In an excerpt from his forthcoming book The Escape Artists, Noam Scheiber has a behind-the-scenes story in The New Republic about how the Obama administration mostly botched the debt ceiling negotiations with Republicans last year. I'm guessing that Scheiber's best sources were the Treasury folk, because they come off looking the best -- advising Obama to cut a deal with the Republicans in December 2010, telling him to not negotiate policy concessions to get a debt ceiling boost, and so forth. Obama did not listen to them, and we all know what happened. Scheiber goes on to note that after the debt ceiling drama of the summer, Obama learned to attack conservatives rather than compromise with them, thereby improving his political fortunes.

He closes the essay with the following:

For voters contemplating whether he deserves a second term, the question is less and less one of policy or even worldview than of basic disposition. Throughout his political career, Obama has displayed an uncanny knack for responding to existential threats. He sharpened his message against Hillary Clinton in late November 2007, just in time to salvage the Iowa caucuses and block her coronation. He condemned his longtime pastor, Jeremiah Wright, just before Wright’s racialist comments could doom his presidential hopes. Once in office, Obama led two last-minute counteroffensives to save health care reform. But, in every case, the adjustments didn’t come until the crisis was already at hand. His initial approach was too passive and too accommodating, and he stuck with it far too long.

Given the booby traps that await the next president—Iranian nukes, global financial turmoil—this habit seems dangerously risky. Sooner or later, Obama may encounter a crisis that can’t be reversed at the eleventh hour. Is Obama’s newfound boldness on the economy yet another last-minute course-correction? Or has he finally learned a deeper lesson? More than just a presidency may hinge on the answer.

There are two big problems with this kind of formulation. The first is that, for all of Obama's stumbles and bumbles on the debt ceiling issue, it's hard to argue in retrospect that he lost that political fight. Since the debt ceiling dispute, Obama's approval numbers have moved north while Congress has become historically unpopular. The improving economy likely explains some of this -- but if that was the only part of the story then Congress' numbers should be rising as well.

It's not that Obama handled the debt ceiling talks terribly well -- it's just that Scheiber misses the point that the Republicans made an even bigger hash of things. Obama came off as someone willing to deal and the House GOP came off as a group of people looking forward to the apocalypse. Looking more reasonable that one's adversaries occasionally matters in domestic politics -- and it's not in Scheiber's account (full and fair disclosure: I would have been in agreement with Scheiber six months ago).

The more interesting question is whether there's any validity to Scheiber's larger point -- that Obama's initial passivity in responding to political crises suggests he's ill-prepared for handling global crises. Does Scheiber's pattern of how Obama responded to domestic political challenges match up with his foreign policy?

I think Scheiber has half a point. As I've noted in the past, the administration's first set of foreign policies were predicated on the same basic impulse that Obama had domestically: deals and bargains were possible in many parts of the globe. However, as the administration found itself rebuffed and frustrated by various international actors (Iran, China, etc.) it quickly pivoted to a more aggressive -- and more fruitful -- counterpunching approach. Similar to how the debt ceiling negotiations play out, Obama has benefited from his initial outreaches; he can say he tried the olive branch before turning to the stick. When it comes to global actors that Obama perceives as enemies or rivals, his administration has been pretty ruthless.

Where Scheiber might have a point is with how Obama has handled America's friends and allies. Obviously, these countries should have more common interests with the United States, so by and large they should be less obstreperous. When issues have flared up, however -- with Israel on housing settlements, with Europe on the sovereign debt crisis, with post-reset Russia on anything, and with G-20 allies on quantitative easing -- the administration seems slow-moving, awkward, and occasionally shocked that these countries might have interests that diverge from the United States.

Pressuring and cajoling allies is a tricky and delicate business. One would be hard-pressed to argue that the Bush administration did a great job of it. Still, as the latest iteration of the Eurocrisis plays out, Scheiber might have hit on the Achilles heel of Obama's foreign policy acumen.

What do you think?

The New Republic has assembled a symposium on what the United States should do about Syria.  Among others, contributors will include Larry Diamond, Anne-Marie Slaughter, and... er... me:

The New Republic wouldn’t be soliciting my take if there was an easy solution to this policy conundrum. Indeed, Syria is such a tough nut to crack that I fear the best approach to the problem is to apply a Sherlock Holmes-style logic to it. When all of the impossible policy choices have been eliminated, only the improbable ones—however unpalatable they might be—are left to mull over.

Read the whole thing:  I confess to not being happy with either of my suggested policies (buy off the Russians; arm the Free Syrian Army), but as I conclude, "the sad truth is that there is no good outcome, only different shades of terrible." 

For some other policy suggestions, see Daniel Serwer and Caitlin Fitzgerald on the reverting-to-nonviolence option.  This argument does have some support in the academic literature -- but I also think this option has been overtaken by events. 

On the opposite side of the spectrum.  I'd also recommend reading Dan Trombly's extended realpolitik cost-benefit analysis  of myriad options and policy contingencies for Syria.  His key paragraph: 

The much more unpleasant strategic reality is that, whether foreign forces intervene or not, the U.S. receives little reward from hastening Assad’s downfall. An embattled Assad imposes just the same limitations on Syrian and Iranian threats to U.S. interests. Resources will have to be diverted from the proxies Iran supports through Syria to Syria itself as Iran tries to maintain its host’s viability. The loss of Assad’s regime would mean a rapid retrenchment in Iranian support, for sure, but this would likely be replaced by a proxy campaign against Syria’s new government and its foreign backers, or a redeployment of IRGC/QF assets to other theaters, probably against the U.S (if not both). Given that rapidly overthrowing Assad without major overt military action from a broad coalition of forces is a pipe dream anyway, the United States should consider contingency plans in which it works through, rather than against, the specter of protracted civil war. To be able to bleed Iran in Syria would, relative to the risks involved, be a far more significant strategic opportunity against Iranian power relative to the investment and risk than would be a major overt campaign to overthrow Assad outright. The more blood and treasure Iran loses in Syria – even if Assad stays in power longer – the weaker Iran will be.

This is cold -- but in the absence of rapid regime change, it's also spot-on.  My  only point of disagreement with Trombly is that he thinks supporting/arming/training the FSA is a bad idea, while I think it's a surefire way to achieve his preferred outcome.  This wasn't the logic I used in my TNR essay, and it's one I'm reluctant to voice, but there it is. 

What do you think? 

As the author of Theories of International Politics and Zombies, I want to make it absolutely clear that I have absolutely nothing to do with this: 

But, based on Al Qaeda's current capabilities, I'm beginning to think that this is their best chance for revival.

Hey, remember how the new Al Qaeda was going to be more networked and more capable of inspiring home-grown terrorism?  Remember how today's threat enviroment was supposed to be worse than the Cold War? 

Bear these points in mind when considering two news items that crossed my screen today.  In the first, courtesy of Micah Zenko, a Pentagon official suggests that maybe, just maybe, the U.S. overrestimated Al Qaeda's capabilities: 

With the benefit of more than a decade of hindsight, America may have misjudged the true threat posed by al-Qaeda in the immediate aftermath of the 2001 terrorist attacks, a top Pentagon official said Tuesday.

“Al-Qaida wasn’t as good as we thought they were on 9/11,” said Michael A. Sheehan, the assistant secretary of defense for special operations and low intensity conflict.

“Quite frankly, we, the American people, were asleep at the switch, the U.S. government, prior to 9/11. So an organization that wasn’t that good looked really great on 9/11,” Sheehan told a room full of special operators in Washington who were attending an annual Special Operations, Low Intensity Conflict Planning Conference.

“Everyone looked to the skies every day after 9/11 and said, ‘When is the next attack?’ And it didn’t come, partly because al-Qaida wasn’t that capable. They didn’t have other units here in the U.S. … Really, they didn’t have the capability to conduct a second attack.”

The true limitations of al-Qaida are one of two key reasons that America has not suffered a major terrorist attack since 2001.

“The other reason is that we actually responded … and crushed al-Qaida immediately after 9/11, and continually for the last 10 years,” Sheehan said. “We are better than we often give ourselves credit for. We have a very polarized political system and it’s very difficult for anybody to actually give credit or receive credit for how good we are.”

Well, sure, Al Qaeda abroad has been weakened, but this homegrown thing, I mean, that's probably a really big-- hey, what is Scott Shane reporting about in the New York Times? 

A feared wave of homegrown terrorism by radicalized Muslim Americans has not materialized, with plots and arrests dropping sharply over the two years since an unusual peak in 2009, according to a new study by a North Carolina research group.

The study, to be released on Wednesday, found that 20 Muslim Americans were charged in violent plots or attacks in 2011, down from 26 in 2010 and a spike of 47 in 2009.

Charles Kurzman, the author of the report for the Triangle Center on Terrorism and Homeland Security, called terrorism by Muslim Americans "a minuscule threat to public safety." Of about 14,000 murders in the United States last year, not a single one resulted from Islamic extremism, said Mr. Kurzman, a professor of sociology at the University of North Carolina (emphasis added).

Digging a wee bit into the actual report -- and read the whole thing, it ain't long -- I'll just reprint the closing two paragraphs below: 

Repeated alerts by government officials may be issued as a precaution, even when the underlying threat is uncertain. Officials may be concerned about how they would look if an attack did take place and subsequent investigations showed that officials had failed to warn the public. But a byproduct of these alerts is a sense of heightened tension that is out of proportion to the actual number of terrorist attacks in the United States since 9/11.

This study’s findings challenge Americans to be vigilant against the threat of homegrown terrorism while maintaining a responsible sense of proportion. (emphasis added)

Now, I'm sure that the reason for this lull is that Al Qaeda's remaining assets in the United States are focusing their energies on getting all turkeys to become halal or something.  That said, I'm going to continue to insist that the United States faces a much less threatening threat environment now than it did fifty years ago.   Oh, and that I don't need to listen to Representative Peter King when he opens his mouth on national security issues. 

In the Boston Review, Natasha Bahrami and Trita Parsi take a long look at the economic sanctions literature and conclude that the ever-more-stringent sanctions regime won't lead to a democratic transition in Iran. One can quibble with their review (they don't cite Nikolai Marinov's work, for example), but they do state the current state of play on Iran rather cleanly:

The official objective of the sanctions is to compel Iran to negotiate with the West toward the implementation of existing U.N. Security Council resolutions calling for Iran to suspend its nuclear enrichment program. Unofficially, there are hints that the sanctions are aimed at collapsing the Iranian regime and bringing about democratic change.

That sums up the situation rather neatly -- the problem is that these goals are somewhat incompatible. If the aim if to negotiate a deal on the nuclear program, then Iran's regime has to be persuaded that the United States is not trying to topple the regime. If the administration keeps up the ambiguity regarding the purpose of sanctions, then Iran's current regime has zero incentive to negotiate. In that case, the only way sanctions work is via regime collapse.

Based on Robert Worth's front-pager in the New York Times on the effect of sanctions in Tehran, however, it looks like the negotiation option might already be closed off. The effect of the sanctions put in place (and the ones that will kick in over the summer) are, well, a mixed bag:

Already, the last round of sanctions on Iran’s Central Bank has begun inflicting unprecedented damage on Iran’s private sector, traders and analysts say, making it so hard to transfer money abroad that even affluent businessmen are sometimes forced to board planes carrying suitcases full of American dollars.

Yet this economic burden is falling largely on the middle class, raising the prospect of more resentment against the West and complicating the effort to deter Iran’s nuclear program -- a central priority for the Obama administration in this election year…

The rising economic panic has illustrated -- and possibly intensified -- the bitter divisions within Iran’s political elite. A number of insiders, including members of the elite Islamic Revolutionary Guards Corps, have begun openly criticizing Iran’s supreme leader, Ayatollah Ali Khamenei, in recent weeks. One of President Mahmoud Ahmadinejad’s aides indirectly accused Ayatollah Khamenei of needlessly antagonizing the West in ways that pushed down the rial’s value, the latest sign of a rift between the president and the supreme leader that is helping to define the parliamentary elections, which are scheduled for March 2.

“They criticize Ahmadinejad and even the supreme leader by name now; it’s not like before,” said Javad, the 45-year-old manager of a travel agency in north Tehran…

Ordinary Iranians complain that the sanctions are hurting them, while those at the top are unscathed, or even benefit. Many wealthy Iranians made huge profits in recent weeks by buying dollars at the government rate (available to insiders) and then selling them for almost twice as many rials on the soaring black market. Some analysts and opposition political figures contend that Mr. Ahmadinejad deliberately worsened the currency crisis so that his cronies could generate profits this way…

Many Iranians are also skeptical about the Western preoccupation with Iran’s nuclear program. “The economic pressure will not push Iran to a nuclear settlement,” said Kayhan Barzegar, the director of the Institute for Middle East Strategic Studies, who has taught in the United States. “The nuclear file is a nationalistic issue; it’s too late for Iran to backtrack. Domestic politics will react negatively to any negotiation — candidates in the elections will say: you sold the nuclear program!”…

[T]he businessman also noted that when Iran last suffered similar privations, in the 1980s, the economy was far smaller, and the revolutionary zeal for self-sacrifice far greater. Iran’s leadership was also far more unified than it is today.

“The question is, when this panic translates into a real diminution in the living standard, will Iranians be willing to take it?” the businessman said. “That’s when these guys will really be in trouble.”

The above report suggests that the sanctions themselves have effectively eliminated the more modest goal of negotiating on the nuclear program. The primary effect of the sanctions to date has been to exacerbated divisions within Iran's regime. Because of these divisons, there's no point to negotiation -- at this point, the United States could ever be sure that the entire Iranian state could credibly commit to any bargain (for advocates of negotiation, it should be noted that this was already a problem; the sanctions just bring it into high relief). The economic effect of the sanctions has also accentuated Iran's nationalist pride in the nuclear program among the middle class.

It's still possible for the sanctions to work. Those that are imposed multilaterally tend to take a longer time to have a policy effect. The target state will first try to break the multilateral coalition apart -- and only after that policy fails will they consider concessions. Recent reportage suggest that Iran was not expecting this kind of multilateral pressure -- and so it's possible that Tehran will reconsider.

That said, the sanctions policy is pushing the United States into a policy cul-de-sac where the only way out is through regime change. In the abstract, that might sound great, but in reality, pushing for that option could be both messy and expensive.

In my experience, pundits tend to be risk-averse in calling out a very rich person on their economic or financial analyses.  There's a couple of intuitive logics at work here: 

1)  Most pundits don't know much about economics, and so are leery of entering those waters;

2)  The really rich person likely became really rich because they demonstrated a shrewd understanding of the markets -- therefore, who is the low-six-figure-or-less-earning pundit to challenge such high-yielding wisdom;

3)  Most pundits refuse to admit that they don't understand something that reads like gobbledgook, because they're afraid this makes them look like an idiot.

Well, your humble blogger has never been afraid of looking like an idiot... which brings me to PIMCO's Bill Gross.  I'll occasionally read his monthly newsletter when a link to it pops up in my Twitter feed.  Every time, I'm amazed at the florid, rambling, not-really-related-to-his-main-point way he opens these little essays. Sometimes I find the analysis afterwards useful, sometimes I find it eerily similar to what someone says after spending too much time with Tom Friedman.  I gather he's had better years as an analyst than he did in 2011, but everyone has down years and bad predictions. 

Here's the thing, though -- I can't understand a word of his latest Financial Times column:  Here's how it opens: 

Isaac Newton may have conceptualised the effects of gravity when that mythical apple fell on his head, but could he have imagined Neil Armstrong’s hop-skip-and-jumping on the moon, or the trapping of light inside a black hole? Probably not. Likewise, the deceased economic maestro of the 21st century – Hyman Minsky – probably couldn’t have conceived how his monetary theories could be altered by zero-based money.

Things get a little clearer towards the end of the op-ed... but not much.  His February 2012 newsletter appears to be an expanded version of this op-ed (plus the usual wacky opening), so let's go there to see what he's trying to say: 

[W]hen rational or irrational fear persuades an investor to be more concerned about the return of her money than on her money then liquidity can be trapped in a mattress, a bank account or a five basis point Treasury bill. But that commonsensical observation is well known to Fed policymakers, economic historians and certainly citizens on Main Street. 

What perhaps is not so often recognized is that liquidity can be trapped by the “price” of credit, in addition to its “risk.” Capitalism depends on risk-taking in several forms. Developers, homeowners, entrepreneurs of all shapes and sizes epitomize the riskiness of business building via equity and credit risk extension. But modern capitalism is dependent as well on maturity extension in credit markets. No venture, aside from one financed with 100% owners’ capital, could survive on credit or loans that matured or were callable overnight. Buildings, utilities and homes require 20- and 30-year loan commitments to smooth and justify their returns. Because this is so, lenders require a yield premium, expressed as a positively sloped yield curve, to make the extended loan. A flat yield curve, in contrast, is a disincentive for lenders to lend unless there is sufficient downside room for yields to fall and provide bond market capital gains. This nominal or even real interest rate “margin” is why prior cyclical periods of curve flatness or even inversion have been successfully followed by economic expansions. Intermediate and long rates – even though flat and equal to a short-term policy rate – have had room to fall, and credit therefore has not been trapped by “price.” 

Even if nodding in agreement, an observer might immediately comment that today’s yield curve is anything but flat and that might be true. Most short to intermediate Treasury yields, however, are dangerously close to the zero-bound which imply little if any room to fall: no margin, no air underneath those bond yields and therefore limited, if any, price appreciation. What incentive does a bank have to buy two-year Treasuries at 20 basis points when they can park overnight reserves with the Fed at 25? What incentives do investment managers or even individual investors have to take price risk with a five-, 10- or 30-year Treasury when there are multiples of downside price risk compared to appreciation? At 75 basis points, a five-year Treasury can only rationally appreciate by two more points, but theoretically can go down by an unlimited amount. Duration risk and flatness at the zero-bound, to make the simple point, can freeze and trap liquidity by convincing investors to hold cash as opposed to extend credit (emplases in original).

And... sorry, I still don't get it.  I get why zero interest rates are bad for bondholders like PIMCO.  I get that flat yield curves + high amounts of economic uncertainty = cash hoarding.   What I don't get is that:

A)  Gross himself acknowledges that the yield curve ain't flat;

B)  Low interest rates allow for private-sector deleveraging, which is a prelude to stimulating market demand;

C)  Low interest rates prevent today's government binge from being even more expensive than it would be in normal times (by keeping financing costs down);

D)  If uncertainty is decreasing -- and that appears to be the case with the U.S. economy -- then low interest rates should spur greater entrepreneurial investments. 

So, at the risk of threatening my status in the International Brotherhood of Serious Global Political Econmy Bloggers That Talk Seriously About Economics, I hereby ask my commenters to explain Bill Gross' concerns to me. Because I don't get it -- and I'm beginning to wonder if I'm not the only one.

Based on his prior scholarly and advocacy work, it's safe to say that Bob Pape has not been a huge fan of U.S. military interventions.  In Bombing to Win, he argued that the coercive effect of air power had been wildly overstated.  In Dying to Win, he argued that the presence of foreign troops and bases are most likely to inspire suicide terrorism.  Pape was a foreign policy advisor to Ron Paul's 2008 presidential campaign, which evinced a foreign policy based on non-interventionism.  There's been some more-than-mild disagreements with Pape's scholarly conclusions, but to date he's articulated a very clear and consistent message warning about the risks of foreign interventions.

Which is why his New York Times op-ed today is so damn surprising.  His basic argument: 

A new standard for humanitarian intervention is needed. If a continuing government-sponsored campaign of mass homicide — in which thousands have died and many thousands more are likely to die — is occurring, a coalition of countries, sanctioned by major international and regional institutions, should intervene to stop it, as long as they have a viable plan, with minimal risk of casualties for the interveners....

Limited military force to stop campaigns of state-sanctioned homicide is more pragmatic than waiting for irrefutable evidence of “genocide.” It will not work in every case, but it will save large numbers of lives. It also promotes restraint in cases where humanitarian intervention would be high-risk or used as a pretext for imperial designs.

As the world’s sole military superpower, the United States will be at the center of many future debates over humanitarian action. Rather than hewing to the old standard of intervening only after genocide has been proved, the emerging new standard would allow for meaningful and low-risk military action before the killing gets out of control.

This is quite the conclusion coming from Pape, and, at a minimum, is hard to square with some of his prior work (though, it should be noted, it is consistent with what he wrote in April 2011).  I wonder how it applies to Syria.... oh, here's the relevant paragraphs: 

Syria is, I admit, a tough case. It is a borderline example of a government’s engaging in mass killings of its citizens. The main obstacle to intervention is the absence of a viable, low-casualty military solution. Unlike Libya, where much of the coastal core of the population lived under rebel control, the opposition to Syria’s dictatorial president Bashar al-Assad, has not achieved sustained control of any major population area. So air power alone would probably not be sufficient to blunt the Assad loyalists entrenched in cities, and a heavy ground campaign would probably face stiff and bloody resistance.

If a large region broke away from the regime en masse, international humanitarian intervention could well become viable. Until then, sadly, Syria is not another Libya. A mass-homicide campaign is under way there, but a means to stop it without unacceptable loss of life is not yet available.

I'm not sure how keen I am on military intervention into Syria right now, but if one employs Pape's own criteria, then these paragraphs seem like some serious hand-waving.  First, it's not a "borderline example" of atrocities.  The UN estimated more than 5000 dead back in December -- that meets the "thousands have died" criteria, and if the status quo persists, thousands more are going to die. 

Second, one could argue that Assad's ability to repress has been severely compromised.  If it's really true that Assad's forces no longer control half the country -- and that's a big if -- then creating an enclave would be easier than Pape suggests. 

Again, I'm not suggesting that the United States should do this -- there would be a lot of policy externalities and second-order effects to consider.  What I'm suggesting is that Pape's sudden embrace of humanitarian intervention -- and subsequent rejection of that option in Syria -- is just damn puzzling.

What do you think? 

The AP breathlessly reports that Punxatawney Phil saw his shadow today, which means another six weeks of winter.  Based on recent data, I'm wondering if Syria's Bashar al-Assad can say the same thing. 

Earlier this week the U.S. intelligence heads testified on Syria, and offered some surprising assessments:

Syrian President Bashar al Assad will not be able to maintain his grip on power in the wake of a wave of opposition that has dragged on for almost a year, America’s top intelligence officials told Congress today.

“I personally believe it’s a question of time before Assad falls,” James Clapper, director of National Intelligence, told the Senate Permanent Select Committee on Intelligence.  CIA Director David Petraeus added, “I generally subscribe to that as well.”

Clapper said “it could be a long time” before the Assad regime falls because of “the protraction of these demonstrations” and a Syrian opposition that remains fragmented.  Despite that, Clapper said “I do not see how long he can sustain his rule of Syria.”

Hey, remember how, a year ago, Clapper got into trouble for being honest about the state of affairs in Libya despite his honesty being a political inconvenience?  This is precisely why I find his testimony so credible. 

Recent facts on the ground buttress Clapper's assessment -- as does the Financial Times' David Gardner's reportage, which is chock-full of interesting facts about the Assad regime's constrained ability to repress:

The [Assad] regime believed it could crush the uprising, which began in mid-March after revolutions in Tunisia and Egypt, by the end of April and then in the summer Ramadan Offensive. It failed.

These operations revealed its reliance on two dependable units -- the 4th Armoured Division and the Republican Guard, made up of Alawites, the heterodox Shia minority that forms the backbone of the regime, and commanded by Mr Assad’s volatile younger brother, Maher. Whenever the Assads deployed units with a rank-and-file reflecting Syria’s 70 per cent Sunni majority -- as they had to if their offensives were to cover more than the hot spots of the moment -- defections ensued.

Even more interesting is Gardner's take on the evolving Russian position:

Russian diplomats…despite their rhetoric, have been talking to Syrian opposition figures and, according to the latter, carefully considering the Arab League proposals. As a veteran U.S. diplomat puts it, “there is a squishiness to where they [the Russians] are now”.

Russia does have a commercial interest in Syria, and arms the regime but the value of this depends on whether it will get paid, by a government running out of cash. It is only six years since Moscow had to write off more than $10bn in unpaid Syrian debts from the Soviet era.

Its real interest is in retaining its base facilities at the port of Tartus, its last naval asset in the Mediterranean. For that it will eventually need to reach an understanding with Syria’s future, not hold on to its past. Tartus is a long-term strategic asset. The Assads are no longer a long-term proposition.

This is new and interesting information, and does appear to track multiple reports that the negotiations in Turtle Bay will lead to an actual Security Council resolution on Syria. If Russia cuts a deal with the opposition and removes its veto from multilateral action, how long can Assad hold out? 

What do you think? Will Assad be out of power in Syria inside of six weeks or not?

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