Bernanke Rules?
In today’s Wall Street Journal, Fed Chairman Ben Bernanke has outlined “The Fed’s Exit Strategy.” He tells the reader how the central bank will avoid an inflation of historic proportions resulting from all the money and credit it has injected into the economy. All of the strategies he outlines are technically feasible ways for the Fed to implement monetary restraint.
The op-ed has an air of a classroom exercise, however, rather than a practical central-bank strategy. Much of the article is devoted to explaining how the Fed can now pay interest on reserves, and how it could raise that interest rate so as to dissuade commercial banks from lending the reserves out. It could do that, but what would that rate need to be in order to meet a private bank’s threshold rate of return in normal economic times?
More importantly, the Fed has never lacked the technical tools to combat inflation. What it has so often lacked is the will to make tough decisions. And, quite frankly, it does not possess the information needed to fine-tune the economy in the way Chairman Bernanke imagines (a point made by Milton Friedman many years ago). Lack of will and lack of information combine to keep the Fed behind the curve. Its policy was too easy after 2001, and so it fueled the housing boom. It was late to recognize the turn in housing and the economy, and its policy was then too tight. If past is prologue, it will be late to implement its exit strategy.
The Fed Chairman has presented a laundry list of policy tools. What investors need is some assurance that the right tools will be used at the right moment. The mere promise of a policymaker to do the right thing has little credibility. There is no monetary rule in place, only the rule of a man.
A Better Way to Reform Health Care
From my oped in today’s Investor’s Business Daily:
As it turns out, “universal coverage” may not be so inevitable after all. Much to the chagrin (and apparent surprise) of President Obama and congressional Democrats, squabbling has erupted in earnest over who will spring for the exorbitant cost.
Fortunately, Obama has an exit strategy: “If there is a way of getting this done where we’re driving down costs and people are getting health insurance at an affordable rate, and have choice of doctor, have flexibility in terms of their plans, and we could do that entirely through the market, I’d be happy to do it that way.”
Well, there is a way: Let individuals control their health care dollars, and free them to choose from a wide variety of health plans and providers. If Congress takes those steps, innovation and market competition will make health care better, more affordable, and more secure.
Cheney vs. Obama: Tale of the Tape
In case you missed it, President Obama and former Vice President Dick Cheney spoke separately today on terrorism and national security. Like two boxers at a pre-fight press conference, they each touted their strength over their opponent. They espoused deep differences in their views on national counterterrorism strategy.
The Thrilla in Manilla it ain’t. As Gene Healy has pointed out, they agree on a lot more than they admit to. Harvard Law professor and former Bush Office of Legal Counsel head Jack Goldsmith makes the same point at the New Republic. Glenn Greenwald made a similar observation.
However, the areas where they differ are important: torture, closing Guantanamo, criminal prosecution, and messaging. In these key areas, Obama edges out Cheney.
Republicans Tell America: Trust Us with Your National Security Again
The Republican Party hasn’t been doing well as of late. A botched governing majority, a lost reputation, two lost legislative elections, two lost congressional majorities, a lost presidential election, a lost Pennsylvania senator, and no relief in sight. So what does the GOP congressional leadership do? Play the national security card.
Stymied in so many of their efforts to put President Obama and Democrats on the defensive, Republicans are returning to national security, an issue that has served the purpose well for them in the past.
Trying to raise doubts about Mr. Obama’s ability to protect the nation, they have raised the specter of terror suspects transferred from the detention facility at Guantánamo Bay, Cuba, to prisons in American communities, issued warnings that the release of memorandums detailing secret interrogation methods has put Americans at risk, and presented a video montage ending with the Pentagon in flames on Sept. 11, 2001, and the question, “Do you feel safer?”
“I think what I’m trying to do here,” Representative John A. Boehner of Ohio, the Republican leader, said in defending the video he and fellow Republicans have been circulating, “is push the administration to tell us, What is the overarching strategy to take on the terrorists and defeat them and to help keep America safe?”
I have a lot of bad things to say about both parties on foreign as well as domestic policy. But it’s hard for me to imagine the previous eight years of Republican governance as a golden era for national security. First there was 9/11. Perhaps it is too much to expect the Bush administration to have prevented the terrorist atrocity, but the administration did nothing over the Clinton administration to improve American defenses to prevent such attacks.
Then there was diverting troops and attention from Afghanistan before that war was finished, to invade Iraq. The Iraq debacle occupies a category all its own. Policy towards North Korea was spectacularly misguided and incompetent: refusing to talk to the North for years as it generated nuclear materials, before rushing to embrace Pyongyang while offering few immediate benefits to entice the North to change its behavior. The results of this strategy were, unsurprisingly, negligible.
Obama’s First 100 Days: Mixed Record on Foreign Policy
Cato foreign policy experts weigh in on President Obama’s record in his first 100 days:
Christopher Preble, Director Foreign Policy Studies:
President Obama deserves credit for making a few modest changes in U.S. foreign and defense policy, and he has signaled a desire to make more fundamental shifts in the future. Some of these may prove helpful, while others are likely to encounter problems. In the end, however, so long as the president is unwilling to revisit some of the core assumptions that have guided U.S grand strategy for nearly two decades — chief among these the conceit that the United States is the world’s indispensable nation, and that we must take the lead in resolving all the world’s problems — then he will be unable to effect the broad changes that are truly needed.
Ted Galen Carpenter, Vice President Defense & Foreign Policy Studies; Christopher Preble:
On the plus side, Obama moved quickly to fulfill his most important foreign policy promise: ending the war in Iraq. That said, the policy that his administration will implement is consistent with the agreement that the outgoing Bush administration negotiated with the Iraqis. Given that the war has undermined U.S. security interests, and our continuing presence there is costly and counterproductive, Obama should have proposed to remove U.S. troops on a faster timetable.
Malou Innocent, Foreign Policy Analyst:
The jury is still out on the other major, ongoing military operation, the war in Afghanistan. That mission is directly related to events in neighboring Pakistan, which is serving — and has served — as a safe haven for Taliban supporters for years. President Obama deserves credit for approaching the problem with both countries together, and also in a regional context, which includes Iran, as well as India. Still unknown is the scope and scale of the U.S. commitment. President Obama has approved a nearly 50 percent increase in the number of U.S. military personnel in Afghanistan. Some have suggested that still more troops are needed, and that these additional troop numbers might prevail for 10-15 years. That would be a mistake. The United States should be looking for ways to increase the capacity of both Afghanistan and Pakistan to confront the extremism in their countries, and should not allow either to grow dependent upon U.S. military and financial support.
Christopher Preble and Ted Galen Carpenter:
On Iran, President Obama made the right decision by agreeing to join the P5 + 1 negotiations, but that is only a first step. The two sides are far apart and President Obama has not signaled his intentions if negotiations fail to produce a definitive breakthrough. Sanctions have had a very uneven track record, and are unlikely to succeed in convincing the Iranians to permanently forego uranium enrichment. If the Iranians are intent upon acquiring nuclear weapons, military action would merely delay Iran ’s program, and would serve in the meantime to rally support for an otherwise unpopular clerical regime, and a manifestly incompetent president.
Doug Bandow, Senior Fellow; Christopher Preble:
A related problem is North Korea‘s ongoing nuclear program, an area where the president and his team seem to be grasping for answers. President Obama was mistaken if he believed that that the UN Security Council would render a meaningful response to Pyongyang’s provocative missile launch. It was naive, at best, for him to believe that even a strong rebuke from the UNSC would have altered Kim Jong Il’s behavior. The president must directly engage China, the only country with any significant influence over Kim. The North’s reckless and unpredictable behavior does not serve Beijing’s interests.
Benjamin Friedman, Research Fellow; Christopher Preble:
Obama and Defense Secretary Robert Gates are correct to apply greater scrutiny to bloated Pentagon spending, and to terminating unnecessary weapon systems, but the budget will actually grow slightly, at a time when we should be looking for ways to trim spending. If President Obama decided to avoid Iraq-style occupations, we could cut our ground forces in half. If we stopped planning for near-term war with China or Russia, the Air Force and Navy could be much smaller. Unless we commit to a grand strategy of restraint, and encourage other countries to provide for their own defense, it will be impossible to make the large-scale cuts in military spending that are needed.
Jim Harper, Director of Information Policy Studies; Benjamin Friedman; Christopher Preble:
Two other quick points. President Obama has moved away from some of the overheated rhetoric surrounding counterterrorism and homeland security, including dropping the phrase ‘War on Terror”. This was the right approach. The language surrounding the fight against terrorism is as important — if not more important — than the actual fight itself. Equally useful is his pledge to close the detention facility at Guantanamo Bay and his renunciation of the use of torture and other illegal means in the first against al Qaeda. These steps send an important message to audiences outside of the United States who cooperation is essential.
Ian Vasquez, Director, Center for Global Liberty & Prosperity; Juan Carlos Hidalgo, Project Coordinator for Latin America.
President Obama has signaled a slight change on US-Cuba policy by softening some travel and financial restrictions. It is not as far as we would have liked, but it is a step in the right direction — toward greater engagement, as opposed to more isolation, which was the approach adopted by the Bush administration.
For more research, check out Cato’s foreign policy and national security page.
New at Cato
Here are a few highlights from Cato Today, a daily email from the Cato Institute. You can subscribe, here.
- “Bright Lines and Bailouts: To Bail or Not To Bail, That Is the Question”: Vern McKinley and Gary Gegenheimer have a new Policy Analysis that discusses the failure of bank bailouts.
- In a new piece at National Interest (Online), Doug Bandow offers a new strategy for dealing with Kim Jong Il.
- Nat Hentoff reports on Obama’s broken promises of transparency in the Washington Times.
- Make no mistake: “Of course it was torture,” says Gene Healy in this week’s Examiner column.
- In Tuesday’s Cato Daily Podcast, foreign policy analyst Benjamin Friedman discusses the record of Defense Secretary Robert Gates under Obama.
Will the Military Industrial Complex Save American Foreign Policy?
Missing from most of the commentary on the Secretary of Defense’s big defense spending speech yesterday is the fact that the program cuts he proposed are largely a result of freezing the topline — keeping defense spending level (once you adjust for inflation) for the next decade.
For nearly a decade the country has really had two defense budgets – one for imagined conventional wars against states like China, another from nation-building, peacekeeping and counterinsurgency. The first budget requires a small ground force and lots of big platforms operated by the Air Force and Navy. The latter requires much larger ground forces, a few niche capabilities like intelligence, surveillance and reconnaissance aircraft, and less high technology wonders.
The current American love affair with counterinsurgency has resulted in a gradual shift of dollars from the conventional budget to the unconventional one. We are reversing the old idea that the American way of war is to replace labor with capital, or manpower with technology. We are becoming a land power first. We have been increasing manpower in the Army and Marines — adding 90,000 new troops — and paying them way more (compensation per service member is up by almost half since 1998). Personnel costs are taking more of the budget. And for more complex reasons, including health care costs, the operations and maintenance part of the budget – essentially the day to day cost of running the military — has also been growing fast when measured per service member. (For details on these issues, read this testimony by Stephen Daggett of the Congressional Research Service.)
That was bound to squeeze the other big parts of the defense budget — research, development and procurement of new weapons systems. There is too much future cost in the budget for everything to fit without topline growth, so something had to give. Big weapons programs are where the most give is, if you don’t want to cut manpower.
That conflict was delayed while the budget topline grew, but now that it is flat, it erupts. The manpower intensive military that follows from our current policies is eating into the conventional military that delivers manufactoring jobs across the country and the high-technology dreams of our military leaders.
What will be interesting to see is whether this shift encourages those leaders and their friends on the Hill to take up the arguments that people like me have been making for years: that small wars are mostly dumb wars. Preparation for these wars didn’t much hurt the military industrial complex before, now it does.
An additional note: Gates’ criticism of the acquisition process was on the mark. Rather than blaming out of control weapons costs on the kind of contracts we write or crafty contractors, as the President seems to, Gates noted correctly that the trouble is the requirements process — what we want, not how we buy it.
Friday Podcast: ‘Obama’s Afghanistan Strategy’
President Obama has unveiled his plan for the war in Afghanistan, taking a more regional approach than the U.S. has in the past.
In Friday’s Cato Daily Podcast, foreign policy analyst Malou Innocent says it’s a critical step in the right direction, but stabilizing Afghanistan and fighting an insurgency can’t be accomplished while killing the livelihoods of so many Afghan farmers by destroying opium poppy.
In the future we should take Afghanistan as it is, rather than what we want it to be. So not only does that mean having a decreased reliance on a central state government from Kabul, but also understanding that many of the farms from these rural areas rely on the opium poppy crop for their own livelihood. So we should focus our efforts to targeting those who are in cahoots with insurgent groups and not simply those who are depending on it for their livelihood.
Her forthcoming paper, “Pakistan and the Future of U.S. Policy” will be released next month.
Trying Harder in Afghanistan
President Obama today gave a statement about his strategy for Afghanistan and Pakistan. The first thing to say here is that, according to those who attended a White House briefing, the strategy is not complete: the goals are not defined.
Second, there seems to be a gap between rhetoric and reality. On the one hand, the White House is rhetorically embracing the idea that, at least as far as Afghanistan is concerned, the problem is insufficient U.S. effort. That is consistent with what Obama has said all along: that we are failing in Afghanistan because U.S. efforts there are starved of resources that went to Iraq.
So we need more trainers for the Afghan army (a brigade from the 82nd Airborne gets that job), more combat troops (although only the 17,000 already committed), more U.S. government civilians to aid local development, and more drug eradication (on the folly of this, read Ted Carpenter and David Rittgers). As an enthusiastic Robert Kagan points out, this seems to be a stronger embrace of the nation-building strategy. The partial departure is the willingness to try to buy off elements of the Taliban.
On the other hand, the trainers being sent were requested long ago, and the troop increase is not new. The other shifts are minor. So, in terms of action, little has changed. There seems be a compromise here between the so-called minimalists and maximalists, which caused essentially a stalemate.
If you agree that the trouble in Afghanistan is that we weren’t trying hard enough, you should wonder why we aren’t trying even harder — doubling down on troops and effort, not just saying so. If you think, as I do, that we need a new strategy of radically reduced objectives, you have the opposite concern.
An Intellectual Counterinsurgency
My friend (and noble peacemaker) Spencer Ackerman points us to Tom Ricks’ take on the Army’s new stability operations manual:
I wonder if the very title of the manual is incorrect. After all, we didn’t invade Iraq to provide stability, but to force change. Likewise in Afghanistan. And once we were there, we didn’t aim for stability, but to encourage democracy, which (the thought is not original with me) in a region like the Middle East generally undermines stability. I mean, if all we wanted was stability, why not find a strongman and leave?
What we really are doing in Iraq and Afghanistan, I think, is instability operations… Personally, I think the mission of changing the culture of Iraq was nuts — but that was the mission the president assigned the military.
I think a more intellectually honest title for the manual would be “Revolutionary Operations.” Don’t hold your breath.
Ricks is right, but he misses a larger problem. The argument of the folks who want to develop COIN capabilities has become completely circular.
Take, for example, the worry of Lt. Gen William Caldwell, in unveiling the original release of FM 3-7, that we live in an “era of uncertainty and persistent conflict.” Accordingly, says Caldwell, we need capabilities to produce stability. Hence, the stability operations field manual.
This elides the fact that if we had to take an impartial look at where the instability is coming from, a hell of a lot of it is emanating from Washington, DC. Our Rube Goldberg political science theories, based in large part on liberal international relations theory, have led us to knock over governments and pursue radical transformation everywhere from Latin America to Eastern Europe to the mountains of Central Asia, the jungles of Vietnam, and the sands of Iraq.
Then, when confronted with the wreckage of our policy, we convince ourselves that we are gravely threatened by the instability we have created, and must enhance our capabilities to rectify this instability. Less kindly, it’s like the Tennessee Valley Authority with guns, Humvees and translators.
Look at the new “whole-of-government” counterinsurgency guide, for example. The issuance of the volume was predicated on the logically-true-but-practically-misleading claim that “in today’s world, state failure can quickly become not merely a misfortune for local communities, but a threat to global security.” (emphasis mine) The COIN manual then quickly proceeds to tell us that any decision to do COIN “should not be taken lightly; historically COIN campaigns have almost always been more costly, more protracted and more difficult than first anticipated.” Then it quickly becomes a cookbook on how to use the Agriculture, Treasury, and Transportation Departments to transform the way foreigners run their countries.
My colleague Ben Friedman recently remarked that “Both Creighton’s Abrams’ reforms ensuring that the president had to activate the reserves to start a war and the Weinberger-Powell doctrine were sneaky usurpations of authority. They were also realistic efforts to avoid bad wars and on balance good things.” He’s right. It would be good if we were devoting a tenth the resources toward stopping the next policy disaster as we are devoting to figuring out how to execute self-destructive policies more effectively.
In short, if, as the leading COIN advocate of the moment tells us, the best way to fight the “war on terrorism” is by engaging in a “global counterinsurgency,” we’re in deep, deep trouble. As long as the only people who can stop us are ourselves, I’m afraid we won’t be stopped.
Power, as Karl Deutsch once wrote, is “the ability to talk instead of listen. In this sense, it is the ability to afford not to learn.” And we’ve got loads of power.
A Far Cry from ‘Axis of Evil’
Hoping to derail the re-election of Iranian President Mahmoud Ahmadinejad, President Obama today gave an unprecedented appeal to the Iranian people in a special video message. In it, he offers a “new beginning” of engagement to end the nearly 30 years of hostile bilateral relations.
This video comes less than a month after the administration wrote a letter to the country’s Supreme Leader Ayatollah Ali Khamene’i, who, as opposed to Ahmadinejad, truly controls the apparatus of government and has the final say on the country’s nuclear ambitions. Khamene’i sent a congratulatory letter to Obama after he won the presidency.
My colleague, Justin Logan, has written extensively on U.S. policy toward Iran, such as here and here, to name a few. He argues — and I agree — that U.S. policymakers must press for direct diplomacy with the Iranian leadership and have a plan “B” in case that diplomacy fails.
In response to those (usually neoconservatives) who fear Israel will be wiped off the map, Logan argues persuasively that attempting to deduce Iranian intentions from public statements is not helpful in ascertaining whether the clerical regime values self-preservation. Instead, we must evaluate what the regime has done when confronted with overwhelming force. For example, rather than wage the Iran-Iraq War (1980–88) to the bitter end, Supreme Leader Ruhollah Khomeini, one of Iran’s most radical Ayatollahs, saved his country from more suffering by accepting a disadvantageous ceasefire with Saddam Hussein.
Overall, the track record of Iranian behavior shows pragmatism and calculating temperament when attempting to advance their interests in the region. As I’ve written here, occasionally the interests of Tehran and Washington have overlapped, most recently when Iran quietly supported America’s effort to oust the Taliban regime in Afghanistan. Thus, it would be prudent for Washington to engage Tehran and allow it to produce uranium and plutonium if the regime agrees to IAEA safeguard regulations in compliance with United Nations resolutions.
National self-preservation has figured prominently in modern Iranian diplomacy. President Obama and his subordinates appear to understand that. Hopefully, this new strategy will work.
Strategy and Counterinsurgency
Counterinsurgency expert Andrew Exum, of Abu Muqawama war blog, takes on Justin Logan’s post below. At the risk of restating Justin’s points, I feel compelled to jump into the fray.
Exum says basically this: Our policies have tended to result in small wars, however foolish. We want an Army of our policies. There is, in other words, a difference between operations and strategy. Counterinsurgency experts are just preaching good practice in the former. They just work here. Grand strategy is someone else’s gig.
There is merit in this view. But it has two problems.
First, the COIN gurus do not confine themselves to the operational side of things. Exum works for the Center for New American Security, which has collected counterinsurgency experts who argue that 1) Americans can become proficient counterinsurgents and 2) counter-terrorism requires that transformation. I believe neither. Apparently Exum only buys 1. I hope he can convince his colleagues to stop saying 2.
Second, the stark divide between strategy and operations is an ideal. The theory that the military services are only professional technicians serving the ends of politicians is too simple. The Army has political interests, which change with its structure and leadership. Those interests affect our defense and foreign policy. The causal arrow between national security policy and the structure and doctrine of the organizations that execute it points both ways. Pretending it is not so is a dodge, even if it gets you an A in your undergraduate civil-military relations class. Both Creighton’s Abrams’ reforms ensuring that the president had to activate the reserves to start a war and the Weinberger-Powell doctrine were sneaky usurpations of authority. They were also realistic efforts to avoid bad wars and on balance good things.
Defense writers tend to depict the generals who resist permanently transforming the US ground forces into a counterinsurgency force as benighted fools and the lieutenant colonels who buck them as forces of truth and light. The reality is more complicated. The Big Army that wants to fight only Big Wars reflects a realistic sense of what military force can and can’t do and the insight that reengineering foreign countries goes in the can’t bucket. They make these wars less likely. The little army aligned against them is a result of the fact that these wars occur anyway, and being prepared is sensible. I am not sure who I’m rooting for.
More clear to me is that the realist view of small wars wars could use support. Realists say that what we’ve discovered fighting in Iraq and Afghanistan are just COIN best practices, which guarantee nothing because this is ultimately someone else’s politics. They say that the best solution is don’t do it and next best is to severely curtail your objectives and stop confusing counterinsurgency with counterterrorism. If the new counterinsurgency class believes even part of that, they should say so more forcefully.
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