Feature

A Plan B for Obama

A stagnant economy. Declining American influence. Dictators on the march abroad. And a more Republican Congress coming soon. Barack Obama is in big trouble. But it's never too late. Foreign Policy has a plan, 14 in fact, for how the president can find his mojo again.

Nearly two years ago, Obama swept into office promising to defeat terrorism, withdraw "responsibly" from Iraq, make peace in Afghanistan, forge "greater cooperation and understanding between nations," pursue a world without nuclear weapons, and "roll back the specter of a warming planet." And that was just one paragraph of his inaugural address.

"Now, there are some who question the scale of our ambitions -- who suggest that our system cannot tolerate too many big plans," the new U.S. president declared. "Their memories are short."

If Obama's optimism wasn't immediately tempered by his predecessor's daunting legacy -- two inconclusive wars, an economy in free fall, soaring deficits -- it soon became evident that his vision might have exceeded his grasp.

Twenty-two months later, Obama has notched a few significant achievements, and he remains popular around the world. But he faces rising discontent at home and a much less supportive Congress after midterm elections as economists warn ominously of a "double-dip" recession. Progress on issues ranging from climate change to Middle East peace to Iranian nukes has been scant -- and it's hard to find an autocrat who has unclenched his fist.

In other words, it's time for a fresh approach. Take it from a president who knows a thing or two about missteps: "If you live long enough, you'll make mistakes," wrote Bill Clinton. "It's how you handle adversity, not how it affects you. The main thing is never quit, never quit, never quit." So read on for Foreign Policy's Presidential Plan B: 10 things Obama should do now, so that the next two years don't go to waste. From a politically savvy idea for raising taxes -- really! -- to a serious antidote for our oil addiction to unorthodox new ways to speak to Muslims around the world, here's how the president can get back on track.

Alex Wong/Getty Images

Robert Shrum
TAKE IT TO THE PEOPLE

Facing a continuing array of grave challenges abroad and an even more divided and hostile Congress a mile down Pennsylvania Avenue, Barack Obama will have to either surrender to short-term political pressures or invent a new form of public diplomacy, one aimed at Americans themselves.

His situation is very different from that of U.S. President Harry Truman after the 1946 midterm elections that decimated Democrats. Indeed, Truman's greatest achievements -- like the Marshall Plan -- came during the next two years. For that Republican Congress, at the dawn of the Cold War, politics stopped at the water's edge. Not today. Every question, from basic constitutional rights to the fight against terrorism, has become grist for the exceedingly fine grind of the partisan mill.

And that was before the midterm elections. Imagine what the rest of Obama's term will be like.

The United States can't afford two years of stalemate in foreign policy. At the same time, the president can't, for instance, leave Afghanistan regardless of the consequences to keep the support of his own party, or stay forever to avoid accusations from the opposition that he's "soft" on national security. Those attacks will come no matter what he does. To lead in the national interest, Obama should go beyond the familiar pattern of forging a bipartisan coalition of "responsible" members of Congress on both sides of the aisle. There won't be enough of them. On critical issues like Afghanistan and Iran, Obama will need to take his case to the people directly, as he did so convincingly as a candidate. This means a continuing conversation in town halls and speeches that connect both emotionally and logically with a majority of Americans. Foreign-policy-speak just won't do.

Only if he moves public opinion will he be able to move Congress. Otherwise, he will be a prisoner of partisan maneuver and division. It's not just economic underperformance that could send Obama back to Illinois in two years. So could a festering, unpopular war or an appearance of weakness, waffling, or defeat on big-stakes questions like a nuclear Iran. Obama needs to become the diplomat-in-chief -- not just for U.S. allies overseas, but for his own citizenry at home.


Robert Shrum, a senior fellow at New York University's Robert F. Wagner Graduate School of Public Service, was a senior advisor to John Kerry's and Al Gore's presidential campaigns.

 

Yuri Gripas/AFP/Getty Images

R. James Woolsey
GET OFF OIL

Americans borrow $1 billion a day to import oil. This is a huge share of the U.S. trade deficit and a major factor in weakening the dollar. Hundreds of billions a year go to the Middle East and end up funding improvised explosive devices and Wahhabi schools, which teach hatred of other religions, the stoning of women, death to apostates and homosexuals, and the need to work toward a worldwide caliphate. It is not an accident that 8 of the 10 largest oil exporters are dictatorships or autocratic kingdoms whose rulers profit massively from oil's gigantic economic rents.

Oil also causes terrible environmental problems. Not only are its carbon emissions nearly as much as those of coal, but the so-called "aromatics" (benzene, toluene, and xylene) that constitute about one-quarter of what's in our gasoline tanks are highly carcinogenic. Careful and authoritative studies put the cost of dealing with the aromatics' damage to our health and consequently shortened life spans at well over $100 billion annually.

For too long, American politicians have said that "foreign oil" is a problem and then gone on to propose ineffective or impossibly expensive solutions. Barack Obama needs to move away from oil, period. "Drill, baby, drill" can help some with the U.S. balance of payments, but will do nothing to undermine OPEC's control of the oil market. Nor are expensive nuclear power plants or wind farms the answer -- only 2 percent of U.S. electricity comes from oil. Cap and trade? The only major environmental policy measure that Obama has seized on is possibly a useful tool, if done right, for discouraging high-carbon electricity generation -- but it has almost nothing to do with oil's use in transportation. And besides, Obama hasn't been able to get it passed by Congress -- nor will he.

Obama should not devote resources to solutions, such as hydrogen, that will take many years to develop and have high infrastructure costs. Instead, he should turn to a portfolio of steps that can move the United States off oil in the near term. Here are five things he can do now: 1) Create incentives for the large-scale production of plug-in hybrid cars and all-electric vehicles; 2) Mandate that fleet vehicles, such as city buses and some interstate trucking, be fueled with natural gas; 3) Follow Brazil's lead and move to an open-standard, flexible-fuel vehicle requirement so that alcohol fuels can compete with gasoline; 4) Require drastic efficiency increases for internal combustion engines; and 5) Encourage auto companies to move toward carbon composites, which will lighten automobiles and require smaller engines to propel them.

Even if each of these solutions reduced oil transportation demand by only about 10 percent over the next decade, Obama could shatter oil's transportation monopoly -- now about 95 percent in the United States. If the president doesn't take such steps immediately, Americans face a grim future: falling ever more heavily into debt, funding terrorism, empowering dictators, contributing to climate change, and giving themselves cancer.


R. James Woolsey, chairman of Woolsey Partners, is former director of the Central Intelligence Agency.

 

Spencer Platt/Getty Images

Elliott Abrams
BUILD UP THE WEST BANK

Forget the peace talks. A lasting, final Israeli-Palestinian agreement is nowhere in sight. With the negotiations as background music, Barack Obama should get serious. The rest of his term should be spent building the institutions of a Palestinian state in the West Bank -- not chasing a dream.

Over the past two administrations, Washington has given substantial aid to the Palestinian Authority. An increasingly reliable and well-trained PA police force -- in place of the late Yasir Arafat's criminal gangs masquerading as security forces -- has been created, and cooperation between Israel and the PA against terrorism is growing. The United States has supported the efforts of Prime Minister Salam Fayyad to prevent the corruption endemic in Fatah, Arafat's stagnant political party, from infecting the PA again. West Bank GDP grew at an impressive 7 percent clip during 2009, even amid the global economic recession. But though many gains have been made, the Palestinian economy is still highly dependent on international aid, and extremist groups have proved that they still retain the capacity to launch attacks on Israel from the West Bank.

If you build it, they will sign. The only way to reassure Palestinians that a state is possible is to make one, and the only way to reassure Israelis that their security will be enhanced rather than diminished is for them to see it with their own eyes. That won't happen for either side at Camp David or Oslo or Annapolis -- only right there on the ground in the West Bank.


Elliott Abrams, a senior fellow for Middle Eastern studies at the Council on Foreign Relations, was deputy national security advisor handling Middle Eastern affairs in George W. Bush's administration.

 

ABBAS MOMANI/AFP/Getty Images

Bruce Riedel
MAKE A SOUTH ASIA COMMAND

South Asia is the epicenter of terrorism and the most dangerous place in the world today: Pakistan is a fragile state with what may be the world's fastest-growing nuclear arsenal; India is an emerging great power, but one with precarious internal rifts; and Afghanistan is just struggling to survive. Yet the U.S. government is alarmingly unprepared to engage with the region -- even at the most basic organizational level. Instead of treating South Asia as a whole, the U.S. national security establishment has carved it up into an array of parts: In the military, Central and Pacific Commands each have a piece of the region, and, more confusing still, the desks at the State Department and the National Security Council that handle "AfPak" are separate from those that deal with India. This may make the Indians happy -- they don't want to be linked with failing states -- but it makes no sense for the United States.

If Barack Obama is to really get serious about the region, he needs to create an executive bureau for Pakistan, India, and Afghanistan -- one that spans across the U.S. government. Good organization does not guarantee good policy, but a poorly constructed bureaucracy is almost always a recipe for bad policy. A new military command that puts Pakistan and India in the same theater would help enormously in improving U.S. strategic thinking about South Asia. No longer would one commander talk to the Pakistanis and another to the Indians; the Pentagon would have just one voice. And likewise for Foggy Bottom: An empowered assistant secretary of state for South Asia could travel regularly on diplomatic missions between Kabul, Islamabad, and New Delhi.

Obama was right to recognize that the Afghan war could not be effectively prosecuted without dealing with Pakistan. But it's foolish to think that Pakistan can be effectively assisted without dealing with the issue that dominates its own strategic calculus: India.


Bruce Riedel, a senior fellow at the Saban Center at the Brookings Institution, was a senior advisor to three U.S. presidents on Middle Eastern and South Asian issues.


Chris Hondros/Getty Images

Ellen Laipson
STOP FAWNING OVER AMERICA'S MUSLIM ALLIES

Barack Obama needs to rethink his approach to engaging the Muslim world. After the promise of his seminal June 2009 Cairo speech, his administration has not focused on any serious initiatives and has fallen into the trap of fawning over Muslims in ways that are contrary to America's core values. The message about religion should be tolerance, full stop. Holding a Ramadan iftar dinner in the Ben Franklin Room of the State Department, a faux ritual that predates the Obama administration, is particularly problematic. Public spaces should honor secular, civic virtues. Good intentions have gotten in the way of common sense and American values.

Obama would be better off skipping symbolism and working to improve the effectiveness of Middle Eastern states in delivering services and expanding the participation of their citizens in public policy. The case of Egypt and its upcoming presidential election is a good place to start. The White House must try to ensure that the 2011 contest be fair and legitimate, for Egypt's sake and ours. But America's good work with grassroots activists needs to be complemented by a bolder public stance and even tough measures when governments fail to advance the most basic democratic reforms.

In the end, Obama's legacy to U.S. relations with the Muslim world would be best served by strengthening public institutions, promoting democratic values and practices, and speaking out when gross injustices occur, even in states that are officially friendly to America.


Ellen Laipson is CEO of the Stimson Center and was vice chair of the National Intelligence Council.

 

KHALED DESOUKI/AFP/Getty Images

Will Marshall
REWRITE THE RULES OF WAR

George W. Bush, in the absence of broadly agreed-upon guidelines for fighting and meting out justice to terrorists, stumbled badly in attempting to write his own rules for the "war on terror." Barack Obama has done better, but his administration is just as bollixed up over the right way to detain and try suspected terrorists.

Nine years after 9/11, let's get it right once and for all. Obama should lead an international effort to clear up confusion and ambiguities surrounding terrorism, war, and the "right" to resistance invoked by groups such as Hamas and Hezbollah to justify attacking civilians and using them as human shields.

Specifically, Obama should call for a new Geneva Convention -- the fifth -- to provide a common legal framework for combating terrorism. This would help the world resolve the "neither soldier nor criminal" quandary that has bedeviled two successive U.S. administrations. More importantly, it would stigmatize the routine use of violence against civilians in fragile or disordered countries around the world.

A tough new anti-terrorism convention would give the international community new weapons in the struggle to discredit violent extremism. By designating mass casualty and suicide terrorism as crimes against humanity, it would take some of the glamour out of violence. It would also provide the legal basis for international tribunals to indict those who recruit the killers and plan the attacks. Finally, leading the charge for a new Geneva Convention would reinforce a core theme of Obama's foreign policy: restoring U.S. moral leadership within a framework of international cooperation for mutual security.

Because terrorism is a global scourge, it makes no sense for every country to write its own rules for combating and punishing terrorists. It's time to arm the civilized world with the legal tools it needs to fight and defeat terrorists -- in a civilized way.


Will Marshall is president and founder of the Progressive Policy Institute.

 

John Moore/Getty Images

James Hansen
GIVE THE PUBLIC A GREEN CHECK

Climate policy is not rocket science. Our fossil-fuel addiction cannot be solved if fossil fuels are the cheapest energy. But fossil-fuel energy is cheapest only because the producers of fossil fuels receive direct and indirect subsidies and are not made to pay for their costs to society -- such as health risks and long-term climate-change remediation. Until Barack Obama tackles this fundamental incongruity, the United States will remain stuck in useless and costly political battles like the rancid, partisan, congressional cap-and-trade debacle of the last two years.

Instead of getting a free ride, fossil fuels should pay their fair share via a gradually rising carbon fee collected from fossil-fuel companies at the domestic mine or port of entry. All funds collected should be distributed directly to the public on a per capita basis via a monthly "green check." This will spur the U.S. economy and promote clean-energy innovations. In the short term, more than 60 percent of the U.S. population would receive more in their green check than they would pay out in increased energy prices. (This won't be true for the wealthiest Americans, as they tend to use more energy.)

The best part about a rising carbon price is that it provides the only realistic chance for an international climate accord. Obama was right not to depend on last year's 192-country, cap-and-trade talkfest in Copenhagen. But he can't give up on an agreement between the world's two top emitters: the United States and China.

The Chinese will never agree to a "cap" on their carbon emissions. But China seems willing to negotiate a carbon price. Why? Not only are its leaders concerned about the country's environmental quality, they also want to avoid the fossil-fuel addiction that has hobbled the United States. More importantly, they stand to profit: Beijing is making enormous investments in nuclear, wind, and solar power. If the United States were to strongly incentivize green choices, China's factories would struggle to keep up with consumer demand. And once the United States and China agree on what the right carbon fee should be, most other countries will go along.

Lest we forget, stabilizing climate change is a moral issue. Our fossil-fuel addiction, if unabated, threatens our children and grandchildren, and most species on the planet. If Obama dreams of being a great president, he needs to take on the great moral challenge of our century.


James Hansen heads the NASA Goddard Institute for Space Studies and is author of Storms of My Grandchildren.

 

Andreas Rentz/Getty Images

Christopher Preble
CUT (REALLY CUT) MILITARY SPENDING

Despite all the hype about Defense Secretary Robert Gates and his cuts of big-ticket military projects, the Pentagon's $680 billion budget is actually slated to increase in coming years. This is unconscionable at a time when taxpayers are under enormous stress and when the U.S. government must reduce spending across the board. Barack Obama can save big bucks without undermining U.S. security -- but only if he refocuses the military on a few, core missions.

Unfortunately, the president has shown no real interest in cutting military spending or in revisiting the purpose of U.S. military power. Why not? For all his talk of change, Obama has continued on the path set by his predecessors. Like George W. Bush and Bill Clinton before him, he sees the U.S. military as the world's sole policeman, and its armed social worker. It is this all-encompassing mission that requires a large military -- and a very expensive one. Americans today spend more on their military, adjusting for inflation, than at any time during the Cold War, even though the threats that they face are quite modest.

If Obama is serious about reducing the deficit and keeping U.S. troops out of "dumb wars," as he famously dubbed them, he should put his money where his mouth is. Cutting defense spending is the only reliable way to stifle Washington's impulse to send U.S. troops on ill-considered missions around the globe.

The hawks will scream, but America will be just fine. Obama can capitalize on the country's unique advantages -- wide oceans to the east and west, friendly neighbors to the north and south, a dearth of powerful enemies globally, and the wealth to adapt to dangers as they arise -- by adopting a grand strategy of restraint. The United States could shed the burden of defending other countries that are able to defend themselves, abandon futile efforts to fix failed states, and focus on those security challenges that pose the greatest threat to America. A strategic shift of this magnitude will not only reduce conflict and make the United States safer, but it will enable Obama to reshape the military to suit this more modest set of objectives, at a price that's far easier for taxpayers to swallow.


Christopher Preble is director of foreign-policy studies at the Cato Institute and author of The Power Problem: How American Military Dominance Makes Us Less Safe, Less Prosperous, and Less Free.

 

Shah Marai/AFP/Getty Images

Joseph Cirincione
DUMP THE NUKES

Barack Obama needs to get real about actual cuts in America's still-enormous stockpile of nuclear weapons -- or his nuclear legacy won't even match that of Ronald Reagan or George H.W. Bush.

So far, the president has made modest progress shrinking stockpiles and preventing new nations and terrorists from getting nuclear weapons. But these gains have been hard won, and his entire strategy is now at risk: Negotiating the New START treaty with Russia took too long, and political opponents slowed Senate approval.

Delay is dangerous. It threatens other planned efforts, including nuclear-test bans and a global lockup of all weapons materials. And it will create diplomatic havoc. Other countries agreed to stronger efforts to prevent nuclear proliferation based on Obama's promise to convince nuclear-armed states to reduce their arsenals. If reductions stall, so will cooperation. Countries will hedge their bets, and nuclear materials and technology will spread.

But Obama can regain momentum by executing reductions that don't depend on Russia or the Senate. The first President Bush did this in 1991, unilaterally eliminating more than 3,000 weapons and denuclearizing the U.S. Army and surface Navy. Obama should begin by taking limited measures: disclose how many weapons the United States has in its nuclear stockpile, step up the pace of dismantlement of the estimated 4,200 excess bombs (Bill Clinton took apart about 1,000 a year, George W. Bush just 300, and Obama could get to 450 easily), and immediately cut the deployed strategic weapons to 1,550, instead of waiting the seven years the New START treaty allows.

Then it's time for bold moves: Obama should unilaterally reduce the active U.S. arsenal to 1,000 weapons (which is still three times more than U.S. Air Force experts judge are necessary) and remove the 200 U.S. nuclear bombs that remain in Europe.

Such cuts won't hurt U.S. or global security in the least -- and Obama has plenty of bipartisan, expert support for cuts of this size. They would put him on the road to fulfilling his compelling promise of a truly nuclear-free world.


Joseph Cirincione is president of the Ploughshares Fund.

 

JEWEL SAMAD/AFP/Getty Images

Ashley J. Tellis
CHANGE THE RULES OF THE GAME IN PAKISTAN

Ever since Islamabad reluctantly joined the U.S. campaign against terrorism in 2001, it has consistently pursued a strategy of running with the hares and hunting with the hounds. To this day, Pakistan's security services continue to support various terrorist and insurgent groups -- such as the Afghan Taliban, the Haqqani network, and Hezb-i-Islami -- that attack Afghan and U.S. forces in Afghanistan, even as Islamabad continues to extract large amounts of aid from Washington. As the July 2011 deadline for beginning the drawdown of U.S. forces in Afghanistan approaches, Pakistan's continued protection of the insurgents will undermine Barack Obama's plans to improve conditions sufficiently in Afghanistan so as to begin an orderly withdrawal.

Yet both the Bush and Obama administrations have tolerated Pakistan's duplicity with regard to counterterrorism, primarily because the country remains the principal artery for transporting U.S. cargo -- food, water, vehicles -- and fuel delivered to Afghanistan. And, as the recent border closings by Pakistani forces have shown, the Obama administration must implement a Plan B that denies Pakistan the ability to hold the coalition at ransom: It must begin by planning to move larger quantities of supplies through the northern distribution network that runs from Georgia through Azerbaijan, to Kazakhstan, and then Uzbekistan to Afghanistan. Although U.S. forces now receive more supplies through this route than they did before, the dependence on Pakistan is still substantial -- and so consequently is Islamabad's capacity for blackmail.

As a complement to increasing reliance on the northern route, U.S. assistance to Pakistan (totaling roughly $18 billion in civilian and military aid since 9/11) should be tacitly conditioned on Islamabad's meeting certain counterterrorism benchmarks. For starters, all transfers of major military equipment to Islamabad should be contingent on Pakistan ceasing support for militant groups that threaten coalition and national forces in Afghanistan. More extreme (and hopefully unnecessary) options would include expanded drone and air-power operations inside Pakistani airspace. Or -- and this is certain to catch Islamabad's attention -- more open support for Indian contributions to Afghan stability.

The most important problem is that suddenly challenging Pakistan after a decade of acquiescence to its mendacity is tantamount to abruptly changing the rules of a game that Washington and Islamabad have gotten used to: It could result in even greater Pakistani obduracy and further support for its jihadi proxies. Although that is certainly an unpalatable possibility, the bitter truth is that the current state of affairs -- in which Washington indefinitely subsidizes Islamabad's sustenance of U.S. enemies -- poses far greater dangers to the United States. The Obama administration must make the difficult choice now and show Islamabad that the rules of the game have changed.


Ashley J. Tellis is senior associate of the South Asia program at the Carnegie Endowment for International Peace.

 

BANARAS KHAN/AFP/Getty Images

Dmitri Trenin
DIVIDE THE IRANIAN LEADERSHIP

Despite all that Barack Obama has to preoccupy himself with in Afghanistan and Iraq these days, it is Iran that is likely to be the U.S. president's most serious foreign policy-challenge in the coming months. By now it is clear that Iran is headed toward nuclear weapons -- and that's plural weapons, not just one. Iran's goal is a nuclear weapons arsenal. The only question that remains is whether this will be maintained for deterrence and regional power politics or actually used. That answer will depend on the balance of power within the Iranian leadership.

Obama essentially has two options: He can provoke the Iranian leadership, or he can seek to influence it, tipping the balance in favor of the moderates. The options mentioned in policy circles so far include striking Iran, supporting an Israeli attack, or imposing ever more stringent sanctions. None will work, however, and each will backfire -- empowering the regime's most radical elements by offering them a pretext to attack Israel or the West. The president must resist the temptation to use highly visible, but blunt instruments of power.

Instead, the Obama administration must work to isolate the religious fanatics and their allies among the Revolutionary Guards, empowering the moderates. Elements of such a strategy include: increasing economic and cultural openness toward Iran; coordinating closely with foreign partners, from Europe and Turkey to Russia and China; and aligning NATO's missile-defense plans with its erstwhile rival, Moscow. There is no guarantee, of course, that this strategy will succeed. What it does ensure is -- at the very least -- that the United States will not make matters worse by throwing a public-relations softball to Iran's radical fanatics. Iran's bomb may be inevitable; its use is still preventable.


Dmitri Trenin is director of the Carnegie Moscow Center.

 

Hamed Malekpoor/AFP/Getty Images

Kenneth Roth
GET TOUGH ON HUMAN RIGHTS

In the 1990s, the United States, though hardly perfect, did more than any other country to promote the responsibility to protect people facing mass atrocities. In Bosnia and Kosovo, though tragically not Rwanda, leaders learned that the slaughter of their people risked a forceful response from Washington.

Unfortunately, President George W. Bush tainted such action when, finding no weapons of mass destruction, he tried to justify the invasion of Iraq retrospectively in humanitarian terms. Yet as Barack Obama recognized in his Nobel Peace Prize acceptance speech, "Force can be justified on humanitarian grounds, as it was in the Balkans."

Obama needs to put this principle into practice, and there is no better case for the humanitarian use of force than the urgent need to arrest Joseph Kony, the ruthless leader of the Lord's Resistance Army (LRA), and protect the civilians who are his prey. And far from requiring a non-consensual intervention, Kony's apprehension would be welcomed by the governments concerned.

The LRA began as a rebel movement in northern Uganda, but it now terrorizes the civilian population of northern Democratic Republic of the Congo as well as southern Sudan and the Central African Republic. Its cadre often descends on a remote village, slaughters every adult in sight, and then kidnaps the children, some shockingly young -- the boys to become soldiers slinging AK-47s, the girls to serve as "bush wives." Over more than two decades, many thousands have fallen victim to these roving mass murderers.

The International Criminal Court has issued arrest warrants for Kony and other LRA commanders, charging them with war crimes and crimes against humanity, but the court depends on governments to make arrests.

So far Uganda has done the most to pursue the LRA, but ineffectively. The LRA is not large -- an estimated 200 to 250 seasoned Ugandan combatants, plus at least several hundred abductees -- but as Ugandan President Yoweri Museveni recently told me, Uganda lacks the special forces, expert intelligence, and rapid-deployment capacity needed to stamp out this enemy.

In May, Obama signed a bill committing the United States to help arrest Kony and his commanders and protect the affected population. Now it is high time to act. Arresting Kony would reaffirm that mass murder cannot be committed with impunity. And it would show that, despite the difficulties in Iraq and Afghanistan, the humanitarian use of force remains a live option at the Obama White House.


Kenneth Roth is executive Director of Human Rights Watch.

 

STUART PRICE/AFP/Getty Images

Nancy Soderberg
TURN SOUTH

Barack Obama must start looking south, not just east and west. Like it or not, the U.S. economic recovery, success in the war on terrorism, and meeting the climate-change challenge all depend on successful partnerships with the developing world -- partnerships we just don't have. To get there, we need to dramatically restructure the leadership of our global institutions -- from the World Bank to the U.N. Security Council -- to better represent Brazil, Nigeria, India, South Africa, and the other countries that make up the world's 4 billion poorest.

Take climate change, for instance. We can't get a deal unless the developing world sees us as helping it adapt to the effects of global warming. This will require money, not just rhetoric: Obama, instead of simply vowing to end fossil-fuel subsidies, should redirect those funds specifically for the purpose of meeting the U.S. share of the global pledge to provide $100 billion through 2020 to help the developing world take on climate change. 

But money alone isn't the issue. We also lack the basic tools to meet these challenges. For too many years, the U.S. military has been Washington's most visible outreach into the developing world. Diplomacy counts, and Obama needs to reinvest in the State Department. The president's modest proposed increase of nearly $4 billion won't cut it -- and Congress even axed that. What is needed is a generous 10-year plan to develop adequate State Department resources; otherwise talk of 21st-century diplomacy is just that. For when America shows up in times of need -- during this year's Pakistan floods or in fighting AIDS in Africa -- we not only reduce poverty, disease, and conflict, but also eliminate safe havens for terrorists. And that's something we can all get behind.


Nancy Soderberg is a former U.S. ambassador to the United Nations and president of the Connect U.S. Fund. 

 

INDRANIL MUKHERJEE/AFP/Getty Images

Feature

Avoid the Double Dip

How Obama can save the fragile economy from going back into a tailspin.

Roughly three years since the onset of the financial crisis, the U.S. economy increasingly looks vulnerable to falling back into recession. The United States is flirting with "stall speed," an anemic rate of growth that, if it persists, can lead to collapses in spending, consumer confidence, credit, and other crucial engines of growth. Call it a "double dip" or the Great Recession, Round II: Whatever the term, we're talking about a negative feedback loop that would be devilishly hard to break.

If Barack Obama wants a realistic shot at a second term, he'll need to act quickly and decisively to prevent this scenario.

Near double-digit unemployment is the root of the problem. Without job creation there's a lack of consumer spending, which represents 40 percent of domestic GDP. To date, the U.S. government has responded creatively and massively to the near collapse of the financial system, using a litany of measures, from the bank bailout to stimulus spending to low interest rates. Together, these policies prevented a reprise of the Great Depression. But they also created fiscal and political dilemmas that limit the usefulness of traditional monetary and fiscal tools that policymakers can turn to in a pinch.

With interest rates near zero percent already, the Federal Reserve has few bullets left in its holster to boost growth or fend off another slump. This lack of available good options was patently on display in August when Fed Chairman Ben Bernanke spoke with a tinge of resignation about new "quantitative easing" interventions in the mortgage and bond markets -- a highly technical suggestion that, until the recent crisis, amounted to heresy among Fed policymakers. It certainly hasn't helped that the U.S. federal deficit has reached heights that make additional stimulus spending, of the kind that helped kindle the mini-recovery of early 2010, politically impossible.

Yet all is not lost. Obama will face an increasingly partisan and divided Washington over the next two years, but he can take steps to reduce the odds that this dark double-dip scenario comes to pass. This will, of course, require deft politics. To that end, the administration should focus on policies that create a revenue-neutral fiscal stimulus -- one that targets both labor demand and consumption.

Start with the one thing that everyone loves to hate: taxes. Forget the political hot potato over the size and shape of the cuts -- there's an easy way to do this. For the next two years, Obama should reduce payroll taxes for both employers and employees. The reduction for employers will lower labor costs and allow the hiring of more workers; for employees, increased take-home pay will get people spending again. It's not just about increasing foot traffic in the mall; households need to pay down the burden of credit cards, second mortgages, and other legacies of the years of easy credit.

But this tax cut can't bust the budget. How can it be funded? By allowing George W. Bush's tax cuts for people making more than $250,000 to expire while keeping in place those for middle- and low-income earners -- the vast majority of Americans. And whatever trickle-down Republicans in Congress say, Obama will have to remain firm on this.

After two years, when U.S. growth is hopefully more robust and the pace of private-sector hiring has picked up steam, Obama can afford to phase out the payroll tax cuts. But the income-tax increases for the rich? They'll need to stick around. To woo key middle-of-the-road Democrats and moderate Republicans and to maximize the incentives for private-sector hiring, the president should make sharper reductions to payroll taxes paid by employers than to those paid by employees. This makes mincemeat of the argument that high-income individuals invariably resort to -- that higher income taxes will hurt small businesses and curtail hiring. By incentivizing both consumer spending and hiring, this plan goes far beyond the modest tax credits for business investment proposed in September.

As for the employee payroll tax cuts, because low-income workers generally consume more of their salaries when given extra money, the payroll tax cut should be designed to provide a larger percentage break to those on the low end of the income scale. This has another ancillary benefit: "Progressive" Democrats will find this tax cut an easier sell.

But the mixture of employer and employee payroll tax cuts, the latter benefiting the majority of Americans, represents only the beginning of what might be done with a more creative approach to tax policy. After all, everyone agrees that something needs to be done: The president's fiercest political rivals go on the record daily declaring an economic state of emergency.

It's high time to hold U.S. financial institutions to account. The very companies that benefited from the billions of dollars of taxpayer stimulus are currently building up huge cash reserves -- in effect, overinvesting in capital at the expense of jobs. Taxing this capital would reduce the relative cost of labor and get companies hiring again.

Both for policy and political reasons, Obama should emphasize that these changes would be temporary. Absent a new stimulus package -- which appears highly unlikely at this point -- these cuts are the best way to avert another economic disaster. They direct billions of dollars back to the American households that are most likely to spend them and those businesses most likely to hire new employees.

Only a tiny percentage of Americans will end up paying more: the highest-income earners, who have already benefited greatly from the service the government (read: taxpayers) rendered to their brokerage firms and investment banks in 2008. Republicans may rail against increasing taxes on any American, but the complaints of the wealthy, in today's economic climate, will have little credibility among middle-class voters. In exchange for this increase, Obama can fashion a large tax break for employers and employees that jump-starts consumption, encourages hiring, and reduces the risk of a double dip -- all without busting the budget.

Hulton Archive/Getty Images