Washington’s “political” class is blinging out!

A couple of decades ago when that temple of conspicuous consumption, Neiman Marcus, opened another store in metropolitan Washington, my old friend and astute political observer, the late Nat McKitterick, warned me we were lost.

For it was about then that – “a political class” – was becoming apparent in the nation’s capital. It was a new phenomenon. Those of us who knew Washington pre-World War II., remember how it largely emptied out on the weekends when the government elite departed for hometowns. The wretched climate in the former swamp meant summer holidays were forced on the bureaucracy when the thermometer maxed out, then without the now ubiquitous air conditioning. In an era when the country depended less on Washington delving directly into our inner most reaches [and pockets], part-time government, or something approaching that, could be tolerated if not welcomed.

Certainly the Founders wanted the new Republic to have limited government, peopled by a constantly fluctuating hierarchy composed of a wide range of citizens with other professions and livelihoods. True, eight of the original 55 men who participated in framing the Constitution were sometime politicians. And fourteen were rich enough to own slaves. George Washington, himself, was not only a slave owner but one of the richest men in the New World. Eighteen framers might be called “speculators” in land and finance. Still, they dreamed of a regime in which the power of the state would be lodged at its lowest level and therefore more responsive to the will of the people.

And, indeed, at the insistence of “the radicals” they immediately adopted the ten first Constitutional amendments to guarantee the people’s rights, changes most of which had been discussed earlier. They were adopted to ease the document’s approval from the various states’ legislatures, jealous of their power and fearful of a central government. The tenth amendment put it in unambiguous 18th century prose: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

The reasoning was clear: a ruling political elite was the nightmare of the Founders, especially those ideologues committed from the beginning to the Revolution against the British crown. Their opposition arose from an overweening King and Parliament repeat and Parliament which had usurped their rights as Englishmen. Steady progress of Anglo-Saxon individualism and strength of new and growing centers of power in Great Britain had erased the once divine right of kings. And then the power of the barons, squeezed reluctantly from John, gave way to a London elite which governed, but in part still based on aristocracy. That was not to be, the Founders hoped, in, after all, what was their Republic modeled on Greek popular democracy and the Roman worship of the law. [Benjamin Franklin, according to legend, famously quipped when asked by a constituent what had come of the secret constitutional conclave, and he replied, “A Republic, Madam, if you can keep it!”.]

But over two centuries that original intent, as undeniable as it is, has been chipped away “in order to form a more perfect union” and to meet the growing needs of a vast, new land and population and the effects of a continuing industrial revolution. By the time the U.S. finally assumed its obligations as a world power, in fact, as a superpower, in the post World War II environment, that process had gathered new, rapid momentum.

On The Hill, the old bourbon-and-branchwater boys gave way to new blow-haired pseudo-sophisticated Congressional staffers, who incidentally, didn’t know how to draft legislation. In the Congress, more and more seats were “inherited” – either through DNA or through gerrymandering which now was based on class, ethnicity and color rather than on old machine politics handing out a Christmas turkey. The two-year term in the House, intended to insure a rapid turnover close to the electorate, of necessity turned into permanent campaigning. The judicial system which more or less had bucked Franklin Delano Roosevelt’s “court-packing” successfully in the mid-30s succumbed increasingly to politicalization – with sociologists rather than legal scholars providing psychoanalytical analysis for decision-making on school desegregation, and a couple of decades later, abortion, rather than resorting on the old torts.

In one of those vaunted reforms with unintended consequences [The 1883 Pendleton Civil Service Reform Act and all is subsequent additions], the effort to insulate the federal bureaucracy from the corruption of political “spoils” created an independent but self-aggrandizing bureaucracy. So much so that sheer dereliction of duty – as witnessed in the current Congressional hearings – is hard to punish with dismissal much less economic sanctions and imprisonment. Watching Committee television hearings, we have seen the apotheosis of the trendy, smirking, self-important, arrogant, self-anointed bureaucrat, defying elected inquisitor politicians – who, however tainted themselves, recognized the dangerous politicalization of the tax system has reached new and dangerous heights.

Grown like Topsy is a class of bureaucrats, political appointees supposedly in their command, reinforced by their K Street lobbyist appurtenances and an increasingly kept mass media and blabbering tax-free, high-paid foundations with pretenses for intellectuality. These latter all too often simply reflect the least common denominator on thinking about any strategy or policy. A systemic revolving door of cushy jobs await any government executive who falls from his seat – until the hoped for next election either brings him back or he continues to work with his alter egos in what is laughingly called the private sector.

Look around and you see the incredible character of our new political elite. They unashamedly reward themselves until the District of Columbia [despite its poverty-stricken Black ghetto] and the surrounding Maryland and Virginia counties have the country’s highest per capita incomes. Alas! The demise of the Founders’ effort for a politically neutral federal territory! And even with the Dulles Corridor information technology industry, you would be hard pressed to find productive sources other than intra-government relations.

To describe the relationship among the inhabitants of Georgetown, Langley, Bethesda, FriendshipHeights, and the other ‘golden ghettoes” of suburban Washington as incestuous would be magnificent understatement. These denizens are often tied by kinship – the former Internal Revenue Service head who presided when it targeted conservative organizations is married to the head of an Obama political organization [not audited], two major network news directors have siblings in “media relations” on the White House staff, etc., etc. They constantly hobnob in New York-priced restaurants, chatter at the plethora of cocktail parties, often vacation together in The Hamptons, Martha’s Vineyard or other plush resorts, when not taking overseas “inspection” trips at the taxpayers’ expense.

It is no wonder that such inbreeding leads to group-think. Only such relationships could produce the catastrophe of a fanatical effort to remodel at one stroke one-sixth of the U.S. economy, the medical services and health industry with its infinite and unanticipated complications. And then, of course, to continue to pursue that course when every single opinion poll in the country shows a majority of the voters oppose it. Obamacare is, in fact, the culmination of a growing tendency of “the political class” to demonstrate increasing incompetence and lack of realism in the face of the growing complexity of American economic, social and political life after the subordination of old methodology by the digital revolution. But it was the ultimate expression of a political class who knowingly and arrogantly “know” what is good for the rest of the population.

Is all lost?

The closest I have ever come to Oklahoma was as a teenage ColumbiaUniversity student I got an invitation from Phil Suitland’s All Girl Orchestra, then playing at the Warner Bros. Theater on Broadway, to see Oklahoma! Opening that 1943 spring. I assume its freshness and authenticity is a reflection of its namesake. To this observer it seems if one wants an antidote to what is happening in Washington, which inspires faith in the American ethos and its political dreams, he must turn to the victims of the recent Oklahoma tornadoes. Even the mainstream media, so often given to stigmatizing ordinary Americans as boobs [“who cling to guns, or religion”], had interview after interview with survivors who expressed their acceptance of the inevitability of life’s disasters but determination to adhere to old Oklahoman and American principles of self-help and perseverance. And I doubt that many of them would recognize a Los Rudos cocktail — with cilantro. As the Communists were want to say, it is not accident that not a single Oklahoma county voted for Obama in 2012.

Therein, perhaps, still lies the essence and the hope of the Founders’ American dream.



What Obama Could Do

The dust has far from settled on the Washington stalemate over setting a new debt limit. As Thomas Sowell pointed out, so logically, were an increase in the debt ceiling only  “routine”, held up by pesky Congressional Tea Partiers, as the spenders charged, then what would be the purpose of having a ceiling at all? But while an indecorous debate encapsulated the larger ideological divide, America rapidly moves on, remorselessly, to threatening politico-economic issues cascading in from Europe and Asia as well as at home.

Ironically the current world crisis proved one thing: a continuing overwhelming faith in America’s importance, whether economically or culturally. Proof is “the flight to quality” by investors worldwide into the American Republic’s indebtedness as witness all-time record low interest in U.S. Treasuries auctions. Prime Minister David Cameron’s turn to American police [overcoming the usual our British Greek to your American Roman prejudices] in the face of chaotic English urban rioting is another indicator. But disquieting news from Libya approaching indecisive civil war and tragic events in Afghanistan where withdrawal leaves a highly vulnerable Pakistan indicate just how wanting is continued Obama Administration “leading from behind”.

US economic amelioration and patching up its world role would require extraordinary statesmanship. And as many observers, Pres. Harry Truman for one, have judged, the Constitution and history has made the presidency a very strong executive, and it sometimes matters less what he decides but that he act. “The buck stops here”, Mr. Truman’s pithy saying, remains a call for presidential courage on Pres. Barack Obama.

Here’s the kind of action that might result were that summons answered:

  • Send Michelle and the kids off to Martha’s Vineyard while making a seminal Oval Office Labor Day speech on economic affairs.  The spin might be: while holding to fundamental beliefs for a new era of economic justice, pragmatism demands that agenda be put on hold to meet the deepening emergency replaced by a program of cooperation with business to produce jobs immediately.
  • Ask the Congress to skip vacation and reconvene in special session, if needs be three days a week, to consider economic-political measures necessitating legislative action, or simply as a forum to vent the public’s criticism.
  • Call for a summit at the highest level with our allies in Europe and Japan on the world economy — including the simultaneous attendance of all central bankers –to discuss coordinating economic strategies and tactics.
  • Begin weekly meetings in closed session with a group of recognized private sector leaders to brainstorm recovery strategies and tactics.
  • Call for an immediate minimum two-year extension of the Bush tax cuts, ask Congress immediately to cut capital gains to zero, and begin the examination of longer term tax alternatives including a flat tax.
  • Propose a tax reform commission of experts modeled after the Defense Base Closure and Realignment Commission to suggest immediate incremental incentives for small businesses – the fountainhead of jobs.
  • Lift all administrative restrictions on discovery and production of fossil fuels, especially in the Gulf and Alaska and Virginia, creating perhaps a quarter of a million jobs immediately.
  • Use the extensive administrative powers written into Obamacare to suspend any implementation for at least five years and suggest its review by a body of medical, insurance and regulatory technocrats to be presented to the Congress before November 2012.
  • Ask Congress for a one-time tax remission for multinationals to encourage repatriation of an estimated $2.5 trillion in profits held overseas, on condition 25% be invested immediately in an infrastructure fund [highways, bridges, airport, rail reconstruction, etc.], a private sector Reconstruction Finance Corporation administered by those companies in collaboration with local governments.

And then sit back and see the American economy take off!

Alas! I fear we have as much hope for such a program, either thematically or in its specifics, as the proverbial snowball in the nether regions. Hangers-on, leftwing Democrats and the kept mainstream media will continue to hope for victory in next year’s elections, clinging to an agenda designed to enthuse the President’s “politically correct” base, demonize his opponents and flimflam independents by pretending a position of compromise.

Unfortunately, it looks like that indomitable American economy with its incredible history of jobs creation will have to continue to tread water – as it will manfully — against a Washington tide.



Obama’s foreign policy: Look the other way to avoid disaster

Whatever the motives by all parties behind the Libyan intervention, the worst fears expressed in the UN resolution “authorizing” the use of force are coming true.

At this writing, half a million civilians in Libya’s third largest port-city of Misurata feel the blast of Muammar Qadaffi’s only half-crippled firepower. Pitifully, they include tens of thousands of Black African illegal migrants trying to get to Europe –hostages like oil in Qadaffi’s blackmail games with the Europeans. Two Western journalists’ deaths dramatized what could well turn into the kind of humanitarian catastrophe the UN trumpets but repeatedly fails to prevent. [A harbinger of a coming catastrophe, ignored by the media, was loss of 200 souls on a refugee ship in early April.]

Misurata is emblematic as the rebels’ outpost in the west close to the Libyan capital, 500 miles from their Benghazi stronghold in eastern Cyrenaica, proof Qadaffi rules largely by terror.

But the Obama Administration has failed to hand off to NATO the dictator’s ouster for which Washington itself along with the Europeans and most Arab states repeatedly calls. Half-hearted attempts to arm the rebels – first with “non-lethal” equipment and later with armed drones – are too little and too late to end what Washington admits is stalemate.

At the UN Security Council, opposition from China and Russia [and hypocritical India] always ready to sabotage Western initiatives, blocks expanding sanctions, including tens of billions Qadaffi’s family still dispenses. They help bribe African states – long on Qadaffi’s dole — who call for a negotiated settlement to rescue the regime. It also whets Russia and China’s appetite for reinitiating lucrative weapons sales to Qadaffi.

This fiasco is only the most flagrant in a growing list of Obama foreign policy disasters. Granted most crises are long in the making, nevertheless, Mr. Obama’s indecisiveness in all but his adamant refusal to fulfill the U.S. role as leader of the Western alliance aggravates every Mideast problem:

• Washington’s obstinate pursuit of accommodation with Syria, perhaps the Arab world’s bloodiest regime, has come a cropper as opponents test whether Dictator Basher al-Assad will escalate current dozens of killings against peaceful demonstrators to the tens of thousands during his father’s reign or abdicate to proliferating Muslim radicals.

• The Obama Administration’s insistence on pressing the issue of outposts in the West Bank, putting the Jewish state’s security at risk, has brought a near Washington-Jerusalem breakdown, endangering the U.S.’ only stable alliance in the region, further negating Israeli-Arab compromise.

• Washington’s indecision in fostering a Mubarrak transition opened the floodgates to the Moslem Brotherhood [whom only Mr. Obama’s Arab experts characterize as “moderate”], weakening Cairo’s military leadership and jeopardizing Egypt’s opposition to Iranian regional expansion.

• The Administration’s belated tepid support for Tehran’s dissidents has not only emboldened the mullahs to strengthen their terrorist tentacles to the Mediterranean and into Afghanistan, but encouraged the Germans, Indians, and of course, the Chinese, to continue flaunting economic sanctions.

• The President’s pretentious “outreach” rhetoric only strengthened the Arab/Muslim “victimization” complexes and symbolic bows to the Saudi monarchy have soured with what Riyadh sees as sabotage of its interests in Egypt, Bahrain and Yemen resulting in its noncooperation on boosting OPEC quotas thereby hiking petroleum prices.

• Everywhere U.S. prestige is taking a shellacking, not only from its opponents, but increasingly becoming suspect to European allies who suddenly have been set adrift without their traditional recourse to American leadership and firepower, in the midst of their own Euro/EC crisis.

The approaching electoral season’s probable concentration on domestic concerns is likely to give the Obama Administration some respite from foreign policy critics. Grounding his campaign headquarters in Chicago – to mask his dependence on its political base among the chattering classes on both coasts – may help obscure international issues. Indeed, American foreign policy since its emergence on the eve of World War I as a major player on the world stage has too often been piquancy for violent fluctuation between withdrawal and forced engagement.

But in the 21st century the digital revolution has sounded the death knell of many older perceived choices with instantaneous communication, globalize economics and space age weapons of mass destruction missilery. And, in the end, what may well be building is a new and unforeseen crisis – at the level of Pearl Harbor or 9/11.
Turning away may not be a real option the American public will have this time.


Horror vacui

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Pres. Barak Hussein Obama has given new meaning to that epithet “imperial presidency”. It was slung at Pres. Richard Nixon not only for his extravagant “palace guard” – some in kitschy uniforms – but his more serious unconstitutional overreach.

But if imperial in his style, Mr. Obama reigns; he does not rule.

Whether domestic or foreign policy, Mr. Obama abdicates to Congressional or bureaucratic control then spins the often resulting muddle as something for which he is not responsible. It results, for example, in outgoing Sec. of Defense Robert Gates and Chairman Admiral Michael Mullen pontificating far above their pay grade, to be contradicted almost instantaneously by events or Mr. Obama himself. The President’s hands-on applies only to maintaining his leftwing political base, whether Wisconsin unionists or Washington lobbies, reinforcing his South Side Chicago-Hyde Park 1960s leftwing agenda and his search for reelection campaign dollars.

Given the presidency’s dual role as chief of state as well as chief executor, celebration of a multitude of ceremonies is necessary and fitting – all the more in times of peril when the nation’s spirit needs uplift. But Mr. Obama’s sports addiction, his gliterrati extravaganzas, his causal acknowledgement of our closest allies’ tragedies, and his wife’s Marie-Antoinette progressions are increasingly bizarre. Importing a Chicago Daley mob family member, supposedly as a pragmatic chief of staff, so far has not injected restraint much less austerity.

This standard operating procedure is reinforced by Mr. Obama’s denigration of historic American accomplishments, often on foreign soil. Symptomatically, in the one international arena where he has sought leadership, relations with the Muslim world, there’s almost total disaster. Having made what he, if not most scholars, considered two seminal speeches offering renewed friendship with Islam, American interests are now in jeopardy in both locales. Turkey, site of his first lecture, once a stalwart NATO ally, defies the West’s policies on the Iranian nuclear weapons issue, the greatest threat now facing the alliance. His Cairo speech, seemingly falling on deaf ears, was followed by his bemused Administration fostering regime change but adding little to its still awaited outcome.

Of course Pres. Obama did not create these long simmering crises. But he contributes to them through his Administration’s lack of faith in American power, hard and soft. Favoring multilateralism to American leadership, his UN representative, Amb. Susan Rice, preaches that gospel but neglects reform of the organization’s abysmal corruption and inadequacy for which taxpayers pick up too much of the tab. Only when Muammar Qadaffi began slaughtering his own people did Washington join to redress the charade of Libya’s prominence on the UN Human Rights Council.

In this world of rampant behaviorism and relativism, Aristotle may not dominate as he once did. And his concept that nature abhors a vacuum [horror vacui in Latin] may be questioned with such new mysteries as black holes in outer space. But we are getting its proof in what happens geopolitically when the world’s paramount power chooses not to lead. Or worse still, when Mr. Obama trumpets policy without following through. Minor players with fewer resources, physical and intellectual, take the field exacerbating regional conflicts in an increasingly intertwined world.

Nowhere has that been more apparent than Washington’s approach to the Egyptian regime’s collapse, the Bahrain religious conflict and now the Libyan civil war with their attendant growing threat to world energy supplies.

Like a sick dog to its vomit, Washington returns again and again to the Israel-Palestine issue as the magic bullet to cure Mideast troubles. It’s the one international issue where the President enthusiastically commits his prestige. But having chosen Israeli settlements in areas won in the 1967 war as fundamental – it was subsidiary until he came along – Mr. Obama jeopardizes Israel’s basic security further postponing any agreement. The absurdity of his position is self evident: in a “two-state solution”, he ignores Israel’s almost 2-million Arabs but infers a Palestinian state must be “judenrein”.

Elsewhere lack of U.S. leadership – even withholding rhetorical support for Iran’s opposition — has helped extend Tehran leadership’s religious fanatic and kleptocratic tentacles across the Fertile Crescent. The Persian Mullahs have managed to play all sides in “the Arab spring”. Not only does Tehran use Shia Syrian and Lebanese co-sectarians, but it sponsors Sunni Palestinian terrorism including Hamas, offspring of Egypt’s Moslem Brotherhood. [The latest unspeakably barbaric murder of an Israeli family eclipsed by the Japanese catastrophe was apparently Tehran-sponsored.] Iran may well profit from whatever comes of Mr. Obama’s belated moves to oust Qadaffi.

The arguments against American intervention in Libya were strong. Though Washington’s choice was to disremember his murder of Americans, in a Berlin discothèque in 1986 and PanAmerican 103 at Lockerbie in 1988, it is not forgotten in a region where mayhem and revenge are ever present. Ultimately, Mr. Obama could no more ignore Tripoli [ah! the ghosts of Thomas Jefferson and his Marines!] than rising oil prices spurred by Obama Administration counterproductive domestic energy policies could fail to cripple American recovery.

Thus Pres. Obama and the U.S. have been sucked into an undelineated vacuum, in part of his own making.



The 2012 electoral pageant begins

It looks like next year’s presidential election will be a beauty contest.
Electors aren’t likely to get a Lincoln-Douglas debate. Voters might reasonably have hoped for something approaching that given the domestic financial crisis, young Americans dying in three wars overseas, a host of other difficult domestic and foreign crises, all against a general conflict over traditional ethical values.

But by launching his campaign with outrageous demagoguery, Pres. Barack Obama “made it clear” he will avoid fundamentals. He counts on emotional appeals to self interest – private and corporate welfare recipients, elderly who make old age a profession out of human tragedy, all interests vying for favor at the public trough.

Mr. Obama obviously counts on adulation rather than cognition – from naïve youth addicted to “change-whatever”, the gold-laden Hollywood glitterati, guilt ridden intellectuals obsessed with race, Washington’s enormous public and private lobbies, and minority voters blindly following media created leadership.

That, in turn, will make it difficult for his opponents to respond with a candidate and a campaign based on issues.

Mr. Obama’s opening speech, supposedly presenting a new economic program, was the tip-off. Clichéd ridden, it was rhetorically a u-turn on his own free-spending budget proposals announced just weeks earlier. Without so much as an apology, he “welcomed” the trimmed 2011 budget – halfway through a fiscal year during which Democrats had held all the three Washington power centers and as though his
Democrats had not opposed every cut only days before.

The verbal turnabout permitted Mr. Obama to jump aboard what his counselors obviously see as the Republican Party/Tea Party/conservatives’ bandwagon appeal for renewed fiscal discipline. As an old friend often warned me, never underestimate the role of fads in American life: “deficit reduction” is now “in”, whether understood or not by recently acquired advocates.

Mr. Obama’s teleprompter readings were as golden as ever – a “gift” he once said — even if one tires of a speechwriter obsessed with “xxx let me be clear xxx”, always prelude to another muddled concept. But there were no specific proposals for reining in government spending. In fact, expanding the liberals’ hallowed welfare state would solve problems of debt and unemployment, he reassured us, not surgical systemic reform as his own investigating panel suggested.

But the program to spend the country’s way into new prosperity had crashed, however slow he and his advisers were to acknowledge until the voters told them so first in November 2010, and now with sagging opinion polls. Scarce jobs and rising food and fuel prices are the reality masked by his cooked statistics.

As always it is likely to be the unintended consequences, partially resulting from his own habitual indecision, and unanticipated events dictating the November 2012 outcome.

But some critical facts on the ground are going to be all too obvious.
Mr. Obama’s intent to give the Libyan situation a hit and a miss and bow out to our allies is doomed, as any military observer worth his salt could have predicted. His stand-in, “NATO”, relies overwhelmingly on U.S. initiative as well as hardware and alone cannot dislodge or even modify Qadfaffi’s regime. Despite Sec. of Defense Robert Gates’ repeated pronouncements, American fighterplanes – the only ones capable of doing the job –continue as close air combat support for Libya’s incompetent and suspect rebels. And they will eventually need ground assistance if Mr. Obama’s announced aim of ridding the world of Qadaffi is to be achieved.

As Mr. Obama uses presidential fiat to cancel another pipeline from Canada, the energy fiasco escalates – in all fairness only partly due to his misbegotten policies. But if gas is at $5 a gallon or more Labor Day 2012, as seems likely, voters may look to their credit cards again before entering the polling booth.

There is no dearth of Republican candidates. But with the emphasis on bling-bling rather than legislative and executive experience, the spotlight is all too likely to fall on those matching the incumbent’s “glamour”. That apparently explains the boomlet for Donald Trump, surely the unlikeliest candidate for the presidency in decades.

That’s a sad thought as we enter the electoral season. One can only hope the good sense of the American people which has held us in good stead for so long will reassert itself and demand more substance and less glitz.


Class warfare using the price of gas

The numbers click upward rapidly at the pump. That’s why, as the 2012 presidential campaign issues emerge, gasoline prices competes with missing jobs and limping Obamacare. [With more and more waivers given White House friends, “universal medical coverage” may go the way of “change”.]

But Mr. Obama has decided most of the people can be fooled most of the time.
Instead of “pivoting” on his disastrous energy policies, the President called an Ides of March press conference to boast of booming domestic crude production. In fact, from 10 million barrels a day it’s at seven going toward six.
With worldwide consumption rising despite still bleeding wounds of the 2007-08 financial crisis, supply has maxed out. Our friends, the Saudis, promise more production. But nobody has seen it yet. [Payback for Mr. Obama ignoring their advice on Mubarak and Bahrein?] Anyway there would be quality and delivery complications.

Truth be told, most experts privately admit the convoluted energy muddle defies immediate solution.

True, we are nowhere near “petroleum peak” – that long prophesied moment when unstoppable infinite energy demand meets immovable finite fossil fuel supply. Recent deepwater drilling has turned up humongous new fuel. A good example is Brazil’s South Atlantic finds we are helping to finance as Mr. Obama proudly acknowledged during his recent visit. Then there’s vast North American shale. The Israelis have learned to crack it underground avoiding environmental constraints much like our “no hands” eastern Kentucky pilot underground coal gasification.
But regulations – which Mr. Obama intensified after the Gulf spill – have throttled U.S. production. [Curiously, soon there will be Chinese pumping off Castro’s Cuba near Florida beaches!] The Obamaites also did inherit local environmentalistas’restrictions. [Note: there’s more seepage in California’s Santa Barbara channel than from drilling!]

Reality stubbornly intrudes. Cheap energy has been hallmark of America’s incredible jobs creation for over a century. But Mr. Obama’s self-righteous ideologues want this reversed. It’s never easy to get into others’ minds, certainly not the elite dominating this Administration. But their “green” religion envisages an early end to fossil fuels, vast government subsidies to speed their demise, and higher prices [including more taxes] to help push us toward unproved, expensive alternatives.
High priest of this man-made global warming gospel is John Podesta, Pres. Clinton’s chief of staff. His Center for American Progress provides a hallelujah chorus for their ally, Sec. of Energy Steven Chu. Nobel physicist Chu has a messianic solution: growing and trading tropical glucose as a petroleum substitute, the very stuff of science — science fiction, that is. Nor do these fanatics tell us where costly funding for preserving the environment is to come if not increasing energy market efficiencies. Nowhere in this crew is anyone who ever produced a single BTU except gassing before captive audiences. Furthermore, as in the Gulf disaster, they are as deaf to pragmatic arguments as the muezzin calling to prayer over the cacophony of Cairo traffic.

Honest oil industry people admit not much can be done immediately given growing Mideast instability with its 40% of world production. Even cutoff of Libya’s 2%, while appearing small, hits European refiners supplying New England and Middle Atlantic pumps. Suspending ethanol mandates now, catastrophically exacerbating a world food crisis at taxpayer’s expense, would only make things worse by reducing volume.

But vast amounts of Fed Chairman Ben Bernanke’s “quantitative easing” flows into soaring commodities including oil. Investors have shied away from long-term investment, again because of Administration generated uncertainties about financial regulation, taxes — and energy.

Were the President to take one of his increasing flipflops – messy and inconclusive as they are – and pull out all stops for domestic fossil fuel and electricity production [a hundred plant proposals sitting on the shelf!], prices would not collapse. But jawboning could erode crude prices, so often loaded with surprises in the past. And it would create jobs!

But alas! Pres. Obama has chosen class warfare, so beloved of his leftwing base, over reconciliation with industry. With the help of innocent populists – such as Bill O’Reilly – he will blame it all on the oil companies and their huge profits. That, his gurus plot, is a winner for November 2012 – if not at the gaspump.


Rescuing Obama [international division]

Annual Washington jamborees of those monuments to post-World War II international economic cooperation, the World Bank and the International Monetary Fund, dramatize by their increasing irrelevance the continuing world economic crisis. Bloated, pampered, tainted bureaucracies whose research is increasingly suspect, they have no solutions.

Ultimately, when VIPS go home and November elections dust settles, but recovery continues to stutter, the Obama Administration could face stark, bilateral decisions on international fiscal and monetary policies.

For while just about everyone warns against “a currency war”, that’s exactly what has broken out. Individual governments are intervening in markets to maintain exports and minimize imports. Japan’s central bank is fighting off the highest yen to dollar in 15 years. South Korea slyly intervenes to undercut the yen. Brazil, to preserve its commodities bonanza, slaps on taxes to slow speculative inflow — its real up 25% since January 2009. South Africa considers something similar with a rising rand costing foreign sales. Greece, Ireland, Spain and Portugal refinance crippling debt at increasingly higher cost, desperately hoping to avoid leaving the euro. Partially responsible for their profligacy, export-led Germany promises a new bandaid, a European crisis management set-up, as an appreciating euro cuts into its trade.

Despite all this frenzied activity – if momentarily frightening off speculators — intervention will not in the end be effective. “Beggar your neighbor” — shifting responsibility from one national economy/currency to another — cannot cure a worldwide recession.

The biggest manipulator of all, China, makes cuddly noises about international cooperation but boosts export subsidies, buttressing a hugely undervalued, nonconvertible yuan. Its unprecedented reserves from trade surpluses – a $2.5 trillion hoard, mostly dollars including a third in U.S. Treasury securities — discombobulates the system.

The Obama Administration’s remedies have included a proposed doubling of U.S. exports over five years, trimming oil imports with subsidized alternatives, wheedling China into currency concessions, health care reorganization, new taxes, and an expansionary monetary policy to pump up domestic recovery along with expanded government. This program seems unlikely to succeed, certainly not in the near term. And to quote the noted British economist, John Maynard Milord Keynes, “… in the long run we will all be dead…”

The reasons are obvious: cash-loaded U.S. companies, facing a vicious circle of lowered consumption because of high unemployment and tightened bank credit, refuse to invest/innovate. They see Washington policies as both inimical to business and contributing further insecurity. Nothing so mocks Administration “green energy” as subsidized American companies moving production to China or closing in Gulf drilling, thereby lopping tens of thousands of jobs and increasing petroleum imports. The Fed’s “quantatative easing” [increasing money in circulation] gets very close — to quote Keynes again — “…to pushing on a string…” with a still unresolved home mortgage market breakdown.
In the post-election era, whatever domestic turns a conservative Congressional majority [Republicans and rightwing Democrats] forces on the Obama Administration, international issues will pose even greater tests for strategy — and risk taking.

It is not hard to see where any new initiative might begin. About half the $55.2 billion U.S. trade deficit in July was with China. That’s good for Walmart. And China’s huge overexpansion of infrastructure is manna for raw materials exporters such as Brazil, Australia and Angola.

And while huge international payments deficits [$378.5 billion in 2009] along with concern about Washington strategies have cheapened the dollar and therefore exports, a good question is how much America could sell China even if Beijing’s currency were floated. Chinese consumption increasingly falls as a percentage of its soaring gross national product – despite tales of inordinate luxury from growing class and regional disparities. Hidden “non-tariff barriers” also block U.S. imports.

Soviet- style Chinese technocrats struggle to centrally plan, stuck with humongous dinosaur government companies and with an accelerating military expansion devouring resources. Meanwhile, Communist apparatchiks scuffle for “fifth generation” posts next year. Major readjustment would be catastrophic, Beijing fears — probably justifiably. Their underprivileged private sector, disproportionately responsible for two decades’ of remarkable progress, would wilt. Labor-intensive manufactures are already fleeing to Southeast and South Asia as wage pressure grows from rising social friction.

But without drastic Beijing moves, the Obama Administration, with Congress at its heels [if not Wall Street, hankering after Chinese financial industry growth] may not be able to stave off tariffs on Chinese imports. And once protection against Beijing got a green light, it might be hard to exempt other foreign sellers. That would turn America’s back on the World Trade Organization – which Beijing joined but did not honor – and the whole post-World War free trade religion. Higher imports would increase U.S. living costs since outsourced manufactures could not be quickly replaced by domestic production. All that might maximize the Fed’s loose money, leading back to the old threat of inflation – perhaps with no growth, “stagflation”.

There isn’t any magical “economic” ideological solution – neither from Smith, Marx, Keynes nor Friedman. Nor is a visionary yet sighted resembling Keynes [who in 1944 gave us the Bank and Fund at Bretton Woods] to dream up new, acceptable, effective international collaboration.


Unintended consequences: help for Obamanomics?

It’s bitter irony for Democrats but Pres. Obama’s election “shellacking” could help his economic program. Early signs might come in pushing through free trade agreements [FTA] the Bush Administration negotiated with Panama and Columbia. For while trade issues cut vertically across party lines, the incoming Republican House majority and a chastened Senate Democratic majority [with a quarter up for reelection in two years] is likely to be more “business friendly”. Final touches to a difficult South Korean pact – which could add $10 billion in exports annually to $60 billion bilateral trade – could come during his present flamboyant Asian tour.

Along with paying some protocol debts, Mr. Obama’s ostensible purpose is to push his doubling American exports goal, using the most expensive presidential whirlwind ever through four Asian countries in 11 days and a look-in on three multinational economic conferences. Opening up new markets had been hijacked by the protectionist lobby in his own Democratic Party. But while unions threw tens of millions into the campaign [in many cases backing failed candidates], their Capitol Hill voice will be as shrill as ever but their clout curbed.

Trade pacts and presidential visits notwithstanding – even when accompanied by a huge gaggle of businessmen – will do no more than ice the cake. And nothing along the way promises all that much. Mr. Obama will formally crown Pres. George Bush’s open sesame to technology for the Indians and he will signal some military aircraft sales, hoping for far more. But the Administration has warned India it will continue to try to slow information technology outsourcing. Washington claims Indian call centers and software are costing U.S. jobs when unemployment proved to be the voters’ chief concern. Never mind that several Indian multinational software companies are grounded in Silicon Valley and have been among the most enthusiastic Obama backers. That won’t make it easier for Prime Minister Manmohan Singh, balancing continuing Indian protectionism in such fields as retailing, or snail-like privatization of huge Indian state companies, both targets for which American multinationals salivate.

The whirlwind tour barely touches down in Indonesia – Mr. Obama’s childhood home where his advisors once hoped a twice postponed nostalgic visit would embellish his international image and reinforce his appeal to the Muslim world. That initiative is on life support – given Islamicist terrorist attempts on the eve of his departure, the intractable Iran nuclear weapons drive, and increasing friction with Turkey. It was in Ankara where he made his ambitious oratorical appeal. The increasingly muddled political outlook in Egypt where he tried rhetoric again is just short of crisis. In Jakarta, repeating platitudes about Moslem “moderation”, Mr. Obama will be lucky if he can get renewed promises against fierce restrictions on foreign investment for the long postponed highly competitive search for new fossil fuels against Chinese competition.

Both the Japan touchdown and his G20 summit participation in Seoul are going to be overshadowed by growing concern over China’s intentions. It is, after all, Beijing’s massive trade and payments surpluses which is the major Washington international economic concern.

Treasury Sec. Timothy Geithner renews his hassle with the Chinese carrying new weapons. Taking a leaf from British economist John Maynard Keynes who tried to wedge it in his original post-World War II Bretton Woods framework [ironically, against American opposition], Mr. Geithner argues that surplus countries as well as deficit economies must shoulder responsibility for international imbalances. He offers a wooly concept whereby surpluses should be measured against national gross product. If an economy ran surpluses beyond that cap, it should be forced to reduce surpluses through, presumably, domestic spending and increased imports.

It was a turn away from a frontal attack on Beijing’s notoriously undervalued currency and export subsidies. At first Beijing coyly welcomed any feint ending currency debate, where they face competing producers as well as the U.S., Japan and the Europeans. But just days before the G20, they furiously attacked it. In any case, Congress’ new hardliners might well ask how such a grandiloquent concept is to be implemented, especially given Beijing’s lackadaisical attitude toward international agreements. Dearer to their hearts is the second U.S. initiative: a welter of complaints filed against China before the World Trade Organization, asking cease and desist orders and penalties.
In another part of the forest, to a chorus of complaints from all the U.S. partners, Federal Reserve Chairman Ben S. Bernanke has again opened the spigot for another half trillion U.S. liquidity through the Fed buying Treasuries. Some call it printing money. The Asians are worried it will loose an avalanche in their direction, further aggravating raising domestic prices and exports. The Europeans, by and large going in the opposite direction for a tightening up, worry too that it may further discombobulate their fragile Euro as the German export boom tapers off and refinancing southern Europe gets more costly by the day. But, if as it has so far, additional “stimulus” further cheapens the dollar, it could make American exports even more a bargain — for those countries willing to let them in.


“Jaw!-Jaw!” – but with teeth!

The Obama Administration – through endless apologies for real and imagined American misdeeds and its resort to what Winston Churchill called “jaw!-jaw!” in all circumstances – has increased world tensions. It has created regional power vacuums by minimizing the U.S. role in leading democratic forces.
No one discounts negotiation and conciliation, of course. Churchill at the height of the Cold War said that “Jaw!-Jaw!” [negotiations] was preferable to “War!-War!”. But in the confrontation with the mullahs of Iran and North Korea’s Communists, diplomatic gobbledygook – inherited from the Bush Administration — has failed to defuse the threat to peace. Although historical analogies should be eschewed – different times, different tempers, different tests – it’s increasingly difficult not to draw analogies between the democracies’ sacrifice of Czechoslovakia in the late 1930s and the Obama Administration’s support of UN policies which would dismember Israel. [Then too, there was the problem of the Sudeten German minority, discrimination against the Slovaks, etc., etc.]
Churchill knew whereof he spoke. Throughout the 30s he was mocked for his campaign against false peace efforts. Later at the 1945 Yalta conference, Churchill [and U.S. Moscow Ambassador Averill Harriman] again was unable to convince his partner, friend and close ally, FDR, of the necessity of bite as well as jaw in dealing with the man Rosevelt jocularly called “good old Uncle Joe.” Concessions to Soviet Dictator Josef Stalin were later to threaten nuclear holocaust.
That’s why it comes as a breath of reassurance that Washington has scored a round. This time it is about money, as it is for so many things, the lifeblood of terrorism.
Much of the terrorists’ funding flows through traditional networks — hawala or hundi, based on ethnic, kinship and criminal ties as old as the Near East and South Asia caravan routes. But as sums have grown larger so has the sophistication of the terrorists’ finances – for example, Islamic welfare organizations have parallel “feeds” to the terrorists, as in the indicted American Holy Land Foundation for Relief and Development or the Turkish Nsani Yardim Vakfi [Humanitarian Relief Fund, or IHH]. The U.S.-based fund supported Hamas, and the Istanbul outfit was the terrorist wedge in the recent “peace flotilla” confrontation with the Israelis. The vast evangelical operations of the Saudi fundamentalist clerics throughout the Muslim world often tail off into local terrorism.
But as international terrorism takes on heft, it is becoming more and more attuned to sophisticated finance – whether Pakistani and Afghanistan drug traffickers supporting jihadists or a “lone wolf” seeking ways to back his often dramatic operation.
The European Parliament, trying late in the game to assert its authority against the Community bureaucrats, had blocked Washington’s access to information on financial transactions. The tussle was over The Society for Worldwide Interbank Financial Telecommunication [SWIFT], a cooperative of some 9,000 financial institutions in 209 countries. In false modesty, the outfit claims: “SWIFT enables its customers to automate and standardise financial transactions, thereby lowering costs, reducing operational risk and eliminating inefficiencies from their operations.”
Without SWIFT international banking as we know it today could not function. And as with so many effective international institutions, it grew from U.S. origins. Because of that and the paramountcy of Silicon Valley, it is still dependent on American information technology although it headquarters in Belgium.
After a game of hide and seek, the Strasbourg assembly has now acceded to permitting American officials to continue to scrutinize SWIFT transactions. This is tacit admission of the former relationship despite a new [and hopefully vague enough] agreement to aid the organization [and the Europeans] toward “independence”. Not only do the Europeans not have the ability to sift data that American technology provides, but as the Financial Times reports, only recently was its data storage moved out of the U.S.
One can only hope that the Obama Administration will maximize this tool. Recent UN and intensified American sanctions seeking to force Iran to back away from nuclear weapons will be effective only if they are enforced not only among the major financial centers but through threats of secondary and tertiary boycotts. Front organizations for Iran’s Revolutionary Guards in the United Arab Emirates and members of the Iranian Diaspora [avoiding U.S. taxation] will attempt to cream the more stringent sanctions for even more profit.
But there is, too, another poignant political lesson in this whole affair. If there were ever need for proof of the U.S.’ power when it chooses to exert it – even in its current gigantic economic difficulties – it is this little brush with sincere European advocates of privacy and their nefarious allies who would protect financial greed. . [Even the vaunted Swiss banks recently have had to let Washington look for taxdogers in their numbered accounts.]
Frequently, as in the case of threatening Chinese banks operating with North Korean fronts in Macao or in forcing oil giants like Mitsubishi and Total [as well as more recently BP] to halt desperately needed investment in Iran, these financial strictures can be powerful weapons. But it takes political will and realism about the U.S. role to use them.

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