Opinion

The Great Debate

Should Obama mimic David Cameron’s austerity?

By Nicholas Wapshott
The opinions expressed are his own.

In medieval times, a key member of a monarch’s retinue was the food taster, a hapless fellow who ate what his master was about to eat. If the taster survived, the food was deemed safe for the king’s consumption. President Obama has a taster of sorts in David Cameron, the British prime minister, who has embarked upon an economic experiment that echoes the recipe of wholesale public spending cuts and tax hikes needed if both sides in Congress are to agree to raising the federal government debt ceiling. How the British economy is faring offers Obama an idea of what a similarly radical policy of cutting and taxing here would mean to the American economy.

Cameron’s election in May 2010 coincided with the start of the Greek debt crisis. The Bank of England governor Mervyn King warned him that the public debt in the UK was so large that Britain, too, might see its lending become impossibly expensive, so Cameron decided that there was no time to lose in putting the fiscal books in order. He decided to slash public spending by 25 per cent over four years and immediately raise value added tax on goods and services from 17.5 to 20 per cent. Such a radical remedy found favor with the rump of British Conservatives who felt that Margaret Thatcher’s free-market, small government, “sound money” policies of the Eighties had not been pressed to their limit. In turn, Thatcher’s prescription to reduce the size of the state derived from her favorite thinker Friedrich Hayek, the author of “The Road to Serfdom,” who believed like many Tea Party supporters that government intervention inevitably leads to tyranny.

Cameron’s experiment in applying a radical cure to the British economy caught the attention of a number of conservatives here, among them George W. Bush’s speechwriter Michael Gerson, who wrote in the Washington Post, “If Cameron’s approach works — dramatically cutting deficits without stalling economic growth — it will be an obvious, powerful example for America.” “If only the Obama administration and the U.S. Congress had been so courageous. Instead, they are choosing to put off these big decisions,” moaned Matthew Bishop, New York bureau chief of the Economist, in a piece co-authored with Michael Green in the Wall Street Journal. Even Treasury Secretary Tim Geithner thought the British experiment worth trying. “I am very impressed, as one man’s view looking from a distance, at the basic strategy [Cameron] has adopted,” Geithner told the BBC.

So, how is the British economy doing? Under Cameron’s Labour predecessor, Gordon Brown, Britain fell into depression, with the economy shrinking during the worldwide banking meltdown to minus 2.1 per cent in the last quarter of 2008 and the first quarter of 2009. By the time of the general election in May 2010, however, growth had slowly climbed to 1.1 per cent per quarter. With Cameron taking the reins and announcing his radical economic plan, the economy slumped back to minus 0.5 per cent in the fourth quarter of last year, before returning to growth of 0.5 per cent in the first quarter of this. But the latest economic growth figures, released this week, show a slowdown in economic activity, to a miserable 0.2 per cent growth between April and June. Cameron’s chancellor George Osborne has blamed the poor figure on widespread partying that accompanied the wedding of Prince William and the effects of the Japanese tsunami. The double-dip recession that Cameron’s critics predicted has not yet taken place, but the figures are clearly headed in the wrong direction.

What exactly is causing the slowdown in Britain is not clear. The cuts have only just begun. The total spending reduction over four years will amount to no more than 1 per cent of government expenditure, though even that Osborne believes will put 1.3 million public sector workers out of work by 2015, though he hopes private companies will create 2.5 million new jobs to make up. The faltering economic recovery suggests he is being optimistic. The independent Office of Budget Responsibility estimates that the decision to raise VAT will cause economic growth to fall by 0.3 per cent in the fiscal year 2011/12. The tax hike has already dampened consumer confidence, leading in turn to a wave of retail store bankruptcies.

Ireland could use a little audacity of hope

By Marian Harkin

The opinions expressed are her own.

Barack Obama’s infectious hope will help replenish the spirits of the beleaguered Irish people as we strive to emerge from recession, but more significantly his invoking our small nation’s educational and entrepreneurial talents help to show us the way forward.

A once-in-a-generation economic crisis might seem like an odd time for Ireland to issue back-to-back invitations to Queen Elizabeth II and U.S. President Obama, but as the sun shone through the rain cloud, illuminating the President as he visited his ancestral home in Moneygall Co. Offaly, it seemed a masterstroke, for it is precisely an injection of Obama-esque audacious hope and “yes we can” positivity that Ireland needs to kickstart our long road to recovery.

One week ago as her Majesty Queen Elizabeth II bowed her head before a Memorial to Ireland’s Republican dead, the message rang out to the high heavens – we work as equals and we can live in peace, and that peace can be the foundation upon which growth and prosperity is restored to this small island north and south.

from Bernd Debusmann:

Who is the superpower, America or Israel?

On February 18, the United States vetoed a U.N. Security Council resolution on Israeli settlements in occupied Palestinian territories. The vote raises a question: Who dominates in the alliance between America and Israel?

Judging from the extent to which one partner defies the will of the other, decade after decade, the world's only superpower is the weaker partner. When push comes to shove, American presidents tend to bow to Israeli wishes. Barack Obama is no exception, or he would not have instructed his ambassador at the United Nations to vote against a policy he himself stated clearly in the summer of 2009.

"The United States does not accept the legitimacy of continued Israeli settlements. This construction violates previous agreements and undermines efforts to achieve peace. It is time for these settlements to stop," he said in a much-lauded speech in Cairo.

from Bernd Debusmann:

In America, violence and guns forever

Another American mass shooting. Another rush to buy more guns.

On the Monday after the latest of the bloody rampages that are part of American life, gun sales in Arizona shot up by more than 60 percent and rose by an average of five percent across the entire country. The figures come from the FBI and speak volumes about a gun culture that has long baffled much of the world.

The Federal Bureau of Investigation compared January 10, 2011, with the corresponding Monday a year ago.

So what would prompt Americans to stock up their arsenals in the wake of the shooting in Tucson that killed six people and wounded 14, including Gabrielle Giffords, the congresswoman who was the target of an unhinged 22-year-old who has since been charged with attempted assassination?

Obama, Moses and exaggerated expectations

-Bernd Debusmann is a Reuters columnist. The opinions expressed are his own-

President Barack Obama is close to the half-way mark of his presidential mandate, a good time for a brief look at health care, unemployment, war, the level of the oceans, the health of the planet, and America’s image. They all featured in a 2008 Obama speech whose rhetoric soared to stratospheric heights.

“If…we are willing to work for it, and fight for it, and believe in it, then I’m absolutely certain that generations from now, we will be able to look back and tell our children that this was the moment when we began to provide care for the sick and good jobs for the jobless; this was the moment when the rise of the oceans began to slow and our planet began to heal; this was the moment when we ended a war and secured our nation and restored our image as the last best hope on earth.”

The date was June 3, 2008. Obama had just won the Democratic Party’s nomination as presidential candidate. He was also winning the adulation of the majority of the American people, who shrugged off mockery from curmudgeonly Republicans who pointed out that the last historical figure to affect ocean levels was Moses and he had divine help when he parted the Red Sea.

Looking for Keynes’ angels

Keynesian stimulus works perfectly, but only if you can find politicians who don’t care about re-election and central bankers who aren’t interested in being liked.

The Obama administration, confronted with staggeringly high unemployment and a struggling economy, has proposed another round of, well, stimulus, this time in the form of tax cuts and investment incentives, but such is the toxicity of the word in current debate they can barely bring themselves to utter the “S” word.

As envisioned by economist John Maynard Keynes, in order to successfully run an economy based on counter-cyclical spending during downturns, you need to also have a policy of counter-cyclical savings during fat times. Budget surpluses must be built up so that they can be run down during recessions

The U.S. war in Iraq is over. Who won?

The end of America’s combat mission, after seven and a half costly years, has raised questions that will provide fodder for argument for a long time to come: Was it worth it? And who, if anyone, won?

It’s too early to answer the first question, according to U.S. Secretary of Defense Robert Gates, a man of sober judgment. “It really requires a historian’s perspective in terms of what happens here in the long run … How it all weighs in the balance over time remains to be seen.”

For a sizeable group of Middle East experts, the second question is easier to answer than the first. “So, who won the war in Iraq? Iran,” says the headline over an analysis by scholar Mohammed Bazzi for the Council on Foreign relations, a New York-based think-tank. His argument: “The U.S. ousted Tehran’s sworn enemy, Saddam Hussein, from power. Then Washington helped install a Shi’ite government for the first time in Iraq’s modern history.

Iraq, America and hired guns

Here is a summary of America’s future role in Iraq, in the words of President Barack Obama: “Our commitment is changing — from a military effort led by our soldiers to a diplomatic effort led by our diplomats.”

And here is a note of caution about that promised change: “Current planning for transitioning vital functions in Iraq from the Department of Defense to the Department of State is not adequate for effective coordination of billions of dollars in new contracting, and risks both financial waste and undermining U.S. policy objectives.”

Obama’s statement came in an Aug. 2 speech in which he confirmed that by the end of this month, America’s combat role would end. The 50,000 American soldiers remaining in Iraq (down from a peak of almost 170,000) would advise, train and support Iraqi security forces. By the end of next year, the last U.S. soldier would come home.

Time for the space vision thing

KENNEDY SPACE CENTER, Florida – My head is spinning as I sit here waiting for President Obama to do what should have been done when the White House rolled out its budget for NASA: do the vision thing.

I have faith in POTUS to deliver the goods and explain his revolutionary approach to space exploration.

Here are a few things to remember as you watch the speech and listen to the spin:

U.S. aid, Israel and wishful thinking

In June 1980, when an American president, Jimmy Carter, objected to Jewish settlements in Israeli-occupied territories, the Israeli government responded by announcing plans for new settlements. At the time, settlers numbered fewer than 50,000.

In 2010, another American president, Barack Obama, is calling for an end to settlements he considers obstacles to peace between Israel and the Palestinians. Israeli authorities responded by announcing new ones, illegal under international law. Settlers now number close to half a million.

In the three decades between 1980 and 2010, there have been multiple U.S.-Israeli spats over the issue and they often fell into something of a pattern, spelt out in 1991 by James Baker, President George H W Bush’s secretary of state: “Every time I have gone to Israel in connection with the peace process … I have been met with an announcement of new settlement activities. It substantially weakens our hand in trying to bring about a peace process.” That is as true now as it was then.

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