Monthly Archives: September 2008

Leadership in an Obama administration

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The Obama campaign has a unique opportunity to show us what leadership in his Internet-savvy administration might look like. Americans are panicking now over the crisis on Wall Street, panicking but completely at a loss as to what we should do. This is Obama’s chance to show us real leadership through running a serious of Web spots and TV ads that:

  • Explain, in simple English, what is happening on Wall Street, and how that affects Main Street;
  • Use graphics and Ross Perot charts to illustrate rather than use words;
  • Outline the options, and the pluses and minuses of each one in as non-partisan way as possible;
  • Do it in the calm, serene, and non-partisan manner in which Obama excels — and which the citizenry really need right now.

This would:

  • Assert high-minded leadership at a time when everyone else is embroiled in politics;
  • Demonstrate Obama’s belief that we are mature and intelligent;
  • Spread like wildfire — because we are all desperate for answers, and no one — including the MSM — is giving us any.

Obama has run a spectacular, Internet-infused grassroots campaign for the Presidency. I’m ready to see how that translates into leadership and governance.

The bailout as negotiation between justice and pragmatism

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This week’s Economist describes a difficult negotiation underway in Washington:

An impaired mortgage security might yield 65 cents on the dollar if held to maturity. But because the market is so illiquid and suspicion about mortgage values so high, it might fetch just 35 cents in the market today. Recapitalising banks would mean paying as close to 65 cents as possible. Those that valued them at less on their books could mark them up, boosting their capital. On the other hand, minimising taxpayer losses would dictate that the government seek to pay only 35 cents. But this would provide little benefit to the selling banks, and those that carried them at higher values on their books could see their capital further impaired.

If we want DC to drive a hard bargain and get taxpayers maximum value, we want them to lowball for $.35. But that would be self-defeating, as the economy would likely seize up. If we go for the $.65, we might be overpaying for them, rewarding Wall Street for its greedy stupidity at taxpayer expense.

There’s a spectrum here between what is “fair” and what will “work” — and what’s worse, we can’t know if/when we cross either threshold. It’s possible, as The Economist suggests, that $.65 will NOT work — AND yet still be perceived as unfair.

The thing that’s impossible for most American taxpayers to swallow with corporate welfare is exactly the same as for individual welfare: you (the taxpayer) will personally pay a certain amount of money for an uncertain and socially distributed benefit. It’s hard enough to convince Americans that we are our brother’s keeper when it comes to getting homeless people we can actually see off the streets with programs that we can understand (if not agree with). The bailout wants us to enact that same value with people who aren’t that sympathetic using mechanisms that even most economists are having a hard time articulating.

Can the Internet restore Congressional power?

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The crisis on Wall Street and subsequent negotiation between the Bush Administration and Congress over solutions expose a dangerous weakness of the people’s branch in the modern era: legislators lack unity and the power that unity affords. They will lose almost every time they get into a showdown with the President, especially without an O’Neill or Gingrich to rally them. The fact that the representative branch of government operates at a disadvantage vis-a-vis the executive branch presents an enormous threat to our democracy.

High school civics classes teach that Congress makes the laws and the President enforces them. Americans would be forgiven if they think that it’s the President who makes law and Congress who has the veto power. The Wall Street bailout and the Iraq war resolution illustrate how — in high-profile crises — the Executive branch drives its agenda through Congress due to its superior ability to plan, focus attention, and control national discourse. Often, Congress is relegated to nibbling around the edges or poking holes in the President’s plans.

Making the first offer gives the Administration enormous leverage over Congress. In both the Iraq war resolution and the Wall Street bailout, Congress never really questioned the core premise (Iraq presents an imminent threat; the economy will collapse without intervention) nor strayed very far from the proposed solution (invade; bail out). We know, in the case of Iraq, at least, that this is not because the President was right on the merits. Rather, he was simply in the better bargaining position, having “anchored” the negotiation.

Administrations have also proven adept at controlling the pace of negotiations. The meltdown on Wall Street was real, but the Iraqi threat was not; yet in both cases, the executive branch set artificial timelines to exert pressure on Congress to accept its view of reality.

Both bargaining tactics are rooted in institutional advantages that the President enjoys over Congress: the staff and personnel to be better-informed (or at least look like it), and message discipline to speak with one voice. Congress “wins” when these strengths are minimized — for example, by dragging out the process and throwing up doubt and noise (see Bush’s failed Social Security and immigration initiatives) or small-bore issues that won’t get national attention. No wonder earmarks have gone haywire.

Mass media have strengthened the executive branch’s power. Television and radio favor those who speak with one voice; Congress is by nature as fractured, contentious, and divided as the electorate itself — something that, paradoxically, the electorate don’t like. In the history of the Gallop Polls’ Congressional approval ratings, Congress has never broken 50%, except right after 9/11. Moreover, broadcast news puts heavy pressure towards real-time drama, something that C-SPAN has proven the Congress lacks.

How does or can the Internet change this dynamic?

First, the Internet is starting to fracture the broadcast bias towards singular voices. We can see the various Netroots refracting and punching holes in political marketing campaigns. Clearly this was insufficient to halt the Iraq war or the bailout, but it remains to be seen whether Internet chatter will gain enough strength to effectively counterbalance the MSM’s tendency to amplify already-powerful messages.

But it’s not enough to destroy hegemonic messaging; the result would be anarchy. I hope, instead, that the deliberative strength of our democracy will expand as the Internet matures as a medium. David Weinberger, my colleague at Berkman, has mused on how the Internet might function as an e-gov social network. This is, I think, the right question, but David grounds that function in the wrong institution. We all want a more transparent Administration, but it’s Congress that’s sorely in need of more deliberative power to counterbalance the Administration’s already mighty dominance over American democracy.

Imagine if, in the past two weeks, Internet technologies had given grassroots networks the ability to rally citizenry around carefully-crafted alternatives to the Paulson-Bernanke plan. Better yet, imagine if in the past few months those networks enabled Congress to tap the wisdom of our citizenry to craft a democratic yet expert plan — proactively — to respond to the crisis before it broke. Science-fiction writer Victor Venge has posited that today’s predictive markets will evolve into rapid-response networks capable of quickly gathering, synthesizing, and analyzing data to support complex decision-making. It’s idealistic, but not impossible to imagine, such network restoring democratic principles to our increasingly top-down government. Everyone would have a role to play in such a system — experts in shaping policy strategy, ordinary citizens in shaping the values that such policies must meet. Lingering anger on both the left and right over not just the Iraq war and the bailout, but also how they were rammed through Congress, may provide us the opportune moment to begin building this future.

Is the bailout really welfare?

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I spent five years working with poverty law advocates and analysts, and it is with those eyes that I’m viewing the proposed $700B bailout of Wall Street. There’s an obvious point to be made here that maybe finally the bootstrappin’ free-marketers finally might develop some empathy for the deadbeat moms and learn that everyone is vulnerable and occasionally needs a helping hand.

But I also take note of liberal demands that banks and their executives should not profit from taxpayer largesse. This is understandable and morally defensible. But there’s a funny parallel between their claims and the argument that’s been advanced by conservatives for the myriad punitive clauses in welfare — dozens of rules to prevent benefit recipients from “defrauding” the American public. Advocates for the poor have rightly pointed out that these clauses provide negative incentives for people to work, and sometimes so rigidly curtail allowed activities that people can’t find their way out of poverty. As a pragmatic, not a moral, matter, I wonder if the same analysis applies to efforts to cap the banking industry’s forward-looking profits.

Seems to me like the argument being advanced for expensive corporate welfare opens up some new possible discussions around the much cheaper and more down-to-earth family welfare programs. Maybe both sides of that debate can have a little more empathy for each others’ positions now that the tables have turned somewhat.