photo credit: db™

Ronald Reagan, that master of the quotable quip, once said that the nine most terrifying words in the English Language are “I’m from the government and I’m here to help”. But if the Gipper were alive today and in President Obama’s shoes he might well change his mind, since right now there’s only one phrase that should strike fear into the hearts of all, and this time it’s only eight words: “The bill will now move to the Senate”.

Last week America’s first real legislation aimed at tackling climate change – The American Clean Energy and Security Act, better known as the Waxman-Markey Bill – passed the House of Representatives by a razor thin margin of 219-212. It will now move on to the Senate, which is often said to be the place where good legislation is sent to die. Where the House of Representatives is full of progressive reformers, the Senate is full of cautious moderates. Where the House often sees bills passed largely to the whipping efforts of Speaker Pelosi, the Senate is full of obstinate minded grand-standers who won’t be corralled by their party leaders.

It’s no understatement to say that the final bill that lands on Obama’s desk could well determine the future success of world efforts to halt global warming. The problem is, not only is it at risk of being sautéed à la Senate, but it’s not exactly in the best of states after having been through the meat grinder of various House committees. Legislation is often said to be like a sausage – you don’t want to watch it getting made. True to form, the various special interests and lobbyists that virtually own many key committee members have managed to make a meaty mess of the bill as it made its torturous way through the House. And you know what? It wasn’t even the most ideal piece of work to begin with.

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The key mandate of the bill – a 17% cut in greenhouse gas emissions by 2020 and  an 83% cut by 2050 – is also one of its biggest problems. These cuts are based on 2005 emission levels.  But multiple scientific bodies such as the IPCC have recommended that by 2020 there needs to be, at the very least, a 20% cut of 1990 levels. The bill , however, only has  a 4% cut. That’s a big difference. Indeed, it’s led many progressives and environmental groups to question whether the bill will do anything to halt climate change. But that’s not the only provision in the bill which seems rather weak. The first draft had weak but acceptable mandates for renewable energy and efficiency savings:  utilities had to ramp up renewable energy to 25% of their portfolio by 2025, and increase efficiency savings to 15% by 2020. But now those two standards have been combined, to a measly 20% total by 2025.

More problems lie with the bill’s headline feature: a cap and trade system designed to achieve the mandated cuts in carbon emissions. Cap and trade is by far the least understood legislative concept that’s in the public eye, but it’s really not that complicated. It’s simply a system that creates a market for carbon emissions. The “cap” involves  the government setting a carbon emission limit beyond which no polluter can pass. Anyone that exceeds this limit will have to buy a carbon permit off someone who’s not polluting as much – that’s the “trade” part. The idea is that by creating a carbon market like this it will become cheaper for a company to pollute less than it is to have to keep buying more permits. Even if this incentivising doesn’t work, you’re still ensuring less pollution, since no-one’s allowed to go beyond the cap.

So far so good. But the controversial part of this system is whether the government should auction off the carbon permits -raking in some revenue in the process – or gives them to polluters for free. The first draft of the Waxman-Markey bill allowed for 100% of the permits to be auctioned. This concerned the big utility companies, all of whom have a powerful influence on many members of the key energy committee. Therefore, by the time the bill finally escaped committee the cap and trade system was magically transformed into one where only 15% of the allowances  were auctioned, with the other 85% doled out free to various big polluters, most notably power companies. Outraged, this was the final straw for many environmental groups. Greenpeace withdrew their support entirely from the bill, with a slightly bizarre warning that it now threatens to do more harm than good.

However, it’s important to be clear on how bad this change is. It shouldn’t affect the incentive system behind cap and trade, since companies given permits for free will still want to reduce their emissions so they can sell their carbon allowances for a hefty profit – go capitalism! Moreover,the cap is still the cap – emissions will still be reduced. So, beyond sheer disgust at big polluters getting a free handout, it’s not really clear why this was the last straw for groups like Greenpeace. Nevertheless, it is unsettling, because the smaller the percentage of permits that go to auction, the less money the government takes from their sale; money which could then be reinvested into renewable energy. At the moment, however, the small amount of revenue the government would makes from auctions is aimed at refunding households that would otherwise be hit by an increase in their energy bills. In terms of potential investment in clean energy, that’s a real missed opportunity.

I could go on – and on. There’s plenty more things wrong with the bill, and astonishingly they’ve all appeared before it’s even got to the Senate.  The question now becomes what damage the venerable upper chamber will do to the legislation. The omens, it has to be said, don’t look so good. The Senate Energy and Natural Resources Committee, which serves largely at the behest of the oil and coal lobbies, recently released a bill of their own which included even worse renewable energy targets than Waxman-Markey. It’s possible that the faults with the cap and trade system may be somewhat rectified, since this will be the prerogative of Barbara Boxer’s relatively progressive Environment Committee. But waiting in the wings when the bill comes out of committee onto the Senate floor, like a troupe of grandstanding pantomime villains, are several centrist, business-serving Democrats who are waiting to do to a climate change bill what was done to February’s stimulus package – i.e. lop some good bits off.  The only person who can really guarantee that the bill comes out of the Senate better, not worse, is Obama and he’s had – and will have – his hands full with the immensely complex issue of health-care reform, which is running concurrent with climate change legislation. Moreover, Obama’s so far shown absolutely no sign that he wants a good climate change bill as much as he wants a good health-care bill.

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Given that a climate change bill is unlikely to end up on the President desk in a state as good as it should – and needs – to be, does this mean that it’s a complete failure? This question matters right now, because the answer tell us whether progressive and environmental groups should be advocating for perfection or searching for compromise. Paul Krugman has argued in the New York Times that we shouldn’t make the perfect the enemy of the good, and that this is a decent bill that can be built upon in the future. Is he right?

Well, first it’s important to remember that the bill – so far – isn’t completely terrible. The long term target of an 80% emissions cut by 2050 is still a respectable one. The fact that there are mandates to reduce emissions in the first place – and a cap and trade system to implement  them – is an achievement in itself given the immense power of energy lobbyists. If either the targets or method of delivery are weak, then they can be improved upon in the future. After all, it’s not like this is the only chance Obama will have to combat climate change. He’s going to need something to do once he’s reformed healthcare, got the economy back on track, made peace in the middle East and fixed the financial sector, less he run out of things that need fixing and has to spend his second term shooting hoops on the White House court. And though he probably won’t sustain the enormous levels of popularity he has at the moment, there are still going to be times when he has political capital to spend on further legislation – most notably after his inevitable re-election come 2012.

Moreover, Democrats are still on target for a net gain of 2-4 Senators in the 2010 midterms, so you would hope that any future bills that arise in the next three years will have a better chance of not being held hostage by the business lapdogs of the Senate.  I suspect many groups currently demanding perfection are at the mercy of the “Big Bang” theory of legislation that says everything must be done at once, before the window of opportunity closes. Sadly, it just doesn’t look like this will be possible with climate change.

Finally and perhaps most crucially, America needs a bill – however imperfect it is – in time for December’s climate change summit in Copenhagen, where the world’s nations will come together to agree on a strategy to fight global warming. After all, the likes of China and Russia are hardly going to make their gardens green if it’s obvious that America isn’t tending it’s own backyard. And America could shut off all its carbon emissions tomorrow, but if China doesn’t do squat then we’re in for a very bad few centuries.

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All the above may well be true. But it doesn’t change the fact that there’s a very scary disconnect between the apocalyptic predictions of most reputable climate scientists and the moderate-to-weak provisions in the Waxman-Markey bill.  For example, check this quote out from Obama’s own energy chief, the Nobel Laureate scientist Stephen Chu: (emphasis mine)

Right now, the climate scientists feel that if all humans shut off carbon emissions today, it will still glide up by about 1 degree centigrade. In the business-as-usual scenarios, Nicholas Stern says there’s a 50 percent chance we may go to 5 degrees centigrade. We know what the Earth was like 5 or 6 degrees centigrade colder. That was called the Ice Ages. Imagine a world 5 degrees warmer. The desert lines would be dramatically changed. The West is projected to be in drought conditions. And certain tipping points might be triggered. We can adapt to 1 or 2 degrees. More than that, there is no adaptation strategy.

Actually, if our only chance to fully adapt to global warming comes if we shut off all emissions right now, then maybe groups like Greenpeace aren’t so much being perfectionist as they are being ridiculously over-accommodating.

This doesn’t mean, however, that America’s first stab at climate change legislation shouldn’t be embraced as a step in the right direction. But it does mean you might want to start saving up for that condo on Mars.

Read More:  The Ethical argument for tackling global warming

Waxman-Markey Bill: Crunch Time

It’s crunch time on capital hill as the Obama administration puts its political capital on the line for the House to pass the Waxman-Markey bill. For those of you who don’t know, the Waxman-Markey bill is the first Climate Change bill to be introduced in the US ( on a federal level).

So what does it promise? (See here for a more comprehensive overview)

• To reduce US emissions on 2005 levels by 17% by 2020
• To bring US emissions down by 80% by 2050
• 25% of US energy by 2025 must be renewable
• A Cap and Trade system, 85% of permits will be auctioned off
• 2 Billion tons worth of carbon offsets
• A whole host of other measures from building efficiency, fuel standards and even a new technology bank!

Ok it’s been watered down, see Kelly McManus’ coverage at Climatico to,how its been watered down. Worse the Senate will be an even tougher battle with a smaller Democratic majority, and still no Al Franken *sigh*, but make no mistake, this bill is a game changer.

For a long time, I’ve had a list of things I would like Obama to do ( not including saving the US economy):

1. Health care
2. Climate Change bill
3. Immigration Reform
4. Gay rights

That isn’t a definitive list but if he got those down, that would do for me. Although far from perfect, this Climate Change bill is the only realistic chance of success in combatting Climate change, not simply because the US is the world’s second largest polluter but because it is the world’s superpower and the largest economy. If the US  was not willing to take serious action against Climate Change, China India and the rest will never get on board. As we head towards crucial Climate negotiations at the end of this year and the beginning of the next this is probably the only chance the US has of passing a serious Climate Change bill in time, to show it is willing to take serious leadership

And to be honest, the Democrats won’t have it this good for a long time, at best they will keep a hold in the 2010 mid terms, there is a small chance they’ll be able to expand and a good chance they will slip a little bit. They have a large majority in the house and IF Franken were ever seated would be looking at filibuster proof majority in the Senate. The time really is now.

So if it passes what then? Well if it passes, it still ahs to go and get watered down in the Senate, but if it survives that and the Republicans don’t use the fillibuster than a framework has been set for the US to reduce Climate emissions. With luck this will change the nature of debate for further incremental legislation to strengthen the legislation, critical to this will be:

• Proven success of green jobs, already a growing number of economists and think tanks ( e.g. Pew Research) have come out in support – that green can be good for the economy.
• An economic upturn in general, weakens the hand of those who oppose the bill purely on economic grounds.
• The continual reduction in climate sceptics as evidence already insurmountable continues to pile over, until Republicans realise that opposing near total majority of world scientific research is ridiculous, this could take a long time, but if enough of the American public are convinced, Republicans may eventualyl change their tune. Then the debate will be about the type of policy rather than the exisitence of Carbon Dioxide :-p

The House votes tommorow, fingers crossed.

photo credit: Mariano Kamp

Climate Change is buzzing across the US political sphere at the moment,  so are torture issues, the Afghanistan war is never too far from the media’s mind, the next Supreme Court nomination is doing the rounds and North Korea just exploded a nuclear bomb. But wait! Climate Change IS buzzing, not even a debate about its existence, at least not in the mainstream, nor its role as global conspiracy but actual Climate Change or related policy has landed.

For those of us who follow the environmental issue, the US has been a sore spot to say the least, and while Obama promised much and seemed to understand it, (by which I mean he did not flat out deny mountains of scientific evidence),  but with the global recession, “sceptical” Republicans in congress etc,  many of us had doubts that Obama would expend serious capital pushing it through. In some ways we were right, he hasn’t expended his capital per se, rather he has revealed his strategic cunning to begin pushing through legislation and shape the debate early on.

The two big Climate Change issues at the moment is the Waxman-Markey bill, proposing a US wide Cap and Trade policy, this one passed its first major hurdle which was making it out of comittee, it has an arduous journey ahead of it but don’t be fooled,  from the Bush administration’s denial of Global warming and paltry increase in renewable energy funding, a debate on a nationwide Cap and Trade is a huge leap forward.

The second, is the fuel standards or CAFE legislation. This surprised many by its boldness. Fuel standards were first introduced after the OPEC oil crisis and were successful in the short term of reducing US consumption. Since then however, the framework for fuel efficiency standards became a patchwork with a lack of movement at a federal level, eventually this resulted in the California face off with the EPA over the latter’s refusal to grant a waiver  for California for higher fuel efficiency standard than the underwhelming Bush proposals. What took commentators by surprise was that Obama passed the CAFE 4 years before it was mandated by law to be revised and with more far reaching standards than many had hoped for, essentially from 2012, fuel efficiency will be raised 5% each year. Although this would still put it behind Europe, after literally  of little to no progress this is a remarkable step forward and has the double effect of changing the Canadian car market ( the two are so closley linked that major Canadian states,  just match their fuel standards to the US).

President Obama undoubtedly realised that on any single front, intransigent Republicans and conservative Democrats could be enough to water down any particular piece of legislation. Which is why Obama has decided to pursue the policy on numerous fronts,  in the hope to reach a more ambitious target.

While the Waxman-Markey bill will continue to endure a very tough battle, setting an ambitious target to raise fuel standards Obama has effectively passed a Climate Change and energy security bill in one:

Obama mentioned that 1.8 billion barrels of oil will be saved over the lifetime of vehicles sold in the next 5 years (this is the equivalent of shutting down 194 coal plants or taking 58 million cars off the roads for a year

In addition to this, the stimulus bill contained approximately $60 billion will go towards green projects from renewable energy investment, research as well as other environmental efforts.

As with all things Obama, the it’s not just about the legislation but changing the the whole framework of the debate. Many have noted that for Climate Change policy to be sustained across the political spectrum and over time it cannot simply rely on Climate Change as a goal, rather it needs to be recast with concomitant values that can unite people across the political spectrum. Obama no stranger to the power of words has placed his bets: Jobs and energy security.

“It’s the economy stupid” may be cliché but it’s the language that wins elections, especially in an election, Obama has promised 5 million green energy jobs and frequently discusses the clean energy market as one America can’t afford not to invest in, describing it as a cornerstone of America’s economic recovery and an excellent future market for investment.

While his first language is positive, Obama takes a more serious tone when he discusses energy security. Although discussed during the campaign, the Obama administration has continued this line and begun to back it up with investment and the CAFE standards.  He’s met with considerable success with some veteran groups coming out in favour of renewable energy investment to prevent future energy wars. Democracy Corp recently found Obama had higher approval on National Security than he did on his job approval , with 50% of American’s saying Obama was doing better than Bush on national security. While this will obviously focus much more on traditional military issues, Obama has nevertheless been able to cast renewable energy and fuel standards as essential tools in strengthening America’s strategic position and subseqeuntly casting those who allowed oil dependency to continue  as damaging to America’s national security *cough* Bush-Cheney *cough*.

He’s got a long road to tread, but Obama is no stranger to playing the longer game.

While few might live up to the notoriety of Colbert’s terrifying Satire (youtube it!) Obama was not found wanting on the jokes, with Limbaugh a recurrent theme throughout the night.

Here’s Wanda:

So, Wanda made ajoke about his Kidney’s…I’m sensing conservative outrage, it’s way worse than say Bush “joking” about trying to find WMD’s ( I mean nothing serious was going on there…[youtube it!])

You saw it coming:

There are no surprises in the deal announced today to reform the banking system, to prevent banks making the kind of risky loans and investments that precipitated the worst global economic crisis since the 1930s.

But it’s nonetheless a historic event that the world’s 20 most powerful economies have signed up for these reforms – because they represent the death knell for the Anglo-American doctrine that economies flourish when financial firms are left alone to do as they please.

Indeed.

18:32 BST: Buried under all the G20 news has been the potentially groundbreaking meeting between Barack Obama and Russian President Dmitry Medvedev, which resulted in an agreement to reduce the nuclear arms of both sides much further than the current agreement demands. This could be very important…

18:30 BST: A wise comment from the Guardian’s Andrew Sparrow (whose live-blog was probably better than mine but nowhere near as epic!):

I’ve been busy updating our main story, having sat through the opening of Brown’s statement. First reaction: I found myself sitting there thinking ‘David Cameron could not pull off an event like this’. That’s not because I think Cameron’s a lightweight. I don’t. It’s because the most important summit conclusions involve international finance, global trade and the inner workings of organisations like the IMF and there are probably very few prime ministers or presidents in the world who understand this stuff as well as Brown.

18:20 BST: Lest I be judged  by my comments below to have been a bit too harsh on the protests, I want to stress that I have great respect for most of them. I say most of them, because the anarchists were just so annoying. Proper anarchism is really cool. It’s an extremely sophisticated ideology . These guys, however, were just pathetic. Bad anarchists!  The majority of protests, however, made some good points.The fact remains, though, that they surely made no difference on the summit at all. If you want to get something changed, you focus on it like a laser and you don’t go off message. But the protests were never on message to begin with – from homelessness to climate change to ending the war to the death of capitalism; only a minority were  actually focused on the topics of the summit! The question becomes then – did they really want to influence the summit? Or did they just want to get their message out there in a sort of vague picture of defiance?  In their defence, however, you could respond that they never stood a chance anyway: governments don’t respond to the people anymore. No-one listened to Iraq protests, for example and they were very focused. So it’s an interesting debate. But I do think that they could have maybe stood a chance at getting some traction if they focused on one message and, you know, stuck to it.

18:13 BST: Here’s the full text of the communique, courtesy of the Guardian. There’s tonnes of details here…

18:10 BST: Oh and I forgot to add that hedge funds and other non-banking institutions will come under the aegis of this new Financial Stability board. Since the mysterious financing of hedge funds helped to exacerbate the mess, this is also good news; but again it all depends on how strong the regulation is…

18:05 BST: The headlines are focusing on the issues of tax havens and that $1 trillion figure, but there’s tonnes of other stuff that’s just as interesting. For example, there’s going to be a new Financial Stability Board that will work with the IMF to monitor the risk of banking transactions and impose limits on things like capital reserves and leverage requirements (not to mention executive bonuses.) This is absolutely crucial in getting the banks back on track and preventing such a crisis happening again, since it was an inherent failure in the banks’s ability to evaluate “systemic risk” that made the crisis so bad. This is pretty complicated and I’ll come back to this another time, but suffice to say it’s a good move – that is, as long as this new regulatory body actually has proper regulatory oversight.

17:54 BST: A timely article over at Foreign Policy discussing whether protests ever work. I agree with its basic conclusion: protests have to be unified and targeted; and focused on changing the system not overthrowing it. The G20 protests were none of these things and so I’m afraid that they’ve had absolutely no effect whatsoever.

17:46 BST: Did Sarkozy and Merkel get their victory? Or was there never any “victory” to begin with? Everyone was in agreement over the basic regulatory provisions. and had been for weeks. The real controversy-  over the possibility of national stimulus packages – was won by Merkel and Sarkozy weeks ago, and so it was no surprise to see no such provisions today. However, Sarkozy must be feeling pleased that the language on tax havens was quite fierce. In the big picture, it’s not really much of an issue, but he’ll make a big deal of it, which is fair enough…

17:44 BST: Canadian PM Steven Harper’s absence in the photo is not going down well in Canada…

17:35 BST: Mark Brough in the comments points out, completely correctly, that I’ve been claiming all through this live-blog be on “GMT” time – Greenwich Mean Time – when in fact, because the hour went forward last week, we are now on “BST” – British standard Time…. Um… My bad!

17:20 GMT: Okay, they’re replaying Sarkozy’s press conference; he’s really laid it on thick… “There’s something moving about this…”; “Who could imagine?”  Definitely basking…

17:14 GMT: Question from Mark Bailey in the comments: does Brown get a boost in the polls from this? Hmm, tricky one that. On the one hand, this trillion dollar figure could backfire; it’s not quite what Obama and Brown wanted in the sense that there’s no commitment to plow government stimulus packages directly into G20 countries. Further, we should expect to see many journalists tomorrow asking the question: How does this help us? How does this help Britain? After all, it’s hard to see how increased IMF funding for developing countries helps the unemployed back in Britian. However, I find it hard to believe that he doesn’t get at least a small boost. I mean, come on: for two days he’s been the public greeter, charman, conductor and organiser of the world’s twenty most powerful people. He’s  even managed to outshine to Obama… (who has appeared quite tired) Moreover, though you can argue over how concrete the provisions are,  there’s no doubt that this is a groundbreaking agreement. And as long as you think globally, then the agreement is very good for Britain in terms of more secure, regualted international finance and trade . The trick for Brown will be getting the British people to realise this. It’s not an automatic thought process; but if he gets the point across then he could get a very significant boost. I still think he’d benefit from giving us a proper stimulus, though…

17:09 GMT: Didn’t listen to French President Nicolas Sarkozy’s press conference, because it was, if you believe it, held at the same time as Gordon Brown’s! Oh, Sarko! But the consensus seems to be that he did a lot of boasting on his achievements re. hedge funds, strong regulation and, crucially, tax havens. Arguably he deserves to boast – he got the strong language he wanted on tax havens; the naming and shaming in particular. He also apparently did some typical admonsishing of journalists. Never a dull moment with this guy…

17:00: GMT: Gordon Brown spoke well at his press conference and the final communique is, on the face of it, pretty impressive. But the criticisms are already forming: is the language against protectionism strong enough? Are there any provisions to force everyone to stick to these agreements? Are there really any sanctions against tax havens? And crucially, is the $1 trillion “stimulus”  really a stimulus, or just a series of provisional loans? There’s certainly no concrete agreements to force governments to plow stimulus money directly into their own country – no direct stimulus. But make no mistake, the IMF funding etc is very significant.

16:40 GMT: Okay, so all the rumours are no more and now we have the final communique – the final version. It’s incredibly complicated, as you might expect. My head hurts just thinking about it. The “headlines” appear to be the following:

- A $1.1 Trillion global stimulus comprised of: $500 billion in extra funding for the IMF; $250 billion in “special drawing rights” – in effect a cheap IMF overdraft facility for poor countries – $250 billion in world trade funding and $250 billion  for “multi-lateral development banks” like the world bank to give to really poor countries

- a multi-tiered “blacklist” list of tax havens that is being published today – here comes the naming and shaming!

16:35 GMT: Clever Channel 4 question: What are the sanctions to make sure countries actually do all this stuff? Brown points out that the IMF will be watching and assess it regularly, and we’ll meet again to check up on stuff in the autumn. Hmmm….

16:31 GMT: What does this mean to the person watching at home? Brown responds by emphasising that today’s developments means that people’s savings, investments and businesses will soon be much safer. “Dealing with the international hurricane that has lashed our shores as well”.

16:27 GMT: Really geeky question about tax havens; basically asking is this really the end of tax havens? Brown says this is the start of the end; a major step forward; outlines three-tier system of tax havens as I described below. We’ll expand the reach later, says Brown.

16:22 GMT: Oooh…. an interesting question from a Chinese journalist: “you say the era of washington thinking is over, but is the era of washington currency”… he’s talking about the possibility of a global reserve currency as proposed by the Chinese. Hope Fox news doesn’t get onto this, as they seem to think that this means replacing the dollar altogether! Brown explains it well…

16:19 GMT: A CNBC guy asks about the controversial breaches of EU countires re. protectionsim: Gordon Brown responds by reiterating that the kind of world trade funding seen today is a boon for free trade.

16:15 GMT: Nick Robinson, the annoying BBC political correspondent asks his question: and his mic doesn’t work! Hahahaha! When he finally asks his question, he tackles one of the main issues, albeit in an annoying, disingenuous way: isn’t the “stimulus” just a series of loans that isn’t techncially a stimulus and won’t help, for example, people in the UK? Gordon Brown rather niftily turns round by pointing out that since we now have a global stimulus, it turns out that the main controversy everyone was talking about wasn’t actually a controversy at all. Clever, although Robinson may have a point about the nature of the “stimulus”. This needs more analaysis later…

16:10 GMT: Gordon Brown is speaking. Lots of stuff here. Six main pledges:

1. Reform the banking system
2. Clean up banks’ toxic assets
3. $1 trillion global stimulus, mainly to the IMF (as described below)
4. Action on global poverty
5. Kick start international trade
6. Seek agreement on post 2012 climate change plan

More analysis later, but first let’s see the questions.

15:53 GMT: Mark Bailey again, from the comments:

I’ve said it once and I’ll say it again: I love Sarkozy!

15:46 GMT: Surely not: it’s looking like Gordon Brown’s closing remarks might be happening at the same time as French President Sarkozy’s press conference! What??? Split screen chaos, here we come!

15:44 GMT: Meanwhile, here’s what we haven’t heard about in detail but we’ll probably see: Fairly strong but not watertight language against protectionism, fairly strong regualtions for hedge funds, possibility of a general regulatory body for global banks, stricter capital/leverage requirements, a new system for regualted ratings agencies, and super-vague language on public stimulus packages. Oh, and maybe some bonus crackdowns too.

15:34 GMT: While we wait, another summary of what we (probably) know so far is definitely part of the G20 agreement:

A package of over a trillion dollars, technically a stimulus package, (see my comments below) which consists of a $750 billion increase in IMF funding that can be used to help developing countries, a $250 billion increase in “special drawing rights” for the IMF – the cheap overdaft facility for poor countries that I talked about below – and at least a $100 billion funding for world trade. Also, an agreement to publish a multi-tiered blacklist of tax havens.

15:30 GMT: Mere minutes away from the Press Conference. This is definitely it, people!

15:28 GMT: Papers including the Guardian are calling the decision to delay publication of the tax-haven blacklist as a partial defeat for France in favour of the likes of China. Perhaps, but you really have to stress the word partial…

15:22 GMT: I’m now into my ninth hour of live-blogging, and I have to say I have enormous respect for the kind of established bloggers who do this regularly… I’m exhausted. The G20 summit may save the world’s economy, but it’ll be the death of me…

15:17 GMT: The BBC just replayed an interview from earlier with UK Climate Change & Energy Secretary Ed Milliband, who gamely tried to assert that climate change issues were also being addressed at the G20 today. Nice of him to try, but I can’t think of  a single provision that will help the environment. Best he can hope for is some vague niceties. And quite right too: this is about saving the economy. Climate change can come later…

15:14 GMT: For more on tax haven news and details, see the Financial Times. Note also that the G2O won’t be publishing a list today; there’ll just be a vague mention of it and then the OECD itself will actually publish the list later…

15:12 GMT: News is leaking out about the decisions on naming and shaming tax havens… basically there’s going to be a sort of three-tier list published by the OECD (Organisation for Economic Co-operation and Development). One tier will be the sort-of-good-guys: the countries that have already shared information.  Then there’ll be the countries that are sort of promising to do so. Then there’s just the downright naughty ones that aren’t doing squat. So, sort of like a, uh, multi-hued blacklist….

15:11 GMT: Okay, just  a red herring… no press conference yet.

15:10 GMT: Here we go…… Gordon Brown speaks!

15:06 GMT: Funny how things turn out – all the talk about how Gordon and Barack won’t be getting their global fiscal stimulus, and yet now all the news is focused on a  global fiscal stimulus. Of course, the devil’s in the details: this isn’t the kind of stimulus we’ve been talking about that will directly help the populations of developed countries like Britain and the rest of Europe. It’s a stimulus via the IMF, as I described below. On the other hand, this is a big boon for developing, poorer countries. However, it doesn’t look like there’s going to be a new public spending fiscal stimulus for any developed countries. This could cause problems for Gordon Brown, since we may end up with a summit that, commendably, helps brazil and India but doesn’t directly help the UK…

14:59 GMT: It’s looking like all the measures I described a few updates ago – funding for the IMF, special drawing rights for the IMF, increase in world trade funding – are going to total around $1 trillion dollars. Expect, therefore the “trillion dollar stimulus” to be one of the main headlines to come out of today’s agreement – funny how everything always comes to a nice round number, isn’t it?

14:38 GMT: Okay, I understood nothing that Bob Geldof just said. I’m not entirely sure he did, either.  I think he just woke up and walked into the building and started quoting his dreams or something. Great stuff, regardless.

14:37 GMT:  “But the truth is that they may as well protest against themselves, because we sucked on the tit of free money and the bloated bubble that burst was us.” -  Bob Geldof, being interviewed by the BBC!

14:25: Following on from Lewis Hamilton’s punishment, more proof that this is a great day for the burying of bad news: Israel’s new foreign minister, the notorious racist Avigdor Lieberman, recently announced in his inaugration speech that the Annapolis peace agreement of 2007 has no force because it was never ratified by the Israeli parliament. More evidence that Israel’s new  extreme right-wing government has no interest in a two-state solution…

14:22 GMT: Via Matthew Yglesias, why IMF reform is so welcome

14:19 GMT: I wonder why all the news and rumours coming out of the meetings are focused on stimuli of things like the IMF and world trade, but nothing on regulations? Does that mean that everyone’s in agreement on things like hedge funds, tax havens and regualtory bodies, or does it mean that there’s so much disagreement that there’s nothing concrete enough for a rumour? I suspect the former…

14:11 GMT: A couple more points to add to what I’ve written below: First, the news I just described does seem to be concerned with what is in effect a kind of global stimulus, though not the kind we’ve been talking about the past few weeks. Basically it seems like the IMF itself is being given a stimulus in order to help struggling countries. As for the “special drawing rights” I talked about, this is really big news: if you didn’t get my explanation below (and I don’t balme you, it’s horrifically complicated) then let me simplify further: it’s a cheap overdraft facility for struggling countries. It’s too early to tell whether this is all true, or even if it’s that good… but this is definitely big news

14:09 GMT: Let’s see what we know so far. First, it looks like there’s been an agreement to triple IMF funding to $750 billion – it was previously thought to be only being doubled. This effectively menas that surplus countries like China will be helping to fund a massive spending boost for the world’s economy, which will particularly aid the struggling developing countries, who can be bailed out by the IMF if they get into trouble. Further, it looks like around $200 billion dollars will be provided to boost struggling world trade. Finally, there’s something that’s being called the “global equivalent of quantitative easing” – a fantastically complicated scheme called ’special drawing rights’ that is being funded to the tune of a $250 billion. Basically, in really simple terms this is how it works:  the IMF creates the money for a”cheap overdraft facility”, whereby countries who can’t afford to lend in normal markets get to lend at really cheap (American) interest rates from the IMF. This cheap overdraft facility is being mainly funded by America and China, who will get a lot of the money back through a complicated system of loans. For more on all of this, see BBC business editor Robert Peston’s blog and the blog of the BBC economics editor Stephanie Flanders.

13:52 GMT: After Canadian Premier  Steven Harper was caught in the toilet for the first official photo, Italian PM Berlusconi went and missed the second one! And the Saudi King didn’t turn up either! This is getting pretty funny…

13:46 GMT: I don’t want to sound patronising, but I can’t help but wonder what some of the protestors today hope to achieve. I’m referring specifically to those protesting about climate change or ending war etc… These issues, though important are very much not on the table today  – and they were never going to be, because we’re in a devastating economic crisis. And as for the people protesting about the Congo; a crucial and scandolously overlooked issue, I grant you, but in terms of recognition you could not have picked a worse day! Come on people. This is basic PR…

13:38 GMT: Okay, I want to briefly look at the subject of rating agencies – one of the not-so-exciting but still crucial issues on the table today. Basically, ratings agencies are responsible for giving a grade to the financial instruments of banks – so, for example, a premier investment bank would expect to be given a triple A rating for its bonds and other securities. The better your grade, the less risky a financial institution used to be perceived. The problem was, since banks could choose their rating agencies,we had the situation where the agencies themselves were loathe to downgrade the ratings of banks, lest no-one want to use them. Thus high grades were given to what was essentially junk and no-one knew it was junk till it was too late. Hopefully today we will see a solution to this problem, whether this be government controlled agencies or randomly assigned agencies…

13:11 GMT: Emily Buchanan of the BBC had a good line, saying the summit meeting was like the “Challenge Aneka” of global politics. She also pointed out that each world leader effectively had eleven minutes to make their case… (though presumably someone could always get some more time by nicking the eleven minutes of, say, Australia or South Africa…)

13:06 GMT: Reports flying around of breakfast discussions with finance ministers in which they’ve agreed that tax havens need to be named and shamed through some kind of published list – but when will it be published? Also, it looks like $250 billion dollars of drawing rights have been created for the IMF. This is very complex, but it’s sort of like saying to the IMF: create some new money for us! It’s good news anyway…

13:04 GMT: The canadian prime minister Steve Harper was in the gents while the official photograph was taken. Hahaha

12:52 GMT: Mark Bailey, from the comments, in response to my mention of news of a further meeting:

The second summit will probably be what was going to be the Sardinian G8: check out Andrew Rawnsley’s funny evocation of probable Berlusconian irritation about being upstaged: http://www.guardian.co.uk/commentisfree/2009/mar/29/gordon-brown-g20-andrew-rawnsley

12:46 GMT: For the sake of my personal safety, I just want to clarify that I think that’s a bad thing…

12:42 GMT: Just been looking at the official photograph and was struck by something: the 29 most powerful people in the world and only two are women!  I don’t want to make too big a deal out out of this, but even so!

12:33 GMT: As of now, this is what’s on the respective news channels – CNN: coverage of G20. Sky news: coverage of G20. Bloomberg: Coverage of G20. Euronews: Coverage of G20. NBC: coverage of G20. BBC: Coverage of G20. CNBC: Coverage of G20

Fox news?: Coverage of a baby deer coming out of a cat flap, under the heading of “Things we like”…

Says it all, really, doesn’t it?

1231 GMT:   While I was ranting about the police, the BBC were interviewing British Chancellor Alistair Darling who seemed pretty convinced that concrete action on tax havens was going to be agreed upon.

12:18 GMT: For more on the police’s tactics, see George Monbiot’s blog post in the Guardian. As you might expect from Monbiot, it’s a particularly devastating riposte. In particular he makes the great point that the police seem to create the violence they react to: in other words police violently entering a peaceful protest with riot gear suddenly find themselves with a riot on their hands

12:17 GMT: Let’s talk about the police for a moment. There’s no doubt that a small minority of protesters were acting up yesterday, for example the rather obviously choreographed smashing of the windows of a branch of the Royal Bank of Scotland. But the vast vast majority were just, you know, protesting – and yet all we seemed to see yesterday were riot police in their ridiculous armour, beating the living sh** out of anyone in front of them. There’s something genuinely scary when you see, in a supposedly democratic country like the UK, police in full, “I’m going to a medieval jousting session” riot gear wantonly whacking people with their shields and batons as a form of crowd control. Note to the police: a whack to the head with a potentially lethal object is not the equal and opposite reaction to a few taunts and a bit of shoving.

12:00 GMT: Just been watching the Fox News coverage, such as it is, of the G20 summit. As you might imagine it’s uniformly terrible, hopefully we’ll get some particulatly hilarious ignorant quotes later on.

11.47 GMT: FTSE 100 opens above 4000 following G20 optimism. Okay, so I get why this is technically good – optimistic markets are better than falling ones – but why do we focus so much on their daily upticks? As economist Dean Baker has pointed out, if a country today announced a massive tax hike for the poor or middle class, then that country’s markets would rally impressively, even though this policy would still be disastrous for their economy. In other words, the markets are not inherently sensible- they respond to what is good for bankers, not necessarily what is good for people. Can we stop obsessing over their ups and downs, please?

11.43 GMT: Reports coming through of an agreement in the draft to give $500 billion to the IMF. This is good news. Japan, in particular, is putting up around $100 billion. Go Japan!

11:40 GMT: BBC police source quoted earlier saying that the reason not that many protestors are out in force yet is because anarchists tend to get up pretty late in the afternoon. Boom boom! Surely, the anarchist would reply, this is merely a result of the state’s arbitrary working hours? No?

11:29 GMT: Some journalists are pointing out that there’s probably going to be a commitment in the finished agreement to meet again later in the year. This is good news – a commitment to meet in the near future will help make any summit promises seem more tangible and immediate – there’s nothing leaders like more than yet another summit to aim at. Also, note that a provision saying this is included in the supposed draft leaked to the Financial Times. (paragraph 24) Does this mean we get to do this all again? Go live-blog!

11.25 GMT: It’s worth reflecting for a moment that, though it’s good to see that we’re probably going to get strong, moral regulatory reform coming out of this summit, it’s nevertheless a massive shame that there probably won’t be any concrete commitments for an increased global stimulus. I touched on this in my post Fiddling while Rome Burns: Britain’s missing stimulus (in particular in the comments section of that post) but briefly, and at the risk of over-simplifying the arguments of  leading economists, here’s why the argument against more deficit spending is wrong: Europe – Germany in particular – is against more stimulus because they are worried about a) inflation and b) the cost of future debt incurred by big stimulus packages. a) is silly, however, because we are facing a deflationary environment rather than an inflationary one and while future inflation can be warded off, current deflation is much more dangerous (indeed, we actually need inflation in the short term – this is the point of many of the current monetary measures currently being put in place) b), meanwhile, doesn’t make sense because though an increase in goernemnt debt should always be of concern, it’s nowhere near as big a concern as an extended global downturn which is what may happen if sufficient fiscal stimuluses aren’t put in place . Basically European leaders have been suffering from long-termism: in other words, they’re ignoring short-term relief in order to focus on long term interests even though if they don’t look after their short term interests then they won’t get the chance to enjoy their long-term ones.

11.15 GMT: Over at the American Prospect, another good intro/summary article about the G20: How Obama should approach the G20

11:00 GMT: Lewis Hamilton should count himself lucky: the announcement that he will be stripped of last week’s third place in the Melbourne grand prix could not have come out on a better news day…

10:54 GMT: Gordon’s introductory remarks, lots of reference to paragraphs in the draft that all the leaders have in front of them. Emphasis on the paragraphs about protectionism, a real concern for Brown and one of the more controversial areas. This is a great time, by the way, to link to what is claimed to be a leaked draft of the summit’s agreement in the financial times. More on this  later…

10:49 GMT: Everyone now sat round an impressive table. Obama next to Brown. U.S. Treasury Secretary Tim Geithner to Obama’s right; Geithner has recently announced plans to regulate hedge funds that won’t be so dissimiliar from the plans in the summit today. He’s also announced controversial plans to give the american government power to take over any failing american financial institution. Geithner is very much leading the pack in terms of global regulation…

1038 GMT: UK business secretary Peter Mandelson’s comment that Gordon is being excessively ambitious – in a good way – is getting a suprising amount of play. Of course he is being ambitious! He’s expecting thirty world leaders to come to an agreement to fix the world’s economy and regulatory systems in just two days! The fact that this is probably going to happen is a real testament to his organisational abilities and his vision. He may be a doomed Prime Minister, but this is a real, monumental achievement – he will never in his life have another day like this.

10:34 GMT: Gordon Brown will be addressing the summit shortly. What a momentous moment for Britian’s prime minister…

10:32 GMT: World leaders gather for the official photograph… Angela Merkel wearing a very bright red dress. Um, not much else to say here…

10:26 GMT: Jamie Oliver’s meal for the world leaders at Downing Street last night came in, so he claims, at £12.50. Great…

10:22 GMT: A couple of good articles on what we can expect to come out of the summit: Will Hutton in the Observer last Sunday and a good introductory article from the Economist.

10:15 GMT: The BBC is reporting that there are rumours that a strict crackdown on executive pay will be announced. Meanwhile, the BBC’s business editior Robert Peston (who, by the way, is a pleasure to watch) is reitirating the things that aren’t quite agreed: decisions on trade, funding for the international monetary fund and exact numbers of aid to the poorer countries in crisis. Again, it’s worth emphasising that though many of the details have already been sorted out by finance ministers days ago, the exact numbers – and we’re talking billions here – have yet to be decided.

9:55 GMT: It’s worth pointing out how incredible it has been seeing around thirty of the world’s most powerful people hanging round together for two days – sometimes in the same room. For a great example of this, check out the video coverage of yesterday’s reception with the queen. (hat tip Mark Bailey) My favourite bit is when the camera focuses on German premier Angela Merkel chatting with the Queen of England while in the background you can hear US Secretary of State Hilary Clinton joking with French President Nicolas Sarkozy. Incredible…

9:41 GMT: Thousands of protestors are expected back in London today. Yesterday, 86 were arrested, 4 were charged and around 4,000 were brutally beaten by the batons of riot squads. (that last figure’s more of a rough estimate)

9: 37 GMT: Short version of what I’ve been saying over the past few minutes: Draft agreement written weeks ago. Boring! But potential for lots of last minute changes… Exciting!

9:29 GMT: Media fiction: France and germany are going head to head with Britain and the US! Merkel and Sarkozy don’t want a global fiscal stimulus, while Brown and Obama are worried about the extent of Europe’s regulatory demands! Who will win? We just don’t know! Will Sarkozy walk out? Will Gordon get his stimulus? Who knows!!!

Reality: Most of the details have already been prepared. Everyone’s in tandem on most of the regulatory reforms, while the global fiscal stimulus stopped being a possibility weeks ago – France and Germany have won that argument, though we might get a vague agreement on some kind of stimulus. But on everything else, everyone’s in tandem.

That’s not to say that there aren’t still issues of contention. The main things that still need to be hammered out include the somewhat controversial details of any plans re. tax havens and how much to give to the IMF. But in general, the framework is already in place.  See BBC economics editor Stephanie Flanders’ excellent post for more.

9:11 GMT:   The BBC’s business editor Robert Peston has a couple of great posts up on his blog about travelling to the summit this morning and the sheer scale of the summit’s interior. He also makes the great, albeit rather grumpy, point that Sarkozy helped Gordon Brown immensely yesterday in the sense that his concerns made it look like everything hasn’t been agreed to, even though it, uh, has. Having said that, there are still some potential disagreements to be ironed out but it cannot be emphasied enough that the agreement is mostly in place already.

9:00 GMT: By the way, feel free to leave your comments on this live-blogging thread, especially if you think at any point I’m talking rubbish (which, given the marathon nature of this live-blogging session, is very probable)

8:54 GMT: Here’s a quick look at the likely substance of any agreement made today, bearing in mind that, despite what the media likes to claim, most of it has generally been agreed – though there a few minor disagreements to be sorted out and details to be finalised, the skeleton framework is essentially in place.  I’ll be looking at these in greater detail throughout the day:

1) A massive boost to the International Monetary Fund’s budget, the exact amount to be agreed (think $500 billion) 2) An agreement to provide aid to the those ailing, poor economies that need emergency rescues – think Eastern Europe 3) Agreements on trade, in particular a conviction to steer away from protectionism 4) Bringing shadowy tax havens into the sunlight 5) A regulatory system for hedge funds and any other financial institutions that need closer regulation 6) Some kind of proper trading market for the kind of deadly financial instruments that helped to exacerbate the crisis (think credit default swaps) 7) An agreement to reform the bonus/compensation culture 8) A global regulatory system to monitor the big banks, control systemic risk and ensure they don’t start doing stupid stuff again 9) New regulation for  stricter leverage and capital requirements for banks, along with a better ratings system for financial products 10) A vague commitment to some kind of potential, perhaps, for some kind of agreement to put in place, maybe, some manner of  global fiscal stimulus, at some point in the indeterminate future. (Me? Skeptical? Never!)

8:35 GMT: Just been looking at last night’s seating plan (see below); lest you should think that not much thought went into it, bear in mind that Gordon Brown was sat next to the Chinese premier (keeper of the world’s debt) and the king of Saudi Arabia (keeper of the world’s oil). Also, surely no coincidence that Obama was sat next to German premier Angela Merkel – Obama perhaps was laying out the case for a global stimulus to a skeptical Merkel. I’m sure you can find some more logic to the seating…

8.33 GMT: Sarkozy just arrived and as usual looks like the most entertaining guy in the building…

8:30 GMT: Quote of yesterday? Gordon Brown citing the President of Brazil, Luiz Inacio Lula da Silva: “‘When I was leader of the trade unions, I blamed the government, when I became leader of the opposition, I blamed the government, when I became the government, I blamed Europe and America.” In other words, it’s a global problem, stupid…

7:56 GMT: By the way, if anyone was wondering what the seating plan was like for the Downing Street dinner for the world leaders last night, then take a look for yourself. Fascinating stuff…

741: GMT: World leaders arriving at Londond’s dockland, where the talks will take place… and here is Barack Obama, in the ridiculously large armoured monster known as “The Beast”…

7: 33 GMT: Hello! Welcome to Entangled Alliances’ live-blogging of the G20 Summit, at the ridiculously early time of 7.30 am. Today should be very exciting; we should hopefully be seeing nothing less than an agreed framework for a complete renovation in the global regulatory system. Either that or a Nicolas Sarkozy walk-out. Either way, things should be interesting and we’ll be there every step of the way… (well, through the medium of television and the internet. We won’t literally be there. Sadly…) Unless otherwise stated by the way, this is Edward live-blogging.

Right now, London is a hip compromise between the nonstop newness of Los Angeles and the aspic-pre-served beauty of Paris, sharpened to a New York edge. In short, this is the coolest city on the planet.

photo credit: *spud*

Thirteen years later, Stryker is back with an altogether more despondent vision.  Looking back over the Blair-Brown era, he casts back to the millennial optimism of the 1997 Labour victory and London’s world leadership in fashion, the arts and architecture.  The contrast, and it’s a stark one, is with a modern-day London heading into deep recession – the symbols of its former glory now insistent reminders of its current predicament:

Glitzy restaurants and cutting-edge fashion that used to be signs of welcome creativity reek of excess in a time of belt-tightening. Heavily mortgaged homes that looked like brilliant retirement nest eggs when property prices were soaring year after year now just look like basket cases. Construction sites and street works that once raised expectations of things to come now seem like major inconveniences. 

Interestingly, McGuire’s comparisons are not just historical, but allude to a Britain in decline while other countries rise from the ashes of their own recent past and, as a corollary, to a Prime Minister engaging in “Jeeves” diplomacy, evidently desperate to bask in the Obamian glow for a chance of electoral salvation.  This, we understand, in contrast to the optimistic verve of the Clinton-Blair “special relationship” (of which we are reminded by this weekend’s Progressive Governance Conference, a Clinton-Blair brainchild of 1999, and the announcement of a new Peter Morgan film).  Today, no more British bridge between the indispensable American nation and an idealistic integrationist Europe, but a country trapped in outdated alliance frameworks while Europe looks inward and America looks East (as the positioning before this week’s G20 summit has shown).

All in all, this is a fascinating article which is worth reading in full.  Its vision of British malaise is not quite as downbeat as The Economist’s notion of Reykjavik-on-Thames, but it does, I think, capture a pessimistic national spirit and the sense of drift not just of an economy, but of culture and a political system to boot.  This tone is manifested in phenomena as diverse as “Olympic regret”, the “summer of rage” and the return to headline dominance of political sleaze – always a sign of political decay.  In many ways, it is redolent of the “crisis of confidence” which Jimmy Carter identified in his ill-advised 1979 malaise speech (ill-advised, because it was a gift for Reagan to trumpet the indomitable American spirit – Britons, I suspect, are more accustomed to self-doubt).

If there’s cause for optimism, though, it can be found in McGuire’s original 1996 piece.  Marvelling at London’s reinvention and deliberately cautioning Londoners against hubris, he reminds readers of the city’s peculiar flux and of its rises and falls that, like inexorable market cycles, never cease to eschew the possibility of relaunch just around the corner:

The fun won’t last, of course. London swings violently between booms and busts. It was stuffy in the 1950s, when you couldn’t find a decent meal in the place; it was “swinging” in the 1960s, when pop music and Carnaby Street injected a dose of classless style. It was almost destroyed by grandiose redevelopment schemes in the early 1970s, then rescued again by the entrepreneurial energy of punk. In the early 1990s the city was mired in a deep recession. Now it’s back. Nobody planned this; nobody ever has.

photo credit: World Economic Forum

The London Summit, which will be held on one fateful day, April 2nd, is a follow-up to a session held last November in Washington D.C. – a session in which rather little was decided, except vague assurances about cutting taxes and increasing government spending.  The Prime Minister’s zeal was already clear at this stage.  He declared that the summit  was “the road to the new Bretton Woods. It is absolutely clear that we are trying to build new institutions for the future.”  For him, London is where the deal will be sealed.   His agenda is extraordinarily ambitious.  As the Economist sardonically put the issue:

The summit should not only stimulate the economy and renounce protectionism, but also bolster the IMF and other international financial outfits, revamp regulation, create an early-warning system for crises, and save the poor. It was as if Mr Brown thought the ailing economy would yield to an act of governmental will, if only it were colossal enough.

The Economist, ever pragmatic, argues that such overreach risks undermining the immediate necessities of global government stimulus and a united front against protectionism.  This pessimism seems to be borne out by the unenthusiastic noises coming from G20 capitals and an emerging transatlantic gulf in attitudes.  Below the fold, I look at the opposition to Gordon Brown’s plan for new financial institutions, and the implications for his domestic political fortunes.

The United States: A Familiar Refrain?

Predictably, in the US opposition to Brown’s “New Bretton Woods” is founded on unease about sovereignty, and a national tendency to distrust international institutions.  These worries, perhaps masked by the unflinching politeness which American representatives show to visiting leaders, was detectable in the lack of ovation with which Brown’s references to new institutions met when he addressed Congress.  Republican Congressman Jeff Fortenberry tweeted, for example:

UK Prime Minister Gordon Brown addressed joint session of Congress. Proposed global New Deal.  Serious concerns about additional financial global interdependency.

But it’s not just the GOP.  Obama himself was pretty reticent to commit to the Brown plan during the “press avail” in the Oval Office earlier this month. Moreover, as the man to whom the whole world is looking for messianic leadership, he seems unlikely to leave the show to Brown.  For the Economic Times (of India):

Gordon Brown went off to Washington to make double sure that Mr Obama would actually show up, and get involved in the discussions. Well he has, and how. His administration has blown the Summit agenda apart even before the first photo-op, proving that US, down or not, is still pretty much the biggest elephant in the room. 

 Ironically, however, given the respective reputation of the US and Europe, the biggest gulf between the two is over stimulus.  Obama wants more money to go to the IMF, more government spending, and more stimulus packages (specifically, a fiscal stimulus worth 2% of GDP this year and next).  Blaming the problem more on hedge funds and tax havens that the banking system itself, it’s big-spending Europe that this time is reluctant to throw more money at the problem until it sees concrete results from first efforts.

Europe: Against Global Fiscal Stimulus

Last week, the Guardian reported that, perhaps disastrously for Brown, Merkel and Sarkozy had come out against his calls for global stimulus:

After talks at Chequers to prepare the way for next month’s G20 summit in London, Angela Merkel, the German chancellor, ruled out ordering another “fiscal stimulus” in the short term, and made it clear that if more action were to prove necessary in Germany it would be for Berlin to decide, not the G20.

photo credit: Chesi – Fotos CC

Her comments were echoed by the French finance minister, Christine Lagarde, who was attending a meeting of G20 finance ministers in Horsham, West Sussex. As ministers tried to agree a way forward, Lagarde said she was optimistic the meeting could make progress, but added that nations needed to “evaluate the remedies already put in place by each of us” before ordering huge extra spending on top of that already sanctioned.

This attitude seems at odds with the traditional British perception of a Franco-German alliance pushing for common EU policies  at the price of national sovereignty and should serve as a reminder that global stimulus is not the only option on the table.  It is also discrepancy which reflects the inevitable result of incommensurate political and economic integration.  As Paul Krugman argues in his NYT column today:

The economies of Europe’s many nations are almost as tightly linked as the economies of America’s many states — and most of Europe shares a common currency. But unlike America, Europe doesn’t have the kind of continentwide institutions needed to deal with a continentwide crisis.

This is a major reason for the lack of fiscal action: there’s no government in a position to take responsibility for the European economy as a whole. What Europe has, instead, are national governments, each of which is reluctant to run up large debts to finance a stimulus that will convey many if not most of its benefits to voters in other countries.

[...] Europe, in other words, is turning out to be structurally weak in a time of crisis.

Add to the gulf between the Brown-Obama axis and Franco-German feet-dragging the Asian insistence that if any new financial institutions are to be created, emerging economies should have more of a say in how they are run (and FCO indiscretion about “two-tiers”), and the prospect for consensus in April looks small.

Brown Feeling Blue

Having staked so much political capital on the London Summit, we are left asking what Gordon Brown’s fate will be if it fails.  Doubtless, the Tories will leap on the issue as another chance to demonstrate Brown’s failure to lead, but it seems unlikely that they have a convincing narrative against the merits of international financial action.  A lot depends on how the media cover the summit (and whether alarmist predictions of a “summer of rage” launched at the same time do indeed come true).  In truth, failure at the G20 would probably not directly affect Gordon Brown’s domestic popularity, which seems stuck at around the 30% level.  What it could do, though, is damage his claim to international leadership, and potential ambition to head up any newly-created financial institution.  Gordon Brown clearly enjoyed signing autographs for members of Congress on the House floor; whether he has the chance to do so again could well be decided by April 3rd.

photo credit: AComment

When Barack Obama’s economic stimulus package passed into law last month, it was mostly greeted by economists as a much needed influx of government spending that should help to get the economy back on track . But among the plaudits were concerns about the effectiveness of the stimulus: specifically, it should’ve been bigger.

Now you might well question whether an $800 billion package could be described as “not big enough”. But it’s important to remember that around $300 billion of it was in the form of tax cuts – helpful to the families they were aimed at, no doubt, but not particularly useful in terms of job creation. Therefore, only $500 billion was actually in the form of direct government spending, and so when considering how much is needed to create enough jobs to get the economy back on track, only two thirds of the stimulus is actually “stimulus”. But even so, surely $500 billion is enough to get the job done?

Well, uh, no actually. It isn’t. The inadequacy of the stimulus, however huge it was, is made clearer every week as increasingly disastrous figures about the economy continue to be released. In his Monday New York Times column, nobel-prize winning economist Paul Krugman, calling for a second stimulus, points out that:

The administration’s budget proposals, released less than two weeks ago, assumed an average unemployment rate of 8.1 percent for the whole of this year. In reality, unemployment hit that level in February — and it’s rising fast.

But isn’t Obama’s stimulus meant to make 3.5 million new jobs by the end of 2010?

3.5 million jobs almost two years from now isn’t enough in the face of an economy that has already lost 4.4 million jobs, and is losing 600,000 more each month.

Oh. Bummer. Okay, so the situation’s really bad, but do we really need another stimulus package? Martin Feldstein, professor of economics at Harvard, has looked at the numbers and concluded that yes, we do. His article’s worth a read but I am nothing if not a prolific summariser, so here’s the cliff notes version, which includes the “things Feldstein doesn’t say because he forgets we’re not all economists”:

America is looking at an annual shortfall in demand of $750 billion. In other words, every year the US will be another $750 billion short of what it should be producing in a normal, crisis free environment. So for the stimulus to work properly, it needs to boost spending by $750 billion dollars a year. Now the stimulus is spread over two years. As I noted above, the actual stimulus part is $500 billion. And only around 75% of that will actually take effect over two years.  So that  leaves around $200 billion per year. Which is rather less than $750 billion. Of course, this neglects to take in the “multiplier effect” – that is, the chain reaction that follows from government spending which means you actually create more demand than you put in. Obama estimated the multiplier effect at 1.6. So that becomes $300 billion a year .

But that’s still nowhere near $750 billion.

So you can add my name to the illustrious list of commentators calling for another stimulus package, albeit in very small writing right at the bottom.  But what about the politics? Congress, bruised from the last stimulus battle, is hardly going to appreciate another punch-up, are they?  Krugman, as always, is ahead of the game, and sounds the alarm:

So here’s the picture that scares me: It’s September 2009, the unemployment rate has passed 9 percent, and despite the early round of stimulus spending it’s still headed up. Mr. Obama finally concedes that a bigger stimulus is needed.

But he can’t get his new plan through Congress because approval for his economic policies has plummeted, partly because his policies are seen to have failed, partly because job-creation policies are conflated in the public mind with deeply unpopular bank bailouts. And as a result, the recession rages on, unchecked.

In retrospect we can see the flaws inherent in Obama’s attitude to the stimulus package. In order to secure a none-too violent passage through Congress, the administration settled for a none-too impressive figure rather than the much larger amount ($1 trillion, not including tax cuts) that economists suggested were necessary. The advantage of this is that, well, it passed; and passed without any notable dent in Obama’s political capital. The disadvantage of this is that it was always going to leave open the possibility of a stimulus package mark 2, and if you thought the last one was difficult to pass, then you’re going to be as fascinated as the rest of us to find out how Obama’s going to shoehorn another one in whilst in the middle of an epic battle for healthcare reform.

Hopefully it won’t come to that. But in case it does, Obama might want to spend some quality time with his political capital because like Citibank, Wall Street bonuses and the American car industry, it might not be around for too long.

Here’s a snippet:

According to White House security documents, Sasha told Secret Service agents that the ghostly twins spoke to her in unison and repeatedly beckoned her by chanting the phrases “come play with us,” “come play with us, forever,” and “Daddy’s making fajitas.”

That said, I can’t hide my disappointment that Cheney isn’t mentioned.

photo credit: CFAPAF

On Thursday night  U.S. Senate Majority Leader Harry Reid was forced to stall a vote on a $410 billion spending package needed to fund the federal government through to September, because he didn’t have enough votes for it in the Senate. It will now be delayed till later this week, to give enough time for Republicans to have their way with it. The reason for the delay? Reid did not have sixty votes. Sixty votes is, of course, the crucial number for any legislation in the Senate, because it prevents a Republican “filibustering” a bill and thus obstructing its passage . As such, it’s a number that could prove the downfall for Obama’s entire legislative agenda.

But it needn’t be like this.

Here’s the situation: Democrats currently have 58 seats in the Senate. 60 votes is needed to prevent any single Republican from “filibustering” any bill.  The Democrats could have  59 seats, – leaving only one Republican Senator to be persuaded on any bill – if Minnesota Senator Al Franken was seated. Why isn’t Franken being seated? Because the Republican he defeated in November’s election, Norm Coleman, is refusing to accept the results of January’s recount and is intent on exhausting all his legal appeals. As the Politico notes in a new article “Dems need Franken more than ever”, this makes things very difficult for Harry Reid. Without Franken, it is that much harder to get to 60 votes on anything and thus that much harder to pass President Obama’s vast legislative program.

Except it shouldn’t be like this. Obama’s entire agenda – health care reform, cap and trade, his upcoming enormous budget – should not be under threat because Democrats can’t quite get to 60 votes without serious watering down of any legislation. Indeed, what the Politico article won’t tell you and what you won’t find in the traditional media is the real cause of this problem: the crazy modern day conception of the filibuster.

I first wrote about this back in January in my post Death to the filibuster? which is worth checking out for an extended argument on the background and merits of this archaic Senate tool. Essentially, though, my concluding argument was this: though the filibuster is a useful tool for the minority and thus a historic bulwark against the tyranny of the majority, in its modern day usage it has become an absurd mockery of its original conception. The way it is used today means that, rather than making a Republican who wants to filibuster a bill actually filibuster it, there is instead simply an assumed requirement of 60 votes for any major legislation. This saves Republicans from actually having to do anything while  making a mockery of the supposed threshold of a simple majority to pass Senate legislation. Why is this so crucial? Because by actually making Republicans filibuster – making them stand up on the floor of the Senate and talk for hours, in other words – then they would have to face the judgement of the public who, as current polls indicate, rather like President Obama’s agenda, thank you very much. The threat of such an unfavourable public spotlight would therefore put off Republicans from filibustering most of the time, or at least encourage moderate republicans to vote to end a filibuster by one of their more extreme contemporaries.

But forcing Republicans to – gasp! – actually filibuster wouldn’t just solve the problem of GOP obstructionism in the Senate, it would also solve the danger of  self-proclaimed “moderate” Senate Democrats trying to throw their weight around by working with their colleagues in the minority to water down Obama’s legislation . We saw this during the battle over the Stimulus package: centrist Democrat Senators like Ben Nelson working with New England Republican Susan Collins to arbitrarily strip provisions from the Economic Recovery Bill.  The omens for forthcoming legislation, however, are worse as it appears that Indiana Senator Evan Bayh, an egotist extraordinaire,  is attempting to get together a sizeable group of fellow moderate Democrats to act as a sort of pompous levee against the tide of Obama’s ambitions. You can get an idea of the number we’re talking about here.

So would making Republicans filibuster stem the flow of obstructionist moderate democrats? Yes it would, because though they are happy to take the limelight for spearheading compromise talks over major legislation – expecting the praise they consistently get from a media that dotes on bipartisanship – I doubt whether they would enjoy being put in the position of enabling a Republican who, by filibustering Obama’s legislation, would be going against the desires of almost 70% of the population. In other words, apply a little pressure and you’ll get them voting to end any filibuster quicker than you can say “my bipartisan reputation is at stake”. Perhaps I’m wrong on this. But I’d love the chance to find out…

To repeat: make Senators who want to filibuster… filibuster! It’s a simple solution that, in one fell stroke, would alleviate the current obstacles to Obama’s agenda. But Harry Reid won’t do it, because he and the rest of the Democrats are terrified of Republicans. So, thanks to their political cowardice,  expect more delays to bills. Expect more compromises. And, unless Franken is seated soon (and even if he is seated soon) expect Obama’s agenda to not make it into law fully entact. Expect healthcare reform to be a little less effective. Expect cap and trade to be a little less stringent. Expect the budget to be a little less ambitious. And expect the Employee Free Choice Act (you know, the bill that stops employers arbitrarily firing union members) to never even make it out the gate.

Like most acts of political cowardice, it’s the people that get hurt, not the politicians.