Don't just reappoint Bernanke, make the decision soon...

It used to be that the Chairman of the Fed was regularly referred to as the most powerful man in the world. This was back in the day of Alan Greenspan and, at the time, it seemed it was in spite of the fact that people seldom understood what he was saying. Subsequently, we learned it was precisely because of the fact that we didn't understand what he was saying. And then, subsequent to that, we also learned ... largely because he had the good grace to admit it ... that he himself didn't understand what he was talking about.

The downward spiral of Greenspan from philosopher king of the global economy to mere mortal caught his successor, Ben Bernanke, in its vortex. He was handed an economy in which the doors and wheels were coming off as we drove and nothing like the power he needed to deal with it. Indeed, as the current crisis unfolded we saw that the Fed chair was not the most powerful job in the world, that title was reserved for current or former ceos of Goldman Sachs. This must be so because for a while people wanted to fire Bernanke after one term in office primarily because he had inherited a mess whereas when you screw up the global economy as the current or former ceo of Goldman Sachs, people want to help bail you out or make you Treasury Secretary or both. 

I kid. It is highly unlikely any ceo of Goldman Sachs is Treasury Secretary again for quite some time. Possibly years. 

And Bernanke did earn some of the flack he got initially, largely because he was swept along in the groupthink of Washington economic honchos, buying into the "leave it to the markets" regulatory philosophy that got us into the mess we faced for far too long. But when it became clear that approach not only did not work but that real change was needed, the quiet academic stepped up and became perhaps the leading dependable voice of reasonable change. That's why there is a consensus emerging today that Bernanke, who against all odds seems to be restoring the notion of Fed Chairman as Washington's most trusted economic oracle, should be reappointed when his term in office ends. Steven Pearlstein, in a typically thoughtful piece in today's Washington Post, gets on this bandwagon and adds a few suggestions as to how to modify the Fed (as well as an absolutely justified endorsement of David Wessel's terrific new book on the economic crisis called, "In Fed We Trust.")

The growing momentum of this bandwagon has put in doubt the once conventional wisdom that Larry Summers had accepted the reins of the National Economic Council as an interim step on his way to the Fed chairmanship. But Summers has done such a good job elevating the National Economic Council to unprecedented prominence in the day-to-day operations of the White House and has so effectively earned the president's trust, that it is now almost certainly better for all concerned (including those of us out here in tax-payer land) that he stay right where he is. If there was ever a situation that called for the president to have a strong economic quarterback at his immediate side in the White House, it is this one and in Summers, Bernanke, and Geithner, Obama has got a first-rate team that has the number one criteria you need for success in each of their respective jobs -- the trust of the president.

Now, as readers of this blog know, I don't think every move they have made is perfect. I am disappointed by the speed of regulatory reform here in the United States and internationally. I think they have not done enough to address some of the underlying causes of the crisis such as the creation of massive pockets of risk in the global economy related to the development of opaque derivatives markets. I think they have cut deals with Wall Street that are too sweet for the bankers. I think they have spent too much, bought into ideas (like tax cuts) in the stimulus that amounted to political pandering and they sure haven't given the president the kind of clear guidance he needs on how to sell the health reforms that are perhaps the economic reforms we most urgently require.

That said, their job was first to stop the bleeding and to stabilize the patient. It was no easy task and what they did in terms of swift and sweeping intervention, while imperfect ... almost necessarily imperfect given the speed at which they were operating ... has seemed to work. I still fear a second dip of the recession ... the "W" rather than the "V" shaped recovery. But today's papers show Germany and France creeping out of recession. Japan may too. Economists (a group with limited credibility at the moment, I must admit) seem to think we are at least plateauing here in the United States too. So I think it is fair that this team get credit for their efforts. 

Frankly, I hope that the initial success they seem to have achieved emboldens them. If anything they have seemed too deferential to the Congress and to Wall Street and once stability seems assured aggressive measures to rein in the budget deficit, further strengthen regulatory oversight and strengthen international regulatory mechanisms will be called for with the same urgency that stimulus measures were called for earlier this year. 

We have seen the dangers of too much deference to the markets, of regulatory indifference, of not believing that government could or should play a significant role in protecting our national interests by identifying and mitigating market risks with broader macro or social consequences. I hope the president makes the early decision to keep everyone where they are so that they can focus on the next wave of reforms that are so urgently needed.

(And to be clear, does the above actually suggest that I want a bigger role for governments in market regulation, stronger global governance mechanisms, tax increases if we need them in addition to substantial spending cuts and that I am a fundamental believer that government also needs to play a much expanded role in ensuring sustainable health care...which optimally would be through a single-payer system that is not even on the table at the moment ... and preserving the environment ... ideally through a simple, straightforward and substantial carbon tax? Yes, it does. Start rolling out your labels if you would like, but if the recent crisis has taught us anything it is that we can't afford the reflexive rejection of government solutions where they are needed ... rather we need to rise to the challenge of figuring out how to make governments more effective in these critical roles that only they can play.)

Spencer Platt/Getty Images

David Rothkopf

Actually, global warming is a major national security threat

Yesterday Steve Walt offered a post on this site called "National Security Heats Up" in which he took on a recent CNA Corporation study that suggested that climate change was an important new national security issue for the United States, Walt argues that this study overstates the threat for the United States. 

His basic thesis is that because some of the biggest potential problems cited are far away they are not U.S. problems. Migratory pressures in Bangladesh that might be caused by rising sea levels are offered as one example. Walt makes the point that this is really a problem for India to handle, that we should beware the trap of inserting ourselves into every problem (which he associates with a Madeleine Albright "indispensable nation" worldview), and that most DoD studies inflate risks anyway ('cause that's the self-serving thing to do.)

While I can't argue with any of these points -- India should take these threats more seriously than they have to date, we shouldn't insert ourselves into every problem, and DoD funded risk assessments tend to have a "sky is falling" tone to them. But the central thrust of Walt's piece -- that global warming is not a major national security threat to the United States, is just wrong.

First, there are the immediate consequences associated with potential sea level changes in our neighborhood. As one Bahamanian minister once said to me, "For you, a shift of a foot or two or three is something you can adjust to. For us, it is a matter of life and death. If some of the estimates are to be believed, we won't exist as a country." Well, don't take the most dramatic estimates. A modest shift in sea-level will have new waves of immigrants pounding at our doors too ... from the Caribbean, from Mexico, from Central America.

Next, we will have our own issues in states like Florida where much of the population lives very close to sea-level. Permanently inundating coastal regions aside, spotting every incoming hurricane a foot or two of sea-level is going to have big costs whether it is in retaining walls, levies or post-disaster relief.

Third, global warming will produce major consequences for agriculture as climatic conditions change, droughts increase, etc. Food shortages and increases in the cost of food are another likely consequence that we will feel here at home, in our neighborhood and in volatile regions where we have vital interests.

Similarly, if glaciers melt, much of the power capacity of regions like Latin America dwindles. If warming produces reductions in the availability of water, an already critical situation, -- perhaps two-thirds of the world's people are already predicted to live in water-stressed environments in the next several decades -- will get worse. Competition for water is already an issue in parts of the Middle East that don't need any more fuel doused on their flames ... and this is going to be an issue in critical regions first.

The list goes on. Food shortages. Economic setbacks. Water competition. Refugee movements. Resulting tensions between states. High costs of mitigation. Walt is right to approach the report and even the motivations for it with some skepticism. And he is right to suggest the United States cannot and should not assume burdens that are rightfully those of other countries. 

But he goes too far when he when he suggests that the primary consequences will be humanitarian and thus this is not really a security issue but a "philanthropic" one. If there were some other threat that was likely to increase tension in the Middle East or South Asia, likely to cause massive immigration in coastal regions worldwide, likely to have a major impact on the vulnerability of the world's poorest (thus creating unrest and opportunities for populists to exploit instability), and to do so while stressing our own resources and testing our own borders, it would definitely be considered a significant national security threat.

I think there is a bit of a bias among "serious" national security scholars against "soft" issues like global warming. But count the wars that have started over food shortages, resource competition, migration, and related issues and you will see there is nothing soft about threats of this nature and there have been very few threats of this scope. For these reasons, it is in my view dangerously short-sighted to dismiss the concerns the CNA Corporation report rightfully highlights.