Entries Tagged as 'Congress'

What Congress Really Thinks of Canada

May 12th, 2011 at 8:40 am 12 Comments

What do American members of Congress really think of Canada? Well, it depends on the issue. Indeed, a Fraser Institute study examining 1,830 mentions of Canada in Congressional debate between 2001 and 2010 shows mixed results.

When it came to Congress’ perspective on the Canadian health care system, border security, and cross-border trade (excepting pharmaceuticals), American members of Congress were generally critical and negative.

On the other hand, American politicians were generally positive about Canada in terms of defense and foreign policy – recognizing their neighbors as a strong ally – as well as being rather supportive about Canadian energy policy, especially additional exploration and development of the oil sands.

The authors of the study, Alexander Moens and Nachum Gabler, found that there was a good deal of misinformation about Canada. Canadian border security, for example, was often mentioned in the context of Mexican border security, as if there were no difference – and of course that meant that the perception of Canada on border security was generally negative.

An even more egregiously erroneous point that members of Congress referred to was the false assertion that the 9/11 hijackers infiltrated the United States through Canada. There were “7 comments made in the U.S. Congress [between 2001 and 2010] saying that one or more of the 9/11 attackers came from Canada. And factually, we know that none did,” said Moens.

At least a sense of friendliness in foreign affairs remained, however. Although there was some concern on the part of the authors that Canada had alienated the United States over the last decade by declining to partner with it in joint missile defense and over the war in Iraq, Congress’ view of Canada as a reliable ally remained strong. “Overall the sentiment was enormously positive, in both chambers and for both parties, in terms of defense and foreign affairs,” said Moens. “This remains an important resource for Canadians… to draw on this positive sentiment.”

Although there were some small differences between the Republican and Democratic parties, views of Canada were often bipartisan. “The Democrats were somewhat more negative than Republicans [on NAFTA and trade relations with Canada], but they were both generally negative… [and] on the border and the question of whether there was a terrorist threat emanating from Canada, both parties were quite negative,” Moens told FrumForum.

Moens also pointed out that he and his co-author were also surprised about how frequently Canada was talked about in Congressional debates, and that Congress mentioned issues of bilateral importance, but also considered whether policies Canada had already adopted would be good for the United States.

So: Canada, a model for the United States? Might be a stretch. But there’s still hope.

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Michele Bachmann: Bad Constitutionalist

April 13th, 2011 at 3:56 pm 10 Comments

Michele Bachmann’s recent statements on the budget fight show she still has a lot to learn about the U.S. Constitution.

In her criticism of the compromises being made, purchase she made a commitment to vote “no” on any CR that did not completely defund Obamacare . This stalwart stance to cut funding is par for the course. However, her reasoning for this commitment is not.

While citing her pledge to cut spending for the American people, Bachmann misses a key point regarding the Constitution: Michele Bachmann’s voters elected her.  Yes, her voters are American citizens but that’s where the similarity stops.  Reading her statements gives a sense that she’s speaking for all of the American people as the leader of a unanimous movement. This type of rhetoric ignores many of the Constitutional principles that have guided the development of our country.

What would James Madison think? In Federalist Paper No. 10, James Madison argued that representative democracies are favorable to a pure democracy structure because representatives can distill and refine the public interest.  That’s why we created a republic. Bachmann seems to have reversed this representative relationship: developing policy decisions and gaining her legislative authority solely from the public.

Representation isn’t devoid of its institutional boundaries. It’s upsetting that many congressional members have taken the Bachmann route in defending their legitimacy as policymakers.  The American people give extremely low approval ratings to Congress and Bachmann fashions herself and other Tea Party representatives as leading a fight to change the arc of history. Ostensibly, this fight would occur to change congressional boundaries and alter the way business is conducted in Washington.

Republics work well when the members understand that they have a responsibility to protect the institution and their constituency. Pretending that you have a national mandate as a congressional representative is simply a misunderstanding of representational democracy. Bachmann and others using her rhetoric should take pains to understand that America was founded this way to avoid a pure democracy.  Turns out, pure democracies don’t work very well.  If Bachmann thinks differently, well, I would ask Ancient Greece about that one.


Congress Gets Ready for the Next Budget Battle

April 10th, 2011 at 11:50 am 37 Comments

The 24-hour-a-day, seven-days-a-week coverage of the fiscally trivial work of the past 3 months is over.  The Continuing Resolution for Appropriations for FY11, passed at 11:55 p.m. Friday, five minutes before a government shutdown would have occurred.  Passage of the CR represents an important symbol for a small section of the American electorate at best and evidence of Congress’ lack of seriousness at worst.  But as far as the American federal debt goes, and as far as day-to-day economics proceeds, nothing happened.

The projected deficit for this fiscal year will be about $1.6 trillion.  After the CR battle that dominated headlines and cyberspace ad naseum, the projected deficit will be $1.567 trillion.  Given the inherent inaccuracies of such projections, even this late in the fiscal year, that is a difference that makes no difference.

In my last blogpost, I considered how a hypothetical 31-year old bond trader in Tokyo might respond to the budget follies in Washington.  They would be sufficiently alarmed by the chaos and inexplicable behavior of our political leadership and would have good reason to worry about how this same Congress would handle the looming debt ceiling increase drama.

Despite the deal, bond markets will be confused and rightly so.  Why did politicians create such noise over almost nothing?  Was it all symbolic?  With such an enormous debt burden bearing down on the country, why did they waste so much time?

The conclusion of the FY11 budget battle leaves bond traders just as apprehensive about how Congress will act on the debt ceiling increase as before.  They have in the back of their minds questions: “Are these folks serious?  Do they know what lies ahead?”

No one won in the FY11 confrontation.  Each of the three major actors suffered injury:

  • the Republican House reinforced an image of ideological rigidity that caused its approval rating to plunge from approximately 53% to the mid-30s in just 90 days
  • the Senate played a relatively minor role, both sides sticking to talking points reinforcing the behavior of their partisans.
  • President Obama, having failed to try to educate the public or lead public opinion in his State of the Union, once again seemed aloof and somehow disconnected to the problems confronting the nation.

But each of these three elements think they’ve won something important:

  • House Republican conservatives believe they have shown their strength and leadership, mistaking stubbornness for wisdom
  • Senators played around with balanced budget amendments and saving National Public Radio while America’s debt increased by about half a trillion dollars during the course of the debate
  • President Obama avoided any real commitment to the outcome, leaving him political room in the presidential race to condemn or endorse more comprehensive fiscal plans later.

It has been fashionable from the first days of Congress more than 200 years ago to criticize the institution and its denizens.  It may well be that most members of Congress believe that this most recent spectacle will soon flee from public memory and that any damage to members will soon dissipate. After all, folks always complain about politicians, but most of them get re-elected on a regular basis.  The same thing, many members may think, will happen this time.

Congress focuses so intently on the audience back home, and prays so fervently that memories remain short, that it fails to notice another audience–our 31-year-old bond trader in Tokyo.  He buys and sells billions of dollars a day in U.S. sovereign debt.  If and when the global bond market begins to lose confidence in American fiscal seriousness, our bond trader wants to be the first to sell, not the last.

Our 31-year-old bond trader is neither mythical nor imaginary.  He really exists. Even in the middle of the tragedies his own country suffers, he concentrates on his task: to make money.   And, he watches closely how this incomprehensible American government will handle the necessity of raising the public debt ceiling, now $14.29 trillion, later this year.

So far, he is far from impressed or re-assured.


Budget Fight May Freak Out Markets

April 8th, 2011 at 5:00 pm 10 Comments

Whether the federal government “closes down” for this weekend remains unknown at this time.

But for the sake of discussion, ampoule let’s assume that Congress fails to agree on a Continuing Resolution for Appropriations for FY 11.  Non-essential personnel in the government will then take the weekend off, waiting to see if they can return Monday or wait a few more days.  The Washington Monument will close during the weekend, but for the most part a week-end shutdown presents no major economic or policy complications.

That’s the general feeling of many in Congress and in the rest of the country.  Shut it down, nobody will notice, and we will have made our point.

Let’s imagine another scenario:

Some people will notice that the American Congress didn’t pass the bill.  They won’t understand what point was made nor why.

Let’s call these people bond traders who work for major financial institutions globally.

Imagine you’re a 31-year-old bond trader in Tokyo, responsible for a small portfolio of $7-10 billion.  Your understanding of the American political system comes only from the books you read and the American traders with whom you do business.  Your American friends tell you, “Don’t worry, they will pass this bill and things will turn out all right.”

But, what happens to the value of your portfolio as Congress dithers?  Will traders at other firms get nervous and begin to sell their positions?  If they do, should you try to beat them out the door by selling first?  If you are caught as the last one out, losing 5-10 per cent of the value of your holdings, you will lose your job.

So, you begin to sell, reducing your risk.  Other traders in the Far East note what they sense is the beginning of a selling trend.  They begin to protect themselves by selling their American bond holdings.  By the time London markets open, computer models at financial firms are flashing a “sell” sign.  Bond traders in London hedge their bets, selling or buying insurance against loss.

By the time New York markets open, and most Americans are awakening, sophisticated computer models all over the globe are signaling “sell.”

Overnight, the 10-year United States note dives in value, with yield going from 3.4% to 4.4%, an almost historic move in 24 hours for the world’s largest debtor nation.

Central banks throughout the world begin to buy as many bonds as they can.  They try to “intervene” in order to stabilize both the fixed income and currency markets.  Lending dries up globally as risk of non-payment rises to unprecedented heights.

Now, that’s just a scenario.  It’s similar to a scenario that in a very minor form played out in the 1990s and ended in the bankruptcy of Long Term Capital Management, a hedge fund.  That bankruptcy threatened a major disruption in markets resulted in a major intervention.

Will bond traders react that way to a short-term American government shutdown this weekend?  Probably not.  The numbers involved are trivial and the world remains a dangerous and unstable place.  So, most investors still seek the “safe haven” of the American Treasury market.

Don’t forget though that this FY11 budget battle is a rehearsal for other really important debates that will happen later this year.

Our 31-year-old Tokyo bond trader will remember the unfathomable behavior of America’s Congress in the FY11 Continuing Resolution matter.  He will become a little leery about risks to his portfolio.

And, when the federal debt ceiling is reached in May or June, and our bond trader sees what he thinks is the beginning of another round of irresponsibility on the part of Congress, he will be wired to sell at the first hint of indecision on the debt ceiling increase.  He will believe that he has seen this movie before.  And, he doesn’t want any part of it.

Markets are driven by psychology as much as any other factor—fear and greed.

When fear overcomes greed, market participants run for the exits, the Devil take the hindmost.

If such a scenario plays out in real life, the result could make the Great Recession of the last three years look minor in comparison.  Perhaps Congress will forget what happened when the House killed TARP the first time through—markets plunged disastrously within minutes.  Markets recovered when the House said, “Oops, never mind” and passed TARP.

So, is a shutdown of the government this weekend really a matter of great concern?

Only to the bond market that trades trillions of dollars of debt each week, and in whose tender embrace the American economy more and more entrusts itself.  Those markets are getting nervous.  They may soon get very nervous.

As James Carville once famously said, “When I die and come back to earth, I hope I come back as a damned bond trader.”


Why the Balanced Budget Amendment is No Good

April 3rd, 2011 at 11:01 am 11 Comments

The latest Balanced Budget Amendment (BBA) proposal is not only an unworkable fiscal monstrosity but also the most fundamental change to our system of government ever proposed since the adoption of the Constitution. It would make the American system more like a European parliament and take away the power of the Presidential veto.

Entitlements currently consume a double-digit percentage of the GDP and are going to grow fast as the baby boomers start collecting them, for sale so the federal budget in the coming decades is going to be neither balanced nor under 18% of the GDP. We also know that cuts to current benefits are not going to happen. Not only Democrats but even conservatives such as Marco Rubio (R – The World’s Biggest Retirement Community) will do everything necessary to prevent that from happening.

So what is actually going to happen? The proposed text says that both restrictions can be disregarded if two-thirds in each chamber vote to override the restrictions.

In other words, salve for all practical purposed the BBA does not mean a balanced budget but merely means that the budget will have to be passed with two-thirds majorities rather than simple majorities (the same will be true for tax increases).

One unintended consequence of such budget procedure might be a massive increase in government spending, since congressional leadership will have to bribe a lot more members (both in the majority and minority) with pork barrel spending in their districts. Another unintended consequence is much more worrisome. If all budgets require two thirds majorities, the presidential veto is irrelevant. Members of Congress will have to negotiate only among themselves, but not with the executive branch. The legislative branch will have much more control over cabinet departments than now.

For example, Congress will be able to shove any weapons program down the Pentagon’s throat regardless of whether the military wants them or not (much of pork barrel spending will probably be disguised as defense spending). The balance between the branches of government will shift greatly. We will move much closer to the European parliamentary system. If the Republicans are actually serious about this proposal, then instead of holding a vote in Congress and passing the amendment to state legislatures they should go down the other path for changing the Constitution and call for a new Constitutional Convention.

The magnitude of change demands nothing less.


The Beltway’s Libya Flip-Out

March 23rd, 2011 at 6:59 am 22 Comments

I just can’t seem to help myself. I may be stubborn, discount stupid, or congenitally contrarian–or some combination of all three. I find myself having been frustrated by the Obama Administration’s handling of the crisis in Libya, but even more upset with its critics–both right and left.

My view for some time was that the U.S., preferably in concert with our allies, would intervene in the growing Libyan crisis. I wish that we had acted sooner. My rationale for this position is uncomplicated: Qaddafi is much worse than a very bad guy. Over the years he has been responsible directly for the deaths of a great many Americans–civilian and uniformed. He committed mass murder over Lockerbie, Scotland. He has been a constant source of violence and instability in the Middle East.

When people in his country began to revolt against Qaddafi, we gave them verbal encouragement but apparently not much else. Only when it became clear that a mass slaughter of rebels and sympathetic civilians was imminent did we act with force–impressive force at that. I applaud and support what the President has done, even if it came a week or ten days later than I wished.

But now we are hearing a cacophony of complaints from Capitol Hill and among TV’s talking heads. There wasn’t enough consultation (is there ever?), the military operations underway are either too forceful or too limited, Obama has ceded too much authority to our allies or he has acted too unilaterally. The bitching and moaning is constant, shrill and ubiquitous; I also think it’s misdirected, ill-timed and decidedly unhelpful.

And in a town and time where every claim and charge, no matter how dumb or outrageous, is covered and repeated on cable TV as if it had merit, Rep. Dennis Kucinich (D-OH) is able to claim some level of dubious distinction by calling for the impeachment of the President. Good grief!

Republican kvetching is just as irksome–some of it is just plain whiney and some is terribly hypocritical. Let’s call the roll: Lebanon, Grenada, Somalia (we went in under Bush 41 and came out under Clinton), Panama, Iraq (twice), Afghanistan… Have I missed any? And while I argued against or was uncomfortable with a couple of those, I and other Democrats argued in support of most–often putting us at serious odds with others in our party (the center of gravity within which is, unfortunately, instinctively and decidedly against the use of force).

Rather than getting all in a lather right now, why don’t critics refocus their anger and instead concentrate their mental energies on the hope that Qaddafi’s drive to squelch the rebellion and execute its participants is halted and reversed. Let’s all hope, too, that the intervention results in as few American, Allied and civilian casualties as possible. And whether or not it’s an official part of the mission, I invite others to join me in hoping that Muammar Qaddafi ends up at the wrong place at the wrong time, and that the world is thereby spared any more pain due to his evil calculations and hostile behavior. As for Dennis Kucinich, I just want him to sit down and be quiet.


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Why Did Obama Bypass Congress on Libya?

David Frum March 21st, 2011 at 11:17 pm 33 Comments

It’s very strange and odd that President Obama did not seek congressional authorization before launching strikes on Libya.

In his mind, he may have been signaling: this is a humanitarian police action (like Somalia or Bosnia), not a real war (like the Gulf war, the invasion of Afghanistan or the invasion of Iraq).

But he opened the door to his critics alleging: Obama is a liberal one-worlder who thinks that a Security Council vote can substitute for American democratic processes.

Did he possibly fear that Congress would say No?

Is he hoping that he’ll wrap this thing up faster than the debate would have required?

Is he signaling inner discomfort with his own decision, a preference for talking about almost anything else?

Or is he just recklessly forgetting the old rule: if you don’t invite them to join you at the takeoff, they won’t be there for the landing?


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Senate Dems Rebel on Spending Cuts

March 10th, 2011 at 1:30 pm 30 Comments

The failure of both Democratic and Republican spending cut proposals in the Senate wasn’t much of a surprise. The Republican proposal–a huge exercise in chutzpa that tried to undo virtually every major Obama administration policy through a budget measure–was never a serious one anyway. The Democratic proposal, a very modest–.18 percent of the federal budget–proposal was serious (in that it could have been signed into law) but would have done nothing, even symbolically, to rein in the huge deficit.

The one real surprise, however, was the total failure of Harry Reid–typically a pretty good vote counter–to keep his own caucus in line. In all, ten Democrats and one independent member of the Democratic caucus voted against the package that Democrats proffered. Since most of these “nay” votes came from more centrist members of the party–Ben Nelson (D-Nebraska), Joe Manchin (D-West Virginia)–were both nays, it shows that Republicans might well be able to muster 60 votes for a credible spending cut package. (Only one truly left-wing Senator, Vermont Bernie Sanders, voted against the package.) And, for those that favor fiscal restraint, this is very good news.



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Hold Off on the Budget Back-Slapping

March 3rd, 2011 at 5:49 pm 5 Comments

Legislation appropriating funds to keep the federal government open for business for the next two weeks has passed the House and Senate and been signed by the President. What in “normal” times might be labeled a modest achievement is being hailed by some as a breakthrough event, cheap as proof that a horribly polarized political structure can be made to work, decease at least temporarily.

Maybe.

It is important to keep in mind that Congress has not yet figured out how, physician or at what level, to fund the remaining six months of FY 2011. The $4 billion cut this week is a pittance compared to amounts being talked about going forward. And while one could argue that, contrary to Republican claims, the $4 billion in cuts had already been proposed by the Obama  Administration (which is not exactly true–some Administration “cuts” were really re-directed to other areas), the President certainly acquiesced to the outline of the package.

These factors–as well as a measure of public impatience–helped bring about this week’s accomplishment. But the same factors cannot be counted on when the next FY 11 funding vote is scheduled. And they sure won’t be there when the debate turns to FY 2012.

More important than all of this, however, is the simple fact that this week’s showdown and the almost-last minute agreement were unnecessary dramas. Key players in both the House and Senate, as well as among the “third house” (lobbyists), insist that a deal was entirely possible last year, during the post-election lame duck session of the last Congress. To be sure there were hurdles to overcome, but they were not insurmountable. Many members of the 111th Congress preferred to clear out the tangled appropriations situation of last year and allow for a clean slate at the start of 2011.

But then several Tea Party adherents among Senate Republicans got steamed up about the bill, and about not wanting to “give” President Obama another victory. That was followed, predictably, by Senate GOP leader Mitch McConnell backing away from previous signals that his side of the aisle could deliver necessary support. Then the Administration began folding its tent, apparently satisfied with the tax cut deal, the end of “Don’t Ask/Don’t Tell” and the approval of the START Treaty with Russia. As a result, 2011 has started out messier than need be.

It is also true that, by allowing the appropriations fight to continue well into the New Year, the President has allowed the opposition to further define the parameters of the debate over fiscal policy. His overly timid 2012 budget proposal–and its flimsy packaging– have only made things worse.

We can hope that a shared commitment to governing has started to set in within the federal district, but we should hold off on any celebration for a while longer–just in case.


Chu’s Energy Research Hijack

February 26th, 2011 at 11:03 am 14 Comments

Nobel Laureate and Secretary of Energy Steven Chu seems to have taken a page from early 20th century labor leader Samuel Gompers:  at every turn he screams for “more.” Even as the Obama administration and both parties in Congress pay lip-service to budget cuts (while doing little to enact them), sickness Chu has taken to running around with a Power Point calling for his department’s budget to grow in almost every area of its operations. For all intents and purposes, order Chu has a proposal to turn his department into a huge government-run research and development firm.  Although intended as an outline for growth, illness Chu’s lucid presentation can also be taken as an outline for slimming his department and cutting government.

The great bulk of Chu’s proposed spending increases and billions of dollars in new loan guarantees (off budget for now, but a taxpayer liability if they’re not repaid) go for applied research and product development. Chu’s department would work to put 1 million electrical vehicles on the road, build new nuclear reactors, establish new “Energy Innovation Hubs,” and open new “Energy Frontier Research Centers.” The Advanced Research Project Agency-Energy, which tries to develop innovative new energy-related products would also get a big boost in funding. So would efforts to improve the overall reliability of the electrical gird and weatherize individual homes (states still have millions of leftover dollars from stimulus-related efforts to do this.) Worthwhile or not on their own terms—and, certainly, some of the new technologies proposed for investment seem like decent ideas—there’s little reason to think that the government ought to be doing any of this. Since they have huge theoretical benefits–no fuel price fluctuations and little or no pollution in the traditional sense–any person or company that figured out an efficient, low-cost way to harness any “green” energy source would make billions of dollars.  Many of the nation’s largest and most profitable companies are in the energy business and have enormous incentive to do energy research themselves.

Taxpayer subsidies let the government decide where R&D dollars get spent.  Furthermore, quite simply, the government has never been any good at developing actual consumer products of any kind. While U.S. government labs and projects have helped in developing the underlying technologies that created everything from the Internet to nuclear power, the private sector has always done much better than the government in bringing new fundamental discoveries to market. Government efforts to develop much better, cheaper housing construction methods (Operation Breakthrough), gasoline substitutes (Synfuels), and a “car of the future” (Partnership for a New Generation of Vehicles) produced nothing useful at all but ran through millions of dollars. The handful of useful products to come directly out of publically financed institutions, like NCSA-Mosaic, the first useful web browser, have typically come from creative people working on projects they thought were interesting rather than the government-mandated task. Even if Chu’s DOE somehow succeeds in developing useful consumer products, the financial benefits of having created them will accrue only to profit-making corporations, not taxpayers as a whole.

All this isn’t to say that it’s possible or even wise to trim the federal budget by the entire $30 billion DOE spends. When the department secures nuclear facilities, cleans up environmental messes that the government itself has made, and does basic research, it is performing necessary government functions. Nuclear security is certainly a government responsibility and it’s likely that the $11.8 billion in proposed spending is worth it.  Likewise, it seems pretty cut and dry that the government should, indeed, spend most of the $6 billion or so it devotes to cleaning up environmental messes its own work has produced.  Finally, basic research—devoted to understanding the fundamental laws of nature without trying to solve any particular problem—has never been done at a large scale without public sector support. Thus, the $2 billion–a 24 percent increase–proposed for “basic energy research” is probably a decent investment. Of course, none of this spending is beyond question and some might be done better outside of DOE.  But even if one rejects the Obama administration’s proposed increases in all of these “necessary” areas and then cuts spending ten percent, that still leaves somewhere around $17 billion in truly necessary spending on current DOE projects. This is still a huge cut from the $29 billion Chu wants to spend.

A look at Chu’s DOE budget, in short, reveals two things. First, that there is, indeed, plenty of wasteful spending that the country would be better off without. Second, even a hugely bloated agency does carry out some valuable, core functions that probably shouldn’t go away.