Monday, February 23, 2009

Mr. Obama Comes to Ottawa

Some of us -- who are old enough to remember -- might be forgiven for thinking that there was something retro going on in Ottawa last week. At times, it looked and felt like the Second Coming of Trudeaumania. Canadians greeted Barack Obama with open arms. It has been forty years since we greeted a politician with such joie de vivre.

Not that there weren't skeptics. National Post columnist Don Martin proclaimed "Obama Conquers 51st State," and in The Toronto Star, Tom Walkom asked, "Is Obama a closet conservative?" Walkom's skepticism ranged from Obama's commitment to clean energy, to the war in Afghanistan to his financial support for hedge funds. South of the border there was a much louder chorus of skeptics. Rush Limbaugh, not exactly a fountain of wisdom, accused Obama of being a "fascist;" and some Republican governors -- most in the states of the Old Confederacy -- announced that they would not accept all or some of the stimulus funds Obama signed into law last week.

But such was not the case in Ottawa. Canadians showed Obama boundless good will. From the moment he stepped off Air Force One and was greeted by Governor General Michaelle Jean, to his handshake with Stephen Harper, to his stroll through the Byward Market in search of souvenirs for his children, Obama never hit a sour note. In fact, he showed a remarkable familiarity with the issues at the top of Canada's agenda. It would appear that his Canadian brother-in-law, his Canadian staff members -- and maybe even the Canadians who worked for his election -- had manged to catch his ear.

His knowledge of this country is no guarantee of sweetness and light. As Martin warned his readers, "If that sounds like a perfect pairing, well, that too will change." After all, Trudeaumania eventually wore off and was replaced by a shrug and a middle finger. Yet, even today, despite the well deserved criticisms of his obvious failings, most Canadians still regard Trudeau as one of this country's great prime ministers. When push came to shove -- during the October Crisis of 1970 --Trudeau remained true to his vision -- and he did what had to be done. The War Measures Act was a cruel and blunt instrument. But -- always a proponent of individual liberties and Canadian Federalism -- Trudeau gave us the Charter of Rights and Freedoms, a document which ensures that the abuses in the War Measures Act can't be repeated.

There is room for skepticism. It may be that Obama has raised impossible hopes. But, once in a great while, history and one human being come together to change the world -- for better or worse. I have felt for some time that Obama can change the world for the better. The reaction in Ottawa last week merely proves that, in this country at least, there are many of us who share that belief.

Monday, February 16, 2009

A Realist's Optimism

There is something refreshing about Barack Obama's candor. First, because one did not hear it from his two immediate predecessors; and, second, because they give some insight into how the man might play the very difficult hand he has been dealt.

When Tom Daschle, Obama's choice for Secretary of Health, was forced to resign because he had neglected to pay his taxes -- and the various perks he had received since leaving public office became public knowledge -- Obama used the vernacular to admit his mistake. "I screwed up," he said. And last week, while generating support for his economic stimulus plan -- in the face of an almost solid wall of Republican opposition -- he told an audience in Fort Myers, Florida that, if he couldn't fix the economy, "you'll have a new president."

Some have taken that candor to be weakness. In fact, the chattering classes have already started to write his political obituary. As Frank Rich pointed out on Sunday, Newsweek declared in the first week of February that Obama "had all but lost control of the agenda in Washington"; and Politico claimed that he was "losing the stimulus message war." However, as Rich also pointed out, the pundits wrote the same kind of things when he was vying with Hilary Clinton for the Democratic nomination; and they predicted that John McCain -- the bus driver on the "Straight Talk Express" -- would run him over.

For while Obama has made mistakes, he is a quick study -- and he is not hide bound by ideology. In fact, he sounds a lot like Franklin Roosevelt. "We will do what works," he has said. That "will require re-evaluation" and "if that doesn't work, we'll try something else." You can bet that Obama has learned something from the Republican threat to filibuster his stimulus package and Senator Gregg's decision to walk away from his nomination for Secretary of Commerce.

At the end of the week the president had his stimulus package. As Paul Krugman points out in today's New York Times, that package, while absolutely necessary, may not be enough; and his bank rescue package leaves out a lot of details. But Obama does not suffer from the self delusion that most Americans have been living with for a long time. "The bottom line," writes Krugman, is that, according to the Survey of Consumer Finances, "there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower that it was in 2001."

The problem is that "until very recently Americans believed they were getting richer, because they received statements saying that their houses and stock portfolios were appreciating in value faster than their debts were increasing." The whole economy was built on the Bernie Madoff model. It was a Ponzi scheme.

Obama -- perhaps because of who he is and where he has been -- is no fool. As he told a group of reporters aboard Air Force One, enroute to Chicago at the end of last week, "You know, I'm an eternal optimist. That doesn't mean I'm a sap." Those who confidently boast that they have cut the young, green politician down to size should engage in their own re-evaluation.

Monday, February 09, 2009

Idiocy Dies Hard

Last week, Bob Rae wrote an open letter to the prime minister: "I am writing you in my former role as Deficit Poster Boy and Punching Bag," the letter read. "This title was bequeathed to me by Pierre Trudeau and Brian Mulroney when I became premier of Ontario, and I have been carrying it around on my back since 1990."

It was time, said Rae, to pass the torch; for Harper -- even though he inherited eight years of surpluses -- was about to enter a time warp. "You will learn, as I did," wrote Rae, "that the estimates of Finance officials are never quite on, that as the layoffs and bankruptcies pile up, government revenues collapse and expenditures grow. . . . You will regret that your every prior thought is in print. Your old copies of Milton Friedman and Hayek's Road to Serfdom will somehow seem less relevant and helpful."

Yet, surprisingly, as Friedman and Hayek become less and less relevant, modern conservatives continue to quote chapter and verse from these sacred texts. When we learned on Friday that Canadians had lost over 129,000 jobs in January, Mr. Harper stoutly proclaimed that his government would not be "blown off track." This from the man who also stoutly proclaimed in October that there would be no recession in Canada -- and who foresaw slim surpluses in late November.

And south of the 49th parallel, Republicans -- under the banner "The New Deal Didn't Work" -- have railed at President Obama's stimulus package. Nobel laureate Paul Krugman is furious -- particularly at the centrists who have managed to cut $100 billion from the Senate version of the legislation. The proposal was already too small, he wrote in today's New York Times. "Even if the original Obama plan -- around $800 billion in stimulus, with a substantial total of that given over to ineffective tax cuts -- had been enacted, it wouldn't have been enough to fill the looming hole in the U.S. economy, which the Congressional Budget Office estimates will amount to $2.9 trillion over the next three years."

But, taking their cues from Friedman and Hayek, those who crafted the compromise bill made cuts precisely where they were not needed -- at the bottom. "The original plan also included badly needed spending on school construction -- $16 billion of that spending was cut. It included aid to the unemployed, especially help in maintaining health care -- cut. Food Stamps -- cut. All in all, more than $80 billion was cut from the plan, with the great bulk of those cuts falling precisely on the measures that would do the most to reduce the depth and pain of this slump." And, railing against the cost of the bill, "36 out of 41 Republican senators voted to replace the Obama plan with $3 trillion, that's right $3 trillion, in tax cuts over 10 years."

This was the approach John McCain advocated. He advanced a plan which would cost a little more than half the Obama plan; and most of that would be devoted to tax cuts. Clearly McCain still doesn't understand why he lost the election. It's worth remembering that his chief economic guru, former Senator Phil Gramm, confidently asserted six months ago that America was in a "mental recession." That conclusion surely must soothe the suffering of those two and a half million Americans who have lost their jobs since he made his pronouncement.

The problem, however, goes beyond Phil Gramm. As Jeffrey Simpson reminded his readers three weeks ago, Republicans have been in office for 20 of the last 28 years. They ran deficits for all 20 of those years. The exception was Bill Clinton's presidency. He spent his first five years digging out of the hole the Republicans left him; and then he piled up surpluses for the next three years. His successor started digging again -- and he left Mr.Obama an even deeper hole.

Mr. Harper disposed of the proportionately larger surpluses he inherited. He surely deserves the award which Mr. Rae assures him "is on its way." Modern conservatism has always been a faith based movement. Facts cannot dent its armour. In the late 19th century, British political philosopher John Stuart Mill wrote that Great Britain's Conservative Party was "the stupid party." Modern conservatives appear to have returned to form. They offer proof of an age old maxim: Idiocy, like the cockroach, dies hard.

Monday, February 02, 2009

Buying Time

Michael Ignatieff's decision to support the Conservative budget -- for now -- buys him and the Prime Minister time. Both men have political imperatives for entering their coalition of convenience. Harper's is obvious. His government -- humbled after its pre-Christmas ego trip -- remains in power. Ignatieff, whose party lacks both the policy and financial resources to go to the country, needs time to genrate both.

Most importantly, each party needs time to think through policy. For, as Robert Reich wrote this week, Conservatives and Progressives are advovating two distinct prescriptions for the current financial crisis. Conservatives, who Reich calls "cyclists," believe that we are caught in a familiar boom and bust cycle. They concede the need for some kind of government intervention; but, says Reich, they "blame the current crisis on a speculative bubble that threw the economy's self regulating mechanisms out of whack." Progressives, who Reich calls "structuralists . . . see the problem much differently." They believe "the bursting of the housing bubble caused the current crisis, but the underlying problem began much earlier -- in the late 1970's, when median U.S. incomes began to stall."

When wages bottomed out, women entered the workforce to help make ends meet; and both husbands and wives began working longer hours. When these strategies failed to help them keep their heads above water, they went into debt and -- well, here we are. And, if the money the economy generated didn't go to the people in the middle, where did it go? "As late as 1976," writes Reich, "the richest 1 per cent of the country took home about 9 percent of the total national income. By 2006 they were pocketing more than 20 percent." The last time this happened was in 1928.

Mr. Harper and Mr. Flaherty are clearly cyclists. They believe this downturn will end in two years; and they have Mr. Carney, of the Bank of Canada, on their side. The Liberals need to go back to the policy drawing board, so it's a little difficult to figure out where they stand. But Mr. Ignatieff's initial noises -- about protecting the vulnerable and insuring that the bailout money gets to those who need it -- suggest that he is more of a structuralist than a cyclist.

Where does this leave the public? Stuck in the middle -- which, recent history suggests, is not a comfortable place to be. For, while the political parties are fighting it out in Ottawa, things are getting worse for ordinary Canadians. NAFTA ensured relatively free movement of goods and services across the border; and, when times were good, that meant that some of the wealth generated in the United States flowed north. But the numbers from there last month were particularly bleak. In the last four months of 2008, Americans lost 1.9 million jobs. Because the United States is our biggest customer, a fair measure of American pain will cross our border.

Last week's budget bought time for both the government and the opposition. It's not clear what it bought ordinary Canadians. They do not have the luxury of time -- as they lose their jobs and try to pay their bills.