Parts to Wholes: the Socionomic Systems Nexus

Refresh on the "New Normal" Economy

Having been over this ground here and elsewhere we don't want to hammer it to much but we narrowly avoided the collapse of Western Civilization, GD 2.0 and 30% Unemployment last year. We're facing a decade of the "New Normal" economy which will not return us to the prosperity of the 50s and 60s, or even of the 80s. (For a fuller discussion of the new normal baseline and the state of the world we'll refer you to two other essays: Chaos, Turbulence, Fragilities: Defining the New Normal, Blueprinting Business Performance, The Cusp Point is Here: Lessons From Davos).

 The top chart is from, of all folks, the chief economist of Goldman Sachs who's done an outstanding job of telling the truth and letting the devil take the hindmost. The central point is that this is going to be as weak a recovery as we've seen - and bear in mind it's LOT deeper than any other one in living memory as well.

The bottom chart lays out our strategic alternatives as clearly as we could think how. We've avoided GD 2.0, likely have escaped the dreaded Japanese malaise though with some risks given the fragility of things but are going to be lucky to get a long, drawn-out U-shaped recovery which will top out after a slow re-build at far less growth than we'd like or that will create new jobs or prosperity. If we don't re-base the economy the next decade (or two!) will be as much a lost one as this one has been.

 In the Spirit of Reality

Let's start our dose of reality by asking (over and above the dissections of the previous post on budgets, deficits and debt: The Real SOTU, RDPs, Go-Forward Strategies and Your Country) what's really going on. Just how fiscally irresponsible is the President and his Administration being? We ask this in light of one member of our network who said that Bush was a spendthrift but Barry was making a bad situation terribly worse. When we asked for his evidence, logic and argument that result to date is silence. So we're going public :)!

The top chart shows receipts, spending and deficits as % of GDP from 1950 to 2014. You'll notice that there was a slow steady deterioration until the Reagan administration when it dropped. One of the biggest changes was the huge swing to a surplus under Clinton, almost completely reversed under BushII. Until we got to this catastrophe - entirely on the Republican watch, or to be fair 96% of it. Yet Barry proposes to repair it rather rapidly, in fact almost too rapidly given the risks of our fragile recovery. So despite all the the rhetoric from the Rips they are largely the source of the problem, it's the Dems who've acted responsibly and they who are putting us in a fiscal straight-jacket for the next decade that makes it almost impossible to deal with the deeper structural challenges we face. But guess who's getting labeled with the problem? Better yet guess who reached across the aisle to charter a bi-partisan fiscal commission to address this problem and got turned down by Rip senators who had originally come up with the idea (including that paragon of moderation Judd Gregg).

Let's Get Really Wonky: Budget Macrodetails

Let's talk a bit about some of the really wonky details that are likely to see your children be citizens of a 3rd world power if the partisan posturings keep up the way the way they have been. These tables, lifted directly from Monday's submission thru technomagic, show outlays and receipts as GDP%. Now the idea is that by freezing discretionary non-defense spending (as the Rips would like) everything would magically get better.

Stop - reality check. To repair the problem and pay down the debt we'd have to cut 60% of spending on everything from weather forecasting to Education to highway support to everything. In fact that bucket is 2.5% of GDP and about 10% of total Federal commitments. In actual fact 14-15% of GDP, or 60% of Federal spending, is in mandatory programs; in fac the bulk of it is in Social Security, Medicare and Medicaid. Which take increasingly large chunks. When the Rips walked away from the Deficit Commission they knew those entitlement programs would have to be the central concern. Whoops and Oops! Social Security is, relatively speaking a fairly straight-forward fix (raise age limits to something matching the original conditions and voila'). Much of which BushII admitted when he tried to tackle the issue. The real problem is the Meditwins which are well on their way to bankrupting the country, if not this decade, then the next. Yet the current set of Healthcare legislation in fact lays a lot of the groundwork necessary to start addressing these problems. But guess who attacked HC Reform as Bolshevik big government with mandatory death panels and raised such a stink that the real substance and value got lost in the noise?

The Problem in a Nutshell

Let's let the OBM talk to us some more with this graphic comparison.  The left-hand charts show spending by category, reinforcing the detail table points we just made while the right-hand shows funding sources. What they tell us is that to meet the greatest economic crisis in 80 years the Administration hit the debt markets because we had no choice. Since no else was borrowing that worked well. It also tells us that financing is rather rapidly reduced as a source of funds. In fact when the current Administration takes Debt down to 4% of GDP that level is sustainable forever and is not a particular drag or risk. What the inheritances of two wars, a huge Medicare drug subsidy and two large tax cuts do is make it impossible to get back on a high growth path. And that's the real legacy of the Republicans...no matter what reality distortions you and the rest of the world believes.

The President and the Dems: Talking the Talk, Walkin the Walk?

Last week saw the SOTU plus the President's session with the Republicans (a link to which we've repeated in the readings). This week the President held a similar session with Senate Democrats where, frankly he was about as equally candid and straight-forward though without as much need to set the record of intellectual honestry straight.

IOHO, which those comments are, the whole thing (like the earlier exchange with the Republicans) is well worth listening to but particularly the exchange with Sen. Blanche Lincoln around min. 38:00 or so. It's very straight-forward and candid. Like the rest of the discussions.

So the bottom lines here are, on the best available evidence, the Administration acted quickly to do the right things to save us from disaster, it worked but we're facing a fragile recovery, we entered this disastrous downturn in the worst financial condition we've been in for many decades due to Republican profligacy and irresponsibility, the Rips have been attacking the President for doing what needed to be done, the President has started challenging them on it and it's not clear if they or the Dims will step up and be responsible going forward. But, literally, the well-being of the Republc and your children depends absolutely on it. At least that's what all the evidence we've been able to collect shows.

Now if you agree please feel free to provide counter-evidence and logical arguments - not talking points. We'd love to have ourselves proved wrong, considering the alternatives. In the meantime we are where we're at, not where we'd like to be.

The SOTU Follow-On

The Tea Party Last Time Ever since the nation’s liberation in 1945, a deep division had run down the middle of the French ideological spectrum: the Gaullists and Catholics on the one side, the Communists and their fellow travelers on the other. The political center had evaporated in the crucible of the cold war. The parliamentary system became ever more dysfunctional, lurching from one crisis to another as the competing parties accused one another of working against the interests of the man in the street. The man (and woman) in the street had a different take. Neither the traditional right nor left seemed interested in his plight. Inflation dogged his heels and the influx of consumer and cultural goods from America breathed ever more warmly on his neck. Yet in the face of this widespread anxiety, the professional political class seemed indifferent. At this critical moment, Pierre Poujade leapt onto the national stage. Poujade (who was, of course, the satisfied recipient of many state benefits, from retirement pensions to health insurance) channeled the swelling of popular resentment by creating the Union for the Defense of Shopkeepers and Artisans. By the end of the year, membership had rocketed, transforming the group from a provincial curiosity to a real and present danger to politics as usual. During the subsequent national elections, the Poujadists bulldozed their way into town meetings, shouting down opposing candidates and threatening violence: a grim rehearsal for Tea Party tactics during last year’s health care debates. Their tactics, if not their platform — they did not, in fact, have one — worked. Poujade’s party won more than 10 percent of the votes, taking more than 50 seats in the National Assembly. The election, though, proved to be Poujade’s swan song. He had demanded the nation’s ear, but once he and his fellow deputies had it, they had nothing substantive to say. Slogans and placards were poor preparation for governance, and the group’s rank and file soon either retreated from the political arena or joined the traditional right. By 1958, most Poujadists were ready to throw their support behind a far more impressive opponent of the Fourth Republic, Charles de Gaulle. When de Gaulle assumed power and held a referendum that replaced the parliamentary system with an authoritarian executive, Poujade’s former adherents overwhelmingly voted yes. As for Poujade himself, he had already become a footnote to French history.

President's question time Remember the old joke, "I was at a fight and a hockey game broke out?" Well, earlier this afternoon, I was at a photo opportunity and a policy debate broke out. Obama's Q&A session with the House Republicans was transfixing. What should have been a banal exchange of talking points was actually a riveting reminder of how rarely you hear actual debate -- which is separate from disagreement -- between political players. This was a surprise. The session was clearly proposed so that Obama could appear to be taking real steps to reach out to Republicans. That implied warm feelings and a studied unwillingness to cause offense. But that was not the event we just saw. Instead, Obama stood at a podium for an hour and hammered his assailants. That makes it sound partisan and disrespectful. But it wasn't. It was partisan, but respectful. There's a value in proving that you understand the other side's ideas deeply enough to disagree with them. And that was the message of Obama's session. Not that the Republicans were right. But that he'd looked hard enough at their ideas to realize they were wrong.

Obama Acts to Engage G.O.P., Testing Party’s Intentions Emboldened by the response to President Obama’s face-off with House Republicans last week, the White House is intensifying its push to engage Congressional Republicans in policy negotiations as a way to share the burden of governing and put more scrutiny on Republican initiatives. The president has invited members of Congress from both parties for a meeting at the White House next Tuesday, the first of the bipartisan brainstorming sessions that Mr. Obama proposed during the State of the Union address. Republicans will also be invited to the White House this weekend to watch the Super Bowl, as well as to Camp David and other venues for social visits. The outreach represents a marked shift in both strategy and substance by Mr. Obama and his allies at a time when Democrats are adapting to the loss of their 60-vote supermajority in the Senate and the president has been losing support among independent voters. The White House’s goal is to show voters that Mr. Obama is willing to engage Republicans rather than govern in a partisan manner while forcing Republicans to make substantive compromises or be portrayed as obstructionist given their renewed power to block almost all legislation in the Senate. While the strategy addresses some of Mr. Obama’s short-term political problems, it is not clear that it will help him with the more fundamental issue facing him as the leader of the party in power, which is showing voters results before Election Day, especially with unemployment in double digits and the health bill stalled. For their part, Republicans said they were more than happy to showcase their proposals. They acknowledge that Democrats might have some ulterior motives in inviting more participation, but that it could still have benefits for both parties.

• Analysis: Obama's dangerous political gambit
• Why I Am Not a Republican, McGOP: The Virtues and Vices of Sameness

Policy Proposals

Obama's $3.8 trillion budget heading to Congress The $3.8 trillion budget blueprint President Obama plans to submit to Congress on Monday calls for billions of dollars in new spending to combat persistently high unemployment and bolster a battered middle class. But it also would slash funding for hundreds of programs and raise taxes on banks and the wealthy to help rein in soaring budget deficits, according to congressional sources and others with knowledge of the document. To put people back to work, Obama proposes to spend about $100 billion immediately on a jobs bill that would include tax cuts for small businesses, social safety net programs and aid to state and local governments. To reduce deficits, he would impose new fees on some of the nation's largest banks and permit a range of tax cuts to expire for families earning more than $250,000 a year, in addition to freezing non-security spending for three years.

Despite those efforts, the White House expects the annual gap between spending and revenue to approach a record $1.6 trillion this year as the government continues to dig out from the worst recession in more than a generation, according to congressional sources. The red ink would recede to $1.3 trillion in 2011, but remain persistently high for years to come under Obama's policies. For a more comprehensive deficit-reduction plan, Obama will rely on a bipartisan task force of lawmakers and budget experts, who will be asked to draft a package of tax hikes and spending cuts sufficient to slash deficits and stabilize government borrowing by 2015. The budget blueprint, the second of Obama's presidency, comes as Republicans emboldened by recent election victories are fanning public outrage over government spending, and nervous Democrats are clamoring for more money to reduce a stubborn 10 percent unemployment rate. As both parties gear up for the November election, Obama's spending plan is designed to steer a middle course between those opposing goals and reassure angry voters.

• Jobs And Deficit, Rock And A Hard Place, Immoveable Object And Irresistible Force...
• THE PRESIDENT'S BUDGET FOR FISCAL YEAR 2011
• The Budget, Analytical Perspectives,  Historical Tables

How to Run Up a Deficit, Without Fear Few subjects rival the federal budget deficit in its power to provoke muddled thinking. It’s a pity, because there are really only three basic truths that policy makers need to know about deficits: First, it’s actually good to run them during deep economic downturns. Second, whether deficits are bad in the long run depends on how borrowed money is spent. And third, eliminating deficits entirely would not require any painful sacrifices.

Why We Still Have A Deficit Just 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:

• Florida, We Have a Problem Cutting a federal program is next to impossible because there’s usually somebody who cares much more about keeping it than the White House does about making it go away.

Deficit Hawk Turns Dove at Home Kent Conrad vaulted from North Dakota tax commissioner to the U.S. Senate in 1986 on the strength of a startling pledge: He would quit and go home if the federal deficit wasn't "brought under control" during his first six-year term.  The deficit that year hit a record $221 billion. Six years later it topped $290 billion. This year, it's expected to hit $1.6 trillion. Mr. Conrad, now the Democratic chairman of the Senate Budget Committee, did resign in 1992, but stayed on after the state's other senator died. Since then, he has become one of the Senate's most vociferous deficit hawks, warning the nation faces insolvency if it doesn't boost revenues and trim obligations.Like many in Congress, he is conflicted. He boasts a 23-year record of looking after North Dakota voters with ample farm subsidies, aid for drought-hit ranchers, defense spending and scores of pet projects. He has done little to help rein in Medicare and Social Security expenses—the U.S.'s biggest budget busters. Congress is wrestling, yet again, with a widening gap between how much the government earns and spends. Only two-thirds of President Barack Obama's $3.8 trillion 2011 budget request, which goes this week before Mr. Conrad's committee, is paid for by taxes. The rest will go on the national credit card. Mr. Conrad's career shows how hard it is to trim spending, even for those committed to beating down the deficit. Lawmakers from both parties routinely scramble to protect or increase funding for home-state projects. Not since 1965 has Congress approved a budget smaller than the prior year's.Together with Republican Sen. Judd Gregg of New Hampshire, Mr. Conrad pushed for more than a year to create a bipartisan commission to tackle the deficit—an acknowledgment that Congress, left to its own devices, isn't up to the job. The commission proposal was defeated in the Senate last week as reluctant Democrats rejected calls for trimming Social Security, and Republicans opposed potential tax hikes. Mr. Obama has said he will form a commission by presidential order. The problem, Mr. Conrad says, is that "everyone in Washington wants to be for every tax cut and every spending increase."Know thyself, say the senator's colleagues. "Conrad says one thing, and then votes hundreds of times the other way—to spend money," says Republican Sen. Tom Coburn of Oklahoma, one of the Senate's strictest spending hawks and among only six senators who sought no funding for home-state projects through the "earmark" process last year.

Tim Pawlenty: Not Ready for Prime Time In The Politico this morning, Minnesota Gov. Tim Pawlenty, who apparently aspires to be the Republican presidential nominee in 2012, has a grossly ill-informed article in which he rants about the deficit without proposing any spending cuts and insisting on still more tax cuts. Like all Republicans these days, Pawlenty wants to have it every possible way: complain about the deficit while ignoring everything his party did to create it (Medicare Part D, two unfunded wars, TARP, earmarks galore, tax cuts up the wazoo, irresponsible regulatory and monetary policies that created the recession that created the deficit, etc.), illogically insisting that tax cuts are a necessary part of deficit reduction, and never proposing any specific spending cuts. The only specific thing Mr. Pawlenty is capable of proposing is a balanced budget amendment to the Constitution. It’s hard to know where to begin in explaining why this is such an irresponsible idea, but I will try. It’s one thing to require a balanced budget when starting from a position of balance or near-balance. It’s quite another when we are running deficits of over $1 trillion per year for the foreseeable future. Even if we were not in an economic crisis and fighting two wars and responding to a natural disaster in Haiti, a rapid cut in spending of that magnitude would unquestionably throw the economy into recession just as it did in 1937. It’s doubtful that Mr. Pawlenty has any clue as to the composition of federal spending. In FY 2009 we would have had to abolish every discretionary spending program, including national defense, to balance the budget and that still wouldn’t have been enough without a penny of higher revenues, as he insists. We would have had to cut more than $300 billion out of Medicare and Social Security as well. Good luck with that. Pawlenty says not a word about how a balanced budget amendment would be enforced. Finally, it’s pretty obvious that the exceptions Mr. Pawlenty would provide are loopholes big enough for a blind man to drive through. I can easily foresee the U.S. in a perpetual state of emergency to avoid the necessity of balancing the budget.

• Too Phony for the TPFN Crowd?
• Pawlenty and Balanced Budget Amendment

Deficit dodgeball The economic collapse of 2008 and 2009 did so much damage to the United States that only now can we begin to measure the devastation.  A sentence buried in the budget that President Obama submitted to Congress this week screamed for attention. "Household net worth fell from the third quarter of 2007 to the first quarter of 2009," it said, "by $17.5 trillion or 26.5 percent, which is the equivalent to more than one year's GDP."  Translated from economic jargon, that sentence means that America lost the benefits of an entire year of work -- of all that the brains and labor of American enterprise can produce, in the calamitous near-failure of Wall Street and the banking system. The casualties of that upheaval are all around us, most notably in the 10 percent of Americans who are officially unemployed -- a figure that increases to 17 percent when you consider part-time workers and those who have become discouraged. What the budget makes clear is that it will be years, under the best of assumptions, before we can recover and it may be a decade until the nation's finances look as healthy as they did the day Bill Clinton left office and George W. Bush was sworn in. Unemployment at the end of this year is expected to remain around 10 percent and it may be only a couple points lower when the nation votes for president in 2012. As David Sanger pointed out in the news analysis that led the New York Times on Tuesday, by projecting a full decade in which debt will outpace income growth for the nation, the budget forecasts a protracted test for the United States' ability to sustain its domestic harmony and international leadership. Time and again, the budget shows beyond question that we are well advanced on "an unsustainable path." The combination of a growing population of the aged and the relentless inflation of medical costs, beyond the overall increase in prices, dooms the nation's future prospects. A chart in the budget shows that the three big entitlements, Medicare, Medicaid and Social Security, now consume 41 percent of the federal spending, aside from interest payments. On current trends, this will rise to 60 percent by 2030, when all surviving baby boomers will be 65 or older -- crowding out almost everything else the country needs from government. Because that prospect is such a nightmare, Obama is right in saying this Congress cannot simply walk away from health-care reform. It has to try again, with an invitation to Republicans and Democrats to make lowering costs the prime objective and not quitting until there is agreement on a plan.

• Deficits May Alter U.S. Politics and Global Power For Mr. Obama and his successors, the effect of those projections is clear: Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors. Beyond that lies the possibility that the United States could begin to suffer the same disease that has afflicted Japan over the past decade. As debt grew more rapidly than income, that country’s influence around the world eroded.

Next in line for a bailout: Social Security Don't look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system. A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits. Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing -- in other words, a taxpayer bailout. No one has officially announced that Social Security will be cash-negative this year. But you can figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO issued last week.The first number is $120 billion, the interest that Social Security will earn on its trust fund in fiscal 2010 (see page 74 of the CBO report). The second is $92 billion, the overall Social Security surplus for fiscal 2010 (see page 116). This means that without the interest income, Social Security will be $28 billion in the hole this fiscal year, which ends Sept. 30. Social Security hasn't been cash-negative since the early 1980s, when it came so close to running out of money that it was making plans to stop sending out benefit checks. That led to the famous Greenspan Commission report, which recommended trimming benefits and raising taxes, which Congress did. Those actions produced hefty cash surpluses, which until this year have helped finance the rest of the government. But even then, it was clear the surpluses would be temporary. Now, years earlier than projected, Social Security is adding to the government's borrowing needs, even though the program still shows a surplus on paper.

Real Policy Issues Without RDP

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.

Inaction on Health Is Costly Barring a political miracle, we're going to learn the cost of doing nothing—nothing significant to restrain health-care cost increases, nothing to prod the health-care system to produce more benefit for each dollar it takes, nothing to expand health-insurance coverage.This, too, will be ugly and unpopular."Failure to enact health reform will result in increasing numbers of people without health insurance because fewer employers will offer it and many employees will not be able to pay the cost of plans that are available," predicts Stephen Zuckerman, a health economist at Washington's Urban Institute think tank. "For people not offered employer coverage, many will not be able to get coverage due to pre-existing conditions that insurers won't cover or because premiums simply won't be affordable. Even people with coverage will find costs becoming a greater financial burden," he said.And all of us—employers, workers and taxpayers—will spend ever more on health care. The numbers are so large they're hard to grasp. But she draws a more ominous conclusion. "The most depressing thing about it," Ms. Darling says, "is that it shows the failure of the political system. Have we lost the capacity to do certain things? Can we govern? That's the most frightening thing. I'm very depressed that we can't solve even parts of these problems."

• Public Share of Health Tab to Top 50% Government programs are projected to account for more than half of all U.S. health-care spending by next year, reflecting an influx of people into Medicaid and slower growth of private insurance in the weak economy.
• The Republican Party's Health-Care Hypocrisy

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.

• Leaders in Davos Admit Drop in Trust

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.

• Travis Sharpe: Lead Author, QDR 2014 Travis Sharpe better watch out, because Shawn Brimley used to sit in his comfortable perch at CNAS and write all kinds of sensible stuff about the budget and the QDR, and look where it got him: in charge of the latter. That hasn't stopped Travis from writing this timely primer on the QDR and the new defense budget, which you can read here. (Travis notes as an aside what a revolutionary budget the FY10 budget was because of the changes it made to the acquisition of 50 weapons systems. Carrying out one of those changes, though, has been more difficult than foreseen and has prompted Sec. Gates to invite Maj. Gen. David Heinz to try his Wu-Tang Sword Style earlier today.)
• Here it is, the Real Deal Holyfield QDR

Biden on the attack Vice President Biden is tired of seeing the Obama administration's economic stimulus plan demeaned, derided and dismissed, and he wanted to talk about it. But a funny thing happened in the course of an interview at Biden's White House office on Tuesday afternoon. The vice president's passions poured forth not when he was offering his point-by-point defense of the economic recovery plan but on the question of whether the United States is in decline. Late in the conversation, I asked Biden about the surprise applause line in President Obama's State of the Union speech -- "I do not accept second place for the United States of America." Will we hear more on the America-as-No.-1 theme? What followed was a torrent, in red, white and blue. "From me you're going to hear more," he replied emphatically. "I want to tell you something, because if we cede the ground to those who suggest that -- I don't mean foreigners, I mean domestic critics -- that somehow, we are destined to fulfill [historian Paul] Kennedy's prophecy that we are going to be a great nation that has failed because we lost control of our economy and overextended, then we might as well throw it in now, for God's sake. I mean it's ridiculous." On he went: "Give me a break. So many people have bet on our demise that it absolutely drives me crazy. . . . There's sort of an attitude that is both politically directed by our Republican friends but also believed by a fair number of people that we just can't make this transition in the 21st century. "We will continue to be the most significant and dominant influence in the world as long as our economy is strong, growing and responsive to 21st-century needs. And they relate to education, they relate to energy, and they relate to health care." Biden's insistence on "pushing back" against unfounded criticisms of the program was clearly part of Obama's post-Scott Brown offensive, and it's bracing that the administration has finally seen the wisdom of a Napoleon axiom that is a favorite of Karl Rove's: "The whole art of war consists in a well-reasoned and extremely circumspect defensive, followed by rapid and audacious attack." Transforming a listless national argument about the stimulus and health care into a larger debate over how to maintain American preeminence is both audacious and useful. Off-message, Biden found the right message.