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Belmont Club

by Richard Fernandez

Enemy At the Gates

June 21st, 2010 - 8:52 pm

The New York Times says that budget chief Peter Orszag is leaving his job next month, “making him perhaps the first official to leave the Obama cabinet and removing a major player from President Obama’s economic team. ” But will he be the last? The  NYT  says Orszag has decided to give his future personal life some attention. “While the president recently urged Mr. Orszag to remain, the calendar for drafting the next budget weighed in favor of Mr. Orszag’s leaving sooner. So did Mr. Orszag’s personal calendar: He is getting married in September.” That Orszag had recently advocated deficit reduction instead of more stimulus spending suggests that he looked at both the prospect of defending the budget and his bride — and chose the bride.

In recent months, Mr. Orszag, 41, has espoused deficit reduction strategies in administration debates against those who pressed for more stimulus spending and tax cuts to keep the economy from slipping back into recession.

The Wall Street Journal says that President Obama needed someone to put together the crucial 2011 budget and had pressed Orszag to decide if he was the man for it. “The president had wanted a decision from Mr. Orszag before the fall, when the administration will begin the arduous process of putting together the fiscal 2011 budget amid some of the greatest budget pressures in modern U.S. history.”

Already, administration officials have begun vetting possible successors. One, Gene Sperling, a director of President Bill Clinton’s National Economic Council and a top aide to Treasury Secretary Timothy Geithner, has been cleared to take the position of deputy budget director, but uncertainty about Mr. Orszag’s departure date had frozen Mr. Sperling’s move. Along with Mr. Sperling, White House officials are considering new names, including Laura Tyson, a former top Clinton White House economist and dean of the University of California’s Haas School of Business; Robert Greenstein, director of the liberal Center on Budget and Policy Priorities; and Rep. Artur Davis (D., Ala.), an early supporter of Mr. Obama’s White House bid who recently lost the Democratic nomination for his long-shot campaign to be Alabama’s first African-American governor.

According to a source familiar with the deliberations, Ms. Tyson’s name has surfaced because she is seen as a confident, credible spokeswoman for White House economic policy as the record budget deficit moves to perhaps the most prominent spot in the president’s domestic agenda.

The WSJ seemed to suggest the president was preparing a “Washington Monument” defense in the face of Republican pressures to cut the deficit. An unpalatable menu of choices has been prepared for presentation to Republicans against a November loss by the president’s party. “A bipartisan White House commission is considering ways to tame the deficit, and will report back after the November midterm elections. … The commission is looking at cuts to discretionary spending and entitlements such as Social Security and Medicare, as well as an overhaul of the tax code that would simplify taxation and bring in more revenue.”  The idea was he would dare the Republicans to choose from these menu items and impale themselves upon his policy cheveux-de-frise.

If, as expected, Republicans grab more seats in Congress in November—or even control of the House of Representatives—the president plans to push them to make good on their own promises to tackle the budget deficit.

The implication was that Barack Obama would try to hold on to his big-government gains and dare the GOP to come against his prepared defenses. But Orszag will evidently not conduct the defense. Why the sudden loss of faith? Ross Douthat’s op-ed in the New York Times may provide an insight into Orszag’s sudden reluctance to fight a rearguard action against the expected Kesselschlacht along the banks of the budgetary Volga. Douthat argues that in the face of trillion dollar deficits and a declining economy, some liberals are having second thoughts about whether they are the wave of the future. Douthat writes:

At work in this liberal panic are two intellectual vices, and one legitimate fear. The first vice is the worship of presidential power. … The second vice is an overweening faith in theory. It’s now conventional wisdom among Obama’s liberal critics that the White House has been insufficiently ambitious about deficit spending. …

Maybe in some parallel universe there’s a Congress that would be willing to borrow and spend trillions in stimulus dollars, despite record deficits, if that’s what liberal economists said the situation required. But not in this one. …

Yet the liberal drumbeat continues. … But it’s here, with the looming fiscal crisis, that the more legitimate liberal fear comes in. Liberals had hoped that Obama’s election marked the beginning of a long progressive era — a new New Deal, a greater Great Society. Instead, from the West Coast to Western Europe, the welfare state is in crisis everywhere they look. The future suddenly seems to belong to austerity and retrenchment — and even, perhaps, to conservatism.

In this environment, the rage against Obama for not doing more, now, faster, becomes at least somewhat understandable. It’s not that he hasn’t done a great deal for liberals during his 18 months in office. It’s that liberalism itself may be running out of time.

And it’s not just the budgetary commanders who are flagging.  Even the military commanders are acting funny. Today Reuters carried the extraordinary story of General Stanley McChrystal’s apology for an interview given by his aides to Rolling Stone magazine basically dissing his commander in chief as being unprepared. McChrystal said, “I extend my sincerest apology for this profile. It was a mistake reflecting poor judgment and should never have happened.” It’s a little late for that. Rolling Stone reported McChrystal as accusing the top US diplomat in Afghanistan of “betraying” him and said he had been disappointed to find his commander in chief unprepared when he finally met him at the White House.

Marc Ambinder at the Atlantic is perplexed. “What I don’t know is which of McChrystal’s aides thought it would be a good idea to let his senior staff speak on background to Rolling Stone (!) of all publications, venting McChrystal’s frustrations and their own.” He somewhat pointlessly suggests this incident will hamper McChrystal’s campaign in Afghanistan by undermining his relationship with the president. But the real story is why things suddenly seem so odd, why Washington suddenly seems like the isle of Cthulhu where geometric laws no longer hold.

But there may be more strangeness, if possible, to come. The AP reported rumors that BP was considering filing for bankruptcy following Tony Hayward’s cancellation of an appearance at an oil industry conference. It quoted an analyst who said BP’s exposure to Gulf cleanup costs could drive the company under.  Jay Tea at Wizbang argues that the government is acting like it doesn’t want to solve the oil spill problem.

Instead, we have an administration that seems hell-bent on destroying BP. Hell, last week they extorted a $20-billion-dollar shakedown out of BP. And, cynically, the primary motive wasn’t to get that money, but to secure the federal government’s first dibs on BP’s assets should they file bankruptcy in the US. This was the same move the Obama administration pulled with GM and Chrysler — bypassing the normal rules of bankruptcy and screwing out the other creditors.

We need an easing of normal restrictions and limitations, freeing up all parties concerned to react swiftly to the impending slow-motion disaster. Instead, we have the Coast Guard turning away skimmers for inadequate life jackets, states being blocked from building berms due to long-term environmental impact concerns, foreign vessels and offers of assistance and expertise being ignored.

What’s going on? These successive events are so extraordinarily suggestive that pundits are at loss to interpret them within the normal framework of commentary. It’s like trying to describe a madhouse. Tea gives it a try. He calls the strange atmosphere the “scent of fear.” Tea uses the oil spill as an example.  It would seem from oil industry commentary that the BP spill may yet develop into a blowout that “could scar — and economically cripple — the US for a very, very long time.” The entire underwater oil and gas bubble could pop like a giant zit and become as close to a Hollywood disaster as possible in real life. So why are both the administration and BP acting as if nothing very serious were happening?  What does it mean when people are yachting and golfing when they should be panicking?

Tea suggests a framework for deciding whether upon watching chiefs of staff threatening to resign, budget directors heading for the matrimonial door, and Special Forces generals giving interviews to Rolling Stone to excoriate the President to conclude we are still in Kansas. How do we account for the void between the falling masonry and the unconcern of the Washington establishment beneath? Is it mere “cool” or something else? What we need, Tea thinks, is an equivalent of Glenn Reynold’s “bullshit meter” that works with insane situations. He writes:

I’ve always been enamored of Professor Glenn Reynolds’ oft-repeated aphorism: “I’ll believe there’s a crisis when the people who say there’s a crisis act like there’s a crisis.” It’s a great BS detector, but it has some corollaries that I’m finding truly terrifying.

What does it mean when those people say there’s a crisis, I agree that there’s a crisis, but they refuse to act like there’s a crisis?

1) The disaster isn’t as bad as we all think it is, and the Obama administration knows that.

If that was true, then their “never let a crisis go to waste” response is understandable. Heinous, but understandable. This is an opportunity for them to push their agenda, and push it hard.

2) The disaster is as bad as we think, but the Obama administration doesn’t realize it.

This would be entirely in character with this administration. They are the Peter Principle writ large: they have been promoted past their level of competency. They simply can’t grasp that this disaster is a game-changer, so they are simply playing the game that they have played all their lives. Not because that’s what they think is best, but because that’s all they know how to do. “When your only tool is a hammer, all your problems start looking like nails.”

3) The disaster is at least as bad as we think, if not worse, and the Obama administration knows it.

If that is the case, then the only explanation that makes any sense is that they believe that the whole thing is a lost cause, that it is pretty much an unstoppable catastrophe, and they’re figuring that since we’re all pretty much fucked, they might as well get theirs before it all goes to hell.

4) The disaster isn’t as bad as we think it is, but the Obama administration doesn’t realize it.

That’s the fourth possibility of my little 2×2 matrix here, but I give it very little weight. It’s the most Pollyannaish of the possibilities, and fits in with the first part of “hope for the best, but plan for the worst.” I only include it here for the sake of completion.

The key to developing a proper insanity meter may be the following metric. If the public response to manifestly serious problems continues to be unserious; if policy makers unfailingly resort to changing the subject, staging PR extravaganzas, massaging the message, seeking celebrity entertainment and doing similarly bizarre and irrelevant things, then it becomes progressively less likely that we’re still in Kansas. It’s just your t-test. How long can you believe things are still normal despite mounting evidence to the contrary? And just where we are now is anybody’s guess. It’s a long way home to Aunt Em. With the enemy at the gates the only way out is to just follow the Yellow Brick Road.

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