After the euphoria of the 2008 elections, Obama’s first year in office was going to feel like the end of a sugar-high no matter what he did or how well it was done. In the era of 20min news cycles a year can seem like an eternity, but in reality it’s a very short-time. Even so, after 12 months of hard slogging Obama’s promise seems quite dulled by political reality. All the while certain segments of American Society either believe the end of America is imminent, or are willing its end to be, if only to hang it on Obama’s (and the liburls) head.

The feeling now might be that Obama is down in the polls and the Dems are heading for a gutting in November. Part of this is simply the magnitude of problems faced upon entering office. But can anyone name one thing that Obama wanted that he didn’t get? (Maybe the public option, but he never fully committed to the idea publicly). A new Supreme Court Justice, a stimulus, and eventually (after 30 years and many months) a landmark healthcare reform; it hasn’t been easy, or neat, or clean, but ‘he will has been done’.

Though far from perfect and incomplete; 2009 seems to be a hugely successful year.

The Domestic Economy

The TARP, the auto-bailout, ‘stress-tests’, and the stimulus were all measures taken to stabilize an economy that was still mostly in a panicked freefall when Obama first entered office last January. That panic has now subsided, the market has rebounded.

This may seem like a small thing but it’s not; namely, because it ‘cost’ almost nothing. The TARP specifically has come back almost in full, with the exception of the money that went towards the Auto-bailout. These measures, combined with the stress test, did one thing: suture the large banks structural wounds.

It was in fact the Treasury and the Fed, under the TAF, that extended the real lifeline to unload trillions of dollars worth of mortgages, aka the transfusion. In a rough and ready sense, the Fed became the new Fannie and Freddie, buying up all of the mortgage securities off the bank’s balance sheets. This allowed them to fix their capital positions, but we have no idea what these MBS’s are worth, or what was paid for them, nor to whom. This is quite worrying, but the Fed’s intransience has been a problem for nearly 100 years now, and this is nothing new. (Though, in light of the unending revelations regarding AIG use of bailout money to pay off counter-parties at 100 cents on the dollar, this problem could come under a bright light very soon, see below.)

Yet, any fears that we ‘spent’ trillions of dollar is simplistic, we lent trillions of dollars, mostly to home owing American Residents. Worst case the Fed *could* hold the mortgages until maturity, and vast majority will pay-out.

Because of its balance sheet expansion, and its Zero-Interest-Rate-Policy (ZIRP) the Fed has also devalued the dollar relative to the rest of the world (save China). This has let housing get a floor under itself, and allowed for the first expansion of American Exports in nearly 20years. Some say that Fed actions have only served to re-inflate a real estate bubble that they largely created themselves. Perhaps true, but the immediate worry is the Fed’s ability to deal with yet ANOTHER crisis, if it doesn’t unload at least some of the assets it has taken onto its balance sheet, and interest rates still at zero, this is an acute worry.

In other words, the fire is out, but smoke and water damage remain and there is no more water in the tower, to fight another fire. This has not been dealt with at all. Many people, from Barry Ritholtz to the Cunning Realist have been livid with the Obama administration’s lack of cleanup in the financial sector. These are the ‘independents’ whom supported Obama last year, but where likely Regan-iets 20 years ago. This to me, is the issue where most of the independent support has left the great Hope-n-Changer, to disillusionment.

Healthcare

The reason why it has not been dealt with was twofold, first the economy is/was still fragile, and second health-reform was put upfront in year one, where it was deemed politically safer to make concessions to get a bill completed.

Healthcare was placed first because it, like the banks, was declared ‘too-big-to-fail’. It was a Dem goal since the 1970’s and was the main unifying feature of the Democratic Primary. It was the one thing all Democrats wanted. But as a result of healthcare being a ‘must-pass’ priority you also allow yourself to be extorted, and that has been the biggest failing of this whole process. Repeatedly, things have been removed (Medicare expansion, public option) or added (no abortion funding for anyone ever from any plan that receives any government money) that make the legislation better for ONE person, regardless of what the other supporters think. Thus, the least committed are the most influential.

Once the tea-party protests in August hit fevered pitch, it became impossible for any member of the GOP to vote in favor or help in anyway. Cutting themselves out has meant that NO GOP proposals entered the legislation. Tort reform, interstate competition, even expanding HAS’s were never mentioned. The GOP believes that this stance will pay dividends in the Congressional races later in 2010, perhaps it will; but it still seems like winning a battle but losing the war.

Healthcare reform will pass and entitlements have this funny habit gaining popularity, see Social Security and Medicare. Furthermore, the crux of the GOP argument has centered on the expense and the deficit. By all accounts, including the CBO, the bill reduces the deficit, and starts to ‘bend-the-cost-curve’. If EITHER happens, the Democratic Party can claim victory, and cast the GOP as a do-nothing party, that would allow us to slowly bleed to death, rather than take corrective action. (Framed as a policy doctor, this will be a damaging line of attack)

The GOP can only win the war, hold POTUS and a majority, if everything fails. But since this was a must win/will win for Democrats this isn’t going to happen. The bill will pass, Obama will sign it, and short of catastrophe will reduce the deficit and will reduce costs. This will be certifiable. The more you yell socialism the less impact it will have, especially in light of expanded coverage/reduced cost reality.

The 2010 Elections

Lastly, Obama decision to move healthcare first, and let financial reform wait until 2010 has a brilliant political strategy implication; true the economy was weak this past year, and yes healthcare reform was more politically fraught, but financial reform has a wonderful populist feel to it.

Healthcare had to be passed by Congress; it’s simply the name of the game, and rules we live by. But Obama runs the executive branch and all its departments. Many things can be changed by executive order and fiate through the SEC, the FTC, Treasury, FDIC, ect. Congress on the other hand gets to play the role of vender of constituent anger. A few round of banker-bashing and popular sentiment is apt to switch sides rather quickly. If the GOP joins in the bashing fine, but the Dems still control congress and will be running the show. If they don’t, and play defenders of the rich (or defenders of capitalism, or fighters of socialism) it would square nicely with a narrative of protecting corp interest, along with their obstinacy on healthcare reform.

In other words, the GOP will have to be onboard with the Dem financial reform agenda or risk a rift within the party between the Tea Party and the GOP faithful. (Which they may face anyway if they go along with the Democrats) The point is this: financial reform is Uber-popular and populist. By pushing it to 2010, Obama has given the Dem a rallying call to unite behind after the monumental effort it took for healthcare. But this particular call helps to not only gin-up the Dem base, but it places the GOP on tenuous footing. Go along and lose the Tea Party Base, or fight and most likely lose independents.

It’s a beautiful divide and conquer strategy.

Of course one should still account for the unknowns. Namely, that Obama has Ben up for reappointment to the Fed, and Tim Geithner was his first choice to head up Treasury. It the hearings start to tarnish those two and their major roles in putting out the fire, this could al backfire on the Dems and the Administration. Only time will tell.

Check, but not Mate

As the out party the GOP has made quite a stir in the media, and whipped their base into activity on par with what Obama was able to achieve in his campaign run. Yet, policy wise they have stopped, improved, and hindered nothing. Furthermore, by stoking the base as they have, base elements have come to personify the party in the public imagination. Old and white are the adjectives most likely to be used to describe the GOP. In 1980, that won the election, in 2009 your John McCain.

Based to pure political tectonics, the GOP will pickup seats in 2010. It will be a limited victory. But look to 2012 and the picture darkens again. The one true leader of the GOP, is giving the Keynote at the 1^st ever Tea Party Convention, which is looking more-and-more 3^rd party, everyday. Then you have Mittens, Huck, and Tim each of whom is untenable to at least one major GOP constituency. Suddenly, in a flash of neon colors it says 1992 all over again.

I’ve said this before, but let me repeat it once more, I voted for Obama on Foreign Policy grounds. While I like him on that front, and him personally, I am not a fan of his domestic agenda. I think the stimulus was needed to an extent, especially in stabilizing state and local government budgets. But the banks, autos, and the Fed actions have been unsurprisingly depressing.

Currently, another big part of Obama’s domestic agenda is winding its way through Congress, and after only taking 50 years, Democrats finally have a health care reform bill in both the House and Senate out of committee and ready for a floor vote. I can’t express how much I had hoped this day won’t actually come, and yet here it is.

Let me start by saying that regardless of what anyone says we have a de facto national healthcare system. We have Medicare and Medicaid for the poor and elderly, on-demand ER care, and SCHIP for the kids. Of the 45Million people who do not have health insurance, about 1/3 would qualify for one of the above programs, another 1/3 could afford health insurance, but doesn’t buy it; leaving around 15million who have no access to Health Care, and depend entirely on ER’s. Meaning that today over 30 million people are covered by the de facto national health care.

I would agree, and I think most people agree with me, that in a society with as much wealth as ours, leaving sick people to fend for themselves, and potentially die from inadequate care, is wrong. That’s why ER’s are legally required to admit all people, regardless of ability to pay. So yes, something should be done. But the devil is always in the details.

The biggest problem with health care in general, and government run care in particular, is the ability to control costs. It was this cost argument, which Obama made during the election that had me starting to acquiesce to the idea of national health care. If health care costs could be contained, government could combine and extend its proper medical care programs (SHIP, Medicare ect) to the uninsured, which would result in fixing the structural budget deficit in the US. It makes perfect sense.

However, it’s been Congress who has actually been writing the Health Care Bill, and both Senate and House Bills are crap. Neither has anything in it to control costs, nothing. The Senate version is really the worst option, because like Medicare Part D, the government actually cedes its power to set prices. Yes, it extends coverage, and for that extension they pile everything onto a 2% subset of society, creating an inverse pyramid of funders-to-beneficiaries.

I could live with a more progressive bill, which included a robust public-option, and paid by higher payroll taxes across the board, with an additional helping of sin taxes on booze, cigarettes, coffee, sugar, and other un-healthy products. Or I could live with a more conservative plan, that uncoupled corporate tax deductions from health care benefits, and de-regulated parts of the state-level malpractice industry, so doctors wouldn’t been as litigiously targeted. Or I could even accept a full-Monty single-payer system, where the government gains monopsony power to set prices.

But I can’t accept something that extends coverage, is paid for by a narrow section of society, and still does nothing about health care costs.

I must say this has been Obama’s biggest disappointment so far, and it ain’t even over yet.

For another take down on similar grounds see Megan McArdle

I am not a big fan of writing about small-ball political happenings, but I think Obama’s speech yesterday is going to reverberate for awhile.
First off the moment couldn’t be better, evidence of which can be seen in the al-Qaida reaction from Zawahiri and bin Laden. Obama hit on every major issue in the Middle East, and rather than skit the issue he addressed the elephants in fairly stark terms, at least by international diplomatic standards. My personal interest was piqued on three main issues:

Iran

They have a presidential election in less than a week. Much of the demonization of Iran has been a direct result of the inflammatory language that Ahmadinejad uses in his speeches. Much of which, similar to the GOP in the US or Lukid in Israel, is a populist distraction from other domestic and economic concerns. Areas which Ahmadinejad won on before, but have not improved during his administration, and are now weighting him down in the polls. His bellicosity can be described as ‘a mouse that roared’ for all the power he actually wields in terms of foreign policy. Iran is ruled by the council of clerics, and in particular Khomeini. Before when Iran had a reformer president in Khatami Iran’s President was a nothing. Now that they have a crazy, he’s presented as the guy with the launch codes.
Part of the problem is that, especially in the US, this type of bellicosity feeds on itself. It’s in the hard-right’s (GOP, Lukid) best electoral interests, enabled by various media outlets around the world, to play up the most inflammatory examples of Muslim leadership. The solution to which, in their formulation, is ‘leadership through strength’. Human self-preservation instincts are powerful motivators.
When you compound this political media landscape with the real and legitimate concern over Iran’s nuclear ambitions, untying the knot is significantly more complex as a result. And in three graphs, Obama acknowledges our conflicting past, speaks to the crux of our concerns, and offers a way past it:

This issue has been a source of tension between the United States and the Islamic Republic of Iran. For many years, Iran has defined itself in part by its opposition to my country, and there is indeed a tumultuous history between us. In the middle of the Cold War, the United States played a role in the overthrow of a democratically-elected Iranian government. Since the Islamic Revolution, Iran has played a role in acts of hostage-taking and violence against U.S. troops and civilians. This history is well known. Rather than remain trapped in the past, I have made it clear to Iran’s leaders and people that my country is prepared to move forward. The question, now, is not what Iran is against, but rather what future it wants to build.

It will be hard to overcome decades of mistrust, but we will proceed with courage, rectitude and resolve. There will be many issues to discuss between our two countries, and we are willing to move forward without preconditions on the basis of mutual respect. But it is clear to all concerned that when it comes to nuclear weapons, we have reached a decisive point. This is not simply about America’s interests. It is about preventing a nuclear arms race in the Middle East that could lead this region and the world down a hugely dangerous path.

I understand those who protest that some countries have weapons that others do not. No single nation should pick and choose which nations hold nuclear weapons. That is why I strongly reaffirmed America’s commitment to seek a world in which no nations hold nuclear weapons. And any nation – including Iran – should have the right to access peaceful nuclear power if it complies with its responsibilities under the nuclear Non-Proliferation Treaty. That commitment is at the core of the Treaty, and it must be kept for all who fully abide by it. And I am hopeful that all countries in the region can share in this goal.

The message of this is two-fold: one is for the Iranian people, ‘move forward without preconditions on the basis of mutual respect’ (aka elect a less inflammatory leader) and the other is to Iran’s true rulers ‘any nation – including Iran – should have the right to access peaceful nuclear power’. He could have also said, if you build the bridge I will be the one to cross over to you. Minus Ahmadinejad, Iran can be dealt with; the Mullah’s are totalitarian autocrats, but they’re not suicidal. Before any deal can be made, and I for one defiantly think the Persian’s are game for a deal, Obama needs to defuse US and Israeli domestic fears over Iran, specifically their President. And that is exactly where he put the pressure with this passage, on the people and power brokers in Iran whom can facilitate that change… in less than a week.

Israel

During the campaign many Jewish voters were concerned about Obama, in small part because of the Obama-is-a-Manchurian-Muslim meme, but mainly because no one knew how Obama would work with Israel. Even after the election and during the transition, when the IDF entered Gaza in late December, Obama was very quiet. It wasn’t until AFTER the Israeli election was over, Bini was clearly the winner, and the players were set, that Obama started to speak on this issue.
The new Public message was pretty straightforward: we’re behind Israel 100%, but you have to listen us. Perhaps paradoxically, given the right-wing collation formed between Lieberman and Netanyahu, Obama choose to take issue with the expansion of Israeli settlements in the West Bank and Jerusalem first and foremost. Those expansionist settlers were a key voting block for the Israeli administration.
My suspicion is that Obama is gearing up to make an offer the Arab countries won’t refuse, which the Israelis then can’t refuse. Just to be clear, by ‘deal’ I mean sovereign recognition, which is viewed by most Arab governments as a concession.
Even though many from the right-wing have, and will, yell and scream that Obama is rewarding ‘60 years of Arab lies and aggression over Jewish Truth’, the reality is the Israel is the strongest country in the Middle East by a good margin. Thus, as Obama said himself,” It is time for us to act on what everyone knows to be true.” It’s from a position of strength that one can give concessions without appearing to be weak. And weakness, or at least the appearance of it, has derailed the Israeli-Arab Peace process time and time again. The US relationship with Israel, since 1967, has made every other country in the Middle East look weak by comparison, making it all but impossible for anyone to strike a deal, without the impression that they were forced into it by the US. The only way an Arab country can recognize Israel, is if it looks like the US pressured Israel into such a compromise.
Most of what Obama said about Israel and Palestine is convention wisdom among foreign policy thinkers; the difference is how and where this is said. In private, most everyone agrees that Israel needs to end its expansionist settlements in the West Bank, Hamas must end its infidata, the PLO must establish itself in terms of governance, and the Palestinian state must recognize Israel’s right to exist (Right of return and Jesrulam are still both sticky issues). The difference is that Obama says all of this in Public and in fairly plain language.
AIPAC, in particular, has been making some uncharacteristically bold moves of late to counter this candor, the most notable was blocking Chas Freedman’s appointment, but even in the previous week they published an open letter, signed by 328 representatives and 76 senators, voicing concern over Obama’s recent Public admonishment of Israeli settlements. Specifically is reads: The proven best way forward is to work closely and privately together both on areas of agreement and especially on areas of disagreement. (Emphasis mine)
That letter seemed to have been precipitated by Netanyahu’s disappointment with Obama in their recent meetings in Washington. Under the Bush administration Israel, apparently, had a number of gentlemanly agreements in place regarding what could and could not be said publicly. Obama doesn’t seem to agree with that agreement.
That backdrop has been fascinating, and it was this public pressure that allowed Obama to make this statement:

“America’s strong bonds with Israel are well known. This bond is unbreakable. It is based upon cultural and historical ties, and the recognition that the aspiration for a Jewish homeland is rooted in a tragic history that cannot be denied,”
Around the world, the Jewish people were persecuted for centuries, and anti-Semitism in Europe culminated in an unprecedented Holocaust. Tomorrow, I will visit Buchenwald, which was part of a network of camps where Jews were enslaved, tortured, shot and gassed to death by the Third Reich. Six million Jews were killed – more than the entire Jewish population of Israel today. Denying that fact is baseless, ignorant, and hateful. Threatening Israel with destruction – or repeating vile stereotypes about Jews – is deeply wrong, and only serves to evoke in the minds of Israelis this most painful of memories while preventing the peace that the people of this region deserve.

I do not think anyone else could have made that statement, with any creditability at all, except Mr. Obama. The implication of this is quite powerful, but Jerry Goldberg sums it up best when he says:

An African-American President with Muslim roots stands before the Muslim world and defends the right of Jews to a nation of their own in their ancestral homeland, and then denounces in vociferous terms the evil of Holocaust denial, and right-wing Israelis go forth and complain that the President is unsympathetic to the housing needs of settlers. Incredible, just incredible.

The most important part is that this speech is that the points are made all the time in the Israeli press, in interviews with Arab leaders, and in private diplomatic discussions, but this level of frankness has not existed in the US public discourse for a longtime. Doing so has empowered the Israeli Peace Movement, especially Gush Shalom, and allows Arabs to view the US as an even handed arbiter, willing to speak hard truth, even to our friends. The courage to state the blindingly obvious is the first, absolutely necessary, step towards rebalancing the Middle East.

The US & the Muslim World

The quote that will live on the longest, and it directly answers many of the questions above, is this section:

I am convinced that in order to move forward, we must say openly the things we hold in our hearts, and that too often are said only behind closed doors. There must be a sustained effort to listen to each other; to learn from each other; to respect one another; and to seek common ground. As the Holy Koran tells us, “Be conscious of God and speak always the truth.” That is what I will try to do – to speak the truth as best I can, humbled by the task before us, and firm in my belief that the interests we share as human beings are far more powerful than the forces that drive us apart.

A speech is just a speech if it isn’t followed through with action, but in this case the speech is the first action. Obama has immense popularity, in some countries he has more popular support then the countries own government; when he speaks people will listen, even if they don’t agree. Knowing this, and being the tech savvy group that they are, the White House broadcast the speech live over the internet, AND distributed official translations direct to the public in 7 languages, including Arabic, Farsi, Hindi, Urdu, and Mandarin, by passing the state media filter altogether, and delivering a complex yet frank argument to the peoples of Middle East.
‘The Obama Tone’, as it were, is quite Socratic. It’s not a lecture; it’s a discussion which is filled with positions and arguments. It is most definitely not a list of talking points. Its most definitely is an explanation, which seeks to be read whole.
Most famous political speeches are famous for a line or phrase that lives on afterwards, and is quoted ad infinitum. Obama’s best speeches, almost purposefully, try and avoid the one-liner. His Philadelphia Speech on race is a brilliant piece on the whole, but no single sentence sums up the whole. His recent speech at Notre Dame’s commencement addressed deep issues surrounding life, and a person’s place in the world, but gave not one symbolic phrase to be rerun on the nightly news.
And that seems to be the point. In the search for truth, there are no simple easy answers, and I think with this speech he makes that clear to one more audience. This is a particularly important point to make when we are trying to win the ideological battle with religious fundamentalist in the Muslim world. The contrast between the statements made by Obama and Osama is fucking-stark. While Osama admonishes and lectures people on loose morals, and primacy of Islamic Sharia; Obama recognizes plurality not only for Western Values, but also for traditional Muslim values. It was a very conservative speech aimed at a very conservative audience.
Above all though, Obama extorted Western values, but did so in Muslim terms; not only peppering in Koran versus and Arabic words, but focusing on quality of life issues that translate universally. When he said the following:

Each nation gives life to this principle in its own way, grounded in the traditions of its own people. America does not presume to know what is best for everyone, just as we would not presume to pick the outcome of a peaceful election. But I do have an unyielding belief that all people yearn for certain things: the ability to speak your mind and have a say in how you are governed; confidence in the rule of law and the equal administration of justice; government that is transparent and doesn’t steal from the people; the freedom to live as you choose.

Those issues of transparency, corruption, and a say in the government are the bed rocks of the pro-democracy movements in the Middle East. It’s these issues that are most dogging Ahmadinejad right now. But these values are many times extorted by Islamic political parties, like the Muslim Brotherhood in Egypt, or the Justice and Development Party in Turkey. It represents a new realism in how the US approaches democracy in the Middle East. In essence saying, religious parties are good, as long as they continue to hold elections, and are non-violent.

UPDATE:

A few DAYS later Lebanon had an election that resulted in a strong showing for the Senora, ‘pro-western’, government, and as we all know, two week later Iran erupted into massive protests. Now I don’t think that this speech set off either, but I think the Obama strategy works increasingly well in light of these developments. “The Arab-Street’ (Yes I know Iran is Persian), has never liked their governments, by taking the US rhetoric into a different direction, he has removed the US as a whipping boy for Middle Eastern problems. We shall see what happens next, and I would have liked to see more concrete action on the part of the Obama administration: polices, programs, ect. But for now, I will be happy that the board has shifted into a more favorable angle.