Peter L. Berger's Blog, page 126

Doing the Impossible

The Impossible Presidency: The Rise and Fall of America’s Highest Office

Jeremi Suri

Basic Books, 2017, 368pp., $32

Shortly after murdering King Duncan in his bed, Shakespeare’s Macbeth declares, “Methought I heard a voice cry, ‘Sleep no more!’” This line, taken from the Bard’s consummate study of power, served as the opening epigraph of Clinton Rossiter’s 1956 work, The American Presidency.  The line lends itself to multiple interpretations. In one reading of Macbeth, the protagonist, guilty of debasing himself in his headlong pursuit of the crown, will forever be haunted by Duncan’s ghost. In another version, Macbeth, suddenly realizing the maelstrom he has just plunged himself into, understands that governing has no end and permits no rest. According to the historian Jeremi Suri, author of The Impossible Presidency: The Rise and Fall of America’s Highest Office, this is a good depiction, minus the killing, of the modern presidency.

Today, it is hard to escape Donald Trump, and the profound questions his presidency has raised over America’s future. Focusing too intently on the current moment, however, obscures how we arrived at this particular juncture. Drawing back and charting the evolution of the presidency, Suri’s survey grounds contemporary political debates about the enablers and constraints on presidential power in a historical understanding of the office and its most notable occupants.

As the subtitle of his book suggests, the story of the American presidency is one of rise and fall, and Suri organizes the book around these those two opposed concepts. The book is not comprehensive but impressionistic, with the first half of the book covering the presidencies of George Washington, Andrew Jackson, Abraham Lincoln, Theodore Roosevelt, and Franklin Delano Roosevelt. But following FDR, who “broke the mold,” according to Suri, the office devolved into a perpetual state of crisis management. Examining the presidencies of Kennedy and Johnson, Ronald Reagan, and Clinton and Obama, Suri concludes that the post-war presidency has failed. Bound to overpromise and underperform, overwhelmed by time-management challenges and institutional constraints, and predisposed to have the immediate crowd out the important, the modern President is incapable of focusing on the things that matter.

Before reaching such a conclusion, Suri looks back at the history of the office and its occupants. In this telling, no matter how profound the differences in background and temperament of its occupants, and no matter how disjunctive the circumstances they found themselves navigating, the early American Presidents represented natural evolutions of the office and were the pivotal figures of its upward trajectory.

George Washington set precedents with everything he did: bringing dignity to the office, attempting to create balance between the government’s three branches, working to ensure national unity where he could, and restraining public passions where he could not. Andrew Jackson built on the Washingtonian model, but altered it to serve his views that the President was the sole representative of the American people. According to Jackson, the President needed to fight against the other branches of government, fill the bureaucracy with sympathetic officials, and bend the state’s purposes to align with his partisan agenda. Abraham Lincoln used this model of a super-empowered President to fundamentally remake American society, as he re-conceptualized the role of Commander-in-Chief and invented the role of communicator-in-chief through his inspired rhetoric.  Theodore Roosevelt used the “bully pulpit” of the presidency to curb the excesses of the Industrial Revolution by regulating business and promoting social and labor reforms. And it was his cousin, Franklin Delano Roosevelt, who reimagined the social contract, transformed the White House into the driver of the legislative agenda, successfully steered the country through World War II, and presided over the birth of a geopolitically dominant United States.

But starting with John F. Kennedy, and accelerating through the present, Suri finds the occupants of the Oval Office increasingly distracted by events, whip-sawed by their schedules, and unable to find time for strategic thinking. This daily grind precluded what Barack Obama described as “the most important thing you need” as President: “big chunks of time during the day when all you’re doing is thinking.”

Alexis de Tocqueville in 1835 found the presidency a weak institution and, compared to Congress, “almost powerless.” Tocqueville was of course observing the office in the midst of its transition under Jackson into a substantially different, and more powerful, office. He was also the first of several sharp-eyed foreign observers to chart the changing fortunes of the presidency.

Most prominent of these were two English perspectives on what some would refer to as America’s elected kings. Written in the era of what Woodrow Wilson called “congressional government,” James Bryce’s 1888 The American Commonwealth shared Tocqueville’s dismal view of the Executive Branch. Bryce titled his most memorable chapter “Why Great Men Are Not Chosen Presidents,” and concluded that the American system worked just fine without great men. While clearly unfair to Lincoln, Bryce was also writing in an earlier era, and before either of the Roosevelts had reshaped the office into the centerpiece of American political life. London School of Economics Professor Harold Laski’s The American Presidency: An Interpretation, published in 1940, reflects this change, arguing that in the 20th Century, the American people had grown accustomed “to think of the presidency as the essential keystone of the political arch.” This question—about how much the President matters to the American government, to American society, and to America’s place in the world—has been a constant thread from the Constitutional Convention’s debates to the disruptions of Donald Trump’s presidency.

Suri’s history stands in a long tradition of eminent scholarship on America’s highest office. Clinton Rossiter’s short and sweeping The American Presidency, Richard Neustadt’s influential Presidential Power and the Modern Presidency, Arthur Schlesinger, Jr.’s well-known The Imperial Presidency, and most recently Aaron David Miller’s The End of Greatness: Why America Can’t Have (and Doesn’t Want) Another Great President all covered the office and the institution.

Suri’s organization of the book and selections make sense, although not all of his omissions do. Woodrow Wilson, who transformed the goals of American foreign policy, and Harry Truman, who presided over the creation of the modern foreign policy and military establishments of the U.S. government, are both conspicuous in their absence. Regardless, such decisions are well within the scope of authorial choice. What emerges is an impressionistic overview of both American history and the evolution of the office itself. Suri’s work brims with historical insights, even if by necessity and design his account is highly selective.

His opening chapter, “Origins,” is an especially powerful synthesis of existing scholarship that discusses the provenance of the concept of the executive, traces out its intellectual evolution, and demonstrates its inherent tensions.  Scarred by their lived experience under an abusive king and a chaotic period following the fall of that king, the Founders sought to create an office that simultaneously restrained and empowered a leader. The result, Suri notes, was twofold: an office full of contradictions, and one that derived its “enduring strength…from its original lack of definition.”1 This was because the Constitution merely sketched the roles and functions of the presidency, leaving open the interpretation of its powers.

Because Suri finds the modern presidency so inherently unsatisfying, if not downright impossible, it should come as no surprise that much of the tone of the book’s second half is one of lament. Especially when judged against the dignity of earlier Presidents, who attempted to tame the country’s passions, soothe internal divisions and channel them into productive ends, it is difficult to arrive at another conclusion today. But, as Suri points out, no matter how anomalous Trump’s presidency might appear, Trump did not materialize out of thin air. His presidency, Suri argues, marked a natural reaction to the increasing inability of Presidents to govern. The result was the election of “an anti-leader.”2  The book concludes with a plea for institutional reform of the office. These range from the eminently sensible, if currently implausible, recommendation of using the Oval Office to engage the public in “a reasoned, fact-based discussion,” to the more fanciful proposal to split institutional responsibilities between a President and “perhaps a prime minister.”3

Given the turbulence of the Trump Presidency, Suri raises an intriguing, and challenging, question. At several points, he asks if American democracy is capable of direction absent a strong national leader who can provide a sense of unity, order, and common purpose. Should America be understood as a presidential democracy, or a democracy that happens to have a President at its head? Implicit in this is one of the oldest and most vexing questions of democratic governance.

Granting that there are profound differences between ancient Athens and contemporary America, the eminent Greek historian Donald Kagan made a similar point in his biography of Pericles, Athens’ lead statesmen of the 6th century B.C.E. In Pericles of Athens and the Birth of Democracy, Kagan asked if democracy could succeed only with energetic and skilled leadership at its helm and if, in its absence, a democracy would face a best case scenario of drift in calm seas, and a more probable outcome of shipwreck in foul weather. Such an outcome would be tragic, but not wholly surprising to the ancient Greeks. To contemporary Americans long accustomed to living outside of tragedy’s shadow, it would be both.

1 Jeremi Suri, The Impossible Presidency: The Rise and Fall of America’s Highest Office (New York: Basic Books, 2017), p. 20.

2 Suri, p. 289.

3 Suri, p. 291; 293.

The post Doing the Impossible appeared first on The American Interest.

Heading Off a Cliff?

President Trump has recently been taking breaks from tweeting and golfing to travel around the country promoting his ideas for “tax reform.” On September 27, for example, he traveled to Indiana to promote his tax plan, which he described as “historic tax relief for the American People.” “We are going to cut taxes for the middle class, make the tax code simpler and more fair for everyday Americans, and we are going to bring back the jobs and wealth that have left our country,” he said. “There’s never been tax cuts like what we’re talking about,” he bragged. “Our explicit commitment,” he promised, is “that tax reform will protect low-income and middle-income households, not the wealthy and well-connected.”

But just a few weeks later, Trump’s tax plan is heading toward a precipice. Everyone knows that tax reform is easier than health care: No one is going to stand up in a town hall and claim that he will die if the legislation is enacted. But that doesn’t make enacting tax legislation easy.

Both the White House and Congressional Republicans are desperate for a “win”—any win—but they don’t have a lot of votes to spare. If three Republican Senators vote “no,” Trump’s promises of “tremendous” tax cuts will slip away. Bob Corker, the retiring Senator from Tennessee, has said that if the tax legislation adds even one penny to the deficit, “There is no way in hell, I’m voting for it.” Arizona’s John McCain, like Corker, has frequently feuded with Trump, and he says that he wants to see “regular order” and some Democratic votes. That’s a long shot. And more than a few other Republican wild cards occupy the Senate: Susan Collins of Maine, and Kentucky’s Rand Paul are two. And on December 12, the wildest card of all, Roy Stewart Moore of Alabama is expected to take the seat now held by Luther Strange, a sure “yes” vote.

With only a handful of “legislative” weeks remaining before year’s end, no one knows exactly what a new tax law might contain. In April, President Trump gave us one page of principles and another half page that outlined some specific goals. Three months later, at the end of July, the so-called Big Six—Secretary of the Treasury Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Majority Leader Mitch McConnell, Senate Finance Committee Chairman Orrin Hatch, Speaker of the House Paul Ryan, and Ways and Means Chairman Kevin Brady—who had been meeting regularly, released a statement repeating their goals for more economic growth through lower tax rates on businesses and individuals, a reform of international tax rules, greater fairness (principally through lower tax rates on families), and, of course, less complexity.1 Shortly thereafter, 45 of the 48 Senate Democrats sent Senator McConnell a letter containing their three principles for tax reform, two of which were that it neither “benefit the wealthiest individuals” nor “increase the deficit.” McConnell rejected those constraints in a Kentucky minute.

Then, during the first week of September, Secretary Mnuchin announced that the group of six had a “detailed” tax reform plan. The next day NEC Director Cohn described it as a “skeleton” plan—by which he surely meant to suggest that it needed some flesh, not that it had died and was awaiting burial. On September 15, Chairman Brady said that the tax plan—scheduled for release during the week of September 25—would not say exactly what the new business tax rate would be. Secretary Mnuchin then immediately said the plan would announce the tax rate. Meanwhile, Donald Trump said that the business rate would be 15 percent—which everyone knows is lower than it will actually be, by at least 5 and maybe 10 percentage points. So things were going very smoothly, just like the GOP effort to “repeal and replace” the Affordable Care Act.

Then, on September 27, the day of Trump’s Indiana speech, the Sixers released their “Unified Framework for Fixing our Broken Tax Code.” In its nine pages (about one-third of which was blank space) they set forth a list of their proposed tax changes. The proposals include a corporate tax rate of 20 percent and a special 25 percent tax rate for partnerships and Subchapter S corporations, labeled a special tax rate for small businesses—even though nearly two-thirds of the net income of partnerships is earned by the largest one percent of firms with more than $50 million in assets.2 On the individual side, the Sixers’ framework was especially vague. It announced an “aim to reduce the current seven tax brackets, which range from 10 percent to 39.6 percent, to three tax brackets, ranging from 12 to 35 percent.” But the framework failed to say at what levels of income these brackets would kick in. The framework also promised to double the standard deduction and replace personal exemptions with tax credits for children and other dependents. The Sixers told us that the credit for dependents other than children would be $500, but it left to Congress the amount for child credits. One large New York law firm aptly told its clients that the Sixers had handed us a frame without a picture.

The President and congressional leaders tell us that the forthcoming tax legislation will be a once-in-a-generation event—on a scale equaling or surpassing the Tax Reform Act of 1986. But it won’t. Just as the “health care” debate hasn’t really been about care but about how to pay for health insurance, the tax debate is liable to be mostly about numbers, not about the structure and function of the tax code as it bears on the American political economy.

The 1986 Tax Reform Act spent 53 weeks in the Congress. Two years before that Treasury had released more than 600 pages analyzing the various tax reform ideas that led to the landmark 1986 legislation, and in May 1985 President Reagan had released nearly 500 pages detailing his proposals. Compared to that, the nine pages we have gotten so far from President Trump and the Sixers can only be described as anorexic.

While they have been very forthcoming in parading apparitions of large tax cuts, so far it’s been all ponies and no manure—with the notable exception of their intention to repeal the deduction for state and local taxes. Some of the ponies are not even real. Donald Trump has insisted that there will be no tax cut for the wealthy. But fewer than the richest half of one percent of people who die in any year pay the estate tax, which he and Congressional Republicans seem determined to repeal. And President Trump surely knows from his own taxes who will benefit from lowering the tax rate on partnership income.

It is not surprising that our political leaders are urging that the 1986 tax reform should be the playbook for tax legislation now. The crowning domestic policy achievement of Reagan’s presidency, that legislation was widely heralded as the most important tax legislation since the income tax was converted into a tax on the masses during World War II. Since some pundits and many politicians from across the political spectrum are now calling for a replay, it is worth reviewing what happened then, and soon thereafter.

The 1986 reform: increased the permissible amount of tax-free income; lowered and flattened income tax rates; shut down mass-marketed tax shelters for high-income individuals; curtailed the ability to shift income to lower-income, lower-rate family members; and taxed capital gains at the same rate as ordinary income. By shutting down tax shelters for individuals and repealing tax breaks for investments in equipment and real estate, Congress not only financed a reduction in the corporate tax rate (from 46 to 34 percent) but also paid for some of the individual rate reductions.3

The corporate changes also made the income tax considerably more neutral across industries. Soon thereafter, the law’s rate-reducing and base-broadening reforms were mimicked throughout the OECD. And in the years since, other OECD countries have continued to lower tax rates, especially corporate tax rates, while the United States has largely stood pat.

But the reforms wrought by the 1986 Act proved neither very revolutionary nor stable. The 1986 tax law resulted from an uneasy, temporary marriage between the forces of “justice” and “virtue.” The conventional Democratic tax reformers, who were principally interested in improving tax equity by broadening the income tax base so that income would be taxed similarly regardless of its source, joined together with Republican supply-siders and deregulators, who were most concerned about incentives and wanted to enact lower tax rates “to get government off the backs” of the American public and American businesses. The ink was hardly dry on the 1986 Act before the divorce proceedings started. Thousands of pages of legislation in the years since 1986 have narrowed the income tax base, while the top tax rate has crept upward.

Even though deficits were becoming a serious concern by the mid-1980s, the linchpin of the 1986 Act was revenue neutrality. By insisting that the new law not reduce government revenues, the Reagan Administration and the congressional leadership ensured that amendments to the tax bill could be offered only if any revenue losses were offset by revenue gains. Legislators behaved better when to pay Peter they had to be explicit about just how they intended to rob Paul. The 1986 Act was not only revenue neutral but also roughly distributionally neutral: the new law was not an occasion for shifting the distribution of tax burdens down the income scale to less wealthy families.

The coming tax legislation is unlikely to be either revenue or distributionally neutral. There is no revenue pot of gold like the investment tax credit and individual tax shelters valuable enough to finance tax cuts today. Nor are we going to raise business taxes to finance individual tax cuts, as happened in 1986. This time our leaders seem determined to cut both business and individual taxes. Donald Trump, who as we know sometimes exaggerates, says that this is going to be “the biggest tax cut ever.” That is a high hurdle indeed: Reagan’s tax cut of 1981 was more than 2 percent of GDP, and George W. Bush’s tax cuts of 2001 and 2003 amounted to about 2.5 percent of GDP.

Unfortunately, given our deficits and large debt the coming tax legislation will resemble the 1981 or 2001/2003 tax cuts more than the 1986 tax reform. So the Sixers are fooling themselves—or they’re trying to fool us.

Alas, given the size of the Federal debt and the promises for retirement income and health insurance coverage that have been made to the now retiring Baby Boom generation, we cannot afford a tax reduction anywhere close to the level of the Bush tax cuts. We have never in modern times faced such a dangerous imbalance between the levels of Federal spending and revenues. The Federal debt as a percentage of U.S. economic output is now greater than it has been at any time since the end of World War II.

And back then we had all the money: Europe and Japan were in shambles, and China was entering into a dark Communist era. No matter how bad our tax system may have been, our economy was poised to grow for decades at an unprecedented pace. And the U.S. government then owed 98 percent of the money it had borrowed to finance the war to Americans. Now our national debt is rapidly approaching $20 trillion—more than three-quarters of GDP—with about half owed to foreigners, some of whom we cannot rely on to be our friends. At a 5 percent interest rate, interest on Federal debt alone would cost more than $1 trillion a year. If we fail to get control of the Federal budget, rising interest costs will devour an ever-larger share of the Federal budget. Public debt growing to such levels will also lead to new challenges to the dollar’s role as the world’s reserve currency. Our growing national debt thus increases the risks of substantially higher interest rates, inflation, and another financial crisis. Over time, it can threaten the living standards of the American people.

The major tax policy challenge of the 21st century is the need to address the nation’s fiscal condition fairly and in a manner conducive to economic growth. But since California adopted Proposition 13 nearly forty years ago, antipathy to taxes has served as the glue that has held the Republican coalition together. Even though our taxes as a percentage of our economy are low by OECD standards and low by our own historical experience, anti-tax attitudes have become even more important for Republicans politically, since they now find it hard to agree on almost anything else. So revenue-positive, or even revenue-neutral, forms of tax reform—at least as long as the GOP maintains its legislative majority—are politically impossible.

One thing we can be sure of is that Congress and the White House will go to extraordinary lengths to disguise the size and the implications of the tax reductions they intend to enact. The Senate Budget Committee passed a budget resolution that requires tax cuts not to exceed $1.5 trillion over ten years to allow them to be enacted through “reconciliation,” a procedure that allows tax legislation to pass the Senate with only 51 votes (including that of Vice President Pence). The House Budget Committee initially insisted that tax legislation not lose any revenue, but the House will certainly accept the Senate’s number. The Tax Policy Center, however, estimates that the changes announced in the Sixer’s framework will cost at least $2.4 trillion and their largest revenue raiser—repeal of the deduction for state and local taxes –has already provoked vigorous opposition from quite a few Republican representatives. Republican deficit hawks quickly transmogrify into hummingbirds when tax cuts hit the table.

Some Senators, most notably Pat Toomey of Pennsylvania and Ted Cruz of Texas, have called for lengthening the budget window from ten years to 25 or even thirty years—not because the ten-year projections have been so spot on—but to allow tax cuts not to expire in a decade, as George W. Bush’s did, because the Republicans will not be able to muster the sixty votes in the Senate required to avoid a termination date a decade hence. That particular gambit will not succeed, but other sleights of hand are ready. The President and his Treasury Secretary have already made clear that this legislation will produce great optimism about its effects on economic growth. So we will see “dynamic scoring” that will understate the revenue costs of the legislation; let us just hope that it falls short of turbo-dynamic scoring.

We will also undoubtedly see the kinds of phase-ins and sunset provisions that characterized the 2001 law and combined to dramatically understate its real revenue costs. When the 2001 Bush tax cuts were enacted, moderate Democrats in the Senate achieved a “victory” by insisting on reducing the cuts’ projected costs over a ten-year period from $1.6 trillion to $1.3 trillion. But the bill was festooned with so many phase-ins and phase-outs that the actual cost over the past 15 years has been far closer to $3 trillion than to $1.3 trillion.

And beware manipulations of the budget baseline to make the cuts seem smaller than they really are; using “current policy” rather than the traditional current law baseline is one possible trick. To understand the importance of the baseline, consider the following exchange between a police inspector and Johnny Depp from The Tourist:

Inspector: Now you wish to report a murder?

Depp: No, some people tried to kill me.

Inspector: I was told you were reporting a murder.

Depp: Attempted murder.

Inspector: Ah, that is not so serious.

Depp: No, not when you downgrade it from murder. When you upgrade it from room service, it is quite serious.4

Beware of budget baseline scorekeeping games.

But at least baseline games don’t change people’s behavior. The newest and most risky funny-money game is what’s become known inside the beltway as “Rothification”—that is to convert 401(k) and other similar retirement saving plans from deductible plans taxable on withdrawal to nondeductible, nontaxable plans similar to Roth IRAs. While this idea has to lose revenue in present value and may cause uncertain, largely-uninvestigated consequences on retirement savings behavior, it would shift at least $1 trillion into the budget window so that Congress could use the money to “pay for” tax cuts despite their long-term revenue costs. Of all the bad budget gimmicks now being bandied about in Washington, this one is the most distressing.

With an aging population, rising health care and education costs, and the extraordinary costs of fighting terrorism and preventing war, we cannot afford large tax cuts like those of 2001 and 2003. So, as already suggested, the new law will be disguised to make us think it more closely resembles 1986. Former Republican deficit hawks can barely be heard anymore, now that the politics have shifted from “shaft Obama” to “support Trump” (which speaks volumes about their former sincerity). And they believe they need a legislative “win” before the 2018 midterms no matter what its fiscal costs.

That, of course, is hardly a surprise. The real question is what will the coming revenue costs produce in terms of the U.S. economy. It’s not an easy question to answer; as that well-known tax philosopher Yogi Berra once said: “It’s tough to make predictions, especially about the future.” But we can try.

First, we seem certain to get a corporate rate cut. After the 1986 Act, we had the lowest statutory tax rate in the OECD; now we have the highest. In today’s global economy, where capital moves around the world with the click of a mouse, this creates nearly irresistible incentives for both U.S. and foreign multinationals to locate their deductions here and their income in a low- or zero-tax jurisdiction. So the corporate rate will be lowered—how low it will go depends on whether the tax base is expanded and by how much. The 20 percent rate of framework seems very optimistic, Donald Trump’s 15 percent rate is unreal.

While many smaller breaks will probably exit the tax code, the big questions concern whether there will be faster write-offs or “expensing” for capital investments and whether there will be serious restrictions on interest deductions. The Sixers’ framework calls for the immediate write-off (or expensing) of purchases of equipment during the next five years. It also says that interest deductions of taxable corporations will be “partially limited” The framework says nothing about limiting the interest deductions of partnerships, no matter how large the partnership. The problem—which is well understood by tax professionals but not at all by the public— is that expensing of assets that are debt-financed leads to negative tax rates, or large subsidies, to investments that would not be made absent the excessive tax breaks. The interest deduction coupled with expensing of assets will be one of the most contentious issues of business tax reform, and how these issues are resolved will not only tell us how low the corporate rate will go, but also whether the investment incentives of the new law will be rational or horribly distortive.

Congress will also abandon our foreign tax credit system in favor of an exemption system for dividends from foreign subsidiaries and impose a low-rate one-time transitional tax on the $2 to $3 trillion of foreign earnings of U.S. multinationals that have not been repatriated—almost certainly with a higher rate on cash than on foreign investments in plant and equipment. The big question for international tax changes will be what kinds of measures are enacted to prevent base erosion in a territorial system, an esoteric subject we don’t have space to detail here. Many options are being considered, some with vigorous opposition from multinational businesses, and no one knows yet which will emerge.

There also seems to be an emerging consensus for a special lower tax rate on certain partnership and proprietorship business income, as the framework proposes. Along with the tremendous increase in the importance of international income tax rules (which has occurred almost everywhere), there has been a uniquely American transformation of the composition of business income. The rise of sovereign wealth funds, private equity, and business investments by large university endowments and pension funds has allowed businesses to amass large amounts of capital without going to the public capital markets. This, in turn, has permitted the creation of very large business partnerships not subject to the corporate tax.

Now about two-thirds of business income is now earned by partnerships and other flow-through entities such as Subchapter S corporations. By comparison, in the early 1980s taxable corporations accounted for about three-quarters of the net income of businesses. This transformation has produced the Sixers’ call for a lower rate of tax on partnership income—something that President Trump has a large personal stake in. In fact, partnership and other pass-through business income is especially concentrated among high-earners, with nearly 70 percent accruing to the top one percent. One careful study by Treasury and university economists has estimated that more than 40 percent of the increase in the top one percent share in income between 1980 and 2013 is due to higher pass-through business income.5 This makes it very difficult, if not impossible, to reduce the tax rate on partnership income from a top rate of 39.6 percent to 25 percent and fulfill the oft-repeated promises of President Trump that this tax legislation will not reduce taxes on the wealthy. As to whether these business tax cuts actually produce more jobs and higher wages for middle-class workers, as they also claim, we will have to wait and see.

On the individual side, the rates will of course become an important issue. For more than two decades now, Republicans and Democrats have fought Game of Thrones-style battles, as if our nation’s destiny turned entirely on whether the top individual tax rate is 35 percent or 39.6 percent. This struggle echoes the comment about faculty politics attributed to Columbia University professor Wallace Sayre that politics in the academy are so bitter and rancorous “because the stakes are so low.”

The framework would also double the standard deduction. Doubling the standard deduction will, of course, do nothing to promote economic growth or increase wages; it is being recommended simply to enable our politicians to claim that most folks will be able to file their tax returns on a postcard. As all income tax history demonstrates, however, postcard returns won’t last long. If they happen, Congress’s taste for using tax deductions and credits as if they were credible solutions to all our nation’s economic and social ills will transform that postcard into a booklet.

A large expansion of the Earned Income Tax Credit, for both single workers and those with children, would be far better policy. It could make work pay better and eliminate debilitating marriage penalties for low and moderate income workers.

To pay for at least some of their tax cuts, the Sixers are planning to repeal the deduction for state and local taxes, but we will see whether that actually happens. There are nearly sixty Republican representatives from high-tax districts, so the political costs of repealing the deduction for state and local income taxes and property taxes could prove very high. Once they learn about this idea, homeowners everywhere will squeal. A cap on such tax deductions—perhaps limited to state income taxes—may prove more likely.

Of course, the new tax law will provide an increase in the credits for children. That is Ivanka Trump’s domestic policy priority. And what Ivanka wants, Ivanka gets.

Finally, there is repeal of the estate tax, which kicks in only for a married couple with more than $11 million of wealth and is estimated to apply this year to only about 5,200 of the 2.7 million people who will die. Despite all the attention in recent years to the growing inequalities of income and wealth, this most progressive piece of our Federal tax system is again in peril. Virtually every Republican candidate for President in this century has supported repeal. Despite the truth of the country song refrain: “I’ve never seen a hearse with a luggage rack,” the opponents of repeal have been unable to convince the public that this “death tax” is a tax on recipients of inherited wealth—a tax on Paris Hilton, not Conrad Hilton.

Enough predictions. I told the Wall Street Journal in 2009 that Congress would never allow the one-year estate tax repeal of 2010 to take effect—that it would be malpractice to allow the tax to expire for just that one year. I was only half right: It was malpractice, but 2010 became the year, as Paul Krugman put it, to “throw mama from the train.” The Tax Policy Center estimated that about 25,000 people who would have been subject to the estate tax died that year. And billions of dollars were also spared future estate and generation-skipping taxes that year—eliminating taxes on the transmission of wealth to remote generations long into the future. So as malpractice goes, this example was quite dazzling.

Well…maybe just one more prediction: Tax legislation that is this controversial, and that benefits high-wealth individuals and multinational corporations, will open up great opportunities for the Democrats to demagogue—and not just about the estate tax. The corporate tax is the worst tax economically: it burdens productive investments and inspires all sorts of distortions and chicanery for only 7 percent of the revenue pie. But it is the most popular tax politically. So, if the coming tax legislation is passed with no or only a few Democratic votes, we will certainly hear a lot in the 2018 and 2020 campaigns about plans to “repeal and replace” it. And as everyone knows, repealing and replacing legislation on taxes is far easier than it is for health insurance.

The sad truth, of course, is that the coming tax “reform” cannot possibly be the great and simplifying stimulus to economic growth and jobs that the President and the Sixers claim. We are hobbling our nation in today’s competitive global economy by relying so heavily on an income tax. How have other countries managed to get their business tax rates so low? By raising their value-added taxes—taxes on consumption now used by every other country in the OECD and by more than 160 countries worldwide.

By enacting a value-added tax of around 12 percent we could: eliminate more than 150 million people from income taxation with a $100,000 family exemption; lower income tax rates for everyone; reduce the corporate rate to 15 percent; and protect low- and moderate-income families from any tax increase through payroll tax credits and expanded refundable tax credits for children administered through government-issued debit cards.6 Senator Ben Cardin of Maryland has introduced legislation along these lines. But that legislation is now going nowhere because most of our politicians believe they can avoid any political heat by insisting on tax cuts alone. Our politicians simply refuse to tell the truth to the American people.

In 1990, when I was serving at the Treasury Department, George H.W. Bush came to believe that the nation’s fiscal situation required serious deficit reduction. And when George Mitchell, then the Democratic Senate Majority Leader, made clear that he would not consider significant spending cuts or new tighter budget rules without tax increases, Bush agreed to increase taxes, violating his famous “read-my-lips-no-new-taxes” pledge, because he believed it was the right thing to do for the country. He knew it might cost him re-election, and it did—in no small part because of the betrayal of Newt Gingrich, who was far more interested in his own ambitions to be Speaker of the House than in what was good for the country.

Five years later Gingrich did become Speaker of the House after Bill Clinton had raised taxes in 1993—again to address the deficit—this time with only Democratic votes. In the 1994 election, the Republicans captured the House of Representatives for the first time since 1954. After that, political courage over the necessary level of taxes became scarce. Political courage: that was so 20th century.

But not all the news is bad. The budget legislation of the 1990s, along with the economic growth unleashed by the information technology revolution of the late 1990s, completely eliminated the projected deficits by the year 2000 and produced a Federal surplus for the first time since 1969. Indeed, the budget surpluses being projected by the Congressional Budget Office were so large that, in March 2001, then-Chairman of the Federal Reserve Alan Greenspan told Congress that the Federal government would soon pay off all of the national debt and would have to begin investing its surplus revenues in corporate stocks, a prospect he abhorred. The good news is that this problem has been solved.

When talking about enacting tax legislation that they can call “tax reform,” Republicans keep insisting that “failure is not an option.” But when it comes to creating a new tax law that will ably serve the American economy, enhance the living standards of the American public, and ensure our nation’s fiscal health in the 21st century, failure is not just an option. It’s the only option.

1That statement was more notable for what the Sixers said they weren’t going to do: a new consumption-based tax system with border adjustability. This system, they said, had too “many unknowns associated with it.” With that they threw overboard the novel consumption tax House Republicans had proposed in the summer of 2016, when they, like everyone else, thought Hillary Clinton was going to be President. Throwing this so-called BAT tax overboard was a message to its opponents—notably retail importers like Amazon and Walmart, as well as the Koch Brothers—that they had won. I published a widely circulated paper detailing the “known unknowns” of this proposal. Graetz, “The Known Unknowns of the Business Tax Reforms Proposed in the House Republican Blueprint,” Columbia Journal of Tax Law, Vol. 8, No. 2 (2017).

2Staff of the Joint Committee on Taxation, “Present Law and Data Related to the Taxation of Business Income,” September 15, 2017, p. 56.

3Before 1986, pretax-loss real estate investments as tax shelters contributed to a massive market distortion in commercial real estate, leading to wasteful oversupply and misallocation of capital. Today we still have an oversupply of commercial real estate—and a greater oversupply than other OECD countries—but that is for other reasons. See “What’s Ahead for Retail Landlords,” Cohen & Steers (June 2017).

4I am grateful to Donald Marron for this illustration.

5Michael Cooper, John McClelland, James Pearce, Richard Prisinzano, Joseph Sullivan, Danny Yagan, Owen Zidar, and Eric Zwick, “Business in the United States: Who Owns It and How Much Tax Do They Pay?” NBER Working Paper No. 21651 (2015).

6This plan was detailed in my 2010 book 100 Million Unnecessary Returns: A Simple, Fair, and Competitive Tax Plan for the United States (Yale University Press) with updated estimates in my article “The Tax Reform Road Not Taken—Yet,” National Tax Journal, volume 27, p. 419 (2014). I presented a briefer version of the plan in these pages as well.

The post Heading Off a Cliff? appeared first on The American Interest.

The Economics of the Global “Bankster” Crime Wave

It is common knowledge that for many of the less fortunate members of American society, the criminal justice system has become a veritable chamber of horrors. Some of this has to do with general institutional mindlessness, but the erosion of “justice for all” and the rule of law also flow from the top down. After all, privileged elites are much less likely to become agitated about all the injustices faced by ordinary people if they rarely encounter such injustices themselves, let alone admit to themselves that the entire judicial playing field is tilted decisively in their favor.

For those who care about basic democratic principles like the rule of law and “justice for all,” therefore, one disturbing recent trend in rich and poor countries alike is that the system for prosecuting transnational white-collar financial crimes has broken down almost completely.

Indeed, given the low risks of getting caught, the time required to investigate complex financial crimes now typically spread across national jurisdictions, the growing propensity of prosecutors to negotiate generous fines rather than pursue cases to trial, and the huge potential upfront profits from such misbehavior, the expected net present value of committing many white-collar financial crimes is not only positive but increasing. The result is a kind of elaborate show-trial kabuki amounting to a system of organized impunity that often achieves the exact opposite of crime deterrence.

The good news is that this problem does not require elegant or especially complex solutions. The most important requirement is for stiffer penalties for white-collar crimes, including serious jail time and personal financial sanctions for white-collar offenders and their bosses. Much tougher organization-wide sanctions must also be imposed for those firms that have become serial enablers of others’ illicit activity. Because of the white-collar defense backlash that this will provoke, real change may require some more prosecutorial resources, but we can also manage the law enforcement resources already on hand more efficiently by consolidating overlapping regulation and by decriminalizing other areas of “victimless” white-collar conduct.

All this is just part of a great rebalancing so badly needed in the U.S. criminal justice system. On this side of the tracks, we need to recriminalize the kind of irresponsible financial misconduct that has ruined so many more lives than street crime during the past decade, not only in the United States but all over the world.

We can illustrate all these points by examining the 2008-09 global financial crisis (GFC)-related “bankster”/”enabler” crime wave in the United States, and then look quickly at one of its spinoffs, a disturbing series of ongoing white-collar financial crimes that include money laundering and the facilitation of kleptocracy abroad undertaken through premier foreign banks, accounting firms, asset managers, and consulting firms in Africa.1

A final preliminary remark: Other commentators have also recently criticized the U.S. white-collar criminal justice system harshly, but it seems to me that the problem cries out for more precise, less anecdotal diagnosis.2 Most important, it needs a clearer focus on the key actors: the transnational enablers themselves, who not only have starring roles in the play, but have helped set the stage and write the script.

The Global Bankster Crime Wave

One clear indication of the breakdown in global white-collar law enforcement is the striking incidence of high-level bankster crime. For example, since the late 1990s, and especially during the run-up to the 2008 global financial crisis, the world’s top 22 banks have been implicated in literally hundreds of cases of serious financial misconduct all over the globe (see attached table). In addition, the “Big Six” global accounting firms, many top law firms, consulting firms, headhunters, asset managers, insurance companies, hedge funds, and private equity firms have also provided a strong supporting cast of “enablers” for this activity.

None of these institutions have been very particular about which financial crimes they commit. In the case of the big banks, for example, the chicanery has ranged from tax dodging, money laundry and outright bribery to illegal trading, mortgage fraud, securities fraud, illegal foreclosures, and the rigging of global energy, foreign exchange, and debt markets.

The effort to investigate and prosecute this torrent of white-collar financial crime continues to this day. This has already cost American taxpayers a fortune in prosecutorial resources, but in terms of both deterrence and even sheer retribution, the results have been disappointing.

True, between 1998 and 2017 the world’s top 22 banks have had to fork over more than $300 billion in fines and settlements to compensate for their involvement in all this financial chicanery. It is also true that many of these institutions have had to sign “deferred prosecution agreements” that supposedly committed them to cleaning up their acts, on pain of having prosecutors reopen their cases. Yet very few of these deferred prosecutions are ever reopened. This is partly just because prosecutors, having put their points on the board, have moved on to other cases or “revolved” into much more lucrative private white-collar criminal defense work.

Most important, while the profits resulting from illegal activities arrive very early in the process, the resulting fines and settlements tend to arrive years later. On an expected net present value/discounted cash flow basis, therefore, given all the lags and uncertainties in the system, white-collar financial crime may turn out to be a winning proposition even if the ultimate fines and settlement costs are substantial.

BANK
Δ ASSETS, 2000-2014 ($B)
TOTAL ASSESSMENTS, 1998-2014 ($B)
% OF ASSET GROWTH


HSBC
$2,055
$5
0.25%


Deutsche Bank
$1,282
$6.93
0.54%


JPMorgan Chase
$1,812
$39.09
2.16%


BNP Paribas
$1,970
$9.20
0.47%


Barclays
$1,711
$3.69
0.22%


Credit Agricole
$1,516
$0.21
0.01%


Bank America
$1,481
$72.70
4.91%


Citicorp
$981
$24.01
2.45%


RBS / ABN Amro
$1,193
$6.70
0.56%


Soc Gen
$1,199
$0.74
0.06%


Santander
$1,412
$0.88
0.06%


ING
$671
$0.66
0.10%


Wells Fargo
$1,364
$10.46
0.77%


Lloyds
$1,032
$6.35
0.62%


UBS
$416
$13.82
3.32%


Credit Suisse
$553
$6.76
1.22%


Goldman Sachs
$579
$4.64
0.80%


Rabobank
$518
$2.13
0.41%


Morgan Stanley
$388
$4.26
1.10%


SCB
$1,001
$0.77
0.08%


BNY / Mellon
$280
$0.38
0.13%


Julius Baer
$65
$0.08
0.12%

But even when they actually arrive, the absolute value of all these fines and settlements has generally only been a miniscule fraction of the institutional perpetrator’s cash flow or wealth. Furthermore, most of the costs associated with defending white-collar prosecutions and related private law suits, and even parts of the fines and settlements themselves, are tax deductible, an “ordinary cost of doing business.”3 And the portion of such fines that is not tax-deductible can often just be passed along to customers, especially by global financial institutions that are not exactly operating in perfectly competitive market environments.

On top of all this, the outrageous fact is that, to date, no major financial institution, accounting firm, or law firm has lost its license to operate in any leading Western country as a result of felonious behavior during the GCF.4 Nor has it led to any jail time or fines for any of the senior executives or partners of any of these august institutions. As noted by other experts,5 this is a striking contrast to the “Savings & Loan banking crisis” of the late 1980s, a crisis only 1/70th as costly as the GFC, but which led to more than 30,000 criminal referrals by U.S. bank regulators, a thousand felony convictions of U.S. bankers and their associates, and the outright closure of many fraud-tainted institutions.

This time around, in contrast, key financial services regulators like the FDIC, the Federal Reserve, the Office of Thrift Supervision, and the OCC (Office of the Comptroller of the Currency), as well as the FBI, simply decided they had better things to do despite clear evidence that outright fraud and other financial crimes had become far more pervasive since the 1980s. During this recent peak white-collar crime wave, from 2000 right up to the present, there have been almost no criminal referrals of individual bank executives. In Professor William Black’s well-worn phrase, the world’s largest financial institutions—most of which received ample government assistance during the GCF, even while their private banking arms and trade finance arms were helping wealthy taxpayers and multinational corporations to dodge taxes—have effectively become “too big to jail” as well as “too big to fail.”

This reluctance to prosecute white-collar financial crime effectively is partly due to simple understaffing. The entire U.S. criminal justice system has less than 2,500 investigators assigned to white-collar corporate crime. Only a small fraction of them can focus on banksters, and much of their time is consumed by the need to respond to complaints from larger banksters about smaller competitors.

Meanwhile, since the late 1980s, white-collar criminal law, as well as global financial regulation and global taxation, have become much more complex. Many of the country’s most talented financial crimes prosecutors seem to feel entitled, after a modest period of government service (and training), to “revolve” over to into joining the world’s most talented, highly-paid mercenary army of white-collar defense lawyers, specializing in, as Thorstein Veblen put it years ago, “clever chicanery.”6

But the overwhelming factor behind “too big to jail” is not on the supply side. Since the late 1980s, there has been a dramatic increase in the demand for financial chicanery, as instantiated by the sheer political clout of the global financial services industry. Recent U.S. political events have shown this only too clearly.

After besmirching Hillary Clinton’s run for the presidency with its gild-edged speaking fees, Goldman Sachs has achieved in just one year the ultimate shape-shift: At last count, at least 14 of its former senior partners are busy beavering away in the upper echelons of the Trump Administration on a whole host of issues, from corporate taxation and electronic currency to antitrust, intellectual property, NAFTA, and Chinese trade matters. If the Obama Administration had effectively prosecuted these or other Goldman executives, Goldman Sachs itself, or, indeed, any other top-tier financial institution, for mortgage fraud, securities fraud, insider trading, or any of their many other crimes, it is hard to imagine that they would be exerting such outsized influence today.

Many observers—like former Senator Carl Levin, who chaired the for now-moribund U.S. Senate Permanent Subcommittee on Investigations—believe they could have been prosecuted. But, as its top executives have admitted, the Obama DOJ simply lacked the will. Had they found it, the Democratic Party, perhaps along with some decent moderate Republicans, might well have been able to stand tall, bankster-free, and victorious in the last election.

But now, however, prosecuting white-collar financial crimes is no longer on anyone’s priority list in Washington, DC. Federal prosecutors and bank regulators, including the Federal Reserve, are even more passive than they were under Obama. The FBI’s new head is a long-time lawyer who has specialized in defending white-collar financial crimes and many of the world’s largest banks for twelve straight years over two thirds of his legal career.

Overall, the U.S. government has become the world’s most recent example of “bank capture,” a dubious status usually associated with wealthy parasitic monocultures like Switzerland, Luxembourg, Singapore, Dubai, or the City of London. On a host of policy issues, the United States has become a one-party state, presided over by the Bankster Party and its revolving doormen.

And the sad reality is that, just like Trump’s innumerable dodgy Russia mob connections, all this might well have been prevented during the Obama tenure had it had not been so studiously ignored.

1The following analysis builds on an earlier one published by Oxford University Press in 2016. For a detailed summary of the “Financial Crimes Data Base,” see James S. Henry, “Let’s Tax Anonymous Wealth,” pp.30-95, at 56-78, in Prof. Thomas Pogge and Krishen Mehta, ed. Global Tax Fairness. (Oxford U. Press, 2016).

2See Bill Moyer’s outstanding 2013 interview with Prof. William Black, a former federal bank regulator. See also Jesse Eisinger, The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives. (Simon & Schuster, 2017).

3In the case of the May 2014 $2.6 billion levy by U.S. authorities against Credit Suisse for facilitating U.S. tax dodging, for example, the levy was fully deductible against the income of the parent company in Switzerland, Credit Suisse AG. Furthermore, all litigation expenses associated with defending such charges are routinely deducted against taxes as business expenses.

4The giant “Big Five” accounting firm Arthur Anderson was compelled to cease operations in 2002 after it was convicted of obstruction of justice in the Enron affair. This conviction was reversed on appeal by the U.S. Supreme Court in 2005.

5See Prof. Black’s outstanding interview, op. cit.

6For a glaring recent example, see James S. Henry, “No Wray,” The American Interest, July 28, 2017.

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One of These Governors Could Save the Democrats in 2020

Under a clear blue sky in late summer, with the peaks of the Gallatin Mountains as a backdrop, Montana Governor Steve Bullock mingles with guests at a private event on a ranch just outside Bozeman. Holding a plate piled high with barbecue, Bullock is half a head taller than most of the people here. He is genial and relaxed, in jeans and battered brown shoes. His nametag reads, “Governor Steve.”

A young mother brings over two little girls in flowered sundresses, and Bullock immediately drops down to eye level. A few minutes later, the girls leave with their mother, smiles on their faces, their votes no doubt locked up for 15 years hence when the girls will be old enough to cast a ballot. In half the conversations that swirl around Bullock, there are joking references to 2020 and hints about the Governor’s ambitions. It’s an open secret here that the Bullock might be running for President.

Just this past fall, Bullock won re-election over GOP challenger billionaire Greg Gianforte by four percentage points—50 percent to 46 percent—in a state where only 35 percent of voters chose Democrat Hillary Clinton for President and Donald Trump won by 20 points. That victory is Bullock’s calling card into the Democratic presidential sweepstakes, along with the prairie populist credentials he has burnished. As the state’s Attorney General, he endeared himself to sportsmen by authoring a state opinion guaranteeing access to public lands. He also took on the Supreme Court’s decision in Citizens United, defending the state’s ban on corporate spending (he lost when the Court reaffirmed its decision).

But Bullock is not the only Democratic Governor with an eye on 2020. No fewer than five Governors (out of a field of only 15 Democratic Governors nationwide) are rumored to be or talked about as serious potential presidential contenders. Many of these, like Bullock, are governing in states that voted for Trump, or where the legislatures are controlled by Republicans, or both. And many, like Bullock, claim a pragmatic approach to policy that’s intentionally difficult to pigeonhole—by turns progressive, populist, and libertarian.

These governors join what is seemingly already a cast of thousands vying for the chance to take down Trump. In addition to liberal senatorial heavyweights Bernie Sanders and Elizabeth Warren and former Vice President Joe Biden, none of whom have (yet) officially revealed their intentions, there is a raft of younger Senators, House members, rising-star big-city Mayors, and an assortment of CEOs and celebrities, including Oprah Winfrey, Starbucks’ CEO Howard Schultz, and Facebook’s Mark Zuckerberg (though revelations of Facebook’s pre-election ad sales to the Russians might sink that candidacy before it begins).

But of all of these, a Governor might have the best shot at actually winning. Why is that? The simple answer is that Governors are not inherently Washington swamp creatures, and that’s what the Democrats need to fracture Trump’s stubbornly loyal coalition.

We are now nine months into an Administration marred by chaos, intemperance, and whiffs of corruption, and yet the loyalty of President Donald Trump’s base remains perplexingly solid. Despite overall approval ratings in the toilet, Gallup polls find that 81 percent of Republicans and one-third of independents still give Trump a thumbs-up as of early October, even as GOP Congressional approval ratings tumble. Democrats’ fervent hopes for a great wave of buyer’s remorse have yet to pan out. Just 6 percent of Trump voters regret their choice, according to a September 2017 poll by the Democracy Fund Voter Study Group, while nearly nine in ten approve of the job he’s doing. Even among so-called Obama-Trump voters—2016’s version of “Reagan Democrats”—approval rates are still as high as 70 percent, with only 16 percent regretting their vote.

Barring impeachment or Armageddon, Democratic strategist Doug Sosnik concluded gloomily in the Washington Post, Trump is plausibly on track to re-election “simply by maintaining his current level of support with his political base.”

Many Democrats still stunned by Hillary Clinton’s defeat believe that Trump’s unconventional victory in 2016 demands a similarly unconventional challenger in 2020 to break the Trump coalition: a populist partisan warrior who can match Trump tweet for tweet, or a celebrity whose star-power outshines Trump’s own. Either strategy carries major risks of miscalculation.

Governors, on the other hand, are a tried and true source of successful nominees, though their perceived staidness may not immediately quicken the pulse of a Bernie Bro. Historically speaking, the road from Governors’ mansions to the White House is a well-trod one. Beginning with Thomas Jefferson in 1801, 17 Presidents first cut their teeth as Governors, including both Theodore and Franklin Roosevelt (both formerly Governors of New York), Woodrow Wilson (New Jersey), Ronald Reagan (California), Jimmy Carter (Georgia), Bill Clinton (Arkansas), and George W. Bush (Texas).

Make no mistake, former Governors can still make sub-standard Presidents (witness Andrew Johnson, who made a hash of Reconstruction, vetoed the Civil Rights Act of 1866, and was later impeached by Congress). They can also make poor candidates (witness Michael Dukakis peering haplessly from a tank). Yet voters ascribe to Governors a combination of traits, such as managerial expertise, that have made them politically successful in the past. The same traits could make them viable challengers to Trump, as well as better candidates than some of their Democratic rivals. Indeed, Governors could be uniquely suited to what Democrats might need in a candidate in 2020.

While the lessons of 2016 are still up for debate, it’s clear that Democrats, at a minimum, must offer up a challenger who can remedy the party’s deficits revealed last year, widen the chinks in Trump’s armor and, most importantly, offer a credible response to the underlying stresses that enabled Trump’s ascension.

Though it’s easy for some to dismiss the concerns of Trump’s white working class base as mere racism or xenophobia, the hardiness of his support points to the durability of the forces that led to his election, including lingering economic anxiety and disgust with the status quo. Nor will these forces have dissipated by 2020, given that Trump retains his power in part by stoking this deep-seated discontent. Even if Trump were to be gone by 2020, the phenomenon of Trumpism might well remain. So the Democrats cannot afford another candidate who views half of Americans as “deplorables” or who reinforces the perennial rap on the party as a bunch of hopelessly out-of-touch elites. Rather, Democrats need a candidate who can credibly connect to the voters whose feelings of neglect by the Washington establishment ultimately morphed into Trumpian rage.

Second, Democrats will need a candidate with a clear agenda and set of values that resonate with the broad majority of Americans. Democrats know at this point that simply not being Trump is not enough to defeat him. That was primarily the strategy Hillary Clinton pursued, pinning her hopes on the “Never Trumpers” and spending more energy attacking Trump rather than elucidating what she was for. The 2020 election cannot be merely a referendum on Trump; it needs to be a choice between two very different but clear alternatives for the American future.

Third, Democrats will need a candidate who can exploit a potentially emerging vulnerability for Trump: the utter lack of any achievements that have bettered the lives of the middle class. As much as Trump’s election was a giant middle finger to the political establishment, it was also a demand for results, and no such results have been or are likely to be forthcoming beyond the evanescently symbolic.

In the immediate aftermath of Trump’s election, in December 2016, the Pew Research Center found that 76 percent of Americans wanted the new President “to work closely with members of the opposing party in Congress,” while just 22 percent said Trump should focus only on his agenda without concern for the other side. One bipartisan debt deal notwithstanding, Trump has utterly failed to deliver on that desire.

Since taking office, Trump has only aggravated political polarization while accomplishing little of consequence legislatively. As much as Trump would like to blame Congress for these failures, he demonstrates daily the pitfalls of electing a President with neither experience nor knowledge, as promise after bombastic promise has hit the hard wall of reality. As Trump himself admitted in his struggles over the Affordable Care Act, policy is “complicated.” At some point, perhaps soon, even Trump’s most ardent supporters will tire of the thin gruel of racist dog whistles and spats over who’s doing what during the national anthem. And as the health care system unravels, promised coal jobs fail to materialize, and essential services get the axe, some may even realize that they’ve been had. Democrats will need to offer up a candidate who can make good on what Americans really want: policies that actually create jobs, grow the economy, and improve their situation.

Compared to members of Congress, CEOs, and celebrities, Governors have the best odds at checking all of these boxes as a presidential nominee: the ability to connect with voters, to stand for something, and to get things done for ordinary Americans. Since states have often been successful incubators of good ideas, a Governor with some innovation notches in his belt would have a particularly appealing record. This combination of connection, vision, competence, and innovation could be the formula that undoes Trump.

On the question of connection, a Governor’s job is inherently “populist”—as in, of the people—in a way that being a Senator, or a CEO, or Trump, is not. Governors balance budgets, build roads, and take actions that directly affect the local economy. They also spend an enormous amount of time crisscrossing their states and talking to constituents, which is not only a handy practice for campaigning but can produce a likable candidate with whom voters would happily share a beer. Compare that with the relative remoteness of the hallways of Capitol Hill, a corner office executive suite, or the luxury of Mar-a-Lago.

“Governors have a unique relationship with their voters that’s tangible and tactile,” said Colm O’Comartun, a former executive director of the Democratic Governors Association. “Voters can see them in action running their state and understand what they do.”

As for competence and vision, governors tend to have plans for their states: how to grow jobs, attract businesses, invest in schools, and improve the quality of life for residents. Moreover, they have established records of achievements. “If you’re a U.S. Senator, all you can talk about is what you’ve fought against,” said veteran Democratic pollster John Anzalone. “If you’re Governor, you can talk about what you’ve done to impact people’s lives. That’s a different story.” If the next four years are filled with gridlock and non-achievement, a Governor with a track record of accomplishment could be a welcome tonic.

Governors enjoy other advantages as candidates as well, such as their aforementioned street cred as “non-swamp” Washington outsiders, coupled with insider expertise. “Governors are unique in that they offer both executive experience and experience outside the Beltway,” said Nathan Daschle, another former executive director of the Democratic Governors Association. “No one else can marry those two things.” It’s a recipe that could be particularly attractive to Americans who are still disgusted by establishment politics but who, exhausted by the antics of a completely novice President, want reassurance that their President actually has a clue.

Finally, Governors offer a depolarizing balm against the toxicity of modern politics, which many voters could also find appealing. For one thing, much of what governors achieve has to happen in a bipartisan way. “Governors are notorious for working with the other party,” as Daschle says. Most states, for example, require balanced budgets every year, an exercise that forces cross-party compromise.

And while Governors can navigate the swamp, they are not creatures of it, which means they can keep their hands clean of the partisan squabbling that ensnares members of Congress. Nor do they have long voting records on procedural matters and litmus-test issues that can be weaponized into hours of talk-radio fodder. “Governors can be seen as less polarizing figures than a Senator might,” says John Weingart, director of the Eagleton Center. “They don’t have to deal with signing on to Bernie Sanders’ [single-payer] health insurance bill.”

The political advantages that Governors might have as candidates are of course insufficient in and of themselves to win the presidency. And perceptions of what Democrats might need to topple Trump could change between now and the early months of 2020. All bets are also off if Trump is impeached or removed from office, which would also dramatically change the calculus, to say the least.

Nevertheless, Democrats would be foolish to bypass a hard look at their bench of Governors in favor of candidates with more luster. In addition to Montana’s Bullock, the Governors rumored to be 2020 hopefuls includes New York’s Andrew Cuomo, Virginia’s Terry McAuliffe, Washington’s Jay Inslee, and Colorado’s John Hickenlooper. Even three-time contender Jerry Brown of California has not ruled out a run, though he would then be 82 years old. There is also growing buzz around first-time governors John Bel Edwards of Louisiana, Roy Cooper of North Carolina, and Gina Raimundo of Rhode Island, not to mention former Governors such as Massachusetts’s Deval Patrick.

Among this wealth of possibilities, the strongest potential nominees might be Montana’s Bullock, Colorado’s Hickenlooper, and Virginia’s McAuliffe. All three are Governors of red or purple states in the south or west, and all three have compiled records that appeal to broad swathes of their constituencies. Hickenlooper, for example, has built a solid economic record in Colorado and developed a reputation for bipartisanship, so much so that a presidential “unity ticket” with Ohio Republican Governor John Kasich has been rumored to be in the works. McAuliffe, meanwhile, has made diversifying Virginia’s economy a top priority, and recently took credit for a $2.2 billion boost in the state’s tourism industry, which the Governor has worked hard to nurture.

At the same time, all three have progressive credentials that are potentially sufficient to energize the liberal base (or at least avoid their enmity). Hickenlooper, for example, has crafted one of the nation’s most forward-thinking policies on marijuana legalization, while Bullock, in addition to his crusade against Citizens United, cut Montana’s uninsured rate by half through a Medicaid expansion under the Affordable Care Act. And Terry McAuliffe, despite his checkered past as the former chairman of the Democratic National Committee and longtime ties to the Clintons, has crusaded to restore voting rights for felons and bragged about his “F” rating from the National Rifle Association.

As important in this age of celebrity, none of the three is boring. While Bullock has presidential-caliber height and hair (he could have been an extra in A River Runs Through It), Hickenlooper’s background is charmingly eclectic as the founder of Denver’s first craft brewery after being laid off as a geologist. McAuliffe is the brashest and most ebullient of the three, the size of his personality matched only by the size of his personal network, amassed over years as the Democrats’ top fundraiser, and the size of his potential war chest. Many observers say that of all the Governors entering the 2020 primary scrum, McAuliffe might emerge on top. “Terry’s got the biggest balls,” said pollster Anzalone, who has known McAuliffe for decades. “He shouldn’t be underestimated.”

Even if a Governor isn’t ultimately the Democrats’ next standard-bearer, they could still show national Democrats how populism and pragmatism working in tandem can energize liberal turnout while still winning crucial swing-state support. It’s a formula that could pose a potent challenge to Trump in 2020.

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Abe’s Gamble Pays Off

At a time of great domestic and global uncertainty, Japanese voters chose continuity over change in Sunday’s general election. After rolling the dice on snap elections last month, Prime Minister Shinzo Abe snatched a sweeping victory for his ruling coalition, prevailing despite allegations of cronyism against the Prime Minister and a populist scare from a powerful rival. Ultimately, Abe’s Liberal Democratic Party and its junior coalition partner Komeito earned a clear mandate from voters, winning more than a two-thirds majority in the 465 seats of the House of Representatives.

Crucially, that majority now meets the parliamentary threshold for initiating constitutional revision, which remains Abe’s ultimate goal. (The coalition already has the two-thirds majority in the upper house needed to proceed.) Nonetheless, Abe was circumspect about the prospects for constitutional revision in the immediate aftermath of the vote. “The matter should be debated in the Diet,” the Prime Minister told a TV interviewer as the votes were tallied, “and at the same time I expect discussions to deepen among the public.”

Abe wants to revise Article 9, the war-renouncing clause of the U.S.-imposed 1946 constitution, by adding an explicit and legitimating reference to Japan’s defense forces. But that proposal still faces lingering opposition among the cautiously pacifist public. Abe’s administration was sharply criticized for ramrodding new security legislation through the Diet in 2015.

Since then, however, the security environment surrounding Japan has dramatically worsened, with North Korea repeatedly firing missiles over the island nation and detonating its sixth nuclear test in September. Just this past month, Pyongyang launched a missile over Japan one day after it threatened to “sink” the country and turn the United States “into ashes and darkness.” For the first time since the final months of World War II, when U.S. strategic bombings (including the Hiroshima and Nagasaki nuclear attacks) decimated more than sixty major cities, Japanese children are learning air-raid safety drills in school.

This ominous security environment colored the campaign from the start. In announcing early elections, Abe said he wanted to renew the public’s mandate for “powerful diplomacy” on North Korea, including Japan’s support for the U.S. stance that all options are “on the table” in dealing with the threat. Abe and the Japanese public are keenly aware that their nation must rely on U.S. security guarantees to deter the threat from Pyongyang, even though President Trump is widely seen as a loose cannon. The President’s intemperate rhetoric and pejorative threats toward “Rocket Man” certainly make Japan very nervous, but Abe has tried to avoid any public show of discord. On Monday, Japanese officials were quick to report that Trump had called and congratulated Abe on the win, confirming the “unshakable” U.S.-Japan alliance just weeks before Trump is expected in Japan on the first stop of his first visit to Asia.

Abe’s other main priorities were domestic. At the start of the campaign, Abe said he must obtain the public’s support and trust to overcome the national crisis of a declining birth rate. He thus asked for a fresh mandate to spend a larger proportion of the extra revenue from a planned consumption tax hike in October 2019 on social welfare initiatives for children and the childbearing-age population. The proposal drew criticism from fiscal conservatives, as the hike was initially meant to pay down the government debt, which is more than twice Japan’s annual GDP.

Citing North Korea and the stimulus issue as justification, Abe was able to call snap elections at an opportune moment. Aiming to recover from allegations of cronyism that dealt a severe blow to his popularity, Abe triggered elections before his rival, Tokyo Governor Yuriko Koike, could get fully organized on a national level. And the move paid off: Totally disarrayed not only by Abe’s bold political gamble but also by their own miscalculations, the opposition parties collapsed. Only one hastily formed party, the Constitutional Democratic Party of Japan, bucked the trend, gaining unexpectedly at the expense of the others.

Koike’s newly formed Party of Hope underperformed expectations, winning only 50 seats. This was a particularly disappointing result for Koike, who broke from LDP to run for Tokyo governor last year and led a highly successful populist revolt in Tokyo’s Metropolitan Assembly elections in June. The Party of Hope took on the conservative wing of the moribund Democratic Party, while the Constitutional Democratic Party took on the liberal wing. The latter become a venting opportunity for some voters’ frustrations over Abe’s alleged scandals and his overwhelming political dominance.

After five years in power and Sunday’s big win, Abe will likely secure the LDP leadership in a party vote next September to become Japan’s longest-serving Prime Minister. The current record holder is Katsura Taro, who served three non-consecutive terms between 1901 and 1913. Abe is expected to oversee the abdication of Emperor Akihito next spring, and then the 2020 Tokyo Olympic Games under the new Emperor’s rein.

Facing grave challenges, Japan’s voters chose stability and known knowns, avoiding the populist paths trodden by their counterparts in the United States and Western Europe over the past year and a half. They also demonstrated the messy yet transparent ways of democracy to their Chinese neighbors—who happen to be choosing their own leaders behind the thick red curtains and shadowy back rooms of the Communist Party Congress this week. If there is any political kabuki going on these days in East Asia, it’s going on in Beijing, not Tokyo.

The post Abe’s Gamble Pays Off appeared first on The American Interest.

Europe in the Shadows of Middle East Immigration

The after-effects of the greatest immigration wave into Europe since World War II continue to ripple across the Continent’s political landscape. Right-wing parties in Germany and Austria made big gains in recent elections. These gains also confirm the sharp decline of support for traditional political parties in the Netherlands, France, Germany, and now Austria. They vividly show that few issues have more currency with European electorates today than their governments’ inability to find a credible solution to the migrant crisis. At the same time, this is not just about the European Union struggling to come up with a viable immigration policy and falling short. For decades the continent’s demographic trends have been a ticking time bomb, raising questions about Europe’s ability to maintain economic growth, sustain its social market compact, and raise the requisite cohorts for its military.

In the long term, the reordering of European politics is arguably less important for Europe’s future than the impact that the current immigration from the Middle East and North Africa (MENA) will have on the continent’s already fragile demographic landscape. Europe is not just the proverbial “old” continent, with its great cultural heritage and splendor; it is literally old, with its populations older on average than anywhere else in the world. According to a recent study by the Berlin Institute for Population and Development, in Europe today there are on average only three people working for every retiree. Furthermore, by the middle of the century this ratio may fall to one-to-two—an unsustainable trend even if most of the continent’s developed economies were to significantly reduce their generous social benefits structures.

A more recent factor that has overturned earlier assumptions about Europe’s ability to cope with its deteriorating demographics has been the lingering repercussions of the economic crisis in Europe’s south in 2008. This region continues to lose young people, as they choose emigration over nonexistent economic prospects at home. Hence, by the middle of the century the average population age is likely to be highest in Greece and Portugal—and those populations will likely also be smaller than they are today, especially in rural areas. Still, before the MENA crisis it was generally assumed that the economically advanced countries in northern Europe, especially Germany, Switzerland, and in Scandinavia, stood a better chance of weathering the demographic crisis than Europe’s southern and southeastern regions. It was expected that the North’s industrial base and its strong educational systems would continue to increase productivity, which, in combination with the intra-E.U. immigration as well as intra-E.U. migration for longer periods of time of a relatively high-skilled labor force from central and northeastern Europe, would attenuate to an extent declining local population growth and the overall aging of society.

Intra-E.U. immigration/migration in particular has improved somewhat earlier demographic projections for Western Europe. According to the European Commission’s 2016 Annual Report on intra-E.U. labor mobility, published in May 2017, in 2015 approximately 11.4 million E.U.-28 citizens and EFTA citizens of working age were residing in an E.U. country other than their country of citizenship—an increase of 5.3 percent from 2014. For instance, despite its strong economic growth Poland has experienced in the last decade its largest outmigration wave in a century, with estimates of 2.2 to 2.7 million having moved to the “old” European Union, of which about 1.2 million are concentrated in the United Kingdom and Germany. Other new member states that have experienced high outmigration rates within the European Union are Estonia, Latvia, Bulgaria and Romania.

Such intra-E.U. immigration has come with a price. Although until Brexit intra-E.U. immigration over the past decade and a half had not garnered a lot of attention amid the political class, there has been friction between internal E.U. immigrants and their host populations in Northern and Western Europe. While on balance the “old” European Union has benefited both from the low-cost labor as well as high-skill level of many well educated young people coming from the “new” European Union, resentment among a number of host communities has grown as well.

Most importantly, however, with the exception of the Roma community, the overall integration of intra-E.U. immigrants has been relatively straightforward and, on balance, successful. In short, one could reasonably expect intra-E.U. immigration to attenuate somewhat the “aging out” process underway in northern and western Europe, albeit with potential long-term negative consequences for the “donor” countries unless they themselves began to experience significantly higher birth rates. But intra-E.U. immigration will not be a panacea, as the demographic trends Europe is facing are a function of composite, long-term changes reflecting the Continent’s shifting family structures, individual choices, increased longevity, and an increasingly postmodern culture, especially in the north and west.

Since 2015 this complex and tenuous demographic picture in Europe has been dramatically impacted by MENA immigration. Supporters of a continued open-door MENA immigration policy have argued that this massive influx of young people—roughly seventy percent of whom are young males—will have in the long-term a much-needed salutary effect on Europe’s demographic balance, possibly even eventually reversing the previous age distribution pattern between the active and retired components of the labor force. However, even if one disregards the rather glaringly mechanistic simplicity of such a calculus, it is simply impossible to adequately assess at this point the extent to which MENA immigration into Europe could in fact improve long-term the overall demographic picture in countries such as Germany or Sweden. Nor is there a convincing argument to be made that simply having a lot of young people enter Europe, regardless of their education levels, language skills, and qualifications, will in and of itself address Europe’s demographic woes. And even if this were the case, it remains unclear whether such putative benefits would offset the ancillary economic and social costs associated with such a massive influx of people from non-European cultures.

Sweeping projections about the relative benefits of the current immigration wave should be approached with caution. The receiving countries, primarily Germany, have yet to come to terms with the overall costs of educating, integrating and acculturating the new arrivals, as well as the attendant friction and not-insubstantial public resentment in communities receiving them. On balance, it is reasonable to assume that the economic, political, and social costs accrued by MENA immigrant-receiving states will be significantly higher than the comparable costs for intra-E.U. immigrants. What is missing from the debate over Europe’s deteriorating demographics is a genuine quest for alternatives to massive immigration. There are other options available to developed democracies, especially policies that encourage and support larger families. Also, rapid digitization of services and the robotizing of manufacturing, to name but a few options, though not in and of themselves a panacea, can attenuate the problem.

It is impossible to gauge with precision at this point how the current wave of MENA immigration will ultimately transform European societies, but there can be no doubt that it will have a lasting impact both in terms of the continent’s politics and culture. But judging at least by the politics already attendant to it, the endgame scenario may result in the deepening of political cleavages and divisions within receiving societies, especially if new arrivals repeat the pattern of establishing poorly integrated “suspended communities” as has been the case with previous waves of Muslim immigration into Europe.

In the end, it may very well be that instead of alleviating the demographic strain on aging European societies, the new entrants will require long-term support from their host states before they can become net contributors to their economies, with Germany, for instance, projecting that that up to three-quarters of its refugees will still be unemployed in five years’ time. This would mean that, instead of attenuating the demographic trends that increasingly make the current European social market model ever less sustainable, the decision to continue to accept waves of immigrants from the Middle East and Africa could in fact do very little for Europe’s negative demographics and carry with it considerable economic and social costs.

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Fifty Shades of Czech Populism

This past weekend’s elections in the Czech Republic show the ideological permissiveness of populism. Czech voters dallied with a dizzying array of populist parties from extreme Right to extreme Left, with multiple shades in-between. In a proportional representation system with a 5 percent threshold, three of these parties together garnered 50 percent of the votes.

ANO (“yes” in Czech, as well as an acronym for Association of Dissatisfied Citizens) came first with 30 percent of the vote. It has a vaguely centrist ideology and is a member of the group of liberal parties in the European parliament.

The Pirate Party, a Czech version of the Scandinavian mildly anarchist high-tech and legal drugs franchise, won almost 11 percent of the vote.

Immediately following the Pirate Party came the Freedom and Direct Democracy Party (SPD, in its Czech acronym), a xenophobic, extreme right-wing party comparable to Germany’s Alternative for Germany or France’s National Front. Interestingly though, the party is led by Tomio Okamura, a half-Japanese demagogue who rails against cosmopolitanism and immigration. He came to prominence by serving as a judge on (what else?) a “reality show” on Czech television about aspiring entrepreneurs and their projects. His image on election posters was touched up to make him look a bit less Asian.

As in other European elections, the Czech Left has collapsed. The Social Democratic Party, the senior member of the current coalition, managed to take only 7 percent of the vote, just behind the Communist Party, which used to be the protest party. This year, the Communists lost that status to the populists and, with it, more than two-thirds of their parliamentary representation.

All this means that for the first time since its founding 25 years ago, the Czech Republic will be led neither by the Social-Democrats nor by the conservative Civic Democratic Party. The big winner of the elections was billionaire Andrej Babiš: the second wealthiest Czech, founder and head of the ANO Party, and a man who draws obvious comparisons with Donald Trump and Silvio Berlusconi. Yet there are clear differences between Babiš and those two men—some for better, others for worse, still others somehow for better and worse. This bit of analytical cryptography begs an explanation.

Unlike other populist leaders, Babiš has not displayed signs of psychological pathology. He is rational, intelligent, competent, and self-composed. He has dealt with competitors and opponents in business and politics in a way very unlike Trump: He has bought rather than fought them. If his commercial competitors refused to sell, he made their best employees offers they could not refuse. When the press was less than admiring, he bought the two main quality dailies. In a small media market, this control provided him with protection not just from the journalists who worked for him, but also from the journalists who might one day want to work for him.

This did not stop Babiš from attacking the media for defaming him, but that was another aspect of a campaign full of contradictions: He got rich from being an insider in the wild and largely lawless privatization process of the 1990s, yet he presented himself as an outsider and an anti-system candidate. ANO was the junior partner in the coalition of the past four years, in which Babiš served as Minister of Finance. Yet he managed to pass blame for selective economic failures to his senior Social Democratic coalition partners while taking credit for the generally improved economy.

Four years ago, the Social Democrats miscalculated that they could discredit ANO as a protest movement by integrating it as a junior partner in an establishment coalition. As the economy recovered from the global recession, they also hoped that populist passions would abate. The economy indeed improved, dramatically so: the budget moved into surplus; Czech economic growth is one of the strongest in Europe; and the Czech Republic has the lowest unemployment rate in Europe—all largely thanks to German investment and trade. Yet Babiš as Finance Minister took credit for these successes while managing to distance himself from the perceived corruption of established party “elites.” By the time the Social Democrats woke up to this reality, it was too late. Perhaps the wunderkind Sebastian Kurz in Austria will notice the harvest of this kind of error before he forms a coalition with the Freedom Party.

Politically, Babiš is both more powerful and weaker than other populist leaders. Like Italy’s Berlusconi and to some extent France’s Macron and Austria’s Kurz, he presides over a one-man party that stands or falls on the charisma of its leader. Recalling forty years of Communist propaganda and the wild nomenklatura privatization of the 1990s, it is noteworthy, if not altogether amazing, that the main source of Babiš’ charisma among his voters, like that of Trump and Berlusconi, is his wealth. He has become the Czech equivalent of the American “magnifico” type.

This marks a radical shift in the value system of parts of Czech society. Babiš holds absolute power within his party to appoint or dismiss officials at will. Rather than craft a mass political party like the two major ones in the United States, he has been carefully limiting membership. He has selected functionaries who are either publicly unknown managers from his companies or locally known leaders who have no political affiliation or power base of their own. Both types are entirely dependent on Babiš’s good graces for their political careers and cannot challenge him. For precisely this reason ANO did badly in past Senate elections, in which Czechs vote for individual candidates rather than party lists.

Since the ascendancy of ANO depends entirely on the charisma of its leader (and the disillusionment of the electorate with the patronage system of the traditional two parties), his party will likely disintegrate when Babiš leaves politics. For this reason, his opponents have focused on attempting to separate ANO from its head. Babiš was entangled in various financial improprieties involving the misallocation of E.U. subsidies to his companies under assumed false ownership and is suspected of legally questionable tax avoidance maneuvers. As a result, the Social Democrats managed to remove Babiš from the government in June, and earlier this year parliament lifted Babiš’s parliamentary immunity so he could stand trial.

The Social Democrats possess other forms of ammunition to use against Babiš as well. Young Babiš, whose father was a Communist-era Slovak diplomat, worked during the Communist era in foreign trade. He is mentioned in the files of the Slovak Secret Police as a collaborator. Though Babiš denies the charge, very few Czechoslovaks with access to the West before the fall of the Berlin Wall had nothing to do with that era’s secret police, whether that participation was voluntary or not.

Besides, by the time these revelations were published and the financial accusations made, Babiš had acquired a Trump-like Teflon political skin. ANO’s voters want to believe in him, and no evidence to the contrary will convince them otherwise. In a final moment of desperation before the elections, the Social Democrats attempted to out-populist the populists by promising to halt all immigration from outside the European Union; they also increased the salaries of all civil servants by 10 percent and teachers by 15 percent last month (a responsible enough budget expansion given the current budget surplus). But it all came too late; enough voters had already formed a relationship of faith and trust in Babiš.

How did he do that? Well, ideologically, to paraphrase another Slovak leader, Alexandr Dubček, Babiš offered “populism with a human face.” His social and economic policies are centrist and mainstream, even concerning the populist shibboleth of immigration. Unlike in Britain, all Czech politicians accept unlimited migration from other E.U. countries. They debate instead whether to allow immigration and worker relocation from other Slavic nations with similar histories and culture that are not part of the European Union, like Ukraine and Serbia. With close to full employment, Babiš accepts the need for such labor mobility and, unlike the Social Democrats who attempted to out-populist him by adopting SPD’s xenophobic policies, has supported it.

Accepting refugees and migrants from Muslim countries is a different matter, more symbolic than substantial. Refugees from the Middle East and Afghanistan are not interested in settling in the Czech Republic because it offers fewer economic opportunities and less welfare than Germany or Sweden, and there is no pre-existing migrant community to assist in accepting them. If the Czech Republic were to accept the small quota of refugees that the European Union (read: Germany) demands, they would likely leave the country at the first opportunity for Germany, and with the borders of the Schengen Zone still open, nobody can stop them.

On the other hand, Germany insists on other E.U. countries sharing the burden of accepting refugees even symbolically for a good reason: The previous major European refugee crisis of the 1930s was exacerbated by rolling prohibitions on immigration, when one country followed another in imposing beggar-thy-neighbor restrictions. To prevent a recurrence, it is necessary to ensure that, at least symbolically, all E.U. countries agree to accept refugees. Yet ordinary Czechs are afraid of Muslim migration, especially of the potential formation of Muslim enclaves. They see the less-than-successful assimilation of second-generation Muslim migrants in France, Germany, Sweden, the Netherlands, and other continental West European countries, and they recoil.

That said, there has never been a foreign terrorist attack on Czech soil, and there are today no migrant ethnic ghettos in the country. (There are Romani-Gypsy ghettos, but they are long-since indigenous.) The additional element in the stew of fear concerns Germany, a country that still reminds Czechs of deep historical wounds. The perception that migration quotas have been forced on them by Germany, which is far wealthier and also dominates the Czech economy, does not help. Babiš echoed and manipulated these popular fears in rejecting E.U. refuge quotas and Muslim migration. He is unlikely to change tack.

At the same time, fears of a new Central European authoritarian bloc comprising Poland, Hungary, Slovakia, and Austria are overblown. Babiš knows well that the Polish and Hungarian governments have practically nothing to offer the Czech Republic. Whatever the historical complications, the source of the Czechs’ historically unprecedented prosperity is Germany. The brightest future for the Czech economy lies with its full integration into the German economic system. In a two-speed Europe, the Czechs and Slovaks must ride in the Volkswagen that Germany drives and that Czech workers build. (Volkswagen is the largest single employer in the Czech Republic.) Babiš, a fairly cosmopolitan polyglot who speaks fluent English, German, and French, will negotiate terms with Merkel and Macron, but the balance of power is such that the French and Germans will find it easy to peel the Czechs and Slovaks away from any budding alliance with Poland or Hungary.

The main potential danger that Babiš’s prospective rule poses is the erosion of democracy and liberal institutional checks and balances, as has already happened in Hungary and especially in Poland. Babiš has promised to change the constitution to disband the Senate and reduce the size of the parliament. He may get a populist majority in the parliament for such reforms, but at present it does not look like he will have anything approaching a sufficient majority in the Senate, if for no other reason than because Czech senators are not about to abolish their own jobs.

The independence of the judiciary, the police, the prosecution, and the secret police from the state executive branch has progressed over the years, starting from less than zero at the end of communism. Babiš’ rule could see some backsliding on this front. The first test would be to see if Babiš manages to stifle the Czech police investigation and prosecution against him and his companies (he will not be able to stop the separate and ongoing E.U. corruption investigation). Next, to follow the populist-authoritarian rulebook, he will need to control directly or, more likely, indirectly the state television and the most popular private television channel, TV Nova (he already owns much of the print media). If he is successful, the large majority of Czechs will receive their news from his people.

Babiš is richer than Trump (and, as he likes to point out, he has never gone bankrupt) in a much smaller and poorer country than the United States. With vast and diverse interests in agriculture, chemicals, and the media, Babiš has equally vast conflicts of interest. As Minister of Finance, he introduced a series of measures involving the digitalization of transactions to prevent tax evasion among small businesses, which happen to be the main competitors of large corporations that cannot hide their income, like his own. The Czech parliament belatedly introduced laws to prevent concentration of media ownership and to exclude businesses owned by government ministers from receiving subsidies. It will be interesting to see whether a Babiš Administration will be able to defang these measures, and to what extent Babiš will further enrich himself during his term. He could become, in effect, the majority owner as well as elected manager of his country. This would achieve, in a sense, the most radical version of the privatization of the state ever, and would put him in the company of the Russian czars of old who owed essentially everything, including most of the people.

What’s next? Horse-trading.

ANO gained 78 of the 200 members of the Czech Parliament. It will prefer to form a coalition with some of the traditional political parties, continue the coalition of the past four years with the Social Democrats (15) and centrist Christian Democrats (10), or form a coalition with the right-wing Civic Democrats (25) to make 103. But the leaders of the traditional parties have declared that they will not form a coalition with a Prime Minister who faces criminal charges, this being part of their attempt to decapitate ANO. But the Social Democrats and Civic Democrats have clientelist networks to maintain with businesses that benefit from state contracts, so it remains to be seen if their threats will last.

If all else fails, Babiš may try to form “a coalition from hell” with the xenophobic SPD (22 MPs) and the passive support of the Communist Party (15) in return for favors to Communist officials and frequent plebiscites, and a halt to immigration for the SPD. The domestic and international disaster that such a coalition would constitute may be a useful bargaining chip to bring in the traditional parties.

If no coalition forms, the President of the Czech Republic, who usually has only ceremonial powers, can step in to appoint a caretaker government of his own loyalists, an option the current and previous two Presidents have exercised in times of political impasse in parliament. The President, Miloš Zeman (who is widely believed to be financed, owned, and operated by Putin’s Russia), himself will have to run for re-election early next year, which current polls predict he will lose in the second round. But in the meantime, if the political parties cannot reach an agreement, the President will have dominant power. By February 2018 there may be a new President, elected directly, and if the polls are right that will be the centrist Jiri Drahoš, a scientist and former president of the Czech Academy of Science.

Meanwhile, as the horse-trading goes on, other deeper historical factors are asserting themselves. Czechs have always been more homogenous and egalitarian than the nations surrounding them. It is striking that demographic variables had little effect on voting patterns. Yes, the populist ANO and SPD appealed to voters who were typically less educated, more rural, and older than the average, while the Pirate Party appealed to better educated, more urban, and younger-than-average voters. But the differences were modest. There is no American- or British-style polarization, and politicians by and large do not try to exploit such polarization as does exist.

This underlying social calm, along with good location and a reasonably skilled and disciplined work force, is largely responsible for the revivification of the pre-Cold War patterns of German-Czech economic and social integration. As long as Germany is the engine of economic growth in Europe, the Czechs will continue to be incredibly lucky. They have already passed the standard of living in Portugal and are about to pass Spain’s. Globalization and European integration work for them. It has not trickled down everywhere yet, but it likely will in a country of fewer than 11 million people. These factors and the mildly “humane” and humorous nature of the culture give reasons for optimism in the long run.

The Czech experience offers a few global political lessons: Anti-elitist and politically disruptive populism does not line up exclusively with extreme right-wing ideologies. There can be centrist, and even buttoned-down anarchist forms of populism, though left-wing populism seems to have gone missing amid the general decline of the Left.

Conceiving of populist movements as exclusively protest movements bound to melt into the incorporating embrace of the establishment is a false notion. Joining government coalitions does not necessarily rub the establishment’s stench on populist movements. As we knew already, populist voters today deify tycoons and vilify politicians in a kind of secular religious faith that worships the God of Mammon.

On the other hand, the prospective Czech presidential election demonstrates that another elite group, at least in and around Prague, may have so far escaped the hot breath of populist wrath: scientists. That may not translate to the United States, however. No one is talking about Michio Kaku for President in 2020.

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The Reach and Limits of Russian Influence

Russia’s influence in the Balkans is real and easily observed. Both before and since the Ukrainian crisis, it has affected the region in a multitude of ways. Moscow’s rising military might has far reaching consequences for the security posture of NATO and its members bordering the Black Sea. The Russian oil and gas companies, Gazprom, Gazprom Neft, and Lukoil, still play an enormous role in the local energy markets, despite the headwinds they face and the beefed-up E.U. legislation aimed at encouraging competition and diversifying supplies. The cult of Vladimir Putin and the celebration of Russia’s resurgence on the world stage routinely makes headlines.

Emboldened, Russia has not shrunk from throwing its weight around, putting pressure on Europe and America, the two guarantors of the security order in the region. The rivalry is intense and it spans both countries and policy arenas. Despite the hopes of detente or even a grand bargain with Russia—touted by politicians on both sides of the Atlantic—there is no end in sight to the ongoing contest.

That all said, it is important to avoid lazy thinking, put the Russian challenge in perspective, acknowledge its limits, and recognize what it is not.

First of all, this is not a return to the Cold War. There are no blocs or alliances poised against one another in Southeastern Europe—a clear departure from the recent past. Russia, moreover, has no permanent allies or coherent ideology to export and sustain. Nor is it in a position to build an economic integration unit, for example by expanding the incipient Eurasian Economic Union (EEU) into the Balkans by accepting as members Serbia, Republika Srpska, Macedonia, or anyone else for that matter. Even Moscow’s best friends in the region tend to gravitate to the European Union in economic terms, and continue to seek positive ties with NATO and the United States. For its part, Russia has been perfecting its skill at disruption, without necessarily trying to establish its hegemony. Anything more ambitious would be a very costly enterprise, and certainly not worth it to the Kremlin in terms of returns on investment.

Second, though certain similarities or flashbacks are certainly present, we are not witnessing a “back to the future” scenario—some kind of return to a “Great Game” era of geopolitics. Back in the 19th and early 20th century, Russia wielded much greater clout over Balkan affairs compared to today, thanks to its recurrent military interventions and the very structure and operation of the Concert of Europe. At no point, however, was Russia an important economic factor. These days, by contrast, Russian energy firms and various financial investments in the region represent a much more effective tool. Whether it’s the South Stream gas pipeline or the 2015 sanctions against Turkey, the economy plays a central role in Russia’s relations with Southeast Europe. What is particularly noteworthy is the broader context: an unprecedented degree of interdependence and border permeability in post-1989 Europe. Denser links between societies, financial institutions, businesses, government agencies, media, and so forth, along with the World Wide Web, have facilitated Russia’s ability to affect events, and are essential to the operation of its soft power, such as it is. Granted, globalization may not be an entirely contemporary phenomenon and there are antecedents in the long 19th century. But were Alexander II or Nicholas I to be miraculously awakened today, would they even recognize the world in which we live?

In the Balkans, Russia is not after the establishment of a new political order or empire, whether formal or informal. Its goal is to undercut and upset the existing institutions and rules put in place by the West. It is also important to underline the fact that Russia is not acting alone. There have always been willing associates and fellow travelers. They cooperate with Russia to advance their own political and economic interests, always on the lookout for external supporters. Remarkably, some of Russia’s associates and partners counted as pro-Western in the not so distant past. A few examples: Milorad Dodik of Republika Srpska, the Turkish President Tayyip Erdoğan, Nikola Gruevski in Macedonia. Others have made the opposite move, dropping Russia in order to align more fully with the West, as is the case of Montenegro’s Milo Đukanović. Russian policy may be opportunistic, but the fact of the matter is that there are an endless number of political chancers on the other side too. This, of course, facilitates Moscow’s job of asserting its influence.

Russia’s footprint in Southeastern Europe, which expanded dramatically in the 2000s, became more visible only recently thanks to the confrontational turn in relations between Moscow and the West. Many factors account for this downturn: the Putin regime’s quest for internal legitimacy in the face of a stagnant economy and a dwindling public trust in “the system,” the desire to assert Russian interests in a growingly multipolar but also uncertain world, the anti-interventionist mood within the United States, and the European Union’s chronic malaise. Whether due to the mechanics of power politics, as scholars of a realist persuasion contend, or because of the push and pull of domestic factors, as liberals might argue, Russia is prepared to challenge America and its allies. It wants to be an international agenda-setter, not an agenda-taker. Fears of Western plots to foment “color revolution” and Maidans inside Russia itself mould the foreign policy thinking of Putin and his inner circle.

Of course, “the near abroad”—or, to use Brussels speak, the Eastern Partnership countries—are where Russia’s pushback is at its strongest. Yet Moscow has reinserted itself in other regions and political arenas. The military intervention in Syria has broadened its footprint in the Middle East beyond recognition. Even in the United States itself, the issue of suspected Russian meddling and cyber espionage came to the forefront of the 2016 presidential elections. The Obama Administration may have styled Russia as a declining regional power, but in reality the Kremlin’s outreach goes well beyond post-Soviet Eurasia. Post-communist East-Central Europe, including former Yugoslavia, is the obvious target. So too is Turkey: Moscow has the means to co-opt Ankara as its relationship with the United States and the European Union frays. Western sanctions and the dramatic fall in oil prices have put the Kremlin on the back foot, but it knows how to play the game of influence and how to exploit weaknesses and opportunities across Europe’s multiple peripheries.

For all that, one should resist the notion that the Kremlin is pulling all the strings in this game. Across Europe, political and civic leaders, governments, and business interests have been more than willing accomplices, enlisting Russia’s support to attain all kinds of goals—balancing against external threats, maximizing payoffs and redistributing the spoils, hedging and pushing for concessions from the West, sidelining and outfoxing domestic rivals, and muzzling critics. This sort of behavior is not unique to Southeast Europe, where historical connections to Russia admittedly play a role. It no doubt has its adepts in many other corners of the continent, including Hungary, the Czech Republic, Italy, Austria, and, not least, Germany. Whatever the weather, there will always be players willing to influence or do business with Russia.

Is the rival power that Russia has become in a position to undermine the European Union from within, starting from its more vulnerable southeastern states? Probably not. For one, notwithstanding the belief in many quarters, the Kremlin does not appear to have a coherent model that is exportable beyond the post-Soviet space. Neither “the managed democracy” or “sovereign democracy” of Putin’s first two terms, nor the more recent praise of conservative values and religion more broadly, nor the celebration of Russia as a unique civilization opposed to global liberalism quite do the job, irrespective of the fact that these ideas have plenty of cheerleaders across the European Union. From Belgrade to Ankara, from Sofia to Budapest, dysfunctional democracies, state capture, and the backslide to authoritarian politics are, on the whole, homegrown ills, not the results of a sinister Muscovite plot. As much as “Putinization” represents a threat, it is worth our while to reconsider who the real Putinizers are. Even more important, Russia appears to have neither the economic resources for costly ideological crusades nor the will to bankroll friendly regimes. The record in the Balkans proves the point. The European Union might be in the doldrums, facing a succession of existential crises, but it still has allure thanks to its market, sizable financial transfers, and, to a lesser degree, the power of its foundational narrative.

So what one is left with is a rivalry between an opportunist who has a clear set of goals but lacks the means to achieve them and the terminally disoriented West, which possesses the power assets but is not of one mind about how to use them. This applies both to the European Union, where member states have always found it difficult to “speak with one voice” on Russia, and the United States where the right balance between containment and engagement continues to be a hotly debated subject.

In the meantime, Southeast Europe will navigate the murky waters of this new contest. For the most part, the states of the region will jump on the West’s bandwagon but hedge their bets and keep their options open. It would be foolish of Putin to just stand idly by and not take advantage. But, as the saying goes, it takes two to tango.

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Russia’s Potemkin Democracy Goes Glamorous

Vladimir Putin has not yet announced his candidacy for Russia’s presidential election in 2018, but the race does have at least one early entrant: Ksenia Sobchak, the daughter of Putin’s first boss and the so-called “Russian Paris Hilton”, is officially running for president.

The Kremlin, of course, has given Sobchak’s candidacy the seal of approval. Russian elections are a farce, and everyone who participates in the process is only contributing to the charade. The story of Ksenia Sobchak’s candidacy is not about real electoral choices, which do not actually exist in today’s Russa. But I would like to summarize some facts about Sobchak that paved the way for her Potemkin presidential run. It’s a story that helps demonstrate how corrupt and tightly-controlled Russia’s system really is.

Ksenia Sobchak has never been far from Russia’s power circles. The daughter of former Saint Petersburg mayor Anatoly Sobchak, who effectively launched Vladimir Putin’s political career by hiring and mentoring him in the 1990s, the younger Sobchak has been hounded by persistent rumors that she is Putin’s god-daughter, though she strenuously denies it. Her mother, meanwhile, has nurtured a national political career of her own: as a Senator since 2002, and before that as a member of the State Duma.

The younger Sobchak first made headlines of her own in 2002. The 21-year-old was at the time dating Chechen businessman Umar Dzhabrailov when she was robbed in her apartment in a highly publicized incident. Sobchak later claimed $600,000 worth of jewelry was stolen in the incident. It was only the first of many headline-grabbing incidents that would follow Sobchak’s life in the public eye. (Dzhabrailov himself is no stranger to the spotlight either: he turned up in the news for firing a pistol in his room at Moscow’s Four Seasons luxury hotel. No one was hurt, but the police later found white powder in the room. Dzhabrailov, a businessman and a former Russian Senator, said it was baking soda.)

Later in the 2000s, Sobchak became a TV star when she started hosting a lowbrow reality show called Dom (The House). The nation came to know her as a glamorous blonde—a “Russian Paris Hilton”—as Sobchak successfully cashed in on her image as a spoiled rich girl.

But when fashion trends in Moscow shifted in a more intellectual and hipster direction, Sobchak accordingly transformed herself yet again. In 2011, riding the wave of mass anti-Putin protests in Moscow, she joined the opposition movement and became one of its public faces—without ever vocally opposing Vladimir Putin, curiously enough.

In December of 2011, at the height of the Moscow protests triggered by rigged Parliamentary elections, Sobchak took the stage and made a speech. She called for “influencing the government, rather than changing it.” Her speech was roundly booed, since protesters were fed up with Putin and his recently announced return. Nevertheless, Sobchak kept attending the protests, giving speeches and interviews. She always said some version of the same thing: “I didn’t go to a rally for Putin’s resignation, I personally went to the rally for fair elections. I believe there is a big difference between these two concepts… I also made clear that among today’s opposition leaders I don’t see a person I’d like to follow. I happen to stand for an evolutionary way of development.” In long interviews for major media outlets, Sobchak kept returning to this theme, saying she didn’t see a person who could credibly replace Putin.

Sobchak’s transformation was complete when she, along with Alexey Navalny and the late Boris Nemtsov, got elected to the Opposition Coordination Council, an organizational body of the opposition forces. Soon after the elections to the OCC, a split emerged. One part of the OCC demanded Putin’s resignation, while the other one—led by Sobchak—called for eliminating anti-Putin messaging and demanded reforms from the government. The OCC proved dysfunctional and a year later, in October 2013, it was dissolved.

In the meantime, Sobchak’s profile in the opposition got a boost. She started hosting a TV show on TV Dozhd, an independent and privately-owned TV Channel popular with the opposition. But Sobchak’s career in state-approved spheres was never hurt. She kept hosting prestigious awards and corporate events which brought her a lot of money. She was never banned from such events because of her opposition views, while others were punished for their political stance and stripped of their affiliations. Nor did Sobchak dare to question the Kremlin’s most important narratives: she has never said that the annexation of Crimea was illegal and that the peninsula must be given back to Ukraine, for example.

Finally, after Boris Nemtsov was murdered in front of the Kremlin, Sobchak disseminated a story that Vladimir Putin was furious about the murder. She was not the only one to do this, but she seemed intent on establishing it as a matter of public record, not merely as one source’s hearsay. Ksenia Sobchak did her best to convince society that it was Chechen strongman Ramzan Kadyrov who made a decision to kill Nemtsov, and that Putin had nothing to do with it. This phrase, from her blog, was read by a half-million people: “According to credible sources, Kadyrov must surely know how furious and shocked Putin was by Nemtsov’s murder.” This declaration of Putin’s alleged anger has been repeated by Sobchak as a declaration of fact. She also said that Putin would surely punish Kadyrov—at some later date, just not now. Much as she did at the protests, Sobchak here performed a very important mission for the Kremlin. (I have been told that Sobchak played a role in luring Nemtsov back to Russia from Israel in the fall of 2014, mere months before he was killed.)

In September, the Kremlin leaked to the press that it was looking for a woman for the 2018 elections, and that it might be Sobchak. At the time, she denounced the rumors, but this week, she finally announced she was in fact running. Putin’s Spokesman Dmitry Peskov immediately supported her decision, saying that she “fully fulfills the constitutional requirements.” This was an implicit reference on Peskov’s part to Alexey Navalny, whose conviction on embezzlement charges precludes him from running.

Ksenia Sobchak’s run for president suggests she is going to be the next Mikhail Prokhorov, a Russian tycoon who ran as a spoiler in 2012. She will play the role of an opposition candidate, even though she has never demonstrated an ounce of real opposition to the Putin regime. Her real role is to play a part in the Kremlin’s grand charade, and to muddy the waters at crucial moments—just like when civil society posed a real threat to the Kremlin’s legitimacy in 2011-2012, or when Putin was embarrassed by Boris Nemtsov’s murder in 2015.

At the very least, Sobchak’s experience in the entertainment world should serve her well in her latest endeavor. In today’s Russia, where Putin and the FSB are really pulling the strings, democracy itself has become a spy reality show, where no one can be trusted.

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Society and Rulers

The prospect of a relatively stable outcome to Putin’s anticipated next term depends on the way that Russia’s central authorities manage their relationship with the country’s wider society over the course of 2018-2024. The Putin regime has made enforcing domestic discipline its main priority and thereby limited its options. The “Vertical of Power” is ill fashioned and has become corroded, making the implementation of fresh or imaginative new policies at the Kremlin’s behest, if any of significance were unexpectedly proposed, extremely difficult.

The prelude to the presidential elections on March 18 next year still has its foggy patches. It is not yet an absolute certainty that Putin will once again run, just highly probable. Installing a pliable substitute as he did in 2008 would mean Putin’s next chance to return to the Kremlin would be in 2024, when he will be 72. It would, besides, be risky to play the same con twice. One Medvedev interlude was enough. There are no indications to date that a genuine successor to Putin from within the present governing cabal has been selected. All of which is a long-winded way of saying that a Putin victory next year will make the 2018-2024 term his last, and the questions of who might succeed him and what policies would then be followed increasingly urgent—always provided, of course, that some further way to violate the spirit of Russia’s constitution is not invented in the meantime to make Putin the equivalent of President for life. And even then the question of who or what might eventually succeed him would disturb both Russia’s ruling group and the country’s wider society as old age took its inevitable course.

Putin and his colleagues need three things to buttress their legitimacy from the outset of a further term, particularly one with a built-in end point: a credible turnout next March; a convincing victory over a credible opponent; and a credible program of government to carry them through at least the first years of their rule. All three are problematic. Turnout at recent local elections in September was low, even remarkably low, by the design of the authorities in the hope that their nominees would win without fuss or even public notice. That gave an opening to organized opposition groups at the municipal level, who made their mark in Moscow and outside it. The local and federal authorities got what they needed higher up the federal scales, but overall the result nonetheless gave a modest boost to non-systemic players. Low voter turnout at the presidential level would be damaging but not surprising given the present assumption that the result, Putin’s return, looks boringly predictable—and fixable too.

A real contest between Putin (or any regime nominee if it came to that) and a substantial opponent would bolster voter turnout, and perhaps in the event of victory reinforce Putin’s vulnerable charisma. Like it or not, however, the only possibility for that opposition role in sight is the anti-corruption publicist Alexei Navalny, who has proven he has drawing power in the regions as well as in Moscow, and an organized following. Putin will, if he bothers to campaign at all, no doubt promise yet again to fight corruption. But Navalny has active form in this field, and Putin does not. Navalny also has the advantage that Putin once had of being a fresh figure. For now at least, the ruling authorities appear reluctant to definitively stop Navalny from running, presumably in part because that would undermine the legitimacy of both the presidential elections and Putin’s position after them. Navalny’s supporters are nevertheless under physical attack, and potential sympathizers have been warned off attending rallies. Navalny’s dubious 2016 and 2017 convictions for fraud and embezzlement could still be used to ban him from campaigning. But if Navalny is locked out altogether the vote on March 18 will be a Groundhog Day event, not a real endorsement of Russia’s existing ruler—particularly, of course, if there have been street protests beforehand.

Putin’s real problem is that, after so long in power, and after the decision in 2012 to rely on repression inside Russia and on its parallel—a threatening foreign policy—he has nothing new to offer the Russian public.

The presently expected tenor of Putin’s last term is therefore seen to be one of “neo-stagnation,”1 at least for openers, enlivened by Great Power posturing. That seems plausible. The draft budget for the next three-year period looks a bit different from that for the current one, but in practice maintains the existing emphasis on security expenditure at the cost of, for example, social services, health, education, or infrastructure. Modest GDP growth is predicted. There have been changes at Governor and secondary ministerial levels designed, it must be supposed, to have qualified new figures in place for the next term. The new appointees lack local roots and have yet to distinguish themselves for a capacity for personal initiative. The implication is that the Kremlin’s aim is to enhance central control over the regions, not to develop a more effective federal system. There is nothing so far to suggest that the top level will be readjusted anytime soon.

Putin and his colleagues benefit from the lack of obvious alternatives to them, together with a popular and understandable fear of a change to unknown figures or policies at the head of a country taught to believe itself to be under outside threat. While there have been signs of discontent among urban voters, and of the ruling group’s relying more than they might wish on older rural voters, they nevertheless have the support of a domestic constituency made up in reliable part of a significant number of state dependents. The narrative of a Russia regaining its rightful place in the world despite the hostility of the West, and the United States in particular, retains some force. So too does the reality of a West grappling with serious problems.

“Neo-stagnation” is, however, a condition more likely to lead to Russia’s further degradation than to the preservation of the status quo that Putin and his associates wish to enforce over the next six years or more. Putin missed his chance in 2012 for desirable but troublesome economic change which if implemented might have helped his country to escape its dependence on petrodollars as the main prop for the system built up since 2000. The dollar stream has weakened since then, while the political, economic, and social prices of diversification have become steeper. Putin has added the burden of increased military spending, Crimea, and Donbas. The approximately 65 percent of the Russian economy in state hands is unlikely to be transferred elsewhere between now and 2024. Nor for that matter are the remaining parts of the economy deemed to be privately held likely to be freed in practice from subservience to the state. None of this would form a promising background to the prospects for the next six years or beyond. Russia no longer has the extensive reserves that enabled it to survive the last global financial crisis in spite of the heavy blows it had to endure. If Western sanctions were lifted, Russia would still be exposed, and would be so even if the Russian state were equipped with an honest and effective management system.

Authoritarian or totalitarian governments suffer from a common paradox. It is in principle clear who is in charge, but it is rarely clear who has decided what in each particular case. Putin is generally supposed to act more like a CEO than a dictator, but no one knows for certain whom he consults among his apparently closest colleagues. When Sechin (Rosneft) decided to frame Ulyukaev (then-Minister of Economic Development in the government headed by Prime Minister and former President Medvedev) for corruption in connection with a dispute with Yevtushenkov (Sistema) over possession of the oil group Bashneft, and then to go after Sistema too, did he consult Putin? Was it Putin brooding alone who decided to seize Crimea? What was Putin’s real reaction to the news that Nemtsov had been successfully assassinated? Or Politkovskaya or Litvinenko?

The real authority in the political system is held to be the FSB. Its spirit of searching out and combatting internal and external enemies is indeed both omnipresent and omnivorous. But who exactly runs its varied and often competing components is an open question. The logic of its present and prospective operations points to greater activity than as of now, on a system of competitive autodrive. Its relationship with other security organs such as the National Guard, which is directly answerable to Putin through his former personal bodyguard, Zolotov, and the Ministry of the Interior’s forces appears ill defined. The varied groups of regime tolerated vigilantes or the quasi-independent forces answerable to Ramzan Kadyrov in Chechnya are further parts of a shifting, amoeba-like security system in which the central authorities have compromised their exclusive right to the use of violence. The Russian Orthodox Church is of course well staffed by FSB personnel, and zealous to extend its control over Russian life, including by deniable force as need be. The Armed Forces are a rising component of the system as a whole. The government headed by Prime Minister Medvedev has no authority in security matters, and no power to curb the corruption that increasingly infects that sphere—or in practice much ability to change either the corroding rule of understandings as opposed to clear legal accountability in the wider economy or to affect its essential structure. Nor does the government seem able greatly to affect the amount of effort or resources devoted to social, health, or environmental needs. Its task is to manage within shifting and increasingly repressive parameters set by others.

It is not surprising in these circumstances that the prevailing mood is one of deep uncertainty as to what the future holds for Russia. Putin’s basic offering is fundamentally empty—the realization of Russia’s special destiny, one based on its special values. None can say what these are, or how they differ from universal values. At least Brezhnev could refer, if somewhat unconvincingly, to Lenin’s interpretation of Marxism at a time when there were party structures, however drained of inner spirit, to provide for the future ongoing government of the Soviet Union. The current regime demands obedience to shifting criteria resting on a steadily narrowing public and even regime-controlled information space. “Extremism” is an accusation that can be addressed to anyone, humble or well known, on any pretext. Periodic dismissals and even arrests of regime-appointed regional governors, for instance, typically on charges of corruption—true or not—is intended to remind others occupying what should be trusted and responsible positions in the federal structures that demonstrable obedience to the Kremlin and its continuing assurance of top level protection are essential to their future well being. Doing nothing and saying nothing are already prudent choices for all Russian citizens.

Putin presides over a system incapable of trust in its subjects, and therefore plagued by fears of what they might do if not strictly controlled. Yet the sheer size of Russia and the variety of nationalities within it make that difficult to achieve. Leaching autonomous authority from the federal regions may make the attempt look easier on first consideration, but is unlikely to prove of lasting positive effect. The same goes for forcing acquiescence in a single set of patriotic doctrines based on false history centered above all on the still-dominant Russian ethnic group. The constant FSB effort to establish total control over the internet and its users is indicative. State control over the greater part of the print media and practically the whole of broadcasting is not enough to ensure the lasting success of regime propaganda, however relentless. Recent viewing figures suggest that the state television channels are declining in their effect. Whereas at least 25 million Russians have watched Navalny’s exposure of Prime Minister Medvedev’s lavish lifestyle and changing sneakers, Putin’s last Direct Line question and answer session attracted only six million, and the nightly news programme Vremya has five million with an average age of 63.

The myth of Russia’s inherent right to be respected as a “Great Power” is an essential buttress to the Kremlin’s hold on power in Russia itself, and will remain as a justification of it in the Kremlin’s eyes, at least as long as Putin’s final constitutionally legitimated presidency may last. Great power status has general traction within Russia, and among ethnic Russians in particular. Waving the flag has its effect for the vast majority of Russians, as witness the surge of support for Putin following the seizure of Crimea in 2014. Putin and his acolytes have made an increasing effort over the years to build up the myth that Russia’s historic worth has been and can only be based on a procession of military victories, Stalin’s not least. This thread has been a major factor in Russia’s cultural degradation over this century, and its reneging on the European and Christian values that were essential to its finest achievements of the 19th and 20th centuries.

The great power doctrine dangerously distorts Russia’s foreign policies and betrays its longer-term interests. Its overall effect has been to drive Russia away from its European—and by extension Transatlantic—bedrock. Like its domestic equivalent, the commitment to Russian values, it is empty of worthwhile intrinsic meaning, being in practice restricted to two crude ideas: first, that Russia has an inherent right to force its will on its neighbors, and ideally the whole of the former Yalta space; and second, that it is locked into a struggle with the West, and the United States in particular. The possibility of mutual trust and common advantage is not in the Kremlin’s DNA. Putin and his cabal are locked into the resulting narrative. Their understanding of Western or for that matter Ukrainian, Georgian, or even Belarussian or Kazakh interests or motivations is inadequate, to put it kindly. The regime’s self absorption is such that when Putin accused then-Secretary Hillary Clinton of provoking the 2011 street protests in Russia against fraud in the Duma elections, he really meant it. The same went for the accusation that it was the Americans who orchestrated the Maidan protests of 2013-14. It is a question from time to time how far we can tell when Putin knows he is in fact lying, as he so often does. But if so, it would not be much of a difference if in both of these cases he was merely laying the blame on others for unwelcome setbacks that he neither anticipated nor was able to consider realistically. In either case, he has built up a picture for himself and others of American aggression against him and his country which is demonstrably false, but demands counter-action.

Kirk Bennett’s September 25 essay, “Thinking Long-Term About Ukraine’s Defense,” provides a persuasive account of the needlessly counter-productive results of the Kremlin’s pursuit of its foreign policies by way of compulsion rather than persuasion and attraction. There are those in the West who admire Putin for what they see as swift and effective action in Syria, in a way that has outplayed the Americans. Others point to Russian intrusion into, for example, Central Europe, the Balkans, or Libya, in a similar spirit. But it is questionable first how long such “wins” may last, second what future others might be practicable or remotely sensible, and third how far they might fit in with any worthwhile vision of Russia’s national interests beyond one based on the premise of a Russian need somehow to re-establish itself as a competitor to the United States. The prospect for the next Putin term will nevertheless remain one of further interference, including cyber interference, in Transatlantic countries, sustained pressure on Russia’s neighbors, and propaganda warfare on its own people as well as beyond its borders. The degree and intensity of such efforts will naturally depend on changing circumstances, but the Kremlin is not, for now at least, looking for bankable or lasting agreements on, for example, security measures with NATO countries. Russia today is different in that regard from Brezhnev’s Soviet Union.

The key unknown as 2024 approaches is how if at all Russian society reacts to the approaching end of the Putin regime in its present form. Foreign adventures appear to be declining in their appeal to the wider public as compensation for doubts about the Putin regime’s ability over the next half decade to reinvigorate and restructure Russia itself. There is a restless spirit abroad in many of the more consequential regional cities, as well as Moscow and St Petersburg, at the prospect of Putin’s returning again in 2018. It would be logical to suppose that this restless spirit will mount in the face of the continuing evolution of the effects of judicial, economic, social, educational, health, infrastructural, and environmental stagnation—or more accurately, degradation. These risks at present look more or less inescapable in the absence of decisive and radical new approaches. The present system appears unable to contemplate the transfers of responsibility to independent actors that would be necessary for such changes to begin to work, for fear of the consequences. Strains within the ruling cabal will mount if, as it may be supposed, such pressures grow, along with pressures within the federal structures. And as time passes “after Putin what?” will aggravate tensions within what may well be a narrowing group at the top. However disparate the FSB grouping might be as the decisive force within Russia now, its instinctive reaction will be to step up repression, not to seek wider and more generous approaches.

A good number of Russians fear that their country faces disaster, given such a scenario, possibly even before 2024 is up. Their premonitions are not lightly to be dismissed—as plenty of outsiders would be ready to do, perhaps on the supposition that they are based on a settled Russian tendency to expect the worst. Russia is however a country still traumatized by its Leninist and especially its Stalinist past, whose real story is too terrible for the majority of Russian citizens to face up to: It was a joint and destructive descent into hell, with nothing achieved remotely worth the price inflicted on all its citizens. That price was paid by ethnic Russians in particular, as the dominant people of the USSR. The Russians of Russia today have therefore a particular human need to deny the truth of what happened. That has been encouraged and indeed enforced during the Putin era, with Stalin by now made into the mythical deity who far-sightedly managed the USSR through to industrial and military victory. The FSB is presented as a worthy successor to the KGB and the latter’s even more murderous predecessors. Putin himself profits from the idea that he embodies Stalin’s accredited strengths.

It would be premature confidently to forecast what might be Russia’s outcome by 2024. The country has a long history of rule by force from the top. It would be foolish to translate one’s own instinctive and inherited suppositions of what constitutes good and effective rule on to a Moscow-centered Russia with its own troubled past. That said, my view remains that Russia is facing an approaching crisis, and that a smooth transition to a legitimate and lasting Putin clone successor is the least likely scenario in or even before 2024. My prejudices, nourished by the experience of living in Belgrade towards the end of Tito’s reign and from 1985 to 1989 in close contact with Milosevic and other leading Yugoslav politicians, persuade me to look seriously at the eventual possibility of Russia disintegrating under the pressures generated by the attempt to entrench personalized command of the country from the Kremlin alone. Someone with experience of Venezuela might see what has happened there under Chavez and now Maduro as a lesson for Russia too.

It is clear already that Russia has become a state governed by a diffuse police network subject not to the FSB’s obedient submission to a single and potentially changing ruling political authority but to a purpose shared with Putin and embodied by him in enforcing a generalized will to power over Russian society as a whole. That will to power is bequeathed by Soviet history. The FSB and those who work to its logic will not give it up.

I began my “Mirror of Justice” essay by referring to the experience of the prisoner Ildar Dadin as an example of the iniquity of Russia’s penitential system. The ongoing trial of Yuri Dimitriev on a fabricated charge of pedophilia attested by FSB hirelings as false “expert” witnesses gives a final instance of the state of Russia today. Dimitriev is a hero dedicated to the discovery of northern burial sites of the victims of Stalin’s crimes through the GULag, the identification of those thrown into them, and the comfort where possible of those still alive who care for them. It is encouraging that older and younger Russians have spoken up for Dimitriev. The FSB wants to silence him and the dead who need justice as well.

1A newly current term designed to recall the later Brezhnev years.

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