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Shields and Brooks Mull Economic Expectations, Afghan Policy

May 8, 2009 at 6:40 PM EDT
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Columnists Mark Shields and David Brooks examine the outcome of the banking stress test results, U.S. policy toward Afghanistan and Pakistan and remember the life of Jack Kemp.
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JUDY WOODRUFF: Finally tonight, the analysis of Shields and Brooks, and to Jeffrey Brown.

JEFFREY BROWN: And that’s, of course, syndicated columnist Mark Shields and New York Times columnist David Brooks.

Hello, gentlemen.

MARK SHIELDS, Syndicated Columnist: Jeff.

JEFFREY BROWN: Fed Chairman Ben Bernanke on Tuesday says things — there are signs that things are better, but caution. Yesterday’s stress tests, everybody passes, but caution. Today, jobs, better, caution. How’s the administration, Mark, doing at managing expectations?

MARK SHIELDS: I think reasonably well. I mean, they’re walking a tightrope between maintaining their own credibility and at the same time not dousing what limited optimism has emerged from these events.

I mean, Chairman Bernanke was probably unexpected blessing, in the sense that he was more optimistic, more bullish about the economy’s improving, even weakly, by the end of the year.

And the stress test, I think, was something else. I’d be happy to talk about that.

But on the number of jobs we’ve lost this year, we’ve lost 2.6 million jobs this year. I mean, so you say that 539,000 is less than — considerably less, 200,000 less than were lost in January, but it’s — you know, it’s tough to say it’s good news. There’s certainly no reason to click your heels. More than 539,000 Americans who had jobs to go to the first of the month don’t have a job to go to Monday morning.

JEFFREY BROWN: So it’s a fine line, David?

DAVID BROOKS, Columnist, New York Times: Yes, it’s tough to rally the country holding up the banner of limited optimism. I mean, that’s just a tough act. But I think it accurately reflects where the economy is.

But I do think there’s been a shift in their tone and certainly within their internal deliberation. The period of just freefall is over. The period of crisis is over, I think.

And now they are beginning to think about the recovery, the long, slow, very gradual recovery. And so they’re beginning to — to think about the policies they’re going to enact when the economy is sort of slowly crawling up, but not at a fast enough pace. So I think internally they’ve made a mental transition.

JEFFREY BROWN: They’ve made it and you feel like the signs we’re hearing are really telling us that?

DAVID BROOKS: Well, this could be a false dawn, of course, in which case we could fall back. But I think they’re beginning to think, well, suppose the economy just peters along for two years. What do we do?

And I think Geithner is beginning to think about that, how to pump money into small banks and things like that so they’ll begin lending, even if the big New York banks don’t begin lending. And so that’s the sort of policy they’re beginning to think about as a way to strengthen a very minor recovery.

Different views on stress tests

David Brooks
New York Times
I think Geithner comes out a big winner. He made a series of pretty tough decisions early on when he was ridiculed.

JEFFREY BROWN: Now, you brought up the stress test. Did the administration pass the stress-test test?

MARK SHIELDS: Well, I mean, if I'd had the stress test when I was an undergraduate, I would have been valedictorian of my class. I mean, it was a little...

JEFFREY BROWN: Wait a minute. I take it you were not?

MARK SHIELDS: I was not. I was not. I was not the anchorman, but I was certainly in his neighborhood.

But it was like a final exam, compared to a final exam in school, where the teacher has as much writing on the results and the success of the exam as does the student. And say, "You want a little more time? Have more time. You can take it when you're stronger. We'll throw out your weakest answers."

Citibank comes in, and they say, "You really have to come up with $35 billion, you know, in order to meet any emergency." "Well, let's negotiate it down to $5.5 billion."

And that's in the administration's interest, because the TARP, the troubled assets program, is down to $110 billion. They don't want to go back to the Congress and ask for more money.

So they kind of announced beforehand that everybody was going to pass, and they set the bar low enough. They're graded on the curve. And I think they managed it a lot better than they had earlier, when Secretary Geithner obviously came out, announced immediately it would have a big plan, didn't, and the markets were shaken and confidence in him was shaken.

They showed a lot better sense of choreography this time. But, you know, whether the tests were really those severe, you know, scrutiny and rigid standards that we thought they were going to be, I'm not sure.

JEFFREY BROWN: Well, that was the criticism, and you heard Judy ask Tim Geithner about it.

DAVID BROOKS: Right. I think I'd give them a little more credit than Mark does. I mean, as Geithner says, the Fed and not the Treasury designed the tests. They had all these people they brought in to administer the tests.

And, third, I guess I'd say, they have no incentive to sugarcoat this thing and then have the banks go insolvent in three weeks. That would be the worst of all possible worlds.

I've taken a look at what's happened over this period, and I think Geithner comes out a big winner. He made a series of pretty tough decisions early on when he was ridiculed, and those decisions were: The banks were not fundamentally insolvent, that there was money, private money that wanted to come in, if they could achieve some degree of stability, and the third -- and I think most prudentially -- that we shouldn't go to nationalization first.

If we have to get there, fine, but we should try this intermediate phase of public-private partnerships. And I think that was the prudent thing to do, and I think the events of the past couple months have basically vindicated so far the Geithner approach.

Nationalizing the banks

Mark Shields
Syndicated Columnist
This country and the world economy was brought to its knees by the misfeasance and bad actions of banks in this country and around the world and the light hand that's been applied. I mean, I'm still waiting for the regulation to come.

JEFFREY BROWN: You know, yesterday I was doing a discussion on this subject here, and one of the people I was talking to, economist Dean Baker, who is a critic of much along the lines of what you were saying, he said, "You don't want to use up your credibility." And I said, "You mean the credibility of the Obama administration?" He said, "Exactly."

And it sort of hit me, is this -- have we passed into now it is the credibility of the Obama administration on the line through these tests?

MARK SHIELDS: I think it is, Jeff. And I'd just say, to complete the role reversal here today, I mean, look at the treatment that this Treasury Department has given the banks as opposed to the treatment this administration has given the auto companies.

This country and the world economy was brought to its knees by the misfeasance and bad actions of banks in this country and around the world and the light hand that's been applied. I mean, I'm still waiting for the regulation to come. I'm still waiting.

G.M. basically had its chief fired by this government. We forced one of the companies into bankruptcy. I haven't seen any sort of severe measures passed out to these banks that I think are really culpable and far more so.

The auto companies were badly run, but they sure as hell didn't bring the economy to its knees.

DAVID BROOKS: I would say, Mark, you're getting at the core issue, which I think divides a lot of economists who think they're too soft and they should go in and nationalize them from a lot of economists who don't.

And the economists who believe in the nationalization -- I'm thinking especially of a guy named Simon Johnson, who's at the Peterson Institute...

JEFFREY BROWN: Who's with us often.

DAVID BROOKS: ... who's often on the program.

MARK SHIELDS: Yes.

DAVID BROOKS: And he believes there's this oligarchy on Wall Street, and there's an oligarchy, and therefore the government really has to fundamentally change Wall Street forever, and this was the occasion to do that. And I believe my colleague, Paul Krugman, more or less believes that, as well.

A lot of other people, other economists believe they made terrible decisions, they made stupid decisions, they didn't understand what they were getting into. The CEOs were managing banks that were too big to manage. But it was not the problem of a condensed oligarchy.

And, therefore, you don't fundamentally need to change Wall Street. You do need to regulate. You do need to do a lot of things. But you don't need the massive intervention that a lot of others want.

Afghanistan, Pakistan policy

David Brooks
New York Times
The question for us and for our troops there [in Afghanistan], does it have concrete effect on the ground? And I think the answer still is extremely limited.

JEFFREY BROWN: All right, let me move abroad, Afghanistan, Pakistan, the other big story this week. The two presidents come, Karzai and Zardari, the embodiment, I guess, in that meeting of this motion of treating the region as one place, two states, one front, in a sense. How's that working?

DAVID BROOKS: It was a good week, but not a great week. I mean, you have to remember -- I was in Afghanistan a couple weeks ago, and the Afghans just hate the Paks. They just think, "We have this nice, peaceful country, but those Pakistanis come over here and they ruin our country."

And so there's just a lot of hostility. So when you take that as the context, having these two leaders here together at the same hotel, doing all these breakout meetings, apparently getting along very well. You bring the agriculture secretaries meeting for the first time, the interior secretaries, that's all kind of impressive.

The question for us and for our troops there is, does it have concrete effect on the ground? And I think the answer still is extremely limited.

If we were sending 10,000 Marines into southern Afghanistan, if we're chasing Taliban across the border into Pakistan, we basically stop. Will there be Pakistani troops there to help us? Probably not. And so that on-the-ground stuff really hasn't happened yet.

JEFFREY BROWN: Mark?

MARK SHIELDS: I don't think there's any question that we don't hear any more talk about George Bush being asleep at the switch as far as Afghanistan. This is now the Obama -- President Obama's war.

I mean, they've changed the policy. They've changed the number of troops. They've changed the level of commitment. For the first time, aid to Afghanistan and Pakistan is greater than that to Iraq. It's a whole new realism, but without much optimism that you hear.

I thought that this week was interesting. We didn't want to appear to be too close to them because they're unpopular and they're unsatisfactory in their leadership. They can't be seen as too close to us because the charge at home is that they're puppets, but they've got to keep the aid spigot on.

So it was a fascinating dance that was going on here. I'm not sure what it accomplished. I hope it was good. But I'm trying to be realistic.

JEFFREY BROWN: And when it comes to Pakistan, the very viability of the state was under discussion today...

MARK SHIELDS: That's exactly right.

JEFFREY BROWN: ... and you heard Margaret in that tough interview.

MARK SHIELDS: With that tough lady, Margaret Warner, that's right.

JEFFREY BROWN: Those kinds of questions about the problems in Pakistan, how seriously are they being taken here now?

DAVID BROOKS: Oh, yes, they had a very good -- apparently a very good lunch with about 28 senators, the two leaders, and they were asked the tough questions.

The two tough ones for Afghanistan is corruption, even including the presidential brother. And for Pakistan, it's, does the intelligence service support the government or does it support the Taliban?

And those are tough questions that are still hanging out there on which they're getting challenged severely while they're here.

MARK SHIELDS: There's a lot of skepticism on the Hill after those meetings.

Remembering Jack Kemp

Mark Shields
Syndicated Columnist
The thing about Jack Kemp was, in addition to his convictions about tax cutting, he put a smiling face on conservatism. Before Jack Kemp came along, conservatives in the country looked dyspeptic and grumpy like their shorts were too tight.

JEFFREY BROWN: The last couple of minutes I want to talk about Jack Kemp, who died Saturday. Quite a career: star quarterback, a congressman, cabinet secretary, tax crusader. Mark, you knew him well.

MARK SHIELDS: I admired Jack Kemp enormously. Jack Kemp, this great slogan that Republicans toss about, the party of Lincoln, the party of Jefferson-Jackson, the Democrats do. He believed the party of Lincoln. He really did believe in broadening the base.

He was committed to civil rights. He said, "I couldn't be there with Dr. King. I couldn't be there when John Lewis was marching. I want to do it now."

You mentioned he was a football player. That was a seminal experience for Jack Kemp. It was said of Jack Kemp, and he even said it about himself, that, "I've showered with more African-Americans than the other Republican candidates have shaken hands with." And it was true. He always was trying to broaden the party. On immigration...

JEFFREY BROWN: That's in the looker room as a football player.

MARK SHIELDS: That's right. That's right. Exactly. Exactly.

JEFFREY BROWN: We probably should just clarify that.

MARK SHIELDS: Yes, no, no, but as a -- that's right. But he was -- you know, on immigration.

The thing about Jack Kemp was, in addition to his convictions about tax cutting, he put a smiling face on conservatism. Before Jack Kemp came along, conservatives in the country looked dyspeptic and grumpy like their shorts were too tight. They were always predicting gloom.

And he gave Ronald Reagan his domestic platform. Ronald Reagan was an incurable optimist, but he didn't have a domestic platform going into 1980, and Jack Kemp's -- Kemp-Roth, you know, across-the-board tax cuts, widespread prosperity, I mean, that was Jack Kemp. And he was a remarkable man.

He was Hubert Humphrey of the Republican side. He had ideas. He had enthusiasm. He was upbeat. And he had no enemies.

JEFFREY BROWN: And his death comes, of course amidst all the backdrop of talk about whither the Republican Party today.

DAVID BROOKS: Right. And on top of what Mark said, he was an entrepreneur, an intellectual entrepreneur. Kemp-Roth was not supported by the leadership of the party. It was something he came up with from the back bench, and he spread ideas that were growth-, opportunity-, and hope-oriented.

Now, does the party have that sort of entrepreneurship from the back benches? No, it doesn't have that today.

MARK SHIELDS: What about the front benches?

DAVID BROOKS: Or from the front benches. You know, Eric Cantor, a very promising Republican House member, tried to set out on a listening tour to find out what people thought of the party this week. He got hit from some Republicans outside Congress, but a little inside, saying, "Why are we listening? We know what we believe."

So they're against listening now? And so -- but Kemp wanted to listen to everybody and to talk to and preach to and convert everybody.

JEFFREY BROWN: All right. David and Mark, nice to talk to you.

MARK SHIELDS: Thank you, Jeff.

DAVID BROOKS: Thank you.