Whose Side Are We On? You Have to Ask?
With Twitter's help, the youth of Iran take on the ayatollahs.
America so often gets Iran wrong. We didn't know when the shah was going to fall, didn't foresee the massive wave that would topple him, didn't know the 1979 revolution would move violently against American citizens, didn't know how to handle the hostage-taking. Last week we didn't know a mass rebellion was coming, and this week we don't know who will emerge the full or partial victor. So modesty and humility seem appropriate stances from which to observe and comment.
That having been said, it's pretty wonderful to see what we're seeing. It is moving, stirring—they are risking their lives over there in a spontaneous, self-generated movement for greater liberty and justice. Good for them. In a selfish and solipsistic way—more on that in a moment—the uprising, as it moves us, reminds us of who we are: lovers of political freedom who are always and irresistibly on the side of the student standing in front of the tank or the demonstrator chanting "Where is my vote?" in the face of the billy club. Good for us. (If you don't understand who the American people are for, put down this newspaper or get up from your computer, walk into the street and grab the first non-insane-looking person you meet. Say, "Did you see the demonstrations in Iran? It's the ayatollahs versus the reformers. Who do you want to win?" You won't just get "the reformers," you'll get the perplexed-puppy look, a tilt of the head and a wondering stare: You have to ask?)
If the rebels on the street win, however winning is defined, they, being more modern and moderate than the ruling government, will likely have a moderating influence on their government. If the rebels on the street lose, however that is defined, this fact remains: Something has been unleashed, and it won't be going away. A thugocracy has been revealed as lacking the support and respect of a considerable portion of its people, and that portion is not solely the most sophisticated and educated but, far more significantly, the young. Half the people in Iran are under 27. When the young rise against the old, the future rises against the past. In that contest, the future always wins. The question is timing: soon or some years from now? (A heartening Twitter feed Thursday, from Andrew Sullivan's site: "Fact is, we've seen variety of protesters grow: young+old, students+professionals, women in chador+westernized students.")
S stifling and corrupt religious autocracy has seen its international standing diminished, and Mahmoud Ahmadinejad, who is among other things a Holocaust denier, has in effect been rebuked by half his country, and through free speech, that most painful way to lose your reputation, which has broken out on the streets. He can no longer claim to speak for his people. The rising tide of the young and educated seems uninterested in reflexively hating the West and deriving their meaning from that hatred.
To refuse to see all this as progress, or potential progress, is perverse to the point of wicked. To insist the American president, in the first days of the rebellion, insert the American government into the drama was shortsighted and mischievous. The ayatollahs were only too eager to demonize the demonstrators as mindless lackeys of the Great Satan Cowboy Uncle Sam, or whatever they call us this week. John McCain and others went quite crazy insisting President Obama declare whose side America was on, as if the world doesn't know whose side America is on. "In the cause of freedom, America cannot be neutral," said Rep. Mike Pence. Who says it's neutral?
This was Aggressive Political Solipsism at work: Always exploit events to show you love freedom more than the other guy, always make someone else's delicate drama your excuse for a thumping curtain speech.
Mr. Obama was restrained, balanced and helpful in the crucial first days, keeping the government out of it but having his State Department ask a primary conduit of information, Twitter, to delay planned maintenance and keep reports from the streets coming. Then he made a mistake, telling the New York Times in terms of our national security there is little difference between Mr. Ahmadinejad and his foe, Mir Hossein Mousavi, which may or may not in the long run be true but was undercutting of the opposition.
What now? Americans, and the West, should be who they are, friends of freedom. Iranians on the street made sure they got their Twitter reports and videos here. They trust us to spread the word through our technology. A lot of the signs they held were in English. They trust us to be for change and to advance their cause, and they're right to trust us.
Should there at this point, more than a week into the story, be a formal declaration of support from the U.S. government? Certainly it's time for an indignant statement on the abuses, including killings and beatings, perpetrated by the government and against the opposition. It's never wrong to be on the side of civilization. Beyond that, what would be efficacious? It must be asked if a formal statement of support for the rebels would help them. And they'd have a better sense of it than we.
If the American president, for reasons of prudence, does not make a public statement of the government's stand, he could certainly refer, as if it is an obvious fact because it is an obvious fact, to whom the American people are for. And that is the protesters on the street. If he were particularly striking in his comments about how Americans cannot help but love their brothers and sisters who stand for greater freedom and democracy in the world, all the better. The American people, after all, are not their government. Our sentiments are not controlled by the government, and this may be a timely moment to point that out, and remind the young of Iran, who are the future of Iran, that Americans are a future-siding people.
A small point on the technological aspects of the Iranian situation. Some ask if the impact of the new technology is exaggerated. No. Twittering and YouTubing made the story take hold and take off. But did the technology create the rebellion? No, it encouraged what was there. If they Twittered and liveblogged the French Revolution, it still would have been the French Revolution: "this aft 3pm @ the bastille." It all still would have happened, perhaps with marginally greater support. Revolutions are revolutions and rebellions are rebellions; they don't work unless the people are for it. In Iran, Twitter reported and encouraged. But the conviction must be there to be encouraged.
The interesting question is what technology would have done after the Revolution, during the Terror. What would word of the demonic violence, the tumbrels and nonstop guillotines unleashed circa 1790-95 have done to French support for the Revolution, and world support? Would Thomas Jefferson have been able to continue his blithe indifference if reports of France grimly murdering France had been Twittered out each day?
The great question is what modern technology can do not in the short term so much as the long. It is not the friend of entrenched tyranny. Connected to which, it would be nice if the technologies of the future were not given babyish names. Twitter, Google, Facebook, etc., have come to be crucial and historically consequential tools, and yet to refer to them is to talk baby talk. In the future could inventors please keep the weight and dignity of history in mind?
Mr. Burd Goes to Washington
Business will pay for government health care.
It's Steve Burd's eighth or ninth trip to Capitol Hill this year -- he can't quite remember. Sitting in a hotel lobby late last week, what the busy Safeway CEO does know is that by the end of this trip, he'll have told all 100 U.S. senators his company's health-care story. That alone might deserve applause.
As most of corporate America sits on the health-care sidelines -- issuing vague statements, trying not to offend a new U.S. president -- Mr. Burd has charged into the political debate. "I'm here because health-care simply isn't a partisan issue," he says. There is what works, and what doesn't. "I'm genuinely concerned someone might try to solve this by nationalizing health care, at the moment we at Safeway have proven that it is the market that reins in costs."
Prove it, he can. As recently as 2004, Safeway was suffocating under health-care costs growing at 10% a year. Mr. Burd, who had long been intellectually and politically drawn to the health-care issue, decided it was time to hit the restart button. He blew up the company's existing health-care structure and replaced it with one that embodied market principles -- choice, responsibility, competition and price.
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Getty Images Steve Burd (R), president and CEO of Safeway, testifies before Congress.
Today, Safeway has accomplished what Washington claims is the goal: The company's per-capita health-care expenses have remained flat, compared to the near 40% increase experienced by the rest of corporate America over the past four years. This has not been done by cutting care or shifting costs to employees. Nearly 80% of the 30,000 nonunion Safeway workers who take part in the program rate it good, very good, or excellent.
Magic? Not even. Mr. Burd explains that the "cure for today's ills is simply removing the obstacles to a free health-care market."
The Safeway plan has two main parts that work in tandem. The first involves giving employees a financial stake in the system. Safeway demolished the traditional PPOs and HMOs that encourage consumers to be cavalier about costs. The company today fully pays for an array of primary and preventive visits and tests. But beyond that, employees have skin in the game. The company deposits $1,000 each year into a "health reimbursement account," which workers can use to pay for care. The next $1,000 in expenses is the employee's responsibility. After that, employees pay 20% of costs up to a $4,000 maximum.
Safeway workers these days treat that first $1,000 carefully, since anything beyond it comes out of their pockets. The company is alive with stories of people who no longer visit the emergency room for routine care but instead call around to doctors to ask prices, and swap information with colleagues. Safeway is doing its part to improve price transparency, by having its care administrator, Cigna, analyze claims information. One discovery was that within 30 minutes of its California headquarters routine colonoscopy prices ranged from $700 to $7,000. By the end of the year, employees will be able to go on a Web site, punch in a zip code, and get a list of providers and costs.
The second part of Safeway's plan was an embrace of the obvious: Healthy people cost less. Mr. Burd notes that 75% of health-care costs are the result of four conditions -- cardiovascular disease, cancer, diabetes and obesity. The majority of these are preventable. "Obesity in this country went from 18% to 40% in 20 years -- this is not genetics, this is behavior," he explains. He says that an obese employee can require 10 times the number of doctor visits in a year than someone of healthy weight.
The result was Safeway's "Healthy Measures" program, which is voluntary. Employees are tested for smoking, weight, blood pressure and cholesterol. Every area they "pass" results in a reduction in their premium, of as much as $1,560 for a family, a year. Those who fail but prove progress can get refunds. Safeway complements this with an intense culture of health: weight-loss tips, fitness competitions and smoking cessation programs.
Critics of price incentives argue that they pressure consumers to forego necessary care. Mr. Burd counters that Healthy Measures and the company's free preventive care -- designed to catch problems before they become expensive -- have in fact resulted in a healthier work force. Safeway's smoking and obesity rates are roughly 70% the national average. The program has even been cautiously greeted by Safeway's union leaders, who understand that soaring health costs are eating into union wages.
When I ask Mr. Burd what he hopes to accomplish here, he is blunt that one goal is to prevent a "public option" that would only "piggyback on the experience of Medicare." It's a "Trojan Horse" that will steer people to government and ultimately squeeze out innovative programs like his.
He's also working to ensure that any health-care bill contains provisions that would replicate or encourage Safeway's success. That includes changing current law so that he can offer even steeper premium discounts for good behavior. It also includes his idea to make available Medicare's vast database of providers and costs so Americans can shop around. An optimist, Mr. Burd says he's had "extraordinary receptivity" from both sides of the aisle.
As for his fellow CEOs, Mr. Burd is eager to debate anyone who thinks he will escape costs by dumping health care on the government. Business will still be taxed to pay for the program, making the U.S. less competitive. Far better, says Mr. Burd, for companies to control their destiny, and prove markets can also work for health care. We're about to find out if Washington will let them.
A Flat Tax for California?
The Governator goes back to his roots as a reformer.
'California is so broken that we must look at every bold proposal out there, no matter how daring or radical -- including the idea of a flat tax."
-- Arnold Schwarzenegger, June 11, 2009
Now we're getting somewhere. Having had his grand budget deal repudiated by the voters, and facing a $24.3 billion deficit only six months after raising taxes to close a $40 billion deficit, California's Governor is going back to his roots as a reformer.
Mr. Schwarzenegger has shocked nearly everyone in Sacramento by embracing some seismic policy changes to fix the California budget for the long term. These reforms include a flat-rate income tax, a spending limitation measure with teeth, and deep cuts in wasteful spending. Yesterday he declared that he won't sign another tax increase and he will no longer allow the state to issue new short-term debt to punt its budget problems down the road. He even told the liberal Democrats who run the legislature that if they're not ready to make cuts, get ready for a long hot summer that may end in "a shutdown of all the funding -- a grind to the halt" in government.
Mr. Schwarzenegger has called for cutbacks even in education, Medicaid, prisons and pensions, heretofore the sacred cows of state politics. And why not? That's where three-quarters of the money goes and the dollars are buying far too little in results. The state has the highest teacher salaries in the nation, but the second lowest math and reading test scores, according to U.S. Department of Education data. The state spends $49,000 per prison inmate, or 50% more per criminal than the average state.
"Other states have privately run correctional facilities," notes Mr. Schwarzenegger. "Why not California?" Good question. The Governor also wants to eliminate and consolidate scores of mostly useless boards and panels -- such as the $1.2 million blueberry commission -- that exist mostly for political patronage.
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The best idea is his semi-endorsement of a flat tax for California. The state's budget problem has two main causes: The first is runaway spending and the second is a tax structure that smothers businesses and entrepreneurs. California's income tax is the most progressive of all 50 states, with the second highest top rate (10.55%) after New York City's 12.62%. The Governor's revenue office calculates that between 50% and 55% of the income tax in the state comes from Kobe Bryant and the rest of the richest 1% of taxpayers.
This sounds like a liberal's tax paradise, but the "soak the rich" system has imploded on itself. As tax rates keep rising, more Californians move to places like Nevada and Texas where they can pay zero income tax, leaving Sacramento with fewer revenue sources. Moreover, the progressive rate structure means that California experiences more extreme gyrations in its revenues than any other state.
The nearby chart shows how state tax revenues rise and fall more excessively than does state personal income. From 2003 to 2008, state revenues boomed by 40% as the economy expanded. But in the last year, revenues have fallen by more than 20%. Politicians in Sacramento pile on new spending in the boom years, building in new pension and other commitments that are unsustainable in the downturns. The interest groups furiously oppose any spending decline, so the politicians dutifully raise taxes, and the cycle repeats.
Mr. Schwarzenegger has appointed a bipartisan tax reform commission and it is exploring a "uniform tax" with a rate of 6% on individuals and corporations with few deductions. This would raise enough revenue to run the government while reducing the sharp revenue shifts from boom to bust and back. More important, it is the kind of tax overhaul that could start to attract business back to the state.
None of this will be easy to pass, but Mr. Schwarzenegger has everything to gain for his state and his reputation. His term ends in 2010 and he's not running for re-election. The state's economy can't prosper under its current burdens, and voters have resoundingly rejected tax-and-spend-as-usual. Arnold became Governor on the promise of reform, and in his final months he once again has a chance to make good on that promise.
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Drug Control Begets Gun Control
The violence in Mexico is caused by prohibition, not firearms.
Jacob SullumDuring his April visit to Mexico, President Barack Obama suggested that Americans are partly to blame for the appalling violence associated with the illegal drug trade there. “The demand for these drugs in the United States is what’s helping keep these cartels in business,” he said. “This war is being waged with guns purchased not here but in the United States.”
Obama is right that the U.S. is largely responsible for the carnage in Mexico, which claimed more than 6,000 lives last year. But the problem is neither the drugs Americans buy nor the guns they sell; it’s the war on drugs our government has drafted the rest of the world to fight. Instead of acknowledging the failure of drug control, Obama is using it as an excuse for an equally vain attempt at gun control.
“More than 90 percent of the guns recovered in Mexico come from the United States,” Obama claimed, repeating a favorite factoid of politicians who believe American gun rights endanger our southern neighbor’s security. The claim has been parroted by many news organizations, including ABC, which used it in a 2008 story that suggested the sort of policy changes the number is meant to encourage. The story, which asked if “the Second Amendment [is] to blame” for “arming Mexican drug gangs,” quoted an agent with the Bureau of Alcohol, Tobacco, Firearms, and Explosives who said, “It’s virtually impossible to buy a firearm in Mexico as a private citizen, so this country is where they come.”
But as Fox News and Factcheck.org have shown, the percentage cited by the president greatly exaggerates the share of guns used by Mexican criminals that were bought in the United States. Fox estimates it’s less than a fifth, while Factcheck.org says it may be more like a third.
If the guns used by Mexican drug traffickers do not mainly come from gun dealers in the U.S., where do they come from? Many of the weapons are stolen from the Mexican military and police, often by deserters; some are smuggled over the border from Guatemala; others come from China by way of Africa or Latin America. Russian gun traffickers do a booming business in Mexico.
Given these alternatives, making it harder for Americans to buy guns is not likely to stop Mexican gangsters from arming themselves. The persistence of the drug traffickers’ main business, which consists of transporting and selling products that are entirely illegal on both sides of the border, should give pause to those who think they can block the flow of guns to the cartels.
The futile effort to stop Americans from consuming politically incorrect intoxicants is the real source of the violence in Mexico, since prohibition creates a market with artificially high prices and hands it over to criminals. “Because of the enormous profit potential,” two senior federal law enforcement officials told the Senate Judiciary Committee in March, “violence has always been associated with the Mexican drug trade as criminal syndicates seek to control this lucrative endeavor.”
The more the government cracks down on the black market it created, the more violence it fosters, since intensified enforcement provokes confrontations with the police and encourages fighting between rival gangs over market opportunities created by arrests or deaths. “If the drug effort were failing,” an unnamed “senior U.S. official” told The Wall Street Journal in February, “there would be no violence.”
Perhaps it is time to redefine failure. Three former Latin American presidents, including Mexico’s Ernesto Zedillo, recently noted that “we are farther than ever from the announced goal of eradicating drugs.” The attempt to achieve that impossible dream, they observed, has led to “a rise in organized crime,” “the corruption of public servants,” “the criminalization of politics and the politicization of crime,” and “a growth in unacceptable levels of drug-related violence.”
Instead of importing Mexico’s prohibitionist approach to guns, we should stop exporting our prohibitionist approach to drugs.
Glass Houses, Left and Right
The wildly overblown issue of political "hate speech"
Cathy YoungPolitical hate speech has been all the rage in recent days. After the shocking attack at the Holocaust Memorial Museum in Washington, DC by a white supremacist, New York Times columnists Paul Krugman and Frank Rich have charged that the right-wing media are creating a dangerous climate of hate in America. Meanwhile, conservative outrage has focused on David Letterman's nasty jokes about former vice presidential candidate Sarah Palin and her family's trip to New York—more proof, many commentators argue, that enlightened liberals condone hateful sexist slurs as long as the target is a conservative woman.
The charges on both sides are wildly overblown, but they also point to a real problem—one to which, unfortunately, both sides respond with stones thrown from its own glass house.
For starters: the actions of 88-year-old James von Brunn, who fatally shot a Holocaust Museum security guard, had exactly nothing to do with Krugman and Rich's chief villains: Rush Limbaugh, the king of right-wing talk radio, and Glenn Beck, the clown of Fox News. Neo-Nazis are not part of the following of mainstream or even far-right conservatives; they are people who see the United States government, under Republicans or Democrats, as a tool of Zionist puppet-masters. As conservative columnist Jonah Goldberg points out on website of National Review magazine, one could at least as convincingly link anti-Semitism to the animus toward Israel and its American Jewish supporters in certain quarters of the left. Indeed, Von Brunn's possible targets included The Weekly Standard, a leading conservative magazine.
While the right-wing pontificators are not responsible for von Brunn, that doesn't quite get them off the hook. Limbaugh, Beck, and quite a few other talk show hosts, journalists, and bloggers on the right have undoubtedly trafficked in political paranoia and hate. There has been much irresponsible, over-the-top scaremongering about looming fascism or (Soviet-style) socialism, the imminent loss of our freedoms and even federally run concentration camps. Barack Obama has been cast as Hitler, Stalin, and a radical Muslim mole. House Speaker Nancy Pelosi was the target of an assassination joke read over the air on the Rush Limbaugh show by substitute host Mark Davis.
Even if none of this ever leads to violence, it is toxic stuff. But the liberals who rightly deplore it rarely acknowledge the equally toxic stuff on the left—including, not long ago, Bush assassination jokes, Bush/Hitler comparisons, and hysterical claims that Bush's America was five minutes away from fascism if not already there. The left has its own Glenn Beck in writer Naomi Wolf, who published an essay titled "Fascist America in 10 Easy Steps" in 2007 and then a best-selling book called "The End of America." Wolf got to make her case on National Public Radio and the Colbert Report; later, The Huffington Post, a leading left-wing website, published her article calling Sarah Palin "the muse of the coming police state."
That brings us to Palin, a favorite target of left-wing hate, and the brouhaha over Letterman. The acerbic late-night TV host has been skewered for his humor about Palin's "slutty flight attendant look" and, especially, about her daughter getting "knocked up" by New York Yankees player Alex Rodriguez at a baseball game. That joke turned out to be especially unfortunate since the Palin daughter at the game was 14-year-old Willow. Letterman has apologized while claiming he was thinking of 18-year-old single mother Bristol. Palin was grudgingly appeased; some feminists have taken Palin's side, accusing Letterman of sexism.
While Letterman's explanation sounds plausible, his joke was undoubtedly coarse (though, as far as sexism goes, had one of Palin's sons gained notoriety as an unwed teenage father, he probably would have been an equal-opportunity target). But it's hardly the worst of anti-Palin invective. During the campaign, major left-of-center sites including Salon.com attacked her in blatantly sexual language: "Republican blow-up doll," "pornographic centerfold." Comedienne Sandra Bernhard railed against Palin in an unfunny foul-mouthed monologue that included a wish to see her raped. For some on the left, the usual taboos against misogyny clearly do not cover right-wing women.
But the conservative outrage, too, has an element of hypocrisy. Fox News talk show host Sean Hannity has vocally deplored the insults to Palin and leftist "hate speech" in general. But where was he in 2007 when right-wing rock star Ted Nugent called then-Democratic presidential contender Hillary Clinton a "worthless bitch" at his concert and suggested, while brandishing two assault rifles, that she "ride one of these into the sunset"? Actually, Hannity was actively defending Nugent as a "friend and frequent guest on the program" and brushing off complaints about his remarks with a dismissive, "If you don't like it, don't go to the concert, don't buy his new albums."
The stones keep flying from glass house to glass house, which may be why following much of today's political discourse is about as pleasant as wading through broken glass. Wouldn't it be nice if both the right and the left focused a little less on getting offended and a little more on curbing hate and hysteria in their own ranks? One can always dream.
Business in Japan
No exit
What Japan needs is more bankruptcies, not fewer
JAPAN has long practised a form of familial capitalism. In good times industrial collusion, overseen by bureaucrats, is practically official policy. The so-called “convoy system” lets corporate stragglers retain a small market share as bigger and better firms steam ahead. For decades this cosy form of capitalism ensured that competition was never too fierce and everyone prospered at least a bit. It certainly smoothed out the occasional ups and downs during the country’s stunning post-war economic development, as it rapidly caught up with the West. So it is not surprising that many politicians and business leaders are advocating an even stronger dose of such medicine now. As Japan struggles with its deepest recession since the war, the government has established a mechanism to give financial help to poorly performing firms, companies are being encouraged to provide support to their weaker suppliers, and banks are being asked to do their bit, too.
There is nothing unusual about any of this, you might say. Governments around the world are racing to protect their cherished, if dented, national champions. Financial institutions and carmakers have been bailed out in both America and Europe. But in the West such assistance is the exception; in Japan it is central to the system. The problem is that keeping ailing companies on life-support holds back healthier firms and harms the economy overall. That is true everywhere, but Japan provides an extreme case that illustrates the dangers of coddling weak companies.
Japan’s stronger firms have responded relatively quickly to the recession, in marked contrast to the dithering during the “lost decade” of the 1990s. It is still unclear whether they have done enough (see article). But it is certain that efforts to keep their struggling rivals afloat are hurting them.
Politicians, having been unwilling to push through painful structural reforms in relatively good times, are even more reluctant to put forward tough measures when times are bad. Banks are being pressured by the government to roll over existing loans and make new ones, and firms encouraged to extend credit and maintain business relations. The government’s recent stimulus measures give failing firms taxpayers’ money. A plan approved in May allocated ¥2 trillion ($21 billion) to prop up (indirectly) troubled companies. Pioneer, an electronics firm, Elipda, a chipmaker, and Japan Airlines are among the first to look for government support.
All of this does enormous harm. Weak firms need to exit the market, either by going bust or being sold to another firm, or the whole business environment gets stifled. Japan has far too much capacity in many businesses—eight mobile-phone makers, for instance, few of which make much money. This squeezes prices and margins, thus denying better-run firms the surplus capital they need to hire talented people, buy competitors or invest in research and development. It also locks up resources, both human and financial, that could be used more productively by stronger firms. Before the downturn, Japanese companies’ return on equity averaged around 10%, about half the level of American firms.
Tellingly, the shut-down rate of companies in Japan is around half that in America and Britain. And the number of corporate insolvencies is expected to increase in Japan this year by only 15%, despite the depth of its recession, compared with more than 30% in western Europe and 40% in America. Normally a scarcity of corporate bankruptcies is a sign of economic vitality; in Japan, it is a sign of its economic weakness. Of course, keeping struggling firms alive protects jobs. But it also fossilises industry structures and hinders the development of a more flexible labour market and a business environment more supportive of new-company creation—two areas where Japan is also sadly deficient.
And the zombies march on
With a general election due to be called by September, in which a new political party may take the reins of government after more than half a century of almost uninterrupted rule by the Liberal Democratic Party, no one has said a word about reforming the economy to introduce more competition in more industries. But this should be on the agenda. During its post-war boom Japan built its reputation on the back of innovative products and fastidious quality; it has since become better known for zombie companies.
As governments around the world come under pressure to bail out everything from retailers to travel companies to automotive firms, Japan’s experience—a downturn followed by years of stagnation—serves as a reminder of the importance of destruction in capitalism. Instead of continuing to prop up struggling companies, Japan and other countries need to let them go under, so that new, better ones can be created.
Argentina's mid-term election
A chance to change course
The Kirchners’ economic nationalism is leading their country down a blind alley
IT IS only a mid-term election, for half of the lower house of Congress and a third of the senate. But when Argentines vote on June 28th much more than that is at stake: the power and perhaps even the permanence of the first couple, Cristina Fernández and Néstor Kirchner, her husband and predecessor as president. By choosing to run for the lower house himself in the province of Buenos Aires, Mr Kirchner has deliberately turned what might otherwise have been a routine affair into a referendum on himself, his wife and their ideology of state-led economic nationalism.
Mr Kirchner gives warning that a vote for the opposition would mean that “jobs will vanish, the poor will fall back, a frightening past will return.” In fact all these things are happening already and the Kirchners must take some of the blame. The election is a chance to stop the first couple from leading Argentina further down its sad path of decline.
When he took office in 2003 Mr Kirchner inherited a country laid low by economic and financial collapse, which had seen a president chased from office by rioting mobs and a massive debt default. Although this was the result of policy mistakes and global financial instability, Mr Kirchner preferred to blame it on “neoliberalism”. But he was lucky, inheriting from his interim predecessor a competent economy minister and macroeconomic policies that had restored stability. With the world hungry for Argentine grains, the country enjoyed six years of economic growth averaging 8%. Grateful voters rewarded him by electing his wife in 2007, amid heady talk of a long reign for the first family.
Some of Mr Kirchner’s actions—such as an expansionary fiscal policy and help for debtors—represented emergency pump-priming of a kind now familiar around the world. But he made them permanent, mortgaging his country’s future. To sustain them, the government has taxed Argentina’s efficient farmers into the ground. Last year Ms Fernández nationalised the private pension system. Foreign investors in privatised utilities have been harassed, deterring others. Brazil is supposedly Argentina’s partner in a customs union, but its exports face a host of barriers.
Shown up by the neighbours
Now Argentina has followed the world into recession and it is ill-placed to respond. Official figures show only a mild downturn and low inflation, but they are worth little: Mr Kirchner put stooges in the statistics office and they massage the numbers. In fact, tax revenues and real wages have plunged. Fears of another debt default may be exaggerated—for the time being. But inflation is unofficially at 15%. And the Kirchners’ refusal to settle with private creditors and their hostility to the IMF leave Argentina with few sources of credit.
This rapidly darkening outlook is why Ms Fernández brought forward the mid-term election, due in October. Her husband’s resort to campaign stratagems also smacks of desperation. The signs are that she will lose her majority in the lower house of Congress. Mr Kirchner may not top the poll in Buenos Aires. They face a reviving opposition, and a revolt from within the ruling Peronist party (see article).
The infantile solipsism that leads a government to fiddle the economic figures has been the handmaiden of decline. It is writ large in the populist nationalism that has been a thread in Argentine policy since the days of Juan Perón in the 1940s. A century ago Argentina was one of the world’s ten richest countries. As recently as the 1960s it prided itself on being the most prosperous and important country in Latin America. Now its neighbour Brazil is bracketed with the world’s leaders, while Argentina trails. Argentines should note that Brazil’s centre-left government has espoused fiscal prudence and free trade and welcomed foreign investment. Measured by purchasing-power, Chile has overtaken Argentina in income per head. Even tiny Uruguay now exports more beef than its neighbour across the River Plate—thanks partly to big investments by Argentines who like its commitment to the rule of law. Long the best-educated people in South America, Argentines now trail Chileans and Brazilians in international tests.
Despite its long history of bad governments, Argentina still has much going for it. The world needs its farmers, and tourists like its culture. But it needs freer trade, fiscal responsibility and greater respect for the rule of law.
The election may help move Argentina in that direction. It could present a credible alternative to the Kirchners. It may provide a more independent-minded Congress, which could oblige Ms Fernández to start ruling in a more consensual manner. Argentines should use their votes to bring that about.
Commentary by Kevin Hassett
June 15 (Bloomberg) -- Conservatives need to cut David Letterman some slack.
They were in an uproar last week after the CBS late-night show host mocked Sarah Palin and her family. Letterman decided it would entertain his audience if he ridiculed the Palins’ unfortunate experience with teen pregnancy. Palin responded that Letterman’s remarks were hostile to young women generally, and that there is a double standard in America today that allows celebrities to make fun of Republicans, but not Democrats.
It is irrefutably in poor taste to make jokes about a teenager’s sexuality. But it is the job of comedians to push the boundaries. Sometimes, they go too far. It is fine to boo a bad joke, but we will leave a ton of delicious material on the table if we punish transgressions too severely. We might even undermine our democracy.
If a comedian fails, turn the television off. There is no reason to go on the “Today” show and attack him, as Palin did with Letterman.
Truth is, the problem with Letterman right now isn’t that he’s going after Republicans. Rather, a review of his signature Top 10 lists suggests that Letterman is committing a cardinal sin in comedy, treating the nation’s biggest political celebrity with kid gloves.
As a result, Letterman’s material feels stale. His lists have lost their edge.
For every Top 10 slap at President Barack Obama (one thing Abraham Lincoln would say if he were alive: “OK, Obama, you’re from Illinois, too. We get it!”), there have been multiple hugs and kisses (one sign he’s getting nervous: “Friends say he’s looking frail, shaky and ... no, that’s McCain.”)
Old Spice Republicans
In “Top 10 Things Overheard at the Meeting Between Barack Obama and the Republicans,” Letterman made fun of Republicans (“You fellas really need to take it easy on the Old Spice”) and Bill Clinton (“I miss the Clinton administration when we’d meet at Hooters.”) He made no jokes at Obama’s expense.
The soft treatment of Obama is in striking contrast to the manhandling of George W. Bush, which started early and never let up. In 2001, Letterman’s “Top 10 Pieces of Advice George Bush Gave to Graduates” included, “Move to Mexico, because I’m gonna run this country into the ground,” and, “If you don’t know a foreign leader’s name, call him ‘Pierre.’”
Comedians have been making fun of politicians for as long as there have been politicians. They, and we, relish the opportunity to make fun of the powerful. Just about every politician has something that creates an endless supply of material: John McCain’s age, Clinton’s alleged philandering, Gerald Ford’s purported clumsiness.
Obama Home Runs
Even if Letterman’s own bias takes Obama material off the table, there are many other comedians swinging for the fences and connecting. Since Obama is so powerful and popular, material that hits him hard will be especially successful with audiences.
Comedians have zeroed in on Obama’s arrogance and cozy relationship with the media. If, as one recurring joke goes, the only difference between God and Obama is that God doesn’t think he is Obama, then the possibilities are endless.
Jay Leno had a field day. “An estimated 75,000 people attended a Barack Obama rally on the banks of the Willamette River,” he joked during last year’s campaign. “And if you believe the media, listen to this. After the rally, Barack Obama fed them all with just five loaves of bread and two fish.”
Here’s Stephen Colbert: “Shocking news out of Illinois today. Governor Rod Blagojevich was arrested on corruption charges, including the allegation that he was selling Barack Obama’s vacant Senate seat. Now, I personally am surprised Obama even needed a seat. I thought he just levitated.”
Free comedy may be as important for democracy as a free press. Given the state of the press, comedy may be our only hope.
No Rules
So lighten up when they go after your side, celebrate when they attack the other guys, and resist any attempt to constrain humor by imposing rules on comedians. First of all, comedians naturally break rules, often with terrific effect. Second, it is hard to think of any rules that might make sense in all cases.
Palin appears to believe that a politician’s family should be off the table. Here are two words that refute that notion: Billy Carter.
Back in the 1970s, there was hardly a comedian in the country who didn’t have a wealth of Billy Carter material. The beer-swigging brother of President Jimmy Carter once paused to urinate publicly on an airport tarmac and warned Americans in all seriousness that beer “is not a good cocktail-party drink, especially in a home where you don’t know where the bathroom is.”
We might never have another Billy Carter. I hope and pray that we do, and that an army of comedians will stand ready to make fun of him.
Commentary by Caroline Baum
June 18 (Bloomberg) -- Maybe it’s a sign of the times, or a manifestation of bailout fatigue, that news of lobbyists descending on the Federal Reserve creates little reaction and no outrage.
“Executives and lobbyists now flock to the Fed, providing elaborate presentations on why their niche industry should be eligible for Fed financing or easier lending terms,” writes the New York Times’s Edmund Andrews in a June 13 article.
When I read that, I felt a pang in my stomach. It’s my gut that warns me when something’s “not right.”
Traditionally the Fed was credit neutral. It bought or sold U.S. Treasury securities when it wanted to adjust interest rates or the size of its balance sheet.
Once the Fed got into the credit business, providing financing for selected assets and essentially picking winners and losers, it was only a matter of time before interested parties wanted to sit down for a chat.
“The minute you start to engage yourself in the business of buying different kinds of assets, it opens up the opportunity for various potentially affected groups to apply for those subsidies,” says Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. and a former research director at the Atlanta Fed.
Andrews goes on to describe how Hertz, the rental car company, enlisted lawyer Stuart Eizenstat, a veteran of the Carter and Clinton administrations, to provide “elaborate presentations on why their niche industry should be eligible for Fed financing or easier lending terms.”
K Street Invasion
I can just picture K Street’s three-piece suits descending on 20th Street and Constitution Avenue, NW, the home of the Federal Reserve Board, armed with facts, statistics and pre- written legislation.
Wouldn’t it be simpler, not to mention more transparent, to hold a street fair, with tables set up for specific industries? That way, lobbyists could stop by, drop a card in the fish bowl -- entering them in the drawing for a free weekend at Harrah’s - - network with their peers and perhaps speak with a Fed “specialist” about his industry’s particular concerns and needs?
It’s one thing to seek feedback on new rules and regulations. Most federal government agencies are guided by the Administrative Procedure Act, which provides for a period of public comment. (Nothing there about a private audience.)
It’s another thing for the central bank to receive lobbyists. While the practice arose in response to the Term Asset-Backed Securities Loan Facility (TALF), it is something that the Fed should dispense with as soon as possible.
Borrower Outreach
The TALF was created to increase credit availability to consumers and small businesses. The idea was to make loans to investors for the purchase of AAA-rated asset-backed securities. The market for ABS had shut down last year, and the Fed wanted to encourage banks to make more credit-card, auto and student loans. Creating an incentive for investors to buy them seemed like the best way to get credit flowing.
The Fed announced the creation of TALF in November, but it didn’t make its debut until March because of legal hurdles and gun-shy investors, who were afraid their participation would subject them to the long arm of government.
What’s more, the Fed was moving into new territory and needed an education in order to understand and manage risk. Hence, the outreach to various industries interested in being included in the program.
To be sure, this isn’t the first time the Fed has gotten feedback from interested parties. When the central bank decided in 2003 to impose a penalty for borrowing at the discount window, setting the rate above that on interbank loans, it received feedback from depository institutions.
‘Soup Kitchen’
There’s something different, even unseemly, about mobile- home manufacturers, equipment makers and car dealers lining up at the Fed with cup in hand. These, and other types of collateralized loans, are now TALF-eligible, along with commercial and residential mortgage-backed securities.
Perhaps it was inevitable that getting into the credit business would subject the Fed to all the political trappings. After all, if you hand out subsidies, people will come, Eisenbeis says. “This is the soup kitchen.”
If the public perceives the Fed as propping up various industries instead of ministering to the economy at large, the central bank may lose some of its hard-won credibility. And that would be a bad thing with the Fed doubling the size of its balance sheet in the fourth quarter of last year.
The Fed wants to make sure inflation expectations remain anchored. Unfortunately, most of the increase in long-term Treasury yields this year has been in inflation expectations, not real rates. The boat appears to be dragging its anchor.
Reputation Risk
Fed officials can’t be happy to read that a couple of hedge funds are raising money to bet on a resurgence of inflation, even hyper-inflation. They’re well aware that their credit policy and flirtation with lobbyists may undermine their credibility and affect their ability to conduct old-fashioned monetary policy.
I suspect Fed chief Ben Bernanke has even less interest in financing Center City Motors’ floorplan loans, which car dealers use to carry their inventory, than President Barack Obama has in running General Motors.
Now, if Kobe Bryant were to request special consideration for his securitized future endorsements, the hoops-shooting President and Fed chief might be interested.
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