Barack Obama | Normative Narratives

May 4, 2013
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Conflict Watch: The U.S., Israel, and Syria

Israel launched an aerial strike on Syria yesterday, in response to growing tension in the Golan heights and intelligence that Syria may be moving advanced arms to extremist factions in the region (most notably Hezbollah in Lebanon).

“Many increasingly see no possible positive outcome of their neighbor’s bloody conflict, no clear solution for securing their interests in the meanwhile. Israel’s military leadership now views southern Syria as an “ungoverned area” that poses imminent danger.”

“For Israel, as for other nations, the Syrian civil war presents pressing security challenges, including the prospect of chemical and other sophisticated weapons falling into the hands of rogue groups, and radical Islamists ultimately coming to power. But speaking to members of Parliament from his faction this week, Prime Minister Benjamin Netanyahu signaled a new focus, saying, “The first and primary threat is an attack on our citizens and soldiers from the Golan Heights line.”

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The U.S. is still weighing it’s options in Syria, although Israeli actions may force the Obama administrations hand. America and Israel both seem reluctant to send ground forces into Syria for different reasons, it seems that military aid and aerial support are the two most likely forms that increased intervention will take.

“So far, President Obama has been reluctant to get involved in the Syrian conflict. He has ruled out placing American forces on the ground, a stance he reiterated on Friday at a new conference in San José, Costa Rica, where he was meeting with Latin American leaders.

Mr. Obama told reporters he did not foresee a situation in which “American boots on the ground in Syria would not only be good for America but also would be good for Syria,” adding that he had consulted with leaders in the Mideast who agree.”

“Mr. Obama has always made clear that any action should be taken with allies and neighbors. But NATO has been reluctant, and Russia, which keeps a naval base in Syria, has been opposed. Israeli officials have said that they do not want to go into Syria, fearing that any Israeli attack would fuel Mr. Assad’s argument that the civil war in his country is the result of foreign provocations. Some Israeli officials have argued that the Arab League should be in the vanguard of any attack, but it has shown little interest in direct military intervention in the Syrian conflict.

That has left the same trio that led the attack on Libya in 2011: the United States, Britain and France. There has been constant discussion among their militaries about “options of every kind,” one official involved in the talks said this week. “Clearly, an airstrike would be much more complex than in Libya,” the official said, noting that most of the targets there were in the desert.”

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By next week there should be lots to talk about on this front, and I will have much more time to look into the matter.

May 3, 2013
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Economic Outlook: Jobs, Spending v. Austerity, And Obama In Mexico

Hey All,

Finals week began for me today, so I do not have time to do a blog post today (we’ll see about tomorrow, and Next Thursday is also in question)

Some interesting econ news from the usual sources:

Paul Krugman writes on the implications of not having enough inflation on fiscal / monetary policy and economic recovery. This piece goes nicely with last weeks NN Economic Outlook.

There are plenty of pieces on the Jobs report out there. I have learned not to read to much into it, but some people are paid to do that and do a good job of hypothesizing potential causes and effects of changes / trends in the report.

Obama goes to Mexico, only days after the U.S. was rebuffed on the drug front, and talks about the economic interdependence between the US and Mexico: After a dinner Thursday night with President Enrique Peña Nieto, Mr. Obama told the gathering “we agree that the relationship between our nations must be defined — not by the threats we face — but by the prosperity and opportunity we can create together. And if we are serious about being equal partners, then both our nations must recognize our mutual responsibilities.’’

“We understand that the root cause of much of the violence here — and so much suffering for many Mexicans — is the demand for illegal drugs, including in the United States,” Mr. Obama said. He also said most of the guns that are used to commit violence in Mexico come from the United States.

“I will continue to do everything in my power to pass common sense reforms that keep guns out of the hands of criminals and dangerous people that will save lives in both our countries,” he said to applause.”

Sounds like he’s putting the spotlight on the U.S. congress to pass the U.N. Arms treaty which addresses human rights violations causes by arms trade.

When this guy Obama gets lemons, he makes lemonade huh? I guess he’s had a lot of practice dealing with lemons in his first 5 years in office.

April 6, 2013
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Conflict Watch: The Obama Ultimatum

To say North Korea’s recent actions and rhetoric have been anti-American would be an understatement. Within the past few months Kim Jong-Un has launched a nuclear test strike, cutoff phone lines with the U.S. and South Korea, barred South Korean workers from entering an industrial complex bordering the two Koreas, stepped up its military capacity, suggested countries shut down their North Korean embassies for the safety of their diplomats, and vowed nuclear strikes on the U.S. and its allies.

Much of this is just tough rhetoric, a young leader trying to show he can “rule with an iron fist”, that he is able to rebuff “western interests”, and will not have his national sovereignty challenged.

Experts agree that North Korea could not strike the U.S. mainland with nuclear weapons. More immediately at risk would be South Korea, Japan, and other pacific island allied states. This is alarming for the U.S. as well, who operates a close to 30,000 troop force in South Korea. South Korean has responded with it’s own stern warnings to North Korea, that it will “strike back quickly” if the North attacks. Japan has recently begun ramping up its military capabilities partially in response to North Korean rhetoric. Factor in China’s proposed military expansion, and we have a full blown arms race in Asia.

This is not an issue of China versus Japan, as both sides are essentially on the same side. The Chinese government has recently expressed dismay towards its allies in Pyongyang, agreeing in principle to tougher U.N. sanctions after North Korea’s most recent nuclear test strike.

The U.S., seizing onto this opportunity, has proposed what I call “the Obama ultimatum”:

“The Obama administration, detecting what it sees as a shift in decades of Chinese support for North Korea, is pressuring China’s new president, Xi Jinping, to crack down on the regime in Pyongyang or face a heightened American military presence in its region.”

“’The timing of this is important,’ Tom Donilon, Mr. Obama’s national security adviser, said in an interview. ‘It will be an important early exercise between the United States and China, early in the term of Xi Jinping and early in the second term of President Obama.’”

“In Beijing, officials said Mr. Kerry also wants to reinvigorate the dialogue with China on climate change… A week after Mr. Kerry’s visit, Gen. Martin E. Dempsey, the chairman of the Joint Chiefs of Staff, will spend four days in China to try to improve communication between the American and Chinese militaries.”

“’What we have seen is a subtle change in Chinese thinking,’ Kurt M. Campbell, a former assistant secretary of state for East Asian affairs, said in a speech Thursday at the Johns Hopkins School of Advanced International Studies. The Chinese now believe North Korea’s actions are “antithetical” to their national security interests, he said.”

This article seizes on many issues brought up at Normative Narratives involving U.S. and Chinese cooperation on issues concerning the “global commons” (environmental, security, etc.). It also highlights the potential for closer Washington-Beijing relations as two supposedly progressive leaders take the helm of the first and second largest economies in the world.

But there are some issues holding back U.S.-Chinese relations. Issues of trust between the two superpowers exist; cyber-attack accusations have flown from both governments in recent months. Also, there are factions within China who believe it is in China’s best interest to have an anti-Western power in the Korean Peninsula. Some believe that if China came down hard on North Korea, even so far as to push for a reunification of the Korean Peninsula at some point in the future, this would bolster U.S. influence in the region and diminish Chinese influence.

And it is exactly because of this point that I like “the Obama ultimatum”. If China’s greatest fear is increased American military capacity in the Asian Pacific, Obama has just offered Xi Jinping a surefire way to check U.S. military capacity in the region.

Obama has essentially put the ball in Jinping’s court. The next move belongs to China. Will they rebuff the American offer in an attempt to show solidarity with North Korea and protect the interest of “national sovereignty”?

It makes little sense to think they would; when you consider the growth and development of China, there is no question as to which country, between the U.S. and North Korea, is a more important partner. Factoring in Japan’s stance and it makes little economic or military sense for China not to align itself with “western interests”.

Nothing should be taken for granted; historically nations have been known to do things against their economic interests in the pursuit of strengthening their political ideology. But in today’s globalized economy, where the political economy intersection is so prevalent in mainstream political thinking, it would be very surprising to see China not at least attempt to comply with Obama’s offer.

March 23, 2013
by bzupnick Leave a comment

Conflict Watch: Two Very Different Approaches to Global Security

President Obama had a very productive trip to the Middle-East this week. Say what you will about Obama’s domestic policy (I for one like his ideas, and believe he inherited a terrible situation and has been handicapped by the ineptitude of the U.S. Congress, but that’s another matter entirely and not the topic of this blog), but Obama has certainly been a very effective President in terms of diplomatic relations.

One area of diplomacy that the Obama administration has not historically been very effective is the Middle-East. Obama muddle relations with Israel early in his presidency when he condemned Israeli housing development in dispute lands in the West Bank. The territory in question has been seen as vital to a potential two-state solution between Israel and Palestine—Israeli development undermines the ability to potentially return the land to Palestinians as part of a negotiated settlement.

But in his most recent trip, Obama made headway in the contentious geopolitical arena that is the Middle-East. He renewed calls for a two-state solution, calling on the younger generation of Israelis and Palestinians to pressure their governments for a peaceful resolution. It may be cliché to say “the youth is the future”, but it is also accurate, and seeing as any durable two-state solution is at least years (if not decades) away, calling on the youth is an appropriate measure.

Obama fell short of calling for Israel to halt construction in the disputed land. He did call the construction “inappropriate”, but stated that halting construction should not be a precondition for negotiations.

Obama also visited Mahmoud Abbas, President of the Palestinian Authority, as a two-state solution requires two willing negotiation partners. Obama’s visit with Abbas was mainly symbolic—showing the U.S. stands with the Palestinian Authority, and that the government has an alternative other than aligning itself with extremists groups. The closer ties the Palestinian Authority has with the U.S., the better the chances of a two-state solution. The closer the ties with extremist factions within Hamas, the less likely such a solution will occur.

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Perhaps most notably was the restoration of full diplomatic ties between Israel and Turkey. Turkey and Israel had a history of close relations which stopped in 2010 after Israel boarded a Turkish ship attempting to bring supplies into disputed lands. The stand-off resulted in the deaths of 9 Turkish citizens and a suspension of diplomatic ties between Israel and Turkey.

Obama was able to convince Prime Minister Netanyahu to apologize and offer compensation to the families who lost loved ones in the dispute. The apology was accepted, and full diplomatic ties were restored.

Turkey is an important geopolitical ally of the U.S., as is Israel. It can only be beneficial for regional and global security to have these two important partners on the same page.

President Obama also visited Jordan, another regional ally. During this visit, he pledged further financial support to Jordan, who receives thousands of Syrian refugees a day as civil war continues to envelop the country. This is the latest measure by the Obama administration to diminish Assad’s prospects by strengthening regional opposition, while still officially keeping the U.S. out of armed conflict.

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Contrasting Obama’s proactive foreign policy agenda was Xi Jinping’s (the new Chinese President) speech in Moscow. Xi stated:

“We must respect the right of each country in the world to independently choose its path of development and oppose interference in the internal affairs of other countries,”

These words mirrored a similar ideology of Vladimir Putin, Russia longtime President:

“Putin, who began a six-year term last May, has often criticized foreign interference in sovereign states.

Russia and China have resisted Western calls to pressure Syrian President Bashar al-Assad over the two-year-old civil conflict that has killed more than 70,000 people.

They both criticized the NATO bombing that helped rebels overthrow Libyan leader Muammar Gaddafi in 2011 and stood together in the Security Council in votes on the Iranian and North Korean nuclear programs.

Both China and Russia have bristled at U.S. and European criticism of their human rights records.

Putin said in a foreign policy decree issued at the start of his new term that Russia would counter attempts to use human rights as a pretext for interference, and his government has cracked down on foreign-funded non-governmental organizations.”

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I have often condemned Chinese and Russian position of national sovereignty above all else. Surely national sovereignty is an important safeguard for good governments against malicious foreign intervention, but it should not be a tool for corrupt and disingenuous leaders to stay in power.

This is an unfortunate if not unexpected position for the Chinese President to take. Recent actions implied that Xi may be more open to protection of human rights, as evidenced by his call to support a higher standard of living for Chinese citizens over economic growth. After this most recent trip to Moscow, it appears Xi is taking 2 steps forward and 1 step back on human rights.

This position held by Russia and China also directly undermines the Responsibility To Protect initiative of the United Nations:

“The Responsibility to Protect has three “pillars”.

A state has a responsibility to protect its population from mass atrocities;
The international community has a responsibility to assist the state to fulfill its primary responsibility;
If the state fails to protect its citizens from mass atrocities and peaceful measures have failed, the international community has the responsibility to intervene through coercive measures such as economic sanctions. Military intervention is considered the last resort.^[3][4]”

R2P safeguards national sovereignty without compromising individual human rights. It states that it is the responsibility of a state to protect its citizen’s rights and in a case where a state cannot protect these rights, the international community will lend assistance.

In a case where the state refuses help or itself perpetuates human rights violations, the international community can impose sanctions and other means to deter such actions. As a last resort, the international community can use military intervention to stop “mass atrocities”.

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It is not surprising that China and Russia fear an undermining of national sovereignty, as both nations have strong autocratic regimes (in practice, despite what formal democratic structures they may have).

However, China and Russia must abandon this slippery slope argument and realize there are different degrees of national sovereignty. The international community has no interest in interfering in Chinese and Russian affairs, but it does have an interest in intervening in state perpetuated human rights violations.

Not only are human rights violations deplorable on moral and ethical grounds, they also compromise regional and global security. Protracted Social Conflict theory places humanitarian grievances at the root of most of today’s armed conflicts—and this theory is overwhelmingly supported by both qualitative and quantitative analysis.

Human rights violations lead to instability, which can create a breeding ground for terrorism. The inability to evoke R2P in Syria has led the opposition to be hijacked by extremist groups, confusing the legitimate humanitarian roots of the conflict with an opportunistic power grab. This has made assisting the Syrian opposition much more difficult than it otherwise could have been.

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Ultimately, China and Russia have the same goals as the U.S. and Europe—prosperity and peace through an open international system. This is not the Cold War, where the two sides were so ideologically opposed that only one could survive (capitalism v. communism). Eventually, China and Russia will have to learn that in order to protect their interests, limits must be placed on national sovereignty.

A useful mechanism for checking national sovereignty already exists in R2P; the next great challenge will be getting China and Russia on board with this initiative.

Hopefully it does not take a large terrorist attack in Russia or China to open these countries eyes to the interrelation of human rights violations and global insecurity, but for the time being it seems that these two countries have (unsurprisingly) not changed their positions on national sovereignty and R2P.

March 12, 2013
by bzupnick 2 Comments

Conflict Watch: Obama Gets Tough on Chinese Cyber-Attacks

The Obama administration ramped up its rhetoric yesterday, calling out China for the first time by name to stop its cyber-attacks “and agree to ‘acceptable norms of behavior in cyberspace.’”:

“The White House, Mr. Donilon [Obama’s national security advisor] said, is seeking three things from Beijing: public recognition of the urgency of the problem; a commitment to crack down on hackers in China; and an agreement to take part in a dialogue to establish global standards.

“Increasingly, U.S. businesses are speaking out about their serious concerns about sophisticated, targeted theft of confidential business information and proprietary technologies through cyber-intrusions emanating from China on an unprecedented scale,” Mr. Donilon said in a wide-ranging address to the Asia Society in New York.”

Just for comparisons sake, here’s what Obama said in his State of the Union address:

“America must also face the rapidly growing threat from cyber attacks.

Now, we know hackers steal people’s identities and infiltrate private e-mails. We know foreign countries and companies swipe our corporate secrets. Now our enemies are also seeking the ability to sabotage our power grid, our financial institutions, our air traffic control systems.

We cannot look back years from now and wonder why we did nothing in the face of real threats to our security and our economy. That’s why, earlier today, I signed a new executive order that will strengthen our cyber defenses by increasing information-sharing and developing standards to protect our national security, our jobs, and our privacy.”

So the Obama administration is certainly focusing more specifically on China, after mounting evidence that the vast majority of cyber-attacks come from a single building in China, which houses Chinese military activities.

It is good that the Obama administration is taking a tougher stance on China. If you remember back to the 2012 presidential campaign season, Obama was generally seen as “soft on China” compared to Mitt Romney, who was “tough on China”. But like most of Mitt’s ideas, his ideas on China we’re outdated. As I highlighted in a previous post, there is no “being soft” or “being tough” on China. China is one of our largest trade partners and an increasingly important partner in issues that require global coordination. Romney wanted the U.S. to be harder on China for currency manipulation, which is simply no lon ger a legitimate issue.

We must work with China, and that means picking our battles. We need China to come together and work on global environmental and security issues. China has done a good job so far dealing with its wayward ally North Korea, agreeing with the U.N. to strengthen sanctions following North Korea’s third nuclear test this past February.

China must also play fair in trade relations. Lack of transparency makes it difficult to determine when China is “dumping” goods (or over-subsidizing certain goods past what is considered acceptable by international standards) into other countries and when it is simply taking advantage of a more efficient production process. Luckily the W.T.O. exists to handle such trade disputes, so the U.S. and China do not have to have a direct political face-off when addressing such issues (there is an impartial dispute settlement process).

But cyber-attacks, either perpetuated by or simply ignored by the Chinese government, are unacceptable:

“The nation’s top intelligence official [James R. Clapper Jr., the director of national intelligence] warned Congress on Tuesday that a cyber-attack could cripple America’s infrastructure and economy and suggested that such attacks pose the most dangerous immediate threat to the United States, more pressing than an attack by global terrorist networks.”

America is generally insulated by physical attacks due to geography and military technology. 9/11 also served as a wakeup call, leading to much stricter counter-terrorism security measures. America is a safer place today from physical attacks, but remains vulnerable to cyber-attacks.

Safeguarding American economic and infrastructure information will come to be a defining issue in Obama’s legacy. As Obama said in his State of the Union address, “we cannot look back years from now and wonder why we did nothing”. Countering cyber-attacks will take a mixed approach of better security at home and tougher penalties to deter those who would seek to steal our intellectual property / national security secrets.

This also highlights why Obama was prudent in not addressing China as a currency manipulator. Chinese-American relations are always a sensitive matter; had Obama taken a hard stance on Chinese currency manipulation, he would have used a considerable amount of diplomatic capital on a non-issue, and would not have been able to be so assertive on the much more important issue of cyber-security.

Getting tough on China is the right thing to do, as long as we’re getting tough on the right issues.

March 6, 2013
by bzupnick 4 Comments

Economic Outlook: The Do-Nothing-GOP Vows to Do-Nothing

I took particular interest in a recent Politifact article highlighting House Speaker John Boehner’s assessment that “There’s no plan from Senate Democrats or the White House to replace the sequester.” This statement should not seem right to anybody who follows politics, the news, or simply has not been living under a rock for the past few months (years?). Have the democrats really dropped the ball, or is this more political jockeying by the Do-Nothing GOP? Unsurprisingly, it is the latter. The President and Senate democrats have proposed plans, just not the plans their opponents agree on. Politifact gave Boehner’s comment its worst possible rating “Pants on Fire”.

Democrats, both in the White House and Capitol Hill, have proposed alternatives to the sequester that involve cutting bloated programs and closing tax loopholes to raise revenue. The “Sequester”, as most know by now, cuts programs indiscriminately of their importance to overall economic and social security and without taking into consideration whether the program runs efficiently or not. This undesirable result was meant to be undesirable in the hopes of forcing congress into passing a more acceptable deal. Unfortunately, Congress was unable to envision its own incompetence, and the sequester became fiscal policy starting last Friday.

But how could Boehner openly deny Democrats having offered alternative plans, when they clearly have (you can go on the White House website and “click a prominent button that says “SEE THE PLAN.” It leads to a page titled “A Balanced Plan to Avert the Sequester and Reduce the Deficit.”?”)

The answer given by Boehner’s representative would be comical, if it did not represent such a high ranking U.S. government official:

“A plan must demonstrate it has the ability to pass a chamber of Congress to be worth anything. We’ve twice passed a plan. We’re still waiting for the Senate to pass something, anything,” Buck told PolitiFact in an email.”

So the Do-Nothing-GOP has decided the democrats have not offered an alternative plan because they have made it their party’s goal to strike down any plan the Democrats offer. This sounds more like self-fulfilling economic suicide than two sides working towards an agreement that will work for the American people.

So what does the GOP require in a plan? It requires that tax loopholes that are closed must be met with equal reductions in government spending. In an effort to be “fiscally responsible”, the GOP has taken any proposal that will raise government revenue off the table.

“’Republicans want tax reform. We want to bring rates down for all Americans so that we’ve got a fairer tax code,’ Mr. Boehner said. ‘But to arbitrarily pull out a couple of tax expenditures and to say, ‘Well, we ought to use that to get rid of the sequester.’ Listen, every American knows Washington has a spending problem.’”

Does the U.S. really have a spending problem, or do we have a revenue problem? Let’s take a look at the numbers:

The blue line represents Federal government receipts (revenue), the red line represents Federal government outlays (spending). A number of interesting takeaways from this graph:

1) The U.S. was running a budget surplus until Bush gave that surplus away in the form of tax breaks (notice the blue line sharply going down around 2000) and spending on the “war on terror” (notice how the red line goes up when around the same time period).

2) Federal government receipts are at their lowest point since the 1960s. This is partially due to Bush Era tax cuts (which have expired for the wealthiest Americans thanks to “Fiscal Cliff” negotiations, which is probably what the current small uptick represents) and partially due to exploitation of tax loopholes (and other forms of tax evasion, such as moving profits abroad).

3) Government spending peaked during the American Recovery and Reinvestment Act of 2009, and has since been on the decline since.

Government spending is supposed to rise during a recession, the only reason this is a problem is because the surplus secured under President Clinton was squandered during a period of economic prosperity by President Bush. Instead of pursuing counter-cyclical fiscal policy, (save up during the good times to spend during the bad times) Bush did the opposite. Therefore, we have had to rely on deficit spending instead of spending out of a “rainy day fund”. While not exact science, if government receipts had stayed at Clinton-era levels, it appears our deficit would be about half of what it currently is (around 40% of GDP instead of 80%).

In an ideal world, we would be able to pass another stimulus program to jump-start the economy and reduce unemployment. As interest rates remain low, the government could worry about paying back this deficit once the economy is producing at its full potential. The deficit is a manufactured problem, a legacy of “starve-the-beast” fiscal policy championed by the GOP. The problem is that starve-the-beast does not work, you can reduce the amount of resources the government has, but you cannot reduce the programs people rely on to survive (especially not during times of high unemployment). What you get instead is a large government deficit.

A balanced approach to deficit reduction would be reasonable during healthy economic times. In the current economic climate, however, the red line will continue to come down on its own as the economy recovers and less people rely on entitlement programs. The blue line is the one that requires government action.

But Obama, ever the centrist, has tried to find a mixed approach of revenue increases and spending cuts that have a chance of passing a House vote. But it seems that the more Obama offers, the more the GOP demands:

“He had written a piece suggesting that if only Republicans knew how much Obama has been willing to offer, they might be willing to make a deal. Jonathan Chait set him straight, informing him that no matter what Obama put on the table, Republicans would find a way to say that it’s not enough. And sure enough, a Twitter exchange lets Klein watch that process in real time, as a top Republican consultant, confronted with evidence that Obama has already conceded what he said was all that was needed, keeps adding more demands.

So Klein admits that Republicans just don’t want to make a deal. Their objections to the deals on the table aren’t sincere; if convinced that Obama has met their demands, they just make more demands.”

The GOP has no interest in getting a deal done if that deal involves raising revenues. This is an absurd position, as government revenue is at its lowest point in decades. A balanced approach to avoiding the “Sequester” is not what the doctor ordered; fiscal stimulus and greater government revenue is the optimal fiscal policy for the American public. But the idea that we have a spending problem, and not a revenue problem, is wrong. A balanced approach is still better than the alternative, but the GOP is refusing to consider even a balanced plan to end the Sequester.

By refusing to consider any deal increasing revenue, the GOP has doubled down on its “Do-Nothing” approach to governance, to the detriment of the American people and American economy. The GOP manufactured this deficit with “starve-the-beast” fiscal policy, now it is manufacturing a need to reform entitlement programs NOW (these are long term issues, while the Sequester and stubbornly high unemployment are immediate problems that are not being addressed).

The GOP is the party of the 1%. and the 1% are not being hurt as badly as the rest of us by the Sequester, so why should the GOP budge if it’s constituents are happy? Hopefully in 2014 the GOP receives 1% of the seats in Congress; representation based on those it truly serves. It has become clear that the Democrats need a complete majority in the Federal government if there is any hope of reversing the high unemployment and inequality and low levels of social mobility that have come to define contemporary America.

February 20, 2013
by bzupnick 2 Comments

Economic Outlook: An Austerity Program By Another Name Will Be Just As Painfull

Some of you may remember, way back when Normative Narratives started a few months back, a prickly little topic on every news outlets agenda–The Fiscal Cliff. The Fiscal Cliff was supposed to be an outcome so unthinkable that it forced congress to act and pass a reasonable budget by new years day 2013. While this is no easy task during a recession (partisan gridlock aside), congress had from the summer of 2011 to come up with some sort of deal. Unfortunately, the best our congress could do was kick the can down the road for a bit.

True important tax reforms we’re secured during the Fiscal Cliff debate (raising the top rate on incomes over $400,000 and raising the capital gains tax, as well as keeping Bush era tax cuts in place for everyone else). Not to take anything away from the significance of averting the “fiscal cliff”, but it was at best an incomplete victory. But on the spending side, nothing permanent was decided. Congress was able to agree that the economy would be unable to absorb the shock of spending cuts without causing a double-dip recession / increasing unemployment, and succeeded in kicking the can down the road for a few months. If congress couldn’t figure it out in the year and a half time period between the original debt-ceiling debate and the “fiscal cliff”, was it realistic to think they would be able to reach an agreement on mostly the same issues over the course of two months?

Whether it was reasonable or not, we are currently face-to-face with another austerity program that could indeed send the U.S. economy back into a recession / greatly increase unemployment:

“In less than two weeks, a cleaver known as the sequester will fall on some of the most important functions of the United States government. About $85 billion will be cut from discretionary spending over the next seven months…The sequester will not stop to contemplate whether these are the right programs to cut; it is entirely indiscriminate, slashing programs whether they are bloated or essential…These cuts, which will cost the economy more than one million jobs over the next two years are the direct result of the Republican demand in 2011 to shrink the government at any cost, under threat of a default on the nation’s debt.”

This New York Times article does a great job of highlighting exactly how and where the cuts would take place.

Initially I was going to go through the article piece by piece and explain how each cut could hurt a specific group of Americans. But this is pretty obvious from reading the article, so I will leave it up to the reader to read about specific cuts and make their own judgements. Much less obvious is why these cuts will hurt the U.S. economy overall (and not just specific groups withing the economy). There are two main reasons for this:

1) The Government provides “public goods” that cannot be adequately provided by the private sector

2) We are still in what economists call a “liquidity trap”

First #1. The government provides public goods, such as schooling, infrastructure, and security (military / policing). Public goods are public because they inherently suffer from the “free-rider” problem. Everyone benefits from public goods, there’s no way of excluding someone from benefiting from a better school system, or better roads, or more police officers. These positive externalities mean that, left up to the private sector, investment in these goods will be insufficient. People will expect someone else to pay for the program and try to reap the benefits for free (hence the “free-rider” problem). Insufficient spending on public goods leads to higher crime (less law enforcement available combined with higher poverty rates due to cuts in social programs), and depresses both current (think poor infrastructure) and future (think inadequate schooling) economic prospects.

The private sector cannot decide to buy public goods just for certain people, as it cannot take advantage of “economies of scale” necessary for public goods to be affordable. Think how expensive it would be for a rich community to decide to pave it’s own roads, or build it’s own schools, and the security bill needed to ensure other people do not use these services. These bills would be much greater than the taxes otherwise needed to pay for such goods.

But lets suppose that the private sector could make up for this government spending. This is where #2 comes in–the liquidity trap:

A liquidity trap is a situation in which despite very low interest rates (up against the “zero-bound”), private sector funds are not being adequately invested into the economy, but instead dumped into government T-bills (or other low yield but safe asset). A common argument against fiscal stimulus is that it will “crowd-out” private sector spending, and therefore cannot lead to growth. In times of economic growth, this is somewhat true (although not true for “public goods”, as explained above). But in a liquidity crisis, this argument does not hold. Even given incredibly low rates of return, the private sector is unwilling to invest the money needed to create the aggregate demand needed for economic growth / job creation.

If the private sector instead decides it is better to give this money to the government, it should be a strong signal that the government should be spending the money in productive ways (instead of letting it sit in the Federal Reserve, and for it’s part the Fed led by Ben Bernanke has done a marvelous job making sure the economic recovery has not been even more stagnant / non-existent by pursuing unprecedented expansionary monetary policy, known as “quantitative easing”. But this alone is not enough, expansionary fiscal policy is also needed. If stimulus is not politically realistic, contractionary fiscal austerity must be avoided at least.

There is no additional cost to the government spending money, as it essentially pays zero interest on borrowed funds. Given high unemployment, why not put that money to work, and worry about paying it back later? Economically speaking, with an interest rate near zero, and a fiscal multiplier > 1, stimulus spending can be a magic bullet of sorts. Government spending costs the government less now than it otherwise would, and the expansionary effects of fiscal spending are greater now then they otherwise would be. Currently, stimulus is both fiscally responsible and economically necessary to boost aggregate demand (and stimulate economic growth / reduce unemployment / increase tax receipts by growing the economy).

So again here we are; the G.O.P. is playing a game of chicken with “the full faith and credit of the United States of America” (which is one of the reasons we are able to borrow at such low rates despite a relatively high debt / GDP ratio, the fact that American debt is considered “safe”). The effects of a default on our debt would cripple America’s ability to pursue meaningful monetary policy in the future. The effects of contractionary fiscal policy would depress an already weak U.S. economy (which would send out a ripple effect, depressing global economic growth) and raise unemployment. Yet the G.O.P. is willing to consider these unthinkable scenarios in order to push it’s tried and failed Austerian ideology.

America will have to reign in it’s deficit one day, especially with rising healthcare / social security costs, but that day is not today. Artificially forcing that day to be today, due to the sequester / debt-ceiling, will do nothing but hurt America’s credibility as an economic power both at home (by forcing the government to cut essential programs) and abroad (by making people reconsider whether U.S. debt is a “safe” investment or not).

February 13, 2013
by bzupnick Leave a comment

Economic Outlook: Economics in The State of The Union Address

Economics always plays a prominent role in the State of the Union Address, particularly during times of economic turmoil. Last night’s speech was no exception.

“President Obama, seeking to put the prosperity and promise of the middle class at the heart of his second-term agenda, called on Congress on Tuesday night to raise the federal minimum wage to $9 an hour, saying that would lift millions out of poverty and energize the economy.”

Raising the minimum wage would help put more money in the pockets of America’s poorest workers. As I have pointed out in previous posts, the lower your income, the greater your MPC (marginal propensity to consume). In other words, every dollar of income that goes to a minimum wage earner has a larger multiplier effect on the economy than that same dollar in the hands of a wealthier wage payer. In light of recent evidence of a corporate cash hoarding, this policy makes sense not only from an economic equality standpoint but also for economic growth.

“Our economy is adding jobs, but too many people still can’t find full-time employment,” he said. “Corporate profits have rocketed to all-time highs, but for more than a decade, wages and incomes have barely budged.”

In addition, by raising the wage floor, everyone else wages should rise as businesses have to adjust the wages they pay to attract more talented workers. This should lead to lower spending on entitlement programs as higher wages will cause less families to qualify for government programs. How far up the wage ladder these increases will trickle is open to debate, but as this is a secondary benefit of raising the minimum wage it should be considered “icing on the cake”.

“On trade policy, the president said that the United States and the European Union were ready to begin negotiations on a comprehensive trade treaty. That came after a report submitted earlier in the day concluded that the gaps between the two sides were narrow enough to put a deal within reach.”

Greater trade openness with Europe will stimulate the economy by provide consumers with lower prices for goods (and therefore more disposable income). A Closer relationship with the E.U. will also allow for greater monetary policy and currency coordination, which is important given the similarities between the American and E.U. economies.

“Mr. Obama pledged to work with states to provide high-quality preschool to every child in America. And he recycled a proposal to help homeowners refinance their mortgages.”

Evidence suggest that early childhood is the most important time period for cognitive, emotional, and social development; investing in high quality public pre-schools ensures that all children, not just those of well off parents, have the ability to reach their full potential. Homeowners deserve more help in coping with the housing crisis; Main St. did not get anywhere near the same bailout as Wall St. did, and many families are still struggling with “underwater” mortgages. Helping families restructure their mortgages would help stimulate the economy for similar reasons as raising the minimum wage (by putting more money in the pockets of those who will spend it).

“On climate change, Mr. Obama endorsed the cap-and-trade legislation once championed by Senator John McCain, Republican of Arizona, and former Senator Joseph I. Lieberman of Connecticut, but long stalled in Congress. Though the president said he would not hesitate to use executive orders to push his own measures to reduce carbon emissions, he did not give any details.”

Cap and Trade should already be U.S. legislation. It has strong bipartisan support and makes sense from an environmental and economic point of view. It is because of special interests (lobbyists) that we do not currently have such legislation. Hopefully congress can come together and pass a bill, although recent history suggest they will not be able to. It will be interesting to see what sort of executive orders Obama has in mind to reduce carbon emissions.

—

In the G.O.P. rebuttal, Sen. Marco Rubio had (unsurprisingly) some choice words for President Obama:

“’I hope the president will abandon his obsession with raising taxes and instead work with us to achieve real growth in our economy,’ Rubio said in the formal Republican response to Obama’s speech.”

Isn’t it interesting that to the G.O.P., “real economic growth” cannot come from government spending? Ask the families of school teachers and police officers how “real” their wages are, ask anyone how “real” their contribution to society is. Ask local businesses (or miltinational corporations too for that matter) if they care whether a public or private sector employee buys their good or service, I guarantee you they do not. Of course the private sector has the play the dominant role in our economy, that doesn’t mean that government spending shouldn’t play any role. It is especially important to have stimulus spending when private demand is low in order to keep the economy growing (weak public sector spending is a major reason for the slow economic recovery both in the U.S. and around the world).

For his part, the President does not seem to be backing off his call for higher taxation and greater government spending:

“ Mr. Obama also signaled, however, that the era of single-minded deficit-cutting should end. He noted that the recent agreements on taxes and spending reduced the deficit by $2.5 trillion, more than halfway toward the $4 trillion in reductions that economists say would put the nation’s finances on a sustainable course.

Mr. Obama spoke darkly of the consequences of a failure to reach a budget deal, which would set off automatic spending cuts on the military and other programs. “These sudden, harsh, arbitrary cuts would jeopardize our military readiness,” he said.”

The government does have a role to play in ensuring markets function properly; government intervention is an essential component of capitalism. Obama has apparently shifted the middle of the political spectrum to the left. The G.O.P., after losing the presidential election, has taken on a “re-branding” of sorts, while the Democratic Party has doubled-down on its ideological stance (and increased the divide between the legitimacy of the two parties; one is sticking to it’s guns and has popular / scientific support, the other is re-branding itself in an attempt to maintain political relevancy).

Will the G.O.P. get on board with Obama or continue to drag its collective feet? How the G.O.P responds to democratic proposals over the next few months will go a long way in determining how many seats it will win in the 2014 congressional elections.

February 8, 2013
by bzupnick Leave a comment

Transparency Watch: The Justice Department’s “White Paper”, and Mr. Brennan Goes to Capitol Hill

This post is an attempt to track recent developments with regards to a Justice Department “white paper” detailing targeted killings with drone strikes, and Mr. Brennan’s confirmation hearing with Senate with regards to his nomination as Director of the C.I.A. Most of the post is direct quotes from relevant actors. At the end of the post I will explore some different opinions on drone strikes.

I have separated the post into different sections (although they are all related) to make the information as accessible as possible. There are quotes from a number of articles, and sometimes different parts of an article will appear in different sections of this post. If you cannot find the source of a quote, check one of the other links, as I have linked all of the articles I pulled quotes from. The post is a bit complicated, but that is the nature of the issue being addressed. Be sure to leave any questions and opinions in the comment section.

—

The DoJ “White Paper”:

“We learned this week, thanks to reporting by NBC News, of a 16-page, unsigned, undated Justice Department “white paper” that outlines the Obama administration’s legal reasoning about targeted killing. The paper asserts that the government may lawfully kill a United States citizen if “an informed, high-level official” decides that the target is a high-ranking Qaeda figure or affiliate who poses “an imminent threat of violent attack against the United States” and that capturing him is not feasible.’”

Mr. Brennan, as Obama’s nominee for head of the C.I.A., was due for a confirmation hearing before he assumed the position anyhow. However, the timely release of the DoJ “white paper” certainly puts more of a spotlight on the hearings, and shifts most of the attention from “enhanced interrogation techniques” to “targeted killings” via drone strikes.

—

Mr Brennan’s History:

“Mr. Brennan, who has wielded tremendous power as the president’s top White House counterterrorism adviser, is expected to face occasionally sharp questioning on a range of topics: from the drone campaign in Pakistan, Yemen and elsewhere to his role in the Bush administration’s detention and interrogation program carried out while he was a top official at the C.I.A.”

“As the agency’s [C.I.A.]deputy executive director when waterboarding and other brutal interrogation methods were approved, he said, his job was to help “manage the day-to-day running of the agency” and he had no direct involvement in interrogations but had “significant concerns and personal objections” to elements of the program.”

“Brennan has been something of a Forrest Gump of toxic national security policies, having been in the room when everything from torture to the killing of an American citizen was being debated,” wrote Christopher Anders, the A.C.L.U.’s senior legislative counsel.

Given his wide-ranging portfolio of the past four years, Mr. Brennan’s move to the C.I.A. would narrow his responsibilities. He would have a role in the debate about whether the agency should gradually shift drone operations to the Defense Department, as many experts advise.”

—

Proliferation of Drone Strikes:

“Stanley McChrystal, the retired general, has warned that drone strikes are so resented abroad that their overuse could jeopardize America’s broader objectives. The secretary of state, John Kerry, spoke at his confirmation hearing of the need to make sure that ‘American foreign policy is not defined by drones and deployments alone.’”

“Leon E. Panetta, who headed the C.I.A. from 2009 to 2011 and has served as defense secretary since then, told NBC News on Sunday that he favored shifting most strikes to the military. ‘The advantage to it is it becomes much more transparent,’ Mr. Panetta said.”

“…the Bureau of Investigative Journalism, a nonprofit news organization in London, estimates the number of persons killed in drone attacks at 3,000 to 4,500, including well over 200 children.

“The White House has said it is still developing rules for when to kill terrorists. The United States has conducted more than 400 total strikes in at least three countries — Pakistan, Yemen and Somalia — killing more than 3,000 people in its war on Al Qaeda, according to a report by Micah Zenko, a fellow at the Council on Foreign Relations. The majority killed were part of a C.I.A. covert program begun in 2004 and aimed at militants in Pakistan. At a minimum, United States rules should specify that no one can be killed unless actively planning or participating in terror, or helping lead the Taliban in Pakistan or Al Qaeda. Killing should be authorized only when it can be demonstrated that capture is impossible. Standards for preventing the killing of innocents who might be nearby should be detailed and thorough.

“The confirmation hearing provides an opportunity for Mr. Brennan to explain his view on whether there is any check on presidential decision-making, especially when American citizens are targeted, and whether targeted killings are creating more militants than they are eliminating.”

“Because so much of the targeted killing program remains shrouded in secrecy, however, it is unclear how much the Senate Intelligence Committee will press Mr. Brennan for detailed answers about the program during the public session, or whether it will wait until the additional “closed hearing” that is routine for the confirmation hearings of C.I.A. directors.”

“An investigator for the United Nations Human Rights Council said last month that he would study the “exponential rise” in drone strikes in counterterrorism operations. More than 50 nations have or are trying to get the technology. The United States will set the standard for them all.”

—

Senate Hearing:

“In his opening statement, Mr. Brennan acknowledged ‘widespread debate’ about the administration’s counterterrorism operations but strongly defended them, saying the United States remained ‘at war with Al Qaeda.’

He [Brennan] said later that when C.I.A. drone strikes accidentally kill civilians, those mistakes should be admitted. ‘We need to acknowledge it publicly,’ he said. ‘In the interests of transparency, I believe the United States government should acknowledge it.’

But senators repeatedly complained that there was too little transparency about the targeted killing program, sometimes producing misleading information in the news media.

‘I think that this has gone about as far as it can go as a covert activity,’ Ms. Feinstein [Democratic Senator from California] told reporters after the hearing.’”

How can drone strikes operate in a more transparent way? Mr. Panetta has called for shifting drone operations from the C.I.A. to the D.o.D for accountability reasons. However, drones are generally used in covert missions, gathering intelligence and visually monitoring an area without striking. How can covert national security missions be made more “transparent”? While Mr. Brennan agreed more transparency was need, he had a hard time explaining how that could be achieved.

“Even Mr. Brennan had a hard time explaining how much information he thought should be disclosed about targeted killings. ‘What we need to do is optimize transparency on these issues, but at the same time, optimize secrecy and the protection of our national security.’ he said.”

“Senator Ron Wyden, Democrat of Oregon, told Mr. Brennan that the committee had never been given the full list of countries in which the C.I.A. has carried out lethal operations.” Creating such a list would go a long way towards increasing accountability with regards to drone strikes. But do we really want national security operations on a list which could potentially fall into the wrong hands?

Another idea [proposed by Ms. Feinstein] was creating a special court to oversee drone strike issues, an idea that Brennan gave a lukewarm response: “Mr. Brennan was noncommittal, noting that lethal operations are generally the sole responsibility of the executive branch. But he said the administration had “wrestled with” the concept of such a court and called the idea “certainly worthy of discussion.”

—

Different Opinions About Drone Strikes:

Mary Ellen O’Connell, a professor of law and international dispute resolution at Notre Dame, is critical of the U.S. use of drone strikes:

“Today, the United States is involved in a true armed conflict only in Afghanistan. Yet drone attacks have been carried out in Yemen, Somalia and Pakistan and may soon begin in Libya, Mali and Nigeria.” (and honestly, who knows where else)

“For years, Mr. Obama has stretched executive power to claim that the 2001 Congressional authorization to use military force against Al Qaeda gives him the unilateral authority to order people, including American citizens, killed away from any battlefield without judicial oversight or public accountability. He took a step in the right direction on Wednesday when he directed the Justice Department to give Congressional committees its classified legal advice on targeting Americans.”

“Terms like ‘armed conflict,’ ‘combat’ and ‘battlefield’ are integral to the proper functioning of human rights law and international humanitarian law, including the Geneva Conventions. Such definitions are well established and can no more be tampered with to suit the administration’s preferences than can the definition of torture.

Putting aside whether the targeted killings are even effective, the law must take precedence. Outside of armed conflict zones, the killing of innocent bystanders cannot be tolerated. The Justice Department has concocted an elastic definition of necessity — attempting to justify force in the absence of an immediate lethal threat — without citing any treaty or decision by an international court.’”

—

Counterpoint:

The U.S. is not legally bound to U.N [or any international organizations] decisions. The U.S. remains autonomous from the U.N (although the two work very closely, legally U.S. military action is decided by Congress and the President; how closely a President works with the U.N. varies by administration). Definitions need to be changed to meet to evolving nature of conflict. Terrorism is becoming more sophisticated with the use of new technology, therefore counterterrorism measures must keep up.

As a nation, we did not do enough to prevent 9/11 or take terrorists (Al Queda specifically) abilities to strike on U.S. soil seriously; we must not underestimate their abilities again. While humanitarian injustices are good reasons to fight terrorism abroad, the number one objective of U.S. foreign policy is to ensure no future attacks are carried out on American soil. If drone strikes help this goal, then they are a worthwhile tool to use (perhaps less liberally than the Obama administration has, although how would any regular citizen have any insight into when and where drone strikes are “justified”.

—

I have personally heard many different opinions on this issue. Those opinions range from “who cares, if they are terrorists it’s fine” to “this is an over-extension of executive powers, it undermines due process and is therefore unconstitutional.”

Every President has expanded executive power in some way to deal with the issues of the day. Is what the Obama administration doing justified? Is it constitutional? How do you feel about other countries using drone strikes? How can we improve our drone operations to make the process more effective and transparent / accountable without undermining national security interests?

This is a very interesting topic; as the debate shifts to the public realm, I can only imagine more and more people will have strong opinions about the issue. While public opinion may shape how certain actors in the media perceive the issue, ultimately these difficult decisions will have to be made by defense experts and not ordinary citizens.