Thursday, June 18, 2009

On Iran, etc.

Thank God Obama favors the 'old' Mideast
By Leon T. Hadar
Commentary by
Friday, June 19, 2009

State Condoleezza Rice travelled to Lebanon in an effort to bring an end to the war raging there between Israel and Hizbullah. At the time, she tried to market to reporters in Washington a somewhat odd spin on the violence taking place, not only in Lebanon but also in Iraq and Israel and Palestine. "What we're seeing here is, in a sense, the growing - the birth pangs of a new Middle East, and whatever we do, we have to be certain that we're pushing forward to the new Middle East, not going back to the old Middle East," Rice explained.
Indeed, the Bush administration's Freedom Agenda was challenging the status quo in the "old" Middle East by using US military and diplomatic power to promote democracy in Iraq (by ousting Saddam Hussein and holding free elections), in Lebanon (by forcing Syria to withdraw its troops and holding free elections), and in the Palestinian Authority (by pressing for elections), a process that would eventually produce political reforms in the rest of the Middle East, including Iran.

Ignoring the lessons of history, and dismissing warnings about the hurdles facing a campaign to implant Western-style democracy at gunpoint, the Bush administration inadvertently helped to give birth to a "new" Middle East in Iraq, Lebanon and Palestine, that was in some ways, less peaceful, less tolerant, and less democratic than the "old" one. And these efforts all had the effect of strengthening Iran.

The recent good news has been that President Barack Obama seemed to favor the more realistic US approach towards the Middle East that assumed the need for American diplomatic engagement with the existing regimes in the region. Focused on securing US interests, the Obama team has downplayed the importance of exporting American-style democracy. Notwithstanding the soaring rhetoric of his historic address in Cairo, Obama seems to be going back to the "old Middle East."

There is no doubt that Obama's rejection of neoconservative grand designs of fighting Islamo-fascism and remaking the Middle East, like his commitment to renew the Israeli-Palestinian peace process, has helped reduce anti-Americanism while empowering those players that favor stronger ties with the United States and the West.

From that perspective, the victory of the pro-Western coalition in Lebanon's parliamentary election, as well as the energizing of the reformist forces during the presidential election in Iran, could be attributed in part to the impact that Obama's message had on political groups calling for political change and openness to the world. Such individuals are now less concerned that they would be perceived as puppets of an anti-Muslim and militaristic United States.

But Obama's Cairo address should not be seen as the launching pad for a new and gentler American campaign - using soft power this time - to democratize the Middle East.

To be sure, Washington and its allies should be relieved that the coalition led by Hizbullah, and backed by Iran, failed to emerge as the winner in Lebanon. But the outcome of the election there should not be misconstrued as a victory for liberal democracy. The system of confessionalism that exists in the country helps to secure the power of recognized religious groups based on demographics. But the current arrangement is based on a distribution that reflects the results of the last official census taken in 1932. Claims that the winning coalition necessarily represents liberal values are undermined by the revelation that it received considerable financial support from Saudi Arabia, which, unlike Iran, doesn't permit women to vote in elections.

In fact, the elections in Lebanon and Iran (as well as earlier contests in Iraq and the Palestinian Authority) point to the fact that the drive for democracy - and, in particular, the push for elections - poses a threat to US interests in the Middle East. These elections have empowered social groups, including the working class and the rural poor, who tend to be more conservative, more religious, and more nationalistic in their political outlook and who don't necessarily share the more secular and liberal values of the West.

Watching the young and "cool" men and women in Tehran, demonstrating in support of the "reformer" Mir Hossein Mousavi (a member of the political establishment), many Westerners seemed to have adopted the wishful thinking that Iran is on a brink of a Western-oriented democratic revolution. The notion that the majority of Iranians may not be "like us" and don't share our dreams or aspirations was clearly very difficult to accept.

But any move on Washington's part to further isolate the ayatollahs in Tehran in order to force political change there would likely be as ineffective as the effort to punish the communists in Beijing in the aftermath of the Tiananmen protests of 1989. Instead, as in the case of China, US diplomatic and economic engagement with Iran could help create conditions more conducive for economic and political reforms, perhaps without the added pain of those birth pangs.

Leon Hadar is a research fellow in foreign policy studies at the Cato Institute and the author of "Sandstorm: Policy Failure in the Middle East." This commentary was written for THE DAILY STAR.

Spending like there is no tomorrow

Business Times - 19 Jun 2009

Spending like there is no tomorrow

It seems in Washington's new financial universe, a trillion here and a trillion there are nothing more than small change


MANY years ago one of America's elder statesmen, the late Everett Dirksen, a Republican Senator from Illinois who had spoken often and passionately about the debt ceiling, federal waste and the growth of government, was reported to have made the following observation about US government spending: 'A billion here and a billion there, and pretty soon you're talking real money.'

It is not difficult to imagine Mr Dirksen turning over again and again in his grave these days after finding out that Washington has approved about US$13 trillion worth of bailouts over the last year; that the US deficit this year will run nearly US$2 trillion (as a result of financial bailouts and the stimulus package); and that the current national debt exceeds US$11 trillion.

Indeed, the Congressional Budget Office (CBO) has warned of a cumulative deficit of about US$8 trillion over the next decade. And in case you did not know it, in the American system one trillion is one thousand times one billion. Real money, indeed.

But it seems that in Washington's new financial universe, a trillion here and a trillion there are nothing more than small change. Hence, President Barak Obama and his aides are now proposing a plan to restructure the ailing American healthcare system that, according to the CBO, 'would result in a net increase in federal budget deficits of about US$1.0 trillion over the 2010-2019 period'.

And remember that these figures don't represent a complete cost estimate of the new healthcare system. That will have to be debated in Congress and it will need to include the huge subsidies that the government will have to pay for the coverage of the poor and the elderly, which means that the cost of the plan could actually come to about US$1.5 trillion over the 2010-2019 period.

Officials and lawmakers in Washington explain that the federal government had no other choice but to borrow and spend trillions of dollars to help the American economy avoid a rerun of the 1930s Great Depression, and there are some signs that such efforts are indeed creating the conditions for an economic recovery.

But the same officials and lawmakers are worried that expanding federal deficit and the mounting debt are going to have long-term catastrophic impact on the American economy.

Yet these concerns don't seem to have any major effect on the spending habits in Washington where the talk is about adding another trillion here - which company needs a government bailout today? - and another trillion there, with the costly plan to reform the healthcare system being the latest example.

The federal deficit remains the elephant in Oval Office. As the government is spending its way out of the recession, it could be creating inflationary pressures that end up putting upward pressure on interest rates and killing the economic recovery.

And while no one is seriously contemplating a scenario in which the United States goes bankrupt a la Iceland, a US government inflating its way out of debt endangers its credibility and reduces the confidence of the financial markets in the American economy.

The soaring US debt which puts downward pressure on the value of the US dollar has already ignited fears among foreign holders of US government bonds, led by China which is the largest creditor with more than US$700 billion invested in Treasury bonds.

Indeed, according to Republican Representative Mark Kirk who returned recently from a trip to China that included talks with government officials and central bank chief Zhou Xiaochuan, senior Chinese leaders have privately voiced fear over the soaring US budget deficit and said that they were increasingly looking to diversify from the US dollar.

'We heard across the board - in private - substantial, continuing and rising concern,' the Congressman told an audience at the Center for Strategic and International Studies, a Washington think tank. 'It's clear that China would like to diversify from its dollar investments,' he said.

In fairness to President Obama who has been accused by Republicans of being a 'socialist' who is responsible for the dramatic rise in government spending, most of these unrestrained fiscal policies go back to the presidency of George W Bush.

Mr Obama and his economic aides insist that one of the main ways to cut on runaway spending and avoid a fiscal disaster is by fixing the healthcare system.

'If we do not fix our healthcare system, America may go the way of GM (General Motors); paying more, getting less, and going broke,' Mr Obama said during an address before member of the American Medical Association in Chicago this week.

The expected costs of the healthcare reform plan have ignited opposition not only from Republican lawmakers but also from many Democrats on Capitol Hill who sense a rising public disenchantment with the level of uncontrolled government spending.

Responding to these public sentiments, Mr Obama has called on Congress to follow that budgetary restrictions that demand paying for expenditures with funds that are made available as the programme is in progress (so-called pay-as-you-go rules).

Moreover, Obama administration officials describe the proposed reform of the healthcare system as part of a wider overhaul of other large government programmes as well as the tax system that will help reduce the federal deficit to a manageable levels.

It is more likely, however, that any serious attempt to reduce the budget deficit would force the White House and Congress to make politically unpopular decisions, including raising taxes on the middle class and imposing cuts on government programmes that enjoy huge public support, like the national pension scheme (known in this country as Social Security).

And that is not going to happen any time soon.

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