Let Me Get This Straight

Politicians are charging that Goldman Sachs was less than forthright about certain of their products. Am I the only one who sees not irony, but hypocrisy, in this? Have politicians told us that the Social Security taxes we pay are funding a Ponzi scheme that would make Bernie Madoff blush? Have any of the Members who force-fed us ObamaCare as a jobs program told us that it is a net job sink? Has the Promised One told us that he was wrong (and knew it) about “not one dime of additional taxes on those earning less than $250K a year”?

What’s fraud for the goose is fraud for the gander.

Does anyone think the timing of this “investigation” is a coincidence? Just as He Who We’ve Been Waiting For is promising to “clean up” Wall Street, here comes a questionable fraud charge (there are no laws currently against what Goldman did) against a famous banker (a little-known house wouldn’t have served the Democrats’ purpose). They’re going to “save” us from Wall Street, just like they did from people dying in the streets from lack of health coverage.

Next up: value added tax to save us from deficits caused by their “saving” us from everything else.

Memo to Democrats – STOP HELPING ME!!!

If You’re Not Careful, I’ll Give Another Speech!

Associated Press reported today that SecDef Robert Gates sent a three-page memo to National Security Advisor General James Jones [USMC] noting that the United States has no “nimble long-term plan for dealing with Iran’s nuclear program”, meaning that with the obvious failure of diplomacy, there is no “Plan B”. This is not news (except to the oh-so-much-smarter-than-we-are news media). There wasn’t any under President George W Bush, and there isn’t any now. The default position (aka: “we can live with a nuclear Iran”) is containment and deterrence, yet we have weapons-hot troops on both sides of Iran right now, and President Obama is throwing deterrence away by short-selling ballistic missile defense (BMD), simultaneously with scuttling our manned space program. Apparently, he thinks that sliding into debt-riddled, over-taxed impotency will put the fear of God into the mullahs.

I have my doubts.

The media hand-wringing might do some good if the administration at least considers the possibility that neighborhood organizing and empty (if pretty) speeches might not work on an Iran that sees Mr Obama accomplishing the mullah’s goal of strategically weakening America faster than they could.

Somebody in the administration has to tell the president that nobody takes him seriously – not allies (Sarkozy calls him “amateurish”) and certainly not adversaries (Russia got him to dump BMD in Central Europe and we got nothing in return). This is worse than just a national embarrassment, its dangerous in the real world (i.e., all that lies outside the Beltway).

I said during the primary that Hillary was the “guy” in the race, but I had no idea just how low that bar was.

a Rare Glimpse into HopeyChange

In a classic case of a stopped watch being right twice a day, a situation is developing where the Obama Doctrine of conciliation is actually the wise course. Last week, Treasury Secretary Timothy Geithner bucked Democrat-friendly lobbyists and his Party’s Congressional delegation in deferring on an April 15th [Congressional] deadline to rule on PRC’s status as a currency manipulator. Treasury is, in other words, allowing PRC to do the “right thing” on their own, rather than our taking public a very good case against them. The world’s economic powers, the G-20, are assembling for a summit June 26-27 [Toronto][1], where it is known that the yuan will be discussed.

Early in the “miracle” of PRC’s economic rise, Beijing pegged the yuan to the dollar, officially stating that the yuan would trade at a fixed [by Beijing] number of dollars, regardless of its actual market value[2]. They did this to stabilize their currency during what was going to be a turbulent era of dramatic change in the internal Chinese economy as they began to marketize society. They put a floor under the value of the yuan at the cost of prohibiting it from strengthening. This was needed to prevent the yuan from going into free-fall if the world lost faith in Beijing’s ability to reform their economy on the fly. A currency crash at the beginning of a restructuring would have proven fatal to the Chinese economy.

Insuring against collapse also comes with existential costs. As long as the yuan is actually worth less than the peg, it is over-valued, and that benefits the rest of the world – if my currency is actually worth more of your currency than you will admit, my goods and services are cheaper to you than they are really worth. It’s an indirect “subsidy” that helps my exports. This represents a downward pressure on the Chinese economy by making foreign goods and services artificially less expensive in the Chinese market, limiting domestic business and employment opportunities.

But Beijing’s rapid and skillful conversion to a more market-based economy proved wildly successful, strengthening the real value of their currency in the process. The yuan is now undervalued, and that benefits the Chinese economy for all the same reasons – it’s now their products that are “subsidized”, making them artificially cheaper in foreign markets, hurting those economies. The rest of the world is transferring net real wealth to PRC to the degree that the yuan is artificially cheap. This is true of trade, of Chinese foreign investment, and of foreign investment in PRC.

This is of more than academic interest because the World Trade Organization – a treaty organization whose arbitration signatories agree to honor – has a prohibition against tariffs and subsidies, and PRC is in material violation of that prohibition. The rest is political – getting a voting majority willing to chastise PRC. The usual remedy is an allowable tariff (but they call it an “excise”) to offset the subsidy, and the ice is broken for a trade war – everybody loses.

In these tough times, there is a lot of pressure to even the playing field vis-à-vis PRC so as to take pressure off of our job creation, hence the angst of lobbyists and Congressmen. In this case, the administration’s signature risk-averse foreign policy is not only the best approach, but also offers a useful window into the efficacy of our newly adopted Kumbaya international posture. Will our magnanimous gesture cause Beijing to “see the light” and allow the yuan to float? No. But they do have a two-month or so period during which they could allow the yuan to appreciate (without losing face), as they did from 2005 to 2008. This wouldn’t eliminate the subsidy, but the improvement in exchange rates would be noticeable. In any event, the problem will be discussed at the June WTO meeting, so Secretary Geithner is essentially kicking the can down that road.

It now boils down to how Beijing reads the politics involved – how many states can they bribe, browbeat and cajole into refusing to call a subsidy a subsidy, against how many we can bribe, browbeat and cajole into standing up to PRC.

This is the right type of problem that can be solved at the evolutionary pace of a non-robust diplomacy, as, unlike a nuclearizing Iran, there is no approaching “toggle” moment at which point the problem becomes insoluble.

In the interest of intellectual honesty and political fair play, I must offer kudos to a department secretary I consider ill-qualified and a mindset I consider ill-advised. When they’re right, they’re right … even if only twice a day.

[1] Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, ROK, Turkey, UK, US, and the EU make up the G-20.

[2] Beijing let the yuan rise 21% against the US dollar between July 2005 and July 2008 before effectively re-pegging it at ¥6.83 = $1.

Washington State’s Senate Race

As early as February 3rd, Jason Raines, a Sunnyside[1] [WA} blogger, noted that the then-thought safe Washington Senate seat of Democrat incumbent Patty Murray isn’t all that safe[2]. As of February 13, the only Washington poll shown by Real Clear Politics was Moore Info’s [a Republican outfit] poll of 500 Likely Voters taken between January 24th and 25th, showing Dino Rossi (R) leading Murray by two, 45% to 43%. Since then [April 6th, by Rasmussen], she has reversed those standings, leading 48% to 46%. But at this stage of a campaign [pre-August], an incumbent with less than 50% support is considered vulnerable. Having campaigned and been elected almost guarantees a name recognition advantage over any challenger, and Ms Murray, having done so three times, is well known in the state. President Obama carried Washington with 58% of the vote last November, so why would moderately liberal Washington have a problem with non-lightening rod Patty Murray?

There are natural forces at play in that an anti-party-of-power influence is always present in off-year elections, and a general anti-incumbency is especially virile this year. This threatens Ms Murray because of the differences between the norm [off-year elections] and the specific [this year’s off-year election]. President Obama’s support has shrunk from his 53% victory last November to today’s 43% job approval rating, a stunning retreat of historical proportions that will have a natural drag on the president’s party. Also, the Democrat-controlled Congress enjoys 14% approval ratings [just above Osama bin Laden’s worldwide approval], also dragging on Democrats as a whole.

In a March 9 poll [Rasmussen], 57% of Washington voters said it would be better for the country if most congressional incumbents were ousted, with just 27% preferring that most be reelected. Only 37% of Washington Likely Voters think their own representative in Congress deserves to be reelected [38% don’t, leaving a whopping 25% undecided]. It’s obvious that, this year, the normal “familiar over unfamiliar” – “known over unknown”, “incumbent over challenger” – has been severely eroded. Still, this shouldn’t greatly weaken a non-controversial three-term senator. It’s here that I need input from Washington as to Ms Murray’s local sense of controversy – has she taken colloquially unpopular stands on issues; does she propose locally unpopular initiatives? I must admit that I’m ignorant of her votes on the animating issues of the day – bailouts, stimulus, healthcare, etc.

Having run political campaigns I can tell you two things: independents determine elections; and a candidate’s position on “hot-button” issues can be vital. Party affiliation in a general election gets you that base, but neither party holds a majority of the vote – any winning candidate will have unaffiliated voters to thank. Hot button issues generate a strong-willed support and opposition, and strongly-opined participants tend to be politically active while inspired. The larger segment of strong opinion will be net more active in an election than the smaller. And as I say, I don’t know to what degree Ms Murray may have run apostate of general opinion, but her stances/record on those events will be outcome-relevant.

The problem in Washington State is microcosm to the Democrat’s problem nationwide. This isn’t a hotly contested single-issue debate, it’s a set of them – that is to say, the distaste in the electorate is more general than issue-oriented, and that is harder to overcome. At the yard-sign, bumper-sticker level, 2010 will be a referendum on Hopey Change, at the comfort-level, however, the coming election has more to do with liberal versus tradition. And I say “tradition” rather than “conservative” because I think that is really closer to the actual national argument going on. The nearest I can congeal our discourse into a singular theme is to say that all opposition leans toward “too big, too much, too fast”. The public is resisting profound change to the landscape without discussing it with us – or worse, ignoring our opposition to it.

Complex organisms, such as societies, don’t change, they evolve. They flow from state to state. One of the mistakes the administration is making is the freight-training of sweeping changes. The rate of change we are being asked to accept has broken free of the specific changes we are being asked to accept, and the natural reaction is to defensively oppose both. The administration and Democrat leadership have placed a natural speed bump to the political status quo in the way of all incumbents. They have added to the burden of unpopular programs by the unpopularity of their velocity.

Washington would be a useful bellwether this year if not for its Pacific Time Zone location – the outcome will likely be known by the time Washington polls close.

[1] Yakima area.

[2] Jason Raines, Patty Murray’s Senate Seat is not Safe, BLOGSUNNYSIDE, February 3 2010. 

the Banning of History’s Most Dangerous Weapon

Much has been made of our glimpse into the administration’s nuclear philosophy, afforded by this week’s leak of the new Nuclear Posture Review and the signing of a new START with Russia. Most analyses I have seen tie the content to President Obama’s avowed aspiration for a nuclear-free world. It is never asked, however, if a nuclear-free world is a practicable effort – is it both possible and desirable – let alone a wise one. All three questions are “deemed-to-pass” as answered in the affirmative.

I think each of these issues – can it be done?, should it be done-A?, and should it be done-B? – are important enough to warrant discussion at least.

Is it possible to get 193 (and growing) nations to agree to abolish the deployment, testing and development of nuclear weapons; and is it possible to get 193 (and growing) nations to not cheat on that agreement? Both aspects of the “is it possible” criterion are inordinately important because of the inordinately outcome-relevant asymmetry of nuclear and conventional weapons. Each phase of the drawdown contains perils to the now-nuclear-armed nation. The profundity of cheating increases inversely as to the total number of the world’s nuclear weapons.

Assuming the US and Russia keep inching backwards, at some point they will encounter another player which, if the US and Russia reduce arsenals further, will become the world’s most nuclearized state. This is the threshold where both the US and Russia must agree to abdicate nuclear leadership to another sovereign. Does it matter if that third party is PRC or France? Should it? Reductions by all three will soon encounter Israel and the UK – are the three agreeable to relinquishing nuclear leadership to another state or states? This phenomenon continues until all the world’s nuclear powers are on-board and reducing toward zero. There are two problems here.

First, while Deputy American Ambassador to the United Nations, Lieutenant General Vernon Walters (USA) issued Walters’ Law of Negotiations – the probability against consensus rises as the square of the number of participants. Consensus – a condition necessary to universal nuclear disarmament – becomes exponentially more difficult with each additional negotiator over two. And second, human nature tells us the race to zero is more likely to be asymptotic than successful. Even if successful, we are now confronted by the 184 or so other nations of the world that must sign-on by dependably pledging to never, ever, pursue nuclear weapons, a process that increases in difficulty, and decreases in probability, with each additional negotiator. Is this an attainable goal, or just a negotiating stance? Does President Obama honestly believe that the world will voluntarily forego increasingly profound asymmetrical weapons for the sake of banning them? Or is this an honest desire by a president who knows it to be Quixotic? Does it matter – is the pursuit worth taking regardless of its attainability? The answer to this last one dictates how one proceeds as totals dwindle.

We are told that nuclear weapons must be banned because they are too dangerous – paradoxically justifying their existence as deterrents. This is part and parcel to the “we live in the most dangerous of times” syndrome, and we are to infer that the ban will rescue us from the predicament. The fact is, we have always lived in the most dangerous of times. The catapult, the gun, rifling the machinegun – all gave first-users a palpable advantage on the battlefield, and each was to change civilization as we knew it. These were the world’s most dangerous weapons, in their day, and each of their deployments, having ratcheted-up potential mayhem, placed us in a new “most dangerous of times”. As we, as a species, get better at everything – including warfare – the effects of our endeavors increase, increasing the danger of mishap. This just happens. We will always live in the most dangerous of times. So, is the pursuit of zero-nukes worthy in the absence of intrinsic security?

“Should We-B” asks if the operating post-nuclear vision is more utopian than realistic. We have a contemporary, in anthropological terms, analog of the dynamics of a post-nuclear world; it’s the pre-nuclear world – history prior to 6 August 1945 – one of trade wars, wars of conquest, and World Wars. It is commonly acknowledged that the presence of nuclear weapons all but eliminated wider wars. It would only stand to reason that the elimination of nuclear weapons would invite the return of wider wars and the cheapening of causus belli. Removing the American nuclear umbrella reduces our ability to project power to the current deployment of our carrier strike groups and [post-nuclear] cruise missile boats. I’m not lamenting the dwindling of American power so much as the nullification of existing treaties and the weakening of stability wrought by the weakening of alliances. Is a non-nuclear world safer than a nuclear one?

I’ve tried to provide several points of departure for discussions on the “invisible” aspects of nuclear disarmament.