It’s difficult to imagine what rational processes, if any, are being pursued by the Obama administration in developing its strategy for dealing with the nuclear weapons threat posed by Iran, not to mention the growing list of acts of war that have already been perpetrated against the United States by that regime over the past thirty years.  The delusion that is in evidence here is stunning.  And now we are presented with the outrageous spectacle of Iranian President Ahmadinejad appearing at a United Nations nuclear non-proliferation conference and lecturing us on our responsibilities, while the best we can muster is further appeasement by entering into yet another meaningless treaty with the Russians and expecting that our good faith arms reductions and “strengthening” the Non-Proliferation Treaty will induce the world’s outlaws to follow.  This is naivete bordering on the pathological.  Memo to Obama:  There is no Cold War analogy here; “containment” is not an option with these fanatics.   Bret Stephens is right:  Iran’s nutcase President may be the only truly serious person in the room.

This is more dreamworld.  We won the Cold War by being willing to think the unthinkable.  The Soviets were not stupid and they understood cost/benefit analysis.  They also knew that U. S. nuclear retaliation in response to something dumb on their part was a very real probability under every American President since Truman.  Was this realistic?  No one knows and thankfully, we haven’t been forced to learn, but it kept us safe for over four decades and it’s a good reason to conclude that the utopian notion of “zero nukes” is not healthy for the U. S. and our allies and only benefits outlaw regimes.  The New Start exposes a very disturbing aspect of President Obama’s worldview.  About a year ago, he previewed his strategy when he said “as the only nuclear power to have used a nuclear weapon, the U. S. has a moral responsibility to act.”  Well, I have a different take:  The moral authority to remain the world’s only nuclear superpower trumps any moral responsibility stemming from its only historic use.  This treaty weakens America and its allies, it undermines our flexibility to employ strategic defensive weapons, it plays into the hands of the world’s rogue states, and it should be rejected by the Senate.

Various pundits have been at work over the past year or so analyzing the Tea Party movement, and I don’t pretend to have any better handle on it than others.  In fact, I think the movement defies comprehensive characterization and is certainly not monolithic in any sense, which is why there isn’t and in my view won’t be a personality or identifiable “leader” of the movement, or at least in the sense that the chattering classes would like to see evolve.

Pat Buchanan has his take on it and, in his typical paleo-conservative approach, gives it a tribal designation as direct descendants of those rebels who took outrage from the trail of British tyranny leading up to 1775 and who spawned a new ethnicity–the Americans.  There is some resonance in this characterization and, frankly, some of us can readily identify with it.

Peggy Noonan has a better idea.  In her view the great unrest in the country is what she calls The Big Alienation–”a deep and growing alienation between the people of America and the government of America in Washington”.  And in her estimation this is not the old conservative “leave us alone” attitude, it is much more broadly and fully evolved, and it has a trail reaching back to two wars, Katrina, the financial meltdown, the bailouts, the health care fight, the deficit, the debt, bankrupt states, etc., etc., capped recently by the new Arizona immigration law, about which more below.  In Noonan’s words,  “the American people fear they are losing their place and authority in the daily, unwinding drama of American history……..and alienation is often followed by animosity”.

True enough and well said.  And I would add some thoughts from the late Richard John Neuhaus who, in his seminal work of 25 years ago, The Naked Public Square, was even then using the alienation theme in observing that the premise of the populist movement is that “they”, meaning the government and whoever is in charge of the culture, are not simply alien but are contemptuous of “us”, the little people, the real people–”Millions of Americans have for a long time felt put upon.  Theirs is a powerful resentment against values that they believe have been imposed upon them, and an equally powerful sense of outrage at the suggestion that they are the ones who pose the threat of undemocratically imposing values on others.”   Alienation indeed, and whatever your take on the phenomenon, it didn’t just arrive and it isn’t going away soon.

Apropos Peggy Noonan’s “The Big Alienation”, the recently adopted immigration law in Arizona is a monument to the dysfunction of Washington and a perfect illustration of the “systematic misunderstanding” that exists between our government and the people it purportedly serves.  Remember the definition of systematic misunderstanding?  This is a condition wherein the frame of reference of the two parties in a discussion is so fundamentally different that the gap cannot be closed by providing more information.  Well, we have plenty of information, but a huge void in political courage outside of Arizona.  Not only is it “a law Arizona can live with”, as George Will has written, it is made necessary by the demands of a sovereign people to fill the void left by the abdication of their government.  Further, it does nothing more than codify in state law the enforcement mechanism for an almost 60-year old federal statute providing that every alien shall carry registration information at all times.  What else is new?  I am asked for my driver’s license every day.  I realize that radical libertarians and the open border crowd want no immigration laws or border control of any kind, and the U. S. Chamber of Commerce wants the continuing supply of labor, but our national sovereignty demands that we control who is in our country.  No one who is not a citizen has a “right” to be here and our citizens should have the right to determine who can enter.  I have written extensively about this issue and I won’t repeat the points here.  They are all available in the archives; just search “immigration”.  Suffice to say, there are reasonable solutions to all aspects of this problem, but they start with border control, and nothing should be done until our southern border is secure.

As the Dodd financial regulation bill nears a vote in the U. S. Senate, it is difficult to fully understand its mission.  Supposedly, we are responding to the “big culprit” in the recent meltdown, which has been identified as the deregulation of the financial markets over the past 30 years or so, in spite of the fact that it was the U. S. mortgage market,  the most heavily regulated element of the system, that created most of the problems.  I don’t see anything in this bill that will address the moral hazard of “too big to fail”;  to the contrary, if the $50 billion bailout fund remains, this hazard will be institutionalized.  There is nothing in the bill that touches Freddie Mac and Fannie Mae, the biggest boondoggles in the entire meltdown scene, which continue to receive massive taxpayer subsidies of negative cash flow, continue to represent approximately one-half of the nation’s mortgage market, continue as a huge dispenser of political patronage, and continue as the largest purveyor of “affordable housing” at any cost, the mission that got us where we are today.

I do see in the bill aspects of another version of the “search for cosmic justice” in the form of seeking social utility for derivatives, the so-called “side bets” that many believe serve no useful function.  In spite of some abuses, it is a mystery to me how reasonable observers see no useful function in the market allocation of risk to those who choose to assume it at their own peril and in particular when this mechanism, properly understood, is an integral part of the ability of well-informed investors in the market to correct pricing imbalances and performs a valuable service in recognizing and sending signals on overpriced assets.  If we hadn’t had a John Paulson, we would have needed one, and it would have been even better if someone had shorted Fannie and Freddie before they got completely out of control.

There remains the question of failing firms and, having had considerable first hand experience here, I favor the resolution process offered by the FDIC for failing banks, including the approach that avoids complete liquidation but wipes out shareholder equity and dismisses management, without political judgments based on which firms constitute “systemic risk” and are too big to fail.

Six months before the free fall of September 2008, I used the following quote from Allan H. Metzler of Carnegie Mellon University:  “If the government underwrites all the risks, call it socialism.  If it underwrites only the failures, call it foolishness.”  These sentiments are clearly applicable today and we are dangerously close to both outcomes with the legislation in its current form.

Well, that remains to be seen, but maybe.  Just maybe the European Union has realized that this crisis has brought them very close to failure and that it ain’t over yet.  Maybe they are sufficiently shocked into strictly enforcing the sanctions that are the conditions for the Greek bailout, which look pretty comprehensive.  And maybe the difficult choices that are being forced on the European polity will begin to reverse the 50-year binge of profligacy.  If it ends up being just a bailout of the entitlement state, then the downward spiral will not only continue, but will accelerate, and the EU can forget about further unity and start to seriously consider its opposite.  And don’t forget that Greece is not the only severe financial problem on Europe’s hands, just the most extreme and immediate, not to mention the well known demographics and the ravages of multiculturalism that have been headed in the wrong direction for over a generation.

And let’s not miss the lessons here for the U. S.  In looking at the conditions imposed on the Greeks for the bailout, the following interesting ones emerge: Cut budget deficit by 11% of GDP by 2013 and to no more than 3% by 2014; cut public sector pay and pensions; raise average retirement age; increase value-added taxes; deregulate the labor market; privatize some state industries; cut public investment; crack down on tax evasion.  Except for the increased value-added taxes, it occurs to me that this is a pretty good list.  We should try some of it here.