Political Issues

Deficits And Debt

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As chairman of the Joint Chiefs of Staff from 2007 through 2011, Admiral Michael Mullen was particularly vocal about saying that the greatest threat to U.S. national security was budget deficits. He pointed out that interest on the debt will nearly equal the defense budget and jeopardize the ability to properly resource the military.

In economic terms, the national debt – the sum total of annual budget deficits – now exceeds $22 trillion. The nonpartisan Congressional Budget Office (CBO) projects a deficit of $896 billion for 2019, about a 15 percent increase over the $779 billion deficit in 2018. The CBO predicts deficits will keep rising in the next few years, topping $1 trillion in 2020 and never dropping beneath that that amount through 2029.

Federal debt held by the public is projected to grow from 78 percent of gross domestic product in 2019 to 92 percent in 2029 and 144 percent in 2049, which would be the most in American history. The prospect of such large deficits and debt poses substantial risks, sayeth the CBO.

In case you missed it, neither Democrats nor Republicans seem to care much. Putting the federal government’s fiscal house in order currently commands the attention of few national politicos. They behave like Scarlet O’Hara in “Gone with the Wind,” who reacted to adverse circumstances by saying, “I can’t think of this now… I’ll think about it tomorrow.”

Democratic presidential candidates have presented plans such as Medicare for All, Free College, and the Green Leap Forward. They advocate increasing taxes on the rich to address wealth and income inequality, social problems and any number of other things, but not to reduce deficits and debt. They don’t appear to be worried by deficits and accumulating debt, and seem to think a magic money tree will fund their spending initiatives.

Republicans also usher the idea of taming deficits out of the room rather quickly, accepting bigger deficits in exchange for tax cuts they argue will promote economic growth and fill budget shortfalls over the long term. The theory is that the debt is manageable so long as the economy grows at a faster pace than the feds’ borrowing costs.

President Trump campaigned in 2016 on eliminating the then-$19 trillion national debt in eight years, but the White House spending plan for the next decade calls for adding another $10.5 trillion to the $22 trillion federal debt – and that assumes continued economic growth.

Doing nothing about government red ink shifts the burden to future generations. The theory is that it is wrong for the current generation to enjoy the benefits of government spending without paying for them.

The CBO estimates the federal government will spend more on servicing outstanding debt in 2020 than on Medicaid, and more than on national defense by 2025. Many Democrats and Republicans deny this is a problem, arguing that the U.S. can simply borrow more to fund unrestrained spending. They appear unconcerned that the government’s debt payments may crowd out a good portion of the spending they want.

The Treasury Department’s Office of Debt Management forecasts that starting in 2024, all U.S. debt issuance will be used to fund the U.S. net interest expense, which will be anywhere between $700 billion and $1.2 trillion or more. If this happens, the U.S. will be engaging in the ultimate Ponzi scheme, in which new debt issuance is used exclusively to fund interest on the debt by around 2024.

Out of control spending will haunt the taxpayers for years to come. Obviously, there is no political gain in being a good fiscal steward.

Nota bene what Edmund Burke wrote in Reflections on the Revolution in France in 1790: “Society is indeed a contract. It is a partnership… not only between those who are living, but between those who are dead, and those who are to be born.”

Not everyone considers socialism a Cracker Jack idea

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Capitalism seemed untouchable several decades ago, but not today. Many politicians aspiring to high office, such as Senator Bernie Sanders, a self-declared democratic socialist, are making the case for the inevitable and Darwinian triumph of socialism.

It is unclear what socialism means to them. It is a word that means many things to many people and has taken many forms. The modern version is different from the textbook variety of public ownership of the means of production, distribution, and exchange, leaving to individuals only the free discretion over consumer goods and creating a paradise on earth. Publicly owned property is preferable to private enterprise, with everyone acting virtuously and focusing on the greater good.

Is it the ideal commonwealth in Plato’s Republic, with a ruling class that has no property of its own and shares all things in common? Or a more robust version of New Deal Liberalism, or perhaps Northern European social democracy? What about the path taken in Venezuela, North Korea, and Cuba?

Or is it a planned economy with benevolent bureaucrats taking the place of free-market capitalism and playing the omniscient busybody in economic affairs to create more opportunity for the underprivileged; open the horizons of education to all, eliminate discriminatory practices based on sex, religion, race, or social class; regulate and reorganize the economy for the benefit of the whole community; protect the environment; provide adequate Social Security and universal health care for the sick, unemployed and aged in a utopian ideal of total equality of opportunity and outcome?

The term has become a blank canvas as presidential candidates embracing some of these ideas become more outspoken about socialism as the solution to problems of social and economic equality, and embracing a political wish list that includes Medicare for All, a Green New Deal and free public college. All grand ideas if they work.

These proposals have great appeal to millennials, the term generally used to refer to people born after 1980 and before 2000. Millennials outnumber baby boomers as the largest generational cohort in American society.

Recent surveys of Americans 18 to 34 find that 45 percent have a positive view of socialism. It gets even higher marks from Hispanics, Asian- and African-Americans. This attraction may have less to do with their understanding of socialism and more to do with their discontent with the current economic system. In contrast, only 26 percent of baby boomers would prefer to live in a socialist country.

Why the generational disparity? Is it because many of these folks reached adulthood in a dismal job market with crippling student loans caused by the brutal 2007-2009 recession that left them with less disposable income than their predecessors? They end up hating their own culture, even as millions around the world dream of coming to the land of milk and honey. Many agree with Governor Cuomo’s comment that “America was never that great.”

But these proposals also create agita for many politicians. That is why House Speaker Nancy Pelosi, in a recent interview with CBS’s “60 Minutes,” said socialism is “not the view” of the Democratic Party,” and that lawmakers on her side of the aisle “know that we have to hold the center.” The Republicans are trying to paint Democrats with the socialism brush, using accusations of rampant amnesia about the failures of socialism as a 2020 campaign weapon.

Former President Ronald Reagan once mocked Fidel Castro’s brand of socialism with a clever joke. He said Castro was immersed in one of his long speeches when a person in the crowd was heard shouting, “Peanuts, popcorn, Cracker Jacks.” Castro continued on with his speech when a second voice was heard shouting the same thing. This time Castro became angry and screamed, “We will kick the tush of the next person I hear say that all the way to Miami Beach.” At which point the whole crowd yelled, “Peanuts, popcorn, Cracker Jacks.”

 Originally Published: April 27, 2019

Find an intelligent way to deal with China and economy

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Trade policy is a contentious issue in contemporary America. A common refrain in trade discussions is “all we want is a level playing field.” President Trump portrays his tough trade sanctions, especially against China, as a confrontation aimed at remedying decades of America being ripped off in the global marketplace.

This represents a major reversal in America’s China policy. Since President Nixon’s opening to China in 1971 and across eight subsequent administrations it was generally believed that engagement would induce China to work with the West and become a peace-loving democracy with no designs on regional or global power.

As a candidate, Trump stood out for his embrace of America-first policies and his promise to “Make America Great Again” by addressing the grievances of ordinary citizens who feel dispossessed. Once in office, Trump, a self-described deal maker, has not been fond of large multilateral deals. He was quick to withdraw from the Transpacific Partnership agreement. After first threatening to void the North American Free Trade Agreement by executive order, his administration renegotiated it.

Countries often use protectionism tools such as tariffs and quotas to support domestic industries until they are able to compete internationally. Tariffs are taxes imposed by a country that make imports more expensive. Quotas amount to quantitative restrictions on imports. It helps to keep in mind who loses and who gains from a tariff or quota. Domestic producers and employees gain and consumers lose. Governments also benefit from tariffs because they generate revenue, but tariff revenues are typically not a big consideration in developed countries.

Countries can also impose stringent quality and safety standards on foreign products. A country can tailor the standards to the product descriptions at home, thereby giving domestic producers an advantage. Consider the continuing debate over stricter standards for antibiotics in the European Union versus the United States. Are these measures of safety or a way to protect a domestic industry? Then there are all kinds of red tape that delay exporters from gaining access to a country’s market.

Still, there is another insidious tool that a country can use to promote its domestic industries. China and other countries build national champions with government funding of state-owned enterprises (SOEs). China is the world’s second largest economy, accounting for about 15 percent of global economic output. It has seen extraordinary economic expansion over an extended period, with double-digit growth for close to 30 years.

Its SOEs have facilitated that growth and are the backbone of the Chinese economy. The nation’s approximately 150,000 SOEs control around $16 trillion in assets, constitute about 40 percent of China’s gross domestic product and employ 35 million people in strategic industries such as energy, technology and telecom.

China’s government helped launch new and emerging industries by channeling capital into SOEs. For example, it flooded global markets, depressed prices, and literally shut down hundreds of U.S. solar-panel startups. China’s SOEs are front and center in implementing China’s One Belt One Road initiative, the nation’s vision for massive development of trade routes between Asia, Africa, and Europe.

These government subsidies stimulate excess production, depress market prices, and enable state-owned enterprises to capture market share. Closely related is the theft of intellectual property and forced technology transfers, often by SOEs, that highlight the need to constrain these enterprises. Countries such as China hesitate to allow state-owned enterprises to fail for fear that it would unleash a tidal wave of unemployment.

While trade talks between China and the United States may be productive in dealing with tariffs, the Trump administration should also address less traditional tactics that amount to cheating. They include China’s use of subsidies to key state-run companies to undercut their American competitors. What should be clearly understood here is that dealing with the Chinese is like engaging in unprotected sex.

Originally Published: January 27, 2019

Sham tax ‘reform’ proves more than ever that isn’t about reform, it’s about money and influence.

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The imperfect tax bill President Trump signed into law on Dec. 22 is further evidence of the rot in Washington,. The tax bill isn’t about tax reform, it’s about money and influence.

Consider the giveaway known as the carried interest rule. It’s another outrageous example of the powerful getting what they want, as they always do. This will come as no shock to anyone over the age of five.

The term “carried interest” derives from the share of profits that 12th-century ship owners and captains were given as an interest in the cargo they carried, usually a 20 percent commission to provide an incentive to keep an eye on the cargo.

Today carried interest is the 20 percent of profits from their funds with which private equity firms, venture capitalists, and real estate partnerships compensate themselves. These proceeds are taxed at a capital gains rate of 20 percent, about half the top individual income rate, which will fall to 37 percent under the new tax law. Critics argue that this money is effectively income and should be taxed at individual income tax rates. The constituents for the deduction argue that removing the incentive would reduce entrepreneurial risk taking.

The reason for the loophole’s survival comes down to campaign contributions to key lawmakers and intense lobbying to maintain the favorable tax treatment. As Gary D. Cohn, director of the White House National Economic Council said, “The reality of this town is that constituency has a very large presence in the House and the Senate and they have really strong relationships on both sides of the aisle.”

The American Investment Council, a Washington trade association that represents private equity firms, reported some $970,000 in lobbying expenditures for the first three quarters of 2017. This is in addition to the smart investment made by way of campaign contributions targeted to key lawmakers. For example, employees of the private equity firm The Blackstone Group L.P. contributed $212,000 to Senator Majority Leader Mitch McConnell in 2017 alone. In turn, politicians serve their contributors by protecting the carried interest preference.

Private equity firms have the means and vanity to get what they want. It is further proof that money is the mother’s milk of politics and that big money gets its way in Washington, D.C.

During the presidential campaign both President Trump and Secretary Clinton gave a pitch-perfect populist performance, wanting everyone to know that they were militantly opposed to this loophole, a form of welfare for the wealthy. When a politician says something like that, sports fans, try inserting a negative and you are likely to hit pay dirt. Political rhetoric is as unrelated to the truth as an advertising campaign.

The power of money seems eternal. Politicians love it like a child loves Christmas, and all are working hard to avoid reading their own political obituaries. Knowledge that it has always been this way is no consolation.

They tell pro forma lies to the public and the media, and then begin to believe what they read. Not laying blame, just putting truth into words. So House Ways and Means Committee Chair Kevin Brady (R. Texas), with a truly magnificent smile, said on the Morning Joe talk show “carried interest, we can talk about that for the next hour if you like, but for most Americans they could care less about that.”

In its pursuit of a free lunch, the public is often a bit too eager to accept the things they want to hear at face value, even though they should know that truthfulness is not a long (or short) suit for elected officials, who spin untruths with the same gusto young Abraham Lincoln supposedly split logs.

You can’t bring about change by wishing upon a star. You can run with that.

 Originally Published: January 6, 2019

A high-stakes contest for technological supremacy

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Meng Wanzhou, chief financial officer of privately owned Huawei Technologies Corp., was arrested by Canadian police at the behest of American law enforcement authorities seeking extradition as she changed planes at Vancouver International Airport. Wanzhou is the daughter of the company’s founder, a former military engineer with China’s People’s Liberation Army.

She has been charged with conspiracy to defraud banks in connection with alleged violations of American sanctions on Iran. The December 1 arrest occurred on the same day that President Trump and Chinese President Xi Jinping agreed to a cease fire in the escalating trade war between the world’s two largest economies.

Huawei, China’s smartphone and telecommunications giant, has long been at the center of drama between the United States and China. The U.S. has pressured allies to limit use of Huawei products and technology.

Huawei may not be a familiar name to Americans, but it is a global telecom behemoth, with about $93 billion in revenue 2017, almost on par with Microsoft.

Based in Shenzhen, near Hong Kong, it has the biggest research and development budget of any Chinese company. The firm has benefitted from Chinese government subsidies, contracts, and financing from the state-owned China Development Bank. These subsidies give Huawei a huge advantage over its competitors.

The company is the world’s second largest maker of smartphones, behind only Samsung. It is the world’s largest provider of telecom equipment, including switches, routers, cell tower gear, cloud computing and cybersecurity. It also sells personal computers and a wide array of wireless devices like smart watches.

Huawei is seen as a global leader in 5G, the ultra-fast wireless technology that will soon allow all the objects around us to be connected. That is good for China and bad for the United States. The U.S. worries that if Huawei wins the race to develop 5G technology, Americans may someday be buying their equipment to connect factories, vehicles, homes, utility grids and more.

Huawei is also seen as a cyber-security threat. Washington has accused it of being a potential conduit for Chinese spying and cyber theft. The Justice Department, intelligence agencies, and regulators have long believed the firm has violated American sanctions against Iran, that it works primarily for Chinese government interests and that its equipment contains back doors that allow that government to spy on customers.

In 2012, the House Intelligence Committee released a report that tagged Huawei’s products a potential security threat, accused them of engaging in intellectual property theft and recommended a ban on the company’s equipment. As early as 2003, Cisco Systems accused Huawei of infringing on Cisco’s patents and illegally copying source codes used in its routers and switches. Other accusations have also surfaced. Motorola named the firm as a co-defendant in a lawsuit and T-Mobile alleged that Huawei stole technology form its headquarters.

The Committee on Foreign Investment in the United States, an inter-agency committee of the federal government, has blocked deals involving Huawei on grounds that it had possible ties to the Chinese government and that the strategic nature of the telecommunications industry made such deals potential threats to national security. This August a defense policy bill prohibited the federal government from using Huawei equipment.

President Trump is considering an executive order that would bar American companies from using telecommunication equipment made by Huawei and other Chinese telecom companies because the equipment poses serious national security risks. Of course, the company strongly denies stealing intellectual property or enabling Chinese espionage.

It is unclear how the arrest of Meng Wanzhou will influence ongoing trade talks between the United States and China. One possibility is that the U.S. government will allow trade to trump national security concerns, as the president has suggested he would intervene on the Huawei issue if it would help secure an agreement.

Americans best stay tuned as this high-stakes contest for technological supremacy unfolds.

Originally Published: January 4, 2019

 

A day that should live in infamy

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Early in 1941, the government of resource-poor Japan realized that it needed to seize control of the petroleum and other raw material sources in the Dutch East Indies, French Indochina and the Malay Peninsula. Doing that would require neutralizing the threat posed by the U.S. Navy’s Pacific Fleet based at Pearl Harbor in Hawaii.

The government assigned this task to the Imperial Navy, whose combined fleet was headed by Admiral Isoroku Yamamoto. The Imperial Navy had two strategic alternatives for neutralizing the U.S. Pacific Fleet. One was to cripple the fleet itself through a direct attack on its warships, or cripple Pearl Harbor’s ability to function as the fleet’s forward base in the Pacific.

Crippling the U.S. fleet would require disabling the eight battleships that made up the fleet’s traditional battle line. It was quite a tall order.

The most effective way to cripple Pearl Harbor’s ability to function as a naval base would be to destroy its fuel storage and ship repair facilities. Without them, the Pacific Fleet would have to return to the U.S., where it could no longer deter Japanese military expansion in the region during the year or so it would take to rebuild Pearl Harbor.

It soon became apparent that the basics of either strategy could be carried out through a surprise air raid launched from the Imperial Navy’s six first-line aircraft carriers. Admiral Yamamoto had a reputation as an expert poker player, gained during his years of study at Harvard and as an Imperial Navy naval attaché in Washington. He decided to attack the U.S. warships that were moored each weekend in Pearl Harbor. But in this case the expert poker player picked the wrong target.

The Imperial Navy’s model for everything it did was the British Royal Navy. Standard histories of the Royal Navy emphasized its victories in spectacular naval battles.

Lost in the shuffle was any serious consideration of trying to cripple Pearl Harbor’s ability to function as a forward naval base. So it was that, in one of history’s finest displays of tactical management, six of the world’s best aircraft carriers furtively approached the Hawaiian Islands from the north just before dawn that fateful Sunday, Dec. 7, 1941, launched their planes into the rising sun, caught the U.S. Pacific Fleet with its pants down and wrought havoc in spectacular fashion. On paper at least, this rivaled the British Royal Navy’s triumph at Trafalgar.

But so what?

The American battleships at Pearl Harbor were slow-moving antiques from the World War I era. As we know, the U.S. Navy already had two brand new battleships in its Atlantic Fleet that could run rings around them. And eight new ones the navy was building were even better.

More importantly, the Pacific Fleet’s three aircraft carriers weren’t at Pearl Harbor. American shipyards were already building 10 modern carriers whose planes would later devastate Imperial Navy forces in the air/sea battles of the Philippine Sea and Leyte Gulf.

Most importantly, as the sun set on Dec. 7 and the U.S. Navy gathered the bodies of its 2,117 sailors and Marines killed that day, all-important fuel storage and ship repair facilities remained untouched by Japanese bombs, allowing Pearl Harbor to continue as a forward base for American naval power in the Pacific.

So in reality, Dec. 7 marked the sunset of Japan’s extravagant ambitions to dominate Asia. Admiral Yamamoto and the Imperial Navy’s other tradition-bound leaders chose the wrong targets at Pearl Harbor.

The dictates of tradition are usually the worst guides to follow when it comes doing anything really important. After all, if they survived long enough to be venerated, they’re probably obsolete.

Originally Published: December 5, 2018

 

 

No doubt about it, China doesn’t play fair on trade

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Trade issues are not everyone’s idea of a good time. With so many demands on their attention, ordinary Americans are wary of the truth quotient in commentary on the subject. They are cautious about separating the genuine from the meretricious comments from corporate America, which is concerned about maximizing shareholder wealth rather than doing the right thing for the majority of Americans.

General Motors has warned that President Trump’s threats to impose a 25 percent tariffs on imports of cars and car parts are projected to cost the auto industry billions of dollars, could raise some car prices by nearly $6,000 and result in fewer American jobs and a smaller GM. In contrast, a Ford Motor Company spokesperson said they believe they are somewhat insulated from the proposed tariffs because their most profitable vehicles are built here.

Currently, vehicles imported to the United States face a 2.5 percent tariff. Cars built in America face a 10 percent tariff when they are shipped to the European Union and a 25 percent tariff when they head to China.

During the financial crisis, the feds put $49.5 billion of taxpayer money into the GM bailout and the taxpayers ultimately lost an estimated at $10.5 billion. The firm has remained profitable since then. In retrospect, the bailout should have included provisions requiring that a portion of future profits go to fully repay taxpayers. Government Motors could also have been required to build automobiles and auto parts in the USA.

The automaker sold 4.04 million vehicles in China in 2017, a third more than the 3.02 million it sold in the United States. Last year represented the sixth consecutive year that China was General Motors’ largest market.

GM and other multinational companies headquartered in America view China’s emerging middle class as the world’s largest market for their products. The firm’s future growth relies as much on China as it does on how the automaker responds to emerging disruptive technologies such as electric and autonomous vehicles, and changing patterns of car ownership and use that will ultimately force the modification of its current business model.

Multinationals are concerned that the tariffs will cause the Chinese government to retaliate by imposing bureaucratic rules and regulations that could cause them to lose market share. China used this approach to roll back Japanese automakers’ market share during a dispute with Japan over contested islands in the East China Sea.

When China was violating the World Trade Organization rules on subsides for wind turbines, General Electric and other firms that were in the business were reluctant to bring a dispute to the WTO for fear of Chinese retaliation. It was the United Steel Workers who ultimately brought it to the WTO.

It is hard for multinational corporations to resist the temptation to placate the Chinese. China doesn’t have to send lobbyists to walk the halls of Congress, they just have the multinationals do what they want.

It is implausible to argue that China does not engaged in unfair trade practices. China is a one-party communist dictatorship. It is not bound by the political constraints of a democratic government with a constitution that imposes presidential term limits and secures the rights of free speech and association.

This political structure enables China to promote state subsidized industries such as steel, aluminum, and solar panels that have flooded global markets, depressed prices, and shut down hundreds of manufacturing plants, all in violation of World Trade Organization rules. Along with currency manipulation and stealing intellectual property, China’s actions amount to a thumb on the scale.

“Free” trade is a concept that works in classrooms insulated from the harsh realities of unfair practices and policies. They ignore predatory practices by foreign governments who view trade as a competition between nations and play dirty to grab a competitive advantage for their industries.

Like that of multinational corporations, China’s position on trade will be based on maximizing their own interest

Originally Published: July 14, 2018

Lessons from the Great War still apply

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On June 18, 1914, the Austrian archduke Francis Ferdinand, nephew of Emperor Francis Joseph and heir to the throne of the Austria-Hungary empire, and his wife Sophie were assassinated by a Bosnian Serb in Sarajevo, the capital of Bosnia-Herzegovina. The assassination was the flash point that triggered a global conflict.

The Great War had a kaleidoscope of causes, including mutual defense alliances, imperialism, militarism, and nationalism. Its origins have eerie parallels to the present and hold important lessons for the future, especially for China and the United States. The emergence of China as a major power trying to assert itself has echoes of Germany’s rise in the late 19th and early 20th centuries, which was viewed as a threat by Britain, so the theory goes.

The two bullets fired in Sarajevo precipitated an international crisis, as various military alliances were activated, dragging everybody into a devastating global war. At the time of the royal murders, nobody believed it to be the “shot heard round the world,” but Europe went from peace to war in five weeks. As British Foreign Affairs Minister Sir Edward Grey said, “The lamps are going out all over Europe; we shall not see them lit again in our lifetime.”

Germany backed Austria after it declared war on Serbia, which was supported by Russia. When Germany then declared war on Russia, France was committed to Russia, and Germany attacked France through Belgium, pulling Britain into the war. Later Japan and the United States entered on the side of Britain, France and Russia, along with Italy, which switched sides in 1915. As Henry Kissinger explained, “the Great Powers managed to construct a diplomatic doomsday machine …” The war to end all wars (until it didn’t), later known as World War I, broke out in the summer of 1914 and was expected to be over by Christmas. Kaiser Wilhelm told his troops, “You will be home before the leaves have fallen from the trees.”

But it lasted until Nov. 11, 1918. Like the 2003 invasion of Iraq, it was to be swift, easy and victorious. Those who plan on fighting short wars often end up losing long ones.

By the time World War I ended, nine million had been killed, including over 100,000 American soldiers. Eight million were prisoners or simply missing. Twenty-one million had been wounded and who knows how many were damaged psychologically.

When the guns went silent, the Ottoman, Hapsburg and Russian empires had collapsed, a new German empire was foiled and France and Great Britain were greatly weakened. The war sowed the seeds of the Great Depression, the rise of fascism and communism and World War II. The dismemberment of the Ottoman Empire created the modern Middle East and laid the foundation for the chaotic conflicts that continue to plague the region. The Great War was also the catalyst for the coming American century.

China is an economic superpower and is translating economic might into military capabilities roughly in the same league as the United States. It is making a run at dominating northeast Asia through various territorial disputes with Asian neighbors over claims in the contested East and South China seas. By themselves, these neighbors are not powerful enough to check China.

The historical lesson for leaders in both China and regional rivals like Japan is to recognize that growing political and military tensions are a potential flash point.

Given the network of bilateral and collective defense agreements the United States has in the region, supporting its allies could draw the U.S. into disputes with China.

A clash between China and the United States is hardly remote. As recently as 2014, President Obama reaffirmed America’s bilateral defense agreements with South Korea, Japan and the Philippines. A lesson from World War I that seems so relevant today is that local conflicts can escalate into a great war.

Originally Published: June 16, 2018

Iraq and the consequences of an ill-conceived war

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American troops are still in Iraq on the 15th anniversary of an invasion, the pretext for which was the entirely trumped-up claim that America’s iconic foe Saddam Hussein had weapons of mass destruction. The failure of the 2003 invasion and continuing presence of American troops illustrate the importance of aligning ends with means.

The stated objectives of the invasion were to end the Hussein regime; eliminate the weapons of mass destruction; drive out Islamist militants; secure Iraq’s petroleum infrastructure, which was to cover the cost of the war; and create a liberal, representative government that would spark a new age of freedom in the Middle East.

The invasion did change the region; it made things worse. It began on March 19, 2003 and the military campaign was quick and decisive. Baghdad fell on April 9.

But unlike in Las Vegas, what happened in Iraq did not stay in Iraq. The war opened a Pandora’s Box in the Middle East, releasing many demons.

The abrupt fall of Baghdad was accompanied by a full-scale collapse of public order and helped incubate and reinvigorate radical Islamist militants in the region. The invasion contributed to the civil war in Syria, helped create a vacuum that ISIS filled and caused massive refugee flows to Syria, Jordan, and Europe, other than that it was a complete success.

In retrospect, it is hard to overstate the damage the Iraq War did to America’s global prestige, badly damaging America’s Godzilla-like unipolar credentials, and offering the world a pitiless example of the limits to American power. The magnitude of this disaster can also be measured in lives and money.

From 2003 until the formal withdrawal of troops in 2011, the war took the lives of 4,500 Americans and over 150,000 Iraqi civilians. Its direct cost has been estimated to be almost $1.7 trillion, with an additional $490 billion in benefits owed to war veterans.

The Ronald Reagan question is appropriate here: Is the Middle East better off today than it was before the Iraq war? Is the United States in a better place than before the invasion? In short, unintended consequences resulted in a shattered Iraq, an emboldened Iran, and a Middle East where many regional and international powers are engaged in a number of deadly conflicts.

Then there is the question of opportunity cost – the extent to which the war distracted America from a slew of other challenges, such as emerging nuclear threats from Iran and North Korea, China flexing its muscles in East Asia, completing the Afghanistan operation and other global trouble spots.

Fundamentally, the cleavage between the invasion’s ambitious goals and its actual results boils down to the fact that President Bush and his hawkish advisors failed to establish a proper relationship between end and means in their prosecution of the war. The year before the invasion, Army Chief of Staff General Eric Shinseki made the point that American troops were already stretched too thin around the world. In February 2003, he told the Senate Armed Services Committee that it would take “several hundred thousand soldiers” to secure and pacify Iraq.

Two days later, Defense Secretary Donald Rumsfeld said the post-war troop commitment would be less than the number of troops required to win the war, and the “idea that it would take several hundred thousand U.S. forces is far off the mark.” The Bush administration sent 150,000 American troops into Iraq.

Successful strategy in military affairs and business requires the proper alignment between potentially goals and resources. The Bush team aroused sky-high expectations without sufficient resources to meet them.

President Bush and his advisors failed to understand the words of Prussian military theorist Carl Von Clausewitz, who wrote, “Everything in war is very simple. But the simplest thing is difficult.” Even great powers operate in a world in which resources are not always sufficient to exploit all opportunities and neutralize all threats. There is never enough of anything to go around.

Originally Published: May 5, 2018

 

 

China flexes its muscle in the Pacific

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Just as Imperial Japan did in the 1930s, China is developing and asserting its own version of the Monroe Doctrine in Asia, so it may enjoy the same continental hegemony America does. The new reality is reflected in the South China Sea. China maintains that it has sovereignty over almost all of the South China Sea. The United States should respond by fostering closer ties with its allies in the region.

Beijing continues to militarize artificial islands in the South China Sea. It was reported earlier this month that China had installed antiship cruise missiles and surfaceto- air missile systems for purely defensive reasons on fortified outposts in the hotly contested waters of the South China Sea. Taiwan, the Philippines, Vietnam, Malaysia and Brunei are also contesting at least part of the chain of islands, reefs and their surrounding waters in the South China Sea.

Each year, a third of the world’s shipping passes through the South China Sea, carrying around $3.4 trillion in trade. In 2016, 21 percent of all global trade passed through it. Any conflict in the South China Sea would likely have serious consequences for global commerce.

Following the logic of the Monroe Doctrine, which opposed European colonialism in the Americas, Communist Party leadership believes China’s security would be better served by muscling the American military out of the Asia-Pacific region.

After all, the Chinese remember what happened in the century between the First Opium War (1839-1842) and the end of World War II, when the United States and European powers took advantage of a weak China. The current generation of Chinese Communist Party leaders are so bitter about the 100 years of humiliation that they can taste it.

In 1823, President James Monroe, on the occasion of his annual message to Congress, wrote “the American continents, by the free and independent condition which they have assumed and maintain, are henceforth not to be considered as subjects for future colonization by any European powers.”

The United States put European nations on notice that it would consider any foreign challenge to the sovereignty of existing American nations an unfriendly act.

The Monroe Doctrine, sweeping in scope, proclaiming hegemony over an entire hemisphere, was an expression of a growing spirit of nationalism in the United States in the 1820s. In short, it warned everybody to stay out of the Americas; this is a United States preserve.

China’s assertiveness in the South China Sea echoes the Monroe Doctrine. It wants to dominate Asia the way the United States dominates the Western Hemisphere. Why should anyone expect China to act differently than the United States?

China’s actions are not catching the United States at its best. The U. S. has been busy chasing bad guys in the Greater Middle East. Is it too late to contain and deter China as it did with the Soviet Union in the Cold War? Or is China just too big and powerful? It should be remembered that the United States did not have deep economic relationships with the Soviet Union, so Cold War-era policymakers did not have to contend with powerful American multinational corporations’ economic interests as they managed foreign relations. Lawmakers in Washington, special interest groups, and the business elite eat at the same table.

China’s moves in the South China Sea can be regarded as a threat. But it is also represents an opportunity to deepen relationships with American allies in Asia and leverage their resources to serve as an effective counterweight to China’s moves before China absorbs these countries into its economic orbit. The President may want to reconsider his decision to withdraw the United States from leadership of the Trans-Pacific Partnership. Keeping America secure means having partners and allies to magnify US power and extend US influence.

This approach merits consideration as long as the United States can avoid its usual perfection of getting things wrong when it comes to foreign affairs.

Originally Published: April 19, 2018