The Hillary Email Scandal: An Unenforceable Rule Serving an Undesirable Goal?

Photographer: Harald Dettenborn, CC license

Hillary Clinton used a personal email account and server for all official business while she was Secretary of State from 2009 to 2013. Although she seems not to have broken any laws outright, she has certainly made it more difficult to process Freedom of Information Act requests lodged with the State Department, for example, and the State Department must comply with such requests and must make official correspondence available. She therefore does seem to have violated the spirit of such rules. Transparency is a big buzzword these days and it is seen as a way to combat corruption, crime, laziness, and dishonesty, all laudable targets. But enforcing these rules is difficult, to say the least, and it is also not clear that transparency is always the best thing for diplomacy.

According to politifact, federal rules state that it would have been OK for Clinton to use her personal email account in an “emergency.” While noting that she had not actually broken any laws because the rules were tightened only after she left office, experts say that EXCLUSIVE use of a personal account is not allowed. Where do we draw the line? How much use is then permitted? How can we know that that occasional "emergency" correspondence was not where she broke laws and committed corruption?

More problematic than the arbitrary percentages of personal email account use is the question of enforcement: Presumably, Clinton could use her personal account for any personal correspondence. But it would be Clinton herself who would judge what’s personal--which is exactly what she has been accused of by opponents. Since the personal emails are not looked at, who is to say whether they are personal or not? In effect, then, there is absolutely no difference between Clinton claiming to use her personal account only for personal emails and Clinton claiming to have deleted only personal emails from her records before handing over what she claims is everything else (which is the current situation). Opponents argue there is no way to verify this, but this would be the case if she had used her personal account only for personal emails, too, which would apparently have been perfectly fine. The rule thus appears pretty unenforceable unless all government officials were prohibited from ever having any private email correspondence.

This rule was meant to serve a seemingly laudable goal: transparency in, in this case, diplomacy. There have long been demands to end "secret diplomacy" because of suspicion of just what goes on behind closed doors. More crimes are committed in the dark than in the light of day, after all. In addition, how can a democracy function well if its people do not know what their government is doing? How can the people make themselves heard? Transparency at all levels, including diplomacy, is supposed to fix this.

The problem is that making negotiations, rather than just their outcomes, public can make diplomacy nearly impossible--and without diplomacy and negotiation, cooperation becomes nearly impossible as well. Without cooperation, everyone is worse off: shared economic benefits don't materialize, wars become more likely, collective action on pollution and climate change can't occur, etc. The reason is simple: Both sides need to be free to offer unpopular things in exchange for what they want. Deals often fall through. The public might accept slaying a sacred cow in exchange for a big deal, but revealing that a leader was willing to do so and did not achieve the hoped-for outcome could cause cries of “traitor!” Secret negotiations thus allow the two sides (or even two negotiators) to speak openly with one another without constantly worrying about how their domestic audiences are reacting to what they are saying and how this might affect their re-election chances or other aspects of political capital. Though a deal was not reached in the end anyway, the Camp David negotiations between Israeli Prime Minister Ehud Barak and Palestinian Auhtority President Yassir Arafat are illustrative: They both offered things in secret that they could not have offered if opposition back home had constantly been up in arms (e.g. both of them moved towards sharing Jerusalem, which, in public, neither had dared to say they could do).

Clinton went against the spirit, at least, of transparency regulations, but those regulations are inherently arbitrary and it is also easy to see why she would wish to skirt them. The negotiations leading to a deal (though not the deal itself) should be permitted to remain secret and be protected from the scrutiny of all but a few insiders, at least for a time. Doing the opposite would not only be impractical (as it would require ALL correspondence to be publicly available, as I have shown), it would be undesirable in the case of diplomacy.

America and Myanmar: Be Realist, but Be Liberal, Too

President Obama just got finished with a trip to Myanmar. This trip is of massive significance, because Myanmar has been a pariah state since the 1990s. The trip is a sort of reward to Myanmar for making positive changes. This is a situation in which sanctions seem to have worked: Myanmar did not like its pariah status, in part because strict Western sanctions meant that it had to rely heavily on China. Myanmar is now looking to diversify its options. This also comes at an opportune time for American policy: America is in the middle of a strategic “pivot” towards Asia. Sanctions have thus been in place for liberal reasons like promoting democracy and human rights and encouraging the release of Aung San Suu Kyi. Removing some of those sanctions is also a way to encourage Myanmar to continue improving. At the same time, however, they also serve a strategic, realist purpose. Has the shift towards good relations with Myanmar been too fast? In other words: Is America getting overly concerned with balancing against China and leaving liberal causes by the wayside?

Myanmar has made some very positive changes towards more openness and democracy. Aung San Suu Kyi has also approved of these changes and the loosening of sanctions against Myanmar in order to support continued change. Myanmar's legislature now includes mostly elected politicians and it seems to have some real influence on governing, which is a welcome change to full-on dictatorship. However, these changes are still limited and, perhaps more importantly, imminently reversible. There are still problems with the repression and mistreatment of ethnic minorities and there are still conservative factions within the army that are opposed to further opening. Myanmar is thus not there yet. Some sanctions, however, are also still in place. They should not be fully removed until the country has arrived at liberal democracy. Are we moving too fast? It seems the most onerous sanctions are already gone. There is also a further danger: Myanmar may see the US “pivot” towards Asia as a reason the United States will want to embrace Myanmar no matter what it does. What's more, the country's leaders would have reason to think this.

In the autumn of last year, the Obama Administration announced a "pivot" towards Asia. The main reason for this strategic shift is that the Administration rightly sees Asia is the future. Specifically, though, it has seen that US allies in the region are increasingly nervous about the rising power of China. Since 1945, with a few glaring exceptions such as the Korean and Vietnam wars (which are not necessarily considered exceptions, but let's leave that for now), the Asia-Pacific region has experienced what is known as the “Pax Americana.” The US presence in the region, including important security guarantees to allies like Japan and South Korea, has meant that countries there have been free to concentrate on economic development and have not needed to worry about the military prowess of their neighbors. Japan has a military that, according to its own constitution, is purely for defensive purposes. It also has no nuclear weapons, though it certainly has the capability to develop them. This stability will be at risk if countries in the region feel that the United States can no longer maintain the status quo there and that they themselves must be able to defend themselves against a rising China.

It does not matter whether or not China or its neighbors actually seek war. What matters is that little bit of fear in the back of leaders' minds that makes them think they had better be prepared – just in case. The result could be a buildup of arms in the region, possibly including Japanese and South Korean nukes. Each build-up would then serve to make each country's immediate neighbors more nervous, encouraging them to build up as well. This conundrum is known as the "security dilemma.” The US presence in East Asia has so far prevented this outcome, and the Obama Administration seems to wish to continue doing so for as long as possible.

This focus on broader strategic goals is good. Over time, of course, the US may not be able to maintain the Pax Americana. But in the short to medium term, it makes sense to try (I won't discuss the pitfalls here). The risk in the case of Myanmar, however, is that the US places realist strategic goals ahead of liberal ones. Generally, if the choice comes down to those two, then I support realism. We do not yet have to choose, however. America can still pivot towards Asia and it doesn't necessarily need Myanmar to do so. What's more, balancing is occurring anyway. China's neighbors are uncomfortable with its power and with its maritime claims in the South China Sea. These countries have been cultivating better relations with each other and with America already. The region's other superpower, India, has also grown much closer to America. America's pivot towards Asia is therefore in many Asian countries' own self interest. America doesn't need to bribe them much (though it should cultivate good relations with them). There is thus no need yet to sacrifice liberal causes on the altar of strategic realism.

America can thus both stick to its principles of support for democracy and human rights while keeping an eye on important strategic goals like stability, security, and, in the end, peace. Hopefully, the Obama Administration and future American Administrations recognize this and will continue to keep the pressure on Myanmar whenever needed in order to keep rewarding it for moving in the right direction. Hopefully, too, both the leaders of the United States and Myanmar realize that the loosening of sanctions is every bit as reversible as Myanmar's own move towards democracy and its promotion of human rights.

America's Debt Deal: Political (and economic) collapse retreats

Just over two months ago, I asserted here that the negativity surrounding America's political system and its ability to function and keep the country going was overblown (see post). The current debt deal, which passed the (more tricky) house yesterday evening, provides more evidence of this. I admit to only having partial details on it, but it thus far looks sensible. The pain is spread evenly and is mostly being delayed until later, allowing time for the economy to recover. These two aspects are very sensible: with divided government, cuts needed to affect parts of the budget both parties hold dear, and with the economy in its current fragile state, cutting too much too soon could have been calamitous. Economists and rating agencies had been calling for a credible deficit reduction plan, not an immediate reduction itself.

OK, fine, so disaster hasn't struck, is that the best we can expect from the US Government these days? This seems like a good point, and sometimes I feel it myself, but it again focuses too much on the negative. Congress over the past few years has passed a revolutionary (for America) health care plan, nationalized student financial assistance programs, changed environmental regulation, and accomplished many other things to boot. This seems to get lost among the noise of insanely partisan politicians screaming at each other (usually figuratively only) and egging groups on who call one side or the other things like "fascist," "Nazi," or "socialist." The absurdity of it all is enough to make the strongest stomach queasy.

But it still works.

American politics is noisy and partisan. That's the way it is. The REASON it is that way is because Americans vote for it to be that way. In particular, republican voters tend to want representatives in government who stick to their guns and don't compromise (see chart). So republicans are loud, obstructive, and stubborn. It's irritating. But that's the way their constituents want them to be. That's a sign that American democracy is working well, not poorly.

The problem, then, is not with America's democracy or even its political system, but rather with Americans themselves. No one likes to hear that they themselves have gotten themselves into a pickle, but they have. Once again, though, let's not be overly negative. I'm a realist, not an optimist by any means, but people on the liberal side of the isle with me tend to be overly negative. It's hard sometimes, I know. But take a closer look at that chart. Not only do most democratic voters prefer compromise to get things done, the majority of ALL voters does, too. As long as that is the case, we ought to be all right, even if compromise comes at the last minute and is a noisy, shameful spectacle every time.

I'm not trying to make all this seem completely harmless: it wastes time and money, and smaller things that need to be done may get lost in the process. What I'm saying, though, is that the system still works. If people start to pay attention to politics more and educate themselves, then people will vote for politicians with sensible policies who are ready to get things done. As long as people are aloof from politics and continue to rely on ideology to provide their compass points, things will be irritating and suboptimal, as they are now. Any suggestions for that systemic problem? Education system?

Reports of America's Political Collapse Are Probably Premature

There's a lot of gloom about America's political system lately. The concern, increasingly, is not so much that individual politicians or even political parties are leading the country down the wrong path (though those concerns certainly abound as well), but rather: there are increasing doubts as to whether the structure of America's political system can even continue to serve it well.

In a recent article in the International Herald Tribune, David Brooks commented: "Usually when I travel from Washington to Britain I move from less gloom to more gloom. But this time the mood is reversed. The British political system is basically functional while the American system is not." He talks about how, though the two main parties "are happy to rubbish each other," they actually agree on more than they disagree.

This is a type of consensus about how to move forward that we in America can only dream of, it seems. Indeed, I can barely hide my admiration and envy of the British and the "adult" decision its electorate has made to put two parties into office that have touted a message of radical reform, coupled with searing spending cuts and some tax increases to boot. The Conservatives came to power while actively expressing the viewpoint that this had to be done. The voters, seemingly, agreed.

All true. But there are two problems with this narrative. For one, voters were not entirely certain what they wanted and were obviously torn, as they failed to give any single party a majority in an electoral system, like America's, that is designed to do just that. The Conservatives don't have a full mandate, they must share power with the liberal democrats. Fine, you say, but the LibDems and the Tories (the nickname for the Conservatives) still came together to agree on the current reform package. This is true, but it may have just been time. Bond markets were already getting edgy about Britain's debt. A looming crisis can compel. The other side of this, too, is that the election may have been more a renunciation of the Labor party, which had ruled Britain for more than a decade, rather than a vote FOR the Tories or the LibDems. The electorate, therefore, seems much less coherently for the changes that are occurring in Westminster than the election results might have us believe.

The second problem is that none of this represents systematic problems, in the sense of a problem with the system's structure itself (as opposed to problems spread throughout a system, another definition of the word "systematic"). As Brooks mentions in his Op-Ed piece, "a generation of misrule between 1945 and 1979 left the U.K. with three large problems: a stifled industrial economy; an overcentralized welfare state; and an enervated people, some of whom are locked in cycles of poverty." Indeed, the 1970s were an extraordinarily tumultuous time in British politics, with Scottish and Irish voters plumping for local parties in 1974, causing a hung parliament (a parliament with no party in the majority). The first coalition that was formed broke down within months. Another election in the same year produced a majority, but defections later destroyed this. In-fighting caused further problems. At the same time, inflation was high, peaking at over 20%. The government tried to stop this by forcing wages to stop rising. This worked fairly well, it seems, but you can imagine the uproar from labor unions. Strikes led to important services being shut down repeatedly and to a huge loss in productivity. Perhaps the most embarrassing event occurred in 1976, when Britain required an IMF bailout! The gloom and sense of political decay must have been palpable!

This all ended with the thumping election victory of Margaret Thatcher's Conservative Party in 1979. Her party introduced numerous reforms, broke the defiance of the unions (with electoral support), and got the country moving again. My point here is not to discuss the controversial aspects of her reign. Rather, the point is: I am sure Britons must have begun to doubt the ability of their political system to provide for a stable, well-managed country during the difficult 1970s. And yet, that very same system produced a political consensus that went on to last for 18 years and to fundamentally change the United Kingdom. The subsequent Labor Government, though it presided over financial deregulation and a boom that turned to bust, also made sweeping and positive changes based on solid electoral victories. The system produced good and bad governments, but the system itself was not fundamentally changed. This is important to remember as we look longingly across the Atlantic at those grown-up British, prudently taking self-administered medicine.

My point is: America has had rough and divided times before, too, and has survived (though the biggest division in history led to the Civil War, which is a rather dramatic version of "surviving"). The problem is not really the system, but that the electorate is honestly uncertain of the best path forward. In this environment, two competing ideologies are espoused by leaders, and Americans seem intent on trying them both simultaneously. In the end, there may be some sort of real crisis (like bond market jitters) that forces real change, but the electorate needs to get its act together first.

That said, there are a few systemic issues that serve to intensify problems, primarily by intensifying polarity. The main culprit here, to my mind, is Gerrymandering. This is drawing voting districts in such a way that seats become safe for one party or another. This is not a partisan issue; since both parties "benefit" from it, at least locally and in the short term, both do it frequently. California has been one of the worst examples, though I believe it has now enacted legislation to put this to an end.

Making seats safe for one party or other leads to polarization because the general election no longer matters. Instead, the primary matters. For example, if a district is so gerrymandered that only a democrat has a chance of winning, then the democratic primary becomes the de facto election. To win the primary, a candidate must pander to the party base. That means they can ignore republicans and independents. (This is, of course, all true for same republican seats, too.) What's more, the democratic voters themselves can ignore the others, too. Normally, voters might think "well, I don't agree with all this candidate says, but I think she has a better chance of beating the republican." If voters know the primary candidate will win the election, they can easily vote for the one closest to their beliefs (which are "extreme" by their very nature, as democrats and republicans are left and right of center, respectively, and their fired up bases on the extremes are the ones surest to vote in primaries). Less political polarization would go a long way to helping America find the consensus needed to move ahead and solve problems. The Senate cannot be gerrymandered, since senators are elected state-wide. This is why the senate has a reputation for being the "saner" of the two houses (another reason is the longer senate term, meaning senators don't have to constantly campaign and can actually get on with governing as they reason is best).

But even gerrymandering is not a problem to make or break America. It, too, can be fixed via the electoral process if voters want to fix it. What America needs most is informed and diligent voters to move the country onto the right path, or, at the very least, a coherent one. No system in the world can counter an electorate that is not doing its job except, of course, for a dictatorship. When voters have not paid attention in the past (or even the present: think Venezuela), this is also precisely what they have gotten. THAT would be a broken political system. America's, as yet, is not.

Libyan Oil, Cynicism, and Anti-Americanism

"We can't be holier than the pope!"
Here we go, I thought to myself.
"America doesn't march into a country to rescue people being abused by their own government. If this were in Saudi Arabia it would never happen. The Americans are good friends with the Saudi rulers and wouldn't do a thing to help the people there."
Next came the inevitable: Libya has oil, so clearly that's what America wants because Americans all drive big cars, which leads them to march into every corner of the world and take every drop of oil they can get.

This diatribe was, unfortunately, from an Austrian acquaintance of mine, but it's easy enough to imagine an American arguing along similar lines. In fact, the nationality of the speaker is pretty irrelevant, because the theme is the same: America is not a force for peace, it is just interested in itself and, above all, getting more oil.

Now, I'm a realist and that makes me lean towards cynicism myself much of the time, but this goes above and beyond cynicism. The arguments are muddled and don't really make sense (I'll get to this below), which leads me to think the argument itself is secondary; it is the point that America is doing the wrong thing (again) that matters. When arguments are left out and the conclusion is the same regardless of the facts, we call this prejudice. It comes in many forms: racism, anti-Semitism, homophobia, Islamophobia, and, in this case, anti-Americanism.

The anti-American argument in this case, as is usual, uses some good points. Does America put its own interests first? Sure, most of the time it does. Just as any other country, when it comes down to it, does. Is America addicted to oil? You betcha. Is that addiction a bad thing? Sure is. Would America attack Saudi Arabia? It would surely be extremely reluctant to do so, but the full answer to this is more subtle. As I answered at the time "it would depend on who had the upper hand." This is precisely what happened in Libya. (Read on!) Let's address the argument piece by piece.

First is the oil issue. There are a number of reasons why this argument makes no sense. First off: the world was receiving oil from Libya with Gaddafi in charge. If that's all the West had been interested in, surely it would have supported Gaddafi from the outset, rather than rebel protests that looked to destabilize a regime that had become quite friendly to the West. Second, Libya has a lot of reserves, but the shortfall of around 1.4 million b/d of oil from there can be made up for elsewhere. Saudi Arabia, Kuwait, Nigeria, and the UAE were set to pump an additional 1 million b/d to make up for most of the Libyan short fall on their own.

As an oil producer, Libya ranks behind the traditional oil producers Saudia Arabia, Kuwait, and Russia, but also behind the United States, the EU, and Norway. Has the unrest and supply cut-off in Libya driven oil prices up? Sure, but so has the unrest in the Arab world in general and, more recently, fears that Japan's nuclear disaster will cause a move towards petroleum as a substitute energy source. It is simply not worth getting involved in yet another foreign military mission over 400,000 b/d of oil. Anyone who tells you that this is what America is doing is missing something.

The next point is about America's leadership role in all this. America has actually been keen to give up the leadership of the mission and have NATO take it on. The biggest advocate of action has been France's President Nicolas Sarkozy, not Barack Obama. It was France that first afforded diplomatic recognition to Libya's Interim Government, long before it had become clear that it had effective control over most of the territory and its citizens. (This is a custom in international relations/international law, albeit one that's been broken several times: Croatia and Kosovo spring to mind.) So why was this guy blaming America (again)? Is there a good reason for the no-fly zone and all the fuss?

As I've pointed out, my acquaintance was right that America does not always get involved when a government is mistreating its people. Two things, though. For one, this is not absolute. America's involvement against the genocide occurring in the Balkans was because Bill Clinton believed it was the right thing to do (and was pressured/guilt tripped into doing something). American involvement in Somalia was also meant to keep peace and rebuild the state. The "CNN syndrome" struck in Somalia, however: images went around the world of dead American soldiers being dragged through the streets behind a pickup truck in Somalia. The American public was clear: if those people want to kill each other, then let them -- get our boys out of there. We did.

America will not usually react to human rights violations with force unless there are additional reasons (like national security) to do so or it is under heavy pressure. This may sound selfish, but the other half of the calculation involves whether or not a change is even reasonably achievable. We cannot topple every dictator, and even when we do, we may have a mess afterwards (as Iraq and Afghanistan have clearly shown). Last but certainly not least: American leaders must consider the costs to their own country, both in blood and treasure. America does well to choose its battles wisely.

So why Libya? It's not national security and, as I hope I've shown, it's not oil. So what is it? The Libyan situation is a simple case of having painted oneself into a corner. The US is acting because it feels heavy pressure to do so, from its allies in Europe, but also due to its, and its allies', actions. When it appeared the rebels were going to topple Gaddafi, supporting them was easy. Kind words were almost all that was required. An embargo was put in place. Gaddafi's accounts in America and (embarrassingly not until later) Europe were frozen. Then the tide turned in favor of Gaddafi.

The US, France, and Britain realized there was wet paint on the floor all around them and that the door behind them had just been closed. They had burned their bridges by making an enemy out of Gaddafi and declaring their support for the rebels. Now the rebels might lose. They basically had no choice but to step up their aid to the rebels. This would have occurred even in Saudi Arabia: If it long appeared the House of Saud was doomed to failure, the West would probably support rebels there. This is because that would be the most likely way to bring about longer-term stability and a quick, and therefore cheap, end to hostilities. They could, of course, fall into the same trap in that case if the tide turned there, too. Such are the problems that accompany marriages of convenience!

It helps in this case that the West is acting under the approval not only of the UN Security Council (in which Russia and China surprisingly decided to abstain rather than veto the no-fly-zone resolution), but also of the Arab League (though the latter is now more ambivalent since actual bombings have begun)! The operation has a level of international approval, and therefore legitimacy, not seen since perhaps Operation Desert Storm under Bush Senior.

So to recap: the US has reluctantly stepped in and taken up a (temporary, it hopes) leadership role in implementing a no-fly-zone with air strikes over Libya. It is doing so in support of rebels against a dictator, but probably would not be if it had not painted itself in a corner. It is acting with a great deal of international support and a UN mandate. It is not about oil.

All in all, while room for cynicism remains about the US and the West's final decision to act, the reasons for this mission are pretty darn good. Whether its a good mission in the sense of the likelihood to succeed, whether it will drag on forever, and how bloody it will get, is another discussion entirely. To imply that this is just another optional war waged by America to slake its oil thirst (or perhaps its alleged thirst for violence) is simply wrong and speaks of ignorance -- or just plain old anti-Americanism.

Fixing America, Part IV

All right folks, as promised, here's part IV. I'm going to try to keep this one short, because I'm also writing a paper on organized begging and human trafficking in Vienna, which you'll soon be able to view online by clicking the link to "grad school papers" on the sidebar.

This section is supposed to cover a lot: budget and current account deficits, debt, and America's labyrinthine tax system. Luckily, all of these issues are related (isn't it funny how they all ended up on my part IV?). Once again, I will suggest some unpopular changes that probably would not be implemented, but hey, my job's to point out realistic solutions (in the sense that they are completely doable) to problems, it's the politicians' job to get it done.

So here we go: introduce a federal value-added tax system (VAT) like the ones seen in almost every other developed country in the world. Much of deficit-reduction will be tackled by measures mentioned in previous installments (individual private health accounts, later retirement age, paying social security benefits only to those who actually need them, etc.). A VAT is a tax that is applied to goods and services every step of the way. Sounds like it would accumulate, but it doesn't. Look at it like a chain: Producer A sells raw materials to producer B. Producer B pays a 10% VAT to producer A, who is obligated to deliver that amount to the IRS. HOWEVER, it will probably end up getting to keep much or most of the money. Everything producer A spends money on, from machinery, to contractors, to services, requires producer A to pay a VAT. Producer A simply writes down all that it has paid in VAT for business purposes and gets to keep that amount from the  VAT it has collected from sales. It sounds complicated, but it's actually much easier to manage than a system of tax-exemptions, which all have to be approved, revised, etc. What a headache!

Producer B then sells its finished goods to the retailer. The retailer pays VAT to producer B, who gets to keep whatever VAT from those sales that it has also spent doing business. The same applies to goods sold by the retailer. In this way, only additional value added at any given stage is taxed, so the effect is not cumulative.

OK, fine, by why is this good? It's good for two reasons. The main one is that studies show that taxes on consumption slow growth less than taxes on income because taxes on income reduce your incentive to work and earn more. The second reason is that a company has to pay VAT to keep VAT, it has an incentive to pay VAT and report this, which makes fraud a bit more difficult.

There are always a few problems, and the main one here is this: consumption taxes are regressive, meaning they tax the poor at a higher rate (as a percentage of their total incomes) than the rich. This, by the way, is another way America is more "liberal" than much of Europe: America's tax system is actually more progressive! In any case, addressing this problem is fairly simple: exempt certain necessities from the VAT, like necessary food items (not potato chips, soft drinks, and TV dinners), clothing items under $50 apiece, prescription medications, etc.

This would allow America's income tax rate to be cut and/or exceptions to it to be removed, making the system simpler (it's one of the most complex and frustrating in the world at the moment, costing individuals and businesses a lot in tax consulting services and wasted time). At the same time, this would help encourage growth and wouldn't be overly regressive.

The other issue to be addressed is also addressed with this tax: America's current account deficit. A current account is made up largely of a country's trade balance. America imports quite a bit more than it exports. This could be due partly to the fact that America taxes income too much and consumption too little when compared to other countries. True, America is likely on the road to rebalancing as we speak, since consumers have no scope to boost consumption in the near future, but this might be a pleasant side-effect of a tax that would otherwise be beneficial anyway.

Nancy Pelosi had indicated last year that a VAT was "on the table." Since then, the discussion has been dropped. It's unpopular because it contains the word "tax," particularly hated by conservatives, and because it's regressive, which makes it unpopular with the left. If combined with income tax cuts, tax simplification, and exceptions to protect those who would be most adversely affected, I think the tax could appeal to a broad base of legislators... if they could explain it to the public. Maybe we can give it some ridiculously long name that excludes the word tax? Those plans are usually stupid, but Congress seems to like them anyway...

Blue Dogs and Tea Parties, Will New Forces Be For Good?

President Obama made a promise to the American people: a new era of political compromise. With the rise of splintered factions of Democrats and Republicans, I bet the President is now wishing for an old era of bipartisanship. The Blue Dog Democrats and the Tea Party Movement have accumulated massive power to taker control of progress (or lack there of) in Washington. As we look at the potential of these two movements, we can begin to see if they will they be a positive influence of compromise, or a paralyzing force of roadblocks.

President Obama made the following comments during his presidential acceptance speech, his promise to America.

“Let us resist the temptation to fall back on the same partisanship and pettiness and immaturity that has poisoned our politics for so long. Let us remember that it was a man from this state who first carried the banner of the Republican Party to the White House - a party founded on the values of self-reliance, individual liberty, and national unity. Those are values we all share, and while the Democratic Party has won a great victory tonight, we do so with a measure of humility and determination to heal the divides that have held back our progress. As Lincoln said to a nation far more divided than ours, "We are not enemies, but friends...though passion may have strained it must not break our bonds of affection." And to those Americans whose support I have yet to earn - I may not have won your vote, but I hear your voices, I need your help, and I will be your President too[1].” (Emphasis added)

I do not think the new President could have ever expected what would happen during his next 12 months in office. Not only did he experience the entrenched factions within his own volatile party, but triggered the rise of a new, powerful, faction within the GOP.

The President made a few mistakes within his first year that triggered a rapid deterioration in the fragile cohesion within congress. It all comes down to the two emphasized words in his speech, “humility” and “determination,” with not enough of the former and too much of the later. I have been working within local government for a few years now. If nothing else, I have learned to manage my own expectations and set achievable goals. Obama thought he could reverse the course of the Country's hardest issues at breakneck speed. His determination to meet an unrealistic timeline was his own trap. As deadlines slipped, he lost his momentum and became vulnerable to a strong wave of attack from the right (and the left, I might add - IPE pundit). This past summer, he should have shown some humility issuing from this rookie mistake, set a new pace for his agenda, and taken a moment to readjust his priorities. Instead, he isolated the party on healthcare, pushing hard on a Democrat-centric solution, far from the Obama we knew from the campaign.

The State of the Union was a good attempt to reset the agenda, but the tone has already been set; and his speech was far from showing any humility. The President has lost a year without any real progress on his agenda and the political backlash from his first year in office may have changed the political landscape for a long time. Both major parties are now splintered. Blue Dog Democrats gained significant power from the healthcare debate, representing a less liberal, more centrist approach to spending. Representing a more extreme end of the political spectrum, the rise of the Tea Party Movement seems to be a growing force in America, and even has the potential to give birth to a new political party.

The Blue Dogs have the potential to bring balance to legislation as long as they bring reasonable compromise to the debate. If played correctly, the more center-leaning legislation can create a more moderate view of the Democratic Party. This is effective only if the Blue Dogs can be seen as part of a united front supporting certain legislation, instead of eating each other alive for political gain. If this new power is of true compromise, bringing legitimate objections WITH legitimate solutions to the table, they can be a strong force for good, centrist legislation. I have yet to really see this positive influence, but the possibility is there.

Unlike the Blue Dogs, which I think are a short term reaction to Obama's missteps, the Tea Party has some staying power. Now unofficially led by my favorite master of misdirection and rhetoric, Sarah Palin, new polls show the Tea Party brand is more valuable than the GOP. Still loyal to her party, Sarah resisted the idea of a Tea Party separation in her keynote speech at the Tea Party Convention last night, but I think this view can definitely change based on Sarah's future political ambitions. For whatever insane reason, Sarah is able to control her political/celebrity persona so well that she could definitely develop the Tea Party Movement into the Tea Party... Party! If she continues to lose support within the GOP this could be a platform to spring into a larger political career. Given the Movement's current distance from the center, and its choice of spokeswoman, I think this this new party has the potential of being a strongly polarizing force. Is the Rogue Maverick even capable of compromise?

Our Country seems to do best when we head down the center of the road. I see the Blue Dogs as a potential force for good, keeping the extreme liberal side of the Democratic Party in check, as long as they keep their own egos in check along the way. Unfortunately, if the Tea Party Movement is going to step in line behind Sarah Palin, I can only see that as a decisive, destructive force. Without compromise, I cannot see the potential for any real progress in this country, but let's hope I am wrong.

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[1] “Barack Obama's US Election victory speech: full text” http://www.telegraph.co.uk/news/worldnews/northamerica/usa/barackobama/3383629/Barack-Obamas-US-Election-victory-speech-full-text.html

Fixing America (and the rest, really)

There are four problems in America right now that, if solved, would restore a great deal of America's strength:

1. Exorbitantly priced, patchy healthcare
2. Inequality of opportunity resulting in an undesirably high level of income inequality
3. Energy dependence
   
4. Budget and current account deficits, debt, and America's labyrinthine tax system.
   

These problems all seem nearly intractable, but they're not! Let's start today with the seemingly most incurable of them all: healthcare. The current healthcare bill would solve some of the patchy coverage problem, but it is a band-aid at best and does nothing to address the underlying problems with the system. Part of the problem is that we have been presented with two false options: private health insurance, or one managed by the government. These are NOT the only two options, however. The economist Tim Harford calls attention in his book The Undercover Economist¹ to a system that has been in use in Singapore for two decades. It would cut costs hugely, give control of most of healthcare to individuals, not government OR insurers, would ensure a high standard of care, and would be universal. Sound impossible? It would be if we remained inside of the private/public health insurance box we've been stuck in.

Here's how it works:
Instead of buying health insurance, individual health accounts are set up. Every person in the US gets a $1,500 per year tax break (roughly the amount paid in taxes to public healthcare in the US already) that is deposited into an individual health account. The deposit is obligatory, but the use of the money is optional and at the individual's discretion (as long as it's for healthcare). Those who do not earn enough to pay over $1,500 a year in taxes will be given a subsidy in that amount. Two things will happen here: younger people, who often avoid health insurance because they (usually rightly) think they can save money by betting they won't get sick, can leave the money untouched. Deposited in a high-rate bank account, this money will grow over the years and can be used for health problems later in life. The other thing that happens is that each individual can decide what types of care she would like. Homeopathy? Flu shots? Massage therapy? No one would have to worry about whether insurance would cover it: there's no health insurance!

There's a third effect, and this one is huge: currently, government and private health insurance companies spend unbelievable sums of money on administration (risk assessment, lawyers, etc.) to attempt to provide low-cost coverage to healthy people and predict who will need more care. These costs disappear under this system.

Finally, the point of this personal responsibility is that, when people see how much things cost, they will make decisions about whether to get treatment or not. That is currently not the case in America's employer-based insurance system. Rationing currently occurs by who can pay the most (insurance companies and employers decide who gets what). In a government-run system (think Britain), the government decides who gets what. In this system, the individual decides what he would like. I think we can all see why this is attractive.

I know, I know, I can already hear the objections: a single MRI or a round of cancer treatment can cost significantly more than $1,500! You're right, of course. That was only one part of the picture, although this plan would likely bring those costs more in line with treatment costs in other developed countries because people would choose less treatment knowing the real costs. The other two are catastrophe insurance and government aid for the unfortunate, along with changes to liability laws, which currently lead to high legal and insurance fees for doctors and to doctors prescribing every treatment in the book, making all treatments more expensive.

Catastrophe insurance is cheap, as only really serious events are covered. In addition, there would be some co-pay (maybe $500). This would provide some encouragement for people not to put themselves in dangerous situations or to run down their personal accounts with frivolous spending.

The government aid is for people who don't suffer catastrophes, but rather who are born with bad genes and need to spend more on healthcare. Here, to be fair, the government would simply have to help out.

There's another result not mentioned in Harford's book: this would all serve to increase wages and tax revenues, making the system more than pay for itself. Studies have shown that much of the cause of wage stagnation in the US in the past decades has been due to healthcare cost inflation. Workers' wages were rising, they just didn't know it because the money was flowing into healthcare. With that system eliminated, employees would receive more cash. They would also then pay more in taxes.

In this system, the benefits for nearly all are obvious. The only ones who would not benefit are the insurance companies. For this reason, you can expect this plan to never come up and, if it did, to be heavily lobbied against. The other problem: it takes a while to explain - voters don't like policies that seem complicated up front (although this one would be much simpler in reality than the current healthcare bill!).

That said, something will have to happen eventually. Americans will not be able to afford their healthcare system indefinitely, unless they want to trade everything else. Let's hope they make the right choice...

1. Tim Harford, The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor - and Why You Can Never Buy a Decent Used Car! (New York: Oxford University Press, 2006), 130-135.
   

How Structural Realism Shows America Needs a More Liberal, Multilateral Approach to Foreign Policy

By Charles Kirchofer, Dec. 17^th, 2008

I actually should be finishing work on part two of my series (if you can call something that when it only has one part) on the big issues for Barack Obama in foreign policy. Or I could work on my planned article on why the stock market is not a casino, even now. Instead, I want to take a few moments to do something unorthodox. If you were thrown off by the title of this article (thinking "what the f$!k is 'structural realism'?!"), have no fear: I'm not about to get all theoretical on you. What I will say, however, is this: there are two major schools of thought on international politics (and maybe a third or possibly fourth, depending whom you ask). These are realism and liberalism. Realists believe nation states are the central players on the international scene and that these states live in a competitive environment. Liberals believe the world is becoming ever more integrated, that NGOs, international organizations, and transnational corporations have seriously reduced the influence of nation states on world affairs, and that there is something called the "international community," whose desires may be universal and are to be put above national interests. OK, that's it for the theory. Here's the unorthodox part: rubbish, I say. I'm about to argue for a more liberal American approach to foreign policy for realist reasons. That's right: the two terms are a false dichotomy, which is why I say they're both right and therefore both wrong, which means we are free to combine reasoning from both "schools" as they fit.


The realist foundation
OK, maybe there's going to be more theory than I promised, but stay with me. Structural realism holds that the number of great powers in the world (called "poles") decide the system's structure, which, in turn, influences outcomes. For example: the world before 1945 was multipolar, with most of the great powers right next to each other in Europe. Because the competitors were next to each other and relied on each other for resources because they were all relatively small, it was very unlikely that there would be any lasting European cooperation. Indeed, though they tried, this was the case. After 1945 the world became bipolar, with the U.S. and the U.S.S.R. as the great powers. Now, with none of the great powers in Western Europe, the countries there were no longer in a position where they had to compete with each other. Cooperation was then possible. The result? The European Community and later the EU, complete with a shared currency. Liberals would say the Europeans just finally learned their lesson and learned to cooperate, but everyone thought that in the late 19th century and after WWI, too. Do ideas and public opinion matter? Sure, but I think this structural explanation explains the timing better and is the more likely underlying enabler (combined with factors the liberals point out).


Nice history lesson, so what's this have to do with anything?
Good question. The world today is no longer bipolar, it's become unipolar, or possibly multipolar. Militarily, at least, the world is definitely unipolar, with America the military superpower (it's military spending is more than the spending of the next five top military spenders combined). Good for the U.S., right? Well, not really. Realists predict that states always move toward balancing power. This would mean essentially everyone else would align against, or at the very least refuse to cooperate with, the United States. European countries may not have agreed with the Vietnam war, either, and yet cooperation remained high because the system was bipolar. It was the U.S. or the U.S.S.R. Faced with that decision, they largely stuck with the U.S. Diplomats will tell you cooperation has become more difficult. Realists would argue this process was set in motion after the fall of the Soviet Union (meaning the tendency would be present even without the Iraq war).

That said, I think we can agree the Iraq war certainly helped to ally states against the U.S. This is bad news. The U.S. was used to playing the world police force during the Cold War. It was indirectly encouraged to do so by the presence of the other pole (the U.S.S.R.), and it was also constricted by the Soviet presence, which checked U.S. power. In the 90's, the U.S. suddenly saw itself changed from a superpower to what some called a "hyperpower." With all this power sitting around, some felt it was time to use it to change the world according to their own standards, just as realists would have predicted (because there was no longer any check on American power), which is not to say they all necessarily would have recommended it (indeed, many realists spoke out against the war as being unnecessary and too risky). Hence: the Iraq War.

What does this mean for us now? Regardless of whether the world is (still) unipolar or if it has become multipolar, cooperation is likely to become more difficult. My conclusion? Start thinking like liberals. Start welcoming cooperation, rely more on "soft power" ("winning over the hearts and minds" of the world, making them want to be more like us and want to cooperate with us), encourage reform in, and support the workings of, international organizations (particularly the UN and NATO). As I've mentioned before, it's time to dust off the old-time art of diplomacy, because coercion is simply going to meet with ever more resistance and become ever more counterproductive for global and U.S. aims.

In the end, the realists accurately describe how the world works, but the liberals accurately prescribe what we should do in the current environment. So we should speak softly and be more friendly, everyone already knows we're carrying a big stick (and the realist in me would advise keeping it).