Newt Reaches for the Stars. Mitt Reaches for the Focus Group

 

Image by Gage Skidmore via Flickr

Newt Gingrich, fresh from his victory in South Carolina, has now been anointed by the British media, at least, as the front runner in the race to be the US Republican Presidential candidate.

And it does seem that his campaign is now taking off like a rocket.

People have been hearing about doom and gloom, deficits and economic disaster, for years now. They want to feel they have a future. Politicians on both sides of the Atlantic have noticed that.

In the UK, the Governor of the Bank of England says we should cheer up because

There is no reason to despair… All crises come to an end.

Meanwhile, in the US, Mr Gingrich said that

exploration of the universe would inspire the country’s young to feel “part of a generation of courageous people who do something big and bold and heroic.”

In the UK, Mervyn King reckons that “something will turn up”, and in the US Newt Gingrich proposes to send a man to Mars.

I guess that sums up the difference between the UK and the US really.

Meanwhile Mitt Romney was left floundering and claiming he supported NASA too. (NASA is a big employer in Florida, the next primary battle ground.)

And that sums up the difference between Mitt Romney and Newt Gingrich. The one a calculating tactician, aiming for the centre ground because of a tactical decision that that is the way to win the most votes. And the other a politician who, love him or loathe him, speaks from his gut instinct.

I know which I prefer – and it isn’t the squidgy middle ground spin merchant. We have one of those ourselves. His name is David Cameron and he is frankly pathetic.

We in the UK have been there, seen it and bought the T shirt. If you are an American Republican, take it from me. Mitt Romney is another David Cameron, and you don’t want to go there. Really.

Go for it, America. Who knows where Newt Gingrich would take you, and the world. But it would sure be fun.

Obama – Beaten by the Tea Party

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The Tea Party. Now the Establishment are Really Listening

Mark Mardell, for the BBC, reckons that President Obama has come out fighting, after his defeat by the Republicans over the Federal deficit.

And it really was a defeat. In almost every respect, the eventual deal is similar to the Bill that the Republican leadership originally put forward in the House of Representatives. The language of the deal is pretty clear, that there will be no tax increases, and that there will be spending cuts – and big ones. Obviously there is always room for quibbling, especially about the timing of the cuts, but the deal looks to me like a big step forward.

The remarkable thing about all this, though, is not the President’s coming out fighting, nor the Republican win on points over the deficit deal.

The truly remarkable thing is that throughout the whole affair, the Tea Party movement have been setting the agenda. Despite having only perhaps 60 Representatives aligned with their cause, it was clear throughout that they had an effective veto on the deal; and all the machinations were ultimately about satisfying them.

They achieved this, not because of their actual numbers in Congress, but because they speak for huge swathes of America, and the establishment there knows it. For decades, huge numbers of Americans have despised “The Beltway” and “Capitol Hill”. It has been quite amazing to an outside observer like me the extent to which Americans have lost faith in their own governing institutions.

The Tea Party are tapping into that.

In so doing, they are giving heart to similar movements elsewhere in the West. In Britain, we have UKIP. The parallels are striking. UKIP is our Tea Party, and like the Tea Party, it speaks for a big section of the British people – maybe not a majority, but certainly a sizeable minority. And like the Tea Party, the establishment is afraid of it.

They are afraid because they have no answer to it.

The US deficit deal should give heart to all of us on this side of the Atlantic who believe in low taxes and small government. Change is in the air.

New IMF Chief Spanks the Naughty Boys in America

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Christine Lagarde, the new head of the IMF, has been putting pressure on US politicians to agree a deal to allow the US to go on borrowing more in the markets.

The Republican-controlled House of Representatives wants the President to agree to big spending cuts before they will agree to the new borrowing. The President wants to go on spending. And neither one will budge.

Ms Lagarde told them sternly:

The issue needs to be resolved immediately.

And the answer, according to her, is more borrowing.

Ms Lagarde warned that whilst a package to cut the US deficit was essential, quick cuts in spending could damage the economy.

“That’s why we’ve advised against fiscal consolidation that is unduly hasty – even as we stress the importance of getting a fiscal consolidation plan agreed soon,” she said.

In other words, she was siding with President Obama. The answer is the same as it was for Greece. More borrowing at all costs.

Ms Lagarde could have made other constructive suggestions.

For example, perhaps she might have suggested that France and Germany should bail out the US. I’m sure they can afford it. After all, they have bottomless pockets and the important thing is to avoid “contagion”. They did it for Greece last year, and surely they could trump that by helping the US now.

If not that, then perhaps she might have suggested a default. It worked just fine for Greece this year, after all.

And it would be so much preferable to the US running out of money on August 2nd. After all, that could lead to … a default.

Which, of course, would be a disaster according to Ms Lagarde.

Meanwhile, there is one bright spot in the world economy – the developing markets are still growing.

Ms Lagarde knows how to put a stop to that. She called for higher interest rates there:

Staying ahead of the curve will be essential to avoid the possible hard landing if policy action comes too late.

Well, what an impressive debut for the new head of the IMF. You’d think she’d be more grateful to the US, considering their arrest of her predecessor was what catapulted her into the job.

Uncle Vince Puts His Foot in it Again

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Vince Cable: Insulting Our Allies

Vince Cable has attacked “US right wing nutters” who are the “biggest threat to the world financial system”:

The irony of the situation at the moment, looking to markets opening tomorrow morning, is that the biggest threat to the world financial system comes from a few right-wing nutters in the American Congress rather than the eurozone.’’ Democrat President Barack Obama is desperately trying to get Republicans in Congress to agree to lift the £8.8trillion limit on US borrowing.

The background to this is that Republicans in the US Congress and the US President have been negotiating for weeks on public spending and tax. The US government will run out of money in early August unless a bill is passed increasing the limit on what the government is allowed to borrow.

The Republicans want a deal to cut public spending over the next few years before they will agree to the increase. The President prefers more tax, and fewer cuts.

Mr Cable, then, is wide of the mark in blaming Republicans for the impasse. The truth is that there is a disagreement in the US about the right way forward, and both sides have so far failed to give in. The Republicans want spending cuts; the President wants higher taxes. Mr Obama could have a deal today if he agreed to the cuts.

Mr Cable could just as easily have blamed “the left wing nutter in the White House” rather than “right wing nutters in Congress”.

It is also pretty fatuous to draw attention to this disagreement in the US, when events in Europe, including the recent huge bailout of Greece, have been destabilising the world financial system for months. Mr Cable, though, is a Liberal Democrat, and the Lib Dems are the most Euro-fanatic British political party, so for him, the EU can do no wrong and the US is a threat.

But all of this rather misses the most important point here. Mr Cable is a British Government Minister and he was talking about senior politicians in our closest and most important ally.

Mr Cable’s antics will have damaged Britain’s reputation in the US and therefore damaged British interests. They were also gross interference in the internal politics of another country. His comments were ill-judged and inappropriate.

Independence Day

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Citizens of the American Colonies in Mourning as the Rebellion Goes On

Today is the 4th July.

My commiserations to all my fellow countrymen on this sad day, when we remember the temporary loss of our most important colony.

Clearly this miserable state of affairs will not be tolerated for ever, and I am sure that Her Britannic Majesty’s Government is planning behind the scenes for a glorious resumption of America’s proper place in the world. The poor down-trodden British colonists, labouring under the yoke of the rebellious American “government”, would expect nothing less.

The so-called American “President” should remember that soon we will again have our own aircraft carriers. We may even be able to put one or two aircraft on them one day, if the Chinese will lend us the money.

Although the Royal Navy is a little smaller than before, we do have many sailing dinghies around our coast. I am sure their patriotic owners would be only too willing to put them at the service of an expedition to regain Her Majesty’s colonies.

As far as aircraft are concerned, we are working with the French and the Germans to produce fighters that will be nearly as good as the American ones and almost as cheap. In any case, we have the finest pilots in the world, and if we can persuade them not to resign from the forces, I am sure they will give a good account of themselves. Remember the Battle of Britain! This will be their finest hour yet.

Our army too must be putting fear in the stoutest hearts of those rebellious colonists. Our troop strength may be a little less than theirs, but everyone knows that every British soldier is worth ten from anywhere else.

The Falklands campaign showed that it can be done! Rule Britannia!

[Sorry, it's time for a tea break now. The invasion will take place just as soon as the cucumber sandwiches are all gone.]

Will America Default on Its Debts?

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US Government Spending as a Percentage of GDP – Rising Inexorably

Will America Default on Its Debts? That is a headline I never expected to see in my lifetime, let alone be writing myself.

There is more evidence today, though, that this may indeed happen.

Exhibit 1 is the deal that was done today on the US Federal Budget.

The agreed budget cuts spending by $38.5 billion. That sounds a lot – but the deficit is $1.5 trillion. In other words, they are cutting the deficit by less than 3%. At this rate, the budget will be balanced in 33 years – except that it won’t, because of course the interest bill keeps on rising. If nothing more is done, the interest bill alone will be $1 trillion per year, or 25% of government spending, by 2020.

The Republicans wanted bigger cuts – of $61 billion or 4% of the deficit. At that rate, “only” 25 years to balance the budget! The Republican leader said of the agreed compromise:

It stops the bleeding. It halts the spending binge and starts us moving us back in the right direction.

Does it cut enough? No. Do I wish it cut more? Absolutely.

I hate to rain on his parade, but is doesn’t halt the spending binge at all. It merely slows it down a tiny trifle. Obviously you can’t eliminate a deficit of the size of the American one at a single stroke. It will take years of cuts to do it. But even that Republican plan was a lot more timid than is needed to rescue America from its crisis.

Exhibit 2 is the BRIC summit that ended today in China. That summit called for the IMF to expand its use of Special Drawing Rights – in other words, to reduce its reliance on the US dollar. The dollar’s role as the main international reserve currency is weakening.

If this process continues, and the dollar loses its role as the reserve currency of choice, its value will plummet as other countries become less keen to hold it. In turn, that will make it almost impossible for the US to service its overseas debts.

That first BBC article quotes Jacob Liew, of the White House Office of Management and Budget, as saying that all parties believed it would be “unthinkable” for the US not to meet its debt obligations. The fact that senior US officials are even openly discussing such a scenario is telling in itself.

For all my life, many or perhaps most people in Europe, including myself, have looked to America as a beacon of freedom, democracy and the very best ideas to build a brighter future. For us it is tragic to watch that great country lumbering towards a precipice. It is not too late even now to pull the US back from the brink. But the clock is ticking. If America does not succeed in curing its addiction to borrowing and spending, the world will indeed be a very different place in 10 or 20 years from now.

Visas to Visit the US

But Britons are Not Welcome

The US government is to introduce a charge of $14 to apply for an “ESTA” form, which allows the user to visit the US and is valid for two years. At the moment, the form is free.

The ESTA form replaced the old “visa waiver programme” by which the US allowed passengers to fill in a form on the aircraft to get into the country.

This is now getting really silly. The ESTA forms are to be charged for, and the airlines are urging people to apply for them at least 72 hours in advance of travel. Astonishingly, the stated aim is to raise funds to promote tourism to America!

In truth, the ESTA forms are visas by another name. As such, the introduction of the charge is a distinctly unfriendly act by the US government.

Visitors to the UK from the US do not normally need visas. The UK government should review this policy. The Americans have introduced what are effectively visas for UK citizens to visit their country. It is not right that we should treat their citizens differently.

Copenhagen Poker Match Ends in a Draw

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A “meaningful agreement” has apparently been reached at the Copenhagen summit – at least according to “a senior US official”.

And so this appalling monstrosity of a conference stumbles towards a close. The Americans were blaming China for failure to reach agreement. China wanted a deal without verification – in other words, a deal in which the Western countries hobble their economies, while the Chinese cheat on the deal and get on with growing their power. The Americans wanted a deal that committed them to as little as possible, while making them seem generous.

The poker final was between these two key players. The rest, in the end, did not really matter.

The struggle between the Americans and the Chinese in this conference has been a fascinating one. The proud United States, easily confident in its own power and ability to control events, but hemmed in by the fact of its own democracy. The vibrant and growing China, clearly out simply to use the conference to further its aim of overtaking the US in world power and influence, and without any need to worry even for one second about their people back home.

The Americans played their hand skilfully for once, announcing their support for the meaningless $100 billion climate fund with perfect timing, keeping people guessing until the last minute whether the President would even attend, and making him seem like a school teacher coming in to class to sort out the squabbling pupils. The Americans also managed to make their own rather lukewarm position on the conference seem positive, while it was the Chinese who were causing obstructions.

Meanwhile the Chinese were much less skilful playing their hand; they showed themselves not yet ready, at least diplomatically, to exercise power on a global basis. They were outflanked diplomatically by the Americans and made to seem obstructive, and they failed to achieve their ultimate objective. However, although they played their hand less skilfully than the Americans, it was ultimately a stronger hand. China’s growing economic power meant that they were able to get at least their second preference from the conference. Their golden prize would have been a binding deal without verification, which the Americans would have kept to, and they would have cheated on. But they settled happily enough for their second preference – a meaningless deal with no real commitments from anybody. Therefore their economic growth, and therefore the growth in their political power, can continue. Unlike the Americans, they had no need to take heed of public opinion.

So the poker final, between the US and China, ended in a draw.

And the losers in the previous rounds? Well, Gordon Brown, obviously. He staked his rapidly dimishing prestige on being a “key player” in pushing a deal, and ended up looking like an irrelevant heckler from the audience. The Third World countries. They wanted to use the conference to get a huge financial boost from the West and failed to do so. And the EU. Despite offering more than most in terms of emissions reductions (20%), the EU ended up being criticised for not offering even more (30%).

And we, the spectators in this uneven match, were left to pick up the bill. Never in my lifetime have I felt more disenfranchised and powerless in my own country. The opinions and the wishes of the British people were completely and utterly irrelevant to the whole process.