Sarkozy And His Beard

Nicolas Sarkozy has been flaunting an apparent relaxed non-combatant status with new designer stubble. Macleans Magazine asked me to explore what the beard signified and I suggested you should beware vanquished politicians who grow beards. After losing to George W. Bush in 2000, a traumatized Al Gore disappeared from sight for several months, only to reappear whiskered, prompting an American commentator to postulate that he looked “like a Bolshevik labour organizer.” Gore’s beard didn’t signify penitential withdrawal, but more the return of the prophet fortified by a short period of reflection—after all, free of the trappings of office, the former American vice-president was able to set his sights on the more noble task of trying to save the planet. The scraggly white beard sported by former IMF head Dominique Strauss-Kahn following his fall from grace also appeared to have a rehabilitation purpose—he appeared, to some commentators, less haughty and imperious, more down to earth. Read the full article here.

Torture: And Who Are We?

From my Newsweek/Daily Beast coverage today of a major report detailing what happened to 15 Libyan opponents of Col. Gaddafi when they fell into the hands of the CIA:

“One former detainee alleged he was water-boarded while held at a CIA-controlled prison in Afghanistan and another described to HRW undergoing water torture but without a board being used. The testimony contradicts claims by Bush administration officials, who told Congress only three men had ever been water-boarded while in U.S. custody. The two Libyans were not among those named by Michael Hayden to the Senate Select Committee on Intelligence on February 5, 2008, raising questions about whether the then CIA director misled Congress or was lied to by his subordinates.”

Let’s Roll — Time for Tax Cuts And More Stimulus

“The movers and shakers of our society seem…oblivious to the terrible destruction wrought by the economic storm that has roared through America.” Thus writes the New York Times’ Bob Herbert, who notes in a weekend column that “nearly 44 million people were living in poverty last year, which is more than 14 percent of the population. That is an increase of 4 million over the previous year, the highest percentage in 15 years.”

And as for the middle-class, Herbert observes, they have “hobbled for years with the stagnant incomes that accompany extreme employment insecurity” and are now in retreat. The economic fear stalking America goes far to explain the severe fall in popularity of President Obama and the rise of the Tea Party.

For all of my fears of the social conservatism that is veined through the Tea party movement, the public focus for most Tea Partiers is on the economy. But their answer is not the right one to deal.

Understandably, they blame government. It was government that gave us the runaway juggernauts of Fannie Mae and Freddie Mac; it was home-ownership encouragement from both sides of the Washington DC political aisle that gave us sub-prime; and it was the administration of George W. Bush that believed “deficits don’t matter” and presided over the greatest splurge of public spending since Lyndon Johnson.

So, why trust government now? For the Tea Partiers it is time to get back to basics – to the U.S. Constitution, to balanced budgets, to limited government. All noble aims. For many of them, though, read “no government” when they say limited government. But this isn’t the time to say “no government” — we need it to sort out the mess it co-authored.

Unfortunately, in the same way that Tea Partiers are going back to basics and mistaking the sky-rocketing deficit as the problem, so various policy-making elites are returning to unsophisticated positions. Free market advocates are becoming more uncompromising; Keynesians more Keynesian. All are over-focused on ideology.

In this fevered political environment the administration is more timid than it should be. The U.S. needs another financial stimulus. Yes, this would add to the federal deficit but when you have cancer, to survive you need to take some poisons as therapy. Convalescence can come later.

For Republicans – and the Tea Partiers – that is heresy. For them “big government” explains the economy’s weakness, and high unemployment is evidence that the President’s fiscal stimulus failed. But this is wrong. As the Economist magazine notes, “the notion that high joblessness ‘proves’ that (the) stimulus failed is simply wrong. The mechanics of a financial bust suggest that without a fiscal boost the recession would have been much worse.”

There has been growing confidence that America will escape a double-dip recession but that is far from certain. The jobs market remains in a slump, recovery is anemic, property prices continue to fall, a further wave of home foreclosures is on the cards.

In 1937-38, fiscal and monetary contraction killed dead a recovery, sending the economy back into a prolonged slump that didn’t end until World War II.  And as Arthur Laffer argued in a Wall Street Journal op-ed earlier this year tax hikes had much to do with the problem. “The damage caused by high taxation during the Great Depression is the real lesson we should learn. A government simply cannot tax a country into prosperity.”

That lesson seems belatedly to have been absorbed by Obama aides, who are now supporting the idea of extending the Bush tax cuts, except for the top 2 percent of earners.

But this crisis is not a normal cyclical one. There are serious structural aspects to it, as the PIMCO chief executive Mohamed El-Erian has been maintaining. His point?  Policymakers must implement a “structural vision to accompany their current cyclical focus. Measures are needed to address key issues, which include the change in drivers of growth and employment creation; the high risk of skill erosion and lost labor productivity; financial deleveraging in the private sector; debt overhangs; the uncertain regulatory environment; and the unacceptably high risks facing the most vulnerable segments of society.”

El-Erian’s recommendations include “pro-growth tax reform, housing finance reform, increased infrastructure investments, greater support for education and research, job retraining programs, removal of outdated interstate competition barriers and stronger social safety nets.”

Yes, in short, a stimulus from tax cuts that can help encourage consumption and unleash animal spirits AND more public spending to get things moving more.

For the Democrats tax cuts – especially for the wealthy – are anathema. But the U.S. needs to grow its way back into prosperity. For Republicans and Tea Partiers, more government spending is just an excuse for “big government.” Of course, federal deficits will need to be curbed in the long run – preferably starting within a couple of years.

Let’s go back to El-Erian’s point about there being a structural part to this crisis and observe the labor market.

According to the GOP Nevada Senate candidate Sharron Angle, people who receive unemployment assistance are “spoiled.” In short, they should just get a job. Easier said than done. Americans have been used to employment snapping back after recessions. But there is clear evidence now that it isn’t just weak demand that’s responsible for stubborn unemployment but something more structural.

For example, unemployment has not fallen in the way it should have with increases in job openings. Many jobseekers do not have the skills needed by employers. This is nothing to do with being “spoiled.” Half of the eight million jobs lost in the recession were in construction and manufacturing. Many of those workers are unable to slot into jobs in education, say, or health services. Add to that the difficulty workers have now in re-locating because they owe more on mortgages than their homes are worth.

Looser monetary policy will not alleviate this problem. Libertarians  argue that government should have no role in trying to sort this out. But the free market will be too slow.

So far no single growth engine has emerged to pull the U.S. towards strong recovery. Consumer spending and business investment have been too weak. President Obama’s hope that the country can export its way to strong recovery looks forlorn. For that to happen, America’s trading partners need to be buying American goods. They aren’t. China and India are eager to head off inflation and are tightening. The PIGS economies in Southern European are cutting spending and raising taxes. So are some of the more robust EU economies, notably Britain. But unlike the European countries the U.S. has some leeway to increase public spending — the yield on 10-year Treasury bonds remains below 4%, well down from the 8% of 1990 and inflation remains weak.

So government has to seek to accelerate growth – by tax cuts, payroll tax holidays and further government spending. The debt can be focused on down the road when growth increases along with tax revenues.

Libertarians and the Tea Party — Back Off

I have to take issue with my former Cato colleague Dan Mitchell and Chicago Tribune columnist Steve Chapman, someone who I agree with on many issues. Like them I want to see the cost of government curtailed and agree that we shouldn’t live at the expense of future generations. We would no doubt disagree on the priorities for government – I believe in a greater welfare role – but even so on the issue of reducing government we are on the same side.

But I part company with them on whether the Tea Party movement is a net plus for America. Steve and Dan maintain that it is a good thing on the grounds that “there is a growing mass of citizens who think it’s important to restrain government.”  They are prepared to overlook the fact that like any mass movement it has a “few odd characters.” Steve admits in a recent column that his first impression of the movement was: “It’s a rabidly right-wing phenomenon with a shaky grasp of history, a strain of intolerance and xenophobia, a paranoia about Barack Obama, and an unhealthy reverence for Fox News. Any movement that doesn’t firmly exclude Birchers, birthers, and Islamaphobes is not a movement for me.”

But his second impression is that “we are lucky to have them.”

I am afraid I can’t overlook “the strain of intolerance and xenophobia.” I can’t overlook the “Birchers, birthers, and Islamaphobes.” And I think it highly dangerous for libertarians, economic conservatives and small-government Democrats (yes, there are some out there) to do so. You can be for restraining government and fiscal responsibility without aligning with the Tea Party – it isn’t an either/or proposition.

American libertarians have had a tendency in the past to feel that they can ignore the racial blots and social authoritarianism of those who share their limited government/fiscal responsibility positions. It ends in tears though. Should limiting government and curtailing expenditure be more important to a libertarian or smaller government advocate than anything else, than, say, civil liberties? Surely not. The importance of both of those is intertwined with a respect for the individual, with a yearning for individual liberty, with an openness to other cultures and races or as Reason magazine’s tag would have it, “Free Minds and Free Markets.”

This tendency to overlook the bad has a lot to do with aligning with those who might be able to carry out part of the libertarian agenda. The GOP may win control of Capitol Hill in the fall, so let’s be nice to them. Libertarians formed an alliance with the Gingrich Republicans but didn’t get much out of that except Health Savings Accounts. Out of George W. Bush they got a foeign policy they were appalled out, civil liberty abuses that shocked them and the economic nonsense of Cheney’s “deficits don’t matter.”

Similar disappointment awaits them if they carry on flirting with the Tea Party. Brink Lindsay, a former Cato scholar, was right to look to the left for more appropriate allies but alas Washington DC libertarians didn’t follow.

It Was Ever Thus

Steve Clemons in his Washington Note blog slams “Communication Corrpution at the White House.” According to Clemons, access is being granted to members of the White House press corps on the understanding of favourable coverage. Clemons notes also that “many White House correspondents and other top tier journalists want to write Obama books” and that such books need “inside access” and journalists are only getting it “when favors are part of the arrangement.”

Clemons says: “What I have learned after discussions over the last several days with several journalists who either have regular access to the White House or are part of the White House press corps is that there is a growing sense that access is traded for positive stories — or perhaps worse, an agreement that things learned will not be reported in the near term.”

In his post, Clemons acknowledges in a parenthesis that this might have happened during previous presidencies. From my personal experience, it was hard to secure access from either the White Houses of Bill Clinton or George W. Bush when you were writing critically of them.

When I was a “Whitewater” journalist investigating various allegations being levelled against President Clinton, it was impossible to get phone calls returned let alone any other kind of access. Likewise, journalists who were supportive of the Bush administration in the run-up to the Iraq intervention got plenty of one-on-one briefings and those of us who were sceptical found doors firmly shut at both the White House and the Pentagon.

Rumours abounded during the last Presidential election campaign that several of the journalists travelling with Obama were pulling their punches because they were planning books. It would be interesting to hear from a journalist who covered previous Presidencies and is covering also this one whether the problem is worse or the same.