Rep. Tom Cotton: America Needs To Be The Strong Horse

Representative Tom Cotton (R-AR) delivered the keynote address today at the American Enterprise Institute (AEI) where he discussed the new threats that the U.S. faces from Al Qaeda and radical Islam. The first-term Congressman is a rising star in the Republican ranks and is challenging Senator Mark Pryor (D-AR) for his seat in 2014. His resume is even more impressive: graduate of Harvard University undergrad and law school, clerkship on the U.S. Court of Appeals and time at McKinsey & Co. But what Cotton values most, and talks about frequently, is his time in the Army in both Iraq and Afghanistan. That’s how Cotton began today’s speech as well.

“For much of 2006, I patrolled the streets of Baghdad as a platoon leader with the 101st airborne,” he said. “My soldiers and I knew in a very concrete and personal way that we needed more troops and we needed a new strategy, even if few of us could articulate what it might be.”

Cotton praised AEI for the organization’s contributions to the Iraq Surge and then shifted from talking about his military background to the main theme of his speech: the growing threat of Al Qaeda.

Tom Cotton speaks at AEI.
Rep. Tom Cotton speaks at AEI.

“To put it simply, Al Qaeda today remains a great threat that too many policymakers misunderstand and want to wish away,” he said. “We have to recognize and understand this threat before we can defeat it. And we need to have strength and confidence to fight Al Qaeda using all the tools and resources that have proven to work over the years,”

Before 9/11, few people were aware of the threat Al Qaeda posed to the United States, he said. Afterwards, that quickly changed as the U.S. joined the war against radical Islam. Cotton emphasized that the U.S. joined the war, which radical Islam had started decades earlier. It had taken the United State an event as tragic as 9/11 to get it to stand up and fight, despite repeated terrorist attacks during the 1990s. Cotton worried that a similar complacency and disregard for Al Qaeda was setting in on both lawmakers and the American people in recent years.

“Regrettably, too many Americans believe that the threat from Al Qaeda ended in 2011 with the killing of Osama Bin Laden,” he said. “And too many policymakers in Washington want to believe that these terrorist groups aren’t affiliated with each other or what might be called Core Al Qaeda.”

Cotton stressed that Al Qaeda has grown in strength over the past four years due to the Obama Administration’s neglect for counterterrorism policies. For years, the U.S. military had kept Al Qaeda in a defensive position, pushing them into the hills of Afghanistan where it was near impossible to coordinate a terrorist attack. The United States was the “strong horse” and Al Qaeda the weak, he said.

In recent years though, Al Qaeda has resurged in unstable regions throughout the Middle East. It is no longer a centralized organization, but a network of groups that are increasingly looking at the United States as the “weak horse,” not the strong. Cotton declared his support for many of the counterterrorism strategies that the United States has used over the past decade including drone strikes, indefinite detention and interrogation of detainees at Guantanamo Bay and the National Security Agency’s surveillance methods. He denounced sequestration’s defense cuts, arguing that “the consequences will be historic – and not in a good way.”

All of these things have altered the balance in the War on Terror, Cotton said. In particular, he criticized President Obama for failing to support the moderate groups in Syria years ago, leading to the messy situation that exists there today.* He emphasized that the Obama Administration has not shown the will and confidence to continue to fight Al Qaeda and that this indifference has begun switching the balance of power so that the United States looks more and more like the “weak horse.”

“In the end, the key trait of the strong horse is the will to win,” he concluded. “Our enemies still have the will to win. America had the will to win for a long time and I believe most Americans still do have the will to win. I know that our troops and intelligence professionals do. But I do worry that many of our elected leaders do not and that is dangerous, because in the end, the strong horse does win.”

*Cotton published an op-ed with Rep. Mike Pompeo (R-KA) supporting Obama’s plan for Syria a week ago.

Do We Have a Structural Unemployment Problem?

That was the question that economists Peter Diamond, Dean Baker and Kevin Hassett debated yesterday afternoon in a panel discussion at the American Enterprise Institute (AEI). Moderated by AEI’s Michael Strain, the panel did not disagree on much, particularly its emphasis on the need for government programs to help the long-term unemployed.

Nobel Prize winning economist Peter Diamond, now professor emeritus at MIT, kicked off the debate by arguing against the oft-repeated claim that the current unemployment problem is not just cyclical, but is structural as well. He focused on the Beveridge Curve, which graphs the unemployment rate compared to the job vacancy rate. It’s shown below:Beveridge Curve

When the unemployment rate is high, the vacancy is rate is low as that generally coincides with recessions when employers aren’t hiring. As you can see from the graph above, the concern amongst economists is that there are now more job vacancies for higher levels of unemployment in the past few years compared with the recent decade. However, Diamond was dismissive of this, nothing that over the long-term, the Beveridge Curve fluctuates dramatically and often crosses back above itself after recessions.

“This is not a tight, technical relationship,” he said. “This is a curve that moves all over the place, in part for reasons we could identify, in part not.

“The path back being above it has happened a number of times before and sometimes after that you stay above,” he added. “Sometimes after that when you get back toward full employment, you’re back to the old curve or even below it. So the issue of thinking about how to interpret the path we’re seeing is something that really calls for digging underneath these aggregates.”

Diamond emphasized that a couple other economic points indicate that this is a cyclical unemployment problem. In particular, the lack of wage growth in any major industry is very surprising if the structural unemployment theory is true. If there was a structural unemployment problem, firms would be unable to find workers with the adequate skills and would have to increase wages to fight for the scarce talent. But that hasn’t been the case, Diamond said. Wages have been stagnant.

He also examined the construction industry in particular to see if the change in long-term unemployed construction workers’ employment has been any different than changes for long-term unemployed workers in other industries. When he looked at the data, he found few differences. This rebukes the idea that long-term unemployed construction workers have been unable to reenter the labor force due to a mismatch in skills.

Dean Baker, the Co-Director of the Center for Economic and Policy Research, added an additional layer to Diamond’s argument, noting that the Beveridge Curve has shifted upwards only for the long-term unemployed, not for the short-term unemployed. This is evidence that there was not a structural employment problem for the long-term unemployed when they were part of the short-term unemployed. The issue began when they became part of the long-term unemployed.

The final panelist, AEI’s Kevin Hassett, focused almost entirely on the problems of those workers.

“When you create a stock of folks who have been unemployed for a long time, then it makes it uniquely difficult to reattach them to the labor market,” he said. “There’s been insufficient attention to the emergency of the long-term unemployed.”

Hassett joked that he’d received a surprising amount of praise from liberal organizations recently for his promotion of government jobs programs to help those workers. Yet, even Hassett in conjunction with liberal economists has been unable to convince policymakers to implement such a program. This, he noted, is devastating to those workers, who see significant negative effects on health and wages due to their long-term unemployment. For those reasons, this is a problem that Congress cannot kick down the road.

The longer we wait to confront this pressing issue, the worse it will become. Unfortunately, the lack of interest from Congress may mean it will get much worse.

The Question I Want to See Asked Tonight

It goes to Romney:

Are there any tax expenditures on savings and investment that you would eliminate or reduce and if so, what are they?

If the answer, is no, well then the math simply does not add up for his plan to be feasible.

But if the answer is yes, then things get more interesting. The Tax Policy Center’s analysis of Romney’s tax plan found that it either had to raise taxes by $86 billion on the middle class or else not be revenue neutral. The numbers couldn’t add up.

But Alex Brill at the American Enterprise Institute dug into the numbers and found some areas where Romney’s plan could possibly gain revenue without raising taxes on the middle class. Some are legitimate complaints. Some aren’t.

In Brill’s analysis, the numbers come out to a $1 billion tax cut for the middle class. But it includes the specific assumption that Romney will eliminate tax deductions for high earners on savings and investment. Specifically, Brill and AEI colleague Matt Jensen found $45 billion from the exclusion of interest on state and local bonds and the exclusion of inside buildup on life-insurance products. But, these are tax exclusions on savings and investment.

If Romney refuses to eliminate those exclusions, then even under the AEI analysis, the math doesn’t add up. It’d be a $44 billion tax increase on the middle class.

So, which is it Governor Romney, eliminate those tax exclusions or raise taxes on the middle class?