After a brief stop at an Asia-Pacific Economic Cooperation summit that will almost certainly be the anticlimax of a 10-day swing through Asia, President Barack Obama will briefly return to Washington to pick up a new change of socks before heading off to Europe. From unsatisfying discussions about the world economy he will move on to unsatisfying discussions about Afghanistan. From difficulties with the new powers of Asia he will move on to difficulties with the old powers of Europe. And through all this he must be thinking, "The heck with the birthers debating where I was born -- if this keeps up, I have to wonder, where am I going to live once I leave this job?"
Admittedly, many of the challenges he faces are not of his own making. He did not send the world economy into a tailspin, gut the U.S. manufacturing sector, recalibrate global labor markets, or introduce the first U.S. troops into Afghanistan. And on this trip to Asia and next week's to Europe he has taken many substantial steps to address these problems and to restore the United States' international footing. From a successful mission to India, the innovative and smart (if largely symbolic) move to endorse India for a permanent seat on the United Nations Security Council, a sensitively handled journey to an Indonesia where he spent time as a boy, and an effort to embrace the new world economic order by continuing to support the empowerment of the G-20, many of his efforts deserve praise.
Having said that, as is often the case with this administration, Obama giveth and Obama taketh away.
The frustrations and missteps of this trip, especially those encountered in Seoul, could have been easily avoided. First, the United States could be somewhat less disingenuous about our economic policies. I am a supporter and admirer of Treasury Secretary Tim Geithner in most things, but his line that "We will never seek to weaken our currency as a tool to gain competitive advantage or grow the economy…" has to go down as the howler of the month, and may qualify for howler of the year honors next month. In the wake of QE2 and longer-term easing, money-pumping policies -- which are clearly designed to offset what are seen as unfair Chinese currency practices -- the United States is guilty of promoting precisely the race to the bottom that earned such broad condemnation from Europeans, Asians, and other emerging powers in Seoul.
The failure of the Korea-U.S. Free Trade Agreement talks is also due to American misplays. Long ago in this space I warned about the mistake of giving too much authority to the office of Senator Max Baucus (D-Mont.) in appointing senior officials at the office of the U.S. Trade Representative. This week, Baucus' influence apparently triggered the breakdown of the Seoul talks. Sources suggest that the Montana senator pushed for greater beef market access beyond what the Koreans had repeatedly said were their limits. The result: A deal the president promised would be done this week floundered -- and its prospects do not look good.
Should the White House, then, have been as surprised and disgruntled as it was this morning by the two column New York Times lead headline "Obama's Economic View Rejected on the World Stage"? Heck no. Them's the facts. What's more, like the election results, perhaps it was a message the team needed to see written out in bold dark type.
Obama embarked on this trip with a message from the American people: They were frustrated with the state of the U.S. economy, and something had to change in the way Washington was dealing with it. As it happens, that is the same message he got from the G-20 leaders in Seoul. While he was away there were two events that may present him with an opportunity to gain ground with both of his stakeholder constituencies, the voters who elected him and the creditors to whom the United States owes so much money. One was that by some sort of alchemy (which is to say the ability of Democrats to do basic arithmetic), the administration realized they would have to accept a deal to extend all the Bush tax cuts, probably for a couple of years. They leaked their inclination in this regard without clearly confirming it. The second was the leaking of the co-chairman's bullet-point summary of the Deficit Commission report. Whatever the problems with their recommendations, they represent the first recent, high-level effort to deal seriously with this problem on both the revenue and the cost side of the ledger.
My sense is that there is a potentially transformational deal here for the president: Agree to an extension of the Bush tax cuts for two years, if Congress agrees to an up or down vote on the National Commission on Fiscal Responsibility and Reform report -- provided it receives support from at least 14 members of the deficit commission. Link dealing with the poor economy to a commitment to getting our house in order -- as our creditors, allies, and most sensible citizens and neighbors are pleading with us to do. (If it is not "fast track" for the deficit report, perhaps it could be a commitment to linking a deficit reduction plan to the first budget of the new congress.)
The president has three big game changers that could restore his standing at home or abroad. One is a spontaneous recovery of the U.S. economy. Another is catching Osama bin Laden. Neither of these is likely, nor are they things that he has much control over. The last would be establishing himself as a president with the courage to manage us through first a market crisis and then a deficit crisis, who could do so in the face of criticism from both parties and who could engineer support from both parties. It is not that much more likely than the first two "brass ring" events, but it is the one outcome over which he has the most potential control.
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