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May 22, 2009

Economist's View - 5 new articles

Sachs: Obama's Military Conundrum

The people who need to hear this advice from Jeff Sachs don't seem to be interested in listening:

Obama's military conundrum, by Jeffrey Sachs, Project Syndicate: American foreign policy has failed in recent years mainly because the US has relied on military force to address problems that demand development assistance and diplomacy. Young men become fighters in places such as Sudan, Somalia, Pakistan and Afghanistan because they lack gainful employment. Extreme ideologies influence people when they can't feed their families, and when lack of access to family planning leads to an unwanted population explosion. President Barack Obama has raised hopes for a new strategy, but so far the forces of continuity in US policy are dominating the forces of change. ...

The policy decisions of recent months offer little ... hope for a fundamental change in US foreign policy direction. While the US has signed an agreement with Iraq to leave by the end of 2011, there is talk in the Pentagon that US "non-combat" troops will remain in the country for years or decades to come. ...

Some opponents of the Iraq war, including me, believe that a fundamental – and deeply misguided – objective of the war from the outset has been to create a long-term military base (or bases) in Iraq, ostensibly to protect oil routes and oil concessions. As the examples of Iran and Saudi Arabia show, however, such a long-term ­presence sooner or later creates an explosive backlash.

The worries are even worse in Afghanistan and Pakistan.

Nato's war with the Taliban in Afghanistan is going badly, so much so that the commanding US ­general was sacked this month. The Taliban is also extending its reach into Pakistan.

Both Afghanistan and the neighbouring provinces of Pakistan are impoverished regions, with vast unemployment, bulging youth populations, prolonged droughts, widespread hunger and pervasive ­economic deprivation. It is easy for the Taliban and al-Qaida to mobilise fighters under such conditions.

The problem is that a US military response is essentially useless under these conditions, and can easily exacerbate the situation rather than resolve it. Among other problems, the US relies heavily on drones and bombers, leading to a high civilian death toll, which is inflaming public attitudes against the US. ...

Obama is doubling down in Afghanistan, by raising the number of US troops... There are also risks that the US will get involved much more heavily in the fighting in Pakistan. ... If so, the results could prove catastrophic, leading to a spreading war in an unstable country of 180 million people.

What is disconcerting, however, is ... the lack of an alternative US strategy. Obama and his top advisers have spoken regularly about the need to address the underlying sources of conflict, including poverty and unemployment. A few billion dollars has been recommended to fund economic aid for Afghanistan and Pakistan. But this remains a small amount compared to military outlays...

Before investing hundreds of billions of dollars more in failing military operations, the Obama administration should rethink its policy... It's high time for a strategy of peace through ... investments in health, education, livelihoods, water and sanitation and irrigation – in today's hotspots, starting with Afghanistan and Pakistan.

Such a strategy cannot simply emerge as a byproduct of US military campaigns. Rather, it will have to be developed ­proactively, with a sense of urgency and in close partnership with the affected countries and the communities within them. A shift in focus to economic development will save a vast number of lives and convert the unthinkably large economic costs of war into economic benefits through development. Obama must act before today's crisis explodes into an even larger disaster.

The Party of Stale Ideas

Bruce Bartlett offers his cure for the Republican Party's problems:

Finding The Next Kemp, by Bruce Bartlett, Forbes: Perhaps the saddest part of attending the funeral for Jack Kemp on May 8 was the realization that he was the last of an era: a politician who really cared about ideas.

At the reception afterward, a few of the old-timers who were with Kemp back in the days when he was creating supply-side economics and bringing the Republican Party back from the brink of extinction got to talking. We all lamented that there just didn't seem to be any politician out there these days that we felt we could get behind.

The reason isn't that there aren't members of Congress who would like to be the next Kemp--one, certainly, is former Kemp staffer Rep. Paul Ryan of Wisconsin. The real problem is the culture of Washington politics, which has changed dramatically since the late 1970s when Kemp was at the pinnacle of his influence.

Back then, liberalism was dominant in a way that most conservatives these days can't imagine. Conservatives didn't even control the Republican Party and the principal organs of conservative thought were small-circulation magazines like National Review and Human Events. The only wide-circulation publications with a conservative bent were the Wall Street Journal and, believe it or not, Reader's Digest.

In those days there was, of course, no Internet, no talk radio and no cable news networks. The three major nightly news broadcasts were very widely viewed and they tended to echo whatever appeared in The New York Times and Washington Post that day. These publications treated even the silliest liberal ideas with deep seriousness and all conservative views were subject to overwhelming skepticism.

It was hard even to get a conservative book published. There were just two small publishers of conservative books, Regnery and Arlington House, and it was extraordinarily difficult to get a major publishing house to touch one even when it clearly had best-seller potential. Respectable editors would rather leave money lying on the table than risk ridicule from their liberal peers by daring to publish a book with a conservative bent.

Congress was solidly in the hands of Democrats and it was very hard for a Republican to even offer an amendment or get a hearing, let alone have a bill seriously considered. The rules and composition of the Senate made it a little easier for conservatives in that body, but in the House of Representatives, where Kemp served, it was extraordinarily difficult to get traction on any conservative initiative.

In this atmosphere, the only chance a conservative had was to develop some kind of alliance with Democrats or have an initiative that was clearly better to offer. On foreign and defense policy, there were plenty of Democrats with whom Republicans could work--conservative Southerners, of which there were still quite a few in those days, and even a few from the North like Sens. Henry M. "Scoop" Jackson of Washington and Daniel Patrick Moynihan of New York. But on economics, getting traction on a conservative initiative was much harder because the Republican and Democrat leadership were pretty united around the idea of expanding the welfare state, or at least doing nothing to actually shrink it.

Anyway, conservatives really had nothing to offer on economic policy. Simply balancing the budget was the only thing they had. But in the inflationary 1970s balancing the budget in the near term wasn't too terribly hard. Because the tax system was not indexed to inflation, every 1% increase in the Consumer Price Index increased federal revenues by about 1.6%. With inflation high and rising, projections of higher federal revenues were also high and rising, making it easy to project budget balance a few years down the road if the growth in government spending just slowed very slightly.

The nature of the Republican Party is that it tends to stick to the same ideas year in and out no matter how unsuccessful they are. The Democrats have the opposite problem--they tend to continually reinvent the wheel even when it is working just fine. But in the 1970s, Republicans faced a crisis that forced them to think outside the box.

The GOP had been decimated in the congressional election of 1974 in the wake of Watergate. Adding insult to injury, liberal Democrats began purging conservative Southerners with whom Republicans often worked from their leadership positions. Then in 1976, Republicans suffered a brutal primary fight between former California Gov. Ronald Reagan and President Gerald Ford, who had never even been elected to his office. Ford had been appointed vice president after the resignation of Spiro Agnew in an ethics scandal, becoming president after the resignation of Richard Nixon because of Watergate.

Reagan, it should be remembered, was much more of a conventional Republican in those days than he was after becoming president in 1981. His major issue in the 1976 campaign was a cut in federal spending by $90 billion, almost a third of the budget, with the states being given responsibility for many federal programs. But Reagan never explained how such a spending cut could be achieved or how the states would be able to administer all of these programs without a massive tax increase.

What this incident really showed is that Reagan wasn't quite ready for prime time; he was still stuck in the old conservative model of trying to repeal the New Deal and the Great Society when there clearly was no significant support for doing do. But his challenge to Ford made it easier for an obscure governor of Georgia named Jimmy Carter to win the White House.

At this point, there was serious talk of the GOP ceasing to exist. It was only because of this that Republicans were at all receptive to Kemp's idea of cutting taxes without trying to cut spending. But, contrary to what many libertarians believe, he wasn't indifferent to the problem of spending. Kemp just thought that if the growth of spending could be restrained to be less than the growth the economy then spending as a share of GDP would fall. He also thought it would be easier to cut spending at a time of prosperity.

Unfortunately, Kemp's idea has now become distilled into the notion that spending doesn't matter at all and that tax cuts are the answer to every problem. So in a way, Republicans are back into the same rut they were in 30 years ago when all they can do is repeat the same old proposals regardless of whether they are appropriate to the circumstances. Back then, balancing the budget was the solution to every problem, today it is tax cuts.

Anyone hoping to emulate Kemp, therefore, needs to start with a genuinely new idea--and more and bigger tax cuts ain't it. That card has been played to the point of diminishing returns, politically. That new idea also has to respond to a genuine problem. But that will require deep thought and analysis, something few members of Congress are capable of these days. They are too busy coming up with sound bites responding to matters of only momentary interest.

One of Kemp's strengths was a willingness to reach out to the smartest people he could find to ask their advice or to hear their ideas and analyses of the problems our nation faced. Too few members of Congress today take advantage of the intellectual resources at their disposal or are willing to take the time to make themselves an expert on some subject before going on television to talk about it.

I would suggest to any politician wanting to be the new Kemp that there are still a few of us who worked with him and would happily lend our time and expertise. But you need to take the initiative by reaching out; we aren't lobbyists who are going to come to you. And be willing to do some reading and research--a one-page memo from your staff with bullet points isn't enough. Deep thinking will be necessary. If a guy like Kemp with a degree in phys ed can get through books like Milton Friedman's Capitalism and Freedom and F.A. Hayek's The Constitution of Liberty, then so can you.

Paul Krugman: Blue Double Cross

How will Obama react to the duplicitous actions of the medical-industrial complex?:

Blue Double Cross, by Paul Krugman, Commentary, NY Times: That didn't take long. Less than two weeks have passed since much of the medical-industrial complex made a big show of working with President Obama on health care reform — and the double-crossing is already well under way. ...

The story so far: on May 11 the White House called a news conference to announce that major players in health care ... had come together to support a national effort to control health care costs.

The fact sheet on the meeting, one has to say, was classic Obama in its message of post-partisanship and, um, hope. ... But just three days later the hospital association insisted that it had not, in fact, promised what the president said it had promised... And the head of the insurance lobby said that the idea was merely to "ramp up" savings, whatever that means.

Meanwhile, the insurance industry is busily lobbying Congress to block one crucial element of health care reform, the public option — that is, offering Americans the right to buy insurance directly from the government as well as from private insurance companies.

And at least some insurers are gearing up for a major smear campaign. ... The Washington Post reported that Blue Cross Blue Shield of North Carolina was preparing to run a series of ads attacking the public option. The planning for this ad campaign must have begun quite some time ago.

The Post has the storyboards for the ads, and they read just like the infamous Harry and Louise ads that helped kill health care reform in 1993. ... "We can do a lot better than a government-run health care system," says ... one of the ads. To which the obvious response is, if that's true, why don't you? Why deny Americans the chance to reject government insurance if it's really that bad?

For none of the reform proposals currently on the table would force people into a government-run insurance plan. At most they would offer Americans the choice of buying into such a plan.

And the goal of the insurers is to deny Americans that choice. They fear that many people would prefer a government plan to dealing with private insurance companies that, in the real world as opposed to the world of their ads, are more bureaucratic than any government agency, routinely deny clients their choice of doctor, and often refuse to pay for care.

Which brings us back to Mr. Obama.

Back during the Democratic primary campaign, Mr. Obama argued that the Clintons had failed in their 1993 attempt to reform health care because they had been insufficiently inclusive. He promised instead to gather all the stakeholders ... around a "big table." And that May 11 event was, of course, intended precisely to show this big-table strategy in action.

But what if interest groups showed up at the big table, then blocked reform? Back then, Mr. Obama assured voters that he would get tough: "If those insurance companies and drug companies start trying to run ads with Harry and Louise, I'll run my own ads as president. I'll get on television and say 'Harry and Louise are lying.' "

The question now is whether he really meant it.

The medical-industrial complex has called the president's bluff. It polished its image by showing up at the big table and promising cooperation, then promptly went back to doing all it can to block real change. The insurers and the drug companies are, in effect, betting that Mr. Obama will be afraid to call them out on their duplicity.

It's up to Mr. Obama to prove them wrong.

"Do Schools Make Inequality Worse?"

Lane Kenworthy:

Do schools make inequality worse?, by Lane Kenworthy: "Far from leaning against economic inequality, U.S. schools make it worse." This sentiment, from a recent Clive Crook op-ed, expresses a view that's commonplace on both the left and the right, and among both proponents and opponents of school reform.

It's wrong. Americans do leave the schooling system more unequal in cognitive and noncognitive skills than when they enter it. Yet that inequality is less — probably much less — than it would be in the absence of schools. Schools don't increase inequality; they just don't do enough to overcome the inequality produced throughout childhood by differences in families, neighborhoods, peers, and other influences.

How do we know that? First, children are vastly unequal in ability when they enter the school system at age five or six. This is due partly to genetics and partly to environmental differences.

Second, we have evidence from the natural experiment that is summer vacation. During those three months out of school, the cognitive skills of children in lower socioeconomic status (SES) households tend to stall or actually regress. Kids in high-SES households fare much better during the summer, as they're more likely to spend it engaged in stimulating activities. In his book Intelligence and How to Get It, cognitive psychologist Richard Nisbett concludes that "much, if not most, of the gap in academic achievement between lower- and higher-SES children, in fact, is due to the greater summer slump for lower-SES children" (p. 40).

Without schools this pattern would be magnified, and the gap in cognitive and noncognitive abilities at age 18 almost certainly would be much greater than it now is.

This by no means implies that our educational system is doing fine. It could and should do much better at helping children from disadvantaged environments. But saying it currently makes things worse suggests the situation is hopeless. Instead of promoting reform, that undercuts it.

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