Josh Marshall

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Fortune magazine has just published an interview with famed management guru Peter Drucker, whose expertise, of course, stretches into law, finance, international economics and foreign affairs. (Unfortunately, it's subscription only.) Here's one passage worth noting.

Look particularly at Drucker's comments on India and China.

FORTUNE: You sound fairly sanguine about the state of the U.S. economy. Do you see any danger signs?

DRUCKER: Oh, yes. The biggest problem I see is our total dependence on foreign money to cover our government debt. Never before has a major debtor country owed its debt in its own currency. It is unprecedented in economic history. Japan, by contrast, owes all its foreign debt in dollars. Now if you devalue the dollar, the Japanese economy benefits, because their imports become much cheaper. And the value of their debt goes down also. The individual Japanese companies that invest in dollars would lose, but the overall Japanese economy gains. But we have no experience about what will happen here when we owe so much debt in our own currency and we're forced to devalue the dollar. Sooner or later, we're going to find out.

What's more, there is an enormous amount of surplus capital in the world for which there is no productive investment. The supply greatly exceeds the demand. So there is a very jittery body of excess money that is desperately in need of returns, and it could become panic-prone. We have no economic theory or model for this.

FORTUNE: Does the U.S. still set the tone for the world economy?

DRUCKER: The dominance of the U.S. is already over. What is emerging is a world economy of blocs represented by NAFTA, the European Union, ASEAN. There's no one center in this world economy. India is becoming a powerhouse very fast. The medical school in New Delhi is now perhaps the best in the world. And the technical graduates of the Institute of Technology in Bangalore are as good as any in the world. Also, India has 150 million people for whom English is their main language. So India is indeed becoming a knowledge center.

In contrast, the greatest weakness of China is its incredibly small proportion of educated people. China has only 1.5 million college students, out of a total population of over 1.3 billion. If they had the American proportion, they'd have 12 million or more in college. Those who are educated are well trained, but there are so few of them. And then there is the enormous undeveloped hinterland with excess rural population. Yes, that means there is enormous manufacturing potential. In China, however, the likelihood of the absorption of rural workers into the cities without upheaval seems very dubious. You don't have that problem in India because they have already done an amazing job of absorbing excess rural population into the cities--its rural population has gone from 90% to 54% without any upheaval.

Everybody says China has 8% growth and India only 3%, but that is a total misconception. We don't really know. I think India's progress is far more impressive than China's.

If Drucker is right (and<$Ad$> I've always been in the camp that agrees with his general point with regards to India and China), that has vast and in most cases positive implications for America's posture across the globe. With respect to China. With respect to Pakistan. And in many other places as well.

Think how much of our broad, long-range foreign policy thinking rests on the premise that China is the rising economic and military power? What if the premise is wrong? Or what if India, nearly as large a country in population terms, is another rising behemoth? Then consider too that India is a democracy, albeit an imperfect one. It's also a rule of law based society -- again, if an imperfect one. And it's a country with hundreds of millions of English speakers and, according to Drucker, 150 million speak it as their primary language. (Update: As this page shows, Drucker's statement in this case is certainly incorrect. Only about 20 million Indians speak English as their native language. A number between 150 and 200 million properly refers to fluent English speakers.)

This is not a partisan issue in American politics, or needn't be. President Clinton began an opening to India in the 1990s and it's been continued under President Bush.

We'll return to this issue.

I'm gearing up to go to New Hampshire later this month (ten days of on-the-ground blog reporting up until primary day), lining up interviews and meetings and so forth. So I wanted to share some sense of what the campaign looks like to me right now.

As nearly as I can tell, the race has four moving parts right now: Clark, Dean, Gephardt and Kerry. And the four candidates are in motion like the interlocking pieces of a clock, each affecting the other in multidimensional ways.

Look for instance, at the American Research Group New Hampshire tracking poll. To the best of my knowledge, ARG is the only outfit currently running a public daily tracking poll.

Going back to the day after Christmas, there are three candidates consistently over 5%: Clark, Dean and Kerry. Clark and Dean have been strikingly consistent over the ten day period, with Clark at 12/13% and Dean at 37%.

(In the last two days, Dean has hit 38% and then 39%. But it's too early to see if that's a trend.)

The one clear trend line is a slow deterioration for Kerry. He started at 19% percent and went down a point each day until he settled at 14%.

Tracking polls are notoriously volatile. And the sample sizes are small. But I think there's consistent enough downward movement there to say something is happening.

Yet, this downdraft is not inconsistent with Kerry's strategy, as I understand it. Or, more accurately, not something they haven't accounted for.

Kerry is making a renewed and intense push in Iowa, figuring that he can't restart his campaign in New Hampshire and has to look for a springboard elsewhere.

I haven't seen any recent polls out of Iowa. But anecdotal reports say he's making some progress and gathering some steam there. The press will need some unexpected story out of Iowa in a couple weeks. And if Kerry surpasses whatever his expectations threshold is there, then he could be the story of the week going into New Hampshire, quite possibly reversing the deterioration which is now so evident there. It's the electoral equivalent of a very long hail mary pass.

But where is that threshold? It's hard to see how a Kerry surge in Iowa could be anything but a footnote unless he actually comes in second. And that seems hard to figure.

But where is that threshold? That's a key question.

Another data point that stands out in the ARG numbers is Clark. Though Kerry is falling, Clark seems to be locked in at 12% or 13%. If Kerry falls far enough in New Hampshire, then it really will be a Dean/Clark race.

But that will be by default. With all the other candidates save these three polling so poorly in New Hampshire, and with Kerry slipping, you'd really expect Clark to be gaining at least some ground. But at least by the evidence of the ARG poll, he's not.

Again, we're dealing with limited data here: one tracking poll. But Clark's putting lots of resources into the state now. If Kerry's decline doesn't reverse, when does he start to move? And if not, why not?

Then we have Dick Gephardt, for whom everything is Iowa. Like Kerry, he's looking for that Iowa leverage to propel him into a two-man race with Howard Dean. On TV this morning The Des Moines Register's David Yepsen (the 'wise man' of the Iowa caucuses) gave the impression that there is still a very real race in Iowa.

He also seemed to say that the mix of attacks and stumbles over the last month hasn't hurt Dean, in the sense of eroding his support, but has for the moment at least arrested any further gains. With a large pool of undecideds, that's important.

Dean's strategy here is the most straightforward: run down the clock. Get through both of these primaries with solid wins, prevent any of the other three candidates from significantly exceeding expectations, and end January with so much momentum than even the opposing candidate in the inevitable two-man race simply can't catch up.

One final thought: an interesting strategic question.

Would Clark gain more from a solid Iowa victory for Dean which effectively ended Gephardt's and Kerry's candidacies (thus forcing a two-man race by default) or by one of the other candidates breaking out, thus knocking Dean significantly off his stride?

With no little interest this morning I tuned in Fox News Sunday, which is now hosted by Chris Wallace. What will it be like, I wondered, to have the Fox Show hosted by a straight-up journalist, rather than a Movement Conservative who takes to Fox's silly conservative slant and Democratic-bashing like mother's milk?

Alas ... They didn't leave me wondering for long. It turns out it doesn't make any difference. His interview with (aka ambush of) Steve Grossman (who's now Dean's national campaign co-chair) was truly shameless, all but a caricature of the Fox MO.

This is really classic Bush.

Look at the first couple grafs of tomorrow's Times article on the roll-out of President Bush's 2005 budget ...

Facing a record budget deficit, Bush administration officials say they have drafted an election-year budget that will rein in the growth of domestic spending without alienating politically influential constituencies.

They said the president's proposed budget for the 2005 fiscal year, which begins Oct. 1, would control the rising cost of housing vouchers for the poor, require some veterans to pay more for health care, slow the growth in spending on biomedical research and merge or eliminate some job training and employment programs. The moves are intended to trim the programs without damaging any essential services, the administration said.

Where to start?

First of all it's nice <$Ad$> to see that we're apparently beyond the need to pretend that the calculus here is anything but electoral -- i.e., finding cuts in spending "without alienating politically influential constituencies."

And what are the cuts?

It sounds to me like it's a combination of cuts to groups with no ability to push back politically (working poor and sick veterans) and cuts that won't show up with visible ill effects until years later.

Like the cuts in biomedical research.

If we weren't all immortal now, I'd say that's a bit of a shortsighted way to save money, no?

And job training -- always a good place to cut in a period when high-skilled jobs are getting sent to India and China.

Look, certainly not everyone will agree with the policy priorities implicit in the criticisms and jabs above.

But it's very hard to look at this budget -- or the outlines of it -- and not see this as a few relatively minor cuts (judged in comparison to the oceans of red inks we're now swimming in), picked for almost exclusively electoral reasons, after the president has as recently as this past year pushed through still more tax cuts and major new spending programs.

The contrast with the Clinton budgets is instructive and, truth be told, almost comical.

Say what you will about the policies behind spending priorities in the Clinton administration. But policy (either inspired or misguided) played a key role in shaping budgeting decisions. This, on the other, is pure politics.

How do we push the budget discipline issue without pressuring any of our interest groups (for whom we've been looting the fisc for the last couple years) and do it in a way that the consequences won't be clear until we're well into the second term?

Sort of the definition of forward-looking leadership.

As Bertrand Russell's little old lady might have said, it's politics all the way down.

Things are seldom as they appear on the surface. And the Plame matter is a case in point.

At the moment the discussion is about whether the doers can beat the rap. (Did the person at the White House know she was covert, etc.?)

(Along those lines, here's a question worth asking. Has Victoria Toensing or, more importantly, her husband and legal partner in their criminal defense firm, Joe diGenova, taken on any clients who might be targets in the Plame probe?)

But that's not the issue and it never has been. At least it hasn't been since very early on. Because the basic facts of the matter have been in plain sight from the beginning. And whether an aide to the president is indicted or goes to prison is largely an issue for that particular person.

The issue here -- from the beginning, and now to the end -- is whether the president accepts such behavior and what the standard operating procedure in the Bush White House is: Do you punish a political opponent by attacking his family if it means exposing one of the country's covert intelligence operatives and breaking the law?

That's a pretty straightforward standard. And by all the available evidence this White House considers it acceptable behavior.

Why do I say this?

From the start it's been clear what the essential facts are -- who did what. If the White House didn't know, it would have been a simple matter for the president to find out. And as I noted in the previous post, we now know that they did know who the people were from the beginning -- since they knew who to issue non-denial-denials for.

Now, just for the sake of the conversation, let's say that the perp didn't know Plame was covert. As I've discussed previously, there are many reasons why this is extremely unlikely. But let's say it's so. If that's the case, it would become an issue of manifest negligence and recklessness that should in itself qualify as a firing offense.

Again, a hypothetical.

Let's say the leaker ... and well, hold on. We don't know the person's or persons' name. So let's assign them a nickname to use as a placeholder. Let's call the person Hopper.

Ok, so back to the leaker.

Let's say Hopper just knew that Joe Wilson's wife was involved at CIA doing some work on the WMD front (remember, Hopper had to know that, because the accusation was that she had gotten him the uranium gig.) We now know -- or we seem to know -- that Plame was not at that point involved in any particular operations the exposure of which would have led to immediate and grave harm to national security or a threat to her life. But if Hopper only knew vaguely that she was at CIA and working on WMD stuff, then it was possible she was abroad and in danger if her name was exposed. Or, more to the point, she might have been involved in a covert operation trying to shutdown a shipment of weapons-grade uranium from Pakistan to al Qaida terrorists in Yemen. Or perhaps the front energy company she worked for was involved in ferreting out a uranium shipment from the Russian mafia to al Qaida operatives in Hamburg?

Was it likely that at that moment she was working on something so, shall we say, thermonuclear?

No, but WMD, in case you hadn't noticed, is a rather big concern for us at the moment. So before picking up the phone and calling Novak you'd think Hopper might have done a little checking and made sure her exposure as CIA wouldn't cause that much damage, right? Make sure she was just an analyst?

We could play out these hypotheticals ad nauseam of course. But I think the point is clear. As a matter of acceptable behavior, Hopper (or perhaps someone near Hopper ) should go pretty much anyway you slice it. If he spilled the beans on Plame without having any idea what she did in the WMD field, that's almost worse than if he knew just what she was working on.

And yet the White House seems to consider this acceptable behavior. Or at least it's behavior that is tolerated just as long as the perp can figure out a way to avoid criminal possible prosecution, by hook or by crook.

And the White House isn't the only place on the line. Not even the most.

For all who have eyes to see, the White House has made pretty clear where they stand from the beginning. They're going to see if they can brazen it out.

But where does the press stand? Do the big papers put heavy investigative resources on to this? Who's working this story at the Times. Does Mike Allen have to break all the stories? Do the editorial pages care? Does David Broder care? Tim Russert? George?

They're the ones on the line here. The issue of criminal prosecution is almost secondary. What do they think is important? What do they care about? It's been that way from the word go.

But of course ... more from the Neil Bush Files. This time a quick 800 grand on a sweetheart stock deal. And, yes, there is more to come on the Chen-Neil Bush 'summit' and how it came about.

The People's Republic of China: Strategic Competitor, Strategic Partner, or Family Business Partner? An issue for 2004.

More on this soon too ....

Mike, Mike, Mike ... just when you were doing so well!

Mike Allen, who wrote several of the best articles about the Plame case, has a new article in the Post today about the Plame story. Actually, the piece contains some really good stuff. But first the egregious lede.

The point of Allen's article is that the perps in the Plame case may not have committed a crime because they may not have known that Plame was undercover. They may only have known she was CIA.

And who's the expert who pushes this angle?

Victoria Toensing.

(If you already know who Toensing is, I'll give you a few moments to laugh uncontrollably. Then rejoin us when you're done.)

Allen calls Toensing a "legal expert" and "the chief counsel of the Senate Select Committee on Intelligence when Congress passed the law protecting the identities of undercover agents."

But that's a rather incomplete description, now isn't it?

Toensing, of course, is not only a pricey DC defense lawyer. She's also a professional Republican, one tightly connected to the DC GOP power structure, and someone you could find at pretty much any point in the late nineties as an anti-Clinton "legal expert" on every chat show under the sun.

Using Toensing as the legal expert on this question is like bringing Bruce Lindsey in as your commentator to discuss Lewinsky.

Now for the substance of what Toensing said.

Toensing says this may not have been a crime because the perps may not have known Plame was undercover.

But this isn't really a reason why this wasn't a crime. It's more properly termed the logical defense at trial or perhaps in a plea negotiation. It may well be impossible to prove the perps' knowledge beyond a reasonable doubt. But it's very hard to believe, for a number of reasons, they didn't know exactly what she did.

Here's just one of the many reasons why.

Allen writes ...

The July column by Robert D. Novak that touched off the investigation did not specify that Valerie Plame was working undercover, but said she was "an agency operative on weapons of mass destruction." That raises the possibility that the senior administration officials he quoted did not know Plame's status.

This rather misses the point.

In the intelligence community, the word 'operative' is a term of art. And it means someone who is undercover. It doesn't refer to an analyst. And as I showed in this post from October 9th a review of all of Novak's columns in the Nexis database shows that he always use the term in this way.

When this mess first hit the fan, Novak tried to claim that he had just made a mistake. And his friends in the press generally gave him the benefit of the doubt. But for someone like Novak that explanation hardly passes the laugh test. And if Novak knew, that means his sources knew.

And one other point.

Back on October 9th and 10th I told you that Scott McClellan's denials that Rove, Libby and Abrams were the perps wasn't nearly as air-tight as they seemed, that it was basically a non-denial denial. But no one seemed to catch on.

Now they're coming clean. Again, from Mike Allen's piece in the Post ...

When White House press secretary Scott McClellan was being barraged with questions about the case this fall, he said repeatedly that he knew of no Bush aides who had "leaked classified information." McClellan would not answer questions about the ethics or propriety of encouraging reporters to write about Plame.

"The subject of this investigation is whether someone leaked classified information," McClellan said. Another time, he said, "The issue here is whether or not someone leaked classified information." McClellan left open the possibility that White House aides had discussed Plame with the media. "You all talk about what's in the news, I talk about what's in the news, people always talk about what's in the news," he said.

A senior administration official said Bush's aides did not intend to mount a legalistic defense, but two GOP legal sources who have discussed the case with the White House said the careful, consistent wording of McClellan's statements was no accident.

"If they could have made a broader denial, they would have," said a lawyer who is close to the White House. "But they seem to be confident they didn't step over the legal line."

So let's stop the charade. They're guilty as sin. It's now crystal clear that from the very beginning the folks at the White House have known who did it. And pretty clearly the president didn't see anything wrong with it, or didn't care, because he didn't try to do anything about it.

A few more quick thoughts on John Ashcroft's recusal in the Plame investigation.

First, I've heard a bit more about Patrick Fitzgerald, the man Deputy Attorney General James Comey appointed to serve as a special prosecutor in the Plame case. And, thus far, everything I've heard leads me to believe he'll lead an independent investigation.

One can never know in advance of course what motives or predispositions a person might have. The proof of the pudding will be in the eating(hackneyed phrase? yes. but clear and to the point). But one can look at clues from past performance. And those clues point in the right direction.

And then, another issue. Why did this happen? And why now?

A few possibilities suggest themselves.

One might surmise that Ashcroft, after some time to think it over, decided that it was the wiser course to recuse himself and appoint a special prosecutor.

You could surmise that. But then you'd be pretty stupid. So let's pass on that possibility.

Let's consider two other possibilities, both of which assume this was triggered by on-going developments in the investigation.

One possibility is that the investigation has come up with more and more evidence and that has made it increasingly likely that there will be an indictment or at least some extensive grand jury proceedings. Because of that, it's now no longer tenable for Ashcroft to remain in charge of the investigation, since it's now clear that some serious wrong-doing occurred.

This seemed to be what Comey was getting at when he said: "It's fair to say that an accumulation of facts throughout the course of the investigation over the last several months has led us to this point."

But there's another possibility: that is, that this decision isn't the result of the general progress of the investigation or the accumulation of evidence, but something specific. Or more to the point, a specific person. And that something has just taken place.

Obviously these are general scenarios, which may, in reality, overlap quite a bit. But what strikes me about this announcement today was its timing. And the timing leads me to think the third scenario is the most likely.

Here's why.

The other news developments from the administration on the Plame case have come at what you might call press-appropriate times. As in, late on Friday afternoons. Stuff like that -- the times guaranteed to get you as little press notice as possible.

This was early afternoon on a Tuesday, albeit, yes, the day before New Year's Eve. If this was just a matter of a slow accumulation of evidence, tomorrow afternoon would have been just as good, and would have gotten the story buried. Same goes for Friday.

Now a third point.

It's always been more or less an open secret who the perps are in this case. And they're very high-level folks -- people with deep influence of the formulation and implementation of policy. And the wrong-doing here is directly related to the execution of policy. So if a crime was committed, and if an indictment is forthcoming, it will bring under scrutiny a whole complex range of wrong-doing (though not necessarily criminal wrongdoing) relating to administration war policy and intelligence manipulation and other stuff we can go into at a later date.

The Washington Post this evening has an article quoting "Republican legal sources who have discussed the case with the White House and the Justice Department" who say that this will give the administration cover and 'depoliticize' the case.

Not likely.

If the real perps are indicted, the political implications will be obvious and undeniable. And the fall-out will be rapid.

I was having lunch with a friend today, and mid-way through our meal I noticed a TV near the bar running CNN with the tell-tale 'Breaking News' logo.

I looked over and saw that it was some Justice Department news conference and figured it couldn't be something too interesting.

Getting back to my office this afternoon I see it was a bit of a bigger deal than I thought.

As you've probably already seen, Attorney General John Ashcroft has decided to recuse himself from the Plame leak investigation, which will be taken over by Patrick J. Fitzgerald, the current United States Attorney in Chicago.

It is gratifying to see that the investigative machinery at Justice and the FBI is a touch more on the ball than the collective wisdom of the Washington press corps, which was that the legal and substantive political issues raised by this incident were satisfactorily resolved by Plame's appearance in a photo in Vanity Fair. But we can discuss this town's corruption another time ...

One point of detail.

At the Washington Post website, the caption under a photo of Fitzgerald seems to identify him as a Republican. But reports from the time of his appointment as US Attorney have him identifying himself as an independent and denying any partisan affiliation.

This from a May 13th 2001 AP report ...

The son of Irish immigrants and a graduate of the Harvard Law School, Patrick Fitzgerald said he is neither a Republican nor a Democrat.

"I'm an independent," he told reporters.

Sen. Fitzgerald said a professional prosecutor with a streak of professional independence was just what he wanted.

The senator said that at the outset of his search he consulted outgoing FBI director Louis Freeh.

"I asked Mr. Freeh who in his opinion were the best prosecutors in the country and one of the first names he mentioned was Pat Fitzgerald," the senator said.

Patrick Fitzgerald graduated from Harvard's law school one year ahead of Sen. Fitzgerald's wife, Nina. But aides to the senator said the two apparently had never met while at Harvard.

In New York, Fitzgerald has the reputation of a tough, no-nonsense prosecutor who doesn't relish bantering with reporters. He is trusted by U.S. Attorney Mary Jo White and was by her side when law enforcement officials gathered the night in July 1996 when TWA Flight 800 burst into flames over Long Island and 230 aboard were killed.

I've only had a chance to do a cursory look at Fitzgerald. So these judgments are tentative. But, from what I've seen, he appears to be someone without any strong partisan profile and a career prosecutor with experience both in public corruption cases and intelligence and counter-terrorism.

More on this shortly ...

I'd quibble with a few points. But over at there's a very insightful brief history of the several decade struggle between Realists and neocons in the Republican party. Good stuff. Take a look.