Monday, November 30, 2009

Obama's Afghan Response

It looks like after a review lasting for many months and 10 high level meetings, President Obama is likely to order around 30K new soldiers to the theater. The number is more than this blogger felt some time back - around 10K. But as everyone says, number is not the issue. The issue is what these soldiers would do.

The two best takes on this response are by - Fred Kaplan and Joe Klein. I agree with Klein who basically points the centrality of Pakistan to the whole affair of stabilizing Afghanistan. To repeat again, stabilizing Pakistan is the necessary condition for a peaceful Afghanistan and subsequent vanquishing of any terrorist threat emanating from that corner of the world. If President determines that 30K troops are needed to achieve this containment of Pakistan, then so be case; America needs to send that many troops. Erring on more number of soldiers is not bad either even if many Liberals want to point the cost factor and borrowed money.

The question is will this increase solve the Pakistan problem. Not really. What these increased troops would do is to help pacify Afghanistan so that trouble makers in Pakistan get lesser opportunities to create problems. Relatively peaceful Afghanistan, where General Petreous and General McChrystal have bought peace with less radical Talibans and few other Pashtun leaders, would allow America to continue to focus on Pakistan and let many policies to start working in Pakistan. The policies of America in question are those espoused by Hillary Clinton and Kerry-Lugar bills - the carrot and stick approach to align national interests of Pakistan away from expediency of using terrorism. Devolving the power of nuke buttons to Pakistani PM from Pakistani President is one right step in that direction. Calming down South Waziristan is another one. Getting China involved indirectly and getting their buy-ins is another one. All these measures will start helping more if Afghanistan is more peaceful and if 30K additional troops would help there, it is that much better.

Between Afghanistan and Pakistan, so many things are interlinked that it is hard to isolate which is the cause and which is the effect. So better is to locate things which are 'actionable' for America so by acting upon that you start the chain reaction of positive outcomes. Sending soldiers is relatively straight forward 'actionable' item though expensive (blood and dollars). Actionable items on Pakistan side are relatively tough. Hence, one has to support President Obama's policy of sending more troops now, even if it is reluctantly one does so.

Wednesday, November 25, 2009

Dubai Default?

As this NYT news shows, possibility of Dubai Default is no more a fiction but actual reality. It is true that Dubai provincial government is only asking for 6 month reprieve in debt repayment and Dubai government is no UAE sovereign government. It is not a sovereign default and Abu Dhabi, the governing entity of UAE is not involved. Rather Dubai default is happening because Abu Dhabi is refusing to back all sorts of crazy investments of Dubai at full tilt.

Nevertheless, defaults involving governments always start by 'stop payment for few months' and so on. Though payment restructuring request from Dubai has been expected for a while and in that sense this news is not a surprise; what this news proves is that all those conservative investment gurus who have been pounding the table for long might be correct. Unbridled growth financed by boat load of borrowed money, without channelling to right 'productive means'; on most occasions end bad. Dubai is no exception.

This means fears of sovereign defaults by Yen, Pound and Dollar are not totally misplaced. One only wishes this news does not give a 'fit' to global financial markets and push the fragile global recovery back into the dreaded 'double dip'. That is something to watch for this week among Asian Markets while Americans are taking the Thanksgiving off.

On a practical level, this development has yet another consequence too. Asian economies need to develop deep 'debt markets' to go away from the reliance on American debt market (and hence American / Fed debt). With Dubai fiasco, chances of 'deep non-American debt markets' get pushed aside. As a result over reliance on Fed and American Debt market continues and over dependence of the world on Dollar does not get stemmed. More pilling of American debt as a result hardly removes the fear of Dollar/ American Sovereign default.

We still don't get out of the hole in which we all are.

Sunday, November 15, 2009

Health Care Reform Non-sense

We get two reports, both by Centers for Medicare and Medicaid Services (CMS) - one saying how House bill increases the cost by $289B over ten years and the another one reporting how Medicare paid $47B and Medicaid paid $18B all in improper bills, essentially how Tax payers money was wasted there.

Despite all these types of reports coming out, New York Times writes an editorial portraying how Congress intends to 'take on the cost control' issues in proposed slate of House and Senate Health Care Reform bills. It is the same line what the prominent Health Care Blogger Ezra Klein takes - poor Americans who cannot get or cannot afford Health Care will not wait until the 'cost problem' is solved but rather it is a moral imperative for the government to expand the coverage now. All these Progressives argue that as long as Health Care Reform (HCR) includes all these diverse cost cutting measures, it is sufficient because we do not know which ones work in reality. However, there is scant attention to what are the realistic chances of any of these cost cutting measures are adopted strictly and not simply glossed over.

The problem is we know that none of these cost control measures will work as long as Congress continues the current practices of financing Medicare and Medicaid. As Doc fix showed (where Senate attempted to pay $250B over 10 years in a separate bill to cover cuts in Medicare fees to Doctors and Hospitals); Congress always finds a back door entry to overwrite all these proposed cuts in Medicare. With such an inability to control entitlements,HCR is nothing but expansion of already costly entitlements with an argument that we are anyways going to be bankrupt as a nation so what is the harm in accelerating that process?

It is a moral imperative to payback all those who lend you the money too. With a possibility of American default not so remote, how can we ignore that 'moral' duty of honoring Fed bond buyers?

Truth is acceleration of a process which will bankrupt this nation is not necessary in responding to the calling to help 'have-nots'. If Congress and Progressives wanted so desperately to do something for poor; they could have opted for removing Medicare & Medicaid waste upfront and then use that saved money to cover socially weak citizens. With CMS reports, we know that at 10%; we are talking here around $60B saving per year (Medicare $40B + Medicaid $20B), essentially $600B over 10 years instead of the current boondoggle at $900B over 10 years called as HCR which likes of NYT want to justify so vehemently. Realization of savings needed is upfront because we cannot believe Congress when it says it proposes to save 'so and so' amount. (Otherwise also all the current Congressional bills assume half of the money to come from disciplined operations of Medicare and Medicaid.)

Interesting thing is expert bloggers like Ezra Klein very well know that the core problem is 'price control / cost control' in our current system and proposed excise tax on insurance for 'Cadillac plans' is the nearest what you get in an attempt to keep a lid on these costs. Everything else are platitudes, good intentions of Congress to address this problem in future and some half hearted attempts to undertake some experimentation. Nothing concrete there. As of now, prices set by Providers in this country (Doctors, Hospitals and other Health Care Service Providers) do not have any worthwhile and direct control. We do not talk about a 'fee schedule' in this country as like many in Europe use. Not that in this 'market only approaches' country we do not have 'price controls'. The famous working example is Public Utilities Commission which sets utility prices (electricity, gas and water) at State level and private companies compete in that market on those rates and still earn money. Unless we have such controlled pricing for providers, all other things are mute - private or public insurance, coverage and mandate, etc.

Senate bills have such MedPac or iMAC commission mechanisms included; but those are watered down with no intention of Congress to follow on those. House bill does not have this provision and so it is no brainier that the joint Conference Committee would adopt at the most a watered down version of such provisions.

With the core problem of 'provider prices' unaddressed, no amount of blathering or NYT Editorializing would save the looming disaster here. Any Congress member who takes solace in faultily argued support of current bills, would no doubt be setting himself or herself for the 'throw these bumps out' reaction by the electorate. Congress has wasted a critical year in arguing and politicking HCR when it should have devoted the entire energy for revising economy, employment and financial regulatory reforms. Not only Congress has just simply wasted this crucial time, it has accelerated the push of this country towards bankruptcy due to uncontrolled entitlement expansion. It was originally President Obama's idea to take up HCR this year and for the whole year he has allowed the Congress to digress from a fiscally responsible road. So he is equal party to all this non-sense.

No wonder, as time passes, less and less number of people are believing in the value of HCR the way Congress has designed so far. This is quite a blatant political as well as policy failure heaped by Dem majority when America could ill afford such disasters. For 8 years this country endured ideologically driven Neocon policies which have cost this country Trillions of dollars and now Dems are taking their turn in repeating same. A country is journey towards a bankrupt dead end has bi-partisan support in USA!

Friday, November 13, 2009

The Cricket Boss Speaks

Times of India reports that all time great Mr. Sachin Tendulkar says

"Mumbai belongs to all Indians. I am a Maharashtrian and am extremely proud of that. But I am an Indian first,"

The boss is speaking 'where his mouth is'. With hundreds of millions of worth endorsement contracts at stake at national level showered by India's businesses; it makes sense for Mr. Tendulkar to say this. It is plain and simple business.

But Mr. Tendulkar has one more thing, as sterling as his batting record and cricketing prowess - his credibility. So when he says what he said above, we believe it, we salute him and then we make an attempt to incorporate that in our life.

There comes an occasion in nation's life when these celebrated sports persons can play the role beyond stadiums. Mr. Tendulkar has done that today with flying colors, as strong as his emblematic power shots.


Mr. Tendulkar, you are the boss.

Thursday, November 12, 2009

Finally a Right Approach for Afghan War

If these reports are any true (Washington Post and AP News) it is very clear that President Obama is finally asking real questions which need to be raised in the case:
- how can America's commitment be close ended instead of being open ended and
- how can America sustain increased involvement when the Karzai government is incapable to provide the basic partnership based on non-corrupt governance to win hearts and minds of Afghan people.

Implicit to all militarist solutions demanding increasing American soldiers in that theater is an assumption that in these early stages of Afghan Nation State History, you got to work with a corrupt government and that is the price of eventually calming down or stabilizing Afghanistan. But when the level corruption at any time negates any realistic possibility of nation building, we need reexamination of such assumptions. A stead fast refusal of this assumption is what is required and whenever President Obama shows that courage, we Americans are in far better shape. What better and significant it can be than Commander-in-Chief showing this maturity and steely character on Veterans Day.

Argument is what can you do even if the local government is corrupt and incapable of cultivating a government which eventually, in finite amount of time, would take over the task of pacifying the population and rule towards prosperity? What can you do is, you can use Predators in such cases if there is no point in putting additional American boots on the ground. America will be least liable in those cases to bomb a region in pursuit of self interest, the region which does not show any sign whatsoever of throwing up any viable partner. If President Karzai wants to show the disdain of American nation building efforts by claiming that the only thing Americans are bothered about is fighting terrorism and no longer term prosperity of Afghans, let him demonstrate that by staying in power for a week without American support. That weak weed will be over run by Talibans in no time. Precisely these tendencies of local powers to blackmail America have to be avoided and if President Obama shows that clarity in dealing with that one Mr. Karzai, that will be one giant step for America's Foreign Policy and a true response to extricate America from losing mechanisms by which America engages with rest of the world.

Argument will be, did we not do similar things in Iraq - partner with corrupt local politicians? But there are number of reasons why that analogy cannot be applied straight forward to Afghanistan - Iraq had had at least 3 credible elections compared to Afghanistan where the election has come a cropper. Iraq had had number of institutions which could help in rebuilding the nation whereas Afghan has literally no institutions and hence it is imperative that the first modern institution - the central government - functions. That does not function and then there is no hope of it working as long as the level of corruption is not reduced dramatically.

So the right approach is to question why there needs to be unconditional support to Karzai government. To imagine and to dare to think possibilities of conducting America's security interests without subjugating the policy to sheepish following of open ended engagements, are the precise reasons why President Obama was elected. Any time a politician walks the road promised to his voters, we have got fulfillment of the mandate.

Monday, November 09, 2009

Some Stupidity of one Nidal

This Fort Hood murder had some nerve to advocate that American Military to relive Muslim American soldiers from fighting against other Muslims in Iraq and Afghanistan! Surprise is how was he not 'court marshaled' at that point itself. How did American Senior Military Professionals allow that non-sense then?

Do we need examples here? What about so many Indian Muslim soldiers died in the war against Pakistan in defending Hindu majority India? Sometimes one really wonders, this country - America - does not get what is Secularism and how to live in a society where people of different religions come together.

This whole Fort Hood affair is tragic but disgrace to Professionalism of American Armed forces and hopefully they would deal with it resolutely.

Update - Andrew Sullivan reports a moving story of a Muslim American soldier sacrificing his life for his comrades in Afghan war.

Monday, November 02, 2009

A Year Later (Foreign Policy)

It is quite clear that President Obama has made solid efforts to fulfill his vast promise which was apparent during the campaign and for what he was elected. Fundamentally the tone of American Foreign Policy is changed and rest of the world is comfortable with it. Not only that, rest of the world would like President Obama to continue this approach (and hence the pre-mature Nobel Peace Prize).

Overall President is sticking to what he said about Iraq - planned withdrawal and continued engagement to sustain Iraqi Political structure. It is the other war - Afghanistan - where he is digging his heels. The initial commitment of troops in Spring of 2009 was swift and a clear signal of his intentions to own this war. The Administration also understood need of a local Afghan Partner for a successful war on Taliban and other terrorists. Credible local partner was supposed to come after the Afghan elections. However, what is surprising is how this White House tolerated the Afghan Election fiasco. It is true that most of the things about this election were decided during Bush term and Obama Presidency had less to do with the preparation. But it would have been apparent to anyone that problems were brewing there and some action was desired. Looking back it seems White House essentially missed the bus and failed to be more vigilant and demanding in that election. Considering all complications of working with Karazi (now that his opponent has backed out of the second round); it would have been much helpful if President Obama was more alert and pro-active about this election.

Compared to that Obama Administration has been quite pro-active and engaged with Pakistan. VP Biden has substantially contributed to this policy, honed by his decades of experience in this matter. Senator Kerry continued his 'carrot and stick' approach via Kerry-Lugar aid package and Sec. Clinton as well delivered a message of 'tough love' courageously. This intense American pressure as well as a challenge raised by terror attacks, finally made Pakistani Establishment to undertake cleansing operations in Southern Wazaristan. There is a long way to right the ship in AfPak theater, but Obama Presidency has at least made a right start in Pakistan.

The White House also intended to make a right start in case of Iran and it did so when it agreed for unconditional diplomacy. However, the Iranian hand is turning out to be a tough one for President Obama. First, it was the brutal suppression of Opposition by Ayatollahs. Not necessarily Iranian Opposition would have been easy to deal with in nuclear matters (listen to recent comments by opposition leaders regarding Western proposal of shipping bulk of partly enriched uranium); but it would have helped surely in reducing tensions. After loosing that opportunity, now comes the news that Iran is effectively rejecting the latest offer of Western countries. Earlier President Obama had good success in lining up Russia and China for these diplomatic efforts, but now these diplomatic efforts are likely to come short. In order to keep the credibility, White House will not have any option apart from going for proclaimed sanctions. Question is will Russia and China deliver on that.

By taking Bush's East European Missile Plan off the table, hope has been that Russia would back White House for Iranian sanctions. When Administration claims that it adopted this change in E. European Missile Defense Plan because there are more effective solutions to address Iranian missile challenges; there is an element of truth in that. But the largest expected payout is in case of Iran. Time has come now when that hypothesis will be tested. One can be wrong here, but propensity here is Russians would disappoint.

Even more harder battle is with China. Neither do China has any strained relations with Iran nor is it uncomfortable with strong hand politics of Ayatollahs. (Differences on religion, those can always be skirted by Communists when it comes to the question of business.) China's graduation to undisputed Super Power status is hardly linked to solving the issue of Iranian nuclear ambitions or solving the Israel-Palestine dispute. For all that matter, China can perfectly imagine a world where Iran is nuclear as a result of American failures. That is the realization one expects this White House internalizes - necessity of containing Iranian nuclear ambitions (what would happen to Sunni Arabs? why would they be far behind?) which may need more than diplomacy and at the same time to make tangible progress on Israel-Palestine dispute.

Arab Israel dispute is the creation of British Empire and America has essentially inherited the British mantle; at least in eyes of rest of the world. The dispute is intimately related to the history of Western Europe, again the leadership of that falls with America. President Obama understands this primacy and hence has been undertaking appropriate policy measures which can bring Israel to the negotiation table. Asking Israel to stop settlements was a right approach in that respect. However, a staunchly conservative Israel government of Bibi and general Israeli opinion about Present Obama that he is soft on Palestine; both are not helping at all. As a result Obama Administration is not able to stick to it's original demands of stopping Israeli settlements and is required to climb down. It is unknown at this point whether such a tactical retreat will help the Administration. But what is more important is that White House understands many more such months without any improvement in Arab Israel conflict and then the world is inviting currently pregnant violence to the real world.

A Year After (Domestic Policy)

Here is my take on domestic policies of President Obama and his Administration since his election last year.

Tom Friedman in his latest NYT column mentions that Obama Presidency is lacking a narrative and as a result his 'nation building' is sounding like a 'work project' which Americans feel just to slough through without much emotive force. Essentially Friedman is alluding that this White House is operating as some kind of 'Program Management Office' devoid of projecting any stronger overreaching purpose for the entire nation. On the same pages, Maureen Dowd explains why it might be the case so - Obama has to encounter the reality of America's two wars and Great Recession. But then intellectual expectation from Obama is despite these wars and lack money, he would articulate and execute a plan and 'narrative' which will ignite American imagination.

The reason why this might not be happening is the choice President Obama made for his nation building - in the midst of severe recession and collapse of Capitalism, he decided to make Health Care Reform as the top priority. The reform will very likely pass soon (by January end for sure). But the price it has extracted is make this Congress unable to take any other legislation seriously. It has jammed out all other important initiatives. Because this Health Care Reform has a hefty price tag with a strong realistic possibility of Uncle Sam requiring to foot unexpected bills in future, President Obama still cannot talk about deficit, tax reforms and better fiscal management. Further, Administration has been bit lax in forcing Congress to adopt 'prudent fiscal path' in the Health Care Reform which sustains a belief that Obama Administration and Dems in particular are not very vigilant in spending tax dollars.

How much of a serious mistake is this - taking Health Care Reform before anything else? Well, most people backed Obama in April when this reform process started on the premise that Obama Administration will be able to do multi-tasking competently. In fact President Obama forcefully rebutted his critics when they pointed President Obama was taking too much.

But forcing critics to shut up in a debate is one thing and 'walking the talk' is another. The two glaring omissions which are become apparent during these months are:

- active intervention to kick start employment and
- financial regulatory reforms.

Administration claims that it created or saved one million jobs due to stimulus package. But as the blogsphere is awash with the statistics which show that indeed the stimulus so far has been disappointing in creating jobs fast; it is apparent that we are nowhere compared to what we were promised. Again Administration critics who pointed then the aggressive assumptions of the Administration in projecting employment effect of stimulus were derided. The debate whether more stimulus is needed or more deficit spending is needed; all that is a policy debate where this Administration is expected to have some hold. With such a disappointed showing so far of the first stimulus package, Administration is short on credibility here. No matter deficit spending or not, one thing is very clear - funds have to be spend fast, smartly and intelligently to generate jobs. That is not happening and this is something President Obama will have to own now. For example, after the stimulus bill, by May - June it was clear that Small Businesses were getting hurt because of the credit freeze. Still it took October for President Obama to take this issue seriously and even today it is not clear how Administration actions would fundamentally solve this particular problem. As whatever 'push' effect of the stimulus wears down, there is a real possibility of renewed challenges to economy and there are no signs on the horizon that American rulers are any ready for those challenges.

For the other issue of financial regulatory reforms, Rep. Barney Franks in House is taking the initiative. But reading all sorts of early reports indicating how these bills are getting compromised during the sausage making in Congress; things do not look very hopeful here. The way derivative market and swaps are proposed for regulation, it is possible that big fishes will leave the net easily. It is also obvious that this Administration did not take any concrete actions in controlling compensation of Bankers, even though Pay Czar issues few orders for some companies owned by Fed. It is not just compensation, it is unclear why AIG honored all bets to Big Banks which essentially benefited too much at the expense of taxpayers. Meanwhile, there is no serious movement in controlling rating agencies which contributed so significantly to the mess we all have landed into.

People recognize that rebooting of the Capitalism is needed. Agreed that entirely new framework of Capitalism is required and that task cannot be done all by the White House alone. But leadership is never about only executing when intellectual clarity is there. While such haze is there, fog is there; White House is still needed to put forward steps to rectify excesses of Capitalism; especially immediate things which are beneficial for average person. It is perplexing that so many of these things politically winner, but the Administration is not undertaking those. This fuels the suspicion that as like any other American Administration, and despite multitude of vows by President Obama; this Administration is no different than others when it comes to withstanding the pressure exerted by Big Banks and Financial Industry. I am not denying the culpability of Congress here and ultimately they are the ones who own most in these matters; the Administration has not set any great examples here as well.

Bernanke, Geithner, Romer, Summers and President, all can argue that saving Big Banks was necessary to avoid collapse of our Economy and there is no denying that. Their fundamental call of not going for nationalization (Paul Krugman and Simon Johnson turned out to be wrong there) is great and probably one of the most important accomplishments of this Administration. But the impression still remains - this whole American Capitalist System is rigged against common man as articulated by NYT commentator Frank Rich sometime back. This Administration has so far been quite lacking in removing such an impression as well as falling short in creating jobs for common people. Automobile Industry bailout (another excellent domestic success, even though bond holders got unfair haircut there) is only one isolated example where some concrete actions by this Administration helped Labor. Apart from that, we are still waiting. Will it be the waiting forever or the wait ends soon; that will be the story of coming year.

Sunday, November 01, 2009

Lessons of hatred

Alissa Rubin writes a thought provoking article in NYT about what is her take away from Iraq - not to undermine the power of hatred and historical animosities. As she mentions at the end, indeed one wishes Americans do not forget this issue as Americans start addressing issues in Afghanistan and Pakistan with a newer strategy. Hilliary's last week trip must have given her that dose first hand.

So all the care and precaution which Obama White House is taking in plotting next moves in Afghanistan and Pakistan; those all are welcome. Not that lengthy deliberations are any guarantees for smart policies, but it will at least give appropriate time for thorough understanding of the situation as well as conducive political developments on grounds (new Presidential term in Afghan and developments in Pakistan's internal battle in South Waziristan).

The general perception of Pakistani and Afghan population is that Americans were only interested in them while fighting Soviets and when that part was done; Americans abandoned them. Of course, there is some truth to that. What was required after the Soviet departure was continued American involvement in that region to carefully handle simmering fanaticism and supporting moderates and middle class in those countries, especially Pakistan. Bill Clinton did not find anything attractive there to continue diplomatically (apart from some high profile visits) nor he found worth while to invest politically at home so as to fund large American aid supporting those societies (instead of just military aid). In some sense there was no pay off to Afghanistan and Pakistan for their support to America in the war against Soviets. American Presidents continued to live with dictators and democracy was skirted aside. It is true that Bill Clinton did see democratic governments in Pakistan and he encouraged those to certain extent. But when those democratic forces started to whittle away, he did not get involved as much as needed. Seeds of 9/11 were sowed in this background.

Coming back to Rubin's article, the involvement cannot be blind or crude without understanding the regional and ethnic divides in those societies. All in all there is no escape for America other than to get involved in this region for a long haul and at great expense. Past mistakes cost a lot. In Bill Clinton's time political environment was favorable to America - it was the only superpower of consequence in those times, American budget was in surplus, Dollar was strong and America had capacity to spend then. Whether America sends more troops today as General McChrystal asks or it does not; it is going to be an expensive endeavor no matter what.

There are few who argue that may be America should restrict all this involvement in AfPak region. Liberal Left is prominent in demanding that and then there are pundits like Tom Friedman who advice along this line now. The case with Friedman is surprising - he was the guy who was at the fore front in backing Bush's Iraq war regardless of realistic cost estimates and now here he wants America to contain her involvement because he fears China, Russia and Brazil all are going to be happy for a perennial entanglement and bogging down of America. It is true that indeed China will be happy for America digging it's own grave in AfPak region. But that still does not absolve America from past omissions and it is imperative for her to still get involved and solve those issues so as these are not fertile grounds of terrorism against America and her allies. Deepening relationship with India and eventual peace in AfPak region; these are worthwhile additional gains too. While executing this undertaking, America needs to be smart and incorporate all lessons which America stumbled upon in Iraq.