Rebuilding America

"Fiscal cliff" has become such a catch phrase that it now shows up regularly in non-U.S. media around the world. Avoiding going over it is certainly President Obama’s number one concern between now and the end of the year.

Or is it? Well, if it is, it’s not stopping him from leaving Washington and flying half way around the world to Cambodia next week to attend the East Asia Summit meeting of top Asian leaders. So "take that" John Boehner. You may be the Speaker of the U.S. House of Representatives, but you’re no Xi Jinping or whomever the Chinese pick as their new leader. This is the first time an American president has attended the summit, and it is a measure of the importance of China/Asia to the United States that Obama is taking part despite the fiscal pressures he, America, and the world are facing.

This is not the first move Obama has made that reflects his concern with China and Asia. The so-called "pivot to Asia" that he adopted earlier in the year as the main focus of American foreign policy in the post-Iraq, post-Afghanistan war world has already resulted in an ongoing shift of U.S. troops, ships, and military presence to the Asia-Pacific region. It has also been manifested by the attempt to negotiate a free trade agreement under the rubric of the Trans Pacific Partnership and by the reaffirmation of U.S. ties with, and support of, Asian countries such as Vietnam, the Philippines, and Japan in some of their contested issues with China.

That Obama’s concern is justified is evident on the basis of many factors. There is a constant din of triumphal commentary in Asia and much of the rest of the world about China displacing the United States as the world’s largest economy. Put aside for the moment the fact that the U.S. economy is not the world’s largest economy — and hasn’t been since being displaced by the EU a number of years ago — and put aside the fact that China will not soon displace the EU, and may well not surpass the United States if its growth rate continues its broad slow down. The fact is that there is a widespread anticipation and even fervent hope that America will fall behind in terms of the size of its GDP. Many around the world see this as a kind of liberation from American hegemony. As one Chinese analyst said to me recently, "America must at last face facts. It’s power is ebbing rapidly and it will no longer be able to get what it wants as easily as in the past."

Good advice. Face the facts. My concern with Obama is not that he’s going to Asia in the middle of the fiscal negotiations with Boehner, but that he’s not properly facing the facts.

The main fact is that while it’s true that U.S. power is ebbing, it’s not ebbing for lack of military presence or capability. It’s ebbing because the U.S. trade deficit appears to be irreducible and U.S. industry continues to offshore not only production but also R&D and innovation while some of America’s greatest educational institutions slash their budgets, even as those of China and most of the rest of Asia expand geometrically. In short, the U.S. is seen in Asia as a declining power because it can’t compete, not because it can’t fight.

Increasing the American military presence in the Asia-Pacific region will only cost more money and goad the Chinese to redouble their own military efforts. It won’t produce a single new semiconductor or new company or higher American wages. In his post election speeches, the President has frequently talked about doing nation building at home and about rebuilding America. He’s right. An economically stronger America wouldn’t have to deploy 2,500 marines in the northern reaches of Australia or put 60 percent of its naval ships in the western Pacific.  So how do we rebuild America?

For starters, we pivot not to Asia, but to America. Look, the Aussies are reducing their own forces. Why are we sending more troops to Australia? China has an economy growing at 7.5 percent while we struggle to hit the 2 percent mark. Why do we want to challenge China to an arms race that is likely to be more costly to us than to them? Remember that U.S. oil does not come across the Pacific. There has been a lot of concern about the off-shoring of U.S. jobs and technology. Yet, the U.S. military presence in Asia promotes a degree of stability that makes the Asian supply chain safe. In effect the Pentagon guarantees corporations who offshore their operations that they have nothing to fear in terms of disruption by doing so. This is like a subsidy for off-shoring. Why is America paying this subsidy?

Halting its payment would be a good way to avoid going over the fiscal cliff.

Similarly, the negotiation of the Trans Pacific Partnership (TPP) and other free trade agreements should be halted and re-defined. These deals are not about creating American jobs. No serious analysis is being done about how many jobs they might actually create or destroy. It is likely that the TPP would result in an increase in the chronic U.S. trade deficit and a net loss of jobs, but the negotiators are not thinking about that. Obama should. His negotiators get points for doing deals whether or not they create jobs, but Obama doesn’t. He should put the talks on hold until an analysis has been done that shows in concrete terms how such a deal might contribute to rebuilding America.

Of course, these steps are only a beginning. They are measures to remove distractions while we concentrate on the main thing by adopting a whole new set of domestic policies. I’ll tell you what they should be in the next installment.