With the Obama administration in office, I’m now pretty confident that the United States of America won’t launch a unilateral preventive military attack on Iran. On the other hand, given that, it now seems more likely that Israel might—especially in light of the election results. This is still a terrible idea that will have bad results for Iran, bad results for Israel, bad results for the United States, and probably bad results for other people as well. This CSIS analysis by Anthony Cordesman (via James Fallows) runs through some of the main problems:

Iran’s Nuclear Program

• The more an Israeli threat to the survival of the regime in Iran, the more Iran will be determined to acquire nuclear weapons.
•Increase Iran’s long term resolve to develop a nuclear deterrent program. Could be the beginning rather than the end of such a program. Iran could start an accelerated program in building its own nuclear weapons. It could also covert it’s dispersed facilities into a full weapons development program and be brought online in a very short period of time.

Iran and the IAEA

• Iran would withdraw from the NPT based on the argument that it needs to acquire nuclear weapons to deter any further aggression by Israel and the U.S.

Iranian response against Israel

• Immediate retaliation using its ballistic missiles on Israel. Multiple launches of Shahab-3 including the possibility of CBR warheads against Tel Aviv, Israeli military and civilian centers, and Israeli suspected nuclear weapons sites.
• Using proxy groups such as Hezbollah or Hamas to attack Israel proper with suicide bombings, covert CBR attacks, and rocket attacks from southern Lebanon.

The basic dynamics in the passages I’ve highlighted are very poorly understood in the American press and political system, and seem even worse understood in Israel. But there’s really no reason to think that unilateral airstrikes will do anything to the delay the point at which Iran has a nuclear weapon. Bombs will destroy facilities, but facilities can be rebuilt. And funding levels for programs can be altered. The political calculus about NPT participation can be altered. The calculus about the desirability of weaponizing nuclear material as opposed to just creating it can be altered. And a unilateral attack will alter all of those things in an unfavorable direction.

I could go on at length, but instead I’ll say this: It was about as disappointing as the bank bailout plan. And in both cases, the fact that I was expecting to be disappointed didn’t, at the end of the day, wind up doing much to mitigate my disappointment.

One interesting thing that happens as a general interest policy blogger is that I shift between discussions about domestic social policy and national security policy. Whenever there’s a conversation about domestic social policy, the overwhelming assumption is that virtually no new funds will be made available for any purpose no matter how worthy unless you can identify offsetting reduced expenditures elsewhere, and that the entire suite of social problems afflicting American citizens will just be perennially underfunded. When you’re a defense policy conversation, by contrast, it’s like all the planning is happening with monopoly money. If you can devise an even remotely plausible rationale while doing something might be useful, you just kind of charge ahead. Consequently, very abstract conversations about defense planning tend to take on a kind of surreal air with grandiose goals framed on the thinnest of pretexts.

All of which is by way of saying that I thought this Steven Metz post on his reaction to “a Department of Defense symposium which discussed the future strategic environment twenty years out” was very insightful:

I was aghast when people talked about future missions like controlling the vast slums of Lagos or Karachi, both because I don’t think those who made this point understood the magnitude of such a task, and because I don’t think doing so would promote American security. None of the architects or implementers of 9/11 were motivated by the lack of jobs or emerged from a teeming slum. On 9/11 we were attacked by a dispersed, non-state entity but in a perfect illustration of the idea that when all you have is a hammer, everything looks like a nail, we did what we knew how to do: we overthrew two national governments. But–and this is the important part—because there were no subsequent successful attacks on the United States, we assumed this was the right approach. I non-concur.

In the coming decades we’re going to have to re-address the basic assumptions of the post-9/11 strategy. We‘ve skated by with flawed assumptions for the past five years, but the day of reckoning is near. I think this revolutionary shift in the strategic environment will be particularly momentous for the Army. The Army’s core function has always been to seize and control territory. That made sense during all of human history to this point since threats were geographic in essence. They arose from an identified place, and if we could control that place, we destroyed or minimized the threat. But if you buy the notion that future threats will not be linked to a particular piece of geography–enemies can mobilize resources and undertake operations from almost anywhere–then seizing and controlling terrain will no longer be the essence of security. This led me to predict at the symposium that 20 years hence, the U.S. Army’s role in promoting American security will decline precipitously.

I keep thinking about the alleged need to provide effective governance over 100 percent of the territory of Afghanistan because in the absence of such governance an al-Qaeda safe haven might emerge. This seems to ignore the fact that there are plenty of other Muslim-majority countries that fall short of the 100 percent effective governance standard. But more importantly it ignores the fact that the major al-Qaeda terrorist plots were hatched from the middle of major western cities. We’re not going to make Lagos as well-governed as Madrid, and even if we did it wouldn’t accomplish the goal.

I think the mentality that leads to the idea that we should spend vast resources trying to control the slums of Karachi while skimping on our efforts to bring schools, jobs, health clinics, safe streets, and economic opportunity to the slums of Baltimore reflects not just a misperception of the strategic environment, but a real failure to appreciate the sources of American strength.

It seems we now have the details of the administration’s plan to clean up the banking system. Convention seems to dictate that we refer to this as “Geithner’s plan” though with something of this level of importance, it’s not like Barack Obama and the White House staff were somehow kept out of the loop.

I would say that what we’re seeing here is a strong view on the part of the administration that it is dramatically more desirable for major financial institutions to continue to be managed by their current managers rather than subject to government authority. If you just keep that in mind—they think it’s extremely important that Vikram Pandit and the rest continue running their firms without interference from congress or the executive branch—then the plan all “makes sense” whether or not you agree with it.

The crux of the matter is that “toxic assets” will be put for sale at auction, in which the bidding will be done by private parties but whoever buys the asset will have their downside risk mitigated by the fact that the government is actually putting up the bulk of the money as a silent partner in the venture. The odds are strong that this will lead to banks being able to sell their assets for more than they’re really worth. This is the basic dynamic of an auction. Ten people guess what something’s worth, and whoever’s guess is highest “wins” the auction. As per the winner’s curse, this usually means that the “winner” of the auction is someone who’s guessed too high. The fact that the government, rather than the bidders, will be bearing most of the risk further encourages the bidders to guess too high. Consequently, the winner of the auction will stand a small chance of making a bunch of money and a large chance of losing a small amount of money. The government will stand a small chance of making a bunch of money and a large chance of losing a bunch of money. And the banks selling the assets will stand a large chance of making a bunch of money.

The basic dynamic here is that the banks will get a bunch of money and be able to go about their business, and the taxpayer will almost certainly be out a bunch of money. That sucks. But it must be understood that in the case of a nationalization plan the taxpayer would be out a bunch of money anyway. The heavy taxpayer losses aren’t really the difference. The difference is that under the administration’s plan the existing banks under existing management will go back into “normal” business, rather than being broken up and sold to new managers. To my way of thinking, this is a big problem—it’s an unjust reward to current managers, it’s an unfair penalty to the managers of better-managed but smaller institutions, it’s likely to keep the banks being well-managed, and it seems to still leave us with the existence of an undesirably large number of “too big to fail” financial institutions. To the administration’s way of thinking, however, this is superior to a situation in which the government would have too much control over the banks.

Think of it this way. There are too lessons you could have learned from AIG. One is that the public has had it up to hear with giveaways to financiers. The other is that congress is prone to overreacting to momentary spasms of outrage fanned by cable news. The administration seems to have decided that the second lesson is more important.

See also: Calculated Risk, Yves Smith, and Paul KrugmanPat Garofalo.

I seriously doubt that this is the line any members of congress are going to take, but as I read through the CBO analysis of the president’s budget it’s clear that the problem is here—the taxes are too low:

Under the President’s proposals, revenues would climb from 17.2 percent of GDP in 2011 to 18.8 percent in 2013 and remain near 19.0 percent thereafter (see Figure 1-2 and Table 1-4). That level is slightly above the average of 18.3 percent over the past 40 years and below the baseline projection of 20.3 percent for 2019.

The past 40 years have been the 40 years of conservative backlash politics following the unraveling of the New Deal coalition after the advent of Civil Rights and the Great Society. Barack Obama has, quite rightly, an ambitious progressive agenda. But in budgetary terms you can’t really implement an ambitious progressive agenda and pair it with revenues that are only “slightly above” the average at which they rested during an era of conservative governance. This is not an issue in the short-term, since we’re dealing with a recession, but what you see at the right hand side of these charts is not sustainable. And I think the administration is correct to think that they should not compromise on their main policy pillars. The issue, though nobody wants to say it, is that taxes need to be higher.

Relative to Obama’s proposed ideas, I would observe the following:

• His carbon targets, though nice, aren’t actually adequate to the problem; more aggressive targets would generate more revenue, though admittedly this isn’t a major source of net revenue since much of it would be rebated.
• There’s no reason that the top tax bracket should have such a relatively low floor. A guy who makes $300,000 should pay more taxes than a guy who makes $30,000 but by the same token a guy who makes $3 million should pay even more.
• The value of the federal gas tax has fallen in real terms over the years; it should be raised and indexed.
• The value of the federal alcohol tax has fallen in real terms; it should be raised and indexed.
• We should consider the possibilities of other public health taxes—on sweeteners, possibly.
• If we implement an ’86-style tax reform in which we close loopholes and expand the income tax base, we could raise more revenues and increase growth.
• Much the same is true of corporate taxes; we really ought to imitate Ireland.
• The defense budget could probably be quite a bit smaller before we’re really running the risk of Brazil dominating the hemisphere and enslaving us.
• Last, insofar as the point of these new taxes is to make it possible to finance progressive health care and retirement security programs it makes sense to rely in part on fairly regressive taxes like a VAT to finance some of it.

This isn’t, as I say, really a problem for the short run. But it’s a significant medium-term challenge. Were Obama to win re-election, real problems would arise during his second term unless growth over the next few years winds up coming in higher-than-expected. That could happen, of course, but we shouldn’t bank on it. More likely, in the future taxes are going to need to go up and revenue is going to have to be higher as a percent of GDP than it was under Clinton, not lower.