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.

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.

[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.

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.

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.”

Returning from a week’s vacation, I’ve been catching up on the G20 summit in Pittsburgh. I am moved, of course, by  the FT’s strictures against cynicism, but one is still entitled to ask what was achieved.

Certainly, the communique is full of fine promises and commitments. The FT summarises:

They agreed to: avoid premature withdrawal of stimulus; plan their exit strategies; launch a “framework for strong, sustainable and balanced growth”; strengthen financial regulation, via reformed rules on capital adequacy and remuneration of bank employees; reform the global institutional architecture, including reallocation of quotas in the IMF; phase out fossil fuel subsidies; “bring the Doha round to a successful conclusion in 2010”; reach agreement in Copenhagen on climate change; and meet twice in 2010, first in Canada and then in South Korea.

Well done. But was there ever any risk that they would promise instead to withdraw stimulus too soon, commit themselves to not thinking about their exit strategies, strive to make financial regulation less effective, increase fossil-fuel subsidies, abandon the Doha round, pledge to reach no agreement on climate change, or say “we may meet again next year, or we may not”? I didn’t think so. Continue reading "Looking back at the G20"

Economic summits are always more about messaging than substance. In recent days officials have been striving, they say, to “lower expectations” about what this week’s meeting of the Group of 20 leading nations in Pittsburgh might achieve. I had not noticed that expectations were dangerously high. I had supposed they could hardly be lower. Usually this would be no great cause for concern, but 2009 is different.

In many ways, events are following the standard pattern. One of the clearest messages from the first summit of this crisis, in November last year, was the collective commitment to hold back protectionism. Since then, every government has been bending or breaking international rules on subsidies and import barriers to protect jobs. Admittedly, they have shown some restraint, for which one is grateful. But the leaders’ fine words still cloak the classic beggar-thy-neighbour response.

On the very eve of the Pittsburgh summit, Barack Obama’s administration raised tariffs on Chinese tyres. This was probably technically legal under the World Trade Organisation’s “safeguard” procedures. It is protectionism nonetheless, and in plain breach of the earlier commitment, which Mr Obama has repeatedly affirmed. We shall see whether kneeling down to the unions in this case abates the demand for further protection, or stimulates it. My guess is the latter.

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

Or so I argue in this new column for National Journal [link expires in two weeks].

The fact that the China tariffs may be legal does not refute the charge of protectionism. One of the main setbacks to liberal trade since the economic crisis began has been governments’ willingness to resort to WTO-conforming trade restrictions. For instance, a country may have tariffs that are lower than the rates they have committed themselves to at the WTO — their so-called bound tariffs. So governments often have scope to raise their tariffs for the usual bad protectionist reasons, without actually cheating…

So protectionism is sometimes legal. That does not make it good policy — still less, as the administration pretends, an effort to uphold the ideal of “free and fair trade.” Of course, the Obama White House is aware of all this. In the China tires case, it knows how safeguards are supposed to work. In reality it is making a cynical political calculation. Dressing the action up as an effort to get tough on trade cheats delights the unions — which seem to regard most imports as unfair by definition — and thrills Democrats, who can use a little protectionist meat thrown their way at the moment, to take their minds off the administration’s equivocation on health care reform and the public option. The tire tariffs have nothing to do with upholding high standards in trade policy.

But note this excellent piece by Alan Beattie. It takes a quite different line:

The conventional wisdom in Washington is that this is a straight trade-off. Placate the labour unions on trade and get them to support Mr Obama on healthcare. Whisper it quietly, and be prepared for accusations of heresy to rain down on your head, but that might be a deal worth making.

Whether or not any such exchange is possible is unclear to anyone below grandmaster level in the perpetual three-dimensional chess game of acquiring, retaining and expending political capital that goes on in Rahm Emanuel’s head. (White House officials deny a trade-off, but then they would, wouldn’t they?) Yet if that is the political calculation, and if it works – two very large ifs, to be sure – it might end up being good for Americans and good for globalisation.

Actually I partly agree with Alan. If things played out this way, it would be a very good deal. Universal health care is an enormous prize and in itself the China tyres issue is small beer. I also agree with the important insight elsewhere in the column that universal health care in the US would have done more for globalisation than Nafta. Yes, absolutely. The problem is the linkage. How plausible is this trade-off in the present case?

It’s true that the unions are unhappy with the healthcare compromise that Obama is signalling he might accept. I see the connection, and refer to it myself in my piece. Still I cannot believe that they will oppose healthcare reform in the end. It is odd, surely, to say that the unions have to be bribed to accept a much stronger economy-wide safety net (even if the strengthening falls a little short of what they want).

The main question when you are thinking about the trade-off Alan describes is whether you feed or suppress the appetite for protectionism by giving way now and then. I think you are more likely to feed it–especially if you rationalise your capitulations in ways that invite new demands. As I argue in the NJ column, Obama’s biggest mistake over the China tariffs was in the way he defended them.

An interesting paper on the WTO by Uri Dadush of the Carnegie Endowment. His main conclusions:

• The WTO must adopt a more flexible approach to trade negotiations, tailored to the needs of individual countries and groups. The institution should move beyond multilateral, all-or-nothing negotiations that are bearing little fruit and find ways to leverage opportunities where liberalization is taking place.
• Though critical for the WTO’s credibility and to capitalize on eight years of negotiations, a conclusion of the diluted Doha round will not negate the need for reform. Nor should discussion of reform wait until after the Doha round has been completed, it might actually encourage progress.
• A formal discussion about reform should get underway during the WTO’s ministerial meeting in Geneva in November.
• The WTO is nowhere to be found in several areas of crucial concern, including food security, international financial regulation in the wake of the global financial crisis, and climate change.

Gary Hufbauer, Steve Charnovitz, and Arvind Subramanian joined Dadush to discuss the paper on Tuesday. There was broad agreement with the recommendations for the institution, but not so much on whether the Doha round was capable of being revived, or even worth reviving. (There should be a transcript here soon.)

Comments on the new US tariffs on tyres imported from China mostly agreed with the line taken in this FT editorial: the Obama administration’s safeguard action was probably legal, and unlikely to start a trade war; but nonetheless wrong-headed, ill-timed (with the G20 summit coming up), and badly presented. Further comment from Subramanian at the Peterson Institute and Simon Lester at the International Economic Law and Policy blog.