China and its Discontents

By now, White House and DoD criticism of the release of the Wikileaks archive has shifted from ‘it harms American soldiers and US military operations’ to ‘it doesn’t tell us anything we don’t already know’ to ‘Wikileaks released the names, hometowns, and families of Afghani informants, which will result in their deaths’. The possibility that Afghans could be assassinated as a result of this leak is reprehensible and probably the worst result of the leak. But is retribution likely?

In an interview with the Daily Beast, Sirajuddin Haqqani, son of the leader of the Haqqani Network, pointedly omitted any reference to retribution, but does talk about the ‘atrocities’ of US and NATO forces, as well as the ‘loss of innocent lives in bombings’. Both the Taliban and ISAF are waging two parallel wars: the physical war with each other, and the psychological war to gain the trust of the Afghani people (this is what the DoD calls psy-ops, or psychological operations). Both are an integral part of the Taliban’s mission, just as much as it is a part of COIN strategy. Retribution is therefore rather unlikely – not simply because the Taliban talks about ‘innocent lives’ (that would be naive), but because it would set them back in the more important psy-ops war.

The lede from a WSJ article yesterday made me laugh – conservatives continually harp that Ben Bernanke and the Fed must do all in their power to curb the inflationary tendencies associated with the coming economic recovery. Of course, no inflation has arrived, and neither has economic recovery – the US is in a deflationary period. But this doesn’t stop the WSJ now complaining of the Fed’s inaction in dealing with unemployment. The paper finally takes the Fed’s inflation targets at face value – a rare occurrence.

But this raises the question – what can the Fed actually do to combat the recession now? Monetary policy is a blunt hatchet – lowering interest rates makes borrowing easier across all sectors of the economy, but isn’t guaranteed to work. In this analogy, fiscal policy is a scalpel. Congress can target individual economic sectors – construction, for example, can be boosted through infrastructure expenditures. Unfortunately for us, neither looks likely to happen any time soon. Interest rates are now at their lowest, and a second stimulus (despite statements to the contrary) is dead in the water. And even if the Fed or Congress did manage to take action of some sort, it would be far too late now to affect the economy before the the end of the year.

What else is left when policy fails? Politics. In a utopia, the benefits of a particular policy would be obvious to completely rational, politically-engaged citizens. But that’s not how it works. The only way for the Obama administration to inspire confidence in the public is to act confidently. Those who are actually committed to sane economic policy (i.e., not deficit hypocrites who would vote for the 2001 and 2003 tax cuts) need to think big – rebuilding America big – because politics, unfortunately, comes before policy.

David Leonhardt at the New York Times gets it exactly right:

The reasons for the new American austerity are subtler, but not shocking. Our economy remains in rough shape, by any measure. So it’s easy to confuse its condition (bad) with its direction (better) and to lose sight of how much worse it could be. The unyielding criticism from those who opposed stimulus from the get-go — laissez-faire economists, Congressional Republicans, German leaders — plays a role, too. They’re able to shout louder than the data…

In an ideal world, countries would pair more short-term spending and tax cuts with long-term spending cuts and tax increases. But not a single big country has figured out, politically, how to do that.