How the Crisis might turn out

[Although the virulence of the infection is declining, it is still necessary to inform new visitors that if they have been drawn here by an email circulating under my name comparing President Obama to Adolf Hitler--an email which generated three phone calls to my home this past week--they should know that I did not write that email, nor do I agree with it. For more information on its origins they should visit this link.

That the United States is now in the midst of the third great crisis in our national life no longer seems in doubt. President Obama faces problems on the same scale as Abraham Lincoln and Franklin D. Roosevelt, and the political stakes for which we are now playing--the future, and possibly even the survival, of the United States as we know it--are just as high. His own approach to the crisis--which I would characterize as far more Lincolnesque than Rooseveltian--is also becoming clear. The question of whether it will work remains open, and probably will be for at least another three years, until he stands for re-election. All we can do now is to speculate about scenarios and assess probabilities.

As in every great crisis, the problems we face are not merely ones of mood, or national disunity--they are real problems requiring real solutions. The two that stand out, clearly, are our collapsing economy and our need to live at peace with the Muslim world, while maintaining the solidarity of the industrialized world that has now lasted for more than sixty years. Simultaneously we face a serious political problem at home: the total alienation of at least a third of the population--by and large, the least educated and affluent white portion of the population--from the Administration. The solution of the political problem, in my opinion, depends on the solution of the first two. The solution of the first two depends--once again, in my opinion--in abandoning business as usual, and that is where the Administration, to date, is not inspiring as much confidence as it might.

For the past thirty years, and especially during the past sixteen or so, the financial sector has fueled our economy. By making what turned out to be irresponsible loans--to consumers holding credit cards, to mortgagees, and, through derivatives and credit-default swaps, to each other--they generated the new wealth that spread demand through the economy. Because we were in the meantime de-industrializing more than any other major economic power, much of that demand fueled the economic growth of other nations, especially in Asia, more or less forcing Asian nations to lend the money back to us and finance our trade and budget deficits. When the impossibility of making good on trillions of dollars of those loans became apparent about 18 months ago, the economic crisis began. Unfortunately--in my view, at least--President Obama picked a mainstream economic team, led by Larry Summers and Timothy Geithner, who were heavily implicated in the policies of the last 18 years. As far as I can tell, their economic prescriptions have not yet attempted to undo any of the fundamental causes of our predicament. When they get around to proposing the restoration of something like the Glass-Steagall Act, which separated investment banking and commercial banking, I will be convinced that some one has grasped the nature of the problem: to put the awesome, inevitably destructive power to create new assets at will back within prett severe limits.

The equally important issue that has not been faced, to put it bluntly, is whether we need a largely new economy. Even as unemployment threatens to pass the 10% figure nationwide, and even as much of the American auto industry goes under for all time, the Administration, from the President on down, grasps at straws, arguing for instance that a decline in the acceleration of unemployment means that we are in some sense on our way to recovery. Such claims are, actually, only marginally more sophisticated than the arguments we heard in the 1990s that the Dow was destined to continue increasing steadily until it reached at least 36,000. It suddenly occurred to me last week exactly what they mean, mathematically: that employment could be expressed as a quadratic equation, with t (time) as the only independent variable. (Less mathematical readers can skip the rest of this paragraph.) Such an equation might postulate that in any given year t from here on out (the 1st year, the second, the third, etc.), the delta, or change in the unemployment rate(let's call it DE, since I don't know how to insert a delta into html), would look something like this:

DE = t² - 3*t

Resurrecting my high school calculus, the slope of this line, over time, would be the derivative of the equation, which would be 2t - 3 . In the first year(next year, until July 2010), the change in the rate would be -2--an additional two per cent unemployment. At the end of the following year (year 2), DE, measured from this moment, would be -4 -- the rate would not have changed. But by the third year unemployment would at last be steady (3² - 9 = 0), and in the fourth year employment would increase 4%, and so on. At any point in time the slope of the curve representing the change in unemployment would be 2t - 3--starting at -3 right now, it would fall to -1 in a year (the exact kind of decline in new unemployment claims upon which everyone is eagerly pouncing on now), and finally get over 0 -- that is, to a point of rising unemployment--in two years.

The problem is that we really don't have the slightest idea whether current increases in unemployment reflect such an incredibly simple equation--there is every reason to believe that they do not. During the Great Depression the unemployment rate did not increase and decrease smoothly. The increases in unemployment accelerated from 1930 to 1931 and again in 1932, before coming to a sudden halt in 1933, whereupon employment began to rise again. Both Paul Krugman and Bob Herbert of the New York Times have consistently argued that the stimulus wasn't big enough and that it would be necessary to ask for a lot more. It will also be necessary, in my opinion, to sell the next stimulus as, if you will, a defensive rather than an offensive measure--a way to prevent the loss of further jobs, particularly in state and local government, rather than to create entirely new ones. Meanwhile, the Administration will have to be able to make a credible case--certainly by 2012, if not by 2010--that new sectors of the economy, such as green energy projects and infrastructure, are providing hundreds of thousands of genuinely new jobs and can provide millions more. That is what Roosevelt managed to do by 1936, leading to his massive re-election. Roosevelt experimented with planning the economy during his first two years, but put a huge emphasis on public works. Not until 1935-6 did he pass the most enduring reforms of his Administration, the SEC, the Wagner Act (legalizing unions), and Social Security. Obama is beginning with his major long-term reform, health care. We do not know whether this sequencing will work--although the way in which the Democratic majorities in Congress are pushing health care along is an encouraging sign.

On the foreign scene, things will, I am afraid, get somewhat worse in the Middle East. Iraq will lapse into a more or or less violent civil war. No surge, no amount of American help, and no decline in violence (a trend that owed a lot to the completion of ethnic cleansing in much of Baghdad), has managed to undo the basic fact that Iraq is at least two, if not three, nations. The Kurds are moving more rapidly towards Independence and asserting claims to disputed territory and oil. There is good reason to believe that the Sunnis will be violently reasserting themselves within a year. I am not optimistic, as I made clear last week, about the results of the surge in Afghanistan. Iran is going to hold resolutely to its course, although I suspect that Iran, like Israel, will not actually test a nuclear weapon. A US-Israeli deadlock over settlements seems likely. That will enrage certain elements in the media and the foreign policy establishment, but I am not sure that it will have much importance politically. The public seems as sick of our Middle Eastern adventure today as the it was of the Vietnam war by 1973 or so. The real political danger is at home.

Obama, like Lincoln, is moving slowly at home--as rapidly as the political traffic would bear. Just as Lincoln spoke in to the South in terms of friendship right up until Fort Sumter, he began hoping for Republican cooperation. He has compromised on many issues already--including climate change--without getting any. Perhaps the situation at home will have to become more desperate, like the Union military situation in 1862, before he can move more decisively on various domestic fronts. But in any case there is only so much that he can do alone. Lincoln won the conventional conflict that the South chose to wage, but after his death the will was lacking to do more than enshrine legal black equality in the Constitution while allowing white supremacy to return in the South. After three decades of free market consensus, we may not have the intellectual capital to do what needs to be done for the economy, either. But it is still, as the British would say, early days. On this day in 1861 the first Battle of Bull Run was still more than a week away. This will be a long struggle--and that, perhaps, is the rhetorical change I would recommend most strongly to the President. We have been on the wrong track for a long time, and it will take ten to twenty years to rebuild a more just America. The Democrats, sadly, may have lost their only chance to repeal the 22nd Amendment during the George W. Bush Administration--which means that Obama's successors will have to carry on the work to complete it. Meanwhile, let us not, like the northern abolitionists in 1861, despair of a leader who probably has a better sense of what is and is not possible just now than we do.

The prospects in Afghanistan

Last week, I attended some sessions of a conference on irregular warfare. Although it was entirely unclassified, I am not permitted specifically to identify any of the participants (their names, in any case, are not famous), but I can talk about what I learned, both from academics, and especially from several individuals who have spent a lot of time on the ground in Iraq and Afghanistan, and who bring other kinds of expertise and experience to bear on the problems there. I am going to talk today about the situation in Afghanistan--a truly tragic situation, and one in which the United States, I fear, is destined to remain involved for some time, and probably without any particularly good result.
The United States is in Afghanistan now to prevent the Taliban from once again taking power in at least a great deal of that country. The Taliban, unlike Al Queda, has never declared any particular designs upon the United States or even, as I understand it, on Israel, but the Taliban regime in the late 1990s allowed Al Queda to establish itself in Afghanistan. More importantly, after the United States initially drove the Taliban out of Afghanistan in 2002, the organization began growing inside nuclear-armed Pakistan, which had previously supported the Taliban regime in Kabul and which may indeed like to see its return there even now. As I have argued before, American policy seems to have created a kind of reverse domino effect: our involvement in Afghanistan, a very poor region of no intrinsic value, has now helped lead to a Taliban threat to Pakistan, a nuclear power.
During the last few years, the Taliban, which appeared to have been completely eclipsed around 2004 in Afghanistan, has retaken large parts of the country. What I heard at the conference was truly tragic. On the one hand, I was very reliably informed by some one in whom I have complete trust, the Taliban is extremely unpopular in Afghanistan. It consists of militant ideologues determined to regulate every aspect of the people's lives, and therefore arouses resentment. In a fair, free and unfettered election, the Taliban would stand no chance.
That, unfortunately, is only half the story. Unfortunately, the rest of Afghanistan is divided into tribes and factions, most of them at least as interested in monetary gain as in coping with the Taliban or uniting among themselves. The Karzai regime, which is certain to be re-elected shortly, is hopelessly corrupt, partly because of the large amounts of U.S. cash of which it disposes. The Taliban, in short, are the most determined, unified, and best organized group inside the country, and thus would be the clear favorites, again, in a civil war. They have established control over much of the countryside mainly in two ways: first, by sheer intimidation, and second, by dispensing justice, something which the national government, despite all our assistance, has not been able to do in much of the country.
It is the great illusion of Americans that just causes triumph because of their virtue--although history repeatedly shows the contrary. What I have said about the Taliban applied just as clearly to the Bolsheviks in Russia in 1917-22, or the Chinese Communists in 1945-9, or the Viet Cong, or, for that matter, the Nazis in Germany from 1930 to 1933. (The latter case, ironically, is different because elections did play a key role in bringing the Nazis to power, too, and superior electoral mobilization was one of their main assets.) The victory of those revolutionary movements invariably meant short-run disaster for their countries, even though China and Vietnam managed to get themselves on entirely different paths within a few decades and are now doing remarkably well. Some of these movements won in part by taking advantage of existing injustices, but their victories owed far more to organization, ruthless intimidation, and military effectiveness. Although it has become unfashionable to say so, the genius of the Anglo-American world was to have established stable local and national political institutions, including law courts, by the early 18th century, allowing their people, from that time on, to live in relative peace. This is what much of the world has never managed to do.
The United States in Iraq, and now in Afghanistan, has set about drastically accelerating the process of history by trying to create modern institutions on the spot. In both countries cadres of westerners have been dispatched to train police forces, criminal justice personnel, and the military. As in South Vietnam, all this seems to be based upon an unspoken assumption that the local populations will naturally accept what we have to offer. In fact, in my opinion, the opposite is true. In a situation of civil war, is a body of uniformed men trained by a culturally alien foreign power really likely to prevail against determined local opposition? Is it indeed not more likely to be discredited by its association with foreigners? Let us be clear: what we are doing is very, very different from what British and French imperialists did in places like India, Vietnam, and much of Africa. There they themselves created and administered new modern institutions and ran them, in some cases for decades (Egypt) or even centuries (India.) That, especially in India, allowed such institutions to grow real roots and survive the end of colonialism. But the United States obviously lacks both the resources and the will to do anything like that in Iraq, which as about 25 million people, or Afghanistan, which has 40 million. (South Vietnam in 1965, by the way, had about 15 million people.)
Another irony emerged during the conference. When the modern history of Europe began to be written about 150 years ago, it tended to idealize the growth of the centralized, modern state, based on a body of written laws, the entity that had put an end to the traditional societies of the Middle Ages. In the Middle East we have encountered two huge ironies. In Iraq we began by trying to create such a state (albeit with a strongly neoconservative political orientation) from the top down. That project failed disastrously, and the security gains of the last two years occurred because we began working with traditional institutions, the Sunni tribes, whom the Green Zone bureaucrats had initially been ordered to shun. The most modern institution ever to have ruled Iraq, indeed, was the Ba'ath party, under which, I venture to say, the country was far more unified, albeit by brutal means, than it had ever been before or is likely to be again. Certainly Iraq was never more secular than under the Ba'athists. (William Kristol, assuring Terri Gross in 2003 that there would be civil war there because Iraq "has always been pretty secular," didn't realize to whom the credit ws due.) In fact, third world modernization has often taken place in opposition to the West. One conference participant actually suggested that today, one of the most modern populations in the Middle East lives in Mullah-ruled Iran, and suggested, not entirely humorously, that we might do better to let Islamists get into power and give the people a couple of generations to modernize in response to them.
Today the Times has long stories about the movement of the Marines into Helmand province, where the Taliban are strong and the people fear, not without reason, that the arrival of the Marines will bring death and destruction. (Despite all the talk about counterinsurgency, the military is still focused primarily on firepower even now, even though our new commander in Afghanistan has finally put real restrictions on air strikes.) Let us hope that our new offensive will be a replay of the French Challe offensive in Algeria in 1959, which was sufficiently successful militarily to give de Gaulle the excuse to pull out. Late in the conference some of my colleagues and I got into a discussion of why we are in Afghanistan, anyway. None of thought that it had enough intrinsic interest to keep us there, but one argued that we were in Afghanistan to keep the Taliban from getting its hands on Pakistani nuclear weapons. I dissented. The Taliban is now considerably closer to that goal than they were in 2002, and in any case, trying to recreate a country of 40 million people seems an awfully inefficient way of securing about 100 nuclear weapons. Let us hope we find a way out.

Facing Reality

A litle more than ten years ago, when Bill Clinton had been impeached by the House of Representatives for lying about his relationship-such as it was--with Monica Lewinsky, I wrote an op-ed for which I was never able to find a home. It was entitled, as I recall, "If Only the Press had been Doing Its Job," and it consisted of a series of mythical news stories. Here was the first.

Washington, National Intelligencer, May 1, 1805. President Aaron Burr announced today that the French ship La Revolution had brought a declaration of war against the United States signed by the Emperor Napoleon, and that the French garrison in St. Louis, whose numbers have steadily increased over the last two years, was expected to cross into the Northwest Territories within a few weeks. This news marks the climax of the crisis that began two years ago, when President Jefferson submitted to the Congress a treaty calling for the purchase of the Louisiana Territory from France for $15 million. Unfortunately, shortly thereafter, widespread reports appeared of Jefferson's long-standing liaison with his Negro slave Sally Hemmings, by whom he had had several children. Pressure, especially from the clergy, forced Jefferson out of office, and the treaty was never ratified. The nation, already embroiled in serious difficulties with Britain over trade and the impressment of seamen, must now face the formidable armies of Napoleon.

Now from the time of the first settlements in the American colonies, our society has been, by and large, far more moralistic than the European countries from which most of the settlers claimed. Tocqueville in Democracy and America discussed the first constitution of the colony of Connecticut, which on the one hand gave all its male citizens equal political rights and provided for elections, while also prescribing the death penalty for adultery. Jefferson himself, when he arrived in Paris during the early stages of the French Revolution, was shocked by the general acceptance of adulterous affairs there. Recent scholarship, however, has shown that colonial sexual practices were much more lenient in practice than in theory--and when one newspaper did reveal Jefferson's relationship with "dusky Sally" during his Administration, the President wisely decided to say absolutely nothing at all, and got away with it. This was the first of at least four occasions upon which leading 19th century politicians survived accusations of sexual misconduct. Andrew Jackson was viciously attacked during two campaigns for having married his wife Rachel before she was actually divorced from her first husband, but won the popular vote in 1824 and 1828 nonetheless (although Rachel, sadly, died just before he took office.) His fellow Tennessean Richard Johnson went Jefferson one better, living openly with one of his slaves and acknowledging his two children by her. The scandal helped cost him his Senate seat in the late 1820s, but he returned to the House of Representatives and in 1836 was elected as Martin Van Buren's Vice President. Most famously, in 1884, Grover Cleveland, the bachelor Democratic candidate for President, had to deal with the revelation that he had apparently fathered a child years earlier by a Buffalo widow. Cleveland, running against the charismatic but financially compromised James G. Blaine, affirmed the truth of the accusation and carried on. A Democratic wag suggested that Blaine, whose private life was exemplary, should therefore be returned to private life, while Cleveland, a reform mayor and then Governor in New York, should put his sterling public character to work in the nation's highest office--and Cleveland won the popular vote for the first of three successive elections (although he lost the electoral tally in 1888.) A majority of 19th-century voters, in short, accepted that politicians were like other men, only more so.

That conclusion is one which, as a historian, I can only endorse. The average politician, male or female, is driven by a great need for love, both from the public as a whole and, often, from those close to him or her. Without such compelling needs few people would even consider undergoing the relentless exposure and the constant demands of constituents which are the essence of public life. In addition, one might note, politicians spend their days trying to meet the needs of others, and we should not be surprised that many (though not all) of them have been more than usually sexually active, often outside marriage. Reviewing the twentieth century, I find very good evidence that Woodrow Wilson, Warren G. Harding, Franklin Roosevelt, John F. Kennedy, Lyndon Johnson, George H. W. Bush, and Bill Clinton all strayed beyond the bounds of marriage to varying degrees, with questions also raised about Dwight Eisenhower (Clinton and Harding, to be sure, share the honor of having their affairs described in detail by books written by one of their mistresses.) On the other side, Theodore Roosevelt, Harry Truman, and Jimmy Carter were notoriously devoted and faithful to their wives, while I am not aware of any suspicions about Taft, Coolidge, Hoover, or Gerald Ford. Reviewing that list, I can't see any correlation between marital fidelity on the one hand, and executive ability on the other--and I certainly would not want to have sacrificed the presidencies of those who strayed for the sake of public morality.

New York Times, June 4, 1941. A new government led by Sir John Simon, formerly Chancellor of the Exchequer under the late Neville Chamberlain, took over in London today after a no-confidence vote toppled Prime Minister Winston Churchill. Simon announced that he planned to open peace talks with the German government with a view to ending the war on reasonable terms and laying the foundation for a generation of peace. The fall of the Churchill government became inevitable after military reverses in Greece, combined with a financial crisis that has now made it impossible for Britain to secure supplies from the united States. A year ago, after the Fall of France, former President Roosevelt had announced his intention to support British resistance in any way possible, but the revelations of Roosevelt's long-term affair with his secretary, Missy LeHand, and with various other women printed in the Chicago Tribune led to the collapse of the movement to nominate him for a third term. The new President, Wendell Willkie, while professing support for the British, had not managed to find a way to provide more aid given the obvious financial weakness of the United Kingdom, or to overcome opposition from the isolationists in his own party. Willkie announced that he was confident that the US would be able to maintain freedom in the western hemisphere, no matter what happened in Europe.

As the age of the new mass media dawned in the twentieth century, the taboo against explicit reporting about the private lives of candidates or public officials remained in place. Plenty of reporters had at least heard credible rumors about Roosevelt, JFK, Lyndon Johnson, Nelson Rockefeller, and many others, but the private lives of politicians remained private. Roosevelt himself in 1940, during a meeting in his office, speculated that Mrs. Wendell Willkie, whose relationship with her husband had apparently not been close for some time, might have been bribed to make appearances with him during the campaign, but such talk never got into the papers. Nor did anything about John Kennedy's private life in the 1960 campaign, although one or two hints of shenanigans appeared late in his Presidency. (As I pointed out in American Tragedy, by the way, Kennedy's dalliances, while numerous, did not stand in the way of effective governance. Kennedy's well-organized and compartmentalized life is well documented in his White House appointment calendar. He arrived at the office around 8:30 or 9:00, held meetings all morning, and then, around 1:00, usually disappeared for about two hours of lunch and unspecified relaxation. Then he returned at about 3:00 for several more hours of meetings before dinner.)

It seems to have been the extensive revelations about JFK's sex life in the 1970s, along with the generally loosening climate regarding sex in the United States as a whole and perhaps the beginning of the decline of print journalism, that broke down the taboo by the 1980s. Gary Hart, who very nearly won the Democratic nomination in 1984, had his candidacy abruptly terminated in 1987 by revelations about his affair with Donna Rice after he had most unwisely dared the press to "follow him around." At that time I suggested to the most prominent journalist I knew that it might be well to convene a summit of major media outlets and agree not to report this kind of thing in the future, but my advice, obviously, was ignored. Since then we have had a string of revelations about both straight and gay politicians, most, though not all, of which have terminated the lusty office-holder's careers. In the last year two governors, from the most different states imaginable, have been caught red-handed, Eliot Spitzer of New York patronizing high-end prostitutes and now Mark Sanford of South Carolina in the mist of an intercontinental affair and a failing marriage. Spitzer took twenty-four hours to resign, and I expect that Sanford will be gone within the week.

Washington Post, June 20, 1964. Senate Majority Leader Mike Mansfield announced today that the omnibus Civil Rights Act, including its provision for the integration of public accommodations, had been removed from the Senate calendar after the failure of yesterday's cloture vote designed to end a southern filibuster. The bill's defeat was a terrible defeat for President Johnson, who in the wake of President Kennedy's death had put all his prestige behind it, and a victory for presumptive Republican candidate Barry Goldwater, who voted against cloture. Observers agreed that the turning point of the debate was probably the revelations, initially published in the Dallas Morning News,, of the many sexual indiscretions of the Reverend Martin Luther King, Jr., whose "I Have a Dream" speech last August had initially made such an impression on the country. The accusations, which were confirmed on behalf of the FBI by J. Edgar Hoover, led to Dr. King's resignation from the Southern Christian Leadership Conference and a noticeable falling off of white support for civil rights.

It is tempting, of course, for an Administration Democrat like myself to take pleasure from the revelations about Governor Sanford, who had already established himself as a prime example of what is wrong with today's Republican party, and who ten years ago called vociferously for President Clinton's removal. That Governor Sanford ascended to a State House in the first place is a regional tragedy (and the same can be said for many of his counterparts), but that does not change my position about sex scandals in the slightest: his marital and extramarital behavior is none of our business. I will always believe that, had law enforcement stumbled upon the Eliot Spitzer affair forty years ago, they would simply have passed a discreet word to the governor's office warning him to clean up his act, and that would have been much better for all concerned, especially the New York citizenry. In the same way Governor Sanford should have been rejected by the voters based upon his attempts to turn down desperately needed stimulus money, not because he did not conform to tradtional, elevated American standards of marital behavior. Should I live another 25-30 years, I hope I shall see the day when the media has become sufficiently interested in the real business of politics and government--and sufficiently respectful of the politicians who do the jobs which most of us would not be capable of doing it--to stop jumping so eagerly on cases like this. That may be a utopian hope, but stranger things have happened--and it would make us once again a more mature and responsible country.

Some Health Care Data

[Veteran readers may skip this paragraph--but believe me, it's necessary.] A fraudulent email comparing President Obama to Hitler continues to circulate under my name (see here The facts are that I did not write it and that it does not represent my views. Yet I hope new readers will take a look at this and other posts, such as A Great Fear, below, which analyzes the broader source of emailed conspiracy theories.

The domestic challenge faced by President Obama, I am increasingly convinced, is every bit as serious as that encountered by Franklin Roosevelt 76 years ago. On the one hand, the nation has so far managed to maintain better economic health than in 1933; employment then was more than double what it is now, and bank failures were endemic. But Roosevelt had three advantages that Obama lacks. First, the very desperation of the country encouraged action of almost any kind. Secondly, the Republican Party included quite a few progressives who served as his allies. And lastly, progressive Republicans and Democrats had a reform agenda they had begun to develop thirty years or so earlier. Now the situation is very different: not only is the Republican Party almost entirely the party of negativity, but the reform tradition of the New Deal days has been dying out, along with some of the key institutions, like labor unions, that sustained it, over the comparable period since 1980 or so, while economic interests have developed new ways to maintain their power. This is going to make it very difficult, I think, for the President to accomplish basic reforms very quickly--especially in health care.

Health care, as we all know, is enormously complex, and I do not have any professional expertise in it--but it is one of the many subjects upon which a little data can go a vey long way. Let's start with some figures from James K. Galbraith's book, The Predator State, which I quoted last week. American health care, as we all know, is the most expensive on earth. We spend 16-17% of GDP on health care, while other advanced countries spent 8-11% of theirs. Right now the Republican Party is having considerable success defining the debate Obama is trying to start as a contest between private and government-run health care. That actually is extremely misleading--quite a large portion of our health-care system is government-run already. Doctors, dentists, hospitals and long-term care facilities received $1.221 trillion in 2006, of which $468 billion--Medicare, Medicaid, Veterans' care, and CHIP--came from the government. $273 billion of that $444 billion--well over half--was in fact for Medicare, which pays for most of America's older, and therefore unhealthiest, Americans. Americans in 2006 paid $481 billion in private insurance, slightly more than what the government paid. It is not clear to me, however, whether this total figure counts money spent on drugs, and I am beginning to think that it does not.

Either way, drug companies and drug company profits are a significant part of the bill. In 2007, the major drug companies had revenues of $383 billion (a good deal of it, of course, not from the United States) and profits of $79 billion. Their profits have been increasing rapidly since the implementation of the Medicare drug benefit. Most people, I suspect, do not realize how the drug companies spend their money, either. The typical big drug company spends about 15% of its revenues on research--that is, the development of new drugs--and two or three times that much on "marketing, advertising, and administration." Americans alone of all the populations of the advanced countries not only pay for the drugs they need, but finance huge advertising budgets to tell them what drugs (including prescription drugs, of course) that they need. They may indeed pay more for the advertising than for the drugs themselves.

Galbraith's most striking fact, in addition to his percentage comparison of US and European spending on health care overall, is this: on a per capita basis, the US government already spends more on Medicare, Medicaid, veterans' health and CHIP (the Children's Health Insurance Program) than the United Kingdom's government spends to care for its entire population. Yes, to those who have good insurance health care may well be more quickly accessible in the US than the UK, but there are certainly no observable differences in overall health care that would reflect such a huge difference in price. The difference, of course, is that in Britain health care has been a public service for more than 60 years, while in America it remains a very profitable industry. And therein, for anyone seeking to rein it in, lies the rub.

Let's take the issue of drug advertising and marketing (the latter carried out continually by a small army of pharmaceutical reps, many of them attractive young women who have been recruited, literally, off of college cheerleading squads.) It presumably has the effect of persuading doctors to prescribe more drugs--if it didn't, it seems hard to believe that the companies would pay for it. Yet to a lay person it seems obvious that decisions on what drugs to prescribe should be made by medical and scientific personnel alone. Television advertising for prescription drugs, actually a relatively recent phenomenon, is another national scandal--certainly men should not need tv to tell them if they need viagara? To put restrictions on marketing and to abolish the advertising of prescription drugs seem like awfully simple and useful reforms with which to begin--but they would also cost some people their jobs, and cost some very important corporations their profits. To my knowledge neither the Obama Administration nor the Democrats in Congres are suggesting this yet.

That drug manufacture is one of the most profitable industries in the US has a lot of other consequences as well. The research and development budgets of drug companies--which as we have seen could in any case be a lot larger than they are--flow, inevitably, towards drugs designed to treat chronic conditions, such as joint pain or impotence, rather than towards drugs that might actually cure diseases once and for all, or vaccinate patients against them. The whole Vioxx scandal grew out of attempts to develop a completely new, patentable anti-inflammatory. Vioxx was not, in fact, more effective than ibprofen or naproxen or even aspirin. Its only real advantage was that certain people whose stomachs reacted harshly to all those readily available and cheap drugs could take it without side effects. Unfortunately, it turned out to have negative effects on their circulatory system as well.

Meanwhile, other important industries--processed foods and chain restaurants--are doing their best to wreck the health of the American consumer, by promoting fructose-sweetened, high-fat foods. Fructose corn syrup has largely replaced sugar partly because it tends to stimulate the consumer to have more. In the last forty years some millions of Americans have become more health-conscious, exercised a lot more, quit smoking, and eaten much more carefully--but they tend to be the better-off and better-educated among us. They have done so largely in defiance of the food industry.

It seems obvious, in short, that the private sector cannot possibly be expected to create a health care system based upon the idea of providing essential care at the lowest possible cost. The patient's stake in health care--including both his or her comfort and, in many cases, life--gives the marketers a built-in advantage which they cannot be expected to ignore. Some months ago, a couple of sabermetricians--that is, sophisticated statistical analysts of baseball--suggested in a New York Times op-ed that the same techniques that have uncovered the relative value of walks, doubles, stolen bases and home runs should be applied to gauge the effectiveness of treatments. The Obama Administration agrees and included $1 billion in the stimulus package for such research. The pharmaceutical and insurance industries are reacting with horror. The Europeans keep their costs lower by relying on such research. They routinely do not treat children's ear infections for several days, having found that most of them will simply go away. European men are not routinely given the PSA test for prostate cancer--a test which, a recent study showed, saves perhaps 2 or 3 lives for every 100 times it is given, while leading to numerous prostate surgeries, and, therefore, a few cases of impotence and a great many prescriptions for viagara, all of which, in one way or another, the broader population pays for. (Prostate cancer surgery has indeed become safer and in many cases has essentially no side effects now, but many of those who have it thanks to PSA screening, it is clear, would live long and happy lives without ever knowing they had anything were the screening not done.)

The European and Canadian kind of "single-payer" system is at this time not even a possibility here in the US. Congressional Democrats are determined to create a government-run insurance option as part of a new plan, although the Obama Administration has not been totally firm on this point. It could be a foot in the door for the plan we eventually need. Medicare, not surprisingly, has much lower administrative costs than private insurance even though it has a much less healthy clientele, and it is not, of course, expected to make a profit. But many doctors and hospitals now resent its low rate of reimbursement. Meanwhile, over the last 60 years at least a third of the population has come to regard "government-run health care" as equivalent to slavery. The other day I actually heard Sean Hannity take a call from a woman (who must have been in late middle age) who talked wistfully about the wonderful private health care she used to have. She had lost her job, she explained, and now had to rely upon medicaid, which frequently put obstacles in her way. Of course, Hannity did not bother to point out the two alternatives to medicaid: 1) universal single-payer care, which would put her on a level with everyone else, or 2) no insurance at all.

Oddly, there do not seem to be any powerful institutions in America that see the benefit to cheaper health care. The costs of providing it has been, of course, a major factor in driving American industries out of business, but that never moved them to try to insist, along with their unions, that something should be done. When times were good they paid for private insurance; when they went bad, they shut their factories down. That, in a sense, is the problem: the media (which lives on advertising), the drug companies, and the for-profit private insurers are growth industries, in a way that iron, steel and automobiles have not been in the United States for many years.

During the New Deal the Roosevelt Administration tried to put one important kind of enterprise out of business: public utility holding companies, which drove up the cost of power for profit alone. I do not know how successful their legislation on that point turned out to be (although I saw a few years ago that it just been repealed), but they also sought to reach this objective by encouraging public power, most notably through the TVA and dams in other parts of the country. The Rural Electrification Administration provided wiring to much of the countryside, something private power had refused to do. That, perhaps, should be the government's approach now: to actually start its own medical service, which would run according to its own principles, just as an option for Americans and companies. I see no other way that such a system could develop.

The personnel may not be lacking. My son, who graduated from college in 2004, has been working in education ever since, first for Teach for America in the Mississippi Delta, and then in a charter Middle School in Brooklyn. He is now busy recruiting new teachers. Teaching in his school is a very demanding job, taking up eight to ten hours a day, and requiring a very high level of commitment; but he is interviewing young people who have decided, after a few years on Wall Street, that it was not for them. I cannot believe that a new generation of medical professionals would not welcome the chance to make care simpler, cheaper, and more readily available. They will however need to be given the chance to do so.

Struggles at home

Since the fraudulent email comparing President Obama to Hitler continues to circulate under my name (see here for more information about it), it behooves me once again to begin by making clear that I did not write it and that it does not represent my views. Yet I hope new readers will take a look at this and other posts, such as A Great Fear, below, which analyzes the broader source of emailed conspiracy theories.

Last week I praised the new President for his rhetorical skills and his extraordinary approach to the divisions that are dividing the nation and the world. This week, I find myself forced to raise some questions about his domestic policies and his medium-term political prospects at home.

During this week, I read a remarkable book, The Predator State, by James K. Galbraith, an economist at the LBJ School of Public Affairs and, I should report, a friend of mine thanks to my frequent visits to Austin during the 1990s and a long-standing connection between our two families. The book, as the author repeatedly and frankly admits, parallels earlier works by his famous father, who indeed in the last weeks of his life in April 2006 jokingly regretted that he was no longer up to the job himself. Analytically Jamie is his father's son, but their personalities closely reflect their generations. Jamie is frequently angry and always combative, as Boomers tend to be; his father, on the Canadian Lost/GI cusp, was always a bit reserved, and more inclined to be amused, rather than enraged, by repeated human folly. The book, in essence, describes what has happened to the American and world economy since his father wrote The New Industrial State in the late 1960s. The story is not an inspiring one.

John Kenneth Galbraith described an economy largely controlled by large corporations, who in turn were run by their bureaucracies, and had to share their profits with powerful unions. Because union voters were Democrats, this economic structure was closely related to the New Deal/Fair Deal/New Frontier/Great Society hegemony of 1933-69--which a good deal of the United States never accepted, and which more Americans repudiated as a result of the civil rights revolution. Jamie shows how the shock of Japanese competition in automobiles and steel in the 1970s was exacerbated, critically, by the Reagan monetary policies of the early 1980s, which destroyed much of American industry and set the rest, as we can now see, on a path of irreversible decline. That not only killed the rust belt economy, but sent millions of Americans heading south, where they swelled the number of electoral votes in the new Republican base. Those monetary policies had, however, another effect--by raising interest rates so high in the US, they strengthened the dollar, re-establishing its threatened position as the leading world currency.

Galbraith (by which henceforth I refer to the son) also gives Reagan credit for Keynesianism. He frankly does not believe in balanced budgets, and indeed argues that they are impossible for a country that runs a chronic trade deficit to finance international liquidity, as the US has been doing since the 1960s. Nor does he regard the Reagan or Bush I deficits as truly harmful, and he regrets the Democrats' emergence as the party of the balanced budget. (I feel a great kinship with him because, thanks to the kinds of families we grew up in, we never forgot much of what we learned about public policy in the early 1960s, even as those ideas went out of fashion around us.) On the other hand, he shows quite clearly how every conservative economic idea--including balanced budgets, supply-side economics in general, and the idea that tax cuts increase savings--has been disproven by data and events. Deficit spending has continued to fuel the American economy for the last thirty years (with private, rather than public, borrowing filling the gap during the brief Clinton surplus period of the 1990s.) What has changed is the distribution of income and the kinds of investments that are made with savings.

Even in the early 1980s, businessmen freely admitted that demand, not supply, fueled investment. When American factories faced increasing demand they built more capacity. Galbraith touches on one of my favorite points here, too: when marginal income tax rates were 91% or even 70%, businessmen had no incentive to pay themselves huge salaries and every incentive to use profits to expand their corporations, creating more employment and increasing wealth. This process reached its climax in the last eight years, when the huge new salaries and bonuses of executives (initially in the financial world) went into mansions and more mansions, most of them built, probably, by illegal immigrant labor. One might indeed define three kinds of investment: investment in public goods like infrastructure (which has been shamefully neglected); investment in private institutions, like corporations, which can also benefit the public; and investment in private consumption, which has the least benefits of all.

It is unfortunate, in a way, that Galbraith turned his manuscript early, it would seem, in 2008, when the subprime crisis had begun but before anyone realized how bad it would be. (The name Barack Obama, interestingly enough, does not appear in his book, although those of Hillary Clinton and Mitt Romney do.) The extent to which new financial instruments could wreck the entire world economy was not yet clear. Looking for something that might force a change in our fundamental economic policies so as to favor society as a whole rather than predatory corporations specializing in finance and raw materials, Galbraith seized upon global warming. Now we have a more immediate problem, the return of double-digit unemployment. Unfortunately, it is not clear that the new Administration is anywhere near coping with the depth of the problem we face.

The financial community, to my untrained eye, seems to have decided to put the best face possible on things in the hope of returning to business as usual as soon as possible. Somehow the stock market has had a substantial rally--could it be in part because more exotic financial instruments have lost their appeal? Some of the banks, although not the very biggest ones, have paid their TARP money back to regain their freedom to trade as they wish and pay themselves huge bonuses again. Yet it is not in the least clear that any of this will be reflected in the broader economy. Indeed, I am begin to wonder whether the financial system, built upon one speculative bubble after another, has not become quite detached from the productive sectors of the economy, which need a different kind of financial institution to service them. In short, we may still need to build a truly new economic structure.

The President obviously cannot do that himself and the personnel to do so may be lacking. His team, to repeat, came of age during the last twenty years and has not shown many signs of wanting to go back to an earlier era. My own great fear at the moment is that the economy will continue to worsen and the Republicans will manage to take advantage of it before we have a chance to get back on track. Yet it is still far too early to know. This week's papers report a revolt among Congressional Democrats on health care, in which Nancy Pelosi and others are insisting that any new plan include a government-run option. Health care, about which Galbraith also has a great many interesting things to say, is a subject for another post, but Obama, like Lincoln and FDR, needs to be pushed from the left, as well as the right, to make the decisions we need. I am hoping that that will begin to happen on economic questions as well.