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Posts For: December 31, 2012

Obama Sets Stage for Conflict

Just as it looked like a fiscal cliff deal was coming together, President Obama gave a partisan, sarcastic speech this afternoon that seemed intended to set back the entire process. As Jonathan wrote, Republicans have good reason to think the president’s goal is to go over the cliff. But they also suspect the White House is preparing to push for further tax increases, in addition to the hikes on individuals making over $400,000 (and families making over $450,000) a year.

“What they’re telegraphing to me is that when Republicans ask for spending cuts, [Democrats are] gonna say ‘You’re not getting those unless we get more tax hikes’,” said one Republican Senate aide after the speech.

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Just as it looked like a fiscal cliff deal was coming together, President Obama gave a partisan, sarcastic speech this afternoon that seemed intended to set back the entire process. As Jonathan wrote, Republicans have good reason to think the president’s goal is to go over the cliff. But they also suspect the White House is preparing to push for further tax increases, in addition to the hikes on individuals making over $400,000 (and families making over $450,000) a year.

“What they’re telegraphing to me is that when Republicans ask for spending cuts, [Democrats are] gonna say ‘You’re not getting those unless we get more tax hikes’,” said one Republican Senate aide after the speech.

According to Senate GOP sources, there is no more debate on the deal to raise taxes on those making over $400,000, which is necessary to avert automatic across-the-board expiration of the Bush tax cuts. But Republican leadership is balking at the White House demand to delay sequestration without corresponding, targeted spending cuts.

“Not only was [Obama’s speech] unhelpful and antagonistic (as pretty much every journalist on Twitter and even Ezra Klein recognized), the tax part of negotiations is done,” another Republican aide said in an email. “There’s already an agreement there. The sticking point is Democrats trying to turn off the sequester cuts. Republicans aren’t going to agree to simply set spending cuts aside.” 

One big concern is that the White House will demand additional tax increases down the road, in return for spending cuts. Some also say the current tax deal will impact more Americans than initially thought. According to a Senate Republican source, the tax increase on individuals/families making over $400,000/$450,000 a year is not enough to reach the $600 billion in tax revenue included in the potential deal, even if you include hikes on capital gains, dividends, and phased-out personal exemptions and itemized deductions. In other words, those making well under $400,000–and as low as $250,000 a year–could also end up paying higher taxes under the deal.

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Call Us Blessed

This year marked the 150th anniversary of what David Von Drehle calls the most perilous year in our country’s history. As 1862 dawned, Von Drehle writes in his marvelous book Rise to Greatness: Abraham Lincoln and America’s Most Perilous Year, America was at death’s door. The federal government appeared overwhelmed. The Treasury Department was broke. The War Department was a corrupt shambles. The Union’s top general, George McClellan, was gravely ill. And Lincoln was viewed as weak and overmatched by events. “It is in the highest Degree likely that the North will not be able to subdue the South,” the British prime minister, Lord Palmerston, counseled his Foreign Office.

By the end of the year, the tide had turned. The South had been dealt major battlefield losses. The Union had developed a military strategy that would eventually prevail. “The twelve tumultuous months of 1862 were the hinge of American history,” according to Von Drehle, “the decisive moment at which the unsustainable compromises of the founding generations were ripped up in favor of a blueprint for a much stronger nation.” And it was the year in which Lincoln rose to greatness. 

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This year marked the 150th anniversary of what David Von Drehle calls the most perilous year in our country’s history. As 1862 dawned, Von Drehle writes in his marvelous book Rise to Greatness: Abraham Lincoln and America’s Most Perilous Year, America was at death’s door. The federal government appeared overwhelmed. The Treasury Department was broke. The War Department was a corrupt shambles. The Union’s top general, George McClellan, was gravely ill. And Lincoln was viewed as weak and overmatched by events. “It is in the highest Degree likely that the North will not be able to subdue the South,” the British prime minister, Lord Palmerston, counseled his Foreign Office.

By the end of the year, the tide had turned. The South had been dealt major battlefield losses. The Union had developed a military strategy that would eventually prevail. “The twelve tumultuous months of 1862 were the hinge of American history,” according to Von Drehle, “the decisive moment at which the unsustainable compromises of the founding generations were ripped up in favor of a blueprint for a much stronger nation.” And it was the year in which Lincoln rose to greatness. 

Rise to Greatness takes us through 1862 month by month. It’s a marvelous and gripping story, compellingly and beautifully written. And this is how the book concludes:

The first day of 1863 did not mark the end of the war, or even the beginning of the end. That would come later in the year, when Grant drove the Rebels out of Vicksburg and Chattanooga on his way to replacing Halleck as general in chief. But the close of 1862 — to borrow from Winston Churchill — brought the nation to the end of the beginning. And like the Shakespearean dramas that spoke so powerfully to the genius of Abraham Lincoln, the events of the final scenes were fated by the decisions, actions, omissions, flukes, failures, and successes of the early drama. When that fateful year began, a shattered land looked backward at a dream that seemed forever lost. When a new year arrived, the way forward was perceptible, an upward climb into a challenging but brilliant future.

As another new year arrives–a century and a half after the end of the beginning of the Civil War–it is a good time to reflect on the extraordinary journey America has traveled, the terrible “original sin” of slavery the United States had to overcome, and how close things came to unraveling. It’s also a good time to recall just how fortunate we were that, at the most arduous moment in our history, America produced its greatest president, an individual whose intellectual, political, and rhetorical gifts converged in a way unmatched in all our history.

Even with all the political nonsense we see unfolding before our eyes today, call us blessed.

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Obama’s Crisis Demagoguery

There may be a last-minute compromise reached today in the negotiations over the fiscal cliff, but not if President Obama has anything to say about it. Even as Vice President Joe Biden and Senate Minority Leader Mitch McConnell were believed to have led the effort to have the structure of a deal in place for the two houses of Congress to vote on later today, the president emerged to make a statement that seemed geared to scuttling the negotiations.

In a campaign-style event, the president spoke of a possible accord between the two parties that would avert the immediate effects of the fiscal cliff being reached. But the bulk of his remarks were devoted to goading the Republicans into backing away from any deal. Not only did he gratuitously insult the GOP about their stands on the budget to the great amusement of the hand-picked audience of supporters, he also made it clear that the tax increases in any compromise would just be the start of what he hoped to accomplish. Even worse, he implied that spending cuts, especially the entitlement reform that is necessary for any long-term solution to the nation’s problems, are not really on the table as far as he is concerned.

Given the tone of his comments and the timing, Republicans should be forgiven for suspecting that his real purpose was to send the country over the cliff in the belief that only the GOP would be blamed for the disaster.

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There may be a last-minute compromise reached today in the negotiations over the fiscal cliff, but not if President Obama has anything to say about it. Even as Vice President Joe Biden and Senate Minority Leader Mitch McConnell were believed to have led the effort to have the structure of a deal in place for the two houses of Congress to vote on later today, the president emerged to make a statement that seemed geared to scuttling the negotiations.

In a campaign-style event, the president spoke of a possible accord between the two parties that would avert the immediate effects of the fiscal cliff being reached. But the bulk of his remarks were devoted to goading the Republicans into backing away from any deal. Not only did he gratuitously insult the GOP about their stands on the budget to the great amusement of the hand-picked audience of supporters, he also made it clear that the tax increases in any compromise would just be the start of what he hoped to accomplish. Even worse, he implied that spending cuts, especially the entitlement reform that is necessary for any long-term solution to the nation’s problems, are not really on the table as far as he is concerned.

Given the tone of his comments and the timing, Republicans should be forgiven for suspecting that his real purpose was to send the country over the cliff in the belief that only the GOP would be blamed for the disaster.

The president obviously thinks the very last moment before a fiscal catastrophe that would raise taxes on all Americans and impose devastating cuts in defense is a good time to mock the idea of spending cuts and to threaten further taxes. The only possible motivation for this is to convince suspicious Republicans that any give in their position will not be met even part of the way by the Democrats. In other words, if even now the president is unprepared to contemplate entitlement reform, then it is difficult to make the argument that they should do the responsible thing and compromise.

Through last year’s debt ceiling crisis as well as the fiscal cliff talks, the president has always behaved as if he thought he had nothing to lose by engaging in class warfare demagoguery. Since going over the cliff means raising more taxes and feeding the government beast that he seems uninterested in restraining as well as cutting defense spending, why shouldn’t he try to incite the GOP to refuse to agree to a deal?

But for him to behave in this manner on the very eve of the crisis while leaders of both parties are struggling to construct a makeshift measure that will get the nation past midnight is telling.

This is not just the confident manner of a re-elected president, but the contempt of a man who believes he doesn’t have to listen to anyone but himself. This may presage future fights over taxes in which he thinks he will continue to have the whip hand over the GOP. But the law of unintended consequences may eventually catch up with him. Though his soak-the-rich rhetoric resonates with many Americans, they also understand that entitlement reform is in the best interests of the nation and that raising taxes on millionaires won’t balance the budget. Few outside the hard left really believe, as Obama seemed to say today, that America only has a tax problem, not a spending problem.

If in the coming months and years these irresponsible tactics catch up with the president, we may look back on his behavior today and see it as the turning point in the debate. The Greeks had a word for the kind of behavior President Obama demonstrated today: hubris. His second term may well be blighted by it.

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How the Right Can Reclaim its Edge on Foreign Policy

Aside from the prospect of automatic cuts in near-term defense spending, the ongoing drama over the so-called fiscal cliff continues to sideline the issue of foreign policy. But as the Republican Party recovers from the November election and finds its issue compass going forward, foreign policy should never be far behind—not least because of what Dan Drezner writes in a new Foreign Affairs essay on the GOP: Republicans finally saw the end of their dominance of public opinion on foreign policy they have held since the era of the Vietnam War.

Conservatives may already be tired of what they perceive to be lectures on their party’s ills from those who don’t share their ideological preferences. I don’t blame them. But Drezner’s essay is worth reading because Drezner generally eschews ad hominem attacks and his writing is tonally free of partisan hostility. Additionally, conservatives reading the essay will find that in addition to what they are accused of getting wrong, they will discover that an honest assessment of the GOP’s recent foreign policy gets a fair amount right.

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Aside from the prospect of automatic cuts in near-term defense spending, the ongoing drama over the so-called fiscal cliff continues to sideline the issue of foreign policy. But as the Republican Party recovers from the November election and finds its issue compass going forward, foreign policy should never be far behind—not least because of what Dan Drezner writes in a new Foreign Affairs essay on the GOP: Republicans finally saw the end of their dominance of public opinion on foreign policy they have held since the era of the Vietnam War.

Conservatives may already be tired of what they perceive to be lectures on their party’s ills from those who don’t share their ideological preferences. I don’t blame them. But Drezner’s essay is worth reading because Drezner generally eschews ad hominem attacks and his writing is tonally free of partisan hostility. Additionally, conservatives reading the essay will find that in addition to what they are accused of getting wrong, they will discover that an honest assessment of the GOP’s recent foreign policy gets a fair amount right.

A great deal of Drezner’s criticism revolves around rhetoric. Thus, there were moments when Mitt Romney, for example, squandered opportunities with unforced errors. The most memorable instance was Romney’s decision to call Russia our “No. 1 geopolitical foe.” Romney was guilty of the same mistake the Obama administration made with regard to Russia: They both overestimated Russia’s power. Obama thought Russia could and would deliver all sorts of cooperation on a range of issues. Yet Vladimir Putin had no intention and in many cases no ability do more than talk tough. Putin simply bluffed his way to more and more American concessions, and pocketed them.

Drezner expands his criticism to an issue directly relevant to the current budget debate. “Republicans continually attempt to justify extremely high levels of defense spending, for example, on the grounds that the United States supposedly faces greater threats now than during the Cold War,” he writes. It is essential that conservatives, and especially the Republican politicians taking part in the standoff over the fiscal cliff, understand how to advocate for defense spending.

It is true that the existence of foreign threats doesn’t necessitate, by itself, historic levels of defense spending. But those threats are far from the only justification for the defense budget. Republican officeholders would do well to turn to another essay in the same issue of Foreign Affairs that makes this case. The essay, by Stephen G. Brooks, G. John Ikenberry, and William C. Wohlforth, explains how a fully engaged America abroad yields both security and financial benefits that make defense spending a bargain.

They note that American security guarantees around the globe prevent the rise of regional hegemons, military conflict, and the spread of destabilizing nuclear weapons more often than not; secure multilateral cooperation; and bring the U.S. economic benefits by both strengthening the dollar and giving America leverage when it comes to negotiating free trade agreements. Romney’s repeated exhortations that we’d want a military so powerful no one would dare “test us” is an inadequate justification for a highly justifiable policy.

Finally, Drezner writes:

George W. Bush’s greatest foreign policy accomplishments came not in the military realm but in rethinking economic statecraft. He signed more free-trade agreements than any other president. Through the Millennium Challenge Corporation and the President’s Emergency Plan for AIDS Relief, the Bush administration devised innovative ways of advancing U.S. interests and values abroad. In developing the architecture for improved financial coercion, the administration paved the way for the sanctions that are now crippling Iran’s economy. Force can be an essential tool of statecraft, but it should rarely be the first tool used, and sometimes it can be most effective if never used at all. Republicans understand the power of the free market at home; they need to revive their enthusiasm for the power of the market abroad, as well.

There are two points to make here. First, Romney had no trouble grasping this, as evidenced by his concentration on economics-based statecraft in the foreign policy debate with President Obama. Republicans remain the party of free trade, and show no sign of abandoning that position. Second, on Iran, there isn’t a ton of daylight between Drezner and the right. Conservatives have pushed for tough sanctions backed up by the credible threat of force. Obama has opposed and weakened tough sanctions every step of the way, and his administration has worked to undermine any credible threat of force.

Drezner says bellicosity is hurting the GOP with a war-weary public. He’s right that the public is war-weary, but Iran is not the issue where this is hurting the GOP. In fact, as the Wall Street Journal recently reported, public support for military action against Iran in the event sanctions fail is now at a high point. Even out of power, the GOP won that argument.

This is not to say that last year’s crop of GOP presidential candidates always had the policy right–far from it. From flirtations with a trade war with China to undue nostalgia for Hosni Mubarak to loyalty investigations into Hillary Clinton’s longtime aide, there were plenty of forgettable—and dangerous–suggestions. But the 2016 crop of candidates will likely be quite different from the 2012 cast of characters, which too often spoke as if the world wasn’t listening. It was–and is–and conservatives need to remember (or learn) how to reclaim what was a well-earned advantage over the left on foreign policy.

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Why Both Parties Failed

It almost goes without saying that even if a deal is somehow reached today that would prevent a massive tax increase and defense cuts, the disgust of the public at the fiscal cliff hijinks that have gone on in Washington the last few weeks will outweigh the relief they feel. If the last-second talks between Vice President Joe Biden and Senate Minority Leader Mitch McConnell succeed in crafting a short-term compromise that enough Democrats and Republicans can live with, the country will be spared the disaster that would ensue should the scheduled across-the-board tax increases and devastating sequestration of funds for national defense be implemented. But as much as both sides have spent more time casting aspersions at each other’s motives than negotiating in good faith, there needs to be a full accounting of why this happened in the way that it did.

To say that both Republicans and Democrats have failed in this episode is stating the obvious. But each failed in different ways and an analysis of their shortcomings tells us a lot about the direction in which the country is heading.

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It almost goes without saying that even if a deal is somehow reached today that would prevent a massive tax increase and defense cuts, the disgust of the public at the fiscal cliff hijinks that have gone on in Washington the last few weeks will outweigh the relief they feel. If the last-second talks between Vice President Joe Biden and Senate Minority Leader Mitch McConnell succeed in crafting a short-term compromise that enough Democrats and Republicans can live with, the country will be spared the disaster that would ensue should the scheduled across-the-board tax increases and devastating sequestration of funds for national defense be implemented. But as much as both sides have spent more time casting aspersions at each other’s motives than negotiating in good faith, there needs to be a full accounting of why this happened in the way that it did.

To say that both Republicans and Democrats have failed in this episode is stating the obvious. But each failed in different ways and an analysis of their shortcomings tells us a lot about the direction in which the country is heading.

The Republicans failed because a critical mass of the House GOP caucus believed their mandate to stop Washington’s out-of-control spending and taxing outweighed their responsibility to keep the government running properly. The Tea Partiers were right that the country has a spending problem rather than one based in taxes that were too low, and their desire to reform the entitlements that are sinking the nation in debt brought a note of sanity to the irrational nature of the way Congress usually does business. But the idea they were empowered to stand in the way of any compromise on the debt ceiling and now the fiscal cliff was just as foolish as the refusal of the other side to address the root cause of the crisis.

After their smashing victory in the 2010 midterms, conservatives were right to say they were elected to throw a monkey wrench into the government machine even if the Senate and the White House were still controlled by the Democrats. But after the people voted to keep government divided last month, there was an obligation on the part of even the most hard-core conservatives to compromise in order to keep the government afloat. They may have been faced with a negotiating partner in the president who was working to prevent a deal since he believes he benefits politically from the implementation of the fiscal cliff taxes and cuts. Yet it would be dishonest to absolve the GOP caucus from blame here, since they were unable to pass House Speaker John Boehner’s Plan B compromise because many of them simply would not sign onto any tax increases of any kind.

Being right about policy does not excuse a political party from the need to keep the government functioning. In this case, that means the reforming zeal of many conservatives that is to be praised in principle prevented them from doing what needed to be done in practice to prevent today’s impending catastrophe. Though the public is wrong to blame Republicans more than Democrats for this mess, it isn’t wrong to see the GOP has having potentially sacrificed the well-being of the citizens for the sake of political purity.

As it turns out, the Democrats are guilty of almost the exact opposite sins.

Over the last year and a half, the president and his party correctly gauged the political effects of any discussion about entitlement reform. They knew doing anything to cut back on such spending would be unpopular even if many of them understood it was necessary. But rather than deal in good faith with the Republicans for a deal that would address the country’s long-term peril rather than merely a momentary shortfall, they spent this time engaging in demagoguery about the wealthy and their opponents. That was smart politics but bad public policy.

The tax increases they have been demanding will do little to fix the deficit. Indeed, they may prove entirely counterproductive since their soak-the-rich scheme will probably diminish the investments needed to produce robust growth instead of the anemic recovery we have been experiencing. Yet the only fact Democrats seemed capable of grasping was the one that told them that the public was dubious about the Republicans’ reform plans and that such ideas were unpopular.

That has left us with one party with sound economic principles but which lacked the willingness to compromise for the sake of the public good, and another with sound political instincts but a cynical view about policy that makes problem solving impossible. The Democrats’ intransigent cynicism is far more disreputable than the Republicans disregard for political reality, but put the two together and you get what we are currently seeing: a perfect storm of government dysfunction. If the long-term fiscal crisis is to be addressed it will require both parties to sober up and address their shortcomings.

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Happy New Year, America

If you’d like to have your New Year’s Eve thoroughly ruined, I’d suggest taking a look today at Mortimer Zuckerman’s piece over at USNews.com, “Brace for an Avalanche of Unfunded Debt.”

It’s so depressing because it’s true. The federal government keeps its books not in ways that most clearly reveal the true financial picture, but in ways designed, quite deliberately, to obscure that picture. This is for the short-term benefit of politicians and nothing else, the country be damned. And, as Zuckerman notes, unless something is done about this, and soon, that is exactly what the country will be.

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If you’d like to have your New Year’s Eve thoroughly ruined, I’d suggest taking a look today at Mortimer Zuckerman’s piece over at USNews.com, “Brace for an Avalanche of Unfunded Debt.”

It’s so depressing because it’s true. The federal government keeps its books not in ways that most clearly reveal the true financial picture, but in ways designed, quite deliberately, to obscure that picture. This is for the short-term benefit of politicians and nothing else, the country be damned. And, as Zuckerman notes, unless something is done about this, and soon, that is exactly what the country will be.

As he points out, the country is incurring future financial obligations at the rate of $8 trillion a year. That exceeds the total taxable income of everyone earning more than $66,198 a year and all corporate profits. Even a liberal should be able to understand that if future obligations in entitlements are rising at $8 trillion and the total taxable income of the middle class and up, plus corporations, is $7 trillion, “getting the rich to pay their fair share” won’t do the trick.

The good news, of course, is that these future obligations are not like the national debt, which is at $16 trillion and rising fast. The debt is an inescapable obligation because we pledged the “full faith and credit of the United States” when we borrowed the money. The only alternatives don’t bear thinking about: repudiating the debt or inflating it away.

As Zuckerman points out, it costs $359 billion to service the debt at today’s very low interest rates. Should interest rates begin to rise, either because of returning prosperity or a loss of faith by the market, the cost of servicing the debt will increase $150 billion for every percentage point rise in interest rates. We’re currently paying about 2.2 percent on the debt. Greece is paying over 16 percent to borrow money. As they say: you do the math.

Unlike the debt, future entitlement obligations are obligations only because current law says they are, and laws can be changed. For instance, if we were to, 1) change the formula by which cost-of-living increases in Social Security payments are calculated so that it didn’t overstate inflation as the formula does now, and 2) gradually increase the age of eligibility to reflect ever-increasing life expectancy, Social Security would become solvent for the foreseeable future.

The annual cost-of-living adjustment is designed to keep recipients’ purchasing power intact, but it currently gives them, in effect, a raise. Is it really too much to ask of recipients that they get what’s due them, not more? Likewise, would raising the age of eligibility one month for every year future recipients are now under the age of 55 incur unbearable political opposition? Not if politicians, starting with the president, do their jobs and, you know, lead, explaining the truth and showing the way out of trouble. I have a news bulletin for the political class: the American people are neither stupid nor selfish. Tell them the truth and they will accept it.

But to do that—to tell the American people the truth about the financial situation of the country—requires that politicians surrender the power to keep the books in self-serving ways. The country needs just what corporations have: a set of accounting rules they are obliged to follow that reveal the truth, not conceal it, and an independent authority to certify the books as honest and complete, including future obligations. (The Congressional Budget Office, which “scores” legislation, is nonpartisan, but it is by no means independent. It is a creature of Congress and has no choice but to do Congress’s bidding, which is political protection first, the truth a long-way second.)

There will be no long-term solution to the impending financial disaster until the government keeps honest books. The sooner this fact is on the country’s political radar and becomes part of the discussion, the better. There is not a lot of time left.

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ObamaCare, 2013, and the Start of the GOP Comeback

Right now the political landscape is grim for Republicans–and in the short term, thanks to the so-called fiscal cliff, things may get grimmer still. But moments like these can pass, often quicker than we think. And next year may turn out to be one in which the pernicious effects of the Affordable Care Act–aka ObamaCare–really begin to kick in, from higher premiums to the loss of employer-based health insurance to the start of enrollment in insurance exchanges. It will become more and more clear to the public what a nightmarish law the Affordable Care Act actually is.

“The administration is well behind schedule,” my Ethics and Public Policy Center colleague James Capretta told Byron York of the Washington Examiner. “It’s going to be a train wreck in a lot of places.”

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Right now the political landscape is grim for Republicans–and in the short term, thanks to the so-called fiscal cliff, things may get grimmer still. But moments like these can pass, often quicker than we think. And next year may turn out to be one in which the pernicious effects of the Affordable Care Act–aka ObamaCare–really begin to kick in, from higher premiums to the loss of employer-based health insurance to the start of enrollment in insurance exchanges. It will become more and more clear to the public what a nightmarish law the Affordable Care Act actually is.

“The administration is well behind schedule,” my Ethics and Public Policy Center colleague James Capretta told Byron York of the Washington Examiner. “It’s going to be a train wreck in a lot of places.”

The Affordable Care Act is President Obama’s signature legislative achievement. Even before its worst effects have been felt it was, according to the presidential scholar George C. Edwards III, “perhaps the least popular major domestic policy passed in the last century.” If conservatives are correct about the inherent flaws of ObamaCare–and I believe they are–it could well become a political millstone around the neck of Democrats for much of the rest of this decade and beyond. This will have ramifications far beyond what happens regarding the fiscal cliff.

As the problems with the Affordable Care Act mount, Mr. Obama will do what comes most naturally to him: blame others. In the end, though, ObamaCare is his baby. It’s one of the most far-reaching progressive achievements in modern times. And it will, if the conservative view of the world is right, turn out to be a policy disaster of the first order.

In 2010, Mr. Obama got what he wanted. He signed the Affordable Care Act into law. In 2012, the Supreme Court upheld its constitutionality. And it 2013 liberals and Democrats may well learn the wisdom of the words, “Be Careful What You Wish for ’cause It Might Come True.”

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