Showing posts with label politics. Show all posts
Showing posts with label politics. Show all posts

Saturday, March 9, 2013

The Real Women's Issue: Time. By Jody Greenstone Miller

The Real Women's Issue: Time. By Jody Greenstone Miller
Never mind 'leaning in.' To get more working women into senior roles, companies need to rethink the clock
The Wall Street Journal, March 9, 2013, on page C3

Why aren't more women running things in America? It isn't for lack of ambition or life skills or credentials. The real barrier to getting more women to the top is the unsexy but immensely difficult issue of time commitment: Today's top jobs in major organizations demand 60-plus hours of work a week.

In her much-discussed new book, Facebook Chief Operating Officer Sheryl Sandberg tells women with high aspirations that they need to "lean in" at work—that is, assert themselves more. It's fine advice, but it misdiagnoses the problem. It isn't any shortage of drive that leads those phalanxes of female Harvard Business School grads to opt out. It's the assumption that senior roles have to consume their every waking moment. More great women don't "lean in" because they don't like the world they're being asked to lean into.

It doesn't have to be this way. A little organizational imagination bolstered by a commitment from the C-suite can point the path to a saner, more satisfying blend of the things that ambitious women want from work and life. It's time that we put the clock at the heart of this debate.

I know this is doable because I run a growing startup company in which more than half the professionals work fewer than 40 hours a week by choice. They are alumnae of top schools and firms like General Electric GE +0.38% and McKinsey, and they are mostly women. The key is that we design jobs to enable people to contribute at varying levels of time commitment while still meeting our overall goals for the company.

This isn't advanced physics, but it does mean thinking through the math of how work in a company adds up. It's also an iterative process; we hardly get it right every time. But for businesses and reformers serious about cracking the real glass ceiling for women—and making their firms magnets for the huge swath of American talent now sitting on the sidelines—here are four ways to start going about it.

Rethink time. Break away from the arbitrary notion that high-level work can be done only by people who work 10 or more hours a day, five or more days a week, 12 months a year. Why not just three days a week, or six hours a day, or 10 months a year?

It sounds simple, but the only thing that matters is quantifying the work that needs to get done and having the right set of resources in place to do it. Senior roles should actually be easier to reimagine in this way because highly paid people have the ability and, often, the desire to give up some income in order to work less. Flexibility and working from home can soften the blow, of course, but they don't solve the overall time problem.

Break work into projects. Once work is quantified, it must be broken up into discrete parts to allow for varying time commitments. Instead of thinking in terms of broad functions like the head of marketing, finance, corporate development or sales, a firm needs to define key roles in terms of specific, measurable tasks.

Once you think of work as a series of projects, it's easy to see how people can tailor how much to take on. The growth of consulting and outsourcing came precisely when firms realized they could carve work into projects that could be done more effectively outside. The next step is to design internal roles in smaller bites, too. An experienced marketer for a pharma company could lead one major drug launch, for example, without having to oversee all drug launches. Instead of managing a portfolio with 10 products, a senior person could manage five. If a client-service executive working five days a week has a quota of 10 deals a month, then one who chooses to work three days a week has a quota of only six. Lower the quota but not the quality of the work or the executive's seniority.

One reason this doesn't happen more is managerial laziness: It's easier to find a "superwoman" to lead marketing (someone who will work as long as humanly possible) than it is to design work around discrete projects. But even superwoman has a limit, and when she hits it, organizations adjust by breaking up jobs and adding staff. Why not do this before people hit the wall?

Availability matters. It's important to differentiate between availability and absolute time commitments. Many professional women would happily agree to check email even seven days a week and jump in, if necessary, for intense project stints—so long as over the course of a year, the time devoted to work is more limited. Managers need to be clear about what's needed: 24/7 availability is not the same thing as a 24/7 workload.

Quality is the goal, not quantity. Leaders need to create a culture in which talented people are judged not by the quantity of their work, but by the quality of their contributions. This can't be hollow blather. Someone who works 20 hours a week and who delivers exceptional results on a pro rata basis should be eligible for promotions and viewed as a top performer. American corporations need to get rid of the notion that wanting to work less makes someone a "B player."

Promoting this kind of innovation, where companies start to look more like puzzles than pyramids, has to become part of feminism's new agenda. It's the only way to give millions of capable women the ability to recalibrate the time that they devote to work at different stages of their lives.

We have been putting smart women on the couch for 40 years, since psychologist Matina Horner published her famous studies on "fear of success." But the portion of top jobs that go to women is still shockingly low. That's the irony of Ms. Sandberg's cheerleading for women to stay ambitious: She fails to see that her own agenda isn't nearly ambitious enough.

"Leaning in" may help the relative handful of talented women who can live with the way that top jobs are structured today—and if that's their choice, more power to them. But only a small percentage of women will choose this route. Until the rest of us get serious about altering the way work gets done in American corporations, we're destined to howl at the moon over the injustice of it all while changing almost nothing.

—Ms. Greenstone Miller is co-founder and chief executive officer of Business Talent Group.

Wednesday, February 6, 2013

A Jersey Lesson in Voter Fraud. By Thomas Fleming

A Jersey Lesson in Voter Fraud. By Thomas Fleming
My grandmother died there in 1940. She voted Democratic for the next 10 years.The Wall Street Journal, February 6, 2013, on page A11

Some youthful memories were stirred by the news this week that the president plans to use his State of the Union speech next Tuesday to urge Congress to make voter registration and ballot-casting easier. Like Mr. Obama, I come from a city with a colorful history of political corruption and vote fraud.

The president's town is Chicago, mine is Jersey City. Both were solidly Democratic in the 1930s and '40s, and their mayors were close friends. At one point in the early '30s, Jersey City's Frank Hague called Chicago's Ed Kelly to say he needed $2 million as soon as possible to survive a coming election. According to my father—one of Boss Hague's right-hand men—a dapper fellow who had taken an overnight train arrived at Jersey City's City Hall the next morning, suitcase in hand, cash inside.

Those were the days when it was glorious to be a Democrat. As a historian, I give talks from time to time. In a recent one, called "Us Against Them," I said it was we Irish and our Italian, Polish and other ethnic allies against "the dirty rotten stinking WASP Protestant Republicans of New Jersey." By thus demeaning the opposition, we had clear consciences as we rolled up killer majorities using tactics that had little to do with the election laws.

My grandmother Mary Dolan died in 1940. But she voted Democratic for the next 10 years. An election bureau official came to our door one time and asked if Mrs. Dolan was still living in our house. "She's upstairs taking a nap," I replied. Satisfied, he left.

Thousands of other ghosts cast similar ballots every Election Day in Jersey City. Another technique was the use of "floaters," tough Irishmen imported from New York who voted five, six and even 10 times at various polling places.

Equally effective was cash-per-vote. On more than one Election Day, my father called the ward's chief bookmaker to tell him: "I need 10 grand by one o'clock." He always got it, and his ward had a formidable Democratic majority when the polls closed.

Other times, as the clock ticked into the wee hours, word would often arrive in the polling places that the dirty rotten stinking WASP Protestant Republicans had built up a commanding lead in South Jersey, where "Nucky" Johnson (currently being immortalized on TV in HBO's "Boardwalk Empire") had a small Republican machine in Atlantic City.

By dawn, tens of thousands of hitherto unknown Jersey City ballots would be counted and another Democratic governor or senator would be in office, and the Democratic presidential candidate would benefit as well. Things in Chicago were no different, Boss Hague would remark after returning from one of his frequent visits.

I have to laugh when I hear current-day Democrats not only lobbying against voter-identification laws but campaigning to make voting even easier than it already is. More laughable is the idea of dressing up the matter as a civil-rights issue.

My youthful outlook on life—that anything goes against the rotten stinking WASP Protestant Republicans—evaporated while I served in the U.S. Navy in World War II. In that conflict, millions of people like me acquired a new understanding of what it meant to be an American.

Later I became a historian of this nation's early years—and I can assure President Obama that no founding father would tolerate the idea of unidentified voters. These men understood the possibility and the reality of political corruption. They knew it might erupt at any time within a city or state.

The president's party—which is still my party—has inspired countless Americans by looking out for the less fortunate. No doubt that instinct motivated Mr. Obama in his years as a community organizer in Chicago. Such caring can still be a force, but that force, and the Democratic Party, will be constantly soiled and corrupted if the right and the privilege to vote becomes an easily manipulated joke.

Mr. Fleming is a former president of the Society of American Historians.

Thursday, December 27, 2012

Brookings: The Exaggerated Death of the Middle Class

The Exaggerated Death of the Middle Class. By Ron Haskins and Scott Winship
Brookings, December 11, 2012


The most easily obtained income figures are not the most appropriate ones for assessing changes in living standards; those are also the figures that are often used to reach unwarranted conclusions about “middle class decline.” For example, analysts and pundits often rely on data that do not include all sources of income. Consider data on comprehensive income assembled by Cornell University economist Richard Burkhauser and his colleagues for the period between 1979—the year it supposedly all went wrong for working Americans—and 2007, before the Great Recession.

When Burkhauser looked at market income as reported to the Internal Revenue Service (IRS), the basis for the top 1 percent inequality figures that inspired Occupy Wall Street, he found that incomes for the bottom 60 percent of tax filers stagnated or declined over the nearly three-decade period. Incomes in the middle fifth of tax returns grew by only 2 percent on average, and those in the bottom fifth declined by 33 percent.

Things appeared somewhat better when Burkhauser looked at the definition of income favored by the Census Bureau which, unlike IRS figures, includes government cash payments from programs like Social Security and welfare, and looks at households rather than tax returns.

Still, the income of the middle fifth only rose by 15 percent over the entire three decades, much less than 1 percent per year. The Census Bureau reports that from 2000 to 2010, the income of the middle fifth actually fell by 8 percent. With numbers like these, it’s understandable why so many people think the American middle class is under threat and in decline.

But there are three reasons why even the Census Bureau figures are deceiving. The size of U.S. households, which has been declining, is not taken into account. The figures ignore the net impact on income of government taxes and non-cash transfers like food stamps and health insurance, which benefit the poor and middle class much more than richer households, and the value of health insurance provided by employers is also left out.

Burkhauser and his colleagues show that if these factors are taken into account, the incomes of the bottom fifth of households actually increased by 26 percent, rather than declining by 33 percent. Those of the middle fifth increased by 37 percent, rather than by only 2 percent. There is no disappearing middle class in these data; nor can household income, even at the bottom, be characterized as stagnant, let alone declining. Even after 2000, estimates from the Congressional Budget Office (CBO) show the bottom 60 percent of households got 10 percent richer by 2009, the most recent year available.

Making sense of income trends
Aside from the brighter picture presented by the Burkhauser and CBO analyses, there is a more complicated trend emerging in the United States. Four factors, both inside and outside the market, explain those trends.

The first market factor affecting middle-class income is a longtime trend of low literacy and math achievement in U.S. schools, which partially explains why conventional analyses of income show stagnation and decline. Young Americans entering the job market need skills valuable in a modern economy if they expect to earn a decent wage. Education and technical training are key to acquiring these skills. Yet the achievement test scores of children in literacy and math have been stagnant for more than two decades and are consistently far down the list in international comparisons.

It is true that African American and Hispanic students have closed part of the gap between themselves and Caucasian and Asian students; but the gap between students from economically advantaged families and students from disadvantaged ones has widened substantially—by 30 to 40 percent over the past 25 years.1

In a nation committed to educational equality and economic mobility, the income gap in achievement test scores is deeply problematic. Far from increasing educational equality as an important route to boosting economic opportunity, the American educational system reinforces the advantages that students from middle-class families bring with them to the classroom. Thus, the nation has two education problems that are limiting the income of workers at both the bottom and middle of the distribution: the average student is not learning enough, compared with students from other nations, and students from poor families are falling further and further behind.

It is difficult to see how students with a poor quality of education will be able to support a family comfortably in our technologically advanced economy if they rely exclusively on their earnings.

The second market factor is the increasing share of our economy devoted to health care. According to the Kaiser Foundation, employer-sponsored health insurance premiums for families increased 113 percent between 2001 and 2011. Most economists would say that this money comes directly out of worker wages. In other words, if it weren’t for the remarkable increase in the cost of health care, workers’ wages would be higher. When the portion of market compensation received in the form of health insurance is ignored in conventional analyses, income gains over time are understated.

Turning to non-market factors, marriage and childbearing increasingly distinguish the haves and have-nots.

Families have fewer children, and more U.S. adults are living alone today than in the past. As a result, households on average are better off since there are fewer mouths to feed, regardless of income. At the same time, single parenthood has grown more common, thereby increasing inequality between the poor and the middle class. Female-headed families are more than four times as likely to be in poverty, and children from these families are more likely to have trouble in school as compared with children in married-couple families. The increasing tendency of similarly educated men and women to marry each other also contributes to rising inequality.

The most important non-market factor is the net impact of government taxes and transfer payments on household income. The budget of the U.S. government for 2012 is $3.6 trillion. About 65 percent of that amount is spent on transfer payments to individuals. The biggest transfer payments are: $770 billion for Social Security, $560 billion for Medicare, $262 billion for Medicaid, and nearly $100 billion for nutrition programs. In addition to these federal expenditures, state governments also spend tens of billions of dollars on programs for low-income households. Almost all of the over $1 trillion in state and federal spending on means-tested programs (those that provide benefits only to people below some income cutoff) goes to low-income households.

Thus, taking into account the progressive nature of Social Security and Medicare benefits, the effect of government expenditures is to greatly increase household income at the bottom and reduce economic inequality.

Similarly, federal taxation—and to a lesser extent state taxation—is progressive. Americans in the bottom 40 percent of the income distribution pay negative federal income taxes because the Earned Income Tax Credit and the Child Tax Credit actually pay cash to millions of low-income families with children.

IRS data on incomes incorporate only the small fraction of transfer income that is taxable. Census data includes all cash transfer payments but leaves out non-cash transfers—among which Medicaid and Medicare benefits are the most important—and taxes.

The bottom line is that market income has grown, and government programs have greatly increased the well-being of low-income and middle-class households. The middle class is not shrinking or becoming impoverished. Rather, changes in workers’ skills and employers’ demand for them, along with changes in families’ size and makeup, have caused the incomes of the well-off to climb much faster than the incomes of most Americans.

Rising inequality can occur even as everyone experiences improvement in living standards.

Even so, unless the nation’s education system improves, especially for children from poor families, millions of working Americans will continue to rely on government transfer payments. This signals a real problem. Millions of individuals and families at the bottom and in the middle of the income distribution are dependent on government to enjoy a decent or rising standard of living. While the U.S. middle class may not be shrinking, the trends outlined above make clear why this is no reason for complacency. Today’s form of widespread dependency on government benefits has helped stem a decline in income, but far better would be to have more people earning all or nearly all their income through work. Getting there, though, will require deeper reforms in the structure of the U.S. education system.

1 Sean F. Reardon, Wither Opportunity? Rising Inequality and the Uncertain Life Chances of Low-Income Children (New York: Russel Sage Foundation Press, 2001).

Monday, December 17, 2012

Gérard Depardieu's letter to the French Prime Minister

Gérard Depardieu's letter to the French Prime Minister
Dec 16, 2012

Minable, vous avez dit << minable >>? Comme c’est minable.

Je suis né en 1948, j’ai commencé à travailler à l’âge de 14 ans comme imprimeur, comme manutentionnaire puis comme artiste dramatique. J’ai toujours payé mes taxes et impôts quel qu’en soit le taux sous tous les gouvernements en place.

À aucun moment, je n’ai failli à mes devoirs. Les films historiques auxquels j’ai participé témoignent de mon amour de la France et de son histoire.

Des personnages plus illustres que moi ont été expatriés ou ont quitté notre pays.

Je n’ai malheureusement plus rien à faire ici, mais je continuerai à aimer les Français et ce public avec lequel j’ai partagé tant d’émotions!

Je pars parce que vous considérez que le succès, la création, le talent, en fait, la différence, doivent être sanctionnés.

Je ne demande pas à être approuvé, je pourrais au moins être respecté.

Tous ceux qui ont quitté la France n’ont pas été injuriés comme je le suis.

Je n’ai pas à justifier les raisons de mon choix, qui sont nombreuses et intimes.

Je pars, après avoir payé, en 2012, 85% d’impôt sur mes revenus. Mais je conserve l’esprit de cette France qui était belle et qui, j’espère, le restera.

Je vous rends mon passeport et ma Sécurité sociale, dont je ne me suis jamais servi. Nous n’avons plus la même patrie, je suis un vrai Européen, un citoyen du monde, comme mon père me l’a toujours inculqué.

Je trouve minable l’acharnement de la justice contre mon fils Guillaume jugé par des juges qui l’ont condamné tout gosse à trois ans de prison ferme pour 2 grammes d’héroïne, quand tant d’autres échappaient à la prison pour des faits autrement plus graves.

Je ne jette pas la pierre à tous ceux qui ont du cholestérol, de l’hypertension, du diabète ou trop d’alcool ou ceux qui s’endorment sur leur scooter : je suis un des leurs, comme vos chers médias aiment tant à le répéter.

Je n’ai jamais tué personne, je ne pense pas avoir démérité, j’ai payé 145 millions d’euros d’impôts en quarante-cinq ans, je fais travailler 80 personnes dans des entreprises qui ont été créées pour eux et qui sont gérées par eux.

Je ne suis ni à plaindre ni à vanter, mais je refuse le mot "minable".

Qui êtes-vous pour me juger ainsi, je vous le demande monsieur Ayrault, Premier ministre de monsieur Hollande, je vous le demande, qui êtes-vous? Malgré mes excès, mon appétit et mon amour de la vie, je suis un être libre, Monsieur, et je vais rester poli.

Gérard Depardieu

Sunday, December 16, 2012

Japan - Major political parties and their pledges

Japan - Major political parties and their pledges
Japan Today, Dec 16, 2012

TOKYO — A dozen political parties and many independents will contest Sunday’s election. Here is a list of major parties and their campaign promises:

The Democratic Party of Japan is a centrist group that has governed Japan since 2009 after ousting long-governing conservatives from power.

Prime Minister Yoshihiko Noda serves as party president.

The DPJ is promising to:

—phase out nuclear power generation by the end of the 2030s.

—promote the Trans-Pacific Partnership free trade deal, along with a trilateral free trade pact with China and South Korea.

—work with the Bank of Japan to try to end deflation in fiscal 2014.

—boost measures to protect Japanese territory, including islands in disputes with neighbouring nations.

The Liberal Democratic Party is Japan’s main conservative force which ruled the nation almost continuously from 1955 to 2009.

LDP president Shinzo Abe is a hawkish ideologue who was prime minister in 2006-7.

The LDP has pledged to:

—review all nuclear reactors in three years to decide whether to restart them.

—decide within 10 years Japan’s new energy mix, which may or may not include nuclear power generation.

—achieve three-percent nominal economic growth.

—set an inflation target of two percent and may review the Bank of Japan law to push the central bank to take further easing measures.

—strengthen Japan’s administration of islands that China claims.

—expand the Self Defense Forces and rename them National Defense Forces.

—cut more than 2.8 trillion yen in public spending by reducing welfare and government personnel costs.

—conduct a 10-year program to make infrastructure disaster-resistant.

The Japan Restoration Party was launched this year, originally under reformist Osaka mayor Toru Hashimoto. It is now headed by controversial ex-governor of Tokyo Shintaro Ishihara.

The JRP was born out of a coalition of small parties with varying ideological backgrounds, and is united in its aim to take power from established parties.

The JRP has promised to:

—draft a new constitution to replace the current one written by the United States shortly after World War II.

—achieve three percent nominal growth and two percent inflation.

—join negotiations for the Trans-Pacific Partnership free trade talks.

—reduce parliamentarians’ salary and seats.

—end reliance on nuclear power.

—aggressively push for decentralisation of power.

The Japan Future Party was launched after the election was called in mid-November. It is headed by Shiga prefecture governor Yukiko Kada on an anti-nuclear platform.

Many pundits say Kada is a figurehead for a party that is really run by veteran backroom deal-maker Ichiro Ozawa.

Among its pledges, the party promises to:

—end nuclear power generation in 10 years.

—stop the consumption tax hike.

—offer special allowances to families with children.

The New Komeito is a party of lay Buddhists that enjoys a narrow but loyal support base. It advocates pacifist policies and social programs to help the vulnerable.

It formed a coalition government with the LDP between 1999 and 2009 and has worked with it in opposition.

The party has pledged to:

—phase out nuclear power “as soon as possible” by not approving plans to build new reactors.

—expand scholarships for high school and college students and freeze fees for pre-schools and nursery schools.

—get Japan out of deflation within two years, achieving nominal 3-4 percent growth.

—boost diplomacy to protect Japanese territory including islands in disputes with neighbouring nations.

—seeks to build a Free Trade Area of Asia-Pacific (FTAAP) through making free trade deals.

© 2012 AFP

Tuesday, May 15, 2012

Changes in U.S. water use and implications for the future

It is interesting to see some data in Water Reuse: Expanding the Nation's Water Supply Through Reuse of Municipal Wastewater (, a National Research Council publication.

See for example figure 1-6, p 17, changes in U.S. water use and implications for the future:

Sunday, May 13, 2012

What Tokyo's Governor supporters think

A Japanese correspondant wrote about what Tokyo's Governor supporters think (edited):
I'll reply one of your questions about Tokyo's governor. He is a famous writer in Japan. Once in Japan, it was said "Money can move Politics." A leading politician who provided private funds to friends in politics, Tokyo's governor was once a lawmaker.

He gained funds by his writer activity, always speak radical statements since he was young, and he had been clearly different from other influential politicians. He was independent. He always strives to influence politicians with his great ability.

Thus, he was on the side of populace.

However he became arrogant now. But the Japanese people expect great things from him, in particular, people living in the capital, Tokyo. He always talks about "Changing Japan from Tokyo."

We think that he can do it.



Tuesday, November 22, 2011

President Obama can't win by running a constructive campaign, and he won't be able to govern if he does win a second term

The Hillary Moment. By Patrick H Caddell & Douglas E Schoen
President Obama can't win by running a constructive campaign, and he won't be able to govern if he does win a second term.

When Harry Truman and Lyndon Johnson accepted the reality that they could not effectively govern the nation if they sought re-election to the White House, both men took the moral high ground and decided against running for a new term as president. President Obama is facing a similar reality—and he must reach the same conclusion.

He should abandon his candidacy for re-election in favor of a clear alternative, one capable not only of saving the Democratic Party, but more important, of governing effectively and in a way that preserves the most important of the president's accomplishments. He should step aside for the one candidate who would become, by acclamation, the nominee of the Democratic Party: Secretary of State Hillary Clinton.

Never before has there been such an obvious potential successor—one who has been a loyal and effective member of the president's administration, who has the stature to take on the office, and who is the only leader capable of uniting the country around a bipartisan economic and foreign policy.

Certainly, Mr. Obama could still win re-election in 2012. Even with his all-time low job approval ratings (and even worse ratings on handling the economy) the president could eke out a victory in November. But the kind of campaign required for the president's political survival would make it almost impossible for him to govern—not only during the campaign, but throughout a second term.

Put simply, it seems that the White House has concluded that if the president cannot run on his record, he will need to wage the most negative campaign in history to stand any chance. With his job approval ratings below 45% overall and below 40% on the economy, the president cannot affirmatively make the case that voters are better off now than they were four years ago. He—like everyone else—knows that they are worse off.

President Obama is now neck and neck with a generic Republican challenger in the latest Real Clear Politics 2012 General Election Average (43.8%-43.%). Meanwhile, voters disapprove of the president's performance 49%-41% in the most recent Gallup survey, and 63% of voters disapprove of his handling of the economy, according to the most recent CNN/ORC poll.

Consequently, he has to make the case that the Republicans, who have garnered even lower ratings in the polls for their unwillingness to compromise and settle for gridlock, represent a more risky and dangerous choice than the current administration—an argument he's clearly begun to articulate.

One year ago in these pages, we warned that if President Obama continued down his overly partisan road, the nation would be "guaranteed two years of political gridlock at a time when we can ill afford it." The result has been exactly as we predicted: stalemate in Washington, fights over the debt ceiling, an inability to tackle the debt and deficit, and paralysis exacerbating market turmoil and economic decline.

If President Obama were to withdraw, he would put great pressure on the Republicans to come to the table and negotiate—especially if the president singularly focused in the way we have suggested on the economy, job creation, and debt and deficit reduction. By taking himself out of the campaign, he would change the dynamic from who is more to blame—George W. Bush or Barack Obama?—to a more constructive dialogue about our nation's future.

Even though Mrs. Clinton has expressed no interest in running, and we have no information to suggest that she is running any sort of stealth campaign, it is clear that she commands majority support throughout the country. A CNN/ORC poll released in late September had Mrs. Clinton's approval rating at an all-time high of 69%—even better than when she was the nation's first lady. Meanwhile, a Time Magazine poll shows that Mrs. Clinton is favored over former Massachusetts Gov. Mitt Romney by 17 points (55%-38%), and Texas Gov. Rick Perry by 26 points (58%-32%).

But this is about more than electoral politics. Not only is Mrs. Clinton better positioned to win in 2012 than Mr. Obama, but she is better positioned to govern if she does. Given her strong public support, she has the ability to step above partisan politics, reach out to Republicans, change the dialogue, and break the gridlock in Washington.

President Bill Clinton reached a historic agreement with the Republicans in 1997 that led to a balanced budget. Were Mrs. Clinton to become the Democratic nominee, her argument would almost certainly have to be about reconciliation and about an overarching deal to rein in the federal deficit. She will understand implicitly the need to draw up a bipartisan plan with elements similar to her husband's in the mid-to-late '90s—entitlement reform, reform of the Defense Department, reining in spending, all the while working to preserve the country's social safety net.

Having unique experience in government as first lady, senator and now as Secretary of State, Mrs. Clinton is more qualified than any presidential candidate in recent memory, including her husband. Her election would arguably be as historic an event as the election of President Obama in 2008.

By going down the re-election road and into partisan mode, the president has effectively guaranteed that the remainder of his term will be marred by the resentment and division that have eroded our national identity, common purpose, and most of all, our economic strength. If he continues on this course it is certain that the 2012 campaign will exacerbate the divisions in our country and weaken our national identity to such a degree that the scorched-earth campaign that President George W. Bush ran in the 2002 midterms and the 2004 presidential election will pale in comparison.

We write as patriots and Democrats—concerned about the fate of our party and, most of all, our country. We do not write as people who have been in contact with Mrs. Clinton or her political operation. Nor would we expect to be directly involved in any Clinton campaign.

If President Obama is not willing to seize the moral high ground and step aside, then the two Democratic leaders in Congress, Sen. Harry Reid and Rep. Nancy Pelosi, must urge the president not to seek re-election—for the good of the party and most of all for the good of the country. And they must present the only clear alternative—Hillary Clinton.

Mr. Caddell served as a pollster for President Jimmy Carter. Mr. Schoen, who served as a pollster for President Bill Clinton, is author of "Hopelessly Divided: The New Crisis in American Politics and What It Means for 2012 and Beyond," forthcoming from Rowman and Littlefield.

Wednesday, August 24, 2011

Views on the balanced budget amendment

1  In favor: Considering a Balanced Budget Amendment: Lessons from History, by E Istook, (Spanish:

Abstract: Attempts at passing a balanced budget amendment (BBA) date back to the 1930s, and all have been unsuccessful. Both parties carry some of the blame: The GOP too often has been neglectful of the issue, and the Democratic Left, recognizing a threat to big government, has stalled and obfuscated, attempting to water down any proposals to mandate balanced budgets. On the occasion of the July 2011 vote on a new proposed BBA, former Representative from Oklahoma Ernest Istook presents lessons from history.

2  Against from a conservative or libertarian viewpoint: The Balanced Budget Amendment's Fatal Flaw. By PETER H. SCHUCK
Nothing would give judges more policy-making power.
WSJ, Jul 22, 2011

A balanced budget amendment (BBA), a hardy perennial in Congress, is once again in the headlines. This is entirely understandable. The public trusts neither the president nor Congress, regardless of the party in control, to strike and maintain an economically healthy, sustainable balance between federal spending and revenues. Thus, the idea of tying them to the constitutional mast, Ulysses-like, so that they cannot succumb to the inevitable temptation to spend more and tax less is itself tempting to many reformers and voters.

Nevertheless, many sound objections to a BBA exist, which the current version—indeed, any version—cannot adequately address. Many of these objections, such as the need for deficit spending in a recession, are hoary Keynesian pieties and will resonate only with liberals and moderates. But one objection, largely absent from the debate so far, should convince even the most hidebound conservative to strongly oppose the BBA.

I can think of no other law that would empower judges to exercise more political and policy-making discretion than a balanced budget amendment. It would quickly realize every conservative's fears of an "imperial judiciary" that "legislates from the bench"—even if the courts simply did their job and did not grasp for that power.

First, the courts would be swamped with challenges to every governmental decision with significant budgetary implications, which means almost all important decisions. As federal Judge Ralph Winter pointed out long ago, the judges would have to decide who, if anyone, would have standing to sue and who the proper defendant would be. If they ruled that no one had standing, then the amendment would be legally unenforceable, a dead letter. If the judges found standing, however, a host of exceptionally controversial legal-interpretation issues would arise.

Perhaps the most fundamental questions have been posed by Rudy Penner, who was Congressional Budget Office director in the Reagan years: What is a "budget," and which budgets are covered by the amendment? This is pivotal because the amendment would create an irresistible incentive for politicians to expand "off-budget" programs or establish new ones.

Social Security, Fannie Mae, Freddie Mac, the Postal Service and the new Consumer Financial Protection Bureau are all off-budget and constitute a huge share of federal fiscal commitments. The BBA does not even mention this multitrillion-pound gorilla, nor does it deal with the creation of new off-budget spending programs which would certainly proliferate in its wake, so a judge would have to decide whether they are included. (The state and local equivalent dodge of balanced budget rules is the "special district"—some 40,000 nationwide—which often has taxing power. )

The BBA also uses the basic term "tax" as if it were self-defining, but of course it isn't. Indeed, one of the key issues in the legal challenge to ObamaCare is whether the spending mandates in the legislation constitute a tax (as the administration argues) or a penalty (as its opponents claim). Only the courts can decide—and so far they have split on the issue. This is political power of a high order, given the importance of the legislation.

Then there are the classic ploys that governments use to evade budgetary restrictions, about which the BBA is also silent. Does the amendment's term "outlay" apply to long-term capital investments such as infrastructure spending, of which the Obama administration is so fond? If not, we can anticipate lots more spending being called capital investment. The judges will have to decide whether the amendment applies or not.

Does "outlay" cover government loan guarantees—a form of subsidy used promiscuously by government to avoid budgetary constraints? Does "revenue" include so-called "offsetting receipts" such as the large amounts that Medicare beneficiaries pay for their physician and drug benefits? If so, we can expect Congress to use more of them. Again, the courts will have to decide.

It does seem clear that the amendment would not cover private expenditures mandated by government regulation of individuals and firms. After all, regulations affect private budgets, not governmental ones; that is part of their political appeal. If the BBA passes, then look for the politicians to transfer much of their spending desires into a burst of new regulations. For conservatives, this should be a nightmare.

The political pundits report that there is no chance that the balanced budget amendment will pass. This should be cause for conservative celebration, not disappointment.

Mr. Schuck is a professor at Yale Law School and the co-editor, with James Q. Wilson, of "Understanding America: The Anatomy of an Exceptional Nation" (PublicAffairs, 2008).

Tuesday, August 23, 2011

The Gulf economies of the Middle East are forming partnerships with other emerging markets, redefining the ancient trade routes

The New Web of World Trade, by Joe Saddi, Karim Sabbagh, and Richard Shediac
The Gulf economies of the Middle East are forming partnerships with other emerging markets, redefining the ancient trade routes that once linked East and West.

When King Abdullah bin Saud, the current ruler of Saudi Arabia, came to power in August 2005, he wasted little time in demonstrating his vision for the country’s future. His first official overseas visit, in January 2006, was not to U.S. president George W. Bush, U.K. prime minister Tony Blair, or German chancellor Angela Merkel — but to Chinese president Hu Jintao.

The meeting reflected both countries’ desire to forge closer economic ties. Before King Abdullah went on to other emerging markets, including India, Malaysia, and Pakistan, he and President Hu signed an agreement of cooperation in oil, natural gas, and minerals. This agreement built on existing relationships between the countries’ national energy companies, Saudi Aramco and Sinopec, which had formed a partnership in 2005 to construct a US$5 billion oil refinery in eastern China’s Fujian province. In 2011, they signed a memorandum of understanding to build a refinery in Yanbu, on the west coast of Saudi Arabia. Sinopec is also engaged in a joint venture with Saudi Arabia’s petrochemicals giant SABIC; in 2010, they began producing various petrochemical products in a $3 billion complex in the city of Tianjin in northeast China, and have recently announced that they will build a $1 billion–plus facility there to produce plastics.

The rise of emerging markets in the global economy has sparked a great deal of discussion, particularly in the wake of the worldwide financial crisis. The implications are often framed in terms of the potential impact on the economies of the U.S. and Europe — for instance, business leaders discuss whether emerging nations’ consumers might be interested in purchasing American products, or whether European telecom operators can counter stagnation in their own markets by investing in new mobile networks in Asia.

But a closer look reveals a separate trend that could shift the economic focus away from the West. Emerging markets are building deep, well-traveled networks among themselves in a way that harks back to the original “silk road,” the network of trade routes between East Asia, the Middle East, and southern Europe, some dating to prehistoric times and others to the reign of Alexander the Great. Most of these routes were central to world commerce until about 1400 AD, when European ships began to dominate international trade.

Today’s new web of world trade is broader and more diverse than the old silk road. It is a network among emerging markets all over the world, including China, the Middle East, Latin America, and Africa. It is a path not just for expanded trade in goods, but for short-term and long-term investment and the transfer of technological and managerial innovation in all directions. Witness, for example, China’s investments in Africa, where the construction of roads, railways, and communications infrastructure provides revenue to China’s state-owned enterprises and also facilitates China’s access to the continent’s natural resources and its consumers. Or consider the fact that in 2009, China surpassed the U.S. to become Brazil’s primary trading partner; bilateral trade between the two countries grew more than 600 percent between 2003 and 2010, from $8 billion to $56 billion. Also in 2009, the Korea Electric Power Corporation, a state-owned South Korean firm, won a $40 billion contract to build nuclear reactors in the United Arab Emirates (UAE), beating out French and U.S. companies that had bid on the opportunity. And in 2010, Russia and Qatar announced that they would work together to develop gas fields on Russia’s Yamal Peninsula.

Such developments remain largely separate activities in the global economy, but taken together, they are early evidence of a pattern that public-sector and private-sector leaders in every part of the world should take into consideration.

An Important Stop on the Road

The countries of the Gulf Cooperation Council (GCC) — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE — represent one regional powerhouse whose relationships with emerging peers can offer valuable insights into the way such alliances are forming. In the last five years, ties between the GCC and the BRIC countries (Brazil, Russia, India, and China) as well as the “Next 11” countries (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey, and Vietnam) have expanded strongly. (See map.) The speed with which the new silk road is being constructed between the GCC and these other rapidly emerging economies is a clear indicator of the GCC’s rising importance. Even the recent unrest in the Middle East, which included a few of the GCC nations, has not impeded the Gulf’s global ambitions.


The GCC is also noteworthy because of its traditionally strong relationships with the U.S. and Europe. The Gulf nations have to maintain their relationships with these large but relatively stable economies while fostering new relationships with the high-growth economies in emerging markets. This balancing act could lead to a new set of policies and ambitions in the region, with significant implications for companies that hope to enter this market, and for the nations (which include the U.S., China, Japan, and most of Europe) that compete for the GCC’s oil and gas resources and have a vested interest in ensuring that regional security issues do not destabilize global oil prices.

By analyzing the dynamics behind the growth of the GCC’s alliances with other emerging countries, GCC leaders can see where there could be potholes in the new silk road and what reforms will be necessary to avoid them. At the same time, the companies and governments of Europe and the U.S. can develop a better understanding of what they will need to do to ensure that their own opportunities in the GCC are not lost in the years to come. The primary drivers of the relationships between the GCC and the BRICs and Next 11 countries are trade, people, and capital; equally important, though more difficult to track with data, is the exchange of knowledge and technology.

1. More than oil. The top item on the strategic agenda for every GCC country is to diversify its economy and thus decrease its dependence on oil. Despite significant efforts, achieving this goal has so far proven challenging: Oil and gas accounted for 38 percent of GDP in the GCC in 2000, 42 percent in 2005, and 39 percent in 2010. The governments in the region are eager to continue investing their oil revenues in knowledge-intensive industries that will create jobs for local populations, and they will cultivate trade partners that help them.

This is one major reason that 19.4 percent of the GCC’s trade flows now involve the BRIC countries, compared with just 8.9 percent involving NAFTA countries. And GCC trade flows with BRIC countries are also more diverse than those with the United States. For example, Saudi Arabia’s exports to the U.S. still revolve around oil, whereas its exports to BRIC countries include chemicals, plastics, and minerals. The UAE’s exports to China, similarly, are split among a range of products, led by plastics (28 percent), electronic equipment (15 percent), and vehicles (9 percent).

The GCC’s non-oil exports to the Next 11 countries are also on the rise. Such exports (including chemicals, plastics, and aluminum) from the GCC to Vietnam, Indonesia, and Turkey are still quite small in absolute terms, just $11.6 billion in 2008. However, they increased by 389 percent between 2001 and 2008, an indication of things to come.

In future years, GCC companies will be looking to expand in a number of directions that will affect their exports. They will build manufacturing bases, as well as act as importers and resellers for automobiles and other advanced manufacturing products; they will also continue developing expertise in critical areas such as water desalination and complex infrastructure and construction projects, and may begin looking outside the region for destinations for those services. Trade partners that support the GCC’s economic goals will find themselves in favorable positions.

2. Rich in talent. As goods and services flow across the borders of the GCC and other emerging markets, so do people. Air arrivals in the GCC from China more than tripled between 2005 and 2009; arrivals from India, which historically has had deep ties to the GCC, increased by 35 percent. Arrivals from Turkey, Egypt, Indonesia, Pakistan, and Iran are on the rise as well: The GCC saw 2.2 million visitors arrive from Egypt in 2009, compared with 1 million in 2005. During the same period, the number of visitors from Pakistan increased from 769,000 to 1.4 million.

The most significant aspect of this change is the skill level of many of the people entering the GCC. No longer do executives come from the West and laborers from the East; instead, skilled individuals from emerging markets are deepening their impact in the GCC with influential positions in the region’s financial, energy, transportation, and public sectors. India, in particular, has a large community of professional expats in the region, stretching back several decades.

Because GCC countries do not publish data on the types of jobs that expats come to the GCC to perform, this trend is difficult to quantify; we are discussing it here primarily on the basis of our own extensive experience and observations. One indicator of the size and status of the Asian expat population, though, is the fact that this group’s private wealth (for which data is available) is now equal to or greater than private wealth among Western expats, and private wealth among Arab expats from outside the GCC is rapidly catching up. In Saudi Arabia, for example, Asian expats held $46 billion in private wealth in 2009, compared with $41 billion for Western expats and $21 billion for Arab expats. In the UAE, Asian expats also led the pack at $27 billion, followed by $20 billion for Western expats and $17 billion for Arab expats.

As countries that are poor in resources but rich in talent send their people to the GCC, they not only further the GCC’s own growth aspirations; they also put their expats in a strong position to encourage and maintain the GCC’s relationships with their countries of origin.

3. New sources of capital. GCC nations have long been investors in other countries — primarily in the U.S. and Europe — via their sovereign wealth funds and other state-owned entities. Although Western countries are still the primary recipients of GCC investments, accounting for 71 percent of capital outflow from the GCC between 2003 and 2008, they are slowly losing share to other Middle East countries and Asia. In light of the strong role that GCC governments play in determining the direction of their countries’ capital investments, this trend could accelerate if GCC governments decide that other emerging markets are a better strategic destination — both economically and politically — for their riyals, dirhams, and dinars.

To some degree, of course, all governments play a role in their national economy. In the aftermath of the global financial crisis, most governments’ roles are larger than they used to be, thanks to bailouts of critical industries in Western countries. But major emerging economies such as China, Russia, Brazil, and Mexico, and the countries of the GCC, among others, are active proponents of “state capitalism” — defined most recently by political risk expert Ian Bremmer as a system in which governments direct state-owned companies, private companies, and sovereign wealth funds in ways that will maximize the state’s resources and power. (See “Surviving State Capitalism,” by Art Kleiner, s+b, Summer 2010.) These countries approach state capitalism not as a last resort in times of crisis but as a sensible policy for protecting national interests while still encouraging economic growth.

For decades, the prevailing view in Western capitalist societies has been that this model cannot succeed — that the bureaucratic nature of government agencies could never compete against a nimble free market. And certainly, some state-owned enterprises in the GCC have stumbled, such as the real estate companies in Abu Dhabi and Dubai that required bailouts. In recent years, however, the track record of some state-supported sectors in the GCC shows that the issue is not quite so black and white. The state-owned airlines in the UAE and Qatar — Emirates, Etihad, and Qatar Airways — have quickly achieved global prominence. In fact, some European carriers (many of which used to be state-owned themselves) complain that it is unfair to have to compete against airlines with the power, and perhaps the economic support, of the state behind them. Thanks to strategic global investments, the size of the GCC’s sovereign wealth funds has nearly tripled in the last decade; they now hold approximately $1.1 trillion, compared with just $321 billion in 2000. And the GCC’s oil companies — the original source of the region’s wealth — are renegotiating their contracts with the foreign oil companies operating within the countries’ borders in ways that give them greater control over national resources while still allowing them to exploit the foreign oil companies’ technology and expertise.

4. Getting connected. As GCC countries seek to branch out and build relationships with other emerging markets, they have found one point of entry in the information and communications technology (ICT) sector. Like many other developing nations, they have recognized the importance of building knowledge economies to accelerate their development, and have made infrastructure investments and policy changes accordingly. Their rankings on the World Economic Forum’s Networked Readiness Index, which measures “the degree of preparation of a nation or community to participate in and benefit from ICT developments,” reflect their efforts: The UAE moved from number 28 on the list in 2005 to number 24 in 2010 (out of 138 nations on the list that year); Qatar jumped from number 40 to number 25 during the same period; and Saudi Arabia, which made its debut on the list in 2007, improved from number 48 in that year to number 33 in 2010.

In making these advances, GCC countries have frequently looked to their counterparts among other emerging nations, many of which have similar initiatives under way. As a result, the nations of the Gulf and their partners in other emerging markets have collaborated to boost their ICT development in ways that they might not have been able to do alone.

Shared infrastructure, for instance, has been crucial. The new silk road runs underwater, in the form of submarine cables that connect the GCC to countries including India, Thailand, Malaysia, South Korea, Pakistan, South Africa, Nigeria, and Sri Lanka. Chinese companies Huawei and ZTE have provided equipment for GCC telecom networks; Huawei has even gone beyond infrastructure to invest in talent in the GCC, sponsoring an academic chair in information technology and communication at the UAE’s Higher Colleges of Technology.

Telecom operators, too, are looking to emerging markets to drive their business. Since the GCC deregulated its own national telecom markets in the 1990s, local operators have been on an acquisition spree, expanding their international footprint from 28 markets in 2005 to 44 markets today. These new outposts are mostly in emerging markets, spanning Indonesia, South Africa, South Asia, the Middle East and North Africa region, and sub-Saharan Africa. These investments run the other way, too, as companies like India’s Bharti consider investments in the GCC. For emerging markets to play any significant role in the global economy of the 21st century, they will need to invest in ICT infrastructure and talent. Pooling their resources to do so can advance them more effectively.

Global Relationships for the 21st Century

The bonds between the GCC countries and the BRIC and Next 11 nations are growing stronger — a development that Western countries to date have viewed with trepidation, fearing that a zero-sum game will leave them cut off from increasingly significant consumer markets and sources of natural resources, goods, and services. But in an interconnected world, unexploited opportunities await players all over the globe.

The fact that these emerging alliances are still in their infancy means that companies and governments in the U.S. and Europe can act now to formulate a response. In doing so, they will need to recognize that the weakening of their own economies during the financial crisis has undermined their historical advantages in the GCC region and has enhanced the appeal of fast-rising emerging markets. To succeed, then, developed economies will need to capitalize on the strengths that their emerging competitors cannot yet match. For example, the U.S. and Europe are still world leaders in terms of building the capabilities and infrastructure that are crucial for innovation, and they have a history of helping GCC countries develop these assets as well. Many of the region’s oil companies relied heavily on contributions from their international partners in their early years, exchanging access to oil resources for foreign talent and technology. This trend continues today: For instance, King Fahd University of Petroleum and Minerals in Dhahran, Saudi Arabia, has formed a partnership with U.S.-based Cisco Systems to create a regional Cisco Networking Academy, which is intended to ensure that the university’s students are prepared to succeed in the digital economy. Companies in developed countries can also build on their extensive global supply chains to easily integrate new partners — whether as suppliers or as customers.

For their part, as the nations of the GCC look around the world to develop their network of relationships, they will find many opportunities with partners in both developed and developing nations. In order for these relationships to have the greatest impact in the GCC, the Gulf nations must seek the investors and trade partners that can help them address their pressing priorities: the creation of new jobs, competition that will spur their own national champions to greater success, and investment in their physical and educational infrastructure.

Gulf nations have begun building these relationships already, and in doing so their economies have become much less insulated than they were in the 1970s and 1980s. However, to increase their appeal to international partners, GCC countries will need to continue making progress on the internal reforms that are under way. Of the six nations in the GCC, only Saudi Arabia ranks in the top 20 countries in the 2010 World Bank Doing Business report, at number 11; Bahrain comes in at number 28, the UAE at number 40, and Qatar at number 50. They need to reduce the amount of red tape required to start or invest in a business, provide more transparency in business fundamentals, and invite more private-sector investment in industries that still have substantial government involvement. They should also expand their overall talent base by making it more appealing for foreigners who have critical skills to live in the region, while simultaneously developing their own people and ensuring that they have the right capabilities to build critical sectors such as energy, education, and communications.

GCC countries will also need to keep pushing forward on economic integration within the region, which will bolster their presence on the world stage. The countries of the GCC have much more clout as an economic bloc than as six separate entities, and they must continue to implement policies that reflect this perspective. A recent Booz & Company study assessed the progress of the GCC toward regional integration on a number of measures using a scale of 1 to 5, with 1 indicating “major setback to the goal” and 5 representing “accomplishment or near completion of the goal.” When all measures were taken into account, the study found that the GCC had achieved an overall score of just 2.9 out of 5. The Gulf nations must redouble efforts toward the creation of a monetary union, improve the coordination of customs and border policy, promote greater intra-regional investment, fulfill joint infrastructure commitments, and increase collective efforts in research and development. If the GCC can become a stronger economic bloc, the entire region will become a less risky, more attractive proposition for investment.

The GCC is at a critical juncture as it determines the parameters of its relationships with partners both old and new, Western and Eastern. But there’s no doubt that the new silk road can be a path toward future prosperity for the GCC countries, building trade and creating wealth as powerfully in the 21st century as the old silk road did in ages past.

Author Profiles:

    Joe Saddi is the chairman of the board of directors of Booz & Company and the managing director of the firm’s business in the Middle East. His work covers multifunctional assignments in the oil, gas, mining, water, steel, automotive, consumer goods, and petrochemical sectors.
    Karim Sabbagh is a Booz & Company senior partner based in Dubai. He leads the firm’s work for global communications, media, and technology clients. He is a member of the firm’s Marketing Advisory Council and the chairman of the Ideation Center, the firm’s think tank in the Middle East.
    Richard Shediac is a senior partner with Booz & Company based in Abu Dhabi, where he leads the firm’s Middle East work for public-sector and healthcare clients. He has led and participated in strategy, operations improvement, and organization projects in the Middle East, Europe, and Asia.
    Also contributing to this article were Booz & Company principal Mazen Ramsay Najjar, Ideation Center director Hatem A. Samman, and s+b contributing editor Melissa Master Cavanaugh.

Sunday, May 2, 2010

A Centrist Agenda for Economic Growth

A Centrist Agenda for Economic Growth. By JIM OWENS
Freer trade plus lower corporate and investment taxes would go a long way.WSJ, May 03, 2010

The long-term health of the U.S. economy is at risk. There are signs of recovery from the worst recession since the Great Depression. But not enough.

We need a renewed, centrist political agenda to support economic policies that will enhance our global competitiveness. America cannot sustain itself as a great country without a strong economy. Yet significant economic decisions are made in Washington with little consideration as to how they will affect the global competitiveness of the small and large companies that employ our citizens.

Here are a few policy suggestions:

• Restore fiscal discipline. Simply stated, we must balance the books. This means deciding how much government we want and the best way to generate the tax revenues to pay for it.

To get there, federal and state governments must be required to use the same transparent accounting standards required of corporations for employee retirement benefits. With baby boomers retiring, we have a ticking time bomb on our hands. Transparency would make it clear to everyone just where the unfunded obligations are and get us on road to begin funding them. Further, we should mandate that federal budget deficits be balanced over a business cycle.

• Simplify the federal tax code with flat personal income taxes. This means incentivizing savings and investment with significantly lower rates for dividends and long-term capital gains. Use consumption taxes to raise additional funds to achieve social goals, such as lowering emissions or tobacco consumption.

• Tax business only on profits earned in the United States. This means adopting a territorial tax system for U.S.-based global companies, which will encourage them to repatriate global profits (billions await) to the United States and increase the likelihood of investment here. We should also recruit foreign direct investment to serve U.S. customers and to pay taxes to our government.

Recognizing that the U.S. has one of the highest corporate tax rates in the world, the government should not eliminate the current provision that allows companies to "defer" paying a U.S. tax on foreign income until it is brought back into this country. Over time this would destroy U.S.-based global companies.

• Increase infrastructure investment. Since the 1970s U.S. investment in infrastructure has grown at only half the rate of GDP growth. Today, our roads are crumbling, bridges are in need of repair, and our power grid is inefficient. Meanwhile, emerging economies (notably China, India and Brazil) are making huge investments in modern infrastructure.

Infrastructure is the foundation for an economy's global competitiveness. We don't want to wake up in 10 years and find ourselves hopelessly behind.

• Free up international trade. The U.S. needs to provide leadership for completion of the World Trade Organizations' Doha Development Round of Trade Negotiations. Moreover, Americans need to pressure Washington to ratify the three Free Trade Agreements (FTAs)—for Panama, Colombia and South Korea—that have already been negotiated. Passage of these agreements will show the world we're open for business, create immediate exports and related jobs, and it would also strengthen the economies of three important allies.

• Improve the health-care system's cost effectiveness. To get there, the country needs to further reform its tort system and to continue to adopt better information technology. It's also critical that consumers have access to better information on health-care prices and outcomes and to be able to purchase competitively priced insurance offered in other states. Finally, citizens must have a personal stake in the costs of their care, which will enable them to make prudent decisions.

• Reform immigration laws to make existing "guest" workers legal, tax-paying employees. We should provide legal avenues for guest workers to apply for U.S. citizenship. It is to our advantage to grant more visas to the best and brightest students from around the world who come to our best universities. Students receiving qualifying advanced degrees (such as in math and science) should get an automatic green card to work in our country.

• Maintain the independence of the Federal Reserve. The task of the central bank is to manage money supply to keep inflation low (0%-2%), employment high and the financial system healthy. Excessive political influence could prevent the Fed from taking decisive actions when needed.

These recommendations are not particularly novel. In fact, the majority of economists and business leaders I've talked to agree with virtually all of them. Real GDP growth of 3.5% over the next decade is an aggressive target—but achievable. We need to think like winners.

Mr. Owens is chairman and CEO of Caterpillar Inc.

Wednesday, April 28, 2010

Attacking the motives of critics is not presidential

It's Only Called the Bully Pulpit. By Karl Rove
Attacking the motives of critics is not presidential.
WSJ, Apr 29, 2010

President Barack Obama's speech last week at New York Cooper's Union showcased two unattractive verbal leitmotifs. The first was the president's reliance on straw-man arguments. America, he said, need not "choose between two extremes . . . markets that are unfettered by even modest protections against crisis, or markets that are stymied by onerous rules."

Mr. Obama was right in calling this "a false choice." Who is suggesting that Wall Street should not be regulated?

The other, more troubling rhetorical device was Mr. Obama's labeling his opponents as "special interests," and demanding that they stop disagreeing with him and get on board his legislative express. Speaking to bank executives, he decried the "furious effort of industry lobbyists to shape" financial regulation legislation—a barb aimed at the investment bankers in the audience who have hired lobbyists. The president urged "the titans of industry" to whom he was speaking "to join us, instead of fighting us."

While criticizing political opponents is standard operating White House procedure, the practice of summoning critics to bully them in public is unpresidential and worrisome.

Before his health-care bill passed, Mr. Obama sent a tough letter to health-insurance CEOs and then castigated them 22 times in a follow-up prime-time televised speech. This is behavior worthy of a Third World dictator—not the head of a vibrant democracy.

Mr. Obama has also excoriated drug and health-insurance companies, while remaining content to have them spend tens of millions of dollars on ads supporting his health-care bill. This smacked of Chicago-style shake-down politics.

Too often, Mr. Obama disparages those who disagree with him as having venal, illegitimate motivations. In his Cooper Union speech he berated the "battalions of financial industry lobbyists" for their "misleading arguments and attacks." He blamed their "withering forces" for buckling "a bipartisan process" that had "produced . . . a common-sense, reasonable, non-ideological approach."

Maybe the renowned lecturer of constitutional law at the University of Chicago should reacquaint himself with Federalist No. 10. James Madison, a father of the Constitution, suggested that there are "two methods of curing the mischiefs of faction."

One was to destroy "the liberty which is essential to its existence"—something that is anathema to our democratic system. The other was to give "to every citizen the same opinions, the same passions, and the same interests," which is impossible.

"The latent causes of faction are thus sown in the nature of man," Madison wrote. Recognizing this led the Founders to create a system in which competition between interests restrains government, cools passions, and forces political compromise. This has kept our politics floating around the center.

Mr. Obama's attacks on his critics are not only unbecoming; they undermine a political process that would otherwise trend toward occasional bipartisan compromise. They are also hypocritical. Mr. Obama said in New York last week that "a lack of consumer protections and . . . accountability" created the credit crisis. As a senator in 2005, he joined Sen. Chris Dodd (D., Conn.) to threaten to filibuster a GOP effort to rein in Fannie Mae and Freddie Mac when it was still possible to diminish the role those companies would play in the financial crisis. He later voted for the Fannie and Freddie reforms after the two went belly up in 2008.

But it is the president's intimidation that is most troubling. Mr. Obama has the disturbing tendency to question the motives of those who disagree with him, often making them the objects of ad hominem attacks. His motives, on the other hand, are pure.

Mr. Obama often makes it seem illegitimate to challenge his views, and he isn't content to argue issues on the merits. Instead, he wants to make opponents into pariahs. And it's not just business executives who are on the receiving end. We've also seen this pattern with the administration's attacks on the tea party movement and those who attended town-hall meetings last summer on health care.

This is a bad habit—and a dangerous one. The presidency is a very powerful office, and presidents need to be careful not to use it to silence dissenting voices.

Mr. Obama will learn these efforts don't work. In a big, free nation like ours, people want to debate the issues. They don't take kindly to arrogant leaders who believe it is their right to silence the opposition—by either driving them out of the legislative process or pushing them out of the public debate with fiery rhetoric. Through the anonymity of a ballot box and beyond the power of presidential intimidation, voters can express their discontent and they will.

Mr. Rove, the former senior adviser and deputy chief of staff to President George W. Bush, is the author of "Courage and Consequence" (Threshold Editions, 2010).

Thursday, December 17, 2009

Rove: The President Is No B+ - In fact, he's got the worst ratings of any president at the end of his first year

The President Is No B+. By Karl Rove
In fact, he's got the worst ratings of any president at the end of his first year.
WSJ, Dec 17, 2009

Barack Obama has won a place in history with the worst ratings of any president at the end of his first year: 49% approve and 46% disapprove of his job performance in the latest USA Today/Gallup Poll.

There are many factors that explain it, including weakness abroad, an unprecedented spending binge at home, and making a perfectly awful health-care plan his signature domestic initiative. But something else is happening.

Mr. Obama has not governed as the centrist, deficit-fighting, bipartisan consensus builder he promised to be. And his promise to embody a new kind of politics—free of finger-pointing, pettiness and spin—was a mirage. He has cheapened his office with needless attacks on his predecessor.

Consider Mr. Obama's comment in his interview this past Sunday on CBS's "60 Minutes" that the Bush administration made a mistake in speaking in "a triumphant sense about war."

This was a slap at every president who rallied the nation in dark moments, including Franklin D. Roosevelt ("With confidence in our armed forces, with the unbounding determination of our people, we will gain the inevitable triumph"); Woodrow Wilson ("Right is more precious than peace and we shall fight for the things which we have always carried nearest our hearts"); and John F. Kennedy ("Any hostile move anywhere in the world against the safety and freedom of peoples to whom we are committed . . . will be met by whatever action is needed").

This kind of attack gives Mr. Obama's words a slippery quality. For example, he voted for the bank rescue plan in September 2008 and praised it during the campaign. Yet on Dec. 8 at the Brookings Institution, Mr. Obama called it "flawed" and blamed "the last administration" for launching it "hastily."

Really? Bush Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke and New York Fed President Timothy Geithner designed it. If it was "flawed," why did Mr. Obama later nominate Mr. Bernanke to a second term as Fed chairman and make Mr. Geithner his Treasury secretary?

Mr. Obama also claimed at Brookings that he prevented "a second Great Depression" by confronting the financial crisis "largely without the help" of Republicans. Yet his own Treasury secretary suggests otherwise. In a Dec. 9 letter, Mr. Geithner admitted that since taking office, the Obama administration had "committed about $7 billion to banks, much of which went to small institutions." That compares to $240 billion the Bush administration lent banks. Does Mr. Obama really believe his additional $7 billion forestalled "the potential collapse of our financial system"?

Mr. Obama continued distorting the record in his "60 Minutes" interview Sunday when he blamed bankers for the financial crisis. They "caused the problem," he insisted before complaining, "I haven't seen a lot of shame on their part" and pledging to put "a regulatory system in place that prevents them from putting us in this kind of pickle again."

But as a freshman senator, Mr. Obama supported a threatened 2005 filibuster of a bill regulating Fannie Mae and Freddie Mac. He doesn't show "a lot of shame" that he and other Fannie and Freddie defenders blocked "a regulatory system" that might have kept America from getting in such a bad pickle in the first place.

The president's rhetorical tricks don't end there. Mr. Obama also claimed his $787 billion stimulus package "helped us [stem] the panic and get the economy growing again." But 1.5 million more people are unemployed than he said there would be if nothing were done.

And as of yesterday, only $244 billion of the stimulus had been spent. Why was $787 billion needed when less than a third of that figure supposedly got the job done?

Mr. Obama also alleged on "60 Minutes" that health-care reform "will actually bring down the deficit" (which people clearly know it will not). He said his reform reduces "costs and premiums for American families and businesses" (though they will be higher than they would otherwise be). And he claimed 30 million more people will get coverage through "an exchange that allows individuals and small businesses" to purchase insurance (though 15 million of them are covered by being dumped into Medicaid and don't get private insurance).

Mr. Obama may actually believe it when he says, "I think that's a pretty darned good outcome" and congratulates himself that he could succeed where "seven presidents have tried . . . [and] seven presidents have failed."

But voters seem to have a different definition of success. And they are tiring of the president's blame shifting and distortions.

Mr. Obama may believe, as he told Oprah Winfrey in a recent interview, that he deserves a "solid B+" for his first year in office, but the American people beg to differ. A presidency that started with so much promise is receiving unprecedentedly low grades from the country that elected him. He's earned them.

Mr. Rove, the former senior adviser and deputy chief of staff to President George W. Bush, is the author of the forthcoming book "Courage and Consequence" (Threshold Editions).

Friday, October 16, 2009

Borrow from the Federal Reserve at zero and lend to Treasury for a profit. That's some racket

The Banking System Is Still Broken. By ANN LEE
Borrow from the Federal Reserve at zero and lend to Treasury for a profit. That's some racket.
WSJ, Oct 16, 2009

Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke have announced that the recession is over. Now that the Dow Jones Industrial Average has broken the 10,000 mark, we'll surely be hearing assurances that economic growth is here to stay. But the credit markets are in much worse shape than some indicators suggest.

First of all, not all U.S. banks are created equal. A few multinational banks such as Citigroup are officially too big to fail. Credit spreads in the markets reflect the relatively risk-free nature of these large companies, which now have implicit government guarantees.

But this protection doesn't apply to smaller banks, some of which are being shut down by the FDIC without much media attention. These smaller banks have done most of the lending to the many small and medium-sized enterprises that do the bulk of the hiring in our economy. They've now had to cut off the flow of credit to their clients.

According to Automatic Data Processing Inc.'s August employment report, large businesses shed 60,000 jobs, and employment at medium-sized and small businesses declined by 116,000 and 122,000, respectively, in August alone. Small businesses, defined as employing anywhere from one to 49 people, account for 48 million jobs in the U.S., and medium-sized businesses, between 50 and 499 employees, account for 42 million jobs. Large businesses account for just 17 million. Without access to capital, these small and medium-sized businesses will continue to lay off their employees, creating a vicious cycle of shrinking consumer credit and demand.

The volume of overall bank lending has not returned to pre-crisis levels. While credit spreads have contracted, not much debt has been underwritten. In fact, banks that received government bailout money reduced their average loan balance by $54 billion in July, compared to the previous month, according to the Treasury's Capital Purchase Program Monthly Lending report.

The first reason for this slowdown in lending is that underwriting standards have risen across the board, making it much more difficult for businesses to obtain loans. Institutional investors no longer tolerate the easy loans so characteristic of this latest credit bubble. Banks are now also being asked to retain a portion of any loans they underwrite in order to align their interests with their investors. As a result, credit has scaled back dramatically. According to reports issued by the major rating agencies, in 2007 $700 billion of asset-backed securities were underwritten. Only $10 billion has been issued in 2009. This has a significant knock-on effect across every sector of the economy.

The banks have no incentive to lend. Most of them still have a significant amount of bad loans sitting on their books that they don't want to recognize as nonperforming. If the banks recognize these bad loans, all the write-offs may force them into bankruptcy. Instead, they hope that over time renegotiated loan terms will eventually allow the borrowers to make their payments. This ordeal could last at least a decade if this cycle is similar to other crises, like Japan's lost decade of the 1990s. As the fed funds rate goes to zero and existing loans in technical default continue to sit in bank portfolios, why should banks make new loans when they can make money for free with the government? There is no longer a stigma associated with borrowing from the Fed, so banks can earn a huge spread by borrowing virtually unlimited amounts for nothing and lending that same money back to the Treasury.

Wall Street will most definitely get richer again. But a return to easy credit for the average consumer and business is not likely in the near future. The only reason that credit spreads have tightened is because of the extraordinary interventions by the Fed and the Treasury.

Such unprecedented actions by the government have led to speculation over when inflation might get out of control. But why not question whether our current banking system actually makes any sense? Rather than giving capital to businesses with real products and services, Wall Street plays a government-backed shell game, enriching bankers' pockets at everyone else's expense.

If banks are being supported by taxpayer dollars as a public good, wouldn't it be logical to make Citigroup and Goldman part of the government so that they can serve the public like the Department of Motor Vehicles? The powerful banking lobby will likely prevent the nationalization of the entire banking system. But expect new challenges to our assumptions about the status quo if this recovery and the proposed regulatory reforms fail.

Ms. Lee, an adjunct professor at New York University, is a former investment banker and hedge-fund partner.

Wednesday, September 16, 2009

WSJ Editorial: Obama and the cost of individual insurance

Another Health-Care Invention. WSJ Editorial
Obama and the cost of individual insurance.
The Wall Street Journal, page A26, Sep 16, 2009

Speaking of health-care distortions, as President Obama likes to do, consider his assertion to Congress that "buying insurance on your own costs you three times as much as the coverage you get from your employer." He liked that one so much that he repeated it over the weekend in Minneapolis, this time as a swipe at "the marketplace."

The media's "fact-check" brigade hasn't noticed, but this is simply false. The Congressional Budget Office expects premiums for employer-sponsored coverage to cost about $5,000 for singles and $13,000 for families this year on average. "Premiums for policies purchased in the individual market," adds CBO, "are much lower—about one-third lower for single coverage and half that level for family policies."

Similarly, the federal Agency for Healthcare Research and Quality finds that the growth rate for premiums is also lower for individuals over employers. Mr. Obama's health team surely knows this dynamic, given that the CBO report was issued under the auspices of Peter Orszag, now the White House budget director.

One reason that individual policies are cheaper is that they generally require more cost-sharing by consumers. The reason that employment-based plans seem cheaper is that on average workers only pay 17% of the premiums directly if they're single, and 27% for family policies, according to the Kaiser Family Foundation. Businesses pick up the rest by paying lower wages, thus hiding the real costs. Meanwhile, in the individual market, consumers pay with after-tax dollars because Democrats won't allow individuals to have the same tax subsidy that employer policies receive.

This tax differential is the core of "our inefficient and inequitable system of tax-advantaged, employer-based health insurance," writes Jeffrey Flier, the dean of Harvard Medical School, in a new commentary in the Journal of Clinical Investigation.

"While the federal tax code promotes overspending by making the majority unaware of the true cost of their insurance and care," he writes, "the code is grossly unfair to the self-employed, small businesses, workers who stick with a bad job because they need the coverage, and workers who lose their jobs after getting sick. . . . How this developed and persisted despite its unfairness and maladaptive consequences is a powerful illustration of the law of unintended consequences and the fact that government can take six decades or more to fix its obvious mistakes." Well said.

As Dr. Flier notes, Democrats have no plans to fix this tax bias, though they are likely to "create a new generation of problems." If Mr. Obama is going to slam "the marketplace," he should at least admit the real cause of its ills rather than invent statistics and strawmen.

Monday, September 14, 2009

Fact-Checking the Federal President on Health Insurance

Fact-Checking the President on Health Insurance. By SCOTT HARRINGTON
His tales of abuse don't stand scrutiny
WSJ, Sep 14, 2009

In his speech to Congress last week, President Barack Obama attempted to sell a reform agenda by demonizing the private health-insurance industry, which many people love to hate. He opened the attack by asserting: "More and more Americans pay their premiums, only to discover that their insurance company has dropped their coverage when they get sick, or won't pay the full cost of care. It happens every day."

Clearly, this should never happen to anyone who is in good standing with his insurance company and has abided by the terms of the policy. But the president's examples of people "dropped" by their insurance companies involve the rescission of policies based on misrepresentation or concealment of information in applications for coverage. Private health insurance cannot function if people buy insurance only after they become seriously ill, or if they knowingly conceal health conditions that might affect their policy.

Traditional practice, governed by decades of common law, statute and regulation is for insurers to rely in underwriting and pricing on the truthfulness of the information provided by applicants about their health, without conducting a costly investigation of each applicant's health history. Instead, companies engage in a certain degree of ex post auditing—conducting more detailed and costly reviews of a subset of applications following policy issue—including when expensive treatment is sought soon after a policy is issued.

This practice offers substantial cost savings and lower premiums compared to trying to verify every application before issuing a policy, or simply paying all claims, regardless of the accuracy and completeness of the applicant's disclosure. Some states restrict insurer rescission rights to instances where the misrepresented or concealed information is directly related to the illness that produced the claim. Most states do not.

To highlight abusive practices, Mr. Obama referred to an Illinois man who "lost his coverage in the middle of chemotherapy because his insurer found he hadn't reported gallstones that he didn't even know about." The president continued: "They delayed his treatment, and he died because of it."

Although the president has used this example previously, his conclusion is contradicted by the transcript of a June 16 hearing on industry practices before the Subcommittee of Oversight and Investigation of the House Committee on Energy and Commerce. The deceased's sister testified that the insurer reinstated her brother's coverage following intervention by the Illinois Attorney General's Office. She testified that her brother received a prescribed stem-cell transplant within the desired three- to four-week "window of opportunity" from "one of the most renowned doctors in the whole world on the specific routine," that the procedure "was extremely successful," and that "it extended his life nearly three and a half years."

The president's second example was a Texas woman "about to get a double mastectomy when her insurance company canceled her policy because she forgot to declare a case of acne." He said that "By the time she had her insurance reinstated, her breast cancer more than doubled in size."

The woman's testimony at the June 16 hearing confirms that her surgery was delayed several months. It also suggests that the dermatologist's chart may have described her skin condition as precancerous, that the insurer also took issue with an apparent failure to disclose an earlier problem with an irregular heartbeat, and that she knowingly underreported her weight on the application.

These two cases are presumably among the most egregious identified by Congressional staffers' analysis of 116,000 pages of documents from three large health insurers, which identified a total of about 20,000 rescissions from millions of policies issued by the insurers over a five-year period. Company representatives testified that less than one half of one percent of policies were rescinded (less than 0.1% for one of the companies).

If existing laws and litigation governing rescission are inadequate, there clearly are a variety of ways that the states or federal government could target abuses without adopting the president's agenda for federal control of health insurance, or the creation of a government health insurer.

Later in his speech, the president used Alabama to buttress his call for a government insurer to enhance competition in health insurance. He asserted that 90% of the Alabama health-insurance market is controlled by one insurer, and that high market concentration "makes it easier for insurance companies to treat their customers badly—by cherry-picking the healthiest individuals and trying to drop the sickest; by overcharging small businesses who have no leverage; and by jacking up rates."

In fact, the Birmingham News reported immediately following the speech that the state's largest health insurer, the nonprofit Blue Cross and Blue Shield of Alabama, has about a 75% market share. A representative of the company indicated that its "profit" averaged only 0.6% of premiums the past decade, and that its administrative expense ratio is 7% of premiums, the fourth lowest among 39 Blue Cross and Blue Shield plans nationwide.

Similarly, a Dec. 31, 2007, report by the Alabama Department of Insurance indicates that the insurer's ratio of medical-claim costs to premiums for the year was 92%, with an administrative expense ratio (including claims settlement expenses) of 7.5%. Its net income, including investment income, was equivalent to 2% of premiums in that year.

In addition to these consumer friendly numbers, a survey in Consumer Reports this month reported that Blue Cross and Blue Shield of Alabama ranked second nationally in customer satisfaction among 41 preferred provider organization health plans. The insurer's apparent efficiency may explain its dominance, as opposed to a lack of competition—especially since there are no obvious barriers to entry or expansion in Alabama faced by large national health insurers such as United Healthcare and Aetna.

Responsible reform requires careful analysis of the underlying causes of problems in health insurance and informed debate over the benefits and costs of targeted remedies. The president's continued demonization of private health insurance in pursuit of his broad agenda of government expansion is inconsistent with that objective.

Mr. Harrington is professor of health-care management and insurance and risk management at the University of Pennsylvania's Wharton School and an adjunct scholar at the American Enterprise Institute.

Friday, July 17, 2009

WaPo Editorial: Mr. Paulson on the Hot Seat - A congressional inquiry into the financial crisis and bailout ignores what went right

Mr. Paulson on the Hot Seat. WaPo Editorial
A congressional inquiry into the financial crisis and bailout ignores what went right.
Friday, July 17, 2009

HERE, MORE or less, is the state of the U.S. financial system as we enter the second half of 2009: The top 20 U.S. banks -- once thought to be insolvent and possibly in need of nationalization -- have survived a government stress test and begun raising private capital. The three-month London Interbank Offered Rate, which rises when banks are illiquid, has declined steadily since March. Several recipients of government bailout funds have repaid them. The Treasury Department felt confident enough of the system's soundness to deny further help this week to CIT Group, a previous recipient of bailout money.

All of this good news must be marked "tentative," of course, for the simple reason that the banks are floating on a sea of government-supplied liquidity, in the form of a near-zero Federal Reserve target rate, open-ended Treasury support to Fannie Mae and Freddie Mac, and multiple government credit guarantees. This is far from a self-sustaining recovery, and a new shock could push the system back to the brink. But all things considered, we could be doing much worse.

Under the circumstances, you might have thought Congress would hold a hearing about what has gone right so far and how to turn this incipient and vulnerable progress into something more permanent. Instead, we got yesterday's backward-looking affair at the House Committee on Oversight and Government Reform, the latest in a series of sessions aimed at December's federally engineered merger of Bank of America and Merrill Lynch, which has ended up costing taxpayers about $50 billion. Resentment of bailing out Wall Street is a bipartisan affair, so both Republicans and Democrats on this committee are determined to show how wrong it was for officials, including Federal Reserve Chairman Ben S. Bernanke, then-New York Fed boss Timothy F. Geithner and then-Treasury Secretary Henry M. Paulson to strong-arm Bank of America chief executive Kenneth D. Lewis into swallowing Merrill even after it turned out that the former Wall Street powerhouse faced much bigger losses than previously known.

In the witness chair yesterday, Mr. Paulson pretty much pleaded guilty to telling Mr. Lewis that he would be out of a job if he reneged -- with the explanation that the alternative would have been worse, namely a financial meltdown that would have spread around the world and probably cost taxpayers many billions more than did the Merrill-Bank of America merger or the bailout of insurance giant AIG. "By far the biggest advantage to the taxpayers is what didn't happen," Mr. Paulson said. Unsatisfied, several committee members arraigned Mr. Paulson for allegedly bailing out the banks and AIG to benefit his former Wall Street firm, Goldman Sachs. As proof, they cited Goldman's record profit of $3.4 billion in the second quarter.

Even though Mr. Paulson didn't quite dare to say it, Goldman's good quarter is a sign that he and other decision-makers made the right calls back in the scary fall and winter of 2008. The objective of government policy should be to get financial firms to where they are once again profitable without taxpayer support. It's absolutely true, as members of the committee said and as Mr. Paulson acknowledged, that the bailout of Wall Street is fraught with moral hazard: It broke the basic rule of capitalism, which says that business executives should bear all the costs of their bad decisions. But it's also true that financial stability is a public good. When the collapse of one or more financial institutions threatens to destroy financial stability, a government bailout can serve the public interest. Believing that, Mr. Paulson and his colleagues made some very difficult decisions under dangerous conditions. The ultimate results of those tough choices are still unknown. A fairer congressional inquiry, though, would start from the premise that, if he had not taken the actions that he did, the subject of today's investigations might have been a much, much bigger catastrophe.