My thought process today started with a piece by John Bolton, George Bush II's UN Ambassador, and a complete believer that the U.S.A. should use military force to intervene in foreign countries to get them to support the policies of the U.S.A.
He looks at the horrors going on in the Ukraine and Venezuela and sees a weakness in U.S. policy that he cannot stomach. He believes that the U.S. could have done something positive to influence these situations. As a sovereign risk analyst, I beg to differ. There is little that the U.S. could have done because these are domestic political situations and there is no role for U.S. military action in domestic political situations.
See my earlier postings on the outlook for EM investing and the political challenges developing democracy has when cronyism generates enormous wealth for the corrupt (e.g. Russia, China, Ukraine, Iran, Venezuela, Saudi Arabia and the rest of the Gulf States, Pakistan, Indonesia, Koch Industries and possibly Turkey). There is no U.S. military solution for this unless we are attacked.
John Bolton was widely seen as being crazy with military fever when he was in the government and nothing about the aftermath of the Great Recession seems to have balanced his belief in military action and fiscal conservatism. In the abstract, Neo-conservatives always want to reduce social welfare spending and cut taxes but they never want to cut the defense budget and they usually want to use military force to accomplish something. These are guys that brought us the War in Iraq and failed to raise the revenues to pay for it (or to pay for the War on Terror in Afghanistan).
You would think that neo-conservatives would want to make sure they pay for their wars and that the U.S. maintains a strong economy with everyone working at good jobs. I was much more comfortable describing myself as a Scoop Jackson or Sam Stratton Democrat when they represented the conservative wing of the Democratic Party in the late 1960's and early 1970's.
Thankfully, the American Enterprise Institute is endeavoring to challenge the Republican Party to stop focusing on defending capitalism on material grounds (i.e. you have the opportunity to become rich and if you fail to do so, it is because you are a failure so just suffer!!!!!!!) and move the defense of capitalism to moral grounds. The moral support for capitalism is that it is the best system for moving people out of poverty and keeping people out of poverty. It also provides the strongest financial support for a strong military defense posture because people have a personal stake in the economy and political system. They want a strong country.
Someone named Joel Kotkin has argued that the popular support for capitalism is in decline because "the middle class is being proletarianized, and the uneducated class is being left behind" by the growing income inequality. The share of GDP going to the middle 60% has fallen from 53% to 45% since 1970.
I have argued and believe that there is little government policy can do about globalization and technology beyond encouraging people to become educated and work hard. But this decline in middle class participation and stake in the economy has given rise to both the Tea Party and hard-line liberals pushing partisan positions without room for compromise. Witness the failure of the GOP to come forward with the President on the Grand Bargain and now the one critical thing I think makes sense to help fix Social Security (changing the CPI measure) has fallen victim to the AARP's campaign for removal.
I believe this shows how off the mark the political process is on the real issues. The country needs entitlement reform that makes the safety net sustainable. There is no safety net without a strong economy. And we cannot pay for the War on Terror through entitlement reform. That is not fair to the people who paid into entitlements their whole working career. Wars need to be paid for with revenues and revenues should be increased to reduce the debt associated with the War on Terror. David Brooks column this morning showed me that there is a focus in the AEI (a conservative think tank) on pushing the political discussion in a positive direction. And one would think neo-conservatives would see the need for revenues to pay for wars.
Link to David Brooks column
Lastly, a summary of how the economic policies from 2009 to today have been entirely appropriate and mostly successful given the constraints on potential, but have lost the battle of political perception.
Link to Paul Krugman on reality vs perception
No comments:
Post a Comment