the United States, the country is ass deep in alligators and so his State of the Union address takes on special importance.
We know he and his team have worked for weeks on the address. They have spent the past few days pre-gaming the press hoping to get the "Obama Does It Again: America Starts Believing in Change They Can Believe In ... Again!" story they really want. And we also know that every single phrase in the speech has been viewed through multiple lenses-impact on the media, impact on the left, impact on the right, impact on the center, impact on donors, impact on November 2010 election prospects ... well, you get the idea. With the pros in the White House you often get the sense they're looking at dozens of angles associated with any phrase or idea. It's not triangulation. That's so 1990s. It reeks of Dick Morris'a mouth full of toenail polish. Today we're dealing with polygonulation of a much richer sort. With three political factions, U.S. and foreign media, 50 states, the G20, Michelle, Malia, Sasha, the White House dog and the Sarah Palin's daughter Bristol, and Oprah that would make it octacontakaihenagonulation. (There's a change you can believe in.)
Anyway, to help cut through it all, we watched carefully as the president delivered his address and have selected ten key phrases in which the president said one thing but actually meant something else. Then, we added the real or alternative meaning. So now, you can truly understand.
And as for knowing what you yourself were really thinking while you watched, perhaps it's best to return to Annie Hall in which Annie says "Well, to me, I mean it's all instinctive. You know, I mean, I just try to feel it. You know, I try to get a sense of it and not think about it so much." But while she says it, the subtitles let us know what she (and you) are really thinking: "God, I hope he doesn't turn out to be a schmuck like all the others."
The following are not necessarily offered in the order they came in the speech:
1. "Despite our hardships, our union is strong. We do not give up. We do not quit."
This actually means: "Holy crap, what a mess. But let's not panic. Please do not give up on me. Please do not quit on me now. It's early yet...and look at this way, you could have elected John Edwards. Imagine where we'd all be then with the economy in the tank, the First Lady moving out and him having to turn the Situation Room into a nursery."
2. "We have to recognize that we face more than a deficit of dollars right now. We face a deficit of trust -- deep and corrosive doubts about how Washington works that have been growing for years."
This actually means: "We've got a gigantic deficit of dollars right now, but let's change the subject. Let's blame it on the past. I sure hope that you don't notice that throughout this speech I blamed problems on the past like 9 or 10 times. Christ, I hope some nutjob pundit doesn't dub this the "Blame It On the Past" speech tomorrow."
3. "To close that credibility gap we must take action on both ends of Pennsylvania Avenue -- to end the outsized influence of lobbyists, to do our work openly and to give our people the government they deserve."
This actually means: "By both ends of Pennsylvania Avenue, I mean in Congress. As for the ending the outsized influence of big money I sure do hope people weren't watching Tim Geithner's mugging on the Hill earlier today for being too cozy with Wall Street. No seriously, I hate lobbyists. The guys that fund them, the donations they give, the issues they advance, those things I'm ok with. But lobbyists, I wouldn't bend over to scrape them from my shoe."
4. "Starting in 2011, we are prepared to freeze government spending for three years. Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected. But all other discretionary government programs will. Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don't."
This actually means: "Anything that pisses Rachel Maddow off this much has got to make centrists a little happier, right? And where's she going to go? Who's she going to vote for? Mitt Romney? Ahahahahahahhaha... I could appoint Bill O'Reilly Secretary of Banning Abortions and Distributing Assault Rifles to Schoolchildren and she would still have to vote for me. As far as the families on a budget line goes, I hope no one does the math. We're freezing 18 percent of the budget. And the rest we're not touching. That's like a family trying to balance its budget by cutting back on what it pays the paperboy."
5. "This year, I will work with Congress and our military to finally repeal the law that denies gay Americans the right to serve the country they love because of who they are."
This actually means: "See my little liberal friends, there's something for you in here too. Oh sure, I know this reeks of Clinton era small ball and a kind of something-for-everyone approach. But hey, gay people, enjoy it ... because in terms of my list of priorities going forward, you're way behind big things like health care and fighting global warming and cutting the deficit and defeating terrorism and winning in Afghanistan and virtually none of those things are actually going to happen either."
6. "Now, the price of college tuition is just one of the burdens facing the middle-class. That's why last year I asked Vice President Biden to chair a task force on Middle-Class Families."
This actually means: "So, ok, here's the one area we are going to spend. Jobs for the middle class. Tax breaks for the middle class. We can't afford anything. Except for programs for the people who will determine whether we get to keep our jobs. Ha...we're part of our own jobs program."
7. "Now let's be clear -- I did not choose to tackle this issue to get some legislative victory under my belt. And by now it should be fairly obvious that I didn't take on health care because it was good politics."
This actually means: "Let's be clear, while I did take this on because I wanted a big legislative victory and because I thought it was good politics, this dog is clearly not going to hunt. So let's just walk it back. Did I say I wanted this done by the State of the Union? What I meant was the first bill I want on my desk this year is a jobs bill."
8. "Last week, the Supreme Court reversed a century of law to open the floodgates for special interests -- including foreign corporations -- to spend without limit in our elections. Well I don't think American elections should be bankrolled by America's most powerful interests, or worse, by foreign entities. They should be decided by the American people, and that's why I'm urging Democrats and Republicans to pass a bill that helps to right this wrong."
This actually means: "Geesh, this is a bit awkward. They're sitting right there. And they don't look happy. The reason I'm all for separation of powers is that if they were any closer they'd bite me on the leg. And frankly Alito looks like he has rabies."
9. "Throughout our history, no issue has united this country more than our security."
This actually means: "Ok, I have to get to national security for a few minutes. Admittedly, I am going to do about 8 minutes out of a 75 minute speech on foreign policy tonight. Pity because I really am getting us out of Iraq, that's a pretty big deal. I wish I could talk more about this stuff ... but right now, America seems to want a time out from the planet earth."
10."Those of us in public office can respond to this reality by playing it safe and avoid telling hard truths. We can do what's necessary to keep our poll numbers high, and get through the next election instead of doing what's best for the next generation. But I also know this: if people had made that decision fifty years ago or one hundred years ago or two hundred years ago, we wouldn't be here tonight."
That meant: "Those of us in public office can respond to this reality by playing it safe and avoid telling hard truths. We can do what's necessary to keep our poll numbers high, and get through the next election instead of doing what's best for the next generation. But I also know this: if people had made that decision fifty years ago or one hundred years ago or two hundred years ago, we wouldn't be here tonight."
But as I said, all politicians have multiple meanings with their speeches. Overall, the speech was not bad. No grand new ideas. But overall ... not a bad domestic stump speech that was particularly effective when it turned to condemning the dysfunctional mood of Washington at the moment. Admittedly, if you're a foreign policy fan, there really wasn't much here ... but Bush was all national security all the time and that didn't turn out so well for anyone. Grade: B.
TIM SLOAN/AFP/Getty Images
So, here we are at last, the big ones, my choices for winners and losers of the decade on the global stage.
While these selections are slightly less subjective than, say, the Golden Globe nominations (which are, I believe, selected by three drunken expat Latvian critics in a bar in West Hollywood), they do represent just the views of one man. If you agree with those views, please post your congratulations below ... or go ahead and add a few other names. If you disagree, just remember, there will be other lists -- only I decide whether to include you among the global losers of tomorrow (alongside, say, the Tiger Woods of 10 years from now when he is running Tiger's "Just Do It" Mini-Golf Course in Melanoma City, Florida) or the global winners of the future (alongside, say, President Timberlake in 2030 or so).
The People of Iraq: George W. Bush was our Washington loser of the decade, but all he lost was his reputation such as it was. He's still rich and will probably never pay for a round of golf again. But somewhere between 100,000 and 800,000 Iraqis are dead as a consequence of the war, the country is shattered, its government held together with chewing gum and bailing wire and the random killing continues. Oh, and there was absolutely no justification for going in and breaking up the place from the get-go. This isn't a tragedy ... it's a crime, as I suspect international courts will conclude in the years to come.
The People of Afghanistan and Pakistan: These countries are no playgrounds, they are home to plenty of bad actors and, as Barack Obama has demonstrated, no U.S. president, regardless of party, could stay disengaged from the festering political sore on the planet that is AfPak. But while the pursuit of al Qaeda and the Taliban is justified, the wars that continue to percolate here will kill countless thousands, impoverish hundreds of thousands more and at the same time, support for terrorists and other enemies of civilization will grow. That there are no good choices here is a cliché ... that there are going to be no winners is a related tragic reality.
The British Government (Lifetime Achievement Award): Well, let's book at the worst problems the world has faced during the past decade -- Pakistan, Afghanistan, Iraq, Israel-Palestine...what do these diverse countries have in common? They were all cooked up or stirred up by those fertile minds at the British Foreign Office and their colleagues elsewhere up and down Whitehall, either as they were dismantling their empire or fiddling with the region after one war or another. Thanks guys for your creativity...and for the foresight you showed by actually bequeathing your handwork to yet another remnant of your empire as you shuffled off the world stage so you could focus on counterbalancing your past contributions to global culture by producing Simon Cowell and the likes of Susan Boyle.
The U.S. Constitution, the U.S. Dollar, and American Capitalism: It was a tough decade for the pillars of U.S. society. We should have seen it coming when the decade began with the Supreme Court fiddling with an election and when a central theme of the Bush years became undercutting the Constitution. Thanks to the U.S. government's similar callous disregard for the laws of economics and fiscal responsibility the dollar began a downward spiral that many experts see as a semi-permanent feature of our future.
Democracy: Oh, yes, we know that Churchill called it the "worst form of government except for all the others that have been tried"... but as my grandma would have said, "there's democracy and then there's democracy." In other words, some forms of democracy are worse than others, and among those that that have flourished during the past decade are Russia, Venezuela, Iran, Zimbabwe, and, yes folks, Honduras -- where leaders took advantage of the common misperception that voting equals democracy.
ADEK BERRY/AFP/Getty Images)
It's the end of 2009, and not just the end of the year, but the end of the decade. A fact that has editors everywhere jonesing for lists ... who am I to disappoint? (Here is the first in a series of lists. Be on the lookout for big Hanukkah treat: The Winners and Losers of the Decade! Put that in your dreidle and spin it.)
Let's start with The Loveable Losers shall we? After all, while Vince Lombardi said that in football "winning isn't everything, it's the only thing."In politics, most of the players are losers to begin with and watching them squirm is what makes Wolf Blitzer so damn irresistible. And that's not to speak of Gloria Borger or Chris Wallace. (Come to think of it, if those guys can make it in television, I have an idea: The Potato Channel. Wouldn't it be more fun to watch an entire field of tubers ripen and rot? That's reality television the average American viewer can relate to. Heck, the average American viewer is likely to think it's about them.)
And the Big Winners?
"Wait a minute..."
Those were allegedly the final words of Pope Alexander VI back in August of 1503. I was thinking of fat, old, syphilitic, corrupt, murdering, adulterous Alexander just this morning. This particular Pope, known before his papacy as Rodrigo Borgia, who had so many mistresses he makes modern America's politicians and talk show hosts look chaste by comparison, is also distinguished by the fact that he was the father of, among many others, Cesare and the notorious Lucrezia Borgia. (To give you a taste for the man, upon becoming Pope he annulled his daughter's previous marriage so he could marry her off in a lavish Vatican ceremony to a relative of one of the cardinals who supported his papacy even as rumors circled of her incestuous relationship with one of her brothers. And the Heene family thought they had what it takes to make a good reality show...)
I thought of old Rodrigo as I flipped through a pile of clippings that I had set aside during the past couple of days. I started collecting the stories last week. The first were clippings about the record round of financial community bonuses in the U.S. and in the U.K. Then, as all this was happening, was Goldman Sachs' CEO Lloyd Blankfein's FT op-ed calling for financial reform. As I mentioned before I found the juxtaposition uncomfortably calculated.
A couple days later, there was the story announcing that former Goldman Sachs' VP Adam Storch was being named Chief Operating Officer of the "new and improved" SEC enforcement division. I have no doubt that Mr. Storch is an excellent fellow and a perfect choice ... other than the fact that he worked at Goldman. Does anyone think about the optics of these things? Or more than the optics, do they ever consider just how genuinely inappropriate such a hiring might be?
Of course, that's a rhetorical question. Some people do think about it. Just not people doing the hiring in the administration. Hence the articles in my pile of clips about the big bonuses that senior advisors to Tim Geithner got from big Wall Street houses prior to signing up to help devise the plans to "fix" Wall Street. I know some of these guys very well, consider them friends, consider them eminently qualified to be doing their jobs ... and yet, something gnaws at me about all this, an insensitivity on the part of the people who were putting together the administration team about what was really at stake in the financial crisis. It seems they felt the issue was more fixing the immediate problem than it was fixing the enduring problems in a system that once again has Wall Street executives lighting cigars with hundred dollar bills while unemployment hits record levels (see Mort Zuckerman's strong piece on this in today's FT) and home foreclosure are forcing former homeowners to live on the streets as never before. In any event it seems like they were really stopping to ask whether something big had changed ... or needed to.
Paul Krugman gets it, has all along and has written about it again in today's Times. Frank Rich, in yesterday's Times wrote a column capturing some of the anger that people feel about the power of Goldman and the other big banks and the utter unwillingness of Washington to do anything other than offer the occasional talk show tsk-tsk in response to the current return to profligacy (or the return of big lenders like Citi and Bank of America to losses after a momentary, bailout induced spate of profits).
Meanwhile, John Harwood in the Times writes about Larry Summers' wise silence on sensitive economic questions while failing to go further and ask why it was that this week's tsk-tsking assignments went to Rahm Emanuel, David Axelrod, and Valerie Jarrett -- successors in function to the troika that once ran Ronald Reagan's White House (James Baker, Michael Deaver and Ed Meese). On the one hand the question is interesting because it leads one to other questions, like why the folks from the president's morning economic briefing who are being most prominently rolled out are not actually the ones who are the economic professionals? Could it be that the administration political brain trust feels the economic team has lost too much credibility by their minimalist, go-slow approach to reform? I think that would be a miscalculation because the future effectiveness of Geithner and Summers will depend on their being seen as the architects of substantially (and accelerating) reforms.
(Of course another question raised by the appearance of the Big Three on the Sunday shows is whether or not the administration really is being some so Office-of-the-President centric that it is all head and no arms and legs, kind of like one of those big-brained creatures from outer space or our future that we were led to believe would evolve from societies that didn't require physical exercise. The critique, provided to me this weekend by a prominent diplomat who has lived in Washington a long time, is that the administration has no trouble coming up with ideas or giving speeches but it has yet to put an effective implementation apparatus in place. It is kind of the Marvin the Martian model of governance.)
That particular aside aside, the pile of clippings grew this morning with the Wall Street Journal noting in its particularly "fair and balanced" way that the criticism of Wall Street from Emanuel and Axelrod was more tempered than in the recent past, suggesting that at least as far as the newspaper of record of the financial community was concerned, the White House wasn't too het up about all these fat pay checks. Apparently swine flu worries us but an epidemic of swinishness does not. At least the Journal seems to hope so.
And so, reflecting on all these clips, I started thinking to myself, is it capitalism? Could Michael Moore be right? (That seems so unlikely...) It's troubling to me, a dyed-in-the-wool practicing capitalist. And I'll have to admit I am still a long way from coming to a good answer about just how we have gone wrong and what needs to be done to fix a system that is producing greater inequality than ever and that is so apparently corrupt that even those from whom you expect big reform have either been co-opted or, alternatively, are simply reluctant to toss these particular money changers out of our particular temple (the small "d" democratic one).
But my first instincts are what brought me back to good old Pope Rodrigo the Base and Repulsive. Because it strikes me that the issue isn't capitalism per se. Because 21st Century Wall Street is to capitalism as Pope Alexander VI was to the teachings of Jesus Christ. There was a connection but it was remote and observed more in the breach than in the honoring of the essentially good underlying ideas.
And that's where I take some comfort. It's not that we need a new economic ideology. We're just in dire need of a Reformation. (Although I for one could do without some of the wars, inquisitions, and public executions of the last one.)
EMMANUEL DUNAND/AFP/Getty Images
World Bank President Bob Zoellick has done an important service with remarks he delivered Monday in which he said, "The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency. Looking forward, there will increasingly be other options." In fact, the only issue I take with his statement, delivered at the Johns Hopkins School of Advanced International Studies, is that it does not go far enough.
It has thus far been easy for most Americans to shrug off discussions of coming competition for the dollar as a reserve currency. First, of course, most Americans aren't even aware that the discussion is taking place and of those that are aware, most haven't the slightest clue how the international monetary system works -- which at least gives them something in common with most members of Congress and central bankers everywhere. (Zoellick is rightly pretty tough on the central banking community in his remarks, as well.)
Also, when Europeans or Russians starting talking about needing another currency so there is an alternative to the greenback, Americans tend to shrug it off as dollar-envy. It was not, of course, so easy to dismiss such suggestions when it came from the Chinese given their role as our principal creditor and the fact that they had more reserves than any other country in the history of mankind. But we put our hands over our ears and made "la, la" noises to drown out the discussion anyway.
Thus, whenever the issue arose, as it did again in discussions last week at the G-20 meeting, it has not had much resonance even among most members of the policy community in Washington. Many view the dollar as an immutable, unchanging fixture of the financial world ... even though recent experience has demonstrated that other than greed, there are few immutable, unchanging features of the financial world. This made it easy for the U.S. Treasury to simply mouth reassurances -- as Tim Geithner did last week -- that the dollar should remain the reserve currency without getting much questioning here at home.
But Bob Zoellick is not a whacky, Gitane-smoking, eurocommunist with an anti-American agenda.
He is a Republican, a Bush appointee, one of only a couple of dozen senior current or former U.S. government officials who can say they worked at Goldman Sachs, the true power center of international finance. So when he says don't take the dollar's place for granted, perhaps others in Washington will listen and start to focus more on the increasing likelihood that the growing chorus of those seeking change may well gain traction and as may the alternative currencies themselves -- be they Special Drawing Rights, the simulated money produced by the IMF for use with its members, or Chinese yuan.
Of course, Zoellick, whose remarks (which I read in "prepared for delivery" form) are typically thoughtful and also address the importance of the ascension of the G-20 and how this newly central group should take into consideration the broader rise of emerging economies, stops short of actually joining those calling for an alternative currency. It's easy to understand why, given his position.
But since none of the rest of us are president of the World Bank, we should not feel so constrained. There are plenty of good reasons why there should be one or more better alternatives to the dollar as a reserve currency than currently exist. Further, by not taking the discussion seriously we are less likely to play an effective role in the discussion about the future architecture of the system, consigning ourselves to a more reactive, sideline role.
First, there is no reason why one country should be given the responsibility or the right to play such a central role in determining international economic policies and outcomes. This is unlikely to be very persuasive here at home where most Americans first reaction is going to be, "Why the heck not? If not us, who? Don't we deserve it as the world's number one economy?"
Given that the call for equity is not likely to be persuasive, what about basic American values like our belief in the benefits of competition. Look what has happened during this era in which we have not believed there was a real alternative to the dollar: We have behaved extraordinarily recklessly, piling on debt and practically taunting the world to find other options. It is clear, we don't have the discipline to manage the dollar properly as it is. We need the competition as much as anyone else.
Would a rapid selloff of dollars be potentially disastrous for America? Absolutely. But, we are deluding ourselves if we don't think such alternatives already exist. Why is gold at such absurd heights and going higher? Further, there is plenty of evidence to suggest that oil and other commodities are regularly used as alternatives to currencies in what amount to forex trading strategies. In other words, markets demand such alternatives already. And any movement toward acceptance of new alternatives is likely to take a long time as investors cautiously adjust. So, we have to ask ourselves is the greater downside in embracing change or in clinging to a viewpoint that is both out of touch with emerging realities and promoting bad behaviors on our own part?
The international economic system will evolve with our cooperation or without it. Currently the biggest threat to the dollar is not those who seek alternatives but the U.S. policies that are pushing them in that direction. It's time we engaged in this debate in a serious way, and Zoellick's remarks are a very constructive first step in that direction.
Win McNamee/Getty Images
In a world of self-help addicts who "just feel too much," the ultimate hero was Watergate burglar G. Gordon Liddy. Never mind that the guy was a few rounds short of a full clip of ammo. He is the man who held his hand over a flickering candle flame while his flesh appeared to roast and then, when asked how he did it, responded, "The trick is not caring."
I'm reminded of this because as we contemplate this week's G20 Summit in Pittsburgh and reflect back on the breathlessness with which the entire world viewed the last two such summits, it is clear that the trick they've seemed to accomplish is that this time around we all don't seem to care so much.
That could, of course, be partially due to the fact that this event is in Pittsburgh and that not that much really exciting has happened there since Franco Harris' "immaculate reception" during an AFC Playoff Game in 1972. At least for me, even recent Super Bowl victories have lacked the gritty drama of those by-gone days as the town has become spiffier and blander. (Have you been to Pittsburgh Airport recently? It's a shopping mall where they happen to land planes.) It's not that the city isn't grittier than say, Santa Monica. It's just that I feel some of that special Pittsburgh "let's have a beer and then punch each other in the faces until we fall down" kind of charm is gradually being lost. We're not too far from the day when a little kid asks, "Why do they call the team the Steelers, Daddy?" and the father then has to explain that once upon a time the steel that went into American cars and buildings was made right here in America. (More on this last point shortly.)
Of course, the reason the meeting is in Pittsburgh has to do with at least one respect in which the region is still seen as pretty exciting to certain types of folks -- like professional politicians, for example. Obama needed Pennsylvania to defeat John McCain. And the people of Pittsburgh like our current Ambassador to Ireland Dan Rooney helped deliver for the president and the president is therefore regularly looking for ways to deliver right back. (This is not to suggest that Rooney might possibly have gotten his job as a form of political payback. His years of experience as the principal owner of the Steelers made him an obvious choice for an important diplomatic position. After all, what riddles could dealing with the Irish pose that would be more complex or challenging than say, former Steeler quarterback Terry Bradshaw's break-up with ice-skater JoJo Starbuck back in 1983.)
Rooney wasn't the only one who helped Obama, however. Which, not surprisingly, brings us back to steel again ... and in particular to the United Steelworkers. Because it is clear that it is not an accident that Obama will be using this meeting to call for new initiatives against global trade imbalances in the hometown of one of his favorite unions. Just like it's not an accident that he primed the pump for his efforts with the recent decision to impose duties on Chinese tires, an issue that was pushed most vigorously by the steelworkers. Just like it's not an accident that Obama's new manufacturing czar is Ron Bloom, who was most recently the special assistant to the president of the United Steelworkers.
Which is all by way of saying, the G20 is not in Pittsburgh either because it's beautiful (and it has its charms) or because it's boring. The G20 is in Pittsburgh because of the domestic politics of U.S. international economics. Just as Marshall McLuhan once said "the medium is the message," in this case the location is the message.
And so we return to the "trick" of this meeting. It is no small feat that while last November's G20 meeting and the one that followed it in London in April were hot topics as the world careened through the worst economic crisis since the Great Depression, that this meeting is viewed in a more relaxed matter. There is an emerging consensus that things are slowly getting better, that we are probably even out of recession even you read this. (Feeling better yet?) No doubt this is largely due to the market working through its fears and repricing accordingly, but the speed and scope of interventions in the United States and China and even some parts of Europe undoubtedly had some positive effect. To the extent we are not still "falling off the table" in the words of Larry Summers, the G20 leaders deserve some of the credit.
And if this turns into a sustainable recovery, none of us should begrudge them the credit they get. But the problem with tricks is that they often involve some form of well, trickery. In the case of Liddy, the (not very well kept) secret was that he was bonkers. But in the case of most sleight of hand the secret is misdirection. We look in one direction while what is important is happening someplace else.
I hope that's not what is happening with the global economy. I hope we are moving toward both a sustainable recovery and toward enacting regulatory reforms that ensure we don't make the same mistakes that led to last year's market debacle. I hope we are not looking at one set of indicators while ignoring another. But there are warning signs.
One is that while the G20 will agree on an expanded role for the IMF, national governments including our own are moving too slowly to address root causes of the recent crisis from opaque, often-illiquid but massive global derivatives markets to effectively controlling the risk appetites and exposures of large financial institutions whose failures carry with them a large risk of damage to the public at large. That's not to say some measures aren't being considered or implemented. It's saying that many of the steps-like creating more transparent markets in some derivatives -- don't go far enough. The biggest banks are bigger. New risky behaviors are being embraced. Old ones are creeping back into vogue.
In fact, I can't help but wonder if the biggest problem with the recent crisis was that it wasn't painful enough. Or that perhaps it ended too quickly to deliver effectively the lessons we ought to have learned.
Further, on the macro level there's still plenty to worry about. First, recovery will be slow. Second, those who are depending on Asia to lead us out don't realize how limited their capability is to do that. Chinese consumers are many decades away from being able to make up for any substantial fall-off in demand from Americans. And there are risk factors out there ... relating to dollar or commercial real estate markets or simply a panic induced by an exogenous event ... that could lead to serious trouble...the dreaded "W."
And finally, there's Pittsburgh. Or rather the reason we are in Pittsburgh. I'm not sure the Obama team has irreversibly set a protectionist course. In fact, I'm pretty sure that the issue is still something of an open question. Summers and Geithner are certainly not protectionists by instinct and USTR Ron Kirk is still getting his legs under him. But many of these decisions are getting made on the political side. So it might be that we will add to the cocktail of inadequate reforms and questionable macro trends policies that can only make things worse: like getting a series of trade scrapes and scuffles that will impede recovery and make key relationships much more complicated.
Which is why, just as with Liddy's little trick, this one creeps me out a bit. The world is letting out a sigh of relief at a moment that has me holding my breath.
SAUL LOEB/AFP/Getty Images
There was for a long time been a widespread belief that the guys who were cashing in on Wall Street were the best and the brightest. Now, as we mark the anniversary of the collapse of Lehman Brothers we have yet another form of proof it just ain't so.
But the deus ex machina arrival of new U.S. ambassador to Germany Philip D. Murphy really is in a class by itself -- stupid, thoughtless and arrogant on so many levels it deserves some kind of an award.
Perhaps State ought to consider some kinds of guidelines for the fat cats who are being plunked down in important embassies around the world. Like: "Don't be a pig with your money." Or: "Try to remember you represent the United States of America and not the sovereign principality of Goldman Sachs anymore."
But you do have to give the White House credit. Getting someone from Goldman to serve in the government is a real coup. Who thought of that? They also deserve a medal.
It used to be that the Chairman of the Fed was regularly referred to as the most powerful man in the world. This was back in the day of Alan Greenspan and, at the time, it seemed it was in spite of the fact that people seldom understood what he was saying. Subsequently, we learned it was precisely because of the fact that we didn't understand what he was saying. And then, subsequent to that, we also learned ... largely because he had the good grace to admit it ... that he himself didn't understand what he was talking about.
The downward spiral of Greenspan from philosopher king of the global economy to mere mortal caught his successor, Ben Bernanke, in its vortex. He was handed an economy in which the doors and wheels were coming off as we drove and nothing like the power he needed to deal with it. Indeed, as the current crisis unfolded we saw that the Fed chair was not the most powerful job in the world, that title was reserved for current or former ceos of Goldman Sachs. This must be so because for a while people wanted to fire Bernanke after one term in office primarily because he had inherited a mess whereas when you screw up the global economy as the current or former ceo of Goldman Sachs, people want to help bail you out or make you Treasury Secretary or both.
I kid. It is highly unlikely any ceo of Goldman Sachs is Treasury Secretary again for quite some time. Possibly years.
And Bernanke did earn some of the flack he got initially, largely because he was swept along in the groupthink of Washington economic honchos, buying into the "leave it to the markets" regulatory philosophy that got us into the mess we faced for far too long. But when it became clear that approach not only did not work but that real change was needed, the quiet academic stepped up and became perhaps the leading dependable voice of reasonable change. That's why there is a consensus emerging today that Bernanke, who against all odds seems to be restoring the notion of Fed Chairman as Washington's most trusted economic oracle, should be reappointed when his term in office ends. Steven Pearlstein, in a typically thoughtful piece in today's Washington Post, gets on this bandwagon and adds a few suggestions as to how to modify the Fed (as well as an absolutely justified endorsement of David Wessel's terrific new book on the economic crisis called, "In Fed We Trust.")
The growing momentum of this bandwagon has put in doubt the once conventional wisdom that Larry Summers had accepted the reins of the National Economic Council as an interim step on his way to the Fed chairmanship. But Summers has done such a good job elevating the National Economic Council to unprecedented prominence in the day-to-day operations of the White House and has so effectively earned the president's trust, that it is now almost certainly better for all concerned (including those of us out here in tax-payer land) that he stay right where he is. If there was ever a situation that called for the president to have a strong economic quarterback at his immediate side in the White House, it is this one and in Summers, Bernanke, and Geithner, Obama has got a first-rate team that has the number one criteria you need for success in each of their respective jobs -- the trust of the president.
Now, as readers of this blog know, I don't think every move they have made is perfect. I am disappointed by the speed of regulatory reform here in the United States and internationally. I think they have not done enough to address some of the underlying causes of the crisis such as the creation of massive pockets of risk in the global economy related to the development of opaque derivatives markets. I think they have cut deals with Wall Street that are too sweet for the bankers. I think they have spent too much, bought into ideas (like tax cuts) in the stimulus that amounted to political pandering and they sure haven't given the president the kind of clear guidance he needs on how to sell the health reforms that are perhaps the economic reforms we most urgently require.
That said, their job was first to stop the bleeding and to stabilize the patient. It was no easy task and what they did in terms of swift and sweeping intervention, while imperfect ... almost necessarily imperfect given the speed at which they were operating ... has seemed to work. I still fear a second dip of the recession ... the "W" rather than the "V" shaped recovery. But today's papers show Germany and France creeping out of recession. Japan may too. Economists (a group with limited credibility at the moment, I must admit) seem to think we are at least plateauing here in the United States too. So I think it is fair that this team get credit for their efforts.
Frankly, I hope that the initial success they seem to have achieved emboldens them. If anything they have seemed too deferential to the Congress and to Wall Street and once stability seems assured aggressive measures to rein in the budget deficit, further strengthen regulatory oversight and strengthen international regulatory mechanisms will be called for with the same urgency that stimulus measures were called for earlier this year.
We have seen the dangers of too much deference to the markets, of regulatory indifference, of not believing that government could or should play a significant role in protecting our national interests by identifying and mitigating market risks with broader macro or social consequences. I hope the president makes the early decision to keep everyone where they are so that they can focus on the next wave of reforms that are so urgently needed.
(And to be clear, does the above actually suggest that I want a bigger role for governments in market regulation, stronger global governance mechanisms, tax increases if we need them in addition to substantial spending cuts and that I am a fundamental believer that government also needs to play a much expanded role in ensuring sustainable health care...which optimally would be through a single-payer system that is not even on the table at the moment ... and preserving the environment ... ideally through a simple, straightforward and substantial carbon tax? Yes, it does. Start rolling out your labels if you would like, but if the recent crisis has taught us anything it is that we can't afford the reflexive rejection of government solutions where they are needed ... rather we need to rise to the challenge of figuring out how to make governments more effective in these critical roles that only they can play.)
Spencer Platt/Getty Images
Senator Charles Grassley, one of the six power brokers featured in the New York Times story today on the inner circle of senators who are shaping health care legislation, may not be one of the three Blue Dog Democrats on the group, but that doesn't stop the Iowa Republican from being pretty dogged when it comes to his own pet issues.
According to today's Congress Daily, the Finance Committee's ranking member has slammed the brakes on the confirmation of Thomas Shannon to be ambassador to Brazil. His reason? He seeks what is euphemistically called a "clarification" of Shannon's confirmation hearing statement that eliminating the tariff on ethanol imports would be "beneficial." Of course, by "clarification" the Senator means a complete reversal slammed down Shannon's gullet by administration higher ups.
In letters to Secretary Clinton and USTR Kirk Grassley wrote:
A clear signal of the President's stance on this issue would decrease the possibility of confusion in America's heartland and in Brazil regarding the ethanol tariff if Mr. Shannon were confirmed as Ambassador to that country."
Since Shannon, most recently U.S. assistant secretary of state for Western Hemisphere Affairs and by consensus the most talented and successful individual to hold that office in at least two decades, is one of America's very best diplomats he will of course, be far too circumspect to offer Grassley the "clarification" he deserves.
Let me try however. U.S. ethanol tariffs are indefensible on any level, yet another example of the system of agricultural welfare that has burgeoned in the United States thanks to that good old fashioned combination of backroom and checkbook politics that make America great. There is not a single credible analyst of biofuels (which is to say one that is not paid for by or affiliated with American agriculture) who thinks that corn ethanol makes a hint of sense. It is hopelessly inefficient and with every new development regarding next generation biofuels only grows more so. Brazilian sugar cane ethanol, the main target of the tariffs, is produced as much as eight times more efficiently. As such, it offers a cheaper, more abundant, more environmentally friendly alternative to American consumers at a time when one would have thought that concerns about reducing dependence on foreign oil and combating climate change would be at the forefront of our concerns.
But once again, America's electoral system rears its ugly head. So long as presidential campaigns begin in Iowa, Iowans like Grassley will use the system to put the interest of their state's three million citizens and the most vocal special interests within their midst like the corn lobby, ahead of the three hundred million or so of the rest of us. Further, in so doing, Grassley seeks to preserve yet another dimension of America's system of farm protection and subsidies that costs tax payers tens of billions each year, forces food prices higher (according to the likes of Nobel Prize winner Joe Stiglitz) and is the single biggest distortionary factor in the world trading system. I understand why he is doing it. It's just a shame he can. The system allowing individual senators to hold up presidential nominations is regularly abused and needs to be reconsidered.
It is now July and the Obama administration does not have its own ambassador in Brasilia, capital of one the rising powers that is most important to us in the world. The guy who is there now, Bush's appointee Cliff Sobel, is widely regarded by Brazilians (and anyone else who is paying attention) as a joke whereas Shannon is seen as the crème de la crème of the U.S. diplomatic service and is a nominee viewed with great enthusiasm by the Lula administration. The Shannon pick said "Brazil is important." Grassley's move says "all politics is local."
It will be interesting to see how this plays out given that Grassley is so important to the prospects for health care reform. Grassley, who is as canny as they come in the Senate, knows the hand he holds and is betting he can get the Obama team to commit to keeping the tariffs as part of the wheeling and dealing associated with health care. I wouldn't bet against him.
As they say around state fair time in Des Moines, "ain't nothing like a corn dog."
Chip Somodevilla/Getty Images
In the 1950's, the British philosopher J. L. Austin came to Columbia to present a paper about the close analysis of language. He pointed out that although two negatives make a positive, nowhere is it the case that two positives make a negative. 'Yeah, yeah,' Dr. Morgenbesser said.
Austin was clearly unprepared for Morgenbesser. But he was also clearly unfamiliar with diplomacy in which the double positive can be deadly.
For example, on one level, if you are an ally like Israel, you might think that the only thing better than being visited by one senior U.S. official (say, Secretary Gates) would be another visit in the very same week from another senior official (say, National Security Advisor Jim Jones). Even better would be adding yet another bit or two of senior level attention, say that of Mideast Negotiator George Mitchell or NSC Mideast guru Dennis Ross. But four times the high-level visitors are hardly four times the fun, or to put it another way, one high level visit is an honor but four in a week is a serious sign of trouble.
While all the visits to date have produced upbeat official statements at their conclusion, behind the scenes it is clear that concerns about the Israeli stance on Iran and the Netanyahu stance on settlements has pushed this relationship to what may be one of its lowest ebbs in modern memory. As one Israeli said to me, "We spent half the Bush administration complaining our issues weren't getting any attention. Now, we're starting to look back on being neglected as the good old days..."
Also, of course, too many envoys raises another question, "if your government speaks with one voice, how come I am hearing so many voices?" This is related to another classic set of double-positives encountered in politics and diplomacy, the problem of too many chiefs. For example, having copresidents of an organization doesn't mean having twice as much leadership, it usually means half as much…or less.
Which brings us to another instance this week in which the positives have been signs of the negatives: the U.S.-China Strategic Economic Dialogue, which is cochaired on the U.S. side by both the Secretary of State and the Secretary of the Treasury. As Glenn Kessler wrote in the Post today:
On Monday, about 200 senior Chinese officials traveled to Washington and heard soothing words of reassurance from U.S. officials: The dollar is still sound, your investments are safe and we are working really hard to restructure our economy.
Such is the nature of the U.S.-China relationship today. Behind all the reassuring language is a nervous sense that the fate of the world economy is increasingly dependent on the United States and China working together.
In other words, it's our turn to sing "Don't You Worry 'Bout a Thing" which, of course, means, in the best interpretation, that our partners the Chinese are worried and at worst means, "worry!" (How things have changed since we were beating them up about their economic management.) Certainly every reassurance we offer is more a sign of an underlying concern than it is a true positive statement about the economy. Thus, the more positives, the more worries.
This, in turn, brings another Morgenbesser anecdote to mind, also recounted in his Times obit:
In the 1970's, a student of Maoist inclination asked him if he disagreed with Chairman Mao's saying that a proposition can be true or false at the same time. Dr. Morgenbesser replied, 'I do and I don't.'
Mark Wilson/Getty Images
Sometime next year, probably a few months after the unemployment rate in the United States passes 10 percent, Goldman Sachs may well generate the $10 billionth dollar of profit that it has made since the American taxpayer helped bail it out at the nadir of the financial crisis. At least it will if keeps making $3 billion a quarter in profit as it did last quarter.
With 2010 being an election year, the Republican Party will be vigorously hammering the Obama administration on record unemployment (it's quite possible real unemployment...including those who don't report, etc...will be approaching 20 percent, it's already 16.5 percent now). They will say the stimulus was wasteful and that new taxes on the wealthy are just the tip of the iceberg. And, if midterm elections hold true to form, the Obama administration will lose the big advantages the Democratic Party currently has in the Senate and the House. (Watch for Mitt Romney selling his business and management credentials to lead this charge and position himself successfully to be the Republican candidate in 2012.)
The Republicans won't actually win a majority in either house. But they won't have to. As we have already seen with health care and climate reform, even with current advantages the Obama team barely can force their own initiatives through given divisions within the Democratic Party.
And those Democratic divisions should grow. Because in all likelihood...if the left has any hint of a spine left...they will be furious that Obama not only fumbled his lead but that he is copping out on health care and climate, seeking to be the Henry Clay of the modern era (and let's remember, the fates of the compromises engineered by "the Great Compromiser" were not so great.) Meanwhile, Obama will also be seen by many as the guy who Wall Street had dancing on a string. Because nothing says "you been played, suckah!" like reading stories such as those in today's Wall Street Journal or the FT of Goldman's bounties. The taxpayer couldn't get played in this instance without the willing shnookery of the Obama administration (and the historically clueless shnookery of the U.S. Congress not to mention that of the Bush administration...let's be fair, the nation's capital is shnook central).
In other words...if things play out as described....2009 could be the legislative high water mark of the Obama administration with the election paralyzing action next year and progress on the Hill much more difficult thereafter.
As for Goldman's record payday, I've asked this before and I will ask it again: Where is the outrage? I'm a dyed-in-the-wool capitalist. I love free markets. I hope a free market marries one of my daughters some day. But if some people have too many advantages and others simply can never catch up, the markets aren't free, regardless of law or intent. Even if the advantages are in part derived from talent and hard work, fairness can remain an issue if other components of the success are linked to access, influence, history and other intangibles.
Few companies in American history...perhaps Standard Oil, perhaps J.P. Morgan's bank, but probably not G.M. in its prime...have had more high-level influence on public policy than Goldman Sachs. This may have seemed fairly benign when markets appeared to be operating as they should and Goldman merely seemed a source of talent for the government.
But now we have a different perspective. In a story from the front page of today's Wall Street Journal: "With competitors such as Lehman Brothers Holdings Inc. and Bear Sterns Cos. Gone and others like Citigroup Inc. flailing, Goldman appears to be pulling off one of the biggest market grabs in Wall Street history." And so we must ask, how did we get here? Is it purely a coincidence that former Goldman CEO Hank Paulson oversaw the management of a financial crisis that allowed several of Goldman's biggest competitors to be destroyed but included goodies like the $12 billion passed through AIG to its prime counterparty Goldman, why aren't there more questions?
Goldman over-leveraged. Goldman advocated for the system that produced the crash...self-regulation by banks, proliferation of risky vehicles, a trading culture that passed risk along and left tidy profits for the traders. When the system blew up, Goldman, its advocate (including a busload of former execs who helped write the rules in the USG), and one of its prime beneficiaries, went to the government and asked for help. It got it. It used it. And then, apparently not as badly off as it once had seemed, it paid off the government cash when it seemed there would be too many strings attached.
Now it is using the new-found freedom and vitality to gain an edge on its remaining competitors, many of them still struggling. (In fact another banking crunch is possible due to margin issues, consumer credit issues and commercial real estate issues among others.) Throughout, it was a Goldman guy at Treasury in the Bush administration, a Goldman guy at White House chief of staff at the end of the Bush administration, a Goldman guy in charge of TARP, and when Tim Geithner left the NY Fed to replace Hank Paulson, it was a Goldman guy who replaced him.
And now, when the rest of the economy is in ruins, who is it that is striding about announcing record profits and record bonuses? And why is there no talk of any commensurate return on investment to the taxpayers who, they argued at one point, were needed to save their hides? (If you ever wanted proof of the premise behind my book Superclass, look no further. These guys operate as ultra-citizens in our society, virtually able to tell the government to heel and fetch in ways the rest of us can only fantasize about.)
Some will surely argue this is the American way, that Goldman has earned every penny. No. While Goldman has legitimately earned much of it, and there are many great and good folks working hard at Goldman who have made important contributions through government service. (In particular I applaud the pending appointment of the vice chairman of Goldman International Bob Hormats as Under Secretary of State for Economics, a great and talented guy.) Fair-minded individuals must also conclude they played the system, their huge profits came at the expense of others who could have used the government bailout money who had no access to it, no clout, no Treasury Secretaries hailing from their failing auto parts dealership or struggling stationery store. Further, Goldman's profits are simply not the broad-based benefit for America, they are a benefit for Goldman employees and shareholders.
Goldman is the most influential financial institution in a community of banks that sucked the system within an inch of its life with greed and to whom the U.S. government seemed to feel a prime responsibility was to rescue them..."to mitigate systemic risk." Crap. What about the risk to the system caused by the inequities created here? These ultra-citizens -- Goldman is one, think of Exxon registering record profits while the country squirmed in the midst of an energy crisis...and then demanded tax breaks along the way -- are operating apart from and above our system, using it for their benefit, putting people at risk, exacerbating inequality. While they may help America in some respects...we need to wise up and recognize when we are being used and abused.
And sooner or later, with deficits mounting (Happy Trillion Dollar Deficit Day everyone!) and the government in need of revenue in some form other than loans from abroad, there will be more tax hikes. And companies that operate with sense of entitlement and moral blankness that distinguishes their counterparts in modern fiction...in the Twilight movies say, or "True Blood"...will be the ones who will find that they are increasingly the targets. And what's more, I think they should be.
My sense is that it is going to take the next wave of crisis...the growing unemployment...the very very slow growth of the recovery whenever it happens...perhaps the next downspike...to mobilize the left and to paralyze the traditional defenders of these folks. (Admittedly a big shift to the right in next year's elections could protect the ultra-citizens in our society, the organizations that have trumped the people in American democracy. And thus watch who supports that shift.)
Obama can still avoid these outcomes...a shrunken edge in Congress, an even more fragmented party, this year's watered-down programs being the high point of a one term administration...but not if he doesn't realize that at the moment his "let's get Wall Street back to the way it was" approach could be the death knell for his popularity with much of his base, much as it was for his Republican opponents last fall. It's time to recognize something not working as planned with this recovery in which the top enjoys record rebounds while the bottom still plummets.
In the old time TV and radio series "The Life of Riley," William Bendix's character would regularly say what I thought this morning while reading about the Goldman bonanza: "What a revoltin' development this is." The question on my mind is: When does the revoltin' in response begin?
Mario Tama/Getty Images
A few quick takes...
DMITRY ASTAKHOV/AFP/Getty Images
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.