Let's face it, Americans do not understand the current state of either macroeconomic policy or foreign policy terribly well. According to Bloomberg, only six percent of Americans know that the federal budget deficit is actually shrinking. According to Gallup, just a bare majority of Americans believe that the United States military remains "number one in the world militarily." In a world of these kind of epic media fails, where significant numbers of GOP legislators seem "more concerned about 2% inflation than 8% employment," it's important to to have recognized experts try to clear the air.
Nobel Prize-winning economist and unusually-pithy-writer-for-an-economist Robert Solow has an op-ed in today's New York Times to offer a primer on the implications of U.S. debt. Here, in brief, are the "six facts about the debt that many Americans may not be aware of," in Solow's words. Let me number them here:
1) Roughly half of outstanding debt owed to the public, now $11.7 trillion, is owned by foreigners. This part of the debt is a direct burden on ourselves and future generations....
2) The Treasury owes dollars, America’s own currency (unlike Greece or Italy, whose debt is denominated in euros)...
3) One way to effectively repudiate our debt is to encourage inflation...
4) Treasury bonds owned by Americans are different from debt owed to foreigners. Debt owed to American households, businesses and banks is not a direct burden on the future....
5) The real burden of domestically owned Treasury debt is that it soaks up savings that might go into useful private investment.
6) But in bad times like now, Treasury bonds are not squeezing finance for investment out of the market. On the contrary, debt-financed government spending adds to the demand for privately produced goods and services, and the bonds provide a home for the excess savings. When employment returns to normal, we can return to debt reduction.
Some foreign pollicy experts think that Solow is being too sunny. Take Council on Foreign Relations president Richard Haass:
With respect, I think Solow is actually being too pesssimistic, and Haass is being way too pessimistic.
The problem is that, contra Solow, I suspect Americans are keenly aware of his points 1-5. The United States owes a lot of money to China, but I'd wager that any poll of U.S. citizens would reveal that the public thinks we owe even more to China than we actually do. Similarly, much of the policy rhetoric coming from Washington focuses on fears of incipient inflation that have yet to pan out.
It's Solow's last point that is the one Americans need to hear more: in an era of slack demand, bulging coporate cash coffers, and recovering personal savings rates, it's actually pretty stupid to have U.S. government spending and employment contract so quickly. I fear, however, that excessive concern about Solow's first, third, fourth and fifth points will swamp out the rest of his op-ed.
As for Haass, I'm not exactly sure what "rising rates" he's talking about, as just about any chart you can throw up shows historically low borrowing rates for the United States government. Indeed, the U.S. Treasury is exploiting this fact by locking in U.S. long-term debt at these rates. As for foreign governments pressuring the United States, the fear of foreign financial statecraft has been somewhat hyped by the foreign policy community. And by "somewhat hyped," I mean "wildly, massively overblown."
The bias in foreign policy circles and DC punditry is to bemoan staggering levels of U.S. debt. This bias does percolate down into the perceptions of ordinary Americans, which leads to wild misperceptions about the actual state of the U.S. economy and U.S. economic power. I'd like to see a lot more op-eds by Solow et al. that puncture these myths more effectively.
Am I missing anything?
A little more than a year ago I blogged that global policymakers had reached a "focal point" moment on the merits of austerity as a macroeconomic policy during a global recession. Namely, central bank authorities had concluded that the policy doesn't really work well at all. If true, this was a big deal. One could argue that from the May 2010 Toronto G-20 summit to the end of 2011 was a period where the austerity policies were widely touted and occasionally implemented. If this was the wrong policy, and there was a shift, that's kind of a big deal.
So where are we now on this?
On the public commentary side, I'd say we're approaching near-consensus on the failures of austerity for large economies. The passing of time has allowed for a comparative look at the data, and the results are not pretty for austertity enthusiasts. Martin Wolf sums up the indictment rather neatly, riffing off of a paper by Paul De Grauve and Yuemei Li:
[T]he chief determinant of the reduction in spreads over German Bunds since the second quarter of 2012, when OMT [the ECB pledge to open up its monetary taps] was announced, was the initial spread. In brief, "the decline in the spreads was strongest in the countries where the fear factor had been the strongest."
What role did the fundamentals play? After all, nobody doubts that some countries, notably Greece, had and have a dreadful fiscal position. One such fundamental is the change in the ratio of debt to gross domestic product. The paper makes three important observations. First, the ratio of debt to GDP increased in all countries even after the ECB announcement. Second, the change in this ratio turned out to be a poor predictor of declines in spreads. Finally, the spreads determined the austerity borne by countries.
On the policy output side, there's been a demonstrable but partial shift. In the past year, the European Central Bank, Federal Reserve, and Bank of Japan have rejected austerity policies in favor of greater levels of quantitative easing. Furthermore, contrary to the outright hostility developing countries directed at quantitative easing in the fall of 2010, the reaction to the past half-year of quantitative easing has been far more muted. When the latest G-20 communique said:
Monetary policy should be directed toward domestic price stability and continuing to support economic recovery according to the respective mandates. We commit to monitor and minimize the negative spillovers on other countries of policies implemented for domestic purposes.
That was code for "hey, G-7 central banks, you gotta do what you gotta do. We get that." Which is demonstrably different from yelling "currency wars", a meme that seems not to have caught fire this time around.
Top central bank authorities have also been willing to speak truth to power -- in this case, GOP members of Congress. John Cassidy recounts Ben Bernanke's testimony from yesterday:
Departing from his statutory duty of reporting to the Senate Banking Committee on the Fed’s monetary policy, Bernanke devoted much of his testimony to fiscal policy, warning his congressional class that letting the sequester go ahead would endanger the economic recovery and do little or nothing to reduce the country’s debt burden.
"Given the still-moderate underlying pace of economic growth, this additional near-term burden on the recovery is significant," Bernanke told his students, who included a number of right-wing Republican diehards, such as Senator Bob Corker, of Tennessee, and Patrick Toomey, of Pennsylvania. "Moreover, besides having adverse effects on jobs and incomes, a slower recovery would lead to less actual deficit reduction in the short run."
Translated from Fed-speak, that meant that congressional Republicans have got things upside down. Bernanke has warned before about the dangers of excessive short-term spending cuts. But this was his most blunt assertion yet that Mitch McConnell, John Boehner, et al. should change course. "To address both the near- and longer-term issues, the Congress and the Administration should consider replacing the sharp, frontloaded spending cuts required by the sequestration with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run," Bernanke said. "Such an approach could lessen the near-term fiscal headwinds facing the recovery while more effectively addressing the longer-term imbalances in the federal budget."
So does this mean some additional policy shifts? Alas, probably not. The consensus against austerity seems pretty strong on the monetary policy side of the equation. On the fiscal policy dimension, however, austerity remains the de facto policy for a lot of economies. This includes the United States, which is conventionally depicted as not having embraced austerity. The New York Times' Binyamin Appelbaum outlines the current fiscal austerity in his story today:
The federal government, the nation’s largest consumer and investor, is cutting back at a pace exceeded in the last half-century only by the military demobilizations after the Vietnam War and the cold war.
And the turn toward austerity is set to accelerate on Friday if the mandatory federal spending cuts known as sequestration start to take effect as scheduled. Those cuts would join an earlier round of deficit reduction measures passed in 2011 and the wind-down of wars in Iraq and Afghanistan that already have reduced the federal government’s contribution to the nation’s gross domestic product by almost 7 percent in the last two years.
The cuts may be felt more deeply because state and local governments — which expanded rapidly during earlier rounds of federal reductions in the 1970s and the 1990s, offsetting much of the impact — have also been cutting back.
Federal, state and local governments now employ 500,000 fewer workers than they did on the eve of the recession in 2007, the longest and deepest decline in total government employment since the aftermath of World War II.
Total government spending continues to increase, but those broader figures include benefit programs like Social Security. Government purchases and investments expand the nation’s economy, just as private sector transactions do, while benefit programs move money from one group of people to another without directly expanding economic activity.
The reason for this split does not require rocket science. Monetary policy is a tool of politrically insulated central bankers. Fiscal policy is a tool for elected politicians. The public might dislike specific budget cuts, but damn if they don't love austerity in theory.
So, in retrospect, I think early 2012 was a focal point -- but only for central bankers and commentators. As Cassidy notes, there remain elected politicians who are super-keen on austerity:
Corker, a former builder who is a long-time critic of Bernanke’s expansionary policies, called him "the biggest dove since World War Two." Toomey, a former head of the conservative lobbying group Club for Growth, questioned whether the sequester would have any real impact on the economy. Bernanke shrugged off the criticisms, calmly and methodically laying out the realities of the situation.
Your humble blogger has returned from vacation
with a sunburn to a rude awakening from the New York Times:
The New York Times Company said on Monday that it was planning to rename The International Herald Tribune, its 125-year-old newspaper based in Paris, and would also unveil a new Web site for international audiences.
Starting this fall, under the plan, the paper will be rechristened The International New York Times, reflecting the company’s intention to focus on its core New York Times newspaper and to build its international presence.
Mark Thompson, president and chief executive of The New York Times Company, said in a statement that the company recently explored its prospects with international audiences, and noted there was “significant potential to grow the number of New York Times subscribers outside of the United States.”...
The announcement is part of the company’s larger plan to focus on its core brand and build its international presence, the spokeswoman said. On Feb. 20, the Times Company said it was exploring offers to sell The Boston Globe and its other New England media properties. Last year, the company sold its stake in Indeed.com, a jobs search engine, and the About Group, the online resource company.
As a business strategy, I get that the Times is sacrificing a minor brand to boost its primary brand. But if I could be nostalgic here for a second, I will mourn the passing of the minor brand.
For me, the International Herald-Tribune was always a small luxury to buy when I was a very budget-conscious undergraduate/graduate student/postdoc/assistant professor travelling outside the United States. It's not that it was a great paper or anything -- truthfully, it was always overpriced and relatively thin in content (except for the wonderful weekend edition, which had the Sunday NYT crossword). It was, however, a very American newspaper in places that were decidedly not the United States. In the pre-Internet days of travel, it was the only place to get two-day old baseball scores. Furthermore, before the Times pushed out the Post, it was also an effective combination of two great broadsheets of American journalism.
It was also a great name -- certainly better than
The Los Angeles Angels of Anaheim The International New York Times, which is ungainly in the extreme.
I suspect the Times will do well in propagating its core brand overseas. But for my generation of travellers, hearing this news evokes a lost memory of grabbing an IHT and a baguette and sitting in a park somewhere digesting a simple lunch and news from home.
It's nostalgia, pure and simple -- but that doesn't mean I won't miss it.
Now Logan makes some compelling points to rebut me, such as:
It’s worth noting that a disproportionate number of academics writing about grand strategy are realists, so that’s coloring the ideological content of what the academics are producing. Drezner has complained about realist victimhood before, but grand strategy is an elite sport, and even headmits that “America’s foreign policy elites are more hostile to realpolitik – though even here, things can be exaggerated.” Drezner then points to Henry Kissinger and Brent Scowcroft as bearers of the realist flag, but even if you would lump Kissinger and Scowcroft in with Posen and Walt (I wouldn’t), both men are in their late 80s. There is no realist faction in the FPC, if by “realist” we mean “person whose views on strategy comport with leading academic realists.”
Think about members of the FPC who work on strategy and scholars in the academy who do so. Is a potential strategy debate between, say, a Democrat like Anne-Marie Slaughter and a Republican like Robert Kagan very interesting? I don’t think so. It’s fought between the seven and nine-yard lines at the primacy end of the field. Then consider a debate between, say,Barry Posen or John Mearsheimer, on the one hand, and Kagan or Slaughter on the other. Pass the popcorn.
Now, ordinarily, this would get my intellectual juices flowing and I'd start trying arguing that Logan is conflating IR theorists with realists a bit or whatnot.
The thing is, this was my actual view (as opposed to my worldview) for much of today:
You know, with this kind of view, it doesn't take much to realize that the problems of a few international relations wonks doesn't amount to a hill of sand in this world.
So I'm conceding this round to Logan. Excellent points, and nicely done!! I'll read the paper when I'm back in a cold climate.
[So, basically, any author of an MS you refereed this week should be feeling pretty good right about now!!--ed. Pretty much, yeah.]
My Twitter feed has been abuzz with a 2009 Justin Logan blog post about the puzzling disconnect between the international relations academy and the foreign policy community in Washington:
[T]he two groups have been wildly at variance in terms of their views on important public policy issues. Take the Iraq war, for example. As anyone who was in Washington at the time knows, the FPC was extremely fond of the idea of invading Iraq. To oppose it was to marginalize oneself for years....
In the academy, meanwhile, there was hardly any debate over Iraq almost 80 percent of IR academics opposed the war. [.pdf] To the extent academics did enter the public debate on the issue, it was to pay for an advertisement in the New York Timeswarning against the war. [.pdf] The only academics who spoke out in favor of the war (to my knowledge, anyway) were IR liberals like Anne-Marie Slaughter, who sought policy positions in Washington....
My sense is that the giant national-security bureaucracy in Washington that has emerged over the last 65 years has shaped incentives in a manner such that it is next-to-impossible to “get ahead” by advocating for restraint. Put differently, restraint isn’t in anybody’s interest except the country’s, and there’s nobody in Washington representing broad national interests as opposed to their own parochial ones. Every neoconservative or liberal imperialist in DC has someone’s interests behind them.
Read the whole thing.
My take: I'm one of the 20% of academics who (regretfully) supported the Iraq War, so feel free to discount my take. First of all, I've always been dubious of that 80% figure -- it's based on a survey conducted in 2005 asking what their attitudes were in 2003. Maybe everyone was honest about this, but I recall a fair number of colleagues voicing some sympathy for Operation Iraqi Freedom in early 2003. Logan is right to point out the divergence -- I'm just not sure it was as stark as he makes it.
More generally, methinks Logan is trying to fit a structural explanation onto a more transient divergence. My explanations for the divergence are based on a more prosaic three-step explanation:
1) All politicians want to be president;
2) All members of the foreign policy community want to be a foreign policy principal;
3) In 2002, what haunted the memory of politicians were the presidential candidates who self-destructed in 1991 for voting against Gulf War I. Immediately after 9/11, no politician who had a future wanted to be seen as soft on war.
On the other hand, if Logan is right, then the foreign policy community should be united in dispatching military force at every opportunity since Iraq. That's not how it's played out, however. A lot of think-tankers opposed the surge in Iraq, as well as operations in Libya. I don't see overwhelming support for action in Syria either.
Logan says he has a longer paper, which I look forward to reading. But I hope he's able to demonstrate that the gap between the foreign policy community and international relations academy has been long-lasting, and is not merely an artifact of 2002.
Your humble blogger continues to enjoy his family vacation immensely -- especially since Phase One has ended and Phase Two does not require anything to do with the House of Mouse.
Today's topic is U.S. foreign policy in the age of Obama. Here's what's worth reading:
1) Richard Neu, "U.S. 'Soft Power' Abroad is Losing Its Punch." RAND. My take: When he writes "The most potent instrument of U.S. soft power is probably the simple size of the U.S. economy," I get the sense that Neu doesn't entirely get what "soft power" means. And the whole "U.S. debt is sapping perceptions of U.S. power" shtick sounds very 2009. Still, as a read of the conventional wisdom of American thought on this issue, it's a good precis.
2) Tom Wright, "Neocons vs. Realists is so 2008," Foreign Policy. My take: Wright accurately describes "restrainers" and "shapers" but misses the bureaucratic impuleses for different actors to adopt these positions. Secretaries of state tend to be "shapers" -- otherwise, why would they take the job? Meanwhile, Secretaries of defense tend to be "restrainers." They're leery of any non-essential engagement that would potentially require the use of force -- because that could put the military in harm's way. The principal exception to this rule during the post-Cold War era was Don Rumsfeld, and even he wanted U.S. troops to get the hell out of Iraq five minutes after Saddam's statue fell.
3) Roger Cohen, "Beltway Foreign Policy," New York Times. My take: On the one hand -- oh, does my former Fletcher colleague and now SAIS Dean Vali Nasr knows how to tease his forthcoming book. I can only hope that, should I be in a similar position, Roger Cohen should need some column filler. On the other hand, it's not a real shock to learn that the Obama White House made serious efforts to constrain Richard Holbrooke/run foreign policy. Going from there to asserting that "American foreign policy has become completely subservient to tactical domestic political considerations" seems a bit of a leap. Mind you, it's still a refreshing and bracing critique that's worth reading.
Your humble blogger was not kidding when he said he was on vacation. Furthermore, this isn't one of those vacations where I can just hide away in my hotel room for hours on end, composing the kind of artisanal, hand-crafted blog posts that make feel Wittgensteinian and all. No, this is the kind of vacation where I can feel the disapproving eyes of my family on my hunched shoulders every time I look at my laptop.
So, in the interest of making everyone happy, this week's blog posts will be of the more old school, "Hey, read this!" kind of link-o-rama that Twitter has made quasi-obsiolete. For each day, I'll focus on topics that revisit an old blog post of mine, to see if there's anything new of interesting out there.
1) Greg Ferenstein, "Former Political Scientist to Congress: Please Defund Political Science." The Atlantic. My take: In all seriousness, about 85% of all political science research can pass the "mother in law test" -- the question is whether political scientists are articulate enough to do this with their own research.
3) Jay Ulfelder, "Why is Academic Writing so Bad? A Brief Response to Stephen Walt," Dart-Throwing Chimp. My take: um... yeah, Jay's right. One caveat: Writing for a general audience requires some genuine craft and care with one's prose style, so those political scientists who want to write for a wider audience do need to care about the writing. Which leads to whispers and murmurs that if they write well, they're not focusing enough on their research. Which leads to a vicious cycle of bad writing.
4) Adam Elkus, "Relevant to Policy?" CNAS. My take: definitely worth a read, and an interesting counter to Ferenstein in particular.
And now... time to unhunch my shoulders!!
Your humble blogger is taking a vacation at an undisclosed zombie-proof redoubt for the next ten days, so blogging will be on the lighter side.
Speaking of the lighter side, juuuuuust a few friends and colleagues have informed me that zombie preparedness has become a political issue up in Canada. From BuzzFeed's Ellie Hall:
The Canadian government has gone on the record about the zombie apocalypse. In an amazing exchange on the floor of the House of Commons today, Foreign Affairs Minister John Baird was asked if he was working to "develop an international zombie strategy so that a zombie invasion does not turn into a zombie apocalypse."
New Democratic Party Parliament Member Pat Martin applauded the United States Center for Disease Control's emergency preparedness measures premised on a zombie outbreak and wanted to know how Canada would act to protect its citizens.
Here's the clip:
For the entirety of Baird's response, click over to Huffington Post Canada.
Now, to be honest, I'm a bit disturbed by this exchange. First of all, there were so many better puns that Baird could have uttered.
Second of all, both the NDP representative and the Foreign Minister were poorly briefed. Sure, Martin knew about the U.S. Centers for Disease Control and the Quebec government's counter-zombie efforts, but why no mention of British Columbia's aggressive campaign against the living dead?! That seems like rank prejudice against Canada's Western provinces.
Third, how in the name of all that is reanimated could the Canadians have this debate without discussing Canada's distinguished contributions to the zombie genre? No mention of Pontypool? No mention of Fido?! Come on!!!
Fourth, the claim that zombies could effortlessly cross borders echoes a leading Canadian perspective on this issue ... but where's the expert testimony? Why no international relations perspective? It's not like Theories of International Politics and Zombies isn't available in Canada.
This is serious business. Winter has come. The White Walkers could be emigrating down from the North at any moment. Until Canada gets its house in order, secures its strategic maple syrup reserve from waffle-eating ghouls, and starts consulting experts on this issue, I for one, am taking my family south.
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.