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January 31, 2010

The Real SOTU, RDPs, Go-Forward Strategies and Your Country

This week saw the most important State of the Union (SOTU) speech in the lifetimes of many of us. Why? Because, as we've been arguing, we're at the cusp point of deep structural changes that we can choose to deal with constructively or cooperatively and put ourselves on a new path or that we can continue to allow partisan bickering to dominate by supporting lizardbrain appeals to our fears and desperate search for easy answers. Unfortunately the President went into the speech suffering from a Reality Distortion Field (a description of Steve Jobs effect on AAPLphiles intended to be dismissive that fails on delivered results) that have wrapped his efforts, the policies that have been pursued and implemented and no one has bothered to try and decode. In fact from the heights of last year's euphorillusions I've watched successive waves of RDF's overtake first my conservative friends, then my liberal friends and now the independents.

Those multiple fields are built on shock, fear, distortion by partisans, sound byte presentations by the punditocracy and sheer dismay at the magnitude of the challenges, the difficulties of solving them and the raw ugliness of the political process. Welcome to the real world. In some ways these times remind me of the Oxford Debating Union's anti-war resolutions in the late 30's where the peace now and at any cost sorts found themselves a short while later on the beaches at Dunkerque or in Spitfires over Britain or sinking ships or burning tanks in the Mediterranean a few short years later. The general sense of things, defining a baseline if you will, is pretty done by this recent Daily Show episode with Doris Kearns Goodwin.

And the Great Debate we're having is what is the form of government that best suits us? We spent blood and treasure settling the ideological wars of the 20thC. Now we need to decide how to govern a market economy - how to balance commercial interests with the requirements of guardianship. Neither functions well in the long-run without the other and we still haven't figured that out or accepted it. Nor have we figured out how to get there. That will be THE challenge of THIS century!

"The dogmas of the quiet past, are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew, and act anew. We must disenthrall our selves, and then we shall save our country. Fellow-citizens, we cannot escape history. We of this Congress and this administration, will be remembered in spite of ourselves. No personal significance, or insignificance, can spare one or another of us. The fiery trial through which we pass, will light us down, in honor or dishonor, to the latest generation."

Annual Message to Congress (1 December 1862) – A. Lincoln

 


Let's Let the Real SOTU Stand Up

Now we've been facing an immense barrage of very difficult problems, the biggest agenda (all of it negative instead of positive opportunities) that we've faced in a long time. Below in the readings (intended to be a short collection but instead the opposite) we provide the SOTU and Friday's discussion with the Republicans, background context on the last two decade's political devolution that's our biggest obstacle, a short survey of the real policy results of the last year, a survey of the pundits reactions, another follow-on of post-game and not much more thoughtful survey and some going forward context setting on the real issue. That being can we govern ourselves - can we reinvent the machinery of government and governance and will our leadership AND citizens rise to these challenges? Or will we, like those long ago privileged undergraduates have to pay a terrible price to the Piper?

On the whole, given the problems and the environment there are two sets of criteria we'd love to have seen used to do the post-game analysis. The first was on the Speech itself, on style and substance, both of which are important. Schematically what that might look like is (Tone, Content, Structure, Theme) <==> (Policy, Persuasion, Enactment, Implementation). On the whole we found the speech to be eloquent and elegant. Eloquent in tone and attitude and Elegant in how carefully linked together the arguments were in both emotional and substantive terms. Where it failed was in setting out any over-arching organizing principles for the public to hang onto and in taking a few key policy areas and presenting their core arguments. Grading on a curve it might be a B+/A-, measured absolutely against game-changing standards and the difficulties of the time we'd grade it a C. On the whole and allowing for the scope and circumstances we'll go with a B/B+.

What we would like to have heard, somewhere in the media or punditocracy, is a summary of key points, the arguments behind them, the context of those arguments, the subtext linkages to issues and players and what it might setup as next steps on the path forward. What we got was a lot of tone, attitude, talking points, biased interpretations (depending on your source) from people who largely have no experience in doing things, or analyzing them, don't know the issues and aren't recognizing the depth and barriers of the problems. In our small way we've spent some small amount of time parsing and summarzing the speech and trying to wrap a bit more subtance around it to give you a foundation for evaluation (please applaud all you want). It's not a be-all, end-all but a start so if you consider this important take it as the Cliff Notes for when you listen to the actual speech or read the text.

The Economy as Example, Exemplar and Central Issue

There's an enormous amount of accepted wisdom and narrative that's built up over the last year including the consensus that nothing's been done, that what's been done is liberal-leftist and too much was tackled. Well if you've been here/hear before we've been running the same architecture on recommended policy actions since we started blogging to evaluate things based on work dating back 6-9 years and reflecting the best synthesis of the best thinkers over the last thirty. By and large the policies implemented are smack in the middle of what we'd recommend and have received widespread recognition from competent analysts (depending on how you feel about Kissinger, Zandi, et.al. and etc.). Norman Orenstein of the American Enterprise Institute is one such expert from a very conservative think tank and his inventory of the last year's amazing legislative successes is excerpted below in the readings. We suggest you at least skim it. This year started with worse problems than we've faced in decades and saw more and more constructive legislation under worse pressures than we've seen since FDR's first term. Moreover much of that legislation actually worked as promised and intended. Let's consider the example of the multi-dimentional economic and financial policies.

Another factor, and this is a twofold failure, but the President has been so busy saving the country that he's let the opposition define him in pejorative terms and not explained himself on each major issues well enough. But that looks to be changing, in both the SOTU and, even more interestingly, in the follow-on meetings with the Republican leadership on Friday. If you listen to anything listen to that session and the follow-on Q&A. All of the questions were of the "have you quit beating your wife" sort and the President called them on. Heralding an entirely new tone where adamant opposition disguised as fact-based disagreement will no longer pass; and long over-due IOHO!

Consider the accompanying graphic. He inherited the worst economy we've seen in eight decades and a financial system still on the verge of collapse that if allowed to fail would have driven Unemployment to at least 20% if not the 30% of the GD. To save the Republic from the fecklessness of the financial community it was necessary to save the system AND pass a stimulus package. A package that the Rips tell us didn't work, despite Friday's 5.7% GDP number, and is creating untold future risks with rising deficits. As the President pointed out in the SOTU budgeting sets next year's spending; in other words the budget of record for 2009 was the last Bush budget. When Obama took office we'd already lost almost 2 million jobs in Dec08 thru Feb09 of the eventual total of 7 million. Which is estimated to be two million better than it would have been without the stimulus - a package btw composed 1/3 of tax cuts, 1/3 of direct transfers to state and local governments and 1/3 of direct spending, mostly on infrastructure. Almost all of which the Republicans say the support but in fact adamantly opposed and have since lizard-labeled as a failure. Worse their posture on deficits and debt is both disingenuous and irresponsible. Of the $9T debt we're now facing $8T was inherited from two tax cuts, a Medicare drug subsidy that was unfunded and two large-scale multi-$T wars plus automatic stabilization programs. When you "adjust" the deficits by origin (Bush vs. Obama) according to Daniel Mitchell of the Cato Institute (a rabidly conservative free-market think tank). The adjusted deficit charts are his as well. If you go thru some of the other major legislation like Healthcare or Foreign Policy you'll find that, again, they are largely centrist, pragmatic, workable and honest attempt to wrestle with difficult and complex problems. Instead of simple soundbyte talking points, unlike every solution that the Rips claim to have put forward. In fact on every major line of initiative where the Republicans put forward workable ideas you'll find them incorporated into the legislation! Despite all that they've voted down very one on straight party-line votes. That's a willingness to work together, compromise and act in the best interests of the country?

Changing Messages and Tone: Re-positioning and Re-selling

If there's two major things we've faulted the President on repeatedly it's on being to elegant and eloquent and not down to earth enough. Now in a political climate where the loyal opposition wasn't so intent on winning every fight by demonizing these efforts for their own partisan advantage that wouldn't matter as much. Not only haven't we gotten bipartisanship we've gotten the exact opposite - taking a trend that was created by Next Gingrich deliberately in '93, has been escalating exponentially since then and has now metastasized into a threat to the well-being of the Republic. The President has several alternatives - the one we naturally gravitate toward is to meet them head on and start the battle of the pejorations (pejorative, perjurous and distortionate) sound-bytes. The President is a wiser, more controlled and disciplined person than we are. What he appears to be starting to do, having laid almost all of the foundations for major legislation as well as saving the economy, is no longer get away with it. Nor is he apparently going to focus on managing the sausage-making machinery as much. Instead when the Opposition presents distortions he's going to call them on, make them take their stand AND he, we very much hope, is going to go the public on key initiatives and boil it down to simpler terms.

In our conceptual diagram as the Rips have retreated away from governance, admittedly their best short-term political strategy but not necessarily the best long-term strategy for many reasons, the President had moved down to more of a pure governance position, focused on substance. We're arguing here that he's moving back into selling mode and re-positioning himself and his policies. Now he could do the Clinton thing and back off on the big items but that would leave them festering and metastasizing. Or could swing back to pure politics and mirror-image the Rips. Instead he's found a third way forward. Time will tell whether a) that's what he's doing, b) whether it was a conscious decision that will result in sustained and focused efforts and c) whether or not it works. But you will find this sort of structural analysis in NO other place we've been able to find, reflecting as it does a synthesis of policy, implementation, politics and social psychology.

Wrapping It Up Simply: Crisis, Policy and Political Dysfunctions

Let's try and boil all this down to one simple conceptual chart to try and render our analysis down to the core arguments. It's been one of our toughest years in many decades with the natural result that people were scared and, when magic answers didn't appears while the "powers and thrones" appeared to be getting the best of it they became justifiably angry. That anger was stoked by partisan political posturing and now threatens the viability of constructive policy making. The two bad alternatives were make the fight worse or give up on the necessary agenda - which is what all the pundits expected. Instead we appear to be staying the course (subliminal and painful puns intended), continue to try and mend a still fragile economy and then lay the groundwork for renewing the structural foundations of our economy and society while coping with equally deep structural changes in the world around us (in which we are still the indispensable leader no matter what they're saying in other capitals). The hinge point of success will be whether or not the President is able to establish a workable climate of opinion and whether or not the American people wake up in time before they cut off their own noses to make their lizardbrains happier.

Promises of the Future

The sad fact is that in fact it doesn't have to be this way. At the end of the readings section you'll find two video clips from this last weeks Davos sessions. Ironically despite the rise of everybody else these two sessions were focused on US policy and the legislative agenda. Think about that for a minute. Yes, Asia is rising but it'll be the middle of the century at best before they reach semi-equal weight and at the end of the century the US will still be a major world power, its principal supporter and architect and one of the leaders. Instead of the only one. And if we can keep the wheels on the wagon it'll be a better world for all of us.

But the really important thing is the session of US legislators which includes both Republicans and Democrats, albeit ones with positions and track records as moderates. Those are the kind of folks you should be sending to Congress. At the end of the day whether we end up with a brave new world or its opposite is utterly dependent on the outcomes of that decision.

The SOTU and the Follow-On

Pres. Obama State of the Union Address Pres. Obama delivered his first State of the Union address to a join session of Congress. The President outlined his priorities for the economy with a focus on jobs.

Obama rumbles with House GOP President Barack Obama on Friday accused Republicans of portraying health care reform as a "Bolshevik plot" and telling their constituents that he’s "doing all kinds of crazy stuff that's going to destroy America." Speaking to House Republicans at their annual policy retreat here, Obama said that over-the-top GOP attacks on him and his agenda have made it virtually impossible for Republicans to address the nation’s problems in a bipartisan way. “What happens is that you guys don’t have a lot of room to negotiate with me,” Obama said. "The fact of the matter is, many of you, if you voted with the administration on something, are politically vulnerable with your own base, with your own party because what you've been telling your constituents is, ‘This guy's doing all kinds of crazy stuff that's going to destroy America.' '' Obama’s comments came in the midst of an extraordinary back-and-forth with Republican House members — a scene straight out of the House of Commons that played out live on cable TV. Republicans invited Obama to appear at their annual conference; the president accepted — and then surprised them by asking that cameras and reporters be allowed into the room. Republicans immediately agreed to the request, but they may be regretting it now. Again and again, Obama turned the Republicans questions against them — accusing them of obstructing legislation for political purposes and offering solutions that won’t work. "I've read your legislation. I take a look at this stuff. And the good ideas we take," Obama said. "It can't be all or nothing, one way or the other … If we put together a stimulus package in which a third of it is tax cuts that normally you guys would support, and support for states and the unemployed and helping people stay on COBRA, that certainly your governors would support … and maybe there are some things in there, with respect to infrastructure, that you don't like … If there's uniform opposition because the Republican caucus doesn't get 100 percent or 80 percent of what you want, then it's going to be difficult to get a deal done, because that's not how democracy works."

Better Solutions (PDF) - A compilation of GOP policy alternatives presented to President Barack Obama by Republican Leader John Boehner (R-OH) on January 29, 2010.

President Speaks at GOP Retreat Pres. Obama today spoke to House Republicans at their two-day retreat in Baltimore, MD. He repeated his State of the Union address plea for bipartisanship on health care and other economic issues. GOP leaders will comment later, following shortly after a question-and-answer session with the President.

Background Context: Political Devolution

'Language: A Key Mechanism of Control' Since winning control of Congress, Rep. Newt Gingrich (R.-Ga.) has constantly complained about "destructive" and "negative" coverage from the "liberal elite media." For example, when asked on Nightline (11/29/94) about his reference to the Clintons as "counter-culture McGoverniks," he first insisted that he had been misquoted--"I used the term McGovernite, not McGovernik--it was one of those things that the Times picked up and therefore it's now history" (actually, at least four different newspapers--including the New York Times--quoted Gingrich in their November 10 editions as calling the Clintons "counter-culture McGoverniks")--and then blamed the media for selective reporting: I didn't say that to attack the president, I was asked an analytic question. But because I am now the next speaker, I am learning that everything I say has to be worded carefully and thought through at a level that I've never experienced before in my life. In fact, the new speaker of the House--who once described his goal as "reshaping the entire nation through the news media" (New York Times, 12/14/94)--has given a great deal of thought to the media and how to manipulate them. One Newtonian axiom is "fights make news" (Boston Globe, 11/20/94). Another skill he has taught to Republican candidates through his political organization, GOPAC, is how to create a "shield issue" to deflect criticism:

Opposition Strategy 101 In any case, I think it is actually wise--as a general rule, and specifically to healthcare--for the GOP to vote against reform. Mind you, this has nothing to do with my opinions about the bill or its significance; I'm speaking here solely about political calculus. To demonstrate my point, consider the opposition party's situation as a simple game with two possibilities for the quality of legislation the majority passes--a generally "popular" bill or a generally "unpopular" one--and two options for how minority party members can vote on those bills, either voting with the majority or against. Presumably, legislators have some notion of how popular the legislation will be, but their information is incomplete. I don't suggest that this game and my hypothetical payouts apply at all times and everywhere. But I do think as a general rule, or at least the default strategy, minority parties should vote unanimously in opposition to majorities. Why? Because if you vote along with them, you get little credit and are used for political cover when things go wrong, making it a break-even/lose situation. And if you vote against you usually pay little to no price if things go well, but stand to reap huge windfalls if things go awry, making that a break-even/win situation. Applying all of this specifically to the healthcare legislation, there really is no reason for any Republican to vote for it. There are a lot of specific reasons why this is so: the GOP coalition is older and whiter and thus will benefit less; conservative voters reflexively oppose expansions of government of any type; etc. But even if the ideological and demographic reasons are held aside, it makes sense to vote "nay."

The party of No  Republicans are riding a wave of resentment. Only 37% of Americans think the country is on the right track, against 58% who think it is on the wrong one. In November 2008 all the buzz in American politics was concentrated in the campaign to elect Mr Obama. Now it has passed to the tea-party movement, a sprawling grassroots campaign against big government and fiscal irresponsibility. Democrats at first dismissed the tea-partiers either as cranks (because a few placard-waving lunatics attend each big protest) or as “Astroturf” (because they assumed the protests were fake, and being organised by the Republican Party). They were wrong on both counts. The temptation for Republicans is to keep saying “no” to everything the Democrats propose. That would please the tea-partiers and leave Democrats with no successes to boast of before the mid-term elections in November. Of course, Republican leaders deny that they intend to do anything of the sort. “If [President Obama] wants to meet us in the middle of the political spectrum, we’ll be there to help him,” said Mitch McConnell, the top Republican in the Senate, on January 24th. But when it comes to specifics, he hardly sounds bipartisan. He would love to work with Democrats on health reform, he says, so long as they tear up the current bills and knife their trial-lawyer friends. He favours a bipartisan commission to balance the budget, so long as it looks only at ways to cut spending, not to raise taxes. Democrats will not agree to either proposal, and he knows it. The only important and controversial policy of Mr Obama’s for which Republican support is assured is his troop surge in Afghanistan. The Republican Party’s strategists reckon that relentless opposition will pay electoral dividends. It is easy to caricature Democratic ideas and then take credit for stopping them. Also, when Republicans vote “no” in unison, every Democratic vote becomes crucial, and every Democratic senator can demand to be bribed. Ben Nelson of Nebraska, for example, voted for Obamacare only after being promised that other states would pay Nebraska’s extra Medicaid costs for ever. Such skulduggery repels voters. Forcing Mr Obama to bow to his party’s grubbiest elements makes him look sordid, and therefore helps Republicans. But this strategy is as risky as it is irresponsible. A Republican Party purged of moderates will struggle to attract moderate voters. And an opposition that never compromises dooms the nation to gridlock. Right now, nearly half of Americans are angry at both parties, according to a CNN poll. Only one in ten is angry only at Democrats. Republicans should bear that in mind.

Obama's Biggest Mistake? I think Obama's real problem is that he is fundamentally a moderate--what we in Washington call a "goo-goo," a good government person, a pragmatist who deals with problems as they arise without seeing them as part of pattern of failure and without any preconceived idea of what should be done about them based on ideology or political philosophy. There's nothing wrong with that, but it places a special burden on those who see the world this way to explain themselves and what they are doing clearly and unambiguously to both their supporters and their enemies, and to be willing to do so over and over again. Obama obviously has the rhetorical skill to do what has to be done. But he seems oddly reluctant to use it. He seems to feel that once he has explained himself there is no need to keep doing so. In this respect, he should take a lesson from Reagan, a former actor who had the ability to deliver a line the hundredth time with the same empathy and enthusiasm as he did the first time. He also understood that ideas had to be repeated many times before they penetrated peoples' consciousness, which is the cornerstone of advertising and modern public relations. It's not too late for Obama. His polls will turn up when the economy does, just as Reagan's did. But he has already lost a lot of time to define himself and his philosophy, which has emboldened his enemies. If he hopes to avoid being a one-termer he needs to sharpen his focus, be more willing to fight for what he believes and find a narrative that ties it all together.

What Killed Obama's Approval Numbers? Unfortunately, I'm not going to be able to give you any one incredibly satisfying answer here. The most basic reason for the decline in Obama's numbers, almost certainly, is that people's expectations for what he ought to have been able to accomplish on the economy have accelerated faster than his ability to do so. But beyond that, things are a little murky. The periods that represent the steepest declines in Obama's approval ratings are only loosely related to the periods that provided the most disappointing economic news. Meanwhile, while I'm sure that the health care bill hasn't helped Obama any, the trajectory of that debate isn't a great fit for the trajectory of his approval numbers. Finally, factors like the nomination of Sonia Sotomayor and the seating of Al Franken may not have been terribly impactful unto themselves, but may have given rise to unhelpful narratives for Obama and the Democrats that contributed to their problems. One takeaway here, I suppose, is that the deterioration of Barack Obama's political fortunes is not quite so easy to diagnose, even in retrospect. It sort of crept up on us -- until suddenly it became obvious with Scott Brown's victory in Massachusetts last week. There's a role for Monday morning quarterbacking, and it's certainly fun to think about how the Democrats have become so unraveled and whether there's anything they might have done to prevent it. But many things that seem obvious now certainly weren't that way at the time.

Real Policy Results

The best Congress you'll ever hate There seems to be little to endear citizens to their legislature or to the president trying to influence it. It's too bad, because even with the wrench thrown in by Republican Scott Brown's election in Massachusetts, this Congress is on a path to become one of the most productive since the Great Society 89th Congress in 1965-66, and Obama already has the most legislative success of any modern president -- and that includes Ronald Reagan and Lyndon Johnson. The deep dysfunction of our politics may have produced public disdain, but it has also delivered record accomplishment. The productivity began with the stimulus package, which was far more than an injection of $787 billion in government spending to jump-start the ailing economy. More than one-third of it -- $288 billion -- came in the form of tax cuts, making it one of the largest tax cuts in history, with sizable credits for energy conservation and renewable-energy production as well as home-buying and college tuition. The stimulus also promised $19 billion for the critical policy arena of health-information technology, and more than $1 billion to advance research on the effectiveness of health-care treatments. Any Congress that passed all these items separately would be considered enormously productive. Instead, this Congress did it in one bill. Lawmakers then added to their record by expanding children's health insurance and providing stiff oversight of the TARP funds allocated by the previous Congress. Other accomplishments included a law to allow the FDA to regulate tobacco, the largest land conservation law in nearly two decades, a credit card holders' bill of rights, defense procurement reform among other initiatives. The House, of course, did much more, including approving a historic cap-and-trade bill and sweeping financial regulatory changes. And both chambers passed their versions of a health-care overhaul. Financial regulation is working its way through the Senate, and even in this political environment it is on track for enactment in the first half of this year. It is likely that the package of job-creation programs the president showcased on Wednesday, most of which got through the House last year, will be signed into law early on as well. Most of this has been accomplished without any support from Republicans in either the House or the Senate -- an especially striking fact, since many of the initiatives of the New Deal and the Great Society, including Social Security and Medicare, attracted significant backing from the minority Republicans.

Party of Irresponsibility Last week the opposition party wrote a startling new entry in the Annals of Obstruction: Republicans were so determined to deny President Obama an achievement that a group of them voted against their own proposal. A month ago, a bipartisan group of senators asked Obama for his "strong support" for a commission to solve the national debt crisis. "We don't recommend this special process lightly," they wrote, calling it "the best way to reach a lasting bipartisan solution that will put our nation back on a sound long-term fiscal path." One of the signatories, Sen. Mike Crapo (R-Idaho), issued a news release trumpeting his sponsorship of the legislation. "Now is the time," he proclaimed. On second thought, maybe not. Obama heeded the letter writers' advice and backed the commission. But when the proposal came to a vote on the Senate floor Tuesday, four of the Republican signers -- Crapo, Kay Bailey Hutchison (Tex.), Jim Inhofe (Okla.) and Robert Bennett (Utah) -- voted no. So did three other Republican senators who had also been co-sponsors of the legislation -- 2008 presidential nominee John McCain (Ariz.), Sam Brownback (Kan.) and John Ensign (Nev.). An eighth co-sponsor, Sen. Lisa Murkowski (R-Alaska), didn't vote. Thanks to these defections, the commission legislation fell seven votes short -- and with it went any hope of tackling the debt crisis anytime soon. Even by recent standards, this may be a new level of legislative fecklessness.

Surviving to Fight Another Day In colonial America, suspected witches were dumped in vats of water until they drowned or confessed, in which case they were hanged. Today, we have congressional hearings. On Wednesday, the accused witch was Treasury Secretary Timothy Geithner, formerly president of the Federal Reserve Bank of New York. He survived, but may yet face the political equivalent of a hanging. The scene was a House oversight committee hearing called to inquire into the terms of federal aid to insurer-cum-casino American International Group in 2008. The basic narrative was conveyed by Edolphus Towns, the New York Democrat who heads the panel: "The taxpayers were propping up the hollow shell of AIG by stuffing it with money and the rest of Wall Street came by and looted the corpse."  More precisely, committee Republicans and Democrats, and a lot of other Americans, are somewhere between baffled and outraged that two months after their initial $85-billion transfusion of AIG, the Fed and Treasury used taxpayer money to pay off big banks that had placed bets with AIG (at one hundred cents on the dollar, instead of forcing them to settle for less.) Mr. Geithner's defense boiled down to this: "There were no better alternatives."

That’s How Budgeting Works One of the most memorable parts of the State of the Union was when the President had to remind certain jeering members of congress that taking budgetary steps this fiscal year that don’t take effect until next fiscal year is “how budgeting works.” It looks to me like Ed Lazaer could use a tutorial in this point:

Since 2008, the ratio of federal spending-to-GDP has risen by about 14%. From 2008 to 2009 we saw the greatest annual increase in spending in the last 30 years. In the name of stimulating job growth, the share of federal spending is now 24% of the economy, up from 21% in the last year of the Bush administration.

As Peter Orszag observes, the Obama administration wasn’t in power when most of the relevant decisions were made:

On January 7, 2009, the Congressional Budget Office issued its Economic and Budget Outlook for Fiscal Years 2009-2019. In that document, CBO projected that government spending would rise from 20.9 percent of GDP in fiscal year 2008 to 24.9 percent of GDP in fiscal year 2009. (Just for the record, that CBO projection was issued 2 weeks before the current Administration took office.)

This week, CBO issued its updated Economic and Budget Outlook for Fiscal Years 2010-2020. That document shows that government spending in fiscal year 2009 turned out to be 24.7 percent—roughly the same as what CBO had initially projected.

That’s how budgeting works! But what’s particularly weird is that Ed Lazaer was chairman of the Council of Economic Advisors from 2006 up until Barack Obama’s inauguration in 2009. He knows perfectly well that the Fiscal Year 2009 Budget Proposal was written by the Bush administration. You can even download the 2009 Economic Report of the President (PDF) and see that it has Lazaer’s signature on it and everything. It’s right there on page 11. The Cato Institute’s Daniel Mitchell did a good piece on this flim-flam back in December. You have to ask yourself what it says about the tea party crowd that they didn’t seem even slightly bothered by federal spending or large deficits until Obama took office.

No Such Thing as ‘Simple’ Health Reform Although the current reform bills undoubtedly are burdened with many tangential items, one can easily underestimate how quickly any kind of health reform will become complex. To illustrate, in her “The Risk of Catastrophic Victory,” Peggy Noonan, the doyenne of American punditry who presumes to know what the American people need and want and what presidents should do about it, opines as follows:

In a way Mr. Obama made the same mistake President Bush did on immigration, producing a big, mammoth, comprehensive bill when the public mood was for small, discrete steps in what might reasonably seem the right direction.

The public in 2009 would have been happy to see a simple bill that mandated insurance companies offer coverage without respect to previous medical conditions. The administration could have had that — and the victory of it — last winter.

In the eyes of people unfamiliar with economics, the step she (like others before her) proposes may seem small.She seems completely unaware that, to be implemented, that step has to be accompanied by (1) a mandate to be insured or, at the least, very powerful financial incentives to be insured. And if government imposes such a mandate on citizens, it must be ready (2) to subsidize low-income families in the acquisition of the mandated insurance. Already we have a bill requiring many pages. In this connection, it is illuminating to note what one of the sharpest critics of the current health reform bills proposes for the health insurance market, Senator Tom Coburn, a Republican from Oklahoma. In his comprehensive summary of an alternative health bill he proposed we find the following stipulation on page 5: The European systems Mr. Coburn has in mind are the Swiss and Dutch health systems, because we are referred to a paper on these systems. It should be noted that the Dutch and especially the Swiss systems are subject to heavy government regulation — far heavier than is foreseen in the Senate health reform bill passed in late December. For example, health insurance is mandatory in both countries. Both countries prescribe purely community-rated insurance premiums which, unlike the Senate bill, cannot take the age of the insured into account. And both countries extend sizable public subsidies toward the purchase of private health insurance. In short, as Senator Coburn’s bill illustrates, “simply” to pass a bill that imposes community rating on health insurers, as Ms. Noonan suggests, is anything but simple.

China Leading Global Race to Make Clean Energy China vaulted past competitors in Denmark, Germany, Spain and the United States last year to become the world’s largest maker of wind turbines, and is poised to expand even further this year. China has also leapfrogged the West in the last two years to emerge as the world’s largest manufacturer of solar panels. And the country is pushing equally hard to build nuclear reactors and the most efficient types of coal power plants. These efforts to dominate renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China. “Most of the energy equipment will carry a brass plate, ‘Made in China,’ ” said K. K. Chan, the chief executive of Nature Elements Capital, a private equity fund in Beijing that focuses on renewable energy. President Obama, in his State of the Union speech last week, sounded an alarm that the United States was falling behind other countries, especially China, on energy. “I do not accept a future where the jobs and industries of tomorrow take root beyond our borders — and I know you don’t either,” he told Congress.

New Security Vision in State of the Union  One key thing President Barack Obama’s State of the Union address will be remembered for is the much sharper focus it placed on dealing with domestic challenges. In order to remain a leader in the world, America needs to be stronger at home. Keeping the important national security issues high on the list of America’s public policy debates may be challenging in the coming year—but national security is not likely to fade away. Progressives should remain vigilant to debate the full range of national security questions, even as they engage more deeply in domestic policy debates. As I mentioned in my initial reaction to the speech at Democracy Arsenal, President Obama spent only about 15 percent of his 2010 State of the Union address discussing traditional national security issues. This is down significantly from the nearly 50 percent that his predecessor President George W. Bush spent on these subjects in his 2008 State of the Union. But Obama’s speech was no retreat to isolationism. In fact, much of the rationale President Obama presented for his domestic program—economy, education, and energy investments—was presented in the context of making sure America remains strong abroad. Still, national security remains an important issue despite the tall agenda at home. President Obama, multi-tasker-in-chief, proved to be an effective and engaged commander-in-chief in year one. While dealing with all of the troubles left behind by the Bush administration, President Obama outlined an ambitious national security agenda in more than eight major speeches. He also spent more time overseas and visited more countries in his first year than any other president in the country's history.

Leadins to the State of the Union

Obama will reset his agenda in State of the Union speech When President Obama appears before Congress and the nation on Wednesday night to deliver his State of the Union speech, his goals will be to reset his agenda, assure his demoralized party that he has not given up on key priorities and try to convince a skeptical public that he can still change Washington. The White House provided new details late Tuesday about a proposed three-year spending freeze aimed at controlling the deficit while protecting key programs that Democrats in Congress view as sacrosanct, including education. Obama will announce what administration officials described as the largest single-year request for federal funding for elementary and secondary schools, making education one of the few areas to grow in an otherwise austere budget. The president will call for a 6.2 percent increase in education spending over last year, including up to $4 billion as part of an effort to revamp the George W. Bush-era programs that expanded testing to measure student progress, aides to the president said Tuesday. Senior aides said Obama will link the increase in education funding to his calls for school reform. They said his proposals fit into a broader effort by the White House to focus scarce resources on the nation's long-term economic health. After the speech, Obama plans to take his newly energized populist message on the road in the coming days, pledging to voters in Florida and New Hampshire -- both 2010 battleground states -- that he will fight for them. Democrats and Obama have yet to agree on how to tackle the year ahead, and a big part of the president's challenge Wednesday will be to begin to clear away the doubt, despair and division that have settled over his party after losing a Senate seat in Massachusetts last week.

What Obama Shouldn't Learn from Steve Jobs  What Obama needs tonight, therefore, is a re-branding. He needs to create a new set of expectations, one which he can more easily fulfill. This is different from lowering expectations, or meeting them in a half-assed way. He can't promise an iPad, for instance, and roll out a Kindle. And it's also different from completely giving up on his original message. Successful re-brandings achieve the right alchemy of the virtues of the original brand and the changes that are needed to adapt to the new marketplace. It is not easy; for every Dunkin' Donuts (a company which successfully leveraged its reputation for convenient and unpretentious service and managed to make itself hip again), there are five Blockbuster Videos, companies which flail hopelessly and give up on any hope of differentiation as the world evolves around them. The extent to which I'll look favorably on Obama's State of the Union address tonight is the extent to which it surprises me. When you have great brand, like Apple does now or as Obama once did, some well-choreographed boilerplate usually does the trick. But Obama needs to think differently about the country -- and motivate the country to think differently about him.

The State of the Union speech Obama would give in a more honest world My fellow Americans, the state of our union is . . . well, quite wretched at the moment. As president, I owe you that honesty and candor. It would be bad enough that we're stuck in an endless war against vicious terrorists or that we've just been through a financial crisis that wiped out a quarter of our wealth and left one in six adults without a job or underemployed, to say nothing of the fact that our planet is on the brink of an environmental calamity. What's truly depressing, however, is that as a country we seem to have completely lost the will and the capacity to collectively confront these challenges. Our union has been torn asunder by a clash of ideologies and special interests and brigades of power-hungry partisans that has resulted in a paralyzing political stalemate. In response, our citizens have become angry, cynical, distrustful and dispirited. Economists have long recognized that what distinguishes successful and wealthy countries from those that are poor and failing is not their natural endowments or even their level of human capital, but rather the quality of their institutions. By institutions, economists refer not only to governmental, business, educational and civic entities, but also the formal rules and informal protocols by which decisions are made, disputes are resolved, commerce is conducted and people interact. It was the quality of its institutions that led our country to become the richest, most powerful and most admired on the planet. Now the deterioration of those institutions threatens our standing in the world. Hardly a day passes now that doesn't bring further evidence of this institutional deterioration.

State of the Union Reactions

'We were sent here to serve our citizens' President Obama delivered an urgent plea for unity on Wednesday night during his first State of the Union address, seeking to recapture the energy that propelled him into office and to reverse his party's trajectory after a series of recent setbacks. A year after entering the White House with a broad mandate, Obama reframed his agenda around a single, central mission: continuing the nation's delicate economic recovery. He focused on jobs, casting himself as the advocate of average citizens, and acknowledged that his administration had "some political setbacks this year, and some of them were deserved." Obama did not use the occasion to build momentum for far-reaching new policies, instead calling for Congress to complete the tasks already at hand, including "another look" at health-care reform, funding more education programs, imposing stiffer regulations on Wall Street and pursuing a more ambitious energy policy. He reiterated his demand for a three-year freeze on discretionary government spending, threatening to use his veto to achieve it, and walked through a series of steps his administration hopes to take to aid middle-class families. Proposing initiatives that contrasted the needs of Wall Street and average citizens -- such as taking $30 billion repaid by big financial firms and turning it over to community banks -- Obama compared, in a populist flourish, the earlier bank bailout to a root canal. But much of the speech was familiar, and more modest in scope than his addresses over the past year. His most powerful words came at the end as he demanded that Democrats stand firm in defense of their policies despite a recent defeat in a Senate election in Massachusetts.

Taking on Washington President Obama used his first State of the Union address to reset his relationship with the American middle class. But it was the politics of Washington, rather than any specific policy, that the president spoke about with the most passion after a year when the change he pledged proved elusive. His goal was to connect the disparate elements of his legislative agenda, which have come across to much of America as overly ambitious and chaotic in the hands of a recalcitrant Congress, into a coherent agenda focused on the economic plight of the middle class. He has attempted to clarify his ambitions before, but never at such a politically treacherous moment for his administration and party. Obama resurrected the language of his campaign to criticize Washington's partisan dysfunction. His emphasis on the partisanship that he said defines Washington rather than his setbacks struck a populist tone for what could be a volatile midterm election year for his party. Standing before the packed House chamber, Obama warned lawmakers, many of whom will face election in the fall, that "we face more than a deficit of dollars right now. We face a deficit of trust." He said the public's anger was rooted in "deep and corrosive doubts about how Washington works," and he called for less partisanship and more action to "give people the government they deserve."

Hard year, harder tone One year had taken him from a self-professed unifier to a historically divisive president; from the man selected to solve the country's problems to the person often disparaged as their cause. He squinted against the lights and stared hard at the audience for his first State of the Union address, looking a little grayer, a little older than when he assessed the country in the same venue last February. A circus of cameras and power brokers stirred around him, yet he stood alone at a single microphone, quieting the crowd with a series of somber nods. It had been, Obama told the audience, "one of the most difficult years in our history" -- and it had been one of his most difficult years, too. The president had plenty of reasons to be frustrated Wednesday night, and he channeled all of them during his 71 minutes at the podium. The poker player so often lauded for his evenness was instead pleading and persistent, frank and angry. His words as much as his body language suggested a shift, that this was the time not only to address the populist aggravation but to make it his own. He pressed his forefinger against his thumb and made jabs at the air to accentuate his points. He told the crowd that he "hated" the bank bailout, that he wanted the government to match the public's "decency," that he was tired of "the numbing weight of our politics." "How long should we wait?" he asked. "How long should America put its future on hold?" It was the 487th time Obama delivered public remarks as president, but this one felt unique. When Obama took office, his advisers vowed to take advantage of his gifts as an orator, so in his first year he spoke in 30 states and 21 countries, at factories, fundraisers and funerals. But none of his speeches, aides said, had been so meticulously prepared as the one he delivered Wednesday night.

Rough, tough and undaunted Americans watch the State of the Union speech largely to check out the state of the president. And the state of Barack Obama appears to be rough, tough and undaunted, though it would be going too far to say it's now "No more Mr. Nice Guy." The president came on strong, breathing fire before the assembled members of the House and Senate. "We don't quit, I don't quit," Obama said of Americans and himself during the stirring final moments of the speech, which took 71 minutes to deliver from the House chamber -- and which was carried live on broadcast and news networks. "I never suggested that change would be easy or that I could do it alone," said Obama, which was as close as he came to apologizing. Indeed, it seemed unusual for him to bring up his own campaign slogan -- "Change we can believe in" -- after a year in office when many people had disregarded it. "He was very assertive tonight," said Bob Schieffer of CBS News. On ABC, George Stephanopoulos found both speech and president to be "unapologetic." Obama did concede that the year ended with goals unmet and some mistakes made by his administration, but he refused to whimper or express regret. There was humility but no remorse in Obama's words or the way in which he delivered them. He hailed and commended American values and seemed also to personify some of them -- directness, candor, neighborliness. At moments he was less the man in the White House than the guy next door. Once or twice during the speech, the pool director cut to a visually thrilling overhead shot of the entire chamber -- but the shot wasn't on the screen for very long. Maybe it was thought that the stunning visual threatened to distract the audience from the speech and the man giving it -- but really, they could have had a live shot of purple people-eaters watching from Mars and not upstaged Obama. As a persuasive political speaker, he's got no serious competition.

A conciliator -- willing to fight It was also obvious that he realizes his administration lost two critical battles last year: to define his stimulus plan and his health-care proposal. Polls show that Republicans' negative claims have stuck with voters, while the administration's arguments for the merits of both plans have not. Obama made the case for his ideas again, but he also challenged Republicans to do more than criticize. "We cannot wage a perpetual campaign where the only goal is to see who can get the most embarrassing headlines about their opponent -- a belief that if you lose, I win," Obama said. "Neither party should delay or obstruct every single bill just because they can." And Obama underscored the Democrats' determination to highlight the GOP's role in creating Washington's sour atmosphere. "Just saying no to everything may be good short-term politics," he said, "but it's not leadership." Barack Obama had once hoped to be a conciliatory president who understood his philosophical adversaries. He is still that man, and much of his speech described ideas, especially in education and energy, that could well win support across ideological lines.But it was clear that the Obama who addressed the nation on Wednesday also understood that he confronts a Republican Party that sees unflinching opposition as blazing a path to victory. And he offered himself as a president ready to do battle. "We don't quit," he said. "I don't quit."

Meyerson: Jumbled message, perfect pitch Thematically, President Obama’s State of the Union address Wednesday night was a bit of a jumbled pudding, with left, right and centrist ideas all packed together. Tonally, however, it was a masterpiece. Obama made clear he understood the gravity of the nation’s problems, took a fair share of the responsibility for the failures of the past year, and, having established himself as the most sober man in the room, proceeded to chastise much of the rest of our political and governmental elite for backing off the efforts to solve our problems and, by so doing, eroding Americans’ faith in their government.He confronted the conservative members of the Supreme Court, seated directly in front of him, for granting corporations more control over our political process than they’ve ever enjoyed. Associate Justice Samuel Alito could be seen shaking his head in disagreement, but when a justice signs on to a decision so corrosive of democracy itself, he should be prepared for some push back.Obama cautioned a Republican Party united in opposition to his every move that if it persisted in subjecting every issue to a 60-vote senatorial threshold, then it, too, had to assume the responsibility for governing. And without specifying what, exactly, he wants in and what he wants out of health-care reform legislation, Obama made clear to the most craven members of his own party -- Sens. Evan Bayh (Ind.), Ben Nelson (Neb.), Mary Landrieu (La.), the whole spineless bunch -- that they still have large majorities in both houses of Congress, and that, “people expect us to solve some problems, not run for the hills.” He became the tribune of our collective exasperation.

  • Cohen: Obama plays grownup It was all so commonsensical. It was all so mature. For those moments, Obama seemed the only adult in the room, the one talking for all the American people, pleading not for this bill or that program but for decorum and civility. This is what a president should do.

Robinson: Pundits were wrong The conventional wisdom was wrong, as usual. Some in the punditocracy expected President Obama to tack toward the center, others expected him to run to the bosom of the Democratic Party’s liberal base. He did neither. By the end of his State of the Union address, when he summed up the whole speech in three words -- “I don’t quit” -- you had to take him at his word.The president’s message was simple: He’s not going to zig or zag to boost his poll numbers. He knows the financial bailout was unpopular, but it was necessary. He knows many people didn’t like the stimulus bill, but it was necessary. He knows his own party won’t cheer a three-year spending freeze, but he sees it as the right thing to do. He knows health-care reform ran into a political “buzzsaw,” but he demands that Congress push ahead. There were no fall-off-your-chair surprises in Obama’s speech, but many people might have been surprised by the style in which he delivered it. Obama didn’t sound like a president buffeted and beleaguered by the political fates. He sounded determined, patient, forceful, good-humored, at times even mischievous. He looked relaxed and in control. For the first few minutes, the applause was strictly partisan -- Democrats rising to clap, Republicans sitting on their hands. Toward the end, Republicans were often springing to their feet, too. Maybe they lost themselves in the moment.Or maybe the Republicans -- and the Democrats, too -- realized that Obama was speaking over their heads to a nation that is fed up with “Washington” and “government” and “partisanship.” For the first time in months, it seemed to me, Obama reconnected with the language and themes that got him elected. I’m for change, he was telling the assembled members of Congress. What about you?

  • A Jolt of Common Sense The ending was chilling – and largely applause-free, because it went beyond the easy political pandering. Obama’s call against cynicism was risky, because it shamed many of the people in the room, Republican and Democrat. Every now and then the fog of nonsense-politics in Washington lifts. In the first State of the Union speech of the new decade, such a thing happened more than once. A minor triumph, perhaps, but a triumph nonetheless after a troubled first year.

State of the Union: Post-Analysis

A New Grasp of Complexities in Washington, and of Blame Mr. Obama did not appear to change many minds with his address. In about two dozen interviews after the speech, people who last month told a New York Times/CBS News pollster that they supported the president’s handling of the economy and health care continued to do so, while those who said they disapproved were still doubtful that he would make much progress. But, according to those interviewed, Mr. Obama succeeded in making Congress and the vague bureaucratic entity known as Washington at least an equal partner in the blame for failing to reform the health care system or stanch a bleeding economy. And he found sympathy for the magnitude of his challenges. “He has expectations that maybe no other president has had before,” Ms. Haas said. “He’s bound to be disappointed, as is the American public. But it’s not all his fault, either.” The president’s proposals for directing $30 billion in credit toward small businesses won him some praise, as did his proposals to build a generation of nuclear power plants. But what seemed to resonate most were his stern words to Congress. “He was right to scold,” said Kathy Steiner, a lawyer in White Plains who voted for Mr. Obama. “He has not done one thing in which he has not been open to compromise.” “He was echoing a lot of peoples’ frustration,” she said. “He certainly echoes my frustration. I’m really sick of the whole thing. They all need to step up to the plate and do what’s right, and worry about the next election at the next election.” But Ms. Steiner, 52, added that she blamed the American people as well as Congress. “If we believe that Congress is the obstacle at this point, we have to send that message, that we’re not interested in hearing them bicker,” she said. “We’re interested in finding a solution. Despite our dire straits, we need to say, we know this is hard, but take a step in the right direction. We can’t let our frustration and anger prevent us from moving forward.”

Obama's SOTU: Clintonian, In a Good Way  Perhaps it is the low expectations established by what has been an exceedingly rough couple of weeks for Democrats, but I was pleasantly surprised by Barack Obama's State of the Union Address last night, which managed at once to recall why the majority of the electorate voted for him while at the same time demonstrating an awareness of the difficult situation in which the President now finds himself. Nevertheless, subjective evaluations of Presidential speeches are notoriously useless. So let's instead attempt something a bit more rigorous, which is a word frequency analysis of the terms that President Obama used last night. What did President Obama focus his attention upon and how does this compare to his predecessors? To investigate, we'll compare the President's speech to the State of the Union addresses delivered by each president since John F. Kennedy in 1962 in advance of their respective midterm elections. We'll also look at the address that Obama delivered -- not technically a State of the Union -- to the Congress in February, 2009. Indeed, I think Obama at least potentially succeeded in achieving the goal that I set out for him, which was to re-brand himself in a way that reminded voters of the better moments of his campaign while at the same time displaying a sensitivity to the challenges that both he and the country now face. It was just a speech, however, and most State of the Unions have had a fleeting impact, at best. And were I evaluating the speech on policy grounds, I would evaluate it more skeptically. Nevertheless, it was a strong speech that ought to lift Democratic morale in the near-term. And in the medium-term, it reminds us that the Republicans' recent momentum may not be the irresistible force that it seems. Their steadfast opposition to any and all policies -- whether popular or not -- carries its share of downside risk with such a rhetorically skilled President at the helm.

Fact Check: Searching for Some Light Amid the Heat When President Obama squared off with House Republicans in a question-and-answer session on Friday, perhaps no issue was more contentious than health care. Among Mr. Obama’s boldest assertions was that Democrats had put forward a mostly centrist plan and that Republicans attacked it as “some Bolshevik plot.” Generally speaking, the president’s assessment was accurate. The Democrats’ health care bill would preserve, and broadly expand, the existing system of private, employer-sponsored health insurance, while also offering subsidies to help moderate-income Americans buy private coverage through new government-regulated markets. Republicans, however, have incessantly criticized the plan as a “government takeover.” Last summer, some rank-and-file Republicans falsely asserted that the Democrats’ bill would create “death panels” to limit medical care for the elderly. And Mr. Obama accurately noted that many experts say the legislation stakes out middle ground. Some health policy issues raised during Friday’s session could be fairly debated. But independent experts have analyzed the major health care proposals in Congress, and their findings indicate Mr. Obama had the facts on his side in an exchange with Representative Tom Price, Republican of Georgia, who said Republicans had put forward proposals that could provide universal coverage “without raising taxes by a penny.” “If you say we can offer coverage for all Americans and it won’t cost a penny, that’s just not true,” Mr. Obama said. “You can’t structure a bill where suddenly 30 million people have coverage, and it costs nothing.” The main House Republican health care proposal, which the Republican leader, Representative John A. Boehner of Ohio, offered as a substitute for the Democrats’ bill, would have extended coverage to about 3 million people by 2019, while leaving about 52 million uninsured, according to the nonpartisan Congressional Budget Office. The House Democrats’ bill, by contrast, would extend health benefits to roughly 36 million people over the same time period, leaving about 21 million uninsured, the budget office said. The cost of coverage provisions in the House Democrats’ bill was about $1.05 trillion over 10 years, according to the budget office, while the cost of those provisions in the Republicans’ bill was $61 billion.

D.C. Bickering Leaves Little Hope for Change  It's becoming increasingly clear that one of the results of the economic meltdown has been a parallel meltdown in the public's confidence that their bickering, partisan leaders in Washington can come together to deal with it, or with much of anything. When Americans were asked in a Wall Street Journal/NBC News poll this week to describe their view of the federal government, a whopping 70% agreed the government is either unhealthy or in need of large reform. That's up from 43% who felt that way just after the election of President George W. Bush. Worse yet, there is a real possibility—despite Mr. Obama's pleas Wednesday night for bipartisanship, his subtle suggestions that Republicans will share the blame if things turn out badly, or his offer to meet Republican leaders regularly—that this year won't bring a big change in the situation. Indeed, it's at least possible that the dysfunction will grow. Certainly Republicans' initial reaction to Mr. Obama's speech didn't suggest they see change coming: "It was a little like a lecture last night," said Rep. Eric Cantor, the second-ranking Republican in the House, who added that he interpreted the president's words as a "doubling down" on his agenda rather than a move toward the GOP. In any case, the message Americans are sending "is a big one, and the message is we hate what's going on in Washington," says Peter Hart, the veteran Democratic pollster who conducts the Journal/NBC News survey with Republican Bill McInturff. In fact, Mr. Hart thinks that's how most American interpreted the outcome of the recent Massachusetts special Senate election, in which voters took the late Ted Kennedy's seat away from Democrats and handed it to Scott Brown, a fresh Republican face. In the new poll, Americans around the country were asked what message that vote sent, and half said they saw it as a message to the capital city. "To the degree they could send a message out of Massachusetts," Mr. Hart notes, "it wasn't a message to Obama. It was a message about what's going on in Washington."

Hard slog for SOTU proposals White House aides had promised that President Barack Obama’s State of the Union address wouldn’t be the typical laundry list of policy proposals. But in the end, it was replete with briefly argued policy points designed to please various constituencies. Some of what Obama proposed is likely to encounter little resistance. Other ideas, such as energy legislation, were in trouble before his speech and not in much better shape after it. And most of his proposals fall into the middle, facing a long, hard slog. As Obama helpfully noted Wednesday night, demanding a new fee on banks, a spending freeze or earmark reform is easier said than done. “I never suggested ... that I could do it alone. Democracy in a nation of 300 million people can be noisy and messy and complicated,” he noted. It’s not surprising Obama is being skittish about setting firm timelines, since that didn’t work so well for health care, which is languishing after having blown unceremoniously through several deadlines the president imposed. Obama did urge the Senate to make the jobs bill its “first order of business this year.” Here’s a look at some of what Obama proposed, what’s likely to fly and which measures seem DOA, based on interviews with advocates and congressional aides tracking the issues.

Time to play defense Message to the president: Watch both flanks. Obama should certainly cover his right flank given the flak thrown his way since he settled into the Oval Office. The Republicans' campaign has been perpetual, their search for chances to trip him up, endless. Sowing division is the least of their worries. Where they are concerned, if saying no to everything makes Obama look bad, then it's a job well done. The reason is simple: Republicans don't want comity; they want the White House. And the way to reach it is by going around, over or through Obama. The president's State of the Union speech showed recognition of that reality. Still, his visit to the House Republicans' annual retreat in Baltimore Friday was a step toward meeting them halfway, and it was good politics. His mistake, however, will come if he believes his right flank is the only side in need of protection. There's grumbling in Obama's base. The anger and disappointment are surfacing on liberal blogs, in progressive journals and on some op-ed pages.

America the Ungovernable? The voter anger that's led Obama to retool his rhetoric even as he shrinks his policy aims won't dissipate in the foreseeable future. Instead, the likeliest scenario is that anti-incumbent fervor becomes the default attitude of an electorate whose economic prospects have dimmed. This is not only because of the Great Recession, though families are obviously suffering with unemployment high and credit tight. The scarier truth of American politics is that even after steady economic growth resumes, more and more Americans will find themselves struggling, especially when compared with the ever-rising tide in which they've been taught to believe. What these trends portend is lasting voter frustration, as it dawns on a widening swath of Americans that the perquisites of middle class life, and the prospects of upward mobility for their children, may increasingly elude them. Importantly, these strains won't change in the two years before the next election, or in the two years after that, or the in two after that, unless policies are introduced that go radically (and controversially) beyond the boundaries of current debate in the United States. What will be missing is a common sense yet ambitious synthesis of the best of liberal and conservative thinking, policies that promote economic growth as well as social justice, funded on a scale equal to the magnitude of the challenge. Because such policies require the kind of ambition that voters now paradoxically seem to be punishing, they'll be seen as riskier than timid bromides. If this scenario holds, the dilemma for America is that neither major party will have a political strategy -- that is, a strategy for acquiring power - that includes solving America's biggest problems. It's hard to imagine America enduring such drift for long without losing its economic standing and self-confidence. Yet given the partisan stasis that is now poised to intensify in Washington, it may be that only a new third force can prod the American system toward real, as opposed to rhetorical, answers.

The Perot Option There is a specter haunting America: the specter of a saner, updated version of Ross Perot. He is lurking out there, ready to ride the free-floating anger and distrust of Washington. He is out there now in one of his homes or private jets, getting madder by the day. He is large of ego, full of money and cranky in mien. When he enters the arena, he’ll say that Washingtonians, all of them, are a bunch of failures. Over the past five years, Washington has tried to reform Social Security, immigration, health care and energy policy. All of these efforts have either failed or are close to failure — thousands of people working millions of hours and in all likelihood producing nothing. He’ll point out that Washingtonians, all of them, breed selfishness. Republicans refuse to accept tax increases. Democrats reject spending cuts. They’ve put the country on a highway to a fiscal crisis, and there are no exit ramps. If I were one of those fellows advising Barack Obama, I would tell him that you can either get run over by that saner Ross Perot or you can be the saner Ross Perot. You made a good start in the State of the Union address, I would tell him. In that speech, you began to reclaim the mantle of the permanent outsider. First, you distanced yourself from the Democratic orthodoxy. You embraced some traditional Democratic policies, but also an eclectic grab bag of other policies that play well with independents: a spending freeze that excluded defense, nuclear power, offshore drilling, the elimination of a capital gains tax on small business, a fiscal commission, free trade deals and earmark reform. Second, you distanced yourself from the old debates. You sidestepped the whole big-government-versus-small-government question. Instead of doing the liberal-people-versus-the-powerful shtick, you emphasized targeted tax cuts, deficit reduction and community bank subsidies. Third, you distanced yourself from Washington morality. At times the speech was like a vice principal’s lecture to an unruly middle school classroom. You scolded Democrats and Republicans about excessive partisanship, pettiness and insider-dealing. You cast yourself as the sole coolheaded man in Gomorrah. In short, you made it clear that you will not be going down with the Congressional Titanic. You took a few steps toward recapturing your image as the last thoughtful reformer. Now you have to embrace that role with a vengeance. There aren’t going to be any big new policy initiatives this year anyway. You might as well cross the country on a Perot-like tour of consciousness-raising, complete with charts and everything.

Re-visiting the Great Debate: Government vs. Market

Selling Short a Humanistic Economist The implication that his economics was uncaring might have disturbed Adam Smith, for he was hardly the man that many now think him to be. While he believed that markets could channel self-interest into efficient aggregate outcomes, he argued that this was no excuse for selfishness: “When the happiness or misery of others depends in any respect upon our conduct, we dare not, as self-love might suggest to us, prefer the interest of one to that of many.” That quotation is not from “The Wealth of Nations,” Smith’s best-known work, but from “The Theory of Moral Sentiments,” his lesser-known opus. A healthy society, Smith believed, requires trust, so that bankers lend. It requires care for the poor. It requires sympathy: the book’s first words extol the feelings in every person that “interest him in the fortune of others.” It requires prudence: simplicity, honesty, thrift, the deferral of gratification, industry, a refusal to risk fortune and tranquillity “in quest of new enterprises and adventures.” And it requires regulation, transparency and other mechanisms of fair play. “In Smith’s vision, greed is socially beneficial only when properly harnessed and channeled,” Alan S. Blinder, a Princeton economist and former vice chairman of the Federal Reserve Board, wrote recently in The Wall Street Journal. “When these conditions fail to hold,” he added, “greed is not good.” But “Moral Sentiments” does more than just balance our understanding of Smith. It is also a thorough analysis of money and the human character. If “The Wealth of Nations” was Smith the economist describing the workings of the market, “Moral Sentiments” is Smith the social psychologist describing how humans actually employ that market. In it Smith serves as a kind of economic Tocqueville, offering sharp insights into the behavior behind the present economic crisis.

Things Fall Apart?I was reading Marlowe’s Soldiers the other day, by Alan Shepard, evading the mysteries of the business cycle in favor of Elizabethan war stories, when this passage, from Geoffrey Cates’ The Defense of Militarie Profession, of 1579, caught my eye. (Elizabethan spelling retained):

There must bee therefore an other state and profession of men, whose power and prudence must comprehend, the maintainence and defence, not only of the Seate of Justice, but also of the Cowe and Plowe, of the Bed and Cradle, yea of the Alter and the sovereigne state: which resteth in the profession neither of the Priest nor Lawyer, nor the occupation of the Housbandmen, Artisans nor Merchants: but lieth in the prowesse and value of them that professe Armes.

Not bad, I thought. Four centuries later, we assign ultimate responsibility for the web of trust that underpins the social order to democratically-elected leaders of constitutional governments, not to soldiers. Otherwise, the sentiment today probably is pretty much the same as it was in the time of Kit Marlowe, William Shakespeare and the Spanish Armada. We want capable leaders who are in touch with interests larger than our own selfish ends, leaders who are far-sighted and steady, cunning and ruthless in pursuit of their goals. A guardian sensibility is the province of political parties and organized religions; kings and war-lords; legislatures and courts; armed forces and police; government ministries and their bureaucracies; union councils and deans; regulators, watchdogs and critics of all sorts, including the press. (A fascination with the contradictions of the guardian life is, I think, what the story of government agent Jack Bauer, of the Fox television series 24, is all about.) A commercial sensibility, according to Jacobs, governs most everyone else, those engaged in trade and the production of goods, services and knowledge. Two very different casts of mind are required to make a smoothly functioning society, one of them disciplined, generous and aloof; the other collaborative, open and honest. Back in October 2008, when the current crisis broke, EP provided a lengthier gloss on Jacobs’ ideas.

"Yes We Can?" US President and Nobel Peace Laureate Barack Obama awoke high expectations with his slogan "Yes, we can!" After one year of presidency, it can be seen where President Obama has introduced political innovation and where he has not. To what extent has the impact of the financial and economic crisis been curbed in the US? Speakers: Susan M. Collins, Riz Khan, Sir Martin Sorrell, Christine Maier, Kenneth Roth, Ulrike Lunacek

The US Legislative Agenda: A Global Perspective The Obama Administration is relying on the US Congress to deliver an ambitious agenda focusing on financial regulation, healthcare, energy and employment.What are the global implications of implementing the 2010 legislative agenda? Speakers: Brian Baird, Susan M. Collins, Barney Frank, Lindsey O. Graham, Edward J. Markey, Michael Oreskes

Posted by dblwyo at 06:09 PM | | Comments (0)

January 26, 2010

Time For a Gut Check: Populist Fantasies vs. Real-World Realities

Let's shift gears just a little bit and tell our story slightly differently. Instead of complex and abstract graphics we'll let the political cartoonists tell most of it, if not quite all :). Think of this as a preamble to the the upcoming state of the Union and show and tell. We won't even load up our usual load of readings, though there are a few (one we think particularly important - David Brooks' on the misuses of populist appeals and the deliberate creation and manipulation of divisiveness. Otherwise known as selling to the lizardbrain, as we've been calling it for a while now).

We'll set this up by proving a hint - there are two head fakes here, using Randy Pausch's definition of a head fake as something you learn as the real consequence, not the ostensible purpose of an activity.

Can You Here US Now?

The MA. election is being read, and we agreed earlier, as a signal to just how feed up the American people are with business as usual in Washington. Actually we've argued that several other things are going on as well. Fear, the ugliness of the sausage-making that's become so visible, a little local politics and a lot of economic pain.

But when you look around at these four cartoons it certainly captures a part of the zeitgeist, doesn't it? But as you look at each one of them, after you get your chuckle in - and they are admittedly pretty funny - ask yourself how true and accurate they are? Is that the real message and is what's shown what's actually going on?


 

Windmill Tilting and Reality Checks

We'll also admit that the flood of funny and rather bitingly satirical cartoons in this last week or so is another reason behind our taking this tack. After all after we've built up this huge inventory the chances that we'd find an opportunity to use them all in the normal course of things was pretty small and they're simply too good to let go by :)! So here's round two - which is in the same vein but a bit more on policy specifics and for which we'd challenge you to ask the same questions.

In this case was tackling Healthcare Reform really titling at windmills? Will Financial reform be worse? What about timing and importance. When, for example, at any time in the last year up until just about now were the markets in good enough shape and the recovery, such as it is or might be, far enough along to make financial reform tolerable, safe and timely? On the other side of the coin if MA. is the death knell of healthcare reform as so many are arguing do the voters have any clue as to what this might mean for their futures?

Shoveling What? Death of Hope

Taking yet another pass (we told you there were a lot of 'em) we found ourselves looking at the one in the upper left hand corner pretty carefully. Just exactly what's being shoveled there, anyway? With a bit of thought we were reminded of the old Greek myths about the "Labors of Hercules", one of which was cleaning up the Augean Stables where some of the gods cowherds were kept. Now you know what needs to be sholved out of stables, right? Sounds like a pretty good description to us of what's been tackled over the last year, right down to the smell.

By-the-way, how do you feel? What's been worked on you thought was a waste of time? What's not going as well as you expected? Who do you think is to blame for all that? What do you think should have been done better?

Is This The End?

And what about the consquences? Does this finish off Barry's presidency? What about that agenda, anyway? Bearing in mind that his general approval rating is still around 53% - sounding a death knell sounds as if it might be just a tad premature.

On the other hand Horton did indeed hear a NO - repeating ourselves there's been no major piece of legilstation that the "loyal" opposition hasn't fought tooth and toenail to stop. Remember the Rip political strategist who told 'em that there was no single important thing than stopping Healthcare Reform because it could the President's Waterloo.

Hard to see that as being public spirited or in the best interests of the country, at least in our view.

Well We. night the President will have his chance to speak to all the various concerns raised by these cartoons which seem to be a widely shared consensus.

Agenda to Date vs. Head Fakes

Remember we promised to raise and look at two fundamental questions - the head fakes if you will implicitly bured in all those cartoons. Did you guess what they were? Before we take a shot we'll indlge ourselves and re-visit the chart inventorying all the major policy initiatives that have beeen dealt with this last year and their status, again.

Here's a kind of master, macro-level inventory and status assessment in the three major policy domains: Foreign Affairs, the Economy and Domestic Policy. For each major line item we rank the status based on Importance - how vital it is to address this problem, the Threat - how big the danger to the system is if this problem isn't addressed in either the short- or long-runs, Urgency - is this a short-term, immediate or longer term issue? And the status - that is, measured against what needs to be done, how far along are we in any case.

There's a curious correction between the things that got worked on thruout the year, but especially earlier in the year as measured by the the Threat and Urgency components. For whatever reason those things that were really big threats and urgent ones tended to get worked first.

Have you figured out the head fakes yet?

One is this - what responsibility for supporting change on the part of the public is there? And what would be reasonable to expect? It looks to us as if every single one of those cartoons implies the whole ugly sausage-making mess was something inflicted on voters and they had no role or responsibility in supporting change. Or in asking for what's right. In other words they're getting what they asked for in reality, not their fantasies about magic fixes to all the problems of the last three decades that somebody was just supposed to wave away.

The second is what was reasonable to expect in the timeframe in any case? For example just how long should we have expected it to take to start creating jobs after a recovery began? This becomes especially important when you realize that another $200-300B in stimulus is required to make sure the economy doesn't fall back into the abyss. Something that was extremely unlikely in the first place given all the shrill populist labels and accusations that have been flying around recently.

So what're your answers - this is the take-home quiz part.

READINGS

Some Obama goals left unmet They met for the first time inside the White House, three anonymous Americans who would be transformed into icons of President Obama's vision. There was a South Carolina teenager who had next to nothing, a Kansas mayor whose town had lost everything and a Miami banker who had $60 million to give away. They shared little in common except their status as honored guests of the president on Feb. 24, 2009, the night Obama planned to outline the goals of his administration in his first speech to Congress.  One year later, as Obama prepares to address Congress again in a State of the Union speech Wednesday night, the stories of his three guests remain instructive, even if their lessons have changed. The past year has challenged Obama's favored themes of togetherness, resiliency and hope. The economy remains unstable. Partisan contempt has intensified. Polls indicate that Americans are increasingly pessimistic. Obama instead has experienced a trial in patience, frustration and fatigue -- and so have his three guests.

Obama’s Credibility Gap Who is Barack Obama? Americans are still looking for the answer, and if they don’t get it soon — or if they don’t like the answer — the president’s current political problems will look like a walk in the park.Mr. Obama may be personally very appealing, but he has positioned himself all over the political map: the anti-Iraq war candidate who escalated the war in Afghanistan; the opponent of health insurance mandates who made a mandate to buy insurance the centerpiece of his plan; the president who stocked his administration with Wall Street insiders and went to the mat for the banks and big corporations, but who is now trying to present himself as a born-again populist.Mr. Obama is in danger of being perceived as someone whose rhetoric, however skillful, cannot always be trusted. He is creating a credibility gap for himself, and if it widens much more he won’t be able to close it.Mr. Obama’s campaign mantra was “change” and most of his supporters took that to mean that he would change the way business was done in Washington and that he would reverse the disastrous economic policies that favored mega-corporations and the very wealthy at the expense of the middle class and the poor. Voters watching the straight-arrow candidate delivering that speech, in the midst of the worst economic crisis since the Depression, would not logically have thought that an obsessive focus on health insurance would trump job creation as the top domestic priority of an Obama administration.But that’s what happened.

Fighting words Bringing in David Plouffe, the architect of Obama's brilliant election campaign, is a smart move that will surely help the president deliver his message more effectively. But part of that message has to be a clear sense of Obama's bottom line. It's not enough to use variations of the word "fight" more than 20 times in relatively brief remarks, as he did Friday in Ohio. At some point, he needs to -- metaphorically, of course -- actually slug somebody.I'm not talking about perceptions here. The point isn't that Obama should be seen slapping opponents and obstructionists around as a way of demonstrating his presidential alpha-maleness. It's that if Obama's agenda is as vital and necessary as he says it is, the White House should make its actions match up with its words.Obama's promise to change how Washington works was a major reason he got elected. He has tried to stick to this pledge religiously -- heedless of the fact that hereabouts, no good deed goes unpunished. On the stimulus, for example, Obama included a huge package of tax cuts as a gesture to Republicans, who turned up their noses and still voted no. Obama's bipartisan tango can't work if one party won't dance.Despite this outreach, Obama's approval ratings have sagged. I'm convinced that this is because results count more than process. It's true that voters are fed up with business as usual in Washington, but not for aesthetic reasons.It doesn't matter whether Obama speaks in a loud voice. What's important is that he speak in a clear voice, a definitive voice. When he draws a line in the sand -- about health care, jobs, energy, whatever -- he should do everything in his power to defend that line, even if it means bruised feelings and ruffled feathers.In the end, voters will respect Obama's accomplishments, not his aspirations. They will reward his passion, not his polish. It's fine for the president to tell Americans that he's fighting on their behalf, as long as he remembers that what they really want is not so much for him to fight but to win.

The Populist Addiction Politics, some believe, is the organization of hatreds. The people who try to divide society on the basis of ethnicity we call racists. The people who try to divide it on the basis of religion we call sectarians. The people who try to divide it on the basis of social class we call either populists or elitists.These two attitudes — populism and elitism — seem different, but they’re really mirror images of one another. They both assume a country fundamentally divided. They both describe politics as a class struggle between the enlightened and the corrupt, the pure and the betrayers. It’s easy to see why politicians would be drawn to the populist pose.So it’s easy to see the seductiveness of populism. Nonetheless, it nearly always fails. The history of populism, going back to William Jennings Bryan, is generally a history of defeat.That’s because voters aren’t as stupid as the populists imagine. Voters are capable of holding two ideas in their heads at one time: First, that the rich and the powerful do rig the game in their own favor; and second, that simply bashing the rich and the powerful will still not solve the country’s problems.Political populists never get that second point. They can’t seem to grasp that a politics based on punishing the elites won’t produce a better-educated work force, more investment, more innovation or any of the other things required for progress and growth.In fact, this country was built by anti-populists. It was built by people like Alexander Hamilton and Abraham Lincoln who rejected the idea that the national economy is fundamentally divided along class lines. They rejected the zero-sum mentality that is at the heart of populism, the belief that economics is a struggle over finite spoils. Instead, they believed in a united national economy — one interlocking system of labor, trade and investment.

Obama to Seek Spending Freeze to Trim Deficits President Obama will call for a three-year freeze in spending on many domestic programs, and for increases no greater than inflation after that, an initiative intended to signal his seriousness about cutting the budget deficit, administration officials said Monday.The freeze would cover the agencies and programs for which Congress allocates specific budgets each year, including air traffic control, farm subsidies, education, nutrition and national parks.But it would exempt security-related budgets for the Pentagon, foreign aid, the Veterans Administration and homeland security, as well as the entitlement programs that make up the biggest and fastest-growing part of the federal budget: Medicare, Medicaid and Social Security.The payoff in budget savings would be small relative to the deficit: The estimated $250 billion in savings over 10 years would be less than 3 percent of the roughly $9 trillion in additional deficits the government is expected to accumulate over that time.The initiative holds political risks as well as potential benefits. Because Mr. Obama plans to exempt military spending while leaving many popular domestic programs vulnerable, his move is certain to further anger liberals in his party and senior Democrats in Congress, who are already upset by the possible collapse of health care legislation and the troop buildup in Afghanistan, among other things.

Is it Time for a 3rd Party? Whenever people ask me what my party affiliation is, I respond “Pragmatic Independent.”The question usually comes up in response to something I wrote. I’ve been contacted by Republicans, who want me to join or advise their committees. I usually tell them that I find much of their ideology intellectually indefensible, and their marriage to the religious right offensive.When I get the same question from Democrats, my response is they seem to not understand how the economy works, are too spineless to get anything done, and are way too politically correct for my tastes.I agree with Krugman that Obama has been wimpy, when he should have been relentlessly beating the opposition over the head. Reagan never let the public forget who had driven the country into a ditch, nor did he let Congress forget he was in charge. Imagine his response if the other party rejected his plan for a bi-partisan panel.There are notable exceptions — the two NY Senators when I was growing up were statesmen — Jacob Javitz and Daniel Moynihan (a Dem and a Repub). They seem to be part of ancient history. Today, I have to search far and wide to find congress critters who are uncorrupted, understand how business works, and have the balls to call it like it is. Alan Grayson of Florida is the closest thing I have seen to what a modern Congressman should be like.We have a Congress that is a Parliament of Whores of who sold themselves to the highest corporate bidder. Why do I want to have any affiliation with either group? And I am not sure if a 3rd party can break the death grip on America the parties have.

Posted by dblwyo at 03:21 PM | | Comments (0)

January 23, 2010

Back to Carter's Gym: Can We Have an Adult Conversation?

After the Ma. election everyone seems to be running around like a chicken with their heads cut off - the sky is falling, the sky is falling. It may well be but we'd like to introduce two elements of reality. One which we tried to cover - perhaps too gently and politely in the last post - and the other by reviewing some of the last year's policy and impacts, especially economic policy. It makes an interesting contrast to look back a year at what the pundits had to say then and what they are saying now as well as what the President said in and around the Inaugural and what he's saying now. Then the pundits said it was a time of faith, hope and renewal. Now they're claiming hubris, arrogance and error. What the President said this last week in Ohio is what he said at his Inaugural, in Grant Park last Fall and at his nomination in the summer of 2008.

We face tough challenges, we can either walk away from them and they'll get worse. Or we can face up to them, collectively, and pull together, not walking away from them and doing what's right instead of what's popular. Well, based on our analysis - which we're willing to debate on the facts and the frameworks but not on the ideologies or shallow misinterpretations - he's met every challenge head on and done his level best to do the right thing. The MA. backlash is people looking for simple, magic answers and quick fixes, the pundits wringing their hands and the political opposition selling doom to the lizardbrains. 

In the readings you'll find four complete essays collections linked in - two that cover the entirety of the 2008 elections but do it within a policy framework and two reviewing economic policy over roughly the same time period, extended to now. You'll also find two posts URL's from that time period and the entire "Renewing America" series we've been working our way thru but we'll draw your attention to this one in particular:It's Your Life: Change Is Hard, Change We Must, Changing We Are!


 

In that entire set of recent posts and materials stretching back over two years you'll find that our framework, evaluations and recommendations have stayed constant, evidence-based and (ahem) accurate from beginning to end. What has changed is the country's willingness to Cowboy Up. But we'll refer you to John Adams speech for the price that must be paid for a Free Republic - it is self-responsibility and a willingness to face the hard problems!

Too Much Government: the Auto Rescue as Exemplar

The "reason" for all the backlash is that government is interfering to much with the private sector. Actually we've been pretty clear that part of the problem is the over-stimulus of the lizardbrains by political opportunists but let's tackle the Auto Industry example head on and we'll let our buddy Jon Stewart do it for us. What an interesting commentary on the state of the Country that one of the most straight-forward, honest and evidence-based discussions of the problems and the need to do something is a "comedy" show. And not the folks who you should be able to count on - the pundits, the media, your elected representatives, you pick. Equally interesting of course is what who people are willing to listen to. If you like a little more detail on the state of business we'll point you at Talking Business: the Outlook vs. the Preparations

What's the State of the Economy

So let's try yet another dose in our long line of attempted treatments of reality checks. What's the actual state of the economy? Sorry if we're going to get more than a little wonkish on but we are after all talking about your future.

The top subchart here shows year-over-year changes in GDP and Employment. One key point to notice is that there are regular cycles and patterns. Another is to notice that Employment is driven by the Economy - in other words as and when GDP turns up so too will Employment. And the Economy turned around this summer but growth is still weak. With the most recent data Employment has also begun to turn - which is about as good as it gets. And trust us, the alternative really was the Abyss!

The bottom subchart shows Private and Public employment since 1980 in blue and on the left axis and cumulative new jobs created in red (and on the right). We had the single worst decade for private job creation since before WW2 - no new jobs were created in a decade. Worse, because it was a very weak recovery this time, we're now about -12.2 million jobs in the hole, not just the headline number of 7 million lost jobs when you account for labor force growth. Over the next decade we need about 20 million to recover breakeven and will be lucky to get 15 according to the BLS. To return to the prosperity of the 50s and 60s we'd need 40 million and there's not a hope in hell of that happening. Welcome to the New Normal!

What Saved the Day: Public Policy

The week before last the Financial Crisis Inquiry Commission (FCIC) began hearings (Pecora 2 Hearings, Malfeasances, Your Future & Cusp Points) and one of the key witnesses was Mark Zandi, the founder and president of Economy.com, a well-respected economic consultant on both sides of the aisle and an advisor to McCain. Some of these charts are borrowed from his materials.

The top chart is from Zandi and shows the impact on GDP of the fiscal stimulus package. Let me put it in a nutshell for you - without public spending we'd have had a disaster on our hands. Growth, such as it was, in 2009 was entirely due to the stimulus.

The bottom two charts are taken from Menzie Chin's recent post updating his on-going coverage of assessments of the impacts and make it pretty clear IOHO what we got vs. what we were facing. Without the stimulus we'd still be at the bottom of a U that was just beginning to flatten out and would take a very long time to begin turning up.

Employment would still be headed down into the toilet and we'd likely be looking at direct, measured Unemployment north of 12%, or worse. The Administration took this problem head on and saved us from the second Great Depression - and took untold heat, criticism and opposition for doing it. All in the name of "sincere" political opposition doing the ideologically correct thing (by the same people who's principled opposition to government intervention almost collapsed the markets in the Fall of 2008 btw).

What Actually Worked

So let's talk about the structure and nature of the package and what worked and how well it worked. Needless to say the loyal opposition has been un-remitting in its criticisms at the time and ever since. If anything should have been done it should have been all tax cuts. Well take a look at some more charts from Zandi (the table) and some pie charts breaking down the structure of the package and spending to date.

The pie charts are taken from FivethirtyEight: Politics Done Right and show the structure and disbursements. As Zandi's table makes clear we got some real benefit out of the tax cuts - a major portion of the effort and partly included as a non-partisan gesture to Republican shibboleths. The permanent tax cuts that they were arguing for would have been, and were at the time, the least effective and in fact enormously contribute to our outyear deficit problem.

What was, is and will be effective is the direct stimulus spending which has a high multiplier effect. What the pundits never discuss is three things. 1) What could be passed politically - on that score it was a very well-balanced package. 2) What would work in which timeframes - tax cuts while less effective are much faster so the balance was about as good as could be crafted. 3) What could be managed - there's a limit to what could be effectively and efficiently managed by the existing Federal departments and agencies and, as Tim Geithner and others have repeatedly explained to the few who were listening, we went right up to those limits. NB: given how severe the job problems are it's very likely we're going to need a second round of stimulus. Now we'll really see the long knives come out to cut off your nose to spite the other guys, eh?

Welcome to Ohio: Can You Handle the Truth?

This last week the President made a major but very short announcement on Financial Reform (Comes 'round, Goes 'round: Hastening Forward Slowly to Finance Reform) announcing the start of major new structural changes in the Industry. While all the punditry chalked it up to quick and dirty reactions to the MA. elections in fact they've been under discussion and review for months, while the Administration kept reaching out the Industry to be cooperative and collaborative. The other major speech he gave was at a town hall in Ohio. And, IOHO, he told the truth and shamed the devil. The question of whether or not people are prepared to hear it is another thing entirely of course. But he outlined the situation as it was, what's been done, the impact it's had and how much farther we've got to go. We strongly suggest you at least listen to the first twenty minutes but if you're really interested in knowing the most important thing, how people are reacting, hang in there thru some of the questions and answers. We think you'd find it revealing.

You won't hear anything in that speech that he didn't say at his Georgetown speech on the Economy almost a year ago, that senior members of the Administration haven't been saying frequently since then or that we weren't saying repeatedly for the last two years.

So you decide - where does the weight of the evidence lie? Who's telling the truth and facing up tot he harsh realities and who's in denial and throwing temper tantrums insisting on magic quick fixes. Welcome back to Coach Carter's gym - or as Col. Nicholson asked - can you handle the Truth?

It would seem that not a lot of your fellow citizens can.

Essay Collections

US Presidential Election 2008 (Early Days): Candidates, Positions, Policies and Consequences Over the course of the Election one of the driving themes that emerged was the need for CHANGE – it could no longer be business as usual. For things to change however not only needed good leadership and sound policy it required, and requires, an electorate willing to accept the painful costs of change. It was not at all during the election that the voters were willing to face the prices required to pay the Pipers who’d made their party. Nor was it clear that the candidates were able or willing to, so to speak, tell truth to the power. Fortunately as the campaigning evolved we moved away from simple-minded slogans and extremist positions, legacy of the culture wars to some extent, and to more substantive and realistic positions. But where we’re at  today was and is shaped by where we were, what we went thru and the choices we made. In a very real sense the story of the 2008 election is still with us, not just in the results, but in the issues considered, the way they were considered and how people reacted. Our considered judgment is that we’ve still got a long, long, long way to go before the electorate is willing to face the truth. Here we try to tell the early part of that story and its beginnings.

 From Nomination to Election: Evolution vs. Devolution, Policy vs. Perjorative and Consequences To persuade voters, or to provide leadership in any situation in fact you must speak to both the rational mind and the emotional mind. If you like you present to the forebrain, the modern mind that’s recently evolved, and but you sell to the hindbrain, the lizard-brain, which is the oldest and most emotional part of our psychological makeup. It is also where our deepest emotional reflexes,
values and beliefs reside and, ultimately, where decisions are made. It is, in other words,
where candidates win or loose. The other major evolution of the campaign was that as John-boy grew increasingly less substantive his desire to win led him to sell more and more to those emotions, using some of the most pejorative arguments and labels. In fact the McCain who we long admired became increasingly hidden by and subservient to the candidate who wanted to win. Apparently at almost any cost. In the course of the final months of the campaign the groundwork was laid for our current crisis of institutional confidence and the metastasis of lizard-brain appeals – in other words the seeds of the Tea Parties were sown in 2008. And now we’re reaping the harvest.

Economy vs. Policy vs. Politics: From Early Warnings to Near Collapse Very early in 2008, January in fact, we warned that the economy was headed for serious difficulties. Later we even identified it as the single most important issue in the ’08 elections, and so it turned out. We then tracked it to and through the crisis, as the economy worsened and the markets collapse. Toward the end of the year we then went on to discuss the steps necessary to correct the problem. And the actions necessary to correct the long-standing and long-ignored deeper flaws that had accumulated over three decades and that metastasized under severe pressure in a collection of major problems all acting at once.This collection of essays puts together the story from beginning to an end, though not the final end. That is not only still playing out but has a long way to go. Along the way we try to address the nature of the total economy in such a way that it’s easier to understand the machinery and how economic cycles work. We also address the policy steps we think are required to repair that machinery in the short- and long-terms.And since we’re going to be living in a policy-driven economy for a long time we also take a hard look at the politics of the situation, and the partisan posturings, that  contributed to the crisis and have hampered us since then.

Wrestling Alligators, Draining Swamps: Economic Policy, Politics and Partisans 2009 was the year we narrowly avoided an economic collapse into a second Great Depression and managed instead to turn it into a Great Recession. While the Economy has stopped its freefall we came very close to the edge of the abyss. The Economy is beginning to recover thru the combined effects of fiscal and monetary policy but joblessness is still higher than at any time since the Great Depression and will take years to begin growing again. Unfortunately the long-term prospects are rather poor, with a weak and jobless recovery and relatively high unemployment and poor job creation throughout the rest of the decade. Unfortunately the things necessary for our survival also became political footballs with strong opposition more on the basis of ideology than on a sound understanding. We try to dig deeper into the crisis, the fiscal policies and the strategic outlook to debunk many of the myths that became headlines and political attacks. A key component of the crisis was malfeasant behavior on the part of the Financial Industry where short-term profits were gained at the risk of long-term damage. To prevent a future occurance we need to re-think the role and function of the Industry and re-formulate the legislative and regulatory regime under which it operates.But political sausage-making is an ugly business at its best and the influence of special interests has rallied behind reducing and slowing down reform, despite its being in the best interests of the country and the industry.

Previous Posts

 From Misconception to Collective Affirmation: the Inaugural Renewal

Welcome to Coach Carter's Gym: Renewal of Duty, Honor and Country

Hard Problems, Deep Changes, Bitter Fights: Framework to Power Politics

It's Your Life: Change Is Hard, Change We Must, Changing We Are!

Change is Necessary: Current Course and Speed = ROCKS!

Reflections for the Season: Faith, Hope and Renewal

Renewing America 1: Hard, Doable and Necessary

Renewing America 2: Institutions, Values & Performance

Renewing America 3: Re-thinking, -designing & -building for Performance

Renwing America 4: Time for Some Changes

Confronting a Cusp Point: Renew, Relapse or Reverse?

Readings

Declarations: Suspend Your Disbelief – Peggy Noonan Flying in, we take the route over the Lincoln Memorial, the Jefferson, the Tidal Basin: the signs and symbols of the great republic. And you've seen it all a thousand times but you can't stop looking, and you can't help it, your eyes well. After a minute you realize you must have a moony look on your face, and you lean back. The lady to your right, engrossed in a paperback of "Marley & Me," sees nothing. Your gaze continues across the aisle, and you see another woman looking out the window in the same way, avidly taking it in. Her view includes the Capitol. She leans back. I know her. A woman of the Reagan era, an old acquaintance, and when we land we greet each other. "Isn't it something that no matter how many times you see it, it still grabs your heart?" I say. She responds, wonderingly, "I never see it that I'm not moved. To this day." We are grownups, we have seen limits and imperfections, compromises and mess, and yet this brilliant thing endures. Lincoln will always be Lincoln, and nothing can mess that up. What is required for full enjoyment of an inauguration, from opening prayers to speeches to marching bands is, in the great 19th-century phrase, the willing suspension of disbelief. If you don't put your skepticism aside, you will not fully absorb and experience the drama. You must allow it to be real for you. Those two young people on the stage did not really take poison and die, but Romeo and fair Juliet did, and that is the reason the audience, which knows the actors still live, says, with genuine feeling, "Oh, no!"

Putting an End to Magical Thinking But I worry that there is more magical thinking afoot than the president realizes. Magical thinking can be defined as a perversion of traditional American optimism. Magical thinking is the can-do attitude without the do. It's faith without works, to borrow a Biblical verse. And it has played a key role in shaping the economic crisis. We know those days are gone. The jig is up. And the economy has to be transformed by genuine, hard-working optimists instead of magical thinkers. This will start with how we choose to frame our losses, says psychologist Denise Cummins, who teaches at the University of Illinois, Urbana-Champaign. "That's the silver lining -- how will you frame this or describe this to yourself," Cummins says. "Whether you couch it in a disaster framework or it's-a-challenge-but-I'll-get-through has a whopping effect on your endocrine system. If you say it's the end of world or that you are stupid and it will never get better again, you're going to keep shooting more and more cortisol and adrenaline through your system, and if you do it long enough, you'll build more receptors for bad hormones. "Ruminating can actually exacerbate the damage. Instead, tell yourself another story. If you put it in terms of a challenge -- what can be done, where do you go from here, and what you have left that's still good -- you dampen all these hormonal effects."  Then ruminate on the words of President Obama in his inaugural address: "In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of shortcuts or settling for less. It has not been the path for the faint-hearted -- for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things -- some celebrated but more often men and women obscure in their labor -- who have carried us up the long, rugged path toward prosperity and freedom." Here's a toast to the end of magical thinking.

The New Political Rumbling What does the Massachusetts election mean? It means America is in play again. The 2008 election settled nothing, not even for a while. Our national politics are reflecting what appears to be going on geologically, on the bottom of the oceans and beneath the crust of the Earth: the tectonic plates are moving.America never stops moving now. Massachusetts said, "Yes, we want change, but the change we want is not the change that has been delivered by the Democratic administration and the Democratic Congress. So we will turn elsewhere."We are in a postromantic political era. They hire you and fire you, nothing personal. Family connection, personal charm, old traditions, fealty to party, all are nice and have their place, but right now we are immersed in crisis, and we vote on policies that affect our lives.It is not the end of something so much as the beginning of something. Ted Kennedy took his era with him. But what has begun is something new and potentially promising.

Politics in the Age of Distrust Despite the Democratic triumph that month, they noted, public distrust of government remains intensely high. Historically, it has been nearly impossible to pass major domestic reforms in the face of that kind of distrust. Therefore, they counseled, the new administration should move cautiously to rebuild trust before beginning a transformational agenda.The Obama administration interpreted the political climate in an entirely different way. As John F. Harris and Carol E. Lee wrote in a smart piece in Politico on Wednesday, the administration interpreted the 2008 election as a rejection of not only George W. Bush-style conservatism, but also Bill Clinton-style moderation. The country was ready for a New Deal-size change. It had a leader in Barack Obama who could uniquely inspire a national transformation.As happens every four years, hubris defeated caution, and the administration began its big-bang approach.Most probably in anticipation of the Republican triumph in the Massachusetts — said to be in part a popular rebellion against the health reform bill now winding its way through Congress – the New York Times columnist

America, the Unbalanced David Brooks recently wrote a column titled “The Pragmatic Leviathan.” Finally, a third reading conjured up this image, of a motorcyclist about to hit the pavement. I stumbled across it some weeks ago when Googling “rugged American individualist.”Behold, this risk-loving, rugged rough rider, enjoying his freedom. In sissy Europe he would be constrained by law to wear a protective suit and a crash helmet. Not so in many freedom-loving American states.There we can see these rugged bikers roaring past our cars on their Harley-Davidsons, T-shirts flapping in the wind, with a bandanna at most as protective headgear. With their vestigial sense of proportion, they bristle at the very idea that government should tell them how to dress for a bike ride. That same sense of proportion, of course, also would lead them to expect the helping hand of government, should they ever take a serious spill, as this rough rider seems about to do.Even if the motorcyclist had little savings and did not carry health insurance, he surely would expect to be taken by ambulance or helicopter to the nearest hospital emergency room for whatever treatment was critically needed, however expensive. He would be encouraged in that expectation by that great and ever patient enabler of reckless individualism – the United States government.To my mind, this biker is a metaphor for the general attitude celebrated by David Brooks, in health care and beyond.Americans want government to make sure that they have at their beck and call the most sophisticated health system in the world, without even a hint of a queue or rationing or balancing of benefits and costs (cost-effectiveness analysis).At the same time, they rail at town hall meetings and in the voting booth against government intrusions into that health system, and they wring their hands incessantly over the height of health insurance premiums and the taxes they pay to support the system.It is all born of that deep, vestigial sense of proportion which, ironically, in his earlier column titled “Tea Party Teens” David Brooks had deplored.This deep, vestigial sense of proportion also informs the attitude in this country toward life-cycle financial planning in general, which leads millions of Americans to live improvidently when young, only to throw ourselves upon the mercy of government in retirement.

 

Posted by dblwyo at 09:09 PM | | Comments (0)

January 20, 2010

Confronting a Cusp Point: Renew, Relapse or Reverse?

We're going to try and wrap up our series of discussions on Renewing America with this final post on the major cusp point we're facing. The central question facing us is whether we collectively opt to confront our challenges and work together to solve them. Or whether we let our not-so-better natures lead us into partisan politics and populist reactions that cause us to relapse into the behaviors that brought us to this point in the first place. Or worse, whether the impulses of our hindbrain so overwhelm the best thinking of our collective forebrains and lead to the reversal of over three centuries of growth and historically unprecedented prosperity. A record of achievement that has served as an exemplar for the world as being an active agent of (mostly) constructive change. Yet, at the same time, those hindbrain impulses have often been the very thing that has enabled us to cope with previous crisis.

The video clip is taken from "The Patriot" which, allowing for dramatic license, is not historically inaccurate. The hero is a Scots-Irish settler who organized his fellow backwoodsmen into an effective and fighting force that was one of the main underpinnings of America's successes in the Revolutionary War (the book to read is Born Fighting: How the Scots-Irish Shaped America by James Webb). But one of the things the Scots-Irish brought with them was an innate distrust of authority and government - largely because thruout 2,000 years of history governments had tried to exterminate them (the Romans twice, the English three times) and then betrayed them multiple times, after exploiting their qualities as fighters (the English again). That populist strain has become infused thruout America and is one of the main under-currents of our culture. The question would then seem to be what behaviors are appropriate in what circumstances and who's likely to pick what? There times when you need a tomahawk and times when you need to "reason together".

 

Expecting Miracles, Confronting Realities

The time when the hindbrain takes over the most is under stress, when competition for scarce resources (like, say, jobs) is most severe and people are scared, apprehensive and have no clue as to where they stand. And it gets worse when they got blindsided by things they took for granted. This being exactly one year since Obama was inaugurated there are a lot of report cards being offered up, and one of the most thorough is the WSJ/NBC poll. Now if you listen to the punditocracy the President's in the ditch and headed for a disaster but if you actually read the whole poll, summarized here, we think people's judgments aren't so far off. Nor are they as disastrous as the infotainment media would have us believe. In fact when you look back over the last several administrations he's actually higher than most of his predecessors. Simply come down off the euphoric highs of the first few months. Wow, what a surprise! What we find and found particularly interesting in this summary is the two questions about how the Rips are handling healthcare and whether or not "business as usual" is getting fixed in D.C. Think about and what it really tells us!

Boots on the Ground: Real Problems for Real People

Let's tunnel down another level of detail by looking at the reactions to Healthcare, Foreign Policy and the Economy. The UL corner is the overall questions that drove the first chart (and if you look closely you'll see our answers are filled in). Now we went to a lot of trouble to create a summary inventory and analysis of the huge slew of problems that've had to be dealt with in this first year (t's Your Life: Change Is Hard, Change We Must, Changing We Are!) so we won't go back thru 'em but suggest you check back on the assessment chart. You may not agree with our conclusions - feel free - but at least consider the inventory and what alternatives you might have had; or you've heard from the opposition.

One of the things you haven't heard from the pundits is any appreciation of how deep these problems are, how hard they are to address, how difficult it is to tackle them legislatively and on the implementation side and how challenging the political problems are. When you consider all that we give the Administration on A on several grounds. They've tackled all the serious problems, they've done so in a pragmatic and realistic way, and allowing for real-world timetables so far everything they've done has worked. And our template for the preferred policy options is identical to the one we published and have been using since 2003/2004 and the same one we used to discuss the entirety of last year's campaigns. If nothing else we've been consistent.

The Wars of the Lizards

Nonetheless, as the recent elections in MA. show, the President's agenda - and therefore our future - is in some jeopardy. The people ARE scared and angry and there are multiple reasons for that. For one thing - fear and anger are reasonable responses to the situations we're in. For another some of the necessary actions, e.g. the Financial bailouts, are very difficult to understand; more so when everybody just wants to burn the witches. That's all made worse by watching the manuverings of the special interest groups and the inside beltway sausage-making (which most people are learning more about than they ever wanted to learn or that allows them to sleep at night). Earlier (several months ago in fact) we put together this evolutionary story of how the candidates and then the Administration and the Rips were approaching the challenges of Vision, Communication, Leadership and Policy, which you can see here. The one we like better, though it's more complex, analytical and built on the first, is the illustrated one. Which captures, we think, all the dimensions and issues. The bottom shows the tri-modal distribution of Voters, with the two end-peaks of die-hard supporters while the vertical shows the distribution of decision-making by those voters - the tendency to let the hindbrain dominate most decisions. The problem is that while campaigning can be done at the fantasy level governing has to happen down where the adult brain lives. While Barry has put more emphasis on clear but complex explanations of the policy decisions his not-so-loyal opposition has spent all their time and energy on ignoring hard choices in favor of appeals to the worst part of a scared and angry electorate. Continuing a two year evolution that began during the campaign, accelerated at the end and has metastasized this last year. So in addition to interests groups and sausage-making uglinesses we've got a major political party making short-term tactical decisions to just say NO to everything and hope they can damage the President without making any effort at compromise. The problem, as the polls show, is that it's working only partially, the voters have caught on and, as things start working out if we're right about the substance, is that they'll get more and more embarrassed.

We're Not Making this Up

Just as a brief sidebar, and entirely serendipitously, there was a recent special Charlie Rose program on what science has learned about humans as social animals and how the brain functions. It's a pretty telling story (and perfectly complementary to the recent PBS specials on "This Emotional Life" we've previously cited).

We offer it up here because it offers both a lot of useful background information and some valuable insights into why and how things are working out the way they are.

But we think we'll give the last word and summary this time to the political cartoonists rather than the scientists. They seem to us to capture the reach and range of the issues involved. From the point that to attack a President who inherited the worst messes we've had in generations due to screwups on the part of the Rips is disingenuous at best, to the tendency of the Teabaggers hindbrains to throw the wrong things overboard, to some arrogancies and complacencies (combined with some profound mis-readings of the public) on the part of the Dims to the not-so-just rewards of being the man on the hot seat. Finally we'll leave you with one other pointer, though sans vidclip picture, to a recent PBS Newshour panel on assessing the first year. As is usual for the Newshour the panel is calm, judicious, covers the political spectrum and, by and large, lines up with our conclusions: PBS Panel on Obama's First Year.

Here's the bottomlines - the President (as implied by our graphic on what's required to both lead and govern) is going to have to do better on creating an over-arching message and vision, communicating it and reaching the hindbrain while still selling the substance compellingly. We'd also hope that the disloyal opposition would turn into constructive opponents who would bring some balance back into the process instead of pursuing their partisan agenda at the cost of substance - and at great risk to the Republic's well-being. Sadly we see little hope of that but in those things like the resolution of our original questions. With one addition - now is not a time for tommyhawks. It's a time to struggle with our fears and go for the substance. In that decision lies the answer to which side of the cusp we fall on.

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First Year Reportcard Readings

Poll Shows Democrats Lose Their Edge As Barack Obama enters his second year in office amid an enduring economic downturn, voters are less optimistic about his ability to succeed and no longer clearly favor keeping the Democrats in control of Congress, according to the new Wall Street Journal/NBC News poll. The trends point to an increasingly difficult political climate for President Obama as he hopes to push his domestic agenda beyond health care this year and preserve his party's majorities in the House and Senate. The severity of that climate, in fact, was promptly underscored by Democrats' surprising loss of a Senate seat in Massachusetts Tuesday. The seat of the late Edward Kennedy went to a conservative Republican, Scott Brown, in one of the nation's bluest states. That may not be an anomaly. Nationally, the new survey finds, voters now are evenly split over which party they hope will run Capitol Hill after the November elections—the first time Democrats haven't had the edge on that question since December 2003.

How's It Going? A One-Year Report Card On the first anniversary of Barack Obama's inauguration as president, Americans seem a bit weary and a bit wary, not yet convinced the nation's economic trauma has passed, or that its leaders have found the cure for it. Mr. Obama won the presidency by rallying Americans by the millions behind the idea of "change." But Americans are proving to be—as they have almost always have been—a people ultimately more comfortable with incremental rather than dramatic change. Thus, most continue to like and respect the man they gathered around televisions to watch sworn in as president on a cold noon hour a year ago, and most still hold out hope for his presidency. Yet many also worry that, in his quest to mobilize government to solve the nation's problems, he may have moved too far too fast. That, at least, is the picture that emerges from a new Wall Street Journal/NBC News poll on the one-year mark of the Obama presidency. As Tuesday's stunning victory by Republican Scott Brown in a special Senate election in Massachusetts suggests, the terrain explored in the survey is a challenging one for a president and a Democratic Party that seemed last January to be in full control of the political world, and destined to stay that way for some time. Obviously, the landscape has proved to be a lot more complex than those easy predictions implied. What the Journal has set out to do here is paint a picture of that national landscape. In collaboration with its partners at NBC News and its polling team of Democrat Peter Hart and Republican Bill McInturff, the Journal surveyed more than 2,000 Americans in December and January on where the country stands at this juncture. We asked their views of their president and other political leaders, of course. But we went well beyond that, to see what they think of the economy, their personal prospects, changes in their health-care system, the security of their nation, and the state of race relations within it. The survey finds areas of doubt and skepticism, and well as areas where Americans are starting to see glimmers of light. So here is our report—a kind of portrait of America one year into the era of Barack Obama's presidency.

Lack of Credit President Barack Obama has presided over a turnaround in U.S. economic growth, but he doesn't get much credit for it. The disconnect has much to do with choices he's made, problems he inherited and deep-seated worries among voters about the economy's long-run health in the aftermath of the recession. In the new Wall Street Journal/NBC News poll, 49% said they disapprove of the job Mr. Obama is doing handling the economy, while just 43% approve. Last February, 56% approved of Mr. Obama's handling of the economy. The downward trend tracks his broader approval ratings. Yet the approval rating is moving in the opposite direction of economic growth. When Mr. Obama took the oath of office a year ago, the economy was contracting at a 6.4% annual rate, its worst decline in more than a quarter century. But by the fourth quarter, the economy recorded a growth rate of well over 4%, according to many estimates. More than six in 10 in the survey said the nation's difficult economic situation is one Mr. Obama inherited. So why isn't he getting more credit for steering the U.S. away from an outright depression?

Missing the Target With the Stimulus Unlike previous recessions, the current downturn was not caused by Federal Reserve tightening and therefore couldn't be reversed by lowering interest rates. President Obama was correct to conclude that boosting economic activity required a fiscal stimulus. Unfortunately, despite the talented team of economists in the administration, most of the president's economic policies have done little to help the problem. And indeed, many of these policies have created even more problems than they solved.

Falling Short on the Stimulus  That leaves us with two major questions: First, why has the outcome thus far been so much worse than what pretty much everyone expected in the late fall of 2008? And second, why is the forecast going forward for growth so much slower than our previous experience with recovery from a deep recession in 1983-84? I attribute the differences to four factors:First, the financial collapse of late 2008 did much more damage than we realized—to American households' and businesses' willingness to spend, as well as to the financial system's ability to match savers with cash to businesses that needed to borrow. The shock now looks to have been about twice as great as the consensus in the fall of 2008 thought. When it comes to fighting economic depressions, governments essentially have two bags of tricks they can pick from: They can directly put the otherwise unemployed to work via deficit spending, or have the central bank boost asset prices and so make it more attractive for businesses to borrow and put the otherwise-unemployed to work. The incoming Obama administration tried to do both. And that leads us to Factor No. 2. The Obama administration envisioned a $1 trillion short-term deficit-spending stimulus for a problem that turned out to be twice as big as was then understood. In other words, had the administration known how big the problem would turn out to be, it would have sought a $2 trillion stimulus. And what did we get once Congress got through with it? A $600 billion stimulus—about one-third of what we needed.

A Good Start  All told, the vision was quite a heavy load for the reform train. Once in the White House and challenged with the chore of governing, President Obama and his allies in the Congress quickly realized that health reform cannot overnight realize the entire vision held out during the election. It had to be achieved in stages—expanding insurance coverage first, bending the cost curve and greater cost-effectiveness later. Extending health-insurance coverage to the millions of Americans who now find themselves priced out of the market for health insurance is the easiest part of health reform. In the bill now working its way through Congress, an estimated 30 million or so lower-income, otherwise uninsured Americans are expected to gain adequate coverage with the aid of between $800 billion and $1 trillion in federal subsidies over the next decade. That may appear a staggering sum, until one realizes that it is only about 3% or so of the $35 trillion or so now projected by actuaries to be spent on U.S. health care in the coming decade, even in the absence of reform. The bill in its current state lays important foundations for obtaining better value for our health-care dollar—more research into cost-effective care, a move away from piece-rate (fee-for-service) payment of doctors and hospitals and toward bundled payments for entire medical treatments, and perhaps an independent Medicare Commission with power to control Medicare spending.

Centrist, and Yet Not Unified The bills before Congress are politically partisan and substantively bipartisan. What does that mean? The first part is obvious. All 60 Senate Democrats and independents voted for the bill, and all 40 Republicans voted against it. The second part is the counterintuitive one. Yet it’s true. The current versions of health reform are the product of decades of debate between Republicans and Democrats. The bills are more conservative than Bill Clinton’s 1993 proposal. For that matter, they’re more conservative than Richard Nixon’s 1971 plan, which would have had the federal government provide insurance to people who didn’t get it through their job. Today’s Congressional Republicans have made the strategically reasonable decision to describe President Obama’s health care plan, like almost every other part of his agenda, as radical and left wing. And the message seems to be at least partly working, based on polls and the Massachusetts surprise. But a smart political strategy isn’t the same thing as accurate policy analysis. The better way to describe the Obama agenda, I think, is that it’s ambitious (even radical) in its scope and sharply different in direction from the Reagan-Bush era, but mostly moderate in terms of how far it goes on any single issue. Mr. Obama wants to undo George W. Bush’s high-income tax cuts, but would keep the basic Reagan tax structure intact. The administration is trying to re-regulate financial markets, but has rejected the sweeping ideas favored by the former Federal Reserve chairman Paul Volcker, British regulators and many liberals. The pattern is especially clear on Afghanistan and Iraq.

  • Second Opinion Americans are worried Congress will make a bad health-care system even worse.

Americans Grow Weary of Government Intervention Republican Senate candidate Scott Brown's surge in Massachusetts comes as a new Wall Street Journal/NBC News poll found increasing voter unease over the federal government's expanding role in the private sector. For the first time, a majority of Americans—53%—disapprove of the government's increased role in the economy since the financial crisis, up from 44% in March. And 48% said Washington was doing too many things better left to businesses and individuals, a plurality seen in polling since September. The government's takeover of General Motors, the biggest economic intervention that happened solely on Mr. Obama's watch, drew the strongest negative reaction. Nearly two-thirds of Americans surveyed, 65%, disapproved of the government's taking a majority stake in the troubled auto maker. Independents were highly critical of the move, as were Republicans. Poll respondents lumped Democrats' proposed overhaul of the nation's health-care system into their basket of worries about expanded government. A majority, 53%, thought the proposed legislation went too far and would hurt the quality of health care. That is the highest level of opposition since the peak of the "town hall" protests against the proposal in August, when 54% of Americans polled felt that way.

Dangers Ahead A trio of big worries—economic troubles, health-care uncertainties and security threats—are weighing on Americans' hopes for their future, though they haven't entirely dashed the traditional American spirit of optimism. Just 34% of Americans surveyed this month in the latest Wall Street Journal/NBC News poll said they think the country is headed in the right direction, compared with 54% who said it is off on the wrong track. In February of last year, not long after President Barack Obama's inauguration, 41% said the country was headed in the right direction and 44% said they thought it was on the wrong track. Moreover, there are some signs that the economy's woes may be sowing doubts not just about current prosperity, but about long-term prospects as well. In a companion Journal/NBC News survey in December, two-thirds of Americans said they didn't feel confident their children's generation would be better off than their own. The key question is whether Americans are convinced a long-term decline in prosperity is inevitable—a sentiment that would have implications for, among other things, spending and investment decisions—or whether the gloom will only persist until there are clearer signs the country's situation is improving. The latest poll found four in 10 expect the economy to improve sometime in the next year.

Do It All, but Better  After just one year, President Barack Obama has expanded the role of the federal government with an agenda already greater than Johnson's Great Society and closing in on Roosevelt's New Deal. Such plans are in keeping with America's deep commitment to a better future, although the financial cost is staggering. The problem, though, is Washington has never been so poorly equipped to succeed. As the failure to detect the Christmas Day bombing plot proves once again, the federal government's stifling bureaucracy can void almost any promise, big or small. The president's agenda covers virtually every aspect of American life—health care for the uninsured, banking oversight, a new consumer-protection agency, mortgage aid, climate regulation, credit-card reform, defense-procurement reform, education, and the giant stimulus package, which contains dozens of extensions in existing programs.What this agenda lacks, however, is the kind of sweeping bureaucratic reform that might increase its odds of success. Just talk to the federal employees who say their agencies won't reward innovation and creativity, deal with poor performers or make promotions on the basis of merit. The solution, however, is not a new Reagan revolution to remove government from people's lives, any more than it is to increase the already gargantuan public sector, whose payroll currently may exceed 20 million, including federal, state and local employees, contractors, recipients of grants and people paid through the stimulus package. Ask Americans whether they think government is too big, and they agree. They understand how much the government has grown, and that there is significant waste in the new programs. But at the same time, most Americans want more of virtually everything government delivers. Ask them whether they support cuts in Social Security, Medicare, job training, environmental protection, highway construction and so forth, and they say absolutely not. The problem, then, is not the government itself, but inefficiency and bloat.

He'll Come Back Has the American Dream come to an end? Certainly, the worst economic crisis since the Great Depression has convinced most Americans that attaining the dream will not be easy in the future. In a National Journal poll last September, 62% thought the economy would experience more severe cycles of boom and bust than in the past, and 79% said average families in the future would suffer economic reversals more often than in the past. But this pessimism about the economy as a whole is tempered by considerable personal optimism about the future. Can the Obama administration connect to this individual sense that the dream remains alive, and turn around feelings of pessimism about the country as a whole? Right now, that is difficult because the state of the economy tends to obscure the administration's contributions to economic progress. Consider the $787 billion stimulus bill. The bill's expenditures, combined with extensive interventions to stabilize the banking system, pulled the U.S. economy back from the brink of a catastrophic meltdown. As a result, we are now on a growth path that, while slow, seems likely to pick up considerably. But President Obama couldn't prevent the steady rise in unemployment. That's making it hard for many Americans to see the connection between his administration's activities and a brighter future. Over the longer term, I believe Mr. Obama will be able to make that connection. The example of Ronald Reagan—who did link the public's individual optimism to a positive outlook on the country—is instructive. Mr. Reagan had to contend with a severe recession, just like Mr. Obama. At about this point in Mr. Reagan's first term, his approval rating was essentially identical with Mr. Obama's current rating, and his party lost heavily in midterm elections.

The Pragmatic Leviathan Over the years, American voters have reacted against any party that threatens that basic sense of proportion. They have reacted against a liberalism that sought an enlarged and corrosive government and a conservatism that threatened to dismantle the government’s supportive role. A year ago, the country rallied behind a new president who promised to end the pendulumlike swings, who seemed likely to restore equilibrium with his moderate temper and pragmatic mind. In many ways, Barack Obama has lived up to his promise. He has created a thoughtful, pragmatic administration marked by a culture of honest and vigorous debate. When Obama makes a decision, you can be sure that he has heard and accounted for every opposing argument. If he senses an important viewpoint is not represented at a meeting, he will stop the proceedings and demand that it gets included. If the evidence leads him in directions he finds uncomfortable, he will still follow the evidence. He is beholden to no ideological camp, and there is no group in his political base that he has not angered at some point in his first year. But his has become a voracious pragmatism. Driven by circumstances and self-confidence, the president has made himself the star performer in the national drama. He has been ubiquitous, appearing everywhere, trying to overhaul most sectors of national life: finance, health, energy, automobiles and transportation, housing, and education, among others. He is no ideologue, but over the past year he has come to seem like the sovereign on the cover of “Leviathan” — the brain of the nation to which all the cells in the body and the nervous system must report and defer. Americans, with their deep, vestigial sense of proportion, have reacted. The crucial movement came between April and June, when the president’s approval rating among independents fell by 15 percentage points and the percentage of independents who regarded him as liberal or very liberal rose by 18 points. Since then, the public has rejected any effort to centralize authority or increase the role of government. Trust in government has fallen. The share of Americans who say the country is on the wrong track has risen. The share who call themselves conservative has risen. The share who believe government is “doing too many things better left to business” has risen. The country is now split on Obama, because he is temperate, thoughtful and pragmatic, but his policies are almost all unpopular.

Posted by dblwyo at 06:24 PM | | Comments (0)

January 15, 2010

Renwing America 4: Time for Some Changes

Just in case you hadn't noticed we're facing a raft of challenges that will be barriers to prosperity for the next decade, and perhaps on into the next. Included among those are an economy that will have to make major structural changes, the need to wrestle with major issues in Healthcare, Education and Energy and a world that's evolving rapidly. At this point we're almost tempted to re-use Andrew Shephard's speech from the American President but figure you've probably heard it enough. The good news is that there are none of these problems that aren't solvable, in fact there are none of them that aren't being addressed. On the whole, about as well as they could be. The better news, in its own perverse way, is that the challenges are "minor" compared to the ones that we faced at previous cusp points historically; whether that was the GD and WW2, the Industrialization of America, the Civil War or the Revolution and the creation of the Republic.

There are two bad pieces of news however. The first is that our biggest challenge, common to all the big problems, is that we need to re-think and re-engineer our institutional framework. The second is that this will required patience, understanding and support from the population at large, in addition to leadership. Changing our institutions will be hard because it calls for re-invention of organizations that have grown up over a century since they were first created and they have accumulated lots of "plaque" and interests. Changing ourselves will be harder. The composite Gallop Poll pretty well captures the disenchantment of the American people. Of course there weren't polls to look at in 1860, 1880 or 1930 so what did we do for guidance then?

 

The State of the Union

 To some extent, aside from all various discussion about the state of the economy, policy (especially Healthcare), etc. we can look at an interesting little survey put together by our friends at the Atlantic Monthly that looks across a bunch of different issues and indicators. It really is worth your while to click on this and work your way around the spinner indicator to see what surveys tell us about ourselves, our attitudes and our situation. But the wedge titles pretty well capture it - we're suspicious, twitchy, fragmented, untrustful, cranky, FEUDAL and over-extended among other things.

The real legacy of the 60s seems to be a profound mistrust of our institutions, somewhat well-earned in our humble opinion, and a general sense of malaise. For those of you old enough to remember the 70s there are certain similarities. But the period this really matches is the 1870s and on when the huge depression of 1873 caused people to loose faith as well and for a surge in populism to dominate the political discourse. There's always been a major populist strain not to far underneath the surface in this country but it's likely to dominate thruout the decade as we wrestle with all these issues. Again, some of it's well earned too. Right now the Financial Crisis Inquiry Commission is starting up in D.C. and just the first two days of hearings have been a revelation. What we've all suspected is already confirmed, even though they have a lot of work to do. The Finance Industry did take advantage of us all, screwed up terribly and while sorry for our pain is not apologetic about how it runs itself. What's that you say - you smell tar being heated? You'll find a fuller survey of the hearings plus extended readings in this post: Pecora 2 Hearings, Malfeasances, Your Future & Cusp Points.

On the Cusp Point of Our History .... Again

Well let's start by not assuming you can change human nature, greed, malfeasance, etc. will always be with us. Though I will go back to previous discussions on the value of Humanities and why teaching students to think, exposing them to the eternal verities, and getting them to "stand tall" comes to mind.

But just think - you're living in historical times, literally. We've come coasting along to this point after ignoring the problems for three decades. Now people are scared out of their minds and seeing inside the sausage-factory for the first time and it's making them sick to their stomachs.

I hate to go all historical and cosmic on you but if we don't look to the available lessons and history why pontificate, after all? The great historical corrective for bad behavior was to raise gentlemen to be honorable, honest and competent and put the Empire in their hands. That was literally tried with some effectiveness by every great civilization from the Persians to the Romans to the Indians to the Chinese. When you look at the 19th public school curriculum vs. that of the ancient Persian training for the young gentlemen of the royal court voila' - synchronicity.

Madison and Hamilton were immensely smarter, more experienced and more practical - though a code of conduct is still an admirable and desirable thing. They built a system with feedback in the institutional design, and it's worked very well by any reasonable standard or historical comparison for a very long time. I'm currently reading McCullough's book on the Brooklyn Bridge, which was the engineering marvel of its day and built in spite of rampant corruption in the halls of the city and state.

The great innovations in administrative organization were put together about the same time and partly driven by the great populist angers resulting from the 1873 Depression, the "Cross of Gold", etc. We've been here before, faced worse, had worse behavior and pulled up our bootstraps and gone on to do great things. But the mirror does indeed tell the story, because at the end of the day, Pogo, our politicians do what we collectively ask them to do.

There's actually some further encouraging mechanics and natural feedback loops. When the rules (legislative, regulatory) are important determinants of profits then interest groups will evolve to shape them because it's in their interest to do so. Interest groups are easier to organize because they're smaller and the benefits are clearer and more direct. It's hard to rouse the citizenry (the feedback) because normally the pilferage in the sausage factory isn't enough personally to get excited about and they benefit from their own little midnight requisition raids..

Disciplining the Lizard-brain

We may be crossing the threshold where the costs and pains are so high that the citizenry is aroused enough to do something. I sure hope so.That hope is why I keep trying to stoke these discussions. The graphic details the institutional re-engineering that should be our agenda for this decade. What it doesn't discuss is the "lizard-brain", the propensity of people to hear what they want to hear, listen to folks who tell them what they want to hear and pick representatives who cater to their short-term whims.

Now we're going to find out if the pain of ignoring problems is great enough for us to tackle them or we try and coast on thru again, with more pain in the future. We'll also find out if the public is mature enough to step up to its responsibilities. We don't guarantee success but we do guarantee failure if we don't try. Oh, and one other thing, win, lose or draw we also guarantee interesting times - which were long over due IOHO.

By the way, if you think we're making this up, we suggest you watch the three segments of PBS's recent special on "This Emotional Life". Extremely well done and, among many other things, it talks about how we deal with life's roller coaster and how that's related to the latest findings on brain structure and decision-making.

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Consequences, Challenges & Inheritances

It hasn't been pretty In November 2008 Mr Obama won 53% of the popular vote, and the Democrats won handsome majorities in both chambers of Congress. That looked like a strong mandate to govern. And yet the battle for health-care reform has been both close-run and unedifying. Last year’s “town-hall meetings” spread the wild falsehood that Obamacare would create “death panels” to determine who would live and die. But the drama in Congress itself has been no prettier. Critics concentrate on four defects: the “undemocratic” Senate, the extreme partisanship of the parties, the lobbying of well-heeled pressure groups and the lure of the pork-barrel.• Extreme partisanship In a legislature of rugged individualists, the supermajority rule might at least force the majority to seek a broad consensus—no bad thing when far-reaching laws are proposed. But if the minority votes strictly on party lines the rule cannot work this way and becomes something less defensible in a democracy: a way for the minority to thwart the majority’s wishes. Whichever side deserves more blame, the partisanship on display in the health fight followed a well-established trend. In its 57th annual study of voting patterns, published this week, Congressional Quarterly reported that Congress was more partisan than ever in 2009. More than seven out of ten Senate votes were what CQ calls “party-unity” votes, pitting a majority of one party against the majority of another. Cross-party coalitions of the sort that created Medicare and Medicaid in 1965 have become virtually extinct as politicians have deserted the middle ground. • Lobbying Senator John McCain memorably called the 2003 energy bill the “no-lobbyist-left-behind” act. But the Centre for Responsive Politics, a non-partisan think-tank, expects that the amount spent on formal federal lobbying by the health and health-insurance industries (some $425m in the first nine months of 2009 alone) will break all records. And this is just a fraction of the two sectors’ total spend on television advertising and other efforts to influence the debate.

Arnold’s Last Yodel Schwarzenegger had everything going for him – no ties to party leaders, interest groups or the past. Now the swagger, the audacity, the blush of the new — it’s all gone for the Governator in Winter. He was grim-faced and hollow-eyed last week in his final state of the state speech, standing in front of the Bear Flag, a reminder of the days when giants ruled California, and further back, when even the Los Angeles basin had grizzly bears. The governor had no choice but to talk like one of the “economic girly men” he used to deride. The new budget numbers, like the old ones, are catastrophic. Despite furlough Fridays and hocus-pocus spreadsheets, despite college tuition spikes and long lines at understaffed licensing bureaus, he still needs another $20 billion just to keep the ship of state from sinking. Does his fall — down to 27 percent approval — signal the end of a certain kind of citizen politician? Or is it because modern California destroys anyone who dares try to govern it? In his six years as governor, he took on state employee unions, entrenched and cynical Democrats, entrenched and anti-tax Republicans, a bloated pension system that has seen costs rise by 2,000 percent in 10 years. And he lost — to every group. He tried to make California a role model for a clean energy state, to make it more European by championing smart design and caring for its citizens. But when the economic crash came, he was left with the DNA for disaster that has determined this state’s fate for a generation. The simple tragedy of California is that its tax and budgeting restrictions — voted in by citizens’ initiatives — make it impossible to pay for the prison, school and health mandates OK’d by those same people. The state is broke, and broken. The latest Band-Aids — plans to legalize marijuana so it can be taxed to pay for substance-abuse clinics, and drilling for oil off Santa Barbara to keep parks from closing — will do nothing to fix it. What it needs, as many are advocating, is a constitutional convention — and there a chance to rewrite its basic governing documents. And the governor, in his final year in office, should join the call. Yodel it, if he wants.

A Nobel Economist Asks: Is Wall Street Ruining America? Today, of course, no one is against markets. The only legitimate questions are: What are their limitations? Can they go wrong? If so, how can we distinguish the ones that do from the ones that don’t? What can be done to fix the ones that do go wrong? When is some regulation needed, how much, and what kind? More broadly: how to protect the economy and society against specified tendencies to market failure without losing much of either the capacity of a market system to coordinate economic activity efficiently or its ability to stimulate and reward technological and other innovations that lead to economic progress? Now comes the layer of ideology: advocates, some of whom may know better, use the “efficiency of free markets” to argue against taxes and regulation in general--they are distortions--and in favor of laissez-faire. Any interference with the free market, they declaim, is ipso facto a bad thing. There are at least two things wrong with this ploy. The first has already been discussed. If a tax or regulation creates an inefficiency, “better” outcomes are available, but the pre-tax or pre-regulation situation is very unlikely to be among them. Some group will have gained from the regulation or from the tax and the use of its revenues. The second reason is that the Invisible Hand Theorem is valid only under certain assumptions, some of which only need to be stated to be seen as very dodgy. Clarifying those assumptions is the role of Cassidy’s “reality-based economics.” Of course such imperfections are ubiquitous in every modern economy. Yet another requirement is the absence of significant external effects or “externalities.” Again, externalities are ubiquitous in a densely populated modern economy. Some taxes and subsidies, instead of being distortions, are designed to correct the distortions that arise from such externalities (carbon taxes, cap-and-trade systems), and many regulations are intended to prevent or minimize negative externalities (no pig farms in city limits, no billboards in scenic areas). Faced with this list of obstacles, one might be tempted to give up on the market economy altogether. That would be as much of a mistake as the one made by doctrinaire free marketeers. The real point is that the choice is not either/or, but when and how much. Many distortions, imperfections, and externalities are small. To try to correct them all would be intolerably bureaucratic. The large ones cannot be wished away or ignored for reasons of piety; they cause large inefficiencies, and they can redistribute income in ways that most people would reject. And so there is no good alternative to case-by-case decision-making. The market evangelists, who tend to claim more for unregulated markets than solid theory can justify, are ideologically motivated. They dislike and distrust governments so much that they overlook the exceptions and the implausible assumptions, and simply propose the blanket principle that the market knows best. What is improper in this manner of argument is the frequent casual hint that it is authorized by economic theory. Nothing so general is ever authorized by economic theory.

How America Can Rise Again  Since coming back to the United States after three years away in China, I have been asking experts around the country whether America is finally going to hell. The question is partly a joke. One look at the comforts and abundance of American life—even during a recession, even with all the people who are suffering or left out—can make it seem silly to ask about anything except the secrets of the country’s success. Today’s fears combine relative decline—what will happen when China has all the jobs? and all the money?—with domestic concerns about a polarized society of haves and have-nots that has lost its connective core. They include concerns about the institutions that have made America strong: widespread education, a financially viable press, religion that can coexist with secularism, government that expresses the nation’s divisions while also addressing its long-term interests and needs. How should we feel? I spoke with historians and politicians, soldiers and ministers, civil engineers and broadcast executives and high-tech researchers. Overall, the news they gave was heartening—and alarming, too. Most of the things that worry Americans aren’t really that serious, especially those that involve “falling behind” anyone else. But there is a deeper problem almost too alarming to worry about, since it is so hard to see a solution. If we’re worried, perhaps that’s a good sign, since through American history worry has always preceded reform. What I’ve seen as I’ve looked at the rest of the world has generally made me more confident of America’s future, rather than the reverse. What is obvious from outside the country is how exceptional it is in its powers of renewal: America is always in decline, and is always about to bounce back. That is the American tragedy of the early 21st century: a vital and self-renewing culture that attracts the world’s talent, and a governing system that increasingly looks like a joke. One thing I’ve never heard in my time overseas is “I wish we had a Senate like yours.” The most charitable statement of the problem is that the American government is a victim of its own success. It has survived in more or less recognizable form over more than two centuries—long enough to become mismatched to the real circumstances of the nation.

Nixonland,  by Rick Perlstein This is not a political biography, though. Rather, it offers a disturbing, detailed look at how America was torn apart during the sixties to a degree rivaled only by the Civil War. Unlike many political histories of the sixties, it doesn’t place the locus of action in the South, where civil-rights pioneers marched, but instead in the big cities: Los Angeles, Cleveland, and Detroit, where blacks rioted and whites revolted against integration. Meanwhile, in Berkeley and Chicago, the New Left hijacked liberalism and helped drive it into the ground.  Perlstein explains that not Nixon but Reagan was the first major figure to campaign against liberalism by linking it to the chaos afoot in America. It was in the course of watching Reagan run for the 1966 California gubernatorial race that Nixon picked up Reagan’s tactics and rhetoric. Two years later—just four years after LBJ’s landslide presidential victory—Nixon successfully campaigned for the presidency by casting the election as a contest between the “Silent Majority” and liberal elites. And in 1972, he built on those divisions to turn that narrow win into a landslide. Perlstein’s master argument is that we are still living in Nixon’s America, where politicians claim to represent us against a ruling class that threatens to corrupt and take advantage of us. (Perlstein makes the case that this trope was integral to the rise of the right, from Barry Goldwater through George W. Bush.) Nixon didn’t just adopt this us-against-them stance for the sake of his campaigns—it was an outlook that characterized his thinking well before he ran for president…

The Glenn Beck effect It's official: Americans admire Glenn Beck more than they admire the pope. This news, at once unsettling and unsurprising, came from the Gallup polling organization on Wednesday. Beck, the new Fox News host who has said President Obama has a "deep-seated hatred for white people" and alternately likens administration officials to Nazis and Marxists, was also more admired by Americans than Billy Graham and Bill Gates, not to mention Bill Clinton and George H.W. Bush. In Americans' esteem, Beck only narrowly trailed South Africa's Nelson Mandela, the man who defeated apartheid. The 45-year-old recovering alcoholic and Mormon convert has become the first true demagogue of the information age. His nightly diet of falsehoods and conspiracies on Fox, and his daily outrages on the radio, have propelled his popularity past even Rush Limbaugh, Bill O'Reilly and Sean Hannity. His method is simple: He goes places where others are forbidden by conscience.

The Tea Party Teens The United States opens this decade in a sour mood. First, Americans are anxious about the future. Sixty-one percent of Americans believe the country is in decline, according to the latest NBC News/Wall Street Journal survey. Only 27 percent feel confident that their children’s generation will be better off than they are. Second, Americans have lost faith in their institutions. During the great moments of social reform, at least 60 percent of Americans trusted government to do the right thing most of the time. Now, only a quarter have that kind of trust. The country is evenly divided about President Obama, but state governments are in disrepute and confidence in Congress is at withering lows. As Frank Newport of the Gallup organization noted in his year-end wrap-up, “Americans have less faith in their elected representatives than ever before.” Third, the new administration has not galvanized a popular majority. In almost every sphere of public opinion, Americans are moving away from the administration, not toward it. The Ipsos/McClatchy organizations have been asking voters which party can do the best job of handling a range of 13 different issues. During the first year of the Obama administration, the Republicans gained ground on all 13. The public is not only shifting from left to right. Every single idea associated with the educated class has grown more unpopular over the past year. A year ago, the Obama supporters were the passionate ones. Now the tea party brigades have all the intensity. The tea party movement is a large, fractious confederation of Americans who are defined by what they are against. They are against the concentrated power of the educated class. They believe big government, big business, big media and the affluent professionals are merging to form self-serving oligarchy — with bloated government, unsustainable deficits, high taxes and intrusive regulation. The Obama administration is premised on the conviction that pragmatic federal leaders with professional expertise should have the power to implement programs to solve the country’s problems. Many Americans do not have faith in that sort of centralized expertise or in the political class generally. Moreover, the tea party movement has passion. Think back on the recent decades of American history — the way the hippies defined the 1960s; the feminists, the 1970s; the Christian conservatives, the 1980s. American history is often driven by passionate outsiders who force themselves into the center of American life. In the near term, the tea party tendency will dominate the Republican Party. It could be the ruin of the party, pulling it in an angry direction that suburban voters will not tolerate. But don’t underestimate the deep reservoirs of public disgust. If there is a double-dip recession, a long period of stagnation, a fiscal crisis, a terrorist attack or some other major scandal or event, the country could demand total change, creating a vacuum that only the tea party movement and its inheritors would be in a position to fill.

Attitudes and Values

The economics of happiness Though the success of the U.S. economic model has long been driven by individual initiative and economic growth, today, with millions of Americans dealing with the loss of jobs, incomes and assets, it does seem like a good time to find better measures of how we're doing. For the past 10 years, I have been studying happiness around the world, in countries as different as Afghanistan, Chile and the United States. It has been an amazing foray into the complexity of the human psyche and the simplicity of what makes us happy. What is most remarkable is how similar the forces driving happiness are in various countries, regardless of a nation's level of development. Wherever I look, some simple patterns hold: A stable marriage, good health and enough (but not too much) income are good for happiness. Unemployment, divorce and economic instability are terrible for it. On average, happier people are also healthier, with the causal arrows probably pointing in both directions. Finally, age and happiness have a consistent U-shaped relationship, with the turning point in the mid- to late-40s, when happiness begins to increase, as long as health and domestic partnerships stay sound. All of this seems rather logical, suggesting that if a government wants to get into the business of promoting happiness, it can pursue some straightforward policy goals, such as emphasizing health, jobs and economic stability as much as economic growth. But here's the complicated part. While there are stable patterns in what leads to happiness, there is also a remarkable human capacity to adapt to both prosperity and adversity. Thus people in Afghanistan -- a war-stricken country with poverty like that of sub-Saharan Africa -- are as happy as people in Latin America, where typical social and economic indicators are a good deal stronger. Kenyans, meanwhile, are as satisfied with their health care as Americans are with theirs. Being a victim of crime makes people unhappy, but the impact is smaller if crime is a common occurrence in their society; the same goes for corruption and obesity. Freedom and democracy make people happy, but the effect is greater when they're used to such liberties than when they're not.The bottom line is that people can adapt to tremendous adversity and retain their cheerfulness, while they can also have virtually everything -- including good health -- and be miserable.

The Battle of the Brain Why is the brain divided? If it is about making connections, why has evolution so carefully preserved the segregation of its hemispheres? Almost every function once thought to be the province of one or other hemisphere—language, imagery, reason, emotion—is served by both hemispheres, not one. There is nonetheless a highly significant difference in how the two hemispheres work, giving rise to two wholly distinct takes on the world. Normally we synthesize them without being aware that we are doing so. But one of the two hemispheres can come to dominate—and just as this may happen for individuals, it may also happen for a whole culture. The neuropsychological evidence shows that the right hemisphere pays wide-open attention to the world, seeing the whole, whereas the left hemisphere is adept at focusing on a detail. New experience, whatever its kind, is better apprehended by the right hemisphere, whereas the predictable is better dealt with by the left. And because the right hemisphere sees things in context, as inseparably interconnected, it recognizes the vast extent of what remains implicit. By contrast, because of its narrow focus, the left hemisphere isolates what it sees, and is relatively blind to things that can be conveyed only indirectly. There is a reason we have two hemispheres: We need both versions of the world. Yet in the West there has been such an imbalance. And as a consequence, over the past 2,500 years, there has been a kind of battle going on in our brains, the result of which has been, despite swings of the pendulum, an ever greater reliance on the left hemisphere. The two hemispheres also differ in their attitude to their differences. The right hemisphere is inclusive in its attitude to what the left hemisphere might know, but the left hemisphere is exclusive of the right. Where the right hemisphere's world responds to negative feedback, the left hemisphere gets locked ever further into its own point of view. Its capacities are limited to doing the same things it has always done, and no more. And so our world has become increasingly rule-bound. Loss of the implicit damages our ability to convey, or even to see at all, aspects of ourselves and our world that transcend the mechanistic. Perspective in art has receded along with harmony in music: We tend more and more to see the world as a heap of intrinsically meaningless fragments. There is an inevitable rise in bureaucracy, with paper replacing people, and experience increasingly virtualized. In going all out for what we believe will be our own happiness, we exploit the world and see ourselves as alien to it, rather than seeing that our happiness depends on being part of it, and therefore on helping it to thrive. This is the world of the left hemisphere, ever keen on control. Yet the pursuit of self-interest has not left us happier.

  • Adult Learning | Neuroscience: How to Train the Aging Brain Over the past several years, scientists have looked deeper into how brains age and confirmed that they continue to develop through and beyond middle age. Many longheld views, including the one that 40 percent of brain cells are lost, have been overturned. What is stuffed into your head may not have vanished but has simply been squirreled away in the folds of your neurons.

Topple the false idols of Wall St. But at its core, this is also a spiritual crisis. More and more people are coming to understand that underlying the economic crisis is a values crisis, and that any economic recovery must be accompanied by a moral recovery. We have been asking the wrong question: When will the financial crisis end? The right question is: How will it change us? This could be a moment to reexamine the ways we measure success, do business and live our lives; a time to renew spiritual values and practices such as simplicity, patience, modesty, family, friendship, rest and Sabbath. Many of our religious teachings, from our many traditions, offer useful correctives to the practices that brought us to this sad place. Jesus's Sermon on the Mount instructs us not to be "anxious" about material things, a notion that runs directly counter to the frenzied pressure of modern consumer culture. Judaism teaches us to leave the edges of the fields for the poor to "glean" and to welcome those in need to our tables. And Islam prohibits the practice of usury. (Muslim-owned financial institutions that charge fees for service rather than interest have done amazingly well during this crisis; their practices offer some interesting models.)

The church was too silent in 2009 It is the last day of 2009 and in my mind the most important religious story of the year has been the silence of the church in the wake of the hatred that has been exhibited by Americans as we have struggled with change. It saddens me that The Church seems to be more interested in becoming wealthy, or maintaining its wealth, than in producing a wealth of love and respect among people. Isn't that what religion is supposed to be about? Rick Warren, in "The Purpose Driven Life," begins the book by saying, or getting the readers to say, "It's not about me." In other words, this walk in God is not about what I feel or want, but how I can help make life better for others, and in so doing, better my life as well. There seems to be a burst of political-religious fundamentalism happening in this country. Karen Armstrong writes that fundamentalism erupts when a group feels its status quo, what it is familiar with, is being threatened. That group then vehemently holds onto what it has known for so long. Newness is frightening. It seems that there is a lot of newness happening, and people are frightened. And The Church is silent. So awfully silent. Would that The Church would develop a spine and not care that it is more concerned with tithers, big buildings and well paid clergy. The harvest is past ... and we are not saved...because The Church is way too silent.

Look Ahead With Stoicism—and Optimism The accomplished and sophisticated attorney was asked what attitude he was bringing to the new year. "Stoicism and mindless optimism," he laughed, which sounded just about right. He meant it, he said, about the stoicism. He had immersed himself in that rough old philosophy after 9/11, and had come to adopt it as his own. But he meant it about the optimism, too: You never know, things get better, begin with good cheer, maintain your equilibrium, don't lose your peace. We're at the clean start of a new decade, and it wouldn't be bad if the national watchwords were repair, rebuild and return, with an eye toward what is now our central project, though we haven't fully noticed, and that is keeping our country together. So many forces exist to tear us apart. We have to do what we can to hold together in the long run. We have been through a hard 10 years. They were not, as some have argued, the worst ever, or even the worst of the past century. The '30s started with the Great Depression, featured the rise of Hitler and Stalin, and ended with World War II. That's a bad decade for you. In the '60s we saw our leaders assassinated, our great cities hit by riots, a war tear our country apart. But the 'OOs were hard, starting with a disputed presidential election, moving on to the shocked pain of 9/11, marked by an effort to absorb the fact that we had entered the age of terror, and ending with a historic, world-shaking economic crash. Maybe the most worrying trend the past 10 years can be found in this phrase: "They forgot the mission." So many great American institutions—institutions that every day help hold us together—acted as if they had forgotten their mission, forgotten what they were about, what their role and purpose was, what they existed to do. You, as you read, can probably think of an institution that has forgotten its reason for being. Maybe it's the one you're part of. So what to do? Here my friend the lawyer's stoicism and mindless optimism might come in handy, for turning around institutions is a huge, long and uphill fight. It probably begins with taking the one thing we all hate to take in our society, and that is personal responsibility. If you work in a great institution: Do you remember the mission? Do you remember why you went to work there, what you meant to do, what the institution meant to you when you viewed it from the outside, years ago, and hoped to become part of it?

Posted by dblwyo at 01:04 PM | | Comments (0)

January 10, 2010

Renewing America 3: Re-thinking, -designing & -building for Performance

We are a society of institutions - a large and complex society is too dependent on effective ones for its success, or lack thereof, as it is on any other factor. The institutions that govern our existence were created in the late 19tC and developed between 1890-1920 - and, by and large, haven't changed since then. In fact when you look at the modern University, the modern Hospital or any other major organization its roots lie in this period. That they are that "old" also means that they've been accumulating rules and procedures since then. Back then the populace could take it for granted that effective service, responsiveness and capability would result. Something we not only no longer take for granted but actively doubt. Sadly with fairly good reason. So there we are between a rock and a very hard place. We must have effective institutions to address the problems we must deal with yet the ones we've got are not longer as effective as they were. The questions are then why and what doe that tell us about what we can do about? Policy is merely good intention without results. Translation - in an odd way re-thinking, re-designing and re-structuring our modern institutions is the single most important domestic policy goal we have.

Looking Toward the Future: What We Need to Address

 In the last post (Renewing America 2: Institutions, Values & Performance) we traced out the path from problem to policy to operations to implementation and discussed the problems with the differences between civics textbook ideals and practical realities inside the sausage factory. We also suggested several directions to move forward on. Here we revisit on graphic and add a little detail for each level as well as list the major groups of barriers (assume that the Interest Groups, Partisans and Voter issues recur at each level).

We also suggest some specifics and add a little more detail here without going into engineering specifics. But, for example, the 911 commission found some 15 different committees have intelligence oversight and often issued conflicting guidance. When the Commission called for a more focused oversight no committee was willing to give up its powers. And we've certainly had a sterling lesson in how Congressional voting rules hamstring the legislative process. Every single major piece of legislation has had to be fought tooth and toenail thru the system in the face of bitter partisan and interest group opposition as well as a general lack of voter support (more on that later). What we want to focus on here is agency operations.

Agency Governance and Management

 Usually when someone is railing against government effectiveness there are several characteristics. First off it's never against a program that helps them, e.g. agricultural subsidies or (in the day) mortgage support. It's always some other spendthrift program. The second big argument is that if government just ran more efficiently and had better management and controls all would be well. You may recall Al Gore led the charge on re-engineering government in the 90s and Bush had a major initiative called PART designed to instill "modern management" methods. PART stands for Program Assessment Review Tool and attempt to do just that. And in the last Budget the Administration put the issue of High Performance Government as one of its key planks, with some high level discussion of re-thinking and re-designing PART. The graphic is four pages taken from a downloadble file that's online as USGOV where you can go and see the PART results for every program or department. The spreadsheet that lists the major programs being tracked has over a 1,000 lines and you can see it here. If that doesn't stun you we don't know what will. When you click to enlarge the graphic you'll get an idea of what kind of data is attempted to be collected for each one of these programs. The PART effort is huge, cumbersome and burdensome but nonetheless it wasn't designed or implemented by stupid people. Just the opposite, in fact.

The program, and similar attempts, has one major vulnerability, one major design flaw and two derived structural problems. All of which need to be addressed if we're going to fix OUR problems.

An Alternative Agency Management Philosophy & Design

The fundamental flaw starts with the argument of "run more efficiently", like a business. Well for one thing as someone with thirty years experience in management systems and performance assessment we're here to tell you most businesses are NOT in fact run very well. But they start with one great advantage - their performance is measurable and their goal is to provide a service that makes a profit in the marketplace. The goal of a government agency is to provide a service but by definition and innate character those services are not marketable services (otherwise obviously they would be). Performance is the result of Productivity and that's NOT the result of cost controls and so-called efficiency. It is the result of delivering a service that meets the policy goals using the optimized mix of resources. In "equation" form Performance = Service Result/Inputs. Note: PART is essentially collecting input data, not taking a top-down performance approach.

So that's where we start in re-thinking government operations, by asking what what services we intend to provide (& breaking it down by major program, department, etc.), what strategies, objectives and outcomes and so forth. To put that in place would be a radical re-think that would change the way we deliver government services and should be a requirement of every current activity and proposed legislation.

Operationally the next step is to manage the delivery of those services thru Communication (Marketing if you would as the business analogy), Relationship management (Sales) and Service Initiation (Customer Service). Then you actually have to deliver the service, whether you're the VA running the world's largest healthcare system, the Agriculture Dept. with its myriad programs or any other government operation. ALL of which have few if any private sector equivalents. Finally you need a Planning & Management function as well as new service development capability that proposes, tests, evaluates and designs new programs in response to new needs and/or legislative requirements. This is the kind of service oriented design, for example, that ought to be in place for the new HC proposals when it reaches that stage. And should be retrofitted to all existing programs (which would be mechanically somewhat straightforward given the preexisting PART machinery).

Such an approach would solve the fundamental design flaw, the missing piece, as well as reduce the major vulnerability and reduce or control the two spinoff problems. Sidebar story: some of the senior government executives we've met are some of the brightest, most talented and public spirited people we've ever met. We well recall listening to a DoD official and talking to him afterwards and found out he was also the most gunshy - because he could always count on being hammered by some politician or interest group whose oxen were gored. His military counterparts were much more forthright because they could count on their services to have their backs. As the recent calls to punish the guilty in the Undybomber case show solving a systemic problem when you can ignore it in favor of punishing the innocent in your righteousness is always preferred. This would defend against that.

It would also defend against the two derived problems. The first of which is that without adequate performance measures the only way to judge is by the size and spending on a program. In other words bureaucrats are incented to maximize inputs, not performance. By putting Performance measurement in place that could be changed.

The Next Level Down: Performance and Productivity Management

Let's take that down a level. Productivity = Outcomes/Inputs. First we establish service performance goals at the highest levels and break them down across all the efforts and programs. And establish accurate objectives and measurements - not ask for opinions. And hold Congress responsible which changes the entire interference dynamic as well as putting up a defensive barrier. Inputs = Activities (People, Operating Expenses, Capital). In other words we allocate human resources, operating costs and capital investment in a balanced across each program and each function within a program. That would be a truly radical change.

When we talk about a service-driven management system that emphasizes measurable performance we're talking about something like this sort of blueprint. Perhaps most importantly we don't expect overnight miracles, either. We start by assessing each program or proposal for where it's really at, including starting with (for the first time we think) being responsible for developing measurable service delivery metrics. Then we look at the available resources and figure out what the best balance of overall performance improvement spending is possible for a given level of rsources. And set that as our first level improvement goal. Then we're in position to measure results vs. spending and control that spending against further stages of improvment.

This would be a radical improvement on all fronts. For one thing government executives would no longer be incented to increase the size of their empires. There would be an automatic counter-balanced because, now, additional resources would be available only on delivery of additional results. Turn that around - we could develop performance based compensation and incentive systems where one could do very well indeed by over-delivering on the Outcome/Inputs equation rather than just reaching for more inputs and the increased organization size. Nor would we need to have the excruciating level of mind-numbing input data collection that's built into PART but could operate at a much higher level of detail and leave the details to the judgments of the responsible executives. Finally we would be in a position to decide, quasi-objectively, on where, what and how to invest to get future improvements.

Finally, and perhaps most importantly, we would lay the groundwork to the various agencies to be able to challenge Congress on the thousands and thousands of line item exception mandates. We could insist that any new legislation pass the same tests - what are the services intended, what are the performance measures and what resources are allocated. Which would also provide further defense against interest group line item lobbying - can you imagine the Agriculture lobby having to show that the subsidies they are pushing for deliver results? They might win the first battle or the tenth. But over time....

There you go ... a government operations revolution in a nutshell. Of course it still needs to be coupled with rule changes at the Congressional level though a reverse feedback would be created. And we need to adopt dispersed and distributed localized implementation using new, alternative regulatory mechanisms (as previously discussed). [For a fuller discussion here's a history discussion of quasi-marketlike mechanisms].

And make no mistake - this is important to all our futures. In spite of the appearance of boring terminal wonkishness!

 

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Re-engineering Government

The DNA Problem in American Spying This time, at least, disaster was averted. But the parallels between Christmas Day and Sept. 11, 2001, were inescapable: a radical Islamist, an airplane, explosives that came close to destroying innocent lives. And — perhaps most alarming — the apparent failure of American intelligence to uncover an imminent terrorist attack despite what seemed ample clues. So why were signals missed? Why can’t intelligence agencies communicate better with each other? Those questions hint at a puzzle that has been at the center of modern intelligence-gathering since it took shape, early in the cold war. Then, as now, theorists and practitioners of intelligence sought a smoothly functioning, highly efficient and seamlessly integrated organization, or cluster of organizations. But they struggled at it, largely because the purposes to which intelligence were put were complex and at times contradictory. But once again, the intelligence establishment seems to have been divided. Now, as the review Mr. Obama has ordered goes forward, the results of the previous changes are coming under scrutiny, with some of the harshest criticism aimed at the National Counterterrorism Center, the clearinghouse established after 9/11 to “connect the dots” between the findings of disparate agencies. And while no one has suggested that the trouble is rooted in the longstanding conflict between analysis and interpretation, it does appear that the various agencies failed to mesh as seamlessly as they might have. The question most frequently heard now is whether yet another period of reform is needed. But the problem, no less in 2010 than in 1949 or 1985, may have less to do with the structural defects than with the competing approaches taken by different agencies. The particular disagreements between Sherman Kent and Willmoore Kendall belong to another era, but intelligence professionals still seem fated to work at cross purposes. It may be that even when security agencies speak to each other, they don’t necessarily hear what is being said.

Want real reform? Let's start with Congress. It's gotten to the point now where all it takes to kill something in the Senate is the mere threat of a filibuster, without anyone actually having to mount one. And if you somehow managed to get, say, health reform legislation to the floor, it would take 60 votes to pass a bill that included the public option and 60 votes to pass one without it. Despite what you hear from legislative leaders, there is nothing preordained about this wholesale disregard for majority rule. In fact, it violates the letter and spirit of the U.S. Constitution, which expressly delineates a limited number of instances in which anything other than a majority vote is required. And it makes a mockery of Senate rules and precedent, which for nearly two centuries were grounded in a tradition of comity and mutual respect between majority and minority. All of this, course, has developed so gradually that Washington insiders are inured to the undemocratic nature of the House and the Senate. Most days they are so caught up in the gamesmanship it has spawned that they barely notice how utterly ridiculous and ineffective the legislative process has become. Although most members of the House and Senate will acknowledge that the process is badly broken, they blame the other party and have convinced themselves that there is no way to change it until the other party is so thoroughly defeated that it agrees to change. In other words, they are frogs in a pot.

The Flow-Chart Fallacy Whenever government breaks down, there is tremendous political pressure on our elected leaders to do something about it, lest they be castigated by the voters for sitting on their hands. What do they often wind up doing? Changing the organizational chart. Do such reorganizations make government work better? We know that our government's financial watchdogs failed the public over the past decade, contributing to today's economic mess. In response, the Obama administration is reportedly weighing an overhaul of our financial regulatory apparatus and considering the creation of a mega-regulator that combines many existing agencies. This news comes on the heels of speculation that we might create a federal food safety agency, which would require a partial restructuring of 15 agencies. To be clear, government reorganizations themselves are not necessarily a bad thing. And perhaps we should restructure our financial regulatory agencies and consolidate oversight of food safety. But there are two major problems with such reorganizations. First, they are really, really hard. According to a survey of Fortune 500 executives, more than 70 percent of corporate mergers are doomed to "outright failure." Reorganizations require sustained commitment. In a town with collective attention-deficit disorder, carrying momentum for any reform effort beyond the next election cycle can be a pipe dream. With 535 potential authors of any overhaul, it is hard to achieve consensus and clarity on a plan. And reorganizing agencies should be accompanied by a restructuring of congressional oversight responsibilities so department officials don't have to answer to a dysfunctionally high number of bosses. The fact that DHS falls under the jurisdiction of 86 committees and subcommittees illustrates how agencies are set up for failure if a reasonable oversight structure is not built in. The bigger problem with reorganizations is that they distract from the real problems. The bigger problem with reorganizations is that they distract from the real problems. When government fails, it typically has little to do with the way an agency is organized and almost everything to do with the performance of senior leadership at federal agencies, their ability to effectively manage the people working under them and the culture of the agencies. The 9/11 Commission summed up this dynamic best when it said, "The quality of the people is more important than the quality of the wiring diagrams."

The Productivity Revolution Trickles Into Government Not long after taking over as secretary of energy, Steven Chu called in the top officials working on a program that had been one of his department's top priorities: providing government loan guarantees for $80 billion in clean and renewable energy projects. Congress had authorized the program in 2005, made the first appropriation the year after, and by the time gas prices reached $4 a gallon last year, even the Bush administration was keen to move ahead. And yet by the time the new energy secretary called his team together early in 2009, not a single loan guarantee had been approved. When could he expect the first one? Chu asked. Last quarter of 2010, he was told. The incredulous new secretary declared that that would not do. He hired a management consultant, Matt Rogers, and announced that he would shake up his department's notoriously slow-moving bureaucracy. It didn't take long. By March 20, Chu announced a conditional offer to guarantee a $535 million loan to a California firm to construct a commercial-scale manufacturing plant for its cylindrical solar panels. Last week, four utilities disclosed that they had been chosen for loan guarantees for next-generation nuclear reactors. And by the end of the year, the department expects to be pumping out the guarantees at the rate of several every month. What Chu discovered is what corporate executives and management consultants have long known -- namely, that there are tremendous efficiencies to be achieved by reengineering the way that work is done. And significantly, it can be done even in government, without changing laws, firing lots of employees or outsourcing work to the private sector. That is the same conclusion reached by McKinsey & Co., which published a report this week suggesting that the government could save $45 billion to $135 billion a year by increasing government productivity gains to match those of the private sector. Measuring performance, setting "stretch goals," tearing down silos, empowering front-line employees and encouraging them to take risks -- for decades these have been the hallmarks of a productivity revolution that is only now beginning to take root in government.But the lesson from business is also that the only way it works is with strong, consistent leadership and involvement from the top of the organization. In Washington, that means a president, a Cabinet and a White House staff that understand that it's not enough to come up with new and better policies if you don't have a government that can implement them efficiently and effectively.

Changes to PART Referenced in Obama Budget  President Obama released more details of his FY 2010 budget request last week and I've been spending some time flipping through it today. I didn't have to flip far to find some encouraging news about how the new administration will tackle performance assessment over the next four years and what they plan to do with the Program Assessment Rating Tool (PART). Front and center on page 9 in the most important volume in the budget release - the Analytical Perspectives - is a section called "Building a High-Performing Government." This gives the first details about administration plans to replace PART with a new performance system the administration refers to as a "performance improvement and analysis framework." It has been no secret that the Obama administration was not satisfied with the PART or the Bush administration's attempts at assessing government performance. OMB Director Peter Orszag let it be known during one of his confirmation hearings before the Senate that he hoped to create a more open, responsive, and dynamic system to review program performance. Until now though, we had few details about how exactly OMB and the White House would go about creating such a system. While the budget release still is short on details with only one page specifically on performance measurement, there are some encouraging themes that are emerging from the budget, including overhauling the focus on the performance system and a commitment to transparency. While not throwing out the PART altogether, the budget speaks of taking a new approach: A reformed performance improvement and analysis framework will switch the focus from grading programs as successful or unsuccessful to requiring agency leaders to set priority goals, demonstrate progress in achieving goals, and explain performance trends. Also encouraging is that the administration wants to engage a variety of stakeholders - including the public, Congress, and outside experts - to help create a more open performance measurement process and identify high priority goals for agencies. In many ways, this was exactly what was missing from the PART - an open dialogue between a variety of stakeholders, including different parts of the government, about achieving shared goals. This is indeed different than under the Bush administration. We aren't likely to see a lot of movement on instituting a new framework until the CPO nominee Jeffrey Zients is confirmed by the Senate, but it will be exciting to see the Obama administration continue to add details to their overhaul of government performance systems.

Sunstein's Ideas at Work in U.S. Policy Cass Sunstein doesn't lack for ambition. His publisher describes him as the most-cited law professor in the U.S., "and probably the world." The 54-year-old Harvard University law scholar will soon enjoy even greater influence. Nominated as President Barack Obama's regulatory czar, Mr. Sunstein will hold sway over the federal bureaucracy at a time when new rules are touching virtually every corner of American life, from health and environment to labor and finance.Mr. Sunstein, who declined to be interviewed pending his Senate confirmation, expected this month, has been picked to run the obscure but powerful Office of Information and Regulatory Affairs within the White House Office of Management and Budget. Created by President Jimmy Carter in 1980 to reduce paperwork and weigh the usefulness of new regulations, the office is the final clearinghouse for rules written by agencies government-wide. The office became an antiregulatory hub under President Ronald Reagan but faded in influence under President Bill Clinton. It regained its punch within the bureaucracy under President George W. Bush. Mr. Obama now wants to reshape the office to dovetail with Mr. Sunstein's pioneering work in the school of "behavioral economics." The idea behind this approach is that rules work better if they are attuned to people's habits and predilections rather than simply to a desired outcome. In a significant, but little noticed, memo written 10 days after taking office, Mr. Obama ordered up a rewrite of how OIRA goes about its work, the first such revision since 1993. "Far more is now known about regulation -- not only when it is justified, but also what works and what does not," the president wrote. A regulatory review would make use of new tools and would "clarify the role of the behavioral sciences in formulating regulatory policy." The dizzying breadth of Mr. Sunstein's opining -- he has weighed in on everything from motorcycle helmets to ways to avoid "uncivil emails" -- has made him a target for both the right and left. He has written hundreds of legal papers and over 15 books, including the recent best seller "Nudge," which focuses on how policy makers could better steer people away from bad decisions. Some conservatives bristle at what they see as Mr. Sunstein's paternalism: that most people don't know what's best for them and need nudges from on high. Rural Republicans are alarmed over his statements on the wisdom of a hunting ban and his suggestion that animals may deserve more rights in court. It is liberals who appear the most uneasy about Mr. Sunstein's track record. He is a strong advocate for weighing the estimated costs against the benefits of regulation, a position that advocates fear could weaken efforts to strengthen federal rules on health and safety.

ROTC for civilians Imagine a time when government work was exciting, widely admired and much sought-after.  It seems an outlandish thought at a moment when you cannot turn on your television without hearing government spoken of as almost an alien creature. It is cast as far removed from the lives of average Americans and more likely to destroy the achievements of private citizens than to accomplish anything worthwhile. True, we don't apply our anti-government sentiments to at least one group of Americans who draw government paychecks: our men and women in uniform. All the polls show they are, deservedly, held in high esteem. But civilians who do the daily work of government are more likely to be referred to as "bureaucrats," "timeservers," and various unprintable names than as public servants. This has not always been the American way. There were important eras in our history when citizens in large numbers were drawn to government service with a sense of mission and exhilaration. The New Deal was certainly such a time, as were the days of the New Frontier and (though it is unjustly derided now) the Great Society.

Posted by dblwyo at 06:47 PM | | Comments (0)

January 05, 2010

Renewing America 2: Institutions, Values & Performance

In case you hadn't noticed today is the first real working day of the new year, and depending on how you count it, of the decade. The last decade began with euphoria to the point of delusion-euphorillusion but quickly came aground against a series of challenges. It ended worse, as if you don't know that. We've managed to avert disaster and step back from the edge of the cliff but have the accumulated detritus of the decade that we must not only clean up but fix and move far beyond. Our last post expressed considerable optimism but accepted the depth and difficulties of the challenges. In our minds the central challenge is in changing our institutions and how they function. But just for starters you might want to review Rick Newman's list of four major problems we need to address. We covered some of that ground in the last post, or at least the readings; they are largely attitudinal but Mr. Newman doesn't propose ways of dealing with them (important as they are).

A while back David Brooks had a pair of opeds that discussed the "The Protocol Society" and "The God That Fails" that begins to. In the first when he talks about protocol he's really talking about the rules that govern our society, what the folks who study it call institutions. They can be formal, for example court systems, government or churches. Or they can be informal, holding the door for someone, norms of behavior and other rules of behavior. But they are the embodied and accumulated learnings from past experience captured in organizations and rules and they govern our lives.

Theory vs. Practice: Policy-making in the Real World

The path from voters wants and needs to new policy to actual implementation is governed by these institutions and it'll pay us to understand how they work vs. how they're supposed in the ideal world of your h.s. civics textbook. In the ideal world wants and needs are supposed to be translated by our represenatives into the best working compromise they can come up with and result in legislation. In turn that is turned over to the Federal agencies to be taken down into more detail and result in a set of detailed regulations to implement.


 

The Agency then develops a set of staffing requirements, operating procedures and processes and policies that are supposed to result in the effective implementation of the result. This being a very large and complex country what they are administering is the distributed implementation of policy in specific directives at the localized level, the state and local level. This being a Federal system that's supposed to happen in conjunction with the local agencies and governments.

In reality this ideal process is perturbed all along the way. Interest groups work to influence politicians in setting policy and agencies writing regulations, as well as in specific cases. Politicians are subject to other pressures as well, starting with their fundamental strategic goal to get re-elected. Since politics is partisan and the best interests of the party and the politician are not necessarily served by finding the best workable compromises between conflicting policy and regulatory goals they often work to pursue other ends. As we've seen in spades this year.

Interest Groups, Rent-seeking and Capture

Anytime things are decided by administrative fiat the impact of the rules is going to determine the fates of many interested parties. It is NOT therefore surprising that they are willing to go to great lengths to influence the decision-making and implementation processes. They would in fact be remiss in not doing so. The real question is how they influence the process. If they seek to make the new rules accurately reflect realities they understand better than anyone else there may be a net benefit. When they focus on manipulating the rules for their own narrow benefit they are seeking to create rents for themselves. And when the pursuit of rents becomes more important to them than in creating value you have the recipe for serious degradation of performance and the cause of the failure of most societies in history. The Chinese have gone thru this cycle so many times that the peasants habitually store emergency supplies away from the government's reach to protect themselves in the case of collapse.

Rent-seekers, Values and Mechanisms

The Chinese answer historically, as it has been for every other civilization, is to try to recruit, train and employ competent administrators who's major ideal is the best public interest. Sometimes this works but more often, and also eventually, the mandarins start pursuing their own interests. We are very far from that stage, fortunately. On the whole most public servants in the US are there to serve the public interest as their highest ideal. But more and more, despite the best intentions, we're becoming prisoners of rent seeking. The appeal to gentlemanly conduct won't fix it. And some of it is inherent so it must be controlled (which is why you have Inspector Generals and the GAO for example). But the real key is the mechanism for implementation.

The administrative apparatus we use today has it's roots in the late 19thC, as well as longer historical experience. But as society grew enormously in size, connections and complexities the challenge was to find ways to run it. Between 1890-1920 we, collectively and in all the major developed countries, came up with one version or another of the same basic answer: large-scale bureaucracy. Which is not inherently a bad thing, and setting aside the interest-group influences. It's certainly the best answer we've come up with.

But innate in the purely administrative approach to implementation is the notion that you can you write a rule to change things. Which in turns calls for inspection, administration, enforcement, adjustment and adjudication of those rules in the trials and turbulences of the real world. For policy problems we've been wrestling with for centuries the ways and means are pretty well understood. But beginning the 60s we started tackling a whole host of new problems for which the administrative approach was very ill-suited. What we desperately require is another strategic approach entirely. One that relies less on rules and more on administered incentives that cause the various interested parties to want to pursue the policy rather than distort the rules in their favor. The whole backlash against social engineering was a backlash against the failures of administrative bureaucracy.

Yet there were pockets where a more de-centralized system was developed and very successfully implemented. Atul Gawande in his recent article points to the agricultural extension programs of the US Ag. Dept. where agents who had access to a huge inventory of knowledge and skills and special capabilities could share all that with the local farmers who knew local conditions better. But who could not afford to learn all that there was to learn. A similar experimental approach to de-centralized organization and collaborative implementation based on incentive alignment is what we need for all the major social and domestic challenges we're facing. Whether it's Energy, Infrastructure, Education or Healthcare. In fact such an approach is explicitly built into the current proposed Healthcare legislation and is being adopted and adapted by the Education and Energy Depts.

Expectations, Realities and Choices

To some extent we're all trapped in the system as it is and must face the challenge of changing it to suit our new needs and problems. Fortuantely we have some examples to point toward. Unfortuantely we don't have a large pool of knowledge, skills, resources or techniques and will have to come up with them. In the 60s though, having won WW2 thru a command-n-control approach we tried to apply the same approach to problems that would last longer, were more complicated and would lead to the capture of the bureaucracies by their own accumulating rules and proceedures. This time around we know better we just don't have the perfect answer.

The recent underwear bomber case and how everyone reacted to it is a perfect illustration though. Read the cartoons for a minute - is that a fair judgement? How would you design and build a worldwide intelligence service that knew everything all the time, stopped all attempts no matter how many and how clever they were? Or got - since this is a game where opponents get smarter over time.Bearing in mind that the NSA sees approximately 500K intercepted messages/day! And, oh btw, with all due respect for politically correct due processes and individual rights as well.

If we expect absolute perfection from our institutions they'll never satisfy those goals. We can expect reasonable effectiveness, satisfactory efficiency, experimentation and learning. If we let them. But if instead we insist that the measure of policy is to serve our own narrow needs and to do so perfectly we create a vicious feedback loop where partisan politics and special interests will pile exception and exemption on top of one another.At the end of the day our institutions will eventually perform like we ask them to. What's your choice?

So, at the end of the day, what do we conclud here?

1) Policy-making needs to be more about value-creation than rent-seeking which calls for process changes in congress on the one hand AND changes in voter expectations. Don't hold your breath but do read How America Can Rise Again.

2) The really big change we need is to change the way the administrative apparatus works - the current search for the guilty in the under-bomber case is simply going to cause well-meaning civil servants to look for more air cover. It's time and far past to move beyond reinventing government and actually do it.

3) The second big change is to look for new implementation mechanisms, though we have a somewhat better idea how to proceed here.

All three changes call for public support - that's you in case you didn't get it! Sealed.

Meanwhile we'll leave you with this quote from James Fallows:

"I started out this process uncertain; I ended up convinced. America the society is in fine shape! America the polity most certainly is not. Over the past half century, both parties have helped cause this predicament—Democrats by unintentionally giving governmental efforts a bad name in the 1960s and ’70s, Republicans by deliberately doing so from the Reagan era onward. At the moment, Republicans are objectively the more nihilistic, equating public anger with the sentiment that “their” America has been taken away and defining both political and substantive success as stopping the administration’s plans. As a partisan tactic, this could make sense; for the country, it’s one more sign of dysfunction, and of the near-impossibility of addressing problems that require truly public efforts to solve."

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A Look Back in Pictures

Consequences, Challenges & Inheritances

4 Problems That Could Sink America If we're lucky, the recession is winding down, and life will start to feel a bit more comfortable before long. But that doesn't mean things will go back to the way they used to be. The global recession that began in America's housing market has shaken the world's economic order and possibly knocked the United States down a notch or two. The spendthrift American consumer is out of money. American wages are flat. Despite some hopeful signs, the U.S. economy could muddle along for years. American innovation has solved daunting problems before and could again. But it would be a mistake to assume that American prosperity will continue on some preordained upward course. Nations rise and fall, often realizing what happened only in retrospect. Here are four problems that are undermining our future prosperity: We don't like to work. Sure, now that jobs are scarce, everybody's willing to put in a few extra hours to stay ahead of the ax. But look around: We still expect easy money, hope to retire early, and embrace the oversimplistic message of bestsellers like The One Minute Millionaire and The 4-Hour Workweek. Unfortunately, the rest of the world isn't sending as much money our way as it used to, which makes it harder to do less with more. White-collar jobs are now migrating overseas just like blue-collar ones. Kids in Asia spend the summer studying math and science while American mall rats are texting each other about Britney and Miley. "We need a different mind-set," says Guillen. "People need to invest more in their own future. Instead of buying stuff at the mall, spend the money on evening classes. Learn a language or skills you don't have." We're uninformed. The healthcare smackdown—sorry, "debate"—is Exhibits A, B, and C. The soaring cost of healthcare is a problem that affects most Americans. It's shrinking paychecks, squeezing small businesses, bankrupting families and swelling the national debt. Yet outraged Americans seem most concerned about fictions like death panels and government-enforced euthanasia, while clinging to the myth that our current system of selective availability and perverse incentives somehow represents capitalist ideals. But let's take a break from that burdensome issue to examine the likelihood that President Obama was born in a foreign country and hoodwinked America into believing he was eligible to run for president. People who lack the sense to question Big Lies always end up in deep trouble. Being well informed takes work, even with the Internet. In a democracy, that's simply a civic burden. If we're too foolish or lazy to educate ourselves on healthcare, global warming, financial reform, and other complicated issues, then we're signing ourselves over to special interests who see nothing wrong with plundering our national—and personal—wealth.

Aughts were a lost decade for U.S. economy, jobs For most of the past 70 years, the U.S. economy has grown at a steady clip, generating perpetually higher incomes and wealth for American households. But since 2000, the story is starkly different. The past decade was the worst for the U.S. economy in modern times, a sharp reversal from a long period of prosperity that is leading economists and policymakers to fundamentally rethink the underpinnings of the nation's growth. It was, according to a wide range of data, a lost decade for American workers. The decade began in a moment of triumphalism -- there was a current of thought among economists in 1999 that recessions were a thing of the past. By the end, there were two, bookends to a debt-driven expansion that was neither robust nor sustainable. There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well. Middle-income households made less in 2008, when adjusted for inflation, than they did in 1999 -- and the number is sure to have declined further during a difficult 2009. The Aughts were the first decade of falling median incomes since figures were first compiled in the 1960s.

The Big Zero Maybe we knew, at some unconscious, instinctive level, that it would be an era best forgotten. Whatever the reason, we got through the first decade of the new millennium without ever agreeing on what to call it. The aughts? The naughties? Whatever. (Yes, I know that strictly speaking the millennium didn’t begin until 2001. Do we really care?) But from an economic point of view, I’d suggest that we call the decade past the Big Zero. It was a decade in which nothing good happened, and none of the optimistic things we were supposed to believe turned out to be true. So there was a whole lot of nothing going on in measures of economic progress or success. Funny how that happened. For as the decade began, there was an overwhelming sense of economic triumphalism in America’s business and political establishments, a belief that we — more than anyone else in the world — knew what we were doing. So here’s what Mr. Summers — and, to be fair, just about everyone in a policy-making position at the time — believed in 1999: America has honest corporate accounting; this lets investors make good decisions, and also forces management to behave responsibly; and the result is a stable, well-functioning financial system. What percentage of all this turned out to be true? Zero. What was truly impressive about the decade past, however, was our unwillingness, as a nation, to learn from our mistakes. Even as the dot-com bubble deflated, credulous bankers and investors began inflating a new bubble in housing. Even after famous, admired companies like Enron and WorldCom were revealed to have been Potemkin corporations with facades built out of creative accounting, analysts and investors believed banks’ claims about their own financial strength and bought into the hype about investments they didn’t understand. Even after triggering a global economic collapse, and having to be rescued at taxpayers’ expense, bankers wasted no time going right back to the culture of giant bonuses and excessive leverage. Then there are the politicians. Even now, it’s hard to get Democrats, President Obama included, to deliver a full-throated critique of the practices that got us into the mess we’re in. And as for the Republicans: now that their policies of tax cuts and deregulation have led us into an economic quagmire, their prescription for recovery is — tax cuts and deregulation. So let’s bid a not at all fond farewell to the Big Zero — the decade in which we achieved nothing and learned nothing. Will the next decade be better? Stay tuned. Oh, and happy New Year.

The Best Is Yet to Come The big idea behind "Sonic Boom" is that globalization—celebrated, reviled and analyzed for at least a decade now—has hardly begun. The world, Mr. Easterbrook believes, is on the verge of a period of pell-mell integration that will dwarf anything before now, and a good thing too: The coming age of global integration, he argues, will produce riches that none of us can imagine and scatter them more widely than ever before. But Mr. Easterbrook is not offering just another account of the shift in economic opportunity from the West to the East. Instead, he wants to show how a rapid reconfiguration of resources is benefiting all sorts of unexpected people and places. Erie may not be booming, but it is doing better than it has for decades, thanks to General Electric's willingness to ignore Wall Street analysts (who said that manufacturing was dead and the future lay in finance) and make a bet on renovating its locomotive plant. Today the plant is an important profit center, and trains are the apple of everybody's eye, including Warren Buffett's, while GE's financial-services division was the source of almost all the company's recent losses. But he is at his most interesting on a subject that he seems slightly reluctant to embrace—the creativity of the manufacturing sector. Manufacturing companies have done a much better job of improving their productivity than sexier service companies. The average car bought today costs 6% less than the average car bought a decade ago and is stuffed full of clever gadgets. America produces more steel today than it did 30 years ago, despite the shuttered plants and slimmed-down work force. Manufacturers have also been much better at responding to the pressures of globalization. Haier, a Chinese domestic-appliance maker that had such a bad record for quality a generation ago that the Chinese used its washing machines to store coal, is now a world-class company with its American headquarters in Camden, S.C. General Electric sells 40% of the locomotives that it makes in Erie to China.

Causes, Dysfunctions and Breakdowns

Opposition Strategy 101 The Democrats have been peddling hard a "Party of No" narrative--I get what seems like an email a day from the Democratic National Committee with some update or twist on this theme--though I have no idea whether this meme about the GOP is resonating or not with the broader public. In any case, I think it is actually wise--as a general rule, and specifically to healthcare--for the GOP to vote against reform. Mind you, this has nothing to do with my opinions about the bill or its significance; I'm speaking here solely about political calculus. To demonstrate my point, consider the opposition party's situation as a simple game with two possibilities for the quality of legislation the majority passes--a generally "popular" bill or a generally "unpopular" one--and two options for how minority party members can vote on those bills, either voting with the majority or against. Presumably, legislators have some notion of how popular the legislation will be, but their information is incomplete. I don't suggest that this game and my hypothetical payouts apply at all times and everywhere. But I do think as a general rule, or at least the default strategy, minority parties should vote unanimously in opposition to majorities. Why? Because if you vote along with them, you get little credit and are used for political cover when things go wrong, making it a break-even/lose situation. And if you vote against you usually pay little to no price if things go well, but stand to reap huge windfalls if things go awry, making that a break-even/win situation. Applying all of this specifically to the healthcare legislation, there really is no reason for any Republican to vote for it. There are a lot of specific reasons why this is so: the GOP coalition is older and whiter and thus will benefit less; conservative voters reflexively oppose expansions of government of any type; etc. But even if the ideological and demographic reasons are held aside, it makes sense to vote "nay."

The Protocol Society In the 19th and 20th centuries we made stuff: corn and steel and trucks. Now, we make protocols: sets of instructions. A software program is a protocol for organizing information. A new drug is a protocol for organizing chemicals. Wal-Mart produces protocols for moving and marketing consumer goods. Even when you are buying a car, you are mostly paying for the knowledge embedded in its design, not the metal and glass. Over the past decades, many economists have sought to define the differences between the physical goods economy and the modern protocol economy. In 2000, Larry Summers, then the Treasury secretary, gave a speech called “The New Wealth of Nations,” laying out some principles. Leading work has been done by Douglass North of Washington University, Robert Fogel of the University of Chicago, Joel Mokyr of Northwestern and Paul Romer of Stanford. Protocols are intangible, so the traits needed to invent and absorb them are intangible, too. First, a nation has to have a good operating system: laws, regulations and property rights. Second, a nation has to have a good economic culture. “From Poverty to Prosperity” includes interviews with major economists, and it is striking how they are moving away from mathematical modeling and toward fields like sociology and anthropology. What really matters, Edmund S. Phelps of Columbia argues, is economic culture — attitudes toward uncertainty, the willingness to exert leadership, the willingness to follow orders. A strong economy needs daring consumers (Phelps says China lacks this) and young researchers with money to play with (Romer notes that N.I.H. grants used to go to 35-year-olds but now they go to 50-year-olds).

The God That Fails During the middle third of the 20th century, Americans had impressive faith in their own institutions. It was not because these institutions always worked well. The Congress and the Federal Reserve exacerbated the Great Depression. The military made horrific mistakes during World War II, which led to American planes bombing American troops and American torpedoes sinking ships with American prisoners of war. But there was a realistic sense that human institutions are necessarily flawed. History is not knowable or controllable. People should be grateful for whatever assistance that government can provide and had better do what they can to be responsible for their own fates. That mature attitude seems to have largely vanished. Now we seem to expect perfection from government and then throw temper tantrums when it is not achieved. We seem to be in the position of young adolescents — who believe mommy and daddy can take care of everything, and then grow angry and cynical when it becomes clear they can’t. Reality is unpredictable, and no amount of computer technology is going to change that. Bureaucracies are always blind because they convert the rich flow of personalities and events into crude notations that can be filed and collated. Human institutions are always going to miss crucial clues because the information in the universe is infinite and events do not conform to algorithmic regularity. Resilient societies have a level-headed understanding of the risks inherent in this kind of warfare.But, of course, this is not how the country has reacted over the past week. There have been outraged calls for Secretary Janet Napolitano of the Department of Homeland Security to resign, as if changing the leader of the bureaucracy would fix the flaws inherent in the bureaucracy. There have been demands for systemic reform — for more protocols, more layers and more review systems. Much of the criticism has been contemptuous and hysterical. For better or worse, over the past 50 years we have concentrated authority in centralized agencies and reduced the role of decentralized citizen action. We’ve done this in many spheres of life. Maybe that’s wise, maybe it’s not. But we shouldn’t imagine that these centralized institutions are going to work perfectly or even well most of the time. It would be nice if we reacted to their inevitable failures not with rabid denunciation and cynicism, but with a little resiliency, an awareness that human systems fail and bad things will happen and we don’t have to lose our heads every time they do.

Posted by dblwyo at 03:31 PM | | Comments (0)

January 01, 2010

Renewing America 1: Hard, Doable and Necessary

It's the New Year so we thought we'd take stock and look ahead, as so many others are doing. For the most part everybody accepts it's been our roughest decade for a long time, that it began with Trouble and ended with TROUBLE and that much of it was self-inflicted. While we agree with most of that, as you can tell by reading almost any post here, we also find ourselves strangely optimistic in general, for several reasons. Not for just emotional ones though that too but for substantive ones as well.

There's no denying that we have a lot of challenges and barriers in front of us, either. But, not to be too pollyannish about, the critical requirement is the heart of the people. We can choose to rise to these challenges or not. America has always shown a great deal of resilience, combined of course with a profound ability to get itself into position where that resilience is necessary. As a fellow sailor said about Lord Mountbatten, "there's no body better to be in terrible trouble with .... and nobody who'll get you in terrible trouble faster than Dickie".

So, can we get ourselves out of trouble here or not?

 The answer to that question is THE central issue we will wrestle with for a long time.

Obligatory Nods: What Terrible Trouble We're In

Let's make the obligatory nods toward acknowledging reality, just so we're all talking from the same baseline. Now we've put up more than our fair share of reviews and diagnostics on things like the economy, budgets, foreign policy, Healthcare, etc. etc. Hopefully our credentials as steely-eyed analysts of accumulated screwing up are well enough established to not need any more wonkcharts to prove it. Another way of taking the temperature of things is by channeling the editorial cartoonists who are good thermometers, even when they don't really get it and react strictly in the moment.

Put another way - they're about as good a zeitgeisterometer and semi-informed opinion monitor as there is. We're going to grab off two composites from Daryl Cagle but his Decade in Review and Year in Review will give you a whole bunch of others. Pick and choose at your leisure and pleasure but we suspect you'll find relative convergence. Sorry for the size but click on through - they're pretty funny, and very painful. But the teeniness lets us use two - this is after all a decade we're talking about. What we did was sort of bookend things, taking the first sample from the beginning of the decade which started with a mild recession, soon followed by 911 and then Iraq. Not to mention the surge of globalization, the Housing Bubble (financiers gone wild 2) and the triumph of 50%+.01 partisan politics, not to mention the Ripublican discovery that being in power meant endless lobbying funding opportunities.

A Deeper Look at the Troubles

Needless to say lots of folks are looking back. NB: can you remember how you viewed the onset of Year00 - probably pretty optimistically despite the market bust, right?

Well, let's pay that super-shrink trick again only this time with something a little more in depth. This graphic made the rounds like wildfire late this week and is a year by year survey by major category (at least major in the view of the more socially conscious, which tells us something about how they view the world). Nonetheless it's worth a minute or three to review it and be reminded of all the things that have changed.

Just to take a personal example - on the floor of my TV/fiction/goofing off room are three boxes of VCR tapes of educational programs. Wonderful stuff which I got circa 2002/2003/2004. Toward the end of that the company (The Teaching Company - VERY highly recommended) started switching over to DVD. But before the DVD revolution really completed online internet access started making lots of interesting stuff readily available 7X24 (have you checked out HULU, or noticed we watch a lot of Charlie Rose's programs on line?). 

A slightly more serious look is this infographic that looks at recent relative news coverage (be interesting to see one for the year, or year by year for the decade though. BtW - we rest our case. The explosion of new user interfaces and re-thinking the media in the last 18 months, particularly the last 6-9, has been phenomenal). On the whole we think the news coverage pretty accurately grasps the relative importance of these issues. Key domestic issues dominated - especially the Economy and Healthcare. Which we've been covering extensively. But key foreign policy issues (Afghanistan, Iran, etc.) got some of their just due. Our rankings would be different of course but this isn't a bad start.

So, How Did People React?

That's always a tough question of course but one way to judge is by an interesting "December Madness" playoff that the Washington Post staged where it "invited" key players of the decade into a "tournament" and had folks pick who they'd thought were most important. Instead of posting the final chart we're going to post the results of the first round. Fascinating and not to far out of line. Of course some of the brackets and seedings were a little artificial - was Paris Hilton really a major factor in the decade? More so than Lance Armstrong. On the surface you'd like to say no (actually we'd like to say hell no but ...). In fact the more we thought about the more relevant and important it was. We greatly admire Lance and all he did and stood for. Our reactions on Paris are just the opposite but being charitable, compassionate and benign we won't give vent to them full bore.

But as an indicator of the attitudes of the culture and society? Paris Hilton was more influential than Lance Armstrong - and that tells you about all you really need to know about what went wrong this decade. It really, truly does. Of course if you want to see the final results, earlier rounds, check out the discussions or find out whether or not your fellow citizens (at least this biased sample) made choices you agree and can live with you need to go to the site.

What's Really Going On Here: Optimism vs. Pessimism and the Renewal of Civitas

Let's come full circle back to my original argument. Despite all the troubles I'm increasingly optimistic for several reasons. Not because the difficulties, costs and timeframes are under-estimated. Not because of some pollyannish blindfulness either. No, for two fundamental reasons. First off the analytical, which we've been covering in detail this whole year. If you look at our various analysis policy and politics the things we put on record years ago as necessary to arrest and fix the problems we were creating are starting to be done. Note: a key word there is starting! Again, this won't be easy, the partisan politics has gotten even worse than it was last decade or in the 90s and the problems are bigger, more difficult and more wrapped up with deep. fundamental changes. That's a recipe for "hard as they come".

No, the reason we're encouraged is we're beginning to see the renewal of a sense of Civitas. Which we've sort of coined and misused but, adapted from the ancient Romans at their ideal best, means being a responsible member of the civitas, the community. That means acting self-responsibly in your own life but equally, if not more important, it means acting in the broader public interest when and as necessary.

You see the real roots of our multiple crisis don't lie in this decade of Hiltonitis, they lie deeper when we decided it was the best of all worlds and the endless pursuit of more instantly became a driving mantra.

Perhaps we're on a journey for the forced re-discovery and re-commitment of the ancient verities?

We've always cycled around multiple, conflicting attitudes and outlooks. Actually not just us, it seems to be human nature. When things get tough people are faced with reality - and they buckle down and figure out how to cope. If for no other reason(s) than we're here to worry about it as the descendants of coping survivors it means it works. It also means that it's also Darwinian - those that didn't cope don't have many descendants. Of course when it works a natural sense of relief is soon followed by relaxation and then relapse into a "heah, I earned this party, dude" attitude. True the first time or the first dozen. If life ultimately is not about wine, women and song what is it about? But you can only drink so much great wine, listen to so many songs and, well...never mind. Then you have to pay for them. Better yet it takes a lot of effort to make a great wine, write a great symphony, paint a great picture, build a better business or develop a new healthcare system. Enormous effort.

At some point though if we partay'd too heartay it's OMG time and people realize it's time to start shifting their attitudes. The police are hear/here, everybody's hungover, the owner wants the bill settled and you realize cleaning up the mess is going to be long, hard, messy and expensive. Just necessary.

So, if we're optimistic, that's the reason. People are still in shell-shock and may curl up in the corner (we certainly admit to the temptation from time to time, but never more than ten a day). But if we have that OMB moment and quickly get to the "All Pull Together" we'll fix this.

The first steps in dealing with problems is admitting they exist, deciding to deal with them and having some clue as to how to go about it. We've started the process and that's encouraging.

 

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Consequences, Challenges & Inheritances

The Recession Begins Flooding Into the Courts New York State’s courts are closing the year with 4.7 million cases — the highest tally ever — and new statistics suggest that courtrooms are now seeing the delayed result of the country’s economic collapse. The Great Recession may be showing signs of easing, but the legal fallout from the financial troubles, the numbers suggest, may have only just begun. And the increase in New York offers a preview of the recession-related cases showing up in courts across the nation. New York’s judges are wading into these types of cases by the tens of thousands, according to the new statistics, cases involving not only bad debts and soured deals, but also filings that are indirect but still jarring measures of economic stresses, like charges of violence in families torn apart by lost jobs and homes in jeopardy. And they said that the data showed that courts nationally would be working through the recession’s consequences for years, much as they did with the flood of cases stemming from the crack cocaine epidemic of the 1980s, even after the epidemic had slowed. “Society’s problems come to us,” New York’s chief judge, Jonathan Lippman, said. “We are the emergency room for society.” Steve C. Hollon, an Ohio court official who is president of the Conference of State Court Administrators, said court officials nationally had noticed a growing number of people saying their circumstances were so desperate that they could not afford lawyers, turning virtually every kind of case into a journey through the economy’s rough edges. The new statistics in New York show the breadth of the recession-related cases — in family, criminal and commercial courts and on across the judicial system. The cases turn the courts into theaters of the economic crisis. Court administrators said it is likely they have seen only the first wave of recession cases because courtroom battles take time to brew. They said they were bracing for more suits over business disputes, foreclosures, evictions and family disputes as the costs of the downturn continued to be revealed.

4 Problems That Could Sink America If we're lucky, the recession is winding down, and life will start to feel a bit more comfortable before long. But that doesn't mean things will go back to the way they used to be. The global recession that began in America's housing market has shaken the world's economic order and possibly knocked the United States down a notch or two. The spendthrift American consumer is out of money. American wages are flat. Despite some hopeful signs, the U.S. economy could muddle along for years. American innovation has solved daunting problems before and could again. But it would be a mistake to assume that American prosperity will continue on some preordained upward course. Nations rise and fall, often realizing what happened only in retrospect. Here are four problems that are undermining our future prosperity: We don't like to work. Sure, now that jobs are scarce, everybody's willing to put in a few extra hours to stay ahead of the ax. But look around: We still expect easy money, hope to retire early, and embrace the oversimplistic message of bestsellers like The One Minute Millionaire and The 4-Hour Workweek. Unfortunately, the rest of the world isn't sending as much money our way as it used to, which makes it harder to do less with more. White-collar jobs are now migrating overseas just like blue-collar ones. Kids in Asia spend the summer studying math and science while American mall rats are texting each other about Britney and Miley. "We need a different mind-set," says Guillen. "People need to invest more in their own future. Instead of buying stuff at the mall, spend the money on evening classes. Learn a language or skills you don't have." We're uninformed. The healthcare smackdown—sorry, "debate"—is Exhibits A, B, and C. The soaring cost of healthcare is a problem that affects most Americans. It's shrinking paychecks, squeezing small businesses, bankrupting families and swelling the national debt. Yet outraged Americans seem most concerned about fictions like death panels and government-enforced euthanasia, while clinging to the myth that our current system of selective availability and perverse incentives somehow represents capitalist ideals. But let's take a break from that burdensome issue to examine the likelihood that President Obama was born in a foreign country and hoodwinked America into believing he was eligible to run for president. People who lack the sense to question Big Lies always end up in deep trouble. Being well informed takes work, even with the Internet. In a democracy, that's simply a civic burden. If we're too foolish or lazy to educate ourselves on healthcare, global warming, financial reform, and other complicated issues, then we're signing ourselves over to special interests who see nothing wrong with plundering our national—and personal—wealth.

Reviewing the Decade

The '00s: Goodbye (at Last) to the Decade from Hell Instead, it was the American Dream that was about to dim. Bookended by 9/11 at the start and a financial wipeout at the end, the first 10 years of this century will very likely go down as the most dispiriting and disillusioning decade Americans have lived through in the post–World War II era. We're still weeks away from the end of '09, but it's not too early to pass judgment. Call it the Decade from Hell, or the Reckoning, or the Decade of Broken Dreams, or the Lost Decade. Call it whatever you want — just give thanks that it is nearly over. Were we Americans alone in our troubles? Hardly. The Asian tsunami of 2004 killed more than 200,000 people. And our financial meltdown quickly spread around the developed world. Yet from our lofty perch overlooking the 20th century — the American Century, TIME's co-founder once labeled it — the fall has been precipitous. Who among us is unscathed? Not many. Even if none of your family members died in combat, you had no money with Madoff and you own your house free and clear, you most likely still took a hit. To paraphrase the question Ronald Reagan posed years ago, Are you better off today than you were at the beginning of the decade? For most of us, the answer is a resounding no. So here's the big question: Why? Why did so much bad stuff happen in this decade? Was it just rotten luck or something more? Sure, some of it was simply randomness, but I think a strong case can be made that it was more than just chance that got things so bollixed up. In large part, we have ourselves to blame. If you look at the underlying causes of some of the most troubling developments of the decade, you can see some striking common denominators. The raft of financial problems, our war with radical Islam, the collapse of GM and much of our domestic auto industry and even the devastation brought about by Katrina all came about at least in part or were greatly exacerbated by:

  • Neglect. Our inward-looking culture didn't heed the warning signs from around the world — and from within our own country — that Islamic terrorism was heading for our shores.
  • Greed. Our absolute faith in the markets, fed by Wall Street, combined with the declawing of our regulators to undermine our financial system.
  • Self-interest. The auto industry disintegrated while management and labor tangoed from one bad contract to the next, ignoring their customers and their competition, aided and abetted by their respective politicians.
  • Deferral of responsibility. Our power grid needs an upgrade and our bridges are falling down because we have not mustered the political and popular willpower to fix them. New Orleans drowned because authorities failed to act before Katrina busted the inadequate levees.
  • It was almost as if we as a nation said in previous decades, "Why do today what we can put off until the first decade of the 21st century?" But we didn't rise to those challenges. What we just lived through, then, was the chickens coming home to roost

Lousy Decade, Little to Look Forward To This was, nationally and globally, a lousy decade. I hate to put a damper on your holiday season, but the next one has every prospect of being worse. The name never really took, but it's too bad this decade wasn't called the "oughts," because so much that ought to have been done wasn't: controlling entitlement spending, slowing global warming, securing loose nukes. The next decade will be consumed making up for squandered time. Time magazine recently proclaimed this "the decade from Hell" while predicting the twenty-teens would be better. I'd like to talk myself into agreeing with that sunny scenario. Instead, I keep coming up with a down arrow. Arrows, actually: The dysfunctional political system. Congress is "the "broken branch," as Norman Ornstein and Thomas Mann have said. Lawmakers seem incapable of rising above political self-interest for the common good. The atmosphere of partisanship has become toxic. The House is divided into extremes reinforced by the decennial drawing of increasingly safe districts. The Senate is captive to the filibuster. The health care debate, with its ugly rhetoric about death panels and unnecessary Christmas Eve votes, underscores the failure of "regular order" to deal with the most intractable problems. The dangerous world. The signal event of this decade occurred on Sept. 11, 2001. The signal achievement of this decade has been that what once seemed inevitable -- another serious attack -- has so far been averted. This outcome is the result of luck augmented by a new realism about America's vulnerabilities and new vigilance in addressing them. But luck eventually runs out. Meantime, the clock is ticking on numerous dangers that ripened this decade. The instability of Pakistan with its nuclear arsenal. Iran's relentless progress to building a nuclear weapon. Finally, there is Stein's law, after the late economist Herbert Stein: Things that can't go on forever don't. Stein's maxim suggests that problems unaddressed for too long will ultimately have to be confronted. The caveat here is that avoidance makes things that much more difficult (entitlement spending) or even impossible (a tipping point on global warming)

The Dimming of a Beacon The 2000s could be termed a lost decade for the U.S. economy. The average American's annual income stood at $39,446 as of October 2009, up only 5.3% in inflation-adjusted terms from the end of the 1990s. That's the slowest growth registered in at least six decades. The average person's net worth fell 13% through September 2009 as stock and home prices plunged. The S&P 500 delivered an inflation-adjusted total return of negative 30% through November 2009. Meanwhile, income inequality grew. Although it's still too early to gauge the full effect of the most recent financial crisis, as of 2007, the highest-earning 0.1% of the population accounted for 8.2% of all pre-tax income, according to economists Thomas Piketty of the Paris School of Economics and Emmanuel Saez of the University of California at Berkeley. That was up from 6.6% in 1999, and the highest level since 1917. Policy makers may be breathing a sigh of relief as the world's largest economy shows signs of emerging from the worst crisis since the Great Depression. But its performance in the 2000s is forcing them to confront an age-old quandary: how to save capitalism from itself. In the 2000s, though, the U.S. quickly went from being the beacon of capitalism to a showcase for some of its flaws. The bursting of the Internet bubble exposed duplicity and cronyism in the stock market, with analysts hyping shares of investment-banking clients. The demise of Enron demonstrated how the U.S. accounting system, which had been held up as a global standard, could be gamed. Consumers spent too much and saved too little, egged on by a housing boom and lax lending standards. The financial sector assumed an ever-larger share of the U.S. economy, devising new investment products that contributed to activity but, in the end, didn't add value. The result: a deep financial crisis that has discredited the idea, central to the U.S. system, that bankers' own interests would guide them to do what was best for the economy.

Attitudes, Culture & Values

Big Government Backlash  President Obama's approval rating has sunk below 50% for the first time, but for our money the bigger polling news is the way his agenda is turning the public against activist government. Last week's NBC/Wall Street Journal survey asked whether voters thought that "government should do more to solve problems and help meet the needs of people" or if "government is doing too many things better left to businesses and individuals." This is a familiar polling question to gauge the credibility of government, albeit a bit loaded toward liberal social rhetoric. Some 47% nonetheless replied that they thought government is doing too much, while only 44% believed that it should do more. That's a striking change since February, when the views were reversed, with 51% saying the government should do more, and only 40% saying do less. Even more startling, in the latest survey only 18% said they trusted government to do the right thing "most of the time," down from a high of 36% in July 2004 and 27% in August 2005. Some 32% said they trusted government to do the right thing "almost never," up from single digits in earlier surveys when it was a volunteered response. One of Mr. Obama's not so subtle political goals has been to rehabilitate the public's confidence in government as a way to further his policies of expanding the entitlement and welfare state. As he said during the campaign, the President sees himself as the anti-Reagan, seeking to build a new Democratic majority as the party of government. And in his September health-care speech to Congress, he devoted several paragraphs to defending government as an agent of social change. So far, however, his Administration's enormous and helter-skelter expansions of the federal government seem to be having the opposite political effect.

Why We Still Have A Deficit ust in case you have any doubts about why there are deficits, this paper from the American Enterprise Institute with a compilation of polling results about attitudes toward government involvement in the economy and federal spending says it all.  Here are excerpts from the money quotes: Questions that ask Americans whether they would like a smaller government with fewer services or a larger government with more services usually produce a preference for smaller government. But when abstractions about government in general become concrete questions about individual programs, Americans don’t want to cut funding for most programs. In the most recent poll (2008) cited in the paper, foreign aid, the Pentagon, "welfare," and "space exploration" were the four areas where respondents said the federal government was spending "too much."  The much longer list of areas where people said the government was spending too little of the correct amount included:

  • Improving & protecting environment
  • Improving & protecting nation’s health
  • Solving problems of big cities
  • Halting rising crime rate
  • Dealing with drug addiction
  • Improving nation’s education system
  • Improving the conditions of blacks
  • Highways and bridges
  • Social Security
  • Mass transportation
  • Parks and recreation

Stan Breaks With The Deficit Hawks: A Very Personal Story I’m having increasing trouble identifying with the religious-like fervor many deficit hawks are expressing these days.  I also don’t think the hawks are advancing the debate by their take-no-prisoners attitude that often seems to cross the line to zealotry.I need to emphasize from the start that I’m talking about real, substantively based deficit hawks rather than those who condemn deficits only when it suits their political purposes. This definitely does not include those who only think the deficit is terrible when the other political party is in the majority. In my mind you don’t qualify as hawk if you talk about the deficit but then fail to support the spending cuts and tax increases that would actually reduce it. In case anyone is wondering, you also aren’t a deficit hawk if all you do is support largely symbolic efforts like process changes.

The Adam Lambert Problem The news came in numbers and the numbers were fairly grim, all the grimmer for being unsurprising. A Wall Street Journal/NBC News poll reported this week that more than half of Americans, 55%, think America is on the wrong track, with only 33% saying it is going in the right direction. A stunning 66% say they're not confident that their children's lives will be better than their own (27% are). It is another in a long trail of polls that show a clear if occasionally broken decline in American optimism. The poll was discussed on TV the other day, and everyone said those things everyone says. But something tells me this isn't all about money. It's possible, and I can't help but think likely, that the poll is also about other things, and maybe even primarily about other things. It is one thing to grouse that dreadful people who don't care about us control our economy, but another, and in a way more personal, thing to say that people who don't care about us control our culture. In 2009 this was perhaps most vividly expressed in the Adam Lambert Problem. I don't mean to make too much of it. In the great scheme of things a creepy musical act doesn't matter much. But increasingly people feel at the mercy of the Adam Lamberts, who of course view themselves, when criticized, as victims of prudery and closed-mindedness. America is not prudish or closed-minded, it is exhausted. It cannot be exaggerated, how much Americans feel besieged by the culture of their own country, and to what lengths they have to go to protect their children from it. It's things like this, every bit as much as taxes and spending, that leave people feeling jarred and dismayed, and worried about the future of their country.

U.S. Hurting in Wallet -- and Spirit The lingering economic crisis hasn't just cost America trillions of dollars in lost wealth. It's also taking a heavy toll on the national psyche, leaving scars that may take years to heal. This psychic damage has serious political implications, to be sure. It helps explain the souring attitudes toward President Barack Obama and the Democratic party now in charge, has produced a kind of national funk that spells trouble for incumbents of all stripes, and is a principal reason for the rising support for the kind of insurrection represented by the "tea party" movement. But ultimately the impact transcends politics. Look inside the latest Wall Street Journal/ NBC News poll and you will see the damage done to the traditional American spirit of optimism. The findings pose a deeper question: What effect does economic calamity have on a nation's soul? At a minimum, the results suggest that, as an exceptionally difficult year draws to a close, the glimmers of recovery that can be seen at a macroeconomic level aren't fully filtering down to the grassroots of American life: After Americans began expressing more optimism midyear that the country was again headed in the right direction, that sense of optimism now appears to be fading. In the new poll, just 33% of those surveyed said America was headed in the right direction, down from 42% in June. A majority said the country was "off on the wrong track." Despite the slowing of job losses and a stock-market recovery, just 46% said they thought 2010 would be better for the country than this year has been. Two in three said they weren't confident that life for their children's generation will be better than it has been for theirs. Almost the same share of Americans said the country is in a state of decline. A stunning 39% said they expected China would be the world's leading nation in 20 years -- compared with 37% who said the U.S. would be the leader. Peter Hart, a Democratic pollster who conducted the Journal/NBC News survey along with Republican Bill McInturff, asked simply: "Where has all the optimism gone?" Jay Campbell, a pollster who works for Mr. Hart, gives a partial answer: "It's hard to have optimism when you can't even pay your bills." One of the striking things about these blows to national optimism is that they aren't hitting just lower-income Americans, who traditionally feel the brunt of pain during a deep economic downturn. The seeds of doubt also are seen among those at the top of the employment ladder.

My lazy American students  By the time students are in college, habits can be tough to change. If you’re used to playing video games like “Modern Warfare’’ or “Halo’’ all night, how do you fit in four hours of homework? Or rest up for class? Teaching in college, especially one with a large international student population, has given me a stark - and unwelcome - illustration of how Americans’ work ethic often pales in comparison with their peers from overseas. My “C,’’ “D,’’ and “F’’ students this semester are almost exclusively American, while my students from India, China, and Latin America have - despite language barriers - generally written solid papers, excelled on exams, and become valuable class participants. Chinese undergraduates have consistently impressed me with their work ethic, though I have seen similar habits in students from India, Thailand, Brazil, and Venezuela. Often, they’ve done little English-language writing in their home countries, and they frequently struggle to understand my lectures. But their respect for professors - and for knowledge itself - is palpable. The students listen intently to everything I say, whether in class or during office hours, and try to engage in the conversation. Too many 18-year-old Americans, meanwhile, text one another under their desks (certain they are sly enough to go unnoticed), check e-mail, decline to take notes, and appear tired and disengaged. Of course, it would be wrong to suggest that all American students are the same. I’ve taught many who were hardworking, talented, and deeply impressive. They listened intently, enriched class discussions, and never shied away from rewrites. At their best, American students marry knowledge and innovation, resulting in some astoundingly creative work. But creativity without knowledge - a common phenomenon - is just not enough. Too many American students simply lack the basics. In 2002, a National Geographic-Roper survey found that most 18- to 24-year-olds could not find Afghanistan, Iraq, or Japan on a map, ranking them behind counterparts in Sweden, Great Britain, Canada, Italy, Japan, France, and Germany. And in 2007 the American Institutes for Research reported that eighth graders in even our best-performing states - like Massachusetts - scored below peers in Singapore, South Korea, and Japan, while students in our worst-performing states - like Mississippi - were on par with eighth graders in Slovakia, Romania, and Russia. We’ve got a knowledge gap, spurred by a work-ethic gap.

Partisanship, Polemics and Posturings

The Republican Party's Health-Care Hypocrisy Charles Grassley, the top Republican on the Senate Finance Committee, has emerged as one of the harshest critics of what the right likes to call "Obamacare." After spending the first half of the year working with Democrats to find a bipartisan compromise, Grassley has spent the second half trying to prevent one. He attacks the bill now being debated on the Senate floor as an indefensible new entitlement. He complains that it expands the deficit, threatens Medicare, and does too little to restrain health-care inflation. At a town-hall meeting in August, the 76-year-old Iowan warned, "There is some fear because in the House bill, there is counseling for end of life."  One might credit the sincerity if not the validity of such concerns were it not for an inconvenient bit of history. Not so long ago, when Republicans controlled the Senate, Grassley was the chief architect of a bill that actually did most of the bad things he now accuses the Democrats of wanting to do. As chairman of the Finance Committee, Grassley championed the legislation that created a prescription-drug benefit under Medicare. The comparison of what he and his colleagues said during that debate in 2003 to what they're saying in 2009 exposes the disingenuousness of their current complaints.  Today the Medicare prescription-drug debate is remembered mainly for the shenanigans Republicans pulled to get the bill through. Bush officials threatened to fire Medicare's chief actuary if he shared honest cost estimates with Congress. House Republicans cut off C-Span and kept the roll call open for three hours to cajole the last few votes they needed for passage. Majority Leader Tom DeLay was admonished by the House ethics committee for threatening to vaporize the son of one Michigan Republican in an upcoming election. The real significance of that episode, however, is not their bad manners but the policy Republicans produced the last time health care was on the menu. Their bill, which stands as the biggest expansion of government's role in health care since the passage of Medicare and Medicaid in 1965, created an entitlement for seniors to purchase low-cost drug coverage. Simply stated, the law is complicated as hell, costs a fortune, still isn't paid for, and doesn't do all that much—though it does include coverage for end-of-life counseling, or what Grassley now calls "pulling the plug on Grandma."  In their 2009 report to Congress, the Medicare trustees estimate that the 10-year cost of Medicare Part D is as high as $1.2 trillion. That figure—just for prescription-drug coverage that people over 65 still have to pay a lot of money for—dwarfs the $848 billion cost of the Senate bill. The price of prescription coverage continues to escalate because the law explicitly bars the government from using its market power to negotiate drug prices with manufacturers or establishing a formulary with approved medications. And unlike the Democratic bills, which the Congressional Budget Office says won't add to the deficit, the bill George W. Bush signed was financed entirely through deficit spending. Former comptroller general David M. Walker has called it "probably the most fiscally irresponsible piece of legislation since the 1960s." 

Republican Rigidity It's an article of faith among right-wingers, especially the tea party crowd, that all of the United States' ills happen because Republicans in Congress don't stand for principle. They believe that whenever you compromise with evil, the result is evil, so every politician should support conservatives' principles come hell or high water, damn the torpedoes. For example, their position on health care reform is that it's pure evil--it's unconstitutional for the government to force anyone to buy health insurance, to tax anyone to pay for someone else's coverage or interfere with the free market in any way, even if people die as a consequence. The right-wing solution to the uninsured is simply to define them out of existence. As Dr. John Goodman, one of John McCain's health advisers, explained to the Dallas Morning News last year, "The next president of the United States should sign an executive order requiring the Census Bureau to cease and desist from describing any American--even illegal aliens--as uninsured….So, there you have it. Voila! Problem solved." His Orwellian logic is that hospital emergency rooms are by law available even to those that cannot pay; therefore, everyone by definition has health coverage.

A Dangerous Dysfunction Unless some legislator pulls off a last-minute double-cross, health care reform will pass the Senate this week. Count me among those who consider this an awesome achievement. It’s a seriously flawed bill, we’ll spend years if not decades fixing it, but it’s nonetheless a huge step forward. It was, however, a close-run thing. And the fact that it was such a close thing shows that the Senate — and, therefore, the U.S. government as a whole — has become ominously dysfunctional. After all, Democrats won big last year, running on a platform that put health reform front and center. In any other advanced democracy this would have given them the mandate and the ability to make major changes. But the need for 60 votes to cut off Senate debate and end a filibuster — a requirement that appears nowhere in the Constitution, but is simply a self-imposed rule — turned what should have been a straightforward piece of legislating into a nail-biter. And it gave a handful of wavering senators extraordinary power to shape the bill. Now consider what lies ahead. We need fundamental financial reform. We need to deal with climate change. We need to deal with our long-run budget deficit. What are the chances that we can do all that — or, I’m tempted to say, any of it — if doing anything requires 60 votes in a deeply polarized Senate? Some people will say that it has always been this way, and that we’ve managed so far. But it wasn’t always like this. Yes, there were filibusters in the past — most notably by segregationists trying to block civil rights legislation. But the modern system, in which the minority party uses the threat of a filibuster to block every bill it doesn’t like, is a recent creation. The political scientist Barbara Sinclair has done the math. In the 1960s, she finds, “extended-debate-related problems” — threatened or actual filibusters — affected only 8 percent of major legislation. By the 1980s, that had risen to 27 percent. But after Democrats retook control of Congress in 2006 and Republicans found themselves in the minority, it soared to 70 percent.

Lindsey Graham: New GOP Maverick in the Senate Lindsey Graham, however, is not your average Republican. In an era when the GOP is defining itself by saying no, the South Carolinian stands out as one willing to say, "Maybe, let's talk." On hot button issues from Afghanistan and climate change to immigration, Graham is often the only Republican in the room. And as past mavericks have turned away, such as Obama's erstwhile opponent John McCain, Graham has stepped up. He is the first call White House Chief of Staff Rahm Emanuel makes for advice on how to handle Senate Republicans; he's a popular co-sponsor of bipartisan legislation; and he's become a sounding board for top Dems. Not surprisingly, such unorthodox behavior doesn't come without cost. With tea party activists increasingly dictating the party's agenda, moderate Republicans are getting eaten by their own, and it didn't take long for some of Graham's once loyal supporters to turn on him. The Charleston County Republican Party voted unanimously last month to censure Graham on a litany of complaints. They claimed that South Carolina's senior senator "in the name of bipartisanship continues to weaken the Republican brand and tarnish the ideals of freedom, rule of law, and fiscal conservatism." The group, closely aligned with the Tea Party movement, accused Graham of holding the GOP "hostage" for engaging on global warming and even lambasted him for having "stated on many occasions that his primary concern is to 'be relevant.'" Graham, who won reelection in a landslide last year, isn't worried. "I've never felt threatened by people who say that it's a crime or sin to work with the other side because most Republicans and Democrats understand that for the good of the country you have to do that," he said in an interview just off the Senate floor. Make no mistake, Graham's conservative credentials are rock solid. He has a 90% rating from the American Conservative Union. The only difference is he's willing to look for compromise. "Two senators from opposite parties sat down today and discussed solving a problem," Graham says with a wry shake of his head, "the fact that that's news is sad. That's where we've come as a country. That's why the [approval rating of] Congress is at 25%."

The Rise of Republican Nihilism Does the Republican Party have any ideas? The query may have a familiar ring. Five years ago, the question of substance was demanded incessantly of the Democrats. Indeed, in one of those intellectual fads that periodically sweep through Washington, the political class became obsessed with the notion that conservatives had unambiguously won what everybody was calling “the war of ideas.” In reality, both parties have plenty of ideas that they would like to implement if given the political power to do so. Republicans’ policy ideas primarily involve cutting marginal tax rates and regulations. The question isn’t whether the Republican Party has any ideas. The question is whether the party has any relevant ideas. In the days following the 2008 election, some Republicans predicted that the party would retool itself in response to reality--not just political reality but the actuality of policy challenges. “Republicans,” wrote conservative Ramesh Ponnuru in Time, “will have to devise an agenda that speaks to a country where more people feel the bite of payroll taxes than income taxes, where health-care costs eat up raises even in good times, where the length of the daily commute is a bigger irritant than are earmarks.” Nothing like that rethinking has happened or will happen. Whatever the merits of President Obama’s agenda, it is clearly a response to objectively large problems facing the country. By contrast, it is impossible to dismiss the problems Obama has chosen to address. In all three areas, the Republican Party has adopted a stance of total opposition, not merely because it disagrees with aspects of Obama’s solutions, but because it cannot come to grips with the very nature of the problems of modern American politics. Partisan self-interest--an accurate belief that Obama’s legislative failure offers Republicans the most likely road back to power--surely accounts for some of the party’s obstinacy. But at least as powerful is the deepening hold on the GOP of anti-government ideology. Rush Limbaugh, speaking at this year’s Conservative Political Action Conference, boasted, “Conservatism is what it is and it is forever. It’s not something you can bend and shape and flake and form.” This is true of the general principles, but utterly false of the particulars. The specifics of the reform they oppose have been in constant flux for a century--from child-labor laws to integration to health care reform. The tone of apocalyptic hysteria at the prospect of reform remains constant.

Back Where We Started  America's politics have gone on a wild, full-circle ride over the past decade -- a journey that has left Americans just as divided as they were at the outset, but more cynical than before. For a brief period after the terrorist attacks of Sept. 11, 2001, it appeared the decade would turn out quite differently. In the wake of that searing national trauma, political divides were bridged, ideological differences faded, and a sense of genuine bipartisanship took hold. But divisions soon reappeared. By some measures, America's two major parties are now more polarized than ever, and voters harbor deep doubts about government's ability to solve basic problems. "However bad we thought partisan polarization was in the late 1990s," says William Galston, a political scientist at the Brookings Institution, "it's worse now." What seems to have been lost along the way is the ability of the two parties to find ways to compromise -- a result, perhaps, of the disappearance of leaders such as the late Sen. Kennedy, who knew how to make deals. Thus, a historic, $787 billion economic-stimulus package passed early this year with exactly three Republican votes in all of Congress. An equally historic piece of legislation, the health-care overhaul now working through Congress, may well pass with no Republican votes at all. As that picture suggests, when political power is balanced so finely between the two parties, they fight all the harder for every small advantage. That leads them to jockey nonstop, which makes them less inclined to compromise -- and more inclined to punish those within their ranks willing to do so. "Politics 20 years ago was about the art of compromise," says Kenneth Duberstein, White House chief of staff for Republican Ronald Reagan. "Now compromise is a four-letter word because it's all about campaigning." In both parties, the ranks of moderates in the middle have dwindled over the decade. Analyses of congressional voting patterns by Keith Poole, a political scientist at the University of California at San Diego, has found that the two parties are more polarized than anytime since the Civil War. In the Senate, Mr. Poole has found, there now is literally no ideological overlap between the two parties; the most liberal Republican has a more conservative voting pattern than does the most conservative Democrat. Many voters appear to be reacting to the partisan divide by turning away from both parties. In the latest Wall Street Journal/NBC News poll, 42% of those surveyed identify themselves as politically independent, up from 34% 10 years ago. Perhaps more telling: As the decade ends, almost one in three say they "almost never" trust the government to do the right thing.

Opposition Strategy 101 Nate is going to be writing a post at some point about the risks facing Republicans for their general tendency toward nay-voting and, in particular, their opposition to healthcare reform. The Democrats have been peddling hard a "Party of No" narrative--I get what seems like an email a day from the Democratic National Committee with some update or twist on this theme--though I have no idea whether this meme about the GOP is resonating or not with the broader public. In any case, I think it is actually wise--as a general rule, and specifically to healthcare--for the GOP to vote against reform. Mind you, this has nothing to do with my opinions about the bill or its significance; I'm speaking here solely about political calculus. To demonstrate my point, consider the opposition party's situation as a simple game with two possibilities for the quality of legislation the majority passes--a generally "popular" bill or a generally "unpopular" one--and two options for how minority party members can vote on those bills, either voting with the majority or against. Presumably, legislators have some notion of how popular the legislation will be, but their information is incomplete.

Attitudes & Opportunities for the Future

'He Just Does What He Thinks Is Right'  Cannon to the left of him, cannon to the right of him, cannon in front of him volley and thunder. That's our president's position on the political battlefield now, taking it from all sides. And the odd thing, the unique thing in terms of modern political history, is that no one really defends him, no one holds high his flag. Wait—it's Christmas. Let's not. There are people who deeply admire the president, who work with him and believe he's doing right. This week, this column is their forum. They speak not for attribution to avoid the charge of suckupism. We start with a note from an accomplished young man who worked with Mr. Obama on the campaign and in the White House. He reminded me this week of a conversation we'd had shortly before the president's inauguration. "I remember you asked me back in January if I loved my guy. And in light of all that's happened in this first year, I still do. Even more so. And I also have a strong sense—based not just on polls but on a lot of folks I've talked to who don't always pay attention to politics—that he DOES have that base of people who still love him too. The president, he suggested, tends toward the long view and the broad view. "Here's what I know about him. He still has this amazing ability to tune out the noise from Washington, read the letters from the people, listen to their concerns, listen to his advisors, hear both sides, absorb all the information, and make the decision that he honestly feels is right for the country." He does this "without worrying too much about the polls, without worrying too much about being a one-term president. He just does what he thinks is right. And that consumes a lot of his time. Most of it, in fact."

Harsh lessons we may need to learn again The best that can be said for 2009 is that it could have been worse, that we pulled back from the precipice on which we seemed to be perched in late 2008, and that 2010 will almost surely be better for most countries around the world. The world has also learned some valuable lessons, though at great cost both to current and future prosperity - costs that were unnecessarily high given that we should already have learned them. The first lesson is that markets are not self-correcting. Indeed, without adequate regulation, they are prone to excess. In 2009, we again saw why Adam Smith's invisible hand often appeared invisible: it is not there. The second important lesson involves understanding why markets often do not work the way they are meant to. There are many reasons for market failures. In this case, too-big-to-fail financial institutions had perverse incentives: The third lesson is that Keynesian policies do work. Countries, like Australia, that implemented large, well-designed stimulus programs early emerged from the crisis faster. The fourth lesson is that there is more to monetary policy than just fighting inflation. Excessive focus on inflation meant that some central banks ignored what was happening to their financial markets. The costs of mild inflation are miniscule compared to the costs imposed on economies when central banks allow asset bubbles to grow unchecked. The fifth lesson is that not all innovation leads to a more efficient and productive economy - let alone a better society. Private incentives matter, and if they are not well aligned with social returns, the result can be excessive risk taking, excessively shortsighted behavior, and distorted innovation. We will soon find out whether we have learned the lessons of this crisis any better than we should have learned the same lessons from previous crises.  Regrettably, unless the United States and other advanced industrial countries make much greater progress on financial-sector reforms in 2010 we may find ourselves faced with another opportunity to learn them.

Special Report: America’s route to recovery Youngstown is an extreme but by no means unique case in America. On a basic level, it represents some of the challenges facing the country today in the wake of the longest and deepest downturn since the 1930s. After two economic expansions based not on sustainable growth but on asset bubbles -- the dotcom boom of the 1990s then the far more damaging housing mania this decade -- longstanding problems have been brought into sharper focus. Even during the recent good times, the U.S. manufacturing sector, the muscle behind U.S. post-war economic might, was buffeted as corporations shipped low-cost production overseas. "The easy, blue-collar shot to the middle class is gone," said Mike Rollins, president of the Austin Chamber of Commerce. "It's going to take a lot more work to get there now." In short, the world's largest economy is at a crossroads. With a smaller manufacturing sector and a consumer base less able to keep leveraging future earnings, where will sustainable, long-term prosperity come from? And more immediately, where will jobs come from? This is a debate that is taking place at the local level around the country, from Youngstown to El Centro, California, and many places in between. But it is also a discussion that few see taking place at the national political level. "Washington just doesn't get it," said Shane Savage, a real estate agent in Pensacola, Florida, smoking a cigarette outside the home of a client who needs to sell fast in a down market. "It's going to take a long time to fix the mess that we're in and our politicians don't have a clue how bad it really is out here."

Keeping America's Edge The United States is in a tough spot. As we dig ourselves out from a serious financial crisis and a deep recession, our very efforts to recover are exacerbating much more fundamental problems that our country has let fester for too long. Beyond our short-term worries, and behind many of today's political debates, lurks the deeper challenge of coming to terms with America's place in the global economic order. Our strategic situation is shaped by three inescapable realities. First is the inherent conflict between the creative destruction involved in free-market capitalism and the innate human propensity to avoid risk and change. Second is ever-increasing international competition. And third is the growing disparity in behavioral norms and social conditions between the upper and lower income strata of American society. These realities combine to form a daunting problem. And the task of resolving it turns out not, by and large, to be a matter of foreign policy. Rather, it compels us to consider how we balance economic dynamism and growth against the unity and stability of our society. After all, we must have continuous, rapid technological and business-model innovation to grow our economy fast enough to avoid losing power to those who do not share America's values — and this innovation requires increasingly deregulated markets and fewer restrictions on behavior. But such deregulation would cause significant displacement and disruption that could seriously undermine America's social cohesion — which is not only essential to a decent and just society, but also to producing the kind of skilled and responsible citizens that free markets ultimately require. Moreover, preserving the integrity of our social fabric by minimizing the divisions that can rend society often requires government policies — to reduce inequality or ensure access to jobs, education, housing, or health care — that can in turn undercut growth and prosperity. Neither innovation nor cohesion can do without the other, but neither, it seems, can avoid undermining the other. Reconciling these competing forces is America's great challenge in the decades ahead, but will be made far more difficult by the growing bifurcation of American society. Of course, this is not a new dilemma: It has actually undergirded most of the key political-economy debates of the past 30 years. But a dysfunctional political dynamic has prevented the nation from addressing it well, and has instead given us the worst of both worlds: a ballooning welfare state that threatens future growth, along with growing socioeconomic disparities.

Big business, big government and the big balancing act If you step back and look at the big economic policy issues-- health care, financial regulation, immigration, education reform, the budget deficit -- they appear to boil down to one fundamental question: What is the best trade-off between fairness, stability and social cohesion on the one hand and disruptive and growth-inducing innovation on the other? At its most simplistic level, this debate plays itself out as the choice between big government and small government, between regulation and deregulation, between European-style socialism and Anglo-American free-market capitalism. Jim Manzi provides a perceptive analysis of these trade-offs in the latest issue of National Affairs, … Like many in the business community, Manzi is concerned that the pendulum is about to swing back too far, that the United States is on the verge of turning itself into France. In truth, those fears are as overblown as they are self-serving, and have less to do with reality than with the abiding disrespect the business community has for the political process. But the debate, it seems to me, needs to go beyond simply determining where the pendulum should come to rest. For equally important is how effective the two sectors are in actually delivering all that social justice and growth-inducing innovation. Americans understand that free markets are the best vehicle for generating innovative products and ever more efficient ways of producing them. But recent experience also reminds that innovation and the competitive dynamic are not always what they are cracked up to be. The question is not simply whether innovation will be "stifled," as the business community likes to suggest, but whether those innovations serve a larger social purpose. At the same time, just because markets have recently failed us does not excuse giving a free pass to those who argue for tougher regulation or bigger government. History is replete with examples of well-intentioned regulation that turned out to be easily evaded or resulted in unintended and unwanted consequences. And too much of what passes for vital public expenditure turns out to be nothing more than special interest rent-seeking and economy-distorting subsidies. "An America that wants to keep its global edge cannot neglect the necessity of innovation and growth, any more than it can ignore the necessity of social cohesion and stability," Manzi writes at the conclusion of his essay. The political challenge for the next decade is not only to strike the proper balance between them but to perfect the public and private institutions that can deliver on those promises.

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