While the media are drawn to the story of the day, which today means the killing of Baitullah Mehsud in Pakistan and the longevity of the "cash for clunkers" program here at home, it is essential for the Obama administration to keep its eye on the strategic ball. In short, while the administration was absolutely right to triage the domestic economy and global crises like Iraq and Afghanistan during its first six months, the President and his most senior advisors must now turn to the great questions of statecraft: great power relations and America's role in the world.
The reality is that the post-war global order, in which the United States asserted a de facto strategy of hegemony, is now irretrievably dysfunctional and, when it comes down to it, triggered the domestic and foreign crises that consumed the president's agenda until now.
That old strategy, as our colleague Michael Lind has written, was founded on a simple bargain: Washington would let the rest of the world export to the American consumer, hollowing out our own manufacturing base but subsidizing our consumer lifestyle. In return, we would assert a kind of global hegemony, using the tools of foreign policy (our military budget and capabilities) to dissuade the rise of peer competitors, to reassure the world's powers that we would take care of common threats (Iraq, Afghanistan, Serbia), and in those cases of resistance to our hegemony, to coercively disarm them (Iran, North Korea).
It was always a time-limited gambit and time finally ran out a year ago when the economic foundation of the strategy collapsed spectacularly in the U.S. housing crisis. Addicted to the false security of bundled American home mortgages, Wall Street built a house of un-priceable derivatives on the sand of irresponsible sub-prime mortgages - fueled by easy access to credit provided by exporting nations like China, Japan, Germany and the Gulf States. Borrowing against rising home prices to keep consumption high, American households lost trillions in home value and cut back dramatically on consumption - such that Chinese exports fell 30 percent.
At the same time, our over-stretched military was finding it harder and harder to find the budget and the manpower to match the operations tempo that hegemony required. And despite today's confirmation of Baitullah Mehsud's death, it looks increasingly like that operations tempo will only remain high, if not get higher.
Furthermore, the basic strategic facts on the ground have changed dramatically since the early 1990s when hegemony was proffered during the George H. W. Bush administration.
China is now a massive economy whose GDP is more about building China then exporting cheap goods to the West. Russia is no longer the post-Soviet basket case it was under Boris Yeltsin, for Vladimir Putin has marshaled its energy resources and nuclear arsenal to make it a real force in the many strategic issues along and beyond its incredibly long frontier.
Europe, meanwhile, used the last two decades to absorb Eastern Europe and along the way avoided getting into a balance of trade trap with Asia. Japan remains a major creditor of the United States and is increasingly concerned that American security guarantees in East Asia are not what they once were. Indeed, the combined economies of Russia, China, India and Brazil are likely to outstrip those of the G-7 in twenty years time, according to Goldman Sachs Chief Economist Jim O'Neil.
Luckily, this new reality points directly to the major issues that require a new great power agreement: global macroeconomic rebalancing, the need to adapt and manage global energy markets, and establishing global and regional collective security architectures.
The most immediate challenge is to begin rebalancing the global economy in a way that promotes sustainable global growth. The American consumption-led model of global growth is not coming back. The great powers must work together to create and balance new sources of domestic demand within their own territories. The United States and China in particular must conceive a new economic relationship that reduces the massive trade and capital flow imbalances at the root of the present economic recession. This will require a combination of policies that reorient China's economy toward domestic demand and develop a new economic engine to power the United States for the coming decades.
Of equal importance is energy. The United States' Energy Information Agency 2009 Energy Outlook predicts that global energy consumption will increase 44% from 2006-2030. Anticipating this increase in demand and the corresponding increase in prices, the great powers have so far conceived of energy security as a largely zero-sum game, and competed with one another for access to hydrocarbon resources from Africa to Central Asia to the Arctic Pole.
Russia, China and the United States all rely on a highly volatile and fragile global energy system. Such volatility, however, has had negative impacts on each of the great powers in recent years. The rise in oil prices accelerated the financial crisis in the United States, in China, high energy prices forced government energy subsidies that, for a while, took the profit out of their export sector. While in Russia, falling prices undercut government subsidies to its uncompetitive industries and massive pensioner class.
With Russia and Europe competing over access to Caspian and Central Asian energy, with Russia, China, and the United States competing over Iranian energy resources and the U.S. and China signing a memorandum of understanding committing both to work toward a "low carbon economy," the geopolitics of energy will continue to shape the strategic outlook of great powers unless something changes. A new energy order that allows economies to develop, transform and function while facilitating global stability and prosperity is in all the powers' interest but is as of yet hard to discern.
Finally, the security arrangements and institutions that guided the United States through the Cold War must be updated to reflect current power realities. This requires a serious effort at global institutional reform as well as the creation of capable regional security structures that allow for rules-based regional resolution of threats to international security.
At the global level, the UN Security Council and the International Financial Institutions need to reflect the realities of today, not 1945. Looking to models like NATO and the EU, regional organizations like ASEAN, the African Union, and the Rio Group need to increase their capability to promote regional stability and sustainable economic integration. Governor George W. Bush was right: the United States should not be the world's policeman.
As President Obama emerges from his first six months of domestic and global triage, conventional wisdom believes that his next priorities should be the usual laundry list: health care, climate change, Iran, Afghanistan, and North Korea. But a deeper look at these issues, we believe, reveals that most of them can be made much more tractable if the President first strikes a durable great power bargain with Russia and China.
The reasons for focusing on Russia and China should be clear. Russia because of the leverage provided by its energy resources and infrastructure and its nuclear arsenal, and China because of its rising economy and massive population. Europe, Japan, India and Brazil are, of course, real or rising world powers and must be accommodated in any new global concert, but their interests, capabilities, outlook and strategies simply do not cross the great power threshold.
Of the three great powers, the United States is in the strongest position to lead such an agenda. Our post Cold War grand strategy has met its natural death and the Obama administration came into office with a mandate to not only deliver change we can believe in, but specifically to "change the mindset" that led the United States to war in Iraq. Meanwhile, China and Russia are in the opposite position: their ability to adapt their grand strategies to a new American agenda is extremely limited, giving the United States a significant silver lining.
But there is not much time. Grand strategy must be conceived of and executed well in advance of political judgment days. There are less than three years before the Obama administration must report on its progress to the American electorate and Russia and China's current strategies are every day reducing American maneuverability and options.
It's time to focus.
-- Patrick Doherty and Ben Katcher
I have written a lot about the Senate's role of Advice and Consent for a President's judicial nominations. A final word of thanks to Senate GOP leader Mitch McConnell:
Senate Minority Leader Mitch McConnell, R-Ky., has used debate over Sonia Sotomayor to argue that Democratic opposition to Bush administration judicial nominees reduced the deference GOP senators are now obliged to give a president's judicial picks, freeing them to oppose nominees on philosophical grounds.
(Emphasis supplied.) As I have written often, that is as it should be. Thank you Senator McConnell for making it the conventional wisdom.
Speaking for me only
I am expecting a significant stock market correction at any time.
If you’re a regular reader of my columns, that won’t come as a surprise to you. And I’m not alone in that camp either. Analysts,…
Gee, what a surprise. The GOP and the health care industry is playing dirty. While our guys negotiate secret backroom sweetheart deals with Big Pharma and then expect them to play nice. Where are our hardball players? Hello?
Just three days after imploring his viewers to refrain from "violence," warning them that "just one lunatic, like Timothy McVeigh, could ruin everything," and saying that "it is your patriotic duty to stop" someone who is thinking or talking about turning violent, Glenn Beck staged a scene in which he gave a glass of wine to House Speaker Nancy Pelosi and then said, "I put poison in your -- no, I -- I look forward to all the policy discussions that we're supposed to have."
Beck: "Your interaction with [members of Congress] needs to be respectful, polite, forceful, and peaceful."
BECK: The best thing that you can do right now is to let Congress know that you are watching them like a hawk. You show up. You let them feel your burning gaze on them at all times. But here's the thing that I am concerned about. Your interaction with them needs to be respectful, polite, forceful, and peaceful. [Fox News' Glenn Beck, 8/3/09]
Beck: "But just one lunatic, like Timothy McVeigh, could ruin everything that everyone has worked so hard for."
BECK: These people in Washington have no idea what they have done. They have awakened a sleeping giant. But just one lunatic, like Timothy McVeigh, could ruin everything that everyone has worked so hard for, because these people in Washington won't pass up the use of an emergency. [Fox News' Glenn Beck, 8/3/09]
Beck: "If you ever hear someone thinking about or talking about turning violent, it is your patriotic duty to stop them."
BECK: There is no excuse for violence. Our founders sailed across the ocean, battled killer storms, smallpox. They vomited for three months on a tiny little wooden ship with a bed sheet for a sail just to get a grievance before the king. They did that for 20 long years.
What have we done? Oh, I sent an email. I made a phone call. They won't even listen to me anymore. So the next logical progression is email, phone, a gun? Only for a crazy person.
If you ever hear someone thinking about or talking about turning violent, it is your patriotic duty to stop them. The only way to save our republic is to remain peaceful -- forceful but peaceful. [Fox News' Glenn Beck, 8/3/09]
BECK: So, Speaker Pelosi, I just wanted to -- you gonna drink your wine? Are you blind? Do those eyes not work? There you -- I want you to drink it now. Drink it. Drink it. Drink it.
I really just wanted to thank you for having me over here to wine country. You know, to be invited, I thought I had to be a major Democratic donor or a longtime friend of yours, which I'm not.
By the way, I put poison in your -- no, I -- I look forward to all the policy discussions that we're supposed to have -- you know, on health care, energy reform, and the economy. [Fox News' Glenn Beck 8/6/09]
Nooners surveys the mob scenes, the hangings in effigy, the assaults, the unhinged rhetoric -- and blames Obama.[...]
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Rep. Bob Inglis (R-SC) faced a “rowdy” crowd at a town hall forum on health care yesterday. Inglis said that he was against the health care policies being advocated by the Obama administration and “won applause for advocating medical liability reform.” However, the crowd revolted when Inglis told people to “turn the TV off” and stop listening to Glenn Beck. Watch it:
Inglis’ comments about Beck are inaudible in the clip, but ThinkProgress spoke to an Inglis spokesperson who confirmed that he had made those remarks.
Apparently the Obama administration made a commitment to the drug companies that it would block efforts to reduce drug costs in the Medicare prescription drug program. This was apparently in exchange for a promise by Pharma to cut their prices to seniors by $80 billion over the next decade. While we may not know the full content of whatever agreement was actually struck, if this exchange is at its center, the taxpayers got a bad deal.
To give some context, the country is projected to spend more than $3.5 trillion on prescription drugs over the next decade. This is more than 2 percent of projected GDP over this period and comes to about $12,000 per family. That is real money even in the context of federal budgets.
The industry's promised $80 billion in savings would be equal to less than 3 percent of its projected revenue. It is also important to remember that these savings are not well-defined and there is no obvious enforcement mechanism. Given the record of the drug industry, a certain amount of skepticism would certainly be warranted.
Even if the industry carries through with its promise, they would still be getting a very good deal. The United States pays nearly twice as much for its prescription drugs as do people in other countries--or for that matter - as do our veterans who receive their health care through the Veterans Administration (VA). If Medicare were to pay VA type prices, it could easily save taxpayers and beneficiaries $600-$800 billion over the next decade .
There is a great deal of support among Democrats in Congress for having Medicare negotiate lower prices with the drug industry. The industry scored a real coup if it was able to head off this possibility with a vague promise of $80 billion in savings.
It is important to realize that high drug prices don't just cost us money, they are also likely to lead to bad medicine. The basic story is that drugs are almost invariably cheap to produce; the reason that prices are high is that the government grants the industry a patent monopoly. This monopoly allows Pfizer, Merck, and the rest to charge hundreds or even thousands of dollars for a prescription of life-saving drugs that would sell for $4 at Wal-Mart if we had a free market.
When there are huge gaps like this between price and cost of production, then the industry has enormous incentive to promote their drugs, even when they may not be the best medicine for patients. This is why it spends billions of dollars each year on ridiculous television ads and why it spends tens of billions of dollars hiring former cheerleaders to go to doctors' offices to push their drugs.
Business responds to incentives, that's basic economics. And the incentives the government is giving the drug companies is to push their drugs to anyone they can get to buy them, whether or not the best medicine for their condition. Needless to say, this goes directly against President Obama's efforts to contain costs by promoting good medicine.
If we had drug prices more in line with production costs, we would take away the industry's incentive to lie in ways that are bad for our health. In short, we would get better medicine and pay less money for it. (Yes, we would have to find alternatives to patents for financing drug research, but there are better ways.)
Of course there is an alternative spin that we can put on the deal with the pharmaceutical industry. Politicians often have to make commitments to gain support in the middle of heated campaigns. Remember how all the leading Democratic presidential candidates promised to renegotiate NAFTA during the primaries? We haven't heard a lot about that one lately.
Perhaps the pledge to block lower Medicare drug prices is like the commitment to renegotiate NAFTA. We better hope so.
"If President Obama walked on water, he [John Bolton] would say he couldn't swim." Secretary of State Hillary Rodham Clinton, shrugging off criticism from Bolton of the mission by former President Bill Clinton to free the two American journalists from a North Korean gulag.
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