Is the Iran deal a "Nixon goes to China" event?

Nixon and Mao

When Nixon went to China, I was on a “Med cruise”, Navy short hand for a ship’s 6-month deployment to the Mediterranean Sea.  In those days, we got our news from the Radio Room printed on a yellow roll of paper, cut to length and attached to a clipboard available for all who wished to read it.  I can only imagine that today’s naval officers are as plugged in as we are here at home. 

But, plugged in or not, U.S. moves to form a new relationship with Iran might seem as confounding as the Nixon/China foray did in the early 70’s.  Our allies in the Middle East – Israel and Saudi Arabia – are objecting loudly to recent developments.  Iran supports the Assad regime and terrorist organizations like Hezbollah and Hamas.  How can we form an alliance with them?

Let’s remember that when Nixon forged a new alliance with Mao’s China, the U.S. was still fighting in Vietnam, facing a foe that was armed by the Chinese. 

Foreign affairs are not about winning or losing wars.  Wars are costly and should be avoided.  Foreign affairs are about maintaining or disrupting the balance of power.  By winning the war in Iraq, the U.S. disrupted the balance of power in the Middle East and southern Asia.  Iran, bordered by two countries occupied by U.S. troops, moved to counter our presence by forming an alliance with the new government of Iraq and through its support of the Assad regime in Syria.  The national initiative to develop nuclear weapons capability was a way for them to establish legitimacy.  It has forced the U.S. and its allies to deal with them.

Iran has a long history of mercantilism that has yielded a well-educated middle class.  Their economy is migrating toward capitalism and is able to compete in international commerce.  They have joined the international patent system and are viewed by exporting economies in the EU as a potential market.  Ideology aside, they are a natural trading partner for the West. 

I don’t mean to take ideology lightly.  But, in the end, national economic and security interests nearly always trump ideology.  That’s why Iran will pursue these discussions with the West constructively.

Our traditional Middle East allies all have interests that are contrary to ours.  Saudi Arabia, Iraq and our NATO ally Turkey support Sunni extremists in Syria.  Nothing is cut and dry in the Middle East but Sunni extremism represents a clear threat to U.S. interests and security.  And, while Iran’s support of Syria’s Assad is seen as contrary to our interests, the stalemate there neutralizes the benefits of their alliance. 

And let’s not forget that Saudi Arabia was home to Osama bin Laden and most of the 9/11 terrorists. 

In the end, it may be that having Iran as a strategic economic competitor will be preferable to having them as a strategic nuclear competitor.  Indeed, it’s not clear that Iran ever wanted to develop nuclear weaponry.  Ever notice how they are always a few months away? 

Kerry with Iran's Foreign Minister Zarif

Of course, our most reliable ally in the region has been Israel, a country that Iran has sworn to obliterate.  But, Israel’s options are limited.  As I have written (Let Israel Do It...), Israel can’t attack Iran without the participation of the U.S. military, which is not forthcoming.  It may be that the assertions of Secretary of State Kerry are correct.  A non-nuclear Iran represents little threat to Israel.  Indeed, a strong commercial relationship with the West will make it less attractive for them to support international terrorism.

Naïve?  Perhaps.  But, many had the same view of China 40 years ago.  Is China still problematic?  Yes.  But, not nearly as much as they would have been if we were not their largest market.

It will be interesting to observe the U.S. politics over the proposed sanctions relief.  Presidents do better when they oppose the traditional politics of their political party.  Reagan signed a treaty with the Soviets to reduce nuclear arms.  Clinton reformed welfare.  But, Obama faces a more hawkish constituency among Republicans than his own party.  And, any American over the age of 40 remembers the Iran hostage crisis well. 

LEADERSHIP is about common cause. Kerry is well qualified to pursue this new balance of power but he is inarticulate.  It will be up to the President to sell this to the American public and up to his political operation to make it work in Congress.

WHO WILL LEAD?

The Russians are coming; the Russians are coming!

When I was a kid, we had A bomb drills in school.  The fear of a Soviet sneak attack was that great.  It was part of our national psyche.  My parents didn’t build a bomb shelter in the backyard but we wouldn’t have been alone if they had. 

When the Soviet Union collapsed, it revealed the weaknesses of an economic and political system that ignored sound principles of economic freedom and human rights.  We have had little to fear from Russia since.  Not only are they weak economically but also they are weak militarily. 

The Russian sphere of influence has shifted east and west for centuries.  It has never extended so far to the west as it did during the Cold War and it has never been so far east as it is now.  The Russians would like to change that. 

Toward that end, they have struck deals with countries like Ukraine, Poland and Germany to sell them oil and gas. And, they haven’t been shy about using their customers’ reliance upon them for energy as a means to influence international events.  Energy exporting nations in South Asia and the Middle East are their economic competitors.  So, they seek to extend their sphere of influence southward as well. 

By contrast, the United States is an economic and military juggernaut, a maritime nation whose integration into the global supply-chain (and our ability to keep it secure) makes it in everyone’s interest to be our ally. 

So, how does Russia end up taking us to school over the handling of Syria?  Or, to put it differently, why we are playing a weak hand when we have a strong one?

The U.S. has a conflict between ideology and military strategy.  Our beliefs – the why of what we know we should do – are based on human rights, the manifestation of which, at least in the case of Syria, is our opposition to weapons of mass destruction.  Moreover, we’ve been sensitized to the specter of mass genocide.  Many people – despite their opposition to war – think we could have prevented the death of hundreds of thousands if we had acted sooner in Rwanda and Bosnia.

So, there is constant friction between what we believe and what we do.  Firing missiles, dropping bombs and sending in the Marines is not the best way to promote human rights.

Our original strategy vis-à-vis Syria was to strike in a limited way.  It would not have had a big effect.  It wouldn’t have destroyed the chemical weapons and wouldn’t have toppled the Assad regime.  It would have been painful while it lasted but not debilitating to a dictator who is in the middle of a long war and who would easily be resupplied by his Russian allies. 

So, why do it?  Like most diplomatic moves played out on the world stage, it’s a gesture.  A gesture to express our unhappiness. 

Unfortunately, the result was to send a signal it doesn’t really matter if we are unhappy!  Our military power should be feared but our diplomatic waffling undermines our intentions. The outcome has been to hand Russia an opportunity to appear to be our equals (or perhaps our superior) by brokering a solution that allows us to back down in the face of popular opposition. 

Our President seems unable to decide if he wants to be George W. Bush or Jimmy Carter and is, therefore, ineffective at being either.  Nations with a strong interest in becoming reliable allies in the region – from Azerbaijan to Turkey to Poland – may now see us as unreliable partners.  The image of Russia forcing us to back down and appearing to be our equals for the first time since the Cold War is bound to have an influence for a very long time. 

International diplomacy is a game of carrots and sticks.  We should reserve our carrots for those who mirror our values and reserve our sticks for those who pose a serious threat. 

The economic and military power of the United States provides us an opportunity to LEAD.  Our values, our economic and political systems are based on human rights, economic freedom and the rule of law.  Promoting these values and helping our allies develop liberal institutions to implement them will lead to global stability and prosperity.  Our long-term national and economic security depends upon it.

WHO WILL LEAD? 

WHERE'S THE BEEF?

Where's the Beef?

“Where’s the beef?”

“There you go again…”

And, don’t forget the scream.

During the debates leading to the Democratic nomination in 1984, former Vice President Walter Mondale famously asked his opponent, Senator Gary Hart (D-CO), "where's the beef?"  He was challenging Hart to provide details instead of just visionary concepts.  Hart was talking about the need to support entrepreneurship since small businesses create about 90% of the jobs in this country (about 28 years before it was popular to talk about it).  But, Mondale stole the show with his one liner cribbed from a popular Wendy's TV Commercial and that’s how the news reported it.

GOP presidential candidate Mitt Romney was in London last week.  He needs a few smiling shots with foreign leaders to bolster his campaign.  But, whatever his purpose, it has been sidetracked by the sideshow resulting from his rather innocuous remarks about the London Olympics.  I have listened to his Brian Williams interview – the whole thing not just the sound bites – and I didn’t think he said anything so awful.  But, we live in a world where every word and phrase is parsed by the press, interpreted, reinterpreted and misinterpreted.

Of course, the master of managing the media was the “Great Communicator”, President Ronald Reagan.  His supporters enjoyed his bravado.  Remember when he said, “I paid for this microphone…”  It was during the New Hampshire Republican candidate debates in 1980.  He used the line to keep the moderator from cutting him off.  That line got played and replayed by TV news.  No one bothered to point out that he stole the line from a Spencer Tracy-Katherine Hepburn movie called State of the Union in which Spencer Tracy was – you guessed it – running for President of the United States.  And, of course, no one remembers the issues being debated as well as they remember that line.

Perhaps Reagan’s most famous debate line was, "There you go again..." responding to then President Jimmy Carter during the presidential debate later that same year when Carter was challenging Reagan’s position on Medicare.  The Medicare debate is hardly remembered but the line is. 

And, what about Howard Dean's scream?  The former Vermont Governor and 2008 presidential candidate got a bit overexcited at a rally and let out a yahoo that offended the sensibilities of… well, almost everybody.  The governor was leading in the polls to that point.  But, the scream which was played and replayed by all the news outlets… that scream was his undoing. 

Governor Romney has been through this drill before.  He famously said, “I am not worried about the poor” and was raked over the coals for that.  Did you hear the whole statement?  What he actually said was that he wasn’t worried about the very rich who are obviously doing well or the poor who have a safety net; he was worried about the middle class.  As an aside, he added that if the safety net has some holes in it, he would fix them.  Does that sound like what was reported? 

President Obama knows what it’s like, too.  He is being attacked for saying that entrepreneurs weren’t responsible for building their own businesses.  Here is the exact quote:  “If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business—you didn’t build that. Somebody else made that happen.”

Was he talking about the businesses or the roads and bridges?  Well, if you have the opportunity to read or listen to the whole statement, you can decide for yourself.  But, the media typically clips out the sound bite that will be most inflammatory.  So, they decide for you. 

Isn’t it interesting that the sound bites of the 80’s were taken out of the context of issues we are still debating today?  Medicare, entrepreneurship?  Shouldn’t the media be doing a deep dive on those topics?  The answer is obvious.  Instead, watching the news makes me wonder:

Where’s the beef? 

The Right is Wrong and the Left is Not Right

I like to think of myself as a political moderate.  And, it must be true since I managed to irritate both conservatives and liberals with my last post, Good, Better, Best... Never Let It Rest.

Oh, I got a few “atta boys”.  “Nice job, John”  “Keep it up”, etc.  However, overwhelmingly, I got the type of response I was hoping not to. 

It boils down to this:  the Right believes that Obama is a Socialist and that there can be no compromise with that element.  The Left rationalizes Obama’s record of economic non-achievement by citing irrelevant examples. 

Well, in the interest of continuing to irritate both sides, let me just say it:  The Right is Wrong and the Left is Not Right. 

There is an emerging monologue among those on the Left.  They postulate that government should raise taxes, invest in infrastructure and that somehow private enterprise will invest in R&D and create jobs.  One respondent asserted that “trickle down” doesn’t work but that “trickle up” does.  Their example is the 1950’s, a decade of the highest growth in our history coincident with the highest tax rates in our history.  I like to point out that “correlation is not causation”.  That high growth coincided with high taxes does not mean that taxes don’t reduce growth.  But, that seems to fall on deaf ears.

The major objection I have to this line of thinking is that no one wants to believe the data.  And, the data show that government spending does not get a financial return.  The “multiplier effect” where a dollar of capital investment gets 2 dollars in return has been shown to work with private investment but not with government spending.  There have been numerous studies demonstrating this result.  I will point out just one.

Liberal economist, Christine Romer, President Obama’s first Chair of the Council of Economic Advisors, wrote "The Macroeconomic Effects of Tax Changes" while she was an economics professor at University of California at Berkeley in 2007.  She concludes, in part, that “tax increases are highly contractionary. The effects are strongly significant, highly robust, and much larger than those obtained using broader measures of tax changes. The large effect stems in considerable part from a powerful negative effect of tax increases on investment.”

Investment has a multiplier effect on GDP and improves employment prospects.  True, robust growth in the 1950’s was coincident with high tax rates.  It is also true that robust growth in the 19th Century was coincident with NO income tax. 

Now, I am not saying we should reduce taxes or even that we shouldn’t increase taxes.  I am simply saying we need to understand the impact of taxes and ask ourselves how much growth we are willing to sacrifice for the government we want. 

Conservatives for their part advocate further tax reduction.  The Supply Side theories of Arthur Laffer were the underpinning of Reagan’s economic policies and they have served us well.  They are right.  They served us well for about 20 or 25 years.  However, in the last decade middle class wages have stagnated while the costs of healthcare and education have skyrocketed. 

As for “trickle down economics”…  Well, there is no such proven economic theory.  It’s more of a political phrase than an economic theory.  And, lately, not much is trickling down. 

Governance is more than just economics.  In colonial times, our founding fathers recognized the need to address the common good, the need to place each selfish and separate interest in the context of the “res publica”, literally the “public thing”. 

Conservatives need to recognize that government should play a role in helping its people through the transition to a global economy and liberals need to recognize that we need a sustainable financial platform to provide for it.

In his Sunday Op-Ed piece, author and New York Times columnist Tom Friedman advocated that we focus on supporting entrepreneurship and suggested “…we should aspire to be the world’s best launching pad because our work force is so productive; our markets the freest and most trusted; our infrastructure and Internet bandwidth the most advanced; our openness to foreign talent second to none; our funding for basic research the most generous; our rule of law, patent protection and investment-friendly tax code the envy of the world; our education system unrivaled; our currency and interest rates the most stable; our environment the most pristine; our health care system the most efficient; and our energy supplies the most secure, clean and cost-effective.”

Our political debate should be about how to achieve the objectives so concisely presented in Friedman’s column.  Instead we have, thus far, been treated to more of the same unproductive, partisan nonsense that has caused us to fail to address our long term challenges since the turn of the century.  Is it any wonder that an increasing number of voters identify themselves as independents.?

Obama and Romney are serious, intelligent people with a sincere desire to advance the American cause and very different approaches to doing so.  I can only hope that the presidential debate will turn to that discussion.

WHO WILL LEAD?

            Recommended reading:

                        The Center on Budget and Policy Priorities

                        The Microeconomics Blog

                        Proceedings of the National Academy of Sciences of the United States