Elizabeth Warren

“You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

“Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

Killer Tea Party

It kills me that somehow the right-est wing of the conservative movement, a movement comprised of lower-to-middle income earners (and a small percentage of top earners) has some how ascribed to the belief that laissez faire economics somehow benefit them. When in fact, it is those very policies that led to the circumstances keeping people jobless for almost three years now.

9.1%

OK people. Relax over the jobs numbers. While there are some negative signs in the economy now, there are also a lot of negative things going on in the world right now. I do not think that the economy is inherently going soft, but rather is grappling with the effects of several large-scale disruptions which would be significant even in a time of economic robustness, e.g. high gasoline prices, severe weather events (frequent tornadoes, major flooding in U.S.), the Japanese earthquake, ect.

There are ups and downs in every recovery. There should be no concern about a double-dip and people need to stop fear mongering. Remember what the same austerity hawks said just weeks ago about long-term U.S. government solvency? Well today treasuries also dipped below 3%, proving that investors actually think long-term U.S. debt is their safest bet right now.

Wake Up Detroit; Or Why Can’t Wait Any Longer

Source: Skyscrapercity

President Obama heads to Ohio today (see: crucial electoral state) to tour a Crystler plant and most likely speak about American ingenuity and innovation. This will coincide nicely with the release of a government jobs report, which will probably show that the official unemployment rate is still hovering around 9%, with a possible increase, in light of this week’s lackluster report showing 38,000 jobs added in May. The President will talk about U.S. manufacturing and job creation through out innovating the competition, blah blah, all things Crystler should be commended for.

The bigger story behind Crystler, however, is that just three years ago it was included in the American car manufacturers who were facing insolvency. Detroit, also known as the Big Three, were deep in the red after decades of mismanagement. They were producing cars which really had no market. U.S. autos were viewed as low quality vehicles, and faced the unfortunate dichotomy of being perceived as more expensive than imports from Japan, with not nearly the craftsmanship of imports from Germany.

In 2009, a young President Obama took the controversial step to put these companies through government sponsored bankruptcy, as well as buy large portions of automotive stock. This gave the Big Three time to retool and again become competitive in the automotive manufacturing field. To GM’s credit, they are now inching into the black, posting consecutive quarterly profits and rebounding from years of losses.

Politico is carrying a story today suggesting that the Obama Administration and the Big Three are on a collision course, as the President looks to raise fuel standards on American cars. Already, in 2009, the President signed a rule that raised fuel economy standards to 35.5 miles per gallon by 2016. The new plans could raise standards for cars and light-duty trucks to as high as 62 mpg by 2025. Obviously, car manufacturers are reacting negatively to this initiative. Their argument, ostensibly, is that a market system in which consumers have free choices and limited resources, higher gas prices will push people to choose cars with higher MPG, thus gradually eliminating demand for other, lower MPG cars and trucks.

There are two things that this argument fails to account for, one is national and short-term and the other is international and long-term.

First, this argument assumes rationality on the part of the consumer. However, evidence would suggest that American consumers tend to be short-sighted. Every time there is a period of high gas prices Americans clamor for higher MPG cars and slightly alter consumption habits (see: 2006, 7, 8). Once crude oil drops below a certain dollar level, gas is off the immediate concerns list and Americans are much more willing to entertain vehicles with lower fuel standards. Cars with higher fuel standards or cars with alternate engines, like the Toyota Prius or Chevy Volt, are often more expensive than their gas-guzzling counterparts. The rational consumer would clearly take the upfront cost increase in favor of long-term savings through inevitable high gas prices, but the average American consumer rarely demonstrates that foresight (evidenced through Volt and Prius sales).

Only 10-15 years ago, there was much less concern for fuel standards. My first car was a 1998 Dodge Durango which cruised at 9 miles to the gallon. While there has been an increase in fuel standards over time, these are not the result of market initiatives, but economic strategy.

The second thing that this market incentives strategy fails to account for is the larger role that gas and oil play in global politics. America is very much invested in the world, for all kinds of reasons, one of which is clearly to promote our interests. Unfortunately, one of our core interests for 40-plus years has been the safeguarding of low-cost crude oil production in the Middle East and North Africa. It is not possible to overemphasize how oil constrains U.S. action in the region. It is one of the largest reasons for our close relationships to partners who do not share our ideological visions for the world, and it is one of the reasons for our unfortunate problems in facing global terrorism.

The U.S., and the world, therefore cannot afford to wait for the American consumer to wise up to the fact that cheap gas is never going to be the future. It is over. The only way we can reasonably conduct ourselves and prepare for a future with limited resources, is to pressure manufacturers to raise fuel standards and invest in alternate energy engines.

Thomas Friedman, who I am not a personal fan of, writes about this all the time in his weekly NYT columns. I disagree with a lot of his arguments, but I am not an idealist. Rather, realists must recognize that if you want the U.S. to stop wasting blood and treasure in places like Libya, Iraq, Saudi Arabia, than you must change the habits of oil consumption in the United States. And the Big Three, who only exist today because of the Obama administration, must stop delaying.

The Golden Years

David Rothkopf asks a great question this morning which can seemingly serve a larger purpose than he intends. American fatalism , or rather defeatism, is pervasive. People of all political leanings call for the decline of American hegemony, the rise of a new global order, the end of the West. But are these fears well founded?

The “decline” syndrome is cyclical, coming around every 10 years or so. Just like a person who faces existential questions at big points during their personal life, such as turning 30. As America faces uncertainty and challenge people are quick to prophesies the great end of American well-being. During the Cold War, it was the USSR who was bound to out-pace U.S. military production. Throughout the 1980s and 1990s Japan was going to win the race in the production of information technology. In 2001 it was al-Qaida, and in 2011 it is China.

As we enter a heated political season, politicians and commentators will undoubtedly use the “golden-era” effect to earn cheap points by hearkening back to some earlier rose-colored decade where America had no enemies and everyone had white picket fences. But in reality this was never the case. America has had no golden years. For the past century, the only certainty in our world has been that America faces enemies, domestic and foreign, as well as economic uncertainty. But that is no reason to sour on the idea of our future.

Just because the next 10 years might be different, certainly does not mean they will be worse. America is emerging into a new century whilst ending two foreign wars, battling through a tough economic recession and dealing with long-term debt issues. In my honest opinion, the next 5-10 years look pretty bright, as we will take a national pause, collect ourselves, regroup and reassess. Try not to throw your chips into the ring with the moral declinists. The great thing about America is it’s always morning.

Frustration

Don’t you just love it when you work on a project for weeks and then INSA barges in and messes it all up?

“Unknown Unknowns”

Insomuch as I have disagreements (deep and veracious disagreements) with the neo-conservative movement idealized by the Department of Defense in the early George W. Bush years, Politico did a thoughtful interview with former Secretary of Defense Donald Rumsfeld recently, entitled “A Decade of Fighting Terrorism,” which I recommend watching. He is a wealth of knowledge, with a political career that spanned almost five decades. He is the second longest-serving Defense Secretary after Robert McNamara, served terms as a Congressional Representative and White House Chief of Staff.

He skirts around the obvious questions and spends a little too much time overtly plugging his book, Known Unknowns (and his website), but his ideas about reform in the DOD and his thoughts on the U.S. intelligence community are, in my opinion, accurate.

The only unnerving part about the interview for me is the cavalier nature with which he speaks about the failures of the Iraq War. I recognize it cannot be mentally healthy to spend the rest of your life killing yourself over it, but his recommendations and decisions have effected the lives of millions and it should not be taken lightly.

Update 

Well it looks like the Rumsfeld interview is part of a larger defense-related series of interviews by Politico. This morning is Rep. Peter King (NY). This is the best find all week.

Finally

Via BBC.

The EU has finally agreed to issue a set of sanctions against Syrian President Bashar Al-Assad and officials in his regime. Whether this development is a direct result of President Obama’s speech last week is indeterminable, however, what we all knew before was that EU sanctions would be a painful blow to the Assad family. Unfortunately, while this human rights atrocity drags on (at least 44 protesters reported dead this weekend), there are not many tools in the U.S. toolbox to shape events. In terms of an economic or diplomatic relationship between the U.S. and the Syrian government, there is none. The U.S. had only normalized relations in the past year after suspending the embassy in 2005 as a result of reported Syrian assistance in the 2005 assassination of Lebanese Prime Minister Rafik Hariri.

The Syrian government had much deeper trade relationships with Eurozone countries. Likely, the effects of these sanctions will not be clear. But at least the EU has finally gotten around to backing up their rhetoric.

Pandering

Source: Israeli Press

Takeaways from yesterday’s speech:

1. After years of pursuing a strategy based on pragmatism, the President  elevated enhancing democratic reforms and strengthening human rights to a US core priority for the region. This, to me, is the most critical portion of the strategy and has gone rather unreported by the press. While the President went the entire forty or so minutes without mentioning the Saudis once, a commitment to democratic reforms ties our hands in a lot of unseen ways in the region. The rhetoric was more reminiscent of a W. speech than a typical O. speech. Could this mean that the Clinton/Powers team has finally won out over the Donilon/Gates counter-weight? Maybe.

2. Syria and Iran and.. Egypt? The President spent the most time talking specifically to Syria, Iran and Egypt as part of a carrot and sticks approach. He issued his strongest words yet against Bashar Al-Assad, plainly stating that he had a choice between leading democratic reform or “stepping out of the way.” The President also chided Tehran for repressing domestic unrest and reminded the country of the Summer 2009 green movement in Iran in which the world saw brutality and violence on unarmed protesters.

As an example to countries who may be considering the cost-benefit analysis of transition, the President unveiled a relatively large economic-aid package for Egypt consisting of debt forgiveness (to the tune of $1 billion dollars), development investment, and trade partnerships. But whether this move serves more to entice other regional leaders or buy allegiance within emerging Egyptian leadership is unclear.

3. Bibi vs. the World. The President, in what I thought was uncharacteristic of his usual modus operandi, bluntly stated that the discussion on Israeli/Palestinian issues has to start with 1967 borders and security issues. This is sure to cause uproar within the Israeli community. I am still waiting to see the results of today’s (sure to be tense) meetings with Benjamin Netanyahu. My roommate had a good point about the timing with Israel and the election: While surely the President understands that Israel v. Palestine is the linchpin of any U.S.-Middle East strategy, isolating influential lobbies in the face of what is sure to be a hard election season just seems like bad domestic politics.

Predictably, hopes were squashed for a proposed U.N. resolution recognizing Palestine independent from a peace process.

The rest of the speech was just padding. Unfortunately, like many other of those within the community, I’m developing a real jadedness with the entire issue.

A U.S. International Strategy for Cyberspace

The White House today released its new international strategy for cyberspace which seeks to unify the broad efforts of cabinet agencies and define the US role in international cyberspace security and internet freedom. For any readers with an interest in the subject, even a passing one, I strongly recommend reviewing the document as it will most likely define the framework for conversations on an open and secure internet for the next few years. A former colleague of mine took the lead on this project, so he should receive plenty of commendations for his service.