The Great Debate

from The Great Debate UK:

Glass-Steagall Lite, brewed by Volcker, served by Obama

Laurence Copeland

Jan 25, 2010 11:42 EST

- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -

Let me say at the outset that I am far from enthusiastic about either of President Barack Obama’s major policy initiatives: healthcare reform and the banking reform plan announced on Thursday.

But both cases are truly momentous, because both are tests of whether America is an imperfect democracy (like all the others) where government by the people eventually works, more or less, or a totally dysfunctional oligarchy.

Each initiative involves a confrontation with powerful vested economic interests whose lobbyists will no doubt fight long and hard in public and even longer and harder behind closed doors to block the changes.

The only difference between the two cases is that, while there may always have been significant popular opposition to the healthcare reforms, the need to “do something” about Wall Street is almost universally accepted on Main Street.

So if Congress blocks bank reform, it will represent a signal triumph of the lobbyists over the popular will.

Obama bank plan is good policy, good politics

John Kemp

Jan 22, 2010 08:17 EST

– John Kemp is a Reuters columnist. The views expressed are his own –

President Barack Obama’s proposed curbs on bank size and proprietary risk-taking will be criticised for being vague, hard to implement, and focusing on issues that were only part of the cause of the recent crisis.

But the president should ignore self-interested counsels of perfection from the industry that aim to preserve the status quo. The plan is good politics, and good policy. On the political front, the plan is a belated attempt to reposition the administration and congressional Democrats. It aims to channel the popular revolt that washed away Democrats in New Jersey and Virginia last autumn and now in Massachusetts.

For much of the year, the administration and its allies have seemed obsessed by issues which are low on the list of voters’ concerns (healthcare, climate change) or reward special interests (bank bailouts) while appearing impotent to do anything about the rising tide of unemployment and punish those responsible for causing the crisis.

The president was radical where the electorate is cautious (healthcare and climate) but appeared to advocate the status quo where voters wanted change (banking, jobs and incomes). While each of these policies can be justified, the combination made the administration appear dangerously out of touch. The bank plan is an attempt to reconnect with the voters.

COVERING FIRE The bank plan is crucial to the administration’s course correction. It has been apparent for months that the rising tide of anti-incumbent sentiment would force the administration and congressional Democrats to change priorities or risk heavy defeat in November’s mid-term congressional elections.

Massachusetts, by giving Senate Republicans the 41st vote needed to filibuster controversial legislation, has made a shift inevitable as well as desirable. In the next few weeks, the administration will disappoint many of its supporters on the left by abandoning ambitious elements of its healthcare and climate programme, as well as card-check.

Obama’s good war goes bad

Bernd Debusmann

Nov 5, 2009 09:40 EST

In the protracted Washington debate over the war in Afghanistan, the most concise analysis so far has come from America’s top soldier: “If we don’t get a level of legitimacy and governance (there), then all the troops in the world aren’t going to make any difference.”

Admiral Mike Mullen, the chairman of the Joint Chiefs of Staff, was speaking two days after Hamid Karzai was declared the winner, by default, in August elections so massively rigged that a U.N.-backed electoral complaints committee threw out about a million Karzai votes. That forced a run-off from which his challenger, former foreign minister Abdullah Abdullah withdrew, saying the second round would be just as fraudulent as the first.

So much for an exercise in democracy President Barack Obama had used as his rationale for escalating the war a few months after he took office. “I did order 21,000 additional troops there to make sure that we could secure the election, because I thought that was important.”

It was. It showed that the United States and its NATO allies are fighting on the side of a corrupt and discredited government in a war, now in its ninth year, for which, according to Defense Secretary Robert Gates, there can be no purely military solution.

An angry assessment of the Afghan leader last year by Thomas Schweich, a former top anti-narcotics official in Afghanistan, has proved prophetic. Karzai, he said, had been playing the Americans like a fiddle ever since he came to power. “The U.S. would spend billions of dollars on infrastructure improvement; the U.S. and its allies would fight the Taliban; Karzai’s friends would get rich off the drug trade; he could blame the West for his problems; and in 2009 he would be elected to a new term.”

U.S. officials, including Admiral Mullen, are now calling on Karzai to purge Afghanistan of corrupt officials by arresting and prosecuting them. This is an unlikely prospect. In his victory speech, Karzai said he would work to wipe off “the stain of corruption” but said that could not be done simply by removing corrupt officials.

The implicit notice that there would be no major house-cleaning followed a telephone call Obama made to Karzai to say it was time for “a new chapter based on improved governance (and) a much more serious effort to eradicate corruption…” If previous promises from Karzai are any guide, the new chapter will remain unwritten.

The lucrative business of Obama-bashing

Bernd Debusmann

Oct 22, 2009 11:20 EDT

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

Four days before Barack Obama was sworn into office, a prominent radio talk show host, Rush Limbaugh, told his conservative listeners that a major American publication had asked him to write 400 words on his hopes for the Obama presidency.

“I…don’t need 400 words,” he said, “I need four: I hope he fails.”

The remark set the tone for a steady stream of unbridled and often bizarre criticism from Limbaugh and like-minded radio and TV commentators, several of them working for Fox News, the network owned by media mogul Rupert Murdoch. Obama responded four days after his inauguration, telling a group of Republican congressmen they needed to break away from a mindset of confrontation.

“You can’t just listen to Rush Limbaugh and get things done.”

What followed should have helped the new administration to reflect on the wisdom of singling out a media critic. But it didn’t. Limbaugh promptly portrayed himself as a man of such pivotal importance that the president of the world’s only superpower needed to pay personal attention to his tartly-worded opinion.

The controversy over his ill wishes for the president caused, as he put, his ratings to go “through the roof,” a reassuring development for a man who makes $38 million a year under an eight-year contract that runs through 2016. The score of that early skirmish: Limbaugh 1, Obama 0.

from The Great Debate UK:

Obama risks South-American style economic decline

- Richard Wellings is Deputy Editorial Director at the Institute of Economic Affairs. The opinions expressed are his own.-

Argentina should be an object lesson for the U.S.

A century ago, it was one of the richest countries in the world. Today, it has fallen far behind Europe and North America, after a hundred years marked by long periods of recession.

Faced with economic crisis, for example during World War I and the Great Depression, Argentina’s politicians turned to socialism. Lame-duck industries were subsidised and protected from competition, and policy was often driven by powerful vested interests such as the trade unions.

Profligate government spending was initially financed by borrowing, and then by printing money. The result was rampant inflation, which damaged investment and growth by making it almost impossible for businesses to plan ahead.

A new IEA study, Economic Contractions in the United States: A Failure of Government, suggests that President Obama’s current economic policies could be similarly ruinous - though, to be fair to Obama, the authors point out that these policies were started by George W. Bush.

Despite deep recession and an exploding budget deficit, Obama is embarking on ambitious and hugely expensive socialist reforms, including a subsidised healthcare programme, extra education spending, and a cap and trade policy to reduce carbon emissions. In the long run, these measures will heap yet more misery on taxpayers following the bailout of banks, insurance companies and the car industry. And they come after George W. Bush's period in office, during which he was one of the most profligate presidents in US history.

Obama healthcare drive looking sick

James Pethokoukis

Jun 22, 2009 09:37 EDT

– James Pethokoukis is a Reuters columnist. The views expressed are his own –

What just happened to American healthcare reform?

The political prospects for major U.S. healthcare reform have taken a decided turn for the worse in recent days (at least from the point of view of many Democrats). And you don’t need to be some totally plugged-in Washington insider to understand that.

Just take a look-see at the stock market performance of industry players such as Aetna Inc, Cigna, UnitedHealth Group, and WellPoint. Shares have been trending higher of late. What’s been slowly dawning on Wall Street is that the legislative process in Washington is unlikely to produce a national public health insurance option that could eventually squeeze out the private sector.

Fact is, the prospects for any sort of bill that would produce major changes are in as much doubt as at any time since President Obama took office. Worried that the plan was growing too expensive, the critical Senate Finance Committee appears to have jettisoned any idea of a public plan option and is also cutting back on subsidies to help fully insure the nearly 50 million Americans who don’t have health insurance for one reason or another.

So what just happened? How is it possible that Democrats cruised to a huge victory on Election Day in November 2008 and are yet again unable to make good on their top legislative priority? Why are the ghosts of Bill Clinton’s 1994 healthcare reform debacle suddenly flitting about Capitol Hill?

What happened was the Great Recession, the political impact of which the Obamacrats completely misunderstood. Oh, they knew the financial and economic crisis helped sweep them to office. That part they got just fine.

Obama and the wrong side of history

Bernd Debusmann

May 21, 2009 10:28 EDT

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

Ringing words, smoothly delivered: “To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history, but that we will extend a hand if you are willing to unclench your fist.”

Did that memorable line from President Barack Obama’s inaugural address on January 20 mean his administration would break with a long American tradition of paying lip service to democracy and human rights while supporting authoritarian rulers friendly to Washington? Too early to say for sure, but probably not.

Four months into his presidency, Obama and his Secretary of State, Hillary Clinton, lean towards pragmatism over ideology and principle, closer in foreign policy outlook to Richard Nixon and Henry Kissinger than to George W. Bush and Condoleezza Rice.

On her first official visit to China, Clinton said concern over human rights must not “interfere” with cooperation on the global financial crisis, climate change and security issues such as North Korea’s nuclear arms programme.

As for those on the wrong side of history, one leader who fits Obama’s description is President Hosni Mubarak of Egypt, from where the U.S. president is scheduled to make a high-profile speech to the Muslim world early in June.

A long-time U.S. ally, Mubarak has been in power since 1981. He won uncontested elections four times. The fifth and latest, in 2005, featured charges of vote-rigging and the arrest of his main opponent.

First 100 Days: Harness the genie of citizen engagement

Don Tapscott

Feb 10, 2009 12:35 EST

Don Tapscott is chairman of the think tank nGenera Insight and the author of 13 books on the impact of the Internet on society. His latest book, Grown Up Digital: How the Net Generation is Changing your World, discusses the Obama campaign and its implications for democracy. The views expressed are his own.

When President Obama announced last month that he’ll ask ordinary Americans to help him change America, it didn’t take long for the influencers inside the Washington beltway to ring the alarm: What happens if ordinary Americans actually come up with some new ideas to run government? Will things get out of control? Will they become bullies who will force Obama and Congressional lawmakers to bend to their will?

To me, they sound a lot like the traditional marketers who are worried that they’re losing control over their brand. Both marketers and lawmakers are struggling to adjust to a digital world where consumers and voters now have powerful tools to talk back, and even influence the brand or the policy. So let me give the Washington lawmakers the same message I have delivered to the marketers: Let go. You can’t control everything. The genie has slipped out of the bottle and she’s not coming back. And I think this is a really good thing.

For far too long, we’ve been living in what I’ve called a broadcast democracy. Voters only count during election time. They have little or no influence in between elections, when the lawmakers and influencers are in charge and citizenry is inert. The “you vote, I rule” model was all that was possible, until recently.

What the system has lacked until now are mechanisms enabling government to benefit from the wisdom and insight that a nation can collectively offer — on an ongoing basis. I’m not proposing some kind of direct democracy, where citizens can vote every night on the evening news or Web sites. That would be tantamount to a digital mob.

What I am proposing is a way to allow citizens to contribute ideas to the decision-making process – to get them engaged in public life. When citizens become active, good things can happen. We all learn from each other. Initiatives get catalyzed. People become active in improving their communities, country and the world. This is long overdue. These days, the policy specialists and advisers on the public-sector payroll can barely keep pace with defining the problems, let alone craft the solutions. Government can’t begin to amass the in-house expertise to deal with the myriad challenges that arise. Governments need to create opportunities for sustained dialogue between voters and the elected.

Courtesy of the Internet, public officials can now solicit citizen input at almost no cost, by providing Web-based background information, online discussion, and feedback mechanisms. Government can now involve citizens in setting the policy agenda, which can then be refined on an ongoing basis. Such activity engages and mobilizes citizens, catalyzing real-life initiatives in communities and society as a whole.

Tarp Two: New deal or no deal?

Richard Baum

Feb 10, 2009 11:43 EST

The U.S. Treasury Department on Tuesday unveiled a revamped financial rescue plan to cleanse up to $500 billion in spoiled assets from banks’ books and support $1 trillion in new lending through an expanded Federal Reserve program. But initial market reaction reflected investors’ doubts about the plan, with stocks falling around 3 percent after the announcement by Treasury Secretary Timothy Geithner.

“For all the rhetoric that this is a new plan, they’ve done nothing but rehash and expand the old procedures,” said Steven Ricchiuto, chief economist at Mizuho Securities USA.

Carl Lantz, U.S. interest rate strategist at Credit Suisse in New York, said details of a proposed public-private investment fund for mopping up toxic bank assets were “very vague”.

“It sounds like for this public-private investment fund they are still exploring a range of different structures for the program or seeking input from market participants,” he said. “That’s the the kind of stuff we heard on TARP One and suggests that given all this time they still don’t have anything very specific nailed down.”

James Ellman, president of Seacliff Capital in San Francisco, criticized the proposals. “Investors want clarity, simplicity, and resolution. This plan is seen as convoluted, obfuscating, and clouded. We know that Geithner was able to overrule many other Obama administration people, and said we should not be tough on bank equity holders or bank management. So equity holders got a better deal, and it’s still not a good deal.”

Do you have confidence in Geithner’s plans? Debate the announcement below. We’ll update this post with fresh comments from analysts and other market participants as we get them.