How Quickly We Forget: Dick Cheney, “Deficits Don’t Matter”
Sure, it’s huge, but big deficits don’t always lead to bad economic health. As we found during The Great Depression, the opposite is also true.
For those worried about the future, huge federal deficits remain the gift that keeps on giving, or taking, depending on your point of view. They are always around, always huge, and seem to be an issue that neither party has immunity from.
If you care to bash Republicans over this issue you need look no further than former Vice President Dick Cheney who told former Treasury Secretary Paul O’Neill that “deficits don’t matter” when the latter voiced concerns about the size of the federal bill. Cheney later fired O’Neill, presumably for thinking deficits actually mattered.
Still, Cheney was true to his word, as the White House of George W. Bush raised the federal deficit every year it was in office. When Bush started his presidency, the national debt as a percentage of gross domestic product hovered at 60%. By the time he exited, it was closer to 80%. Surely the first part of President Obama’s term will see that ratio only rise further, as the federal government fully deploys the $700 billion Troubled Asset Relief Program, the $200 billion Term Asset Backed Loan Securities Facility and the $500-$1 trillion Public-Private Investment Program, among other alphabet soup bailouts.
Of course, to critics of Obama, including conservatives, now deficits do matter a lot more than they did a year ago. Look no further than the well-covered “tea parties” to see an instance where partisanship has seemed to trump fiscal stewardship, or at least short-term memory.
By: David Serchuk: Article originally posted August 5, 2009, Forbes.com
Republican Balanced Budget Amendment: The Worst Idea In Washington
Bruce Bartlett takes a look at the Balanced Budget Amendment all 47 Republicans signed their names to and pronounces it “quite possibly the stupidest constitutional amendment I think I have ever seen. It looks like it was drafted by a couple of interns on the back of a napkin.”
I think “stupid” is the wrong word. “Dangerous” is more like it. And maybe “radical.” This isn’t just a Balanced Budget Amendment. It also includes a provision saying that tax increases would require a two-thirds majority in both houses of Congress — so, it includes a provision making it harder to balance the budget — and another saying that total spending couldn’t exceed 18 percent of GDP. No allowances are made for recessions, though allowances are made for wars. Not a single year of the Bush administration would qualify as constitutional under this amendment. Nor would a single year of the Reagan administration. The Clinton administration would’ve had exactly two years in which it wasn’t in violation.
Read that again: Every single Senate Republican has endorsed a constitutional amendment that would’ve made Ronald Reagan’s fiscal policy unconstitutional. That’s how far to the right the modern GOP has swung.
But the problem isn’t simply that the proposed amendment is extreme. It’s also unworkable. The baby boomers are retiring and health costs are rising. Unless you have a way to stop one or the other from happening — and no one does — spending as a percentage of GDP is going to have to rise. This proposal doesn’t interrupt those trends. It simply refuses to acknowledge them — or, to be more generous, it rules them unconstitutional. This is the equivalent of trying to keep your kid cute by passing a law saying he’s not allowed to grow up.
Another problem: In a recession, tax revenue plummets and GDP stops growing, but spending has to be sustained, or even increased, to a) give people unemployment insurance and Medicaid and other services they need and b) keep the economy from contracting violently. This amendments includes no provisions for recessions, meaning that when the economy contracted, the government would have to contract as well. That is to say, we’re still not out of one of the deepest recessions in American history, and every Senate Republican has co-sponsored a constitutional amendment to make future recessions worse. It’s just breathtaking.
A world in which this amendment is added to the Constitution is a world in which America effectively becomes California. It’s a world where the procedural impediments to passing budgets and raising revenues are so immense that effective fiscal management is essentially impossible; it’s a world where we can’t make public investments or sustain the safety net; it’s a world where recessions are much worse than they currently are and the government has to do more of its work off-budget through regulation and gimmickry. I would like to say something positive about this proposal, say there’s some silver lining here. But there isn’t. This is economic demagoguery, and nothing more. It’s so unrealistic that it would’ve ruled all but two of the last 30 years unconstitutional, which means it’s so unrealistic that there has not yet been a Republican president who has proven it can be done. And that doesn’t just suggest it can’t be done: It suggests that when Republicans are actually in power and have control of the budget, they know perfectly well that it shouldn’t be done. They’re just pretending otherwise for the moment.
By: Ezra Klein, The Washington Post, April 1, 2011
On Middle East, Obama Took Only Path Available To U.S.
There’s been a lot of criticism of President Obama for being too slow to support the Mideast’s popular uprisings, especially in Libya.
“Feeble,” “incoherent” and “not showing leadership” are some of the complaints I get from readers from both sides of the political spectrum. At moments, I’ve felt the same: The White House’s Mideast team is weak, his “peace process” diplomacy has failed, his support of pro-democracy rebels is conflicted.
Yet, after reflecting on a recent visit to Egypt and conversations with experts in the region, I’ve concluded that no U.S. administration could have acted more decisively to aid Arab rebels. Any president would have been constricted by the same factors Obama faced.
Let’s start with Libya, where Obama hesitated for weeks to intervene, but has now agreed to a U.N.-backed no-fly zone that aims to stop Col. Moammar Gadhafi from slaughtering his own people.
In deciding how to act, Obama was haunted by the legacy of the Iraq war. That ill-conceived conflict and failed occupation turned the entire Middle East, including democrats, against U.S. interventions. Egyptian rebel leaders made that point to me over and over. Imposing democracy from above, a la Iraq, is out.
So unilateral U.S. intervention in Libya was out of the question. Moreover, the Pentagon strongly opposed intervention in another Muslim country. U.S. generals feared it would take ground forces to get rid of Gadhafi.
Only after the Arab League endorsed a no-fly zone March 12 (and called for United Nations support) could the White House press for a vote by the U.N. Security Council. The vote meant – in theory, at least – that Arab countries could provide cover for action by France and Britain, with the United States in a supporting role. Even so, had Gadhafi not been on the verge of committing large-scale atrocities against civilians in full view of the world, Obama might not have concurred.
However, the Libya story is but a tragic sideshow. The fate of the region will turn on the results of democratic experiments in Egypt and events in Yemen, Bahrain, and Saudi Arabia.
The Obama-ites were slow to support Egyptian rebels, but that may have been a godsend. Much of Egypt’s newfound pride lies with the fact that its rebels made their revolution on their own.
Now is the moment when U.S. officials should back democratic Egyptians (and Tunisians) in their push for fair elections and an open constitutional process. Secretary of State Hillary Rodham Clinton, who just visited both countries, seems to get it. But in their eagerness to avoid interference in Egypt’s politics, U.S. officials may be taking an approach that’s too hands-off.
The president’s ambivalence has also stemmed, however, from the fact that we have sharply conflicting interests in the region.
In theory, we back political reform in the Middle East, in the hope that Arab states can build democratic institutions in the long run. If they succeed, terrorists may find less fertile ground in the region.
Yet in the short run, the United States still faces crucial security threats from Iran and from Islamist terrorists. Our autocratic Arab allies helped us fight these threats. Their demise is likely to create instability in coming months or years that will enable those threats to increase.
This conflict underlay the slow support for change in Egypt. Hosni Mubarak’s intelligence service was aggressive in pursuit of Islamist terrorists, and he was a key Sunni ally in containing Shiite Tehran. In the new Egypt (and Tunisia, and Libya, if Gadhafi falls), intelligence services will be curbed. This is a good thing, as the secret police repressed their own people. But it will also make it easier for terrorist networks to regroup in the region.
At least in Egypt, the White House can still rely on a close relationship with the army, which will remain a power center for the foreseeable future. In the Arabian Peninsula and the gulf, however, the democracy-vs.-security conflict makes it almost impossible to shape a coherent policy.
Gulf rulers like Saudi Arabia’s King Abdullah want Obama to forget about democracy and focus on security. Such a choice seemed possible in the last decade: George W. Bush promoted Mideast democracy in his first term; then, when that backfired, he emphasized Mideast security in his second term. But that choice is not possible now.
The administration has tried, unsuccessfully, to encourage the president of Yemen to usher in peaceful democratic change. Neither ruler nor rebels seem able to make the necessary compromises, which means U.S. officials probably can’t save Ali Abdullah Saleh. Yet if he falls, this country, just below Saudi Arabia, may relapse into tribal warfare. This would make it easier for al-Qaida in the Arabian Peninsula to flourish.
In Bahrain, the revolt of a largely Shiite population against its Sunni rulers presents the greatest danger to U.S. interests. This island kingdom is connected by a causeway to Saudi Arabia, whose eastern oil region is dominated by its Shiite minority. The Saudis fear that if Bahrain’s rulers fall, Iran will have the perfect base from which to push Saudi Shiites to rebel.
Last week, over Obama’s objections, the Saudi monarch sent troops across the causeway to help crush Bahrain’s rebels. He won’t listen when U.S. officials urge him (and Bahrain’s ruler) to give more representation to their Shiites. Obama’s team says this will head off trouble; Abdullah believes it will create more.
The Saudis think Obama is too strong on democracy and weak on security. Obama’s critics slam him for being too weak on democracy – or on security. Few realize he is caught in a historical bind that requires him to be strong on both, even though the two contradict each other – at least in the short term. Bush couldn’t resolve that contradiction; Obama has no choice but to try.
By: Trudy Rubin, Columnist, The Philadelphia Inquirer, March 22, 2011
The Republican War On Elizabeth Warren
Last week, at a House hearing on financial institutions and consumer credit, Republicans lined up to grill and attack Elizabeth Warren, the law professor and bankruptcy expert who is in charge of setting up the new Consumer Financial Protection Bureau. Ostensibly, they believed that Ms. Warren had overstepped her legal authority by helping state attorneys general put together a proposed settlement with mortgage servicers, which are charged with a number of abuses.
But the accusations made no sense. Since when is it illegal for a federal official to talk with state officials, giving them the benefit of her expertise? Anyway, everyone knew that the real purpose of the attack on Ms. Warren was to ensure that neither she nor anyone with similar views ends up actually protecting consumers.
And Republicans were clearly also hoping that if they threw enough mud, some of it would stick. For people like Ms. Warren — people who warned that we were heading for a debt crisis before it happened — threaten, by their very existence, attempts by conservatives to sustain their antiregulation dogma. Such people must therefore be demonized, using whatever tools are at hand.
Let me expand on that for a moment. When the 2008 financial crisis struck, many observers — myself included — thought that it would force opponents of financial regulation to rethink their position. After all, conservatives hailed the debt boom of the Bush years as a triumph of free-market finance right up to the moment it turned into a disastrous bust.
But we underestimated the speed and determination with which opponents of regulation would rewrite history. Almost instantly, that free-market boom was retroactively reinterpreted; it became a disaster brought on by, you guessed it, excessive government intervention.
There remained, however, the inconvenient fact that some of those calling for stronger regulation have a track record that gives them a lot of credibility. And few have as much credibility as Ms. Warren.
Household debt doubled as a share of personal income over the 30 years preceding the crisis, and these days high levels of debt are widely seen as a major barrier to recovery. But only a handful of people appreciated the dangers posed by rising debt as the rise was happening. And Ms. Warren was among the foresighted few. More than a decade ago, when politicians of both parties were celebrating the wonders of modern banking and widening access to consumer credit, she was already warning that high debt levels could bring widespread financial disaster in the face of an economic downturn.
Later, she took the lead in pushing for consumer protection as an integral part of financial reform, arguing that many debt problems were created when lenders pushed borrowers into taking on obligations they didn’t understand. And she was right. As the late Edward Gramlich of the Federal Reserve — another unheeded expert, who tried in vain to get Alan Greenspan to rein in predatory lending — asked in 2007, “Why are the most risky loan products sold to the least sophisticated borrowers?” And he continued, “The question answers itself — the least sophisticated borrowers are probably duped into taking these products.”
Given Ms. Warren’s prescience and her role in shaping financial reform legislation — not to mention her effective performance running the Congressional panel exercising oversight over federal financial bailouts — it was only natural that she be appointed to get the new consumer protection agency up and running. And it’s hard to think of anyone better qualified to head the agency once it goes into action.
The fact that she’s so well qualified is, of course, the reason she’s being attacked so fiercely. Nothing could be worse, from the point of view of bankers and the politicians who serve them, than to have consumers protected by someone who knows what she’s doing and has the personal credibility to stand up to pressure.
The interesting question now is whether the Obama administration will see the war on Elizabeth Warren for what it is: a second chance to change public perceptions.
In retrospect, the financial crisis of 2008 was a missed opportunity. Yes, the White House succeeded in passing significant new financial regulation. But for whatever reason, it failed to change the terms of debate: bankers and the disaster they wrought have faded from view, and Republicans are back to denouncing the evils of regulation as if the crisis never happened.
By the sheer craziness of their attacks on Ms. Warren, however, Republicans are offering the administration a perfect opportunity to revive the debate over financial reform, not to mention highlighting exactly who’s really in Wall Street’s pocket these days. And that’s an opportunity the White House should welcome.
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 20, 2011
Realism Or Politics: The Council On Foreign Relations Richard Haass Has A Credibility Problem
Meet The Press had a very interesting cast of characters today for their round table discussion on the events occuring in Libya. Panelists included Helen Cooper, White House Correspondent for the New York Times; Andrea Mitchell, NBC News Chief Foreign Affairs Correspondent; Michael Hayden, Former Director of the NSA and CIA; John Miklaszewski, NBC News Chief Pentagon Correspondent; and Richard Haass, President of The Council on Foreign Relations.
None of the input by these elitist panelist’s came as a surprise. In fact many of their responses were predictable. Cooper, Mitchell and Miklaszewski obviously wanted to use their airtime to promote their next story..to keep the news cycle going. That’s their job so more power to them. Hayden, as a George W. Bush appointee, surely would not suddenly have a change of heart and say anything contrary to the proven failed policies of that administration. Richard Haass, in symphony with Hayden, played his “bad cop” role to the hilt. Haass never seemed to miss a step in his criticism of the Obama administrations handling of Libya (excerpted comments):
David Gregory, the host (and I use that term lightly) of Meet The Press, Began the discussion: I want to talk, however, about how much is on the president’s plate right now. You talk about crisis management and a confluence of crisis. We’ve pulled together some cover stories from Time magazine–I want to put it up there on the screen–“Target Gaddafi.” The next one, “Hitting Home: Tripoli Under Attack.” And the next one, “Meltdown.”
MR. RICHARD HAASS: It’s a lot to manage, but also it raises the importance of an administration having its priorities. You’ve got a lot to manage with Japan, you’ve got a lot to manage with what’s going on in the broader Middle East, you’ve got a lot to manage what’s going on in the United States in terms of our economy and our deficit. So one of the real questions is why are we doing as much are we are doing in Libya? So many of your guests are talking about too little too late. Let me give you another idea, David, too much too late. In times of crisis and multiple crisis, administrations have to figure out their priorities. They got to do some triage. The–to me, the big problem is not what we haven’t done, it is what we are doing.
MR. GREGORY: Richard, you, you just have broad concerns as you, as you penned a piece in the Wall Street Journal earlier this month, “The US should keep out of Libya.”
MR. HAASS: Again, our interests aren’t vital. We’re talking about 2 percent of the world’s oil. Yes, there’s a humanitarian situation on, but at the risk of seeming a bit cold, it is not a humanitarian crisis on the scale say of Rwanda. We don’t have nearly 100–a million people, innocent men, women and children whose lives are threatened. This is something much more modest. This is a civil war. In civil wars, people get killed, unfortunately. But we shouldn’t kid ourselves. This is not a humanitarian intervention, this is U.S. political, military intervention in a civil conflict which, by the way, history suggests, often prolongs the civil conflict. And, as several people have already pointed out, what is step B? Whether Gadhafi complies with what we want or whether he resists successfully, either way, we are going to be stuck with the aftermath of essentially having to take ownership of Libya with others. And just because others are willing to share in something, as so many people point out, doesn’t make it a better policy. It just means the costs are going to be distributed. But the policy itself is seriously flawed.
MR. GREGORY: The big ideas and are we getting them right?
MR. HAASS: Mike Mullen says the big idea, the biggest single national security threat facing the United States is our economy, it’s our fiscal situation. This will not make it better. Instead, we are ignoring a previous secretary of state, John Quincy Adams, someone you haven’t had on the show in awhile. We are going abroad in search of monsters to destroy. There’s any number of monsters. But is this, right now, something that’s strategically necessary and vital for the United States, given all that’s happening in places like Egypt, Bahrain, Saudi Arabia, around the world, with all that we need to repair at home? The answer, I would think, is not. And that’s the big idea the administration’s missing. It’s not enough to simply want to do good around the world wherever we see bad. We’ve got to ask ourselves, where can we do good, at what cost, against what else we might have to do?
All of Haass’ comments gave me a flashback. Iran immediately came to mind. Haass, Iran..Haass, Iran. When is enough actually enough..when is enough not enough?
The answer is Mr. Haass, you’ve got a credibility problem. The following article appeared in Newsweek on January 22, 2010. It was written by none other than Richard Haass:
Enough Is Enough
Why we can no longer remain on the sidelines in the struggle for regime change in Iran.
Two schools of thought have traditionally competed to determine how America should approach the world. Realists believe we should care most about what states do beyond their borders—that influencing their foreign policy ought to be Washington’s priority. Neoconservatives often contend the opposite: they argue that what matters most is the nature of other countries, what happens inside their borders. The neocons believe this both for moral reasons and because democracies (at least mature ones) treat their neighbors better than do authoritarian regimes.
I am a card-carrying realist on the grounds that ousting regimes and replacing them with something better is easier said than done. I also believe that Washington, in most cases, doesn’t have the luxury of trying. The United States must, for example, work with undemocratic China to rein in North Korea and with autocratic Russia to reduce each side’s nuclear arsenal. This debate is anything but academic. It’s at the core of what is likely to be the most compelling international story of 2010: Iran.
In the wake of 9/11, the Bush administration judged incorrectly that Iran was on the verge of revolution and decided that dealing directly with Tehran would provide a lifeline to an evil government soon to be swept away by history’s tide. A valuable opportunity to limit Iran’s nuclear program may have been lost as a result. The incoming Obama administration reversed this approach and expressed a willingness to talk to Iran without preconditions. This president (like George H.W. Bush, whose emissaries met with Chinese leaders soon after Tiananmen Square) is cut more from the realist cloth. Diplomacy and negotiations are seen not as favors to bestow but as tools to employ. The other options—using military force against Iranian nuclear facilities or living with an Iranian nuclear bomb—were judged to be tremendously unattractive. And if diplomacy failed, Obama reasoned, it would be easier to build domestic and international support for more robust sanctions. At the time, I agreed with him.
I’ve changed my mind. The nuclear talks are going nowhere. The Iranians appear intent on developing the means to produce a nuclear weapon; there is no other explanation for the secret uranium-enrichment facility discovered near the holy city of Qum. Fortunately, their nuclear program appears to have hit some technical snags, which puts off the need to decide whether to launch a preventive strike. Instead we should be focusing on another fact: Iran may be closer to profound political change than at any time since the revolution that ousted the shah 30 years ago.
The authorities overreached in their blatant manipulation of last June’s presidential election, and then made matters worse by brutally repressing those who protested. Supreme Leader Ayatollah Ali Khamenei has lost much of his legitimacy, as has the “elected” president, Mahmoud Ahmadinejad. The opposition Green Movement has grown larger and stronger than many predicted.
The United States, European governments, and others should shift their Iran policy toward increasing the prospects for political change. Leaders should speak out for the Iranian people and their rights. President Obama did this on Dec. 28 after several protesters were killed on the Shia holy day of Ashura, and he should do so again. So should congressional and world leaders. Iran’s Revolutionary Guards should be singled out for sanctions. Lists of their extensive financial holdings can be published on the Internet. The United States should press the European Union and others not to trade or provide financing to selected entities controlled by the Guards. Just to cite one example: the Revolutionary Guards now own a majority share of Iran’s principal telecommunications firm; no company should furnish it the technology to deny or monitor Internet use.
New funding for the project housed at Yale University that documents human-rights abuses in Iran is warranted. If the U.S. government won’t reverse its decision not to provide the money, then a foundation or wealthy individuals should step in. Such a registry might deter some members of the Guards or the million-strong Basij militia it controls from attacking or torturing members of the opposition. And even if not, the gesture will signal to Iranians that the world is taking note of their struggle.
It is essential to bolster what people in Iran know. Outsiders can help to provide access to the Internet, the medium that may be the most important means for getting information into Iran and facilitating communication among the opposition. The opposition also needs financial support from the Iranian diaspora so that dissidents can stay politically active once they have lost their jobs.
Just as important as what to do is what to avoid. Congressmen and senior administration figures should avoid meeting with the regime. Any and all help for Iran’s opposition should be nonviolent. Iran’s opposition should be supported by Western governments, not led. In this vein, outsiders should refrain from articulating specific political objectives other than support for democracy and an end to violence and unlawful detention. Sanctions on Iran’s gasoline imports and refining, currently being debated in Congress, should be pursued at the United Nations so international focus does not switch from the illegality of Iran’s behavior to the legality of unilateral American sanctions. Working-level negotiations on the nuclear question should continue. But if there is an unexpected breakthrough, Iran’s reward should be limited. Full normalization of relations should be linked to meaningful reform of Iran’s politics and an end to Tehran’s support of terrorism.
Critics will say promoting regime change will encourage Iranian authorities to tar the opposition as pawns of the West. But the regime is already doing so. Outsiders should act to strengthen the opposition and to deepen rifts among the rulers. This process is underway, and while it will take time, it promises the first good chance in decades to bring about an Iran that, even if less than a model country, would nonetheless act considerably better at home and abroad. Even a realist should recognize that it’s an opportunity not to be missed.
Which is it Mr. Haass…Is the humanitarian crisis in Libya too small or is there just too little oil? Are you a realist or just another political hack?
By: raemd95: Excerpts are quotes from Meet The Press, March 20, 2011; Enough is Enough: By Richard N. Haass, originally published in Newsweek, January 22, 2010
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