Actually, that history is never explicitly laid out in Margin Call: this disaster film plays with the formula by stopping short of the disaster and sending us out of the theater into a world that hasn’t yet returned to normal. At one point, one of the bankers looks out from a company car and wonders aloud if any of the “normal people” knows what’s about to happen… and we don’t really need that question answered for us. No, we didn’t have any idea, and to a certain extent we still don’t.

In that sense, Margin Call is a deeply ironic film: Director JC Chardon is (more or less) telling a true story that the audience-members were never privy to while it was happening, but the emotional payoff comes from inviting us to be much more concerned about the fate of the economy than any of these characters seem to be.

That emotional sleight of hand is one of the film’s greatest strengths, problematic though it is. In the age of Occupy, it’s very difficult to view these young and careless bankers positively. Some of them, like division head Jared Cohen (Simon Baker looking even more snake-like and unsympathetic than usual), are the furthest thing possible from heroes. However, they are also not quite villains as evildoers should lie outside of our sympathy, where we see their choice and can condemn them for it. There is never any doubt about the harm that these characters have caused, but there is a more complex form of moral ambiguity when we cannot isolate the bad guy’s choices or avoid feeling pity for him. That ambiguity is central to Margin Call.

The audience is constantly forced to ask if these bankers have real agency: these masters of the universe are scrambling to control forces that they barely understand, let alone have power over. In one of the film’s most striking moments, CEO Richard Fuld stand-in (Jeremy Irons) instructs Sullivan to explain the situation to him “as you would to a three-year-old, or a golden retriever.” The subtext is not lost on the audience: these people are playing a deadly serious game, and they’ve just realized how little they understand it.

How are we to react to this? This failure to realize their own limits should be the place where the audience pins our moral outrage on Wall Street: they played with fire and we got burned. But somehow that moral outrage is arrested when we watch these individual bankers realize their mistake: we’ve zoomed in on Icharus’ face when he realizes that the wings are melting, and our pity blunts our anger.

If the outside world has a representative in the cold boardrooms where the fate of American finance is being decided, it’s Peter Sullivan, the young banker who sounded the alarm call in the first place. Picking up geek-chic where Star Trek left off, Zachary Quinto plays Sullivan with just enough uncertainty to arouse our sympathies. He is not quite one of “them.” He’s a brilliant young physicist who went into banking because those equations pay better. He doesn’t reject the value system that prizes the firm’s profits above all else, but he doesn’t seem to have bought into it either. We make sense of the crash through his confusion.

Of course, Margin Call is not a primer on the 2008 financial crisis, and it is a better film for having not taken an explicit political stance. However, by using this historical event as a means to explore these larger themes of agency and blame, the film does provoke some uncomfortable questions about the crash. How much blame can we pin on individual people? Can we trust the banks to use their economic power wisely? Is it fair to say that the bankers caused massive harm to others because of greed and recklessness, but stop short of calling them bad people? There are no answers in this film, but it deserves credit for asking those questions.

Photo Courtesy of Lionsgate.

Last October, a Bloomberg poll found that 43 percent of Americans felt that TARP had weakened the economy, while only 24 percent felt it had strengthened the economy. Despite being conceived by a Republican administration and continued by a Democratic one, TARP is likely one of the most hated programs ever implemented. Nonetheless, TARP undoubtedly averted greater economic catastrophe and ultimately cost far less than expected.

But voters’ instincts are not wrong. For all its achievements, TARP cannot be called a great success; it failed to stem the foreclosure crisis, increase lending, hold bankers accountable, and stop rocketing unemployment. It also sparked a still simmering distrust of policymakers and government.

The Road to TARP

The US housing bubble  collapsed at the height of the financial crisis in 2008, devaluing mortgage-related securities and the banks that held them. The stock market plunged in the wake of major bank liquidity crises and insolvency. Ad-hoc government-brokered sales of Merrill Lynch and Bear Sterns only created more uncertainty.

In September 2008, over an extraordinary 19 days, the US financial system moved toward catastrophe. The Federal Deposit Insurance Corporation (FDIC) moved Washington Mutual through the largest bank failure in US history, Fannie Mae and Freddie Mac were placed in conservatorship, Lehman Brothers suddenly filed for bankruptcy, the Federal Reserve began an $85 billion rescue of the American International Group (AIG), and the Treasury guaranteed $3.7 trillion worth of money market funds. Chairman of the Federal Reserve Ben Bernanke later claimed that the growing crisis was “a cataclysm that could have rivaled or surpassed the Great Depression.”

Convinced that a more comprehensive plan was needed to reassure markets, Bernanke and Secretary of the Treasury Henry Paulson conceived of TARP, an unprecedented $700 billion authorization to allow the Treasury to purchase toxic assets from banks. Congress recoiled at the price amidst growing public outrage, rejecting the first iteration of the bill. But as the markets convulsed, Congress passed a marginally amended version of the bill.

Given the delay, Secretary Paulson decided that purchasing toxic assets was no longer practical and instead elected to spend the first $350 billion by directly injecting capital into banks. The nine largest banks, representing 75 percent of all American banking assets, were given $25 billion each in exchange for stock. This initial round of funding bolstered the banks’ capital reserves, but without any preconditions attached, failed to increase lending.

As President Bush’s term drew to a close, some $17 billion in TARP funds were loaned to General Motors (GM) and Chrysler to avoid bankruptcy. Together, in January 2009, President Bush and President-elect Obama requested that Congress release the remaining $350 billion in TARP as further capital infusions seemed likely. By the end of the month, TARP had disbursed $301 billion in total.

Shortly after, the new Secretary of the Treasury Tim Geithner ordered the TARP banks to undergo stress tests to gauge their financial resilience. Expecting poor results, he further laid out a new rescue plan that would have created a private- public bank to purchase and hold up to $500 billion in toxic assets. This plan, however, was soon abandoned after banks refused to sell their assets at large losses in spite of generous government financing.

Simultaneously, Chrysler and GM, beginning to exhaust their existing federal loans, returned to seek more funds. The President’s auto task force, after guiding both GM and Chrysler through bankruptcy and significant restructuring, granted the automakers $25 billion in TARP loans.

In June, under heavy lobbying and with better-than-expected stress tests, the administration began to allow banks to repay their TARP funds. To date, the Treasury has recouped $313 billion of the $412 billion it dispersed. Both GM and Chrysler paid back their TARP loans several years ahead of schedule. While the bank bailout itself was profitable, the administration estimates that the total cost of TARP, including assistance to insurers like AIG, will be $48 billion.

What Went Right

In the broadest sense, TARP was a success. It halted the collapse of the US banking system and may have prevented a second Great Depression. The Congressional Oversight Panel wrote in its final report that TARP “provided critical support to markets at a moment of profound uncertainty.”

In September 2008, as the market was making three digit swings, TARP not only provided a mechanism for resolving the core of the crisis, but also served as a strong statement that the government would take extraordinary measures to ensure the survival of the financial system. Mark Zandi, chief economist of Moody’s, wrote that “the capital purchase program was ultimately the one key thing that was necessary for stabilizing the financial system and the economy.”

TARP also prevented an even deeper recession. A study done by Zandi and Alan Blinder of Princeton determined that without TARP and the Federal Reserve’s monetary easing, GDP growth would have been 4.7 percentage points lower and unemployment would have been 4.0 percentage points higher in 2010.

And, from a cost standpoint, TARP was a greater accomplishment than anyone had possibly imagined. At its onset, estimates ranged in the hundreds of billions of dollars. The Congressional Budget Office initially determined that the program would cost $356 billion.

This significantly reduced cost stemmed not only from stronger-than-expected bank performance, but also from effective Treasury management. The Congressional Oversight Panel reported that the “Treasury deserves credit for lowering costs through its diligent management of TARP assets and, in particular, its careful restructuring of AIG, Chrysler, and GM.”

TARP, then, also allowed for the orderly bankruptcy of Chrysler and GM. Without the TARP funds, the carmakers would have exhausted their funds and been liquidated to pay creditors. Such a shutdown would have been devastating, wiping out over one million jobs in the motor vehicle industry and likely taking Ford down as well. Today, Chrysler and GM have restructured, paid back their funds ahead of schedule, and appear to be on the road to recovery.

What Went Wrong

In the final analysis, TARP must be faulted for accomplishing less than originally anticipated and for the significant financial and cultural distortions it created. TARP may have prevented the worst of the financial crisis, but it ultimately failed in its other stated goals—preventing the foreclosure crisis and increasing lending.

In fact, part of TARP’s low cost can be attributed to the failure of the Treasury’s foreclosure prevention programs. Expected to cost $50 billion, the TARP-created Home Affordable Modification Program (HAMP) was supposed to restructure mortgages and prevent 3 to 4 million foreclosures. Instead, this goal has been lowered over time, and today only 1.5 million trial modifications and 500,000 permanent modifications have been made. Since TARP’s authorization, 7.1 million homeowners have received foreclosure notices.

HAMP attempted to save mortgages through temporary reductions in interest rates and monthly payments. But even with these lower payments, many homeowners were still underwater at high risk of default. The Congressional Oversight Panel recognized that HAMP was flawed: “moderate, long term payment relief did not provide the deep, short term relief necessary to keep unemployed borrowers temporarily without income in their homes.”

Many of TARP’s greatest costs, however, cannot be strictly measured in dollar amounts. Though TARP rescued large banks and the motor vehicle industry, Americans perceived it as a massive bailout of undeserving bankers, underscoring the nexus between Wall Street and Washington and undermining public confidence in policymakers and regulators.

TARP may have done too well in rescuing banks and too poorly in addressing the broader economy, allowing bankers to rebound and pay bonuses even as unemployment remains high. Felix Salmon of Reuters summed up the sentiment: “The little guy was hurt hard; the fat-cat bankers are smiling, unremorseful, and back to their old ways already.”

This attitude is undoubtedly simplistic, but TARP’s rushed execution and failure to provide accountability is seriously twisted policymaking. Anil Kayshyap, Professor of Finance at the Chicago Booth School of Business, said, “The public’s frustration has led to a general rise in populist political rhetoric and has polluted the policy discussion in many other areas.” The significant backlash has frustrated further government efforts to stabilize the economy and prevent a double-dip recession.

Closing the Book on TARP

TARP was a hastily executed effort of unprecedented size to rescue the US financial system from collapse. In that regard, TARP succeeded; without the immense government intervention, the recession would have been deeper, longer-lasting, and far more serious.

But as TARP comes to a close, it is clear that the program failed in several serious ways. Its foreclosure efforts were poorly designed and will not provide the mortgage relief needed. Toxic assets were not ultimately purchased, and banks did not use TARP funds to restart lending. The program’s greatest claim, then, is also its downfall. TARP saved the economy by saving the banks. And while its creators and promoters had hoped TARP would do far more, it failed to deliver. The American people, facing a 9.1 percent unemployment rate (as of September 2011), have a right to despise it.

Design by Andrew Seo

When Google stopped complying with China’s censorship laws, users could still access the Hong Kong site, where they could see unfiltered results, including ones about Tiananmen Square and Tibet. This was a victory for the former colony, a reminder of why Hong Kong still has much to offer even as its neighbors begin to catch up in economic growth. While China’s economy is still hampered by concerns about the rule of law, Hong Kong’s solid legal system and history of productivity sustain an environment that is ideal for attracting investment. But economic progress has not translated directly into political freedom, as many might have expected. Indeed, Hong Kong’s uniquely vibrant economy may be leading to excessive patience, or complacence, when it comes to political progress.

Freedom and Prosperity

Hong Kong has flourished as the economic crown jewel of the developing Chinese nation, with considerably higher income levels and standards of living than other Chinese cities. In 2007, Hong Kong’s GDP per capita reached $42,000, compared to the mainland’s $5,400. Still, China has enjoyed unprecedented growth rates since opening its markets, and recently some Chinese cities have been catching up to Hong Kong.

Shanghai, for instance, just surpassed Hong Kong’s economy in GDP. But, rather than creating a threat to Hong Kong’s dominance, this reflects little to no change in the economic landscape. As Harvard political scientist Roderick MacFarquhar explained, “The population of Shanghai—14 million—is almost exactly double that of Hong Kong. It was inevitable that it would overtake Hong Kong.”

Moreover, Hong Kong maintains a major advantage over Chinese cities: a reputation for quality control and safety that stems from its long history of British oversight and regulation. “China’s rich come down to HK to buy property because the property rights and laws are so clear. Chinese parents come to HK to buy milk powder because they know it’s not tainted here,” said Harvard senior and Hong Kong resident Alexandra Chen.

Furthermore, investors are confident that their assets will be secure in Hong Kong, given its British common law system and strong commitment to property rights. With these unique advantages, Hong Kong is seen as the default choice for hosting financial transactions. Until the mainland establishes an equally strong legal regime, it will forfeit to Hong Kong an advantage that will become increasingly significant as the Chinese economy becomes more complex and prone to legal disputes.

Long March to Democracy

Since decolonization in 1997, Hong Kong has been ruled as a “special administrative region” of China under a “one country, two systems” policy, which has granted Hong Kong considerable economic freedom and some political autonomy. Hong Kong’s political system retains its British traditions of semi-direct democracy, with an article in its constitution, the Basic Law, that promises universal suffrage at some point in the future.

But, as of now, that democratic promise is only partially realized. Half of the 60 seats in Hong Kong’s legislature are voted on by the population, and half are chosen by a smaller electorate of corporate bodies and special interest groups. And the election of Hong Kong’s chief executive is even less democratic—he or she is chosen by a 400-member election committee and then appointed by the Central People’s Government in Beijing.

Pressures to Democratize?

Although the central Chinese government promised universal suffrage in Hong Kong by 2007 under the original Basic Law, Beijing has not followed through. It has postponed direct elections twice, first to 2012, and then to 2017. Beijing also continues to condemn pro-democracy activists in Hong Kong.

Hong Kong residents have made some noise over this apparent failure to live up to the Basic Law. In 2005, some 80,000 citizens protested for direct elections outside the central government’s office. In February, hundreds of protestors flooded the streets to call for the release of pro-democracy activist Liu Xiaobo, convicted by the People’s Republic of China for “subverting the state.”

And in another dramatic push for democracy, legislators from each of Hong Kong’s five electoral districts resigned suddenly this past January, forcing special by-elections—a sort of referendum on universal suffrage—throughout Hong Kong by the end of the year. The protests on Liu’s behalf and the resignation of the five legislators earlier this year represent growing demands for Beijing to stop dragging its feet. But these rumblings of discontent hide a surprisingly widespread conservatism and cautiousness among the general population of Hong Kong.

Popular Contentment

Despite the agitation earlier this year, Hong Kong as a whole has been noticeably muted in calling for democracy. The referendum triggered by the five legislators will, in fact, turn out to be less of a statement than the pro-democracy parties had hoped: the moderate parties and the leading pro-Beijing party have refused to take part, rendering the election meaningless, as the pro-democracy candidates will retake their seats uncontested. Chief Executive Donald Tsang seems poised to strike a deal between all of the parties, not satisfying the pro-democracy legislators’ calls for immediate democracy.

Furthermore, the public seems to favor a gradual, cooperative approach to the implementation of reform. As Peng Qinghua, head of China’s liaison office in Hong Kong, said publicly, “This [referendum] is a total violation of mainstream public opinion that wants stability, harmony, and development.” Almost half of the elected officials in Hong Kong are from pro-Beijing parties, not the more staunchly pro-democracy parties. This representation reflects a fundamental contentment among the people of Hong Kong with their semi-democracy.  “As long as the government is relatively efficient and clean—which it is—most people are only concerned about their pocketbooks,” said Chen.

The gradualist sentiments expressed by government officials and by the public seem to indicate that popular attitudes towards democratization are far less urgent than recent events might suggest. Rather, calls for immediate democracy emanate from an activist political minority; the general attitude is more cooperative and even patient.

Growth Versus Rights

Although recent, highly publicized political events seemed to indicate full-throated support for democracy, many Hong Kong residents pay more attention to their economic well-being than to their political rights. Legal rights in the city provide a level of sufficiency for daily life, and citizens feel secure with their property and livelihoods. Combined with the promise of continually rising incomes and standards of living, the political status quo stalls any real push for free elections.

Given its legal structure and its tradition of freedom of expression, Hong Kong will continue to attract the businesses and investments that propel its economy. As long as the risk differential between the Chinese and Hong Kong economies exists, Hong Kong will flourish and its population, complacent with its relative wealth, will favor a gradualist approach toward democratization, waiting on promises of political freedom made years ago.

Tiffany Wen ’11 is a Staff Writer.

Photo Credits: Flickr (Trodel, Ed meister)

General executive partners of long-term investment partnerships, including investments in real estate, venture capital, private equity, and other investments, are paid a management fee based on the assets they are managing, plus a share of the capital gains (typically 20 percent) earned on the investment. The management fee is taxed as traditional income, but the the limited (passive) partners pay the general partner a share of the profit—called “carried interest”—as an incentive for the general partner to maximize investment performance, which is taxed at the 15 percent capital gains rate, much lower than the individual income tax rate.

This rate is already scheduled to increase to 20 percent in 2011, but the American Jobs and Closing Tax Loopholes Act, which passed the House yesterday by a vote of 215 to 204, would tax three-fourths of carried interest profits at the regular individual income rate, up to 38.5 percent.

This proposal, as the Wall Street Journal’s John Rutledge points out, is the latest consequence of a Washington mentality that focuses on who is taxed rather than what activities are taxed. The rate hike would of course reduce income for investors; this includes both general and limited partners, since the latter would have to pay a greater share of their after-tax returns to compensate the general partners. But even if one accepts the political and moral legitimacy of a government playing the role of Robin Hood, robbing from the rich to give to the poor, the policy would have adverse consequences for the economy as a whole, including poor and middle-class citizens.

Rutledge explains that the law would “discourage capital investment, increase the cost of money to start and grow a business, and depress real estate and stock prices.” Reduced after-tax returns on investment diminishes investors’ willingness to take risks, which is especially true in this case since long-term investments do not begin generating profits for years after the initial investment. This makes it more difficult for small businesses to acquire the capital needed to establish themselves and expand, which in turn means fewer jobs. The diminished value of after-tax returns on assets would drag down asset prices. As Rutledge notes, “The direction of these changes is not in question.” The only question pertains to their magnitude.

Given that partnerships are America’s “primary vehicle for funding long-term investments,” the decline in such investment is likely to be substantial. Rutledge cites the most recent Treasury Department data, which indicate that there were more than three million partnerships, representing 18.5 million investor partners, in 2007. Altogether, the 2.3 million partnerships required to report their asset balances to the IRS financed $20.5 trillion in investments that year.

There is reason to believe, moreover, that net revenues would actually decline as a result of investment reduction. As ABC’s Charlie Gibson noted in an April 2008 debate between Senators Barack Obama and Hillary Clinton, President Clinton signed legislation in 1997 reducing the capital gains tax rate to 20 percent, and President Bush subsequently reduced it to 15 percent; in each instance, when the rate dropped, revenues from the tax increased. When the rate had been increased to 28 percent in the 1980s, revenues went down. In a sound bite that never ceases to amaze me, then-candidate Obama said he would “look at” raising the capital gains tax in spite of this “for purposes of fairness.” He then reverted to his usual class-warfare rhetoric, noting the unfairness of an economy that allows the top 50 hedge fund managers to earn $29 billion in 2007. The President and House Democrats are apparently so determined to punish the rich that they will do so even if it means less jobs and capital formation, and has resulted in reduced revenues in the past.

Incidentally, yesterday’s vote to raise taxes on carried interest was partly sold as a tax on wealthy hedge-fund managers, but Rutledge notes that such funds generate short-term capital gains, and their managers already pay taxes at ordinary income rates. The tax will instead affect those who make the long-term investments that generate long-term capital gains.

The ostensible purpose of this provision, other than to redistribute wealth, is to partially offset extensions of various tax credits (despite aforementioned evidence that this could reduce revenues, and despite the name of the bill itself). A few of the most egregious of these, the vast majority of which, as Tax Foundation president Scott A. Hodge has noted, amount to earmarked spending through the tax code, are catalogued on the Tax Foundation’s Tax Policy Weblog. The current Congress, of course, has already substantially increased spending, much of which is permanent and likely to easily outlast the current economic downturn. In the majority party’s mind, tax revenues must be vigorously maintained, but the same standard does not seem to apply to spending.

The good news is that the bill is unlikely to pass in its current form due to serious concerns in the Senate. Sen. John Kerry (D., Mass.), for example, has expressed strong reservations about the provision, likely because of the venture capital community in Massachusetts. Still, the fact that such a proposal is even being considered speaks volumes about the current Congress’s idea of fiscal policy.

Photo Credit: Wikipedia

Even more interesting, I think, is the fact that Democrats extended their streak in House special elections by holding on to the Pennsylvania 12th, John Murtha’s old seat. That makes ten straight special elections to fill House seats in which Democrats have either retained or stolen a seat. You have to go back to May 2008, when Steve Scalise replaced Bobby Jindal, to find a Republican victory. (Of course, Scott Brown won a special election in January. But the GOP probably has more realistic hopes of flipping the House in November if there is a genuine “wave” a la 1994.)

To review:

LA-6: Don Cazayoux (D) replaces Richard Baker (R), May 2008 (though Cazayoux lost the general election in November)

MS-1: Travis Childers (D) replaces Roger Wicker (R), May 2008

MD-4: Donna Edwards (D) replaces Albert Wynn (D), June 2008

OH-11: Marcia Fudge (D) replaces Stephanie Tubbs Jones (D), November 2008

NY-20: Scott Murphy (D) replaces Kirsten Gillibrand (D), March 2009

IL-5: Mike Quigley (D) replaces Rahm Emanuel (D), April 2009

CA-32: Judy Chu (D) replaces Hilda Solis (D), July 2009

CA-10: John Garamendi (D) replaces Ellen Tauscher (D), November 2009

NY-23: Bill Owens (D) replaces John McHugh (R), November 2009

PA-12: Mark Critz (D) replaces John Murtha (D), May 2010

I’ve italicized the elections that were hyped in the media and by national Republicans as referenda on President Obama and as potential warning signs of an impending Republican wave. Democrats won all of those elections, and yet the conventional wisdom continues to be that Republicans have a solid chance to take back the House in November.

Granted, Scott Murphy won by a hair, but the New York 20th is a conservative district that only became Democratic in 2006. Bill Owens’s victory in the longtime-Republican 23rd district should have challenged the desired Republican takeaway from the elections in Virginia and New Jersey, which was that they were harbingers of the midterm cycle rather than local elections based on local politicians and issues. If any race last November was truly nationalized, it was Owens’s.

So now why is it that everyone supposes that Republicans are experiencing a “wave” in their favor? Seats like the PA-12 are the kind that you win when there’s a wave: long-held by a Democrat but a swing district (went for Kerry, but also for McCain). I’m getting mighty sick of hearing pundits talk about the “anti-incumbent” mood without explaining that it’s not necessarily an anti-Democrat mood.

Photo credit: Wikipedia

In February, the United States Agency for International Development (USAID) awarded some $50 million in funds for disaster relief and long-term rebuilding efforts following the earthquake in Haiti. Although the grants themselves were uncontroversial, their recipients were less so. Eschewing the private sector, USAID chose to distribute its funds through several large faith-based organizations (FBOs), notably World Vision, Catholic Relief Services, and Samaritan’s Purse. These FBOs are some of the oldest relief and development organizations in the United States, and they are growing fast. World Vision’s budget has nearly tripled since 2000, and Catholic Relief Services has expanded a $250 million annual budget in 1992 to a $850 million budget this year. Increasing ties between the government and these FBOs account for a significant proportion of their expansion, as FBOs have assumed more responsibilities for distributing government aid.

The growth of faith-based organizations has been controversial. These organizations base their missions on Christian convictions: the scriptural imperative to feed the hungry and clothe the naked, and the desire for solidarity with the world’s poor. Skeptics are concerned about the separation of church and state, and worry about religiously-inspired aid programs, such as abstinence-only HIV/AIDS prevention.  Even so, such culture-war debates obscure the valuable contribution that FBOs can make towards development goals. While controversy rages in Washington, American FBOs are providing valuable foreign aid in Haiti and around the world.

The New Evangelical Internationalism

The past decade was a good one for faith-based aid organizations. In 2006, the Boston Globe calculated that the percentage of federal foreign aid awarded to FBOs had nearly doubled since George W. Bush took office in 2001. Bush signed executive orders relaxing restrictions on FBOs receiving federal funds, allowing grantees to display religious symbols, to use the same buildings for dispensing aid and conducting religious services, and to favor employees of their faith in the hiring process. Despite last year’s presidential transition, the trend of funneling aid through FBOs has shown little sign of slowing down. Within a month of entering office, President Obama established the Council on Faith-Based and Neighborhood Partnerships. And, as shown by the recent Haiti relief grants, FBOs have been very successful in USAID’s competitive grant application process.

Besides government funding, increased interest among their constituents has been a major catalyst for the expanded abilities of faith-based organizations. Private donors are the largest source of income for most FBOs, and they have been increasingly generous. As George Ward, World Vision’s senior vice president for international programs, told the HPR, “Individual contributions have increased at least as fast as government contributions.” Ward attributed this to a “greater engagement of our donors in learning about the problems of development and health worldwide.” This increased engagement marks a shift in evangelical Protestantism, which Ward described as “moving the focus of American Christians away from issues of personal salvation” and towards more communal issues.

God’s First Responders

FBO leaders also attribute their success to an improved ability to deliver services, and they de-emphasize the role that the Bush administration’s friendliness played. “It has taken our organization 16 years of building our capacity, honing our skills, and becoming more professional to develop the relationships we have with USAID and other grant-giving entities,” Ken Isaacs, vice president of Samaritan’s Purse, told the HPR in an interview immediately after his return from Haiti.  Samaritan’s Purse had activated its disaster-response mechanism by 2 a.m. on the day after the earthquake, and proceeded with a large-scale response: chartering airplanes to carry trained personnel to Haiti, and later hiring a barge to ferry heavy equipment, trucks, and lumber to the island. “We’re building latrines and providing clean water,” Isaacs said. “We’re not out there with bullhorns trying to win converts.”

Nor was the quick response of Samaritan’s Purse an unusual phenomenon. Indeed, experts believe that FBOs may enjoy certain advantages over secular firms. FBOs are values-driven, financially transparent, and not-for-profit, and usually have minimal overhead costs. Most of all, FBOs enjoy crucial motivational advantages. “If we say we’re doing something in the name of Jesus Christ, we have an obligation to do the best-quality work possible,” Isaacs emphasized. Isaacs believes that FBOs are often more willing to do manual labor, like clearing rubble and digging latrines, than many secular organizations. In many ways, then, FBOs are well-suited to be agents of foreign aid, and the large amount of federal money they are receiving should not surprise or frustrate  anyone.

Mixed Missions?

Despite these advantages, skeptics raise concerns about longer-term proselytizing by FBOs. In disaster situations such as Haiti, where aid recipients are both physically and emotionally vulnerable, faith-based organizations walk a particularly fine line. Superficially, most organizations attempt to maintain a strict separation of their faith-related and their aid-related activities. For example, Ward explained, “We don’t ever use federal funds for any activities that are related to faith. In fact, we reimburse the government for any time that a World Vision employee might spend in personal devotions or attendance at a chapel.”

Still, FBOs often see their mission as broader than just meeting the immediate material needs of disaster victims. Isaacs reflected on his time in Haiti: “Would we talk about Jesus in a food line? Never. But would I pray with a patient who is suffering in a hospital bed? There is a high likelihood of that.” Other leaders were quick to point to connections between the material and the spiritual. “Beyond meeting basic needs, we view the human person as a holistic being, with social and spiritual needs and assets,” Annemarie Reilly, vice president of overseas operations for Catholic Relief Services, told the HPR.

“Good Greater than Government”

In the aftermath of the Haiti earthquake, USAID did good in giving its money to the organizations most capable of providing aid to the Haitian people, regardless of their religious foundations. While some may fear proselytizing, such concerns pale in comparison to the positive goods that FBOs can deliver. With President Obama’s continued commitment to FBOs, leaders of faith-based aid organizations feel that they are competing for grants on a level playing field with secular organizations. Recognizing that “there is a force for good greater than government,” Obama has emphasized the values that are behind his progressive agenda, which are shared by many Christian aid organizations.

Ultimately, the work on the ground is far removed from the controversies in Washington. Reilly observed, “There is a gap between the politics of aid in D.C. and the way that it plays out in a disaster setting. Things are just much more collaborative on the ground.”

Amy Beeson ’10 is a Contributing Writer.

Photo Credit: USAID

Jay Cost has a passionate response to recent liberal criticisms of the filibuster. In his view, it’s a good thing to pass legislation that has broad (and perhaps bipartisan) support, rather than to pass legislation with increasingly partisan “simple majorities.” But there are several little problems with Cost’s argument that need to be pointed out, and I think they add up.

First, perhaps it’s true, as Cost argues, that ideological polarization has led to the increased use of the filibuster, but it is also possible that the existence of the filibuster has enabled ideological polarization, creating a vicious cycle. Senate leaders on both sides have discovered, to put it crudely, that they don’t need to win elections in order to win legislative battles. As long as they man the barricades to preserve 40 safe seats, they can achieve a lot — or, what is the same, prevent the other party from achieving a lot. And those 40 seats, sought for their safeness, are likely to be filled by very partisan, ideological senators.

Second, I’m unconvinced that the filibuster has really led to “moderate policies,” instead of just nonsensical ones. I don’t really understand Cost’s position on this issue: he admits that he finds the compromised Senate health care bill “highly objectionable,” but implies that it’s better than what we would have gotten if the Dems only needed 50 votes. I think that this assumption is quite wrong, and wrong not just from my own liberal perspective but from a “moderate” perspective as well. Sure, you would have gotten a public option if there had been no filibuster. But you might also have gotten more serious attempts at cost-cutting: tough choices of the sort that serious moderates like Cost and Ross Douthat desire, but which stand no chance in the polarized, minority-rule Senate. You would also have avoided the sweetheart deals to “centrist” senators that Republicans have spent the last week decrying.

See, if you have liberal senators cutting deals with center-right senators, or conservative senators cutting deals with center-left senators, what you are likely to get is not moderate legislation — precisely because the parties have become so polarized, and their most extreme members, their Boxer and their DeMints, also have effective veto power. Rather, you will either get the same old “partisan” legislation but with sweetheart deals to bring the centrists on board, or you will get watered-down legislation, catering to the centrists’ overwhelming imperative to extract their pound of flesh from all legislation no matter the policy implications. In the case of the stimulus and health care reform, half a loaf was/is better than no loaf, but that will not always be the case (consider cap-and-trade, for instance). Sometimes a bill that can attract Boxer and Franken, as well as Nelson and Landrieu, just won’t make sense. Ditto if you replace the first two with DeMint and Inhofe.

Third, I just don’t find Cost’s concern about violent policy swings all that convincing. The fact is, if we got rid of the filibuster, it would still take a lot of work, and a lot of electoral success, to swing policy sharply in one direction or the other. Imagine that the Democrats had only 53 seats at the moment, and there was no filibuster, and they passed “extreme” liberal health care legislation. Now imagine that the Republicans win five seats in 2010, take the Senate, and pass narrow, partisan bills to repeal health care reform and privatize Medicare. You’d still have to assume that the House has changed parties too, because Nancy Pelosi’s majority, even if neutered, would never consent to those bills. And you’d never get those bills past the desk of President Obama. So, the extreme changes would have to wait at least until 2012, and we’d have to assume the (I think unlikely) defeat of President Obama. (And all this without considering political culture and the likelihood that many laws, once passed, are not so easily repealed.)

In other words, what Cost forgets is that bills have to get by three different institutional sets of eyes, a fact which, on its own, limits the amount of legislation and, yes, ensur

es consensus. The people decided, over the course of two biennial elections, to put Democrats in charge of the entire federal government. That’s a consensus! Cost’s persistent reference to a “bare majority” passing legislation overlooks the fact that you need a bare majority in effectively three legislative bodies (the executive branch included) and that, per the founders’ wisdom, the members of these bodies have different constituencies, and are elected in different ways and at different times. There are a lot of checks on the passions of bare majorities in the American system. Cost’s fallacy, in understandably pointing to Federalist #10, is that he suggests that because some checks were desired, all checks must be justified. But

we can require varying degrees of political consensus; we don’t have to choose between government-by-filibuster and government-by-faction. By any measure, even without the filibuster, our system would require a substantial degree of consensus. But the filibuster goes too far.

One last thing. Cost argues that the filibuster doesn’t prevent change, it just makes it less likely. He says, if your party has only 55 senators, and can’t get anything done, you can always try to enlarge your majority in the next election. But voters punish ineffectiveness, and they are not likely to be favorably disposed to cries from the majority party that they couldn’t get anything done because of dastardly filibusterers. Yes, the argument could work in extre

me circumstances, but the most likely outcome is that the minority party says “you gave them a chance, and they couldn’t handle it” and that the voters buy that. In other words, the filibuster not only allows the minority party to stop legislation, but (and it should be obvious that this follows) to politically hurt the majority in doing so. You can see this on a small scale in the recent furor over Ben Nelson’s sweetheart deal: the deal would never have been needed without the filibuster, or without the Republican threat to use it, but instead of blaming the institution or the Republicans, people are (predictably enough) blaming Nelson and the Democrats. So, I think Cost overestimates the likelihood that “they’re filibustering for

political reasons” will be a winning electoral argument, and so the filibuster might not just make legislative change less likely, but make it impossible for a long time. Is there any doubt that health care reform wouldn’t happen in 2011 if it doesn’t happen in 2009?

A positive official tone masks U.S.-China tensions

“We have laid the foundation for a positive, cooperative, and comprehensive relationship for the 21^st century,” said Secretary of State Hillary Clinton during the conclusion of the inaugural meeting of the U.S.-China Strategic and Economic Dialogue this past July. But three months later, the Obama administration leveled a tariff on Chinese tires. China fired back with an investigation into American chicken imports. While this exchange may not indicate a seismic shift in the U.S.-China trade relationship, such obvious strain contrasts sharply with the positive official tone.

The S&ED’s simple optimism fails to account for a range of issues, particularly trade imbalances and U.S. debt, which could fracture the foundation for positive cooperation between the United States and China. There are also less structural tensions, such as mutual mistrust and negative public perceptions. While there are several ways to improve attitudes, there will need to be a quick turnaround in the current direction of opinion.

Trade and Debt

In the three decades following Deng Xiaoping’s policy of “Reform and Opening Up,” economic issues have come to bind the United States and China tightly: the United States is the largest buyer of Chinese exports, and China holds roughly one quarter of American foreign debt.

Charles Freeman, a China expert at the Center for Strategic and International Studies, noted in an interview with the HPR, “For most of the last five years, household debt in the United States has been 130 percent of household income while household debt in China has been less than 30 percent of household income.” China, meanwhile, has built up a massive trade surplus.

Economists in both countries have decried the current trade relationship as “unsustainable.” Freeman argued that there would be “a lot of hard work” as the United States and China struggle to reverse the imbalances. “China must work to become a demand-driven economy and the United States less of a consumer driven economy,” he explained.

The recession has made this difficult adjustment even more important by augmenting American debt and stoking Chinese fears of U.S. currency inflation.

Imbalance and Interdependence

These economic tensions are exacerbated by trade spats, as embodied in the recent tariffs and probes. Stapleton Roy, former U.S. ambassador to China and current director of the Kissinger Institute on China and the United States at the Woodrow Wilson Center, told the HPR, “If we were to allow ourselves to get into a vicious cycle because of reciprocal [trade] measures justified by the actions of the other country, then the relationship could turn much more confrontational.” At the very least, threats of protectionism reveal a pretty and acrimonious underside to the relationship.

But the tensions become starker when viewed through the lens of China’s nearly $1 trillion investment in U.S. debt, which has helped to sustain the trade imbalance.  Kenneth Rogoff, professor of international economics at Harvard, said in an interview with the HPR that the Chinese are “very concerned that the U.S. deficit is out of control and that someday, they could suffer a huge capital loss” due to their massive stockpile of Treasury bills.

Indeed, Chinese leaders such as Premier Wen Jiabao have often worried aloud about American financial problems. Talk of a new global currency to replace the dollar may be premature, but it has laid the rhetorical groundwork for future action. And in the wake of the financial crisis, Wen urged the Obama administration to meet China’s “expectations” with a proper response. “We have lent a huge amount of money to the United States. Of course we are concerned about our assets,” he explained. The seemingly inextricable nature of the U.S.-China economic relationship has raised the stakes and increased wariness on both sides.

Public Attitudes and Mutual Mistrust

Although elite perspectives are more often represented in the Western media, public attitudes in the United States and China are not as positive. According to Gallup, 55 percent of Americans now have a negative image of China, up from 25 percent in 1980.

In China, nationalist sentiment has surged, perhaps symbolized most clearly by this year’s bestselling book Unhappy China, which blames the United States and the West for many of China’s problems. “If China stood as the world’s top country,” reads one passage, “it would not act like the United States, which has been irresponsible, lazy and greedy and engaged in robbery and cheating.”

Suspicion of China in the United States runs deep and wide, ranging from distrust of authoritarian regimes to fear of a growing military threat.  Robert Sutter, professor of Asian studies at Georgetown University’s School of Foreign Service, explained that negative feelings are “stronger outside of the executive branch of the U.S. government—they’re stronger in the Congress, and they’re certainly stronger in the media.” These bastions of mistrust can push the relationship in a dangerously confrontational direction.

Responsible Stakeholders and Transparent Dialogue: A Silver Lining?

Despite this negative trend, there are significant opportunities for both countries to develop warmer public attitudes.

To begin with, there is little indication that the majority of the Chinese public endorses the extreme views of Unhappy China. Some Chinese reviewers, in fact, have called the book “embarrassing” and “unconstructive.”

Second, mutual suspicion is partly derived from a lack of transparency in inter-government communication. As Sutter explained, “The American people, like you and I, don’t know what they’re saying in these [strategic and economic] dialogues, and that’s no way to build a consensus in the United States on China policy.” Greater openness about the tone and topics of high-level discussion between the United States and China could soothe suspicions on both sides.

Third, giving China a greater role in international institutions would undercut Chinese nationalist complaints about “U.S. hegemony.” For instance, China has yet to take a proportional role in global financial institutions such as the International Monetary Fund and the World Bank. Enabling China to become a larger stakeholder in multilateral organizations could improve perceptions of its role as a responsible stakeholder in the global community.

Getting Along

It is partly a testament to the power of diplomacy and dialogue that U.S.-China relations are warmer today than they were thirty years ago.  As Rogoff noted, comparing the current era to earlier periods in the twentieth century, “The U.S.-China relationship has simply been much more constructive. They’re interested in promoting self-interest, but not in just causing trouble.”

This is an important distinction. The interests of the United States and China may frequently diverge over the course of the next century, but these tensions need not lead to direct confrontation. To interpret Clinton’s statement another way, faith in the fruits of cooperation is itself the foundation for a positive relationship.

“When we lose that common need for pragmatic cooperation,” said Sutter, “as a country we move in a very different direction in dealing with China.”

On Feb. 13, 2007, six-party talks with North Korea reached a breakthrough. In exchange for economic and energy aid, the regime would begin dismantling its nuclear reactor at Yongbyon in a key step towards denuclearization. But a major setback occurred in December 2008, when the D.P.R.K. suddenly halted the process and refused to continue talks. In March, it carried out a failed but highly provocative satellite launch likely intended to bolster its bargaining position ahead of another round of negotiations.

The North’s volatile behavior is, of course, a perennial obstacle. But China’s soft-line approach, and Japan’s tendency to use six-party talks as a forum for addressing unrelated disputes over decades-old abductions, have also been serious impediments to the denuclearization process. As China’s policy towards the regime is likely rooted in rigid geo-strategic interests, the practical lesson of the past two years is that Washington must seek a separate framework for dealing with Japanese concerns to accomplish the objective of the talks.

“Quiet Diplomacy” versus Confrontation

North Korea’s ability to wring concessions from the United States stems in part from its perception that China, which supports the regime as a means to stability on the Korean peninsula, will toe a softer line. “China emphasizes quiet diplomacy as opposed to confrontation,” said Nicholas Szechenyi, a fellow at the Center for Strategic and International Studies, in an interview with the HPR. In March 2007, before starting denuclearization, Pyongyang demanded $25 million in assets that had been frozen by the U.S. Treasury Department. Washington wanted to press the regime on its February commitments, but China advised returning the funds.

The Bush administration had planned to withhold the frozen assets until the Yongbyon reactor had been completely disabled, but the absence of a joint position with China allowed North Korean to stall and take a heavy bargaining chip off the table. Scott Snyder, a Korea expert at The Asia Foundation, told the HPR that the North Koreans are “willing to pursue the lowest common dominator.” This can thwart progress on other issues by allowing North Korea to drive a political wedge between two parties.

Abduction Politics

The more recent setback in the talks illustrates Japan’s hard-line approach on the D.P.R.K.’s status as a state sponsor of terrorism, which it ties to the abduction of Japanese citizens by North Korean spies in the 1970s and 1980s. In October 2008, Washington took the regime off of its official list of terror sponsors in an attempt to accelerate denuclearization. Japan responded by refusing to deliver its share of fuel oil under the February agreement, and in turn North Korea stopped dismantling its nuclear facilities. Mitchell Reiss, vice provost for international affairs at the College of William and Mary, told the HPR that Japanese leaders were frustrated by failed attempts to gain information about the abductees, some of whom may be alive today. “They tried, repeatedly — but the North Koreans refused, so [Japan] had to take unilateral steps,” Reiss explained.

Although Japan may not have anticipated that its move would derail the negotiating process, the risk it took revealed the extent to which the country expects U.S. support on the abduction issue. Said Szechenyi, “they thought that America would not make any moves without Japanese satisfaction.” The challenge for Washington ahead of the next round of six-party talks is to assure Japan of its attempt to collaborate in pressuring Pyongyang on the abduction issue, while encouraging Japanese leaders to use a separate diplomatic track outside of the talks.

Why Six-Party Talks?

Resolving differences among multiple negotiating partners is no easy task, but the multilateral approach has yielded some recent benefits. Insook Kim, research associate at the Monterey Institute of International Studies, told the HPR that landmark agreements such as the one struck in February 2007 indicate gradual progress under the six-party framework. “[M]ultilateral negotiations have led North Korea to take incremental and concrete steps toward the ultimate goal of denuclearization,” Kim noted.

According to Szechenyi, six-party diplomacy remains “extremely important” because “all of the stakeholders are involved” in a more equitable distribution of responsibility. The framework, however, requires “the attention and the will necessary to hold [North Korea] to the terms of the agreement,” Snyder cautioned. But it may be Tokyo, not Pyongyang, that requires the primary attention of American diplomats in the coming months.

Snark aside, honestly, what else would you expect?  It was a large amount of money being dispensed with in a short time in a period of national emergency; it’s very easy to take advantage of that sort of situation, hence the perennial popularity of war profiteering.  This just illustrates something which should be pretty basic: absorbing the value-neutral (what a quainter age used to call “amoral”) utility-maximizing ethos of modern economics turns you into a value-neutral utility-maximizer (what a quainter age used to call a “crook”).  Obviously bankers inculcated in that belief system are going to rip off an essentially unlimited supply of public money.  They obviously believed the government wouldn’t catch on (and I’m sure this round of investigations is the tip of the iceberg), and what else would stop them? Civic spirit in a crisis?  If bankers had a civic spirit, they wouldn’t be bankers.

Possible solution?  I’d say pick the bank that looks most corrupt, take the senior executives and board members and any traders implicated, and seize all of their assets.  It’s pursuant to an ongoing criminal investigation, and is moreover the product of ill-gotten gains.  This is called asset forfeiture, and we do it on a daily basis to drug dealers.  Why not people who’ve done far more harm to the public?  It requires no conviction, and could be done tomorrow.  It’s all legal, and would send a strong message to the financial sectors that the government is not f*cking around.  It’s also without question what law enforcement would do if the amount of money involved was several orders of magnitude smaller…so why not show we’re taking this seriously?

Okay, one more snark.  The former foremost proponents of capitalism are now not only welfare wards, but welfare cheats.