I did a post a while back on why I don't think we have any reason to doubt Obama's commitment to Israel. I said then that I would eventually like to do a post on why I think Obama is better for Israel. With 4 days until the election, I suppose there is no better time than now.
Now, I don't, in any way, doubt John McCain's commitment to the security of the State of Israel. He has a long record of support that I think we should be grateful for. Of course, it's easier to express support for Israel from the Congress, where you're one voice out of many, and don't have to make any real decisions. Presidents of both parties have campaigned with a strongly pro-Israel rhetoric and disappointed once in office. Not the least of these is George W. Bush. Jews, and other supporters of Israel, should not be so enthusiastic for another Republican after George Bush. Sure, all of his public statements are tremendously supportive, but behind the scenes, his proposals, like the Road Map, and the Annapolis Summit, have been the same kind of disastrous mistakes the Clinton administration made. (At least with Clinton, it hadn't been tried yet. Bush should have learned his lesson). His state department, through Condoleeza Rice, has been pushing Israel into all kinds of unsafe concessions, like removing security checkpoints, and dismantling settlements, in the name of peace, with absolutely not guarantees from the other side. I suspect either candidate running now, is likely to disappoint somewhat once they're in office. Most presidents do. But here is why I think Obama's overall worldview will be better.
First of all, while many of Israel's supporters were also strong supporters of the Iraq war, those really in the know, knew from the beginning it was a mistake. Iran was always a bigger threat to Israel than Iraq was. Attacking Iraq has strengthened Iran, and increased they're influence in the region. Of course that is all in the past. However, as long our troops remain paralyzed in Iraq, Iran will never take any threat from us seriously. Obama's plan to withdraw our troops from where they are not needed to allow them to refocus on our real threats, will give the United States greater leverage in the region. Furthermore, Obama's efforts to engage Iran in direct diplomacy will leave the Arab world unable to claim that the US is just an imperialist power trying to arbitrarily force its will on the region. If negotiations break down, and military action becomes necessary, we will have a much easier time convincing the rest of the world of the reality of the threat. If we rush in to another war, like John McCain wants to do, the anti-American sentiment in the region will get even greater, and recruitment for Al-Qaeda and Hezbollah will continue to rise.
Furthermore, I cannot exaggerate the importance to Israel of having an America that is respected by the world. Before George Bush, we were a moral leader. If we declared a war was necessary, other nations knew they could trust us. In the last eight years, we have become an object of derision the world over. They resent us for our power, but do not respect us. There has been no better terrorist recruiter than George Bush. John McCain has made it clear that, if there would be any change in his approach to foreign policy from that of George Bush, it would be to make it more militaristic. Obama clearly has the respect of the world, and with him as president, America has the opportunity to claim it's role as moral leader again. Since America is, and will remain, Israel's best and strongest ally, having America respected in the world, means that we will be taken seriously in our support for Israel, and Israel will consequently enjoy greater respect from the rest of the world (though I don't delude myself into thinking it will ever be anywhere near the level of support it gets from the United States).
Lastly, and, of course, I couldn't comment about this the last time I wrote about Obama and Israel, I want to stress the significance of Joe Biden versus Sarah Palin. Sarah Palin, by all accounts, is a supporter of Israel. She may even have had an Israeli flag in her office. Nothing in her response to the question about Israel in the debate gave me reason to doubt her sincerity. However, she clearly has no particularly deep understanding of the issues facing Israel, and what American policy should actually be, beyond this vague notion of "support." Joe Biden, on the other hand, has been a leader in supporting Israel in the Senate for 36 years, even longer than John McCain. Israel could not have a better friend in the vice-presidency than Joe Biden. His debate answer was not the vague expression of support we heard from Sarah Palin (and most other politicians, really), but a thorough critique of how the Bush administration has mishandled the situation, including the pushing for elections in Gaza that lead to Hamas' rise to power there. He made it clear that he will be driven by what is truly in Israel's best interests and not some abstract theory about how to reshape the Middle East. When he says that he would not have joined the ticket were he not absolutely convinced that Barack Obama supports Israel as strongly as he does, he has a record of support strong enough that he deserves to be taken seriously and seen as not just pandering. The fact that Obama showed that Biden is the kind of person he would like giving him advice on foreign policy is very reassuring to me, and should be similarly reassuring to all supporters of the Jewish State.
The McCain campaign and the Republican Jewish Coalition(RJC) have no argument other than their McCarthyite guilt-by-association charges. He once talked to/shook hands with/ate lunch with/went to church with someone who expressed some anti-Israel sentiment. The latest faux scandal they are trying to trump up seems to be about a toast Obama once made to Prof. Rashid Khalidi, who is on record supporting the PLO. Even from the text of the toast as reported by the LA Times, it seems that he essentially said he enjoys talking to him because he likes to hear views that differ from his own. Prof. Khalidi, as well, has said that Obama disagrees with him on just about everything related to the Israeli-Palestinian conflict. Yes Obama, clearly enjoys hearing views different from his own, as most mature, intelligent people do. But listening to someone, even being friends with them, in no way indicates agreement with their politics. I have many friends with different politics from my own, and I assume most readers of this do as well. The RJC may like to claim that he surrounds himself with anti-Israel people, but it just isn't true. He clearly has a couple of friends with anti-Israel views, but he also surrounds himself with Joe Biden, Dennis Ross, and a host of others with pro-Israel views. He is a mature, intelligent person, with a complex mind, who likes to hear different points of view, but nothing in his record indicates any reason to doubt that his own sympathies lie with the latter group.
Friday, October 31, 2008
Some Campaign Reflections and Thoughts on Redistribution
There really hasn't been much to say in the last month. Despite the intensity of the campaigning, not much new has been introduced. Just a lot of rehashing of the same silliness we've been hearing for the last two years. I think the most comical/scary moment has been John McCain's repeated condemnations of Barack Obama for not being willing to support nuclear power, "unless it's safe." What exactly he means by this, I'm not sure. I keep waiting for him to follow it up with, "I pledge to support nuclear power even if it's not safe." He never quite goes that far, but it's the clear implication. I'm don't exactly understand how anyone could be opposed to safety, and in fairness, he probably isn't, but it's kind of scary that he's trying to make a campaign issue out of this. I guess I'll just attribute it to silly season.
Then, there's this whole bit about redistribution of wealth. I'll admit "spread the wealth around" was probably a poor choice of words on Obama's part, given its popular associations with socialism, but his proposals really are anything but. Conservatives and Republicans like to throw around the word socialism anytime a liberal politician talks about helping the poor, but they seem to lack any real concept of what the word means. Socialism is defined by the collective (or government) ownership and control of the means of production. Under socialism, essentially, all private enterprise is eliminated, everything in the economy is centrally planned, and everyone is a public employee. What the Fed is currently doing with the banks comes closer to socialism than anything Obama is proposing. Obama clearly believes in capitalism and private enterprise. He just wants to make sure that system works for everyone. The beauty of capitalism is that people are supposed to be rewarded for their innovation and ingenuity. The problem is, the way the system is working now, some people are permanently shut out of that opportunity. By increasing access to education, by making sure anyone who's working full time can pay their medical bills and put food on the table for their family, we open up capitalist opportunities for more people. Liberalism, as it was once said (I don't remember by who), will save capitalism from the capitalists. Does this involve some amount of redistribution of wealth? Of course it does. The way the market has been working lately it has been rewarding all the wrong things. The government's responsibility is to create sensible regulations to make sure the right things are rewarded, so the economy can operate in a fair and equitable manner. If John McCain is really opposed to redistribution, he needs to scrap his health care plan, endorse a flat tax, call for the elimination of medicare and medicaid, and any other federal programs designed to help the poor. If not, he needs to tell us why he thinks Obama's redistribution scheme is somehow worse than the one he's proposing, because so far, it seems people just aren't buying it.
Then, there's this whole bit about redistribution of wealth. I'll admit "spread the wealth around" was probably a poor choice of words on Obama's part, given its popular associations with socialism, but his proposals really are anything but. Conservatives and Republicans like to throw around the word socialism anytime a liberal politician talks about helping the poor, but they seem to lack any real concept of what the word means. Socialism is defined by the collective (or government) ownership and control of the means of production. Under socialism, essentially, all private enterprise is eliminated, everything in the economy is centrally planned, and everyone is a public employee. What the Fed is currently doing with the banks comes closer to socialism than anything Obama is proposing. Obama clearly believes in capitalism and private enterprise. He just wants to make sure that system works for everyone. The beauty of capitalism is that people are supposed to be rewarded for their innovation and ingenuity. The problem is, the way the system is working now, some people are permanently shut out of that opportunity. By increasing access to education, by making sure anyone who's working full time can pay their medical bills and put food on the table for their family, we open up capitalist opportunities for more people. Liberalism, as it was once said (I don't remember by who), will save capitalism from the capitalists. Does this involve some amount of redistribution of wealth? Of course it does. The way the market has been working lately it has been rewarding all the wrong things. The government's responsibility is to create sensible regulations to make sure the right things are rewarded, so the economy can operate in a fair and equitable manner. If John McCain is really opposed to redistribution, he needs to scrap his health care plan, endorse a flat tax, call for the elimination of medicare and medicaid, and any other federal programs designed to help the poor. If not, he needs to tell us why he thinks Obama's redistribution scheme is somehow worse than the one he's proposing, because so far, it seems people just aren't buying it.
Thursday, October 2, 2008
Economic Meltdown, Bailout and Why You Shouldn't Blame Wall Street
The economic situation we're currently in is arguably the worst it's been since the Great Depression. Let's examine the causes of this crisis. First, who isn't responsible?
1) Liberals. It's become popular in right-wing circles to spread the notion that liberals are actually the ones responsible for the mortgage-crisis because of their policies forcing banks to make loans to lower-income and minority families. An interesting argument. Unfortunately, for them, it isn't true. Presumably the legislation they're referring to is the 1977 Community Reinvestment Act (CRA). As this article makes clear, there is no connection between the CRA and the current crisis. For those of you who don't want to read the whole article, let me summarize the main points. a) Only 25% of sub prime mortgages were made by banks that were even subject the the CRA. b) Even among those 25%, there's no evidence that the CRA loans have a higher default rate than the rest of their loans. c) The investment instruments that spread this bad mortgage debt around the whole economy had absolutely nothing to do with the CRA. d) The first sub prime mortgage was made 25 years after the CRA was first passed. Blaming the CRA is such a ridiculous argument that neither John McCain nor any bank executive has tried to make it, but never underestimate the power of the right-wing chatterboxes in convincing people that liberals are really responsible for all of their problems.
2) Wall Street Executives. This may seem counter intuitive to anyone listening to any politician talk about the meltdown lately, but Wall Street is not to blame. They were just doing what the rules of the game expected them to do. It's a classic prisoner's dilemma. For those of you not familiar, I'll fill you in. Two people are arrested. They each have to decide whether to stay silent or rat the other one out. If they both stay silent, they'll each get 6 months in prison. If they both rat each other out, they'll each get 30 years in prison. If one stays silent and the other rats him out, the ratter will go free, and the rattee will get life in prison. Assuming we are dealing with rational people who prefer less jail time to more, the only outcome we will ever get is that they'll both rat each other out and spend 30 years in jail. Even though they'd both be happier if they both stayed silent, absent any way to bind the other person to an agreement, there's no incentive for either one to remain silent. If I think you're going to remain silent, I should rat you out because free is better than 6 months. If I think you're going to rat me out, I should still rat you out, because 30 years is better than life. This is essentially how wall street works on a much bigger scale. It's the paradox of the free market. If you allow everyone maximum liberty to make the decision that most benefits him or her, you will almost inevitably wind up with an outcome where everyone winds up suffering. It's not fair to blame the people involved. True, they all would have been better off if they didn't make these risky investments, but if I choose unilaterally not to make these investments while everyone else still is, I'm just going to wind up in even worse shape. Another one of my favorite examples of this is the minimum wage. Every time congress raises the minimum wage, conservative economists start screaming about how it's going to put companies out of business and lead to huge unemployment, and yet this has never panned out. Why? Because even though minimum wages might drive up short term costs, in the long run they are good for the economy. When the people at the bottom, the people for whom every extra dollar translates to an increase in their quality of life, have more money, they spend more. They create more demand in the economy. Businesses sell more. Everyone benefits. However, one firm raising wages will never be sufficient to create that stimulus. Without the government mandating it, no company is going to unilaterally volunteer to increase their payroll costs. However, when the situation is required of everyone, everyone is better off.
So who is responsible for the current economic crisis? It should be obvious by now. It's not Wall Street and it's not liberal government policy. It's conservative government policy. I stress conservative and not Republican, because many of these conservative policies were passed with the full support of a large number of Democrats as well. It's the policies of deregulation that caused this mess. The false belief that the market will perform best if the government would just leave it alone. Adam Smith's contention that a completely unregulated market will work at maximum efficiency is true only in the highly idealized situation where competition is perfect, and no firm is large enough for their decisions to have an impact on any other firm. No real market actually works this way (and besides, efficiency doesn't necessarily equal fairness). If I had to put the blame on one person for the current economic mess, it would be Ronald Reagan. Not that I can point to any specific policy of his that caused it. However, he was the one who set the conservative trend in American economics in motion. He was the one who made deregulation the politically popular thing to do. If it weren't for Reagan, Bill Clinton never would have felt compelled to go along with deregulation to the extent he did, and George W. Bush never would have been able to muster the political will to push deregulation to new extremes.
So what's the solution to the crisis? Well, in the long run, the solution is liberalism. We need to reregulate the markets in a way that makes sense for the 21st century economy. Now, I'm not a socialist. I don't want to government running the entire economy. In general, I view competition as a good thing. It motivates innovation and can be of tremendous benefit to the consumer. In order for competition to work, companies do need the opportunity to make bad decisions and fail on account of them. However, the government needs to have an active role in preventing situations where the markets motivate everyone involved to act in destructive ways as it does now. I find it funny when Larry Kudlow on CNBC asks things like "Can the market survive the regulatory state of an Obama presidency?" He doesn't seem to get that the market can't survive without the regulatory state of an Obama presidency. A successful capitalist economy depends on liberal government policy. It shouldn't surprise anyone that historically, the market has performed considerably better under Democrats than Republicans. The Republicans like to frame it as class warfare, business versus the middle class. But the truth is when the middle class is doing well, businesses fare better also. Economic success percolates up, it doesn't trickle down.
What about in the short term? I think we have no choice but to go along with this bailout. It's not perfect, but we don't have time to work out something better. If we want capitalism to survive, the government needs to do something now to preventing the market from collapsing on itself. We should do it in a way that protects the investments of ordinary people and not just big business, but if we completely ignore business interests, ultimately the people will wind up suffering as well. The idea the House Republicans proposed of a government-run insurance company that banks could buy into to insure their mortgage debt, is not a bad idea in the long run. In fact, it's similar to the original function of Fannie Mae, in the days when it was a pure public utility, created as part of the New Deal. I hope they continue pushing the idea after the immediate crisis has subsided, because it's something I think we should very seriously consider. However, it's not a short term solution. Telling the banks to buy mortgage insurance after the debts have already gone bad is like telling the residents of New Orleans to buy flood insurance after Katrina has already hit. Insurance is a good way to prevent crisis, but not a good way to alleviate one already in progress. However, if we only remedy the short-term crisis, and not the long-term problems, that's a good recipe for another crisis in the not too distance future. The best hope we have left is to elect Barack Obama president with strong Democratic majorities in congress and pray that they live up to their mandate.
1) Liberals. It's become popular in right-wing circles to spread the notion that liberals are actually the ones responsible for the mortgage-crisis because of their policies forcing banks to make loans to lower-income and minority families. An interesting argument. Unfortunately, for them, it isn't true. Presumably the legislation they're referring to is the 1977 Community Reinvestment Act (CRA). As this article makes clear, there is no connection between the CRA and the current crisis. For those of you who don't want to read the whole article, let me summarize the main points. a) Only 25% of sub prime mortgages were made by banks that were even subject the the CRA. b) Even among those 25%, there's no evidence that the CRA loans have a higher default rate than the rest of their loans. c) The investment instruments that spread this bad mortgage debt around the whole economy had absolutely nothing to do with the CRA. d) The first sub prime mortgage was made 25 years after the CRA was first passed. Blaming the CRA is such a ridiculous argument that neither John McCain nor any bank executive has tried to make it, but never underestimate the power of the right-wing chatterboxes in convincing people that liberals are really responsible for all of their problems.
2) Wall Street Executives. This may seem counter intuitive to anyone listening to any politician talk about the meltdown lately, but Wall Street is not to blame. They were just doing what the rules of the game expected them to do. It's a classic prisoner's dilemma. For those of you not familiar, I'll fill you in. Two people are arrested. They each have to decide whether to stay silent or rat the other one out. If they both stay silent, they'll each get 6 months in prison. If they both rat each other out, they'll each get 30 years in prison. If one stays silent and the other rats him out, the ratter will go free, and the rattee will get life in prison. Assuming we are dealing with rational people who prefer less jail time to more, the only outcome we will ever get is that they'll both rat each other out and spend 30 years in jail. Even though they'd both be happier if they both stayed silent, absent any way to bind the other person to an agreement, there's no incentive for either one to remain silent. If I think you're going to remain silent, I should rat you out because free is better than 6 months. If I think you're going to rat me out, I should still rat you out, because 30 years is better than life. This is essentially how wall street works on a much bigger scale. It's the paradox of the free market. If you allow everyone maximum liberty to make the decision that most benefits him or her, you will almost inevitably wind up with an outcome where everyone winds up suffering. It's not fair to blame the people involved. True, they all would have been better off if they didn't make these risky investments, but if I choose unilaterally not to make these investments while everyone else still is, I'm just going to wind up in even worse shape. Another one of my favorite examples of this is the minimum wage. Every time congress raises the minimum wage, conservative economists start screaming about how it's going to put companies out of business and lead to huge unemployment, and yet this has never panned out. Why? Because even though minimum wages might drive up short term costs, in the long run they are good for the economy. When the people at the bottom, the people for whom every extra dollar translates to an increase in their quality of life, have more money, they spend more. They create more demand in the economy. Businesses sell more. Everyone benefits. However, one firm raising wages will never be sufficient to create that stimulus. Without the government mandating it, no company is going to unilaterally volunteer to increase their payroll costs. However, when the situation is required of everyone, everyone is better off.
So who is responsible for the current economic crisis? It should be obvious by now. It's not Wall Street and it's not liberal government policy. It's conservative government policy. I stress conservative and not Republican, because many of these conservative policies were passed with the full support of a large number of Democrats as well. It's the policies of deregulation that caused this mess. The false belief that the market will perform best if the government would just leave it alone. Adam Smith's contention that a completely unregulated market will work at maximum efficiency is true only in the highly idealized situation where competition is perfect, and no firm is large enough for their decisions to have an impact on any other firm. No real market actually works this way (and besides, efficiency doesn't necessarily equal fairness). If I had to put the blame on one person for the current economic mess, it would be Ronald Reagan. Not that I can point to any specific policy of his that caused it. However, he was the one who set the conservative trend in American economics in motion. He was the one who made deregulation the politically popular thing to do. If it weren't for Reagan, Bill Clinton never would have felt compelled to go along with deregulation to the extent he did, and George W. Bush never would have been able to muster the political will to push deregulation to new extremes.
So what's the solution to the crisis? Well, in the long run, the solution is liberalism. We need to reregulate the markets in a way that makes sense for the 21st century economy. Now, I'm not a socialist. I don't want to government running the entire economy. In general, I view competition as a good thing. It motivates innovation and can be of tremendous benefit to the consumer. In order for competition to work, companies do need the opportunity to make bad decisions and fail on account of them. However, the government needs to have an active role in preventing situations where the markets motivate everyone involved to act in destructive ways as it does now. I find it funny when Larry Kudlow on CNBC asks things like "Can the market survive the regulatory state of an Obama presidency?" He doesn't seem to get that the market can't survive without the regulatory state of an Obama presidency. A successful capitalist economy depends on liberal government policy. It shouldn't surprise anyone that historically, the market has performed considerably better under Democrats than Republicans. The Republicans like to frame it as class warfare, business versus the middle class. But the truth is when the middle class is doing well, businesses fare better also. Economic success percolates up, it doesn't trickle down.
What about in the short term? I think we have no choice but to go along with this bailout. It's not perfect, but we don't have time to work out something better. If we want capitalism to survive, the government needs to do something now to preventing the market from collapsing on itself. We should do it in a way that protects the investments of ordinary people and not just big business, but if we completely ignore business interests, ultimately the people will wind up suffering as well. The idea the House Republicans proposed of a government-run insurance company that banks could buy into to insure their mortgage debt, is not a bad idea in the long run. In fact, it's similar to the original function of Fannie Mae, in the days when it was a pure public utility, created as part of the New Deal. I hope they continue pushing the idea after the immediate crisis has subsided, because it's something I think we should very seriously consider. However, it's not a short term solution. Telling the banks to buy mortgage insurance after the debts have already gone bad is like telling the residents of New Orleans to buy flood insurance after Katrina has already hit. Insurance is a good way to prevent crisis, but not a good way to alleviate one already in progress. However, if we only remedy the short-term crisis, and not the long-term problems, that's a good recipe for another crisis in the not too distance future. The best hope we have left is to elect Barack Obama president with strong Democratic majorities in congress and pray that they live up to their mandate.
Debates
My apologies again for not writing for a while. I've been somewhat swamped with schoolwork, and not feeling well for some of the time. I want to briefly comment on the first debate before I do a longer post on the economic situation. I think if I were scoring the debate on points, John McCain won. Not a knockout punch, but I think he made his points marginally more convincingly, and was able to respond to more of what Obama said than Obama was able to respond to what he said. (Of course, a lot of his responses were dishonest, but most people watching the debate don't know that.) Obama had a decent performance, but I think there were a lot of missed opportunities where he could have hit back hard and didn't. Why then, do the polls show overwhelmingly that voters think Obama won? Obama came accross looking presidential, and McCain came across looking like a jerk. Obama was respectful, he addressed McCain directly, he looked him in the eye. McCain's points were laced with insults ("Senator Obama doesn't understand..."). He refused to address him directly at any point during the debate. He wouldn't even acknowledge when the two of them agreed. The McCain campaign has released and ad splicing together all the different times Obama said "I agree with John" during the debate, as if it was an endorsement. For most people watching the debate, Obama wasn't endorsing McCain, he was reaching out and trying to find common ground. How can McCain claim to the guy who can reach across the aisle and find common ground with the Democrats, when he can't even be respectful to his opponent in the race? So that's why Obama benefitted the most from this debate even though on points, McCain probably won.
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