Some things just lend themselves to smart ass responses:
In the high profile lobbying contest to win hosting rights to the 2016 Olympics Brazil’s President Luiz Inacio Lula da Silva has completely shellacked President Obama.
In the grand scheme of things the location of the 2016 Olympics isn’t of great importance. In fact, Chicago is probably better off for having lost. However, Obama’s involvement in Chicago’s bid displays in microcosm one of the key problems with the Obama presidency.
Having stood aloof from the selection process, the president swooped in at the last minute, made a pretty speech and expected to swing the vote.
By contrast, the rather more effective President Lula da Silva was far more engaged. He apparently understood that the result would be decided well before the TV cameras were turned on. Lula was so confident he had the votes that he supposedly pressed the Obamas to go to Copenhagen.
President Obama’s approach to the Olympic selection process mirrors his approach to the far more important issues being decided on Capitol Hill. Stand aloof from the messy politics and trust that golden voice to swing the necessary votes.
It appears that we have an applause line President. He looks great on TV and gives a great speech. These are fine qualities in a politician, but fall well short of what is require to make an effective leader. When it comes to shaping legislation and winning diplomatic fights he is doing about as well as you would expect for a guy with a whole half term of Senate experience.
It appears that some liberal Democrats are so incensed by President Obama’s unreasonably centrist tendencies and willingness to compromise with Republicans that there is talk of Obama facing a primary challenge before the 2012 election.
It’s no wonder that so many in the liberal base are falling out of love with the president. So much so that there is even faint talk of an insurrection if Obama doesn’t straighten up and fly left. Recently, during an appearance on a cable TV show, Washington Post columnist Gene Robinson discussed the political costs for Obama if the public option is dropped from the health care bill. They included the possibility of a primary challenge in the 2012 presidential election. Said Robinson, “You don’t want to see the progressive caucus in a foul mood.”
A interesting question is whether the Obama re-election team would consider a primary challenge from the left a bad thing. If you were trying to get a relatively liberal president re-elected, a wild eyed progressive challenger playing up how crazily centrist and bipartisan your guy was might actually be an asset.
The only scenario in which this might be negative is if the president is so weak in 2012 that a primary challenger actually has a chance of winning the nomination. In that case President Obama might be forced to publicly tack left in order to win the primary, which might be the thing that costs him the general election.
Brad DeLong has written a pretty interesting piece on his reminiscences of the health care battles of the mid nineties. As Mr DeLong tells it, there was never any hope of getting a Democratic plan through the Senate. Key Democratic Senators weren’t going to let a “hick from Arkansas” push through health reform. Even a reform they might otherwise support (charming).
All hope actually rested on an eventual compromise coauthored with Bob Dole. Apparently, this plan was sabotaged by “Gingrich and company”, who allegedly made opposition to any Clinton health plan a condition of supporting Mr Dole’s presidential aspirations.
The moral according to Mr DeLong is:
I have drawn what I think are appropriate lessons from it. First, Democratic senators do themselves no good either in the next world or in this when they block sensible initiatives from Democratic presidents. (But what lessons are Democrats Landrieu, Nelson, and Lincoln drawing?) Second, Republican senators do themselves no good either in this world or in the next when they block sensible initiatives from Democratic presidents. (But what lessons are Republicans Grassley, Voinovich, and Hatch drawing?)
I don’t know how accurate Mr DeLong’s recollections are, however his conclusions are a little iffy.
On the subject of Democratic Senators Mr DeLong may have at least half a point. All elected Democrat’s have a vested interest in making the President appear successful. Perceptions of how the President is doing will inevitably hang over every race in the coming mid-term elections. On the other hand, getting the President’s bills passed is hardly a guarantee of electoral success. The Democrats may well have lost control of Congress in 1994 even if they had passed health care reform.
Regardless, the situation in 2010 will be very different from 1994. The 1994 election was a decisive swing against a decades long Democratic majority that resulted in Republicans picking up many marginal or even liberal leaning seats. The 2010 election will probably be more like 1996, 1998 and 2000 when the Democrats picked up seats as the Republican tide ebbed.
This time around disgust with the Bush administration resulted in a Democratic flood in 2008. With the focus of anti-Republican feeling long gone, this tide too will begin ebb. The marginal Democrats who survive 2010 may well be the ones who recognize that the President is rather more liberal than their constituents and vote accordingly.
On the subject of Republican Senators, my guess is that they are drawing conclusions exactly opposite to what Mr DeLong would prefer. By Mr DeLong’s own admission, the real political winners in the health care struggles of the early nineties were the Republicans who led the charge against ‘Hillarycare’.
Today’s 30-year treasury bond auction apparently went smoothly, with prices even firming slightly in subsequent trading. I confess that I don’t fully understand why there is such strong investor demand for long term (and thus inflation sensitive) treasury debt. Some of the possible explanations are:
The third explanation arises from an old, informal rule of banking, “If you owe a $100 the bank owns you. If you owe a $100m you own the bank”. My thinking here is that the United States has become a debtor that is too important to be denied credit.
Due to years of conscientious currency manipulation China (and other trade surplus nations) have accumulated enormous dollar assets. Protecting the value of these assets is not an insignificant concern. This means that US interest rates cannot be allowed to go up in any situation where the rise would not be accompanied by an offsetting rise in the dollar.
The 30 year bond auction was just such a situation. A poor auction would have resulted in higher long term interest rates. Normally higher rates would put upward pressure on the dollar. However, right now, a bad auction would imply that the government is going to have difficulty funding the deficit, increasing the likelihood that the deficit will be monetized, which would be bad for the dollar.
So a bad auction would likely mean US interest rates up and the US dollar down, which is the worst possible combination if you happen to be a foreign power that owns a lot of dollar assets.
If you were such a power my guess is that ensuring a strong auction, by say bidding for a bunch of bonds, would start to look like a good idea. Interestingly, indirect bidding (i.e. by foreign central banks) during the Treasury auction was described as “strong”.
The following is from Karl Rove‘s opinion piece in this morning’s Wall Street Journal (emphasis mine):
“So what’s a president to do when the promises he made about his economic stimulus program fail to materialize? If you’re Barack Obama, you redefine your goals and act as if America won’t remember what you said originally.”
Anyone who remembers the ex ante and ex post justifications for the Iraq war may appreciate the irony.
Brad DeLong, in his “Fair, Balanced, Reality-Based, and More than Two-Handed” blog recently posted a couple of charts to buttress his contention that, “employment losses are about to be bigger than in any previous recession since the Great Depression itself”.
The more alarming chart is taken from Nancy Pelosi’s office wall:
A naive observer might conclude that the current recession is the worst since WWII. Unfortunately this chart doesn’t adjust for the dramatic overall expansion of the labor force over the last fifty odd years. William J. Polley has produced a more informative (less ludicrously tendencious) percentage based comparison. Note that the current recession actually falls somewhere in the middle of the pack for post WWII recessions.
The second chart is an annotated copy of the Time Magazine original.
There is nothing actually wrong with the chart. However, the annotations are interesting. Mr DeLong has added the names of the Presidents who happened to be in office during the charted recessions. It isn’t clear what Mr DeLong’s purpose in doing this was exactly. Perhaps Mr DeLong is trying to suggest responsibility. If so, he appears to have made the classic mistake of confusing correlation with causation.
The other questionable addition is the gratuitous highlighting of the current recession. Painting something bright red and labelling it with a honking a great sign is not exactly the strategy of someone seeking to make a sober analysis. Perhaps the real purpose of this overdone annotation is to conceal the fact that, when charted in relative terms, the trajectory of employment in the current recession looks a lot like that of the 1981 recession. While certainly very unpleasant, the 1981 recession did not in fact result in the end of civilization, which is not the kind of thing you want to dwell on if you are trying to sell people on your, “the world is going to end if Congress doesn’t spend” view of the world.
As the stimulus package wends its way through Congress the arguments in support of even the basic principle are becoming increasingly half-hearted. Brad Setser has compared the current recession with other post 1945 downturns and come to the conclusion that it is really, really bad. He thus endorses a large stimulus:
“That is why — despite the risks — I support a large stimulus. The United States debt levels suggest that it still has room to use the public sector’s balance sheet to try smooth the economic cycle. And there is nothing moderate about the current cycle.”
‘Things are really bad, we should try something, even if its very risky’, isn’t exactly a ringing endorsement of fiscal stimulus as a response to the current crisis. In fact, it reveals the biggest problem with fiscal stimulus. While the costs are large and certain, the supposed benefits aren’t exactly guaranteed.
In situations like this it is often helpful to lay out the options and their consequences in the form of a decision tree:
Stimulus Decision Tree
In this case X is certainly less than one. It may in fact be significantly less than one.
At the very least, this should give us pause before endorsing stimulus as a policy response. It is always worth remembering that there is no situation so bad that Congress can’t make it worse.
Atlantic blogger Megan McCardle doesn’t think much of the the ongoing discussion about whether or not the next President should meet with controversial foreign leaders.
To date, the current administration has been pretty resolute in its policy of not talking to people it doesn’t like. This could reasonably be described as the angry two-year-old approach to foreign policy.
Unsurprisingly, the lack of invitations to the White House has not had a huge impact on the policies of Iran, Venezuela or North Korea.
To be fair, the President’s lack of involvement has little to do with the administration’s difficulties in dealing with the country’s various foreign antagonists. The fact is, getting unfriendly regimes to do what you want is largely a question of leverage. For various reasons, the US doesn’t have any.
Going further, the administration’s no talking policy isn’t quite as pigheadedly stupid as it sounds. A meeting with the President can be a significant carrot. It’s the kind of thing that you might reasonably want to hold back until the final stages of negotiation.
More importantly high level talks with dictatorships can be dangerous for the President. In any high profile meeting the administration tends to be under enormous pressure to show results. Dictators, who don’t have answer to voters or the press, have no such concern. The playing field is thus not level, which can easily result in the good guys making concessions that they probably shouldn’t.
However, this is a concern that can easily be addressed. We have tended to get very hung up on whether or not the President should speak to problematic foreign leaders. What really matters is what the President would say. Obama could largely eliminate concerns about his engagement policy by addressing the issue along the following lines:
“Would I speak with President Ahmadinejad? Certainly. Communicating with foreign leaders is part of the President’s job. Would President Ahmadinejad enjoy the conversation? Probably not. I would tell him in no uncertain terms that his country is on a dangerous path that could lead to conflict with the United States.
We should have no illusions that my words alone will change the policies of the Iranian government. However high level engagement is one of the tools we have at our disposal. I will not neglect any opportunity to communicate our views and apply pressure to the Iranian regime. This is one of those times we need a full court press.”
Harvard economist Greg Mankiw supports the “plague on both your houses” view of Congress’ role in the Freddie & Fannie fiasco.
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