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United States

Throughout ‘reform’ debate, US ‘immigration’ has changed

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In 2001, when George W. Bush came to power in the United States, three factors — his record as a Texas governor, the strong relationship that he had developed with his conservative Mexican counterpart, Vicente Fox, and his hope to make the Republican Party more attractive to US-based Latino voters — meant that immigration reform was suddenly back on the agenda for the first time since 1986.USflag

Three US presidential elections, two Mexican presidential administrations and a 2001 terrorist attack and a 2008 financial crisis later, Bush’s successor, Democratic president Barack Obama, will take a leap toward immigration reform today through executive action, pushing as far to the line as possible without exceeding his authority vis-à-vis the US Congress.

Obama will announce today a plan that will de-emphasize the deportation of undocumented immigrants to the United States who have lived in the United States for at least five years, and he will do so with a prime-time Thursday night speech and a campaign-style rollout in Las Vegas on Friday:

Up to four million undocumented immigrants who have lived in the United States for at least five years can apply for a program that protects them from deportation and allows those with no criminal record to work legally in the country, President Obama is to announce on Thursday, according to people briefed on his plans.

An additional one million people will get protection from deportation through other parts of the president’s plan to overhaul the nation’s immigration enforcement system, including the expansion of an existing program for “Dreamers,” young immigrants who came to the United States as children. There will no longer be a limit on the age of the people who qualify.

But farm workers will not receive specific protection from deportation, nor will the Dreamers’ parents. And none of the five million immigrants over all who will be given new legal protections will get government subsidies for health care under the Affordable Care Act.

It’s a strong first step toward reforms that both Republican and Democratic politicians have attempted (unsuccessfully) to pass through the US Congress since the Bush administration. Obama’s action could affect between 4 to 5 million of the currently 11.4 million undocumented immigrants in the United States today.

Why now? And why without Congress?

A pro-reform Republican president couldn’t pass a bill with either a Republican-led Congress (from 2005 to 2007) or a Democratic-led Congress (from 2007 to 2009). Nor has a pro-reform Democratic president passed a bill with either a Democratic-led Congress (2009 to 2011) or, currently, with a Republican House. Obama’s action indicates that he doesn’t believe that the switch to a fully Republican-led Congress will make much different. Despite howling from the Republican opposition about the ‘monarchial‘ nature of Obama’s executive action

While Washington debated immigration for over a decade, the nature of immigration in the United States has changed dramatically. Even if the basics of ‘reform’ today still look and feel like they did in 2001 or 2005 or 2008, the world has changed, and the nature of immigration to the United States has changed with it.

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RELATED: 2014 US midterms showcase rise of Asian Americans

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For example, in 2013, more Asians migrated to the United States than Latin Americans, part of a new wave of immigration from an even more diverse array of cultures, languages and backgrounds that’s rising. In 2008-09, as the global financial crisis sent the United States into its worst recession in decades, net migration from Mexico actually decreased, reflecting a larger trend that began in the mid-2000s. Continue reading Throughout ‘reform’ debate, US ‘immigration’ has changed →

China, United States

China has self-interested incentives for a bilateral climate deal

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When you walk through the streets of New York or Washington or even Houston or Los Angeles today, the air is clear — by at least global standards.USflagChina Flag Icon

That’s due, in part to the 1963 Clean Air Act in the United States, which together with wide-ranging 1970 and 1990 amendments that have largely brought air pollution under control within the United States. Sure, Los Angeles is still known for its smog, but the worst day in Los Angeles is barely a typical day in Beijing.

The PM2.5 reading (a measurement of particulates in the air) for Los Angeles last year averaged around 18. In Beijing? A PM2.5 reading of 90, on average. Los Angeles’s worst day was 79, while Beijing’s was 569.

That’s one of the reasons that the landmark carbon emissions agreement between the United States and the People’s Republic of China, announced in the wake of the Asia-Pacific Economic Cooperation (APEC) summit is such a big deal — it’s not necessarily a coup for US diplomacy, but it’s definitely a signal that Chinese authorities are taking pollution seriously. It shows that Chinese leaders under president leader Xi Jinping (习近平) recognize that in order to showcase their seriousness about environmental hazards, they have to engage the international community on climate change.

xibama

Landmark though the US-Chinese bilateral agreement may be, it is still much more about domestic Chinese priorities than trans-Pacific good will. As James Fallows writes in The Atlantic, pollution and environmental harms are the single-most existential challenge to the now 65-year rule of the Chinese Communist Party (中国共产党):

But when children are developing lung cancer, when people in the capital city are on average dying five years too early because of air pollution, when water and agricultural soil and food supplies are increasingly poisoned, a system just won’t last. The Chinese Communist Party itself has recognized this, in shifting in the past three years from pollution denialism to a “we’re on your side to clean things up!” official stance.

If you want to showcase to 1.35 million citizens that you’re serious about the environment, there’s no better way than signing a high-profile agreement with the world’s largest economy (and the world’s second-largest carbon emitter).

Xi himself has admitted earlier this year that it’s China’s most vexing policy issue, when he plainly stated that pollution is Beijing’s most pressing problem. Shortly thereafter, in March, premier Li Keqiang (李克强) declared a ‘war on pollution’ within China:

“Smog is affecting larger parts of China, and environmental pollution has become a major problem,” Mr. Li said, “which is nature’s red-light warning against the model of inefficient and blind development.”

That’s already having an effect, with the first drop in coal use in China in over a century, a result that’s possibly affecting global coal prices, though part of the effect might be explained by a slowing Chinese economy — it’s expected to grow at a pace of just 7.5% this year. That’s still robust by most standards, but it would be the lowest reported GDP growth in China since 1990.

Republicans in the United States grumbled that the pact was ‘one-sided,’ and perhaps it was (though you’d expect grumbling from incoming US Senate majority leader Mitch McConnell, a Republican from Kentucky, the heart of the US coal mining industry). But if so, it’s one-sided in the way that unilaterally lowering tariffs is good for trade. But US president Barack Obama’s commitment to lower US carbon emissions by 2025 by between 26% and 28% (compared to 2005 levels) is only going to accelerate the transition of the US economy from fossil fuels to cheaper, cleaner alternatives, including renewable energy.

China, on the other hand, has agreed to reduced emissions that it expects to peak in the year 2030, when it hopes to raise 20% of its energy from zero-carbon emission sources under the agreement. But Obama has already, through executive action, committed the US Environmental Protection Agency to work to reduce emissions levels by 17% through the year 2020, so the United States (for now) is already committed to carbon reductions on a unilateral basis.

Of course that’s lopsided, to some degree, but only if you ignore that the United States and Europe polluted without abandon in the 18th and 19th centuries when they were going through the same level of industrialization and development — and they surely didn’t do it with national populations of over a billion consumers.

Today, China is by far the largest emitter of carbon into the global atmosphere, responsible for 29% of the world’s total carbon emissions, while the United States is responsible for 15%, the European Union 10%, India 7.1% and Russia another 5.3%.  As White House correspondent Josh Lederman writes for the Associated Press, however, one of the agreement’s benefits might be in the power it will have to nudge other countries to join the fight against carbon emissions and its role in climate change with the 2015 Paris conference fast approaching:

Scientists have pointed to the budding climate treaty, intended to be finalized next year in Paris, as a final opportunity to get emissions in check before the worst effects of climate change become unavoidable. The goal is for each nation to pledge to cut emissions by a specific amount, although negotiators are still haggling over whether those contributions should be binding. Developing nations like India and China have long balked at being on the hook for climate change as much as wealthy nations like the U.S. that have been polluting for much longer. But China analysts said Beijing’s willingness to cap its future emissions and to put Xi front and center signaled a significant turnaround.

But there’s an even stronger benefit in the US-Chinese accord, insofar as it demonstrates that Xi is willing to work with the United States on tricky issues, even as China scrambles to compete with the more developed US efforts (through the Trans-Pacific Partnership) to form an Asia/Pacific trade bloc.

As Chinese military and political influence grows throughout the Asia/Pacific region, agreements like today’s on carbon emissions show that US and Chinese diplomats are establishing strong working relationship for potential collaboration in the future — cooperation that could be vital in the decades to come in maintaining a peaceful Asia and world.

 

United States

2014 US midterms showcase rise of Asian Americans

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CIMG9933Flushing, in Queens, is one of the most Asian neighborhoods in the United States.

Apparently, the swing among Asian Americans between the 2012 general election in the United States and the 2014 midterm elections was a staggering 46%:asia iconUSflag

Note the big swing in the Asian voting bloc, too. In 2012, strong support for the president among Asian-American voters was a surprise. Asian voters preferred the president by 47 points. In 2014, the (low turnout) group split about evenly. It was a 46-point swing.

That still translates to a fairly robust tilt among Asian Americans toward Democrats — just not the overwhelming trend that we saw in 2012 and 2008 and, even to some degree, 2010. Other exit polling shows that Asian Americans still strongly supported Democrats — in Virginia, they favored incumbent Democratic senator Mark Warner over Republican challenger Ed Gillespie by a margin of 68% to 29%, for example.

But why should Asian Americans necessarily lean to the left? The Asian American experience in the United States is extremely varied, and it’s a growing bloc of disparate cultures and experiences. In that regard, Asian Americans are just like Latin Americans, who come from an equally broad range of national and ethnic background. Mexican Americans in California may have different political views that Mexican Americans in Texas, to say nothing of Salvadorans in Maryland, Cubans in New Jersey or Dominicans in Florida.

The same goes for Asian Americans.

So what are we talking about when we say, ‘Asian Americans?’ Continue reading 2014 US midterms showcase rise of Asian Americans →

United States

What a Republican Senate means for world politics

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On Tuesday, when tens of millions of US voters go to the polls, they are very likely to deliver a US Senate majority to the Republican Party.USflag

Six years into the administration of Democratic president Barack Obama and four years after the midterm elections that delivered control of the US House of Representatives to the Republicans and conservative speaker John Boehner, most polls and poll aggregate forecasts give the Republicans anywhere from a strong (70%) to moderate (74%) to an overwhelming (96%) chance to retake the Senate.

It’s not uncommon for the ‘six-year itch’ to reward the non-presidential party with gains in midterm elections. Throughout the post-war era, in every midterm election during the second term of a reelection president, the opposition party has made gains each time — with the exception of 1998, when the Democrats benefited from a strong economy and Republican overreach in pursuing  what would eventually become impeachment hearings against US president Bill Clinton over alleged perjury in the Monica Lewinsky affair.

It’s also not unheard of that foreign policy can drive larger narratives about presidencies.

Most recently, in 2006, Democrats recaptured both houses in midterm elections, forcing then-president George W. Bush to accept the resignation of his defense secretary Donald Rumsfeld, in light of the war in Iraq’s unpopularity and the unfolding sectarian civil war taking place there despite US military occupation. As it turns out, the 2006 midterms paved the way for a much more moderate tone to the final two years of the Bush administration and a change in strategy under Robert Gates, Rumsfeld’s successor, who ultimately stayed on as defense secretary until 2011, lending a sense of continuity to the Obama administration’s approach to defense policy.

So what exactly would a Republican Senate mean for US foreign policy in the final two years of the Obama administration? Continue reading What a Republican Senate means for world politics →

United States

What Eric Cantor’s stunning primary defeat means for world politics

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Israel's PM Netanyahu walks next to House Majority Leader Cantor before pre-bipartisan meeting on Capitol Hill in Washington

The eyes of the entire political elite were on the 7th congressional district Thursday night, as the majority leader of the US House of Representatives, Eric Cantor, lost a primary election to challenger Dave Brat, an economics professor at Randolph-Macon College by margin of 55.5% to 45.5% among mostly Republican voters in a sprawling exurban district that includes Richmond’s northern hinterland and the faintest southwestern hinterland of the DC metro area.USflag

The most immediate response from pundits is that Cantor’s loss all but dooms the chances for immigration reform between now and 2016:

Coming off President Barack Obama’s re-election, immigration reform was seen as an issue both parties could deal with quickly. Democrats wanted to deliver on promises made to their Latino backers and Republicans wanted to get the issue off the table to avoid reliving the electoral demographic nightmare of 2012.

But House GOP leaders have long said they wouldn’t bring up the Gang of Eight bill the Senate passed last year, and Cantor’s embrace of even piecemeal proposals was derided by opponent Dave Brat and tea party activists as “amnesty” for undocumented immigrants.

That’s probably right.

While there were almost certainly several reasons for Cantor’s loss to Brat, a conservative insurgent supported by Tea Party enthusiasts and several top conservative radio talk show hosts, the perception that Cantor’s muddled position on supporting at least a tepid version of immigration reform will almost certainly scare House Republicans from supporting any version of reform between now and the 2016 election. Political writers were already calling Cantor’s shocking loss  a harbinger of difficulty for the presidential hopes of former Florida governor Jeb Bush, who’s weighing a run, and who has called illegal immigration to the United States an ‘act of love.’ 

That, of course, has obvious implications for US foreign policy in Latin America, where immigration reform is one of the top regional issues, alongside enhancing trade, drug policy and promoting economic and political development.

It’s the first time since 1899 that a House majority leader, second in rank only to the speaker of the US House, currently John Boehner of Ohio, has lost an election, and it’s a political earthquake reminiscent of Democratic speaker Tom Foley’s 1994 loss in his own House district in Washington state or of the Democratic US Senate minority leader Tom Daschle’s loss in 2004. 

But both of those upsets were not entirely unexpected, and they came at the hands of surging Republican candidates in November general elections, not to underfunded Tea Party renegades in a primary election. 

There will, no doubt,  be plenty of commentary on Cantor’s loss in the hours and days ahead. Most immediately, Cantor’s defeat creates a looming hole in the House Republican leadership — Cantor’s position as House majority leader was so secure that he was thought to be the favorite to succeed Boehner as House speaker. 

But what, if anything, will Cantor’s loss mean for foreign affairs?

It’s worth noting that Cantor was not merely the only Jewish Republican in the House caucus (one among 233 lawmakers), he was the highest ranking Jewish member of the US Congress in American history. Though there’s no shortage of support on Capitol Hill for Israel, especially among Republicans, Cantor (pictured above with Israeli prime minister Benjamin Netanyahu) held a special role for Jewish conservatives in the United States. When Netanyahu visited the United States four years ago, he met privately with Cantor before an official visit with Hillary Clinton, then the US secretary of state at the time, and he told Netanyahu that House Republicans would act as a ‘check’ on the administration of US president Barack Obama. 

Although there’s no love lost for Cantor among Jewish Democrats, who largely noted they wouldn’t be sorry to see his exit from Congress and from the House leadership, his loss is a blow to big-tent Republicans who desire as broad and diverse a leadership as possible. 

Nonetheless, Cantor was a top Netanyahu ally among the House Republican leadership ranks. Just earlier this week, as US diplomats softened their opposition to the new unity Palestinian government between the competing Fatah and Hamas factions, Cantor reiterated his call to suspend US aid to the Palestinian Authority.

But Cantor’s loss isn’t just a defeat for Netanyahu.

As Timothy B. Lee at Vox also notes, Cantor’s loss is also bad news for the National Security Agency: Continue reading What Eric Cantor’s stunning primary defeat means for world politics →

Cuba, United States

Did Hillary Clinton just lose Florida in the November 2016 election?

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The big headline today is that former US secretary of state Hillary Clinton’s upcoming memoirs, which will be released June 10, will state unequivocally that she believes she was ‘wrong’ about her vote authorizing force in Iraq in 2003.USflagcuba

But the potentially bigger news is that Clinton’s memoirs also state that she unequivocally opposes the US embargo on Cuba — a position that few politicians in the past half-century have dared, lest they draw the wrath of anti-Castro voters in south Florida, a key constituency in a state with 29 electoral votes, more than one-tenth of the electoral votes that Clinton would need to become the 45th president of the United States.

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RELATED: A public interest theory of the continued
US embargo on Cuba

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Here’s what The Associated Press reports:

In excerpts of the book “Hard Choices” obtained by The Associated Press ahead of its release next week, Clinton writes that the embargo has given communist leaders Fidel and Raul Castro an excuse not to enact democratic reforms. And she says opposition from some in Congress to normalizing relations — “to keep Cuba in a deep freeze” — has hurt both the United States and the Cuban people. She says the 2009 arrest by Cuba of USAID contractor Alan Gross and Havana’s refusal to release him on humanitarian grounds is a “tragedy” for improving ties.

“Since 1960, the United States had maintained an embargo against the island in hopes of squeezing Castro from power, but it only succeeded in giving him a foil to blame for Cuba’s economic woes,” she writes. She says her husband, former President Bill Clinton, tried to improve relations with Cuba in the 1990s, but the Castro government did not respond to the easing in some sanctions. Nonetheless, Obama was determined to continue the effort, she writes. She says that late in her term in office she urged Obama to reconsider the U.S. embargo. “It wasn’t achieving its goals,” she writes, “and it was holding back our broader agenda across Latin America. … I thought we should shift the onus onto the Castros to explain why they remained undemocratic and abusive.”

What Clinton writes is an understatement — regardless of your view on the Castros, it’s impossible to deny that the US embargo has given the Castros the kind of anti-imperial patina that have transformed them from run-of-the-mill socialist authoritarians into champions of Latin American sovereignty.

For the record, I have argued there’s room both to praise the Castros for their role leading the 1961 Cuban revolution and to denounce them for an ensuing half-century of economic negligence and political repression. It’s also understandable why, for two or three generations of Latin Americans who have felt the economic or military sting of US intervention, dating back to the 19th century, the Castros have achieved such an iconic status for their willingness to stand up to the United States.  Continue reading Did Hillary Clinton just lose Florida in the November 2016 election? →

European Union, United States

The US perspective on the European parliamentary elections

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I sat down with Brian Beary from Europolitics late Sunday night to discuss the results of the European parliamentary elections, with a particular focus on the US perspective. USflagEuropean_Union

The link is here (unfortunately, subscription only), but here’s one excerpt:

Is there a US equivalent to the Eurosceptics that did so well in the European elections?

In a formal sense, it is a peculiarly European thing. There are no parties in the US that are saying ‘we need to pull out of the United States’. The one thing they do share is that politicians in the US, for at least two generations now, in every election run against Washington. And in Europe, whether it is the hard Euroscepticism of groups like UKIP or Front National, or the soft Euroscepticism of certain members of the British Labour Party, or Silvio Berlusconi, there is an anti-Brussels-ness that reminds me of the way US politicians campaign against Washington.

Though many commentators and academics like to refer to the European Union today as a kind of ‘United States of Europe,’ especially during the EU’s ill-fated constitutional debate in 2004 and 2005, I argued that the European Union today more closely resembles the confederation of US states that existed under the 1781 Articles of Confederation.

Most US headlines in the lead-up to the European elections have concerned Ukraine and the ongoing security crisis and showdown with Russia that’s caused a regeneration of interest in transatlantic security, NATO’s role and additional follow-on issues,  such as the potential US export of liquified natural gas to Europe. In the aftermath of the European elections, US headlines are focusing on the rise of eurosceptic parties like Nigel Farage’s UK Independence Party and Marine Le Pen’s Front national in France.

In both cases, that’s understandable — and both topics are incredibly important. The real issues where the European Parliament will have the most impact in the next fiver years, however, are somewhat less sexy, but they should be on the radar of US policymakers and investors in the years ahead: Continue reading The US perspective on the European parliamentary elections →

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’ →

United States

Brian Schweitzer, Montana’s foremost foreign policy expert

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In the United States, it’s never too soon to start thinking about the next presidential race, even though the 2016 primary season won’t kick off for another 24 months, and voters have to get through the 2014 midterm elections in November before fully turning to 2016.USflagmontana

But this fairly engaging snippet comes from David Weigel’s Slate interview with former Montana governor Brian Schweitzer:

The Iranian deal makes sense. We linked up with the Saudis before and after World War II. Look, unlike virtually every member of Congress, I have a pretty good firsthand knowledge of the Middle East. The day after I got out of graduate school, after I defended my thesis, I went straight to Libya. I was there for a year; I was in Saudi Arabia for seven. I learned to speak Arabic. I can explain to you, in a way that almost no one else in the country can, the difference between a Sunni and a Shia. I can explain to you who and what the Wahhabis are in Saudi Arabia. I can talk to you about why we, the United States, initially got involved with the Saudi royal family, what we got out of the deal. I can explain to you why we knew Saddam Hussein had weapons of mass destruction. We knew, because we supplied chemical weapons to him so he could poison the Iranians. The Iranians are Persian, not Arab; they haven’t got along for several thousand years.So we’ve had a bad history with Iran because of what we did in 1953, replacing an elected official with a dictator. If we can build a relationship that’s a little more even-handed, if we can get them to back away from their nuclear ambition—let’s face it, their neighbors don’t even like that—if we were to step up and said we’re no longer just going to take the Saudis’ position all the time, you don’t have to worry about us attacking you from Afghanistan or Iraq, if you agree to back away from your nuclear ambitions, we’ll be neutral.

When was the last time that you heard a candidate for US president — on either the Republican or Democratic side — who has such an immediately strong command of foreign policy, especially the historical cause-and-effect that so few US policymakers seem to understand?  When was the last time that a governor with such a command of foreign policy? And it’s not California or New York or Texas, but Montana, a landlocked Western state with a population of just over one million people.

Here’s a checklist:

  • Schweitzer speaks Arabic. (who knew?)
  • Schweitzer opposed the war on Iraq, which now seems like a no-brainer. (But in any event…)
  • He opposes the continued US occupation in Afghanistan, given that US forces essentially the nullified the Taliban’s reach in 2001-02.
  • He thinks Edward Snowden, the consultant that leaked the extent of the National Security Agency’s global and internet surveillance efforts, should be pardoned.
  • France and the United Kingdom have more capitalist health care systems because their governments negotiate hard over prices (that’s an argument that takes some brass, I’ll note).
  • The drug war ‘appears’ to have been lost, though Schweitzer didn’t mention the ongoing (and ridiculous) paramilitary US anti-drug efforts in Latin America today.
  • In mentioning the 1953 coup against Iranian president Mohammad Mossadegh, he demonstrates that he knows Iran’s history — and US-Iranian relations — predates 1979.
  • He knows that the United States supplied chemical weapons to Iraq in the 1980s, which Saddam Hussein used against Iranians.  (If you’re keeping score, that was the last time chemical weapons had been used in the Middle East prior to the Syrian attack outside Damascus in August 2013).

I wish Weigel had asked Schweitzer more about the US drone program, the difference between covert and clandestine operations, the use of both special forces and the Central Intelligence Agency, targeted killings of both foreign nationals and US citizens, the destabilization of Yemen and Somalia by US forces in the 2000s and 2010s, and the controversial US killing of Pakistani Taliban leader Hakimullah Mehsud, whose death virtually meant the end of any peace talks with the Pakistani government and its new prime minister Nawaz Sharif.

Oh, and don’t forget this gem: ‘If you ask generals whether we should stay in a war a little longer, that’s like asking a barber whether you need a haircut.’

Keep your eyes on this one — I knew Schweitzer was an impressive two-term governor who won election as a Democrat in a very Republican state (Mitt Romney won Montana in the 2012 presidential election by a margin of 55.3% to just 41.8% for US president Barack Obama).  But I had no idea the depth of his foreign policy knowledge.  Impressive, even though the Democratic presidential nomination seems today like it’s almost certain to be Hillary Clinton’s for the taking.

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

Libya, United States

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 →

United States

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 →

Puerto Rico, United States

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:

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 →

China, United States

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:

foreignholders

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 →

Comparative Politics, United States

Don’t blame the constitution for the shutdown — blame single-member plurality districts!

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Dylan Matthews at The Washington Post wrote impressively yesterday about the perils of presidentialism and blames the current federal government shutdown not on the individual actors in the US Congress, but on the US constitution itself.  Citing the late Juan Linz, who died Tuesday (coincidentally), Matthews points to a body of comparative politics research that shows presidential systems are more likely to fall into dictatorship and chaos than parliamentary systems:USflag

But it’s not just that [James] Madison’s system is unnecessary. It’s potentially dangerous. Scholars of comparative politics have shown that presidential systems with a separation of executive and legislative functions, like America’s, are considerably more likely to collapse into dictatorship than are parliamentary systems where the executive and legislative branches are merged. That’s because there are competing branches of government able to claim democratic legitimacy and steer the ship of state at the same time — and when they disagree profoundly, there’s no real mechanism for resolving the dispute.

But parliamentary systems come with their own challenges.  Italian prime minister Enrico Letta, who won a no-confidence vote yesterday after a four-day political crisis spurred by the whimsy of a single, highly volatile opposition leader, may disagree that parliamentary systems are necessarily more stable.

Matthews is right to poke holes in the sanctity with which the US political system holds 18th century governance documents, including the US constitution and the writings of Madison and others (after all, it’s important to remember that the original constitution plunged the United States into civil war — it’s the post-1865 version that includes the 13th, 14th and 15th Amendments that we use today).

We live in a 21st century world that doesn’t always fall into sync with 18th century political economy.  The US constitution, whether Americans like it or not, is no longer state-of-the-art technology for constitutions and hasn’t been for decades, and the US presidential system isn’t one that many countries choose to follow these days.  When the United States helped craft new political systems in Germany and Japan after World War II, they built parliamentary governments with mechanisms alien to the American system.

But in a world where a minority of one house of the legislative branch of government can shut down the US government, it’s a tall order to ask that American political elites contemplate a major constitutional adjustment — a constitutional amendment to transform the United States into a parliamentary system would require the support of two-thirds of the US House of Representatives and the US Senate and the support of three-fourths of the 50 US states.

While we’re working through thought experiments, can we can lay some of the blame on the nature of the American electoral system?  Maybe the United States should elect members of Congress through some form of proportional representation (or ‘PR’) instead of a ‘first-past-the-post’ system — more technically, single-member district plurality.

Although it’s typical to think about PR as a voting system used more often in parliamentary systems, both Canada and the United Kingdom (which have parliamentary systems) use a pure ‘first-past-the-post’ system to elect members to each of their respective House of Commons, while México (which has a presidential system) uses a mixed system that relies heavily on PR to determine members of both houses of its Congress.

How first-past-the-post skews US congressional elections: the 2012 conundrum

In the United States, House members are elected in single-member districts on the basis of ‘first-past-the-post’ voting.  That means that the candidate who wins the most votes in the district wins the House seat.  Typically in the United States, at least, that means the winning candidate will win over 50% of the vote (or close to it) because of the cultural dominance of the two-party system.  That kind of two-party dominance, by the way, is much more likely to develop under the American electoral system (first-past-the-post in single-member districts) than under PR systems.  That phenomenon even has a name — Duverger’s Law — and we could spend a whole post pondering the mechanisms and effects of it.

So in the most recent November 2012 US congressional election, Democrats won 48.3% of the national vote and Republicans won 46.9% for the national vote.  But Democrats won just 201 seats to 234 for Republicans — the party that won 1.7 million fewer votes nonetheless holds a fairly strong majority of seats in the House (by historical standards).

The skew is even more intense on a state-by-state basis.  Here’s a chart that shows five swing states that US president Barack Obama won in his November 2012 reelection bid where Republicans simultaneously won a majority of the state’s congressional delegation — the first column is Obama’s reelection percentage and the second column is the percentage of that state’s House seats held by Republicans:

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It works both ways — here’s another chart that shows five solidly Democratic states where Democrats hold an outsized advantage in the House.  Again, the first column is Obama’s reelection percentage and the second column in the percentage of House seats held by Democrats:

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What would proportional representation mean for the US House? 

Contrast this to a PR system where seats are awarded on the basis of the party’s overall level of support.  There are nearly as many varieties of PR electoral systems as there are countries on the map, but the general idea is that if a party wins 25% of the vote, it should hold 25% of the seats in the legislative body.  Often, there’s an electoral hurdle — so a party would have to win 4% of the total vote in order to win any seats in the legislative body. Continue reading Don’t blame the constitution for the shutdown — blame single-member plurality districts! →