Obama’s Public Administration Philosophy
No polling result is available to serve as a reaction gauge to Obama’s Afghanistan deployment speech. Obama was an anti war candidate. Now he is making a deployment decision. Is he contradicting himself? What is he after? What does it mean to us?
He is after his re-election, as every politician is. Having said that, what also went on in his mind must have been the 2010 mid-term election, although he knew (and everyone else knew) that Democrats will lose seats in that election since all president lose seats in the first term’s mid-term elections.
War is expensive. Unemployment is still high. He acknowledges with Eisenhower’s quote very well that “Each proposal must be weighed in the light of a broader consideration: the need to maintain balance in and among national programs.” After all, war is still a budget item.
He is not appeasing his own base. That is for sure. Is he reaching middle ground? Considering a much greater proportion of rural area voters have military ties, having a higher expense on military could be Obama’s way to secure a wider base. But at the expense of sending more people to battle field?
Obama’s speech stresses on one point to justify his approach to this war: the primary nation of nation-building exercise is his own nation. Will the rural electorate see this as a venue to reward Obama’s core constituency, the urbanites? Of course, this will be dictated by what Obama will do with the resources or energy freed up by this management approach.
This Eisenhoweran philosophy is simply a reflection of budget constraint. This is consistent with Nancy Pelosi approach to this portfolio item: war tax. If you want it, then pay for it. If you do not want to pay for it, then you probably don’t think it is worth it. Will the war tax actually fly? Hard to say. However, if this Eisenhoweran approach to military conflict will be applied consistently over time and therefore will establish a new foreign policy doctrine, then this war tax idea will eventually take roots. That will establish another kind of precedence: purpose dedicated tax. Not that purpose dedicated tax is completely new since social security is funded by a dedicated tax as well. However, this war tax will definitely take this idea to the next level.
This is what affects us the most. America is facing a fiscal crisis and will continue to face a fiscal crisis for decades to come even after paying down the costs incurred by the Bush’s Iraq war, Bush’s Afghanistan war and now Obama’s Afghanistan war, because of the expecting expenses for baby boomers. Due to this budget constraint, conflicts different interests group will compete harder for this federal budget. Purpose dedicated tax will then be the weapon for different groups to secure their own funding, especially for new issues, such as green issues.
If Obama will be employing Eisenhower approach and Pelosi will be playing her cards, they will create a new policy management philosophy that will last long beyond their political accomplishments.
Why Can’t America Happy Talk With Pakistan And Save 2010 Election?
Did anyone foresee that US-India relationship has an impact in 2010 election? Or that it may cost $20B annually? US Secretary of State Clinton is visiting Pakistan for three days to have a frank and open discussion and is in no time to have a “happy talk”. Pakistan is the most important ally to US in the anti-terrorism war. Therefore, US should be happy to have such an important ally and Pakistan should happy to see it is an important ally to the most powerful country on earth. What made this strong Pakistan-US relationship to the point where there is no time for happy talk? What sours the relationship? Is US able to fix it? Is US going to find a new friend?
The sore point is about the future of Afghanistan. US want to remove terrorist heaven in the area and be done with it. The core interest of Pakistan is its relations with India. The US’ version of the Afghanistan future is not advancing Pakistan’s interests with India.
Pakistan, relative to India, has no strategic depth. Of all its fronts, Afghanistan is the only front where Pakistan can develop, cultivate and incorporate as Pakistan’s back. That was why Pakistan would have supported US’ interests in Afghanistan during the Soviet Union’s Afghanistan invasion and created resistance forces where Pashtuns, Pakistanis cousins, had the controlling stakes. If US’ version of Afghanistan is to dilute the influence of Pashtuns, open Afghanistan to more international players (say India) or US itself develops a stronger ties with India and marginalizes Pakistan as a result, then this ally relationship may not be simply a bargaining chip for Pakistan, but actually may become contrary to the self interest of Pakistan.
US have developed an undisputable interest with India in the eyes of Pakistan. Both India and Pakistan have nuclear weapons (not just capability, unlike Israel). However, US scold Pakistan and promise to assist India to develop civilian nuclear abilities (Hyde Act). Of course, US see India as a counter weight to China. However, in doing so, US are compromising its anti-terrorism objective by alienating Pakistan.
If India serving as a counter weight to China is more important than losing Pakistan, then can US find a replacement ally in the area to fight terrorism? Ironically, the only player adjacent to Afghanistan available in the area is China. All other countries are either unavailable (Is Iran available? At what price?) or they have their own problems to deal with, say Turkmenistan, Tajikstan, Uzbekistan. Do these countries listen more to Russia or China since they love their Shanghai Organization so much? Do US want to invite China to extend its influence to Afghanistan? Or have US ever invited China to play in Afghanistan? Can US impose this arrangement to Pakistan, i.e. can US tell Pakistan to fight a war and strengthen Pakistan’s nemesis at the same time? Worse, what if this arrangement actually is eroding the supporting base of the Pakistan governing elite?
More likely than not, Clinton’s trip means this relationship management has gone beyond the authorities of Special Representative for Afghanistan and Pakistan Richard Holbrooke. If this frank and open discussion is meant to be a give and take negotiation, then we can wait and see if a resolution will come. If this frank and open discussion is meant for Pakistan to rant and move on to live with this arrangement, then this military campaign in Afghanistan will drag on as other NATO allies plan to return home. If Clinton’s trip is meant to facilitate Obama’s final decision on Afghanistan’s troop level, then considering its fiscal policy consequences and electoral consequences in 2010 and possibly 2012, Clinton is actually carrying one heavy responsibility.
Want A Solution? Or Want A Political Solution?
Regulations suffocate businesses, so we have been hearing from the right side of the political spectrum. Can you imagine a case where businesses, big businesses, want to have more regulation?
Central bank veterans like Volcker (Federal Reserve) and Mervyn King (Bank of England) and politicians like Gordon Brown and Barrack Obama (or Timothy Geithner) are advocating opposing positions. The first interesting story is that central bankers (or bureaucrats) are advocating less regulation. The more interestingly part is the affected businesses want more regulations. What is at heart of this debate?
King advocates that in order to prevent another financial tsunami, we should prevent having banks that are too big to fail in the first place. To suffice that, we need to break up banks that are big enough to pose systematic risk to the economy. In this case, they see financing the whole economy as a portfolio. Diversification is the solution. It is simple, very simple. Cost of regulation is minimal. Markets will regulate and therefore reduce some of the problems. Easy on the government (read: central banks will not get blamed), easy on the consumers. Who would have a problem? Big banks: Citi (NYSE: C), HSBC (NYSE:HBC) etc because they are everywhere. The market share of big banks is already big. The top three banks (BOA, NYSE: BAC; Citi, NYSE: C; JPMorgan Chase, NYSE:JPM) in the US take up already 1/3 of the assets in the bank sector. NYT has an article about how Volcker is doing with this effort.
Another angle to view the cause of this financial tsunami is that some financial institutions carried risky activities that were not lending in nature (i.e. not banking) and relied on government bailouts where the money came from deposit insurance funds when such funds were designed to protect depositor’s money and not to finance the risk of activities unrelated to banking, i.e. lending. That is why CNN is saying the cost of the bailout will be higher than previously thought. To suffice that, we can separate lending from the risky activities (trading). This is actually the Glass-Steagall Act, which got repealed. Again, who has a problem? Again, big banks: Citi (NYSE: C), HSBC (NYSE:HBC) etc because they have activities of all kinds, from boring first lien mortgage lending to exotic trading activities that only the math PhDs in that specific department would understand and not even the CEO can speak to them intelligently in any kind of congressional hearings.
Gordon Brown and Barrack Obama are advocating neither of these. They want compliance enforcement agencies (Financial Services Authorities in UK and Federal Reserve and others in the States) to create new rules/laws for the governments to check on. These would involve reserve requirements and so on. In both countries, central banks will have more oversight powers, which should be what bureaucrats want (more government jobs!). However, both (and Nobel laureate Stiglitz) argue against it. Why aren’t politicians listening to their advice? Since central banks still carry high credibility in the society, central bankers do not typically have aspiration for high political office, elected officials want central banks to mitigate this systematic risk and thus be liable to the failure of systematic risk. The proposals by central bank veterans are fundraising poisons.
Why is Alan Greenspan silent? His position is that this systematic risk a financial tsunami. Nothing could have prevented it (and thus it was not his fault). If some compliance enforcement could have prevented this tsunami, then he would take the blame. Thus staying silent serves his best interests.
Will Obama’s Health Care Bill Be A Plagiarized Product?
If Obama is drafting his own version of the health care bill, and that CNN is correct regarding a “trigger option”, then at least Obama actually wants it done, although fairly late in game since almost no Republican is left for negotiation. One good example: Grassley says he will defeat Obamacare.
This trigger option seems to suggest Obama will be plagiarizing Bipartisan Policy Center’s ideas. In the world of policy development, being violated (the copy right of your policy idea, of course) is a good thing. What does Bipartisan Policy Center say? Why does Obama listen to this one? Remember there are thousands of “think tanks”, advocacy groups and lobbyists who have plenty of ideas (guess where lobbyists’ policy ideas come from?). So why Bipartisan Policy Center?
Bipartisan Policy Center is created by all the living Senate Majority Leaders (Dole, Republican; Baker Republican; and Daschle, Democrat). Taking their work probably does not only symbolize that Obama is buying a plan that has 2/3 of Republican input, but taking Republican ideas seriously into lasting piece of foundation to the country. Is it a tactic or philosophic in substance? Hard to say. Does it increase the probability of getting done? Yes, but how much? That will have to depend on the sales delivery mechanism. Will it be LBJ style where Obama will be calling each Congressmen, their donor, mother, children, gardener and babysitter? Will it be an air war about Republicans defeating their own ideals? It reads like Obama will want to avoid fighting.
If you want to have advanced information about how this policy will affect your favorite health insurance companies such as Cigna, Aetna (NYSE:AET), Humana (NYSE:HUM), UnitedHealth (NYSE:UNH) Blue Cross Blue Shield (http://bcbs.com), then consider reading Pillar 2. The main piece of recommendation from Bipartisan Policy Center that is related to health insurance companies such as is in Pillar 2. If you want to find out how it will affect balance sheet of health care delivery companies (hospitals and so on) like Health Management Associates (NYSE:HMA), Community Health Systems (NYSE:CYH), then Pillar 1 and Pillar 4. Pillar 3 has something interesting about laws concerning patients. Of course all 4 pillars are important to all vested parties, be they practitioners, insurers, buyers, support systems (technology service providers).
Another Obama TV Performance? This Time, Health Care
Is Obama ready for a deal? Unnamed senior aide says so to cnn.com. Obama may be preparing another TV performance again. We all know everyone in the country is vested in this issue, one way or the other. The question Obama has to answer is: who else does he need to pull to his side to get this done? Of course, an interesting question would be: Is he aiming to pass a health care reform?
A lot of critics have already voiced their opinion (this one and this one) how Obama administration could have handled this debate better, more civilly so that the debate can have more substance.
Let bygone be bygone. Obama is only interested at the future anyway. Which vested party will have a continual interest to fuel more grass root anger? Not necessarily pharmaceuticals. PhRMA is not that critical. It is so uncritical that Republican would rather attack PhRMA’s position on Obama-care.
As long as Republicans do not sign the legislation, the success or the failure of health care reform will make Republicans the biggest gainer. In that sense, Republicans are the greatest stakeholder. If health care reform fails, it certainly is a victory for Republicans. If health care reform passes, this health care reform will provide ammunition for elections to come.
Back to the pharmaceuticals, their interest lies in having more profit. If the health care will expand prospective customers to enlarge their profits, they will be all for it. In fact, this is how I would understand PhRMA’s website statement (this one and this one).
Patients are voters. In fact this issue will motivate a lot of voters, especially seniors. This is where the upcoming Obama-care speech will be a major source of information. When Obama will be talking to the voters through the TV box,
1) Who are the interest groups Obama will be talking to behind the text?
2) How is he creating dissent among the opponents?
3) Is he blaming someone else for the fear raised in the town hall meetings? Or is he explaining his position to overcome the fears?
4) Does he show a sense of prioritized items in this legislation?
5) Is he setting up an epic failure to harden his core support and lend a focus on something else?
Whatever position Obama will choose by then, he ultimate will re-structure the health insurance market, and possibly more than just the health insurance market. Does anyone remember the last time a piece of legislation that affects the society in such scale? It was the credit market. Not anything caused by the 2008 credit crisis. It was actually Equal Credit Opportunity Act enacted in 1974. How long was that legislation? 8 pages. How long is the current the congress is discussing? >1000 pages. Once it becomes clear what this health care reform beast looks like, it will become clear what kind of a world Cigna, Aetna (NYSE:AET), Humana (NYSE:HUM), UnitedHealth (NYSE:UNH) Blue Cross Blue Shield (http://bcbs.com) will have to live with. Some will grow and some will shrink. This is how political risk affects regulation risks.
Obama, in my opinion, is a pro-civil servant president, a contrarian position of Benjamin Franklin, if you remember Franklin’s Dangers of Salaried Bureaucracy. Obama also enjoys eloquence argument (eloquent is not succinct). Having a short legislation is easier to make it eloquent. Of course, this is not a critical factor. However, being short definitely makes it easier for the salesmen (congressmen).
If Geithner will have to do financial sector regulatory reform, Obama can actually break this health care reform in pieces, in Federal Trade Commision, Department of Treasury, medicare and social security reform. If Obama can be stealthier about this reform, he can accomplish more than anyone can conceive.
The cost to the society is high for this prolonged battle, may Obama be victorious or not. Even Gore’s election loss did not generate such a polarized conflict over such a long period of time. The last time an event generated such political energy was probably the 60’s. If we employ this kind of analogy, then is this conflict between eggheads and the rest of society or is this a conflict between generations? Or is this a continuation conflict of the racial haves and have nots from the 60’s?
What Does Your Wallet Or Your Politics Care If Japan Were Ready For Change?
The 2009 general election in Japan is the first time any opposition party won a mandate with meaningful margin. Does it matter to the United States/Obama? What does your wallet care about a Japanese election?
DPJ won this election with a landslide, 60% of the seats. LDP, the incumbent who lost, still has 20%. However, its electoral power is greatly reduced. DPJ should have no difficulty in implementing changes it advocates.
Election result often is a reflection on the perception of their economic lives for most voters. This one is no different. Challengers have no experience in governing. And the voters do not care. They want the incumbent out.
Opposition DPJ promises more government checks for babies to lift fertility rates (negative population growth) and for seniors (20% for Japan vs 13% for US). How are they going to pay for this when the labor force is shrinking and Japan has been avoiding the talk of an immigration policy? if you think Obama is irresponsible in drowning your grand children with eternal debts or that French were crazy, then consider Japan’s public debt ratio: 162% back in 2007
and expect to be 200% in 2009.
Japan will eventually do what Obama is already doing, lower the exchange rate. It will make the bonds they are making worth less (I do not know want to say worthless), not that they aim to cut down the prices of their products (Honda NYSE:HMC, Toyota NYSE:TM, Nissan not trade outside of Japan, Mitsubishi NYSE:MTU, Sony NYSE:SNE). Will these companies be more profitable? At least they will have one more factor. Will Walmart’s (NYSE:WMT) spreadsheet make a dent (Yes it operates in Japan)? Probably not.
Reforms to boost productivity is obvious a step they will have to take. However, the easiest way to score points for DPJ is to shrink the power of bureaucrats. Opening trade barrier is not one of them. Americans will probably continue to make most of their money through large heavy industrial sales or trading outposts in Japan. How much can Obama lean on them?
DPJ advocates for more fraternity in the face of US led capitalism which makes “human dignity is lost”. Is DPJ socialist? The NYT speaks well of Liberty, Equality, Fraternity. Japan will be more interested at balancing itself between China and US rather than an ideological shift, although US never really helped with Japan’s ambition in the international politics (like getting a seat in UN Security Council). After all, The NYT editorial mentions America twice and China 9 times. All references about China are about its economic power. And China can afford to make large inter-governmental purchase that US cannot in the near future. Will this be a geopolitical shift? Hardly, if Japan recovers quickly with great confidence about itself. If Japan recovers with pace and DPJ wins re-election, then a whole new generation of voters will mature through the benefit of China trade. That will make a shift.
USA Election 2000 – Iranian Edition (And Your $$)
The Iranian election becomes another election mess. The American (the first edition) version requires a Supreme Court to give a final answer. Iranian one? A Supreme Leader gives a final say.
And the Supreme Leader says the incumbent wins.
In a situation like, just like the American original version, a decision made by that few individuals, the decision is ultimately political, whatever the cloak it is actually. In the American original version, it is under the cloak of law. In the Iranian version, it is under the religious leader’s cloak. Note that the Supreme Court Justices are life time appointments just as well.
What ticked? Not bribe. As usual, what is the alternative of the decision? Supreme Leader weighted between incumbent and challenger. Who is a bigger threat to the Islamic Republic? Or for that matter, to the power of clergy?
Challenger is always about “change”. Incumbent is always about “you know what you get. Don’t rock the boat.” This applies to any institution (note, not necessarily a country), any selection process (note, not election), any candidate.
The next question is: what about the protests? Supreme Leader is confident he can manage the internal crisis. If the protests get any worse, it will be between a Tiananmen Square (Iranian Edition) and End of Soviet Union (Iranian Edition). Certainly, Supreme Leader thinks the worst scenario is Tiananmen Square.
Alright, so what does one care about this latest news episode? Political instability drives up the prices of commodities, in particular, the commodities the geography produces. So, in this case, oil.
Oil will become more expensive, if this goes on. The only way oil does not increase further is traders believe the recession is so bad there is no demand for oil anyway, i.e. demand will decrease even if the quantity of supply is not being affected by the political instability of Iran.
Oil exploration companies’ stocks go down (not up). The core material of their product gets more expensive, so their profit margins get squeezed. Consider the following company, BP:
The companies that get affected less so are the American oil exploration companies who have less exposure to Middle East (or think about the Canadian oil companies). And if you happen to own renewable energy companies’ stock, you should see prices going up for your stocks. Given today is Friday, one may be tempted to clear their stock inventory just in case the next episode of this Iranian Election comes up and affect the portfolio.
The things that really distort the prices of stocks affected by Iranian election are: Obama’s announcement on health care and Obama’s announcement on the merger of OTS and OCC.
Too Big To Be
Obama administration is finally using anti-trust as a treatment for “Too big to fail”. That is exactly what this blog asked for: http://poweranddollar.com/2009/03/27/anyone-understands-geithner/
Had Bush used this treatment during his time, systematic risk could have been reduced, although not eliminated nor sufficiently managed.
Did Sherman and Clayton (as in Sherman and Clayton Acts, the anti-trust legislations) have systematic risk in mind? Certainly not. However, they were more in the line of if market entry cost is too high due to market makers, then something bad is bound to happen.
Was that line of thinking new at the time? No. That is why monopolies have to be granted by the governments in England, as in Crown corporations. This practice is still in place, just to highlight how much consideration should be given for monopolies.
Interestingly enough Obama administration is trying to enforce tougher antitrust, Obama administration may be guilty of antitrust as well, if Obama administration is in “restraint of trade” or “price discrimination” on health care costs when the administration is trying to “contain cost”. Unfortunately, critics are only concerned with “quality” or “ration care”.
The problem does not need to get that complicated.
CNN Advertisement: Time To Buy Republican
The author (John Feehery) of this CNN commentary is a political operative, lobbyist, etc. He makes his living by using his access to the Republicans. When Republicans are in disarray, so is his livelihood. In order to drum up more business, he has to encourage his potential customers to spend money in Republicans. This article is very consistent in his message about “bottom out”. He also points out very explicitly that political entrepreneurs will see opportunities.
He is also very good at organizing his advertisement into 5 bullet points. These points are also in order to of investment relevance rather than political ideology relevance.
All his points are very valid. However, the advertisement taste is a little too obvious.
Since when CNN did distributing ad content in place of news content?
