November 24, 2009
In Euro Pacific Capital, Peter Schiff builds an explanation of the Chinese pegging the yuan to
the US dollar, and what will happen when the Chinese stop this practice.
During President Obama's high profile visit to China this week, the most frequently discussed, yet least
understood, topic was how currency valuations are affecting the economic relationship between the United
States and China. The focal problem is the Chinese government's policy of fixing the value of the renminbi
against the U.S. dollar. While many correctly perceive that this 'peg' has contributed greatly to the current
global imbalances, few fully comprehend the ramifications should that peg be discarded.
The common understanding is both incomplete and naive. Most analysts simply see the peg as China's
principal weapon in an economic struggle for global ascendancy. The peg, they argue, offers China a
competitive advantage by making its products cheaper in U.S. markets, thus allowing Chinese firms to
gobble up market share and steal jobs from U.S. manufacturers. The thought is that were China to allow its
currency to rise, American manufactures would regain their lost edge, and both manufacturing firms and the
jobs formerly associated with them would return. In this narrative, the struggle centers on the United States'
diminishing leverage in persuading the Chinese to lay down their unfair weaponry. It's a sympathetic picture,
but it tells the wrong story.
While the peg certainly is responsible for much of the world's problems, its abandonment would cause
severe hardship in the United States. In fact, for the U.S., de-pegging would cause the economic equivalent
of cardiac arrest. Our economy is currently on life support provided by an endless flow of debt financing from
China. These purchases are the means by which China maintains the relative value of its currency against
the dollar. As the dollar comes under even more downward pressure, China's purchases must increase to
keep the renminbi from rising. By maintaining the peg, China enables our politicians and citizens to continue
spending more than they have and avoiding the hard choices necessary to restore our long-term economic
health. ...
In WaPo, Robert Samuelson comments on Obamacare's transfer of wealth from the young to
the old.
One of our long-running political stories is the economic assault on the young by the old. We have become a
society that invests in its past and disfavors the future. This makes no sense for the nation, but as politics it
makes complete sense. The elderly and near elderly are better organized, focus obsessively on their
government benefits and seem deserving. Grandmas and Grandpas command sympathy.
Everyone knows that the resulting "entitlements" dominate government spending and squeeze education,
research, defense and almost everything else. In fiscal 2008 -- the last "normal" year before the economic
crisis -- Social Security, Medicare and Medicaid (programs wholly or primarily dedicated to the elderly)
totaled $1.3 trillion, 43 percent of federal spending and more than twice military spending. Because workers,
not retirees, are the primary taxpayers, this spending involves huge transfers to the old.
Now comes the House-passed health-care "reform" bill that, amazingly, would extract more subsidies from
the young. It mandates that health insurance premiums for older Americans be no more than twice the level
of that for younger Americans. That's much less than the actual health spending gap between young and
old. Spending for those age 60 to 64 is four to five times greater than those 18 to 24. So, the young would
overpay for insurance that -- under the House bill -- people must buy: Twenty- and thirtysomethings would
subsidize premiums for fifty-and sixtysomethings. (Those 65 and over receive Medicare.) ...
In Der Spiegel, Gabor Steingart assesses Obama's Asian trip, and reviews Obama's foreign
policy paradigm.
...The mood in Obama's foreign policy team is tense following an extended Asia trip that produced no
palpable results. The "first Pacific president," as Obama called himself, came as a friend and returned as a
stranger. The Asians smiled but made no concessions.
Upon taking office, Obama said that he wanted to listen to the world, promising respect instead of
arrogance. But Obama's currency isn't as strong as he had believed. Everyone wants respect, but hardly
anyone is willing to pay for it. Interests, not emotions, dominate the world of realpolitik. The Asia trip
revealed the limits of Washington's new foreign policy: Although Obama did not lose face in China and
Japan, he did appear to have lost some of his initial stature.
In Tokyo, the new center-left government even pulled out of its participation in a mission which saw the
Japanese navy refueling US warships in the Indian Ocean as part of the Afghanistan campaign. In Beijing,
Obama failed to achieve any important concessions whatsoever. There will be no binding commitments from
China to reduce greenhouse gas emissions. A revaluation of the Chinese currency, which is kept artificially
weak, has been postponed. Sanctions against Iran? Not a chance. Nuclear disarmament? Not an issue for
the Chinese.
The White House did not even stand up for itself when it came to the question of human rights in China. The
president, who had said only a few days earlier that freedom of expression is a universal right, was coerced
into attending a joint press conference with Chinese President Hu Jintao, at which questions were forbidden.
Former US President George W. Bush had always managed to avoid such press conferences. ...
We hear from another disillusioned liberal. In Politico, Elizabeth Drew discusses Greg Craig's
departure.
...While he (Obama) was abroad, there was a palpable sense at home of something gone wrong. A critical
mass of influential people who once held big hopes for his presidency began to wonder whether they had
misjudged the man. Most significant, these doubters now find themselves with a new reluctance to defend
Obama at a phase of his presidency when he needs defenders more urgently than ever.
This is the price Obama has paid with his complicity and most likely his active participation, in the shabbiest
episode of his presidency: The firing by leaks of White House counsel Gregory Craig, a well-respected
Washington veteran and influential early supporter of Obama.
The people who are most aghast by the handling of the Craig departure can’t be dismissed by the White
House as Republican partisans, or still-embittered Hillary Clinton supporters. They are not naïve activists
who don’t understand that the exercise of power can be a rough business and that trade-offs and personal
disappointments are inevitable. Instead, they are people, either in politics or close observers, who once held
an unromantically high opinion of Obama. They were important to his rise, and are likely more important to
the success or failure of his presidency than Obama or his distressingly insular and small-minded West
Wing team appreciate.
The Craig embarrassment gives these people a new reason – not the first or only reason – to conclude that
he wasn’t the person of integrity and even classiness they had thought, and, more fundamentally, that his
ability to move people and actually lead a fractured and troubled country (the reason many preferred him
over Hillary Clinton) is not what had been promised in the campaign. ...
In the Daily Beast, Lee Siegel looks at Obama's governing style in light of the KSM decision.
...This illusion of national participation in his decision-making process, with the promise of a happy ending
that excludes no one, has been Obama’s method almost from Day One. Call it the American Idol style of
governing—except that no possibility ever gets voted out of the competition. ...
...On health care, once again, Obama proclaimed his desire for an ideal solution, held himself aloof from the
fray, and let the public, the media, and the politicians turn it into a World Wrestling match that made almost
any sort of compromise a victory. On Afghanistan, the same process: The president might deplore the leaks
that came from inside and outside his administration, but they dripped slowly, and from widely scattered
places, just like the slowly dripping, all-inclusive way he appears to think.
Obama seems not so much to govern as to preside. And yet for all the prudent pragmatism of his style, he
doesn’t seem merely to want to please everyone. He seems determined not to be held responsible for the
displeasure he causes. In the end, Obama won’t be blamed for what will likely be the health-care bill’s
substantial flaws. Instead, the transparency of the process leading up to the bill ensures that at every point
where the bill seems to fail one constituency or another, a particular person or people will be blamed for
thwarting Obama. ...
In News Busters, Noel Sheppard has a surprising post on Chris Matthews' opinion of Obama.
Chris Matthews appears to have lost that loving feeling for Barack Obama.
On "The Chris Matthews Show" Sunday, the once smitten MSNBCer called some of Obama's recent
mistakes "Carteresque" ...
...Potentially as surprising as Matthews bringing these issues up was the Washington Post's Anne Kornblut
and David Ignatius agreeing with him
CHRIS MATTHEWS, HOST: Welcome back. The word these days is optics, visuals, signals. In the Carter
presidency, the optics were not exactly robust, and Ronald Reagan rode that to a big victory in 1980. Is the
Obama White House sending some Carteresque signals these days? Some see that in the deep bow to the
Emperor of Japan, an unforced error say critics. Then there was, there was what happened in China:
Obama got nothing in the way of concessions over there in spite of playing the polite visitor. And his effort to
speak directly to the Chinese was jammed by the government. Third, that decision to try the terrorists up in
that federal court in New York City. Again, nothing that had to be done, and critics say it shows that Obama,
his team doesn't understand this is a war we're in. David, that's the question. These optics are everything in
a president. Carter used to carry that garment bag over his shoulder. This president is he making mistakes
like in China like in Japan?
DAVID IGNATIUS, WASHINGTON POST : I think he is coming across as stiff. He is talking too much
sometimes and communicating too little. So the opposite of what we saw during the campaign. Although the
decision to try Khalid Sheikh Mohammed in New York apparently was Eric Holder's, it strikes me that it really
is a mistake. I mean, there are too many bad things that could happen. There is no reason to have to have
done this. ...
Sometimes you have to laugh at the ludicrous liberal politicians. Jonah Goldberg has an article
in National Review that helps us do that.
...The point of that emasculating exercise was ostensibly to tell the world that Joe Biden was going to be
riding herd over how the stimulus money was spent. It’s worth revisiting exactly what he said:
"That is why I have asked Vice President Biden to lead a tough, unprecedented oversight effort — because
nobody messes with Joe. I have told each member of my Cabinet, as well as mayors and governors across
the country, that they will be held accountable by me and the American people for every dollar they spend. I
have appointed a proven and aggressive inspector general to ferret out any and all cases of waste and
fraud. And we have created a new website called Recovery.gov so that every American can find out how
and where their money is being spent."
In the cold, bracing light of today’s facts, this is just plain bladder-draining hilarious. We’ve all heard the
stories of vast sums of money funding a tiny number of jobs, and tiny amounts of money paying for vast
numbers of jobs. Even better, the stories have for the most part been broken by such non-right-wingdecoder-ring-wearers as the AP and the Boston Globe. A story in the Fort Worth Star-Telegram reports that
after spending $608.9 million, the White House got 1,458 jobs. That’s nearly half a million dollars per job.
Meanwhile, Alabama’s Talladega County alone claimed that it stretched $42,000 into 5,000 jobs “saved or
created.”
“Saved or created” is itself the greatest weaselly locution yet coined in the 21st century. Just for the record, I
save or create 500 push-ups every morning. ...
Another great T-Shirt. This from Boing Boing.net.
Euro Pacific Capital
The Truth Behind China's Currency Peg
by Peter Schiff
During President Obama's high profile visit to China this week, the most frequently discussed, yet least
understood, topic was how currency valuations are affecting the economic relationship between the United
States and China. The focal problem is the Chinese government's policy of fixing the value of the renminbi
against the U.S. dollar. While many correctly perceive that this 'peg' has contributed greatly to the current
global imbalances, few fully comprehend the ramifications should that peg be discarded.
The common understanding is both incomplete and naive. Most analysts simply see the peg as China's
principal weapon in an economic struggle for global ascendancy. The peg, they argue, offers China a
competitive advantage by making its products cheaper in U.S. markets, thus allowing Chinese firms to
gobble up market share and steal jobs from U.S. manufacturers. The thought is that were China to allow its
currency to rise, American manufactures would regain their lost edge, and both manufacturing firms and the
jobs formerly associated with them would return. In this narrative, the struggle centers on the United States'
diminishing leverage in persuading the Chinese to lay down their unfair weaponry. It's a sympathetic picture,
but it tells the wrong story.
While the peg certainly is responsible for much of the world's problems, its abandonment would cause
severe hardship in the United States. In fact, for the U.S., de-pegging would cause the economic equivalent
of cardiac arrest. Our economy is currently on life support provided by an endless flow of debt financing from
China. These purchases are the means by which China maintains the relative value of its currency against
the dollar. As the dollar comes under even more downward pressure, China's purchases must increase to
keep the renminbi from rising. By maintaining the peg, China enables our politicians and citizens to continue
spending more than they have and avoiding the hard choices necessary to restore our long-term economic
health.
Contrary to the conventional wisdom, when China drops the peg, the immediate benefits will flow to the
Chinese, not to Americans. Yes, prices for Chinese goods will rise in the United States – but so will prices
for domestic goods. As a corollary, the Chinese will see falling prices across the board. As anyone who has
ever been shopping can explain, low prices are a good thing.
In addition, credit will expand in China while it contracts here. When China abandons the peg, it will no
longer need to swell its currency reserves by buying Treasuries or other dollar-denominated debt
instruments. Other nations will no longer feel the pressure to keep their currencies from rising, so they too
could throttle down on their onerous dollar purchases.
As demand falls for both dollars and Treasuries, prices and interest rates in the United States will rise.
Rising rates will restrict the flow of credit that is currently financing government and consumer spending.
This change will finally force a long overdue decline in borrowing. So, not only will Americans lose access to
the consumer credit that funds their current spending, but the things they buy will also get more expensive.
Our short-term loss will be in sharp contrast to the gain felt by foreigners, who will be rewarded with falling
consumer prices and a more abundant supply of investment capital. In other words, the American standard
of living will fall while that of our trading partners will rise.
However, this does not mean that I want the Chinese to maintain the status quo. In the long run, the U.S.
economy will benefit from the abandonment of a system that guarantees our dependency and inevitable
downfall. De-pegging will force the hand of U.S. politicians toward pursuing realistic policies. The Chinese
will come to their senses eventually because it is in their interest to do so. Meanwhile, the longer the peg is
maintained, the more indebted we become, the more out of balance our economy grows, and the more our
industrial base shrivels. In short, the longer they wait, the steeper our fall.
A weaker dollar will price many imported products beyond the reach of most Americas, giving our hollowed
out manufacturing sector the opportunity to rebound. However, if our industry has any chance of getting off
the mat, we must reduce taxes, repeal regulations, reform our cumbersome legal system, and, most
importantly, replenish our savings to finance the necessary capital investment.
If we position ourselves to deal with the consequences, tough love from China will provide a path back to
genuine economic growth. However, if our politicians continue to misread the problem and push us deeper
in the red, the inevitable 'rebalancing' could be truly ruinous.
Washington Post
Health 'reform' that burdens our young
by Robert J. Samuelson
One of our long-running political stories is the economic assault on the young by the old. We have become a
society that invests in its past and disfavors the future. This makes no sense for the nation, but as politics it
makes complete sense. The elderly and near elderly are better organized, focus obsessively on their
government benefits and seem deserving. Grandmas and Grandpas command sympathy.
Everyone knows that the resulting "entitlements" dominate government spending and squeeze education,
research, defense and almost everything else. In fiscal 2008 -- the last "normal" year before the economic
crisis -- Social Security, Medicare and Medicaid (programs wholly or primarily dedicated to the elderly)
totaled $1.3 trillion, 43 percent of federal spending and more than twice military spending. Because workers,
not retirees, are the primary taxpayers, this spending involves huge transfers to the old.
Now comes the House-passed health-care "reform" bill that, amazingly, would extract more subsidies from
the young. It mandates that health insurance premiums for older Americans be no more than twice the level
of that for younger Americans. That's much less than the actual health spending gap between young and
old. Spending for those age 60 to 64 is four to five times greater than those 18 to 24. So, the young would
overpay for insurance that -- under the House bill -- people must buy: Twenty- and thirtysomethings would
subsidize premiums for fifty-and sixtysomethings. (Those 65 and over receive Medicare.)
Not surprisingly, the 40-million-member AARP, the major lobby for Americans over 50, was a big force
behind this provision. AARP's cynicism is breathtaking. On one hand, it sponsors a high-minded campaign
called "Divided We Fail" and runs sentimental TV ads featuring children pleading for a better tomorrow. "Join
us in championing your future and the future of every generation," ended one ad.
Meanwhile, AARP lobbyists scramble to shift their members' costs onto younger generations. For example,
the House health legislation improves Medicare's drug benefit. That would help the half of AARP members
who are over 65. The other half, those between 50 and 64, could benefit from the skewed insurance
premiums.
Although premium changes would apply mainly to people using insurance "exchanges," the differences
would be substantial. A single person 55 to 64 might save $3,490, estimates an Urban Institute study. By
contrast, single people in their 20s and early 30s might pay about $600 to $1,100 more. For the young, the
extra cost might be larger, says economist Diana Furchtgott-Roth of the Hudson Institute, because the
House bill would require them to purchase fairly generous insurance plans rather than cheaper catastrophic
coverage that might better suit their needs.
Whatever the added burden, it would darken the young's already poor economic prospects. Unemployment
among 16- to 24-year-olds is 19 percent. Peter Orszag, director of the Office of Management and Budget,
notes on his blog that high joblessness depresses young workers' wages and that the adverse effect -though diminishing -- "is still statistically significant 15 years later." Lost wages over 20 years could total
$100,000. Orszag doesn't mention that health-care "reform" might compound the loss.
AARP justifies the cost-shifting as preventing age discrimination. Premiums based on age should be no
more acceptable than premiums based on medical expenses reflecting race, gender or preexisting health
conditions, it says. The House legislation bans those, so it should also ban age-based rates. AARP dislikes
even the 2-to-1 limit. It thinks premiums for someone 22 and someone 62 should be identical. (In insurance
jargon, that would be full "community rating.")
This is unconvincing. All insurance aims to protect against risk -- but within groups facing similar risks. Put
differently, most insurance is risk-adjusted. Auto insurance premiums vary by age; younger drivers pay
higher rates because they have more accidents. Homeowners' policies for similar houses cost more in highcrime areas. This is not "discrimination"; it's a reflection of risk and cost differences. Insurers that ignored
these differences would soon vanish because they'd suffer heavy losses and lose customers.
On health insurance, we may choose to override some risk adjustments (say, for preexisting medical
conditions) for public policy reasons. But the case for making age one of these exceptions is weak. Working
Americans -- the young and middle-aged -- already pay a huge part of the health costs of the elderly through
Medicare and Medicaid. These will grow with an aging population and surging health spending. Either taxes
will rise or other public services will fall. Already, all governments spend 2.4 times as much per capita on the
elderly as on children, reports Julia Isaacs of the Brookings Institution. Why increase the imbalance?
It's true that premiums for older people would be higher. But this might have a silver lining: Facing their true
health costs, older Americans might become more eager to control spending.
Der Speigel
Obama's Nice Guy Act Gets Him Nowhere on the World Stage
When he entered office, US President Barack Obama promised to inject US foreign policy with a new
tone of respect and diplomacy. His recent trip to Asia, however, showed that it's not working. A shift
to Bush-style bluntness may be coming.
by Gabor Steingart
US President Barack Obama is back in the US after an Asian trip that produced few results.
There were only a few hours left before Air Force One was scheduled to depart for the flight home. US
President Barack Obama trip through Asia had already seen him travel 24,000 kilometers, sit through a
dozen state banquets, climb the Great Wall of China and shake hands with Korean children. It was high time
to take stock of the trip.
Barack Obama looked tired on Thursday, as he stood in the Blue House in Seoul, the official residence of
the South Korean president. He also seemed irritable and even slightly forlorn. The CNN cameras had
already been set up. But then Obama decided not to play along, and not to answer the question he had
already been asked several times on his trip: what did he plan to take home with him? Instead, he simply
said "thank you, guys," and disappeared. David Axelrod, senior advisor to the president, fielded the
journalists' questions in the hallway of the Blue House instead, telling them that the public's expectations
had been "too high."
The mood in Obama's foreign policy team is tense following an extended Asia trip that produced no palpable
results. The "first Pacific president," as Obama called himself, came as a friend and returned as a stranger.
The Asians smiled but made no concessions.
Lost Some Stature
Upon taking office, Obama said that he wanted to listen to the world, promising respect instead of
arrogance. But Obama's currency isn't as strong as he had believed. Everyone wants respect, but hardly
anyone is willing to pay for it. Interests, not emotions, dominate the world of realpolitik. The Asia trip
revealed the limits of Washington's new foreign policy: Although Obama did not lose face in China and
Japan, he did appear to have lost some of his initial stature.
In Tokyo, the new center-left government even pulled out of its participation in a mission which saw the
Japanese navy refueling US warships in the Indian Ocean as part of the Afghanistan campaign. In Beijing,
Obama failed to achieve any important concessions whatsoever. There will be no binding commitments from
China to reduce greenhouse gas emissions. A revaluation of the Chinese currency, which is kept artificially
weak, has been postponed. Sanctions against Iran? Not a chance. Nuclear disarmament? Not an issue for
the Chinese.
The White House did not even stand up for itself when it came to the question of human rights in China. The
president, who had said only a few days earlier that freedom of expression is a universal right, was coerced
into attending a joint press conference with Chinese President Hu Jintao, at which questions were forbidden.
Former US President George W. Bush had always managed to avoid such press conferences.
Relatively Unsuccessful
A look back in time reveals the differences. When former President Bill Clinton went to China in June 1998,
Beijing wanted to impress the Americans. A press conference in the Great Hall of the People, broadcast on
television as a 70-minute live discussion, became a sensation the world over. Clinton mentioned the 1989
Tiananmen Square massacre, when the government used tanks against protestors. But then President
Jiang Zemin defended the tough approach taken by the Chinese Communists. At the end of the exchange,
the Chinese president praised the debate and said: "I believe this is democracy!"
Obama visited a new China, an economic power that is now making its own demands. America should clean
up its government finances, and the weak dollar is unacceptable, the head of the Chinese banking authority
said, just as Obama's plane was about to land.
Obama's new foreign policy has also been relatively unsuccessful elsewhere, with even friends like Israel
leaving him high and dry. For the government of Israel Prime Minister Benjamin Netanyahu, peace is only
conceivable under its terms. Netanyahu has rejected Obama's call for a complete moratorium on the
construction of settlements. As a result, Obama has nothing to offer the Palestinians and the Syrians. "We
thought we had some leverage," says Martin Indyk, a former ambassador to Israel under the Clinton
administration and now an advisor to Obama. "But that proved to be an illusion."
Even the president seems to have lost his faith in a genial foreign policy. The approach that was being used
in Afghanistan this spring, with its strong emphasis on civilian reconstruction, is already being changed.
"We're searching for an exit strategy," said a staff member with the National Security Council on the
sidelines of the Asia trip.
'A Lot Like Jimmy Carter'
An end to diplomacy is also taking shape in Washington's policy toward Tehran. It is now up to Iran, Obama
said, to convince the world that its nuclear power is peaceful. While in Asia, Obama mentioned
"consequences" unless it followed his advice. This puts the president, in his tenth month in office, where
Bush began -- with threats. "Time is running out," Obama said in Korea. It was the same phrase Bush used
against former Iraqi dictator Saddam Hussein, shortly before he sent in the bombers.
There are many indications that the man in charge at the White House will take a tougher stance in the
future. Obama's advisors fear a comparison with former Democratic President Jimmy Carter, even more
than with Bush. Prominent Republicans have already tried to liken Obama to the humanitarian from Georgia,
who lost in his bid to win a second term, because voters felt that he was too soft. "Carter tried weakness and
the world got tougher and tougher because the predators, the aggressors, the anti-Americans, the dictators,
when they sense weakness, they all start pushing ahead," Newt Gingrich, the former Republican speaker in
the House of Representatives, recently said. And then he added: "This does look a lot like Jimmy Carter."
Translated from the German by Christopher Sultan
Politico
Why the Greg Craig debacle matters
by Elizabeth Drew
President Barack Obama is returning from his trek to Asia Thursday to a capital that is a considerably more
dangerous place for him than when he departed.
While he was abroad, there was a palpable sense at home of something gone wrong. A critical mass of
influential people who once held big hopes for his presidency began to wonder whether they had misjudged
the man. Most significant, these doubters now find themselves with a new reluctance to defend Obama at a
phase of his presidency when he needs defenders more urgently than ever.
This is the price Obama has paid with his complicity and most likely his active participation, in the shabbiest
episode of his presidency: The firing by leaks of White House counsel Gregory Craig, a well-respected
Washington veteran and influential early supporter of Obama.
The people who are most aghast by the handling of the Craig departure can’t be dismissed by the White
House as Republican partisans, or still-embittered Hillary Clinton supporters. They are not naïve activists
who don’t understand that the exercise of power can be a rough business and that trade-offs and personal
disappointments are inevitable. Instead, they are people, either in politics or close observers, who once held
an unromantically high opinion of Obama. They were important to his rise, and are likely more important to
the success or failure of his presidency than Obama or his distressingly insular and small-minded West
Wing team appreciate.
The Craig embarrassment gives these people a new reason – not the first or only reason – to conclude that
he wasn’t the person of integrity and even classiness they had thought, and, more fundamentally, that his
ability to move people and actually lead a fractured and troubled country (the reason many preferred him
over Hillary Clinton) is not what had been promised in the campaign.
This may seem like a lot to hang on a Washington personnel move. After all, intramural back-stabbing or
making people fall guys when things go wrong (think Bill Clinton’s Defense Secretary Les Aspin after the
disaster in Somalia) are not new to Washingtonians.
But Craig’s ouster did not occur in a vacuum. It served as a focal point to concerns that have been building
for months that Obama wasn’t pressing for all that might be possible within the existing political constraints
(all that one could ask of a president); that his presidential voice hadn’t fulfilled the hopes raised by his
campaign voice (which had also taken him a while to find); that he hadn’t created a movement, as he had
raised expectations that he would; that would be there to back him up and help him fulfill his promises.
That is why it is worth pondering how the Craig story, unfolded in detail – its consequences likely will echo
far longer than anything Obama said or did in Asia.
Briefly, here’s what happened, some of it told for the first time: Craig, who had known the Clintons since they
were all at Yale Law School together, had served as a senior adviser to Secretary of State Madeleine
Albright, but in 1998 gave up that job to help defend Bill Clinton against impeachment. Yet in 2008, he
supported Obama for the nomination – not so much a turning against Hillary Clinton as being impressed
early, as were some other prominent Washingtonians, by the then-state senator but would-be U.S. Senate
candidate at a fundraiser held by Vernon Jordan, seeing Obama as the first potentially inspiring Democratic
figure since Robert Kennedy. In the course of the campaign, Craig wrote a highly publicized memo
questioning some of Hillary Clinton’s claims of foreign policy experience, such as coming under enemy fire
in Tuzla, Bosnia. During the campaign, Craig coached Obama for the debates (playing McCain), and praised
him highly. Craig’s imprimatur helped the neophyte Obama in certain influential circles.
He hoped to get a high foreign policy position in an Obama administration, but when Clinton was named
secretary of state, this of course became untenable. The Clintons are an unforgiving lot. So, Obama and
Craig agreed that Craig would take the job of White House counsel for a year, and then they’d discuss what
he’d do next. Thus, Craig was handed a very tricky portfolio.
During the transition, about mid-December, Craig presented to a group of the president’s newly named
national security advisers meeting in Washington – including Clinton, Defense Secretary Robert Gates,
national security adviser General James Jones, and others – three proposed executive orders: One ordered
the shutting down of Guantanamo in a year. (The others banned torture and closed down the C.I.A.’s “black
sites”; and addressed future detainee policy.) The one-year target for closing Guantanamo resulted from
consultations with human rights and detainee rights groups, who argued that Guantanamo could be shut
down in three months, and with Pentagon officials, who had no united position but argued that it would take
from a year to 18 months.
At the meeting, only the newly named Homeland Security Secretary Janet Napolitano, beamed in from
Arizona, questioned whether a year was realistic. When Gates, as he later confirmed publicly, said that
though it was an “ambitious” deadline, he supported it because setting it was the only way to get things,
especially the bureaucracy, moving toward that end, and that it could be extended if it couldn’t be met, that
was it.
Obama’s new national security team signed off on the executive order to close Guantanamo in a year. This
was passed along to the president as well as his top aides; Craig was never in a meeting with the political
side of the White House on the Guantanamo matter – and the president-elect and then president raised no
objection before, when, or after he signed off on it.
Unsurprisingly, the deadline became hard to meet, for various legal and political reasons – including the
congressional outburst of NIMBYISM (similar to its earlier outbursts on Dubai Ports and even Terri Schiavo
– short-term, irrational, and politically motivated fits that erupt from the Congress from time to time). If Craig
failed to foresee this (as some later charged), he had a lot of company.
The closing of Guantanamo is undoubtedly far further along than it would have been without the executive
order. But along the way, Craig fell out of favor with the president’s political aides and, apparently, the
president himself. Whether he was simply being made the fall guy, or the tight circle of Chicagoans in the
White House didn’t care for this outsider, or he committed some unknown errors, suddenly, in August, leaks
began to surface that his job was in danger. Non-denial denials were issued from the White House. The
leaks became a pattern, a systematic, anonymous, tipping off of reporters that Craig would soon be gone.
Craig was accused, anonymously of course, of a welter of charges: of being “too close to the human rights
groups” (if so, what was wrong with that?), of not playing well with others, of being a bad manager, of being
fixated on Guantanamo to the detriment of other issues. In the summer, Obama offered Craig another job,
which Craig declined, and the two agreed that they would discuss the matter further later in the year. But the
leaks continued, and Craig decided that his situation was untenable, and he had to leave.
To make sure he did, he was leaked his way out, up to the day before he planned to resign. What caused so
many Obama supporters’ stomachs to turn was that Obama could have stopped the leaking at any time; he
or White House Chief of Staff Rahm Emanuel could have arranged a dignified departure. (They’re within
their rights to get rid of someone if they’re dissatisfied, for good reasons or not – but a preferred route would
be to call that person in and ask what day would suit him or her to resign, and then just let that person do it.
This happens a lot in administrations; even if people don’t believe the resignation was voluntary, there’s a
soupcon of dignity left to that person.) Even some Hillary Clinton supporters, who still hold no brief for Craig,
think he was treated shabbily.
And this opinion is not confined to “political junkies.” Thomas Wilner, a distinguished Washington attorney
who challenged Bush administration detainee policies, particularly on Guantanamo, and had worked with
Craig on these issues, told me, “There's a lot of concern among a lot of lawyers in this town, especially those
who were supporting Obama, that somebody this bright, this respected, this good, and with this integrity,
was treated in such a way."
Yes, we knew, or should have, during the campaign that the supposed idealist Obama had a bit of the
Chicago cut-throat in him, but there was little sign that he could be as brutal and heedless of loyalty as he
was in the Craig affair. An unexpected climate of fear emanates from the Obama White House.
The incident underscored worries that several had held about the Obama White House for some time: that it
was too tightly controlled and narrowly focused by the Chicago crowd; that it seemed from the outset to
need an older, wiser head, someone with a bit more detachment.
The current crowd displays a certain impulsiveness and vindictiveness that do it no good – as in the silly
war-let on Fox News that it is now trying to back out of. Even if Craig was making a hash of his job – and
there’s no independent evidence of this – it just wasn’t smart to treat someone widely held in such high
respect in this manner; once again, the impulsiveness backfired.
The replacing of Craig with Washington attorney Robert Bauer, Obama’s own attorney for years as well as
counsel for the Democratic National Committee and the Obama campaign, further narrowed the White
House circle just when it needed broadening, lowered the stature of the office, and choosing the president’s
personal attorney for a position that calls for dispassionate judgment is hazardous. (Does anyone remember
Alberto Gonzalez?)
The Obamas themselves hang tight with a small Chicago crowd. Yes, he talks to others, and yes, a
president’s time is very limited, but the Obamas themselves seem as closed-off and unto themselves as
does his inner White House circle. (Is this a coincidence? What is all this wariness about?) When the
Obamas go to someone’s house for dinner, almost invariably it’s to that of Valerie Jarrett, the old friend from
Chicago who serves as a counselor and whom they see all day. Old Chicago friends fly in for weekends
frequently.
At the same time as the Craig imbroglio happened, many people who had defended Obama against charges
that he wasn’t what he’d been cracked up to be were now becoming concerned themselves: though it was a
relief to have a president who thought through crucial decisions about sending the country’s young to war, it
was taking him awfully long to make up his mind about what to do about Afghanistan and Pakistan, and the
decision-making was bafflingly leak-ridden (was this a deliberate airing of ideas or a loss of control over the
process?); that the health care debate had in fact careened out of his control and it seemed less and less
likely that, having used up almost a year of his presidency on it (his “deadlines” had become irrelevant, and
so, in a way, had he), he would end up with a bill, if at all, that did enough net good.
Certain things are not his fault: the unprecedented truculence of the Republican Party, scared silly by rightwing ranters on cable television; the unholy economic and foreign-policy mess that he inherited; the fact that
he never had, as so many liberal commentators asserted, the 60 (or 58 or 59) Senate votes that would
enable him to get what he wanted from the Congress. It’s not his fault that unemployment rates remain
stubbornly high following a traumatic recession.
And it’s always risky to project the long-term from the moment. Perhaps this will prove to have been a
passing moment. Perhaps Obama will still salvage a health care bill that is a real step forward (though there
will be a humongous fight over its definition); maybe he’ll come up with a smart strategy – or the best of bad
options – on Afghanistan and Pakistan; it’s not impossible that he’ll add real progress on climate change and
regulatory reform to his list of achievements, and that he’ll start to get the deficit under control.
Maybe there’ll be enough examples of grace that will make people forget this period of pettiness. He’s been
lucky before; maybe he’ll get lucky again. Meanwhile, serious people who had a lot of hope about him and
who defended him are more worried than ever, and in this if anything over-communicative society the White
House can’t write them off as “a bunch of Washington insiders.” So meanwhile, there’s a palpable mood
change in Washington that could signify that Barack Obama is in deeper trouble than he was even a week
ago.
Elizabeth Drew is a journalist and author in Washington. She is the author of 14 books, most recently
"Richard M. Nixon" (Times Books, 2007)
The Daily Beast
Obama, the Un-decider
The president’s approach to the Khalid Sheikh Mohammed New York trial offers something for
everyone—and decisions on nothing. Obama may be the anti-Bush, but he’s failing to govern.
by Lee Siegel
F
Lord Acton once wrote that in a political system’s success lie the seeds of its eventual decline. Lately, it
seems that President Obama’s grandiose image of himself as a paragon of democratic virtue is hastening
the process of democratic decay.
The Obama administration’s approach to the 9/11 trials is emblematic of what you might call Obama’s
egalitarian faux-democracy, in which the illusion of responding to every side in a debate undercuts the
democratic process of actually arriving at a decision.
Consider the way Obama is handling the trials. First, you have the president and Attorney General Eric
Holder wanting to try Khalid Sheikh Mohammed and four other men in a federal court in New York City.
Then you have their stated policy of trying other accused terrorists before a military tribunal. Finally, there is
Obama’s declared intention to hold some prisoners in detention indefinitely, without trial or tribunal.
Something for everyone, in other words. Mohammed’s trial in New York will please Obama’s base, those
apostles of non-compromise who lay into every instance of political realism with the passion of
undergraduates arguing about the death penalty into the dormitory dawn. They believe that a civilian trial will
prove America’s open, democratic nature to the Islamic world—though the militant elements of the Islamic
world despise America precisely because of its open, democratic nature.
Military tribunals for other defendants will pacify conservatives and liberals who feel that a civilian trial will
grant foreign-born enemies the procedural rights of an American citizen; they will satisfy those who worry
that technicalities might well result in an acquittal, along with those who decry the absurdity of Obama calling
for a civilian trial and virtually assuring the public that it will end in a conviction. And they will appease the
people who fear a civilian trial’s revelations of torture and state secrets. Indefinite detention will appeal to
everyone else.
This illusion of national participation in his decision-making process, with the promise of a happy ending that
excludes no one, has been Obama’s method almost from Day One. Call it the American Idol style of
governing—except that no possibility ever gets voted out of the competition.
No one must feel marginalized by a tyrannical majority. Obama allows the responses of the public, and the
political establishment, and the media to break down every issue into a million parts, so that the multi-
faceted clamor outside his head ends up looking a lot like the multi-faceted way he considers the world from
inside his head. And by the time a decision comes—and yet it seems that Obama has not come to a single
consequential decision since his inauguration—some people will feel unsatisfied, but no one will feel
defeated.
On the economy, there was Obama’s decaration of an ideal solution. Then came the results: The
unemployed got a few sops, the homeowners got a few more, and the bankers got nearly everything. But
everyone felt enough responded to that, with the exception of the hard-line Obama-haters, anger against
Obama remains unfocused.
On health care, once again, Obama proclaimed his desire for an ideal solution, held himself aloof from the
fray, and let the public, the media, and the politicians turn it into a World Wrestling match that made almost
any sort of compromise a victory. On Afghanistan, the same process: The president might deplore the leaks
that came from inside and outside his administration, but they dripped slowly, and from widely scattered
places, just like the slowly dripping, all-inclusive way he appears to think.
Obama seems not so much to govern as to preside. And yet for all the prudent pragmatism of his style, he
doesn’t seem merely to want to please everyone. He seems determined not to be held responsible for the
displeasure he causes. In the end, Obama won’t be blamed for what will likely be the health-care bill’s
substantial flaws. Instead, the transparency of the process leading up to the bill ensures that at every point
where the bill seems to fail one constituency or another, a particular person or people will be blamed for
thwarting Obama.
The 9/11 trials will be Obama’s greatest achievement in the practice of proclaiming a lofty ideal and then
withdrawing from the ensuing ruckus and letting the chips fall where they may. The right gives him too much
credit for standing on “left-wing” principles when they accuse Obama of wanting to use the trials to decimate
conservative credibility in the area of foreign policy. Rather, he is going to use whatever the trials throw up to
distract an angry and unhappy country.
The media and political chaos that even defenders of a civilian trial admit will probably occur when the trials
begin are an almost irrefutable argument against them. But Obama will not be persuaded to change his
mind. Why should he? The trials could well go on for months, possibly right up to the midterm elections next
fall. They will produce a daily reminder of Bush-era perfidy and incompetence, which will impart to Obama’s
prosecutors an air of white-knight rectitude. The magnetism created by the trial, and amplified by the
media—the spinoffs, the furious debates, the sidebars, the profiles, the interviews, the related stories!—will
keep drawing attention away from the plummeting economy, from two overseas wars, and from a general
national drift.
So unlike Bush! everyone will say. So fair and transparent! Except that Obama himself will now be using
9/11 as an artful distraction. Also for the sake of democracy, of course. Unless Lord Acton was right, and
today’s "fairness" and "transparency" become tomorrow’s grim expedience.
Lee Siegel has written about culture and politics and is the author of three books: Falling Upwards: Essays
in Defense of the Imagination; Not Remotely Controlled: Notes on Television; and, most recently, Against
the Machine: Being Human in the Age of the Electronic Mob. In 2002, he received a National Magazine
Award for reviews and criticism.
News Busters
Chris Matthews Shocker: Obama Making 'Carteresque' Mistakes
By Noel Sheppard
Chris Matthews appears to have lost that loving feeling for Barack Obama.
On "The Chris Matthews Show" Sunday, the once smitten MSNBCer called some
of Obama's recent mistakes "Carteresque":
In the Carter presidency, the optics were not exactly robust, and Ronald Reagan
rode that to a big victory in 1980. Is the Obama White House sending some
Carteresque signals these days?
These "signals" included bowing to the Emperor of Japan, getting nothing on his
trip to China, and deciding to try terrorists in New York City.
Potentially as surprising as Matthews bringing these issues up was the Washington Post's Anne Kornblut
and David Ignatius agreeing with him
CHRIS MATTHEWS, HOST: Welcome back. The word these days is optics, visuals, signals. In the Carter
presidency, the optics were not exactly robust, and Ronald Reagan rode that to a big victory in 1980. Is the
Obama White House sending some Carteresque signals these days? Some see that in the deep bow to the
Emperor of Japan, an unforced error say critics. Then there was, there was what happened in China:
Obama got nothing in the way of concessions over there in spite of playing the polite visitor. And his effort to
speak directly to the Chinese was jammed by the government. Third, that decision to try the terrorists up in
that federal court in New York City. Again, nothing that had to be done, and critics say it shows that Obama,
his team doesn't understand this is a war we're in. David, that's the question. These optics are everything in
a president. Carter used to carry that garment bag over his shoulder. This president is he making mistakes
like in China like in Japan?
DAVID IGNATIUS, WASHINGTON POST : I think he is coming across as stiff. He is talking too much
sometimes and communicating too little. So the opposite of what we saw during the campaign. Although the
decision to try Khalid Sheikh Mohammed in New York apparently was Eric Holder's, it strikes me that it really
is a mistake. I mean, there are too many bad things that could happen. There is no reason to have to have
done this. And, you know, it's a political feel for decision-making. That wonderful thing you just did about
President Johnson's feel for the moment. That's what I think is missing now with this group in the White
House. I don't know where it's gone. They certainly had it during the campaign. Maybe they'll get it back. But
it's missing now.
MATTHEWS: It's the political touch. You were in China. You just got back. Tell me about that. The president
tried to speak to the Chinese people and apparently it was jammed. Tell me about that.
ANNE KORNBLUT, WASHINGTON POST: This was the big moment of the whole trip to Asia in fact, eight
days in Asia he was going to speak to Chinese students in Shanghai unfiltered at least in his answers, and
in fact the Chinese government, you know, they allowed the event to take place, but it was only shown
locally on Shanghai television. People didn't see it. The one piece of news he made in it saying that the
internet should be free and people should have access dribbled out to the Chinese public and then started
being deleted from all the Chinese websites. So, then, the following day he held a quote unquote press
conference with the Chinese President Hu Jintao in which there were no questions and they read
statements. Now, this is of course, this is the Chinese, it's their home turf. They were allowed to do what
they wanted to. That was the White House's argument. And the White House haggled with them to get it
more open.
MATTHEWS: The White House got jammed here. Did they know this was coming, that it wouldn't get to the
people?
KORNBLUT: Sure. They knew, previous presidents had been allowed to reach the Chinese public. They
knew that it might or might not. It did. But they didn't have to stand there at a press conference, call it a
press conference, and not answer questions. And I think they're expect, they may have raised expectations
a little for how much they were going to be able to do.
Indeed. Cue "Saturday Night Live."
National Review
Give the Veep a Noogie
by Jonah Goldberg
Remember when the president shouted “Nobody messes with Joe!” to a joint session of Congress? He
sounded a bit like a condescending high-school quarterback trying to buck up the paste-eating waterboy in
front of the other players. Biden even smiled awkwardly, as if to say, “Aw, Barack, cut it out!” All that was
missing was the presidential headlock and noogie.
The point of that emasculating exercise was ostensibly to tell the world that Joe Biden was going to be riding
herd over how the stimulus money was spent. It’s worth revisiting exactly what he said:
That is why I have asked Vice President Biden to lead a tough, unprecedented oversight effort — because
nobody messes with Joe. I have told each member of my Cabinet, as well as mayors and governors across
the country, that they will be held accountable by me and the American people for every dollar they spend. I
have appointed a proven and aggressive inspector general to ferret out any and all cases of waste and
fraud. And we have created a new website called Recovery.gov so that every American can find out how
and where their money is being spent.
In the cold, bracing light of today’s facts, this is just plain bladder-draining hilarious. We’ve all heard the
stories of vast sums of money funding a tiny number of jobs, and tiny amounts of money paying for vast
numbers of jobs. Even better, the stories have for the most part been broken by such non-right-wingdecoder-ring-wearers as the AP and the Boston Globe. A story in the Fort Worth Star-Telegram reports that
after spending $608.9 million, the White House got 1,458 jobs. That’s nearly half a million dollars per job.
Meanwhile, Alabama’s Talladega County alone claimed that it stretched $42,000 into 5,000 jobs “saved or
created.”
“Saved or created” is itself the greatest weaselly locution yet coined in the 21st century. Just for the record, I
save or create 500 push-ups every morning.
According to Recovery.gov, Arizona’s 86th congressional district received $34 million to help the Navajo
people. Trouble is, Arizona has only eight districts. In fact, Watchdog.org claims that the White House has
given $6.4 billion to 440 nonexistent districts. That’s five more fake districts than there are real ones.
Jim Watson/AFP
On October 30, two weeks before the fake-district story broke, Ed DeSeve, the White House’s top man on
stimulus oversight — other than Biden — insisted that he’d been “scrubbing” the job estimates for fraud and
discrepancies so thoroughly he had “dishpan hands and my fingers are worn to the nub.” Unmessable Joe
has insisted that the stimulus is working better than anyone hoped, creating a million jobs he cannot identify
as he ignores the 4 million jobs we know the economy has lost.
There’s so much deceit, incompetence, arrogance, and outright fantasy at work, it’s like listening to a highschool kid explain how he maxed out a for-emergencies-only credit card buying a prom dress for his fictional
super-hot girlfriend in Canada, even though she won’t be able to make it to the party after all.
Last winter, Christopher Caldwell argued in the Financial Times that the stimulus bill, “whether it succeeds or
fails, could be the Democrats’ Iraq.” He went on: “Like Iraq, it is a long-standing partisan project that is being
marketed as an ad hoc response to a national emergency. It reflects the pre-existing wishes of the party’s
most powerful interest groups more than the pre-existing wishes of the country. Democrats are now liable to
be judged by the standard they created when they abandoned the Bush administration over the Iraq war:
you break it, you own it.”
The comparison may be strained in parts, but the point is a good one. Perhaps the biggest similarity is that
the stimulus may well cement the Obama brand, if it hasn’t already. Despite a lot of rhetoric and actions to
the contrary — compassionate conservatism, “Islam means peace,” humble foreign policy, amnesty, etc. —
Bush was defined by Iraq, and this restricted the political space in which he could maneuver. Every day, the
stimulus looks more and more like Obama’s InvisiFence, demarcating how far he can go politically before he
gets zapped with the painful reality of the stimulus. In purely economic terms, the stimulus robbed the
Treasury and the taxpayers of dollars he surely wishes he could spend on health care and other programs.
But just as significantly, the stimulus bleeds sincerity from his rhetoric. The president still spouts a great deal
about post-partisan unity, economic expertise, and heartfelt concern for jobs, the deficit, and “sound
science.” On each score the stimulus boondoggle undermines his credibility.
Just imagine if Obama said “Nobody messes with Joe!” today. The only appropriate venue for such a
statement now is either immediately before, or immediately after, giving the vice president a wedgie in the
White House locker room.