Economy
Today's NY Times was full of stories that will make libertarians and deficit hawks cringe. The stimulus bill is including large increases in health care: people currently receiving unemployment benefits can now qualify for Medicaid, regardless of income.
Republicans wanted to deny the premium subsidies to people who had annual incomes of more than $100,000 or assets of more than $1 million. They also wanted to prevent people with more than $1 million of family income from taking advantage of the Medicaid option for the unemployed.
Democrats voted down those proposals.
Meanwhile, in a commendable move, Obama met with Republican lawmakers to discuss the stimulus. Unfortunately, he continued the old fallacy he and Dems have been using all along: “The statistics every day underscore the urgency of the economic situation,” he said, which has been his only defense of his stimulus plan. But as I've written before (here and here), there is considerable debate about whether the stimulus will be worth its massive cost in political capture and deficit spending. While everyone agrees we have an "urgent economic situation," Obama and the Dems still haven't made the case for their particular plan, which seems to be turning into a pork fest (and the timing is not consistent with Obama's promises, according to the Congressional Budget Office).
Part of the plan is supposed to improve our failing infrastructure, a worthwhile goal. Of course, this is not the greatest time to be worrying about this: Clinton and Bush both dropped the ball on using budget surpluses for public investment. Since it will be financed entirely by deficit spending, which will be paid for by the unborn in terms of higher taxes and lost growth, I think the infrastructure issue merits more national dialog. Also included in the stimulus is a more than doubling of the federal education budget.
My bottom line is this: to keep his promises about consensus politics (and Change), Obama must separate economic stimulus from permanent government expansion (Bill Clinton's budget director agrees with me). Pushing through long-time Democrat agendas in the name of economic relief is disingenuous. The economics of fiscal stimulus themselves are subject to enough disagreement already - and Obama has yet to defend that plan - so permanent changes to entitlements or other spending should be a separate discussion.
Foreign Policy
As a background note, readers should remember that, despite his reputation, the vast majority of Bush's foreign policy was not unilateral. His approaches to Russia, Iran, North Korea, Israel/Palestine, and Afghanistan were all multilateral.
That said, Obama is taking a good look at Afghanistan, with Robert Gates having "openly criticized the United States' NATO allies for not fulfilling their promises." During the campaign, amidst Obama's promises of a new, cooperative United States, nobody forced him to explain what made him think our partners would suddenly want to help us despite decades of expecting us to shoulder the burdens of world peacemaking.
For Iran and North Korea, we have more evidence that Bush was already doing the multilateral thing, and that the Obama administration plans to continue the same agenda. "Mrs. Clinton did not disclose the options under consideration for reaching out to Iran, beyond mentioning the existing multilateral talks," says the Times. Translation: Iran will proliferate on Obama's watch, because Iran sees proliferation as a national interest, and talking does not deter states from pursuing their interests. From the same article, "As for North Korea, Mrs. Clinton said the administration was committed to existing multilateral talks over its nuclear program." Change we can believe in.
I've before discussed the catch-22 Obama made for himself by promising to dramatically change the US international image. This week, he spoke to the Islamic world community. The Times and Obama people would like us to think that this "signaled a shift... from the Bush Administration." Wouldn't that be nice; but anyone who has been alive since 2001 will remember that Bush made similar statements about the US not being an enemy of Islam. Currently, it seems that a large portion of the Islamic world believes Obama, but this cannot last: (1) Leaders in radical Islam have incentives to make Obama look like Bush, so they will try their best to do so; and (2) every time Obama pursues a US interest that runs counter to Arab or Persian interests, the radicals will score PR points - and Jihad will continue. Failing to understand this might be Obama's biggest foreign policy mistake.
Some random other thoughts: in a strange statement, Hillary Clinton has implied that Bush's econ-central approach to US-China relations was somehow flawed. Newsflash, Hillary: China sees virtually all of its national interests in terms of economics. If we want to do diplomatic business with China, we must do so based on economics. There will be no change in policy here. Also: there is some talk of Russia suspending plans to deploy missiles in Kaliningrad. I've before discussed Obama's tricky catch-22 with missile defense and Russia.
(1) While Russia has announced a 27% increase in defense spending for this year, falling oil revenues will limit such plans, especially for things that aren't central to Russian security. Since Russia internally knows that American BMD in Europe is not a real threat, the missile plans might have to be axed.
(2) Putin continues to use Obama's promises as a way to force the hand of the US. This is yet another incentive for Obama to reverse Bush's BMD policies; but once he does so, as Putin hopes he will, Putin scores major domestic points and makes the US look like a Russian pawn. Such behavior will incent Russia to push for more US concessions in Eastern Europe.
If Obama is smart (he is) and as pragmatic as he claims (I doubt it), he will recognize that the key to US-Russia relations is lower oil prices, which can only be effectively achieved with a gas tax.
In summary, it is looking like the Obama policy will be little different from Bush's. Multilateral delegation on Afghanistan, North Korean, and Iran; attempts to balance our image in Islam with national security; continued withdrawal from Iraq made possible by the Surge and political progress (which Obama predicted would never happen).
