Tag Archives: house of representatives

United States

Trump boosts Nehlen in August 9 primary vs Paul Ryan

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Paul Ryan, speaker of the House of Representatives, faces a unique primary challenge on August 9. (Facebook)
Paul Ryan, speaker of the House of Representatives, faces a unique primary challenge on August 9. (Facebook)

Don’t look now, but House speaker Paul Ryan may have just one week to salvage his career.USflag

OK, that might be hyperbole, but the longtime Wisconsin representative is facing perhaps the stiffest challenge of his nearly two-decade career in elective office.

For the better part of a decade, Ryan has been the face of movement conservatism in the United States. From the beginning of the Obama administration, Ryan quickly filled a role as something of the dean of conservative policymaking on Capitol Hill, earning for himself a reputation as a radical intellectual of the American right, who would routinely propose budgets that would so drastically reshape taxes and spending in the United States, even his predecessor as House speaker, Newt Gingrich — no shrinking violet on the American right — dismissed some of his ideas as ‘right-wing social engineering.’

Nevertheless, Ryan’s ascent in American politics is stunning. He served as Mitt Romney’s running mate in 2012; had the Romney-Ryan ticket won that election, Ryan would have played an important role in formulating economic policy for the Romney administration. Reluctantly — very reluctantly — Ryan agreed to run for House speaker last year after John Boehner stepped down and the frontrunner, House majority leader Kevin McCarthy, suddenly dropped out.

In many ways, Ryan’s has been a fairy-tale rise in American politics and, even today, he is a plausible future president in 2020 or beyond.

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RELATED: A brief history of Republican speakercide

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That may be changing, however, in the age of Trump.

By all appearances, Ryan was already facing an uncomfortably tough primary challenge from local businessman Paul Nehlen. But that challenge became a bit tougher on Sunday evening, when Republican presidential nominee nudged supporters toward Nehlen via Twitter:

On Monday, Trump refused to endorse Ryan in his primary, openly mocking the House speaker with the same kind of equivocating language that Ryan used in May when he refused to endorse Trump for the presidency:

Trump praised the House speaker’s underdog opponent, Paul Nehlen, for running “a very good campaign.” Trump said that Ryan has sought his endorsement, but that as of now he is only “giving it very serious consideration.”

“I like Paul, but these are horrible times for our country,” Trump said. “We need very strong leadership. We need very, very strong leadership. And I’m just not quite there yet. I’m not quite there yet.” Trump’s refusal to back Ryan represents an extraordinary breach of political decorum and signals that the Republican Party remains divided two weeks after a national convention in Cleveland staged to showcase party unity.
Continue reading Trump boosts Nehlen in August 9 primary vs Paul Ryan →

Germany, United States

Can Hillary Clinton become America’s Mutti?

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Former US secretary of state Hillary Clinton might find in German chancellor Angela Merkel a role model in the era of Trump (State Department)
Former US secretary of state Hillary Clinton might find in German chancellor Angela Merkel a role model in the era of Trump (State Department)

In 2008, US president Barack Obama won the largest Democratic mandate in a generation, in part, by pledging to change the tone in Washington.USflag

But in 2016, after eight years of increasingly bitter and partisan posturing, it’s Obama’s one-time rival, Hillary Clinton, who now has the opportunity to transcend the hyper-partisanship that began with the divided government under her husband’s administration in the 1990s.

Donald Trump’s hostile takeover of the Republican Party laid bare the long-growing schism among various Republican constituencies. Currently, the two living former Republican presidents (George H.W. Bush and George W. Bush), the party’s most recent presidential nominee (former Massachusetts governor Mitt Romney), its one-time 2016 frontrunners (former Florida governor Jeb Bush, Wisconsin governor Scott Walker, Texas senator Ted Cruz and Florida senator Marco Rubio) and the Republican in the highest-ranking elected official — speaker of the House (Wisconsin congressman Paul Ryan) — have all refused to endorse Trump.

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RELATED: That transcending ideology thing from 2008?
Merkel did it. Obama hasn’t.

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Despite the promise that the coming general election will be nasty, even by the recent standards of American politics, Clinton, if she’s nimble enough, can become a unifying and moderate figure who can work with both Republicans and Democrats. If Trump loses as badly as polls suggest he might, the Republican Party will be a shambles on November 8. The fight for Senate control was always a toss-up, and a Trump debacle could endanger even Republican control of the House of Representatives.

Increasingly, the debate in world politics is tilting away from traditional left-right discourses, replaced by a much darker fight, for the first time since the 1930s, between populist nationalism and globalist internationalism — and not just in the United States, but everywhere from the Philippines to the United Kingdom. In that fight, Ryan (and Bush and moderate Republicans) have much more in common with Clinton and the officials who will lead a Clinton administration than with Trump.

Make no mistake, if Clinton wins the presidency in November, she’s not going to form a German-style ‘grand coalition’ with Ryan and leading Republicans. Postwar German politics operates largely on consensus to a degree unknown in American (or even much of European) politics. Still, German chancellor Angela Merkel has already paved the way for how a successful Clinton presidency might unfold, and Clinton advisers would be smart to figure out, as the campaign unfolds, how to position Clinton as a kind of American ‘Mutti.’ Clinton is already reaching out to moderate Republican donors, but the challenge goes much deeper — to become a kind of acceptable figure to both blue-state and red-state America.

It’s not clear that Clinton has the same political skill to pull off in the United States what Merkel has done in Germany.

But it’s a rare opportunity, nonetheless, if she can.  Continue reading Can Hillary Clinton become America’s Mutti? →

Japan

Abe calls snap elections in Japan as recession returns

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Barely hours after the news that Japan is entering a recession, with an annualized GDP drop of 7.3% in the second quarter and 1.6% in the third quarter, prime minister Shinzō Abe (安倍 晋三)  has announced snap elections that will be held sometime in mid-December.Japan

Ostensibly, Abe’s rationale is his determination to postpone the next installment of Japan’s consumption tax increase, which jumped from 5% to 8% in April and is set to rise further to 10% in 2015.

But that’s an obvious fig leaf — the consumption tax is the legacy of the opposition government that Abe defeated in his landslide victory in December 2012.

Instead, Abe hopes to maximize his government’s relative popularity and to take advantage of a scattered opposition to win a rapid mandate next month and extend the LDP’s control for another four years instead of waiting to face voters in 2015 or 2016, when the opposition could be stronger and when Abe’s policies might be even less popular. Abe also faces an internal LDP presidential election next year — it will be hard for rivals to attack Abe so soon after a successful election victory.

Ultimately, however, the election is also a referendum on ‘Abenomics,’ the most audacious experiment in neo-Keynesian economic policy today. Continue reading Abe calls snap elections in Japan as recession returns →

United States

The cynical politics behind the Benghazi ‘scandal’

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I’m always super-hesitant to jump into commentary on American politics, mostly because there’s so much to learn about politics and policy elsewhere in the world. USflag

But the decision by the US House of Representatives and House speaker John Boehner on Thursday to form a select committee to ‘investigate’ the Benghazi attacks is one of the reasons I find US politics so utterly discouraging.

A select committee is a ‘special’ committee created for a specific, targeted purpose. The House typically creates a select committee when one or more of the existing House committees don’t have enough authority or capacity to carry out that purpose. For example, between 2007 and 2011, the House, under Democratic control, authorized a select committee on energy independence and global warming.

Of all the mistakes that US president Barack Obama has made in six years in foreign policy, the Republican leadership has generally focused on the Benghazi sideshow — at the expense of more fundamental and, constitutionally controversial matters.

Why ‘Benghazi’ has become such a spectacle

It’s easy to understand why ‘Benghazi’ makes for such a sensational affair. The attack left four US personnel, including Christopher Stevens, the US ambassador to Libya, dead. It left the Obama administration, just weeks before a presidential election, slack-jawed to explain why US security failed so spectacularly.

Add to that the post-Watergate alchemy, whereby shouting ‘cover-up’ can spin routine politics into scandal, a White House that’s been reluctant, perhaps understandably, to work enthusiastically with its Congressional interlocutors, and a zero-sum political environment where House Republicans show, time after time, that they are willing to take extraordinary measures to achieve certain objectives (e.g., last autumn’s government shutdown, routine debt ceiling crises).

It’s easy to see the political advantage for Republicans in opening a select committee to investigate the matter. Trey Gowdy (pictured above), the two-term congressman from South Carolina, who will head the committee, is already talking about the investigation in terms of a ‘trial,’ with Gowdy and his committee as the prosecution and the Obama administration as the defense. Continue reading The cynical politics behind the Benghazi ‘scandal’ →

14 in 14, United States

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

Japan

Japan pushes forward with consumption tax hike

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Earlier this month, Japanese prime minister Shinzō Abe (安倍 晋三) moved forward with plans to increase the top rate of Japan’s consumption tax from 5% to 8%, effective as of April 2014 — and he is expected to allow the rate to rise further to 10% in autumn 2015. Japan

It was the first major policy decision since Abe led his party, the long-dominant Liberal Democratic Party of Japan (LDP, or 自由民主党, Jiyū-Minshutō) to a landslide victory in the July vote that elected one-half of the seats (121) in the House of Councillors, the upper house of Japan’s parliament, the Diet (国会).  That vote was essentially a referendum on Abe’s big-spending economic stimulus program — widely called ‘Abenomics’ — following Abe’s equally impressive victory in December 2012 in the elections for the House of Representatives, the Diet’s lower house.

It’s notable for three reasons. Continue reading Japan pushes forward with consumption tax hike →

Puerto Rico, United States

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

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CIMG0357

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:

debtratings

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:

Screen Shot 2013-10-22 at 3.01.14 PM

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 →

Australia

Rudd-erdämmerung 2013: An election-day guide to Australia’s national elections

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ruddabbott

Polls are now open across Australia, where voters will elect all 150 members of the House of Representatives, the lower house of the Australian parliament, and a little over half of the 75 members of the Senate, the upper house.Australia Flag Icon

If polling surveys prove correct, prime minister Kevin Rudd (pictured above, left) and the Australian Labor Party is facing certain defeat at the hands of Tony Abbott (pictured above, right), the leader of the Liberal Party and the center-right Coalition between the Liberals and Australia’s agrarian conservative National Party.

As we wait for results to come in later today, it’s worth taking a closer look at the voting to determine just what could happen.

Polls opened at 8 am and will close at 6 pm (for those of us on the east coast, polls close on Australia’s east coast at 7 am ET and on Australia’s west coast at 9 am ET).  Voting is mandatory in Australia, with a fine of around A$20 for citizens who don’t participate.

Australia elects House members in single-member constituencies, but with a preferential voting system that ranks candidates (much like Ireland’s preferential vote).  Each voter casts a ballot in one of 150 electoral districts throughout Australia.  But instead of just voting for one candidate, voters rank their candidate to indicate preferences from first to last.

The so-called ‘primary vote’ is the tally of the first preferences of all voters.  If, after the primary vote is counted, no candidate wins an absolute majority, the candidate with the lowest amount of support is eliminated, and the second preferences of the voters who preferred the eliminated candidate are distributed to the remaining candidates.  Candidates are eliminated, and preference are allocated, until one candidate wins more than 50% of the vote.  In reality, this typically means that all third-party candidates are eliminated, and the final count comes down to a contest between the Coalition and Labor — this is referred to as the ‘two-party preferred vote.’

So imagine a race with three candidate — Kevin, Tony and Christine.  Suppose that in the primary vote, Kevin wins 35%, Tony wins 45% and Christine wins 20%.  Christine would be eliminated, and we would look at the second preference of all of Christine’s voters.  Suppose that Christine’s voters preferred Kevin and Tony equally — when the second-preference votes are added to the existing tallies, we would see that Tony wins the election with 55% to just 45% for Kevin.

The system for determining senators is even more complex because voters elect 12 senators for each state (in a typical election, voters select just six senators for each state, but in a ‘double dissolution’ election, voters sometimes choose all 12 at once).  Senate elections are conducted with the same principles of preferred voting, but within statewide multi-member districts.  I’ll spare you the details, but if you’re interested in how the vote count becomes exponentially more complex, feel free to watch this primer.

In the previous August 2010 election, neither Labor nor the Coalition won enough seats to form an absolute majority in the House — Abbott’s Coalition actually has one more MP in the House today than Rudd’s Labor (a 72-71), which means that Abbott needs to pick up just four seats to become prime minister:

houseaustralia

Realistically, if polling data is correct, it’s not a question of whether Abbott and the Coalition will win — it’s a matter of how large Abbott’s majority will be.  So without further ado, here’s a look at each of Australia’s six states and two territories and where Labor and the Coalition stands in each (for even further reading, here’s a look at the policies that Abbott’s government is likely to pursue and here’s an look at whether Labor MPs should have sacked former prime minister Julia Gillard three months ago in the hopes that Rudd could deliver an improbable victory.

Continue reading Rudd-erdämmerung 2013: An election-day guide to Australia’s national elections →

Japan

Twelve considerations upon the DPJ wipeout in Japan’s legislative elections

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Japan

Well, that was quite a blowout.  Just a little more than three years after winning power for the first time in Japan, the Democratic Party of Japan (DPJ, or 民主党, Minshutō) was reduced to just 57 seats in a stunning rebuke in Sunday’s Japanese parliamentary elections.

Japan

Shinzō Abe (安倍 晋三), former prime minister from 2006 to 2007, will return as prime minister of Japan, and the  Liberal Democratic Party of Japan (LDP, or 自由民主党, Jiyū-Minshutō), which controlled the House of Representatives, the lower house of Japan’s parliament, the Diet, for 54 years until the DPJ’s win in 2009, has seen its best election result since the early 1990s, with 294 seats.  Among the 300 seats determined in direct local constituency votes, the LDP won fully 237 to just 27 for the DPJ.  An additional 180 seats were determined by a proportional representation block-voting system, and the LDP won that vote as well:

japanproportional

In contrast, the DPJ has fallen from 230 seats to 57 seats — by the far the worst result since it was created nearly two decades ago.  Its previous worst result was after the 2005 elections, when the popular reformist LDP prime minister Junichiro Koizumi (小泉 純一郎) won an overwhelming victory in his quest for a mandate to reorganize and privatize the bloated Japanese post office (a large public-sector behemoth that served as Japan’s largest employer and largest savings bank).

Outgoing prime minister Yoshihiko Noda (野田 佳彦) has already resigned as the DPJ leader, and a new leader is expected to be selected before the new government appears set to take office on December 26.

The result leaves Abe with the largest LDP majority in over two decades — together with its ally, the Buddhist, conservative New Kōmeitō (公明党, Shin Kōmeitō), led by Natsuo Yamaguchi (山口 那津男), which increased its number of seats by 10 to 31, Abe will command over two-thirds of the House of Representatives, thereby allowing him to push through legislation, notwithstanding the veto of the Diet’s upper chamber, the House of Councillors.

It’s a sea change for Japan’s government, and we’ll all be watching the consequences of Sunday’s election for weeks, months and probably years to come.  Just a full working day after the election, events in Japan’s politics are moving at breakneck speed.

For now, however, here are 12 of the top takeaway points from Sunday’s election: Continue reading Twelve considerations upon the DPJ wipeout in Japan’s legislative elections →

Japan

Can Shinzō Abe boost Japan’s economy?

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Over at Slate, Matthew Yglesias made the argument last week that the likely victory of former prime minister Shinzō Abe (安倍 晋三) and the return of the Liberal Democratic Party of Japan (LDP, or 自由民主党, Jiyū-Minshutō) to government after a three-year hiatus means that Japan might finally embark on a path of more expansionary monetary policy — namely, more quantitative easing and a higher inflation target. Japan

With Japan apparently headed back into a recession — its fifth in 15 years — that strategy could be the surest way to boost the Japanese economy, but it’s a little naive to believe Abe can command enough political support, even with a landslide victory in Sunday’s election, to dictate monetary policy to the Bank of Japan.

Earlier in the campaign, Abe pledged to force the Bank of Japan to purchase construction bonds directly from the Japanese government (although, as Yglesias notes, Abe has already backed down from that pledge during the campaign).  Abe needs the BOJ to buy those bonds in order to finance additional infrastructure spending, with the LDP calling for up to ¥200 trillion ($2.4 trillion) in public works over the next decade.  Public spending is an old LDP favorite, but that staggering amount of spending could well pull Japan’s economy out of recession and deflation.

Abe has also pledged to appoint a new bank governor — the term of the current Bank of Japan governor Masaaki Shirakawa (白川 方明) ends in April 2013 after five years heading the BOJ — who agrees to set an annual inflation target of 2% or even 3%.

Abe’s push for expansionary fiscal and monetary policy comes as a bit of a 180-degree turn, given that the third and final government of the Democratic Party of Japan (DPJ, or 民主党, Minshutō) under prime minister Yoshihiko Noda (野田 佳彦) recently expended its last gasp of governing willpower to double Japan’s consumption tax from 5% to 10%, which is scheduled to begin in 2014.

It seems much likelier that Abe could implement a new round of fiscal expansion than strong-arm the Bank of Japan, which has an extraordinary amount of central bank independence — derived in part from the memory of hyperinflation that resulted after World War II when politicians controlled monetary policy decisions.

Noda (pictured above, right, with Abe) has attacked Abe’s platform as a dangerous intrusion on central bank independence and he has attacked the LDP plan for additional debt-financed spending as the same old LDP  ‘baramaki’ (pork barrel) politics, especially given Japan’s debt-to-GDP ratio is already, by far, the world’s largest, at around 230%.  Greece, by the way, has only a 160% ratio.

Japan has traditionally been able to carry such a high ratio because much of that debt is held by its citizens, who collective have one of the top savings rates in the industrialized world, but with $13.64 trillion in debt already on its public books, it’s not clear whether Japan could sustain public spending that would boost its debt-to-GDP ratio to nearly 300%.

As Yglesias notes, the Bank of Japan has been criticized for nearly two decades for its policy to keep Japan’s inflation target at zero:

Back in 1999, Ben Bernanke condemned the self-induced paralysis of Japanese monetary policy made by flailing officials who claimed it was beyond their power to fix this. He called for “Rooseveltian resolve” on the part of Japan’s leaders to shake the bank out of its torpor.  Paul Krugman, too, spent the late ’90s urging Japan to aim for more inflation, arguing that mucking around with the banking system was inadequate and weird delusions of respectability were holding policymakers back.

As Yglesias also notes, Europeans and Americans promptly forgot that advice when the 2008 financial crisis exploded budget deficits:

Suddenly, criticizing the Bank of Japan went out of style. America became Japan and simultaneously forgot what America used to think about Japan.

But perhaps the lesson that Yglesias is forgetting — and the lesson that the 2008 crisis taught Europeans and Americans — is that politics matters, and that politics can intrude on what might otherwise be a clear policy path, whether it’s ‘fiscal cliff’ negotiations in the United States or the ‘kick-the-can’ politics of eurozone bailouts.

Yglesias is also forgetting that Japan has politics, too. Continue reading Can Shinzō Abe boost Japan’s economy? →

Japan

Hashimoto’s once-rising Japan Restoration Party falling short as third force in Japanese politics

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ishiharahashimoto

Osaka mayor Tōru Hashimoto (橋下徹) is probably the most charismatic politician that Japan has seen since Junichiro Koizumi (小泉 純一郎), the wavy-haired reformist prime minister from 2001 to 2006. Japan

Shintaro Ishihara (石原慎太郎) has spent the past 13 years as governor of Tokyo and is one of Japan’s most outspokenly nationalist right-wing politicians.

So it was odd, to say the least, to see Hashimoto (pictured above, right) and Ishihara (pictured above, left) merge their two new parties, with Ishihara folding his more stridently right-wing Sunrise Party (太陽の党, Taiyō no Tō) into the Osaka-based, free-market liberal Japan Restoration Party (日本維新の会, Nippon Ishin no Kai).  Ishihara became the new leader of the merged Japan Restoration Party, with Hashimoto taking on the deputy leadership.

But given the now-schizophrenic nature of the party’s platform, it seems as if the party — once expected to become a major third party force in elections for Japan’s lower house of the Diet, the House of Representatives — may have turned out to be less than the sum of its parts.

After the Japanese turned out the long-ruling (since 1955!) Liberal Democratic Party of Japan (LDP, or 自由民主党, Jiyū-Minshutō) and are now disillusioned with the opposition Democratic Party of Japan (DPJ, or 民主党, Minshutō), it seemed as if there were an opening for a new politician to ride the same wave to power that the DPJ rode in 2009 — especially for a young politician with Koizumi-level charisma.

But the party seems to be falling short — whereas, even in November, the party was polling in the mid-teens (ahead or even with the DPJ, and the LDP polling between 20% and 25%), it’s now fallen well below 10%, to just 4% in some polls.  Notably, most Japanese polls include a wide undecided vote (around 40% to 50%), so it’s important to take those trends with an even bigger grain of salt than we would take polls in the United States.

What that means is instead of fashioning a new opposition, Japan will instead opt for a doubling down on LDP policies under Shinzō Abe (安倍 晋三), who served as prime minister from 2006 to 2007.

If the Japan Restoration Party comes up short on Sunday, it could well frustrate Hashimoto’s career before it has even had a chance to peak.  Continue reading Hashimoto’s once-rising Japan Restoration Party falling short as third force in Japanese politics →

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Power, destruction, and Hello Kitty: Article 9, the Self-Defense Force and Japan’s election campaign

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Among the more famous — and unique — provisions of the world’s constitutional jurisprudence is the Japanese constitution’s pacifist Article 9, which prohibits any act of war by the state.

The English translation of the article reads as follows:

Aspiring sincerely to an international peace based on justice and order, the Japanese people forever renounce war as a sovereign right of the nation and the threat or use of force as means of settling international disputes.  In order to accomplish the aim of the preceding paragraph, land, sea, and air forces, as well as other war potential, will never be maintained. The right of belligerency of the state will not be recognized.**

Traditionally, Article 9 has limited Japan’s military capability since World War II to a merely defensive capacity, with the country largely dependent on the United States for its external security.

But with tensions already high and rising with the People’s Republic of China over three of the tiny Senkaku Islands (Diaoyu in Chinese) since the Japanese government formally purchased the islands in September, and with the relatively more militant Shinzō Abe (安倍 晋三), leader of the Liberal Democratic Party of Japan (LDP, or 自由民主党, Jiyū-Minshutō), increasingly set to win Japan’s snap elections on December 16 for the lower house of Japan’s parliament, the Diet, Article 9 may be set for reinterpretation.

Abe comes naturally to his more hawkish views on Japan and its military power.  As prime minister from 2006 to 2007, he tried to push a stronger interpretation of Article 9 and pursued a more aggressive foreign policy.  Moreover, as prime minister and most recently after winning the leadership of the LDP, he visited the Yasukuni Shrine in Tokyo, which honors Japan’s war dead, including several war criminals, a move that has consistently provoked China and South Korea. Abe’s grandfather Nobusuke Kishi (岸 信介) served as Japan’s prime minister from 1957 to 1960 and counts among his major accomplishments the signing of the mutual cooperation and security treaty between Japan and the United States.

Although Japan’s election campaign has also featured nuclear energy policy, the current government’s recent increase in the country’s consumption tax and economic policy for pulling Japan out of more than two decades of economic slump, the Senkaku showdown with China has highlighted Abe’s stance to revise the government’s interpretation of Article 9, at a minimum, to allow for collective self-defense.  Such a relatively more aggressive interpretation would allow Japan to join allies, such as the United States, in military actions throughout the world or possibly even join collective security alliances such as the North Atlantic Treaty Organization (Japan is already a major ‘non-NATO ally’).  Although all of Japan’s postwar administrations have interpreted Article 9 to prohibit such a wide interpretation, Abe and his LDP allies would prefer the capability to deploy Japanese forces alongside, for example, U.S. forces in Afghanistan.

In a sense, it’s ridiculous to say that Japan doesn’t have a military.  Its Self-Defense Force was created as an arm of the Japanese defense department in 1954, and it’s consistently grown ever since.  Although it’s technically not an army, Japan’s active forces (around 250,000) are a bit larger than either of Germany’s or the United Kingdom’s active forces.  True, under Japan’s complicated national defense policy, the Self-Defense Force is limited to exclusively defense-oriented policy, and Japan has refrained from developing nuclear weapons and traditionally worked in random to develop security arrangements with the United States.

But Japan itself has been stretching its interpretation of Article 9 for years — from 2004 to 2006, notably, Japan sent forces to Iraq to assist the United States in its occupation of Iraq, and in the past decade, Japan has become increasingly at ease with sending Self-Defense Force troops abroad to assist in humanitarian and peacekeeping arrangements, typically under the aegis of the United Nations.

The LDP’s return to government — it essentially controlled Japan from 1955 to 2009 — could not only result in a more aggressive interpretation of Article 9 to allow collective self-defense, but the re-christening of the Self-Defense Force as the more militaristic National Defense Force, and a full-fledged revision of Article 9 to allow Japan to have a full military like any other country, especially as the memory of Japan’s imperial army during World War II fades from memory and Japan feels increasingly vulnerable from a strengthening Chinese presence in East Asia. Continue reading Power, destruction, and Hello Kitty: Article 9, the Self-Defense Force and Japan’s election campaign →

China, United States

Two systems, two transitions: China, U.S. face leadership crossroads simultaneously

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Next week, arguably the two most important countries in the world will kick off two very different leadership transitions.

On Tuesday, November 6, the United States of America will hold a general election.  For the 57th time since 1790, Americans will vote for U.S. president, at once the country’s head of state and head of government.  The winner will most certainly be one of two men: the Democratic Party incumbent, former Illinois senator Barack Obama (pictured above, right) or the Republican Party challenger, former Massachusetts governor Willard ‘Mitt’ Romney.  Americans will also determine who will control the both the lower and upper houses of the U.S. legislature.‡  The new Congress will be sworn in early in January 2013 and the president will be inaugurated (or reinaugurated) on January 20.

On Thursday, November 8, the People’s Republic of China will watch as the 18th Congress of the Chinese Communist Party (中国共产党) gets underway in Beijing, where all but two of the members of the Politburo Standing Committee, China’s foremost governing body, will step down and new members will be appointed in a once-a-decade leadership transition.  China’s ‘paramount leader’ Hu Jintao (pictured above, left), the general secretary of the Chinese Communist Party and PRC president since 2002, is expected to be replaced by Xi Jinping as general secretary, with the other state offices to follow through early 2013.  China’s premier, Wen Jiabao, is expected to be replaced by Li Keqiang.  Otherwise, the Politburo Standing Committee is expected to be reduced from nine to seven members and will include Xi, Li and five new faces — generally known as the ‘fifth generation’ of China’s leadership.

Despite their vastly different political systems, it’s fitting that the two transitions will coincide so neatly for the two most powerful countries in the world, both so alien culturally and interlinked economically — and there are parallels for both the superpower of the 20th century and a rising superpower of the 21st.  For every ‘5,000 years of history,’ there’s a corresponding ‘shining city on a hill.’  The United States has George Washington, Thomas Jefferson and 1776; China has Mao Zedong, Zhou Enlai and 1949.

The United States is the world’s third-most populous country with 315 million people, the third-largest country by land area, and the world’s largest economy with a GDP last year of over $15 trillion.  China, meanwhile, is the world’s most populous country with 1.347 billion people, the second-largest country by land area, and the world’s second-largest economy with a GDP last year of $11.3 trillion.

In 2012, if we don’t quite live in a bipolar world, we certainly live in a multipolar world where the United States and China are first among equals, and the U.S.-Chinese relationship will, of course, be a major focus of both governments over the next four years and beyond.

Indeed, Chinese relations have been an issue throughout the U.S. presidential election.

China emerged, if not unscathed, certainly more economically powerful than ever before following the 2008-09 global financial crisis, and China may well have the world’s largest economy within the next decade.  But the juggernaut of its double-digit economic growth, which has been fairly consistent throughout the past 20 years, is showing signs of sputtering, and a Chinese slowdown (or even a recession) would have a major impact upon the global economy.

Romney has vociferously attacked China for manipulating its currency, the renminbi, to keep the cost of its exports low, and Obama’s treasury secretary Timothy Geithner has made similar, if more gentle, criticisms.  Notably, however, the renminbi has appreciated about 8.5% since Obama took office in January 2009, chiefly because the Chinese government has hoped to cool inflationary pressure.

The level of U.S. debt held by the Chinese government has also become an important issue, especially with the U.S. budget deficit at its highest level (as a percentage of GDP) since World War II.  China, however, holds only about $1.132 trillion out of a total of around $15 trillion in U.S. debt, which is down from its high of around $1.17 trillion in 2011 — meanwhile, Japan has accelerated its acquisition of U.S. debt and may soon hold more than China.  The outsourcing of jobs previously filled in the United States has long been an issue across the ideological spectrum of U.S. domestic politics, with respect to China and other Asian countries.

In reality, however, other issues are just as likely to dominate the next generation of Chinese and American leadership.  With both militaries looking to dominate the Pacific (note the growing U.S. naval presence in the Philippines and throughout the Pacific), geopolitical stability throughout the region will be more important than ever — not just the perennial issue of Taiwan, but growing concerns about North Korea’s autarkic regime, tensions between China and Japan over territorial claims or other future hotspots could all spur wider crises.

As China’s middle class grows in size and purchasing power, and as the United States continues to boost its exports, China will become an increasingly important market for U.S. technology, entertainment and energy in the next two decades.  China’s accession to the World Trade Organization in 2001 and its increasing role as a trading partner with the United States mean that trade-related issues — such as the case that the United States brought against China in the WTO last month on cars and auto parts — will only become more important.

But while the U.S. federalist constitutional structure — with its tripartite separation of powers — has been set in place since the adoption of its Constitution in 1787, the Chinese structure is a more recent creation.  The Chinese Communist Party holds a National Congress every five years, with a handover of power every ten years, vesting power in a collaborative Politburo Standing Committee that makes all key policy-making decisions, a process that came into being only really with the passing of Deng Xiaoping in the 1990s.

After Deng, Jiang Zemin and the so-called ‘third generation’ of China’s political leadership essentially regularized the current process, and the ‘fourth generation’ led by Hu and Wen that assumed leadership in 2002 and 2003 is now set to pass leadership on to the ‘fifth generation’ under Xi and Li.

China’s party-state essentially has a dual structure: the state institutions of government (the National People’s Congress and the State Council) and the structure of the Chinese Communist Party are essentially parallel — the same people control both.  So from a wide base of over 2,000 delegates to the National Party Congress, around 200 will form the Party’s Central Committee, just 25 the more important Politburo and, after next week’s transition, merely seven will form the Politburo Standing Committee.  Those seven will also hold the key offices of state — as noted, Li is expected to become China’s premier, the head of the PRC government and Xi, as general secretary of the  Party, will serve as the president of the PRC and the chair of the Central Military Commission, the entity that directs the People’s Liberation Army, China’s main armed forces. Continue reading Two systems, two transitions: China, U.S. face leadership crossroads simultaneously →