Goodbye, Mr. Jones

And good riddance. Why Jim Jones was the worst national security advisor in decades.

Gen. Jim Jones will go down in history as the least successful national security advisor since Adm. John Poindexter was forced out of office during the Reagan administration. This fact alone illuminates just one of the many miscalculations that were made in hiring Jones. He was a military man, went the conventional wisdom; military men do well in such jobs. After all, the most successful national security advisor in history was Gen. Brent Scowcroft. And Scowcroft was clearly the model President Barack Obama had in mind when he selected Jones.

The problem was -- as Poindexter demonstrated -- that military experience is no guarantee of success in the job. Poindexter's predecessor, Robert MacFarlane, also had an extensive military background, and he was another disaster. (And who was the freelancing go-to guy in the Reagan NSC? Col. Oliver North. 'Nuff said.)

But Jones was no Scowcroft in so many ways. Scowcroft came into office with a deep, personal relationship with the president. Jones and Obama, aloofness squared, never got there. Scowcroft came to the job with a well-defined worldview, cultivated over a life of intensive and thoughtful study of international affairs. One diplomat who worked with Jones when he was supreme allied commander in Europe said, "He never had the slightest interest in foreign policy." He was just interested in military affairs, and even in that respect he was not particularly creative or intellectually curious. Scowcroft was a master of both key jobs of the national security advisor -- he willingly and loyally spoke of the president as his boss (Jones started bad-mouthing Obama on the cocktail-party circuit months ago and never saw himself as anyone's staffer), and he was an exceptionally effective policy coordinator -- the honest broker trusted and respected by all (Jones was out-to-lunch literally and figuratively on the process from his earliest days, presiding over meetings without leading a process). 

Of course, even as he is acknowledged as the model to which all national security advisors should aspire, Scowcroft is often underestimated. He is so soft-spoken and smooth that he always made it look easy. And while part of his success was due to these traits and the fact that his team got along famously well following his example, underneath the surface, Brent Scowcroft is an extraordinary man. No one who ever had the job worked harder. No one was smarter. No one had a better, more nuanced worldview, and I include in that Scowcroft's boss when he was deputy, Henry Kissinger, who was almost certainly the second-best national security advisor ever.

So while picking Jones because superficially he seemed he might be cut from the same cloth as Scowcroft -- or even just actively emulate him -- was a perfectly reasonable thing for the president to want to do, he clearly picked the wrong man. That said, one of the most overlooked reasons for Scowcroft's success was his boss, George H.W. Bush, a president who was deeply experienced in foreign policy when he came into office and who knew just what he wanted from a policy process. And Barack Obama is no George H.W. Bush. 

The president's inexperience did in Jones more than any of the general's deficits. He didn't know what he wanted. He vacillated on key issues. He simply demonstrated the problems America repeatedly has when it hires men with no foreign-policy background to take on the most important international job in the world. Further, he did not really know enough about how the presidency works to nip in the bud the creation of the inner-circle bubble that effectively negated much of the work that the formal policy process did. Obama encouraged (or tolerated for long-enough that it looks like encouragement) his campaign foreign-policy deputies to continue to report directly to him, and this led to some public and private backdooring of Jones that undercut his authority dramatically. He did not empower Jones, and that combined with Jones's own shortcomings led to the zero-chemistry, ineffective collaboration that has been openly criticized by senior White House and foreign policy officials since the spring of Obama's first year in office.

In fact the situation got so bad that Jones was publicly undercut by true Obama confidante Denis McDonough more than once. It is something of a surprise he lasted this long. As one former national security advisor said to me while we were discussing a well-known instance of McDonough publicly undercutting Jones, "That would have only happened once on my watch. It would have been me or him."

Which raises the question: How will the NSC operate under Tom Donilon, Jones's replacement? There is no question Donilon starts out with a much better relationship with Obama (and McDonough) than Jones ever had. There is no question that he is more willing to staff the president or that he is a gifted master of policy processes. The question is whether he will imprint the process with his own stamp or whether he has been hired to make the memos run on time, eliminate controversy, and fade into the woodwork. 

Despite conventional wisdom to the contrary, as noted earlier, that is not the Scowcoft model either. Honest brokers are needed, yes. But so too are men who bring insight, wisdom, and new ideas and who can, behind closed doors, tell the president when they think he should reconsider an approach. Scowcroft was a master of this. National security advisors do not need to be spokespeople and Obama has a great chief foreign-policy spokesperson in Secretary of State Hillary Clinton (who is strengthened by this move given her stature relative to Donilon). Nor should they be foreign-policy emissaries… though Scowcroft was on occasion and Donilon seemed to audition for the job with his recent trip to China with Larry Summers. 

But they do need to be more than paper-pushers or master-bureaucrats.

Just because Donilon has never done anything to suggest that he was a policy guru or someone who could regularly stand up to a president doesn't mean he can't do it. Compared with Jones, he has a running start on a number of key points. But there are some big open-ended questions regarding him -- and regarding whether Obama has learned enough from his Jones's experience that he can be the kind of president who can make his national security advisor a success. I understand there will be some who argue Condi Rice was worse. Certainly some of the Bush policies were. But as a close advisor to her president and as someone who sought to play a more engaged policy coordinator role, she gets higher marks. She, at least, was the national security advisor her boss wanted.

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The Ghost of Economics Past

What would the world's economics Nobel Prize laureates make of Barack Obama's response to the financial crisis?

By all accounts, President Barack Obama and his party may be in big trouble. The Nov. 2 U.S. congressional elections, judging by the latest polls, are shaping up to be a pointed response to the Democrats' stewardship of the economy. More precisely, they are a referendum on Obama and his predecessor's big economic bets, grounded in 70-odd years of economic theory: the bailout of the financial system and auto companies, the economic stimulus package, regulations reining in Wall Street, and George W. Bush's tax cuts for the wealthiest Americans.

With Goldman Sachs predicting that the economy is going to be "fairly bad" or "very bad" over the next few months, Obama could probably use a little smart advice. So now that Peter Diamond, Dale Mortensen, and Christopher Pissarides have been named the winners of the 42nd Nobel Prize in economics, let's take a look at what previous Nobel laureates have contributed to our understanding of the current economic crisis -- and what they might have made of the solutions that have been attempted or proposed so far.

One question arising out of the recent economic turmoil is whether the bailout of the country's largest banks and automobile manufacturers was prudent. From one side of the debate, we hear that the bailouts were an unnecessary expansion of government into the private sector. No doubt Friedrich Hayek (1974 Nobel laureate) would agree and warn us that bailouts violate the principle of private enterprise, threatening to put the country on a dangerous path toward socialism. The Tea Party would have found a kindred spirit in Hayek -- and indeed, its more erudite members refer to him often.

James Buchanan (1986) offers a less philosophical case against the bailouts. The government, he would argue, is populated by self-interested bureaucrats who always put themselves first -- how can such self-promoting officials objectively choose which banks to bail out and which to abandon? Will they base their decisions on the public good or on their own private interest?

On the other hand, Paul Samuelson (1970) would likely have pointed out the similarities between the current situation and the banking crisis of 1933, when the government had to shore up the financial system long enough to allow the private sector time to recover. Letting one bank fail may make sense on a microeconomic level but letting many large banks fail can be catastrophic on a macroeconomic level. The failure of one large bank can bring down another in a cascading effect that can create chaos in the financial sector.

Even a successful bailout, however, may create problems in the long run if banks start to believe that the government will bail them out in the future. As a consequence, these banks may be more likely to make risky investments, a concept described by Kenneth Arrow (1972) and Joseph Stiglitz (2001) as moral hazard.

What about the stimulus package, with its massive increases in government spending? Did that provide a boost to the U.S. economy? Economic models by Edward Prescott and Finn Kydland (2004) would probably show no benefit at all. The real business cycle model they developed generally doesn't respond positively to government deficits in the short run or the long run. However, a model by Lawrence Klein (1980) would have shown a positive benefit because his equations were derived from the theories of the influential macroeconomic theorist John Maynard Keynes. In a Keynesian model, government deficit spending energizes a depressed economy and can stimulate investment and consumption in the private sector.

What about the tax cuts in the stimulus package -- were those beneficial? James Tobin (1981) was a member of the Council of Economic Advisers in the 1960s that convinced President John F. Kennedy to cut $11 billion in personal and corporate taxes to combat a small recession. The stimulus worked, and became an essential component of Keynesian policies, inspiring the stimulus package of 2009. During the current crisis, Paul Krugman (2008) has endorsed spending increases and tax cuts, but argues that the actions contained in the stimulus package were insufficient given the severity of the crisis.

Using fiscal policies like these to fine-tune the economy has always been controversial. By the theories of Edmund Phelps (2006) and Milton Friedman (1976), they're at best irrelevant -- the unemployment rate is fixed in the long run, Phelps and Friedman argue, and no amount of government spending or tax cuts can change that fact. Even if a stimulus package temporarily reduced unemployment, in this theory, it would be entirely ineffective over the long haul.

Tobin's thinking on tax cuts was less black and white. Although he favored the measure in the Kennedy years, he had nothing good to say about the Reagan tax cuts, which he thought did little more than "redistribute wealth and power to the wealthy and powerful." It is unlikely that he would have supported extending the Bush tax cuts -- which the Democrat-led U.S. Congress seems poised to do today -- for an upper class that has become arguably wealthier and more powerful than it was in the 1960s. You would expect to find Robert Mundell (1999), a prominent proponent of supply-side economics in the 1980s, on the opposite side of the argument: According to Mundell, tax cuts for the rich provided an incentive for them to invest more and work harder, thus benefiting the entire economy.

Then there's the Federal Reserve, which has played a major role in combating the economic crisis by injecting large sums of money and liquidity into the U.S. economy. Franco Modigliani (1985) was one of the first Keynesians to endorse an expansionary monetary policy like this under conditions of high unemployment. The strategy seemed to work, long enough that it eventually became a standard tool for the Federal Reserve, one the bank deployed in 2008.

But Friedman would likely have objected strongly to any attempt by the Fed to increase the money supply in the name of fighting a recession. The result of such a misguided strategy, according to his monetarist theory, would be inflation, not economic recovery. (There is one notion here, however, on which most economists might agree: the Fed's role as the lender of last resort. When panic strikes financial markets, aggravated by temporary shortages, the central bank has a unique opportunity to provide liquidity -- this was, after all, one of its original purposes.)

Confused yet? It should be clear by now that if you seek clear, unambiguous policy guidance, the Nobel laureate roster is probably a bad place to look -- economic theory, even when honored with the top prize in the field, is brutally contested terrain. Unlike physics, chemistry, physiology and medicine, the Nobel Prize in economics seldom delivers a vetted and verified discovery, but rather highlights novel and interesting ideas. At their best, however, Nobel-winning economic theories can inspire policies that protect the environment, reduce poverty and unemployment, subdue inflation, ensure prosperity, and of course, avoid economic depression. Let's hope for the best.

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