The GOP-controlled House remains on track to pass $3.7 billion in disaster relief as part of a bill to avert a government shutdown at the end of the month, the No. 2 House Republican said Wednesday. But first the party must overcome opposition from Democrats and some tea party Republicans.
Democratic leaders, including some who said last week they would back the stopgap measure, came out solidly against it Wednesday morning because it contains $1.5 billion in cuts from a government loan program to help car companies build more fuel-efficient vehicles.
That money would pay for the most urgently needed portion of the disaster aid that’s required to avoid a cutoff next week of Federal Emergency Management Agency relief to victims of Hurricane Irene, recent Texas wildfires and Tropical Storm Lee.
GOP leaders are also encountering opposition from tea party Republicans like Rep. Jeff Landry of Louisiana, who opposes the stopgap measure because it permits a higher spending rate than Republicans proposed last spring. The measure instead follows a hard-fought spending pact endorsed by GOP leaders and President Barack Obama.
Majority Leader Eric Cantor, R-Va., predicted Wednesday that the stopgap measure, commonly called a continuing resolution, or CR, will pass.
In the Senate, the measure awaits a battle with Democrats. That fight involves how much disaster aid to provide and whether any of it should be paid for with offsetting spending cuts.
FEMA has only a few days’ worth of aid remaining in its disaster relief fund. The agency has already held up thousands of longer-term rebuilding projects — repairs to sewer systems, parks, roads and bridges, for example — to conserve money to provide emergency relief to victims of recent disasters.
The House measure contains $1 billion in immediate aid for the 2011 budget year that’s about to end and another $2.7 billion for the 2012 budget year beginning Oct. 1. The Senate measure totals $6.9 billion, with $804 million proposed for the last few days of fiscal 2011.
Senate Majority Leader Harry Reid, D-Nev., said that once the stopgap measure passes the House, he’ll move to substitute the Senate’s more generous aid package for the House’s version. It will take at least seven Republicans to join with majority Democrats to win the 60 votes likely required to defeat GOP blocking tactics.
Ten Republicans voted with Reid last week to pass the stand-alone disaster aid measure, but their votes can’t be taken for granted now. Tea party favorites like Sens. Marco Rubio, R-Fla., and Pat Toomey, R-Pa., were among those who voted with Reid last week, but they told reporters Wednesday that they’ll instead support the partially paid-for House version.
If two more Senate Republicans switch, Reid would no longer have the 60 votes he needs.
In the House, Democrats are rallying against the measure because of accompanying cuts to an Energy Department program that subsidizes low-interest loans to help car companies and parts manufacturers retool factories to build vehicles that will meet new, tougher fuel economy standards. These lawmakers include House Democratic Whip Steny Hoyer of Maryland and top Appropriations Committee Democrat Norm Dicks of Washington. Both had previously said they would support the measure.
Democrats say cutting the loan program could cost up to 10,000 jobs because there wouldn’t be enough money for all pending applications.
“While the government has a responsibility to fund disaster response in places that were devastated by Hurricane Irene or other natural disasters, it is unconscionable to use funds designed to create jobs in manufacturing states to pay for it,” Reps. Gary Peters, D-Mich., and Anna Eshoo, D-Calif., said in a letter to House Speaker John Boehner, R-Ohio.
They credited $3.5 billion of loan subsidies with supporting loans totaling $9.2 billion that created or saved 41,000 jobs in Tennessee, California, Indiana, Michigan, Delaware, Illinois, Kentucky, Missouri and Ohio. Ford Motor Co. and Nissan Motor Co. have already received loans; Chrysler Group LLC is awaiting final approval of a loan.
A protracted showdown could ultimately lead to a partial shutdown of the government when the budget year ends Sept. 30. That’s unlikely, however.
Senate Minority Leader Mitch McConnell, R-Ky., predicted the conflict could be worked out in time for the Senate to make a Thursday night getaway to a weeklong recess. Such a scenario probably depends on Republicans prevailing.
“Congress always responds appropriately to disasters,” McConnell said. “We’re having a discussion about the appropriate way to do that, and I’m confident it will be resolved.”
Reid, however, is spoiling for the battle. “We’re not going to cave in on this,” he said.
The underlying stopgap funding measure would finance the government through Nov. 18 to give lawmakers more time to try to reach agreement on the 12 unfinished spending bills needed to run government agencies on a day-to-day basis for the 2012 budget year.
On Thursday Jean-Claude Trichet, the president of the European Central Bank or E.C.B. — Europe’s equivalent to Ben Bernanke — lost his sang-froid. In response to a question about whether the E.C.B. is becoming a “bad bank” thanks to its purchases of troubled nations’ debt, Mr. Trichet, his voice rising, insisted that his institution has performed “impeccably, impeccably!” as a guardian of price stability.
Indeed it has. And that’s why the euro is now at risk of collapse.
Financial turmoil in Europe is no longer a problem of small, peripheral economies like Greece. What’s under way right now is a full-scale market run on the much larger economies of Spain and Italy. At this point countries in crisis account for about a third of the euro area’s G.D.P., so the common European currency itself is under existential threat.
And all indications are that European leaders are unwilling even to acknowledge the nature of that threat, let alone deal with it effectively.
I’ve complained a lot about the “fiscalization” of economic discourse here in America, the way in which a premature focus on budget deficits turned Washington’s attention away from the ongoing jobs disaster. But we’re not unique in that respect, and in fact the Europeans have been much, much worse.
Listen to many European leaders — especially, but by no means only, the Germans — and you’d think that their continent’s troubles are a simple morality tale of debt and punishment: Governments borrowed too much, now they’re paying the price, and fiscal austerity is the only answer.
Yet this story applies, if at all, to Greece and nobody else. Spain in particular had a budget surplus and low debt before the 2008 financial crisis; its fiscal record, one might say, was impeccable. And while it was hit hard by the collapse of its housing boom, it’s still a relatively low-debt country, and it’s hard to make the case that the underlying fiscal condition of Spain’s government is worse than that of, say, Britain’s government.
So why is Spain — along with Italy, which has higher debt but smaller deficits — in so much trouble? The answer is that these countries are facing something very much like a bank run, except that the run is on their governments rather than, or more accurately as well as, their financial institutions.
Here’s how such a run works: Investors, for whatever reason, fear that a country will default on its debt. This makes them unwilling to buy the country’s bonds, or at least not unless offered a very high interest rate. And the fact that the country must roll its debt over at high interest rates worsens its fiscal prospects, making default more likely, so that the crisis of confidence becomes a self-fulfilling prophecy. And as it does, it becomes a banking crisis as well, since a country’s banks are normally heavily invested in government debt.
Now, a country with its own currency, like Britain, can short-circuit this process: if necessary, the Bank of England can step in to buy government debt with newly created money. This might lead to inflation (although even that is doubtful when the economy is depressed), but inflation poses a much smaller threat to investors than outright default. Spain and Italy, however, have adopted the euro and no longer have their own currencies. As a result, the threat of a self-fulfilling crisis is very real — and interest rates on Spanish and Italian debt are more than twice the rate on British debt.
Which brings us back to the impeccable E.C.B.
What Mr. Trichet and his colleagues should be doing right now is buying up Spanish and Italian debt — that is, doing what these countries would be doing for themselves if they still had their own currencies. In fact, the E.C.B. started doing just that a few weeks ago, and produced a temporary respite for those nations. But the E.C.B. immediately found itself under severe pressure from the moralizers, who hate the idea of letting countries off the hook for their alleged fiscal sins. And the perception that the moralizers will block any further rescue actions has set off a renewed market panic.
Adding to the problem is the E.C.B.’s obsession with maintaining its “impeccable” record on price stability: at a time when Europe desperately needs a strong recovery, and modest inflation would actually be helpful, the bank has instead been tightening money, trying to head off inflation risks that exist only in its imagination.
And now it’s all coming to a head. We’re not talking about a crisis that will unfold over a year or two; this thing could come apart in a matter of days. And if it does, the whole world will suffer.
So will the E.C.B. do what needs to be done — lend freely and cut rates? Or will European leaders remain too focused on punishing debtors to save themselves? The whole world is watching.
Washington (CNN) — As rescuers raced Tuesday to free people trapped by floodwaters caused by Hurricane Irene, Washington politicians bickered over how to pay for it.
The same budget arguments that nearly brought the first government default in history earlier this month now raise questions about whether the Federal Emergency Management Agency will have enough money to deal with Irene’s aftermath.
FEMA’s Disaster Relief Fund has less than $800 million remaining, and given the pace of operations in the wake of Irene, could run out before the end of the current fiscal year on September 30.
With conservative House Republicans calling for spending cuts to offset any increase in emergency funds — a condition opposed by many Democrats — the ability of Congress to act quickly on the issue remains uncertain.
“The notion that we would hold this up until Republicans can prompt another budget fight and figure out what they want to cut, what they want to offset in the budget, and to pit one section of the country against the other and to delay this and create this uncertainty, it’s just the latest chapter and I think one of the most unsavory ones of our budget wars,” said Rep. David Price, D-North Carolina.
Irene first made landfall on the U.S. mainland in North Carolina, devastating some coastal areas. Price said GOP efforts led by House Majority Leader Eric Cantor of neighboring Virginia to offset additional emergency funds amount to “an untenable position and one that simply is unresponsive and insensitive to the kind of situation we face.”
Cantor’s spokesman, however, noted that an appropriations bill already passed by the House and awaiting action in the Democratic-controlled Senate includes additional money to replenish the FEMA disaster fund.
“That funding was offset,” said the spokesman, Brad Dayspring. “The Senate has thus far failed to act on that legislation.”
While the appropriations bill is for fiscal year 2012, which begins October 1, the money could be used for disasters that occurred in fiscal 2011.
“People and families affected by these disasters will certainly get what they need from their federal government,” Dayspring said. “The goal should be to find ways to pay for what is needed whenever possible. That is the responsible thing to do. ”
States can request FEMA Disaster Relief Fund assistance once the president declares a federal disaster within their borders. Most of the Eastern and Northeast states hit by Irene already have that designation.
Federal officials say they don’t yet know how much money will be needed for all the emergency operations associated with Irene. After a series of destructive tornadoes earlier this year, including one that leveled a large swath of Joplin, Missouri, FEMA announced Monday that it was not approving new long-term reconstruction projects in order to ensure it has enough money for immediate emergency funding needs.
“Historically, when the balance in our Disaster Relief Fund has been under the range of $1 billion, we have employed this strategy,” a FEMA statement said.
Rachel Racusen, a FEMA spokesperson, said in a statement that the revised funding strategy “prioritizes the immediate, urgent needs of survivors and states when preparing for or responding to a disaster.”
“This strategy will not affect the availability of aid that any disaster survivors are receiving for recent disasters, such as tornadoes or flooding, or our response operations for Hurricane Irene or any event in the coming weeks or months,” Racusen said.
Missouri legislators worried that FEMA was shifting priority from Joplin’s recovery to focus on Irene because of the funding crunch.
“Recovery from hurricane damage on the East Coast must not come at the expense of Missouri’s rebuilding efforts,” Republican Sen. Roy Blunt said in a statement Monday. “If FEMA can’t fulfill its promise to our state because we have other disasters, that’s unacceptable, and we need to take a serious look at how our disaster response policies are funded and implemented.”
To Price, the problem is the Republican demand for spending offsets, which he said ended up pitting regions against each other for needed emergency funding.
“I’m just very impatient and I think the American people are going to be impatient with any attempt to hold these funds hostage to political objectives,” he said.
A Democratic Senate appropriations aide told CNN on condition of not being identified that the FEMA disaster fund was at $772 million on Tuesday morning, and that it would be about a week before the agency can estimate the costs associated with Hurricane Irene.
The House appropriations bill for the Department of Homeland Security, which includes FEMA, will come up in the Senate Appropriations Committee on September 6, according to the Senate aide.
It doubled the original $1.8 billion requested by President Barack Obama for fiscal 2012, adding $850 million for emergency funding that was offset by cuts in other DHS programs including the Coast Guard, first responders and FEMA, the aide said.
In addition, House Appropriations Committee Chairman Robert Aderholt, R-Alabama, added another $1 billion for the Disaster Relief Fund that was offset by cutting funds for a fuel-efficient vehicles program, according to the aide.
Democrats take issue with cuts to Homeland Security funding to offset additional emergency funding, the aide noted. In July, Sen. Mary Landrieu, D-Louisiana, who chairs the Homeland Security Appropriations subcommittee, criticized the House appropriations bill as “short-sighted.”
Even the White House got involved in the fracas, with Press Secretary Jay Carney telling reporters Tuesday that he wished Cantor and other conservative Republicans had the same commitment to spending offsets “when they ran up unprecedented bills and never paid for them” during the administration of President George W. Bush.
That prompted a quick response from Cantor’s office, which said: “The goal should be to find ways to pay for what is needed when possible. In the face of a $14 trillion national debt, that is the responsible thing to do.”
Editor’s note: Sally Kohn is a strategist and political commentator. She is the founder and chief education officer of the Movement Vision Lab, a grassroots think tank. This piece was written in association with The Op-Ed Project, an organization seeking to expand the range of opinion voices to include more women.
(CNN) — Three months ago, Republicans in the House of Representatives tried to slash 2012 spending for the Federal Emergency Management Agency by 55% compared with 2011 spending levels, 70% compared with the 2010 budget. Thankfully, Senate Democrats avoided the most extreme cuts to FEMA. But since then, the United States has been pelted by several major disasters and FEMA is almost out of money.
Nonetheless, Republican House Majority Leader Eric Cantor of Virginia — whose own district was the much-damaged epicenter of a severe earthquake last week — said he would not increase FEMA’s funding until spending is cut elsewhere.
We shouldn’t be surprised. Republicans also said they wouldn’t do anything to help the economy and the middle class unless spending was cut from the very poor and elderly: proposing cuts to food stamps and Medicare. It’s as if millions of Americans are drowning while Republicans stand on the shore, hoarding life preservers by the armfuls. You can have one in a natural disaster or get one later if you’re old or unemployed — but you can’t have both.
Of course, many conservatives want to get rid of life preservers altogether. This weekend, Republican presidential candidate Ron Paul made waves by saying FEMA should be destroyed. In its policy manifesto for members of Congress, the libertarian Cato Institute urged that FEMA “should be abolished,” saying that “by using taxpayer dollars to provide disaster relief and subsidized insurance, FEMA itself encourages Americans to build in disaster-prone areas and makes the rest of us pick up the tab for those risky decisions.” Indeed, when the small town of Mineral, Virginia, built itself over a fault line in 1890, it should have foreseen last week’s earthquake. And don’t even get me started on New York City brazenly popping up in the path of a hurricane.
Conservatives hate FEMA precisely because it represents the ideals of government at its best. Not always the implementation — the aftermath of Hurricane Katrina exposed the dire need for reforms in FEMA’s chain of command. But the spirit — that, as Thomas Jefferson put it, through our government, we “unite in common efforts for the common good.”
Just as up and down the East Coast this weekend, good neighbors helped those who couldn’t help themselves, in these crisis moments, good government helps entire neighborhoods, towns and even cities that can’t help themselves.
Hurricane Irene tragically claimed at least 21 lives, but fortunately the damage overall was less than anticipated. Still, according to the Los Angeles Times, total uninsured losses could be as high as $4 billion. At a time when cities and states are already strapped and our fragile economy needs every small business and working family at full speed, it’s the job of our federal government to help. Yes, even if that means taxing the very rich or borrowing more money to do so.
Funnily enough, now some Republicans in Congress are demanding FEMA’s budget be increased. The very same party that tried to slash FEMA’s budget by more than half is now accusing President Obama of “purposefully and irresponsibly underfunding” disaster relief and “putting families and communities who have suffered from terrible disasters on the back burner.”
The Republican-led House Appropriations Committee which earlier this year gouged FEMA’s budget has issued a press release trying to blame Democrats and the president for cuts to disaster relief aid. Someone had better call the congressional doctor and check the Capitol building for chunks of falling debris.
This dramatic about-face perfectly captures conservative opportunism against government: Beat it to the ground and then, when government is obviously needed, blame liberals for not helping it get up. Coming from a political party that has vowed to shrink government to the size where it can be drowned in a bathtub, we should be skeptical when Republicans pretend they’re the ones resuscitating our common good.
Governors from both sides of the aisle are praising FEMA in the wake of Irene. “FEMA has been very responsive,” said New Jersey’s Republican Gov. Chris Christie. Maryland’s Gov. Martin O’Malley, a Democrat, also praised FEMA and drew contrasts with a few years ago when, under President George W. Bush, FEMA was undermined and ineffective.
The fact is, government works. FEMA, when it’s adequately funded and staffed by competent professionals, is not an exception but the rule. It’s one of millions of examples of how, through government, we unite in common efforts for the common good.
As Irene approached my neighborhood in New York, people were helping evacuees get safely to shelters, carrying gallons of water up each other’s stairs and generally keeping each other entertained in the insanely long lines at grocery stores. In our national community, government was standing by to offer its helping hand if needed — a hand conservatives are trying to sever, when they’re not busy ceremoniously shaking it.
The opinions in this commentary are solely those of Sally Kohn.
[WARNING: THE FOLLOWING IS A VERY PESSIMISTIC GLOBAL POLITICAL ECONOMY POST]
So, just to sum up the past week or so of global political economy events:
1) U.S. government debt got downgraded by Standard & Poor;
2) Global equity markets are freaking out;
4) London Britain is burning;
This all sounds very 2008, except that it’s actually worse for several reasons. First, the governments that bailed out the financial sector are now themselves the object of financial panic and political resentment. Second, the tools used to try and rescue the global economy in 2008 are partially to blame for what’s happening right now. Despite all the gnashing of teeth about the Fed twiddling its thumbs, it’s far from clear that a QE3 would actually stimulate anything besides a rise in commodity prices.
With both Europe and the United States unable to stimulate their economies, and China seemingly paralyzed into indecision, it’s worth asking if we are about to experience a Creditanstalt moment.
The start of the Great Depression is commonly assumed to be the October 1929 stock market crash in the United States. It didn’t really become the Great Depression, however, unti 1931, when Austria’s Creditanstalt bank desperately needed injections of capital. Essentially, neither France nor England were willing to help unless Germany honored its reparations payments, and the United States refused to help unless France and the UK repaid its World War I debts. Neither of these demands was terribly reasonable, and the result was a wave of bank failures that spread across Europe and the United States.
The particulars of the current sovereign debt crisis are somewhat different from Creditanstalt, and yet it’s fascinating how smart people keep referring back to that ignoble moment. The big commonality is that while governments might recognize the virtues of a coordinated response to big crises, they are sufficiently constrained by domestic discontent to not do all that much.
So… is this 1931 all over again?
There are three aspects of the current situation that make me fret about this. The first is the sense that developed country governments have already tapped out all of their politically feasible methods of stimulating their economies. This is the time when both politicians and voters start to ask themselves, “Why not pursue the crazy idea?”
The second is whether the Chinese government will do something to satiate their nationalist constituency. Neither Joe Nye nor James Joyner thinks this is likely, and I tend to agree that any effort at economic coercion will hurt China as much as the United States. When autocrats are up against the wall, however, then they might take risks they otherwise would never consider.
The third is this working paper on what causes societal unrest in developed economies (h/t Henry Farrell). The abstract suggests more trouble on the way:
From the end of the Weimar Republic in Germany in the 1930s to anti-government demonstrations in Greece in 2010-11, austerity has tended to go hand in hand with politically motivated violence and social instability. In this paper, we assemble crosscountry evidence for the period 1919 to the present, and examine the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the key factor.
So… there are, unfortunately, numerous reasons to think that we’re headed down a bad road… which is the pretty much point of this post.
Readers are encouraged in the comments to offer counterarguments for why things aren’t as bad as 1931. I’ll be offering some thoughts about why 1931 won’t happen again later in the week.
Today, there was a climate science hearing in the House Committee on Science, Space, and Technology. Of the six “expert” witnesses, only three were scientists. The others were an economist, a lawyer, and a professor of marketing.
One of the scientists was Richard Muller from University of California, Berkeley. Muller has been working on an independent project to better estimate the planet’s surface temperatures over time. Because he is willing to say publicly that he has some doubts about the accuracy of the temperature stations that most climate models are based on, he has been embraced by the science denying crowd. A Koch brothers charity, for example, has donated nearly 25 percent of the financial support provided to Muller’s project.
Skeptics of climate science have been licking their lips waiting for his latest research, which they hoped would undermine the data behind basic theories of anthropogenic climate change. At the hearing today, however, Muller threw them for a loop with this graph:
You don’t have to be a Berkeley PhD to see that Muller’s data (black line) tracks pretty well with the three established data sets. This is just an initial sampling of Muller’s data—just 2 percent of the 1.6 billion records he’s working with—but these early findings are incredibly consistent with the previous findings. In his testimony, Muller made these points (emphasis mine):
The Berkeley Earth Surface Temperature project was created to make the best possible estimate of global temperature change using as complete a record of measurements as possible and by applying novel methods for the estimation and elimination of systematic biases.
We see a global warming trend that is very similar to that previously reported by the other groups.
The world temperature data has sufficient integrity to be used to determine global temperature trends.
Despite potential biases in the data, methods of analysis can be used to reduce bias effects well enough to enable us to measure long-term Earth temperature changes. Data integrity is adequate. Based on our initial work at Berkeley Earth, I believe that some of the most worrisome biases are less of a problem than I had previously thought.
For the many climate deniers who hang their arguments on Muller’s “doubts,” this is a severe blow. Of course, when the hard scientific truths are inconvenient, climate denying House leaders can always call a lawyer, a marketing professor, and an economist into the scientific hearing.
Is America in denial about the extent of its financial problems, and therefore incapable of dealing with the gravest crisis the country has ever faced?
This is a story of debt, delusion and – potentially – disaster. For America and, if you happen to think that American influence is broadly a good thing, for the world.
The debt and the delusion are both all-American: $14 trillion (£8.75tn) of debt has been amassed and there is no cogent plan to reduce it.
The figure is impossible to comprehend: easier to focus on the fact that it grows at $40,000 (£25,000) a second. Getting out of Afghanistan will help but actually only at the margins. The problem is much bigger than any one area of expenditure.
The economist Jeffrey Sachs, director of Columbia University’s Earth Institute, is no rabid fiscal conservative but on the debt he is a hawk:
The debt is not a financial problem, it is a political problem”
David Frum Former speechwriter to George W Bush
“I’m worried. The debt is large. It should be brought under control. The longer we wait, the longer we suffer this kind of paralysis; the more America boxes itself into a corner and the more America’s constructive leadership in the world diminishes.”
The author and economist Diane Coyle agrees. And she makes the rather alarming point that the acknowledged deficit is not the whole story.
The current $14tn debt is bad enough, she argues, but the future commitments to the baby boomers, commitments for health care and for pensions, suggest that the debt burden is part of the fabric of society:
“You have promises implicit in the structure of welfare states and aging populations that mean there is an unacknowledged debt that will have to be paid for by future taxpayers, and that could double the published figures.”
Richard Haass of the Council on Foreign Relations acknowledges that this structural commitment to future debt is not unique to the United States. All advanced democracies have more or less the same problem, he says, “but in the case of the States the figures are absolutely enormous”.
Mr Haass, a former senior US diplomat, is leading an academic push for America’s debt to be taken seriously by Americans and noticed as well by the rest of the world.
He uses the analogy of Suez and the pressure that was put on the UK by the US to withdraw from that adventure. The pressure was not, of course, military. It was economic.
Britain needed US economic help. In the future, if China chooses to flex its muscles abroad, it may not be Chinese admirals who pose the real threat, Mr Haass tells us. “Chinese bankers could do the job.”
Because of course Chinese bankers, if they withdrew their support for the US economy and their willingness to finance America’s spending, could have an almost overnight impact on every American life, forcing interest rates to sky high levels and torpedoing the world’s largest economy.
Not everyone accepts the debt-as-disaster thesis.
David Frum is a Republican intellectual and a former speech writer to President George W Bush.
He told me the problem, and the solution, were actually rather simple: “If I tell you you have a disease that will absolutely prostrate you and it could be prevented by taking a couple of aspirin and going for a walk, well I guess the situation isn’t apocalyptic is it?
“The things that America has to do to put its fiscal house in order are not anywhere near as extreme as what Europe has to do. The debt is not a financial problem, it is a political problem.”
Mr Frum believes that a future agreement to cut spending – he thinks America spends much too big a proportion of its GDP on health – and raise taxes, could very quickly bring the debt problem down to the level of quotidian normality.
I am not so sure. What is the root cause of America’s failure to get to grips with its debt? It can be argued that the problem is not really economic or even political; it is a cultural inability to face up to hard choices, even to acknowledge that the choices are there.
I should make it clear that my reporting of the United States, in the years I was based there for the BBC, was governed by a sense that too much foreign media coverage of America is negative and jaundiced.
The nation is staggeringly successful and gloriously attractive. But it is also deeply dysfunctional in some respects.
Take Alaska. The author and serious student of America, Anne Applebaum makes the point that, as she puts it, “Alaska is a myth!”
People who live in Alaska – and people who aspire to live in Alaska – imagine it is the last frontier, she says, “the place where rugged individuals go out and dig for oil and shoot caribou, and make money the way people did 100 years ago”.
But in reality, Alaska is the most heavily subsidised state in the union. There is more social spending in Alaska than anywhere else.
To make it a place where decent lives can be lived, there is a huge transfer of money to Alaska from the US federal government which means of course from taxpayers in New York and Los Angeles and other places where less rugged folk live. Alaska is an organised hypocrisy.
Too many Americans behave like the Alaskans: they think of themselves as rugged individualists in no need of state help, but they take the money anyway in health care and pensions and all the other areas of American life where the federal government spends its cash.
The Tea Party movement talks of cuts in spending but when it comes to it, Americans always seem to be talking about cuts in spending that affect someone else, not them – and taxes that are levied on others too.
Analysis is on BBC Radio 4 on Monday, 27 June 2011 at 2030 BST and Sunday 3 July at 2130 BST
And nobody talks about raising taxes. Jeffrey Sachs has a theory about why this is.
America’s two main political parties are so desperate to raise money for the nation’s constant elections – remember the House of Representatives is elected every two years – that they can do nothing that upsets wealthy people and wealthy companies.
So they cannot touch taxes.
In all honesty, I am torn about the conclusions to be drawn. I find it difficult to believe that a nation historically so nimble and clever and open could succumb to disaster in this way.
But America, as well as being a place of hard work and ingenuity, is also no stranger to eating competitions in which gluttony is celebrated, and wilful ignorance, for instance regarding (as many Americans do) evolution as controversial.
The debt crisis is a fascinating crisis because it is about so much more than money. It is a test of a culture.
It is about waking up, as the Americans say, and smelling the coffee. And – I am thinking Texas here – saddling up too, and riding out with purpose.
Peter Day takes the temperature of the start-up scene in India – what challenges do entrepreneurs face?
From laptops to ebooks and iPads to apps – how teaching is moving away from the blackboard
The science committee of the U.S. House of Representatives this week criticized steps that the National Oceanic and Atmospheric Administration (NOAA) has taken to create a National Climate Service, telling NOAA Administrator Jane Lubchenco that she is ignoring congressional language intended to block its implementation. The dispute is part of a larger battle between the Obama Administration and House Republicans over how to address climate change.
In February 2010, NOAA announced its intention to create a parallel entity to its National Weather Service that would issue long range climate forecasts about future weather conditions such as severe storms, floods, and droughts. The proposed climate service would enable NOAA to answer the increased number of requests for climate change data, Lubchenco told the committee, and would strengthen science across the agency by integrating three data centers, two laboratories, and the Climate Prediction Center. Veteran NOAA climatologist Thomas Karl, director of one of the data centers, serves as transition director, and Lubchenco has hired six new regional climate service directors.
Those actions don’t sit well with the Republicans on the House Science, Space, and Technology Committee, which on Wednesday held an oversight hearing on the activity, for which NOAA has requested $346 million in 2012. “My objection to this proposal has been the concern that the focus to create a climate service will severely harm vital research at NOAA by transferring resources away from fundamental science to mission-oriented research and service-driven products,” said the chair of the committee, Representative Ralph Hall (R-TX). “More than half the resources of NOAA’s research enterprise would be moved into a climate service. This proposal appears to contradict the notion that fundamental research must not be driven by operational demands.”
One big sticking point for legislators is language in this spring’s final 2011 spending bill that averted a government shutdown, which states that “none of the funds made available by this division may be used to implement, establish, or create a NOAA Climate Service.” Representative Dana Rohrabacher (R-CA) said the appointment of Karl and the hiring of six regional directors appear to have ignored those instructions. He quipped that NOAA was “living in climate sin,” a reference to Karl’s statement during an interview in December 2010 with ClimateWire that “we’ve moved in, … we’re waiting for the marriage certificate, but we’re acting like we have a climate service.”
Lubchenco defended her actions, saying that her appointments were “smart” and merely “good planning.” She said their salaries are drawn from “existing funds” and that legislation dating back to the National Climate Program Act of 1978 describes providing climate services as part of NOAA’s mission. She responded to Hall’s concerns that the climate service would take away from NOAA’s other activities by saying, “It’s good government to reorganize periodically.” She also referred to its economic potential, citing the $1 billion industry that has emerged around the National Weather Service.
Speaking with ScienceInsider after the hearing, she made it clear that NOAA intends to push ahead. “This is an idea whose time has come.”
In the United States, when world wheat prices rise by 75 percent, as they have over the last year, it means the difference between a $2 loaf of bread and a loaf costing maybe $2.10. If, however, you live in New Delhi, those skyrocketing costs really matter: A doubling in the world price of wheat actually means that the wheat you carry home from the market to hand-grind into flour for chapatis costs twice as much. And the same is true with rice. If the world price of rice doubles, so does the price of rice in your neighborhood market in Jakarta. And so does the cost of the bowl of boiled rice on an Indonesian family’s dinner table.
Welcome to the new food economics of 2011: Prices are climbing, but the impact is not at all being felt equally. For Americans, who spend less than one-tenth of their income in the supermarket, the soaring food prices we’ve seen so far this year are an annoyance, not a calamity. But for the planet’s poorest 2 billion people, who spend 50 to 70 percent of their income on food, these soaring prices may mean going from two meals a day to one. Those who are barely hanging on to the lower rungs of the global economic ladder risk losing their grip entirely. This can contribute — and it has — to revolutions and upheaval.
Already in 2011, the U.N. Food Price Index has eclipsed its previous all-time global high; as of March it had climbed for eight consecutive months. With this year’s harvest predicted to fall short, with governments in the Middle East and Africa teetering as a result of the price spikes, and with anxious markets sustaining one shock after another, food has quickly become the hidden driver of world politics. And crises like these are going to become increasingly common. The new geopolitics of food looks a whole lot more volatile — and a whole lot more contentious — than it used to. Scarcity is the new norm.
Until recently, sudden price surges just didn’t matter as much, as they were quickly followed by a return to the relatively low food prices that helped shape the political stability of the late 20th century across much of the globe. But now both the causes and consequences are ominously different.
In many ways, this is a resumption of the 2007-2008 food crisis, which subsided not because the world somehow came together to solve its grain crunch once and for all, but because the Great Recession tempered growth in demand even as favorable weather helped farmers produce the largest grain harvest on record. Historically, price spikes tended to be almost exclusively driven by unusual weather — a monsoon failure in India, a drought in the former Soviet Union, a heat wave in the U.S. Midwest. Such events were always disruptive, but thankfully infrequent. Unfortunately, today’s price hikes are driven by trends that are both elevating demand and making it more difficult to increase production: among them, a rapidly expanding population, crop-withering temperature increases, and irrigation wells running dry. Each night, there are 219,000 additional people to feed at the global dinner table.
More alarming still, the world is losing its ability to soften the effect of shortages. In response to previous price surges, the United States, the world’s largest grain producer, was effectively able to steer the world away from potential catastrophe. From the mid-20th century until 1995, the United States had either grain surpluses or idle cropland that could be planted to rescue countries in trouble. When the Indian monsoon failed in 1965, for example, President Lyndon Johnson’s administration shipped one-fifth of the U.S. wheat crop to India, successfully staving off famine. We can’t do that anymore; the safety cushion is gone.
That’s why the food crisis of 2011 is for real, and why it may bring with it yet more bread riots cum political revolutions. What if the upheavals that greeted dictators Zine el-Abidine Ben Ali in Tunisia, Hosni Mubarak in Egypt, and Muammar al-Qaddafi in Libya (a country that imports 90 percent of its grain) are not the end of the story, but the beginning of it? Get ready, farmers and foreign ministers alike, for a new era in which world food scarcity increasingly shapes global politics.
THE DOUBLING OF WORLD grain prices since early 2007 has been driven primarily by two factors: accelerating growth in demand and the increasing difficulty of rapidly expanding production. The result is a world that looks strikingly different from the bountiful global grain economy of the last century. What will the geopolitics of food look like in a new era dominated by scarcity? Even at this early stage, we can see at least the broad outlines of the emerging food economy.
On the demand side, farmers now face clear sources of increasing pressure. The first is population growth. Each year the world’s farmers must feed 80 million additional people, nearly all of them in developing countries. The world’s population has nearly doubled since 1970 and is headed toward 9 billion by midcentury. Some 3 billion people, meanwhile, are also trying to move up the food chain, consuming more meat, milk, and eggs. As more families in China and elsewhere enter the middle class, they expect to eat better. But as global consumption of grain-intensive livestock products climbs, so does the demand for the extra corn and soybeans needed to feed all that livestock. (Grain consumption per person in the United States, for example, is four times that in India, where little grain is converted into animal protein. For now.)
At the same time, the United States, which once was able to act as a global buffer of sorts against poor harvests elsewhere, is now converting massive quantities of grain into fuel for cars, even as world grain consumption, which is already up to roughly 2.2 billion metric tons per year, is growing at an accelerating rate. A decade ago, the growth in consumption was 20 million tons per year. More recently it has risen by 40 million tons every year. But the rate at which the United States is converting grain into ethanol has grown even faster. In 2010, the United States harvested nearly 400 million tons of grain, of which 126 million tons went to ethanol fuel distilleries (up from 16 million tons in 2000). This massive capacity to convert grain into fuel means that the price of grain is now tied to the price of oil. So if oil goes to $150 per barrel or more, the price of grain will follow it upward as it becomes ever more profitable to convert grain into oil substitutes. And it’s not just a U.S. phenomenon: Brazil, which distills ethanol from sugar cane, ranks second in production after the United States, while the European Union’s goal of getting 10 percent of its transport energy from renewables, mostly biofuels, by 2020 is also diverting land from food crops.
This is not merely a story about the booming demand for food. Everything from falling water tables to eroding soils and the consequences of global warming means that the world’s food supply is unlikely to keep up with our collectively growing appetites. Take climate change: The rule of thumb among crop ecologists is that for every 1 degree Celsius rise in temperature above the growing season optimum, farmers can expect a 10 percent decline in grain yields. This relationship was borne out all too dramatically during the 2010 heat wave in Russia, which reduced the country’s grain harvest by nearly 40 percent.
While temperatures are rising, water tables are falling as farmers overpump for irrigation. This artificially inflates food production in the short run, creating a food bubble that bursts when aquifers are depleted and pumping is necessarily reduced to the rate of recharge. In arid Saudi Arabia, irrigation had surprisingly enabled the country to be self-sufficient in wheat for more than 20 years; now, wheat production is collapsing because the non-replenishable aquifer the country uses for irrigation is largely depleted. The Saudis soon will be importing all their grain.
Saudi Arabia is only one of some 18 countries with water-based food bubbles. All together, more than half the world’s people live in countries where water tables are falling. The politically troubled Arab Middle East is the first geographic region where grain production has peaked and begun to decline because of water shortages, even as populations continue to grow. Grain production is already going down in Syria and Iraq and may soon decline in Yemen. But the largest food bubbles are in India and China. In India, where farmers have drilled some 20 million irrigation wells, water tables are falling and the wells are starting to go dry. The World Bank reports that 175 million Indians are being fed with grain produced by overpumping. In China, overpumping is concentrated in the North China Plain, which produces half of China’s wheat and a third of its corn. An estimated 130 million Chinese are currently fed by overpumping. How will these countries make up for the inevitable shortfalls when the aquifers are depleted?
Even as we are running our wells dry, we are also mismanaging our soils, creating new deserts. Soil erosion as a result of overplowing and land mismanagement is undermining the productivity of one-third of the world’s cropland. How severe is it? Look at satellite images showing two huge new dust bowls: one stretching across northern and western China and western Mongolia; the other across central Africa. Wang Tao, a leading Chinese desert scholar, reports that each year some 1,400 square miles of land in northern China turn to desert. In Mongolia and Lesotho, grain harvests have shrunk by half or more over the last few decades. North Korea and Haiti are also suffering from heavy soil losses; both countries face famine if they lose international food aid. Civilization can survive the loss of its oil reserves, but it cannot survive the loss of its soil reserves.
Beyond the changes in the environment that make it ever harder to meet human demand, there’s an important intangible factor to consider: Over the last half-century or so, we have come to take agricultural progress for granted. Decade after decade, advancing technology underpinned steady gains in raising land productivity. Indeed, world grain yield per acre has tripled since 1950. But now that era is coming to an end in some of the more agriculturally advanced countries, where farmers are already using all available technologies to raise yields. In effect, the farmers have caught up with the scientists. After climbing for a century, rice yield per acre in Japan has not risen at all for 16 years. In China, yields may level off soon. Just those two countries alone account for one-third of the world’s rice harvest. Meanwhile, wheat yields have plateaued in Britain, France, and Germany — Western Europe’s three largest wheat producers.
IN THIS ERA OF TIGHTENING world food supplies, the ability to grow food is fast becoming a new form of geopolitical leverage, and countries are scrambling to secure their own parochial interests at the expense of the common good.
The first signs of trouble came in 2007, when farmers began having difficulty keeping up with the growth in global demand for grain. Grain and soybean prices started to climb, tripling by mid-2008. In response, many exporting countries tried to control the rise of domestic food prices by restricting exports. Among them were Russia and Argentina, two leading wheat exporters. Vietnam, the No. 2 rice exporter, banned exports entirely for several months in early 2008. So did several other smaller exporters of grain.
With exporting countries restricting exports in 2007 and 2008, importing countries panicked. No longer able to rely on the market to supply the grain they needed, several countries took the novel step of trying to negotiate long-term grain-supply agreements with exporting countries. The Philippines, for instance, negotiated a three-year agreement with Vietnam for 1.5 million tons of rice per year. A delegation of Yemenis traveled to Australia with a similar goal in mind, but had no luck. In a seller’s market, exporters were reluctant to make long-term commitments.
Fearing they might not be able to buy needed grain from the market, some of the more affluent countries, led by Saudi Arabia, South Korea, and China, took the unusual step in 2008 of buying or leasing land in other countries on which to grow grain for themselves. Most of these land acquisitions are in Africa, where some governments lease cropland for less than $1 per acre per year. Among the principal destinations were Ethiopia and Sudan, countries where millions of people are being sustained with food from the U.N. World Food Program. That the governments of these two countries are willing to sell land to foreign interests when their own people are hungry is a sad commentary on their leadership.
By the end of 2009, hundreds of land acquisition deals had been negotiated, some of them exceeding a million acres. A 2010 World Bank analysis of these “land grabs” reported that a total of nearly 140 million acres were involved — an area that exceeds the cropland devoted to corn and wheat combined in the United States. Such acquisitions also typically involve water rights, meaning that land grabs potentially affect all downstream countries as well. Any water extracted from the upper Nile River basin to irrigate crops in Ethiopia or Sudan, for instance, will now not reach Egypt, upending the delicate water politics of the Nile by adding new countries with which Egypt must negotiate.
The potential for conflict — and not just over water — is high. Many of the land deals have been made in secret, and in most cases, the land involved was already in use by villagers when it was sold or leased. Often those already farming the land were neither consulted about nor even informed of the new arrangements. And because there typically are no formal land titles in many developing-country villages, the farmers who lost their land have had little backing to bring their cases to court. Reporter John Vidal, writing in Britain’s Observer, quotes Nyikaw Ochalla from Ethiopia’s Gambella region: “The foreign companies are arriving in large numbers, depriving people of land they have used for centuries. There is no consultation with the indigenous population. The deals are done secretly. The only thing the local people see is people coming with lots of tractors to invade their lands.”
Local hostility toward such land grabs is the rule, not the exception. In 2007, as food prices were starting to rise, China signed an agreement with the Philippines to lease 2.5 million acres of land slated for food crops that would be shipped home. Once word leaked, the public outcry — much of it from Filipino farmers — forced Manila to suspend the agreement. A similar uproar rocked Madagascar, where a South Korean firm, Daewoo Logistics, had pursued rights to more than 3 million acres of land. Word of the deal helped stoke a political furor that toppled the government and forced cancellation of the agreement. Indeed, few things are more likely to fuel insurgencies than taking land from people. Agricultural equipment is easily sabotaged. If ripe fields of grain are torched, they burn quickly.
Not only are these deals risky, but foreign investors producing food in a country full of hungry people face another political question of how to get the grain out. Will villagers permit trucks laden with grain headed for port cities to proceed when they themselves may be on the verge of starvation? The potential for political instability in countries where villagers have lost their land and their livelihoods is high. Conflicts could easily develop between investor and host countries.
These acquisitions represent a potential investment in agriculture in developing countries of an estimated $50 billion. But it could take many years to realize any substantial production gains. The public infrastructure for modern market-oriented agriculture does not yet exist in most of Africa. In some countries it will take years just to build the roads and ports needed to bring in agricultural inputs such as fertilizer and to export farm products. Beyond that, modern agriculture requires its own infrastructure: machine sheds, grain-drying equipment, silos, fertilizer storage sheds, fuel storage facilities, equipment repair and maintenance services, well-drilling equipment, irrigation pumps, and energy to power the pumps. Overall, development of the land acquired to date appears to be moving very slowly.
So how much will all this expand world food output? We don’t know, but the World Bank analysis indicates that only 37 percent of the projects will be devoted to food crops. Most of the land bought up so far will be used to produce biofuels and other industrial crops.
Even if some of these projects do eventually boost land productivity, who will benefit? If virtually all the inputs — the farm equipment, the fertilizer, the pesticides, the seeds — are brought in from abroad and if all the output is shipped out of the country, it will contribute little to the host country’s economy. At best, locals may find work as farm laborers, but in highly mechanized operations, the jobs will be few. At worst, impoverished countries like Mozambique and Sudan will be left with less land and water with which to feed their already hungry populations. Thus far the land grabs have contributed more to stirring unrest than to expanding food production.
And this rich country-poor country divide could grow even more pronounced — and soon. This January, a new stage in the scramble among importing countries to secure food began to unfold when South Korea, which imports 70 percent of its grain, announced that it was creating a new public-private entity that will be responsible for acquiring part of this grain. With an initial office in Chicago, the plan is to bypass the large international trading firms by buying grain directly from U.S. farmers. As the Koreans acquire their own grain elevators, they may well sign multiyear delivery contracts with farmers, agreeing to buy specified quantities of wheat, corn, or soybeans at a fixed price.
Other importers will not stand idly by as South Korea tries to tie up a portion of the U.S. grain harvest even before it gets to market. The enterprising Koreans may soon be joined by China, Japan, Saudi Arabia, and other leading importers. Although South Korea’s initial focus is the United States, far and away the world’s largest grain exporter, it may later consider brokering deals with Canada, Australia, Argentina, and other major exporters. This is happening just as China may be on the verge of entering the U.S. market as a potentially massive importer of grain. With China’s 1.4 billion increasingly affluent consumers starting to compete with U.S. consumers for the U.S. grain harvest, cheap food, seen by many as an American birthright, may be coming to an end.
No one knows where this intensifying competition for food supplies will go, but the world seems to be moving away from the international cooperation that evolved over several decades following World War II to an every-country-for-itself philosophy. Food nationalism may help secure food supplies for individual affluent countries, but it does little to enhance world food security. Indeed, the low-income countries that host land grabs or import grain will likely see their food situation deteriorate.
AFTER THE CARNAGE of two world wars and the economic missteps that led to the Great Depression, countries joined together in 1945 to create the United Nations, finally realizing that in the modern world we cannot live in isolation, tempting though that might be. The International Monetary Fund was created to help manage the monetary system and promote economic stability and progress. Within the U.N. system, specialized agencies from the World Health Organization to the Food and Agriculture Organization (FAO) play major roles in the world today. All this has fostered international cooperation.
But while the FAO collects and analyzes global agricultural data and provides technical assistance, there is no organized effort to ensure the adequacy of world food supplies. Indeed, most international negotiations on agricultural trade until recently focused on access to markets, with the United States, Canada, Australia, and Argentina persistently pressing Europe and Japan to open their highly protected agricultural markets. But in the first decade of this century, access to supplies has emerged as the overriding issue as the world transitions from an era of food surpluses to a new politics of food scarcity. At the same time, the U.S. food aid program that once worked to fend off famine wherever it threatened has largely been replaced by the U.N. World Food Program (WFP), where the United States is the leading donor. The WFP now has food-assistance operations in some 70 countries and an annual budget of $4 billion. There is little international coordination otherwise. French President Nicolas Sarkozy — the reigning president of the G-20 — is proposing to deal with rising food prices by curbing speculation in commodity markets. Useful though this may be, it treats the symptoms of growing food insecurity, not the causes, such as population growth and climate change. The world now needs to focus not only on agricultural policy, but on a structure that integrates it with energy, population, and water policies, each of which directly affects food security.
But that is not happening. Instead, as land and water become scarcer, as the Earth’s temperature rises, and as world food security deteriorates, a dangerous geopolitics of food scarcity is emerging. Land grabbing, water grabbing, and buying grain directly from farmers in exporting countries are now integral parts of a global power struggle for food security.
With grain stocks low and climate volatility increasing, the risks are also increasing. We are now so close to the edge that a breakdown in the food system could come at any time. Consider, for example, what would have happened if the 2010 heat wave that was centered in Moscow had instead been centered in Chicago. In round numbers, the 40 percent drop in Russia’s hoped-for harvest of roughly 100 million tons cost the world 40 million tons of grain, but a 40 percent drop in the far larger U.S. grain harvest of 400 million tons would have cost 160 million tons. The world’s carryover stocks of grain (the amount in the bin when the new harvest begins) would have dropped to just 52 days of consumption. This level would have been not only the lowest on record, but also well below the 62-day carryover that set the stage for the 2007-2008 tripling of world grain prices.
Then what? There would have been chaos in world grain markets. Grain prices would have climbed off the charts. Some grain-exporting countries, trying to hold down domestic food prices, would have restricted or even banned exports, as they did in 2007 and 2008. The TV news would have been dominated not by the hundreds of fires in the Russian countryside, but by footage of food riots in low-income grain-importing countries and reports of governments falling as hunger spread out of control. Oil-exporting countries that import grain would have been trying to barter oil for grain, and low-income grain importers would have lost out. With governments toppling and confidence in the world grain market shattered, the global economy could have started to unravel.
We may not always be so lucky. At issue now is whether the world can go beyond focusing on the symptoms of the deteriorating food situation and instead attack the underlying causes. If we cannot produce higher crop yields with less water and conserve fertile soils, many agricultural areas will cease to be viable. And this goes far beyond farmers. If we cannot move at wartime speed to stabilize the climate, we may not be able to avoid runaway food prices. If we cannot accelerate the shift to smaller families and stabilize the world population sooner rather than later, the ranks of the hungry will almost certainly continue to expand. The time to act is now — before the food crisis of 2011 becomes the new normal.