Tuesday, December 15, 2009

Rise of the Fed bashers By George F. Will Thursday, December 10, 2009 Washington Post

And at Rep. Ron Paul, the 2008 presidential candidate who had the zany idea -- as many laughing people thought -- that the Federal Reserve system could become a sizzling political issue. Ben Bernanke, chairman of the Fed, who does not laugh promiscuously, knows that it is no laughing matter that Paul has 317 co-sponsors (180 Republicans, 137 Democrats) for a bill to open the Fed's books to "audit" by the comptroller general.

The canny congressman cannot accomplish what the title of his best-selling book recommends: "End the Fed." But he probably hopes that if the Fed's transactions with financial institutions were publicized, he and kindred spirits could stir populist resentment of the mysterious institution. Although profoundly mistaken in his objective -- breaking the Fed to Congress's saddle -- Paul is not frivolous. His rage against the Fed is rooted in his rejection of fiat money -- paper money backed by nothing but confidence in Congress (really), and his libertarian enthusiasm for maximizing the role of unmanaged markets in allocating social rewards.

Bernanke on Monday told the Economic Club of Washington that Congress already can examine the Fed's balance sheet. His worry is that Congress, by ordering audits when it dislikes Fed monetary policy decisions, might make the Fed seem subject to, and eventually actually make it subject to, congressional pressure.

At Bernanke's recent confirmation hearing on his nomination for a second four-year term, Jim DeMint, a South Carolina Republican who is co-sponsoring a Senate version of Paul's bill, asked Bernanke: "Do you believe that employment should be a mission, a goal of the Federal Reserve?" Bernanke, who had already noted Congress's "mandate" that the Fed "achieve maximum employment and price stability," answered that the Fed "can assist keeping employment close to its maximum level through adroit policies."

That mandate was, however, improvidently given. Congress created the Fed and can control it, and eventually will do so if the Fed eagerly embraces the role of the economy's comprehensive manager. America's complex, dynamic economy cannot be both "managed" and efficient. Attempting to manage it is an inherently political undertaking, and if the Fed undertakes it, the Fed will eventually bring upon itself minute supervision by Congress.

Rep. Paul Ryan (R-Wis.), has, as usual, a better idea: Repeal the Humphrey-Hawkins Full Employment Act of 1978 that, he says, "dangerously diverted the Fed from its most important job: price stability." For 65 years after its creation in 1913, the Fed's principal duty was to preserve the currency as a store of value by preventing inflation from undermining price stability. Humphrey-Hawkins gave it the second duty of superintending economic growth.

Before the recent downward tick in unemployment from 10.2 percent to 10 percent, Democrats said: The absence of downward movement proves the urgent need for more stimulus spending. After the downward tick they said: The improvement proves the urgent need for more stimulus spending lest the momentum stall. For such people, "more spending" is a verbal tic. Let such people begin managing the Fed and they will mandate low interest rates, regardless of circumstances. The currency will fail as a store of value.

Is the Fed's independence (de facto, not de jure) "undemocratic"? Somewhat. So what?

America is committed to democracy -- and to circumscribing democracy's scope in order to minimize the damage it can do by improvident responsiveness to untempered gusts of public passion. Thus the government is replete with restraining mechanisms -- three branches of government, rival chambers of the legislative branch, vetoes, supermajority requirements, judicial review, etc. And there are extraconstitutional circumscriptions of democracy, such as allowing the Fed an independence that exists at the sufferance of Congress.

If Time magazine has a lick of sense, Bernanke will be its Person of the Year because his leading role in stabilizing the financial system enabled the president to pursue other objectives. He did not do it perfectly, but he prevented paralysis.

On Monday, he reminded his Economic Club listeners of John Maynard Keynes's hope that "economists could manage to get themselves thought of as humble, competent people, on a level with dentists." But humble people do not claim -- as Bernanke does, under Congress's mandate -- the competence to simultaneously produce, with "adroit" policies, price stability and full employment.

Like the Fed, dentists are always important and urgently desired when pain is intense. But they are rarely objects of their patients' affections.

georgewill@washpost.com

Monday, December 7, 2009

Obama, the anti-Churchill? By Fareed Zakaria

If you take out just one sentence, Barack Obama's speech on Afghanistan last week was all about focusing and limiting the scope of the U.S. mission in that country. The objectives he detailed were exclusively military: to deny al-Qaeda a haven, reverse the Taliban's momentum and strengthen the Kabul government's security forces. The nation that he was interested in building, he explained, was this one.

And then there was that one line: "I have determined that it is in our vital national interest to send 30,000 U.S. troops to Afghanistan." Here lies the tension in Obama's policy. He wants a clearer, more discriminating foreign policy, one that pares the vast commitments and open-ended interventions of the Bush era, perhaps one that is more disciplined than Bill Clinton's approach to the world. (On the campaign trail, Obama repeatedly invoked George H.W. Bush as the president whose foreign policy he admired most.) But America is in a war that is not going well, and scaling back now would look like cutting and running. Obama is searching for a post-imperial policy in the midst of an imperial crisis. The qualified surge -- send in troops to regain the momentum but then draw down -- is his answer to this dilemma.

This first year of his presidency has been a window into Obama's worldview. Once most presidents get hold of the bully pulpit, they cannot resist the temptation to become Winston Churchill. They gravitate toward grand rhetoric about freedom and tyranny and embrace the moral drama of their role as leaders of the free world. Not Obama. He has been cool and calculating, whether dealing with Russia, Iran, Iraq or Afghanistan. Obama is a realist by temperament, learning and instinct. More than any president since Richard Nixon, he has focused on defining American interests carefully, providing resources to achieve them and keeping his eyes on the prize.
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"In the end," the president said last Tuesday, "our security and leadership does not come solely from the strength of our arms." He explained that America's economic and technological vigor underpinned its ability to play a world role. At a small lunch with a group of columnists before his speech last week, he made clear to us that he did not want to run two wars. He seemed to be implying that the struggles in Iraq and Afghanistan were not the crucial path to America's long-term security. He explained that challenges at home -- economic growth, technological innovation, education reform -- were at the heart of maintaining America's status as a superpower. In fact, throughout history great nations have lost their way by getting bogged down in imperial missions far from home that crippled their will, strength and focus. (Sometimes even when they won they lost: Britain prevailed in the Boer War, but it broke the back of the empire.)

It is clear that Obama is attempting something quite ambitious -- to reorient U.S. foreign policy toward something less extravagant and adversarial. That begins with narrowing the "war on terrorism"; scaling back the conflict with the Islamic world to those groups and countries that pose serious, direct threats to the United States; and reaching out to the rest. He has also tried to develop a better working relationship with major powers such as Russia and China, setting aside smaller issues in hopes of cooperation on bigger ones. This means departing from a bipartisan approach in which Washington's role was to direct and hector the rest of the world, pushing regimes large and small to accept American ideas, and publicly chastising them when they refused. Obama is trying to break the dynamic that says that when an American president negotiates with the Chinese or Russians, he must return with rewards or concessions -- or else he is guilty of appeasement.

For his policy to succeed, Obama will need to maintain his focus come July 2011. Afghanistan will not be transformed by that date. It will not look like France, with a strong and effective central government. The gains that will have been made will be fragile. The situation will still be somewhat unstable. But that should still be the moment to begin the transition to Afghan rule. We can find ways to secure American interests in that region more manageably. By the end of 2011, the United States will have spent 10 years, thousands of lives and $2 trillion trying to create stable, democratic governments in Iraq and Afghanistan, two of the most difficult, divided countries in the world. It will be time to move on.

Fareed Zakaria is editor of Newsweek International. His e-mail address is comments@fareedzakaria.com.

Friday, December 4, 2009

Politik Americano

Between the troop escalation in Afghanistan and the fudging of some documents and destruction of others in order galvanize support for Global Warming; we have now proven the theory of “circular relativity”. It states that if you go far enough to the Left, eventually you will hit the Right side of any issue. Liberals and conservatives at times mirror an old married couple, they disagree on everything, but after a certain amount of time they start to look alike.

I understand the idea of being fiscally conservative, low taxes and responsible spending, but since we haven’t had a President from either party that could effectively reduce spending in quite some time. Perhaps we should stop screaming for lowering taxes. The Left’s modus operandi is “tax and spend”, the Right’s should be “don’t tax and spend anyway”.

Why does the Tea Party crowd keep saying that they want their country back? It didn’t go anywhere. You lost the election, this is what happens when someone you disagree with gets elected President (voted in by a majority, not stolen, not taken away, not even decided by Floridians who can’t fill out ballot sheets), things begin to happen that you disagree with. You never heard President Bush say, “Since all of you Al Gore supporters don’t agree with my plans for the country, I’m going to respect that and in turn I will refalect (Bush speak for reflect) Al Gore’s ideas in everything I do.”

Someone told me the other day that these large gathering of Tea Party protesters is an indication that the President is destined for only one term. I was watching some Tea Party coverage on Saturday and I’m just guessing, but I’m willing to bet large sums of money that a super large majority of those people didn’t vote for Obama the first time around.

President Obama is a true inspiration to me. He is a Kenyan-Muslim-Communist-Nazi, which proves that America truly is a melting pot. This helps me to believe that even I, a Religious-Liberal-Chink-With Impulse Control Issues, can do anything.

Sarah Palin is no threat in 2012. She lacks media savvy, and a true in depth (we need to hear more than talking points) understanding of the most pressing issues of our time. She is very exciting and she energizes the right. Can anyone say Pat Buchanan?

When President Bush would give a speech on the challenges we were facing as a country, Conservatives would hail his optimism and his inspirational spirit. When President Obama states that unemployment rates moving from 10.2% to 10% “is a step in the right direction” they say he is out of touch with the reality of the situation. Perhaps, next time when speaking to the American people the President should say, “The economic situation in our country is bleak. We face a hopeless and impossible challenge. Soon we will all DIE!” I only fear that if he spoke in these terms pundits from the right would then say he wasn’t showing leadership.

I used to like Glenn Beck. When he was on headline news I didn’t always agree with him but he had a good understanding of politics and a pragmatic approach to the issues. Today he has become a true caricature of himself, a cartoon character to inspire ratings. Last week he spoke for almost 15 minutes about the White House party crashers and somehow managed to link it to a conspiracy between the Obama Administration and Bravo Television, all while stating more than 6 times that he didn’t believe the conspiracy was true.

Lenny Bruce. Shame on us, shame on our government, shame on the police, and shame on our justice system, what we did to that man is no different than what we did to the Japanese during World War II, suspected communists in the 50’s, homosexuals now, or blacks for centuries. Again and again we destroy what it means to be American, in order to protect America. Who’s next? Can anyone say Islam?

Tuesday, December 1, 2009

CBO: Three-Quarters Of Stimulus Unspent By Ryan Grim ryan@huffingtonpost.com | HuffPost Reporting

Only $100 billion of the $787 billion stimulus package passed nine months ago has actually been spent by the federal government so far, with another $90 billion of stimulus coming in the form of tax reductions, the nonpartisan Congressional Budget Office reported Monday evening. That leaves three quarters of the package -- and its stimulative effects -- yet to come.

Slow as that pace may seem, it's in line with initial CBO estimates.

But much of the spending hasn't had the full impact it could, the report says, because "it appears that stimulus funds substituted for some spending from regular appropriations."

Despite the limitations, the CBO estimates that between 600,000 and 1.6 million people were employed in the third quarter of 2009 who otherwise would not have been. The spending and tax cuts raised the Gross Domestic Product by somewhere between 1.2 and 3.2 percent, it found, and reduced unemployment by 0.3 to 0.9 percent.

In Washington, the stimulus is often discussed as if the entire $787 billion was all spent on the first night -- with some pundits expressing shock and dismay that the economy hasn't already bounced back as a result. That three quarters of the stimulus has yet to be felt undermines their positions.

Shortly after the stimulus was passed, the GOP began declaring it a failure, a conclusion the party has stuck to since - even if some officials take credit for what it's accomplishing when they're back at home

Democrats in Congress have been stung by the criticism and even while pushing for more stimulus spending have worked hard to avoid calling it a stimulus, dubbing it a "jobs" bill instead.

Michael Steel, a spokesman for Minority Leader John Boehner (R-Ohio), told HuffPost Monday night that he's not buying the CBO estimate.

"The White House claimed that if we passed the trillion-dollar 'stimulus' unemployment would stay below 8 percent and jobs would be created 'immediately.' Instead, unemployment is over 10 percent, more than three million more Americans are out of work, and folks are asking 'where are the jobs?'" he wrote in an e-mail.

The White House had been mocked for its flawed reporting of how many jobs the stimulus created - which included jobs in congressional districts that don't actually exist. But the CBO said it used a different model than relying on the word of bureaucrats.

"Estimating the law's overall effects on employment requires a more comprehensive analysis than the recipients' reports provide," the CBO said. "Therefore, looking at the actual amounts spent so far (where identifiable) and estimates of the other effects of ARRA on spending and revenues, CBO has estimated the law's impact on employment and economic output using evidence about how previous similar policies have affected the economy and various mathematical models that represent the workings of the economy. On that basis, CBO estimates that in the third quarter of calendar year 2009, an additional 600,000 to 1.6 million people were employed in the United States."

That could be a tremendous underestimate, as the CBO's thinking doesn't take into account the possibility that the economy might have fallen off a cliff if the stimulus hadn't been passed, with world markets panicking and employers continuing to eliminate jobs at an eye-popping pace.

Similarly, the reason the CBO failed to predict the rise in unemployment that has taken place since February is that the model it uses doesn't take into account the fact that the banking system collapsed.

A courageous call for civility By E.J. Dionne Jr. Monday, November 30, 2009

The most surprising and disappointing aspect of our politics is how little pushback there has been against the vile, extremist rhetoric that has characterized such a large part of the anti-Obama movement.

President Obama's White House has largely ignored those accusing him of "fascism" and "communism," presumably believing that restraint in defense of dignity is no vice.

Republican politicians, worried about future primary fights, have been reluctant to pick a fight with a radical right that seems to be the most energized section of their party. Their "moderation" has consisted of a non-benign neglect of the extremists and of accusing the president merely of "socialism." And so it is that the first genuinely ringing call for moderation has come from a man who is effectively without a party and whose own demeanor and career define temperance.

Jim Leach spent 30 years as a Republican member of Congress who went his own way. If this meant standing almost alone against his caucus, he was content to do so.

But he was never bombastic about it, as befits an extravagantly understated guy. The characteristic Leach look is a comfortable sweater worn under a tweed jacket, in season and out. That's about as fashionable as the persona of old Mr. Chips, the warmhearted and mildly Victorian headmaster who was the hero of James Hilton's 1934 novel.

Leach lost his Iowa seat in the 2006 Democratic tide, but he emerged relieved rather than bitter. He turned to academia, not the lobbying trade favored by so many defeated politicians, and in 2008 engaged in the ultimate act of a maverick (a real one) by becoming a Republican for Obama. The new president in turn appointed Leach chairman of the National Endowment for the Humanities.

It was in this role that Leach offered his critique of extremism in a speech at the National Press Club titled "Bridging Cultures" a few days before Thanksgiving. It deserves far more attention than it ha

"Little is more important for the world's leading democracy in this change-intensive century," Leach argued, "than establishing an ethos of thoughtfulness and decency of expression in the public square.

"If we don't try to understand and respect others, how can we expect them to respect us, our values and our way of life?" But our own political practice belies anything remotely like "civility," a word that Leach has as much a right to use as anyone in public life.

"It is particularly difficult not to be concerned about American public manners and the discordant rhetoric of our politics," he declared. "Words reflect emotion as well as meaning. They clarify -- or cloud -- thought and energize action, sometimes bringing out the better angels in our nature, sometimes lesser instincts." But what are we doing in this great democracy? "Public officials," Leach observed, "are being labeled 'fascist' or 'communist.'

And more bizarrely, significant public figures have toyed with hints of history-blind radicalism -- the notion of 'secession.' " This last is a reference to Texas Gov. Rick Perry's effort to ride to reelection by invoking a concept that we thought had been discredited in 1865.

Leach has no problem with a vigorous debate, but he's right that much of what passes for argument right now is mere calumny.

"There is, after all, a difference between holding a particular tax or spending or health-care view," he said, "and asserting that an American who supports another approach or is a member of a different political party is an advocate of an 'ism' of hate that encompasses gulags and concentration camps. One framework of thought defines rival ideas; the other, enemies." As a result, "citizens of various philosophical persuasions are reflecting increased disrespect for fellow citizens and thus for modern-day democratic governance."

Leach still has a lot of the old moderate Republican in him, and he is critical of a political system that, by creating so many safe one-party seats, has produced strong incentives for politicians "to remain firmly positioned far from the center." He adds: "Institutional polarization is the inevitable result." That's true, too, especially in the GOP.

Leach's speech is the kickoff for a 50-state "civility tour," and my hunch is that this very civil man may have to put up with a lot of incivility along the way. It's strange that a call to consider respecting each other more might become a controversial endeavor. This is precisely why Leach's witness to moderation requires an immoderate dose of courage.

ejdionne@washpost.com