The Great Debate

President Obama’s three percent solution

– Jonathan R. Hoganson is the deputy executive director of the Technology CEO Council, a public policy advocacy group that includes the CEOs of Intel, HP, Dell, Applied Materials, EMC, Motorola, Micron Technology and IBM. He previously was the legislative director for Rep. Rahm Emanuel and policy director for the House Democratic Caucus. The views expressed are his own. –

A few years from now, when our economy has regained its stride, we may look back to a little-noticed announcement last Monday that spurred the resurgence. Amid swine-flu hysteria and First 100 Days hoopla, President Obama quietly announced a commitment to spending three percent of the U.S. GDP on science research and development.

This is a profoundly important step, but if we are to continue to lead the world, the United States must also develop a comprehensive policy to foster innovation. For too long, the United States has lived in a “next month” mindset when it came to our economy. This short-termitis has led to sub-prime lending, credit card debt and a general lack of long-term planning. And in no place has this been more evident than in the sciences.

For the past decade our spending on research and development has been anemic at best, and beginning in 2005, federal funding of academic research actually began to decline. This was happening at the same time our overseas competitors were increasing their commitment. For example, China has increased its R&D spending by an average of 17 percent each year in an effort to catch and surpass developed nations’ spending.

Currently, the United States ranks seventh among developed countries in R&D spending as a ratio of its GDP. Is that a recipe for continued economic and technology leadership?

There is, in fact, a direct correlation between R&D and scientific leadership. As the commitment to science ebbed, so did the U.S. share of worldwide patents and research articles in peer-reviewed journals. And R&D has been proven to catalyze economic growth and enable comparative advantage for developed companies and economies.

Now is the time to make technology and innovation a cornerstone. In the last three months we have made a good start, making broadband, health-care information technology and green tech key components of the stimulus package. The president has proposed a 10-year extension of the R&D tax credit to give businesses the incentive to continue to invest in cutting-edge technologies and products. By advancing these initiatives, we are developing the foundation of a national innovation strategy, but Congress must work with the president to advance a comprehensive strategy.

President Obama’s first hundred days

– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.  The views expressed are her own. —

In his first one hundred days, President Obama has shown himself to be one of the most radical U.S. presidents in history.  He is harming America’s defenses by publishing memos on interrogation of detainees and threatening to prosecute lawyers who drafted supportive memos.  He shakes hands with America’s enemies, such as Venezuelan leader Hugo Chavez, and sends mixed signals to its friends, such as Colombia’s President Uribe.

And, in the name of combating a recession, he is destroying the fundamental institutions of America’s free-market economy.

Not only would President Obama’s proposed programs move government spending to levels, in relation to the economy, unseen since the end of World War II, but his administration is increasingly involved in the minutiae of a new, unwise, industrial policy, such as how much firms can pay workers, and which banks are allowed to repay government loans, and which industries and companies deserve a government rescue package.

Under Obama’s proposed budget, the nonpartisan Congressional Budget Office projects the government deficit to hit $1.2 trillion in 2019, or six percent of GDP, after “bottoming out”—if it does—at  $658 billion in 2012, a level more than 40 percent above the highest deficit under the presidency of George W. Bush. By 2019, government spending would take up nearly a quarter of GDP, far higher than at the peak of Iraq war spending and the highest, excepting 2009 and 2010, since 1946.

Much has been written about President Obama’s plans for multi-year, growing expenditures on energy and health care. He has proposed to invest billions of dollars in wind, solar power, and other renewables, which now produce about 3 percent of U.S. energy, yet he neglects nuclear power, which produces 20 percent.  He has suggested a substantial cap-and-trade energy tax, which would raise more than a trillion dollars over time, according to some estimates. And he wants a down payment of $634 billion for a universal health care plan whose details he has not yet confided to the public.

In addition, Obama is pushing for other programs which are both costly and naive.  One of his priorities is high-speed passenger rail service, which was given a downpayment of $8 billion in economic stimulus funds and possibly $5 billion more in the budget.  This proposal is, to put it charitably, poorly-designed. Real high-speed rail, with trains that travel 150 miles an hour and faster, can be found in Europe and Japan, but they have not stemmed the increasing use of road transportation.  And these trains need their own, specially engineered rights-of-way, which would cost much more than $13 billion.

First 100 days: Grading Obama’s foreign policy

– Michael O’Hanlon is a senior fellow at the Brookings Institution. The views expressed are his own. –

It’s no great surprise in American politics these days, but already a great partisan debate has broken out about President Obama’s foreign policy effectiveness to date. For his enthusiasts, the United States has hit the “reset” button and is reclaiming its place as not only a strong country, but a respected leader among nations. For his detractors, Obama is making the world dangerous by apologizing for America’s alleged misdeeds of the past, naively talking with dictators, and cutting the defense budget.

And as usual, the truth is neither of these polar positions. But as a past critic of Obama, especially during his days of promising a rapid and unconditional exit from Iraq during the presidential campaign, I would nonetheless argue that he has done a good job overall, and that his supporters have the stronger case to date. Still, making too much of provisionally good decisions in the first 100 days verges on playing a silly game of Potomac Jeopardy that only the evening talk shows and political junkies really care about. The bottom line is that Obama is just getting started. But he is off to a more solid start than almost any of his recent predecessors.

Consider the policy towards five key nations. And start with the wars. These are Category A problems. Obama has inherited a more difficult hand than any president since Nixon in terms of active, ongoing conflicts. Already we have lost almost as many American troops in our two wars on Obama’s watch as died in the first year of all of Obama’s predecessors going back to Carter combined.

But that is not a slight on the president, only a reminder of the difficult world that confronts him. And in dealing with these challenges, to date Obama has wisely listened to the counsel of his commanders and other experts on Iraq and Afghanistan. Our drawdown in the former place, while still rapid, will retain up to 50,000 U.S. troops even after it’s over. That is a lot of combat capability, and as such a departure from what Obama promised last year, and a relief to those of us still nervous about Iraq.

In Afghanistan, Obama will roughly double the American troop presence there in his first year in office. That will finally give commanders the wherewithal (or at least most of the wherewithal) to carry out a proper counterinsurgency strategy–with its twin goals of protecting the civilian population and building up Afghan institutions so they can increasingly do the job on their own.

The other crucial set of problems might be described as the nuclear hot spots–Iran, North Korea, Pakistan. On these, Obama’s record is less impressive to date. That is not, however, because he has done anything particularly wrong. Rather, the problems are extremely nettlesome. If Obama deserves any criticism, it is simply that his campaign rhetoric implied these would be far easier problems once George Bush was out of the White House and a new president was ensconced on Pennsylvania Avenue. In fact, the main reason these problems are hard is because of who we are dealing with in each case, and not because of George Bush or any other American leader. Since Obama is the one who raised expectations, he deserves to take a bit of a hit perhaps for not quickly fulfilling them–but otherwise his hand seems rather steady on the tiller.

First 100 Days: What not to do in public diplomacy

– Kristin Lord is a fellow at the Brookings Institution and author of the recent report, “Voices of America: U.S. Public Diplomacy for the 21st Century.” The views expressed are her own. –

As Senate confirmation hearings approach, America’s next public diplomacy leaders will get abundant advice about how to improve America’s standing in the world. The Obama administration’s nominees (an under secretary and at least two assistant secretaries in the State Department alone) would be wise to listen.

Yet, in truth, America’s new public diplomacy team can accomplish much by following that age old maxim: first, do no harm.  Seven key “don’ts” are worth bearing in mind.

1) Don’t let the pollsters get you down. Being liked and admired, while useful, should not be the sole metric of success in public diplomacy. The job of American public diplomacy leaders is to promote American national interests through the power of communication, build mutual trust and understanding, strengthen support for universal values Americans share, and build enduring relationships with current and future opinion leaders around the world. Measuring achievement through poll numbers encourages short-term thinking and can jeopardize long-term success.

2) Don’t forget the borders. More than 50 million foreign travelers spend their own money to visit the United States each year, a number that vastly exceeds the number of participants in U.S. government funded exchange programs. Talk of re-booting America’s image in the world will fall flat if those visitors feel badly treated at U.S. borders and consulates.

3) Don’t forget the Pentagon. The State Department controls just a fraction of the U.S. government’s personnel and budget for public diplomacy and strategic communication.  To have impact, the State Department’s public diplomacy leaders should engage the Defense Department and the rest of the U.S. government early on.

4) Don’t go it alone. As the State Department’s new director of policy planning wrote in a recent “Foreign Affairs” article, in today’s world the “measure of power is connectedness,” a fact that should give the United States tremendous advantages.  But to fully embrace the power of networks, the U.S. government must find new ways to mobilize private actors it does not control, support and call attention to the good work of others without taking credit, and (when it advances important American objectives) empower credible voices to speak out even if they fall out of step with official U.S. policies.

First 100 days: A fix for the housing crisis

– Elena Panaritis is an institutional economist. She spearheaded property rights reform while working at the World Bank, and lectures at Insead, The Wharton School and Johns Hopkins University-SAIS. A social entrepreneur, she now heads the investment advisory firm Panel Group. Her recent book is “Prosperity Unbound: Building Property Markets with Trust”. The views expressed are her own. —

In his speech to Congress, President Obama spoke of how the proper response to the economic crisis is not just a matter of immediate fixes, but also an opportunity to make investments that will serve the nation’s long-term interests. The same idea should govern the housing recovery plan. Otherwise, we get nothing more than a crutch when we need a cure.

As much as short-term help is needed to keep more people from foreclosure, there is a big opportunity to get to the end of the crisis by starting at the beginning of the problem. The conventional wisdom is that subprime mortgages represent the beginning. In fact, the beginning goes back much further. The current crisis stems from the absence of a system that provides stability to the value of properties in the United States.

Instead, real estate “value” in the United States continues to be set through speculation, and that undermines the security – that is, the underlying asset – when mortgages are traded as part of complex financial instruments. We cannot ignore a simple truth of economics: if we are going to treat mortgages as securities, then they must be secured by the tangible asset: namely, land and buildings. To do otherwise has proven to be a recipe for disaster.

The opportunity before the U.S. government with a housing recovery plan is to set up a new system that will keep us from ever getting to this crisis point again. How? The devil is in the details.

It’s no accident that other countries, even those that trade mortgages as financial instruments (such as Australia and Canada) have avoided the levels of off-the-cuff valuation of property we’ve seen in the United States. The reason is that other countries have standardized the information needed to determine the genuine value of real estate and hence mortgage valuation.

This information – actual boundaries, property transfers, claims, liens, and so on – is made available to everyone. The system is sound and transparent. And where do they keep this information? In national property registries, which maintain all the data, in a standardized format, that buyers and sellers need to undertake transactions related to real property.

First 100 Days: Obama’s foreign policy challenges

– Willis Sparks is a Global Macro analyst at the political risk consulting firm Eurasia Group. The views expressed are his own. –

Few things in life amused my dad more than a good karate movie. I once asked what he found so funny about Bruce Lee’s jaw-dropping display of poise and power. “Nice of the bad guys to attack him one at a time,” he said. In the real world, threats don’t arrive single-file, like jets lining up for takeoff.

President Barack Obama’s toughest foreign-policy challenge will be in managing the sheer number of complex problems he’s inherited and their refusal to arrive in orderly fashion. In addition, the still-metastasizing global financial crisis will exacerbate several of these problems, by depriving a number of governments of the funding they need to maintain social stability and to meet internal and external threats to their security.

AFGHANISTAN AND PAKISTAN

There is clearly a risk of collision at the intersection of Afghanistan and Pakistan, both of them plagued with floundering elected governments and deteriorating security environments. In Afghanistan, once Obama keeps his promise to provide thousands more U.S. troops, he must decide whether his team can afford to work around President Hamid Karzai (who may win reelection in August) and more directly engage tribal leaders and willing members of the Taliban to restore stability.

But Afghanistan’s security continues to depend on the ability of U.S. forces to stem the flow of militants and supplies into the country from tribal areas in Pakistan. Aware that Pakistan’s armed forces are neither reliably willing nor able to help, the Obama team must find a way to neutralize Pakistani militants without arousing broad public anger across the country and destabilizing its cash-strapped government.

IRAN

First 100 Days: The next steps in the Middle East

Reuters Staff

Feb 13, 2009 07:36 EST

President Barack Obama inherits a distinctly gloomy outlook for progress in settling the Israeli-Palestinian conflict. Is change really possible?

Reuters asked Oliver McTernan, the director a UK charity called Forward Thinking and two experts from the Brookings Institution in Washington — former Ambassador to Israel Martin S. Indyk and Kenneth Pollack — what steps the Obama administration should take next in the Middle East.

First 100 days: Turn down the rhetoric on Russia

– Peter Schechter is an author and an international political and communications consultant. A founder of one of Washington’s strategic communications consulting firms, he has spent twenty years advising Presidents, writing advertising for political parties, ghost-writing columns for CEO’s, and counseling international organizations out of crises. “Pipeline” is his second novel. The views expressed are his own. –

After an eighteen year sabbatical, we fiction writers have recently put Russia back foursquare into its role as a novelist’s favorite fierce antagonist.  For decades, thrillers were dominated by the threatening Soviet imagery spun by John Le Carré, Tom Clancy and Frederick Forsythe.  Now, recent offerings like Daniel Silva’s “Moscow Rules”, Ted Bell’s “Tsar”, and my own “Pipeline” again reassign Russia its place of concern for political leaders, intelligence agencies and military planners.

That Russia provides good material is no surprise. The non-fiction Russia uses natural resources for coercion.  It militarily overwhelms a small neighbor. It crushes domestic dissension through physical or psychological intimidation. It suffers from near-obsessive mistrust of foreigners’ intentions.  Oligarchs and Kremlin bureaucrats are locked in a maze of corruption, mafia and violence.

So, how does America reconcile this reality with its foreign policy needs? As it considers its options with Russia, the new administration must wrestle with two potentially contradictory considerations.  On the one hand, no matter how good the fodder for fiction, Washington must ”reset” relations that have gone badly off track with this prominent nuclear-tipped, 11 time-zone behemoth.

On the other hand, events in the financial and energy markets may have inadvertently exposed an uncomfortable quandary: Does the New Russia actually matter all that much?

As demand and prices for its commodities soared, Russia has gotten rich without making much of anything.  When is the last time you bought something with a ‘Made in Russia’ label?  No textiles.  No computers.  No cars of any worth. No refrigerators or washing machines. No services. Even Stolichnaya is now bottled in Latvia.

Depressed energy prices and weak demand means that petro-states have lost the saber they used to rattle.  As the Kremlin’s finances flounder, some see a possibility that Vladmir Putin could even lose his hold on power – but not before Putin’s Siloviki (security bureaucrats) apparatus fights tooth and nail to hang on to money and clout.

First 100 Days: Do not marginalize small businesses

George A. Cloutier

Feb 3, 2009 10:17 EST

– George A. Cloutier, a graduate of Harvard Business School, is the founder and CEO of American Management Services, one of the nation’s largest turnaround and management services firms specializing in small and mid-size companies. He is also the author of the upcoming book, “Profits aren’t Everything, They’re the Only Thing.” The views expressed are his own. –

Why are the Obama Administration, Congress, and the Senate marginalizing the nation’s largest industry in the new stimulus plan?

Small Business Inc. employs about 60 million people, accounts for 70 percent of new jobs each year, and clearly represents the backbone of almost every regional and local economy. For this vital industry, the administration has allocated less than 1 percent ($700 million earmarked vs. $1 trillion in proposals). The nation’s leaders continue the small business program of the Bush years: talk a lot and do practically nothing.

The sponsors of the bill, most likely to succeed, say that small business will benefit indirectly from the spending programs. This is the same discredited thinking of Reagan’s “trickle-down” economics.

Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke and Lawrence Summers, director of the Economic Policy Council, have absolutely no experience with small business.

They have no idea what it’s like to not meet a payroll, have no money because collections are slow, and to be able to only pay a fraction of their bills to stay in business.

Approximately 12,000 small businesses will close their doors every week this year. The Obama administration says it cares about the little guy, but what they should say is that they care about the little guy except for those who own small businesses.

Obama and the Afghan narco-state

Bernd Debusmann

Jan 29, 2009 11:49 EST

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

To understand why the war in Afghanistan, now in its eighth year, is not going well for the United States and its NATO allies, take a look at two statistics.

One is Afghanistan’s ranking on an international index measuring corruption: 176 out of 180 countries. (Somalia is 180th). The other is Afghanistan’s position as the world’s Number 1 producer of illicit opium, the raw material for heroin.

The two statistics are inextricably linked and, a year ago, prompted Richard Holbrooke, the man President Barack Obama has just picked as special envoy for Afghanistan, to write: “Breaking the narco-state in Afghanistan is essential or all else will fail.”

Holbrooke, who was not in government service at the time, took particular issue with the counter-narcotics strategy the Bush administration pursued in Afghanistan.

“The … program, which costs around $1 billion a year, may be the single most ineffective policy in the history of American foreign policy,” he wrote in an op-ed in the Washington Post. “It’s not just a waste of money. It actually strengthens the Taliban and al Qaeda, as well as criminal elements within Afghanistan.”

Exactly what the Obama administration intends to do about that, and how it might break the narco-state, has yet to be articulated. Sending more troops to fight a growing insurgency does not necessarily translate into progress towards dismantling the “narco-state,” eliminating corruption or cutting down on the opium production whose proceeds help finance the Taliban.