Tag Archives: Congress

The path to India’s next government runs through Uttar Pradesh

India, Uttar Pradesh, Agra Man on bike with girl on trailer and man pushing from behind in front of Taj Mahal at sunset

It’s the most populous state in the world’s largest democracy.India Flag Icon

It’s the great heartland of Hindustan along India’s north-central border, home to the Taj Mahal, home to seven of India’s 13 prime ministers, and the traditional base of the Nehru-Gandhi family, which has given India three prime ministers, and hopes to give India its next prime minister in Rahul Gandhi.

It’s Uttar Pradesh (which translates to ‘northern province’), and Narendra Modi’s path to becoming India’s next prime minister runs right through it.

A sketch of India’s most populous state

With 199.6 million residents, it’s nearly as populous as Brazil — and with 80 seats up for grabs in the 545-member Lok Sabha (लोक सभा), the state is by far the largest prize in India’s parliamentary elections, which kick off April 7 and will be conducted in nine phases that conclude on May 12. Given the sheer size of the state, voters in Uttar Pradesh will go to the polls in six of the nine phases,** spanning virtually the entire voting season.

That means that Uttar Pradesh holds about one-third of the seats any party would need to win a majority in the Lok Sabha, the lower (and more consequential) house of the Indian parliament.

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Though it lies in the heart of the ‘Hindi belt,’ which might otherwise make it fertile territory for Modi’s conservative, Hindu nationalist Bharatiya Janata Party (the BJP, भारतीय जनता पार्टी), it won’t necessarily be the easiest sell for Modi, the chief minister of Gujarat since 2001.

In contrast to Gujarat, which is one of the wealthiest states of India, Uttar Pradesh is one of the poorest — it had a state GDP per capita of around $1,586 (as of 2009), less than 50% of Gujarat’s equivalent. Continue reading The path to India’s next government runs through Uttar Pradesh

US ambassador to India resigns a week before Indian elections

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India starts its massive, nearly five-week, nine-phase general election in just seven days.India Flag IconUSflag

So you figure that US-Indian relations must be on fairly poor terms when the United States ambassador to India, Nancy Powell, stepped down on Monday after less than two years on the job.

According to reports in both the United States and India, Powell had become increasingly ineffectual due to the Khobragade affair.

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RELATED — In Depth: India’s elections

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Her resignation came amid growing reports that her recall was imminent, though US officials strongly denied that yesterday:

And at a Monday briefing, deputy State Department spokeswoman Marie Harf strongly denied that Powell’s resignation was anything but a 37-year career diplomat retiring after serving posts all over the world….. “All the rumors and speculation are, quite frankly, totally false,” Harf said.

Powell’s decision wasn’t really Powell’s fault — she will retire in May after a 37-year career in the foreign service, having served as the US ambassador to Uganda, Ghana, Pakistan and Nepal, as an assistant acting secretary of state three times, director general of the US Foreign Service, and previously as consul general in Kolkata (previously Calcutta) in the early 1990s and political counselor at the US embassy in India in the mid-1990s.

So Powell was already one of the most experienced hands that the US state department could have deployed to India.

The Khobragade incident is essentially a minor diplomacy scandal. US officials arrested deputy consul general Devyani Khobragade in December of last year on suspicion of visa fraud — and then strip-searched and detained Khobragade. The incident initially caused a minor kerfuffle over diplomatic privileges and immunities, but quickly escalated to the point where it’s had an extremely adverse effect on the bilateral relationship. India began stripping US diplomats of certain privileges, and Indian officials made themselves increasingly less accessible to Powell.

Meanwhile, Powell had to deal with the even thornier issue of how the United States ought to handle Narendra Modi, the chief minister of Gujarat and, increasingly the frontrunner to become India’s next prime minister. Modi, who’s leading the parliamentary election campaign of the center-right, Hindu nationalist Bharatiya Janata Party (the BJP, भारतीय जनता पार्टी) was denied travel visas to both the United Kingdom and to the United States, the latter in 2005, stemming from the controversy over Modi’s role in fomenting — or at least, not stopping — the worst Hindu-Muslim riots of the past two decades in 2002, which left over 1,000 Muslims dead and occurred shortly after Modi took office in Gujarat.

Following the release of a recent report from the US Congress, that policy seems almost certain to change if Modi becomes India’s next prime minister.

Powell met Modi in February, the first ambassador to do so since Modi emerged as a potential prime minister. But the Khobragade affair delayed the meeting (pictured above), and some reports from India claim that Washington faults Powell for being too close to the administration of Mamohan Singh and foreign policy advisers within Singh’s party, the Indian National Congress (Congress, भारतीय राष्ट्रीय कांग्रेस).

Modi hasn’t spoken at length about his foreign policy, but most Indian observers believe he will be relatively more muscular vis-à-vis Pakistan, relatively more aloof with Europe and the United States, and relatively friendlier with China, on the basis of past trade-related cooperation between China and Gujarat.

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With a fresh start, expect US president Barack Obama to appoint a relatively high-profile political ambassador to replace Powell. One option he should consider is Bobby Jindal (pictured above), a two-term governor of Louisiana, former member of the US House of Representatives, a conservative Republican and an Indian American who was raised in a Hindu household, though he later converted to Roman Catholicism.

It wouldn’t be the first time that Obama recruited a sitting Republican governor for such an important post — Utah governor Jon Huntsman served as the Obama administration’s ambassador to China from 2009 to 2011.

Though the India portfolio isn’t always filled by a high-profile political official, there’s a long pedigree of important figures in the role: Continue reading US ambassador to India resigns a week before Indian elections

What exactly is the ‘Gujarat model’? And can Modi export it nationally?

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Narendra Modi’s strongest argument in his quest to become India’s next prime minister is the record of economic growth in Gujarat, where he has served as chief minister since 2001 — and the promise that Modi can unlock the same kind of growth nationally. India Flag Icon

There’s no doubt that Indian GDP growth has slowed — despite bouncing back from the 2008-09 global financial crisis with 10.5% growth in 2010 on the strength of a surge of investment in the developing world, India has struggled with much lower growth over the past three years. That’s one of the reasons that the governing center-left, governing Indian National Congress (Congress, or भारतीय राष्ट्रीय कांग्रेस) is so unpopular as it tries to win a third consecutive term in India’s April/May parliamentary elections.

But what is the ‘Gujarat model’? Can Modi really claim that his government’s policies are responsible for the superior Gujarati economic performance?

What’s more, even if Modi’s claims do hold up, is the Gujarat model so easily replicable that he will be able to implement nationally in the likely event that he becomes India’s next prime minister?

Though Modi and his center-right, Hindu nationalist Bharatiya Janata Party (the BJP, or भारतीय जनता पार्टी) lead polls in India’s election campaign, the answers to those questions will determine the success — or failure — of any future Modi-led government. Continue reading What exactly is the ‘Gujarat model’? And can Modi export it nationally?

What does Nitish Kumar want?

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In a more perfect Indian democracy, the increasingly presidential-style showdown for the April/May Indian general election would not be between Narendra Modi, the chief minister of Gujarat, and Rahul Gandhi, the latest scion of the long-ruling Nehru-Gandhi dynasty.India Flag Icon

Instead, it would pit Modi, a champion of economic liberalism and Hindu nationalism against Nitish Kumar, the chief minister of Bihar state. Kumar, who’s been in power since 2005, can claim to have transformed Bihar from an economic basketcase into one of the fastest-growing states in India. What’s more, Kumar has paired the quest for high economic growth with the values of secularism and a push for greater social welfare spending. Kumar (pictured above) has been mentioned as a potential prime minister, and he certainly will be in the future — even if Modi wins this year’s elections.

But in the odd calculus of Indian domestic politics, Kumar, formerly an ally of Modi’s conservative  Bharatiya Janata Party (the BJP, भारतीय जनता पार्टी), is increasingly marginalized in the current campaign.

At first glance, it’s odd that Kumar and Modi came to be allies in the first place, it’s odd that Kumar would leave the BJP-led National Democratic Alliance (NDA) last summer just as Modi won the prime ministerial nod from the BJP’s leaders, and it’s odd that Kumar, with the strongest counter-example to Modi’s ‘Gujarat’ model, could now be squeezed out of having any national role in Indian politics.

When the BJP decided last June to anoint Modi, the chief minister of Gujarat, as its prime ministerial candidate, however, Kumar promptly pulled his party, the Janata Dal (United) (JD(U), जनता दल (यूनाइटेड)), out of the NDA, depriving the coalition of its second-largest member.

That decision now looks like a mistake, because JD(U) stands to lose most of its seats in the April/May parliamentary elections. Though it currently holds 20 of the 40 seats allocated to Bihar, projections show that the JD(U) could lose around 15 (or more) of those seats.

So what happened?  Continue reading What does Nitish Kumar want?

Is Priyanka Vadra the secret Gandhi family weapon for Congress?

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All eyes have been on Rahul Gandhi, the somewhat reluctant warrior who’s leading the campaign for the governing Indian National Congress (INC / Congress) that hopes to win a third consecutive term in power in this spring’s parliamentary elections.India Flag Icon

But it’s his sister, Priyanka Gandhi-Vadra, who is getting all the buzz recently with word that Priyanka will step out of the shadows to take a fuller role in the election campaign this year, mostly as an advisor and manager for Rahul’s campaign, but also taking an increasingly visible role as well.

As she steps closer to the heart of Congress’s campaign, it will be the third major Gandhi family member to figure prominently in the 2013 elections.  Their Italian-born mother, Sonia Gandhi, has been Congress’s party leader since 1998, though when Congress won the 2004 national elections, Sonia declined to become prime minister, instead handing the top job to Manmohan Singh, who will step down this spring after a decade in office.

Rahul is not technically the Congress’s prime ministerial candidate in 2013, but his role leading the campaign means that it’s more likely than not that he’ll become India’s next prime minister if the INC wins this spring.

That outcome seems increasingly less certain.  The latest CNN-IBN-Lokniti-CSDS poll shows that Congress and its allies, which together comprise the United Progressive Alliance (UPA) will win between 107 and 127 seats in the 545-member Lok Sabha (लोक सभा), the lower house of the Indian parliament — a loss of over 100 seats.  Instead, the more conservative, Hindu nationalist Bharatiya Janata Party (BJP, or भारतीय जनता पार्टी) would win, together with its own allies that form the National Democratic Alliance (NDA), between 211 and 231 seats, under the leadership of Gujarat chief minister Narendra Modi.

Modi, the BJP’s prime ministerial candidate, has waged an aggressive campaign against Congress, on the basis that he can bring Gujarat’s high-growth economic approach to the rest of India.  Modi, who is 20 years older than Rahul, routinely refers to his opponent as shehzada, or ‘prince,’ and there’s speculation that Congress’s leadership decided not to anoint Rahul as its official prime ministerial candidate to avoid a presidential-style showdown between the two leaders that Modi would almost certainly win, despite his flaws.

Priyanka has campaigned before on behalf of her mother and broher in their constituencies in Uttar Pradesh.  But neither she nor her brother, Rahul, have faced the rigors of leading a national campaign in the world’s largest democracy — especially against perhaps the most talented BJP politician in over a decade.  Modi’s not without flaws, though, especially given doubts over his role in 2002 anti-Muslim riots in Gujarat.

But there’s no disputing that Modi, if the elections were held today, has enough momentum to win.

So who is Priyanka and how can she help turn things around for Congress?  Continue reading Is Priyanka Vadra the secret Gandhi family weapon for Congress?

Could the United States and Canada effect a national merger?

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I spent an impromptu weekend in Ottawa and Montréal, which marked my first visit to Canada’s capital city — and its fourth-most populous (after Toronto, Montréal and Calgary).USflagCanada Flag Icon

Though Ottawa is a bilingual city that sits on the Ontario-Québec borders, there’s no doubting that this was a city founded by English Canadians (and, in fact, New Englanders founded the first colonial-era settlement) — which may explain why it’s impossible to find a decent meal other than poutine on a Sunday night after 10 p.m.).  But the trip gave me good reason to read the new book from National Post columnist Diane Francis, Merger of the Century: Why Canada and America Should Become One Country. 

OK, so let that sink in for a moment.  Merging the United States and Canada into one mega-country.  Impossible, right?  A national political space with room for both Jacques Parizeau and Haley Barbour? Come on.

But it’s not an unhinged read — it’s a page-turner, and Francis has a command of the data that motivates her argument.  It also meets the ‘learn something on every page’ test.  Did you know that Canada’s First Nations residents also have US citizenship?  Or that the US defense department, if it were a nation, would have an economy the size of Turkey’s?

The political hurdles are immense 

Let’s start with the obvious — in a world where the US Congress can’t even agree for three weeks on whether to fund the government, the appetite for a merger with Canada is probably less than zero, and Francis certainly knows this.  The politics of a US-Canada merger are impossibly difficult, and the weakest part of the book is that Francis glides over the political hurdles — the Québec question and the issue of Southern intransigence in the United States are dealt with in just over three pages.  I like to think that’s because Francis knows the political obstacles are insurmountable and prefers to spend more time making her very able case for the economic synergies that a merger would bring.

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It’s tempting to believe that Canada’s relatively more statist and socially and economically liberal population would give the US Democratic Party an almost immediate lock on elections for the foreseeable future (and Francis hints as much), but that’s not necessarily the case.  It’s Canada that has a three-term Conservative prime minister in Stephen Harper and the United States that has a two-term Democratic president in Barack Obama (pictured above with Harper).  As John Ibbiston and Darrell Bricker argue in their own big-think volume from last year, The Big Shift: The Seismic Change In Canadian Politics, Business, And Culture And What It Means For Our Future, there’s a growing majoritarian coalition of immigrants, Westerners and Ontario suburbanites that could make Harper’s Tories the natural party of government in Canada in the 21st century — just as much as the Liberal Party of Wilfrid Laurier, William Lyon Mackenzie King, Pierre Trudeau and Jean Chrétien dominated the 20th.

It’s hard to imagine that Québec premier Pauline Marois and Texas governor Rick Perry would have much in common.  Still, there are common trends in the politics of the left and right on both sides of the border, and Toronto mayor Rob Ford proves that Canada has as many colorful characters in politics as the United States.

On the right, the rise of the ‘tea party’ movement on the US political right matches the rise of a new fiscal and social conservatism captured by the rise of Alberta’s new Wildrose Party (as an alternative to the long-dominant Progressive Conservative Party).  Harper’s own rise, and the merger of the western-based Canadian Alliance with the dwindling eastern-based Progressive Conservatives, is the story of the rise of a more anti-government, pro-Christian, social and economic conservatism in Canada.  That mirrors the rightward shift of US conservatism under the influence of Barry Goldwater, Ronald Reagan and others.

On the left, the late Jack Layton led the New Democratic Party to a historic breakthrough in the 2011 federal election in a way that mirrors the new progressive coalition of minorities, moderates and young voters that powered Obama in 2008 — first to win the Democratic Party nomination over Hillary Clinton, then to win the presidency.  The difference between the pragmatic, business-friendly Liberals and the social democratic NDP in Canada is the difference between, say, US senator Chuck Schumer of New York and US senator Patrick Leahy of Vermont.

Nonetheless, with all due respect to Paul Cellucci, the former US ambassador to Canada, the difference between Québec and Alberta is not the same as the difference between Massachusetts and Mississippi (despite the heritage of French Americans from Maine to Louisiana).  The cultural gulf between the United States and Canada is the gulf between revolution and evolution, fixed in place by 200 years of path dependence.

If I were Canadian, I would worry that the best aspects of Canadian culture and politics would be totally subsumed by US culture and politics — it was Trudeau, after all, who said that having the United States for a neighbor was like being a mouse sleeping next to an elephant.  For all the valid criticisms of the US military-industrial complex, it’s hard to believe that the Canadian influence would slow the militarism of US policy (though, frankly, deploying US troops to patrol the Arctic north or to fortify and develop new northern settlements seems a more productive endeavor than invading Iraq).  

As the United States has increasingly retreated behind a wall of homeland security in the wake of the 9/11 terrorist attacks, Canada has increasingly opened its borders to immigrants.  One out of every two residents of Toronto, Canada’s largest city, is foreign-born, and nearly seven million of Canada’s 35 million people are foreign-born.  In the 21st century, Canada is becoming the melting-pot society that the United States once was in the 20th century.  That would be endangered if Canada became merely the northern-most region within a greater North American superstate.

Francis also betrays a protectionist edge that view Chinese, Russian and Arab malevolence at every turn.  If I were Canadian, I’d be happy to know that China, Russia and other countries are willing to compete with US and Canadian investors to most efficiently develop the resources of Canada’s far north.  It seems to me that the kind of knee-jerk nationalism that led to the 2006 Dubai Ports World kerfuffle in the United States is something that’s more dangerous to democratic and economic institutions in North America than an investment here or there by China.

But when you get to the heart of Francis’s argument about the reasons for and benefits from a US-Canadian merger, it’s as thoughtful, radical and brilliant as you’ll find in any of the top books published last year.

Even the most outlandish ideas should win points for creative thinking.  A payout of $492,529 to each Canadian citizen at a total cost of around $17 trillion to the US treasury?  A bifurcated health care system that would include greater rights and freedoms for Canadians?  The concept that the US deep south, which chose segregation over industrialization and economic modernization for nearly a century, would sign up to a merger because it might mean more Canadians would migrate to the Sun Belt?  That Quebeckers would willingly give up what amounts to a veto on national policymaking for  irrelevance in a super-country whose First Amendment freedoms would make most of the province’s language regulations unconstitutional on Day One?  That the staid Bay Street approach to banking regulation would easily graft itself onto the creatively destructive mentality of Wall Street? None of these are politically feasible.

How to capture the benefits of greater cooperation

The good news is that the United States and Canada don’t actually have to become one nation-state in order to effect a lot of the benefits that Francis outlines, which is where her book really shines.  That’s especially true in a globalized world where national borders are conceivably less important than at any time in the post-Westphalia era.  A handful of efforts could bring much of Francis’s dream to reality without a supranational acquis communautaire or admitting Canada’s provinces and territories as the next 13 American states:

Continue reading Could the United States and Canada effect a national merger?

14 in 2014: US midterm elections

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14. United States midterm elections, November 4.USflag

Though US president Barack Obama and his administration’s top officials — secretary of state John Kerry, national security adviser Susan Rice and defense secretary Chuck Hagel — will continue to set the tone for US foreign policy through January 2017, US voters will elect all 435 members of the House of Representatives and one-third of the Senate, the upper house of the US Congress.

In particular, the Republican Party hopes to finish what it started with the 2010 midterm elections by winning control of both the House, where it currently enjoys a 232-to-200 majority, and the Senate, where the Democratic Party (and two independent allies) holds a 55-45 lead.  A bevy of gubernatorial elections (in 36 out of 50 states) will also decide who controls 12 out of the 15 most populous US states, including California, Florida, New York, Texas.

Midterm elections — and control of Congress — can effect huge results on American foreign policy.  Just recall the way that the 2006 midterm elections forced the nearly immediate resignation of former president George W. Bush’s defense secretary, Donald Rumsfeld, and signaled a new era in the US occupation in Iraq.

If the Republicans succeed, it would make Congress a much more muscular voice of opposition to Obama’s signature foreign policy initiatives — most notably with regard to Iran, with which the administration hopes to reach a deal on Iran’s nuclear energy program.  But the enhanced scrutiny from the US Senate Foreign Relations Committee and other committees to hold hearings on everything from Iran to the 2011 Benghazi consulate attack in Libya to the Obama administration’s ongoing global efforts to stop terror from Pakistan to Somalia to Yemen, could complicate Obama’s final two years in office.  The Republicans would also be able to pass legislation designed to embarrass the Obama administration or attempt to rein in executive power.

 Next: 14 more to watch in 2014

Neither Republicans nor Democrats learned the real lesson of Benghazi

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In the United States, ‘Benghazi’ has become a code word for conservative Republicans hinting at a dark cover-up within the administration of US president Barack Obama about who actually perpetrated the attack on September 11, 2012 against the US consulate in Benghazi, Libya’s second-most populous city.Libya_Flag_IconUSflag

The furor stems largely from comments by Susan Rice, then the US ambassador to the United  Nations and a candidate to succeed Hillary Clinton as US secretary of state, that indicated the attack was entirely spontaneous, caused by protests to a purported film trailer, ‘Innocence of Muslims,’ that ridiculed Islam and the prophet Mohammed.  Republicans immediately seized on the comments, arguing that al-Qaeda was responsible for the attack, which left four US officials dead, including Christopher Stevens, the US ambassador to Libya at the time, a volatile period following the US-backed NATO efforts to assist rebels in their effort to end the 42-year rule of Libyan leader Muammar Gaddafi.

An amazingly detailed report in The New York Times by David Kirkpatrick on Saturday reveals that there’s no evidence that al-Qaeda was responsible for the attack.  While it was more planned than the spontaneous anti-film riots that rocked the US embassy in Cairo the same day, the Benghazi incident was carried out by local extremist militias.  Kirkpatrick singles out, in particular, Abu Khattala, a local construction worker and militia leader, but he also identifies other radical militias within Benghazi, such as Ansar al-Sharia, which may not have been responsible, but still seem relatively sympathetic to anti-American sentiment:

Mohammed Ali al-Zahawi, the leader of Ansar al-Shariah, told The Washington Post that he disapproved of attacking Western diplomats, but he added, “If it had been our attack on the U.S. Consulate, we would have flattened it.”

Similarly named groups have emerged throughout north Africa and the Arabian peninsula over the past few years — a group calling itself Ansar al-Sharia, not ‘al-Qaeda in the Arabian Peninsula’ (AQAP), took control of portions of southern Yemen after the battle of Zinjibar in 2011.  The United States ultimately listed ‘Ansar al-Sharia’ as an alias for AQAP, but it’s unclear the degree to which the two are (or were) separate.  It also underscores the degree to which local Islamist groups like AQAP are necessarily fueled by local interests and concerns .  Most Yemenis fighting alongside AQAP are doing so for local reasons in a country that remains split on tribal and geographic lines — South Yemen could claim to be an independent state as recently as 1990.  Groups also named Ansar al-Sharia also operate  in Mali, Tunisia, Mauritania, Morocco and Egypt, and some of them have links to al-Qaeda affiliates and personnel.  Others do not.

If Khattala, as The New York Times reports, is the culprit behind the consulate attack (and the US government continues to seek him in response to the attack), he fits the profile less of a notorious international terror mastermind and more of a local, off-kilter eccentric:

Sheikh Mohamed Abu Sidra, a member of Parliament from Benghazi close to many hard-line Islamists, who spent 22 years in Abu Salim, said, “Even in prison, he was always alone.”  He added: “He is sincere, but he is very ignorant, and I don’t think he is 100 percent mentally fit. I always ask myself, how did he become a leader?”

Moreover, if there’s a scandal involving the Obama administration, it’s the way in which the United States came to enter the Libyan conflict in 2011.  The Obama administration refused to seek authorization from the US Congress when it ordered military action in Libya in support of the NATO mission and to establish a no-fly zone, pushing a potentially unconstitutional interpretation of the 1973 War Powers Resolution, which requires Congressional authorization for open-ended conflicts that last for more than 60 days.  Ironically, Obama’s case for ignoring Congress was actually stronger with respect to potential airstrikes on Syria earlier this year, though Obama’ ultimately decided to seek Congressional support for a potential military strike in August in response to the use of chemical weapons by Syria’s military. 

Republicans, who control the US House of Representatives but not the US Senate, the upper house of the US Congress, just as they did in 2011, could have (and should have) held Obama more accountable for his decision vis-à-vis the War Powers Resolution.  Instead, they’ve colluded with a conservative echo chamber that mutters ‘Benghazi’ like some unhinged conspiracy theory, suggesting that somehow the Obama administration purposefully lied about what happened that day.  The reality is that the Obama administration was as caught off guard as anyone by the attack.  Democrats that would have howled with disgust over Benghazi if it had happened under the previous administration of Republican George W. Bush have remained incredibly docile during the Obama administration — to say nothing of the Obama administration’s encroaching internet surveillance, ongoing war in Afghanistan, frequent use of drone attacks and pioneering use of ‘targeted killings’ (including assassination of US citizens).

Kirkpatrick’s report showed that while US intelligence agencies were tracing an individual with tangential ties to al-Qaeda and Osama Bin Laden, they largely missed the more local threats like Khattala and Ansar al-Sharia:

The C.I.A. kept its closest watch on people who had known ties to terrorist networks abroad, especially those connected to Al Qaeda. Intelligence briefings for diplomats often mentioned Sufian bin Qumu, a former driver for a company run by Bin Laden.  Mr. Qumu had been apprehended in Pakistan in 2001 and detained for six years at Guantánamo Bay before returning home to Derna, a coastal city near Benghazi that was known for a high concentration of Islamist extremists.

But neither Mr. Qumu nor anyone else in Derna appears to have played a significant role in the attack on the American Mission, officials briefed on the investigation and the intelligence said.  “We heard a lot about Sufian bin Qumu,” said one American diplomat in Libya at the time. “I don’t know if we ever heard anything about Ansar al-Shariah.”

That, in turn, highlights the real lesson of Benghazi — both the Obama administration and the national security apparatus that it has empowered, and the conservative opposition to the Obama administration are missing the larger problem with the way that the United States engages the world.  It’s a point that rings most clearly in the words of Khattala himself:

“The enmity between the American government and the peoples of the world is an old case,” he said. “Why is the United States always trying to use force to implement its agendas?”….

“It is always the same two teams, but all that changes is the ball,” he said in an interview. “They are just laughing at their own people.” Continue reading Neither Republicans nor Democrats learned the real lesson of Benghazi

Why Menendez is such an awful Senate Foreign Relations Committee chair

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Was Jesse Helms a better chair of the Senate Foreign Relations Committee than Bob Menendez?  USflag

Menendez, who took over the committee earlier this year when former senator John Kerry was appointed as US secretary of state, is making headlines this week for a bill that would largely derail a still delicate US-Iranian rapprochement.  He introduced a Senate bill yesterday that, if enacted, would mark a serious setback in the nuclear negotiations between the United States (and the other members of the ‘P5 + 1’ team that includes the five permanent members of the United Nations Security Council, plus Germany) and Iran.  The bill would institute a new round of punitive economic sanctions on Iran on the heels of a six-month deal between negotiators and the administration of Iran’s new moderate president Hassan Rowhani that all parties hope could lead to a more permanent accord.  On Thursday, ten Democratic committee chairs sent a letter to Senate majority leader Harry Reid in opposition to Menendez’s bill, and the White House has warned Menendez that his legislative efforts aren’t helping negotiations.

Though Menendez’s bill, co-sponsored with Republican senator Mark Kirk of Illinois, is called the ‘Nuclear Weapon Free Iran Act,’ there’s no firm evidence that Iran even wants to build a nuclear weapon, though plenty of US policymakers suspect that Iran has secret designs on building one.  Rowhani and his foreign minister Javad Zarif have disclaimed interest in nuclear weapons, and Iran’s supreme leader Ali Khamenei has argued that nuclear weapons are a violation of Islamic law.

The bill would introduce new sanctions if Iran violates the terms of the current agreement or fails to come to a permanent agreement with the ‘P5 + 1’ team.  In essence, it would put an economic sanctions gun to Iran’s head — the bill demonstrates no respect for a process of negotiation between two sovereign states.  It seems more designed to score low-hanging political points for conservative Democrats than to engage seriously on finding a mutually acceptable path for Iran’s energy program that also makes the Middle East more stable.  Menendez, a longtime ally of the American Israel Public Affairs Committee (AIPAC), is siding with Israeli prime minister Benjamin Netanyahu, who has attempted to derail the Iran deal at every turn.

As James Traub wrote in Foreign Policy earlier this week:

 The reason why Menendez and others really are marching on a path to war is that they are demanding an outcome which Iran manifestly will not accept: zero enrichment. As Daryl Kimball, director of the Arms Control Association, puts it, “This is a strategy based upon hope that is not supported by the evidence of Iranian actions over the past decade, its past statements, or common sense.”….

I have no idea why Menendez and other Democrats believe that more pressure will make Iran abandon a core tenet of the revolution and thus undermine their claim to rule. (I asked for an interview, but the New Jersey senator was not available.) Maybe they believe it because [Netanyahu] has made zero enrichment his own bottom line.

So who is Menendez, and how did he rise to become the preeminent foreign policy official in the legislative branch of US government?

Menendez is the son of Cuban immigrants who came to the United States in 1953 for economic opportunity (not, as you might believe, to flee Fidel Castro, who was in 1953 still six years away from overthrowing the US-supported dictatorship of Fulgencio Batista).  Menendez spent his childhood in New Jersey and rose to political prominence in the Democratic machine politics of Union City, which was once known as ’10 Percent City,’ and not because its residents were tithing Christians.  Initially a protégé of Union City mayor and New Jersey political powerbroker William Musto, Menendez broke with his mentor only after Musto’s indictment for skimming.  Though Musto was ultimately convicted and served five years in prison, he still managed to defeat Menendez when the future senator challenged him for the mayorship in 1982.  But Menendez eventually won the office in 1986, then became a member of the New Jersey State Assembly, the New Jersey State Senate and in 1993, a member of the US House of Representatives.

For nearly as long as he’s chaired the Senate Foreign Relations Committee, Menendez has been under investigation by a Florida grand jury in connection with potential misconduct with respect to one of Menendez’s top donors, Salomen Melgen, a Miami eye surgeon who moved to Florida from the Dominican Republic in 1980.  Though the nastiest rumors about Melgen and Menendez cavorting with underage prostitutes were probably false, Menendez admitted to violating Senate ethics rules when he forgot to reimburse Melgen for two private jet flights to the Dominican Republic in 2010.  Other accusations are less salacious but potentially illegal — Menendez is accused of intervening on Melgen’s behalf in respect of a billing dispute between Melgen and the federal government’s Medicare offices and in favor of a port security contract in the Dominican Republic that would have benefitted Melgen financially.  

The grand jury hasn’t issued any charges against Menendez, and prosecutors may ultimately choose to drop the matter, but it’s not best practices for the Senate’s top foreign policy voice to be implicated in an abuse of power scandal that involves, in part, international contracts.

The Iran bill follows Menendez’s push earlier this autumn to goad US president Barack Obama into a more hawkish position on Syria that would have seen US military attack on Bashar al-Assad.  Menendez actually made the following analogy in his push to win support for an attack earlier this year: Continue reading Why Menendez is such an awful Senate Foreign Relations Committee chair

Is there a potential parliamentary path to amending Section 377 in India?

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Sonia Gandhi, the leader of India’s largest party, and a massively influential voice in Indian government, has strongly denounced the Indian Supreme Court’s ruling on Section 377 of the Indian penal code, which effectively re-criminalized same-sex relationships yesterday.India Flag Icon

The Supreme Court rejected the earlier 2009 decision of the Delhi High Court, which had interpreted that Section 377 violated several rights guaranteed under India’s constitution, thereby effectively decriminalizing same-sex conduct.  India’s Supreme Court yesterday instead ruled that it was up to India’s parliament, not its judiciary, to address Section 377.

Gandhi forcefully called on India’s parliament to take up the issue by amending Section 377 in a way that makes it clear that she believes same-sex conduct should not be criminalized:

“The High Court had wisely removed an archaic, repressive and unjust law that infringed on basic human rights enshrine din our Constitution. This Constitution has given us a great legacy, a legacy of liberalism of openness, that enjoin us to combat prejudice and discrimination of any kind. We are proud that our culture has always been an inclusive and tolerant one. The Supreme Court also suggested another course. I hope the Parliament will address this issue and uphold the constitutional guarantee of life and liberty to all citizens of India, including those affected by this judgement.”

As the leader of the governing Indian National Congress (Congress, भारतीय राष्ट्रीय कांग्रेस), her strong condemnation makes it possible that India’s parliament just might enact a legislative fix.

Gandhi’s statement cleared the way for several high-profile members of India’s government to attack the decision.  Finance minister P Chidambaram said he was extremely disappointed with the decision, and he argued that the decision, by upholding a law enacted in 1860, embodies  colonial-era reasoning.  Kapil Sibal, India’s minister for law and justice, after a somewhat non-committal statement yesterday, today issued a call clearly supporting government action to neutralize the Supreme Court’s decision:

“I am disappointed, and, it is unfortunate that the Supreme Court has upheld the legality of Section 377. The High Court was right on this issue. Right now, there are several options before the government, and, we are exploring all of them. This government believes in firm and quick action, and, we will do that. We will adopt a policy that will provide relief at the earliest,” he said.

Congress, which likes to wrap itself in its legacy as the party that delivered Indian to independence in 1947 under Jawaharlal Nehru, a leader of the independence movement and later, India’s first prime minister, would jump at the chance to attack Section 377, above all, as a relic of Victorian-era repression inflicted upon India by its British colonial rulers.

Fresh off its massive political victory in regional elections earlier this month in Delhi, the anti-corruption Aam Aadmi Party (AAP) also announced its disapproval of the decision and its support for repealing or amending Section 377.

In contrast, the center-right Hindu nationalist Bharatiya Janata Party (the BJP, भारतीय जनता पार्टी) and Narendra Modi, the chief minister of Gujarat state, and the BJP’s prime ministerial candidate in next spring’s parliamentary elections, have been silent since yesterday’s decision.  Sushma Swaraj, the BJP opposition leader in the Lok Sabha (लोक सभा), the lower house of India’s parliament, has called for an all-party meeting to determine whether there’s support to amend Section 377 in the Lok Sabha.

While Muslim and Christian groups have been more active on Section 377 in India than Hindu groups, the conservative BJP doesn’t exactly fit the mould of a party willing to take a progressive stand in favor of LGBT rights.  Baba Ramdev, a top Indian yoga guru, and a leading Modi supporter, has been outspoken in his virulent opposition to homosexuality.

Either way, Gandhi and Congress will find that time is rapidly running out, with the Lok Sabha expected to be dissolved next spring in advance of parliamentary elections that must be held before May 2014.

While Congress could push to amend 377 through legislative action, there’s a chance that the government could also support a ‘curative petition’ that calls on the Supreme Court to reconsider its ruling — such petitions rarely succeed, but such petitions rarely have the full support of Sonia Gandhi behind them.

Both the Congress-led government and the BJP have at least some reason to pull together to support legislation essentially decriminalizing same-sex conduct (once again) in India.  Continue reading Is there a potential parliamentary path to amending Section 377 in India?

India’s Supreme Court re-criminalizes same-sex conduct in LGBT setback

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In a setback for human rights in the world’s largest democracy, the Supreme Court of India early Wednesday re-criminalized same-sex conduct in a decision that directly affects millions of LGBT individuals.India Flag Icon

The court was considering a 2009 decision by the Delhi High Court, Naz Foundation v. Govt. of NCT of Delhi, that found much of Section 377 of the Indian Penal Code unconstitutional.  Section 377 dates from the British colonial era in India — its origin lies in an 1860 law that prohibits ‘carnal intercourse against the order of nature,’ essentially criminalizing same-sex conduction.  When the Delhi High Court handed down its ruling in 2009, it narrowed its reading of Section 377 to exclude adult consensual same-sex conduct, though the law continued to apply to sex with minors and non-sexual conduct.

Today’s decision by India’s Supreme Court, however, invalidates that interpretation, making same-sex conduct once again a criminal offense — think of it as the reverse of the US Supreme Court’s 2003 landmark decision in Lawrence v. Texas, in so much as the Supreme Court of India had the opportunity to decriminalize same-sex conduct in one fell swoop.  Instead, India’s Supreme Court ruled that it was up to the parliament, not India’s courts, to invalidate Section 377.  The effect is to criminalize same-sex relations at a time when most countries are moving toward greater LGBT rights in both judicial and legislative terms.

The 2009 decision was a landmark moment at the time for LGBT activists in India, who believe that the legacy code violates the guarantees to equality, freedom of expression and personal liberty in the Indian constitution.  The Delhi High Court (think of it as a kind of cross between a state supreme court in the United States and the federal DC Circuit Court of Appeals) itself took seven years to hold hearings in the Naz Foundation case, and the verdict was delivered eight years after the case was originally filed.  Here’s a portion of the Delhi Supreme Court’s ruling from 2009:

If there is one constitutional tenet that can be said to be underlying theme of the Indian Constitution, it is that of ‘inclusiveness’. This Court believes that Indian Constitution reflects this value deeply ingrained in Indian society, nurtured over several generations. The inclusiveness that Indian society traditionally displayed, literally in every aspect of life, is manifest in recognising a role in society for everyone. Those perceived by the majority as “deviants’ or ‘different’ are not on that score excluded or ostracised.  Where society can display inclusiveness and understanding, such persons can be assured of a life of dignity and non-discrimination. This was the ‘spirit behind the Resolution’ of which Nehru spoke so passionately. In our view, Indian Constitutional law does not permit the statutory criminal law to be held captive by the popular misconceptions of who the LGBTs are. It cannot be forgotten that discrimination is antithesis of equality and that it is the recognition of equality which will foster the dignity of every individual.

It’s difficult to categorize the state of LGBT rights in a country as diverse as India with over 1.2 billion people across 1.2 million square miles, but LGBT individuals face myriad challenges in a country where same-sex marriage and adoption are not recognized and no anti-discrimination laws exist.  India’s relatively conservative culture means that there’s a lot of opposition to same-sex attraction, both culturally and religiously.  Religious groups, for example, especially within India’s Muslim and Christian communities, applauded today’s decision.

While Section 377 was never regularly enforced, it was nonetheless widely used to harass LGBT individuals.

As supreme courts often like to do, India’s supreme court lobbed the issue back to the elected branch of government:

However, keeping in mind the importance of separation of powers and out of a sense of deference to the value of democracy that parliamentary acts embody, self restraint has been exercised by the judiciary when dealing with challenges to the constitutionality of laws. This form of restraint has manifested itself in the principle of presumption of constitutionality. Continue reading India’s Supreme Court re-criminalizes same-sex conduct in LGBT setback

The next debt crisis in the United States may require a Puerto Rico bailout

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Washington may be enjoying some well-deserved rest from the brinksmanship of the dual crises over the US federal government shutdown and the possibility that the US Congress might not raise the debt ceiling.USflagPR

Though both crises ended last week, a new crisis may have been gathering steam while the world focused on the global implications of a seemingly dysfunctional American political system.

It’s Puerto Rico, where both finances and the economy seem to be spiraling out of control.

Bondholders are pressuring Puerto Rico

Investment vehicles that buy state and municipal bonds have long loved Puerto Rico’s bonds.  Although the bonds are rated BBB+ (by Standard and Poor’s), they are a tax-exempt hat trick.  Not only are Puerto Rican bonds exempt from all federal taxes (like all state and municipal bonds), and not only are they exempt from applicable Puerto Rican commonwealth and other local taxes (which is generally how most state and municipal bonds are treated in the state or territory of their issuance), Puerto Rican bonds are exempt from state taxes in all 50 US states.  So while Virginian bonds may be taxable under New York state tax, or Californian bonds may be taxable under North Carolina state tax, Puerto Rico’s bonds are exempt from state and local taxes everywhere.

Bondholders have typically shrugged away Puerto Rico’s ‘BBB+’ rating because the yields were sufficiently high enough (around 5%) and the tax advantages so pronounced that Puerto Rican debt looked like an easy way to goose returns for the average fund manager.  So Puerto Rican bonds became predictably popular, and many mutual funds and other investment vehicles are widely exposed to Puerto Rican debt.  Morningstar estimates that 77% of all muni funds hold Puerto Rican bonds to some degree, and they’re all now incredibly itchy about their exposure.

But when yields started climbing over the summer and early autumn to above 8% and even 9%, it spread alarm not only in San Juan, but in New York and other global financial capitals, as investors and analysts started thinking more deeply about the weakest geographic link in the US financial system, a ‘commonwealth’ with a much more fragile economic outlook that shares only some elements in common with the mainstream US economy.  Puerto Rico’s governor, Alejandro Garcia Padilla, and a slew of top officials have spent the rest of October in New York, Washington and elsewhere trying to calm markets and policymakers.

No US state has a debt outlook as poor as Puerto Rico’s, and its ‘BBB+’ rating is just one notch above junk debt status.  If any of the three major ratings agencies downgrade Puerto Rican debt further, it could trigger a number of adverse ‘death spiral’ consequences.  Puerto Rican bonds are already selling on the open market well below par, but if Puerto Rican debt hits ‘junk bond’ status, it would suddenly become much, much worse.

Mutual funds could be forced to sell their entire Puerto Rican portfolios, which would flood the market with bonds that would become almost immediately worthless.  Puerto Rico’s government could be forced to post additional collateral against those bonds, leaving its government even more strapped for cash.  That’s not even taking into account the effects of any credit default swaps related to Puerto Rican debt.

All of which means Puerto Rico is now a lot closer to insolvency than it was a month ago.

But unlike the city of Detroit, which filed for Chapter 9 bankruptcy earlier this summer, Puerto Rico is a sovereign (technically an ‘unincorporated territory’) and cannot file for bankruptcy as a matter of law.  To the extent there was any legal doubt about it, a federal court slammed shut the door in 2012 when it ruled that the pension fund of the commonwealth of the Northern Mariana Islands could not file for bankruptcy.

That leaves US president Barack Obama with the unpalatable option of having to consider a bailout of Puerto Rico — an option that some Puerto Rican officials were already discussing openly earlier this month:

In a meeting with bond analysts in New York on Monday, the president of the Puerto Rican Senate, Eduardo Bhatia, said officials in the United States Treasury and White House had been analyzing the situation carefully, “wondering how they can help Puerto Rico send a very strong signal of stability right now.”

Given that the Republicans who control the US House of Representatives are incredibly anti-debt, the fight to raise the debt ceiling would look like a cakewalk compared to the congressional fight over a potential Puerto Rican bailout.  If House Republicans seem unwilling to move forward on immigration reform, they seem even less likely to approve a bailout for a territory that pays no federal income tax, that elects no members to Congress and that has no electoral votes in the US presidential election.

Is Puerto Rico the Greece of North America?

The real horrorshow element to this is that Puerto Rico could wind up being to the United States what Greece was to the European Union — the canary in the coal mine that exposes wider state-level and municipal exposure.

The immediate possibility of a US debt default through political brinksmanship has now passed, at least until February 2014.  Furthermore, no one expects Puerto Rico to fall out of the ‘dollarzone,’ or face the idiosyncratic problems that the European Union faces, where monetary policy is set at the European level and fiscal policy is still set at the national level.

But if yields remain elevated, Puerto Rico won’t be able to borrow enough to finance its government.  Its leaders say that Puerto Rico is prepared to refrain from further borrowing through June 30 of next year and wait out the current debt scare, but that’s hardly a solution to the crisis.  Even if that estimate is correct, what happens in July 2014 if yields spike again?  What happens the next time bondholders start doubting Puerto Rico’s ability to meet its debt obligations?

Like Greece, Puerto Rico spent the 2000s on a debt spree — its debt load as a percentage of what Puerto Rican GNP increased from around 60% in 2000 to over 100% today.

It now seems clear that Greek debt was mispriced following its entry into the eurozone because debt yields converged among all eurozone countries.  That allowed Greece’s government to borrow throughout the 2000s at rates lower than its fundamental economic and financial performance would otherwise warrant.  Essentially, Greece continued to borrow at Greece-level amounts but with the benefit of German-level rates.

In the same way, investors have potentially mispriced Puerto Rican debt — no one actually treated Puerto Rico’s bonds as if they were one downgrade away from junk status.  That’s partly because the tax incentives were so favorable, but it’s also because no one really thought that the debt of a US territory was actually so risky.

But the debt ceiling fight highlighted the attention of world markets on the precariousness of US debt generally.  So while a run on Puerto Rico’s debt could end with Puerto Rico, it could also make mutual funds and global investors think twice about holding US municipal and state debt, especially in the wake of the debt ceiling fight and Detroit’s municipal bankruptcy.  There’s wide variance among the credit ratings of the 50 US states:

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According to S&P state-level credit ratings (as of January 31), while many US states have stellar credit ratings of ‘AAA’ (bright green in the map above) or ‘AA+’ (spring green), there are plenty of states with ‘AA’ (yellow) or ‘AA-‘ (orange).

Two of the largest states with a combined population of nearly 51 million have even more precarious ratings — California (rated ‘A’), despite the best efforts of California governor Jerry Brown to transform his state’s finances, and Illinois (rated ‘A-‘).  State debt loads vary considerably on a per-capita basis as well — this chart from the Tax Foundation shows that per-capita state-level debt ranges from $925 in Tennessee to over $11,000 in Massachusetts.

But it’s all worse in Puerto Rico, which has issued about $87 billion in outstanding debt, which comes out to over $23,000 on a per-capita basis.

Puerto Rico’s economy has been struggling for a decade

Meanwhile, no US state has an economy that’s in such poor shape as Puerto Rico does.

Puerto Rico’s unemployment rate is 13.9% (as of August), which is higher than the national average (7.3%) and higher than any other US state or territory.

Like Portugal and Italy, Puerto Rico’s economy was stagnant long before the 2008-09 global financial crisis — since the year 2000 (when it achieved 6.3% GDP growth), the Puerto Rican economy has been in contraction more often than it’s been in expansion.  Here’s a chart of the GDP growth of Puerto Rico against that of the United States between 1999 and 2012 — you can see that Puerto Rico entered a recession in 2005 that ended only last year, when it posted 0.5% growth:

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Puerto Rico’s economy outperformed the US economy only once in the past decade — it didn’t take the sharp hit that the United States suffered in 2008 and 2009.  But even that’s bad news for Puerto Rico, because it shows just how disconnected the island’s economy is from the mainstream US and global economy.

Moreover, Puerto Rico is already starting off far behind the US mainland in just about every economic indicator. Its median income of around $18,000 is far lower than the average income in the United States, and it’s about one-half of the poorest state median income (Mississippi’s median is around $36,000).  Nearly 41% of Puerto Ricans live below the poverty line, compared to just 16% within the United States.  Its regional GDP per capita is around $27,000, about half that of the United States generally.

Also like Portugal and the peripheral economies of Europe, Puerto Rico’s population (around 3.67 million) is in decline.  Its population peaked at just over 3.8 million people in 2004, and it’s dropped more than 4% in the past eight years, partly due to migration to the US mainland and partly due to a declining birthrate.  Just as in the peripheral economies of Europe, population decline means that there are fewer workers to support an increasingly unproductive and aging population.

Continue reading The next debt crisis in the United States may require a Puerto Rico bailout

Amid debt ceiling showdown, China sharply calls for a ‘de-Americanized’ world

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In case you missed it over the weekend, China’s state-run newspaper Xinhua printed an extraordinary editorial calling for a turn to a ‘de-Americanized’ world that appears to have had the support of the top leadership within the world’s most populous country:China Flag IconUSflag

As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world….

The tone only sharpens as the editoral blames the United States for torturing prisoners and killing civilians in drone attacks before fully condemning the era of ‘pax Americana‘:

Moreover, instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas…

Most recently, the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized.

Elements of the editorial are somewhat biased — a self-serving ding against Washington for ‘instigating regional tensions amid territorial disputes’ is more reminiscent of Chinese bluster and blunder on relations with Taiwan, Hong Kong and Tibet, as well as the recent territorial dispute with Japan over the Senkaku/Diaoyu Islands.  But if, as is almost certainly the case, the editorial has the backing of top Chinese leadership, it will be the strongest call to date for a move to a ‘de-Americanized’ world.

It’s important to keep in mind that, for all the defeatist talk that China has eclipsed the United States, the US economy remains roughly twice the size of the Chinese economy:

GDP

Furthermore, for all of the talk that the United States is becoming ever-more indebted to the Chinese, it’s also important to keep in mind that of the $16.7 trillion or so in outstanding US debt issuance, around $4.7 trillion amounts to intergovernmental holdings (e.g., amounts held by the US Federal Reserve).  Another significant chunk of that debt is held by state and local pension funds, the Social Security Trust Fund.  In fact, as of July 2013, foreign governments held just $5.59 trillion of the debt, and China held just $1.277 trillion of it, while Japan held nearly as much with $1.135 trillion.  Here’s a closer look at the breakdown of the foreign holders of US debt:

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In all the loose talk about China’s rise, it’s easy to lose track of those two items — China holds just over 7.6% of all US debt and its economy is just 52.5% the size of the US economy.

So while China isn’t today in a position to issue edicts about the de-Americanization of the world economy, its views are becoming increasingly influential, especially as it takes a greater investment role within the world from Latin America to Africa.  Its call for developing and emerging market economies to play a greater role in international financial institutions like the World Bank and the International Monetary Fund mean that the days of an always-American World Bank president and an always-European IMF managing director are numbered.

Even in the worst-case scenario in which the US Congress’s failure to lift the debt ceiling leads to another Lehman-style panic, China can’t do much immediately to bring about a de-Americanized world.  But, like Humphrey Bogart’s warning to Ingrid Bergman in Casablanca, the threat will come ‘maybe not today, maybe not tomorrow, but soon — and for the rest of your life.’

So when China makes noise about a de-Americanized world, it essentially means two things: a world where US debt is no longer perceived as the world’s safest investment and the US dollar is no longer the world’s reserve currency.  I’ll take a look at each in turn, but first, it’s worth making sure we’re all on the same page as to the basics of the debt ceiling standoff itself.

The debt ceiling crisis

US treasury secretary Jack Lew has pinpointed October 17 as the day that the United States will be truly jeopardized by its failure to raise the debt ceiling (currently at $16.7 trillion).

With about 24 hours to go until the world hits that deadline, the Republican Party, which controls a majority of the votes in the US House of Representatives, are nowhere near approving a bill that, with or without conditions, would raise the debt ceiling for even a short period of time, and the US Senate, which is controlled by the Democratic Party, will spend Wednesday taking the lead on a last-ditch effort at negotiations between Senate majority leader Harry Reid and Senate minority leader Mitch McConnell.

It’s reassuring to know that Moody’s isn’t quite as pessimistic about the October 17 deadline — in a memo from earlier this month, Moody’s experts argued that the US government could quite possibly hobble along, quite possibly until November 1, when a slew of entitlement spending means that the US government will be unlikely to meet its obligations on time.  The US government will certainly prioritize interest payments on US debt and meet its other obligations on the basis of incoming revenues.  But the clock’s ticking, and while Wall Street and global markets seem nonplussed about the shutdown and even about the October 17 debt ceiling deadline, there’s no way to know when that could change.

Market sentiment is a tricky thing to forecast — recall the speed in 2008 with which former US treasury secretary Hank Paulson went from worrying about the moral hazard of bailing out Lehman Brothers on September 14 to, less than 24 hours later, worrying about rescuing the entire financial system from a global panic.  While it seems unlikely that markets will immediately tank at midnight tonight if the US Congress fails to act on the debt ceiling, there are signs that other actors in the global economy are running out of patience.  One of the other top three credit ratings agencies, Fitch, put the United States on warning Tuesday by lowering the outlook on its ‘AAA’ credit rating from ‘stable’ to ‘negative,’ citing the brinksmanship in the US political system that’s so far failed to secure a debt ceiling hike.

For those of you who might have been living on a deserted island for the past three years, the US Congress is generally obligated to raise the total aggregate amount of US debt issued, irrespective of whether the US Congress has approved the spending levels associated with issuing such additional debt.  No other country (except Denmark) has a similar concept, which is why the debt ceiling crisis is such a foreign concept for non-Americans.

Between 1798 and 1917, the US Congress had to approve every single issuance of new debt; the onset of the ‘debt ceiling’ concept was initially a way to streamline debt issuance during World War I.  Since 1917, the US Congress raised the debt ceiling over 100 times, and 14 between 2001 and 2013.  Traditionally, in times of divided US government, though those votes have sometimes been subject to one party’s political posturing.  US president Barack Obama himself cast a vote against raising the debt ceiling in 2006 when he was just a US senator, and he issued some pious, if garden-variety, blather about ‘shifting the burden of bad choices today onto the backs of our children and grandchildren.’  Matt Yglesias at Slate called out Obama for ‘bullshitting’ back in 2006.

But only in 2011 did one party seek to wield the debt ceiling as a weapon of economic destruction — give us what we want on our policy priorities or the world economy gets it!  In 2011, just months after Obama’s party suffered devastating losses in the November 2010 midterm elections, Obama agreed to make budget cuts in exchange for a hike in the debt ceiling.  But now, fresh off reelection, Obama is arguing that he won’t negotiate over the debt ceiling — partly to discourage anyone from trying to use the debt ceiling as an instrument of political blackmail in the future.

In any event, for the best reporting in the United States on the debt ceiling crisis in terms of both politics and policy, go read Ezra Klein (and friends) at Wonkblog at The Washington Post and every word that Robert Costa at National Review reports from within the House and Senate Republican caucuses.

But it’s vitally important to the global economy because US debt — Treasury debt securities (called ‘Treasurys’) and, specifically 10-year Treasurys (called ‘T-notes’) — is generally viewed as the safest investment in the world.

Why US Treasurys are so special 

As Felix Salmon at Reuters memorably explained Tuesday, US-issued debt is the ‘risk-free vaseline which greases the entire financial system’: Continue reading Amid debt ceiling showdown, China sharply calls for a ‘de-Americanized’ world

Toward a pink-blue coalition: how House Democrats can rescue Boehner’s speakership

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Last week, I noted that German chancellor Angela Merkel succeeded in achieving the post-partisanship in Germany that US president Barack Obama had hoped to achieve when he ran for president in 2008.USflag

While that’s somewhat of an unfair comparison given the collegiality and consensus that’s developed in Germany’s postwar politics, there’s perhaps a lesson for US politicians to learn from the example of German politics in resolving the current standoff that has shut down the federal government of the United States and threatens to precipitate a sovereign debt crisis later this month over the US debt ceiling.

Even after Merkel’s center-right Christian Democrats won a once-in-a-generation landslide victory, she remains five seats of an absolute majority in Germany’s Bundestag (the lower house of the German parliament) and well short of a majority in the Bundesrat (the upper house), so she’s locked in negotiations — likely for the rest of the year — to form a viable governing coalition with either her rival center-left Social Democrats or the slightly more leftist Green Party.

Contrast that to the United States, where a minority of a party that controls one-half of one branch of the American government has now succeeding in effecting a shutdown of the US government.

In the US House of Representatives today, speaker John Boehner (generally) operates on the ‘Hastert rule.’  He’ll only bring bills to the floor of the House that are supported by a ‘majority of the majority’ — a majority of the 232-member Republican caucus.  So even if 115 Republicans and all 200 Democrats in the House support a bill, such as a clean ‘continuing resolution’ to end the current shutdown, they won’t be able to do so if 117 Republicans prefer to condition a continuing resolution upon a one-year delay of the Patient Protection and Affordable Care Act, popularly known as ‘Obamacare.’

It’s not uncommon in parliamentary systems for the ‘loyal opposition’ to sometimes lend their support for an important piece of legislation.  Earlier this year in the United Kingdom, British prime minister David Cameron passed a marriage equality law only with the support of the opposition Labour Party in the House of Commons in light of antipathy within a certain segment of the center-right Conservative Party to same-sex marriage.

In country after country in Europe, including Greece, Ireland and Latvia, traditional rivals on the left and right have sucked up the political costs of austerity and voted to accept difficult reforms, tax increases and tough budget cuts in the face of rising unemployment and depression-level economies in order to avoid the further tumult of being pushed out of the eurozone’s single currency.  If Italy’s left and right could support former prime minister Mario Monti’s technocratic government for 15 months, it’s not outside the realm of democratic tradition to believe that Boehner could form a working coalition in the US House to resolve a crisis that threatens not only American political credibility in the world and the American economy, but the entire global economy.

But as Alex Pareene at Salon wrote earlier today, the United States doesn’t have a parliamentary system, it has a presidential system where an opposition party that controls one house of Congress can cause a crisis if it wants to do so:

An American parliamentary system with proportional representation wouldn’t immediately or inexorably lead to a flourishing social democracy, but it would at least correct the overrepresentation of an ideological minority, and cut down on intentional tactical economic sabotage. The reason we’re in permanent crisis mode isn’t “extremism,” but a system of government that guarantees political brinkmanship.

There’s a bit of ‘grass is always greener’ mentality to that counterfactual.  Parliamentary systems come with their own set of difficulties, and governments in parliamentary systems can wind up just as paralyzed as the current American government seems to be — former Italian prime minister Silvio Berlusconi is causing a political crisis this very week in Italy that will culminate in a vote of no confidence on Wednesday against the fragile coalition headed by center-left prime minister Enrico Letta.  Though the government’s been in power for just five months, Italy could face its second set of elections in 12 months if Letta’s government falls.  Belgium famously went without a government for 535 days between 2009 and 2011 because no majority coalition could form a government.  Moreover, minority governments in parliamentary systems often lurch from crisis to crisis, with individual lawmakers willing and able to ‘hold up’ the government’s legislation.

But the United States need not change its entire system of government to take away a few lessons from Merkel and from Germany.

Juliet Eilperin and Zachary A. Goldfarb at The Washington Post suggested earlier Tuesday that Boehner make a push to become the first truly bipartisan speaker:

[T]he press tends to trumpet two unflattering themes: that Boehner can neither manage his own conference nor make a credible deal with the White House. As a result, the narrative runs, Americans are left careening from fiscal crisis to fiscal crisis, and Congress can’t even tackle popular initiatives such as immigration reform. A host of other potential changes supported by huge swaths of both parties — from tax and entitlement reform to infrastructure spending — are also left on the table just because of the fallout Boehner faces from a few dozen, ultra-conservative Republicans.

At least that’s the rap against Boehner, whose speakership so far has been defined by blocking Obama’s priorities rather than producing significant laws. But that could all change if he were just to decide to say to House Minority Leader Nancy Pelosi (D-Calif.): “Let’s enter a grand coalition. Democrats will vote for me for speaker as long as Republicans hold a majority. And we’ll do a budget deal that raises a little bit of tax revenue and reforms entitlements. We’ll overhaul the tax code for individuals and businesses. We’ll pass immigration reform and support the infrastructure spending that the U.S. Chamber of Commerce and labor unions want.”

Call it a pink-blue coalition — the moderate Republicans and the Democrats.  (Or maybe the donkey-rhino‡ coalition). Continue reading Toward a pink-blue coalition: how House Democrats can rescue Boehner’s speakership

How the US government shutdown looks to the rest of the world

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The People’s Republic of China doesn’t do government shutdowns. USflag

Neither does India, the world’s largest democracy.  Neither does Russia nor Japan nor the European Union.

The crisis that the United States faces over the next month — the nearly certain federal government shutdown set to begin on Tuesday and the US government’s potential sovereign default if the US Congress fails to raise the debt ceiling — is almost completely foreign to the rest of the world.

The vocabulary of the government budget crises that have sprung from divided government during the presidential administration of Barack Obama — from ‘sequester’ to ‘fiscal cliff’ to ‘supercommittee’ — is not only new to American politics, it’s a vocabulary that exists solely to describe phenomena exclusive to American politics.  As the Republican Party seems ready to force a budgetary crisis over the landmark health care reform law that was passed by Congress in 2010 and arguably endorsed by the American electorate when they reelected Obama last November over Republican candidate Mitt Romney, the rest of world has been left scrambling to understand the crisis, mostly because the concept of a government shutdown (or a debt ceiling — more on that below) is such an alien affair.

If, for example, British prime minister David Cameron loses a vote on the United Kingdom’s budget, it’s considered the defeat of a ‘supply bill’ (i.e., one that involves government spending), and a loss of supply would precipitate his government’s resignation.  If Italian prime minister Enrico Letta loses a vote of no confidence in the Italian parliament later this week, his government would also most likely resign.  In some cases, if cooler heads prevail, their governments might form anew (such as the Portuguese government’s reformation earlier this summer following its own crisis over budget austerity).  Otherwise, the country would hold new elections, as will happen later this month in Luxembourg after the government of longtime prime minister Jean-Claude Juncker fell over a secret service scandal.

So to the extent that a government falls, in most parliamentary systems, the voters then elect a government, or a group of parties that then must form a government, and that government must pass a budget and, well, govern.  Often, in European and other parliamentary systems, the typically ceremonial head of state plays a real role in pushing parties together to stable government.  Think of the role that Italian president Giorgio Napolitano played in bringing together both Letta’s government and the prior technocratic government headed by Mario Monti.  Or perhaps the role that the Dutch monarch played in appointing an informateur and a formateur in the Dutch cabinet formation process until the Dutch parliament stripped the monarchy of that role a few years ago.

But wait! Belgium went 535 days without a government a few years ago, you say!

That’s right — but even in the middle of that standoff, when leaders of the relatively more leftist, poorer Walloon north and the relatively conservative, richer Flemish south couldn’t pull together a governing coalition, Flemish Christian Democrat Yves Leterme stayed on as prime minister to lead a caretaker government.  The Leterme government had ministers and policies and budgets, though Leterme ultimately pushed through budgets that reduced Belgium’s budget deficit.  No government workers were furloughed, as will happen starting Tuesday if congressional members don’t pass a continuing resolution to fund the US government.

To the north of the United States, Canadian prime minister Stephen Harper caused a bit of a constitutional brouhaha when he prorogued the Canadian parliament in both 2008 and 2009 on the basis of potentially political considerations.  In Canadian parliamentary procedure, prorogation is something between a temporary recess and the dissolution of parliament — it’s the end of a parliamentary session, and the prime minister can prorogue parliament with the consent of Canada’s governor-general.  Harper raised eyebrows among constitutional scholars when he hastily prorogued the parliament in December 2008 after the center-left Liberal Party and the progressive New Democratic Party formed a coalition with the separatist Bloc Québécois in what turned out to be a failed attempt to enact a vote of no confidence against Harper’s then-minority government.

The governor-general at the time, Michaëlle Jean, took two hours to grant the prorogation — in part to send a message that the governor-general need not rubber-stamp any prime ministerial requests for proroguing parliament in the future.

Harper again advised to prorogue the parliament from the end of December 2009 through February 2010, ostensibly to keep parliament in recess through the 2010 Winter Olympics in Vancouver, though critics argued he did so to avoid investigation into his government’s knowledge of abusive treatment of detainees in Afghanistan.  Again, however, proroguing parliament didn’t shutter Canadian government offices like the US government shutdown threatens to do.

Moreover, in parliamentary systems, it’s not uncommon for a government to survive a difficult vote with the support of the loyal opposition.  But in the United States, House speaker John Boehner has typically (though not always) applied the ‘majority of the majority’ rule — or the ‘Hastert’ rule, named after the Bush-era House speaker Denny Hastert.  In essence, the rule provides that Boehner will bring for a vote only legislation that’s supported by a majority of the 233 Republicans in the 435-member House of Representatives, the lower congressional house (Democrats hold just 200 seats).  So while there may be a majority within the House willing to avoid a shutdown, it can’t materialize without the support of a majority of the Republican caucus.  That means that 117 Republicans may be able to hold the House hostage, even if 116 Republicans and all 200 Democrats want to avoid a shutdown.

Realistically, that means that anything that Boehner can pass in the House is dead on arrival in the US Senate, the upper congressional house, where Democrats hold a 54-46 advantage.

There’s simply no real analog in the world of comparative politics.  Even the concept of a debt ceiling is a bit head-scratching to foreign observers — US treasury officials say that the government will face difficulties borrowing enough money to achieve the government’s obligations if it fails to lift the debt ceiling of $16.7 trillion on or before October 17.

Denmark stands virtually alone alongside the United States in having a statutory debt ceiling that requires parliamentary assent to raise the total cumulative amount of borrowing, but it hasn’t played a significant role in Danish budget politics since its enactment in 1993:

The Danish fixed nominal debt limit—legislatively outside the annual budget process—was created solely in response to an administrative reorganization among the institutions of government in Denmark and the requirements of the Danish Constitution. It was never intended to play any role in day-to-day politics.

So far, at least, raising Denmark’s debt ceiling has always been a parliamentary formality, and it was lifted from 950 billion Danish kroner to 2 trillion Danish kroner in 2010 with support from all of Denmark’s major political parties.

Contrast that to the United States, where a fight over raising the debt ceiling in summer 2011 caused a major political crisis and major economic turmoil, leading Standard & Poor’s to downgrade the US credit rating from ‘AAA’ to ‘AA+.’  The Budget Control Act, passed in early August 2011, provided that the United States would raise its debt ceiling, but institute a congressional ‘supercommittee’ to search out budget cuts.  When the supercommittee failed to identify budget savings before January 2013, it triggered $1.2 trillion in ‘sequestration’ — harsh across-the-board budget cuts to both Democratic and Republican priorities that took effect earlier this year, though they were originally designed to be so severe so that they would serve as an incentive for more targeted budget adjustments.

Despite the fact of the dual crises facing the US government in October, the yield on the 10-year Treasury note has actually declined in recent weeks, indicating that while US political turmoil may spook global investors, they still (ironically) invest in Treasury notes as a safe haven:

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Continue reading How the US government shutdown looks to the rest of the world