Reach Out to Morsy

Egypt's new president may be no moderate, but he deserves a chance to prove he's no enemy.

Egypt's new president, the Muslim Brotherhood's Mohammed Morsy, is not a man after my own heart. He represents a movement that seeks to apply religious norms to a secular state -- even as he vows to represent all people, including Coptic Christians and liberals. Clearly, at some point in the near future, he will face the necessary conflicts between liberty and human rights on the one hand and his religious precepts on the other, and we cannot know how he will resolve them. His values are extremely remote from Western-liberal values: Americans will take no comfort in the fact that he devoted part of a major address in Tahrir Square to seeking the release of the fundamentalist sheikh who planned the 1993 terrorist attack on the Twin Towers.

His statements regarding Israel are very harsh. His first active role in the Brotherhood was in an anti-Zionist movement within its ranks, he objected to the peace agreement between Egypt and Israel, and he insinuates that he will not continue the "cold peace" that existed under his predecessor, President Hosni Mubarak. He talks about Israel's alleged failure to comply with its part of the agreement, and maintains that Egypt will only comply with its obligations if Israel does the same. Even if he does not move forward with the foolish idea of submitting the 1979 peace agreement to a referendum, it appears that he will make great efforts to justify its deterioration.

And yet, since June 30, Morsy has held the most important position in the Middle East. Even if Egypt's generals have limited his powers, he is still the leader of the largest Arab state in the world. He has a powerful bully pulpit, and his decisions will influence the future of the Middle East -- and the future of the Israeli-Palestinian conflict, even if the generals in Cairo would prefer they didn't. Any attempts to punish Morsy -- to isolate him or attempt to push Egypt to the point where voters are convinced that his election was a colossal failure -- would be a serious mistake.

The world should honor its promises -- both financial and political -- to Morsy's Egypt. Withholding U.S. aid from Morsy is tantamount to withholding aid from Egypt and there is no reason to harm the Egyptian people, who suffer from no small degree of poverty and social disparities. The withholding of aid will only exacerbate Egyptian hostility to the West and strengthen anyone who argues that Morsy failed in his position as a result of the cessation of aid.

Setting Morsy up for failure will not set up the United States or Israel for success in the Middle East. A failure in running the country -- even if it is fairly predictable, in the case of the Muslim Brotherhood -- does not mean that the next time, the Egyptian masses will shift their vote to a more accommodating candidate. Take the Israeli boycott of Hamas in the Gaza Strip: Even though the Islamist movement has unambiguously failed to make life better for the average Gazan, the people have been persuaded that it was the Israelis who are the culprit for these failures, not Hamas.

Morsy came into office as a total surprise to the world. We do not know exactly what he will do as the leader of this large, destitute, and afflicted country, and I believe even Morsy himself does not know the answers to these questions. The dilemmas he faces are daunting: He has committed himself to saving the country's collapsing economy, rolling back the influence of the powerful military establishment, and reconciling the Muslim Brotherhood's lofty religious slogans with the practicalities of running the country.

In addition, he has nobody to learn from. Anyone who believes that the Muslim Brotherhood is keeping the Turkish model in mind as it embarks on this experiment in governance does not understand the depths of hostility it bears the legacy of the Turkish Republic's founder, Ataturk. Recall the episode when Turkish Prime Minister Recep Tayyip Erdogan explained in Cairo that Egyptians should not fear secularism -- the Muslim Brotherhood reacted indignantly, criticizing the premier for interference in Egyptian affairs.

As far as Israel is concerned, Morsy's election presents an extremely complex situation. The Muslim Brotherhood's hostility toward us is deep and harsh. I would not suggest that we offer the Egyptians a great big bear hug, because it would be rejected immediately. But there is one way the Israeli government could pave the road to better relations with Cairo: In his speeches, Morsy makes a connection between the absence of an Israeli-Palestinian peace agreement and the poor relations between Israel and Egypt. Prime Minister Benjamin Netanyahu may not be prepared to pay the price to conclude a permanent status agreement, but he could conduct a dialogue with the Palestinians on agreements that would lead to that result.

The Israeli government could also suggest to Egypt's new president that he host talks between Israel and the Palestine Liberation Organization. This would give the Egyptians the possibility of being involved in the resolution of the conflict, and it would develop an important channel between Israel and Morsy's government. The very act of making the offer would be a positive step: Instead of the Israelis making do with listening to Morsy's speeches -- with a great deal of discomfort -- it would be possible to set him a challenge and judge his intentions. And if Morsy accepts the challenge, then good would come out of it for everyone.

This is the moment to reach out a hand to Morsy and to offer him whatever help is possible. If he disappoints, the outstretched hand can be taken back. However, if there is no outstretched hand in the first place, Egypt's resentment against the United States, Israel, and the West as a whole will be further deepened. Egypt is very important to the Western world, and now, more than ever, the West can prove how vital it is to the new leaders of the land of the Nile.

Daniel Berehulak/Getty Images


Gunpoint Stimulus

Defense contractors are trying to frighten Americans into believing that Pentagon budget cuts will destroy the economy. It's bogus.

Since 1998, U.S. military spending has grown exponentially, reaching 20 percent of overall federal spending and more than half of discretionary spending-levels not seen since the end of World War II. In particular, the portion of the budget used to purchase equipment from private industry has doubled over the last 14 years, growing from about $100 billion in 1998 to nearly $200 billion today.

Unsurprisingly, the defense industry has enjoyed remarkable prosperity during this time, with industry profits quadrupling between 2001 and 2010. But with a struggling economy and the conclusion of two wars, the United States can no longer afford to fund a massive defense buildup in the absence of an existential threat. Every bipartisan group confronting the deficit problem -- including the President's Debt Commission (Simpson-Bowles), the Domenici-Rivlin Task Force, and the Gang of Six -- has recommended reducing defense spending by about $1 trillion over the next decade. And the Budget Control Act (BCA), passed last summer, called for Congress to identify $1.2 trillion in cuts, revenue, or both to address this fiscal dilemma. If Congress failed, the act stipulated that $500 billion be automatically "sequestered" from defense (an equivalent amount would also be "sequestered" from non-defense programs) to meet the shortfall.

Faced with the prospect of declining government spending, the defense industry has stepped into the fray. Whereas for much of the last decade the defense industry relied on fears of terrorism and the ongoing conflicts in Iraq and Afghanistan to secure lucrative contracts, the end of the wars and the economic downturn have forced it to dramatically change its approach. Now, the defense industry is marketing itself as an essential job creator. Lockheed Martin, in particular, garnered headlines last week by announcing it will issue layoff notices to the majority of its 123,000 employees the week before the November elections unless sequestration is averted. It's certainly a tactic tailored to the times. The question is: will it work?

The Lockheed announcement was not the first shot in this new battle. In October 2011, the Aerospace Industry Association (AIA) published an economic impact analysis which concluded that cuts of $1 trillion over 10 years would cost the U.S. economy more than 1 million jobs, increasing the rate of unemployment by 0.6 percent. More recently, the National Association of Manufacturers (NAM) echoed this dire economic forecast, reporting that the BCA plus sequestration would result in the loss of over 1 million jobs, increase unemployment by 0.7 percent, and decrease gross domestic product by almost 1 percent. Most of these jobs, however, would not come from the defense industry itself. To maximize their findings (and their political impact), both studies assessed the effects of defense sequestration on every sector of the economy that could be hit by "induced effects," including secondary and tertiary effects like reduced consumer spending. As a result, the "1 million jobs" figure includes jobs in industries as distant from defense as "retail trade" and "leisure and hospitality services."

In addition to this methodological sleight of hand, the AIA and NAM studies are flawed for two fundamental reasons. First, defense spending is not a jobs program; it is a collective effort to address the threats facing the country, assure our national security, and secure our interests abroad. Therefore, the level of defense spending should be dictated by our national strategy and fiscal capacity, both of which point towards a drawdown. While it is in our interest to maintain essential industrial capacity, revenue growth and profit margins should not enter the calculus. Furthermore, if implemented wisely, $1 trillion in cuts spread over 10 years would not threaten our industrial base or national security. After more than a decade of real growth, such cuts would amount to a reduction of only about 15 percent in real terms and return defense spending to 2007 levels.

Second, defense spending is an extremely inefficient way to stimulate the economy. Both studies ignore the fact that defense spending creates far fewer jobs per billion dollars spent than other forms of government spending. For example, spending on educational services creates three times as many jobs as military spending and health care twice as many, according to research from the University of Massachusetts. Even tax cuts create almost 30 percent more jobs than money spent on weapons. So if Congress wants to spend taxpayer money to create jobs, it shouldn't give it to defense contractors.

Last week, the defense industry brought out the big guns, announcing that, since sequestration would kick in on January 1, 2013, the WARN Act (which requires that employers give their employees 60 days' notice about layoffs) would require defense contractors to issue layoff notices on November 2, 2012-4 days before the presidential elections. That's when Lockheed Martin said that it therefore plans to notify the "vast majority" of its 123,000 employees that their jobs could be lost due to sequestration. Defense hawks immediately seized on the warning as a political weapon; Senator Lindsey Graham (R-SC) has even called on defense companies to start issuing layoff notices sooner to force Congress into repealing sequestration.

The defense industry's new line is a potent political offensive designed to hit legislators where it hurts: their districts. It's a variation on the long-standing industry strategy of spreading the production of weapons systems across numerous congressional districts in order to ensure political support for the programs. Taking the economic tack -- particularly in an election year in which the political punditry has decreed that "it's the economy, stupid" -- is also a useful way to separate the defense spending debate from its proper historical context. Many of the people now animated by the industry's jobs claims are unaware of the recent history of the U.S. defense industry and its taxpayer-financed bonanza.

The offensive has certainly spooked members of Congress with military installations or defense industrial operations in their districts (basically, everyone). Rep. Buck McKeon (R-CA), the chairman of the House Armed Services Committee, has been particularly vocal, declaring that sequestration would "cripple our economy and defenses in a single blow." Senator Kelly Ayotte (R-NH) has also taken up the call, along with Senator John McCain (R-AZ).

While these tactics are designed to cause legislators and their constituents to panic, the fact of the matter is that defense companies are overstating the impact of sequestration. First, sequestration would require the Pentagon to reduce its budget by about 10 percent next year. While a 10 percent reduction in weapons procurement certainly would not be good news for defense contractors' bottom lines, it would hardly require companies to lay off their entire work force.  Lockheed Martin, for example, would still be contracted to build new F-35s, if perhaps not as many as anticipated, and provide maintenance and spare parts for numerous aircraft already in service.

Additionally, defense industry leaders have kept quiet about another trend bolstering their businesses: foreign arms sales. The State Department announced in early June that it had approved over $44 billion in sales of military parts or equipment by private U.S. companies abroad in 2011, up $10 billion from the previous year. This equipment was researched, developed, and tested in large part with U.S. taxpayer funds, but the defense industry has been strangely silent regarding Uncle Sam's seed capital. 

Moreover, sequestration impacts budget authority -- that is, how much money Congress sets aside for programs each year. Not all of this money, however, is spent in the year it is appropriated. Right now, for example, the Department of Defense has an unobligated or unspent authorized balance of $88 billion. As a result, the Pentagon's outlays -- that is, how much the Department spends in 2013 -- will almost certainly be considerably higher than what Congress appropriates, even under sequestration, so there is some economic breathing room. Massive and immediate layoffs would be both premature and an overreaction.

But the most dangerous result of these strong arm tactics by the defense industry has been to prompt budget hawks on the Hill to attempt to divorce the defense cuts from a comprehensive debt reduction plan. The sequester was, after all, the stick intended to force a grand bargain, and in that way it is working. We should not allow the parochial concerns of defense company executives -- even dressed up as sudden concern for economic stimulus -- to distract from this broader public policy debate.

Joe Raedle/GettyImages