Interpreting the 2009 Election

By Andrew Wolf

What can the results of the three key races in this past Tuesday’s election tell us about the national political landscape?

On one hand, off-year elections tend to be more about local candidates and local issues than anything else. And voters said so, with 56 percent of voters in Virginia and 60 percent in New Jersey claiming the President’s performance in office did not affect the way they voted. Indeed, the President’s approval ratings in both states are similar to what they were when he was elected. The state of the economy was a dominant issue, but so were property taxes and corruption in New Jersey and transportation in Virginia. It also should not come as a huge surprise that the Republican candidates triumphed in either state. In fact, the party that won the White House lost the gubernatorial race the following year in Virginia dating back to 1977 and in New Jersey since 1989.

On the other hand, President Obama carried New Jersey in 2008 by 16 points and won Virginia by 6 points. This year, Obama campaigned for both Democratic gubernatorial candidates, and they both lost; it marked the first time in 12 years that either New Jersey or Virginia elected a Republican Governor. The coalition profile the President put together in 2008 of young voters, first-time voters, and African-American voters failed to materialize. And this time Independent voters turned to the Republican candidate. In Virginia, Independents chose McDonnell 66-33 percent. In New Jersey, Independents broke for Christie 60-30.

And then there’s New York’s 23^rd District. Democratic candidate Bill Owens defeated Conservative Party candidate Doug Hoffman in a bizarre race that highlighted the split between moderate and conservative Republicans and could hold broader implications for the future of the Republican Party. Owens became the first Democrat since 1872 to represent the 23rd district.

Time will show the relationship between Tuesday’s results and the 2010 midterm elections. Still, the 2009 election raised some important questions concerning what will happen moving forward. On the Democratic side, can President Obama turnout Democratic voters in large numbers for the midterm elections, given that next year he will not be on the ballot? And will the losses in Virginia and New Jersey affect the President’s standing among more conservative members of the Democratic Party? On the Republican side, can the Party win in more moderate districts if it nominates conservative candidates? And can the Republican Party develop a national narrative that persuades and mobilizes voters to vote for Republican candidates?

There’s a strong anti-incumbent mood across the country. It remains to be seen which side will better channel the anger and concern among the electorate about the economy, healthcare, and the wars in Iraq and Afghanistan into electoral gains.

For a roundup of Tuesday’s election results, click here.

Obama and the Gay Rights Agenda

by Michael Branson

Last Wednesday, October 22, President Obama signed the Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act into law. The Act expands the 1969 federal hate-crimes law to include crimes motivated by the victims’ gender identity or perceived sexual orientation. In addition, the bill, which stalled in Congress two years ago because of a veto threat by President Bush, gives federal prosecutors increased authority to aid local law enforcement in the prosecution of hate crimes against gay and transgender people and provides federal funding for state and local agencies to investigate and prosecute such crimes, among other provisions. The law is also the first that provides federal legal protections of any sort to the transgender community.

This legislation marks a step forward in the fight for gay rights, including gays and lesbians under federal hate crimes protections more than a decade after the murders of its namesakes. Expanding hate-crimes legislation is the first achievement the Obama administration can point to in its attempts to appease a gay community that has become restless with the administration’s slow pace in following through on campaign promises to repeal “don’t ask, don’t tell” (DADT) and the Defense of Marriage Act (DOMA). The administration surely hopes that the well-covered Matthew Shepard Act signing ceremony, which was attended by both the Shepard and Byrd families, will buy it some time.

The Obama administration should not rest on its laurels, though, and gay rights activists should (and will) continue to apply pressure on the administration to repeal DADT and DOMA. The repeal of DOMA is of particular importance as Maine votes on November 3 whether to ban same-sex marriages in the state and the District of Columbia inches toward allowing gay couples to marry within city limits. By denying federal benefits to same-sex couples married in states that allow the practice, DOMA gives credence to those who argue that gay marriage is unnecessary where civil-union laws are intact. Also, with two active wars and the president weighing the possibility of a troop surge in Afghanistan, it seems silly to allow a policy to continue that discharges high-performing troops (and sought-after Arab linguists like Lt. Dan Choi).

Although it may not be politically expedient for Obama, the climate for repealing these policies will most likely get worse, not better, over the coming years. Democratic losses in the House and Senate are almost assured in the 2010 midterm election (as is to be expected for a party that has controlled Congress for four years and the White House for two), and the president’s approval ratings have begun to dip over the past few months (the result of a bruising health care battle and a natural decline after the honeymoon period). These trends are all the more reason for activists to demand that the administration focus on these issues sooner rather than later.

While the Matthew Shepard Act is an important first step, the Obama administration still has a way to go in ensuring equal rights for gay and lesbian Americans and following through on the president’s campaign promise to be a “fierce advocate” for the gay community. Let’s hope he doesn’t stop here.

Project Honduras 2009/2010

Project Honduras 2009/2010 has geared up and is in full swing. There is a brand new team of students led by 2^nd year students and returning Project Honduras team members, Marika Butler and Ryan Carrington. While the trip to Roatán is not planned until March, the team has been selected and is already knees deep in project selection, planning, and fundraising efforts. For those who are unfamiliar with the program, Project Honduras is a hands-on development project focused on fostering a sustainable relationship with the community of La Colonia on the island of Roatán in Honduras. This is currently the third year of the program, which began in 2007.

Much improvement has been made since the group’s trip last year. Most notably the school’s second story is finally completed, after delays over contracted workers provided by the municipality. In collaboration with the community of La Colonia, projects being considered for this year include improving sanitation in the school, establishing a school computer lab, creating a sustainable means of overcoming the community’s waste management problem, working with youth in La Colonia to mobilize them as leaders and give them alternatives to delinquency, and teaching English to better equip community members to take advantage of the nearby tourist trade.

The trip this year has become especially important in light of the current political situation in Honduras. On June 28^th, Honduran President Manuel Zelaya was sent into exile over disagreement on his plans for constitutional change to allow him to run for an additional presidential term. An interim government led by the former Speaker of Congress, Roberto Micheletti, has been running the government despite international condemnation of the deposition of a democratically elected leader. Currently, Zelaya has returned to the country and is seeking shelter in the Brazilian Embassy. Various talks have been held between the two sides to resolve the dispute before November’s elections, but a deal has yet to come of these discussions. Needless to say, the political crisis has shifted attention away from addressing important policy issues such as poverty, with the U.S. Government, World Bank and other international donors suspending aid.  This situation makes it even more critical that Project Honduras continue to provide the humanitarian assistance to La Colonia than it has provided the last two years.

Look for updates and information on upcoming fundraising events!

Too Late on Climate Change?

By Tom Neeley

With the upcoming U.N. Climate Change Conference in December, many hopes and fears have been pegged on the creation of a broad, comprehensive initiative similar to the 1997 Kyoto Protocol. However, the downturn in the global economy has affected the willingness of many nations to jeopardize economic recovery efforts by saddling domestic industries with new emissions regulations that could put them at a disadvantage with competitors producing in less regulated nations.

While certainly China, which surpassed the U.S. as the top producer of greenhouse gases, and the EU member states will be key players to watch during the conference, The most interesting player to watch during the Copenhagen conference will be the U.S.

Being the only industrialized nation that failed to ratify the Kyoto Protocol, the U.S. has been playing catch-up in addressing climate change. Presently, the Obama administration and the Senate are attempting to develop legislation addressing greenhouse gas emissions prior to Copenhagen, and earlier this month, the president signed an executive order outlining goals and requirements for the federal government to reduce greenhouse gas pollution. These actions follow the EPA’s declaration in April that carbon dioxide (along with methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride) is detrimental to the environment. This decision follows two years after the Supreme Court ruled that carbon dioxide is a pollutant and subject to regulation under the Clean Air Act (although, for some, the jury is still out).

These moves by the U.S. government follow a sea change in terms of public awareness about climate issues. Since Kyoto, public perceptions in the U.S. of climate change have become more informed and understood broadly across issues of national security, gas prices, and daily living. However from a policy perspective, there is still broad skepticism among Americans of the need for action on climate change.

Despite this new willingness of the U.S. government to address climate change, recent expectations for Copenhagen (especially among EU member states) have shifted toward sweeping incrementalism, inviting disappointment among advocates for bold action. But should a incremental approach be such a bad thing?

The Atlantic recently evaluated the effectiveness of environmental and energy policies in California that have developed in piecemeal since the 1970s. Still, these incremental (but highly successful) policy steps occurred over a span of 40 years.

Many scientists and studies, although offering sometimes conflicting estimations on the timetable of rising sea levels, increased carbon, and the reduction of polar ice caps, generally agree on the urgency of addressing the causes of these effects sooner rather than later. Some are fearful of an environmental point-of-no-return, at which the adverse effects of climate change become irreversible set.

Could it be, then, too late for incrementalism?

After the IMF/World Bank Annual Meetings in October 2009: What is New and What is (Still Expected) to Change

By Adrian Ineichen

New Lending Facilities and Their Impact
The IMF and the World Bank held their annual meeting in early October in Istanbul. In response to the global financial crisis, over the past two years both institutions have revamped their facilities and increased their lending to ailing countries.

The IMF has increased the amount of its concessional loans – loans with below-market interest rates – particularly to poor countries (expected to reach $8bn in 2009/10 and up to $17bn through 2014) as well as interest payment cancellations until 2011, and will launch new SDR allocations with which low income countries could borrow approximately $18bn. At the same time, conditionality for some facilities has been reduced, which makes sense if a country through no fault of its own sees itself in a liquidity crisis due to contagion (bad spillover effects from an external shock).

While this sounds good and may help poor countries cope with the current crisis and polishes the Fund’s reputation, but it may hurt the IMF’s mission in the longer run. One can expect that borrowers will pressure the Fund in the future for more forbearance, less conditionality, and more concessionality: If you give a finger, the other wants your whole hand. What happens if more money induces moral hazard and countries that got into the crisis due to exogenous shocks (and not due to imprudent domestic policies) become addicted to loose macroeconomic policies? As the World Bank Group also increases lending facilities, the “pressure to lend” may well increase and lead to diversion, risky lending and soured projects.

Governance Reform
Another big theme is governance reform at both international financial institutions (IFIs). While it seems certain that developing countries will gain influence in both the IMF and the World Bank, the details on how much is less clear (proposals vary from three to seven percent). The International Monetary and Financial Committee (IMFC), which is an advisory body that provides some policy guidance for the IMF, calls for at least a 5% shift of voting power to developing countries. There are currently five formulas in use to determine quotas (and thus voting power), there are basic votes and we can expect pushback by some potential losers (who wants to give up influence voluntarily?) it is going to be very complicated to find a new formula, arithmetically and politically, by early 2011.

Will this voting power shift have an impact? European countries are overrepresented in terms of voting power, but decreasing their shares may not change the balance of power crucially. Proposals to install one seat for the EU are doomed, as this may not just raise legal issues but Europe would emerge as effective second veto power (as one joint EU seat will likely have more than 15% of voting shares) and smaller European countries would be marginalized inside an EU block. This matters because small European countries that currently hold own Executive Director (ED) seats (Belgium, the Netherlands, Sweden and Switzerland) are incentivized to represent developing countries to some degree and would lose their seats with such a change.

Instead, if the new voting power structure is stuck with the current country-group structure, probably not much is going to change in IMF policymaking as the change of the voting power inside country groups may be too small. However, some proposals call for a reduction of the Executive Board from currently 24 to 20 EDs which would necessarily lead to changes in country groups and could increase the influence of some developing countries. Whether this is beneficial for their interest representation as a whole is another thing and will be interesting to see. A cautious view might say that low- and middle-income countries do not always have overlapping interests and some may not have the means (or the political will) to shoulder the burden – e.g. contributing hard currency for SDR allocations or ad hoc contributions – that comes with increased influence (some developing countries have signaled that they may want more voting power, but could accept ED seats still being held by small European countries who have the means to take over responsibilities and may be more receptive to the concerns of the poor).

A thorny issue which has not been addressed in earnest so far is the selection of the top leaders of both IFIs. The hitherto practice of selecting an American as president of the World Bank Group and first Deputy of the IMF, a European as managing director of the IMF and a Japanese as second deputy of the IMF has excluded other regions. If granting developing countries more weight is meant seriously, then the election of the top leadership should be open, more transparent and allow for the election of capable people from so far neglected countries.
Interestingly, the Chinese already seem to have prepared a senior banker, Zhu Min, for a potential top post at the IMF. Zhu was executive vice president at the Bank of China, one of China’s top four commercial banks, and has recently been named vice governor at the People’s Bank of China (the central bank).

Surveillance and Early Warning
Another key issue is rebalancing the world economy. After the traditional surveillance mechanism has sprawled and let the IMF gradually broaden its surveillance activity beyond its core function (of examining exchange rate regimes), the multilateral consultation process was launched in 2007 to bring in more transparency, and (mutual) pressure on countries. However, this mechanism was not successful.

One of the characteristics of the current crisis is the imbalance between Western countries (particularly the US) consuming beyond their means and emerging market economies that have trade surpluses, relatively high savings rates and thus accumulate a lot of foreign exchange reserves which have flooded back into the US and provided the means for imprudent overlending.

The G-20 pushed for more surveillance measures and the installation of an early warning system that ideally could raise red flags before another global crisis breaks out. While this sounds nice its implementation is difficult. First, early warning systems tend to be modeled according to the last crisis and may come with an inherent bias (which may lead to neglecting other trends). Second, technological improvement could lead to market innovations which are per se difficult to anticipate, and even more to estimate their potential impact (who thought that “subprime” could cause a global crisis?). Third, even if beefed-up surveillance works, political decisions to move may not be forthcoming (who wants to end a party, or prick a bubble, if it is in full swing?).

Ideas are floating around for rebalancing the world economy. But to which degree they are technically feasible and politically implementable, is an open question. Affaire à suivre…

Further Reading

IMFC Press Release http://www.imf.org/external/np/sec/pr/2009/pr09347.htm

IMF Lending to the Poor http://www.imf.org/external/np/exr/facts/poor.htm

The Chinese prepare Zhu Min for a top role in the IMF http://online.wsj.com/article/SB125585629799792513.html

Critical Voices and Civil Advocacy Groups:

Bretton Woods Project on the IFI Annual Meetings October 2009 http://www.brettonwoodsproject.org/art-565422

IFI Watch
http://www.ifiwatchnet.org/

Bank Information Center on the IFI Meeting October 2009 http://www.bicusa.org/en/Article.11378.aspx