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.

BOXED IN BY RHETORIC

Obama is close to making a decision on a request by General Stanley McChrystal, the U.S. commander in Afghanistan for as many as 40,000 additional troops. If the president followed the logic of Admiral Mullen’s analysis, he would send none. But he will, because he is boxed in by his own portrayal of Afghanistan as the “good war” (as opposed to the war in Iraq) and his definition of why the U.S. must be in Afghanistan.

“This is not a war of choice,” he said in a speech in August. “This is a war of necessity. Those who attacked America on 9/11 are plotting to do so again. If left unchecked, the Taliban insurgency will mean an even larger safe haven from which al-Qaeda would plot to kill more Americans. So this is not only a war worth fighting. This is fundamental to the defense of our people.”

One of the most passionate arguments against this reasoning has come from Matthew Hoh, the first State Department official to resign in protest over the war. Hoh, a former Marine Corps captain, said in his letter of resignation that if the U.S. strategy really was to prevent al-Qaeda from regrouping in Afghanistan, then America should also invade and occupy western Pakistan, Somalia, Sudan and Yemen - all countries with an al-Qaeda presence.

“Our presence in Afghanistan has only increased destabilization and insurgency in Pakistan where we rightly fear a toppled or weakened Pakistani government may lose control of its nuclear weapons. To…follow the logic of our stated goals we should garrison Pakistan, not Afghanistan.”

Instead, he wrote, the U.S. was following the example of the Soviet Union, a previous and unsuccessful occupier, by bolstering a failing state.

– 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.

The White House is now engaged (as in war, not diplomacy) with an even bigger target, Fox News, to the evident delight of Murdoch. “There were some strong remarks coming out of the White House about one or two of the commentators on Fox News,” he told the annual shareholders’ meeting  of News Corp, the media conglomerate that includes Fox. “And all I can tell you is that it has tremendously increased their ratings.”

His cheerful observation came a few days after the administration switched from occasional counter-attacks to full-scale offensive. Anita Dunn, the White House Communications director, fired the first rocket in mid-October by saying Fox News was not a legitimate news organisation but operated as a research and communications arm of the Republican Party.

The president himself stayed out of the fray this time but two of his closest aides, Senior Advisor David Axelrod and Chief of Staff Rahm Emanuel followed up with similar comments on television news shows. Axelrod went as far as to urge other news organisations not to treat Fox News as a legitimate news outfit. Fox denies its news coverage is slanted and says critics fail to understand the difference between reporters and commentators.

SHOCK VALUE AND SHOW BUSINESS
Past performance is no guarantee of future results but it is probably a safe bet that the controversy will be good for the Fox bottom line - and that the commentators with the most provocative attacks on Obama will benefit most, a pattern reflected by the network’s third quarter results.

They showed Fox News as the dominant cable news organisation. It drew an average 2.25 million prime time viewers (a 2 percent increase over the previous year) - more than twice the combined number of its nearest competitors, CNN and MSNBC, both of which suffered considerable audience declines.

The shows by Fox’s top conservative commentators all showed steep increases, but none more than Glenn Beck (up almost 90 percent), who said of Obama on a Fox show in July: “This president has exposed himself as a guy, over and over again, who has a deep-seated hatred for white people and white culture.”

Commentators aiming for shock value are not in the business of context, such as pointing out, for example, that Obama’s mother was white and that he had close and cordial relations with his white grandparents. Obama was visibly shaken when his white grandmother, Madelyn Dunham died, a day before he was elected president.

Beck’s “hatred for white people” remark prompted several advertisers to abandon his show but that didn’t hurt the bottom line. A Fox spokeswoman said at the time that offended advertisers had shifted to other Fox programmes so there was no revenue lost.

Which raises the question why Fox News, which effectively functions as the voice of the opposition, has been more of a commercial success than its competitors which feature liberal, pro-Obama commentators and give a platform to people who want the president to succeed?

After all, he won the elections with the votes of Americans who bought into his reform agenda. And according to a Washington Post/ABC poll to mark his ninth month into the presidency, his job approval rating stands at 57 percent and only 20 percent of the country now consider themselves Republican, the lowest percentage in 26 years.

Even on the most hotly disputed aspect of Obama’s health care plan, the public option seen as socialism by conservative commentators, a majority of  Americans are coming out in support of the president, according to that poll.

So why is the White House acting as if right-wing critics pose a mortal danger? Thin-skinned sensitivity to criticism? John Batchelor, a conservative radio show host, has a different suggestion: ignorance.

“The White House war on Fox,” he wrote on the website The Daily Beast, “shows its ignorance of the network’s true purpose: show business. And Team Obama is giving Murdoch just what he wants.”

- 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.

For the time being, Obama is relying on lenders to fund his spending spree. The Federal Government’s budget deficit is likely to reach $1.6 trillion this year. Shockingly, this means around half the money it spends will be borrowed.

The long-term economic impact is likely to be devastating. Such high levels of borrowing hamper recovery by crowding out investment and will almost certainly lead to much higher taxes and interest rates. Expectations of a less dynamic US economy as a result of greater state intervention and more burdensome taxation also act as a deterrent to business expansion.

Perhaps more worrying still, Obama’s policies will increase the share of the US population directly dependent on government largesse. This will make it far more difficult to cut Federal expenditure if borrowing levels prove unsustainable. The temptation to monetize debt on the grounds of political expediency will be much stronger, even if it risks high inflation.

The President is sowing the seeds of the kind of destructive special interest politics that helped consign many South American countries to a century of economic failure. And while the authors do not argue that the US is likely to become the next Argentina - years of stagnation are more likely - by expanding the role of government so rapidly, Bush and Obama have raised at least the possibility of long-term catastrophic decline

– 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.

But they also assumed that the downturn would create such a sense of economic insecurity that time would be ripe for the sort of expansive, government-led healthcare changes that the party has been dreaming of for two generations.

Instead, the Great Recession made healthcare less of a priority for voters than economic recovery — as fast as possible, please — and job creation. A recent spate of polls shows concern about healthcare (and climate change and pretty much everything else) lagging concern about unemployment.

Healthcare lags concern about the shocking enlargement of the federal budget deficit, which has grown partly due to government actions — such as the $800 billion Obama stimulus package — to deal with the recession, as well as by the decline in tax revenue caused by the downturn itself.

And then this week, the Congressional Budget Office, the respected arbiter of what new government programs might cost, calculated that the Senate Finance Committee’s health reform bill would cost more than $1.6 trillion over 10 years. That was determined to be a political no-go by Senate Democrats– a smart conclusion given the recent polling — and the committee moved on to a still evolving plan B.

It is also ironic that the Obama administration, so aware of the latest research in behavioral economics, would forget about a phenomenon called “loss aversion”, which suggests people feel the pain of financial losses more acutely than comparable gains. Seems the whole healthcare plan was built up on the theory of losing something now — such as tax-free, employer-provided health benefits — for something later, like lower costs and a more sustainable government fiscal situation. To recession-shocked voters, that probably doesn’t seem like a more economically secure situation at all.

(Editing by Martin Langfield)

—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.

The U.S. Department of State, which issues annual reports on human rights, gives Egypt poor grades and notes “the government’s respect for freedoms of press, association and religion declined during the year (2008).” No unclenched fist here.

To boot, Mubarak has played host and acted as a sponsor to Omar al-Bashir, the Sudanese president who has been indicted by the International Criminal Court in The Hague for war crimes in Darfur. The court issued a warrant for Bashir’s arrest in March.

At the height of the Bush administration’s “freedom agenda,” the second-term drive for “democracy promotion,” Washington publicly scolded Mubarak. Rice, during a visit to Cairo, announced a break with the past:

“For 60 years, my country, the United States, pursued stability at the expense of democracy in the region. And we achieved neither. Now we are taking a different course. We are supporting the democratic aspirations of the people.”

TARNISHED IMAGE

By 2005, when Rice made her democratic aspirations speech, the U.S. image in the Arab world was so badly tarnished by the war in Iraq, the Abu Ghraib prison scandal and Guantanamo that few Arabs were inclined to believe anything the Bush administration said.

Her remark stood out for its bluntness and its venue but the idea was not new. Support for democracy against dictatorships has been a key theme of American foreign policy since the U.S. rose to big power status at the turn of the 20th century.

That did not keep the U.S. from overthrowing democratically-elected leaders it did not like (Chile’s Salvador Allende, Guatemala’s Jacobo Arbenz) and propping up dictators it did (the Shah of Iran, Congo’s Mobutu Sese Seko, Ferdinand Marcos of the Philippines). Saying one thing and doing another earned the U.S. an enduring reputation for hypocrisy.

The Bush administration’s enthusiasm for democracy promotion in the Middle East fizzled rapidly after the Islamist group Hamas, shunned as a terrorist group by the West, won a resounding electoral victory in Gaza in 2006. Since then, part of the American foreign policy establishment has framed the alternatives in the region as Islamists or authoritarians.

If there were free elections today in Egypt, many experts predict that the Muslim Brotherhood, whose aim is the establishment of an Islamic state, would win easily, an uncomfortable prospect for Washington.

To push an Arab peace plan Obama wants to make part of an effort to create a Palestinian state side-by-side with Israel, Mubarak is clearly a better partner even though he may be on the wrong side of history. The plan offers Israel normal relations with all Arab states in return for withdrawing from territory it seized in the 1967 Arab-Israeli war.

The plan was first floated by Saudi Arabia, another staunch U.S. ally far from democracy and prone to silence dissent.

How (and whether) Obama intends to persuade countries on the wrong side of history to switch to the right side should become clear in his speech to the Muslim world. It could be a turning point in America’s relations with a fifth of the world’s population, but there is a lot that could go wrong, even for a president with Obama’s charisma and outstanding political skills. Not to mention a middle name that resonates: Hussein.

The goal he set himself for the speech, spelt out before he took office, is ambitious: “Reboot America’s image” in the Muslim world. Words alone won’t do it, but they are a start.

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.

When Obama launched Organizing for America, his dialogue with citizens, the idea was to channel the unprecedented grassroots campaign that propelled him to victory into the hard business of changing America. Organizing for America will “talk about and work on the pressing issues facing the country,” said Obama’s campaign manager David Plouffe. Obama “believes in grassroots politics,” said Organizing for America’s executive director Mitch Stewart. “He’s going to be your partner. He’s going to listen.”

The first test of the idea came at the weekend, when thousands of meetings of Obama supporters took place across the country. What’s not clear yet is how the president intends to use the Internet to tap into the public’s thinking.

There are lots of Internet-enabled ways to engage America, from policy wikis, citizen juries, deliberative polling, ideation contests, and virtual town halls. I call one of the most promising the digital brainstorm. This is an online way to bring together policy officials and citizens in a real-time, moderated session, to exchange ideas and identify new policy issues and strategies and to mobilize the citizenry.

Here’s how it would work. The president would say, “We’re going to have a national discussion on revitalizing our cities. It starts on Monday at noon and ends the same week on Friday at noon. Anyone can participate through the Web 2.0 discussion community we’ve set up. If you don’t have Internet access, I’ve partnered with corporations, schools, libraries, community computing centers, and shopping malls to give you access. We’ll post background papers. We’ll organize the discussion by region and also by interest groups. There’ll be a business discussion, a discussion of public transit users, and so on. As you participate in the discussion rate the ideas that you come across and the best ideas will rise to the top. I’ll participate daily and give my views. At the end of the process we’ll explore our options for further action.”

The goal is to have a conversation in which people become engaged in political life; think about issues; get active in improving their communities; and mobilize society for positive change. Politicians and citizens alike would become more informed and learn from each other. And collectively we would take a step away from broadcast and toward participatory democracy. As an exercise in government 2.0, it could show that power can be exercised through people, not over people.

I’m currently working with government leaders in several countries to conduct brainstorms of all their citizens. Interestingly, the main topic of choice is climate change, using a question such as “How could our country more effectively contribute to the fight against global warming?” or “How could we reduce carbon emissions in our country?”

If Obama really wants to change America, he should hold digital brainstorms for all Americans, and he should make sure the young people – the Net Geners who have grown up digital – are involved. He’ll need a social movement of young people to bring about real change. This can only happen in public – not through backroom negotiations. Only through open struggle and conflict can a real and lasting change take place.

You can follow Don Tapscott on Twitter @dtapscott

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.