Since Brooks’ column concisely details both the scope and severity of the Fannie Mae housing crisis, it’s worth quoting from it extensively. He begins by describing how James A. Johnson, a Democratic Party politician, started an aggressive effort to expand homeownership once appointed chief executive of the government-sponsored enterprise in 1991.

Back then, Fannie Mae could raise money at low interest rates because the Federal Government implicitly guaranteed its debt. In 1995, according to the Congressional Budget Office, this implied guarantee netted the agency $7 billion. Instead of using that money to help buyers, Johnson and other executives kept $2.1 billion for themselves and their shareholders. They used it to further the cause—expanding their clout, their salaries and their bonuses. They did the things that every special interest group does to advance its interests.

Indeed, a 2004 report from the Office of Federal Housing Enterprise Oversight found that during Johnson’s tenure, Fannie Mae improperly deferred $200 million in expenses. This enabled top executives, including Johnson, to receive substantial bonuses. A 2006 study by the same office found that Fannie Mae had substantially underreported Johnson’s compensation. Instead of $6 to $7 million, he actually received approximately $21 million.

Even more money was used to recruit relevant activist groups for Fannie Mae’s cause, including Democratic congressmen and Acorn, an organization that championed affordable housing for low income neighborhoods.

Fannie ginned up Astroturf lobbying campaigns. In 2000, for example, a bill was introduced that threatened Fannie’s special status. The Coalition for Homeownership was formed and letters poured into Congressional offices opposing the bill. Many signatories of the letter had no idea their names had been used.

Fannie lavished campaign contributions on members of Congress. Time and again experts would go before some Congressional committee to warn that Fannie was lowering borrowing standards and posing an enormous risk to taxpayers. Phalanxes of congressmen would be mobilized to bludgeon the experts and kill unfriendly legislation.

Fannie executives ginned up academic studies. They created a foundation that spent tens of millions in advertising. They spent enormous amounts of time and money capturing the regulators who were supposed to police them.

According to Brooks, “this is how Washington works.” Except for Johnson, who made millions while “helping the poor,” many of the people involved were simply doing what reputable figures do in service to a supposedly good cause. he writes. “Johnson roped in some of the most respected establishment names: Bill Daley, Tom Donilon, Joseph Stiglitz, Dianne Feinstein, Kit Bond, Franklin Raines, Larry Summers, Robert Zoellick, Ken Starr and so on.” Only Congressman Barney Frank of Massachusetts, whose partner at the time worked for Fannie, deserves some blame for being “arrogantly dismissive when anybody raised doubts about the stability of the whole arrangement.”

Of course, it all came undone. Underneath, Fannie was a cancer that helped spread risky behavior and low standards across the housing industry. We all know what happened next.

The financial collapse of 2008 happened next and the very people involved in the scandal went on to call for even more regulation and an even greater role for government in housing and finance.

Bill Daley and Tom Donilon went on to serve in the Obama Administration. Dianne Feinstein still represents the state of California in the United States Senate. Larry Summers was the president’s chief economic advisor until late last year. Robert Zoellick is now president of the World Bank. They are responsible, in part, for today’s recession. They were not involved in any “good cause.” They were involved in a scam.

Ever since the early 1970s, particularly since the Club of Rome postulated its “limits to growth,” the notion that the world is headed for ecological disaster has firmly rooted itself in the Western mindset. The unprecedented economic expansion and population growth, which, by any measure, is only set to accelerate in the decades ahead, is of grave concern to pessimists who fear that we are pillaging our dear planet and imperiling its very survival with our reckless economic policies that are solely concern with profits and growth.

This is hardly a new phenomonon. Not only have alarmists forecast mass famines and resource conflicts as a result of overpopulation when there were still just three billion people in the world; in the early nineteenth century, the British scholar Thomas Robert Malthus (1766-1834) was the first serious thinker to postulate that population growth is unsustainable; that disease and war will wreck havoc on the peoples of the world whenever they reproduce too actively.

The specifics may have changed but the basic theory remains the same—that the Earth can only feed so many. Consider Thomas Friedman’s recent New York Times column which suggests that we are about to cross a red line of growth, climate, resources and population, “all at once,” in just a few years.

We are now using so many resources and putting out so much waste into the Earth that we have reached some kind of limit, given current technologies. The economy is going to have to get smaller in terms of physical impact.

Friedman endorses a move away from “consumer driven growth” toward a model that is “happiness driven,” based on people “working less and owning less.”

Sound familiar? It should. Ever since the Western world broke out of the Malthusian trap with the Industrial Revolution, there have been naysayers who predicted all sorts of tragedy if we continued down this selfish growth path. They have been telling the world’s billions, rich and poor alike, for generations now that they’re just going to have to make do with less.

And they claim to be “humanitarians” at the same time.

They reality is that they always underestimate the vast amount of natural resources available to us and the ingenuity of human science and industry.

It wasn’t a desire to “work less” that inspired the Industrial Revolution. It wasn’t a desire to “own less” that prompted landless entrepreneurs from across Europe to migrate to the Americas and Australia to buy land, farm and produce. Economic contraction doesn’t lead to investment in technologies that allow more and more people to live in relative comfort compared to the sad state of poverty and dependence which many hundreds of millions still experience. Growth does.

There is nothing noble or humanitarian about population controls and regulations aimed at curtailing growth instead of enhancing it. The human tragedy aside that has been evident in China and India where millions of young girls have probably been murdered in recent history as a consequence of ill advised demographic policy, the notion that statisticians the employ of the government should be empowered to prevent people from making such basic, personal decisions as whether or not to procreate would be utter epogee of totalitarianism.

The world’s climate is changing and its population will continue to growth. The best way to deal with it is for the human species to continue to evolve, to continue to develop—in a free market—better technologies and products and means of production that will allow us to not only sustain but improve our way of life and that of billions more.

The alternative is stagnation. That’s what the neo-Malthusians like to impose because they don’t recognize man’s capacity to command nature nor trust him to make the right decisions for himself and society as a whole.

As early as 1957, philosopher Ayn Rand warned against this destructive obsession with sustainability instead of growth in her novel Atlas Shrugged. As the greatest of producers of the United States go “on strike,” top level bureaucrat Wesley Mouch is confronted with an economy that has seized to grow. His solution to the problem?

[O]ur sole objective must now be to hold the line. To stand still in order to catch our stride. To achieve total stability. Freedom has been given a chance and has failed. Therefore, more stringent controls are necessary.

Back in 1957, it was still science fiction.

Economist Paul Krugman addresses the Swiss Economic Forum in Interlaken, June 3, 2010

In his latest New York Times column, economist Paul Krugman criticizes the “pain caucus” in Europe, notably the European Central Bank (ECB), for insisting that sound money and balanced budgets will somehow fix all of the continent’s fiscal woes. Austerity, he argues, is failing and American policy makers would be ill advised to repeat it in their own country.

Krugman’s column is unfortunately so filled with mischaracterizations and outright blunders that it is difficult to purely dissect his Keynesian alternative. In fact, he doesn’t offer much of an alternative to austerity at all except to suggest “debt reduction,” which means restructuring. He has traditionally championed stimulus though and blamed the “arrogance” of Europe’s policy elite for “pushing” the continent into adopting a single currency well before it was supposedly “ready for such an experiment.” Krugman then is no fan of the euro and hasn’t ever had much respect for Europe.

The ECB, writes Krugman this week, claims “that raising interest rates and slashing government spending in the face of mass unemployment will somehow make things better instead of worse” but only half of that statement is perfectly true. Frankfurt has been urging budget cuts but kept interest rates low at the same time not to make matters worse in the highly indebted eurozone countries of the south. Austerity, moreover, is not supposed to get people back to work directly. The point is to avert sovereign bankruptcy as would have happened in Greece and possibly Ireland without European support by restoring confidence on bond markets.

Krugman characterizes this as “belief in the confidence fairy—that is, belief that slashing spending will actually create jobs, because fiscal austerity will improve private sector confidence.” That’s more accurate although budget cuts in themselves won’t create jobs. The private sector will if it has confidence in future growth.

But, “the confidence fairy hasn’t shown up,” writes Krugman. Case in point? Greece, Portugal and Spain where unemployment remains high. He is right but also disingenuous in pretending that those countries have fully implemented austerity measures yet—while not considering the nations that have.

Greece has made cutbacks, laying off public sector employees and reducing the salaries of those that weren’t fired but it’s protracting on necessary privatizations and making very little progress in getting its fiscal house in order. The government remains heavily involved in energy, health care and public transportation. The country’s railway system alone needs €1 billion in yearly subsidies to keep afloat. Pharmacists have retained their monopoly and continue to enjoy fat profit margins. Law firms still cannot open branches in different cities. Greek competitiveness overall is lacking far behind many other European countries.

Portugal’s highly inefficient public sector accounts for nearly half of gross domestic product and has gravely undermined the nation’s competitiveness. Its labor laws are inflexible. Regulations on dismissals and the use of temporary contracts are burdensome. The government maintains majority ownership of air- and seaports, railways and sanitation. Tax evasion is a problem and while corruption is limited, it is more widespread than is the case in most of the rest of Europe.

Spain is suffering from similar mistakes. Before the crisis, its government invested in renewable energies, bioengineering and infrastructure but in the process, probably destroyed more jobs in traditional industries than it created. Homeownership was heavily subsidized like in Britain and the United States, leaving people today with gargantuan debts that they’re unlikely to ever be able to pay back. Banks are naturally cautious about lending money and anxious about the prospect of losing even more if their loans to sovereign states aren’t fully repaid.

It’s no coincidence that in all of these countries, socialists have been in government throughout their recessions. In the immediate aftermath of the 2008 financial shock, they attempted the very Keynesian stimulus measures that Krugman at the time proposed.

In Spain, government spending already amounted to nearly 40 percent of GDP in the years preceding the downturn. Its stimulus provided for public works investments, support of the auto industry and increased social benefits. Yet one in five Spaniards remains unemployed today. For all the money that their government poured into the economy, the country did not recover.

What is Paul Krugman recommending these countries do now? Spend more! he says. Whatever you do, don’t cut back. But what about the countries that have?

Krugman doesn’t mention in his column that fiscal prudence in Germany enabled a relatively quick and export driven recovery. He doesn’t mention Latvia where austerity brought on a dramatic 18 percent drop in GDP in 2009 but where growth and jobs are returning less than two years later. He doesn’t mention Slovakia which pushed through huge market reforms earlier this decade and opted for austerity in recent years. Like Germany, it has seen a rise in exports and enjoyed two consecutive quarters of growth while unemployment is decreasing. He doesn’t mention the Czech Republic where a conservative government is reining in public sector spending and confidence among business owners and consumers is high. Nor does Krugman mention countries as Austria, Finland and the Netherlands where fiscal restraint and a considerable dependence on demand from Germany is fueling growth.

Finally, Krugman fails to consider lessons of austerity from the past, including Mexico during the 1980s and East Asia during the late 1990s, where each time international rescue efforts were conditioned on spending cuts and liberalizations that helped nations recover from terrible crises within just a few years.

Perhaps the most striking example of nation mired in recession and faced with the choice whether to spend or to cut was Britain during the 1970s though. There and then, Margaret Thatcher proved Krugman wrong. Despite hundreds of economists who told her that austerity would deepen the nation’s recession, Thatcher cut spending and privatized old, unprofitable industries held in government ownership for many decades. By the end of her prime ministership, Britain was back on a path for growth. It was “heartless” and “unsocial” and unpopular but it worked.

President Barack Obama listens during an economic policy meeting in the Roosevelt Room of the White House, September 11, 2009

President Barack Obama has called critics who point out that his budget falls short of restoring fiscal balance “impatient.” After running multitrillion dollar deficits for two years though and bracing for a third, how much more patience does he want?

The president introduced a $3.7 trillion budget on Monday that included $100 billion in yearly spending cuts. While his budget would achieve $1.1 trillion in deficit reduction over the next ten years, in 2012, the Federal Government is expected to borrow a record $1.6 trillion.

The administration’s cuts would affect mainly welfare provisions, including financial assistance for the working poor, heating benefits and subsidies for community organizing activities in poor neighborhoods. The president also proposed a 5 percent cut in defense spending, eliminating tax exemptions for oil and natural gas producers while increasing subsidies for high speed rail and electric car development.

The spending reductions fall short of balancing the books. The White House boasts that by 2017, revenues will match outlays—except interest payments which account for several hundreds of billions of dollars annually. The budget assumes that the economy will have fully recovered by then. Republicans are afraid that as a result of increased public spending and taxation, job creation will actually be stifled.

During a press conference Tuesday, the president suggested that he might introduce bigger spending reforms in the near future. “If something doesn’t happen today, then the assumption is it isn’t going to happen,” he said. “My goal here is to actually solve the problem. It’s not to get a good headline on the first day.”

As David Brooks points out in his New York Times column, President Obama has rallied against deficit spending for years. As a senator, he forecast a “mountain of debt” if the Bush Administration continued its spending policies. While campaigning, he promised to tackle the budget issue and mere weeks after he was elected, Obama told The Washington Post that the country was “not in a position to kick it any further.” He promised to initiate a budget initiative in February 2009.

The president did install a deficit reduction commission near the end of 2009 but virtually none of the recommendations which its chairmen have made were adopted in his budget.

After the stimulus package passed, he and his aides said it would soon be time to turn to deficit issues. The same promise was made after health care reform. He made the pledge yet again at a press conference this week. Right now is not the time, the president always says, but tomorrow we will get serious.

“But tomorrow never comes,” writes Brooks.

In an editorial Monday, The New York Times admitted that it would be “facile and mistaken” to blame conservatives for one madman’s actions yet, “it is legitimate,” according to the newspaper, “to hold Republicans and particularly their most virulent supporters in the media responsible for the gale of anger that has produced the vast majority of [death] threats, setting the nation on edge.”

The rage is stirred by talk radio hosts, the Times claimed explicitly, and Fox News pundits, presumably. “They seem to have persuaded many Americans that the government is not just misguided, but the enemy of the people.”

On his Fox News broadcoast that night, Bill O’Reilly denounced the Times‘ stance as “flat out reprehensible.” Republicans had nothing to do with the murders in Arizona, he declared. “The New York Times does this all day long. If you would disagree with their far left view you are hateful.” He similarly condemned NBC News for allowing “vicious personal attacks” to be issued on MSNBC. “The hatred spewed on that cable network is unprecedented in the media,” said O’Reilly.

On the night of the shooting, Keith Olbermann, on MSNBC, professed that, “We need to put the guns down.” He spoke of “politicians and commentators who have so irresponsibly brought us to this time of domestic terrorism” and said that if conservatives including Glenn Beck, Bill O’Reilly and Sarah Palin “are not responsible for what happened in Tucson, they must now be responsible for doing everything they can to make sure Tucson doesn’t happen again.”

Reporting on the tragedy in Arizona has, if anything, painfully exposed the deep divide between left and right that exists, not so much in American society or even politics, but among its media class. MSNBC commentators on the one hand and Fox News contributors on the other have lambasted one another for feeding, twenty-four hours a day, a discourse that might have inspired politically motivated violence.

Before any details of the attack were evident, on the left, bloggers and talking heads blamed the Tea Party, former vice presidential contender Sarah Palin in particular, for “targeting” political opponents and deploying rhetoric that was draped in gun related metaphors. But liberals have done the same. The demonization of President George W. Bush by leftists was no less spiteful than the smearing of his predecessor by some Tea Party activists. Campaign speechcraft has become more heated and hyperbolic. Punditry has become more outspoken across the political spectrum.

On Comedy Central’s The Daily Show, Jon Stewart, who has rallied against cable news hysteria, suggested that even if the political climate in America is “toxic” and “unproductive”, it cannot simply be blamed for the shooting in Arizona. “Boy would that be nice,” he suggested, “to be able to draw a straight line of causation from this horror to something tangible because then we could convince ourselves that if we just stop this, the horrors will end.” But they probably won’t. “You cannot outsmart crazy. You don’t know what a troubled mind will get caught on.”

Which is not to say that the discourse cannot be improved. Americans should not conflate their political opponents with enemies, said Stewart. “If would be really nice if the ramblings of crazy people didn’t in any way resemble how we actually talk to each other on TV.”

“For all the hyperbole and vitriol that’s become part of our political process” though, “when the reality of that rhetoric; when actions match the disturbing nature of words, we haven’t lost our capacity to be horrified,” he concluded. People hear about crazy, “but it’s rarer than you think.”

Advertisement

Many tens of thousands of classified American diplomatic cables were released by WikiLeaks this weekend, an international forum for whistleblowers. The releases have been condemned by the Obama Administration and are humiliating because of the blunt assessments of foreign governments and leaders they contain. But even if WikiLeaks claims otherwise, they contribute nothing to the public’s understanding of international relations and certainly won’t encourage authorities to be more transparent.

Among the most embarrassing and potentially most harmful of cables released by WikiLeaks are reports of Middle Eastern governments from Israel to Saudi Arabia pushing the United States to undertake military action against Iran before it builds a nuclear weapon.

Any observer who has been paying attention could have known that nearly all countries in the region are dreading the prospect of a nuclear Iran. It is why other states along the Persian Gulf have been buying American arms and modernizing their own weapons arsenals and it is why countries as Jordan and Turkey have been trying to act as middlemen in negotiations. Their role, and that of Saudi Arabia as well, may be harmed by the release of their confidential communications with the United States. Why would Iran sit down with them if it knows that behind closed doors, its neighbors are simultaneously recommending air strikes?

The “Cablegate” files, as the release has been dubbed by WikiLeaks itself, further include reports on European national leaders, including German Chancellor Angela Merkel, who is criticized for her lack of creativity; French President Nicolas Sarkozy, who is said to be prone to authoritarian behavior when under siege; and Italian Prime Minister Silvio Berlusconi, who, like his Russian counterpart Vladimir Putin is suspected of maintaining ties with organized crime. Anyone who has ever read a European newspaper could have told you that but it is embarrassing for the United States for such assessments of their allies to be in the public domain now. Berlusconi, for one, is said to have had a “good laugh” over reading the reports though.

The most—or only—serious allegation that has surfaced from the leaked reports so far involves American ambassadors and personnel at the United Nations who were told to spy on the organization by the State Department.

Five media—The New York Times, the Guardian in the United Kingdom, the French Le Monde, the German Der Spiegel and Spanish newspaper El País—were granted access to the documents before they were published at WikiLeaks Sunday. All have released only a selection and the Times said to have verified certain information with the White House before putting the cables online.

Even if the leaked documents cover a period of more than forty years (only a portion of the cables stems from the period after 9/11 and relates to current international relations), the impact, even according to some of the aforementioned newspapers, is supposed to be gargantuan. “The impression is of the world’s superpower roaming helpless in a world in which nobody behaves as bidden,” according to the Guardian‘s Simon Jenkins. Der Spiegel lambasted that the leak constitutes “a political meltdown for American foreign policy,” one that leaves “the trust America’s partners have in the country [...] badly shaken.”

That may be overstated but it is not without an element of truth. The White House’s chief spokesman agreed that the releases could compromise discussions with foreign leaders in the future. “When the substance of private conversations is printed on the front pages of newspapers across the world, it can deeply impact not only US foreign policy interests but those of our allies and friends around the world,” said Robert Gibbs today.

WikiLeaks obviously begs to differ and defends its actions in the name of transparency. The website’s real and self proclaimed goal however is to constrain if not outright undermine American power and influence. In doing so, it doesn’t shrink—as it has demonstrated with the release of classified military files in the past—from putting people’s lives at risk. Publishing information indiscriminately is not how journalism should work.

Newspapers including The New York Times have fortunately chosen to exclude sensitive details when the White House asked them to. According to Le Monde, the different publications worked together to edit out the names of people to whom the releases could be dangerous. WikiLeaks makes no such distinctions.

While the latest collection of leaked documents does not appear to include anything too dramatic, it does affect US foreign policy, particularly in the Middle East. WikiLeaks may not care and retort that the United States should not interfere in other parts of the world to begin with but as long as there are American troops stationed in the region; as long as Israel is an ally and other countries worry about Iran’s brinkmanship, such arguments should be confined to sensible political discussion and not be pressured with the illegitimate release of confidential information.

Senator John Kerry listens to Afghan president Hamid Karzai in Kabul, October 20, 2009

Readers who have been following the news from Afghanistan lately have undoubtedly come across several front page articles suggesting that representatives of the Taliban have engaged in “peace talks” with the government in Kabul. The New York Times has run a couple of stories to this affect. On October 20 for instance the newspaper wrote that, “Taliban elite, aided by NATO, join talks for Afghan peace.”

Talks to end the war in Afghanistan involve extensive, face-to-face discussions with Taliban commanders from the highest levels of the group’s leadership, who are secretly leaving their sanctuaries in Pakistan with the help of NATO troops, officials here say.

From all of these stories—and from that single quotation—one may get the picture that the Taliban’s rank-and-file are being decapitated on the battlefield, Mullah Mohammad Omar is shivering in his boots, and that the United States are brokering a peace deal that could finally end the war after ten long years. Last week I warned that reports of NATO turning the page in the war should be viewed with the utmost caution. Indeed, the reports themselves are a bit inaccurate, in that most simplify a very complex situation.

For instance, both The New York Times and The Washington Post frequently label the Taliban-Karzai discussions as peace talks, which imply that both factions are hammering out details for what a postwar Afghanistan will look like. Throughout the history of warfare, the term “peace talks” is generally invoked when all major sides of the conflict have come to a mutual understanding that the continuation of the war is detrimental to everyone’s interests. In Vietnam, this meant a peace agreement between the United States, South Vietnam, and the North Vietnamese Government—one that unfortunately collapsed within two years. In the Gulf War, the end of hostilities culminated in the withdrawal of Iraqi troops from Kuwait in exchange for an end to coalition operations. In other words, peace talks lead to peace agreements, which end fighting and establish a postwar order that aims to ensure stability in the future.

The ongoing talks with the Taliban should not be considered in the same light. For one, there is no evidence that the Taliban leaders that are participating in the discussions represent the entire Quetta Shura organization. Mullah Omar, the top official in the Quetta Shura, continues to deny that his group is engaging with Hamid Karzai’s administration. The Haqqani network, perhaps the most dangerous segment of the insurgency in Afghanistan today, virtually remains irreconcilable. And the Pakistani intelligence service has yet to endorse Taliban talks with the Afghan Government.

If anything, the discussions in Kabul should be seen more as efforts toward reconciliation, not a outreach to establish peace. Taliban fighters, at least in the mid to upper ranks of the organization, are clearly hedging their bets and trying to solidify their position once the United States get out of the country completely. The problem is that those Taliban who are talking may not be representing the entire organization. Rather, these Taliban “negotiators” may be trying to ensure that they personally gain some sort of powerful position once NATO soldiers depart. There is a huge difference between negotiating for personal survival and negotiating for an end to the war.

As long as Pakistani intelligence holds the reigns of the Quetta Shura and dictates what they can and cannot do, we should all question whether current exchange between Taliban and Afghan government officials is truly the beginning of a comprehensive US-NATO-Afghan-Taliban peace accord.

Clearly, any insurgent who wishes to switch sides and join the Afghan Government is a welcoming development. And if the Times and Washington Post reports are to be believed, both low and high level Taliban commanders are exploring the option. But a few fighters that are willing to ditch the Quetta Shura cannot, and should not, be interpreted as a peace negotiation.

I’m sure General David Petraeus recognizes this crucial difference. But it certainly isn’t being portrayed that way in the media.

View of the Odaiba bridge in Tokyo, Japan, May 2, 2009 (Spreng Ben)

Different Western news media have picked up on a story that ran in The New York Times recently, suggesting that Japan goes from dynamic to disheartened. Still lingering in economic hardship, it seems that neither ballooning budget deficits nor a flood of easy money has been able to reverse the trend of Japan’s decline and stagnation.

For nearly a generation now, the nation has been trapped in low growth and a corrosive downward spiral of prices, known as deflation, in the process shriveling from an economic Godzilla to little more than an afterthought in the global economy.

Japan would appear a dark place indeed and according to the Times the Japanese themselves are anything but confident in what the future will bring. Their population is aging and their economy was recently overtaken by China’s.

Politically, Japan hasn’t been particularly stable either with the last prime minister resigning this summer and the current barely surviving an internal power struggle last August.

Still, Eamonn Fingleton, an Irish journalist who has lived in Tokyo for many years and written numerous books on Japan’s economic success story back in the 1980s, has hope. The New York Times, he complains, has “completely misrepresented” the state of Japan’s economy. “This article is a highly selective pastiche of isolated hard luck stories plus quotes from propagandistic sources,” he lambasts. And there’s more.

Japan’s total economic output since the start of the 1990s, usually considered a “lost decade” for the country, did grow and massively so: up to $5.7 trillion last year compared to a mere $3.45 in 1991. Despite Chinese competition, Japan also multiplied its current account surplus more than threefold between 1989 and 2008. (America’s current account deficit ballooned sixfold in the same period, notes Fingleton.) “With per capita income nearly ten times China’s, Japan is almost alone among major nations in running a surplus on its huge trade with China; by comparison America’s bilateral deficit with China was $166 billion last year.”

Why does China buy so much from Japan? Because it has no alternative: although this is not obvious to the world’s consumers (nor, evidently, to the editors of The New York Times), Japan monopolizes the supply of many of the world’s producers’ goods—specifically the most advanced materials, components and production machines powering the world’s factories, not least China’s.

During the last two decades, Japan did experience an extremely low population growth—a cumulative rise of 3 percent compared to 23 percent for the United States. “The differing population experience is a fundamental factor in Japan’s apparently ‘disappointing’ GDP performance,” according to Fingleton. When Japanese GDP statistics are stated on a per capita basis as opposed to as national aggregates, Japan has kept pace with American growth.

What Fingleton leaves out of the equation is the enormous pressure which Japan’s aging population is exerting on the country’s pension regime. And Japan’s aging workforce is just part of a larger problem. The long term effects of repeated short term government interventions in the private sector during the 1990s are starting to be felt and not just in the shape of a mounting public debt that exceeds GDP twofold. Labor productivity has been impaired due to substantial labor hoarding in antiquated sectors of the economy while expanded credit guarantees, intended to counter tight credit, have had similar adverse side effects.

Discontent among Japan’s urban population with a government seemingly inept at handling the economy has been rising through the years which led to an historic defeat for the traditional ruling party last year. Since the new government has similarly been wrecked with upheaval and internal dissent, the average Japanese can’t be expected to have much confidence in the political establishment anymore.

The recession hit Japan hard and government stimulus hasn’t so far managed to lift the country out of anxiety and gloom even if the numbers say that it is back on a growth path. Japan is not doing so bad—and will remain one of the richest, most developed economies in the world for decades to come—but somebody may have to remind not just The New York Times, but the people of Japan as well.

House Minority Leader John Boehner, a Republican of Ohio, appears on CBS' Face the Nation, September 12, 2010

Democrats are preparing to focus their campaign rhetoric this fall upon the Republican leader in the House of Representatives, Congressman John Boehner of Ohio. Boehner, who would likely succeed Nancy Pelosi as Speaker of the House should the Republican Party manage to secure a majority in that chamber, has remained relatively unknown with the American public but is now thrust into the spotlight under pressure from both parties.

Fox News reports that Democrats are intending to frame the November midterm elections as a choice between the two parties—”a contest they believe they have a chance to win”—instead of a referendum on Democratic leadership in Washington, “which they fear they would lose.”

The strategy makes sense from the Democrats’ perspective for President Barack Obama’s popularity has been trailing in the polls lately while many of his party’s lawmakers in both houses of Congress are clinging onto their seats with dangerously low approval ratings.

At the same time, the Republicans are still very much without direction and have thrived almost entirely in opposition to the Democrats’ agenda. This has prompted senior Democrats to allege that the GOP is in fact the “Party of Limbaugh, Beck and Palin,” referring to the two popular right wing commentators and former governor and vice presidential candidate from Alaska, now hailed as a prominent figure in the Tea Party movement. For the majority of Americans, left and center, this conservative triumvirate dwells on the fringe of the political spectrum and is wholly unelectable.

This puts the GOP in a tough spot. It has simultaneously to appeal to libertarian Tea Party enthusiasts and the bulk of conservative voters. Both may fret about this administration’s interventionist economic policies but they differ very much on priorities and social issues. The tea partiers claim to favor limited government but a majority of Americans continues to value the pervasive entitlements programs that are Social Security, Medicare and Medicaid, all of which are in desperate need of reform. The “religious right”—a Republican stronghold for over two decades—still worries about issues as abortion and gay marriage moreover; something moderates wouldn’t rank among their political priorities nor particularly care about for that matter.

Religious conservatives have had little reason to warm up to John Boehner so far. His voting record has been much more pro-business than pro-life and as Minority Leader, he has chosen to target Democrats almost exclusively on their economic policy failures while avoiding to take positions on anything that could stir controversy with the Republican base at large.

The New York Times this week was critical of Boehner’s cozying up to Big Business, painting him as one “tightly bound to lobbyists” and member of an ol’ boy network of perpetually tanned, sharply tailored fat cats who happily settle legislation over a game of golf.

According to the Times, corporations including Goldman Sachs, Google, Citigroup, R.J. Reynolds, MillerCoors and UPS “have contributed hundreds of thousands of dollars to Boehner’s campaigns, provided him with rides on their corporate jets, socialized with him at luxury golf resorts and waterfront bashes and are now leading fundraising efforts for his Boehner for Speaker campaign, which is soliciting checks of up to $37,800 each, the maximum allowed.” As Democrats increasingly try to cast Boehner as the face of the Republican Party, “his ties to lobbyists,” according to the paper, cultivated since he came to Washington almost twenty years ago, “are coming under attack.”

The president himself has been no stranger to portraying Republicans as in bed with special interests. Last April, he blamed the opposition for takings its cues from Wall Street as it did its best to stall passage of financial reform legislation. In August, Vice President Joe Biden warned that Boehner “and his party ran this economy and the middle class literally into the ground.” On Monday, Obama charged that the “man who thinks he’s going to be speaker,” favored tax loopholes for “shipping jobs and profits overseas.” Last Wednesday, he added that “there were no new policies from Mr Boehner.”

This sort of rhetoric ties in perfectly with the Democratic strategy of pretending that Republicans have no new ideas; that they have become the “Party of No” and, if elected, would enact policies similar to those that supposedly caused the recession. “It’s still fear versus hope,” said the president. Republicans want to cut taxes, especially for millionaires; cut regulations; cut trade deals; cut back on investments passed as “stimulus” in the wake of the economic downturn two years ago—”that, too, is what this election is about.”

Boehner responded to criticism on CBS’ Face the Nation on Sunday, arguing that to extend existing tax rates—even when, after eight years, Democrats still refer to them as “tax cuts”—would undo part of the uncertainty currently looming over the US economy, “so that small businesses can plan, and reinvest in their business, and the new economy” instead.

Cutting taxes alone won’t do. “I think the other thing that has to happen is that we’ve got to cut spending,” said Boehner. “If we cut spending we will help our economy, we will send signals to the markets, we will send signals to the business community, that Washington’s attempting to get its fiscal house in order.” The Federal Government is currently running over $1 trillion in deficit, adding to a debt that already comprises more than 60 percent of GDP.

Some 10 percent of Americans are currently out of work. The administration is proposing to invest billions more in infrastructure projects to encourage job creation. Boehner not only rejected the notion that his own party has had no fresh ideas; he urged Democrats to stop trying ideas that have failed. “The President says we’ve had no new ideas, but we’ve offered him new ideas for the last twenty months. And speaking of new, I wonder what’s new about more stimulus spending, more taxes, and more uncertainty for American small businesses?”

“If the President wants to get serious and wants to do something new,” Boehner added, “why don’t we cut spending and get rid of this notion that we can continue to spend our way back to prosperity?”

In recent months, the secretary has been waging a fierce battle with the defense establishment and industry about his announced budget cuts. Gates understands that austerity is necessary—”If the Department of Defense can’t figure out a way to defend the United States on half a trillion dollars a year,” he said last year, “then our problems are much bigger than anything that can be cured by buying a few more ships and planes”—but also politically expedient. If the Pentagon doesn’t start trimming its budget now, Congress is likely to interfere next year with cuts that will be more severe than what Gates is proposing.

The Times praises Gates for having canceled or cut back several dozen of weapons programs, including the acquisition of the new F-22 Raptor fighter aircraft which some congressmen desperately wanted more of. On top of finding some $330 billion in long term savings, the secretary has ordered the armed forces to find $100 billion in administrative cuts and efficiencies over the next five years.

His latest proposed savings, outlined last week, are modest—despite the political fire they are drawing. He is calling for closing the Joint Forces Command in Norfolk, Virginia [and] proposed a 30 percent cut over three years on contractors who provide support services to the military, placed a freeze on the number of workers in his office, and said he planned to eliminate at least 50 posts for generals and admirals and 150 for senior civilians, and shut down two Pentagon agencies that employ 550 more people.

If Gates has his way, the Defense Department will continue to see a 1 percent budget increase over inflation for the foreseeable future. “That is still too much,” according to the newspaper.

“Since the 9/11 attacks, Congress has given the Pentagon pretty much everything it has requested, with few questions asked.” As far as the Times is concerned, it’s time to put a stop to that, at least, as soon as the United States wind down their military involvement in the Middle East.

Perhaps overlooking this administration’s commitment to significantly reducing America’s nuclear arsenal, the Times wants to do with even less, describing atomic weapons as “redundant” and “anachronistic.” They’re anything but. America doesn’t need the potential to destroy the world ten times over but it does still need nuclear weapons.

The paper further suggests that Gates have a hard look at the Air Force and Navy and decide to reduce both their strength in terms of manpower. This makes even less sense than further shrinking America’s nuclear deterrent. Both services have had to make do with less in recent years as the Army bears the brunt of the fighting in Afghanistan and Iraq. Yet the Times wants to subject them to budget cuts after these wars come to an end? Though both are instrumental in America’s ability to project force around the world and at a time when conflict is brewing in the South China Sea and North Korea and Iran remain the likeliest targets of future military strikes?

It would be interesting to learn just what projects and programs the Times would rather see cut. Sadly the editorial volunteers no specifics but points instead to the necessity of balancing the federal budget. “The military budget is 20 percent of federal spending and 50 percent of discretionary spending,” it notes. “There is no way to address the deficit without deeper cuts in defense spending.” That is blatantly untrue, considering that America spends twice as much on entitlement programs as it does on national defense. There is no way to address the deficit without making tough choices though.

The Defense Department is already choosing to make cutbacks. With health care reform recently enacted, the costs of Medicaid and subsidizing insurance premiums will probably skyrocket by contrast. If the Times would rather government provide health care to all Americans and perpetuate Social Security indefinitely as the president seems to prefer without the risk of running into massive debt, it cannot afford to have America remain a superpower at the same time. This is an honest choice. Americans can hardly be blamed for picking the former. But The New York Times shouldn’t pretend that they can have their cake and eat it too.