Descend into the Maelstrom

Barack Obama has been President of the United States for almost two months now.  It has been a shaky start for his administration at best, as I thought it would be.  Any time a new president attempts to come into Washington and shake things up, the Washington establishment fights back tooth and nail to maintain its grip on the worst aspects of the status quo.  We are witnessing a period where Obama has rapidly and decisively moved forward on many parts of his agenda laid out during the long 2008 campaign season; on the other hand, it appears that Obama has given in on several core principles.  It is also worth mentioning that Obama has inherited the most difficult situation of any White House transition in our lifetimes, with several unresolved American wars abroad, heated conflicts tangentially affecting America in other parts of the world, and a monumental collapse in the American economy and world economy.  Entire industries, including American auto manufacturing, have approached the brink of disaster.

Under the stress of these times, Obama’s Democratic party has splintered into several factions, rendering it more difficult to get things done, and above that the two parties in power have failed to reach across the aisle for bipartisan achievement so far.  Most bills are being rammed through by the Democratic majority without much input from the Republicans, which is not good for the nation in the long run.  The weak Republican party, which is having a crisis of leadership at the moment, isn’t helping the cause.  The result is a mixed bag, and although contention is everywhere in Washington these days, there is a lot going on on the legislative front and in the halls of executive power.  Here is a fair examination of Obama’s first two months.  At the 100 day mark, the media outlets will be chock full of report cards.   Consider this to be a mid-semester preview of Obama’s performance, both positive and negative.

Problematic Personnel Moves. Obama’s team has flubbed a number of presidential appointments, due largely to an unexpected epidemic of tax problems and the specter of corruption and industry ties amongst high-level appointees.  Bill Richardson, an early Obama favorite to join the Cabinet as Commerce Secretary, bowed out due to an ongoing federal investigation into a transportation contract that involved him as Governor of New Mexico.  Tom Daschle, the formerly powerful Senator and an Obama Rabbi, was felled by $128,000 in unpaid income taxes.  Dashcle’s fall was especially painful as he was to head the Department of Health and serve as the president’s health czar, picked to oversee a vast expansion in the health care system to cover all Americans.  Earlier the same day Daschle withdrew his nomination, Obama’s pick for the newly created position of Chief Performance Officer, Nancy Killefer, went down in flames for owing taxes from 2005 related to a housekeeper.  Tim Geithner, Obama’s appointment for Secretary of the Treasury, supposedly owed $34,000 in social security and medicare back taxes during a stint at the IMF, while retaining a housekeeper whose immigration documents were not in order.

This disturbing trend has stained the administration for several reasons.  First of all, these are jobs of immense authority and accountability where it is unacceptable to have legal issues in your personal life when you are overseeing the work of thousands of government officials.  It begs the question of how Geithner could oversee the Treasury Department and the IRS; how Killefer could measure the success of government programs based on performance indicators, and how Daschle could regulate a multibillion dollar industry in massive transition when each of these people could not keep their own house in order.  Of course, the opposite argument is that these people probably do not manage their own money, and have accountants who are supposed to take care of the inane complexities of tax laws.  But these people too are in the employ of the appointed officials and should have been managed more closely.  More importantly, the delays in filling these important roles has harmed Obama’s agenda during the critical early days of the administration, despite the work of a well-oiled transition team.

Yet another gaffe occurred when Obama’s highest-level Republican appointee, Senator Judd Gregg, withdrew his nomination for the cursed Commerce Secretary spot.  This was a failure of bipartisanship more than of substance, as Obama had promised to appoint people for the job regardless of party affiliation.  Gregg’s qualifications don’t appear overwhelming, so I envisioned him as a token Republican Cabinet Secretary just as Norm Mineta was the token Democrat under Bush.  Gregg somehow woke up and realized that taking this job would cause an irreconcilable conflict with his fiscal principles and his ideas about the 2010 census (run by Commerce), of all things.  This belated realization makes me wonder what conversations really occurred behind closed doors to make the Senator change his mind.   However, the damage has been done and the cabinet cannot be called truly bipartisan by any stretch of the imagination, even though Obama has kept on critical Bush appointees including Defense Secretary Robert Gates and Federal Reserve Chairman Ben Bernanke.

Finally, the appointment by Obama of William Lynn as Deputy Secretary, the #2 at the Pentagon behind Gates, appears to be a failure on a different level.  He campaigned on the principle that federal lobbyists would not be part of his team; yet Lynn was just that for the defense contractor, Raytheon, and accepting the position required him to dump millions of dollars in company stock.  Obama’s team waived the rules for Lynn.  Qualified for the job or otherwise, the exception in this case was troubling to many.

On the other hand, I believe some of Obama’s personnel moves were strong.  Picking Joe Biden as Vice President has pluses and minuses.  One minus is that he will continue to commit gaffes on the job.  However he will be loyal to Obama, not attempting to undermine him as Cheney did over and over under Bush.  The country would also move forward under a President Biden if anything were to happen to Obama.  Biden is also overseeing the disbursal of the federal budget, and as a Congressional insider for 35 years that can only be helpful.  Picking Hillary Clinton for the State Department was also a wise choice; though I have not always agreed with her foreign policy positions, most notably the vote to use force against Iraq, few could argue that she knows world affairs inside-out from a wonk’s perspective.  It is also a positive step for the world to continue seeing a woman in the position of Secretary of State.

Overall, only time will tell how the Obama appointments fare.  There are still several key holes to fill, including in the offices around Geithner’s at Treasury.  For the sake of the country, these holes must be patched quickly with first-rate people.

Foreign Policy. Perils abound on the world stage, and they require swift and decisive action by the United States.  The Iraq conflict must be wound down.   Efforts to contain terrorists in Afghanistan and Pakistan must be ramped up.  Rogue actors with nuclear aspirations such as Iran and North Korea continue to give America a headache.  Russia is rapidly turning backward from democracy; China is moving forward on capitalism but backward on most democratic indicators as well.  Meanwhile, Mexico threatens to be a massive failed state right on our border, as a cabal of powerful drug dealers are overwhelming the state’s resources and ability to govern.  Violence in Mexico has reached unprecedented levels, largely to quench American demand, and the situation is deteriorating.

It appears Obama will approach fighting terror differently than Bush did, and in this I believe Obama is doing the right thing.  He has moved to ban torture of detainees.  He has moved to shut down Guantanamo Bay and find an alternative way to try terror suspects.   These measures are morally correct from a human rights standpoint, and also a better play for America’s long-term national security.  Shutting down Gauntanamo will remove a key rallying cry for Middle Eastern radicals, while helping regain America’s image of moral authority that was lost drastically under Bush.    Meanhile, some aspects of Bush’s anti-terror tactics have remained, notably the right to use unmanned drones to bomb terrorist targets in Pakistan’s lawless Northwest Frontier region.  If this program kills terrorists instead of civilians, I am all for it.

Obama is also cutting the budget for missile-defense systems, a costly and questionably effective program that has served to rattle a belligerent Russia into ramping up its own missile programs.  Although Obama has made secret overtures to the Kremlin on this subject, it is unclear at this time how far cooperation will go between the two rivals that do not fully trust one another.  On a related note, I believe that Obama’s thoughts on WMD non-proliferation are serious and will be followed through during his administration.   Obama intends to enlist the assistance of Russia’s good offices with Iran, which will be necessary when dealing with this prickly rogue state.  It is early times on the diplomatic scene but our fledgling foreign policy is moving in the right direction.

Domestic Policy. Domestic policy interests me far less, but it is at the forefront in today’s environment.  The recession is here and it is very real.  Various programs initiated under Bush continue, such as the $700 billion bank bailout known as T.A.R.P., a separate fiscal stimulus of nearly $800 billion being injected into the economy, and a massive federal spending bill for the next fiscal year.  Much of this appears to be necessary to get us out of where we are; I’ve written on some of the concepts involved here for the stimulus and here on the bailout.  However Obama appears to have given in on pork.  Realizing pork, or the earmarks in the budget inserted by Congress for various pet projects with varying degrees of necessity is a tiny part of the overall budget, Obama may have agreed to let it through for political expediency- to mollify his Democratic Congress.  Obama needs this body to pass his agenda.  Like the appointment of Lynn, it seems to some like a compromise on principle however.  Obama’s opponents feel vindicated during these instances, whether Obama held his nose or not.

Science is advancing under Obama after what seemed like eight years of the Dark Ages.  Obama has acted quickly in the arena of stem cell research, reversing Bush’s opposition to this area of laboratory testing based on religious grounds. By recent executive order, the government will allow federal funding of stem cell research to proceed again to help find cures for various diseases.   The environment and global warming are again at the forefront of the conversation after many years of denial.  The new Energy Secretary Steven Chu is a professor who specialized in solar power research.  The stimulus has set aside money for mass transit, alternative energy, and other improvements to infrastructure that are sorely needed both by the sick worforce and by crumbling towns and cities across America.

We have not seen the health care debate begin in earnest, and that is something to watch for.  The issue is complex, controversial, and contentious, which should make for good theater at the very least.  Obama has promised to bring all vested parties to the table to debate openly: insurance companies, HMOs, drug companies, doctors, etc.  This is a departure from the past, including Hillary Clinton’s own efforts that fell short in the 90’s.

Finally, the promise of a new era of bipartisanship in Washington is looking increasingly bleak.  Obama has been unable to bring a meaningful number of Republicans onto his wagon on any critical subject.  Partly that is a symptom of an ailing Republican party, led by ignorant clowns such as Rush Limbaugh and an increasingly incompetent and tone-deaf RNC Chairman, Michael Steele.  However, part of the blame must fall on the Obama administration, fairly or unfairly, for being unable to reduce the toxic partisan rhetoric that is becoming highly problematic.  The media, of course, loves the drama and that doesn’t help either.  Although the Republicans are reflexively opposing the Democratic agenda without clear, viable alternative ideas, and have overseen many years of failed policies, it is necessary for them to at least be a part of the debate as a strong minority party.  At this time they are being nearly shut out of most debates.  This will backfire on the Democratic party unless its members rule completely effectively, which they do not appear capable of.

Finally, Obama must take control of the Democratic party back.  There is much opposition within the party, especially on fiscal issues.  If the tensions within the party continue to escalate, it will prevent the passage of needed legislation despite large majorities in both houses of Congresses.  In dealing with both Congressional Republicans and Democrats, Obama’s team must find ways to play the political game better and prevent a full-scale mutiny.  This is perhaps harder than anything else; it is not a merit-based system, but one of painful compromise and soul-selling.   Obama seems to have been pragmatic on the budget by giving in on some pork that Democrats wanted, and also tax relief that Republicans were looking for.  It’s a dangerous game but one that must be played.

Overall, we are not out of the woods yet on most aspects of the economy or national security.  However, Obama has worked hard, he has made serious inroads, and many pans are frying simultaneously on the burner.  We all know much is left to be done.  All in all, it has been an active two months that have seen a whirlwind of achievement.  I believe the biggest failures are related to personnel decisions, and once these have settled all parts of the administration can get cracking in earnest.  It is my firm belief that the nation’s outlook will improve during the first two years of the administration, with or without the help of the government.  Inevitably, this will make Obama look good.  The goal is to not screw things up any worse than they already are, which should be feasible.  I remain an Obama fan, but one who is not beyond criticism where it is due.

Much is being made of controversial high-cost bailout packages and stimulus packages these days.  Washington is engulfed in an all-out war against an economy in global decline, and Washington is losing so far.  The conflict has already spanned over the sunset of the Bush reign and the sunrise of the Obama era.  It appears that the Obama administration, with a largely partisan Democratic Congress, will ram through some version of a $700-$800 billion stimulus package as an opening salvo in the battle.  Much has been said about all of this, and above all the only predictable outcome is more uncertainty in the short run.  Since I nearly failed every one of my college Economics classes, four of which I was required by my undergraduate institution to suffer through in order to matriculate, perhaps I’m not the best person to comment on all of this.  Then again, the world’s top economists and policymakers appear to be as clueless as I am, so here are some issues to keep track of as the battle rages on.  It’s a complex and unpredictable subject, so one thing we can sure about is that there are no easy answers.

To Stimulate or Not to Stimulate. That is the question.  Most of the citizenry and most of the government seem to be in agreement that something must be done, as the economic indicators spiral out of control.  Unemployment is at a high level unseen for decades.  Housing prices are down sharply, resulting in trillions of dollars of lost wealth collectively for Americans and foreigners.  The financial system is on the brink of collapse.  Lending is down, and so is consumer spending.  Most people, rich and poor feel like they are worse off right now than a few years ago.  To navigate out of the quagmire probably requires drastic government action of some sort rather than sitting lamely by.  The Democrats believe that we should spend our way out of it, thousands of multi-million dollar checks at a time.  The nay-saying Republicans have been thrashed so badly in the last two election cycles that they are rendered irrelevant in the debate because most of them are not needed to pass legislation.  Their game appears to be that tax cuts are the ultimate answer, not spending.  John McCain, the closest thing the party has to some semblance of leadership, has taken pains to absolve his party of responsibility for the bill.  As a compromise several hundred billions of dollars of tax cuts are part of the plan.  The Republican strategy appears to be: hope the stimulus will fail miserably in its aim, making us look good in time for the 2010 midterm elections.

The Need vs. the Speed. On the other hand, the optimistic tack taken by Obama and his Democratic team appears to be that the stimulus can right the ship, a la President Franklin Delano Roosevelt’s massive spending bills from the 1930’s whose public works projects shaped much of what America looks like today and helped the country out of depression, along with a patriotic re-purposing of the workforce toward defeating the Axis powers in World War II.  This period saw workers who used to make fridges learn how to make tanks and bombs instead.

However the stimulus bill is based on America’s ability to spend the money speedily.  In the political world that means progress must be made by 2010.  Contracts have to be signed, shovels have to pierce the earth, and dams and bridges and windmill farms must pop up or be repaired.  But the speed must be balanced with practical concerns.  Are we building roads that we really need, or are we just spending for the sake of spending?  Will the newly planted infrastructure help our economy into the future or will it be a one-off shopping spree that will leave us back where we are now at the end of it- like a temporary caffeine rush from a visit to Starbucks?  Unfortunately, Congress’s poor track record on spending wisely does not inspire any confidence.  That’s not even the biggest pitfall.

Debt. The larger risk is taking on more debt to get there.  Money doesn’t appear magically from the sky- the government is spending from a finite pot, and putting more cash in circulation means that the American people are borrowing against our own future.  This is a sticking point for Republicans, and it’s a good thing that it’s being discussed.  But debt is only a problem if the economy doesn’t get stimulated.  If stimulation occurs, the debt will be neutralized by a rejuvenated economy revving up.   If it doesn’t happen, we will owe the Chinese and the Gulf states even more in the future than we do now.

Bigger is Better? Size matters when it comes to spending.  What’s the right amount to spend?  Bush and Obama both backed a bill that injected $700 billion worth of treasure into the coffers of America’s banks.  With about half of the taxpayer money already spent, nobody can prove that it’s been any better than pissing $350 billion into the wind.  Credit hasn’t loosened, job loss has not been stemmed, and the banks seem even worse off and more tone-deaf than before.  Many banks have admitted to just holding onto the gift money for dear life to better position themselves for an economic recovery that they have no intention of contributing toward.

The latest stimulus figure being thrown around today,  $789 billion, has clearly been pulled out of someone’s ass.  Nobody can agree that any number, whether it’s $400 billion, $800 billion, or $2 trillion would really stimulate a damn thing.  That is because our economy is more complex and globally entwined now than it’s ever been.  This 789 number is an arbitrary compromise between all of the pigs feeding at the special-interest trough and salivating at getting their pieces of the slop.

What Should We Really be Doing? Ultimately I do not believe that we are spending the money in a creative enough fashion.  Our way of life as we know it is being threatened, and a massive shopping spree paired with a massive bank bailout simply cannot be the only fathomable option on the table.  We have to think of re-structuring our country and indeed the entire international trade system in radical ways.

We need to consider more carefully what Americans should be doing, and what we should let other people in other countries do.  Our economy should be driven more by things that Americans can do better than everyone else.   For example, our cars will not be able to compete much longer against those built by automakers in other countries with sharply lower labor costs and access to similar technology.  Cars, for America, are a thing of the past.  We should be focusing on what will matter 20 years from now, high technology innovation, the stuff that Google and Microsoft and Oracle are made of.  We should invest more of the stimulus money in alternative energy research and production, and re-thinking our entire energy grid system.  We should begin the complete transition of things we do not do well or cost-effectively, such as auto manufacturing to other nations.  People in Detroit should learn to make or do something else.  For that matter, American workers should be commuting to work not in SUVs but instead, newly-built mass transit or perhaps new types of high-tech bicycles powered by electric batteries.  Our schools should be teaching foreign languages from 1st grade onward, sponsoring mandatory study abroad programs, and hooking up every child with a laptop computer.

Finally, we need to invest in stabilizing the rogue states of the world run by dictators tacitly supported by foreign great powers, and get them working productively as part of the community of nations.  Until that happens, we will always be at war with somebody who hates us, and we will not be using our resources most effectively.  It’s my opinion that if Africa never becomes politically stable and civil enough to be the place that builds all our cars, America and the rest of the world will never progress.  We will probably sink or swim together now in the global drink.

Unfortunately, these creative long-term goals are difficult to achieve when politicians are only elected for short spans lasting 2, 4, 6, or 8 years at most.  Transitioning America toward the next and better step of history would take longer than that, and many aspects of creative and visionary thinking are defeated by the overpowering urge to seek short-term gain and glory.  Ultimately this may be the largest flaw in our system, one that is not nimble enough yet for the 21st century, and one that to our peril just may never be.

Inevitably, we’re going to have some sort of stimulus package.  I hope it achieves some sort of stimulation.  But I don’t think it will be a long-term solution in any case.  That means we are still going to need one.