Stories by Jeff Cimbalo

Jeff Cimbalo is a Virginia lawyer. He worked on books and articles on American politics, democratization, and the "clash of civilizations" with former Secretary of the Navy John Lehman and Harvard professor Samuel P. Huntington. He himself has written for Foreign Affairs, The National Interest, The Wall Street Journal, and other publications, mostly on European affairs. He graduated from Georgetown, Harvard's Kennedy School of Government, and the University of Virginia School of Law. He is a member of List E of the Brussels Bar and can be reached at info@cimbalofirm.com

Is California the Next Greece?

May 18th, 2010 at 10:38 pm 35 Comments

Last December, capsule the Los Angeles County Chief Economist, Jack Kyser, said “no one really knows what will happen” if California defaults on its over $60 billion of general obligation bonds backed by the state’s general fund.  Now we know.  Greece — for the moment running deficits of about one-eighth of its GDP — is a useful example to the American experience again, probably for the first time since the Founding.

California, like Greece, has run out of options.  Their circumstances are eerily similar:  theoretically independent sovereigns in a federation-style broader economic system, beleaguered by decades of an overspending legislature, saddled with debt, and without the credit to borrow any more money.  Both can repudiate their debt in a way only sovereigns can.  Add their large and powerful public employees unions for the maximum possible discord.  Their federation mates, here the United States and the eurozone, are deeply concerned about both this particular situation and the signals they will send to the next special pleader with the same situation inside their respective group, such as Portugal or New York.  Both, for reasons of instilling confidence in their economies, want also to create the impression that all is and will remain well.

The same structural impediments to fixing the underlying problem that Greece’s bailors can point to also apply to California.  Neither the European Central Bank nor the European Union itself can control Greek taxing and spending, even if it is above what Greece has agreed to by treaty.  By rule, other eurozone countries cannot loan money to Greece when its deficit is over its agreed limit.  The American federal system, including with constitutional law helping delineate it, restricts the conditions the federal government can place on state legislatures in exchange for federal money, even if there is a decision to help.  The biggest difference between the U.S. and the EU is that the American federal government can tax its citizens and give the money to a state.  But expect to hear calls similar to George Soros’s as to Europe and the tax power that, if only the federal government were more empowered (i.e., if U.S. states could declare bankruptcy like localities can, which would allow federal courts to arbitrate state obligations) this problem would be considerably less dire.  It may not be a popular argument right now, though, that the answer to governmental failure is more power for the larger government.

But even if some arrangement can be worked out that gives the federal government satisfactory guarantees that the money can be repaid and the problem actually solved at the state level, whether it is prudent or fair to do so is the identical question in Frankfurt and Washington.  In neither the Greek nor Californian case do we consider a greater benefit to all in a bailout other than the self-evident recognition that it would be bad if a component of the federation should not be able to pay their debts as they come due.  In other words, solving the problem would only make Greece or California temporarily better off, but would prevent additional harm to their neighbors.  How much Germans should have to pay for Greece’s problems to maintain a eurozone is a slightly less difficult question than America’s, since one might have guessed (as Soros claims he did) that a currency without a treasury might run into such problems.

But to a Virginian, who for hundreds of years could have never conceived of his money being used to help fund a profligate, other, state government, the question produces even more problems than the future behavior of California or its successors.  Even if there were enough money to go around, which there is not, the encouragement of political blocs within federal or Union politics based solely on state government bailouts is so distasteful as to merit suffocating the notion in its crib, both here and there.  That another state needs better leaders is not something any given state can prevent, so the American system seems to oblige the well-run state very lightly, and likely ought to.   The eurozone may disagree for Greece.

This timing presents a unique opportunity for the US.  If one wants to solve the states’ budget crises without creating incentives for California or another state government to become a permanent welfare case for all the others, America has no better laboratory for how to deal with California than how the eurozone will deal with Greece.  In that sense, too, it is far preferable that their crisis broke first.

France and Britain: Together Again

July 14th, 2009 at 10:42 am 3 Comments

On July 6, Gordon Brown and Nicolas Sarkozy met in Evian and issued a joint declaration on defense and security, in some ways similar to the St. Malo declaration after a similar meeting in 1998.

What a difference eleven years makes.

In 1998, their statement focused on giving the European Union the structure and forces to allow it to “make its voice heard in world affairs,” while allowing those members to act alongside NATO if, like the UK and France, they are a member of NATO.

Since St. Malo, and after the successive expansion in this sphere of the European Union through the Amsterdam and Nice Treaties, as well as in anticipation of what most feel will be the Irish approval of the Lisbon Treaty, the question last week was not whether the EU will act, but how.  This new declaration gave little guidance on the matter.

First, it is enormously confusing as a diplomatic matter to have a joint communiqué on huge strategic issues that need to be voted on unanimously by the Union.  Thus, if any of the declaration strongly rings true or false to the reader, it is worth mentioning that none of it is Union policy until the Union itself votes on the matter.  This is true despite the level of Anglo-French solidarity on any particular issue.

Even so, the UK and France gave some clues as to how they view their position in the Union firmament as regards security affairs, which may itself explain its lack of detail on EU decision-making.  The preamble of the statement emphasizes their common role as the only permanent members of the UN Security Council in the Union and their common perception of the threats to the two of them, though Union rules nearly require, and will require after Lisbon, that both maintain the Union position if there is one, including their vote on the Security Council.

Their leading role in the first EU naval operation, Op Atalanta, is also noted.  Later, they remind the reader that “France and the UK are the two largest European investors in defense.”  And their serial mention of NATO and the Atlantic Alliance, including France’s participation in NATO’s military structure, “which provides an opportunity for reforming NATO and strengthening our Alliance,” later defined as a “leaner” NATO.

Strangely, little is said about Atalanta’s other member state participants, including Greece and Spain, or EU mechanisms that have allowed such joint task forces to be formed and operate effectively, or about the Lisbon Treaty, which promises to significantly help this process from the top down.  Perhaps this hesitation stems from France’s “no” vote on the European Constitution or Brown’s own forgotten promise to himself arrange a referendum on the constitution, most all of which, incidentally, made it into Lisbon.  Either way, the Union, seen as a collection of its member states, got very short shrift in the declaration.

Some things the two did address also bear mention.  First, they point to goals of “a strong trans-Atlantic relationship and improved relations with Russia,” as though the former is as much in peril as the latter, and that both are perfectly compatible.  These goals are laudable, but largely separate and, to the extent improved relations with Russia mean prejudicing certain Eastern European NATO allies or prospective ones, inversely related from a Western perspective.  And, to the extent NATO/EU relations actually need to be “improve[d]” as declared, no outreach to non-Union NATO members is explicitly contemplated, nor any details or methods by which to make that happen.  It can be rightly assumed that the Union members of NATO have had significant impact on such relations for years.

Next, coming from two of the three members of the “EU three,” which has been at the forefront of Western efforts to convince Iran that it should abandon its nuclear ambitions (Germany is the other), the declaration is at best incomplete.  They state that they are determined not to allow Iran to gain access to nuclear weapons, that they hope Iran will “choose cooperation rather than isolation and engage” with the West on the matter, but do not say how Iran might be isolated if other permanent members, say Russia or China, might be ambivalent to Western desires on the matter.  The two state that they “stand by those in the region who would feel threatened by a nuclear-armed Iran,” but if I were Israel, I would not hold my breath.  My copy of the declaration, from the 10 Downing Street site, offers little hope that such agreement on approach has been reached but kept secret, instead containing the parenthetical “Iran issues:  to be adjusted either here or in press conference.”

In all, it may well be that Britain and France have already positioned themselves inside the Union as the leaders in defense and foreign policy action, but it may not be the apex of diplomacy to tout that to its Union brethren.  It is telling, though, that no mention whatever is made of any “European interest” at all in the declaration.  So, given the new decisional arrangements that are likely to occur after the Irish re-vote this fall, it is impossible to tell by the declaration how the Union might come down on any or all of the issues discussed.  For the two that pushed so hard and so successfully for mechanisms to facilitate a European Security and Defense Policy in 1998, they maintain a studied ambivalence to its limitations, if there are any, on the formulations and expressions of their own interests.  After Lisbon, they may fondly remember the days of St. Malo, when their own joint opinions seemed to matter inside Europe, if not also the Union, a good deal more clearly.

Obama’s First International Goof?

February 13th, 2009 at 12:11 pm 7 Comments

Last August, find Poland and the United States struck a deal to base a battery of U.S. antimissile systems, online consisting of about 10 missiles, prescription on Polish soil. To make the deal, Poland had to fend off opposition from both Russia and the European Union.

Now, after Poland has toughed its way through these risks, the Obama administration is hinting that it may renege on the deal.

At the Munich Security Conference on Feb. 7, Vice-President Biden opened this escape hatch from the Polish agreement:

“We will continue to develop missile defenses to counter a growing Iranian capability, provided the technology is proven to work and cost-effective.”

The escape hatch is the conviction of many inside the Obama Administration that missile defense can be tarred as unproven or prohibitively expensive.

Yet both objections to the Polish arrangement are empty.

The threat to be deterred by the Polish battery is an accidental, difficult to attribute, or other small nuclear launch toward Europe from, say, Iran.  The Polish deal uses off-the-shelf technology, and is the best defense possible to the particular threat.  Even if the systems do not actually successfully intercept such launches if needed, they may have a significant deterrent effect, since Iran might not risk launching its one or two operational missiles in the way of such interceptors.

Biden’s presumed doubts about missile defenses predate all those occasions, however, and seem to have been formed and ossified around 1985, when there was much more talk (and doubt, too) about a comprehensive missile “shield.”  They have little to do with the technology as it stands today and its proposed very limited use against small strikes.  As to cost-effectiveness, UAE seems to believe that its $4 billion on new U.S. missile defenses is well-spent.  The Administration has done nothing to discourage that on the grounds of efficacy or cost-effectiveness to that ally.

Rule Number One of international politics is to know who your friends are.  And Poland has been a great one, participating jointly with the United States in virtually every enterprise they have been asked to do, including NATO and Iraq.  To now scuttle the relatively modest missile defense and military modernization proposal just because Russia and/or the EU might not like it will make Poland look foolish, and for worse than nothing, since the Administration would have needlessly cast doubt on existing technologies intended to deter nuclear strikes from a proliferating region.

The late presidential scholar Richard Neustadt noted that new presidents typically encounter a critical foreign policy decision early in their term that they flub because of lack of preparation or its complexity (taking the name from the Bay of Pigs, Kennedy’s particular one, he called them “piglets”). If Biden spoke wrongly for the Administration, Obama himself should say so, and right away.  If his words were Administration policy, it is in for one diplomatic and strategic piglet on top of another.