Thursday, August 09, 2007

Candidates Mislead on Economics

In an earlier post today, I noted how important it is to check facts and assumptions anytime economic issues are involved, not only by the media but also from politicians. Now I read this from James Pethokoukis and his blog Capital Commerce, "Democratic Debate Spawns Weird Economics":

The Democratic presidential contenders went at it again last night in a debate (or "forum" if you prefer) sponsored by the AFL-CIO. For once, economic issues—especially trade—shared equal importance with the war in Iraq. Here are a few statements from the various candidates —including front-runners Hillary Clinton and Barack Obama—that struck me as kind of strange:

1) "You know, six and a half years ago, we had a balanced budget and a surplus; now we are in deep debt with a rising deficit, and it is absolutely true that George Bush has put it on the credit card, expecting our children and grandchildren to pay for it." -- Sen. Hillary Clinton. Hey, the last time I checked, the budget deficit for this year was forecast to be $207 billion, half of what it was in 2004. (The budget might actually be back in the black when the next president takes office.) And while Bush did inherit a balanced budget and surplus from Team Clinton, neither administration successfully fixed the $100 trillion unfunded liability problem with Social Security and Medicare.

2 ) "For every $1 billion we spend [on infrastructure], 40,000 jobs can be created in the United States of America." -- Sen. Christopher Dodd. I have no doubt that jobs can be created through government spending. But those billions must be taken from the private sector. Will those billions be used more wisely and efficiently and productively by federal bureaucrats than by private managers? If so, maybe the feds should guarantee a job for everyone who wants one. Using the Dodd formula, it would cost a mere $175 billion a year to employ all 7 million unemployed Americans.

3) "Well, look, people don't want a cheaper T-shirt if they're losing a job [from free trade] in the process." -- Sen. Barack Obama. Inexpensive T-shirts vs. outsourced jobs isn' t really the debate. According to research from the International Institute for Economics, Americans are $7,000 to $13,000 richer because of trade, and removing all trade barriers would permanently increase our wealth by $4,000 to $13,000 per household. And since the North American Free Trade Agreement took effect in 1994, America has added nearly 30 million net new jobs.

4) "What we need to do is say that from now on, America will adhere to all international labor standards in any trade agreement—no child labor, no slave labor, freedom of association, collective bargaining—that is critically important—making sure that no wage disparity exists." -- Gov. Bill Richardson. If what Richardson was saying is that American trade negotiators should demand foreign workers make the same as American workers or no trade deals, then what he is saying is no trade with India or China. Incomes in those countries are rising thanks to globalization, but there is a long way to go.

5)"It means that we are also not running up deficits and asking China to bail us out and finance them, because it's pretty hard to have a tough negotiation when the Chinese are our banker." -- Sen. Barack Obama. This is the myth that "China holds all the cards." Look, the Chinese government needs fast growth to hold down social unrest and justify the continued dominance of the Communist Party there. And the most likely cause of a slowdown there would be a slowdown here first. The last thing China wants to do is start dumping U.S. bonds and cause a recession here.

Perhaps I have been assigning too much blame to the media and not enough to pandering politicians. I am sure many of the Republician candidates will be as bad and when I get those misleading remarks I will pass those on as well. It is not by any means a one party problem.

Maybe Sen. Clinton doesn't know the deficit is very low at present, or Sen. Obama doesn't know know that counties buy our treasury bonds because of the strength of our economy not our weakness, or that Sen. Dodd's doesn't remember that government spending originates from the taxes paid by citizens not thin air? Or that Gov. Richardson thinks all wage disparities can be eliminated if the US says so, or Sen. Obama (again) sees no benefit in trade to the US consumer?

Is it possible that people can reach a point of being a US Senator or a state governor, let alone running for president, and either know almost nothing about basic economics or not telling the truth due to an obsessive desire to win elections?

Fixing Broken Government

Cal Thomas is out today with "Competence Above Ideology". Here are some highlights:

We pour increasing amounts of time, attention and money into giving children, especially underprivileged children, a chance to succeed. Do the candidates really believe the problem is not enough money, or is it too much money and not enough choice as to which school -- public or private -- best serves the needs of children? Ending the education monopoly would help those languishing in substandard schools. Are the candidates -- especially Democrats -- so beholden to the teachers unions that they care more about winning their approval than they do about educating children? The answer for Democrats is "yes." Why don't the overpaid interrogators/moderators ask the question this way?

H. George Frederickson, a professor in the Department of Public Administration at the University of Kansas, has written a compelling essay on "Repairing Broken Government." It addresses the need to focus on competence more than ideology. Noting the familiar list most people make on the reasons for broken government -- the pervasive influence of money in politics, the power of interest groups and lobbyists, legislative gridlock and more -- Frederickson touches on something of perhaps even greater importance: "bureaucracy, ineffective management, or poor policy implementation are central elements of a broken national government."

Instead of "sound-byting," character assassination and sloganeering, Frederickson calls for "substantive competence (think Katrina)" in government. He wants more competent people running things and he suggests the way to make that happen is to amend the Civil Service Reform Act of 1978.

That law, he writes, "added a thick layer of political appointees to the upper ranks of federal agencies" while the ranks of merit-based civil servants were reduced from almost 3 million to about 1.8 million. "From the standpoint of government effectiveness, this has been a deadly combination," he says.

Where are the voices of the presidential candidates promising to clean house of political appointees and replace them, not with political appointees from their party and persuasion, but with people who know what they are doing?

I care about social issues and the eroding morality of the country, but I care more about competent government. We are spending more on government than ever and getting less for our money...

Let's have a little less ideology from the presidential candidates of both parties and a lot more talk of how to repair broken government.

These remarks fits perfectly with my recent post on school failure, see here.

I also think in a way that a focus on competence in managing government fits into points being made repeatedly by Giuliani and Romney as to the importance of managerial experience in the presidential election campaign. I hope that the public and candidates from all sides see this not however as a party issue but that a real need exists for America to fix our schools and to fix the inability of government to carry out basic duties.

By the way, The New Republic has a funny parody out today, listed on the web site as "The Absurd Comedy of the Dems' Labor Suck Up". I hope this writer does one on the next Republican debate as well.

Public Opinion & US Economy

One blog that I really like and admire is Back Talk written by an anonymous person who describes himself (or herself) as "a professor at a research university, a registered Democrat, a liberal by some measures, but a radical conservative relative to the large majority of my colleagues." The author is an economist of talent given the analysis and manner of thinking exhibited in Back Talk.

The following is an introduction to a couple of excellent posts about the actual state of the US economy as opposed to public perceptions that I recalled from early June of this year that serves as an excellent introduction to an article from today's Wall Street Journal that I will get to shortly. Here from Back Talk, "What Americans Think About Their Economy":

Americans are not happy with the state of their economy, which either means that they are insane or that the media is so negative that Americans do not realize how good they have it. It's definitely the latter.

The health of an economy is measured by such things as GDP growth, GDP per capita, unemployment, inflation, budget deficit and cumulative debt. Additional issues include income inequality (we aren't doing that well if only the rich are getting better off), the trade deficit, and the exchange rate for the dollar.

People need some perspective before forming an opinion about the economy, but they never get that from the news media.
There are two kinds of perspective that are needed: perspective over time and perspective over place. That is, on all of these measures, how do the current numbers compare to prior years in which we were much happier with the state of economy? In addition, on each of these measures, how does the American economy stack up against the other major industrialized nations of the world (i.e., the G7)?

After the professor goes through all the data he concludes:

...Americans fail to appreciate the strength of their fabulous economy. Our economy is not only as good as it has ever been (unless you count the bubble economy years), it is better than any large economy on the planet (as I'll show again tomorrow). Perhaps that's not good enough for you, but, if not, you should consider having your head examined, because that's where the problem lies.

Now let's turn to the WSJ piece today, "Fair But Unbalanced: How the Media Promote False Pessimism about the Economy":

...[T]he most recent Wall Street Journal economic forecasting survey, from July, shows that 49 out of 60 forecasters expect real GDP to grow at an average annual rate of 2%, or faster, in 2007. Of the remaining 11 forecasters, only two expect growth of less than 1%, and only one expects a recession. For 2008, the forecasters are even more optimistic, with none expecting recession.

There are at least a half-dozen other institutions publishing surveys, and all of them report very similar results among the 100 or so active professional forecasters. Except for two well-known economists (Nouriel Roubini at New York University, and Gary Shilling of A. Gary Shilling & Co.), who are not in many surveys, a super-duper majority of professional forecasting economists believe the economy will continue to expand during the next year and have believed so for the past four or five years.

Despite this, an NBC News/Wall Street Journal poll taken in late July found that 68% of Americans thought that the economy either was in recession already, or would experience a recession sometime during the next 12 months. Interestingly, this is not much of a change from the past. This same survey question has been polled at least five times since September 2002. Each time a robust majority of between 65% and 85% of respondents thought a recession either was under way or would occur within the year. Americans have been bearish on the economy for quite some time.

In short, over the past five years, forecasting economists from academia, consulting shops, financial services and industry have a perfect 5-0 record against a random sample of American citizens. It's important to understand that economists are not always right. Some even say that economists were put on earth to make weathermen look good.

In fact, some suggest that the experts don't know what they are talking about. They say that economists make the mistake of looking at aggregate data, for GDP or overall income, which hides serious dislocations for the middle class and those with lower incomes. Those who argue this point believe that unfair foreign competition and unfair distribution of income are leaving many Americans behind.

But this is hard to believe. The economy moderated last year, but the unemployment rate is still just 4.6%, almost a full percentage point below its 20-year average of 5.5%. Since the jobless rate first fell below 5% in December 2005, average hourly earnings have expanded at a 4.1% annualized rate--as good as any year during the late 1990s. And recent research shows that incomes for the bottom fifth of wage earners have risen faster in the past few decades than incomes at the top, hard work is being rewarded more by performance pay, and income volatility is no worse today than it was in the 1980s and 1990s.

Stranger still is a July poll by the American Research Group (ARG) in which 68% of respondents rated their own personal financial situation as "good, very good or excellent." This is a huge improvement from March 2003, when another ARG poll found only 46% of Americans were either "hopeful or happy" about their personal financial situation, while 46% were "worried or angry."

This begs the question: If the actual economic data, the views of professional economists and the self-proclaimed personal financial situation of a majority of Americans have improved this much, why are people so worried about the economy? Why do people assume they are the exception rather than the rule?

One answer is that people gather knowledge about the rest of the economy, the part they cannot see, from watching news. As a result, it could be that the format behind most business journalism skews perceptions and creates pessimism. To be very clear, I am not arguing that business news is purposefully biased. But what seems clear is that in the name of producing an entertaining product, and in an attempt to provide contrasting views, the true consensus of experts is rarely reported.

...The global economy may never have been as strong as it is today. The pace of technological achievement has boosted living standards for billions of people, and promises to do even more in the years to come. It's sad, really, that so many people can't enjoy it because they fret so much about the future.

Let me suggest fully reading the two posts in Back Talk that provide an exceptional review of where the US economy does stand now compared to the past and compared to other world economies. These posts are from June 5 and 6: What Americans Think About Their Economy, which provides a perspective of the US economy over time, and then read Perspective Over Place.

I also highly recommend the blog for insightful analysis on current topics with a bent toward what I call the economic way of thinking.

I further suggest that anytime you read or hear references to the economy in newspaper articles, news magazines, blogs, blog comments and, most especially editorials, letters to the editor, and campaign speeches and promises you turn a keen ear and eye to the assumptions made and the facts involved as most often than not both will be wrong.

I get particularly incensed when I read letters and comments about the terrible spending deficits in the US right now - typically quoting the amount and never in the context of a percentage of GDP or in any historical context of past numbers, or the growth of the economy overall compared to actual deficit trends. The same is true in almost all negative descriptions of the economy because right now the negatives are very hard to find and be honest at the same time.

I have no doubt when the occupant of the White House changes then suddenly the economy will turn excellent in every way in the eyes of the mainstream media. No doubt at all.

Wednesday, August 08, 2007

Gingrich on School Failure

Newt Gingrich may be grating to a lot of people as reflected in his high negative polling numbers (like Sen. Clinton.) I suspect that in the case of the former Speaker those numbers are primarily because he is right so often and tells everybody that he is right so often too.

In any event, he is absolutely correct in the opinions he is expressing about Detroit city schools utter failure and what that fact reveals about all of our government's inability to accomplish goals and its structural incompetence. In today's issue of The Detroit News we find "Gingrich: Will Detroit Save Its Kids or Bureaucracy?". Gingrich explains that according to the Gates Foundation that Detroit schools are dead last in its independent study and noted that "the Detroit school system graduates only one-fourth of its entering freshmen on time, placing Detroit dead last on its list." Now here's more from Newt:

But this failure is not just Detroit's failure. It is an American failure. When American children are being cheated out of the education needed to succeed and an American city is allowed to decline while its leaders refuse to confront the failure, it should concern every American.

This human tragedy extends well beyond the schools. The New York Times reported that an African-American male who drops out of high school faces a 72 percent unemployment rate in his 20s and a 60 percent possibility of going to jail by his mid-30s. The Detroit bureaucracy now presides over a school system whose black male students are more likely to go to jail than go to college.

...This bureaucracy is so focused on protecting its monopoly, it turned down a $200 million offer from a Metro Detroit philanthropist to help high school students learn. Faced with such appalling failure, why would the Detroit bureaucracy be so aggressive in defending itself? And why would it be so unwilling to adopt bold changes to improve its performance?

It could be that the Detroit school system is the single largest employer in the city, followed by the city government. Of Detroit's 25 largest employers, state, county and city governments provide 40 percent of the jobs.

These numbers raise a critical question: What is the purpose of our government bureaucracies? Clearly, we have a fundamental disagreement about how to measure success, and it goes right to the heart of the issue.

If the purpose of the Detroit school system is to provide jobs for members of a unionized bureaucracy, pay them well and pay them on time, then Detroit's school system is a stunning success. If this is the primary purpose of the bureaucracy, Detroit may very well be the most successful school district in the nation.

If, however, the purpose of the school system is to provide Detroit's children with an education, the knowledge, the tools and the motivation to succeed in the real world, a prerequisite to prosperous, productive communities, then Detroit's bureaucratic schools are an abysmal failure.

There is ample evidence of what works in education, but the bureaucracy has systematically ignored all of it. The innovations include merit-based pay; increasing teacher-to-student ratios; revamping union rules to reward the best teachers; bonuses and incentives for new teachers; charter schools; and offering parents a coupon that allows them to send their children to the school that works best for their children and not the bureaucracies.

...[R]eal change requires real change, not new rhetoric while doing more of the same old thing. Propping up the failed past at the expense of future generations leads to prison and poverty vouchers for too many of our children.

The time for excuses is over. The crisis is not about money. The crisis is a failure of responsibility, accountability, honesty, transparency and determination to protect the children from the bureaucracies that are crippling their lives. Who will the people of Detroit save -- their failing bureaucracies or our American children?

Here is what I asked in a post at the end of July, from "Big Labor & Presidential Politics":

"Can you draw any obvious correlation between the fact that education and our government is widely perceived to be dysfunctional despite the amount of money devoted to those undertakings and the fact that those employees are almost completely unionized and have almost zero turnover? Dysfunctional and employed for life does not a good combination for performance make."

Tuesday, August 07, 2007

Beer Prices and Ethanol

Recalling all the problems with ethanol that was discussed earlier in my post "The Ethanol Scam", including the increase of world-wide cost of food which is a life and death matter in the Third World countries, is --- an increase in beer prices. From "Biofuel Brews Up Higher German Beer Prices":

Like most Germans, brewer Helmut Erdmann is all for the fight against global warming. Unless, that is, it drives up the price of his beer.

And that is exactly what is happening to Erdmann and other German brewers as farmers abandon barley — the raw material for the national beverage — to plant other, subsidized crops for sale as environmentally friendly biofuels.

"Beer prices are a very emotional issue in Germany — people expect it to be as inexpensive as other basic staples like eggs, bread and milk," said Erdmann, director of the family-owned Ayinger brewery in Aying, an idyllic village nestled between Bavaria's rolling hills and dark forests with the towering Alps on the far horizon....

Already, at the annual brewery festival in Aying this week, prices for Erdmann's Ayinger beer were up at $8.60, or 6.40 euros, from last year's 6.10 euros for a 34-ounce mug. That's no small matter for Bavarians, who are among the world's heaviest beer drinkers. They put away about 42 gallons of beer a year _ well above the already high German average of 30.38 gallons per person.

And organizers of the world-famous Oktoberfest in Munich have announced a 5.5 percent price increase: A one-liter mug will cost up to $10.70 at this year's autumn beer festival _ the highest price ever.

...[I]in its first major report on bioenergy, the United Nations tried to temper enthusiasm over biofuels last week, warning that the diversion of land to grow crops for fuel will increase prices for basic food commodities.

That is what happened in Mexico, when increased demand for corn to make ethanol in the United States pushed up the price of tortillas.

...Germany leads in the consumption of bioenergy in Europe with an annual usage of 4.3 percent of overall fuel consumption, according to figures by the Agency of Renewable Energies. Germany also is among the leaders in producing wind energy and recycling garbage.

Beer prices are serious business in Bavaria, which has some 615 breweries and gave Germany its famed beer purity law, which dates back to 1516 and in its current form permits only four ingredients: malted grain, hops, yeast and water.

This does, in a somewhat lighthearted way (even though beer is a serious matter,) point out that all government actions do have unintended consequences. I am of the opinion that the best approach to restraining the use of oil in the West for environmental reasons and national security reasons (which for me the latter reason is an even stronger argument) is imposing a gasoline tax (maybe a carbon tax) with some method (perhaps like the fair tax ideas) to make the tax less regressive (both to the poor and to rural consumers) and to devote a good portion of those taxes to dedicated spending on mass transportation and energy efficient infrastructure modernization. The tax is probably the best method to reduce all the unintended consequences and, directly and clearly, accomplish the desired goal of decreased fossil fuel dependence. Also note most serious economists endorse the tax opposed to other methods, particularly the slippery carbon offset fads, as well as the boondoggle subsidies addressed before.

Monday, August 06, 2007

Two Views of Populism

I could summarize the following by writing the American Enterprise Institute versus the Center for American Progress and you might have a good clue where this is going.

First, in one corner, from yesterday in The Financial Times we have Matt Miller and "Phoney Fears Grip America":

A spectre is apparently haunting America – the spectre of “populism”. “New populism spurs Democrats on the economy,” cried the front page headline in The New York Times the other day. Republicans rail against unseemly “class warfare”, while centrist Democrats fret that hard-edged populist appeals will spook suburban voters.

“It is not unusual,” The New York Times explained, “for candidates seeking the Democratic presidential nomination to move left in the primary season.” However, rhetoric aside, there is little reason to view today’s supposedly wild-eyed Democrats as “populist” or “leftwing” at all.

Consider John Edwards, who the press and Republicans have cast as the heartthrob of the resurgent “left”....

The fact that a Thatcher-Cameron-Buffet agenda can be hyped as “populist” says more about propaganda success and media norms than anything else. Over three decades, America’s conservative movement has so deftly shifted the boundaries of debate to the right that even modest adjustments to the market system can be cast as the second coming of Marx without anyone blushing. Today’s phony populist fears also remind us that the real problem with the media is not ideology but stenography. If official sources call something “populist” often enough, it is.

More depressing is that many Democrats fall into the same trap, worrying that a Thatcher-Cameron agenda in America will frighten suburban swing voters, rather than asking themselves how they might win the argument over the direction America needs to take. At this rate, Americans will be lucky to catch up a decade from now to today’s social policy consensus in the UK. Meanwhile, Brits and others will have moved forward on a new generation of ideas to help citizens find security and opportunity in a global economy.

So as Miller praises the European system and demands America follow suit, we turn to the opposite corner where we find that Europe is recognizing the problems inherent in their social policies, moving toward American policies and that following Europe's mistake would be a travesty. In a recent Wall Street Journal article (which was a re-print of an article originally on TCSDaily) by Jurgen Reinhoudt, we see "Wrong Turn: Even as European leftists move right, American ones move further left":

In Europe, reforms are in vogue. Though many special interests are fiercely resisting change, it is striking to see just how many European Social Democrats have come to recognize the need for structural reforms to welfare states....

In many countries the left has been willing to discard or, at the very least, publicly reconsider old big-government approaches in order to reinvigorate economic growth and general prosperity.

In the United States, by contrast, those most committed to the welfare state tend to talk about trimming entitlements the least. This is particularly true of politicians aspiring to the highest office of the land....

Far from tackling the looming fiscal crisis, presidential candidates are busy marketing expensive new plans to voters. The health-care plan of John Edwards would "cost the federal government some $120 billion a year," $1.2 trillion over a 10-year period, for the foreseeable future. And that's not including $15 billion a year in proposed antipoverty measures. No word on how the existing entitlement shortfall will be dealt with....

While proposals for new entitlements may be politically easy, they are fiscally reckless. Candidates who promise expansive new entitlement spending are effectively writing checks the American economy cannot cash. They will take us to the place where Europe is today: a place where existing entitlements are unaffordable. Yet what matters is not so much the specific measures being considered, but the broader mindset from which they originate. It is in this context that comparing the European political mindset to the American political mindset is useful.

In 2005, the liberal Washington Post columnist Sebastian Mallaby criticized the opposition of many Democrats to the possibility of investing in private Social Security accounts by saying that "a party that refuses to acknowledge the urgency of entitlement reform is a party of ostriches." He's right--and the label applies to many leaders in both parties.

Presidential candidates ought to learn from Europe's lessons. Even if it is politically painful, we should not race to the place that Europe is trying to get away from.

So which opinion is correct? I will let you look at the articles, research the facts and you can decide.

In case you have any doubt, my money is on Mr. Reinhoudt with Mr. Miller suffering a KO both in terms of economics and in what is the best policy for the citizens of Europe and America.

A Corporate Speak Glossary

To provide some relief from all the recent long serious posts, here is something fun; from Conde Nast's Portfolio magazine comes this "Corporate Speak Glossary". Here are a few of my favorites for you to enjoy:

action item - An urgent task requiring immediate action—from someone else.

assign ownership - To dump responsibility on someone else as quickly as possible.

branded - Pre-DCE (dotcom era), this described the status of a steer after a rancher burned his symbol of ownership into the animal’s backside; now connotes how the public perceives a company’s image. In the company’s mind, though, that poor steer will always be you.

core competency - Depending on your company’s stock price at the time, your shareholders describe this as either your ability to run a company or to play a low-scoring round of golf.

deliverables - Stuff you owe your customers before they owe you a lawsuit.

dress-down Friday - The day your boss pulls out a sweater that cost more than your suit.

driver - The key factor in getting something done; what you can afford when you get enough things done.

empower - The process by which the powerful dribble out bits of power to the powerless.

fast track - A type of professional advancement that leads most quickly to divorce and personal despair.

first mover - A nice epitaph for a company that goes bankrupt for being two years ahead of its time.

low-hanging fruit - The part of a project your boss completes before handing it over to you.

outside the box - Ironically, an expression used most often by people who will never understand it.

overhead - The fixed costs of running a business (such as rent, heat, and electricity) that must be paid, making them very different from your salary.

paradigm shift - What you want your foot to give the V.P. of marketing when he overuses this term.

take it offline - The “let’s take this outside” of the business world; often thrown around when people begin to disagree too openly in a large meeting.

team player - An enthusiastic co-worker who some say can’t get hired anywhere else.

upsell - To peddle expensive add-ons to an otherwise useful but inexpensive product.

OK, you get the idea, read them all and start thinking of the ones you could add.

Sunday, August 05, 2007

Iraq: A Need for Wisdom

This past fortnight has been very interesting regarding some perspective over the entire issue of the Iraq war and on-going foreign policy.

It seems to me that recently, given the context of a way too early presidential campaign and the pressure from the main stream media and the far left on the panic to "end the war" that we have lost all perspective and wisdom on where we stand and what we should do. Good decisions are never made in great haste, panic or hysteria. Our founding fathers wisely structured the government to avoid the wide swings in popular opinion and manage policy from a perspective of contemplation and wisdom; hence, the nature of the Senate, the Judiciary and the Executive branch to have longer tenure and less responsiveness to the "will of the people" than the House or local politics. Unfortunately, given all the Senators who wish to be President and the nature of political parties to place elections over all other considerations we have been poorly served lately in the nature of comments from our Senate leaders and all the pandering politicians who seem to be so much more reactive than reflective on important situations and problems.

So many issues both in the press and in the campaigns seem directed toward saying what is good based on polls and not saying what is right or good for the country without regard to polls. I know this is an over-simplification as politicians always want to please the voters and get re-elected but there often comes along times that call for more statesmanship and leadership and this seems to be one of those critical times. I am reminded of Dick Morris and his columns which always look at every issue in terms of its polling strength and popularity and never any remarks about what is right or wrong -- and we see the same thing out of so many of our politicians and Senators on a day to day basis.

From The Federalist Papers here is James Madison in The Federalist No. 63:

As the cool and deliberate sense of the community ought in all governments, and actually will in all free governments ultimately prevail over the views of its rulers; so there are particular moments in public affairs, when the people stimulated by some irregular passion, or some illicit advantage, to mislead by the artful misrepresentations of interested men, may call for measures which they themselves will afterwards be most ready to lament and condemn. In these critical moments, how salutary will be the interference of some temperate and respectable body of citizens, in order to check the misguided career, and to suspend the blow meditated by the people against themselves, until reason, justice and truth, can regain their authority over the public mind? What bitter anguish would not the people of Athens have often escaped, if their government had contained so provident a safeguard against the tyranny of their own passions? Popular liberty might then have escaped the indelible reproach of decreeing to the same citizens, the hemlock on one day, and statues on the next.

In The Federalist No. 10, Madison uses similar reasoning in explaining the many reasons to favor a Republic over a pure Democracy:

The two great points of difference between a Democracy and a Republic are, first, the delegation of the Government, in the latter, to a small number of citizens elected by the rest: secondly, the greater number of citizens, and greater sphere of country, over which the latter may be extended.

The effect of this first difference is, on the one hand to refine and enlarge the public views, by passing them through the medium of a chosen body of citizens, whose wisdom may best discern the true interest of their country, and whose patriotism and love of justice, will be least likely to sacrifice to temporary or partial considerations. Under such a regulation, it may well happen that the public voice pronounced by the representatives of the people, will be more consonant to the public good, than if pronounced by the people themselves convened for the purpose.

Now to the present. We have great disparity of opinion at present over: 1) what is happening and will happen on the ground in Iraq; 2) the consequences of withdrawal from Iraq; and, most importantly, 3) the long term strategic nature of Iraq and the Middle East as it concerns the well-being of the United States.

Several important pieces and occurrences that touch on these three vital questions have been appearing along with the detritus noise we get frequently. The perfect answers may indeed be unknowable but the decisions to be made require the best analysis and information obtainable. I have pointed out the importance of recognizing sunk costs in our decision making (here) so let's begin by not rehashing the past and make our decisions based only on the situation at present.

The pieces that stick most in my mind include the O'Hanlon and Pollack's Op-Ed in the NYT "A War We Might Just Win" which I discussed earlier (here) and two more pieces that really have my attention.

The first is a short commentary from Victor Davis Hanson in which he reviews all the frankly horrible mismanagement of the Middle East situation by all the recent Presidential administrations and surveys the Middle East situation in "Back to the Future?"; a large portion:

...[B]efore the United States abandons its present policies in Iraq and Afghanistan, we should at least recall the past record — which may be best summed up as the ying of Democratic appeasement and the yang of Republican cynicism.

Jimmy Carter now writes books damning our present policies. He should keep quiet. When the Iranians stormed the American embassy in Tehran and inaugurated this era of Islamic terrorism, his U.N. ambassador, Andrew Young, announced that the murderous Ayatollah Khomeini was “a 20th-century saint.” Moralist Carter himself also tried to send hardcore leftist Ramsey Clark over to Tehran to beg the mullahs to release the hostages — in exchange for arms sales.

Next came Ronald Reagan, who, to put it kindly, was bewildered by Islamic extremism. He pulled out American troops from Lebanon after Hezbollah murdered 241 Marines and thereby helped to energize a new terrorist movement that has spread havoc ever since. The Lebanon retreat was followed by the disgrace of the Iran-contra affair, when American agents sold the hostage-taking theocracy missiles and then used the receipts illegally to fund the Contras. Few now remember that Oliver North purportedly flew to Iran to seal the deal, bearing gifts for the ayatollah. No need to mention the intelligence the Reagan administration gave to Saddam Hussein during the savage Iran-Iraq war, or the way it continued Carter’s policy of arming jihadists in Afghanistan.

There were just as many cynical realists in George Bush Sr.’s foreign policy team. In the debate leading up to the first Gulf War, Secretary of State James Baker justified attacking oil-rich Saddam Hussein for the sake of “jobs, jobs, jobs.” And when our coalition partner, the even oil-richer House of Saud, objected to removing the murderous Hussein regime after its retreat from Kuwait, we complied — to the point of watching Saddam butcher thousands of Kurds and Shiites.

Bill Clinton also often weighs in with ideas on the Middle East. But during his two terms he passed up an offer from Sudan to hand over bin Laden. Shortly afterwards, the terrorist openly threatened us: “To kill the Americans and their allies — civilians and military — is an individual duty for every Muslim.” The Clinton administration also didn’t do much about eight years of serial terrorist attacks on the World Trade Center, American servicemen in Saudi Arabia, the East African embassies or the USS Cole. The $50 billion U.N. Oil-for-Food scandal did not reflect well on Clinton’s multilateral model of dealing with Saddam Hussein.

The point of reviewing prior American naivete and cynicism is not to excuse the real mistakes in stabilizing Iraq. Instead, these past blunders remind us that we have had few good choices in dealing with the terrorism, theocracy, and authoritarian madness of an oil-rich Middle East. And we have had none after the murder of 3,000 Americans on September 11.

After four years of effort in Iraq, Americans may well tire of that cost and bring Gen. Petraeus and the troops home. We can then go back to the shorter-term remedies of the past. Well and good.

But at least remember what that past policy was: Democratic appeasement of terrorists, interrupted by cynical Republican business with terrorist-sponsoring regimes.

Then came September 11, and we determined to get tougher than the Democrats by taking out the savage Taliban and Saddam Hussein — and more principled than the Republicans by staying on after our victories to foster something better.

The jihadists are now fighting a desperate war against the new stick of American military power and carrot of American-inspired political reform.

They want us, in defeat, to go back to turning a blind eye to both terrorism and corrupt dictatorships.

That’s the only way they got power in the first place and now desperately count on keeping it.

The second major piece that is a must read is an interview of John Burns who I regard as the best foreign correspondent writing today. He has been with the New York Times for many years yet still maintains his personal integrity and strives to report the facts. My problem with the NYT is twofold, of course, the editorial side (making the above Op-Ed even more startling) and secondly, the growing tendency to have analysis and opinion creeping into the news at the NYT.

The interview is with Hugh Hewitt who is certainly conservative but here shows he can just ask questions and we hear/see the answer. Please read it all. Here are some cuts from that interview, "New York Times Pulitzer Prize winner John Burns on Iraq, Iran and How the Surge is Working.":

[These are selections from the transcript of comments by John Burns.]

David Petraeus is a man who’s had a remarkably distinguished military career, and he is very clear that he thinks his responsibilities lie not to the White House alone, but to the White House and the Congress conjointly, and through them to the American people. I don’t think that this is just a profession, a claim. I think he really intends that, and he’s been very careful not to make commitments at the moment as to what he’s going to say, though we may guess it. And I think he’s going to say that the surge is having its effects, it hasn’t turned the tide of the war, there’s been too little time for it, and I think he and Ambassador Crocker, who will be his partner in that September report, are going to say one thing very clearly, and that is a quick, early withdrawal of American troops of the kind that is being argued by Nancy Pelosi, for example, would very likely lead to catastrophic levels of violence here. And in that, General Petraeus and Ambassador Crocker will be saying something which is pretty broadly shared by people who live and work here, I have to say. The removal of American troops would very likely, we believe from all indications, lead to much higher, and indeed potentially cataclysmic levels of violence, beyond anything we’ve seen to date....

The plan is that with the surge, aimed primarily at al Qaeda, who are responsible for most of the spectacular attacks, the major suicide bombings, for example, that have driven the sectarian warfare here, the belief is, or the hope is, that with the surge, they can knock al Qaeda back, they can clear areas which have been virtually sanctuaries for al Qaeda, northeast, south, west and northwest of Baghdad, and in Baghdad itself, and then have Iraqi troops move in behind them. The problem here is time. How much time does the U.S. military have now, according to the American political timetable, to accomplish this? I think most generals would say, indeed have said, most serving current generals here have said that a drawdown, which took American troops from the 160,00 level they’re at now quickly down to 100,000 or 80,000 over the next, shall we say, year to eighteen months, that’s too fast. If you do that, I think they would say, though they don’t put it quite this frankly, that this war will be lost for sure. Given a little bit more time, they think that it is realistic to think that the Iraqi forces can move in behind them, and can take over the principal responsibilities for the war. The problem is, of course, that American generals have been saying this now for four years, and as we know, the Congress is beginning to run out of patience with that. But I think that they have a good plan now, at least if there is any plan that could save the situation here, any plan that could bring a reasonably successful end to the American enterprise here, it’s probably the plan they have right now....

I think it’s probably fair to say that the Iraqi political leaders, Sunni, Shiia, Kurd in the main, are somewhat further apart now than they were six months ago. In other words, the Bush administration’s hope that the military surge would be accompanied by what they called a political surge, a movement towards some sort of national reconciliation, uniting around a kind of national compact, that has simply not occurred. Indeed, the gulf between the Shiite and Sunni leaders in the government is probably wider than it has ever been. There’s a great deal of recrimination. There’s hardly a day when the Sunnis do not, as they did again today, threaten to withdraw from the government altogether. There’s virtually no progress on the key benchmarks, as the Bush administration calls them, matters like a comprehensive oil law that will settle the issue of how oil revenues, which account for 90% of government revenues here, will in future be divided and spent between the various communities, and many other issues, eighteen of them, benchmarks identified by the Congress, there’s very little progress on those benchmarks. Where there is some progress is at the grass roots level, some progress, though we’re beginning to see tribal leaders, in particular, in some of the most heavily congested war areas, beginning to stand up and say they’ve had enough of it, and to volunteer to put forth their young men, either to join the Iraqi police or army, or to join in tribal auxiliaries, or levees if you will. That’s probably the most encouraging political sign. But at the Baghdad level, unfortunately, the United States still does not have an effective political partner....

...[Y]ou would think it would be so, wouldn’t you, that the threat of withdrawal of American troops, and the risk of a slide into catastrophic levels of violence, much higher than we’ve already seen, would impel the Iraqi leadership to move forward. But there’s a conundrum here. There’s a paradox. That’s to say the more that the Democrats in the Congress lead the push for an early withdrawal, the more Iraqi political leaders, particularly the Shiite political leaders, but the Sunnis as well, and the Kurds, are inclined to think that this is going to be settled, eventually, in an outright civil war, in consequence of which they are very, very unlikely or reluctant, at present, to make major concessions. They’re much more inclined to kind of hunker down. So in effect, the threats from Washington about a withdrawal, which we might have hoped would have brought about greater political cooperation in face of the threat that would ensue from that to the entire political establishment here, has had, as best we can gauge it, much more the opposite effect, of an effect that persuading people well, if the Americans are going, there’s absolutely no…and we’re going to have to settle this by a civil war, why should we make concessions on that matter right now? For example, to give you only one isolated exception, why should the Shiite leadership, in their view, make major concessions about widening the entry point for former Baathists into the government, into the senior levels of the military leadership, that’s to say bringing in high ranking Sunnis into the government and the army and the police, who themselves, the Sunnis, are in the main former stalwarts of Saddam’s regime. Why would the Shiites do that if they believe that in the end, they’re going to have to fight a civil war? This is not to reprove people in the Congress who think that the United States has spent enough blood and treasure here. It’s just a reality that that’s the way this debate seems to be being read by many Iraqi politicians....

I think the war is close to lost, but I don’t think that all hope is extinguished, and I do think, as do many of my colleagues in the media here, that an accelerated early withdrawal, something which reduced American troops, even if they were placed in large bases out in the desert to, say, something like 60-80,000 over a period of six to nine months, and in effect, leaving the fighting in the cities and the approaches to the cities to the Iraqis, I think the result of that would, in effect, be a rapid, a rapid progress towards an all-out civil war. And the people who are urging that kind of a drawdown, I think, have to take that into account. That’s not to say, I have to say, that that should be enough to inhibit those politicians who make that argument, because they could very well ask if that’s true, can those who argue for a continued high level of American military involvement here assure us that we wouldn’t come to the same point three or four years, and perhaps four or five thousand American soldiers killed later? In other words, we might only be putting off the evil day. It seems to me that’s where this discussion really has to focus. Can those who argue for staying here, can they offer any reasonable hope that three, two, three, four years out, the risk of a decline into cataclysmic civil war would be any less? If the answer is no they can’t, then it seems to me that strengthens the argument of those who say well, we might as well withdraw fairly quickly now....

Whatever we may make of the original intent of coming here, if the United States did not have a problem with Islamic extremism in Iraq before 2003, it certainly does now. You only have to look at the pronouncements of Mr. bin Laden and Mr. Zawahiri, his deputy, to see that they regard Iraq now as being, if you will, the front line of the Islamic militant battle against the West. And so if American troops were withdrawn, I think that there would be a very serious risk that large parts of this country will fall under the sway of al Qaeda linked groups. Now we could debate what that exactly means. Al Qaeda’s a holding company. Does that mean that Mr. bin Laden would be able to direct affairs in Afghanistan? No, I don’t think he would. I don’t think he does now. But it would mean that Islamic extremists who bear the worst intent towards the United States would have a base similar to the base they had in Afghanistan before 9/11 from which to operate, and I think it’s very likely that they would then begin to want to expatriate their hatred of the United States in some way or another. In fact, it’s already the case, that there are parts of Iraq which are under the sway of groups that swear allegiance to al Qaeda. And just to speak of one of them, the city of Sumarra, where I was yesterday, it’s about sixty miles north
of Baghdad, is definitely under the sway of al Qaeda right now. And that would likely get very much worse in the event of an accelerated withdrawal. So I don’t think it’s purely propaganda, political propaganda on the part of the Bush administration to say that there would be a major al Qaeda problem here. It seems to me it’s absolutely self-evident that there would be....

This a long and very important interview, well worth your valuable time to read it all.

I will have many other comments later but my focus is to stick to real analysis that is food for thought and not all the sound bites from all the players in the politics of it all including the inane comments from Senators and the Presidential candidates; while those comments make the news and are interesting from an entertainment and political perspective those biased and self-serving comments often offer little insight into the depths and complexities of the situations involved.

I think the Iraq war will be the defining issue of the 2008 presidential election with the Democratic nominee determined to withdraw and the Republican candidate determined to stay. In reality an exit cannot practically be quick and easy regardless of the intent to "end the war." The issue is how soon we draw down, by how much and what carnage do we cause and foment in the drawdown/withdrawal/retreat/cut and run.

The second most important issue will be health care with both sides agreeing to a goal of universal coverage relatively quickly but with Democrats in a favor of a single-payer government solution and the Republicans for a multi-payer, portable and tax driven solution for coverage.

I also predict, contrary to what the polls suggest, it will again be a very close election but the issues will be more clearly defined than in a long time: Hawk v. dove, big government v. less-big government. An exciting, sometimes bitter, and close election is again on the horizon.