Monthly Archives: October 2009

I thought last night’s PBS Frontline documentary on Afghanistan was excellent, if depressing. If you didn’t see it you can watch it here. The scene where the US marine starts to lose his temper with the people he is trying to protect makes you wince. Talking through a translator who spoke neither the local dialect nor English all that well–”I’m asking you for the fifth time”–the marine’s posture is impatient throughout and increasingly exasperated. He eventually resorts to an outright threat. The villagers’ not unreasonable response: What do want us to do? You have tanks and planes. If you can’t beat the Taliban, how do you expect us to?

This is counter-insurgency? Impossible to say, of course, how representative an encounter it was, but the situation looked all too plausible. You could not help but think that what we are asking of our forces–with little training and no aptitude for this kind of work–is just impossible.

If that isn’t enough to make you gloomy, this WashPo piece today might do the trick.

An excellent column by Henry Aaron and Isabel Sawhill.

So here is what we propose: Congress should enact a value-added tax, the equivalent of a broad-based sales tax on all goods and services. It should take effect only after unemployment has fallen to a predetermined level or in, say, five years, whichever comes first. Congress should link revenue from the new tax and other sources directly to public health-care spending through a newly created health-care trust fund. The trust fund would pay for all federal health-care spending. This framework would mean that Americans would get the health care they are willing to pay for. If spending outpaces projections, Congress will have to choose between raising taxes and finding ways to slow the growth of spending.

By balancing revenue and health-care spending, such a reform would help solve America’s long-term fiscal problems. In the near term, it would also support and sustain the economic recovery. Consumers would be encouraged to buy now, before the tax takes effect. And by showing financial markets that Congress is determined to put our fiscal household in order, it would help keep interest rates low and encourage investment. The trust fund mechanism would strengthen incentives to institute reforms that will actually bend the health-care cost curve, because measures to slow the growth of health-care spending would avoid unpopular future tax increases that would otherwise be necessary.

This is a good idea.

Last year, by the way, I praised a book by Zeke Emanuel which makes the same points while laying out a basic blueprint for healthcare reform. Healthcare, Guaranteed is still the best thing I’ve read on the conjoined issues of tax reform and healthcare reform. The policy in the works is not going to be like this, needless to say, but the country might get there in the end. For the reasons Aaron and Sawhill say, it had better. Unfortunately Emanuel has been silent on the subject since going on to the White House payroll (where he has faced a lot of brainless criticism on the “death panels” issue). I think he would be more valuable educating the public than advising the president.

My new column for National Journal looks at the Senate’s climate-change bill [the link to the article expires in two weeks].

Carol Browner, the top White House adviser on energy and the environment, recently told a conference hosted by our sister magazine The Atlantic that the president was unlikely to sign a climate-change law before the next big international meeting on the subject, in Copenhagen in December. “That’s not going to happen,” she said. The American negotiators should have a bill to work from — quite likely more than one — but no new law. This will be an embarrassment. It will hamper the Obama administration’s efforts to claim global leadership on the issue.

But for those who seek effective curbs on carbon emissions, the news is not all bad. It matters more to get the right kind of agreement — one around which global cooperation on carbon abatement can work — than it does to meet the December deadline. And it may be that the United States is inching, after all, toward the kind of measure that could serve this purpose.

Later I refer to a paper for Brookings by Adele Morris, Warwick McKibbin and Peter Wilcoxen. This advocates a “carbon price collar”–a very good idea that Kerry-Boxer has now taken up. If you follow this issue, the paper by Morris et al is essential reading. You can find it here.

One might say a lot about the bizarre decision to give Barack Obama the Nobel Peace Prize, starting with a few things about the panel that awarded it. Something you cannot say is that it is good news for the president.

Mr Obama has been in office just nine months. Apart from pushing through a controversial fiscal stimulus, he has done little. He gives memorable speeches, moves audiences and is widely admired. So far, that is it. The panel cited his “extraordinary efforts to strengthen international diplomacy”. Yes, he has changed the tone of US policy, which is good. But it is not unusual for a politician to give speeches. In foreign affairs, the most ardent admirer can point to no great exertion or persistence, let alone actual achievement.

As seen from the US, the timing is especially jarring. The committee has awarded its prize just as Mr Obama has begun to be the butt of jokes from previously friendly quarters about broken promises and the gap between words and deeds.

The remainder of this article can be read here. Please post comments below.

Mickey Kaus is right.

For those who read my column on rage in US politics, and for others as well, no doubt, here is an interesting article by Lou Cannon (noted biographer of Ronald Reagan, among other distinctions) on “the once and constant opposition”.

My foray in the archives casts doubt on two assertions that have been made so often they seem as if they have the force of fact. The first is that Obama faces slurs and slanders of unprecedented magnitude. This is sometimes been attributed to racism but more often to the coarsening of the public dialogue arising from the decline of newspapers and the rise of talk radio, 24-7 cable news, and an Internet that puts legions of amateur bloggers on equal footing with professional journalists and historians.

The second assertion is that conservatives and/or Republicans are out of ideas and time, a contention made provocatively by Sam Tanenhaus in his new book, “The Death of Conservatism.” “Today’s conservatives resemble the exhumed figures of Pompeii, trapped in postures of frozen flight, clenched in the rigor mortis of a defunct ideology,” Tanenhaus writes.
I’ll come back to Sam Tanenhaus and his fine new book another time, but for the moment let me respond to the first assertion, which goes to the issues raised in my column. Yes, I agree, slurs and slanders and attacks on a politician’s legitimacy are hardly unprecedented in US politics. But does this mean that the syndrome I’m complaining about is just business as usual, no cause for alarm? I don’t think so. The usual historical examples are hardly reassuring. Lincoln’s legitimacy was furiously attacked–and (as Cannon notes) the divisions of his time literally tore the country in two. FDR’s legitimacy was furiously attacked, and (you could argue) the outcome was uncertain until global war restored the country’s sense of unity and purpose. If US politics is again as divisive and unreasoning as it was in Lincoln’s and FDR’s times, the country has something to worry about.
By the way, I have had emails taking issue with part of my column for “equating” views of unequal merit. For instance, one correspondent wrote:
[Y]ou do a disservice to your readers when you equate right-wing birthers questioning whether Mr Obama was born in the US and leftwing counterparts who argue that George W. Bush stole the 2000 election.  There is absolutely no evidence that Mr. Obama was born anywhere outside Hawaii, whereas there are serious grounds to question the legitimacy of the outcome of the 2000 election.  At least four Supreme Court judges would agree.  Furthermore comparing conservative claims that Congress’ (not Mr. Obama’s) healthcare plan is a plot to turn the US socialist to former president Jimmy Carter’s (impolitic) suggestion that much of the opposition to Mr. Obama is mere racism is also misguided.  Carter clarified his (arguably misinterpreted) remarks saying that some attacks on President Obama were tinged with racism.  Few Republicans have backpedalled on claims of a socialist plot.
I take the point (though I think this way of putting it is pretty generous to Jimmy Carter). I wasn’t trying to equate these views, or compare their merits, only to give examples from each side of attacks that question not the judgment but the legitimacy of the other. Charges of that kind, which seem to be becoming the standard line of attack, are uniquely toxic. They are saying, in effect, that democracy itself has broken down. Flawed as the Supreme Court’s decision on the 2000 election may have been–and for what it’s worth I thought it was a mistake–its ruling should have settled the matter. The fact that there were dissenting judges–when are there not dissenting judges?–does not make their judgment half-binding. To persist in believing and saying, as many Democrats did, that George Bush was an illegitimate president, was anti-constitutional and anti-democratic. Those are bad habits to pick up.

Bromley illustration

Last week, in his column in the New York Times, Thomas Friedman broached a subject that nags at many Americans. “I have no problem with any of the substantive criticism of President Obama from the right or left,” he wrote. “But something very dangerous is happening. Criticism from the far right has begun tipping over into delegitimation and creating the same kind of climate here that existed in Israel on the eve of the Rabin assassination.”

Increasingly, rage is the dominant mood of US politics – but the feeling is not confined to the far right. Committed partisans on both sides question their opponents’ legitimacy. It is one thing for an adversary to be mistaken, quite another to be a liar or traitor. You do not argue with an opponent like that, or seek an accommodation. You silence him, you shout him down, you impeach.

Right-wing “birthers” question whether Mr Obama was born in the US and can lawfully be president. Their leftwing counterparts think George W. Bush stole the 2000 election, then permitted the attacks of 9/11 to justify his war against Iraq and the creation of a police state. Conservatives deride Mr Obama’s healthcare plan as a plot to turn the US socialist. Liberals, led by former president Jimmy Carter, no less, suggest that much of the opposition to Mr Obama is mere racism.

The remainder of this article can be read here. Please post comments below.

This was the second day of a conference organised by The Atlantic, the Aspen Institute and the Newseum.

David Leonhardt’s interview with Alan Greenspan was interesting. (Megan McArdle’s write-up is here, along with a video.) Greenspan emphasised the need for higher capital requirements in banking and finance. He was also asked to name the issue that we would one day come to see as today’s biggest neglected economic-policy problem. Public debt, he said. Asked how we solve that problem, he said with higher taxes–they will be needed even if control of spending can be tightened–and a VAT would be the best way to raise them. He is right on all those counts, in my view. What’s striking, though, is that as a matter of practical politics the conversation about restoring fiscal balance has not even started. In the end, of course, the country will have to confront this question. But when and how will the inevitable present itself? What kind of further crisis will it take to get this subject on the table?

In another session, political strategists Steve Schmidt and Bob Shrum discussed, among other things, the prospects for next year’s elections. (See Marc Ambinder’s write-up.) Whether and how far the Republicans make progress will depend on the strength of the recovery, they noted. If the economy surges back, the administration and the Democrats might do quite well, said Shrum. At the moment, most economists seem to be expecting a fairly tepid expansion, with unemployment still higher than 10 percent on election day–but not all. The column I mentioned in my previous post mentions a paper by Michael Mussa of the Peterson Institute. This argues, and quite persuasively, I think, that the recovery will be a lot stronger than that, with unemployment falling to less than 9 percent by the end of 2010. Democrats seeking uplift should read it.

My new column for National Journal argues that the success of the G20′s efforts to stabilise the world economy will turn on whether governments can mend the capital-adequacy regime for banks and other financial firms. [The link to the article expires in a week.]

The most important unfinished business is reform of financial regulation — and the most crucial piece of that fix is capital requirements. To prepare the way for the Pittsburgh summit, the G-20 finance ministers met in London, and Treasury Secretary Timothy Geithner presented some good proposals. The details are complex and troublesome, of course, but the basic principles of what needs to be done are actually quite simple and not in dispute…

Regulators have let banks hold less and less capital over the years, reasoning that bankers were competent managers of financial risk. How quaint that now seems. In effect, banks were allowed to decide for themselves how much capital was needed, and even what counted as capital for regulatory purposes. Capital has a low yield — which is why a higher capital requirement is like a tax on banks’ lending — and governments were standing by to rescue them if necessary. So they cut corners. You know the rest.

Geithner said that banks need to set aside much more capital. Big banks should reserve proportionally more than small banks. The new requirement also needs to be “counter-cyclical”: Banks should have to set aside proportionally more capital when their lending is increasing quickly. There should be an overall leverage ratio, too, as a global check on capital adequacy, even if proper amounts of capital have been reserved against specific types of “risk-adjusted” lending. And there should be a liquidity requirement so that banks have a line of retreat if their ability to borrow short-term is compromised…

The Pittsburgh meeting affirmed the need for this new regime, but the timetable for reform is vague and the G-20 partners have different ideas about what happens next. Right now, U.S. banks are better capitalized than many of their European counterparts, so Europe is complaining that it will be harder for its banks to execute Geithner’s proposal. This disagreement is liable to slow the introduction of new rules and might lead to their being watered down…

This is the G-20′s real challenge. Forget the rest — rebalancing global growth, rebuilding the International Monetary Fund, coordinating fiscal and monetary “exit strategies,” and all the other stuff name-checked in the communique. Helpful though some of that may be, none of it is indispensable (and some of it is impossible). Stricter bank capital requirements are in a category of their own. Judge the G-20 — and place your bets on the next financial crisis — according to what, if anything, it achieves on this.

EJ Dionne asks a good question: why don’t centrists approve of the public option?

It doesn’t involve a government takeover of the health-care system. The idea is that only consumers who want to enroll in a government-run health plan would do so. Anyone who preferred private insurance could get it.

The public option also uses government exactly as advocates of market economics say it should be deployed: not as a controlling entity but as a nudge toward greater competition. Fans of the market rightly oppose monopolies. But in many places, a small number of insurance companies — sometimes only one — dominates the market. The public option is a monopoly-buster.

Centrists tell us they want to hold down spending and fight deficits. Strong versions of the public option, as the Congressional Budget Office showed in its scoring of Sen. Jay Rockefeller’s proposal, cut the costs of insuring everyone.

My view on the public option has always been that I’ll know whether I like the idea when I see it explained. The problem is that the idea has been pitched as all things to all men. Centrist voters are told it won’t make much difference. Progressive voters are told it will make so much difference that the entire project is a waste of time without it.

Dionne does that very thing in recounting the public option’s virtues. The public option cannot be both an ordinary competitor, leaving your circumstances unchanged if you choose not to take it up, and a force that can balance the budget by squeezing hundreds of billions out of public health-care costs. It can be one of these or the other but not both.

Democrats have been debating whether a “strong” public option should pay Medicare reimbursement rates, something an ordinary competitor could not do. If it did, this would drive down costs and have many other (not necessarily intended) consequences. It would be a big step towards Medicare for all.  As I have argued before, there are worse things than Medicare for all, including in my view the present system. But this outcome is one of the things that the administration is saying it does not want. If you want Medicare for all, do what some Democrats do and make the case. If you don’t, stop proposing a public option that would push the system towards it.

Politically, the problem with the public option is that it has added to the uncertainty, and hence the anxiety, that surrounds this reform. People want to know where all this is heading. The public option might be nothing, or it might be everything, depending on how it is done. But when advocates like Dionne say that it can be both everything and nothing at the same time, according to your preferences, then centrist voters are right to say, “No thanks.”

Clive Crook’s blog

This blog is no longer updated but it remains open as an archive.

I have been the FT's Washington columnist since April 2007. I moved from Britain to the US in 2005 to write for the Atlantic Monthly and the National Journal after 20 years working at the Economist, most recently as deputy editor. I write mainly about the intersection of politics and economics.

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