The Most Interesting Articles I Read Last Week
FORECASTS & TRENDS E-LETTER
I have been quite distracted over this past week as my 95 year-old Mother-In-Law was admitted to the hospital due to severe bronchitis. Debi and I have shared time being at her side since then. Fortunately, she was discharged from the hospital yesterday, and we have moved her to a skilled nursing facility where she will hopefully regain her strength and get to go back home before long.
Given the demands of the last week, I had little time to work on today’s E-Letter, so I have chosen to reprint the two most interesting articles I have read over the last week. Both are very insightful and answer some critical questions that the media is ignoring. Regardless of your political leanings, this is information that all Americans ought to know.
I will offer some brief commentary prior to each of the articles. Let’s get started.
My family and friends and business associates know that I am a political animal, so I get a lot of questions, especially about President Obama. Probably the most often-asked question has to do with Obama’s obsession with the “wealthy” and income inequality – and more recently his revelation that he would prefer that more people depend on government for their subsistence rather than working. The following article sums it up as well as anything I have read.
The War Against Work And Wealth
The Congressional Budget Office’s recent analysis of the Affordable Care Act concludes that it will result in the equivalent of 2.3 million full-time workers leaving the work force to preserve their taxpayer-financed subsidies for health insurance.
This is troubling on several levels: In terms of fiscal impact, it will exacerbate the federal budget deficit, both on the revenue side (fewer taxable hours being worked) and on the expenditure side (Obamacare’s new subsidies). Economically, our country will be poorer than it otherwise would be.
Work produces wealth; less work means less wealth, and also less upward mobility for those who drop out of the labor force. Politically, as the number of unproductive citizens dependent on government increases and the number of productive citizens whose taxes finance government decreases, the unproductive may achieve a permanent majority—a political hegemony—as happened in ancient Rome with dire consequences.
News of fewer Americans working should come as no surprise with the current administration running the show. Whether it be the unproductive “stimulus plan,” increasing the minimum wage, suffocating regulation, increasing unemployment subsidies (miscalled “compensation”), adding record numbers to the disability rolls, etc., the Obama presidency has been a job-destroying machine from the start, as I noted four years and two-and-a-half years ago. Even as the heroic efforts of industrious Americans manage to keep our economic nose above water, the labor participation rate has fallen.
What is remarkable about the all-too-predictable loss of jobs resulting from Obamacare is the administration’s response. Jason Furman, the chairman of the White House’s Council of Economic Advisers, tried to spin the projected net reduction in productive labor as a positive. He said, “This is not businesses cutting back on jobs, this is people having new choices they didn’t use to have.”
Team Obama’s attitude seems to be that it’s bad for society when businesses reduce jobs in the face of increased cost burdens—as if the primary reason businesses exist is to “give” somebody a job rather than to produce wealth and serve consumer needs—but it’s good for society if individuals cut back their work hours and increasingly live on government support.
Note the double standard: If businesses respond to Obamacare’s disincentives to employ people by reducing employment, that’s bad (and the IRS, without statutory authority, will play the grand inquisitor, and demand to know if Obamacare was the reason they cut employees’ jobs or workweeks) but if individuals respond to Obamacare’s disincentives to work by reducing their hours of work to qualify for larger government subsidies, that’s good.
Referring to a record number (over 100 million) of Americans not working, White House spokesman James Carney hailed this lost economic production as a wonderful development. Or, in other words, “a milestone on the path toward the ultimate complete liberation of the American worker from the drudgery of work,” to quote Lewis K. Uhler and Peter Ferrara. This utopian vision of a world without work is uncomfortably close to the economic irrationality of the Occupy Wall Street crowd.
At their 2012 May Day rally in Chicago, the Occupy Wall Street members prominently displayed signs saying, “If you have to work to live, is it a choice? If you have no choice, are you free?”
Sorry, people, but, we aren’t born with a lifelong supply of sustenance accompanying us, and so we are not free from the necessity to produce what we consume—that is, to work. Those who lament that they aren’t free if they have to work seem remarkably unconcerned about the freedom of their fellow citizens. To reword the slogan on the Occupy Wall Street sign: If you don’t work, and you expect your fellow citizens to work to support you, can your fellow citizens be free?
This administration’s desire to make it easier for people not to work and to live at taxpayer expense makes no economic sense. It reduces the amount of wealth produced and keeps people from ascending the ladder of individual economic progress.
Politically, though, it makes a lot of sense to Obama and his progressive allies. By continually increasing the number of citizens economically dependent on the political process, Obama comes that much closer to achieving the Curley Effect [wealth redistribution] and securing a permanent Democratic majority over an increasingly shrinking productive sector.
Should that happen, the war on producers, and therefore on wealth, will escalate, resulting in a poorer America. The longer Team Obama’s war against work continues, the more they cripple the wealth production upon which our standard of living depends. END QUOTE
Most Americans pay little attention to US foreign policy. So when the media praises Obama for refusing to get involved in foreign problems and atrocities, most people think little about it. Yet as the following article explains, President Obama’s hands-off foreign policy has been an unmitigated disaster for America, and may have contributed to tens of thousands of deaths in the Middle East. You really should be aware of how radically our foreign policy has changed.
America's Global Retreat
Never mind the Fed's taper, it's the U.S. geopolitical taper that is stirring world anxiety. From Ukraine to Syria to the Pacific, a hands-off foreign policy invites more trouble.
Since former Federal Reserve Chairman Ben Bernanke uttered the word "taper" in June 2013, emerging-market stocks and currencies have taken a beating. It is not clear why talk of (thus far) modest reductions in the Fed's large-scale asset-purchase program should have had such big repercussions outside the United States. The best economic explanation is that capital has been flowing out of emerging markets in anticipation of future rises in U.S. interest rates, of which the taper is a harbinger. While plausible, that cannot be the whole story.
For it is not only U.S. monetary policy that is being tapered. Even more significant is the "geopolitical taper." By this I mean the fundamental shift we are witnessing in the national-security strategy of the U.S.—and like the Fed's tapering, this one also means big repercussions for the world. To see the geopolitical taper at work, consider President Obama's comment Wednesday on the horrific killings of protesters in the Ukrainian capital, Kiev. The president said: "There will be consequences if people step over the line."
No one took that warning seriously—Ukrainian government snipers kept on killing people in Independence Square regardless. The world remembers the red line that Mr. Obama once drew over the use of chemical weapons in Syria . . . and then ignored once the line had been crossed. The compromise deal reached on Friday in Ukraine calling for early elections and a coalition government may or may not spell the end of the crisis. In any case, the negotiations were conducted without concern for Mr. Obama.
The origins of America's geopolitical taper as a strategy can be traced to the confused foreign-policy decisions of the president's first term. The easy part to understand was that Mr. Obama wanted out of Iraq and to leave behind the minimum of U.S. commitments. Less easy to understand was his policy in Afghanistan. After an internal administration struggle, the result in 2009 was a classic bureaucratic compromise: There was a "surge" of additional troops, accompanied by a commitment to begin withdrawing before the last of these troops had even arrived.
Having passively watched when the Iranian people rose up against their theocratic rulers beginning in 2009, the president was caught off balance by the misnamed "Arab Spring." The vague blandishments of his Cairo speech that year offered no hint of how he would respond when crowds thronged Tahrir Square in 2011 calling for the ouster of a longtime U.S. ally, the Egyptian dictator Hosni Mubarak.
Mr. Obama backed the government led by Mohammed Morsi, after the Muslim Brotherhood won the 2012 elections. Then the president backed the military coup against Mr. Morsi last year. On Libya, Mr. Obama took a back seat in an international effort to oust Moammar Gadhafi in 2011, but was apparently not in the vehicle at all when the American mission at Benghazi came under fatal attack in 2012.
Syria has been one of the great fiascos of post-World War II American foreign policy. When President Obama might have intervened effectively, he hesitated. When he did intervene, it was ineffectual. The Free Syrian Army of rebels fighting against the regime of Bashar Assad has not been given sufficient assistance to hold together, much less to defeat the forces loyal to Assad. The president's non-threat to launch airstrikes—if Congress agreed—handed the initiative to Russia. Last year's Russian-brokered agreement to get Assad to hand over his chemical weapons is being honored only in the breach, as Secretary of State John Kerry admitted last week.
The result of this U.S. inaction is a disaster. At a minimum, 130,000 Syrian civilians have been killed and nine million driven from their homes by forces loyal to the tyrant. At least 11,000 people have been tortured to death. Hundreds of thousands are besieged, their supplies of food and medicine cut off, as bombs and shells rain down.
Worse, the Syrian civil war has escalated into a sectarian proxy war between Sunni and Shiite Muslims, with jihadist groups such as the Islamic State of Iraq and Syria and the Nusra Front fighting against Assad, while the Shiite Hezbollah and the Iranian Quds Force fight for him.
Meanwhile, a flood of refugees from Syria and the free movement of militants is helping to destabilize neighboring states like Lebanon, Jordan and Iraq. The situation in Iraq is especially dire. Violence is escalating, especially in Anbar province. According to Iraq Body Count, a British-based nongovernmental organization, 9,475 Iraqi civilians were killed in 2013, compared with 10,130 in 2008.
The scale of the strategic U.S. failure is best seen in the statistics for total fatalities in the region the Bush administration called the "Greater Middle East"—essentially the swath of mainly Muslim countries stretching from Morocco to Pakistan. In 2013, according to the International Institute of Strategic Studies [IISS], more than 75,000 people died as a result of armed conflict in this region or as a result of terrorism originating there, the highest number since the IISS Armed Conflict database began in 1998. Back then, the Greater Middle East accounted for 38% of conflict-related deaths in the world; last year it was 78%.
Mr. Obama's supporters like nothing better than to portray him as the peacemaker to George W. Bush's warmonger. But it is now almost certain that more people have died violent deaths in the Greater Middle East during this presidency than during the last one.
In a January interview with the New Yorker magazine, the president said something truly stunning. "I don't really even need George Kennan right now," he asserted, referring to the late American diplomat and historian whose insights informed the foreign policy of presidents from Franklin Roosevelt on.
Yet what Mr. Obama went on to say about his self-assembled strategy for the Middle East makes it clear that a George Kennan is exactly what he needs: someone with the regional expertise and experience to craft a credible strategy for the U.S., as Kennan did when he proposed the "containment" of the Soviet Union in the late 1940s.
So what exactly is the president's strategy? "It would be profoundly in the interest of citizens throughout the region if Sunnis and Shiites weren't intent on killing each other," the president explained in the New Yorker. "And although it would not solve the entire problem, if we were able to get Iran to operate in a responsible fashion . . . you could see an equilibrium developing between Sunni, or predominantly Sunni, Gulf states and Iran."
Moreover, he continued, if only "the Palestinian issue" could be "unwound," then another "new equilibrium" could be created, allowing Israel to "enter into even an informal alliance with at least normalized diplomatic relations" with the Sunni states. The president has evidently been reading up about international relations and has reached the chapter on the "balance of power." The trouble with his analysis is that it does not explain why any of the interested parties should sign up for his balancing act.
As Nixon-era Secretary of State Henry Kissinger argued more than half a century ago in his book "A World Restored," balance is not a naturally occurring phenomenon. "The balance of power only limits the scope of aggression but does not prevent it," Dr. Kissinger wrote. "The balance of power is the classic expression of the lesson of history that no order is safe without physical safeguards against aggression."
What that implied in the 19th century was that Britain was the "balancer"—the superpower that retained the option to intervene in Europe to preserve balance. The problem with the current U.S. geopolitical taper is that President Obama is not willing to play that role in the Middle East today. In his ignominious call to inaction on Syria in September, he explicitly said it: "America is not the world's policeman."
But balance without an enforcer is almost inconceivable. Iran remains a revolutionary power; it has no serious intention of giving up its nuclear-arms program; the talks in Vienna are a sham. Both sides in the escalating regional "Clash of Sects"—Shiite and Sunni—have an incentive to increase their aggression because they see hegemony in a post-American Middle East as an attainable goal.
The geopolitical taper is a multifaceted phenomenon. For domestic political as well as fiscal reasons, this administration is presiding over deep cuts in military spending. No doubt the Pentagon's budget is in many respects bloated. But, as Philip Zelikow has recently argued, the cuts are taking place without any clear agreement on what the country's future military needs are.
Thus far, the U.S. "pivot" from the Middle East to the Asia Pacific region, announced in 2012, is the nearest this administration has come to a grand strategy. But such a shift of resources makes no sense if it leaves the former region ablaze and merely adds to tension in the latter. A serious strategy would surely make some attempt to establish linkage between the Far East and the Middle East. It is the Chinese, not the Americans, who are becoming increasingly dependent on Middle Eastern oil. Yet all the pivot achieved was to arouse suspicion in Beijing that some kind of "containment" of China is being contemplated.
Maybe, on reflection, it is not a Kennan that Mr. Obama needs, but a Kissinger. "The attainment of peace is not as easy as the desire for it," Dr. Kissinger once observed. "Those ages which in retrospect seem most peaceful were least in search of peace. Those whose quest for it seems unending appear least able to achieve tranquillity. Whenever peace—conceived as the avoidance of war—has been the primary objective . . . the international system has been at the mercy of [its] most ruthless member."
Those are words this president, at a time when there is much ruthlessness abroad in the world, would do well to ponder. END QUOTE
Mr. Ferguson is a history professor at Harvard and a senior fellow at Stanford University's Hoover Institution. His most recent book is "The Great Degeneration" (Penguin Press, 2013).
Gary D. Halbert
Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.