Congress Will Test Obama's New Tone

The Jack Bauer Exception

Obama's executive order wants it both ways on interrogation.

Most politicians would rather do anything than make a difficult choice, and it seems President Obama hasn't abandoned this Senatorial habit. To wit, yesterday's executive order on interrogation: It imposes broad limits on how aggressively U.S. intelligence officers can question terrorists, but it also keeps open the prospect of legal loopholes that would allow them to press harder in tough cases.

AP

While that kind of double standard may resolve a domestic political problem, it's no way to fight a war. The human-rights lobby and many Democrats are still experiencing hypochondria about the Bush Administration's supposed torture program, and their cheering about this "clean break" means they may be appeased. But the larger risk is that Mr. Obama's restrictions end up disabling an essential tool in the U.S. antiterror arsenal.

Effective immediately, the interrogation of anyone "in the custody or under the effective control of an officer, employee, or other agent of the United States Government" will be conducted within the limits of the Army Field Manual. That includes special-ops and the Central Intelligence Agency, which will now be required to give prisoners gentler treatment than common criminals. The Field Manual's confines don't even allow the average good cop/bad cop routines common in most police precincts.

The Army Field Manual is already the operating guide for military interrogations. The crux of the "torture" debate has been that the Bush Administration permitted more coercive techniques in rare cases -- fewer than 100 detainees, according to CIA Director Michael Hayden. Yesterday Mr. Obama revoked the 2007 Presidential carve-out that protected this CIA flexibility.

The techniques that had been permissible until yesterday remain classified but were widely believed to include such things as stress positions, exposure to cold and sleep deprivation. Senior officials have said they stopped waterboarding in 2003 -- which in any case was only used against three senior al Qaeda operatives and succeeded in breaking these men to divulge information that foiled terror plots.

The unfine print of Mr. Obama's order is that he's allowed room for what might be called a Jack Bauer exception. It creates a committee to study whether the Field Manual techniques are too limiting "when employed by departments or agencies outside the military." The Attorney General, Defense Secretary Robert Gates and Director of National Intelligence-designate Dennis Blair will report back and offer "additional or different guidance for other departments or agencies."

In other words, Mr. Obama's Inaugural line that "we reject as false the choice between our safety and our ideals" was itself misrepresenting the choices his predecessor was forced to make. At least President Bush was candid about the practical realities of preventing mass casualties in the U.S.

The "special task force" may well grant the CIA more legal freedom to squeeze information out of terrorists when it could keep the country safe. An anecdote former Clinton counterterror czar Richard Clarke recounts in his memoir "Against All Enemies" is instructive. In 1993, White House Counsel Lloyd Cutler was horrified by Mr. Clarke's proposal for "extraordinary rendition," where our spooks turn over prisoners to foreign countries like Egypt so they can do the interrogating.

While Mr. Clinton was still chewing his fingernails and seemed to side with Mr. Cutler, Al Gore arrived late to the meeting. "Clinton recapped the arguments on both sides," Mr. Clarke writes. "Gore laughed and said, 'That's a no-brainer. Of course it's a violation of international law, that's why it's a covert action. The guy is a terrorist. Go grab his ass.'"

The wider danger Mr. Obama is inviting by claiming to draw a line while drawing no line at all is the message it sends to Langley. CIA interrogators are already buying legal insurance in the expectation that a Senator like Carl Levin or some prosecutor-on-the-make rings them up for war crimes. The executive order is bound to produce a more risk-averse CIA culture and over time less intelligence-gathering. No one may be willing to be Jack Bauer when Mr. Obama really needs him. This will have consequences for U.S. safety, and for the Obama Administration if there is another 9/11.

Congress Will Test Obama's New Tone

Congress Will Test Obama's New Tone

'Truth commission'? Just call it a witch hunt.

• By KIMBERLEY A. STRASSEL

President Barack Obama has called for an end to "the petty grievances" and "recriminations" of Washington. John Conyers intends to find out if the new president really means it.

AP

John Conyers

Mr. Conyers, the powerful chairman of the House Judiciary Committee, has spent years gearing up for a Bush administration witch hunt. Backed by a mob of congressional liberals, outside groups, and the New York Times, he's counting on this new president to play along with payback. Consider it the first test of Mr. Obama's promise of a new civility.

Mr. Conyers's own notion of civility has included holding no less than 70 hearings into Bush programs. Last year, he and 55 House Democrats demanded the Justice Department appoint a special prosecutor to conduct a criminal investigation into Bush interrogation policies. This year, they expect the incoming administration to finally give them satisfaction.

Mr. Conyers also just introduced legislation to establish a Soviet-style "truth commission" to investigate (for starters) interrogations, wiretapping, Valerie Plame, Iraq intelligence, and the firing of U.S. attorneys. The body would be vested with a big budget and subpoena power. House Speaker Nancy Pelosi, with no hint of a smirk, explained her party had a duty to the "truth."

Over in the Senate, Carl Levin released a creative-writing report in December that purported to show the Bush administration's legal responsibility for "abusive" interrogations. This was designed to pressure the new administration to climb on board with "war crimes" trials of officials like former Justice official John Yoo, who were trying to keep the country safe. Senate Democrats are also busy snooping for Republicans to sign on to the "truth commission," to ward off a GOP filibuster. The name John McCain keeps popping up.

Truth commissions and special prosecutors are just the beginning of the left's demands. Congress is mulling document requests from agencies Mr. Obama now runs. They want the president to pressure Justice attorneys to produce prosecutions out of current investigations, like that of destroyed CIA tapes. They are using Mr. Obama's own words to push the president. America can't reclaim its "moral authority" without a commission, says Mr. Conyers. It's necessary to "move forward," says the ACLU.

Mr. Obama's own idea of moving forward, according to a recent interview, does not include "looking backwards." This was a tone the president first struck on the campaign trail, and as other problems have piled up, he's proven increasingly reluctant to commit political capital to an exercise in retribution.

And no wonder. Aside from the fact it's wrong, it holds no upside.

Mr. Obama has pledged, for starters, to set a new tone. He has publicly worried that Bush investigations would be viewed by Republicans as a "partisan witch hunt." (You think?) Any "truth commission" will undoubtedly pass on a strict party line vote, and with that passage will evaporate any good will.

Then there's the public. If Mr. Bush gets credit for anything, it's keeping the nation safe after 9/11. This helps explains why, despite all the left-wing outrage over Guantanamo, the facility to this day is supported by more Americans than those who oppose it. The sight of triumphant Democrats humiliating little-known Bush aides will not play well. As for a special prosecutor, Mr. Obama might want to ring Lawrence Walsh and ask him how well that Iran-Contra investigation played.

The president probably also knows that there is little left to know, and that any further discussion will come back to him -- and his party. We'll all get to hear again just how many times senior Democrats were briefed on interrogations, and just how many times they did nada. Mr. Obama will get to explain, again, why he voted for the Bush wiretapping program.

The probes could go deep and result in a purge of capable hands from his own national security structure. The CIA, already edgy over Leon Panetta, will view further investigations of their own as an excuse to mutiny. Mr. Obama presented a hawkish tone in his inaugural because he has a lot to prove. He's already sacrificing vital tools (Gitmo, CIA detentions) to placate the left. He's going to need what's left to function.

His problem is that this isn't an issue on which he can easily split the baby. He might be tempted (as might we all) to just keep Mr. Conyers busy with these investigations. He might think he can avoid administration entanglement. But unless checked, Democrats will keep on this road until he is presented with a "truth commission" bill. At which point Mr. Conyers will get his answer about Mr. Obama's civility, in front of the entire nation.

If Mr. Obama is as averse to this charade as he seems to be, he'd be better off making Rahm Emanuel earn his pay. The fellow Chicagoan was brought in to soothe his former congressional colleagues, or, barring that, scream them into submission. The president's best bet is shut this down soon, and quietly -- before he no longer can.

Investors Want Clarity

Investors Want Clarity Before They Take Risks

Obama could calm markets with some swift policy moves and reassuring words.

MICHAEL BOSKIN

With the U.S. (and global) economy contracting at the steepest pace since 1982, we need a clear and coherent policy response rooted in a sound analysis of how we got to this dreadful place. Washington's changing explanations, ad hoc bailouts, massive special-interest spending, and references to the once-in-a-lifetime nature of this event convey a sense that policy makers do not have one.

Martin Kozlowski

The current situation was created by a perfect storm of mutually reinforcing trends and major policy mistakes: loose monetary policy (years of negative real interest rates in a growing economy); socially engineered housing policy; poorly implemented regulation; the rapid growth of leverage, opaque and technically deficient derivatives, and the shadow banking system; lax investor diligence and bank supervision; poor governance and misaligned incentives; and outright fraud. The low interest rates subsidized massive short-term borrowing, led investors to reach for yield, increased demand for allegedly safe securitized mortgages, drove up housing prices, and reinforced the ever-looser lending standards championed by government.

Loans for subprime mortgages, credit cards, autos, commercial real estate, and private-equity financings were made on the projection or hope by banks, businesses and households that strong economic growth, rising housing prices and easy short-term credit would continue forever. Credit-market debt soared relative to GDP. Subprime loans tripled. Home prices rose 45% more than rent or income. Private equity and asset-backed-securities issuance quadrupled.

We now have a giant margin call and painful deleveraging following the mother of all credit cycles. The resulting widespread insolvency in financial institutions was magnified by the over-the-counter derivatives subject to counterparty risk creating uncertainty about who was or might quickly become insolvent. The tardy Treasury and Fed recognition, ad hoc bailouts, and letting Lehman fail added confusion. Private capital fled and even interbank lending froze.

What needs to be done to ease the economic and financial crisis? The first order of business is still to recapitalize the banking system, with equity injections and a Resolution Trust-like, toxic-asset removal program. The first $350 billion was not enough to repair the balance sheets of financial institutions that needed to raise $1 trillion before the height of the financial crisis (although former Treasury Secretary Henry Paulson is correct that it prevented a worse contraction of lending).

More rapid, transparent, efficient triage -- closing insolvent, nonsystemically important institutions and merging marginal ones with healthy ones -- is required. That's what eventually made our Resolution Trust Corporation solution to the savings-and-loan crisis work, along with selling the acquired assets off in large blocks. Exhorting the banks to lend -- when examiners are in their offices telling them not to -- cannot work. Hammer out an approach consistent with FDIC resolution procedures. Include a sensible circuit breaker for the procyclical interaction of bank capital rules and mark-to-market accounting. But beware the law of unintended consequences, such as restrictions on banks causing private capital flight or foreclosure relief creating millions more delinquencies.

While we have legitimate infrastructure needs, public-works spending historically has been too slow, has delayed private and local government spending, and created few jobs for the unemployed. The programs are not labor-intensive and require skills few unemployed have. Public works did not end the Great Depression. Even FDR's treasury secretary, Henry Morgenthau, said in 1939, "We have tried spending money . . . and it does not work . . . we have just as much unemployment . . . and an enormous debt to boot." Nor did a decade of infrastructure spending help the Japanese escape three recessions and a decade of stagnation. It did, however, saddle Japan with a national debt burden four times ours.

President Barack Obama has wisely pressed for legislation free of Congressional earmarks. But what about the local officials with incentives to build if someone else pays for it? Who guarantees the national benefits exceed the costs? Worse yet, once started, it will be difficult to stop this flow of easy money from Washington. A year or two from now we'll have many partly finished projects over-budget and behind-schedule, in need of their own continuing bailout. For these reasons we need to focus on projects of proven national benefit, such as speeding up the re-equipping and refurbishing of the military and expanding and upgrading the electrical grid.

The one-time tax rebates last year were mostly saved, not spent; Mr. Obama's planned rebates will do no better. Permanent reductions, especially in rates, would be much more stimulative. If temporary tax cuts are necessary, at least provide some incentives to reduce layoffs and/or spend now, with temporary payroll-tax or sales-tax rate reductions (via funds to states).

With the federal-funds rate close to zero, the Fed is trying to affect credit and spending via expectations of future monetary policy lowering long rates, and by use of its balance sheet. Fed Chairman Ben Bernanke is right to emphasize the asset side of the Fed's balance sheet, and he should also buy longer-term non-Treasury securities. It is vital that the Fed finish the long-delayed project of a well-capitalized derivatives clearinghouse, in order to reduce the risk of another financial crisis emanating from the derivatives markets.

But there is still more that can be done. With Treasury in control of Fannie and Freddie, it can lower conforming mortgage rates by explicitly stating the implicit guarantee. With many small importers unable to get normal letters of credit, national export-import banks might provide them (unsubsidized). With hundreds of billions of dollars of American companies' earnings overseas due to heavy taxes on repatriation, a low-tax repatriation holiday would add substantial deposits to our banking system.

These policies, those already in the pipeline, and the natural adaptation of the economy have the best chance to reduce the length and severity of the recession. But they still leave an economy and financial system on government lifelines. We need a glide-path back to normalcy.

First, the Fed must forestall future inflation by withdrawing its immense liquidity injections in favor of private extension of credit as soon and predictably as feasible. Its failure to do so earlier in the decade helped create this mess.

Second, the various guarantees and insurance will need to be unwound without causing another panic. As their expiration dates approach, (e.g., April for money-market funds), pressure will be intense to extend them to prevent a mass exodus of capital. While they may have to be extended briefly, predictable ending dates should be enforced, if necessary with declining percentages to zero (insure 95%, then 90%, etc.).

Equally important, the new administration needs to be clearer on its long-run goals and policies. Mr. Obama deserves time to lay out his longer-term agenda, but he must reassure those who would put capital at risk that we are not headed toward a European-style social welfare state. Will he push for financial reform with better intelligence, the centerpiece being that any firm that is or could quickly become too big to fail must be subject to real-time capital adequacy and risk disclosure and monitoring? Or will he just push for more punitive regulation?

Mr. Obama has pledged to go through the budget and shut down ineffective programs, but how much shorter is his list than mine or yours? Is he capable of a "Nixon goes to China" on Social Security, as President Bill Clinton once hoped to do? Or will he push for tax reform and simplification with a broader base and lower rates?

One thing is certain: Investors, workers and employers need to have a sense of where tax, spending and regulatory policy are headed, or they will postpone decisions and further weaken the economy.

Mr. Boskin is a professor of economics at Stanford University and a senior fellow at the Hoover Institution. He chaired the Council of Economic Advisers under President George H.W. Bush.