Monday, November 29, 2010

Federal Pay Freeze

I don't know about other demands of Tea Party, but I think Obama is right politically to concede this pay freeze demand. Routinely in Silicon Valley competent engineers have seen pay freeze and in many cases pay cuts too, for last 2 or 3 years. Taxes of these engineers and so many unemployed are supporting government employees. So what is wrong if they contribute to deficit reduction? We all know this is not going to solve the deficit problem. But it is the question of showing that Obama is not beholden to any partisan concerns like always increasing salaries of government employees no matter how rest of the country is doing.

Generally it is not easy to disagree with Bernstein, the classy blogger; but I would say emphatically that this is a good politics and a right move for the nation. I would not support indiscriminate lay-offs of government employees because not only it brings misery to the person losing the job; collectively we all go down by decreased purchasing power. Even hiring freeze is fine too. Goal should be to protect jobs of those who are already working albeit with compromises on part of these employees. For Federal Government, there does not seem to be a problem of pension of these employees as like State employees and that is good. Otherwise more cost cutting would be needed there too.

New Jersey Governor Christie has got it right here - private sector unemployed person pays taxes which should not be used to give increments to government employees.

As far as good people leaving Federal Government, that danger is real. But right now so many competent people are in the job market, it should not be hard to find replacement.

All in all good politics here by President.

Ashes - 500 for 1

“One for 500 is a pretty demanding scorecard, isn’t it,” Ponting said.

That too in the second inning of the team and third inning of the test match. Looks like the pitch was really bad for bowlers. Let us see whether next matches get any better pitches or not.

Sunday, November 28, 2010

Obama Administration and Economic History

Brad DeLong has a classic Keynesian critique of Obama Administration. This one is for an instant classic. Another one is an equally brilliant take by Paul Krugman about Dark Ages on Macro-economics. Together these two presentations commemorate an important milestone in the intellectual history of this country. Simply brilliant and must read.

Saturday, November 27, 2010

Black Friday

I think those watching American Holiday Shopping Season are likely to see much better Black Friday, based on my anecdotal experience; needless to say unscientific observations of a blogger. Question is whether American Economy builds on this perceived solid holiday shopping. Chances are good, though nothing is given.

All this and continued weakness in Europe mean a decent recovery for Dollar. One just wonders whether all these signs of 'traction / sustainable growth' in American Economy may append Bernanke Program of QE2. If so, politically it will be interesting - even though Paul Ryan's of the world are correct (Fed should not go for QE2, economy will come on its own), in the end improved economy will benefit Obama.

On the other hand if non of this pan outs, the worm would not have turned and the story of 2010 will continue - slog months of building recovery unless of course Europe does not disturb this apple cart too much in which case we will be back to square one.

Update - Looks like indeed my observations were unscientific as numbers are not that impressive. Seems like things are still improving gradually rather than in leaps and bounds.

Friday, November 26, 2010

Krugman Trapped?

The forceful argument which Paul Krugman does here to argue the case of Ireland People against Banks is the exact kind of argument Tea Party has against TARP regardless of its success. Krugman has to have both political and economic arguments to indicate why TARP was justified in American context and why did it succeed whereas what problems he sees with the Ireland bailouts. In absence of that Krugman's Ireland argument remains baffling.


Few pointers for any such justification of TARP are:

1. Currency - While USA has full sovereign currency, Ireland is stuck with Euro which primarily serves German Economy, typically at the cost of all other peripheral, small economies. Of course in the case of Dollar, being a reserve currency it is not such a free ride for USA as last few years have shown that in times of economic distress 'flight to safety' continues to keep Dollar overvalued. China's currency manipulation further erodes this advantage for USA.

2. Size of Economy - I suspect that is one more reason why things were different in case of USA. TARP layout was commensurate with the size of American Economy which is still the largest in the world and quite diversified with global competitive advantage intact in many industries.

3. Geithner Stress Test - European copy cat Bank Stress Tests have been already exposed by failure of Ireland Banks. The European Financial Bureaucrats, ECB and its brethren, simply did not have the political acumen and strength to pull off this affair. ECB and EC are still beholden to nationalistic pressures, still hesitant to offend any national economies instead of having clarity to steer through all these contradictory national pressures to convince the market. Geithner / Summers pulled off one of the most high wire acts of Public Finance in many many years; Americans are beneficiary of that whereas when Europe attempted to pull that off, it failed miserably.

4. Stimulus - It is no small reason that along with TARP, Obama pushed his stimulus to kick start the economy. That was the Fiscal component of the medicine for the 2008 Great Recession. Yes, as Krugman argues it was insufficient and political ham handling by White House (committing specific unemployment percentage at 8% as payoff the stimulus) compounded the politics of any such fiscal remedies. But the fact is that stimulus nevertheless helped to keep moving American Economy forward which in conjunction with TARP helped USA to avoid Ireland kind of situation. On European soil, with Germany firmly against any such committed stimulus; there never were so emphatic efforts on fiscal side.

These are few of the aspects what this blogger could think off. But clearly it is for public intellectuals like Krugman to argue for a coherent case of why American Bailout was relevant. True, Krugman advocated Bank Nationalization instead of TARP so he can argue that it will be the job of Geithner and Summers to put forward the case here. But let us try to understand the politics here - in absence of any cogent argument in support of TARP and Stimulus; Obama and Dems are going to be with these millstones until their political decimation is complete. For Americans, improving economy will be the only pardoning of Obama, Dems and their discredited bailout politics; which for a surprise may happen after all.

Thursday, November 25, 2010

Korean Knot

It is a very disappointing article by B.R. Myers because it hardly tells what options USA has in this case. Of course it is better than this latest Palin Pearl; but hardly useful. Also it is hard for me to agree with my blogger friend Raymond Turney's assertion that China is using North Korea fully to expose limits of American Military Power. Obviously China would love to expose limits of American Military but China knows that ridding a difficult to control tiger for short term gains is not a longer term strategy when China herself has difficulties in containing recalcitrant North Korea in the first place.

Generally it is held by most analysts that USA-South Korea Alliance will prevail in the end when an actual Korean War starts. But the problem is thousands of artillery guns pointing to Seoul, proximity of South Korean Capital to the danger zone and ability of North Korea to deliver nuke bombs (supposed to be around 10) on South Korea and potentially Japan. What can USA do about it? Is it not in the end call of South Korea to indicate that it is willing to take the pounding and potentially Japan also? Only when South Korea is finally ready for all these possibilities of catastrophes that USA can open the fire in DMZ.

Next Korean War will not be where USA will have to necessarily commit large number of boots on the ground. It is unlike Iraq and Afghanistan where 'occupation and nation building' have been the objective. That job will be done by South Korea here. The only possibility of requiring large number of American soldiers on the ground will be when China starts taking part blatantly in this Korean War. That will be repeat of last Korean War. Now the question is how far China will go in committing PLA for this war. Refugees from North Korea is China's immediate issue. Second, strategic objective for China is not to have American presence next to it's border, even though Americans are already there in South Korea. If there is some understanding for that among China, USA and South Korea - though a diplomatic uphill - there is a possibility that China may be restrictive in this fight while USA and South Korea are attempting to neuter North. Very clearly American strategy for any future Korean War will be total 'air power war' like Powell's Gulf War. The goal will be to minimize the damage on South side by trying to take out North Korea fire power as early as possible. The qualitatively improved 'air power edge' compared to America's earlier engagement on Koreas Peninsula; is the real key for minimizing America's presence on the ground.

But China needs to buy this. It is not like 1950s when immediately after the glow of WW II victories USA could think about taking on China as just another belligerent. Today USA simply cannot pull off that. All this means, there needs to be clear understanding among China, South Korea and USA about what happens after the war concludes (assuming that South Korea and Japan are ready for all the heavy and potentially catastrophic price of a nuclear attack) - how the division of North Korean Territory would work. Giving some pieces of land to China along with some population (meaning South Korea's border moving up of 38th parallel as much as possible); that can be attractive to China. But when China is already global economic engine with 3rd largest land mass and highest population; what few million acres of land and few million people can attract her?

The third issue for China is partially united Korea - assuming some territory is permanently gobbled by China - will be a stronger competitor than present day South Korea. Equally for the same reason Japan would be reluctant to do all that. Similarly, Russia would support any such North Korean land barter only if it perceives that China's designs on its Far East Regions are lessened by all this arrangement.

Given all this, it is true that it is much easier for China to continue the current status quo as the Korean entangle will continue to be a thorn for Americans. But if as reported China has less control on North Korea, the possibility of North Korean stupidity and aggression crossing a line cannot be ruled out. In absence of such truly unacceptable incident; getting full understanding among China, Japan, Russia and South Korea about post-war arrangements is not easy. Neither America has the diplomatic clout to bring all these powers to a table and propose a solution acceptable to everyone and get the buy in from all; nor South Korea or Japan are anywhere near to accept the price of war with North Korea. Till then maintaining the status quo i.e. being fully committed to South Korea with full readiness of a war; is the only thing what America can do.

Wednesday, November 24, 2010

Nitish Kumar - India's Lula?

Now, that is Progressive Politics and emphatic electoral victory. Nitish Kumar has great potential to become India's Lula, he is delivering to masses where it matters most. (He is much more natural and better suited national leader for BJP/NDA than the other rival - Gujarat CM Narendra Modi.)

I was wondering, may be in a growth phase of Capitalism; it is easier for Socialist Politicians to move to Right and Center and deliver the goods. Lula has established that pattern firmly on global scale. Dr. Singh started the same in 1990s and of course China is there, though its politics is not changing. But in electoral democracies, it is becoming a recognizable pattern that Socialist Politicians are riding the Capitalism and as long as they do that in careful and prudent manner; electoral success is there. In case of Nitish Kumar, the true benefit is he is genuinely attempting to make his governance in more transparency. In a corruption ridden country like India, this has far more significance. Besides, with growing Economy; it is becoming easier to conduct politics beyond all caste calculations and Nitish Kumar is precisely practicing that. All in all very impressive and truly positive for India. Kudos to Nitish Kumar and best wishes for him to succeed in what a great work he is doing for Indian masses.

Monday, November 22, 2010

Conservatives from America

They know that Ireland poses an issue.

It is just that American People do not know that the policy of American Conservatives is nothing but to take away Obama years as soon as possible so that any 'state intervened successes' go away from the memory of America. What do you do when your 'dharma' is 'market forces' but reality is much more biting? You try to hide as much as possible which is what American Conservatives are up to.

There is no option today than bid for time until majority of Americans realize what is happening, especially when Obama has decided 'caving in' to demands of Paul Ryans of the world rather than to fight for principles of Paul Wellstones of the world.

Friday, November 19, 2010

Germany

"Time is of essence. Europe must give serious consideration to a wider range of approaches. It is in a good position to do so given the undeniable strength of core Euro-zone countries, anchored by a fiscally sound and economically robust Germany."

-- Mohamed A. El-Erian, CEO and co-CIO of PIMCO, Blog post on Reuters website.

I think a point clearly forgotten by people like El-Erian is what if Germany has vested interest in not exploring any other approaches? The logic is very simple - more weaker economies like Ireland and Greece in Europe; more is the underwriting of these weak economies by Germany and there by keeping the Euro weaker. Weaker Euro clearly translates into higher German Export which means better German Economy. Then why bother exploring other approaches? Just keep on pushing draconian methods down the throat of these weaker European economies along with few Euros thrown in the mix. For example, a competitive advantage Ireland had like lower Corporate Taxes which has been luring lot of companies to Ireland will be gone as a result of accepting German backed Euro terms (Versailles - I guess old habits die hard for Europeans). Why would not Germany like less competitive Ireland? Why would it not support harsh terms for Ireland and Greece for few more Euros?

The G20 coordination, for all the froth that is being said in public, is nothing but a 'currency devaluation tango of 3 currencies' - Germany playing Euro by keeping weaker economies on the Euro book, Fed undertaking QE2 and China not budging from fixed rate Yuan. Britain does not have much of an export sector left to benefit from weaker Pound. On the contrary stronger Pound is basically good for core Financial Industry competence of British Economy when around 25% of British GDP is tied to the Financial Sector in and around London. Japan is simply not in a position to bring around any international weight to keep Yen down. Ever since the Plaza Accord, Japanese Economy has been neutered effectively by overvalued Yen. (That Plaza Accord, apart from the fear of how a stagnant economy drove Soviets to ground, is another nightmare scenario Chinese Communist Party wants to avoid at any cost; meaning China will be loath to agree to currency accord in itself.) Brazil, Canada, Australia, India & South Korea are small individually to matter with their respective currencies in the global economy. So all in all it is a threesome tango of Dollar, Euro and Yuan devaluation at global level.

Euro provides a perfect cover for Germany to continue to grow it's already formidable economic power further; typically at the cost of many other weaker economies. The thing is even smart people are unable to read in between here. Bernanke seems to be one of the rare folks who is trying to retort Germany and China in the code language what they can understand.

Dr. Singh in Rough Waters?

In the event of Dr. Singh's resignation for the 'Raja Mess'; it could be Pranab Mukharjee who will be India's next Prime Minister. That is not a bad choice considering important State elections next year in West Bengal. He is well qualified, has well earned his place and has demonstrated political adroitness. However, all that is speculation. In the first place, I doubt the Raja case would develop to a point where Dr. Singh needs to resign.

Failure to act upon quickly on a plea to prosecute Minister Raja after explosive CAG Report - well, let us face it; can it be a serious breach of law? Raja has resigned and he can very well be prosecuted going forward. Prime Minister's Office is always busy and apart from issues of national security; all other issues can be potentially delayed. Just because CAG said 'things have gone wrong' does not mean Prime Minister has to drop everything else what he is doing and immediately start prosecution of the alleged guilty. It is not like that Minister has been convicted and Prime Minister is needed to take the action right now. No mistake here, Minister Raja has quite possibly emblazoned money. Corruption has taken place here; but it is always the question of proving it in a court.

Point is, smart legal minds can indeed find lot of valid reasons why Prime Minister's Office was delayed in granting 'prosecution of a minister'.

Obviously, resignation of PM Dr. Singh, if it comes to that, will not be because of some such delay in a bureaucratic matter. If at all, it will be for the simple political reason of allowing the Raja mess on his watch. After making crusade against corruption by sacking Maharashtra Chief Minister Ashok Chavan for the Adarsh Society Scam and removal of Suresh Kalmadi for CWG corruption; it will not be easy for PM Dr. Singh to remain slow in the case of addressing corruption of ex-Minister Raja. The political narrative is very simple - Dr. Singh is simply a puppet who allows all sorts of corrupt practices in his Cabinet. Clearly, Sonia and Rahul Gandhi - the true powers in Congress - cannot face electorate with this impression. That is the danger and that will be the reason, if at all, for which Dr. Singh may have to go.

But Delhi is still far away and it is very much possible that Dr. Singh is able to ride this crisis instead of being a victim of it.

Tuesday, November 16, 2010

START Stopped Permanently

I was naive to expect that GOP would eventually support START. But with Sen. Kyl turning on this one, the fate is sealed now. Surprises are always possible, but those cannot be expected rationally.

I think consequences are going to be serious - hardly anyone would be interested to negotiate anything substantive with America. President Obama will be seriously crippled in his nuclear containment policy. Rest of the world now knows what 'bar' Obama cannot clear. Practically, any serious foreign policy victory requiring Senate vote is gone until Obama manages to get elected back; which does not look easy for now. Foreign policy areas where Obama can hope to make any difference will be those for which he does not need Senate approval; like Arab-Israel resolution or stabilizing Afghanistan. Even there as well, it is questionable why would anyone listen to a so crippled leader.

I guess it must have been like this in American Political History all along - politics trumping national interests on so many occasions. Nevertheless, this is a breathtaking moment; not only harbinger of 'bad blood' which is going to spill in Washington DC in days to come (starting with snubbing of President for a meeting with Congressional Leaders), but fundamentally setting the devilish framework of American Politics for next two years.

Gridlock days - days to take America down by deeds of our own politicians - have arrived.

Saturday, November 13, 2010

Continued Political Insanity of Democrats

In democracy we are used to see losing political party to do stupid things in the aftermath of an electoral loss until it finds its grooves. But there is nothing compared to total communication and policy breakdown which President Obama and Democrats are showing in the context of Bush Tax Cuts for rich. What is going on? Jonathan Chait gives up when he says:

"....why the Democrats won't do the obvious thing. ...exhaustion and demoralization keeping them from thinking straight. That's the best explanation I can think of."

Indeed that seems to be the case. Otherwise David Axelrod would not have talked all that non-sense on Huffington Post.

Apart from inability to think straight, President Obama and his White House indeed have a communication problem. I mean it is bizarre that President has to reiterate his tax policy on a foreign soil in Seoul while collecting pieces in the aftermath of Korean Trade deal collapse. Where do we start - dazed by election losses to think clearly or communication failure or political ineptitude in not having worked out trade deal while allowing to raise expectations about the trade deal? (1) Anyone one reason or all? Really Obama Political Machine is looking more as a fumbling rookie, bunch of inexperienced people trying desperately to man a big ship on which they are completely out of their own league.

Coming back to the tax cut mess, my thinking is Obama knows that he does not have votes in Senate and Dems like Nelson of Nebraska, Joe Lieberman, all that gang is simply not on board. The solution for President Obama is to expose that non-sense and hypocrisy of these Senators. What will be the cost - these Senators will not come with him and GOP will have effective caucus in Senate. But seriously, how bad is that going to be? Is Harry Reid still not the majority leader not to allow anything senseless to come on the floor even if he is not able to bring anything positive? True, that means tax increases across the board until Congress caves in. But to who Public is going to blame for that? Congress or White House? If Barack Obama does not have any confidence of waging this basic Presidential Politics 101 battle in bringing Congress on mat, we have real serious problems here. Seems like Karl Rove is right - the guy simply does not have 'political smarts', nowhere near to Bill Clinton. Unless Americans see that this President is strong enough to take on political opposition to do what is right for America - reduced deficit in this context - there is going to be no respect to President Obama. The message of the last week election was not for Obama to join the 'looting of Uncle Sam by American Rich to exasperate already high deficit'; but to 'stand firm regardless of political ease to reduce ballooning deficit'. It is really inexplicable that the President who lamented to give in 'tax cuts' without negotiations with GOP in the Stimulus Act is giving all these wrong headed concessions even before the political negotiations start.(2) There is also equal lack of foresight in touting any significant 'middle path' of applying these tax cut funds to businesses in order to leverage employment generation.

It is no longer an issue of domestic politics but is a question of international credibility too. Cameron of UK and Merkel of Germany are to the Left of Obama when it comes to Tax Policy. China is planning new taxes to stop rampant housing boom. Compared to that here we have an American President who is simply caving into his political opposition to accept misguided tax cuts. Nothing but it enforces the image of American Political System as completely unable to rein in its budgetary deficit.

Rarely there is a sweet spot where both national interests and global economic interests converge (3) and this is the political sweet spot Obama and Democrats are simply wasting. Foreign Leaders and Public can read these leadership failures equally and will stop bothering about American President who cannot deliver anything. Seeds of more Korean trade bill like failures and further 'roughing of America in G20' are sowed by all these actions.

Update - With a headline picture alluring to 'Tank Man'; Frank Rich has a devastating critique of American System which is practically ruining this Republic because of its inability to get the tax policy right for super rich. Of course Eric Cantor, John Boehner and Mitch McConnell of the world would not bother to answer this criticism. The new refrain in American Politics is 'it is a free country so anyone can criticize politicians' and meanwhile these politicians are free not to answer any of that criticism. The only hope is few in Tea Party sense the 'political opportunity' here and start attacking the establishment GOP.


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(1) "...you don’t send the president overseas to fail to get an agreement. Wasn’t anybody taking notes when he went to Denmark to fail to get the Olympics for Chicago?"
Gail Collins

(2) "Perhaps he should not have proposed tax breaks as part of his stimulus and instead “let the Republicans insist on the tax cuts” so it could be seen as a bipartisan compromise. "
Interview with NYT.

(3) “National responsibilities are conflicting with global responsibilities for both the U.S. and China. That is a real problem for the global economy.”
Mohamed El-Erian, the CEO of Pimco.

Thursday, November 11, 2010

Praise where it is due

Generally I do not get any opportunities to praise Charles Krauthammer, but here is one. He is no Prof. Drezner, but still it is good to read Charles making a relevant point emphatically.

But what about the American Power Lady?

As a British reporter said "you lose 65 seats, you resign. Period."

It is nonsensical for Pelosi to argue that it was not her leadership which cost those Dem seats, but the Economy and the Senate. A leader cannot go with that argument anywhere. With the position of House Speaker, the third ranking in USA Federal Government, she had a bully pulpit to argue a political vision. Faithful to her ideology (which was worst manifested when House passed fiscally irresponsible Health Care Bill which was thankfully turned down); she put a political vision and for right or wrong reasons that vision has been repudiated fully.

Job of a politician is to get reasonable popular support for his or her political vision. You do not say all the time 'I am going to prescribe Spinach only' with no willingness of Public to eat that Spinach. As President Obama is finding, to get that Public backing is not easy. In elections when you do not get that backing, you relinquish the leadership. Plain and simple.

Time for Nancy to move on.

Update - The other American Power Lady is however rocking with continued upward approval ratings.

Monday, November 08, 2010

Saturday, November 06, 2010

Beyond Shellacking

It is conventional wisdom in punditry that with a political gridlock - GOP majority in House coupled with Democratic majority in filibuster infested Senate - nothing worthwhile likely to pass in 112th Congress in next two years. There is a merit in this commonsensical observation, given that the scorched earth policy of saying NO to everything what Obama proposes has produced handsome dividends like 65+ seats in House for GOP. The gridlock will unfold by flurry of GOP House passed bills which GOP will claim as its attempt to repair America. GOP will blame Democratic Senate and President in turning down those highly partisan, ideological driven House Bills which are unlikely to solve any of America's problems. And so the blame game and vilification of Obama will continue in full speed. Democrats will tend to argue 'but what about the quality of those bills'? But that is not a passable argument with American People. The smarter approach here would be to publicly subject every legislation for two litmus tests - is it fiscally balanced / funded and whether it generates employment. Only when Dems and Obama start sounding very early, preferably before the flood of House bills, how these criteria are critical to evaluate every political and policy measure; American Public will understand how GOP House sponsored bills are nothing but pure political ploy.

The net result of all this posturing will be a drought of legislative measures to remedy America's multitude of problems. However, it need not be bad as Barack Obama is finally realizing that 'governance does not mean legislation only'. With his acknowledgment of failure of communication, 'selling the vision of America' becomes obvious vocation for President for the next two years. Practically it will be reenactment of what he did during 2007 and 2008 on campaign trail to win presidency. But this time it will be different due to his incumbency and what with all the baggage of Health Care Reforms and not so stellar handling of unemployment situation. There are few obvious themes which President Obama needs to consider for this extended phase of campaign for re-election while the Congress is gridlocked.

1. To start with, time has arrived for President Obama to start a straight dialogue about the core contradiction of America's fiscal mess - people's expectations about entitlement do not reconcile with what they are ready to pay as taxes and fees. We need public debate and general acceptance for what % of GDP should be government budget and what % of shortfall is acceptable. Going next step, we also need 'variable tax rates' depending on overall economic situation and unemployment. For example, if Congress wants to extend Bush Tax Cuts for Rich (which is what fiscally minded GOP wants to do!) then are those to be in perpetuity or could those be linked to unemployment rates? Does it make sense as Economy grows and unemployment is reduced, these Tax Cuts are still in force without any recalibration? If for banks we think about 'counter cyclical capital requirements' (less capital in recessionary time whereas more capital in boom times); why not for tax rates? Will not such an approach essentially triangulate Conservative demand of 'tax cuts' all the time?

2. If failure to communicate benefits has been a reason for unpopularity of Affordable Health Care Act, the need to correct that failure does no go away. If President and Democrats continue the current line of saying they are open to improve this reform further and indeed actually work to put changes to address concerns of American people, that will be good politics and good for American people; provided GOP comes along. Unfortunately GOP has more incentive in keeping that legislation flawed for obvious political benefits. The trick is to show the true motive of GOP here - no interest in fixing Health Care but intention to use it as a 'pinata' to flog Obama. When that game is exposed, public is bound to see through this cynicism. Constantly bringing public attention to 'relentless health care costs' would provide the necessary backdrop to continue the second stage of this debate. With 2010 MidTerm Elections, it is clear that Obama cannot avoid his responsibility to correct the course there.

3. President Obama has not be emphasizing enough the importance of funding Education, Research & Development and Infrastructure for America to compete in today's global world. Trade barriers and currency devaluation are not sustainable solutions and GOP majority in House would be supportive in that respect. Analogy here is does not a family take a loan to fund 'college education' of kids knowing that without it those teenagers do not stand any chance to compete? Harder part of the job here is to persuade Americans that funding these activities is indispensable. If wars in Iraq and Afghanistan are good enough to fight on borrowed money, why is it not good to borrow to invest in Technologies which will produce tomorrow's Google? Until Americans are presented these stark choices in blunt wording, muddling of budget which GOP undertakes, will not be challenged politically.

4. Immigration is another issue where Democratic supporters probably have reached a limit. President Obama needs to make the case why immigration means improving Economy in Medium to Longer Term. Not only will it redress the political blind spot for Democrats, hesitating further due to the fear of how GOP would engineer political backlash is not going to untie Democrats from their current predicament in any of future election.

5. Finally, at some point fantasies of American Exceptionalism need to be squarely faced so that Americans understand working with emerging democratic power houses like India, Indonesia, South Korea, Poland, Brazil and Chile is much more beneficial than locking horns with China. There is an opening for bi-partisan understanding here as these sentiments on Conservative side show. What Obama needs to do here is unshackle Liberal Orthodoxy on nuclear proliferation and labor protection. President Obama's current trip to some of these countries is a right step, what he needs to do here is to keep building on it rather than leaving it half way through.

The goal in attempting to put forward this agenda forcefully in front of Americans is stir clear of ideological blindness of both Left and Right and utilize better next two years in rendering a vision on the background of gridlocked Congress. There is no other road for President Obama than this if he wants to get re-elected.

Wednesday, November 03, 2010

Mid-Term Elections

1. GOP Tea Party wave was estimated on bit of lower side and as usual the pendulum has reached the other extreme with GOP winning the House by 65+ seats. Dems have been lucky to hold on Senate with 51 to 53 seats.

2. Overall this is bit of a tolerable result for President Obama, given the bashing expected. Except holding onto Senate and victory in CA governorship; there is nothing much positive for Democrats apart from good fights in many Senate races like PA, IL and governor races in OH and FL; all lost by Dems. Reid winning Nevada is the only high profile notable victory for Dems.

3. Tonight's stars are Ron Paul and Marco Rubio and to some extent Harry Reid and Jerry Brown on Dem side. John Boehner is for Media, I am not so enamored for him. He is an old hand and House Majorities are more of a collective work rather than an individual. Meanwhile President Obama is clear loser here having been unable to pull off any hard fought electoral victory in MidWest and on East Coast.

4. With House emphatically under GOP, people will perceive this as the divided government; meaning GOP sharing the responsibility as well as blame for any governance lapses. If Economy does not turn as expected in next 2 years, Republicans will be not be able to get off the hook so easily here.

5. On the other hand if Economy recovers respectably, 'grid lock as the Goldilocks' perception will be entrenched among Americans, howsoever misplaced it is, and possibly that economic recovery will help Obama to get re-elected.

6. In terms of policy, Public Opinion has clearly shifted to Center-Right and Krugman feared 'retrenchment in government spending' policy will be in full force.
- For Health Care, Republicans will focus on 'de-funding Obama Health Care Reform' wherever applicable as they will realize that outright repeal is not possible. Failure to repeal outright Obamacare will be disappointing to Tea Party Base and GOP will be conflicted here. GOP will be limited here since any Health Care Fights are more of backward looking rather than a forward vision. This is because GOP corrections of Health Care will not fix unemployment. If passing Affordable Health Care Law was a distraction in the first place for which Dems paid the price, GOP will be foolish in paying repeat price due by getting distracted while fixing that same Health Care.
- In the first budget, GOP is aiming to cut around $100 Billion from the discretionary spending resulting in potential layoffs of government employees and cutting of many services. But this is going to be really hard for GOP to pull off without losing some political capital.
- Bush Tax Cuts for Rich will be clearly passed by Congress and President Obama will meekly accept that. Such a failure by Obama and Dems to pick up 'defining fights' will continue to dilute a strong political identification for Democrats and will continue to cost them in future elections as well.

7. Longer term, in absence of any policy framework to reconcile demands of Americans for entitlements like Social Security and Medicare and unwillingness to pay/collect taxes; fiscal imbalance will continue more or less as is. Congress will accept some recommendations of President Obama's Committee on Deficit and will essentially adjust Social Security even though the crisis there is not so alarming, not requiring draconian solutions. On the other hand the core problem of Medicare and unabated Health Care Costs - Republicans will not be able to stop it and will not be much interested in addressing this issue as well. Malpractice Reform - that one positive outcome is possible since President Obama will trade that to preserve some of the gains of his Affordable Health Care Act. But in itself 'malpractice reform' does not solve America's core problem of relentless health care cost increase.

8. Further, apart from an amorphous policy of being 'business friendly'; lack of any cohesive vision to grow America will continue stymie longer term American economic growth. In other words, American Political System will hardly make any dent in addressing longer term structural issues. Few Trade Deals will pass through Congress and there will be pressure on all non-Dollar currencies; but in themselves these things will not revive American Economic Growth.

9. In case of Foreign Policy, START II will continue to face resistance before passing eventually. President Obama will continue to muddle through Afghanistan war listlessly for next two years just to ward off any political attacks from GOP. Essentially General Petraeus will run that war with a solid GOP backing in Congress and President Obama will allow that without much resistance to avoid picking any costly political fights before re-election.

10. Finally, early in the game Sen. McConnell's plan of making President Obama as the one term President seems to be on track. Unless President Obama becomes more attuned to Public Opinion and is laser like focused on Job Growth (even though he has less means to do anything substantive there) policy wise these two years will be a drought for Obama and Democrats. He has an opportunity to keep his game plan simple and winning - doing all he can for employment growth and pointing out fiscal insanity of Republicans. Question is whether he wants to do it aggressively or to continue to be meek in taking on any political fights.

Monday, November 01, 2010

San Francisco Joy

The local Giants are on the top of the baseball world! Tonight it should be all joy in San Francisco.

Tomorrow will be another day - the power lady of the city, Speaker Nancy Pelosi, will give back her gravel to John Boehner.