Stop the world I want to get off: Obama's global merry-go-round and the three brass rings

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.

Yonhap News via Getty Images

David Rothkopf

Now playing: Economic theater for the gullible

The United States seem to be swimming in economic initiatives that are going to go nowhere. But are we really surprised? After all, as in the case of U.S. efforts with regard to Afghanistan, Iraq, Iran, and Israel and the Palestinians, we also seem to be swimming in foreign-policy initiatives that are very unlikely to produce much (positive) change to the status quo.

But seriously, if the United States is going to devote our efforts to empty symbolism and hollow gestures, couldn't we focus on some that were leavened by a little nobility, creativity or boldness? If we are going to float proposals that are doomed to failure or ineffectiveness, couldn't we float better proposals?

Let's take the four big economic initiatives making headlines this week.

The Korea-U.S. Free Trade Agreement
We were greeted this morning with the unsurprising news that the efforts by U.S. Trade Representative Ron Kirk and his Korean counterparts to hammer out a new and improved version of the Korea-U.S. Free Trade deal had foundered on beef and automobile issues. I lead with this news because it is one of those rare proposals that actually have the opportunity to fail twice -- in addition to this week's setback, it could also fail in the negotiating phase. That's not very likely (the White House promises a deal "within weeks"). But even if the deal is reached, the likelihood that a free trade deal is going to make it through the U.S. Congress any time soon seems slim.

While conventional wisdom has it that Republicans are warmer to free trade than Democrats, the reality is that centrists are warmer to trade. The real opposition lies in the growing right and left wings in each party. A story in today's New York Times highlighted a Pew poll that 44 percent of Americans feel free trade deals have been bad for the country, while only 35 percent feel they have been beneficial. While some deals are viewed more favorably, others -- like deals with China or Korea, countries viewed with more unease -- are not. The article also notes that, "Republicans and Republican-leaning independents who were aligned with the Tea Party movement had a particularly negative view of the impact of free trade agreements." In the last election cycle something like 4 out of 10 voters identified themselves with the Tea Party or Tea Party candidates -- a group that now has 110 members of Congress.

With the Blue Dogs slaughtered in the last election, the power in Democratic caucus has also shifted solidly to the left; between that fact and the growing importance of unions as 2012 nears, the idea that a trade deal might get approved anytime soon should provoke some skepticism.

Global Trade Imbalances at the G-20
Joining the free trade deal on this week's economic cannon fodder hit parade is the agreement being hammered out among G-20 nations regarding cooperation in reducing global trade imbalances. When, and if, a final deal is struck, it is -- according to the U.S. Treasury Department -- likely to resemble the non-agreement agreement concluded a few weeks ago among the G-20 finance ministers. No solid metrics. No enforcement mechanisms. Just a plaintive, "Can't we all get along here?" from the Rodney Kings managing the world's finances.

In the end, gestures of cooperation will be followed by countries acting in their narrow self-interests, followed by more expressions of indignation and calls for better cooperation.

The QE2
Speaking of statements of indignation, a chorus of disapproval has rained down on U.S. Fed Chairman Ben Bernanke since his introduction of dubious economic initiative number three on our list, the QE2. Given the reaction to the initiative and its likely failure, compounded by its unintended consequences, Bernanke probably should have picked a different ocean liner after which to name his effort. With it being burned in the court of public opinion and going up in smoke in terms of results, the "Andrea Doria" would seem to be a fair comparison. Given the icy reception and that it could well accelerate a race to the bottom among world currencies, the best choice might have been to call it "Titanic." 

U.S. Debt Commission Recommendations
And speaking of unsuccessful trial voyages, how ‘bout those recommendations from the U.S. debt commission? As with the Titanic, they also were doomed by their initial leaks. Within literally minutes of hearing that they included cuts to social security, ending the mortgage interest deduction for many Americans during a devastated housing market, and cuts in corporate tax rates, Democratic leucocytes in the body politic converged on this alien intruder and began to kill it. Even as President Barack Obama very sensibly urged from Korea that people give the commission time to release their detailed recommendations and then actually read and consider them, Democratic members of Congress were swearing blood oaths to defeat the proposal.

Personally, I think it is a welcome development that serious people are trying in a serious fashion to reduce the U.S. deficit. This effort shows a modicum of creativity and courage which, in Washington today, counts for something. Would it be better if they started bolder with the real revenue initiatives we need -- including a value-added tax and a substantial gas or carbon tax -- plus a sweeping simplification of the U.S. tax code? Of course. But that's my point: The failure of good ideas may be more lamentable than the failure of bad ones… but that's a pretty lousy reason not to offer them.

If we are going to advance trade deals that have a slim chance of success, why not also advance the Colombia trade agreement that is long-overdue? It's a deal that rewards another valued friend for social and economic progress, and is likely to strengthen U.S. interests in a region of the world where we could use all the friends we can get. I had the pleasure of attending a small dinner for Colombia's former President Alvaro Uribe, and his frustration at having addressed every criticism of the deal put forth -- winning ILO approval for labor practices, virtually eliminating human rights issues created by the country's civil conflict -- while actively supporting the United States was palpable. This is a deal that would actually grant the United States greater market access and would be one of very few tangible initiatives in Latin America. It should be getting at least the same attention as the KORUS agreement.

As for dealing with the unfair competitive practices of other nations, we need to wake up and recognize that the world has embraced activist competition and industrial policies; the rest of the world is down on the field playing the game, and the United States is sitting up in the stands complaining about the score. It's not that we shouldn't be addressing currency imbalances head on… it's that we should be doing so much more to attract investment, get our companies to start spending the cash on which they are sitting here at home, to increase competitiveness through strengthening infrastructure, etc.

Of course, better still than promoting middling policies that will fail or even good ones that will fail would be promoting good policies that will actually work. But I suspect we're still a couple of really substantially crises away from getting anywhere like that at this point.

South Korean Presidential House via Getty Images