Wanted: Bold, Game-Changing Ideas

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Perhaps the most frustrating aspect of last Friday’s presidential debate was that neither candidate proposed a bold, new way of thinking about foreign policy that cuts through the crisis-driven, incremental approach that has characterized the United States’ national security posture since the end of the Cold War.
The only hint of a major break from the past was on the issue of economic policy, where Obama made clear that the long national nightmare of Bush-McCain-Clinton-Bush-Reagan manic neo-liberalism is over. I suspect he will continue to stress this theme at next week’s debate in Nashville.
While the final dash to an election may not be the most opportune moment for unconventional ideas to come to the fore, the widespread feeling that the country is on the wrong track and the imminent departure of the most lame-duck president in recent memory suggest that the first one hundred days of the next administration may present unusually fertile ground for big ideas.
My colleagues at the New America Foundation have developed several proposals that would allow the next president to leverage our strengths to shape an emerging world order in which American power will be limited and the interests of other states will have to be taken into greater account. In the foreign policy realm, these ideas include engaging Cuba, rapprochement with Iran, and developing a new grand strategy predicated upon a sustainable, energy-efficient domestic economy.
On Friday, the New America Foundation will host a forum co-sponsored with Wired Magazine that will propose innovative solutions to some of the most urgent global challenges that the United States will face during the next administration and beyond. The panel will include Parag Khanna, Director of the New America Foundation’s Global Governance Initiative, Johns Hopkins University Professor Robert Dalrymple, Terreform 1 Partner Mitchell Joachim, and Senior Social Science Adviser Montgomery McFate. Nick Thompson, Senior Editor at Wired Magazine and a New America Foundation Fellow, will moderate what promises to be a dynamic and thought-provoking discussion.
–Ben Katcher

Comments

12 comments on “Wanted: Bold, Game-Changing Ideas

  1. Kathleen says:

    Wigwag…you’re right…it isn’t terribly original but as a strong counterpoint to Paulson, it could cause the final plan to be a better compromise….one that does attempt to help those on the bottom of the heap….it’s a good goal post to try to reach…

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  2. WigWag says:

    Thanks for your interesting post, Kathleen.
    George Soros presents a good plan although there is nothing original about it. Paul Krugman, Brad DeLong and others have suggested the same thing and when Sweden’s banks went broke a few years ago, the Swedish Government injected capital into those tottering institutions using the same mechanism.
    The problem that Robert Shapiro brings up can easily be handled if, like Buffet, the government takes only preferred stock (which is non voting) instead of common stock. Buffet does have an option to buy common shares in Goldman and GE at a relatively strike price (actually lower than the current market price), but this could easily be excluded from a Soros like plan. It should be, the idea of the government’s competing with the interests of other common shareholders in not tenable.
    The problem with all of this is that the Republicans will never go along. The Republicans would view the Soros plan as socialism and many of them would rather let the economy collapse than agree to allow the government to essentially take an ownership interest in literally hundred of financial service companies.
    The best option is to pass the Paulson Plan now because something needs to be done quickly if we want to avoid major bank runs and another Great Depression.
    Once Obama is elected, he can introduce the Soros idea and try to phase it in while he phases out the Paulson Plan.
    My guess is it won’t work. To get it through the Senate, Democrats will need 60 votes. The best case scenerio is that they will have 56 or 57. In light of this, it is hard to see how the Soros idea can ever actually be enacted.

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  3. Kathleen says:

    Speaking of bol.d new plans, George Soros weighs in on the bailout with his own plan…
    Soros’ Plan…The Hill
    Wednesday, October 01, 2008
    Soros floats alternative bailout plan with Dems
    By Alexander Bolton
    Posted: 09/30/08 11:19 PM [ET]
    The billionaire financier George Soros, a major Democratic financial backer, is floating his own rescue plan among Democratic lawmakers who are uncertain what to do in the wake of a surprise defeat of a proposed $700 billion rescue package proposed by Treasury Secretary Henry Paulson. Soros has outlined his plan in an opinion editorial in the Financial Times and circulated a concept paper among decision-makers.
    Specifically, the liberal philanthropist has proposed that government funds should be used to recapitalize the American banking system by purchasing equity in banks and investment firms.
    Democratic Rep. Jim Moran (Va.) scheduled a meeting Tuesday afternoon with Robert Johnson, a former manager of the Soros Fund Management, to discuss the proposal.
    Moran compared the proposal to Warren Buffet’s $5 billion investment in the investment firm Goldman Sachs Group in return for preferred stock and warrants to buy common stock at a discount.
    Soros has also contacted Sen. Barack Obama’s (D-Ill.) presidential campaign to share his views on the financial crisis and the best way to solve it.
    Soros described the plan he outlined in his concept paper in an opinion editorial that appeared in the Financial Times early Wednesday morning, Greenwich Meridian Time.
    “Instead of purchasing troubled assets, the bulk of the funds ought to be used to recapitalize the banking system,” Soros wrote.
    “The Treasury secretary would rely on bank examiners rather than delegate implementation of [the Troubled Asset Relief Program] to Wall Street firms,” he wrote in reference to the plan first crafted by Treasury Secretary Henry Paulson. “The bank examiners would establish how much additional equity capital each bank needs in order to be properly capitalized according to existing capital requirements.”
    “The recapitalized banks would be allowed to increase their leverage, so they would resume lending,” he wrote.
    Soros has emerged as a harsh critic of the Treasury Department, especially of Paulson’s proposal for the government to buy $700 billion of distressed mortgage-backed securities to restore the flow of credit in the financial markets.
    It is unclear whether his entry onto the debris-strewn field of the debate will help lawmakers reach agreement on an alternative proposal or further anger House Republicans, who blew up a compromise plan on the House floor Monday.
    “The two main principles are to inject more cash into the securities market and shore up home mortgages,” said Moran, who has been briefed on the proposal. “He thinks it has to be more direct than the government buying up tranches. He doesn’t think the government should be buying up toxic stock.”
    “There are a lot of people with ideas, I’m going to look at what they want,” said Moran, who added that he also scheduled a meeting with Robert Dugger, managing director of Tudor Investment Corporation, a fund connected with the billionaire trader Paul Tudor Jones.
    Soros, who is widely regarded as a financial wizard, could jumpstart congressional negotiations in a new direction, especially now that some strategists believe the Paulson-based plan that failed Monday will be difficult to revive.
    One banking industry lobbyist said it would be very difficult politically for Republicans who voted against the package Monday to change their minds and vote for it a few days later. More than two thirds of the House Republican conference voted against the plan, which failed by a vote of 228-205.
    Michael Vachon, Soros’s spokesman, said: “There have been a lot of conversations going on about the Paulson plan and George has been very critical of it.”
    Democrats are fond of Soros, who has emerged as one of the party’s biggest financial backers in recent years. He spent close to $24 million to defeat President Bush in the 2004 election.
    For this reason Soros is a bogeyman among many Republicans. He clashed famously with former Republican Speaker Dennis Hastert (Ill.).
    During the 2004 election Hastert questioned the source of Soros’s wealth and suggested it could have links to the drug trade.
    Soros has fiercely criticized Paulson’s proposal.
    “Mr. Paulson’s proposal to purchase distressed mortgage-related securities poses a classic problem of asymmetric information,” Soros wrote in a Financial Times op-ed dated Sept. 24. “The securities are hard to value but the sellers know more about them than the buyer: in any auction process the Treasury would end up in the dregs.”
    Soros would like the government to restore the flow of credit to the financial markets by purchasing equity in companies saddled with distressed assets, said Moran.
    The international financier would also like the government to take direct action to shore up the ailing housing market.
    “The scheme addresses only one half of the underlying problem — the lack of credit availability. It does very little to enable house owners to meet their mortgage obligations and it does not address the foreclosure problem,” Soros wrote in Wednesday’s commentary .
    “A revised emergency legislation could also provide more help to homeowners,” he wrote of a package based on his own proposals. “It could require the Treasury to provide cheap financing for mortgage securities whose terms have been renegotiated, based on Treasury’s cost of borrowing.”
    He has also suggested prohibiting mortgage companies from charging fees on foreclosures. Many companies are quick to foreclose because they no longer own the loan itself, which has likely been turned into a security.
    Instead, these companies make money by charging delinquent borrowers during the foreclosure process.
    Soros’s plan could find favor among members of the Congressional Black Caucus, many of whom voted against the Paulson-based plan Monday.
    Foreclosures of subprime mortgages, considered the root of the housing crisis, affects African-American homeowners disproportionately.
    Robert Shapiro, chairman of Sonecon, an economic advisory firm, who served as Commerce Department undersecretary during the Clinton administration, raised questions about Soros’s proposal.
    He said that if the government bought stock in troubled firms, a problem would arise regarding how Uncle Sam would be represented as a shareholder.
    “How does the government vote the shares?” he asked. “It puts them in a potential conflict of interest. Regulatory interests may hurt the bottom line.”

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  4. questions says:

    I’m not a historian and I don’t want to believe what I hear on talk radio (even if it’s Air America), but Thom Hartman (sp?) spent about 45 minutes or so reading from the 1929 and 1931 NY Times — hmmmm. Lots of similar proposals, lots of similar language, all followed by a really big depression. Help for Main Street rejected, help for Wall Street useless. “Fundamentals” are strong, buy ins by the very rich as a sign of investor confidence…. The parallels are striking, it would seem.
    The boldest ideas of the new administration are likely to be ways to get us out of a depression without triggering a new bubble or a world war. Perhaps efficiencies in distributing bread?

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  5. Mr.Murder says:

    Debt relief for third world countries was the majo agenda I could see developing, paired with renewable and emissions benchamrks.
    Debt relief alone(and accompanied reinforcement of the actual banking institutions in that sector regarding accepted regulatory norms) would be two major items to drive the scale economies forward.
    Transparency of regulation would address the concerns of corruption and unlevel playing fields for broad trade.
    Debt relief also would promote greater stability for bringing world community members up in ways that sustain growth by empowering demand for earners and capital access for employers.
    Engaging Iran would help secure the border of both war fronts at this time, expiditing our ability to withdraw and fast tracking better energy curves for the determination of production costs.
    Engaging Cuba and Venezuela would reassert out influence in the hemisphere. Both would widen the market for fossile fuels during this peak transition time.
    Suddenly, America needs debt relief as well. It seems our interest are their interest after all.

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  6. Mr.Murder says:

    Anyone care to look at who has not exercised their oversight using SEC so it could adequately perform regulatory functions?
    The Executive Branch:
    http://www.whitehouse.gov/news/releases/2007/01/20070118.html
    For Immediate Release
    Office of the Press Secretary
    January 18, 2007
    Executive Order: Further Amendment to Executive Order 12866 on Regulatory Planning and Review
    the authority vested in me as President by the Constitution and laws of the United States of America, it is hereby ordered that Executive Order 12866 of September 30, 1993, as amended, is further amended as follows:
    Section 1. Section 1 is amended as follows:
    (a) Section 1(b)(1) is amended to read as follows:
    “(1) Each agency shall identify in writing the specific market failure (such as externalities, market power, lack of information) or other specific problem that it intends to address (including, where applicable, the failures of public institutions) that warrant new agency action, as well as assess the significance of that problem, to enable assessment of whether any new regulation is warranted.”
    (b) by inserting in section 1(b)(7) after “regulation” the words “or guidance document”.
    (c) by inserting in section 1(b)(10) in both places after “regulations” the words “and guidance documents”.
    (d) by inserting in section 1(b)(11) after “its regulations” the words “and guidance documents”.
    (e) by inserting in section 1(b)(12) after “regulations” the words “and guidance documents”.

    GEORGE W. BUSH
    THE WHITE HOUSE,
    January 18, 2007.
    That wicked Democratic President Bush.
    Instead of actually performing assigned regulatory duties, he had them make estimates of the net gain or loss of considering no regulation in required areas.
    Instead of doing what the gov’t is supposed to do, let’s write a paper about what might happen good if we do nothing. The market will welcome us as liberators and shower us with rose petals!

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  7. Zathras says:

    Limiting American power, engaging Cuba and Iran while telling the governments with which the last three manically neoliberal administrations have negotiated trade agreements that our trade barriers are going back up, and repudiating the entirety of post-Cold War American foreign policy are certainly game-changing ideas. So are punting the football on second down and making yourself less predictable by shooting at your own basket once in a while.
    The ways in which foreign policy can be screwed up have not been exhausted by the Bush administration, and I wonder about whether an Obama administration will just end up replacing one set of ambitious, entitled and self-regarding officials who spent the years before they entered government telling one another how brilliant and special they all were with another.

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  8. Liz says:

    There is a significant difference between the candidates. Barack Obama actually believes in government. Name one country that doesn’t have a government. Note, I did not say functional.
    President Reagan’s meme that government was inherently a bad construct did more to damage America than any foreign or domestic policy he implemented. Our Founders handed us a brilliant construct of democratic governance and it just infuriates me to hear people on either side diminish the power of its premise.
    Our style of government consists of elected officials who govern badly or govern well and the beauty of it is that it is the people who ultimately choose whether the government can be labeled bad or good at any moment in history. I am not saying this well or elegantly, but John McCain does not believe in government and in the end this is why we have failed thus far in Iraq.

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  9. WigWag says:

    And by the way, Ben Katcher, while it is arguable that neo-liberal policies that both Republicans and Democrats have endored, especially free trade, may have had negative consequences; there is a big difference between Republican neoliberalism and Democratic neoliberalism. Democrats believe in a social safety net; Republicans don’t.
    The minimum wage was raised three times during the eight years Bill Clinton was President. Unemployment insurance was extended twice. Bill Clinton vetoed Republican welfare reform twice; that is before he signed a bill that would have passed anyway because it had a veto proof majority.
    Equating CLinton’s version of economic neoliberalism” with Reagan’s or Bush’s (either one)is ridiculous.
    And before you repeat the ignorant refrain of so many Obama supporters about Clinton and Glass-Steigal; remember this. The repeal of Glass Steigal passed both the Republican controlled House and the Republican controlled Senate also by veto proof majorities. Of the three sponsors of the bill, one is McCain’s chief economic policy advisor (Gramm) and another is Co Chair of Republicans for Obama (Jim Leech).
    So why don’t you tell us, Ben Katcher exactly which Clinton era economic policies Barak Obama will repudiate. Sure, he will place less emphasis on free trade; so will McCain. That’s just the political reality of the day.
    Let’s here it. What are those brilliant economic policies that Obama has up his sleeve that no other Democrat has thought of?

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  10. Tahoe Editor says:

    “the long national nightmare of Bush-McCain-Clinton-Bush-Reagan manic neo-liberalism”
    i.e. Barack Obama is a “once-in-a-generation” leader who will turn the page on everything that’s happened in the last 20 years, and he’s the only one who can do it because he is an “avatar of reconciliation” who can accomplish what no one else can, even though he hasn’t shown he has a leadership bone in his body, because he was born to be in the Oval Office and that’s when his real accomplishments will begin, and if Americans reject him they don’t deserve him because he is a Godsend the likes of which we will never see again.
    *yawn*

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  11. DavidT says:

    “Manic neo-liberalism”? Not sure why you wish to lump neoliberalism with the far right’s insistence that all regulation is bad and all taxes should be decreased.
    Neoliberals were not for gutting regulations or for destroying the tax base. Rather they are for policies that benefit society even if they may not be fully supported by some interest groups. The movement for more accountability amongst the teaching profession, if you wish, is “manic neoliberalism” but support for it seems to be growing even amongst Democrats. Fiscal responsibility would be another important tenant of “neoliberalism.” Is that going by the wayside? Is that central to this Administration’s ethos? Was it foolish for the Clinton Administration to pursue this?
    What we are likely to see is more regulation that is “sensible” in that it will encourage productivity, discourage dishonesty, build trust in the market, and so on. If that’s not neoliberalism than I don’t know what is. I doubt many neoliberals wish to coddle grossly overpaid ceos or increase the government’s responsibility for industries that take no responsibility for themselves.

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  12. WigWag says:

    “The only hint of a major break from the past was on the issue of economic policy, where Obama made clear that the long national nightmare of Bush-McCain-Clinton-Bush-Reagan manic neo-liberalism is over. I suspect he will continue to harp on this theme at next week’s debate in Nashville.”
    This paragraph is dumb. First of all, Obama said nothing in the debate that suggested he would do anything different than Bill Clinton on economic policy. It is true that he didn’t articulate a strong economic message as Bill Clinton always did. But if he said anything that would repudiate either Clinton’s economic record or any of his policies, I would love to know what it is.
    Clinton’s economic policies were part of a “long national nightmare?” What are you smoking?
    GDP practically doubled in eight years. Productivity was at the highest level in a generation. Unemployment reached post war lows, the trade deficit shrank. The Dow Jones Industrial Average went from about 4,000 to about 11,000 (where it has been ever since). We went from a budget deficit of more than $100 billion to a budget surplus of around $400 billion. The real income of working people began to rise for the first time in a decade (it hasn’t done that since Clinton left office). It is fair to surmise that measured by economic parameters, Bill Clinton was one of the ten most successful presidents in history
    So what exactly is Ben Katcher talking about? Other than the era of Roosevelt and the early 1960s, when exactly have working people been better off economically than when Bill Clinton was President?
    Do you really think that Barack Obama, who Ben Katcher thinks (based on no evidence)is abandoning those heinous Bill Clinton economic policies, will produce a better economy than Clinton did?
    I guess Ben Katcher also believes in the tooth fairy.

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