Monthly Archives: December 2010

I’ll be on semi-vacation for a week or so (Arizona and West Virginia, since you ask). See you on the 29th, or thereabouts. Happy Christmas to one and all.

US business leaders are feeling more cheerful lately, and with reason. Last week’s tax deal is a fillip – not because it provides stimulus on the scale its proponents and critics say, but because it avoids an inadvertent tightening of policy that could have strangled the economy just as it was starting to revive. Other economic news has been good too. Cautious optimism is on the rise.

In the torrent of material about Richard Holbrooke, I especially liked the following. The PBS Newshour discussion between John Negroponte (who had known Holbrooke and worked with him when they were in their twenties) and Susan Glasser (editor of Foreign Policy, a job Holbrooke once had). Jonathan Alter’s glowing and affecting tribute for the Daily Beast. David Ignatius’s note for the WashPo website, which mentions the drawbacks to Holbrooke as though they mattered, but without being mean about it, a difficult balance to strike. Michael Hirsh’s appreciation for National Journal. National Journal’s James Kitfield also did an excellent piece focusing on Holbrooke’s last and most difficult job, which was not going well (this one is behind a paywall).

A federal judge in Virginia has ruled that a key feature of Obama’s health-care reform–the mandate on individuals to buy insurance–is unconstitutional. In due course the issue will be decided in the Supreme Court. If you want to understand the legal issues underlying the case, and get some guidance on how things are likely to go, you cannot do better than read this column by Stuart Taylor.

Note that, as Taylor points out, the individual mandate may not be the part of the policy that is most vulnerable to constitutional challenge. (Florida and other states are challenging the law before another federal judge tomorrow, arguing among other things that the federal government cannot force the states to expand their Medicaid programmes.) In the end, Taylor expects the Supreme Court to go along and uphold the reform, but don’t take it for granted–especially if the law remains unpopular. What, you mean the court would be influenced by that? You bet it would be.

[T]he bottom line is that I think that a perhaps narrow majority of the justices would defer to the political branches here. The alternative would be to strike down the president’s signature initiative — something that no Court has done in more than 70 years, for good reason.

But what if the new law continues to remain unpopular with voters, or even become more unpopular? What if they sweep congressional Democrats out of power in November, or even sweep Barack Obama out of the presidency in 2012? What if majorities of the new House and Senate sign friend-of-the-court briefs asking the justices to strike down the mandate, which was passed without a single Republican vote? And what if–politics and law aside–the whole business comes to look like a mess that can be salvaged only by a Supreme Court decision clearing the decks for Congress to rethink health care reform from the ground up?

Such are the dreams of those who imagine the justices striking down the proposed health care mandate. I hope that they don’t all come true. But if they do, five justices might go with the flow.

Barack Obama continues to hesitate over a decision from which there may be no retreat and which could seal the fate of his presidency. Does he stand up to congressional Democrats, regain the esteem of the middle of the country and get re-elected in 2012? Or does he fight for progressive principles, further alienate the independent voters who switched to the Republican party in the midterm elections and make do with a single term?

Charles Krauthammer says that Obama has conned Republicans into agreeing to a second stimulus even bigger than the first. Democrats are too stupid to see this (and Republicans are even more stupid, presumably, since they are the victims).

Barack Obama won the great tax-cut showdown of 2010 – and House Democrats don’t have a clue that he did. In the deal struck this week, the president negotiated the biggest stimulus in American history, larger than his $814 billion 2009 stimulus package. It will pump a trillion borrowed Chinese dollars into the U.S. economy over the next two years – which just happen to be the two years of the run-up to the next presidential election. This is a defeat?

He’s right about the Democrats’ stupidity, but this is not Krauthammer at his most lucid.

I found Obama’s press conference this afternoon on the tax deal with Republicans absolutely fascinating. We were treated to two Obamas for the price of one (three Obamas, if you count yesterday’s announcement; see previous post). The Great Question confronting him in the remainder of his first term was vividly clear.

Yesterday, you recall, he set out to defend the tax deal as an honorable compromise and a victory for common sense–which in my view it is. He also put himself above the partisan fray, in a way that was bound to offend many Democrats. But he did this very tepidly. Today, especially in response to questions, he was much more animated and forceful. The problem was, he forcefully defended not one but two rationales for what he has done–rationales that are at least in tension and in the end, I think, irreconcilable.

I don’t suppose I should be surprised by the operatic dismay of liberal Democrats at the agreement Obama has reached with congressional Republicans. But is it really good politics for the party to keep telling the electorate that raising taxes on the rich is the one thing, in the end, it stands for? That nothing else comes close in the party’s list of priorities? Because this is the message that comes across.

Obama was right to strike this agreement. The concession on taxes is minimal, because a much larger tax reform is coming soon, one way or another, and that will be the time to press for an appropriately progressive formula for raising significantly more revenue. Meanwhile extending unemployment benefits and delivering some additional short-term stimulus through the payroll tax cut are matters that really cannot wait.

He did the right thing. But he did it in an unconvincing way. It has been obvious for weeks if not months that this was the kind of deal that would eventually be struck. He could have shaped it more to his liking (and mine) if he had taken the initiative in moving the $250,000 threshold for higher income taxes to $1m early on, and then gone out and sold it. (The party line about “millionaires and billionaires” simply does not square with that $250,000: the policy and the marketing were completely out of sync.) He let the debate drag on too long. He refused to get in front of it. He let the outcome be forced upon him. And in his televised statement–although what he said all made sense, to me at least–his tone was timid and defensive, I thought. He looked weary.

In January a new Republican majority takes charge in the US House of Representatives. The balance of political power is about to shift decisively – yet the result is not pre-ordained. Can a bitterly divided government get things done, or must the country prepare for two years of quarrelsome stagnation?

David Gardner draws my attention to this Letter from Dublin by Kevin O’Rourke, one of Ireland’s most distinguished economists. It might be the best single thing I’ve read on the Irish crisis. Analytically astute, and moving too. Just how profound a blow this has been comes through. It is not just an economic and political crisis, but a full-blown constitutional crisis. And the European Union has made it all so much worse than it needed to be.

[W]e are about to have a general election, and if Brussels thinks that this deal is not going to be the big issue in that election, then they are even more out of touch than we already think they are. It is no longer even certain that the budget will be passed in December. Brussels may not have a Plan B, but they had better prepare one nonetheless.

Irish citizens may bring down the bailout of foreign bank creditors by voting at the ballot box, but if they do not, they will bring about a default of some kind by voting with their feet. We now face a negative spiral in which austerity causes emigration, which increases the burden of the debt, which ultimately leads to more austerity. We need a game-changer to break the cycle, but what might it be? Since the fundamental problem is that Ireland is insolvent, the smart thing to do is to tackle our debt burden head-on, but the Europeans have vetoed this.

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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