Parts to Wholes: the Socionomic Systems Nexus

Well we're definitely playing the end game for Healthcare Reform, after trying every generation or so since at least the time of Truman, if not Teddy Roosevelt. Ironically the Western World's first comprehensive health reform was conceived and passed by the Iron Chancellor, Furst Otto von Bismarck. Ironic, isn't it? The Last Hurrah by Edwin O'Connor is one of the great political novels and is based on the life and times of one of the last great Boston Irish-American politicians. Whether this is "just" an endgame and we'll try again or it is indeed a last hurrah is TBD but the way to bet is the latter. Either we pass it or we won't see it come again. Unfortunately we no longer have any runway to maneuver with either. By the time another generation has passed insurance will no longer be affordable, most people won't have it and the public finances will be in real shambles. Worse yet almost everything you've heard about problems with it is largely false-to-fact and represents a deliberate political distortion. Largely undertaken for partisan political advantage hiding behind a facade of concern.

So as we move into the endgame that may be more we thought we'd take one more shot at trying to level-set the playing field and explain what's going on here. Starting with the realities of cost, performance and value. This composite of two charts is taken from a study by the McKinsey Global Institute and confirms a lot of what a lot of folks have been saying all along. First off healthcare in the US is more expensive by far than in any other developed country. Secondly, our results are NOT at the forefront on standard measures of effectiveness. That shibbolethic statement that America has the best healthcare is just flat not true when you look at overall results for most of the population, which is IOHO the only valid measurement. It is true that for very advanced treatments at great expense American capabilities are the best in the world and for the 1% who might need them and the .01% who can afford those treatments more power to you. For the rest of us what this tells us is that we should be spending about 1/2 what we spend and getting about 2X better performance.

The Economic Impact: Private Insurance

Of course that's not the only problem either. Kaiser did a study late last year that looked at trends and consequences in Health Insurance costs, as anybody who's facing surging premiums should now be aware. Costs have been racing ahead of inflation by huge margins over the last decade and, as a result, family coverage has ballooned to almost $14K/year. There's nothing slowing any of that down either so it's no surprise that the estimate is that over the next ten years annual costs are estimate to near $30K/year for family coverage.

Does anybody think that's affordable? Better yet does anybody think it's affordable now? Certainly not business which is busy lopping off coverage for retirees and reducing coverage for current employees. The part where we can keep deferring these issues for future debates is over. The great bye and bye where rising HC costs become 50% of GDP and bankrupt the country is still a ways away but the part where everybody's choking to death in the dark because they can't afford coverage is here now.

The Economic Impact: Alternative Misfeasances

Like we, and many others, have said. We can't keep deferring this, if we don't resolve us it's going to kill us shortly and by avoiding coming to gripes with it it's already damaged the economy, the individual and the competitiveness of small and large businesses. In fact it's one of the great ironies of this whole debate that the strongest supporters of reform should be business but instead they're looking at short-term impacts and, strangely for supposedly rational and analytical folks, not doing their homework.

Reviewing some more old and new evidence in this last decade incomes were stagnant because of healthcare costs. Yet (on the bottom) when you look at it we're well on our way to "socialized" medicine - the government already pays 50% of per capita spending and that'll go up as all these other trends play out. But the most important part of this whole chart is the UR corner - take a real good luck. NONE of this had to happen if we hadn't indulged ourselves in political gamesmanship and special interest pandering, absolutely none of it. And the LL corner reinforces the point - too many other countries are spending less for more by taking different approaches (and for the record many of them are as or more "market--oriented" as is the US Switzerland or Germany, or even Japan, for example). Frankly the chart suggests to us that we set a "concerted national goal" of reducing spending to ~10% of GDP AND improving overall performance in the next two decades. Think what that would do for freeing up l.t. debt, funding for Education, Energy, or Infrastructure, investment in new industries, corporate profitability or the ability of small businesses to hire and create new jobs! It continues to amaze us that all of this has gotten shunted aside.

What the Existing Proposals Actually Accomplish

To reach that end state our fundamental requirement is to figure out how to slow, then reduce and perhaps eventually reverse, the growth of health costs. We're truly headed for the edge of a cliff otherwise and we're headed for that cliff because of the dysfunctional dynamics of a system that encourages over-consumption of health resources and a political system that allows special interest groups to protect those dysfunctions to create rents for themselves, instead of value for the rest of us. One of the great myths going around is that the current proposals don't control costs. That has two major flaws. First off it takes all the necessary steps that we need to get started AND that we know how to do. As somebody keeps pointing out this is 17% and growing of the US economy (2X what it should be) and you don't change it on a dime. Especially when we don't actually know exactly what works or how to scale it up across an entire continental economy.

But what we do know how to do is done. All previous debates have largely concentrated on expanding coverage as a matter of social justice. This is the first one where cost control was as much a part of the discussion from the get-go as coverage (NB: and a universal national program was off the table from the beginning). That's actually the first step in controlling costs, not just fairness, because you need the largest possible population to spread total costs across and reduce rates. That's a bedrock part of the proposals. It also feeds forward to a critical important feedback that is created by the combination of exchanges and reimbursement standards.

The biggest problems we've got are that all the incentives are to maximize consumption of healthcare because providers are paid for treatments administered not care realized. And also because the consumers of healthcare don't see the total costs because they're hidden behind tax barriers that create implicit subsidies. Despite all the free-market rhetoric of the Republicans they didn't actually put anything substantive on the table and certainly not something as radical as moving healthcare out in front of the tax shelter. Like John McCain did in the campaign or the Whyden-Bennet proposal does no. That really gets to the heart of the problem - after the summit it's been made chrystal clear that the Rips are more interested in winning than in fixing.

But wait there's more! What we think is nicely setup by the exchange and standards combination are two things. First off it becomes very straight-forward to migrate coverage and make it portable, once we find out how to implement the exchanges. The other thing it makes possible is many....many field experiments. In fact the great strength of a market economy is that no one size fits all and as long as common standards for services are set it'll be possible to try a lot of different approaches. We think the ultimate fix though is to migrate toward a flat fee for service, say a flat monthly charge for basic coverage with riders for special circumstances. This is already being tried in a lot of places and again would fit nicely on the foundations that are laid in these proposals. Especially after we get some experience.

The real key difference that's then set up is an entire structural shift to a different engineering design philosophy of HC management from detailed standards, which required lots of work, inspections, administrative overhead, payment and adjustment methods, etc. etc. to a flat fee structure. On that path lies the ability to more than just bend the curve.On that path lies the ability to get costs headed back downward on an apples-to-apples basis.

But then again, we obviously lead a rich fantasy life. But don't say we haven't warned you about the consequences, the causes, the alternatives or the pragmatics, please!

 BtW - the underlying feedbacks aren't something we entirely made up. If you want to see the collection of our previous work that lies out the bad cycle vs. the good cycle as the bad poltiics vs. the worse politics see this whitepaper collection: The Great Healthcare Reform Debates: Understanding the Causes, Complexities, Policy, Politics and Consequences

Continue reading "HC Reform - End Game or Last Hurrah? Dysfunctional Sausage-Making" »

Posted by dblwyo at 01:54 PM | Permalink | Comments (0)

The last post took a pretty deep dive on the Economic Report of the President (ERP) because it was the best such document we've seen in years and lined up so well with our assessments of the economic situation (a link in that post took you to a proposed agenda for Economic Policy we proposed in Oct08 and wrote up in Jun/Jul08). We hadn't intended to go that deep but defining a baseline on where we're at and going seemed like a good idea, especially when somebody else did all the work AND you could use it to test whether or not the guys making the decisions get it. That's not all it should be because if we learned anything over the last year or two it's that being right on the substance has little or nothing to do with what the politicians, punditocracy or population thinks about it. About the talking heads - we'll say this: to date we haven't seen, with some exceptions, any serious digging into what's really going nor any sense of timing, rythm or mechanics. In other words all the things that are critical for understanding what's going on and how we can go about things is largely missing from any discussion. As for the politicians and populace, well that situation seems to make the pundits beacons of reasoned enlightenment. Just to set the table try listening to this clip from Rachel Maddow's show on political rhetoric vs. local positioning on the stimulus and other policies. It's pretty amusing and factually accurate (that's not a general endorsement of her show - fun to watch, gently sharp-tooted but fair but more than over the top from time-to-time; after a spell last summer we quit watching. No grasp on "making it so" in the real world and the entertainment value faded).

Just So You Know: the Real Economic Situation Once Again

So, speaking of the stimulus, let's try and take one more level set of how things actually worked out when it turned out we weren't going to become the USSA. The UL graphic on the impacts of the stimulus is taken from a recent column by Leonhardt in the NYT (review by Menzies Chin) but consistent with what Menzie, I and many others have been saying for over a year. The bottom line is that it saved us but, in the UR graphic, we're a long way from being out of the woods. As bad as it was it'll take a long time to recover the lost jobs. Especially with the LR corner that tells us (btw that one's from Goldman Sachs!) how weak this recovery is and will be. The LL corner puts it all in strategic context - the question is how we keep things from tipping back over, move onto a self-sustaining basis, re-establish growth and then, the hardest challenge if we get, re-establish a new long-term path back toward prosperity. There's the rub, as they say!

Continue reading "Real State of the Deficits/Debts, Politics and Governance Changes" »

Posted by dblwyo at 06:15 PM | Permalink | Comments (0)

Time to come back onshore from Haiti to our own profound problems of governance and governing. The good news is that we're not facing a giant life-threatening disaster with no resources. The bad news is that we're facing a set of prosperity threatening and self-inflicted crisis that require as much structural change, in their own way, as fixing Haiti will require. Their problems were inflicted on them by history, bad leadership and nature while ours were, believe it or not, largely our own choice. America, having survived its own major crisis of the last two years is not out of the woods yet but the more important questions are where do we go from here and how do we get there? But the central question is can we face reality and make the choices that will get us there? In other words is American governable - and what will it take to make it so?

Last week after a long and convoluted exchange with a conservative (self-id'd libertarian) friend of mine a discussion that was intended to be evidence-based turned into a null set stoppage. At the end of the day there was no data, evidence, argument or other form of persuasion that was acceptable. Things were broke, it was the fault of the Administration, which had screwed everything up, nothing had worked or would work and Barry was a screaming socialist radical who would destroy the country. This despite a chain of analysis, data and so forth both stretching back (literally) for years which had been used to defend some of Bush's agenda! So what's going on here - and btw all this talk about unconscious decision-making and the lizardbrain is just nonsense and insulting to boot. The catch is my friend is far from alone for reasons we've discussed before and will re-review later. But if we don't figure out to hang together then we will surely all hang separately! My friend would likely disagree vehemently with everyone of these cartoons as being pejorative and distortionate. Yet each one, aside from our own biases, reflects evidence we've presented before and propose to carry forward.

Jon Stewart and Bill O'Reilly: Framing the Naysayers

One of the more interesting exchanges we've heard recently is the full interview between Jon Stewart and Bill O'Reilly of Fox News. Ironic isn't it when two entertainers are some of the better sources. This takes a few minutes but is well worth your time to listen to frame the situation out. You really do need to listen to this and make your own judgments but what we heard from Stewart was a reasonable man in difficult and complex circumstances trying to figure out what's going on. Admittedly from a left of center position but willing to inquire, test and engage in civil discourse. What we'd argue we heard from O'Reilly was someone with a hard position who led with "quit beating you sheep" questions, cut them off when he didn't like the answers, sidestepped any counter-evidence, contradicted his own position several times and seemed more interested in his position than in any facts. And he is, as Jon noted several times, what passes for the King of Reasonableness and Moderation on Fox and among similar venues. The problem of course is that ideology is no substitute in the long run for being right - it just disguises the real problems with a high fever and makes you feel better until you get blindsided by that selfsame reality.

Continue reading "America At Hard Choices Crossroads: Policies, Politics & Partisans" »

Posted by dblwyo at 02:10 PM | Permalink | Comments (0)

Somedays we feel like the little boy who cried wolf or his cousin who spent all his time shouting at the wind. More and more we feel like the little girl, or the earth sciences prof, who were vacationing in Asia when the tsunami hit and saw the tides recede to the horizon and tried to warn everyone around them and were almost completely ignored. If you understand the dynamics and indicators of certain natural dynamics some things are that easy to read. If you don't they aren't. We feel that way about economic policy and politics in particular but are going to try, once again, to push back the frontiers of the reality distortion field and explore the "undiscovered country" where real policy has real impacts, instead of the partisan positions and pundits pontifications on political process instead of substance. For example in the recent Charlie Rose show or the latest Washing Week in Review all of those defects were on view. The tone of the discussions, and the grasp on reality, is perfectly illustrated in these cartoons but we admit on the recent Rose show where Judd Gregg (one of the most moderate, balanced and public spirited Rep. senators) started off by mouthing the standard party line instead of a non-RDP assessment we turned it off before getting viscerally sick to our heart. So, once more into the breech McDuff, and dammed be he that cries (and cries and cries and...) e'nuff!

Continue reading "Reality, Politics, Policy & Partisans: the Undiscovered Country" »

Posted by dblwyo at 02:44 PM | Permalink | Comments (0)

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

Continue reading "The Real SOTU, RDPs, Go-Forward Strategies and Your Country" »

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

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?

Continue reading "Time For a Gut Check: Populist Fantasies vs. Real-World Realities" »

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

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!

Continue reading "Back to Carter's Gym: Can We Have an Adult Conversation?" »

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

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".

Continue reading "Confronting a Cusp Point: Renew, Relapse or Reverse?" »

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

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.

Continue reading "Renewing America 3: Re-thinking, -designing & -building for Performance" »

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

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.

Continue reading "Renewing America 2: Institutions, Values & Performance" »

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

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.

Continue reading "Renewing America 1: Hard, Doable and Necessary" »

Posted by dblwyo at 11:53 AM | Permalink | Comments (0)

We're going to follow along with the "change is hard" theme by a semi-wonkish dissection of why it's necessary, including a look back at the history, how we got here and what's next. But the bottomline is that the last two posts inventoried the changes that are necessary (and their scope and scale) and why it's so hard to change, given we're working in a sausage-factory. But, remember, somebody buys the sausage - and that's you! At the end of the day we weren't concerned about making our lives, those of families and friends and the world around us better this would all be irrelevant. Instead we could focus on having a good time. The problem is when you wake up the next morning and the party of the last three+ decades is over and it's time to deal with the hangover (always an extremely painful process in our experience).

The bottomline is that America has become an increasingly stratified society where the rewards for growth and progress go to fewer and fewer people. That's not (just) an issue of social justice because it's people's commitment to the strong and working society that's required. Which means, in turn, that they have to believe that society treats them fairly and with justice. The fundamental social contract in America is that if you work hard, play by the rules and help out your neighbors you can get ahead and make life better for your family, now and in the future. These days people are more than seriously questioning that - just ask your neighbors the next time you're having a beer or three.

Jobs, Jobs, Jobs: It's All About the Jobs

Everything we want to do in live ultimately rests on the ability to earn a decent living - a fair day's pay for an honest day's work. That was always our core belief and, we think, most peoples. What the chart above shows you is that's no longer entirely true. Underneath all this is the bedrock requirement for a growing economy that creates good jobs for everybody who wants to work that is fairly paid and qualified (those are all critically important caveats). That's the day-to-day translation of the social contract and what allowed us to build the society we have. The good news in all this btw is that we can get there again. The bad is that it'll take time, hard work, discipline, being willing to give up things to get ahead and the death of the "instant gratification" culture.

O.K. - here's we get a little wonkish, or worse. Sorry but it's necessary.

Continue reading "Change is Necessary: Current Course and Speed = ROCKS!" »

Posted by dblwyo at 03:07 PM | Permalink | Comments (0)

The question, and challenge, that immediately follows from the last post on the challenges of change and the internecine battles (as well as its predecessors) is what changes? As well as how are we doing, what's the situation and, in general what's going on? Let's set the stage with a little Bon Jovi riff channeled thru Dragon Ball Z - It's Your Life. In other words you, we and us can choose to tackle these things or continue to pretend, posture and politic. Letting a heroic fantasy cartoon be the front page for a teen angst and rebellion warsong carries a bunch of mixed and subliminal messages, don't you think? You pick what you want but at heart they are about change, tackling things and a belief that it can be done.

So think what you like, take what you want and/or think we're reaching to far for metaphors and implicit puns (we readily admit) but hey, if they can't take a leg-pull then F em.

Getting Serious: Inherited Major Challenges

A little more seriously one of the major agenda problem sets is all the major domestic issues that have accumulated and metastasized over three decades. Here we pick up on several of the major ones that we're actually tackling, at very deep levels indeed. that are mandatory to fix if we're going to re-ground our society and economy on a sounder footing.

Each of these is a serious national problem, and one we've had a pretty good idea how to tackle for years. Take Energy for example. The current Climate/Energy proposals in Congress and the regulatory changes that have been decided by the EPA move us rather far along. But just as an example of mis-interpretation the Climate Change Bill(s) aren't about climate, or just about climate. They're about Energy, Economics and National Security. Do you think we'd be spending $Bs in the ME were it not for oil? Or that it helps our economy to be hostage to desert oil reserves and have to keep shipping money we could better use here, as well as lives, over their? With the best intent of course it'll still take 30 years to change our dependencies. But it didn't have to be that way. The current energy policy actually bear a striking resemblance to the National Energy Policy published as the first major policy framework by the Bush Administration around Sept. 9, 2001! Think about it and the ironies. To make it worse both bear a striking resemblance to the proposals put forth in the late 1970s, at a very detailed level.

Continue reading "It's Your Life: Change Is Hard, Change We Must, Changing We Are!" »

Posted by dblwyo at 08:19 PM | Permalink | Comments (0)

The changes just keep coming fast and hard. Last week saw the announcement of the new Afghanistan strategy, this week a major compromise in the Senate on the Healthcare bill, financial reform continues to make progress, on both a legislative and regulatory base and last Friday saw job numbers that were much better than anyone anticipated. Simultaneously but farther out of the limelight we continue to evolve our Foreign Policy, keynoted today by the award of the Nobel Peace Prize to the President, and on Education and Energy. Both of which have also seen significant strides. At the same time, while people are feeling more comfortable, in some quarters even complacent and ready to return to business-as/was-usual (we're particularly thinking of Wall St. there!) most people are still in a bit of shock and very unsure of what the brave new world we'll look like.

After the last three posts on specific policy problems (Healthcare, the Economy and Financial Reform) preceded by several posts riffing on the related themes of Veterans Day, Ft. Hood and coping with change and stress, we're going to pop up a couple of levels. In that pop up we want to frame the approach to roadmap where we're at and going, do a little survey of the changes swirling around us (mostly in the readings) and talk about change management. Along the way we hope this helps you get oriented, sort things into buckets but see how they are related and agree that there's actually some method to our madnesses. In an ideal world we'd even like to argue that our approach works fairly well. Just an an example our Healthcare analysis pretty well captures what's going on and the pros and cons while our early October assessment of what Afghanistan strategy should be bears more than a passing resemblence to last week's announcement had to say. That's either encouraging and confirmatory or really.....really scary. In effect we're picking back up on a theme we set in an earlier post on change being hard and the breadth and depth and number of changes we needed to adapt to this Brave New world. In fact you might want to go back and review it as it lays out some useful background and machinery (Change is Hard: Policy, Politics, Partisans and Gumption). You might even say that one has led to this one, if you like.

Framing Complex Problems: the Digital vs. the Organic

Let's pop way/weight up the stack if you'll bear with me. When we deal with complex real world problems we're almost always wrestling with complex issues that involve multiple disciplines, perspectives and datasets. The problem is that the world doesn't care. Several years back a sketch and performance artist put on a childrens show at the Berkeley Livermore Labs telling an ancient Indian creation myth and illustrated it with her own on the spot drawings, using her own organic colors made from natural materials. She explained that she did that because natural colors were so much richer because they were complex compounds of many elements instead of the chemically derived industrial colors we tended to use from Industrial processes. Looking back on her drawings that had a richness and complexity unmatched by the typical commercial color. Ever since I've thought of the argument as the digital vs. the analog theory, or the organic vs. the artificial. Ever wonder why electronic synthesizers aren't used much any more? Or why we tried digital dashboards but found them over-precise but hard to read and therefore inaccurate?

The accompanying graphic is the best illustration I've ever seen of how complex real-world problems are organic; composed of many elements which must all be addressed to deal with the problem at hand. Normally we drift along and only deal with the tip of one particular pipette stem. Incremental change in other words. The result of drifting with incremental tunings of problems is that, sooner or later, they shift from being minor to major. And we're facing major problems on each of several areas. from Foreign Policy to the Economy to Domestic issues. And the world doesn't care that we'd like to think about them one specialty at a time. It's organic, a whole and insists on serving us with the whole bouillabaisse with everything thrown into the stew. At some point we need to wrestle with all the parts to get to the wholes.

Continue reading "Hard Problems, Deep Changes, Bitter Fights: Framework to Power Politics" »

Posted by dblwyo at 04:07 PM | Permalink | Comments (0)

Well, somehow or another we continue to make sausage in the Healthcare political factory. And, despite the commentaries it's substantial progress that, over time, will do the country and a great deal of good. At the same time it perfectly illustrates the problems with tackling substantive change we've been talking about. The problem with getting interest groups to surrender some of their immediate advantages for the broader benefit to society and in their own longer-term self-interest since they need a viable industry that's funded. The problems with getting partisan politics to take a back seat to the public interest, the sheer size, scope and complexities of this topic and the combination of confusion, hostility and fear among the voters. Not to mention the punditry's thinking this was going to be a slam dunk and looking for the latest headline. Despite all that we've had the House pass out a reasonable bill while the Senate not only is out of committee but has gotten its bill to the floor. This farther, with more substantive progress, than we've gotten since Medicare was passed in 1965.

Let's refresh our memories about where we want to got with the accompanying graphic. The chart portions are one set of data telling us why doing something constructive is a vital national interest - briefly put, otherwise we'll drive everyone bankrupt. The lower-right text chart is borrowed from Uwe Reinhardt in the NYT and so summarizes the strategic requirements in terms of provision, operations and incentive management, with the bottom capturing the essence of the charts. Setting aside the partisan bickering and a lot of the interest group posturing the better commenters still applauded the existing bills for expanding coverage and avoiding some of the worst problems while not directly attacking the longer term structure of cost growth. Actually we think they're wrong about that last for reasons we've discussed, but let's come back to that.

Continue reading "The State of the HC Debate: Rattling Toward Resolution" »

Posted by dblwyo at 05:25 PM | Permalink | Comments (0)

 Let's go back and pick our theme of Financial re-regulation. On the surface that may appear to be a real swerve from our discussions of, stress and self-management. Or even the first bookend on "change is hard". It's actually not. Now this is critically important in and of and for its own sake. But it's also a case in point. It actually points to the problems when self-delusions and hubris create gigantic problems. It also a perfect example of the problems with sausage-making in the policy and political factories. It should be fairly clear at this point that reform is necessary and justified. But as reform has wound its twisty path thru the factory the Industry has been fighting it tooth and nail. Normally all that, like all the other momentous changes we're collectively tackling has been more visible than usual so we get an inside view of the slaughtering and processing that would normally be well hidden. The question, tying both threads together, is what kind of sausage do you want? In other words this about change on the personal and social level.

The Warning: How We Got In This Mess

An interesting question is it not? Overall it turns out we all drank the koolaid, some much more than others and therefore more directly responsible. But a central cause was a widely shared belief that markets would govern themselves. An argument that ignores the vital role of law, a court system and police to enforce it. As well as rules and regulations that make markets possible. There is no market that has ever existed that didn't have some mechanism for defining the nature and quality of goods, how they can be exchanged or what the price-setting mechniams are. And ways of adjudicating and resolving disputes. Whether it's buying groceries, getting a new car or house, something arcane like a wheat (or pig) futures contract. Or punishing the guilty and malfeasant - just ask Bernie Madoff or think back to Enron and Ken Lay or Worldcom and Bernie Ebbers. Not only did we all drink the koolaid and surf a wave of funny money to buy all those things we believed.

Nonetheless when there are rules there are those who will focus on manipulating them to their own advantage rather than playing the game. And from time-to-time there are key players who try and make sure the game stays honest, fair and just. When the players spend more time on manipulation than trying to win economists call that a rent-seeking society - in other words rule manipulations trying to create rents just like the old German River Barons put up their castles at bends in the river to force merchants and bargemen to pay tolls, or rent. In the late '90s when the players were really starting to play rules one person, Brooksley Born, took a shot at reforming the game and was shut down by the koolaid drinkers. With the widespread applause of the Industry and society ringing in their ears. PBS did a marvelous special on her and The Warning which you click on the picture to watch. The web page is here.

 Continued ...

Continue reading "Beginning a Great Debate: People Singing, Politicians Making Sausage" »

Posted by dblwyo at 11:37 AM | Permalink | Comments (0)

In the last few weeks we've dug into Healthcare, Afghanistan and Financial Reform which are all hard problems without easy answers, multiple stakeholders and many conflicting interests. Each, along with a myriad of other problems we've also discussed, e.g. the Economy, Education, Energy, etc., also reached their current state of "challenge" (that's a euphemism btw) thru decades of neglect. And all have reached proportions of near crisis after being warned about for that entire period without anyone seriously attacking them. If we're going to get back on track we need to start changing our trajectory on not just one thing but on many dimensions at once. And change is hard.

Not least of the challenges is the competition among interest groups to influence public decisions in their own interest, the maneuverings of partisan political groups and, the fuel feeding the frenzies, the belief that complex problems have simple magic answers. The accompanying cartoon pretty well captures the sense of things, as political cartoonists represent it. You'll notice of course that each chose to pivot around the recently released "Wild Things" movie which at its heart is about discovering your own inner demons and learning to deal with them. Until folks in general are willing to face up to their own Wild Things change will be challenged. Nonetheless a great deal of progress has been made - in fact considering the magnitude of the challenges, the short timeframes and compared to the last three decades we'd have to say that these multiple crisi are indeed not being wasted.

Change is Hard, Deal With It

Last week a friend very generously passed on his collection West Wing DVDs to me and I've subsequently been indulging in an orgy of multiple episodes. As most know it's a marvelous program, well written, acted and crafted. Moreover it's also great drama that presents a deep and realistic look issues, policy, politics and the unintended consequences of difficult choices. That was something that we've always felt but one of the benefits of this opportunity to re-watch it is how deeply and accurately it reflects the challenges of the Clinton Administration and the triumph of partisan politics. One could almost map the program year by year to the actual facts on the ground, from the earlier "world is our oyster" to the growing darkness, disarrays, and failures. Among all the various things swirling thru the program though a couple stand out. Nothing ends up on the President's desk that is easy - we each face what could be called existential moments a few times in our lives. A President may face them several times a day where hard, painful and difficult choices must be made. Perhaps more than any other the thing that struck us though, which we think is an accurate reflection, is much of the policy dilemmas was centered around incremental changes on existing legacy policies. Roll that forward - we are facing huge challenges where we have to fundamentally change the direction we're moving and the way we go about it. And the changes will be hard, slow and difficult. And, as we try and illustrate with the graphic, the bigger the change the bigger the resistances from the interest groups and the more sniping from partisans and the harder it is for people to grasp. The embedded quote, which is from Machiavelli btw, seems particularly apt.

Continued ...

Continue reading "Change is Hard: Policy, Politics, Partisans and Gumption" »

Posted by dblwyo at 05:37 PM | Permalink | Comments (0)

The last several months have seen partisan fight after partisan fight in Washington, often leaving us average citizens as innocent bystanders or even collateral damage, or so it seems to many people. Now we've been focused on the Healthcare Reform fight and the debate on Afghanistan. On the first there was some amazingly good news, the last committee passed a proposal out of the Baucus Committee to the rest of the Senate, though the day before the Insurance Industry published a report attacking the proposals that was so bad even the consultants who wrote it have disavowed it. On Afghanistan we by stand what we've been saying - it's a mess but if we walk away again it'll be worse. The big fight you may be missing is the one over Finance Industry Reform. It was back-burnered because of the urgency and importance of immediate business, e.g. saving the country from economic collapse, but is moving center stage. Like many of the stakeholders in HC Reform those in Finance have been fighting to water down the bill but in this case with less justification, if possible, more smoldering anger among the public and, with this week's announcements. The Industry argues that the last two quarters of monumental bonuses are right, proper, the way they do business, indicate a return to health and good for the economy and country. The country's mood is probably captured by the cartoon collage but just in case were wondering how angry people are check out this video clip from Dylan Rattigan's Morning Meeting. The question is who's right?

UPDATES: Some recent news and blog posts reinforce the line of inquiry we are pursuing here and we recommend them to your attention.

• US unveils broad effort to limit executive pay
• Curbing Wall Street Pay, and the Corporate Boards That Set It
• PBS Frontline: the Warning (Brooksley Born and Derivatives Regulation)
  

Post De-regulation: Finance Industry, Debt and the Economy

There's no question that a properly functioning Finance Industry is necessary for a growing economy and contributes to long-run growth and prosperty. Neil Ferguson covers millenia of history in addressing that in his PBS Special "The Ascent of Money". We'll rest the strategic case there and focus instead on the narrower one of is our finance industry functioning properly? In particular has it contributed to our wealth and prosperity at an acceptable cost to society, that is are we getting a return for our money? :)!

The graphic starts to speak directly to that with the top part showing recent changes in debt among several sectors (NB: all this worry about excess government borrowing is mis-placed, btw; right now it's simply absorbing all the excess sloshing around as everybody else de-leverages and is likely to do so for years).

The bottom part of the chart is the really interesting part. On the left you can see ordinary businesses continuing a gradual growth of their borrowing while the Finance Industry, ex-post mid-80s de-regulation, securitzation and financial engineering wizardry, shooting for the money...oops, we mean moon. Similarly consumers got completely carried away as well, again beginning with the widespread availability of cheap consumer and credit card debt.

Judging from these charts the net impact of the last three decades of de-regulation was to load down everybody in the economy with loads and loads of debt. Which sustained the explosion in consumer demand that fueled worldwide economic growth. As the US consumer pulls back, de-leverages and re-builds their balance sheets we're facing a fundamental change in the underlying economic structure we've been dealing with.

Continued .... 

Continue reading "The Chinese Goldsmith, Finance and the Next Big Fight(Updates)" »

Posted by dblwyo at 07:19 AM | Permalink | Comments (0)

Hopefully the last post on Healthcare Reform ( Taught/Taut/Taunt Moment: Healthcare Speech, Policy, Politics & Realities) laid out the current dysfunctional dynamics (the vicious cycle) and the potential evolutionary improvements embedded in the President's speech (the virtuous cycle). Moving to a better state of things is about extending coverage in the short-run and getting costs under control in the long-run, and the key to the latter is creating an incentive system that causes all the interested parties to make more sensible choices. In that post one thing we talked about was the macro implications for the health of the economy, now we're going to shift the ground and talk some about the micro-consequences and the sausage-grinding that's been going on since the Inaugural. But our driving mantra is to try and see things as they are, not as the fantasists, ideologists and partisans pretend they are:

"You can't make radical changes in the pattern of your life until you see yourself exactly as you are now."

 - Bhante Gunaratana, Mindfulness in Plain English

And on that note, seeing things as they are and finding a way to work with them clear-eyed, clear-headed and dispassionately we'd refer you to an addition to the readings explaining some of the key workings of the Baucus Plan:The Baucus Plan: A Winner’s Curse for Insurance Companies In the context of the prior post's machinery this thing is potentially brilliant. Incremental change that will drive deep structural evolution!

Consequences for the Individual: Unaffordable Insurance

We tried to make clear that the cost trends are going to put the Meditwins out of business with a few years and essentially bankrupt the economy. What many people still don't really grasp is the personal implications. It's not just the country who can't afford insurance but even the supposedly insured. In the last decade family coverage has skyrocketed from $6K/yr to $13K/yr, individual contributions have gone up, as have deductibles and co-pays. At the same time wages and other benefits have been stagnant or worse. As a consequence more firms, large and small, have been dropping, not just modifying, coverage. In other words even folks who think they're insured, at least before an insurance bureaucrat rescinds their coverage, aren't in fact. Or won't be shortly. Without controls in another 10 years costs will double or triple!!! If you think it's unaffordable now or it's going to lead to more people being dropped...well no kidding. And the crisis is here, right now! On top of which fewer and fewer retirees are going to be covered as well; in fact we'd guess none.

Continued ...

Continue reading "Paths Toward Healthcare: Compromise, Consensus or Conflicts?" »

Posted by dblwyo at 04:51 PM | Permalink | Comments (2)

Well last night the President gave his speech on HC Reform and, as he said, we've never been closer to serious reform in 63 years and now we need to bring it home. Was it a teachable moment and were we taught? It was certainly a taut moment with everything allegedly riding on it and, as it turned out, a taunt moment given the emotions that ran out of control on the part of certain partisans. A quick take on some reactions is the online WSJ poll where the reactions are abysmal...usually Journal readers are a bit more balanced but this is one indicator with lots more to follow. There were several audiences and agendas that had to be effectively addressed. First was Congress - where supporters and possible supporters needed to be energized, organized and disciplined as well as opposers who needed to be told it was time to lead, follow or get out of the way. Second are the various interest groups and stakeholders like the insurance companies, service providers, drug companies, etc. In fact the White House started working to get their concerns on the table back in February. Third, and most importantly, were the people who are scared, apprehensive and don't understand.

As a speech it was one of the great speeches IOHO - calm, judicious, deeply felt, inspirational, very heavy on substance and workable & innovative substance at that and it also threw sufficient sharp elbows to warn opponents that the time for pattycake was over. But, again IOHO, it still failed of two major reachouts: it only briefly spoke to the larger set of fears people have that have been stoked by partisan opposition and it didn't really translate the big picture issues to the personal level - the "what does this mean for you" level. That may not matter.

Unfixed Healthcare is Dangerous

Let's start with understanding where we're at and what's going on, what the trends are and where we're likely to end up without changes in current course and speed. Costs have grown over 300% in the last three decades, 3X the growth in the economy. Which means those resources have lowered pay, hampered the economy, impacted every citizen and every business and not given us much for our money. The US spends multiples of what other major countries do on HC but has worse outcomes. If we keep on this course HC spending is going to be 40% of the GDP - which is clearly unsustainable. That means $8000/yr/person, or $14K/yr/family and soon to be $25K. Wages growth has been flat or declining for two decades because of it. Uwe Reinhardt offers up an interesting shopping list of things required to fix the system by expanding coverage, improving cost control thru better visibility, changing the incentives so we pay for treatment (results) and not services (piecemeal activities) and bending the infamous cost curve. Without these changes the system is unaffordable, unsustainable and, in crashing, will take us all with it though it's already badly hurting the majority of the population. Boiled Frog Syndrome again.

Continued .... 

Continue reading "A Taught/Taut/Taunt Moment: Healthcare Speech, Policy, Politics & Realities" »

Posted by dblwyo at 12:02 PM | Permalink | Comments (0)

Is this a teachable moment, for us and the country? Out of what seemed to be nowhere a brushfire of protest over the President's opening day speech to American school children was being billed as communist propaganda. It's worth while to read the text and more so to listen to the speech. It sounds to us more as if it could have come from 'ol Abe than from Uncle Joe. Tomorrow night the President will address Congress on the subject of Healthcare Reform, which is a lot more complicated, difficult and shot full of special interests than "work hard, do your homework, find something you're passionate about and learn from your mistakes because you'll surely make a few".

Now there have been angry and mis-informed voices raised on both sides of every issue, always and forever. And bitter political partisanship thruout our history (Jefferson paid a propagandist to attack Adams) but we've sure heard high decibel outrage, appeals to the hindbrain and little constructive criticism in the last eight months. In fact what we think we've seen is a continuous attempt to label every single initiative that comes out of the Administration with the worst possible description and oppose every one of them on ideological grounds. We're all for passion and opposition but shouldn't it be grounded in some basis in fact?

Reality Checks

The labeling started with calling the stimulus, rescue and budget plans as "Socialism" and went on from there. So before we go on with the values and philosophy let's segue to a bit of a reality check. The rescue of Detroit was eventually acknowledged by hard-headed industry and business observers as doing for Detroit what it should have been able to do for itself anytime in the last three decades. The heavily critisized Bank Stress Tests managed to restore confidence in the Financial system at a moment when it appeared like the markets were going to collapse. The continuing support of Financial bailouts, hated, complex and mis-understood as they are, was a major contributor. (Which is not to say we're thrilled about how Wall St. manipulated a public emergency they created to their own advantage; if ever there was prima facie evidence of opportunistic special interests calling for regulatory reform Wall St. is the poster child.). And the much maligned stimulus bill literally saved the economy, along with Fed monetary intervention, from a Great Depression 2.0. Responsible estimates are that at least 4% was added to Q2 GDP and without instead of a -1% we'd have had a -5% or worse downturn. Even the job markets are repairing themselves. We've been discussing economic policy for a long time and the readings have a small collection that might be worth your while. The chart shows OMB's long-term outlook thru 2019 which tells us the worst is likely over but we've got a ways to go and face a severely hobbled future.

Continued ...

Continue reading "A Teachable Momenet? - Fear, Loathing, Renewal and Futures" »

Posted by dblwyo at 02:43 PM | Permalink | Comments (0)

Right now we're in the midst of an ugly, pejorative and distortionate debate on Healthcare Reform that's dominated by our lizard, or hind-, brains. The outcome of this debate is important, in many ways the most important of this administration and not just for its own sake but because it will define the context of the rest of this term. It will also tell us a lot about whether the American people are willing to face the hard decisions we've deferred for three decades in pursuit of debt-fueled hedonism. Or whether we're willing to be told the truth about the way things really are, facing the "brutal realities" as Jim Stockdale taught Jim Collins or whether we want to continue to be lied to. It will also tell us a lot about whether or not the political class will put staying in office/power ahead of some attempt to do what's right for the country. Now we don't expect all politicians all the time to pursue the pure public interest, we expect and hope for them to strike a workable balance. We also expect them to learn something about the issues, to engage in reasonable debate, to treat each other with some civility and respect for the other and to conduct themselves with Civitas (the pursuit of the public good). We particularly expect them to be constructively critical, which means presenting their own proposals for fixing the mammoth problems we face. Most especially, importantly and critically we do NOT expect them to pursue pure and purely obstructive opposition by appealing strictly to the worst nature of the voters. While the Democrats have their Dimowackic factions on the whole they're passing these test and have passed them with respect to all the other major pieces of legislation proposed or passed since Jan.20. On the other hand the Republicans appear to be letting the darker angels of the Ripudiacan fringe dicate policy, strategy and tactics.

Fear, Shock, History and Change vs. the Lizard-brain

 The US has its historical roots in a set of peoples and cultures that had good reason to distrust authority (Born Fighting: How the Scots-Irish Shaped America by James Webb), which has been a strength and a weakness. These bedrock tendencies got super-charged at the end of the 19C when the sudden industrialization of the country made us a true continental nation-state of huge size and complexity dominated by large institutions in business, government and public service. (The Search for Order, 1877-1920 by Robert H. Wiebe) But with size and complexity comes a fundamental necessity for large mechanisms to keep the wheels on the track. It was the (real) Progressives invention over three or more decades of the modern administrative apparatus that allowed us to govern this country and grow to our present state of prosperity (take that how you like). In the process though the distance between the citizen and the centers of power went from village scale to national scale and people, rightly, felt themselves the fungible victims of forces beyond their control. The turmoils of the '60s and the failures of large-scale social engineering iced that cake but what really turned it sour, IOHO, was the confirmation of all the worst conspiracy theories by the Enron/WCOM scandels and the malfeasant and self-serving behaviors of the Finance Industry and outright criminal behaviors in this last go-around.

Continue reading "Lizard-brains vs the Public Good: Time to Embrace the Suck" »

Posted by dblwyo at 12:41 PM | Permalink | Comments (0)

Welcome to "Reset World" where we're having to face up to the last thirty nears of grasshopperian neglect of vital issues and public policy. This is a post we've been holding in the pending file for too long because it's just been one damn thing after another. The bad news is the delay and, perhaps, the amount of reading materials in the excerpts section. The good news is that there's a bunch of stuff to point too. The worse news is that we're going to be trying to weave together a bunch of different threads into a coherent fabric. The possible news is that if we do this bear dance you may get something out of it. Just remember though the miracle of the Dancing Bear is that it dances at all,not how well it dances.

Serendipitously this was the 40th Anniversary of Woodstock, you know the celebration of peace and love that set the tone for the next 40 years ! Yeah, right. Just not quite the way it was intended. That clip was Woodstock then, for Woodstock now try this vidclip of the old surviving hippies who are now tour guides, and the museum, all selling the vision. As David Clayton Thomas of Blood, Sweet and Tears reminds us in this BNN interview it wasn't quite like that. For one thing Kent State had just happened and people were angry, for another none of the headliners got paid so they aren't memorialized in the historical videos. For another there was sure a lot of violence in other places and a lot of folks who didn't buy into the "it's all different now" message. In fact the Greatest Generation who had survived the GD, fought WW2 and built modern America that Woodstock was so against were just in their forties.Woodstock is now twice as far behind us as their adventures were behind them.

BUT...and this is the point...the decisions and divisions we created then have been reverberating every since. Have we done any better ? That's not an easy answer btw - the Boomers fought the Cold War, 'Nam, dealt with the biggest social changes in our history and changes in our society and economy that were phenomenal, to say the least. How we wrestle with the consequences of those legacies going forward is going to define America for the next forty years. How will we deal with our mental imps - rationally with a sense of decency, commonality and public interest ? Or pursuing private agendas that put partisan advantage ahead of the public good ?

One final clip, audio, this time from the historical archives of "This, I Believe":  Our Noble, Essential Decency. Scifi Master Robert A. Heinlein.

Continued...

Continue reading "Sausage Eating Lizards: Sonia, Spooks, Death Panels and the Pope" »

Posted by dblwyo at 11:40 AM | Permalink | Comments (0)

Robert McNamara died at home in his sleep this last week, prompting widespread commentary and reflections. Perhaps the most thoughtful was on PBS's Newshour, at least IOHO. After the break you'll find some reflections and ruminations from a wide spectrum of observers, commentators and participants. Reading them and reflecting on the lessons ourselves we were, and are, struck by several things. First everyone sees things thru their own prism, naturally, but fails to some extent to broaden that prism to include the entire context. Second, McNamara's Legacy is widely held to be a failed strategy that led to a failed war; and beyond that, a legacy of distrust with government and divisions in society that persisted for years. It can be argued that in fact they persist until recently and we are only now beginning to move beyond them. Of course Mr. McNamara wasn't alone in making the decisions that so shaped and warped our public discourse, attitudes and culture for the last 30+ years but he was and is a bit of a lightening rod. History will reach its own conclusions in the fullness of time but the damage created and the difficulties in re-bounding seem to be clear. Nor is Vietnam the sole legacy of the '60s from legislation to civil changes, many of which suffered similar fates for similar reasons; and for which we are only now beginning to come to terms with and respond adequately to !

So what are those legacies ? We'll work thru that but we'll suggest (assert) three major ones for you to think about. 1) It is fundamentally necessary to understand how things work in context and not impose simple models on a complex universe. 2) It is equally necessary to adapt your understanding to new learnings and change your strategies and actions accordingly. 3) The core requirement of a public servant is to have the moral courage to admit when things aren't working and take responsibility for finding alternatives. In other words see the world as it is, not as you fantasy it and then adapt yourself to reality to achieve your goals. And have the courage, discipline, persistence and old fashioned gumption to stick with it long enough to reach a conclusion.

Ugly Americans, Real Lessons of 'Nam and Responses

The majority of the commentators (though not the PBS guests who were biographers) failed to assess McNamara and American policy in the context of the times. Retrospective criticisms are all well and good as well as fun and entertaining but they can't be taken seriously. Decision-makers have to act with situations as they are, with the tools they have and the information available, not operate in some ideal and theoretical world where infinite time and resources are available. So before we judge Caesar let us properly bury him by making the real record clearer. In the readings we've collected a reading list on Vietnam per se and on the history and context, e.g. John Lewis Gaddis' short history of the Cold, which underpins this section. We've also collected a set of Rose interviews on 'Nam, Somalia/Balkans and Iraq that trace the arc of American institutional response to these sorts of crisis and challenges.

Continued...

Continue reading "McNamara's Legacies and Lessons: Beyond Simple Answers" »

Posted by dblwyo at 11:48 AM | Permalink | Comments (0)

We've sorta taken our time since the last post partly for laziness and partly for events. What a tumultuous month it's been, too ! On the international front we started with the Cairo Speech (more planned for later) watched it segue into a brief, noisy but dying "revolution" in Iran where we think all the commentators either got it wrong or were playing to the home crowd instead of dealing with reality and had the worst economic news we've had in a while. Nonetheless great progress has been made and the President's agenda continues to move forward (five points for sourcing "hasten forward quickly there"). We also just celebrated the 4th. On that topic we think the last two posts (Reflections & Remembrances: Memorial Day, D-Day, Today,Frontline Lessons Brought Home: Others, Selfs and Manners) summarize everything we had and have to say but as our hattip to our great national holiday we'll point you to this vidclip which adds, in its own way, what needs to be added:The Fife and Drum Corps of the Old Guard. Plus it's fun to watch ! Now that it's time to jump back into the fray we'll also argue that the last post set the table for our key focus here:

The answer to how we best honor the veterans sacrifices is not in laying flowers on their graves nor in applauding them as they walk by in the airport or during the Memorial Day parades. It lies in conducting our own lives according the values of honor, integrity and self-sacrifice that they showed in theirs.

The question then is how are we doing ? And where are we going ? The answer is some good and some bad with the central theme being, "never waste a good crisis". In our system we don't make deep and necessary changes unless the pain of change is clearly exceeded by the pain of implosion; and we're clearly there. The graphic shows how this has cycled from "suck it up" to "building prosperity" to "grasshoppers at play" to "crap and OMG". Now the administration has, IOHO, tabled all the right solutions for all the major problems. The other news of the month is that fundamental new initiatives on Healthcare and Energy/Climate have been tabled. You may disagree but every single thing that's been tabled since Jan20 is, by and large, in line with the best thinking of the beltway, academics and real policy makers accumulated over the last thirty years. It may not be right but it's the best we know how to do at this time.

Continued ...

Continue reading "Warm Hearts, Clear Heads, Hard Decisions: 2nd Star to the Right" »

Posted by dblwyo at 01:20 PM | Permalink | Comments (0)

An existential crisis is one that threatens the existence of the entity in questions - the Hudson plane crash was that for the passengers, WW2 and the Cold War were such for the US and the world order as know and love it. By those standards the current multi-part crisii aren't quite existential but in each domain (Economic, Foreign Policy and Domestic) we are faced with disruptive threats to the structure of the system as it exists. In other words if/when/as we get thru all this the nature and structure of the US and World economies will be radically different than what's evolved over the last 3-5 decades, the world system is being re-architected as we watch and key domestic policy issues (Education, Healthcare, Energy) that have been allowed to metastasize into systemic, disruptive threats by willful neglect have all reached cusp points. As existential as we care to get. Yet, by and large, in a few weeks a lot has been done to address them. The prior three posts were wrap-up and summary assessments for each of the three and were preceded by series exploring each. With the release of the new Star Trek movie everybody and their siblings have been using it to re-visit history, the culture wars and current events. Newsweek for example gifted us with this Star Wars vs Trek poster, which is both amusing and rings true (or truish). Jon Meachem, the managing editor, was on Charlie Rose the other night and gave his impressions of Barry after the first 100 Days. [A conversation with Jon Meacham] Pretty inside baseball stuff and it misses some of the key points which are critically important. Not least of which is not just the speed, force, magnitude and scope/number of major policy initiatives being put into place, nor how well the process is being managed or even - so far - how decently they are being implemented. What Meachem and the rest of the beltway observers are missing is the processes that are being used to apply rigor, logic, experience, multiple points of view and consensus building to arrive at pragmatic, workable and implementable solutions.

Revisiting the Policy Blueprint

 This particular graphic evolved to try and compress and represent the fundamental themes we face as a nation. It's genesis begins back in 2004 and it was put together almost three years ago. The point was that these were and are the changes in philosophy, policy and values needed to meet the existential challenges we faced... and still face. If you skim back over the prior readings you'll find that each one is being tackled, being tackled with a strategic policy that meets the test of being the best thinking that has evolved over the last three decades and is, therefore, the "right" thing to do. The readings provide current updates coupled with structural graphics illustrating each area in all of the major policy areas, politics and value development. While each deserives it's own series consider two key examples - mileage standards and Healthcare. The US auto industry has fought standards for years because it's profit-dynamics favored large vehicles while it gave ground to the Japanese. What's been needed is a set of national standards that reduce consumption, decrease pollution and avoid the expense of a single company trying to invest in multiple standards from many states. This legislation was put together over several months and is a consensus among the stakeholders, especially including the manufacturers, on how to proceed collectively. Similarly the biggest momenturm for HC Reform since 1992 has been built up and, as shown by recent industry payors and other players, it too represents a coalescing consensus that's been carefully built up in the public square. As opposed to be crafted by a small team in a backroom and forced down the throats of the polity, of Congress and the stakeholders. On all these fronts we have the best chances we've had to do something reasonable and constructive we've had in two generations. If they fail it won't be because the best we can think isn't being put on the table. Nor will it be because the right steps to building political support and putting workable implementation are being put in place. It'll be because narrow interests can't help themselves or because we haven't yet come up with the right mechanisms for implementation.

Making It So: Policy From Vision to Selling It

To get a new idea from vision to implementation there are several components that have to be put in place. First is the overall Vision - what principles, values and directions are suited to the time, which direction do we need to head, how do we judge ? Next is Leadership - or character, integrity, explanations (Voice) and delivery (making it happen; approach). Finally there are the wonkish specifics - what, where, when, why and how ? Especially mechanism ! Over the course of the last two years Barry started out focused on the Vision Thing while John-boy had some old principles lying around but was mainly focused on specific policies. As the election evolved Barry got more and more into details and strategies (his acceptence speech, his victory speech, his inaugural and every subsequent major policy speech could almost be a single book as they are consistent from beginning to end). Meanwhile JB retreted more and more to vituperative specifics based on old philosophies and shibboleths that were and are out-dated. Though he redeemd himself with a noble and public-spirited concession speech, as fine as anyone could make. His party on the other hand is turning out to be a bunch of angry, old white mean, I mean men, who are getting angrier and angrier about narrower and narrower concerns. Concerns where they are not only losing on each issue but are proving to be wrong, which is more important.

The Agora and Civitas:

Tolerance, Civility, Open-Mindedness & Public Responsibility

Having a different point of view is all well and good but it should come with two critical characterisitcs. A willingness to dsiplay tolerance for alternative perspectives and to reason together in resolving disagreemetns. And a commitment to abiding by the decisions reached in the public square - the Agora. At the end of the day we all benefit from a functioning public square and it is healthy if and only if we all exhibit civility, manners, tolerance and a commitment to it's health. Each of the last two administrations, in their own ways, contributed to the disruption of the Agora. Clinton by chasing after the latest polls and swinging with the wind, looking not for the right thing to do but the thing that would win. Bush by trying to force what he and his people "knew" was right and govern not for the good of the majority but trying to find the 50 + .01% that would allow them to force a decision. If you actually listen to President Obama's Notre Dame speech he's not insisting that he's right. Rather he asks for open minds and a willingness to tackle collectively difficult and divisive issues. And live with the collective decision.

So, at the end of the day, the pundits are missing the two most important things that are happening.

1) Each major policy decision is being arrived at by open dispute among the involved parties until the issues and alternatives are clear when a decision is arrived at.

2) The Administration is treating the public and it's opponents as adults who are open to discussing complex issues with difficult answers. And who are also willing to govern themselves with Civitas - that is with a sense of public responsiblity. MUCH more importantly we can slowly see the tenor of the debates change and evolve more toward a sense of Civitas - tolerance, open-mindedness and a willingness to roll up our sleeves.

Continue reading "Existential Crisis IV: the Agora, Civitas, Values and Futures" »

Posted by dblwyo at 09:33 AM | Permalink | Comments (0)

The last two posts were, in some senses, wrap-ups on the economic and international situations; they were couched in terms of the Agora - the public square and how it functions. A major purpose of the Agora is free exchange, that is trade and the economy, and the public square exists within the context of the relationships among states, hence the international part. Now we want to shift our attention to the third major aspect of the Agora - the behavior and rest of the lives of the citizens. In other words what goes on in the Agora besides "just" being a marketplace, or what is going on with Domestic Policy. Now that's a topic we've covered, in some depth before for it's own sake, as well as in the context of the role of key policies for the health of the economy (changing the game with regard to Education, Healthcare and Energy are sine qua nons of reaching a new plateau of healthy economic growth that's sustainable for example). But we have serious problems with these policies that will take serious people to solve them.

Why You Care: Long-running Structural Problems

Necessarily we all focus on our own day to day concerns and affairs, hopefully with a weather eye to how the winds and currents are blowing. Letting today's emergencies swamp all concern for the weather leaves us extremely vulnerable to boiled frog syndrome. Ignoring them entirely and taking a comfortable state of affairs for granted (that's not a lukewarm bath it the soup water warming up slowly) guarantees it. As we've hopefully made clear in the prior two posts we are crossing major cusp points in the economy and in the world that will shape the next decades as much as anything that's happened in the last six. One way or another they cannot be ignored - our only choice is cope or drift. Let's descend into wonkishness for a minute and consider another of the major structural trends, and remember this is just one of several major structural challenges we face. The top part shows the cumulative growth in the economy, consumption, investment and saving since 1948. The key thing to note is that when credit-driven consumption led to the relative demise of savings; in other words when immediate gratification became the dominant driver of our socionomic health. At the end of the day growth is jobs, income, prosperity and the well-being of our descendants. You can see the debt vs consumption link more clearly in the second sub-chart while the third comes full-circle back to growth, investment and savings. Growth has been gradually slowing down for many years until it went cliff-diving recently (NB: as badly as it's done in those six decades !). If we want to create a prosperous new future we need to return to being a nation of ants, not of grasshoppers.

Domestic Policy and Future Prosperities

Our first post on the health of the Agora took a fairly deep dive on long-term economic prospects, what it'll take from an economic policy point of view and what it'll take for those policies to work in terms of re-factoring crucial domestic policies in Education, Energy and Healthcare. In other words our future prosperity is utterly dependent on getting them right and making them work. There's a giant meme that's set into our politico-cultural DNA that government should keep hands off on everything, which is something of a natural reaction to the failed social engineering policies of the '60s. It also is neither realistic nor reflects the vital roles that are mandatory for government to play if we are to have a healthy society; it's also appallingly ignorant of history. Each of these topics require not just a post but books to properly dissect and, unfortunately we're still feeling our way thru on some key ones. Nonetheless government has a traditional role to play in defense and public safety as well as the creation and maintenance of civil society - which we've known about since the First Cities and continue to work on. A lot of folks think free markets came down from on high thru the immaculate conception but in fact they are a recent invention in human history and require their own institutional infrastructure. Government has also played a role in public investment that's vital to the health of any society from roads and bridges to China's Great Canal. For example modern capital markets were created by the Dutch and adopted and grown by the English. The entire notion of reliable financial markets (ahem) and public finance owes a great deal to England, Issac Newton, David Hume and others. The US government has played a vital historical role in jump-shifting US economic growth in investing in all our modes of transportation. And did you know that the entirety of our post-WW2 prosperity, over which we're now haggling, was based on federal investment in pre-war inventions that turned then into major new products, industries and jobs ? Markets don't work well for these sorts of good and are also prone to other systemic (that is self-caused) breakdowns as well as market failures. The classic example is pollution where no one company can afford to clean itself up if everyone doesn't. On a macro-scale modern economies are vulnerable to Black Swan breakdowns where the entire system implodes. We experienced one during the Great Depression and are in the middle of another, who's worst potential consequences appear to have been avoided. Another example is the role of publicly funded education - without the widespread adoption of free public high-schools the industrialization of our economy wouldn't have worked very well. And without extensive public health programs the urbanization that drove it was also infeasible. At the end of the day government is indeed vital - the question is finding the proper balances between public, private and civic policies and the mechanisms to implement them.

Getting It Right: Policy Mechanism

Many of the public initiatives listed in our shopping list are things that we've been working away at for centuries, even millenia and we've gotten to the point where we understand what needs to be done and how to do it pretty well. The area where we thought government could do everything led to a rather hubristic set of social engineering policies in the sixties that didn't go at all well however. And led to the Reagan Backlash as the limits of government intervention were reached and tested beyond workability. Now we've gone to far in the other direction, with obvious penalties. Friedrich Hayek arrived at the telling criticism of socialism and communism - if you attempted to determine policy across a large and complex society the efforts at data collection, decision-making, implementation, monitoring, control and enforcement quickly swamp your coordination capabilities and led to a rigid and ossified public policy. That's also what, IOHO at least, made the social engineering projects of the '60s unworkable. Yet the painful burns we've acquired by refusing to do what we've known needs to be done in Education, Healthcare and Energy, where we've literally been talking about fixes for three decades or more, makes clear that the ARE NOT SELF-CORRECTING problems. Which gets us to the fundamental challenge of implementation. In other words we need to set national policy congruent with our long-term goals and find the appropriate mechanisms to get people moving in the right direction voluntarily. Creating such incentives for individual decision-making is how markets work, when they work. Here we know they do not. What may be required - remember we're still feeling our way thru these new challenges - is national standards and funding combined with localized implementation and customization. If you look at the Big Three programs rolling out in D.C. you'll find that this is indeed the path they are taking. We'll be picking up on that thesis in the future with detailed dives into each. In the meantime we suggest you put to bed the "socialism" meme that partisan politics attempted to exploit to win points.

It's Time For Every Person

Horatio Lord Nelson's final general signal to his fleet at Trafalgar, which saved England and the modern world as we know it by their victory, was that "England expects every man to do his duty". Since we started with an Aaron Sorkin allusion we'll end with one as well. Here Ainsley Hayes, newly appointed to the White House Office of the Counsel is challenged on her motives.

"Is it so hard to believe in this day and age that some one would roll up their sleeves, set aside partisanship and ask, what can I do ?

What's your answer ? Whatever it might be let's hope the people in D.C., or at least the White House, agree with Miss Ainsley. Clearly many do not and put partisan victory ahead of duty to country. And duty to country is NOT blind - it doesn't require blind acquisence. It requires coming up with the best answers of which one is capable and makng one's best efforts to shape public policy. It then requires doing one's best to make the decisions reached  effective and successful - not continuing a constant search for advantage at the expense of the country.

Continue reading "Existential Crisis OF the Agora III: Fixing Things Around Home" »

Posted by dblwyo at 02:24 PM | Permalink | Comments (0)

Welcome to the "Brave New World", or as we like to call the land of reset. If you listened to the 100-day press conference we think the President did a decent job but not a great one, unlike his economic situation and policy review. Nonetheless, excepting the die-hard ideologues, this is a remarkable performance. And, in our judgment, an effort to find centrist, pragmatic and workable policies domestically, economically and internationally. In each of these areas thoughtful, informed, bold and potentially revolutionary policies have been put forth. An assessment put forth by a wide range of pundits (some of whom you'll find in the readings). We're going to try and take that apart a bit and look at what went on (though there's too much to review in ANY detail), what some of the assessments are and, our typical schtick, what the context and consequences are and how things will play out structurally. Setting aside partisan posturings the three major critiscisms that have been voiced (many by David Brooks initially and then picked up by others) are: 1) too much, to quick, 2) workability and execution (not in so many words but it is THE issue now that we're moving beyond ideological posturings) and 3) a radical shift in the line between the public and private spheres. All of them are legitimate, raise serious concerns and need to be addressed. But the bottomline here is that we're seen a remarkable 100 Days where critical markers have been laid down that set the tone, direction and strategies for most of the rest of the term and beyond. We are in fact engaged in an audacious reset at the most fundamental levels that will frame our outlook for decades. Perhaps most importantly we "Coach Carter" treating the voters like responsible adults and a slow shift in how they respond: from poll-driven policy-faking to principle-based decisions that try to balance what's best with with what's feasible and saleable. Now it's time to execute, execute, execute.

A 100-Day Assessment: Brooks, et.al.

In the readings you'll find selected excerpts and URL links to some of the more thoughtful pundits but so far the doyen and dean of reasonably balanced commentary is Mr. Brooks. Who, despite being a moderate conservative and a Burckian who worries about disrupting complex socionomic systems and unintended consequences, has applauded many of the decisions. For example calling the new Afghanistan policy bold but the war winnable or describing the economics speech as stunningly good or being dazzled and amazed at the sheer managerial competence of the Administration and how much they've managed to get done on so many fronts. We strongly suggest you invest the 30 min. required in watching the interview and taking notes because he covers an immense amount of ground quickly but insightfully. Some of the those major points deserve long essays in response. On the workability question we'll pursue some critical aspects later in policy focused posts but what Brooks and the others are missing is the repeated application of a systematic and systemic decision-solving methodology that seems to permeate each issue:gather the best people and ideas, pull them together, put a framework down, work out the details, start working the legislative process and selling to the voters. Review, revise,verify and extend as circumstances evolve.

Policy, Politics, Lizard-brains and the Disruptive Opposition

Let's get a little more analytical about some of the things swirling around. The accompanying graphic is a little busy but instead of building it up we compress several key ideas to that you can see how they all work together. Policy and politics have at least three key dimensions that must be addressed to be effective: what's the right policy, what constituencies does it impact and how do they react (the Political Spectrum) and how do you persuade sufficient support (the Mental Spectrum). Political interest combines the moderate and centrist leanings of the polity with the tendencies of party activists to retreat to the extremes while selling a policy has to balance the depth and density of information with the appeals to the hindbrain where decisions are really made. Clinton sold to the polls and told us what we wanted to hear - he got away with it because the times were good. Bush II told us what he thought we ought to hear based on his own ideologies. Obama is telling us what we must hear and not sugar-coating it. We'll see if the polity evolves itself enough to continue to respond constructively - so far there's more faith in the President than in his policies. We first used this chart during the elections and have modified to show how a centrist candidate (Barry) sold his intent while a wannabe centrist (McCain) retreated to the right and more and more appealed to the hindbrain. Now President Obama has gotten even more information-rich and is doing a fabulous job explaining things. It's not clear he's selling them - which is in fact one of the two major weaknesses he's got so far. That's not a problem that goes away until more pudding is eaten for proof however. On the other hand the Rips are retreating faster and faster into pure hindbrain appeals and bad policies. It's all very well and good to be "sincere" but right counts first and foremost and they're pushing shibboleths that were appropriate in Reagan's day, had a positive impact for a while but are badly outdated and deeply flawed. But instead of re-thinking themselves the True Believers are getting increasingly self-destructive. Too bad for them and ultimately for the country - a set of observations that roughly Brooks agrees with btw ! Ironically (cf. the readings, especially the assessment by Matt Miller) Obama's major initiatives in Healthcare, Education and Energy are closer to a combination of a) what Bush tabled in several State of the Union speeches (on Energy for example what's emerging is pretty close to his 2001 National Energy Strategy) and b) what other moderate Republicans have proposed over the last 20+ years. The Republicans, as opposed to the Rips, should be getting behind these instead of pursuing power and advantage at the cost of what's best for the country.

The Public Square: What Makes the Agora Work

Any society consists of a private sphere where people conduct their lives and make a living, a public sphere where the society makes decisions for everyone and a civic sphere where culture, religion and values define the ecology of the private and public sphere. If you go to almost any city in the world you'll find a public square which typically has shoppers strolling around, shops and commerce, public buildings and civic institutions (libraries, schools and churches for example). In Ancient Greece the called it the Agora - where all the myriad facets of the life of the city-state came together into one organic whole. Have you ever stopped to wonder what makes the public square work ? Like our mutual agreement that we have to have rules of the road so that we can operate our highways safely and efficiently we have to have rules that govern the Agora. Key among which is the agreement to abide by the rules, a recognition that they are necessary, tolerance for anybody who follows the rules to have the right to come to the square and be heard and a willingness to cooperate in it's creation, maintenance and safety. The public square has defined Civilization for millenia and, in it's modern, complex and gigantic form, it still does.

We've spent the last two or more decades abusing the rules necessary for the long-term health of the public square and damaged both the private and civic spheres as a result. Largely thru the opportunistic pursuit of various interest groups of their own advantages and interests at the expense of the general health and well-being. Now the question is will we all be citizens together and act in our collective self-interest to return the square to health or not ?

 Changes in Attitude: Paco vs the Consumer

This might be an odd sort of source to look at but Paco Underhill, who is one of the best consultatns and strategists in the world when it comes to retail and consumer behavior, was interviewed on the Newshour last week. He had a lot to say that was "ostensibly" about change in consumer behavior. But his critical observations and insights were really about whether or not we can continue to sustain our old behaviors. This economic crisis is forcing major and radical changes in shopping but Paco think the changes in attitudes are going to be permanent. We happen to agree. As points out - we can no longer afford to consume beyond our means. More importantly, fundamentally and even philosphically, we don't need to. Perhaps his most startling observation is that people need to learn, and are learning, that the next car or house or vacation is not only unnecessary. IT's NOT SATISFYING ! Now that's a SEE-change in our books. And when it comes from a guy who makes his living getting you to buy more and he's calling for changes in basic attitudes somethings up.

UPDATES: the Difference Between Pundits and Executive Responsibility

Here's the link for the CSpan: Obama 100 Day Press Conference and the post-conference Rose panel that discussed it. We were struck in the first case by how closely our assessment of things mirrored the President's directional intent while at the same time was reinforced by the pundits. BUT that's NOT the most important thing - THE important things are that the pundits don't talk at all about 1) whether the policies are right (which we've argued at length that they are), 2) what it takes to implement them (the question never came up among them) and 3) what it takes to explain and sell them to motivate the country in support of them. Yet as a matter of fact those are the central questions that must concern the Administration. The difference is between outside observers who've never stepped in front of the gun, even in a small way and the people who see dealing with all the elbow jostlers as just another part of their job but who's primary concern is getting it done, and getting it done right, workably and sustainably.

Continue reading "Peace in the Public Square: the 100 Days and Re-emergence of Civitas (Updates)" »

Posted by dblwyo at 09:40 AM | Permalink | Comments (0)

It's time to speak of many things, of kings, and cabbages, said the walrus. And speaking of things unless you've been hiding in the wilderness you've heard about Susan Boyle's stunning performance on the British Idol. Truly wonderful and a revelation. But beyond the singer and her voice one fascinating thing was watching the reactions of the audience and the judges - which we've tried to capture a bit here. But you need to watch the whole carefully as they move from snickers to shock to transformation to sheer joy. Amazing what's out there if only the opportunities are available, ain't it ? What she sang was "I Dreamed a Dream" from Les Mis, about the sundering of hope, ambitions and the cruelties of the world. Personally ironic but in light of the times we're living in more so for all of us. The question becomes what opportunities will we all have, what might be taken away and what do we do about it.

Economic Opportunities: Potential vs Actual GDP

One way to sneak up on those questions is to compare potential GDP - what the economy could produce at full employment, and actual GDP - what it produces when it's working at less than full capacity. The chart shows potential and actual real GDP per capita and they look pretty close from 1950-2008. Until you look at the differences between them ! Which is what the faint red line does while the heavy red line shows the trend. Notice that up until the late '90s things moved in a nice gentle cycle and then blipped up a bit. But the recent collapse is already more severe than anything we've seen in almost sixty years. And given that this downturn is going to go on for a while you can imagine where it will end up !

Dreams Indeed: Long-term Job Creation

One way to bring home the consequences a bit more is to look at the creation of new jobs which the next chart does. The light blue line shows new jobs quarterly from 1980 while the dark blue shows net new jobs. For the economy to grow, met growth in population and make folks better off we need to create a minimum of 450K jobs per quarter just to breakeven. Otherwise net new jobs falls behind population and productivity growth - and it is increased productivity that creates prosperity. When you take the running total over time you get the red line, which tells us more than we'd like to know about the health of the economy. For one thing it was poor with little real job growth thruout the '80s until the mid-'90s with only a little blip in the Tech Boom followed a very weak, jobless recovery that gained NO ground. And now - well judge for yourself - but it looks like a lot of folks will be singing "had a dream", emphasis past-tense, unless we do something. And that something is NOT just arresting the economic collapse or even beginning a recovery. It's putting the economy a path to new, sustainable growth based on new technology, new industries and new jobs. Which, as it happens, is exactly what the Administration has set out to do.

The Best Economic Policy Speech Ever

As it happens that President gave the single best economic and economic policy speech last week we've ever heard. He covered all the bases, talked about what got us into this mess, where we need to go, each major element of the recent spurts of activity and where they fit and how they all work together in a coherent and cohesive pattern that makes a whole greater than the sum of the parts. In particular he focused on why we need to act intelligently now with an eye on positioning ourselves for the future. If you click on thru the picture it takes you to the CSpan vidclip and we highly recommend you do just that. A while back, in fact several times, we listed out, discussed and analyzed the state of the economy and all the steps we saw, both on our own analysis and as a synthesis of the best thinking of a very wide variety of analysts and economists what needed to be done. Now there's a few green shoots (Green Shoots vs Self-Arrest: Back to Economic Realities (UPDATED)) that have shown up but we've got a long...long way to go. Some of the details are listed out in earlier posts (First Things: Financial Crisis, Economy and Barry, To Boldly Go Where We Must: Speech, Budget and Dr. Noes).

The shopping list of necessary economic policies is:

1. Find immediate and emergency fiscal stimulus through things like tax cuts, extended unemployment benefits and direct spending while

2. Keeping the wheels on the credit markets by injecting loanable funds directly but then we need

3. Substantive direct spending programs that should also not be simple consumption in disguise but improve the long-term performance of the Economy. Investment in Infrastructure perfectly fits that intermediate term bill. But then...

4. Invest in the creation of new industries that lower costs in the economy, create new technologies and new jobs. Strategic investment in Energy and Healthcare happen to fit that bill perfectly. And then...

5. Make sure enough people have the right qualifications - in other words we need to re-think how we deliver Education for the 21rst Century. Finally...

6. Quite wasting money on pork barrel projects driven by special interests and political manipulations and

7. Re-regulate the Financial Markets without destroying their creativity.

Now almost all of the markers are down and it's time to play the game - which means patience, persistence, skill and hard work. Fortunately all the right things are in place, unfortunately it won't be a quick or easy set of fixes because we've neglected things for too long and worse yet there are still major execution challenges. As the Zen Master Huitang said in Lessons on Leadership:

"What has been long neglected cannot be restored immediately. Ills that have been accumulating for a long time cannot be cleared away immediately. One cannot enjoy oneself forever. Human emotions cannot be just right. Calamity cannot be avoided by trying to run away from it. Anyone working as a teacher who has realized these five things can be in the world without misery". (Welcome to Coach Carter's Gym: Renewal of Duty, Honor and Country).

Sadly that was written well over 1200 years ago but then we're clearly a species that learns slowly when we learn.

Continue reading "Re-building On A Rock: Policy, Economy & Values" »

Posted by dblwyo at 05:10 PM | Permalink | Comments (0)

Peter Drucker had a famous and insightful saying (many actually): "change the people or change the people". In other words when an organization had to change to meet new circumstances and challenges either the behavior of the people had to change or you need to get new people on board. We can paraphrase that by in these times by saying, "change the institutions or change the institutions". This applies on the micro-level, for example with the re-regulation of the Finance Industry (Helmet Laws vs Adult Supervision: Re-Regulation & Finance Industry Futures), or on a macro and global scale. To get those changes however we need leadership for and from all the organizations and institutions who are involved as serious stakeholders. That paraphrase can be extended however and just how and when is best captured in the accompanying YouTube video clip. Either change the institutions or they will be changed for you, by a mob of angry citizens. Unfortunately history is not very encouraging as to the results. One cannot argue, for example that the 2nd French Revolution led to either permanent or constructive changes. Rather it seems to have continued a dysfunctional cycle in French socio-politics that still exists to this day. In a Charlie Rose interview Lee Kuan Yew, the founder of Singapore, made the fascinating observation that family ties and guanxi were so important in Asian socieites because they had millenia of surviving failed states and they only thing they knew to fall back on was family and social ties. AS the worldwide credit and economic crisis continues to metastasize into a worldwide social and political crisis it would be well to keep the alternatives in mind !

State of the World Economy

 If you look around the world there is no single country where trade hasn't literally fallen off a cliff. That ought to tell the whole story if you understand how critically dependent many, even most, of these countries are on trade for manufacturing, employment and general economic health. Whatever you think the situation is in the US the depth of the economic downturn is more severe in most of these countries. And threatens to drive many of the poorer ones over other kinds of cliffs. That drive will lead over a third precipice - profound socio-political instability that could strain many of these governments to the breaking point. Something they are all well aware of. With the upcoming G-20 meetings the question then becomes how will they respond ?

Trade is the Lifeblood...and Credit the Oxygen

We can say that but it's not entirely clear it has emotional weight to most, including ourselves. Let's consider an analogy. Consider the human circulatory/respiratory system that takes air and food from the environment, processes it, turns it into cellular structures and then carries those to each and every location in the body where complex, large-scale and very fast bio-chemical interactions enable us to breath, burn energy, build new bones, muscles and other tissues and, in short, exist. Not enough food and we begin to waste away, literally eating ourselves up. What allows for that food to be burned up is the oxygen in the air. Well trade is the analogy of food and the energy it contains while credit is the air that fuels the fires.

Where Are the Adults ? Into the Valley of Decision

When the crick's rising to fast, the food running out and there's a fire in the school we can either all pull together or we can run around in circles, screaming, shouting and pointing fingers of blame. And we can look to our leaders to step up the challenges of putting out the fire, organizing the dike repair teams, buying food from other regions and then making sure enough is saved out for Spring planting while also changing the engineering of the dikes and creating a  fire department when we didn't have one. The upcoming G-20 meeting was supposed to be the opportunity of the key world leaders to step up and do the right things. Unfortunately there seems to be an extremely limited supply of folks acting to both quell the emergencies, repair the system and start the process of evolving a new and improved one. Actually, broadly speaking, the folks acting proactively and correctly seem to be limited to the US, China, the UK and Brazil while the erstwhile leaders of the EU still seem to be in profound denial and Japan is rocking from one political breakdown to another. When you add those up you've added up the bulk of the world economy. On which the fate of all now rests. What was that about interesting situations ?

Unfortunately the number of self-responsible adults let alone the ones willing to take public responsibility seems to be very limited even in the countries who are leading. Pundits to the left of them, politicians to the right, challenges in front, still into the Valley of Responsible Decision-making rode the six hundred (600 ? Really). With all apologies to Tennyson !

That's hardly our sole assessment, btw. In the readings excerpts you'll find everything from state and outlook on the world to key oped pieces by Steve Perlstein of the WaPo and David Brooks of the NYT to the first in a series by the Economist on re-thinkings of global capitalism. We particularly recommend the Martin Wolf Rose intereview and the Perlstein/Brooks pieces. As well as the Yellen situation summary and our own prior posts on the situation and the realities vs the politics.

Continue reading "Sounds of Angry Men, Whimpering Politicians & the Global Crisis" »

Posted by dblwyo at 08:40 AM | Permalink | Comments (0)

We're going to circle back to the US and take up the state of the economy, economic policy, policy vs. politics and partisan political posturings and try and braid them together into a single rope of investigation. At the same time we are NOT leaving the topic of the state and outlook of the world because, as we argued in the first foreign affairs post in this series the US's role in maintaining and re-developing a new international system is critical and indispensable. And central to that role is the success of economic policy without which both the US and the world will face severe difficulties. In the readings we cover a lot of ground, as usual admittedly, starting with a survey of the state of the economy and real nature of proposed economic policy instead of what the headlines, pundits and partisans are telling you. If you read nothing else click thru and download Paul Kasriel's two essays on what did work in fact in the Great Depression (The Great Depression – Just the Facts, Ma’am) and on what role savings and investment will play in future growth (Paradox Squared). Then we shift to what the real challeng is - IMPLEMENTATION ! Then we segue to the partisan catfights where old shibboleths of the '80s are being revived to counter these policies when the facts on the ground  have changed ("when the facts change I change my mind. what do you do ?"). Finally we finish up with some readings on re-imagining what the new world could/should look and why a return to fundamental values revived in new clothes are essential to making this all work !

To summarize our main points however we'd say: 1) the economic situation is very serious but fixable and we have strong historical evidence, 2) the biggest challenges are implementation AND laying future foundations. On the latter the Administration is doing many right things on the former it's early to say. However, 3) partisanship is proving to be a poisonous legacy, 4) the American people still haven't grasped the Administration's direction at a fundamental (gut) level and 5) the biggest danger is the knife-edge balances between impatience for what will take time, effort and perseverance against the all to real risks of backlashes, anger and a radicalization of American politics. Then all bets are off. We take our socio-political stabilities for granted but what happens if they aren't a self-renewing gift from past generations ? Then we're in for the same kinds of troubles that are threatening other nations !

Economic History Realities

 Take a look at this composite chart from Kasriel of Northern Trust, which dissects the realities of what what on during the 1930s. The UL corner shows real GDP changes from 29-39 and that a recovery was actually underway. In fact when you net out Gov't spending it was in the core economy; that is there's a pretty good chance it was internal and organic. The evidence is further strengthened by looking at the significant improvements in Employment that took place in the middle '30s. Now look at the last sub-chart in the LL corner which shows the increases in Gov't spending. It turns out that this was the priming that got the pump going. And when "religious" orthodoxies prevailed the Depression resumed ! Despite the nay-sayers it is possible to re-stimulate the economy, you have to act early, forcefully and with enough resources. You also have to sustain until full health is restored. Fortunately for us the financial system is not anywhere near as frayed nor is there a complete absence of social safety nets. So there's no way this'll be anywhere near as bad but unless we act well and hard it'll get a lot worse and things are going to say fragile for a long time.

 Current Economic Legacies

Now let's look at another chart set that traces out the situation in the US economy and it's evolution over the last several decades. The top sub-chart shows the cumulative % change in GDP, Corporate Profits and the SP500 from 1950 to now. This is another one of those "simple" charts which tells us, when properly decoded, a profound human story. Notice first that they moved in lockstep until 1995+; in other words there was a natural, structural linkage between prosperity, profits and stocks for almost five decades. Which was broken by the Tech Bubble of the late '90s but investment-driven speculative bubbles are endemic to market systems. More interesting is the surge in Profits in this decade which appears to un-grounded in the underlying economy. If you look at the second sub-chart you can see that "bubble" highlighted. Now we know that much of these profits came from the Financial Sector and were built on houses of cards and sandcastles. In the non-financial world they also turn out to be built on reduced hiring (this was the weakest post-war job creating "recovery") and reduced capital spending. Both symptoms of corporations not investing in growth because they couldn't find the opportunities. Bear that in mind - economic growth is the sine qua non of prosperity and socionomic well-being. Back to the first chart for a minute when things were saner notice the markets did well in the '50s and '60s relatively and under-performed from then until the mid-'90s ! In the bottom chart you see the shares of national income that went toward Profits, Wages and Capital investment. Thru the mid-'60s Wages and Profits did well together while capital spending was stable. Then the piper wanted to be paid and wages and profits dropped during the "malaise" while capital's share went up to help deal with the shift to a less-energy intense economy. Since then it's re-stablized but wages have deteriorated, with the excpetion of the late '90s boom. Profits alone would appear abberational. There's probably a lot of complex factors but we think one is central: during the '50s and '60s we were enjoying the stable and sustainable growth from new industries in a stable political environment. Unless we find new sources of growth averting this current emergency and returning to a more normal business cycle WILL NOT fix these long-term problems.

Unintended Consequences

 Consider this interesting little chart which summarizes the Unintended Consequences (UiC) of our decades-long neglect of finding successful policies and politics in several key areas. Including Energy, Environment, Education, Healthcare, Welfare and Retirement. Strange how that chart which is close to two years old at this point so closely resembles the Administration policies being put on the table to address our long-term needs to re-vitalization. For each of these areas a detailed examination of a policy, or it's lack, would ask "what next ?" several times.That is what's the initial proposal, what incentives does it create, how will the various stakeholders act and what are the longer-term ripple effects. For four of the major areas we provide our summaries of where stood and where we stand; again the proposals on the table seem like they were all tailor-made to address these concerns. And, if you believe the implications of the prior discussions about the need to balance and integrate short- and long-term policies represent areas that MUST be successfully addressed.

Speaking of Stakeholders

Which means the stakes for all of us are pretty serious indeed, if not as serious as they could become if things don't go well. Which leads to the natural question of how are the various stakeholders acting - responsibly as concstructive citizens ? Or otherwise and pursuing their own narrow agendas ? Now in my book there's clearly enormous merit to almost all the proposals on the table and each of them have flaws. Those flaws are natural to the speed, size and complexity of what's involved as well as the messiness of the political process. We can't reasonably nor legitimately expect the various stakeholders to sacrifice all their own interests in the pursuit of some vauge national agenda dictated to them. We can expect them to balance the two and, where they have grounded and legitimate disagreements, provide critiscism and suggestions. That in fact is one of our acid tests for the loyal opposition. By their own lights are they trying to make things better ? A second is are they balancing partisan advantage reasonbly well with broader interests in the light of how things are going ? Finally a third is are they right ? A friend has rather strenously objected to some of my previous characterizations of the Rips as being almost entirely and narrowly partisan. The counter being that they are sincere in their objections. That may be true as it's hard to judge the inside of someone's heads. But my counter-counter is that even if they are they fail the tests of not offerring up constructive critiscism and contribution. And blind opposition is not in their own best interests as it paints them as part of the problem. Those are observables. But the most important thing, after much reflection, that I come down to is this. Sincerity when you're wrong and making no effort to test and validate your ideas doesn't count. Let me make a terrible and odious comparison. The Khemer Roughe were entirely sincere in their ideological purities that led to genocides. As was Mao during the Culutural Revolution or Stalin in his purges and collectivizations. Yet millions still died while they were field-testing their ideologies. If the best available evidence, thinking and analysis indicates your ideas are wrong while the best available history suggests they've been tried and failed it's time to come up with new ones. And be a constructive loyal opposition instead of a destructive collection of nay-sayers. So Mr. Wizard, just how would you go about this ? And why should we believe you ?

Continue reading "Back in the US: Economic Realities vs Partisan Posturings" »

Posted by dblwyo at 01:47 PM | Permalink | Comments (0)

With the Fall socionomic crisii plus the election and (can it only be a "month") the jumpstart of the Administration we've sadly neglected Foreign Policy; aside from the "detour" to address Gaza and the ME it's been since August. But because we've not talked about it doesn't mean either that a lot isn't going on nor that a lot isn't being done. Our intent here is to refresh, update and frame all that and provide a benchmark against which we can measure the FP situation going forward. The accompanying graphic is from a Davos09 session detailing the kind, nature and magnitude of the major risks facing the World Community. The readings survey the vital role of the US, the general world situation, the growing depth, breadth and sophistication of the US institutional response (which in all fairness despite rhetorics and mis-interpretations is more building on Bush Administration initiatives and is also a continuation of policy and strategies !). In the readings you'll find the URL (as always click to visit on the blue-shaded titles) to this and at the end a careful selection of other key Davos sessions (along with some valuable Kennedy School and TED talks). But if you listen to nothing else listen to George Friedman's survey of the structural nature of things and the world outlook (The Next Hundred Years: A Forecast for the 21st Century), along with Hans Rosling's TED talk (Rosling's TED profile with two great talks) which'll greatly surprise you IOHO !

Let's summarize things a bit to sketch out what we're going to talk about:

1. The "end of history" is flat wrong - instead we're re-discovering history and all the old political power games, need for international institutions and requirements for national security, defense, a robust and clever foreign policy and, most especially, the need for the US to be constructively engaged in re-factoring the post-WW2 institutional framework and adopting new forms to enable adaptation to new realities, or old ones re-discovered.

2. The single most urgent FP crisis is the metastasizing worldwide economic crisis which could threaten the stability of many different countries and regions; which also means that the Administration's focus on economic policy is in fact the sine qua non of re-stabilizing the world. Despite all the arm-waving in fact the US is more than ever the in-dispensable country, both economically and politically.

3. That means we need to be constructive in our engagement which means pursuing our national interests as the pre-dominant stakeholder while also recognizing other's critical interests and emphasizing getting as many as possible to also act as responsible stake-holders in the state of the world.

4. A critical component, however it works out in details, is focusing on encouraging good but appropriate governance suited to the level of development and cultural history of these potential stakeholders.

 So with that as a set of assertions, which we think are provable, let's dive right in. Bear with us a bit here as we're going to cover some ground at a mostly conceptual level and lay down some machinery which we'll be re-using in the future in deeper dives on particular topics.

Re-stabilizing the World

Let's start by taking a look at this little jewel of conceptual over-compression expressed in graphics. One of the things that most folks are in denial about is the fact that violence, or being more sensitive, the control and management of force, governs the nature of how things are run. Just ask any German Baron with a castle on the Rhein. It's always greatly amused us that the US Navy dominates the world's oceans more completely than the Romans controlled the Med and as a result the sea lanes are safe for everyone's commerce. Without it and it's hidden support the world's economy couldn't function yet no critic of so-called American Hegemony objects. Stop and think about it for a while. And has been true for a long-time whether or not the US acts to support the world system or goes ostrich has enormous impacts on everybody else's ability to do their business. The converse is also true - as we should know beyond a shadow of a doubt after 911 ! In an international system control of force is a negotiated balanced among those with the capability, one reason among many that nations will continue to dominate international relations. If we compare and contrast US policy to some representative average of the world's other players we end up with this graphic. Let's say the US can be isolationist and self-centerred, strictly pursuing it's own agenda, call that a Chauvinist. Or it could say the devil with the rest of you all, we're going to pursue our own narrow interests, call that an Evangelist. Or it could act to actively promote worldwide institutions and a stable world order, rather as it has done to  a large extent for the last century.(WRFest 27Jan08: What World Do You Want to Live In ?) We think the case is pretty clear-cut that our prosperity and security is better served by pro-active and constructive support of the world system. Contrawise the Rest of the World (RoW) would choose to Tolerate and respect the rights of other nations, go along to get along and Muddle Thru or pursue their own aggressively chauvinistic policies. WW2 was caused by the Axis powers pursuing an aggressively self-centered set of policies while the RoW just let them. The result was a major implosion. The graphic shows this as a dynamic flow of currents over time; wherever you start each set of policies will tend to create force vectors which will move the trends one way or another. Prior to Iraq the US leaned isolationist though it was THE major under-pinner of the system as it existed while the other major powers tend to want to pretend that everything was alright and let it drift. So, for example, Iraq had pursued a corrupt and corrupting Oil for Food program and threatened the stability of the world sytem. The Europeans denied all that and we were eventually headed for a major problem. Not getting int'l support the US chose to act unilaterally. Oddly enough our difficulties in Iraq caused more foreign powers to become more interested in being contributors rather than free-loaders and the current crisis has taken that up a bunch of notches. That timepath is mapped out by the Blue Line which, at this current point in time, presents us with future strategic alternatives of joint collaboration as responsible stakeholders (Green), a gradual degradation driven by un-balanced policies (Yellow) or a true implosive devolution (Red) based on "suave qui peut", or save yourselfs. The catch is that nobody, including the US, can just save themselves. In some ways the Davos speeches and Brown's recent Congressional speech suggests the meta-crisii have presented us with the best opportunity to re-formulate the world system in generations.

Responsible Stakeholders & Good vs Bad Governance

The ability of any government to both maintain it's own stability, manage the socionomic crisis and be a contributory stakeholder rests on the soundness and stability of their governance institutions. (Peace, Stability and Prosperity: the Nature of Good Government) That is can they hold things together, provide the institutional framework for their societies and economies, maintain their legitimacy (their citizens trust them and are committed to supporting them) and balanced inclusisveness. That last is particularly important - the purpose of government is to make societies work better and a critical factor is the extent to which the interests of the citizenry and polity are reflected in decision-making. There's been a slew of books in the last two years or so highlighting the fundamental changes in the world and arguing that China, India, Brazil, et.al. will dominate the next century eventually. State capabilities are ultimately based on two factors: the totality of resources available to them and the efficacy and efficiency with which those resources are deployed. Have you ever wondered how tiny Holland fought and eventually won a century long war against the mightiest power on earth - the Spanish Empire ? While the latter drove itself to bankruptcy multiple times and so encumbered the institutions of Spain with rigid, non-adapative and non-progressive characteristics that Spain to this day hasn't even begun to recover ? The secret lay in Holland's modern, progressive economy, it's manufacturing and trading capabilities, capital markets and representative government. On a 1-10 scale of effective use of available resources the Dutch were probably an 8 while the Spanish were arguably a 3 at best. The French created and experiened similar problems until the repeated bankruptcies and corruptions of the Royal regime led to the Revolution and two centuries of French political instability and dysfunction. Friedman alludes to all this but at the end of the day the ability of the emerging powers to continue their startling progress rests firmly on their ability to re-vamp their institutional foundation. Europe for example has never been able to marshall the continent wide governance to make it's potential power effective. Among other things the accompanying graphic is trying to tell us is that government must be appropriate - don't try to leap to full-blown democracy until the social institutions will support it for example. Russia underwent a big bang that led to the Oligarchs taking power and exploiting the "state" for their own purposes. Putin's rise was essentially the restoration of the Civil Authority. Unfortunately we seem to be seeing the resurrection of traditional Russian power politics, a rigidification and corruption of the system and a likely collapse. Ditto for Europe with a lower probability. What's required for domestic strength AND international contribution is a government that's appropriate AND at least on the frontier that balances extractions of resources with re-investment in socionomic development. The US clearly has a very strong framework as does the UK. It's not clear about Japan, India is fragmented, China is doing alright and Brazil doing quite well, all things considered.

 Putting the House in Order: Getting Back on Balance

The guiding principles for US foreign policy are two. First, encourage and support the best achievable governance frameworks around the world. And second, get our own house in better order. We've argued that, aside from the consequences of the socionomic implosion, the most critical (as in urgent and important) foreign policy challenge we face is pro-active engagement and support for the Middle East. (Gaza and the ME: Flames for the Fuses) Every situation is unique and policy, strategy and means have to be adopted that are appropriate for the circumstances. Nonetheless we'd like to suggest that our outline of a sustained US strategy that moves beyond simply keeping the lid on is in our own best interests. And that the strategies sketched in that post are a) models of how we should approach the RofW; for example Latin America and particularly Mexico. And b) an example of the kind of detailed thinking that needs to go on with regard to all our foreign relationships for both geographies and countries as well as the problems inventoried by the Davos group.

At the same time we need to get our own house back in order. The accompanying graphic is from our last post and creates a simple model of post-WW2 US history that argues that we've cycled around civic-minded effort and self-minded indulgence. In that model after the recovery efforts, so-to-speak, of the '80s we went over-board in the '90s and paid the price this decade. And will continue paying it for some time. Since all the troubles we've been wrestling with from the War on Terror (now the Long War) to the changes in the world system to the crisis are all metastasizing we effectively got blindsided. To meet these challenges requires a return to core values, concerted efforts and the design, development and implementation of new institutions and capabilities. Again much that the Bush Administration did behind the scenes was trying to adapt to the new emergencies without having adequate capabilities on hand. Enormous strides have been made in many areas, for example Intelligence. (There's no better example of perspective and insight than this Kennedy School talk:Today's Challenges, Tomorrow's Threats: Why America Needs an Agile and Robust Intelligence Community . Nor no better example of the organosclerotic barriers to adaptation than the post we built around another one:Changes and Challenges: a New Year Unlike Most Others).

Meeting the Enemy

Now, to get our own house in order, we need to make and implement the same kind of policy initiatives and strategic capability development in a whole host of other areas (). Which brings us full-circle back to the importance of domestic economic policy, investment in the future and the development of new institutions and policies in Regulation, Education, Healthcare and Education ! (Miracles on Pennsylvannia Ave: Make it So, No. 1 !, The Devil's Advocates: Dancing Dimagogues vs Economic Policy (Update),To Boldly Go Where We Must: Speech, Budget and Dr. Noes). Unfortunately too many seem to be interested in manuvering for partisan political advantage rather than acting for the general public good. We need a loyal opposition but it must needs be a constructive opposition. As that great philosopher and statesman Pogo told us so long ago we have met the enemy and he's us.

Continue reading "Foreign Policy for a Dangerous Old World: Adoption, Adaptation & Resilience" »

Posted by dblwyo at 09:13 AM | Permalink | Comments (0)

Judging from the readership indicators we can move on to the next discussions but judging from the cartoons, talking heads and agitated feedback from my network we need to stay with the "Political Economy" of the Stimulus/Budget/Rescue efforts, so we will. Just in case you were on vacation last week it was one of the most momentous in post-war American history ioho - particularly for the speed, size and complexities of what was done. Mo saw the signing of a giant stimulus package, Tu a major national "suck-it-up" address that's largely gotten plaudits from almost all sides with the exception of diehard Rips, We saw the Phase 2 announcement of TARP II and Th the tabling of the most ambitious budget proposals we've seen in a very long time. Not to mention Chairman Bernanke's testimony that "yes a recovery was possible if everything went right AND we repaired the financial system". Any one of those things, or actually a subset of line items, would have been as much major news as we've been used to getting in a month in the last 8-12 years. Barry's striking while the iron is hot indeed. As is our wont we've tried to capture the sense of things, at least as seen by others, in a cartoon collage.

Just for the record we won't re-visit our dissection of the not-so-loyal opposition's behavior beyond the longish review in the last post but we want to stake out two arguments. First, we try not to do opinion here but instead understand how things work and let the observables drive us to our arguments and then test the results against reality. So far the results have held up pretty well over the last almost two years. So empirics would seem to support the approach. Within all that we repeat our assertion that the Rips as a whole aren't serving anyone, including themselves. They're falling prey to the same problems the Dims had with respect to Iraq. Once something's already happened that you think isn't going well then try and fix it - particularly when so much is at stake. If nothing else a good-faith effort gets you credit for being public spirited citizens. At the end of the day we need a competent and effective loyal opposition and, as among others, David Brooks argues what we're watching is a suicide pact in process. A legacy of the partisan '90s that won't go away any time soon, unfortunately, but one which makes solving our problems unnecessarily more difficult.

Private Gain vs Public Spirit:

Civitas vs Indulgence

After the break you'll see a pretty complete collection of a representative range of reactions to Barry's major speech as well as assessments of Jindal's (we recommend the PBS Newshour vidclips of Brooks and Shields very much btw). You'll also find assessments of the Budget proposals and a couple of sections looking at the strategic implications and the positions of key players. In a nutshell the Budget proposal is bold, innovative, addresses the critical set of policy issues that Barry's been talking about since Grant Park and we've id'd as the critical ones for a couple of years now. It not only complements the stimulus package by trying to build on the foundations being laid there but also tries to combine long-term fiscal discipline with a reversal of nearly three decades of policy neglect. In other words there are at least four major strategic policy themes being braided together here: 1) Stimulate the economy, 2) do it intelligently so we lay the groundwork for areas of public policy that have been neglected, 3) do it with due recognition of the trades-offs and long-term fiscal consequences and 4) try to repair the damages that have been dragging down US socionomic performance for decades. Before we try and talk about the uglier side of practical policy let's look at the big picture and see if we can't frame this up a little. In the graph the green line is public effort, the blue the level of indulgence and the red the state of prosperities.

If you step back and ask what's gone on in the US you can very roughly look back nostalgically at the "Golden Age" '50s where hard-work, thrift and shared prosperity laid the foundations for the rest of the century. A golden age succeeded by the gilded age partay of the '60s in some views which led to the problems, crisis and general malaise of the '70s. Followed by another era of hard work, thrift and a return of prosperities, then another party decade and so on. It's tough times that call for hard efforts but as all that work begins to pay people naturally want to enjoy some of the fruits. Unfortunately their successors all too often take that prosperity for granted and over-indulge and not only eat all the food and drink all the bear but consume all the seed corn and end up in debt to the bank as well. There's just one problem as we keep cycling around this quadrille - every trip 'round we take more of the "nutrients" out of the soil, use up more of the water and so on. Or put another way we haven't made the investments in Education, Innovation, Infrastructure, Energy etc. necessary for the long-term trend to be up. Instead it's down - and with every turn the peaks are lower and the valleys deeper. So if we don't make those four strategic themes work in harmony we might get out of this immediate problem and still find ourselves in trouble.

Pragmatics, Policy & Politics:

Inside the Sausage Factory (Again)

We won't argue that either the stimulus package or the budget proposals are perfect; far from it. Neither are they anywhere near as bad as their harshest (partisan and polemical) critics would have it either. What they are is large, fast, complex and targeted at the right areas. They pass the first major test that should be applied - as in don't let be perfect be the enemy of good enough especially when you're in trouble and your window of opportunity for both emergency fixes and directional change is likely to be limited. Most of the criticisms on the other fail the two mirror tests. Nobody's proposed anything better or stepped up to constructively contribute improvements. And they aren't realistic - ideal policy on some narrow topic that's your own interest has to be weighed against what you can persuade all the interested stakeholders to support. Policy must be balanced with politics and both must be traded-off against the possible. We've talked multiple times about what we think are the ideal strategic policies and why we think so. Now let's add the pragmatic dimensions. First of there's a fundamental question of implementation: are the resources, people, money, skills and implementation mechanisms available ? If so in what timeframes ? A new green energy infrastructure is useless if the technology ain't there, it takes decades to deploy or the power grid won't support it for example.

The graphic tries to pull all that together but listing the major policy initiatives we've argued are important in each major category; it you test our shopping list against the Administration's pronouncements the alignment is close to 100%. The red line is our assessment of where we're at while the yellow represents a reasonable set of goals to get us back on a healthier, more self-sustaining path. Note - that still leaves a long way to go to some "ideal". The real challenge is mechanisms and means: do we know how and have we the resources ? And what are the trade-offs ? The second sub-chart maps the policy areas to the political questions - the "Four P's of Power". Who are the Players, What are their Positions, What's their Power to influence things and what Policies will they support ? Answer those questions and you have an idea of the layout of the sausage factory.

The other, almost as important and more influential, implementation barrier is that every policy initiative will face entrenched stakeholders with their own positions, influence, resources and interests. As Machiavelli noted doing something new is the most difficult thing in the world because your support comes only from those who might benefit while your enemies are the folks who know they'll be hurt or disadvantaged. One can trace thru the rise and fall of Chinese Dynasties for millenia with the re-birth under strong new emperors, the rise of the state, the gradual accumulation of power by the mandarinate and the erosion of the system as corruption led to the priveleged placing their own short-term interests ahead of the common good. Did you know that the Great Fleet of Kublai Khan that invaded Japan and was destroyed by the Kamikaze was, when the marine archeologists got to it shoddily constructed because the mandarins in charge of construction had stolen the funds ? One doesn't have to look that far back in history to illustrate the problem - just look to Detroit these days...or the Steel industry before it.

We come full circle - we have a limited window of opportunity here to not only get out of a crisis but to do so in ways that help us move back to an upward trajectory. And an essential part of that is persuading the power groups to support it in the broader public interest while we undertake the biggest re-vamping of our economy and society in decades. To try and recover from squandering the legacies that the prior generations created and leave something more hopeful for our successors. On that basis - all things considered indeed - not bad.

Continue reading "To Boldly Go Where We Must: Speech, Budget and Dr. Noes" »

Posted by dblwyo at 03:00 PM | Permalink | Comments (0)

Well we were hoping to move on beyond economic concerns, which we're on record since this time last year as being the single most important policy domain we need wrestle with. A desire to move on is not, therefore, downplaying it's criticality; rather it's arguing that other issues are also critical, e.g. Foreign Policy ! Based on feedback from our readers and network, some casual exposure to the talking heads and punditocracy and browsing the appropriate political cartoon it's not yet time to move on. So we're going to focus on economic issues at least one more time and hopefully set you up for listening to the Prez's address this evening. (BtW - if you'd like your coverage undiluted C-Span will be live this evening). Just to put a point on all this consider the accompany political cartoon collage - clearly the grasp, acceptence and understanding of both the economic situation and the recovery packages and initiatives are minimal. Also BtW the markets are up today almost 4% but down 14% over the last two weeks ! Trust me, as we discussed(Miracles on Pennsylvannia Ave: Make it So, No. 1 !), this is different, massive, unique in post-war America and the debate is more polemical than helpful. From an economic, policy and political machinery perspective there is no single one of these cartoons that is anywhere near accurate. Yet as an indicator of the general views of the situation it's likely entirely too accurate; and therein lies the problem. The thing we have to fear is not just fear, it's mis-understandings and distortions. Which engender and reinforce fear. The President has an enomrous challenge on his plate to address this "unconscious" fears and deal with the political environments. After the break you'll some reviews of the economic situation with two of the only balanced columns on the Recovery package and Geithner's Plan; as well as the consequences if these initiatives don't work. The readings also cover a wide range of other topics that are critically important.

More on the Package Breakdown

Let's start by taking a look at yet another breakdown of the Recovery Package, this one courtesey of the Macroblog and written by a research VP at the Atlanta Fed. What the graphic depicts is the relative size by major component the Package over the next several years. When you examine the details of each year (additional graphic) several things are rather striking, at least to us. The first is the size of each component, the timing patterns and the implicit thoughtfulness of each component in terms of timing and feasibility. There are, by and large, almost no commentaries on the package that recognize the balance between policy (what works best in what timeframe as discussed in the prior post linked above), politics (what can be sold in the sausage factory and what support is available at what price) and implementation. Two "grounded" critiscisms that recur are the package is not large enough nor is it fast enough. Well the spending in'09 is, as you can see, huge but smaller than '10, and continue to ripple for some time. Nobody is seriously discussing the implementation challenges per se as critical decision components. We don't have the institutional infrastructure to absorb more spending any faster and the amounts in the authorization will strain what is in place and require massive new programmatic support. In other words this is not just a reasonably well-crafted plan given the timeframe but also likely to be at the limits of what can be managed.

Political Dysfunction

Some of my prior posts and private comments have been harshly critical of the Rips for failing to support this process. Let me reiterate and reinforce those comments. The critiscism of my comments as that they were disdainful of folks with whom I didn't agree despite their potentially being well-intentioned. That's possible, even somewhat likely, so discount what follow to whatever exent you'd like. My so-called disdain is based on a nested set of bad behaviors. First off there's the technical critique that not enough reliance was placed on tax cuts and too much on spending that was wasteful. We dissected that set of objections pretty fully last time but so did Steve Perlstein in the WaPo, which we linked in the last readings. Briefly the Administration made a great and sustained effort to reach out, got no on-going feedback and support and still included a large component (huge in the first year) of tax cuts. Martin Feldstein is often cited as evidence that the package was badly done but his most trenchent objection was for an over-reliance on tax cuts; which hardly seems like objective evidence of the flaws the Rips are asserting. As for "spending", without going into further deep detail we appeal to Perlstein's bon mot - spending is stimulus. There are three more telling and fundamental problems with the Rips political posturing.

1. We all recognize the seriousness of the problem. Even if the Rips disagreed why didn't they step forward as responsible leaders and citizens instead of posturing partisan politicians ? In other words all the evidence indicates that given every opportunity to contribute to re-crafting the packages they failed to step forward with any, collectively and en masse. Which can only reflect a political decision.

2. Given that lack of participation it would still have made, and will still make sense, for the Rips to position themselves to offer up some support for the Package in whatever forms it took rather than just vote the entire thing down. A ready-made political position we have been to express doubts but argue and admit that despite their disagreements they would vote in the best interests of the Rupublic. Instead they chose blanket denial and denigration.

3. Finally, and perhaps most telling and indicative, they then proceeded to mount concerted, massive and public attacks using the worst of the perjorative labels created in the '90s to try and appeal to the lizard-brain emotional centers of the voting public. Which assertion you can verify by yourself by listening to the Su. morning talk shows, e.g. some of the links pointed to in our last posts. And further delved into in some of the C-Span videos cited in the readings below.

On balance our judgment is that the Rips have decided that their political advantage lies in not attempting to contribute to fixing these problems but in labeling them as somebody else's problem and using their position of lack of responsibility to be malfeasantly irresponsible. We used the accompanying graphic to characterize the differences in the candidates approaches. It looks like selling to the lizard-brain will continue to be the Rips strategy.

The President indeed has some major challenges in explaining, selling and dlelivering. It would be in all our interests if more folks were in the boat and rowing with the team instead of throwing rocks from the shore. But so be it.

Tough Love From the Coach

 Our intent is to dive further into a deeper analysis of "Coach Barry's" (Welcome to Coach Carter's Gym: Renewal of Duty, Honor and Country) call to arms and self-responsibility, but having spent a bunch of time reviewing everybody from the WaPo to the NYT to the WSJ to the foreign press (Der Spiel, FT, Jerusalem Post, Xhinghua,...) we think our little summary captures the essence of. If you've gotten this far hopefully YOU'VE got a balanced understanding of the situation AND why what's happening in D.C. will define your future. Here's my informal summary:

 If you check out the new readings excerpts or listen to the talking heads on this Rose panel discussion you'll find that a) just about everybody except the diehard (dying suicidal paranoics) Rips and b) in that general consensus the conclusion is that Barry took a great step forward to selling all his massive, indeed revolutionary, agenda to the hearts. And just for the record David Brooks assessment of the Rips is MUCH harsher than mine !

Continue reading "The Devil's Advocates: Dancing Dimagogues vs Economic Policy (Update)" »

Posted by dblwyo at 03:46 PM | Permalink | Comments (0)

The big news from the last couple of weeks, at least domestically, is that we've succeeded in crafting and passing the largest peacetime suite of economics legislation in our history (the Stimulus Package plus the next round of TARP) with more to come as the other two legs of a 4-legged stool. Those being a Housing rescue package and a re-formulation of Financial Industry regulation. We also learned that the ME is not the only place where intransigent adherence to provably wrong shibboleths of policy, position and belief are rampant. Nonetheless the package is un-surpassed for size, scope, force and timeliness and as such gets a B+ on economics, an A- on politics and an A for pragmatic and realistic policy-making craftsmanship, admittedly grading on a curve. What do we mean by all that ?

Economic Policy to Date

First, make absolutely no mistake about it. This package is absolutely essential to saving the economy. We're in a very serious situation where the liklihood of a more pronounced downturn followed by a decade or better of Japanese Malaise is entirely possible. Further, the economy is unlikely to recover on it's own because the normal, organic self-correction mechanisms are broken. People and companies are, were and will be continuing to pull in their horns as the situation deteriorates; government is the ONLY possible source of the spending necessary to salvage things. Second, in a short-term view the notion that OMG it's spending is just utter and absolute nonsense, that in fact is the whole point. It doesn't matter if gov't employees steal everything and go to Vegas - it's still stimulative. Third, there are real tradeoffs between tax cuts (which are fast but don't give you much bang, direct spending which gives you a much better multiplier but is slower and investment, e.g. infrastructure, where you get the most bang but is much slower and complex. For example investment in new energy sources doesn't do much good if you haven't the power grid to move the new power. Fourth, given the spending if you can use some of it to both get high multipliers AND lay the foundations of downpayments in future improvements in the economy that's smart policy-making. Finally, this is a large, very complex under-taking for which the implementation mechanisms are lacking; as a result there's only so much spending you can do in certain timeframes and you need to build up your capabilities. You also need to get support and buyin. Taken all together the package is a very well-crafted balance among all these competing requirements, let alone in the time and with the ideological oppositions it faced. We've gone into some of this before (First Things: Financial Crisis, Economy and Barry) but if you'd like some more details try these more "technical" discussions (State of the World: Crisis Metastasis, Strains and Fault Line,Economy vs Earnings Cage Match: Outlook, Business Performance & Realities ???,Time, and Past to Play Bizzball: Economy to Business Performance).

 Let No. 1 Speak for Himself

If you don't entirely grasp the size and complexity of the package check out the accompanying graphic from the WaPo which shows how it's balanced across the major components and how those components break down across the various Departments and areas as well as across time. And if you think pulling that off in the timeframe with that good a design was an accident, or that all the talking heads echo-chamber discussions of how badly things were done is accurate here are some excerpts from the recent AFOne Chicago flight of an on-record interview with the President, again from the WaPo.

Obama Interview Transcript

1. Almost to a economist, there was a consensus that we needed a large stimulus package not as the silver bullet to solve our economic problems, but as a necessary component to solving our economic problems, and in terms of scope, that we were going to need something between $600 billion and $1.3 trillion. That was the range that was presented to us. There also was consensus among economists that the best approach to spending that much money and getting the stimulus out of it was to diversify a little bit, so have a tax cut component -- there was a generally strong feeling that tax cuts targeted at people who were most likely to spend would have the biggest impact; a state fiscal relief component, or a countercyclical spending component, so everything from -- food stamps to unemployment insurance -- again, stuff that would be spent out quickly and, in some cases, help prevent a worsening of layoffs and a spiral downward. And then a third component of infrastructure. Now, each of these components had pluses and minuses. For example, tax cuts, you can get them out quick, but the general view is that you don’t necessarily see a dollar of spending by consumers for every tax cut they receive. Infrastructure, you get probably the biggest multiplier effect -- for every dollar you spend you might get $1.5 worth of demand out there, but necessarily you can’t get all those infrastructure projects done within a two-year time frame and the start-ups may be longer. So our whole goal was to provide a framework for Congress that presented the best mix based on the best available information that we’d gotten. I raise this because I think that some of the critics ended up fastening on this pet project or this program that they suggested was not stimulative; in fact, it would be hard to find economists who would argue that the guts of the program, the core of what just passed the House and hopefully will pass the Senate while we’re in the air or shortly after we land is not pretty well designed to get the economy moving again. And one last point -- one last goal that we set out, and that was if we were going to spend this much money, our number one priority being to get jobs in place and to get the economy moving again, wouldn’t it also be helpful for us to make sure that we laid some made -- that we made an investment in longterm economic growth -- that we put a down payment on things that have been deferred for too long?

2. Now, in terms of what I’ve learned on the politics of it, I think what I’ve learned is that I’ve got a great team because we moved a very big piece of legislation through Congress in record time. And that was not easy to do. And I think the end product is not a hundred percent of what we would want, but it is a very good start on moving things forward. I made every effort to reach out to Republicans early to get their input and to get they buy-in. I think that there were some senators and House members who have a sincere philosophical difference with the idea of any government role in boosting demand in the economy. They don’t believe in Keynes and they’re still fighting FDR. And no matter what we did, said, whatever the process was, they just don’t agree that this is the best prescription. And I think we can disagree without being disagreeable on that front. I also think that there was a decision made that was political and tactical on their part where they said, you know what, if we can enforce conformity among our ranks then it will invigorate our base and will potentially give us some political advantage, either short term or long term. And whether that’s a smart strategy, I think you should ask them. The last point I would make, though, is that given the urgency of the situation right now, my consistent goal throughout this process is: Are we getting the most immediate, most effective relief possible to American families who are losing their jobs, losing their homes, losing their health care? I welcome Republican participation in that process, but ultimately I’m answerable to the American people. And my determination was to get it done, and I think that we’re going to get it done.

3. Look, I mean, the fact of the matter is, is that once a decision was made by the Republican leadership to have a party-line vote -- a decision that I think occurred before I met with them -- then I’m not sure that there was a whole host of things that we were going to do that was going to make a difference. But again, my bottom line was not how pretty the process was; my bottom line was am I getting help to people who need it. Going forward, each and every time we’ve got an initiative I’m going to go to both Democrats and Republicans and I’m going to say, here’s my best argument for why we need to do this. I want to listen to your counter-arguments; if you’ve got better ideas, present them. We will incorporate them into any plans that we make, and we are willing to compromise on certain issues that are important to one side or the other in order to get stuff done. There are 535 members of Congress; they’re not potted plants. Their job is to represent their constituents and they’ve got ideas, too. So I’m not interested in bulldozing them. On the other hand, I’m answerable to the American people in an emergency economy. And what I won’t do is to engage in Washington tit-for-tat politics and spend a lot of time worrying about those games to the detriment of getting programs in place that are going to help people. : Well, look, as I said, I don’t want to question the sincerity of some of the Republicans who opposed this plan. They just may have a different theory about how the economy works. Now, I have to say that given that they were running the show for a pretty long time prior to me getting there and that their theory was tested pretty thoroughly and it’s landed us in the situation where we’ve got over a trillion dollars’ worth of debt and the biggest economic crisis since the Great Depression, I think I have a better argument in terms of economic thinking. But, again, I don’t question their sincerity. I do think that over time, as we keep on reaching out, and as I think the American people express their view that we need to start actually doing something about jobs, housing, health care, education, and so forth, that there will be some counterveiling pressures to work in a more constructive way.

4.I don’t have a crystal ball, and I don’t think anybody does, but I think that you can imagine very easily a scenario in which we duplicate what happened in Japan in the ‘90s, where we paper over core problems in the banking system. Despite some efforts at stimulus, we never fully get private credit flowing again, and the economy contracts severely and then sort of limps along for a very long period of time. Keep in mind, though, that even in that scenario, Japan had an awful lot of foreign currency reserves, they had a surplus from a positive trade balance. And the United States was pulling a world economy along. In this situation you’ve got all the economies around the world, even including China, decelerating at a fairly rapid rate. So if what happened in Japan is duplicated here in the United States, there’s nobody else to help drive the engine of growth, you could end up seeing an even more protracted and prolonged worldwide contraction. And I think that would have a severe impact on our quality of life. Let me, first of all, emphasize that the recovery package was critical to help families right now. Unemployment insurance extensions, health care through a COBRA that’s affordable, some immediate job creation -- those are very important. That’s only one leg of the stool. As I said in my press conference, the second leg of the stool is getting credit flowing again. And what the first round of TARP accomplished was to avert potential -- I hate to use the word again, but potential catastrophe in the banking system. I mean, things could have melted down much worse. Because of a lack of clarity, consistency, transparency, what you didn’t see was a market rebound and credit moving the way it needs to. So the credit markets still are not functioning the way they should. Now, this is a hard problem, and that’s why I said, I think on Nightline the day that Tim Geithner spoke, there are certain market participants who think that there’s some painless, quick fix here. There isn’t. Because what happened was that you had banks making bets, leveraging $30 off of one dollar of subprime assets; that was duplicated throughout the system, and deleveraging, sort of working through all those bad debts is going to be really tough. Now, we started talking about this, by the way, in transition as well, and so along parallel tracks, even as we were working on getting the recovery package done, we were also talking about how do we get credit flowing to home owners; how do we make sure that we’re getting small businesses the resources they need; how do we make sure the banks trust each other in terms of lending, and even blue-chip companies are able to shed corporate debt, so they can make payroll and keep people working. 

 Bottomline Assessments

 Think of this as the New Coke marketing paradigm - even if you screw up you gain because you've ranged and bracketed the opportunity.
 
1. Barry reached out to everybody and included major chunks in the plan strictly for compromise, that is the tax cuts, which we know are NOT that efficacious in this regime.
 
2. He and his team guided things in the background but rested the primary responsibility for Congress and let them do their thing.
 
In both cases we learned they aren't up to the task, still thinking in old patterns and (especially the Rips) reverting to old posturings and shibboleths; the talk show appearances sounded just like Newt the Grinch's playbook from the mid-'90s on perjorative labeling to trigger the lizard brain. McCain did too. And btw it was the same rhetoric that lost the election for him.
 
So what did Barry do so far...he
 
3. Kept his cool, didn't get trapped into we said/you said, and pointed out it takes time to change people's habits thought, especially when they're burned into the deepest levels of their lizard brains.
 
4. At the same time in the press conference and at Elkhart he fired several major warning shots that said he can't afford to tolerate to much childish behavior before being forced to get out the leather strap.
 
Chess master indeed. And playing not just for the Opening or to set up the Middle Game but begin to set up the positional game for the long-run. And AT THE SAME TIME taking a very long, patient and balanced view of how you work in the short-term but play to change the tone without getting trapped in the emotionalisms and posturings. Unlike almost everybody else in the game.

We'll see in that short-run how the messaging and positioning works out - that one he may have lost by losing some of the skirmishes but this battle isn't over. Let along the campaign. In fact if you'd like a baseball analogy much of the critiscisms have been about the base-running and sliding while ignoring the hits, runs and errors, let alone the season or the balance of forces. As it happens less than 1% of the bill is characterizable as "Pork" but the Rips played the old pejoration labeling games invented by Newt the Grinch to go after Clinton that have since dominated political discord, oops, I mean discourse, in this country. For a prior dissection of Lizardbrain vs Substantive communications see this (Rope-a-Dope at Hofstra: Handicapping the Debate and Results) and then compare it to the Meet the Press vidclip. Better yet compare that vidclip to this book talk by psychologist Drew Westen and look for the labeling vs non-labeling appeals to the lizard-brain.

IOHO they've made major strategic and tactical blunders for narrow partisan advantages that may in fact be cynically self-serving, with an admixture of sincere disagreements (despite all evidence to the contrary over almost thiry years of Supply Side debates). In any case listen to the posturings on some of the vidclips in the readings (of which there is a whole......le bunch covering the spectrums of political, policy and posturings concerns). Or check out this series that provides a window on how well they sold the PorkFest Messages.

Continue reading "Miracles on Pennsylvannia Ave: Make it So, No. 1 !" »

Posted by dblwyo at 05:24 PM | Permalink | Comments (0)

If it's not entirely clear to everyone we're trapped in a concentric and converging set of Perfect Storms on the economic, financial, socio-political and geo-political fronts that we will have to deal with. One way or another, that is consciously and deliberately or inadvertently or accidentally. We got into this mess thru combinations of systemic failure, moral failures (on our part as well as by the powers that be) and systematic leadership failures. Our last post (Welcome to Coach Carter's Gym: Renewal of Duty, Honor and Country)addressed the need for us to suck it up and pull together - to return to fundamental values. Yet what are followers without leaders, just as what our leaders without followers ? We need both ( Following the Spirit: Leaders, Leadership and the "Wise" Course) and both have to perform more then adequately. You might both enjoy William James on the symbiosis between leaders and led:Great Men, Great Thoughts, and the Environment., and profit (greatly) from the explicit analysis of mutual inter-dependence.

So if we do our part what will the folks with their hands on the levers do ? As it happens the Davos conference is underway and the sessions are available online for your viewing pleasure and we recommend them, for lots of reasons, very...very much. Having been watching over the last several days we've culled several that are well worth your time IOHO. And you can find them below along with some short comments (forgive the graphics - it's proven technically impossiel for me to get a good picture but we've left apparently blank spaces to provide "space" to encourage you to pause and watch).

Crisis and Leadership

 This first session we'll point you to is on leadership in a crisis with Bibi Netanyahu, David Cameron, Jaime Dimon and Anna Botin. Their observations and astute insights are both wise and experienced as well as informed by a great deal of practical experience in getting results from the "sausage factories" that make policy, politics and decisions. We were particularly impressed with Bibi and Jaime but feel that the entire session is well worth your time. If the session won't come up by either clicking on the placeholder or the marked hyperlink you can find it on the Davos web site directly for yourselves. If you haven't the time to watch all the sessions or even a complete one go back - we think these are worth listening to repeatedly !

Views From the Next Generation

One other interesting session is this one that has six teenagers selected from several hundred from around the world to come and briefly present their activities and observations and then respond to the moderator's questions. While it'll be our actions and the decisions of the greyheads in power which determine our future course these are, ultimately, the folks who will have to live with the long-term consequences. And their reactions are fascinating, interesting and encouraging. For anyone who thinks that there's no civic spirit in the younger generation this will disabuse you...or should. At the same time they also displayed a natural and justified anger at the moral failures of the people they've trusted, willy-nilly, to build them a better world.

Sad Lessons of Past Generations

Speaking of which the opening graphic is a YouTube vidclip of Dylan's "Times They Are a Changn'" composited by various artists over the years. This song was an anthem it it's day and ever-afterward. Watching it again and the various artists interpretations reminds us of that and, hopefully, causes us to be willing to pick up our burdens. Yet watching this reminded us of a great PBS Special on the "Folk Years" (of which there is a wonderful CD/DVD collection out) that collects many of the great songs of change and youthful effort. When it was broadcast it was fascinating to watch many of the middle-aged and well-off audience singing along from memory. Yet how did they live their lives ? Rather traditionally at the end of the day. They surrendered their Revolution for comfort and complacency and squandered the inheritances received from the Greatest Generation bought at so much cost in blood, sweat and tears.

Time will tell whether they will be a new Great Generation or not but the earlier signs are encouraging. They're acting not just talking, rioting, partying or dancing to the music. They appear to know that good intentions are no substitute for good actions. But listen to the lyrics, at least the opening lines. The times are indeed changing - whether it's for the better or not is to be determined. Which in turn depends on whether these Crisis or just Risks....or Opportunities as well !

Bad Lessons of the Current Generation

Speaking further of which after the break you'll find the counter-examples in point. These are recent news stories on the awarding of $Bs in bonuses last year by the Finance Industry. Talk about a total lack of leadership, morals or values ! We knew that the Industry was self-serving and not to be trusted without adult supervision and would sell our collective interests down the river for another bottle of wine. Now we're learning they have no sense of the broader interest at all. Our guess would be that at the end the adults supervisors will be armed and authorized to use deadly force, so-to-speak. And will be roundly applauded when they do. There's a fundamental lesson of Civitas here - no one is an island and we all prosper in conjunction with the ecologies we live in. When you damage that ecology by poisoning it in pursuit of your narrow self-interest you're citizenship rights are likely to be justifiably amended.

Values, Attitudes and Coping

Our favorite Davos session is this one with Benjamin Zander. If you watch no other watch this one. Zander is an orchestra conductor who lectures on how to conduct your life well by rising to challenge thru seeing them as opportunities. A 1-sentence summary that does nearly complete injustice to the power, depth and force of his "lecture". Which is not really a lecture. He starts though by telling the story of his Jewish father who lost everything fleeing the Nazis yet found the strength of will, moral purpose and principles to build a new life.

At the end of the day whether or not we and our leaders pull ourselves thru these messes boils down to that. Can we find it within ourselves to rise above this and re-discover fundamental values ?

Continue reading "Crisis, Leadership, Leaders and Values" »

Posted by dblwyo at 10:59 AM | Permalink | Comments (0)

Now that we've had some time (can you believe it's basically just a week since the Inaugural Speech - it seems like months ago !) let's stop and consider it. The general quick take of the punditocracy seems to be that it was a good, even very good, speech without flights of soaring rhetoric but with a sober, realistic and grounded call to arms. We sort of agree but think they missed a lot of it being too narrow in their interpretations, for one thing, and not able to step back and listen to what they really heard. In fact our take differs somewhat from theirs on several levels, both rhetorical and substantive. On the latter the speech deserves to be parsed out and analyzed line by line - which we intend to do at a future date. There was a huge amount of substance but it was entirely consistent with our prior takes on the Grant Park speech, the nomination acceptance speech and what came out of the debates. Perhaps one of the most substantive we've ever heard. On the rhetorical front the standards of comparison were JFK, FDR and Lincoln, particularly the latter's second Inaugural. Quite a standard, yet in each case they were ill-received at the time. In fact so was the Gettysburg Address. Our opinion is that there were plenty of rhetorical and policy points that worked well together.

Call for Responsibility

By this time you've probably heard the old story, true to our knowledge, that the Chinese ideogram for Crisis is the composite of the ones for Crisis and Opportunity. Which seems to perfectly capture the times and the speech. As Rhammie puts it, "never waste a good crisis...do what you've been putting off and couldn't get support for it." That pretty well captures a central message. Woven thruout the entire speech in fact was the charge/argument/what have you that we all bear and bore responsibility for these multiple crisis, not just a few fat cats. A point we've argued several (many ?) time before and one which stands up to severe scrutiny. Any time you bought a new giant TV using your house as an ATM machine or lived on 0% savings you were part and parcel of this whole shebang. We all rode this gravey train for at least the last 30 years and put off facing the hard decisions (  Party on Grasshopper: Digging Deeper....into the Policy Agendi, Inside the Sausage Factory: the 4P's of Political Reality). Instead of posting the speech itself though we're going to let someone else put it in a nutshell - Samuel L. Jackson speaking/acting as the real life Coach Carter.(IF there are some technical problems with the pop-up the highlighted section takes you hopefully to the trailer - which speaks amazingly well to our basic points. Otherwise search YouTube for "Coach Carter").

Listen to it and you'll hear in a lot blunter language what the President told us. We can work our way out of these messes. It's not going to be easy and it's not going to be quick and it will take hard work, discipline, sacrifices and, MOST ESPECIALLY, working for someone besides our own selves. We are a team in other words or we're going to be road kill. Or, as one the Founding Fathers put, "Gentlemen, we must all work together or we will surely all hang separately !" We're all big people now and need to take responsiblity for our own decisions and the consequences.

Values for the Future

One of the best moments for us, among many, was where the President challenged us to rest our efforts on fundamental values, built on the historic values that made this country great. This is what he said:

For as much as government can do, and must do, it is ultimately the faith and determination of the American people upon which this nation relies. It is the kindness to take in a stranger when the levees break, the selflessness of workers who would rather cut their hours than see a friend lose their job which sees us through our darkest hours. It is the firefighter's courage to storm a stairway filled with smoke, but also a parent's willingness to nurture a child, that finally decides our fate.

Our challenges may be new. The instruments with which we meet them may be new. But those values upon which our success depends -- honesty and hard work, courage and fair play, tolerance and curiosity, loyalty and patriotism -- these things are old. These things are true. They have been the quiet force of progress throughout our history.

What is demanded, then, is a return to these truths. What is required of us now is a new era of responsibility -- a recognition on the part of every American that we have duties to ourselves, our nation and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task.

This is the price and the promise of citizenship.

At heart this is, as Coach Carter has it, a call to suck it up. We've chatted before on the fundamental requirements for peace and prosperity of a grounded and workable set of values. The accompanying graphic is taken from that post (  Stories We Tell Ourselves: Values, Culture and Change,  From Griffindor to Tatoonie: Searching for Good Ground in a Groundless World) so we won't repeat our discussion. But at the end of the day the central question here is what ground do you stand on ? One way or another we are, "each and every one", going to find out ! For sure, for sure.

One final observation or look back if you would, the prior post (From Misconception to Collective Affirmation: the Inaugural Renewal) was looking forward to the speech but also looked back before to the values, risks and actions that made this country. In our book the Inaugural answered the mail, completely, thoroughly and on every point. It was indeed a call for renewal ! After the break you'll find a three-part readings collection: some lead-ins that set the expectations, some selections from some pundits who got it better than most IOHO, and the most important section. A set of key readings on the new Civil Society we need to build the world we'd like to live. Those are the ones I particularly think you ought to read.

Back in the day, so-to-speak, someone who had full legal rights as a Roman Citizen was said to be part of the CIVITAS. But Civitas implied much more than privileges and rights...it also implied and implies duty and obligation. Most especially it implied that a good citizen would act to properly balance their own narrow interests with a proper concern for the well-being of the city and the state. For all one's fellow citizens...Barry is asking us to renew our Civitas in a modern age.

Continue reading "Welcome to Coach Carter's Gym: Renewal of Duty, Honor and Country" »

Posted by dblwyo at 08:42 PM | Permalink | Comments (0)

In her weekly column in last weekend's WSJ Peggy Noonan talks about the Inaugural and what it means to her, starting with tearing up as she flies in and sees the great monuments to our historic past. She continues by dissecting things a little bit, admitting that there's going to be a lot of hoopla, maneuverings, posturing and politics. Even, perhaps, some cynical manipulations, or three, in the days to come by various parties. She closes with the appeal that "we suspend our disbelief". That is we don't just watch a series of public ceremonies, a swearing in and a multi-hour parade by everybody from the Old Guard to high-school bands selected more for who they are than how good they are, but we suspend our modern cynicisms, our disbeliefs. While taking her point, even understanding it and agreeing with the surface logic, it bothered me enormously. Suspend our disbelief ?

NO, absolutely not. While we don't always agree with Noonan we've always found her insights and humanity to be worthy. In this case, though, we must vehemently disagree with her fundamental premise. If we've learned anything in this last election cycle it is that we are all children of our deepest, unconscious emotions. Our lizard-brains, as it were. Yet we also know that our lizard-brains are both trainable and disciplinable. We also know that our most fervent beliefs and values reside not in our higher rational processes but in our deepest and oldest human characteristics.

Instead of suspending disbelief we should instead be affirming our beliefs. No matter how hokey, maudlin or manipulative these Inaugural events and celebrations might seem they are recognition of some of the best that is in us. And of some of our highest ideals and greatest achievements. If you don't think so then we urge you to listen to HBO's broadcast of Sunday's Inaugural Celebration.For which we thank them for broadcasting, online and now making available (in case it disppears you can find some YouTube clips from which this picture is taken).

The Miracle That Was and Is

Now the analyst in us suggests that the carefully, artfully and well-crafted Celebration be parsed out a bit. And if you listen carefully, over and above enjoying the music, the peformances, and the speeches you'll find several recurrent themes. Reinforced by the musical choices. If you want to know the tone this administration intends to set, what it's major philosophies will be you'll hear all you need to know. All of which we agree with from "we can face our challenges" to "we are one" to the emphasis on the dignity and value of work, the need for people to be self-responsible and for government to help finding opportunity and lifting the burdens that prevent them from achieving these goals. While also asking each and every one of us to bear our share.

But no matter our problems they continue to pale in comparison to what we've faced historically. Serendipitously the HBO mini-series "John Adams" is now out on DVD and in my local rental shop. Renting it this last weekend couldn't have been better timed. It's a very real, gritty, accurate and honest portrait of the people, times, challenges and events. But it also showcases how our Founding Fathers (& Mothers) were motivated by their ideals, governed by their values and dedicated themselves to making this a better world. Beyond that we all take too much of this for granted. When they started their deaths by hanging were more likely - they were after all 13 small colonies taking on the mightiest and most powerful Empire in the world. More than that they were creating a Republic from scratch by their own decision. Something never before done in human history.

Re-read that last line. As we stand on the shoulders of the giants who came before us we forget what leaps of faith and imagination and courage were required for their achievements. The man who first made the "shoulders" comparison was Issac Newton who's own work on the Principles of Gravity required a conceptual leap, that action at a distance without a physical connection, was possible and what organized the Universe. That was an act of insight, intellect and Faith for which there was no logical or rational basis at the time.

The act of deciding that we would be governed by ourselves, in a form we crafted, that we would be dedicated to the enabling the "pursuit of inalienable rights" for all was an even bigger act of Faith.

So don't supsend you disblief this week - affirm your Faith.

After the break we provide a YouTube playlist of the Adams series but if you listen to nothing else listen to the clip that is embedded in the accompanying picture. John Adams gives the most pointed statement of that fundamental faith that we've ever heard. And take his message - the Faith that created, not just moved, a nation and pay it forward.

Continue reading "From Misconception to Collective Affirmation: the Inaugural Renewal" »

Posted by dblwyo at 04:13 PM | Permalink | Comments (0)

There's a fairly well known cartoon of two scientists working out a problem on a chalkboard covered with complex equations and down in the corner is a little circle with the key step inserted in small print - "and then a miracle occurs". Wouldn't it be nice if we could take the same short-cut to fixing the horrendous shopping list of significant challenges we all face ? There's another sort of urban myth that the Chinese character for Crisis is composed of the two characters for risk and opportunity. That pretty well describes our situation - so much so that it's becoming a semi-common theme among the commentariat. Which doesn't stop it from being very....very accurate. We've muddled along for the better part of two decades deferring action on key strategic initiatives from energy to healthcare to education to the economy because the apparent cost of fixing known problems was far greater than the experienced pain of hunching along. Fortunately for us we're no longer in that position. In prior posts (Populist Panderings, the Candidates and Real Solutions, Hit the Decks aRunnin...Git 'er Done Barry, Changes and Challenges: a New Year Unlike Most Others) we've inventoried and analyzed what needs to be done, how the incoming President is approaching things and the major barriers to finding daylight to run to. Now it's time to knuckle down and get 'er done, starting of course with vital steps on short-term economic fixes to lay the groundwork for long-term solutions (First Things: Financial Crisis, Economy and Barry) that put us back on a growth track. With all that in mind let's consider what some of those long-term steps are and how they inter-act.

Strategic Economic Policy

Presuming we get thru the next two years of continuing economic crisis and get the economy back on track the real challenge we'll face (we should be so lucky) will be to get the long-term structural trend of the US economy headed upward again. In a nutshell that means creating enough new high-value jobs so that the average worker can find one with a rising income. Conversely that worker has to have the necessary qualifications. Taken all together there are a lot of moving pieces which need to work together as we've tried to show in the accompanying graphic. There was a day when P&G was an innovative growth company because having a clothewasher was a big new deal. In other words the right kinds of new jobs come from innovation in new products and industries and we need to look at Energy, the Biosciences and Materials. Imagine new solar panels that are cheap, affordable or new biologically derived bacterial production of alternative fuels and you get the idea. Our ability to do all that is dependent on establishing a secure and peaceful world where we minimize the impact on the environment, not end up in a series of on-going conflicts over water rights, oil or other resources.

Strategic Domestic Policy

 Contrary to current popular belief nobody has come up with any better way to feed, house and support more people more effectively than a free-market economy. Contrary to dead and dying shibboleths however nobody has come up with a way to have efficient markets in a vacuum. They require a legal system, secure property rights and a certain sense of peace and security. As all to many places around the globe show by terrible counter-example right now. Which really means we need to find the right balance of government regulation to let markets work well where they do and constrain them within those limits...and that's not just an observation about the Finance Industry, our current poster-child of run amok self-interest. It also applies to health, safety, the environment and on and on. So finding the right mechanisms and designing new generations of public institutions that provide the right incentives for the kinds of behaviors we want is a critical dependency we need to address. Oddly enough if you look at the prior posts where we inventory and analyze the range of domestic policy challenges in Education, Healthcare and so on as well as the institutional barriers to success we come full circle. If we want to reform Healthcare or Education we need to find a way not just to have nice ideas about what we'd like to have. Or even constructive ones about how we'd like to implement those ideas. Instead we need to create the incentives that get us the most bang for the buck ! Consider Healthcare for example - the 46 million people who are un-insured don't necessarily lack some health coverage per se. If they show up at a hospital they'll be treated. Which means the folks who are paying insurance are subsidizing them. Done that way we're probably paying 2-3X what the real cost of providing good care for everyone would be. We could work our way thru all our other key areas of concern and likely reach similar conclusions.

The Will and the Way

As usual we'll end up circling back to a point we keep re-discovering. At the end of the day a lot of this turns out to be up to us. The reason we drifted thru the '90s until we ended up facing this decade's terrible consequences is that nobody was willing to change. Now we'll find out if the troubles are serious enough to get from MEISM to WEISM.

So how do we work smarter instead of working harder and harder just to keep falling farther and farther behind ? Again the answer - build the right kind of incentives to get everybody to act in our collective interest rather than maintain perverse incentives where everybody chases only their own narrow interests. There's lots more to it than that of course but much of the technical details we already know how to do - there's no invention required. What we've lacked is the will and the way.

Continue reading "Blocking, Tackling & Running: Leveraging a Crisis Into Real Change" »

Posted by dblwyo at 02:21 PM | Permalink | Comments (0)

Well Prezelect Barry has pretty well made his cabinet selections, announced each with a rather sober survey of the problems in the areas with which they'll be responsible, had his little vacation and is now in D.C. picking up the threads of his inauguration and preparing to take office. As we begin our new year it seems like a proper time to assess the outlook for the year. Just in case you haven't noticed we've taken a bit of hiatus ourselves - partly out of laziness and distraction of course (thank you very much), but largely to avoid confronting the new year until we had to. Now that we're (barely) thru the holidays it's time to face the future....and what a future it will be be. The cartoon captures it perfectly IOHO. It will indeed be a wild ride. There is literally no single are of policy-making from the Economy to Foreign Policy to Domestic issues where we're not facing significant challenges, however. Some/much of which we've assessed before (First Things: Financial Crisis, Economy and Barry) this, the state of the economy and necessary policy strategies therein in particular. We've also had a long-running set of benchmarks on policies and strategies as well. In fact just as a reminder a chronological survey of what we think were some of our more important prior posts starts the readings collection.

Policy Directions

Just as a reminder we offer up the accompanying graphic of key policy areas. For which there are several pieces of good news. First, in each area Barry has picked as eminently well-qualified a team as we've seen in many decades, with each apparantly selected with more focus on competence, smarts and practical capacity to get things done. Second, judging by both the picks and the accompany news conferences, this is both a non-ideological team and a non-ideological set of directions and strategies. Let's be real clear about that....taking the news conferences at face value as we initially have to do, and as we're inclined to do because there was no sugar coating or pretend, the marching orders are as non-ideological as anything that's been put in place in at least four administrations. If not more ! Beyond that if you look at our structured inventory of the policy issues and review the prior posts the marching orders are, aside from some details and quibbles, exactly what we think they ought to be: pragmatic, centrist, workable, and balanced between immediate and long-term. Neither Clinton nor Bush II arrived at this sort of team and this sort of hard-nosedness until the last couple of years of their last terms. In fact if you'll look back to Clinton's first year in office he blundered as badly as possible with his gays in the military and socialized healthcare initiatives and set the table for the '92 conservative triumphs and poisoned the rest of his time in office. Third, since we're so far down the rampup phase, is what happens now ? Unfortunately that's a question of change management and political and policy skill. The good news is that we can raise that issue now instead of two years from now. The bad news is, and for the record, that Bush II tabled some radical and innovative, forward-thinking proposals in each of these areas himself and failed to deliver thru execution failure and lack of legislative skill in almost everyone.

Change Management

In our civics classes we're often taught that intent results in correct policy. As we learn, even if we don't wheel and deal at these exalted levels but just deal with local office or workgroup politics, you have to figure out how to build the right kinds of support to get change in place. Take a careful look at the accompany graphic, which is rather complex but compounds several key policy implementation issues into one conceptual ideograph (click to enlarge please !). Start with the famous (or infamous) quote from Machiavelli - a man who knew whereof he talked. Change is hard....hard...hard. First off you have to balance analysis with execution and understand the gap between where you want or need to be with where you're at and translate that gap into stepwise path forward. Second, as we are now, the bigger the gap between where we need to be and are the greater the resistances to change. Resistance escalates exponentially with the size of the gap. Finally, for each major policy area of concern, you need to understand the Four P's of power and change: the Players, their Positions and Interests and their ability to influence the outcome. Then you need to build the right kind of support to put the proper set of resources in place to get to where you want to go. Change is NOT intent - it is programatic execution well done.

 Where's Gandalf ?

It's probably fair to say that most of us are rather like the Hobbitts. Hardworking in our own patches of the world but perfectly satisfied to let the rest of it run along as it may without spending to much time or effort defending the borders. Unfortunately if somebody doesn't pay attention to the bigger issues sooner or later Mordor triumphs and the Orcs burn down the village. That requires folks of broader awareness but all too often you get ineffectual dreamers (James Earl Carter, hereafter "Peanut" comes to mind). Or you get folks who understand and work in the big picture but to their own advantage. A little predatory behavior is problem a good thing as it keeps things stirred up and keeps the socionomic ecology turning over. But too much predation where the predators get out of control and sacrifice the entirety of the public good to their own narrow interests is a really....really bad thing. As we should have learned with Enron and Worldcom but have had to be re-schooled by the horrendous financial market collapses. What we need is hard-headed statesmen who can both think and do but also act in the broader public interest. And those are scarce commodities indeed. But it is the pool from which we hopefully draw, and are drawing, our leadership and from which all the great figures of history come. So here are the two final questions/issues/challenges:

1) Have we learned our lessons and are we willing to support the necessary and painful changes needed to confront our multiple crisis ? Because no warehouse of potentially great men can lead us where we're not willing to go.

2) And do we have the right kinds of folks with the right policies beginning to be put in place ?

On the second the signs are encouraging. On the first....well that's up to you and the rest of us. Isn't it.

Continue reading "Changes and Challenges: a New Year Unlike Most Others" »

Posted by dblwyo at 04:34 PM | Permalink | Comments (0)

Otto, Furst von Bismarch, was not only a great statesman but an experienced, wise and witty politician; author of the "Sausage Factory" epigram we keep re-using. He had another, actually several but this one sticks, that when a crisis goes by grab its' coattails and ride for all it's worth. In this case we're facing multiple inter-lacing policy crisis that have been accumulating for decades, which nobody was willing to tackle to the can kept getting kicked in the ditch until it put itself back on the road and, worse, we actually knew what to do about all the cans. The thing about a crisis is that it not only represents danger but opportunity since it's likely that the will to change and do what is NOW clearly necessary can be mustered instead of continuing in denials. We're so much in that position that many on the inside of things are actually excited to finally get a chance to do what they've known needed doing for a long time. So much so that my alternative title was Economic Crisis=Opportunity, Danger and Change. While we're in the midst of the worst financial crisis since the '30s and the most serious economic downturn since the early '70s the cartoon is still more black humor than reality; but if we don't seize this opportunity it'll be more truth than anything. Fortunately not only is Barry picking the best economic team since Bretton Woods or the Marshall Plan with outstanding people in the right jobs (Hit the Decks aRunnin...Git 'er Done Barry) but he and they are moving with speed, urgency, accuracy and skill. He's already made more progress that's the right kind than the last three Presidents did in their first 18 months. Amazing and startling but to establish why we're going to have to take rather deep dive on the subject of economic policy by poking at the nature of business cycles and fiscal stimulus. In the readings below are some URL addresses for a key press conference, a couple of critical interviews and some commentary. After you finish here watch the press conference carefully - you'll hear a thoughtful, forceful, true and nuanced but workable discussion of staged economic policy that moves from very short-term tactics to intermediate-term initiatives to strategic investments. (Populist Panderings, the Candidates and Real Solutions) It couldn't be better IOHO.

Nature of Economic Cycles

 Economic cycles are like waves in the ocean - they move in predictable and repetitive patterns. Depending on the forces acting on them sometimes you get small waves, sometimes you get storm-driven huge surf that's scary and dangerous and sometimes you get tsunami's. We're facing heavy storm surf that we want to keep from getting worse. Economic cycles are inescapable - trying to avoid them entirely leads to the kind of malaise we had in the '70s. Post WW2 we had fairly normal, consumer-driven cycles shown by the heavy line. The Tech Boom/Bust was investment-led where over-spending on technology led to a bubble that, when it burst, could in fact have driven a huge downturn (GD II ? Possibly). To mitigate that the Fed and the Administration moved to cut interest rates and cut taxes and it worked. You'll hear a lot about that being a screwup but employment didn't recover until '03, rates were raised in '04 and Housing didn't turn into a new bubble until '05 with the worst insanities in '06/'07 after the coming collapse was already predictable and predicted. Now we're dealing with the aftermath of another burst bubble combined with a crisis in the credit markets brought about by self-serving and non-adult behavior in the financial markets and industry.

Current Economic Cycle and Alternatives

The next graphic shows you where we're at and what we're trying to avoid. The short and shallow downturn meme has finally been put to sleep after getting over-used, and being just plain and grossly wrong. On the other hand we're also avoiding, so far, a major downturn of the worst sort (the tsunami) and are instead trying to mitigate the worst effects while not denying their inevitability.  The green line would be a normal cycle which the Dotcom bust took away as an option while the light purple line is the fantasy that's not possible. At the same time we're avoiding and should be able to avoid the disaster of the red line if we can get some pump priming in the economy (otherwise known as fiscal stimulus) and get the financial markets working again. So what we're really debating is the region between the yellow and black lines (the yellow area) and where we're at. The bad news of course is that it's really just taking off, so-to-speak.

Credit Crisis and Vicious Cycles

We've "enjoyed" nearly two-three decades of increasing de-regulation of the financial markets. What people forgot and are re-discovering is that markets require rules and governance to function; nor are the participants apparently capable of self-responsible adult supervision. Instead they exploited their positions in pursuit of their own immediate, narrow advantages at huge and systemic costs to the rest of us. We're going to need to re-regulate and provide that supervision while finding the proper balance between excesses of too little and too much regulation. This means that an industry that depended on lax supervision, bad business judgment and excess leverage (that's where you have a $1 and loan out $7 instead of $3 btw) to create a liquidity bubble. Unfortunately we still have a lot to work thru until that process is complete so all we can do is keep the wheels on the wagon and find ways to inject credit into the economy where businesses and consumers can get to it instead of being trapped in a corner where no amount of lower interest rates increases lending. Economists call this a liquidity trap - the bad corner of the economic universe where no amount of money causes people to spend or lend. While we're not back to normal by any means things would have been enormously worse without the Fed and the Treasuries amazing innovations and skills. Sadly the only senior politician who appears to get that is Barry himself - wait that's not sad. The next President gets it ! Hallelujah !! Hopefully the graphic almost speaks for itself but it shows breakdowns in Housing leading to accelerating breakdowns in Credit Markets and the feedback between them turning the situation worse until it spills over in the real Economy. Which in turns weakens the ability borrow and loan and so on and so on. Welcome to a malfeasant world which we need to fix; but first we need to survive it.

Employment, Downturns and Policy Strategy

One of the key initiatives announced is a fiscal stimulus program exact nature TBD, to create 2.5 million jobs by Jan11. That's good, necessary, conservative and likely doable. The number probably sounds great until you realize that this was the weakest recovery on record for job creation (the top and middle panels of the graphic) and when you look at job creation this decade was the weakest of the period.

Sorry for the business of the chart - hopefully you're head won't hurt too much but we're compressing a lot of data into one graphic. The bottom panel shows net new jobs over the amount required to keep up with growth in the labor force and productivity. When you take the running total it turns out we're in the hole by almost five million jobs and we still have a long ways to go. To get back to where we're actually growing the economy we need new industries creating new jobs for people who need new and suitable educations. So there you have it in a "nutshell".

Key Steps to Economic Recovery 

1. Find immediate and emergency fiscal stimulus through things like tax cuts, extended unemployment benefits and direct spending while

2. Keeping the wheels on the credit markets by injecting loanable funds directly but then we need

3. Substantive direct spending programs that should also not be simple consumption in disguise but improve the long-term performance of the Economy. Investment in Infrastructure perfectly fits that intermediate term bill. But then...

4. Invest in the creation of new industries that lower costs in the economy, create new technologies and new jobs. Strategic investment in Energy and Healthcare happen to fit that bill perfectly. And then...

5. Make sure enough people have the right qualifications - in other words we need to re-think how we deliver Education for the 21rst Century. Finally...

6. Quite wasting money on pork barrel projects driven by special interests and political manipulations and

7. Re-regulate the Financial Markets without destroying their creativity. 

As you skim over the readings below and listen to the various vidclips see if that's not exactly what's being proposed. 

Continue reading "First Things: Financial Crisis, Economy and Barry" »

Posted by dblwyo at 06:13 AM | Permalink | Comments (0)

For someone who ran a careful and cautious, but well organized, led and managed campaign, where few risky positions were taken, not a lot of truth was told to power (the voters) and substance was somewhat downplayed in favor of labels (supwise, supwise,....heh, heh) Barry has really hit the decks arunnin indeed. Starting with his accepetence speech which you really ought to listen to carefully, with the caveat that his moved so far and fast beyond that it seems like ancient history. Nonetheless here it is and it really is well worth listening to: Barry's Victory Speech.

An interesting compare and contrast between the tone, direction and content of that speech lies in comparing it to David Brooks on Charlie Rose (A conversation with David Brooks) where, the day before the election, he summarizes things from his perspective. His view of the world and ours are quite similar. We were both hoping that we could finally have the serious and substantive debate over issues, directions and identities required to move beyond two decades of culture wars. And our take on the respective campaigns, reasons for failure/success, history of the Culuture Wars, etc. etc.) are nearly identical. (Populist Panderings, the Candidates and Real Solutions,Rope-a-Dope at Hofstra: Handicapping the Debate and Results, Campaigns, Candidates, Consequences: Some Assessments).

So, in other words, we highly recommend listening to the interview. But in some ways that almost doesn't matter because in the last three weeks Pres. (elect ?) Obama has covered more ground in terms of staffing and transition, establishing a tone and standard for his team and addressed the most critical issues facing the country than most administrations accomplish in the their first six months, or even year. One of the thing's we learn, slowly, about Barry is that he's very self-possessed, incredibly disciplined and able to adjust/adapt (with some caveats) and believes as fiercely in self-development as anybody ever has. And he started with his victory speech and kept going from there. Strangely enough a lot of folks are having trouble grasping the speed, focus and level of execution on display here, as shown by the cartoon.

 Change Indeed

To appreciate what's going on listen to Barry's Victory Speech on C-Span. Aside from being historic in it's own right there's lots to see and hear and reflect on. Start with Oprah and Jesse Jackson with tears in their eyes and savor Barry's ability to cast the moment in a historical narrative. To tell a story. But he does more than that. Aside from a view special thanks (unusual in who was thanked btw, very) it was no end-zone dance or even celebration. Instead it was a sober assessment and the beginnings of a rallying cry - telling truth to power indeed. It was also perfectly staged to set a tone and well-executed - hallmarks of the B-Style. As was the depth of thinking and preparation that went into that speech. And the transition.

Some of the more astute observers (again David Brooks get it) but the hallmark of this team so far is a combination of pragmatism, grounded idealism, savvy and sheer smarts along with experience. Along with some very clever to solid to brilliant choices. And a demonstrated ability to function well under fire.

The Team 

Economics - given the depth and speed of the financial and economic crisis this is probably the most important set of staffing decisions. And Barry went from having a world class, hall-of-fame advisory team to picking too extraordinary men for jobs perfectly suited to their backgrounds and temperaments. Geithner at Treasury has been a ground-zero for finance for decades and a key player in the last several years. Summers as head of economic policy both elevates that position and puts a brilliant economist and policy wonk into a job where he can guide policy without having to PR policy (something at which he's demonstratably not to good). And, btw, putting Summers there may downplay the Council of Economic Advisers but Christian Romer is a first class choice as well.

Foreign Policy - despite the rumors and fantasies Barry looks to do what he always did as a prof. - learn the data, be guided by the facts, apply reason and discipline to searching for a workable answer. In that vein it looks as if he'll ask Gates to stay which would be a solid move on his part. Asking Hillary to take State led to my most lizard-brain and visceral response - which was rejection. Yet on further reflection it makes tremendous sense. The Dems have narrow and limited bench strength in their foreign policy funnel (typically pundits, admin. officers, etc.) track themselves over a career in and out of government by focusing on Defense, Foreign Policy, Econ, etc. Hillary's way outside the box but brings a toughness, some experience and a no-nonsense approach along with a hard-learned willingness to confront where necessary. And if, like Lincoln, Barry can get her to learn to pull in harness and follow direction then he'll have something.

Domestic policy - in the same vein Richardson at Commerce, Daschle at HHS and Napolitano at Homeland Security puts a bunch of tough, centrist, experienced, politically savvy and powerful people in key posts. With in some ways perfect backgrounds.

And the piece de reistance' is how Barry's building his White House team (notice by the way he's building from the inside out - key staff then secretaries). The extremely early and fast choice of Rahm Emmanuel sent all the messages one needed to hear if you were listening. This is Josh Limon in the flesh but with more savvy, more in-dept grasp on policy and a demonstrated set of abilities to get things while providing a president with workable recommendations instead of fuzzy, think-tank ideas.

Final Thoughts 

This is a team that should sail thru the nomination process unless somebody is out to make fools of themselves or try to score political points. And given the scope of the Dem. victories in other elections even the small-minded dinosaurs among House Rips who survived may be smart enough to keep their heads down. 

We'll have to see of course but IOHO picking Rhammie set the tone, direction and strategic intent as clearly as anything could. Combine that with the Inauguration (oops Victory) Speech and "these are serious people, for serious times" working for a President who's proving more serious and adept than anybody anticipated. This is what you have to have if you want change - not a morass of ideologues who'd spend their time in futilities chasing dreams and theories. We're getting more than we asked for and about as good as hoped for. There may be better folks out there but this is as fine a team as we've seen assembled since when. Let me let David Brooks have the last words. As an avowedly articulate conservative who's also demonstrated a pronounced ability to go where the fact take him this is what he said:

"... the team he has announced so far is more impressive than any other in recent memory. One may not agree with them on everything or even most things, but a few things are indisputably true. Finally, there are many people on this team with practical creativity. Any think tanker can come up with broad doctrines, but it is rare to find people who can give the president a list of concrete steps he can do day by day to advance American interests. Dennis Ross, who advised Obama during the campaign, is the best I’ve ever seen at this, but Rahm Emanuel also has this capacity, as does Craig and legislative liaison Phil Schiliro."

Continue reading "Hit the Decks aRunnin...Git 'er Done Barry" »

Posted by dblwyo at 08:50 AM | Permalink | Comments (1)

Now that we've just had the worst single week in the financial markets in post-war America, that people are (literally) shivering in their beds and nobody knows which end is up now what ? The answer to that is technical, economic and political. But remember back in distant history when Wall St. was going to rip us all off with a "bailout" package and the consensus reaction was let 'em burn in hell. Well we did, they are and we've got the seat right next to 'em. Be careful what you wish for - God's listening and he has a bleak sense of humor. There's so much going on we can't compress all the explanations, analysis and readings into one post. And it's been moving so fast it's been hard to keep up. For a bit more technical explanation of the market situation, and a few reasons for a gleam of hope try this: Whistling Past the Graveyard: Market Assessment and Outlook. And for a look behind the curtain at the economic realities which are just beginning to come home try this one: Wheels Back on the Wagon ? Still Headed for Icy Curves along with the prior post: Marketing Elephant Pills: Struggling to Explain the Rescue. So here we're going to concentrate on some of the political and policy issues with more to follow. However the bottomline is that the composite political cartoon exactly captures what triggered a crisis into a near collapse.

Inside the Sausage Factory

This started out bad, as we've discussed and metastasized into something really dangerous but, IOHO, what sent things over the edge was the failure of the rescue package on the first attempt in the House. And make no mistake, it failed because it not only didn't get supported by the Rips there but was actively opposed on ideological and partisan grounds. In fact the House Dems more than stepped up to their responsibilities. Unfortunately by the time the bill eventually passed it was necessary to scare people which woke up everyone to how fragile the situation is before we we prepared to cope with it. Now that's not the only thing that went on. Rather like that H.S. lab experiment where you drop just one more grain of salt in the super-saturated solution which immediately crystallizes into a near-solid this was a pre-avalanche situation just waiting for that last big boulder to start the whole thing down the mountain. BtW - that's not entirely a metaphor but how the mathematicians describe catastrophic cascades leading to collapses. The picture is from the press conference just after the Rescue package was passed - you can judge the level of strain AND the anticipated results from the near giddy grins on the faces of the most senior and serious members of both House and Senate. Unfortunately little did they and we know we were all standing on the lips of the abyss.

Now What ?

After the break you'll find some readings on the the anatomy of the political backstory and some on the financial backstory. The former substantiate all the conclusions we're suggesting IOHO. Skim 'em and reach your own conclusions if you like. In the latter section we especially want to draw your attention to the story and audioclips from PBS on some of the details which are all couched in non-technical terms. We strongly suggest you listen to those - it'll only take a few minutes and surely this crisis deserves that much attention ? Even more strongly we suggest you listen to Charile Rose's interview of Warren Buffett who provides his usual insight, folksy wisdom and blunt, plan-speaking truths about where we're at and where we're going. 

The bottom line here is that y'all just got a lesson in practical politics and what the majority of the electorate thought it wanted. The problem is that what you've seen is the triumph of the lizard-brain over good sense. The lizard-brain being that primitive part we inherited from our remotest ancestors that makes decisions on emotions and survival instincts and relies on the thinking mind to help rationalize things and get us out of trouble. We aren't going to wax on having done so at some length, if rather abstractly, in major prior posts (Inside the Sausage Factory: the 4P's of Political Reality ,911 Memorial: Fix the Problem Don't Repeat the Crash,Rational Voters, Public Choice, Economics and Futures).

Here's the key point - this is going to keep happening as long as we keep electing people to public office who tell us what we want to hear instead of telling us what's really going on.

You don't have to know the technical details of these major issues to make deeply informed decisions. What you do have to do is pick people to represent you whom you trust, who tell the truth and who will act in the balance for larger as well as narrower interests.

Let me that another, blunter way.

There's nothing going on that we didn't encourage. Make up your minds whether or not the party's worth the price the Piper always charges. And then either party on or let's start cleaning up these messes. 

Continue reading "Anatomy of a Crash: Welcome to the Political Sausage Factory" »

Posted by dblwyo at 03:42 PM | Permalink | Comments (0)

Have you heard the old joke about the guy headed into work who bumped into a salesman scattering some sort of pill on the grounds in front of his building and asked him who he was and what he was doing ? Well it seems he was an elephant pill salesman scattering samples to show how well the worked. After the guy fell down laughing he said, "You idiot, this is New Jersey...we don't have elephants here !". To which the reply was, "See, and you ever wonder why ? Work pretty good don't they". That, among other things is a major part of the problem. The Rescue Package is dealing with an arcane issue that nobody can yet see is a real problem. On that note did you notice that Ford's auto sales were down 35% today ? And least you think that's due to their problems Honda, who's been trouncing everyone, was down 24% ! So there do indeed be elephants here and they're in the room. Worse they're pretty po'd.

Over the course of the day I had a long series of exchanges with a friend who I initially thought was speaking for himself and eloquently presented the credibility problems and voter backlash with the bill. Over the course of the day that was clarified and it beame clear my friend was representing his neighbors and colleagues and doing so eloquently. Since he's captured extremely well much of the pushback that threatens our economy it seemed like a good idea to share it since it speaks to objections that many of you may have. If you find them convincing I strongly suggest you share the arguments with your network and your Congressional representatives. Again the level of ignorance is apalling and the anger palpable. Here's the re-constructed exchange, edited for posting and in some of the back and forth my buddy, Snow, is in blue while my comments are inserted in red for contrast. Other than that it's in timeline order. 

The graphic provides a little context. What all the talking heads thought we'd is the light purple line but are becoming rapidly disabused. We can't escape a downturn and it's likely to be something worse than we've since at least 1980, all things considered. Think of that as the black line with the best case, receding in the rearview mirror the yellow line. What we desperately want to avoid is falling into the region below the black line and heading for the read line, or worse. And ending up with the Japanese disease for a decade or more. BtW - it's not jus theirs. Did you know that we had the same experience in the '30s and only the massive spending of WW2 pulled us out of it ? Think about that while you re-read and, hopefully, re-think the alternatives in the following table. And go vote for the one you'd prefer. Again this is up to you. Stick to your anger and get prepared to find out what that redzone looks like.

----- Original Message -----

Continue reading "Marketing Elephant Pills: Struggling to Explain the Rescue" »

Posted by dblwyo at 04:07 PM | Permalink | Comments (0)

Well now that we've all had a decent night's sleep, being defined as not sleeping like a baby too..o much hopefully we can step back and get some perspective on this. A couple of analogies occur to me. The underlying cause of all this was the massive voter negative reactions which prompted and supported a palace revolt by the House Republican back-benchers. The best comparison is that the Peasants set out to burn down the castle and destroy the monsters but instead set the forest on fire and are about to see the village go up in flames. Now the question is can we contain the fire, put it out and then we'll deal with the monsters. The political cartoon collage almost captures things perfectly IMHO. The "interesting" thing here, at least for me is the extent to which the most primitive parts of our brains have dominated those reactions (the lizard-brain) and how ill-informed almost all the pundits, legislators and others have been. Including many who should know better. One doesn't expect deep financial expertise out of the general populace but the lack of grasp of people in decision-influencing positions should be a permanent blight on their records. On a par with Winston Churchill's triggering of the British Depression of 1922.

How Bad Was It ?

Yesterday the US equity markets lost about $1.3T in value. Now one can honestly argue that we're due for a major downturn in the markets, which haven't properly priced in the rapidly metastasizing downturn, but the question is how far and how fast ? This certainly hasn't helped. Judging from the reactions prior to the vote of several of my network the conspiracy theories are widespread among more than the peasants as well. So these results shouldn't be surprising. For the record both the Rep. and Dem. leadership and, so far, membership in the Senate stepped up to the plate as did the House Dem. leadership. The Rep. leadership in the House threw major monkey wrench in the works last Thur. when they disrupted a deal that met all the requirements and the principles of both candidates. John McCain's statement that there was no deal and his principles weren't satisfied is, IMHO of course, somewhat disingenuous. Somewhat in the sense that there was a backbenchers revolt. His subsequent statements haven't helped much and show a lack of grasp of the importance and intricacies. Obama, while still speaking as they both must, to the populist anger has done a much better job of attempting to calm people down, explaining the necessity to act and supporting the process. Particularly by concentrating on the forward/backward sausage-making of the legislative process that we're all now getting over-educated in.

If you'll permit the wry observation some of my own early religious training was in economics though I became apostate and went into business while retaining a lot of affection and conviction about the discipline. And learning that the book theories must be balanced and integrated with a lot of real world practicalities. But for those who argue that it's all theory let me tell you your flat wrong. In the long-run economics works as well as the Newtonian physics that describes the orbits of the planets. As we're all going to be learning here shortly. So for all the folks who think economics has no laboratory verification let me warn you we're all about to be lab rats in yet another giant field experiment.

Leadership to Date

Last week began with an awesome and somewhat skilled display of political kabuki as the Senate hearings were kicked off with posturing displays designed to placate the angry, fearful and vengeful electorate. By the end of the week enough progress had been made that a workable bi-partisan package was ready for approval. It was of course blown up but put back together over the weekend. What is slightly amusing is that the heart of the proposal is entirely intact and it was merely wrapped with clauses designed to make it more palatable and saleable. Both the Kabuki and the wrapping were vital to moving it forward because, in the face of profound ignorance, it was necessary to force it thru the approval process. For the record the final vote (Y/N/Pass) was: Dems(140/95/~), Reps(64/133/1),Ind(~/~/~) for a Total of 225/208/1.

Now a lot of blame is being placed on a floor speech by Nancy Pelosi for attacking Rep mis-management. Not sure that her timing wasn't bad but then she hasn't had any sleep in a week either. If you listen to the speech though it struck me more as attempt to save a failing bill but telling her colleagues that they'd address and fix all their long-term substantive concerns when they came back but vote for this bill now. Clearly there were opponents in both parties but this was a Rep. bill, put together by the leadership of both Houses, strongly supported by the Pres., initiated by two of the best public servents we've had and the perfact men for the job (Paulson with his exemplary real-world experience and pragmatism and Benanke with his distinguished background as one of the world's leading macro-economists and a specialist in the Depression). At the end of the day this bill failed because the House R's decided to oppose it and they were given air-cover and leadership by McCain. If you want to see some real straight-talk by a man who know's what he's talking about listen to Sen. Gregg's press conference (R of NH btw). Here's the URL: rtsp://video1.c-span.org/project/economy/econ092808_gregg.rm.  And back that up with Mark Zandi's interview on his recent book. Finally walk, don't run, to read John Mauldin's latest newsletter.(Who's Afraid of a Big, Bad Bailout?) Save your energy, you'll need it later in the bathroom.

Judging the process we apply the criteria we've already set out. Who's acting to lead ? Acting in the public interest ? Spending less time pointing fingers and more acting, constructively and proactively, to support this critical bill ? So you can judge for yourself we've included various press conferences and speeches in the readings. Ironically Pelosi said nothing on the floor that McCain hadn't said in his press conference the week before, during the debate, on Sixty Minutes and in his press conference after the failure. With a major difference. Her speech spent a 1/3 of its' energy on polemics, a 1/3 on futures and another 1/3 on pass it now. His was all about partisanship (or at least 80%). This is not the country first, straight-talk that was supposed to be his hallmark. Either this was a display of massive ignorance of the consequences and how things worked, a brilliant tactical political manuver for which both parties leadership tried to give him credit or both.

My suspicion is that as Obama continues to play the public spirit card, with the necessary popular wrappings to sell it given voter angers, and as more and more of the sausage making becomes visible that he may have just cost himself the election.

On the other hand the ex-post statements of Paulson, the President and Dodd and Gregg continued to sustain a spirit of not laying blame, of understanding the job-threatening difficulties for the House representatives, to appeal to bi-partisanship and to emphasize the criticality. Now if any of this is working for you is the time to speak up. To this point people still weren't and aren't taking this as seriously as it deserves to be taken. Maybe that'll change and we'll get this rescue package passed in a workable form. The punditry is certainly not helping and the dearth of constructive suggestions and total lack of insight is stunning. With the occasional exception like our last post focused on Perlstein's column. Let's hope we end up doing the right thing. The downside risks are more enormous than anyone is admitting. 

Continue reading "Calm Down: the Fat Lady Ain't Sung, Yet." »

Posted by dblwyo at 10:50 AM | Permalink | Comments (2)

The original plan was to put up a post over the weekend looking beyond the rescue package but as the news ebbed and flowed we got distracted more than a bit. And still headed into today with a relatively benign outlook which turned out to be mis-placed. There's been a change of plan since instead of containing the breakout from Stalingrad we've had an ideologically motivated sit-down strike on the part of the troops who're now sulking in their tents. So rather than our normal longish analytical post along with excerpts, charts, etc. we're going to focus on Steve Perslstein's latest column from the Washington Post which is as short, pithy, direct, accurate and honest a description, in ordinary English, as we've read. We've got a lot more to say but we're simply going to start here and pick up more tomorrow, depending on how tonight's drinking goes. BtW - how's your food, water, ammo, fuel and liquor stocks doing ? After you read Mr. Pearstein's elegantly direct assessment we also suggest you consult John Mauldin's latest newsletter for a more detailed explanation: Who's Afraid of a Big, Bad Bailout?

They Just Don't Get It

Oy vey.

That is the technical economic term that best sums up a day in which the House of Representatives refuses to pass a $700 billion rescue plan pushed by the White House and congressional leaders from both parties, Wachovia is taken over in a deal that will have the government potentially owning 10 percent of Citigroup, a few European banks fail, the Federal Reserve and other central banks are forced to inject an additional $300 billion into the global banking system, the Dow Jones industrial average plunges 777 points, and investors everywhere rush to the safety of gold and short-term Treasury bills. The basic problem here is that too many people don't understand the seriousness of the situation. Americans fail to understand that they are facing the real prospect of a decade of little or no economic growth because of the bursting of a credit bubble that they helped create and that now threatens to bring down the global financial system. Politicians worry less about preventing a financial meltdown than about ideology, partisan posturing and teaching people a lesson. Financiers have yet to own up publicly to their own greed, arrogance and incompetence. And leaders of foreign governments still think that this is an American problem and that they have no need to mount similar rescue efforts in their own countries. In the coming weeks and months, all of these people will come to understand how deep the hole really is and how we're all in it together. They'll come to understand that the giant sucking sound they hear is of a massive deleveraging of the global economy and the global financial system as households and governments, businesses and investment funds adjust to living in a world with less debt and more inflation.

And they will come around, reluctantly, to the understanding that the only way to get out of these situations is to have governments all around the world borrow gobs of money and effectively nationalize large swaths of the financial system so it can be restructured, recapitalized, reformed and returned to private ownership once the crisis has passed and the economy has gotten back on its feet.

In the next few weeks, the center of attention here in the United States will shift from the Congress and an exhausted Treasury to the Federal Deposit Insurance Corp., which will now have to rescue any number of failing banks, either by taking them over directly or managing their transfer into stronger hands. It will also shift back to the Federal Reserve and other central banks, which will have to step up their efforts to maintain liquidity in money markets and prevent the credit crunch from taking down hedge funds, businesses, and state and local governments.

These will, alas, be only holding actions. Restoring real stability to financial markets will require the kind of systemic approach and extraordinary government interventions that the public has refused to authorize and finance. In better times, the public might have put aside its reluctance in response to the strong and unified recommendation of political and business leaders. But it is a measure of how little trust remains in both Washington and Wall Street that voters are willing to risk a serious hit to their wealth and income rather than follow their lead.

Posted by dblwyo at 09:58 PM | Permalink | Comments (1)

For several years I've been arguing that economic health is critically important to all other policy agendii we want to pursue; and, for several months, that it was the single most critical issue in this campaign. Hopefully, at this point, the number of naysayers is approaching zero on this argument. At the same time the number of scared, angry and obtuse commenters and pundits who have been energized by the crisis of the last two weeks has metastasized. Sadly, but understandably, because of a lack of grasp of the seriousness of the situation, it's sources and possible cures. Instead we're being inundated with populist rhetoric and political posturing. Often by the same people who helped us all get in this mess in the first place. Calming them down is now the first order of business since without some popular support the proposed rescue package will be stillborn and we'll all be in deep kimchi. Fortuantely there are some calmer heads who do have the necessary knowledge, and more fortunately, some of them occupy positions of power on the Hill. To try and contribute to some small smidgeon of understanding we'd like to disabuse you of some of the errors and make you aware of the stakes.

Quick and Dirty Summary

That lack of grasp is our most dangerous problem and it has two roots. First off almost noone understands how this is all working - and hasn't bothered to learn or investigate - and popular anger is out of control. Second, rather like a fish swimming in the ocean, we take the complex system we depend on for survival without grasping it's linkages, fragilities and susceptibility to disruption. We're going to do our best to to move along with more, hopefully, to follow. Too much ground for one post if we try and explain the background.

1. Bailout = Rescue. This is called a bailout and postured as charity for the fat cats. It is nothing of the sort. It is a purchase of assets that yield a flow in income and are likely to be worth more in the future if they weren't sold during the sack of the city but held until things return to more normalcy and less turbulence. $700B is not $700B - by buying at less than book valuation but above distress the goal is to unfreeze the banks and get them lending again. Some of the table stakes are laid out in the first section of readings, including a fact that everybody has lost sight of. All the econ news was really bad, including this morning's major downward revision of GDP growth from 3.3% to 2.8%. 

2. Main Street, Not Wall Street: Everybody is reacting as if this were their problem and not ours when just the opposite is true. The few who got and kept the $M bonuses won't go hungry. Right now companies thruout the country are having trouble meeting daily cash needs for purchases, payroll and other bills because the credit markets have frozen up. They've frozen because banks are afraid to loan money to anybody, especially themselves, for any reason. You care because you're car loan, credit card payments, etc. are at risk. If this worsens you really care because you job, your retirement, your kid's college and your healthcare is too. There's actually plenty of money to loan if the banks weren't afraid they'd lose it. Call this the paradox of caution - when one bank is careful and nobody else changes their behavior o.k. But when the next two banks react by also getting cautious that quickly turns into four, then forty, then four thousand. It's like a benign and life-giving fluid we need to live where some cells suddenly turn cancerous. If caught and treated in time it won't spread. That's what the Fed and the Treasury were trying to do until last week when three major danger spots metastasized into contagion at alarming speed. Not it's systemic and it needs a massive dose of chemotherapy and radiation treatment. That comparison is deliberate btw. No one enjoys such treatment, wishes they had to undergo it but it's the best we have available. Unlike cancer the really sad part is that this is all self-inflicted by widespread irresponsible behaviors. 

3. Economic Collapse is the Risk: even if the total rescue investment were doubled and a deadweight loss we'd still get a positive return. All the rescue does is keep the wheels on the wagon by un-freezing the credit markets. It doesn't make the Housing crisis go away and it still has two years to run to get back to more reasonable values and work off excess inventories. Nor does it stop the recession that's underway from happening. What it does do is stop it from turning into something far...far worse and ending up in a 15-year malaise like the Japanese created for themselves by trying to avoid realities and wave the tide out when it wanted in. Learn to surf the waves, don't go surfing or drown. Those are the choices on offer...period, end-of-story. This being the ocean we swim in it's hard not to play. Drowning is not much fun. Let's see if we can learn to swim - and it doesn't matter how well. Only that you keep your head above water for long enough to reach the shore. Let me give you two cases that concern the bald twins, King Henry and Uncle Ben, as well as the President and apparently darn few others.

 The trick is to ask yourself what the economy looks like over the future with and without a rescue. Now if things really seize up the numbers will be much worse. These two cases are not major downturns (trying to avoid the D word here) but are worse than the downturn we will have to live thru if the credit markets aren't repaired. The Bad case is a moderate recession followed by slower than potential growth while the Malaise case is a more severe downturn finished up with the Japanese disease. In the first case the total losses are $18T while in the second they are $25T. Plus of course the destruction and blighting of all our hopes for the next two decades but that's hard to analyze.

4. Deeper Problems Remain - the Rescue is a quick-fix proposal to keep the wheels rolling and doesn't address nor is it intended to address, the need for regulatory reform, a short-term stimulus package needed to get the economy cranking again. Or the necessary investments in infrastructure, energy, education and new technologies that are required for a prosperous future. All it does is reduce the risks of Malaise, which are otherwise pretty high.

5. Congress Not Acting Well - if you've been listening to any of the hearings you're hearing a lot of yokel like posturing and just plain ignorance on display. How much of that is political kabuki and how much of it is dead serious isn't known. If we're lucky it was 1/3 play-acting and 2/3 posturing for the folks back home so the Congress critters could return and sell the package. If we're unlucky it was 2/3 dead serious and 1/3 demagoguery by politicians without a clue. Given that the leadership managed to craft the details of a legislative proposal that addressed the core of the original proposal, added on the fixes that made it salable and palatable, had the public and full support of the President and were blindsided in a surprise attack with no warning by House Republicans at the last minute in a political maneuver triggered if not directly supported by John McCain and his grand-standing inclines me to the latter for some. On the other hand they climbed back into the pits to fight again. Bravo ! This is important - welcome to the Sausage Factory. This is how politics gets played. All those grand hopes we have for the right economic agenda are going to get wrung thru it.

6. Popular Pressures - by and large the politicians, even the good ones have no choice but to dance the Kabuki dances because the outpouring of popular anger was and is over-whelming. This coming from an electorate that was perfectly happy to ride the gravy train up when it met rising housing prices, a growing economy, easy boat loans, credit for vacations and all the goodies everybody consumed. When this is all said and done we're all going to have to change our behaviors. The real downside risks here are that a major downturn turns us all into a witch-hunting mob and locks us into another decade of angst and general despair like the '70s. Except this is more avoidable and almost entirely self-inflicted. 

7. Twins and Bush - Paulson and Bernanke having been performing well under incredible pressures for almost two years. We couldn't ask for a better pair. The distinguished macro-economist who's spent a lifetime studying this exact problem but also nearly a decade making policy along with a tough, no-nonsense financial executives who understands markets as well as anyone. Almost every other past pairings would not be doing as well. We got lucky. On the other hand they aren't selling it. 

8. Barry and Johnboy - up until four o'clock last night I though the candidates were playing it well asking us all to pull together and standing up for a non-partisan approach which is so critical. Unfortunately John McCain violated every principle he purports to stand for when he attended to critical kiss and sign meeting and withheld his approval from an all but done deal that met every requirement he'd laid out for a proposal he was entirely ignorant of and hadn't been involved in crafting. Leadership in this case calls for standing up and supporting this as the best available solution crafted by the best available minds. Not posturing for your base.

9. WE WILL GET THRU THIS - perhaps the most important point. Despite long hours, much strain, the severity and urgency of the task and being bushwhacked at the last minute by the House Republicans the Dems, all the Senate (so far), the Twins and Bush are keeping their heads and staying conciliatory. Last week when this blew up in hours the markets and the credit markets almost crashed. So far today they're being a lot more sanguine than anybody should expect. Let's hope they're right.

10. IT'S UP TO YOU - at the end of the day this may still remain a great mystery but the slivers of silver lining in all this is we're getting to pre-test our candidates, the machinery and the process. As well as undergo a forced education in economics that was long overdue for everybody. You may not be able to judge the technical merits but you can judge the behavior and cut the Gordian knots of complexity.

• Who's acting in a public spirited manner ?
• Who's supporting collective action in the best interest ?
• Who's stepping up and providing leadership by speaking in support ?
• And who's attacking the other parties at an inappropriate time ?

Continue reading "This is a Rescue, Not A Bailout: And It's Your Life" »

Posted by dblwyo at 09:22 AM | Permalink | Comments (2)

Well it's been a tumultuous couple of weeks and it bodes well to get worse before it gets better. The bad news is that it's not the beginning of the end, it's not even the end of the beginning. The worse news is that this is JUST breakdowns in the market mechanisms and not the real economic downturn that's still emergin. But the worst news is that in our search for the guilty parties we're in the process of repeating the simple solutions and wishful thinking that created the crisis in the first place and nobody is stepping up to the plate to admit it. There are two pieces of really good news however. The first of which is that the folks in charge, who have to be unbelievably stressed, sleep-deprived and over-criticized, are very sharp, extremely knowledgeable and have big brass cojones as well as a pronounced tolerance for idiots complaining about the problems the idiots created. The really good news is that we seem incapable of addressing major problems based on warnings until the pain reaches crisis proportions and then we start trying to do something. The real struggle here is to something right in both short- and long-terms. Now this isn't our normal or preferred Su. morning sort of posting but with everything going on it seemed appropriate. So let's dig in.

Welcome to Metastatic Contagion

Unfortunately it's not clear that many grasp how close to financial Armageddon we came this past week (a more technical discussion is Back to Stalingrad: Containing the Contagion, Moving Forward ?) so we're going to start with scaring you to death, then focus on the collapse of the Frannie Twins and the historical roots, and current finger-pointing before we can get to looking at the paths forward. Two weeks ago saw the takeover of the Frannies, this week saw the bankruptcy of Lehman, the sale of Merill and the "nationalization" of AIG. Obviously creeping socialism. In all the arm-waving people missed the fact that in addition there was a huge worldwide injection by the world's Central Banks of credit to counter-balance all this and it didn't work. US Treasuries collapsed to zero this last week as everybody in the world fled other credit and equity investments for the safest thing they knew of it. When that happens credit stops flowing and the wheels of the economy grind to a halt. This would be kind of like the situation in Dune where Muad Dib threatens to destroy the spice and then does it. If the spice doesn't flow we all die. The chart is probably a little technical but you get the point about the implosion. Let's try and put it in a different context with this little excerpt from the 1995 movie Contagion.

The real problem is that the case by case approach, which worked for Bear Sterns, appeared to work for Frannie and then all of a sudden - and we mean in 24 hours sudden - it didn't. Stop and think about that. The world that's had a constant and stable institutional framework since the regulatory innovations of the 1930s almost blew up in everybody's faces. Fortunately the guys in the control didn't expect this exact thing but were prepared for some such crisis and managed keep the wheels on our little red wagons. Metastasis is such a dry and academic word. When we say systemic we mean that all of a sudden everything's breaking down all at once. The contagion map from the movie is a pretty good depiction of what happens when the sandpile of slowly accumulating stupidities reaches the point of collapse.

After the break there's a large collection of readings that start with background on specific instances and background - the vidclip on Does market hinge on AIG? is the best simple discussion we've found. Then there's a section on the broader implications for the economy, i.e. your lives and livelihoods and the future ripples of these problems. Next is some historical background on the Frannie Twins and how we got into this mess. This is really important btw - we all rode this gravy train up because we all benefited by letting these guys run amok despite years and years of warnings and attempts to do something about it. In this case even the Bush administration was clearly on the sides of the angels and was stopped by the lobbying prowess of agencies run amok. Worse many of the politicians now pointing fingers at others were the central legislative policy makers responsible for letting them escape adult supervision. So as all the blame-waving goes on remember that. In fact one of the saddest, funniest and most disgusting excerpts is the story on Th. night's emergency briefing to Congress on the crisis where they were shocked, just shocked to hear how serious it is. Despite being 18 months into a situation they'd been warned about, literally, for years if not decades. Finally there's two sections on strategies to start addressing these problems and the political reactions therein. It seems for example that Congress's noses are out of joint because Bernanke and Paulson didn't kowtow to them properly when taking out AIG. Stop and think about that - if your congress critters had had their ways we'd still be debating this and the markets would have collapsed with the economy lined up right behind it.

Let's Make the Same Mistakes All Over Again

Our last post, building on long-running themes, focused on three major crisis facing us (911 and the WOT, Energy and the economy) and traced their roots back to wishful thinking. populist panderings and  delusions. We're in the process in this crisis of repeating all those errors in reverse with a lot of wrong-headed labels being thrown around and looking for blamees instead of focusing on fixing the problem. For example the word socialism is getting a heavy workout along with the argument that this is socialism for the rich and victimization for the rest of us. There are so many things wrong with that one doesn't know where to begin. When the school is burning down first let the students out don't stop to check them for proper religious atire at the expense of their lives. Second nobody's getting bailed out here - the stockholders of BSC for example got wiped out as did those of Lehman and AIG. The evil Hank Greenberg,who did lay the foundations for his company's demise, lost $14B in one day. And there are thousands of jobs gone and families at risk as the result of all this. Nor are the rest of these moves bailouts either. We're buying bad assets at mils ( = $.0001) on the dollar hopefully and even if all we get is pennies it's still a return. Not to mention - who cares ? If we keep the economy from collapsing we're all well repaid. Criticizing the dancing bear for bad dancing ignores the miracle that he's dancing at all. NOT a good idea.

Thirdly we all benefit from these shennanigans - the economy was held together these last years by housing related spending which was based on mortgage securities. If your house went up in value, if you made money off of your pension plan, if you kept your job, if you got a raise you benefited from this one way or another. If you want to see and read some reflections on how to go about reforming regulation and some general principles download, read and share Notes and Reflections on Regulatory Reform:, something we put together back around '01 when the Enron/Wcom, et.al. blowups happened after earlier regulatory reform errors.

 Cutting the Gordian Knot

What we need now is to support the guys on the front lines while they put out the fire and for our political leadership to something sensible this time instead of something that makes us feel good. We may greatly enjoy watching the witches being burned for causing the plague but that effort would be better spent in treating people and finding a cure. Let me give you a simple test here.

As we've been saying the economy will be the most important issue in this election, trumping though not excluding, national security and foreign affairs. It is the sine qua non, that without which there is no other, of all the issues facing us. Get it right and we can afford to deal with the ME and Energy and Russia and Education and Healthcare and....Get it wrong and we'll all be freezing in the dark while slowly starving to death.

Now this is extremely complicated and hard to sort out. We do our best but it's almost impossible to compress it down let alone to simplicities. And so many people want to find so many simple but wrong-headed solutions, burn the witches, feel better and ignore the contagion. So here's the test.

Support the candidate, leadership and solutions that are constructive on balance. Don't support somebody who spends their time on complaining, laying blame, giving you simple solutions and not admitting this is a painful, complex mess. And support the person who's showing the most willingness to work with whomever can help, across whatever lines.

Now that's a simple decision-making rule that give you sharp sword to cut thru the know of all these technicalities, complexities, deceptions and self-serving declarations.

1. We are in a mess.

2. It can be fixed but not simple, easily or quickly.

3. The pain will go on for sometime and get worse before it gets better.

4. Pain now is the smaller price for avoiding huge pain later.

5. We can afford these fixes and don't care because the alternatives cost many times as much.

There, how's that for boiled down ? 

Continue reading "The Frannie Twins and You: Wall St., the Crisis and the Mess We Made" »

Posted by dblwyo at 04:04 AM | Permalink | Comments (1)

I was of several minds about whether or not to tackle this and put it off but in my mind real respect for the victims of 911 is to do something about it. Not have another maudlin remembrance and go back and re-create the disaster all over again for the same reasons. So in that spirit we're going to start with 911 and re-treat it as the wake-up call it was and then point out that much of the substance of he 911 commission report has yet to be enacted, let alone implemented. But it's not just the changes in security, defense and foreign policy that the Commission called for that are in dire straits as the result of the same fundamental flaws. And are coming home to roost (look up ROC on Wikipedia for how big these birds are going to be). So in addition to talking a bit about continuing failures related to 911 we're going to tackle, briefly, two other major breakdowns that result from the same policy-making dysfunctions. One of the things I like about political cartoons is that whether you agree or disagree they're a good indicator of the feelings, attitudes and spread of same. The opening cartoon is sadly funny but not right on in my book. In fact it's got a couple of major flaws.

Were you ever in a small town, neighborhood, city what have you that had a "Deadman's Corner" ? You know the place where the preponderance of accidents seemed to happen. Now there was always some reasonable explanation for each accident: drugged out teenagers, bad storm, road repairs, whatever. But somehow that one corner always got 60+% of the serious accidents. And nobody bothered to ask why - that is what design flaw was causing the accidents to happen in the same spot. That's called a "systemic risk" - that is there's a flaw in the fundamental operation of the whole system - after all drunks, teenagers, storms and repairs are part of life. And there wasn't a rash of accidents all up and down the rest of the highway - just CRASH CORNER ! Well we're in the process of re-creating and re-experience a slew of crashes in several different areas and all due to the same systemic flaws. Which to my mind is perfectly captured by the next political cartoon - the only one I've found that is truly respectful of the 911 dead because it doesn't deny the source of the problem. Our own unwillingness to face reality.

2nd Failure Source: Institutional Breakdown 

Now after the break we back up that assertion with a series of readings excerpts on National Security, the collapse of the Frannie twins (btw - in case you don't follow the news last weekend the two biggest financial institutions were taken over by the government. And this weekend Lehman Brothers is headed for bankruptcy, Merrill has been bought by Bank of America, Washington Mutual and AIG insurance aren't in much better shape), and on energy policy. In each case we find the second major systemic flaw - and the same one. Now in each of the readings sections we've not only listed some key excerpts in these areas but also the pointer to a prior post of ours that provides background context. So for 911 and Security policy there's a prior collection, for the Frannie breakdown a couple of our economic/market posts from this weekend that may be a little technogeeky but.... and our post on a national energy policy for that. Now if you click on the Twin Towers picture where you actually go is a 2004 panel discussion at the Kennedy School on the aftermath of 911 and it's not a pretty picture. Just in case that doesn't work the pointer is repeated below along with an easy to use, read and understand version of the 911 report in graphics form by Slate. Which is unfortunately no longer free online - you have to buy a copy.

Some Teaser Points

Notice we didn't characterize the second major fundamental breakdown. Rather we're hoping you'll reach a similar conclusion to ours in your own words and thoughts by watching the KSG vidclip (the whole thing is 90 min but the first 30 min are the panel). The first two pointers after the break btw are to two earlier posts of ours laying out all the machinery in detail that will give you a very complete and thorough diagnostic toolkit. As well as some approaches to fixing it. But let me see if we can get your dandruff up with a few summary points.

1. 911 was the result of a sustained period of ignoring the world as it is and treating terrorism as a police problem instead of a security problem but has it's real roots in the self-righteous emasculation of the intelligence agencies by the Church Commission in the '70s. In other words we created terrible long-term problems for ourselves by making short-term feel good decisions that had terrible long-term consequences. Wow, deja vu' all over again Pogo. By the way, in passing, the two Senators who took the lead on breaking some of the post-'04 legislative logjams were named Liebermann and McCain.

2. Our problems with the insolvency of Frannie aren't like nobody wasn't trying to fix the problem. In fact, as you'll read, George Bush, Alan Greenspan and a host of others tried to start a major re-structuring of the Bloated Twins but were stopped dead by their lobbying clout with Congress. Guess who the four largest recipients of their political contributions was....read it for yourself. 

3. Energy policy is a great irony. Was just chatting with my neighbor and telling him that back in my days as a resource economist every single proposal on the table right now was on the table then. And btw we actually have, believe it or not, a National Energy Policy and it's a pretty good one. Just not implemented. Guess what - it too was one of the earliest policy initiatives of President Bush and couldn't make it thru the Congressional barriers and special interests lobbying (that's another hint btw). Here's another with an example: Having Fun, Doing Good, Making Sausage: Goodtime Charlie's War

Now we're not holding up a brief for any party or politician here. At the end of the Clinton Administration Larry Summers took a serious pass at the Frannie Twins too. And got as far as Uncle Alan and George W. And for the same reasons. Like we pointed out in the last post policy makers and politicians often have a much better idea of what needs to be done than we know, or give them credit for. They just can't sell it no matter how hard they try.Oil and Other System Shocks: Beyond Iraq & Georgia

At least until the dire consequences that you've been warned about are so serious and painful that you're willing to do the hard stuff. You see the third major barrier is us - we're the ones that refuse to buy in and instead go with the snake oil salesmen. As the record proves over and over again.

So if you're truly interested in change don't buy the snake oil - take the real medicine, eat right, loose weight and exercise. Or face the penalities. 

Continue reading "911 Memorial: Fix the Problem Don't Repeat the Crash" »

Posted by dblwyo at 08:50 PM | Permalink | Comments (0)

Let's catch up a little bit on the political and policy news. After the break we've clustered some readings excerpts that look at the Democratic Convention, some other political news and some major policy issues. Make no mistake the Democrats had a remarkable convention. Actually it was going to be remarkable in one way or another for several reasons. Fortunately for all of us it turned out remarkably positive on many fronts. Headed into the convention there were major problems in bringing the Hillary supporters back into the party, in establishing the credability of Barry with the voters as a guy who, if he clearly wasn't one of them, understood their problems, in moving from the cerebal and ethereal to the practical, pragamatic and substantive and in energizing the party and larger public.

On the whole there was no commentator who felt that  any one of those could be accomplished, at least well. And certainly not all of them And early in the convention, especially after Hillary's speech - as the excerpts show - it looked like the problems were getting worse with Hillary damming with faint praise and setting herself up to catch the standard after it fell and position for 2012 ! The level of bitterness was apparantly severe or worse. Instead, starting with Michelle Obama's speech there was a carefull crafted convention that moved from strength to strength. The Clintons and their supporters were brought into the fold - Bill made a great speech if not a heartfelt one and one always has to wonder at the sincerity. And Teddy main a real old-fashioned barn-burner which was a tribute to his courage and dedication as well as the shibboleths of the Democratic past.

But the real keys were what had to be extraordinarily well-crafted, coordinated and delivered speeches by Michelle, Joe Biden and Barry. Early on the key strategic themes were established and worked and worked. Until we get to Barry's speech. Now a political speech, especially at a convention, is largely supposed to be emotive. And this one was but it was also substantive. If you compare Barry's speech to our prior assessment of key policy priorities he literally ticked them off right down our list. In what we think is the right priority order and with the sub-points being pretty much the right ones, whether it was the economy, energy, domestic policy or foreign policy. We'll try and dig into in more detail but his only real problem is that the initiatives he's proposing aren't affordable without increased deficits. On the other hand, and holding his feet to the fire on those isn't a fair test at a convention, one can still legitimately argue for the ROI. The return on investment - these are all the right major strategic initiatives and if we want to fix those problems it makes sense to borrow the funds to make the capital investment for the sake of future, long-term growth and social well-being.

So take a gander. Better yet listen to the speeches. As it happens C-Span not only has them all online but put them over on YouTube and I put together a playlist for you. 

Continue reading "Politics and Policy: Convention to Consequences" »

Posted by dblwyo at 10:00 PM | Permalink | Comments (0)

It's all well and good to talk about how the campaign is going, how the candidates need to find their voices, what good men they were revealed to be and so on. But as the last couple of weeks have revealed it's still a serious, challenging and ugly world out there. As it happens both the latest NYT/CBS and WSJ/NBC polls come to similar conclusions: 1) you guys are nice guys but you're in a deadlock because b) you haven't made yourselves clear about what c) the major issues are in ways that are convincing. To quote from the NYT story excerpted after the break:

"Senators Barack Obama and John McCain are heading into their conventions neck and neck in the presidential race, with voters focused overwhelmingly on economic issues but convinced that the candidates are not paying enough attention to their priorities, according to the latest New York Times/CBS News poll. Slim majorities said neither candidate had made clear what he would do as president..."

What we'd like to do here - likely in two parts - is use some relatively recent stories and columns combined with various work of ours to summarzie the major policy challenges in Domestic and Foreign Affairs. As we had into the conventions this isn't a bad list. Moreover because it's been sorted and categorized according to the structure we've used before in how things are related and what needs to be concentrated on, in what order but in a balanced fashion, you can go into the upcoming weeks with your own checklist of evaluation criteria. Or at least a way of developing one. 

Here's my own personal model/blueprint of what the major issues are, how they cluseter and what the key relationships are. Starting at the top this is indeed a time for change but the question is what changes ? My suggestion is that the top-level changes required re-recovery of core civic values and virtues that combine self-responsibility with proper public policy (civilized adulthood ?). And that we need to re-think some/many of the governing mechanisms that have subsidized the capturing of the political processes by partisans and special interests. If you won't change the mechanisms you can, as my dad used to say, "wish in one hand and xxx in the other. which'll get full ?"

Strangely enough the concerns, anxieties and attitudes of many seem to mirror that. We then sort the major "line-item" talking points into major clusters - the ones where we need a coherent, comprehensive, workable and realistic set of policy principles because they are critically important. How do we relate to the world and manage those relationships ? What should we do, and can we do about our deteriorating economic situation ? "What do we need to do to arrest, recovery and move forward domestically ? You'll find the readings below grouped into rough correspondence. In addition we've gone back and combed thru a bunch of the prior postings in each areas that took deep dives and listed them as well.

While we're going to pick up Foreign Affairs in a future post and concentrate on Economic and Domestic ones here let's offer up a brief strawman.

Foreign Affairs: while normally this is the single most critical area, and will always be vitally important, the weight may be shifting. In any case Iraq is coming under control though it will need a sustained commitment. Afghanistan is at a similar point that Iraq was a couple of years ago but the most immediately dangerous problem is Pakistan which may be imploding before our eye. Meanwhile Russia's behavior has indicted the hidden presumptions that a "New World Order" of international cooperation was built on. However IOHO they are neither strong enough nor resilient enough to be a serious long-term threat and are containable. The most serious, if not urgent, long-term policy issue is our relationship with China. And then India. With whom we should still be able to re-architect a viable, stable and peaceful world system if we're willing. Despite Russia.

Economy: this is the single most important challenge because it is the bedrock foundation of everything else, the least understood, the most badly explained and the one where both candidates are failing to deliver a clear, comprehensible view. And the one where we're in the most immediate, intermediate and long-term trouble. The good news is that all of the problems are addressable and perhaps fixable, if not in months. In fact they will require sustained effort over years, perhaps decades. The most immediate one of which is the on-coming recession coupled with the need to re-structure the financial system and re-vamp our regulatory framework. Next up is improving the infrastructure of the economy which can also serve as an intermediate term stimulus program that pays for itself in the long-run. In the long-run we need to find new sources of innovation and growth which suggest serious investments in R&D, pilot programs and most especially in Energy and Bio-sciences. Again a place where the return on investment is potentially phenomenal.

Domestic Policy: there are a lot of things that need work from Social Security to Healthcare. Again they are all, without excpetion, addresable and many reasonable proposals have been put forward that would resolve a lot of the difficulties. The single most important one and perhaps the most intractable is Education. Which, demonstratably, is the most critical domestic element of our future prosperity in this changing world, the area where we've known change is needed and where all our own evil demons have gotten in our way the most. But, as they used to say in the Foreign Legion, "March or Die". Or in our case "Adapt or Fall Behind". 

Continue reading "Stories They Need to Tell: a Policy Challenge Review" »

Posted by dblwyo at 10:35 AM | Permalink | Comments (0)

Since the candidates aren't being as clearly forthcoming with their policy directions as we'd like the  next step is to return to foundations and parse out the details, to some extent, ourselves. And since Barry is just finishing up his triumphal tour of foreign shores the area of Foreign Affairs and National Security seems like the appropriate place to start. After the break are a set of collected excerpts that review the national security situation, the broader topic of US grand strategy with respect to the world and Iraq specifically. Unfortunately for us all his posture on Iraq seems to be accurately captured in the cartoon - which despite being a couple of weeks old represents the feedback we've been getting on several fronts. Despite what you heard on the news both the Iraqi government and the commanders on the ground told them the last thing they wanted was a definite timetable. While supportive of an eventual withdrawal, or at least drawdown, what they're after is a flexibility to decide in concert with the evolution of events. Along with a longer term US commitment to Iraqi security, defense and on-going support. What Col. Austin Bey characterizes as strategic over-watch.

In fact the Surge strategy has been enormously successful and laid the basic foundations for a more durable civil environment. At the same time the defeat of al-Queda in Iraq (AQI) has had three fundamental consequences. First it's functioned as an enormous rat trap with every nutjob inthe region and further being drawn into the meatgrinder and suffering enormous casualties. Second the unchecked violence deployed by AIQ has resulted in a major defeat for them in the public mind thruout the ME. And third, though only a far-away glimmer, it raises the potential for a stable, improving and democratic country sitting in the middle of the world's most unstable, dangerous and strategic geography. Which btw means Barry's emphasis on Afghanistan as the "central front" is an error of judgment of monumental proportions, as pointed out by no less than the Washington Post on its' editorial page. His posturing and manipulation of the press coverage - preventing all active coverage and interviews and presenting somewhat distorted views of what he was getting as feedback, can at best be described as disingenuous and self-serving. As Lord Keynes put it, "when the facts change I change my mind. What do you do, sir ?"

Which is not to say that Iraq was, by any means well-executed. But we did succeed in adopting and adapting in "orderly, proficient, military manner" to quote GSY T. Highway. Which leads to broader questions of what did we learn and how do we apply those lessons worldwide for a more open and inclusive US Foreign Policy. Earlier we'd argued (Brave New World: Non-Flatness, History and Challenges, Peace, Stability and Prosperity: the Nature of Good Government) that the central principle of US FP ought to be constructive engagement with the world to establish a new world system based on a stable int'l regime that asked for support from major stakeholders in line with the benefits they receive. And one that also recognizes that failed states are in no one's interest.

With those governing principles in mind the lesson for strategic development of our FP capabilities include a more balanced emphasis on bringing to bear all our capabilities in an integrated whole, which is NOT well-received among the bureaucratic turf-mice. It also includes using those TBD capacities in our specific strategies, the example given here being Pakistan. And finally it means putting more emphasis on soft power and public diplomacy. An integrated perspective we've tried to represent in the accompanying graphic.

Yet at the end of the day this requires vision, leadership, integrity and honesty as opposed to pursuit of narrow and partisan political advantage. Take a look at the readings below - where we've deliberately and typically passed on the more polemical and biased sources in favor of the informed and balanced. After you skim them - or better, clicked thru and read a few - make up your own minds regarding whether Barry was a) being disingenuous, b) right, c) flexible and d) public-spirited. On the whole my interpretation of these reports does not lead to a favorable conclusion. 

The Democrats fought the surge with every maneuver and ounce of energy they could muster, including pejorative attacks on our commanders and distortions. Notice that they've been notably silent since around Oct. Given their position that we'd screwed up it would seem to me civic responsibility called for fixing the problem...not trying to make it as much worse as possible.

So how would you like to evaluate things ? The final excerpt on Iraq outlines a strategic alternative that serves all our goals and applies these lessons. And Sen. Obama would achieve a new stature in my mind if he'd carp the diem and adopt some version. Instead he seems to be doing his level best to come out even more mis-guided than when he went in. Very sad for a reasonable, rational man who could have been one of the great leaders of our time.

Continue reading "Foreign Affairs, Security & Iraq: Poseur in Chief ?" »

Posted by dblwyo at 03:32 PM | Permalink | Comments (1)

I don't know about you but so far this state of the campaign has me greatly puzzled trying to establish clarity and a deeper of understanding of what the candidates stand for and what they intend to do. In fact this has been in some ways the most difficult post to write in a long time because no clear position is gelling out in my mind. Judging from the composite potpourri of political cartoons that dilemma is rather widely shared - insofar as political cartoonists typically capture the attitudes of some segment of the population. You can parse out and de-construct each of the cartoons for yourselves but IMHO each has an element of truth and some error. It seems to us that indeed each is struggling to migrate centerward, has evolved their positions somewhat, taken some heat for it (particularly Barry) and Johnboy ain't Ford nor Barry Peanut. Though given that choice between a well-meaning, honest and reasonably competent leader who restored some confidence in our government as opposed to the 2nd worst US President of the 20thC that would be a clear choice. The best summary of how things are going is this recent Rose interview with two smart and informed political commentators: A conversation with Chuck Todd and Mark Halperin.Both of whom while providing insight basically seem to share our "confusions". Highly recommended. As independent check btw notice that Barry's vast post-primary lead has largely disappeared and the two candidates are, to some extent, running neck and neck. Check out the RealClear Politics composite of recent polls.

Where We're At ? 

So what's going on here ? And what did we expect or what would we like to see. After the break there's a decent collection stretching over the last two weeks of the more useful and/or thoughtful pieces talking about the candidates worldviews and how they're evolving as candidates. There's also a collection of prior posts that contains a pretty complete assessment of the key policy issues, the dynamics of the campaign and what we need them to be addressing, instead of what they aren't addressing. There's good news and bad news in all this btw - the good news is that so far each candidate has by and large conducted himself as a gentleman with nothing like the Democratic primary and a far cry from the '00 and '04 partisan snakepits. And they have migrated toward a constructive and workable center. This campaign has been described by several people as the most important since FDR's first. That's nonsense but makes good headlines. It is the most serious since 1980 however in the scope and depth of the issues facing us.

What We Need

A friend recently quoted Bill Bennett's judgement of McCain as a person who has moral clarity - that is he knows what he stands for and what decisions his likely to make. Johnboy, in our opinion, is an exemplary individual. But he's not running for individual - he's running for President. And what he and Barry both owe us is more than "moral clarity" - we have to trust him to represent us and make, on balance, the best decisions of which they're capable for our collective best interests. Stop and think about that for a minute - how will you reach your decision regarding either candidate.

It seems to us that positions are only a part of it but we can't dig thru each major policy area in detail let alone work it thru in the hurly-burly of a campaign. We do need some indication of where they stand and how they'll proceed. Which we're not getting. There's actually been little of substance, the differences aren't that particularly vast with regard to prior elections (an assertion which we walk thru in some careful detail in the prior posts listed after the break) and what we've seen is a mish-mash of point positions. Not any over-arching themes for the major policy challenges we face. What would be nice to see is for each candidate to tell us what their general philosophy of government is, how they see it playing out domestically, economically and internationally and give us some idea of what direction they think they'd work in for those areas.

But that's still not likely to be how we evaluate them though it'd be a nice supplement. No we'll look at them and decide based on our judgement of their character, leadership and their abilities to represent our views on what should be done. And that jury is out as well. The graphic is my last attempt to do something like for the '04 election - as you can my take on each candidate wasn't particularly favorable. And also as you can see it's for the last election since the process of thinking it through for this one is still early. But it's an interesting checklist and blueprint to work from. Agree or disagree but building something like it isn't a bad way to get started. At the end of the day last time around we had a C/C+ candidate running against a D/D+ one. This time we've got a couple of decent B-students in the game. That's progress - now if only we get lucky and don't need A-students this'll work out. So what's your opinion ? Have you thought about it or just made a snap judgement ? Take a gander at the excerpts and the prior posts and cycle back and see if your answer remains the same.

Continue reading "Moral Clarity ? Good Intentions, Muddy Proposals, Directional Obscurities" »

Posted by dblwyo at 08:18 PM | Permalink | Comments (4)

Did you ever stop to wonder why we won the Cold War ? And how hard, difficult, costly and unlikely it was ? Not to mention a big element of luck and good fortune ! Well there are big answers and little answers. Beyond some of the theoretical abstractions were people like "Goodtime Charlie" Wilson. A hard-drinking, hard-partying Democractic Congressman from Texas who engineered the largest and, arguably, the most effective covert war in US history. If you click on the graphic it starts up the movie trailer which captures a lot of the gist of the movie - much better than almost any other trailer I've seen. And what a movie - just as movie. First off it was put together by Tom Hanks as the lead producer - in other words he wanted to make this movie and went out of his way to "make it so". He also played the lead along with Julia Roberts and Phillip Seymour Hoffman - three Academay Award winners is a lot of horsepower. They all must've seen something in it as well. It was directed by Mike Nicholas, one of America's greatest modern directors (The Graduate, Catch 22, Silkwood,...), and written by Aaron Sorkin of West Wing fame. That means to start with it was not only extraordinarily well acted and written but on the surface it's very funny, very clever and very insightful. BtW - it's almost the only recent gig that Sorkin fought hard to get - another telling indicator. You see it's also a true story. And offers up several lessons we think tell us a lot about manuvering inside the Sausage Factory (Inside the Sausage Factory: the 4P's of Political Reality) to get things done for the good of us all. Hard as that might be to believe. The Wikipedia synopsis is pretty decent though a tad limp-wristed trying to be even-handed.

You see we won the Cold war partly thru inherent dysfunctions of the Soviet system which made it unable to adapt and grow. Partly thru the military and economic pressures Reagan put on the Soviet system, including a secret economic war which has yet to make it beyond hints in various thrillers - if you can ever find it it's worthwhile tracking down Cap the Knife Weinberger's review of Tom Clancy's novel "Cardinal of the Kremlin" - written as the sitting Sec. of Defense and published as the main editorial in the WSJ of all places. Talk about a broad hint. Another reason was the growing restiveness of Eastern Europe, particularly the Poles, encouraged and motivated by Pope John Paul II. But did you ever wonder why the Red Army didn't put down the Poles like they had earlier put down the Czechs and the Hungarians ? Because they weren't allowed to after the debacle of Afghanistan where they sufferred horrendous casualties, demonstrated a barbarism toward the population more reminiscent of the Mongols, had (as Charlie Wilson points out) their hearts broken and destroyed their credability with the Politboro. Gorbachev wasn't just being civilized when he wouldn't support their plans to suppress Eastern Europe - he didn't believe they could do it. It's worth your time to watch this interview on Charlie Rose with Goodtime Charlie in which the supposed buffoon has a lot to say about politics, partisanship, and partying. And this much earlier one with George Crile - the 60 Minutes producer who first got Charlier interview and later wrote the book that brought all this to light for us. Who basically back up the fact that a rogue Congressman who set out to do the right thing was the primary mover on one of our greatest foreign policy successes. An amazing story from the real world, better than fiction.

In fact the movie's tag line captures it exactly - "base on a true story...you think we could make this up ?" 

And some of the lessons are pretty sad indeed, and revealing and salutory. But if we want the sausage factory to make better sausage we'd better figure out how to learn them, apply them and repeat them. After the break we'll dig into several of them - though perhaps we did't catch them all and you'll have to watch the DVD and get back with some comments. In the meantime this quote captures the nature of the challenge:

CIA Award Presenter: The defeat and break up of the Soviet empire, culminating in the crumbing of the Berlin wall, is one of the great events of world history. There were many heros in this battle, but to Charlie Wilson must go this special recognition. Just thirteen years ago the Soviet army appeared to be invincible. But Charlie, undeterred, engineered a lethal body blow that weakened the communist empire. Without Charlie, history would be hugely, and sadly different. And so for the first time a civilian is being given our highest recognition; that of honored colleague. Ladies and gentlemen of the clandestine services, congressman Charles Wilson.

One final question, maybe two:

1. What would it have cost us in the '90s to turn Afghanistan into a viable state - $30-40 million a year ? (Wilson's estimate). What did it cost us on 911 ? What's it costing us now ?
2. What 4P lessons do we take away here for Energy, Education, the Economy and National Security that a) we've known what to do about for decades ?

Continue reading "Having Fun, Doing Good, Making Sausage: Goodtime Charlie's War" »

Posted by dblwyo at 11:15 AM | Permalink | Comments (0)

Our last post (Party on Grasshopper: Digging Deeper....into the Policy Agendi) laid out a perspective on a comprehensive strategic policy agendii that covered Foreign, Economic and Domestic/Social Policy and related them to some over-riding principles. The goal was only partly to suggest specifics - it was also to provide a blueprint and checklist for your own thinking and to show how all the moving pieces fit together. We took our own best shot at the "right answers" of course but are more than willing for you to take yours. That said there's many a slip 'twixt cup and lip - or as a famous German statesman once pointed out if you can't stand the sight of blood but want to enjoy the results don't go inside the sausage factory. In other words no matter what our best intentions on Policy nothing will change unless we understand how things get translated. The key factors that control the results are Policy, Players, Position and Power. After the break we're going to take a deeper dive, again, and get a little abstract on you, again, but sometimes a picture or headline is worth a thousand graphics and arm-waving so let's shoot for a little motivation. Since the last major post several friends and I have had a running exchange on "CHANGE" and one of them put it very nicely - "Perhaps only an independently wealthy President can achieve his policy goals", talking about why a decent national energy policy has been available and frozen in limbo since '01. Of the major policy issues we outline there are none them not resolvable, IOHO, and most with straight-forward and availble knowledge, resources and capabilities. So why ain't nuttin gettin done, Yogi ? Consider the following headlines:

Call for Change Ignored, Levees Remain Patchy Few of a presidential panel’s recommendations after the Midwest’s devastating flood in 1993 were implemented.

Did Bank of America Write the Housing Bailout Bill?  ." I don't understand why a realistic bill can't be hammered together. It should reflect the following realities:... It is not the taxpayers responsibility to bailout borrowers who are in over their heads, or lenders that made bad loans. How hard can that be?

Economic Scene: High Medicare Costs, Courtesy of Congress  Based on a pilot program, the price of walkers, delivery and setup included, will fall to about $80. Now, would you like to guess how the equipment makers feel about this?

Reading those headlines/excerpts perhaps it's clear why the opening cartoon makes so much sense or why we started with "Institutional Re-engineering" as the sine qu non, the fundamental starting point without which we'll continue to remove both our feet at the shoulder or higher, as the critical initial point of our Domestic Agendii blueprint. After the break we'll dissect the whole problem in some more detail but consider the accompanying chart, which summarizes, some major policy problems that we've cheerfully been ignoring until the current stage of near-terminal feasturation has set in. BtW - this and other charts are part of a dloadable Powerpoint slideshow you can open and save. Please feel free to do so and share it around as widely as you like - better yet, mail it to your political representatives. Politics of Change: Strategic Agenda vs Interests  

Continue reading "Inside the Sausage Factory: the 4P's of Political Reality" »

Posted by dblwyo at 01:39 PM | Permalink | Comments (0)

This pretty well speaks with itself though you have to study the components...having seen a number of political cartoons lambesting the notion of offshore drilling and other reasonable alternatives to freezing in the dark because the SUV's out-of-gas and we have no money because it is offshore...:)

 And please don't consider this as replacing the immediately prior post - rather consider it a graphic supplement. The Manga Appendix as it were. If nothing else my sister the artist ought to give me brownie points for extending the notion of collage to political commentary, right ?

Posted by dblwyo at 08:12 PM | Permalink | Comments (0)

Like we argued in the last post we're anticipating a shift to more emphasis on policy and a tad less on pizazzaroni, depending on what we the voters ask for. At least so we hope and anticipate given the seriousness of the multiple challenges that have come home to roost. In sharing that post with several friends there was general agreement and a couple of constant themes in feedback. One was Barry supporters wouldn't cut the slack for John-boy they gave their own guy and visa versa - sobeit. May the past man win. Another and stronger one was for more depth on policy - a challenge we've actually been building up to with prior deep dives on particular issues, particularly economics. That said our primary goal here is to take another turn of the crank and break down the Principles/Strategies/Categories to the next level of detail. A third was the objection, a reasonable and accurate one, that no voter is going to dissect things this way. Quite true and rational - people spend more time on picking a car than a President because it matters more,more immediately and they control the whole decision rather than being a minuscule part. Yet wrong in another way. People, at least IOHO, judge the status of these issues by the surface symptoms they see and experience combined with the inputs from friends, neighbors and commentators they trust. And at the end of the day they'll look to the candidate they think will do best on these issues as they can best judge it - even if not using analysis worthy of the Kennedy Skul. Yet strangely enough not only do we have to live with this collective wisdom but over the course of time the people do tend to converge on a collective judgment that's relatively sophisticated, accurate and deep. Strange isn't it how socio-biology works itself out ? Anyway just as a reminder the opening graphic was our attempt to capture the key policy issues taken all together. While we laid out what we thought was a balanced strawman proposal in priority order, given how things work in reality and the challenges we face, the template is as important as the specifics. The intent was for you to use the blueprint to build your own house if you chose, with our suggestions as a starter kit. Though we're prepared to defend the specifics of course as being the only sensible strategy available to us :). That said let's capture the fundamental challenge facing us less abstractly.

'nuff said ? We thought so though the excerpts after the break start with some prior posts on why shooting ourselves in both feet around the kneecap continues to be an inherent structural problem. Back to that reality problem-facing thing again Pogo. BtW - just for the record - when you vote for a solution, or the candidate who proposes it, that's based on short-term fixes that serve your own special interests and presume that water runs uphill when legislated you get your own slot at the trough. Oink, oink, oink...

Like we said the central concern will be the Economy followed by Defense and Foreign Policy and then Domestic policy. That's based on our best judgment not of voters wants but their needs. However the way the dependencies work the sine qua non of a stable and safe nation is a secure defense coupled with a competent foreign policy. That then sets the stage for the next fundamental which is a healthy and growing economy - which is the penultimate requirement for any social policy debate to be material. If you can't afford it you can't afford it. A combat medic calls it Triage. Then we can talk about Domestic policy and perform the same sort of trade-off darwinian filtrations. Fortunately or not there are linkages and inter-dependencies.

Foreign Policy 

Despite what you may here the US hasn't just been influential it has been the architect and prime move of the post-WW2 world. The basic system design with the UN, World Bank, IMF, GATT/WTO, even the progenitors of the EU were all creations of US policy. Not to mention the Marshall Plan or the recovery and development of Germany, Japan, South Korea and Taiwan. And let's be real - it wasn't entirely disinterested nor should it have been. When a national decision maker is going to spend the national treasure and citizen's lives he has a fundamental obligation to allocate those resources in the best interests of his country. It just so happens that our best interests are served by supporting a stable, peaceful, law-aligning and progressive international regime. Nonetheless the world is changing and we need to change with it and help instigate the necessary adaptive evolution of a modified world system. We've talked before about why that's important in a series on the State-of-the-World and the nature of good governance (Peace, Stability and Prosperity: the Nature of Good Government) so we'll leave it there for your reference.

Economic Policy

Something we probably need to re-visit but have spent considerable time and investigation on on several prior posts - a few of which are referenced below. The fundamental requirement is Innovation - which is the major driver of new jobs, economic growth and national wealth. In the short-term we're facing a major economic downturn triggered by breakdowns and malfeasant behavior in the real estate and financial markets as well as just plain old-fashioned greed, stupidities and illegal behavior. There are no clean hands. So in the next two years we've got to fix the breakage, keep the economy from tanking as much as possible and start laying the groundwork for the future. Among other things the boulder that kills many birds would be a twofer - serious national investment and spending on revamping our infrastructure and on a concerted national energy program. Both of which by their very nature would help stimulate the economy and without which the tanking could get really rough. But both of which create longer-term jobs AND, the most important, change the structural nature of the economy. The infrastructure by making our operations more efficient and creating new capabilities. The energy program by improving national security, lowering the cost of energy and oil and creating new technologies which create new industries, jobs and competitive goods for world trade. Voila'....a win...win...win..win strategy. Which also depends by the way on both Education and Healthcare cost reductions, performance improvements and increased Benefits:Costs performance in the long-run.

Domestic Policy

The "Pigs-at-Trough" problem means that for the rest of these strategies to be successful we can't just keep substituting good intentions for understanding how to run the buzz saw and the lumber plant. Hence the need for "institutional re-engineering", i.e. we're actually pretty close on policy agendii but making them workout is a whole other problem. Now we're faced with a situation where Healthcare, Social Security and Medicaire costs will destroy the long-term economic capacity of the US. Nonetheless the later two are relatively easy fixes with a combination of bi-partisanship (ha, no I'm not kidding) and realism on the part of the voting public. When SocSecur was established retirement was 65 and life expectancy was 65+. You do the math. Ditto for the Medixxx programs. Healthcare needs some major structural changes but we're starting to get a handle on that. In terms of timing, feasibility and so on it problem goes #1 in the que because we can start making progress. But the #1 domestic policy agenda item is Education because without progress in teaching and training people for this brave new world it all falls apart. 

Part of the excerpts below are some pointers to various online programs, mostly from Charlie Rose, which start with an '04 appearance by Tim Russert which was supposed to focus on his book but ended up mostly discussing politics and policy. Notice that by and large if you didn't know the date nothing's changed. Now you can't discuss Russert without leading yourself to Danial Patrick Moynihan - one of the great public servants of recent American history and a brilliant and pragmatically insightful man. So there are two more shows of which he was a part that go back into the '90s. Guess what - the problems they're discussing are largely the ones we've just discussed.

UP to us this time....Oink, Oink, Oink. 

Continue reading "Party on Grasshopper: Digging Deeper....into the Policy Agendi" »

Posted by dblwyo at 02:28 PM | Permalink | Comments (1)

We seem to be in a bit of a lull while the candidates catch their breaths, maybe rest a tad, re-structure their organizations and re-positions themselves for the general election. That calm is probably very deceptive and underneath the surface the duck's feet are paddling furiously indeed. However there are two giant changes coming, willy-nilly, whether we want them to or not. And they should represent cusp points in the tone, tenor and direction of the campaign.

The first is a shift from matters of style and maneuver to including more matters of substance and policy. Now that's not to be too "Pollyanish" about it all - as we've said we've already gotten quite a bit of improvement in this election in ways that really matter to us. And at the same time it's still an election where style and sound-bytes will matter, as they always do. The extent to which we shift will depend, in part, on the voters. Are we going to ask the hard questions or be satisfied with the easy and good-sounding answers ? There's some evidence the the number and seriousness of our challenges is indeed forcing some shift. Of course in the long-run there are two key things to bear in mind. These issues are substantive, they're hear to stay and we'll have to face them one way or another. And, no matter who wins, the real world has rhythms, patterns and directions of its' own - no matter what the rhetoric US Foreign Policy is not likely to shift all that much other than in cosmetics. The graphics is our proposed template for these matters of substance from re-newing key general principles to structural re-engineering of the governance mechanisms to key policy clusters. Consider it a proposed architecture for the debates on policy as well as a representation of our best analysis of realities and resolutions.

The second big shift coming is generational. About every 20+ years there is a major shift in political leadership as one generation succeeds another. In 1960 JFK succeeded DDE as the baton was passed to the youngsters of the "Greatest Generation" from their elders. When Slick Willy took over from Bush41 it was another generational shift from the "Greatest" to the Boomers - and a massive attitudinal shift as well. Stop and think about what you think it was - a worthy topic of exploration. I'd suggest it was a shift from struggle, duty, obligation and "no free lunch" to the beneficiaries of that effort who were more concerned about "actualization", self/me and less focused on the hard work needed to get there. And that's not to pick on either posture, at least entirely. The attitudes are as much a product of the environment as the reverse and are more or less appropriate for them. We did, IMHO, loose sight of what brought us to that pleasant state of being able to focus on our navels and have spent the last several years being reminded.

Whoever wins this election it is a generational shift again - like we said...these issues will be with us for decades. It's not given to us to avoid them, only how we deal with them. John-boy stands for the last, and in some ways, the best of the Boomer generation. A genuine war hero, a man of integrity and substance and a demonstrated maverick who has followed his own thinking and the evidence on most matters of substance. Barry, aside from both his eloquence and his ability to put the challenges of the time in new and insightful way, is less well known. But appears to also be a man grounded in his own self. to know what he believes and why and to have both a good idea of where he wants to take us and what it'll take to get there. He's certainly shown a solid predilection behind the scenes for picking good people, seeking out the best advice and advisers, running a well thought out organization and inventing new ways of doing things. All to the good.

This campaign so far has confounded the pundits right and left because the old shibboleths of which issue works for which voter group in which state keep getting over-turned. And now that we have the two most atypical, for their parties, candidates whatever remains of the old thinking will continue to be challenged. Between the return of serious issues from the frivolities of the last two decades and the aftermath and these changes in the polity we are facing an inescapable cusp point. Good - it's about time.

IMHO Barry needs to do three things: 1) translate his future vision into more specific operating principles - note, not specifics, just guidelines so we can better evaluate him on the big issues. Then 2) convince more voters that while he's not one of them he gets them. And 3) absorb, not just listen to advice, a more realistic view of what a tough and ugly world it is. Conversely John-Boy needs to give us something to hang our hats on - that is he needs to explain what the over-arching vision of his candidacy is. In my mind it's not blind change for changes sake to make us feel good. It is to reform and re-structure those things that aren't working well - change for progress and performance, based on the best of the past but dealing with the challenges of the future.

At the end of the day the accompanying graphic is my proposed set of "Fundamental Principles" that represent my suggestions for how to accomplish these ends - marrying matters of communication, leadership, style, substance and specifics into a set of principles and policies best suited for the times as I see them. Agree or not - and please feel free - it's not a bad checklist to use to evaluate the candidates. More specifically here are the five cusp point policies that wrap things together and you should use to judge the candidates.

1. Economy - we're facing the most serious economic challenges we've faced since 1980 and need regulatory reform, stimulus and long-term investments to jump-start growth.

2. Energy - it's time for a concerted national effort in a multi-decade long migration to different energy sources. Which would also help out the Economy.

3. Middle East - Iraq is still a challenge and needs care and attention but a stable ME is the sine qua non of holding the world system and our economy together.

4. Education - the other side of the coin of creating new sources of economic growth is making sure our populace is qualified, which it's not. And the major obstacle for a new education are the existing institutional infrastructures which place private interests ahead of innovation, adaptation and the public interest.

5. Regulatory Reform - we actually understand Foreign/Security Policy and the Economy pretty well and have the mechanisms fairly well developed to accomplish what we want. Our strugglies with Social Policy are really a new thing in human history - only since the the 1960's has any society attempted to re-engineer itself like this. The intent was good but the mechanisms failed us. We need new ones. 

Continue reading "Crossing the Cusp Points: Politics, Policy and a Proposal" »

Posted by dblwyo at 08:22 AM | Permalink | Comments (1)

Now that the candidates are settled it's time to get down the the real debates. First up will most likely be economic issues as we've been forecasting for months but the one we're going to que is the neglected one that's slide to the back burner. That's Foreign Policy and National Security. Here the contrast between the candidates is about as broad as it gets, though again both are reasonable men given more to argument than shouting. Which is about time.

The fundamental lesson we'd draw from our series on the State of the World and Good Government is that the US is best served by constructive engagement with the rest of the world. By that we mean it does its' best to encourage and support the emergence of as good a government as feasible in the local circumstances, working with established and legitimate governments while recognizing their rights to their own interests and defending ours. And working to suppress those who are attempting to use violence to overturn these processes. Over the decades that at the end of the day has actually been US foreign policy in a nutshell, though with perhaps more emphasis on protecting our agendii at the expense of respect for others occasionally. At the same time no power has done what the US has done to support the emergence of an open and pluralistic world system. If we are a Hegemon we're the most benign one in human history.

But as usual the wheel of History keeps on rolling and it's time for us to roll with it. A while back Joe Lieberman had a great editorial in the WSJ asking how the party of FDR, Truman and JFK had become the party of McGovern, Gov. Peanut and appeasement. He didn't quite put it that strongly of course. Sen. Biden responded quickly, articulately and disingenuously on the whole with a reply. Both are excerpted below.

What Lieberman argued in the main (2/3 with 1/3 being a bit of partisan politics) was that the Democrats used the troubles of the Iraq war to pursue a partisan political agenda, despite having supported the original authorizing vote. Now we are where we are and those are sunk costs never to be recovered. If everybody, and we do mean everybody, believed in WMD and no smoking test tubes were found Iraq and the ME is still better off w/o Saddam and that ticking, oil-funded timebomb. If the Dims disagreed so vehemently as Americans it was incumbent on them to help change policy - not retreat to Namdrome responses and an attack mentality, which they did. Despite them the last year has seen enormous progress with a long way to go. Meanwhile the War on Terror is actually being won and much of the world's Islamic population has developed an accelerating disenchantment with Islamic terrorists because of their indiscriminate violence.

Joe Biden goes on to attack the Bush administration for the rise of Iran, the lack of communications with same, over-concentration on the WoT and the neglect of China, India, Russia and the rest of the world. None of which addressed the core of Liberman's primary point but was very clever. And not very constructive - rather more of the same partisan politics (he's editorial probably gets a ranking of 1/4 good points and 3/4 disingenuous and non-constructive critiscism). Without going into too much detail in fact what would he propose as alternatives ?

Talking to Iran - this administration and every other has had numerous attempts over two decades. Meanwhile a multi-lateral negotiation has been being pursued under the auspices of of the IAEA involving Britain, France, Russia, et.al. What more is possible ? The Administration has carefully pursued a multi-party approach in NE Asia involving China, Russia, Japan, S.Korea that's kept the lid on and made some slow progress. In particular it has gotten China heavily involved and committed as part of a broader set of evolving strategic relationship developments that exceed those of any prior administration. Similarly our relationships with India are deeper and wider than at any time in history. The US had done more for Africa than at any other time as well.

While there have been a lot of slips twixt cup and lip of which we've been vehement critics Biden's editorial was polemical and partisan, as well as disingenuous. If anything a practical and pragmatic US policy will in fact have to build on the initiatives established and the situation as it is. So as we move into the heart of the campaign you can keep this shopping list in mind and challenge the candidates and their representatives to do one of two things. Speak truth to Power - that is, US ! Or continue to posture to win over whichever audience we most need to get votes.

Boy...when you put it like that the answer's sure obvious isn't it. 

Continue reading "National Security(Readings): Let the Debate Begin" »

Posted by dblwyo at 04:51 PM | Permalink | Comments (0)

The last post (Hidden Issues and Government Reform: the Politics of Special Interests) talked about how the combination of special interests and representative government tended to lead to policy that more served the benefits of the narrow interests rather than those of the broader republic. We ought to pursure that some more because reforming the MECHANISMS of government are as central a policy problem as we face. Not a bad one, contrary to any impression being created - like over-eating and obesity it's a problem of success. But if there's any single place where the cumulative impact of politico- bureaucratic organosclerosis has resulted in deadly damage to the national interest it's energy. Yet here's the rub - there's nothing going on with regard to energy policy that the primary responsible party isn't us. For decades we've chose low oil and gas prices, avoided off-shore exploration, prevented nuclear power development, made sure that no new US refineries were built in 30 years and then only in the path of hurricanes and curtailed substituting coal, which could be clean with R&D investment, for oil. Driven bigger and bigger cars with more and more H.P. and failed to implement easy energy conservation. Look in the mirror indeed Pogo, the cartoon has it exactly right.

The great irony of the cartoon, well one among several, is that it's only a few weeks old as I've been plotting this post for a while now. And wouldn't we love $3.49 gas ? Given that the week closed out with a surge in oil to almost $140/barrel ! Just to put a little perspective on it consider this rather busy little composite chart - handcrafted just for you :). The bottom is my own estimate of real oil prices and the top shows the growth rates in world oil supply and demand as well as the yoy% change in the difference, the balance.

Now we have a few things to say about a short summary of a national energy policy, triggered by a friend's question but before we get to it we'd like to "pause" for you to watch a great interview on Charlie Rose with John Hofmeister of Shell Oil. Which has been famous for decades for long-term scenario planning. And before you dismiss it because he's a big-oil executive it's, IOHO, a very balanced, reasonable and honest discussion. That tells some hard truths plainly and straight-forwardly. But the bottom-line point is encapsulate in this chart:

A conversation with John Hofmeister,President of Houston based Shell Oil Company.

 That'll take you about an hour to watch some time but if you're concerned about the issue it's the best compression we've found that's also the most honest and balanced. Quite unlike, for example, the recent Congressional war-drumming about windfall profits for Big Oil. Jeff Jacoby wrote an interesting little editorial but didn't go nearly far enough with regard to diagnosing the problem.

The reason Jacoby doesn't begin to go far enough at all is that the counter-argument isn't the nature of business and profit cycles in the oil industry, though again he is technically correct. The primary problems are structural on multiple fronts.

1. World demand exceeds and is growing faster than world supply.

2. In the short-run the base necessary to capture long-run requirements, including a premium for exhaustible resources, is probably in the $80-100/barrel range. On top of which there is most likely a 20% factor for geo-political risk AND speculation. Which would put the fair market price in the $120-140/barrel range. Surprise.

3. There is plenty of oil available for the next fifty years if it were readily and affordably available. Which it is not.

4. Approx. 90% of the world's known total reserves are relatively inaccessible to the major western oil companies because they are controlled by national oil companies and/or the nation-states themselves.

5. The primary l.t. drivers of oil prices are exploration and production costs. With the reserve access problems much of the terrain for both is behind political barriers which means they cannot reliably be developed and exploited. In other words investment is very limited, highly risky and increasingly liable to expropriation.

6. Of the oil in front of the barriers much of it still comes from producing countries where aging oil fields and gross (malfeasant ?!) und