Commentary Magazine


Topic: Jack Lew

Was Russia’s WTO Membership a Mistake?

A couple of years ago I was having a discussion with a critic of Putin’s Russia–who was expelled for his trouble–who noted with alarm the Russian-owned gas companies dotting American highways. I said I saw that as a good sign: at the very least the economic integration meant Russia had more skin in the game, and would probably be less abusive to Western companies doing business in Russia.

In the broader sense, though, the benefits were potentially endless, in large part because the more that Russian citizens dealt directly with Americans the better for both countries. My interlocutor saw it differently, because America will play by the rules whether Russia does or not. I thought of his warning, and dismissed it, in the debate over Russia’s accession to the World Trade Organization. Russia’s membership in the WTO, I argued repeatedly, was overdue and would benefit American companies, and the increased trade would restrain Putin’s ability to manipulate American policy while boosting American leverage over Russia.

I was sure I was right. I’m not so sure now. But it’s not because Russia doesn’t “deserve” to be in the WTO or that the benefits were a mirage. And it’s not because of the push to “punish” Russia for its invasion of Ukraine–though sanctions are surely appropriate. It’s because the economic integration of Russia has done precisely the opposite of what it was expected to do in one crucial regard: the recent events in Ukraine and the West’s unsteady response indicate Russia’s increased leverage instead. Today’s New York Times story on the Obama administration’s internal debate over Ukraine demonstrates this perfectly.

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A couple of years ago I was having a discussion with a critic of Putin’s Russia–who was expelled for his trouble–who noted with alarm the Russian-owned gas companies dotting American highways. I said I saw that as a good sign: at the very least the economic integration meant Russia had more skin in the game, and would probably be less abusive to Western companies doing business in Russia.

In the broader sense, though, the benefits were potentially endless, in large part because the more that Russian citizens dealt directly with Americans the better for both countries. My interlocutor saw it differently, because America will play by the rules whether Russia does or not. I thought of his warning, and dismissed it, in the debate over Russia’s accession to the World Trade Organization. Russia’s membership in the WTO, I argued repeatedly, was overdue and would benefit American companies, and the increased trade would restrain Putin’s ability to manipulate American policy while boosting American leverage over Russia.

I was sure I was right. I’m not so sure now. But it’s not because Russia doesn’t “deserve” to be in the WTO or that the benefits were a mirage. And it’s not because of the push to “punish” Russia for its invasion of Ukraine–though sanctions are surely appropriate. It’s because the economic integration of Russia has done precisely the opposite of what it was expected to do in one crucial regard: the recent events in Ukraine and the West’s unsteady response indicate Russia’s increased leverage instead. Today’s New York Times story on the Obama administration’s internal debate over Ukraine demonstrates this perfectly.

It reveals that there are two sides in the administration: those who want to swiftly punish Russia and those who want to show extreme caution toward something that could reverberate throughout the economy. That’s why, the Times explains, “Obama has the power to go much further even without new legislation from Congress” but hasn’t done so. And the roster of administration advisors line up pretty much exactly where you’d expect them to on this, with those like Victoria Nuland supporting more aggressive sanctions and Treasury Secretary Jack Lew opposed. The Times continues:

But American businesses are warning against overreaction. Representatives of groups like the U.S. Chamber of Commerce, the National Association of Manufacturers and the United States-Russia Business Council have been holding meetings at the White House or in Congress to share their views.

They are urging policy makers to be sure that any sanctions would actually have an impact on Russian behavior, that the costs not outweigh the benefits and that they be multilateral. “We are working closely with policy makers on both sides of the aisle to safeguard manufacturing employees and manufacturers’ investments around the world,” said Jay Timmons, president of the manufacturers association.

Although the United States does only $40 billion in trade with Russia each year, American businesses argue that the amount understates the real economic ties. Ford, for instance, has two assembly plants in Russia that make cars with material that comes from Europe, so that would not be reflected in import-export figures.

Boeing has sold or leased hundreds of planes in Russia and projects that the republics of the former Soviet Union will need an additional 1,170 planes worth nearly $140 billion over the next 20 years. Moreover, the company has a design center in Moscow, has just announced new manufacturing and training facilities in Russia and depends on Russia for 35 percent of its titanium.

“There’s no doubt that key economic groups, especially energy, don’t want us to act,” said James B. Steinberg, a former deputy secretary of state under Mr. Obama and now dean of the Maxwell School of Citizenship and Public Affairs at Syracuse University.

I’m not suggesting that U.S.-Russia trade suddenly materialized out of nowhere when Russia joined the WTO–of course that’s not the case. But it does raise questions about authoritarian actors joining international institutions that don’t require more sturdy political liberalization (like NATO). I’ve written in the past about “reverse integration,” James Mann’s theory of how China could take advantage of economic integration not to play by international rules but to weaken the threshold for rogue regimes to be granted increased international legitimacy and thus dilute, not enhance, global democracy.

That is not quite the concern here with Putin (or at least not the main concern). Russia’s membership in the WTO doesn’t seem to be de-democratizing economic institutions here or abroad. Rather, Putin has taken advantage of economic integration with the U.S. to dull any American response to his adventuresome foreign policy. Because that response already had virtually no military component, weakening or greatly delaying any financial sanctions would tie both the West’s hands behind its back while he did what he wanted.

There has been some talk of how a more proactive energy policy, in terms of American production and export, could have already put a more effective sanctions infrastructure in place. But it’s also worth pondering if, with the best of intentions, we’ve not only depleted our own sanctions arsenal but bolstered Putin’s.

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Jack Lew’s Lie and Obama’s ‘Not One Dime’

Today’s Senate hearing on the confirmation of Jack Lew as Treasury Secretary isn’t attracting as much attention as those of Chuck Hagel and John Brennan. Nor is it likely that Republicans will have any more success in derailing his nomination than they did with the president’s national security picks. Nevertheless, the proceedings will afford Republicans plenty of opportunities to skewer both the Obama administration’s economic policies as well as give the nominee a hard time about his time leading a financial institution that got bailed out by the government after the 2008 fiscal meltdown. But the real focus on Lew today ought not to be on the slim chance that he will slip up in a way that will delay his confirmation. Rather, senators and the public should be zeroing in on the ominous similarity between something Lew said under oath in 2010 when he was White House Budget Director and a key point in the president’s State of the Union address last night.

Testifying before the Senate Budget Committee in 2010, Lew pledged that the budget the president had put forward as an alternative to Republican plans “would not add to the debt.” If that sounds familiar this morning, it should. Last night during the SOTU, President Obama presented another laundry list of liberal projects that he said Congress must enact into law. But, he added, no one should worry about the cost since the left-wing wish list of “investments” would add “not a single dime” to the nation’s debt. Unfortunately for the president, a hard look at the facts about Lew’s testimony makes the president’s current pledge look like just another politician’s fib.

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Today’s Senate hearing on the confirmation of Jack Lew as Treasury Secretary isn’t attracting as much attention as those of Chuck Hagel and John Brennan. Nor is it likely that Republicans will have any more success in derailing his nomination than they did with the president’s national security picks. Nevertheless, the proceedings will afford Republicans plenty of opportunities to skewer both the Obama administration’s economic policies as well as give the nominee a hard time about his time leading a financial institution that got bailed out by the government after the 2008 fiscal meltdown. But the real focus on Lew today ought not to be on the slim chance that he will slip up in a way that will delay his confirmation. Rather, senators and the public should be zeroing in on the ominous similarity between something Lew said under oath in 2010 when he was White House Budget Director and a key point in the president’s State of the Union address last night.

Testifying before the Senate Budget Committee in 2010, Lew pledged that the budget the president had put forward as an alternative to Republican plans “would not add to the debt.” If that sounds familiar this morning, it should. Last night during the SOTU, President Obama presented another laundry list of liberal projects that he said Congress must enact into law. But, he added, no one should worry about the cost since the left-wing wish list of “investments” would add “not a single dime” to the nation’s debt. Unfortunately for the president, a hard look at the facts about Lew’s testimony makes the president’s current pledge look like just another politician’s fib.

Senator Jeff Sessions hasn’t let go of his anger about Lew’s 2010 debt promise and has even vowed to attempt to filibuster his nomination because of what he says was an outright lie under oath to Congress. It doesn’t look as if many of his colleagues will join him in that endeavor so Lew’s confirmation isn’t in much doubt. But as he wrote last month in National Review, Sessions is right on target when he points out just how egregious Lew’s lie about the Obama budget and the debt really was. Far from being deficit neutral, the budget proposal that Lew tried to sell to Congress would have added $13 trillion to the national debt by the figures provided by the White House. Many senators, especially Democrats, are probably inclined to give Lew a pass for the fib rather than agree with Sessions’ characterization of it as a “campaign of financial deception,” But there’s no denying that Lew was blowing smoke about expenditures that almost always turn out to be far higher than originally promised.

Combined with his role in the 2008 disaster as head of Citigroup, that’s the sort of lie that ought to worry Americans who were told last night by the president that the economy was in pretty good shape and getting better even if unemployment remains high. But more to the point, it ought to serve as a red flag to anyone inclined to take the president’s “not one dime” promise seriously.

If politicians, even the one who just won re-election as president, wonder why Americans are increasingly cynical about politics, they can look no further than the Kabuki dance the Obama administration has been enacting for the past few years about the debt. Republicans need to be more than the party of austerity if they are ever to take back the White House. But if Democrats think they can go on lying about the deficit or the need to enact far reaching reforms of entitlements they are mistaken. While fibs about spending are a time-honored Washington tradition, no one should be under the impression that these kinds of lies about the debt crisis will be tolerated indefinitely.

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Choosing Nomination Battles

Republicans don’t seem to be retreating from the battle over Chuck Hagel. Senator James Inhofe, the new ranking member on the Senate Armed Services Committee, has added his name to the list of Republicans opposing the defense secretary nominee. The question is, how far will the party be willing to go on this fight? There are other nominations it has an interest in fighting, including Jack Lew for treasury secretary, John Kerry for secretary of state, and John Brennan for CIA chief. In the end, it will only be able to choose a couple to focus on.

The point of battling Lew wouldn’t necessarily be to prevent his confirmation outright, because there is no indication that Obama would choose someone preferable. But threatening a fight could help bring attention to policy differences between the GOP and the White House, and hold Lew accountable for his slippery relationship with the truth.

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Republicans don’t seem to be retreating from the battle over Chuck Hagel. Senator James Inhofe, the new ranking member on the Senate Armed Services Committee, has added his name to the list of Republicans opposing the defense secretary nominee. The question is, how far will the party be willing to go on this fight? There are other nominations it has an interest in fighting, including Jack Lew for treasury secretary, John Kerry for secretary of state, and John Brennan for CIA chief. In the end, it will only be able to choose a couple to focus on.

The point of battling Lew wouldn’t necessarily be to prevent his confirmation outright, because there is no indication that Obama would choose someone preferable. But threatening a fight could help bring attention to policy differences between the GOP and the White House, and hold Lew accountable for his slippery relationship with the truth.

Brennan is a different story. Republicans don’t necessarily have a problem with his nomination, but they want to block him primarily as leverage to uncover more information about Benghazi. This is less defensible than blocking a nominee because of concerns over competency, temperament, policy differences, etc. Democrats will frame it as political gamesmanship, and they will have a point.

There have been some rumblings about opposing Kerry, but none serious and he’s expected to get through easily.

At this point, the Hagel fight appears to be the most winnable one for Republicans. The fact that he disavowed his past positions suggests the White House realizes the political risks of having a big, public debate over Middle East and Iran policy. Senate Democrats seem willing to support Hagel, but are they really willing to fight for him? Not just during the confirmation hearings, but also if his confirmation ends up getting blocked? I can’t imagine they want this debate either, which, for Republicans, may be all the more reason to go ahead with it.

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An Administration That Won’t Face Reality

President Obama isn’t likely to have much trouble getting the Senate to confirm Jack Lew as his new treasury secretary. Though Senator Jeff Sessions has vowed to try and stop Lew, there is nothing in the nominee’s long record of service to Democratic presidents that would disqualify him for the office. Given the fight that is brewing over the nominations of Chuck Hagel and John Brennan for the Department of Defense and the CIA, there is little appetite on the Hill for any further effort to deny the president his choice to run an important department.

But even though Lew will probably be easily confirmed, his nomination is one more signal that there may be no way to avoid more bitter and counter-productive confrontations with Congress over the budget. Lew is well known to be a hard-core progressive who, during the negotiations with Republicans over the debt ceiling and the fiscal cliff, made it clear that he opposes any true reform of entitlement spending. Having run to the left and won re-election, President Obama is entitled to try and govern from the left. Lew’s selection illustrates that this is his intention. But though he may have a mandate to govern, that doesn’t give him the power to alter reality. If he isn’t prepared to start thinking about cutting spending, then no amount of rhetorical excess will prevent this country from going further down the road to insolvency.

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President Obama isn’t likely to have much trouble getting the Senate to confirm Jack Lew as his new treasury secretary. Though Senator Jeff Sessions has vowed to try and stop Lew, there is nothing in the nominee’s long record of service to Democratic presidents that would disqualify him for the office. Given the fight that is brewing over the nominations of Chuck Hagel and John Brennan for the Department of Defense and the CIA, there is little appetite on the Hill for any further effort to deny the president his choice to run an important department.

But even though Lew will probably be easily confirmed, his nomination is one more signal that there may be no way to avoid more bitter and counter-productive confrontations with Congress over the budget. Lew is well known to be a hard-core progressive who, during the negotiations with Republicans over the debt ceiling and the fiscal cliff, made it clear that he opposes any true reform of entitlement spending. Having run to the left and won re-election, President Obama is entitled to try and govern from the left. Lew’s selection illustrates that this is his intention. But though he may have a mandate to govern, that doesn’t give him the power to alter reality. If he isn’t prepared to start thinking about cutting spending, then no amount of rhetorical excess will prevent this country from going further down the road to insolvency.

Lew’s hard-line liberalism is exactly what qualifies him to sit in Obama’s new cabinet of yes-men. That he has the trust of the president after serving him faithfully as White House chief of staff is to his credit, but that doesn’t change the fact that an administration economic team that is dedicated to defending the status quo is exactly what the country doesn’t need as we sink further into a period of fiscal crisis.

Mr. Obama seems to think that he can avoid the usual second term blues that afflict most presidents by creating a team with a hard ideological edge that won’t lose focus or lack the energy to fight for the things he believes. That’s an interesting working theory for how to be the first president to avoid a miserable second term since Theodore Roosevelt. But he and Jack Lew seem to think that he can alter the basic laws of economics the way King Canute sought to alter the laws of nature at the seashore.

By replacing Tim Geithner—a man who for all of his flaws had a grasp of what was good or bad for the nation’s economy—with a left-wing ideologue, Obama is telling us that he thinks his second term will be one in which his political beliefs can contradict the basic fact that the United States cannot tax its way out of its spending problem. While the liberal press continues to portray the president’s conservative opponents as extremists, it is clearer than ever that the real radicals are in the White House and now at the Treasury.

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Obama’s Diversity Problem Might Not Be Easily Solved

As the White House scrambles to push back on the narrative that Obama’s cabinet lacks diversity, National Journal reports that there are few jobs left for potential female appointments (h/t HotAir):

Say Obama wants to make a grand gesture; what jobs are left? If he names a female labor secretary to succeed Solis, that will keep him at the status quo. But it’s not a top job and it’s one many women have held. Plus Solis is Hispanic, so now there’s that to worry about as well.

The only immediate opening with stature roughly equivalent to secretary of State, Defense, or Treasury is Lew’s job as White House chief of staff. To name a woman, Obama would have to throw top mentionees Ron Klain (former chief of staff to Vice Presidents Al Gore and Joe Biden) and Denis McDonough (currently deputy national-security adviser) under the bus. He does have some logical female options, starting with Nancy-Ann DeParle and Alyssa Mastromonaco. Both now hold the title of deputy chief of staff.

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As the White House scrambles to push back on the narrative that Obama’s cabinet lacks diversity, National Journal reports that there are few jobs left for potential female appointments (h/t HotAir):

Say Obama wants to make a grand gesture; what jobs are left? If he names a female labor secretary to succeed Solis, that will keep him at the status quo. But it’s not a top job and it’s one many women have held. Plus Solis is Hispanic, so now there’s that to worry about as well.

The only immediate opening with stature roughly equivalent to secretary of State, Defense, or Treasury is Lew’s job as White House chief of staff. To name a woman, Obama would have to throw top mentionees Ron Klain (former chief of staff to Vice Presidents Al Gore and Joe Biden) and Denis McDonough (currently deputy national-security adviser) under the bus. He does have some logical female options, starting with Nancy-Ann DeParle and Alyssa Mastromonaco. Both now hold the title of deputy chief of staff.

This is another reason why the Chuck Hagel defense secretary nomination was an odd choice. Michele Flournoy was arguably more qualified than Hagel for the role, yet she was passed over. Now, if Obama nominates a woman, it will look like a tokenism under external pressure. Worse, because all the roles he has left to fill are of lower standing, this makes it seem like he doesn’t trust a woman in a higher-ranking position.

There isn’t anything the left can do about this but complain, and I doubt this controversy will drag on much longer. Still, the extent of the backlash seems to have caught the White House off-guard, which only adds to the sense that Obama was unprepared for the second term transition.

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The Great Miscalculation of John Roberts

Conservatives have been rightly disappointed with the Supreme Court ruling to uphold ObamaCare, but that disappointment has been all the more bitter because the case has been full of unpleasant surprises. Conservatives believed they had two objectives to get ObamaCare overturned: convince a majority of the justices there was no “limiting principle” to the individual mandate that would excuse it from setting precedent on the Commerce Clause, and convince Anthony Kennedy (the assumed swing vote) that because there was no limiting principle, the law could not survive an accurate reading of the Commerce Clause.

They did both, and yet still lost the case, thanks to Chief Justice John Roberts’s decision to elevate politics over jurisprudence. But now it’s time for Roberts to confront disappointment himself. Roberts believed he was doing two things by upholding ObamaCare: he was settling the issue of whether the mandate is a tax (it is), thus protecting the Commerce Clause, and he was preventing the further delegitimization of the Supreme Court by the Democrats, thus improving its general reputation. He failed on both counts.

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Conservatives have been rightly disappointed with the Supreme Court ruling to uphold ObamaCare, but that disappointment has been all the more bitter because the case has been full of unpleasant surprises. Conservatives believed they had two objectives to get ObamaCare overturned: convince a majority of the justices there was no “limiting principle” to the individual mandate that would excuse it from setting precedent on the Commerce Clause, and convince Anthony Kennedy (the assumed swing vote) that because there was no limiting principle, the law could not survive an accurate reading of the Commerce Clause.

They did both, and yet still lost the case, thanks to Chief Justice John Roberts’s decision to elevate politics over jurisprudence. But now it’s time for Roberts to confront disappointment himself. Roberts believed he was doing two things by upholding ObamaCare: he was settling the issue of whether the mandate is a tax (it is), thus protecting the Commerce Clause, and he was preventing the further delegitimization of the Supreme Court by the Democrats, thus improving its general reputation. He failed on both counts.

Roberts had good reason to believe his decision to surrender to pressure from the Obama administration and reduce the Court’s power as a supposed equal branch would at least stop the assault on the Court. After all, he held up his end of the bargain. The New York Times waited all of two days to rough Roberts up some more:

The Court’s conservatism calls to mind the defiance of the Court in the 1930s when it regularly struck down New Deal statutes during the Great Depression. But there are important differences. The 1930s Court saw itself as preserving established precedents and principles. The Roberts majority does not have that conservative role. Nor does it play the role of the 1960s Court, whose rulings reinforced a relatively liberal trend in politics.

The current conservatives are not preserving a tradition or articulating a new social consensus. Instead, as the legal historian Robert W. Gordon put it, they have regularly been radical innovators, aggressively stepping into political issues to empower the Court itself.

Roberts extended an open hand to the administration and its allies only to find, as a favorite White House metaphor would have it, a clenched fist. But he shouldn’t have been surprised–nor should he be surprised to read the recent polling showing his Court to have lost some of the public’s respect. Apparently, bowing to pressure and issuing a ruling consistent neither with constitutional law nor public opinion won’t endear him to the people.

But Roberts’s ruling should have at least settled the tax issue. After all, the bill only survives because the mandate must be labeled a tax. When White House Chief of Staff Jack Lew made the Sunday morning talk show rounds, things sounded like they were heading in the right direction for Roberts’s authority. On “Fox News Sunday,” Lew said, “When the Supreme Court rules, we have a final answer.”

So the mandate is a tax, then? Not so fast. Lew meant the constitutionality of the law is settled. As for whether it’s a tax, according to Lew, the Court “said it didn’t matter what Congress called it. It was a penalty for 1 percent.” That is most certainly not what the Court said, but Lew was only repeating what the administration has been saying since the ruling. Press Secretary Jay Carney told reporters a day after the ruling that “You can call it what you want.” But didn’t Roberts call it a tax? Here Carney unleashes the chutzpah:

“With regard to the penalty as was discussed by Chief Justice Roberts in his opinion, for those who could afford health insurance but choose to remain uninsured — forcing the rest of us to pay for their care — a penalty is administered as part of the Affordable Care Act.”

Conservatives may find this maddening, but the worst part of the Carney story is how the reporter framed the debate. The White House, he wrote, “is aggressively fighting back against Republican claims that ObamaCare contains a tax increase.” (Italics are mine.) Far from settling the question, then, Roberts’s decision has rendered the Court’s opinion irrelevant. The debate about ObamaCare continues as if there were no Supreme Court ruling, only now there’s no judicial oversight waiting on the horizon. Roberts seems to have accomplished nothing with this ruling except diminishing the Court’s standing.

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