Egypt and The Death of Hope

Reprinted from National Journal

As the Egyptian military consolidates control by murdering pro-Muslim Brotherhood protesters and declaring a state of emergency, we may be witnessing the most dangerous potential for Arab radicalization since the two Palestinian intifadas. Despite the resignation Wednesday of Mohamed ElBaradei, the vice president, in opposition to the Egyptian junta's action, the discomfiting fact is that most of Egypt's liberal "democrats"—along with the United States—have never looked more hypocritical. If the bloody crackdown is allowed to continue while the U.S. and West do nothing, the actions of the Egyptian military could de-legitimize democratic change in the Arab world for a generation or more.

And for Washington, a dream that began with the neoconservative push to turn Iraq into a "model democracy" after the 2003 invasion—the somewhat naïve Western hope that the Arab nations would catch up with the rest of the world—may already be dead. Worse, the loss of moderate Islamist alternatives, and the failure of democracy, could supply al-Qaida with its biggest recruiting campaign since 9/11.

The images in Egypt are excruciating to behold, both in a literal and philosophical sense. In what appeared to be more of a direct military assault than a police-style crowd-clearing exercise, Egyptian forces killed more than 500 people, most of them supporters of ousted President Mohamed Morsi who were engaged in nothing more offensive than a series of sit-ins. Suddenly, in one awful day, the exercise of the democratic rights and ideals that are so dear to America's self-image—and which have formed the heart of U.S. foreign policy since the end of the Cold War—were rendered all but irrelevant to many Arabs, especially because of Washington's mild response. Apart from a few dissenters such as ElBaradei, the once-inspiring secularists who massed in Tahrir Square to oust Hosni Mubarak have now repudiated those democratic rights and values by continuing to support the bloody crackdown. And while the Obama administration issued a rote condemnation, the lack of any more dramatic response continues to fritter away what little moral authority America has left.

The administration's initial response, voiced by White House spokesman Josh Earnest from the president's vacation spot on Martha's Vineyard, was mostly an exercise in posterior-covering. Earnest urged the Egyptian government to refrain from violence even as the violence was fully underway. He added that "we also strongly oppose a return to a State of Emergency law, and call on the government to respect basic human rights such as freedom of peaceful assembly, and due process under the law," even as the Egyptian government was clearly not respecting any of those things, and had already declared a state of emergency.

Secretary of State John Kerry also condemned the military's actions, calling "this a pivotal moment for all Egyptians," but then left the podium without taking questions.

What the administration must also consider—and it has been well behind the curve here—is that Egypt may only be the current epicenter of the radicalization phenomenon. The danger goes well beyond Cairo. Consider:

• In Iraq and Syria, a newly renamed al-Qaida umbrella group calling itself the Islamic State of Iraq and the Levant is dramatically expanding its presence in both countries, The Washington Post reported Tuesday.
• In Tunisia, where the Arab Spring began, the secular opposition and the ruling Islamist Ennahda party have grown more and more polarized, and two leading secular politicians have been assassinated. The secularists, apparently inspired by the ouster of Morsi in Egypt, have held daily mass protests in an effort to dissolve the national assembly.
• Even in Afghanistan there is a danger of re-radicalization despite the hundreds of billions of dollars and thousands of lives the United States spent there in what has amounted to America's longest war. According to a report in The Wall Street Journal, President Hamid Karzai is considering anointing as his successor the man who brought Osama bin Laden to the country, Abdul Rasoul Sayyaf, an Islamist warlord and the man who mentored 9/11 mastermind Khalid Sheikh Mohammed.

Marc Lynch, an expert in the Arab world at George Washington University, says that if the Muslim Brotherhood separates itself permanently from the democratic process—and its leaders have vowed to do so until Morsi is restored—then the moderate Islamists the West was hoping to bring into the government may grow scarce.  That, in turn, will empower and reinvigorate the more radical al-Qaida-linked groups who preach the use of force. "What Islamist can now plausibly argue that democratic participation works?" he says. "Many Islamists will likely pull back from politics for a while, go underground, or retreat to charity work, but some portion are going to find extremist ideas much more convincing now. Only takes a small number to make a difference, remember."

Lynch's assessment is endorsed by Reuel Marc Gerecht, a former CIA expert in the region and a conservative commentator at the Foundation for Defense of Democracy. "For radical Islamists who thrive on tyranny, the Nile Valley has again become exceptionally fertile ground," Gerecht says. "The secular crowd blew it. They can try to walk away from the military now … but it's too late. Egyptian society is badly, probably irretrievably, polarized with the potential for horrendous violence. The secular crowd who thought they'd pulled off a 'coup-volution' with Morsi's downfall have guaranteed that we only see devolution in Egypt, either to an increasing sad, morally corroding, impoverished society, where liberals have no future, or to an explosion that may consume the country."

Fawaz Gerges, director of the Middle East Center at the London School of Economics, agrees that an excessive fear and loathing of the secularists for Morsi and the Brotherhood may have triggered the current disaster, and it's difficult to see how to turn things around. "The secular-leaning opposition never allowed Mohamed Morsi a honeymoon period," Gerges says.

In the saddest irony of all, the ultimate outcome could be a return to the Arab ancien regime: the pre-Arab Spring world of retrograde military rule, with radical Islamists as the generals' chief opposition. "There have already been calls by extremists, such as Ayman al-Zawahiri, current chief of al-Qaida, to renounce the electoral box and rely on force as the most effective means to establish God's kingdom on earth," says Gerges. "Although the majority of Islamists will not buy Zawahiri's faulty goods, some would do so out of rage at the hijacking of the toppling of the first democratically elected Islamist president in Egypt's modern history." 

As it has for the last two years, the Obama administration is still struggling with the appropriate response. But the perception abroad is that the administration has vacillated without any coherent policy. Initially during the Arab Spring the administration defended its old autocratic allies, such as Egypt's Hosni Mubarak and Yemen's Ali Saleh. Then it moved to championing the young secularists in the street, with hopes of liberal democracy that now look as naive as the visions of the George W. Bush-era neoconservatives. After the election of Morsi, the administration lurched in yet another direction, embracing the Islamist president and the Muslim Brotherhood, even to the exclusion of secularists. And when Morsi was ousted on July 3, the administration avoided calling it a coup so as not to jeopardize its aid relationship with the Egyptian military.

To be sure, there was never any easy course—no obvious choice between an alarmingly Islamist president, which Morsi was becoming, and the military junta that succeeded him. But for months critics of the administration's approach have been urging it to at least speak loudly and clearly, using the $1.3 billion in U.S. aid and military supplies as leverage, in demanding that first the Morsi government and then the military junta uphold democratic principles. That did not happen. And it may be too late now to alter the terrible path that Egypt is on.

Is Jeff Bezos What Thomas Jefferson Was Thinking of?

Reprinted from National Journal

During the early First Amendment debates over the survival of the infant democracy called the United States of America, Thomas Jefferson famously wrote: "Were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter."

Although he obviously had no inkling of the Internet age, we are now approaching the moment that Jefferson feared: Newspapers are disappearing or are, alternatively, becoming mere vanity presses for vastly wealthy people like Jeff Bezos, who may or may not have the nation's best interests at heart as they add what is effectively intellectual bling to their collections of art, cars, or mansions.

And this is happening at a moment when, as Jefferson also feared, government has grown huge, superpowerful, and all but out of control. The government is paralyzed on policy choices, and the debates that occur in the nation's capital are, increasingly, unchecked by reliable information, of which The Washington Post is one of the country's last major national conduits.

The response of those who take an optimistic view of Bezos's surprise purchase of The Post--as well as other recent Silicon Valley takeovers of old media, such as Facebook cofounder Chris Hughes's acquisition of The New Republic--is to say that this is the natural order of things. These are the media's new barons; if the old ones got rich on railroads or oil or Wall Street (the provenance of Eugene Meyer's fortune when he started the Graham family media empire by buying The Post in 1933), the Bezoses earned their way in from Silicon Valley. So what? And the Internet Age, after all, has supplied us with oceans of information that were once available only through newspapers.

But this may be a fool's paradise. Eugene Meyer (Katherine Graham's father and current Washington Post Co. Chairman Donald Graham's grandfather) wasn't just some rich guy. He was a passionately involved patriot and denizen of Washington, D.C., who served in and out of government, including a stint as Federal Reserve chairman, and who spent a good part of his fortune over 20 years buildingThe Post into a great newspaper. And for decades, the Grahams were the center of Washington life, devoted and generous caretakers of The Post and the once-great magazine I used to work for,Newsweek.

Bezos, by contrast, is a classic West Coast techno-libertarian who most likely sees Washington as a toxic-waste dump to be avoided whenever possible (and he told Post employees in a letter Monday that he would indeed be an absentee landlord). One of the last great national newspapers--what Jefferson insisted was necessary to functioning of American democracy--is now the Amazon founder's personal toy, its fate the subject of his whimsy. If The Post were to disappear from the Earth tomorrow, Bezos would lose less than 1 percent of his personal fortune. Yawn. What's next?

Oh, well, you might say, that's also the natural order of things. Print is dying. Digital rules. But unfortunately, just as Bezos may not be the ideal substitute for Meyer, digital is proving to be a dubious replacement for print when it comes to reliable information. The Internet has only encouraged the disappearance or marginalization of formerly trusted conduits of information. What was once a continent of responsible news gathering, led by major trusted news outlets (including ThePost and Newsweek), has become a sea of crap. The continent has been washed away, and all that is left are a few eroding islands of reliable sources. Especially for young readers, there is no direction home any longer. What's the home truth on immigration? The national debt? The tax code? How to produce economic growth? Which website will tell you the truth? None, really. Almost all are ideologically skewed. The advent of "fact-checker" columns at The Post and other newspapers has been a good trend, but they just can't keep up with all the bad information.

No better evidence of this exists than Capitol Hill, where junk science and misinformation rule in every debate from climate change to stimulus spending. As New York's Republican mayor, Michael Bloomberg, seemed to realize during last year's president campaign, when he came out for Barack Obama just after Hurricane Sandy, by the time we wait for our legislators to separate the real information from the false, Manhattan may be under water.

As Jefferson divined, the dissemination of good information is necessary to the functioning of a democracy. "The basis of our governments being the opinion of the people, the very first object should be to keep that right," he wrote to Edward Carrington in the January 1787 letter in which his famous quote about newspapers appears. And after writing that newspapers were more important than government, Jefferson clarified that this meant "that every man should receive those papers and be capable of reading them."

People aren't receiving them nearly as much today; what they are receiving instead is too often tainted information on the Internet. If that trend continues, can American democracy still function? Jeff Bezos is a very smart guy, and no one has ever had reason to doubt his patriotism. So perhaps helping to correct this problem is just what he has in mind. "We will continue to follow the truth wherever it leads," Bezos wrote to Post employees.

But Bezos is also a frugal businessman with a passionate customer-first retail philosophy who is entering a business that is by its nature expensive and inefficient: news gathering. So the truth may lead him elsewhere. It will be up to him to see the larger value in that to the country. Let's hope he does.

Why We Should Worry about Larry Summers

Reprinted from National Journal

In the whispering campaign that accompanies every big-time appointment in Washington, Lawrence Summers is now said to be favored by President Obama over Federal Reserve Vice Chairwoman Janet Yellen to succeed Ben Bernanke as Fed chairman. But if that is the president's desire—and he insists he hasn't made his choice yet—then Obama probably knows that he may end up fighting the biggest battle for a nominee since naming Chuck Hagel as his Defense secretary.

What is the main objection that critics in Congress and elsewhere have to Summers? It is certainly not the Harvard economist's formidable intellect, nor his middle-of-the-road views on monetary policy. Nor is it his considerable prowess and record as an economist or even his notoriously prickly personality. The complaints about Summers revolve more around questions of integrity and character—more specifically, his career-long inability to admit the serious errors he has made as a senior policymaker, even when they have been staring him in the face.

It is a disturbing record, in the eyes of many critics. Nowhere, of course, is the art of avoiding responsibility for one's actions so highly developed as in Washington. But even in the nation's capital, there are few more masterful practitioners of this art than Obama's former chief economic adviser. And that may be a worrisome characteristic for a man with his hands on the central levers of economic power, a post that, despite semi-annual congressional hearings, enjoys scant oversight.

And it is an issue that is almost certain to come up, in various forms, during confirmation hearings.

Consider, as evidence, Summers' op-ed in The Washington Post in March of last year, as economic growth lagged and criticism mounted that he had failed to push a big-enough stimulus measure on Obama in 2009. He began the piece, in Summers-like fashion, with a preemptive strike on all the critics who are saying that he failed the president with bad advice and bad policy. Summers wrote: "Economic forecasters divide into two groups: those who cannot know the future but think they can, and those who recognize their inability to know the future." In other words, Summers was saying, "It is utterly impossible to know what will happen to the economy in the future. The smart ones, like me, won't even try."

This appeared to be Summers' way of absolving himself for what critics were ticking off as a series of major mistakes: his failure to appreciate the dimensions of the economic crisis, to push for a large-enough stimulus and a deep-enough housing fix—and perhaps as well for the major errors he made in his previous incarnation as Bill Clinton's Treasury secretary, when he oversaw financial deregulation that set the stage for the worst collapse since the Great Depression.

Furthermore, Summers wrote, "such recovery as we are enjoying is less a reflection of the natural resilience of the American economy than of the extraordinary steps that both fiscal and monetary policymakers" – guys like him, that is – have taken. Summers then drew tightly around him the Olympian robes of the Harvard academic, urging Washington's policymakers not to withdraw the economic medicine he had administered.

Let's briefly remove those robes and have a look at the record underneath. In truth, during his nearly three years as Obama's chief economic adviser (as has been the case throughout his career), Summers was surrounded by more prescient, high-level naysayers who urged him to take more dramatic action, who did sense that the economy needed deeper fixes. The record shows that he dismissed them at the time, and then later on pretended their advice didn't exist.

Take housing. The mortgage market, though it is recovering, is still one of the biggest drags on a still-deleveraging economy, with nearly half of homeowners underwater a full five years after the financial collapse. Yet the record shows unmistakably that the same administration that shoveled hundreds of billions to the Wall Streeters who had fraudulently sold all those mortgage-backed securities has had little sympathy for mortgage holders who got shafted. Summers and Treasury Secretary Timothy Geithner avoided what was desperately needed: a "cramdown" that would have allowed federal bankruptcy judges to force banks to reduce mortgage balances, cut interest rates, and lengthen the terms of loans to help borrowers get out of trouble, National Journal reported last year. Even Obama's own housing secretary, Shaun Donovan, called it a "missed opportunity." But "Summers and Geithner didn't try, according to numerous sources who were involved in the discussions,"National Journal reported. "Instead, they sided with the financial sector, and the administration went quiet as Wall Street pulled out all the stops to kill cramdown in the Senate."

Then there was the stimulus. As Noam Scheiber recorded in his book, The Escape Artists, because of Summers' underhanded efforts to mute Christina Romer, then the chairwoman of the Council of Economic Advisors, in the early debate, Obama was given the option of only a modestly sized stimulus and had "little reason to suspect that this amount was perhaps $1 trillion too small." And Romer was hardly the only economist who dared to peer into the future and pronounce the stimulus inadequate; among those who did at the time were Joseph Stiglitz and Paul Krugman. Even Harvard's Kenneth Rogoff, who advised John McCain in the 2008 campaign, was saying well before the 2008 election just how bad things were going to get.

Nor has Summers ever owned up to his responsibility for deregulation in the 1990s, which led directly to the financial disaster. In an extraordinary TV interview in January 2012, which Felix Salmon of Reuters and others have written about, Summers maintained precisely the same line he had previously taken: He couldn't see far enough over the horizon; the future was utterly unknowable. Summers said that when he sponsored the Commodity Futures Modernization Act in 2000—creating essentially a global laissez faire market in over-the-counter derivatives—credit default swaps hadn't even been invented yet. So how could he have known what was to come? "If you want to assign responsibility, if you take a market that essentially didn't exist in the 1990s, that grew for eight years from 2001 to 2008, and then brought on a major collapse, if you were looking to hold people responsible, you would look to … officials of the Bush Administration," he said.

In fact credit derivatives did exist, as Salmon writes, and plenty of people were worried about them. In post-2008 interviews, Summers sought to recast himself as a pro-regulation man. But in 1998 Summers called then-chairwoman of the Commodity Futures Trading Commission, Brooksley Born, and loudly ordered her to desist from a proposal for regulating over-the-counter derivatives. Born was eventually railroaded out of her job, and others, such as Arthur Levitt, the chairman of the Securities and Exchange Commission during the Clinton years, felt badly about it. Levitt too had gone along with the pillorying of Brooksley Born, but after the crash 10 years later he told me, "All tragedies in life are always preceded by warnings. We had a warning. It was Brooksley Born. We didn't listen to that." Levitt told other reporters they had made a mistake by quashing Born's ideas.

When Summers heard about such comments, he got upset with Levitt. Shortly after the November 2008 election, when Summers and Levitt were called into a meeting on the crisis with then-House Speaker Nancy Pelosi, the two of them were walking out of the conference room together when Summers quietly told him, "I read somewhere you were saying that maybe Brooksley Born was right.... But you know she was really wrong," according to someone who overheard the conversation, which Levitt later confirmed. "Her plan was no good. And we offered a different plan." In truth there had been no other plan, at least not one that anyone ever tried to enact.

Indeed, perhaps Summers' biggest liability was one that Obama himself didn't seem to fully understand at the time the president-elect appointed him in the fall of 2008: Summers was one of the authors of the titanic financial mess that Obama was now tasked with cleaning up.

Back in the '90s, Summers had pushed hard to open up capital flows around the world. He had fought against efforts to regulate swaps and other derivatives. He had backed the 1999 repeal of the Glass-Steagall law, permitting commercial banks to jump into risky investment-banking activities, as "historic legislation" that would "replace" Depression-era rules "with a system for the 21st century." At the Jackson Hole central bankers gathering in 2005, when University of Chicago economist Raghuram Rajan presciently raised questions about the growing risks in the financial system, Summers publicly ridiculed Rajan. Summers spoke of how much he had learned from Fed chief Alan Greenspan, the Ayn Rand devotee who believed that Wall Street financial firms could always be trusted to preserve the system, and then launched into an attack on Rajan, saying he found "the basic, slightly Luddite premise of this paper to be largely misguided."

In fact, Rajan's analysis was dead on. But Summers never acknowledged that, either.

The Wall Street Journal recently ranked more than 700 predictions made between 2009 and last year by 14 Fed officials on everything from growth to jobs to inflation. The economist who came out on top of the list? Janet Yellen.