Morning Fog

Shorting the Short Term

Anyone who's been reading Morning Fog for a while has probably heard me complain more than once about the national (U.S.) tendency to take the short view.  Whether it's ending a war, looking to improvements in the economy, or just buying blinds for our home's windows, everybody seems to look for the immediate results, long term consequences be damned.

Thus, I commend Sheila Bair's well-argued piece from today's Washington Post regarding the effects this approach has had in our financial markets.  As I've said myself, we're not even out of the woods from having lost our way last time, yet many of those high-salaried financial wizards and certain of our political leaders are tossing away the map and eager to lead us down the wrong path again.

Gates's Frank Talk On NATO Allies

In being brutally frank regarding our NATO allies' wimpiness in participating in commonly agreed defense projects, outgoing Defense Secretary Gates has called attention to a couple of problems in the U.S.-Europe relationship.  Both relate to the very imbalanced see-saw between the U.S., on the one end, and our NATO allies on the other.  One problem has to do with participation in, and funding of, defense efforts but the other, not much addressed in recent reportage of Gates's speech, has to do with an imbalance in how the two ends of the see-saw define the tasks the Alliance undertakes (or should undertake). 

Gates noted that our allies have generally been cutting their defense budgets, leaving the U.S. to pick up more costs, and that their forces have been less involved in recent NATO efforts, while attaching conditions to their involvement when they are engaged.  He almost makes it sound like a new problem, but it isn't.  

In fact, serious differences between what allied countries including Canada spend on defense, and what the U.S. spends, have existed for decades.   It's true that the U.S. GDP, even in these economically slow times, is greater than the NATO allies'.  So shouldn't we spend more?  That makes sense, but a more prudent and fair measure of expenditures would contrast defense expenditures of NATO members as a percentage of GDP.  Conveniently, NATO itself provides this information in an annual report, "Defense Expenditures of NATO Countries, 1990-2010."    (You'll need to scroll down to Table 3 in this report.)  To cut to the chase, you'll see that in 2009 (the last year for which complete figures are available) the U.S. spent fully 5.0% of GDP on defense, while our most engaged allies (France, Germany, the U.K) spent respectively 2.1, 1.4, and 2.7%.  Other allied countries, with a couple of anomalies, have consistently spent well less than 2%.  Previous years, going back two decades, on average show the same pattern.

The other side of the coin is that the U.S. has generally been content to outspend its allies in this manner because it enabled us to steer the ship.  Despite some occasional turbulence with prickly allies, Washington has been able to call the shots more often than not; to guide NATO decisions and policies in the directions the U.S. wanted; to retain command (or a very senior voice in command) of military forces in operations.  

This is the part that may now be under greatest stress.  Since the Cold War ended, the common bonds that originally brought this collection of allies together in NATO has faded away - not perhaps for the new members from the former Soviet sphere of influence, who  look to their freshly minted membership in NATO to protect them from an overweening Russia, but certainly for many of the members of longer standing.   Europe does not share our perception of the threat posed by terrorists in faraway Afghanistan, and sees less justification for military operations so far from home.  Within the Alliance, only the U.S. maintains a firm global outlook (the U.K. and France shared it once but seem to be fading), or the ability to project military force halfway around the globe.  For the rest, to be "Candide," it's back to Voltaire:  "Il faut cultiver nôtre jardin."

Ultimately, U.S. foreign policy has long been based on the assumption that the interests, traditions, and outlook that we share with Europe are one of the pillars of our foreign and defense policy.  Is that linkage falling apart, or is it just under stress?  That's something Presidents will need to decide, but I suspect we'll stick with what we know for quite a while to come, and seek to preserve our ties and cooperation with Europe.

Meantime, the cost issue is not insignificant.  I've always thought it's the unmentioned and unmentionable root of what I see as a key U.S. domestic problem, what I call the "Third World Superpower."  We are loath in the U.S. to acknowledge what statistics make clear:  by many measures, in education, health, infant mortality, crime, poverty, infrastructure, and hunger to name a few, we now lag behind many of the European countries.   What could that extra three percent of GDP, the difference between what our Allies generally spend and what we generally spend, do for us if it were redirected toward some of our pressing domestic needs? 

Our current level of "defense" spending impoverishes us.  Many don't think so (yet); others would deny that there's a link; some would argue that we can still have guns and butter.  I think it's inevitable, long term if not short, that we will need to face this music, define our international interests more precisely, reemphasize inexpensive diplomacy over expensive military hardware, and scale back our ambitions to fit. 

The Blame Game, And U.S. Government Shutdown

Whatever the outcome of today's last-minute negotiations between Republicans and Democrats over budget cuts and the funding of government operations -- and the outlook at this point, only 9 hours before the deadline, is not good -- we can reach several conclusions about the process itself, and what it means.

First, of course, just as in previous such crises during the Clinton Administration, it's all about blame.  If the government closes down, and people can't obtain services they've come to rely on, which party stands to gain politically in the public eye?  In my view, both will lose in the sense that each will lose credibility in the eyes of opposition voters,  but the Republicans are likely to bear the onus for shutting things down. 

And that's justifiable  They've done it before, and lost traction because of it, and the situation isn't arguably different this time.  Also, anybody should be able to figure out that the party that generally champions a greater role for government really has no interest in shutting it down.  By contrast, Republicans may actually relish bringing about a shutdown, because they want to reduce it anyway, and because they see no value in government except possibly as a source of largesse to corporations.  Further, the GOP has continued to be the Party of No, not having moved to compromise a whit of its position, while Democrats have (cleverly, yes) increased the amount of cuts they are prepared to accept. 

A second clear conclusion:  It's a tempest in a teapot.   As already suggested, the fight isn't really over budget cuts, but even if it were, these cuts are pitiably tiny and can't be taken as serious efforts to deal with our deficit.  At best, even at the Republicans' preferred figure, cuts of this magnitude are nothing more than token efforts, especially as they ignore the gorilla of military spending.

Third:  The whole battle is symptomatic of what I call the "third-world superpower."  (That's the U.S., if you find it hard to guess.)  Real countries, developed countries, countries run by serious leaders with the nation's best interests at heart, don't purposely and needlessly drive their government into default or make it impossible for it to pay its debts.  Not over partisan political posturing.  This kind of thing, occurring every decade or so, will go a long way to destroy U.S. political and economic capital in the world, not to mention the nation's stability.  It will also likely deepen and broaden our economic slump and slow the recovery.

Finally, a few comments on some of the "issues" that have been raised:
(a) Is it "fair" that government employees be furloughed and not paid?  Yes, in the sense that lots of private sector workers also have been furloughed, or worse, through no fault of their own.  But that's a false analogy, when in fact the shutdown won't occur for economic reasons, but for completely avoidable political ones.  Those who play this game of chicken at the political level are simply taking advantage of the fact that unlike a private corporation, the government can't legally continue to operate when it may be operating "in the red."  They're also flouting the basic premise of the civil service system, that government workers performing their ordinary functions shouldn't be subject to political manipulation.
(b) Does it make sense for Democrats to fall on their swords over funding for a couple of favored causes, like NPR or Planned Parenthood?  Ultimately, no.  These programs (and many favored by Republicans as well, like farm subsidies) should stand on their own merits.  Both, I suspect, could survive having their government funding cut.  However, the real sticking point is that each party only wants to cut the programs favored by the other, and that's a road we should not go down.  

Safe Food - Can We Afford NOT To Have It?

Food safety has been a big issue lately, as some of the Bush Administration's chickens (i.e. the gutting of regulatory agencies and an endemic lack of concern about effective oversight in the most basic processes of food production) came home to roost in the form of illnesses and death in a number of food categories -- eggs, spinach, jalapeno peppers, lettuce, peanuts.

This is an area where Republican legislators make no bones about their interest in undercutting recently passed legislation by denying or cutting funding for effective regulation.  (The same process led to many of the problems we've experienced in food safety.) 

Currently, the new Republican chair of the appropriations subcommittee that has to authorize the FDA's funding (Rep. Jack Kingston of Georgia) is justifying his concerns about "possible overreach" on the basis of competing demands for limited funds.  That's an easy course when the economy is still widely viewed as weak.

The fact is, though, that a shortage of funds is not the real problem.  When the economy was booming, Republicans still failed to enact rules to enforce penalties for gross health code violations.  And when the economy is regaining momentum (as it is doing now), they'll still be engaged in foot-dragging and obstructionism on anything involving possible limitations on businesses' "right" to do as they see fit, regardless of the consequences for public health.  Since they tend to be staunch friends of business, these party dogmatists might want to consider that the U.S. is a major exporter of agricultural products, and that as our produce gets an ever more degraded reputation abroad, our markets shrink. 

As with health care, education, feeding the hungry, and other issues, it's just plain ridiculous to say that we "can't afford" to do far better in all these areas, because most other developed countries with per capita GDP and incomes DO afford them, surpassing us in providing basic essential government services to their citizens.  Even one food-health scare, of the kind we've had several of recently, would be nearly unthinkable in most of Europe or in Japan. 

Politicians who deny reality with the "we can't afford it" mantra are pushing us down the road toward developing-nation status.  Some may be too ignorant to see it; others may act out of venality (wasn't that rat-infested peanut factory in Georgia?), but it's a shame that such out of touch, head-in-the-sand types still exist, let alone get elected to Congress.   

The GOP needs to foster more original thinking on such issues, and to break out of thrall to business interests.  That would help the party to regain long-term political competitiveness, and help the nation to maintain its international competitiveness too.  Otherwise, countries more successful in controlling their food supply and agricultural production are going to eat our lunch (though in a literal sense they wouldn't, because they'd be concerned about whether it was safe for consumption). 

Outmoded Infrastructure - Those Overhead Power Lines

Sunday afternoon my little neighborhood experienced a heavy thunderstorm - unusually heavy winds and a violent torrent of rain, but still a thunderstorm - that passed through the area in less than 30 minutes but put out the electrical grid to hundreds of thousands of homes and businesses for 10 hours (in my case) or even longer.   This was only the longest of three recent power outages, all of three hours or more, over the past two weeks.  Two were weather-related, the third was somebody driving into a utility pole.  

In addition, we've experienced at least two blips in the same period, of the sort that punch out the power just long enough to shut down computers and cause the waste of 15-20 minutes rebooting, logging in again, and the like.  I wish this performance were rare, but power outages occur where I live on the average of one or two a month.  The electric company's reporting number should be on speed dial, but by now, I have it memorized anyway.

The constant interruption of power supplies, even by fairly normal weather or routine traffic accidents, has several causes, but primary among them is simply our failure as a society to protect power lines by burying them.   Here as in other endeavors, a business's short-term cost considerations are allowed to overrule sensible public policy.  No one has found a way yet to deliver electric power wirelessly; until we do, it only makes sense to update our infrastructure to minimize the potential for disruption.

National Debt

"The National Debt and Washington's Deficit of Will" by Joel Achenbach is a pretty good look at issues surrounding our perennial national debt problem - how it develops, and the factors that make it so difficult to solve.  It's well worth reading.

As this article correctly points out, the real problem is more a political than economic one (politicians shy away from raising taxes); the long-term moral dilemma is burdening future generations; but the greatest danger of our failure to trim our profligate spending is that foreign governments and individuals may lose confidence in the solidity of our economy and stop investing in it.  All true, and worrisome.

To Achenbach's summary I would add three considerations he seems to have omitted.

First, although the problem clearly involves politicians who lack political will, there is good reason for their reticence.  That would be the voters, who by and large appear to believe that more and more government services can be had by paying less and less for them.  How can that fairy-tale mindset be altered?  Possibly through political leadership, as Achenbach hints, including better information efforts about what's at stake.  

Second, our political system for years has been dysfunctional when it comes to dealing with tough issues.  This has led us toward a lower standard of living and decreasing real incomes for a lot (let's say, a majority) of our citizens.  But the reality is that we won't deal with a problem until it gets into crisis mode.  That's why, for example, I have supported the changes President Obama has sought in health care reform, even while recognizing that much more needs to be done on the cost-control side.  Only a shock to the system is likely to jar it into action.

Last, Achenbach notes fears that foreign investors may quail at our failure to make difficult decisions.  That's possible, though wiser ones may rely, per my preceding paragraph, on our dealing with the problem just in the nick of time.  More to the point, the article ignores that for many investors, the political stability of the U.S. makes it an attractive place to invest even when there's noticeable turbulence on the economic waters.  This may give us a bit more margin than doomsayers predict.

The Commission headed by Erskine Bowles and Alan Simpson, which has been charged with making recommendations on the debt by December 1, has its work cut out for it, but it's not at all certain even its best suggestions will have any impact.  Those weak-willed politicians who created it adamantly refused to accept any binding commitment to implement its ideas. 

Third World Superpower

I was born early in 1945, the dawn of what we might call the American Age: we emerged from World War II victorious, kicked off an economic boom that seemed it would last forever, saw in the promise of new-age technology endless improvements in health, education, and the general welfare, and came to believe that our active involvement in the world was essential to global peace and the spread of democracy.  Wow.

A lot of that is still true in various ways, but over time I've found my thoughts keep leading back to a nagging sense that we are losing ground in what we once conceived as an uninterrupted climb up the ladder of betterment in various areas of endeavor.  Despite our strengths, or maybe because of them, we tend to think that we can't learn from anyone else, and we ignore (or deny) clear evidence that on many quality-of-life measures, we lag behind our peers - i.e., other developed industrial democracies.

One glaring example is in health care.  Those who declaim that U.S. health care is "the best in the world" are just plain wrong, as many a statistic -- infant death, communicable diseases, access to medical care, life expectancy after adulthood, obesity, cost of care -- will demonstrate.  Fortunately, there is a growing consensus that our health care mess requires our attention. 

Unfortunately, the politics of getting that done demonstrate another weakness we share with less "developed" countries -- a broken political system more focused on partisanship than on achieving real results, and an oligarchy of rich folks and corporations running the country for their benefit rather than the people's.

But that's far from the end of it:  Our education system can't consistently produce kids who can spell, write a basic sentence, figure your change correctly, or locate the United States on a world map.   The middle class is losing its buying power by leaps and bounds. Our transportation infrastructure is crumbling and we won't invest money to fix it.  The number of people still living in poverty is ridiculously high.  And on, and on...

None of this is acceptable for a true "superpower,"  not when less-super powers often perform better on these yardsticks.  And I think some of the malaise so much in evidence today stems from our inchoate realization of that fact.

We can deal with these problems, but first we've got to be honest enough to admit we have them, rather than deceiving ourselves that they don't exist. 

A word about resources:  We often hear that we "can't afford" to deal with basic failings of our economic, health, social, or justice systems.  Not so.  This view is espoused by those actively seeking to turn us into a third-world nation.   First, a growing, recovering economy will quickly start to refill government and private coffers that seem empty now.  Second, we must give up our preoccupation with security hobgoblins.  Defense is essential; warmaking for no better reason than just to eliminate a dictator who once made a fool of our President's daddy is not.  Our military forces must be strong but they need not be constantly deployed.  We can play a leading role in the world through diplomacy, backed by the potential to apply force, at much lower cost.

It's a big subject.  I don't intend to analyze it exhaustively here.  But having outlined it, I've also created a category on this blog for it, and will come back to it from time to time.