Saturday, December 1, 2012

Debate: Progressives & Conservatives on Entitlements

Progressives

Sorry, Erskine, America Rejected Simpson-Bowles. By John Nichols
The Nation, November 29, 2012 - 8:46 AM ET
http://www.thenation.com/blog/171513/sorry-erskine-america-rejected-simpson-bowles
Erskine Bowles, who is sort of a Democrat, met Wednesday with House Speaker John Boehner to help Republicans promote proposals to cut entitlements, as part of the “fiscal cliff” negotiations.

This is the right place for Bowles, who has long maintained a mutual-admiration society with House Budget Committee chairman Paul Ryan, R-Wisconsin. The former Clinton White House chief of staff has always been in the corporate conservative camp when it comes to debates about preserving Social Security, Medicare and Medicaid.

It’s good that he and Boehner have found one another. Let the Republicans advocate for the cuts proposed by Bowles and his former Wyoming Senator Alan Simpson, his Republican co-conductor on the train wreck that produced the so-called “Simpson-Bowles” deficit reduction plan.

After all, despite the media hype, Simposon-Bowles has always been a non-starter with the American people.

Last summer, at the Democratic and Republican national conventions, so many nice things were said about the recommendations of the National Commission on Fiscal Responsibility and Reform that had been chaired by former Wyoming Senator Alan Simpson, a Republican, and Bowles that it was hard to understand why they were implemented. Paul Ryan went so far as to condemn President Obama for “doing nothing” to implement the Simpson-Bowles plan—only to have it noted that Ryan rejected the recommendations of the commission.

But, while a lot of politicians in both parties say a lot of nice things about the austerity program proposed by Simpson-Bowles, there is a reason why there was no rush before the election to embrace the blueprint for cutting Social Security, Medicare and Medicaid while imposing substantial new tax burdens on the middle class.

It’s a loser.

Before the November 6 election, Simpson and Bowles went out of their way to highlight the candidacies of politicians who supported their approach—New Hampshire Republican Congressman Charlie Bass, Rhode Island Republican US House candidate Brendan Doherty, Nebraska Democratic US Senate candidate Bob Kerrey. Bipartisan endorsements were made, statements were issued, headlines were grabbed and

The Simpson-Bowles candidates all lost.

Americans are smart enough to recognize that Simpson-Bowles would stall growth. And they share the entirely rational view of economists like Paul Krugman.

“Simpson-Bowles is terrible,” argues Krugman, a Nobel Prize winner for his economic scholarship. “It mucks around with taxes, but is obsessed with lowering marginal rates despite a complete absence of evidence that this is important. It offers nothing on Medicare that isn’t already in the Affordable Care Act. And it raises the Social Security retirement age because life expectancy has risen—completely ignoring the fact that life expectancy has only gone up for the well-off and well-educated, while stagnating or even declining among the people who need the program most.”

On election night, Peter D. Hart Research Associates surveyed Americans with regard to key proposals from the commission. The reaction was uniformly negative.

By a 73-18 margin, those polled said that protecting Medicare and Social Security from benefit cuts is more important than bringing down the deficit.
By a 62-33 margin, the voters who were surveyed said that making the wealthy start paying their fair share of taxes is more important than reducing tax rates across the board (62 percent to 33 percent).

But that’s just the beginning of an outline of opposition to the Simpson-Bowles approach.

To wit:
* 84 percent of those surveyed oppose reducing Social Security benefits;
* 68 percent oppose raising the Medicare eligibility age;
* 69 percent oppose reductions in Medicaid benefits;
* 64 percent support addressing the deficit by increasing taxes on the rich—with more than half of those surveyed favoring the end of the Bush tax cuts for those making more than $250,000.

Americans want a strong government that responds to human needs:
• 88 percent support allowing Medicare to negotiate with drug companies to lower costs;
• 70 percent favor continuing extended federal unemployment insurance;
• 64 percent support providing federal government funding to local governments;
•72 percent say that corporations and wealthy individuals have too much influence on the political system.

AFL-CIO president Richard Trumka is right. On November 6, “The American people sent a clear message.”

With their votes, with their responses to exit polls, with every signal they could send, the voters refused to buy the “fix” that Erskine Bowles is selling.


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Conservatives

The Crisis of American Self-Government. By Sohrab Ahmari
Harvey Mansfield, Harvard's 'pet dissenter,' on the 2012 election, the real cost of entitlements, and why he sees reason for hope.
The Wall Street Journal, November 30, 2012, on page A13
http://online.wsj.com/article/SB10001424127887323751104578149292503121124.html

Cambridge, Mass.

'We have now an American political party and a European one. Not all Americans who vote for the European party want to become Europeans. But it doesn't matter because that's what they're voting for. They're voting for dependency, for lack of ambition, and for insolvency."

Few have thought as hard, or as much, about how democracies can preserve individual liberty and national virtue as the eminent political scientist Harvey Mansfield. When it comes to assessing the state of the American experiment in self-government today, his diagnosis is grim, and he has never been one to mince words.

Mr. Mansfield sat for an interview on Thursday at the Harvard Faculty Club. This year marks his 50th as a teacher at the university. It isn't easy being the most visible conservative intellectual at an institution that has drifted ever further to the left for a half-century. "I live in a one-party state and very much more so a one-party university," says the 80-year-old professor with a sigh. "It's disgusting. I get along very well because everybody thinks the fact that I'm here means the things I say about Harvard can't be true. I am a kind of pet—a pet dissenter."

Partly his isolation on campus has to do with the nature of Mr. Mansfield's scholarship. At a time when his colleagues are obsessed with trendy quantitative methods and even trendier "identity studies," Mr. Mansfield holds steadfast to an older tradition that looks to the Western canon as the best guide to human affairs. For him, Greek philosophy and the works of thinkers such as Machiavelli and Tocqueville aren't historical curiosities; Mr. Mansfield sees writers grappling heroically with political and moral problems that are timeless and universally relevant.

"All modern social science deals with perceptions," he says, "but that is a misnomer because it neglects to distinguish between perceptions and misperceptions."

Consider voting. "You can count voters and votes," Mr. Mansfield says. "And political science does that a lot, and that's very useful because votes are in fact countable. One counts for one. But if we get serious about what it means to vote, we immediately go to the notion of an informed voter. And if you get serious about that, you go all the way to voting as a wise choice. That would be a true voter. The others are all lesser voters, or even not voting at all. They're just indicating a belief, or a whim, but not making a wise choice. That's probably because they're not wise."

By that measure, the electorate that granted Barack Obama a second term was unwise—the president achieved "a sneaky victory," Mr. Mansfield says. "The Democrats said nothing about their plans for the future. All they did was attack the other side. Obama's campaign consisted entirely of saying 'I'm on your side' to the American people, to those in the middle. No matter what comes next, this silence about the future is ominous."

At one level Mr. Obama's silence reveals the exhaustion of the progressive agenda, of which his presidency is the spiritual culmination, Mr. Mansfield says. That movement "depends on the idea that things will get better and better and progress will be made in the actualization of equality." It is telling, then, that during the 2012 campaign progressives were "confined to defending what they've already achieved or making small improvements—student loans, free condoms. The Democrats are the party of free condoms. That's typical for them."

But Democrats' refusal to address the future in positive terms, he adds, also reveals the party's intent to create "an entitlement or welfare state that takes issues off the bargaining table and renders them above politics." The end goal, Mr. Mansfield worries, is to sideline the American constitutional tradition in favor of "a practical constitution consisting of progressive measures the left has passed that cannot be revoked. And that is what would be fixed in our political system—not the Constitution."

It is a project begun at the turn of the previous century by "an alliance of experts and victims," Mr. Mansfield says. "Social scientists and political scientists were very much involved in the foundation of the progressive movement. What those experts did was find ways to improve the well-being of the poor, the incompetent, all those who have the right to vote but can't quite govern their own lives. And still to this day we see in the Democratic Party the alliance between Ph.D.s and victims."

The Obama campaign's dissection of the public into subsets of race, sex and class resentments is a case in point. "Victims come in different kinds," says Mr. Mansfield, "so they're treated differently. You push different buttons to get them to react."

The threat to self-government is clear. "The American founders wanted people to live under the Constitution," Mr. Mansfield says. "But the progressives want the Constitution to live under the American people."

Harvey Mansfield Jr. was born in 1932 in New Haven, Conn. His parents were staunch New Dealers, and while an undergraduate at Harvard Mr. Mansfield counted himself a liberal Democrat.

Next came a Fulbright year in London and a two-year stint in the Army. "I was never in combat," he says. "In fact I ended up in France for a year, pulling what in the Army they call 'good duty' at Orléans, which is in easy reach of Paris. So even though I was an enlisted man I lived the life of Riley."

A return to the academy and a Harvard doctorate were perhaps inevitable but Mr. Mansfield also underwent a decisive political transformation. "I broke with the liberals over the communist issue," he says. "My initiating forces were anticommunism and my perception that Democrats were soft on communism, to use a rather unpleasant phrase from the time—unpleasant but true." He also began to question the progressive project at home: "I saw the frailties of big government exposed, one after another. Everything they tried didn't work and in fact made us worse off by making us dependent on an engine that was getting weaker and weaker."

His first teaching post came in 1960 at the University of California, Berkeley. In California, he came to know the German-American philosopher Leo Strauss, who at the time was working at Stanford University. "Strauss was a factor in my becoming conservative," he says. "That was a whole change of outlook rather than a mere question of party allegiance."

Strauss had studied ancient Greek texts, which emphasized among other things that "within democracy there is good and bad, free and slave," and that "democracy can produce a slavish mind and a slavish country." The political task before every generation, Mr. Mansfield understood, is to "defend the good kind of democracy. And to do that you have to be aware of human differences and inequalities, especially intellectual inequalities."

American elites today prefer to dismiss the "unchangeable, undemocratic facts" about human inequality, he says. Progressives go further: "They think that the main use of liberty is to create more equality. They don't see that there is such a thing as too much equality. They don't see limits to democratic equalizing"—how, say, wealth redistribution can not only bankrupt the public fisc but corrupt the national soul.

"Americans take inequality for granted," Mr. Mansfield says. The American people frequently "protect inequalities by voting not to destroy or deprive the rich of their riches. They don't vote for all measures of equalization, for which they get condemned as suffering from false consciousness. But that's true consciousness because the American people want to make democracy work, and so do conservatives. Liberals on the other hand just want to make democracy more democratic."

Equality untempered by liberty invites disaster, he says. "There is a difference between making a form of government more like itself," Mr. Mansfield says, "and making it viable." Pushed to its extremes, democracy can lead to "mass rule by an ignorant, or uncaring, government."

Consider the entitlements crisis. "Entitlements are an attack on the common good," Mr. Mansfield says. "Entitlements say that 'I get mine no matter what the state of the country is when I get it.' So it's like a bond or an annuity. What the entitlement does is give the government version of a private security, which is better because the government provides a better guarantee than a private company can."

That is, until the government goes broke, as has occurred across Europe.

"The Republicans should want to recover the notion of the common good," Mr. Mansfield says. "One way to do that is to show that we can't afford the entitlements as they are—that we've always underestimated the cost. 'Cost' is just an economic word for the common good. And if Republicans can get entitlements to be understood no longer as irrevocable but as open to negotiation and to political dispute and to reform, then I think they can accomplish something."

The welfare state's size isn't what makes it so stifling, Mr. Mansfield says. "What makes government dangerous to the common good is guaranteed entitlements, so that you can never question what expenses have been or will be incurred." Less important at this moment are spending and tax rates. "I don't think you can detect the presence or absence of good government," he says, "simply by looking at the percentage of GDP that government uses up. That's not an irrelevant figure but it's not decisive. The decisive thing is whether it's possible to reform, whether reform is a political possibility."

Then there is the matter of conservative political practice. "Conservatives should be the party of judgment, not just of principles," he says. "Of course there are conservative principles—free markets, family values, a strong national defense—but those principles must be defended with the use of good judgment. Conservatives need to be intelligent, and they shouldn't use their principles as substitutes for intelligence. Principles need to be there so judgment can be distinguished from opportunism. But just because you give ground on principle doesn't mean you're an opportunist."

Nor should flexibility mean abandoning major components of the conservative agenda—including cultural values—in response to a momentary electoral defeat. "Democrats have their cultural argument, which is the attack on the rich and the uncaring," Mr. Mansfield says. "So Republicans need their cultural arguments to oppose the Democrats', to say that goodness or justice in our country is not merely the transfer of resources to the poor and vulnerable. We have to take measures to teach the poor and vulnerable to become a little more independent and to prize independence, and not just live for a government check. That means self-government within each self, and where are you going to get that except with morality, responsibility and religion?"

So is it still possible to pull back from the brink of America's Europeanization? Mr. Mansfield is optimistic. "The material for recovery is there," he says. "Ambition, for one thing. I teach at a university where all the students are ambitious. They all want to do something with their lives." That is in contrast to students he has met in Europe, where "it was depressing to see young people with small ambitions, very cultivated and intelligent people so stunted." He adds with a smile: "Our other main resource is the Constitution."

Mr. Ahmari is an assistant books editor at the Journal.

Systemic Risk from Global Financial Derivatives: A Network Analysis of Contagion and Its Mitigation with Super-Spreader Tax

Systemic Risk from Global Financial Derivatives: A Network Analysis of Contagion and Its Mitigation with Super-Spreader Tax. By Sheri M. Markose
IMF Working Paper No. 12/282
November 30, 2012
http://www.imf.org/external/pubs/cat/longres.aspx?sk=40130.0

Summary: Financial network analysis is used to provide firm level bottom-up holistic visualizations of interconnections of financial obligations in global OTC derivatives markets. This helps to identify Systemically Important Financial Intermediaries (SIFIs), analyse the nature of contagion propagation, and also monitor and design ways of increasing robustness in the network. Based on 2009 FDIC and individually collected firm level data covering gross notional, gross positive (negative) fair value and the netted derivatives assets and liabilities for 202 financial firms which includes 20 SIFIs, the bilateral flows are empirically calibrated to reflect data-based constraints. This produces a tiered network with a distinct highly clustered central core of 12 SIFIs that account for 78 percent of all bilateral exposures and a large number of  financial intermediaries (FIs) on the periphery. The topology of the network results in the “Too- Interconnected-To-Fail” (TITF) phenomenon in that the failure of any member of the central tier will bring down other members with the contagion coming to an abrupt end when the ‘super-spreaders’ have demised. As these SIFIs account for the bulk of capital in the system, ipso facto no bank among the top tier can be allowed to fail, highlighting the untenable implicit socialized guarantees needed for these markets to operate at their current levels. Systemic risk costs of highly connected SIFIs nodes are not priced into their holding of capital or collateral. An eigenvector centrality based ‘super-spreader’ tax has been designed and tested for its capacity to reduce the potential socialized losses from failure of SIFIs.

The Coming World Disorder - The Decline of American Power and the Westphalian World Order

World Order in the Age of Obama. By Charles Hill
November 30, 2012 | 2:30 am
http://www.advancingafreesociety.org/the-caravan/world-order-in-the-age-of-obama

Excerpts:

[...]

What ominous factors caused Kepler to shiver? Disturbances, uphealvals and conflicts. Merchants moaned about untrustworthy bankers. Diplomats strutted even as they wavered. The masses sullenly made deals they needed to survive when the gathering storm broke. Varieties of religious fervor caused many to prepare to be slain rather than submit to rule by others.

The 1648 settlement at Westphalia, though setbacks were many and vicious, enabled procedures fostering what eventually would be called “the international community,” a term that curled many a lip in the midst of twentieth-century world wars. Those wars were attempts to overthrow the established world order. Those wars failed, but in recent decades have become seemingly interminable, and have required the stewards of world order to confront what George Shultz labels “asymmetrical” warfare in which professional standards have been turned into self-imposed liabilities by enemies who reject civilized international conduct.


No international order has proved immortal. Kepler today might note that the world order shaped by the war he predicted, might now fail to survive to celebrate its 375th anniversary. As President Obama ponders his Second Inaugural Address, what Keplerian factors are now “prepared” for war?
The causes of war as discerned ever since Thucydides’ time are three: wars of ideology, of fear, and of gain.

The ideology of Islamism has been on the rise for generations and now aims to expropriate the Arab Spring. The ambitions of the1979 Iranian Revolution and Sunni fanaticism are transmogrifying into the kind of major religious war that the Treaty of Westphalia sought to forestall.

Thucydides traced the war that ruined ancient Greece to Sparta’s fear that Athens’ growing power was crossing the line where it would be impossible to contain. Israel faces that threat from Iran, as today’s international structures for the maintenance of international security have failed to halt Iran’s drive, propelled by religious ideology, to possess nuclear weapons. Israel, bereft of its traditional sense of American support, is making ready to act against Iran’s menace to its existence. President Obama’s priority must repair relations with Israel by visiting the Jewish state and convincing its leaders that the U.S. understands Israel’s uniquely dangerous position.

And there now grows a deepening appetite for gain. America, perceived as eager to shed the burdens of world order in order to be “fundamentally transformed” through European-style social commitments, talks of engagement even when Iran’s “diplomacy” is a form of protracted warfare. The enemies of world order translate the American election results into the lexicon of abdication, telling themselves that their time has come: there is a world to be gained.

Only America’s return to world leadership can halt this deterioration. “Sequestration” will relegate the U.S. to a second rate power and must be reversed to enable American strength and diplomacy to be employed in tandem. Without this the prediction of a Kepler for today must be grim. As the biographer of Augustus Caesar wrote in the years just before the Second World War, “Once again the crust of civilization has worn thin, and beneath can be heard the muttering of primeval fires. Once again many accepted principles of government have been overthrown, and the world has become a laboratory where immature and feverish minds experiment with unknown forces. Once again problems cannot be comfortably limited, for science has brought the nations into an uneasy bondage to each other.”

In this maelstrom lie opportunities not for idealism but for the cold, austere use of power, soft and hard, in order to, as Augustus was advised, teach the arts of peace to all. The old platforms for the region, including the “peace process,” are gone. New structures must be built and only the US can lead the construction job. Peace is not at hand, but statesmen can see the possibility of laying foundations for a new Middle East in Syria-Lebanon, Egypt-Gaza, Saudi Arabia and the Gulf, and even, should we finally get serious, in Iran.

Charles Hill is the Brady-Johnson Distinguished Fellow in Grand Strategy at Yale University and co chair of the Herb and Jane Dwight Working Group on Islamism and the International Order, Hoover Institution.

These excerpts are from a post that is part of The Caravan, a periodic discussion on the contemporary dilemmas of the Greater Middle East. Other commentary in this symposium on Obama’s Second Term – Middle Eastern Memos is provided by Russell Berman, Itamar Rabinovich, Robert Satloff, Asli Aydintasbas, Habib Malik, Reuel Gerecht, Leon Wieseltier, Tammy Frisby, Abbas Milani, and Fouad Ajami.